Good day and thank you for standing by. Welcome to the Prosegur Cash Full Year 2023 results presentation. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To whisper your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Miguel Bandrés, head of IR. Please go ahead.
Good afternoon to everyone, and thank you for joining today's call. I would like to welcome you to our 2023 Q4 results review that will be led by our CEO, José Antonio Lasanta, Javier Hergueta, our CFO, and myself. The presentation will last around 30 minutes, in which we'll review the main events that have taken place in the quarter and in the year, as well as the drivers behind our performance. We'll as well review our regional performance, our key financials, and we'll update on our ESG strategy. After, we'll open a Q&A session to address all the points you might have. Should we not get to respond to everything today, we'll, of course, answer those remaining on an individual basis.
As said, I want to indeed thank you all for your attendance and remind you that this presentation has been prerecorded and is available via webcast on our corporate webpage that you can find at www.prosegurcash.com. Now, before turning to José Antonio, let me highlight some news regarding cash that have lately appeared in the media. They range from the thriving cash usage in LATAM's recovery in Britain to Digital Euro, or the risks in rails, by a recent major breakdown in Spain's main payment platform. In the first piece of news, we can read from several sources, such as EL PAÍS or Cinco Días, about a major disruption that took place in Spain's main payment platform.
It recently collapsed in several occasions, and those breakdowns impacted social and economic activities, such as the ability to conduct payment transactions at point of sale. It stopped e-commerce, or it brought down Bizum, the popular peer-to-peer transfer system. This event, which is not the first one, neither in Spain nor in other countries, brings in the limelight the relevance of cash as the sole completely resilient payment method and what it offers to society. It underlines that for the economy to run safely, it needs a healthy and efficient cash infrastructure, since all other payment methods are frequently and constantly attacked and often disrupted, with clear negative effects to society.
In the second news, we can read on a Bank of Spain analysis shared in Antena 3's news that underlines that cash has been the most used payment method in 2023, increasing its share and being, for seven out of every 10 Spaniards, the essential payment method that will continue to be such into the future. Thirdly, we can read from El Economista on a report issued by the European Central Bank on the Digital Euro, where it recommends a limit per user of EUR 3,000-EUR 4,000. Here, the relevant point is not the amount it should or not be limited to, but the fact that it's a worry and a concern that if not properly designed and implemented, it may have negative effects on both the financial system and for monetary policy in the region.
Doubts along these and other lines are conditioning its development of form and subsequent approval. Next, and switching geographies, we can read in Euromonitor that despite the arrival of a growing number of alternative payment methods in the Latin American region, cash continues to be the favorite means of payment for consumers in the region. This once again highlights the fact that cash can and does live without payment methods in a complementary manner, while there's a growing amount of competition among digital means. Lastly, we can read in the BRC that the British Retail Consortium shares that for the first time in 10 years, cash payments have increased due to its relevant unique characteristics, such as the ability to permit consumers to control their spending, as well as because of the natural trend of cash returning in a post-pandemic environment.
I think this piece of news is particularly relevant when considering Britain is a region where cash has been particularly attacked. Even in those circumstances, it shows its resilience and the support of the population that see in it attributes that other payment methods cannot offer. After this brief news update, I will share today's agenda. First, José Antonio will review the highlights for the period. I'll ask to review key aspects per region. Then Javier will share the main financials for the year, after which we'll do an update on our ESG strategy. And lastly, José Antonio will review the key takeaways before opening the Q&A session. Without further delay, I turn to José Antonio so he can share with us this year's highlights.
Thank you, Miguel. Good afternoon to everyone, and thank you for attending. It is a pleasure for me to share with everyone the overview of what has been a very special year for our company, despite the fact of foreign exchange having taken a relevant impact on our numbers, an impact that is fundamentally accounting-driven due to hyperinflationary principles. That is non-cash and of a very temporary nature.
We can see, as we will share together throughout the presentation, a strong behavior of our underlying business in both organic growth and margins, the continued success of our transformation strategy into new products that continues to take a higher and higher stake in our overall sales, a yearly solid cash flow of EUR 120 million in line with 2022, when you consider the one-off impact of the regulatory changes with an effect of EUR 15 million throughout the year, together with the EUR 20 million incremental CapEx in new products, to strengthen our transformation strategy while we continue to finance organic growth. And the two days, collection days that we have reduced, and the impact has been of around EUR 10 million. Going a bit more specific on key highlights, our sales remain flat because of the effect of foreign exchange and hyperinflationary accounting.
Now, once that is factored in and taken into account its temporary nature, I want to stress the strength of our business and the trust of our customers, resulting in double-digit organic growth in all our regions, both in the year and in the standalone quarter. Second, regarding our margins, when we compare versus last year, excluding hyperinflationary accounting and the ChangeGroup business, for which we consolidated only the best seasonal part of the year 2022, our margins have improved by over 60 basis points thanks to the positive contribution of both commercial and efficiency measures across all geographies, on top of a solid performance of new products. Along the margin line, we must underscore the relevant improvement we continue to see in Europe, where its performance has been the best since 2019, almost doubling last year's in relative terms.
In the year, new products have reached 30.4% of total sales, and in the fourth quarter standalone, we have attained 33.5% of total sales. That is over one-third of every euro we sell comes from new products. Our main solutions, Cash Today, Corban, Foreign Exchange, all continue to grow at solid double-digit rates, showing the acceptance by our customers. Looking at free cash flow, we reached EUR 120 million in 2023, with the particular aspects already mentioned before having a cumulative net impact of around EUR -25 million. As a proof of our cash generation ability, the company will propose to increase its shareholder retribution by over 20% through a raise in our dividend to EUR 60 million, in line with our commitment to shareholder return.
We have analyzed current and prospective cash flows, and we are confident they will permit a sustained dividend growing pattern in the coming years. And of course, our sustained commitment to ESG in different fronts. I will share it in depth later. I hand over to Javier so he can share the key financials for the period.
Thank you very much, José Antonio. If we look at the sales figure, we've reached EUR 1,861 million in 2023, which is a slight decrease of 0.6% versus the prior year. This figure, as José Antonio has rightly pointed out earlier, as the rest of the P&L, is very strongly affected by the impact of hyperinflationary accounting. As you well know, hyperinflationary accounting implies translating local currency sales into euros at the exchange rate of the last day of the period. In this context, the peso more than halved its value after the 55% devaluation that took place in Argentina in late December, affecting all sales generated throughout the year in the country. When netting off Argentina, we still see the business growing at a solid organic level rate, M&A contributing positively to growth, and the rest of currencies having a negative, albeit minor, impact.
If we look at the EBITDA level, we have reached EUR 326 million, which in relative terms account for 17.5% of sales, while EBITA reached EUR 220 million, representing 11.8% of sales. This implies a reduction of EUR 40 million versus last year and a loss of 210 basis points in relative terms. It is very important, however, to underline, as José Antonio mentioned earlier on, that the margin improvement, excluding both hyperinflationary accounting effects and the impact of consolidating the ChangeGroup business quite seasonally in nature, would have been an increase of 60 basis points year on year. This gives a very clear idea of both the good evolution of our sales and the contribution of our new products, together with the progress of our efficiency measures. EBITDA totals EUR 194 million, a 17.8% decrease over 2023, and implying a relative 10.4% of sales.
Financial expenses have reduced to only EUR 5 million in this last quarter, totaling EUR 76 million for the full year, which is an increase of EUR 25 million compared to last year due to the hyperinflationary accounting impact. Taxes amount to EUR 55 million, some EUR 35 million less than last year on account of a lower earnings before taxes for the above-mentioned reasons, and as well a significant improvement of 290 basis points versus a year ago on the tax rate, down to 46.6% of sales. Finally, net profit reached EUR 63 million, decreasing 33.3% over 2022 and representing 3.4% of sales.
To finalize this part, I would like to highlight the fact that the P&L is highly impacted by the timing of the devaluation in Argentina in mid-December, which, due to the application of the hyperinflationary accounting principles non-cash in nature, made the full year be restated at the new devaluated exchange rate with almost no time for inflation to catch up. We expect a strong 2024 based on a solid underlying performance of our business and a reversal of the devaluation effect we suffered in Q4 2024, with macro analysts forecasting inflation in the year to be above devaluation. In the following page, we can see the evolution of our cash flow statement. Cash flow has always been, and still, of course, is, of a paramount priority for us.
Starting from an EBITDA that we've already reviewed of EUR 326 million, we have a positive impact in our provisions and others that account for EUR 23 million, that is, EUR 36 million improvement over last year, mainly due to adjusting the higher impact of hyperinflation in EBITDA. From there, we can see that there's a significant reduction in the taxes paid from EUR 91 million in 2022 to EUR 66 million in this year, 2023, explained by the strong fall in due taxes mentioned in the P&L review. As well, there is a relevant increase in CapEx of EUR 29 million versus 2022, up to EUR 106 million, mainly driven by the growth of Cash Today and the expansion of Foreign Exchange business.
Working capital accounts for a EUR 58 million investment to finance and organic growth of 50.8%, with an improvement of two days in the average collection period, which results in a free cash flow of EUR 120 million. This result of EUR 120 million free cash flow is particularly positive, as José Antonio noted earlier, if we take into account the following aspects that, as said, make it be much in line with last year's figure when factored in. First, the EUR 15 million related to regulatory changes in Latin America. Second, the EUR 20 million increase in CapEx due to the growth in our new products, Cash Today solutions, Foreign Exchange business, that will bring strong sustainable growth into the future, as we will later see when we share our Cash Today rationale and model.
And all of this while financing strong organic growth in all of our geographies and at the same time reducing our DSOs by two days. Looking at our net debt, we see this has increased due mainly to non-recurring effects. First, the change of consolidation method in Australia, which explains the variation year-on-year in the others caption in the cash flow. It is worth mentioning that from 2023 onwards, this line should not present significant seasonal impacts anymore, therefore facilitating the reading of our cash flows going forward. Second, a strong increase in foreign exchange impact coming from both the devaluation impact in the net financial positions in local currencies and the increase in the repatriation costs from affiliates. And thirdly, as well, because of an increase in EUR 23 million of deferred M&A-related payments due to the overperformance of the underlying acquired assets versus the initial plans.
When looking at our leverage ratio, this is in our comfort range of 2.5 x despite the temporary reduction in the EBITDA due to hyperinflationary accounting, and that should promptly revert to the levels seen in previous quarters. All in all, we are confident that our cash flow generation ability enables us to increase shareholder remuneration, taking the proposed dividend to be approved by the shareholders' meeting up to EUR 60 million. With this, I will hand over to José Antonio.
Moving onto page 6, I am very pleased to share how consistent and successful our transformation strategy continues to unfold. Sales of new products in the year 2023 have reached EUR 566 million, which implies an EUR 86 million or 18% improvement over an already very strong 2022. When we look at these sales in relative terms, we see that they total 30.4% of total sales as a result of our transformation initiative, which continues to gain strong acceptance and support by our customers, both by evolving the existing ones as well as by capturing new customers. This penetration implies an improvement over last year of 480 basis points. If we look at the quarter on a standalone basis, then we'll see that the penetration for the last three months of the year reached 33.5%, which is the best quarter we have ever achieved.
Our main new solutions, being Cash Today, Corban, Foreign Exchange, have all performed at very solid double-digit growth levels. It is as well important to underline that all regions have contributed strongly to such growth. I would like now to provide you with further visibility of our Cash Today solutions, which we think are a very important innovation for our industry and for our business model. The solution basically consists of a safe device into which our retailer customer can introduce the bills collected from the end customer, transferring the physical responsibility to us and reducing his or her risk. Once the bill is verified to be fit, it is accepted and credited to the customer's bank account, improving working capital.
This way, the customer frees himself of time to manage and carry the money and has full control and traceability over his collections, with a lower need of traditional CIT stops, partially substituting our core business. As you can see, the advantages for the customer are very clear and relevant. For us, it enlarges our addressable market since its added value features attract new customers that were not traditional CIT users. It increases the efficiency of our operations by reducing the number of stops and smoothing our operating pattern that translates into additional efficiencies. And finally, it reinforces our customer loyalty since the service is provided on a multi-year basis, which also entails a more predictable revenue stream. The acceptance of this solution by the market has been very positive, and to prove it, we've been growing at an average of 32% year-on-year for the last eight years.
Even in 2023, over an already very large install base, we have grown at a very healthy 27%, installing the highest ever number of new devices. Key figures that I believe are relevant for our discussion today are that these solutions account for well over 10% of our total revenue, generate an EBITDA margin of 18%-20% for the most popular models, so all the investment needed has typically a payback around four years, with an internal rate of return in the region of 20%. We are confident that this solution that automates our core business is a key pillar from which to keep growing sustainable and profitably. I now turn to Miguel so he can review our regional dynamics.
Thank you, José Antonio. Turning first to Latin America, our main region accounting for 60% of total sales, we can observe how revenue reached EUR 1,125 million, a 9% decrease over 2022 that, despite a strong organic growth of 70.2%, has the already commented strong negative currency effect of 79.4%. Important to underline that when netting off the effect of Argentina, organic growth remained strong. New products in the region reached EUR 353 million despite the currency impact and now accounts for 31.4% of total sales. Once again, important to underline that penetration has improved and reached 36.5% of total sales in the last quarter of the year.
EBITDA reached EUR 187 million, which is 16.6% of total sales, heavily impacted by the temporary hyperinflationary accounting effect we've already highlighted, which has a non-cash nature and also suffering from a negative one-off impact due to a non-performing acquisition in Brazil belonging to our Horizon 3 initiatives. Regarding Europe, we can see that the region has performed very solidly in the year. Total sales reached EUR 613 million, implying a 23% improvement versus the prior year on the back of a very solid organic growth of 11.8% as well as an almost equally important contribution of inorganic growth of 11.3%, fundamentally due to the solid performance of Foreign Exchange business. Organic growth has accelerated in the fourth quarter standalone to 13.6%. Organic growth only proves, once again, the strength of our core business together with the trust new products have among our customers.
If we see the evolution of our transformation strategy, this is even more impressive. New products have grown by 75% to EUR 185 million and now account for 30.2% of total sales. At the margin level, EBITDA for the year reached EUR 33 million, more than doubling the amount in 2022. In relative terms, it represents a 5.4% of total sales, with an improvement of 240 basis points, being the best performance by all measures we've had since 2019, helped by the contribution of Foreign Exchange business and the improvement in the performance of the rest of business lines in the region. And thirdly, turning to Asia-Pacific, we can see how total sales reached EUR 124 million in 2023. This figure is propelled by a very solid 17% organic growth.
However, inorganic growth takes a toll of 21.3% due to the changing consolidation method for Australian business, which from September 1st is accounted for on the equity method. Lastly, we can see a - 5.7% effect due to currency devaluation. Turning to new products, they've reached EUR 28 million, representing 23% of total sales, a 110 basis point improvement versus 2022. Its absolute figure, decline of EUR 2 million, is as well affected by the Australian change in accounting method. And at margin levels, we've almost reached the breakeven in the year despite the negative contribution of Australia until September, reducing the losses year-on-year by EUR 7 million that reflects the positive evolution of margins month after month.
It's worth mentioning that after having closed the merge at the end of Q3, we are in the midst of the restructuring effort that is going according to plan and should be finalized this 2024. With this, I finalize our regional review, and I hand over to José Antonio. Thank you.
Thank you, Miguel. Now I would like to share with you the efforts on the ESG front, which are particularly relevant to us. First, on the environmental side, I want to underline the effort we have done in reducing emissions. We have developed 23 energy efficiency projects in eight countries that have enabled us to decrease our electricity consumption by almost 500 MW. We have different initiatives underway regarding our armored fleet, enabling our trucks to be safer and lighter, all resulting in a 2% reduction of used fuel. And in an effort to drive plastic reduction, we are proud to share that close to 80% of the sealed bags we use in Europe are recycled. All of the above are key examples of our initiatives to fulfill our ESG commitment while providing value to the shareholder.
Regarding social, we have put a special effort on our third global driving security campaign, in which close to 4,000 employees from multiple countries have participated with these initiatives. With these initiatives, we foster a safer environment for our team and for society, and we have reduced our road accidents in more than 50%. We have as well subscribed to the Women's Empowerment Principles and the Diversity Charter. We are convinced that by promoting diversity, we enrich our company and enable to promote society. We are very proud to share our recognition along these lines by the Financial Times. Relating to governance, besides bringing new and more robust policies to our corporate governance, we have implemented a sole tool at a global level to manage all anti-money laundering prevention systems.
We are sure that this will enable us to be a more solid and reliable company in the governance front that will help strengthen our sustainability. All the above-mentioned initiatives added to the many previously adopted result in a very fluid relationship with proxy advisors that accordingly recognize our company. Lastly, I'd like to conclude with a quick review of the main aspects of this year we have closed. First, as said, we have to underline and understand our financials reflect the impact of hyperinflationary accounting, which takes a very strong currency toll, this effect being absolutely temporary and non-cash. Despite sales having reduced by 0.6% in the year, we see that our sales organically have grown with a strong contribution of price and volume and that all our geographies have had a very healthy growth.
This shows the consistent trust that customers place in our services as well as the health of cash as a means of payment. From a margin standpoint, something similar happens of relative EBITDA. Margin reaches 11.8%, again affected by currency evolution and especially the hyperinflationary accounting derived from it. However, if we exclude this effect and the consolidation of the ChangeGroup business from our figures, we observe a 60 basis point margin expansion reflecting the strong performance of the business across all geographies, both at the commercial and the operational levels, as well as a solid delivery of new products. Transformation continues at a very strong pace. This last quarter, over one-third of new sales came from new products, and the key solutions continue to grow strongly.
We have seen the positive dynamics of our Cash Today solution that make us very sure that we have been and are in the right track from a customer satisfaction solution and from our shareholders' financial perspective. Cash flow has reached EUR 120 million in line with 2022 when considering one-off effects of EUR 15 million and new products incremental CapEx of EUR 20 million. Together with our relentless commitment assured to ESG, we want to underline how important shareholder retribution is for us. Hence, the board of directors is proposing to increase dividends for this year to up to EUR 60 million. What is more, when looking into our future cash flow generation ability, we are assured we'll be able to sustain a growth trend in this line in the coming years.
We are confident that as financials swiftly recover and our strategy pays back in terms of margin transformation together with a growing shareholder compensation, we will crystallize our hidden value to shareholders. Thank you all for your attention, and we can now open the Q&A session.
Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To whisper your question, please press star one and one again. Once again, please press star one and one on your telephone keypad if you wish to ask a question. Please press star one and one for questions. There are no questions at this time. I will now like to turn the conference back to José Antonio Lasanta for oh, sorry. We have one question. One moment, please. The question is from the line of Miguel González Toquero from JB Capital. Please go ahead.
Yes. Good morning. Thank you for taking my questions. I got two, if I may. The first one, well, the P&L in the quarter was obviously affected by your hyperinflationary accounting, but the free cash flow generation was strong. So I wonder if you could give us any indication of how you see free cash flow this year. So I think you said that you expect to be this EUR 120 million free cash flow. Is that correct? And secondly, you mentioned that market estimates for Argentina pointed to an inflation higher than depreciation. So based on this, what's your view on this market? I mean, only because of peso depreciation, I guess, you almost lost half of the sales in euro terms there. So you feel you can recover most of it this year? Thank you.
Thank you, Miguel. Regarding the first question about Argentina or the question about Argentina, as you said, we think it's going to be temporary and it's going to be it has had an impact of non-cash in our accounting. We are seeing already the recovery on first month of the year. Our aim for 2024 will be trying to beat a consensus for the company. Regarding cash flow, we expect 2024 to be a stronger year than 2023. We aim to generate more cash and we'll dedicate it to, as we said, to increase our shareholders' remuneration that we are planning to increase 20% and also to deleverage mostly on the banking debt plus deferred payments. That part of the debt is going to be deleveraged and obviously, the ratio of debt will come down. So that's our plan.
As I said, the first year has been more or less in line of what we expected. We believe that inflation is going to be higher than devaluation this year. That's what the experts say. We are starting to see some of the recovery why? Because we had the devaluation on the last 15 days of the month of December, and the price increases are starting to get passed to our clients. We transfer to our clients on January and February. We are already seeing part of this inflation taking forward to this part of the year. If you look at the exchange rate, it has been maintained fast in the last few weeks. It's been quite promising for us.
Understood. Thank you.
Thank you. Once again, if you wish to ask a question, please press star one and one on your telephone keypad. Please slowly press star one and one . We will now take the next question. The next question comes in the line of Jaume Rey Miró from GVC Gaesco. Please go ahead.
Hi. Good morning. Thank you for taking my questions. I have also two questions regarding profitability in terms of EBITDA margins. Well, the first is in Europe. Despite the improved profitability this year, we are still far away from it used to be before the pandemic, which was at high single- digits if I remember well. I would ask you if you have some internal targets, I don't know, to achieve this profitability again and to understand also why, well, the profitability is that far away from it used to be. Then the second is also from EBITDA margin, but in the Asia-Pacific region. I'm wondering what should have been the EBITDA margin this year without the consolidation of Australia if it's possible. Thank you so much.
Okay. Thank you, Jaume. Regarding the two questions, the first one on Europe. On the second half of the year, we have shown a 7% EBITDA margin, and we are still increasing it, and we are going to increase it. We have higher margin targets for next year. And as you said, I think we are going to be on the high single- digit, if not more. Regarding Asia, if you take out the effect of Australia, the rest of the countries are mostly on. The rest of the group.
Okay. Thank you.
In that region, the growth is coming from the growth of sales.
Okay. Understood. Thank you.
Thank you. Once again, if you wish to ask a question, please slowly press star one and one on your telephone. That's star one and one if you wish to ask a question. We will now take the next question from the line of Manuel Lorente Ortega from Santander. Please go ahead.
Hi. Good afternoon. My first question is on Argentina. Sorry if I mixed up some numbers, but I have the impression that you stated a one-off effort of EUR 15 million, 15. Is that correct? Because when I double-checked that number with your free cash flow statement, there is somehow a provision of a delta in provisions of roughly EUR 40 million, 40, quarter-on-quarter. So I was wondering whether you can give us some more details of the actual technical impact on P&L of the hyperinflation or of the adoption of hyperinflation standards in Argentina. Thank you. At sales and EBITDA level, if it's possible.
Thank you. I think there was some misunderstanding. The EUR 15 million effect on cash flow is really an effect on change on some regulatory items in Argentina and Brazil. There was some social security payments, anticipation of payments that was regulated by authorities. And the second one was the food tickets, food tickets also anticipating in Brazil. So there is no here, you cannot see the effect of the hyperinflationary accounting. The effect on our accounts, as we said, we are not disclosing it. We said it was again, it is temporary, and this year, we shouldn't have any effect. But sorry, if there is an effect, it could be very marginal. And the effect is a non-cash effect. So there shouldn't be any effect on the cash flow of the company.
As we said, the first month of the year has been quite positive because we have a devaluation, but at the same time, there was high inflation in December, and we were able to pass through to our clients during the month of January. So we are starting to catch up. We catch up in January, and February, there has been some more price increases, and I think the first tranche of the price increases will finish in March.
Okay. And then my second question is on the organic trends at the European level, whether you can ideally split it between price and volume and even more ideally split it between price and volume ex-contribution from new products. I was wondering whether I could have some sense regarding the underlying trends of the pure cash in transit business ex-new developments? Sorry.
On the traditional cash, volumes have been positive. More or less, if you put everything together, one-third is volume and two-thirds is price. More or less of the growth.
I see. Great. Thank you.
Thank you. There are no further questions at this time. I would like to hand back over to José Antonio Lasanta for closing remarks.
Thank you very much for your time and questions. As we said, reiterate our commitment to shareholders and to deliver next year results pretty much beating consensus. Thank you very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.