Southern Cross Protection Managing Director Patrick Bourke, speaks with Chris Cubbage, Executive Editor for APSM about SIS International Pty Ltd (SIS), the fastest growing security provider in the Asia Pacific region, acquiring a minority stake in Southern Cross Protection.
SIS has been active in the Australian market since 2008, when it purchased MSS Security, previously known as Chubb Security Personnel. Since then, MSS has consolidated its position as Australia’s largest security company with in excess of 5,000 employees and a turnover of nearly AUD$400 million. As Managing Director, Patrick Bourke says the agreement represents a significant milestone in the growth of Southern Cross Protection.
APSM: Certainly going through with interest the take up by SIS in Southern Cross, I suppose maybe you can walk us through the deal and summarise some of the key aspects.
PB: Well both parties were well known to each other in that SIS, when we were divested from Chubb back in 2007/2008, SIS bought the guarding component of Chubb in which they branded as the MSS in Australia or re-branded as MSS, and we spun off as Southern Cross Protection. We obviously went through that process jointly and then there were a lot of familiarities with the circumstances and indeed with the Indian parent company as well. So we worked very closely together since we were divested and it didn’t seem all that remote of an idea for us to offer SIS the option of taking up an equity role given that we’ve worked so closely on so many large contracts together.
CC: Were Southern Cross looking for that partner or is it something that just happened naturally, or is it a significant move by SIS to take another step forward?
PB: It probably happened more naturally than anything else, although Southern Cross was certainly looking to get an injection of equity capital. So the very first people I spoke to were MSS and SIS to do that. It was only going to be more of, if that didn’t work out, we’d have to go back and have a serious think about who else to approach. But it was a logical decision to approach them.
CC: And obviously you are going to keep the brand at this stage?
PB: Oh, absolutely! We will continue to trade as Southern Cross and its only a minority holding. But really it was more about formalising a commitment to work with each other plus providing some of the capital we needed to introduce some new products and reinvest in the business.
CC: And SIS, through MSS Chairman George Chin, I’ve had a look at recently and interviewed their Vice President of Operations for SIS Prosegur in Sydney, and having a look at that company, they’re certainly the world’s largest and certainly in the region…
PB: I reckon they’d be the largest in Asia Pacific.
CC: Easily in the Asia Pacific, and they’ve partnered with the world’s second largest cash in transit (CiT) company in Europe through Prosegur. Are you seeing this group continuing to grow? Are they making noises about continuing to expand into the market?
PB: Yes, I think they are very hungry for growth, like many Indian companies at the moment they see their opportunities to take their economy of scale overseas and I think they will continue to acquire businesses and diversify throughout Asia Pacific, I am certain of that.
CC: And what do you see as the major market drivers at the moment?
PB: In Australia? I think there is continued pressure from customers to be demonstrated that there is real value in what they’re buying. I think that there’s going to continue to be a consolidation of operators. The increased compliance with Fair Work Australia obligations is placing a strain on some of the smaller operators and certainly the Tax Office’s changes with regards to phoenixing and also non-payment of statutory receipts within three months. We’re seeing a lot of small and medium sized players under pressure there now.
I think that is only a good thing for the industry though, they’re positive and long overdue developments.
APSM – In terms of the industry and cycles of consolidation and the tipping point – SIS has been experiencing 20 per cent growth annually in India, where as the Australian market may not be offering that growth, is that one of the dangers.
PB: I think the Australian market will continue to grow better than inflation rates but I think 3 – 4 per cent per year is reasonable and not anything faster than that. There will be movers who will grow their share during the next five years because there is a greater awareness amongst customers to make sure they’re buying from reputable providers. There is a greater acceptance within the industry that everyone needs to be doing the right thing in order for us to get wages up that security officers earn. At the moment there is a majority in the industry who would like to see security officers earn more.
APSM: Isn’t that the bug bare though with the labour costs in the current market, it’s difficult to get those wages up and that triggers other events, such as the take up on new technology, like CCTV and the perception that cameras will replace manpower. Do you see that pressure in Australia when you compare it to countries like India, where the labour market is much cheaper?
Certainly we’re at a different stage, no two ways about it. The cost of labour in India, and Asia generally, obviously makes it much easier to utilise labour resources. In Australia however, I believe the trend will be towards better educated, more resourceful security resources and manpower working more closely with technology to make them more productive. As opposed to swapping directly to technology. That’s the trend we will see.
There will be a real emphasis on making sure that security resources are productive. The concept of a guard standing and staring at a brick wall are long gone. People want to see active, well trained security professionals providing a role using technology, with less labour deployed in the market but the labour that is deployed will be more effective and productive.
APSM: What are some of the key outlooks for Southern Cross Protection over the next twelve months?
PB: One of the main initiatives we’re working on is the introduction of new technology to our vehicles. So we’re moving to in-car cameras to assist with collation of information when we visit customer’s premises. We’re also looking at a new generation of mobile devices and handheld technology to replace the ‘old fashioned’ in-car terminals. We’ll look to make all of the technology enabled in the hand of the security officer as opposed to a control room or in the car. The other aspect is we’re continuing to invest heavily in training and spent over $500,000 last year on training our managers, supervisors and patrol officers, and we’ll spend a similar amount this year.
Related to improved standards and training, what’s your view on police privatisation. Is this something you see as a future opportunity?
I do but obviously the main issue will be on where is the line drawn. I think the private sector has a valuable role to play in a lot of those auxiliary services relied upon for police services to provide in the past. Police services are very highly trained, strong investigative skill base and very expensive resources and I think they can be better deployed and better utilised working on the more serious criminal tasks and I think the private security sector, in particular with better training, has a role to play in providing more of those periphery activities. I really do expect that to increase over the next 15 – 20 years in Australia.
Patrick commenced his career as a Chartered Accountant at KPMG. After working in the United Kingdom and New Zealand, Patrick returned to Australia and held senior executive roles at Mayne Nickless, Chubb Security and TNT including launching the Australian operation of a new SameDay business unit.
After 25 years in business he formed his own management consulting practice. Patrick is Managing Director and set up Southern Cross Protection from part of the Chubb security business in 2008. Pat has other Directorships at ayers Management Pty Ltd and Endeavour Fleet Pty Ltd.
patrick.bourke@sxprotection.com.au
