Securitas Annual Report 2007

The Group’s total capital employed was MSEK 18,692 (19,338). The translation of foreign capital employed to Swedish kronor decreased the Group’s capital employed by MSEK -284 after taking into account net investment hedging and MSEK -359 before net investment hedging of MSEK 75.
The return on capital employed was 13 percent (8).
The Group’s net debt amounted to MSEK 9,878 (9,735). Acquisitions and acquisition related payments in 2007 increased the Group’s net debt by MSEK 902, of which purchase price payments accounted for MSEK 917, assumed net debt for MSEK -54 and acquisition related restructuring costs paid for MSEK 39. The Group’s net debt decreased by MSEK 77 due to the translation to Swedish kronor of net debt in foreign currencies.
Dividends of MSEK 1,132 (1,278) were paid to the shareholders in April 2007.
The four convertible loans issued by Securitas AB to Securitas Employee Convertible 2002 Holding S.A. in Luxembourg in May 2002, totaling MEUR 254, were repaid back on May 2, 2007. No conversions have taken place.
In the first quarter 2007, Securitas AB’s 6.125 percent MEUR 500 Euro Bond was reclassified from an interest bearing long-term liability to an interest bearing current liability as it matures in March 2008. Securitas has access to long-term funding through its MUSD 1,100 Revolving Credit Facility that matures in 2011 and its MEUR 550 Term Loan Facility maturing in 2010.
The interest coverage ratio amounted to 3.9 (4.4). The free cash flow to net debt ratio amounted to 0.24 (0.18).
Interest expense for the period on the convertible debenture loans that matured on May 2, 2007 amounted to MSEK -30 (-74).
Shareholders’ equity amounted to MSEK 8,814 (9,603). The translation of foreign assets and liabilities to Swedish kronor impacted shareholders’ equity by MSEK -207 after taking into account net investment hedging of MSEK 75 and MSEK -282 before net investment hedging. Refer to page 50, Statement of recognized income and expense, for further information.
The total number of outstanding shares amounted to 365,058,897 as of December 31, 2007. The average number of shares after full conversion of the convertible debenture loans that matured on May 2, 2007 was 369,365,776 for 2007.
Condensed Balance Sheet according to Securitas’ financial model  
MSEK 2007 2006
Operating capital employed 4,171.0 4,669.2
Goodwill 13,793.5 14,031.6
Acquisition related intangible assets 624.0 464.2
Shares in associated companies 103.5 172.7
Total capital employed 18,692.0 19,337.7
Return on capital employed, % 13 8
     
Net debt 9,878.0 9,734.6
Shareholders’ equity 8,814.0 9,603.1
Total financing 18,692.0 19,337.7
Securitas’ financial model is described on pages 25–28.
Operating items. Net debt related items. Goodwill, taxes and non-operating items. Items related to shareholder’s equity.
Acquisitions
All acquisition calculations are finalized no later than one year after the acquisition is made.
Acquisitions January – December 2007 (MSEK)            
    Included        
            Acquisition related
        Enterprise    
      Annual      
Company Division1 from sales 2 value3 Goodwill intangible assets
Opening balance         14,032 464
KARE, Turkey 4 Security Services Europe n/a 54 61
Black Star, Spain 4 Security Services Europe n/a 47
  Security Services Europe,          
Chubb van den Enden, the Netherlands Mobile and Monitoring Mar 1 56 17 5 16
PSI, Spain 5 Security Services Europe n/a 47 8
Protection Service, France Security Services Europe Apr 1 210 6 19
Seguridad Argentina, Argentina New Markets 7 May 1 186 36 49 34
CPI Security, Romania Security Services Europe May 1 87 3 10
Seguridad Burns de Colombia, Colombia New Markets 7 Jun 1 72 20 7 13
G4S Cash Services, France Loomis Jul 2 405 234 140 59
Brink’s cash handling, Great Britain Loomis Aug 6 165 17
Guardian Armored Security cash handling, USA Loomis Sep 1 55 24 16
Cono Sur, Argentina New Markets 7 Sep 1 58 24 20 9
Walsons, India New Markets 7 Nov 9 103
Forza, Peru New Markets 7 Dec 1 160 85 66 18
Other acquisitions 6     257 146 20 114
Total acquisitions January – December 2007     863 376 308
Impairment losses of goodwill         –350
Amortization/impairment of acquisition related intangible assets       –108
Reclassification         –22
Translation differences         –264 –18
Closing balance         13,794 624
1 Refers to division with main responsibility for the acquisition.
2 Estimated annual sales.
3 Purchase price plus acquired net debt.
4 Deferred considerations paid in Q1 2007 for KARE and Black Star acquisitions.
5 Deferred consideration paid in Q2 2007 for PSI acquisition.
6 Värmlandsvakt (contract portfolio), Schäferhundvakt (contract portfolio), Royal Säkerhet AB, Kristianstad Hundbevakning (contract portfolio), Nässjö/Eksjö Bevakning (contract portfolio), WGA (contract portfolio), PBB Borlänge (contract portfolio) and UVOS, Services Sweden, Facility Network A/S, Services Denmark, Rometex Oy (contract portfolio), Services Finland, IDS (contract portfolio) and Alsterwacht, Services Germany, Actir, Avantage Sécurité SARL, Bretagne Protection Surveillance (contract portfolio), SARL Départemental Sécurité (contract portfolio), ESG Sécurité (contract portfolio) and Lahire Protection Sécurité, Services France, Actir (contract portfolio), Lahire (contract portfolio) and Team & MVS, Alert Services France, Patrol (contract portfolio), Services Switzerland, FS&P NV and M.O.T, Services Belgium, Eureca (contract portfolio), Kuypers (contract portfolio), Hummel (contract portfolio) and Vision (contract portfolio), Alert Services Netherlands, Vigilancias y Siguridad S.A., Services Argentina, Aseco and Proguard, Services Uruguay, Security Services Northwest, Loomis USA. New Markets is included in the segment Other.
KARE, Turkey
As announced in the full year report for 2006 Security Services Europe has, through DAK Güvenlik, acquired 100 percent of KARE in Turkey. The company, which has 900 employees, has annual sales of MTRY 15 (MSEK 72) in guarding services.
Black Star, Spain
Black Star in Spain was acquired in December 2005 and a deferred consideration of MEUR 5 (MSEK 47) was paid as planned during the first quarter 2007. A further MEUR 5 will be paid in the first quarter 2008.
Chubb van den Enden, the Netherlands
In March 2007, Securitas acquired Chubb van den Enden in the Netherlands which had total sales of MEUR 6 (MSEK 56), in 2006 and 200 employees. This acquisition confirms Securitas’ market-leading position in mobile guarding in the Netherlands.
PSI, Spain
PSI in Spain was acquired in June 2006 and a deferred consideration of MEUR 5 (MSEK 44) was paid as planned during the second quarter 2007. A further MEUR 5 will be paid during the second quarter 2008.
Protection Service, France
In April 2007, Security Services Europe acquired certain assets and customer contracts from Protection Service in France. This company is focused on retail clients and Securitas has taken over personnel and customers representing annual sales of MEUR 23 (MSEK 210). This acquisition makes Securitas the leading player in the French private security market for retail customers.
Seguridad Argentina, Argentina
In April 2007, Securitas in Argentina entered into an agreement to acquire 100 percent of the shares in Seguridad Argentina. This acquisition will bring estimated sales in 2007 of approximately MARS 84 (MSEK 186). Seguridad Argentina is one of the four major players in security services in Argentina with 2,500 employees. This acquisition makes Securitas the leading security services supplier in Argentina with approximately 7,000 employees and annual sales of MSEK 500. The estimated final enterprise value of the acquisition is MARS 42 (MSEK 93).
CPI Security, Romania
Security Services Europe has acquired 55 percent of the shares in CPI Security in Romania. In December 2007 a capital contribution was made which increased Securitas’ ownership to 87.75 percent. Under the agreement the remaining 12.25 percent will be purchased in 2010 and the purchase will be based on the financial performance of the company until the year 2009. CPI Security is one of the major players on the Romanian security market. The company’s estimated annual sales in 2007 are MRON 30 (MSEK 87) and it has more than 2,000 employees. The estimated final enterprise value is 6 MRON (MSEK 16).
Seguridad Burns de Colombia, Colombia
Following the strategy to expand the Latin American platform, Securitas has acquired 71 percent of the shares in Seguridad Burns de Colombia. Under this agreement the remaining 29 percent of the shares will be purchased in 2010 and the purchase will be based on the financial performance of the company in 2009. The company has approximately 1,000 employees. The company’s annual sales are about MCOL 21,500 (MSEK 72). The estimated final enterprise value is MCOL 8,500 (MSEK 27).
G4S cash handling operation, France
Loomis has acquired the G4S cash handling operation in France with 720 employees. The acquisition makes Loomis the market leader in France. The operation has annual sales of approximately MEUR 46 (MSEK 430). The enterprise value is MEUR 25 (MSEK 234).
Brinks’ cash handling operation, Great Britain
Loomis has acquired Brinks’ cash handling operations in Great Britain. The enterprise value is MGBP 1.1 (MSEK 18). The Brinks’ cash handling operations in Great Britain consists of 350 employees, whereof 260 are in England and 90 in Scotland. The operation has annual sales of approximately MGBP 13 (MSEK 180) and comprises cash transportation and ATM services.
Guardian Armored Security cash handling operation, USA
Loomis has acquired Guardian Armored Security, a Michigan-based cash handling services company. This acquisition makes Loomis the leading cash handling company in the Michigan market. The enterprise value is approximately MUSD 4 (MSEK 23). The operation was consolidated into Loomis’ accounts on September 1, 2007. The Guardian cash handling operations in Michigan consists of 205 employees based in three operating locations within the state. The operation has annual sales of approximately MUSD 9 (MSEK 64) and comprises cash transport and cash handling services.
Cono Sur, Argentina
Securitas in Argentina has entered into an agreement to acquire 100 percent of the shares in the security services company Cono Sur. The final enterprise value is estimated at MARS 17 (MSEK 33). Cono Sur has annual sales of approximately MARS 27 (MSEK 60). The company operates in the Province of Buenos Aires, the City of Buenos Aires and the southern part of the country. Cono Sur is primarily active within permanent guarding, in the health, banks and industry market segments. With this acquisition Securitas adds important clients to its portfolio.
Walsons, India
Securitas has acquired 49 percent of the shares in the Indian security services company Walsons. The estimated enterprise value of the 49 percent acquisition is approximately MINR 633 (MSEK 103). Walsons is the fourth largest national security services company in India and has annual sales of approximately MINR 475 (MSEK 76). Walsons has a high quality contract portfolio with a majority of the business within the IT, insurance and finance sectors. The company has approximately 6,500 employees and is located in nine regions in India.
Forza, Peru
Securitas has acquired 90 percent of the shares in the security services company Forza with subsidiaries Forza Alarmas and Forza Amazonica in Peru. Estimated final enterprise value of the acquisition is approximately MPEN 44 (MSEK 94). Forza has annual sales of approximately MPEN 75 (MSEK 160) and is one of the four largest security services providers in Peru. Forza is based in Lima but with a strong presence in the mining sector in the interior part of the country. The company has approximately 3,200 employees.
The Group’s total capital employed was MSEK 18,692 (19,338). The translation of foreign capital employed to Swedish kronor decreased the Group’s capital employed by MSEK -284 after taking into account net investment hedging and MSEK -359 before net investment hedging of MSEK 75.
 
The return on capital employed was 13 percent (8).
 
The Group’s net debt amounted to MSEK 9,878 (9,735). Acquisitions and acquisition related payments in 2007 increased the Group’s net debt by MSEK 902, of which purchase price payments accounted for MSEK 917, assumed net debt for MSEK -54 and acquisition related restructuring costs paid for MSEK 39. The Group’s net debt decreased by MSEK 77 due to the translation to Swedish kronor of net debt in foreign currencies.
 
Dividends of MSEK 1,132 (1,278) were paid to the shareholders in April 2007.
 
The four convertible loans issued by Securitas AB to Securitas Employee Convertible 2002 Holding S.A. in Luxembourg in May 2002, totaling MEUR 254, were repaid back on May 2, 2007. No conversions have taken place.
 
In the first quarter 2007, Securitas AB’s 6.125 percent MEUR 500 Euro Bond was reclassified from an interest bearing long-term liability to an interest bearing current liability as it matures in March 2008. Securitas has access to long-term funding through its MUSD 1,100 Revolving Credit Facility that matures in 2011 and its MEUR 550 Term Loan Facility maturing in 2010.
 
The interest coverage ratio amounted to 3.9 (4.4). The free cash flow to net debt ratio amounted to 0.24 (0.18).
 
Interest expense for the period on the convertible debenture loans that matured on May 2, 2007 amounted to MSEK -30 (-74).
 
Shareholders’ equity amounted to MSEK 8,814 (9,603). The translation of foreign assets and liabilities to Swedish kronor impacted shareholders’ equity by MSEK -207 after taking into account net investment hedging of MSEK 75 and MSEK -282 before net investment hedging. Refer to page 50, Statement of recognized income and expense, for further information.
 
The total number of outstanding shares amounted to 365,058,897 as of December 31, 2007. The average number of shares after full conversion of the convertible debenture loans that matured on May 2, 2007 was 369,365,776 for 2007.
 

Condensed Balance Sheet according to Securitas’ financial model  
MSEK 2007 2006
Operating capital employed 4,171.0 4,669.2
Goodwill 13,793.5 14,031.6
Acquisition related intangible assets 624.0 464.2
Shares in associated companies 103.5 172.7
Total capital employed 18,692.0 19,337.7
Return on capital employed, % 13 8
     
Net debt 9,878.0 9,734.6
Shareholders’ equity 8,814.0 9,603.1
Total financing 18,692.0 19,337.7
Securitas’ financial model is described on pages 25–28.
Operating items. Net debt related items. Goodwill, taxes and non-operating items. Items related to shareholder’s equity.
 
Acquisitions
All acquisition calculations are finalized no later than one year after the acquisition is made.
 

Acquisitions January – December 2007 (MSEK)            
    Included        
            Acquisition related
        Enterprise    
      Annual      
Company Division1 from sales 2 value3 Goodwill intangible assets
Opening balance         14,032 464
KARE, Turkey 4 Security Services Europe n/a 54 61
Black Star, Spain 4 Security Services Europe n/a 47
  Security Services Europe,          
Chubb van den Enden, the Netherlands Mobile and Monitoring Mar 1 56 17 5 16
PSI, Spain 5 Security Services Europe n/a 47 8
Protection Service, France Security Services Europe Apr 1 210 6 19
Seguridad Argentina, Argentina New Markets 7 May 1 186 36 49 34
CPI Security, Romania Security Services Europe May 1 87 3 10
Seguridad Burns de Colombia, Colombia New Markets 7 Jun 1 72 20 7 13
G4S Cash Services, France Loomis Jul 2 405 234 140 59
Brink’s cash handling, Great Britain Loomis Aug 6 165 17
Guardian Armored Security cash handling, USA Loomis Sep 1 55 24 16
Cono Sur, Argentina New Markets 7 Sep 1 58 24 20 9
Walsons, India New Markets 7 Nov 9 103
Forza, Peru New Markets 7 Dec 1 160 85 66 18
Other acquisitions 6     257 146 20 114
Total acquisitions January – December 2007     863 376 308
Impairment losses of goodwill         –350
Amortization/impairment of acquisition related intangible assets       –108
Reclassification         –22
Translation differences         –264 –18
Closing balance         13,794 624
1 Refers to division with main responsibility for the acquisition.
2 Estimated annual sales.
3 Purchase price plus acquired net debt.
4 Deferred considerations paid in Q1 2007 for KARE and Black Star acquisitions.
5 Deferred consideration paid in Q2 2007 for PSI acquisition.
6 Värmlandsvakt (contract portfolio), Schäferhundvakt (contract portfolio), Royal Säkerhet AB, Kristianstad Hundbevakning (contract portfolio), Nässjö/Eksjö Bevakning (contract portfolio), WGA (contract portfolio), PBB Borlänge (contract portfolio) and UVOS, Services Sweden, Facility Network A/S, Services Denmark, Rometex Oy (contract portfolio), Services Finland, IDS (contract portfolio) and Alsterwacht, Services Germany, Actir, Avantage Sécurité SARL, Bretagne Protection Surveillance (contract portfolio), SARL Départemental Sécurité (contract portfolio), ESG Sécurité (contract portfolio) and Lahire Protection Sécurité, Services France, Actir (contract portfolio), Lahire (contract portfolio) and Team & MVS, Alert Services France, Patrol (contract portfolio), Services Switzerland, FS&P NV and M.O.T, Services Belgium, Eureca (contract portfolio), Kuypers (contract portfolio), Hummel (contract portfolio) and Vision (contract portfolio), Alert Services Netherlands, Vigilancias y Siguridad S.A., Services Argentina, Aseco and Proguard, Services Uruguay, Security Services Northwest, Loomis USA. New Markets is included in the segment Other.

Page 33

 
KARE, Turkey
As announced in the full year report for 2006 Security Services Europe has, through DAK Güvenlik, acquired 100 percent of KARE in Turkey. The company, which has 900 employees, has annual sales of MTRY 15 (MSEK 72) in guarding services.
 
Black Star, Spain
Black Star in Spain was acquired in December 2005 and a deferred consideration of MEUR 5 (MSEK 47) was paid as planned during the first quarter 2007. A further MEUR 5 will be paid in the first quarter 2008.
 
Chubb van den Enden, the Netherlands
In March 2007, Securitas acquired Chubb van den Enden in the Netherlands which had total sales of MEUR 6 (MSEK 56), in 2006 and 200 employees. This acquisition confirms Securitas’ market-leading position in mobile guarding in the Netherlands.
 
PSI, Spain
PSI in Spain was acquired in June 2006 and a deferred consideration of MEUR 5 (MSEK 44) was paid as planned during the second quarter 2007. A further MEUR 5 will be paid during the second quarter 2008.
 
Protection Service, France
In April 2007, Security Services Europe acquired certain assets and customer contracts from Protection Service in France. This company is focused on retail clients and Securitas has taken over personnel and customers representing annual sales of MEUR 23 (MSEK 210). This acquisition makes Securitas the leading player in the French private security market for retail customers.
 
Seguridad Argentina, Argentina
In April 2007, Securitas in Argentina entered into an agreement to acquire 100 percent of the shares in Seguridad Argentina. This acquisition will bring estimated sales in 2007 of approximately MARS 84 (MSEK 186). Seguridad Argentina is one of the four major players in security services in Argentina with 2,500 employees. This acquisition makes Securitas the leading security services supplier in Argentina with approximately 7,000 employees and annual sales of MSEK 500. The estimated final enterprise value of the acquisition is MARS 42 (MSEK 93).
 
CPI Security, Romania
Security Services Europe has acquired 55 percent of the shares in CPI Security in Romania. In December 2007 a capital contribution was made which increased Securitas’ ownership to 87.75 percent. Under the agreement the remaining 12.25 percent will be purchased in 2010 and the purchase will be based on the financial performance of the company until the year 2009. CPI Security is one of the major players on the Romanian security market. The company’s estimated annual sales in 2007 are MRON 30 (MSEK 87) and it has more than 2,000 employees. The estimated final enterprise value is 6 MRON (MSEK 16).
 
Seguridad Burns de Colombia, Colombia
Following the strategy to expand the Latin American platform, Securitas has acquired 71 percent of the shares in Seguridad Burns de Colombia. Under this agreement the remaining 29 percent of the shares will be purchased in 2010 and the purchase will be based on the financial performance of the company in 2009. The company has approximately 1,000 employees. The company’s annual sales are about MCOL 21,500 (MSEK 72). The estimated final enterprise value is MCOL 8,500 (MSEK 27).
 
G4S cash handling operation, France
Loomis has acquired the G4S cash handling operation in France with 720 employees. The acquisition makes Loomis the market leader in France. The operation has annual sales of approximately MEUR 46 (MSEK 430). The enterprise value is MEUR 25 (MSEK 234).
 
Brinks’ cash handling operation, Great Britain
Loomis has acquired Brinks’ cash handling operations in Great Britain. The enterprise value is MGBP 1.1 (MSEK 18). The Brinks’ cash handling operations in Great Britain consists of 350 employees, whereof 260 are in England and 90 in Scotland. The operation has annual sales of approximately MGBP 13 (MSEK 180) and comprises cash transportation and ATM services.
 
Guardian Armored Security cash handling operation, USA
Loomis has acquired Guardian Armored Security, a Michigan-based cash handling services company. This acquisition makes Loomis the leading cash handling company in the Michigan market. The enterprise value is approximately MUSD 4 (MSEK 23). The operation was consolidated into Loomis’ accounts on September 1, 2007. The Guardian cash handling operations in Michigan consists of 205 employees based in three operating locations within the state. The operation has annual sales of approximately MUSD 9 (MSEK 64) and comprises cash transport and cash handling services.
 
Cono Sur, Argentina
Securitas in Argentina has entered into an agreement to acquire 100 percent of the shares in the security services company Cono Sur. The final enterprise value is estimated at MARS 17 (MSEK 33). Cono Sur has annual sales of approximately MARS 27 (MSEK 60). The company operates in the Province of Buenos Aires, the City of Buenos Aires and the southern part of the country. Cono Sur is primarily active within permanent guarding, in the health, banks and industry market segments. With this acquisition Securitas adds important clients to its portfolio.
 
Walsons, India
Securitas has acquired 49 percent of the shares in the Indian security services company Walsons. The estimated enterprise value of the 49 percent acquisition is approximately MINR 633 (MSEK 103). Walsons is the fourth largest national security services company in India and has annual sales of approximately MINR 475 (MSEK 76). Walsons has a high quality contract portfolio with a majority of the business within the IT, insurance and finance sectors. The company has approximately 6,500 employees and is located in nine regions in India.
 
Forza, Peru
Securitas has acquired 90 percent of the shares in the security services company Forza with subsidiaries Forza Alarmas and Forza Amazonica in Peru. Estimated final enterprise value of the acquisition is approximately MPEN 44 (MSEK 94). Forza has annual sales of approximately MPEN 75 (MSEK 160) and is one of the four largest security services providers in Peru. Forza is based in Lima but with a strong presence in the mining sector in the interior part of the country. The company has approximately 3,200 employees.