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

Good morning, ladies and gentlemen, and welcome to the Prosegur 9 Months 2020 Results Presentation. [Operator Instructions] Just to remind you all, this conference call is being recorded. I would now like to hand over to Antonio de Cárcer. Please begin your meeting, and I'll be standing by.

Good afternoon, and welcome to Prosegur 9 Months 2020 Results presentation. This presentation is expected to last around 30 minutes, followed by an open Q&A session to cover any doubts or inquiries you may have. As usual, this webcast will be hosted by Antonio Rubio, Prosegur's CFO; Maite Rodriguez, Finance Director; and myself. Prior to starting, I would like to remind you that this presentation has been pre-recorded and that it will also be available for download in our corporate webpage. I will now hand you over to our CFO, Antonio Rubio.

Good afternoon, everyone, and thank you very much for attending this presentation. As it has become customary over the past 9 months, COVID-19 effects continue being the main concern for the global economy, and its effects seem to be lasting longer as we anticipated on our previous call. The results we are presenting today corresponding to the first 3 quarters of 2020 are also biased by this situation. And as you will see, they are very solid given the fact that although there is still a noticeable impact on volumes and revenues, Prosegur has been able to maintain a solid stance in terms of profitability and cash generation. Our main priority remains being the safety of all our employees and to support our clients to maintain their business continuity with the highest level of security and safeness for them and the assets. And in this regard, we are very proud to state that all our safety goals have been met to the max, becoming a good industry reference on how to handle this type of crisis in any geography. As we did in previous presentations, before getting into specific indicators of the business, let me first give you some insight of the main impacts and reactions experienced by the company in the last quarter deriving from the COVID pandemic, both at the individual business line and consolidated group level. The main appreciable sequences of the last 3 months in relation with the pandemic has been not only the second wave of outbreaks we have experienced in Europe or U.S., but also how the intensity of inflation and social distress have shift towards Ibero-America. So as we gradually have begun to recover activity in developed economies somehow slower than expected due to the second wave of outbreaks, on the contrary, our main markets in LatAm remain experienced reduction in volumes deriving from continued confinements and business closedowns. Those global dynamics have had a higher effect in cash or dependency in emerging markets is much higher than security or alarms. Therefore, in cash, we are experiencing a certain recovery slowdown in all regions. We also had seen hold the strong demand to support the delivery of government aids to population would receive in Q2 is still in place, but also with lesser volumes than at the beginning. Security, on the contrary, has experienced more positive inputs during these past months. Although volumes are still weak deriving from the general situation of the economy, in Europe, we are seeing a gradually increased demand for all type of COVID-free solutions that now have become a fully structured offering to market, adapted to the specifics of each client business, and of which in Spain, we have been awarded several large contracts. Nevertheless, the weak situation in Argentina, U.S. and several LatAm countries still maintain volumes on the negative side. Although, as you will see later on, profitability in this business line continues improving. Also comment that at the beginning of October, we have fully completed our divestment of our security business in France. Alarms is also recovering very fast. Movistar Prosegur Alarmas, our joint venture with Telefónica in Spain, has initiated sales with an outstanding result in the end of domestic confinements. On the other hand, severe social distancing requirements are still in place in Ibero-America. And therefore, Alarms growth on that geography is still limited. Nevertheless, as the situation rapidly becomes back to normal, churn rate is decreasing and new additions to the installed base are incrementally coming back. Finally, at group level, we're very proud to state that all the cash flow and liquidity protection measures put in place at the beginning of the crisis continue bearing good results despite the complexity of the situation. This is very good news as we have all seen how the global situation has become more complex and uncertain. And in this regard, the group wants to be financially ready to face any challenge. Let's now move to a summary of the main financial indicators of the period. Prosegur has obtained a total sales figure of EUR 2,620 million during the first 9 months of 2020. In organic terms, growth has been kept positive, good result considering the increased negative effect of the pandemic that, as previously mentioned, has now shift its intensity towards Ibero-America. Revenues in euro terms suffered from the negative transactional currency effect that has been maintained along the whole year and also, to a certain extent, from the divestments made in Security in France and in Alarms in Spain. Regarding Alarms, I would like to restate the promising results that the newly-created Movistar Prosegur Alarmas is presenting. In roughly 3 months of real operation after the confinements, they have tripled the traditional average growth ratio that Prosegur have delivered in Spain in the past years. On the profitability side, the business has produced a recurring EBITA of EUR 201 million. Both Security and Alarms have improved their margins, being Security the most remarkable of them 2 as this clearly shows the positive effect of new products and COVID-free solutions are having in the service mix. Profitability has also benefited from some job keeping subsidies received in U.S., Australia and Singapore, totaling EUR 50 million equivalent. Beside COVID, the main dilution in our EBITA continues being generated by the best FX as we reduced the compound weight in our revenues of the countries with the highest profitability ratios. Cash flow generation continues to be excellent and surpassing previous year levels, both in absolute and relative terms. Through our working capital management, reinforced collection procedures, CapEx contraction up to 35%, together with some other crucial cash protection measures, continue being our focus as their positive results are clearly visible. And finally, on the liquidity and balance sheet side, we are also very proud to communicate the renewal of our BBB stable outlook rating by S&P, being this a good proof of our solid balance sheet situation. This regardless slight temporary net debt-to-EBITDA ratio increase deriving from the combined effects of the divestment in France, the credit treasury stock and temporarily deterioration of our results due to the current pandemic situation. In summary, once again, better than consensus business performance results with better profitability than expected, while maintaining a very sound financial position, even in the harvest of this crisis period. Let's have now a quick view of our P&L account on the period. As indicated previously, total sales figure in the period is EUR 2,620 million. This implies a 15.4% decline compared to same period in 2019. The main reason of this revenue reduction comes from the combined effect of the 11.6% negative FX impact, and the new 4.5% inorganic coming from the financial deconsolidation of Security in France and Spanish Alarm business, now operating jointly with Telefónica. EBITDA totals EUR 292 million, and the reported EBITA is of EUR 176 million. This reported EBITA figure is minor in EUR 25 million as we are including the nonrecurring efficiency plans that were announced last quarter by Prosegur Cash, including this extraordinary item, the final accounting figure of EBITA becomes EUR 201 million. A more realistic figure as it prevents the real -- recurring capability of our profitability. More on this later, we're analyzing profitability and cash flow generation. EBIT, including those effects, totals EUR 154 million, and net profit comes down to EUR 55 million once applied financial costs and taxes. Tax rate, importantly, remains about 50%. Being this another side effect of COVID-19 as the bulk of revenues has skewed towards countries with a higher effective tax rate, while also the application of the hyperinflationary accounting rules generates an increased tax impact that, nevertheless, is of noncash nature. Finally, if we deduct the EUR 10 million assigned to minority interest related to Prosegur Cash, we end with a total net consolidated profit of EUR 55 million during its first 3 quarters of the year. Looking at the breakdown of revenues by business line and geography, we see that in all business lines, there is a double-digit percentage drop down in revenues in euro terms. This corresponds, in the case of Cash, mainly to their high exposure to negative FX, and their local currency growth is still positive. While in the case of Security, it mainly reflects the deconsolidation of France, the slowdown in the U.S. due to the COVID impact in air transportation industry and to some extent, also the negative effect of currencies, mainly in Brazil, which continues to be the second biggest market of our Security business line. Alarms, on its side, receives the combined impact of both effects, accounting the deconsolidation of the Spanish business in Europe and the negative currency translation in Ibero-America. Analyzing by region, we see similar behavior. Europe still reports the deducted revenues from the sole French operations and still a slow recovery from the clients' business cross downs, both in Security and Cash, both gradually coming back to normal but again affected by the second wave of virus outbreaks initiative at the beginning of the month of September. Ibero-America, on its side, is delivering a positive 7.2% local currency growth, lower than the equivalent reported at the first half of the year due to the increased COVID-19 effects on the local economies and also heavily impacted by negative FX when converting into euros, being this is still the main cause of the down line resolution of the region. Finally, rest of the world region still maintains its positive evolution, but also we saw deceleration compared to previous quarters, as its 2 main contributors in terms of revenues, U.S.A. and Australia, are still catching up with their expected recoveries. Australia, gaining new large contracts, but still under pressure from the strong competitive environment, while U.S. keeps on focusing on consolidating its newcomer position in the market and gets ready for the market activity recovery that will sooner than later return to the country. We are now going to analyze profitability and cash flow generation in the period. As we did in our 6-months presentation, we are stating both accounting reported EBITA EUR 176 million and the recurring EUR 201 million figure if we exclude the efficiency plans costs of EUR 25 million announced by Prosegur Cash. The reason for this is to give to the market a more realistic view on the real profitability of the business as this efficiency plan is of nonrecurring nature. Therefore, the EUR 201 million EBITA produced in the period and is a second 7.7% EBITA margin is a more precise way to state how our suggested profitability is gradually coming back to similar levels previous years, even in the very harsh conditions that the global economy is currently leading. Our estimations indicate that, up to now, COVID-19 has had a negative impact in our profitability growth to EUR 70 million. This is estimated compound of volume losses in the 3 business lines deriving from clients closedowns and also by the extra expenditure required to guarantee our employees and customers safety when operating our services. We believe this figure could revert back to our results some moment in future when stability and confidence comes back to market. But in the meantime, rather remain cautious as the effects of the crisis seem to be of longer tenure. Moving now to cash flow generation side, we are very proud to note how our operating cash flow continues improving. Cash generation has grown by 13.5% compared to the same period in previous year and keeps on expanding for the fourth year in a row. And our cash to EBITDA conversion ratio has peaked an extraordinary 80.2%. We remain under the strict financial discipline implemented at the beginning of the pandemic, that includes CapEx containment, its hosted control and limitation of nonessential expenditures, labor cost adjustment to market demand and some other cash out protection measures such as discrete dividend offered to shareholders, amongst others. But we are also reinforcing other internal procedures of long-term nature, such as thorough management of our working capital, putting extra care in our collection policies and streamlining our payables in most efficient way possible. As always, our Finance Director, Michael Rodriguez, will give you a more detailed insight on the main cash flow generation drivers when commenting the financial highlights of this result. But I would like to restate once again our satisfaction and recognition with exceptionally behavior of all the company has put in place to guarantee our capability to continue generating cash flow even in these extraordinary circumstances. This is all on my side for now. I will now hand the presentation over to Antonio de Cárcer, who will provide you with more detailed information on the performance of each individual business line. I will join you again at the end of the presentation for my closing remarks and the Q&A.

Thank you, Antonio. We will now have a look at the breakdown of revenue structure and main profitability drivers of each activity as well as some other relevant key performance indicators. Starting with Prosegur Cash, we see that organic growth has been very limited due to current economic situation, although to a greater extent, it also suffers from an offerable comparative effect. Given the fact that during the third quarter of 2019, the business generated extraordinary volumes in Argentina, deriving from the uncertain period prior to the elections. As indicated by Antonio Rubio, the reduction in volumes of cash in circulation generated by the COVID crisis, mainly in Europe at the beginning of the pandemic, has now geared towards emerging economies, where the larger portion of cash revenues resides. Extra service is demanded by certain governments to deliver aged population have also partially reduced their intensity, and therefore, a temporary lower activity has been performed in the Ibero-American region. Europe and Asia Pacific are showing better progression as the activity is gradually coming back to normal, but still under pressure, mainly in Europe, although the evolution is positive and make us confident that it will be recovered as the pandemic eases. Inorganic growth is also positive as it still includes our recent operations in Ecuador, Colombia and Brazil. And finally, strong negative currency effect deteriorates the final figure by 16% to a total of EUR 1,140 million. New products continue proving resiliency to the pandemic effects and remain being 18.2% of total sales. In this regard, Brazil, followed by Spain, leads the growth of the Smart Cash solutions. Asia Pacific has experienced an interesting boost of the new ATM services in Australia that has grown by 50% due to the assignment of a very large banking contract to externalize the displaced ATM network. On the profitability side, if we exclude the efficiency programs currently undergoing, the business has obtained a total figure of EUR 158 million. That implies a 13.3% EBITA margin. Profitability in absolute terms is still driven by the reduction in volumes of cash transported because of COVID crisis. While in relative terms, EBITA margin of 13.8% also reflects the impact of FX in the product mix. Moving on to Prosegur Security. We also find similar revenues patterned at the ones in cash. Sales have reached EUR 1,318 million. Organic growth has been slightly negative as most of the countries within the perimeter of Security have reported volume reductions coming from client loans and general economic deceleration. Nevertheless, both our main contributors, Spain and Brazil, have reported positive organic growth in [indiscernible], driven mostly in both cases by the high demand of extra services to guarantee social distancing measures in clients, but also, in both cases, by the gradual transformation that those services are experiencing, transforming from plain temporary man guarding to high-end remote monitoring solutions of higher profitability and permanent nature. On the inorganic side, security revenues also have a reduction of almost 6% that corresponds to the divestment made in France and negative ForEx also adds an additional reduction of 8% to the reported revenues. Much better news can be seen when we look at the penetration of new products that continues growing and now represents 34% of total Security sales. COVID-free solutions developed in record time have caught a significant grip on our commercial activity. And several important contracts have been awarded to Prosegur in Spain, Brazil and Singapore to provide systems that guarantee safe access of citizens to large public infrastructures such as train stations or large malls. It is important to note that these COVID-free solutions, based mainly on remote monitoring services, are also serving as powerful door openers to continue transforming traditional guarding services into integrated security solutions as they both share the same technological infrastructure and, therefore, represent a clear scalable savings proposal for the clients. In terms of profitability, Prosegur Security continues with the margin expansion initiated by the end of 2019, with the temporary exception of initial stage of the pandemics, while we were adapting the cost base to the new situation. Reported EBITA of EUR 41 million is slightly above the same figure in 2019 and drives to a 3.1% EBITA margin that can be considered an excellent result considering that there are still profitability constraints in U.S., our third biggest market, and the general COVID situation. Profitability improvement comes mainly by the incremented sales of new solutions in key markets, such as Spain or Brazil, and general good execution in all geographies when transferring inflation cost to market and, to a minor extent, from the support of job keeping aids provided by some governments, mostly in the U.S. To conclude these business lines breakdown analysis, let's look now at the performance of the Alarms in the period. As you know, during the most severe moments of the pandemic, confinements and social distancing limitations imposed to population prevented the normal sales activity of the Alarms business, and therefore, during the first 4 months of the crisis, neither Prosegur or Movistar Prosegur Alarmas were able to add any significant number of new clients. And the installed base suffered a reduction of close to 10,000 units coming from noncovered churn rate. As the situation began to gradually normalize, sales activity was resumed in most of countries, delivering the following results. Within Prosegur perimeter, LatAm countries, Portugal and South Africa, confinements are still partially present and new additions to the base are still below average of previous years. Nevertheless, the reported loss of 10,000 contracts in Q2 has been greatly reduced in 3 months to only 3,000 at the closing of the reported period, and our estimations believe the gap can be fully closed or even surpassed by year-end, depending on the evolution of the COVID crisis. On the other hand, Movistar Prosegur Alarmas has generated more than 20,000 new connections since the real start of their sales activity in the last weeks of July, an average of 10,000 new clients per month, more than tripling the previous growth rate of Prosegur in the Spanish market. This is an outstanding milestone. Moreover, if we consider that the commercial infrastructure of MPA is not yet fully operational, and the market is still partially paralyzed, mainly in the small commerce client side. Consolidated revenues on Alarms, excluding Movistar Prosegur Alarmas, have totaled EUR 151 million, with an excellent almost 14% growth despite the difficult situation, also impacted by a negative 8.5% currency effect. And with also a negative 31.7% in organic that corresponds to the deconsolidation of our accounts in MPA that is now being reported through the equity method. ARPU also remains stable, having experienced a minor temporary loss of EUR 1, as a result of the combination of higher churn rate on commercial clients due to the effect of closures and the client rotation measures applied during the pandemic in order to control client drops. Regarding churn rate, we are satisfied to appreciate a gradual reduction as a result of the aforementioned client rotation measures and the recovered normality that sales activity is bringing back. Finally, on the profitability side, I would like to point out that the measured EBITDA pre SAC or operating margin of the full lifespan of each individual control continues progressing, being now above 53% on the Spanish connections operated by MPA and over 42% on the remaining one, thus making a compound 47% EBITDA pre SAC margin on the accumulated total installed base. Quite a remarkable figure that we believe will continue expanding in future years as it has a direct correlation with the scalability of the business and the increased use of new technologies to enhance it. That was all on my side related to the evolution and performance of our principal business lines. I will now hand over the presentation to our Finance Director, Maite Rodriguez, who will cover the main financial parameters of this first half of 2020 results.

Thank you very much, Antonio. Good afternoon, everybody, and thank you very much for attending this presentation. Let's now have a closer look at our cash flow statement, debt structure and balance sheet. On the cash flow statement, we can appreciate that operating cash flow maintains the positive trend we have been experiencing so far during the year, improving by EUR 25 million versus September 2019, an increase close to 14%, being this a noteworthy aspect, particularly considering the adverse effects and the complex global situation. Additionally, performance in terms of EBITDA to cash conversion ratio is also remarkably solid, standing at an extraordinary level of 80% after normalizing the purely accounting impact of the IAS 16. In this context, I'd like to highlight the strong cash flow generation of Prosegur Alarms. As previously stated by Antonio de Cárcer when covering the EBITDA per SAC generation of this business. Up to September 2020, Prosegur Alarms, excluding MPA, has generated more than EUR 41 million operating cash flow. As you know, we usually reinvest a similar amount of generated cash flow to fund the growth of the business and thus maintain it with high-growth rate being self-funded. Coming back to the consolidated operating cash flow, EBITDA keeps suffering the negative effect of the pandemic, dropping close to 23% versus same period in 2019. To face this tough situation, Prosegur has maintained its wide and efficient measures, implemented at the beginning of the outbreak, achieving an excellent cash generation outcome despite the hostile FX and pandemic environment. To reinforce the working capital optimization, which is our main focus, we continue taking several measures such as keeping control of timely collections in all top clients across all geographies, constantly improving DSO and deferring pending payments to the maximum limit to generate more liquidity. Provisions and other noncash items, at a lesser extent than in the previous quarter, keep providing certain temporary positive effects driven by some tax payment deferrals, taking advantage of the option offered by many government immediately after the COVID-19 outbreak to delay certain tax payments as an eye to face health crisis. These kind public administration initiatives are still in place in some geographies, but with a lower impact. When it comes to the interest payments, Telefónica's dividend inflow received in July has almost entirely offset the outflows coming from the full disposal of the syndicated revolving credit facility of the short-term credit lines. In terms of CapEx, U.S. still can appreciate its reduction above 35%, both in client and maintenance CapEx as a direct effect of the lockdowns and cash protection measures implemented. During the third quarter of the year, a scrip dividend was offered once again to Prosegur and Prosegur Cash shareholders. Thanks to this program, Prosegur has been able to save more than EUR 20 million until September 2020. Regarding others, it mainly refers to the share buyback investment program and the adjustment driven by the consolidation of the Spanish alarm division, while in September 2019, a this figure was positively affected by the divestment in France and South Africa cash business. All in all, Prosegur keeps proving its resilience and strong cash generation capacity, even in the toughest environment. Having said that, we are going to keep a special focus in protecting working capital and optimizing cash flow generation in order to face the current COVID-19 second wave and the still complex global scenario. Looking now at the group's financial position. We can see that at the end of the third quarter of the year, total net debt amounted EUR 877 million, including both deferred payments of EUR 89 million and treasury stocks at a market price of EUR 132 million. It will furthermore include additional IAS 16 related debt of EUR 95 million, total net debt reaches to EUR 972 million. Regarding net financial debt, when comparing to second half of 2020, you can appreciate a temporary increase, which is mainly driven by the share buyback program and the divestment in France security operations. These 2 aspects together with the exceptional decline due to the health crisis, produced a slight deterioration of leverage ratio up to 2.3x. Normalizing the one-off impact of share buyback program during 2020, this ratio could be lower staying at 2x. In terms of net financial debt-to-equity ratio, the indicator has also suffered a temporary deterioration, fully justified by FX and Telefónica share price drop during the last few months. In this context, I'd like to highlight that Prosegur remains comfortable with its debt level since it is far below the current banking covenants of 3.5x. As always, Prosegur will continue to follow its traditional financial discipline, which is in our DNA, guaranteeing a healthy and sound financial position, the best evidence to prove our financial resilience is the recent confirmation of Prosegur BBB stable rating by Standard & Poors. As far as pure cost of debt, our group's average keeps evolving positively. With a reduction of 25 basis points when compared to the same period last year. In this respect, the cost has risen due to funds repatriation process, which has been considered as FX cost, since it is a direct consequence of the highly volatile current environment. To conclude with our financial information review, let's now have a look at our consolidated balance sheet. In general, there haven't been any significant changes during the third quarter of 2020 farther than the purely traditional impact coming from currencies devaluation when converting into euros, particularly in the case of Brazilian Real and Argentinian peso, which suffered 47% devaluation and 33% versus December 2019, respectively. Assets and liabilities related to Prosegur Security operations in France keep being classified as available for sale as of September 2020. Since the official disinvestment date agreed with the local player, Fiducial, was due on the 1st of October. When it comes to maturity profile, once again, I would like to highlight that Prosegur remains extraordinarily solid. We are proud to confirm that more than 85% of our financial liabilities are considered of long-term nature. As a final remark, treasury stock as of September 2020, reached 59 million of own shares, representing close to 10% of share capital of the group. Last week, as publicly announced, 25 million of those shares have been amortized in the context of capital reduction. Additionally, close to 6 million owned shares has been devoted to dividend reinvestment program executed by the end of October. Most of the remaining treasury stock after those 2 actions will be canceled as well following the approval of the Annual General Meeting held on October 29. This is all on my side. I'd like now to return the presentation back to our CFO, Antonio Rubio, who will share his final conclusions and remarks with you. Thank you very much for your attention

Thank you, Maite. Prior to my closing remarks, I would like to comment on our ESG commitment as we intend to provide you with regular updates on our sustainability practice and developments. ESG is becoming an increasingly important factor to evaluate and recognize value on a company. Commitment with sustainability and good governance has always been present in our actions since our incorporation 44 years ago. And now we are happy to see that society is defining at a structured set of goals and tangible measures to help companies to communicate their actions in a more structured way. In this regard, Prosegur is focusing in the 7 sustainable development goals that we understand better represent our values and capabilities to preserve the environment and show our respect for society and example governance practices. We will try to keep you regularly updated of our progress and initiatives. And today, I would like to share with you the 3 main actions we have been covering over the past months. As we previously advised in recent presentations, we had initiated an ambitious project to gradually implement electric and hybrid vehicles in all our fleet. Not only in Cash in Transit, where the first units are already entered in service in Germany and Spain, but also at [indiscernible] level by introducing an innovative car sharing model in our light vehicle fleet, being those the bicycles that our technicians, sales representatives and other field employees are using on a regular basis. Also, we are forcing the reduction of construction of operating plastics as well as signing agreements in several countries, which especially third parties to guarantee an environmentally friendly recycling of tires. Our commitment with safety has been thoroughly extended during the pandemic to guarantee the protection of all our employees, promoting teleworking practices and implementing several COVID-free solutions in our workplaces, similarly to what we have done with our clients to ensure their business continuity or at a later scale with some governments to help them distribute aids to serve in sector of population in a strong need to support. And finally, but probably most important, we had granted new functions to the Board by creating a Sustainability and Good Governance Commission that will supervise, at the highest level possible, the accomplishment of all the ESG goals the company has ascribed. A result of this new initiative we have recently approved the publication of a new human rights policy of immediate application in all the group and have started the work for an update on our code of ethics. Now for my closing remarks, I would like first to restate once again our deepest appreciation to all our professionals. They have expensed the worst of the pandemic on the frontline, supporting our clients and society to stay safe. Their attitude and willingness have been remarkable, and all of us feel extremely proud of working alongside with them. The stress situation that COVID-19 has brought to the global economy seems to be far from over. As we advised in our previous call, the negative effects of the pandemic have shift towards emerging economies, while in Europe, the recovery process has been decelerated by the recent outbreaks. We are still confident in the remarkable strength that our business model is showing. But nevertheless, we remain prudent towards what may come, confident in our capability to overcome the crisis. Security is readily adapting to the new demand, reinforcing our new products portfolio, where we are focused. Cash has been able to sustain organic growth even in the decreased volumes environment provoked by the pandemic. The business has proven its capability to quickly recover lost ground when conditions come back to normal. And thus, we are confident that despite the actual situation, it will quickly react when the global situation improves. Alarms on the side is recovering growth very quickly, with improved churn rates and excellent sales expansion in Spain. Profitability-wise, both Security and Alarms continue increasing their margins. With Cash, it is still under the combined temporary effects the transactional currency impact and the reduction of commercial activity in Ibero-America. We expect this situation will revert as soon as commercial activity from our clients gradually comes back to normal. But in the meantime, we will maintain all measures at hand to support profitability, preserving our projected investment not only at operational business level, but also reactivating our digital transformation strategy as it is a fundamental cornerstone of our future evolution. I also want to restate our confidence in the growth opportunities that development of new product lines and services are unfolding in our path. Lastly, I recall on the excellent financial strength and liquidity profile that the group retains, confirm by the recent renewal of the BBB stable credit rating by Standard & Poors. This, together with the demonstrated resiliency of our business model and our strong commitment with sustainable growth are the key fundamentals that will make us prevail and continue growing and will drive us to a preeminent market position during the post-pandemic recovery period. This is all on my side. Thank you once again for your participation in this call. And now I will be glad to take all your questions.

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

I have 4 questions. The first one is if you could give us an idea of which percentage of employees which are under [indiscernible] agreement? And what is the impact in the cost in your margin? The second one is regarding the new budget law in Spain, which is expected to tax dividend from foreign and national subsidiaries by 5%. So could you have an impact -- an idea of the impact that it could have in your accounts? The third one is, if you could give us a little bit more detail on the contribution of Telefónica's dividend and also the asset contribution of the Movistar Prosegur Alarmas. And last but not least, as you mentioned, Antonio, that the churn has been normalizing in the last month. Can you give us an idea what's the level of the churn right now?

Paco, thank you for your question. About the in Spain, that for the rest of the [indiscernible] special situation for employees during the pandemic, in the case of our company, the impact was facing a very short period of time and compensated by the decrease in [indiscernible] into at the end of the day, almost negligible. About the new cash figure about the dividend and in scale, you know that, in any case, we'll be -- we will have a compensation of 94%, I think. And in our calculation, we think that in the next year, probably in our P&L will be really, really low. In the case of Telefónica, they have been paying their dividend, and for us, it's an interesting cash inflow. The performance of MPA, Movistar Prosegur Alarmas, we are very happy. We are very optimistic about the [indiscernible] we initiated commercial activity [indiscernible] March. So the first 3 months are really difficult with the impossibility for BCP houses. But as soon as the confinements were ended and the commercial strength of Telefónica is really, really wonderful. And with all our teams on the ground and our free automation and so on is really a success. As you know, the impact in the [indiscernible] is negative because we are invested all the profit generated by MPA in fueling the machine and increasing the growth. The rest of Alarms business, the impact is really positive because we are not -- with the confinements in many countries, we didn't have the possibility to reinvest our EBITDA [indiscernible] of the drivers in the improvement in the EBIT in the company. About churn rate, a domestic level, the churn rate remains as usual. The main impact has been in the commercial side [indiscernible] was an increase, really high close to 17%. But as soon as the commerce restaurants and reopening the activity, that is going down close to 12%.

But Antonio, could you give me the impact of Movistar Prosegur Alarmas in your P&L in the associate line? I think it's what it's included.

Paco, now, although we are reporting the [indiscernible] for the sake of maintain the same level of information about our customer base, but we are reporting in our -- the P&L by equity method. So it's aligned in the EBITDA, that I think is roughly EUR 5 million.

Our next question comes from the line of Alvaro Lenze.

Alvaro Lenze from Alantra Equities. I had a few ones. First, if you could provide us some more detail on what the fiscal aid has been on the security business? How much has it contributed to the profits in this first 9 months of the year? Secondly, I think that you said the pre-SAC EBITDA margins in the alarms, but I didn't quite get the time to write it down. If you could clarify was the pre-SAC EBITDA margin level in -- including and excluding MPA? And another question would be what is your plans for the shares of Telefónica, whether you're going to -- you're looking to keep them longer-term for the dividends or whether you are considering to sell it completely or in part? And lastly, if you could give us some idea of what should we expect regarding shareholder remuneration, whether you are looking to suspend the dividends or continue next year with the scrip dividend program that you have right now? And in this context, what should we think that the share buyback program that you have announced today, how does it fit in the shareholder remuneration, whether this is to compensate for the potential future scrip dividends? Or if you are looking to reduce the total share count?

About your first question, the aids that we have received from the governments in the security business have been EUR 7 million globally, in all the -- mainly in the U.S., Australia and Singapore. About the EBITDA pre-SAC that is account -- we are beginning to share with you because we have had this conversation sometime in the past. The Alarm business is a very profitable one because with EBITDA before the cost of new operations close to 50%. It's very related to the volume and the critical massing in every [indiscernible]. For example, in Spain, with MPA, the EBITDA pre-SAC is 52%. In the rest of the group is 42%, and the compound of all our Alarm business, but considering the MPA is incorporated to the equity method is close to 47% EBITDA pre-SAC figure that should go up as the [indiscernible] is growing, and you can attend to these new customers with the same infrastructure, more or less. About the shares of Telefónica, we are a happy shareholder of Telefónica. We are in a very, very good relationship with them. We are very confident in Telefónica as a company too. Our intention is to maintain today the shares, and we are receiving a very, very interesting dividend. Our shareholder operation in this moment, it's a little bit early. For sure, we will maintain dividend. This is something sure. We have to decide the level is something that the Board of Directors have to decide in the next month in the last [indiscernible] year. And you know, we have been a very solid balance sheet position. We're having a privileged liquidity position, but we have suffered an impact in the P&L in Prosegur and in the rest of the subsidiaries. It's something that we have to take into consideration with all the elements. And the final decision will be -- will be taken in the next month.

Okay. And just on the share buyback program that you announced today, where you are looking to maybe use it to mitigate potential future scrip dividends or whether you would be looking to cancel the shares at some point in the future?