Prosegur Compania de Seguridad SA

MAD:PSG

Earnings Call Transcript 2022-Q4

[Operator]

Good day and thank you for standing by. Welcome to the Prosegur Full Year 2022 Results Presentation Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded.I would now like to hand over to your speaker, Mr. Antonio de Carcer, Head of IR. Please go ahead, sir.

[Antonio de Cárcer, executive]

Good afternoon and welcome to Prosegur full year 2022 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 Rodriguez, and myself. Prior to starting, I would like to remind you that this presentation has been prerecorded and that will also be available to download in our corporate web page.I will now hand you over to our CFO, Maite Rodriguez.

[Maite Sedano, executive]

Good afternoon, everyone, and thank you for attending this presentation. Today, Prosegur is very pleased to be able to present an excellent set of results to the market that illustrate the strong recovery that our businesses have experienced over the past 12 months. In 2022 all our business areas were able to overcome a year based on a complex macro environment full of constant uncertainty starting with the Omicron variant at the beginning of the year followed by the war, supply chain problems and a high level of inflation with subsequent interest rate increases. Despite this complex and changing environment, we were able to adapt quickly, efficiently and effectively; attaining sales levels similar to those of 2019 and growth in all those geographies in which we operate.Within this context, Prosegur has been gaining traction quarter-over-quarter and was amply capable of passing on all inflationary effects through prices without impairment and exhibiting a consistent volume increase turning concern into advantages while at the same time proving our efficiencies. The result has been a significant level of global growth accompanied by a strong recovery in margins with excellent improvement in all business indicators. As you may recall, 2022 was the middle year of our '21-'23 Strategic Plan, a plan whose main claim is to perform and transform, specifying our ambition to not only provide the market with positive financial result, but to redesign our internal procedures and boost our innovation capabilities as well in order to turn our company into a leaner, more digital and agile entity capable of facing any type of economic and social transformation.In this regard, let's start this presentation by reviewing the most relevant indicators of the perform side of the period. Revenues have grown 19.3% in euro terms and more than 25% in local currency terms with all regions exhibiting double-digit organic sales increase above the corresponding compound nominal GDP. Price transfer to market was accomplished ahead of the schedule in all areas and we have incorporated close to EUR100 million of extra value through 6 strategic M&A deals. Profitability accelerated quarter-over-quarter throughout the entire year even during low seasonality periods delivering a remarkable 31% EBITA increase boosted by the extraordinary performance of Cash, but also showing relevant improvements in the other core business lines. EBIT increased incrementally in relation to revenues and this combined with a milder tax rate led to an extraordinary increase of our earnings per share of 57.8%.We hope that this result together with the additional EUR32 million interim dividend paid in December was favorably received by all our shareholders. Finally, our operating cash flow generation also expanded by almost 7% in comparison to 2021. A notable achievement considering the increased working capital consumption imposed by the volumes growth at the start of the year. This reinforced by a moderate leverage ratio that remained stable despite the increased dividend and the very low interest cost of our long-term debt structure makes us very proud of how we deliver the perform part of our Strategic Plan in 2022. Let's now take a quick look at its transform side. Throughout this challenging year, we have continued to expand our range of new products while integrating higher levels of efficiency into our internal procedures as well. We took advantage of our considerable efforts in digital transformation to achieve these goals.In 2022 Prosegur Cash expanded the penetration of its New Product line, which now represents over 25% of the total generated revenues. The company focused its merger and acquisition efforts on both CORBAN and the newly incorporated ForEx business line. Security underwent a significant transformation with the launch of a new service delivery concept known as Hybrid Security. This innovative approach substitutes the previous guarding and technology integration into a single commercial model that also includes data management. This new paradigm relies heavily on the use of remote monitoring and to do this, we have unveiled our latest intelligent security operations center in Madrid. The flagship of our worldwide network of high-end technology control rooms about which Antonio will provide you with more detailed information later.New technologies have also brought benefits to the Alarm sector. The use of our new Artificial Intelligence platform has resulted in savings of up to 60% in the operation of remote video services on the back office side. On the product development side, we have launched new mobility related services and products. AVOS has also experienced significant growth, increasing the penetration of its technological solutions by over 70%. These solutions are primarily offered under the software as a service umbrella for banks and insurance companies. AVOS has also outperformed its budget in advanced hyperautomation solutions such as robotics and RPA, this one together with Cipher. These accomplishments are just a few examples of the significant digitalization milestones we have achieved under our transform strategy, which now forms part of all our activities.Let's proceed to examine our profit and loss statements, which summarize the company's performance during 2022. The most noteworthy observation is the remarkable progress in the growth of each individual line of the P&L. Revenues amounting to EUR4,174 million representing a 19.3% increase over the entire year and 6.6% during the last quarter. In pure organic terms, growth was over 22% for the entire year and over 26% for the last quarter. This reveals the unfavorable effect of foreign exchange witnessed in the later part of Q4, which was somehow magnified by the application of International Accounting Standard 29. It should be noted that these standards have no effect on cash flow. Aside from this currency translational behavior, the P&L profit section shows an incremental margin expansion that begins with an EBITDA growth of 21.3% reaching EUR468 million. Followed by an EBITA increase of nearly 31% and culminating in a net profit of EUR84 million accounting for an exceptional 92.3%.Consequently, the final consolidated net profit amounts to EUR65 million after reducing the Prosegur Cash minority interest. This represents an increase of 57.8% in our net result as well as our earnings per share. Moving on to a deeper analysis of our revenues breakdown. We can see that 25% local currency growth comes from the combination of 22.4% pure organic growth, plus 2.7% inorganic coming from the diverse number of acquisitions made in the course of the year. As illustrated by the chart on the right side of the slide, organic growth has continued to accelerate quarter-over-quarter both at the group level as well as in the main business lines with a remarkably high double-digit increase in comparison to previous years proving the strong recovery of our business dynamics. Regarding Cash, I would like to point out that while it seems to have deflated slightly during this last quarter, this has not been the case at all.Price transferring process to market took place this year at such an accelerated pace that a large part of it was fulfilled during Q3 and late Q2, which somehow altered our traditional seasonality. While at the same time, the strongest FX impact was recorded during Q4 and, as you know, the application of IAS 29 related to hyperinflationary accounting also had a certain impact at the local currency level in the country of application. Nevertheless, in terms of growth, Prosegur Cash delivered an extraordinary second half of the year with volume increases of over 30% during the period. A similar impression may be applied to Security, which has shown consistent and sequential growth demonstrating that the business is on the right track to continue growing and expanding its margins as the costs are being effectively passed on to the market.Finally, I would like to remark quickly on the geographical evolution of revenues throughout the year. As you can see, growth has been consistent in all regions with revenues increases far above their corresponding weighted compound inflation rate in euros as well as local currency terms. Turning our attention to profitability. This reveals the same trend of sustained improvement of service and sales levels with an EBITA increase of more than 30%. It is worth noting that Cash has obtained an accumulated EBITA margin of nearly 14%, which corresponds to the target established in 2021 for the full period of the Strategic Plan '21-'23. Thus, we are very proud of the extraordinary performance shown by the business in the past 2 years. Security on its side has continued increasing its profitability on the back of the innovation solutions with an excellent catchup with the previous year, but still under the pressure of the commercial expansion and technology transformation investment being carried out mainly in the U.S. market.Alarms have also increased their EBITA pre-SAC outcome at consolidated level. And as you will see later, both MPA and Prosegur Alarms have increased their profitability indicators benefiting from the operational efficiencies that increase as the contract base continues expanding. I will now proceed to analyze the cash flow generation for the year. Another very positive milestone in our performance. The overall operating cash flow generated in 2022 was EUR288 million representing an improvement of almost 7% over 2021. This is a significant achievement considering the increase in working capital from the expansion of trade volumes combined with increased stockpiling of materials to prevent and hedge the supply chain shortage crisis during the same period. We are pleased to see that our efficient collection procedures together with a very fast price increase campaign managed to overcome the situation enabling us to outperform the previous year even despite an adverse start.Likewise, worthy of note is the efficient CapEx management that the group has undertaken in a year-offset robust growth. Maintenance CapEx remained below 2.5% of sales. At the same time, client CapEx increased compared to the previous 2 years and represents 40% of total investments. This is an ample proof of both our efficient capital allocation measures and the increased demand for new products by our clients to which most CapEx is related. Finally, let's review the debt position and balance sheet to conclude the financial overview of the yearly results. In terms of debt structure, we experienced some reduction during the final quarter of the year, which decreased our net debt to EBITDA ratio to 2.3x. The ratio sits comfortably below our internal control parameters and is in line with our intention to continue deleveraging the group during 2023, which is one of our financial discipline targets for the year ahead.It is interesting to note that this debt reduction was achieved even though we increased our dividend in Q4. As you may be aware, in December 2022 we opted to advance part of our 2023 dividend taking advantage of our strong reserves. I would also like to emphasize the extraordinary health of our debt structure once again, of which approximately 84% is at a fixed interest rate with long-term maturities between 2026 and '29. Currently, 1 of the lowest financial cost in the Spanish market according to a recent Financial Press publication. Regarding our balance sheet, there are no significant variations to report other than the inclusion of our Australian cash operations under the heading noncurrent assets held for sale. As you know, we still wait for the regulatory approval to conclude our merger with the main Australian cash in transit operator.That's all from me for now. I will now turn the presentation over to our Head of Investor Relations, Antonio de Carcer, who will provide you with more detailed information on the development of the specific business areas as well as additional information on our ESG progress and achievements.

[Antonio de Cárcer, executive]

Thank you very much, Maite. Let's now have a look at the results of each individual 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 23.3% revenues increase. Ramping up organic growth along the year with a very impressive second half where local currency revenues have expanded by more than 30% each quarter. A very strong volume recovery driven by inflation that has been consistent in all regions, being of double digit in all of them including Europe. This solid growth has been followed by a very remarkable 40% EBITA increase with sequential margin improvement quarter-over-quarter and concluded with an outstanding 185% net profit increment. On the innovation side, it is highly noticeable how new products in Cash have grown by more than 55% in the year and now account for more than 25% of total generated Prosegur Cash revenues.The main scale of the new product range continues to be our cash automation machines for retailers or Cash Today followed by our banking corresponding agencies network of CORBAN, which has benefited this year from some acquisitions in Latin America. Now these 2 products have been reinforced by the introduction of our new ForEx service areas obtained by the recent acquisition of ChangeGroup in Q3 2022, which has expanded Prosegur Cash activities into 6 new countries mainly in Northern Europe and the U.K. Looking at Cash results in more detail, we can appreciate that total revenues have totaled EUR1,872 million. This figure comes from the more than 28% pure organic growth supplemented by an additional 5.2% inorganic and diminished by an adverse currency depreciation effect of slightly more than 10% that has been concentrated mainly in the last 3 months of the year.As mentioned before, new products now represent more than 25% of Prosegur Cash total revenues, growing more than 55% over the previous year and totaling EUR480 million of revenues. An impressive figure when seen isolated from the rest and even more impressive if we look at the progression that this range of products and solutions has shown over the past 3 years clearly gaining speed and demonstrating the healthiness of the cash in transit industry able to redesign itself and continue expanding in the digital era. Finally, Prosegur Cash EBITA grew 40.7% in the year totaling EUR260 million and delivering an EBITA margin of 13.9%. This accomplishment together with the more than 25% penetration of new products in the mix corresponds with the strategic goals that Cash has established for the '21-'23 Strategic Plan.An outstanding achievement considering the strong negative effects imposed by the pandemics and fruit of the beneficial combination of favorable macro conditions that we have been able to take advantage of and the severe operational efficiencies put in place by the company during the worst part of the sanitary crisis. Moving on to the Security business, we also appreciate double-digit revenues growth of more than 16% in the year. Performance in sales have been excellent during 2022 with a solid increment in commercial production of more than 53%. This means net new customers and sales added to the client base on top of the expected inflation price increase transferred to market. This is a particularly good indicator of how the business is catching up with new demand and has also been paired with a 30% increment of our gross margin, which translates into a 13.5% improvement in EBITA in comparable terms with 2021.There is 1 main aspect about Security we would like to take some minutes to comment with you as it implies a very significant change in our service delivery model. As Maite Rodriguez mentioned in her introduction, innovation has been 1 of the cornerstones of our development during the past 2 years. In this regard, Security has been the business that has experienced the deepest transformation and this transformation comes under the launch of the Hybrid Security concept and its physical support through our intelligent security operation centers network or iSOC. Let me explain myself a bit more on these 2 concepts. Hybrid Security is a new value proposition to clients based on the combination of 3 elements: people, our security professionals; the most advanced security technology that enhance human capabilities and the data captured by the security ecosystems that feed back into the model allowing for its adaptation and flexibility.The efficient interaction of those 3 elements; people, technology and data; is supported by 3 interactive platforms that have been developed by our innovation teams. POPS, the operational platform of Prosegur Security, a proprietary software that enables real-time connection of security guards into our iSOCs and thus to our global security network while allowing for the massive generation of conceptualized data. GENZAI, our contextual artificial intelligence platform oriented to massive management of different video sensing sources. And CONNECT, a background communication platform that makes it possible for the data captured by the security ecosystem to be transformed into intelligent and insights for our clients through interactive dashboards, automated reports and reports prepared by expert analysts.All of this is orchestrated in our iSOCs, the net centers of our operation which ensure the quality and homogeneity of the service and provide the best response to any situation by combining the elements of the model in such a way that the solution results in a greater value than the sum of its individual parts. Prosegur iSOC or intelligent security operation centers is a network of 13 control rooms from which combining state of the art technology intelligent data processing and professional excellence, we remotely manage our customer security services and businesses process. Designed to operate either on a stand-alone basis or in coordination with other centers, they can provide full 24/7 intelligent surveillance service to any customer regardless of the location, number of operational centers or country of implementation.Our iSOC currently provides support for more than 5,000 clients, some of them very large multinationals to whom we have designed a tailor-made business intelligence service based on the interpretation of the sheer amount of data which is generated. Here on the slide you can see some relevant quantitative data from the current capabilities of our iSOC network, the foundation of our new Hybrid Security model and the result of a strong investment in digital transformation that will accelerate the turnaround of our Security business. Let's now get back into track of this financial business overview and have a look at financial results of Security in 2022. Revenues have totaled EUR2,017 million. This implies a 16.8% organic growth with a negligible negative currency effect as the business now benefits for a larger part of its income denominated in U.S. dollars.Growth has been consistent in all regions led by the U.S., Brazil and Singapore; delivering double-digit growth in most of the countries and above inflationary increases in all of them. Regarding new products, from now on we will report the penetration grades of our new Hybrid Security model in our client base that at the closing of 2022 represented nearly 31% of our customers. Please note that the customers can have different grades of hybridization depending on how many different products and services they combine and the level of integration of those services. In further communications, we will provide a wider scope on the various levels of hybridization and their implication on margins. Regarding profitability, Security has closed the year 2022 delivering an EBITA of EUR51 million. This calls for an EBITA margin of 2.5%, still below our initial estimations but showing a gradual and sequential improvement quarter-on-quarter.If we eliminate the effect of the Job Keeping subsidies received from the U.S. government during '21 to support companies affected by the pandemic, you can see how our current EBITA has strongly catchup and almost double previous year's figures and this is a satisfactory proof of how we are now on track to continue expanding margins. As previously mentioned, our top line margins have grown by more than 30% on the year and will continue doing so and this improvement will gradually come down to bottom line as we begin to obtain results of the strong investments made in digital transformation and commercial growth in the U.S. Let's now take a look at the Alarms business. The total number of contracts worldwide has increased by 15% and now stands at 805,000 connections. That means we've gained almost 200,000 new clients in the past year. Of those new clients, around 50,000 signed for Prosegur Alarms which grew organically by 28%.The remaining 150,000 came from Movistar Prosegur Alarmas, which increased the client base by 12.4% compared to 2021. These are impressive numbers that reflect the Portuguese and Latin American operations' strong recovery from the pandemic as well as the significant growth potential of the Spanish market. Prosegur Alarms has improved its ARPU by over 20% in 2022 and its churn rate has decreased by 120 basis points. Meanwhile, MPA is now focused on increasing its Net Promoter Score, which has increased from 56 to 70 points over the year despite still reflecting the effect of the past 2 years commercial campaigns aimed at doubling the client base. This will likely lead to a further reduction in churn for MPA in 2023. Both Prosegur Alarms and MPA have increased profitability through increased ARPU and expanded scale. And in the case of MPA, there is this adjacent improvement on ARPU and profitability of 5.6% and 55.4%, respectively.Additionally, a newly overhauled video management platform is now common to all countries resulting in savings of more than 60% in video operation costs. The Alarms business has also introduced new mobility services in Spain, including Movistar Car Protect and Movistar Senior Telecare. Furthermore, the GENZAI platform, which is based on artificial intelligence and in our intellectual property, has surpassed 70,000 clients and continues to grow. This core platform is shared across our security iSOCs and benefits from global scalability, making it a transversal innovation project for the entire group. Looking now at the business key performance indicators of both units. The most remarkable facts we observed are 14.8% growth on the combined installed base of both MPA and Prosegur that now reached 444,000 and 360,000 active clients, respectively, totaling 805,000 alarms.Regarding ARPU and churn rate, as previously mentioned, both indicators improved noticeably in Prosegur Alarms being now EUR38 of monthly ARPU reducer and 11% churn. While in MPA, they still are affected by the aggressiveness of the commercial campaigns put in place mainly in 2021. I would like to draw your attention to the fact that ARPU in MPA is heavily affected by the customer acquisition discounts that the strong commercial campaigns have applied to new customers. This should be normalized once the client covers a full 12-month cycle and come back to the projected recurring ARPU in the signed contract. In this regard, if we normalize those temporary discounts, ARPU in MPA has grown by 5.6% growing from EUR37 to EUR39. That is the expected ARPU the current base would show once campaigns are over. Similar method can be applied to the EBITA pre-SAC figure in MPA.As you can see in the chart provided, both units have increased its figure both in absolute and relative terms. EBITA pre-SAC margin in Prosegur Alarms now sits on 43.1% benefiting mainly from the nearly 20% increase in ARPU seen during the year. And MPA EBITA pre-SAC margin is now close to 52%. Moreover, if we normalize the effect of the commercial discounts applying to new customers, margin in MPA rises to 60% as this is the expected outcome once the customers gradually finish their promotional period. This notable improvement in profitability comes from the strong operational efficiencies generated by the increased volume of contracts that has doubled in 2 years. Another example of the attractive profitability model of the Alarms business that increases its margins with volume despite having suffered some reduction.Operating cash flow in Prosegur Alarms has remained stable over the year despite the accelerated growth seen mainly in the last quarter that has increased the subscriber acquisition cost slightly above the generated EBITA pre-SAC in relative terms. Finally, looking at revenues on Prosegur Alarms only, we can see a very solid 29.2% organic growth affected by still present negative inorganic coming from the sale to MPA of the commercial unit Prosegur Soluciones and a minus 17% FX impact as 2/3 of the alarms belonging to Prosegur Alarms are in Latin America. To conclude with this product line results overview, let's now briefly look at AVOS and Cipher. Prosegur AVOS has closed the year with sales of EUR86 million and a gross margin of EUR23 million or 27% of our sales. Geographic diversification has been achieved through the acquisition of Solunegocios which showed outstanding performance in 2022 with sales growth of 31% compared to 2021.AVOSTech; the technology brand of AVOS specialized in banking and insurance, robotic technologies, big data, business intelligence and data science and processes transformation; achieved sales of EUR20 million with a growth of 76% compared to 2021 and has strengthened its own intellectual property software. AVOSTech represented more than 50% of AVOS in EBITA in 2022. And finally Cipher, our subscriber security specialized firm, has increased its sales by nearly 40% maintaining a total gross margin of EUR6 million or 28.7% of sales. In 2022 Cipher has fulfilled the creation of both Cipher Labs and Cipher Platform as 2 distinctive business units aim to accelerate creation and fast market deployment of several different solutions mainly based in intensive use of artificial intelligence and robotics to provide clients with high recurrent cybersecurity services supported inside our iSOCs and in total coordination with the new Hybrid Security offering.This concludes our analysis of the performance of each business line in 2022. As customary, I would like to briefly comment on our latest ESG performance and improvements. Several ESG achievements and initiatives have been put in place in Prosegur alongside 2022. As the ESG commitment is becoming increasingly embedded in our daily activities, our plans also becoming more concrete and measurable. A good example of this can be the compensation during 2022 of more than 48,000 equivalent tons of CO2 or the achievement that now 100% of the energy we consume in the Iberian Peninsula comes from renewable sources. On the social part of our commitment, we have fully adopted the Women's Empowerment Principles throughout the entire organization. In this way, our company reaffirms its commitment to promoting and developing female talent and increasing its representation in the private security sector. Prosegur also included supplier management in its code of ethics and conduct.The company selects its suppliers according to criteria of independence, objectivity and transparency; maintaining stable relationships with ethical and responsible collaborators. In this regard, Prosegur is partnering with GoSupply as a risk monitoring and validation service for its more than 23,000 suppliers in all the markets where it operates. Additionally, as we introduced last quarter, we have put in place a new code of ethics with greater focus on sustainability, transparency and innovation and a new anticorruption policy. Finally, 2022 has seen a positive evolution of the main ESG rating agencies covering our company. We are very proud to state that S&P has increased their positive valuation of Prosegur by 10 points being our company is the best valuated in comparison with equivalent sector industry peers. Similar happens with Sustainalytics that valuates Prosegur as 1 of the lowest ESG risk scoring companies in their comparable industry peers.That was all on my side. Thank you very much for your attention. I will now hand the microphone back to our CFO, Maite Rodriguez, for her closing remarks.

[Maite Sedano, executive]

Thank you very much, Antonio. Let me now share with you my concluding thoughts on the most relevant conclusions of this full year 2022 results presentation. As an overall wrap-up remark, I am very proud to state that our annual results have been very satisfactory reflecting the solidness of our business model and Prosegur's ability to maximize opportunities presented by macro conditions using inflation to leverage volume growth and being able to transfer cost increase to market in record time. Our strong sales growth and our improved profitability attained the creation of high value for the year. We have successfully entered new markets through new products expanding our presence to a total of 31 countries. Our investments in digital transformation have proved to be very profitable as evidenced by the speed of growth of new products in all our business lines. We will continue devoting part of our capital allocation to enhance and sustain this effort.Our new network of intelligent security operations centers or iSOCs is sure to be a real game changer for the security business recovery. And this together with investments made in Cash and Alarms will ensure future growth for the company. Looking ahead to 2023, we have positive expectations despite greater uncertainty in the evolution of FX that nevertheless continues to be common ground for us from which, as we have proven in past years, we know how to extract the most value. Business dynamics in 2023 are expected to be similar to those of 2022. And to further enhance our performance, we will focus on reducing corporate leverage, continuing to develop new products in the Cash business, increasing profitability in Security and establishing new strategic alliances in Alarms. We remain confident that our continued efforts will lead us to even greater success in the future.That is it from my side. Thank you very much for your attention and now I will be happy to take all your questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Enrique Yaguez from Bestinver Securities.

[Enrique Yáguez Avilés, analyst]

Few questions from my side. First of all, regarding the aim to reduce leverage, it's not the leverage I assume, what leverage do you target for the year and why this strongest focus on leverage taking into consideration that the financial leverage of the company has not changed a lot versus last year and that 85% of your CapEx debt is fixed? Secondly, regarding the M&A, should we assume that with the strongest focus on reducing leverage, most of the capital to M&A will be deployed just to the Cash business? And finally, any comments on the U.S. Security business plans? Do you think that your OpEx levels have reached the level that you would like to have or is it still in the process of increasing your cost base over there?

[Maite Sedano, executive]

Thank you, Enrique, for your questions. In terms of leverage, you're right. Our main goal for this 2023 is going to be to reduce our leverage ratio and now we are in 2.3x and that should decrease for next year. And I'm just answering also your second question about M&A and capital allocation. We are going to be quite less aggressive in M&A terms. If there is a big opportunity, of course we are going to take it. But if not, we are going to be low profile in this sense. And in terms of U.S.A. in Security business, we will be really working hard in U.S. and we are not going to stop there. So if there are big opportunities, if we have to invest more there, we will do it even depending that that means that our leverage will increase. U.S. is going to be our main goal in 2023 and we will be there.

[Operator]

Our next question comes from Miguel Gonzalez Toquero from JB Capital Markets.

[Miguel González Toquero, analyst]

Three on my side. First of all, margin recovery. You delivered a strong recovery on EBITA margin by division, but margin expansion seems lower at the consolidated level. So maybe you could provide some visibility on this. I don't know if this might come from higher digitalization costs this quarter perhaps. And secondly is just a follow-up on the Security division. You had a small margin improvement this quarter, but how should we think for next year? You had I believe an EBITA margin target for next year of 4% to 5% in the Capital Markets Day. So you see this achievable at this time and how this could affect the targets for next year? And maybe related to this, you also guided in the Capital Markets Day for more than EUR350 million sales in the U.S. this year. So is this maintained or do you think you could be selling for -- maybe you could allow for higher sales?

[Maite Sedano, executive]

Thank you, Miguel, for your questions. In terms of the margin recovery in EBIT, we will continue having the same trend as we have been having in this 2022 in the next 2023 and you have to consider that in EBIT, we also have several past investments in digital transformation and so on. So now all those depreciations are booked in our P&L. But from now on we should have something more business as usual. In relation to your second question about Security, we are very happy how Security is evolving. The positive trend that we are having and we expect the same thing for 2023. And just answering a little bit in relation to the Capital Markets Day. Here we have to consider that our '21-'23 Strategic Plan was done previously to the Omicron variant, the war, the high levels of inflation and the subsequent interest rate increase. So some of our strategies due to these factors have changed. For example in Alarm business due to the interest rate increase, we need to be focused on cash generation.As I mentioned, the debt is going to be 1 of our main goals for 2023. So our strategic here for example is going to be more focusing increasing our ARPU or improving our churn rate. So all the macro environment have changed. But however, our guidance in terms for example of Alarms was to achieve EUR900,000 and we are in EUR800,000 in 2022. And in other business like Cash where we already have achieved part of the goals in advance to 2023. And in Security business, we should fulfill the plan in sales but we are not going to fulfill it in profit mainly because -- I'm answering your third question, mainly because we are going to continue investing in U.S.A. and in all the iSOCs that we are investing in. I don't know if you're aware it, but we have just opened a new iSOC here in Madrid. All of you are welcome to visit it because it's a good way to understand our Hybrid Security business. And so in balance, we are very happy on the numbers that we have and on the budget that we have for 2023.

[Operator]

[Operator Instructions] Our next question comes from the line of Pedro Alves from CaixaBank BPI.

[Pedro Alves, analyst]

I'll go back if I might to the Security margin. Is it possible to have some guidance for the margin for this year? Do you think it's possible to reach something like 3% EBITA margin this year? And if you could guide us through the moving parts and the drivers to reach that margin improvement. I think in Spain for instance you have already reached an agreement or you are close to reach an agreement in terms of the collective agreement for the inflation on the wages, a multiyear agreement. How do you see the challenges of passing this through to your clients because apparently it's usually easier for you to pass through high inflation in countries in emerging markets? Then in Brazil also for instance whether you are still in breakeven in this country and what do you think is still not working there from an operational perspective? And if things do not change especially with the changes in the environment in Brazil, would you consider for instance selling this operation or just restructuring more deeply the business if it continues to be at breakeven?

[Maite Sedano, executive]

In terms of Security, we are very positive for the year 2023. We expect the same positive trends as in 2022 with higher currency effect and the growth is going to be less high than in previous years due to the comparable effect, but the trend has to be very positive and we have high expectancies mainly in U.S.A. In terms of inflation and transferring prices, we are very used to inflation in South America. We have been living with it for the last years. And in Europe that we are not so used to it. As you know, our main market is Spain. We already have closed the collective bargain agreement for the next 4 years and we are working hard on transferring prices. We are doing very well and we do not think that we are going to have any kind of issue there. As you know and as I always said, we are very good transferring prices. We have to do it quickly because the moment it's important that we don't expect impacts coming from transferring inflation to prices. And coming back to your last question in relation to Brazil, this year we achieved the breakeven. We have positive results not just breakeven, also positive results. So we have an important challenge to improve those figures in 2023, but I'm sure that we will have to maintain that trend and to continue growing in that country.

[Operator]

We have no further questions at this time. I would now like to hand the conference back to Maite Rodriguez for closing remarks. Please go ahead.

[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 your lines. Thank you.