SECURITAS AB Annual Report 2011

66
Annual Report
Report of the Board of Directors
Acquisitions after December 31, 2011
MPL Beveiligingsdiensten, the Netherlands
Securitas has acquired the security services company MPL Beveiligingsdiensten
in the Netherlands. Enterprise value is estimated to MSEK 44 (MEUR
4.9). MPL Beveiligingsdiensten has annual sales of approximately MSEK 99
(MEUR 11) and approximately 180 employees and is operating both within
specialized guarding and mobile services.
Protect, Croatia
Securitas has acquired 85 percent of the shares in the security services
company Protect in Croatia. There is an agreement to acquire the remaining
15 percent of the shares in 2013. Enterprise value of the acquired 85 percent
of the shares is estimated to MSEK 53 (MHRK 43). Protect has annual
sales of approximately MSEK 73 (MHRK 60) and approximately 600
employees. The company is mainly operating in guarding services.
Other significant events
As described in the Annual Report for 2010, the former claims by and
against Securitas Germany in relation to the U.S. Army was settled in
February 2011. The settlement amount, consisting of MEUR 4.2
(MSEK 38), was paid out during the first quarter and was covered by
previously recognized provisions.
Other significant events after the balance sheet date
There have been no significant events after the balance sheet date except
the acquisitions listed above and the bond loans issued in 2012.
Change in Group Management
Luis Posadas, previously Divisional President Security Services Latin
America, has been appointed Divisional President of the new division
Security Services Ibero-America.
Åsa Thunman has been appointed Senior Vice President General Counsel.
She succeeded Bengt Gustafson, who remains in the company as Senior
Vice President and Senior Advisor to Group Management.
Antonio Villaseca Lòpez has been appointed Senior Vice President
Technical Solutions. With this appointment, Securitas further strengthens
its technical knowledge and experience.
Risk and uncertainties
Managing risk is necessary for Securitas to be able to fulfill its strategies and
achieve its corporate objectives. Securitas’ approach to enterprise risk management
is described in more detail on pages 44–48.
Securitas’ risks fall into three main categories: contract risks, operational
assignment risks and financial risks.
Contract risks
This category encompasses the risks related to entering into a customer
contract and also those risks related to the acquisition of a new business.
When entering into a contract with a customer a balanced division of
responsibilities and risks between Securitas and the customer is essential.
Standardized contracts are the norm. Reasonable caps on potential liability
and indemnification for third-party claims are important. Significant focus is
devoted to contract risks and the management of contract risks. Each segment
has developed policies and procedures tailored to their specific needs.
These policies are all based on the contract policies approved by the Board
of Directors in the Group policies and guidelines.
Securitas Annual Report 2011
In addition to organic growth resulting from new and / or increased customer
contracts the Group has grown by a significant number of acquisitions over
the years and will, as part of the Group’s strategy, continue to acquire security
companies. The integration of new companies always carries certain risks.
To a higher degree than previously, such acquisitions are also taking place
in new markets such as Latin America, the Middle East, Asia and Africa. The
profitability of the acquired company may be lower than expected and /or
certain costs in connection with the acquisition may be higher than expected.
The acquisitions and divestitures made during 2011 are described under
the heading Acquisitions and divestitures above and in note 16.
Operational assignment risks
Operational assignment risks are risks associated with daily operations and
the services we provide to our customers, for example, when services do
not meet the required standards and result in loss of property, damage to
property or bodily injury. Proper recruitment, training and supervision of
security officers are important to mitigate these risks. Another type of operational
assignment risk which may impact profitability is the risk that Securitas
will not be able to increase prices to be paid by customers in order to compensate
fully for increases in wages and related costs.
Financial risks
Financial risks are mainly managed through continuous measurement and
follow-up of financial performance, with the help of Securitas’ financial
model. This model identifies certain key figures that are vital to the profitability
of the operations, and facilitates the detection and handling of risks.
The financial model is described in more detail on pages 54–55. In addition,
financial risks (other than relating to financial reporting) arise because the
Group has external financing needs and operates in a number of foreign
currencies. The risks are mainly interest rate risk, foreign currency risk,
financing and liquidity risk and credit /counterparty risk.
The customer credit risk, that is the risk of Securitas’ customers not being
able to fulfill their obligation of paying invoices for services being provided,
increased during the current recession. The risk is reduced by the fact that
the numerous customers are spread over many business sectors and geographies,
and by established routines for monitoring and collecting of
accounts receivable within Group companies. Further information regarding
financial risk management is provided above under the section Capital
employed and financing /Financing and in note 6.
The preparation of financial reports requires the Board of Directors and
Group Management to make estimates and judgments. Estimates and judgments
will impact both the statement of income and the balance sheet as
well as disclosures such as contingent liabilities. Actual results may differ
from these estimates and judgments under different circumstances and
conditions. Further information regarding critical estimates and judgments
is provided in note 4.
For the forthcoming twelve month period, the financial impact of certain
previously recognized items affecting comparability, provisions and contingent
liabilities, as described in note 32 and 37 respectively, may vary from
the current financial estimates and provisions made by management. This
could affect the profitability and the financial position of the Group.