Tasty : Report and financial statements year ended 2023

TASTY PLC

Report and financial statements

53 weeks ended 31 December 2023

Contents

1. Directors and information
2. Chairman's statement

5 Strategic report

1. Report of the directors

1. Corporate governance

1. Statement of directors' responsibilities

36 Independent auditor's report

1. Consolidated statement of comprehensive income
2. Consolidated statement of changes in equity
3. Company statement of changes in equity
4. Consolidated balance sheet
5. Company balance sheet
6. Consolidated statement of cash flows
7. Company statement of cash flows
8. Notes forming part of the financial statements

Tasty plc Annual report and financial statements 1

Directors and information

Directors

Keith Lassman (Non-Executive Chairman)

Daniel Jonathan Plant (Chief Executive Officer)

Harald Samúelsson (Non-Executive Director)

Wendy Dixon (Non-Executive Director)

Secretary and registered office

Keith Lassman

32 Charlotte Street

London W1T 2NQ

Company number

05826464

Independent Auditor

Haysmacintyre LLP

10 Queen Street Place

London EC4R 1AG

Solicitors

Howard Kennedy LLP

No. 1 London Bridge

London SE1 9BG

Setfords Solicitors

46 Chancery Lane

London WC2A 1JE

Bankers

Barclays Bank plc 1 Churchill Place London E14 5HP

Nominated adviser and broker

Cavendish Capital Markets Limited

One Bartholomew Close

London EC1A 7BL

Registrars

Computershare Investor Services plc

P O Box 82

The Pavilions

Bridgwater Road

Bristol BS99 6ZY

Tasty plc Annual report and financial statements 2

Chairman's statement

I am pleased to be reporting on the Group's annual results for the 53 week period ended 31 December 2023 and the comparative 52 week period ended 25 December 2022.

Post year-end, the Board took considered action to reshape the Group's estate and correct the trading decline and the projected EBITDA loss trajectory. The Board believes that the decisions taken have placed the Group on a firm footing to enable growth in the future. In arriving at the best course of action to take, the Board evaluated the Group's strategic and restructuring options, given its performance both during 2023 and since the beginning of the calendar year, and assessed what was in the best interests of shareholders and creditors as a whole. This culminated in the post year-end Court and creditor sanctioned restructuring plan (the "Restructuring Plan").

Under the Restructuring Plan, 1 dim t, 10 Wildwood, 2 non-trading and 3 sub-let sites have closed and the liabilities compromised (by way of a compromise with the Group's creditors binding secured creditors, unsecured creditors and compromising members' rights), further site leases have been renegotiated and a £750,000 convertible loan was injected into the Group. The Board is confident that these corrective steps will position the Group for a positive future with a profitable estate and the right cost base for future growth and expansion. Further details of the Restructuring Plan are set out below in the Strategic Report. As at the period end, the Group comprised 53 restaurants: 6 dim t and 47 Wildwood restaurants. Despite the Group delivering 4.1% like for like sales growth, the continuing increased utility, food and labour costs hampered the Group's performance. Footfall continued to be affected by the work from home culture post Covid, transportation strikes and bad weather occurring during important trading periods of the year, as well as the pressure on consumer spend as living costs continue to increase.

Delivery and takeaway weakened during the year, without a corresponding move towards a dine-in experience. Performance for the start of 2024 was disappointing with year to date like for like sales only 0.2% positive.

The Board expects the Group's performance to continue to be impacted by energy costs, labour costs and increasing food costs, pressure on consumer spend as well as the negative impact on sales of events including the Euros 2024, the Olympics and the upcoming General Election. However, an uplift is expected towards the end of the year when a new Government will be in place and the Group will have a reached a period of stability post restructuring plan with the all the benefits of the smaller, more profitable estate the cost efficiencies will be apparent.

We regret that we had to make the difficult decision to make redundancies as a result of the Restructuring Plan. It is especially upsetting to lose loyal and dedicated employees at every level but we believe this action will protect the long-term security of the Group and the remaining employees. We wish everyone who we were unable to retain, good luck for the future and we are extremely grateful for all their hard work and support over the years.

Dividend

The Board does not propose to recommend a dividend (2022: £nil).

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Chairman's statement

Outlook

The Board believes that the Restructuring Plan will allow the Group to stabilise towards the end of the year, with a significant improvement in EBITDA performance expected over the next two years through site rationalisation and other tangible cost savings. We are hopeful that the Restructuring Plan will allow the Group to meet new opportunities in the sector in 2025 beyond its existing operations, including exploring new concepts, attracting new audiences and considering potential partnerships.

Keith Lassman

Keith Lassman

Chairman

27 June 2024

Tasty plc Annual report and financial statements 4

Strategic report for the 53 weeks ended 31 December 2023

Business Review

Tasty operates two concepts in the casual dining market: Wildwood and dim t.

Wildwood

Aimed at a broad market, our 'Pizza, Pasta, Grill' restaurant remains the Group's main focus. Our sites are primarily based on the high street. However, our estate comprises a number of leisure, retail and tourist locations that have historically traded well, highlighting the broad appeal of the offering. Located nationally, mainly outside of London, Wildwood is currently trading from 33 branded restaurants.

dim t

Our pan-Asian restaurant now trades from 4 sites, serving a wide range of dishes, including dim sum, noodles, soup and curry.

Introduction

The hospitality industry continues to navigate a landscape marked with significant challenges and uncertainty. Customer numbers continue to be affected by rail strikes, a continuation of working from home culture post Covid and cost of living crisis. Despite these struggles, sales revenue growth in 2023 was positive. Summer traded particularly well as people enjoyed "staycations" and Christmas performance surpassed management expectations. A competitively priced Christmas set menu proved popular and like for like sales improved.

There has been a continuation of shift from the early weekday trade to the weekend. Using our extensive customer database we have been able to strategically target specific sites on these quieter days and have avoided blanket aggressive discounting and promotions.

Delivery and takeaway have slowed as customers look to cut back on non-essential spend and without a corresponding shift to a dine-in experience. We believe value, well-targeted promotions and quality of product and service are the focus to improve demand.

Energy costs

Seasonal prices shifted from high volatility in 2022 to relative stability in 2023. With the energy price cap falling in 2023 we entered a fixed price contract for both electricity and gas at the start of September 2023 and ending in June 2024 and have reset the new contracts at a further reduced rate.

Offering

We are constantly reviewing our menu and increasing the choice of options, including set price two and three course menus. The Head of Food and our central kitchen production have significantly improved our food quality and consistency, and this is evident by the customer feedback surveys. With approximately three menu changes a year, we can adapt products to suit availability and changing tastes and we always review ways to offer vegan and gluten-free a greater choice. To ensure we are accessible to a broader consumer group, we have maintained a very low entry price point for both pizza and pasta for Wildwood and noodles for dim t - dishes which continue to be very popular with our customers.

People

The business continues to concentrate on creating an environment to retain the best talent. The training and development of our kitchen and front of house teams is a key part of our people strategy.

Tasty plc Annual report and financial statements 5

Strategic report for the 53 weeks ended 31 December 2023

A new recruitment system has been rolled out across the Group which has improved candidate selection and retention. We have undertaken a comprehensive review of our employee training and engagement which will both produce a better customer experience and improve employee satisfaction and development. The full implementation of this project is now complete and we expect to see the benefits in terms of enhanced customer service and improvements in staff retention.

Increases in April 2024 of the National Living Wage and general inflationary wage pressures will inevitably result in higher labour costs, which will be impossible to absorb completely. We continue to be committed to improving labour efficiency through a focus on the trading day-parts, forecasting and scheduling, and where possible, simplifying the menu.

We strengthened and rationalised our management structure and senior teams across all areas with some investment in food, marketing and the learning and development team.

We regret that we had to make the difficult decision to make a number of redundancies as a result of the necessary Restructuring Plan. It is especially upsetting to lose loyal and dedicated employees at every level, but we believe this action will protect the long-term security of the Group and the remaining employees. We wish everyone who we were unable to retain, good luck for the future and we are extremely grateful for all their hard work and support over the years.

Suppliers

Supply has been relatively consistent with minor disruptions and prices have been generally stable. We are thankful to suppliers that continue to work with us and have supported us through our restructuring.

Property

The Group has successfully sold and surrendered two underperforming restaurants and compromised 23 other leases in the tail of the estate. The Group is currently trading out of 37 units with 7 of those leases compromised through the Restructuring Plan. The Group will consider expansion or other opportunities over the next few months. There are restaurant refresh programmes as well as some overdue capital expenditure which will be considered in the second half of the year.

Events since the year end

Following a period of external challenges which have impacted the Group's business and trading performance, the Board concluded that it was in the best interests of the Group, to enter a restructuring plan under 26A of the Company's Act 2006 to return the business to profitability and secure its long-term future. The Restructuring Plan was sanctioned by the High Court on 4 June 2024.

In order to fund the Restructuring Plan and provide additional working capital, the Group entered a loan agreement with a secured creditor for £750,000. The loan is required to be discharged by 31 December 2024, or later if agreed by both the Group and the lender, by either:

• Payment, purchase, redemption or discharge in any other form agreed in writing between the Group and the Lender (including, subject to shareholder approval, conversion of the loan into equity); or if not
• Payment in cash in an amount equal to £2.6m

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Strategic report for the 53 weeks ended 31 December 2023

The Group has entered into a side agreement in relation to the loan to enable conversion of the principal amount of the loan to ordinary shares of £0.001 each in the capital of the Company at a conversion price of £0.0146, subject to and conditional on shareholder approval.

The Group has received irrevocable undertakings to vote in favour of the necessary share allotment authority resolutions in relation to the conversion, representing approximately 35 per cent of the current issued share capital of the Company.

On 9 April 2024 the Group closed nine trading sites, three sub-lets and two non-trading sites with a further two trading sites closing in May 2024. An additional seven sites are trading on a new flexible basis under significantly reduced rent terms.

The Group has entered a Time to Pay arrangement with HMRC in relation to PAYE and VAT arrears of £2.1m which are expected to be paid in full by April 2025. HMRC is excluded from the Restructuring Plan and continues to be paid in the normal course of business.

In accordance with the terms of the Restructuring Plan payments to local authorities in respect of business rates and council tax were not paid in April and May 2024.

Under the Restructuring Plan, the sum of £525,000 will be paid to compromise creditors in three equal tranches in August 2024, March 2025 and June 2025. Based on the current claim values this will result in a dividend of 4.17p/£ to Plan Creditors. In addition, such creditors will benefit from the participation in the Restructuring Plan Surplus Fund which will also allow them to share in the upside of the Group achieving its EBITDA in 2024.

Current trading and outlook

Performance for the year to-date is behind management expectations, due largely to the cost of living crisis and the initial impact of the Restructuring Plan. However, the outlook post restructuring is positive. With underlying labour issues easing, inflation tailing off and the expected positive impact of the Restructuring Plan, as previously announced, the Group should see an uplift in profitability towards the end of the year.

The rationalisation of loss-making restaurants and a reduced central overhead will enable significant EBITDA and efficiency improvements between 2024 to 2025 to counter the disruption caused by the restructuring in the first half of 2024.

Financial review

Highlighted Items

The Group recognises a number of charges in the financial statements which arise under accounting rules and have no cash impact. These charges include share-based payments and impairments to fixed assets. The above items are included under 'highlighted items' in the statement of comprehensive income and further detailed in Note 5. These items, due to their nature, will fluctuate significantly year-on-year and are, therefore, highlighted to give more detail on the Group's trading performance.

Full year results and key performance indicators

The Directors continue to use a number of performance metrics to manage the business but, as with most businesses, the focus on the income statement at the top level is on each of sales, EBITDA before highlighted items, and operating profit before highlighted items compared to the previous year. All key performance indicators that adjust for highlighted items do not constitute statutory or GAAP measures.

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Strategic report for the 53 weeks ended 31 December 2023

The table below shows key performance indicators both before and after IFRS 16:

	Post IFRS 16	Pre IFRS 16	Post IFRS 16
	53 weeks	53 weeks	52 weeks
	ended	ended	ended
	31 December	31 December	25 December
	2023	2023	2022
Non-financial
Sites at year end	53	53	54
Open sites	51	51	52
Financial	£'000	£'000	£'000
Sales	46,910	46,910	44,027
EBITDA before highlighted
items	4,377	(922)	2,621
Depreciation of PP&E and
amortisation	(1,589)	(1,658)	(1,667)
Depreciation of right-of-use
assets (IFRS 16)	(2,524)	-	(2,641)
Operating profit/(loss) before
highlighted items	264	(2,580)	(1,687)

Sales were £46.9m, up 6.5% on the corresponding period which was impacted by restricted trading (2022: £44.0m) and EBITDA before highlighted items was £4.4m (2022: £2.6m). The EBITDA loss before highlighted items and IFRS 16 adjustments was £0.9m (2022: £2.6m loss).

Operating profit before highlighted items (see Note 5) was £0.3m (pre-IFRS 16 equivalent: £2.6m loss,

2022: £4.4m loss).

The impact of the implementation of IFRS 16 "Leases" from 2020 has resulted in both depreciation on Right-of-use ("ROU") assets for leases and also the interest charge on lease liabilities being greater than the charge for rent that would have been reported pre-IFRS 16; the net impact on the reported loss for 2023 is £0.5m (2022: £0.3m). We have reviewed the impairment provision across the ROU assets and fixed assets and have made a net provision of £12.3m (2022: £2.3m).

After considering all of the non-trade adjustments, the Group reports a loss after tax for the period of £14.5m (2022: £6.4m loss after tax). Net cash inflow for the period before financing was £2.4m (2022: £2.8m inflow) and is driven by a net cash inflow from operating activities of £2.5m (2022: £4.4m).

As at 31 December 2023, the Group had no outstanding bank loan (2022: nil) after repaying the Barclays Bank facility in full in June 2022. Cash at bank at the end of the period was £4.2m (2022: £7.0m). Capital investment decreased to £0.3m (2022: £1.6m). Prior year capital investment included Loughton dim t new opening of £0.5m, mini refurbishments of £0.4m and capital expenditure catch up post Covid.

Tasty plc Annual report and financial statements 8

Strategic report for the 53 weeks ended 31 December 2023

Principal risks and uncertainties

The Directors have the primary responsibility for identifying the principal risks the business faces and for developing appropriate policies to manage those risks.

Risks and uncertainties	Mitigation
Cashflow and liquidity	Cash preservation has been a key focus over the last few
The impact of cost-of-living crisis and	years. The Group monitors cash balances and prepares
other trading conditions on cashflow	regular forecasts which are reviewed by the Board. These
and liquidity	forecasts include our best estimates and judgements
	based on currently available information and the current
	environment. In addition, management will apply
	sensitivities to assess the impact of actual results or events
	impacting on future cash flows.
	The Group also has an unutilised £250,000 overdraft
	facility.
	Post year end the Group received a loan of £750,000 to
	fund the Restructuring Plan and provide working capital.
Utilities and Cost of Living Crisis	The biggest challenge faced by the Group, and many other
	businesses, has been the increase in utility prices. We
	continue to work with our energy broker to mitigate costs
	by focusing on reducing consumption and increasing
	efficiency. The Group's energy contracts have been fixed
	to September 2025 benefitting from an approximate 10%
	reduction on the previous contract.
	The increased energy prices and the cost-of-living crisis
	have impacted the economy and we have reviewed our
	menu prices to mitigate some inflationary pressures.
Market Conditions and "Brexit"	Brexit has impacted food and drink primarily in the form
Economic uncertainty and impact of	of cost inflation and shortages of certain products.
the UK leaving the European Union
("Brexit") could reduce customer	We work closely with our suppliers on assured supply and
confidence / spending.	regularly re-tender prices. To minimise the impact of food
	cost increases we consider menu engineering and review
	recipes.
Competition	To mitigate this risk, we continue to invest in and renew
The casual dining market faces new	our offering whilst maintaining accessibility, staying
competition on a regular basis.	committed to quality and the overall customer
	experience.
	We constantly review marketing initiatives to ensure that
	we remain relevant to our consumers and ahead of the
	competition. We review performance and success whilst
	exploring new opportunities.

Tasty plc Annual report and financial statements 9