Tortilla Mexican Grill (MEX) H2 2024 earnings summary

Executive summary

• Achieved significant operational transformation and progress in the UK, with like-for-like sales outperforming the market by 8 percentage points and strong international expansion through the Fresh Burritos acquisition and franchising.

• Opened 28 new stores (including 27 Fresh Burritos), bringing the total to 117, and reduced staff turnover by 35 percentage points.

• Enhanced menu quality, launched new food ranges, and invested in technology such as loyalty apps and kiosks, supporting a 12-point LFL improvement and increased customer engagement.

• Strengthened franchise partnerships, signed a new SSP agreement for 18 stores over five years, and established a central kitchen in Lille for European expansion.

Financial highlights

• Group turnover/revenue reached £68 million, up £3.5 million or 3.5% year-on-year, mainly from the Fresh Burritos acquisition and new store openings.

• Adjusted group EBITDA was £4.5 million, slightly down from £4.6 million, but UK EBITDA grew 13% to £5.2 million; France contributed a £0.7 million loss as expected.

• Cash from operations was £4.2 million, up 10% year-on-year, reinvested into business growth and technology; free cash flow was negative £2.7 million due to acquisition and CapEx.

• Net leverage ratio increased to 1.3 from 0.7, with net debt at £5.7 million and total debt at £8.5 million.

• Loss before tax rose to £3.3 million, mainly due to a £1.4 million impairment and £1.6 million in one-off acquisition costs.

Outlook and guidance

• UK trading in Q1 and Q2 2024 is strong, with 6% like-for-like growth and cost savings from prior initiatives coming through.

• France store conversions to Tortilla branding are set to commence in summer 2024, leveraging the new central kitchen, with further franchise openings expected in 2025.

• Input costs are stable for 2024 due to early hedging of protein and energy prices.

• Board and management remain optimistic about sizeable growth opportunities in both the UK and Europe.