Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Amplifon Q1 2023 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 and Sustainability Senior Director of Amplifon. Please go ahead, madam.
Thank you. Good afternoon and welcome to Amplifon's conference call on the first quarter of 2023 results. Before we start, two 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 dial-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 two, as some of the statements made during this call may be considered forward-looking statements. With that, I'm now pleased to turn the call over to our CEO, Enrico Vita.
Thank you, Francesca. Good afternoon, everyone. Thank you for joining us today. Today, I'm pleased to comment on a great quarter, one of our best quarters, even above our expectations. Definitely, I would say the best way to start the new year after all the turbulences of last year. Our performance was supported by a market demand finally back to a positive growth, also by our relative performance, once again above market. Let's immediately review some of the quarter's key numbers and achievements together. Revenues were up 9% at current exchange rates and 9.3% at constant exchange rates. More importantly, the composition of the growth was excellent. In fact, the organic growth was at a remarkable 7.4%. Clearly, the pricing actions I anticipated you during our last conference call supported this high organic growth.
Today, I can share that these actions have been executed very well, and the current outcome is even above our initial expectations. M&A contribution was also strong at almost 2%, thanks to our bolt-on acquisitions, which accelerated, as already discussed, in the last part of last year and during this first quarter. Also, thanks to decreasing multiple expectations by the sellers. Regarding the recurring EBITDA, we delivered around EUR 124 million, increasing by almost 10% versus 2022, while the margin increased by 10 basis points to 22.9%. We posted the net profit recurring of EUR 35 million, increasing by 6% versus 2022. The net financial position was at EUR 826 million, further reducing versus year-end, despite the lower seasonality of our business in Q1.
All in all, we are very happy about our results in this initial part of the year. Now I hand it over to Gabriele to give you more color about our financials.
Thanks, Enrico. Good afternoon, everybody. Moving to chart number four, we have a quick look at the group financial performance in Q1, which as already commented by Enrico, offered a truly excellent start to the year. In the quarter, revenues at constant ForEx increased by over 9% versus 2022, with an excellent above market organic growth at 7.4%, despite the very tough comparison base. Revenues in Q1 2022 were 16% higher than in Q1 2021. The very strong organic performance was driven by a market demand back into positive territory, primarily for the U.S. private market, share gains and positive pricing developments. M&A contribution, strongly accelerating since October, was around 2%. ForEx was negative for 0.3%, primarily for the ARS and the AUD, in part, more than offsetting the U.S. dollar appreciation.
EBITDA recurring came in at almost EUR 124 million with a margin at 22.9%, up 10 basis points versus 2022, thanks to solid operational leverage while strongly investing for the growth. Moving to chart number five, we have a look at EMEA very strong performance. Revenue growth at constant ForEx was 6% versus 2022, with a strong and above market organic growth at 5%. Despite still some market-related softness and a challenging comparison base. M&A contribution related to bolt-on in France and Germany was around 1%. Strong organic growth was reported in Italy and Germany, as well as a sequential recovery versus ERM 2022 in Spain and France. EBITDA amounted to EUR 100 million, up 7% versus 2022, with margin at 27.8%, up 30 basis points, thanks to strong operational efficiency.
Moving to chart number six, we have a look at another outstanding performance of Americas despite a very challenging comparison base. In fact, last year, revenues grew 30% versus Q1 2021. Revenue growth was over 19% at constant Forex, with an excellent organic growth at around 13%, driven by an outstanding performance in the U.S., especially for Miracle-Ear direct retail and Amplifon Hearing Health Care and LATAM. M&A contribution, primarily related to U.S. and Canada, was over 6%. Forex effect was positive for 0.6%, driven by U.S. dollar appreciation, partially offset by the high inflation in Argentina. EBITDA amounted to EUR 24.8 million, with margin at 24.6%, in line with the Q1 2022 after strong investment in the business.
Moving to slide number seven, we have a look at Asia Pac performance, where we posted an excellent revenue growth as well as profitability improvement. Revenues were up over 13% at constant Forex, mainly driven by the outstanding organic growth boosted by Australia and China after the negative impact of COVID in 2022. M&A contribution related to China was open 8%. Forex headwind was -2%. EBITDA reached EUR 21.7 million, an increase of 12.5% compared to 2021, with margin at 27.3%, 20 basis points higher versus Q1 '22, being back to positive operating leverage also after significant continued investment in the business. Moving to slide number eight, we appreciate the Q1 profit and loss.
In the quarter, total revenues increased by 9% to EUR 540 million, with an excellent 7.4% organic growth versus Q1 2022, by far the strongest quarter last year, with an outstanding 9% organic growth versus 2021. EBITDA recurring came in at EUR 123.5 million, increasing 9.5% or around EUR 11 million with margin at 22.9%. This is point above Q1 2022 record level. After stronger reinvestment in the business versus last year when we implemented some cost containment measures related to non-strategic investment and other operating costs due to the softer than expected market conditions.
EBITDA reported was around EUR 116 million, up around EUR 6 million versus 2022, after around EUR 8 million one-off non-monetary costs, primarily related to the application of IFRS 2 accounting principles to the share assignment to the CEO already communicated in January. Ordinary D&A and PPA were EUR 62 million versus EUR 58 million last year in light of the increased investment in network, IT infrastructure, and innovation. Net financial expenses amounted to EUR 11.9 million versus EUR 8.4 million in Q1 2022 in light of the extraordinary exchange rate differences related to Forex swings in America and of the increase in interest rates, although, as you know, our credit line are mostly at fixed rates.
Tax rate as usually slightly higher in the first quarter versus the following quarter due to seasonality, posted a 10 basis point reduction versus 2022, leaving recurring net profit at around EUR 35 million versus EUR 32.8 million in Q1 2022. Moving to slide number 9, we appreciate the cash flow evolution. Operating cash flow after lease liabilities was in the period equal to EUR 73 million, almost in line with the EUR 74.5 million outstanding level achieved in 2022. Net CapEx increased by EUR 5 million to EUR 27 million, leading free cash flow to over EUR 46 million. Net cash out for M&A posted a significant increase to around EUR 39 million versus EUR 24 million last year, following the significant acceleration of bolt-on M&A, primarily in France, Germany, Canada and China, with around 70 shops acquired in the quarter.
NFP ended at EUR 826 million, posting an improvement versus year-end 2022 after strong capex and M&A cash out. Moving to slide 10, we have a look at the debt profile trend and key financial ratios. As mentioned, the net financial position closed at EUR 826 million, with liquidity accounting for EUR 95 million, short-term debt accounting for around EUR 274 million, and medium long-term debt accounting for around EUR 747 million. This confirms the very strong financial profile of the group with a financial headroom of over EUR 350 million, including the undrawn revolving credit facilities after the repayment of the USPP we completed in January.
Following the IFRS 16 application, lease liabilities amounted to around EUR 480 million, leaving the sum of net financial debt and lease liability to EUR 1.3 billion. Equity ended up at around EUR 1.05 billion. Looking at net financial ratios, net debt over EBITDA ended at 1.48, improving versus 1.52 of December last year, despite the seasonality and after the strong CapEx and bolt-on M&A slide. Net debt over equity ended at 4.79. I would now hand over to Enrico for the outlook and closing remarks.
Thank you, Gabriele. We are at the end of today's presentation, which contains several key, very positive messages. First, the market demand is back to growth after three quarters of negative developments. Second, our pricing actions have been implemented smoothly and are delivering strong results. Third, we continue to increase our share in most core markets and delivering on M&A bolt-ons. Clearly, we are very satisfied about our performance in Q1, which further increases our confidence about a very positive 2023. In fact, this confidence translates into our outlook for the year. In terms of revenues, we now see our revenues growing in the region of EUR 2.3 billion-EUR 2.35 billion.
Regarding EBITDA recurring, we aim to end in the EUR 570-EUR 585 million region, also thanks to an easier comparison base, particularly in H2 . Definitely, let me say, a strong set of good news for today. With this, I want to thank you all for your attention, 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 Sherry in order to open for Q&A. Thanks.
Thank you, madam. Excuse me, 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 touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use handsets when asking questions. We will pause momentarily as the callers join the queue. The first question is from Hassan Al-Wakeel of Barclays.
Hi, good afternoon, and thank you for taking my questions. I have two, please. So firstly, could you talk about the guidance on margins and why you only expect up to 10 basis points of margin expansion with organic growth in the range of 6.5%-9%, as well as pricing actions that you're taking? Is this a function of greater marketing, perhaps more dilutive retail M&A or simply conservatism? Then secondly, could you talk a bit about the growth guidance and why, you know, guidance doesn't imply a more meaningful acceleration in growth over the coming quarters given that comps do ease meaningfully? How has growth trended in March and April? Thank you.
Good. Thank you for your questions. With regards to profitability, I think that what we have put in our guidance today is very coherent with what we said just a few weeks ago at the beginning of March during our full year results. Our target was basically to be above the profitability of last year, and I think that the guidance for today is very coherent with that. We felt that that was not really meaningful to change anything for the time being. Let me say that we are very positive about our ability to continue to increase our profitability in the medium term, exploiting, of course, operational leverage. Let me also add that there is nothing really to be concerned about profitability.
If we compare with last year, you know very well that, last year, as usual in these kind of situations, we were very good in managing the profitability. Also, thanks, as you would expect, to some cost containment measures on non-strategic items that of course this year we will not have any more. I don't see any issue in terms of profitability, anything to be concerned. Of course, if the market will develop in a positive way, there is also the opportunity actually to be above last year. A lot will depend also on this. In fact, please also consider that while in the first quarter the market was positive, still below the historical levels.
We are still coping with a market that is not growing at the same pace of, let's say, of the last, the historical pace of the market. With regards to, with regards instead to the revenue growth, well, I think that the guidance, it is reflecting some sort of acceleration in the second, in the next three quarters if you take, of course, the upper part of the range. That's why of course we give a guidance which is in a certain range. If things will develop in the right way, we can be in the upper part of the range.
Please do not forget that not all the clouds that were present last year, basically disappear overnight, but definitely we are much more positive than we were just a few months ago.
That's very helpful. If I could just follow up on that, on the market dynamics that you talked about. I mean, do you think that the improvement that you're seeing in the market is sustainable barring a, you know, significant macro event? How are deferral of replacements trending across your major markets compared to, say, two or three months ago?
Well, let's say that our view for the Q1 in terms of market growth in our reference market, so I'm not considering channels like BA or like NHS, where we are not present, of course. In the first quarter, we estimated that the market was positive in the region of 2%-3%. Going forward, for the full year, we estimated the market to be above this number, but still the historical, below the historical level of last years when you may recall that our assumption was always a market growing in the region of 4%.
Why we still, believe that the market will be definitely much more positive than last year but below the historical levels, simply because we still see some deferral, some delay in particular in the returning customer part of our client base, which we expect perhaps, of course, to continue also for the remainder part of this year.
Excellent. Thank you very much.
Thank you.
The next question is from Julien Ouaddour of Bank of America.
Hi. Hello, everyone. Thank you for taking my questions. I have a couple. The first one, we've seen strong results from some manufacturers recently, with especially some recently launched new platform which seems to perform, like, pretty well. Is it something that you're worried, I mean, in the case where some patient could prefer to go in the independent channel to try out these platforms instead, in your Amplifon's network? Have you noticed, I don't know, fear, like, fiercer competition from the integrated manufacturers recently? That's the first question. The second one, I think you mentioned on price increases that the current outcome is even above expectations. Could you give a bit more explanation there?
I mean, do you mean demand is more resilient than expected despite higher pricing, or do you plan to pass on even further than the 2%-3% already announced? Thank you.
Thank you. I always struggle actually to comment on other other players result. Let me answer first of all, if I see something different in terms of competition, I would say absolutely not. Definitely, we continue to grow share. You have seen our performance in the U.S., you have seen our performance basically around the globe. We continue to gain share this is our estimation, our assumption, we continue to gain share in all the core in the core markets. When you compare our results with others, I think that first of all, we should look at the comparison base. As you may recall, our first quarter of last year was exceptionally strong, which was maybe not the case everywhere.
Actually, last year we had a growth of 16%. On top of this, now we are adding another 9%-10%. In my opinion, this is a huge result. To be honest with you, also in consideration of the first month of the year, I was not expecting such a strong result. Also please consider that, as you mentioned, if we speak about manufacturers, we're speaking about Selene, we're speaking about different channels. I don't think that comparing the two things are really very extremely meaningful, at least in the short term, let me say. If we coming to your second question and therefore the price increase, yes.
I think that we have seen that the demand is even more resilient than we were thinking to price. Definitely a very positive news. Despite of the fact that as I said, our pricing was above our 2%- 3% that we were planning, we have not seen meaningful impact on units. We are very pleased with our pricing actions.
Thank you. Thank you very much, Enrico. Can I just follow up on the price increases question? You just said that you're like you're positive about it, and maybe you might increase prices slightly above the 2%- 3%. Can you maybe provide a sort of more color about it? Any number maybe to give to give us?
Yeah. Let me say that for the time being, what I can tell you is that it's above that number. We need to see a bit above that number, then we need to see if it will stick for the entire year and so on and so forth. In general terms, as I said, I'm very, very positive about what we have done, and this is also very comforting because, as I was saying before, we have not seen a material impact on units, which is very good.
perfect. Thank you very much.
Thank you.
The next question comes from Niccolò Storer of Kepler.
Good afternoon. Thanks for taking
Oh, hello.
Ciao. Thanks for taking my two questions, which are again on, sorry for that, about pricing and the EBITDA guidance. On pricing, if I remember well, last time, you talked about starting the increases in the month of March. I was wondering how much of the 7% organic growth you reported in Q1 was effect of price hikes. If, as I'm expecting, we should expect something more, a higher contribution in Q2, Q3 and Q4, as this increases go at full speed. The second question is again on EBITDA guidance.
Basically, you are assuming a flattish margin year after year even in a context of a good ability of passing higher prices probably above your expectation. The initial idea was that price increases would have been enough to guarantee a sort of steady, maybe not that high, but steady improvement in profitability to protect your profitability growth path. Why this year you're guiding for stable margins? In the press release and the presentation, you talk about new initiatives to support growth. Maybe can you share something with us on that front? Thank you.
Thank you, Niccolò . Your question was very long. I hope that I have took, I've taken notes of everything. Otherwise, please, remind me some parts that I'm gonna miss. In general terms, as I said before, I mean, I'm very positive about our ability to continue to improve our profitability in the medium term. I think that if we look and we compare our profitability versus last year, as I said, I think that we need also to take into consideration, two elements. The first point is about the fact that of course we are now sustaining higher, inflation than usual on labor costs.
We have said in the past that basically the kind of inflation rate that we are envisaging for this year on labor cost is basically double of what we were historically sustaining in the past. Also, again, let me underline the fact that last year, as usual, in a similar situation, in a situation, in a challenging situation, we have been very, very good in managing our profitability. Of course, also containing, taking some containment measures on some costs that were not strategic for us. We will have this cost this year. It is also a matter of comparison base. Again, you're right.
I mean, the market this year in the first quarter is positive, but still not in the same kind of positive territory of the past in terms of growth. In the first quarter, we estimate something in the region in our reference market, I wanted to underline once again, in the region of 2%-3%, which is below the usual 4%-4.5% of the past. Of course, this is also something that we have to take into consideration. With regards to your first part of the question, and therefore, our price increase and materialization, I would say that in the first quarter, we gained more than we were expecting.
What I said, I think last, during our last conference call, it was that the price increase was starting from the January 1st , but with the majority of it being materialized in March. In reality, we had even a better result that we were expecting. All in all, let me say, basically what we are saying with our guidance is the fact that we aim to have a profitability which is above the historical level of last year, when also we have taken some cost containment measures, as you would expect, given the challenging situation of last year. Let me say also, let me add that historically we have been able to improve, thanks to operating leverage, our profitability in the region of 30, 40 basis points.
Let's say so basically what we are missing here, just in the worst case, is, what? 20 basis points. We are speaking about EUR 1 million per quarter, which is basically, let me say, not really, not really meaningful. Just the cost of the conference, let me say, together, all together after so many years of virtual conference, et cetera, et cetera, can explain this kind of gap in Q1. The message that I would like to give you is that I have no concern about our ability to improve our profitability in the medium term.
Of course, if we compare with the last year, we have, we are comparing ourselves with a year in which, we were able actually to keep profitability at the highest levels in our, in our history, also taking some cost measurements actions, and that's basically it. I can't also, of course, exclude that we can do better, but especially in the H2 , you know that, in particular, in the last quarter of the year, last year, we had a profitability which was below the previous year. especially in the second half, we will have also an easier comparison base.
Thank you. Very clear. Maybe a very quick follow-up. You talked about 2%-3% market growth for your reference market.
Yeah.
How much was Europe alone, maybe?
Europe was in this first quarter, was still in negative territory. Let me say 1%-2% negative.
Brilliant. Thank you.
Thank you.
The next question is from Veronika Dubajova of Citi.
hi guys. Good afternoon, and thank you for taking my questions.
Hi, Veronika.
First, I just kind of want to circle back to the margin conversation. Enrico, I think you said in response to an earlier question that you're still very confident in midterm margin expansion. Maybe just quantify that for us. Are we talking sort of 10 basis points, 30 basis points, 50 basis points? Not necessarily this year, but as you look beyond this year, what you think the right ballpark is for that midterm margin expansion and how you're thinking about that? That would be my first question. My second question is a follow-up on, I think Hassan asked about the trends that you've seen in March and in particular in April. If you can comment on market growth, and how that's progressed. I know that the comps change a lot through the first half of the year.
If you can share any color with us on that would be super helpful. Apologies for being pedantic about this, of the 7% organic growth that you've reported, can you confirm whether price was 1, 2, 3 points of growth, whatever it was? It'd just be really helpful for us to understand that. Thank you.
No, thank you. Thank you. Thank you, Veronika, for the, your questions. Yes, well, with regards to our, my confidence actually to be able to improve profitability in the medium term, you know, historically, we have been able to improve our profitability by 30, 40 basis points in the past. I would say that this is something that of course we can aim for for the future. This is not, let me underline, is not an official guidance for the next three years because this is something that we have not decided yet.
In general terms, let me say that this is the historical level of profitability improvement, and there is no reason why it shouldn't be the case also going going forward. With regards to the second question, which is about the market growth in the first quarter, as if I'm right. In the first quarter, we estimated that our reference market was positive by 2%- 3%, with EMEA still being slightly negative, with America being very, very positive, and with Australia and New Zealand being slightly positive in the region of 2%, something like that.
Sorry. Enrico, actually, I was asking, has this growth continued through to April? Would you say that April's been consistent with this trend, better or worse? That was really my question. Sorry if I wasn't clear.
All right. Sorry. With regards to April, still, of course, we are very positive about our. Of course, I have no doubt about the market, clearly. Difficult to make comments about April also because, you know, this year, April, we had the Easter in the first part of the month. There were many bank holidays and many days off. Very positive. I'm positive also about how things are developing in April. No concern at all. No concern at all. With regards to the third question, as I said, definitely pricing was a good support to our organic growth above the 2%- 3%.
I would refrain to give you the exact split, of course, but, above this, slightly above this number is a good assumption.
Excellent. Very clear. Thank you for that.
The next question comes from Domenico Ghilotti of Equita.
Good afternoon. First, just a clarification on the full year guidance. If I'm not wrong, you are really pointing to something more in the region of, let's say, 9%-11%. With a slightly negative effects and 2% of M&A, the actual organic growth is really very high single digit or even close to double digit. Just to check that, and if you can say, comment on what could be the mix between price and volumes on that contribution, back to the previous question. Second, on the U.S. market. I have seen a quite significant pickup in M&A contribution. Can you comment on what has been so the key focus in terms of acquisitions?
Also you were commenting on the direct operated stores contribution on organic growth, so you can give us an update on that. Maybe the third question, so I'm parsing to say the two, but I saw that Germany, you mentioned some good rebound in Germany. You were mentioning weak performance in Q4. Can you comment on the volatility that you are seeing maybe in the performance of some markets?
Well, thank you. Thank you, Domenico, especially for for the first question, because I think that you got, in my opinion, the most important message of this conference call, which is about the fact that our guidance implies a very strong organic growth. So definitely thank you for for underlying this. Perhaps it's something that I should have underlined even more in my comments earlier on. You are absolutely right with your assumptions, which, in my opinion, are leading to a very, very positive and very strong year for the company. With regards to the split, the price volume, as I said before, I won't give you the exact split.
What I can tell you is that in this first quarter, our pricing action was above our initial expectation, which was a 2%-3%. You can assume something above that. With regards to the M&A contribution in the U.S. market, this is the combination of basically some stores that we have acquired in the U.S. The biggest contribution was through a very nice acquisition that we made in Canada. You know that Canada is also a core market for us. It's the fifth market in the world in terms of dimension, and we have been able actually to complete a nice acquisition, which definitely will increase our scale in Canada.
Finally, with regards to the third question about volatility, yes, it is true that we still see some volatility. We still see, as I was saying just at the beginning, some still some returning customer postponing their purchase. Overall, from what we have seen so far, we are definitely much more positive on the market than we were at the end of last year when we were coming from three quarters in a row of negative market. We have seen a good rebound, let me say.
In Canada, Just to check, is, say, new stores or, I mean, not, franchise stores that have been converted?
No, no. We have acquired the new stores. We have acquired new stores.
Good. Thank you.
Thank you, Domenico.
The next question is from Oliver Metzger of ODDO BHF.
Hi. Good afternoon. Thanks a lot for taking my questions. The first one is on your top line guidance. The difference between the lower and the upper end is 2% points, which in an environment which appears to be more volatile given also some historic data. Can you tell us a little bit more about the moving parts? Should we potentially assume more external growth than your organic growth slows down? Second question is about the phasing of your price increases. Obviously, it's the hardest part to observe from the outside. If you look for on the positive contribution in the first quarter, should we see a similar contribution also in the next quarters, or can you tell us when the contribution should become lower?
The last one, very quick, is, how has the share of manufacturers changed over the last month? Thank you.
Thank you. Thank you, Oliver, for the three questions. With regards to the first question and therefore the top line guidance, no. In this guidance, we are not, let's say we are sticking with what we have already disclosed in terms of contribution coming from an M&A. Basically we are looking a contribution from M&A in the region of 2%. Something less, something more, the 2% region is absolutely confirmed. All the rest, the top end of our guidance implies a +11% growth. The bottom end implies an 8.5% growth, which is our, I think, let's say, which implies also one of the best organic growth that we ever had in our company.
All the rest is coming from organic growth. With regards to the next quarters and the phasing of the price increase, we are not definitely lowering the contribution. We are not envisaging a lower contribution from pricing in the next quarters. Eventually something more also given a bit of phasing in Q1. The final question was about share of manufacturers. Nothing meaningful to report.
Okay. Thank you very much.
Thank you.
The next question is from Robert Davis of Morgan Stanley.
Hello. Yep, thanks for taking my questions. I just wonder if you could touch on the expected seasonality and the profitability of the group going through the year. I was just looking back through your results from last year, there was quite a bit of movement, I guess, across the quarters, particularly on your gross margins. Just wondered how you'd think about that cost evolution given your comments earlier on inflation as you move through the year. That was my first question. Then Along the same lines, just in terms of sort of labor inflation, just be curious where you're seeing the sort of, the sort of most aggressive inflation across your labor base. Thank you.
Thank you. Thank you for your question. With regards to profitability, you are absolutely right. If we look at our performance of last year, basically we were in positive territory in the first three quarters. As or as I remember, in the last quarter, we had we posted the profitability, which was down versus previous year of about 70 basis points. In, let me say that's why I was also commenting earlier on about the fact that in terms of profitability in the second half, we should have also an easier comparison base. With regards to labor costs, the, where we have seen the let's say the bigger increases are in Australia and New Zealand.
Australia and New Zealand also, I think that we commented in the past about France, where, of course, given the huge growth of the market, let's say competition on audiology also increased. Also there we had a labor cost inflation which was above the average. These are the three markets that I would mention.
Thank you. Maybe just one follow-up. The comment you made earlier around more hesitation from returning customers coming back to you back to buy a sort of follow-on product. What do you hear anecdotally from the stores in terms of why that is? Is it sort of all macro-related? Is it anything to do with the platforms on offer or the technology or people becoming more ambivalent about sort of buying upgrades as quickly as before? Just be curious what you're hearing in terms of in terms of feedback.
Well, let me say, first of all, we see very good response from new customers, which might, I say might because I can't give you a definite statement on this, which might be also related to some sort of pent-up demand from last year. I don't know, to be honest with you. What I mean is that on new customers, we see a very good response on our marketing activities. What we see, let's say less response is on returning customer. I personally associate that with the current scenario because, you know, if you have already a hearing aid that perhaps you delay, given all the things that are happening at the global level, perhaps you can decide maybe to postpone three, four months, et cetera, et cetera.
If you are a new customer and you arrive to the decision after to buy a hearing aid after seven years, you really need it. There is less of this kind of effect on new customers. I think it is more on related to returning customer just postponing for a few months the decision to renew their hearing aids.
That's very helpful. Thank you.
Thank you.
The next question is from Shubhangi Gupta of HSBC.
Hi. Thanks for taking my question. I have two. First, regarding price, are you seeing any price increases from the manufacturers, and is that built into your guidance and your price increases throughout the year? The second question on OTC regulations, are you seeing any impact from those? Since this is the early stages of OTC, do you think, going forward, it would slow down your growth? Thank you.
Thank you. With regards to the first question, no price increase to us, if this was the question actually, Therefore, no inflation on cost of goods sold. Not at all. With regards to the second question, OTC, thank you for this question because what we see is basically that the sales of OTC product are decreasing month-over-month, in the, according to the official data from HIA in the first quarter of the year were sold something in the region of 13,000 OTC product, which means nothing, zero.
You may recall that we also, decided actually to have a sort of pilot in a bunch of our stores in order to understand consumers interested in OTC, et cetera, et cetera. Basically, since October to end of March, we sold, I believe, less than five OTC products. Again, there is no. For now, at least, we have not seen any interest on OTC in the U.S.
Thank you.
The next question is from Giorgio Tavolini of Intermonte.
Oh-
Hi. Good evening. Thanks for taking my questions. I was wondering if you can elaborate more on some items related to your P&L, in particular the corporate costs. I saw in the first quarter, there was a peak, basically on adjusted basis, corporate costs came at 5.6% of total sales, if I do not make mistakes. Should we expect some reduction in the coming quarters also given the seasonal trend of reduction that we saw last year? The second question is on net financial expenses.
Is it fair to assume something in the region of EUR 41 million-EUR 42 million for the financial year, since you had EUR 3.5 million increase in the first quarter, even though it's more related to the short-term debt, if I understood correctly. The third question is on China. Should we expect a positive performance in the second half of this year? I mean, in terms of easier comparison, given the lower restrictions on in China from the borders. Thank you.
Thank you for the three questions. I will answer the last one. I will leave the word to Gabriele for the other two. With regards to China, yes, of course, in China, we are doing very well. We are very active. China actually already in the first quarter contributed to the growth of the Asia Pacific region. Clearly, the comparison base was very, let's say, was much, very easy because of the lockdowns of last year. Definitely we have grown so much today. We can count on a network of more than 200 stores in China, which are performing extremely well and with also good profitability although, of course, still lower than the average of the region, with a good profitability, very good profitability.
This is also, increasing while we gain share. Definitely, we expect China, thanks to the fact that now all the restrictions are over, to grow very, very fast this year. With regards to the first two questions, I will leave the word to Gabriele.
Thanks.
Thank you.
In terms of corporate costs, if you look at the recurring ones, we are very much aligned with what we posted last year. Actually, the percentage overstayed in the range of 4.3%. Last year was 4.2%. We are very much aligned. If you look at the recurring one, we had some non-monetary one-off costs due to the assignment of some stock given from the shareholder. But it is something one-off and non-monetary, which you cannot include, of course, as a recurring item in the profit and loss. Also for the year, we envisage a ratio recurring corporate cost in the range of 4%, very much aligned to the past. Going to financial expenses, I mean, we are aligned with the forecast you said.
At the end of the year, it should be something in the range of EUR 41 million-EUR 42 million, with the current level of a credit line of standing. During Q1, there was some increases related not to interest rate increase, but due to some one-off Forex exchange difference. Some of it because last year we had a gain, and this year we didn't have the gain and some other loss related to Latin America and something related to U.S. dollar. This should be something one-off, not to be included, of course, on the recurring financial expenses made of interest costs on financial loans plus the rents, which of course, also taking into account the IFRS 16 also are included in this line of the profit and loss.
Very clear. Thank you.
Thank you.
For any further questions, please press star and one on your touchtone telephone. Mr. Baldi, gentlemen, there are no more questions registered at this time.
Thank you.
Thank you. Thank you, everyone.
Thank you.
Thank you, everybody, for your interest. You can disconnect, operator. Thanks.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.