Garda World Security Corporation
TSX : GW

Garda World Security Corporation

December 06, 2011 08:00 ET

Garda Announces Record Third Quarter Results

- Operating Profit of $35.5M

- EPS at $0.24

- Solid Organic Growth

MONTREAL, QUEBEC, CANADA--(Marketwire - Dec. 6, 2011) - Garda World Security Corporation ("Garda") (TSX:GW), one of the leading Security Solutions, Cash Logistics and Global Risk Consulting firms in the world, announced today its financial results for the third quarter ended October 31, 2011.

SELECTED HIGHLIGHTS FOR THE QUARTER ENDED OCTOBER 31, 2011

  • Continued strong sales growth of 12.4%
    • Cash Logistics organic growth of 8% (US at 9.1%)
    • Canadian Security Solutions at 15%
    • Emerging Markets organic growth of 25%
  • Solid operating profit of 11.3% at $35.5M an increase of 7.7%
    • 16% in Cash Logistics
    • 7.1% in Security Solutions
  • Adjusted net income for one time cost at $7.7M or $0.24 per share; net income of $6.3M or $0.20 per share
  • Solid cash flow from operations of:
    • $35.3M, up 8.8% over Q3 last year
    • $92.4M year to date
  • Major contract award for security screening services in 14 airports in the Central Region of Canada worth $650M over 5 years
  • Acquisition of Aeroguard in October 2011; in excess of $421M over 5 years with 13 additional airports across the Prairies in Canada started on November 1st 2011
  • Continued aggressive deleverage strategy while investing more than $42M in growth for additional sales run rate of $128M in 2011
  • On September 30, 2011, the company concluded the sale of all the assets related to Surveillance Services division located in Ontario for a total cash consideration of $4.1M. A loss on disposal of $1.4M was taken in the quarter

"Our positive record performance for the quarter reflects the beneficial effect of contract start-ups in the United States and in our emerging markets," said Patrick Prince, Senior Vice President and Chief Financial Officer. "Because we integrated the new revenue faster than we expected, we improved our margins for the quarter compared to Q2. We now have established a strong momentum for the remainder of this fiscal year and into 2013."

"I am extremely pleased with Garda's position today," said Stephan Cretier, President and CEO. "Business is very good throughout all areas of the company. We've accomplished our goal of repositioning Garda as a thriving growth company. We've aggressively deleveraged as our three main business units, security solutions, cash logistics and global risks consulting are all driving strong organic growth despite a very challenging economic environment."

"What is even more impressive about this growth is the fact it was achieved with sustainable margin improvement at every level," Mr. Cretier continued. "In fact, except for our Canadian cash logistics operation which is below budget year to date, every single business unit is delivering results above expectations. With several new major contracts starting in the next two quarters and the Aeroguard acquisition fully integrated as of November 1st, we are in an enviable situation to continue generating superior cash flows and earnings momentum."

As previously disclosed, considering this year's positive sales results and the successful integration of Aeroguard, the company has increased its outlook for C2012 (Fiscal 2013) to an operating profit of $145M.

SELECTED FINANCIAL HIGHLIGHTS

(in thousands of Canadian dollars, except per share amounts). Three months
ended
October 31, 2011
Three months
ended
October 31, 2010
Nine months
ended
October 31, 2011
Nine months
ended
October 31, 2010
Revenues 313,033 282,521 895,578 834,795
Gross profit(1) 74,672 68,766 206,124 200,243
Operating profit(1) 35,472 32,931 93,362 95,077
Adjusted net income for the period(1) 7,751 6,256 16,051 17,900
Net income for the period 6,324 6,256 14,624 17,900
Adjusted basic net income per share 0.24 0.20 0.51 0.57
Basic net income per share 0.20 0.20 0.46 0.57
Quarterly US dollar average exchange rate 1.0017 1.0308 0,9809 1.0331
(1) Adjusted net income, gross profit and operating profit are not accepted performance measures as per IFRS.

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

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.

We focused on this strategy last year and the fourth quarter of 2011 resulted in strong revenue growth, particularly in US cash logistics.

The second and third quarter results of this year showed the same momentum with a growth of 8.1% and 8.0% respectively. With many new contract start-ups, the revenue growth in cash logistics is clearly established. With so many new businesses starting up, our focus has been on executing a flawless transition. We have also developed new areas where our previous footprint was limited. This allows us to now further develop new markets and gives us new capabilities for growth.

In security solutions, the growth was generated by Kolossal and by many new contracts in the natural resources sector. Fully integrated in the first quarter, Kolossal is now functioning within our structures and we are working at portfolio management of their contracts.

In emerging markets (Middle East and North Africa), we have successfully started many new diplomatic contracts and the growth is clearly established for quarters to come.

Overall we were able to generate 23.9% of gross profit compared to 24.3% last year.

As a result, operating profit was 16.0% in cash logistics, higher than the 15.9% of the third quarter last year and security solutions showed an operating profit of 7.1% compared with 7.4% for the same quarter last year.

Finance costs amounted to $16.4 million, up $1.0 million from last year, mainly due to higher interest on long-term debt of $0.4 million and higher bank charges of $0.6 million.

Net income amounted to $6.3 million or $0.20 per share in the third quarter, at the same level as the correspondent quarter last year. The net income adjusted for the disposal of Surveillance Services division amounted to $7.7 million or $0.24 per share.

Revenues

The revenues for the third quarter were $313.0 million, compared with $282.5 million last year, an increase of $30.5 million or 10.8%. The acquisition of Kolossal added $14.8 million and organic growth totalled $19.7 million or 7.1% in the quarter. The decline in US dollar has decreased the revenues by $4.0 million year-over-year.

Security solutions' revenues in Canada were $134.0 million, compared with $116.6 million last year. This increase of $17.4 million or 15.0% is mainly attributable to the acquisition of Kolossal.

Revenues from emerging markets (Middle East and North Africa) were $30.7 million compared with $25.3 million for the corresponding period last year. The decline in US dollar has decreased the revenues by $0.6 million year-over-year. At constant exchange rate the revenues from emerging markets were $30.6 million compared with $24.5 million, an increase of $6.1 million or 24.8%.

Cash logistics' revenues were $148.3 million compared with $140.7 million last year, an increase of $7.6 million or 5.4%. At constant exchange rate the revenues for cash logistics were $148.0 million compared with $137.0 million last year. This increase of $11.0 million or 8.0% is mainly attributable to the start-up of several new large bank contracts in the United States during the last two quarters of fiscal 2011 and in the second and third quarter of fiscal 2012.

Gross profit

The gross profit for the third quarter was $74.7 million compared with $68.8 million last year, an increase of $5.9 million or 8.6%. The US dollar depreciation reduced the gross profit by $1.2 million.

The gross profit at constant exchange rate was $74.5 million compared with $67.4 million last year, an increase of $7.1 million or 10.6%, mainly due to organic growth in both segments.

For the nine-month period ended October 31, 2011, the gross profit was $206.1 million compared with $200.2 million last year, an increase of $5.9 million or 2.9%. The US dollar depreciation reduced the gross profit by $6.8 million.

The gross profit at constant exchange rate was $208.7 million compared with $195.9 million last year, an increase of $12.8 million or 6.5%, mainly due to organic growth in both segments.

Security solutions' gross profit for the third quarter was $23.8 million compared with $20.2 million last year, an increase of $3.6 million or 18.0%. At constant exchange rate, the security solutions' gross profit was $23.7 million compared with $20.0 million last year. Excluding the contribution of Kolossal's acquisition of $1.3 million, the gross profit for the quarter increased by $2.4 million.

Security solutions' gross profit for the nine-month period was $63.4 million compared with $60.5 million last year, an increase of $2.9 million or 4.9%. At constant exchange rate, the security solutions' gross profit was $63.6 million compared with $60.0 million last year. Excluding the contribution of Kolossal's acquisition of $3.3 million, the gross profit for the nine-month period increased by $0.3 million.

Cash logistics' gross profit for the third quarter amounted to $50.9 million compared with $48.6 million last year. At constant exchange rate, cash logistics' gross profit was $50.8 million versus $47.4 million last year, an increase of $3.4 million or 7.2% attributable to several contract start-ups.

Cash logistics' gross profit for the nine-month period amounted to $142.7 million compared with $139.8 million last year. At constant exchange rate, cash logistics' gross profit was $145.1 million versus $136.0 million last year, an increase of $9.1 million or 6.7% attributable to several contract start-ups.

Cash logistics' gross profit as percentage of revenues for the third quarter was 34.3% compared with 34.6%, this reduction is mainly attributable to start-up costs of the new contracts.

Cash logistics' gross profit as percentage of revenues for the nine-month period was 33.4% compared with 33.7%, this reduction is mainly attributable to start-up costs of the new contracts.

Operating profit

Operating profit for the third quarter was $35.5 million compared with $32.9 million last year, an increase of $2.6 million or 7.7%. The US dollar depreciation reduced the operating profit by $0.5 million. The Kolossal's acquisition had a positive impact of $1.0 million.

At constant exchange rate the operating profit for the third quarter was $35.4 million compared with $32.3 million last year, an increase of $3.1 million or 9.5%. Of this, $1.3 million is attributable to security solutions' segment, while cash logistics' segment increased their operating profit by $1.8 million.

Operating profit for the nine-month period was $93.4 million compared with $95.1 million last year, a decrease of $1.7 million or 1.8%, of which $3.1 million is attributable to decline in US dollar. The Kolossal acquisition had a positive impact of $2.1 million.

At constant exchange rate the operating profit for the nine-month period was $94.5 million compared with $93.1 million last year, an increase of $1.4 million or 1.5%. Of this, $2.9 million is attributable to cash logistics' segment, while security solutions' segment decreased its operating profit by $1.5 million.

During the third quarter, security solutions' operating profit reached 7.1% of revenues, compared with 7.4% last year. Operating profit for the cash logistics segment reached 16.0% of revenues in the quarter, compared with 15.9% last year, increase due to the effects of start-up of contracts in the US.

During the nine-month period, security solutions' operating profit reached 6.1% of revenues, compared with 7.2% last year. Operating profit for the cash logistics segment reached 15.2% of revenues compared with 15.6% last year, decrease due to the effects of contract start-ups in the US.

Cash flows

Cash position as at October 31, 2011 amounted to $14,717, a decrease of $261 versus January 31, 2011. This decrease is explained by the following:

Operating activities

Cash flow from operations, which is in direct relation to the income before taxes generated by the business segments of the Corporation, amounted to $92,377, a decrease of $2,033 or 2.2% over the cash flow generated by the operations last year.

Net change in non-cash working capital balances items used cash of $27,142 compared with cash used in the amount of $24,998 last year. This is mostly attributable to an increase in accounts receivable generated by new businesses and a reduction in accounts payable in 2010.

Financing activities

Cash used for financing activities amounted to $36,021 compared with cash used of $51,893 last year. The revolving facilities and the long-term debt variation generated $21,055 during the nine-month period compared with $57,224 last year. In 2010, the Corporation used $47,441 related to the SWAP termination payment and $21,384 in borrowings costs related to the refinancing of its long term debt.

The interest paid on debt increased by $14.5 million, due to the semi-annual payment of interests on the US and Canadian notes.

Investing activities

Cash used in investing activities amounted to $29,151 compared with cash used of $14,232 last year. This increase is mainly attributable to payments made for Kolossal and Aeroguard's acquisition of $16,581 (including bank indebtedness).

Additions to property, plant and equipment were $16,039 versus $19,114 last year. Intangible assets additions totalled $2,617 versus $2,591 last year.

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 revenues and benefits 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 according to the current circumstances. 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 economic conditions make forward-looking information and the underlying assumptions used by Garda subject to uncertainty and that, consequently, they may not materialize, or the results may differ from the company's expectations. 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 growth management, market competition, cost of financing, government regulations, collective bargaining, currency fluctuations, credit risk, reputational risk and financial covenants risk, many of which are beyond the company's control. The reader should also take knowledge of the Garda's Management's Discussion and Analysis for the third quarter ended October 31, 2011. 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.

This analysis should be read in conjunction with the company's consolidated interim financial statements, and the notes thereto, prepared in accordance with IFRS and the MD&A of the third quarter ended October 31, 2011.

Throughout this discussion, all amounts are in Canadian dollars unless otherwise indicated.

CONFERENCE CALL

Stephan Cretier, President & CEO, and Patrick Prince, Senior Vice President & CFO, will discuss the third quarter results today, December 6, 2011 at 10:00 AM ET during a conference call with financial analysts and institutional investors. Listeners may access the call by dialing 1.416.641-6654 or 1.800.666-9864 for international calls.

MD&A FILING

Garda's Management's Discussion and Analysis for the third quarter ended October 31, 2011 was filed with SEDAR on December 6, 2011 and is available on the web site http://www.gardaglobal.com in the investors' section as of December 6, 2011.

ABOUT GARDA

Garda (TSX:GW) is a global provider of security solutions, cash logistics and global risk consulting. 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. Garda works with clients in a broad range of sectors and industries including financial institutions, retailers, manufacturers, insurance companies, governments, humanitarian relief organizations and the natural resources, construction and telecommunications. 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, meet their business obligations, and achieve their corporate objectives. 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, businesses, governments, and individual clients place their trust in Garda. For more information, visit: www.gardaglobal.com.

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