Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon full year 2022 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations Director of Amplifon. Please go ahead, madam.
Thank you. Good afternoon and w elcome to Amplifon's conference call on full year 2022 results. Before we start, few logistic comments. Earlier today, we issued a press release related to our results and this presentation is posted on our website in the investor section. The call can be accessed also via webcast and d ial-in details are on Amplifon's website as well as on our press release. I have to bring your attention to the disclaimer on slide 2, as some of the statements made during this call may be considered forward-looking statements. With that, I am now pleased to turn the call over to our CEO, Enrico Vita.
Thank you, Francesca. Good afternoon, everyone, and thank you all for joining us also today. Let's begin with some comments on the year that has just ended. A year that was certainly very different from what we expected just a few months ago. The war in Ukraine first and the inflationary environment that followed impacted on the world economy and on our sector too. If I have to define the context in which we operated in one word, I would call it highly volatile. As also evidenced by the market performance in the last quarter of the year, which we estimated to have been unexpectedly negative by about 2%-3%, clearly below our expectations of a positive market also thanks to easier costs. In this context, also in 2022, we achieved record and best-in-class results on all key financial metrics.
If the sales growth of about 9% allowed us to cross the EUR 2 billion mark for the first time, I would like to highlight in particular the profitability that remained at the record level of 2021 and the net profit that was up by double digits by 13% in a year, as mentioned, characterized by high inflation in many cost items, above all labor cost. Last but not least, in 2022, despite the challenging microenvironment, our cash flow generation was again extremely strong, allowing us to further the leverage at 1.56. These results certainly make me very proud of how our team reacted to the unexpected environment. Regarding Q4, it is hard to say the causes of the negative market demand.
Still, apart from a few adverse contingent effects here and there, such as the severe weather in the U.S. in December or the latest COVID developments in Asia Pacific, I believe that the main reason was the negative consumer sentiment at the end of the year due to energy cost inflation and inflation-related media noise. The positive news is that the situation seems to be improving since the beginning of the year. I can anticipate that the new year is off a good start in many respects. In fact, in January and February, we saw solid growth in sales, even more so considering that last year first quarter had been the strongest of the year.
Additionally, in December and in this first two months of 2023, we were in a position to close many bolt-on acquisitions that we had chosen not to conclude sooner for pricing reasons. While we are now starting to see a decrease in expectations on the multiples by the sellers. I will return on to this at the end of the presentation when we discuss the outlook for 2023. Now, I will leave the floor to Gabriele, who will give you more details about our performance.
Thanks, Enrico, and good afternoon, everybody. Moving to chart number four, we have a look at the group's financial performance in Q4, which, as already commented by Enrico, posted sound results despite the softer than expected market demand. In the quarter, revenues increased by 2% of current ForEx and 1.5% of constant ForEx. Organic growth was positive for 0.4% vs. 2021, despite softer than expected market demand due to macroeconomic headwinds and some temporary adverse factors, including the storm Elliott in the U.S. and lockdown in China, as well as the contraction of the French market. Still remarkable comparison base. In fact, revenues in Q4 2021 were over 16% higher than Q4 2019. 1.5 trading days less, which is equivalent to around 2.5% growth. M&A contribution was at 1.1%, strongly accelerating since October.
ForEx was positive for 0.5%, significantly reducing vs. previous quarters and lower than expected for both the lower appreciation of U.S. dollar and Australian dollar vs. the euro and the hyperinflationary environment in Argentina. EBITDA recurring was around EUR 156 million, in line with the Q4 2021 record figure, with margin contracting 70 basis point vs. 21%- 26.9% due to lower operating leverage for the softer organic growth and not withstanding the extremely challenging comparison base, as in Q4 2021, the margin rose 180 basis point compared to the same pre-pandemic period of 2019 and the very high inflationary environment. These results was also achieved after significant investment in the business. Moving to slide number five, we have a look at our financial performance in the full year.
Revenue were up 9% at current ForEx and 7% at constant ForEx vs. 2021, with an above market organic growth at 3%, M&A contribution at 3.8%, and positive ForEx impact for 2%. EBITDA recurring amounted to over EUR 525 million, up around 9% vs. 2021, with margin at 24.8%, in line with the 2021 record level. This best-in-class profitability was achieved in a high inflationary environment, thanks to timely and effective cost management measures and even after significant investments in the business. Moving to slide six, we have a look at EMEA performance. In Q4, revenues were down around 2%, both at current and constant ForEx. Negative organic performance was due to softer than expected demand in most markets across the region.
The anticipated contraction of the French market, though, improving vs. Previous quarters, 1.5 trading days less, accounting for around 2.5% organic growth. Negative performance was reported in Spain and Portugal and in Germany. EBITDA was EUR 124 million, with margin at over 31% due to the reduced operating leverage for the slower organic performance. This result was achieved after sizable investment in the business and an extremely challenging comparison base as Q4 2021 posted a 190 margin increase vs. the 2019 pre-pandemic level. In the full year, revenue growth was 2.1% of current ForEx and 1.7% of constant ForEx, of which 1% organic. EBITDA amounted to EUR 415 million with margin in line to 2021 record profitability level.
Moving to slide number seven, we have a look at another outstanding and above market performance of Americas. Revenue growth was over 20% at current ForEx and around 18% at constant ForEx, with an outstanding organic growth of around 14%, despite the exceptional comparison base of over 30% growth reported in Q4 2021. Once again, the U.S. posted excellent and well above market organic growth, driven by all businesses and confirming the successful strategy. Exceptional organic growth was also reported in Latin America. M&A contribution, primarily related to U.S. and Canada, was at 3.7%.
ForEx effect was positive for around 2.6%, though significantly reducing vs. previous quarters, also affected by the high inflation in Argentina. EBITDA amounted to circa EUR 27 million, costing over 20% growth vs. 2021, with margin at 27.1% after strong investment in the business. In the full year, revenue were up 24% of current ForEx and circa 16% of constant ForEx, driven by an excellent above market organic growth of 13%. EBITDA amounted to over EUR 100 million, costing around 25% growth vs. 2021, with margin at 26.3%, up 10 basis points. Moving to Chart 8, we have a look at the Asia Pac, where we had a solid revenue performance despite the COVID impact across some markets, namely China and New Zealand.
Revenues were up 2.4% at current ForEx and 2.1% at constant ForEx, thanks to organic growth of 1.5% despite lockdowns in China, M&A contribution related to China at 4.6%, ForEx tailwind, though reducing vs. previous quarter at 4.3%. EBITDA reached over EUR 21 million, contracting vs. 2021 following reduced operating leverage due to lower organic performance and labor cost inflation, and after significant investment, primarily in the Australian business. In the full year, revenue were up 27% at current ForEx and circa 24% at constant ForEx, with organic growth at over 2% and strong M&A contribution for Bay Audio.
EBITDA came in at around EUR 84 million, with margin at 26.2% due to lower operating leverage, labor cost inflation, and after continued significant investment in marketing in Australia. Moving to slide number nine , we have a look at the Q4 profit and loss. In the quarter, total revenues increased by 2% to EUR 580 million. EBITDA recurring margin came in at 26.9% with a decrease of 70 basis points vs. 2021, following the reduced operating leverage due to lower organic growth and despite the high inflationary environment. Recurring EBITDA decreased 0.5% to EUR 156 million. Reported figure include around EUR 1 million one-off costs, primarily related to M&A integration costs.
D&A, including PPA and lease accounting depreciation, increased by EUR 0.6 million, leaving the recurring EBIT to EUR 94 million. Financial expenses increased by EUR 7.6 million at EUR 9.8 million, leaving profit before tax at EUR 85 million vs. EUR 94 million Q4 2021. Being the Amplifon financial debt almost entirely fixed interest rate, this result reflects for the comparison period 2021, the income of EUR 4.6 million recognized in the fourth quarter due to the change in the fair value of the GAES acquisition financing, and the gain of around EUR 4.8 million following the disposal of a subsidiary. The GAES refinancing had a reverse effect in the fourth quarter of 2022 in accordance with IFRS 9, a financial split over the five years life of the loan.
In addition, 2022 financial expenses were affected by the negative impact of inflation accounting on the Argentine subsidiary. Therefore, the net increase in net financial expenses deriving from increase in interest rate is in the quarter lower than EUR 1 million. Tax rates slightly decreasing vs. Q4 2021 led to a recurring net profit of EUR 63.7 million vs. EUR 70 million in 2021. Reported net result ended up at EUR 63 million with an increase of EUR 6 million vs. EUR 57 million in 2021. Moving to chart number 10, we see the full year profit and loss evolution. Total revenues increased by 8.8% to EUR 2.12 billion. Recurring EBITDA increased by 8.8% to EUR 525 million, with a margin at 24.8% in line with full year record profitability.
Reported figure include around EUR 6.5 million one-off costs primarily related to M&A integration. D&A, including PPA and lease accounting depreciation, increased by around EUR 19 million. Leading the recurring EBIT to EUR 285 million, with a growth of 8.8% or around EUR 23 million vs. full year 2021. Net financial expenses accounted for around EUR 35 million with an increase of around EUR 12 million vs. 2021, mostly explained by the effect of GAES refinancing, which had, as mentioned above, a EUR 4.6 million benefit in 2021 and a reverse effect in 2022. The EUR 1.6 million gain in 2021 following the income from the disposal of the Irish and Luxembourg subsidiaries, the negative impact of inflation accounting on the Argentine subsidiary in 2020.
The increase in net financial expenses deriving from the increase of interest rate is in the year around EUR 2 million. Profit before tax came in to around EUR 250 million from around EUR 240 million in 2021, costing therefore a 4.5% increase vs. 2021. Tax rate ended at 26.7%, leading recurring net profit at circa EUR 184 million, with an increase of 5% or EUR 8 million vs. 2021. Reported net result ended up at EUR 179 million, with an increase of EUR 21 million vs. EUR 150 million in 2021. Moving to slide number 11, we appreciate the cash flow evolution.
Operating cash flow after lease liabilities was in the period equal to EUR 353 million, hosting a 3% reduction vs. the exceptionally high EUR 366 million figure of 2021, which was over EUR 127 million or 53% higher than the EUR 239 million pre-pandemic figure achieved in full year 2019. Net CapEx decreased by 5% to EUR 106 million, leading free cash flow to around EUR 247 million, vs. EUR 255 million of 2021. Highly comparative figure, which was over 70% higher than the around EUR 150 million pre-pandemic figure achieved in 2019.
Net cash out for M&A was around EUR 85 million, driven by bolt-on acquisition, primarily in France, Germany, U.S., and China, slightly below our yearly target of EUR 100 million per year, hosting a considerable acceleration Q4 and during the first month of 2023. Following the strong buyback of 1.6 million shares in the period and the dividend distribution, net cash flow for the period ended positive for EUR 44 million vs. a negative EUR 240 million in 2021 following the acquisition of Bay Audio. NFP ended at EUR 830 million, decreasing by over EUR 40 million vs. year-end 2021, after over EUR 300 million investments in CapEx, M&A, buyback and dividends. Moving to slide 12, we have a look at the debt profile and key financial ratios.
As mentioned, the net financial debt closed at EUR 830 million with liquidity accounting for EUR 230 million, short-term debt accounting for around EUR 250 million, and the medium long-term debt accounting for around EUR 810 million. This confirms the very strong financial profile of the group, with a financial headroom of over EUR 480 million, including the undrawn revolving credit facility. Following the IFRS 16 application, lease liability amounted to EUR 470 million, leading the sum of net financial debt and lease liabilities to EUR 1.3 billion. Equity ended up at around EUR 1.04 billion, with an increase of over EUR 110 million vs. December last year.
Looking at financial ratios, net debt over EBITDA ended at 1.52x, improving 16 basis points vs. December 2021, and net debt over equity ended at 4.80 vs. 4.94 at the end of 2021. Let me finally point out that in January this year, we successfully completed the prepayment of our outstanding US PP
Amounting to $110 million, bearing an average coupon rate of 4%. The prepayment financed via available liquidity will allow us to lower our overall cost of funding and enhance our financial flexibility. I could now hand over to Enrico for the outlook and closing remarks.
Thank you, Gabriele. Let's first talk about our sustainability plan, as 2022 also marked a significant step up in our ESG commitment with a strong focus in all three areas. First, we strongly accelerated on our environmental responsibility. We measured our carbon footprint along the whole value chain, including our Scope 3 indirect emissions for the future definition of the group climate strategy. We participated for the first time in the CDP questionnaire. We also delivered on our green objectives, having increased, for example, the share of renewable energy from 30% to over 50% in 2022. Another area of focus was diversity, equity and inclusion. We adopted our new DEIB Policy and global governance, have seen a significant increase in women and gender balance in managerial roles.
In addition, we received important recognitions as a top employer in all our regions. This year, we were included in the S&P Global Sustainability Yearbook as a member and as the only industry mover in the healthcare providers and services sector, showing the best year-over-year improvement in the score. All in all, we look forward with real excitement to our journey towards an even more sustainable company. Let's move now to the following chart number 14 for the outlook. This is the last chart of today's presentation, where we summarize some key messages about 2023. The first message is that after a weaker than expected Q4, sales in the new year are off to a solid start. I think March and April will be important to confirm this trend and have a better picture about the rest of the year.
Still, our goal remains to grow more than the market to strengthen our leadership further. The last few months have also been very positive in terms of bolt-on acquisitions. In the final part of last year and at the beginning of this one, we have closed many deals that we preferred not to finalize earlier because of the expectation on multiples that we felt were unjustified. The current pipeline is strong too, and we expect a contribution from a bolt-on acquisition at least of 2% this year. Finally, in January, we began implementing 2%-3% price increases to offset the inflation on labor costs. The price increase will have a full effect from March, and we have not seen a material impact on volume so far.
This price increase will also support our goal for the year to improve profitability further compared to 2022. All in all, thanks to the initiatives already in place, we look positively to 2023, as well as we remain very confident about our prospects of a sustainable and profitable growth in the medium term. With this, I thank you all for your attention, for your support, and we look forward to taking your questions. Francesca, over to you.
Thanks, Enrico. I kindly ask operator to open today's Q&A session. Please kindly limit your questions to maximum two initially in order to give everybody the opportunity to ask questions. Now, I turn the call over to Sabrina in order to open for the Q&A. Thank you.
This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Julien Ouaddour of Bank of America. Please go ahead.
Thank you very much, and good afternoon, everyone. I have two. The first one, I mean, this year the market growth seems to be a bit more tricky to call than in the past, and we have some different assumptions from several manufacturers. Could you share just a bit your view for the market in 2023? Second question, can you give us all the levers for the EBITDA margin expansion this year and also what's the kind of margin expansion that you can deliver in 2023 and beyond based on new market conditions, current inflation? Are we still talking about 30 basis points per year? Thank you.
Thank you. Thank you, Julien, for your questions. About the first question is actually the hardest to answer because as I said also during the presentation, last year was characterized by very high volatility in terms of market demand. So, t o predict what will be the market in 2023 is very difficult and, as I so also said during the presentation, I think that even if we are off a good start in 2023, January and February were two good months. I think that March and April will be, in my opinion, a key in order to see and to have a better picture about 2023.
In general terms, if I have to make, let's say, an outlook about next year, I would say that in terms of volume, we should expect a positive, still a positive market, but clearly below our historical level. You know that our assumption for, I mean, for the long-term growth of the market is about 4%. We see still a positive market, but below, let's say, the historical levels that we were used to see, in the past.
With regards to margin expansion, and where we see the opportunity actually to increase our profitability further, I would say that the main action that will have an impact on profitability is clearly the price increase that we have implemented starting from January. We will see the full effect of this price increase, which is in the region of 2%-3%, starting basically from this month, from March. This price increase clearly will help us to offset the inflation, in particular on labor cost that we are gonna have this year. I can confirm that on all the other cost items, we do not see any kind of inflation.
Actually, I'm extremely confident that we can even make efficiencies and be even more productive on many of those.
Thank you. Thank you. Just, like, a quick follow-up on the margin. Could you give just a bit of, you know, like, granularity in terms of, what kind of margin expansion can we expect at least for this year?
Yeah. Well, as you know, the margin expansion, it depends a lot from the organic growth and the organic growth depends, of course, also from the kind of market development and demand that we will see. I would prefer actually to wait, as I said, another couple of months, so March and April, which are two important months, in order to have a better visibility about what kind of market demand we can expect for this year, in order also to answer to your question with more, let's say, more details. As I said, we are confident that we can improve our profitability this year vs. 2022.
Well noted. Thank you very much, Enrico.
Thank you. Thank you, Julien.
The next question is from Niccolo Storer of Kepler. Please go ahead.
Thank you. Thank you. Good afternoon.
Ciao.
First question.
Ciao.
First question is on the solid start to 2023. So, I was wondering if this solid start has to be intended in relative terms compared to Q1 last year or more in absolute terms and m aybe if you can elaborate a bit more on the trend by main geographical areas and maybe the split between volume and prices if relevant? The second question is still related to price increase. You mentioned 2%-3%. A clarification more than a question. Is this to be intended as a price increase over your total turnover for 2023, of course, for 10 months, March through December?
Is just the price increase that you're going to apply to selected products where you can do these increases? Thank you.
Thank you. Thank you for the question. With regards to further comments on the solid start of 2023. Solid start means solid start in comparison with last year, which is a good news because as you may recall, the first quarter of last year was the strongest at the end of 2022. So, we have a solid growth on top of last year growth, in my opinion, is a good sign. As I said, please note that March, April are strong months, and therefore to confirm this trend, I prefer really to look at what will be our performance in these two months.
With regards to the areas and the color by region, I would confirm what we have experienced in Q4. Definitely strong growth in the Americas region. Lower growth, middle growth, let's say, in the Asia Pacific region, and lower growth in Europe. The kind of qualitative trend that we have seen in Q4 has been confirmed also in these first two months. With regards to volume and price, as I said, we have implemented price increases starting from January. We do not see yet the full effect, but the trend is very positive. Also in order to offset, to answer your second question, the 2%-3% price increase is on the total of our sales for, let's say, 10 months or whatever.
Clearly is on the total of our sales. We aim to increase our prices, let's say, across the board by this 2%-3%.
Maybe as a follow-up, have your expectations on wage inflation increased compared maybe to the latest that you have given us? You were talking about, if I remember well, 2%-3% on top of the usual 2%-3% that you see in a normal year.
Absolutely confirmed what we said last time, and now we have a better visibility, so I can definitely confirm what we have been saying now for a while, and that you summarized in a very correct way.
This price increase, maybe is even something more than
It is [audio distortion] [crosstalk]
Definitely is even more. Of course, we needed to see that it will speak for the entire year. The objective is that one.
Perfect. Thank you.
Thank you.
The next question is from Veronika Dubajova of Citi. Please go ahead.
Hi. Good afternoon. This is Giang from Citi on behalf of Veronika. I have [crosstalk] 2 questions, please. The first one is, can you talk about any assumptions that you have made for 2023 as it relates to the mixed development? Are you seeing any down trading already in the U.S. and Europe, or whether, you know, this is something that is a risk in your view if inflation remains elevated and my second question is on the M&A environment. Is there any particular market where you see a high number of M&A targets, and how competitive is the process now, given that some of the peers who reported already also seem highly focused on M&A now? Thank you.
Thank you. Thank you for your questions. So, with regards to, let's say, consumer behaviors and down trading, no, we do not see any significant down trading effect on our sales. What we see is that, you know, the difference between returning customers and new customers. We see the returning customers to be a bit hesitant, let me say. We see more positive demand from new customers than from returning customers. This is, I believe, just eventually a postponement. In some way, I also think that some pent-up demand has been created in the last few months and the last year.
With regards to M&A, well, actually, as you know, as I said, actually, we since October, we have accelerated on our M&A activity, and we were able actually to close many deals that we were a bit reluctant to close earlier because of the expectations of multiples. I think that the general macro environment also had an effect on the expectations of multiples, which now are more, let's say, reasonable than maybe one year ago. So, no, I'm very happy about the activity in the last four months, four, five months.
I would like to in particular highlight that we have been able to close a few deals both in U.S. and China, which are two strategic markets for us, as well as, you know that in terms of bolt-on M&A, we are focusing on France, Germany and also Canada as a priority. I can also add that the target for this year is to increase the contribution from acquisition to more than 2%. So definitely an acceleration with respect to 2022. So I feel pretty comfortable with that.
Thank you [audio distortion] . Very helpful. I just want to go back to the down-trading point. Understand that you're not seeing any down-trading now, but hypothetically, if inflation were to remain at an elevated level, would you be concerned that this might turn out to be a risk?
It's very difficult to say about the future. What I can tell you is that so far we have not seen that than about the future, is very difficult to predict.
Got it. Thank you.
Thank you. Thank you so much for your questions.
The next question is from Domenico Ghilotti of Equita. Please go ahead.
Good afternoon. My first question is on the European market. Now, to everybody. On the, f irst of all, on the trend that you are seeing, so, when you say European is, so the lowest area in terms of growth, is it now positive and can you comment on why Iberia, in your view, and Germany were the countries most affected by the slowdown? The second question is on the profitability for 2023. Do you see some profitability developing, say, quite evenly on the different regions, or you see some regions that are driving really the profitability for 2023?
Okay. Thank you. Thank you for the question. With regards to the market demand in EMEA, which you rightly highlighted that we expect and we see actually to be the lower at the moment in terms of growth and w ith regards to Iberia, you know, my first answer would be that, you know, both Spain and Portugal are completely 100% private markets. So with no reimbursement whatsoever, and so no support from the government. That could be perhaps the reason why we see Iberia to be lower in terms of market demand. However, I appreciate that I'm gonna contradict this talking about Germany, because on the other side, Germany has a quite strong reimbursement system, and also we see some slowdown there.
I think that it is more related perhaps to the resilience in general of the consumer confidence but to be honest with you, I do not have a just one answer. The second question was about.
The profitability. Is there any specific-?
Yeah, sorry. By region for expected for next year, I would say that we expect even contribution from all the three regions. So, the goal is to improve profitability in all the three regions.
Even Europe. Okay. Thank you.
Thank you. Thank you, Domenico.
The next question is from Hassan Al-Wakeel of Barclays. Please go ahead.
Hi. Good afternoon. Thank you for taking my questions.
[audio distortion]
Firstly, just in terms of the quarter, I'd love to hear more about the drivers of market share gains in the Americas and what you put the weakness down in EMEA down to? Whether there are any key countries in Europe outside of Iberia to call out, and how you expect these key markets, both Europe and Americas to progress over the course of 2023? secondly, you talk about a 2% M&A contribution expected this year or greater than 2% M&A contribution. What is the run rate in terms of the sales contributions from the stores already acquired in Q1 in December, please and how meaningful are U.S. franchisees being acquired within this mix? Thank you.
Thank you. Thank you for the questions. With regards to the first question and therefore the outperformance, our outperformance in the Americas in general, I think that we report, we recorded a very strong performance across the board, both inside the U.S. with franchising, with our network of direct operated stores, as well as Amplifon Hearing Health Care reporting strong growth but also outside the U.S., what I mean is that we had also very strong contribution from Canada and I would say also exceptional contribution from LATAM and therefore with all the different components. With regards to the U.S., I'm very happy of course about our performance, which was clearly well above the market.
The market, you know, public data reports, a -4% for the U.S. market in Q4 and we were clearly very well above that. Well, The team there is just doing well. We are doing well. I think that the strategy that we implemented starting from the end of 2018 and 2019 was the right one and now we are reaping the benefits of that kind of strategy implemented a few years ago. So, very happy about our performance in America and I expect, unless something change in terms of market demand, I expect the U.S. to continue to be the engine for the growth of the group.
With regards to some more colors about other markets, Iberia, Germany and France. As we pointed out, yes, Iberia was lower, as well as Germany. France was still negative, even if less negative than in the previous quarters, despite an easier comparison base. All the three markets actually were negative in Q4. With regards to the second question and therefore, I mean, a contribution, of course, I can't give you exact numbers, but we put in place already a significant effort in terms of M&A and all the deals that we have closed make us confident that we can have a contribution from M&A for the full year above 2%.
Some of those, to complete the answer, were also related to the acquisitions of some of our franchises in the U.S.
Perfect. Very helpful. If I could just follow up on, you know, the strong performance that you cite in January and February of a particularly tough comp last year. Are you able to help us a little bit more just with a potential quantification of that? Should we be assuming mid-single digit, or potentially higher than that? Thank you.
In January, February, of course, I do not like to give you the exact numbers by month but January, February, what I can tell you, broadly speaking, is that the growth was above 5%. I want to underline again that March is the biggest month of the quarter. So, to confirm our growth, March will be crucial. What also is positive, in my opinion, is that, as I said before, Q1 in general was the strongest of the year. So, in theory, starting from Q2, we should see also a more favorable comparison base.
Perfect. Thank you.
Thank you.
The next question is from Hugo Solvet of Exane BNP. Please go ahead.
Hi, guys. Thanks for taking my question. Just on the strength in the U.S. market, can you maybe talk to the performance of your Hearing Health Care, and the size of it? To what extent this has been a major driver for growth? Also, on the strong reinvestment, as you call them, in the business across all geographies, are those reinvestments behind now, and should enable for a margin uplift in 2023? Lastly, can you quantify the impact from-[crosstalk]
Sorry, I couldn't get the second question. Can you please say again?
Yeah. Sure. You mentioned strong reinvestments...
Yeah.
All businesses and geographies. Are those investments behind now, or not?
Okay. Okay. Thank you.
Yeah. Thanks.
Okay. With regards to the first to the first question, Therefore some colors on our performance in the U.S., I would answer by saying that the main contributor to the growth of the U.S. was the performance in our direct store network. That was the, let's say, the business unit that performed better, just followed by Amplifon Hearing Health Care. [audio distortion] before, actually, I mean, we got good performance across all the three different business unit as well as in the broader American, Americas region. We also got good performance from Canada and exceptional performance also from Latin America. With regards to reinvestments, well, as you know, we want anyway to continue to invest in our business.
I would say that we have a plan to continue to strengthen our position also through our investments on the brands, on the organization, etc. , etc. , also going forward. So, I would say that as we also highlighted many times, I mean, we wanted to partially reinvest the gain in terms of profitability in order to strengthen our position on many aspects.
Thank you.
Thank you.
The next question is from Sezgi Ozener of HSBC. Please go ahead.
Hi. Thanks for taking my questions. I will keep [crosstalk] them to two. First of all... Hello, can you hear me?
Yes.
I will keep them to 2, please. First of all, in terms of medium-term targets, I know you haven't been very specific, but I was just wondering if you'd go back to Capital Markets Day 2021, 25.5% or above could be seen as a 2025 target, or would you project that to be substantially below or above that? My second question is relates to reimbursement. We know there were changes in France, and now we have a base effect from that. Do you see any changes from any of the other countries or any risk that measures similar to OTC regulation in the U.S. might be replicated by other countries?
Right. Thank you. Thank you for the questions. So, with regards to the medium target that we issued back in October 2021. As you can understand, these targets were shared before something important that has then afterwards happened, which is about the war in Ukraine, all the inflation related to energy costs, etc. , etc. . Before giving you a target, as I said also before giving you a granular target in terms of profitability for this year, I would like to see if the trend in terms of market demand will be confirmed also in the next two, three months. What we have also said is that anyway, still we think that we have as a goal to increase profitability in 2023 vs. 2022.
With regards to reimbursement, no, I do not see any risk at all. You mentioned OTC in the US. What I can tell you about this is that so far our assumptions are confirmed. What I mean is that we do not see any significant traction from OTC in the U.S. I can also tell you that in order to understand about consumer behavior with regards to OTC products, OTC proposition, etc. , etc. , we ran a pilot in the U.S. starting from basically October, and we basically sold none. Literally none, maybe two or three units, actually. So, I do not really see so far the market changing because of the OTC introduction in the U.S.
That's very helpful to know. Thank you.
Thank you.
The next question is from David Adlington of JP Morgan. Please go ahead.
Hey, guys. Thanks for taking the questions. Most of them have been asked already, but maybe just circling back on the Americas growth. I just wondered if you had a feel for where you were taking share from which particular segment. Is it the other large players? Is it the independents? Just wondered where you were taking some share in the U.S. Then just a technical question, please. Just wondered what the interest guide for 2023 might be, please. Thank you.
Thank you. Thank you for your questions. I believe that in the U.S., the channel which is suffering the most, is the independents. So, I, I guess, that, we are taking share mainly from the independents, which still represents the largest, channel in the U.S. market. Above 40% of the market in the U.S. is included in the independent channel. So, I guess that the small players, of course, in a complex situations are the ones that are suffering the most. With regards to interest, I would leave the answer to Gabriele.
Yeah. As we showed during Q4, I believe, because, I mean, the interest rate increase was progressive during the year. In Q4, making apple with apple, the interest rate increase caused a total of an additional expenses in terms of interest cost in the range of EUR 1 million. Actually, it was a little bit lower. Almost or a little bit above than 80% of our credit line are fixed interest rate. Of course, the more we go ahead, some of them will be expiring, will be substituted by some other, and so there would be the cost of the moment in which the credit line are negotiated. Most of our credit line among the one expiring, will do it during 2023 and 2024.
For 2023, I really don't see any important significant increase. Maybe something in the range of the EUR 1 million [crosstalk] per quarter that we saw in Q4 or maybe something higher.
Of course, I mean, if you look at this number and you take into consideration that the interest rate increased by 3%- 3.5% points over the last 12 months, and we have a net debt in the order of EUR 900 million, that's something absolutely negligible compared to what could have been the cost for the group.
Perfect. Thank you.
Thank you.
The next question is from Oliver Metzger of ODDO. Please go ahead.
Good afternoon. Thanks a lot for my questions. The first one is, can you talk on the M&A deals? You said that multiples for some assets have become more attractive. So, c an you comment first to which extent multiples have come down? Is it in the 20% territory, or where does it stand? I agree that basically if you look at the multiples that they have come down given the increased interest rate environment and even the expected rollover of mature bonds into new debt, how should we think about your expected ROCE compared to the M&A transactions that you executed over the last years? That's the first part. Second part is more of a strategic dimension.
Historically you commented that you will limit yourself of supply to 1/3 of supply from one single manufacturer. First, where do you stand right now, and is this framework still active?
Okay. Thank you. Thank you for the questions. With regards to the multiples, yes, I mean, I think that it's difficult to quantify if it is 20%, 10%, etc. , etc. . What I would say is that you have seen that last year our activity was lower because the ask was for higher reps multiples or in general term a more, let's say reluctance from sellers to sell, which we have seen to change in the last part of last year. What I mean is that we have seen higher propensity from sellers actually to conclude a deal, most probably because of the challenging environment in the market.
With regards to the second question and therefore share of wallet of our manufacturers. Yes, I mean, our strategy is still the same and what we said in the past is also confirmed going forward.
Okay, thank you. May I just ask a follow-up on my first question because you answered on the multiples, but not yet whether the deals have still a similar ROCE compared to the deals you executed, let's say [crosstalk] one years ago.
Sorry, say what?
The ROCE, the return of.
Oh, right.[crosstalk]
On [audio distortion]
Yeah. I mean, that has not changed at all. I mean, absolutely not at all.
Yeah, even as you incorporate some higher interest costs into your estimates.
Yeah, I mean, Oliver, I mean about interest costs, we can do, I mean, nothing moving forward apart what we did in the past, which really put us in a very strong position today. I mean, when we negotiated each single financing, it was covered into fixed, and some of them expired, so we had to renew and so was done with a cost which was a little bit higher but again, as of today, 80% is fixed and we have availability of most of them, all of them up to the end of 2024. Some of them, as you know, the bond up to 2027. This is a very important source with a 1% interest cost.
Moving forward, of course, if in 2024 we will have to renew EUR 300 million, it will have the price of the moment. What it is good is that today, if you make the comparison could have been something in the range of an higher cost of EUR 20 million-EUR 30 million, and it has been EUR 2 million during 2020.
Yeah. Okay, great. Thank you very much.
Thank you.
I think we are running out of time. Maybe, if we can have, one last question.
The last question comes from Julien Ouaddour, is a follow-up from Bank of America. Please go ahead.
Thank you for squeezing me in at the end. Very quick one. Could you share with us what you have in mind in terms of growth phasing throughout the year? I guess just Q1 is expected to be the softer quarter, right?
Yes, in general terms, what I can tell you is that Q1 last year was the strongest in the year. So, actually we should have a better comparison base starting from Q2, Q3 and also especially Q4.
Great. Thank you very much.
Thank you.
Thank you. Thanks to all for the participation.
Thank you.
We remain at the disposal, our IR department for any other Q&A, and I would ask the operator to close the call. Thanks.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.