Securitas AB Annual Report 2005

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The Group – Market The security market for guarding, alarm and cash handling Source: Securitas and Freedonia The global security market is worth approximately MSEK 850,000, with North America and Europe accounting for MSEK 644,000 or around 75 percent. Over the long term, the industry is expected to grow by 6–8 percent annually. Securitas has approximately an 8 percent market share of the global security market and a total of approximately 10 percent of the markets in Europe and the USA. The security markets in Europe and the USA have historically grown by an average of 6–8 percent a year. Alarms and cash handling services are growing the fastest, at approximately 8 percent a year, while guarding services are growing by approximately 5 percent. The alarm market (Securitas Systems and Direct) is now larger than the guarding market. A growing market and an increasingly specialized security industry The global security market is growing by 6–8 percent per year, driven by society’s increasing complexity and the resulting rise in the cost of disruptions and need for protection. Demand is growing quickly for differentiated and specialized services, and there is a clear segmentation of the market, a trend Securitas is leading. The USA and Europe account for approximately 75 percent of the total world market. The global security market is very large and fragmented, with major differences in maturity between continents, countries and various segments. The total global market is estimated at SEK 850 billion with an annual growth rate of around 6–8 percent in the USA and Europe, which account for approximately 75 percent of the total market. In the rest of the world, growth is even faster. The market’s limits are constantly being redefi ned, however, as security companies develop their offerings, customer needs change and new technology is developed. Growing complexity The main driver is society’s growing complexity, which raises the demand for reliable, tailor-made security solutions. The increasing scalability, specialization and segmentation of functions with cross-border deliveries, where value-enhancing processes are dependent on justin-time-deliveries, create greater risks and vulnerability. Disruptive events can have far-ranging consequences, with large values at stake. Security issues are therefore becoming a higher priority of companies, institutions Market development, Europe and USA MSEK Total market Long-term growth Securitas’ market share Security Services USA1 125,000 4–6% 17% Europe 151,000 4–6% 17% Securitas Systems 245,000 6–10% 2% Direct 60,000 5–10% 2 11% 3 Cash Handling Services 63,000 5–10% 18% Total 644,0004 6–8% 4 10% 4 1 Including Canada and Mexico but excluding Consulting & Investigation. 2 European market. 3 European market share. 4 Markets outside Europe and the USA are not included. Source: Securitas and Freedonia and individuals, and decisions are being made higher up the command chain at the management and board level. The available market is also growing due to the security industry’s consolidation into larger companies focused on global growth in an increasingly specialized market. More customers are choosing to outsource their security needs at the same time that demand for specialized services with high-value content is growing. This professionalizes the market and gives security companies the incentive to refi ne their services and solutions. High-value content means higher prices and operating margins, at the same time that cost effi ciencies increase for the individual customer. A typical example of this trend is guarding. The “old” market for permanent guarding is growing by about 4 percent per year with a gross margin of approximately 15–18 percent. The “new” guarding market comprises specialized guarding – mobile services and combined contracts. Growth is twice as high, approximately 8 percent per year, with a signifi cantly higher gross margin. 16 SECURITAS 2005
From multi-service providers to security specialists Multi-service Focus on Security Consolidation Specialization Differentiation Security Staffi ng Corrections Rescue Care Locks Cleaning Maintenance Health Catering Parceel Guards Alarms Cash handling Corrections Rescue Care Staffi ng Locks Size Guards Alarm Cash handling Corrections Rescue Decades ago, security was often just one part of a multi-service company or conglomerate. Priorities were based on the overall requirements of these groups, and security was of secondary importance. Since then, an independent security industry has been created in which most of the main players are solely focused on security. Guarding and cash handling services have since become independent businesses, while both alarm companies and conglomerates are driving the alarm business. From multi-service providers to security specialists The industry previously had a highly fragmented structure dominated by multi-service providers and conglomerates and a large number of small local players. Since the mid-1980s Securitas has been a pioneer by focusing strictly on security. Management and the Board of Directors decided at the time that developing a skilled workforce and specialization was the way to generate profi table, income- and quality-driven growth. Four streamlined security players have gained a growing share of the market in the last 15 years, in the USA from approximately 30 percent to 45 percent and in Europe from 15 percent till 35 percent. Professional services Professional services require professional people. The industry’s development is therefore dependent upon its ability to develop employees into professional security specialists. The key factors are recruitment of the right people, better training and the right wages. Today the security profession can no longer be viewed as a fi eld dominated by temporary staff, high turnover and low wages. The greater competence exhibited by employees goes hand-in-hand with the increasing confi dence customers have shown in the industry and what it can accomplish, which is expanding the market’s potential. Higher demand for quality and more specifi c security services is also driving the development of standards, laws, rules and norms. Though sometimes signifi cantly different between countries, they essentially determine the qualifi cations for security companies, how to verify the background of employees and training requirements. Guards Cash handling Alarm Knowledge Security solutions – Large specialized – Small specialized Large systems – Banks – Retailers – Integration Direct – Consumer alarms – Local business alarms Cash handling – Transport – Processing – Management These standards are continuously being developed, which is further raising the level of quality and professionalism in the industry. Securitas has continued to drive the industry towards greater specialization and segmentation. This is why the Group has been organized in fi ve divisions, each of which develops independently with differentiated customer needs and markets. Guarding services are combined with technological security systems and consulting, and needs are developing differently for small and large customers. In alarm systems, customer needs are being segmented by industry. The market for home security is growing rapidly with increasingly sophisticated technology. In the area of cash handling, there are two completely different markets in banking and retail, each requiring specifi c cash management solutions. From size to knowledge The future development of the security industry today seems fairly clear. The industry is dominated by a few, large internationally active security specialists that in certain segments face local and regional competition from niche players. Size is no longer the biggest competitive advantage. The decisive factor will be a critical mass of knowledge and the ability to create innovative solutions that provide greater benefi ts for customers in increasingly specialized segments. Market SECURITAS 2005 17
Page 1 and 2: Securitas AB Annual Report 2005
Page 3 and 4: Sales per region A world
Page 5 and 6: A positive 2005 lays the foundation
Page 7 and 8: A history of growth Securitas was f
Page 9 and 10: The wheel of fortune Rationalizatio
Page 11 and 12: Koncernen 12 Comments by the CEO 14
Page 13 and 14: and customers have been convinced t
Page 15: The Securitas Group - sales growth,
Page 19 and 20: The entire organization supports th
Page 21 and 22: Our values Our values - Integrity,
Page 23 and 24: New sales of customer contracts tha
Page 25 and 26: 25 20 15 10 5 0 Return on capital e
Page 27 and 28: Risk business plans Each division a
Page 29 and 30: Swedish GAAP IFRS MSEK 2001 2002 20
Page 31 and 32: Income 2004 MSEK IFRS Q1 2004 IFRS
Page 33 and 34: Market capitalization & Enterprise
Page 36 and 37: Report of the Board of Directors -
Page 38 and 39: Financial overview BDM, Switzerland
Page 40 and 41: Financial overview Divestment of re
Page 44 and 45: Security Services USA Security Offi
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Page 62 and 63: Direct Mikael Sundberg holds the fr
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Report of the Board of Directors -
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Cash Handling Services Route Superv
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Cash Handling Services One of the s
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Annual Report - Financial statement
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Statement of cash fl ow MSEK NOTE I
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Supplementary information Securitas
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Financial statements - Notes and co
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net assets, and qualify for the hed
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Recognition and subsequent measurem
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NOTE 3 CRITICAL ESTIMATES AND JUDGE
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Table 3A. Maturity structure of iss
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a certain percentage of the fi nal
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NOTE 10 OPERATING EXPENSES Income s
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Notes and comments to the consolida
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Goodwill is tested on an annual bas
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NOTE 28 CHANGES IN SHAREHOLDERS’
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Pension cost MSEK IFRS 2005 Notes a
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Table 1A. Adjusted Consolidated Sta
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Free cash fl ow was not impacted by
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elating to the tax calculated on th
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Table 5. Consolidated Balance Sheet
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NOTE A GOODWILL MSEK Jan 1, 2004 De
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Statement of income MSEK NOTE Paren
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Parent Company changes in sharehold
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NOTE 42 PERSONNEL Average number of
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NOTE 50 LIQUID ASSETS Liquid assets
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To the Annual General Meeting of th
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Corporate Governance - Board of Dir
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Corporate governance - Report of th
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Corporate Governance - Report of th
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Corporate Information
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Corporate Information - Financial i
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Securitas Services Ltd. Berkshire H
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Securitas AB Annual Report 2005

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