Good afternoon, ladies and gentlemen. My name is Łukasz Wachełko , I'm representing WOOD & Company. I have the pleasure of moderating the call with AmRest after the quarter results. The company is being represented by CFO Eduardo Zamarripa and Chief of IR Santiago Aguilera. Guys, not to steal too much of your airtime, we are already fairly late. The mic is yours.
Thank you, Łukasz, and good afternoon, and thank you for joining us today. I hope you and your families are doing well. In this first month of the year, the war in Ukraine has caused human suffering. From AmRest, we remain focused on supporting health initiatives and providing humanitarian relief while standing with the international community in the call for peace. Starting with first quarter results presentation, as you know, AmRest is Europe's leading restaurant operator with a portfolio of 2,434 restaurants in 25 countries across Europe, Middle East, and China. In slide two, you can find updated information regarding our presence and brand split by typology of service offered. That remains virtually unchanged compared to year-end. In slide three, during the first quarter of the year, the COVID-19 pandemic continues.
However, in the main economies where the group operates, with the exception of China, the restrictions imposed by the governments are gradually relaxed. As mortality rates decrease due to a higher proportion of the population being vaccinated and the lower lethality of the new variants. This is facilitating greater mobility and social interaction, and it's having a positive impact on the group's revenue generation. As you can see in slide three, during first quarter of 2022, we achieved the highest revenue for a first quarter in AmRest history, reaching EUR 507 million. These excellent results are related to the return of our guests to on-site dining restaurants and coffee stores. The human touch, the possibility of sharing experiences, smiles around a nice meal constitute the heart of our business.
In this sense, the biggest advances were registered in the dining channel that continues to be highly correlated with the easing of restrictions from the pandemic. This channel accounted for 37% of the sales in the current period, compared to 15% in the same period of 2021, showing a growing acceleration during the quarter. Nonetheless, these figures are still far from the levels recorded in the pre-pandemic period, when 55% of sales were obtained through this channel, a sign of the significant potential that the group still has, and which will foreseeably put in value as the normalization and opening up of the economies continue. At the same time, the EBITDA generated reached EUR 75 million, boosting cash flow generation and putting distance from the figures of the past two years, severely impacted by the pandemic.
Due to seasonality of our business, in a normal year, the first quarter have the weakest level of year sales, profitability or cash flow generation. On the opposite side, the fourth quarter tends to show the stronger positive seasonality. The fact that we have recorded the best first quarter in our history, substantially increasing margins over last year, makes us positive about the future of the business dynamics despite of the important challenges ahead. In slide four, we can find the evolution of the 12 months trailing average revenues per store that reached EUR 840 thousand, recovering the peak levels reached back in 2019. We are sharing what we consider to be one of the most relevant indicators to monitor the evolution of quality sales.
The positive evolution of revenue per restaurant provides sales leverage, a key factor in offsetting cost pressures from semis and labor costs. In this regard, the labor market remains very tight in many markets. Restaurant wages have increased, both sales leverage and the continuous enhancement in our digital capabilities that leads toward less labor-intensive processes, have allowed us to absorb them with a minor impact in our margins. In the next slide, let me focus on two very relevant events. Since the last part of the quarter, higher volatility has impacted the economic activity, affecting pricing dynamics and commodity prices, thus increasing the already high inflationary pressures and stress on global supply chains. In the left part of the slide, we illustrate the cost evolution that we are seeing in relevant items for our business. We're expecting aggregated inflation levels for the full year in the high single digits.
However, we have had to review our expectations towards the mid-teens. At the same time, we are facing an abrupt fall in terms of consumer confidence indicators, as we are illustrating in the right side of the slide, evidence of the impact of the war on sentiment and the rising uncertainty that it is generating. If now we go to slide six, despite these new challenges posed, the gradual reopening of the economies, the reactivation of tourism, the increase in people traffic, and occasions for socializing and sharing create an environment in which our value proposition is very attractive because we offer quality and remarkable consumer experiences at very competitive prices. This situation invites us to believe that our trade dynamics should remain strong and will continue to increase in the coming months. As for most other companies, the big challenge ahead of us is to maintain profitability and margins.
As we explained, in our case, dynamic sales are necessary to offset the cost of semis and labor. Moreover, despite advances in digitalization, which generates less labor-intensive process, and other advances in terms of efficiency, we will need to continue to increase prices in a responsible manner to protect margins. The price increases made so far in the mid single digits have been compatible with a very significant increase in number of transactions, which we believe illustrates the appropriateness of the actions taken, and AmRest's current ability to continue to maintain margins. With this, Santiago will cover the main financial highlights of the quarter. Santiago, the mic is yours.
Many thanks, Eduardo, and good afternoon to you all. Before I start, let me join Eduardo in wishing for an early solution of the war in Ukraine, and an end to the suffering of many innocent people. Our prayers are with them. The first quarter of the year was another challenging quarter for the hospitality industry globally. Despite that, AmRest continue its recovery trends across major regions. In the slide eight, we can find the main financial highlights for the first quarter of the year. Group revenues increased by 33% to EUR 507 million, with a same-store sales level of 128% compared to 2021. The number of operating stores declined below 99%, mainly due to the closure of restaurants from the lockdown of the Shanghai area in China.
In terms of EBITDA, the generation reached EUR 75 million that allowed to finance a CapEx of EUR 16.5 million, while the cash position stood at very high levels of almost EUR 180 million. As usual, we would like also to share with you the most up-to-date information. At the end of April, the same-store sales index stood at 129% compared to 2021, reinforcing the positive momentum that we are seeing in our business. In slide nine, we saw the revenues evolution.
The easing of COVID restrictions, the strength and balance of our diversified portfolio, and progress in better embracing new distribution channels have led AmRest to achieve, during the first quarter of the year, the highest revenues for our first quarter in AmRest's history, reaching EUR 507 million, up 33% year-on-year or 14% compared to the same quarter of 2019. The same-store sales index stood at 128% compared to 2021, and 109% compared to 2019. On slide 10, we can see the EBITDA generation evolution that reached over EUR 75 million in this quarter. This is 52% higher than the previous year. This represents an EBITDA margin of almost 15%. This is 2 percentage points higher than last year.
As Eduardo has explained, the high cost pressure has been mitigated by increased sales, advanced in terms of digitalization and efficiency, as well as responsible price increases. This has not prevented a significant increase in the number of transactions in line with our expectations. A clear signal that the actions taken so far have been appropriate, and that our ability to continue to act responsibly via pricing remains intact. Cost inflation is affecting all categories and regions. The success and timing of price increases really depends on the strength of the company's position and value proposition. Here, I really think that we have a clear competitive advantage. As a last point, let me emphasize again the seasonality of our business. This is why it's so important to contextualize these record first quarter results. In slide 11, we show the cash flow generation.
Let me remark that the cash flow generated from operating activity was over EUR 53 million, double the amount generated during the same period of 2021, which has allowed financing a net investment of almost million euros. Once again, almost doubling last year amount. In slide 12, we are showing the changes in our restaurant portfolio that was modified with the opening of 11 new units and the closure of 13. Once more, in line with the seasonality of the first quarters. From our side, work continues on securing new openings and the necessary equipment in order to achieve the new openings announced. In the next two slides, you can find information on our leverage and debt profile. On slide 13, you can see that further improvements in profitability led to a further reduction in leverage.
The ratio of net financial debt to EBITDA was 2.2 x, compared to 2.3 x on the previous quarter. Net debt stood at EUR 484 million, and the cash level at almost EUR 180 million, after having decreased by EUR 19 million during the quarter following the normal seasonality of the first quarter, which implies adjustments in working capital and bonus payments. All these figures are in line with the targets we shared with you on the last quarter. In slide 14, we have our debt profile. Following the agreement with our club banks at the end of last year, in which we extended the maturities of outstanding debt by three years, there has been no relevant changes during this quarter.
As you can see, we have a comfortable maturity profile over the next couple of years, where in addition we expect to see an acceleration of our cash flow generation. Next, we will focus on the results by different segments. On slide 15, you can find the revenues, EBITDA, and the number of restaurants that we have in each region. Starting with Central and Eastern Europe in slide 16, sales reached almost EUR 244 million during the first quarter of the year, registering a year-on-year increase of 49%, or 31% compared to 2019. EBITDA generation reached EUR 45 million, an increase of almost 60% compared to the same period of 2021, and 18% higher than in 2019. The EBITDA margin stood over 18%, higher than in the same period of 2020 and 2021, despite this increased pressure on cost.
Minimal variations in terms of the number of restaurants that stood at 1,084 after the net reduction of 1 unit. All of them were operational at the end of the quarter. In slide 17, in Western Europe, revenues reached almost EUR 187 million during the quarter. An increase of 24% compared to the same period of 2021, and practically recovering the levels of revenues recorded in 2019. In this regard, the markets that suffered the greatest impact during the pandemic, such as Germany, are the ones showing the best year-on-year performance. EBITDA reached EUR 23 million, representing an EBITDA margin of 12%. That is an increase of 5 percentage points versus first Q 2021.
All restaurants were operational at the end of the quarter, and the portfolio recorded a net decrease of 4 units following the restructuring of certain businesses, mainly concentrated in Spain. In slide 18, we have China. As we mentioned, strict lockdowns were imposed in some areas of China during the first quarter of 2022 and continue to be in place right now. The situation has affected mobility, commercial activity, and has led to the temporary closure of 19 of our restaurants. As a result, revenues stood at EUR 21.5 million, virtually the same level that we had during 2021. With a decline in EBITDA, which stood at EUR 4.3 million, representing an EBITDA margin of 20%. This is 6 percentage points lower than the same period of 2021.
Last point, the total number of restaurants increased to 80 units following the opening of three new restaurants. Unfortunately, only 76% of them were in operation at the end of the quarter. Finally, regarding Russia, in mid March, the group decided to initiate the process of temporarily suspending operations in Russia. Since then, AmRest has engaged in close and constant conversations with the brand's owner to stop investment in the country and is currently in negotiations with the franchisor to transfer its Pizza Hut operations in Russia to a local operator. This is all from my side.
Many thanks, Santiago. We're very proud of our results and of making consistent delivery every quarter despite the difficult macroeconomic situation. This quarter impacted us directly with a temporary closure of restaurants in China and indirectly increasing even more the elevated cost pressures. Today, once more, we presented that we are on the right track and with confidence in the future despite the significant challenges ahead. Many thanks to everyone, and with this, we are open to any questions that you may have.
Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad, or if you've joined us online, please click the Request to Speak flag icon. We have a written question from Hubert, which reads, "What is the non-IFRS 16 Q1 EBITDA and the amount of lease liabilities payments?
To be honest, this is something that we need to check because, of course, I mean, the information that we provide is the one in compliance with the current regulation, no? That is the one including the IFRS 16. Usually we have a difference of around 7 percentage points in terms of the cost of the rents and amortizations.
Thank you. We have a follow-up question which reads, "What is the current status of Russian operations and their accounting treatment in Q2?
Well, as we mentioned, we have negotiation with the franchisor to suspend the Pizza Hut operations in Russia at this moment, and the accounting registers the operations that we are having up to date.
Thank you. As a reminder, if anyone would like to register a question to the public side, please press Star followed by one on your telephone keypad.
Okay. Maybe I will take the privilege of the moderator, and I will jump in with couple of questions from my end. Well, in effect, your presentation was fairly full of data, so some of the questions of mine were already answered. Can you elaborate a bit about the split between dine-in and take-away deliveries? Because it has rebounded pretty much to the middle point between COVID and normal situation. Going forward, should we expect dine-in to go back above 50% of restaurant revenues, or it's just the past world and it's not coming back? How do you see that?
I think you make a very interesting question, Łukasz. We consider that still there's a percentage that the dine-in should be recovering, no? I think. That, of course, will help the numbers of AmRest, no? The toughest part of your question is at which level it's gonna get, no? As you mentioned, the reality has changed, no? One of the things that we took the opportunity to do because of this is enhance our digital capabilities. That's why right now it's easier, and we have made easier for our consumers to use the digital channels and always to use the delivery channels. One thing that we are sure of, people likes to see face-to-face.
People likes to enjoy and have very nice times together, and this is what we are offering through our restaurants, no? The percentage should go up, but of course, the percentage is uncertain, no? What we are really happy, as mentioned, is that we are able to get together, no? One of the things that we saw now that restrictions are easing, of course, is that that change in terms of the mix. Now spring is coming, spring is here, no? That's another enhancement that we may have to see the percentage going up.
Yeah. I mean, if you want, no, to illustrate what happened during the quarter. We are starting the quarter really in the barely reaching the thirties level. We finished the quarter with levels above 40%, no? This is an indication really of how things are evolving in this specific channel, no, very correlated, as we pointed out, with the easing of restrictions coming from the pandemic.
Okay. Going forward with increasing share of dine-in, should we expect the margins to be also supported? Or, in fact, you sorted out the logistics delivery cost that well that it should not have an impact. Or maybe the other way around.
Everything is a mix, Łukasz. Part of the, of course, we have made, as you can imagine, analysis of the impact that having different mix between the different channels have, no? What I can share is that we are really happy that consumers are coming back, no? Seeing the restaurants, seeing the restaurant food is something that is quite positive for us, no?
If I may also, no? I mean, what we are showing really is that this is accretive, no? All the channels are accretive, no? The fact that you have or that you may have different profitability across different channels is not compromising your margins, no? The channels that we have ahead really are coming in terms of the cost pressure. It's not really because what we are seeing are new distribution channels. To have an adequate adaptation of each channel is what is important, no? What we are showing is that we are working on that, and I think that quite successfully until the point.
Okay. Can you elaborate a bit about the cost pressure? Because I understand that inflation is one of the key drawbacks currently you are seeing. What are your plans on passing on the inflation to customers? Is it possible to, well, transfer double-digit inflation to customers with sticky price points of your products, or will everybody around see the inflation and in fact, the market should be able to accept price hikes? What's your point on that?
Well, we provide, you know, some guidance regarding to the inflation that we are seeing and the price increases that we have done until now. The point over here is that every market is different and every brand is different, no? What we are showing is that you have to be very vigilant, to study well the market, to understand well the elasticity of your clients and the value proposition that you do in order to have adequate price increases, no? If this is going to lead to a double-digit increase in terms of prices on an overall basis, I wouldn't expect really that, but we don't know, no? Every market, it has different dynamics. Every brand, it has different dynamics. Some markets are more used to higher level of inflation.
Other markets, you have to look for different value propositions. The focus for us really is the value that we get from ourselves, not so much the focus on the final price.
The other consideration, Lukas, is something that is affecting the entire industry, no? At the end, it's something that we are very focused on, of course, in our numbers and the value proposition that we have. That's where revenue management initiatives take a lot of sense, no? As you know, this is a matter of pricing to the products, but also price to the packages that we sell, to the combos that we sell, and have the proper price point for the different products across our restaurants, no?
One of the things that is, let's say, positive for us. We are in a market in which our products are affordable, and that's quite positive for us, and it's value added, no? We have proven to be resilient to these pressures.
Okay, thank you. Operator, are there any questions from the room? I don't wanna monopolize it too much.
We have another written question here from Adrian Górniak from IPOPEMA Securities. It reads: Do you maintain previous statements concerning sales growth of greater than 10% and keeping EBITDA margin on a comparable year-over-year level?
At this moment we are keeping the expectations that we have shared. I think revenues have been in line with those ranges, so we feel comfortable with that. As we say, we are addressing updates frequently, but I think it's still early to talk about changing the expectation, no? That's also why we were highlighting across the call the pressures that we are facing and the initiatives that we are making in order to absorb partially those pressures, no? I think there's still a lot of chapters to be written in this 2022.
Thank you. We have one more question from Michał Sikorski, which reads: Please elaborate a bit about traffic evolution across your markets, breakdown of same-store sale between traffic and ticket.
To be honest, no, despite the price increases that we have, the average guest check that we have, it has not increased. The increase in transaction is really aligned with increases that we are seeing in terms of sales. In other words, the big driver behind the increase in sales that we are having is the increase in terms of transactions.
Thank you. We have no further questions on the public side.
Okay. In fact, I will ask my usual question on roll-outs. In the first quarter, you've closed more restaurants than you actually opened. I understand the seasonality building industries rather skewed towards the second half of the year. What should we expect on that end? Is it realistic to assume that at the end of 2022, AmRest will have less restaurants in operations than while starting or I'm exaggerating because part of that is dispute of yours with Burger King and the other is handing over Pizza Hut in Russia to Yum?
In terms of openings at this moment, we are complying with the plan that we have internally. Now, as you correctly mentioned, usually in the first, mainly the first quarter and first half of the year, we have a lower number of openings, and we have a higher number in the second half. One of the things that we are facing, but again, it's still early to talk about changing the expectation, as you know, the supply chain is suffering in these latest months. That's not an exception for equipment that we need in order to have the restaurants in place.
Still we feel that it's a number that we should be achieving, but highlighting that risk that everybody in the industry is facing.
If you don't mind, one thing that I consider important to clarify. You mentioned Burger King, no? We make a public statement regarding to the situation that we have with Burger King. Basically, we have concluded, developed an agreement that we have in certain markets, but this is not putting in risk the operations that we have in these Burger Kings. What it means is that instead of to have the compulsory obligation of the compromise to reopen X number of restaurants in the regions, right now, what we need to go through is an individual process for opening new restaurants in those regions.
In fact, no, during the first quarter of the year, we have opened, if I remember correctly, four Burger Kings, and our expectations is that we will continue to open more restaurants during the rest of the year, no? This is subject to the approval of the franchisor, no?
Okay. I understand that, given the current situation of the markets and issues with availability of equipment, we shouldn't expect major acceleration of you adding more Burger King. Is it fair for me to assume that the dispute with Burger King would be not that easy to be solved?
No, no. The thing is that Burger King continues. Let's say we announce what happened with Burger King. That remains. The development agreement is finished. Right now we are in negotiations, as Eduardo was saying, with the restaurants that were on track to be opened, that we have that approval to finish to build those openings in this 2022.
Okay, I misunderstood. The final question of mine would be on China. Are you seeing any relaxation of the lockdowns up there and any improvement going beyond the end of the first quarter? How does it look like there? Because, in fact, it was a market which outperformed for many quarters during the COVID, and now they are pretty much the other way around.
Yes. No, in fact, as we mentioned, we had at the end of the quarter 19 restaurants closed. This is something that we are very attentive, and we are very close to the regulations and complying with all the regulations. We are expecting news from the government in order to come back. Unfortunately, at this moment.
Thank you very much.
We don't have more data on that.
Okay. Operator, are there any questions in the room?
We have no further questions.
Okay.
We have a question registered.
Thank you. Thank you.
From Gamze Alpar from Impera Capital. Gamze, your line is open. Please go ahead.
Hi. Thank you very much for the presentation. I apologize, I dropped out at a certain point, somehow I rejoined. Apologies if this question has been asked. Would it be possible to give a little bit more color on Russia? Are these operations, I mean, the restaurants are still open and functional while you're you know taking the necessary steps to sort of close the operation or you know have the operations been suspended and no sales are incurring? If you can give a little color on that and the timeline you see, that'd be great. Thank you.
Okay. Thank you. No, as we mentioned, we are on that process for making that temporary suspension. Right now, the restaurants are open and since we made the analysis, as we mentioned, we continue the conversations with the brand owner and stop investments in the country. No? Currently negotiating to suspend the Pizza Hut operations in the market. That's where we stand today.
Do you have at this stage, you know, have you made some calculations as to what the costs are gonna be associated with stopping your operations?
In fact, as you can imagine, we are making our analysis towards that. No, that's something that is information that we are working on at this moment.
Okay. Thank you. By when do you think you will have clarity?
Well, it's a working process. What is important to highlight at this moment, the net asset value that we have in our numbers is. It was in December EUR 79 million and is EUR 57.6 million in the month of March.
Thank you. I have one more question. When for example we look at your Central and Eastern operation, in terms of sales it's been very high, close to the third and fourth quarters of last year. But on an EBITDA basis, the margin has been coming down. Your sales were the same, but the margins were low. I mean, is it fair to say this is obviously due to sort of increasing raw material prices, and I'm assuming you haven't increased your prices, maybe, you know, maybe you increased your prices towards the end of the first quarter. Is that a fair assumption?
What we are facing today, you're right in your assumptions. What we faced during the first quarter is mainly increases in terms of costs of energy. That was an important item within our numbers, no? We started of course to face some pressures in terms of the cost, no? What we are doing, as you can imagine, is analyzing at the moment the cost increases that are affecting us, which are the adjustments that we need to make in terms of prices in order to manage the margins to the proper level. Also, this is a continuous exercise that we are doing in the market.
Yeah. Thank you. Do you expect that I mean, I guess, this is probably starting to show itself now, although you said April sales have been quite good. Because people's disposable incomes are also getting hurt, do you see, you know, I guess, we are in May now, a sort of declining trend in terms of sales or that the fact that you have to give more promotions? How has it been in the second quarter?
For us, the sales continue on the right track as expected. No? The thing is that what we see is the effects the economy may be having on the numbers, but it's something that we have not yet reflected in our sales.
Thank you very much.
Thank you.
Thank you. This is all the questions we have on the public side.
Thank you very much, operator, and thanks, everybody for joining the AmRest conference call. Today once more, we presented that we are on the right track and with confidence in the future despite the significant challenges that we have ahead. Stay safe and thank you very much.
Have a great weekend. Thank you.
Thank you.