Securitas Annual Report 2007

Securitas’ European guarding operation consists of Security Services Europe, providing specialized guarding services for large and medium-sized customers in 20 countries, and Aviation, providing airport security services in nine countries. The organization has more than 800 branch offices and more than 100,000 employees.
Financial information
The organic sales growth for Security Services Europe, including Aviation, was 8 percent (7). Strong seen in markets such as Norway, Denmark, Estonia, Switzerland, Austria, Turkey and Eastern Europe. In Germany, the lost US Army contract and sales related to the Football World Cup in 2006 resulted in negative decline, the growth rate in Germany would have been around 9 percent. Aviation is continuing to show double-digit organic sales growth, which is largely attributable to the Arlanda/Bromma contract in Sweden that started in February 2007 and has a total value of more than MSEK 1,000 over five years.
The operating margin was 5.7, compared to 5.8 percent last year. After adjustment for the impact of last year’s repayment of pension premiums from FORA AB in Sweden in the amount of MSEK 24, the margin remains unchanged. Operating income showed a real change of 9 percent in the period.
There is continued pressure on price levels and gross margins for Security Services Europe, and this therefore remains a focus area. The client retention rate was stable at around 90 percent. The employee turnover is slightly higher than in 2006, at 39 percent compared to 38 percent. The strong labor markets in most European countries challenged the organization’s ability to retain its employees.
Service offering
Customer segments range from health care, financial services, retail, energy services, industry, aviation, maritime, logistics and the public sector to special events among others, to mention a few. This requires a strong ability to provide tailor-made solutions and a deep understanding of each customer segment. Securitas’ solutions are developed in close cooperation with customers locally and often include elements of technology, in addition to specialized guarding. The combination of specialized security officers and various security systems provides our customers with flexible and cost-effective security solutions. Securitas acts as coordinator for its customers by being the single point of contact, combining the elements above and partnering with sub-contractors on specific requirements.
As an independent organization within Security Services Europe, Aviation provides specialized services for airports, airport-realted business and airlines. The services range from security screening of hand and hold baggage to cargo security, document profiling and aircraft guarding and search.
Market
The market for outsourced security services, (excluding Mobile and Monitoring) in the countries where Security Services Europe operates grew by 4 percent in 2007 and reached a value of BSEK 140.
Securitas has a strong position in the European market and is the market leader in eight countries and second or third in another eight. In 2007 Security Services Europe’s market share was 18 percent compared to 17 percent in 2006.
There are close to 22,000 security companies operating in Europe with a total of nearly 1.1 million employees. The market is still fragmented and most of the companies are local players, competing mainly on price. The main competitors are G4S, which operates across Europe except in Spain, Portugal and Italy, and Prosegur, which mainly operates in Spain, Portugal, France and Italy.
Strategy and objectives
The overall objective of Security Services Europe is to grow faster than the market average and to see yearly margin improvements. This will be achieved by specializing in specific customer segments and offering tailor-made security solutions. The growth strategy is supported by selective acquisitions and the long-term objective is to have an operational presence in the whole of the EU. To support the growth strategy a specialization process is ongoing, and in 2007 the first two competence centers were introduced to strengthen cross-border development of the customer segments Retail and Maritime/Logistics.
Our employees
Continually striving to improve and develop our employees is of great importance. As an example of this, the division is developing a pilot for an employee survey. In addition, a number of managers are trained every year under the Securitas Management Training program which aims to strengthen local leadership and firmly establish Securitas’ culture and business model. An even stronger customer focus and increased human resources efforts will be the main ingredients in the business strategy for Security Services Europe in 2008. In combination they will contribute to organic sales growth and improved profitability in the years to come.
Key figures and events in 2007
  • Total sales amounted to MSEK 25,353 (22,786). Organic sales growth amounted to 8 percent (7).
  • Operating income amounted to MSEK 1,433 (1,316). The operating margin was 5.7 percent (5.8).
  • Return on total capital employed amounted to 25 percent (23).
  • Bart Adam, presently Chief Operating Officer for Security Services Europe, was appointed Divisional President of Security Services Europe in January 2008. At the same time Erik-Jan Jansen, Country President of Securitas Services Netherlands, was appointed Chief Operating Officer for the Security Services Europe division. They will assume their new positions in spring 2008.
Financial key ratios    
MSEK 2007 2006
Total sales 25,353 22,786
Organic sales growth, % 8 7
     
Operating income before amortization 1,433 1,316
Operating margin, % 5.7 5.8
Real change, % 9
     
Cash flow from operating activities 1,428 1,162
Cash flow from operating activities, % 100 88
     
Operating capital employed 1,059 1,078
Operating capital employed as % of sales 4 5
     
Total capital employed 5,278 5,252
Return on capital employed, % 25 23
Tore K. Nilsen, Divisional President, Security Services Europe
Securitas’ European guarding operation consists of Security Services Europe, providing specialized guarding services for large and medium-sized customers in 20 countries, and Aviation, providing airport security services in nine countries. The organization has more than 800 branch offices and more than 100,000 employees.
 
Financial information
The organic sales growth for Security Services Europe, including Aviation, was 8 percent (7). Strong seen in markets such as Norway, Denmark, Estonia, Switzerland, Austria, Turkey and Eastern Europe. In Germany, the lost US Army contract and sales related to the Football World Cup in 2006 resulted in negative decline, the growth rate in Germany would have been around 9 percent. Aviation is continuing to show double-digit organic sales growth, which is largely attributable to the Arlanda/Bromma contract in Sweden that started in February 2007 and has a total value of more than MSEK 1,000 over five years.
 
The operating margin was 5.7, compared to 5.8 percent last year. After adjustment for the impact of last year’s repayment of pension premiums from FORA AB in Sweden in the amount of MSEK 24, the margin remains unchanged. Operating income showed a real change of 9 percent in the period.
 
There is continued pressure on price levels and gross margins for Security Services Europe, and this therefore remains a focus area. The client retention rate was stable at around 90 percent. The employee turnover is slightly higher than in 2006, at 39 percent compared to 38 percent. The strong labor markets in most European countries challenged the organization’s ability to retain its employees.
 
Service offering
Customer segments range from health care, financial services, retail, energy services, industry, aviation, maritime, logistics and the public sector to special events among others, to mention a few. This requires a strong ability to provide tailor-made solutions and a deep understanding of each customer segment. Securitas’ solutions are developed in close cooperation with customers locally and often include elements of technology, in addition to specialized guarding. The combination of specialized security officers and various security systems provides our customers with flexible and cost-effective security solutions. Securitas acts as coordinator for its customers by being the single point of contact, combining the elements above and partnering with sub-contractors on specific requirements.
 
As an independent organization within Security Services Europe, Aviation provides specialized services for airports, airport-realted business and airlines. The services range from security screening of hand and hold baggage to cargo security, document profiling and aircraft guarding and search.

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Market
The market for outsourced security services, (excluding Mobile and Monitoring) in the countries where Security Services Europe operates grew by 4 percent in 2007 and reached a value of BSEK 140.
 
Securitas has a strong position in the European market and is the market leader in eight countries and second or third in another eight. In 2007 Security Services Europe’s market share was 18 percent compared to 17 percent in 2006.
 
There are close to 22,000 security companies operating in Europe with a total of nearly 1.1 million employees. The market is still fragmented and most of the companies are local players, competing mainly on price. The main competitors are G4S, which operates across Europe except in Spain, Portugal and Italy, and Prosegur, which mainly operates in Spain, Portugal, France and Italy.
 
Strategy and objectives
The overall objective of Security Services Europe is to grow faster than the market average and to see yearly margin improvements. This will be achieved by specializing in specific customer segments and offering tailor-made security solutions. The growth strategy is supported by selective acquisitions and the long-term objective is to have an operational presence in the whole of the EU. To support the growth strategy a specialization process is ongoing, and in 2007 the first two competence centers were introduced to strengthen cross-border development of the customer segments Retail and Maritime/Logistics.
 
Our employees
Continually striving to improve and develop our employees is of great importance. As an example of this, the division is developing a pilot for an employee survey. In addition, a number of managers are trained every year under the Securitas Management Training program which aims to strengthen local leadership and firmly establish Securitas’ culture and business model. An even stronger customer focus and increased human resources efforts will be the main ingredients in the business strategy for Security Services Europe in 2008. In combination they will contribute to organic sales growth and improved profitability in the years to come.
 
Key figures and events in 2007
  • Total sales amounted to MSEK 25,353 (22,786). Organic sales growth amounted to 8 percent (7).
  • Operating income amounted to MSEK 1,433 (1,316). The operating margin was 5.7 percent (5.8).
  • Return on total capital employed amounted to 25 percent (23).
  • Bart Adam, presently Chief Operating Officer for Security Services Europe, was appointed Divisional President of Security Services Europe in January 2008. At the same time Erik-Jan Jansen, Country President of Securitas Services Netherlands, was appointed Chief Operating Officer for the Security Services Europe division. They will assume their new positions in spring 2008.
 

Financial key ratios    
MSEK 2007 2006
Total sales 25,353 22,786
Organic sales growth, % 8 7
     
Operating income before amortization 1,433 1,316
Operating margin, % 5.7 5.8
Real change, % 9
     
Cash flow from operating activities 1,428 1,162
Cash flow from operating activities, % 100 88
     
Operating capital employed 1,059 1,078
Operating capital employed as % of sales 4 5
     
Total capital employed 5,278 5,252
Return on capital employed, % 25 23