Good day and thank you for standing by. Welcome to the Prosegur Cash Q1 2023 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 session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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 Investor Relations. Please go ahead.
Good morning to everyone, and thank you very much for dialing to today's meeting. I want to welcome you to our 2023 Q1 results review that will be led by Javier Hergueta, our CFO, and myself. The presentation is scheduled to take around 30 minutes, in which we'll update the main events that have taken place in these first three months, including main ESG developments, as well as the drivers that lie behind our performance. We'll review our main financials and our performance by region. After the presentation, we'll have time for Q&A, where we will address the questions you might have. Should we not get to respond all points today, we'll answer those remaining on an individual basis. I again want to thank you all for your participation and remind you that this presentation has been prerecorded and is available via webcast on our corporate webpage at www.prosegurcash.com.
As a start, and before passing on to Javier, let me highlight some recent key facts and news regarding cash that can give us an idea of some important developments in the field. The topics covered range from the high underlying inflation world we're in to the latest developments in the continued increase of cash in different markets, or the almost $25 million households that are underbanked in the U.S. Turning to page 2, we can first see a mention to an article on the Bank for International Settlements that states that after the release of key COVID restraining measures, cash in circulation as a percentage of GDP has returned to pre-pandemic levels, if not increased in fundamentally all markets.
It's interesting as well how it highlights the record level of such a developed market as Japan, where cash in circulation reaches 23.5% of its gross domestic product. In the end, it signals that cash circulation levels after these turmoil years is back to normal and thriving in different markets, from very developed to those on the way of evolving. Regarding the next item, I find it very relevant to note the new setting information from Eurostat, where it highlights that core inflation in the Eurozone is at an all-time record of 5.7%. This is the inflation rate isolating some volatile prices such as energy, food, alcohol or tobacco, and provides a more precise diagnostic of price levels in the day-to-day economy.
It is a set the highest inflation since the Euro came to life, it as well portrays an idea of how sticky this inflation is proving to be. Not to say that this is an environment where cash usage thrives. Along the same lines, we can see from data released by the Bank of Spain the sustained growth in cash withdrawals over the last two years. As we can see in the graph on the right-hand side of the page, we can observe a sustained growth of not only the number of withdrawals, but as well the amount of euros withdrawn. That, again, gives a very clear idea of the health of cash, in this case, in the Spanish market.
Lastly, it's interesting to cite the report from the U.S. Federal Deposit Insurance Corporation, stating that there are close to 25 million households, either unbanked or underbanked in the United States. This implies that this part of the population relies on a very heavy manner on the use of cash to conduct the daily activities in the world's biggest economy. This pattern can be observed in different markets. For instance, in the European Union, according to the World Bank Findex, unbanked population exceeds 13 million adult citizens. This responds to different reasons, from not meeting minimum balance requirements to lack of trust in banks, privacy concerns, or unwillingness to pay high banking fees. This overview reflects a macro environment that is very positive towards cash and its usage, as is clearly shown in the actual figures. I will share with you today's agenda.
First, Javier will review the highlights for the period, as well as the performance of our PNL on the delivery of our transformation strategy. After, I'll share the key elements of our performance by region, and then Javier will review our cash flow as well, as our debt evolution. With that, we will lead to conclusions after which we'll open the Q&A session. This being shared, I would like to pass over to Javier so he can walk us through the key highlights of the period.
Thank you so much, Miguel. I would like now to share with you the main highlights of the period, where one more quarter we can see delivery of the continuous improvement of our activity, as well as a relentless advancement in the transformation of our company. Before diving into detail, I would like to sum up three very important elements. Number one, the environment in which we are conducting business is very positive for us and will likely remain as such. Key aspects that contribute to this environment are a world of ever-growing uncertainty, a sticky inflationary environment, and conditions for raising interest rates, all of which resulting into a constant increase of volumes. Number two-
Our first quarter of 2023 is affected by three specific items, which we will explain more thoroughly in the presentation. The first one-off exceptional adjustments of cash flow level. The second, the hit in relative margins due to business seasonality. The third one, an increase of financial expenses expected to stabilize. Number three, the fact that despite these impacts in the first quarter, we are confident that we will be in line with consensus when looking at full-year expectations. This being said, I would like to review first our top line, where, as we can see in the first block, sales have increased by 16.2%, showing on one side a very solid performance on the back of strong volume growth and a steady pricing discipline, leading to an overall circa 30% organic growth.
On the other side, I would like to highlight that all geographies have contributed to that improvement with double-digit organic growth figures. If we look at our profitability at the EBITDA margin line, we can see that for these first three months, it has reached 12.5% of sales, which implies an absolute growth of 9.2% versus the profit we reported one year ago. In this respect, we have to take into account that profitability has been affected by the seasonality of our new Forex business that follows a pattern in line with that of tourism and air traffic that tend to have a slower start of the year, which we are sure will recover as we are already seeing in April's volume activity. Also, the impact of the hyperinflationary accounting explains part of the margin evolution in the quarter.
It is particularly remarkable to see how our new products continue to climb and have reached 28.1% of sales, increasing our end of 2022 penetration. Here, I would like to remark two points. First, the fact that all geographies have contributed positively to the improvement of this line, both in absolute and in relative terms. Second, the strong performance of our new product or transformation solutions, where especially Cash Today, Corban, and Forex have had a very strong performance. This being a clear example of the commercial execution capacity of our team on promoting sales of new products. Turning to such an important line as free cash flow, we can see that we have generated a free cash flow of EUR 8 million.
This is a significant amount taking into account that we have had to finance a solid organic growth we will later see, as well, we have been affected by around EUR 10 million of extraordinary anticipated payments due to regulatory changes in some of our markets. Lastly, regarding our ESG commitment, in these first 3 months, there are 2 initiatives that are worthwhile sharing. The renewal of our emission offset plan, which deepens our commitment to the environment in which we conduct business, specifically enabling us to compensate all CO2 emissions for European and Central American operations. The approval by our board of directors of specific goals to the management team to assure that all interests are properly aligned in our target to foster the most responsible, sustainable, and reputable company.
Turning now to page 4, I'd like to share with you the key developments from our profit and loss statement. First, if we look at sales, they have improved by EUR 66 million when we compare them to this quarter one year ago, reaching EUR 477 million and implying a net growth of 16.2%. Important to see as outlined in the chart on the right-hand side of the page, a very strong performance of organic growth of close to 30%. This shows the trust customers have on Cash as a means of payment, how reliable they find it, as we have heard from Miguel earlier on, and as well on the drive and delivery of our commercial strategy.
Next, we see that inorganic has contributed positively with 5.1% of total sales, fundamentally driven by the ChangeGroup acquisition we closed last summer. Lastly, we see a negative impact of foreign exchange of 18.6% due to the depreciation of some of the currencies within our footprint. If we look down to the EBITDA line, we can see that we have increased it from EUR 79 million to EUR 85 million, which is an improvement of 7.2%, reaching in relative terms 17.8% of sales. Depreciation maintained at a level of EUR 25 million. Regarding EBITDA, we have achieved an improvement of EUR 5 million in the period, reaching EUR 60 million, which represents an increase of 9.2% versus one year ago and implies a margin of 12.5% of sales.
When compared to one year ago, we see a decline in relative performance of 80 basis points that is fundamentally driven mainly by the mentioned seasonality of the Change business that has its main cost structure in terms of rentals and part of personnel costs fixed, with lower revenues driven by the fact that there are less people moving between countries. To a lesser extent, the effect of currency devaluation. The financial result accounts for EUR 24 million, up from EUR 16 million one year ago, such gap being driven to a significant extent by non-cash items. On one side, the increase in financial costs is explained by higher costs linked to deferred payments and other liabilities and larger M&A and IFRS 16 related charges due to the incorporation of ChangeGroup to the perimeter.
The recent hike of interest rates has limited impact, given most of our debt is at fixed rates, and it also allows us to obtain better returns on our liquidity positions. On the other side, when looking at FX related expenses, we see part of those are of a non-recurrent nature, and some of the elements there are non-cash. All in all, you can see a much lower figure when referring to interest payments in our cash flow statement than the one in our P&L. Tax expenses account for EUR 50 million, resulting in a tax rate of 51.5%, which is affected by the non-deductible nature of some of our cost elements, and which we are sure will reduce as the year progresses. This leads us to a net consolidated profit of EUR 14 million, that is 3% of sales.
We are convinced that in the coming quarters, seasonality effects will reverse and create an opposite effect, and thus, we will see a constant improvement of our profitability, both in absolute and relative terms. Going now to the next page number 5, I will update on the performance of our transformation strategy, on which we continue to deliver at a very strong pace. We see that sales have climbed to EUR 134 million, up from EUR 95 million one year ago, resulting in a 41% growth. In absolute terms, it represents an increase of close to EUR 40 million in the period versus 2022.
Equally or more important is that despite the solid growth of the core business, the penetration of new products over total sales has improved by an stunning 500 basis points from 23.1% one year ago to 28.1% at the end of the first quarter of 2023. I would like to underscore the strong performance of our main key solutions. Cash Today, that enables our customers to digitize their cash operations. Cor ban, that facilitates the access to financial services beyond the traditional banking branch infrastructure. The newly incorporated Forex business, which is performing very well despite the aforementioned seasonality. As well, it is important to underline that new products are performing very, very strongly across all our geographies.
In summary, we continue to deliver on our transformation strategy, both in absolute and relative terms, and we are confident that they will best position us for the future. I'll now pass over to Miguel, so he can review our performance on a regional basis.
Thank you very much, Javier. I'll start by reviewing Latin America. That is our most important region, accounting for 64% of the group sales, and where the macro environment is probably the most positive for our industry. In this region, we've experienced a very significant organic growth of 36.6%, reflecting the strength of volumes as well as our strict pricing discipline. Exchange rate has had an impact of 27.3%, driven fundamentally by Colombia and Argentina. Inorganic had a minor positive impact of 0.4% in the region sales.
It's important to underline the extraordinary performance of new products that on an organic basis have climbed by 22%, having added EUR 17 million to reach EUR 92 million this first quarter, and improving the share of wallet over total sales by 300 basis points to 30.1%. Europe continues to consolidate as our second most relevant region with 28% of total sales. Important to note here, the double-digit organic growth of +13% experienced on the back of returning volumes as consumers continue to share their confidence in cash and in our new solutions. New products have more than doubled from EUR 14 million to EUR 34 million, representing an increase of 140%, driven by the acquisition and growth of the Forex business, together with the very strong performance of our cash-based solutions.
With this, new products in the region now account for 25.1% of total sales versus 13.8% one year ago. Last but not least, when we look at Asia-Pacific, a region that accounts for 8% of group sales, very interesting developments have taken place. On one side, a very strong organic growth of 23.4%, driven by new contract wins. FX had a moderately negative impact of close to 2%, and inorganic growth accounted for a positive 1%. Lastly, new products in Asia-Pacific have grown extraordinarily from EUR 5 million to EUR 8 million, which implies an increase of 52% and now account for 21.9% of sales, increasing its penetration by 330 basis points. This is our regional overview.
Now I'd like to turn over to Javier, so he can proceed to explain as our cash flow and net debt performance.
Thank you, Miguel. I'd like now to share with you, as said, first, our cash flow statement, which, as anticipated, is affected by the regulatory changes in some countries, due to which we had to advance the payment of certain concepts that account to around EUR 10 million. Departing from the EUR 85 million EBITDA for the period, provisions and other items account for EUR 4 million in line with last year's. Income tax outflows reached EUR 20 million in the period, as well in line with the figure reported last year. When we look at CapEx, we can see that it has reached EUR 21 million, up from EUR 11 million one year ago.
The main reason for this being that in 2022. The quarter started in the middle of the Omicron wave, and we decided to take an extra cautious view on investments until we had a clear outlook for the year, which led to an increasing level of CapEx in later quarters. In this 2023, on the other hand, with better visibility, we have started investing on a more stable basis, which we anticipate will likely remain at similar levels for the rest of the year, as well acknowledging the fact that our Cash Today solutions demand has continued to grow customer CapEx.
Changes in working capital account for EUR 32 million, which is EUR 4 million more than one year ago, which is very reasonable, taking into account that we've had to finance the continuous strong organic growth of the business, which has been significantly higher than in the same period of 2022. With this, after the close to EUR 10 million extraordinary advance payments, we reach a free cash flow of EUR 8 million, down from EUR 17 million one year ago. As we have explained, taking into account a more linear projected CapEx expenditure, the financing of the increase of our business and the exceptional regulatory driven adjustments, we are very proud of the cash flow generating ability in these first three months of the year. Below free cash flow, interest payments account for EUR 6 million and deferred M&A related payments from acquisitions reach EUR 8 million.
The execution of our shareholder retribution scheme accounts for EUR 13 million, 10 of which are related to the dividend distributed that will total EUR 40 million in the year, 33% more than in the prior year. The remaining EUR 3 million are due to the purchase of treasury stock as agreed in the general shareholder meeting that took place last year and by which the share buyback program was to be extended until the end of 2023. The others line, which is driven mainly by customer certifications that tend to net over time, has had a negative impact of EUR 25 million, down from EUR 42 million 1 year ago. Taking all these items into consideration, our total net cash flow reached EUR 44 million outflow.
We look at the graph on the right-hand side of the page, we can see that our total net debt reached EUR 777 million, meaning an increase of EUR 48 million on the debt we had at the end of 2022, and completely in line with the seasonality pattern and the growth of the business. I would like to underline that our net financial position at the end of the first three months of 2023 accounted to EUR 568 million, which is pretty much the same or EUR 1 million lower to the one we had one year ago. This reflects our prudent debt management. Deferred payments due to M&A activity accounted to EUR 126 million. IFRS related debts summed EUR 111 million and treasury stock totaled EUR 29 million.
In terms of total net debt to EBITDA on a trailing 12 months basis, we are at 2.1 times, a clear 0.3 times lower than the ratio we shared one year ago, proving again our strict financial discipline. With this, I would like to turn to page 8, where to conclude, I want to underline the continuous improvement of our business while we constantly deliver on our commitment to transforming the company. As said earlier, we've posted a strong increase of sales of 16.2%, backed on organic growth of close to 30%. We have been able to reach an EBITDA margin that has grown by 9.2% versus the one achieved one year ago, and that represents 12.5% of sales.
We have had a very good performance regarding transformation, by which new products have grown by 41% or EUR 39 million in absolute terms and now represent 28.1% of sales. Cash flow, always important to us, has reached a level of EUR 8 million, taking into consideration a more uniform CapEx investment than the one we carried on in 2022, the impact of EUR 10 million of extraordinary advanced payments due to regulatory changes in some jurisdictions, and the financing of the already mentioned strong organic growth. Lastly, while driving our financials, we continue to be firm on our commitment to our ESG strategy, as proven in this period by, on one side, the renewal of our emission offset plan and on the other, by the establishment of clear ESG targets for the company's management.
With this being said, I would like to thank you for your attention, and I'll be pleased now to open the Q&A session.
Thank you. As a reminder, to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, that's star one and one if you wish to ask a question. We will now take the first question. One moment, please. It comes from the line of Miguel González Toquero from JB Capital Markets. Please go ahead. Your line is open.
Yes. Hi, good morning. Thank you for taking my question. I got only three. The first one on Argentina. We have seen a few weeks ago a very aggressive depreciation of the blue dollar.
Which is obviously affecting the economic situation. I believe with election this year, this trend could continue. I wonder if you could provide some visibility on how the performance in Argentina has been this quarter, and what's your expectation for the year, and how this could affect the whole group. Secondly, penetration of new products. You mentioned that increased like 4% compared to last year, which I believe help for some margin improvement. The reality is that we haven't seen this improvement yet, and margin seem below the low part of the range you gave in the Capital Markets Day. Where will you see margins for this year?
I mean, so we assume margins more in the low end of the guidance range, you gave in the Capital Markets Day, or do you think you can improve throughout the year? Lastly, and I don't know if I missed it in the presentation, but you registered EUR 10 million negative impacts from some regulatory changes. Is this a one-off, or do you expect further impacts in the year? Thank you.
Good morning, Miguel. Thank you for your questions. Starting with the first one on Argentina. We feel that the context in Argentina is uncertain because of the elections in the second half of the year. Nevertheless, it is very good context for our business. I mean, we're seeing the monetary issuance in all-time high. Inflation keeps being very high. It's a context where it is key the experience and the quality of our management team. We've been managing in this type of context for over 20 years on a successful manner. This is thanks to our team in the region. We don't really expect a major devaluation throughout the year because this is an election year, as you pointed out.
So we feel that this should help a milder effect into the effects than the one we've seen in the recent weeks. The performance of the business is really good. We are doing our job properly in the pass-through of the price increases. As I said, the context is good, and the management is very experienced in these type of situations. Going forward, we would expect this good trend to move ahead throughout the rest of the year. In relation to the second question about new products, and the impact it might have in terms of margins, I want to clarify the following when referring to margins, which is, I think is important for all of us to bear in mind.
If we excluded the impact from the seasonality of the Forex business and from the hyperinflationary accounting, we would already be seeing an improvement in margins in Q1. That's a fact that has already happened. When we look at the rest of the year, when we look ahead of us, we should have a positive impact coming not only from the traditional seasonality of our core business, but also a reverse effect from the Forex business. The same way the seasonality is now driving the margin, it should be pumping it up in the coming quarters. Overall, we are quite positive on that one. As you were mentioning, the new products are increasing their contribution and are also increasing their profitability, so they're also playing a role on it.
All in all, on a run rate basis, we will expect to be in the Capital Markets Day guidance within that 14%-16% range. On top of that, and this is an extra if you want, we have the potential reconsolidation of the Australian business, which should be also helping the margins on a recurring basis going forward. We're quite positive on the Capital Markets Day guidance being met because of all the reasons that we just mentioned. Third, related to the EUR 10 million one-off, it is just due to a change in the regulatory landscape regarding some of the ongoing payments. I mean, some of the payments we have to do have been short-term in term.
That is something that has happened just at once in Q1, and there shouldn't be any additional impact going forward, coming from that.
Understood. Thank you.
Thank you. We will now take the next question. It comes from the line of Enrique Yágüez from Bestinver. Please go ahead. Your line is open.
Good morning, Javier and Miguel, thank you for the presentation. Just three questions. The first one is regarding the merger agreement with Armaguard. Could you provide an update about how it's going, the process, the timeframe? Any visibility on this regard will be appreciated. Second, in terms of cash flow, the negative impact of minus 25 million EUR in the line of orders, just to check if it is related with the cash balance certification to clients. If that is the case, should we assume that after the merger agreement with Armaguard will be completed, this volatility on, from this concept should be radically reduced? The last question is regarding the CapEx.
to which extent the increase, the CapEx in this quarter is related to, client CapEx for the Cash Today and the other initiatives? Thank you very much.
Good morning, Kike. Thank you for all your 3 questions. On the first one on Australia, just to give you a heads-up on where we are right now. I think we, as we always say, we don't want to speculate too much on this. The ACCC, who is the antitrust authority in Australia, is still doing their job. They're in the final phase of it. We are collaborating with them as much as we can, but we still have to wait for a final outcome on it. We are very positive on it. We have a positive stand because we firmly believe the case is very solid, and this is the best option for the industry as a whole. We are quite positive on it. Right now we are expecting a final outcome in Q2.
Then after that, we should be, assuming it is positive, completing the transaction, early Q3. That's the most updated picture that we have on the table right now. In terms of the others in the cash flow, which is EUR 95 million, yes, as you're correctly pointing out, it has to do mainly with the temporary cutoffs from the cash certifications. You're also right that, after the consolidation of the Australian business on a recurring basis, we should have no further volatility coming from this affecting them in the others in our cash flow.
In relation to CapEx, which was your third question, the client CapEx is growing year-over-year, around 30%-40% more or less, which is quite in line with the growth we are experiencing in our total install base of Cash Today devices, which, you know, is the main component of our client CapEx. That I think gives you a good flavor of the good shape that the Cash Today business is immersing, which we expect to keep going forward, in the coming quarters as well.
Thank you very much.
Thank you. We will now take the next question. It comes from the line of Francisco Ruiz from BNP Paribas Exane. Please go ahead. Your line is open.
Good morning, guys. I have 3 questions too. The first one is, given that Change is, it's a new business for us, if you could give us a little bit more clarity on the impact on this in the margin. You said that it have contributed to around 5% of sales. Could you give us the seasonality impact and how much it has contributed to this quarter? The second question is on cash. I mean, mainly the free cash flow has been lower this quarter, but you said that it's gonna improve in the coming quarters, so probably your leverage will continue.
I have heard from the parent company that there is a restriction in terms of M&A in the future in order to deliver the whole group. How it could be seen under the perspective of priceable cash? I mean, will you stop M&A? Will you remunerate more than the shareholders? What are you going to do with the cash at the end of the day? And last but not the least, you have started the conference by saying that this result, despite seasonality, is in line with the consensus for the year. Could you give us the data that you have for consensus for this year? Thank you.
Good morning, Paco. Thank you for your time and questions. In relation to the ChangeGroup acquisition, just as a summary from what we said, when we closed the transaction, ChangeGroup, the FX business all in all for us should be a 100+ million EUR business in terms of revenue, with margins being in line or slightly above the group average margins. Right now what we are seeing is that despite the seasonal pattern of the business, I mean, the contribution in terms of revenues is in line with that, and we also expect the margins to be in that range. As of today, of course, I mean, they're not yet there in Q1 because of the seasonality, but they are doing some around mid-single digit margins.
All in all, when it comes back to the drop in the margin that you've seen, the seasonality of the ChangeGroup business should explain you more or less two-thirds of the margin drop in the quarter. In relation to the cash, in terms of M&A, I mean, there's no restriction, properly speaking, from our side. I mean, we keep having an active stand on M&A, and we have opportunities in our pipeline. Having said that, I mean, I think we also mentioned that last time we spoke, there should be some activity, but we don't expect any really major transaction happening. There might be some M&A throughout the year, but probably nothing too disruptive, I would say.
In terms of shareholder remuneration. You know that, as of today, we have paid half of the dividend that was approved back in December, which totals EUR 40 million in the year. That is 33% more than 1 year ago. Also, we are executing the share repurchase agreement, which was extended back in December. Now the total value of the program is EUR 25 million, and that's been executed more or less on around 70% of it. Both things together have a combined yield, as of today, of around 5.5% overall. You know that shareholder remuneration is at the forefront of our strategies, a very strong commitment from the moment of the IPO onwards, and that will be the case going forward.
I think it's hard to say, I mean, which will be the next decisions in terms of shareholder remuneration, because it's something that the governing bodies of the company will have to take in due course, which will happen far from now. The principle of the strong commitment with the shareholder remuneration is firm and valid. In terms of consensus that you were asking for, I think that what we have compiled right now is sales a bit over EUR 2 billion with EBITDA around the EUR 280 million figure. That's what we think that on a normalized FX scenario should be beatable. We are quite comfortable with that, as we mentioned earlier in the presentation, with the view that we have for the coming quarters right now.
Thank you very much, Javier.
Thank you. As a reminder, it's star one one if you wish to ask a question. The next question comes from the line of Alvaro Lenze from Alantra Equities. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. The first one is just to clarify, you have indicated that Change has had, I assume, EBITDA margin of 5%. That would be roughly 1 million EUR of contribution. That means that your EBITDA in EUR terms, excluding M&A, has increased by roughly 7%. I wanted to know if you are seeing any margin pressure on a local basis, given that your EUR revenues in LATAM have increased more than 10%, in Europe also more than 10%, and in Asia-Pacific, they have increased over 20%. I don't know if all your regions are growing at double-digit rates in EUR terms, excluding M&A, how come your EBITDA is only growing at mid to high single digits?
Good morning, Alvaro. I think the numbers on ChangeGroup can be more or less as you're pointing out. We said 5% operating margin, it's around the EUR 1 million figure that you have in mind. When it comes to the performance excluding the M&A, what we have is an improvement in the profitability in all regions. We are seeing better LATAM, country by country basis. I mean, locally, we are seeing an increase in profitability in the region. We are also seeing a better performance in Europe and also better performance in terms of Asia. Of course, I mean, the numbers that you're pointing out are on euros.
I mean, that's 7% growth, so that's, that explains part of why there's a gap between that 20% that you were mentioning and the performance in EUR terms. We are seeing a very good development in terms of profitability region by region on a local basis, as you were asking for. I can confirm that that is the case all across the different geographies.
How come your EBITDA is not growing at double- digits? Is it due to maybe, I don't know if it's Argentina that in euro terms is falling so much that it offsets the margin improvement everywhere else? Or because if you were actually growing your margins in every region, it's not reasonable that your EBITDA grows less than sales. It should at least grow at the same rate as your slowest growing region. If your slowest growing region is Latin America, it should be growing at double- digits.
As we were saying before, if you exclude the seasonality of the Forex business, so you take it out, and then you take out also the hyperinflation, the margin in the quarter has improved versus last year. In terms of sales, we are growing 16% or over 16% in EUR terms. You have an underlying improvement in margins that makes you or arrives to a higher growth in EBITDA because of the margin increase than what you have in sales. There's still some, you know, costs related to the M&A activity and some other things there that could help us improve even more. Just by taking out the Forex and the hyperinflation, the margin is already improving. You cannot see that because of the two elements that we just mentioned.
Okay. Another question, I don't know if you mentioned this and I didn't catch it, but can you break down the net financial cost between actual interests and the impacts of FX? How should we think about FX going forward in the financial result line? Thanks.
Yeah, I think that information is in the filing that we reported today, happy to disclose that for you. When we look at pure financial cost, if you want, what we see out of the EUR 24 million is roughly EUR 10 million on that one. The increase year-over-year has to do part of it with the ChangeGroup acquisition, which creates more M&A related costs and more IFRS related costs. The rest has to do with the revaluation of the deferred payments and other liabilities in our balance sheet. That explains the increase year-over-year in that specific line. The rest, the other, EUR 14 million is coming from the FX thing.
The way to see that going forward is that it is affected by non-recurring items to a big extent, and then a significant part of that is non-cash. When you look at it in the information that we disclose in the filing today, you'll see that a big portion of that has to do with hyperinflationary accounting as well, which explains basically most of the delta year-over-year on the financial cost. That is something that is non-recurring in nature and shouldn't be extrapolated going forward. I think that should be the basis for understanding the future evolution of it in the rest of the quarters.
Thank you.
Thank you. We will now take the next question. It comes from the line of Manuel Lorente from Mirabaud. Please go ahead. Your line is open.
Hi. Good morning. My first question is on revenue indications for Latin American business for the second quarter. In the sense that, on the first quarter you have delivered a solid underlying growth offset by FX headwinds, but it's also fair to say that comps were easy this year on EUR 277 million. There is a ramp up on those comps. Q2 last year you made EUR 324 million, is actually below what you have requested on the first quarter. Is each another double-digit growth for the second quarter stand alone the right way to see the evolution of the business on this area or how we modelize going forward?
Hi, Manuel. I think there's been a bit of a cut off in the noise. I'm not sure we captured properly the question. Could you just summarize it and...
Yeah. Basically, I was wondering regarding if that double-digit growth in Latin America, it's valid for the second quarter, and given the fact that comps are very tougher. You reported EUR 277 million in Q1, and in Q2 last year was already EUR 324 million.
Yeah, I got it now. Well, I would say that from an organic growth perspective, we feel that the business is performing very strongly. In fact, there's an acceleration from previous quarters. We are at 36.6 organic growth in Latin America, and we expect that good trend to move forward. When it comes to growth in euros, I mean, it's all FX and we don't have the crystal ball there, so it's hard to say how it will look like in terms of euros. What we can say is that we feel the business is performing very strongly from an organic perspective.
Okay. you believe that 30% organic is sustainable?
We feel that it's very strong. I mean, I don't know if it will be 36, higher or lower, but it's really strong.
Okay. Another question. You stated EBITDA consensus of EUR 280 million. If you multiply the EUR 60 million reported on the first quarter, you reach well below that level. That improvement throughout the year is a combination of higher operational leverage as you pass through the crisis, the contribution from ChangeGroup, issuing of FX. How can you elaborate a little bit of if this is the case or am I missing something that we should consider?
Sure. I think we mentioned that before. That's a combination of factors. I mean, there's seasonality typically in our core business. We typically generate higher margins in later quarters and lower in the first quarter. On top of that, you have the seasonal nature of the Forex business, which has the reverse effect in margin. It is dragging the margin right now in Q1, but it should ramp it up in the coming quarters as well. That is on top of the seasonal nature of our core business. We have the new products which are increasing their contribution so they weight more and more every quarter, and they're also improving their profitability.
That's also another source for EBITDA that helps us and makes us think that we will be in the consensus figure. And I think we also mentioned before that, on top of that, I mean, we have the potential impacts from the deconsolidation in Australia on a run rate basis, which will for sure be beneficial for the EBITDA as well. But even without that, I mean, we're firmly convinced that we will be in the consensus figure for EBITDA.
Okay, you stated that the ChangeGroup contribution for the whole year will be roughly EUR 100 million.
Said that, we said that in terms of revenues, the ChangeGroup will be around EUR 100 million or 100+, and that it has operating margins in line or slightly above the group average margins. That's why we say that if that is the picture on a full year basis, if they are contributing lower margins at the beginning, they should be contributing much higher margins in the second part of the year.
Mm-hmm. In terms of revenues, on the first quarter, it has contributed roughly EUR 20 million. Top line speaking, there is no seasonality.
There is as well, because what we're saying is that it will be contributing 100+, so it's that's more than just 20 times 4. There's seasonality both in the activity level and in the profitability, because there's a high operating leverage as well, coming from revenue in that business.
Okay. Thank you.
Thank you. There are no further questions on the phone. I would like to hand back over to the speakers for closing remarks.
All right. Thank you everyone for taking the time. You know that our Investor Relations team remains available for any further queries you may have, and hope to hear you back again in our Q2 results presentation. Thank you and goodbye to everyone.
That does conclude our conference for today. Thank you for participating. You may now disconnect.