Prosegur Compañía de Seguridad, S.A. (PSG) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Prosegur Full Year 2021 Results Presentation Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Antonio de Carcer, Head of IR. Please go ahead, Antonio.

Good afternoon, and welcome to year 2021 to Prosegur presentation. It's around 30 minutes, followed by an open Q&A session. This webcast will be hosted by Antonio Rubio, Secretary General; Maite Rodriguez, CFO; and myself. Prior to starting, I would like to remind you that this presentation has been prerecorded and that it will also be available for download in our corporate website. I will now hand you over to our Secretary General, Antonio Rubio.

Good afternoon, everyone, and thank you for attending this presentation. Today, we are presenting the financial results of a year that has been full of challenges, not only for Prosegur but also for the industry and the global economy as a whole. In this complex environment, Prosegur has managed to achieve positive organic growth in all regions and business areas. This consolidates a solid recovery trend and shows that our business model remains solid after the gradual fading of the pandemic effects and will soon return to pre-pandemic levels without structural damage. We had not fully recovered yet as negative impacts are still present in some regions and business areas, but we are very optimistic about the positive of the situation and also about the favorable tailwinds that the current macroeconomic environment will bring to our operations. Before we go into these details, let me first summarize the main highlights and achievements that Prosegur has made in the past year 2021. In 2021, we launched our strategic plan for the next 3 years, a plan that relies heavily on innovation, new products and digitalization of the company. And what's main goal is to improve the profitability of the company in the mid and long term. On the innovation side, we have been extremely active, launching two new business lines, AVOS and CIPHER; introducing a new intellectual property frameworks, inside artificial platform and ops, global interconnection and communication systems amongst others. That will add as the foundation of new products and solutions in all business lines. To actively transfer all this innovation to the market, we have also developed a new organizational structure with the creation of the role of Global Managing Director to jointly drive the evolution and market expansion of security alarms, AVOS and Cipher. And also appointed a new Managing Director of the Security business based in the U.S., whose main responsibility will be to accelerate the change towards a full integration between guarding and technology and quickly capture the interesting growth opportunity that the U.S. market is presenting to us. On the business evolution side, we have been able to respond to the harsh macro environment created by the pandemic, gradually recovering our volumes in all business lines and geographies, expanding the penetration of our new products, mainly in cash and improving our profitability quarter-over-quarter in almost all products, although we are still suffering insecurity from the strong negative effect that the last pandemic wave has imposed. Our balance sheet has also performed very well, renewing our investment-grade credit rating for the 11th year in a row, delivering a very good cash flow, thanks to our excellent working capital optimization and [ completion ] policies, together with very effective foreign currency recognition programs that have allowed us to reduce to the maximum possible [indiscernible] FX. Regarding ESG, in 2021, we had launched a new sustainability director plan with more than 60 different initiatives, and had fully integrated ESG criteria across all the business lines, back office and corporate procedures, obtaining a better rewarding valuation increase from the main ESG rating agencies we work with it. And finally, in terms of inorganic expansion, we have been active in all business lines, not only on the pure M&A side, but creating very promising partnerships and alliances. Let me give you some more color on this topic. We have completed 3 M&A transactions during 2021, providing a total acquired value of EUR 73 million. Prosegur Cash has expanded their presence in the banking correspondent industry CORBAN, following the acquisition of the one of the main market's leading national players Uruguay in May. This deal will add 460 additional physical branches to our current platform of over 6,500. We now run in several countries in LatAm. AVOS has also performed and operation in LatAm through the acquisition of [indiscernible], a major national BPO provider specializing in digital document verification, data mart and transactional reports with adding strong presence among retail, insurance and banking customers. Finally, security has also increased its footprint in the U.S. by acquiring superior security and investigations, a security operator highly focused in the air transportation industry with ample presence in the states of Oklahoma, Texas and Missouri. Furthermore, in addition to the ongoing M&A, we will continue to deliver through 2022, we have struck a number of strategic alliances and collaborations with major players in different industries over the past year. Cash has formed a joint venture with Euronet, the ATM industry leader to become the region's leading independent ATM network operator in LatAm. And in addition, has also signed a strategic commercial alliance with Santander Bank in Spain to target the small and medium commerce market with the Cash-Today solutions. In Spain, Santander has teamed with Movistar Prosegur Alarmas, to resell their home security alarms via its branch network. A similar agreement has been signed by Prosegur Alarmas and Telefonica to extend their presence in the Colombian residential market. Finally, Prosegur Microsoft has signed a strategic collaboration agreement in the cybersecurity environment, certifying Cipher as a preferred cybersecurity partner in the GRC technology. This long-term partnership will work together to beat cybersecurity protection services that Microsoft will integrate into their collaborative client solutions. This has been the main highlights of the period. Let's now review the financial performance of the company. And for that, I will hand over the presentation to our group CFO, Matar Rodriguez. I will join you back at the end of the for final comments and remarks.

Thank you very much, Antonio, and welcome, everyone, to this presentation. I will start the financial review of our full year 2021 results with a quick overview of the most relevant indicators of the period. As Antonio mentioned before, volumes have recovered, especially in the second half of the year as the negative impact of the pandemic has subsided. Proof of this is the overall sales growth of 5.8% in local currency. Organic volume growth was recorded in all regions, with increase of up to 10% and 11% in South America and the rest of the world, respectively. In this sense, it is remarkable the outstanding revenue growth in security in the U.S. of up to 16% in local currency terms. New products have also grown both in security and cash, being Prosegur Cash, the best performer with an increase of up to 15% in the penetration of the new solutions in the revenue mix. Alarms added nearly 100,000 new connections to their customer space, reaching more than 700,000 customers in 9 countries. EBITDA has reached EUR 223 million. This represents an EBITDA margin of 6.4% for the group, although the company saw a gradual improvement in margin especially in cash business. There were some temporary effects in the later part of the year that had a negative impact on the results. I will come back to this point later when we analyze the consolidated profitability. However, let me tell you in advance that this effect are temporary and mainly caused by the Omicron COVID variant. Cash flow generation continues to be good, with an excellent EBITDA to cash conversion ratio of almost 80%. We continue to improve our best practices in working capital together with a tight control of the infrastructure CapEx, which allows us to achieve an operating cash flow above the average of the last 5 years, despite the unfavorable macroeconomic environment. Finally, in terms of balance sheet position, Prosegur continues to benefit from a very comfortable liquidity profile and firepower, maintaining a moderate leverage ratio and an excellent maturity profile for our corporate debt. If we look at the group's income statement for the full year 2021, we see that revenue has increased by 1% compared to 2020, reaching EUR 3,498 million. This is made up of positive organic growth of 5.5%, supported by an additional 0.3% from the net effect between M&A acquisitions and sales and only diminished by a negative currency effect of 4.8%. Geographically, all regions also posted positive organic growth, including Europe, whose negative decline of minus 1.3% was due to the sale of the Prosegur solution company to Movistar Prosegur Alarmas. If this effect is excluded, Europe sales grew organically by 1%, while LatAm and the rest of the world increased their revenues by 10.9% and 11.3%, respectively, in local currency, or by 1.2% and 10.2% if the negative currency effect is deducted. This is a good indicator of how our volumes have progressively evolved during the year. In fact, if we analyze the development of our volumes on a quarter-by-quarter basis, our two main revenue drivers, cash and security, have gradually improved their organic growth compared to the same period in 2020. With the sole exception of the first quarter of 2021, in which Prosegur suffered the most from the pandemic and climatic conditions in Europe and whose comparable benchmark was the first quarter of 2020 when the pandemic had not yet been declared. It is also worth noting that the strongest improvement was achieved in Q4, which benefited from the general recovery of the economy. Reported EBITDA is still negatively impacted by the pandemic-related productivity, mainly in security. Consolidated net profit remains at EUR 59 million, almost at the same level as in 2020. Let us now analyze the consolidated profit for the period. EBITDA has reached EUR 223 million. This represents a decrease of 13.7% compared to 2020. As already mentioned, this can be partly explained by the reactivation of the investments in digital transformation that has been put on hold during almost all 2020, but mainly by the strong negative impact that the Omicron variant imposed on the security business through increased labor and productivity. The high number of positive COVID contingents, which occurred mainly in Spain, Portugal, Argentina and Brazil had a strong impact on our workforce, drastically increasing absenteeism and forcing us to replace all sick leaves of operational staff, with substitutes who had to be compensated for the extra work and overtime. In addition, some labor regulatory changes in Latin America at the end of the year allowed us to already mention the workforce in line with actual market demand. We have chosen to defer this additional cost in 2021 to benefit from a cleaner cost structure from the beginning of 2022. And lastly, we have also increased our commercial investment in the U.S. to take advantage of the increased market demand for our business. And we are proactively expanding our structure in this market to be able to serve this potential higher demand. As you can see, all these negative effects are temporary or one-off in nature. And we firmly believe that security will resume the positive trend of profitability growth that it has been experiencing for the last 2 years. The chart on the slide clearly shows how our margins have gradually recovered on a sequential basis, with the sole exception of the previously mentioned impact that security has suffered in Q4. Let us now take a closer look at our cash flow statement, financial position and balance sheet. Starting with the cash flow statement, the most remarkable aspect is, once again, the excellent ratio of EBITDA to cash conversion, which reaches almost 80%. This ratio exceeds the already very good values of the last 3 years before the pandemic. The main reason for this is the positive development of the working capital, especially in the last quarter, which was favored by the continuous optimization of the DSO. Please bear in mind that in December 2020, many special effects from the COVID outbreak were included in working capital. Regarding tax payments, I would like to mention that despite the fact that the tax rate is significantly higher than the group's historical average, outflows in this regard have not increased equally, as many aspects that explain the increase in the tax rate are purely accounting in nature with no related cash outs. Capital expenditure continues to be contained, especially investment in infrastructure CapEx, which remains under control, representing 2% of total group sales. However, investments in digitalization projects have been reactivated, especially in the last quarter of the year. In terms of M&A, deferred payment settlement mainly from cash and CIPHER business lines acquisitions explains the cash out of the quarter. Lastly, regarding dividends, both Prosegur and Prosegur Cash completed the fourth and last committed installment of the year in October. Looking now at the group's financial position. Total net debt at the end of 2021 amounts to EUR 845 million, including deferred payment of EUR 86 million, treasury shares at market price of EUR 37 million, and Telefonica shares of EUR 191 million. If we also include additional debt related to IFRS 16 of EUR 102 million, the total net debt reaches EUR 947 million. Regarding net debt, I would like to note that this ratio remains almost unchanged in the reported period compared to the previous quarters. Outflows from dividend payments, M&A, CapEx and taxes were almost completely offset by the positive operating cash flow of the last 3 months of the year. In terms of leverage, Prosegur continues to have a moderate net debt to EBITDA ratio of 2.3x, well below current bank covenants of 3.5x. Prosegur maintains its traditional financial discipline and guarantees a solid financial position, even in the most difficult conditions such as the health care crisis, which still affects our results to some extent. In terms of pure cost of debt, I would like to highlight the efficient management of financial costs, which has allowed us to keep the company's average cost of debt very low and almost unchanged throughout the year. Let us conclude our overview of the financial information by looking at our consolidated balance sheet. In general, there were no significant changes in the fourth quarter of 2021, apart from the impact on intangible assets due to the impairment of EUR 18 million related to the Australian business. Please note that this impact has not been included in the income statement of this presentation, as it is a one-off effect of nonrecurrent nature. This being said, I would like to highlight that the most remarkable aspect of the Prosegur's balance sheet is it's historical solidity and stability. As always, our maturity profile is worth mentioning as almost 85% of our financial liabilities are of a long-term nature. Liquidity is also one of our greatest strengths. It currently covers more than 80% of the main debt maturing in the next 5 years. Moreover, the maturities of the main financial facilities are spread over the years, avoiding a concentration of due date. Last but not least, another noteworthy aspect of Prosegur's balance sheet could be the quality of our client portfolio, which, historically, has a very low percentage of insolvencies, representing less than 2% of the group's total turnover, 1.15% in December 2021. That is all from my side for the time being. Thank you for your attention, and I will rejoin you for the Q&A session. I will now hand over the presentation to our head Investor Relations, Antonio de Carcer, who will give you more detailed information on the development of the individual business areas.

Thank you very much, Maite. Let's now have an overview of the results of each activity line, covering the main performance indicators of each one. Starting with cash, we can see that revenues in local currency terms have grown by almost 7.2%. A very good result coming from a generalized increase in volumes in all the geographies despite the strong negative effects suffered by lockdowns during the first half of the year. Inorganic growth of 0.2% comes from the differences between the acquisitions made in LatAm and Asia Pacific, deducting the sale of the AVOS business to Prosegur. Negative translational currency impact has also been milder than in previous quarters and the overall result in euro terms has reached EUR 1,519 million, almost a 1% increase over 2020. Worth noting the excellence performance of the products that now account for more than 21% of total cash sales with very good penetration figures in all geographies. Being quite remarkable, the evolution of both Cash-Today solutions and CORBAN business that have grown a significant almost 48% year-on-year. On the profitability side, EBITDA in the period has totaled EUR 185 million, keeping the EBITDA margin figure in par with year. A very good figure considering that at a consolidated group level, the capital gains obtained from the sales of AVOS to the group are not accounted. And that in 2021, Cash was no longer benefiting from the special support programs put in place by some governments to guarantee subsidies distribution to population during the worst of the pandemics. Normalizing those effects, underlying margins in cash have been improving quarter-on-quarter throughout the full year. And this is an excellent proof of how fast the business recovers from outer situations and how during 2022 profitability will continue improving, taking advantages of the macro tailwind that inflationary economics can bring. In security, we can also appreciate positive organic growth of 2.8% and an additional 0.1% of inorganic nature from the acquisition made in the U.S. in August. A negative currency effect of minus 3.4% has led to a total turnover in euros of EUR 1,735 million. This represents an almost flat decline of 0.5% compared to 2020. Volume growth was led by the U.S. with excellent 16% organic increase and followed by Spain and Argentina, which showed a very good recovery trend in the last half of the year. This growth has come to adapt to a large extent due to the increase of technology sales. Indeed, technology is gaining more and more presence in our product mix. A good proof of this is the expansion that it has experienced in our mix of the new products over the last 2 years. As you know, in recent years, we have used the term integrated security solutions to mean a combination man guarding services with remote monitoring and technology products that together provide a coordinated solution for each individual customer. In this context, we have now decided to expand the disclosure of the weighting of the individual components the integrated solutions mix. As you can see in the chart, few technology products are gaining more presence in our new products every year. They now account for 57% of the total mix, although they were affected by the supply shortages in the microchip industry at the end of the year. This is a very good progression that should accelerate in future as we add new customers every year with our model of integrated security solutions. In terms of profitability, as Maite Rodriguez said, security EBITDA in Q4 was impacted by some temporary negative effects that reduced the overall margin from 3.9% in 2020 to 2.6% in 2021. The main cause of this margin erosion is the strong negative effect that the Omicron variant had on the business, leading to high levels of unproductivity and labor absenteeism. This, together with the strong commercial investments we are making in the U.S. market to drive growth and the one-off effect of some staff adjustments we made in Latin America in December, also due to the impact of the pandemic has had a temporary negative impact on the profitability of the business, which we expect to fully correct in the second half of the year. Let's now move on to alarms. We are extremely satisfied with the performance of this business in 2021 despite the negative impact in terms of churn rate and stagnation of sales that we suffered during the confinements in all countries. As you can see on the graph, both Movistar Prosegur Alarmas in Spain and Prosegur Alarms in the rest of the world increase the number of new connections from quarter-to-quarter. In total, they reached more than 700,000 customers with NPA sowing phenomenal increase in the second half of the year. The dynamics of each company were different, but equally positive for each one. On the one hand, Prosegur Alarms has focused part of his commercial activities on building alliances and potential partnerships in LatAm that will accelerate the future growth of this customer base. In this context and following the success in Spain, we have signed a commercial agreement with Telefonica in Colombia, which is now starting to bear fruit and increase the number of new clients. On the other hand, the business has demonstrated it can quickly recover from the negative impact of the confinements and lockdowns, reducing the churn rate by 150 basis points to 12%, an increase in its ARPU to EUR 32 per client. This increase in ARPU is largely due to the addition of several new products, such as Contigo, mobile personal protection service, which was requested by almost new customers and also by the advanced features implemented in both the new domestic panel and our SME solution, HawkEye, which now incorporate artificial intelligence and video analytics to provide our customers with more advanced services, such as facial and voice recognition or machine learning of lifestyle habits. NPA on its size has become the fastest-growing alarm company in the Spanish market, lengthen contracts with quarterly increases up to 31%. This represents a growth of more than 66% since its creation 2 years ago and exceptional value creation. Also very remarkable is the fact that more than 85% of new contracts come from customers who previously had no alarm system on the homes. This shows that the market is still not sufficiently penetrated, and that similar or better growth rates can be achieved in the incoming years. If we now look at the key performance indicators of the Alarm business broken down by company, we can see that NPA increased its customer base by 40% compared to the previous year, achieving a total of 352,000 clients, while Prosegur Alarms kept its total contract base almost flat while recovering from the strong churn rate caused by the pandemic in 2020. NPA exchange rate remained at the same level as in 2020 at 10.6%, an excellent result considering the aggressive advertising campaigns carried out during the year, which could theoretically increase the number of less reliable clients. On the other hand, these promotional efforts have had some impact on the ARPU, which has fallen to EUR 35 due to the aggressive offers made in the customers in Spain. In the rest of the world, as already mentioned, ARPU has increased to EUR 32 per client. Subscriber acquisition cost, or SAC, has also decreased in both companies, thanks to the efficiencies and economies of scale resulting from higher customer density and financing programs. This effect is not yet clearly visible in our reported cash flow, as the comparative figures from 2020 still include 2 months when Spain was still in the portfolio, creating a distorted comparable effect. Reported revenues only referred the perimeter of Prosegur Alarms. As you know, NPA is consolidated using the equity method. In this regard, we can note an excellent organic growth of 18.2%, reflecting the strong ability of this business unit to increase prices. This is only diminished by the corresponding negative inorganic effect from the sale of the Salesforce service company, Prosegur Solutions, which was sold to NPA in Q2. Finally, in terms of profitability, NPA has slightly reduced its EBITDA pre-SAC margin down to 51.2%, and similar happens to Prosegur Alarms that reports 41.1%. This is mainly due to both company's investments in innovation and technology to launch new products. This effect will hopefully weaken as the customer base continues to grow. To conclude the analysis of the different business lines, let us now examine the performance of our newly created business, AVOS and CIPHER. With AVOS, we appreciate a very good revenue growth of 10.3% and a gross margin expansion of more than 20%. The company's good performance is spread evenly across all product lines, including front office and back office services plus technology products geared towards insurance and financial companies and reinforced by the recent acquisition in Chile of one of the main BPO product solutions providers in the market. Meanwhile, CIPHER, our cybersecurity business, has been redefining its business model by shifting its customer portfolio from one-off implementation projects towards a mix of more recurring services based on monitoring and response. This requires additional investments and reduced revenues. However, sales have maintained flat at good organic level with only some FX impacts since a large portion of our revenues comes from the U.S. and Latin America. Nevertheless, CIPHER has become the focal point of the strategic alliance signs with Microsoft at the beginning of the year. As indicated by Antonio Rubio in his introduction, this partnership will lean on CIPHER at a global to jointly develop with Microsoft, the foundation of the services that Microsoft will be providing to their corporate clients in terms of managing detection and response in cybersecurity and data governance compliance in their cloud solutions. This was all regarding the evolution of each individual business line during 2021. I will now hand over the presentation to our Secretary General Antonio Rubio to provide information on our ESG and sustainability achievements in 2021 as well as his final remarks.

Thank you very much, Antonio. Now before moving to my final remarks and conclusions, I want to provide you with an update on how our ESG commitment has progressed over the past year. This year, 2021 has seen a considerable reinforcement of all the sustainability and government standards that have been in place at our company for many years, adapting them to the new economics and metrics, combining them all together within our new sustainability policy. This document was accepted on October 21 and will be overseen by a newly formed Sustainability Corporate Governance Appointments and Remuneration Committee at the Board level. We also approved our new sustainability master plan for the incoming 3 years. 63 lifting initiatives are covered by the plan, which is organized around 4 key areas of action: Ethics, transparency and governance, environment and people and safe work. And all of them will have detailed indicators to allow them to monitor progress and improvement. We have also strengthened our agreements and applications with prominent ESG organizations, including foretica, the climate page or the global company in order to assist us in our goals with the global ODS. We have increased and deepened our involvement with ESG rating agencies in recent years. We have dedicated ESG team. We are aiming for a fluid bidirectional communication approach. As a result of those initiatives, we are very pleased to see how our ESG ratings has improved in all the process during the last 12 months and also to welcome the new [indiscernible] good corporate governance rating that has awarded Prosegur with higher qualification, being the first company in Spain to obtain this scoring. We will continue improving and expanding our commitment with sustainability in all fields of action as it now has begun a cross-functional requirements in all our business lines. And as such, we will be constantly monitored and measured. Now before going to our closing remarks, I would like to express my foremost appreciation to all of you for all the support, dedication and good relationship you have shown to me in the past 12 years. As you know, I have been promoted to the position of Secretary General of the group, and Maite Rodriguez has taken over the role of CFO at Prosegur. Today, I want to congratulate Maite for her promotion, fully confident in her capability and experience to access and manage all the financial aspects of the company, improving them to higher standards and continuing with the excellent financial discipline that the group has created over the past 2 decades. Having the opportunity to communicate with all of you throughout the years has been a great pleasure for me. Learning from you all and hopefully being of use to you in better understanding our company and its fundamentals. I will continue to be at your complete disposal in my new position. And hopefully, I will remain in touch with all of you in future patience. Let's now finish this results presentation with a summary of our view on the current and future state of our company. 2021 been a challenging year for all. However, we are pleased to see how our business strategy has been able to overcome the majority of these challenges, resulting in positive volume growth across nearly all product lines with cash steadily increasing both revenues and profitability, taking advantage of the current inflationary environment that will accelerate cash volumes and expedite price transfer processes. And security also returned to positive growth, only affected by the still present negative pandemic effects that are also double in fading. Alarms on Prosegur side has shown an excellent level of resiliency, improving its key performance measures and sequentially expanding the number of clients on a quarterly basis. We expect this trend to accelerate in the coming months, and the business unit is now focusing extensively on expanding alliances in order to increase growth across all geographies. Regarding Movistar Prosegur Alarmas, I'd like to highlight the sectional value creation that this joint venture has produced since its creation in March 2020. In this time, more than EUR 400 million in enterprise value has been created based on current market multiples. This is an extraordinary figure that we are confident will continue to increase at similar or higher rates in the incoming years. M&A has been active in this year, contributing another EUR 73 million of enterprise value to the group and will continue so during 2022 as we have a consistent pipeline in practically all business lines. We continue to generate strong cash flow and maintain our favorable DSO trend. This, combined with a moderate leverage level and well managed CapEx, ensures that we had liquidity outside power to continue increasing our M&A and serving our dividend to shareholders. Finally, we will continue to improve in all the ESG metrics that we had specified in our strategic plan, providing more precise information to the market about our goals and accomplishments, aspiring to be a model for a strong sustainability practices in the industry. This concludes this result presentation. Once again, thank you very much for your attention. And now our CFO, Maite, and I, will gladly attend all your questions.

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

And congratulations to Maite and to Antonio, and Antonio, we will miss you. And Mr. de Carcer, I think, you should be the next one. So I mean, three questions on my side. I mean the first one is if you could quantify this impact of absenteeism in your margins in security. And if you could give us an impact of what could be this impact in the U.S. where the labor cost is, I mean, well above the rest of geographies. My second question is on the CapEx. We have seen an acceleration in CapEx in Q4. So I don't know if this Q4 CapEx could be a good indication for 2022 number. And the last one is, I mean, Antonio has commented on the change in the scope on Alarms, okay, something like Prosegur Solutions. Could you give us more information about that?

Thank you very much, Paco, for your questions. In relation to the [indiscernible] activities coming from security business, the main impact -- the global impact is around EUR 3.5 million. And if we go back to U.S.A., we remain -- we are also having some significant productivity impact, mainly coming from the problems that we are having from hiring people because, as you know, U.S. has full employment, and this is becoming an issue. And in relation to the CapEx, as you know, we are recovering and reactivating the digital transformation investments. We are also increasing in new products. And for 2022, we will be more or less same line as we have been in 2021 in relation to the infrastructure CapEx, around 2%. But for the new products, we will have an increase and the same trend as what we have suffered during -- as what we have had during this last Q. And in terms of Alarms, I don't know if you can repeat the question because I forget it.

Yes. I mean on the Alarms that Antonio de Carcer has commented that there is a change in scope. I mean in your presentation is something like around 18% of sales of last year due to the disposal of Prosegur Solutions, could you give us more detail? And just a follow-up on -- to be sure on what you have commented, it's 3.5 the total effect on absenteeism. So at the end of the day, we are talking about a slightly higher margin than the one that you released. How confident you are on reaching the target margin in 2023 of between 4-point-something-five percent?

Okay. Thank you. In terms of Alarms, yes, it's Solutions. And we sold it due to NPA during this year. And we didn't have any -- very significant impact in our P&L. It's -- I think that's close to EUR 2 million or something like that, but it's something insignificant. And in terms of all the one-offs that we have suffered during this 4Q, we didn't just have the unproductivities cost from Omicron variant, there are other additional effects at dismissals in Argentina after the last labor regulation changes. Even though I -- it had a negative effect during 2021 because it will have a positive effect in 2022 because we will be more efficient in labor costs. So this total labor lay off impact amounts around to EUR 7 million. And we also have the investments in new talent and commercial sports in U.S. what for this 4Q is also around like EUR 3 million. And we have the reactivation of the digital transformation that, full year, we have like EUR 13 million more than previous year. So if we consider all those impacts, we should be in an EBITDA margin in Security business above 4%, so better than the last Q.

[Operator Instructions] That will conclude today's Q&A session. I would now like to turn the call back to Mr. Antonio Rubio for any additional or closing remarks.

Paco, thank you very much for your polite words. It has been a honor for me to represent Prosegur from the financial markets during the last 13 years. I am leaving the financial responsibility of the company in the best hands and you have the opportunity to test it. And thank you for these years of real companionship. So thank you very much for attending this presentation. You have your disposal Maite and the rest of the IR team. Thank you for attending. Bye.

That will conclude today's conference call. Thank you for participating. Ladies and gentlemen, you may now disconnect.