Security guarding companies turn into 'zombies'

05 Jul 10

According to Plimsoll’s latest market analysis, there are now 14 companies in the UK security guarding sector that have turned into ‘zombie’ businesses. Brian Sims investigates.

By Brian Sims

The companies concerned have seen their performance deteriorate to such an extent that they now exist merely to pay off their debts and survive.

David Pattison, author of the new Plimsoll Industry Analysis: Manned Security, explained to SMT Online: “These companies are in a state, posting growing losses and, despite the obvious freeze in the credit markets, increasing their debts.”

He continued: “They are zombie businesses with debts at an average of 46% of turnover. They exist to service their out of control liabilities. Many are also using their suppliers to finance their growing losses, taking twice as long as to pay their bills as the industry average of 28 days.”

Pattison also outlined the other major problems these zombies are facing. “They are falling behind the rest, and their productivity is well below the industry average. It’s hard for them to compete as their cost base is just too high. As a result, investment plans have been mothballed, meaning their aging assets are further restricting their ability to remain competitive.”

Can the zombies be saved?

So can these zombies be saved? Pattison is clear that not all will survive, and those that do have a lot of pain ahead of them.

“The first thing they need to do is sort out their immediate finances. They have to convince their banks and suppliers to keep supporting them or at least to not pull the plug. If they can pull that off then the hard work really starts. They urgently need to stem their losses and control costs. The longer it takes them to address these issues, the harder and less likely it is they will ever fix the current situation.”

However, Pattison points to some attractive takeover targets hidden among the zombies. “Canny investors are seeing an opportunity to pick up a bargain. Some of these companies, stuck in a zombie state because of their balance sheet, have lots of potential for new owners to turn their fortunes around. We’ve picked five companies that we feel have the most potential.”

For those unable to attract new buyers, Pattison commented: “Most have simply had their day. A combination of aging assets, rising losses and increasing debts mean they are unlikely to attract a suitor before the receivers are called in. They’ll be forced back into negotiations with their lenders to buy more time, but their future doesn’t look good.”

Performance rating on 292 companies

The new Plimsoll Industry Analysis: Manned Security will tell you instantly which companies are prospering in the post-recession market place, those taking a big gamble and those in trouble. It gives an instant performance rating on 292 companies, and highlights those ripe for acquisition.

Each company is assessed using ‘The Plimsoll Model’, a graphical and written analysis that lays bare the facts and gives you instant opinion.

Readers of Security Management Today (SMT) Online are entitled to a £50 discount on copies of this new special edition of the Plimsoll Industry Analysis: Manned Security.