Very welcome, everyone, to the Securitas Investor Day. We're happy to have you here, and also the ones who have logged into the webcast. We will try to show you and to prove to you that our strategy works and that we are in execution mode. I, together with some of my senior key managers in Securitas, will show you how we are implementing our strategy. I start with a summary. We have some good news, and we have some bad news. The bad news is that we have said historically that the security market in the mature markets, that is North America and Europe, is growing with GDP + 1%-2%. That is not the case anymore. It's more GDP flat.
The good news is that we feel as we implement our strategy, as we see and gain traction from what we are doing, that we are able to gain market shares in different ways, and I will come back to that in a minute. But we are gaining market shares, and we are confident and convinced that we will continue to gain market share. We see some signs of that, we have some examples of that, and we will see more of that. So we think the good news is, we think that we will grow faster than the security market organically. You know our company. I will not educate you on that. We are about 300,000 people in 52 countries. We are market leader in North America and in Europe.
We are the only Pan-European company, and we have all the services we need in order to be a successful security services company. And we'll be happy to educate you and train you on that, but we will spare you the details on that for today. If we look this schematic slide, how we see things and how we have seen things. In the past, the security system companies, the system engineering companies, the integrators, the technology companies, have been living sometimes in business symbiosis with the guarding companies, but to a large extent, kind of independently, and the manned guarding companies have been kind of independent from those companies. They have been in a little bit more of a positive market environment than the guarding companies, but they have kind of been in parallel.
But sometimes they have done business together and then successfully made contracts where they have a complete solution to the client. What we feel is happening is that from the past to the present, the trend is that more and more growth is in the technology and the Security Solutions arena, while the number of guards will decline or is declining. Some markets, it is happening, others, not yet, but could very well be the case. And potentially, it could speed up in both directions. At some point in time, there is a jump, and that is that little very tricky thing to make on PowerPoints, but anyway, finally, we succeeded. That little jump there in both directions. When that happens, there is a paradigm shift in the security industry, and we think that is going to happen. We have seen signs of that.
We will give you some examples, but it is happening in a very few places, but still, and more and more it will happen in other places. Again, I repeat, some countries, we are not there at all. Some countries, we are there in the paradigm shift, and others will come. But if you are not prepared for that paradigm shift, you will be in trouble. And we are prepared for that paradigm shift within our businesses, and we are preparing ourselves in different modes, in different ways, in the different countries where we're active. The customers, they will love this, and they will support this process, and they will give fuel to that process because it's good for good news. You get better security and more security for the same money or even less money.
So historically, we have seen, security market growing 1%-2% + GDP. There is clearly a reason to revise that opinion, so the security market is not growing at that pace. In the mature market, I repeat, North America and Europe, is more GDP flat. Now, you need to try to find ways of how to mitigate that situation, and there will be some changes as this paradigm shift happens. Speed will be different country to country, and you will get testimonies of that today. But when that happens, within the market where we are working, you need to-- we need to move from and replace some of the guards by technology, because the technology piece will grow while the number of guards will likely be reduced.
You can use your guarding footprint and your guarding force to also do more safety work, and that will be beneficial. It's very cost-efficient to do that, and it's a nice market where we are focusing quite a bit. And consulting and investigation, C&I businesses, will grow quite a bit, and they are growing quite a bit, where you give advice to your clients of small and, and difficult or large and difficult situations in the security work. So there will be pieces within the market that where you are, and you need to act in that in order to have a way to mitigate a potentially declining, further declining guarding market....
But there will also be a change, in our opinion, when that paradigm shift takes place, and as we see the years to come, is that the insourced market, which we have talked about, I think, for decades, that it will change, and it will be more and more of insourced market to the outsourced market, but it hasn't changed a lot, really. But when technology speeds up, then all of a sudden, your offer to your client will be completely different to what we have seen in the past. And when that happens, we will be able to offer the insourced market a solution which will make them think twice if they should continue to do the guarding by themselves as an insourced and keep our own employees. That will be a game changer, I think, as technology speeds up.
What will also happen is that there is, and there will continue to be an increase in cost pressure from authorities, governments, and so forth, in order to find ways to cut costs and pay down their debt and save our budgets. When that happens, there will be possibilities for the private security industry to do more of the work which is presently done by the police or by the authorities themselves. There's an opportunity to enlarge the market. There are ways to mitigate a potentially declining trend in the guarding industry, and that is what we are working for. Then you either prepare yourself for that, or you just sit around and wait for it to happen, and then you will be caught by surprise, and you will be in trouble, I think.
We have since two-two and half years really tried to prepare ourselves for that, and that is what we will try to prove to you in more detail today. If we look on Securitas and how things look in Securitas, it kind of substantiates what I just said. This is our organic growth. If you look back over the past 10 years, a period of time, our organic growth was in the range of, let's say, 2%, maybe 3%, if you are kind, above the average GDP growth of Europe and North America or US. While in the last period, you see that it's pretty much in line with or pretty much flat with GDP. We started to prepare ourselves for this paradigm shift. We see it more clearly today, I must admit.
It's easier to write the story afterwards than when you are in the middle of it. But anyhow, we saw there were things going to happen, and it was changing. The industry was changing, and we need to react and act and be proactive in that situation when this big jump or paradigm shift will occur in different markets. We cleared the situation with Niscayah in 2011, May, two and a half years from now, we put a bid on it, which was not successful. So we need to go our own way, and we went our own way, and we are building it in a different way compared to acquiring Niscayah and bringing them back into Securitas.
So that's history now, but it was, in a way, an important step for us to clear that situation so we could move on in our building the Securitas piece of that. We did a big restructuring program last year, as you're all aware. We cut costs to improve our results, but also freed up a lot of capital and money in order for us to be able to invest in the technology arena, and that was what we have done to in order to speed up in that process. We have set targets internally, externally, it's the same target, to make us hunt for that target. And we have also changed our acquisition strategy to be much more focused on acquiring a technology-related company than buying market share in mature markets in the guarding industry, which is not very interesting.
The main focus of this process is to convert the existing portfolio, and you have seen this slide 100 times, some of you, maybe 1,000 times. I've seen it 1 million times, but it still works, and it's the one we are using. We use it not only on the global macro level, we use it on the branch level. In our thousands of offices we have around the world, this is the methodology we use. Try to identify your clients, which are guarding clients, which are Specialized Guarding segment, segmented businesses, and how we can move them up one by one, make your priorities, move them one by one up to Security Solutions. Every step we take, we improve operating margin 2%, roughly speaking. You will get witnesses and testimonies today to prove that this is true.
We are not very worried about the numbers here, that we will not improve the margin, as I'm stating in this slide. The challenge for us is to move the presently 7.5% of our portfolio in Security Solutions to 18% in about two years from now. We are fighting, and we are investing to do that, and that is really the agenda where we spend most of our time at work to try to achieve that. But there will also be opportunities to gain market share in this, in this journey. So it's not just gonna, gonna come from converting the existing portfolio, but also to use that investment to be more successful, gaining new, new, new businesses from enlarging the market, from the insourced market, or from competition. So in summary, this is what we're working on.
We are implementing our strategy. We have a very clear strategy. It's well communicated. It's in place everywhere. Our budgets, our business plans, our activity plans are built around this. We are executing. We are not planning, we are not dreaming, we are not making PowerPoints and not doing nothing. We are executing this plan, and we will try to prove that for you today. We will continue to invest as much as we possibly can in that, and every time we have a chance to reprioritize indirect resources, we will do so to support this strategy.... We will invest more money also in sales and marketing to be more active on the marketplace, and we think we can do that within that indirect, that cost level that we have in place today.
But if we find more ways to save money, we will use that money to invest in that, in that journey. And we need a sense of urgency. The main challenge in this process is within the company. It's our own mindset. It's not the rest. Our own mindset will make the difference, and that will determine the speed of our success. There are some opportunities within the fire and safety arena, and those we will, of course, grab. We think there are good chances to use the footprint we have, use the guards we have, use the structure we have to be more active in fire and safety, and that is what we are working on presently, and we see some success in that. This transition is a big ship, and you don't turn it in a minute.
So it takes some time to communicate with 300,000 people, and especially when you have a turnover about 30%, which means that you employ 90,000 people a year, it takes a while to communicate a message, but also to get the traction of that message. But we are very well on the way, and we've been working hard on that, and we will try to prove that to you today. But it takes time and it takes money. It takes not only your P&L, it takes your balance sheet. We need to invest, and we will give you some guidance later on today, how much money we think we need in CapEx in order to substantiate our 18% target, which is our first target to reach.
At the same time, I don't believe in plans which are hockey stick plans, where you should not make any money, and then all of a sudden, you should make a lot of money. You should be able to produce good results and good cash flow at the same time as we are reconstructing Securitas, because that is actually what we're doing. We are in a historical situation where we are completely rebuilding this company to be prepared for that paradigm shift, which hasn't happened in some places, but is happening in a few places. That reconstruction process takes time, investment, but at the same time, we like to make money. We have to make money, produce good dividends and good cash flow.
So the important part in this journey is, of course, to convert the existing portfolio, and that is very much around that target of 6%-18% in three years, what we have communicated. Very much of our communication has been about that piece, and that is on the left-hand side here of this slide. But that organic, but that and that will improve our gross margin. We will see some indirect cost increases because we need some in places to make some investments and free up money to make those investments. We prioritize in different ways. But it will improve the operating margin, there's no doubt about that. But it will not generate a lot of growth.
That journey by itself, the conversion of existing portfolio, will not generate a lot of growth, because what's happening is that you will many times explain to the client that where we get more security for less money or better security for less money or the same money. So you will have some erosion of your top line. On the other hand, we see examples that clients are using that money to invest in increased security or better security. So that will mitigate that. And at the same time, there will be some GDP growth, hopefully, going forward. But in order to reach our earnings per share target of 10%, we need to do a bit more than that. And we think that we will be able to do that. So we will reach that target.
We reached it some years ago, but we have been not reaching it for some years, and now we need to get back to reaching that target. Intentionally, there is not a timeline on that, so I will, I will answer already now, but we will not give you any specific date on when we do that. But we think as we move on this journey, and we will be successful in gaining market share, and we will be able to grab a piece of that enlarged market and grab a piece of that insourced market, that gives us confidence that we will be able to reach the 10% earnings per share consistently, annually, improvement of our EPS. So in summary, we are in execution mode.
We are ready, we are prepared at different stages in different country for the paradigm shift, and the paradigm shift is taking place, and it will come in some places. It's taking place in some places. And as we prepare for that, we will create shareholder value that consistently will give a very pretty picture for our shareholders going forward. All right, that's was my introduction. My clock is on red, so I'm looking there, but I'm still within the time frame. And we will move on now, and I would like to introduce for the next speech Antonio Villaseca, who is our Senior Vice President of Technical Solution and also a member of group management. So please, Antonio, go ahead.
Thank you. Good afternoon. My name is Antonio Villaseca. I was appointed in that position in May 2011. Very brief summary about my background. I developed all my professional life in the security industry, in the technology part, and in this position, I work for Securitas, and since 1995 to 2006, I left the company, and I came back in May this year. So I have some experience in the technology and also in the game between guarding and technology in the past. So maybe we talk after about that point. So we invest in technology, maybe repeating the words with Alf, to enrich our offering to the market in order to grow, increase our growth rate, increase our margin, and the technology can contribute to create value for the company.
So today, we have a plan in place. We are in the execution mode in different countries, and today we have organization in technology in the major countries of Securitas, more than 2,000 people working in technology part. And if we look at the value chain in technology or security system business, we are very, very, very focused in the analysis and design, and of course, in the after-sale service and remote service, in order to generate portfolio business as according with Securitas Group. I'm sorry, I forget to move the... Sorry. I thought you don't follow my work. So I repeat, we are very focused in the value chains and very focused to extend and develop the long relationships according with the Securitas Model, and also to generate recurring revenue for the company.
But the target, the main target when we invest in technology is not to build or rebuild a strong organization in technology, because Securitas enjoy this organization in the past. On that point of time, Securitas have included in his offering the combined contract or combined solutions. But I remember that this approach to the market didn't work 100%. Country by country, some successful case, but no, generally speaking, in all the Securitas world. Why? Different reasons we can find if we ask the managers, but the main reason was we never reach really integration between the guarding organization and technology organization. Because we generate internally some high barriers and some very strong silos to move along in the market. So in this sense, it's very complicated. I can give some examples.
In that time, we have different targets and goals in technology and the guards business. In this sense, we have different incentive plans. We don't share any successful case. We only enjoy our own P&L. So in this sense, it is very high barrier; it was impossible to develop cross-selling or bundling to enrich the offering to the market. So in the end of this history, very, very long history, each silos invent their own central support team. That's mean it was impossible to measure the successful when we talk about the combined contract, because we work like silo, silos, very isolated organization. So we have learned some lesson for the past, and today we have applied in Securitas when we define the strategy, and we execute this strategy in the market.
So you can see here today, the goals are common for the technology and for the guard people, so we are in the same boat. We have the same targets. We don't make any internal markup. We see the contract like a global result for the company. In this sense, we enjoy the successful and the results, because we share the P&L. And we don't use the silos. We work like a one company. Our incentive plan work in the same direction, align with the same strategy. Today, it's easy to develop cross-selling and bundling because our people understand and don't feel any barriers to develop this strategy to the market. And of course, we leverage all these strategy in the common central support platforms to support this strategy in our organization in each country.
So this is the way we are working today. During this session, you will have the opportunity to see, to touch, that this strategy is working. I show you some proofs that demonstrate that this strategy is working in different countries, and you also can see during this session, some results is coming. Today, we feel very strong position to move forward in this strategy in the market. Nothing else from my side. Thank you. Now, I would like to introduce Santiago Galaz, my colleague, Santiago Galaz.
Okay.
Maybe your friend as well.
Okay, good afternoon. Okay, very, very happy to be here. Very nice to see familiar faces for all these years. And we quote some of the things I said two years ago, and explain where we are right now. My goal today will be to present to you our strategy regarding Integrated Guarding, and how this will help us to drive growth and margin. And I think Integrated Guarding in the U.S. market, not just in U.S., in North America, but especially in the U.S., will help us to deal in a better and stronger way with the ACA. And all of you are aware it's coming, and it's coming in next months to us, okay?...
We represent 35% of the, of the group in revenue and in profit, and we are the market leader in, in North America, in all the market we play. For the market growth point of view, I think we, where are we? But we are in the same place that we were maybe in 2008. You see the numbers on the screen, you see the number of officers to the total security industry, including the in-house market, the in-house segment, are almost the same, are almost identical. But of course, in between, a lot of things happened. We touched the bottom in 2010, and we rebound from there.
But you see, in between, well, when you compare the end and the beginning, it's not much, but you look in the details, you see how the market developed. What is happening right now is a recovery, and you see rebounding since then. And we start to be in the number of officers growth around 2%. And the price increase, as you can see in the graph there, is still in the low end. Before was around 2% in the U.S., always significantly lower than the price increase in the European part of the company. But now, for the last two years, it's almost flat. You see on the graph over there, it's almost at the zero level. I think in 2013, we start to see a little bit more.
My prediction on how we see the market moving in the next years, we will be back to the previous rates. I think we can expect the market growing according with the GDP, and, and inflation will add some extra points, who will be projected through the price increase. Now, how we see in the, in the U.S., you analyze the last two-three years there, you start to see this trend where coming back to normal. But in between, when you analyze and you follow our result for the last few years, say, okay, there is no growth.
This depends, and in some cases, we are, as a company, ahead or behind of the cycle, but all in all, I think we, we protect our market share in this period, and we can expect some growth coming to us through the growth in the industry in the, in the next coming years and be back to the, to the previous rate. And we think with Integrated Guarding, we can speed up that a little bit. So we can do better on the market, that's our hope, and we try to illustrate today how and how, yeah, how we, or more detail, how we're doing this. For the organization point of view, I think you are familiar with our different business unit.
Last year, we changed from 10 geographical regions in the U.S. in the fourth quarter to five, and together with Canada and Mexico, represent the seventh unit, are geographically organized. The rest of the ones you see on the screen are specialized in one way or the other. I will point you in some changes we're introducing as we speak. We'll be fully implement the beginning of the year is the creation of Critical Infrastructure unit, who will be the previous Government or Aerospace Defense unit, plus the energy. So we have all the Pentagon, federal government business, the PGS, being the government services, and the energy, more the nuclear division. I think with this move, we are creating a stronger proxy company.
As you know, when you are a foreign-owned company required to have a proxy to provide this kind of services, and that unit will be around $650 million. So we have a nice size to be a national player and try to pursue some new opportunities in areas like a DOE was not that easy for us to provide with the previous organization. So we see a big upside there. That's the only big change, and maybe we didn't present to you, we presented today, and will be fully implemented at the beginning of the year. You see mobile for the first time. Many of you were asking us about mobile, especially you compare with European standard. Mobile is a business we didn't exist historically in the U.S..
We had a kind of patrol kind of services, but not the mobile that you see, especially in the Nordic. But for the last, I would say, seven years, we've really been investing in that little by little, and now we cover 60% of the main markets in the North America geography. So we are ready to support our strategy. You will see in a minute when I introduce our approach, our version of this new security solution in the U.S. we call Integrated Guarding. We need a strong mobile operation. As for us, it's key, and it's what reason I'm pointing here for the first time it's on the map, and, and it's for real.
It's still not a large operation, but we are with capacity to provide these services in 60, and we expect we'll grow exponentially in the next few years. And of course, we have technology, who is our baby now, the one we are creating and expanding. How we organize? I think many of you have seen this slide I used many times, and I really believe in the thoughts behind that. We're a big company, and we share a common platform. You see at the bottom, we share the IT, all the financial reporting, knowledge center. We and Antonio start to talk in his presentation about cross-selling and bundling, right? You see in the gray part there. So, but at the same time, we have this solid and common platform.
We have a lot to specialize, and we try to specialize the maximum we can. I think we are more efficient, we create more value, and we make more money, but through the efficiency we can put in the production if we specialize. And you see all the areas, I said, the blue are specialized. All this vertical represent a different segment, and you... I don't have to read all of them. That's our approach. But you segment this, like Antonio referred, you don't, you cannot create silos like maybe we did in the past with technology. Technology is on the left side there, but at the bottom, you say cross-selling and bundling. That's key.
That's the key function for us, how we can combine, specialize as you, the people who really know that area of the business, but at the same time, you have to take advantage of the 640 branch manager you saw before, right? You have to take advantage and use this as a channel or to access to your clients. That's, that is the idea, so specialize and leverage. How are we doing in this journey? This is a similar graph, almost the same graph with no numbers I've used before. And now we, 40% of our business is specialized right now, is in the step number two, and 16% of our business is in Guarding Solutions. What is Guarding Solution?
To then try to clarify that, was the something I present to you with together with Bill Barthelemy in London in 2011, when we show you the portal at that time, and we show you some of the tools of the reporting, the KPIs, the electronic things, try to modernize our officers. For the pen and papers to use some more according tools with the times we are living, including the portal. At that time, I think we said, I said to you, we have 600 clients connected, now we have more than 2000. And, and 16% is the number you see, is the average for the total division. But in reality, that tool is not used in all the units.
It's very heavily used in the five guarding regions and in Canada and Mexico, and in for that part of the company, it represent 20%-25%. You will see again, when we use, and I'm sure you will track our numbers in the future, we always, depends how we talk and we present the numbers. Some numbers I will talk to you, I will try to clarify to you, will apply for these five guarding regions and not for the total, North American division. We include Pinkerton C&I, for example, who is, as you know, a total different business and a growing, and it's a growing business as well. Okay? So we are there. We 60%, we think we're moving a good speed. For us, the Guarding Solution is the way we do business.
I think in a few years, this five guarding regions, I can see almost 80%-90% of the clients using these tools. Will be the general rule, not exception. We are moving that direction. During this process for the last few years, we were gaining strength, gaining confidence, not just at the management level, at the branch level. People had to try to use, not just to sell hours, officers by the pound, we said in our internal language. Doing that, I think we start to be ready for the next step, and the next step is the way this graphic represent the Integrated Guarding for us. Is the new version of guarding, who combine different things, and I will try to explain how we approach that introduction of technology.
For us, guarding, as was understood in the past, is disappearing, is changing. You cannot be a complete guarding company, you only are able to provide on-site guards. Is the way we survive for maybe 150 years, but that's not the way we see the future. To be a complete guarding company, you need to have these three components: who are the on-site guards, of course. The remote guarding, some of the job we perform today on site can be performed taking advantage of technology remotely, that's the second component. And the third, the mobile, is the guards as you need. That's the response force, an app, as well as a proactive approach for the guarding. You need to have these three components to be a complete guarding operation.
For us in the U.S. and in North America, that's a big change. We were not used historically to have a strong mobile operation. Our manager were not used to have that, and of course, we didn't have this technology to allow the remote services. So the change is internal change, to be sure, like we can, all our branch might, are able to provide these kind of services to all their clients. That's the journey we are in, involved right now. How this will apply? The second graph you see, we call low activity post. Of course, you have a very busy lobby. You need one officer, maybe not, maybe you need two or three or four, right? But in the night, in some facilities, in some officers or storage places, you don't need even an officer there.
You can take control and guarantee the security of that premises from the distance remotely and verify with your mobile. That graphic represent with the activity you see up and down, shift, shift by shift, activity is different. We need to figure out which combination of these three services is the more- is the optimal for every single post and shift. Is different, the first, the second, and the third. That's the graphic. That's the way. This PowerPoint is used internally to our people in different ways. This tool, we try to educate our people to say, "Now, your job is to identify which level of service need in any of these, and try to keep it simple." Keep it simple, especially for the technology point of view. We cannot forget we are still a guarding company.
We have engineers in the technical division, but we don't need to reconvert everybody and now becoming all of us engineers. We are still a guarding company, and then we need to do in a simple way, and we do creating simple packages and try to simplify the maximum we can this technology to be able to be used for the managers we have in place. And give the choices to the client, clear alternatives. Not all the clients will be happy with this kind of combination. Some will still require or will like to have an officer on site 24/7, but some will like to change and enjoy some economical benefit there. The components, and I will try to keep this a little bit brief. We focus on the service side, as you... I was explaining before.
We need connectivity, of course, for some services to allow those to be possible to operate. We need to connect our control rooms with these clients' systems, and we need connectivity. But for the system point of view, for the technology, for the cameras, for the access control, we have a very flexible approach. In some cases, the client have almost, have even all the possible system needed to the service we try to provide. This means we don't need to add anything. The only thing need to connect with the, we call the black box, and the engineers, Antonio, his team define what is inside. My guarding people, they don't have to know all the secrets of the black box, but they need to know the price, and they need to know this will work.
You connect the client system with the black box, and then boom! Bingo. You have the connection with your remote service center. That could be one option. This means the investment and the technology required at the end, in the client side, could be nothing, just the black box and the connectivity, or can be needed to add one or two cameras. In that case, in many ways for us, it will be better to recommend the client to go to the actual integrator, and they can take care. They know the system, they know how things work, the cables, all of these things, and be more efficient. But you know, in the case the client needs to refresh something to a new system or add one of our packages. In this case, we will go with all the technology, and we will be part of the pricing.
So when I try to say to you, we were not obsessed to just sell cameras or sell system. Our obsession is to sell our service, our guarding service, who is this new way to understand guarding with these three components. And we need cars for the mobile, and we need, in some cases, cameras. But the cameras doesn't need to be all the time on us, can be, can be there already, and be in the balance sheet of the client or can be taking for their own integrator. Okay, we have, one reason I put the optional in bracket underneath. This is a, it's an option, where it's not optional for us, where we are really strong in our belief that we can be the best player in the market to provide the services are in the left side of this graph.
That's our core. It's how we were doing this business and the areas we think we are the best in the market. I have some examples. This is a theoretical and conceptual example, and later, I have some real ones to illustrate how this can work. I need to check the time, right? Okay. I'm okay. I'm normally very bad. I'm from Spain still, even I know American, and always very. And the people out here have need to be crazy with me. I move too much, I talk too fast, and never respect the time. But third, and say you cannot change your life, but, I will try to behave the maximum I can. Okay. Theoretical example. This theoretical example introduce something for you is the ACA cost, something maybe you are, maybe you're interested to know how much is that, right?
Just to, for the example, is at 24/7, an average revenue for us is $150,000 for that kind of services. And normally, we provide today, in general speaking, with man-hours, 168 hours per week on on-site guarding, right? On the right side, you have the alternative to Integrated Guarding. The coverage is still 24/7. The cost is $8,000 less, $142,000, $8,000 savings. And the coverage is not just guards on site. You get 112 physical hours on site. Of the 56 are the remote guarding and the mobile combination. And in the right example, you have an ACA compliant plan. How this work? We eliminate the first shift in this example, $50,000, right?
150, three times, $50,000 saving, and this is how we can allocate that money. $20,000 allow us to introduce a very rich package. I don't need to disclose all the detail, but I promise you, it's a very rich package for the remote services and for the mobile. Can take care of the $8,000 dollar will be for the remaining officers in the first, first and the second shift, right? Will be the remaining $100,000 for they, around 8%, and we improve $6,000 dollar the profit and will give some savings to the client, $8,000. This will be a not impact of the ACA, and everybody will enjoy. We will be a little more money and no more cost for the client. That's a theoretical case, but I think can happen quite often in the future.
But before go there, Alf is talking about a plan we put in place, and it's established all the way, in my case, to the branch level. We have we see this percentage, Alf mentioned in his opening, coming in two different ways. We see it coming through new sales. We estimate, like, one-third of our new sales will be Integrated Guarding, and we estimate this new sale will represent 1/3 of this final goal we have at the end of 2015. The other 2/3, we say the bigger portion of that number will come for through conversions. So for us to be successful, yes, we need new sales, but we really need conversions.
We need to have a plan, and I think we have a good plan, branch by branch, about what's, which clients we think make sense for us to offer these kind of services. We have this branch by branch, this step-by-step process you see here, and in average, we identified, like, 40% of the portfolio in the five guarding regions are suitable to be used or to be implemented, these kind of services. So 40% of our portfolio in this part of the company, the five guarding region, can be a real target. And then why we know that? We are serving this client for many years. We do operational analysis every year. We know the client. We know what is needed there. But we cannot think that we convert everything.
We use a success rate of 50%, so this 40, half of them, we make 20% success rate. So with 20% of our portfolio in the five guarding region, we think can be converted. That's our goal, right now, and that's how the numbers are moving. And we will track this weekly. We have a weekly report, will be reported, and we will track in which step of the process are each client. But for us to reach the goal, and as a goal, we really believe, and we really think we need it, we have to have a very strong and very clear tracking system and keep pushing and keep supporting all the way, and supporting the field as well, especially in the redesign step here.
This is a real example, and this is a real case, and all these cases are pre-ACA, so you will not see the pre ACA cost. This means here we don't try to mitigate ACA cost. It's just some clients decide to have a better service, or we think we can, we, and we should offer something different. Except the ACA cost is not here. We don't have that many cases. As you know, ACA will be fully implemented in 2015. And doesn't represent exactly how we see the future. Just five cases try to show you different, how this work in a small client like this one. This is a very small client, 46 hours per week, with the scheduling changing every week.
This is really a pain in the neck for the scheduler to provide, and the happy one, the client was not very happy, and we were not very happy... And, our branch manager, we just touched the limit, was it really eliminate the hours per week. So the physical hours on site disappear, and they were replaced with sign cameras, remote guarding services, and mobile guarding services. So we don't have physically any hours our officer on site. So we provide services remotely and with the mobile, in and out, in a proactive way, when our response way, something happen. It's a stream case to illustrate to you this can work, but don't put in the model in your Excel, like, now all the guard will disappear, right? I don't try to say that. I try to say, in some cases, yes, we can do it.
In some cases, with this very cold, cool off, it's very difficult to, cold start. I confuse the expression. Cold start, it's very difficult to have the schedulers and to put this officer in place, that makes sense. Stream case, to illustrate, this work in a smaller scale. The next case is a large one. It's a very heavy system, 41 IP cameras. I don't believe that in all the cases we will have these 41 AI IP cameras, with a lot of CapEx, a lot of investment for us. We will do it, and my presentation before was very light in the third component, in the system side. I really believe where we will not need a lot of system all the time.
That's my belief, and we will see in two years, if I'm invited to be here again, and we do this C apital Markets Day, how the reality looks like. By my prediction right now, I don't see this will be the general rule, but could be possible, and in some cases, make sense. You see 112 hours eliminated and replaced just for technology. But, in all the cases, the previous one was more dollars at the bottom, I'm sure you didn't miss that, and a bigger percentage, a higher percentage. Here, the same. You reduce the revenue, you reduce the hour, but you make more dollars and better margin in percentage here as well. Another case, this is for the central part of Florida, it's a gated community. 56 hours were eliminated, replaced with technology. In this case, was in the night, the third shift.
Of course, again, savings for the client, saving and more margin for us in dollars and in percentage. ACA, again, we changed the picture. ACA, this kind of approach, and it's our belief, we help the client to mitigate the cost. Maybe the same it will be not like here, you see $20,000 or $22,000. The $8,000 I spent before can be a absorb the ACA cost and still have some savings. Okay? The next and the last case I have here, the previous one was conversions. This is a new sale. This is from a competitor. So that's a dramatic change. We had two offices around the clock. We eliminate one, and you have 168 and a system in a healthcare product factory in Georgia.
Another example, I try to present to you different cases, so I don't using your model like a, this is the standard rule. And I try to cover the small, the middle, and the large, with almost no technology, with a lot of technology, and with a more middle-sized technology. Okay? We really think the technology in our approaches will be around 10% of the total revenue. That's the number we have in mind as, as a goal, but of course, it's hard to predict. That's how we see in the U.S. We think this Integrated Guarding approach, and I repeat several times in my presentation, this case, it doesn't have the ACA cost. I think the Integrated Guarding will help, without a doubt, to deal with that, with this you have on the screen, the ACA.
ACA is a cost increase for the industry. You see the numbers are currently or actually, we got 70% of our officers doesn't have a compliant healthcare plan. This means only 30% have it. And we think we represent the industry. I think our industry will follow pretty much our numbers. So that's a lot of people we have to deal with this, and we think we have a secret or a nice weapon to use in our advantage. We simplify, it's at the bottom of the slide, at the tagline. We simplify the maximum we could, all this complex law. The politician didn't do a good job.
From that point of view, they create something very difficult to understand, but we spend a lot of effort, money, and time simplifying for our managers to have something they can use in the daily work with the clients, and we did that, I think, a very good work in that area, simplifying for them what is really important to understand, to deal with ACA. We create certainty, and we think this alternative plan we have in mind will help to manage this cost or this hassle to deal with this. For the timing point of view, today, it's 7:30, we think we can be 50/50 before July next year. So we are already converting clients. Some they already have healthcare plan today. This means, the jump is not that much. It's a little bit jump.
It's easier to convert. You combine this and another client, they are willing to move a little bit ahead. We think we can just have half of the company covered before July, and, of course, will be 100% at the end of the journey. For the cost impact point of view, for the clients, when they have our officer doesn't have any healthcare, they have nothing, so the premium will represent around 6%. But we are hoping, and we think, will be fair to try to have a wage compensation for the officer who can mitigate the cost impact on them on another 4%. So you combine both, could be 8%-10%, the total price increase needed to cover both the premium and the wage compensation for the officers.
That would be, you can say, in average, the worst case scenario, for these, officers who doesn't have anything. The percentage of population who already has signed healthcare will be only the differential between the cost of the actual plans and the new plans. So 6% would be just the plan for officer, we don't have any healthcare just for the premium, but we hope to stop turnover and to suffer a little bit, to reduce the suffer and all the pain for the, for the office or the, for the wage point of view, we think we need to ask, and would be fair to reduce around $0.50 per hour, will be move the, the total price increase needed to eight-10. That's, that's the number. Okay, I think we have, the right strategy.
Everything we, we had to deal is not, I don't think one size fit all, so we cannot approach the market and say, "Okay, the ACA cost is 6%, give me the price increase." We need to have alternative for that. Some client would like to just completely eliminate the impact in their budget. Some will be just, okay, mitigating personally that, or some will take it. So our approach is very flexible for that point of view, and, Integrated Guarding will help us to allow us to do all these different versions or the, security we can provide to them. We think, Integrated Guarding will help us to deal with ACA, and will help us to win and expand some market share. Market share, who can be taken not just from the competitors.
As you saw already, and you are aware of that, we have 400,000, 440,000 guards still in the in-house market. We talk about that several times, and so far, we didn't open that. We didn't untap that, right? With only 2,000 move in these five years on the screen before, I'm sure you, you saw that. I think Integrated Guarding can, can help us to be more attractive for this part of the market, and can give us extra growth in that area. So we have the GDP growth and protecting our market share.
If we do a better job, like the rest in our industry, dealing with ACA, dealing with the day-to-day challenge, with the Integrated Guarding, we can go a little bit harder than that, higher than that, and I think the house is opportunity, and I hope finally, we can untap that. Again, we need to prove it, and we need to see how successful, but I think we have an extra weapon we didn't have in the past. Okay, thank you for your attention, and I think now we change for question and answers.
Yes, we will.
I'm taking your job now with this.
No, no, no, no, no. Feel free. Now, please, Alf, and Antonio, can you please enter the stage? And which will come soon, to the next break, I hope.
Thank you. You know very well our European organization. We are the Pan-European player. We are the market leader in Europe with a strong position, and we also see an interesting trend: that more and more European players are looking for Pan-European supplier, players or suppliers, and at least partially Pan-European suppliers. That has not been the case in the past, but we see more and more of that, and we have an organization separately working only with that type of contracts. This has been primarily historically a U.S. matter, but in Europe, we see more and more of that. The pattern, the growth situation in Europe is very similar to what I showed you before.
Here, you see this includes Spain and Portugal, so it's a complete European situation. And here you see the GDP, on the green one, for the different countries in the European Union, the average year, the GDP development. You see that the outsource market was actually growing faster than GDP in previous years, but in the last few years, it's actually been the other way around, and very much hampered, both from our organic point of view, which is the gray line there, but also in the previous period, because of a very tricky development in Spain and Portugal that drags those numbers down. I'm gonna speak a few words about Sweden, because here things are happening, but before that, I already give you all this, how this video will be.
You already are. Give it verbally, but now you will see the reality. So I'll show you a short video of how, what I mean by video analytics and Remote Video Solutions coming from a Swedish organization.
This is Securitas. You are being observed. Leave the premises immediately. Security officers and the police are on their way.
... Heard a criminal ahead of the break-in, 90% of the cases, they will actually go away. Unfortunately, 10%, they will continue, but it still makes a big difference... Anyhow, this is the Swedish situation. These are the real facts from the Swedish market. And as you can see, the general consensus is that there will be a GDP growth. It varies from day to day, depending on which paper you read, but somewhere in the range of 2.5% positive GDP next year in Sweden. The security market, though, has been in 2011, 2012, pretty much in line with the GDP, but now it's less than GDP. And why is that? What's going on? What's happening? But well, what's happening is that the paradigm shift is happening now in Sweden.
We are in the midst of that, and it's going fast. And it's really exciting, but at the same time, you need to be really on top of that and have an organization ready to manage that. So here, I will say that Sweden is a front runner in that development and what is going on, what we could see and expect to happen in many other countries. There are other countries which have a similar situation, mainly the Nordics, but Sweden, this is going on right now. And within the security market, the man guarding is dropping. There is less and less guards. There will be less and less guards in Sweden.
But those guards will do different tasks in the future, and they will be more sophisticated in how they perform their tasks, but the number of guards will be less, while the security solution and technology part will grow. And if we look on what we think is going to happen to us, we have a development that was reasonable in 2012, compared to the market growth, but we think that we will grow faster, not this year, but next year. We expect to take market share in Sweden because we are very well equipped with the things that we are explaining here, and I will give you some proof of that in a second. So we will actually take market share next year in Sweden. That is our expectation.
And, in a way, we actually do it already this year because there are some contracts that we have lost this year, which is in our number, which were more parking-related contracts here in Stockholm. We did some subway work for SL here in Stockholm, and those contracts we lost. So if I take those away, we're actually taking market share already this year. Out of this, in the Swedish organization, 60% of our new sales here to date, September, comes from Security Solutions. 60%. One out of three new video, Remote Video Solutions, the ones I showed you on the video, one out of three, we win from competition. So we are taking market share.
And we expect that we, in Sweden, will be able to increase our from where we are in the end of September, our target for 6% and 18% and all that, that number will be 22%-30% or so. We keep chasing that. We'd like to do even more than that. And that is the expectation for the Swedish from the Swedish side. So in our total portfolio, that will be the conversion. So things are happening here right now, and it's exciting to follow, and we can learn a lot from that. And we are the good news, it's happening in Sweden, because here we are really well equipped to manage that situation. I can give you hundreds of examples, but I don't think you will appreciate that, so I'll give you two.
And here are two from the customers in Sweden. Without going into any details, we have changed the content to a more sophisticated solution. And when we have done that, we have provided the customer with a better security for the same money or for less money, and at the same time, we have been able to improve our margin on that contract and share the piece of that savings, I'll say. We took a piece, and we shared a piece with the client. And there are many of those. This is another one on the same topic, where we have been able to install solutions, and there are hundreds of those. We are selling very well in Sweden right now, and the speed is going up every week.
We sell quite a number of solutions on a weekly basis, and, we follow it on a weekly basis, and we have a lot of interest from clients about, especially about the video analytics solutions in one form or the other. So this is really exciting, and I think it will be a very nice journey also in the years to come, where we will be able, and we are already taking market share. And the ones we take market share from in Sweden are the mid-sized companies. They are suffering from this journey. I will now move on. We will now move on. It doesn't work.
I have to point? Okay. And I would like to introduce Erik- Jan Jansen. We are in Europe. We have quite a lot of countries to manage, and we have then decided to split the work between the two of us, so we work kind of in parallel. In Europe, where 60% of the turnover is reporting to Erik and 40% to me. So we work together sometimes and in parallel other times. And so Erik is the COO, but in reality, we have split the work, so we are kind of two managing directors of a European organization. So he will give you a little bit of insight how we run the process in Europe. Erik?
Thank you, Alf. Yes, I would, in the next 15 minutes, which is not a long time, will try to update you on where we are with regards to the implementation of the technology strategy and especially how we are progressing. And let me start by saying that it has not been an easy task. And maybe it's a bit underexposed during these type of meetings. But in order to get where we are, we have to do a lot of work, and that work has been performed. Like Alf has said, we are ready now to execute and to perform.
But I'd just like to take you back in the timeline and show you what major projects we have actually implemented, which all have to do with the organization structure, processes, in order to be able to execute and to sell. And I'm extremely proud and happy with where we are today. I think our local management teams in the countries have done a tremendous job. It's, I would say, a hell of a job to do this, to transform a company from where we were. Almost zero, except Sweden, I would say, capability when it comes to providing solutions to where we are today. I just want to highlight that. So if I can take you back, I'll just show you the timeline. If you can take you back to Q4, 2012.
You all know our company very well. You know that we did a restructuring process in the last quarter, which was, of course, to create cost synergies, which we could then, for a large part, reinvest in our structure, which we succeeded to do. But a side effect from that, from that project, was that we were able to tear down what I would call Chinese walls. We were organized in divisions. Antonio also mentioned that in his presentation. We were not effective, and if you want to sell solutions that come from different parts of the organization, such as mobile monitoring, guarding, and technology, you need to work together as one. So that was a very important side effect. When we took away the divisions, working from one division, we became much more effective, in our approach to the market.
Now, what were the main projects that we completed during the year? Well, the first one was to organize for this new journey. We had to create a structure, which we refer to as the CTO structure. We started hiring Antonio, then we went to the next level, the divisional level. We created a CTO organization, which is a support function working very closely with the countries. We then implemented a CTO structure in all of our countries. All of our countries in Europe are now well-equipped. They have this structure in place, and there's a very close relationship between Antonio and Aimé Lyagre, who is our CTO in Europe, and the CTOs in the countries. And again, you have to remember, we came from almost zero to having a new technology structure in place.
There's four areas that I would like to highlight that are the responsibility of the CTO structure. The first one being the production, which is basically the traditional alarm monitoring, which we have had for a long time, which was organized in Alert. But we have added to that, well, basically, the type of service that we've shown you in the video, which is Remote Video Solutions, which is also handled from the monitoring center, but it's a completely different way of producing a service. The second box you see here in the chart is about business development, and I would say product management. So everything that has to do with designing solutions, pre-sales of those solutions, but also implementing solutions once they have been sold. You have to put all the wires together in order to make it work.
The third box is all about what we call production tools and customer tools, and the systems you need in order to support those. Production tools are like customer portal—no, those are customer tools. Production tools are the tools that our guards use when they deliver the service to the customer. Customer portal, for instance, is a customer tool that we use to enhance the service delivery to the customer. And then the final box is more coordination and support function when it comes to technology acquisitions. We do those small bolt-on acquisitions in order to gain more knowledge if we see opportunities. And then from there, we will support and coordinate that.
So this was a huge task, to first of all, understand what is needed in this structure, and then implement the structure and hire the right people and make those people understand what they are responsible for. The second, very important, part in this whole journey was to create a language. If you want to transform a company with thousands of managers and people who are going to be responsible to implement and execute, you need to create a common language. And Santiago, you mentioned it in your presentation, we want to keep things simple. If you don't keep it simple, especially in technology, it becomes very complex, and you will not reach your targets and goals. So this is what we created. It's basically what we call a technology process.
It will take you from the cradle to the grave, from the start to the finish, and it tells you basically in six steps what you need to do in order to have a successful technology solution implementation. Starting with research and development, looking at all the components that you need, which is a good example in Malmö, where we did the RVS research and development. The next step is to design a solution for the customer. You need to have people who are knowledgeable and able to put all those components together and design a solution which is catering to the specific needs of these customers. Once you have the solution designed, you can sell it. So our sales force need to be able to then actually sell it to the customers.
Once it's sold, it, again, it needs to be implemented, and there we again need technology experts who are able to connect it together before we can start to produce it in, for instance, the monitoring centers, which is the production phase. And then finally, there will be some feedback. There's relationship management. You can also think about maintenance that will take place in that part. So in one slide, I've tried to tell you what we've done over the year. Mainly putting an organization in place and putting a process in place which everybody in the organization understands. And yeah, the summary here is that we are ready. We've used most of 2013 to get this in place, which was a huge task. I just want to repeat that.
Maybe that's also, well, it's not maybe, it's for certain that that is the reason why you have seen 1.5% increase. But you can imagine now we are ready, and we will focus on those two steps in the process, on sales, solution design, and sales, we will really start to see things take off. That in a nutshell. Then we always try to help our people in the field to give them weapons to be successful. When it comes to selling, we have created, I would call a state-of-the-art tool, which is basically an application that runs on a tablet, on an iPad, in this case, we chose to use Apple. So we have equipped more than 500 salespeople out in the field with this tool that supports them in the sales process.
It's state-of-the-art. It's also unique. Nobody else has this. You cannot buy it because we own it, we own it. And it was designed by people who understand the business. This will, again, the word is used quite often, but this will be a game changer in the sales process and the way we execute our sales. Now, what are the benefits then of this tool? First of all, I think it's important that the tool holds all our components and all our solutions, which are being managed from the back office. So all those salespeople have the same information available at the touch of a button. That is a big change to where we come from.
Everybody was taking their bag and went to a customer, and depending on what they had in their head, was the sales story. So we enhance the sales call, so to say. So it's a much better customer experience. The second benefit is that we take the salespeople almost virtually by the hand and take them through a sales process. This tool really drives the process. You have to follow the process step by step in order to complete the sales visit. So we are ensured that we have a uniform, consistent sales process all over Europe, I would say, and all over the countries where we use this tool, which is, again, a very big change to how we used to perform our sales sales calls.
And it starts with doing risk analysis and operational analysis, and it will take you all the way through these available services to the solution offering, and finally, even a proposal that can be sent in the during the sales call by press of a button by email to the customer. So it's really huge. The third benefit I would like to mention here is the benefit of having all the marketing collateral, again, available in this tablet. Remember, everything is being entered in the back office, and by logging into this system, you have all that information. And then you can think of videos like we've just shown. Imagine a salesperson going to a customer, talking about RVS. The customer has no clue what RVS means. You show the video on the tablet.
You can even hook it up to a beamer and you have a really, really good experience. But we have all our product brochures, we have our PowerPoint presentations, product sheets, anything you can think of. It also generates an overview of the risk analysis that has been performed on site. So it really is a huge improvement to where we were. And again, nobody else has this. So I think country managers like Michel, they were fighting about who could be the first one to implement this, and we've never seen that before, to be honest, when division or group develops something. So that's good news. We have 9 countries who are working with the tool now. Like I said, 500+ salespeople. All the other countries are lined up.
We will complete a few in the remainder of the year, and the rest will follow in the first half of 2014. So that's one example of how we support our sales force. Then I make a next step, which is a big big part again. You've seen the top two slides, I think, especially the first one, which is our climbing the value chain picture, again, conceptualized, where we want to improve our margins by by climbing up the stairs step by step. The one on the right is what we call our life cycle, which we use internally, and that determines where our customer sits at any point of time within the contract period.
So you can imagine a customer has a start, startup phase, and a customer has a phase where we call the danger zone, where they start to think about maybe going to the competition because they might not be as happy with the solution they have. So what we want to achieve is that our branch managers, our salespeople, start executing in the whole transformation process. So what it basically means, it's that there are no shortcuts. You have to take every customer, map these customers on the ladder, map them on the life cycle, prioritize, and decide where are they today, and where do I want to bring them tomorrow in order to improve the margin? And then the basic result is that you have to create an action plan, customer by customer.
Like I've already said, we have made this part of our business plan cycle, our budget process. So every branch manager, and we have more than 900 of them, all our area managers, they have created such a transformation action list, showing what the responsible people will do between now and next year in order to move these customers up the ladder. I will show you an actual example from Germany, which I discussed recently with the Germans, and show you how they have used this theoretical conceptual approach in real life then. It's a lot of numbers and a lot of text, but what it basically says is, it lists all the customers, it lists the responsible managers. It also lists the current volumes per contract and the operating margin per contract.
It then shows you in which phase the customer sits today and in which phase the customer needs to be next year. So for instance, a customer can be a Specialized Guarding Solution, where we want to take the customer to a Security Solution, which is the last step. And then you see some actions that need to be taken. If you take the real, the real action list, they are, of course, much more elaborate. They show much more actions, but that didn't fit on this slide. And then finally, in the last two columns, you see the new volume, and you see the new operating margin, the targeted operating margin. And we've been helpful to increase the font a bit, so it shows really well. And it shows that it's a very significant increase.
At least the target increase is significant to move, for instance, if you take the top one from 5% to 9%, and that will help the average growth of the margins. So this is how we will work. It's no rocket science. There's no secrecy or hiding. This is what we do. And what is also nice, because we use this system all over, in this case, Europe, is that we, as senior managers, we can follow up. We country managers will discuss it with their area managers, area managers will discuss it with their branch managers, I will discuss it with the country presidents. And you can follow every month or every quarter, what is the development? Are we reaching our targets? So again, this will be a big step forward in achieving our results.
My last slide, just to conclude, shows you, even though we don't sell cameras, just as cameras, how many cameras we have sold over the year. And it should be said that these cameras are always part of a service solution. There's always service connected to it. So in this case, it's most of it is Remote Video Solutions. What you see is a steady incline. And if you then just go back a few steps where I explained that we have been building the capacity and the capability, this should really take off next year. So in a nutshell, we have the structure in place, we have the processes in place, we've given our people weapons, we have tools to follow up on the progress. Yeah, we are ready for the future.
So I'm very confident, and I hope you are as well. So having said that, I would like to introduce our next speaker, my colleague, Michel Mathieu from France. I'm sure he's eager to share what he has been doing in France. So-
Thank you.
Thank you.
Thank you, Erik-Jan. So I'm Michel Mathieu, and as you have immediately guessed, with my accent, I'm French. I joined Securitas in 1997. After different responsibilities, operational or sales responsibilities, I became the country president in 2004. So now it's a long time. I hope it's not means that I am a dinosaur, not yet. But it means I have now a long experience of my country, and I have a long experience of my business in this country. This afternoon, I have the responsibility to organize you a little visit in the daily life in a country like France. But the example of France could be the same in some other country.
I have also the challenge to try to do that in English, and you know that, for a French, it's not the main quality, to speak English. And, please, mainly for English people who are not native, excuse me in advance if I have some approximation in my English. So welcome, welcome to Paris, and welcome to France. I know many of you have a lot of question about the general economy in France. So which way to explain in the more neutral way what we think about this economy? I decided to use the last issue from Standard & Poor's, issued earlier in November. And in a few, you have all the words of the overview of Standard & Poor's on screen.
In a few words, in a résumé, Standard & Poor's is very skeptical about the capacity of our government to dynamize our economy. I'm not sure it's not only a question of politics, I think it's also a question of leadership. We need, we will need a leader in France, and today we haven't. But it's not the main question for a manager like me, because if I expect some help from somebody like the government, I think I could wait for a lot of time. It's our own responsibility to find solution.
I know today, in France, a lot of companies, small or large, industrial or services company, which now, for two, three years, after the crisis cycle from 2009 to 2011, who have, who have found a lot of new solution, to move forward, to, to innovate, to change the organization, to adapt the strategy. And today, I think in France, with the Securitas model, we are part of this type of, of company. Just a few words, I think many of, a large part of you know the story of Securitas. The first footprint in Securitas, for Securitas in France, took place in 1992, with the first acquisition. In my own experience, I remember a very important date, in this country.
It was the first of June, 2000. It was the day where we launched the Securitas brand in France, after a huge acquisition in 1998. We have had a very strong and very positive cycle from 2000 to 2008, where we have built a very strong platform in terms of operational basis, and I will come back to that, in terms of IT, IT support, tools to measure, tools to support the guards, and so on. After, of course, we faced, we have faced the crisis, mainly in 2010, on 2011, with a very difficult year in 2011, and I'll come back also to that. Now, we have opened for two years a new cycle.
It's a cycle where we are now—we have reopened the company to the external to the market, after the cycle where we have defended mainly the portfolio on the margin. It's important, perhaps, for you to have a short overview of the market. Yes, today, Securitas is the leader in France. It's a strong leader, and as you can see, the number two is less than a third than Securitas in term of size. It's a bit strange. It's a very disorganized market. It's more than 4,000 companies on about 150,000 guards. So it's a huge market where the German market is the two main market in Europe.
But it's a disorganized market, and it's an immature market, and all the companies except Securitas as a very low, low-cost, low-price strategy and a volume strategy. And we are quite alone to focus on quality level, on margin, quality level for our customers, on margin. Perhaps you remember the story of G4S in our country. G4S has left the French market in 2008, after five years of losses. And some other well-known brand has left the French market, like ISS in security.
Behind the story of G4S, after the different event, like the takeover by NEO in 2011, the bankruptcy of NEO, I think it's a very strong sign of the immaturity of this market. But it's our market, and we have to find our way in this market. After the crisis on this specific cycle, we have a new structure now to face in this market, because in the top seven, the top ten, we have now, and it's quite new, it was not the case five years ago, we have the three main facilities manager cleaning companies, multi-service, it depends what you want.
So the three main French company in this type of business who have entering the market. So it has changed the image of the market, and yet for us, it's a challenge, but it's also a chance, a chance. Because we are alone to explain, to provide, and to push a strategy with the will to produce the best level of security and the best level of safety, and the best level of quality. We are alone. We are alone for a while now in France, and we know how to play with that, I think.
For the coming years, after years of decreasing between 3%-5% of decreasing inside the market, now for the coming years, I hope more, I expect more, a flat market. Yes, I talk about a platform. I talk about strong basics. If we want to deploy our strategy, mainly in technology, first of all, when we are in the real life, when we are in the daily business, I think it's really necessary to have a very strong, strong, strong platform. And what we have learned, mainly in 2011, where we have had a very negative balance between price increase and wage increase, that the price is very, is really a key for the future.
We have developed a specific strategy at the level of our country around the pricing power. The pricing power is, first, a way to explain internally to our people, and it's about 150 branches, that if we don't push the price, if we don't defend the price, if we don't cover the cost year after year on, in our country, it's a national sport to increase the social cost, as you know, on taxes, charges, and so on. So each year we have between 3%-5% of social cost increase. And some years it's up than the margin, so it's really a question of life or death. So in 2011, we faced with this, a real difficulty, and the sanction was immediate. The result of Securitas France decreased by 40%.
So we have worked a lot, and we have developed this pricing power strategy, a way to push internally a lot of process, a lot of methods, a lot of reflex for people, a lot of tools. And also, we... And I think now we have succeeded about that. We have put some chain inside the company, inside the process, inside the mind of people, that price is key. It's also a way to explain to the market that when we produce some quality, when we produce added value, when we want to continue to invest for their own needs, we need to have serenity, and we need to have a value in our price. It was concretely a specific plan in 2012, named Emergency, and it was really a success.
A first success in this pricing power, because in 2012, the cost has increased about 2.8%, and we have increased the price more than 4%. It was a real success. We pushed a lot, and it was a strategy like pay or leave. So it was a very tough strategy, but in a country like France, with the economic we have, it's necessary to sometimes to push a lot. We have had some collateral damage of from the strategy in terms of volume. We lost volume. So we have adapted for 2013, the same type of plan, process, industrialized tools, strong management. And the plan this year was named Energy 2013.
More, it was a more subtle approach with less damages, and we reached the goal we have defined just to cover the cost and manage with more, with a better tuning the portfolio. It's really part of the platform. Second point, around this platform, of course, as in a lot of countries in Securitas, we have had a saving plan last year. But more than a saving plan, it was a double saving plan, because we use this saving plan to, of course, to save money, but also to change the company and to change the organization. It was another plan named Proximity, and the aim of Proximity was to be closer to the customer and closer to the guards.
And we use the opportunity of savings to create more savings than the group expected, to reinvest in our own organization with new people, with opening more than 10 branches. And we are in the middle of this, of this plan. It's a two-year plan for 2013 and 2014, and we are exactly in the middle. And it creates, with some of the detail in the plan, I have no time to explain all in detail, but we, we have created, in for Securitas France, a more flexible organization. We have split some businesses. And so today we have more like 10 little ships instead of one big ship petroleum. Right...
So, I wanted to emphasize these two points, because I think in the economy we have today, it's very important to have a strong platform. Because whatever the strategy we have for tomorrow, if I miss the price increase campaign for 2014, I have no chance to deploy the technology strategy. So now the future. Of course, I'll come back to three points. Of course, always pricing, pricing power. And, second point, the new road to growth, and of course, where we are in the remote video solution strategy. Just to illustrate what is a tool for the price increase, it's just an example. It come from a part of the portfolio, a part of the core business.
In the core business, we suffer a lot, of course. The core business of Securitas in France for 30 years, it's an industrial plant on tertiary premises. So we suffer a lot, of course, in the part of the industry in our portfolio. So it's an example of some tools we provide to our branch managers to create more efficiency, to save time also, and to give, and I think it's a most important point, to give them very clear instruction. A French always want to do something new. You always want to innovate, but it's nice, but we need to manage this innovating mindset.
So we have learned a lot with Securitas for years for that, and we have learned a lot also from U.S. methods on process. So in this tool, we sort out the size of the customer from a little contract day on week to a large contract 24 hours on more than 24, 24 hours. And we sort also the portfolio with the level of margin. And we create, like this, some type of family, and we give the instruction to the branch managers: if you are in this type of family, you have to, for example, whatever the size of the contracts you have, if you don't produce any margin with the contract, first of all, you cancel the contract, and after, you discuss.
At the opposite, if you have a very large contract, and if you have an acceptable level of margin, please save the contract. So be more flexible, be more commercial. So, for example, at the bottom on the right, where the instruction is, for example, you could exchange the contract duration against price, a smaller price increase, for example. We know that our customers would like to have a two-three years vision for the relationship. But this year, of course, we use also this matrix to focus our branch managers around RVS on alternative. And we use exactly the same word than in U.S., alternative.
And as it's a large country, we have more than 3,000 contracts on sites, we could. It's impossible to do all in the same time. So we have decided to focus RVS alternative on the part of the portfolio we would like to save or to optimize, on it's the part of the square, on this matrix. So it's one example of some tools we have to manage the company and to push the strategy. Perhaps it's because I'm French, perhaps also it confirms my own education as an engineer. I like innovation, but product and service services innovation.
For years, I push a lot a process of innovation from the field. So each year, we have a huge process to ask to our guards, we have about 20,000 people in France, some ideas to change some things somewhere, in the relation with also in some tools we could have with on site. And after all, after a year of process, at the end, the 10 best ideas are presented to the group management meeting in France. So this year, in September, we had this presentation, and in these 10 ideas, we have some guards.
And come from that, we have launched, for example, now two years ago, what we named One Guard in One Hour. I think it's, it's totally unique. You haven't that in U.S. It's, it's to develop some new markets where we were not. One Guard in One Hour, it, it's what? You connect to internet, to the internet site, you express your, your need, you pay with your credit card. In 10 cities in France now, you have your guard in one hour. So it's for specific needs... like, for private needs for, for a wedding, for a party, it's needs for some communities, for little events, local events.
We have opened a new market for Securitas, and it's also for us a way to amortize some other difficulties in the portfolio. In two and a half years, we have developed quite SEK 8 million of sales in this business with 10 branches, and we continue to invest and to open some branches. In the plan, we have two more branches next year in this specific business. Another example is, it's a little example, but I think it really creates some difference from the competition. It's a tablet. It's exactly coming from the same process.
It's a tablet with a, with an apps to manage all the security item we could have in a, in a premises, on, to, to organize the maintenance and the control of this, all these items. We have also an opportunity this year on next year in our market about the CICE. Perhaps you know the CICE. It's a tax credit. It has been a decision from our government. The idea is to reduce the labor cost in our market. But we have some compulsory with this tax credit. We need to reinvest this tax credit in some areas. And the law define five areas where we have to reinvest.
It's training, competence, skills. It's recruitment. It's also to actually the is in the sustainable development and so on. We have chosen, of course, innovation and competence, and we have improved a lot and increased a lot the budget we have for training for 2013 and 2014. First of all, I think and I have always believed in that, that the competence for our guard and for our middle management, it's a key for the future to improve the added value. To conclude, to go to the conclusion of the presentation, of course, what about RVS in France?
After a year of work, we launched RVS officially, first internally and after externally, earlier September this year. What we are looking for today with RVS? First of all, we have focused RVS on large customers. In the Nordics, it's more small customers, if I have understood well. In France, we have chosen large customers because it's a part of the portfolio where we have the most important pressure in term of price or optimization. For me, RVS, it's a tool for two leverage. First, to defend the portfolio, and second, to win some new market share. After years of decreasing, now, I want to reach, as soon as possible, a break even in term of growth.
I think RVS is the main leverage, leverage for that. For that, we use all the processes you have already seen in the U.S. presentation, North America presentation, in Erik-Jan presentation. We use exactly the same, the same tools, the same methods, and the same steps also. The second step we have with RVS, it's already in the agenda. It's next September, and we will launch the first of September, RVS package, package for the mobile, for the mobile, for the small customers. And we have launched, so, the five classical RVS services: Remote Perimeter Protection, Remote Alarm Verification, Remote Entry/Exit Management, Remote Video Escort, and Remote Video Patrol.
The best way to explain is to take an example, and I take the example of the Fnac. If you are in Europe, you well know this brand. It's a brand who sells electronic devices and cultural products like books, CDs, and so on. It's one of the main customers we have in our retail segment in France. It's more than 170 shops. And we have in our portfolio 25 shops and the main warehouse of Fnac in the south of Paris. And today, this customer is under pressure, a huge pressure, and the purchaser asks us 25% of savings. So don't remember more than 24%, it's a purchaser message.
Even if we produce 10% or 15% of savings, I think it will be right. So, for Fnac, for example, we propose a different solution. And I try to illustrate. Imagine you are a manager of a shop. Imagine you have to open the back door of your shop at 5:00 A.M. And, of course, the shop is in a deserted environment at this time. Also, and you know that the main risk you have to face with some robbery could happen early in the morning or late in the evening. So you arrive at your shop at 5:00 A.M. Today, you have a guard or you have a patrol to secure the environment.
Tomorrow, you will arrive in your car, and you'll call the Securitas control room. "Hello, I am from Fnac for this shop. Please, I will arrive in five minutes. Could you secure the area of the back door?" With one or two cameras, not more, we could secure with the remote patrol the area of this shop on the back door. And also, when you arrive on the parking, you will park your car, and we could take you in the scope of the camera. It's what we name an escort, a remote escort, until you will be in the shop and secure in the shop.
So we increase, we improve the level of security and safety, and we also optimize the contracts because we don't need any longer the guard. Another example, and I will finish with that, imagine you are a young woman in a shop during the daily hours and you are alone, because in some little shops, you could be alone. We know that the level of risk is different if you are Monday or Saturday. We know also that the level of risk is different if it's morning or if it's afternoon. Today, to secure the shop, we have to provide a guard for the daily hours.
Tomorrow, we could avoid to have a guard, for example, Monday morning or Tuesday morning, because the level of risk don't need a guard. But if there is no guard, no longer a guard, what about the risk for you, the woman who are alone in the shop, to sell and to cash? And what about the goods in case of a problem? You have a red button, or you could call the panic room. Excuse me, the control room. The control room. It's interesting. The control room, and you could ask for a Remote Alarm Verification, and the operator in the control room could have a presence through the camera.
And if the operator sees something wrong, he could make—he could send the police, he could send a guard from the mobile in Securitas, or he could use the sound as we have seen in the video. So to conclude about France, today we have a strong platform, four years now, and we continue to build this strong platform because it's never win. We have always to face some specific difficulties or some specific cost increase. So we have a strong platform, we have a strong team, and now we have a new tool, a new weapon, RVS, to continue to be a strong leader and a strongest leader than before.
And it's for us, a new way to open this, this cycle, more open to the market with some innovation. And in France, RVS clearly is an innovation. And I go further, it's a rupture, innovation by rupture, and the customer today have a very positive reaction with with RVS. So it's, it's our future. And I, I'd like after this little visit, for you in France, I'd like to be here a lot next year or in two years to continue to explain this, this journey. Thank you for listening.
Merci, Michel. Please stay on the stage, and I'll ask Alf and Erik- Jan to join you, so we can take some questions from the audience before we have another breakout. Any questions? Stefan Andersson here in front.
Stefan Andersson. Question on this. But I could be incorrect, but maybe you can help me. The call-outs that you make on a burglary or an attempt, I think sometimes you invoice that separately, and it's also rather lucrative. So what, given that you're trying to protect that from even happening, what do you think the negative impact from that side is, or if you can indicate how much you invoice through that system?
It's not a huge invoicing, the call-out business, but it's good margin. And it's an important volume to protect the mobile network. And I think what's gonna happen is that you will use video cameras to a much larger extent to verify the alarm, instead of today, I mean, most alarm systems are motion detectors, and very few with video verification. And as you will be able to verify with video cameras, then you don't need to send the guard, because, you know, just a butterfly flying in front of the camera or something, I don't know. So you will use that to hide, and then the call out volume will go down.
On the other hand, I think what you will see is that there will be opportunities to build, to add services to that network that we have. And also, so we can add services to that mobile network, and we can do fire protection, and we can do other things that will, so to say, enhance that network, and you can then compensate for that volume. And also, I think there will be opportunities as we are taking market share to do more, to use that mobile network to a higher degree than we would done historically, in a historical way. So we have a lot of ideas and plans on how to mitigate that. And I also think that-
... many competitors or people who do that kind of business today, they will reconsider maybe because volumes will decrease, and they will say, "Well, we shut this thing down." That will, that is absolutely not a smart decision, but maybe from economic reasons, necessary. Then we can pick up volume because it will be not prioritized business for others. But in order to sell the complete service, you need to have a mobile network, 'cause it's really key to be able to respond as a part of the service. So there are minuses. You point on that one, it's an important one, but there are some pluses that we think can mitigate that. So we think we can kind of manage that.
Then the second question, I'm a little bit curious on what camera supplier you're gonna use or you are using. I guess this is digital and network cameras, and there's especially one which is a clear market leader. So my question is, are you gonna use the market leader, or are you gonna use a spread of all of the players?
Yeah, no, we have, we have... I'll answer on behalf of Antonio now, he's the expert here, but I'll try anyway. I mean, we have, for our RVS solutions, when we have, so let's say, our standardized, what we standardize on in that solution, and we are supplying the camera, a new camera, many times it's not the case. We are just using the installed base, and we hook up to that. But if we supply the camera, we have standardized on Axis, and we work very closely with Axis. They are the number one in that field, in our opinion. They sit in Lund with all their competence, and we in Malmö with our RVS team, and the software supplier is in Copenhagen. So it's a nice cluster of trying to interact in that sense.
So yes, the simple answer is Axis. But we will use others from time to time also because for all kinds of different reasons, and to a large extent, also the installed base by the client. You agree with that?
He's correct. I approve. He approves.
Thank you.
Please go ahead.
Yes. Laurent Monnaux, Exane BNP Paribas. Two questions, if I may. Looking at your target of 18% in 2015, so you talk about a rapid ramp-up of conversion rate in the next coming two years, and gave the example of Sweden, with 50% of new sales coming from a combined solution. Can you elaborate a bit by country in Europe, and especially on France? And what are the main differences between today large clients and SME? And second question on, can you remind us, what are your current relationship with Niscayah? Do you have still a partnership with Niscayah? Thank you.
Stanley.
France. France before?
Yes. In France, we are in the average of Europe. So the starting point is about 6%. We have decided to start this, the strategy with the large customers. And I think we, it will accelerate the process of transformation, mainly in terms of figures. Because with one or two or three contracts on, we are in step six of the process shown by the U.S. We are today, this week, in negotiation with, on three main contracts of, with transformation. So it could create an acceleration in the transformation process in terms of figures.
But at least, I will prefer tomorrow to have some medium size of contract, but more contract to transform, to consolidate, to consolidate the process.
But you will see, I think you will, what you will see, you will see an exponential increase-
Mm.
In quarter by quarter, how we increase the share to get to the 18%. And so in the near future, but for the next Q4, Q1, it will not be a dramatic change. There is a lot of activity, but from that to being sales and invoicing in our books, which will be the one that we are talking about, it will take another few quarters until you start to see really. So I think by mid-near next year, that is when you start to see the increase. But a small important step taken in between. The relationship with Niscayah—or Stanley, I should say today—has deteriorated after the process some years ago, so it's going apart. And we cooperate still in some places, but of course, that has been reduced.
In Sweden, which has been one of the main markets where we have historically worked together, we are insourcing hundreds of contracts every month, but we have outsourced historically to them on the maintenance and the service of the contracts of the technical base. So yes, we had, yeah, 5,000-6,000 contracts outsourced to Niscayah, and over a period of three years, I would say, and we are in the middle of that period, or at least the second half of that period, we are insourcing that volume. But this doesn't improve the relationship in a way, I would say.
And then we have also recruited quite a number of very qualified people from that organization, as that divorce kind of, or that moment of trying to acquire, and we couldn't, and we had to build our own journey with our own resources, took place. So there is, in some countries, still a decent relationship, but it has deteriorated, and the commercial volume between the two companies is far less today than it was three years ago.
Okay, shall we take a short break and join back in here at 4:00 P.M.? But do have some coffee out there and find a handout by now. Luis Posadas, who is the Divisional President of Security Services, Ibero-America.
Hello, everyone. Good afternoon. It's the last presentations at the end of the day; we try to compensate your patience, huh? With a very nice information and very nice speakers. Not myself, but of course, the rest of the speakers, huh? But okay, right. And I try to show you what—what means the title of my presentation: Building a Strong Ibero-America Platform. I'm responsible from Ibero-America platform since 2011, and previously was... Doesn't work. Yes, right. Previously in 2006, starting to create a Latin America platform.
And now, we are 14% of our sales in the group and 14, 15% of the operative income, more than 58,000 employees, nine countries, two in Europe, Iberia, Spain, and Portugal, the rest in Latin America. And now we are approximately 14% of the market share. Well, we start our journey in Latin America to create the Ibero-America division in 2001, when we decide from Europe to starting in Argentina in order to explore what happened in another part of the ocean. And we start with a small company, acquired a small company in Argentina in 2001.
It was a strong year, very complex, but it was an opportunity to start in a country with a lot of possibility to growth in the future. We started with a small company, 600 employees, and during the years, 2006, in other countries, Uruguay, Peru, and Chile, and Ecuador. And in 2011, in May 2011, we decided in the group to create Ibero-America. What was the reason for to create Ibero-America? By the simple way, was the culture, the language, the market, the customers, the base of the customers, to provide services for our customers in another platform, a common language in both parts of the ocean.
It was a very clear idea, and also the idea to separate part of Spain and Portugal and to create Ibero-America. In 2012, we complete our journey, and right now, we're starting in Central America and well, in Costa Rica. In fact, we have - I have problems with the tweets, okay. Two different realities. One is, of course, Iberia, Spain, and Portugal. You know, this is markets with a macroeconomic or economic situation, very, very difficult, but it's totally different realities, where we are at a very strong position. We have 18% market share. We are strong companies in Portugal and in Spain. And, of course, it is a mature market with a where is the, the competition are based in the price.
Of course, it's in a problem, but it's for us, it's a very big opportunity to be different. It's the idea, to be different in order to apply our strategy to starting with a new solution, technology, improving our offer in a different way than the rest of the competitors. In another way of the ocean, in another side of the ocean, we are in Latin America, where we are starting in the growth market. We start, we continue growing in two-digit, plus two digits during the years. It's in a growth market. We're increasing our footprint, where it is possible to focus on innovation and technology. Why? What is the reason?
We learn a lot of lessons in the mature markets, but it's possible for us to implement the same ideas when we have problems, whether what is the reason for not creating a strong platform in the beginning, in the market where there's possible to growth. Of course, we continue with the idea to continue improving our footprint with a selective acquisition during the years, and now merge both cultures in order to increase our speed growth in this area, in Latin America. What? The technology, the evolution of the technology, okay? In 2006, we starting. We learned the lessons in part of Europe, in part of the mature market. We, in Latin America, we're starting to working with technology organization.
Uruguay and Argentina was an example. We create organization with a technical people working and technical facilities and technical solutions, and we decide to create a strong technology organization in Latin America, in all the countries. In the end of the day, 2010 was an important year when we have in all Latin American countries, structures with responsible people working in technology. And when we create the Ibero-America division, we starting to work in Iberia. It was the idea to implement the same model. But the reason is very simple. When we have a strong market with a lot of problems to growth, it is necessary to protect our work portfolio, and the key is the solution and the technology.
is to starting with our strategy in a strong market, like Spain and Portugal. In 2012, we complement this idea with acquisitions in Argentina, in Spain, and Uruguay, in technology companies. As case of Spain, was Chillida, in Argentina, and a company named Fuego Red, and Uruguay, Selectron. This important company focus in a very, very specialized part of the market, complement our offer and complement our position in the technology in these countries. And, of course, 2013 is in a, is in a year, where we have, in, in all the countries, the organization, specialized, working in technology, working in provide solutions and technical solution in our customers and in our portfolios. And the next step in 2014, you look at, this is to create a Securitas Security Operational Center. What means this for us?
This is an important innovation in our opinion for the next immediate future in our countries. One of the main challenge for us is to listen our customers. And what is the message we receive in our customers? Need and to be proactive. Our customers need security proactive, need a center for provide solutions and all and solve all the problems to the beginning for the finish. This is the reason for we adapt all our center of controls, mobile control, monitoring station, dispatch, and remote solution in one important security operating center for to provide in our customers solutions all day. And this is one of the-- We receive information of our customer about to say, "Okay, we don't need reactive companies.
We need proactive companies." And this is an. We believe it is in a good platform and a very good tool to provide solution for our customers in order to adapt every information, and to create solution for our customers. This is one of the important step we want to make in the next future, in all the countries, in Ibero-America, of course, but the rest of the countries is named in the different ways, but is we are in the same idea. Okay? Two examples. We have different examples. One is in a country like Spain, and the next example is in a country like Argentina, and my colleague, Christian Faria, tried to show you better than me.
But Spain is an example, what is our reaction in a market with a lot of difficulties, and where the macroeconomic is absolutely difficult environment, where negative market growth. We have a lot of bad condition in the labor relationship. We have in our customers cost saving, and it is the focus for our customer. What-- This is in a not very optimistic market. But what was our response? It is totally opposite, totally opposite to the pessimistic market. We are starting to be... The first one is to be different offer. It's not only guarding, it's not only pure guarding. It is starting to make an offer based in Security Solutions, in the combined solutions, and to create on a platform totally different to the pure price per hour.
Other important activity, we're starting to negotiate, to renegotiate the condition with the unions in the country. The labor condition is very bad. We are starting, and we achieve a negotiation with the unions during 2012, 2013, in order to adapt the labor condition to the reality of the market. But this is another important step we make in the collective bargaining agreement with our unions during 2013. New organization. We have right now more than 300 people working in security in technology. We recruit people, we train people, we are starting to create at a new, totally new organization, different to the traditional. This is a big response against the pessimistic market.
Of course, in the top of that, we are starting with the new facilities. This is the picture for the new facilities in Madrid, with a new training center and new security operating center. Not a traditional monitoring station, but is one step ahead for the create the new idea to promote and to provide services to our customer. In résumé, in a country with a very big difficulties, we decide to invest in people, to invest in facilities, to invest in technology, and to make a new ideas and a new solution for our customers. It's totally different approach to the rest of our competitors.
For us, in our opinion, it's a very, very, very good opportunity to increase our presence in the market, and to, of course, protect our portfolio, and to create new opportunities in the next future. Okay, this is a realities. We have another one. This is a cases, I have one in Europe and another in Latin America. Typical examples, which you know what you receive information about the my colleague in another examples. But that's typical example, where this our reaction in the market difficult. This is in a shopping center in Spain, and in this case, but you can imagine the pressures in this kind of businesses, retail, the consumer, it is the focus is to save money, is the idea.
They have a lot of pressures into to save money and to save cost. Our response is, of course, to analyze professional, the needs of the customers. It's at the key of our strategy. We working in multidisciplinary teams, together with the guarding people, technology people, analyst people, inside our company to provide to the customer the correct security. The correct security in our point of view, of course, professional point of view, but with the idea to increases the leverage of security, the increases the possibilities to to adapt the budget of the customers to the needs of security.
Now the result is an example, real example, when we reduce the guarding services 5%, increase technology installation, maintenance, we put in video technology in the high level, and implement the Securitas Connect. It is so important for us. It's in a platform, it's in a portal for our customer, very important. And in the end of the day, for our customer, we reduce 14% the cost. It's so important, but in the same way, we increase the level of security. We are more professional and receive better service than the previous. And one other important things for us is we extend the relationship. It is our focus with our customers in the portfolio, and the new customer is extend the relationship.
It is the possibility to create value during the time. This is a part of our strategy. This is a question for we start to make this kind of service. Other example, this is in Latin America, typical big facility with a lot of guards, a lot of problems, threats, or isolated areas where it's very difficult with where we have a lot of people working. And now, in this case, we don't reduce the money for the customer. The customer, in the end of the day, pay more, but pay more and receive much more, is the question. It is, first of all, to increases the relationship in the period of time, but we provide full security services.
It's one of the demands for our customer, to be proactive and a single point contact, is the question. When the customer say, "Okay, I have a lot of problems. I need a professional company to provide me everything related with security." In this case, is don't reduce the budget, but we increase significant the security level in our customer, and of course, in our contract, in our profitability. Of course, we increase the profitability, we increase the relationship with the customer. It's in a an example for to manage in more professional way, using the technology and advantage for our approach to the market. In resume, okay, we have two different realities, but we have two different worlds. One, a macroeconomic situation, difficult, and another, market growth. Both are opportunities for us, big opportunities.
In the market with the big difficulties, we are ready to provide different solutions. This is a typical question what... We need to be more proactive with our customers. In countries or market with growing constantly, more than two digits a year, but this is a moment to continue to put in speed into growth, with the new ideas and with the ideas provided by all the organization in Securitas, from Europe, from U.S., and from Europe in general, and Europe in general. Our strategy working in all the countries, not different. It is one of the our main targets and main challenges, is to implement the strategy in all the countries in our division, and of course, invest on resources, humans, and technicals.
Now, right now, we have operational centers in all the countries, and we try to continue to improving the capabilities for to provide more efficient services to our customers. The operational center are the key for the future. It's in a very start process for us. This is very nice. We are convinced that this is a very strong solution for our customers. And, of course, we want to, we like to continue to increase our footprint in the countries in Latin America, of course, with a selective acquisition and in the rest of the countries. In résumé, we have two realities, and we have two worlds of opportunities, in the pessimistic way, in the optimistic way.
But in both, we are in the best position for to increase our, significant our position in these countries with our solutions, with our strategy, and to increase technology and solution for our customers. And now, in order to show you on all the reality, better than me, my colleague, Christian Faria, Country President of Argentina, he show you the, the, one of the, our successful countries in Latin America, one of the biggest. And please, my friend. Okay.
Okay, please. Okay, thank you, boss. Good afternoon, everyone. As Luis says, my name is Christian Faria.
... I joined the company in 2007, and I'm responsible of the Argentina organization since 2009. I'm here to present you what we are doing in Argentina and how we are implementing the security strategy back there. Oops, it's okay now. So, Argentina has a very cyclical economy. Many of you may know that we went through a huge crisis in 2001, but then the country is back on trend. We have been growing around 8% during the last decade, and these days, it's a bit slower. And the good news is that we are number one in Argentina since 2007; it was really a tough work. And we have been growing above the market since then.
You can see the market growth is really, really big because it's not only the economy pushing up, but also the prices. With all this growing, we nowadays have a more or less 15% of market share, and this we really are proud of we have been doing. Our main concerns basically is inflation. Inflation basically erodes our margins directly push our pressure on our contracts. That way, we want to show you this sort of stairway. Since 2007, we have very, very high inflation levels, around 25%-30%, whereas the same was the cost increase of our salaries and so on our prices.
So every time, it took some time to catch up the inflation line, and we have been very successful in that. Really, it is a battle to defend those margins and to keep that trends against. And the difference between both lines, basically, our profit that we have lost. So, it's a strong battle to defend our margins, and not only, we must be constantly innovative, creating more value to our customers, to keep the margins and also to improve that. As I said, we are the market leader in Argentina. In this graph, you can see how was the evolution of our sales. It is really a tremendous evolution of the sales level.
And you can see in the blue one, in millions SEK, and in the green one, in Argentine pesos. This year, we are getting more or less ARS 2,000 million, more or less SEK 2,500 million, and we managed to keep this 8% operating margin through these years. So it has been really a tough work to keep this growth, this tremendous growth, and keeping the margin in that side. We started operation, as Luis said, back in 2001. We bought a very well-organized company in Argentina, around 600 guards by then. We went through a process, a very hard process in our country, but since 2006, we have been growing, not only by organic growth, but also through acquisitions.
We bought nine guarding companies and two technological companies since then. That's why we are now in that position. Most important is what is the strategy behind these figures? I want to resume our strategy in these eight roads. The very first one is solution. Solution, maybe you have heard this word during all this evening. Solution is key for us to understand the only way we have to our future is to make solutions. We have already decided this road. We will. We are no longer a just guarding company, we are now a solution company.
When we're talking about solution, we're talking about delivering to our customer a package where we correct put the ingredients, like a formula of how much guarding, how much technology, how much mobile, how much remote services, making tailor-made solutions to our customers. But the second role is specialization. No one can talk about solution if we are not really specialized, if we don't really know about security. Hopefully, nowadays, our organization is more or less 60% organized under business segments. You know that the security in an airport is totally different to a port, and the mining is totally different to the retail, and also the houses is totally different than a manufacturer.
So our people are working in one segment, and in that way, they are developing knowledge, they are developing experience, and they're really getting to a customer and delivering proven good and good, good services. The third road is mobile. Mobile is a powerful tool, not only to serving to small customers, but also as a key component of this box of solutions for big customers. As to complete that, the solution scheme, up-giving to our customers a more value and in more cost-efficiently way. Then we have a service called we delay like a custody of merchandise in transit. Basically, they are the escorts to trucks during the in the highways, basically for logistics.
Again, we do that services to complete the solution to our customer, to give also more value, keeping those goods from his facility to their customers. Many of my colleagues have already presented this concept of remote services. We talk that we are managing solutions remotely. In fact, that picture is a guard. It's a real guard, it's a real picture of our center. It looks very peaceful, but the picture, but in real life, it's very heavy. There's a lot of people working over there, many incidents. The idea is to remotely manage security from guarding, as Santiago told before, until fire detections.
Also, we are servicing our customer with BMS, building management systems. We are locking doors. We are turning on and off lights. We are controlling air conditioners. We are doing a lot of tasks remotely, and that's really give value to our customers in this package with the solution. Then the technical guys. We have a really, really strong organization in technology. Around 300 technicians and professionals are working right now in Argentina. And basically, they are building up the installations to use the technology. Or as we have already said, we don't sell hardware. We use the hardware to provide better services, to provide better tools to complement the package to our customers. Then the consulting and investigation.
Obviously, it's key, it's very important to us to get to know our customers. That's why the consultants go to our customers to understand their needs. And in that way, we really can provide a package of solutions that is in line what they really are willing. And investigation when things happens, we obviously go there and try to understand what was wrong and try to correct and therefore so on. And everything is, it will be worthless if we not share the knowledge. All these things we are doing, all this knowledge we are getting, we don't share each other, will be nonsense.
So that's why it's key for us, and I will talk to you later to share the experience within our colleagues and also with our colleagues in the Spanish-speaking in Latin America. So finally, we get then, again, to the solutions, this package, all these components, to deliver unique tailor-made services to our customers that provide us growth and provide us, obviously, profitability. I go deeply in three of these parts. The very first one is the solution concept. Our strategy basically is divided in two. The very first one is to transform our operator portfolio into solutions. For that reason, we have built up a specific team to help to speed up the transformation process. And obviously, every new sales, every new contract, start as a solution.
The process starts with our operational analysis, understanding the client, defining what are really the client needs. And for each issue of the client, we try to solve in a most cost-effective way, which product is best, and then deliver the installation. You can see this is our evolution to 2009. We have been growing the business. During this time, we also bought security guarding companies. So every time we have some guarding portfolio, we were able to transform that. Nowadays, we are around 14%, and my CEO, let me say, October was 14%, the portfolio with solutions. So we are speeding up the process, and we are very confident to get the 20% in 2015.
The other point I want to explain deeper was how we share knowledge. It's key for us to share all this knowledge to other people. That's why we built up a training center. It's really a dream come true. We call that the Securitas Institute. Hopefully, one day it will be the University of Security. It's a building exclusive for security training. We have more than 300 seats to train, at the same time, our people. Train not only the basics of security, but also in the specific segment they are going to work, as I mentioned, ports, airports, mining, et cetera.
Also, to keep refreshing and state-of-the-art knowledge of security. Also, we train middle management, obviously, supervisors and branch to really serve to our customer, a really professional real person that knows the customer needs and can deliver the service they're expecting. Also, we put all of these lessons under the e-learning, because Argentina is a very huge country. So everything we perform, we record, and we put that in an e-learning platform in order to share with the other in the country and the other countries in the Spanish-speaking and Latin America.
Obviously, we make workshops between the branches and so on, so to keep the pace of getting more professional in order to deliver to our customer better services. The other thing I want to show you now, it's this concept of the Solution Management Center. This center where we provide services remotely. And to show that, I want to explain by a short video. This video is really a real case of... Obviously, we have re-recorded for you today. This was a real case in a gated community near Buenos Aires, where we have set up some thermal cameras with the analytics to detect intruders. And we were able to see it was really happened.
It's really really a very good example of what the RVS concept is. So let's see it works. It was three months ago in a community. Obviously, the real scene was not so peacefully. You can imagine the those guys in the middle of the night with some screaming and shouting from a speaker, what was their reaction? Oh, they fell down to the and start running anywhere. And the guard, obviously, was not like peacefully working. He started screaming and shouting in the station. And really really it works. And the most important thing is really prevention. As Alf shows in the previous video, we are preventing crime.
These thermal cameras, you know, that identifies the movements and the guard is in our solution management center, get notice, give the notice to our on-site guard to go to the incident and to check what happened. And finally, as you have seen, he wrote everything. So the customer received really the report what have happened, not only the written of the things, but also the video of what have happened. So it's really getting more value to our customer, and really we are ensuring and delivering them what they really, really needs. Two customer cases, you have seen a lot of these customer cases. Today is how we are transforming our guarding services into solutions. This is a manufacturing facility, basically, a guarding service.
We usually go from the same process. First, we perform an operational analysis. We go to the customer, we understand what are the issues, the things that they have. We try to understand what are their needs. And between their needs and the first, we identify which are the things we should cover. And for each issue, we try to select the best product or service to solve. Maybe an on-site guard, maybe a remote guard, maybe a technology, maybe a mobile. And basically, in that combination of products is when we deliver this unique package to our customer. In this case, we have reduced 40% the guarding hours.
We put some technology, obviously. We get some remote services, and everything is under our clients' portal. We name it Securitas Connect, where every customer can access and can see online what is happening with these services. This is a very good example of what happened. In this case, the customer pays the same, is the same level, but a really better and enhanced Security S olution. And for us, the profit increased from 8% to 27%. So it's a huge increase in margins. The customer keeps paying the same, and really we enhance the security level of this, and we extend three years, the contract.
The other example is a storage facility, more or less the same case. Basically, guarding, strong guarding contract. Again, we produce the same process. It started with the operational analysis, understanding what are the threats, then go to understand what the client needs. And with that combination, we set up where are the threats and where I will need to cover. And for this thing, we try to find the most cost-effective way to solve the issue. So in that point, we reduce 35%, the guarding hours. We include some technology, thermal cameras, again, video analytics, very important to identify that, to create incidents, as we have seen in the video, access control and so on.
In this case, the customer pays more or less 12% more than he's paying, but really a different solution, a very enhanced solution for his security. And in our case, we increased the margin from 5% to 20% and also extend the contract by three years. Finally, a few takeaways. Managing, we are managing really a very tough environment. You may know by the news, Argentina is really a tough environment. Many restrictions, many regulations, the inflation that lowers our margins. But where the competition are seeing issues and problems and excuses, we are seeing opportunities. We know we have a lot of opportunities. We are getting more contracts. We are really increasing. You have seen our sales development because we see opportunities over there.
And each day, there are more and more solutions that are going on. For me, the job is very easy, and I'm very proud of my team. Really, we have a very strong organization, and it was very hard to put that in place, but now we are confident we are all already set, and I'm very glad that they are back there. And with a clear strategy, everyone knows what they have to do, and everyone is targeting and following the same road. So I'm very proud of them. Finally, all this knowledge, all this experience that we are doing, we are helping the other countries in the Spanish-speaking Latin America in order to get the road more or less more quickly.
All of us are more or less the same. We have more or less the same culture, where we have more or less the same business type. The business is the same in each country. The customer are basically the same, and we are setting up solutions one country to other, but by the same concept. So maybe a customer in Argentina wants the same solution in Uruguay, in Chile, in Colombia, in Costa Rica, so in Peru. So we are delivering or we are speeding up the process in the whole region, sharing our experience, and not reinventing the wheel once over and over again. So that's what we are doing, and we are very proud of that. Okay. That is thank you.
Now let me introduce our CFO, Bart Adam. Bart, all yours.
Thank you, Christian. I have now the difficult task to bring you the last presentation of today, of this afternoon. And I would say, what more can I add to what all the things that you have been seeing this afternoon from my operational colleagues? As being the CFO of the company, I do like to remind people also of our goals. And we have two clear financial goals within the company, and that is one, is the financial performance target, which basically means that we want to increase on average, year-on-year, our earnings per share with 10%. We have then a financial stability target, which relates to the balance sheet and the cash flow we are generating. And there, basically, we state that we want to achieve a free cash flow to net debt of minimum 20%.
Another important thing for us is the dividend policy, and Securitas should be able to sustain a dividend level of approximately 50% of free cash flow. You know that since performance year 2009, our dividend has been on SEK 3 each year. Then, of course, we have the development target, the strategic target, which is to triple our shares, sale, the sales in Security Solutions and technology by the end of 2015. That, I think, you have witnessed from the different presenters from today. That is well embedded within the organization. Let's now have a more detailed look at some of these goals. Let's start with the financial performance target, and we know that we have been living in a very difficult macroeconomic environment the last two, three years.
Our business is largely in mature markets, and that has been a difficult environment to live in. I think we have benefited from that a lot as well. We have been able to do things, and we are doing things differently today than we did two, three years ago. For instance, we are working in a different way with our prices and wages, which you have learned also from the different presenters today, from Michel, from France. In Spain, we are working in a different ways with those things. We have also taken the advantage to build up a new organization. We have made savings, but at the same time, we have also learned that we have invested part of those savings back into our strategy, into the development of the company, and that is key thing as well.
Our strategy is very clear, and we see now that there are fragile signs of economic recovery. We see it in Europe. We see it in North America. And you should also remember, of course, that we are late cyclical when it comes to the economic development. Our strategy is clear, and I hope that from all the presentations you have seen today, that it is also clear that it's in full execution mode. It is not just PowerPoints, as sometimes you can see with strategies, but it is in real execution mode, day by day, hour by hour. And this, of course, we will also complement with further technological acquisitions to complement the development wherever we need the capability or the resources.
The focus then from the CFO organization in all of this is—has been to also work with the reporting connected to how does the sales, how does the top line develop? We have developed KPIs related to the conversions and the new sales, and we are following very closely the sales development and the margins from these different actions. All of that, the monthly reporting and benchmarking, is fully in place since summer this year. We have worked with pricing models to ensure that we have the returns, of course, and that we have the right margins. And then, as sales are increasing, as we see the top line increasing, we are—and the focus shifts then more towards the capital usage, which then brings me to the next slide, and that is, of course, the financial stability target.
How would that look like in this new strategy? Yes, we need capital expenditures to support the change, to support the conversion in our portfolio, or to support new customers, new sales. The main capital expenditures relates to customer equipment.... customer site equipments. Equipment that we put up on the site of the, of the customer. We have, year by year, about SEK 1 billion of investments, and that takes care of, of the investment in our own organization, our own buildings, in the monitoring centers, and in things like that. And then we complement that with capital expenditures related to customer site equipment. The extra cash that we will need for this will be balanced with reduced acquisition pace, and you have already witnessed the last 12 months, I think, that we have a reduced acquisition pace compared to how it was before.
Of course, the target is that this will enhance then our return on capital employed. We have put up an example here, where you see that before the conversion, this is an example of a conversion, where you see that before the conversion, we had sales of EUR 400,000 per year. We achieved an operating margin, EBITA, of 5%, and we had a return on capital employed of 17%. Then what we do, and you have seen many of these examples today, we reduce the guarding, and in this case, then we make an investment, which is, like, 15% of the original sales, which is 60,000 EUR in this case, and that will be depreciated then over five years. What happens then after the conversion, year X plus one, then we reduce a little bit.
In this case, we reduce a bit the top line, but you also see that the margin has increased to 10%, that the real dollars have increased, although it's euros in this case, that the euros have increased. And then you also see that the capital employed has, of course, increased as well with the EUR 60,000, but that our return has improved. This is year X plus one. As we will then move on further, year X plus two, by that time, we will have already depreciated some parts, so the capital employed will start to go down, and that should improve our returns further on. So the main question is, is that what level of capital expenditures will you require going forward to achieve this?
In terms of, we measure it first is the sales that we achieve out of it, and it will depend on many different factors. As we have learned today, there are many different solutions possible. It will depend on the type of customer, on the type of technology that we will put in place, on the type of solution that we will bring him. It will depend also a little bit, probably, if it is a bigger customer or a smaller customer, so that is quite difficult to forecast.
But what we see is, and our plan is, that for every SEK 100 million in annual sales that we will convert from existing portfolio or that we will bring in as new sales, we will approximately need 10%-20% of that annual sales as an investment at the beginning of that contract. So as a one-off investment, when we make the conversion, when we perform the new sales, then we will make this 10%-20% of the annual sales. So if it's a contract for five years, it has 100, so that will, over the five years, generate 500. We will invest 10%-20% of the 100. So as a rule of thumb, then, SEK 10 million-SEK 20 million per SEK 100 million of conversion or new sales.
For the group then, if you then relate that back to our target to achieve the tripling, then that should mean that we will have approximately SEK 350 million-SEK 400 million Swedish krona capital expenditures on top of the SEK 1 billion that we have today in 2014 and 2015. This will be depreciated over the contract period, and of course, the depreciation of this is calculated into the operating margin that you see moving on contract by contract. I think we have got that question many times: Do you see the margin moving? And I think from all the cases you have heard today, you really see the margin moving from this level we are used to, the 4% or 5%, to whatever level you have seen today on the screen.
I would like to—I hope this is clear, and I would like to leave now a little bit of the financial area to go to another important point in our strategy, and that is the focus on responsible business. Maybe one more thing to say in relation to the cash flow; we believe that we can generate strong cash flow going forward as well. And the final result on that target will more depend on how we manage our accounts receivables going forward as well. And also, we have taken advantage of the crisis to improve our routines, our processes, our incentive systems, when it comes to managing the accounts receivable.
We did very well on that last year, and we did also very well on that, a little bit less six months, this first six months this year, but we recovered from that nine months after Q3 now. That brings me then to the responsible business and focus on CSR. This is really a key thing in our strategy as well. I think, and I can witness, that Securitas has always been very keen on not cutting corners. We think that you need to behave responsible in every single thing that you do, but maybe we have not always been good at making that in a systematic way or at communicating about that. It is within the company culture to really behave as good people. CSR is important. We have a CSR officer in place that reports to the audit committee directly.
Policies are in place. We have an Integrity Line implemented over the past 12 months in 49 countries. Extensive training efforts are being made, both towards the management level and towards the security officer level, everywhere in the world. Our goal is, of course, also to continuously improve this matter and to work with that more, improve our policies, improve the way we implement things, and improve our reporting on this matter. I would like to turn to another topic, and that is the emerging markets and entering new countries. Today, we are in 52 markets around the world, and we believe we have a goal in place to have a presence in 60-65 countries.
The pace of working with this has reduced a bit because we have also had the economic crisis, and we have worked a lot with the technology, as you have seen. If it would not have been for the economic crisis, I think we would have been advanced more in this goal. But the goal is in place without a specific timeline on it. We will, of course, continue to build on the Latin American platform, which I think is a really strong platform, which is ready for the future and which we benefit already from today. We will follow our global customers, and then we also believe that if we are present in these 60-65 countries, that is also where the business potential is.
Going after more countries would mean too much effort for a low business potential when you translate that back into Swedish krona. Which brings me to the final slide, and of course, what else could you expect from the CFO than to talk about, if the button will work, the financing? It's important that we have the right financing in place as well, and we have recently funded the company with a $85 million private placement in October, with a maturity of six years and with EUR 350 million Euro bond then, which has been issued in November now, with seven and a quarter -year maturity, which is longer than the five-year we used to be.
When you then think, and you have the table there on our net debt, our net debt is around SEK 10 billion, you could say, to make it easy now, and it should go down, of course, towards year-end. Then if you look at the maturities we have in place, 2017-2021, that adds up actually to SEK 9.7 billion. So all of our financing for the net debt is in place, and it only matures as of 2017, the earliest. Which means that we have anything that matures before that day is actually headroom, and we have ample headroom in place to deal with any need.
We have no financial covenants in place, and we want to keep it like that, and then we are committed to solid investment-grade rating, which then completes my presentation a little bit. Yes, still in time. It's turned red now, but it's still within time. So yeah, happy that you're here with us today. I have been the CFO now for the company since January first, and this has been a tremendous experience for me, and I would like to witness as well that I think, I'm very happy with the performance of our line management.
But I'm also happy to say that we have a back office organization when it comes to finance, legal, and risk communication that is really ready to support our business, has been ready and is performing very well, and that we have all the means to support the line people that needs to make the business happen. Thank you very much, and Micaela, I turn back to you.
Yep. We'll do another round of Q&A . So please, Alf and Luis and Christian, please come back to the stage. Yep, please go ahead, George.
Hi, it's George Gregory from UBS. Couple of questions, please. First, in terms of the margin target, the target to grow margins. Alf, you said that if you weren't undertaking this strategy, you might be losing 20-30 basis points per annum in margin. If we work through the very simple math, the net of what you gain from shifting to technology contracts and losing 20-30 basis points of natural attrition would leave you, would be a zero-sum game. You have articulated how you plan to move up the value chain with your security and with your technology contracts, but the missing part of the puzzle is what happens to the rest of it. Ultimately, that is probably what is going to determine your margin in the coming two years.
Perhaps you could just spend a minute, touching on that, and then I have one follow-up, please.
Well, I mean, you will have a margin erosion, and it is debatable whether that is 0.1, 0.2, or 0.3, and it probably varies from place to place. But there is some if you do nothing, if you just hang around and just run your business and just don't do nothing, you will have a year-on-year margin erosion. We think that the strategy we have put in place and the improvements that you see here and the testimonials that you have had proves that we are able to move up that value chain and make significant improvements to our margin. We do this in total, the net, the net-net, with everything else equal, we expect that to improve the margins years to come.
Okay, thanks. The second question relates to Argentina. You laid out the gap versus price and wages. At the last quarter, we had some pressure on the margin due to a timing difference. Where are we now in terms of Q4? Will we get the full catch-up in Q4, or is there still a period where it won't be reflected?
Yeah, it happens all the years. You see, every year the catch-up is, it takes quite a time, but we always manage to be back on track. So actually, we are there right now. So for Q4, you will see that we catch up with the line. It happens every year the same, because, you know, the association with the customer, the invoice, so it takes time. And it's key for us to be back at the level. We don't accept lower levels than we end at that part.
Thank you.
Please, Paul, in the middle there.
Thanks. It's Paul Checketts from Barclays Capital. I've got, two, I think. First of all, can I clarify something to start? If you're converting contracts, it looks like it often leads to a revenue move downwards, something like 3.5% in that example you gave. Yet you're telling us that you expect revenues to grow slightly ahead of GDP. Is the missing link there, the market share gains?
I mean, it's not... Many of the examples you have seen here is that when we convert the existing portfolio, you will have a reduction on your sales. Yes, that's probably a fact in most contracts, not all contracts. You have also seen a couple of examples where we actually increase the amount of sales because we offer this client a completely different solution, and you will see some increases, and that varies from place to place. What is the net of that? It's hard to tell, but there is, of course, a risk that that will be less than the GDP growth, let's say, in the marketplace, because you will have to give away some more, some top-line erosion when that transformation happens. Hopefully not. It's hard to tell. It's hard to predict.
We are early in the phase, so it's not for certain, but it could happen. But we will compensate that, we think, because we will gain market shares, and we will be able to gain market shares not only from stealing from competition contract and winning, because we have a better solution, but also because to challenge the insourced market, and there will be, there is quite some movement on the political level that the margin will be enlarged. So these things together and some GDP growth, that makes that picture looks more pretty than if you would just take that standalone piece and just extrapolate that.
The second one was on CapEx and the increase required. Bart, are you telling us that if you hit the target, you would expect up to SEK 700 million extra per year in the next two years?
No, SEK 350-SEK 400 per year.
So in total then, your number of two years?
Yes, that would be our number.
Okay. And on the depreciation point, you're going to depreciate it over the contract length?
Yes, which-
Presumably you'll expect to roll over some of those contracts.
Yes.
So when that occurs, you will not have that cost going through?
Exactly. So on average, we will. Well, some contracts run on three years, some on five years, so we will depreciate that over the initial contract period, and then if the contract rolls over, then, yeah, many things could happen, but that should be beneficial to our margins then at that point in time.
Yeah, and that makes, if I may add to that, that makes a big difference. I mean, if you have had a home alarm in your house for 10 years, in your apartment, you paid for it at least twice. So, and that is how that business model works. So in the first three or four years, or five years, in the worst case, you depreciate your system. But if you then stick to that contract for a 10-year period, you have a pretty nice margin as the supplier of that equipment over the second half of that contract, during the time that you keep that, and you just roll it over.
What, what—so in that, in that example you gave, you gave us the, the direct and indirect costs pre and post. How would they break down in terms of, you know, used to maybe be 90% labor? How would it break down?
Sorry, I didn't-
Yeah. Yes, I mean, it's, it's simple.
You want to second?
So 90% of our P&L today is labor cost, of course. In this case, you would have a depreciation of 60. It was the investment, so divided by five, you get to the annual depreciation, and then on top of that, you will have some maintenance cost, and then comes the guard, I mean, the remote monitoring, and then comes any mobile. So that is how you should look upon that. But the technology, if you have like a depreciation of 60 divided by five, which is 12 in this case, you should probably add another 30% to have the maintenance in place.
Thanks.
One thing also in connection to your question, I would like to say is that what mostly happens in reality is that after three or four years, the customer has done some rebuilding, or he goes into new premises, or he closes down something, and then you can already renew your contract for, yeah, hopefully another four or five years, because then you need to make some new investment, maybe a smaller investment, and you prolong your contract as well.
Okay.
Any further questions?
Looks like-
Yes, one here, please.
Yeah. Hi, Tom Bennett from RBS. I just want to ask again about market shares and your trends in that regard. Is it too early to tell how they've gone? Because you have this new sales tool, you have this new technology platform you're implementing. Are you seeing a visible impact in terms of share of new wins and therefore market share development going forward, or is that too early to tell?
It's too early to tell. I would say that if we take the big picture, the general picture, we have kept our market share over the past five or 10 years, whatever period you choose to take. There are ups and downs year- on- year. Sometimes we lose, sometimes we win, but generally speaking, we have kept our position. Then you can take out Sweden, for example, right now. We are winning market share this year and next year. We are winning. It's happening. But generally speaking, the big picture is that it's too early to tell. It's too early to show that we are gaining market share.
But we are convinced that when we are working with that, and when we see it's happening, and when we're implementing that, and you have some testimonies of that here, we are actually not only converting our portfolio, but also have a tremendous weapon in front of competition in order to gain that market share. So we are certain it's gonna happen, and we see it all the time, and there is a lot of confidence in the organization, and we are quite bullish in that when we talk within our organization, when we meet, that we have a good chance. We have a weapon now. We have the weapons to fight the battle, and we have more weapons and better weapons than most of the other players.
That makes us confident that we will be able to grow faster than the security market in the years to come. There are some signs of that from bits and pieces, so it's not the guesswork, because there are some signs, but you don't, if you take the big picture, 18% market share in Europe, and the same in North America, you cannot say that we have 1% or so in the last year. It's too early on that level to make any, to prove it, to give you any proof of that. But we wouldn't say it today. It would be too dangerous if we didn't feel confident that that is happening. You had a question, I think, didn't you? Or you were just waving to us, I'm not sure. You had a question, okay, go ahead.
I want to ask on insourced. Have you actually had any experience with that or doing any work there? And also on the policing, you mentioned that-
Yeah
You would like to do more on that as well.
No, I think it's more... I mean, I mean, we have had hopes on that for a long time. I can certainly, I'm sure Santiago can give some examples, for example, in the educational sector, we have a healthcare sector in North America. But on the other hand, where are things going the other way as well, some insource in the nuclear industry and things like that. So it hasn't changed a lot. But what I'm trying to convey is that when you have something completely different to offer, but because we have generally been competing with similar services and similar content to that market than they have themselves, and then they protect themselves, they protect their people, their structure, then now we have something totally different, with a totally different cost structure.
Then it will be much more difficult to be protective when we have something to offer. So that's why we feel that there is a chance now, which is totally different, as these things moves on than it has been in the past. Remains to be proven. It's an aspiration and hope, but it on a good basis. Then we have seen some small, tiny pieces within that, government authority levels, but there is a huge debate, right? So discussed in many, many places. In events, for example, to use less police and more private security companies to manage that. That's football games, whatever events you have, because we will do that similar kind of job at a much lower cost. Some of the police work could certainly be outsourced. It's being discussed, various levels in different countries.
There are some small bits and pieces. I know, for example, drink and driving tests and harbors today in Sweden is done by the private security, used to be done by others. But that's a tiny example. But there's a huge debate about that because they need to cut their cost. So I think there will be some movement in that respect as well.
So that, that's quite developed in the U.K., but not so much in-
It varies from country-
Anywhere.
It varies from country. Then it backfired because there were some difficulties, but, I mean, generally speaking, the trend is there. There will be a continuous trend in that direction. Prisons has been such an area, immigrations, things like that.
Well, I still have the microphone. Can you just ask, quickly?
Yeah.
You're America as well. I just want to check on your aspirations. Are you still keen to have a business in Brazil? And on Argentina, what is your take on the valuation, the currency? Please, thank you.
Who should take it?
Christian.
Very specialist, better than me.
Argentina. Yeah, the rhythm of the valuation was lower than the inflation rates, because it passing during the last, I may say, five or six years. But this years, it changed. The valuation rate start to be ahead of inflation, and it started to catch up with the line. We take a long time. We are not foreseeing a huge devaluation as we used in the past. We are foreseeing a small, little pieces of accommodations. In fact, you analyze the three last month, we are around 40% of the valuations, again, 25% of inflation. So it's a sort of catch up again in a step-by-step basis, another huge. This is what we are foreseeing by now.
And all the government, through regulations, are trying to hit the trends and not as a big shot. So from our perspective, we are not foreseeing that, at least for the next two years. Yeah.
Brazil, Luis?
Brazil, okay, we are interested in starting in Brazil, but it is a very complex country now in the legal point of view. Of course, we are very careful to choose the correct timing to enter in Brazil, where the legal conditions are absolutely ready for us. Of course, we're looking at the targets in Brazil, no doubts.
... Thank you.
Okay.
Okay.
I think that's-
Yep, one more in the middle, Mikael Laséen there, please.
Hi, Mikael Laséen, Carnegie. I have a question regarding Europe and the technology transition that you expect. Is there any reason to believe that there will be sort of a delay in this take-up from here? Or should we expect a linear trend, development of the penetration? Can you explain?
Yeah, you should not expect a delay. That is out of our minds.
Good.
We don't even allow to think in that way. So I think you will see an exponential journey, because we are in early phase, and it takes time. So I think the next two or three quarters, it will not be dramatic, but then you will see it. Because what we have—we are in a very much of a rollout phase throughout 2013. We need to convince the clients, we need to prove it, we need to get some references in many countries. We need to sell it, we need to sign the contract, and then we need to start to invoice. And the moment it shows up, when I declare those numbers, those six, seven and a half, etc., that's when we invoice.
And then we have to do that on a full quarter basis in order to show up in the numbers, right? That's why I say you should not expect dramatic changes in the next few quarters, but then you will see it, and we will reach that target.
What about the sales cycles? What's your experience so far?
Sorry?
The sales cycles to sell in this concept.
How long it takes?
Yeah.
That varies. Maybe, I mean, you can say that or say... Yeah, here.
May I say it? It takes time. It really takes time because you have to understand whether... To be successful, it takes time. You must understand the client needs, the operation analysis, which of each issue we are going to address, and which, what product, then combine those things under the package, and then convince the customer that it's the best solution, negotiate the contract, and then implement. For our experience, between four and six months, it's taking a medium-size, well-organized, proven, with margins, solution. So it's really. But the point is, when you start up, it's like a wave, no? You know, because it's when the customer feels good, so another customer see the experience and also wants the same solutions.
It's hard to start, but when the wheel is going, you are getting faster and faster. In fact, in our case, each month we're getting faster and faster, and we have a long queue of customers already in the side, in the implementation process. But as Alf says, if you don't invoice, we don't count in our books.
In addition to that, it's also our own people. When you sell your first contract, and you're a branch manager and sales guy, you will be nervous. You don't know all the things you need, a lot of people to hold your hand. When you've done it once, and you've done it twice, and you got the wins, you will be stronger, more confident, and then you, I think, you will also get traction. So it goes a little bit slower in the beginning, and after a while, you really, it will move on. And we will pass that 18%, but we'll do that for the next Capital Markets Day. But, so we have something to say for that. But, I mean, 18% is not the end of end of our journey.
It's certainly to continue beyond that 18%, but you need to pass that one first. All right.
Okay. Then you have some final remarks.
Yeah, just say two words-
Yep
... Before I should say that, thank you very much, everyone, for coming and listening to us on the webcast. For you who are here, it's been a pleasure to have you here. We don't do this very often, but every second year or so. So thank you very much for coming here. And as a concluding remark, I will say, I hope that we have proven to you with testimonies that we are executing, that this is real, it's happening right now. It's not dreams, it's not plans, it's not PowerPoints, it's going on, and it works. The strategy works. So we are not afraid of the future. We are not. We don't fear change.
I think we see this as a golden opportunity for us to be very successful and develop Securitas in a very successful way in years to come. So thank you for coming.