Security firms play the waiting game

  • 2009-05-14
  • By Adam Mullett

MARKET LEADERS: Security firm G4S is by far the largest company in the industry and is estimated to be bigger than the next four companies combined.

VILNIUS - Security companies are feeling the pinch as businesses and private individuals are forced to cut back on their security budgets in the face of the recession that continues to ravage Lithuania.
With every business and government organization in the country having to slash its budget, security is often one of the first things to go. But the situation is far from simple as crime is also on the rise and demand is expected to soon increase in turn.
Many security services companies are simply waiting until people realize they need the service and business starts to flow back in 's in the meantime, however, those companies are struggling to stay afloat.

A representative of the Ministry of Interior told TBT that since the onset of the crisis there   has been a noticeable increase in crime rates. The exact reasons behind the increase are still unclear, but rising unemployment and an amnesty for criminals at the beginning of the year are suspected causes.
Despite a rising fear of break-ins, some security companies have seen their revenue plummet. Apsaugos Komanda Director Juris Adomaitis said revenues had fallen by 75 percent year-on-year in the first quarter of 2009.

"To compare our sales of the first quarter of last year and now 's the decrease in sales is about four times. Last year in the first quarter, we had contracts of 17,000 litas and this year it is about 4,000 litas. I guess our clients have no money to pay for security. No money to guard," he said.
Romualdas Jonaitis, the general director of the Klaipeda-based Argus security, also said he has seen a decline in business because their clients simply can't afford it. He said some people are even resorting to their own measures to save money 's like staying at home permanently or installing their own security devices.

Other companies, however, have not seen a significant change in business. G4S Lietuva, formally Falck, said they have noticed only a small drop in business. The company has a large and diverse portfolio making it more immune to market pressures, its director said.
"In general we haven't detected any big increases 's [but] it depends on the players in the market and marketing campaigns," G4S Lietuva Managing Director Saulius Paulevicius told TBT about his company's threats.

"The volume of certain products has gone down 's a lot of clients have asked us to bring down the price or have asked to changed their terms.
"Guarding is going down because the companies that are having trouble with money decrease the costs and they decrease the number of hours or cancel the contracts. We have a big portfolio and we do see some volatility but nothing of a critical level," he added.
G4S is the largest security company in the country. Paulevicius estimates that its revenues are equal to its next four competitors combined.
Eks Komisarai president Alius Sadeckas said his company will manage with the changes to clientele.

"Demand for some services is falling and for some services are rising. Naturally, the demand for security services for construction has fallen because the market of construction collapsed."
"But the worsening crime situation has raised demand for other security services 's in the private sector, in supermarkets, in private premises areas and so on. Generally, we expect our turnover to be the same as last year or grow 2 to 4 percent this year, even though the price for security services has fallen a bit," he said.


Before the crisis, companies had ample funding to protect their buildings from theft or other crime, but it was just a preventative measure, Argus said.
"During the period when the economy was growing, companies were requesting security services more as preventative measure, since they had an ability to do so. During this period of time it's more a necessity," Jonaitis told TBT.

Statistics from Eurostat, the European Union's statistics department, show that only 7 percent of Lithuanians perceived crime to be a problem in their neighborhood during the boom in 2007.
While current statistics are not yet available, Adomaitis said the focus of his business is changing in the crisis.

"More houses, less companies 's lots of companies are closing down or some are suffering payment difficulties. Our stable clients are the houses."
"People are afraid because people read the news because there is more crime in the private property 's they are concerned about this 's there is an increase in crime of about a 30 or 40 percent increase depending on where you are. It is more or less stable in the countryside," he said.
Jonaitis' company hasn't noticed a rise in crime, but said that is not unusual.
"At the moment, not really, since the criminals are choosing unsecured objects more often than secured ones.

Paulevicius was quick to quell fears, saying that it is common to see a rise in crime in spring.
"In our market, I wouldn't say that something significant has happened. Perhaps there are more attacks on private property, but it's not significant. Usually we do have a fluctuation during the year. Before summer it goes up and then in summer it is an easy time, but in autumn it goes up again," he said.

"Yes, [we have noticed crime rising] and statistics show the same. We expect the crime level to rise more in the autumn. We have to pay attention to thefts and especially to frauds," Sadeckas said.


Like most services during the crisis, security is going down in price. Some people are even expecting this to lead to more customers.
"There are more and more companies providing security services 's last year we had 40 new companies trying to offer security services," Adomaitis said.

Adomaitis said some of them would be amateurs or retired policemen aiming to supplement their pension, which they receive after retiring from the police force.
"I suppose people don't understand the situation in the market and what they are trying to sell. To start a serious company, you need to invest a lot."
Many companies are dropping their prices so low that they are selling below cost to get attention from potential clients.

"Another question is that our rivals have dropped prices significantly so there is no chance to sell more. They are price dumping below the cost of the services in other parts of the country. We are related to the economy in general 's when companies suffer, we suffer too. We are paid by customers and if they can't pay, then we can't either," Paulevicius said.

Sadeckas said it could spell death for many companies.
"The negative part is that the debt level is raising in all sectors. Private and government entities are not paying for security services 's and other services of course. It means that security companies must have internal financial resources to finance the negative cash-flow. I think some of smaller companies will not survive in 2009-2010," he said.

In any case, Jonaitis said customers will come back when they need to.
"As mentioned earlier, criminals are choosing unsecured property, so people are motivated by their own bad experience, by the experience of their neighbors and are requesting security services after they themselves or their neighbors have been robbed," he said.
Sadeckas hopes that he will still gain some customers during the crisis.

"The crisis makes the crime level go up. The crime level going up makes people search for security. The worse financial situation makes private sector and business search for cheaper solutions 's for example we offered a video surveillance system which is connected to our central security station instead of manned security. In our central office, security officers monitor video signals coming from clients. It is cheaper for the client than maintaining manned security services."