Securitas AB (SECUB) Chief Executive Officer Alf Goeransson said he will focus the Swedish company on electronic systems rather than branch out into new services as it battles G4S Plc (GFS) for the top spot in the security industry.
The provider of guards to clients such as retailer Marks & Spencer Group Plc is hiring engineers to boost its technical competence and looking to buy a “handful” of companies that offer the latest in electronic cameras and entrance systems, the CEO said in a Dec. 12 interview.
Goeransson’s strategy contrasts with that of larger rival G4S, which was thwarted by its shareholders in an attempt to diversify into cleaning by acquiring ISS A/S for $2.4 billion. Securitas aims to raise margins with value-added services like monitoring. It lost out to Stanley Black & Decker (SWK) in an auction of Swedish technical security provider Niscayah AB in September. With 285,000 guards globally, Securitas is currently the No. 2 security company.
“If Securitas doesn’t want to go the way of G4S with multiple integrated facility services, they have to differentiate themselves in security in another way,” said Soeren Lontoft Hansen, an analyst at Sydbank A/S. “Technical security solutions are crucial to Securitas’ future.”
Securitas has plunged 23 percent this year, compared with a 0.9 percent decline for London-based G4S.
Customers want more packaged solutions, and Securitas needs to be better at providing detectors, fire alarms, monitors and entrance systems, said Hansen, who has an “underweight” rating on the company’s shares.
Securitas has bought three technology-based security companies since September, in Turkey, Argentina and Thailand. It’s now mostly looking at companies in Europe and North America with revenue of 50 million kronor ($7.3 million) to 300 million kronor, the CEO said.
“You can either diversify or specialize, and Securitas has chosen to specialize,” Goeransson, 54, said at the company’s Stockholm headquarters. “We’re doing great on providing guarding but we can be better on the technical side. Then we can raise the value of the services we provide.”
Securitas will shun big-ticket acquisitions in 2012 and will likely buy fewer companies next year than in 2011 as it has less need to add pure guarding services, Goeransson said.
Securitas is renegotiating two of its biggest contracts that expire soon, Goeransson said. A contract with Arlanda airport outside Stockholm, the company’s most valuable deal in the Nordic region, ends in February, and Securitas’s five-year contract with General Motors Co. (GM) in the U.S. expires at the end of the year, he said.
The company is seeking to push through higher prices to customers to combat wage inflation in countries such as France. Securitas’s margin narrowed to 5.7 percent in the third quarter, compared with 6.5 percent a year earlier.
“If we lose the GM contract it will have a very low impact on earnings since the margin there is very low,” Goeransson said.
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