Good afternoon, and welcome to Sphera Franchise Group Q1 2022 results call. My name is Zuzanna Kurek, and I'm Investor Relations Officer at Sphera Franchise Group. This morning, we have published our Q1 2022 report, which you can find on our website in Investor Relations section, as well as on BVB's website, Sphera SFG investor profile. Thank you for joining our call to discuss our performance in the first three months of 2022. Before we begin, I would like to mention that this call is being recorded and that the recording of this call will be updated on our website by Monday the latest. As stated in the call invite, by joining the video conference, you automatically and implicitly consent to being recorded. If you do not consent to being recorded, please leave this call.
In terms of organizational aspects, we will follow our standard call setup, which means that the management will first deliver a presentation outlining the Q1 2022 results, and later we'll have a Q&A session. Please note that all of the participants are put on mute. If you would like to ask a question, please type it in the chat box. Feel free to do it during the call, and we'll answer all the questions in chronological order as the presentation of the management is over. Last but not least, I would like to mention that we might be making forward-looking statements today during this call regarding future performance of Sphera Franchise Group and that actual results may differ materially.
We encourage you to review the disclaimer that we have included in the presentation, which is available also on our website at spheragroup.com Investor Relations, as well as BVB website. This disclaimer applies equally to all the statements made in today's call. Let's kick off the call. I would like to introduce the management that is here with me today and that will present to you the Q1 2022 results. I am joined today by Călin Ionescu, Chief Executive Officer, Valentin Budeș, Chief Financial Officer, as well as Monica Eftimie, Chief Marketing Officer. I will now pass the floor to our CEO, Mr. Călin Ionescu, who will share some insights about our performance in Q1 2022. Calin, the floor is yours.
Thank you, Zuzanna. Hello, everyone, and thank you all joining the call today. We are going through a period characterized by unpredictability. We had to face some crisis like the sanitary one, the one of the price of energy or fuels. Furthermore, we are struggling with the disturbance of the logistic chains. On top of this, there is the war in the region that has massively impacted the price of basic food, and not only. Of course, we are still facing the workforce crisis, which is here with us for so many years. Working in this difficult economic environment become a major challenge since the events are occurring extremely fast.
First quarter of this year was the second-best quarter for the group in our history in terms of restaurant sales on the Romanian market as the revenues increased 28% year-on-year and 4.5% quarter-on-quarter. We have continued to invest in the development of our footprint, and between March 31 last year and March 31 this year, we have opened 15 new restaurants, out of which 14 in Romania and one new restaurant in Italy. The development of the network in this period full of uncertainties is the basis for future results. Despite the challenging context, we see the improvement in the performance of all our iconic brands.
Over the years, we have proven that our business has been resilient even to the most unforeseen shocks, and we are confident that all through 2022 has already brought several challenges, particularly on the costs and supply chain side. We will deliver a solid performance. Expenses grew faster than sales in the first quarter of this year, increasing by 39% in the first quarter 2022 compared with first quarter of last year, driven primarily by the pressure from raw material costs, which increased by 40.7% to a level of RON 97.8 million. This evolution was driven by a significant hike in chicken meat prices, energy costs, as well as the general inflationary environment. Part of this costs were reflected in the increase of product price from March 2022.
However, lower than the total cost increases recorded in first quarter this year. Historically, the group has always increased price in stages. Therefore, given the current context, further price increases can be expected to our stakeholders this year. Having this said, it's better to go deeper in details, and in this sense, Valentin will start immediately presenting the results and later on, we'll answer your questions, if any. Valentin, please take the floor, and best of luck with the presentation.
Thank you very much, Călin. Thank you, everybody, and good afternoon. As you saw in our release this morning, Q1 was a challenging quarter, particularly on the cost lines.
In the last two years, in the context of the pandemic, top line was the main preoccupation of us to be able to ensure that we do not lose sales. 2022 came with a different set of challenges, supply chain disruption, inflation, geopolitical context, and the pressure on the cost side, which grew extremely rapidly at a pace that we have never seen before. As a consequence, Q1 2022 was really challenging as it still includes, for the better part, pandemic restrictions for restaurants, which, paired with the increase across all cost category, particularly on the payroll, food, especially chicken and energy expenses. Nonetheless, in this extremely unpredictable environment, we are pleased with the performance of all the brands from our portfolio.
While the quarter w as certainly challenging, we also saw the undisputed evidence of the strength of our iconic brands, which fueled the robust growth of top line year-on-year. As we remain committed to our growth strategy to increase our footprint in Romania and Italy, we'll continue to mitigate the cost in the coming months in order to improve the bottom line performance. Worth mentioning that the performance was in line with our expectation, mirroring the approved monthly budget. However, tremendous effort is to be invested in the remaining part of the year. Coming back to the Q1 performance, despite continued governmental restrictions so in all our countries of operations for almost the entire part of the quarter, we have managed to have a solid performance.
The Q1 2022 significantly surpassed Q1 2021 sales level by 31.8%, with double digit increase in same-store sales as well, i.e. 23.6%. Also, while comparing with Q1 2019, the pre-pandemic sales, the same-store sales increased by 20.6%, which show an important recovery after the sanitary crisis. Furthermore, our sales performance was higher even compared with Q4 2021 level, despite the fact that historically Q4 has the best seasonality in our industry. Even more in Romania, the same-store sales are higher than previous quarter as well by 2.6%. During the quarter, we reach another significant milestone, the highest same-store sales level in the history of Taco Bell in March 2022, reaching RON 4.7 million.
Consistent with our communication during the prior earnings calls, we face significant inflationary cost increases across the cost lines in the first quarter. Overall, our group generated a positive EBITDA of 3.8 million RON for this first quarter. When looking at the operating expenses that grew faster than the sales, as Călin mentioned as well in the beginning, a reason mainly related to the increase in the food and material payroll and other operating expenses. I think it's now the time to share some color on this main category. I will start with the food and material cost line, where there is an increase of 40.7% versus the same period of last year, surpassing the sales level increase.
The weight in sales increasing with 2.2 percentage points, reaching the 35.1% level in Q1 2022. The increase in food and material cost was driven by the significant increase in chicken prices by more than 40%, triggered by the spike in cost of feed grains, growing energy costs, the minimum wage increase, as well as by the general inflationary environment. Other significant increases have been registered for shortening, vegetables. These two categories recording an increase of more than 60%. Mozzarella, cheese, flour with an increase of more than 20%. In order to cover the inflationary effects, a price increase applicable to all channels has been implemented during March 2022, followed by another pricing adjustment performed recently on May 6.
Also, regular evaluation of the evolution of our cost of materials may trigger further successive increases in line with what Călin said, meant to boost the profitability for the remaining part of the year. Next category is the payroll cost line. During Q1, our payroll cost increased by 40% versus Q1 of the previous year, reaching RON 67 million, which is 24% of sales, i.e. 1.4 percentage point weight increase. As a combined effect of higher FTE needed to support the business growth, which is around one third of the increase and the higher average staff cost.
In the context of the scarce and the more demanding labor market during 2021, we focused, as you remember in the previous call, on motivating and securing our employees by implementing wage increases, 22% on average, a new bonus scheme and raised benefits for meal ticket increase. During Q1, the technical unemployment reimbursed by the state was very low, amounting only RON 154,000, compared with Q1 of the previous year, when we had recorded reimbursement worth of RON 1.8 million.
Excluding the effect of this reimbursement of the technical unemployment, the increase versus last year, the same period would be 36.7% instead of 40% mentioned before, having a delta weight in revenue of 0.9 percentage point instead of 1.4 as it is with the entire amount. Going forward with the restaurant expenses, we have our rent cost line with RON 21.5 million for the Q1. Also here, if you are excluding the rent discount received last year, which were worth of RON 1.3 million, the weight of rent in total sales has decreased with 0.7 percentage points, reaching 7.7% in total sales.
Even deeper, we have the advertising expenses, where we have invested in marketing during Q1 almost RON 14 million, which represent 5% of sales in line with our commitment. Lastly, other operating cost line with an expenditure of RON 45.3 million and the weight in revenue of 16.3%, higher with 1.4 percentage points versus similar period of last year. The main cost lines here are aggregator commissions and utilities. Aggregator commissions increased by 20.6% versus Q1 of the previous period due to the aggregator sales increase. However, the weight of aggregator commission in net sales decreased with 0.4 percentage points while comparing with Q1 2021 from 5.2% to 4.7% in 2022.
The other main component is represented by utilities, as I said, that increased with RON 5.6 million, mainly due to the higher energy cost, which represents around 90% of the utility cost line, with the unit cost increasing more than 80% versus Q1 2021. Excluding aggregator's commission and energy cost, the two lines that we just spoke about, the weight of other comparable operating expenses in total sales is almost in line with Q1 2021. Now, some color on our general and administrative expenses, where we have recorded a slight increase of 7.6% in 2022, mainly due to higher employee benefits, transportation costs, and third-party expenses. For the employee benefits cost line, more than 70% of the impact is coming from higher number of FTE.
However, the share of G&A expenses in the consolidated sales decreased by 1.1 percentage points from 6% to 4.9%. Looking at the balance sheet, we have closed the quarter with a very solid cash position of almost RON 119 million. A performance achieved along with no influence on our ambitious development activity, which was executing according to the plan, all this while maintaining a net debt-to-EBITDA ratio below 2. Our strong free cash flow generation will allow us to continue our long-term strategy. Now some words on guidance for the second quarter of 2022. Despite all the challenges faced in the first three months, the performance achieved is in line with our expectation, as embedded as well in the forecast of the first quarter.
However, taking into consideration all the volatile context recording in these three months, we are very carefully monitoring the execution of our budget for this year. Our guidance assumes no new COVID disruption. As we expected, the robust sales evolution, double-digit increased quarter-on-quarter of sales in all our countries of operation, mainly as a result of the removal or reduction of the COVID restrictions, which shows a recovery after the COVID-19 sanitary crisis. In terms of delivery sales, we estimate a decrease both on our aggregators and own delivery channel comparing with the first quarter of this year, and an increase on dine-in channel due to the elimination of the COVID restriction. Consequently, we estimated the weight of food aggregator cost in net sales will be lower than Q1 2022.
In this moment, we are not able to provide any guidance related to EBITDA or profitability, as the inflationary context is a very volatile evolution at this moment. However, as mentioned a couple of times until now, we are planning different pricing milestones to counter-attack the inflationary negative effect and build up the margin. On the next slide, we have as usual, the bars related to the revenue expense and EBITDA evolution. Starting from left to right, we are delighted to see the magnitude of our sales recovery ramp-up. Although it will be visible on the brand performance section later. It is worth mentioning that we have recorded a solid same store performance as well, sales increasing, both versus Q1 2021 with 23.6% and versus Q1 2019 with 20.6%.
Unfortunately, in this challenging inflationary environment, the expenses as just presented in detail grew faster than the sales, and as a result, EBITDA decreased to 3.8 million RON for our first quarter. Next slide talks about the share of our market and brands. As usual, Romania, our main market with a share of almost 87%, and Italy, which despite being severely impacted by the lockdown measures from the beginning of the year, secured a market share of 12% with a double-digit top-line performance. Regarding brands in Q1, KFC brought revenue in total amount of 236 million RON with a share of 85%, Pizza Hut 28 million RON with 10% share, and Taco Bell 14 million RON, i.e. 5%. All the brands had a positive evolution. Furthermore, KFC, Romania, and Moldova closed the quarter profitable.
Next, some update related to COVID-19 restrictions. As you already know, as of March 9, Romania has lifted all the COVID-19 restrictions, which have been in place since October 25, 2021, requiring the possession of a COVID-19 green certificate for restaurants. Therefore, as of March 9, both vaccinated and unvaccinated customers can enter shopping malls and restaurants. The restrictions in Italy were loosened as of April 1 and lifted as of May 1. Until May 1, to eat in restaurants, the customers were obliged to hold a Super Green Pass, which proved full vaccination, including a booster or a recovery from COVID-19 within the last six months. In Moldova, the restrictions have been removed starting April 24, so Q1 being fully affected.
Another topic is related to the restaurant-specific tax exemptions, which is similar with the previous year. This initiative will give us a benefit of RON 1.3 million for the first six months, equivalent of RON 2.5 million for the full year. Related to state aid, we have the technical unemployment that I was referring to on our first slide. We had only 1% of our staff in Romania under this status. In Italy and Moldova, no technical unemployment. The compensated values was limited to a very low level. I mentioned already RON 154,000, lower with RON 1.1 million versus the similar period of last year. Next, on this slide, we present the evolution and plan for our development.
We have closed the quarter operating 174 restaurants, 153 in Romania, 20 in Italy, and two in Moldova. In Q1, we had opened four new restaurants: two KFC, one FCD, the Pizza Hut in Bucharest Militari Shopping Center, and one Taco Bell in City Park Mall Constanța. The two restaurants of KFC open were located in Bucharest, in Colosseum Mall, and one DT in Călărași. As a reminder of our 2022 commitment on development, we have an extra number of 14 more restaurants to be open until the end of the year. Seven KFC in Romania, two KFC in Italy, three Pizza Hut and two Taco Bell. Worth mentioning that at the end of Q1, 70% of KFC stores have adopted digital solution in place.
The labor, as Călin mentioned, for HORECA, it's more and more challenging, as many employees decided to requalify to other sectors or to migrate to less labor-intensive jobs. We did our best effort to increase our people engagement by implementing different initiatives, as presented when we have discussed about payroll cost line. At the end of the first quarter, we had 4,784 employees, out of which 4,445 in Romania, 255 in Italy, and 84 in Moldova. Also, to cover our business needs, we continue to hire people from Sri Lanka, having more than 255 employees at the end of the first quarter of this year. Now, moving on next slide, we have some updates related to capital market situation.
As we mentioned in our previous call, starting with 21st of March this year, Sphera is included in the FTSE Global Micro Cap. This triggers better liquidity in the market and a better visibility among the local and global community of investors. Based on the current level of liquidity, we believe that we'll be eligible to maintain our inclusion when the revaluation will take place. Regarding corporate sustainability, we joined the United Nations Global Compact on March 21st of this year, and also the dividend distribution from the undistributed net profit of 2020 fixed to a dividend per share of RON 0.901 has been approved in the AGA on 4th of February this year. Now we're going to the marketing session, so I will pass the floor to my colleague, Monica Eftimie.
Thank you, Vali. Good afternoon, everybody. I am pleased to share that in the first quarter of 2022, we set new sales records despite the difficult operating environment. This quarter's results are a testament to the demand for our iconic brands. In terms of marketing strategy, we are continuing to build brand over time and sales overnight. As always, I'll go through each individual brand. The objective for KFC for this year is to drive frequency and to maximize relevance. With the aim of boosting sales and reinforcing the best tasting chicken attributes, KFC concentrated its communication on value for Q1, successfully relaunching Smart Menu with a promo layer on top and De Poftă, another value campaign with an attractive price point.
Both of them are resulting in regaining lost transactions. Also as a secondary campaign layer for Q1, which is now present all year round, the brand is offering coupons through its mobile app in order to reinforce the value perception and also to drive traffic in restaurants. As a side note, the value perception is very important for all brands because it's counteracting the price increases of our permanent menu items. Another activity this quarter was a gaming tournament in order to interact with specific communities that are a natural fit with the brand, which also helps us with the lingering situation. KFC reactivated Killer Discounts.
As I said, the gaming tournament with the live stream component and potential discounts that could be won by the players. Addressing a new usage occasion, we launched a platform that has group offers called Unu Pentru Toți . Another activity that we've done in quarter one. Moving on to Pizza Hut. The objective for this brand is to build sales and increase distinctiveness with the objective of improving transaction levels. If you remember last year, we were struggling to regain traffic in restaurant due to restrictions. Our focus is still on transaction this quarter. The brand started the year by communicating value as well.
No surprises here either. It's a small pizza, only 1 free with any medium pizza bought, which attracted new consumers and increased trial. As a secondary campaign, Pizza Hut brought in Cheesy Bites, a very popular crust from our menu, with the objective of increasing both frequency among regular users and also average tickets. As Vali mentioned in January, we launched the Fast Casual Delivery concept in Bucharest, offering both eat-in and delivery services in Militari, with the aim of attracting new consumers to the brand. Moving on to Taco Bell. Here, the objective is to drive trial and build brand.
Taco Bell focused on value as well for Q1 and communicated two value campaigns by offering core products at an affordable price with the objective of making core craveable and boosting transactions. The brand launched its mobile app in quarter one with a rewards program on top with the aim of making our digital assets so ownable that customers can only come to us for certain exclusive features and offers. Again, Vali mentioned this. Taco Bell continued to build brand equity and top line by opening a new store in Constanța.
As you probably remember from our previous quarterly calls, we are heavily focusing on digital and technology and trying to offer ease of access to our consumers, who expect frictionless experiences. This quarter we continue our digital journey and communicated through digital media our click and collect services and e-commerce platforms for all of our brands with the objective of expanding our user base. Also in Q1, in terms of social responsibility, all brands in the Sphera portfolio joined the humanitarian efforts and donated EUR 30 thousand and 10,000 hot meals to support the people affected by the war in Ukraine.
Now moving on to the next section of brand performance. A few highlights for each brand. KFC in Romania, quarter one, 2022 was a strong quarter of growth for KFC Romania as all store performance improved 23.6 percentage points year-on-year, due to good like-for-like performance, paired with the sales generated by the seven new KFC restaurants opened since Q2 of last year. Same store performance at KFC Romania registered 15.1 percentage point increase year-on-year. The brand ending the quarter with an EBITDA of RON 9.2 million and net profit of RON 1.7 million. Moving on to Italy.
Performance registered a very strong sales increase of 70.3% with a strong same-store result of 77.3% sales increase year-on-year. The brand in Italy closed the quarter with RON 2.4 million restaurant operating loss. However, this result is better, improving the net results by RON 2 million. In Moldova, sales increased 22.8% in quarter one year-on-year, reaching RON 3.4 million. The brand in Moldova closed the quarter profitable with an EBITDA of RON 0.4 million and net profit of RON 0.2 million. Moving on to Pizza Hut.
Pizza Hut continued the positive trend in Q1 2022, growing sales 55.3% year-on-year in terms of all store performance. The second-largest like-for-like increase of all the brands in the portfolio was registered by Pizza Hut, which increased 45.2% versus Q1 of last year. This result reflecting the lifting of the restriction for indoor dining. Moving on to Taco Bell, the last brand on the list. Taco Bell's same store performance in Q1 2022 registered a 32% increase year-on-year, while in-store performance saw a 48.2% increase. Between the second quarter of last year and the end of Q1 2022, Taco Bell opened three new restaurants. This concludes the brand performance.
Thank you. Thank you very much, Monica. We will now start the Q&A session. Before we jump into the questions that were already sent by some of you, I would like to mention that we will only be taking questions through chat. Please be so kind and type your questions in the chat window. We're gonna start from the top. The first question, I'm gonna read out all the questions just so everybody's on the same page, because we are going to also share this recording on our website after the call. The company rose prices two or three times in the last period, yet it is known that the customers are price sensitive. How much pricing power has Sphera left? I'm gonna let Monica take this question.
As I mentioned during the presentation, we started the year with value campaigns because value campaigns are hooked to bringing good customers to the stores. They have options on top of the permanent menu items, which have a higher price. This is part of the strategy to make sure that we are not losing customers. Also, if a brand is strong, has strong brand indicators, which is our case, and it offers different usage occasions to customers, the brand can has, let's say, a higher ability than the competition to increase pricing.
Thank you, Monica. We are now going to the next question. Could you please split the same-store sales growth per brand into volume and price component? What was the size of price increases in March? We have two questions. I'm gonna pass this to Valentin.
We always have a factor analysis trying to see the elasticity effect of the price increases. If we are looking at the KFC Romania, the same store variance versus the similar period of last year was RON 24.4 million, out of which the volume impact is RON 17.3 million, and the price impact is RON 7.1 million. For Pizza Hut, the same store variance is RON 7.1 million, out of which RON 5.1 million is coming from volume impact and RON 2 million from price impact as factor analysis. For Pizza Hut delivery, we have it split in delivery and dine-in. What I just mentioned is the dine-in side.
For the delivery, we have a total variance of RON 1.2 million quarter-over-quarter, with RON 1 million coming from volume impact and 0.2 from pricing. Taco Bell, RON 3 million variance, out of which 1.9 is volume impact and 1.1 pricing. KFC Moldova, small 0.6 variance, out of which 0.1 it's volume and 0.6 here it's more on price impact. Lastly, the KFC Italy with RON 13.2 million variance. Out of which, almost entirely is coming from volume. Regarding the pricing, one second to go to the evolution of the pricing price increases. In March, I will take you through channels.
We have for KFC Romania an aggregated increase of 7.2% for all channels, at which we add on top 4.3% as sales mix only for aggregators on top of the 7.2. For Pizza Hut, 3.9% all channels, out of which we are adding on top for aggregators 2.1% for the dine-in and the same percentage for delivery, so unitary. We have the Taco Bell with 3.9% for all channels, at which we are adding on top to the aggregators 4%. In Italy, 5.5% all channels, and Moldova, 7% all channels.
I will go even beyond the question because, as we said, we just had another milestone in beginning of May, sixth of May, last Friday, with another 3% on KFC for all channels, price increase.
Thank you, Vali. Moving to the next question. For the next quarters, should we expect food and material and salary expenses to be at the same level as percentage of sales as in Q1 of 2022? I'm gonna ask Vali to answer this question.
Yes. As I mentioned in my presentation, we are very carefully monitoring the evolution of the entire context. There are weekly meetings with the management to evaluate and to assess the impact of the evolution coming from the inflationary. In this moment, based on the secured prices that we have and the information that we have, we do not expect any increases weight of revenue for these two main categories we have.
Due to all the initiatives that we are implementing with the pricing, we may even expect a small decrease of this as a weight in revenue by taking all the necessary actions to secure back the margin as we have indicated in the budget of 2022.
Moving to the next question. How do you see the 2022 budget objectives execution considering the weak Q1?
First of all, I will take it as well, Călin, you can add freely if you want. Yeah, we don't see Q1 as a bad performance, because even at the time of the budget preparation, which was well before, we have foreseen a difficult Q1 because, you know, all the negative inflationary effects started even in the last period of last year. Okay, they have a different trajectory, but according to our figures in our forecast that we are working on, the results of the Q1. It's expected and it's embedded in the full year picture that we have presented through our budget.
Regarding the execution, I think, I already mentioned in the previous question, we are monitoring very carefully. In this moment, there is no new guidance on it, but we are still very careful and we are very fast trying to implement all the necessary actions in order to secure the budget.
Thank you. Next question. Any update on the development plan of the company starting 2023? I will ask, Călin to take this one.
In this moment, we cannot say something about our discussion about development plan for the next five years, starting with 2023, because it's subject of negotiation between us and Yum! International.
Thank you, Călin. Going to the last question. Before we take that, I have a kind request. If you have any additional questions or would like to follow up on the questions that were so far answered, please type your questions right now so we can wrap up this call within the timeline that we have provided for the results call. The next question is: Does the management consider changing the focus from sales to operating margin as top priority? I'm going to also pass this question to Valentin.
From our calls, you already know how this industry works. The volume, it's a critical milestone on the evolution of our business. I would rather say that there is not a shift of priorities. Always the profitability was one of our main priorities here. We also know that this goes hand in hand with the securitization of the volumes. Through the pricing, which is the most effective instrument that we have in our hands nowadays, we'll do all the efforts to secure and build up back the profitability as well.
Again, I will reinforce the fact that the Q1 is not taking us by surprise, and it's part of the plan. A plan that with all the efforts we are trying to fulfill it. The last argument, it's the fact that taking into account what's happening, the entire market, I mean, the sector, it's heading the same direction. Based on the information we have, we are performing even better than what is in the market in this moment. We have the tools on the table to attack, to counterattack and build up back the profitability in the remaining part of the year.
Thank you, Vali. We do not have any other questions at this moment. Please, if you have any remaining topics you would like us to cover, write them in chat. From our side, we would like to thank you for joining us. The next call we are going to have on August thirtieth, after we publish the half year financial statements for this year, and we look forward, of course, to welcoming you there as well. The recording of this call is going to be available on our website. We are also going to issue, as usual, a current report informing you all about the availability of the recording. On behalf of the whole management team, thank you all once again, and we look forward to seeing you in August. Have a great day.