Ladies and gentlemen, thank you for standing by, and welcome to the Prosecure Cash Full Year twenty nineteen Results Presentation. At this time, all participants are in a listen only mode. There will be a prerecorded presentation followed by a live question and answer session today. I must also advise you the call is being recorded today, Friday, 02/28/2020. On the call with us today, we have Jose Antonio La Santa, CEO Javier Higueta, CFO and Pablo Dalla Morena, Head of Investor Relations.
Please go ahead.
Thank you. Good morning to everyone, and welcome to our 2019 full year results review. This presentation will be led by Jose Antonio Bazanta, CEO of Prosper Cash Javier Regueta, CFO and myself. We estimate it will last around half an hour. And during this time, we will try to address the most significant events that took place during the reference period.
At the end of the call, we will open the floor for a Q and A session, where we will try to answer any remaining doubts with as much detail as possible. I wish to thank you all for your attendance and remind you that this presentation is also available via webcast on our corporate webpage. Now before turning the call over to Jose Antonio, let me comment some interesting news regarding the use of cash. First, let's analyze how the lack of options in terms of transaction methods might undermine democracy. Alex Gladstein, Chief Strategy Officers at the Human Rights Foundation states that a healthy democracy needs financial privacy and that the current trend of tracking all of our behaviors and all of our movements can damage democracy in a further way.
In this sense, if all of our data are collected and used to assign a rating to each human being, this could determine, for example, our financial freedom, the loans we can obtain, the Internet we can get, or even the schools where our children can attend. Second, let us mention that the ECB supported the draft law proposed by the Swedish government, which aims to warranty that the largest banks provide a minimum level of cash services throughout the country. The ECB noted that the ability to pay in cash remains particularly important for certain groups in society that for various reasons prefer to use cash rather than other means of payment or who are unable to use digital technology. Additionally, cash payments facilitate the inclusion of the entire population in the economy by allowing it to settle any kind of financial transaction in this way. Third, let me make some comments regarding the evolution of the credit card fraud in the e commerce, which is growing at the same rate as the number of transactions.
According to the most recent studies, this short of fraud grew by 30% during the last year in Spain, while the counterfeit of notes evolved in the opposite direction and decreased. In this sense, unless the new means of payments significantly improve their security in the future, the use of cash to perform payments will remain much safer. Finally, a follow-up on how the different cities are approaching the cashless debate. After Philadelphia, San Francisco and New Jersey, New York has also decided to apply its business to receive cash payments. And again, this has acknowledged that as a mean of payment, cash is universal and a very powerful tool to guarantee financial inclusion.
Moving forward, today's agenda is as follows: We will start discussing the main highlights of the period. Then we will review the performance of our different regions. And finally, we will summarize our financials and make some closing remarks before moving to the Q and A session. I will now turn the call over to Jose Antonio, who will cover the most relevant topics today.
Thank you, Pablo, and good afternoon to everyone. Today, we are presenting the 2019 full year results, a period marked by the ongoing depreciation of the emerging market currencies and the second year of application of the hyperinflationary accounting in Argentina the resume of the path of growth of our sales and improvement in our operating margins and the continued execution of both our consolidation and transformation strategies and finally, our financial discipline, which allow us to keep deleveraging and to get our investment grade rating reaffirmed. Both our sales and our operating margins have continued expanding as we anticipated and are showing a recovery in euro terms on the back of a solid underlying operational performance. Our sales growth in local terms reached close 17% in 2019, thanks to the steady organic growth, which has accelerated versus last year and our M and A activity. Moreover, our operating margins improved close to 150 basis points in the case of both our consolidated EBITA and our consolidated EBIT.
This solid recovery is mainly explained by the positive contribution coming from most of our countries, our divestments in non performing operations and the synergies coming from our recent acquisitions. This M and A activity has helped our consolidation strategy to keep evolving in line with our expectations. We have closed one more deal during the fourth quarter, reaching a total of six transactions during the year and investing €85,000,000 in aggregate. Moving now to our new products strategy, let me highlight that the progression continued in the last quarter. As a result, our new services represented 16.2% of our sales at the end of the year, showing a remarkable evolution when compared with the 11.8% posted a year ago.
New solutions grew slightly above the 40% mark in euro terms on the back of our smart cash solutions, AVOs and ATMs. Finally, I would like to point out that our free cash flow generation reached EUR $213,000,000 during the period. Our financial discipline allow us to redeploy funds to keep growing the business organically and through the acquisition of companies to reduce our leverage ratio down to 1.6x, including IAS 16 related debt and M and A deferred payments and to maintain our credit rating, which remains at BBB with a stable outlook. Let me now spend some minutes discussing the evolution of our sales and margins and our performance in terms of M and A and new products development. In the next slide, we can see two different charts, showing on a cumulative basis the evolution of our local growth and our operating margins.
The chart at the top reveals that our business continues to grow in local currency terms and that this trend has been accelerating since 2018. This is the result of an accelerated organic growth higher than initially expected in many countries on our M and A investments despite of our divestment in France in the later part of the year. The chart at the bottom highlights the sequential improvement in our operation margins in euro terms along the year. This margin uplift is the consequence of the positive underlying evolution of our operations, the synergies resulting from our M and A activities and the strategic divestments executed during the previous quarters. During the quarter, we have completed one additional acquisition in Europe, reinforcing our presence in the Spanish AVOs ecosystem.
This means that during the whole year 2019, we have closed six deals for an accumulated M and A investment close to EUR 85,000,000, which is within the guidance provided to the market. We believe these transactions fit very well in our current footprint, reinforcing our leadership in our existing geographies and laying the foundations to capture future growth in new specific business and regions. Complementary to our M and A activity, we implemented portfolio management initiatives that materialized in our divestments in South Africa and France, as already commented in previous conference calls. To conclude, I would like to stress that M and A remains at the forefront of our growth strategy. We have more opportunities in the pipeline, some of which have already been successfully closed at the beginning of twenty twenty, which led us to think that this year we will be on the higher range of our target.
Additionally, at the beginning of this year, we have completed our portfolio management plan with the divestment of our Mexican operations. To conclude this part of the presentation, let me talk about transformation. As of December 2019, the sales of our new products ended in EUR $292,000,000, coming from EUR $2.00 5,000,000 a year ago. This figure represents an increase of 42% in euro terms over the same period in 2018, variation that is much higher in constant currency. In terms of sales penetration, the new solutions exceeded the 16% mark at the end of the period, a very successful increase versus the figures reported a year ago.
And this is the result of the very good performance of our smart cars, AVOs and ATM solutions, which kept growing organically and inorganically quite strongly and above our expectations. As we are excited with existing opportunities in this area, we continue strengthening our teams and accelerating our investments in platforms to capture capture the potential growth related to these new businesses. And this is something that we will keep doing as long as the return on the investment remains as attractive as they currently are. Now I will give the word to Pablo, who will walk you through the different dynamics of our regions.
Thank you, Jose Antonio. In Latin America, our sales reached $1,185,000,000 euros 3.2% higher than the figures reported a year ago. Our local growth close to 23% more than offset the combined negative effect coming from the strong currency depreciation against the euro and the hyperinflationary accounting. Organic growth continued with its sequential acceleration reaching 16.3%. This improvement resulted from the general positive contribution of all our countries in the region and the higher than initially expected volumes in some of our countries that were temporary in nature.
Inorganic contribution, resulting from the acquisitions we have made in both traditional business and new products was somewhat above 6%. Integrations of the acquired companies evolved in line with our expectations, although we believe there is still room to extract more synergies. Moving to the new products, I would like to stress that our sales increased an impressive 52% up to €192,000,000 As a percentage of sales, new solutions represented 16.2% of our total Latin American sales catching up with the average of the group. Smart cash solutions, AVOS and ATMs remained the main contributors of this improvement. Operating margins grew more than 11% in absolute terms and expanded in relative terms due to the positive underlying evolution of our operations and the synergies resulting from our M and A.
As a result, our consolidated EBITA and EBIT ended the period in $390,000,000 and €275,000,000 while in relative terms improved to 24.523.2% respectively. Moving to Europe. Our sales grew from €491,000,000 to $5.00 €9,000,000 an increase of 3.6%. Our organic growth in the region remains close to the 5% mark. This figure, which is quite robust, is a bit lower than the one shown in the first nine months of the year as it includes the complete deconsolidation of France, which was growing above the region average up to the divestment.
M and A contribution was minus 1.2%, also reflecting the impact of our divestment in France at the July. Our new product sales ended in €94,000,000 representing 18.5% of our European sales, an increase of more than three seventy basis points versus a year ago. Our growth in the region continues to be driven by EVOS, Smartcast Solutions and ATMs. Also our operating margins slightly improved both in absolute and relative terms, thanks to the divestment of our French business. We expect this positive margin trend will continue in 2020.
To continue the regional summary, let me spend some minutes reviewing our performance in AOI Region. Our sales ended in €105,000,000 an increase of 13% versus a year ago. The positive contribution from The Philippines and Indonesia more than offset the negative ForEx impact and the evolution of Australia, where the situation remains in line with previous quarters. New products contribution reached 5.4%, in line with our strategy to promote these kind of solutions in the region. Finally, our operating margins remain subdued because of Australia and the integration cost in core in Indonesia.
This is all regarding the performance of our different regions. I will now hand you over to Javier, who will summarize the financials.
Thank you, Pablo. Starting with the top line, total sales reached EUR $1,799,000,000, an increase close to 4% versus 2018. This is the result of a total negative impact of minus 12.8% coming from the combination of currency depreciation and the effect of applying IAS 29 and 2021 that was more than offset by the contribution of our local growth of 16.7%. Operating margins also improved in absolute and relative terms, increasing more than 13% and close to 150 basis points. Consequently, our EBITA margin reached three twenty three million euros representing 18% over sales, while our EBIT margin ended in $3.00 €5,000,000 16.9% over our reported revenues.
This margin recovery versus last year is explained by a combination of factors such as the positive contribution coming from most of our operations that are growing and improving their performance as a result of the operating leverage and various efficiency programs designed to streamline the operations, the synergies captured from our acquisitions and our divestments in South Africa and France. Below the EBIT line, our financial results posted net expenses of EUR 45,000,000 and were affected by some non cash items. Higher interest expenses coming from deferred payments and the applications of IFRS 16 together with costs related to FX explained the difference against last year. Our tax rate for the period close to 35% was pretty much in line with the guidance provided along the year. As a result, our net consolidated profit ended the period in EUR 169,000,000, which represents margin close to the EUR 9.5 mark.
Regarding cash flow, I would like to underline that at the December, our free cash flow reached EUR $213,000,000 and that our cash conversion ratio remained at 74% better than in 2018. Our CapEx amounted to EUR 104,000,000, fueled by our investments in smart cash solutions that continue gaining weight within our CapEx mix. Client CapEx grew by 41%, representing the same percent in our mix of the 2019. Working capital ended the period consuming €34,000,000 of cash due to the strong organic growth in local currency terms we have experienced in our geographies. Nevertheless, an important effort was done in the last quarter as figure shows.
This cash outflow has been offset by the improvement in the provisions and other items captured that resulted from the sliding of some payments to the 2020. Finally, I would like to mention that during the quarter, we paid the first tranche of our newly approved dividend, which amounted to EUR 22,000,000, taking the total disbursement in the year to €110,000,000 Let me now make some comments regarding our total net debt, which on top of our net financial position includes not only the deferred payments coming from former acquisitions and the treasury stock, but also the IAS sixteen related debt. As of December 2019, our historical total net debt, excluding IAS sixteen related debt, amounted to EUR $548,000,000, pretty much in line with the one reported in December 2018. The lower net financial position versus last year was somewhat compensated by the higher amount of deferred payments resulting from the acquisitions executed during 2019. On top of that, this amount was increased by €105,000,000 reaching €654,000,000 due to IAS 16 implementation.
According to our financial discipline and conservative approach, and despite our financial covenants do not computed, we calculate our leverage ratio, including the IFRS 16 related debt. As a result, our total net debt to our last 12 EBITDA ratio reached 1.6 times, showing a deleverage when you compare against the figures reported in previous quarters and the 2018 pro form a. Before moving to the balance sheet, let me highlight that the maturity of our main debt facilities is concentrated in twenty twenty five and twenty twenty six, as you can see in the chart at the bottom of the slide. As we do not have any major refinancing needs before that time, we can fully concentrate on capturing the existing organic and inorganic opportunities while continue transforming our company. Our main balance sheet parameters have remained stable versus previous quarters, being the most noticeable topics, the increase of our tangible assets due to the application of IFRS 16 and our CapEx investments, the increase in our intangible assets due to our M and A investments and lastly, the increase in our financial liabilities resulting from the application of IFRS 16 and our inorganic growth efforts.
I will now turn it back over to Jose Antonio, who will make some closing remarks.
Thank you, Javier. Prosegur CAS has strong focus on ESG related topics as these factors are integrated into our company's business model. However, we have decided to refine and strengthen our commitment to all environmental, social and governance related issues. In this regard, I would like to comment the following. First, our aim to combat climate change by accounting for carbon dioxide emissions and setting control measures to optimize our carbon footprint.
In addition, we are introducing electric, hybrid and lighter vehicles in our fleet, which have fewer greenhouse gas emissions with an objective of reducing carbon emissions over sales. Second, our willingness to decrease our plastic consumption and recycle both plastics and oil from vehicles, targeting our circular economy objective. We are also pursuing to cut down our paper consumption for which we are investing in digital transformation projects to introduce electronic handhelds in all our operations. Third, the sponsorship of our new contract in Spain, guaranteeing that 100% of our electricity comes from renewable sources. We hope that this is the first of more contracts, not only in Spain, but in our geographies.
Fourth, we have signed a new equality and inclusion plan to reinforce our commitment to prevent discrimination and to avoid the gender gap. Finally, we have created a committee to improve health and safety with a clear target of achieving zero recurrences and a budget to deploy measures to reach this target. Before moving to the Q and A, I would like to review our performance in 2019. First, we declare our intention to grow organically at mid single digit in euro terms. As you have seen during the presentation, in 2019, our sales in euros grew close to 4%, thanks to the 16.7% local growth that more than offset the 12.8% negative impact coming from the currency depreciation.
Second, we targeted to maintain or slightly increase the profitability of our operating margins, an objective that has well exceeded in the year. As previously discussed, this margin recovery resulted from the positive underlying performance in most of our countries due to the operating leverage and targeted efficiency plans and the synergetic M and A activity. Third, we also said that we wanted to spend between EUR 50,000,000 and EUR 150,000,000 in acquisitions, something that we did as we deployed EUR 85,000,000 in six transactions. We have invested half of these resources in traditional opportunities to complement our current footprint and to place our company in an advantageous position to capture the bright prospects of the industry and the other half in new products, trying to accelerate the time to market of some of these new solutions. Fourth, we continue increasing the weight of our new products within our revenue mix.
In 2019, the sales of our new products represented an impressive 16.2% of our total sales, coming from an 11.8% a year ago. This represents a 42% increase in hard currency over our 2018 revenues. Fifth, financial discipline. In 2019, we have been able to reduce our leverage ratio to 1.6 times, well below our internal covenant of 2.5 times without slowing down our investments in client CapEx and additional M and A. We do have ample room to pursue our growth strategy, something that we will continue doing as long as the return of the investment makes it worth and does not jeopardize our financial soundness.
Finally, last December, our Board of Directors approved the distribution of an interim dividend of EUR 87,000,000. This amount represents a payout of 50 percent on the net result of the year 2018 and is aligned with the payout ratio established in our dividend policy. All in all, I believe this strong set of results prove one more time the resilience of our business model and allow us to face the future challenges with optimism. This is all on my side. Thank you all for the attention.
I will now be pleased to begin with the Q and A session.
Thank you very much. You. The first question today comes from the line of Juan Ross from Intermoney. Please go ahead.
Hello. Good morning. Thank you for taking my questions. Have a couple of quick ones. First of all, I don't know if you can guys update us on the FX clampdown in Argentina and how are you coping?
Are you still being able to retrieve the cash in any way and and get it to to the to the holdco in in Spain, or maybe you are thinking about, investing in real estate or I don't know. Whatever. And then well, the obvious I don't know if you guys are feeling any changes in your in your activity as a result of the of the coronavirus. Maybe you can provide some some insight if if you have any. Finally, I don't know if you can provide some some more granularity on on the 30,000,000 others that you have in your cash flow.
Are they earn outs, or or maybe there are some some other things? Thank you.
Okay. Thank you, Juan. Regarding the first question, the market is open right now, so we could send any potential dividend or payment of our management fees to the holding company as normally. Nevertheless, as you know, we've been quite proactive. We believe that we won't need to or we will not send any cash to the holding company in the next six months because of the profile of our cash flow in in the different countries.
So, that's about the first question. The second one about the coronavirus, we'll have a updated business continuity plan because of obvious reasons. And we don't see any drop of activity up to to this moment. And the third question about the 30,000,000 in the cash flow is a advanced payment of taxes, really.
Thank you.
Thank you very much. The next question today comes from the line of Matthijs Gergelat from Goldman Sachs. Please go ahead.
Yes, hello. Good morning. Quite a few questions for me, but okay, the most important ones. Firstly, on guidance. So you provided us some guidance for Europe on the margins.
Could you give us a little bit of guidance also for what you expect for Latin America from these fairly high levels? Second question is on your strong growth in, let's say, new products. I would like maybe some commentary there on the margins. I would expect like the, for example, outsourcing part to be below the group average margin, for example, but then you keep showing margin improvements. And also like in Latin America, you you keep growing in value added services, you know, new services and showing margin improvement.
I mean, frankly, it's quite surprising. If you can comment a little bit on what do you expect in terms of, say, margins from these new services relative to the rest of the business? Are they now in line, higher, lower? That would be helpful. Then thirdly, on M and A, you did comment on basically that the M and A pipeline is at the high end of the range of EUR 50,000,000 to 150,000,000.
Is that perhaps if you could comment part linked to no expectations on G4S? Or is this no top end of the M and A range independent of any developments with G4S? And just and two more, if I may, very quick ones on numbers. Is it right that Argentina will have a lower corporate tax rate in 2020, which maybe will impact you positively? And then lastly, financial result, 45,000,000, interest expense only EUR 10,000,000.
Could you just help us with the no major items for the for the difference? Thank you.
Thank you, Maria. The first one, as you know, we we don't normally give any guidance. I think that the we can take I think we are improving our margins on all countries because of the m and a and because of the important efficiency plans that we are launching in all countries, both in in both regions, in Europe and Latin America. I think that the profile of margins that we have this year is could be similar to the ones that we are gonna get this year. In Latin America and in Europe, we are gonna clearly improve it because we won't have the the drag of the French operations that we had for the first half of the year.
So a clear improvement of the European operations and we maintain the profile of the operations in Latin America, very much dependent on the Forex behavior. On the rest of the world or AOA operations, we also expect a clear improvement compared to this year because we are really getting results on our streaming efficiency plans that we are launching in Australia. Also, we will not have the startup costs that we had or incur in Indonesia. So clearly, we would improve our margins there as well. New products.
I think in new products, we also have maintained from the beginning that the margin of our new products is in line with the average of the group. So while it grows, it's clearly a little bit below the higher margin countries, but is much higher than in the rest of the country. So as we keep growing it, we will add a little bit of margin expansion to the whole of the business. The third question was about M and A. The M and A, we are going to be on the top of the range independently of the G4S transaction.
I think G4S is already closed with brings most of their operations, cash operations. And we have many other opportunities in in a clear road map that we have been designing for the last few months. So we really believe we are gonna be on the the top part of the range. If you ask me where are gonna be, I think there's not gonna be much more on bolt on acquisitions. The more during the the next few months.
Although they are the priority for us, I don't think we'll open new markets, And I think most of them will be in new products. And the fourth question was around the corporate tax in Argentina. There is a lot of discussions right now on what the government could be doing. I think the government is taking tough decisions in that other governments were were or have more problems to implement. So they are hard decisions that would be adjusting regarding depending on the results that they are getting.
One that is being debated is the an adjustment in the corporate tax. But we we personally, as a as a company, we don't see any change during this year, but anything could happen, really. And the fourth question, the last question, sorry, was, about the financial cost. I think on financial cost, I think the the important thing is half of it is noncash items. Half of it, they are Forex as we said, non cash items, Forex related, and there are some repatriation costs that maybe Javier would like to comment on.
Yes. Yes. Just to put some more color into that if you want. When you see the cash outflow of €10,000,000 that's basically related to the cash outflow for pure bank debt interest and when comparing it to the P and L where you see the €45,000,000 which is €40,000,000 difference versus last year, as Jose Antonio was saying, half of that comes from FX related topics, basically coming from the fact that we had a strong FX gain in 2018, which is much as more in 2019. So that makes the bulk of the difference on that front.
And the other 50% comes from higher M and A expenses being accrued by the deferred payments, the IFRS 16 financial cost due to the new accounting standard and then to a lesser extent, the monetary revaluation of the provisions in our balance sheet that makes the whole detail fit.
Okay. I think
here the important thing is to notice that 50% of it is noncancel items, and you can see it in the in the cash flow that has been quite solid on that. So there has been some of the accounting telling from from this hyperinflationary new accounting that we are using.
Thank you.
Thank you very much. The next question today comes from the line of Francisco Ruiz from Exane. Please go ahead.
Hi. Good morning, guys. I have three questions. The first one is if you could give us more detail of the other income that you have, this €90,000,000. I imagine that is something coming from from France and South Africa.
So could you give us the split by division in order to calculate a clean margin? Second one is a follow-up on M and A. After the deal with G4S, is there any interesting asset that g four s has kept and you could bid for for it? And third, it's I have heard I'm I'm currently enrolled that you live in Mexico. So can you give more detail there?
Thank you.
Okay. Thank you, Pablo. Regarding the three questions, the first one on other income, most of it comes from the divestment, as you were saying, of France and South Africa. Second one, talking about G4S. I think the G4S asset was a very good asset.
It was very well run, but had, in our view, a lot of integration cost. At a certain price level, it was, it seems to be difficult to to create value on it. The assets that GeForce is is keeping, they are more difficult to they are really difficult to create value on on those, but I think this is something that we need to assess as as they are as as as it is one of the most important assets that have been or are gonna be in the market for the in in this industry. So it's our obligation to look at them, very thoroughly with but with a a very, very focused on on the financial discipline, on the value creation. Okay?
And then on Mexico, yes, we have divested Mexico, and this is because we have a market share we had a market share of two to 3%, and we thought that it was gonna be very difficult for us, very capital intensive, and with a quite quite it had a lot of uncertainty in the value creation of that project because of the dynamics of the market, because there are two players that already have of around 9092% of the market. So we thought that it was better to a better use of our funds to focus on on other projects that we believe that we have a better return on on our capital. So I think that's that's about it. For the also, I think we have closed our the review of our portfolio. We will continue making some reviews from time to time, but I think that, for this phase, we have closed it as as we don't have any more assets with limited market shares.
Or, like in the case of South Africa, shareholding, which didn't allow us to really implement our model.
But, a couple of follow ups. Could you give us the breakdown of this 19 other income by division? I mean, how much is AOA and how much is Europe? And and a second follow-up on this in Mexico. Could you give us an idea of the economics of the disposal, I mean, the proceeds and how they're going to impact your revenues?
Okay. I think about on the 19,000,000, I think it's 5,000,000 in Europe and around 9 point something in AOI. And the rest is split because it's it's not about divestment. So the rest is split Okay. On on on different small things.
The the economics of of the divestitures of Mexico will be released on the on the first on the first on q one because we have one or two things that are in order to finalize the the the final price, we there is some adjustments to be done one month after closing.
And who is the who is the buyer?
The buyer is the a local company called GSI. The the it's a company that owns 60% of the market. Mhmm. Thank you.
The next question comes from the line of Steven Goulden from Deutsche Bank.
Just a couple for me. Just I know could you clarify your guidance around coronavirus? I thought you said earlier on that you really haven't seen much of an impact as yet. I just want to I just wanted to make sure that, that's what you'd said. And secondly, thinking about how if it did become a bigger problem for you in your core markets, how do you how would you expect corona to impact your business?
And around that, I'm thinking, for example, in security, you have to provide a certain level of coverage, but you might have a workforce that may be quarantined. Maybe there would be more of a reliance on overtime workers, obviously, being a relatively low margin business that puts that at risk. And similarly on the cash side, one would assume lower retail sales and therefore you could see volumes dropping off. Have you got any internal thoughts as to what this might mean for the business? And what you what levers you could pull to protect the business in the case of it becoming a pandemic?
And the last question for me is, I didn't quite catch what share you had in Mexico. If you could just clarify that, that would be very helpful. Thank you very much.
Okay. Thank you, Stephen. Starting by the last question, we had a two to 3% market share. So it was a very small operation for us. And we were presenting only four cities of Mexico.
So it was a very difficult to grow operation. We had to invest really in more than 30 or four new cities to be a significant player. So it demanded a significant amount of investment, and we thought it was better the use of funds, new projects that we have in in the new products. And going back to the coronavirus, we have our business continuity plan. We have several scenarios that our security people, internal security people, and risk department are are addressing.
We have, in terms of business continuity, what could be doing if it's only in the different scenarios. If it's a scenario of of low impact in our employees, what could be done with a medium scenario, and what could be done in a pandemic scenario, and you have different scenarios of business continuity. I don't know if it makes a lot of sense to to really give the the the numbers of the different scenarios that we are taking into account. But we have a good business continuity plan. We have not seen in the last few days any any not significantly, but any variation of volume in in cash usage.
You have to understand that we are mostly in Latin America where there's not been only but one case of coronavirus. In Europe, the mostly, the countries that have been mostly affected, are, Italy, we are not present. Also, Germany, we have good operations, and we are we are following closely day by day the operations. Until today, we have not seen any change in our in our operations, but we are following it very, very closely. I think that the more more time happens, the more time goes by, I think people are or countries are more, prepared about it, but we are we are following very close in Germany and and in Spain.
We have a full stock of of several measures being already, yes, stopped by the company. So I think I think we in the scenario one or two, we will be quite, safe if there is a big pandemic, because I think we'll have, everybody will have a lot of problems. And the economic slowdown that is expected, because of the coronavirus, we we haven't seen any, as as we said, so far. But in the future, we we don't know how how much is gonna be the the the impact, really. But, we really think that we have a a good understanding of our of the variation of our operations on
a daily basis.
Great. Thank you very much.
Thank you.
Thank you very much. The next question comes from Alvaro Lentz from Alantra. Please go ahead.
Hi. Thanks for taking my questions. I have a follow-up on Juan's question on cash repatriation from Argentina. I wanted to know if you could provide us some indication of what the exchange rate you are being able to exchange the cash for. So if we can have a reference whether you are able to exchange the cash flows at the official exchange rate or if we should look at any specific alternative market exchange rates.
Second, I wanted to know regarding the EBIT margin in Argentina. If I am not mistaken, second half EBIT margin has been higher already than the margin that you had in 2017 before the slump in Argentina. I wanted to know if there has been any specific one off impact in LATAM margin in during H two and if we should continue to see these high high margin levels going forward. And then on Europe, you are guiding for an improvement in margin in 2020. I wanted to know if this was excluding the capital gain from France or including the capital gain from the sale.
And lastly, if I may, regarding the G4S and Brinks deal Sorry. Yeah. The G4S and Brinks. If you see some implications for your day to day business in any of the countries where you operate, maybe the acquisition by Brinks of G4S could have some impact on the competitive landscape in any of the specific countries where you compete with both. And that's about it.
Thank you very much.
Okay. Thank you, Ella. As we said, the big repatriation that we did in the last quarter of last year was at a better exchange rate that we have we currently have. Also, we did a proactive policy of having some debt of in in Argentina. So we need to repay some some debt on a local basis.
So that's why I said that for the coming months, we won't be generating any cash in Argentina because we need to repay the local debt. So we have repatriated some of the funds of that this year we repatriated last year. Second, on the improvement of margins in Latin America sorry, in Argentina, I think there's been improvement in the margins of the whole of Latin America. I think we are seeing an acceleration of growth in Brazil. Peru, Colombia has been performing very well as well.
Paraguay, even Chile, despite of everything that is happening in the country, it's been posting very good results. So I think it's more of the whole region more than Argentina. If so, I would say that Argentina has been flat in relative terms. Europe, we will say that we are going to see important improvements in Europe. And I think we are gonna beat the the we are gonna beat, for sure, the the capital gains, one off that we had this year.
So I think that we are gonna see an improvement in Germany, and we are gonna see an improvement in Spain also be very much driven by new products. And the last one was about M and A. In M and A, mean, the operations that Brinks has acquired from G4S has no common so there is no overlap or or they are not in countries where we are present. So there should be no there should be no issue for us on on on the short term. In medium terms, as we said, we think it has a strong integration cost in terms of resources and time from the acquirer.
So, we believe that Brings will have to put a lot of attention on those markets where we are not present. So so I think that's the only thing the only thing that we we could see impacting our businesses in the in the short and medium term.
Okay. Thank you very much. That's very helpful.
Thank you very much. There are no further questions over the phone at this stage. Please continue.
Okay. Thank you. Jas' closing remark, this year has been an execution year, which we have taken radical measures in terms of divesting several businesses for different reasons and taking forward aggressive efficiency plans in several fronts. Second, I would like to stress our strong business model navigating in a turmoil environment, which has helped us to grow and improve substantially our margins. And also, we remain committed to our ACT strategy for agility, consolidation and transformation of the business that we designed in 2017.
We have been trying to accomplish our targets that we set at that time and transforming our company in order to become more agile, more diversified and with a better product portfolio. And this is something that we would like to continue doing in the future. And as we said last year, our focus is on cash generation for our shareholders, and we understand that this is the best indicator to understand our underlying performance. This is all on my side, and thank you very much, and have a very good afternoon.
Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect.