Tortilla Mexican Grill has announced interim results for the 26 weeks ended 2 July 2023 (H1 FY23), with revenue growth of 22% to £32.7m.
Financial highlights
Like-for-like (lfl) revenue growth was 5% or 8.4% on a VAT-adjusted basis, ahead of the CGA Coffer Tracker benchmark average of 4.6%.
Adjusted EBITDA (pre-IFRS 16) was £1.8m – in line with market-expected financial performance – and down from £2.5m in H1 FY22, which benefitted from £1.1m of government support.
Loss before tax was £0.6m compared to a profit of £0.3m in H1 FY22.
Tortilla further reported a strong balance sheet, with net debt of £1.6m at period end (H1 FY22: £3.2m net cash) and a further £7m of liquidity available from existing debt facilities.
Expansion
The fast casual Mexican cuisine specialist has made “good progress” on new openings in the UK, with three opened during the period – including its first in Northern Ireland.
Since period end, a further two sites have opened in Belfast and Bracknell and are trading well, with Belfast doubling the opening revenue expectations.
A further three sites are expected to open in H2 FY23, taking the total to eight new sites in the year.
It remains ahead of its IPO aim of 45 new sites in five years and is currently assessing a number of European opportunities through franchising or strategic acquisitions.
Operational and strategic highlights
Tortilla also reported successful integration of Chilango and realisation of the investment case, along with growing confidence in the UK and international franchising opportunity, with record profits following the return to normalised trading post-Covid.
It has successful implemented two tech projects – its first kiosk-only site, which is delivering positive early results, and a nationwide rollout of delivery order-aggregation software.
The Tortilla Sunsets ‘dinner for a tenner’ menu and happy hour offer was launched last week to drive evening sales.
The business further reported cost pressures are easing along with favourable contracts negotiated with key suppliers.
It has strengthened its board of directors, with the appointment of Keith Down as NED, while CFO Andy Naylor has been promoted to managing director.
Current trading and full year outlook
The group delivered lfl growth over the summer, which was quiet as seen in the wider market, attributed to an increased demand for overseas holidays, ongoing industrial strike action, and bad weather.
Self-help management initiatives – in the supply chain, energy, and productivity – are expected to drive a 1.3 pp improvement in adjusted EBITDA margin in H2 FY23 compared to H1.
Tortilla will continue to drive menu development and utility cost savings, as well as drive footfall through targeted events and promotions such as its Tortilla Sunsets offer.
“Considering the secured upside from our cost hedging, the exciting initiatives launched to drive evening trade and the resilient trading performance of the Group, we remain confident of being broadly in line with our targeted Adjusted EBITDA for FY23 and we expect to see the full year benefit of these initiatives next year.”
Richard Morris, CEO, commented: “Despite the challenging economic backdrop, during the first half Tortilla demonstrated its resilience and showed consistent progress, with revenue growth of more than 20%. We continued to expand our store estate and have successfully embedded the Chilango acquisition. We have also enhanced our food offer and secured significant improvement in our costs structure while making technology upgrades which will improve and quicken customer service at peak trading times.
”We are very excited by the launch of our Tortilla Sunsets initiative earlier this month, which has had a very positive customer response so far. We believe there is a significant opportunity to enhance our evening sales by offering a great-value, dine-in experience including beers and margarita cocktails for just £2.50 as well as a number of delicious new menu additions.
”With our outstanding food offer, excellent value for money and great service, alongside our adaptable and resilient business model, we remain well placed to continue expanding our UK network whilst taking the brand into new markets, particularly in Europe.”
