Tortilla warns of £2.3m hit in FY22 amid inflationary pressures

Tortilla has warned that it faces future challenges from rising protein and energy prices, expecting to take a £2.3m hit in its full-year results amid increased inflationary pressures on the industry.

For now, its revenue rose by 30% to £26.9m in the first half of FY22, up from £20.8m the prior year, with like-for-like revenue up by 19% in the period.

However, profit before tax fell to £0.3m, down from £2.6m the prior year, while EBITDA also suffered, falling from £4.9m to £2.5m.

It comes as sales over the summer period were “more challenging” than anticipated for the group, due to a combination of train strikes, the heatwave, and pent-up consumer demand for overseas holidays. Tortilla estimated that the impact of the first two factors is around £0.25m in lost sales.

London’s recovery continued “unabated” according to the group, however, with sales trending at 98% of pre-Covid FY19 levels across its Zone 1 central London sites, giving it “great confidence” in the Chilango acquisition that completed for £2.75m in the period.

As well as the Chilango acquisition, the group also made progress on its new store roll-out with five sites opened across the UK, and one delivery kitchen, taking the total number of sites, including eight acquired Chilango sites, to 84 at the period end.

In its latest update, the group said that inflationary cost pressures “remain the biggest challenge across the industry”. Whilst it has taken “decisive steps” to control what factors it can, and mitigate cost increases where possible, it estimates these will result in a three percentage points reduction in gross margin for FY22 (approximately £1.8m).

It noted this is driven primarily by a c.40% increase in protein costs, which account for approximately one third of its cost of goods sold. It also expects a further £0.5m adverse full year impact from increased utility costs.

Tortilla warned these industry headwinds will have a material impact on profitability in the second half of the year, and said it is “prudent to assume that inflationary cost pressures will continue beyond FY22”.

Richard Morris, CEO of Tortilla, said: “Against a backdrop of challenging macroeconomic conditions, I am really proud to report that we have continued to make great progress against our ambitious growth plans laid out at our IPO last year. Our strong top-line growth was significantly ahead of the broader market, again reflecting Tortilla’s growing reputation for great value, high quality food.

“We continue to focus on our plans for strategic expansion, accelerating our new site roll-out to locations across the UK through both our acquisition of Chilango and organic roll-out programme. We are pleased to be ahead of our expansion targets set out at IPO, adding 18 sites this year, and excited by the opportunity to increase organic roll-out to 12-15 sites per annum from FY23.”

He added: “Times remain tough across the industry at large reflecting the extent of recent cost pressures. However, we remain confident in our ability to successfully navigate our way through these industry-wide challenges whilst continuing to deliver against our ambitious growth strategy.

“Our long-term progress will continue to be underpinned by a firm focus on consistent operational excellence, ensuring a great value proposition, and the continued broad appeal of our offer. The board is highly confident in achieving the group’s exciting longterm growth potential.”