Editors Angle: The Bull Is Back
While all of those are important, certainly you also measure overall revenue and recurring monthly revenue (RMR) growth. But at what level can RMR growth be considered â€œexceptional,â€ compared with just â€œaverageâ€?
Early indicators from the SDM 100, SDM Magazineâ€™s ranking of the 100 largest electronic security firms, show that 2004 was an exceptional year for RMR growth. But it hasnâ€™t been easy, because the security business is booming in systems that arenâ€™t attached to monthly monitoring revenues.
Most of the countryâ€™s largest security dealers said the market was strong in all sectors in 2004 â€“ with some firms citing video surveillance (CCTV), access control, and fire alarm systems as the greatest expansion areas. Some claimed that the residential burglar alarm market either grew more slowly or declined.
â€˜Is profitable pricing back in vogue?â€™â€œThe market for security systems in 2004 was stronger for commercial burglary, access control, and CCTV than in 2003 due to increased concerns about customer and employee safety and property protection,â€ reported SecureNet Alarm Systems Inc., Wichita, Kansas. â€œResidential markets were average in 2004 compared with 2003.â€
JMG Security Systems, Fountain Valley, Calif., reported experiencing â€œstrong, steady growth, primarily in the industrial/commercial markets.â€
Competition was stiff, noted Sonitrol of Southwest Ohio, Cincinnati. Still, â€œwe were able to get fair prices compared to 2003.â€ The firm gained 12 percent in RMR in 2004.
Kimberlite Corp., Fresno, Calif., which owns and operates 11 Sonitrol franchises in California, reported â€œstrong sales, particularly in the government/educational sector with ever-increasing demand for monitored video systems and verifiable intrusion detection.â€
These are two categories that can help security companies continue to gain RMR, especially as more traditional sources of monitoring â€“ residential burglar alarms â€“ may tend to slip in certain markets.
â€œGenerally you have to be bullish [on this industry],â€ noted Mike Barnes, Barnes Associates, at the 10th annual Barnes Buchanan & Mallon Conference, held recently in Palm Beach, Fla. Alarm systems work, there are great technologies available, and the insurance industry is mandating them, Barnes said, noting that â€œthere is a surge back to charging more for installations.â€
Is profitable pricing back in vogue? Why not, when the demand for security systems and services is clearly delineated. Investors are looking keening at our industry again, and for good reason.
â€œAll signs point to a continued level of mergers and acquisitions in the still highly fragmented security industry,â€ said Jack Mallon of Mallon Associates. â€œIt is a hot industry and the security threat is still there, which means there are numerous investment opportunities.â€