After reviewing all the Infologue.com articles published this year it was a simple task to summarise the theme of the annual review, it was a year of laying foundations. This year the government has actively promoted the development of the wider police family to include the manned security industry. Lord Falconer, as the Minister of State at the Home Office, said in April this year, ’The SIA and the private security industry at large have an important part to play in the wider Home Office agenda for reducing crime and the fear of crime and tackling anti-social behaviour’. He also said in the same speech “government policy is to treat a licensed and regulated private security industry as part of the ‘extended police family”. This theme was continued by Sir Keith Povey, Her Majesty’s Chief Inspector of Constabulary for England & Wales, who said that the security industry was well on the way to becoming part of the extended police family. Sir Keith said “The police service and the security industry should not be in competition; instead we should complement one another.” He believed that the security industry will play an important role in the area of visibility and reassurance. Sir Keith highlighted areas of co-operation such as “using shared intelligence to task staff, a common livery on vehicles and of integrating our communications systems where appropriate” and also in the area of training. “I do believe that the police and the Security Industry are on the cusp of a positive, productive relationship which has the capacity to create substantial opportunities for both of us to the real benefit of the community.”
Infologue.com “Quote of the Year – 2003”
“Is service bought for example, on the basis of “6 people 24 hours a day” or “we have a building and people to protect what’s the most effective solution?” John Saunders – Chief Executive – Security Industry Authority
The next foundation laid was the launch of the Security Industry Authority (SIA) in April 2003 and the start of the stakeholder education process that culminated in a series of joint seminars with the British Security Industry Association in the latter part of this year. The SIA set out the criteria for licensing which had three key cornerstones, criminality, identity verification and competency. The SIA have also agreed to re-examine the exclusion from regulation of in-house manned security personnel. During the year the SIA appointed BT to run a call centre and process applications. The SIA also announced a fee of £190 for the three year licence and revealed the cost of running the SIA would be £30 million per annum. During a presentation John Saunders the Chief Executive of the SIA asked “Is service bought for example, on the basis of “6 people 24 hours a day” or “we have a building and people to protect what’s the most effective solution?” We believe that this question is at the core of the future of the manned security industry where buyers and suppliers of manned security will start looking at how to secure instead of how to man security. This is where an organisation such as The Security Institute could play a vital role in developing education programmes to deliver the required competencies. Having reviewed many speeches this year, Infologue.com believes that the question asked by John Saunders encapsulates the essence of what future thinking in the manned security industry should be and deserves the plaudit of Infologue.com “Quote of the Year – 2003”
Infologue.com “Person of the Year – 2003”
“BSIA has this year gone a long way to remove the “Big Boys Club Label”. Infologue.com believes that the leadership of the BSIA Chief Executive, has been key to the successful transition of the association” David Dickinson – Chief Executive – British Security Industry Association
The third key foundation laid this year was the role of the British Security Industry Association (BSIA). Having for many years played the unofficial role of the “watchdog” of the industry, Infologue.com was keen to see if the BSIA could perform its traditional role as the voice of the industry. The BSIA has a responsibility to ensure that the interests of its members and in effect the manned security industry are protected and developed, especially during transition. It also has a vital pivotal role of keeping the industry properly informed. The BSIA has for many years been perceived by smaller companies as a “Big Boys Club” looking after the interests of the major players. Whilst the development of the extended police family has been the most visible activity of the BSIA, its other less publicised activities have protected and developed the interests of its members. An area of concern for security companies is what form the Approved contractors Scheme would take. The BSIA released a fully mandated standard “Towards the future” which it believes should become the basis of the Approved Contractors scheme. As reviewed earlier, the BSIA ran a series of seminars with the SIA to inform end users, put pressure on the Government to decide timeously on the Working Time Directive, lobbied the SIA on the inclusion of in house security officers, and also developing a positive relationship with the Police as part of the extended police family. The BSIA also participated in developing a procurement guide produced by The Security Institute. Infologue.com believes that the BSIA has this year gone a long way to remove the “Big Boys Club Label”. Former Metropolitan Police Commissioner Lord Condon of Langton Green QPM DL became President of the BSIA. It appears that a decision on the Working Time Directive has been delayed until at least 2005. Infologue.com believes that the leadership of the BSIA Chief Executive, David Dickinson has been key to the successful transition of the association and we have pleasure in announcing David Dickinson as the Infologue.com “Person of the Year – 2003”.
Infologue.com “Best Industry Initiative of the Year 2003
“The publication by The Security Institute “A Guide to the Procurement and Management of Manned Security Services” sets out effective buying practices and is an ideal foundation for buyers to move to a best value approach from the current lowest bid strategy.” The Security Institute
An area highlighted by John Saunders the Chief Executive of the SIA this year was “contract promiscuity” where services are bought solely on price; he said “Anecdotal evidence suggests that buyers of services focus on price – a slick commodity procurement approach?” Purchasing on price was also confirmed in an international survey of outsourcing contrasting current practice between European companies and US. The survey “Trends in Outsourcing Contrasting USA and Europe 2002 by Professor Andrew Kakabadse, of Cranfield University found that “US companies are identified as pursuing more value adding sourcing strategies while European companies are more focused on gaining economies of scale through outsourcing.” Strategy Guru Harvard University’s Professor Michael Porter told a conference in London in January this year “There’s a fair amount of evidence that UK companies are relying too much on cost, and not enough on quality: they’re not competing on innovation,” Prof Porter also told the audience of academics and policymakers at the London School of Economics. “A systematic strategy to raise the education of managers would be a good thing.” The publication by The Security Institute “A Guide to the Procurement and Management of Manned Security Services” sets out effective buying practices and is an ideal foundation for buyers to move to a best value approach from the current lowest bid strategy. Buyers who fail to realise this shift could be faced with a situation quoted to John Saunders of the SIA, “There will be a finite pool of quality, licensed labour and an infinite amount of work… the wiser contractors will already be drawing up league tables of clients and look after the good ones.” A Guide to the Procurement and Management of Manned Security Services by The Security Institute is the Infologue.com “Best Industry Initiative of the Year 2003
“Profitability in the industry through improved margins needs to be addressed”
There is a growing realisation that the lack of fair profit within the manned security industry is an issue that requires addressing through improved margins. Logue Corporate Services, publishers of Infologue.com and Plimsoll the industry analysts constantly monitor the financial state of the industry. Last year six of the Infologue.com Top 20 Companies recorded a loss whereas only one company has reported as loss this year. We believe this is due to stringent cost control, which could impact on service levels, than improved revenue streams. The most profitable Top 20 Company declared a 5.18% PBIT (Profit Before Interest and Taxation) whilst the average profit was 2.54% PBIT. Research by Plimsoll has concluded that profit margins are at a record low and with a staggering 29% of the industry is loss making. Infologue.com considered publishing a Profit League Table but due to various methods of interpretation of profit and related factors has decided to postpone the publication of the Profit League Table until December 2004. Senior Analyst, Alan Matthews of Seymour Pierce provided Infologue.com with his thoughts on the manned security sector “Manned guarding particularly is seeing pressure on margins. Companies in this sector have to cope with the extra National Insurance cost as from April 2003 and higher insurance costs generally. Whilst no doubt the companies will attempt to pass these on to their customers, this has coincided with a period when there has been considerable caution in corporate spending patterns and tightening of budgets. The growth in electronic security is no doubt also eating into the manned guarding market, although to my mind, the operators in the electronic field do not find it easy to make good returns either.”
“Industry consolidation continued through acquisition in 2003”
Industry consolidation through acquisition took place on a global and UK basis during the year. UTC acquired Chubb plc and as yet they have not stated their intentions in respect of their manned security operations. Should UTC decide to remain in the manned security sector, this could give impetus to further global consolidation. Mitie plc acquired Trident Safeguards Ltd and the Executive Group raising their security division’s annual turnover to circa £51 million. Mitie are now ranked as the 9th largest UK manned security company in the Infologue.com Top 20 League Table. Signalling greater involvement by facilities services companies in the sector, AIM listed MacLellan Group plc, acquired Attlaw Security & Protection Limited. There were several other acquisitions made during the year with both Temple Security and SectorGuard being particularly active. Temple Security is a Infologue.com Top 20 company and SectorGuard are bordering on entry to the Top 20. Well run and profitable companies were sold at a premium, whilst low margin companies were sold at below market value.
“Labour churn, caused principally although not exclusively through low wages and long unsociable hours, remains the Achilles Heel of the manned security industry.”
Infologue.com believes the foundations for a professional and successful industry have been successfully laid during 2003. However a strong industry cannot be built without resolving the issue of labour turnover. Labour churn, caused principally although not exclusively through low wages and long unsociable hours, remains the Achilles Heel of the manned security industry. Significant investment in employees cannot be made until the churn rate is resolved. Regulation in itself will not resolve the fundamental issue, only a sea change in the thinking of buying practices and senior manned security executives will. The adage of “Turnover is vanity but profit is sanity” needs to be applied to our industry in 2004. The foundations have been laid, it is now the responsibility of all stakeholders to ensure that this ethos is carried through to practice. We wish all our subscribers Seasons Greetings and a successful 2004