Garda World Security Corporation
TSX : GW

Garda World Security Corporation

September 02, 2010 08:00 ET

Garda Announces Net Income of $5.3 Million for the Second Quarter

MONTREAL, QUEBEC, CANADA--(Marketwire - Sept. 2, 2010) - Garda World Security Corporation (TSX:GW)

  • EPS at $0.17, up 31.0%
  • 7.5% Organic Growth
  • Major multi-year wins

Garda World Security Corporation (TSX:GW) (Garda), one of the most trusted Physical Security, Cash Logistics and Global Risk Consulting firms in the world, announced today its financial results for the second quarter ended July 31, 2010.

For the quarter ended July 31, 2010:

  • Solid organic growth of 7.5%
  • Stable gross profit at 23.8% despite several new contract startups
  • Operating profit at $31.2 million, an increase of 8.5%
  • Net income up 31.0%, at $5.3 million or $0.17 per share compared to $4.0 million or $0.13 per share in Q2 2010
  • Major multi-year contract wins in the Canadian and US Cash Logistics markets

During the second quarter, Garda secured several multi-year contracts with leading Canadian and US financial institutions for a total of $340 million. This business, which includes renewals or extensions of existing contracts and new accounts, promises to provide Garda with solid organic growth over the next three to five years both in Canada and the US. As the second largest provider in North America, the company is leveraging its recent sales, strong credibility and intense customer-centric focus to foster and maintain this robust pipeline of business.

"Given that our second quarter is usually the weakest, we achieved excellent results in what continues to be a challenging economic climate," said Patrick Prince, Senior Vice President and CFO. "In physical security, many of the contracts that were starting up in Q1 2011 are fully operational and delivering excellent profitability. Our net income increased by 31.0% to $0.17 per share and our organic growth of 7.5% is very encouraging considering the economic climate in the US. We continue to benefit from our strong focus on execution, the strength of our platforms and the momentum we established in Q1."

"While our cash logistics segment is doing extremely well, our physical security group is really outperforming this quarter with continuous margin improvement and organic growth of 17.3%," said Stephan Cretier, President and CEO. "With the announcement of several significant multi-year contract wins in Canadian and US cash logistics, Garda now has three solid operational platforms – Physical Security, Cash Logistics and Global Risk Consulting – poised for growth and earnings momentum."

FINANCIAL HIGHLIGHTS

(in thousands of Canadian dollars, except per share amounts). Q2 2011 Q2 2010
Revenues 280,004 273,020
Gross profit 66,780 70,794
Operating profit(1) 31,242 30,312
Net income for the period 5,299 4,044
Adjusted net income(1) 5,299 4,025
Basic net income per share 0.17 0.13
Basic adjusted net income per share(1) 0.17 0.13
Cash flow from operations(1) 16,927 17,355
Total assets 795,285 822,855
Long-term debt (including current portion) 593,738 553,599
(1)Cash flow from operations, adjusted net income and operating profit are not accepted performance measures as per Canadian GAAP.

MANAGEMENT'S DISCUSSION & ANALYSIS - MD&A (EXTRACT)

The Corporation's strategy is to establish platforms and continually improve them with a combination of business development, operational excellence, and focused entrepreneurial leadership in order to achieve our goal to be the best operator in our industry.

During fiscal 2010 we focused on this strategy. With the difficult US economic environment which affected our banking and retail customers, as well as the general uncertainty having an effect on Canadian businesses and development projects, we focused on making improvements and positioning ourselves to take advantage of the economic recovery.

During the quarter ended July 31, 2010, we continued to take advantage of the many opportunities that were cultivated last year. New contracts started in physical security, enhanced and reinforced security requirements in Canadian airports and the new Foreign Commonwealth Office (FCO) contract announced last year yielded an organic growth of 17.3% in physical security.

Cash logistics revenues continued to be affected by the economic activity in the US, with an organic reduction of 1% during the quarter. In the month of July we started-up several new large bank contracts both in Canada and the US which temporarily affected margins during start-up. These contracts will be implemented during most of the second part of the year.

Net income amounted to $5.3 million or $0.17 per share for the quarter ended July 31, 2010 versus an adjusted net income of $4.0 million or $0.13 per share for the corresponding period last year. There were no adjustments for specific items in the quarter ended July 31, 2010. Adjustments for specific items in the quarter ended July 31, 2009 represent charges related to the fair value of derivative instruments and discontinued operations.

Revenues

The increase of $7.0 million in revenues year-over-year for the quarter ended July 31, 2010 is attributable to organic growth. The decline of the US dollar has decreased the revenues by $12.2 million. The revenues at constant exchange rate or organic growth have increased by 7.5% or $19.2 million. Organic growth in physical security was 17.3%.

Graphic 1: "Revenues from continuing operations" is available at the following address: http://media3.marketwire.com/docs/Graph1_ENG_Revenues.jpg

Physical security revenues increased by 13.3% in Canada, as a result of new contracts and enhanced security measures at Canadian airports. Revenues have steadily increased throughout the last fiscal year as business development initiatives were intensified. Revenues outside Canada show organic growth of 41.2% at constant exchange rate with the beginning of the new FCO contract in Iraq in the first quarter.

Cash logistics revenues decreased by 1.0% at constant exchange rate due to the level of activity in the US.

Gross profit

For the quarter ended July 31, 2010 physical security's ,gross profit amounted to $21.8 million, an increase of $1.9 million year-over-year, of which 2.3 million is attributable to organic growth. Cash logistics' gross profit amounted to $45.0 million, a decrease of $6.0 million year-over-year, of which $3.7 million is attributable to the decline of US dollar, and most of the remainder to start-up of new contracts both in Canada in the US and the volume decrease.

Graphic 2: "Gross profit by sector" is available at the following address: http://media3.marketwire.com/docs/Graph2_ENG_Grossprofit.jpg

Fixed costs, general and administrative expenses

During the quarter ended July 31, 2010, the Corporation continued to apply the same focus as last fiscal year to fixed costs, general and administrative expenses which decreased by 12.2% or $4.9 million over the corresponding period last year. The decline in the US dollar represents $2.6 million year-over-year.

Operating profit

The continuous improvement of all our platforms in terms of efficiencies is a central part of our objective to be the best operator in the industry and the reason why we focus on operating profit as a key measurement of the performance of our platforms. 

For the quarter ended July 31, 2010 the operating profit was $31.2 million, an increase of 3.1% over the corresponding period last year. At constant exchange rate the operating profit increased from $28.0 million to $30.4 million in the quarter, an increase of 8.5%. This demonstrates the benefit of our continuous improvements programs.

Graphic 3: "Operating profit" is available at the following address: http://media3.marketwire.com/docs/Graph3_ENG_Operatingprofit.jpg

During the quarter ended July 31, 2010, physical security's operating profit reached 7.8% of revenues, compared to 7.3% for the corresponding period last year, this increase is explained by the new contracts started in the first quarter which are now fully implemented. Operating profit for cash logistics segment continued to improve and reached 14.6% of revenues for the quarter ended July 31, 2010, compared to 14.2% in the corresponding period last year despite the effects of start-up of contracts on margins.

Graphic 4: "Operating profit by sector" is available at the following address: http://media3.marketwire.com/docs/Graph4_ENG_bysector.jpg

Net income for the period

Net income for the period was $5,299 ($0.17 basic and diluted per share) compared to $4,044 ($0.13 basic and diluted per share) for the corresponding period last year.

Graphic 5: "Net income" is available at the following address: http://media3.marketwire.com/docs/Graph5_ENG_Netincome.jpg

Cash flows

Cash position as at July 31 2010 amounted to $13,226, an increase of $1,369 versus January 31, 2010.

Operating activities

Cash flow from operations, which is in direct relation to the operating profit generated by the business segments of the Corporation, amounted to $16,927 for the quarter ended July 31, 2010, a decrease of 2.5% over the cash flow generated by the operations during the corresponding period last year.

For the quarter ended July 31, 2010, net change in non-cash working capital balances items used cash of $957 compared with cash used in the amount of $2,182 for the corresponding period last year.

For the six-month period ended July 31, 2010, cash flow from operations amounted to $35,621 compared to $35,229 for the same period last year, an increase of $392.

Financing activities

Cash used in financing activities amounted to $9,773 for the quarter ended July 31, 2010 compared to cash used of $51,517 for the corresponding period last year. The decrease is mainly attributable to the debt repayment following the disposal of the US and Mexican Guarding operations.

For the six-month period ended July 31, 2010, the financing activities used cash of $5,697 compared to cash used of $55,444 for the same period last year.

Investing activities

Cash used in investing activities amounted to $9,710 during the quarter ended July 31, 2010, compared to cash generated of $38,180 for the corresponding period last year. The sale of the US and Mexican guarding operations generated $43,296 in the quarter ended July 31, 2009. During the quarter ended July 31, 2010 additions to property plant and equipment were $7,698 versus $5,275 in the corresponding period last year.

For the six-month period ended July 31, 2010, the investing activities used cash of $14,765 compared to cash generated of $33,806, the decrease resulting mainly from the sale of the US and Mexican guarding operations.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to Garda's future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as "may"; "will"; "should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate"; "predict"; "potential"; "continue"; "foresee", "ensure" or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the company's future operating results and economic performance and its objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which Garda believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to the company, they may prove to be incorrect. The company cautions the reader that the current adverse economic conditions make forward-looking information and the underlying assumptions subject to greater uncertainty and that, consequently, they may not materialize, or the results may significantly differ from the company's expectations. It is impossible for Garda to predict with certainty the impact that the current economic downturn may have on future results. Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what Garda currently expects. These factors include technological changes, changes in market and competition, governmental or regulatory developments, general economic conditions, the development of new services, the enhancement of existing services, and the introduction of competing products having technological or other advantages, many of which are beyond the company's control. Therefore, future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While management may elect to, the company is under no obligation (and expressly disclaims any such obligation), and does not undertake to update or alter this information before the next quarter.

This analysis should be read in conjunction with the Corporation's unaudited consolidated financial statements, and the notes thereto, prepared in accordance with Canadian GAAP and the MD&A for the second quarter ended July 31, 2010. Throughout this discussion, all amounts are in Canadian dollars unless otherwise indicated.

CONFERENCE CALL

Stephan Cretier, President & CEO, and Patrick Prince, Senior Vice President and Chief Financial Officer, will discuss the second quarter results today, September 2, 2010 at 10:00 AM ET during a conference call with financial analysts and institutional investors. Listeners may access the call by dialing 416.981.9000 or 800.736.4610 for international calls.

MD&A FILING

Garda's Management's Discussion and Analysis for the second ended July 31, 2010 was filed with SEDAR on September 2, 2010 and is available on the web site http://www.gardaglobal.com in the investors' section as of September 2, 2010.

ABOUT GARDA

Garda (TSX:GW) is a global provider of physical security, cash logistics, and global risk consulting services with headquarters in Montreal, Canada. The firm's 45,000 dedicated professionals, among the most highly qualified and best-trained in the industry, serve clients in countries throughout North America, Europe, Latin America, Africa, Asia, and the Middle East. The company's decentralized management philosophy and structure encourages employees to be entrepreneurial and performance-driven in their approach to client service and the pursuit of excellence in all they do. Garda's global experts take the time to fully understand their clients' business goals and objectives in order to customize solutions with strong local engagement that meet their needs. As a result, clients can improve operational performance and meet their corporate obligations. With proven experience and a commitment to ensuring the highest ethical standards in everything the Corporation does, Garda has earned a reputation for integrity, leadership, and uncompromising safety standards. Most importantly, Garda is a firm in which businesses, governments, and individual clients place their trust. For more information, visit: http://www.gardaglobal.com, http://www.gardacashlogistics.com and http://www.garda-world.com.

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