Hi, and welcome everyone to ABGSC's Investor Days. My name is Stefan Knutsson. I am an Equity Analyst working at ABGSC, covering the service sector. With me today I have the Founder and Acting CEO, Andrew Spry, for Tempest Security. Welcome.
Thank you. As Stefan kindly introduced me, I am currently the acting CEO of the company. I founded the company in 2008 and have since, up until 2022, been the CEO of the company. Having come into 2022, I decided to take a more strategic position in the company and hand over to somebody else. We are now in a position where that ordinary CEO is on maternity leave, so I am here standing in her case. It has been a couple of years since I did these kind of presentations, so I hope you bear with me in any forms of mistakes. To give you a brief introduction about the company, we were founded in 2009. The truth is it was founded a bit earlier than that, but our proper inception was in 2009 when we were accredited as a licensed security company in Sweden.
We are a full-scale service provider of Security Solutions. We do basically everything from bodyguarding to uniformed man guarding, investigations, and background checks. We have segmented the company into two main segments, Security Solutions, which encompasses uniform man guarding and what we refer to as Risk Solutions, which is more qualified security solutions that are not uniformed. So where we do investigations, where we do background checks, the bodyguard part of what we do is under Risk Solutions as well as our international businesses. We currently run operations in Sweden, Denmark, the United Kingdom, and today the U.S.A., but as of tomorrow, no longer in the U.S. We have just signed an agreement to sell the company in the U.S. to our country manager. I will get into that a bit later on. We cover most of the world.
We do part of it in our own books, but we also have a global network of subcontractors that handle the areas where we are not present ourself or where we feel that the knowledge in our company is not sufficient to provide the services that we need to do on the level that we need to provide them. We are approximately 1,000 employees. If we look at it as full-time employees, it converts to about 500. It has mainly to do with the Swedish uniform man guarding part of the business where a lot of people work part-time rather than full-time in the industry. Trailing 12 months or last 12 months, our revenue has been SEK 487 million , which puts us at the third-largest provider of uniform man guarding services in Sweden at least. We did for full year 2023, SEK 470 million.
There is a slight increase in revenue there, and margins 2023 were 5.3% in EBITDA. They have gone down in the last 12 months. We, in our last quarterly report, reported 1.5% for the trailing 12 months there. If we look at the raison d'être for us, where it comes to macro trends that benefit us, we are currently in a situation globally, and even more so in Sweden, with threats from foreign countries, with internal threats from organized crime. There has been an increased demand overall, not only in Sweden but in other parts of the world as well, for security services as a result of the perceived insecurity in society. I say perceived, but I would like to take this opportunity to say that it is a very real perception.
There is an increased threat to all levels of society, whether it be to children at school or people in prominent positions in society or in the business world or politicians. There is an increased threat and, as a result, the security industry is booming. We also have hand in hand with that, new laws and regulations. Sweden has just joined NATO. There are a lot of factors that play into our industry in a positive sense, where increased requirements on companies and authorities provide an incitement for them to increase their security, purchasing from players like us in the industry. If we look into the financial development of the company over the last few years, our first reported year here is 2017, the year we IPO'd on First North. We have had a fairly steady increase revenue-wise.
It has been far more interesting to look at our revenue than it has been to look at our EBITDA, which has been both negative a few years and then positive, and it has been increasing since 2020, to go into a dip again now in 2024. We have reasons for that, but we also have a fairly positive view on how we are working to change the negative trend that has been the first three quarters this year, and we have quite a positive outlook for the coming quarters ahead. The company has grown both organically and through acquisition. As I said, our inception as we count it now in 2009 was an organic touch. We started with a few contracts and have since grown both through a few of these acquisitions here listed.
In 2017, we did our first real acquisition that has had any impact on our business, I would say, which was when we acquired Falck's alarm monitoring center in Sweden. We set about in 2012, a program to increase the services that we provided from having only provided uniform man guarding in Stockholm. We set a five-year plan to increase it geographically, as well as to increase the sections and segments that we worked with, and we saw that we needed to provide what we call Risk Solutions. We had a wish and a want to start our own alarm monitoring center, as well as to dabble with technology as well in providing it to our clients. Not necessarily ourselves, but at least have it in our offering.
We quite quickly understood that setting about starting our own alarm monitoring center would be a fairly costly way to establish that part of our services. The opportunity arose by chance when I called Falck in Denmark to see if they would be interested in talking about selling their alarm monitoring center in Sweden. They were apparently in negotiations already to do that. We managed to nab it at a good price, way lower than it would have been to establish it ourselves, and it has been one of the best investments we have done so far. It went from a large deficit on a monthly basis to within a year, we did a turnaround. We cut costs, increased price over a year, and managed to retain the majority of the clients, and it has been profitable ever since.
We have a fairly strong EBITDA from the, we call it a SOC, Security Operations Center. Now, we see that we can increase that even more over the years, and we are far from satisfied with the revenue from that part of our business. It does not mean we are dissatisfied, it just means that we see that there are a lot of opportunities to upsell existing clients, but also to increase the portfolio of services provided from there. Going on the year after we IPO'd, we acquired Gothia Protection Group, a Gothenburg-based risk solutions service provider to increase that offering, and we have since continued with a couple of acquisitions within our Risk Solutions segment, Fusion 85 in the U.K., as well as Dynamic Security Solutions in the U.S. Beyond that, we have through by organic establishment, started up in Denmark as well.
I am going to touch on that just briefly with regards to the U.S. The U.S. did for the few first couple of years, a fairly good profit, and we saw a lot of opportunities arising from that part of our business. But going into the last quarter of 2023 and throughout 2024, we have seen a diminishing revenue as well as a diminishing return on that revenue going into red. We decided that we needed to look into whether that was part of our future or not, and we came to the decision that rather than throwing good money after bad, we would divest and not necessarily get out of the U.S. market. We can still, through DSS, provide that service to our clients, but not do it in our own books anymore. We have been around for a few years.
We have managed to establish a well-balanced customer portfolio, throughout the company, so all of our services. A lot of these clients have been with us for quite a few years. We have companies that have been with us from day one, are still with us. The British Embassy has been with us for 10 years. Stockholm University as well. Scandic Hotels for quite some years as well. So it is our belief that we have a fairly happy group of clients that are satisfied with the services we provide. We do, obviously, on a yearly basis, tests to see whether they are still happy and the results always come back as good. So on the private segment, where it comes to clients, we are fairly secure that the majority part of them will stay with us for a long future.
The two segments that I talked about, Security Solutions and Risk Solutions, are diversified in the sense that one of them, Security Solutions, is a lot bigger and the other, Risk Solutions, is smaller, but in return, in theory, has higher margins. Security Solutions has mainly been organic growth since day one. It is the part of the business that we started with when we incepted the company. It has been the engine and the brick and mortar in our company from day one and continues to be so. We have a fairly high level of respect within the industry, I would like to say, without sticking my chin out too much. I am pretty sure that the levels that we deliver our services on are quite higher than those of our competitors. The increased revenue in the company is a proof of that, I would like to say.
The services encompass, as I said before, uniform man guarding business, which is both stationary and mobile. It also encompasses our security operations center, which is an alarm monitoring center, but with added services beyond just monitoring intruder alarms. We monitor surveillance cameras. We monitor building systems like ventilation, elevators, et cetera. As I said, I would like to say the most profitable part of the security industry where it comes to physical security, and it is also scalable in a sense that no other part of our business is. The operations are stable. The contracts are mostly over four years. Some of them stretch over five, six, even seven years in some cases. There is a high personnel intensity.
The highest part of our cost basis in that part of our group is obviously, salaries and costs for staff, which also means that in times of pandemic, hopefully not again in a few years, our results are affected by high levels of sick leave and as a direct result of that over time. But when everything is normal or normalized, it is an industry that has steady revenue streams and steady profits as well. During 2023, 75% of the group's total revenue comes out of Security Solutions. As I said, it has been the brick and mortar of the company from day one and the majority of our DNA strain comes out of the Security Solutions division. Risk Solutions was added in 2013, when we started providing background checks and close protection or bodyguards in daily terms to clients of ours.
The profit margins there are a lot higher than they are in any other part of the staffed security services, i.e. the uniform parts. We decided that we would venture into building a division of that organically and through potential acquisitions. Again, Gothia Protection Group that I mentioned was one of those. The services we provide there are background checks in conjunction with clients of ours hiring new staff. We do security interviews, which is something that is becoming an increasingly large part of what we do. The laws around protective security in this country require both authorities and private sector companies involved in security regarding the nation to test potential recruits as well as existing recruits on an annual basis, through security interviews.
We do a lot of investigations, both around counter counterfeiting, as we refer to it, helping our clients remove counterfeit products from the physical market as well as from online markets. We do security consulting, personal protection, and brand protection again. Something that we've done for quite a few years. Something that we see has a high revenue in the sense that it's 25% of our total revenue, but it also has a higher margin than our Security Solutions division. We expect 35% EBITDA margin out of this part of our company prior to overhead costs. That is in comparison to security, it says 65% here. I'm not quite sure that's correct. That should be around 10%. It's, in other words, a lot more profitable.
Looking forward, the current situation in the Swedish market and to some extent, the Scandinavian market with external threats, has made us focus a lot more on our future growth within the borders of Sweden rather than looking beyond that. There is an immense difference in the way our clients in Sweden now talk about their security needs from what it was like only four or five years ago. The increased interest and the demand-driven development of our Security Solutions division mostly has made us reconsider the necessity of being in other countries to grow our company the way we want to grow it. It doesn't necessarily mean that we're stepping out of all of the countries that we're in, and that's not that many anymore.
The U.S. making a loss, being too far away geographically as well as culturally from us, was a decision we made just recently to step out of. The U.K., Denmark are a lot closer, and the U.K. is profitable. The Danish entity has been profitable up until last year, where it started going down, but we've made a turnaround there now, and we're looking forward to growing that as well, going forward. We've done a lot of work on looking into where we should be and what we need to do to retain those markets, and we've also done the same in the Swedish market. The Swedish Risk Solutions division has been running at a loss for a while now. There is a program to turn it around, cut costs, and increase sales as well.
Our ongoing Security Solutions division is profitable and growing at a very fast pace. Our immediate, I'm not going to say problems, but challenges there are resources rather than anything else. We need to recruit people that will stay and people that are representative of our company, both where it comes to the level of service provided, but also to represent the values that we have in our company. We do have an aim to be the most qualitative security company in Sweden. Not to become the largest one, that's way out of the books for us, but to be the most qualitative one, and in doing so, be able to service our clients in the future on the same level that we have done so far. I'm running out of time here, I realize that.
I am just going to briefly run over the downward spiral that we have had over 2023. We reported third quarter, which was way lower than we are used to. The third quarter is usually the best quarter of the year. There has been a lot of seasonal variations in the services that we provide, where Q3 has historically always been very profitable as a result of a few clients buying a lot over that quarter. Those clients are now no longer with us. The U.S. entity, as I explained, was running red numbers, and the Danish entity, which was extremely seasonal, had most of their services during the third quarter. As a result of those clients no longer being with the Danish entity and the U.S. entity running at a loss, our third quarter was in the red.
Looking into the future, we see our quarterly reports going back to where they have been, and even though we do not believe that the third quarter next year will be on par with previous years, it is at least not going to be on par with 2023, rather better than that, I would like to say. There are a lot of factors that give us trust to speak positively about the futures. One of them is that we have started counting additional orders now beyond those orders that are in the books in long-term contracts, and those additional orders are coming in at 50% higher now than they were 12 months ago. And the positive side on that is that the price for additional orders is a lot higher than it is on contracted orders.
We see that the underlying margin in all our business is increasing, even though, again, Q3 was a horrendous quarter. Stefan, I am not going to take more time now. Please go ahead-
Okay
-with your questions.
Perfect. Thank you very much, Andrew, for the presentation. I will follow up with some questions. You have an ambition to establish Tempest Security as the third largest security provider in Sweden. What would you say separates you from your direct competitors?
The services that we provide are, in the industry as a general, very homogenic. There's very little you can do to differ the service provision, especially when it comes to the uniform man guarding business. What we've chosen to do is decentralize the management of our larger contracts. Rather than having our operations managers working out of our central office, we decentralize them to sit with our clients. Maybe not the most economical way to run business, looking at it firsthand. We have, however, found that the upsale that we get for it, the contact we get with the client, and the relationships that we establish with our staff working with the clients, that kind of investment, it's difficult to count in money initially, but the return on that investment shows after one year. We get upsales beyond any of our competitors.
We have longer-standing relationships with both clients and with staff. I say, when you ask what differs us, I'd say the closeness to our clients. We work a lot closer to them than to my knowledge, any of our competitors do.
If we look at the Swedish market, we have seen solid growth in recent years, both from high criminality in conjunction with increased terror threat. Do you think this can continue, and what will be the future demand drivers?
Definitely. I don't see it stopping or decreasing in any sense from where it is going. On the opposite, I think it is going to increase. The need for security services is higher than ever, but it is not as high as it will be over the coming years. The increased insecurity in society as a result of crime, organized crime, terror threats, and also now our neighbors in the East, just means that people are going to need and also feel the need to increase their purchases of security services. Laws and regulations that I referred to previously are being pushed further than they ever have been where it comes to requirements for authorities to check staff before they start work, to check subcontractors before they are allowed into buildings, and most of this is outsourced to security companies.
My belief is that the industry will keep on growing at the same pace that it has now over the last couple of years for an unforeseeable future.
Lastly on profitability. The industry profitability is quite slim. You mentioned your Security Operations Center as being one part of the business that you can scale. Can you just give us a few example how you can grow revenues from that part of the business?
From the Security Operations Center?
Yeah.
Looking at trends and statistics where it comes to intruder alarms, that's always been the main part of alarm monitoring centers. It shows that the number of intruder alarms in Sweden at least is fairly level. It's not increasing anymore. It has been increasing, but it's not increasing anymore. Instead, it's stable and what we're seeing increasing is CCTV. So monitoring geographical locations or buildings or offices over camera rather than being there as a security guard doing rounds is becoming more common than it has been before. But what we aim to do is to increase the portfolio of services that we provide there to encompass monitoring systems related to buildings, for example. So to go beyond just doing alarm monitoring, to monitor surveillance cameras, to now move in to monitor other systems that are essential to keeping buildings in operations.
We believe there is a lot to do there.
Perfect. I think we're running out of time, unfortunately. I would like to thank you, Andrew, for coming here and presenting with us today.
Thank you.