Good day, and thank you for standing by. Welcome to the Prosegur Q1 2023 results presentation. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I will now like to hand the conference over to your speaker today, Mr. Antonio de Castro, Head of IR. Please go ahead.
Good afternoon, and welcome to the Prosegur Q123 results presentation webcast. This presentation will last around 30 minutes and will be followed by an open Q&A session. This webcast will be hosted by our Group CFO, Maite Rodríguez, 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 to download on our corporate webpage. I will now hand you over to our CFO, Maite Rodríguez.
Good afternoon, everyone, and thank you very much for your attention. The good results we are presenting today for the first quarter of 2023 show solid continuity and improvement, persisting with the growth dynamics seen throughout 2022. With a strong organic growth driven by our commercial capabilities, able to benefit quickly from inflation, but also capable of generating higher demand for our new products in all business areas. 2023 is somehow presenting bigger challenges in terms of seasonality and adverse macro than 2022. However, we are confident that we can overcome them and deliver good results throughout the year. This first quarter is a good example of this. Without further ado, let's begin by reviewing the main milestones seen during the period.
The most noticeable aspect of the period is our excellent revenues growth of over 13%, coming from organic growth close to 24% and exhibiting double-digit business expansion levels in all geographies, far above the compound nominal GDP of each region. Transferring cost inflation to market is also progressing fast with positive results. Some time is still needed to fully conclude this process. Our second point to note is the highly efficient performance the group has shown in what usually tends to be one of the weakest quarters of the year due to seasonality. In this regard, profitability at EBITDA level has grown by 22.7%, with a remarkable margin increase of nearly 60 basis points versus Q1 2022, demonstrating our capacity to pass prices through and generating new demand.
Our cash flow generation has also improved significantly compared to Q1 2022, recovering from the exceptional adverse effects we saw one year ago as a result of increasing absenteeism due to COVID, supply chain shortages, and increased working capital consumption. The group's balance sheet also remains stable, with low cost of debt and moderate leverage ratios despite the current global increase in the cost of money. Finally, I would also like to highlight our continuous commitment to sustainability. We have a very ambitious, well-structured ESG policy that has launched several different initiatives to be implemented in 2023. Today, I am proud to share with you our recent announcement of a new emissions compensation project in Brazil. This project, which is a pioneer in the sector, focuses on compensation by generating 100% renewable energy in Rio Grande do Norte in Brazil.
By supporting this infrastructure, Prosegur is proud to contribute to local sustainability thanks to the production of renewable electricity from wind power plants with low environmental impact. Let us now analyze the financial results of this first quarter in more detail, starting by looking at evolution of our revenues. Sales in the first quarter has increased by more than 13%. In organic terms, growth has been over 23%. This excellent sales result is in line with the reported growth in the fourth quarter of last year and significantly higher than equivalent growth in the first quarter of 2022. This increase in organic revenues has gone hand in hand with an additional 2.2% for recent M&A operations, only reduced by a negative FX impact of 12.7%.
This excellent performance clearly reflects the effectiveness of our business model in leveraging inflation and generating new business opportunities. This growth has been primarily driven by the excellent performance of our cash business, with volumes continuing to increase in both traditional and new products, supplemented by excellent business development in our security business in Spain and in the U.S., as well as the powerful pricing capabilities of our alarm business. This is clear evidence of how our business model is gaining traction in each of our markets, sustaining double-digit growth in euros across each region and business line, despite the translational effect of exchange rates. Moving on to analyze profitability, we can see how our EBITDA margin growth is approximately 23%. This is a higher increase than sales growth while maintaining the EBITDA margin at levels almost equal to those of the last quarter of 2022.
It is an excellent result, especially considering the increased seasonal effect observed this year due to the high inflation rate of 2022. As you are aware, the first few months of the year usually have a negative seasonal effect on our accounts due to the cost increases that have not yet been properly transferred to prices. This seasonal pattern, which is typical of the business, is further exacerbated this year by a greater differential in cost increase compared to the previous year, coming from higher salary negotiations agreed in the collective bargaining agreements in almost all geographies, along with the incorporation of some new business units such as Forex, whose profitability is more skewed to the second half of the year, given the strong seasonal nature of the operations.
The progress in price transfers to the market is satisfactory, the negative effect of the still updated quantities is comparatively higher than last year. As shown in the profitability graphs by business, this effect has had a greater impact on Cash and AVOS in Q1, with relative profitability remaining flat despite the absolute increase in the respective EBITDAs. This will be corrected through the year as the negotiations for rate updates, which are retroactive in some markets, are being concluded satisfactorily. Security and alarms, on the other hand, show a significant improvement in their respective indicators, while Movistar Prosegur Alarmas also improves in absolute terms, maintaining its pre-SAC EBITDA above 50% and being only temporarily affected by the cost of updating its technological platforms. As a result of these commercial and profitability dynamics, we have reached the following P&L in this first quarter of 2023.
The most significant aspect is the excellent increase in improvement in all lines, all of them going farther than the previous one and leading to an improvement in net profit of nearly 20%. This is a strong indication of the resilience of our business model and our ability to maximize market macro circumstances. It is also important to note the increase in the group's financial costs compared to Q1 2022. This comes mainly due to the refinancing of the EUR 700 million bond at a 1% interest rate, which matured in March, and which has been replaced by a new one worth EUR 500 million at 2.5%, a very attractive rate if compared to the current interest rates rise. There has also been a significant reduction in the tax rate, mainly due to the improved profitability in certain geographies.
This is good news, as it is expected to be maintained throughout the year and will contribute positively to offsetting the increase in financial expenses. Let us now move on to analysis of the group's cash generation for this first quarter. Cash flow also improves compared to Q1 2023. Our operations continue to gain in scale, and we are optimizing the working capital consumption that underwent a strong increase in Q1 2022. As you may remember, this came about due to the strong volume recovery experience at the beginning of the year, combined with accelerated stockpiling to offset the supply chain shortage seen in the same period of 2022. Fortunately, all these negative experiences are almost over, and our cash flow generation capabilities are returning to normal, as evinced in this quarterly cash flow statement.
Total CapEx remains below 3.8% of sales, despite its obvious increase in absolute terms, resulting directly from higher sales in new products and more intense operational volumes. We have continued to increase customer CapEx in the first three months of the year, and this now represents 46% of CapEx consumption, compared to 40% at the close of 2022. This is an excellent indicator directly linked to the increased penetration of new products and the growing demand of technological solutions from cash and security clients, respectively. Finally, let's review the debt position and balance sheet to conclude the financial overview of the quarter results.
In terms of debt structure, it's worth mentioning the moderate level of leverage, which now sits on a 2.3x s Net Debt to EBITDA ratio, in line with the close of last year and one notch lower than reported in Q1 2022. Our average cost of debt has increased slightly to 2.5% due to the refinancing of our bond. Our balance sheet, as usual, there are no significant variations to report other than the inclusion of our Australian cash operations under the heading non-current assets held for sale. We are still awaiting regulatory approval to conclude our merger with the main Australian cash-in-transit operator. I will now turn the presentation over to our Head of Investor Relations, Antonio de Castro, who will give you more detailed information on the development of the specific business areas.
Thank you very much, Maite. Let's now have a look at the results of each activity line, covering the main performance indicators and the most relevant aspects of the period in each one. Starting with Prosegur Cash, the most significant achievements of the period have been the noticeable nearly 30% revenues growth in organic terms, sustaining the excellent local currency revenues growth seen along the past year and coupled to an additional 5.1% in organic growth coming from recent acquisitions. This excellent performance has been consistent in all regions, with increments in excess of 36% in LATAM, 13% in Europe, and more than 23% in Asia-Pacific. All of them far above of their respective nominal GDP growths.
These excellent revenues results have been affected from a negative 18.6% currency translational impact, leading nevertheless to a very solid 16.2% sales growth in euro terms. That reflects the good expansion dynamics the business is delivering. EBITDA has also grown by 9%, totaling EUR 60 million. It was temporarily affected by a more intense seasonality due to both the price transfer season and the Forex business acquired last year, whose operational volumes tend to be stronger in the second half of the year. However, we expect a progressive recovery in cash profitability as the year progresses.
Also worth noting in this quarter has been the strong increment in revenues experienced by our new products, that now account for more than 28% of total sales in cash, reinforced by the introduction of the new Forex services coming from the recent acquisition of ChangeGroup. New products have grown by more than 40% year-on-year, being important contributors in all regions, including Asia-Pacific, due to the intense commercial activity, and with a significant increment of sales in the main solutions, Cash Today, Corban, and Forex. Turning our attention now to the security business, we can observe a significant organic growth of 17.8%, amounting to EUR 521 million, after adjusting for the negative FX impact of -6.7%.
Sales performance has been very strong across all regions, with Spain and the U.S. being particularly noteworthy due to the continued success of our hybrid security. We have accelerated our expansion plan in the U.S., opening six new branches in addition to the 11 created during 2022, which is driven by the demand of new clients. By the end of 2023, we expect to add another 10 operational branches to fulfill our geographical expansion. In terms of profitability, security has grown by almost 35%, reaching EUR 9 million, and delivering an EBITDA margin of 1.8%, which is a remarkable achievement given the strong investments in the U.S. and seasonality, indicating a good structural recovery of the business profitability. Price increases have been well-received by the market, with proposed increments being fully accepted by clients.
There is still some percentage of the client base pending closure, which is normal at this time of the year. We expect this process to be fully concluded in the incoming months. Finally, our hybrid security solutions continue to grow and expand their presence, now serving more than 32% of our total client base, which is a 140 basis points increase compared to the figure at the end of 2022. Hybrid security combines three elements: our security professionals, the most advanced security technology that enhance human capabilities, and the data captured by the security ecosystems that feeds back into the model, allowing for its adaptation and flexibility. This new value proposition to clients allows for the implementation of different types of services, as opposed to traditional single product contracts, and is largely responsible for the profitability improvement that the business is experiencing.
Shifting our attention to the alarms business, we observe that the total number of clients has reached nearly 820,000 connections. This indicates a net growth of 90,000 clients since Q1 2022. New clients acquired in Q1 2023 have increased by 43% in Prosegur Alarms, but have voluntarily decreased in MPA. This is because MPA is now focusing on attracting higher quality clients to enhance business efficiency indicators. Revenues for Prosegur Alarms have impressively increased by 36.3% in organic terms, which is evidence of this business's exceptional ability to raise prices and pass on inflation to clients. However, this growth has been negatively impacted by FX, as more than two-thirds of the total client base is in LATAM.
Both units have reported improvements in churn rate as a result of client retention campaigns initiated this year. They have also seen significant increase in ARPU due to pricing updates. ARPU has grown by almost 10% in Prosegur Alarms and by an excellent more than 13% in MPA. This increase was also due to a reduction in aggressive campaigns that were offered to most clients in 2022 without any upfront connection cost. In line with our previous results presentation, we have included a projection of the actual value of ARPU and EBITDA pre-SAC in MPA once the newly gained clients terminate the discount periods.
This provides a better understanding of the excellent value creation of this business. Profitability by client in both units have continued to increase, with the obtained EBITDA being EUR 17 per client and month in Prosegur Alarms and EUR 19 in MPA, or EUR 23 if discounts are normalized. The EBITDA margin has also increased in Prosegur Alarms to 44.4%, while in MPA, it still reflects the cost of the new video management platform that is being diluted as the number of clients demanding this system increases, as well as the client retention campaign initiated this year. Nevertheless, the EBITDA margin in MPA still remains above the comfortable 52%, and it will continue to span as the client base increases. To conclude with this product line results overview, let's now briefly look at AVOS and Cipher.
Prosegur AVOS has increased its revenues by almost 14%, with no adverse effects to be taken into consideration, being this a very good indication of the sustained double-digit growth this highly technified BPO business line is delivering. Profitability-wise, EBITDA has stayed almost flat due to seasonal effect as pricing implement is still in the process to be concluded, given that the increment to be transferred to client this year, 2023, is higher than the one in 2022. Nevertheless, we expect this situation to normalize as the year progresses and the business regains its habitual healthy EBITDA margins. Cipher, on its side, is reflecting this quarter the cost implicit on the restructuring of the business towards a more agile and recurring service model. We are on the final stages of implementing the new xMDR platform.
xMDR, Extended Managed Detection and Response, is a proprietary robotic technology developed by Cipher to streamline threat intelligence, detection, and response activities, designed by our engineers and operated by our experts as one team. It's a major investment that will help boost sales and has also demanded a restructuring of the commercial team, whose cost has been fully incorporated in this first quarter. Client bookings on the last part of the quarter have been very positive, and we expect the situation to revert to profitable numbers along the year. This concludes our analysis of the performance of each business line in this first quarter of the year. Thank you for your attention. I will now hand the microphone back to our CFO, Maite Rodríguez, for her closing remarks.
Thank you very much, Antonio. Let me now share with you my concluding thoughts on the most relevant conclusions of the Q1 results presentation. We are very pleased to report a satisfactory start to 2023, characterized by robust organic growth across all our geographies and businesses. This achievement is thanks to our consistent focus on innovation, operational excellence, and good understanding of the macro conditions. The company's profitability is growing ahead of sales, a remarkable accomplishment in a seasonally adverse first quarter. This strong performance indicates a positive trajectory for the company's results in the upcoming quarters, leaning on the two main factors of volume increases and successful price transfer to market. We expect seasonal effects on profitability to be offset over the next few months.
In this regard, we are happy to state that our inflation volumes have continued to grow at similar rate as in Q1 2022. Our price increase process is progressing successfully and in line with expectations. New products have continued to perform exceptionally well with close to 30% penetration across the group, led by Cash, also with an increasing penetration of the hybrid security concept, which has a direct positive effect on margins. This indicates that the company's focus on innovation and customer centricity is bearing fruit. We will continue to focus most of our efforts on developing this strategy as it is proving to be the healthiest way to sustain our future growth. The company has also seen an interesting recovery of its cash generation levels in this first quarter.
It's still affected by the seasonality of the business, but with a positive outlook as our main investments are becoming more client-oriented with short-term returns. Finally, taking all of this into consideration, the company has positive expectations for 2023. It is true that we are facing tougher macro challenges than the previous years, but we remain optimistic given the strong start of the year, actual growth momentum, and our ability to take advantage of inflationary environments. That's all from me. I would now like to open the floor for any questions, and thank you all for your time with us.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile a Q&A roster. We will now take the first question. It comes from the line of Enrique Yagüez from Bestinver Securities. Please go ahead. Your line is open.
Good afternoon, Maite and Antonio. I have three questions. The first one is regarding the evolution of EBITDA.
If we exclude the contribution of Cash and Security, there has been a positive impact of EUR 5 million roughly from the remaining businesses and the headquarters versus minus EUR 2 million in the first quarter of last year. The question is, what drives this improvement? Is lower cost at reduction of costs at the headquarters or larger contribution from Alarms or any other reason? The second question is regarding the tax rates. It increases for Cash and falls for the parent company. What is the reason? It's just a question of the higher impact of hyperinflationary accounting in Cash or any other reason. Finally, on the Alarms business, two questions. First of all, in the previous quarter, you highlighted signing new strategic alliance as one of the priorities of the company.
Any update on this regard would be welcome. How has been the evolution of the commercial agreement size until now, especially in Latin? Secondly, if you could give us some also color feedback about the evolution of the KPIs in the second quarter, given the strong evolution of Q1. Thank you very much.
Thank you, Enrique, for your questions. In relation to the first question, here you have to consider that we have a better margins coming from security. We have better margins coming also from alarms. We also have some impact coming from indirect cost efficiencies that were done last Q4 of last year, and they are bearing fruit now in this Q1 in the rest of the year. It's mainly coming from there. In relation to the tax rate, here you have to consider that in some countries, in security business, we were losing money, and this year we are not. As you know, in our accounting policy, we are very conservative, and we just booked as a credit losses the...
We just booked as credit losses the companies that have achieved the breakeven. We almost have that breakeven in almost all countries, and that's why the tax rate is also improving. In terms of alliances, we are, as you know, it's one of our main targets for this 2023. We are really working hard in this point, and we will see if we have new ones or. This is like I always say the same thing. This is like the M&A deals, that you never know what's going to happen till the day that you are signing the deal. We will see, but we are very positive.
In terms of how our commercial, the previous commercial agreements that we have been signing during the last year, how they are evolving, the answer is they are evolving very slowly. It is true that time is very It's not so quickly because, you know, you have to train the sales team, you have to know your partner, and you have to know how to work together. Sometimes that is not so easy. We are really working harder so that we expect more positive results for the second half of the year. In terms of KPIs, we, for the Q2, we will maintain this same trend. We are very positive on how it's going to evolve for this Q2.
Thank you very much.
Thank you. We will now take the next question. It comes from the line of Pedro Alves from CaixaBank BPI. Please go ahead. Your line is open.
Hi, good afternoon. Thank you for taking my questions. Two, if I may. The first one on security. Given the collective bargaining agreements to date, and inflation transfer to clients moving in part into your expectations, the good penetration of hybrid solution and so on. Do you have now an updated view on where margins will stand for the full year in security? Do you think you are on track to reach at least a 3% EBITDA margin figure? Secondly, Prosegur Cash. I know this is a recurring question of keeping the company listed or not, but following the buyback programs, I think Prosegur now should own close to 80% of the company.
Can you just remind us if there is any mandatory takeover rule that could be triggered at some point by the Spanish regulator? Thank you so much.
Thank you, Pedro, for your question. In relation to the security margin for the year-end, the answer is that we are going to maintain the same trend as last year. We have started this Q1 stronger than last year, so we expect to continue like that, and with that same positive trend of growing and improving the margin. In terms of the buyback programs that nowadays we do not have any buyback programs in the parent company. We have them in the Prosegur Cash business. There isn't any mandatory. I know that now the remaining percentage for the reputation of Prosegur Cash is 20%.
There isn't, from our regulator, there isn't any regulation that says that we have to buy it. It is if we achieve another 10%. When you have 10% listed, it's like a kind of mandatory to buy it. If not, there isn't any kind of regulation that applies in this sense.
Thank you.
Thank you. We will now take the next question. It comes from the line of Francisco Ruiz Martín from BNP Paribas Exane. Please go ahead. Your line is open.
Hello. Good afternoon to both of you. I have three questions too. One is on a follow-up on the security margin, because it's true that security margin improves in this quarter, mainly we are comparing with the Omicrom quarter last year. Mainly this improvement is a little bit fictitious. Could you give us an idea of what should be the impact of price transfer in coming quarters in the margin security? How is the situation in Brazil and United States for the year? The 2nd question is on the consensus. I mean, last week, your colleagues on Prosegur Cash commented that they are comfortable with the current consensus on EBITA for the year.
Are you as well comfortable with this? I mean, I think your consensus is around EUR 340 million. Last but not least is on alarms. It's true that the result has been quite good, but if you look at net adds, we have seen a slowdown. I mean, this is a typical slowdown because of the changes on the policies between you and your competitor. Do you think that the current levels of new adds it's a ceiling for the company, and growth in terms of net adds would be more difficult from now on? Thank you.
Thank you, Paco, for your questions. In relation to security margin, we are very happy of how it's evolving and how during this first few even we are improving in comparison to last year. This is thanks to the evolution of all the countries where we are, even Brazil and U.S. In the case of Brazil, we have achieved the breakeven, what are very good news. In the case of U.S., as you know, we are investing a lot in new branches. Now we have opened around 10 new branches, we really have a very challenging target for this year because we are really going to open a lot of more new branches. That's decreasing the margin.
If we exclude those investments, the margins coming from U.S. are one of the highest in, at group level in security business. In terms of price, as you know, this part of the year, we have the price weighs more than volume. As it happens in the first few of previous years. However, this year the price is slightly higher than what is common in this period, but it's mainly because of the inflation that we have. In relation to your second question about the consensus, the answer is the same, as Cash answered yesterday.
We are also very comfortable and our budget is quite similar to the consensus. Answering your third question about the alarm it's not a group. You can grow whatever you need, whatever you want in the alarm business in Spain because the penetration of the market is very low. Now our strategy has changed a little bit. As I mentioned in the Q4 of last year, this year we are more focused on retention than on achieving a higher number of subscribers. That's why our churn rate also has been improved and even we are also care about the margins in EBITDA per stack.
That's why we are not growing so much. In alarm business you have to be sharing all the time retention, because when you grow, you need cash. You have to control also that, the cash that you need for growing. It's very common to combine, both models. We have, growing, and now we have to be more focused on retention and looking for the cash flow. That strategy for sure that will be changing in the future.
Okay. Okay. Thank you. Just a follow-up, not a follow-up. Another question is, as you deconsolidate already Australia in your balance sheet, first is how it's possible that you deconsolidate on the balance sheet and continue to show it on the P&L, secondly, if you could give us the impact that this has had in net debt?
Paco, that's because of the accounting standards. You have to, in the P&L, you have to consolidate it fully as normal. In the balance sheet, you have to split it from the rest of the balance sheet. It's mainly because it's not. The technical word is because it's not considered a segment. That's why we are not separating it also in P&L. Your second question was.
It's on the debt. What has been the impact on the debt of this deconsolidation?
It's Paco, in... I don't have exactly the figure. Antonio, maybe later we can give you exactly the figure. It's going to be related with what we call creditors that are the cutoffs coming from the Australian customers. By excluding that, it's not a very significant amount. Antonio will tell you later if you want, because we do not have here the figure.
Okay. Thank you.
Thank you. There are no further questions at this time. I would like to hand back over to Maite Rodríguez for closing remarks.
Thank you very much for your attention. If you need further information, please contact our Investor Relations department, who is open to help you at any time. Have a nice day.
That does conclude our conference for today. Thank you for participating. You may all disconnect.