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The European security group has had several quarters of disappointing results. A reorganisation of the group - involving integration of previous acquisitions - appears to be taking longer than expected, especially in France (which is now the company's main market). This led us to question management's ability to deliver. In addition a significant portion of sales are in low-end security products, such as perimeter fencing, which are unlikely to retain pricing power. With margins below our original expectations, fair value for the group was reduced and we sold the shares.
Gunnebo is a restructuring Swedish company that specialises in niche security products. The range of products runs from safes that store data, are fireproof and opened only by biometric data, to perimeter security devices, barriers and so forth. The new CEO is continuing to move production to lower-cost factories. The latest results show a buoyant underlying market as security sadly remains a growth sector. We believe that a rebound in margins in 2006 should deliver a free cash flow yield of over 9% and a dividend yield of 4% in 2006.
| Sedol |
Type |
Price |
Date |
| B010FR0 |
Sell |
SEK 51.858 |
14/02/2008 |
| B010FR0 |
Buy |
SEK 74.268 |
13/03/2007 |
| B010FR0 |
Buy |
SEK 74.948 |
08/03/2007 |
| B010FR0 |
Buy |
SEK 86.675 |
27/01/2006 |
| B010FR0 |
Buy |
SEK 76.80 |
19/09/2005 |
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