Tortilla Mexican Grill Ltd. · LSE:MEX
Tortilla Mexican Grill — H1 2023 Earnings Presentation
38 slides from Tortilla Mexican Grill's earnings presentation, October 2023
Slide 1: 2023 Half Year (Interim) Presentation
Tortilla Mexican Grill plc 2023 Half Year (“Interim”) Presentation October 2023
Slide 2: Presenting Team
PRESENTING TEAM Richard Morris – CEO Andy Naylor – CFO 2
Slide 3: Agenda
AGENDA 01 INTRODUCTION & HIGHLIGHTS – Richard Morris, CEO 02 FINANCIAL REVIEW – Andy Naylor, CFO 03 STRATEGIC & OPERATIONAL REVIEW – Richard Morris, CEO 04 Q&A 3
Slide 4: Introduction & Highlights
INTRODUCTION & HIGHLIGHTS Richard Morris, CEO 4 4
Slide 5: Highlights
HIGHLIGHTS Strategic & operational • Good progress on our UK new store openings with five opened year to date, including our first site in Northern Ireland. • Chilango acquisition proving successful. • Franchise network in great shape with quality partners. • Cost pressures easing. • Successfully la
Slide 6: Financial Review
FINANCIAL REVIEW Andy Naylor, CFO 66
Slide 7: Income Statement
INCOME STATEMENT • Revenue increased by 22% to £32.7m (H1 FY22: H1 FY23 H1 FY22 £26.9m), driven by the addition of new stores and £m £m Revenue 32.7 26.9 the continued LFL sales growth of the existing Cost of sales (7.5) (6.2) estate Gross profit 25.2 20.7 % of revenue 77.0% 77.0% • Gross profit mar
Slide 8: Revenue (H1 FY23 vs H1 FY22)
REVENUE (H1 FY23 vs H1 FY22) Notes: - VAT benefit difference: Q1 FY22 benefitted from a £0.8m uplift due to the temporary lower VAT rate of 12.5% applied to most of the Group’s revenue (a +22% form of COVID-support). (+£5.8m) - New store openings (see table below): additional net revenue of £4.9m wa
Slide 9: Revenue: LFL Growth and Channel Mix
REVENUE: LFL GROWTH AND CHANNEL MIX LFL Growth Channel Mix H1 LFL % H1 LFL % Actual Adj. VAT1 100% Sales LFL 5.0 8.4 80% In-store LFL 6.5 66% 68% 68% 60% Delivery LFL 2.8 40% CGA Coffer benchmark 20% 34% 2 32% 32% Sales LFL 4.6 N/A 0% H1 FY22 FY22 H1 FY23 1 Removing the favourable impact of the lowe
Slide 10: Inflationary Impacts: Food
INFLATIONARY IMPACTS: FOOD Costs are easing with medium term certainty on food and utilities Gross margin • Adjusting for the VAT benefit in Q1 FY22 margin has improved by 0.7 percentage points since H1 FY22. Protein Basket Inflation 40.0% 35.0% • New contracts were agreed with our main food supplie
Slide 11: Inflationary Impacts: Utilities
INFLATIONARY IMPACTS: UTILITIES Costs are easing with medium term certainty on food and utilities Utility costs • Volatility in utility market remains, however utilities now hedged until March 2024. Ongoing strategy will look to hedge a minimum of 60% of 1 volume ahead of the delivery period. Electr
Slide 12: Adjusted EBITDA
Adjusted EBITDA 1 (“EBITDA”) H1 FY23 vs H1 FY22 Notes on H1 FY23: • H1 FY22 EBITDA included the Q1 VAT benefit and 2021/22 rates relief and these collectively drove £1.1m of one-off upside. Additionally, the inflationary impact on the protein basket amounted to £0.2m. • Margin improvements generated
Slide 13: Balance Sheet
BALANCE SHEET At 2 Jul At 3 Jul • Net debt of £1.6m, with debt of £2.9m drawn from a total available facility of 2023 2022 £10m (at 2 July 2023). £m £m Non-current assets • Strong liquidity provides platform for future growth. Intangible assets 2.6 2.6 • The Group’s efforts to recover profitability
Slide 14: Strategic & Operational Review
STRATEGIC & OPERATIONAL REVIEW Richard Morris, CEO 14 14
Slide 15: UK Growth: FY23 to Date
UK GROWTH: FY23 TO DATE Total number of stores reconciliation FY22 vs H1 FY23 Openings x3 (within H1 FY23) A further franchise site later this year plus two further company-owned openings. • Derby (Feb 2023) • Greenwich London (Feb 2023) Total openings for FY23 expected to be 8 (6 company-owned, 2 f
Slide 16: UK Growth: FY24 Onwards
UK GROWTH: FY24 ONWARDS On track to exceed our IPO growth target to open 45 sites 120 • Opening programme of 8-12 UK company-owned stores per annum expected to resume in FY24 onwards 101 100 95 +6 vs IPO target 91 Total company-owned UK stores 81 • FY24 pipeline looking strong: 80 71 • 1 x completed
Slide 17: Assessment of Competition
ASSESSMENT OF COMPETITION Tortilla considerable larger than competition in both UK and Europe We have existing scale economies and are best-positioned for With a similar story in continental Europe… ongoing growth in the UK… 79 79 39 27 21 17 16 14 14 9 7 Tortilla Fresh Burrito Zócalo Tierra Burrito
Slide 18: New Stores – FY22 & FY23 Cohorts
NEW STORES – FY22 & FY23 COHORTS UK property market still favourable, with lower rents and FY22, FY23 new store update (company-owned) good landlord contributions Cohort2 Avg rent % of sales1 Avg landlord contribution FY22, FY23 openings £ • Ten openings in FY22, four openings in FY23 YTD. Pre-FY22
Slide 19: FY23 New Store Openings (Company-Owned)
FY23 NEW STORE OPENINGS (COMPANY-OWNED) Belfast Bracknell • Opened in July 2023 • Opened in August 2023 • Average weekly sales since opening: £24.2k • Average weekly sales since opening: £11.2k • Investment case maturity sales1 £21.3k: • Investment case1 maturity sales: £13.1k • CAPEX to build: £425
Slide 20: Chilango Acquisition
CHILANGO ACQUISITION A big success, supporting confidence for further London growth • 8 sites were acquired in May FY22 • 5 of these sites have been re-branded to trade as “Tortilla” and 3 remain trading as “Chilango” • Particularly pleased with the outcome from conversion to Tortilla with average w
Slide 21: Franchising
FRANCHISING Adaptable business model ideal for franchise growth • Perfect operating model for franchising due to: • Site format flexibility with no requirement for kitchen-extraction; • Central production food model provides consistency of food quality and enables a simpler employee model (no relian
Slide 22: Digital Concept Store Trial
DIGITAL CONCEPT STORE TRIAL Early signs are very encouraging1 • Hourly sales record increased by 37% • Increased peak-day average lunch period2 sales already increased from £2200 to £2600 • AOV increase by 3.3% • Average customer journey (kiosk – collection): 3 minutes 20 seconds • Potential for fur
Slide 23: Marketing Campaigns
MARKETING CAMPAIGNS LOYALTY BOOST EVENING SALES • Launched new menu & service style • Enhanced generosity of scheme in to drive in-store evening sales June to drive usage & lifetime value • Launched Happy Hour offer & • Adoption up 6% since June, to 345k Student app partnership to drive total acquis
Slide 24: Value for Money
VALUE FOR MONEY Tortilla’s value for money proposition remains important in the current cost-of-living crisis. The Group has pricing headroom and expects customers to down trade from higher cost peers. The Group increased prices to cover increased costs in late March: 7% in Central London and 3% out
Slide 25: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK • Post Period-end, a further two sites opened and are trading well: Belfast and Bracknell. • Trading remains positive with LFL sales growth achieved in July and August despite lapping a strong prior year comparative • Favourable cost environment and management initiatives
Slide 26: Key Strategic Levers – FY24 and Beyond
KEY STRATEGIC LEVERS – FY24 AND BEYOND UK NEW STORES EUROPEAN GROWTH FRANCHISING 8-12 openings per annum Unique opportunity to consolidate and Leverage successful existing franchises own the cuisine across Europe and explore further partnerships UK PROFITABILITY TECHNOLOGY PRODUCT & MARKETING Levera
Slide 27: Summary
SUMMARY • Despite all the continued headwinds, we are delighted to be broadly in line with FY23 EBITDA expectations. • We continue to drive revenue forward with the kiosks, improved delivery software and the Tortilla Sunsets initiative. • Whilst there are uncertainties around strike action on the tr
Slide 28: Q&A
Q&A TORTILLA L___—_} Tiel Gatti eros Te 28
Slide 29: Appendix
APPENDIX TORTILLA 29
Slide 30: About Us
ABOUT US We are the UK’s largest and most successful fast-casual Mexican restaurant business • Founded in 2007 • Leading fast-casual Mexican • Value-for-money proposition • By Brandon Stephens with a restaurant group in the UK • Freshly-prepared, mission of bringing authentic • 85 sites worldwide1 c
Slide 31: Strengthened Board of Directors
STRENGTHENED BOARD OF DIRECTORS EMMA WOODS RICHARD MORRIS ANDY NAYLOR BRANDON STEPHENS Non-Executive Chair Chief Executive Officer Chief Financial Officer Founder, Non-Executive Director LOEIZ LAGADEC FRANCESCA TIRITIELLO KEITH DOWN Non-Executive Director Non-Executive Director Non-Executive Directo
Slide 32: Fresh, Customisable Product Proposition
FRESH, CUSTOMISABLE PRODUCT PROPOSITION Freshness: Our toppings and guacamole are freshly Award Winning: Numerous awards for food, made in-house every day value, and profitability including: Innovation: Menu regularly reviewed and refreshed to • Third most loved fast- add trending fillings (e.g. chi
Slide 33: Well-Defined, Proven Property Strategy
WELL-DEFINED, PROVEN PROPERTY STRATEGY WITH FLEXIBILITY ACROSS SITE LOCATIONS AND FORMATS Site Selection Criteria • Uncompromising in site selection • Size: 60 sqM – 200 sqM • CAPEX: circa £375k - £450k depending on size, site condition and store front requirements • ROCE: 30% minimum investment hur
Slide 34: Robust Scalability Through Centralised Production and Head Office Team
ROBUST SCALABILITY THROUGH A CENTRALISED PRODUCTION INFRASTRUCTURE AND EXPERIENCED HEAD OFFICE TEAM Centralised Production Unit (CPU) Head Office Structure • Tortilla’s 5,500 sq ft Central Production Unit (CPU) in Tottenham Tortilla has an established and experienced senior management team to suppor
Slide 35: People & Culture
PEOPLE & CULTURE • Our mission is to provide high quality support that will allow us to recruit, retain and develop an exceptional team that will enable us to achieve our goals including our overarching aspiration of becoming the employer of choice within the fast casual sector • We are committed to
Slide 36: Environment Social Governance (ESG)
ENVIRONMENT SOCIAL GOVERNANCE (ESG) The Group reports on it’s environmental, social and governance targets and achievements annually, available to view here. Highlights of the 2023 Impact Report includes; OUR PEOPLE People are the heart of our business and we’re proud to champion diversity, inclusio
Slide 37: Solar Project – Tortilla CPU
Solar Project – Tortilla CPU Largest energy efficiency project ever undertaken by the group • Preferred supplier is proposing to fit a 60.7 kWp array utilising 148 panels • This has been calculated to produced 57 MWh per annum considering the building orientation, shading and several other variables
Slide 38: Tortilla
TORTILLA Real California Burritos & Tacos 38
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