Tough times in the security guarding sector have been confirmed by industry analyst Plimsoll Publishing in its latest market report. Plimsoll has produced a financial health check for each of the Top 266 companies in the UK manned security industry, and reveals that consolidation is “essential” as supply is outstripping demand.
All companies are experiencing a difficult trade-off between protecting margins and appeasing price-sensitive customers.
Plimsoll has placed each of the UK’s largest security companies into one of five financial ratings based on their overall financial performance. Ratings have been given as Strong, Good, Mediocre, Caution and Danger. 107 firms are rated as Strong with the best financial performance. 39 are said to be Good, exhibiting an “Improving overall financial performance”. 33 fall into the Mediocre category, meaning that they’re “in transition” and facing “a make or break year”. 39 companies find themselves in the Caution category with a weakening financial position while 49 are said to be in Danger and need changes to be made in order to survive
Commenting on the results of the survey, David Pattison – senior analyst on the project – told info4security: “A great deal has been written on the general slow down in the UK, but until now no-one has measured the impact on the manned security market and, crucially, who is most exposed. Of most concern are the 48 firms who have been rated as Danger. These firms are being hit the hardest. The numbers are stark – profit margins falling to only -3% of sales, and the majority of companies in this classification are making a loss. Most are taking on debt at an alarming rate simply to cover their costs.”
Pattison continued: “I think these figures just prove the point that a period of consolidation is long overdue. Bit-by-bit the weaker players will be removed from the market.”
Consolidation realises consequences
A period of consolidation will obviously have consequences, aside from the obvious job losses. The Plimsoll report suggests that up to 68 companies might need to shed jobs. For some businesses, anything up to 30% of the current payroll may have to be divested if the company is to survive.
“These companies [those rated Danger] must put immediate plans in place to start to trade their way out of their problems,” suggested Pattison. “Cutting costs, jobs and even turning unprofitable work away – stringent measures like these must be put in place before it’s too late. Currently, the owners are sitting on an ‘unsellable’ asset and are woefully exposed to acquirers who are ready to snap them up for next to nothing.”
Those companies rated as Strong and Good offer some room for optimism. Benefiting from stronger business models and tighter financial management, these organisations are ideally placed to benefit from the fall-out in the market.
Copies of the analysis can be obtained for GB pound 350 by telephoning Clair Sherwood on 01642 626400 (or send an e-mail to: [email protected])
