Annual Report 2008 - Securitas

Germany – U.S. Army
Securitas Germany has filed a law suit against the U.S. Army for
unpaid services under a now expired contract for guarding services.
Securitas’ claim is approximately MEUr 4.4. The U.S. Army has
filed a counterclaim of MEUR 10.5 plus penalties (requesting also
treble damages under U.S. law) alleging over-billings of 550,000
hours by Securitas. An independent auditing firm has been
engaged to assist in the investigation of the claim.
Based on Securitas’ U.S. counsel’s current evaluation of
Securitas’ claim and the conclusions of the auditing firm, Group
Management view a settlement solution as a possible option for
Securitas. Settlement discussions are therefore agreed with the
U.S. Army to continue during 2009.
United Kingdom – Loomis Cash Management (LCM)
On November 24, 2007, LCM sold its fixed assets and operation
to vaultex U.K. Ltd, jointly owned by HSBc Bank plc and Barclays
Bank PLc. On the same date LcM became a wholly owned subsidiary
of Loomis when the banks as part of this transaction sold
their shares to Loomis.
The sale of the fixed assets and the operations resulted in a loss
of MSEK 160 in the fourth quarter 2007, due to a lower transaction
price than book value and a provision made for warranties agreed
with the buyer. The provision was made to cover potential claims
from any of the banks customers claiming reconciliation errors or
omissions in their accounts with LcM during the period from June 1,
2007 up and until November 24, 2007, or claims that have arisen
and have been notified to LCM prior to June 1, 2007 but have not
been settled at closing. Such claims had to be presented to LcM
for investigation by LcM prior to August 31, 2008. After that date
this obligation expired. No additional claims were reported as per
August 31, 2008 which means that the provisions made are
expected to be used in full but still sufficient. LCM has also provided
the banks with a capped standard warranty related to the business
assets, subject to relevant disclosures.
A final settlement has, as of June 19, 2008, been agreed
between Securitas and the Bank of England regarding declarations
made by Loomis cash Management Ltd (LcM) that did not
comply with the rules of the Bank of England’s Note circulation
Scheme (NcS). The amount of the settlement is covered by the
provisions already taken. No further financial effects are expected.
LcM transferred most of its operations to vaultex U.K. Ltd (jointly
owned by HSBc Bank and Barclays Bank) on November 24,
2007, when vaultex replaced it as a member of the NcS.
Spain – Esabe
In January 1992, Securitas acquired Esabe, Spain’s then secondlargest
company in the guard services and cash-in-transit segments.
Shortly following such acquisition, the seller in such transaction
filed for bankruptcy under Spanish law. As a consequence
of such bankruptcy filing, Securitas has been involved in multiple
litigations with the bankruptcy estate in respect of claims by the
estate relating to the validity of the acquisition transaction and
certain accounts claimed to be due to the estate. During 2006,
final rulings in these litigations were made by the Spanish
Annual report
report of the Board of Directors
Supreme Court. Following these final rulings, Securitas entered
into settlement negotiations with representatives of the estate
and a final settlement was agreed with the estate resolving all of
the outstanding claims. A provision in the amount of the payment
to be made to the estate under the settlement agreement was
recognized as of December 31, 2006. The final settlement has
been signed by all parties and submitted to the relevant Spanish
court for its approval. The court has finally approved the settlement
agreement between the bankruptcy estate of Esabe and
Securitas. The settlement amount has been paid and the agreement
will be implemented according to its terms.
Spain – Overtime compensation
All major security companies in Spain have been compensating
their employees in respect of overtime work in accordance with
a labor agreement covering the period 2005 to 2008. In February
2007, the Spanish Supreme court ruled that the overtime compensation
under the existing labor agreement was not in compliance
with Spanish law.
The potential exposure in respect of overtime compensation
payable to employees of the security services and guarding companies
in Spain has increased due to the failure of the major security
companies and the local unions to negotiate a settlement
agreement on the overtime compensation. A petition has been
lodged with the lower court in Spain seeking specific guidance as
to how overtime compensation shall be calculated. A judgment
was rendered in January 2008 giving guidelines on calculation of
overtime pay, which substantially accepted the views of the
employers. The judgment has been appealed by the local unions.
Securitas will vigorously defend its position in the appeal. A decision
in the matter is not expected until mid-2009.
In the absence of final guidance on overtime compensation,
Securitas has chosen to apply the guidelines given by the court for
salary payments to be paid in 2008. For historic overtime compensation,
the company will await the outcome of the appeal. Securitas
will have to prepare for several suits from employees and former
employees in respect of historic overtime compensation.
Simultaneously, one industry association commenced legal
proceedings in an attempt to invalidate the current collective
bargaining agreement due to an alleged imbalance created by
the earlier decision on overtime pay by the Supreme court.
In a judgment rendered in January 2008 the court ruled – on
procedural grounds – against the industry association. It has now
appealed the court decision. Judgment in the appeal is not
expected until mid-2009.
Securitas Spain is already the target of several labor claims
and the number of claims is increasing. Based on this fact the
management estimates the additional compensation for the
historic overtime claims to amount to MSEK 128 and a provision
of this amount was recognized as of December 31, 2007.
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