Securitas AB Annual Report 2005

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Securitas Systems In the fall of 2005, the division changed its name to Securitas Systems and introduced a new profi ling scheme that includes a new logotype to be introduced successively in all 13 countries of operation. The new profi le offers a stronger specialized systems integrator idunit. Service Technician Christoffer Moilanen (left) is carrying out service and maintenance work on the access control system at a shopping center while Service Technician Patrik Wanberg (right) is servicing and maintaining a CCTV system at a bank. Operations Securitas Systems offers customers with high security demands specially adapted security solutions based on modern technology. The customers mainly comprise large companies that require integrated security systems, such as banks and fi nancial institutions, telephone service providers, utilities, logistics centers and retailers. Offering Securitas Systems combines technical systems and components into a comprehensive solution designed for the customer’s needs. A security solution can comprise intrusion systems, access control and CCTV, complemented by a range of services offered by Securitas Systems’ service organization and security services centers. These include alarm monitoring and response, remote monitoring and “helpdesks”. The offering consists of two parts: installation and maintenance (service). Installation accounts for approximately 60 percent of Securitas Systems’ income and service for the other 40 percent. By providing high-quality service, Securitas Systems is able to retain customers throughout the life of their systems, which is normally 8–10 years. This generates annual income corresponding to approximately 8 percent of the original installation cost. Services include preventive maintenance, repairs and customer training. Technical services are primarily contract based and generate stable revenue that is less dependent on economic conditions. Market The market for technical security solutions in Europe and the USA continues to grow and is currently estimated at MSEK 245,000. As customers become more global, they demand new types of security and monitoring solutions. New information technology in turn facilitates greater effi ciencies and solutions that were not possible before. Rapid technological developments are fragmenting the industry and causing high turnover among the competition. There has been some consolidation in the market as large companies have acquired others in the industry. This trend is expected to continue as globalization leads to higher demand for worldwide security partners. Sales and market shares Country Sales MSEK Sales MLOC Market share, % Sweden 1,320 1,320 33 Norway 541 465 27 Denmark 102 82 6 Finland 362 39 20 Germany 246 26 1 France 724 78 2 UK 619 45 2 Ireland 104 11 6 Spain1 742 80 7 Portugal 183 20 9 Belgium 102 11 3 The Netherlands 154 16 2 USA1 881 114 1 Australia 62 10 Hongkong 6 6 Elimination of internal sales2 –61 Total1 6,087 2 1 Adjusted for the full year sales of acquired units. 2 Refers to sales within the Securitas Systems division. Securitas in the market Securitas Systems is active in 12 European countries as well as the USA, with a market share of 4 percent in Europe and 1 percent in the USA. We are focused on a number of customer segments. The Banking and fi nance segment and Retail segment cover most of our geographical markets. Each country otherwise determines which segments are most appealing in the local market. The knowledge built up locally in certain segments can then be used in our other markets. We face competition in our markets from many small companies that are strong locally and from large companies such as Siemens, Bosch, Group 4 Securicor, Chubb, Gunnebo, ADT and Diebold. 56 SECURITAS 2005
Robert I. Spilman (right), Business Unit Manager of Securitas Systems’ Response concept in Norway, discusses the latest security system installation with Runar Karlsen, Risk manager of the Varner Group, Norway’s largest clothing chain. When the economy slows down, the impact on Securitas Systems is limited by two factors. One is service agreements, which provide a stable fl ow of expansion orders and maintenance requests. Secondly, an economic slowdown often leads customers to accelerate the change from personnel-intensive security services to more cost effective technical solutions. Europe Securitas Systems has a leading position in the segment for banks and fi nancial institutions in Europe. In Sweden, Norway and Finland, we are by far the market leader. Our operations are stable and we have satisfactory profi tability. The organizations in Sweden and Finland were modifi ed during the year to speed up growth. The Norwegian operations have been generating good organic growth for a couple of years. The Danish company has a weaker market position. Operations in Spain have been built up mainly through organic growth, and Securitas Systems’ current development focus utilizes the strategies that have proven successful in Spain. In 2005 Securitas acquired ESES, which is active in the installation and maintenance of security systems throughout Spain. It has 130 employees and had a turnover of MSEK 73 in 2005. The French operations have expanded through both acquisitions and organic growth. The same applies to operations in Germany, where Securitas Systems has been established for two years. In the UK, operations comprise Bell Security, which was acquired in 2004. Operations also span Portugal, Belgium, the Netherlands and, as of January 1, 2006, Switzerland. A fi re alarm unit was established during the year in Belgium through the acquisition of Elmaco, with nine employees and sales of slightly over MSEK 10 in 2005. USA Operations in the USA date back to Securitas’ acquisition of Pinkerton. At the time, the systems integration operations of Pinkerton essentially supported its guarding services. These loss-making operations had no strategy of their own. With a strong sense of purpose, the U.S. management has been able to create a fast-growing business with improving margins. Two complementary acquisitions in 2005 strengthened the company’s positions in key markets. The fi rst, Hamilton Pacifi c, is a leading provider of security solutions for U.S. banks. The acquisition broadened Securitas Systems’ operations from those of a supplier to the head and regional offi ces of U.S. banks to also include services for their branch networks in large regions of the country. The acquisition is an important part of the strategy to segment operations. Sales amounted to MSEK 325 with 225 employees at year-end 2005. Operations are profi table and contributed positively to Securitas Systems’ income. The second acquisition, Wornall, installs and maintains security systems in Kansas City and New Jersey. This gives Securitas Systems access to new markets and a strong local presence in these two regions. Sales in 2005 amounted to MSEK 35 with 27 employees at year-end. Other markets and production In addition to the above, a small Hong Kong installation company was obtained through the acquisition of Bell Security. They are primarily a supplier to British banks in Hong Kong. Securitas Systems’ only manufacturing unit is Pacom Systems, a producer of integrated alarm and access control systems in Sydney, Australia. The Pacom product has been important to Bell’s success among British banks. It has also sold well to U.S. banks for years. Securitas Systems Knut Öistein Haug, Service Technician in the Response Unit for Securitas Systems in Norway, discusses an installation of a new surveillance camera with Benedikte Edwin Vigander, clerk at clothing store Cubus in the Sandvika shopping center outside Oslo. Response is a standardized security concept for retailers where alarm reception, call out and technical services are offered at a set price. SECURITAS 2005 57
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Securitas AB Annual Report 2005
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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
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Page 62 and 63: Direct Mikael Sundberg holds the fr
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Page 77 and 78: Supplementary information Securitas
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Page 81 and 82: net assets, and qualify for the hed
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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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Securitas AB Annual Report 2005

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