Tempest Security (TSEC) ABGSC Investor Days summary

Company overview and business segments

• Provides full-scale security services, including man guarding, investigations, and background checks, segmented into Security Solutions and Risk Solutions.

• Operates in Sweden, Denmark, the UK, and recently divested its US business to focus on core markets.

• Employs about 1,000 people (500 FTEs) and reported SEK 487 million in trailing 12-month revenue, ranking third in Sweden for uniform man guarding.

• Security Solutions is the largest segment, contributing 75% of 2023 revenue, while Risk Solutions offers higher margins and specialized services.

• Growth achieved both organically and through acquisitions, including Falck's alarm monitoring center and Gothia Protection Group.

Financial performance and profitability

• 2023 revenue was SEK 470 million, with a slight increase into 2024, but EBITDA margin dropped from 5.3% in 2023 to 1.5% in the last 12 months.

• Security Operations Center (SOC) is a key profit driver, with ongoing efforts to expand services and upsell to existing clients.

• Risk Solutions segment, though smaller, targets a 35% EBITDA margin before overhead, compared to around 10% for Security Solutions.

• Q3 2023 was notably weak due to client losses and underperformance in the US and Denmark, but additional orders are now up 50% year-over-year.

• Underlying business margins are improving, with expectations for better quarterly results ahead.

Strategic focus and market trends

• Increased demand for security services driven by rising crime, terror threats, and new regulations, especially after Sweden joined NATO.

• Strategic shift to prioritize growth in Sweden and Scandinavia, reducing exposure to distant or underperforming markets like the US.

• Danish operations have turned around after a recent decline, while UK remains profitable; Swedish Risk Solutions is undergoing a turnaround program.

• Security Solutions faces resource challenges, focusing on recruiting and retaining high-quality staff to maintain service standards.

• Management decentralization and close client relationships differentiate the company from competitors, leading to higher upsales and retention.