Hello, welcome to today's AmRest Q1 2023 results conference call. My name is Bailey, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Łukasz Wachełko. Please go ahead when you're ready.
Good morning, good afternoon, ladies and gentlemen. My name is Łukasz Wachełko. I'm representing Wood & Company, and today, I have the pleasure of moderating the call with AmRest after the very decent results of the first quarter of this year. The company is being represented by CFO, Mr. Eduardo Zamarripa , and by Chief of IR, Mr. Santiago Aguilera. Guys, not to use too much of the time of yours, the mic is yours.
Good afternoon, thank you for joining us in AmRest first quarter 2023 result presentation. Let's start with an update regarding our presence and brands in slide two. As you know well, AmRest is a Europe leader restaurant operator with a portfolio of 2,346 restaurants distributed across 23 different countries in Europe, Middle East, and China. We keep a nice balance of franchise and property brands, which nonetheless have business bias towards the quick service segments that generates almost 70% of our revenue. Every month, we serve 30 million guests that find our restaurants at instinctive service, providing by over 53,000 passionate AmRestees. In slide three, let me summarize the most relevant events for this first quarter of the year. Our revenues reach a new record-breaking level for a first quarter with EUR 621 million.
Our commercial dynamics continued to show a strong growth in transactions together with increase in average guest check that resulted in a 22.5% increase versus first quarter of 2022. In terms of profitability, the EBITDA generated in the quarter amounted almost EUR 80 million. Net income was EUR 3.1 million, of which the profit attributable to equity holders of the parent company amounted EUR 1.7 million. Finally, leverage ratio remained stable at 2 x at the low end of the group target range. In slide four, we are illustrating the evolution of AmRest revenues and main profitability measures for the first quarter of recent years.
Let me remind you that our revenues and margins have a strong seasonal behavior driven by the dynamics of consumptions, where the first quarter of the year is usually the lowest of the period, both in revenues and margin perspective. This ends, sales increased by 23% in first quarter of 2023 versus last year, setting the best first quarterly figures in the group history. EBITDA generation also reached a new all-time highs for a first quarter of the first year, almost EUR 80 million with an increase of 6% compared to first quarter of 2022. However, the EBITDA margin fell almost 2 percentage points to 12.8%, affected by significant pressures on cost but also for initiatives to increase the traffic.
In terms of operating profit , our EUR 17 million were generated up to 22.1% versus first quarter of 2022, resulting in an EBIT margin of almost 3% stable versus the same period of the previous year. On slide five, on the left side graph, you can see the breakdown of AmRest sales by distribution channel, where the gradual recovery of dine-in consumption continues in our restaurants and generated 44% of the sale in the quarter. This trend is highly correlated with the greater mobility and the recovery of tourist flows that continues to take place in most of Europe. In addition, business dynamic continued to demonstrate the value of the advances made in technology and digitalization, as well as the importance of continuing to invest in developing new capabilities.
During the first quarter of 2023, for the first time, sales originated through digital channels were higher than those coming from other channels. These changes are the results of the evolution and modification in the customer habits. We are serving each day a more digital consumers who demand new ways of ordering and even understanding consumer experience. As stated last quarter, our industry is suffering one of the biggest transformation in its history that is providing an amazing opportunity for the companies that are willing and able to adapt to it. That is why AmRest is immersed in an ambitious technological transformation that already is starting to pay off. In slide six, you can find the evolution of the 12-month trailing average revenue per store, where we continue to report a consistent advance that supports improvement in the quality of our sales. Let me put off a different perspective.
We are reducing the resources that we need to generate sales. In slide seven, let me appoint that the cost pressure challenge faced by our industry worldwide has been enormous, with the highest inflation level seen in the latest decades in many markets. The moderation in energy and some commodity prices, together with improvement in the functions of supply chains, are leading to a scenario of gradually easing these cost pressures. We are not and we will not slow down our commitment and work on long-term initiatives to improve the profitability and efficiency of our business from several angles, as energy consumption, waste reductions, delivery model improvements, and further progress in digitalization. In summary, we are committed to continue offering the best value for money to our guests with a sustainable business model.
This situation, together with an active revenue management, is placing us in the right position for near future margin expansion. Moving to slide eight, we are providing a view about the changes in AmRest restaurant portfolio. We ended the quarter with a portfolio of 2,346 restaurants after the opening of 17 new restaurants and closure of 12 restaurants during the quarter. Let me highlight that major effort in terms of closure and portfolio optimization is mostly completed. Restaurant closures must be understood as a natural process in a portfolio of restaurants, as granular of the one that AmRest has in more than 2,000 sites. We should expect a gradual decrease in the number of closures in the next quarters.
In addition, as part of the strategic adjustments undertaken, the disposal of our remaining business in Russia, comprising 213 KFC restaurants, is in process. As we informed on February of 2023, AmRest signed a sale and purchase agreement with Smart Service for the disposal of all the businesses held in the country. The closing of the transaction is pending to the regulatory authorizations that are applicable in Russia. As soon as we have any further news, we will share that with the market. With this, we will pass to cover the main financial figures. Santi, when you are ready, the mic is yours.
Many thanks, Eduardo. Good afternoon to everyone. It is always a pleasure to have the opportunity to share with all of you the latest achievements of the AmRest team and also to hear your point of view. In this sense, for another quarter, despite once more expectations of a slowdown in consumption, AmRest commercial dynamics continue to show a very strong performance with a business model that continues to prove itself ready to adapt to the different phases of economic cycles and to grow in a sustainable manner. As you know well, AmRest value proposition combines great geographic diversification in its portfolio of top brand restaurants, with management focused on combining greater customer penetration with efficiency gains, always maintaining the group's identity mark of offering an excellent and differential service.
I think that we are having some problems with the display of the presentation, so I'm going to try to illustrate every time in which slide we are referring with. If we go to slide 10, you can find the main financial highlights for the fourth quarter. Sorry, for the first quarter. Group revenues increased by almost 23% and reached EUR 621 million in this quarter, with a same-store sales level of 117% versus last year. The most up-to-date information in this regard provides a reading of 115% to the first days of May. As already covered by Eduardo, the EBITDA generated in the quarter reached EUR 80 million, with an increase of 6% versus last year. The operating profit stood at EUR 70 million, up by 22% versus last year.
Finally, CapEx accelerated to reach more than EUR 28 million. Let me remind you that we expect to have a significant increase in our CapEx during the year, supported by an increase in cash flow generation and with the objective to dedicate a record allocation of resources to modernize a significant number of our restaurants, to invest in our technological transformation, and to accelerate the number of new openings. Next, in the slide 11, let me highlight two main ideas. The first one, AmRest quarterly revenues of EUR 621 million constitute the best start of the year in our history. Second, the sale performance was driven by a new increase in the number of transactions and an active revenue management. In this regard, the comparable same-store transaction index was 107. In the slide 12, you can find our quarterly EBITDA and operating profit evolution.
As discussed, the EBITDA generated in the quarter was EUR 80 million, an increase of 6% versus last year, despite a 2 percentage points margin decline. Decline explained by the still elevated cost pressure, but also for business disruption in some of our countries due to strikes and protests, and also for some advances in terms of cost that will be offset during the rest of the year. As we mentioned, the cost pressure in our industry is a worldwide phenomenon, so not surprisingly, the margin decline has been widespread in most geographies, with the remarkable exception of China and Germany due to some specific situations. If we move to slide 13, you can find the cash flow generation.
Here, I would like to draw the attention to the acceleration in the operating cash flow generation that it was raised to EUR 82 million during the quarter, compared to EUR 53 million in Q1 2022. This represents an increase of 54%. For us, this is a key metric that supports the idea of a sustainable business model with capacity to generate resources to address the planned investment and the commitments that we made. In the slide 14, you can find the organic changes in the restaurant portfolio, where you can appreciate in the graph the strong seasonality of our new openings towards the second half of the year. Nonetheless, during this first quarter, we have opened 17 restaurants, 8 in Eastern and Central Europe, 5 in Western Europe, and 4 in China. In addition, we have closed 12 restaurants.
In the next slides, in the number 15 and 16, we are showing our cash and debt evolution. At the end of the first quarter of this year, the net financial debt stood at EUR 437 million, with a prudent cash level of almost EUR 250 million after increasing by almost EUR 90 million during the quarter. We already talked about the acceleration in the generation of cash flow from operating activities. This, together with a new bilateral and secure loan of EUR 30 million, allow us to cover our CapEx needs, increase the CapEx, sorry, increase the cash buffer while maintaining stable our leverage ratio at 2 x EBITDA. As a subsequent event, in April, we have signed an additional bilateral loan for EUR 26.5 million.
Before, in total, EUR 56.5 million have been granted by two leading European banks that results in an improvement in our debt structure. Both operations are bilateral and secure loans with maturity dates June 2025. They are inside the permitted conditions that we have in our syndicated bank loan agreement. Moving to slide 17, as a last part of our presentation, we will focus on the results by different segments with the breakdown of revenues, EBITDA, and the number of restaurants that we have in each region. In slide 18, starting as always with our more relevant region, we provide the main metric for Central and Eastern Europe that is generating 49% of our sales in the first Q of the year. Revenues amounted EUR 304 million, with a growth of almost 25%.
The EBITDA generated was almost EUR 48 million. This is EUR 1.5 million higher than in the same period of 2022, with an EBITDA margin of nearly 16%. In this point, I would like to highlight the excellent performance of the Czech market, with EBITDA margins above 20% and that currently constitute the second most important contributor to the EBITDA of the company, with more than EUR 50 million generated during this quarter. Finally, the restaurant portfolio in the region reached 1,131 units after increasing by four. During the quarter, we have eight new openings and the closure of four restaurants. Moving to the slide 19, we cover Western Europe. Revenues increased by 14% in this region and reached almost EUR 230 million.
The EBITDA generated increased to EUR 24 million with a growth of 5% with respect to the same period of 2022. The EBITDA margin stood slightly above 11%. Here, let me highlight the progression and the strong performance registered during the last quarters in the German market. Our revenues grew over 28% in this market, and the EBITDA contribution more than double in nominal terms after expanding the EBITDA margin to almost 13%. Regarding the total number of restaurants in the region, it stood at 918 restaurants, with a net decrease of 2 during the quarter. In this market, we have the opening of 5 new stores and the closure of 7 stores.
Finally, in slide 20, we can appreciate the performance of the China market, where after the COVID restrictions were lifted, our restaurants are experiencing a strong recovery of activity. Revenues generated during the first quarter of the year stood at EUR 25 million. This is almost 16% higher than in the first Q of 2022. The EBITDA generated was EUR 5.6 million, up by more than 30% versus last year and with margin of almost 23%. In terms of the portfolio, AmRest has 84 restaurants in the region after increasing the portfolio by 4 units during the quarter. There were no closures of restaurants during this period in China. This is all from my slide. Eduardo, I don't know if you want to do any final remarks.
Many thanks, Santi. The macro perspective continues to be very challenging. However, we continue with our roadmap of building a more robust and profitable company with our resilience model. We are all at AmRest very optimistic about the opportunities that lie ahead of us. Thanks, everyone. With this, we are open to any questions that you may have. Please, operator.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please ensure to pick up your handset before asking your question, and please do ensure you are unmuted locally. As a reminder to ask a question, please press star followed by one.
Maybe if people are still shy of asking questions, I will start on my own using the privilege of moderator. First of all, if you could help us understand what was the profitability damage in France related to the protests. Are you able to estimate the hit, the value of EBITDA loss or it's just tough to do an estimation?
Thank you very much, Lukasz for the question. We have a situation in France that is a combination of several factors, no? In France, we have business that is very biased towards delivery. Delivery right now is as we are trying to illustrate, you know, in our presentation and the rest of report, no, is a segment that is being impacted by the coming back that we are seeing in the dining segment. This is affecting the profitability of this channel. In terms of estimate, the consequences and the impact of the strikes and protests, it's quite difficult, you know, because it has been seeing impacts in many different segments, no?
During this period, what we have seen is some people who were not able really to arrive to the restaurants for working. We have seen disruptions in terms of some of the suppliers that we needed in some of our restaurants. It has been really a combination of several factors that is not so easy to isolate. As we discussed, no, in terms of EBITDA margins, in terms of impact in profitability, every market it has been impacted. In this specific market, we have a little bit of a higher impact. All these combinations of effects, you know, is really what explain perhaps this abnormally high impact that we are seeing there.
Okay. Thank you. Going to the other side of the spectrum, great performance of Czechia and Germany. Can you elaborate a bit more here? Was it external factors? Was it something you have done internally? What drove such a strong performance there?
Lukasz, we have different, as you say, we have different performance across the different geographies. One of the positive news that we have, of course, as you highlighted, is the Czech recovery. We are seeing people more willing to go to our restaurants, more recovery, more recovery in terms of the same-store transactions in all our formats. We see good performance on KFC, on Pizza Hut, in Starbucks, from Burger King. In all our portfolio, we see that the transactions are overperforming. That has been sustainable, I would say, since the latest part of last year. This is also related to the initiatives that we were saying in terms of digitalization. How to serve better our consumers.
We see they're coming back, and we have, like, more options in terms of how to place the orders in the restaurants, taking advantage that they are going there. The uses of kiosks, the uses of the apps that we are developing. It's being close to the consumer and up to speed in terms of the trends in the different markets, no? Definitely we see a very good same-store level, same-store sales and positive impact of sales, same-store transactions. Traffic is there, and that's the most relevant part.
Okay. Thank you. What about Germany?
In Germany, the portfolio of Starbucks is performing very well, no? Of course, we see more people going to the offices. That's one of the effects that we are seeing. Also, tourists are traveling more in the different geographies of Europe. Starbucks is one of the brands that gets benefit because of this openness of the market, no? We see both things in terms of same-store sales and same-store transactions, no? We see more people entering into our restaurants.
On that brand in Germany, we have made a lot of updates in terms of the attention to our to our consumers, investments that we have made in terms of POS, and how to deliver a better value to our consumers, no? We serve, we are increasing our offering also of prepared food, so it's complementary to the service that we are giving there, and that also allow us to increase the average guest check.
Okay, thank you. Last question of mine in this in this set, we are seeing erosion of your profitability, but at a slower pace. I understand that's related to a bit easing cost pressure, especially on energy. When do you expect margins to stabilize? Should it be over the second quarter or latter part of the year?
You make a very challenging question. Every day we see different information coming around. But really what we are seeing that those pressures are easing. Doesn't mean that they are really upsetting, but those pressures are easing, no? It's difficult to give a date on that, but hopefully the trend continues, so we can see some better evolution in terms of margins in consecutive basis. This is a result of two topics. One is the inflation rate, but the other thing that is very relevant is that the consumer is strong and that the traffic continues in terms of the economy and particularly in our restaurants, no?
In terms of expectations, we have some cost of food that is going down, particularly as well as energy, as you mentioned, but there are also raw materials, mainly, I would say crops, that due to a poor, rainy season could have an impact, could also have an impact in our mix. It's still early, still early to say.
Okay, great. Thank you. Maybe there are some questions from the room. I don't want to monopolize the call.
Thank you. We do have a written question that has come through from Grzegorz Kujawski from Trigon. They've asked, "Please give us some color on food cost component share, their pricing dynamics and term of trades. Is it fair to assume that input prices should have less negative impact on profitability in coming quarters? To what extent SSS growth is price/volume driven among KFC, PH banners and different geographies?" Thank you.
Okay. Thank you, Greg, for the questions. I'm gonna start in terms of the pricing. If you can imagine, we have a different mix between the brands and the geographies, no? I would say that in general terms, mid-to-high single digits have been the price increases that we have put in place in different geographies and brands, no? Of course, we have made a lot of effort in terms of revenue management within our different countries and segments. We cannot talk about a price increase across regions. No, the aim of here is how we can maximize the profit of the business. No.
A lot of initiatives in terms of revenue management. No, as an overall number, I would say that mid to high single-digit is something that is reasonable to assume across the different geographies. Still some percentage to catch up. That's why we still see some margin pressure. This is something that we need to balance between prices that we can put and also the value that the consumer is perceiving and really the disposable income that our consumers have. No. This is a balance. In terms of cost, similar to the answer that I was.
or information that I was providing previously, we see some of the components in the different brands in terms of cost that are easing in terms of cost pressures. No? But at the end, this is something that we will have more clear idea of how the levers is gonna stabilize in the second half of the year. One thing that is a reality is that we see a slight lower pressure in terms of cost of food that the one that we were considering at the beginning of the year. The last part of the question was related to same-store sales and same-store transactions, and we see both of them growing across the geographies. That's really the focus that we are having. No?
It's important to have the sales, but it's also very important to have the traffic into our restaurants. We are looking forward to have that balance in the most profitable way for our portfolio.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad, or please do submit a written question.
Okay. Maybe another one from my end. I wouldn't myself, you know, I wouldn't ask for rollout acceleration given that your results are improving and balance sheet is more and more under control. Shall we expect the rollout to accelerate or you are sticking to your guidance for now?
Lucas, you raise a very interesting topic. Now, as you have mentioned, in terms of, in terms of the leverage, we have done a very important effort in order to reduce it. That's going in the correct, in the correct trend. Now, the idea is how we can increase the profitability of the business, and that would allow us to have a better capacity to increase the openings. We have already shared the guidance for the year, and we feel comfortable with that. The other thing that we need to take into consideration and also is very relevant, is how the central banks behave. No?
One thing that is relevant is the cost of cash has become more expensive. That's also something that we need to put into the equation. As long as we are delivering with the results, we are committed to continue the growth story of AmRest.
Okay, great. Thank you.
Thank you. There are no additional questions waiting at this time. I'd like to pass the conference over to the management team for closing remarks.
Thank you, operator, and thank you everybody for joining AmRest Result Call. Looking forward to see you soon in one of our restaurants. Have a nice day. Goodbye.
Thank you. Thank you. Congratulations on good results.
Thank you.
This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.