Since 2001, instability across the world ,from Iraq and Afghanistan to Lebanon and Nigeria, have highlighted the growing risks facing international organisations, whether private or public, and the increasing need to protect their people and infrastructure assets. Security for personnel and facilities is no longer a discretionary investment for major organisations but a necessity.

The worldwide market for defensive protective security services was estimated to be worth US$900m for 2003, of which Iraq accounted for approximately US$300m (see note 1). However, the market has grown strongly since then and was estimated to have exceeded $2.6 billion for 2006, of which US$1.5 billion was anticipated to originate from Iraq (see note 2).

There was a a noticeable change in the competitive landscape during 2006 with a gravitation of the bigger contracts towards the larger international security companies with sufficient resources in management, finance and infrastructure to be able to operate in the more hostile environments. The changing environment in Iraq led to some consolidation of the market as a number of the Group’s smaller competitors withdrew from the country altogether, giving rise to more opportunities. The larger Iraq-born companies are seeking to expand into new geographic markets or develop new service lines, with varying degrees of success.

Iraq is likely to remain a significant driver of growth for ArmorGroup for the foreseeable future and the Group expects a number of different business streams to develop over the short to medium term, including the following:

• Back-loading of coalition military equipment out of Iraq;
• Iraqi-funded reconstruction and development;
• Training of Iraqi security forces; and
• Development and modernisation of the Iraqi oil infrastructure.

In the medium term , the major drivers outside Iraq continue to be:

• growing commitment of the US, British and other governments to homeland security and a related focus on long term, sustainable reconstruction and development projects in areas of the world experiencing diminished law and order, collapsed infrastructure or where there is a high risk of terrorism;
• increasing outsourcing of protective security services, from logistics support to the guarding high profile facilities, by the US and UK governments in order to allow their agencies to focus on their primary objectives;
• increasing demand from governments to update their personnel’s specialist technical skills for the risks and needs of their current operations, as a result of their expanding headcount and their more extensive requirements;
• growing necessity for the oil and gas and extractive industries to explore and operate in hostile environments driven by strong commodity prices, leading to greater consultancy and protective security opportunities; and
• Compliance and governance issues as corporations take the commitment to their employees safety and wellbeing ever more seriously, leading to greater use of security planning and training prior to and during deployment to new markets or regions. This is combining with a growing focus on the regulatory and ethical policies of suppliers.

The Group’s unrivalled competitive advantages of an extensive global footprint, high quality employees, blue-chip client base, strong regulatory standards and access to significant resources will continue to position it strongly in the market.

Notes

1 Source: AMR International Ltd (August 2004).

2 Source: AMR International Ltd (March 2007).