Garda World Security Corporation
TSX : GW

Garda World Security Corporation

December 10, 2010 08:01 ET

Garda Announces Net Income of $6.3 Million for the Third Quarter

MONTREAL, QUEBEC--(Marketwire - Dec. 10, 2010) - Garda World Security Corporation (TSX:GW)

  • EPS up +350% at $0.20
  • Operating Profit at $32.9 Million 
  • 10% Organic Growth

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 third quarter ended October 31, 2010.

Highlights for Q3 2011 (ended October 31, 2010): 

  • Strong organic growth of 10%
    • 2% in cash logistics, first positive growth in more than a year
    • 11% in Canadian physical security
    • 70% in emerging markets
  • Stable gross margin at 24.3% despite cost of several new contract start-ups
  • Solid operating profit of $32.9 million, up 6%
    • 16% in cash logistics
    • 7.7% in physical security
  • Net income up 354%, at $6.3 million or $0.20 per share compared to $1.4 million or $0.04 per share last year
  • Debt leverage now at 4.5, lowest level in more than three years

"Our on-going strategy has been to focus on business development in order to achieve strong organic growth and progress on our goal of global operational excellence, said Stephan Crétier, President and CEO. "These first nine months give clear indications that our three growth platforms have a strong momentum for the months and years to come. Our organic growth rates of 11% in Canadian security solutions, 70% in emerging markets and 2% in cash logistics, and this despite a tough US economic environment, testifies that our relentless efforts are producing excellent results. The cash logistics contracts signed with leading financial institutions earlier this year are beginning to contribute positively. As market conditions improve, I believe we are exceedingly well positioned to take full advantage of expanded growth opportunities."

"These results illustrate how the combination of discipline in cost management and operational improvement with strong organic growth produces solid results," said Patrick Prince, Senior Vice President and Chief Financial Officer. "We continue to maintain benchmark-level margins in all our operations. As a result, net income per share for the quarter increased by more than 350% over the previous year and our debt leverage is now at 4.5, our lowest level in more than three years."

SELECTED FINANCIAL HIGHLIGHTS

(in thousands of Canadian dollars, except per share amounts). Three months ended
October 31, 2010
Three months ended
October 31, 2009
Nine months ended
October 31, 2010
Nine months ended
October 31, 2009
Revenues 282,521 263,373 834,795 815,624
Gross profit 68,766 67,524 200,243 213,605
Operating profit(1) 32,931 31,195 95,077 94,098
Net income for the period 6,256 1,379 17,900 7,952
Adjusted net income(1) 6,256 3,831 17,900 10,766
Basic net income per share 0.20 0.04 0.57 0.25
Basic adjusted net income per share(1) 0.20 0.12
0.57

0.34
Cash flow from operations(1) 18,476 18,586
54,097

53,815
Total assets 793,338 819,667 793,338 819,667
Long term debt (including current portion) 583,536 546,063

583,536


546,063
Quarterly US dollar average exchange rate 1.0308 1.0748

1.0331


1.1509
(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)

(All amounts are in thousands of dollars)

Our 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 US economic environment affecting our banking and retail customers, as well as the 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 October 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 18.6% in physical security.

Cash logistics revenues continued to be affected by the economic activity in the US, but yielded an organic growth of 2.1% during the quarter. In the month of July we started the implementation of several new large bank contracts both in Canada and the US which temporarily affected margins during start-up. These contract implementations will continue throughout the next few months.

Net income amounted to $6.3 million or $0.20 per share for the quarter ended October 31, 2010 versus an adjusted net income of $3.8 million or $0.12 per share for the corresponding period last year. There were no adjustments for specific items in the quarter ended October 31, 2010. Adjustments for specific items in the quarter ended October 31, 2009 represent charges related to the fair value of derivative instruments and discontinued operations.

Revenues

The increase of $19.1 million in revenues year-over-year for the quarter ended October 31, 2010 is attributable to organic growth. The decline of the US dollar has decreased the revenues by $5.9 million. The revenues at constant exchange rate or organic growth have increased by 9.9% or $25.0 million. Organic growth in physical security was 18.6%.

Graphic 1: Revenues from continuing operations ($ CER) is available at the following address: http://media3.marketwire.com/docs/Graph1_Profit_ENG.pdf

Physical security revenues increased by 11.4% 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 from emerging markets show organic growth of 70% at constant exchange rate with the beginning of the new FCO contract in Iraq in the first quarter.

Cash logistics revenues increased by 2.1% at constant exchange rate due to the level of activity in the US.

Gross profit

For the quarter ended October 31, 2010 physical security's gross profit amounted to $20.2 million, an increase of $2.6 million year-over-year, of which 3.1 million is attributable to organic growth. Cash logistics' gross profit amounted to $48.6 million, a decrease of $1.3 million year-over-year, of which $1.8 million is attributable to the decline of US dollar.

Graphic 2: Gross profit by sector ($ CER) is available at the following address: http://media3.marketwire.com/docs/Graph2_CER_ENG.pdf

Fixed costs, general and administrative expenses

During the quarter ended October 31, 2010, the Corporation continued to apply the same focus as last fiscal year to fixed costs, general and administrative expenses which decreased by 1.4% or $0.5 million over the corresponding period last year. The decline in the US dollar represents $1.1 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 October 31, 2010 the operating profit was $32.9 million, an increase of 5.6% over the corresponding period last year. At constant exchange rate the operating profit increased from $29.8 million to $32.8 million in the quarter, an increase of 9.8%. This demonstrates the benefit of our continuous improvement programs.

Graphic 3: Operating profit is available at the following address: http://media3.marketwire.com/docs/Graph3_OProfit_ENG.pdf

During the quarter ended October 31, 2010, physical security's operating profit reached 7.4% of revenues, unchanged versus last year. Operating profit for the cash logistics segment continued to improve and reached 15.9% of revenues for the quarter ended October 31, 2010, compared to 15.6% in the corresponding period last year despite the effects of start-up of contracts on margins.

Graphic 4: Operating profit by sector ($ CER) is available at the following address: http://media3.marketwire.com/docs/Graph4_CER_ENG.pdf

Net income for the period

Net income for the period was $6,256 ($0.20 basic and diluted per share) compared to $1,379 ($0.04 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_Income_ENG.pdf

Cash flows

Cash position as at October 31 2010 amounted to $14,641, an increase of $2,784 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 $18,476 for the quarter ended October 31, 2010, a decrease of 0.6% over the cash flow generated by the operations during the corresponding period last year.

For the quarter ended October 31, 2010, net change in non-cash working capital balances items used cash of $6,499 compared with cash used in the amount of $12,929 for the corresponding period last year.

For the nine-month period ended October 31, 2010, cash flow from operations amounted to $54,097 compared to $53,815 for the same period last year, an increase of $282.

Financing activities

Cash used in financing activities amounted to $3,434 for the quarter ended October 31, 2010 compared to cash used of $3,415 for the corresponding period last year. 

For the nine-month period ended October 31, 2010, the financing activities used cash of $9,131 compared to cash used of $58,859 for the same period last year. The decrease is mainly attributable to the debt repayment following the disposal of the US and Mexican guarding operations.

Investing activities

Cash used in investing activities amounted to $6,744 during the quarter ended October 31, 2010, compared to cash used of $3,690 for the corresponding period last year. During the quarter ended October 31, 2010 additions to property plant and equipment were $5,913 versus $4,673 in the corresponding period last year.

For the nine-month period ended October 31, 2010, the investing activities used cash of $21,509 compared to cash generated of $30,116, 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 third quarter ended October 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 third quarter results today, December 10, 2010 at 10:00 AM ET during a conference call with financial analysts and institutional investors. Listeners may access the call by dialing 416.981.9070 or 800.676-3079 for international calls.

MD&A FILING

Garda's Management's Discussion and Analysis for the third quarter ended October 31, 2010 was filed with SEDAR on December 10, 2010 and is also available at www.gardaglobal.com in the investors' section.

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: www.gardaglobal.com, www.gardacashlogistics.com and www.garda-world.com.

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