Tortilla upbeat on strong full-year performance

Fast-casual restaurant chain Tortilla Mexican Grill reported a strong financial performance in its annual results on Monday, despite lingering pandemic-related challenges.

The AIM-traded company said revenue increased 20% over the 52 weeks ended 1 January, to a new record of £57.7m.

That growth was driven by a record year of new site openings, while its like-for-like revenue was ahead 16.4% compared to the pre-Covid comparator in 2019.

Adjusted EBITDA, pre-IFRS 16, came in at £4m, which was lower than the previous year's £8.7m.

However, Tortilla noted that the prior period included a VAT benefit of £3.9m.

Gross profit margins were 76.4%, down from 79.6% year-on-year, while the company's net debt totalled £0.6m, swinging from net cash of £6.7m a year earlier.

The firm said its outlook remained positive, with trading currently in line with expectations.

Like-for-like sales growth for the eight weeks ended 26 February remained strong, up 4% compared to last year.

The management team said it had taken action across the supply chain to manage costs and aid profitability, including utilities hedging from April to September this year, providing certainty for the majority of the 2023 financial year.

Food cost inflation rates, meanwhile, had largely plateaued.

Tortilla said it opened new sites in the first quarter in Derby and Greenwich, which had seen “encouraging” early trading.

The firm was planning to open new sites in Milton Keynes, Belfast, and Bracknell later in the year, adding that it was ahead of schedule with its targeted ambition of 45 new sites in five years, stated at the initial public offering.

It was exploring several new franchise sites for 2023 to enhance its diversity of locations, including expanding its existing partnership with Compass Group and planned openings at railway stations with SSP Group.

The company said it was also investing in technology to enhance customer service and reporting efficiencies, to better support its growth strategy and customer loyalty.

Tortilla’s board said it remained confident in the group's ability to perform in line with market expectations for the full financial year.

“We have a proven, great value, and highly popular customer proposition and these strengths continue to underpin our good levels of like-for-like growth and further strategic expansion during 2022,” said chief executive officer Richard Morris.

“More and more consumers are seeking out high-quality, healthy, customisable food at great value, and both of our brands - Tortilla and Chilango - sit at the heart of these exciting consumer trends.

“The strong performances of our restaurants up and down the country as well as the success of new openings in the likes of Lincoln, Coventry, Canterbury, and Leicester once again demonstrate the very broad appeal of our proposition and the demographic diversity in which we operate and succeed.”

Morris said that as well as the company’s continued expansion across the UK, it also strengthened its market position in London through the strategic acquisition of eight Chilango restaurants in the first half of the year.

“We successfully converted five of these to the Tortilla brand and have refurbished the three remaining Chilango sites.

“All these sites are benefiting from increased footfall in London.”

The beginning of 2023 started well, Richard Morris added, with like-for-like sales up 4% in the eight weeks to 26 February.

“We know that restaurants that offer great, consistent food at competitive price points will always be the winners in our sector, and we are confident that we sit very comfortably in this space.

“We remain highly motivated and excited about Tortilla's continued growth potential in the UK as well as our opportunities to build on our proven franchise operations to expand overseas.”

At 1014 BST, shares in Tortilla Mexican Grill were up 2.5% at 123p.

Reporting by Josh White for Sharecast.com.