I hope you like it. That is just to give you a little bit of a flavor of who we are and how we're thinking. First of all, I think that this is a good industry to be in. When you look at the main drivers, obviously economic activity and economic prosperity is driving underlying demand in terms of security services. We also see that there is an increasing emphasis on security and safety. When we look at the industry for the long term, we believe that there are really good growth opportunities in our space. There is also real innovation opportunity now, and this is thanks to technology advances, but it's also the opportunities that we see that are related to digitization and how we're using data and information in a good way. We are the leading player.
I wanted to share with you as well just where we are and a few points from three different lenses, if you will. One is related to customers, second one is related to our current position and offering, and then third, last but not least, our great people and our teams. Let us look at the customers. We have roughly 150,000 customers, and when we were preparing for this presentation, we said it will be good to actually give a number. We also then struggled a little bit to define exactly what is that number, because we have, as you know, a presence on a global level, and we are primarily B2B business.
This number that we are showing here, and the 150,000, these are our normal customers who are providing an ongoing service which is more than just a standalone monitoring service, because we have hundreds of thousands of customers who are just providing a monitoring and an alarm connection. This is obviously a lot of customers. If you look at, okay, what's the average size of that customer? Well, if you take out total sales, you end up around EUR 60,000 or SEK 600,000 plus on an annual basis for that customer base. A big part of the business is obviously then a lot of local customers. We also see that with our footprint, and also then a number of the global organizations are also seeing that there is a need and an opportunity for us to work with them on a cross-border basis.
These are then customers that we define as global customers. We have a harmonized coordination across multiple geographies within a region or on a global level. Today, we serve around 140 customers in that category and many of the finest brands that you can think about. When we look at our customers, what is critical for us, of course, is that we deliver quality, and we always also try to deliver continuous improvement in terms of how we are delivering the services. One of the good metrics that we are looking at is the customer retention. This is just to get a feel as well for how happy are the customers with the relationship and with the services that we provide to them. This rate in the last 12 months on that total portfolio is 92%.
We also have a number of countries where it's significantly higher than that. I think that this is one of the critical points, of course, not just to gain new customers, but with the customer base that we have, we also believe that we are delivering good quality, and we are also keeping the customers because we're driving improvement continuously. I can obviously stand here and talk about customers, but I think it's also quite good to get the perspective from a customer. Let me just show a brief video, a company called ICE Mobility, which is a long relationship that we have with this customer in the U.S., and then to listen a bit to what they say in terms of the relationship with Securitas.
ICE Mobility has been a Securitas onsite guarding client since 2014. As their security requirements grew, it became clear that integrated guarding would be a great fit, both in meeting their needs and providing the best value. The integrated guarding solution we developed for ICE complements our onsite security with remote guarding and mobile guarding. The remote guarding services are provided during off-hours and weekends from our Securitas Operations Center in Charlotte, North Carolina. The SOC uses ICE's existing video surveillance system integrated to the SOC's remote guarding software to perform custom design tours of ICE's facility. The third part of the solution uses our local Securitas mobile guarding officers to provide a physical presence for alarm verification and response as needed.
I think remote guarding is a great technology. I think any company that is looking to maximize their resources when they need them should look into the technology because you're not missing out on anything. You still have that human element where if something were to happen on site and you actually need a physical guard, you have the patrols that could come whenever the remote guarding personnel actually tells you that there's trouble within a DC. The alarms are still active.
We've gotten every bit of the service that we thought in terms of the secure monitoring that we're looking for. The executive team of ICE Mobility has a long-standing history with Securitas. They've always been our partner of record because like ICE, we have felt that they are very customer-centric. They always go above and beyond for us. Everything that we had hoped for has happened. It's a combination, I think, of the Securitas personnel Securitas technology and then the processes they put in place. The partnership has been a great one for us.
This is not the first time that the executive team here has worked with Securitas, the thing that I really enjoy about them and working with their leadership is as things change and new opportunities come up that we can either partner more closely or change the service offering, they are the ones bringing those ideas to us.
I think this is a good example because it's a relationship that we've had for a long time, when you listen to the customer, they're also emphasizing our dedication in terms of delivering, also driving that development in a positive way over time. Let us look at our market position. We are, without any doubt, the leader in security services on a global level. If you look at the position, we have a very strong position and team in North America. We have a strong position in Latin America, very strong position in Europe, we also have a faster-growing presence as well in the Asia Pacific and Middle East and Africa regions. We put at the bottom of this slide, the power of presence.
I think this is an important concept that we will come back to a few times during the morning today, because this is really the presence that we have. It's not just to have the footprint, but the quality that we have, the on-site security officers, the mobile officers that are working closely connected with our Securitas Operations Center. This presence gives us an ability to respond. I think this is something that I would just like you to keep in mind for some of the coming parts that we're going to discuss. Let us look then at our offering, because when you look at our development, we have continuously trying to improve the offering, we started this journey to become a leader in protective services five, six years ago. This started with on-site guarding, with the mobile guarding and the monitoring.
With the move towards protective services, we are now putting more emphasis on electronic security and solutions, on fire and safety, also corporate risk management. When you look at this offering today, it is definitely the strongest offering that anyone can bring to the customers. We have had also, as you can see, a strong development when you look at the share of these protective services and solutions then going from 8%-20% in this fairly recent timeframe. With our leadership in protective services, we also put a lot of emphasis on solutions. Solution is essentially when we are combining these different services into one packaged offering. That is what we define as a solution.
When you think about Securitas today and what is different with us versus any competitor, is that we are not only good at doing a risk analysis and understanding risk, but we also have a better offering than anyone else. That means that we are ahead of all the competition in terms of the offering that we bring to the customers. This is obviously built on a lot of capabilities. One of those critical capabilities is our Operations Center. The Securitas Operations Centers that we have, this is really like the central nervous system of the entire operation, where we are overseeing the total operations, all the activities that we are driving, but also our officers that we have in the field.
Through very advanced integration in terms of systems, we are also able to act and respond very quickly to incoming alarms, for example, and also be able to dispatch. The Operations Centers, we have 44 today in all the key markets. These play a very important role now, but we also emphasize this asset because it will become even more important as we go forward when we have more of the technology-driven and also data-driven type of operation. The SOC is important to us. Even more important is obviously our team. I make a fairly bold statement here, but we firmly believe that we have the best team in the security services industry.
I try to spend a lot of time with our customers, with our teams that we have in the front line, and also deliberately try to make sure that it's not only with the global partners, but also spending a lot of time with local customers, because that is really where we see the unfiltered view as well in terms of the work that we do. We have many good people. When I ask the customers, "Why do you choose Securitas?" The number one answer, which is almost always the response, is because of your people. We believe that we have in our front line with our officers, but also many strong leaders around the world, and that is the reason that we say the best team in the security services industry.
I joined in 2015, the company, and I spent quite some time thinking about why and how have we been able to build this. This has not happened overnight. It has been built over a very long period of time. From my perspective, this is very much based on the values that guide us in the small decisions, but in the day-to-day life, but also in terms of how we develop the strategy. It's also very much the way of working. The picture that you see here in the lower left-hand corner is picture of the Securitas Toolbox, and that was developed quite a long time ago.
It contains all the core beliefs that we believe are important in terms of how we actually manage and operate the business and the team relationships with customers, how we are building to really create value for the long term. In the Securitas Toolbox you will have key themes such as flat organization, customer proximity, the ownership in terms of end-to-end operations that we have across our branches and areas and countries. All of these kind of central concepts that are so important to Securitas way of working are captured. That essentially means that you will see a similar Securitas way of working and approach in Australia as you will see in Chile. I think this is also one of the advantages that we have. Customers know what they can expect from us.
One critical part related to this is related to ethics and compliance. This is good because we want to be a good company. When I look at our 345,000 employees, it's compulsive for everyone to go through our ethics and value training, for example. This is all related to the view from our owners and board and leadership and how we have really developed and built this business over time, that we want to be a good company, and for that reason, we put a lot of emphasis on ethics and on compliance. When I say that, this is also good from a customer perspective because we work with many fine companies and fine brands all over the world. What is positive from my perspective is that we see an increasing emphasis on ethics and compliance from most of these companies.
This is something that in some presentations you would have it towards the middle or the end of a presentation. Quite often now we actually bring up this work that we are doing already to the front, so that they also see that this is who Securitas are. Let us now look at the numbers, because we also have a solid track record in terms of the top line performance, but also the profitability development. If you look at the top line, we've had solid growth, as you can see in this timeframe from 2013 onwards. We're growing significantly faster than the market. I think that there are two main reasons why this is the case. First is that we have a better offer in terms of the delivery that we actually bring to the customers.
We also see in a lot of the customer interaction that the customers really appreciate also the strategic view that we have in terms of how we believe that this industry is going to develop and the journey that we are on in terms of becoming a stronger partner not only tomorrow, but for the next five, 10, 15 years. If you then look at the profitability, you also see a solid development in terms of the profitability. I just wanted to emphasize as well that when we talk about the financial targets, Bart will give you all the details in terms of how we are performing. We are fully committed to the financial targets that we have, and there obviously the earnings per share growth of 10% per year is one of those targets.
To wrap this up, we have made this picture to give a little bit of an overview in terms of the different strategic phases. Starting in the mid 1980s or the early 1990s, there was a clear ambition to become a leader in security services. That is what you see in the lower part of this picture. That is then related very much to build very strong guarding operations. We're talking about on-site guarding, we're talking about mobile and Remote Video Solutions. That is an ambition that we have also been able to realize and to deliver on. When we say that we have a strong foundation, this is really a critical part.
A few years ago, we set out the ambition to become a leader in protective services, and that is like I explained earlier, when we're then expanding the range of the offering from guarding services to include then electronic security solutions, fire and safety, and corporate risk management. That is really the protective services phase. That we are right in the middle of driving that, and Bart will share quite a lot of numbers and also then share how are we actually progressing in that phase. Then the next one that we have then marked as 2020 and beyond is then related to our ambition to become the leader in intelligent security. Intelligent security we're going to come back to and talk quite a lot about after the break.
It is very much about more data-driven innovation and how we are able to use information in a good way to enhance security for the customers, but also then to drive higher efficiency as well in terms of our way of operating. You will see that these arrows are overlapping a little bit, and we have done that deliberately to also make a clear point that one phase is not replacing the other. The foundation is there, and we're continuously working on how do we also improve in our foundation to deliver good quality, but also then the efficiency and value that we generate. Then obviously Protective Services, like I said, we are now in the middle of that, and we have many years that we still continue to drive and develop that part.
Then obviously quite a lot of exciting opportunities related to intelligent security as well. With that, I am happy to hand over now to Bart Adam to give you an overview in terms of the progress that we are making in the Protective Services journey. Welcome, Bart. Should I click through here?
Thank you, Magnus.
Thank you.
This is your glass, obviously, this is my glass. It says here on a small note, actually. Warm welcome to all of you. I see many familiar faces and also new faces in the audience here today. Thank you for joining us. Also, warm welcome to the people out there on the webcast. Thank you for being with us here today. As Magnus said, no surprise, we will jump straight into the numbers now. Everything starts with defining clear goals. We have been working towards these goals for the last 10 years, you could say. This has really been the guide for our decisions, our strategies, and how we implement and execute on these strategies. I think it's a clear set of targets. It's easy to understand. It's not complicated, and at the same time, it's well-balanced as well.
It touches upon the basic dimensions of our company. It talks about the financial performance and the income statement. It talks about the financial stability related to the balance sheet. It also talks about how we will reward our shareholders. Finally, also how we want to develop the company strategically. Four targets, and this is how we have performed on those. We have EPS real change, where we have been hovering around this 10% that we have set as a target. Free cash flow to net debt around 0.2. You also notice that we have started to communicate more about net debt to EBITDA, and you can see here the numbers as well. That has been quite stable, around a little bit between two and 2.5, you could say. Why net debt to EBITDA?
I think it's a bit easier to understand compared to the free cash flow to net debt, and it's also more commonly used. Dividend in SEK, it has never reduced. We have never skipped a dividend, and it has been gradually increased over the last five years. Of course, the strategic target, where we have been able to see double-digit organic and acquired growth in the company over the last five years. I would like to take you now to some further granularity here. On the sales side, top line, we have moved the needle quite importantly from SEK 65 billion back in 2013 to SEK 92 billion in 2017. If you take the speed of Q2, if you would multiply that with four, we would actually be on the SEK 100 billion level.
That has been the result of both organic growth, on average 4.2% in the periods, acquired growth 1.4%. You can see there in the chart as well that we have been stepping up the sales growth. Back in 2012-13, we were a little bit internally focused, and have been gradually able to improve our external focus and implementing our strategy. Especially if you adjust for the refugee and terror-related sales, which peaked back in 2016. If you look at the dotted line there on the chart, you can see that it has been really a gradual step-up to the levels we have now been reporting 6%, 7%. From top line to results. If you look at the operating income, it has moved from SEK 3.3 billion to close to SEK 4.7 billion with a stable operating margin.
The operating margin has been between 5.0%-5.2% throughout this period. On the operating margin, we have seen a little bit different dynamics in the divisions in the business segments. In North America, we have seen a growth from 5.1%-5.9% throughout this period, clearly driven by the implementation of the strategy, Protective Services, Security Solutions. Europe, we have seen some pressure there on the margin. It has been a bit more difficult to scale up there. Totally the implementation of the strategy. We'll get back to that. We have also been a little bit troubled there by what has happened in 2015-16 related to refugee and terror-related sales. Ibero-America, where we were suffering in the beginning of the period from Spain, and that has also been reversed, and Spain is doing well, as we have reported in our last quarters.
This has taken us from SEK 3.3 billion to SEK 4.7 billion, and then this has, of course, then delivered further down in the income statement an improvement, a vast improvement in our EPS from SEK 5.07 gradually stepped up to SEK 7.83. From top line to results to bottom line EPS. What about cash flow? This is how we have been performing over the last five years. We have seen a steady generation of good cash flow. You've noticed there that our operating cash flow as % of income throughout the period has been on average 82%, and it has been around SEK 3 billion, you could say, peaking last year to SEK 3.8 billion. On free cash flow, you notice that has been 73% of adjusted income. Throughout, pretty good cash flow, while of course, at the same time, we have been investing into our strategy.
We have been investing into our transformation to customer site equipment, into acquiring businesses as well. I would like to give you some further detail on that now when looking at our operating capital employed. We have got quite some questions over the last months, years, you could say, on operating capital employed. This is a bit of a busy slide. I realize that. I want to share you here with the details and the granularity below. Our operating capital employed has moved from 3-point-something to 7-point-something billion SEK. Quite a step up. Of course, at the same time, our sales has grown as well from the earlier mentioned 65 to now a speed of around 100 billion SEK based on Q2. As percentage of sales, still we have moved from 5% to 8%.
Quite an important step up. Here you can see the drivers behind. One part is coming from the implementation of the strategy. 1.4, actually, out of the three. That is the investments we have made into solution contracts into our customers, combined also with the growth of electronic security business. Electronic security business as such requires more operating capital employed than the average guarding business. Why is that? Because basically, you have inventory and work in progress that you have to finance. The implementation of the strategy related to solution contracts and electronic security, 1.4 out of the three. We have a growth component. This is a bit technical to explain. I will try my best. We have low employee-related accrual countries. We have higher employee-related accruals countries.
That really hangs together with the liabilities that you have sitting on your balance sheet towards your employees. In certain countries, that is high, higher liabilities because you accrue some things on your balance sheet that you pay out later. In some countries, that is lower. For instance, in the U.S., you have very little liabilities towards your employees at the end of the day because you pay out, basically. It's much more cash-based. Whereas if you compare to Europe, there you have more things sitting on your balance sheet that you will pay out later. Vacation, premiums, all of that. We have been growing faster, actually, in these countries with low employee-related accrual in the balance sheet. As we have been growing there faster compared to our average growth, that means that we have spent also more operating capital employed in those countries.
That together then also with the fact that we have increased our organic growth. Increase in organic growth will normally hit your balance sheet a bit faster than you see the upswing in your top line, actually. That means together then, the fact that I try to explain here with this employee-related accruals in combination with the accelerated growth is an effect of 0.9% out of the three mentioned before. We have one final point here out of the three, which is how we have managed our defined benefit obligations. In simple words, pension liabilities. Actually, we have been able to reduce those. That is also one of our policies or strategies. We would like to reduce our defined benefit obligations. I think it's a practice of good housekeeping.
We have been able to do that over the period. I think that is a really good thing for the shareholder as well. It reduces risk, future risk. At the same time, of course, it is not so good for operating capital employed, because as you have less liabilities, you increase your operating capital employed. In essence, a good thing for the company, which then if you look at the operating capital employed, it hits you a bit with 0.4. These are the main drivers. There are two other ones mentioned here on the slide. We have reduced deferred tax assets, but that has been offset by a few other things. We also have some pressure on customer payment terms, but that have been offset by our DSO projects priorities in changing our processes around that.
Two other things to mention, I will not go into the details of that, but at least to have on your radar screen is IFRS. Both IFRS 15 and IFRS 16 have an impact on our operating capital employed. For IFRS 15, that is 0.3, actually, has been disclosed before all the details on that earlier this year. IFRS 16, that will actually come into play as of 2019. We have not quantified yet the effects of that. Long explanation, but I wanted to have that with you in your minds. I think it is fair to say that our strategy implementation has been successful based on the slides we have just seen. You are familiar with the chart here that you see with the steps there that you have, the step chart that you see on the slide.
When you move from guarding, which is around 4%-6% operating margin, you climb up the stairs, you will end up in 10% in security solutions and electronic security. You could say we double the margins by going from guarding to security solutions and electronic security. The sales in these two main boxes, you could say, has moved from 60 in guarding to 75.5 in 2017, then in solutions and electronic security has moved from 5 to close to 17 last year. You notice that we have had very good traction in the development of security solution and electronic security. At the same time, we had even more traction when it comes to moneywise in the guarding side. That, to some extent, has been a bit of a surprise as well compared to when we designed on the outset, the strategy.
A very positive surprise. We like guarding business as well. It is a good business to be in. Some further detail to that. We have been generating double-digit real growth. You can see here year-by-year how that has developed, how we have moved the needle from, actually it was 6% in 2012 to now more than 20% 2018. Has been a bit of different dynamics in different divisions, different business segments. In North America, we started from basically 0, in the dark blue there. You can see that they have ended now on 15% of sales in 2017. I say ended, but that is of course not correct because they will continue to develop. Europe had started there from 10% and has moved gradually to around 20%.
Ibero-America was in the lead from the beginning and has been able to move further down as well, up to close to 25% of sales. Different dynamics in different divisions. We often get a question also, "But how are you doing in your countries? How far can you take this? Where are you?" That is I would like to share with you and give you some further insight on that in the next slide. Here, we have put 2013 compared to 2017. In 2013, we had 36 countries in the bucket of 0%-10%. 36 of our countries, of our operating entities, had basically close to no security solutions and electronic security. Actually somewhere between 0% and 10%. They had to start from almost nothing, you could say.
In the meantime, if you move to the other corner of the slide here or the graph, we see that now today we have 13 countries which have more than 30% of their sales in security solutions and electronic security. That is quite a development that we have seen. We have already three countries which have more than 40%, which are in the bucket 40%-50%. Since there is no bucket more than 50%, it means that no one is there. At the same time, you also notice that we still have 16 countries in the 0%-10%. That is also what we have tried to explain. This is not just an easy change. This is not an easy, I go from here to there. This is a transformation. Some countries have been better at executing on that.
Some countries have been less good for different reasons, but this is the picture that we get. There's still a lot of opportunity left as well. The goal is, of course, that we gradually move the countries, the operating entities in the higher buckets as we will go forward. Turning back to the operating margin there. You are familiar with this chart. I just showed it a minute ago. These are key drivers. This is a key statement. We double the margin when we go from guarding to security solutions. At the same time, there are other key margin drivers as well, and that is what I would like to share with you right now. Here you can see them. They are mentioned there on the slide in six different key drivers for our performance at the end of the day. It's not only security solutions, of course.
It's other things as well. Those things is, as a starting point in the lower corner there, the maturity of the services market. How do the customers recognize the value that we can bring to them in a particular country? That differs quite a bit from country to country. It hangs together with what type of people are we able to recruit? How can we train them? What type of services can we bring to our customers? What is the trust that our customers put in our industry? In countries where that is high, that is obviously a good driver for our margin because that means that we are trusted by our customers to deliver them sophisticated services, more content services day by day. Content means value, means margin. Within that landscape in a country, we of course have our own competitive positioning.
That hangs together with our geographical footprint, how well do we cover the country, with the strength of our local teams, with the strength of our processes, with the strength of our systems. All of that will decide on our own competitive positioning in a certain country. We have the development of protective services. As Magnus has showed you, we have moved from guarding, and we have gradually increased or included other type of services and start to focus more and more on those as well. Mobile, remote services, fire and safety, corporate risk management, all of that electronic security. How far have we come in developing those services in a particular country? We have worked a lot on that. We have still a lot to do, still a lot of opportunity left here, but that will also decide on our margin at the end of the day.
Together, of course, with the question on how far have we come in developing security solutions, electronic security, which is an important driver as well. Two other key elements, price, wage. It must be key because you ask me the question all the time. That is extremely important that we manage that correctly, that we're on top of that in the countries. Of course, we have our cost efficiency, both on the indirect level and on the direct level, how do we manage our costs? All of these elements, these drivers will decide our operating margin in a country. Comes the next question: how are your countries doing? Where is the margin? This is a picture then that you see here on the slide, and I will try to explain that to you.
If we take our countries which have less than 2% operating margin, they end up together, and we take the sales of that, together, we have 5.8 billion SEK of sales in those countries. Countries with less than 2% margin, 5.8 billion SEK. We gradually move into the different boxes. In the bandwidth 2%-4% operating margin, we have 14.7 billion SEK. The vast majority is what you could expect as well, in the middle, of course, in the 4%-6% bandwidth, SEK 38, 6%-8%, 19 billion SEK. We also notice that we have actually countries, if we add the sales together there, 14 billion SEK, which has operating margin of more than 8%. That is if you work on those different drivers, that is when you move then countries to the next bucket. This is, of course, our entire strategy.
Our entire strategy is to move through these different drivers, countries from one bucket to the next bucket. Coming back then to the question on our strategy of security solutions and electronic security, I would like to show them and share with you the next slide. What have we done here? We have basically plotted the entities that you saw on the previous slide in two dimensions. On the horizontal axis, you see how far we have come in implementing security solutions and electronic security as a percentage of total sales in that country or region. On the vertical axis, we have then plotted the operating margin of the same entity. You get this picture. We have asked the system to calculate for us the regression line. This is what you see then as a statistical regression line between the two dimensions.
You notice here that there's a positive correlation between how far we have come in developing security solution, electronic security, and the operating margin in a particular country. This is the picture for emerging markets, and we have done the same thing for mature markets. Why it's a different picture? Because it has a bit of different dynamics in the different drivers there. Why we're choosing to make two pictures. In the mature markets, this is the picture. It's the same graph, it's same axis, and again, we have plotted the different entities. Also here, you notice the positive correlation between how far we have come in implementing this security solution strategy in relation to the operating margin.
The final slide on this is we have taken our top 15 markets, which is, of course, from a final result perspective, the most important, the most critical one. Here we see that the same is evident in our top 15 markets. You can see there that the margin, the regression line, somewhere starts a bit below 5%-6% and ends up a bit above 8%, actually. This is the impact, as I said, from implementing our strategy of one of the main drivers we have chosen to drive the operating margin in our countries. The strategy has been built on organic implementation, meaning recruiting people, meaning training people, meaning a lot of different activities that has been organized in the different countries around the world. At the same time, we also said that we would support the strategy with acquisitions.
This is a picture connected to that. You remember maybe that 5 years ago we said we will tune down on guarding acquisitions. It's not because there is something wrong with guarding acquisitions. It's because we basically wanted to focus our capabilities, our capacity on acquiring electronic security companies in order to support this journey of security solutions, electronic security. We said that 5 years ago, and I think we have executed on that. If you see here, we have spent SEK 4.7 billion in enterprise value over the last 5 years then in acquiring electronic security companies. Compared to SEK 560 million in guarding companies. Sales-wise, SEK 5.3 billion in electronic security and SEK 1 billion in guarding. Oh, I'm sorry. I'm sorry for the confusion. I will go backwards a little bit.
Acquisitions have been part of our strategy, here you can see that we have been acquiring SEK 4.7 billion in electronic security, and SEK 560 million in guarding. As I said, there's nothing wrong with guarding companies, but we do have a very strong guarding footprint already. We will probably do a guarding acquisition here and there if there is a good opportunity, if we want to extend a bit of footprint in further countries. But the main focus has been, and will continue to be, on electronic security companies. Sales-wise, SEK 5.3 billion acquired in technology, SEK 1 billion in guarding. Then, of course, when you look at the full-time equivalent, it shifts the picture because guarding is much more labor-intensive than, of course, the electronic security and solution part. We have capability to further acquire companies and integrate them.
Many companies try to outspell an acquisition strategy, we have it in our DNA to do acquisitions. That DNA, we have been able to shift that from acquiring guarding companies to acquiring more technology-based companies. Acquisitions would not happen without having solid financing in place, that is the next thing I would just like to mention to you. I will not go into details, in all the details of this slide. In essence, we have a BBB stable outlook rating from Standard & Poor's. There is ample rating headroom in this rating. We could leverage much more the balance sheet within that same rating actually. We have significant undrawn committed funding facilities available, close to SEK 9 billion. We have no financial covenants.
When you look at the chart, basically also our large maturities only come up as of 2021, we have a good profile here. This is backed up by a strong banking group, some of you are here. I would like to thank you also for your commitment to our company, you know that we are committed to you as well. This is what I would like to share with you for today. I hope I have been able to provide you some further insights. I am a bit afraid you will bombard me with many more questions after this session. Anyhow, we are here to help you out, we will provide you further detail, of course, or further explanation to the details provided here. It is fair to say we have been creating value, we are creating value.
If you look back at where we were 2013, we made a bold statement in a way. We said we will take tech from 6% to 18%. In all honesty, that looked like a mountain which was very difficult to climb. We made the statement, it has been the driver for making the changes we have been able to make through this period. At that point in time, you could say it was about starting to build a tech platform. We have moved the needle to now 20%. The major difference is that on top of the development you have seen financially, at the same time, we have now a platform in place from which we can further build on and leverage for the future.
That is also why Magnus has been trying to explain to you, we have a strong base in guarding. We are in this transformation journey still of moving it to protective services and solutions. We are in the middle of that journey. Lot of opportunity left still, lot of things to do as well. There is a further horizon also out there, that is for after the break. I have said more or less everything I wanted to say. There is a break now, it is always good if you can announce a break. Also, for the people in the webcast out there, we will leave you now. There is an opportunity here to meet some of my colleagues as well, I would like to introduce them now to you. We have Anders there.
Okay. Good morning, everyone. My name is Anders Gustafsson. As Bart said, I'm responsible for the development and deployment of our Standardized Video Solutions. I have a friend with me. He's on the leave. You can see him somewhere in the room, moving around. What we will talk about in this station is actually how we make cameras, implement moving cameras. That creates new challenges. You have the drones, flying cameras, you have robots, and you also have body-worn. Welcome to me to have a discussion on that can help us taking further steps.
Thank you, Anders. Then we move to Ole-Ivar.
Yes. Hello. My name is Ole-Ivar Bjerkemo. I'm a fire chief in Norway. Here you can try to virtual reality in firefighting. I hope you come to this stand and try it, where you can fight the fire in the hotel room. You can try something new. Welcome.
Thank you, Ole-Ivar. Then we have Staffan in the back.
Hello. I'm Staffan Gustafsson, R&D manager for Remote Video Solutions. You will find me in the hallway, where I show face recognition. Also happily speak about sensors and analytics in general.
Very good. Thank you so much. Now it's like 9:30 A.M., and this idea that we will have a 20-minute break, we will be back 9:50 A.M. in this room and on the webcast. Thank you very much.
Okay. Welcome back, everyone. For those of you who are in the room, I hope that you had an opportunity to experience some of the demos. If you haven't done so, they will be available also after we are wrapping up here at 11:00 A.M. today. I think it's important, because it is a good opportunity to get the flavor of some of the things that we are able to do leveraging technology. Now we're going to turn the attention over to strategy. I think one thing that we have established, Bart and myself in the first part, is that we have a strong foundation. We are in a very good position to lead the development of the security services industry in the years ahead.
When I started at the beginning of this year in the new role, we decided that from a group management perspective, we're going to review the strategy where we are, but also then looking at how are we delivering it now versus 2020. That was really the strategy that we launched in 2015. How are we doing in terms of our delivery towards our 2020 objectives? The second part of that strategy is then more focused on how are we shaping the strategy beyond 2020, I will capture these two points now in the next couple of slides. What is important right now in terms of delivery of 2020? There are three areas that are important for us in terms of focus in the next 12-24 months, one of those is related to the customer engagement and the customer value proposition.
Second one is that we continue to strengthen our protective services leadership. The third one is we have fairly high ambitions in terms of things that we want to do. We also have a big emphasis on modernization and efficiency. One thing or one change that we're going through right now is going from working very much on a local level to work in a direction where we're building more synergies on a global level, and that is very much in the areas of IS/IT and technology. Let us look at the customer engagement and the customer value proposition first. I think that I have already commented on some of the strengths that we have, I will focus now more on the areas where we see opportunity for us to improve and in some cases, also a strong need to improve.
The first one here is related to what we call customer centricity and engagement. In terms of the work with the customers, we have always had as one of the core philosophies of Securitas customer proximity. This is obviously to be close to our customers in our branches and in all the ways that we are engaging. When we talk about centricity and engagement, we are now expanding the range of services to protective services. This also means that we need to become better in terms of how we are engaging with the customer. If you simplify that is very much about who are we working with, how do we win these customers, and then how do we develop these relationships and the services over time. That is one important area. Second one is related to the different segments.
We have a very good presence when you look at the aviation segment today, and we have a good capability with our aviation team. That's a dedicated team focused on our aviation business and capability on a global level. We also see in a lot of the discussions with global customers, but also local, that the more targeted understanding of the needs in the different segments will help us to also bring more value to those different segments. That can then be anything ranging from automotive or data centers, or if we're looking at harbors, for example. The needs are quite different, but with technology and with our protective services offering, we're becoming smarter when we take a more focused approach on the segments to also be able to deliver knowledge and also solutions that are better for the customers.
The last one I touched upon earlier in the morning, that is related to global customers, because we have this very good strength in terms of our presence. We also see a number of customers that are really looking for engaging with a quality provider across a broader footprint. When we talk about that, it's not only the cross-border aspect, but it's also an increasing demand in terms of delivering not just the good on-site guarding capability, but also then expanding to more protective services in our offering that we can bring to the customer. That could be, for example, that we are doing good guarding, but that we're also implementing technology solutions across different geographies.
That's something that is still very early days, we see that there is a demand, there is a need from the customers, and we believe that we are well-placed to tap into that and to deliver that value as well. When we talk about the customers, we always start with a risk analysis. This is a competence that we have been building up for many, many years. We do the risk analysis, and that is one of the most important points of input in terms of the security solution that we then develop.
Now what we are doing with the risk analysis, something that has historically been very much a local practice, we are now digitizing this so that we are basically enabling data capture from a local level to global, also funneling all the knowledge back to our people in the frontline who are working with the customers. We're going to take a look now at the video, looking at the Securitas digitalized way in terms of doing risk analysis. When you own or operate any kind of physical environment today, preventing bad things from happening is one of your main responsibility. Risk priority may change, businesses evolve, and even protective solutions we put in place have an impact on the situation itself. The fact is the things that can happen and the likelihood of them happening varies from place to place.
Still, you're expected to protect all these people and assets in an efficient and affordable way. That is where ISO 31000 for risk management comes in. It's a framework for dealing with all the different elements involved, starting from identifying the opportunities and risks, it guides your analysis and leads to allocating the right resources for mitigating the risk that has been identified. Results are what matters, and putting your analysis to work happens through a cycle for implementation on one hand, and constant monitoring and review on the other. Let me show you how we do this. We start by choosing from a predefined database called the risk value chains, and choose a segment we want to work in. I will select this one, and open up the library of areas that are common to this segment. Here you also have the possibility to customize the areas if needed.
I will select this one. From the risk library, we choose the risks that are more relevant. Here based on our experience and benchmarking. I will select these three. Each risk has its own probability and impact. We select the risks that we have identified in this area. All the input helps us decide on the probability. How likely is this to happen and impact? If this particular incident should happen, how severe is it? Let's say, yeah. All this feeds into the risk matrix, which shows your risk according to impact probability. The risk goes in here from low impact, low probability to high impact, high probability. The result we share as a comprehensive document containing an executive summary, risk matrix, and the full risk assessment with all the images, notes by area and risk. Securitas solutions help protect people, homes, and businesses.
We make it simple and are built in to constantly evolve with our customer needs. Doing this by integrating data in a standard-based way is what we believe to be the new face of security.
Great. What Reinert now showed is a practice that we have been doing more on a manual and more pen-and-paper-based approach in the past. We're now digitalizing that so that we're able to capture all the information. We're also then creating a feedback loop so that for every risk analysis that we do, we become a little bit smarter based then on similar objects, similar characteristics. This is a picture showing the security equation. When you're looking at the mix between guards, physical security on site and remote, that is essentially the different components of services that we provide based on the risk analysis.
Obviously we have an optimal solution, which is then the result, because it's based on the risk analysis that we do this. In the video, what you see now is that we are now digitizing this to be able to capture the information, so that when we do this, for example, at an airport hotel outside of Heathrow, for example. Number 1, when we go into that airport hotel, we are bringing knowledge from hundreds of other hotels with similar characteristics. We bring more value into the customer meeting and even the first engagement.
Once we have done the risk analysis, we design the solution. With more data-driven feedback as well in terms of the risk assessment to the risk situation at a specific location, we are now then also, thanks to digitalizing this, able to drive faster response as well in terms of the optimal security solution. This is quite a big shift and that's why I'm spending time on it. When you look at from a customer perspective, what does this really mean? Well, it means that we are coming in with more knowledge. We're capturing that knowledge on a global level through a standardization, that we then also feed that back.
We enabled all the thousands of branch managers that we have and the people who are engaging with our customers to come in with more knowledge also then in that early engagement with the customer or when we're looking at how do we develop this over time. This is exciting and it's also something that we believe will generate significant customer value. Like I said, when we have this feedback loop as well, we show that because this is constantly then building more knowledge, the more risk analysis we do, we're adding more knowledge and we become smarter as well and we bring more value to the customer.
Shifting to our protective services, how do we continue to now strengthen these? Bart has shown the progress in terms of our journey towards protective services. One of the most important focus areas for us now is we now have a recipe and a formula. We know what we are doing, but we also want to accelerate these sales and also then the share of solutions that we bring. That is because we add more value. We have higher customer satisfaction when we do solutions, but it will obviously also help us to create higher value financially as well for the company. How do we do that? One important part is through the customer engagement. Like I said, we are working quite a lot on how do we become better in terms of the customer engagement through the entire cycle.
We're also then standardizing a lot more around specific services. Anders, for example, who has been presenting here some of our Remote Video Solutions, that is a good example of standardized services that we are now bringing and rolling those out to make it easier to bring really good quality and service and solution to the customer, and to do that at a bigger scale. We continue with the acquisitions focus, which is primarily electronic security related. Obviously the other part is also about leadership. We are all quite convinced that we're on the right path and we're doing the right things, but it's also a fairly sizable organization, and we have hundreds of thousands of customers, as we have shown before.
It is also important for me and the entire team that we drive the understanding, but also then the commitment, and that every leader is also really driving this change and keeping pushing the transformation. Those are some of the key points that we do to accelerate the solution selling as we go forward. We're also then in the strategy work where, by the way, we're just in the middle of that. We're going to come back next year when we have the full strategy set for more of an extensive session. One other aspect of the strategy work that we are also putting quite a lot of emphasis on is also to build specialized knowledge in the different protective services. Like Bart and I have commented earlier, we like guarding.
It is a good business. We continuously also need to look at this big base and foundation that we have. How do we become better every day in the guarding? How do we provide better service to the customer? How do we also make sure that we protect the value in the guarding as well? That is really the foundation, and that approach we're now taking to all the different protective services. One of the critical areas I mentioned earlier in the morning is the Securitas Operations Center, because this, when we have a more technology-based and more data-driven operation, will become an even more important function in our total offering and operation. We're now going to look at how do we operate a Securitas Operations Center and what is also then the different activities and the value that we bring there to our customers.
This case, I should mention, is one example, and it's from the Netherlands.
Welcome to the Securitas Operations Center, one of the Netherlands' most advanced monitoring and alarm receiving centers. From here, Securitas controls its preventative security solutions through coordinated actions by customer services, operations and support, and data analytics. Customer services takes care of all daily customer contacts. Our specialists handle over 45,000 interventions a month, ranging from new customer initiatives and general queries to in-depth technical support requests. In order to secure our excellent service, comprehensive key performance indicators are monitored in real time. The operations and support department guarantees our customers professional remote services 24/7. Securitas remote services supports facilities processes such as remote entry and exit management, corrective maintenance, a response and call-out service for outside office hours, and it manages ERO organizations. Every month, over 72,000 actions are swiftly dealt with.
The control room plays a primary role in monitoring and alarm receiving within the Securitas Operations Center and is only accessible via a secure filter. Homes, offices, cars, and other objects belonging to both businesses and private customers are guarded from the control room. We deal with over 1 million interventions per month. The high security room monitors high-risk objects such as homes, buildings, and cargo. We also monitor people with our personal position alarm and track and trace systems. Each customer has their own specific security needs. On top of increased priority, we always act according to highly specific follow-up protocols. The video monitoring center provides for active video monitoring services. Here we verify and follow up alerts from smart cameras and other remote sensors. We immediately respond to unusual activity based on real-time data and human behavior.
The dispatch department plays a key role and handles all communication between the operation center and our 6,000 guards and 350 mobile patrol cars, who provide guarding and surveillance services on site. Last but not least, data analytics takes care of collecting, combining, and analyzing all data stemming from our activities and external sources. As our operation centers are connected worldwide, we combine international data, trends, and developments, while simultaneously boosting our global data and intelligence position. This way, any operation is information-based, led proactively, and is continually optimized. Securitas leads the way as the global intelligence security company with preventative security solutions. By combining our people, knowledge, and technology worldwide, we make this ever-changing world a bit safer day by day. For more information-
I hope that gives you a good understanding of what is the role and the function of our Securitas Operations Centers. We have 44 of these around the world, and we're also looking at, and now actively working on, how do we standardize the capability of the services, because there is also a global connected component related to this SOC as well. The last area in terms of what is important now is related to modernization and efficiency. We're talking quite a lot about the protective services journey, we're also now really laying the groundwork as well to be a leader in intelligence security, which is the next exciting phase. This also requires quite a lot of upgrading, and if you look at Securitas historically, we have built almost all our IS/IT on a local level. It's been built locally for the local needs.
When you look at technology, when you look at IS/IT, we see a strong need to upgrade this to also be able to build more efficiency, but also stronger capability on a global level. This is one very important aspect of the work that we're doing. When we do that, I should also mention that at the core of our beliefs is local ownership and ownership for the operations customers and the team. That is not going away. It's more that we are strengthening and enabling the local operations with more efficient tools to be able to conduct the business in a better way. Driving full digitalization. If you look at the security services industry, if you take a hard look, you can say in the last 10, 20 years, there hasn't been that much innovation.
One of the important change areas that we are now driving is that we are trying to digitalize everything that we do. This is very much related also to all of the people that we have in the front line, because if you have a pen-and-paper-based operation, it does not enable you to capture information in real time, and it doesn't enable you to respond in a fast manner. Broad digitalization is also one very important thing that we're working on. When we do that, it will also enable us to enhance and to build better services and innovation as we go forward. Obviously, a lot of this will require investment, and we are also looking at how do we ensure good operational efficiency and financial efficiency.
Some of the numbers that Bart has shared, we are also driving strong focus on really having good transparency in terms of all the performance metrics so that we can also make sure that through higher efficiency, we're also able to free up resources, which will enable us to also invest more in the future. That is a brief overview of what are the focus areas right now. What I have talked about is the customer engagement and the value proposition, how do we continue to strengthen our protective services leadership, and then the third part about modernization and efficiency.
Let me just now spend a few minutes on the next exciting opportunity, because this is then a little bit of an introduction also, and to answer the question why I said at the beginning this morning that we are well-placed to lead the development of the security services industry, and to take a strong position in intelligence security. When we look at Securitas, we have one fundamental strength, and that is our presence. This is not only a matter of having the geographic footprint, but it's also the quality that we have and that we're also now building modern capabilities related to this presence. When we talk about the power of presence, why is that important? Well, it does give us the ability to respond. There is quite a lot of activity.
Many technology companies are looking at how can we become smarter in terms of leveraging hardware, software to be able to predict or to be able to detect something that is happening. That is all good work, and we are obviously leveraging quite a lot of that ourselves. A lot of knowledge without being able to respond is also not that valuable. I think that one very strong asset that we have when we look at the next 10 to 20 years is this power of presence because it does give us the ability to respond. When we are able to respond, it also then means that we can enhance customer value through swift response when it's needed. When you're looking then at the assets, on the left-hand side of this slide, we talk about the rich information and data that is available to us.
Data, I would categorize in a couple of different categories. One is the data that is our own data, that we are generating. There we have a good advantage because of the size. A lot more data we're able to generate in terms of leveraging technology and sensors, and Martin is going to come back and talk about this in some more detail. There is also a lot of public and third-party data that is available that we can also leverage.
It's about not only then having a lot of data, because one of the fundamental beliefs that we have is that when we're looking at intelligent security, the company that has access to the most data, which we are, and who is also smart in terms of using that data, will also be able to provide better predictions and also then really making this shift from reactive view of security to a proactive and to be able to prevent. The value creation, if we talk about, okay, what is then the value from a customer perspective or internal perspective? First one, from a customer perspective, when we do this, we are convinced that we are able to bring better security to the customers. That is one source of value.
Second one is related to efficiency of our own operations, because we do operate large and also fairly complex operations at airports, many larger sites all around the world. What we are also seeing is that we can use data in a good way to drive optimization, and we're able to use more of a data-driven approach. We can actually beat quite a lot of the human capability in terms of planning and scheduling and things like that. The value of that is that we can then enhance the efficiency, we can provide better value to the customers, but we can also then use this also to provide better optimization and working conditions for our people as well.
This is really exciting, and we do believe that our position is strong because we are working now to be able to not only to predict, but also then to detect, and with the presence that we have, also to respond. With that, I'm going to hand over to Martin in a minute. One thing I wanted to mention when we talk about intelligent security is that we are sharing a flavor today, and this is still a fairly early view. We are working on use cases and examples, and Martin will share some of those. We are excited because we believe that we are really on the right path, but there is quite a lot of work that is required for us to do to be able to realize this ambition and to be able to do that at scale as well.
That is why we're saying that the emphasis of a lot of this is really 2020 and beyond. With that, warm welcome, Martin.
Thank you very much, Magnus. Hello, everyone in the room and on the web. It's a true pleasure for me to be here today and to share with you a insight and a glimpse into the future of the security industry and an insight into the future of Securitas. An exciting future. What I will talk about here today is, of course, about the future. There is a risk of becoming a bit conceptual talking about the future, but I will try to do my best at providing examples and some clarity around what it is and how we will do it. My name is Martin Althén, and I'm the CIO of Securitas. I've been that soon two years now.
I have spent the last 20 years in global companies like Securitas, but not in the security industry, working with information technology, product development, digital strategy development, and digital strategy execution. When I was presented with the opportunity to join Securitas, I didn't know much about security industry, and to be honest, I didn't know too much about Securitas either other than a strong brand recognition being Swedish. You see Securitas all over the place in this country. Quite quickly I saw the opportunity. It's a market, an industry where the demand is growing. It's a market and an industry where digitization still have not taken off. It is also a company, Securitas, a giant in the industry and one of the world's most trusted brands.
On top of that, a management that had concluded and were very committed to a strategy where technology is going to drive innovation and drive the strategy of the company forward. I didn't want to miss the opportunity to join that journey. When we started to analyze the point of departure for Securitas from a digital transformation perspective We quite quickly zoomed in on what Magnus talked about, the power of presence. We have 300,000 guards. We have over 700,000 connections to customers. We have millions and yet millions of incidents that are handled and pushed through our systems. With that power, what can we do with that unique strength of Securitas if we complement that with new and emerging technologies? Most specifically, we focused in on the opportunities presented by the different flavors of artificial intelligence.
What if we use the data, the tremendous amount of data, that all this presence generates every second? How about we leverage that data to both gain insight and also enhance the real-time capabilities of our operation, instead of just throwing away that data and seeing the data as being a cost of operating? What opportunity does that present? We concluded that this is a unique position for Securitas in the security industry. We developed a view also of the future of the security industry. Our view is that future market leadership in the security industry is really belonging to those who are best positioned to capture, analyze, and respond to rich data sets. It's a view of the future which lends itself very well to scale and supports the market leaders of the industry.
You see that there is a virtual cycle in capturing the most data, having the best and strongest abilities to analyze the data, and having the strongest presence on the market to respond to the outcome and the analysis of that data. The technology that is needed to leverage this virtual cycle of capture and analyze and respond is still emerging. Some of this technology is more mature. Machine learning that automates the ability to quickly and at scale respond, automize the response to data, is becoming more available at scale in general to the industry. Advanced analytics, AI in analyzing huge amount of data, is still an early technology, but it is becoming more and more widely deployed in different use cases in our industry and other industry.
Other technologies, such as deep neural networks, are still very early days, but those will present a game changer when it comes to capturing and responding to rich data sets in real time, like live video streams. As you see, this strategy, this outlook of the future for the industry, is really about scale. Scale which is a unique position for Securitas. That led us to basically make a quite bold statement about the vision with this analysis of the future of the industry in mind. We said, we are committed to take the position as the global intelligent security company, and that we are committed to actually lead the transformation of the entire security industry from a low-tech business to a high-tech business.
We will leverage the strength that we have as a company, being the leader in security services, having evolved to be the leader in protective services, and adding the component of data-driven innovation to also become the leader in intelligent services, building on the strong foundation and base that we have. With that introduction, let me be a little bit more concrete now. What is intelligent security and why is it important? As I have said, the intelligent security at the heart of it is by generating and capturing enormous amounts of data sets from multiple sources, huge amount of different sources. It's about transforming this information into intelligence. With that, we can both enhance our existing operation, and we can develop and deploy new services and new business opportunities.
As Magnus talked about, we can both improve the efficiency of our operation, and we can deliver better security to our customers. In delivering and executing on this strategy, we have broken down the execution into four tracks. One track is about the officer of tomorrow. How can we use technology to enhance the capabilities of our security officers? The second track is about future sensors. How do we leverage this exponential technology and the opportunities that present to capture even more data and information? The third track that we have and work on is crime prediction. How can we actually draw insights and use this data to actually predict what is going to happen before it's happening so that we can put in preventive actions and give advice on the most effective security programs to our customers?
The last track we are exploring, or actually executing on, is how do we take the next step to leverage the assets of our 44 Securitas Operations Centers? How do we set them up to be most effective for a future where data is exponentially larger than it is today? We're already handling huge amounts of information and data in our operation centers, but tomorrow it's only a fraction what we compute today compared to what we'll compute in the future. Let me now go a little bit more into detail of each one of these tracks. Let's start with getting personal and talk about the officer of tomorrow. Many people interpret that technology will replace people. That is not true. Technology changes the position and the role of people. Technology changes also the role of the security officer.
Magnus has talked about the presence and the strength of our 300,000 guards is actually a unique differentiator for Securitas if you compare us to technology companies that might want to enter into the security equation. Think about the 300,000 guards, their ability to actually capture data. They are a most capable data capture platform, equipping 300,000 guards with sensors that they wear. Sensors that pick up sound, air quality, chemicals, wearable cameras, huge amount of very capable data capture platforms in the shape of a guard, which is much more flexible than installed security technology in buildings, for example. Which is more capable in the short to midterm than robots, because a guard can handle stairs, can open a door, can adapt their behavior to circumstances. On the other hand, the guard equipped with technology will be also much more powerful in what he or she can do.
The guard will be connected in real-time to colleagues in the same area, and they can mesh with their view of the event scene together and create a rich picture of what's going on in the larger area where they operate. They will be connected to the technology that is installed in the environment, in the building, that adds to their information picture. They are also connected to the Operation Center in real-time that the Operation Center can help guide the guard to the most effective response that is suitable in the actual scenario. The guard of the future equipped with technology will help us to really drive data into the company, but the guard will also be much more effective, much more capable than the individual standalone guard that is the norm or of the presence.
I will now show you a short movie that we've done together with a couple of our partners. It is showing a use case, oversimplified I should say, with how technology can help a security officer in the future. This project is a perfect example where we three partners, Combitech, Microsoft, and Securitas, were able, in a very easy way, to evaluate the value of a digital solution in a real security environment. New technology opens up new possibilities, but they are not always obvious, right? When we started to look at scenarios for HoloLens, it was important to ask us, now, what can you do that you cannot do already better without a technology?
From our experience, which also includes decision-making functions for fighter aircraft pilots, this is actually quite a similar example where you add ability to the human being by extra sensors.
Our digital transformation towards the best combination of technology, people, and knowledge requires a strong proactivity on us at Securitas. Our augmented reality scenarios aim to solve existing and future challenges. On one hand, it is an add value to our customers. On the other hand, it is a knowledge increase for our employees.
When you look into new technologies, always ask yourself the question
What is the unique possibility with this technology compared to what is already existing? It's not until we find the answer to that question that we can do things truly different compared to before. The goal of these scenarios, they are realistic and test technology capabilities that work right here and now. Of course, this is a simplified use case, but I think it does actually give a quite good illustration of how the reality of a security guard could look like a few years down the road. The technology will obviously be more adapted to field experience and field requirements then. I, anyway, still think that it does serve as a good illustration of the future.
Another point that I want to highlight from this video is that you see that Securitas is working and partnering together with other companies to co-create and develop solutions for the future. In the past, we have been very much more working on our own, developing technology for our purposes, whereas the future will be much more about Securitas partnering with different companies, high-tech companies specifically, around the globe to actually really accelerate the digitization and our transformation of the industry. Let's talk about the second track. It's about the future of sensors. Sensors is often referred to one of these exponential technologies, where really the cost of the technology is going down exponentially, whereas the quality of the technology is going up exponentially.
Sensors is already, and will increasingly be, so cheap that they will be installed everywhere, and so capable so that they can inform about their environment in a way that you can really leverage the output of them in extremely many and interesting ways. When I talk about sensors, I did already talk about sensors that the guard can carry on herself or himself. Other kinds of sensors is what you see when you enter the room here. We have smart cameras. Smart cameras being an example of where we're pushing intelligence to the edge so that built-in intelligence in the cameras can make intelligent decisions on actually how to respond at the edge together with the user and at the event scene. Other kind of sensors is what you have up to the left here. You have a drone there.
Drones today, we already use to send in, for example, to look at fires in a petrochemical industry. Imagine micro drones that goes together with a mobile guard patrol that enters a big warehousing area or a harbor area, and you send up a swarm of drones that automatically scans the entire area and informs both the operation center about the risk and potential events that's going on in the area, but also the guard that gets a quick scan of what is it that he or her is going into right now. That allows the guard to make an informed decision on how to actually act in this situation, and informs in the same time the operation center about what potential is going on and if there is any additional resources that needs to be deployed to the scene.
If I extrapolate a little bit into the future, you are all aware about 5G, you are all aware about the internet of everything or connectivity of things that has been talked about in the last couple of years. There is a lot of extrapolation about how many devices and things that will be connected in 2020 and so on. Without adding to those speculations, I just want to make very clear that 5G will completely disrupt the services and security industry. Why? Today, the typical modus operandi of security is that you are either preventive by your presence, or you are responding in real time by patrolling and checking that everything is okay or not okay, and then taking an action. In a connected society with 5G being deployed in our environments, each equipment will talk about itself.
An equipment can be a door, for example, or it can be a high-value asset. Those will continuously send status about themselves. I'm here, I'm okay. I'm here, I'm okay. I'm here, I'm not okay. That means a completely different way of operating as a security company. Instead of the patrolling, the heart of it will be to be connected and monitor all of these signal at all time and act on anomalies and exceptions. Combine that with randomized patrolling to achieve a preventive effect. It totally turns around the equation and how you act, and the delivery model and business model for security. Again here, scale is a key factor, and it's about being connected to those environment and tapping into all these signals that are being sent all the time from billions and billions of devices.
Scale in terms of the company that can actually capture this information, do anything meaningful with that information, and actually provide a response to when the device says, "I'm not okay." Going into the third track, talking about crime prediction. Magnus talked about it. Data, where I have talked a lot about it. Huge amount of data. What do we do with the data? Well, I provided some examples, but the end game is really about being able to predict what is going to happen. How can we design preventive actions, preventive security programs, by predicting the probability of something that is going to happen?
When having predicted that, how can we assign our resources up front in line with the prediction and the probability so that we are geared up, and we are able to be where we need to be at the right time before it happens, based on the probability of an adverse event? Here we are already doing quite exciting things. We have huge amount of internally generated data. We have huge amount of data generated by our cameras, et cetera, which is really interesting. Lastly of the four tracks, we're talking about the intelligent SOC. Magnus talked about the operation centers, 44 of them.
We're leveraging that asset, but also for the future where there is so much more data, we're also taking the steps to build the next generation SOCs, which is basically standardized, cloud-based global platform, where really the ability to capture the information and transform the information into intelligence and provide the response is concentrated. How are we now setting ourselves up to deliver these four tracks? Well, we're already building or actually to some extent have built a strong team, and working across the organization in three different programs. One program is about Optimize for today. It's about how do we modernize our infrastructure and set our foundation. The other track is about building for the future. How do we develop data-driven digital products for the future? The third program is about research and innovation.
What we are describing here today is a much more innovative and technology-savvy company that used to be the norm in the security industry. Such company need to invest also in research and innovation. Optimize for today is really about a multi-year journey to consolidate and rationalize and modernize our IS/IT environment. Examples of what we do there are quite obvious. It's about rationalizing the number of data centers that we have, working out much more capacity, and pushing as much as possible of our technology to the cloud. It's about driving efficiency, but also building the platform for the future. In building for tomorrow, we are organizing ourselves around different product areas to develop and deploy the products of the future, and you will soon see some examples of those products I'm talking about.
In the Innovate for the Future, it's really about creating and focusing research areas, for example, around 5G, as I talked about. It's also about fostering an innovation culture and a partnership culture in the company. It's about how do we run co-creation programs with our customers, and how do we run speedboat projects to proof point our ideas and our concepts. Let me show you now a film that shows the example of the products that I'm talking about and how they can be deployed in the context of a customer in the center.
In a time to innovate, Securitas is the new face of security. We help you mitigate risk, foresee potential threats, and bring peace of mind. Securitas innovative tools and services are accessed through our digital customer interface, an interface that enables our customers to seamlessly control their security. One example of this is our crime prediction that utilizes many different data sets to support our operations and proactively help our customers, notifying them of new risks and advice on mitigating actions. When our system detects increased risk in an area, our customers get an automatic notification. This can be a recommended action or an advice to book a digital meeting with our security specialists. When discussing their security needs, our specialists can propose tailored solutions directly bookable in our digital interface. This customer made the choice to install one of our smart security cameras.
Through computer vision and advanced analytics, the camera can automatically detect when someone in the store is shoplifting. The customer gets a notification that our smart security camera detected shoplifting and that our security officers are already on the way. To make rapid response possible, we optimize the location of our security officers with our intelligent scheduling based on our crime prediction engine. In this way, we secure that our customers can feel safe and trust that Securitas will arrive when they need it. At Securitas, we have created a common framework, the Securitas customer engagement cycle, where the voice of our customer drives our actions and innovations. By putting the customer at the center of everything we do, we want to transform our customers into our fans. It's time to innovate.
At Securitas, we integrate technology, people, and knowledge to offer innovative protective services to customers all over the world.
Is one of the great people on our team. I hope you enjoyed the film exemplifying some of the technologies of the future. To remind you, what you saw in the film was first a digital interface, the digital touchpoint with a customer through a channel through which one we propagate our digital products. In terms of the context, you saw example of crime prediction in real life. You saw also demonstrated our new capability around intelligence scheduling, how we optimize where people should be at what time, and what people, actually, with what capabilities. You also saw an example of video analytics and how that can be used in the scenario of a customer in the center.
To conclude and wrap up, what I want to leave you with is basically that I think Securitas is uniquely positioned to capture the opportunity of digital transformation in the security industry. That is due to the scale that we have, and it's also due to the power of presence that we have. I also want you to take away the commitment from the management to actually stand behind and do what it takes to drive this transformation, because it's not easy and it's not everyone who is going to succeed with it, but Securitas is the company that will succeed with this. Thirdly, I want also to leave you with that what I just talked about and what Magnus and Bart is talking about is being recognized and acknowledged by our customers.
One of our largest customers we are working with, a year ago, we were the trusted worldwide security partner. Very good relationship. A year later now, when we are engaged deeply together on the journey of intelligent security, we are now digital partners, not only a trusted security partner, but we are also their partner in their own digital transformation program. I think that acknowledges also that we are on the right track. With that, I am done, we are now going to have a Q&A. With that, I want to invite Magnus and Bård up on the scene to help me out to respond to questions or actually take those questions. Okay.
Okay. I will try to moderate this. Please. Yes, gentleman there in the middle.
Hello, good morning. Matija Gergolet from Goldman Sachs. Two questions on my side. First, a little bit more strategic. You talked a lot about the opportunities from innovating data technology. How does GDPR impact you? You're talking a lot about collecting data. Essentially, it's about identifying the bad people to some extent. Collecting data now has become more difficult in the context of GDPR. What's your thinking about that? What are the limits, and how do you expect to overcome them? Secondly, on the margins, you showed those charts, I think pages 25, 27, there is some correlation between basically your sales of, say, security service, electronic services on margins. Like on page 27, you have some countries at 10% margin, even though you have very limited security sales or electronic security solutions sales.
What are the drivers you think are there now explaining the high margins in those countries? Conversely, perhaps also, where you're underperforming, what you think are the critical aspects that are basically preventing you from having higher margins, and can you address them in some way? Thank you.
Thank you. I think in terms of GDPR, that in itself has been quite a significant work and effort that we had to undertake. We obviously take all privacy seriously and all the integrity of the data as well. I think one of the mechanisms, if you will, is anonymization of the data. A lot of this data, we don't really need to know exactly who it is, but more that there is a specific pattern or there is a specific incident or a specific movement or something like that. This is obviously something that we are working into our plans and we're investing quite a lot also to make sure that we handle in a robust way as we go forward.
I think of the margin. Do you want to take that part-
Yeah
on this side?
Yes, as you have rightfully observed, electronic security and solutions is not the only driver to the margin. That is also what I have tried to explain. There is a bunch there of 6 key drivers, and there are a few other ones, but the 6 key drivers are mentioned there in the deck. First is really, what is the status of our industry? I mean, how well are we recognized as an industry in a particular country of being able to deliver value? That hangs together with the regulations that are available in that country, how the market leaders are acting in that country, where do you position the industry? How much value can you bring to your customer, and how much are you able to be recognized for that? Secondly is our own position in that.
There might be a market which is a very good market, but we might be not so strong in that market, or the other way around as well. Sometimes the market is not so good, but we have a very strong position. You move up these different matters there. The protective services as well. How much have we been able to develop there? The security solution, electronic security, but also how much have we been able to be on top of our cost development and of our efficiencies and our price wage. All of that basically over a longer time period, the margin is not a result of a 1-year work, it is a result of long and many years of working. That will decide on where you position yourself.
In some markets, if you go in some markets, the market is not well developed, and we feel we need to have an impact there, we need to have a certain size. In some markets, we still lack that size. We are not able to set a clear market leadership role there on showing what this industry can do to you as a customer. We have lower margins. It is depending on all these different factors, and that is why it is all blending together as well. In many cases, those things build up on each other. If we have a strong position, we are able to change the market conditions. If you have a strong position, we are able to move ourselves to protect the services. It somehow fits together, but there is a bandwidth around that.
If you look at the 15 top markets where, that is where we mostly focus on, of course, you clearly see the correlation there. This is statistical correlation, which has been calculated, so the correlation is very much there. There is a bandwidth where the many different entities are. Then there are a few exceptions. There are always exceptions in every statistics. That is, I think, unless you want to add anything.
No
that would be my view.
I think the one thing that Bart mentioned is that there is also a correlation between the different areas. If we, for example, have a guarding contract, to make it specific, and we have a customer that is saying, "You know what? I want to enhance my security, but I also want to manage the cost." If we then increase the technology component and the electronic security, it also then helps that we have ability to respond. That would also be easier to make happen if we have a strong mobile capability in that country, if we have a strong monitoring capability.
I think the reason that we are sharing this is because we are obviously keen on driving higher value, and this is very much in line with the work that we're doing with all the countries as well in terms of saying, how do we now really build up a good position over time?
I want to just emphasize what Martin said on GDPR, actually. Changing a little bit the perception of GDPR as only being a challenge to actually being an opportunity. By addressing it diligently, and we foresee that we will have similar requirements from customers outside of Europe, global customers. That by actually taking it really seriously, using what Martin has talked about, analyzing data, making sure that we have really good control of our data flows, it's actually something that we can turn into an advantage. We can provide that we are really on top of the data flows and how we handle data in this industry, which I think will be a challenge for many companies.
Next question from Bilal Aziz, UBS. Thank you.
Good morning. Just three questions from me, please. Firstly, what impact do you think the expansion towards electronic security is having on the traditional guarding side? In some cases, have you seen that accelerate the pressures in the commoditized side of the business? Secondly, as you expect the business to become more capital intensive, how is that number of 15% of CapEx as total contract value tracking? Is that starting to trend higher? What do you see as a long-term trend towards CapEx to sales for the group? Lastly, you've been pushing this strategy for nearly five years, and we should have probably had a few contract renewals. How does that process work? Is it similar with regards to the margin reset, where the customer asks for another price discount, or is it somewhat different? Thank you.
I can start with the first one. That was essentially the question, how does electronic security solution affect the guarding part of the business? Well, there is a few, I think, dynamics that are important. One is that I think we are selling more guarding today because we have a broader protective services offering. There is a number of customers, because moving to protective services is a change journey for us, but it's also a change for many of the customers as well. Why do we then sell more guarding? Well, because they understand and they believe the logic in the strategy in the story. I think that is actually one of the main reasons Bart explained in his part why we're also growing guarding more than what we had anticipated.
We welcome that, because when we bring a guarding customer in. It also then gives us one more customer that we can also then drive the development with over time. I think that is a positive impact. The other part, of course, is that guarding is such a big part of the business. It is almost 80% when you look at the totality. We also need to look at how do we then say, well, the guarding that we deliver is good. We are proud of it, and we deliver good quality, but how do we also then preserve the value in that part of the business? Because that is the part that is always subject to more pressure as well from competition, because in a number of countries, there is a lot of competitors, and unfortunately, quite a few who are more price aggressive as well.
That is also one of the focus areas we then talk about. How do we also then make this part better as part of the specialization focus as well as we go forward. I think on the CapEx part, do you want to comment on the?
Yeah.
Trend was the question.
Absolutely. Within our present strategy, we have stepped up our use of capital as being discussed, and we have guided there before, if we look at the contract at the average capital expenditure that we do into solution contract is around 15% of annual sales, one-off capital expenditure. Trending there a little bit below 2%, I think, capital expenditures as a percentage of our sales. We have obviously stepped up. We used to be a bit lower there. We obviously stepped up a bit. We get many, and I get many acquisition files on my table. Almost every week an acquisition opportunity is presented to ourselves. Quite often in there is one sentence which says CapEx has been lower than 1% of sales, which is put as a positive to that business, and I consider that really as a negative more and more.
The companies we have studied, we see if that is the case, they are underinvested. They have been underinvesting for quite some time, and there's an inherent debt being built up there by being underinvested. My view is clearly that we should support the CapEx for the business. The guidance we have provided is still valid contract by contract. Maybe that could change going forward, but for the timing, it's still valid. I would also say that our shareholders really encourage us to make those type of investments as well and prepare the company for the future.
It does give us a competitive advantage as well because we are one of the few, in many cases, the only one that is actually willing to invest in that partnership in a much deeper way. It also helps us to win more business, which I think is an important part.
The third question on the contract renewals?
Yeah. I think, like you rightfully said, we started this journey five, six years ago. We're now coming to some of these contracts. We always prefer long contracts together with the customers because it gives us more time to also then build and develop the services. What I have seen is it's usually working well when we are proactively working to drive improvements throughout the contract period. If we take kind of a past approach and we say, okay, we build a security solution and we don't really change it that much in that five-year period, well, then the customer say, okay, what are now the triggers in terms of the added value?
I think one of the critical parts that we are working on is when we have that longer contract period, that we continuously also doing the risk assessment, we are understanding the needs, how they develop, and that we also fine-tune and make differences to the services that we provide over time. We have a lot of proof as well that the customer satisfaction for the solutions contract significantly higher. When there is higher satisfaction, that also typically means better profitability and better retention as well.
Okay, next question. Yeah, please.
It's from Kepler Cheuvreux. I've got four questions. They're all related in trying to assess whether this move to technology is a value-enhancing strategic move or a necessary defensive cost of staying in business. Bear with me. The first question relates to the technology solution. You gave some indication of what you think is the most important benefit on the commercial side. I was wondering in terms of the most important margin driver, are we talking about an efficiency cost benefit over time as you replace people by automation and monitoring devices, or are we talking more of an organic growth driver, a pricing enhancer or retention benefit that as you alluded to? That's the first question. The second question, I think it was almost asked, but about capital intensity of the business as it's growing.
We see the barrier to entry, obviously of the industry, the benefit strategically, is there a tipping point when that scale advantage that you're building start to drive return higher as well? Third question is on leverage. You've been accelerating the acquisition move. You mentioned you have an acquisition every day brought to you. You also have that very narrow leverage ratio target. Would you be ready to actually increase that band to absorb larger deals in order to accelerate further this strategic move? The last question, you didn't talk about competition and how technology is actually bringing alternative to customers. In particular, is it possibility to do that security monitoring themselves as the cost of technology is coming down, or the possibility that technology providers are actually entering that segment. Could you help us understand the competitive landscape as evolving in that manner? Thank you.
I'm going to make it easy for myself, I will answer the fourth question then I hand over to you, Bart. I think because the competitive aspect, we obviously prefer to talk more about what we are doing and our journey. I think we see, and it's partly related to the first question that you had as well, that the technology is playing and will play a more important role. The data will also play a more important role in terms of how smart we are in providing the security. I think that is a trend that is unquestionable. If you look from a customer perspective, many customers also say that, you know what? We like the services, we like the quality, but we need to manage that cost equation.
That is always where we have the strength of being able to bring an alternative solution, where we're then integrating the capability of the different protective services. I think that is clearly helping us, and like we said earlier, it's also helping us to win more business. There are many customers that I have seen over the last couple of years who just one or two years or three years back said, "You know what? We really want to work with you. But solutions, electronic security, not at this point in time." Today we're starting to roll out on a footprint across Europe, or in one case, on a global level as well, more standardized solutions. It is also a journey that we need to go through, and I think that is one important part.
In terms of being replaced, I think that's what you mentioned in the fourth question also in terms of will technology replace? Well, you can do a lot of smart and smarter things with technology, but it's then also important to have the right information to be able to work in a smart way. I think that's the reason that Martin and I emphasize that quite a lot. We believe we have a competitive advantage because of the footprint we have and the data that we can generate. We have a real scale advantage from the presence. I think that these are some of the kind of the views that we have. The other part, of course, as well, is with technology, well, you cannot have a camera respond.
A camera can indicate to you what is potentially happening, you can put smart analytics on it, but you do not have the power of being able to respond. That's also the reason that we talk about the power of presence as one of the real important assets. Bart, do you want to give some-
Yep
on the other questions as well?
Absolutely. You challenge a bit my brain now to remember all the questions. Is it a margin drive? Is it growth drive? The entire journey we're looking into, it's both. It's obviously protective services, guarding protective services, electronic security. We're looking at driving both the top line and the margin. I think we have been quite successful. We have actually been more successful than we thought at the beginning on driving the top line. Guarding has developed, and we should not forget, guarding is a good business. It has been better than we expected, basically, on the top line, largely driven also to some traction that we get from the entire offering to our customers. It's something which blends together, and the different pieces are enforcing each other. It's both. We're looking both at efficiency and top-line growth. Capital expenditures, is there a tipping point?
I don't know for sure. What is clear, of course, is that through our scale and what we have reached, it will become difficult to get up to the same level as we are. We have been investing. We have been moving in this direction. I think we are taking advantage or advance compared to many of our other players in the industry. It's a combination of having both the understanding what is the needs of the customers, how can we use technology and our people then to combine, and how can we respond? You need to have all those components in place. We will continue to invest in all of that and make sure that we keep the lead here. Is there a tipping point? I don't know. Our strategy is much more to make sure that we take advance compared to anyone else.
Then leverage acquisitions. We are comfortable there around leverage. Net debt to EBITDA of 2.5 is absolutely no problem. We have been lower as well at some point in time, more around two. We have been up a little bit higher as well just after the Diebold acquisition. Our balance sheet is in a very good position. Acquiring is one thing, integrating is another thing. You also need to make sure that you have the integration capability. If we come around the right targets and we have the right capability to integrate, then we could make such acquisitions. It's more a matter of making sure we find the right targets and we invest into the right companies as well. There's quite some M&A activity going on right now, as all of you judge from different industries.
We are taking actively part of that, are evaluating and scanning different possibilities. At the same time, prices are also quite high at this point in time. We are judging on our course here. One thing is for sure, we have a right balance sheet, and our shareholders support us in using that leverage capacity.
Okay, thank you. Next question. From Mikael Holm, Danske.
Hi. I have two questions. The first one, I think we have got many times over the latest years, and that's on the margin progression in the group. You showed that security solutions and electronic security has grown from 8% of sales to 18% of sales 2013 to 2017, and margins were flat during that period. If you could just elaborate a bit of that, what is happening with the margins in more of the technology part of the business, and what is happening on the man guarding side of the business, and when we can see potentially then an inflection point for that development. That's the first question. The second one is just related to, you divided the 51 countries in how large share of sales that were coming from solutions and electronic security.
If you could say something about the sales growth organically in the different groups, at what level in terms of security solutions and electronic security are growth leveling off? Is that 30%, 40%, or at 50%? If you take a really long-term view, how large that business could be. That's the second question.
Okay. Thank you. I think on the first question, we are aware of the operating margin obviously being at the stable level. We have been growing the business quite a lot. We want to bring that up over time. There's no doubt about that. We believe that we're going to be in a position to do that as well, as we're progressing on the journey. I think one of the reasons that we also shared the examples from the countries today is also to see what is really the dynamic when we are progressing in terms of solutions, electronic security, and also what is the kind of correlation to profitability. Like we said, this is one key driver. There are a few others as well.
When we do that, when we look at individual contracts, we're tracking this all the time because we're also investing in CapEx, as we've said. We have many good proof points that the strategy is working. At the same time, we're also investing quite a lot. When we say that in our protective services journey, we are in the middle of that right now, that is continuously requiring investment on our side. There is also on the guarding side, there is always some pressure as well on the guarding. There we see different cycles as well. When you look at Spain, for example, it was almost a brutal situation, competitively speaking, a number of years ago in the middle of the crisis.
A number of companies were basically pricing themselves too low, they also went out to the market, now we see that that is stabilizing a little bit as well. This is something that we're continuously working with. The pressure is there, like I mentioned earlier as well, we are also looking at how can we also become more efficient and deliver better efficiency also and profitability in that guarding side. Second one, do you want to take that part?
The 51 countries, could you elaborate a little bit more on your question? It was not that clear what you were asking for me. Sorry.
Yeah. I meant, for example, if you take those 13 countries that today have more than 30% of sales-
Okay
from electronic security. Are they growing still in line with the group average of 67% organically, or is growth leveling off at that level?
Yeah. Now I understand. If you look at the entities which of course have a low percentage of sales, for them it's easier to grow the percentage-wise.
Yeah.
Clear. The more you go up in the ladder, the more difficult it becomes to grow percentage-wise. In nominal terms, however, we see that they are moving on in similar patterns still. Where is the end of that? Well, you have seen that we have already couple of countries which are in the 40%-50% bandwidth, which to be honest, we could almost not imagine that would happen five, six years ago. Where is the endpoint? I don't think we have discovered it. It's probably not 100%. We have simply not discovered that. The first opportunity for us is they have to move this 0%-10%, to move them also up in the ladder and to move everyone up to the 40%-50% level. That is our first priority at this point in time.
It's also a learning curve. I think what we see in a number of countries is that to get the first kind of movement before you build real momentum typically takes some time. That is also because we need to have the right type of mindset. We need to have the technical capability, also quite a lot stronger support also on the sales and the commercial side. That's why we talk quite a lot about the customer engagement, because it's different to sell a range of protective services or an integrated solution versus selling a standalone service.
I think this is also something that is really, like Bart said, is that when we have good growth in the penetration, we also typically see that the nominal levels, that continues, because we're building the momentum and the confidence and the knowledge as well within that country to make it happen.
One more comment may be related to the margin. I think if you look at what happened in North America, there we have the cleanest picture on both being benefiting from scale and having not been too much disrupted by any other events. There we have been able to bring more content to our services, move up more into the protective services, do a large acquisition in electronic security. We have been able to build scale there, and you also see that being reflected in the margin, thanks to very good work of our colleagues in North America. In Europe, it has been proven to be a bit more difficult. It's the same strategy, it's the same goals, it's the same targets, but you need more people organically. It's more difficult to make sizable acquisitions. We have been a bit disturbed from the refugee and terror crisis.
We have also been a bit, maybe surprised is not the right word, but at least our indirect cost development has also been higher than our sales on our top line. All of that is a bit more reflecting on Europe. Ibero-America, there we have been very much impacted from what is going on in Spain, and now that has started to turn around as well. For instance, in Spain, if it would not have been for our journey of security solutions and technology, we would have been in a much worse position.
Clearly. We can clearly see that. Now we start to benefit from what we have built.
Just to follow up on the margin, you have this ladder showing that security solutions and electronic security should have a margin of around 10%. Is that the vision you have, or is that where you are today in that part of the business?
That is the clear benchmark, and we have proof points to show that this is also the case. What we are doing also to support that is we're always looking at if we are converting a contract, what is then the benchmark in terms of what does good or great look like? That we are tracking every contract, every country as well, so that we also make sure that we're getting the return for that investment and for the conversion that we're making.
On average, you are a bit below that then, if you just have proof points of.
I think that's the general rule, then there will be contracts where we have higher than that. There will be contracts where we have lower as well. It depends quite a lot also on what is the mix of the protective services in the contract.
Next question, Paul Checketts from Barclays.
Hi, everyone. Yeah, it's Paul from Barclays. I've got three as well, please. The first is you've seen this explosion in use of electronic security, you're going to see a lot more data coming through. Are the IT systems within the organization robust enough to deal with all that? That's number 1. The second is returning to acquisitions, when you get to this sort of scale and when you're leading the industry, why can't you do this organically rather than making purchases? Perhaps in the future, is it not about the next stage, where you'll be adding skill sets rather than buying businesses that look like yours today? The last 1 is, with the changes that are happening, do you think we'll see more tendering for contracts rather than the sort of bilateral negotiations that have typically happened? Thanks.
Martin, do you want to take the first 1?
I think that sounds like my question, yes. The systems we have today, Magnus talked about it also. They, I would say, are robust and fit for purpose in an operating model which we have been using up to date. When we move to more globalized economy and leveraging scale and data, there is a need to modernize to consolidate these systems. You heard me talked about the program around Optimize for Today. It's really what it's all about. It's about modernizing our systems. It's about building the platforms for the futures, reducing local complexity into fewer points which can scale well and leverage the new technology like cloud platforms, et cetera. Yes, there is a gap that we are addressing in terms of modernizing our systems, et cetera.
My team roughly on the Optimize for Today, that's where we spend at least 50% of our total resource and effort and attention to making sure that is actually setting the foundation so that we can build the future on.
I think when you look at the second question was more related to organic versus acquisitions. When we look at electronic security, acquisitions enable us to speed up this pace of transformation. What you have seen in our North America division, Bart shared numbers earlier, fairly low numbers five years ago, but now they have done a tremendous job in really driving the change. That is partly thanks to them making significant acquisitions and also then getting a different type of capability. When we do that versus then hiring organically and training and building organically, that obviously buys us some time as well. I think that the time dimension is one very important part related to that question. Obviously we keep on building organically consistently.
We're also looking in some territories, we would like to make acquisitions, but we don't find the right targets. That means that there we have to do more of an organic growth investment as well. I'll take the last one.
Your third question was around tendering activity. I would say in general, there is a move and definitely of the leading companies to say they go from more tendering to partnering. I think people are looking for efficiencies, for improved quality, for improved safety and security environments absolutely, and bring also efficiencies to that. I think there is a shift going on definitely in the leading company say, "Well, instead of going for tendering, we go more for partnering and see what we can do together and create value here together." I think it's not there to say this is everywhere and it's happening in every corner, but you see that the leading companies are embarking on this journey more than on a brutal tendering exercise. Still, you will find brutal tendering as well.
I see some shift there in thinking of some of our global key large customers, yes.
What's important then is that they look at security, safety are very important activities, but typically not their core activity. Here I think from a competitive standpoint, we are in a really good position because the footprint we have, the services we have, there are not that many companies that are actually able to compete with us. That is why we're also then saying we're putting quite some focus also on the global customers because we believe that we are stronger and clearly the head of everyone else in that space.
I think we have a coinciding interest here actually where we see a customer base which is moving more to managed services which coincides with our interest and abilities actually to provide managed services that can move us up the value chain in our customer delivery.
The next question from Mikael Löfdahl, Carnegie.
Yes, hi. Follow-up on the margin question. First of all, how do you define when a contract becomes a solutions contract? I mean, the percentage of technology or electronic in that contract, when does it become a solutions contract? On that topic, when you look at the.
The margins that a specific contract then generates, is the mix within that contract more important than the actual country where you operate in, i.e., the competition or the level of maturity and so on? Because when you look at all these graphs, there's a huge spread between countries and between the tech content, which we have difficulties to understand, I guess.
No, to answer the last part of your question, it is different drivers. We have been focusing a lot on the technology component because we see the opportunity of that. The other components we are working on as well, constantly. We have maybe not talked so much about it, but of course, price wage equation, we have talked a lot about that, so that we have been able to manage from one year to the other. The basics of our industry is something we work on as well. That is very difficult one to change, and it takes time to change that over time. There are countries where we have really been able to change that over time. There are other countries where we have not been able ourselves to change that yet. Still to come.
In any case, even then, in those countries where we are in a lower maturity, so to say, we still by introducing electronic security and solutions, we still move the needle. That's the whole thinking to wherever you are today, it doesn't matter, as long as you start to improve. That is really the goal. Even if you are in a country with maybe a low maturity, still you can improve, and that is what we try to bring to all the countries. Yeah, that is why you see some spread as well. If you would draw a line there around it, we're still playing in a bandwidth. You could do that mentally. You could draw a bandwidth there around the regression line, and you would see that most countries play in a bandwidth with a few exceptions here or there.
You will always have statistical exceptions, of course. The other part of your question?
The definition of a solution contract.
The definition of solution. Yes. That is when we combine different services into one contract with a customer, we add the component of technology in there where we are investing into the technology.
Yes, what is the criteria for being defined?
Yeah. The criteria, it is when we combine different things, that's one criteria, we also invest into the technology. There's a bandwidth there. The one-off investment should be between 10%-20% of sales on average. On average, 15% has been mentioned here before today, the capital expenditure. You will find exceptions where it is a bit lower and where it is higher as well.
It should also be signed for three, four, five years.
It should be three, four, five years.
to be recognized internally as a solutions contract.
Exactly.
Yeah. Yes, Carina Elmgren from Handelsbanken.
Yes, thank you. I was a little bit wondering about the margin for intelligent and predictive security beyond 2020. Is your target for this kind of service also 10%?
Yeah, I think, today we're giving a flavor of the services and the kind of the use cases. Too early to talk about the commercial model. Obviously, when we are bringing something which will be stronger and different than anyone else can bring, we will add more value to the customer. We must also be able to price that. That is also one of the reasons that we do this, of course, because we believe we can bring really strong offering, but also create significant value to the customer. Also then the internal efficiency-related aspects as well, because this is about being data-driven. It's not only to enhance the security for the customer, but also then how do we optimize better also the entire operation that we have.
Okay, and maybe a second question. You're saying that your margin has been a bit maybe hampered by also your investing in this kind of new technology and solutions. Is the level of investment something that you're going to continue with or are you going maybe to increase that or decrease, say, in the near term or mid-term?
I think what we have shared today is that we need to modernize to be able to realize this ambition. There is quite a lot of work that we have ahead of us. That's the reason we say it's a multi-year program. I think that when it is the appropriate time, then we'll obviously come back and also communicate what that will mean also in terms of continued work and changes that we need to undertake, and also the financial impact of that.
Thanks.
Any further questions? Yes, Henrik Nilsson from Nordea.
Thank you. Sorry if this is a long and complex question. I'm trying to sort my own thoughts here. This primarily aimed to Martin. On the systems behind the digital solutions now, my question is really about trying to understand how proprietary and difficult those systems are to build. I suppose that there is a large need for local adoption and has been a large need for local adoption, which to some extent acts as a barrier for tech players to copy or make similar systems. You're now saying that you want to globalize this and have reduced the amount of local adoption of this system, and to me, that could be an indication that maybe they are converging on more global standards and thus would actually reduce the barriers of entry.
Can you elaborate a little bit around how much of the back end, or should we say plumbing of these systems, is actually proprietary to Securitas and how much is just something that you've bought?
Okay. In our legacy, it differs a little bit on the geographies we have here. There is a certain amount of proprietary systems, and they of course have a hampering effect on scale
We are both addressing some modernized and changed systems to more modern platforms. We are also working on the data model and data modeling of the data that is common across systems, so that we can actually tap into the valuable data regardless of the system and build services on top of that. The long term, of course, then we are exchanging the systems to modern platforms. In some of the geographies we already have production systems that are coming from external bought platform providers, which are already built for such purposes from the beginning. It is a combination, and to really drive out the full scale, as Magnus said, that's a multi-year journey. We have a lot of commonality in our back-end system.
We have guard reporting and guard management systems that have different flavors across different markets, but at the heart of it, they are basically the same systems. The adaptation is not a completely different system in one market to another market. The adaptation is smaller steps there. I foresee if you look at the longer term, that we will actually modernize our back-end systems quite significantly. For the bulk of our processes, we will go for more than platform-based systems, which will then quickly scale up what data is available.
Do we have a final question? Yes. Please.
Hi there, James Winkler from Jefferies.
Hi, James.
Obviously, the operational centers are a key part of deploying your new strategy going forward at 44 now. I'm wondering if you could provide some context in terms of how many you had, say, five years ago and maybe future plans in terms of how many more that may be required in terms of investment in the future in order to execute your strategy. Then just a quick follow-up on the earlier conversation on IT modernization, wondering if that's baked into current CapEx estimates in terms of sitting around 2% of group, or whether that represents a possibility of the requirement to increase CapEx moving forward. Thank you.
I think in terms of the security operation centers, the numbers have been fairly stable. When you look at the last five years, the critical difference now is that we are building more harmonized capabilities, so more sophisticated capability across this footprint. Because when you're looking at an operation center, some of that is just basic alarm receiving activities. As you've seen in the video, there is quite a lot more that we actually do. The change there is not to really expand the number, but it's more a question of bringing up the capability and harmonizing that capability on a global level. I think the question, second one.
On capital expenditures, I have mentioned they are a bit below the 2%, and that is still where we are targeting at this point in time. As Magnus said, we have made investments. We have upgraded. We had quite some of these operating centers, but we were more talking then about the control room, and it was smaller things, and it was more limited in capacities. We have been upgrading those centers both in terms of premises, in terms of software capabilities. We will further do that, but the big investments there have been made. Absolutely. For instance, if you look at the U.S. by itself, we almost had nothing four or five years ago in terms of operating center. Today, you have seen it in the movie. It was in one of the movies.
Our Securitas Operations Center in Charlotte is state of the art with lot of capacity to further benefit from growth as well. Those things we have been working with the last four or five years, everything of that is today included in our numbers.
To be clear, the intelligent operation center I talked about, it's not another 44 new operating centers. It's basically more to be seen as a platform that we glue together the footprint that we have today and leverage the capacity and the capabilities of those centers. I'm not saying that we will not add operating centers, it's not something that is new and standalone to the current operating centers.
One more thing we have to add is, of course, we have to decide on our final strategies as well for the next five or 10 years, which is an exercise which is going on. Based on that, it could be that we change some of our assumptions of some of our targets. That is too early to talk about. We haven't had those conversations either, to be honest with you. We are now looking at conceptually what do we need to do in front of our customers, and then we will take the decisions based on that.
I think we should round off. Yeah?
I think if you can just click one forward, Micaela, I would just like to say thank you to all of you for joining us today. I hope that we have made it informative for you. I hope that you also had some good opportunity to get a bit of a flavor of some of the things that we are doing, also leveraging technology. I also want to say we have a very strong foundation as a company, and this is obviously related to the strength of the entire team. The team that has been helping and putting together this session this morning, but obviously also all the colleagues that we have all around the world who are really making Securitas such a great company. We put up a last slide. This is about the different phases.
That was just to recap the strength that we have, but also then the continuous work that we are driving to make sure that we are stronger and that we're really leading the industry in the next 15 to 20 years. This is an exciting journey, and we are looking forward to also coming back and sharing more with you as well as we progress. With that, a big thank you, and enjoy the rest of the day. Thanks a lot.