27th Mar 2023 11:35
(Alliance News) - Investment bank Liberum said it is encouraged by Tortilla Mexican Grill PLC's annual results, pointing to the progress made with its roll out and its strong value offering amid a cost of living crisis.
On Monday, Tortilla said revenue in the year that ended January 1 rose 20% to GBP57.7 million from GBP48.1 million, "driven by a record year of new site openings". Like-for-like revenue was up 16% from 2019 levels.
The Mexican food chain added 18 sites net to its portfolio, bringing the total number to 82 at the end of the year.
Liberum noted its organic roll out pace of 10 per annum is on track, and "the headroom for growth remains vast, with additional franchise opportunities being explored".
The record openings also puts the firm "ahead of schedule to reach its goal of opening 45 sites within five years set out at the [initial public offering]", Liberum noted.
Liberum is also "encouraged" that the Tortilla stores opened during the year are trading at 83% of their investment case mature sales level already.
The company also said its strategic acquisition of eight Chilango restaurants strengthened its market position, with five restaurants being converted to the Tortilla brand.
However, Tortilla swung to a pretax loss of GBP928,549 from a profit of GBP2.3 million. This was as admin expenses climbed 19% to GBP43.6 million from GBP36.5 million.
Tortilla explained that this was a result of unprecedented food and energy inflation due to the war in Ukraine.
However, Liberum is confident that the firm has costs under control. It points to "favourable" actions such as hedging utilities through to September, changing its packaging supplier, and the evidence that food cost inflation is reaching a "plateau".
In the period since the year's end, trading has been in line with expectations, and the board is confident of meeting market expectations for 2023.
"Tortilla has one of the lowest price meal offerings as compared to peers and hence has some pricing headroom if required. We believe this will help to keep demand for their product resilient, at a time when consumer incomes are being squeezed, further aided by the rising popularity of Mexican cuisine," Liberum noted.
By Elizabeth Winter, Alliance News senior markets reporter
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