PSI to hold onto residential business

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Saturday, March 1, 2003

RANCHO CUCAMONGA, Calif. - Changing its stated plans from last year, Protection Service Industries has decided not to sell its residential accounts to focus solely on its commercial security business.

According to newly named PSI President and Chief Executive Officer Robert Ricucci, Jr., after looking at the market and the value of the residential accounts, PSI decided “to focus our attention on successfully caring for that base as well as the commercial base and use it as a platform to grow.”

“It’s a large piece of our business, and we place a high value on it, and (intend to) keep it,” he added.

PSI has about 70,000 total accounts, with a slightly higher number on the residential side. Despite the higher number of accounts, Ricucci adds PSI’s revenues are just about equally split between commercial and residential accounts in the western United States

Ricucci, who was named PSI president earlier this year, said due to recent economic factors, PSI chose to maintain its current accounts rather than pursue a sale. “That’s where our focus (will lie),” said Ricucci. “(We will still) manage our growth aggressively, but with a primary focus on our existing customer base residentially and commercially.”

While he said he is not familiar with the details behind PSI’s decision not to sell, analyst Jack Mallon, managing director at Mallon Capital, said there might be a dearth of buyers for the residential accounts. “There’s no question this is not the best time to sell,” he said.

Mallon said the recent growth in the residential market has been flat while there has been more robust growth in the commercial markets.

“The deals are few and far between,” continued Mallon. “The major would-be acquirers, ADT and Protection One, are on the sidelines and the multiples have dropped.”

“The economy has made some people in the marketplace tentative,” Ricucci said.

Despite reiterating the fact PSI has no intention to pursue a sale of its residential assets at the present time, Ricucci would not rule out revisiting the situation if the economic climate changes.

“While at this point I don’t think it’s likely, market conditions change all the time,” Ricucci said. “As the strategic leader of the organization, it’s my job to review everything to make us better for our customers and our shareholders. I will continue to look at things as the market changes, but at this point there is no intention of continuing to pursue that line.”