Welcome to the conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions- and- answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CEO Jens Mathiesen, CFO Åsa Wirén. Please go ahead.
Thank you, good morning, everyone, and thank you for joining Scandic's presentation of our first quarter of 2023. As mentioned, my name is Jens Mathiesen, I'm the CEO of Scandic, and I'm here together with Åsa Wirén, our CFO. Together, we will of course take you through this first quarter. Please jump into page two. First of all, I am very pleased to present a strong start to the year. Demand from corporate and leisure has been good, with increasing prices, and we are operating our hotels with high efficiency. Current booking situation is good, and with today's news of the launch of Scandic Go, we are also accelerating our growth journey ahead. All in all, this is a very strong start to the year.
Looking at the numbers, net sales reached SEK 4.5 billion, which is an increase of 66% compared to Q1 last year, and just over 11% higher than it was in Q1 2019. We also delivered a strong result of SEK 170 million, which was SEK 407 million higher than in 2022 and slightly higher than in 2019. During the quarter, demand from corporate and leisure was good. I would like to highlight that the demand for meetings and events was on a historically high level for a first quarter, which is very promising and a promising start of the year. The occupancy rate in the first quarter was 53.5%, compared with 39.1% last year.
Please, of course, remember that last year was impacted negatively and affected by the pandemic restrictions in our markets. Room rates are on continued high levels on all markets, and we see a positive development of RevPAR driven by rates. We report a RevPAR of SEK 626, compared with SEK 395 in Q1 last year. The free cash flow in the quarter improved and was stronger than expected, and we have a very solid financial situation that creates flexibility and enables us also to execute on our strategy. Of course, Åsa will give you more details on this later in the presentation. We run our operations well with a sharp focus on efficiency that pays off, and I'm very satisfied also how we work commercially to meet the demand.
We have a strong first quarter now behind us, and I think also with strength in financing, we are picking up the pace in Scandic's development. Today, we also announced that we are launching Scandic Go, a new brand with a strong offering in the fast-growing economy segment, and I of course will give you some more details about that later in the presentation. Please turn to page three, where you can see the quarterly adjusted EBITDA development since the beginning of 2021. Adjusted EBITDA increased to SEK 170 million in Q1, compared with - SEK 237 million in the first quarter last year. We also delivered an adjusted EBITDA margin of 3.8%, compared with a - 8.7% last year.
The overall performance was mainly driven by high efficiency and cost control in combination with good demand and increased prices. I'm also happy that all markets delivered a positive adjusted EBITDA in the quarter, and that actually all our 10 hotels that we opened in 2022 are performing well and are all contributing positively to Scandic's group results. Please turn to page four. Here, you know this graph. Here, you can see the monthly market occupancy in the Nordic countries. The hotel market has had a good start to the year, with increasing demand throughout the quarter. The demand was good from both corporate and leisure. As I also mentioned, demand from meetings and events was on a historically high level for a first quarter.
Domestic travel in our markets continued to be strong, well above 2019 levels, and intra-Nordic and European travel is at good levels, in line with 19. We know that we also note that intercontinental travel is picking up quite well and continues to improve strongly month by month, mainly driven by more guests from the USA and from China. Overall, demand for hotel stays and visits is good, and there's more potential for market recovery, especially from intercontinental travellers. So, 2023 seems to be a strong year for the travel industry, which of course is very satisfying. Please turn to page five. This you also know. This is market data for average room rates for the Nordic market, Sweden, Norway, Finland, and Denmark.
It's indexed to the corresponding month, 2019. We continue to see rising room rates well above 2019 levels. Scandic's average room rate was around 12%-15% above 2019 levels in the first quarter. Based on the current booking situation, we expect prices to continue to improve in the second quarter. The big question is, of course, how much can prices continue to increase? Despite macro headwinds in the short term, we see no signs of a weakening of the market. Good demand from leisure travellers and corporate, with particularly increasing demand from meetings and events should continue to drive prices as well. Please turn to page six. Here you can see the market RevPAR development index also to the corresponding month of 2019.
All markets are above 2019 levels, with Norway continuing to be the strongest market. Scandic's RevPAR for the first quarter was SEK 626, compared with SEK 395, as mentioned in the beginning, in 2022, and versus SEK 599 in 2019. Please note that we also had close to 4% more rooms at the end of this quarter, the first quarter, compared with the end of the first quarter of 2022, and just over 8% more rooms than in the first quarter of 2019. Please turn to page seven. We continue to strengthen our position in Germany. On the first of March, we opened Scandic Frankfurt Hafenpark, which is located in a prime location, just a few minutes walk from the European Central Bank in Frankfurt.
Scandic Frankfurt Hafenpark, which has 505 hotel rooms, 14 conference rooms, and an event space of up to 570 people, is a fantastic addition to our portfolio in Germany. The hotel has been designed to accommodate many types of events and meetings. The timing of the opening is good, with a strong demand for meetings, and I'm very pleased that we already have had very good booking levels from the beginning. As for all our hotels, sustainability is also a central part of the new hotel in Germany, in Scandic Frankfurt Hafenpark. This hotel aims to be certified by the Nordic Swan Ecolabel when we label when this labeling is introduced in Germany later this year.
This is now our sixth hotel in the German market, and we now have 2,150 rooms in Germany. Please turn to page eight. This was the pipeline at the end of the quarter. As we mentioned before, we have a strong focus on growing the pipeline. With the launch of Scandic Go and our improved financial position, we now have a high pace to ensure growth while optimizing the portfolio. We continue to work a lot with the portfolio. Since the previous quarter, as mentioned, we opened Scandic Frankfurt Hafenpark with 505 rooms, and we also announced plans to exit five smaller hotels with a total of 731 room.
As we already are on the note of speaking about our pipeline and focus on growth, please turn to page nine for today's announcement about Scandic Go. We are very happy at Scandic and proud to finally talk to you about Scandic Go, which will be launched after the summer. We are now taking a position in the economy segment, the fastest-growing segment in the industry. By launching Scandic Go, we aim to, over time, establish and take a leading position in this segment in our markets. Scandic Go has been in the works for quite some time, since it was postponed during the early stages of the pandemic. This is a strategic investment for Scandic, and we have utilized the time carefully to continue to improve and build on the concept, as well as adapting to a new market situation.
I'm confident that we have announced a brand and concept that shows our clear objective to boost our growth rate, attract a new generation of hotel guests, as well as adding more hotels to our pipeline. Scandic Go is a new brand with a sustainable, smart and lean offer in the fast-growing economy segment, and it's a perfect complement to Scandic's full-service offering that broadens the addressable market. This means also great growth potential, as the economy segment represents only about 5% of the hotel market in the Nordic countries, compared to about 15% in the rest of Europe. With a high share of room revenue and less food and beverage, Scandic Go will also support higher margins and be more capital efficient than the average Scandic hotel.
We have a target to sign between 1,000 and 1,500 new rooms per year on average and to establish a leading position within the segment. Our first Scandic Go hotel open now in September in central Stockholm on Upplandsgatan. With that, I would like to take or pass over the word to our CFO, Åsa Wirén, who will take you through our financials.
Thank you, Jens, and good morning, everyone. If we please turn to page 11 for our financials. Starting off with the financials for the quarter, as Jens mentioned, we report a strong first quarter with increased net sales and improved results. Net sales increased by 66% to SEK 4.5 billion compared to the first quarter last year. We also deliver a strong result with an adjusted EBITA of SEK 170 million, which is SEK 407 million higher than in the first quarter last year, and also slightly higher than in 2019. The adjusted EBITA margin increased to 3.8% compared to -8.7% in the first quarter last year. The result was mainly driven by higher net sales and an increased efficiency.
All markets contributed with a positive adjusted EBITA in the quarter. It is satisfying that our sharp focus on efficiency and cost control keeps paying off. The adjusted EBITA, excluding one-offs, improved to 2.9% compared to -12.5% in the first quarter of last year. This quarter included one-offs of SEK 18 million for compensation related to housing for refugees in Norway and an additional SEK 23 million in compensation for a delayed opening of a new hotel. The total one-off in the first quarter last year was SEK 128 million. In Q2, we expect one-offs with a positive adjusted EBITA effect of around SEK 20 million. This is related to continuing housing for refugees in Norway.
Turning to page 12 and looking at our cash flow, the free cash flow improved to - SEK 356 million compared to - SEK 997 million in the first quarter last year. The cash flow was better than expected, mainly driven by higher net sales and a stronger result and an underlying positive development for working capital. Working capital was negatively impacted by the previously communicated repayment of variable rent debts for 2022 of SEK 450 million. A further approximately SEK 270 million in rent debts are expected to be paid in 2023, mainly during the second quarter. Excluding the effects of repaid rent debts, the development of working capital was positive, mainly driven by increased operating liabilities. We can continue to page 13.
As Jens mentioned also, our financial position has strengthened during the last quarters. At the end of the quarter, net debt corresponded to 1.2 times adjusted EBITA rolling 12 months. This was in line with the debt level at the end of 2022 and an improvement compared with year-end 2019, where net debt adjusted EBITA amounted to 1.7 times. At the end of the first quarter, net debt amounted to 3.4 billion SEK, including 1.5 billion SEK related to the convertible bond and 880 million SEK related to deferred VAT payments and social security contributions in Sweden. Excluding the convertible bond, net debt in relation to adjusted EBITA amounted to 0.6 times.
Our available credit facility amounted to 3.4 billion SEK, and total available liquidity amounted to 2.2 billion SEK at the end of the quarter. As we communicated in the previous quarter, we completed a refinancing in beginning of this year. As you all are aware of, we have the convertible bond with conversion price at 43.36 SEK that matures in October next year with a potential dilution of 41.5 million shares. If we turn to page 14, here you can see the net financial items and impact from IFRS 16. Including IFRS 16, the reporting financial net was -SEK 522 million. If we exclude IFRS 16, the financial net was -SEK 91 million .
Non-cash convertible interest was SEK 40 million, and ultimately, cash financial items amounted to - SEK 47 million. With that said, please turn to page 15. Jens, I'll hand it back to you for some final comments.
Thank you. Thank you, Åsa, and we can jump to page 16 for some concluding remarks. We are very optimistic about the market development in general and in short term. Despite macroeconomic headwinds, we see no signs of a weakening in the market. People continue to prioritize meetings and traveling, whether for business or pleasure. Based on the current bookings, we should expect good demand in line with last year for the spring and upcoming month. We expect occupancy levels for the second quarter to be on par with second quarter last year, but at higher room rates. We also expect a good quarter for meetings and events and continued high efficiency in our operations overall.
We have a great momentum, as you also can hear, in Scandic, so we really look forward to an exciting year of 2023. With that, I would like to take the opportunity also to thank all our team members for a good first quarter and thank you all for participating here. Over to you, operator, for the Q&A session.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Adela Dashian from Jefferies. Please go ahead.
Good morning, Jens and Åsa. A few questions from me. The first one relates to the current occupancy rate. I do appreciate that obviously it's increasing versus last year. I believe it's still five percentage points, something like that, below pre-pandemic levels. Could you explain what it is that's holding you back from being back at pre-pandemic levels, especially since you're not experiencing any decline in demand due to the market uncertainty? What's missing here?
Yes, absolutely. Let's start with that question, Adela. A very good question and important to highlight because when you compare with Q1 2019, we have 8.2% more rooms in the operation. You need to take that into account that we have much more rooms in operation than we had in 2019. Totally you can say we are actually selling more rooms than we did at that time with the lower occupancy. That is of course one of the impacts. One thing that is also impacting us still, and where the sum of, let's say, the opportunity lies is that we have seen month by month throughout the last 12 months a growth from intercontinental travelers.
And I think in the end of the quarter, international travelers from USA and Asia is at index some 85 or so, 85 to 86 versus 2019. That is still a gap that's holding us back. If we look at the occupancy from the closer markets, domestic is much higher than 2019. Inter-Nordic and European is back on 2019 level. All in all, despite the Asian and long-haul traffic, we are doing very good versus 2019 levels on occupancy. That means selling more rooms from these markets than we did before.
Okay, great. Thank you very much for that. On the comment about demand for meetings and events being at historically high levels, is it historically high levels for being Q1 or just generally historically high levels?
For Q1. For Q1. That's the for Q high. Yeah. It should be high, and we should continue to grow due to inflationary increases as well. We really see. We have had so much talk about meetings and events, whether that was like a pent-up demand after pandemic. Now we have, like, 12 months since we reopened after pandemics, we continue to see even in the, let's say, the booking pattern for the coming period, an extreme stabilized booking pattern when it comes to meeting and events. They are really back.
Okay, great. Finally on Scandic Go, I saw in the press release that you mentioned that you're targeting 50 cities. Are all of these 50 cities in your existing markets today, or could we see an expansion further into Europe, per se?
Yes, you're right. We say approximately 50 cities. It is the major cities and capital markets and the major cities and regional cities in the existing markets, including Germany and Poland when we talk about these 50 markets. There's of course a lot of potential for growing, also growing with Scandic Go hotels into the German market. The everything, let's say, into new markets is an addition to that. This is in the existing, let's say, markets where we operate in six countries today.
Just finally on your comment about I appreciate the target of wanting to open between or having 1,000 to 1,500 new rooms per year. Are we talking about existing hotels that you're making into Scandic Go concept? Or is this going to be new lease agreements for brand-new buildings?
This also a very good question, Adela, because it's not if we convert, you know, a Scandic, existing Scandic hotel into Scandic Go's. These 1,000 to 1,500 will be new rooms to our portfolio. It will be a mix of taking over existing properties, which will be totally renovated, converted into Scandic Go's, or it will be new builds as well. It's a combination of those two. We have a lot on the desk right now, and there's quite a high interest, I can tell you, on between us and the landlords to really develop into this segment.
Everybody understands that this is a bit underdeveloped in the Nordics versus European market, where it's on 15% of the total market and only 5% in the Nordics. We also see as a fact that the economy segment is the fastest-growing segment in Europe, and it is expected that this will continue. Of course, this is a huge opportunity for Scandic to tap into and take a leading position in the home markets and also grow further outside the Nordics.
On competition there, is it similar to what you're experiencing in your existing portfolio or does it differ?
I think there's a more local competition. You can say if you look at the economy segment that's popping up, you know, local competition here and there, but nobody has taken a clear Nordic position. We are pretty ambitious when we say this, that we want to take that position. We are the largest operator in the Nordics, and we expect that also over time to be in this segment. We have a clear position we want to take.
Excellent. Thank you very much.
Thank you.
Please state your name and company. Please go ahead.
Yes. Good morning. Karl-Johan Bonnevier from DNB Markets. Congratulations, Jens, and fantastic development in Q1, and good to see that you're back in full working order also in a seasonal weak month. Just continuing on the on the previous Scandic Go thing to start with. If you're looking at the hotel portfolio you have now and when you announced this, say, a couple of years back pre-pandemic when you wanted to go into Scandic Go, I think you at that time highlighted maybe eight to 10 hotels in your current portfolio that would fit very nicely into the Scandic Go concept. Is that the amount of conversion we should think about coming from the current portfolio?
When we have now really worked on the concept, we are still overlooking, you could say, how many potential conversions we have within the portfolio. It might be a few less than these eight to 10. It might only be, let's say, four to five or something like that when we look into it today. That's also because we think that we have been much more clear in how we have developed the concept. It is a concept, as you have read and know about that will have a very, I would say, interesting cool food offering in the ground floor, but not an à la carte restaurant, and it's with rooms above.
There will be no meeting facilities, no spas, no pools, no gyms. If you want to have all of that, you will go to a Scandic, regular Scandic. We have been very clear on how we want to be very, let's say, optimizing this part of the new portfolio. We have also simply seen Karl-Johan, since this, let's say, since we have been pausing this Scandic Go project, then you can say we have seen an increasing interest in both the segment and in signing up new hotels.
We have quite a lot of developers and operators, you know, from the Pandox AB and Fastighets AB Balder and Midstar and all of them, they are pretty interested in growing as well in these segments. I think the interest is high. We expect actually to be able to sign up quite some new hotels in the coming period.
When you look at this, I guess, the, what you call office, maturization or what one should call it, the converting old office building that are unused in to larger extent, would that be an interesting segment for the Scandic Go concept, or would that be more for classical Scandic kind of hotels?
No, absolutely also for the good thing about a lot of these, they are centrally placed in good locations and pretty easy to convert quite a lot of them into efficient hotels. That could absolutely also be a potential. Of course, we have had some years where the spaces of office buildings has been extremely high. We see that it's maybe more and more interesting to look at the hotel opportunities, and we can compete again with that, with increasing room rates in the hospitality industry. Absolutely that is also a potential.
Excellent. Coming also for continuing on the room rates, you sound very positive, and it would be good to hear your indication what kind of level of commitment you see from corporates and renegotiating corporate contracts and getting those kind of price premiums also into those contracts.
Yes. We see the effect of course, all corporate agreements that was renegotiated over the last part of last year and in the first months of this year, which is of course being uploaded. What is very interesting and also important for all of you to understand is that, we of course get the question, how much can we increase rates and prices? What is very interesting is that we are in Q1 at historically high Net Promoter Score level, meaning that guest satisfaction index is higher in Q1 than what we have seen in a Q1 historically. Guests are very satisfied. It seems that we all accept that prices are going up. You know, salaries are going up, but prices also going up.
It is more expensive to travel and to live, but we prioritize it. Every analyst that are looking into this on a global and European scale understands that people tend to prioritize, you know, traveling and experiencing. Still we expect that we could be affected on restaurants, but really haven't seen it yet. It seems that people really prioritize to explore, and then they save on their new car or their new kitchen or something else like that in the private economy. It is a clear priority for people to continue to travel. That was what we also see in the booking pattern for the coming period.
When you look at, let's say, particularly the corporate contract segment, have you noticed a huge difference how you negotiate contracts today compared to pre-pandemic? The kind of commitments that maybe the corporates are willing to do at this stage?
Yeah, I think I hate the word stabilized, but it's very stable, because what does really stable say? What is important is that we have not had corporate clients that were having, like, travel restrictions or discussing that they expected much lower demand. Everybody is expecting, you know, very stable demands. Then we see that we actually see that the booking pattern has changed. People travel less in and out the same day with the airlines, so you see a huge decrease on domestic traveling and short traveling on airlines. When they travel, they also stay a few days, and they need a hotel.
I think that the combination of the traveling mix is holding up the good pace on the hotels. We've seen that even in 2019 that where domestic traveling went down, and we saw an increase. This tends to continue. Traveling is, in general, is continuing to increase.
Excellent. Looking at your, kind of from me, looking at your financial structure, obviously getting very, very strong again. What kind of opportunities would you have for, say, an early retirement of the convertible bond to avoid that kind of dilution effect? What kind of opportunities, if you don't go down that route, maturing it, would you have for, say, share buybacks instead? Is your current financing agreement allowing you to buy back shares?
We have sent out material for the AGM, where we're asking for also the opportunity to buy back shares. If you look into that material, it kind of sends a clear signal. For sure, we are extremely satisfied with the way we have dealt with the situation, and we have lowered our debt situation. Our debt levels are on historically low levels. Of course, we have much more, let's say, internal muscles to handle whatever cost we need to handle. See this as debt, and then you should worry less about the like a full dilution of this until you know what we will do. We have a year and a half still, and we see a fantastic momentum in the market and positive outlook.
Of course, as months go by, our balance sheet is just growing better and stronger and with lower debt. That's good.
Good to hear. Good to hear. Good luck out there. All the best.
Thank you very much.
Thank you.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you very much, operator. I just want to, on behalf of Åsa and myself, and on Scandic, thank you for dialing in, and I wish you a fantastic day out there and looking forward to speak to you again. If you have further questions, please give us a call, and we'll be ready to assist you. Have a nice day.
Bye.