Prosegur Compania de Seguridad SA

MAD:PSG

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Prosegur First Quarter 2020 Results Presentation Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today on Tuesday, the 26th of May 2020.I would now like to hand the conference over to your first speaker today, Antonio de Cárcer. Please go ahead, sir.

[Antonio de Cárcer, Head of Investor Relations]

Good afternoon, everybody. Thank you for taking the time to attend this conference call setting out the company's results for the first quarter of 2020. As usual, this webcast presentation will be hosted by Antonio Rubio, Prosegur's CFO; Maite Rodríguez, Finance Director; and myself.Over the next 30 minutes, we will give you a detailed summary of the key financial indicators and most significant events of the period. At the end of this presentation, we will open the line for a Q&A session. When will we be answering any remaining doubts or inquiries you may have. Prior to starting, I would like to remind you that this presentation has been prerecorded and that it will be also available for download in our corporate web page.I will now hand you over to our CFO, Antonio Rubio.

[Antonio Rubio Merino, Chief Financial Officer]

Thank you, Antonio, and good afternoon, everyone.As it may have happened with many other companies these days, the results we are presenting today are heavily influenced by the fact that the COVID-19 pandemic has generated in both our global economies and our personal lives. Prosegur has not been an exception to that. And as you will see on following slides, the effects that social distancing, population confinement and non-essential economy lockdown has had in our different business, and in the security industry in general, have been diverse and with negative outcome. Prior to analyzing the Q1 results, let me first give you some color on the main impact and what type of measures we are putting in place to minimize them.The first thing to point out is the fact that the private security has been declared an essential activity by the government in almost all countries. And therefore, not only our activity has not ceased, but in certain specific areas, has been increased due to our capability to support and enforce certain public services, such as extraordinary healthcare operations or even the disposal of our logistics capillarity to ensure delivery and storage of certain medical goods. Coronavirus expansion has generated several temporary asymmetrical effects of each individual business line. Population confinement and close down of nonfood retail and most of other nonessential activities has generated volume losses in all 3 business lines, as they all 3 are likely dependent on the normal development of the economy. Thus, as you will see later, we're analyzing individual business lines, Cash and Alarms are the business that have been most affected by this. One, because of this immediate dependency on retailers and general consumption; and the other one because of the impossibility of performing door-to-door sales operations during the confinement period.Traditional activity in security has also suffered a volume reduction deriving from the general economy slowdown as most of the clients have closed their facilities and premises. Extraordinary services demanded by food retail and healthcare has softened this impact but, unfortunately, the outcome is still negative. Within this present environment, a large set of cash protection and spending containment measures have been put in place. The main pillars of this cost control strategy are reduction of our capital expenditure to the minimum compulsory, adequation of labor cost to existing levels of activity, strengthening collection policies and a dividend reinvestment offer to shareholders. We expect that the temporary nature of this crisis release its negative effects along the second half of the year, although normal activity will possibly take longer to recover. In the meantime, we will continue applying all sensible measures needed to protect our people and our business, while remain being part of the essential supporting industry, helping our society to overcome this crisis. More on this later.Let's have now a closer look to the main business indicators of the period. Total revenues in the period have remained flat in comparison with the Q1 2019, totaling EUR 994 million and showing a positive local currency growth of more than 9%. It is important to note that FX translational impact in the period has been significantly increased in respect to last year. Due to the additional depreciation, the LatAm currency has suffered since January and the application of the hyperinflationary accounting rules are still in place for this year. Profitability-wise, EBITDA reached EUR 53 million, affected mainly by the combination of additional adverse ForEx and coronavirus effects. In fact, as we will see when analyzing profitability and cash flow generation, if we isolate both negative effects, our profitability should have offered an incremental profile versus previous year. Regarding cash flow generation, as previously mentioned, all of our efforts are oriented towards the protection of our liquidity. And therefore, a set of very strict financial discipline measures have been put in place to control cash consumption and reduce expenses. Following these intentions, capital expenditure has been reduced to the minimum compulsory, putting on hold most of our M&A projects and digital transformation initiatives. While collection procedures have been reinforced to the max, and all cash out requirements are being very carefully considered. All these recent implemented measures will become more visible in Q2. In this regard, our noncash dividend plan was offered to shareholders past month of April, offering them the possibility to receive shares instead of cash and thus minimizing the cash out of the dividend during the period. Taking all this into consideration, operating cash flow in the period has remained within our historical parameters. Bearing in mind that, as you all know, Q1 and Q2 are seasonally the weakest in the year and as most of our costs are being updated, but not yet transferred to market.Finally, looking at our balance sheet and liquidity profile, we maintain our historical solid financing position of the group as a result of our careful and conservative leverage policies. As of today, the company debt structure is mainly of long-term nature, with leveraging level below our internal standards and with a natural hedging policy that help us to minimize currency risks, and has proven to be the good strategy along the years. Later, our Finance Director, Maite Rodríguez, will give you more detail on our financial position.So let us now move to analyze our P&L that looks as follows: consolidated revenues have totaled EUR 994 million, remaining almost identical to the same period in 2019, and driven by a good 6%-plus organic growth, reinforced by an additional 3% inorganic. M&A figures come from the remains of previous year operations in U.S.A., plus new additions made during the first 2 months of the year in Ecuador, Brazil and Colombia in Cash and Security in Spain.As previously indicated, most of M&A activity has now been put on hold since mid-March as a temporary measure to protect cash flow. EBITDA and EBITA totaled EUR 98 million and EUR 53 million, respectively, strongly affected by both the additional negative ForEx suffer from the beginning of the year, but also by the initial impacts of the COVID-19 crisis. EBIT follows a similar path and comes down to EUR 46 million. Our net profit shows a final figure of EUR 19 million prior to minority interests.Please note that this consolidated P&L of the period is free of the accounting extraordinary effects deriving of the exchange of participations between Prosegur and Telefónica that took place at the end of February 2020. Those effects coming from the creation of the joint venture, Movistar Prosegur Alarmas, are purely accounting and of noncash nature. And therefore, we have decided not to reflect them on this presentation to give a realistic -- a more trustworthy image of the real dynamics of the business during this period.Looking at the breakdown of revenues by business and geographies. We see that in absolute terms, Cash is the business with sales most affected due to the combination mainly of increased adverse FX in LatAm and coronavirus crisis in Spain. Nevertheless, in local currency terms, Cash has still delivered an interesting 9% revenue growth that experience the strong business dynamics in emerging economies, where the business lockdown measures had been milder and later applied in comparison with Europe.Security business, on the contrary, has been able to sustain positive growth figures coming from both inorganic growth and extraordinary demand in service in food retail and healthcare due to the pandemic. It is also worth mentioning the fact that economic activities lockdown has a milder impact in volumes in Security than the ones in Cash as security services are still needed, to some extent, mainly remote monitoring and anti-intrusion services, even when the business grows. However, negative COVID effect has been noticed and growth, even being positive, has been weaker than forecasted, being the Spanish market, the most affected.Finally, regarding Alarms, the most significant change is the deconsolidation of our perimeter of all the Spanish connections that now belong to the recently created joint venture, Movistar Prosegur Alarmas. And this is reflected in the apparent volume reduction reported in this first quarter. Antonio de Cárcer will give you more information on this when analyzing results by business, but the domestic alarms tend to present a more resilient business profile less affected by the pandemic, being the only circumstances, the temporary fact that during the confinement period door-to-door sales models have been banned and therefore, commercial activity has been reduced to the minimum.Analyzing by region, the most noticeable highlights are the strong negative currency translation effect generated in Ibero-America by depreciation suffered by the main currencies in the region. This has converted a positive 13.3% local currency growth into a negative loss of slightly more than 5% when converting into euros. Europe, on its side, reflects the negative effect of the COVID crisis that has been particularly intense in Spain, cushioned by a better situation in Germany and Portugal, but nevertheless strong to the point of generating no volume growth.Finally, rest of the world region has shown an excellent, almost 50% growth, fully driven by our recent M&A operations in U.S.A., Philippines and Indonesia, and also by the fact that negative pandemic effects had been of lesser importance on those regions.Moving on to profitability and cash flow generation. We see that EBITA has achieved EUR 53 million coming from EUR 73 million in the same period in 2019. At this point, I would like to draw your attention to the fact that this 27% reduction on our profit comes almost exclusively from the combined impact of adverse ForEx and COVID-19. In respect to FX, in these first 3 months of the year, we have seen how the Brazilian real has dropped down by more than 25%, where the Argentinian peso has also declined an additional 5%, both with respect to the corresponding exchange rates at the end of 2019. This additional currency drop down is responsible of almost 60% of our total EBITA reduction. While the remaining 40% comes from the effect of the COVID-19 control measures applied by governments that have generated. On their initial stages, several operational leverage excesses that take some time to correct.As you can see on the chart, if we excluded those 2 negative effects, our EBITA would have grown by 19%. Being this a good evidence that our business fundamentals are still solid, and our measures to increase profitability are working besides these extraordinary force majeure events. Regarding cash flow generation, additional negative currency translational effect also takes its toll in this area. Operating cash flow of EUR 22 million in the period reflects mainly the FX impact of depreciated collections over invoices issued in late 2020 (sic) [ 2019 ], plus some extraordinary cash out effects coming from accelerated investments performed in December 2019, whose payments have been made in early Q1 this year. Maite Rodríguez will give you a more detailed insight about our cash flow structure in this first quarter when analyzing main financial indicators. But I would like to emphasize that despite these FX timing effects, our operating cash flow generation, as you will see later on, remains within the average Q1 parameters over the past 4 years, showing its traditional seasonal profile.This is all on my side for now. I will now hand the presentation over to Antonio de Cárcer, who will provide you with further information on the performance of each business line. I will join you again at the end of the presentation for my closing remarks and Q&A.

[Antonio de Cárcer, Head of Investor Relations]

Thank you, Antonio. We will now cover some more detailed information on the breakdown of sales by nature in each business line, as well as some additional insights on the main drivers of profitability evolution and other key performance indicators.Starting with Prosegur Cash, the most significant fact that we can appreciate in the chart is the strong negative ForEx impact of this first quarter of the year. As you can see, organic growth has been of 7.3%, supported by an additional 1.7% growth corresponding to M&A operations. Nevertheless, this good 9% local currency growth has been fully eroded by the adverse, almost 13% negative translational currency impact, leaving a final total revenues figure on the period of EUR 415 million. Regarding M&A, at the beginning of the year, 3 new transactions were closed. Being the most significant, the one related to the acquisition of the main cash-in-transit operator in Ecuador. With this deal, Prosegur Cash bolts another new market in the Ibero-American region, gaining an absolute leading position in the South Cone where it has become the most relevant and profitable player. Additionally, we have also increased our presence in Brazil and Colombia and also terminated our activity in Mexico. I would like to point out the fact that new services continue growing even in this harsh condition of clients' lockdowns and social confinement. We expect this situation could imply a good opportunity for this line of products. As in this economic turmoil, clients will be more incentivized to outsource certain noncore activities to more efficient third parties and thus reduce their own operational costs. Finally, looking at the profitability of the business lines in the period. EBITA has suffered a 20% decrease, totaling EUR 53 million. This is explained mainly by the direct effect of less volumes of cash transported and also by the cost of integration of recently performed M&A, as most of the synergies from those operations have not yet been captured and also the mix effect of the currency depreciation suffered in LatAm. This is all on Cash.Let's now move to Security. As previously indicated by Antonio Rubio, Security has had a more resilient performance to the COVID-19 crisis and also has suffered less from the currency translation impact. Thus, it has totaled EUR 513 million in revenues, with an organic growth of 4.6% and an inorganic increment of 6.3%. Inorganic growth comes from both the last 2 months of integration of the acquisitions we made in U.S.A. at the beginning of '19, but also from another transaction performed in Spain, where we acquired a strategic specialist in monitoring technology based in the north of the country. Altogether, when applying the negative 6.3% ForEx effect, volumes have shown positive growth in the period. The negative impact of the losses, mainly from larger sport event services and the reduction of a big portion of our general industry and real estate services, have been partially offset by the strong increment experience in food retail and healthcare clients. New integrated security solutions continue growing and now represent 29% of our total client base, with notable perceived increments in Spain, Colombia and Brazil. This line of products presents a very interesting growth opportunity as we are beginning to deploy anti-COVID solutions based in a combination of remote monitoring of temperature and intelligent image recognition systems that will allow our clients to reinforce and control their new hygienic and customer distancing protocols, a very powerful set of solutions that we expect will be of high demand in the new normality after the crisis. These new services are being put in place by a worldwide initiative denominated COME IN. In which Prosegur has invited several different start-up, universities or consolidated technology companies to present their ideas and tender them to become a viable solution to address this crisis.Finally, on the profitability side, EBITA has suffered a 33%-plus reduction coming mainly from the mix effect that implies the volume reduction on the largest contributor, Spain. Margin reduction in Spain has come from the loss of high-profit services, such as the aforementioned sport events, and also by some operational leverage access that will be corrected along the following months.Finally, a brief comment on our U.S.A. operations that are now fully integrated and beginning to increase profitability with revenues contribution above estimations and still under the pandemic effect, but with a positive outlook.To conclude, let's now move to the Alarms business that has also presented a different profile than usual. The most important thing to note here is the full deconsolidation of our total client base of all the Spanish connections as they have now become the installed base of Movistar Prosegur Alarmas, the new commercial name of the joint venture we created with Telefónica at the beginning of March 2020. Income from Movistar Prosegur Alarmas, or MPA for short, will be reported through equity method and therefore its revenues will not be stated in our P&L from now on. This is the main explanation of the negative 12.4% reduction in inorganic growth, as you can appreciate in the revenues chart. Other than that, the remaining 368,000 connections we operate in 8 countries have contributed with an excellent 12.4% organic growth that has been eroded in LatAm by the strong currency impact. And these, altogether, has built a final outcome of EUR 62 million in revenues.Incidentally, COVID-19 crisis has had a significant effect in new sales as the social distancing measures put in place in all countries have fully banned the door-to-door sales and in-house installation activities that are inherent to this type of product. In consequence, new additions to the base have been almost null, barely to cover the average churn rate of the activity. We expect this to be clearly of temporary nature and hope we will be able to resume our normal sales activity as soon as confinement measures have been released on each country.Finally, RPU at country level remains stable in all markets, but there has been a small reduction at consolidated level. This is explained by the elimination of all the Spanish connections, whose local ARPU was slightly higher than the group's average and to some minor extent, also from the negative currency translation effect in Argentina.That was all on my side regarding the evolution and performance of our different business lines. I will now hand the presentation over to our Finance Director, Maite Rodríguez, who will cover the main financial parameters of our first quarter 2020 results.

[Maite Rodríguez Sedano, Global Finance Director]

Thank you very much, Antonio. Good afternoon, everybody, and thank you very much for attending this presentation.I want now to briefly comment on our consolidated cash flow statement, financial position and the balance sheet. Looking at the cash flow statement, you can appreciate how the operating cash flow, as of March 2020, remains within group's historical parameters, reaching an EBITDA to cash conversion ratio higher than 25% after normalizing the purely accounting impact of IAS 16.I'd like now to comment on the main variations occurred during the first quarter of the year, but not before remarking that the alliance with Telefónica, signed back in February 2020, has not had any impact in the group's net debt position since Prosegur has received Telefónica shares in return of the transaction.Regarding provisions and other noncash items. There is a slight improvement versus March 2019 that can be explained almost entirely by the increase in provisions related to holidays and bonuses, driven by the growing inflation. In terms of changes in working capital, the decrease is due to a mix of several effects. On one hand, the most significant impact derived from the devaluation of our main LatAm currencies. And on the other hand, calendar effects, together with payments related to the digital transformation investment executed at the end of 2019.As far as tax on profit is concerned, its evolution is mainly driven by FX. CapEx, in absolute terms, remains almost flat versus last year same period. Client CapEx still represents around 50% of the total amount. In this regard, I'd like to highlight that as a cash protect measure, only crucial CapEx is going to be invested during 2020.Regarding M&A, the main payments are related to the acquisition of 2 new companies in Ecuador and Brazil under Cash traditional business. When it comes to treasury stock, during this first quarter of the year, Prosegur has invested EUR 48 million in the acquisition of own shares, which has had a direct impact on net debt.Finally, the line Others mainly contains adjustments driven by the consolidation of the Spanish Alarm division, which from March on, is being consolidated under the equity method, together with temporary operating effects coming from certification systems.To conclude, it is worth mentioning that Prosegur hasn't had a significant COVID-19 impact during the first quarter of the year. And it's working hard on protecting its recurrent cash generation. To that end, we are taking many different measures to reinforce collections, delay as much as possible any payment and put in place cost-cutting programs across the whole group. Besides, a dividend reinvestment program has been executed for the second installment in April which has meant a saving of cash higher than 50% of the committed amount to be paid.As far as the current structure of our debt is concerned, at the end of March 2020, the total net debt position amounted to EUR 883 million, excluding debt related to IAS 16, including both deferred payments of EUR 146 million and treasury stock valued at EUR 102 million. As previously mentioned, one of the main reasons that justifies the variation of the net debt during the first quarter of the year is the shares buyback program in place since June 2019, which as of March 20, has reached 7.4% of Prosegur's share capital. Inorganic growth operations are also part of the net debt increase explanation.In terms of liquidity, I want to highlight the group 2 main strengths. First of all, our debt maturity profile remains very solid. Since more than 80% of our financial liabilities are considered of long-term nature. Short-term maturities are mainly credit facilities and they are directly linked to the working capital.Secondly, Prosegur has a low leverage profile with a net financial debt-to-EBITDA ratio of 1.8x, far below our internal limit of 2.5x, and even lower than our banking covenant of 3.5x. In terms of pure cost of debt, our group's average keeps evolving positively with a reduction of 21 basis points when compared to the same period last year. In this regard, cost risen due to funds repatriation process has been considered as FX cost since it is a direct consequence of the highly volatile current currencies environment. To conclude with our financial information review, let's have a look at our consolidated balance sheet. The most significant variations of the balance sheet are explained by changes on the consolidated perimeter. Full disposition of the syndicated revolving credit facilities and impairment test updates. Firstly, regarding changes in the perimeter, the most remarkable one occurred during this first quarter of 2020, comes from the joint venture with Telefónica, summarized in 3 main noncash impacts. On one hand, the increase of noncurrent financial assets, driven by Telefónica shares received back in February after the signing of the 2 companies' alliance. Please bear in mind that any share price variation will directly impact Prosegur equity, having no effect on P&L.On the other hand, as we already said, the Spanish Alarm business began to be consolidated under the equity method since the alliance with Telefónica closing date, that is to say, 28th of February.And finally, as a result of the application of IFRS 10.25, you can appreciate an extra increase in intangible assets. This variation is purely accounting and fully driven by the loss of control of the Spanish Alarm division in which Prosegur now holds a 50% stake.Secondly, the increase in financial liabilities and cash and cash equivalents are mainly justified by the fully disposition of both syndicated revolving credit facilities up to EUR 500 million just as a preventive measure and immediate liquidity guarantee to better face the current uncertainty of the market. In this regard, it's important to highlight this measure does not affect net debt since the funds withdraw appear in our balance sheet as liquidity.Finally, we have updated impairment test within group, concluding mainly with a fully asset impairment for France Security business.This is all on my side. Now, I'd like to return the presentation back to our CFO, Antonio Rubio, who will share his final conclusions and remarks with you. Thank you very much for your attention.

[Antonio Rubio Merino, Chief Financial Officer]

Thank you, Maite.For my closing remarks, I would like, first of all, to express, once again, our recognition and deepest appreciation of the excellent labor that all the private security professionals have been delivering in these difficult times. All our staff has demonstrated a very high level of commitment and professionalism. Being on the forefront of the situation, helping healthcare services and public security forces to guarantee our citizens' and clients' safety and wellness. We are very proud of all of them, and their protection has been our main priority since the very beginning of the crisis.Second, bear in mind that although COVID-19 effects are being negative to our activity, they will be of temporary nature, and we expect all 3 business to recover and come back to normal gradually as the situation begins to ease. Prosegur Cash is most affected due to the severe nature of the confinements and lockdowns, but we probably recover faster as the banks and non-food retailers began to open back again. Security may take some more time, but has shown a more resilient profile, and hence, volume losses are expected to be milder. Alarms, on its side, is less affected, only by the temporary freeze of sales activity that we expect will be resumed soon. As mentioned in my introduction, there have been very asymmetric business dynamics due to the coronavirus crisis, higher-than-expected volumes in certain areas of clients and strong reductions in others. And thus, the net outcome has been negative and high volatility of the situation does not allow us to provide any estimations for the short-term future. We believe there will be new opportunities to take advantage deriving from this situation. Security will benefit from higher demand of new services, commonly defined as anti-COVID and oriented to guarantee certain social distancing protocols that will be kept on the new normality. Hence, remote thermographic scanning, artificial intelligence applied to behavioral recognition patterns and remote monitoring of hygienic dispensing measures will become new services. We are already delivering and that will be supplied at a larger scale in the future.Prosegur Cash, on its side, has an opportunity to increase new service sales. As in a cost pressure environment, clients tend to ask for more absorptions of noncore activities, and this implies a good opportunity for AVOs and BPO services.Finally, we will continue applying all austerity measures at hand to maximize cash protection and reduce expenditure. Adapting our labor cost to existing levels of activity, strengthening our collection procedures, reducing CapEx to the minimum compulsory and re-profiling dividend policies. That are the actions we had already taken. But we will continue analyzing further actions to guarantee our liquidity and protect our cash. That was all on this Q1 2020 results presentation. I wish to thank you all again for sharing your time with us today. And now I will be happy to take all your questions. Thank you very much.

[Operator]

[Operator Instructions] Your first question comes from the line of Francisco Ruiz from Exane.

[Francisco Ruiz, Research Analyst]

I have 3 questions. The first one is regarding the -- what you saw in the Page 6 of your presentation about this COVID-19 effect. Can you give us more light on how you calculate it and what's the total amount? The second question is -- was similar to what Cash has done. Can you give us an idea of the performance in April and May of Security and Alarms? And finally, on Security. Could you give us more information about the organic growth in the U.S.? And what's your plans in France, as I heard that you have made an impairment for the full business there?

[Antonio Rubio Merino, Chief Financial Officer]

Paco, on your first question about the effects of the COVID in the decrease in the EBITDA, 40% of the decrease is coming from this, and it's not very difficult to analyze, mainly is volume reduction and a small portion is the increase in costs related to the security protection measures taken for our people.In April and May, as happened in the second half of March, the effects are very different country by country and business by business. What we can say is that we are seeing now some recovery in volumes in those countries, more affected. And something important, considering our footprint, is that in one side, we suffered a lot in Spain from the very beginning. And of the lockdown and confinement measures have taken a toll in part of our clients, with the most impact in Cash business. But in Security -- because the Security has the possibility to compensate a little bit with the non-food retailing. But in other countries, the measures have been taking in a moment in time where probably we will see the final numbers when finally the pandemic will arrive to an end. The impact there will be lower. So it's difficult for us to extrapolate an effect in March, April or May to the rest of the year. What we can say is that we can now receiving the recovery in volumes in all 3 business, even in the increase in the commercial activity in Alarms. In Alarms, we don't see any extraordinary effect in the churn rate, but all the commercial activity had been almost stopped due to the situation of confinement.And about the situation in France. In France, we remain with a security activity that have been very profitable in the last year. And consequently, in this special situation, we have considered was a good moment to reestimate the value in the balance sheet and reduce it to 0.And about the performance in the U.S., they are also affected because the aviation industry is an important customer there. But despite this temporary effect, we remain optimistic about the integration process and about the performance of the country in the rest of the year.

[Operator]

Your next question comes from the line of David Roux from Bank of America.

[David Roux, Associate]

Sorry, I'm not too sure if it was mentioned, but in terms of the segments, I see that this segmental profitability is now reported as EBITA, as opposed to EBIT, in previous quarters. I was just wondering whether this is something we can expect to be the norm going forward.Then if I just look at the assistance, then the government's initiatives to assist the business during this time. Can you remind me, what sort of government's assistance, the business is currently utilizing, number one. And secondly, how many employees do you currently have on temporary unemployment schemes as a percentage of your workforce?

[Antonio Rubio Merino, Chief Financial Officer]

Thank you for your 3 questions.First of all, for the question about EBITA, that you are right that we mentioned at the end of last full year presentation, but probably we should repeat this year. Historically, internally, within Prosegur, we always use EBITA like the best measure for our performance and even our bonus every year are related to value creation formula, and we use a multiple of EBITA. And historically, we have done this because you know this is a very acquisitive business, and we consider that EBITA, without the effect of amortization, is the best measure for the day-to-day performance of the activity.So we will -- we have decided at the end of last year to use the same metrics internally and externally. And we will -- we provide you with all the historical data for helping to have comparable information, but you are right that we will use EBITA in the future, like the key metric about the operational performance.And about the aids that's coming from the government, we can say that we are not a very affected sector, generally speaking. In Europe, the impact is almost 0, and there are some grants in the U.S. to the companies staying both with the aviation industry, and there is some also in Australia, but nothing significant with a material impact in the P&L.And about the temporary situation with our workers in Spain that have been in the country more effective during this quarter. In Spain, there is a formula, this ERTE, this has temporary a reallocation of the workers, but they remain part of our payroll. And in Spain, where we had 33,000 workers are affected, more or less, 6,000 of them.

[Operator]

Next question comes from the line of Steve Goulden from Deutsche Bank.

[Steven James Goulden, Research Analyst]

So I just wanted to get a bit of feel for -- in the Security business, what kind of -- what sort of wage price dynamic are you having -- are you seeing right now? Are you finding it -- particularly given the issues in Argentina and to some extent, increasing in Brazil, are you finding it difficult to pass on prices there? I also wanted -- for my second question, I just wanted to ask on the dividend point that you discussed before. So sorry, could you clarify that? And apologies if it already has been clarified, and I missed that. But you said that there was an offer given to shareholders in terms of an equity-based dividend -- or shares-based dividend, sorry. Could you just tell me exactly kind of what happened there and what the latest is with that initiative? And lastly, sorry, I didn't quite catch it. Just on -- would you be able to repeat the point on the furloughing and the Spanish workers. I wasn't entirely sure what was going on with your Spanish workforce. I think on the furloughing, you said that it's been relatively minimal in Europe, that you'd use some furloughing or temporary wage agreements in the U.S. If you could clarify that, that would be really appreciated.

[Antonio Rubio Merino, Chief Financial Officer]

Steve, about the price dynamic, we are not seeing nothing different than any other year. So our commercial teams are working and passing through the inflation to the customer without any extraordinary impact. We are very lucky with the portfolio of customer, they are blue chips. Our exposure to the public administration is really low, and we are not foreseeing any negative impact about the process of passing through cost increase through prices during the year. And we are in a normal calendar situation than any other year.About the dividend, it's true that we've not devoted a lot of time for explaining the financials behind. In the first moments of the crisis, our intention, our first step was to protect our cash flow. We have taken very tough measures. We have offered voluntary reduction even in salaries. The executive committee, for example, had a reduction of 40% in our salaries.Considering the situation for protecting our cash flow, we would have like even to reduce the dividend during the period that the uncertainties about the future of the crisis will happen. But you know that our dividend is historically approved more or less in October of every year on the results of the current year. So we approved in October '19, a dividend in 4 payments related to the own results of the year '19, although the year was not accountingly closed. So these 4 payments is a debt that is compulsory for us. So we couldn't not pay them. So what we consider was to offer our shareholders that voluntary, instead of receiving the dividend in cash, they can use this dividend for buying our own shares that we have in our balance sheet. We have, more or less, 7% of the share of the company in our balance sheet. So -- but in any case, the main shareholders wanted to announce, it's important statement and a clear signal for our people and about their commitments with the company, that they will go with their 100% of dividend to this program. And this has been more or less then resolved. The main shareholders had gone to the project, but also 300 additional shareholders, more or less 60% of the dividend have been paid through shares and the rest in cash. And we will do the same while this extraordinary situation will remain. So -- and we consider this a way -- good way for protecting our cash flow. But at the same time, to provide a clear message of commitment from the main shareholders to our people, no?And about the aids of the government. In Spain, there is an extraordinary hike in social security payments for this period that we estimate is less than EUR 0.5 million. In Australia, I think it's something related to AUD 1 million and in the U.S. at similar figure. So it's nothing material, no? So what we are doing is adjusting our labor structure to the present situation. And you know there are markets more flexible than others, Australia and U.S., they had a very flexible labor market. Spain is not so flexible, but with the ERTE instrument, we can -- we have done our best for reducing the cost during this period.

[Operator]

Your next question comes from the line of Isabel Carballo from BBVA.

[Isabel Carballo, Chief Analyst]

Two questions, if I may. The first one is regarding the shares of Telefónica, if you have any lock up period for selling the shares? And second question is regarding the share buyback program. If we can consider that in this environment, you put on hold the remaining buybacks.

[Antonio Rubio Merino, Chief Financial Officer]

Isabel, about the share of Telefónica, yes, we had a lock-up period until November, of 6 months. And about the share buyback program, our intention in this moment is to maintain the program. We consider the share price of the shares really, really low. We are not investing at important amount of cash in the program, and we consider it's a significant message to the market that we remain very confident in the -- in our underlying business, in our business model and in the strength of the company. And that the share price, sooner or later, will reflect it.

[Operator]

[Operator Instructions] Your next question comes from the line of Chirag Vadhia from HSBC.

[Chirag Vadhia, Research Analyst]

Just on the operating cash flow side. Do you expect operating cash flow to remain on track in Q2 with the historical parameters that you've mentioned? And how do you see alarm installations progressing into the second half, as social distancing and measures come a bit better.And in terms of deferred earnings schemes as well, when the deferred earnings schemes are taken away, how do you view the options and levers that you have in place in terms of flexing your cost base?

[Antonio Rubio Merino, Chief Financial Officer]

Chirag, about operating cash flow, we are very happy about the reaction of our commercial collection teams. At the beginning, I imagine the last week, so March, we didn't know exactly if we were in front of a big wave of a tsunami. We put all our attention and have very clear and transparent conversations with our customer. We have been very lucky about the collections during the month of March and April. We have put in practice a lot of measures for protecting the cash flow, controlling DSO, been very transparent that we are a company mainly paying salaries, so we can suffer an important delay in our collections, and we are very, very satisfied about the performance of the cash flow. But we will remain very cautious for the following quarters for providing the best cash flow image also possible. About the Alarm business, we are seeing some recovery in the -- in new installations. We are putting some more people in -- on the ground, selling alarms in Spain, for example, in [indiscernible] But now, we have close to 100 people selling alarms in Spain. So we are slowly -- we have seen a recovery in the activity, and we are a little bit optimistic about the commercial activity in Alarms for the rest of the year. And excuse me, Chirag, I didn't understand very well your third question.

[Chirag Vadhia, Research Analyst]

Sure. Yes. So when furloughing schemes are taken away, will you, as the company, bear the costs for employees? Or will you look, I guess, to sort of restructuring with your cost base?

[Antonio Rubio Merino, Chief Financial Officer]

You know that it's a good -- very good question. Prosegur is a very secure company, and we are permanently reviewing our structure, our annual debt costs and review things. Teleworking probably something that is now here for remaining. What is -- what are the consequences of this about our profile of our payroll? Come in new talent interested in a different salary, seeing -- saying of a different way to work with us. We don't know. But for this sure, that is that all the austerity measures related to expense, not related to salary, will remain for the whole year. So we have a lot of plans related to -- imagine traveling expenses that are significant in our company, imagine meetings, imagine any -- no absolutely necessary costs are under control, CapEx not related to the -- to our customer. But I think that we had to take this opportunity for reviewing, again, once again, our structure after this crisis to have a Prosegur stronger and more efficient.

[Operator]

We have no further questions. I will now pass the conference back to Antonio Rubio for his closing comments.

[Antonio Rubio Merino, Chief Financial Officer]

So thank you very much for attending this presentation. Thank you for your very good questions. Once again, I would like to restate how proud we are our colleagues. This day, we are seeing every night all the people realizing the enormous effort of our health system professionals, but beside them every morning, every night, every 24 hours are the people of the private security industry, helping to reorganize this new normality and they are real heroes in this situation. We are obsessed about their profession and their security. But at the same time, we can't be more proud about them. So thank you very much to all of them, again. And thank you very much to all of you. And Antonio de Cárcer and Cristina will remain available for you for any further questions you may have. Thank you very much, and have a nice evening.

[Operator]

That does conclude our conference for today. Thank you for participating. You may all disconnect.