Tortilla Mexican Grill plc (73D.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Tortilla Mexican Grill plc investor presentation. [Operator Instructions] Before we begin, we would just like to submit the following poll. If you could give back your kind attention. I'm sure the company would be most grateful. And I would now like to hand over to the executive management team from Tortilla Mexican Grill plc. Andy, good morning, sir.

Good morning. Thank you for the welcome, and welcome, everyone, to the interim results for 2025. I'll -- joined here with Josie today. We'll do a quick intro in a minute. Yes, just a quick one on myself. I've been the CEO now for about 18 months. I've been with Tortilla now for over 8 years. So you can imagine I've eaten a lot of burritos in that time. I love the brand, I love the cuisine. Started my life as an accountant back in the day in the Big 4 firm. So yes, that's myself, and then I'll leave you with Josie.

Yes. I'm Josie, I've been with the business now for 3 years and just recently started the interim CFO position. I'm also a qualified chartered accountant and started my career at the Big 4 back in New Zealand. Hospitality is in my blood. My parents run a hospitality franchise business in New Zealand. So it's always been a very important part of my life. I'm happy to be here with you today.

Great. So we're going to proceed with this agenda. So I'll do a quick summary followed by strategic and operational review, then I'll hand over to Josie to run us through some financials and then we'll try and leave plenty of time for Q&A at the end. So yes, I guess it's not just 6 months now we're in September, we've had a year of significant progress in 2025, which is great, which is much the same as what we reported last time. So I mean some of the highlights are fantastic. I mean against the backdrop of a difficult U.K. market, we performed extremely well during that time, which we'll talk much more about. We've outperformed the industry by about 8 percentage points in the first half of the year. Delighted to say 6 of the French sites are converted by early October. They are all now -- those 6 are all now done actually, so all trading. We grew our franchise estate substantially as well in the year. And so that revenue stream now is worth a significant amount in terms of total system sales. So we're going to cover that also a bit later. And we signed a pilot with a business called New Growth Kitchen, which we're really excited about. We've improved our staff retention and engagement, and I'll tell you a lot more about that. We've talked a lot about people in the past, which is important to myself and the team. We've worked really hard on our food product launches, our brand, our tech. So I'll tell you all about that in the presentation as well. And yes, delighted that half of our sites now have got self-watering kiosks in which we continue to see some really good upside on as well. So some really good headlines for us to deep dive into -- in a minute. So, I guess just to remind everyone, when I started as the CEO, we devised the vital 5 strategic pillars for us, our sort of strategy, if you like. The five areas were to improve our U.K. profitability, to drive our brand through investing in food and brand to drive top line growth, investing in the team and technology, which is a key priority in a very people-heavy business. And actually, technology has been something that's been a wonderful addition to our organization. Doubling down on our franchising was a key priority and to develop the brand internationally, which we have obviously begun that journey on with the acquisition that we made last year. So we're going to cover -- walk through these five areas over the course of the next 20 minutes. So we look at U.K. profitability firstly, it's really impressive story actually, and I'm very proud of the team for how hard we've worked to get to this point. If you look at where we launched this strategy back in March 2024, which is identified on the graph. Since then, the red line represents our sales, our like-for-like sales growth, and it's gone from strength to strength. And as you can see really since September of last year, we've outperformed the industry tracker quite substantially, which is fantastic. And that shows no sign of slowing in September as well, which we'll come on to current trading, we've had a very strong Q3, which we're really pleased with. And as you can see, the industry data is somewhat more challenging. The industry has had a difficult year this year. So I think it's even more impressive that we've been able to perform so well in that environment. So yes, I mean, I guess what that led to, which is a fantastic achievement is a year of record U.K. profitability. So year-on-year, our profit increased by more than 30% in the first half of the year, which is fantastic. And we'll deliver record profit margins both from a pound and percentage perspective this year, which is fantastic. And yes, I guess it really nods to all of the efforts across the vital 5 areas which we're going to come on to. And actually one other area as well, which we're focusing on is looking at our estate. We have a small sort of single-digit number of stores which are loss-making, which we are going to try and address. And we've addressed a couple of those already to close 2 units this year. And I think actually, when we do that, we can get our store EBITDA margins back or not back because we've never been at that level but close to 20% level, which has been the traditional milestone that people have aim for in this industry. So yes, really pleased with this and lots of things for us all to be really excited about. And I guess this slide sort of covers that point in a bit more detail. And actually, one of the things we want to look at here is if you look at 2019 actually, pre-COVID, we've increased our adjusted EBITDA. So this is our EBITDA -- store EBITDA plus your franchise income less your head office cost. We've increased that from 7.2% to 10%. And I think a few years ago, we identified that 10% is our aspirational target in the short term on that. So that's a great result. And actually, when you look at the -- since 2019, the amount of capital we've invested in the business through either expansion capital, whether that's adding new stores or the acquisition of Chilango and then the EBITDA less the maintenance cost growth that we've seen over that same 5-year period. We've delivered a 24% ROCE during that time, which I think is a great result actually considering that we entered into some smaller towns across the U.K. where the brand awareness was lower. We're going to talk a bit more about that later in the presentation how those sites are maturing. So I think that's a pretty reasonable return on capital actually. I think once we rationalize the estate as mentioned, with a small number of units, that ROCE will look really, really good. And yes, on the right-hand side, you can see corporate margin post maintenance CapEx. So yes, it's really fantastic news story where we are now this year. So I just wanted to talk a bit about what's driven the top line. I guess that's really fundamentally the thing that's driven that profitability. It's always great when you can generate sales growth through your core estate rather than necessarily adding new sites to drive growth. And that's, I guess, been our mission. We've been really focused on how we drive volume, more people eating burritos. So we'll talk a bit more about volume later on. But essentially, the main things that we've done is we've improved our core menu quite significantly as we talked about before, whether that's quality of ingredients, cooking methods or recipes. And our food is really substantially better than it used to be. And there's still some exciting stuff being trialed at the moment that will come live in the coming weeks. So really excited about those changes. We've also jumped on to some seasonal menu rollouts. We launched a summer salad to compete with what was quite a big growing food trend in the U.K. at the time of the year where we're meeting the customers what they want, and that was really successful, huge growth on that year-on-year. We innovated with new products, our proteins costs, which drove substantial sales, so that's my point about you don't necessarily need to add sites to [indiscernible] business when you've got products that you can bring to the market to drive sales growth and they were really well received. Everyone can see when we walk around the supermarkets that there's a lot of protein badges on food now it's a big trend. We jumped on that and I think we're really able to capitalize on that food trend. And we've been doing some limited time offers, which have been really well received. We had what was a Sauce Shop, which is coming next week and we worked with Tubby Tom's. We've worked with ton of different businesses, and it just creates some buzz that people get excited about, and we will continue to do that. So then moving on to some of the work we've done on our brand as well. The imagery you can see on here, it looks very different to our tone of voice and our imagery a year ago really. We've worked incredibly hard to create a really bold and consistent storytelling and really hero in the food. I think as these pictures go to show the food looks vibrant, it looks fresh. And I think the message is just really clear and concise and it's consistent across all customer touch points as well, whether that's on the loyalty app, whether it's on our website, whether or not it's on social media. And actually we'll talk about this later in the presentation. This is the way that we've designed our stores in France as well. So people will see this brand show up equally across all areas. And yes, we think it looks great and a lot more modern, I guess, than what we had before. So yes, just to sort of talk a bit more about some of the things we've done on the marketing side as well around building community as well. We've got some strategic partnerships. We worked with JAB, where we did fun work at their gym, which is a boxing thing, big reach on that. We've done some supper clubs, and we've done as you can see here, we did a walk bar couple of weeks ago in the National Avocado Week. And yes, it's been really fun. We've been working with social media to create quite a lot of hype around the brand, and I think that's going to be something that continues to build. And then looking at a few other areas, the picture on the left is the store. So this is something we'll cover a bit more later on. The store that's a location in France that we built. It's a lot cleaner sharper simple design than what we have in the U.K. at the moment, and we're really proud of the work and effort that we invested in that brand. Our digital platform is very different and we've enhanced our burrito society application. And I think we've had some good traction through that which we'll come on to. Our packaging looks better. And our staff uniform. People have been really excited to wear a more sort of interesting fresher looking uniform. And I think that whole interaction the customer has across all those touch points does make it nice and consistent. So yes, talking about team. I mean this is something that's hugely important and I think sometimes is often overlooked. I've talked about a lot before. It means a lot to our organization. We have a lot of employees and those employees if they're motivated and morale is high, they are likely to give the customer a great experience. And so I think other than the food, the customer service is something that can really make or break somebody's experience of any business. So that's why we've invested hard in it. We've seen our new manager retention up 7 points, which is fantastic. And we've been promoting internally through the centers of excellence that we have. We talked before about the Habanero Highway in the previous presentation. This is a career pathway that we built for our team members. You can see the various graduations here on the slide, which is fantastic, and that's created improved skill set within the organization and the training team has done a fantastic job with that. And the other thing just to highlight here is we implemented our Burrito Masters Competition last year for the first time, we're doing it again in a couple of weeks. And this is a bit of fun, but it's each restaurant, we identify the best retail role in each restaurant and then we do regional heat where we find the best in the region, and we've got a national competition or I should say, international competition because we've got the best from France and the best from Dubai coming over as well to really sort of celebrate the fact that we're a global business now. So yes, lots of fun to be had with these things, and it's definitely something that's added to morale and the feeling in the organization and the growth. Very quickly on customer service as well. We've implemented a new feedback tool to have a little bit more precision, I think, in the types of reporting we see what customers are saying. And a couple of themes that came out of that a recent deep dive on that was value portion size and value for money since really doubling down on portion size, we've been able to improve the back on that quite substantially. And so this goes to show you can kind of use data to act quickly, you can jump on trends that are coming up and that's something that our operations team has been very focused on recently and will continue to be a big focus. And then on technology, this has been an area that we've been really focused on really since the launch of the Vital 5. It's been fantastic that we've managed to implement so many kiosk sites in such a short period. Over half of our estate in the U.K. now have kiosk sites. Where it's possible to put them in, we would intend to put them in pretty much everywhere because we see a substantial improvement that some customers in the customer journey, you feel perhaps a little bit nervous with the fact you get lots of questions at the line and they find it perhaps a little bit intense, it creates a sort of more of a carved process for those individuals. But we work really hard to do it in a way that doesn't detract from those that do want to come to the line and order in the traditional way. So getting the customer journey right in terms of way you position them the signage, we've put a lot of effort into making that a good customer journey and fantastic sort of returns that we see on those kiosks, both in terms of transaction volume growth and average order value as well. The Burrito Society continues to be a fantastic success. We're nearly 0.25 million members now, which is fantastic. The outlook is great. It's got the new design, as I said, the new branding and we continue to work hard to encourage our customers to come quite regularly. We don't ever really want to discount our in-store products. We're trying to provide value for our loyal customers by rewarding loyalty. They get free [indiscernible]. We're continuing to evolve and explore potential robotics partnership with Kaikaku, which we've talked about before, which is fantastic. And we've been working on our data warehousing and how we use information to make quick decisions. I think we all agree that the world has moved on very rapidly over the last year or so in the world of AI, and it's fantastic when you can get to the bottom of questions and decisions and analysis more quickly by using the tools that are now available in the marketplace. So we talked before as well on some of the other pillar around doubling down on franchise. And this is an area that I think the graph is fairly indicative that we have doubled down on franchising over the last 5 years. It's been a big thing for us. Just to remind -- well, to tell those of you that are not so familiar with our business, but we have a really strong effective operating model for franchising. We have slow cooked meat and beans cooked in the central kitchen and that creates a really fantastic consistent product. And a lot of those cooking processes benefit from slower cooking times, which is more easily achieved in central kitchen. But then what we do at the store level is much more simple because we just have to prepare some fresh sauces, which is super simple. So it means we can build sites without extraction and complicated expensive kitchens. We don't need chefs. And so it's a very nice model for our franchisees where they receive the food from us and then they just do the small bit of preparation themselves on site. SSP has been growing fantastically with us. We're looking at some opportunities with Compass as well. I mean SSP just to talk about that business, we've opened a number of stores recently in airports, train stations and they're in double-digit like-for-like growth in the first half of the year with us, which is fantastic. Compass, we're looking at some other sectors as well. That's a relationship which is going well. And then Ethos, again an even bigger like-for-like growth, fantastic job the team have done there and they've opened some sites this year, and there'll be one more later on in this year as well in Dubai Mall, which will be fantastic. So yes, we're looking at some other opportunities. I mentioned earlier, we signed a pilot with Growth Kitchen, which will be exciting. So there will be 3 sites over the next few months. We've just opened with SSP in Glasgow Central Train Station. The site looks fantastic to the new brand design guidelines. And we're actively progressing discussions with some European partners. Now we've got the Springboard for Growth in Europe through our big Kitchen [indiscernible] which will come on to, we're sort of actively working on that as well. So yes, talking about then a good segue into developing the brand internationally. I mean this is ultimately why we bought Fresh Burritos. It wasn't to do a corporate rollout of our own stores, but it was to create a platform for growth in Europe. So we bought business with 13 of our own stores and they're in fantastic locations like Gare du Nord railway station, probably one of the best units in the busiest railway station in Europe is fantastic. So we've got a great property portfolio over there, which we're busy converting. And as I said earlier, we've now converted 6 of those locations. Still early days, but some really encouraging signs coming out of that and we'll look forward to talking more about that later in the year when we got some more information. We've got a team in place led by [indiscernible] and yes, really motivated. And we've built the Central Kitchen as well, which has been in operation now for some time. Huge facility, 3x as large as the U.K. one, which obviously supplies about 100 restaurants. So we've got a facility there that can supply a lot of restaurants. And obviously, the plan for us there is to franchise our brands in various countries close to France. So France, Belgium, Netherlands, Germany. We're also looking at opportunities in Spain as well in Portugal. So there's a lot of white space opportunity in Europe. And I guess that's why we made that strategic acquisition in the first place, and we've been in the investment phase there. So yes, this is some imagery of some of the stores that we converted in France. I hope you agree that it looks a lot more modern and fresh and a sort of cleaner design. And we're really pleased with it. It has meant that we took a bit longer to convert the sites, but we feel that you have one chance to enter a new market and you've got to do it well. And so I think what we have done here is -- it has taken a bit longer, but we have done a good job of it. The sites look great and we're really excited about the opportunity. So there's various site on the left about Europe, one in the middle is [indiscernible]. So they look great, the outside looks great, the inside looks great. And I think it's going to be a good opportunity for us to really showcase the brand in a new market. And then yes, just to cover off a bit of a store table before I hand over to Josie on the financials. We're now at 116 sites at the end of September, which is fantastic. We're by far the largest in Europe. There's no business retail that's anywhere near our size, which is great, a good strategic advantage. And we've got a good mix of countries, franchise stores, own stores. And as I said earlier, the focus at the moment in the U.K. at least is to continue on the journey to drive volume and profitability in the U.K. business, and we'll look at expansion opportunities in years to come. But I think there's enough to go out in the U.K. in terms of that side of things. And then with Europe, the opportunity is obviously fantastic. There's lots of countries, lots of great shopping centers, lots of great train stations, lots of high footfall locations that we feel really confident that the brand will perform well in. And so yes, as you can see from here is sort of a good reconciliation of the existing estate. So yes, over to you Josie now to run us through some of the financials.

Great. So thank you, Andy. I'll start with some of the financial highlights, which I think really confirm the progress that we've made in the U.K. this year as well as the progress towards our European expansion strategy. So firstly, U.K. sales like-for-like growth was 5% over H1, which Andy mentioned was significantly ahead of the market. Our revenue was GBP 36 million for H1, which was just over a 14% increase year-on-year. System sales reached GBP 50 million, which is fantastic to see that's including our franchise sales as well. Overall, our adjusted EBITDA reduced as a result of the investment phase in France. But importantly, the U.K. adjusted EBITDA increased over 30% to GBP 2.4 million, which I'll speak to later in the slides. Great. So taking a look at the income statement, I will speak to revenue and adjusted EBITDA further down. I've got some waterfall graphs, which I can take you through. But looking at our gross profit margin increased to GBP 27.7 million, which importantly, the U.K. margin actually increased to 78.3% year-on-year. Despite inflationary pressures, we had strong supplier negotiations. I think it's important to highlight that beef prices have increased significantly in the market this year, which we haven't been exposed to due to a hedge that we completed at the beginning of the year. So that's really where that margin improvement has come through. Overall, we did have a loss before tax, which we view as a near-term consequence of the investment phase in France. This was largely driven by France, GBP 2 million with a smaller loss in the U.K. Great. So I think, yes, this really demonstrates the strong like-for-like sales performance that we've had across the U.K. this year. As Andy mentioned, we've been really focused on really squeezing our existing estate, which is the best way we can grow our sales. Some of the initiatives mentioned with our protein pots, which generating sort of 12,000 a week in additional sales without any capital outlay, is a great example of how we can grow our sales without significant capital. Overall, as Andy mentioned, for H1, we performed -- outperformed the market by over 8%, which is just fantastic to see. And that's continued into Q3, and we're expecting Q4 to be strong as well. Great. So as Andy mentioned, we do have a short tail, which are largely in our regional sites where we opened quite a few sites across '22 and '23. I think this graph is fantastic to show that despite us opening the sites in more regional areas with lower brand and lower product and cuisine awareness, we're actually seeing really strong sales like-for-like performance across these sites now. And with that short tail in the sort of low single digits, if we were to remove that, then this performance would be stronger in those regional areas, which is just fantastic to see. Great. So this waterfall graph just shows our revenue growth from H1 last year to H1 this year, which is a record, as I mentioned earlier. A significant portion of that is due to the French acquisition, but also our growth in our franchise income where we've opened a couple of sites over H1. Our U.K. sales like-for-like growth as well. So, really a good acknowledgment of U.K. growth whilst also acknowledging our U.K. international expansion strategy. Next slide here. This is also another word for [indiscernible] which shows how we got from our H1 EBITDA, last year to EBITDA in H1 this year. Again, a significant portion of that reduction is due to France, which we -- give us a near-term impact of being in our [indiscernible]. The first arrows points out that actually our U.K. adjusting [indiscernible] to GBP 2.4 million for H1, which is just great to see mainly driven by top line if anything [indiscernible] got the initiative from the like-to-like sales growth as well as cost savings, which really show our focus on ensuring that we are optimizing costs as well as growing that top line.. Right. So, moving on to cash flow and leverage. So, importantly our Mature UK estate continues to deliver stable, recurring cash generation, which with free cash flow reflecting our investment leading to growth strategy. Adjusted EBITDA of GBP 1.2 million there, you can see convert to an operating cash outflow of GBP 1.8 million, which was driven by working capital movements, which is largely timing driven in the U.K. as well as our French operational investment. Yeah, so the free cash outflow of GBP 4 million really reflects our planned investment in the U.K. you can see where there is a [indiscernible], which is our kiosk invest as well as mainly our French investment expansion. It's where technology met this free cash outflow reflects being at the early stage of the investment cycle. We have frontloaded the investment spend, as Andy mentioned, the central production Kitchen as well as the initial conversion, which is temporarily weighed on cash, but the infrastructure is now in place with the heaviest spend behind us, and future rollouts will be much more efficient. In terms of the financing to support the growth, we secured in H1 an additional GBP 2.5 million of refinancing with Santander, of which in H1 we had drawn GBP 1.5 million with a further drawn in H2 just continue supporting this growth really, which is great. I think then, let's just summarize this [indiscernible].

Yes. So I guess just to summarize. We got through the presentation quite quickly so there will be lots of time for some Q&A. But I guess what are the headlines and things we want you to walk away from this, I guess the U.K. is in a great position, better than ever. So we want that to continue and that is always at the moment at this stage in the business is going to be the kind of the cash generating engine of the organization to support growth. In terms of outlook, one thing we wanted to highlight on the outlook side of things is that we continue to trade well in the U.K. So our like-for-like in the third quarter was 7%, which compares favorably actually to the first half year that's 5%, so that's fantastic. And yes, we've got 6 sites converted with only one more this year, end of the year. And then we'll be looking forward to sort of coming back with some information about how they're trading in the coming months towards the end of the year. Great that we hedged and that does continue, as Josie mentioned, to help us protect our U.K. profitability in what is quite a volatile sort of food market at the moment from an inflationary point of view. And yes, franchising growth, We've set a couple of sites to open in the second half of the year. One of those is Glasgow, which is now open. The other one will be Dubai Mall later in the year. And then on top of that, there's the three pilot locations we're planning with Growth Kitchen as well. So that's really exciting. And yes, I guess we, as a Board, remain really excited about the opportunity. I mean we are the pan-European winner with the largest business celebrated in Europe. Scale is everything in this industry and the fact that there's lots of businesses now talking about European expansion. It's great that we're not just talking about it, but we're doing it. We've got the infrastructure built now. We've got the Kitchen there. We've got the team there and we've got some stores designed. And so yes, we're on that journey, and that's really exciting for us. That's why we're all here. And I think having then the U.K. engine regenerating the great profits, that's a fantastic sort of combination to mean the business is really going to succeed over the coming years. So yes, we remain really excited. And hopefully, this presentation has helped highlight some of that opportunity for you all as well. So, I think there's one more slide, I mean this is a summary, coming back to [indiscernible] this does remain a priority. We are going to continue improving U.K. profitability, and some of those steps we talked about in terms of the initiatives that we've launched this year, having the full year impact of those next year, whether that's disposals we've made in a short [table] of sites or other initiatives like kiosks, they will continue to provide a lot of value in the future. We're going to continue investing in our food and our brands to drive growth. I think there's more opportunity there. So I'm going to work really hard with the team to keep pushing that. Product is absolutely everything in this industry to keep investing in the team and technology we have so far. Talked about franchising, that's already well set up, but we want to go harder at that as well. Now we've got the little Kitchen built which [indiscernible] about our objective of developing the brand internationally. So we're all of the view that it's very exciting and hopefully as excited you are as well. So that does take us to the end of the presentation.

So there are some questions, I think, which have been submitted. So we can run through some questions now. So the first one here is, a pre-submitted one about how are we capturing the vegan vegetarian market? Well I guess the answer to that is we launched a new vegan chilli product last year. It's a really, really strong product that's very popular actually. So it does remain something that we offer. Obviously, no one wants to get a vegetarian burrito and have a guacamole in it. So we do have a couple of options. But actually, what we're seeing is not a huge growth in the vegetarian vegan market. I think there's other food trends which have sort of grown more quickly and so the protein pots and things like that. So whilst it's something that we look at, I guess that's the beauty of having an adaptable menu we can cater to that market. So next on the list, can you detail on self-ordering kiosks delivering strong uplifts and rapid paybacks. Can you quantify the average sales uplift per site and what proportion of U.K. sites do you expect to be kiosk enabled by the end of the year. Do you want to take that one?

Yes, absolutely. So, we are seeing strong like-for-like sales up [indiscernible] kiosk sites. About a 10% sales up compared to the sites that don't have kiosks that don't have kiosks. So we are sort of very focused on continuing to deploy those across the estate. There are some sites where it's not [wholly] possible to have kiosks and stalls for the shopping season that won't allow us but all the sites that we can and support kiosks, it's on our agenda to do so.

Great. Next one is what is the restaurant opening strategy? Will you open yourself or prefer franchise? Will definitely be the latter. I guess it depends on the market we're talking about to be fair. So certainly in Europe, that would be the plan is to franchise [indiscernible]. Of course, we always look at opportunities if a fantastic store came up that we felt we could do ourselves. We could look at it, certainly in the U.K. where we have the operational skill set to operate. When you enter a new country, say, somewhere like Germany, it is easier to find franchisees because we don't have the operating infrastructure in that market. We know the market from a recruitment point of view, property point of view. So I think it would be a wise strategy to have a capital-light model where we're then also supplying food to those businesses, which enables us to utilize the buying power of having that food come through our supply chain, but also we're able to have financial benefit, then we can control consistency as well, which is super important. I think in the U.K., we'll see. I think it's something we're going to keep thinking about as a Board and assess perhaps a hybrid model in the future. So the next one we've got here is how to explain the lower like-for-like growth for restaurants opened in 2024 versus the cohort opened in 2022, 2023. New restaurants should have higher growth because they started from a lower base and they do. So yes, I mean, last year, we - I don't remember what site we opened last year, I think.

Yes, Norwich. I think when I explained that slide that 2022, '23 comparison was far existing at the stage, not to the site openings in 2024. So, I might have confused you on that slide. So you are right, the 2022 and 2023 are really our newest cohort and they are outperforming the existing [indiscernible] of those like-for-like sales.

So the question here, how likely is the U.K. model success to translate to France? That's a brilliant question. I guess we believe very well there are businesses doing what we do in the U.K., in France some other organizations and they're moderately successful doing that. We believe our product is better and we think our price point is better and we can leverage our supply chain and processes from the U.K. and I think synergies from a supply chain point of view, some of our food comes from Europe anyway. So there's opportunity to consolidate supply chains and benefit from that. In terms of the model success, I mean, what we're seeing in terms of food trends, I guess, is that people want to be able to customize their meal and our meal is obviously fully customizable. People want healthy food, but they also sometimes want indulgent food. So our proposition ticks both of those boxes. And another trend is obviously the fact that delivery is a key growth area in the industry. And we're very lucky in that our product travels very well, particularly the burritos, which are wrapped in tin foil, travel really well. And that's driven a lot of the growth we've seen in the U.K. I think when you look at the other European markets, you see those same trends as well. So the question around, can you remind us the Kitchen capacity in the U.K. and France, how long do you think it will take to fully utilize these kitchens? Well, in France, certainly many years of opportunity with that. It's 3x the size of the U.K. And the U.K. facility is supplying around 100 restrooms. It's a good question as to what -- how many of the U.K. facilities can supply. I think it depends a little bit in the future around our strategy whether we want to put additional food items through the Central Kitchen if we grow our menu. So that's something we are working on, but there's no risk of that running out of capacity. This, we could open on more days and we run more shifts. So there's definitely more space in there for growth in the future. There's another question here around the [indiscernible] production facility. We're curious about the capacity of that facility. I mean a lot more work needs to be done on that. But broadly speaking, it's as I said 3x the size the U.K. [indiscernible] is to 100 stores [indiscernible] obviously extrapolate that to a few hundred locations. We need to do some more work on that. Our priority and focus has been very much on growing the U.K. profitability and obviously making success in France. But yes, there's no sort of issue that, that facility is going to be large enough to support the business. I think that probably the bigger limiting factor when we're exploring other countries is actually the commercial question of whether or not it's better to travel for food, shorter distances. If you open up in Portugal, it's not going to make sense to move the food from [indiscernible] all that way. So I think each market needs to be looked at on sort of case-by-case basis in terms of the commercials and the food quality, it's not just about the commercials. We don't operate a frozen supply chain at the moment. It's fresh. So these are all things that we need to play around with and have to think about. So I guess our focus with the unit in [indiscernible] was always going to be in the short term, France, Germany, Netherlands really, they are the locations which is easiest for us to expand into with the white space research that we did previously identified those are the markets that have the greatest immediate potential for us. What is the mix of sale on deliveries and the objective in the long term? Do you want to take that one?

Yes, so it's at 30% currently, which I think is about the right level for us really. We are, as I mentioned earlier, really focused on growing our in-store sales. Obviously, it's margin impact on delivery, but again, it's a really important channel for our delivery sales, and we recently changed our delivery strategy to a dual model, which we've mentioned before was a great option for us in terms of improving our profitability. So I think it's around that 30% mark.

There's a question here around U.K. company-owned stores have declined over the last couple of years. We talked about optimization of the portfolio, which could be closures. Does tortilla feel the U.K. market is saturated for company-owned stores and then a follow-up thing of you showed that our franchisees generate more than GBP 20 million sales, which is great, but wouldn't it be amazing if that was all tortilla's, not simply a royalty? Great question. So I guess looking at the first bit of that, does that mean closures? Probably. We've got a couple of sites which the rent is either too high now. I mean could be Central London ones where work from home means that you get 3 days a week from some of those sites not 5 days like you used to. But also there are some smaller towns in which are a bit of a challenge. So I guess we're going to look at it,as I say we've got a very small number of stores we're talking about here. But I think it's right if you can extinguish some losses within your organization with exiting a couple of locations, that feels like one of the key ways to get into that 20% store EBITDA. It definitely doesn't mean the U.K. saturated. There are many great shopping centers and high streets that we're not in. What it does mean is we enter a couple of locations that we probably shouldn't have in hindsight. But for a business with as many stores as we have, it's not unreasonable to look at those and address any sort of underperformance. I don't believe the U.K. is saturated. But I do believe that the franchising strategy is the right one. Although you obviously make more money if you open your own stores, if you've got a 20% store EBITDA model, which as an average, which is a great average to get to. You can make 5% from a franchisee plus another 3% or 4% on supply chain effectively by leveraging your buying power and then potentially you get a marketing fee as well. You can get to nearly 10% with franchising, which versus 20% where you're not putting any capital down. It's a really appealing model. And it means that you can go faster growth as well than we could with our own resources. So franchising is absolutely the right strategy for us in Europe. But where there is opportunity to open a corporate store, a flagship type location, of course, we'd look at it. But I think our philosophy at this stage is franchising is the thing that we'll be looking at harder. Is there any outstanding earnout on former acquisitions. When are the cash out expected? Do you want to answer that one?

[indiscernible] that we launched in H1, it's also contingent consideration relating to prior year acquisitions that's now [indiscernible] so it's no future, no more future outflows.

Okay. How many restaurants rebranded in France? How many are waiting to be rebranded. So, we have six corporate stores rebranded now and open trading. A seventh one will open later this year in [Garden Hall] Railway Station and then the remainder will be next year. And so that's the sort of split. So there's 13 sites in total. So just over half will be done this year. There's a Growth Kitchen here for -- question is [indiscernible] caught using growth kitchens before physical retail presence acting on delivery act. You later closed these down. So I'm wondering why you are revisiting this approach and why [indiscernible] can you address the potential risk on quality and brand equity here. So it's a slightly different model we're going to explore with Growth Kitchen. When we were running the kitchens before, we were running them ourselves. This time, we're going to be licensing the use of our brand. But we will be controlling the food in the same way as we deal with the franchisee. So it's no different really to a franchise relationship. So obviously, we know the guys who work at Growth Kitchen well. They're good operators. We've actually got one of our former employees working in that business knows that business very well. So we feel that we went through the right process to be quite selective on the partners that we look at this model with. And I think it is an interesting model to grow your brand. These are all London locations at this stage, but to kind of saturate some of your delivery areas with some high-quality operations that also means that you can get food to the customer more quickly. So it's a slightly different approach to what we did previously, but we feel confident with the food protection quality and the fact that we know this business very well that we can protect our brand equity as you raised in your comment. So just looking down the list, just trying to read them quite quickly. Follow up on the [indiscernible comment. If the CPU is 3x the size of the U.K. and is a 100 units, does this imply you can support 200 to 300 units in Europe with a single Central Kitchen? Yes, essentially it does. I don't have the exact number because we haven't done the full math today. But the reason we bought such a substantial unit was to embark on a large franchise rollout in Europe. And I guess ultimately, what we're saying is we believe that there is an appetite for this cuisine in Europe. I mean, for example, in Germany, in many ways a burrito is a wrapped, breaded product. I mean it's full of carbohydrate, protein, it's fresh. So yes, our view is it doesn't have to be spicy. A lot of people sometimes say well, other countries don't like spicy food. Burritos don't have to be spicy. They can just be tasty without the spice. So yes, we do believe there's a big opportunity. And as I say, the limiting factor, I think, for us on Central Kitchen will be more the size of the market near there rather than the manufacturing capacity of the Central Kitchen. We are also exploring opportunities to cap supply business to business as well from that Central Kitchen. We could do something like that a food manufacturer. So we're looking at it's early days. I guess our focus has been on the mission at hand, converting stores. But yes, that Kitchen is substantial and would be able to support a big size of state. So the question here on U.K. and Europe, have you ever considered the United States? Yes. I mean it's a very interesting question. Obviously, some brands have come from Europe to the United States. I guess the honest truth is Chipotle have got a massive number of units in the U.S. They are the hero in that market. You could argue that there's space for another large player, a bit like you've got in the, I guess, the burger or chicken market in the U.S. There's not just one business doing it. But to be quite honest, I think the obvious priority for us given that we are the largest in Europe is to continue cracking on in Europe. You never know in the U.S., maybe one day, but it's not something we'll jump out immediately. There are other markets that are also interesting, like I say, the Middle East, Saudi, Dubai. So yes, I think we've got enough expansion opportunity on our hands at this stage. Question around why we made our loan facility so largely a waste of money on any reasonable time frame. Well, we got it for a very good price. And actually, it was very well fitted out before we entered the unit. So the truth is we haven't really paid a lot more for a large facility there. In fact, the rent on that facility is lower than our U.K. facility. And the CapEx was lower as well than it would have been if we developed it from a shell because of the work that the landlord has already done on the unit. So yes, I take your point, it seems like a bit excessively big, but actually, when you look at the commercial, it made a lot of sense for us.

Company is down from GBP 6.6 million in cash from 2021 to GBP 10.7 million in 2025. What are the moving parts of this. What is the strategy with perspective cash and how to fund future growth, so that is really reflective of our investment strategy in France where we have, as I mentioned, at the beginning of our investment cycle to here where we have out layed the capital to be able or not able to acquire our Central Kitchen, which Andy mentioned we did get a good price for as well as the additional outlay for early phase of the conversions. So, we're really beginning a cycle here where we have laid out the capital and we are expecting future returns to come from that.

A question here about essentially how many restaurants does the Central Kitchen need to breakeven. The answer is roughly the number that we've got because one of the reasons we looked for a strategic acquisition was that we wanted to build a Central Kitchen, and we knew that we needed around about 15 restaurants to enable that facility to kind of cover its costs. So that was part of the rationale for buying a business of the size that we did, to create that stepping stone for our expansion. So yes, sort of roughly of that order. And obviously, from this point onwards, if we can franchise the business in other markets in time, which is the plan, then obviously, the kind of unit economics of that Kitchen really start to make a lot more sense. But yes, it's covering its cost at the moment. Just trying to flick through to see if we've missed anything. The level of borrowings is edging close to the max capacity you have available. Any thoughts on when you would prioritize paying down borrowings. I guess we've never had the intention of being a business carrying a lot of leverage. It's never been our mission, and I think that's still our philosophy, frankly. Obviously, we're at a sort of a more better position than we have been previously because we are in that investment phase. But I think it's important to remind ourselves that a lot of that investment has now been done in the Central Kitchen and the sites that we've built. So yes, we feel like we're in a good place to bring that leverage down in time, particularly as well with having the U.K. business pumping out some really good numbers, that's going to generate more cash for us in the coming years as well. So our intention is not to continue to grow our leverage in any way. I think we've covered most of them. How do you develop in the Middle East, sorry, we missed that one, where are the kitchens for this market. So actually, in the Middle East, they use one of their restaurants to produce some of the food for the others. But actually, they do produce more of their food on site, which is a model that the U.K. business used to use obviously back at the start. It does work well as well. I mean ultimately, and food is relatively easy to produce whether it's in a Central Kitchen or a store. It's just for us, it makes a lot of sense our scale to produce on mass in a Central Kitchen because we can control the quality. But I have to say that the guys in the Middle East are doing a fantastic job of retaining food quality. In fact, their operation is extremely good. We have one of our former operators over there as their sort of key [indiscernible] director. So it's a model that works well and they can control the food quality really well. And there's actually not that many adaptions to the menu over there as well. It's quite similar to our U.K. model. The question about the term of the franchise, royalties flat fees. I guess terms, I mean, for example, we have a development agreement with SSP, it's a 5-year agreement that we've got as an example. And then usually with that, there's an exclusivity whichever market, there can be an exclusivity and in exchange of commitment from the franchisee to open stores, so that's traditional model we've used. The franchise fees vary depending on the partner. I would want to kind of commercially say what they are for each partner, but that's sort of the typical level that you see in the industry. And I say the other advantage that we have is ultimately, as we're supplying businesses outside of our own organization with food, it means the cost to serve a lot of our own stores in the U.K. is brought down because there's the efficiencies in costs from supplying external businesses as well. And on top of that, we can then -- everyone benefits from our increased buying power on product lines like the chicken and the beef and avocados. As you can imagine, we're one of the largest buyers of avocados in the U.K. And so it's great because we've got that buying power that we can then pass that on to our franchisees as well and they can generate some good returns. So I think we're pretty much at the end of the presentation. I think we've done all of the questions from what I can see as well. So we can probably wrap up, I think, at that stage, if you want to hand back.

Perfect, guys. That's great. And thank you very much for your presentation and for being so generous with your time and addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation just for you to review. But Andy, perhaps before really now, just looking to redirect those on the call to provide you of 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 just to wrap up with, that would be great.

Yes, absolutely. Well hopefully, we've conveyed the key messages this year. I guess the key takeaway is a record year in the U.K. [indiscernible] with, I guess, the sector that struggled this year. So that's fantastic and a testament to the hard work of the team, and that will continue, and we've made progress in France. We'll have 7 sites open by the end of the year. We've got 6 there already. So it's fantastic. Yes, it's taken us a bit longer to get there, but actually the designs are fantastic as a result of that. And I think it was important to get that right and entering the new market. So yes, we're really excited. And I guess as we've talked quite a lot about the Central Kitchen, hopefully, investors can see that this is a strategic acquisition that we made to provide the springboard for a lot of future growth. So hopefully, everyone is as excited as we are and the Board are about that opportunity as well. So yes, that's really the key messages from us today.

That's great. Andy, Josie, thank you once again for updating investors this morning. 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 the management team can really 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 morning.