Good morning. Dear listeners, welcome to Novaturas meeting with investors. I'm Amelia from Nasdaq Vilnius, and I'll be moderating today's event. We will start with a presentation from the management, which will be followed by the Q&A session. Please be informed that this webinar is being recorded. As always, I encourage every one of you to ask questions during or after the presentation in the Q&A session. With that said, I'm pleased to introduce today's presenter, Chief Executive Officer Vitalij Rakovski. Mr. Rakovski, please, the floor is yours, and good luck.
Thanks a lot. Hello, dear investors, and thanks a lot for joining. We will start the overview of financial results of year 2022 first quarter. To begin with, after the unprecedented drop in year 2020 and 2021, this year Novaturas continues its gradual recovery. When our sales in the first quarter reached slightly more than EUR 29 million, this is more than four times higher than the revenue level we had in the first quarter in 2021. It is even slightly higher than year 2019 on a pre-pandemic year. Also, in terms of clients served. We served more than 36,000 tourists. Again, it's more than three times more than we had in year 2021.
Basically, I would say that this is a quite strong start, strong start of the beginning of the year, or what relates to the profitability of the business. Our EBITDA in the first quarter was slightly negative, EUR -100,000. Basically, there are two main reasons behind that, two equally important reasons behind that. First is the fuel price increases, which was quite significant from the beginning of the year and especially high growth we experienced in March. Due to the fact that quite high proportion of our sales were already made in year 2021. Meanwhile, our clients traveled when the fuel prices were already increased. It gave us a negative impact towards our profitability.
Based on our estimations, it's slightly more than EUR 200 thousand, so quite significant impact. The second main reason for quite low profitability in the first quarter is that we experienced quite intensive competition in certain winter destinations. When our prices were quite low, which also gave us some negative impact. Despite that, it's probably worth to outline that in general, first quarter for tourism sector is a low period. Actually, sales volumes compared to total annual sales are quite low, so it typically accounts for some 15% of total annual sales. Sometimes it could be even up to 20%, but still it is a low season.
Basically what I want to say is that upcoming quarters and the performance in upcoming quarters, which would much more contribute towards the total annual performance of Novaturas. Despite that, it is very important to outline that at the beginning of April, we introduced a fuel surcharge for all existing already made bookings in order to manage the fuel price risk going forward. By doing that, we're basically eliminated the impact of the risk we had for the first quarter and going forward. This risk, I would say, is managed or controlled. We did it by using derivatives. Secondly, it's also important to say that in order to create additional security for our clients, we introduced a fuel price change protection service.
Which basically implies that when buying the package from Novaturas, for year 2022, going forward, the prices for clients wouldn't increase due to the fuel price increases, going forward, if such increases would happen. Last thing to be said is that, our Q1 profitability is also positively impacted, by accounting impact, which comes from implementation of IFRS 15 standard. However, on this, more information will be provided, in the audited financial statements of year 2021. There will be some movements and changes to year 2021, and some part of that result is moved to year 2022. We plan to announce, audited financial statements for 2021 this week. Jumping to the uncertainties in the market on which I mentioned before.
Probably a few things needs to be said. I would be concentrating on the impacts which we had from the Russians' war against Ukraine. First of all, the Ukrainian and Russian airspaces were shut down. This is one important development. Another important development is that Russian carriers were banned by many European countries, and it also gave certain developments. Regarding the first one, the shutdown of airspace. The flight times for quite a few destinations actually increased. The increase is not so significant, however, the increase is there. Also it gives impact for our aviation costs as the distance is getting longer. The fuel costs are getting up and also the aviation part is increasing.
However, on the other side, the ban on Russian carriers increased hotel availability in our destinations. Not only in European destinations, but also in Egypt and Turkey. It gives, of course, a positive impact as it gives us additionally more selection and more availability to be offered for our clients. Also it gives positive impact on prices. Prices were getting lower. Not significantly, however, still they were getting lower. Moving on. Due to the outbreak of the Russian war, the number of reservations has temporarily dropped. I would say by almost half in the first few weeks after the war started. However, probably looking from today's perspective, I would say that the effect was temporary.
Afterwards we have experienced a gradual recovery of the bookings. Currently, I would say that our weekly bookings are on back to normal levels. Moving on. Also important development happened related to the EU-imposed sanctions on various Russian-related businesses and individuals. One of the impacted persons was Alexey Mordashov, who was the majority owner of TUI Baltics tour operator. As a result of that, basically, TUI Baltics are currently not operating, and they stopped their operations in the Baltics. What would happen going forward, probably nobody knows. However, currently our view is that at least for short and mid-term, this tour operator wouldn't be operating in the Baltics. Last thing to be said regarding our contribution towards help for Ukrainian citizens.
We also had an opportunity, at least partially, contribute and help. Once the war started, there were quite a number of Ukrainian tourists in various destinations, and some of them were willing to travel to the Baltic States and to stay temporarily here. Basically, we allowed them to come back with our planes free of charge. Up until now, there were almost, I would say, full two planes of Ukrainians which came back to the Baltic States from holiday destinations, and we did it all free of charge. Moving on. What to expect from Q2? A few things to be said. The first is that we generally expect that our sales volume and revenue levels should be close to the pre-pandemic levels to the year 2018.
Whether we would exceed or would be close to those levels, now it's hard to predict as the uncertainty in the market is still exists. We want to be close to those levels. Secondly, we want to put additional attention on profitability and develop the action plan of how to recover our profitability. Thirdly, we already announced our early booking sales for key destinations for winter season, which starts at the end of this year. For key destinations, the sales are already open. Meanwhile in May, we will introduce to the market full program for winter holidays. Together with this introduction, we want to offer some additional new destination holidays to our clients.
Also, recently in April, we signed a letter of intent with Kidy Tour, another tour operator, with the intention to fulfill the obligations to the travelers from Lithuania and Estonia, who have booked trips from Kidy Tour. Basically now we are in a negotiation stage. There is high likelihood that such agreement will move forward. We would take over all Kidy Tour reservations. Currently it is up to 5,000 travelers. The reasoning behind that is that our, again, of course, opinion that Kidy Tour is planning to also stop their operations or temporarily or permanently in the Baltic states. Last things to be said regarding the development of competitive landscape.
Actually partially I already mentioned, but to sum up everything and put everything into one place. Probably we can say that two tour operators, like, TUI Baltics and Kidy Tour would not be operating in the Baltic markets for at least 2022. However, new competitor has entered the market or recently announced the entrance to the market, the Ukrainian tour operator Join UP!. Of course, it's very early now to assess the impact of new competitor's entrance, as basically their flights are starting only this weekend. However, we would be monitoring the situation and also reacting towards that. This is what relates to our forward-looking statements for the second quarter in 2022. Regarding our product mix.
Here I would say there are no significant changes. Still, the majority of our products are flight package tours and flights only. This accounts to almost 100% of our total services. The sightseeing tours by coach and by plane are insignificant at the moment, and still the recovery of this product is not yet there. Also what needs to be said probably is that despite the fact that our taxes are three times higher versus 2021, to compare it to the year 2019, we are still minus approximately 10%. However, the first month this year in March, our tax volumes basically exceeded 2019 levels, which is a quite good development. Let's hope that this is that such tendency would continue going forward.
In terms of top destinations, again, as Q1 is a low season, and it is a winter season, the destinations remain very similar to what they were historically. The main ones were Egypt, Tenerife Islands and skiing resorts. In total they account for some 85% of our total sales and total selection. In terms of our distribution channels, here I would say that the main distribution channel remains the same, which is travel agencies, around 70%. It is quite stable during the years. Another thing which needs to be mentioned is that our web sales are increasing. Our e-commerce share from total sales was approximately 20% this year.
If to compare the absolute growth of e-commerce sales in the last two years. During the last two years, it increased by 20%, quite high growth. It is quite promising going forward. To slightly go deeper into the profitability performance, I would basically say that the comparison of year 2022 with year 2021 on EBITDA comparison and net profit comparison wouldn't be 100% accurate, as probably Q1 last year was exceptionally good due to a few reasons behind. First is that there was still a subsidy received from Latvian government, which was used for pandemic measures.
Secondly, last year we were the first ones and took the leadership to reopen our flights to Egypt in February 2021. It actually gave some indeed exceptionally positive result towards the profitability last year.And secondly, the difference between the EBITDA and net profit, as you see, is also quite high. Main line behind that is our interest expenses. Basically, we have to serve quite huge amount of loans which were taken to cover the pandemic impacts in year 2020 and 2021. This is the main difference between EBITDA and net profit. What relates to our operational performance, I would say that our load factor in the first quarter was okay.
So it is on those levels which we target. 95% load factor. Secondly, our sales profit per pax, and sales profit per pax is our gross profit less commissions paid was approximately 40 EUR. Yes, it's lower than 2021, which I explained to you before, but it is also slightly lower than 2019. The reasons behind that are the same reasons which were mentioned regarding capital profitability, which is the fuel price differences and the intensive competition in winter destinations in the first quarter, especially in the beginning of first quarter, I would say. Last thing to be said is the average package tours. They are increasing. Additional 80 EUR as you see versus 2021. Package tours increased.
Of course, the significant part of this increase comes from fuel prices. As fuel in total sales composition accounts for some up to 10%, and the fuel prices went up quite significantly. Huge impact comes from that. In general also there are increases coming from the services increases. Hotels are increasing prices as well in general. The last thing to be said about our operational excellence. Our operating expenses in the first quarter this year were EUR 1.6 million. I would say that they were managed quite okay. Sales and marketing costs as percentage from sales were 3.2%, and it is the lowest rate in the last three, four years. It's still very close to 2019.
However, the biggest efficiency comes from our general and administrative expenses. They were slightly more than EUR 600,000. Meanwhile, if to compare it to the pre-pandemic levels, it was EUR 1.1 million. The biggest difference and still savings are coming from here. We are currently operating quite efficiently in terms of operating expenses. At this point, I would stop and leave you the time for questions. Thank you.
Thank you very much for the presentation. Indeed, we will switch to the Q&A session. Before that, I would like to remind all the attendees that you are very welcome to send in your questions in the Q&A box of your screen. Let's start. The first question that we received is as following: Enlight Research did a report about Novaturas. On this report is marked that Novaturas occupies over 40% of tour operator market in Lithuania. According to the Law on Competition of the Republic of Lithuania, a company which is occupying more than 40% of the market is recognized as a dominant in the market. Do you acknowledge that Novaturas is a dominant company in the market? Thank you.
Thanks a lot for the question. First of all, is that Enlight Research is a purely independent analyst company, and this is. It needs to be said that this is their opinion, their calculations, and their conclusions coming from that. Commenting on this, how to say, compliance, probably it would be better to ask the question for competition authority. I would say that typically it's a very huge question on the definition of the market. How the market is defined and how we look internally. Not only on the market of tour operators, but in general tourism market overall. Because we are for sure competing with regular flights.
We are for sure, how to say, we know that the market also includes people who travel by themselves, and they are not using the organized tourism. I would say so that actually the market in which we are competing is much, much, much higher than only tour operator market. Probably I'm not the one who is the most competent person to answer what would be the treatment of competition authorities.
Thank you very much for your comment. We received one more question, which is as follows: Could you please expand on the reasons why Kidy Tour could not manage the trips for summer destinations? Thank you.
I would say so that again they would be better to answer to this question. Basically they came to us with a how to say offer or idea that they would like to how to say give these reservations to some other tour operators. Maybe they were even communicating with other tour operators. I don't know that. Basically I think publicly it was commented that in general the owners of Kidy Tour are reshifting their strategy. They don't want to operate in tour operator business and want to concentrate towards the aviation which is their main business. I would just presume that this is probably the main reason.
Thank you very much. Another question would be: Why the good practice of reporting financial results timely before the webinar has changed? Thank you.
Probably this is the more one-off event, I would say so. This year we spend a lot of time with financial statements of year 2021 related to this new format of reporting and all related audit procedures behind that. I would say that going forward, we would be following the good practice.
Thank you for your answer. Let's go to another question, which would be: Gross profitability notably lower compared to 2019. Is in this case that the company cannot pass full cost increase to customer, and is lower profitability the new normal for the next periods? Thank you.
Partially, we were not able to pass the fuel price increase, which I mentioned in the beginning, so quite a significant effect came from that. Going forward, as we introduce the fuel surcharge for all existing, meaning already made bookings from April, so we would've been able to pass this increase to the clients' shoulders. Also probably it needs to be said that, actually, when we introduced this fuel surcharge, the dropout rate was not so high. Basically, clients accepted this increase. Majority, the absolute majority accepted this increase. By the way, it was allowed by EU directive and EU regulations to increase the prices due to the fuel price changes up to 8%. We basically followed this directive. Answering the second part of the question, I would say definitely not.
We want to be close to the profitability levels which we had on the pre-pandemic levels. Again, we can't maybe very equally compare those periods as competition is changing. It all depends on the competition and how the market develops and of course, on our action plans to react to that. Definitely we want to orientate ourselves more towards pre-pandemic level profitabilities.
Thank you very much. As Novaturas conducts the fuel price hedging, hasn't that helped to keep the fuel prices lower?
I would say it helped to manage the risk for them not to go higher or to basically fix the price once we do the sale. Once we did the sale, we know what the price is, and we are sure that we wouldn't have any negative effects coming from that once the client would be traveling, which could be, as you know, one month, two months, three months or even six months after the sale happens.
Thank you very much for your comment. Another question would be: What proportion of flights are affected by extended flights around Russia and Ukraine? Is profitability lower for those trips, or the cost increase is passed to clients? Thank you.
Partially, it is passed to clients as the fuel costs increase due to the longer flight times, longer distances due to the overfly. This overfly, by the way, is regulated in such a way that we should keep 200k m from Ukrainian borders. Not only just close to Ukrainian borders, but 200k m from Ukrainian borders. Partially this effect is transferred. I would say biggest portion of this effect is transferred to the final price.
Thank you. Let's continue. Another question would be: One of the low profitability reasons was increased competition. With TUI and Kidy Tour out, who are bringing the tough competition now? Thank you.
I would say the risk uncertainty is behind the Join UP!, so it is now very hard to assess their what would be their strategy, how aggressive they would be. There are opinions they were quite aggressive in the markets in which they operated before. However, we really lack of information of what is their financial stand and how they would manage this operations, so very early to assess. I would say two possible how to say scenarios, is one that their operations wouldn't be so aggressive, let's say moderate, which would be probably one way to go. Another is that they could go very, very aggressively, and that could definitely disturb the market. Too early to assess at the moment.
Thank you very much. Another question would be what is the final decision about Novaturas? Your loss was EUR 300 thousand from this company. Did you ask about loss solution? Thank you.
On that, probably I would say we would follow up separately. With the up-to-date answer.
Thank you very much. Another question would be, Novaturas on 2020 will ask from travel agencies refund commission. It was not illegal according to Lithuanian laws. When you plan to refund this commission for travel agencies? Thank you.
Can you once again read the question?
Of course. Sorry. Novaturas on 2020. I'm reading as it's written, "Ask from travel agencies refund commission. It was not illegal according Lithuanian laws." When you plan refund this commission for travel agencies?
Again, we can follow up separately, but probably short answer would be that we are not planning to refund.
Thank you. Let's continue then. Another question would be. Travel agencies do a lot of job for changes of bookings on 2020 and 2021. They do it for free. Did you plan offer compensation for this job for travel agencies? Thank you.
Today we have a lot of travel agencies participating probably in the call. Thanks for showing such a big interest for us. I would say so that probably this is the commercial relationships between the travel agencies and the tour operators, and probably wouldn't be, I'd say, fair for me now to comment publicly on how such commercial relationships are managed between different travel agencies. Because just to remind everyone that there are a number of travel agencies with whom we work. Probably shortly reacting that, I wouldn't say that this is fair to say that this is free of charge. Every business basically assessing their risk when working with one or another counterparties. I would say that everybody should consider their risks.
Some rebookings are definitely happening, and this is part of the probably tourism industry practice. Let's put it like this. It happens. Probably we can't say that this is something unusual, especially in the current uncertain environment.
Thank you very much for your comment. Another question refers to your previous reply about the competition. The question is, what about the current competition, and who are your main competitors now reducing the profitability? Thank you.
Main competitors remain the same, which is TUI and Coral Travel. The main one is TUI. I wouldn't say that any of those is reducing profitability. The profitability is probably impacted by the general competitive landscape in the market. That's not only one competitor who is doing the impact, it's general market situation.
Thank you very much. It seems that we have the last question for today, which would be, when do you plan to start working on profitability levels again? Thank you.
As I said in the presentation, basically is that we want to work on the action plan for upcoming periods to recover the profitability, so in upcoming future.
Thank you very much. As all the questions are answered, on behalf of Novaturas and Nasdaq Vilnius, thank you everyone for joining us today. The recording of the presentation will be available in the company's website and Nasdaq Baltic YouTube channel. Dear Mr. Rakovski, thank you very much. Have a good day everyone and goodbye.