Tortilla Mexican Grill (LSE:MEX) Q2 2023 Earnings Call

0:00 Good afternoon ladies and gentlemen and welcome to the Tortilla Mexican Grill plc half year results investor presentation. Throughout this recorded presentation investors will be in listen only mode. Questions are encouraged they can be submitted at any time via the Q&A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. the company may not be in a position to answer every question it receives during the meeting itself however the company will review all questions submitted today and publish responses where it's appropriate to do so and these be available via your investor meet company dashboard before we begin I would like to submit the following poll and I would now like to hand you over to the executive management team from Tortilla Mexican Grill Richard, Andy, good afternoon hi good afternoon Jake good afternoon everyone good afternoon

0:51 Okay, thanks for joining us. We'll take you through our presentation. We think probably half an hour, 40 minutes, something like that. First of all, a quick intro to ourselves. My name is Richard Morris. I'm led to believe a hospitality veteran. I've been in this sector all my working life, actually, from flipping burgers at McDonald's as a kid through TGI Fridays, Lock Fine restaurants, and then I joined Tortillas. just about 10 years ago actually or nearly 10 years ago so it's been an interesting career and a very exciting last 10 years with this business. Hi everyone I'm Andy I'm the CFO at Altura. I've been here about six years having worked in another restaurant business Gaucho before.

1:40 I started my career in oil and gas yeah moved into a more of a commercial role in recent years and yeah we have a great management team here.

1:59 Okay so flipping on to the first slide and we thought we'd talk you through the highlights of the half year and where we were at and what we were up to so strategic and operational highlights for the business well we made some good progress on our UK new store openings so far actually year to date we've opened five including our first site in Northern Ireland which has been hugely successful and very exciting and we'll talk about that a little bit later on but so suffice to say that site openings have gone well we also have a slide on our Chilango acquisition which we made in May last year some updates on that business our franchise network with SSP, Compass and our franchise partner in the Middle East with Ethos.

2:47 Some little updates on those. Most encouragingly it looks as though cost pressures are starting to ease. We say that quietly because we never know but as we sit here today we are sensing that things are moving in the right direction for a change so we're very excited about We've also launched a couple of major tech projects for the business and our first kiosk only site in London Mall which again we can talk about in a bit more detail later on and a nationwide rollout of a delivery order aggregation software because we are a multi-platform business with what was before lots of different screens lots of different printers we've now managed to sort of consolidate it all through a business called Deliberect which is making life a lot easier for us and far better from a customer and an employee standpoint so that's good news you'll hear me talk a lot in this presentation about Tortilla Sunsets one of the most exciting promotions we've ever done and we have just launched it so we will give you a little bit more detail about what that is later on.

3:59 We've talked in the past for those of you that have joined this before around European opportunities for us just a few comments that we'll talk about that as we go through the presentation still something we're very keen on something that we are keen to pursue. and from a personnel perspective we've strengthened our board with a gentleman by the name of Keith Down who's joined us as our non-exec director he comes with a raft of experience he was ex-CFO with Selfridges and also Wetherspoons is currently the chair of Tops Tiles so he's been with us about a month now and will be a fantastic addition to the business and is already proving to be very helpful and a small round of applause, a large round of applause for Andy sitting on my right who we recently promoted up to the role of MD fully deserved in his six years in the business he's obviously moved from FD to CFO and has also been heavily involved in a lot of commercial work that we've been doing over the last few years so I'm delighted to say that he's moved into that role.

5:14 on the financials I'll kind of leave those for Andy to talk through on his on his pages as he's got quite a lot of um as he's got quite a lot of notes on the and all the financials so we'll flip over to those now so on to the uh the exciting bit the numbers uh some headlines here which we dive into all these points into more detail but some of the headlines to hit those we had a significant year-on-year increase in revenue of just over 20 and the Chilango business last year. The gross profit margin remained at 77% which is the same as the prior year number although actually on an underlying basis it was 0.7% better because the prior year number benefited from some VAT support. Admin expenses increased in line with revenue growth and the EBITDA and the rest of the world. So we've got a lot to say on this.

6:16 So 22% increase which equates to 5.8 million. You'll see and the rest. So £2.5 million of that comes from sites that were opened post H1 in the prior year. We also bought the Chalanga business in May last year, so there was only five weeks of trading in the comparative, so obviously lapping that with a full 26 weeks in the current year means a significant increase. Obviously additionally to that, the revenue from the prior year openings obviously lapped

7:53 so there's an extra 1.2 million from that and then the only thing going downwards on that was we shut some cloud kitchens which was a consequence of the Chilango acquisition they had some loss making cloud kitchens that we decided to shut down as part of the acquisition and then also we shut some of our own because the delivery market significantly contracted over the last 12-18 months they were marginally profitable so we decided to close those on to a bit around the like the likes so we continue to outperform the industry benchmark the CGA coffer weekly data so we posted the five percent like-for-like growth and the peach reported at 4.6 CGA peach 4.6 and I guess what we what we also wanted to point out on this really is that there's good growth coming from both the in-store and delivery revenue streams which at the moment considering the Delivery platforms and actually you can see from the bar graph on the right delivery is stabilising around 30% of sales so we're feeling pretty sure that the growth is coming from lots of different angles as a business.

9:17 Moving on to some very positive things last year we were sat here feeling a little bit glum if you like around cost pressures it's a lot better now really pleased to report that food Haley. Thank you very much. and the rest of the team.

10:27 and the rest of them. So, fantastic result and similarly with utilities on the next page, we've been working with an energy broker to hedge our prices and that's resulted in a positive trend in terms of our utility prices. So, we're feeling a lot, not only is it going in the right direction in terms of prices, in terms of obviously managing this business. Then coming on to an EBITDA bridge which is important because the headline number obviously makes it look like the profit dropped a lot year on year but it didn't really in absolute terms. So last year we generated 2.5 million but you can see the first two bars of that 0.8 from the VAT benefit and there was Q1 basket inflation so that that downwards bar 0.2 million is because obviously some of the Q1 last year was running at a favorable cost cost rate on proteins and food obviously this year a lot of the efforts that we've talked about in terms of margin improvement they came later in in the first half of the year so sort of towards the end of May early June so then you know there's not much impact of those in the H1 numbers but there is a bit and you can see there's some margin improvement and underlying growth going up to generate our 1.8 million so to that effect in terms

12:00 of the timing of a lot of these upsides there's a normal sort of 40-60 weighting of EBITDA generation for this business you know taking back a look at the last few years back to 2018 on top of that there's a 1.3 percentage point further improvement in the adjusted EBITDA margin from the utilities the food costs and some savings that we've made in terms of our processes in the stores which we'll come on to later in the presentation so We're feeling really good about those because they will obviously go a long way to improving our EBITDA generation in the rest of the year and beyond. Then just quickly onto the balance sheet before I hand back over to Richard.

12:47 Balance sheet remains strong, very minor net debt position of 1.6 million and I think with the EBITDA generation improvements we talked about, we'll be able to get back to our original principal IPO and so on. So that's been a key principle for us as a business. We don't want to get into a heavy debt position given that debt markets are expensive now and so to be in a nice position like that puts us in a great position for the next year as well.

13:26 Okay moving on to openings and sort of sites and the amounts of, we put a little box in the top corner here because it's Brands, we've got some delivery kitchens, franchise sites in the UK and overseas. So we've put a box here that basically tells you where we're at by the 2nd of July of this year. I've put 85 sites worldwide and franchise and company owned and we've opened so far this year, we've opened a site in Derby in the Derby and Centre which is a shopping centre in Derby. shopping centres have been performing exceptionally well and this one is no exception so we're delighted to be the performer for Derby.

14:15 Greenwich, a London site, a cracking London site, big student population, very heavy tourist area, offices, very busy and great site, we're delighted to get that one and that has opened already at sort of mature sales so that's a great performer for us. and we opened a SSP franchise business Manchester Piccadilly on the on the ticket line great site very small site but doing some good numbers out of there so another successful SSP franchise business for us there and as I mentioned earlier on we've opened a couple since then one in Belfast which has been and one in Bracknell which is again in a very good shopping center area and after four to six weeks of trading is performing in line with expectations so so all good with the openings this year and we have a couple more that we will open this year a couple of a couple more company owned sites so we will get we will be at eight openings this year now we discussed last year about doing between sort of 10 to 12 sites but we also stated in this presentation that we're going to take a bit of a view in the first quarter just to see just get a sense of the market and see how things were and how the inflation was going and I think the first quarter was quite challenging so whilst we didn't make a considered effort

15:48 not to open 10 sites we probably didn't push quite as hard and the reality is we do have a couple of sites that we could have probably opened this year but we pushed them back to quarter one and quarter two for next year. We also wanted to make sure that we got Chilangos right and we'd embedded that into the business and we were getting the profit and that business had been transported over to Tortilla well. But the reality is opening early eight as opposed to the 10 or 12 still keeps us well ahead of our expected target kind of highlights that but we stated at IPO we'd open 45 sites in five years so even allowing for the slight shortfall that last year based on the 18 that we opened the previous year we're still ahead of target and assumed to be looking at over 100 sites by the full year end of 2026.

16:47 Next year is looking very good and we're keen to find great sites. The property market whilst perhaps not being as soft as it was immediately post Covid is still more favourable than pre-covid so there are still some great sites for us to go for. Slight tweaks and changes in some of the areas and focuses of where we're looking for sites. Obviously you'll all be aware that the high streets have found life quite challenging post-covid. We've seen huge upturns in shopping centre sales and travel locations and office places so we will continue to focus on those. still giving us a lot of wide space in the UK and a lot more university towns for us to continue to go to. So to that end we've got four pretty much locked and loaded already for next year so I'm out and about with the property director making sure that we find the rest of them for the rest of next year.

17:46 Just one other thing, Andy's talked a lot about how costs are starting to ease. One area that we have been and a lot of businesses and then a lot of areas that there's not been very much we can do about it. We've been quite creative in the way that we you know we're doing on new sites looking at different materials and whilst it's been quite challenging we've managed to maintain our CapEx costs on our new sites and anticipate them certainly not going up next year well let's assume always interesting to share competition see what's going on both in the UK and in Europe because obviously Europe does become a higher focus for us as we move the business forward and the truth is nothing really changes we are still noticeably somewhere ahead of our competitors in the UK there are a couple of those businesses beneath us that have been recently being bought by larger businesses larger organizations that will have a will no doubt have a strategy to be growing those brands otherwise I can't imagine why they report them. Barberita has a plan to open sites up in the north of England as

19:16 yet that's not happened Chipotle continue to open a few sites around the UK some strange decisions around locations from them in our opinion but they are obviously the one that if they do decide to put the hammer down then they can do they're you know very very wealthy business but as it currently stands they're still operating locations where that primarily we probably wouldn't choose to take so there's still some way behind us from Ireland that have been doing unbelievably well over there which was one of the main reasons we went to Belfast to to compete directly with them and they have also been brought they'll be coming over to the UK at some stage this year as well so we'll keep an eye out for them and then the other two are more I would say Taco Bell style operators not not of the same sort of slightly more premium offer that the other ones are so generally still in a position of strength we don't want to lose that we want to keep our foot down in the UK and that's why I'm keen to get very involved around property for next year continental Europe much the same we have talked about it as a strategy for us and I think even more so we want to be able to get involved in Europe we think there's a massive opportunity there we always have

20:46 It feels similarly similar to the UK 10 or 15 years ago or maybe longer ago when Brandon started this business There were quite a few runners and riders at the beginning And with the obvious exception of Tortilla, most of them were not really particularly great And I'd probably say that's much the same and more businesses with upwards maybe up to 10-12 company owned sites. So there's a massive consolidation opportunity in Europe and we really feel like we are now in a position to take full advantage of that opportunity and we are continuing to pursue that. So just to talk a little bit around the the new stores and just give you an update on those that we opened last year and those that we've opened this year.

21:38 So I guess one of the key things to flag is that there's a much improved picture to present around fixed costs part of the tortilla business so from a rent perspective as a percentage of sales the openings of this year and last year and the Chilango acquisition the rent what we're at what that's saying is we're still able to get deals on new sites that are favorable to the sites that we had pre-COVID and I think that's you know that's a trend that's very much here at the moment and there are lots of additional opportunities like Richard said to keep acquiring sites at favorable rent levels something to flag which is often overlooked obviously business rates is almost 50% of the bill that you pay in rents each year and actually and the valuation office rigged the business rates regime in April and that saw a 14% reduction for us in our rates bill versus the year before so from a fixed cost point of view things are looking very very good and similarly in terms of our new store it means things are looking very good the sites we opened last year are largely on track you know there's some smaller towns that we opened last year and we did want to flag that they do continue to grow it takes a bit longer for the sites to

23:11 hit maturation in some of these smaller cities um you know there's a graph at the bottom there that just The good thing about the tortilla model is it continues to grow for many years after opening. As people understand more about Mexican food, this is a new concept, burritos, as a concept in a lot of these smaller cities. As people try the food and where the mouth spreads, sales grow. and so we're really encouraged by how well we started in those locations already and actually the Chilango Estate which Richard's going to come on to in terms of new store openings is performing very well as well so we're feeling very positive about the UK wide space opportunity overall.

24:07 Just a flag, it's nice to put a picture against some of our new store openings since we updated at the year end and the rest, but encouragingly Belfast having only been open for a couple of months is already ahead of its investment case maturity sales level. Investment case maturity sales level just to remind you is the sales level that you need to hit a 30% return on capital employed which is the company's key financial hurdle that we make investment decisions against. and Bracknell similarly has started very strongly it's close to its maturity sales level and you know it's again it's only been open a couple of months we've been really encouraged by how well burritos have been received by that local market it's in a great shopping centre and we think it's a strong site as well so we're really encouraged with the with the openings from this year and although the numbers are not up here obviously Darby and Greenwich that we opened in the year. It's a similar story with those sites as well.

25:27 This is a very exciting slide for me to present because there were quite a few eyebrows raised when we looked at buying this business at a time when there were genuine concerns about working from home and should you be investing in a central London business at this stage. I think we as a team and as a board have always been very Pro London. We were always of the opinion that it would come back to 80, 85, 90% of its previous sales. It's a very, it's a very buoyant city and always has been. We always believed that Chilango was quite a good competitor of ours, one of the best. So it gave us an opportunity to take them out of the game or certainly control that business.

26:15 And we got it for a very good price we felt. What's been really encouraging is there was some concern around rebranding them to Tortilla. Would that work? Would people feel very disappointed about Chilango, etc.? Well, the actual truth is that our sales since we converted these five sites to Tortilla are circa 30% up versus the back end of their time as Chilango. and so on. It's been a hugely successful acquisition for us and we're incredibly proud of what we've managed to achieve there and so subsequently the return on capital on that business has been fantastic and we would anticipate hopefully that we'd be almost at circa 800 million pounds of EBITDA out of these Chilango sites.

27:01 So real tick in the box for us for many reasons not just that we've managed to do this and it shows the strength of the Tortilla brand but it shows that as a business we're able to do an acquisition and we're able to do it well so if other opportunities presented themselves whether they be here or even perhaps abroad that really gives us the confidence of knowing that Tortier can go into these spaces and perform substantially better than the previous tenants what we've also done is because we're still we still have three locations trading as Chilango they continue to perform well and we've actually put Chilango back into the delivery network at our Croydon Box Park location which we did convert back to Tortilla but we wanted to see whether brand recognition in a certain area would work and we have a facility there to have to put Chilango back in and that's been a real success our delivery sales out of that business have grown substantially and a lot of people are ordering Chilango off their So we're about to do the same in Manchester, which was an ex-Chilango site. So we're keeping the brand alive through delivery and we're able to do it out of our tortilla kitchens. So it's a win-win there.

28:27 Franchising, another successful time for us with franchising. Obviously all the doom and gloom around travel has completely cleared away now. Everybody is traveling, it seems that way anyway. certainly by looking at our numbers that we have in our Tortier locations in travel hubs and airports our Euston Tortier which is a franchise is just breaking sales records all the time as is Gatwick Airport Tortier and Bristol Airport Tortier so again really good news for us with our relationship with SSP and they're very keen to continue to grow with us there are a few more locations that we're doing we're doing one more with them this year and then we've got a couple more early next year that we're doing very good relationship with SSP and we would like them to do things quicker we'd like them to open more as is the case sometimes with these enormous businesses they are quite slow to get things done but they'd love to it's a very profitable business for them so we are anticipating continued strong relationships with them Ethos over in the Middle East continues to operate eight tortilla sites operating them very well we sent one of our operations guys out to oversee and run that business on their behalf about a year ago he's done a phenomenal job and it's now their most successful like-for-like business within their portfolio within our franchise company's

30:01 portfolio so we're now pushing them hard to continue to grow the brand in the Middle East and Dubai and Abu Dhabi by the end of this year, ready for mid to late next year openings. Certainly the confidence around the brand has grown dramatically in the last 12 months, I like the likes of double digit over there, which is fantastic. Companies continue to operate our businesses in university halls, which are performing very, very well. In fact, I was looking last week, I think it's only the second week all the students are back and the numbers are really, really encouraging. and again with them a bit of a slow mover compass we're hoping to open more sites for them and we'll continue to work with them and hopefully that will happen.

30:55 Moving on to areas where we've been trying to drive the top line I mean Andy's been talking a lot it's almost been a game of two halves for us this year first of What do we need to do to be more profitable? What do we need to do to sharpen up our cost lines? What do we need to do on our P&L to utilize our size and work with our suppliers to get the benefits of pricing? We've done a pretty phenomenal job on that and as Andy's already said, we are already seeing some pretty good movement on our margin for the last half, certainly in the next quarter of this year and going forward. So that's great news. but clearly any business needs to be driving the top line because the top line is really where where it all comes from so we've put in some tech which we were keen to do we've been keen to do for a while especially in some of these central London sites where we have enormous queues for two to an hour hours every single lunch time and the challenge with a single line and as quick as we can be on a single line realistically it's still relatively slow process if you join the queue at the back you know you're probably 15 20 minutes by the time you're done most people are pretty happy to do that but we think we can improve we thought we can improve our throughput by adding kiosks and adding two more lines which we've done in London Wall so we have in effect got three

32:26 tortilla lines in there now and eight kiosks So we've got six people producing food on three lines and we've got eight customers being able to order at exactly the same time. It does take away the kind of customer interaction and you're not walking along a line and picking and choosing what you want. You are doing that via a kiosk. The reality is this has been unbelievably successful. Our Audi sales records have increased by nearly 40%. Almost every day we're breaking sales records We're getting food out of the kitchen within a minute and a half from somebody pressing send so it's a pretty awesome setup actually and this is generating real extra revenue for us in this store and there are a couple of other sites in central London where we will almost certainly be putting kiosks in so very exciting for us and you know the way forward in very very high volume locations We continue to push our loyalty. We're over 350,000 people are on our loyalty app now, so that's fantastic. So we're able to talk to them, communicate with them, let them know of all the things that we're doing.

33:44 We have had this new product that Andy, I think, mentioned when he was talking about things we've done to improve profitability. We put a chicken pibble offer into our restaurants now, taking away our char-grilled chicken, saving us a lot of money in utility costs. Cleaning Costs and Labor Costs. This is a fantastic product, consumers love it, but it's a win for the consumer and it's also a win for us as a business in terms of costs, so really pleased that that's gone in. And the really big thing that I've been excited to talk about over the last few weeks to everybody and anybody who's prepared to listen is about Tortilla Sunsets. We are really getting right behind this promotion, this is very exciting for us I think it's a genius idea we have a business that performs tremendously well at lunch times but we are relatively quiet in the evenings other than delivery so based on the fact that we have employees in our business looking after some guests and a lot of delivery we really want to reverse that a little bit by looking after a lot of guests in our businesses because we have lovely restaurants and we've put together an offer that we think is sensational well it is sensational we're selling margaritas and beers for £2.50 I'm not I can't remember the last time I had a beer for £2.50 so there's no way in London and the rest of the country you can get these quality drinks for that sort of price

35:17 that's the hook that gets people into the business and then we're selling them our new menu items which are fantastic we've got some Sweetcorn ribs, we've got sharing quesadillas, we've got some nachos, we've got a cheese and chorizo dip. So there's a fantastic menu now. We're serving our food in plates and crockery, real crockery, not just sort of in bowls that we do it at lunchtime. So we're really trying to create a restaurant feel with really good value food. Everybody who eats out now, everyone knows how expensive it is to eat out. all our competitors in all aspects of this sector have had to put their prices up which is understandable if you go out to a relatively mid-range casual dining restaurant and you have a bottle of wine and a couple of courses you're almost at 40 50 pounds a head now that's a lot of money and we're able to offer this 10 pound menu with a beer or a margarita and it's quality food you know all our food is made fresh etc etc So it's all about getting the message out there. I'm shouting and screaming it.

36:27 We've even sent megaphones to all the restaurants at five o'clock. We're encouraging the managers to be shouting out, come and get your beers and your margaritas. So early signs are very strong for us. First couple of weeks, we've seen some increasing numbers. And of course, majority of that in student vacations. But it's overdue everybody and anybody. So please, for those of you that haven't been yet, please give it a go. So on to value for money which is something we talk about each time but it's important just to reiterate particularly with the cost of living crisis and the carefulness with which people are looking after their cash.

37:12 We have priced once this year in late March coinciding with the increase in the minimum wage. It blends at five percent but we did more and the rest of the team. we've redone some research and surveys with our customers that we did previously and good value remains really important to them and we know we're well priced compared to our peers as this graph shows against our direct Mexican and California Mexican competition but also against businesses like itsu which we're not as cheap and clearly the product is very different to the QSR segment, the Taco Bell, Nanda, McDonald's, KFC type businesses but we sit cheaper than sushi, poke bowls and some of the burger businesses so it's a nice spot to sit and obviously although it's not mentioned on here the food is healthy and customization with food

38:46 is very much on trend and those remain important principles for us to just give a few points before Richard wraps up around current trading and outlook so since the end of the first half here we as I mentioned we have opened in Belfast and Bracknell trading remains good over the summer August was a slightly quieter month because the weather was not very good and a lot of people did leave the country for overseas holidays but and the favourable costume environment is probably the most significant point as I mentioned earlier in the presentation that will yield a 1.3 percentage point improvement in our adjusted EBITDA margin in the second half of the year on top of as I said the normal seasonality that you get with EBITDA generation and some other costs within our stores. We're launching these exciting initiatives which are already yielding some positive progress and we obviously want to continue progressing our technology initiatives and we've got some other ideas as to things we can do on that front as well having appointed an experienced head of IT earlier in the year so we've got lots of exciting ideas there

40:19 and lastly we're continuing through franchising and support strategic acquisitions as we as we referred to earlier in the deck and you know there's a tremendous opportunity in Europe to create a consolidated Mexican bit burrito business there's plenty of pizza burrito businesses in Europe and you know the customization of what we do and the healthiness of it burritos are burrito businesses are growing across all countries in on the continent

40:55 so coming to the end really this is just a you know slide to give a really a little bit of the sort of strategic leaders that we believe this business has for next year and kind of ongoing really we're keen to do the 8 to 12 openings Brandon we feel like the world is turning slightly more favorably so we do want to keep pushing hard on that the UK is still our core business and we still see lots of opportunities so we want to go and do that We do genuinely believe there's a unique opportunity to consolidate in Europe. Enough said, we've talked a lot about that. Franchising, we now have a very, very good franchising business. We spent a while making sure we were nailing our central production processes. We have a cracking CPU now that's very well oiled and well run and a great product.

41:42 We have franchise procedures in place for this business now so we're ready to really press the button on franchising more. presumably around Europe but who's to say that won't happen more in the UK but for the moment that's more of a European idea. Something Andy and I have talked a lot about but I think for us as a business and where we sit now and the size of the business that we're at I think it's really important that we are striving to get back to our you know adjusted EBITDA corporate EBITDA of sort of 10% and that we were running at pre-COVID and then clearly we've been battered with all sorts of headwinds and this business any protein-led business.

42:27 We've worked incredibly hard to get ourselves back to a place of parity but I think next year we want to really push on with that and see if we can get back to 17-18% store EBITDA and 10% corporate EBITDA. So that's something we're striving to achieve. Technology, we talked about kiosks early days were very successful but really drive sales and efficiencies for us. and I think we're also businesses at a size where we really need to be punching a bit harder on our marketing budgets spending a little bit more money on that maybe some national marketing next year you know we're not a small business anymore we're the largest Mexican business and we've got 70 80 sites in the UK pretty soon so it's pretty important that we're shouting and screaming about how good we are in some and Richard Haley.

43:24 So in summary, I feel like I've written this sentence about four times over the last couple of years, despite all the continued headwinds. But despite all the continued headwinds, we're delighted to be broadly in line with our full year numbers. We will continue to drive forward with our sales through kiosks and improved delivery software. And as the Pied Piper of the Sunsets initiative, we will continue to push very hard on that over the coming months. Yes there is a little bit of an air of slight concern. I mean obviously these train strikes are very disruptive in many different ways. We are anticipating and hoping that there will be some kind of resolution to this. I can't believe that they'll continue in December as they did last year but there is another risk around that. We certainly hope that's not the case.

44:15 There is good progress being made on our site openings. We're still on track to hit our target of 45 sites over five years. I think strengthening the board is always a great thing. We have a fantastic board, a very strong operational board, a strong marketing team, finance team. We also have Francesca sitting on our board who's CFO of KFC over in Europe so a real help to us with our European strategy and now with Andy moving up to MD as well that's a great move for us. and I think again as I say at the end of all these presentations we really continue to be very very excited we feel like we keep getting stunted by various events macroeconomics that sort of slightly hold us back but we've got the foundations in place in this business now to really let it rip and that's the intention both in the UK and in Europe over the coming years that's it thank you very much Thank you very much indeed for your presentation this afternoon.

45:21 Ladies and gentlemen please do continue to submit your questions just by using the Q&A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with the copy of the slides and the published Q&A can be accessed via your investor dashboard. Andy, Richard as you can see we have received a number of questions throughout your presentation this afternoon and given the significant number of questions received you may not be able to get through them all now but of course immediately after the presentation we'll give you back all of the questions and any you don't manage to get through we can add additional responses to post the meeting and we'll publish all of those on the platform

46:02 but for now Richard and if I could just ask you just to make your way through that Q&A tab and give your responses where it's appropriate to do so and then I'll pick up from you at the end thank you okay right well Paul S thank you very much for that and we do own Chalango so that's good I'm sorry that you consider them to be better but actually maybe I'm not because we love Chalango as well we think that it's fantastic so fair comment are we considering raising more equity to finance better positions at this stage probably can't really answer that I think it's probably unlikely the stage we're at with the business in its current state with regards to the share price I think our preferences would be if we were to do anything though is promote money obviously we've still got seven million undrawn on our debt facility so if we need to access that that's clearly the preferable route than raising money in the current So there's a question here around can you share some details about how you calculate the Roki so we calculate simply we just take the capital cost that we incurred so we were at Recollect we were saying we were spending around 400 to 425,000 on a new site 12 months outside of London it's more like 24 months depending on the on the location

47:39 okay um what's the point of clarification is the intention going forward to fund expansion internally yes yeah yeah and then do you have something you can share regarding the return on investment on the kiosks We needed to generate an extra £800 a week from the kiosks in order to return the capital expenditure. We're generating 1200 quid a week extra and we're only five weeks in so that was the kind of main hurdle we were working on towards that. You keep referring to yourself as a proctor.

48:35 Oh yes, very funny yeah. Yeah I mean obviously a rollout story like ours you have got the depreciation on your stores and that is always something to consider but we believe that the right strategy for the business is to continue to pursue growth and you know the profitability challenge that we've had over the 12 months obviously a lot of them are being alleviated so we we can see that coming back nicely in sort of future periods.

49:06 I wanted to ask about the new openings in full year 23 in March the announcement target which stands 12 and it seems to be well in the year eight instead can you speak to the challenges opening new sites that prevented the earlier target Well I think I sort of highlighted that but yes that's correct that was the target I think we also stated that we wanted to be very sure that we wanted to check the sort of sentiments of the market at that particular time we didn't want to draw down too much debt to do that we wanted to make sure that we were in a place to open that many sites whilst we were still in the process of dealing with Chilango as it turns out we'll end up opening eight which is a little less than we'd hoped but it is still keeping us on track with our 45 sites over five years so we don't consider that to be a massive shortfall and I think as I stated earlier we did have a couple of sites that we could have pushed into this year but we felt like we were happy to move them out to next year so there's nothing suspicious about it it was just something we felt was probably the right thing to do last year There's a question from Connor around our intention to franchise in Europe and how we're set up for that. So you're right, we obviously do not have any stores and the rest of the world.

50:51 Although they're relatively small businesses there has been some moderately successful growth stories in different European countries selling similar burritos and tacos like we do and having tasted the the rents can be lower and actually the VAT rate on hot food is as low as sort of sub 10% so with a 20% rate in the UK we do have a bit of a disadvantage here so we're quite excited by the opportunity to make it work in different countries. At what store level do you need to open another central operated kitchen?

51:40 it's a good question the changes that we made with our chicken pit bull process has bought us more time in terms of our current units

52:10 Reem not selling tacos on delivery? Yes I would have to say the reason we don't is from a quality issue. You're warming some flour tortillas and suddenly you know when they're not wrapped up like burritos are wrapped in silver foil they can get very sticky. They're not the easiest things in the world to eat and certainly after a after a journey on a bike tend not to look particularly wonderful on arrival that's not to say that we're not trying to find ways of doing that we know they're very popular we we're always looking at better ways of packaging our food from a delivery and a takeaway perspective and that is one of the one of the areas that we're looking at for those those products okay Right, which one next?

53:04 In terms of a rewards membership, are there any plans to build an app? Obviously there are bigger businesses like Starbucks and Greggs. I think the view on apps is quite mixed. I think there is a view that people are a bit fed up of apps and there's too many of them. it's something we're looking at I mean obviously we as I said in the presentation we do have a new head of IT and we are we are reviewing lots of different sort of tech options for us definitely there's more opportunity with kiosks and obviously the thing that we did in terms of putting in some delivery application software that's those things that were the obvious low-lying fruit for us but of course things like apps and other ways that we can get but to click and collect you know can we try and push more of the orders to come in people just come in and pick them up rather than queuing there's lots of opportunity on that type of thing as people get used to the idea of ordering in advance sorry just looking at this some duplication in terms of um questions here when you calculate the return on capital do you calculate the same what would be your profitability um obviously there's a there's a view here that adjusted EBITDA isn't a not isn't a a real number um I mean I guess the reality is adjusted EBITDA for us is the most

54:37 equivalent way of looking at the underlying results you know removing Haley, and We can't really talk about acquisition talks.

55:44 Conor's noted that he ate three burritos from Tortilla this week. The pibble is 10 out of 10. That's good to hear.

55:51 Thanks Conor. I'll give you the 10 pounds next time I see you. That's great. We're taught to entertain acquisition talks. I mean we obviously can't really talk about that. I mean clearly with our share prices depressed as it is, we're significantly undervalued in our opinion in terms of a multiple EBITDA. How confident is the management team in the future of business? Is the management adding shares to their personal a very good chunk of shares still held by the management team and obviously we have an exec team with with with an LTIP and everyone is incentivized to drive the business and and you know we've got very young excited driven people in the organization and we feel very confident Richard, Andy, absolutely and thank you very much indeed for addressing all of those questions that came in from investors this afternoon and of course if any further questions do come through we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses of course where it's appropriate to do so but Richard perhaps before really just looking to redirect those on the call to provide you their feedback which I know is particularly important to yourself and the company if I could please just ask you for a few closing comments

57:22 just to wrap up with that would be great

57:26 um well i think you know when i read when i go through this this this presentation and we as you can imagine we've been through quite a lot we've spent some time putting it together the overriding view is this is a this is this is a great business that's been you know hit by external scenarios that were really outside of our control we've worked incredibly hard to get ourselves back to a place of profitability we're really excited about certainly in the next few months and we think we've got a couple of great things going on to drive the top line in the business we've got a very stable senior management team in this business who absolutely love it I mean kind of you know we're all out and about last night again all the senior guys a lot of office people out in their stores talking about sunsets giving feedback there's a genuine determination in the company to to do absolutely the very best we can and it's wonderful to be around such a committed bunch because you have to be in this in this in this industry at the moment it's challenging yes it's a little frustrating that the markets are a little against us but it is what it is we just we just carry on doing and taking responsibility for what we can do and I'm very comfortable that that's exactly what we are doing and we believe that as things start to ease that all the hard work we've done in the last six to That's it, just thanks very much for your time today and hopefully as you reflect on

58:56 the presentation you'll think actually do you know what, this is good business because we really think it is. That's great. Richard, Andy, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected. for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete but I'm sure will be greatly valued by the company. On behalf of the management team of Tortilla Mexican Grill plc we would like to thank you for attending today's presentation. That now concludes today's session so good afternoon to you all.