Prosegur reported a robust financial performance for Q4 2024, with total sales reaching €4.9 billion, marking a 13.9% increase from the previous year. According to InvestingPro data, the company maintains an impressive gross profit margin of 90.94% and has achieved a revenue growth of 16.86% over the last twelve months. Despite a slight rise in net financial debt, the company’s stock price surged by 3.86% to 1.99 in pre-market trading, reflecting investor confidence in its strategic direction and growth prospects.
Key Takeaways
- Prosegur’s sales grew by 13.9% year-over-year, reaching €4.9 billion.
- EBITDA increased by 17%, and net income rose by nearly 24%.
- The stock price climbed 3.86%, indicating positive market sentiment.
- Strong performance in Latin America and Asia Pacific regions.
- Continued investment in technology and ESG initiatives.
Company Performance
Prosegur demonstrated strong financial health in Q4 2024, with significant year-over-year growth across key metrics. The company reported a 13.9% increase in total sales to €4.9 billion, driven by organic growth in all geographic regions. EBITDA rose by 17%, and net income saw a nearly 24% increase, underscoring the company’s operational efficiency and market resilience.
Financial Highlights
- Revenue: €4.9 billion, up 13.9% year-over-year
- EBITDA: €328 million, a 17% increase from the previous year
- Net financial debt: €1.26 billion, with an improved net debt to EBITDA ratio of 2.3x
- Organic growth: 7-20% across all geographic regions
Market Reaction
Prosegur’s stock price increased by 3.86% to 1.99 in pre-market trading, reflecting investor optimism about the company’s performance and strategic initiatives. InvestingPro analysis indicates the stock is currently undervalued, with analysts setting price targets suggesting significant upside potential. This rise places the stock near its 52-week high of $28.88, suggesting strong market confidence in its growth prospects and ability to navigate economic challenges. The company also offers an attractive dividend yield of 5.23%, making it particularly interesting for income-focused investors.
Outlook & Guidance
Looking ahead, Prosegur remains optimistic about its growth trajectory. The company expects its leverage ratio to continue falling in 2025, with a targeted range of 2.0-2.2x. It also anticipates a slight increase in the EBITDA margin year-over-year, driven by ongoing investments in its security business and technology initiatives. InvestingPro data reveals strong operational efficiency with a return on assets of 14.4% and return on invested capital of 18%, suggesting effective management of resources. For deeper insights into Prosegur’s financial health and growth potential, including additional ProTips and comprehensive analysis, subscribers can access the full Pro Research Report.
Executive Commentary
CFO Maite Rodriguez highlighted the company’s resilience and efficiency, stating, "We proved to be highly resilient and efficient in overcoming certain headwinds." She emphasized the importance of innovation, noting, "Innovation is at the top of our priorities." Rodriguez also expressed confidence in the company’s leverage reduction strategy, saying, "We are confident that our leverage ratio will continue to fall during 2025."
Risks and Challenges
- Economic instability in Argentina could impact future performance.
- The slight increase in net financial debt may pose financial risks.
- Ongoing investments in technology and ForEx present potential challenges.
- Market saturation in certain regions could limit growth opportunities.
- Macroeconomic pressures may affect overall market conditions.
Q&A
During the earnings call, analysts, including Alvaro Bernal from Alantra, inquired about Prosegur’s leverage and other business areas. Management explained the positive impact of trademark royalties on corporate EBITDA and confirmed their strategy to reduce leverage in 2025. They also discussed ongoing investments in Cipher and AgOS technologies, highlighting their potential to drive future growth.
Full transcript - Prosegur (PSG) Q4 2024:
Conference Operator: Good day and thank you for standing by. Welcome to the Bosei Goode Full Year twenty twenty four Results Presentation. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer you. Please be advised that today’s conference is being recorded.
Maite Rodriguez, CFO, Prosegur: Now I’d
Conference Operator: like to hand the conference over to your first speaker today, Juan Ignacio Galliano. Please go ahead.
Juan Ignacio Galliano, Head of Investor Relations, Prosegur: Good afternoon and welcome to Prosper Full Year twenty twenty four Results Presentation Webcast. Before we start, I would like to remind you that this presentation has been prerecorded and that it will be available on our corporate website. I will now hand you over to our CFO, Maesa Rodriguez.
Maite Rodriguez, CFO, Prosegur: Good afternoon and thank you all for your presence. We are once again proud of presenting very strong results both from a financial and operational perspective. We proved to be highly resilient and efficient in overcoming certain headwinds such as the political and economic turmoil in Argentina, especially during the first half of the year among others. The good results achieved not only validate the decisions that we made, but also lead us to be highly optimistic about the future. As we have already stated to many of you, the upcoming year should be marked by a significant leverage as we continue to generate strong cash flows.
Now with all this in mind, let’s deep dive into the most significant milestones of the period. Our top line continued to be fully driven by organic growth and reached an all time high of EUR 4,900,000,000.0, marking an impressive 13.9% increase when compared to the same period of last year. As a clear evidence on the sustainability of the figure, we should highlight that all geographic regions grew by over 7%, making the growth well balanced. As for profitability, EBITDA stood at million, 17 percent higher year over year, mainly driven by our security business and to a lesser extent to our cash business. Indeed, as we shall later see, our security business continued to do a great job this year, marking a 3.3% margin throughout the year and a 4.1% in the fourth quarter.
Thanks to an efficient working capital management and keeping infrastructure CapEx under control, the higher achieved profitability, we don’t need in higher cash generation. Indeed, cash flow from operations reached EUR113 million, while free cash flow stood at EUR132 million, million or 16% higher year over year. As always, our main premise is to continue growing, but always being mindful on leverage. Overall, net debt stands at 2.3 times relative to EBITDA, while it’s not only very well structured in the long run, but also very cheap. As it has been the case for many years now, innovation is at the top of our priorities.
As we know for a fact that it paves the way for a more diversified and hence sustainable growth. In this line, transformation products in our cash business continue to gain more relevance and exceeding 32% of total sales, continuing its upward trend. Let’s now turn to Slide two, where I would like to deep dive into our sales figure. As said, total sales during 2024 reached EUR 4,900,000,000.0, 13 point 9 percent higher year over year. Discounting for the FX effect, almost the entire growth was organic, evidencing our strict policy when it comes to passing through inflation to prices.
At the same time, volumes continue to grow both in our most traditional businesses and most importantly in our transformation products. As for geographic sales diversification, it should be noted that excluding the hyperinflation effect, it improved as LatAm losses share against Europe and Ro. This is well explained by the higher relative weight of USA and Asia Pacific in our security and cash business respectively. And it’s another edge to assess the sustainability of operations going forward. I would like to stress once again before we move on to our next slide, the solid growth in all of our different economic regions with increases ranging from 7% to 20% in euros year over year.
Let’s now move on to review profitability. On a full year basis, total EBITDA was EUR328 million, marking a strong 17% increase compared to the same period of last year. Even though part of the increase is due to the disparate impact of the hyperinflation accounting, the truth is that operational performance was enhanced, further contributing to the year on year growth. Our cash business performed well on a full year basis with EBITDA increasing almost 14% and margins gaining 20 basis points. It’s worth to highlight that this growth was achieved despite of certain headwinds that impacted the business such as the strong economic recession in Argentina, particularly during the first half of the year, the labor strike that we faced in Germany, the setup cost and investment deployed in our ForEx business, and finally the restructuring cost of the Australian operation.
The good news here is that all these factors were temporarily in nature and should be gone for 2025, pointing to a strong year ahead. Indeed, we already reached a reasonable agreement in Germany. Macroeconomic performance in Argentina indicate that we should expect a strong recovery. An investment in our ForEx business has now been reduced as it’s time to consolidate. In our security business, the positive combination of higher selling volumes together with the agile pass through from inflation to prices and enhancements at cost structure level were responsible for the strong performance.
At the same time, the higher share of our USA operations further contributed to EBITDA generation. Our Alarm (NASDAQ:ALRM) business presented solid results with service margins increasing year over year, driving the growth of recurring cash flow. As we will see, the performance of every relevant indicator in alarms moved in the right direction, pointing to an increase in value per customer. This is the case for both MPA, our operation in Spain and for Prosegur alarms in the rest of the world. Turning now to our P and L, it can be seen that as you go down the different lines, every and each one of them increased by almost 20%.
This is a good testament on enhanced operational performance throughout the year. The growth in depreciation expenses and financial results should be further explained. The former increased 25% and seems to be quite high given that deployed CapEx was in line to previous years. The reason behind such a growth lies on the hyperinflation accounting as the assets which are the base for future depreciation expenses should be increased along with inflation. Needless to say, this effect will fade away as inflation progressively slow down.
Moving now to financial results, the increase is once again mainly explained by the hyperinflation effect. Indeed, as already explained in past week forecast, as a result of the capitalization of intercompany debts in Argentina to reduce the financial impact of last year depreciation coupled with the genuine cash generation of our security business, our net monetary position in the country shifted from negative more liabilities than assets to positive. As a result, the accounting impact of applying IAS 29 is that of a negative result. It’s very important to highlight the accounting non cash nature of the impact. As a matter of fact, financial results with direct impact in cash generation went down by 47%, mainly driven by the reduction in the dividend upstreaming costs.
Finally, our fiscal rate went down by over 100 basis points, further contributing to the increase in net profit, which together with higher EBIT generation explains the nearly 24% increase in net income. Let’s now turn to cash generation. All the way down to net cash flow, there are four lines that present significant differences compared to last year. Provisions and other non cash items, investment in working capital, others and dividend payments. Before explaining them individually, I would first like to point a 16% growth in free cash flow compared to last year.
Evidently generating good amount of cash is a necessary condition to deleverage, which is as you all know our goal for the next couple of years. At the same time, CapEx is under control as it can be seen. Starting with provisions and other non cash items, the EUR141 million reduction is entirely explained by the hyperinflation impact coupled with two additional VAT payments in 2024 due to calendar effect. It’s worth to highlight that we won’t have any impact neither positive or negative in this regard next year. Moving on to working capital requirements, the reduction has multiple reasons.
To start with lower inflation in Argentina translates into lower working capital investment, particularly in our security business. At the same time, due to an active treasury management, we were able to reduce DSO in one day. The others line register at EUR38 million reduction year over year. There are two things to consider here. To begin with, the 2023 figure was negatively impacted by the change in the consolidation perimeter of the Australian operation.
Also, we did not purchase any stock during 2024, thus reducing the cash outflow in this particular line. Lastly, the difference in dividend payment has to do that by the end of twenty twenty two, part of the 2023 dividend was advanced. Reason why last year dividends paid were artificially low. Let’s now turn to the next slide to discuss the company’s financial position. Net financial debt slightly increased year over year, reaching EUR 1,260,000,000.00 resulting in a total net debt to EBITDA ratio of 2.3 times versus 2.6 times in December 2023.
I would like to remember all that the achieved ratio is well below the goal we’ve set at the beginning of the year. It’s worth highlighting that both the terms and the structure of our debt is very healthy with an average cost at 2.568% at fixed rate and long term in nature. As a significant financial milestone, we would like to highlight that Prosaburo has strengthened its firepower and liquidity by refinancing syndicated credit facilities with a limit of EUR500 million, including EUR 300,000,000 in cash and EUR 200,000,000 for the group. The maturity has been extended from February 2026 to February 2030 with two years extension option. Currently both credits are almost undrawn and this exercise reinforce the firepower and confirms the group’s solvency and liquidity with the support of our main relationship banks.
Let’s now turn to Slide nine. By the end of twenty twenty four, our Board of Directors approved the ESG master plan for the upcoming three years, which reaffirms the strong commitment of Prosper in this matter. This plan consists in a nutshell in 12 strategic lines that guide the company’s actions 48 strategic initiatives, which main purpose is to reinforce Prosego’s commitment, include specific objectives and define responsibilities. At the same time, the above mentioned initiatives were further classified in concrete and specific actions. For instance, some of the quantitative objectives that were set in this master plan regarding our environmental commitment include reduction of emissions of scope one and scope two and an increase in green energy consumption.
For environmental preservation, quantitative objectives have been established for free transformation and for increasing the supply of new products that generate fewer emissions. Finally, for the sustainable management of resources and waste, targets have been set for the use of recycled plastic and paper and a reduction in water consumption. That’s all from me for now. I will now turn the presentation over to our Head of Investor Relations, Juan Ignacio Galliano, who will give you more detailed information on the development of the specific business areas.
Juan Ignacio Galliano, Head of Investor Relations, Prosegur: Thank you very much, Maite. Let’s now have a look at the results of each business line covering the main performance indicators and the most relevant aspects of the period. Starting with our cash business, I would like to reinforce the 18% organic growth that we achieved during 2024. This not only shows the agile commercial response to inflation, but also that volume growth remains high at very healthy levels. The depreciation of both the Argentine peso and the Brazilian real resulted in slight reduction in total sales.
As already pointed out, LatAm and APAC regions continued to show strong growth rates hand in hand with volumes. When it comes to profitability, the ongoing enhancements and operating efficiencies allowed us to overcome some difficulties that we already explained, resulting in a fourteen percent and twenty basis points increase in EBITDA and margins respectively. The achieved results in P and L were maintained at a cash flow level with a 2.2% increase in operating cash flow, thanks to high efficient treasury management. These positive results are reinforced by the fact that diversification continues its upward trend. Indeed, new products are gaining more relevance exceeding 32% of total sales.
We are certainly benefiting from all CapEx deployed in both cash today and ForEx businesses. Needless to say, increasing the percentage in the context of higher sales deserves even more credit. Let’s move now to our security business, which continued to be the major highlight during the fourth quarter. Total revenues reached on a full year basis EUR 2,500,000,000.0 with the organic share reaching a remarkable 19%. This is mainly driven by our volume based strategy that leads to operating leverage, our capacity to pass through inflation to prices and the outstanding performance of the operation in The United States.
All the above, coupled with enhanced efficiencies and operating leverage resulted in total EBITDA reaching EUR 82,000,000, 17 percent higher compared to the same period of last year. This is by every means impressive considering the volume led nature of the business. Margins for their part continued to increase reaching 3.26% during 2024 and four point one percent in the fourth quarter. Evidently, we are ripping off the benefits of our five pillar strategy that can be easily summarized as follows: First, a strict discipline in passing through inflation to prices second, a thorough control of absenteeism third, operational leverage thanks to higher sales volume fourth, a controlled customer portfolio turnover and finally, a lean operational structure. Operating cash flow resulting in €17,000,000 marking a 32% reduction compared to last year.
This decrease followed a deliberate strategy of increasing sales during the last quarter as we profit from very good opportunities capturing highly attractive margins. Evidently, this impacted working capital requirements, which fully explained the drop in operating cash flow. Let’s now turn to the Alarm business where once again we delivered outstanding results. As it can be seen every relevant KPI is better when compared to the same period of last year. Our client base totaled 962,000 marking a 10.5% increase year over year.
As we add more net clients compared to last year, we are strictly monitoring the quality so that we can achieve a sustainable growth without implying significant increases in churn. Indeed, as it can be seen, churn rate in MAPF went down by an astonishing 2.3%, while the increase in Prosegur alarms has to do specifically with one big client in Chile and it’s definitely not a widespread issue. Both ARPU and service margin increased in both businesses, while acquisition costs either remained the same or reduced, leading to an increase in both customer value and recurring cash flow as we can see in the next slide. It’s clear that the combination of higher service margin and good performance at a churn rate level implies a significant increase in recurring cash flow. That is the resulting cash after the clients that churn are fully reacquired.
In the charts above, what we are showing is the twelve month rolling recurring cash flow of both Proseuro Alarms and MFEA. The one on the right side clearly indicates that the generating recurring cash flow capacity of the two businesses combined for Prosegur stands at EUR 72,000,000, by the way, 48% higher year over year. As we have been suggested for quite a while now, it seems that the market is not considering this when calculating the company’s fair value, reason why we see this as a natural catalyst. This concludes our analysis of the performance of each business line for full year. Thank you for your attention.
I will now hand the microphone back to our CFO, Maite Rodriguez for her closing remarks.
Maite Rodriguez, CFO, Prosegur: Thank you very much, Juan Ignacio. Let me now share with you my closing thoughts on the most relevant conclusions of this results presentation. Overall, as we have seen during the presentation, all businesses reported enhanced operating efficiencies and a strong result. On a consolidated basis, total sales increased almost 14%. Even more important is the fact that this increase was widespread across all geographies and further enhancing both geographic and product diversification that’s making the entire operation more sustainable.
In our cash business, total EBITDA and EBITDA margin increased compared to the previous year despite facing important challenges, proving not only the resilience of the business, but also it’s sustainable based on geography diversification. Moving to our security business, we presented a strong results with EBITDA increasing 17% year over year. This implies a 3.3% margin confirming the outstanding trend over the past two years. We expect to continue with this positive trend in the upcoming years as EBITDA margin should slightly increase year over year. Our Alarm business presented solid results with increased service margins and cash generation.
This is clearly captured by our recurring cash flow, which amounted to EUR72 million, implying a 48% increase year over year, pointing to a strong cash generation. All this growth was achieved as we continue to be mindful on our leverage position. We are confident that our leverage ratio will continue to fall during 2025 as we will both not only reduce net debt at absolute level, but also EBITDA should continue to increase. At the same time, the good structure and low cost of our financial debt should not be overlooked to properly assess our financial position. The recent refinancing of our syndicated credit facilities reaffirm our solid position on this matter.
Lastly, I would like to reinforce Prosegur’s commitment to ESG principles as the backbone for every corporate and operational decision. This was all on my side for this results presentation. I would like to thank you all once again and we are now open for Q and A.
Conference Operator: Thank you. Thank you. We’ll now take our first question. First question is from the line of Alvaro Bernal from Alantra. Please go ahead.
Alvaro Bernal from Alantra. Your line is open. Please go ahead. Sorry,
Alvaro Bernal, Analyst, Alantra: I was on mute. Just regarding the other businesses, Avos, Cipher and Corporate, if you could shed some more light on the evolution of these businesses. I’ve seen that corporate has yielded a positive EBITDA when normally it sits closer to negative 20 or even more. And in Cipher, the EBITDA has also been more negative this year. If you can just shed some light on how this will evolve looking going forward to 2025 and beyond.
Maite Rodriguez, CFO, Prosegur: Thank you, Alvaro, for your question. In relation to the difference coming from that positive to that negative figure, it’s mainly because we have increased the royalties coming from the trademark due to a new agreement with the Spanish tax authority. We also have more revenue coming from a few building sell ins mainly in Australia. And remember the last year, we also have some few severance payments from DGA. So that’s why $20.24 figures were half a lower amount.
Coming to the AgOS and Cipher businesses. AgOS is both of them are on the budget that we estimate for this year. We have a big investment in Cipher. As you know, we have a very good technology and we are investing in improving even more that technology so that we can have a market where we can grow and complete the budget that we have also for 2025. And Agosi is also doing well.
The last quarter has been a very they really have a very good result. We I don’t know if you know, but we changed the management during the year and now with this new management, we are really doing a very good sales and also good marketing. So when you add everything, that’s why we have those positive results.
Alvaro Bernal, Analyst, Alantra: Okay. Thank you very much. And second question regarding leverage. You mentioned in the presentation you’re aiming to reduce the net debt in absolute terms. If you could shed some light on where you could see it by the end of next year, either in terms of leverage or absolute terms, if you have a target in mind that you aim to achieve?
Thank you.
Maite Rodriguez, CFO, Prosegur: In terms of debt, as you know now, we are in 2.3 times. We in 2023, we were in 2.6 times. We and we should be better in EBITDA in other EBITDA. The range more or less should be between two and two point two times. It will depend also that’s why I’m not going to tell you in absolute terms exactly the figure that I have in mind, because it will depend on the security growth.
As you know, the security growth is going to eat a little bit the working capital. And if and what I think is that in the 2025 figures that I have for the budget, it will be around two, two point one something like that. But I don’t know if finally we will arrive in 02/2002 just because of the growth of security because I think that they even can grow more than what we have in the budget. I think that they are going to do an amazing year this 2025. So but yes, for your calculations, yes, I don’t know, put yes like 02/2000, something like that, between 02/2000 and 02/2002.
Alvaro Bernal, Analyst, Alantra: Okay, understood. Thank you very much.
Conference Operator: Thank you. I’m not sure if you’re on mute. Please go ahead if you would like to close the call.
Maite Rodriguez, CFO, Prosegur: Thank you very much for attending this presentation. If you need further information, please contact our Investor Relations department, who is open to help you at any time. Have a nice day.
Conference Operator: Thank you. This concludes today’s conference. Thank you for participating and you may now disconnect.
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