Securitas AB Annual Report 2005

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Report of the Board of Directors – Security Services Europe New organization strengthens leadership “ For Security Services Europe, 2005 was the fi rst full year for our specialized and enhanced customer-oriented organization. The process of reorganizing 86,000 people from a geographical, country-oriented organization to four vertical, specialized units – Permanent guarding and Transport aviation security for large customers, Mobile services and Alarm monitoring for small customers – started in late 2004 and was fully implemented in January 2005. The results have confi rmed that we are on the right track. New organization Our new organization increases opportunities to transfer knowledge and concepts within each individual customer segment to gain better competence and customer focus. This is particularly true for large customer operations. We have already formed specialized units to address customers in specifi c segments, such as Retail, Banks, Energy Sector, Public Sector and Health Care in many countries. In 2006, we expect this trend to become stronger as we build cross-border networks to further promote best practices. In most countries, our unit for Mobile services devoted a lot of effort in 2005 to IT development. We imple mented integrated IT solutions, incorporating GPS technology to track and monitor call-out cars and transport vehicles, computerized report and feedback systems, and online services for our customers. As for our large customer operations, we benefi ted from being able to exchange experience between countries. With our new focus and specialization in high-risk areas such as airports and seaports, it has been important to improve insurance coverage to limit our liability exposure. This led to the loss of some airport contracts The development of mobile services for small customers will be an important driver for our continued growth and improved margins. Tore K. Nilsen Divisional President Security Services Europe where we were not able to agree on new terms. Meanwhile, we see defi nite signs of recovery as the market are responding positively to our specialized approach and new contracts are expected to improve our results in 2006. Transfer of knowledge The security industry in Europe as a whole grew by 3–4 percent in 2005, despite large differences between the countries in terms of market maturity. We also see new business opportunities arising as the market expands and new countries apply for EU membership. We expect to be able to expand and render the exchange of knowledge and best practices more effectively across borders within our division. We also see opportunities for mutual exchange with our colleagues in the USA. Even though our markets may at fi rst seem different – for example, in Europe 75 percent of the security market is outsourced, compared to only 50 percent in the USA – the need for skilled and trained security professionals is fairly similar. We are confi dent that an increased exchange of business concepts and knowledge will benefi t both markets. In order to enhance and encourage best practices across borders, we expanded and refi ned our manage ment training program. In 2005 the number of participants increased by more than 30 percent. The training is increasingly focusing on specialization and refi nement of our services. With the new organization, Securitas has strengthened its market leadership in Europe. Through close cooperation with our customers, we are in a strong position to continue to develop our services for profi table growth. ” 48 SECURITAS 2005
30 25 20 15 10 5 0 Total sales ■ BSEK 01 02 03 04 05 The year 2005 ■ Total sales amounted to MSEK 24,996 (23,289) and organic sales growth was 5 percent. ■ Operating income amounted to MSEK 1,873 (1,849) and was affected by start-up costs for new contracts and higher turnover in the contract portfolio for airport security operations. ■ Margins stabilized and improved late in the year owing to lower turnover in the contract portfolio in combination with positive sales results in our Mobile services unit and the units for large customer operations, particularly during the third and fourth quarters. Key ratios 1 MSEK 4 3 2 1 0 Operating income/Operating margin ■ BSEK % ■ 01 02 03 04 05 Security Services Europe ■ A new organization with four vertical, specialized units – Permanent guarding, Transport aviation security, Mobile services and Alarm monitoring – was fully implemented. ■ The specialization process helped to reduce costs in relation to sales. The reorganization did not burden the division in terms of direct costs but may have contributed to an increase in portfolio turnover and lower margins. ■ A management meeting held outside Paris in June 2005 brought together 230 managers from all of our countries to work on new strategies for growth through identifying and studying specifi c customer segments. IFRS 2005 IFRS 2004 Swedish GAAP 2003 Income Total sales 24,996 23,289 22,577 Organic sales growth, % 5 4 3 Operating income before amortization 1,873 1,849 1,699 Operating margin, % 7.5 7.9 7.5 Amortization of goodwill – – –414 Amortization of acquisition related intangible fi xed assets –40 –26 – Acquisition related restructuring costs –1 –21 – Operating income after amortization 1,832 1,802 1,285 Operating cash fl ow Operating income before amortization 1,873 1,849 1,699 Investments in fi xed assets –606 –629 –546 Reversal of depreciation 584 526 567 Change in operating capital employed 65 –14 –39 Cash fl ow from operating activities 1,916 1,732 1,681 Cash fl ow from operating activities, % 102 94 99 Capital employed and fi nancing Operating fi xed assets 2,106 1,978 1,992 Accounts receivable 4,229 3,710 3,670 Other assets 588 592 517 Other liabilities 5,492 4,688 4,430 Total operating capital employed 1,431 1,592 1,749 Goodwill 5,587 4,962 5,248 Acquisition related intangible fi xed assets 290 100 – Total capital employed 7,308 6,654 6,997 Operating capital employed as % of sales 6 7 8 Return on capital employed, % 26 28 24 1 Adjusted to exclude Canada and Mexico that have been transferred to Security Services USA, and adjusted to include the third party monitoring business. 8 6 4 2 0 12 10 8 6 4 2 0 Capital employed/ Return on capital emloyed ■ BSEK % ■ 01 02 03 04 05 SECURITAS 2005 49 30 25 20 15 10 5 0
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 and 16: The Securitas Group - sales growth,
Page 17 and 18: From multi-service providers to sec
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 56 and 57: Securitas Systems In the fall of 20
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Page 62 and 63: Direct Mikael Sundberg holds the fr
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Page 72: Annual Report - Financial statement
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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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Report of the Board of Directors -
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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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