Ladies and gentlemen, thank you for standing by, and welcome to Prosegur second quarter 2021 results presentation. At this time ,all participants are in listen-only mode. Following the speakers' prepared remarks, they will be a question and answer session. To ask a question during a session, please press star one on your telephone keypad. Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Antonio De -Cárcer, Head of Investor Relations. Please go ahead, Antonio.
Good afternoon, welcome to Prosegur first six months 2021 results presentation. This presentation is expected to last around 30 minutes, followed by an open Q&A session. As customary, this webcast will be hosted by Antonio Rubio, Secretary General, Maite Rodríguez, Global Finance Director, and myself. Prior to starting, I would like to remind you that this presentation has been pre-recorded, and that it will also be available for download. I will now hand you over to our Secretary General, Antonio Rubio.
Good afternoon, everyone, and thank you for attending this presentation. It's been roughly two months since our Q1 result presentation, and just one month since our 2021 Capital Markets Day. There has been a lot of information delivered to market in the past eight weeks, and therefore, on today's presentation, there is not much additional information or new milestone to be addressed.
Hence, we will present today a set of middle-year results that are totally in line with our estimations and reflect both the gradual recovery of our activity as the pandemic effects are becoming softer, but also the traditional seasonal slowdown that our industry in general suffers during the second quarter of the year. In this regard, the results we are presenting today are good.
Very much in line with the market dynamics of each of our different geographies and with all business lines reporting margin improvement on a quarter-on-quarter basis. Good sign of how our activities quickly react to the improving market condition, although, as previously mentioned, still under decisional slowdown.
Typically coming from a period when all costs increase in each region had already been incorporated and its subsequent transferring to prices is still in process. Prior to start analyzing the results, I would like to quickly recap on the main messages we exposed to market during our Capital Markets Day held past 30th of June. As you may remember, during the event, we unfolded the main pillars of our strategic plan for 2021-2023. A plan that relies on the concepts of perform and transform.
Meaning this, the ambition of our company to become a technology innovation leader in the industry, while at the same time, continue developing internal efficiencies and more streamlined business process to guarantee not only increased revenues growth, but also improve profitability as well.
We also gave to the market a comprehensive outlook of our goals, not only for the next three years, but also for the next decade. In which we plan to grow to almost double revenues while improving our global margins to a mid-teen double-digit figure. We also restated to market our deep confidence in the Ibero-American region as one of the most promising and strong growing geographies to develop the security industry.
LATAM is the region that gathers the most interesting growth dynamics of our industry, and this has been proven by our excellent track record over the past 10 years and will be continued doing so in the years to come. Our digital transformation strategy was also put in value during the event.
The rationale behind all of our investments and efforts to transform the company into a much leaner and efficient entity, while at the same time, taking advantage of all the generated intellectual property to develop a near future array of new products that will become the main revenue generators of the group in the years to come. To summarize all the contents deployed during the event, I would like to restate the market guidance figures our CEO, Christian Gut, stated during his presentation.
While the pandemic effects are still present in our society, we are confident that our plan will help us to sustain and increase growth, almost doubling our revenues in the long term. Gradually recovering profitability, even above historical levels, in the coming 10 years. Maintaining our strong cash flow generation in the same levels of today, even though the higher use of technology will require bigger investments.
Hopefully adding an additional EUR 1 billion-EUR 1.3 billion of M&A, also in the next 10 years, with an accretive effect on our margins. We are fully confident on the accomplishment all these ambitious goals. With this concludes my introduction, prior to moving into our present period results, I would like to draw your attention to one interesting macroeconomic factor that has been dragging market's attention in the past few weeks. Global inflation arise.
As you may have noticed, over the past months, there has been an increased negative sentiment on all markets around the fear of a global inflation increase, both in emerging and mature economies. The vision shows that inflation will continue escalating, not only in countries such as Argentina or Brazil, but also in regions like Europe or U.S., where it is expected to reach levels of close to 2% and higher than 5% respectively.
In this uncertain environment, I would like to take the opportunity to remind you the positive effects that inflation can bring to our business. Increased inflation will call for higher volumes of cash in circulation in emerging markets, but also for faster velocity of cash movement in mature ones.
Traditionally, this will probably derive into better margins for the cash business, as increased volumes will benefit from the ad valorem pricing structure in which the operator charges a certain percentage of the value to be transported. Security could also benefit from this situation, as higher inflation usually calls for faster cost transfer into prices in an industry which is highly unionized and mostly driven by collective bargaining agreements. Besides that, as you can see on the third chart of the lower right corner, S&P Global foresees a good recovery of the main Latin economies in a post-pandemic era starting in early 2022.
Although we remain prudent, as it is still difficult to estimate whether these projections will become true on the stated updates, we firmly believe that the American region represents a formidable growth opportunity for all our businesses, and will continue growing and succeeding in those countries as we have been doing in the past two decades.
Let's move now to our present six months result review. I would like to invite our Global Finance Director, Maite Rodríguez, to comment on them as she has now become the main responsible of all the group financial information.
Thank you very much, Antonio, for your introduction. Looking at the most relevant indicators of the first half of 2021, we see the revenues at consolidated level have reached EUR 1,637 million. This implies almost 3% organic growth.
We are happy to state, besides the accumulated negative drop-down in respect to the same period in 2020, our volumes in the past two months have shown a strong positive tendency, mainly in LATAM and rest of the world, while Europe is still below previous year due to the negative inorganic coming from the deconsolidation of alarms in Spain and some still present negative effects of the pandemic, mostly in Germany and Portugal.
We have also expanded our perimeter in new products through the acquisition of Redpagos, a leading operator of banking agencies in Uruguay. Our EBITDA has reached EUR 93 million, with margin improvements in both cash and security in respect to the previous year, and also showing an improvement in all business lines in regard to first Q 2021, even considering that second Q is traditionally the weakest quarter in profitability terms due to adverse seasonal effects.
Profitability in this quarter has also been affected by costs connected to digital transformation that, as we explained in our Capital Markets Day, is now the main focus of the company to accelerate the development of new products and also obtain future margins improvement.
Cash flow generation has been good, in line with normalized average of previous years, and also maintaining the positive evolution of our working capital consumption, delivering a successful EUR 91 million operating cash flow, only visibly affected by the strong comparable effect versus same period in 2020, when all extraordinary cash protection measures implemented due to COVID crisis delivered a very high exceptional cash flow figure, which is now being normalized.
Finally, in terms of liquidity and debt structure, there are no significant changes regarding the figures reported two months ago, as we keep maintaining an excellent liquidity profile and our debt remains almost equal.
Looking at our consolidated P&L, we can see how the revenues breakdown reflects the already mentioned 2.9% organic growth, with almost unnoticeable inorganic effect as the deconsolidation of the Spanish alarm is partially compensated with additional revenues of the new acquisition in Uruguay, evidencing that adverse effects is the main explanation of the nearly 8% reduction in volumes.
May I also remind you that all our figures are still under the negative comparable effect, comparing a semester fully influenced by the pandemic versus another one in the previous year that only had those negative effects in the second half. Looking at revenues by region, we can appreciate how both LATAM and rest of the world present good local currency growth, only erode in LATAM by adverse effects, while Europe still sustains a negative growth, still suffering from deflated volumes derived from lockdowns and confinements.
EBITDA totals EUR 171 million, showing a slight improvement in EBITDA margin over previous year, even considering the negative comparable effect, while EBITDA and EBIT total EUR 91 million and EUR 78 million respectively. Financial results amount EUR 4 million, benefiting from the dividends received from the Telefónica shares, which this year was paid in June instead of July, and also from some beneficial exchange rate effects.
Tax rate is strongly influenced by hyperinflationary accounting effects, reached 61.4%. Finally, net consolidated profit grows by 16.2% to reach EUR 26 million in the first six months of 2021. Let's move now to analyze the profitability on the period, both in consolidated and individual business lines terms. As previously mentioned, EBITDA at group level has reached EUR 93 million, coming from EUR 106 million in the same period in 2020.
This implies a 12.3% reduction explained mainly by adverse comparable effect, lower volumes derived from COVID, and the recent investment in digital transformation CapEx. On the other hand, looking at margins and profitability by main business lines, we can see that there is a slight margin recovery in Cash that improves its margins both over the same period in 2020, but also over the previous first quarter of the year.
This being a good indicator that the activity is coming gradually back to normal. On the security side, EBITDA continues growing significantly, both in absolute and relative terms, reaching EUR 27 million and delivering a 3.4% EBITDA margin. This shows the good acceptance of the new integrated security solutions in market and how effectively they are increasing our margins quarter by quarter.
On the alarm side, on the contrary, there is a temporary contraction of the compound EBITDA per- SAC margin of the group. This is the combination of both Movistar Prosegur Alarmas in Spain and Prosegur in the rest of the world, and comes mainly from the incurred extraordinary cost needed to fully reactivate the commercial structure after the pandemic and some one-off projects related to digitalization of the client support platform.
To analyze now the results by independent business line, I will pass the word over to Antonio de Cárcer, who will provide you more detailed information on the performance of each individual business. I will join you again afterwards for the financial statement review.
Thank you very much, Maite. We will now have a look on the breakdown of revenue structure and main profitability drivers of each activity, as well as some other relevant key performance indicators. Starting with Cash, we see a total revenues figure of EUR 692 million. Despite the adverse comparable effect versus first half of 2020, Cash has delivered a satisfactory 3.5% organic growth.
This growth comes from both LATAM and Asia-Pacific, while Europe still reflects the negative impact of the pandemic, although with a noticeable improvement during the last stages of the second quarter. Prosegur AVOS deconsolidation calls for a slight deterioration on the inorganic growth, as you can see, the main negative impact on our top line comes from the adverse translational currency impact. New products continue growing very fast, now they represent 21.4% of total Cash sales.
Very remarkable figure, taking into consideration the deconsolidation of Prosegur AVOS that has been fully compensated by a strong growth of this type of solutions that, in the Asia-Pacific region, have duplicated their penetration in respect to last year. On the new product side, it's worthy to note the recently closed transaction in Uruguay to acquire the main banking correspondent agent company in the country, Redpagos.
That will reinforce our CORBAN business with more than 500 new offices, in addition to the nearly 3,000 branches of CORBAN that Prosegur Cash currently operates in Latin America. Important on the new product side is the recent joint venture signed with Euronet to become the leading ATM operator in LATAM, a market with more than 300,000 ATMs whose trends move very quickly to a full externalization of the service, and in which Prosegur Cash aims to be the largest player.
Looking now at profitability, we see a total EBITDA figure of EUR 70 million. Still deflated in comparison to first half of 2020 due to adverse comparable base, but with increasing margins that have reached 10.2% in this first half of the year. That continue gradually expanding as the situation in Europe comes back to normal.
Moving now to security business, we also appreciate a very slight positive organic growth and a lesser negative FX impact. Security has kept on growing successfully in both Europe and U.S., while the situation in Iberoamerica remains still slow due to our careful client portfolio optimization that calls for avoiding less profitable clients to protect margins.
This leads to a total figure of EUR 826 million. We expect to continue with this positive trend as we are still recovering from the non-productive effect generated by the pandemic, such as the one seen on the airport industry in the U.S. that is now coming back to normal, or the stagnation suffered in the large event security division that is also gaining back speed and volume. New products continue expanding, now they represent 37% of sales.
Their influence is now clearly being reflected in our margins. We continue increasing our safety and business continuity solutions in parallel with the traditional security ones, all of them relying on a highly technified remote monitoring platform that is also gaining scale quarter-on-quarter. On the profitability side, it's very remarkable the continuous profit and margin expansion the business unit is delivering.
If we consider that the second quarter of the year is usually the most affected by seasonality, as we normally, in this time of the year, have already fully incorporated the salary raises to our cost base and still not have transferred it to market.
Taking this into account, the excellent 27.3% increment in EBITDA and its subsequent 3.3% EBITDA margin are a very good evidence of the structural improvement of our margins in security, driven by the increased penetration of new solutions, careful commercial policies when selecting clients, and a strict control discipline that will continue being applied throughout the full strategic plan.
Let's look now at the alarms business, whose main indicators are as follows. Movistar Prosegur Alarmas has increased its client base in 38,000 new connections during the first six months of the year.
This is quite remarkable as you know, the pandemic imposed a strong sales ralentization that was still present in the first months of the year. It is foreseeable an even higher number of clients to be delivered on the second half of the year, as now all efforts are put into rebuilding the sales infrastructure and gain as much client base as possible.
Likewise, the alarms base operated in the rest of the world by Prosegur has also improved their growth to almost cover the loss of clients generated by churn rate during the periods where selling new connections was not possible due to population confinements. The situation is quickly coming back to normal, and we will possibly end the year with positive growth on the install base.
Churn rate in Prosegur perimeter has again improved due to our new exigent client scoring model that obtains better qualified clients at the expense of a less aggressive growth rate. Organic growth sales continues increasing by almost 24%, while negative inorganic from the deconsolidation of the Hispania's alarms base and negative FX arose the final result in EUR 97 million on the reported semester.
ARPU remains stable on Prosegur perimeter and has only been temporarily reduced in NPA due to the additional cost of quickly rebuilding the commercial infrastructure and some aggressive client retention policies to capture the high sales season with the best position possible to address demand. This extraordinary effort has had an impact on profitability. Hence, our consolidated EBITDA pre SAC margin has reduced from 48.3% - 45.7%.
Although we expect this to be recovered in the midterm, as the incurred cost will become diluted gradually once the new generated sales becomes recurrent. Finally, cash flow generation in Prosegur perimeter remains stable, maintaining the same proportion between generated cash and consumed subscriber acquisition cost.
Only with the comparable difference versus previous year, in which we still incorporated the Hispania's alarms during the first two months of 2020. Finally, to conclude with the evolution of the different activities, let's now have a look at the performance of both Cipher and AVOS, our new business lines. Cipher reports EUR 7 million revenues in the period with a reduction of 10% in respect of the first half of 2020. This is mainly explained by adverse FX, as large part of our cybersecurity operations are based in LATAM, mainly in Brazil.
On the other hand, the gross margin has increased from 33% - 37%. AVOS, on its side, reports a very solid 16% growth year-on-year, totaling EUR 31 million, and also increasing its gross profit by 8.6% to reach EUR 9 million. This implies a slight reduction on gross margin coming mainly from seasonal effects, but also from some restructuring costs related to the incorporation into Prosegur after acquisition from CAS.
AVOS is now focusing on expanding their operations into other countries within the group's footprint, and some efforts have been put in place into the M&A side, whose results we expect will be announced anytime soon. That was all on my side related to the evolution and performance of our principal business lines. I will pass the word back to Maite Rodríguez to cover the main financial parameters of these first six months of 2021 results.
Thank you very much, Antonio de Cárcer. I will now briefly comment on our cash flow statement, debt structure and balance sheet. When looking at the cash flow statement, the most remarkable aspect is the strong operating cash flow, exceeding the group's historical average, isolating the one-offs occurred back in 2020.
The extraordinary 61% EBITDA to cash conversion ratio reached in the period is far above the metrics of the last three pre-pandemic years. This is a notable aspect since, as many of you may already know, second Q is normally the toughest one because of the seasonality of our business, in which 60% of the total year cash flow is usually generated during last four months of the year.
Analyzing in detail operating cash flow composition, despite the positive evolution in working capital in this quarter, driven by the ongoing improvement in DSO, you can appreciate a strong comparable effect versus same period of last year. In this context, I would like to highlight two main ideas. On the one hand, first half 2021 has been fully impacted by the sanitary crisis, while in 2020 pandemic effects started at the beginning of March, being the first regular one, both in terms of volumes and activity.
Consequently, EBITDA has dropped close to 7%, also affected by the adverse FX. On the other hand, during the second quarter of last year, Prosegur benefited from significant and non-recurrent tax deferral, with a direct positive impact in provisions and other non-cash items. As we explained back then, governments from different regions granted those tax aids to help corporate facing the pandemic.
As of today, most of them are not in place. As far as cash flow from investment and financing is concerned, I will briefly mention the major aspects occurred during the second quarter of the year. In terms of CapEx, infrastructure CapEx remains under control, and as stated in Capital Markets Day, represent 2% over sales.
M&A-wise, the Redpagos acquisition was closed in June. As usual, part of the price has been paid in the moment of the acquisition, and the rest of the payments are deferred for 2022 and 2023. When it comes to dividends, both Prosegur and Prosegur Cash completed three out of four committed installments in April. Lastly, Prosegur has kept increasing its treasury stock stake through the share buyback program in place.
Part of the cash out related to share buyback has been offset with the inflow of the Telefónica dividend, which last year was paid in July. Before ending the cash flow review, I would like to explain that we have included the Telefónica share to calculate the adjusted net debt to be in line with the banking covenant calculation method.
Looking now at the group's financial position at the end of June 2021, total net debt amount to EUR 816 million, including deferred payments of EUR 115 million, treasury stock at market price of EUR 62 million and Telefónica shares of EUR 195 million. If we furthermore include additional IFRS 16 related debt of EUR 93 million, total net debt reaches EUR 909 million.
Regarding net financial debt, it is worth mentioning its containment during the quarter, remaining almost flat when compared to March 2021, even after perform the inorganic growth operation in Uruguay, paid dividend, and increased CapEx. Leverage-wise, Prosegur shows a moderate net debt to EBITDA ratio of 2.2 x after including both IFRS 16 and Telefónica shares into the equation, far below the current banking covenant of 3.5 x.
Despite this comfortable situation, please bear in mind that for this calculation, we are using last 12 months EBITDA, which is fully impacted by the health crisis initiated in March 2020. Therefore, the leverage level will gradually improve as soon as the global situation goes back to normal, thanks to the positive evolution of vaccine programs, particularly in Europe. To conclude our financial information review, let's now have a look at our consolidated balance sheet.
Apart from the incorporation of Redpagos, in general, there haven't been any significant changes during the second quarter of 2021. The most remarkable aspect is the solid and stable balance sheet Prosegur historically shows. Once again, our maturity profile is worth mentioning, since more than 80% of our financial liabilities are considered of long-term nature. Liquidity is also one of our greatest strengths, with a firepower that currently covers more than 75% of the main indebtedness, which will mature over the next five years.
On top of that, the maturities of the major financial facilities are fairly separated along the years, avoiding the concentration of due dates. Treasury stock-wise, the share buyback program that is currently in place has, as a purpose, the acquisition of own shares that eventually will be amortized. This program was resumed in April 2021 after finalizing the previous one devoted to employees compensation plan.
This concludes my overview on the main financial indicators of the period. I will now give the presentation back to our Secretary General, Antonio Rubio, for his comments on our ESG progress and his final conclusions and remarks.
Thank you very much, Maite. During the past Capital Markets Day, we extensively presented the main guidelines of our new sustainability plan for 2021-2023 that is already in place and bearing fruit. We have been providing information on certain key aspects of that plan in previous calls and will continue doing so regularly in future ones. Today, we would like to present you our social cash flow of the previous year, 2020.
Prosegur contributes significantly to the social and economic development of the communities in which it operates. Our business activity generates wealth through the creation of jobs, the payment of salaries, the contribution tax, the purchase of goods and services from suppliers, the distribution of dividends, the implementation of social programs, the development of environmental initiatives, support to the value chain, and investment in innovation.
When we talk about how the company gets its revenues, I want to call the attention to the degree of integrity, respect for its stakeholders, transparency and ethical behavior that guides the way in which our company operates. In Prosegur, we rely on our ethical code or business principles. Thanks to them, we develop internal policies and internal procedures to embed ethical behavior within the day-to-day management.
We are trying to work transversely and to involve all corporate areas and operating businesses. As you can see on the provided information, when we talk about how much value we generate to our stakeholders with our business, social programs included, we are also talking about the positive business impact in the economic, technological, and social development of the countries in which the company operates.
It's our pride and honor to share with you this information that enlightens the measurable positive impact that our company has in the society. An impact that directly benefits nearly 150,000 employees and their families, more than 26,000 suppliers in 26 countries, and several other stakeholders that take participation from those more than EUR 3.5 billion of generated economic value in 2020.
Now, for my closing remarks, I would like to summarize first half of the year results with the following ideas. We continue delivering positive organic growth. This growth is currently driven by Americas and rest of the world regions, while Europe is quickly catching up as the last months of the quarter have been better than expected in terms of recovery of volumes.
Inflationary global trends compose an interesting growth and margin expansion opportunity to our industry, and we have the best footprint and business dynamics to take advantage of it. Margins are recovering in cash and continue expanding in security, benefiting from the excellent acceptance of all our new products and solutions are experimenting in mature economies.
We expect this excellent trend will continue, supported by additional M&A in different product lines and geographies, similar to what we had already done in Uruguay with the acquisition of Redpagos. Also through new partnerships and alliances like the one signed with Telefónica in Colombia for the alarm business, or the recently announced joint venture with Euronet to create the largest independent ATM operator in America.
Our new two business lines, AVOS and Cipher, are beginning to unfold their value, showing an excellent profitability and growth profile that is still in its initial stages, but that is consolidating very fast, making them two very promising future value generators. Lastly, our strict financial discipline continues generating good cash flow, even in the actual complex environment.
Net financial debt remains almost equal to the previous quarter, even taking into account the recent M&A and our infrastructure CapEx stays below 2% of sales, in line with our historical group's ratios. We are very satisfied with the actual recovery dynamics of all our businesses, and hence, we reassure ourselves in the mid and long-term guidance we provided to the market on our Capital Markets Day. With this, we have come to the end of this first half of 2021 results presentation. I wish to thank all for your attention, and now both Maite and myself will be glad to attend all your questions. Thank you very much.
Thank you. We'll now begin the question and answer session. If you would like to ask the question,please press star and one on your telephone and wait for your name to be announced. Please stand by as we compile the Q&A. This will only take a moment. If you wish to cancel your request, please press the hash key. Once again it is star and one if you wish to ask a question. Your first question is from the line of Pedro Alves of CaixaBank BPI. Please go ahead.
Hi. Good morning, everyone. I have two questions, please. First, on Prosegur Cash. I was wondering what could be the level right now of volumes compared to pre-COVID levels, and your outlook for the second half, assuming obviously no further restrictions due to new variants.
My second question, in advance, just to understand a little bit better the expectations of connections for the second half. Outside MPA, do you expect to grow the number of connections above the churn already this year? In MPA, what is your best expectations for connections until December? Thank you very much.
Good afternoon. Thank you very much for your question, Pedro. In the case of the volumes in Prosegur Cash, we are measuring. At the beginning of the year, we were very optimistic. Probably in terms of volume, the year of the pandemic have been more this year 2021 than the year 2020. Since the month of May, we are seeing a clear recovery in volumes in Prosegur Cash, and this is one of the main reasons because we are very optimistic about the evolution in the rest of the year as soon as the vaccination process will develop in LATAM. About the question of connections, Maite?
Thank you, Pedro, for your question. In relation to the increase that we expect for the new connections in alarm business, as you know, in MPAs here in Spain, we have increased 38,000 connections during this first half of the year. For the rest of the year, we think that we should be around 9,100 thousand connections.
For the rest of the group, you can see a slight decrease, mainly coming from the reactivation on sales after suffering from the reduction on the churn rate or the increase on the churn rate in the past. Now for this second half of the year, we expect also a slight increase in number of connections, because now we have a more normalized churn rate levels.
Okay, thank you. Can I just ask a follow-up? My question on cash. You said that you are now quite optimistic for the rest of the year. Given also the calendar of the usual inflation transfer to prices, should we expect a more meaningful margin improvement in the second half compared to the first half on a year-on-year basis? Thank you.
Thank you, Pedro. You know that the seasonality in our business is bullish in the second quarter of the year, and usually as we can transfer the inflation to prices along the rest of the year, usually we have improvement in margins in the second half of the year. We are waiting to repeat the seasonal effect this year, too.
Thank you.
Thank you. Your next question is from the line of Brian Ruttenbur of Imperial Capital. Please go ahead.
Yes. Thank you very much. A quick question about M&A in the U.S. On your Capital Markets Day, you talked about big plans to acquire, want to hear what you have to say in terms of valuations, what you're seeing out there, given all the SPACs and the capital market raising that's happening in the security industry, especially in the U.S., what you're seeing in terms of valuations, anything changing, and when should we expect to start hearing about some of this M&A coming out of you guys? Is it in the next couple of months, by year-end, in the next 12 months? Kind of a two-part question. Thank you.
Brian, thank you for your question. We remain optimistic about the M&A in the U.S. The multiple remain irrational in many transactions. In any case, we are analyzing, and we are winning some transaction, and probably we will offer you some fresh news sooner than later. For the kind of companies we are looking for, niche companies, technology with high quality of portfolio, we are seeing opportunities, and you will see delivery in this area in the following weeks.
Thank you so much.
Thank you. Your next question is from the line of Beatriz Rodríguez from GVC Gaesco. Please go ahead.
Hi. Just one question. Regarding the security businesses, could you give us information about the situation evolution of the activity in Brazil? Thank you.
Thank you, Beatriz, for your question. In Brazil, as you know, pre-COVID, we were in break-even levels. Due to the COVID, we have been suffering from some unproductivity costs, mainly because all the labor costs on the relation to the COVID were quite conservative. Now for the full year and for this second half of the year, we expect to have less unproductivity costs so that we should have a less impact in our margins coming from Brazil.
Thank you very much.
Thank you. Your next question is from the line of Alvaro Lenza of Alantra Equities. Please go ahead.
Hi. Thanks for taking my questions. I have a couple ones. Could you please tell us what the IT costs have been during this quarter, and what should we expect for the second half? Secondly, on the security business, I see that on H1, you indicate no inorganic impact in revenues, despite the consolidation of France, which affected Q1 results.
Maybe you could provide more information on what the inorganic evolution or lack of evolution thereof is driven by. Lastly, on your corporate tax rate, if you could provide us some guidance on what the normalized rate should be for second half and going forward. Thanks.
Thank you, Alvaro, for your questions. In terms of IT, I guess that you are asking for the total cost that we are going to invest in digital transformation. This first half of the year, we have accelerated this process. We had EUR 7 million more than last year.
For the rest of the year, we will continue going in same level, like 40%, 45% higher investment than last year. In terms of the tax levels, the main impact in our tax rate is derived from the application of IAS 29 or hyperinflationary accounting policy, which it is merely an accounting impact. There is no cash impact.
The second main aspect that affects comes from the increase of the local tax rate in the different geographies, like Spain and Argentina. For example, this last month, in June, Argentinian local tax authorities have increased the local tax rate from 30%-35%. This also has made us to actualize retrospectively our inflationary effect. Additionally, we are not booking any deferred tax assets coming from losses.
We do have a very conservative policies in this respect, and also it has affect our tax rate in this matter. If we normalize all these previous effects, we should be around historical figures. In relation to the inorganic growth for security, we soon, very soon, you are going to have notice about it. As we introduce in our Capital Markets Day, we are very focused in USA. There will be some surprises regarding this matter.
Thanks. A follow-up, if I may, but the thing is that on Q1, you reported a EUR 37 million negative impact from the deconsolidation in France in Q1, with no impact. I would assume that there is a EUR 37 million positive contribution from inorganic growth in Q2. Whether this is correct, or am I missing something?
No, it is correct. We do not have any kind of other deconsolidation effects in that matter.
Okay. Thank you.
Thank you. Once again, it is star and one if you'd like to ask a question. We also have a request from the line of Manuel Lorente. Please go ahead.
Hi, good afternoon. My first question is on security margins. If my numbers are correct, we have a muted profitability progression on the quarter. Security margins in the first quarter were 3.4%, and on the second quarter, it's 3.2%. Whether you can give us some details of what is going on there, what you expect for coming quarters?
Thank you, Manuel. The reason is that we have explained the seasonality. In this moment, we have all the costs incorporated in our payroll mainly, and we are only in the half of the process of passing through this slight increase to prices. It's only a seasonal effect. We remain optimistic about the margin expansion in security around the rest of the year.
Okay. My second question is on the alarms business then. If I'm correct, in this quarter or in the following quarter will end up the initial promotional effort made by Movistar Prosegur Alarmas. Do you expect any churn deterioration going forward, or what are your thoughts about that potential migration in terms of price of clients and its potential implications in churn?
About alarms, although our new commercial efforts are evident, and the beauty of alliance with Telefónica, now we are really happy because we have achieved a figure of 300,000 connection in Spain, increase of 50% for our previous customer base only in less than one year, in the year of the pandemic.
Something that we are perceiving that despite these commercial campaigns, we are capturing this period of the year that usually is the period with more connections. Generally speaking, this growth is without deterioration of the churn rate and maintaining the high quality of our portfolio.
Maybe my final question on sequential improvement. Q3, what you are starting to see from Q3, it's a continuation of the, let's say, positive improvement that we have seen on the second quarter? Can you give us some indication of what are your first insights about that quarter?
You know that we really have suffered a fifth wave in the pandemic. We wait at the final one. In any case, usually Q3 is better than Q2, with almost all the price increase passed through to the customers. We remain optimistic in the evolution of volumes also with these two effects or three effects considering seasonality too. We are waiting an improvement in margins in Q3 too. Yes.
Okay. Thank you.
Thank you. With that, we conclude today's Q&A session. I would now like to turn the call back to Mr. Antonio Rubio for any additional closing remarks.
Once again, thank you very much for attending this presentation in this really intense day, intense presentation in Spain. Thank you very much for your attention, we wish necessary and pleasant summer holiday in the northern hemisphere to all of you. Thank you very much again, the IR department will remain in contact with you if you need any further clarification. Thank you very much, good holidays for all.
Thank you. With that, we conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.