Today the UK, tomorrow the world.
If anyone doubted Securicor’s stated intent to become a global top three security player when it divested its 40% share in Cellnet for a whopping GB pound 3.15 billion, it’s time for a serious rethink.
Having returned nearly all of the investment to its shareholders and relisted on the stock exchange since the November ’99 deal, the cash-rich ‘new’ Securicor plc began last year as a debt-free entity. It then embarked on an acquisition strategy which has strengthened the company’s service capabilities, giving it a global presence in 40 countries employing 105,000 people.
Last year, Securicor’s purchases included guarding firms Securewest, Seceurop and Shopwatch – acquisitions that helped in expanding its regional position and service capabilities in the UK. Overseas, the company swallowed up South African security concern Gray Security Services Ltd (and, with it, Gray’s own significant GB pound 12 million UK presence) as well as the US-based AHL Services, whose European arm is better known as ADI.
The latter neatly allowed Securicor to take a GB pound 50 million leap to the number one spot in the UK market. Having shadowed Group 4 all year, Securicor is now turning over GB pound 200 million per annum in the guarding sector.
“We are now clearly the market leader, with about 13% of the market,” says Nick Buckles, the security division’s chief executive. “Until this latest acquisition we were probably just about number two, but this one has taken us above the GB pound 200 million benchmark in the UK. Whichever way you describe the market, I don’t think Group 4 would be that close at the moment.”
That’s less than half the story…
Securicor’s cash services business also leads the way on home soil, with about 60% of the outsourced market and 52% of the total UK market. Last year, this market share was augmented by the purchases of the US Loomis Armoured Car Service company, German Cash-in-Transit provider GWK GMBH and the Australian-run high value goods transportation company, Brambles.
And, while it hasn’t been the focus of an acquisition strategy, Securicor’s custodial division has also enjoyed strong organic growth, states Buckles, giving the security division three strongly performing products.
All in all, Securicor’s rapid cheque-book style expansion, coupled with strong organic growth, has allowed the (global) business to double in size from GB pound 600 million to nearly GB pound 1.1 billion.
Calm after the storm
Sector wise, the company now provides manned services in aviation, retail, rail/transportation (which includes revenue protection) and commercial offices. Buckles envisages a period of “less major acquisitions for the next 12 months” while the company digests those made over the past year.
So what was the logic behind those buys? Buckles comes straight to the point: “The market is consolidating on a global basis. To be a serious player to some of the bigger customers now emerging, you have to have a presence in a number of territories. There are probably a dozen companies we could acquire every week, but we have quite a stringent acquisition profile of the type of companies we would acquire.” He adds: “What we tend to look at are businesses in niches which we are focused on, or wish to focus on in the future. The retail sector is a good example. Here, we’ve acquired Shopwatch to provide store detectives. We now have approximately GB pound 20 million worth of turnover in the retail sector alone.” Acknowledging that there’s just as much management time involved in a small acquisition as in a big one, Buckles has targeted larger acquisitions with their inherently strong management teams. “What we will bring to those businesses in particular are our financial disciplines, our operating systems and the way we monitor and improve performance, which we’ve demonstrated in our businesses in the last few years,” adds Buckles.
Investment has also been a strong focus of Securicor’s management technique. Between the UK businesses, the company has invested about GB pound 15 million in operating systems.
“We’ve also changed our focus on how we deal with customers,” states Buckles, “building our business with bigger customers rather than chasing smaller ones. We also have very good management information about how profitable our customers are. So there’s been a lot of investment in technology, and a good deal of common sense application of that investment.”
Technology pluses
Alongside this, the company is also working on a strong product development strategy. Although still in its infancy in terms of development, says Buckles, Securicor is “researching the impact of technology on the UK manned security industry”.
This is in line with the beliefs of many industry watchers and analysts, who have been indicating a state of readiness for ‘man-tech’ guarding solutions for some time now.
Says Buckles: “We need to get to the bottom of what that impact is going to be. I certainly haven’t experienced any major changes in the last five years, but technology’s advancing rapidly and we need to be aware of that. Until now there’s been other, much bigger drivers in the industry, including the minimum wage, the social chapter and private security sector regulation.” All of which have put pressure on profit margins. Buckles continues: “Manned guarding has always been a tough business to make money in. It’s become even tougher with the manpower shortages, particularly in the south of England. Sadly, our inability as an industry to get the right rates for the job to enable us to invest in the business continues to be a major problem.” Yet the pressure on margins is likely to see ‘technology and manpower’ solutions sooner rather than later. Indeed, such a ‘combined proposition’ is already in evidence in Europe.
Securicor can cite examples of combined product offerings in smaller markets like the Channel Islands, Luxembourg and Hungary. “That’s all down to the fact that we’ve built up very strong relationships with senior customers in these areas,” says Buckles. “We’ve yet to find customers who can see the benefits of acquiring technology and manpower in a combined product offering in the UK, though. That may be because we need to build the right customer relationships. There has to be an education process in the next couple of years.”
A global game
Indeed, product development is already the focus of Securicor’s strategy for the next 12 months, and Buckles envisages the company will be ready to roll out what he calls an ‘integrated security’ (manpower and technology) package by the end of this year. That said, the goalposts for Securicor as a company have been moved, requiring a different strategy.
“We now see ourselves as a global security company, so we have actually taken the requirement, the product development, innovation and IT development for strategic HR into the centre. That’s something we are developing as a global capability,” says Buckles.
The new business model will be rolled out over the next 12-18 months. “We have only invested in those countries and areas where we are a strong player. In any country where we operate cash services we are a number one or two player, except in the US where we have only just acquired Argenbright/ADI (AHL). In the guarding sector we are a top three or four player. It’s becoming more and more frequent now that our main competitors in those countries are global companies like Group 4 Falck and Securitas.” Given this ‘super league’ of global players, the game will now be to obtain global contracts. Buckles cites Securicor’s recent foray into aviation security with the AHL acquisition, which trades as Argenbright in the US and has contracts with two of the largest airline networks – Delta and United – in the States. Its UK arm, ADI, has a GB pound 25 million contract with BA in the UK and Europe.
“What we have now is a 40-country network with an ability to service these airlines in 40 countries, rather than the two or three we have at the moment. In terms of pure manned servicing, there’s probably only about 2% of the market that is global. In terms of airline security, there’s now a growing requirement to provide global services.” Similarly, with the Brambles acquisition the company significantly raised its capabilities in the international Cash-in-Transit/high value goods transportation business, offering its customer base a one-stop-shop in security transport services. In the UK, too, cash services is a market where Securicor sees significant growth opportunities. Traditionally, the service has been structured around moving cash around and counting it.
Buckles, who envisages a move into areas like centre management and ATM management.
Buckles continues: “I think the cash services industry in the UK has become much more credible in the last five years, largely thanks to better margins and more investment being ploughed back into the business.” All of which has filtered through to Securicor and helped produce higher quality staff and services, ultimately attracting more outsourced business from banks.
Having branched out into developing its own brand of ATMs, Securicor has 400 machines installed in UK convenience stores. This shows its technological capability to provide added value services which, says Buckles, “persuades people that it’s not just about providing ‘a man in a secure van’. We’ve moved on from that.”
