Devcon 'getting back to core business'

NEW YORK—At the Imperial Capital Security Investor Conference here on Dec. 13, Devcon's chairman of the board, Christopher Munday, spoke frankly about the company's challenges in the past couple of years—including an ill-fated branch expansion. He confirmed that the company is actively seeking a buyer and shared several operating and financial metrics to support his assertion that the company is on strong footing.

In 2010 and 2011, Devcon hired many former Brink's Home Security dealers and quickly opened up 50 branch offices around the country.

That move was a mistake, Munday said. “In 2010 and 2011 we tried to fast-track the company. That did not work,” he said.

Today, Devcon has gone back to its “core business.” Munday said it has spent the past eight months realigning costs and reassessing its regional structure.

Based in Hollywood, Fla., the company now has 11 branches, eight of which are in Florida. It has 136,000 customer sites, 547 employees and $4.3 million in RMR.

While Devcon and Utah-based Pinnacle Security are both owned by Golden Gate Capital, the two are “separate companies with separate debt facilities,” he said.

Devcon's business mix is 46 percent residential, 35 percent commercial and 19 percent homeowner associations. Its attrition rate varies by division, but is 11 percent across the business.

While Pinnacle does door-to-door sales, Devcon's residential sales require an average of “1.7 to 2.3 visits—it's a slower, controlled sale,” Munday said. Those residential accounts typically have a $200 to $225 upfront investment from the customer.

Devcon has two central stations, one in Staten Island, N.Y., and one in Hollywood, Fla. While its branch offices do some commercial work, the bulk of its commercial business comes from two New York City-based businesses: Mutual Central Alarm Services, which does large commercial deals, and Stat-Land, which serves many banking and high-end retail customers.

Recent changes have not affected Devcon consumers, Munday said.

The past few years have included investments in “enhanced business intelligence systems.” Those technology investments and software systems could “support tremendous growth nationwide, should [a new owner] choose to do that,” he said.

“After the uncertainty, there is positive momentum at Devcon,” Munday said.