Tortilla Mexican Grill (LSE:MEX) Q4 2024 Earnings Call

0:00 Good morning and welcome to the Tortilla Mexican Grill plc full year results investor presentation throughout recorded presentation investors will be in listen only mode questions are encouraged and they can be submitted at any time by the Q&A tab situated in the right corner of your screen just simply type in your questions and press send the company may not be in a position to answer every question it receives in the meeting itself however the company can review all the questions submitted today and we'll publish responses where it's appropriate to do so before we begin I'd like to submit the following poll I'd now like to hand you up to CEO Andy Naylor. Good morning to you sir. Good morning, thank you for the introduction and welcome everyone to our latest update with our 2024 full year presentation. We'll start with some intros. So I'm Andy, I'm the CEO of Tortier.

0:45 I've been with the business for eight years now. and yeah I love the restaurant industry not a didn't start life as a restaurant so I was an accountant by background but yeah food industries where what gets me excited now and yeah delighted to have Maria on board as well since the beginning of last year. So welcome everyone and yes Andy said I'm Maria the CFO since February last year when Andy stepped into the CEO role. Right so we'll do a quick summary and then we'll walk through a strategic review and an operational update and then Maria will take us through some of the financials and then we'll leave plenty of time for some Q&A at the end as well.

1:30 So in terms of the key headlines, there's sort of six areas here we wanted to highlight. The first is that the UK business, well, first and foremost, has been 12 months of significant progress across a number of the key pillars that we identified before. um it's fair to say that we've had a busy 12 months transforming a lot of elements of the business which has been fantastic and it's good to see some of the fruits of that labor coming through so the uk business starting with that um started the well q1 last year was was quite tough for us and so a lot of the initiatives we implemented kicked in from sort of april onwards when i took over and over the last 12 months it's moved on significantly We'll talk a lot more about our light for lights and the progress we've made on that in the presentation.

2:20 We commenced an exciting strategic uh roll out in Europe with our acquisition of business in France so we've got 13 quality locations there and some franchisees so we'll tell you a bit about that uh we grew our franchise estate um last year mostly with SSP and we signed a new agreement with SSP to get us to 18 sites over five years so really excited to see all of those relationships going from strength to strength becoming quite a significant part of our business now We've worked very hard on team and culture and we'd love to tell you a bit more about that in the presentation and you know the key headline is we've got our staff turnover down by 35 percentage points which is quite incredible actually and you can see there's a little picture of the first the inaugural Burrito Masters rolling competition that we did last year. We had a significant change in our recipes and our food, our products over the period in terms of limited time offers and creating some buzz around the brand. So we'll tell you about that. And then lastly, we did a lot on the tech kiosks loyalty.

3:39 I've seen some good numbers with those. We'll talk to you about that in a bit more detail too. So moving on, just as a reminder, in April last year when I took over as CEO, we identified five strategic pillars that we wanted to really focus on as a business. One was to improve our UK profitability. Second one was investing in our brand, both brand and food to drive our top line growth. We felt there was big potential there. We wanted to invest in our teams and our technology. We had a mission to double down on franchising. and then we also wanted to develop our brand internationally in Europe. So these are the things that we're going to focus on in the coming slides.

4:24 So starting with the UK profitability, we are really delighted with the progress on this. I wanted to create a culture of obsession about volumes in the business, getting more people through the door eating burritos and tacos and quesadillas. You can see the red line here is the tortilla in store, sorry, total like for like. And then the gray line is the industry like for like. And you can see when we started the vital five strategy, we're at about minus 6%. And then it grew quickly during the period of all of the things that we've launched. And you can see from September onwards, we've consistently outperformed the industry tracker. during that time and actually that gap is just widening bar April which Maria will talk to in a little bit more detail later because there's a nuance around pricing there. So yeah we're really really pleased with this and I think to have such a big gap against the restaurant tracker is a really good indicator that we're on the right journey here as a brand in the UK.

5:31 So linked to profitability, we've got some historicals here in terms of our profitability percentages. We've moved it forward year on year from 23 to 24, which is great. But actually, as Maria will tell you a bit more about later on, a lot of these improvements since the top line and some of our cost savings, they really impact the second half of the year. And so what we will find, you know, since the year went on, it got better, as you saw from the last graph. so a lot of these will come to a full year fruition in 2025 and so we should see our profitability grow healthily this year in terms of the things that have driven our profitability the main fact is that we have obviously transformed the top line through that sales growth and as everyone knows in the restaurant industry that top line sort of sales growth flows through very quickly down to the bottom line so that was the main mission really of ours but also we've looked given that the general climate within the restaurant industry is profitability is decreasing because of all the labor inflation and other types of inflation we also put in various self-help measures like automation so we are now doing more automation of our cooking processes at the central kitchen which actually also we've coincided that with improving the quality of what we do as well which I'll come on to in a minute but it's also saved us manual labor hours we've got better buying power than we've ever got before because we're growing particularly as well with

7:02 our franchise partnership growing and that supply chain coming through for our business energy saving initiatives we've got the solar panels in at our central kitchen which is fantastic particularly with the weather we've had over the last couple of months and the AI smart sockets in the store as well have been saving us energy too and then finally the hedging strategy we've been So yeah, good progress on UK profitability. So moving on to the second pillar, the investment in the brands to drive growth. This slide covers really the food side of that which has probably been the most substantial element that we've done on brand. So starting with capability, we brought in a new food director in June last year, a guy called James who's had a fantastic impact on the business and we've upskilled his team as well with a new executive chef and some wider changes within the team.

8:00 So we've got a really strong team driving the food now. and we've invested in new uh servery equipment as well as part of that so skipping on to the all-day quesadilla one of the things that we really wanted to do we felt our quesadilla was one of our best products but before we only served it after two o'clock because it was too slow to serve at lunch and slow the line down with putting in some new equipment in the stores. We can cook these very quickly now and with a much better quality to them as well. So we launched the Ditch the Sandwich campaign with a lower price, 0.695, get a quesadilla. And the improvement in the sales mix of that has doubled. It's been a really popular product. You might have a concern that that's diluting our ATV, but it isn't because what we're doing with that is we're really promoting it as a meal deal. And so actually people are adding on drinks and chips as a result.

8:54 So it's a fantastic volume driver for us. We've overhauled our food offer. I mean, we have reviewed forensically every single container of food on our line. and we've made improvements to it whether it's the recipe, the way that we cook it or actually even the produce that we're purchasing to put into it we've changed a lot of stuff and those that eat our food regularly are always telling me that they've seen a big change and you know I think it says a lot if the founder says it's the best that our food has ever been which I think we're all feeling within the organization we're in a really strong position from a product's point of view Now given the competitive landscape in the UK having the top product at the best price you can afford to do it is absolutely vital to driving the top line.

9:41 We invested in our central kitchen as well as I mentioned earlier with various bits of equipment to not just improve the speed at which we can produce things but also the quality to enhance that as well and that's been critical to underpinning the changes. We've also started on our journey of launching limited time offers, which have been fantastic for the brand. So it's a bit of a mixture for us of working with big brands like Beyond Meat, you know, global brands, to also work with more artists and producers. So we've done various collaborations, for example, with Tubby Tom's Pork Belly, which was this year, really great product. And, you know, partnering with people who've got quite big Instagram followers, and just whipping up a bit of food news and excitement in the brand, not only for the customers, but also for our employees.

10:31 You know, you can see the energy it creates and the excitement and people are upset when they see some of them come off the menu, but that's the whole idea clearly behind creating a buzz around your brand and being able to rotate things like that. So moving then onto brand, We have pulled the brand lever a bit but if I'm honest this is a lever there's a lot more to pull on and I'm delighted that we recruited a new marketing director at the beginning of the year who joined us in January and we've got some really exciting bold plans coming on this run. Starting the first mesh mission that we've been working on over the last 12 months that was evolving our brand our brand that is 20 years old and I think when we were looking at the fresh burrito sites and how we convert them to tortilla it was a moment of realization for us that there was an opportunity to make our own brand bolder fresher and also having a more youthful energy around and a more simple design structure so there's a consistent identity now as well we've implemented across our digital and physical touch points on our social presence as well and we've seen some really good growth on our channels over the last six months we've been driving awareness and there's a lot more to do on this but we have done quite a few big activities we did the national burrito day as you can see from a screenshot there we've got our app our loyalty app number two behind chat GPT for a day which is fantastic so we require people to sign up to our loyalty scheme in order to redeem their free burrito 18,000 given away we signed

12:04 up 62,000 new loyalty members and then that gives us obviously a lot of audience to kind of contact and bring back into our stores now we did a quesadilla stunt in December last year which was good fun ditch the sandwich ditch the boring sandwich and replace it with a nice quesadilla and as I said we've been doing a lot of culture-driven collaborations as well and some brands listed on this slide but yeah it's been great to partner with and and have some fun with So yeah, that was it on the brand side of things. As I say, there's a lot more to come on that front this year. Onto team. I'm a big believer that although we are a restaurant and a food business, we're also a people business. And so we've been working really hard to develop Tortier as an employer of choice and become a sort of place that people talk about as being a place that's really good to work. I mean, the most impressive statistic on that front so far, I mentioned on the main side is we had a 35% improvement in our team turnover, which is absolutely fantastic.

13:08 That's versus 2023. We've been really working hard on this. We now meet with our store managers face to face quarterly. We launched what we call Habanero Highway, which is an L&D framework. I was actually at some graduate presentations from the leadership course that we did yesterday. Various people that have been in the business a long time have remarked they feel that's the best thing that we've ever done as a company, which is high praise indeed. And I think it really goes to show what kind of an impact you can have on your people when you start building this culture. we did our first burrito masters which i mentioned earlier so celebrating that the challenge of rolling a burrito who's the best of it and now we're an international business we can get the best from the middle east the best from france the best from the uk the best from our franchisees and have a lot of fun with it and celebrate the success of that and yeah there's been a big improvement in our operational statistics as well so you know hats off to the team they've worked really hard on our inaccurate order rate the mystery diners and our google ratings so we've seen some really strong results operationally as well it goes to show that that buy-in is building within the organization there's still a lot more to do on that front there's another 12 months at least a big transformation but but we're going to get there and we're going to keep growing it So this is another slide here on team. So there's some statistics here around feedback from our guests. The scores are pretty good, but they could be better.

14:38 And so I'm gonna be working with our chief operating officer to see what we can do to drive these things forward. I think particularly in this space of value for money and portioning, making sure that the portioning is consistent. We want people to walk away with a consistently sized product we want to make sure people are satisfied with their visit and we know from our loyalty that they are so it's just about driving that further now we've implemented some more systems to track this stuff going forward as well so if we move on to technology other than the food this is probably the other lever that we've pulled most heavily last year to drive that sales growth so we've got a fantastic new loyalty app which we launched in late summer last year a lot more functional than what we were using before we call it the burrito society and it says 196 000 users we're over 200 000 now which is fantastic and we've seen a huge improvement in our average weekly sales on that application what we're really seeing with tortilla is a very sticky loyal customer you know with our type of food offer and the variety you can get from it you will get people coming multiple times a week and the scheme is very generous we wanted to not fall down the track that many restaurant businesses have done and discount but instead provide value to our customers through rewarding loyalty so you get a sixth burrito after you've bought five you get the sixth one free it's pretty generous and I think we're really seeing sort of visitation

16:10 frequency go up heavily because of that We've also rolled out self-ordering kiosks across a range of stores. We've seen some really strong results from that. It enhances the customer experience in a lot of locations where people feel that the journey that we have at the moment is perhaps a little bit intimidating. It's not for everyone though, so we've been working hard on how do we put them in without it feeling like QSR. and so we've been evolving as we go around where we position them in the store so they're not in your face as soon as you walk through the front door. So we learned as we went on that but by learning as we went, we went quick and we got lots of these in and we've seen some really strong payback and results from them so far. Not just in average transaction value which is the commonly reported upside that people talk about but also volume which goes to show that people enjoy the experience in some of these locations and it's driving footfall.

17:05 The Robotics Partnership we've announced, fantastic business Kaikaku. I believe that our proposition is inherently suited to further automation opportunities. There's less precision needed in producing our food on the servery compared to burgers, sushi and other more foods requiring more finesse in the preparation. Our food is fun. I think we can automate further and I think we can redeploy people Haley much more than a functional guest experience than we're able to do at the moment really enhancing that kind of customer journey explaining the menu I really love for us to become a much more heavy front of house focused organization BI and data warehouse probably a bit less exciting but exciting to data nerds like us because ultimately it means you can make decisions more quickly and you can make a commercial impact more rapidly by so then we talked about doubling down on our franchise and we definitely have so we've delivered on this pillar just as a reminder for those that are new to the business we've got a great operating model for franchising I mean it's it is a very strong model simple kitchen format we provide a lot of the harder to produce

18:35 recipes and food from our central kitchen meaning the on-site preparation is very simple for our franchisees great for the franchisee great for us because it means that we can protect the consistency of our offer much better than some of our competitors are able to do which is great in terms of protecting your brand it means that our franchisees can build sites without extraction and they can take smaller units as well and as you can see from the graph in the bottom left corner Our franchising sales across the UK and the Middle East are over 16 million now and you can see how that evolved over the last five years it's quite incredible and it goes to show with the commitment that SSP had made to the business and the sites were opening elsewhere there's excitement about our brand on that front. SSP have opened a range of stores recently, there's a few of them listed here. Stansted Airport recently in December last year, fantastic site. This year with SSP we opened Victoria as listed on the slide, but also Liverpool Street Station. So we're across most of the major train stations in London now, fantastic from a brand perspective. We also opened a couple of sites in the Middle East so far this year. We'll be opening another site in the summer in Abu Dhabi.

19:48 Fantastic region. That business is incredibly well run by the franchisee we've got there. And you can see 24% like for like sales growth. I'd love that number as well. Our sales growth is strong, but hats off to those guys. They're absolutely killing it over there and doing a great job. And Compass as well. They're strong. We're in the higher education spaces and we're looking at other sectors as well with them and looking to expand that relationship. And then, yeah, lastly, I guess with the European growth, we'll come on to that. We've got a range of franchisees now in France. And so we've got some stepping stones to build on the franchising in Europe now as well. So yeah, developing the brand internationally. We obviously made some progress on this by buying our largest European competitor last year in the summer.

20:36 We bought 13 owned stores and 14 franchise sites. Fantastic locations. This was a property play for us, let's have no doubts. This is not a brand that we were looking to Retain in our own corporate stores we want to turn them to tortilla we've got our food in the restaurants at the moment we've got our central kitchen built in Lille and this central kitchen is enormous it's three times the size of our UK facility and our UK facility is supplying around 100 sites so as you can imagine there's huge rollout potential now that we've got as a springboard in Lille and it's important that we're able to provide food to the franchisees for the reasons I talked about previously we've got a great team in place led by a French MD called Gilles he's got great experience from KFC and yeah we're on the journey to getting the stores converted we'll be converting the first sites in the summer we're all hugely excited about that and we'll be working hard on that for the rest of the year so really exciting and it gives us a solid platform for our European growth which is There's a quick quick reconciliation here of our number of our sites. You can see that we're up to 120 internationally by the end of May of this year.

22:04 diverse portfolio as we talked about previously you can see a bar graph at the bottom with the different types of sites we've got and yeah great to see us expanding across both franchising but also through the acquisition we did last year and you know that property play that we commenced on that front as well so lastly before I hand over to Maria I just wanted to give you a quick view of our rebrand so as I mentioned on another side when we were looking to convert the fresh burrito stores to sorts here we wanted that conversion to really feel like wow noticeably different to existing design and it made us go through a journey of looking at our own design in the UK and seeing if there was an opportunity to modernize it create a more contemporary design and I think that's what we've delivered here these are some renders from some sites that we're going to be reopening This is a site in Leeds that we'll be opening next year.

22:59 Looks fantastic, bright signage on the outside. Looks fantastic with the kiosks well positioned, you know, and the interior nice and clean looking. I think it's a much more contemporary design than our current look and so this is something that we're really excited to be deploying in the UK where we can and also rolling out our sites in France. We've simplified the main logo from Tortilla, Real California and Burritos and Tacos, just burritos and tacos, simplify it and we want to start, this feels like a global brand to us now, not just a UK brand and I think having an iconic logo is a key part of that. Thank you. Thank you, Andy. I'm going to talk you through some of the financials now, starting with the highlights of next year from last year.

23:49 And I think the key thing of this is they really prove what Andy's been talking about, the significant progress we have made in the UK, as well as obviously the investments we're doing to grow in Europe. So first of all we saw the slide earlier on with our improvement in our like for like sales in the UK compared with the market but just to highlight again compare where we were in in quarter one last year we were about sort of minus five percentage points decline and then finishing quarter four last year in about in over four percent increase means we moved nine percentage points between where we started to where we ended the year which is quite a significant move On our top line turnover we have grown to 68 million up three and a half million year on year. I'll talk to you a bit more in the detail of the breakdown of that but the majority of that's coming from the acquisition of our fresh burritos.

24:44 On an adjusted group EBITDA line We were 4.5 million, which is slightly less than last year at 4.6, so down 2 percentage points. But what's important is really to look at the split between the UK and France. If you look at the UK operations, we were up from 4.6 to 5.2, so 13 percentage points. As Andy hinted on earlier, the majority of that was driven through the second part of the year hence where we will see full year impact of that really coming through in 2025. As expected when we bought a distressed business which was more of a property play as Andy said, we expected early day losses and that's what we're seeing in the minus 0.7 EBITDA contribution from France. On a cash perspective, we generated 4.2 million of cash from operations, up 10% year on year. And that's been really reinvested within the business, which I will talk to you a bit more about later on. Already gone through the sites, but yes, to highlight that again, at the end of the year, we had 117 stores, up 28 year on year, and we're now at 120 as we stand today.

25:51 Our net leverage ratio for last year was 1.3, up from 0.7 the previous year, which is really driven by that we increased our debt to be able to grow and expand into Europe. So we will then go a bit more into the details, starting off with the income statement. So you can see that the revenue growth being 2.3 million up 3.5%. I said the majority that comes from the acquisition of Fresh Breeders, but we also opened one new site in Arndale in Manchester in the UK in the year and we have the full year impact of 2023 openings and also seen strong, as Sandy said, franchise growth both in the UK and the Middle East. This is then offset by our delivery sales year on year because back in February for those of you who listened before might have heard this that we changed our delivery strategy to go on dual platforms rather than trading on three platforms and that meant a drop in sales of 10.5 percentage like for like but that's increased our profitability which you'll see on a later slide.

26:58 From a gross profit margin, we are temporarily down 70 basis points. And I say temporarily for the reason that this is really driven by the fact that we took over the French business. They had a frozen supply chain and didn't purchase very well from the suppliers. So we had a short-term sort of impact on our gross margin dip. Since we implemented the new central kitchen in Lille in France in Q1 this year, we have now seen margins going up again and we're currently trading around 78.5%. The adjusted EBITDA I've already mentioned to you that we were slightly down as a total but a strong progression on the UK side whilst France was down driven by the early sort of losses that we expected there.

27:43 Looking at the bottom line, the loss before tax, it looks quite alarming maybe at going up three times to 3.3 million, but it's really driven by two items. The first one is an impairment of 1.4 million in a small number of stores in the UK. And just as a reminder, that has no cash impact at all. It's just sort of an accountancy sort of booking. And the second one is one of the exceptional items of 1.6 million of which the majority 1.3 is driven by the acquisition costs. This drives down a little bit more into our like for likes in the UK following on from the slide that Andy showed at the very start on that So I just want to talk to you a bit and show that really the splits here between in-store and delivery as well.

28:29 So you can see that on the in-store, they were really transformed it from minus 4.6 in Q1 to 4.8 in Q4. So up with nine percentage points as I said earlier on. And the nice thing with that is that we can then see that tracking through into this year. We dipped down a bit in Q1 and it was really driven by in April, sorry, I'm saying wrong now we didn't we started off a little bit slowly but we then have been really strong in the q2 despite the fact that we dipped down a little bit in april because we chose to price slightly later rather than going first of april with a price increase we actually priced end of april to be able to watch the market a bit hence we saw that bit of dipping like for likes in april on andy's slide but since then it come up in stronger and we're now around sort of plus nine percentage points for After we had implemented that sort of price and when you're looking at our total there I think it's really interesting to compare that with the market so where we were in a decline quarter one last year of over two percentage points and now in an increase of six so we've gone up nearly nine basis points our the market was in a two percent increase last year in Q1 and Thank you for joining us.

30:09 overlapped this relevant timing last year where we also traded on two platforms rather than three. The actual delivery channel is in quite a strong growth of nearly 10 percentage points. This is an interesting slide because as you might remember we opened quite a lot of stores, 18 in fact, back in 2022-23 and a majority of those stores were opened in smaller tertiary towns, so not in a major sort of city. and because of that we have expected them to take a bit longer to mature and what's interesting with this is that obviously these sites have benefited from everything else the other sites in in our portfolio have done like the investment in food and tech and marketing and so on but what we can see here on the gray line which is the new store openings from 22-23 versus a total to tier state which is the red line is that the new store openings are really outperforming our total estate specifically over the last sort of three months is 11 percentage points difference between the two lines which really demonstrate that those stores are still maturing which is interesting because obviously a year or so ago there's really a drag on to our P&L you know loss making or maybe as marginal they're all now starting to reach that sort of point that they're starting to become profitable or at least break even and as you can see here they're still maturing so that should benefit us as the year go through and into the future as well.

31:40 I told you already quite a lot through the revenue slide but this is really just to demonstrate how much the revenue went up there from we'd have the acquisition increased with three million we opened new stores last year which is an average of 1.1 million net that contribution to revenue you can see from that little a new store opening graph that we have a closure of two stores in there those two closures are coming from one in Peckham which was our last delivery kitchen out of the ones we opened in Covid to close down we're not really having sort of specific delivery kitchens anymore we're using our normal stores for that and the second one was our store in Nottingham where we had two stores fairly close to each other we realized that we only really need one in that town and since we closed that one store the majority of the sales actually transferred over to the second one Franchise income is growing 0.2 up. You can then see that the revised delivery strategy made our revenue fall by 2.8.

32:44 Small impact of our in-store, which was in decline as a total for the full year, driven by the first four months of the year. That was really negative before we started to turn the business around. And then you have a accounting adjustment of 0.8, which is just the way we book our Book the sale we do to our franchise partners of our food from our central production kitchen has no impact on our actual profitability as to where in the P&L we book that, giving us a total of 68 million. Looking at our EBITDA bridge, we were at 4.6 last year. You can see a lot of green ones here coming from the UK business. Cost savings of 0.7, which comes from the points that Andy highlighted earlier. The automation in stores of bringing our, say, chicken dicing to the central production kitchen. The fact that we have saved on energy and that we have now stronger purchasing power, all of that contributing to this 0.7 million.

33:47 Franchise income goes straight to the P&L of 0.2. The change in delivery strategy was bringing down our revenue actually increased our profitability with 0.3. And we can then see that we price the last year we priced 6% in April, giving us an increase here in our EBITDA of 0.8. This year, we've gone a bit softer when we delayed it to the end of April to watch the market, we also choose to price only 4.5% is probably slightly lower than We've also chosen to go slightly softer on the pricing in central London where we already have a premium pricing and also the fact that the competition is really intense in central London compared with in some of the towns outside of London so we've done more of a split pricing strategy there but the pricing and the cost savings combined there more than offset the labor inflation we've seen of 0.8 and that means we've been able to also invest in our head office in particular marketing of 0.6 to start driving our brand awareness and repeat purchasing powers and that and then you could lastly you can see the fresh burrito acquisition and and the downside on the EBITDA that are 0.7 giving us 4.5 in total for the year And as Andy highlighted earlier, again, I just want to point out in the table at the top, you can see that the split for our EBITDA in 2024 is more heavily weighted towards the second half of the year compared with the normal seasonality that

35:18 we see, which always more heavily half two, because that's just the seasonality of, you know, having a really strong quarter four and that what we normally see. but because of a cost savings and other initiatives driving the sales and so really started coming through from the second half of the year that's what's driving that and that's what we will see it's fully materializing in 2025. So I'm going to tell you about the cash flow. So what you can see here is that we generated, as I said earlier, 4.2 million cash from operation. We've reinvested this in the business, both in the UK business to invest in our product technology, both the kiosks and the app, as well as our central production kitchen. to really drive our like for like sales and then on top of that we have maintenance investments that will to improve the sort of quality of the estate as we would always have and some new site capex the majority of that has gone to Armdale which I said we opened in Manchester last year but we also have investments in in France both for the central production kitchen and starting to invest in equipment into the stores of 1.6 million as well as the actual acquisition costs has come through here 1.4 impacting the the cash flow meaning that at a free cash flow level we were actually adverse 2.7 therefore we have drawn down 4.2 million more from our credit facility with Santander.

36:45 All of that's not fully utilized at the end of the year, meaning that as we close the cash position at 2.8 and obviously further capex investments will go on as we start converting the stores in 2025. So that means at a total net debt level, we were 5.7 million at year end, 1.3 times. and we have to remind everyone we have a total facility with Santander of 10 million. We've now drawn down 7.2 of that and that facility is agreed until September 2026. Actually being less than 18 months, we would have started our discussions with banks and we are pleased to say we're in a really advanced discussion with banks to renew our facility and we'll release some news to the market as soon as we have agreed that.

37:37 Just looking at our trading outlook for the rest of the year as I said UK is trading well going into quarter one quarter two this year now six percent likes for life we can see the cost savings coming through that we sort of for the initiatives we drove last year and we keep driving obviously food news and marketing and in technology investments as Andy's already talked about so the UK outlook is very much in line with the management expectations for France we're now ready to start conversion converting the stores with the first conversions to take place towards the summer Our franchise partners have already opened two new stores through SSP and two through IFA so far this year and we're expecting another two to four to open in 2025, a bit relating to the timing of the last two, whether they will fall into this year or into 2026.

38:33 I'm also pleased to say that the hedging strategies we have and the relationships with our suppliers means that we have already agreed very early on back in January the prices for all our proteins and for you know energy prices are fixed so we have no really volatilities throughout this year or risk to other input costs so they will be stable for the year which is quite nice with everything going on in the world economy at the moment so I think yes generally I'd say that both Andy and myself and the board we are really so excited about both this year and the future and the growth opportunities we have both in the UK and abroad and I think over to Andy to just summarize yeah so just to wrap things up I guess before we move on to the Q&A yeah we we've made really good progress you know there's still a lot There's some big moves forward on some of these key pillars so the UK profitability as we've talked about quite a lot today has moved forward last year and will move forward again this year so we're feeling in a really good place about how we're recovering here and getting more people through the door eating our food through all the different things that we've done around our food and our tech so feeling very strong on that front we're investing in our brands so there's more to do on food there's still tweaking that we're doing on our recipes in fact there always will be i think it's something that you have to be continuously optimizing

40:04 but we will also now with our marketing team be working very hard on our brand and the new look and feel how we get that into stores how we bring that to market if you look at some of the real success stories in the UK in recent years it's very often been heavily impacted by marketing so really excited by a huge lever that we can pull on this that we've only just begun to do so far continuing on the team and tech there's lots more work to do on both of those fronts we've made good progress but we'll be making more progress this year and we're doubling down on our franchising again as Maria just mentioned we've got a healthy pipeline of sites and with the franchising and the brand the last pillar that developing the brand internationally this is how we envisage Tortilla expanding across Europe there is a huge opportunity to consolidate and really own this cuisine in Europe we believe that If you look at other markets, not just the US next to Mexico, but you look at Australia and the success there with burritos, Europe is clearly underserved with this type of food.

41:12 I think we all feel that it's very much on trend with the way that people are going around eating clean food without sort of deep frying, you know, clean protein and being able to create variety in health through that food as well. yeah it should be a great opportunity for us to expand across Europe over the coming years so that brings us on to the Q&A before we do a final wrap-up so we'll we'll just flip to some of the questions that have come in over the course of the presentation I think I'll let you take the first question and it's the first question is around the Chipotle team has obviously started to expand internationally and particularly started to take some some presence sort of through Europe and what sort of is our view on that and what's on our radar?

42:00 Yeah I mean it's an interesting business Chipotle they've got a great product and we know their team relatively well they've been in some good locations they have been expanding a bit in recent months but they you know they've also closed the store so I think they're working out what their right type of site is for them but yeah it's great that there's more businesses selling burritos in in the UK I think to be honest I really like the awareness of the cuisine type to increase we've been the ones driving that over the last 10-15 years so we're very happy to see them expand I think for us scale is everything and we've already got that we've got significant scale in Europe which obviously comes with huge advantages around buying power and we have a slightly different proposition to Chipotle so our our food is slightly different and you know you feel that that's why it's super important to I think if you've got products and price generally you're going to be in a very good place on a competitive landscape.

43:15 The next question is, the file shows this UK sell fell in 2024. How confident are you that you can return UK back to revenue growth in 2025, specifically given the lack of owner store expansion plans in the region? And where would you put the ballpark guide on your 2025 revenue estimates? so what I was saying on that one of the big reasons as you would have seen from the slides about we fell in 2024 was firstly we had a really like really weak q1 and april last year before we started turning the business around secondly we changed the delivery strategy so we we lost nearly three million worth of sale because of delivery of trading on two rather than three platforms going into 2025 we started strongly so we've been in six percent uh like for lycra of both through sort of q Thank you for joining us.

44:23 We rolled out 11 as we said before last year we already implemented 12 so far this year and we're driving to get up to at least like at least 20 for this year so and that's really driving not just the AOV but also the volume which is crucial to us. So the next question here then is about this year appears to be about continuing the focus on UK stores franchising and converting the French owned stores Looking out beyond 2025, are there any other countries in Europe that you would take a similar path to expand in? Or is the focus in the medium term the UK and France? Any color there would be appreciated. Yeah, I think that's exactly right. Yeah, the UK stores, there's lots more to do here to generate profitability.

45:11 So just thinking about the comment on the UK stores is absolutely a priority to keep going on that. I think there's loads more room to grow our sales in our own stores in the UK and grow our existing franchise partnerships. I don't want to distract the team with too many missions because I think it's important just to knuckle down you know getting our UK cash generation back to a really solid place and we've made good progress on that and the French stores you know it's a big mission buying a fairly big business in France so the mindset is not necessarily chasing new opportunities now but making what we've got work and I think that's definitely the right strategy but of course we're starting conversations we showing franchisees our central kitchen in Lille people are excited you know there is opportunity in other European countries most obviously it would be countries near to France where we can get the food easily into those stores and there are burrito businesses in those Western European countries and some of them are performing relatively well so it proves the use case for burritos and the appetite for it so we will be keeping an eye on that and our focus will pivot towards that when the time is right The next one, can you talk us more about the departure of Kilvest Capital Partner and what their motives were for selling down that stake in Tortilla?

46:36 To let you take that. Yeah, I mean, so, I mean, Kilvest were, came into Tortilla, I think in 2010. So obviously a private equity firm, they tend to hold investments for a long period of time and they have no presence in the public market. So for them, there was always a sort of view that they were, although very supportive, that they would ideally like to bring that fund to a close at some point and move on to other things so I think it's just a natural life cycle as businesses you know as that fund moves on to different things we were really excited to bring in Okta as a key shareholder they've got some fantastic ideas on the board as well some really good conversations around tech and I think actually a bit of change is good because you bring new ideas to the table. Kill Best were fantastic and you know we had a great relationship with them but it is nice to get new ideas, new energy and we've had a really good time with working with Usman and the team at Orkster so far.

47:40 I think Andy, this one specifically says this for you, one for Andy and anyone else who would wish to comment. So Tia, share price has been dead for the better part of the year now. As executive team, you can control operation, which appears to be taking a turn for the better. So congratulations. The market dynamics, you have less control over, but if you could comment on your thoughts, why Tia fails to affect optimism for the market, what would be welcomed? yeah it's a great question yeah I mean I guess I'm a big believer in spending time energizing yourself about things that you can control and so I guess we're very much focused on looking at things we can control which is how do we get our brand to win that is how do we get obsessed about volume more people eating breeders that's kind of the management team's obsession here I think the public markets are difficult, not just in the smaller market cap space like we are now sadly, but also just wider. We've seen a lot of volatility this year.

48:41 I can't say I'm an expert on public markets and the market dynamics. but I think the priority for me just remains growing this business and making Tortilla win this mission that we think that remains I think there's opportunity for hundreds of stores across Europe and so that's kind of what we energize ourselves talking about I think there's also a view probably that we just need to get this business if you like a bit more rubber on the road in a way not just in the UK but in Europe and so I guess that's kind of very much what we're prioritizing you know How do we grow? How do we make a success of what we've got going so far? How do we grow our average weekly sales in our UK sites another 20%? You know, what is the opportunity here? So this is probably the thing for us is we just need to keep executing on what we're doing so far and perhaps spend another couple of years proving out some of these concepts a bit further.

49:39 So with our international expansion now a favor on today's menu can you speak on how you will expect FX volatility impact the business going forward a short and medium term? So firstly at the moment obviously our France business is not that massive yet so what we're doing at the moment is we're utilizing a euro account with our bank where we sort of transfer the money across when we're fairly sort of at a favorable position and We don't sort of really hedge any further than that. As the business grow in Europe, we would look to do some probably FX hedging as most bigger companies would do that have a operation in a different country. can you speak to why it took so long to get the fy24 results communicated to investors the really reason behind this is the acquisition so we acquired a completely new business we've had to do you know a component audit in france of the french business and then then a group audit at you know group level uh for for overall so it just takes slightly long you know to to have what we have versus last year about three weeks delay is probably not unreasonable considering we have purchased a completely new business that had to be audited for the first time and I think the follow-up question today is when can we expect the H1 FOI 25 results to be published we will as normal go out with a trading update in some point in July and then the interims is likely to be published similarish time to previous years which is around the sort of end of September time

51:14 In slide 8, Tortillas Like for Like lags the market significantly at the start of 24 and that was an inflection particularly in November 24 when Tortillas starts to significantly outperform the market Like for Like basis. Can you comment on what changed there and why you lagged so much previously and why you're now outperforming? Maybe that goes back to what we discussed. Yeah, I guess it's the fruition of The Vital Five Strategy really, I mean you know in April we kicked off a load of different transformation projects around our product as we talked around bringing in our new food directory in the summer in June starting to do limited time offers getting kiosks in we try out those in the early bit well sort of the spring of 2024 and then we really after the initial results of those ramped up our cadence on getting those into stores quite quickly So I guess a lot of it was back weighted, which is why the profitability will improve considerably in time. So yeah, it's the it's the fruits of the labor on that front. I mean, the other thing to point out is our new loyalty platform and the push on that didn't really start until September.

52:28 And so that's why you start to see these things kind of compound in terms of their impact and to kind of really generate some strong sales growth. There's a piece here around the robotics partnership. Yeah, I mean, there's all sorts of things we're looking at that. I do believe that if you were to do a swap diagram on tort here, I think that one of the opportunities of our concept is it will be easier to automate certain manual processes. I don't believe that there are processes that are highly manual and boring in nature. I think there are things that we can get our teams to do that'll be much more exciting for them in terms of interacting with customers so we're going to be looking at a lot of opportunities to automate back of house processes in the kitchen but also on the servery I think there is a much easier route to this than other brands so I can't talk in detail about that we're still working through with Kaikaku on some concepts but we would love to update in the coming months on some of that in a bit more detail okay UK company owned stores have been flattened for a few years.

53:36 At what point do we see Tortilla start expanding? Is their ROI not attractive enough in the current environment to build company operated stores in the UK? I think to focus on that is really at the moment our absolute number one priority when it comes to capex investment is to convert our stores in France and put them Put the money towards that. So that's why we sort of slow down the UK kind of rollout to some extent and also we in the UK have focused our management bandwidth really on all of the other sides of driving food, the marketing, the technology and we still see We will start to look at opening UK owned stores again, but we're probably very targeted on where those are in sort of prime sort of grade A locations, central towns and shopping centers should things come up there.

54:32 we will for sure look at it and then when we have converted all the stores in France that would be then how we will when we will start looking at own stores again but in the meantime we're still growing and I think it's important to say that that franchise growth has been strong we already as I said before have four new store openings through franchising this year and expecting another two to four this year so could be up to eight stores in franchise opening across the Middle East and UK. Just to build on that what I would highlight as well is as the graph showed in the presentation and the improvement of the business here in the UK in tertiary locations smaller towns that we've opened in like Durham or Canterbury and places like this the growth we're seeing in those is so strong that it does give you that confidence that the UK white space opportunity is really there in those smaller locations and so I think there's there is a lot of opportunity to grow the business still in the UK I think also from a return on investment point of view the returns on kiosks and the servery equipment that we've put into stores is so significant in terms of the improvement in the like for likes but also the payback on kiosks is so quick that it makes much more sense to deploy any cash that we do want to spend in the UK on that rather than new sites at the moment like Maria said whilst we're also working on our French opportunity so It's a conscious decision that we're making right now but obviously we will revisit this when the situation changes and we've got further growth

56:03 behind us. Two questions here. What's your EBITDA margin target and is it fair to say that for the existing sites the growth in revenue is mostly due to hike in prices? but take that first of the EBITDA margin I think what we saw before here in store EBITDA is that we grew it by two percentage points last year we're now 16.3 and that's across the full estate so our mature stores would be over 20 it sort of story bit down that's really where we're looking to be for the whole estate but specifically now as our sort of new store openings is starting to mature and not dragging that P&L down so we expect that to go up further and get to that sort of 20% mark at a total level I think previously Andy we have said around 10% as our story bit down as a corporate level and we sort of stand by that still at that sort of a target for the longer term Yeah I mean hopefully even more than that with the world of tech and automation and sales growth but yeah I think that is our sort of shorter term targets to try and get back to that in the coming years and sort of see how some of these other initiatives come to bear some results in the time as well.

57:13 I think that maybe the last bit there is the existing science is mainly growth is mainly driven by revenue and I think yes there is revenue growth in there but as I said before we are growing with six percent four and a half is pricing we're still in volume growth which is quite significant to point out because if you compare with the market that's also priced they are not seeing that volume growth at all at the moment. We're conscious we've only got two minutes so it might be a good time to sort of wrap up I think um given that uh yeah we're nearly at the end of the slot yeah that's great Andy Maria just like to thank you for answering the questions from investors of course company can review the questions submitted today and we will publish responses on the investor meet company platform perhaps just before redirecting investors provide you with their feedback which is particularly important to the company Andy could I just ask you for a few closing comments yeah I think thank you for for um dialing in to listen to the update and hopefully you can take away a feeling that we're making some big progress in the UK it's been a it's been a busy 12 months I think it's fair to say but you know with busyness comes excitement and the team are very energized we've got a very strong management team in the business now we spent a lot of time getting that right and yeah we see lots of opportunities to continue on the same journey in the UK I think that you know there's still a lot of levers that we've not fully pulled and we'll be putting those over the next 12 to 24 months to keep that kind of cash generation building and then yeah looking forward to getting some sites looking like Tortilla in

58:44 France and seeing some good results from that expansion you know that was a strategic step for us and yeah we're dead excited about that and hopefully all of you listening are feeling the same way about the kind of burrito opportunity in Europe so yeah that's that's probably about it from us now so thank you very much for your time everyone thank you that's great Andy Maria thank you once again for updating investors today could I please ask investors not to close this session as you now be automatically redirected to provide your feedback and all the management team can better understand your views and expectations on behalf of the management team of Tortilla Mexican Grill plc we'd like to thank you for attending today's presentation and good morning to you all.