CANADA SECURITY INDUSTRY BOOM
July 4, 2005 Monday

BUSINESS; Pg. C01

1263 words


Security boom

Hicham Safieddine, Toronto Star


While the terrorist attacks of 9/11 dealt a serious blow to the U.S. and Canadian economies, one business sector that did benefit was the private security industry.

Governments and corporations scrambled to boost protection of their assets and reached out for help from firms specialized in the field.

Nearly four years onward, public fears of large-scale acts of terrorism are nowhere near the levels reached in the aftermath of the 2001 attacks. But the business known on Wall Street as the "Silent Giant," for its low profile but growing economic importance, may be in for another - less abrupt - wake up call.

Analysts say the multi-billion dollar industry is heading for more growth and the solidification of an already-well-underway structural makeover, and Sept. 11 is only part of the reason behind it.

Traditionally, security services were sold a la carte by many different companies to buyers big and small, who'd pick and choose the bits they needed.

But security providers say their customers are increasingly expecting to get all services from one provider and under one deal, a kind of one-stop-shopping approach. In return, suppliers are shopping for the elements missing in their arsenal of security operations so they can offer customers across the country the variety of services they have come to expect.

"Traditionally this industry has been a very low-wage low-skill industry where clients were looking for warm bodies to fill positions," says Joseph D'Cruze, a professor at the University of Toronto's Rotman School of Management.

"Right now the industry is in the process of transformation ... and there is a huge potential for consolidation, especially in Canada, after skill requirements have changed and aggressive technologies are being introduced."

The private security services market includes all sorts of protection services from personal security guards for individuals and institutions to prison management to moving high quantities of cash to home security alarm systems. Worldwide, the market is projected to grow at an annual rate of 7.7 per cent through 2008, according to industry market research group Freedonia.

Revenues topped $90 billion (U.S.) in 2003, with nearly half earned in North America. These figures were based on a 2005 study conducted by the Cleveland-based research group in 22 countries and involving 36 leading competitors in the market including Securities AB, Group 4 Securicor, and Brink's.

In Canada, the study concludes that revenues - estimated at $2.2 billion in 2003 - are expected to double in the next seven years.

The largest segment in the industry is guarding. It accounts for almost half the revenues, ahead of armoured transportation, alarm monitoring and prison management.
One Canadian company betting big on the one-stop, one-shop vision is security provider Garda World Securities Corp.

Garda founder and chief executive Stephan Cretier says the company's strategy of transforming itself into a full service provider is paying off. The former baseball umpire says the Quebec-based firm will double its annual revenues in the next five years.

Garda reported last month that its first-quarter profits more than tripled compared with the previous year. Profits for the period ending April 30 reached $3.1 million (Canadian), up from $1.08 million the year before.

About 45 per cent of Garda's revenues come from western Canada and Ontario and close to 2,000 of its employees work in the GTA area.

Part of Garda's revenue is based on its aggressive round of $25 million worth of acquisitions of a dozen businesses in the past four years, including the lucrative pre-boarding screening operations at Pearson airport and 18 others in British Columbia run by the Canadian Air Transportation Security Authority last year.

But another less-talked about acquisition that reflects Garda's transformation strategy is that of Keyfacts, a firm that specializes in background security checks for financial institutions.

Keyfacts' background-check expertise is coupled with up-and-running cash handling services such as armoured money transportation vehicles.

With more than 8,500 employees across Canada and expansion outside its Quebec home in full swing, the CEO says a fragmented market and sound management is enhancing Garda's future as a key player in the security market.

But Cretier is well aware of the challenges faced by Garda when competing against other companies such as Securicor, Brink's and Securitas, which are also cognizant of the need for offering a one-stop alternative to clients.

Brink's, best known for its cash-transport armoured cars, has been reporting a steady increase in net profits during the past five years in its cash transport and home security departments.

In the case of Securitas, even before 9/11 the Swedish-based provider was in the process of swallowing up other firms - in part to broaden its national net of offices and bring a wide range of services to its customers. In April 2001, security firms Pinkerton and Burns merged into Securitas Canada, a wholly-owned subsidiary of parent company Securitas AB.

Securitas Canada vice-president Randy Smith says his company began noticing the rising trend of consolidating security needs in this country last year among financial and government institutions that own offices located from coast to coast.

After an 18-month jump in demand for security services following 9/11, he says the abrupt hike in demand levelled off but the company continued to enjoy steady growth.

"What happens [with consolidation] is that you get consistent security practices within the company," Smith says.

"With one security director, it does not matter which branch or which province or which location you are in, you are going to have the same level of security across the board."

Rotman's D'Cruze says the consolidation trend can be traced back to Europe where top security firms employed highly skilled labour and technology-heavy techniques for protection of property and assets. The events of Sept. 11 triggered a heightened interest in this approach on this side of the Atlantic.

Smith says consolidating a company's security needs under one provider also makes more sense for the provider. Economies of scale come into play when a branched network of services is rolled out across the country, he points out.

Combining different segments of security services also requires further focus on expertise and training to handle increasingly complicated operations.

And expertise, in the form highly skilled labour and intelligence-based investigative work is the wave of the future, says D'Cruze.

But many hurdles have yet to be conquered, including laws and regulations governing the operation of contractual security firms.

In the U.S., an umbrella organization representing a slew of security and investigative firms has recognized the importance of lobbying for a legislative environment that better suits the work of its corporate members.

In its objectives statement, The National Council of Investigation and Security Services outlines the need to combat "restrictive legislation regarding training and standards" and "proliferation of legislation requiring public licensing."

In Canada, Cretier says a number of provincial associations are banding different security groups together, adding that their future role in securing the prosperity of the industry is hard to overestimate.

"These associations are a must to lobby the governments to upgrade legislation related to the security sector and to discuss specifics about the industry [such as] certification training etc."

Peter Power toronto star file photo Transport Minister David Collinette and other officials announce new airport security measures at Pearson in October, 2001.Tony Bock toronto star Allan Bentley, vice-president of Garda World Securities Corp. of Canada, at the company's Mississauga offices. The security services firm has a one-stop, one-shop vision.AP FILE PHOTO A Brink's armored truck leaves the World Trade Center work site in New York just weeks after the Sept. 11, 2001, terrorist attacks. Its haul: some of the $200 million (U.S.) worth of gold and silver buried under a building at the disaster site.AP FILE PHOTO A Brink's armored truck leaves the World Trade Center work site in New York just weeks after the Sept. 11, 2001, terrorist attacks. Its haul: some of the $200 million (U.S.) worth of gold and silver buried under a building at the disaster site.