Prosegur Compania de Seguridad SA

MAD:PSG

Earnings Call Analysis

Strong Organic Growth Despite Challenges

In the first quarter of 2024, the company reported a 5% year-over-year increase in total sales, reaching €1.1 billion, with organic growth of up to 7.3% when adjusted for the Australian operation. Revenue from the security business grew 24%, driven by efficient inflation pass-through and enhanced operating efficiencies. However, overall EBITA decreased by 18% due to FX impacts and restructuring costs in Australia. Despite challenges, the company remains optimistic about improving cash flow and achieving a net debt-to-EBITDA ratio of 2x by 2025. The alarms business showed robust performance, with a 107% organic growth and an 8% increase in the client base.

A Strong Start to 2024

In the first quarter of 2024, Prosegur achieved a total sales figure of EUR 1.1 billion, marking a 5% increase year-over-year. Excluding the impact of foreign exchange (FX), nearly all of this growth was organic. Notably, the company has shown an impressive range of organic growth across its business units, which reached as high as 107%. Positive momentum was observed across all operating regions, with a particular strengthening in European sales compared to Latin America, with the latter's share of sales decreasing to 51%.

Profitability Challenges Amid Growth

Despite the growth in sales, Prosegur's total EBITA decreased by 18% year-over-year to EUR 60 million, primarily due to FX impacts and increased operational expenditures. Key investments, particularly in the ForEx business, contributed to the decrease in EBITA. The management expects these temporary setbacks to reverse as the company moves into its higher sales season in the upcoming quarters.

Security Business Shines

The security division stood out with total revenues hitting EUR 585 million and organic growth of an impressive 37%. This robust performance reflects the effective pass-through of inflation to pricing and improved operational efficiency. The EBITA for this segment also rose by 24% to EUR 12 million, leading to an EBITA margin of 2%, which is a 16% improvement from the prior year. Despite positive results, cash generation was somewhat challenged due to the timing of billing, resulting in negative cash flow in the quarter.

Alarm Business Performance

Prosegur's alarm business continued to demonstrate strong performance, with service margins increasing significantly. The acquisition costs for their MPA operations experienced a slight uptick, attributed to ongoing improvements in their service offerings and investment in marketing. The total number of clients increased to 887,000, representing an 8% year-over-year growth, and the service margin per connection also showed favorable movements.

Looking Ahead: Revenue Growth and Operational Efficiency

Looking forward, management expressed optimism regarding cash flow generation, particularly in the second half of the year when historical trends indicate stronger cash flow performance. The guidance includes expectations of consistent growth in the security and alarm business, with EBITA projected to reach EUR 330 million for the year. The overall sentiment in the earnings call was that despite near-term challenges, the long-term operational efficiency and profitability prospects remain strong.

CapEx and Debt Management

Capital expenditures are projected to be slightly higher than in the previous year, with a focus on expansion and technological investments, such as those in AVOS Tech, which might account for EUR 11 million of the total CapEx. The current net debt-to-EBITDA ratio sits at 2.8x. However, management is confident that this will decrease to approximately 2x by 2025 as cash generation improves. They also noted that a stable structure and low-cost debt are aligned with their strategic financial management objectives.

Conclusion: Confident in Future Performance

Overall, Prosegur's Q1 performance sets a solid foundation for 2024. With a focus on operational efficiency, continuing to pass through inflation to pricing, and strategic investments, the company is well-positioned to overcome its current challenges and achieve strong financial results in the coming quarters.

Earnings Call Transcript 2024-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Prosegur Q1 2024 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your speaker today, Juan Ignacio Galleano, Head of IR. Please go ahead.

[Juan Galleano, executive]

Good afternoon, and welcome to [ Prosegur's ] First Quarter 2024 Results Presentation Webcast. Before we start, I would like to remind you that this presentation has been pre-recorded and that it will be available on our corporate website. I will now hand you over to our CFO, Maite Rodriguez.

[Maite Sedano, executive]

Good afternoon, and thank you, all, for your presence. We are very encouraged with the results we are presenting today, and we feel confident that we are in the right track to comply with the objectives we set for this year. As we shall see throughout the presentation, operating performance in each of our business improved year-over-year.Indeed, the first quarter, and specifically the month of March, is not fully comparable on a yearly basis as in 2023 Easter was celebrated in April. This fully explains the negative impact, particularly in operating cash generation. It's worth stating though that this effect was temporary in nature and should be fully reversed during the second quarter.Let's now deep dive into the most significant milestones of the period. During the first quarter of the year, our main businesses continued to perform, resulting in EUR 1.1 billion in total annual sales. This represents a 5.2% increase year-over-year, which considering the FX impact, speaks for a remarkable organic growth. This is particularly true for our security and alarm businesses where the pass-through from inflation to prices was quite rapid.The figure is still more impressive when correcting for the Q1 '23 sales of the Australian operation. As all you know, we no longer fully consolidate that country. So in order to make the comparison homogeneous, we should subtract last year Australian sales. By doing so, the increase in sales go up to 7.3%.Moving to profitability. Our cash business was mainly impacted by the depreciation of the Argentine peso. Indeed, year-over-year the currency depreciated in real terms over 20%. On top of this, 2 other factors explain the decrease. On the one hand, our ForEx business continued to expand, resulting in additional setup costs and operating expenditures.On the other, we are still impacted by restructuring costs in our Australian operation. We are confident that over time this will no longer exist, allowing us to reap off the benefits of the synergies and efficiencies of the combined operation. Our security business for its part continues its upward trend with a 16% increase in EBITA margin and higher cash generation.As it has been the case in past quarters, positive results were mainly driven by enhanced operating efficiencies, coupled with an ongoing focus in increasing our commercial production, making our whole operation way more efficient and sustainable. As we will later see in our Alarms business, we continue with our systematic growth while keeping all main operating and financial indicators in line. This is the case for both Prosegur Alarms and our Spanish operation, MPA.Our cash flow generation has been temporarily impacted by the fewer operating days compared to the previous year. As said, Easter celebration followed by [indiscernible] has implied that the last operating day of the quarter was on the 27th with the obvious consequence in collections. There are a couple of things that should be stressed out here. First, the [ temporality ] of the impact and then the fact that if we exclude it, cash generation increases year-over-year.As it has been the case for many years now, innovation is at the top of our priorities as we know for a fact that it paves the way for a more diversified and hence sustainable growth. In this line, transformation products in our cash business continued to gain more relevance exceeding 31% of total sales.Let's now turn to Slide 2, where I would like to deep dive into our sales figure. As said, total sales during Q1 '24 reached EUR 1.1 billion, 5% higher year-over-year. Discounting for the FX effect, almost the entire growth was organic, clear evidence on how efficient we were in both passing through inflation to prices and most importantly, growing volumes. This has been the case for all our main business units where organic growth ranges from high 30s to as high as 107%.When it comes to sales breakdown by geographies, 2 conclusions outstand. Not only did sales grow in every region that we operate, but also diversification continues to improve as Europe share is increased against LatAm.Moving now to profitability. On a quarterly basis, total EBITA reached EUR 60 million, marking an 18% decrease compared to the same period of last year. As explained, this is primarily attributed to the adverse impact of FX. Our cash business performed well, but was impacted by the investments deployed in our ForEx business, which resulted in lower EBITA.It's important to stress the [ temporality ] of the effect as not only we have import in additional OpEx and setup costs, but we did it in a quarter of low seasonality, meaning that costs went up without countereffect of growing sales. We certainly expect to reverse this in the upcoming months with the tailwinds of high seasonality.At the same time, FX dynamics played their part as currencies in some of the geographies where we operate suffered a real depreciation against the euro. EBITA growth in our security business reflected the positive combination of higher selling volumes together with the agile pass-through from inflation to prices and enhancement at cost structure level.Our Alarm business presented solid results with service margins increasing 1% and 14% in Prosegur Alarms and MPA, respectively. As we shall later see, the performance of almost every relevant indicator in alarms moved in the right direction, pointing to an increase in value per customer. This is the case for both MPA, our operation in Spain and for Prosegur Alarms in the rest of the world. Still conditioned by anticipated earn-out, our stake continues its progressive recovery throughout the year, while Cipher reported a significant increase in gross margin given the good market acceptance that our XMDR product is currently having.Turning now to our P&L. It can be seen that all the way down to EBIT results were temporarily impacted by the reasons I already explained. However, they are fully reversed at the profit before tax level. The reason is the sharp increase in financial results. While maintaining net interest expenses in line with the past year, dividend upstream costs were significantly reduced and FX results stemming from intercompany debt in foreign exchange was significantly reduced as exchange rates remained virtually flat.When it comes to income tax, the effective tax rate for the year dropped to 48.3%, marking a 690 basis points reduction year-over-year. As we shall later see, the reduction in accrued taxes is consistent with lower paid taxes. One of the main reasons for this decrease is the reduction in tax losses. All this led to an astonishing 32% increase in both net income and EPS.Let's now turn to cash generation. As explained at an operating cash flow level, the negative impact of the calendar effect can be fully appreciated. Indeed, the EUR 18 million increase in working capital requirements are fully explained by the fact that the last business days this year was on March 27th, whereas last year it was March 31st. This means that this year 4 days of billing were essentially lost with the corresponding spike in DSO.As per CapEx, total investment reached EUR 40 million, in line with the same period of last year. Following our business strategy, the deployment of expansion CapEx was more skewed towards transformation products, mainly in our cash operations.Infrastructure CapEx continues to be stable at 1.6% of total sales. Going down to total net cash flow, the additional EUR 4 million difference is explained by higher M&A payments attributed to the RedPagos operation in Uruguay, partially offset by lower treasury stock and others outflows.To wrap up the consolidated financial overview, let's now discuss the company's financial position. Net financial debt reached EUR 1.3 billion, resulting in a total net debt-to-EBITDA ratio of 2.8x. As it is evident by now, the ratio is negatively impacted both at [ EBITDA ] and net debt level by the calendar effect, which I should stress it one more time, is temporary in nature. It's worth highlighting that both the terms and the structure of our debt is very healthy with an average cost of 2.8% and over 70% at fixed rate and long-term in nature, maturing in 2026 and 2029.That's all from me for now. I will now turn the presentation over to our Head of Investor Relations, Juan Ignacio Galleano, who will give you more detailed information on the development of the specific business areas.

[Juan Galleano, executive]

Thank you very much, Maite. Let's now have a look at the results of each business line, covering the main performance indicators and the most relevant aspects of the period.Starting with our cash business, I would like to reinforce the 52% organic growth that we achieved during the first quarter. This not only shows the agile commercial response to inflation, but also the volume growth remains high at very healthy levels.At the same time, and as it was already pointed out, different geographic dynamics of sales growth resulted in a more sustainable diversification as the share of sales [ ex-LatAm ] increased to 51%. Both EBITA and EBITA margin were negatively impacted by restructuring costs in our Australian operation and by the FX impact in some of the geographies in which we operate.Investments in our ForEx business further explain the fall in EBITA as we've incurred in setup costs and additional operating expenses without still benefiting from higher sales. As you know already, both the second quarter and third quarter are the high season quarters for this business, reason why we wanted to be fully prepared in advance.As per product diversification, it must be said that it continues its upward trend. Indeed, transformation products are gaining more relevant exceeding 31% of total sales. We are certainly benefiting from all CapEx deployed in both cash today and ForEx business.Operating cash flow was virtually impacted by the same reasons as EBITA. Indeed, calendar effect explains most of the negative variation year-over-year and the natural temporary gap in the pass-through of inflation to prices in a very high inflationary environment as the one in Argentina further impacts cash generation. Once again, it must be pointed out that all these effects are temporary in nature and are already partially reversed.So let's move now to our security business, which continued to be the major highlight during the first quarter. Total revenues reached EUR 585 million with organic share reaching a remarkable 37%. This is mainly driven by our volume-based strategy that leads to operating leverage and our capacity to pass-through inflation to prices. All of the above coupled with enhanced efficiencies and operating leverage resulted in total EBITA reaching EUR 12 million, 24% higher compared to the same period of last year.Margins for the part reached 2%, marking a 16% increase when compared to the same period of last year. At first glance, it appears that positive results didn't translate into more cash generation. However, a more detailed analysis allows us to conclude quite the opposite.Starting with the base year, the negative EUR 21 million generated in the first quarter of '23 included a EUR 12 million extraordinary inflow coming from a cash advance for a particular client in Argentina. As for the negative EUR 24 million generated this year, they are impacted by the already mentioned calendar effect. Excluding this, operating cash flow this year would have been significantly better compared to last year.Let's now turn to the Alarm business, where once again we delivered outstanding results. As it can be seen, all relevant KPIs continue to move in the right direction as we continue to grow. As you can notice, we are now presenting 2 new metrics that we think are key to correctly assess the performance of the business, service margin and acquisition costs. The former one is similar to gross margin, where at a unitary level both direct and indirect costs are [ subtractive ] to ARPU.The operating performance of the business is thus measured with this metric. Acquisition cost refers to the total amount of investment necessary to sell one additional connection. Materials, commissions, and marketing expenses, among others, are included here.As said, these metrics together with churn provide a full picture to both assess the performance of the business and value it accordingly.Starting with Prosegur Alarms, I would like to stress the outstanding organic growth which shed light on how agile we were in passing through inflation to prices. This has been particularly so in the case of Argentina where given current macroeconomic circumstances, we decided to advance price increases. This is mainly the reason why churn slightly increased compared to the previous year, something that we expect to normalize as we enter into the second quarter.Volume growth is the other missing part that explains the 107% organic growth. As can be seen, our client base totaled 887,000 clients, marking an 8% in place year-over-year. Service margin went up from EUR 16.5 to EUR 16.6 despite the negative impact of the depreciation of the Argentinian peso.Indeed, excluding Argentina, service margin went up 3.2%. Unitary acquisition costs went down almost 12%. This is mainly due to enhanced efficiencies and volume growth contributing to cost dilution, a higher share of what we call new channels, dealers and commercial alliances and the depreciation of the Argentine currency.Moving now to [ MPA ]. All metrics behaved as expected. ARPU without including discounts, went up 3.6% from EUR 40 to EUR 42 per connection, while churn plummeted from 14% to 12%. Acquisition costs slightly increased year-over-year, primarily explained by enhancements made at a product level. Service margin resulted in an outstanding 15% increase moving to EUR 20.9.To conclude with this product line results overview, let's briefly examine AVOS Tech and Cipher. AVOS Tech sales reached EUR 19 million, marking a 19% decline year-over-year. This is mainly attributed to the churn of a specific client. An action plan was triggered to increase future sales, which includes enlarging our commercial sales force. All this coupled with the depreciation of the Chilean peso explained the decrease in gross margin.As for Cipher, sales reached EUR 3 million, showing a 6% decline compared to the same period of last year. It should be noted that this is mainly explained by the shift in sales scheme moving from the retailing to recurring. As for profitability, gross margin resulted in a solid 63% as we are profiting from enhanced operating efficiencies.This concludes our analysis of the performance of [ Fitch ] business line for the first quarter of 2024. Thank you all for your attention. I will now hand you over to our CFO, Maite Rodriguez, for her closing remarks.

[Maite Sedano, executive]

Thank you very much, Juan Ignacio. Let me now share with you my closing thoughts on the most relevant conclusions of this results presentation.On a consolidated basis, total sales increased in all geographies despite fewer business days. On top of this, we reported an enhancement in geographic diversification as the share of ex-LatAm increased year-over-year.In our cash business, total EBITA has been negatively impacted by temporary effects such as the restructuring cost in Australia and the additional setup costs in ForEx. At the same time, the natural temporary gap of the pass-through of inflation to prices in geographies with very high inflation temporarily deteriorated margins. It's worth highlighting the ongoing increase in the transformation product share of total sales, which are now over 31%.Moving to our Security business. We have presented strong results with EBITA and EBITA margins increasing 24% and 16%, respectively, compared to the same period of last year. This is clearly a good estimate on the efficiencies we are achieving as we continue to consolidate in certain geographies, capturing operating leverage.The Alarm business continues its positive trend with all relevant indicators going in the right direction, while at the same time, BTC keeps growing both in MPA and Prosegur Alarms. All this growth was achieved without putting in jeopardy our solid leverage position. We acknowledge that the increase in the leverage ratio is temporary in nature and feel confident that it will go down as we generate cash flow according to our strategic plan.At the same time, the good structure and low cost of our financial debt should not be overlooked to properly assess our financial position.This was all on my side for this results presentation. I would like to thank you all your time with us, and we are now open for Q&A.

[Operator]

[Operator Instructions] We will now take the first question from the line of Miguel Gonzalez Toquero from JB Capital.

[Miguel González Toquero, analyst]

I got three. First of all, on the security business, we saw a significant improvement in margins in the quarter, but it remains still far from the 4% to 5% margin target. Moreover, it continues to deliver negative operating cash flow. So when you expect to reach this margin target and security to be free cash flow positive?Secondly, on the alarm business, could you explain what are the drivers behind a 6% increase in acquisition costs for Movistar Prosegur Alarms? And also why there is EUR 500 difference with the rest of the portfolio? I believe you mentioned something might be related to your new channels. So I don't know if this is the reason or for how long it may [ be affecting ] cost?And lastly, at the cash flow level, could you explain what is behind the EUR 19 million cash outflow from treasury and others?

[Maite Sedano, executive]

In terms of free cash flow for the security business, this year, I have to say that we are very positive. I know that in this first Q we have negative cash flow, but it's mainly because of our seasonality. As you know that now we have increased all the costs because all the collective bargaining agreements are signed during the first Q. And until the end of the year we are not going to pass-through all the costs.And as you know, for example, in Brazil we always do it retroactively. So that's why our best cash flow generation is coming in the second half of the year. And I have to say that we are very optimistic in this sense because I'm sure that security business this year is going to achieve even a better cash flow generation than last year, and even I think that we expect to have positive cash flow in all the countries where we operate so that we can achieve a record cash flow generation for security business in 2024, because this never happened previously. We have positive cash flow in all the geographies.In relation to the second question about the acquisition cost of MPA, we are improving our product, and we are also investing a little bit [ borrowing ] in marketing, but not very significantly. Mainly it's because we are improving our product. We wanted to have the best product in the market, and we are trying to have this new video and technology that is required by the customer, and it's where we are investing. That's why it has increased.And I don't know if you have said something about what I mentioned at the beginning of the script, about the 107% of -- but that's coming from inflation of Argentina, but I don't know if you were asking that.And in relation to the third question, the other [ caption ] of the cash flow is mainly coming because of 2 main things or concept. The first one is because of the intercompany loans that we have with -- or that we have granted to the company that we do not have the controls so that we don't consolidate, or we don't fully consolidate. We consolidate them under equity method. So all those cash out are -- we always include them in the others.I have to say that from this concept, the cash out is around EUR 14 million or EUR 13 million, something like that. And from those EUR 13 million, more than, I think that is EUR 8 million or EUR 9 million, are temporary. So we are going to recover them during the year. So year-end [ gross NII ] should be less.And the other concept is, Brazil this year we have another temporary tax effect, about EUR 4 million. And also it's going -- it's temporary. That's why we have put it in others because we do not want to disturb the free cash flow. And that a temporary tax effect is going to be deducted during '24, I think, but maybe it's -- something is going to come in '25, but in any case always will be in the line of others.

[Operator]

We will now take the next question from the line of Francisco Ruiz Martin from BNP Paribas.

[Francisco Ruiz, analyst]

I have three questions. The first one, if you could give us an idea of how much of the 38% organic growth in security comes from pricing and inflation and how much is volume? And if you could give us an idea of geographies, it will be highly appreciated.The second question and following what your [indiscernible] colleagues have done. [indiscernible], the CFO of [indiscernible] commented that consensus looks achievable for cash. So I don't know with your guidance -- sorry, your consensus on EBITA at EUR 330 million, what do you think about this figure? I mean, it's achievable as well?And last but not least is, on net debt how comfortable you are with a 2.8x EBITDA? And if this is harder for any movement that you would like to do on your asset allocation, please?

[Maite Sedano, executive]

In relation to the first question, more or less it's around [ 60-40 ], something like that. Maybe -- it depends, as you know, in the country. Some countries as Brazil, for example, has a higher this match, but in general, it's around [ 60-40 ]. In relation to the second question about the consensus, we are also --

[Francisco Ruiz, analyst]

Sorry. It is volume.

[Maite Sedano, executive]

No, it's like 60% is price and 40% is volume. And in terms of how we are -- or the -- a little bit of how do you -- do we think that we are going to fill the year-end, we are comfortable with the consensus. So I think that it's -- at the moment it's a good guidance.And in relation to net debt, as you know, we have finished in 2.8%, mainly is because of the calendar effect. But for year-end, last year we finished in 2.6%. That's going to be at least the ratio that we will achieve. We should be below that figure. So as you know, our strategic plan is very, very focused in cash generation and in net debt.This year, it is true that we are going to invest a lot in [ ForEx ] in U.S.A. and other new products and new geography diversification. But I have to say that for 2025, the ratio should be [ 2x ] area. And for the rest of the -- for 2027, it should be lower than 2. So this year we are not going to reduce the debt in comparison to last year, the net debt, but the ratio that we are observing now is because of the calendar effect. For year-end, as I said, should be the highest, the 2.6 that we have last year. But I'm sure that we are going to have a better ratio.

[Operator]

[Operator Instructions] We will now take the next question from the line of Enrique Yaguez from Bestinver Securities.

[Enrique Yáguez Avilés, analyst]

Three questions on my side. The first one is a follow-up of [indiscernible] question regarding security. I don't know if you could provide some granularity about what has driven the very strong organic evolution in security among the countries, or geographic countries just because -- I don't know if any new countries contributing to the past performance of U.S. and Spain.Second, in Prosegur Alarms, you mentioned advanced price increases in Argentina. But when I look at the ARPU, it falls. I don't know if there is an explanation for this?Finally, you mentioned an action plan for Prosegur that -- I don't know if you could provide some details about the amount invested and when we should expect a turnaround in the phase?

[Maite Sedano, executive]

In relation to the organic growth of security, we are very happy with the positive evolution that we are having. It is true that U.S.A. is helping -- as you know, the highest gross margin of the group is coming from U.S.A. And -- but the rest of the countries, they also have suffered a turnaround. As you -- I don't know if you remember, but a lot of years ago that we had like a pending task of Brazil that year-over-year was always losing, but now is having positive results.So I think that the key is coming because Spain is doing well, but U.S.A. is doing -- is really, really giving a very good gross margin. But the rest of the country that we're [ losing ], they are also having a positive result. So mainly the growth is -- the profit or the EBITA growth is coming from there.In terms of what you mentioned about the ARPU, that has decreased mainly because of the devaluation of the Argentinian peso. But the -- one of the reasons why the churn has increased is because, as we have said in the [ Street ], we have lost retail client in different branches in Portugal, but the reaction of the ARPU increase in Argentina that we really do is -- very quickly has had also a churn impact.But that ARPU that, even though has increased in -- when you compare it with the first Q last year, the devaluation has been so big that, that's why the ARPU has decreased. And in terms of Prosegur Tech, we are also very optimistic. Our [indiscernible] [ AVR ] is growing and is -- I think that we have found also the niche of the market for this product. And if we are doing well, the investment this year -- in 2024, security cash, they are going to have a very good cash generation. Alarms, they are not going to eat too much cash, and they should be quite close to 0. The cash flow that they are going to generate should be the one that they are going to consume for growth.And in the case of AVOS Tech, we are going to invest around EUR 11 million, something like that. Maybe it's going to be more, maybe it's going to be less, but this is what we have included in the plan. And as you know, sometimes there are other external factors that could make our strategy change, but is what we expect. Maybe we can [ defer ] something for the future, but now we are on track. We need to invest a lot in the product, in artificial intelligence. So we are really investing a lot in this business, and we will hope to see the results in the next 2 to 3 years.

[Operator]

We'll now take the next question from the line of Manuel Lorente Ortega from Santander.

[Manuel Lorente Ortega, analyst]

My first question is on the net debt target of around 2x for 2025. This is -- more or less, it's going to be achievable as a normal consequence of, let's say, better operational conditions, or we should think about it as well as, let's say, more focus in, I don't know, CapEx control, work proactive, [ working ] capital measures or less intensity in [ cap out ] from a pending M&A? If you can elaborate a little bit of the evolution towards that deleverage, is just the normal recovery of the business, or if any [ other ] issues that we have consumed?

[Maite Sedano, executive]

For net debt, as I mentioned, for 2024, we are going to be -- we are not going to improve it in comparison to last year for [ 2025 ], mainly because we are going to invest in, as I said, in Prosegur Tech, in U.S.A., in ForEx. In 2025, we are going to -- or we should be [ 2x] area. Now we are in 2.16 2023. Full year we should be in -- the ratio should be better, but -- for year-end.But for 2025, what I can tell you is that we should be in the ratio of net debt-to-EBITDA, which should be [ 2x ] area. Why? Mainly because of the good performance of the business, we have a very -- we are very, very focused on improving DSO, managing the stocks. And I think that even we can -- even though we are going to grow, we -- and as you know, in working capital, we always have impact -- a negative impact coming from growth overall.We are going to compensate that impact, thanks to the cash generation. Why? Because if you compare it with a few years ago, we -- alarm business usually used to have a negative or a 0 impact in cash flow, but securities usually used to have a very negative impact, and that's the key for last and this year and what's going to happen in the future. That security is providing positive cash flow, and that's the main game changer of our cash flow.

[Manuel Lorente Ortega, analyst]

And then just a follow-up on working capital and probably on free cash flow as well. You have mentioned a number of times throughout the presentation the calendar issues coming from Easter break. Can you quantify a little bit how has been the impact or how much has been the impact on working capital or in cash flows, so we have it into consideration for the phasing of the coming quarters?

[Maite Sedano, executive]

Yes, the FX is more or less between 3, 4 days that we didn't collect as we normally or in general we collect if we would work till the 31st. And every day its DSO more or less is around EUR 10 million. So you have the impact is around EUR 30 million to EUR 40 million.

[Manuel Lorente Ortega, analyst]

Okay. And [ just ] my final question. You have also stated in several times the strong growth and the strong delivery on the security, which is true, but it's also fair to say that don't you believe that the margins in the first quarter has been a little bit [ mute ] considering that fourth quarter last year the margin was on the range of 5% and on the full year basis the margin was roughly 3.2%? It's something that we should consider in the profitability of the security business throughout these first quarters once taking into consideration the Easter, or no, you are just simple -- just okay with the profitability and you expect a meaningful progression throughout the year to reach last year levels?

[Maite Sedano, executive]

Manuel, as you know, we have an important seasonality in our business, mainly in security business because, as I mentioned earlier, the collective bargain agreements are signed in the first Q. And for example, now in Brazil we have just passed between 20% and 30% of the cost, until December we don't complete the total process retroactively. So that's why last year we have a 4.8% margin in isolated terms in the 4Q mainly because those [ retroactive ] impact. So that's like very, very common. I am -- I think that we -- it is true that now we had a 2% margin higher than last year, but is positive. But it is also true that the calendar didn't help in -- and what I mean with that is that if you add the 3 months, January, February and March, these 3 months we have 1 less day. So maybe it also has a little bit of impact, but nothing very, very significant.So we think that the 2% margin that we have is what we should have. And the key here in security in this big volume companies moving and improving margin is not -- you can pass from 2 to 5 or 6 in 1 year, but you have to do it step by step. And you have to do it -- you have to maintain the trend all the time. So is -- as you mentioned purposely a minimum progress that you have to do, and we are doing it. So I am very comfortable of our performance this quarter, and I'm sure that we are going to achieve last year margin, the 3 points in a cumulative terms, the 3.2% margin that we achieved last year, for sure that this year we will achieve it.

[Operator]

[Operator Instructions] We will now take the next question from the line of Miguel Gonzalez Toquero from JB Capital.

[Miguel González Toquero, analyst]

And just a clarification on a previous question. You just said that you're going to expect to see a net debt reduction this year. So do you expect a free cash flow generation and [ is ] aligned with our dividend year or free cash flow could be even below? So we might see a lower dividend in 2024? And also related, you said that CapEx will be higher for investments in AVOS Tech, ForEx, and I believe you also mentioned U.S. expansion for security. So what levels of CapEx should we expect for the year?

[Maite Sedano, executive]

Yes, as I mentioned, the net debt in 2024 is not going to be improved. The net debt-to-EBITDA ratio, yes, should be improved in comparison to last year, but let's keep it equal, but I know that it's going to be better. And the dividend for this year is going to be EUR 83 million -- around EUR 83 million. It's not -- it's public because it was approved in the last [ Board ].And in CapEx, we have -- in our -- I have to say that in our estimations, in our [indiscernible] we have slightly higher investments in CapEx fully, including expansion and infrastructure, and we should be -- yes, slightly higher, but nothing super significant, let's say. The infrastructure CapEx will still -- we will continue. We have -- as you know, we always are -- between 2% of sales is invested to, or is invested in infrastructure CapEx. And more or less should be -- we should maintain the same figure. And for expansion, CapEx is going to be a little bit more than last year. But in total, slightly higher than last year, but nothing very, very significant.

[Operator]

There are no further questions at this time. I would like to hand over to the speakers for closing remarks.

[Maite Sedano, executive]

Thank you very much for attending this presentation. If you need further information, please contact our Investor Relations department who is open to help you at any time. Have a nice day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.