Brink's Company (BCO)

The article on this company has not been written yet. If you're the first person to write this article, it's a sure thing that you'll be credited as a Top Contributor. For tips on getting started, check out the sample article.

• U.S. Economic Cycles

TOP CONTRIBUTORS

Fan Zhou

Michael Mitchell

The Brink's Company (NYSE:BCO) is a leading global security services provider based in Richmond, Virginia. Its operations, outside of the USA are primarily located in Europe, the Middle East, and Africa (EMEA), Latin America and Asia Pacific. Combined, Brink’s has 492 branches operating in 37 countries ^[1]. From an organizational standpoint the business is broken down into two wholly-owned subsidiaries: Brink's Inc. and Brink's Home Security which together comprise a total of 57,000 employees. Brink's Inc. provides armored car transportation, ATM servicing, currency and coin processing, and other related services to both commercial and governmental agencies around the world. In recent years, Brink's has transitioned from a conglomerate with stakes in the natural resources industry into a focused firm that has its resources dedicated solely to the security industry ^[2].

Brink's Home Security (BHS), on the other hand, is the second-largest provider of security systems for residential and commercial properties^[3]. The primary consumers are residents of a single-family home and this group makes up more than 90% of BHS's customer base^[4]. On February 25, 2008, as a result of a review of strategic options that began in November of 2007, Brink's announced that it will be spinning off this sector of its business into a separate publicly traded company ^[5]. Investors will receive a tax free distribution of stock as the deal is finalized in the fourth quarter of this year.

Business Financials

During the 2007 fiscal year, revenues exceeded $3 billion and total profit amounted to 337.5 Over the past few years, Brink's has seen a significant increase in their revenue stream from overseas, accounting for 68% of their total revenues this past fiscal year million^[6].

Segment Breakdown

Brink's Inc.

Brink's Inc., as the oldest and most extensive security service provider in the world, has an extensive and complex infrastructure and logistical network that is made up of 1,100 vehicles and 800 facilities^[7]. This unit has seen continued revenue and profit growth over the four years as evidenced below:

Moving forward, growth in this subsidiary will occur through internal actions taken by management supplemented by strategic acquisitions that are aimed at expanding Brink's reach into both existing and emerging markets around the world. Moreover, Brink's, in conjunction with their global expansion has outsourced many of the securities services provided within this unit. Therefore, future growth will be contingent upon their ability to successfully outsource services at a lower cost with no subsequent decrease in quality and customer satisfaction. Overall, This unit represents 80% of the total revenue and 2/3 of the company's profits.

Brink's Home Security

Brink's Home Security (BHS) provides comprehensive alarm and security systems in more than 250 metropolitan areas in the United States and two provinces in Canada. While revenue and profits have grown at a steady pace, there has been a recent decline in the customer base that, if continued could have a negative effect on future revenue streams and Brink's ability to leverage capital into improving the technology of their services. Not only has there been an absolute decrease in the customer base but there was also a simultaneous increase in the customer disconnect rate, a ratio comparing the number of customers who cancel during the period with the total number of customers, to 7% which is a .6% increase over the previous period^[8]. However, more than 50% of customers who do disconnect do so as a result of business or residential relocations, which lie outside of Brink's control. That being said, even though Brink's screens potential clients on the basis of credit up to 30% of the customer disconnects that occur in a given year are financially motivated^[9].

BHS does not directly manufacture any of its home security systems itself but chooses to purchase much of them directly from limited third party distributors and suppliers. As a result, it has been able to keep inventory costs low but also expose itself to the difficulties that arise from being overly dependent on a smooth and timely supply chain that can meet customer demand^[10]. In order to continue growth in this area BHS has participated extensively in direct marketing to consumers through such mediums as television, direct mailings, and use of the yellow pages. More recently, BHS has also implemented a dealer program that accounted for 20% of new customers and 11% of the current customer base this past fiscal year.

Key Trends and Forces

Changing global conditions economically, politically and socially may negatively impact future revenue growth Currently, more than 60% of Brink's revenue is derived from its overseas operations. This sector is expected to continue to play a pivotal role in generating profit for the organization but is also subject to many of the risks associated with operating at the global level. The most pressing issues include the declining US dollar which has increased the downward pressure on revenues and equity and the fluctuations in the political and social climate in primarily the emerging market economies of the countries where Brink's conducts business. Additionally, due to the service oriented focus of Brink's its ability to find qualified employees to staff its branch operations around the world will be highly dependent upon the local economic conditions.

A continued decline in US economic conditions may will negatively affect BHS

Labor Union Relations

References

1. ↑ Reuters Stock Description
2. ↑ Reuters Stock Description
3. ↑ Brink's Company Website
4. ↑ Reuters Stock Description
5. ↑ Yahoo Finance: "Brink's to Spin Off Home Security Unit"
6. ↑ 2008 10K Statement Page 5
7. ↑ 2008 10K Statement Page 7
8. ↑ 2008 10K Statement Page 13
9. ↑ 2008 10K Statement Page 15
10. ↑ [2008 10K Statement Page 13