No Pain, No Gain: 'Forget the space-age gadgets. Use human security guards'

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The Independent Online

Protecting people and chattels in this increasingly violent, ill-tempered age has, not surprisingly, become a high- profile growth industry. And it is not just obvious terrorist targets, such as airports, where security is required. An army of unofficial PC Plods patrols many sites regarded as vulnerable. Even schools, in my younger days left unoccupied once the elderly part-time caretaker had left for home, now feel the need to embrace this burgeoning branch of the support services business.

In the perennial war against crime and terrorism, the most sophisticated space-age gadgets are available. But security guards, in vehicles or on foot, are still essential and have never been busier.

The stock market already recognises the ability of the big security players such as Rentokil Initial, still best known as the royal rat-catcher, and Securicor. But lurking on the undercard, with a capitalisation of just £6.7m, is a company that is taking full advantage of the security boom. SectorGuard is among the smallest members of the quoted contingent but it is ambitious and achieving the sort of progress which indicates its shares could be worth accumulating.

This week it unlocked year's profits of £742,000 against £502,000 the year before. Further progress, perhaps to near £1m, should be possible this year. SectorGuard is ignoring the hi-tech electronic side of the security industry and sticking with its 670 security guards. With some 2,000 manned security firms, many little more than one man and his dog-type operations, dotted around the country, the SectorGuard chief executive David Marks is convinced there is plenty of opportunities for expansion.

Last year he put through four smallish deals and more are in the pipeline. As the industry, like so many others, is clamped in a growing regulatory environment, the desire of many of the smaller players to remain in what is becoming an increasingly tough game must be evaporating. There are also opportunities for organic growth. Last year the group captured new contracts.

Some were for education centres. SectorGuard now has such establishments as Birkbeck College, London, Brunel University and the Henley Management College on its books. All told, it takes in more than 50 schools and other seats of learning. Residential protection is another growth area.

Many security groups, including SectorGuard, are happy to offer the sort of service so many police forces fail lamentably to provide. Patrolling estates, where the residents are rich enough to pay for the service, and providing various forms of community policing, at, of course, a price, are becoming a major part of the security industry.

It would be foolish to pretend that SectorGuard has been hiding its light under a bushel. Its shares, not too long ago 1.75p, are 4p, down from a 4.75p peak. But, if the group continues to forge ahead, they still look cheap. Dividend payments are unlikely, with available cash earmarked for acquisitions. Mr Marks, a 43-year-old accountant, is not keen to surrender equity for expansion.

He started the operation in 1998 and has 18.3 per cent of the capital. An electronic security company, SectorAlarm, is also under his leadership. The two have a close working relationship and I would not be at all surprised if in the next year or so a merger is arranged.

But SectorGuard itself could be taken over. As an accountant, Mr Marks believes every business has its price. And I believe an offer must be a distinct possibility. With many service companies anxious to add manned guarding to their activities, it is possible his single-minded approach actually adds to SectorGuard's attractions.

MacLellan, a service group in the no pain, no gain portfolio, recently acquired a manned security group, paying £5m. Its chief executive, John Foley, is also prepared to pay a further £7m if certain trading targets are met.

Providing security, as well as other services such as cleaning, often attracts entrepreneurial types. In my years in the City I have witnessed many of these support companies come and go. But these days it is not just security guards and cleaners outsourced to willing payers. Many offer a wide range of services. As they increase their spread it can only mean much more consolidation in the support services industry. Just to add a little extra spin to the takeover merry-go-round, there is talk - and I put it no stronger - of South African and US groups wanting to buy into the industry.

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