Securitas AB Annual Report 2005

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The Group – Strategy and organization Strategies and business model for profi table growth Securitas’ success is based on being a driving force in the development of the security industry. The strategic foundation is therefore to focus entirely on security using a learning organization that continuously develops specialized, value-enhancing services for a growing number of segmented markets. Main strategy: Focus on security for profi table growth Providing the customer with the right service creates growth. Effi ciency in the organization drives profi tability. Focus among employees builds knowledge. Growth, profi tability and knowledge create resources for further development of solutions for customers, while providing stimulation for employees and increasing value for shareholders. The main strategy, and thus the foundation of Securitas’ business model, is therefore to focus on security. This is achieved by constantly building our understanding and knowledge of various customer groups’ needs and specialized requirements and by designing new services and solutions. Our success is measured by customers based on their interactions with our employees. In fi nancial terms, we want that success to lead to: ■ Growth exceeding the market average ■ Positive trend in the operating margin ■ 20 percent return on capital employed in existing operations with an aim of reaching this objective within three years for acquired businesses. The market is growing as society becomes more complex and demands new, reliable and tailor-made security solutions. By satisfying new and more complex needs, we open new markets, gain market shares and thereby grow faster than the underlying market. The ability of our organization to develop effi cient, valuable services and solutions for customers determines how far we stay ahead. Sub-strategies: Specialization and customer segmentation The main sub-strategy to utilize and boost the potential in underlying organic growth is to constantly refi ne our customer offering through increasingly specialized services. By raising value added, Securitas creates customized, competitive offerings that help buyers to realize it can be profi table to add specialized security services and to outsource their security work. In the process, demand is segmented and grows in volume. These refi nements provide customers with greater value for the money they spend on security, while giving Securitas the opportunity to improve its pricing structure and increase margins. Decentralized organization As an important sub-strategy, Securitas is developing a decentralized organization with an emphasis on its more than 3,000 branches, where concrete value is created in day-to-day interactions with customers. The strong position of the branches is motivated by Securitas’ decentralization philosophy. Customer benefi t is best created by placing decision-making authority close to the customer and employees. Demanding customers have the right to deal with competent, independent and strong local managers. Branches are driven by qualifi ed managers with the responsibility to develop and drive operations on the basis of their own profi t and loss statements. This fosters entrepreneurship as part of the Securitas culture. Shared culture, governance, controls and incentives Securitas has a strong corporate culture that creates the shared values of responsibility, ownership and entrepreneurship. This culture is built in large part with the so-called Securitas Model, which serves as the basis for how all Group employees work and are organized in order to develop and create profi table growth. Every part of the model is applied by managers at every level, who thereby become the Group’s central culture bearers. This has proven successful in all of the Group’s operations and wherever Securitas works. Among the key elements in our culture are continuous performance measurement and follow-up and clearly designed incentive structures that make employees personally committed to Securitas’ fi nancial development. Market leadership One sub-strategy is to seek market leadership in attractive markets with good prospects for long-term profi tability. In this case, Securitas plays the role of transformer in the market in terms of both the structure and quality of service development, professionalism and confi dence. Market leadership requires size in order to infl uence the local society’s laws, rules, norms and wages for employees in the security industry and, not least of all, 18 SECURITAS 2005
The entire organization supports the branches Branches/ local organization Areas Countries/ Regions Divisions 650 895 375 1‚200 440 100 145 175 120 76 In Securitas’ organizational pyramid, the focus is on the branches and the role they play in creating value for customers. Their knowledge with customer needs and the market’s development become tools for the Group’s strategic development. their professionalism in order to change opinions about what can be entrusted to a security company. Together with development of the service offering, this expands the market’s potential. Acquisitions A large part of Securitas’ growth is achieved through acquisitions, which are an effective tool to gain entry to new geographic markets and market segments and to quickly achieve market leading positions. Acquisitions Customers and branches in focus The structure of branches differs between divisions depending on the customer and market structure. It can be geographical or based on various customer segments. The critical factor is that branch managers must be able to act quickly and independently in order to meet customer demands, while at the same time be able to utilize the entire Group’s support and resources at other levels. Branches are organized in areas and countries, which in turn are combined into the fi ve divisions. Branches are the focus when Securitas expands. The fi rst step when a new market opens up or an acquisition is implemented is to strengthen the local operations. This is done through a careful recruiting process and training for managers in topics such as marketing, sales, organizational development, leadership, compensation CUSTOMERS 13 19 13 9 11 Security Services USA Security Services Europe Securitas Systems Direct Cash Handling Services Demanding customers need to meet a competent and strong local management. Great emphasis is therefore placed on business and leadership training for local managers. are also a way to restructure and consolidate a fragmented industry into larger players with greater resources that can take active responsibility for continuous specialization and professionalization. This creates the possibility of an enhanced offering with greater value for customers. After two decades with more than 60 acquisitions, Securitas has great experience using a well-established acquisition model that leads to quick integration and a positive outcome in terms of volume, margins and profi tability. systems, legal affairs and, not least, fi - nancial control. The key elements are the Securitas Model and Six Fingers, the fi nancial control model. Training is then based on various scheduled development programs, in combination with formal career planning. Personnel are recruited and trained systematically for professional positions. Salary structures should be attractive and refl ect Securitas’ philosophy to create incentives for employees to stay and develop in the profession. The second step is to focus on existing business operations. When the local organization has gained strength and stability, it is time for step three. This entails further expansion by developing new services and customer segments. Specialized branches are created for various customer segments or areas. This increases organic growth and the organization’s maturity. At that point it may be time for step four, to further expand through acquisitions. The collective expertise of the branches in their markets and customer needs is the Group’s tool for strategic development. This lies behind Securitas’ continuous work with specialization, further development of services and segmentation of markets and customers. The Group’s divisional structure refl ects the same basic idea about decentralized decision-making. The divisions have grown substantially with increasing independence. Today, they have virtually complete organizations that, under divisional management, comprise units for countries, regions, areas and branches. Divisional managements have professional staffs for accounting and fi nance, business development and risk management trained in international business environments. Strategy and organization SECURITAS 2005 19
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
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Page 15 and 16: The Securitas Group - sales growth,
Page 17: From multi-service providers to sec
Page 21 and 22: Our values Our values - Integrity,
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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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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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Free cash fl ow was not impacted by
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elating to the tax calculated on th
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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 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 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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