Morningstar | Narrow-Moat Prosegur Delivers Solid Underlying Result Masked by Huge Currency Hit
Narrow-moat Prosegur delivered a set of full-year results decimated by adverse currency movements but very much in line with our expectations for the period. Organic revenue growth came in at 6.5%, partly weighed down by some temporary effects, while the company’s Latin American currency exposure, particularly that to hyperinflation-hit Argentina, impacted by more than 16%, the highest level in a decade. We do not anticipate making any material changes to our forecasts on the back of these numbers and reiterate our EUR 7.10 fair value estimate. We believe the shares are currently very attractively priced.Divisionally, Prosegur's cash continued to grow apace, with organic revenue growth of 8.5% over the period. The company explained the dip in organic growth in the guarding business as the effect of a client portfolio optimisation. We read this as a clear-out of some lower-margin contracts and wait to see if this program will have a material benefit on margins in this area over the coming year. Encouragingly, the proliferation of integrated security contracts--where technology is combined with traditional manned guarding--continued, with these types of contract now representing 23% of security revenue, up from 20% last year. Lastly, the alarms business saw the highest level of growth in the group, with revenue rising almost 20% organically and margins picking up by 40 basis points to 1.8% as the business begins to get critical mass in at least some regions.
Prosegur, Compania de Seguridad and its subsidiaries are engaged in the provision of security guards and related services; fund transport and handling through a fleet of armored vehicles; alarm and electronic security systems; distribution and auxiliary services, including storage, logistics and distribution services; document transport and courier services; cleaning services and temporary employment. Co. is also engaged in security consulting and external training.
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