PROSEGUR COMPAÑÍA DE SEGURIDAD, S.A. Prosegur Compañía de Seguridad, S.A. and subsidiaries
Consolidated Annual Accounts
31 December 2019
Consolidated Directors' Report
2019
(With Independent Auditor's Report Thereon)
(Free translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
KPMG Auditores, S.L. Pº de la Castellana, 259C 28046 Madrid
Independent Auditor's Report
on the Consolidated Annual Accounts
(Translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails.)
To the shareholders of Prosegur Compañía de Seguridad, S.A.
REPORT ON THE CONSOLIDATED ANNUAL ACCOUNTS
Opinion __________________________________________________________________
We have audited the consolidated annual accounts of Prosegur Compañía de Seguridad, S.A. and subsidiaries (together the "Group"), which comprise the consolidated statement of financial position at 31 December 2019, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and consolidated notes.
In our opinion, the accompanying consolidated annual accounts give a true and fair view, in all material respects, of the consolidated equity and consolidated financial position of the Group at 31 December 2019 and of its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and other provisions of the financial reporting framework applicable in Spain.
Basis for Opinion _________________________________________________________
We conducted our audit in accordance with prevailing legislation regulating the audit of accounts in Spain. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Annual Accounts section of our report.
We are independent of the Group in accordance with the ethical requirements, including those regarding independence, that are relevant to our audit of the consolidated annual accounts in Spain pursuant to the legislation regulating the audit of accounts. We have not provided any non-audit services, nor have any situations or circumstances arisen which, under the aforementioned regulations, have affected the required independence such that this has been compromised.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KPMG Auditores S.L., sociedad española de responsabilidad limitada y firma miembro de la red KPMG de firmas independientes afiliadas a KPMG International Cooperative ("KPMG International"), sociedad suiza.
Inscrita en el Registro Oficial de Auditores de Cuentas con el nº.S0702, y en el Registro de Sociedades del Instituto de Censores Jurados de Cuentas con el nº.10. Reg. Mer Madrid, T. 11.961, F. 90, Sec. 8, H. M -188.007, Inscrip. 9
N.I.F. B-78510153
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Key Audit Matters ________________________________________________________
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consolidated annual accounts of the current period. These matters were addressed in the context of our audit of the consolidated annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Labour and tax provisions and contingencies
See notes 23, 27 and 35.17 to the consolidated annual accounts
Key audit matter | How the matter was addressed in our audit |
The Group is exposed to possible claims and disputes in the course of its activity, primarily of a tax and labour nature. Assessing and monitoring lawsuits, claims and disputes, including contingencies and, where applicable, the related provisions, is a complex process that entails evaluating future developments in these proceedings. Furthermore, in view of the characteristics of labour legislation in the different countries and the regulatory requirements applicable to this activity, these proceedings may be ongoing for a long period of time which in turn further complicates evaluation of these processes.
From a tax perspective, the Group has ongoing claims relating to various taxes in Spain and Brazil, for which a provision of Euros 95 million has been recognised at 31 December 2019. The Company also has contingencies for contested tax assessments amounting to Euros 69 million for which no provision has been recognised
Specifically, in relation to estimating the uncertainty associated with income tax contingencies, applying the interpretation of the IFRS Interpretations Committee (IFRIC 23) that is effective for the first time in 2019, the Group recognised a current tax liability of Euros 61 million and Euros 59 million at 1 January 2019 and 31 December 2019, respectively.
As regards labour matters, which primarily affect Brazil due to the high number of employees, the Group has various contingencies, mainly associated with claims lodged by employees or former employees. At 31 December 2019 a provision of Euros 29 million has been recognised in this respect.
Due to the judgement inherent in assessing these different matters, the uncertainty associated with the estimates relating to the ongoing labour and tax proceedings, and because changes therein could give rise to material differences with respect to the amounts recognised to date, this has been considered a key audit matter of the current period.
Our audit procedures included the following:
- Assessing the design and implementation of the controls relating to the process of estimating the probability and impact when measuring the assets of labour and tax contingencies.
- Obtaining representations from lawyers outside the Group regarding the status of these matters, their probability and, where applicable, resources outflows for the Group.
- In the case of potentially material claims, assessing the underlying facts and circumstances deemed relevant by the Group's legal counsel in their conclusions and evaluating the Group's best estimate, with the involvement of our specialists, if needed.
- Analysis of the reasonableness of the most relevant judgements applied by management in the first-time application of IFRIC 23, in particular regarding the identification of uncertain tax treatments, the determination of the unit of account and the valuation method considered by management as the method that best predicts the resolution of the uncertainty.
- Evaluating whether the disclosures in the consolidated annual accounts comply with the requirements of the financial reporting framework applicable to the Group.
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Recoverable amount of non-current assets
See notes 11 to 14 and 35.10 to the consolidated annual accounts
Key audit matter | How the matter was addressed in our audit |
The Group has property, plant and equipment and intangible assets amounting to Euros 1,821 million, Euros 634 million of which is goodwill of the Group.
In 2019 the Group did not recognise any impairment for non-current assets.
For the purpose of testing non-current assets for impairment, they were assigned to the corresponding cash-generating units (CGUs). In the Prosegur Group, the CGUs are the individual business segments (Cash, Surveillance and Alarms) in each country.
There is a risk that the carrying amount of CGUs whose financial position has declined may exceed their recoverable amount.
At each reporting date, or earlier if there are indications of impairment, the Group estimates the recoverable amount of each CGU.
The recoverable amount of cash-generating units has been determined considering their value in use for the Cash and Surveillance businesses and based on the fair value for the Alarms business.
To estimate these amounts, the Group used valuation techniques that require the Directors to exercise judgement and make assumptions and estimates.
Due to the uncertainty associated with these estimates and the significance of the carrying amount of non-current assets, this has been considered a key audit matter of the current period.
Our audit procedures included the following:
- Assessing the design and implementation of the key controls relating to the process of estimating the recoverable amount of non- current assets.
- Analysing the indications, identified by the Group, of impairment of the cash-generating units.
- When estimating value in use (Cash and Surveillance businesses),
- evaluating the reasonableness of the method used to calculate value in use and the main assumptions considered, with the involvement of our valuation specialists;
- contrasting the consistency of the estimated growth in future cash flows of each cash-generating unit included in the calculation of value in use with the business plans approved by the Group's governing bodies;
- contrasting the cash flow forecasts of cash- generating units estimated in prior years with the actual cash flows obtained.
- When estimating fair value (Alarms business),
- assessing, with the involvement of our valuation specialists, the reasonableness of the estimated fair value of the Alarms business, which was calculated by applying market multiples to recurrent monthly revenues per connection, obtained on the basis of the latest transactions observed;
- contrasting the consistency of the multiple used to calculate this value with the market reports on the latest transactions observed.
- Analysing the sensitivity of the estimated recoverable amount to changes in the relevant assumptions and judgements, such as the discount rate, the future growth rate or the EBITDA used when calculating the value in use of the Cash and Surveillance businesses and the recurrent monthly revenues per connection and the multiplier when estimating the fair value of the Alarms business.
- Evaluating whether the information disclosed in the consolidated annual accounts meets the requirements of the financial reporting framework applicable to the Group.
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Hyperinflation in the Argentinian economy
See notes 7, 22.2 and 34.28 to the consolidated annual accounts
Key audit matter | How the matter was addressed in our audit |
Since 2018, the Argentinian economy has qualified as a hyperinflationary economy.
In accordance with IAS 29, non-monetary items in the statement of financial situation are expressed in the current monetary unit at 31 December 2019. As this is a hyperinflationary economy, in application of IAS 21, all balance sheet and income statement items must be translated to the Group's presentation currency (Euro) at the year-end exchange rate. As detailed in note 21.2, the Group has opted to transfer both accumulated translation differences at 1 January 2018 and those generated afterwards by Argentinian subsidiaries to reserves, so the total effect of the adjustment for hyperinflation is shown in this line item.
Given the significance of the adjustment for hyperinflation made to the 2019 figures, the complexity associated with the calculation of this adjustment and that the IFRS IC's stance on the accounting treatment of translation differences is pending, we considered this to be a key matter in our audit.
Our audit procedures included the following:
- Understanding the methodology used by the Company in the adjustment of the financial position at 31 December 2019.
- Corroborating that the criteria in IAS 29 for adjusting the financial position to the current monetary unit have been applied. In this regard, our work focused on the following:
- Identifying the monetary and non-monetary assets and liabilities.
- Verifying that the inflation rates applied are those published by the National Institute of Statistics and Census of Argentina (INDEC).
- Recalculating the net deferred income tax position at the beginning and end of the year.
- Performing tests of detail in relation to the revaluation of non-monetary assets to verify that the adjusted amount does not exceed their recoverable amount.
- Recalculating the accumulated adjustment in reserves at 31 December 2019 from application of IAS 29.
- Verifying that the effect of applying IAS 29 based on the variation in monetary items is reasonable by recalculating the revaluation of non-monetary items, capital and reserves.
- Verifying that the financial statements of Argentinian subsidiaries, once adjusted for inflation, have been translated at the year-end exchange rate and that initial translation differences have been taken to reserves.
- Evaluating whether the disclosures in the consolidated annual accounts relative to hyperinflation comply with the requirements of the financial reporting framework applicable to the Group.
Other Information: Consolidated Directors' Report__________________________
Other information solely comprises the 2019 consolidated directors' report, the preparation of which is the responsibility of the Parent's Directors and which does not form an integral part of the consolidated annual accounts.
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Our audit opinion on the consolidated annual accounts does not encompass the consolidated directors' report. Our responsibility as regards the content of the consolidated directors' report is defined in the legislation regulating the audit of accounts, which establishes two different levels:
- A specific level applicable to the consolidated statement of non-financial information and to certain information included in the Annual Corporate Governance Report, as defined in article 35.2. b) of Audit Law 22/2015, which consists solely of verifying that this information has been provided in the directors' report, or where applicable, in a separate report on non-financial information, as provided for in legislation, to which reference is made in the directors' report, and if not, to report on this matter.
- A general level applicable to the rest of the information included in the consolidated directors' report, which consists of assessing and reporting on the consistency of this information with the consolidated annual accounts, based on knowledge of the Group obtained during the audit of the aforementioned accounts and without including any information other than that obtained as evidence during the audit. Also, assessing and reporting on whether the content and presentation of this part of the consolidated directors' report are in accordance with applicable legislation. If, based on the work we have performed, we conclude that there are material misstatements, we are required to report them.
Based on the work carried out, as described above, we have verified that the information mentioned in paragraph a) above has been provided in the consolidated directors' report and the rest of the information contained in the consolidated directors' report is consistent with that disclosed in the consolidated annual accounts for 2019, and that the content and presentation of the report are in accordance with applicable legislation.
Directors' and Audit Committee's Responsibility for the Consolidated Annual Accounts_________________________________________________________________
The Parent's Directors are responsible for the preparation of the accompanying consolidated annual accounts in such a way that they give a true and fair view of the consolidated equity, consolidated financial position and consolidated financial performance of the Group in accordance with IFRS-EU and other provisions of the financial reporting framework applicable to the Group in Spain, and for such internal control as they determine is necessary to enable the preparation of consolidated annual accounts that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated annual accounts, the Parent's Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
The Parent's audit committee is responsible for overseeing the preparation and presentation of the consolidated annual accounts.
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Auditor's Responsibilities for the Audit of the Consolidated Annual Accounts
Our objectives are to obtain reasonable assurance about whether the consolidated annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with prevailing legislation regulating the audit of accounts in Spain will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence economic decisions of users taken on the basis of these consolidated annual accounts.
As part of an audit in accordance with prevailing legislation regulating the audit of accounts in Spain, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated annual accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Parent's Directors.
- Conclude on the appropriateness of the use by the Parent's Directors of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated annual accounts, including the disclosures, and whether the consolidated annual accounts represent the underlying transactions and events in a manner that achieves a true and fair view.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated annual accounts. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the audit committee of the Parent regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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We also provide the Parent's audit committee with a statement that we have complied with the applicable ethical requirements, including those regarding independence, and to communicate with them all matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the audit committee of the Parent, we determine those that were of most significance in the audit of the consolidated annual accounts of the current period and which are therefore the key audit matters.
We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Additional Report to the Audit Committee of the Parent ____________________
The opinion expressed in this report is consistent with our additional report to the Parent's audit committee dated 27 February 2020.
Contract Period __________________________________________________________
We were appointed as auditor of the Group by the shareholders at the ordinary general meeting held on 4 June 2019 for a period of one year, specifically for the year ended 31 December 2019. Previously, we were appointed by consensus of the shareholders at their general meeting, and have been auditing the annual accounts since the year ended 31 December 2010.
KPMG Auditores, S.L.
On the Spanish Official Register of Auditors ("ROAC") with No. S0702
(Signed on original in Spanish)
María Lacarra
On the Spanish Official Register of Auditors ("ROAC") with No. 20,411
27 February 2020
Consolidated
PROSEGURAnnualCOMPAÑÍA DE SEGURIDAccountsD, S. . AND SUBSIDIARIES
Consolidandted A ual AccountsDirectors'and ctors' Rep rt for the ye r e ded 31 December 2019
PreparedReportin accordance with the Internatifornal the year Financial eporting Standards adopted by the European Union (IFRS-EU)
ended 31 December 2019
Prepared in accordance with International Financial Reporting Standards adopted by the European Union (IFRS-EU)
(Free translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails).
Prosegur Compañía De Seguridad, S.A. and Subsidiaries
2019 CONSOLIDATED ANNUAL ACCOUNTS
Table of contents
2019 CONSOLIDATED ANNUAL ACCOUNTS
2019 CONSOLIDATED ANNUAL ACCOUNTS
32.2. | Capital risk management ..................................................................................................................... | 93 | |
32.3. | Financial instruments and fair value .................................................................................................. | 95 | |
33. | Other disclosures ........................................................................................................ | 98 | |
34. Events after the reporting date ................................................................................ | 99 | ||
35. Summary of the main accounting policies ........................................................... | 100 | ||
35.1. | Accounting principles ........................................................................................................................ | 100 | |
35.2. | Consolidation principles.................................................................................................................... | 105 | |
35.3. | Consolidated income statement based on function ....................................................................... | 109 | |
35.4. | Segment reporting.............................................................................................................................. | 109 | |
35.5. | Foreign currency transactions.......................................................................................................... | 109 | |
35.6. | Property, Plant and Equipment ......................................................................................................... | 110 | |
35.7. | Right-of-use assets and Lease liabilities (policy applicable as from 1 January 2019) ............... | 111 | |
35.8. | Intangible assets................................................................................................................................. | 113 | |
35.9. | Property investments ......................................................................................................................... | 115 | |
35.10. | Impairment losses .............................................................................................................................. | 115 | |
35.11. | Financial assets .................................................................................................................................. | 116 | |
35.12. | Inventories........................................................................................................................................... | 118 | |
35.13. | Trade receivables ............................................................................................................................... | 118 | |
35.14. | Cash and cash equivalents ............................................................................................................... | 118 | |
35.15. | Share capital ....................................................................................................................................... | 118 | |
35.16. | Own shares ......................................................................................................................................... | 118 | |
35.17. | Provisions ........................................................................................................................................... | 119 | |
35.18. | Financial liabilities.............................................................................................................................. | 119 | |
35.19. | Current and deferred taxes................................................................................................................ | 120 | |
35.20. | Employee benefits .............................................................................................................................. | 121 | |
35.21. | Revenue recognition .......................................................................................................................... | 124 | |
35.22. | Leases (policy applied through 1 January 2019) ............................................................................ | 126 | |
35.23. | Borrowing costs ................................................................................................................................. | 126 | |
35.24. | Non-current assets held for sale....................................................................................................... | 126 | |
35.25. | Distribution of dividends ................................................................................................................... | 127 | |
35.26. | Environmental issues......................................................................................................................... | 127 | |
35.27. | Consolidated statement of cash flows ............................................................................................. | 127 | |
35.28. | Hyperinflation...................................................................................................................................... | 127 | |
VII. APPENDIX I. - Subsidiaries within the consolidation scope ............... | 129 | ||
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2019 CONSOLIDATED ANNUAL ACCOUNTS
VIII. APPENDIX II. - Breakdown of Joint Arrangements ............................. | 145 |
IX. APPENDIX III. - Summary Information on Joint Ventures ................... | 152 |
DIRECTORS' REPORT FOR 2019...................................................................... | 154 |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
- CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 December 2019 AND 2018
(In thousands of Euros) | |||||
Note | 2019 | 2018 | |||
Revenue | 3 | 4,198,212 | 3,939,206 | ||
Costs to sell | 4 | (3,167,993) | (2,987,486) | ||
Gross profit | 1,030,219 | 951,720 | |||
Other income | 6 | 27,828 | 13,247 | ||
Sale and administrative expenses | 4 | (712,196) | (648,628) | ||
Other expenses | 6 | (14,206) | (13,840) | ||
Stake in profits / (losses) for the year of Investments accounted for | 16 | (1,164) | (1,119) | ||
using the equity method | |||||
Operating profit/(loss) (EBIT) | 330,481 | 301,380 | |||
Finance income | 7 | 21,082 | 31,495 | ||
Finance expenses | 7 | (86,696) | (52,836) | ||
Net financial costs | (65,614) | (21,341) | |||
Profit before tax | 264,867 | 280,039 | |||
Income tax | 27 | (104,641) | (100,022) | ||
Post-tax profit from continuing operations | |||||
160,226 | 180,017 | ||||
Profit/(loss) for the year from discontinued operations | 15 | - | (11) | ||
Consolidated profit/(loss) for the period | 160,226 | 180,006 | |||
Attributable to: | |||||
Owners of the Parent | 113,862 | 132,272 | |||
Non-controlling interests | 22 | 46,364 | 47,734 | ||
Earnings per share from continuing operations attributable to the | |||||
owners of the Parent (Euros per share) | |||||
- Basic | 8 | 0.1918 | 0.2210 | ||
- Diluted | 8 | 0.1918 | 0.2210 |
The Notes on pages 11 to 127 form an integral part of the Consolidated Annual Accounts.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
II. CONSOLIDATED | STATEMENTS | OF | |||
COMPREHENSIVE INCOME FOR THE YEARS | |||||
ENDED 31 December 2019 AND 2018 | |||||
(In thousands of Euros) | |||||
Note | |||||
2019 | 2018 | ||||
Profit for the year | 160,226 | 180,006 | |||
Other comprehensive income: | |||||
Items which are not reclassified to profit and loss | |||||
Actuarial profits/(losses) on defined benefit plans | 5.2 | (6,323) | (1,024) | ||
(6,323) | (1,024) | ||||
Items which are reclassified to profit and loss | |||||
Translation differences of financial statements of foreign operations | 22 | (16,257) | (63,705) | ||
(16,257) | (63,705) | ||||
Total comprehensive income, net of taxes | |||||
137,646 | 115,277 | ||||
Attributable to: | |||||
- Owners of the parent | 94,792 | 72,693 | |||
- Non-controlling interests | 42,854 | 42,584 | |||
137,646 | 115,277 |
The Notes on pages 11 to 127 form an integral part of the Consolidated Annual Accounts
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2019 CONSOLIDATED ANNUAL ACCOUNTS
- CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AT 31 December 2019 AND 2018
(In thousands of Euros) | Note | ||||
ASSETS | 2019 | 2018 | |||
Property, Plant and Equipment | 11 | 716,427 | 700,131 | ||
Rights of use | 12 | 120,519 | - | ||
Goodwill | 13 | 634,027 | 570,073 | ||
Other intangible assets | 14 | 349,923 | 272,247 | ||
Property investments | 15 | 44,110 | 45,308 | ||
Investments accounted for using the equity method | 16 | 9,452 | 29,433 | ||
Non-current financial assets | 18 | 21,004 | 19,251 | ||
Deferred tax assets | 27 | 94,769 | 84,103 | ||
Non-current assets | 1,990,231 | 1,720,546 | |||
Non-current Assets held for sale | 15 | - | 642 | ||
Inventory | 19 | 64,846 | 76,087 | ||
Clients and other receivables | 20 | 914,989 | 820,890 | ||
Current tax assets | 155,721 | 153,982 | |||
Other financial assets | 21 | 319,621 | 489,268 | ||
Cash and cash equivalents | 21 | 530,677 | 558,355 | ||
Current assets | 1,985,854 | 2,099,224 | |||
Total assets | 3,976,085 | 3,819,770 | |||
EQUITY | |||||
Share capital | 22 | 35,921 | 37,027 | ||
Share premium | 22 | 25,472 | 25,472 | ||
Treasury Stock | 22 | (107,927) | (52,777) | ||
Translation differences | 22 | (187,965) | (174,397) | ||
Retained earnings and other reserves | 22 | 1,060,609 | 1,162,402 | ||
Equity attributable to equity holders of the Parent | 826,110 | 997,727 | |||
Non-controlling interests | 22 | 72,230 | 68,730 | ||
Total equity | 898,340 | 1,066,457 | |||
LIABILITIES | |||||
Financial liabilities | 24 | 1,364,942 | 1,391,557 | ||
Lease liabilities | 12 | 86,848 | - | ||
Deferred tax liabilities | 27 | 45,950 | 58,510 | ||
Provisions | 23 | 224,466 | 197,027 | ||
Other non-current liabilities | 26 | 28,807 | 29,273 | ||
Non-current liabilities | 1,751,013 | 1,676,367 | |||
Trade and other payables | 25 | 833,058 | 794,840 | ||
Current tax liabilities | 138,583 | 78,594 | |||
Financial liabilities | 24 | 256,996 | 150,720 | ||
Lease liabilities | 12 | 45,173 | - | ||
Provisions | 23 | 2,277 | 4,524 | ||
Other Current Liabilities | 26 | 50,645 | 48,268 | ||
Current liabilities | 1,326,732 | 1,076,946 | |||
Total liabilities | 3,077,745 | 2,753,313 | |||
Total equity and liabilities | 3,976,085 | 3,819,770 | |||
The Notes on pages 11 to 127 form an integral part of the Consolidated Annual Accounts.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
IV. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 December 2019 AND 2018
(In thousands of Euros) | Equity attributable to equity holders of the Parent | |||||||||
Non-controlling | ||||||||||
Share | Translation | Retained | Total equity | |||||||
Share capital | Treasury Stock | earnings and | interests (Note 22) | |||||||
premium | differences | |||||||||
(Note 22) | (Note 22) | other reserves | ||||||||
(Note 22) | (Note 22) | |||||||||
(Note 22) | ||||||||||
Balance at 31 December, 2017 | 37,027 | 25,472 | (53,079) | (537,720) | 1,597,383 | 74,357 | 1,143,440 | |||
Transition adjustments (Note 35.1) | - | - | - | - | 6,019 | (329) | 5,690 | |||
IAS 29 First adoption (Note 35.28) | - | - | - | - | 46,428 | 8,920 | 55,348 | |||
Translation differences reclassified to reserves (Note 35) | - | - | - | 421,878 | (421,878) | - | - | |||
Balance at 1 January, 2018 | 37,027 | 25,472 | (53,079) | (115,842) | 1,227,952 | 82,948 | 1,204,478 | |||
Total comprehensive income for the year | - | - | - | (58,555) | 131,248 | 42,584 | 115,277 | |||
Hyperinflation adjustment | - | - | - | - | (119,196) | (24,338) | (143,534) | |||
Share-based incentives offered to employees | - | - | 302 | - | 183 | - | 485 | |||
Ordinary interim dividend | - | - | - | - | (79,054) | - | (79,054) | |||
Dividends Prosegur Cash, S.A. | - | - | - | - | - | (32,464) | (32,464) | |||
Other changes | - | - | - | - | 1,269 | - | 1,269 | |||
Balance at 31 December, 2018 | 37,027 | 25,472 | (52,777) | (174,397) | 1,162,402 | 68,730 | 1,066,457 | |||
Transition adjustments (Note 35.1) | - | - | - | - | (60,133) | (9,682) | (69,815) | |||
Balance at 1 January, 2019 | 37,027 | 25,472 | (52,777) | (174,397) | 1,102,269 | 59,048 | 996,642 | |||
Total comprehensive income for the year | - | - | - | (13,568) | 108,360 | 42,854 | 137,646 | |||
Purchase of own shares | - | - | (107,937) | - | - | - | (107,937) | |||
Hyperinflation adjustment | - | - | - | - | (20,684) | (7,247) | (27,931) | |||
Share-based incentives offered to employees | - | - | 349 | - | 102 | - | 451 | |||
Ordinary interim dividend | - | - | - | - | (79,026) | - | (79,026) | |||
Dividend Prosegur Cash, S.A. | - | - | - | - | - | (23,966) | (23,966) | |||
Capital Reduction | (1,106) | - | 52,438 | - | (51,332) | - | - | |||
Other changes | - | - | - | - | 920 | 1,541 | 2,461 | |||
Balance at 31 December, 2019 | 35,921 | 25,472 | (107,927) | (187,965) | 1,060,609 | 72,230 | 898,340 |
The Notes on pages 11 to 127 form an integral part of the Consolidated Annual Accounts.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
V. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 December 2019 AND 2018
PROSEGUR COMPAÑÍA DE SEGURIDAD, S.A. Y SOCIEDADES DEPENDIENTES
Consolidated statement of cash flows
(In thousands of Euros)
Cash flows from operating activities | Note | 2019 | 2018 | ||||||||
Profit/(loss) for the year | 160,226 | 180,006 | |||||||||
Adjustments for: | |||||||||||
Amortisations | 11, 12, 14, 15 | 205,911 | 154,615 | ||||||||
Impairment losses on trade receivables and inventory | 6, 20 | 6,905 | 9,327 | ||||||||
Change in provisions | 23 | 34,236 | 25,057 | ||||||||
Finance income | 7 | (21,082) | (31,495) | ||||||||
Finance expenses | 84,858 | 6,564 | |||||||||
(Profit)/losses on disposal and sale of property, plant and equipment | 6 | 8,883 | 1,860 | ||||||||
Stakes in (profits)/losses of investments accounted for using the equity method | 16 | 1,164 | 1,119 | ||||||||
Income tax | 27 | 104,641 | 100,023 | ||||||||
Changes in working capital, net of the effect of acquisitions and translation differences | |||||||||||
Inventory | 4,508 | (10,515) | |||||||||
Clients and other receivables | (102,335) | 11,097 | |||||||||
Trade and other payables | 56,133 | 11,495 | |||||||||
Payment of provisions | 23 | (31,684) | (34,690) | ||||||||
Other liabilities | 7,176 | 2,982 | |||||||||
Cash from operating activities | |||||||||||
Interest paid | (27,526) | (29,321) | |||||||||
Income tax paid | (125,285) | (121,805) | |||||||||
Net cash from operating activities | 366,729 | 276,319 | |||||||||
Cash flows from investing activities | |||||||||||
Proceeds from sale of property, plant and equipment | 11 | 600 | 20,485 | ||||||||
Collections from the sale of dependent entities | 26,721 | - | |||||||||
Collections from the sale of joint ventures | 19,755 | - | |||||||||
Proceeds from sale of financial assets | 171,650 | 290,000 | |||||||||
Interest collection | 12,315 | 8,084 | |||||||||
Acquisition of subsidiaries, net of cash and cash equivalents | 30 | (106,077) | (55,239) | ||||||||
Acquisition of property, plant and equipment | 11 | (171,761) | (191,087) | ||||||||
Acquisition of intangible assets | 14 | (33,094) | (23,514) | ||||||||
Minority interests adquisition | (1,183) | - | |||||||||
Acquisition and capitalisation of joint businesses, net of cash and cash equivalents | 16 | (1,179) | (2,978) | ||||||||
Acquisition of financial assets | (2,880) | (298,147) | |||||||||
Net cash from investing activities | (85,133) | (252,396) | |||||||||
Cash flows from financing activities | |||||||||||
Payments arising on lease liabilities | (51,744) | - | |||||||||
Purchase of own shares | 22 | (107,578) | 183 | ||||||||
Proceeds from loans and borrowings | 24 | 434,139 | 190,543 | ||||||||
Proceeds from debentures and other marketable securities | 24 | - | 694,800 | ||||||||
Payments for debentures and other marketable securities | 24 | - | (500,000) | ||||||||
Payments for loans and borrowings | 24 | (408,947) | (286,900) | ||||||||
Payments for other financial liabilities | 24 | (27,489) | (20,515) | ||||||||
Dividends paid | (107,286) | (118,265) | |||||||||
Net cash from financing activities | (268,905) | (40,154) | |||||||||
Net increase/(decrease) in cash and cash equivalents | 12,691 | (16,231) | |||||||||
Cash and cash equivalents at the beginning of year | 558,623 | 630,939 | |||||||||
Effect of exchange differences | (40,637) | (56,085) | |||||||||
Cash and cash equivalents at the end of the period | 530,677 | 558,623 | |||||||||
- Cash and cash equivalents at the end of the period from continuing operations (Note 21) | 530,677 | 558,355 | |||||||||
- Cash and cash equivalents at the end of the period from discontinued operations (Note 15) | - | 268 |
The Notes on pages 11 to 127 form an integral part of the Consolidated Annual Accounts.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
VI. NOTES TO THE CONSOLIDATED ANNUAL ACCOUNTS AT 31 DECEMBER 2019
1. General Information
Prosegur is a business group composed of Prosegur Compañía de Seguridad, S.A. (hereinafter, the Company) and its subsidiaries (jointly, Prosegur) which is present in the following countries: Germany, Argentina, Australia, Brazil, Chile, China, Colombia, Costa Rica, El Salvador, Spain, United States, The Philippines, France, Guatemala, Honduras, India, Indonesia, Luxembourg, Mexico, Nicaragua, Paraguay, Peru, Portugal, Singapore, South Africa, Turkey and Uruguay.
Prosegur is organised into the following business lines:
- Security;
- Cash;
- Alarms.
Prosegur is controlled by Gubel, S.L., a company incorporated in Madrid which, after the capital reduction approved in the General Shareholders Meeting held on 4 June 2019, owns 51.618% of the shares of Prosegur Compañía de Seguridad, S.A., which consolidates Prosegur in its consolidated financial statements.
Prosegur Compañía de Seguridad, S.A. is a public limited Company that is listed on the Stock Exchanges of Madrid, Barcelona, Bilbao and Valencia whose shares are traded on the Spanish Stock Exchange Interconnection System (SIBE). The Company was incorporated in Madrid on 14 May 1976 and is entered in the Mercantile Register of Madrid. The registered offices of Prosegur Compañía de Seguridad, S.A. are at Calle Pajaritos, 24, Madrid (Spain).
The corporate purpose is described in Article 2 of its Articles of Association. The main services and activities provided by the Company by means of its subsidiaries are as follows:
- Security patrol and protection of premises, goods and individuals.
- The transportation, storage, safekeeping, counting and classification of coins and banknotes, deeds, securities and other items that require special protection due to their economic value or associated risk.
- The installation and maintenance of security equipment, devices and systems.
These Consolidated Annual Accounts were authorised for issue by the Board of Directors on 27 February 2020 and are pending approval by the shareholders at their General Meeting. However, the directors consider that these Consolidated Annual Accounts will be approved with no changes.
Structure of Prosegur
Prosegur Compañía de Seguridad, S.A. is the Parent Company of the Group formed by subsidiaries (Appendix I). In addition, Prosegur has Joint Arrangements (Note 16, 17 and Appendix II).
Prosegur holds interests of less than 20% in the share capital of other entities. It does not exert significant influence over these entities (Note 18).
Details of the principles applied to prepare the Prosegur consolidated annual accounts and define the consolidation scope are provided in Note 35.2.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
Agreement with Telefónica, S.A.
Prosegur has reached an agreement with Telefónica, S.A. for the sale of a 50% stake in Prosegur's alarms business in Spain, with the aim of developing this business through the synergies of the two companies.
The operation to be submitted for approval by the relevant authorities involves a valuation of 50% of Prosegur's alarms business in Spain, amounting to EUR300 million, subject to standard adjustments in this type of transactions on debt, working capital and client base at the time the operation is closed.
Under the terms of the aforementioned agreement, the price could be paid, in whole or in part, in own shares, at Telefónica's discretion.
Prosegur has not considered this operation as discontinued operation because is not a significant business line separate from the rest, nor a geographical area of operations. Its liabilities and assets have not been classified as held for sale given their non-material amount.
2. Basis of Presentation
2.1. Basis for presentation of the Consolidated Annual Accounts
The accompanying Consolidated Annual Accounts have been prepared on the basis of the accounting records of Prosegur Compañía de Seguridad, S.A. and the consolidated entities. The Consolidated Annual Accounts have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (hereinafter EU-IFRS) and other applicable financial reporting regulations to present fairly the consolidated equity and consolidated financial position of Prosegur Compañía de Seguridad, S.A. and subsidiaries at 31 December 2019, as well as the consolidated profit and loss from its operations and consolidated cash flows for the year then ended. The Consolidated Annual Accounts are filed yearly in the Mercantile Register of Madrid.
Note that these Annual Accounts omit such information or breakdowns that, not requiring details because of their qualitative importance, have been considered not material or not relatively important in accordance with the concept of Materiality or Relative Importance defined in the conceptual framework of IFRS-EU.
2.2. Changes in the consolidation scope
The following companies were incorporated or wound up in 2019:
- In March 2019, Prosegur Alpha3 Cashlabs S.L. was incorporated in Spain.
- In April 2019, Prosegur Pay Consultoria em Tecnologia da Informação Ltda. was incorporated in Brazil.
- In June 2019 Prosegur Serviços Aeroportuarios Ltda. was wound up in Brazil.
- In July 2019 Prosegur Finance, S.L. was incorporated in Spain.
- In August 2019 Prosegur Technology International Incorporated was incorporated in the United States.
- In August 2019 Prointrans, LLC was wound up in the United States.
- In September 2019 Prosegur STV 1 PTY Limited was incorporated in Australia.
- In October 2019 Prosegur ODH, S.L. was incorporated in Spain.
- In October 2019 Gelt Cash Transfer, S.L. was incorporated in Spain.
- In October 2019 Prosegur BSI Canada Limited was incorporated in Canada.
- In October 2019, Shanghai Bigu Security Technology Co Ltd. was incorporated in China.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
- In October 2019, Dopar Servicios, S.L. was wound up in Spain.
- In October 2019, Iberprofin, S.L. was wound up in Spain.
- In November 2019, Yellow RE SA was incorporated in Luxembourg.
The following mergers took place between subsidiaries in 2019:
- In May 2019, Integra Security Systems SA, merged with and into Prosegur Seguridad Electrónica SAS in Colombia.
- In August 2019, the takeover merger of Tellex, S.A. by Transportadora de Caudales Juncadella, S.A. was formalised in Argentina.
- In November 2019, the takeover merger of Enclama, S.L. by Prosegur AVOS España, S.L. was formalised in Spain.
On 4 February 2019, Prosegur sold 100% of the German companies M Sicherheitstechnik Venwaltungs Gmbh, AC Alarm Verwaltungs Gmbh, M Sicherheitstechnik Gmbh & Co KG and AC Alarm Gmbh & Co KG for the total amount of EUR 559 thousand. The cash and cash equivalents that were sold with the company amounted to EUR 51 thousand. The net assets of the German companies at the time of sale amounted to EUR 65 thousand. The sale involved revenue for Prosegur of EUR 494 thousand.
Prosegur sold all its stakeholding in the joint venture for the alarms business in India, SIS Prosegur Alarms Monitoring and Response Services Pte Ltd, on 23 April 2019 (Note 16).
Prosegur Cash exercised the put option on its 33.33% stake in SBV Services Proprietary Limited on 4 June 2019 (Note 16).
Prosegur signed the sale agreement of 100% of the capital of Prosegur Cash Holding France to Loomis AB on 22 July 2019.
Additionally, other changes to the consolidation scope in 2019 are acquisitions of subsidiaries, details of which are provided in Note 30.
2.3. Comparative information
Each one of the items of the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity and the notes to the consolidated financial statements, in addition to the consolidated figures for 2019, include comparative figures for the previous year, with the exception of the accounting policies applied for the first time in 2019 (IFRS 16 and IFRIC 23), which have not entailed a re-statement of the Consolidated Annual Accounts for 2018 and are summarised in Note 35.1.
2.4. Estimates, assumptions and relevant judgements
The preparation of the Consolidated Annual Accounts in accordance with EU-IFRS requires the application of relevant accounting estimates and the undertaking of judgements, estimates and assumptions in the process for application of the Prosegur accounting policies and valuation of the assets, liabilities and profit and loss.
Although estimates are calculated by Prosegur's directors based on the best information available at year end, future events may require changes to these estimates in subsequent years. Any effect on the consolidated annual accounts of adjustments to be made in subsequent years would be recognised prospectively, where appropriate.
13
2019 CONSOLIDATED ANNUAL ACCOUNTS
Accounting estimates and assumptions
Information on relevant accounting estimates and assumptions that pose a significant risk of causing material adjustments in the year ending on 31 December 2019 are included in the following notes:
- Business combinations: determination of the interim fair values (Notes 30 and 35.2).
- Impairment of property, plant and equipment, intangible assets, goodwill, right-of-use assets and held-for-salenon-current assets: assumption for the calculation of recoverable amounts (Notes 11, 12, 13,14, 15, 35.6, 35.7, 35.8, 35.9, 35.10 and 35.24).
- Equity instruments: assumptions used to determine fair values (Notes 18 and 35.11).
- Impairment of financial assets: calculated based on the expected loss (Note 20 35.11 and 35.13).
- Recognition and valuation of provisions and contingencies: assumptions to determine the probability of occurrence and the estimate amounts of resource outflows (Notes 23, 28 and 35.17).
- Recognition and valuation of the defined benefit schemes for employees: actuarial hypotheses for the provision of defined benefit schemes for employees (Notes 5.2, 23 and 35.20).
- Recognition and valuation of deferred tax assets: estimates and assumptions used to measure the recoverability of tax credits (Notes 27 and 35.19).
- Revenue recognition: determination of the degree of progress for construction contracts (Note 35.21).
Relevant judgements
Information on judgements made in applying Prosegur accounting policies with a significant impact on the amounts recognised in the consolidated financial statements is included in the following notes:
- Consolidation: control determination (Note 35.2)
- Leases: lease classification (Note 35.7 and 35.22).
- Non-currentassets held for sale (Note 35.24)
Determination of fair values
Certain Prosegur accounting policies and details require the determination of fair values for assets and liabilities, financial as well as non-financial.
Prosegur has established a control framework with respect to determining fair values. This framework includes a valuation team, reporting directly to Financial Management, with general responsibility over the supervision of all relevant fair value calculations.
On a regular basis the valuation team reviews significant unobservable criteria and valuation adjustments. If third-party information is utilised in determining fair values, such as price-fixing or broker quotations, the valuation team verifies the fulfilment of such information with the EU-IFRS and the level of fair value in which such valuations should be classified. Significant valuation issues are reported to the Prosegur Audit Committee.
In determining the fair value of an asset or liability, Prosegur uses observable market data to the greatest extent possible. Fair values are classified into different levels of fair value on the basis of the input data used in the measurement techniques, as follows:
- Level 1: quoted price (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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2019 CONSOLIDATED ANNUAL ACCOUNTS
If such input data that are used to measure the fair value of an asset or liability may be classified into different levels of fair value, the fair value measurement is classified in its entirety into the same level of fair value, corresponding to the significant input data level for the complete measurement presented by the lower Level.
Prosegur recognises transfers among levels of fair value at the end of the period in which the change has taken place.
The following Notes contain more information on the assumptions used in determining fair values:
- Note 18: Equity instruments.
- Note 30: business combinations.
- Note 32.3: financial instruments and fair value.
3. Revenue
Details of revenues are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Provision of services | 4,023,399 | 3,774,043 | |
Sale of goods | 13,343 | 2,036 | |
Operating lease revenues | 161,470 | 163,127 | |
Total revenues | 4,198,212 | 3,939,206 |
Operating lease revenues are generated by alarm system rentals. As explained in Note 35, when a client rents an alarm system, the Company receives an initial amount which is taken to the income statement over the average contract duration and a regular payment for the rental of the equipment and the service provided.
For a description of the Group's revenue recognition policy see Note 35.21. See Note 10 for further information on revenues by segment and geographical area.
15
2019 CONSOLIDATED ANNUAL ACCOUNTS
4. Cost of sales and administration and sales expenses
The main expenditure items composing cost of sales and administration and sales expenses are as follows:
Thousands of Euros | 2019 | 2018 | ||||
Supplies | 203,372 | 177,914 | ||||
Employee benefits expenses | (Note 5) | 2,471,148 | 2,346,688 | |||
Operating leases | (Note 12) | 27,545 | 33,225 | |||
Supplies and external services | 258,530 | 244,837 | ||||
Amortisations | 89,922 | 75,427 | ||||
Other expenses | 117,476 | 109,395 | ||||
Total sale expenses | 3,167,993 | 2,987,486 | ||||
Thousands of Euros | ||||||
2019 | 2018 | |||||
Supplies | 8,174 | 6,823 | ||||
Employee benefits expenses | (Note 5) | 361,512 | 318,194 | |||
Operating leases | (Note 12) | 11,813 | 44,091 | |||
Supplies and external services | 137,561 | 122,195 | ||||
Amortisations | 115,988 | 79,188 | ||||
Other expenses | 77,148 | 78,137 | ||||
Total sale and administrative expenses | 712,196 | 648,628 | ||||
Total supplies in the consolidated income statement for 2019 amount to EUR 211,546 thousand (EUR 184,737 thousand in 2018).
Under the heading of employee benefit expenses, included under total sales expenses, new business combinations (Note 30) as well as expenses relating to endowments for occupational risks (Note 23) are included.
Additionally the heading of other expenses, included under total administration and sales expenses, includes indirect tax expenses mainly in Argentina and Brazil for the amount of EUR 33,537 thousand (2018: EUR 49,191 thousand).
The heading of supplies and external services includes the costs for the repair of items of transport, bill-counting equipment, operating subcontracts with third parties and other advisors such as lawyers, auditors and consultants.
The heading of operating leases includes the lease costs that are not recognised as a right-of-use because they are exempt from that recognition as short-term contracts and contracts whose underlying asset is insignificant, as well as the expenses associated with those leases (Note 35.7).
The main change with respect to 2018 of the heading on operating leases as well as depreciation corresponds to the first-time application of IFRS 16 (Note 2.3).
16
2019 CONSOLIDATED ANNUAL ACCOUNTS
5. Employee benefits
5.1. Employee benefits expense
Details of the employee benefits expense are as follows:
Thousands of Euros | ||||
2019 | 2018 | |||
Salaries and wages | 2,144,731 | 1,979,894 | ||
Social Security | 534,304 | 515,952 | ||
Other employee benefits expenses | 88,269 | 107,841 | ||
Indemnities | 65,356 | 61,195 | ||
Total employee benefits expense | 2,832,660 | 2,664,882 | ||
The accrual of the long-term incentive associated with the 2017 and 2020 Plans for the Executive Director and the Senior Management of Prosegur was included under the heading of salaries and wages for the amount of EUR 5,674 thousand (2018: EUR 4,707 thousand) (Note 23).
The indemnities heading includes the endowment to the provision for occupational risks (Note 23).
5.2. Employee benefits
Prosegur contributes to various defined benefit schemes in Germany, Brazil, El Salvador, France, Honduras, Mexico and Nicaragua. The defined benefit plan comprising post-employment healthcare offered to employees in Brazil is compliant with local legislation (Act 9656). In Mexico the defined benefit scheme consists of seniority premiums, in France and Germany the defined benefit schemes consist of retirement premiums, whilst in Nicaragua, El Salvador and Honduras the defined benefit schemes consist of contract termination benefits.
During the 2019 period, the amount recognised as a higher expense in the income statement under the heading of personnel costs amounts to EUR 1,206 thousand (a higher expense of EUR 1,139 thousand in 2018).
The movement of the current value of the obligations is shown in the following table:
Thousands of Euros | |||||
2019 | 2018 | ||||
Balance at 1 January | 14,918 | 11,833 | |||
Net cost of the period | 1,206 | 1,139 | |||
Contributions to the plan | (323) | (93) | |||
Actuarial Loss/(Profit) | 7,572 | 1,579 | |||
Business combination (Note 30) | - | 68 | |||
Disposal of the scope of consolidation | (1,844) | - | |||
Translation differences | (785) | 392 | |||
Balance at 31 December | 20,744 | 14,918 |
During 2019 the negative impact on equity arising from actuarial losses amounted to EUR 6,236 thousand, (negative impact of EUR 1,024 thousand in 2018) (Note 23).
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2019 CONSOLIDATED ANNUAL ACCOUNTS
The breakdown by country of actuarial losses at 31 December is the following:
Thousands of Euros | |||
2019 | 2018 | ||
Brazil | 11,926 | 8,775 | |
France | 4,729 | 3,365 | |
Germany | 624 | 624 | |
Mexico | 3,377 | 2,068 | |
Central America | 88 | 86 | |
Total liabilities through employee benefits | 20,744 | 14,918 | |
At 31 December 2019 the defined benefit schemes in Brazil had 18,978 employees (19,214 employees in 2018). The France plan involved 3,953 employees in 2019 (5,283 employees in 2018). The Germany plan involved 3 employees at 31 December 2019 (3 employees in 2018). In Mexico the scheme had 3,402 employees in 2019 (3,266 employees in 2018). The Central America plan involved 922 employees in 2019 (922 employees in 2018).
The breakdown of actuarial assumptions used for calculating the current value of the main obligations of the defined benefit schemes in Germany, Brazil, France, Mexico and Central America is as follows:
Brazil | France | Germany | Mexico | Nicaragua | Honduras | El Salvador | ||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Inflation rate | 4.0% | 4.5% | 1.7% | 1.0% | 1.8% | 1.8% | 4.3% | 3.5% | 5.0% | 5.0% | 2.0% | 7.0% | 2.0% | 2.0% | ||||||||||||||||||||||||
Annual discount rate | 3.6% | 51.0% | 0.7% | 1.5% | 1.0% | 1.0% | 8.8% | 11.5% | 9.9% | 8.5% | 4.3% | 6.6% | 4.3% | 4.3% | ||||||||||||||||||||||||
Retirement age | n/a | 65.0% | 65 | 65 | 65 | 65 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
From Prosegur's experience, the age factor assumed in the benefits scheme in Brazil is as follows:
- 0 to 5 Minimum Wages = 16.97%
- 5 to 10 Minimum Wages = 14.29%
- More than 10 Minimum Wages = 11.42%
The mortality tables used in determining the defined benefit obligations were as follows:
Brazil | France | Germany | Mexico | Centroamérica | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||
Mexican | 100% of the | 100% of the | ||||||||||||||||||
AT 2000 | AT 2000 | Mexican | ||||||||||||||||||
smoothed by | smoothed by | Heubeck | Heubeck | Experiment of | Experiment of | securities of | securities of | |||||||||||||
10% | 10% | INSEE 2017 | INSEE 2017 | Richttafeln | Richttafeln | the Social | the Social | Watson | Watson | |||||||||||
segregated by | segregated by | 2005 G | 2005 G | Security for | Security for | Wyatt | Wyatt | |||||||||||||
gender | gender | Assets 1997 | Assets 1997 | Worldwide | Worldwide |
The variables of the defined benefit schemes that expose Prosegur to actuarial risks are: future mortality, trend in medical costs, inflation, retirement age and the market and discount rate.
18
2019 CONSOLIDATED ANNUAL ACCOUNTS
6. Other income and expenses
Other expenses
Details of other expenses are as follows:
Thousands of Euros | |||||
2019 | 2018 | ||||
Impairment losses on trade receivables (Note 20) | (2,770) | (7,559) | |||
Losses through disposal of property, plant and equipment | (8,883) | (5,953) | |||
Other expenses | (2,553) | (328) | |||
Total other expenses | (14,206) | (13,840) |
The section for losses on the disposal of fixed assets mainly includes losses associated with disposals of property, plant and equipment, which correspond mainly to the alarm installations that Prosegur hires to third parties under operating leases, for a total of EUR 6,368 thousand (EUR 3,789 thousand at 31 December 2018).
Other income
The heading of other income in 2019 primarily records the following income:
- Profit arising from exercising the option for 33.33% of the share capital of the South African company SBV Services Proprietary Limited (Note 16).
- Profit arising from the sale of 50% of the share capital of the joint venture for the alarms business in India, SIS Prosegur Alarms Monitoring and Response Services Pte Ltd, for the amount of EUR 1,605 thousand (Note 16).
- Profit arising from the sale of 100% of the German companies M Sicherheitstechnik Venwaltungs Gmbh, AC Alarm Verwaltungs Gmbh, M Sicherheitstechnik Gmbh & Co KG and AC Alarm Gmbh & Co KG for the amount of EUR 494 thousand.
- Profit arising from the sale of 100% of the capital of Prosegur Cash Holding France to Loomis AB.
The heading of other income in 2018 primarily recorded the income from the sale of a property in Madrid for the amount of EUR 4,093 thousand (Note 11) and the income from damages and losses for a total of EUR 3,073 thousand relating to the funds on deposit for a client withheld in Brazil from 2008 until 2014.
The heading of other revenue also includes the revenue generated by various properties located in Buenos Aires (Note 15). Income generated for these properties in 2019 amounted to EUR 5,166 thousand (EUR 5,346 thousand in 2018).
At the close of 2019, these properties are leased to third parties, with contracts lasting between 1 and
5 years. Future minimum receipts for the leases of those properties are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Up to 1 year | 5,081 | 5,335 | |
Between 1 and 5 years | 20,326 | 708 | |
25,407 | 6,043 |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
7. Net financial expenses
Details of the net financial expenses are as follows:
Thousands of Euros | |||||||||||||
2019 | 2018 | ||||||||||||
Interest paid: | |||||||||||||
- Loans and borrowings | (10,361) | (12,849) | |||||||||||
- Bonds and other marketable securities | (15,250) | (14,667) | |||||||||||
- Loans from other entities | (326) | (448) | |||||||||||
- Remeasurement of lease liabilities | (7,485) | (1,039) | |||||||||||
- Securitisation programme | - | (1) | |||||||||||
(33,422) | (29,004) | ||||||||||||
Interest received: | |||||||||||||
- Loans and other investments | 10,502 | 12,141 | |||||||||||
10,502 | 12,141 | ||||||||||||
Other profit/(loss) | |||||||||||||
Net profits/(losses) on foreign currency transactions | (10,002) | 9,522 | |||||||||||
Exchange rate finacial effect | (5,108) | - | |||||||||||
Earnings in the fair value of financial instruments | 853 | - | |||||||||||
Net financial expenses from net monetary position | (7,116) | (2,692) | |||||||||||
Other financial income | 9,727 | 9,832 | |||||||||||
Other finance costs | (31,048) | (21,140) | |||||||||||
(42,694) | (4,478) | ||||||||||||
Net financial costs | (65,614) | (21,341) | |||||||||||
Total finance income | 21,082 | 31,495 | |||||||||||
Total finance costs | (86,696) | (52,836) | |||||||||||
(65,614) | (21,341) |
The main change is associated with the volatility of currency transactions included under the heading of net profits/(losses) on foreign currency transactions as well as with monetary adjustments of deferred payments from the latest business combinations that have taken place (Note 30).
In addition, as a result of the application of IAS 29 (Note 35.28), net financial expenses have arisen from the net monetary position in an amount of EUR 7,116 thousand (EUR 2,692 thousand in 2018). That item reflects the exposure to the change in the purchasing power of the Argentine currency.
Furthermore, as a result of the first-time application of IFRS 16, finance expenses went up by EUR 7,485 thousand (see Note 2.3 and 12).
The heading other financial income and expenses mainly includes the financial updates, as the result of calculating the amortised cost of the debt, as well as deposits in court, both associated to the labour actions open in Brazil (Note 23), as well as the financial updating of tax contingencies, mainly in Brazil (Note 23) and the financial updating of deferred payments on business combinations taking place in the different countries.
The majority of financial income and expenses derive from financial assets and liabilities measured at amortised cost.
At 31 December 2019 and 2018 Prosegur has no financial derivatives contracted.
20
2019 CONSOLIDATED ANNUAL ACCOUNTS
8. Earnings per share
Basic
Basic earnings per share are calculated by dividing the profit for the year attributable to the owners of the parent by the weighted average number of ordinary shares outstanding during the year, excluding own shares acquired by the Company (Note 22.1).
Euros | ||||
2019 | 2018 | |||
Profit for the year attributable to owners of the Parent | 113,862,000 | 132,272,053 | ||
Weighted average number of ordinary shares outstanding | 593,772,779 | 598,554,575 | ||
Basic earnings per share | 0.1918 | 0.2210 |
Diluted
Diluted earnings per share are calculated by adjusting the profit for the year attributable to the owners of the parent and the weighted average number of ordinary shares outstanding for all the inherent diluting effects of potential ordinary shares.
Euros | |||||
2019 | 2018 | ||||
Profit for the year attributable to owners of the Parent | 113,862,000 | 132,272,053 | |||
(Diluted) weighted average number of ordinary shares outstanding | 593,772,779 | 598,554,575 | |||
Diluted earnings per share | |||||
0.1918 | 0.2210 |
There are no commitments for potential adjustments on outstanding shares (Note 35.20).
9. Dividends per share
On 18 December 2019, the Board of Directors approved the distribution of a regular dividend of EUR 0.1320 per share on account of the 2019 profits, or a total maximum dividend of EUR 79,026 thousand (considering that the share capital is currently represented by 598,679,362 shares). This dividend will be distributed to shareholders as four payments, in January, April, July and October 2020. Each payment is calculated as EUR 0.0330 per outstanding share at the payment date. At 31 December 2019 dividends payable of EUR 79,026 thousand have been recognised under current liabilities as other payables within suppliers and other payables.
The maximum amount represented by own shares at each payment date, and therefore not distributed, will be transferred to voluntary reserves. The amount for undistributed dividends out of the maximum total agreed for the year 2019 is reflected in the item of "Other Changes" in the consolidated statement of changes in equity for the amount of EUR 2,060 thousand.
Nevertheless, if the number of shares changes between two payment dates as a result of a share capital increase or reduction, the total maximum amount of the dividend at each payment date (EUR 19,756 thousand) should be divided by the new number of outstanding shares that corresponds following the aforementioned increase or reduction.
21
2019 CONSOLIDATED ANNUAL ACCOUNTS
The provisional accounting statement prepared by the Board of Directors in accordance with legal requirements which revealed the existence of insufficient liquidity to pay out those interim dividends is shown below:
Initial cash (before the interim dividend) Balance in current accounts with the group Current proceeds
Temporary financial investments Payments for Current Operations Payments for Financial Operations Extraordinary Payments
Forecast Cash
Less payment of dividends according to proposal Final cash after dividends
Thousands of
Euros
2019
(43,882)
422,863
57,067
689,998
(3,807)
(8,725)
(962)
1,112,552
(79,026)
1,033,526
10.Segment reporting
The Board of Directors is ultimately responsible for making decisions on Prosegur's operations and, together with the Audit Committee, for reviewing Prosegur's internal financial information to assess performance and to allocate resources.
Business is the backbone of the organisation and is represented in the General Business Management Areas which are responsible for the design of security solutions for clients and cover the main business lines: Security, Cash and Alarms which therefore correspond to the segments of the Group.
- Security: mainly includes the activities of guarding and protection of premises, goods and individual and activities related to technological security and cybersecurity solutions. Cybersecurity activity was included only in this segment in 2018.
- Cash: mainly includes the transportation, storage, safekeeping, counting and classification of coins and banknotes, deeds, securities and other items that require special protection due to their economic value or associated risk.
- Alarms: this includes the installation and maintenance of home alarm systems, as well as the alarm monitoring service by Alarm Reception Centre (ARC).
The corporate functions are supervised by the Global Support Divisions which cover the Financial- Economic department, Prosegur Gestión de Activos (Prosegur Asset Management), Risk Management and CEO's Office. From the geographical perspective, the following geographical areas are identified:
- Europe, which includes the following countries: Germany, Spain, France, Portugal and Turkey.
- ROW, which includes the following countries: Australia, China, United States, The Philippines, India, Indonesia, Singapore and South Africa.
- LatAm, including the following countries: Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru and Uruguay.
The Board of Directors uses earnings before interest and tax (EBIT) to assess segment performance, since this indicator is considered to best reflect the results of the Group's different activities.
Prosegur is not highly dependent on any particular client (Note 32.1).
Inter-segment transactions are carried out at similar market conditions.
22
2019 CONSOLIDATED ANNUAL ACCOUNTS
Total assets allocated to segments do not include other current and non-current financial assets, non- current assets held for sale - property investments of cash and cash equivalents, as these are managed at Prosegur Group level. Rights of use have emerged in 2019 as a result of the application of IFRS 16 (Note 12).
The total liabilities assigned to segments exclude bank borrowings as Prosegur jointly handles the financing, and they include lease liabilities. In 2019 lease liabilities increased as a result of the application of IFRS 16 (Note 12).
Details of revenues by geographical area are as follows:
Europe | ROW | LatAm | Total | ||||||||
Thousands of Euros | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||
Total sales | |||||||||||
1,770,031 | 1,739,908 | 341,594 | 157,681 | 2,086,587 | 2,041,617 | 4,198,212 | 3,939,206 | ||||
% of total | 42% | 44% | 8% | 4% | 50% | 52% | 100% | 100% | |||
The breakdown of sales and EBIT is as follows:
Thousands of Euros | Cash | Security | Alarms | PGA and Not allocated | Total | |||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||
Total sales | 1,798,654 | 1,731,605 | 2,107,667 | 1,945,717 | 278,085 | 261,884 | 13,806 | - | 4,198,212 | 3,939,206 | ||||
EBIT | 304,757 | 268,008 | 66,095 | 54,489 | 21,197 | 4,599 | (61,568) | (25,716) | 330,481 | 301,380 |
In fiscal year 2019, the cybersecurity sub-business is led by the Prosegur Asset Management support area, hereinafter PGA. In 2018, the total sales figure of the cybersecurity sub-business amounted to 4,641 thousand euros, which was collected under the security business.
Unallocated costs are composed of the support costs of the Security and Alarms business, as well as any exceptional costs incurred during the year which are not considered as the outcome of any of the three business lines themselves, mainly for the costs associated with the digital transformation of the Company, which have increased with respect to the previous year.
A reconciliation of EBIT allocated to segments with net profit/(loss) for the year attributable to the owners of the parent is as follows:
Thousands of Euros | |||
2019 | 2018 | ||
EBIT allocated to segments | 392,049 | 327,096 | |
EBIT not allocated | (61,568) | (25,716) | |
EBIT of the period | 330,481 | 301,380 | |
Net financial costs | (65,614) | (21,341) | |
Profit before tax | 264,867 | 280,039 | |
Income tax | (104,641) | (100,022) | |
Post-tax profit from continuing operations | 160,226 | 180,017 | |
Profit/(loss) for the year from discontinued operations | - | (11) | |
Non-controlling interests | 46,364 | 47,734 | |
Profit for the year attributable to owners of the Parent | 113,862 | 132,272 |
23
2019 CONSOLIDATED ANNUAL ACCOUNTS
Details of assets allocated to segments and a reconciliation with total assets are as follows:
Cash | Security | Alarms | Not allocated to | Total | ||||||||||||||||||||
segments | ||||||||||||||||||||||||
Thousands of Euros | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Assets allocated to segments | 1,523,606 | 1,380,932 | 949,443 | 821,064 | 247,586 | 242,180 | 340,038 | 262,770 | 3,060,673 | 2,706,946 | ||||||||||||||
Other unallocated assets | - | - | - | - | - | - | 915,412 | 1,112,824 | 915,412 | 1,112,824 | ||||||||||||||
Other non-current financial assets | - | - | - | - | - | - | 21,004 | 19,251 | 21,004 | 19,251 | ||||||||||||||
Investment Properties - Non-current assets held for | - | - | - | - | - | - | 44,110 | 45,950 | 44,110 | 45,950 | ||||||||||||||
sale | ||||||||||||||||||||||||
Other current financial assets | - | - | - | - | - | - | 319,621 | 489,268 | 319,621 | 489,268 | ||||||||||||||
Cash and cash equivalents | - | - | - | - | - | - | 530,677 | 558,355 | 530,677 | 558,355 | ||||||||||||||
247,586 | 242,180 | 1,255,450 | 1,375,594 | 3,976,085 | 3,819,770 | |||||||||||||||||||
1,523,606 | 1,380,932 | 949,443 | 821,064 |
The heading of "assets allocated to segments" includes the investments accounted for using the equity method (Note 16) for a total of EUR 9,452 thousand (EUR 29,433 thousand in 2018) which are mainly allocated to the Cash segment.
Additions made in 2019 of non-current assets allocated to the segments amount to EUR 201,821 thousand (2018: EUR 215,807 thousand), which correspond mainly to the investments made for fitting- out work on bases, facilities and armoured vehicles intended for use in operating activities.
Details of liabilities allocated to segments and a reconciliation with total liabilities are as follows:
Cash | Security | Alarms | Not allocated to | Total | |||||||||||||||||||||||
segments | |||||||||||||||||||||||||||
Thousands of Euros | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Liabilities allocated to segments | 779,161 | 634,384 | 444,822 | 390,057 | 136,089 | 130,964 | 218,068 | 139,184 | 1,578,140 | 1,294,589 | |||||||||||||||||
Other unallocated liabilities | - | - | - | - | - | - | 1,499,605 | 1,458,724 | 1,499,605 | 1,458,724 | |||||||||||||||||
Bank borrowing | - | - | - | - | - | - | 1,499,605 | 1,458,724 | 1,499,605 | 1,458,724 | |||||||||||||||||
779,161 | 634,384 | 444,822 | 390,057 | 136,089 | 130,964 | 1,717,673 | 1,597,908 | 3,077,745 | 2,753,313 |
24
2019 CONSOLIDATED ANNUAL ACCOUNTS
11.Property, Plant and Equipment
Details and movement of property, plant and equipment are as follows:
Technical | Other | Other | Under | ||||
Land and | installations | property, | construction | ||||
Thousands of Euros | Obtaining costs | installations | Total | ||||
buildings | and | and furniture | plant and | and | |||
machinery | equipment | advances | |||||
Cost | |||||||
Balance at 31 December, 2017 | 238,138 | - | 147,840 | 382,525 | 364,319 | 42,784 | 1,175,606 |
Transition adjustment (Note 35) | - | 51,989 | - | - | - | - | 51,989 |
Balance at 1 January, 2018 | 238,138 | 51,989 | 147,840 | 382,525 | 364,319 | 42,784 | 1,227,595 |
Translation differences | (5,057) | (431) | (8,399) | (11,031) | (13,353) | (2,518) | (40,789) |
Business combinations (Note 30) | 2,688 | - | 490 | 2,842 | 9,196 | 138 | 15,354 |
Adjustment for Hyperinflation | 16,443 | 7,310 | 10,676 | 23,774 | 30,853 | (3,692) | 85,364 |
New Additions | 15,937 | 25,680 | 24,374 | 66,778 | 27,073 | 31,351 | 191,194 |
Write offs | (21,808) | (3,089) | (4,400) | (28,093) | (9,104) | (503) | (66,997) |
Transfers | 1,140 | - | 21,220 | (8,429) | 6,539 | (20,470) | - |
Balance at 31 December, 2018 | 247,481 | 81,459 | 191,801 | 428,366 | 415,523 | 47,090 | 1,411,721 |
Transition adjustment (Note 12) | (3,427) | - | (2,657) | (98) | (50,492) | - | (56,674) |
Translation differences | (662) | (432) | (2,566) | (1,235) | (970) | 41 | (5,824) |
Business combinations (Note 30) | 425 | - | 190 | 1,716 | 1,674 | - | 4,005 |
Adjustment for Hyperinflation | (466) | (568) | (241) | (2,772) | (2,070) | (2,175) | (8,292) |
New Additions | 5,004 | 22,852 | 36,489 | 54,556 | 17,421 | 35,439 | 171,761 |
Write offs | (756) | - | (9,564) | (16,153) | (11,693) | (3,766) | (41,932) |
Disposal of the scope of consolidation | - | - | (3,013) | (15,107) | (14,047) | (221) | (32,388) |
Transfers | 6,583 | - | 6,070 | 12,370 | 65,822 | (41,841) | 49,004 |
Balance at 31 December, 2019 | 254,182 | 103,311 | 216,509 | 461,643 | 421,168 | 34,567 | 1,491,380 |
25
2019 CONSOLIDATED ANNUAL ACCOUNTS
Technical | Other | Other | Under | |||||||
Land and | installations | property, | construction | |||||||
Thousands of Euros | Obtaining costs | installations | Total | |||||||
buildings | and | and furniture | plant and | and | ||||||
machinery | equipment | advances | ||||||||
Amortisation and impairment | ||||||||||
Balance at 1 January, 2018 | (51,240) | - | (78,955) | (222,841) | (235,620) | - | (588,656) | |||
Translation differences | 468 | 89 | 3,854 | 5,025 | 8,685 | - | 18,121 | |||
Adjustment for Hyperinflation | (3,736) | (5,055) | (7,616) | (25,789) | (25,580) | - | (67,776) | |||
Write offs | 604 | 929 | 3,735 | 25,046 | 8,765 | - | 39,079 | |||
Transfers | 76 | - | (1,254) | 802 | 376 | - | - | |||
Amortisation for the year | (3,925) | (19,597) | (14,648) | (41,340) | (32,847) | - | (112,357) | |||
Balance at 31 December, 2018 | (57,753) | (23,634) | (94,884) | (259,097) | (276,221) | - | (711,589) | |||
Transition adjustment (Note 12) | 81 | - | 2,579 | 98 | 31,350 | - | 34,108 | |||
Translation differences | 15 | 269 | 1,710 | 453 | 1,713 | - | 4,160 | |||
Adjustment for Hyperinflation | 45 | 81 | 80 | 665 | 1,951 | - | 2,822 | |||
Write offs | 209 | - | 3,071 | 9,681 | 10,065 | - | 23,026 | |||
Transfers | - | - | - | (1,392) | (32,016) | - | (33,408) | |||
Disposal of the scope of consolidation | - | - | 1,935 | 12,104 | 11,399 | - | 25,438 | |||
Amortisation for the year | (4,284) | (22,149) | (18,199) | (41,086) | (33,792) | - | (119,510) | |||
Balance at 31 December, 2019 | (61,687) | (45,433) | (103,708) | (278,574) | (285,551) | - | (774,953) | |||
Carrying amount | ||||||||||
Balance at 1 January, 2018 | 186,898 | 51,989 | 68,885 | 159,684 | 128,699 | 42,784 | 638,939 | |||
Balance at 31 December, 2018 | 189,728 | 57,825 | 96,917 | 169,269 | 139,302 | 47,090 | 700,131 | |||
Balance at 1 January, 2019 | 189,728 | 57,825 | 96,917 | 169,269 | 139,302 | 47,090 | 700,131 | |||
Balance at 31 December, 2019 | 192,495 | 57,878 | 112,801 | 183,069 | 135,617 | 34,567 | 716,427 |
26
2019 CONSOLIDATED ANNUAL ACCOUNTS
Additions to property, plant and equipment recognised in 2019 amount to EUR 171,761 thousand (EUR 191,194 thousand in 2018) and mainly comprise cash automation equipment fitted to client premises and to fitting-out work on bases, facilities and armoured vehicles intended for use in operating activities. These investments were essentially made in Argentina, Brazil, Colombia, Chile and Spain.
As stated in note 35.28, the hyperinflation adjustment includes the impacts by application of IAS 29 and by application of IAS 21.42, the devaluation of the Argentine peso having been higher than the effects of inflation.
In 2018 three properties were acquired in Guatemala and Honduras for a total of EUR 5,805 thousand.
In May 2018, a property in Paseo de las Acacias in Madrid was sold for a total of EUR 24,761 thousand. That property had a net carrying amount of EUR 20,668 thousand after a reappraisal under the initial transition to IFRS-EU of EUR 19,891 thousand. The revenue from the sale of that property was EUR 4,093 thousand (Note 6).
The heading on advances and work in progress at the close of 2019, includes constructions, mainly in Argentina, Peru and Colombia for a total of EUR 9,301 thousand (EUR 15,192 thousand in 2018); conditioning work, mainly in Germany and Australia for a total of EUR 6,123 thousand (EUR 4,780 thousand in 2018); bill-counting equipment, mainly in Argentina, Brazil, Spain, Chile and Peru for a total of EUR 11,856 thousand (EUR 7,997 thousand in 2018) and advances on armoured vehicles, mainly in Germany, Argentina, Spain and Paraguay. The date anticipated for concluding the above work on fixed assets is expected to be within the first six months of 2020.
Transfers in 2019 include the reclassification of rights-of-use to property, plant and equipment owing to the execution of the purchase option on that property, plant and equipment (Note 12).
Under the heading of property, plant and equipment, since 1 January 2018, following the adoption of IFRS 15 on recognising revenue from contracts with clients, Prosegur recognises the incremental costs of obtaining contracts with clients, mainly regarding the Alarm business (Note 35.21). The incremental costs of obtaining contracts with clients generally arise from sales commissions for sales staff and labour for installation work. At 31 December 2019, the additions recorded for this item amounted to EUR 22,852 thousand (EUR 25,680 thousand in 2018).
No assets are subject to restrictions on title or pledged as security for particular transactions at 31 December 2019 and 2018.
Commitments for the acquisition of property, plant and equipment are detailed in Note 29.
Prosegur's policy is to take out insurance policies to cover any possible risks of damage to its property, plant and equipment. At the close of 2019 and 2018 there was no hedge shortfall whatsoever regarding such risks.
Property, plant and equipment are measured at historical cost, with the exception of the Hospitalet building in Barcelona, which was measured at market value on first-time adoption of EU-IFRS and the property, plant and equipment denominated in Argentine Pesos subject to IAS 29. The effect of this reappraisal of the Hospitalet building in Barcelona, that reflects the attributed cost, is as follows:
Thousands of Euros | ||||||
2019 | 2018 | |||||
Cost | 12,344 | 12,344 | ||||
Accumulated amortisation | (6,017) | (5,641) | ||||
Carrying amount | 6,327 | 6,703 | ||||
27
2019 CONSOLIDATED ANNUAL ACCOUNTS
Other installations and furniture includes installations, mainly of alarms, let by Prosegur to third parties under operating leases, with the following carrying amounts:
Thousands of Euros | ||||||
2019 | 2018 | |||||
Cost | 158,204 | 142,229 | ||||
Accumulated amortisation | (83,022) | (72,564) | ||||
Carrying amount | 75,182 | 69,665 | ||||
The amount for items of property, plant and equipment fully depreciated and still in use was EUR 379,299 thousand at 31 December 2019 (EUR 318,515 thousand in 2018).
12.Rights of use and lease liabilities
On 1 January 2019, the Group adopted IFRS 16, on Leases (Note 35.1). The following table reflects the impact of the first-time application in Retained earnings and other reserves which is reflected in the item of "Transition adjustments" on the consolidated statement of changes in equity (Note 22.3).
Thousands of | |
Euros | |
01/01/2019 | |
Right of use | 130,286 |
Deferred tax assets | 4,221 |
Long term lease liabilities | (101,749) |
Short term lease liabilities | (41,729) |
Retained earnings and other reserves | (8,971) |
28
2019 CONSOLIDATED ANNUAL ACCOUNTS
The breakdown of changes in right of use assets for the year ended at 31 December 2019 is as follows:
Thousands of | |
Euros | |
Cost | |
Balance at 31 December, 2018 | - |
Transition adjustment (Note 35.1) | 130,286 |
Reclassification of property, plant and equipment under | 56,674 |
financial leasing (Note 35.1) | |
Balance at 1 January, 2019 | 186,960 |
Additions | 22,868 |
Adjustment for Hyperinflation | 1,335 |
Business combinations (Note 30) | 4,795 |
Disposal of the scope of consolidation | (3,608) |
Write offs and transfers | (52,235) |
Translation differences | (733) |
Balance at 31 December, 2019 | 159,382 |
(1) | |
Thousands of | |
Euros | |
Amortisation and impairment | |
Balance at 31 December, 2018 | - |
Reclassification of property, plant and equipment under | (34,108) |
financial leasing (Note 11 & 35.1) | |
Balance at 1 January, 2019 | (34,108) |
Disposal of the scope of consolidation | 666 |
Adjustment for Hyperinflation | (185) |
Amortisation for the year | (41,261) |
Translation differences | 77 |
Write offs and transfers | 35,948 |
Balance at 31 December, 2019 | (38,863) |
Carrying amount | |
Balance at 31 December, 2018 | - |
Balance at 1 January, 2019 | 152,852 |
Balance at 31 December, 2019 | 120,519 |
Of the total amount of rights of use at 31 December 2019, EUR 90,429 thousand correspond to buildings, EUR 29,036 thousand to vehicles and EUR 1,054 thousand to machinery.
With regard to lease contracts, Prosegur has a dispersed portfolio. The average duration of property lease contracts is 5 years, and 3 years for vehicles.
The right of use has been defined according to the duration of the contract in force for each asset.
29
2019 CONSOLIDATED ANNUAL ACCOUNTS
The breakdown of changes in lease liabilities for the year ending at 31 December 2019 is as follows:
Thousands of | |
Euros | |
Balance at 31 December, 2018 | - |
Transition adjustment (Note 35.1) | 143,478 |
Reclassification of property, plant and equipment under | 13,610 |
financial leasing (Note 11 & 35.1) | |
Balance at 1 January, 2019 | 157,088 |
Additions | 22,868 |
Business combinations (Note 30) | 4,986 |
Write offs and transfers | (55,578) |
Financial expenses (Note 7) | 7,485 |
Translation differences | (1,098) |
Disposal of the scope of consolidation | (3,730) |
Balance at 31 December, 2019 | 132,021 |
The analysis of the contractual maturity date of the lease liabilities, including future interest to be paid, is as follows:
Thousands of Euros | 6 months or | 6 months to 1 | 1 to 2 years | 2 to 5 years | more than 5 |
less | year | years | |||
Total lease liabilities | |||||
23,158 | 22,015 | 43,675 | 30,647 | 12,526 | |
23,158 | 22,015 | 43,675 | 30,647 | 12,526 | |
The average incremental discount rates for the main countries affected by this standard, used for calculating the current value of the rights of use and lease liabilities recognised at the date of first-time application of IFRS 16 were as follows:
Average rate | |||
between 1 and | between 3 and | between 5 and | |
Germany | 3 years | 5 years | 10 years |
1.03% | 1.14% | 1.41% | |
Brazil | 7.98% | 8.92% | 9.88% |
Peru | 3.74% | 4.10% | 4.65% |
Argentina | 31.82% | 32.22% | 32.09% |
Colombia | 6.19% | 6.08% | 6.53% |
Chile | 4.68% | 4.93% | 5.33% |
Spain | 0.87% | 0.97% | 1.21% |
As indicated in Note 35.7 the Group has chosen to not recognise in the balance sheet the lease liabilities and the right-of-use asset corresponding to short term lease agreements (leases for one year or less) and leases for low value assets (5 thousand U.S. Dollars or less). Those exceptions have been recorded entirely under the heading of operating leases. The total lease expense not subject to IFRS 16 for term as well as amount came to EUR 39,358 thousand (Note 4).
30
2019 CONSOLIDATED ANNUAL ACCOUNTS
13.Goodwill
Details of movement in goodwill are as follows:
Thousands of Euros | |||||
2019 | 2018 | ||||
Balance at 1 January | 570,073 | 520,389 | |||
Business combinations (Note 30) | 82,827 | 53,822 | |||
Additions | 486 | 791 | |||
Write offs | (16,938) | (610) | |||
New additions for hyperinflation | (489) | 7,924 | |||
Translation differences | (1,932) | (12,243) | |||
Balance at 31 December | 634,027 | 570,073 |
Additions to goodwill in 2019 and 2018 derive from the following business combinations:
Business combinations Cash Latin America(1) Business combinations Cash Europe(1) Business combinations Cash ROW (1) Business combinations Cibersecurity Europe (1) Business combinations Cibersecurity Latim America(1) Business combinations Security and Cibersecurity ROW (1) Business combinations Alarms Latin America(1)
Business combinations Cash Latin America(1) Business combinations Cash Europe(1) Business combinations Cash ROW (1) Business combinations Security ROW(1) Business combinations Alarms Latin America(1)
2019
Thousands of Euros
24,920
7,512
3,623
1,688
14,028
28,714
2,342
82,827
2018
Thousands of Euros
23,133
5,990
11,907
12,338
454
53,822
- Calculations relating to business combinations may be adjusted for up to a year from the acquisition date, which are fully consolidated as a whole.
Additions recorded in 2019 correspond mainly to the adjustments made to the value of goodwill associated with a combination of Cash businesses in LatAm as a result of re-estimating the associated opening balance and to adjustments made to the value of goodwill associated with a combination of Security businesses in ROW as a result of re-estimating the deferred contingent consideration:
2019 | ||
Thousands of | ||
Business combinations Security ROW | Euros | |
308 | ||
Business combinations Cash Latin America | 178 | |
486 |
31
2019 CONSOLIDATED ANNUAL ACCOUNTS
Additions recorded in 2018 corresponded to adjustments in the value of the subsequent goodwill as a result of re-estimating the deferred contingent consideration associated with the business combination of the Contesta Group:
2018 | |
Thousands | |
Groupo Contesta | of Euros |
791 | |
791 | |
Disposals recorded in 2019 corresponded to the goodwill associated with Prosegur Cash Holding France, which was sold to Loomis AB.
Disposals recorded in 2018 corresponded to the adjustments made to the value of the following goodwill as a result of the reassessment of the deferred contingent consideration associated with the business combination for purchasing assets from Omni S.A.:
2018 | |
Thousands of | |
Assets purchased from Omni S.A. | Euros |
(610) | |
(610) | |
Details of the estimated goodwill in the tables above are provided in Note 30.
Impairment testing of goodwill impairment
Goodwill has been allocated to Prosegur's cash-generating units (CGU) in accordance with their respective country of operation and activity. Goodwill is allocated to CGU for impairment testing purposes. Goodwill is allocated to those CGU that are expected to benefit from the business combination from which the goodwill arose.
The nature of the assets included for establishing the carrying amount of a CGU are: Property, Plant and Equipment, Goodwill, Other Intangible Assets and Working Capital (Note 35.10).
A summary of the CGU to which goodwill has been allocated, by country and activity, is as follows:
32
2019 CONSOLIDATED ANNUAL ACCOUNTS
Thousands of Euros | |||||||||||
2019 | |||||||||||
Cash | Security and | Alarms | |||||||||
Cibersecurity | |||||||||||
Spain CGU | 20,143 | 92,114 | - | ||||||||
France CGU | - | 22,849 | - | ||||||||
Portugal CGU | 5,730 | 2,550 | 6,189 | ||||||||
Germany CGU | 35,985 | - | - | ||||||||
United Kindong CGU | - | 1,621 | - | ||||||||
USA CGU | - | 38,821 | - | ||||||||
Australia CGU | 34,772 | - | - | ||||||||
Singapore CGU | - | 9,670 | - | ||||||||
China CGU | - | 89 | - | ||||||||
Indonesia CGU | 3,623 | - | - | ||||||||
The Philippines CGU | 13,090 | - | - | ||||||||
South Africa CGU | - | - | 3,366 | ||||||||
Brazil CGU | 103,756 | 24,118 | - | ||||||||
Chile CGU | 35,586 | 3,730 | - | ||||||||
Peru CGU | 32,583 | 8,163 | 9,935 | ||||||||
Argentina CGU | 47,236 | 13,333 | - | ||||||||
Colombia CGU | 19,897 | 16,367 | 2,772 | ||||||||
Rest of Latin America CGU | 18,562 | 286 | 7,091 | ||||||||
Total | 370,963 | 233,711 | 29,353 | ||||||||
Thousands of Euros | |||||||||||
2018 | |||||||||||
Cash | Security | Alarms | |||||||||
Spain CGU | 12,631 | 92,117 | - | ||||||||
France CGU | 16,938 | 22,849 | - | ||||||||
Portugal CGU | 5,730 | 2,550 | 6,189 | ||||||||
Germany CGU | 35,985 | - | - | ||||||||
USA CGU | - | 9,704 | - | ||||||||
Australia CGU | 34,300 | - | - | ||||||||
Singapore CGU | - | 8,983 | - | ||||||||
China CGU | - | 88 | - | ||||||||
The Philippines CGU | 12,340 | - | - | ||||||||
South Africa CGU | - | - | 3,366 | ||||||||
Brazil CGU | 97,453 | 12,788 | - | ||||||||
Chile CGU | 35,586 | 3,916 | - | ||||||||
Peru CGU | 32,165 | 7,859 | 9,565 | ||||||||
Argentina CGU | 34,634 | 9,330 | - | ||||||||
Colombia CGU | 19,513 | 16,189 | 432 | ||||||||
Rest of Latin America CGU | 18,428 | 447 | 7,998 | ||||||||
Total | |||||||||||
355,703 | 186,820 | 27,550 | |||||||||
Prosegur tests goodwill for impairment at the end of each reporting period, or earlier if there are indications of impairment, in accordance with the accounting policy described in Note 35.10 As of December 31,2019, and 2018 Prosegur has verified the impairment at the level of the CGUs grouped by activity and country concluding that there are no losses due to the impairment of value.
33
2019 CONSOLIDATED ANNUAL ACCOUNTS
The recoverable amount of a CGU is determined based on two different calculation methods, depending on the type of business. The alarm business is calculated for its fair value and the Cash and Security businesses for their value in use.
Value in use as a method for calculation:
The key operating assumptions used to calculate value in use for the various CGUs are based on the company's budgets for the following year and the strategic plan for subsequent years. Both the budget and the plan are approved by the Directors. Projections of both gross margin and sales, on which the calculation of value in use are based, are drawn up in accordance with each country's macroeconomic growth and the efficiency plans defined to optimise profit. Cash flows are discounted using a discount rate based on the weighted average cost of capital (WACC). The residual value of each CGU is generally calculated as perpetual income.
Details are given below for the items proposed for calculating the value in use and the key assumptions considered:
- Ordinary income: the sales figure for the projected period is estimated based on the business plans prepared by the Management. The perpetuity figure is calculated based on long-term inflation estimates for each country.
- Gross Profit/(Loss): based on efficiency plans defined by the Company, mainly the optimisation of client portfolios, using a method of cost-benefit analysis aimed at establishing threshold margins under which it is not considered viable to establish a business relationship with those clients. The gross margin is calculated as the Group's total revenue less sell expenses, divided by total revenue, expressed as a percentage.
- EBITDA: based on the average optimisation costs obtained in the past. It is calculated using the Group's net profit, before deducting interest, tax, depreciation and amortisation.
- CAPEX: based primarily on plans to renew the fleet in accordance with its age.
- Working capital: based on optimising DSO or average collection period for trade accounts receivables. The projection is based on revenue growth, in accordance with the DSO determined.
- Tax: Tax estimates are calculated in accordance with the effective tax rate in each country and the expected profit/l(loss) therein.
The macroeconomic estimates used are obtained from external information sources.
Details of the key assumptions relating to the most significant CGU are as follows:
31 de diciembre de 2019 | |||||||||
Spain | France | Germany | Australia | Chile | Brazil | Colombia | Peru | Argentina | |
Growth rate | 1.77% | 1.69% | 2.13% | 2.50% | 3.00% | 3.49% | 3.04% | 2.00% | 3.20% |
Discount rate | 4.14% | 5.43% | 3.81% | 6.92% | 8.21% | 10.97% | 10.45% | 7.47% | 10.25% |
31 de diciembre de 2018 | |||||||||
Spain | France | Germany | Australia | Chile | Brazil | Colombia | Peru | Argentina | |
Growth rate | 1.90% | 1.87% | 2.56% | 2.52% | 3.00% | 3.97% | 3.04% | 1.99% | 4.86% |
Discount rate | 4.98% | 4.54% | 4.20% | 7.19% | 9.12% | 13.14% | 12.20% | 8.92% | 24.03% |
34
2019 CONSOLIDATED ANNUAL ACCOUNTS
The discount rates used are post-tax values and reflect specific risks related to the country of operation. In the case of Argentina, discount rates used as well as the cash flows in 2019 do not include the effects of the inflation rate. Using pre-tax rates would make no difference to the conclusions as to each CGU recoverable amount.
Along with impairment testing, Prosegur has also performed a sensitivity analysis on the goodwill allocated to the main CGU, for the purposes of the key assumptions.
The sensitivity analysis on EBITDA consists of determining the turning point which would lead to an impairment loss. Accordingly, hypotheses are evaluated until the figures that imply an impairment to be recognised in the financial statements are reached. The percentage represents the amount by which EBITDA would have to diminish in order for the CGU to be impaired, maintaining the other variable constant.
The sensitivity analysis performed on the growth rate consists of determining the weighted average growth/deceleration rate (used to extrapolate cash flows beyond the budget period) from which impairment losses would be incurred by each of the most representative CGUs.
In addition, the sensitivity analysis made on the discount rate consists of determining the basis of which weighted average discount rate used for extrapolating cash flows would incur impairment losses for each of the most representative CGUs.
Details of the thresholds for discount rates, the growth/deceleration(-) rates and EBITDA, taken independently, above which impairment losses would arise, maintaining the other variables constant, are as follows:
Cash | 2019 | |||||
Discount rate | Growth rate | EBITDA | ||||
Brazil | 13.74% | -0.67% | -14.98% | |||
Argentina | 96.77% | -100.00% | -65.91% | |||
Spain | 16.65% | -23.88% | -48.39% | |||
Colombia | 11.96% | 0.74% | -6.16% | |||
Peru | 35.22% | -100.00% | -49.92% | |||
Chile | 11.46% | -1.87% | -16.51% | |||
Germany | 10.05% | -11.63% | -32.01% | |||
Australia | 7.76% | 1.42% | -7.07% |
Security | 2019 | ||||
Discount rate | Growth rate | EBITDA | |||
Argentina | 14.95% | -5.31% | -24.17% | ||
Spain | 9.87% | -14.56% | -42.30% | ||
Colombia | 10.78% | 2.51% | -1.96% | ||
Peru | 17.78% | -72.43% | -40.62% | ||
Chile | 8.68% | 2.21% | -4.96% |
35
2019 CONSOLIDATED ANNUAL ACCOUNTS
Cash | 2018 | ||||
Discount rate | Growth rate | EBITDA | |||
Brazil | 17.59% | -2.32% | -16.75% | ||
Argentina | 356.85% | -100.00% | -60.20% | ||
Spain | 43.78% | -100.00% | -51.71% | ||
France | 5.70% | 0.56% | -10.07% | ||
Colombia | 12.75% | 0.23% | -3.01% | ||
Peru | 31.42% | -90.44% | -46.29% | ||
Chile | 10.97% | 0.70% | -10.00% | ||
Germany | 11.40% | -6.51% | -28.22% | ||
Australia | 7.95% | -0.17% | -17.82% | ||
Security | |||||
2018 | |||||
Discount rate | Growth rate | EBITDA | |||
Argentina | 29.55% | -0.71% | -17.14% | ||
Spain | 11.08% | -6.35% | -35.70% | ||
France | 6.85% | -0.90% | -21.20% | ||
Colombia | 12.50% | 2.65% | -1.70% | ||
Peru | 15.47% | -19.50% | -29.20% | ||
Chile | 13.66% | -2.90% | -26.20% |
Discount rates greater than the % indicated in the table would give rise to impairment losses, and growth rates or EBITDA lower than the % indicated in the table would also give rise to impairment losses.
Fair value as a calculation method:
With regard to the Alarms CGU, given the type of business, in which growth is based on the increase in costs for gaining clients and that contracts are for a defined term, Prosegur did not consider it reasonable to calculate the value in use based on permanence and opted to use fair value, which is common in this type of business.
For analysing the impairment of the Alarms CGU, its fair value was used as the basis for the recoverable value, which has been estimated according to the market multiples for the last transactions observed (level 3). The multiple used is 45 times the recurring monthly income per connection.
Prosegur does not consider it likely that the sensitivity assumptions used would occur, so it does not consider there to be any indicator of impairment problems.
36
2019 CONSOLIDATED ANNUAL ACCOUNTS
14.Other intangible assets
Details and movement of other main intangible assets are as follows:
Trademark and | Other | ||||
Thousands of Euros | Computer software | Client portfolio | intangible | Total | |
licenses | |||||
assets | |||||
Cost | |||||
Balance at 1 January, 2018 | 123,740 | 374,483 | 29,771 | 30,265 | 558,259 |
Translation differences | (1,639) | (24,740) | 613 | (822) | (26,588) |
Business combinations (Note 30) | 611 | 46,804 | 3,239 | 339 | 50,993 |
Adjustments Hyperinflation | 4,177 | 7,307 | 599 | - | 12,083 |
New Additions | 22,446 | 1,107 | - | 440 | 23,993 |
Write offs | (690) | - | - | (379) | (1,069) |
Balance at 31 December, 2018 | 148,645 | 404,961 | 34,222 | 29,843 | 617,671 |
Translation differences | (436) | (3,406) | 803 | (360) | (3,399) |
Business combinations (Note 30) | 894 | 86,301 | 5,014 | 5,294 | 97,503 |
Adjustments Hyperinflation | (1,512) | (86) | - | - | (1,598) |
Disposal of the scope of consolidation | (1,837) | (14,127) | (140) | - | (16,104) |
New Additions | 29,617 | 2,458 | - | 1,019 | 33,094 |
Write offs | (3,417) | (357) | (2) | - | (3,776) |
Saldo al 31 de diciembre de 2019 | 171,954 | 475,744 | 39,897 | 35,796 | 723,391 |
Amortisation and impairment | |||||
Balance at 1 January, 2018 | (81,074) | (182,314) | (23,182) | (26,727) | (313,297) |
Translation differences | 726 | 13,827 | 1,642 | 461 | 16,656 |
Adjustments Hyperinflation | (4,215) | (3,449) | (778) | - | (8,442) |
Write offs | 36 | - | - | 59 | 95 |
Amortisation for the year | (14,805) | (24,207) | (716) | (708) | (40,436) |
Saldo al 31 de diciembre de 2018 | (99,332) | (196,143) | (23,034) | (26,915) | (345,424) |
Translation differences | 282 | 1,914 | 309 | 195 | 2,700 |
Adjustments Hyperinflation | 380 | 14 | - | - | 394 |
Write offs | 809 | - | 387 | 7 | 1,203 |
Disposal of the scope of consolidation | 1,578 | 10,182 | 140 | - | 11,900 |
Amortisation for the year | (16,565) | (25,005) | (1,695) | (976) | (44,241) |
Saldo al 31 de diciembre de 2019 | (112,848) | (209,038) | (23,893) | (27,689) | (373,468) |
Carrying amount | |||||
Balance at 1 January, 2018 | 42,666 | 192,169 | 6,589 | 3,538 | 244,962 |
Balance at 31 December, 2018 | 49,313 | 208,818 | 11,188 | 2,928 | 272,247 |
Balance at 1 January, 2019 | 49,313 | 208,818 | 11,188 | 2,928 | 272,247 |
Balance at 31 December, 2019 | 59,106 | 266,706 | 16,004 | 8,107 | 349,923 |
37
2019 CONSOLIDATED ANNUAL ACCOUNTS
The carrying amount at 31 December 2019 of individually significant client portfolios and their remaining useful lives are as follows:
2019 | ||||||||||||||
Amortisation | ||||||||||||||
Segment | Country | Cost | and | Value in books | Remaining useful life | |||||||||
Portfolio of large clients Group Nordeste | impairment | |||||||||||||
Other | Brazil | 68,974 | (30,017) | 38,957 | 10 years and 2 months | |||||||||
Portfolio of large clients Norsergel Vigilância e Transportes de Valores Ltda | Other | Brazil | 24,342 | (15,491) | 8,851 | 6 years | ||||||||
Portfolio of large clients Preserve and Transpev | Cash | Brazil | 18,464 | (14,189) | 4,275 | 3 years and 5 months | ||||||||
Portfolio 5 Main Clients Chubb Security Services PTY LTD | Cash | Australia | 12,441 | (3,929) | 8,512 | 13 years | ||||||||
Portfolio Other Clients Chubb Security Services PTY LTD | Cash | Australia | 18,381 | (5,804) | 12,577 | 13 years | ||||||||
Portfolio business combination Prosegur Cash 2017 | Cash | Other | 2,866 | (478) | 2,388 | 16 years and 8 months | ||||||||
Portfolio Group Contesta | Cash | Spain | 9,812 | (1,590) | 8,222 | 11 years and 8 months | ||||||||
Portfolio Business combinations Cash Latin America 2018 | Cash | Other | 16,721 | (1,586) | 15,135 | Other | ||||||||
Portfolio Business combinations Cash ROW 2018 | Cash | Philipines | 6,327 | (449) | 5,878 | 12 years and 6 months | ||||||||
Portfolio Business combinations Cash Europe 2019 | Cash | Other | 9,882 | (55) | 9,827 | 14 years ad 11 months | ||||||||
Portfolio Business combinations Security ROW 2018 | Security | USA | 6,860 | (373) | 6,487 | 21 years and 9 months | ||||||||
Portfolio Business combinations Security ROW 2019 | Security | USA | 17,259 | (766) | 16,493 | Other | ||||||||
Portfolio Business combinations Cash Latin America 2019 | Cash | Other | 41,924 | (3,231) | 38,693 | Other | ||||||||
Portfolio Business combinations Alarms Latin America 2019 | Alarms | Colombia | 5,355 | (58) | 5,297 | 7 years and 11 months | ||||||||
Portfolio Business combinations Cibersecurity Latin America 2019 | Security | Brazil | 6,414 | (840) | 5,574 | 6 years and 1 months | ||||||||
Clients portfolio Transbank | Other | Brazil | 7,016 | (3,942) | 3,074 | 6 years and 2 months | ||||||||
Clients portfolio Sergipe Goup Nordeste | Other | Brazil | 6,679 | (5,231) | 1,448 | 2 years and 2 months | ||||||||
Portfolio of large clients Fiel | Other | Brazil | 6,442 | (3,964) | 2,478 | 5 years | ||||||||
Portfolio Other Clients Bahia Group Nordeste | Other | Brazil | 5,220 | (3,407) | 1,813 | 4 years and 2 months | ||||||||
291,379 | (95,400) | 195,979 |
The carrying amount at 31 December 2018 of individually significant client portfolios and their remaining useful lives are as follows:
2018 | ||||||||||||||
Amortisation | ||||||||||||||
Segment | Country | Cost | and | Value in books | Remaining useful life | |||||||||
Portfolio of large clients Group Nordeste | impairment | |||||||||||||
Other | Brazil | 70,108 | (26,615) | 43,493 | 11 years and 2 months | |||||||||
Portfolio of large clients Norsergel Vigilância e Transportes de Valores Ltda | Other | Brazil | 24,743 | (14,246) | 10,497 | 7 years | ||||||||
Portfolio of large clients Preserve and Transpev | Cash | Brazil | 18,768 | (13,205) | 5,563 | 4 years and 5 months | ||||||||
Portfolio 5 Main Clients Chubb Security Services PTY LTD | Cash | Australia | 12,273 | (3,230) | 9,043 | 14 years | ||||||||
Portfolio Other Clients Chubb Security Services PTY LTD | Cash | Australia | 18,131 | (4,771) | 13,360 | 14 years | ||||||||
Portfolio business combination Prosegur Cash 2017 | Cash | Other | 3,238 | (270) | 2,968 | 17 years and 8 months | ||||||||
Portfolio Group Contesta | Cash | Spain | 9,812 | (889) | 8,923 | 12 years and 8 months | ||||||||
Portfolio Business combinations Cash Latin America 2018 | Cash | Other | 16,996 | (589) | 16,407 | Other | ||||||||
Portfolio Business combinations Cash ROW 2018 | Cash | Philipines | 5,925 | (207) | 5,718 | 13 years and 6 months | ||||||||
Portfolio Business combinations Security ROW 2018 | Security | USA | 6,728 | (73) | 6,655 | 22 years and 9 months | ||||||||
Clients portfolio Transbank | Other | Brazil | 7,162 | (3,496) | 3,666 | 7 years and 2 months | ||||||||
Clients portfolio Sergipe Goup Nordeste | Other | Brazil | 6,789 | (4,639) | 2,150 | 3 years and 2 months | ||||||||
Portfolio of large clients Fiel | Other | Brazil | 6,548 | (3,526) | 3,022 | 6 years | ||||||||
Portfolio Other Clients Bahia Group Nordeste | Other | Brazil | 5,305 | (3,021) | 2,284 | 5 years and 2 months | ||||||||
212,526 | (78,777) | 133,749 |
The cost at 31 December 2019 and 2018 for each individually significant client portfolio differs due to exchange differences.
38
2019 CONSOLIDATED ANNUAL ACCOUNTS
During 2019, additions to intangible assets are recognised due to the allocation of fair value to the purchase prices of the following business combinations (Note 30):
Business combinations Cash Latin America Business combinations Cash Europe Business combinations Cash ROW Business combinations Alarms Latin America Business combinations Cibersecurity Europe
Business combinations Cibersecurity and Security ROW Business combinations Cibersecurity Latin America
Thousands of Euros
Computer | Customer | Trademarks | Other |
intangible | |||
software | portfolios | and licences | |
assets | |||
48 | 41,871 | - | 5,294 |
477 | 9,882 | - | - |
- | 512 | 28 | - |
22 | 5,355 | - | - |
- | 791 | 259 | - |
77 | 20,951 | 3,674 | - |
270 | 6,939 | 1,053 | - |
894 | 86,301 | 5,014 | 5,294 |
During 2018, additions to intangible assets were recognised due to the allocation of fair value to the purchase prices of the following business combinations:
Business combinations Cash Latin America Business combinations Cash Europe Business combinations Cash ROW Business combinations Security ROW Business combinations Alarms Latin America
Thousands of Euros
Computer | Customer | Trademarks | Other |
intangible | |||
software | portfolios | and licences | |
assets | |||
28 | 28,347 | 930 | 178 |
429 | 3,311 | - | 161 |
105 | 5,717 | 1,460 | - |
25 | 9,429 | 849 | - |
24 | - | - | - |
611 | 46,804 | 3,239 | 339 |
No other intangible assets are subject to restrictions on title or pledged as security for particular transactions.
The intangible assets reported have finite useful lives and are amortised at rates of between 3.33% and 50% depending on the estimated useful life. The useful life of the client portfolio and trademarks are described in Notes 30 and 35.8. The trademark arising from a combination of Security businesses in 2019 is the only intangible asset with indefinite useful life, and amounts to EUR 2,147 thousand. This intangible asset has an indefinite useful life since there is no foreseeable limit to the period during which the asset is expected to generate net cash flows.
The factors analysed in determining the indefinite life include:
- It is expected to use the asset indefinitely and there are no plans to change the trademark
- Regular disbursements are being made to maintain the trademark and there is no contractual expiration
- The life of this asset does not depend on the useful lives of other assets held by the entity
On the other hand, this trademark is tested for impairment at the close of each year.
The intangible assets are tested for impairment as described in Note 35.8. No impairment losses have been recognised or reversed in 2019 and 2018.
39
2019 CONSOLIDATED ANNUAL ACCOUNTS
15.Non-current Assets Held for Sale and Property Investments
15.1. Non-current Assets Held for Sale in the year
The breakdown of non-current assets held for sale in 2019 and 2018 is as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Balance at 1 January | 642 | 50,963 | |
Additions | - | 642 | |
Write offs | (642) | - | |
Transfers from investment properties | - | (50,963) | |
Balance at 31 December | - | 642 |
On 8 June 2018 the Almo Group in Central America was purchased. By means of this purchase a series of assets were acquired relative to the security business under the Company Alarmas de Guatemala, which were sold in the first quarter of 2019.
In 2018 the property investments that were classified under the heading "Non-current assets held for sale" were classified under the heading of "Property Investments" as it is not considered highly likely that they will be sold in the short term.
40
2019 CONSOLIDATED ANNUAL ACCOUNTS
15.2. Property investments
Details of movement in property investments for 2019 are as follows:
Thousands of | |
Euros | |
Cost | |
Balance at 1 January 2018 | - |
Adjustment for Hyperinflation | (3,908) |
Additions | 58 |
Transfer of non-current assets held for sale | 52,623 |
Balance at 31 December 2018 | 48,773 |
Adjustment for Hyperinflation | (665) |
Additions | - |
Transfers | 426 |
Balance at 31 December 2019 | 48,534 |
Amortisation and impairment | |
Balance at 1 January 2018 | - |
Adjustment for Hyperinflation | 16 |
Amortisation for the year | (1,660) |
Transfer of non-current assets held for sale | (1,821) |
Balance at 31 December 2018 | (3,465) |
Adjustment for Hyperinflation | 27 |
Amortisation for the year | (899) |
Transfer of non-current assets held for sale | (87) |
Balance at 31 December 2019 | (4,424) |
Carrying amount | |
Balance at 1 January, 2018 | - |
Balance at 31 December, 2018 | 45,308 |
Balance at 1 January, 2019 | 45,308 |
Balance at 31 December, 2019 | 44,110 |
In 2018 the property investments that were classified under the heading "Non-current assets held for sale" were classified under the heading of "Property Investments" as it is not considered highly likely that they will be sold in the short term, having amortised the amount accumulated since when they were classified as held for sale in 2016.
At 31 December 2019, after an appraisal was made by an independent expert, the fair value of the properties, was EUR 86,602 thousand, with the breakdown of those investments as follows:
Thousands of Euros | ||
Buildings | Fair value | |
Bouchard 551 | 46,233 |
Torre Intercontinental, Moreno 845/847/87 Alsina 880 | 40,369 |
and Tacuari 242/292 | |
86,602 |
41
2019 CONSOLIDATED ANNUAL ACCOUNTS
The income and expenses generated in 2019 from property investments amounted to EUR 5,166 thousand (EUR 5,346 thousand in 2018) and EUR 1,123 thousand (EUR 2,046 thousand in 2018), respectively.
Future minimum receipts under property investment leases at the close of 2019 and 2018 are contained in Note 6.
16.Investments accounted for using the equity method
The main Joint Arrangements of Prosegur (Appendix II) mainly correspond to companies operating in India engaged in the Cash business line. These Joint Arrangements are structured as separate vehicles and Prosegur has a share of their net assets. Consequently, Prosegur has classified these shareholdings as Joint Ventures. In the Arrangements with India governing the Joint Ventures, Prosegur and the other investor company have agreed, if necessary, to make additional contributions in proportion to their shareholdings in order to offset any losses.
The breakdown of the movements of the investments in joint ventures accounted for under the equity method is as follows:
Thousands of Euros | 2019 | 2018 | |
Stake in joint business | 9,452 | 29,433 | |
9,452 | 29,433 | ||
Thousands of Euros | |||
2019 | 2018 | ||
Balance at 1 January | 29,433 | 29,837 | |
Acquisitions | 1,179 | 1,838 | |
New additions (capitalisations) | - | 1,140 | |
Share in profits/(losses) | (1,164) | (1,119) | |
Sales | (19,794) | - | |
Transfers | 68 | 249 | |
Translation differences | (270) | (2,512) | |
Balance at 31 December | 9,452 | 29,433 |
On 4 June 2019, Prosegur exercised the sales option on the 33.33% interest in SBV as, at the time of exercising it, the entire holding of Prosegur did not exceed 50% of the capital. The shares taken up by Prosegur were acquired by the other shareholders of the company. The revenue from the sale was recorded under the heading of other income (Note 6).
Acquisitions in 2019 correspond mainly to the subscription by Prosegur of part of the shares representing the share capital of the Spanish company Dinero Gelt, S.L.
Acquisitions for the year 2018 correspond to Prosegur subscribing shares representing 9.45% of the share capital of the Australian company Scout Security Limited, which operates in the alarms sector.
During the month of February 2018, the joint venture in India for alarms operations, SIS Prosegur Alarms Monitoring and Response Services Pte Ltd, was capitalised with the sum of EUR 1,140 thousand.
42
2019 CONSOLIDATED ANNUAL ACCOUNTS
On 23 April 2019, Prosegur sold its entire interest in the joint venture for the alarm business in India, SIS Prosegur Alarms Monitoring and Response Services Pte Ltd, for the total amount of 204,432 thousand Indian rupees (equivalent at the transaction date to EUR 2,505 thousand). The value of the holding at the time of being sold was 73,448 thousand rupees (equivalent to EUR 900 thousand at the transaction date). The sale involved revenue for Prosegur of EUR 1,605 thousand (Note 6).
The breakdown of joint ventures accounted for under the equity method is as follows:
Thousands of Euros | 2019 | 2018 | |
Rosegur Fire, SRL | 3 | 3 | |
Rosegur Holding Corporation SL | 27 | 47 | |
Dinero Gelt S. L. | 1,148 | - | |
Scout Security Limited | 1,825 | 1,838 | |
SIS Cash Services Private Limited | 2,049 | 4,237 | |
SIS Prosegur Alarmas Monitoring and | - | 852 | |
Response Services Private Limited | |||
SIS Prosegur Holdings Private Limited | 4,313 | 3,330 | |
SBV Services Proprietary Limited | - | 18,809 | |
Others | 87 | 317 | |
Balance at 31 December | 9,452 | 29,433 |
The breakdown of the main amounts of investments accounted for under the equity method is included in Appendix III.
Prosegur has no significant contingent liability commitments in any of the joint ventures accounted for under the equity method.
17.Temporary Joint Ventures
Prosegur participates in joint operations which take the form of Joint Venture Companies (JVs), in which the companies lack any legal status of their own and in which a system of cooperation between the companies is established for an agreed period, either definite or indefinite, in order to implement or execute a job or service (Note 35.2).
They are usually used to combine the characteristics and rights of JVs in pursuit of a common goal with the aim of achieving the best possible technical value. In general, JVs are considered to be independent companies with a limited scope of action given that, despite the fact that they may make undertakings on their own behalf such undertakings tend to be carried out through the partners in a manner proportionate to their interest in the JV. As a result, Prosegur considers JVs to be a joint operation.
43
2019 CONSOLIDATED ANNUAL ACCOUNTS
The amounts presented in the table below represent Prosegur's share of the temporary joint ventures' assets, liabilities, sales and profit and loss for the year. These amounts have been included in the statement of financial position and the income statements for the financial years ending 31 December 2019 and 2018.
Thousands of Euros | ||||
2019 | 2018 | |||
Assets: | ||||
Non-current assets | 145 | 155 | ||
Current assets | 14,035 | 14,986 | ||
14,180 | 15,141 | |||
Liabilities: | ||||
Current liabilities | 16,061 | 19,560 | ||
16,061 | 19,560 | |||
Profit and loss: | ||||
Income | 65,626 | 89,702 | ||
Expenses | (63,494) | (87,642) | ||
Post-tax profit | 2,132 | 2,060 | ||
The breakdown of temporary joint ventures in which Prosegur holds a stake is contained in Appendix II.
Prosegur has no contingent liabilities in relation to its participation in temporary joint ventures.
18.Non-current financial assets
Details of the statement of financial position are as follows:
Thousands of Euros | |||||
2019 | 2018 | ||||
Equity instrument | 14,526 | 9,954 | |||
Deposits and guarantees | 3,285 | 6,182 | |||
Other non-current financial assets | 3,193 | 3,115 | |||
21,004 | 19,251 |
Equity instrument
The breakdown of equity instruments measured at fair value with changes in other comprehensive income is as follows:
Thousands of Euros | |||||||||
2019 | 2018 | ||||||||
Octopus System Israel Ltd | 2,670 | 2,608 | |||||||
Capital Concil Inteligencia CSA | 2,910 | 2,827 | |||||||
Reflekt GmbH | 1,450 | 1,250 | |||||||
Walmeric Soluciones S.L. | 2,000 | - | |||||||
Situm Technologies | 700 | - | |||||||
Other investments and other | 1,223 | 677 | |||||||
Balance at 31 December | 10,953 | 7,362 | |||||||
44
2019 CONSOLIDATED ANNUAL ACCOUNTS
The main investments correspond to the start-ups Octopus System Israel Ltd, Capital Concil Inteligencia CSA, Reflekt GmbH Germany and Walmeric Soluciones, S.L.
Octopus System Israel Ltd is an Israeli start-up which has developed Command and Control software which manages the alerts and action procedures of any workforce on a single mobile platform. The example of its use which is closest to the business activities of Prosegur Seguridad lies in managing the sensor alerts (both physical and digital) of a complete security system in a large plant and also the action procedures for specific situations or the communications channels of geolocated human resources in the field. Octopus System Israel Ltd is a clear example of integrating the physical and digital worlds into the security environment.
Capital Concil Inteligencia CSA is a Brazilian start-up within the Fintech framework, which offers a solution for conciliating cash management at retail points of sale. Capital Concil Inteligencia CSA has developed software capable of collecting, processing, organizing and reconciling information on the payment transactions of all of the agents involved in processing a payment transaction (issuing bank, receivers, switches, buyers and national banking systems) and then produce a receipts and payments flow forecast at the daily cash level. Its principal connection with the commercial strategy of Prosegur resides in the possibility of offering a complete service which integrates the cash payment and safe deposit service solutions into the cash flows of each point of sale. Additionally, in the medium term, an opportunity opens up for exploiting consumption pattern data (Big Data).
Re'Flekt Gmbh emerged in Germany with the aim of offering an Augmented Reality (AR) solution for industrial environments. Its two main products offer superposition of the plans of industrial plants of any type, with their operational and maintenance procedures, over the displays of viewing hardware (Mobile phone, Tablets, Smart glasses, etc.). The value it provides for its clients, which include major manufacturers in the automotive sector or in the large-scale industrial sector, lies in the fact that it produces efficiencies both in operational and maintenance procedures of any type of plant or assembly line and training for technicians, thus reducing action deadlines or, where appropriate, training. This technology can be applied to all Prosegur businesses.
Walmeric Soluciones, S.L. is a Spanish start-up that has developed a set of technologies to increase "Lead Management" efficiency. The Company has developed a series of algorithms to automatically track potential clients, estimate the probability of conversion and assign the sale to the corresponding channel. It offers a cross-platform connection that integrates social networks, CRMs, call centres and Google Adwords. The main connection with Prosegur is with our AVOS equipment, where its technology is put to work to improve the conversion of our clients.
Situm Technologies came about in Spain to improve the cybersecurity of web applications and APIs. Its IAST ("Interactive Application Security Testing") and RASP ("Runtime Application Self Protection") technologies detect vulnerabilities continuously in the source code of the applications. Situm has the distinctive ability to offer protection not just from external attacks, but from internal intrusion attempts as well, which represent more than 50% of cybernetic attacks. This technology is applicable to the general protection of Prosegur clients, and specifically as a cutting-edge technology for our cybersecurity business.
In 2019 these investments had an impact on other comprehensive income of EUR 87 thousand.
All other equity instruments were appraised at fair value with changes in the consolidated income statement, with an impact in 2019 amounting to EUR 853 thousand (Note 7).
45
2019 CONSOLIDATED ANNUAL ACCOUNTS
Other non-current financial assets
Details of other non-current financial assets movement are as follows:
Thousands of Euros | |||||||||
Balance at 1 January | 2019 | 2018 | |||||||
3,115 | 3,308 | ||||||||
Additions | - | 233 | |||||||
Translation differences | 78 | (426) | |||||||
Balance at 31 December | 3,193 | 3,115 | |||||||
At 31 December 2019, the other non-current assets item includes fixed term deposits, most of which are due in 2022 and a loan granted by Prosegur to one of its subsidiaries in India, SIS Cash Services Private Ltd, which it consolidates using the equity method for the sum of EUR 2,450 thousand (2018: EUR 2,448 thousand).
19.Inventories
Details of inventories are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Work in progress | 7,883 | 11,614 | |
Goods for resale, fuel and other | 56,757 | 62,038 | |
Operating materials | 1,851 | 2,358 | |
Uniforms | 6,732 | 5,186 | |
Impairment of inventories | (8,377) | (5,109) | |
64,846 | 76,087 | ||
No inventories have been pledged as collateral to secure loans.
The changes in impairment losses are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Balance at 1 January | (5,109) | (5,459) | |
Additions | (4,135) | (1,768) | |
Applications and other | 1,036 | 1,828 | |
Adjustments Hyperinflation | (327) | 243 | |
Translation differences | 158 | 47 | |
Balance at 31 December | (8,377) | (5,109) |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
20.Clients and other receivables
Details of cash and cash equivalents are as follows:
Thousands of Euros | ||||||
2019 | 2018 | |||||
Customer receivables for sales and services | 785,437 | 730,768 | ||||
Less: impairment losses on trade receivables | (57,004) | (77,082) | ||||
Clients - net | 728,433 | 653,686 | ||||
Public administrations | 70,426 | 72,855 | ||||
Advances to employees | 8,275 | 6,711 | ||||
Legal deposits | 25,580 | 20,875 | ||||
Prepayments | 30,032 | 21,993 | ||||
Other receivables | 52,243 | 44,770 | ||||
Current | 914,989 | 820,890 |
Credit risk from trade receivables is not concentrated because Prosegur works with a large number of clients distributed among the different countries in which it operates (Note 32.1).
Details of past-due trade receivables by maturity tranches, net of the corresponding impairment, are as follows:
Thousands of Euros | ||||
2019 | 2018 | |||
0 to 3 months | 269,252 | 243,205 | ||
3 to 6 months | 22,396 | 20,238 | ||
Over 6 months | 53,989 | 26,840 | ||
345,637 | 290,283 |
The carrying amount of past-due trade receivables is close to fair value, given the non-significant effect of the discount.
There have been no changes to the client structure or to the circumstances that make the anticipated loss differ from calculations based on historical data.
There are no reasonable doubts as to the recoverability of past-due trade receivables for which no impairment has been recognised.
Changes in the impairment of receivables are as follows:
Thousands of Euros | |||
Balance at 31 December | 2019 | 2018 | |
(77,082) | (66,618) | ||
Transition adjustment (Note 35.1) | - | (13,234) | |
Balance at 1 January | (77,082) | (79,852) | |
Provision for impairment (Note 6) | (2,770) | (7,559) | |
Applications and reversions | 18,148 | 3,302 | |
Hyperinflation adjustment | 2,036 | 4,175 | |
Translation differences | 2,664 | 2,852 | |
Balance at 31 December | (57,004) | (77,082) |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
As a general rule, impaired receivables are written off when Prosegur does not expect to recover any further amount.
No impairment losses have been incurred on the remaining trade receivables.
The maximum exposure to credit risk at the reporting date is the fair value of the receivables in each of the above-mentioned categories. The Prosegur Group has taken out a credit facility with the aim of ensuring and minimising its insolvency risk. This insurance applies to clients in Spain and provides risk cover for new operations and/or expansions of services in relation to existing operations.
The procedures followed by Prosegur in relation to credit risk and currency risk on trade receivables are described in Note 32.1.
Legal deposits comprises mainly court bonds associated with employment-related litigation in Brazil (Note 23).
Under the heading of other receivables, it mainly recognises advances from suppliers and creditors for the amount of EUR 14,254 thousand (2018: EUR 14,218 thousand) and other debtor balances for the amount of EUR 25,303 thousand (2018: EUR 16,557 thousand).
The Group considers that the rest of client balances other than for the rendering of services does not pose a credit risk because these are Public Administrations or Court Deposits that are cancelled against the provision for those risks or their retrieval.
21.Other financial assets and Cash and Cash equivalents
Details of other financial assets and changes in Other financial assets during the year are as follows:
Thousands of Euros | ||||
2019 | 2018 | |||
Balance at 1 January | 489,268 | 490,298 | ||
Additions | - | 290,000 | ||
Write offs | (170,000) | (290,000) | ||
Other changes | 353 | (1,030) | ||
Balance at 31 December | 319,621 | 489,268 | ||
The composition and the issue of financial assets in 2019 are as follows:
Thousands of Euros
Description | Date of issue | Principal | Balance at |
31/12/2019 | |||
Fixed-term deposit | 07/04/2017 | 15,000 | 14,810 |
Fixed-term deposit | 19/04/2017 | 15,000 | 14,811 |
Fixed-term deposit | 22/06/2017 | 150,000 | 150,000 |
Fixed-term deposit | 20/03/2018 | 140,000 | 140,000 |
320,000 | 319,621 | ||
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2019 CONSOLIDATED ANNUAL ACCOUNTS
Details of Cash and Cash equivalents are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Cash in hand and at banks | 454,473 | 468,968 | |
Current bank deposits | 76,204 | 89,387 | |
530,677 | 558,355 |
The effective interest rate on current bank deposits is 1.44% (1.52% in 2018) and the average term of deposits held is 150 days (210 days in 2018).
22.Net equity
Details of and changes to equity during the year are shown in the consolidated statement of changes in equity.
22.1. Share capital, share premium and own shares
Details of share capital, share premium and own shares, and changes therein, are as follows:
Thousands of Euros
Number of | ||||
shares | ||||
(thousands) | ||||
Balance at 1 January 2018 | 617,125 | |||
Other awards | - | |||
Balance at 31 December 2018 | 617,125 | |||
Buy shares | - | |||
Own stock amortization (capital reduction | (18,446) | |||
Other awards | - | |||
Balance at 31 December 2019 | 598,679 | |||
Share | Share | Treasury | Total |
capital | premium | Stock | |
37,027 | 25,472 | (53,079) | 9,420 |
- | - | 302 | 302 |
37,027 | 25,472 | (52,777) | 9,722 |
- | - | (107,937) | (107,937) |
(1,106) | - | 52,438 | 51,332 |
- | - | 349 | 349 |
35,921 | 25,472 | (107,927) | (46,534) |
Share capital
At 31 December 2019, the share capital of Prosegur Compañía de Seguridad, S.A. totals EUR 35,921 thousand (EUR 37,037 thousand in 2018) and is represented by 598,679,362 shares (617,124,640 shares in 2018) with a par value of EUR 0.06 each, fully subscribed and paid. These shares are listed in their entirety on the Madrid and Barcelona stock exchanges and traded via the Spanish Stock- Exchange Interconnection System (electronic trading system) (SIBE).
On 26 June 2019 the share capital was reduced following approval by the Shareholders General Meeting held on 4 June 2019.
The Company's share capital was reduced by EUR 1,106,716.68, through the cancellation of 18,445,278 own shares.
Consequently, article 5 of the Company's Articles of Association was modified and after the reduction, the share capital stood at EUR 35,920,761.72, divided into 598,679,362 ordinary shares of the same class and series each with a par value of EUR 0.06, fully subscribed and paid up.
49
2019 CONSOLIDATED ANNUAL ACCOUNTS
The capital reduction was made against free reserves, by provisioning an amortised capital reserve with an amount equivalent to the par value of the cancelled shares (that is EUR 1,106,716.68).
Details of the Company's shareholders are as follows:
Number of shares | |||||
Shareholders | 2019 | 2018 | |||
Ms Helena Revoredo Delvecchio (1) | 309,240,330 | 309,240,330 | |||
FMR LLC (2) | 37,089,806 | 30,970,374 | |||
Ms Mirta Giesso Cazenave (3) | 34,778,187 | 34,778,187 | |||
Invesco Limited (4) | 21,318,944 | - | |||
Oppenheimer Acquisition Corporation (4) | - | 34,957,437 | |||
Others | 196,252,095 | 207,178,312 | |||
598,679,362 | 617,124,640 |
- Through Gubel, S.L. and Prorevosa, S.L.U.
- Investment through various managed funds.
- Both directly and through AS Inversiones, S.L.
- Investment through various managed funds.
In May 2019 Invesco Ltd. acquired and subsequently merged with Oppenheimer Funds Inc.
At 31 December 2019 and 2018, the members of the Board of Directors, either directly or through companies over which they exercise control, hold 310,131,060 shares (310,125,760 shares in 2018), representing 51.80% of the Company's share capital (50.25% in 2018).
Share premium
The share premium amounts to EUR 25,472 thousand, is freely distributable and has not changed in 2019 or 2018.
Own shares
Details of changes in own shares during the year are as follows:
Number of | Thousands of | |||
Balance at 1 January, 2018 | shares | Euros | ||
18,627,835 | 53,079 | |||
Other awards | (85,829) | (302) | ||
Balance at 31 December, 2018 | 18,542,006 | 52,777 | ||
Buy shares | 30,083,417 | 107,937 | ||
Own stock amortization (capital reduction) | (18,445,278) | (52,438) | ||
Other awards | (99,185) | (349) | ||
Balance at 31 December, 2019 | 30,080,960 | 107,927 |
At the general meeting held on 27 June 2011, the shareholders authorised to the Board of Directors the acquisition of own shares up to the legal maximum. All or part of these own shares may be granted or transferred to the directors or employees of Prosegur, either directly or as a result of a share option being exercised within remuneration schemes linked to the quoted share price.
On 4 June 2019 the Board of Directors of Prosegur decided to implement an own share buyback programme.
50
2019 CONSOLIDATED ANNUAL ACCOUNTS
The Programme puts into effect under the provisions of Regulation (EU) no. 596/2014 on market abuse and the Commission Delegated Regulation 2016/1052, making use of the authorisation granted by the Shareholders General Meeting held on 27 April 2016 for the purchase of own shares, for the purpose of reducing the share capital of Prosegur Compañía de Seguridad, S.A. in the terms agreed by the Shareholders General Meeting held on 4 June 2019.
The Programme will apply to a maximum of 59,850,000 shares, representing approximately 10% of Prosegur's share capital (after the capital reduction agreed upon).
The Programme will have the following features:
- Maximum amount allocated to the Programme: EUR 300,000 thousand.
- Maximum number of shares that can be acquired: up to 59,850,000 shares representing approximately 10% of the Company's share capital.
-
Maximum price per share: the Company will not buy shares at a price higher than the highest
of the following: (i) the price of the last independent trade; or (ii) the highest current independent bid on the trading venues where the purchase is carried out. - Maximum volume per trading session: in so far as volume is concerned, Prosegur must not purchase more than 25% of the average daily volume of the shares in any one day on the regulated market on which the purchase is carried out.
- Duration: the Programme will commence on 5 June 2019 and finish no later than 5 June 2022. Notwithstanding the above, Prosegur reserves the right to conclude the Programme, if prior to the indicated maximum date of the term, it has acquired the maximum number of shares authorised by the Board of Directors, if it has reached the maximum monetary amount of the Programme or if any other circumstances arise that call for it.
On 26 June 2019 a capital decrease took place by means of the redemption of 18,445,278 of its own shares.
No purchase or sale transactions took place in 2018 with treasury stock.
The heading "Other awards" reflects the awarding of shares to employees at market value.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
22.2. Cumulative translation differences
Details of provisions and movements of this reserve are as follows:
Thousands of Euros | ||||||
2019 | 2018 | |||||
Balance at 1 January | (174,397) | (537,720) | ||||
Translation differences of financial statements of foreign operations | (13,568) | (58,555) | ||||
Transfer translation difference to reserves | - | 421,878 | ||||
Balance at 31 December | (187,965) | (174,397) | ||||
The change in the balance of the cumulative translation differences at 31 December 2019 as compared to 31 December 2018 results mainly from the devaluation of the Brazilian real.
As a result of applying IAS 29 for Argentina (Note 35.28), the Company has adopted the accounting policy of entirely recognising changes in equity, associated with currency effects, under the heading of other reserves in its entirety. IAS 29 does not consider that these changes lead to profit and loss in the income statement, but rather treats them as adjustments to equity balances. The translation differences at 31 December 2017 associated with Argentina are shown from 1 January 2018 entirely in the item of "Retained earnings and other reserves" for a negative figure of EUR 421,878 thousand (Note 22.3).
22.3. Retained earnings and other reserves
The structure and changes of retained earnings and other reserves are as follows:
Thousands of Euros | ||||||
Legal reserve | Capitalisation | Other | Other retained | Total | ||
reserve | reserves | earnings | ||||
Balance at 31 Decembre, 2017 | 7,406 | - | 165 | 1,589,812 | 1,597,383 | |
Transition adjustments (Note 35.1) | - | - | - | 6,019 | 6,019 | |
IAS 29 First adoption (Note 35.28) | - | - | - | 46,428 | 46,428 | |
Traslation differences reclassified to reserves (Note 35) | - | - | - | (421,878) | (421,878) | |
Balance at 1 January, 2018 | 7,406 | - | 165 | 1,220,381 | 1,227,952 | |
Total comprehensive income for the year | - | - | - | 131,248 | 131,248 | |
Share-based incentives exercised by employees | - | - | - | 183 | 183 | |
Distribution of ordinary interim dividend | - | - | - | (79,054) | (79,054) | |
Hyperinflation adjustments | - | - | - | (119,196) | (119,196) | |
Other changes | - | 10,000 | - | (8,731) | 1,269 | |
Balance at 31 December, 2018 | 7,406 | 10,000 | 165 | 1,144,831 | 1,162,402 | |
Transition adjustments (Note 35.1) | - | - | - | (60,133) | (60,133) | |
Balance at 1 January, 2019 | 7,406 | 10,000 | 165 | 1,084,698 | 1,102,269 | |
Total comprehensive income for the year | - | - | - | 108,360 | 108,360 | |
Share-based incentives exercised by employees | - | - | - | 102 | 102 | |
Capital reduction | - | - | - | (51,332) | (51,332) | |
Distribution of ordinary interim dividend | - | - | - | (79,026) | (79,026) | |
Hyperinflation adjustments | - | - | - | (20,684) | (20,684) | |
Other changes | - | 45,000 | - | (44,080) | 920 | |
Balance at 31 December, 2019 | 7,406 | 55,000 | 165 | 998,038 | 1,060,609 |
Other restricted reserves at 31 December 2019 and 2018 correspond to the reserve for the update of National Budget Act 83 (EUR 104 thousand) and reserves for capital adjustment to Euros (EUR 61 thousand).
The legal reserve, which amounts to EUR 7,406 thousand, was endowed in compliance with article 274 of the Revised Text of the Spanish Companies Act, which requires that companies transfer 10% of profits for the year to a legal reserve until this reserve reaches an amount equal to 20% of share
52
2019 CONSOLIDATED ANNUAL ACCOUNTS
capital. The legal reserve has been fully endowed. The legal reserve is not distributable and if it is used to offset losses, in the event that no other reserves are available, it must be replenished with future profits.
On 04 June 2019, the General Shareholders Meeting approved distribution of profit for the amount of EUR 45,000 thousand to a capitalisation reserve.
On 27 April 2018, the General Shareholders Meeting approved distribution of profit for the amount of EUR 10,000 thousand to a capitalisation reserve.
The impacts from the application of IAS 29 and IAS 21.42 on equity were recorded in 2018 under "Retained earnings and other reserves" for a negative net amount of EUR 72,768 thousand. The first application of IAS 29 had a positive impact of EUR 46,428 thousand, with a negative impact due to currency depreciation of EUR 22,381 thousand. The rest of the negative impact associated with IAS
21.42 amounted to EUR 96,815 thousand. An increase of EUR 43,782 thousand was recorded in 2019 associated with inflation and a decrease of EUR 64,466 thousand associated with translation differences.
The proposed distribution of the parent's profit for 2019, determined in accordance with prevailing legislation and standards for the preparation of individual annual accounts, in terms of the interim dividend agreed by the Company's Board of Directors and which will be submitted to the General Shareholders' Meeting for approval, is shown in the following table:
Thousands of Euros | |
2019 | |
Basis of allocation | |
Profit for the year | 81,874 |
81,874 | |
Allocation | |
Voluntary reserves | 2,848 |
Dividends | 79,026 |
81,874 |
22.4. Non-controlling interests and other changes
Prosegur Cash, S.A. is a subsidiary of the Spanish company Prosegur Compañía de Seguridad, S.A., which currently holds 51% of the shares, and indirectly controls another 21.5% through its wholly- owned subsidiary, Prosegur Assets Management, S.L.U. The remaining 27.5% of the shares are in the hands of non-controlling interests as a result of its first listing on the stock market on 17 March 2017 Prosegur Cash shares started trading at 2 Euros per share on the Madrid and Barcelona Stock Exchanges and they are traded through the Spanish Stock Markets Interconnection System (Continuous Market) (SIBE).
On 8 May 2017, Prosegur Cash, S.A. signed a liquidity agreement in accordance with the regulations in force at the time. Prior to signing this agreement, the Company did not have treasury stock. The operating process prior to the liquidity contract to set up treasury stock ended on 8 June 2017, having attained treasury stock of 1,000,000 shares. The liquidity contract came into operation on 9 June 2017 and ended on 10 July, when the liquidity agreement was terminated. On 7 July 2017, the company signed a new liquidity agreement, entering into force on 11 July 2017, in accordance with the new legislation, commencing operations again to boost the contractual liquidity.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
At the close of 2019, the treasury stock held by Prosegur Cash, S.A. is composed of 1,119,862 shares (1,057,307 shares in 2018), of which 696,866 are linked to the aforementioned liquidity contract (602,496 in 2018).
Below is the consolidated financial information for the Prosegur Cash Group before intragroup eliminations, of which 27.5% corresponds to non-controlling interests:
(In thousands of Euros) | |||
2019 | 2018 | ||
Non-current assets | 1,089,241 | 937,314 | |
Current assets | 845,074 | 768,952 | |
Total assets | 1,934,315 | 1,706,266 | |
Total equity | 243,633 | 237,991 | |
Non-current liabilities | 902,843 | 865,918 | |
Current liabilities | 787,839 | 602,357 | |
Total liabilities | 1,690,682 | 1,468,275 | |
Revenue | 1,798,654 | 1,731,605 | |
Operating profit/(loss) (EBIT) | 304,757 | 268,008 | |
Profit before tax | 259,606 | 264,109 | |
Post-tax profit from continuing operations | 169,016 | 174,228 | |
Post-tax profit from discontinued operations | - | (11) | |
Consolidated profit/(loss) for the period | 169,016 | 174,217 | |
Cash flows from operating activities | 313,039 | 225,687 | |
Cash flows from investing activities | (96,316) | (125,550) | |
Cash flows from financing activities | (152,884) | (97,039) | |
Net increase/(decrease) in cash and cash equivalents | 63,839 | 3,098 |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
23.Provisions
Details of provisions and changes are as follows:
Employee | ||||||
Thousands of Euros | Labour-related | Legal risks | Restructuring | benefits | Other risks | Total |
risks | expense (Note | |||||
Balance at 1 January, 2019 | 5.2) | |||||
66,211 | 16,101 | 577 | 14,918 | 103,744 | 201,551 | |
Provisions charged to income statement | 19,333 | 6,081 | 1,206 | 35,958 | 62,578 | |
Reversals credited to income statement | (4,142) | (2,239) | - | - | (21,961) | (28,342) |
Applications | (24,686) | (3,626) | (577) | (323) | (2,472) | (31,684) |
Financial effect of the discount | 3,008 | 640 | - | - | 5,163 | 8,811 |
Transfers | - | - | - | - | 3,376 | 3,376 |
Disposal of the scope of consolidation | (514) | - | - | (1,844) | (216) | (2,574) |
Business Combinations | - | - | - | - | 11,679 | 11,679 |
Reversion charged to Equity | - | - | - | 7,572 | - | 7,572 |
Translation differences | (858) | (253) | - | (785) | (705) | (2,601) |
Adjustments Hyperinflation | (3,384) | (239) | - | - | - | (3,623) |
Balance at 31 December, 2019 | 54,968 | 16,465 | - | 20,744 | 134,566 | 226,743 |
Non-current 2019 | 54,968 | 16,465 | - | 20,744 | 132,289 | 224,466 |
Current 2019 | - | - | - | - | 2,277 | 2,277 |
a) Occupational risks
The provisions for occupational risks, which amount to EUR 54,968 thousand (2018: EUR 66,211 thousand), are calculated individually based on the estimated probability for success or failure. This probability is determined by the various lawyers' offices which work with the companies in the group. In addition, an internal review is carried out of the probabilities of reaching agreements in each of the cases, depending on the past experience of Prosegur, in order to arrive at the final provision to be recorded.
The provision for occupational risks is composed mainly of labour legal cases in Brazil, which include lawsuits brought by former and current Prosegur employees. The characteristics of labour legislation in that country and the regulatory requirements of the business activities result in such processes becoming drawn out, and has led to a provision in 2019 of EUR 28,618 thousand (2018: EUR 40,601 thousand). The reduction compared to the previous year was a result of the latest changes in Brazilian labour legislation.
At 31 December 2019, the number of labour legal cases open in Brazil amounts to 3,913 (31 December 2018: 4,075). During 2019, almost 2,610 proceedings were closed.
Additionally, under this item, there is a provision for EUR 2,987 thousand (2018: EUR 6,614 thousand) related to the business combination carried out in 2005 with Transpev. During the 2019 financial year, 70 cases are still pending (31 December 2018: 76).
Provisions charged to income and reversals credited to income statement are included under other expenses in cost of sales (Note 4), and the monetary adjustments associated to said provision are included under other financial expenses (Note 7).
b) Legal risks
The provisions for legal risks, that amount to EUR 16,465 thousand (in 2018: EUR 16,101 thousand), correspond mainly to civil claims, which are analysed on a case-by-case basis. This mainly includes lawsuits in Brazil, Spain and France. The settlement of these provisions is highly probable, but both the value of the final settlement as well as the moment are uncertain and depend upon the outcome of the proceedings under way. There are no significant legal risks.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
c) Restructuring
This provision corresponded to Brinks Deutschland GmbH in 2013, for estimates for the payment of severances for dismissal and other costs. This provision was paid in its entirety during the first half of 2019 in an amount of EUR 577 thousand (payments of EUR 945 thousand were made in 2018).
d) Employee benefits
As indicated in Note 5.2, Prosegur maintains defined benefit schemes in Germany, Brazil, El Salvador, France, Honduras, Mexico and Nicaragua. The actuarial valuation, carried out by qualified actuaries, of the value of the benefits to which the Company is committed is updated at the 2019 financial year- end.
The defined benefit schemes of Germany and France consist of Pension and retirement schemes, while the benefit scheme defined for Mexico consists of a seniority scheme. The defined benefit schemes for Central America consist of contract termination benefits.
Prosegur has a defined benefit plan comprising post-employment healthcare offered to employees in Brazil compliant with local legislation (Act 9656).
The defined benefit schemes that Prosegur maintains for Honduras, Nicaragua and El Salvador by law have obligations under defined benefit schemes arising from the termination of employment contracts by dismissal or following a mutual agreement.
e) Other risks
The provision for other risks, amounting to EUR 134,566 thousand (2018: EUR 103,744 thousand), includes a whole multitude of items.
The settlement of these provisions is probable, but both the value of the final settlement as well as the moment are uncertain and depend upon the outcome of the proceedings under way.
We list the most significant ones below:
Tax risks
These mainly refer to tax risks in Brazil and Argentina for the amount of EUR 95,122 thousand (2018: EUR 79,282 thousand).
The tax risks associated with Brazil are related to several items, mainly to claims for direct and indirect local and State taxes, as well as provisions coming from the business combination of Nordeste and Transpev. In Argentina they relate to various amounts that are not individually material, linked mainly to municipal and provincial taxes. The most representative risks arise as a result of the disparity in criteria between Prosegur and Tax Administration.
Prosegur uses "the most likely outcome" as the valuation basis for evaluating uncertain tax positions. Tax risks are classified as material on the basis of opinions in external studies according to the analysis of case law in the matter of reference. In addition, it makes internal analyses based on similar cases occurring in the past in Prosegur or in other companies.
At each close of quarter, a detailed analysis of each of the tax contingencies is made. This analysis refers to quantification, qualification and the level of provision associated with the risk. An annual letter with the respective analysis and assessment by an independent expert is used to determine these parameters in the most significant risks. On the basis of this, the level of provision is adjusted.
56
2019 CONSOLIDATED ANNUAL ACCOUNTS
Provisions charged to income and reversals credited to income statement are included under other expenses in Note 4.
Accruals with personnel
These provisions include the incentive, due and payable in cash, corresponding to the 2020 and 2017 Plans (Note 35.20) for the Executive Director and Senior Management of Prosegur and for Prosegur Cash.
During the year, provisions to results have been made in an amount of EUR 5,674 thousand (Note 5.1) (EUR 4,707 thousand in 2018). That amount includes the adjustment for fair value of the share price for the 2017 Plan at the time of payments and the corresponding accrual for the 2020 and 2017 Plans.
During 2019, payments were made corresponding to the 2017 Plan, taking as a reference the Prosegur and Prosegur Cash share price at the time of the payment, thus substituting the method of share settlement initially planned.
During 2019 a sum of EUR 1,594 thousand (2018: EUR 8,967 thousand) has been applied, corresponding to the second payment of the 2017 Plan.
The fair value of the incentives referred to the share quotation price was estimated on the basis of Prosegur and Prosegur Cash share quotation price at the close of the period or at the payment time.
Lastly, part of this provision was recognised as current provisions in an amount of EUR 1,793 thousand, since the maturity of this commitment will take place in 2020 associated with the final payment of the 2017 Plan (2018: EUR 2,946 thousand, with maturity in 2019).
Comcare Australia
In 2019, payments have been made for commitments associated to the occupational accident insurance plan in Australia amounting to EUR 452 thousand (EUR 960 thousand in 2018). The allocation for the year amounted to EUR 158 thousand, reaching a provisional total of EUR 2,907 thousand (EUR 3,474 thousand in 2018), of which EUR 484 thousand fall due in the short term (2018: EUR 1,001 thousand).
57
2019 CONSOLIDATED ANNUAL ACCOUNTS
24.Financial liabilities
The details and composition of financial liabilities and the corresponding terms and conditions are as follows:
Thousands of Euros | Average interest | 2019 | 2018 | |||||||
rate | Non-current | Current | Non-current | Current | ||||||
Bonds and other marketable securities | 1.00%-1.38% | 1,289,510 | 15,124 | 1,287,370 | 15,124 | |||||
Loans and borrowings | 1.50% | 19,699 | 112,082 | 64,314 | 77,482 | |||||
Finance lease payables | 5.39% | - | - | 6,380 | 7,230 | |||||
Credit accounts | 28.05% | - | 63,190 | - | 14,434 | |||||
Other payables | 14.94% | 55,733 | 66,600 | 33,493 | 36,450 | |||||
1,364,942 | 256,996 | 1,391,557 | ||||||||
150,720 | ||||||||||
Thousands of Euros | Currency | Year of maturity | 2019 | 2018 | ||||||||
Non-current | Current | Non-current | Current | |||||||||
Bonds and other marketable securities | Euro | 2023-2026 | 1,289,510 | 15,124 | 1,287,370 | 15,124 | ||||||
Loans and borrowings | Euro | 2020-2022 | 18,451 | 55,532 | - | 63,975 | ||||||
Loans and borrowings | USD | 2020 | - | 266 | - | - | ||||||
Loans and borrowings | Brazilian Real | 2020-2021 | 54 | 499 | 93 | 358 | ||||||
Loans and borrowings | Australian dollar | 2020-2021 | 29 | 44,014 | 43,423 | - | ||||||
Loans and borrowings | South African Rand | 2019 | - | - | 17,563 | - | ||||||
Loans and borrowings | Peruvian Nuevo Sol | 2020 | - | 6,456 | 2,349 | 9,134 | ||||||
Loans and borrowings | Other currencies | 2020-2022 | 1,165 | 5,315 | 886 | 4,015 | ||||||
Finance lease payables | Euro | 2019-2020 | - | - | 1,736 | 2,222 | ||||||
Finance lease payables | Brazilian Real | 2019-2020 | - | - | 492 | 3,066 | ||||||
Finance lease payables | Other currencies | 2019-2026 | - | - | 4,152 | 1,942 | ||||||
Credit accounts | Euro | 2020 | - | 29 | - | 4,827 | ||||||
Credit accounts | Argentine Peso | 2020 | - | 28,255 | - | - | ||||||
Credit accounts | USD | 2020 | - | 23,581 | - | - | ||||||
Credit accounts | Other currencies | 2020 | - | 11,325 | - | 9,607 | ||||||
Other payables | Euro | 2020-2023 | 14,499 | 5,076 | 8,800 | 7,096 | ||||||
Other payables | Brazilian Real | 2020-2033 | 27,911 | 24,021 | 12,420 | 11,381 | ||||||
Other payables | Argentine Peso | 2020-2023 | 31 | 14,534 | 63 | 127 | ||||||
Other payables | Other currencies | 2019-2033 | 13,292 | 22,969 | 12,210 | 17,846 | ||||||
1,364,942 | 256,996 | 1,391,557 | 150,720 |
At 31 December 2019 drawdowns from credit facilities in current accounts totalled EUR 63,190 thousand (EUR 14,434 thousand in 2018). Details of undrawn credit facilities are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Maturing in less than 1 year | 261,624 | 203,648 | |
Maturing in more than 1 year | 480,000 | 500,000 | |
741,624 | 703,648 | ||
Credit facilities are subject to various interest rate reviews in 2020.
58
2019 CONSOLIDATED ANNUAL ACCOUNTS
Debentures and other negotiable securities
On 8 February 2018 an issue of uncovered bonds with a nominal value of EUR 700,000 thousand, maturing on 08 February 2023, was made. The bonds are traded on the secondary market of the Irish Stock Exchange. They accrue an annual coupon of 1.00% payable at the end of each year.
On 2 April 2018 the uncovered bonds issued on 2 April 2013 for EUR 500,000 thousand were amortised on their due date.
On 4 December 2017 Prosegur, through its subsidiary Prosegur Cash, S.A. made an issue of uncovered bonds with a nominal value of EUR 600,000 thousand, maturing on 4 February 2026. The issue was made in the Euromarket as part of the Euro Medium Term Note Programme. This issue will enable the deferment of maturities of part of the debt of Prosegur Cash and the diversification of funding sources. The bonds are traded on the secondary market, on the Irish Stock Exchange. They accrue an annual coupon of 1.38% payable at the end of each year.
Syndicated credit facility (Spain)
Syndicated credit facility of EUR 200,000 thousand (Spain)
On February 10, 2017, Prosegur contracted a new syndicated financing operation in the form of credit amounting to 200,000 thousand euros for a term of five years in order to provide the company with liquidity in the long term. On February 7, 2019, the novation of this syndicated financial transaction was carried out in the credit modality, extending the maturity for another 5 years until February 2024. As of December 31, 2019, there is no available balance of this credit.
The interest rate of the drawdowns under the syndicated credit facility is equal to Euribor plus an adjustable spread based on the Company's rating.
Syndicated credit facility of EUR 300,000 thousand (Spain)
On February 10, 2017, Prosegur's subsidiary, Prosegur Cash, SA, contracted a new syndicated financing operation in the form of credit amounting to 300,000 thousand euros for a term of five years in order to provide liquidity to The company in the long term. On February 7, 2019, the novation of this syndicated financial transaction has been carried out in the credit modality, extending the maturity for another 5 years until February 2024. As of December 31, 2019, the available balance of this credit amounts to to 20,000 thousand euros.
The interest rate of the drawdowns under the syndicated credit facility is equal to Euribor plus an adjustable spread based on the Company's rating.
Syndicated loan (Australia)
On 28 April 2017, Prosegur, via its subsidiary Prosegur Australia Investments Pty, arranged a syndicated financing operation in the amount of AUD 70,000 thousand for a 3-year term. At 31 December 2019, the drawn down capital corresponding to the loan amounts to AUD 70,000 thousand (equivalent to EUR 43,764 thousand at 31 December 2019). At 31 December 2018, the drawn down capital amounted to AUD 70,000 thousand (equivalent to EUR 43,170 thousand at 31 December 2018).
Bank borrowings (South Africa)
In order to partially finance the subscription of shares representing 33.33% of the share capital of the South African company SBV Services Proprietary Limited, Prosegur arranged a 4-year bullet loan on 29 January 2016 for ZAR 272,000 thousand.
59
2019 CONSOLIDATED ANNUAL ACCOUNTS
On 20 June 2019, and as consequence of exercising the sales option on the 33.33% holding in SBV (Note 16), the entire loan has been cancelled in advance, therefore there is no outstanding amount at 31 December 2019 (at 31 December 2018: 272,000 thousand Rand) equivalent value at 31 December 2018: EUR 16,534 thousand.
Finance lease payables
Details of minimum payments under finance leases at 31 December 2018 are as follows:
Thousands of | |
Euros | |
2018 | |
Less than 1 year | 7,732 |
1 to 5 years | 6,985 |
Interest | (1,107) |
13,610 |
The main assets acquired under finance leases are armoured vehicles and cash management machines (Note 11).
At 1 January 2019 with the entry into force of IFRS 16, this debt was reclassified under the lease liabilities heading (Note 12).
Bailment
Prosegur in Australia has access to facilities under loan for use for the supply of cash to ATMs belonging to Prosegur. In these facilities, cash is owned by the bailor of the loan in use, who has contracts directly with Prosegur. Prosegur has access to this money with the only purpose to load cash onto the ATMs, governed by this contract. The settlement of the cash assets and liabilities is carried out via regulated clearing systems, such as the right of set-off. As a result of the foregoing, no assets and liabilities are shown in the Consolidated Annual Accounts for this item. The outstanding amount at 31 December 2019 is AUD 50.5 million (equivalent to EUR 31.6 million) (at 31 December 2018 it was AUD 43.9 million, equivalent to EUR 27.7 million).
Other payables
Other payables mainly relate to pending payments of business combinations formed in both the present year and previous years (Note 30). Details of other payables are as follows:
Thousands of Euros | |||
Non-current | 2019 | 2018 | |
49,852 | 26,833 | ||
Contingent and deferred payments for acquisitions | |||
Others | 5,881 | 6,660 | |
Current | 55,733 | 33,493 | |
Contingent and deferred payments for acquisitions | 66,471 | 34,992 | |
Others | 129 | 1,458 | |
66,600 | 36,450 | ||
60
2019 CONSOLIDATED ANNUAL ACCOUNTS
The deferred and contingent payments relating to acquisitions are as follows:
Thousands of Euros | 2019 | 2018 | ||||||
Currency | Non-current | Current | Non-current | Current | ||||
Fiel Vigilancia e Transp. Valores | Reals | - | 952 | - | 908 | |||
Transvig - Transporte de Valores e Vigilancia LTDA | Reals | - | - | - | 347 | |||
Grupo Nordeste y Transbank | Reals | - | 5,556 | - | 4,591 | |||
Martom Segurança Eletrônica Ltda. | Reals | - | 23 | - | 25 | |||
Securlog GmbH | Euros | - | 258 | - | 258 | |||
Dognaedis Lda | Euros | 1,381 | - | 1,381 | - | |||
Grupo Contesta | Euros | - | 1,762 | 3,447 | 3,544 | |||
Indiseg Evolium Group S.L. | Euros | - | 300 | - | 472 | |||
Purchase of client portfolio from CSS Tactical Propietary Limited | South african Rand | - | 507 | - | 486 | |||
Inversiones BIV, S.A. y filial | Colombian Peso | - | 222 | - | 221 | |||
Grupo Integra - Colombia | Colombian Peso | - | 1,920 | - | 1,905 | |||
Other business combination Prosegur Cash 2017 | Other | - | 2,172 | - | 1,900 | |||
Business combination Cash ROW 2018 | Phillipine Peso | 8,849 | 3,142 | 7,198 | 2,230 | |||
Business combination Security ROW 2018 | Other | 4,000 | 1,290 | 4,163 | 962 | |||
Business combination Cash Latin America 2018 | Other | 4,563 | 11,061 | 8,305 | 14,210 | |||
Business combination Cash Europe 2018 | Other | 1,905 | 1,137 | 2,339 | 2,570 | |||
Business combination Cash ROW 2019 | Other | - | 2,692 | - | - | |||
Business combination Cash Latin America 2019 | Other | 7,619 | 27,764 | - | - | |||
Business combination Cash Europe 2019 | Other | 5,834 | 1,691 | - | - | |||
Business combination Alarms Latin America 2019 | Other | - | 4,010 | - | - | |||
Business combination Cibersecurity Latin America 2019 | Other | 6,850 | - | - | - | |||
Business combination Cibersecurity Europe 2019 | Other | 827 | - | - | - | |||
Business combination Security ROW 2019 | Other | 8,024 | - | - | - | |||
Purchase of client protfolio from Security Systems Paraguay S.A. | Paraguayan Guarani | - | 12 | - | 363 | |||
49,852 | 66,471 | 26,833 | 34,992 |
The reconciliation of balances classified as financial liabilities with the flow of financing activities in the Statement of Cash Flows is as follows:
Bonds and | |||||
Thousands of Euros | other | Bank | Credit | Other payables | Total |
marketable | borrowing | accounts | |||
Balance at 1 January 2019 | securities | ||||
1,302,494 | 141,796 | 14,434 | 69,943 | 1,528,667 | |
Cash flows from financing activities | - | (9,649) | 34,851 | (27,489) | (2,287) |
Acquisitions/interest accrual and others | 2,140 | 170 | 321 | 12,367 | 14,998 |
Business combinations (Note 30) | - | 922 | 13,741 | 67,783 | 82,446 |
Translation differences | - | (1,458) | (157) | (271) | (1,886) |
Balance at 31 December 2019 | 1,304,634 | 131,781 | 63,190 | 122,333 | 1,621,938 |
61
2019 CONSOLIDATED ANNUAL ACCOUNTS
25.Suppliers and other payables
Details of suppliers and other payables are as follows:
Thousands of Euros | ||||
2019 | 2018 | |||
Trade payables | 212,055 | 194,473 | ||
Accrued personnel costs | 245,034 | 238,517 | ||
Social Security and other taxes | 193,428 | 188,691 | ||
Other payables | 182,541 | 173,159 | ||
833,058 | 794,840 | |||
Accruals with personnel
Prosegur's remuneration policy for indirect personnel includes a variable component determined through specifically designed incentive programmes, which aim to recognise and reward Prosegur employees' contribution to its success by achieving or surpassing targets and developing the necessary skills for excellence in their duties and responsibilities. The incentive programme directly links variable remuneration to the achievement of targets established by Prosegur management or the employee's direct superior over a given time.
Accruals with personnel include EUR 44,468 thousand relating to the incentive programme (EUR 38,639 thousand in 2018). The cost recognised under employee benefits expense in the income statement in relation to this policy amounts to EUR 77,915 thousand (EUR 66,940 thousand in 2018).
The employee benefits expense also includes salaries payable and accrued extraordinary salary instalments.
Information on average payment period to suppliers. Second Final Provision of Act 31/2014 of 3 December.
Information on deferred payments to suppliers by consolidated Spanish companies is as follows:
2019 | 2018 | ||
Days | Days | ||
Average payment period to suppliers | 63 | 57 | |
Ratio of transactions paid | 63 | 56 | |
Ratio of transactions pending payment | 62 | 64 | |
Thousands of Euros | Thousands of Euros | ||
Total payments made | 297,264 | 276,278 | |
Total payments pending | 25,398 | 25,186 |
In accordance with the ICAC Resolution, the calculation of the average payment period to suppliers has considered the commercial transactions corresponding to the delivery of goods or the rendering of services accrued through the date of entry into force of Act 31/2014, 3 December, i.e. 24 December 2014. The information in these consolidated accounts on payments to suppliers refers exclusively to the companies situated in Spain which are fully consolidated.
For the exclusive purposes of providing the disclosures envisaged in this Resolution, suppliers are deemed as commercial creditors holding debts for the supply of goods or services, included under Suppliers and other payables of current liabilities of the consolidated balance sheet.
62
2019 CONSOLIDATED ANNUAL ACCOUNTS
"Average payment period to suppliers" is understood as the period between the delivery of the goods or the rendering of the services by the supplier and the material payment of the transaction.
The maximum legal term of payment applicable to the consolidated companies in 2019, according to Act 11/2013, of 26 December, is of 30 days (unless the conditions set forth in the Act allowing the maximum payment period to be raised to 60 days are fulfilled).
26.Other liabilities
Other non-current liabilities include amounts corresponding to accruals of alarm rental income.
Details are as follows:
2019 | 2018 | |||||||||||||
Thousands of Euros | Non-current | Current | Non-current | Current | ||||||||||
Prepaid Income | 28,807 | 47,081 | 29,273 | 44,391 | ||||||||||
Other liabilities | - | 3,564 | - | 3,877 | ||||||||||
28,807 | 50,645 | 29,273 | 48,268 | |||||||||||
The heading Current Prepaid Income mainly includes the advance billing for alarm contracts for EUR 31,785 thousand (2018: EUR 28,334 thousand), as well as the anticipated income associated with building contracts.
Under the heading of non-current prepaid income, since 1 January 2018 following the adoption of IFRS 15 on the recognition of revenue from client contracts, Prosegur recognises the deferred income associated with alarm system rental installations (Note 35.21).
27.Taxation
Prosegur Compañía de Seguridad, S.A. is the parent of a group that is taxed under the fiscal consolidation regime in Spain. As well as Prosegur Compañía de Seguridad, S.A., as the parent, this consolidated tax group comprises the Spanish subsidiaries that meet the requirements set out in regulations governing consolidated taxation.
Additionally, Prosegur files tax returns under Tax Consolidation in the following countries: France, Luxembourg, Portugal, Australia and the United States.
- Certain companies in France, directly or indirectly owned, form a Consolidated Tax Group and file tax returns pursuant to legislation under the special "Intégration Fiscale" scheme under French law.
- In Luxembourg, Prosegur has two independent consolidated tax groups composed of: (i) Luxpai CIT SARL and Pitco Reinsurance S.A.; and (ii) Luxpai Holdo SARL and Yellow Re S.A.
- In Portugal, Prosegur has a consolidated tax group made up of the following Portuguese companies : Prosegur Companhia de Segurança Ltda., Prosegur Distribuçao e Serviços Ltda., Prosegur Agencia Promoçao e Comercializaçao de Productos e Servicios Unipessoal Lda., Prosegur Logistica e Tratamento de Valores Portugal S.A., Prosegur Alarmes Dissuasao Potugal Unipesoal Ltda., Prosegur SES Serviços Empresariais de Segurança Unipessoal Lda., Prosegur de Servicios Partilhados Unipessoal Lda. and Prosegur Gestao de Activos Imobiliarios, S.A.
- In Australia, Prosegur SPV1 PTY Limited, incorporated during the year, has joined the consolidated tax group. As a result of this incorporation, the group is composed of that company
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2019 CONSOLIDATED ANNUAL ACCOUNTS
and the five Australian companies that already formed part of the group the previous year: Prosegur Australia Holdings Pty Limited, Prosegur Australia Investments Pty Limited, Prosegur Australia, Prosegur Technology Pty Limited and Prosegur Asset Management.
- In the United States, Prosegur has a consolidate tax group composed of the following US companies: Prosegur Security USA Incorporated, Prosegur Security Monitoring Incorporated, Prosegur Services Group Incorporated and Prosegur Technology International Incorporated.
The rest of Prosegur's subsidiaries file tax returns in accordance with tax legislation in force in the countries in which they operate.
Details of the income tax expense, for current tax and deferred tax, are as follows:
Thousands of Euros | ||||
2019 | 2018 | |||
Current tax | 127,586 | 97,640 | ||
Deferred tax | (22,945) | 2,382 | ||
104,641 | 100,022 |
The main items making up the deferred tax expense/(income) are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Tax losses and Tax deductions | (9,556) | (6,456) | |
Temporary Provisions and Differences | (16,773) | 4,118 | |
Intangible asset amortisation | (9,675) | (7,898) | |
Property, plant and equipment amortisation | 13,059 | 12,618 | |
(22,945) | 2,382 | ||
The deferred items arising from tax-related goodwill are from local mergers in Brazil which took place during previous years. Tax legislation in Brazil allows for accelerated amortisation.
The calculation of the income tax expense, based on pre-tax profit for the year, is as follows:
Thousands of Euros | |||||
2019 | 2018 | ||||
Profit before income tax | 264,867 | 280,039 | |||
Tax rate | 25% | 25% | |||
Result of applying tax rate to profit | 66,217 | 70,010 | |||
Permanent differences | 18,380 | 12,166 | |||
Effect of application of different tax rates | 5,969 | 8,941 | |||
Tax losses and adjustments to deferred tax | 17,674 | 10,263 | |||
Tax deductions applied and not recognised in prior years | (3,599) | (1,358) | |||
Income tax expense | 104,641 | 100,022 |
The effective tax rate in 2019 is 39.5%, compared to 35.7% in 2018, which means an increase of 3.8 percentage points owing essentially to the adjustment for hyperinflation.
64
2019 CONSOLIDATED ANNUAL ACCOUNTS
The tax rates in the countries where Prosegur operates are as follows:
Tax rate | 2019 | 2018 | |
Germany | 30.5% | 30.5% | |
Argentina | 30.0% | 30.0% | |
Australia | 30.0% | 30.0% | |
Brazil | 34.0% | 34.0% | |
Canada | 26.5% | - | |
Chile | 27.0% | 27.0% | |
China | 25.0% | 25.0% | |
Colombia | 33.0% | 33.0% | |
Costa Rica | 30.0% | - | |
El Salvador | 30.0% | 30.0% | |
UAE | 55.0% | 55.0% | |
Spain | 25.0% | 25.0% | |
USA | 29.0% | 29.0% | |
Phillipines | 30.0% | 30.0% | |
France | 33.3% | 33.3% | |
Guatemala | 25.0% | 25.0% | |
The Netherlands | 25.0% | 25.0% | |
Honduras | 30.0% | 30.0% | |
Hong Kong | 16.5% | 16.5% | |
India | 28.0% | 28.0% | |
Indonesia | 25.0% | - | |
Luxembourg | 24.9% | 26.0% | |
Mexico | 30.0% | 30.0% | |
Nicaragua | 30.0% | 30.0% | |
Paraguay | 10.0% | 10.0% | |
Peru | 29.5% | 29.5% | |
Portugal | 22.5% | 22.5% | |
United Kingdom | 18.0% | 18.0% | |
Singapore | 17.0% | 17.0% | |
South Africa | 28.0% | 28.0% | |
Turkey | 22.0% | 22.0% | |
Uruguay | 25.0% | 25.0% |
Also, in 2019 some local legislations changed their tax rates for the coming years. Accordingly, the tax rate for the following years is indicated below:
Type of taxation | |||
Tax rates that commence from: | Colombia | France | UK |
1 January 2020 | 32% | 28% | 17% |
Consequently, deferred tax assets and deferred tax liabilities have been adjusted in accordance with these new tax rates.
65
2019 CONSOLIDATED ANNUAL ACCOUNTS
Movements in deferred tax assets and liabilities and changes in their composition are as follows:
Deferred tax assets
Thousands of Euros
Property, plant and equipment amortisation Intangible asset amortisation
Losses and Tax Deductions
Provisions
Investments and Others
Deferred tax liabilities
Thousands of Euros
Property, plant and equipment amortisation Intangible Asset Amortisation Investments and Impairment Provisions and Others
Balance at 1 | Balance at 31 | Disposal of | Balance at 31 | ||||||||||
Recognised | Business | Recognised | Translation | Recognised | Business | Recognised | the scope | Translation | |||||
January, | in profit and | combinations | December, | in profit and | combinations | of | December, | ||||||
in equity | differences | in equity | differences | ||||||||||
2018 | loss | (Note 30) | 2018 | loss | (Note 30) | consolidatio | 2019 | ||||||
n | |||||||||||||
17,225 | 5,281 | 37 | - | (678) | 21,865 | (3,163) | 56 | - | - | (610) | 18,148 | ||
5,206 | 2,175 | 760 | - | (261) | 7,880 | (2,168) | 146 | - | - | (16) | 5,842 | ||
44,104 | 6,456 | 94 | - | (1,280) | 49,374 | 9,556 | 1,677 | - | (1,573) | (2,233) | 56,801 | ||
77,907 | (1,456) | 1,799 | 555 | (12,327) | 66,478 | 14,725 | 2,532 | 4,275 | (1,078) | (3,688) | 83,244 | ||
4,523 | (8,613) | - | 13,251 | (157) | 9,004 | 4,658 | - | 4,221 | (5) | (1,995) | 15,883 | ||
148,965 | 3,843 | 2,690 | 13,806 | (14,703) | 154,601 | 23,608 | 4,411 | 8,496 | (2,656) | (8,542) | 179,918 | ||
Balance at 1 | Balance at 31 | Disposal of | Balance at 31 | ||||||||||
Recognised | Business | Recognised | Translation | Recognised | Business | Recognised | the scope | Translation | |||||
January, | in profit and | combinations | December, | in profit and | combinations | of | December, | ||||||
in equity | differences | in equity | differences | ||||||||||
2018 | loss | (Note 30) | 2018 | loss | (Note 30) | consolidatio | 2019 | ||||||
n | |||||||||||||
(19,158) | (17,899) | (696) | (5,086) | (17) | (42,856) | (9,896) | - | - | - | 2,592 | (50,160) | ||
(50,278) | 5,723 | (8,652) | (809) | 931 | (53,085) | 11,843 | (13,800) | - | 1,314 | 410 | (53,318) | ||
(9,352) | 3,453 | - | - | 691 | (5,208) | 1,679 | - | - | 90 | - | (3,439) | ||
(14,617) | 2,498 | (2,450) | (16,306) | 3,015 | (27,860) | (4,289) | (37) | - | - | 8,004 | (24,182) | ||
(93,405) | (6,225) | (11,798) | (22,201) | 4,620 | (129,009) | (663) | (13,837) | - | 1,404 | 11,006 | (131,099) |
66
2019 CONSOLIDATED ANNUAL ACCOUNTS
In 2019, as a result of the first application of IFRS 16 (Note 35.1), deferred tax assets amounting to EUR 4,221 thousand were recognised in equity.
Tax loss assets at 31 December 2019 were EUR 48,793 thousand (2018: EUR 41,348 thousand). Tax deductions at 31 December 2019 amounted to EUR 8,008 thousand (EUR 8,026 thousand in 2018).
Details of total current and deferred income tax in relation to items credited or debited directly in other comprehensive income during the year are as follows:
Thousands of Euros | 2019 | 2018 | |
Losses and Profits equity | 1,336 | 556 | |
1,336 | 556 |
Details of deferred tax assets and liabilities that are expected to be realised or reversed in periods exceeding 12 months are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Deferred tax assets | 158,049 | 134,633 | |
Deferred tax liability | (126,138) | (123,013) | |
31,911 | 11,620 |
The breakdown by country of the main deferred tax assets and liabilities, in thousands of Euros, is as follows:
Thousands of Euros | |||||||
2019 | 2018 | ||||||
Deferred tax | Deferred tax | Deferred tax | Deferred tax | ||||
assets | liabilities | assets | liabilities | ||||
Brazil | 62,159 | (25,715) | 58,248 | (26,429) | |||
Argentina | 22,489 | (29,255) | 9,068 | (29,618) | |||
Spain | 18,051 | (34,809) | 20,414 | (32,083) | |||
Germany | 15,345 | (602) | 15,955 | (2,331) | |||
Remainder | 61,874 | (40,718) | 50,916 | (38,548) | |||
Total | |||||||
179,918 | (131,099) | 154,601 | |||||
(129,009) |
Prosegur has no inactivated tax credit carryforwards.
Deferred tax assets regarding tax loss carryforwards are recognised provided that it is probable that sufficient taxable income will be available against which to offset the asset.
Prosegur presents the amounts of deferred taxes in accordance with the provisions of IAS 12 in relation to offsetting current tax assets and liabilities in certain conditions, which are fulfilled in Spain, France, Portugal, United States, Luxembourg and Australia. In the breakdown of deferred tax assets and liabilities these are shown without offsetting.
67
2019 CONSOLIDATED ANNUAL ACCOUNTS
Details of tax loss carryforwards and the year until which they can be offset at 31 December 2019 are as follows:
Thousands of Euros | |||||||||
Year | Total | Not | Capitalised | ||||||
capitalised | |||||||||
2020 | 5,553 | 5,553 | - | ||||||
Subsequent years or no time limit | 365,866 | 203,901 | 161,965 | ||||||
Total | 371,419 | 209,454 | 161,965 | ||||||
The breakdown of tax carryforwards and prescriptive periods at 31 December 2019 is as follows:
Thousands of Euros | |||
Total Amount | 2020 | Later | |
Germany | 53,248 | - | 53,248 |
Argentina | 25,757 | 143 | 25,614 |
Australia | 30,193 | - | 30,193 |
Brazil | 52,729 | - | 52,729 |
Canada | 6 | - | 6 |
Chile | 59,464 | - | 59,464 |
China | 2,322 | 41 | 2,281 |
Costa Rica | 4 | - | 4 |
Colombia | 12,266 | - | 12,266 |
USA | 22,386 | - | 22,386 |
Spain | 469 | - | 469 |
The Philippines | 308 | - | 308 |
France | 57,054 | - | 57,054 |
The Netherlands | 175 | - | 175 |
Hong Kong | 2,276 | - | 2,276 |
India | 7,100 | - | 7,100 |
Indonesia | 1,257 | - | 1,257 |
Luxembourg | 700 | - | 700 |
Mexico | 28,186 | 4,831 | 23,355 |
Peru | 6,815 | - | 6,815 |
Portugal | 2,445 | - | 2,445 |
South Africa | 545 | - | 545 |
United Kingdom | 446 | - | 446 |
Uruguay | 5,268 | 538 | 4,730 |
Total | |||
371,419 | 5,553 | 365,866 | |
68
2019 CONSOLIDATED ANNUAL ACCOUNTS
Detail of the tax loss carryforwards offset and pending offsetting at 31 December 2019 is as follows:
Thousands of Euros | ||||||
Capitalised | Not Activated | Total | ||||
Germany | 46,977 | 6,271 | 53,248 | |||
Argentina | 21,154 | 4,603 | 25,757 | |||
Australia | 10,030 | 20,163 | 30,193 | |||
Brazil | 19,146 | 33,583 | 52,729 | |||
Canada | - | 6 | 6 | |||
Chile | 24,565 | 34,899 | 59,464 | |||
China | 2,203 | 119 | 2,322 | |||
Costa Rica | - | 4 | 4 | |||
Colombia | 3,076 | 9,190 | 12,266 | |||
USA | 22,350 | 36 | 22,386 | |||
Spain | - | 469 | 469 | |||
The Philippines | - | 308 | 308 | |||
France | 9,907 | 47,147 | 57,054 | |||
The Netherlands | - | 175 | 175 | |||
Hong Kong | - | 2,276 | 2,276 | |||
India | - | 7,100 | 7,100 | |||
Indonesia | - | 1,257 | 1,257 | |||
Luxembourg | - | 700 | 700 | |||
Mexico | 38 | 28,148 | 28,186 | |||
Peru | 28 | 6,787 | 6,815 | |||
Portugal | 1,436 | 1,009 | 2,445 | |||
South Africa | 545 | - | 545 | |||
United Kingdom | - | 446 | 446 | |||
Uruguay | 510 | 4,758 | 5,268 | |||
Total | ||||||
161,965 | 209,454 | 371,419 | ||||
The most significant non-activated tax bases are in France, Chile, Brazil, Mexico and Australia. Of the EUR 371,419 thousand of activated and non-activated tax bases by Prosegur with a period of limitation extending beyond 2020, there is no time limit for offsetting EUR 278,985 thousand and there is a time limit for the remaining EUR 92,434 thousand.
Deferred tax assets are recognised provided that it is probable that sufficient taxable income will be generated against which the temporary differences can be offset. The recoverable amount of a CGU is determined based on its value in use. These calculations are based on cash flow projections, excluding the effects of potential future improvements in the return on assets, from the four-year financial budgets approved by Management.
On 10 May 2016, the Group was notified of the beginning of a partial inspection for Corporate Income Tax on whether the freedom to amortise was appropriate due to the maintenance or creation of jobs in 2011 and on whether the remunerations made to the Directors for the years 2011 to 2014 are deductible.
Additionally, on the same date, the Group was informed of the beginning of inspection proceedings for Corporate Income Tax and which partially affects the origin of the freedom to amortise for maintenance or creation of employment in 2011.
69
2019 CONSOLIDATED ANNUAL ACCOUNTS
As a result of those inspections, the following records were signed:
- Record of acceptance relating to the freedom to amortise.
- Record of non-acceptance regarding the Directors' remunerations with a tax charge of EUR 390 thousand and interest of EUR 30 thousand.
In relation to the record of non-acceptance, on 9 March 2018, the Technical Office issued a Resolution for rectifying the settlement proposal contained in the record of non-acceptance, establishing the debt at the amount of EUR 1,344 thousand, of which EUR 1,195 thousand correspond to principal and EUR 149 thousand to late-payment interest. After the Company had filed its arguments for the defence, on 6 June 2018, the Technical Office issued a Resolution for settlement for the amount of EUR 1,355 thousand, of which EUR 1,195 thousand correspond to principal and EUR 159 thousand to late- payment interest. The Company has lodged a claim against that Resolution with the Central Court for Economic-Administrative Issues. That claim is awaiting a decision.
In addition, the Group has filed two lawsuits awaiting decision arising from two records of non- acceptance and for which no provision was made by the Spanish Administration. The first was brought in 2012, in relation to Corporate Income Tax for the years 2005, 2006 and 2007 and is for a tax liability of EUR 10,200 thousand, of which EUR 8,269 thousand are capital and EUR 1,931 thousand are late- payment interest. In relation to this first litigation, on 14 November 2019, the National Court issued a dismissal decision against which the Company has prepared a cassation appeal before the Supreme Court, which is pending admission. The second was brought in 2015 in relation to Corporate Income Tax for the years 2008 and 2009 and is for a tax liability of EUR 20,041 thousand, of which EUR 16,088 thousand are capital and EUR 3,953 thousand are late-payment interest. That lawsuit is awaiting a decision by the National Court.
Lastly, on 4 April 2019 The Brazilian Tax Authority notified Prosegur Brasil S.A. Transportadora de Valores e Segurança, of a tax settlement decision regarding Personal Income Tax, Social Security and withholdings at source in relation to the corporate cost incurred from 2014 to 2016. The amount under that notice was BRL 214,820 thousand (tax liability BRL 102,938 thousand, interest BRL 30,833 thousand and penalties BRL 81,049 thousand), equivalent value at 31 December 2019 EUR 47,737 thousand. The resolution was challenged by the Company in first instance in the administrative stage on 29 April 2019, and was resolved on 30 July 2019 with a reduction of 44,877 thousand reals. The Company has proceeded to appeal this in the second administrative instance, where a favourable resolution to this lawsuit is anticipated.
The company has considered that the resolution of these disputes is considered possible but not probable.
The other Prosegur companies are subject to the local jurisdictions in the countries in which they operate.
Due to the different interpretations that could be made of the fiscal legislation in force, additional tax liabilities could arise in the event of inspection. In any event, the Directors of Prosegur do not consider that any such liabilities that could arise would have a significant effect on the Consolidated Annual Accounts.
Prosegur has decided to implement IFRIC 23 referring to the application of the recognition and valuation criteria of IAS 12 when there is uncertainty regarding the tax authority's acceptance of a specific tax treatment used by the Group (Note 35.1).
With this, if the Prosegur Cash Group considers it is likely that the tax authority will accept an uncertain tax treatment, it will establish the taxable gain (loss), the tax bases, unused tax losses, unused tax credits or the tax rates consistent with the tax treatment used or intended to be used in its income tax returns, without allocating any provision for that uncertain tax treatment.
70
2019 CONSOLIDATED ANNUAL ACCOUNTS
However, if Prosegur considers it unlikely that the tax authority will accept an uncertain tax treatment, it will reflect the effect of the uncertainty to establish the taxable gain (loss), the tax bases, unused tax losses or credits or the corresponding tax rates. In this manner Prosegur will reflect the effect of the uncertainty for each uncertain tax treatment by using the most likely amount or the expected value of the probability-weighted amounts.
The impact of the transition of adopting IFRIC 23 at 1 January 2019 was EUR 60,844 thousand, having recorded that impact under the heading of Retained earnings and other reserves which appears under the item of "Other Changes" of the consolidated statement of changes in equity (Note 35.1), as well as under the heading of current tax liabilities.
In 2019 the following corporate restructuring operations were carried out under the neutral tax regime:
- In Spain, the takeover merger of Enclama S.L. by Prosegur AVOS España S.L.
- In Colombia, the takeover merger of Integra Security Systems S.A. by Prosegur Seguridad Electrónica SAS
In 2018 the following corporate restructuring operations were carried out under the neutral tax regime:
- In Brazil, the merger by absorption of SETHA Industria Eletronica Ltda by Segurpro Tecnologia em Sistemas de Segurança Eletronica e incendios Ltda effective as of 31 July 2018.
- In Brazil, the spin-off of Prosegur Brasil S.A. Transportadora de Valores e Segurança to Segurpro Vigilancia Patrimonial S.A., with effect on 31 July 2018.
- In Spain, the contribution of 100% of the shares of Prosegur Ciberseguridad SAS, Prosegur Ciberseguridad Uruguay SA, Dognaedis Limited Dognaedis Lda, Prosegur Ciberseguridad SL and Prosegur Ciberseguridad Paraguay SA from Prosegur Compañía de Seguridad, S.A.. to Prosegur Ciberseguridad SL.
- In Brazil, the merger by acquisition of Transexcel Segurança e Transporte de Valores Ltda by Prosegur Brasil S.A. Transportadora de Valores e Segurança, with effect on 31 December 2018.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
28.Contingencies
Sureties and guarantees
Prosegur has contingent liabilities for bank and other guarantees related with its normal business operations that are not expected to give rise to any significant liabilities.
Guarantees provided by Prosegur to third parties are as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Commercial guarantees | 274,118 | 243,020 | |
Financial guarantees | 248,686 | 217,911 | |
522,804 | 460,931 |
Commercial guarantees include those given to clients.
Financial guarantees essentially include those relating to litigation in process totalling EUR 85,830 thousand (EUR 110,932 thousand in 2018). Civil and labour-related litigation in Brazil amount to EUR 45,143 thousand at 31 December 2019 (EUR 42,910 thousand at 31 December 2018) (see Note 23).
National Commission on Markets and Competition
On 22 April 2015, Spain's National Commission on Markets and Competition (hereinafter, the CNMC) commenced disciplinary proceedings against Prosegur, Prosegur Servicios de Efectivo España, S.L.U (currently a subsidiary of Prosegur Cash) and Loomis España, S.A. for alleged anticompetitive practices in accordance with European Union legislation. On 10 November 2016, the Competition Chamber of the CNMC ordered a fine of EUR 39,420 thousand to be imposed on Prosegur and its subsidiary.
On 13 January 2017, Prosegur announced it planned to file, in the National Court (Audiencia Nacional), a contentious-administrative appeal against said ruling and requested the adoption of an interim measure consisting of suspending payment of the fine imposed.
On 13 February 2017, the National Court accepted the appeal proposed by Prosegur for processing, commencing the relevant proceedings, prior to formal filing of the appeal. On 6 September 2018, Prosegur filed the relevant appeal which at present remains pending resolution by the National Court in respect of the underlying matter.
With regard to the request for the interim measure, on 31 March 2017, the National Court agreed to it and suspended execution of the CNMC resolution in particular concerning payment of the fine by Prosegur, on the condition that, within a maximum of two months, Prosegur should provide surety or any other guarantee in the amount of the fine. On 9 June 2017, Prosegur presented the National Court with a bank guarantee amounting to EUR 39,420 thousand.
Prosegur will exclusively and at its own expense assume the defence of Prosegur and Prosegur Servicios de Efectivo España S.L., having sole power regarding the directing and control of that defence and of the lawsuit.
The ruling that will be given in due course by the National High Court on the decision of the National Commission on Financial Markets and Competition (CNMC) could lead to additional liabilities when the
72
2019 CONSOLIDATED ANNUAL ACCOUNTS
proceedings conclude. In any event, the Directors of the Company do not consider that any such liabilities that could arise would have a significant effect on the consolidated annual accounts.
Liquidation of subsidiaries in France
In April 2005 the accounts of Bac Sécurité, Force Gardiennage and Sécurité Européenne de L'Espace Industriel (SEEI) were deposited with the Versailles Court of Commerce and since that date these companies have been in receivership. The liquidation of these companies was completed in 2008 and they are currently being wound up. The Directors do not expect significant liabilities to arise from this process.
Liquidation of subsidiaries in Romania
At the end of financial year 2017, the company SC Rosegur S.A. is undergoing insolvency proceedings and the company SC Rosegur Cash Services S.A. has been declared bankrupt. The company Rosegur Holding Corporation S.L. has been dissolved by agreement of the General Meeting and is currently under liquidation. Lastly, the companies SC Rosegur Fire S.R.L. and SC Rosegur Training S.R.L., both inactive, form part of the equity of SC Rosegur S.A. to be liquidated as part of the insolvency proceedings. The Directors do not expect significant liabilities to arise from this process.
29.Commitments
Purchase commitments for fixed assets
Investments committed but not made at year end are as follows:
Thousands of Euros | ||||
2019 | 2018 | |||
Property, Plant and Equipment | 8,456 | 17,109 | ||
Other intangible assets | 2,260 | 3,022 | ||
10,716 | 20,131 |
At 31 December 2019, the commitments correspond mainly to the purchase of armoured vehicles, machinery and plants (Note 11).
Lease commitments
As indicated in Note 35.7, the Group has chosen not to recognise in the balance sheet the lease liabilities and the right-of-use asset corresponding to short term and low value lease contracts.
73
2019 CONSOLIDATED ANNUAL ACCOUNTS
The commitments deriving from these lease contracts are as follows:
Balance at 31 December, 2019 | Thousands of Euros | |||||
Type | Less than 1 | 1 to 5 years | Over 5 years | |||
year | ||||||
Buildings | 7,438 | 1,367 | - | |||
Vehicles | 15,085 | 4,432 | - | |||
Other assets | 2,621 | 1,940 | - | |||
25,144 | 7,739 | |||||
- | ||||||
Balance at 31 December, 2018 | Thousands of Euros | |||||
Less than 1 | 1 to 5 years | Over 5 years | ||||
Type | year | |||||
Buildings | 12,142 | 34,653 | 18,233 | |||
Vehicles | 17,341 | 20,667 | 10,334 | |||
Other assets | 106 | 247 | - | |||
29,589 | 55,567 | 28,567 | ||||
30.Business combinations
Details of changes in goodwill are presented in Note 13.
30.1. Goodwill included in 2019
Details of the net assets acquired and goodwill recognised on business combinations during the year are as follows:
Cash | Deferred | Total | Fair value of | ||||
Thousands of Euros | amount at | purchase | identifiable net | Goodwill | |||
payment | |||||||
fair value | price | assets | |||||
Business combinations Cash Europe (1) | 15,320 | 7,526 | 22,846 | 15,334 | 7,512 | ||
Business combinations Cash Latin America (1) | 30,812 | 34,282 | 65,094 | 40,175 | 24,919 | ||
Business combinations Cash ROW (1) | 1,241 | 3,079 | 4,320 | 698 | 3,622 | ||
Business combinations Latin America Alarms (1) | 4,683 | 3,832 | 8,515 | 6,173 | 2,342 | ||
Business combinations Cibersecurity Europe (1) | 1,875 | 938 | 2,813 | 1,125 | 1,688 | ||
Business combinations Cibersecurity Latin America (1) | 14,450 | 7,225 | 21,675 | 7,647 | 14,028 | ||
Business combinations Security and Cibersecurity ROW (1) | 47,539 | 10,901 | 58,440 | 29,724 | 28,716 | ||
115,920 | 67,783 | 183,703 | 100,876 | 82,827 | |||
- Calculations relating to business combinations are provisional and may be adjusted for up to a year from the acquisition date.
Goodwill is not tax-deductible.
Had the businesses acquired in 2019 been acquired on 1 January 2019, consolidated income statement revenues would have been EUR 30,316 thousand higher and consolidated profit/(loss) for the year would have been reduced by EUR 5,990 thousand.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
Prosegur has recognised under administration and sales expenses of the consolidated income statement transaction costs of EUR 4,366 thousand (in 2018: EUR 5,825 thousand).
The cash outflow incurred to purchase these businesses, net of cash acquired, is as follows:
Cash and | Cash outflow | |||
Cash | cash | |||
Thousands of Euros | for the | |||
payment | equivalents | |||
acquisition | ||||
acquired | ||||
Business combinations Cash Europe (1) | 15,320 | (5,928) | 9,392 | |
Business combinations Cash Latin America (1) | 30,812 | (3,153) | 27,659 | |
Business combinations Cash ROW (1) | 1,241 | (5) | 1,236 | |
Business combinations Latin America Alarms (1) | 4,683 | - | 4,683 | |
Business combinations Cibersecurity Europe (1) | 1,875 | (87) | 1,788 | |
Business combinations Cibersecurity Latin America (1) | 14,450 | (99) | 14,351 | |
Business combinations Security and Cibersecurity ROW (1) | 47,539 | (571) | 46,968 | |
115,920 | (9,843) | 106,077 | ||
- Calculations relating to business combinations are provisional and may be adjusted for up to a year from the acquisition date.
Cash business combinations in Europe
In 2019, Prosegur acquired a software engineering company in Europe specialised in the development of technological solutions for the insurance industry implemented in open systems and platforms, and a company that provides cash management services related to digital software of the retail sector. The total purchase price was EUR 22,846 thousand, comprising a cash consideration of EUR 15,320 thousand, a deferred contingent consideration amounting to a total of EUR 5,952 thousand, due in 2020, 2021, 2022, 2023, and a deferred payment of EUR 1,574 thousand, due in 2020.
The revenue and net profits contributed to the consolidated income statement for 2019 amounted to EUR 500 thousand and EUR 163 thousand respectively.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 5,928 | 5,928 | |
Clients and other receivables | 1,452 | 1,452 | |
Non-current financial assets | 1,126 | 1,126 | |
Deferred tax assets | 155 | 155 | |
Current tax assets | 56 | 56 | |
Other liabilities and expenses | (386) | (386) | |
Property, Plant and Equipment | 789 | 789 | |
Trade and other payables | (1,540) | (1,540) | |
Other Current Liabilities | (5) | (5) | |
Deferred tax liabilities | (12) | (2,600) | |
Other intangible assets | 3 | 10,359 | |
Identifiable net assets acquired | 7,566 | 15,334 |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
The goodwill on this acquisition was allocated to the Cash segment and to the European geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 9,882 thousand) with a useful life of 15 years and a software specialised in the development of technological solutions for the insurance industry (EUR 474 thousand) with a useful life of 8 years.
Cash business combinations in LatAm
During 2019, Prosegur acquired a number of security companies and assets in LatAm providing cash in transit and cash management and administrative banking services. The total purchase price was EUR 65,094 thousand, comprising a cash consideration of EUR 30,812 thousand, a deferred contingent consideration amounting to a total of EUR 19,748 thousand, due in 2019, 2020 and 2021 and a deferred payment of EUR 14,534 thousand, due in 2020 and 2021.
The revenue and net profits contributed to the consolidated income statement for 2019 amounted to EUR 29,309 thousand and EUR 2,898 thousand respectively.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 3,153 | 3,153 | |
Rights of use | 2,027 | 2,027 | |
Property, Plant and Equipment | 914 | 914 | |
Clients and other receivables | 8,979 | 8,979 | |
Non-current financial assets | 16 | 16 | |
Deferred tax assets | 114 | 114 | |
Current tax assets | 983 | 983 | |
Provisions | (6,812) | (6,812) | |
Trade and other payables | (9,838) | (9,838) | |
Other current Liabilities | (270) | (270) | |
Current tax assets | (724) | (724) | |
Short-term lease liabilities | (1,663) | (1,663) | |
Long-term lease liabilities | (381) | (381) | |
Deferred tax liabilities | (36) | (3,536) | |
Other intangible assets | 48 | 47,213 | |
Identifiable net assets acquired | (3,490) | 40,175 | |
The goodwill on this acquisition was allocated to the Cash segment and to the LatAm geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets are based on client relationships (EUR 41,871 thousand) with a useful life of 9-13 years and a non-competition agreement (EUR 5,294 thousand) with a useful life of 5 and 10 years.
76
2019 CONSOLIDATED ANNUAL ACCOUNTS
Cash business combinations in ROW
In 2019, Prosegur acquired a security company that provides cash in transit and cash management services. The total purchase price was EUR 4,320 thousand, comprising a cash payment of EUR 1,241 thousand, and a deferred payment of EUR 3,079 thousand maturing in 2019 and 2020.
It contributed revenue of EUR 3,837 thousand and net losses for the year of EUR 742 thousand to the consolidated income statement for 2019.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |
(Thousands of Euros) | the acquired |
company | |
Cash and cash equivalents | 5 |
Property, Plant and Equipment | 374 |
Rights of use | 269 |
Clients and other receivables | 502 |
Trade and other payables | (475) |
Current tax assets | 86 |
Other intangible assets | - |
Deferred tax liabilities | - |
Short-term financial liabilities | (180) |
Long-term financial liabilities | (26) |
Short-term lease liabilities | (150) |
Long-term lease liabilities | (131) |
Inventory | 19 |
Identifiable net assets acquired | 293 |
Fair value
5
374
269
502
(475)
86
540
(135)
(180)
(26)
(150)
(131)
19
698
The goodwill on this acquisition was allocated to the Cash segment and to the ROW geographical area and mainly reflects the profitability of the business and sizeable synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 512 thousand) with a useful life of 19 years and trademarks (EUR 28 thousand) with a useful life of 1 year.
Alarms Business combinations in LatAm
In 2019, Prosegur acquired a series of assets in LatAm from a security company specialising in monitoring residential alarm systems. The total purchase price was EUR 8,515 thousand, comprising a cash payment of EUR 4,683 thousand, and a deferred payment of EUR 3,832 thousand maturing in 2020.
77
2019 CONSOLIDATED ANNUAL ACCOUNTS
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | ||||
(Thousands of Euros) | the acquired | Fair value | ||
company | ||||
Property, Plant and Equipment | 712 | 712 | ||
Other intangible assets | 22 | 5,377 | ||
Clients and other receivables | 38 | 38 | ||
Inventory | 46 | 46 | ||
Identifiable net assets acquired | 818 | 6,173 | ||
The goodwill on this acquisition was allocated to the Alarms segment and to the LatAm geographical area and mainly reflects the profitability of the business and sizeable synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 5,355 thousand) with a useful life of 8 years.
Security business combinations in Europe
During 2019, Prosegur acquired a security company in Europe specialising in cybersecurity. The total purchase price was EUR 2,813 thousand, comprising a cash consideration of EUR 1,875 thousand, a deferred contingent consideration amounting to a total of EUR 786 thousand, due in 2023 and 2024 and a deferred payment of EUR 152 thousand, due in 2021, 2022, 2023, 2024 and 2025.
It contributed revenue of EUR 503 thousand and net losses for the year of EUR 439 thousand to the consolidated income statement for 2019.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 87 | 87 | |
Property, Plant and Equipment | 2 | 2 | |
Clients and other receivables | 383 | 383 | |
Trade and other payables | (218) | (218) | |
Other intangible assets | - | 1,050 | |
Deferred tax liabilities | - | (179) | |
Identifiable net assets acquired | 254 | 1,125 | |
The goodwill on this acquisition was allocated to the Security segment and to the Europe geographical area and mainly reflects the profitability of the business and sizeable synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 791 thousand) with a useful life of 9 years, and trademarks (EUR 259 thousand) with an indefinite useful life.
Security business combinations in LatAm
During 2019, Prosegur acquired a security company in LatAm specialising in cybersecurity. The total purchase price was EUR 21,675 thousand, comprising a cash consideration of EUR 14,450 thousand, a deferred contingent consideration amounting to a total of EUR 6,513 thousand, due in 2023 and 2024 and a deferred payment of EUR 712 thousand, due in 2021, 2022, 2023, 2024 and 2025.
78
2019 CONSOLIDATED ANNUAL ACCOUNTS
It contributed revenue of EUR 7,105 thousand and net losses for the year of EUR 82 thousand to the consolidated income statement for 2019.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | Fair value | ||
(Thousands of Euros) | the acquired | ||
company | |||
Cash and cash equivalents | 99 | 99 | |
Rights of use | 99 | 99 | |
Property, Plant and Equipment | 295 | 295 | |
Deferred tax assets | 15 | 15 | |
Current tax assets | 205 | 205 | |
Clients and other receivables | 5,096 | 5,096 | |
Trade and other payables | (3,329) | (3,329) | |
Provisions | (66) | (66) | |
Other intangible assets | 270 | 8,262 | |
Deferred tax liability | - | (2,717) | |
Short-term financial liabilities | (23) | (23) | |
Long-term financial liabilities | (97) | (97) | |
Short-term lease liabilities | (172) | (172) | |
Long-term lease liabilities | (20) | (20) | |
Identifiable net assets acquired | 2,372 | 7,647 |
The goodwill on this acquisition was allocated to the Security segment and to the LatAm geographical area and mainly reflects the profitability of the business and sizeable synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 6,939 thousand) with a useful life of 7 years, and trademarks (EUR 1,053 thousand) with an indefinite useful life.
Security Business combinations in ROW
During 2019, Prosegur acquired a number of security companies in ROW providing services of surveillance, remote video-surveillance,cyber-security and sales of security devices. The total purchase price was of EUR 58,440 thousand, comprising a cash consideration of EUR 47,539 thousand, a deferred contingent consideration amounting to a total of EUR 10,324 thousand, due in 2019, 2022, 2023, and 2024 and a deferred payment of EUR 577 thousand, due in 2021, 2022, 2023, 2024 and 2025.
It contributed revenue of EUR 153,058 thousand and net losses for the year of EUR 1,621 thousand to the consolidated income statement for 2019.
79
2019 CONSOLIDATED ANNUAL ACCOUNTS
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 571 | 571 | |
Property, Plant and Equipment | 919 | 919 | |
Rights of use | 2,400 | 2,400 | |
Clients and other receivables | 36,500 | 36,500 | |
Inventory | 5,096 | 5,096 | |
Current tax assets | 311 | 311 | |
Other liabilities and expenses | (581) | (581) | |
Trade and other payables | (18,491) | (18,492) | |
Non-current financial assets | 166 | 166 | |
Short-term financial liabilities | (13,741) | (13,741) | |
Long-term financial liabilities | (249) | (249) | |
Short-term lease liabilities | (1,343) | (1,343) | |
Long-term lease liabilities | (1,198) | (1,198) | |
Deferred tax assets | 4,227 | 4,227 | |
Provisions | (4,801) | (4,801) | |
Current tax liability | (93) | (93) | |
Deferred tax liability | - | (4,670) | |
Other intangible assets | 77 | 24,702 | |
Identifiable net assets acquired | 9,770 | 29,724 |
The goodwill on this acquisition was allocated to the Security segment and to the ROW geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 20,951 thousand) with a useful life of between 8 and 27 years and trademarks (EUR 3,674 thousand) with a useful life of 5 years and an indefinite useful life.
30.2. Goodwill added in 2018 with valuation completed in 2019
Details of the net assets acquired and goodwill recognised on business combinations during 2018 for which measurement was completed in 2019 are as follows:
Thousands of Euros
Business combinations Cash Latin America Business combinations Security ROW
Cash | Deferred | Total | Fair value of | ||||||
amount at | purchase | identifiable net | Goodwill | ||||||
payment | |||||||||
fair value | price | assets | |||||||
26,568 | 22,593 | 49,161 | 25,850 | 23,311 | |||||
18,526 | 5,652 | 24,178 | 11,532 | 12,646 | |||||
45,094 | 28,245 | 73,339 | 37,382 | 35,957 |
Goodwill is not tax-deductible.
80
2019 CONSOLIDATED ANNUAL ACCOUNTS
At 31 December 2018, the total goodwill recognised for these additions was EUR 23,133 thousand for the LatAm Cash business combinations and EUR 12,338 thousand for the Security ROW business combinations. The difference generated by the verification of the fair values in 2019 corresponded to the re-estimation of the opening balance associated with LatAm Cash business combinations and to the re-estimation of the deferred contingent considerations associated with the ROW Security business combinations. Prosegur has not restated 2018 figures as the changes are not significant.
The cash outflow incurred to purchase these businesses, net of cash acquired, is as follows:
Cash and | Cash | ||||||
Thousands of Euros | Cash | cash | outflow for | ||||
payment | equivalents | the | |||||
acquired | acquisition | ||||||
Business combinations Cash Latin America | 26,568 | (2,887) | 23,681 | ||||
Business combinations Security ROW | 18,526 | (2,076) | 16,450 | ||||
45,094 | (4,963) | 40,131 |
Cash business combinations in LatAm
In 2018, Prosegur acquired a series of security companies and assets providing cash in transit and cash management services and conducting correspondent banking activities in LatAm. The total purchase price was EUR 49,161 thousand, comprising a cash payment of EUR 26,568 thousand, and a deferred contingent consideration totalling EUR 22,593 thousand maturing in 2018, 2019, 2020 and 2021.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 2,887 | 2,887 | |
Property, Plant and Equipment | 9,710 | 9,710 | |
Clients and other receivables | 6,899 | 6,899 | |
Inventory | 129 | 129 | |
Non-current financial assets | 859 | 859 | |
Deferred tax assets | 981 | 981 | |
Current tax assets | 581 | 581 | |
Trade and other payables | (7,379) | (7,379) | |
Short-term financial liabilities | (440) | (440) | |
Long-term financial liabilities | (2,241) | (2,241) | |
Provisions | (8,702) | (8,702) | |
Current tax liability | (565) | (565) | |
Deferred tax liability | (342) | (5,995) | |
Other intangible assets | 27 | 29,126 | |
Identifiable net assets acquired | 2,404 | 25,850 | |
The goodwill on this acquisition was allocated to the Cash segment and to the LatAm geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 27,991 thousand) with a useful life of between 7 and 16 years, licences (EUR 178 thousand) with a
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2019 CONSOLIDATED ANNUAL ACCOUNTS
useful life of 2 years, and trademarks (EUR 930 thousand) with a useful life between 2 years and one month and a half.
Security Business combinations in ROW
In 2018, Prosegur acquired a number of security companies providing surveillance and remote video surveillance services in ROW. The total purchase price was of EUR 24,178 thousand, consisting of a cash payment of EUR 18,526 thousand, and a deferred contingent consideration for a total of EUR 5,652 thousand due for payment in 2018, 2019, 2020, 2021, 2022 and 2023.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | Fair value | ||
(Thousands of Euros) | the acquired | ||
company | |||
Cash and cash equivalents | 2,076 | 2,076 | |
Property, Plant and Equipment | 399 | 399 | |
Clients and other receivables | 2,374 | 2,374 | |
Inventory | 5 | 5 | |
Deferred tax assets | 509 | 509 | |
Current tax assets | 4 | 4 | |
Other financial assets | 27 | 27 | |
Provisions | (114) | (114) | |
Trade and other payables | (1,525) | (1,525) | |
Other financial assets | 102 | 102 | |
Short-term financial liabilities | (139) | (139) | |
Other financial liabilities | (7) | (7) | |
Current tax liability | (334) | (334) | |
Deferred tax liability | - | (2,701) | |
Other intangible assets | 25 | 10,856 | |
Identifiable net assets acquired | 3,402 | 11,532 | |
The goodwill on this acquisition was allocated to the Security segment and to the ROW geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 9,982 thousand) with a useful life of between 10 and 23 years and trademarks (EUR 849 thousand) with a useful life of between 5 and 9 years.
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2019 CONSOLIDATED ANNUAL ACCOUNTS
30.3. Goodwill incorporated in year 2018 not reviewable in 2019
Details of the net assets acquired and goodwill recognised on business combinations during 2018 whose valuation has not been reviewed in 2019 are as follows:
Thousands of Euros
Business combinations Cash Europe Business combinations Cash ROW Business combinations Alams Latin America
Cash | Deferred | Total | Fair value of | ||||
amount at | purchase | identifiable net | Goodwill | ||||
payment | |||||||
fair value | price | assets | |||||
6,922 | 4,742 | 11,664 | 5,674 | 5,990 | |||
12,593 | 8,071 | 20,664 | 8,757 | 11,907 | |||
124 | 650 | 774 | 320 | 454 | |||
19,639 | 13,463 | 33,102 | 14,751 | 18,351 |
Goodwill is not tax-deductible.
The cash outflow incurred to purchase these businesses, net of cash acquired, is as follows:
Thousands of Euros
Business combinations Cash Europe Business combinations Cash ROW Business combinations Alams Latin America
Cash and | Cash | ||||||
Cash | cash | outflow for | |||||
payment | equivalents | the | |||||
acquired | acquisition | ||||||
6,922 | (2,358) | 4,564 | |||||
12,593 | (2,232) | 10,361 | |||||
124 | (20) | 104 | |||||
19,639 | (4,610) | 15,029 | |||||
Cash business combinations in Europe
In 2018, in Europe, Prosegur acquired a series of security companies providing ATM management and maintenance services, cash in transit and document management and the development and marketing of software specialising in prevention of money-laundering and terrorist financing. The total purchase price was of EUR 11,664 thousand, comprising a cash consideration of EUR 6,922 thousand, a deferred contingent consideration amounting to a total of EUR 4,492 thousand, due in 2018, 2019, 2020, 2021, 2022 and 2023 and a deferred payment of EUR 250 thousand, due in 2019.
83
2019 CONSOLIDATED ANNUAL ACCOUNTS
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 2,358 | 2,358 | |
Property, Plant and Equipment | 176 | 176 | |
Clients and other receivables | 2,175 | 2,175 | |
Inventory | 786 | 786 | |
Deferred tax assets | 37 | 37 | |
Current tax assets | 12 | 12 | |
Non-current financial assets | 52 | 52 | |
Trade and other payables | (1,979) | (1,979) | |
Other liabilities and expenses | (414) | (414) | |
Short-term financial liabilities | (342) | (342) | |
Deferred tax liability | (148) | (1,087) | |
Other liabilities | (1) | (1) | |
Other intangible assets | 429 | 3,901 | |
Identifiable net assets acquired | 3,141 | 5,674 | |
The goodwill on this acquisition was allocated to the Cash segment and to the European geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 3,311 thousand) with a useful life of 6-12 years and other intangible assets (EUR 161 thousand) with a useful life of 6.5 years.
Cash business combinations in ROW
In 2018, Prosegur acquired a security company that provides cash in transit and cash management services in ROW. The total purchase price has been EUR 20,664 thousand, comprising a cash payment of EUR 12,593 thousand, and a deferred contingent consideration totalling EUR 8,071 thousand.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 2,232 | 2,232 | |
Property, Plant and Equipment | 4,540 | 4,540 | |
Clients and other receivables | 6,851 | 6,851 | |
Inventory | 216 | 216 | |
Deferred tax assets | 144 | 654 | |
Trade and other payables | (5,819) | (5,819) | |
Long-term financial liabilities | (202) | (202) | |
Short-term financial liabilities | (3,131) | (3,131) | |
Provisions | - | (1,700) | |
Deferred tax liability | (13) | (2,166) | |
Other intangible assets | 105 | 7,282 | |
Identifiable net assets acquired | 4,923 | 8,757 |
84
2019 CONSOLIDATED ANNUAL ACCOUNTS
Goodwill was allocated to the Cash segment to the ROW geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur. The intangible assets acquired comprise client relationships (EUR 5,717 thousand) with a useful life of 14 years, and trademarks (EUR 1,460 thousand) with a useful life of 5 years.
Alarms Business combinations in LatAm
In 2018, Prosegur acquired a security company specialising in monitoring residential alarm systems in LatAm. The total purchase price was EUR 774 thousand, comprising a cash payment of EUR 124 thousand, and a deferred payment of EUR 650 thousand maturing in 2018.
The assets and liabilities that arose from this acquisition are as follows:
Carrying amount of | |||
(Thousands of Euros) | the acquired | Fair value | |
company | |||
Cash and cash equivalents | 20 | 20 | |
Property, Plant and Equipment | 453 | 453 | |
Clients and other receivables | 1,009 | 1,009 | |
Inventory | 250 | 250 | |
Deferred tax assets | 643 | 643 | |
Current tax assets | 216 | 216 | |
Non-current financial assets | 53 | 53 | |
Provisions | (754) | (754) | |
Other current liabilites | (88) | (88) | |
Trade and other payables | (1,262) | (1,262) | |
Other liabilities and expenses | (88) | (88) | |
Other current financial liabilities | (142) | (142) | |
Deferred tax liability | (14) | (14) | |
Other intangible assets | 24 | 24 | |
Identifiable net assets acquired | 320 | 320 |
The goodwill on this acquisition was allocated to the Alarms segment and to the LatAm geographical area and mainly reflects the profitability of the business and major synergies expected to arise as a result of the acquisition by Prosegur.
31.Related parties
Prosegur is controlled by Gubel, S.L., which was incorporated in Madrid and holds 51.618% of the Company's share capital. The remaining 48.382% is held by various shareholders, including Invesco Limited with 3.561%, AS Inversiones S.L. with 5.492% and FMR LLC with 6.195% (Note 22).
Procurement of goods and services
In October 2005 Prosegur and Proactinmo, S.L.U (controlled by Gubel, S.L.) signed a lease contract for the building located at Calle Santa Sabina, 8 (Madrid), which is adjacent to a building at Calle Pajaritos, 24. In December 2015 the novation of the contract was signed updating the current rent to market conditions, established as EUR 1,012 thousand and extending the term of the contract from five to ten years, renewable for a further year. In 2019, Proactinmo, S.L.U. invoiced the Group EUR 1,149 thousand for that lease contract (EUR 1,172 thousand in 2018).
85
2019 CONSOLIDATED ANNUAL ACCOUNTS
In December 2015 a lease contract was signed with Proactinmo, S.L.U. (controlled by Gubel, S.L.) for the building located in calle Pajaritos, number 24, Madrid. This contract has a term of ten years, and may be extended for an additional year and was arranged at arm's length. In 2019, Proactinmo, S.L.U. invoiced the Group EUR 815 thousand for that lease contract (EUR 918 thousand in 2018).
Prosegur has a lease contract with Proactinmo, S.L.U (controlled by Gubel, S.L.) for the building located at calle San Maximo, 3 and 5, in Madrid. This contract was executed in December 2018. This contract has a term of five years and was arranged at arm's length. In 2019, Proactinmo, S.L.U. invoiced the Group EUR 701 thousand for that lease contract (EUR 15 thousand in 2018).
The leases are at market prices.
During the year, the Euroforum Group (controlled by Gubel, S.L.) billed Prosegur for hotel services amounting to EUR 325 thousand (2018: EUR 733 thousand).
During the year, Agrocinegética San Huberto (controlled by Gubel, S.L) invoiced Prosegur for EUR 398 thousand (EUR 182 thousand in 2018).
Provision of services
In 2019, Prosegur provided security services to Gubel, S.L. in the amount of EUR 18 thousand (EUR 17 thousand in 2018) and to Proactinmo, S.L.U. (controlled by Gubel, S.L) for EUR 59 thousand (EUR 48 thousand in 2018).
During the year, Prosegur billed the Euroforum Group (controlled by Gubel, S.L.) EUR 397 thousand (2018: EUR 260 thousand).
In 2019 and 2018 no assets were sold to related companies.
Remuneration of members of the Board of Directors and senior management personnel
1. Remuneration of members of the Board of Directors
The total remuneration accrued by members of the Board of Directors is as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Fixed remuneration | 1,724 | 1,724 | |
Variable remuneration | 250 | 308 | |
Remuneration for membership of the Board | 160 | 160 | |
Per diems | 169 | 143 | |
Life insurance premiums | 73 | 67 | |
2,376 | 2,402 | ||
2. Remuneration of Senior Management personnel
Senior Management personnel are understood to be Prosegur employees who hold, de facto or de jure, Senior Management positions reporting directly to the Board of Directors, executive committees or Executive Director, including those holding a power of attorney which relates to the corporate object and is not restricted to specific areas or matters.
86
2019 CONSOLIDATED ANNUAL ACCOUNTS
The total remuneration accrued by Senior Management personnel of Prosegur is as follows:
Thousands of Euros | |||
2019 | 2018 | ||
Fixed remuneration | 1,720 | 1,749 | |
Variable remuneration | 774 | 741 | |
Remuneration in kind | 21 | 27 | |
Life insurance premiums | 11 | 12 | |
2,526 | 2,529 |
The expenses for civil liability insurance for directors and members of Senior Management amount to EUR 172 thousand (2018: EUR 154 thousand).
At the general meeting held on 28 April 2015, the shareholders approved the 2017 Plan of long-term incentives for Prosegur Executive Director and Senior Management. The 2017 Plan is generally linked to value creation during the 2015-2017 period and foresees the payment of share-based incentives in cash to the Executive Director and Senior Management of the Company, the same as for the previous plan (Note 35.20).
At the general meeting held on 28 May 2018, the shareholders approved the 2020 Plan of long-term incentives for Prosegur Executive Director and Senior Management. The Plan is linked to the creation of value in the 2018-2020 period and envisages the payment of cash incentives, calculated for certain beneficiaries based on the share price. The Plan has a duration of three years and is based on length of service and target achievement. In the vast majority of cases, the Plan measures target achievement from 1 January 2018 until 31 December 2020 and length of service from 1 January 2018 until 31 December 2022.
In both plans, for the purpose of determining the value in cash of each share to which the Beneficiary is entitled, the average listed price of the Prosegur shares on the Stock Exchange will be taken as reference during the last fifteen trading sessions of the month prior to the one in which the shares are awarded.
Quantification of the total incentive will depend on the degree of achievement of the targets established in line with the strategic plan.
The 2017 and 2020 long-term incentive Plans for the Executive Director and Senior Management of Prosegur (Note 5.1), within the Salaries and wages paragraph, have been included in the expense accrued during the year in relation to the 2019 commitment amounting to EUR 5,674 thousand (EUR 4,707 thousand in 2018) (Note 23).
With regard to the total commitment acquired, it is recognised as an expense in the income statement with a credit to provisions on an accruals basis over the Plan assessment period (see Note 23).
In 2019 EUR 1,594 thousand were used, corresponding to the second payment under the 2017 Plan (Note 23) (2018: EUR 8,967 thousand).
Loans and investments with related parties
At 31 December 2019 and 2018, there were no loans to related companies except for the loan granted from Prosegur to one of its subsidiaries in India, SIS Cash Services Private Ltd, which is consolidated using the equity method for the amount of EUR 2,450 thousand (Note 18) (EUR 2,448 thousand in 2018).
Through the company Gestconsult S.A. Prosegur invested EUR 50,000 thousand in a fixed income fund in 2017, for which an expense was recognised for a management fee of 0.60%. The chairman of
87
2019 CONSOLIDATED ANNUAL ACCOUNTS
Gestconsult, Juan Lladó Fernandez-Urrutia, is a person related to Mr Christian Gut Revoredo. Following a favourable report from the corresponding Committee, on 3 April 2017 the Board of Directors authorised this related transaction. In 2019 a disinvestment of EUR 20,000 thousand took place in the fixed income fund mentioned above. That investment is recorded under the heading of other financial assets at 31 December 2019 and 2018.
Information required by article 229 of the Spanish Companies Act
As required by articles 228, 229 and 230 of the Revised Text of the Spanish Companies Act, approved by Royal Legislative Decree 1/2010 of 2 July 2010 and amended by Act 31/2014 concerning improvements to corporate governance, the members of the Board of Directors and their related parties declare that they have not been involved in any direct or indirect conflicts of interest with the Company in 2019.
Recurrently, and for many years before the appointment of Fernando Vives as a director of the Company, the law firm J&A Garrigues, S.L.P. has provided Prosegur with legal counsel and tax advice, within the ordinary course of business and in market terms. Prosegur does not work solely with J&A Garrigues, S.L.P., but also receives legal counsel and tax advice from other firms. The fees received by J&A Garrigues, S.L.P. from Prosegur are not material for the firm and neither do they represent a significant amount on the accounts of Prosegur. At 31 December 2019 the fees amounted to EUR 668 thousand, representing less than 0.5% of Prosegur's total administration and sales expenses (Note 4) (at 31 December 2018 the amount was EUR 746 thousand).
In addition, in 2019 Prosegur provided surveillance services to the offices of J&A Garrigues, S.L.P. The surveillance services billed to J&A Garrigues, S.L.P. at 31 December 2019 stood at EUR 697 thousand, accounting for less than 0.5% of Prosegur's sales (at 31 December 2018 it was EUR 636 thousand).
Furthermore, these services are provided through partners from the firm other than Fernando Vives, whose remuneration as a partner of J&A Garrigues, S.L.P. is entirely independent and in no way linked to the amount invoiced by the firm to Prosegur. Accordingly, the Board of Directors considers that the business relationship between the law firm J&A Garrigues, S.L.P. and Prosegur, due to its recurrent, non-exclusive nature in the ordinary course of business, and its scant significance in the terms outlined, in no way affects the independence of Fernando Vives to discharge the duties of independent director of Prosegur.
32.Financial risk management and fair value
32.1. Financial Risk Factors
Prosegur's activities are exposed to currency risk, interest rate risk, price risk, credit risk and liquidity risk. Prosegur's global risk management programme aims to reduce these risks using a variety of methods, including financial instruments.
The Financial Department identifies, proposes and carries out the management of these risks along with other operating units of Prosegur in accordance with policies approved by the Executive Committee.
Currency risk
Prosegur operates on an international level and is therefore exposed to exchange rate risks for currency operations. Currency risk arises when future trade transactions, equity investments, profit and loss from operating activities and financial positions are denominated in a foreign currency other than the functional currency of each one of the Prosegur companies.
88
2019 CONSOLIDATED ANNUAL ACCOUNTS
To control the exchange rate in these operations, Prosegur's policy is to use appropriate instruments to balance and neutralise the risks associated with monetary in- and outflows, considering market expectations.
As Prosegur intends to remain in the foreign markets in which it is present in the long term, it does not hedge equity investments, assuming the risk relating to the translation to Euros of the assets and liabilities denominated in foreign currencies.
The following provides details of Prosegur's exposure to currency risks, with details on the carrying amounts of the financial instruments denominated in a foreign currency other than the functional one of each country:
At 31 December 2019 | |||||||||
Thousands of Euros | Euro | US Dollar | Brazilian | Colombian | South African | Australian | Other | Total | |
Real | Peso | Rand | dollar | currencies | position | ||||
Loans between related parties | 15,067 | - | - | - | - | - | 62 | 15,129 | |
Non-current financial assets | - | 3,191 | 2,786 | - | - | - | 1,212 | 7,189 | |
Total non-current assets | 15,067 | 3,191 | 2,786 | - | - | - | 1,274 | 22,318 | |
Clients and other receivables | 14,359 | 23,553 | - | - | - | - | 4,929 | 42,841 | |
Other current financial assets | 35,864 | 291 | - | - | - | 9,039 | 2,298 | 47,492 | |
Cash and cash equivalents | 10,042 | 20,769 | - | - | - | 7,575 | 635 | 39,021 | |
Total current assets | 60,265 | 44,613 | - | - | - | 16,614 | 7,862 | 129,354 | |
Financial liabilities | 7,397 | 657 | - | - | 8,054 | ||||
Non-current liabilities | 7,397 | 657 | - | - | - | - | - | 8,054 | |
Trade and other payables | 41,999 | 13,013 | - | - | - | - | 15 | 55,027 | |
Financial liabilities | 5,056 | 850 | - | 2,065 | - | - | 102 | 8,073 | |
Current liabilities | 47,055 | 13,863 | - | 2,065 | - | - | 117 | 63,100 | |
Net position | 20,880 | 33,284 | 2,786 | (2,065) | - | 16,614 | 9,019 | 80,518 | |
At 31 December 2018 | |||||||||
Thousands of Euros | Euro | US Dollar | Brazilian | Colombian | South African | Australian | Other | Total | |
Real | Peso | Rand | dollar | currencies | position | ||||
Loans between related parties | - | - | - | - | - | - | - | - | |
Non-current financial assets | 15,241 | 221 | - | - | - | - | - | 15,462 | |
Total non-current assets | 15,241 | 221 | - | - | - | - | - | 15,462 | |
Clients and other receivables | 77,293 | 33,696 | - | - | - | - | 597 | 111,586 | |
Other current financial assets | 14,745 | 392 | - | - | 1,702 | 21,989 | - | 38,828 | |
Cash and cash equivalents | 32,591 | 4,996 | - | - | 434 | - | - | 38,021 | |
Total current assets | 124,629 | 39,084 | - | - | 2,136 | 21,989 | 597 | 188,435 | |
Financial liabilities | - | 353 | - | - | 16,534 | - | - | 16,887 | |
Non-current liabilities | - | 353 | - | - | 16,534 | - | - | 16,887 | |
Trade and other payables | 41,900 | 65,421 | - | - | - | - | - | 107,321 | |
Financial liabilities | 6,574 | 778 | 25 | 1,767 | - | - | 9,144 | ||
Derivative Financial Instruments | 2,161 | 1,294 | - | - | - | - | - | 3,455 | |
Current liabilities | 50,635 | 67,493 | 25 | 1,767 | - | - | - | 119,920 | |
Net position | 89,235 | (28,541) | (25) | (1,767) | (14,398) | 21,989 | 597 | 67,090 | |
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2019 CONSOLIDATED ANNUAL ACCOUNTS
Details of the main average and year-end exchange rates to Euros of the foreign currencies in which Prosegur operates are as follows:
2019 | 2018 | ||||||||
Average rate | Closing rate | Average rate | Closing rate | ||||||
US Dollar | 1.12 | 1.12 | 1.18 | 1.15 | |||||
Brazilian Real | 4.41 | 4.52 | 4.31 | 4.44 | |||||
Argentine Peso | 53.70 | 67.17 | 32.94 | 43.07 | |||||
Chilean Peso | 786.44 | 836.51 | 756.95 | 796.84 | |||||
Mexican Peso | 21.55 | 21.22 | 22.71 | 22.56 | |||||
Peruvian Nuevo Sol | 3.74 | 3.73 | 3.88 | 3.87 | |||||
Colombian Peso | 3,672.02 | 3,681.54 | 3,488.62 | 3,722.26 |
The strengthening (weakening) of the Euro vs. the Brazilian Real, Argentine Peso, Chilean Peso, Peruvian Nuevo Sol and US Dollar at 31 December would increase (decrease) the profit and loss and the equity in the amounts shown below.
This analysis is based on a variation of the foreign currency exchange rate that Prosegur deems reasonably possible at the end of the reporting period in question (increase and decrease in the exchange rate). This analysis assumes that all other variables, particularly interest rates, remain constant.
Increase of exchange rate | Decrease of exchange rate | |||||||
Thousands of Euros | Equity | Result | Equity | Result | ||||
At 31 December 2019 | 59,633 | 1,965 | (80,680) | 779 | ||||
Brazilian Real (15% variation) | ||||||||
Argentine Peso (25% variation) | 32,663 | 9,102 | (54,438) | (15,170) | ||||
Chilean Peso (10% variation) | 10,545 | 386 | (12,889) | 242 | ||||
Peruvian Nuevo Sol (10% variation | 11,336 | 353 | (13,855) | 825 | ||||
US Dollar (10% variation) | 6,668 | - | (8,149) | - | ||||
At 31 December 2018 | ||||||||
Brazilian Real (18% variation) | 66,230 | (4) | (48,952) | 3 | ||||
Argentine Peso (25% variation) | 93,440 | 15,565 | (56,064) | (9,339) | ||||
Chilean Peso (10% variation) | 14,609 | (2,648) | (11,953) | 2,754 | ||||
Peruvian Nuevo Sol (10% variation | 13,232 | (6,721) | (10,826) | 5,499 | ||||
US Dollar (10% variation) | (23) | (18) | 19 | (1,687) |
90
2019 CONSOLIDATED ANNUAL ACCOUNTS
Credit risk
Prosegur is not significantly exposed to credit risk. Bad debts are not a significant factor in the sector in which it operates. Independent credit ratings of clients are used if available. Otherwise, the Credit Control Department assesses each client's credit rating, considering financial position, past experience and other factors. Individual credit limits are established based on internal and external ratings in accordance with the limits set by the Financial Department. The use of the credit limits is monitored regularly.
Prosegur has formal procedures for detecting objective evidence of impairment on trade receivables. As a consequence, It identifies significant delays in payments and the methods to be followed to estimate the impairment loss based on an individual analysis by business area. Impairment of trade receivables at 31 December 2019 amounts to EUR 57,004 thousand (EUR 77,082 thousand in 2018) (Note 20). As the credit ratings relating to trade receivables not included in this provision are sufficient, this provision is considered to cover the credit risk.
In Spain, the Collections Department manages an approximate volume of 12,460 clients (excluding alarm clients) with a monthly average turnover of EUR 8,192 per month. 94% of payments are made by bank transfer and the remaining 6% in notes (cheques, promissory notes, direct debit, etc.).
Details of the percentage of total Prosegur turnover represented by the eight main clients are as follows:
2019 | 2018 | ||
Counterparty | |||
Customer 1 | 6.02% | 3.66% | |
Customer 2 | 4.03% | 2.58% | |
Customer 3 | 3.94% | 2.56% | |
Customer 4 | 3.92% | 2.48% | |
Customer 5 | 3.25% | 2.41% | |
Customer 6 | 2.09% | 1.31% | |
Customer 7 | 2.08% | 1.29% | |
Customer 8 | 2.06% | 1.29% |
In December 2019 it arranged a non-recourse factoring line for a total of EUR 15,130 thousand (EUR 4,068 thousand in 2018).
All financial assets contracted in 2019 are exposed to risk of default by the counterparties which, in all cases, are financial institutions with guaranteed solvency and high credit ratings that are not sensitive to adverse changes in the economic climate.
Liquidity risk
A prudent liquidity risk management policy is based on having sufficient cash and marketable securities, as well as sufficient short-, medium- and long-term financing through credit facilities to reach Prosegur's business targets safely, efficiently and on time. The Corporate Treasury Department aims to maintain liquidity and sufficient availability to guarantee Prosegur's business operations.
Management monitors Prosegur's liquidity reserves, which comprise credit available for drawdown (Note 24) and cash and cash equivalents (Note 21), based on expected cash flows.
Prosegur's liquidity position for 2019 is based on the following:
- Cash and cash equivalents of EUR 530,677 thousand at 31 December 2019 (EUR 558,355 thousand in 2018).
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2019 CONSOLIDATED ANNUAL ACCOUNTS
- EUR 741,624 thousand available in undrawn credit facilities at 31 December 2019 (EUR 703,648 thousand in 2018).
- Cash flows from operating activities in 2019 amounted to EUR 366,729 thousand (EUR 276,319 thousand in 2018).
The amounts presented in this table reflect the cash flows stipulated in the contract.
2019 | |||||||||||||||
Thousands of Euros | Carrying | Contractual | 6 months or | 6 months to | 1 to 2 years | 2 to 5 years | Over 5 years | ||||||||
amount | cash flows | less | 1 year | ||||||||||||
Non-derivative financial liabilities | |||||||||||||||
Bonds and other marketable securities | 1,304,634 | 1,385,750 | 15,250 | - | 15,250 | 738,750 | 616,500 | ||||||||
Loans and borrowings | 131,781 | 135,937 | 111,725 | 1,780 | 801 | 21,631 | - | ||||||||
Credit accounts | 63,190 | 75,691 | 46,106 | 29,585 | - | - | - | ||||||||
Other payables | 122,333 | 148,697 | 48,190 | 27,936 | 30,351 | 36,007 | 6,213 | ||||||||
Lease liabilities | 132,021 | 185,661 | 26,901 | 27,701 | 50,461 | 53,102 | 27,496 | ||||||||
Trade and other payables | 639,630 | 639,630 | 639,630 | - | - | - | - | ||||||||
2,393,589 | 2,571,366 | 887,802 | 87,002 | 96,863 | 849,490 | 650,209 | |||||||||
2018 | |||||||||||||||
Thousands of Euros | Carrying | Contractual | 6 months or | 6 months to | 1 to 2 years | 2 to 5 years | Over 5 years | ||||||||
amount | cash flows | less | 1 year | ||||||||||||
Non-derivative financial liabilities | |||||||||||||||
Bonds and other marketable securities | 1,302,494 | 1,401,000 | 15,250 | - | 15,250 | 745,750 | 624,750 | ||||||||
Loans and borrowings | 141,796 | 147,968 | 72,077 | 8,384 | 49,368 | 18,139 | - | ||||||||
Finance lease payables | 13,610 | 15,515 | 1,786 | 6,141 | 2,000 | 4,580 | 1,008 | ||||||||
Credit accounts | 14,434 | 15,114 | 7,672 | 7,442 | - | - | - | ||||||||
Other payables | 69,943 | 84,860 | 30,923 | 11,070 | 16,039 | 21,911 | 4,917 | ||||||||
Trade and other payables | 606,149 | 606,149 | 606,149 | - | - | - | - | ||||||||
2,148,426 | 2,270,606 | 733,857 | 33,037 | 82,657 | 790,380 | 630,675 |
Finally, systematic forecasts are prepared for cash generation and requirements, allowing Prosegur to determine and monitor its liquidity position on an ongoing basis.
Interest rate, cash flow and fair value risks
Prosegur is exposed to interest rate risk due to its monetary assets and liabilities maintained in its statement of financial position.
The exposure of Prosegur's financial liabilities (excluding other payables) at the contract review dates is as follows:
Thousands of Euros
At 31 December 2019
Total financial liabilities (fixed rate)
Total financial liabilities (floating interest rate)
At 31 December 2018
Total financial liabilities (fixed rate)
Total financial liabilities (floating interest rate)
6 months | 6 to 12 | 1 to 5 | Over 5 | Total |
or less | months | years | years | |
49,118 | 23,029 | 771,690 | 605,832 | 1,449,669 |
137,007 | 26,416 | 18,534 | - | 181,957 |
186,125 | 49,445 | 790,224 | 605,832 | 1,631,626 |
86,488 | 13,196 | 704,711 | 593,347 | 1,397,742 |
7,370 | 7,214 | 60,008 | - | 74,592 |
93,858 | 20,410 | 764,719 | 593,347 | 1,472,334 |
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Prosegur Compañía de Seguridad SA published this content on 24 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 September 2020 07:24:03 UTC
