ADT 2004 Annual Report Download - page 31

29
us a strong competitive advantage. Our design and
project management expertise is well suited for the
large-scale projects that many of our customers require.
Our key brands also enhance our market position. To
name a few, SimplexGrinnell is the number one name
in fire protection services in North America, Scott is
the leader in emergency breathing systems, and Ansul
is the worldwide leader in fire suppression systems.
Q: WHAT ARE THE BIGGEST CHALLENGES YOU’VE ENCOUNTERED
OVER THE PAST YEAR, AND HOW HAVE YOU OVERCOME THEM?
We made significant progress in 2004 by revamping
some of our business models and getting back to busi-
ness basics. That helped us produce strong free cash
flow and improved operating profit margins while
reinforcing a focus on specific customer needs in our
core businesses. We refined our global manufacturing
and logistics footprint, leveraged synergies among our
business units, rolled out our Six Sigma program to
every region, reduced operating costs, invested in new
products and our sales and service force, and divested
a variety of smaller noncore operations.
In our security business, we transitioned from
quick-growth business models to ones delivering
stronger, sustainable economic returns. In new sales,
we shifted focus to customers who tend to have a
longer-lasting relationship with their suppliers and
typically own, rather than lease, their security sys-
tems. And now the majority of our new customers
sign up for service through our direct sales force
rather than through an authorized dealer channel.
Both ADT sales channels, direct and dealer, are
strong producers today. We believe we now have a
solid growth foundation in place.
Q: WHAT’S ON YOUR AGENDA FOR 2005?
We will continue to drive strong cash flow and profit
margin improvements while increasingly turning
our attention to growth. To fuel sustainable organic
growth, we’re investing even more in our sales force;
leveraging new technologies to provide new services
and more value to our existing customers; develop-
ing new products; and increasing our penetration
in faster-growth economies. China is a good exam-
ple of a fast-growing market. We already have a well-
established presence in China, and we are committed
to leveraging our key brands to offer a broader
array of services to customers there.
We’re also expanding through “close adjacencies.”
This refers to untapped opportunities existing
alongside markets where we already do business.
For example, if a retail customer uses our anti-theft
solutions, it would be logical for us to provide that
customer with access control and video surveillance
services. Taking this one step further, we can help
that retailer with its supply chain by leveraging
radio frequency identification (RFID) technology to
tag and track bulk shipments from its suppliers,
providing solutions for optimizing inventory levels.
In the residential market, we’re excited about expand-
ing new ADT offerings beyond the traditional
home alarm services. We can help provide peace
of mind to the loved ones of people requiring
assisted care, to people in cars, and through the
addition of helpful service features such as two-way
voice and, over time, video monitoring.
In general, we are continuing to focus on
strengthening our business, doing an even better
job of helping our customers, and growing. We’re
working on international and homeland security
by increasing and improving service to airports,
tunnels, ports, bridges, and power generation facili-
ties. We will continue to increase service performance
and improve customer relationships. We believe
we are in a great position with enormous potential,
strong momentum, and a bright future.