Garda World Security Corporation
TSX : GW

Garda World Security Corporation

May 26, 2011 08:01 ET

Garda Reports First Quarter Results and Positive Outlook for the Year

MONTREAL, QUEBEC, CANADA--(Marketwire - May 26, 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 first quarter ended April 30, 2011.

For the Quarter ended April 30, 2011:

  • Revenue growth of 7.5% at constant exchange rate including the acquisition of Kolossal
  • Cash Logistics organic growth at 6.8%, maintaining the momentum of Q4 2011
  • Gross Profit of 22.5% at constant exchange rate, up 3% from previous year despite $2M contract start-up costs in US Cash Logistics
  • Operating profit of $29.5M
  • Net Income of $4.5M or $0.14 per share
  • Cash Flow from Operations of $29.3M

"Our continued focus on operational efficiencies and the leveraging of our platforms produced solid results in the first quarter despite additional costs resulting from contract start-ups in the US," said Patrick Prince, Senior Vice President and Chief Financial Officer. "We maintained the strong momentum of the US Cash Logistics business established during FY 2011 with those new contracts. We also acquired and integrated new business with the acquisition of Kolossal within Security Solutions in only six weeks' time. These activities demonstrate that we have the capability to assimilate new business with our existing platforms."

"Considering that Q1 is historically our weakest quarter, we are optimistic for the future given the level of growth we achieved in the first quarter," noted Stephan Cretier, President and CEO. "Moving forward, we need to focus on what we are known for, entrepreneurial expertise and excellent execution, so we can convert these new sales in net earnings. We continue to be on the look-out for new opportunities to create additional momentum. Our pipeline remains strong and I am very positive about the prospects for all our business units."

FINANCIAL HIGHLIGHTS

(in thousands of Canadian dollars, except per share amounts)Three months
ended
April 30, 2011
Three months
ended
April 30, 2010
Revenues285,998272,270
Gross profit (1)64,42064,697
Operating profit (1)29,49730,904
Net income for the period4,4876,345
Basic net income per share0.140.20
Total assets770,064782,970
Long-term debt (including current portion)566,665595,955
Quarterly US dollar average exchange rate0.971.03
(1)Gross profit and operating profit are not accepted performance measures as per IFRS

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

April 30, 2011 PERFORMANCE

As stated previously, 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.

In fiscal 2011 we focused on this strategy and the fourth quarter resulted in strong revenue growth, particularly in the US cash logistics.

The first quarter results showed the same momentum with a growth of 6.8% and with many new contract start-ups, the revenue growth in cash logistics is clearly established.

In security solutions, the focus was on the Kolossal integration in Canada and resulted in the complete integration of this business in six weeks.

Overall we were able to generate 22.5% of gross profit despite more than $2.0 million in contract start-up expenses in the US cash logistics.

As a result, operating profit was 15.9% in cash logistics, slightly below the 16.4% of the first quarter last year and security solutions showed an operating profit of 5.2% compared with 6.4% for the same quarter last year.

Finance costs amounted to $15.2 million, up $2.1 million from last year, due to higher amortization of deferred financing costs and higher interest on long-term debt. During the first quarter of fiscal 2011, we refinanced our bank debt and, as a result, we did not have a full period of amortization of deferred financing costs and interests on swaps, which were terminated with the refinancing.

Net income amounted to $4.5 million or $0.14 per share in the first quarter versus a net income of $6.3 million or $0.20 per share last year.

Revenues

The revenues for the first quarter were $286.0 million, compared with $272.3 million last year, an increase of $13.7 million or 5.0%. The acquisition of Kolossal added $12.7 million and organic growth totaled $8.4 million or 3.2% in the quarter. The decline in US dollar has decreased the revenues by $7.4 million year-over-year.

Graphic 1: Revenues (CER) is available at the following address: http://media3.marketwire.com/docs/Graphic1_Revenues.pdf.

Security solutions' revenues in Canada were $128.9 million, compared with $117.3 million last year. This increase of $11.6 million or 9.8% is mainly attributable to the acquisition of Kolossal.

Revenues from emerging markets (Middle East and North Africa) were $19.5 million compared with $19.9 million for the corresponding period last year. The decline in US dollar has decreased the revenues by $1.1 million year-over-year. At constant exchange rate the revenues from emerging markets were $20.0 million compared with $19.3 million, an increase of $0.7 million or 3.4%.

Cash logistics' revenues were $137.6 million compared with $135.1 million last year, an increase of $2.5 million or 1.9%. At constant exchange rate the revenues for cash logistics were $140.8 million compared with $131.9 million last year. This increase of $8.9 million or 6.8% is mainly attributable to start-ups of several new large bank contracts in the United States during the last months of fiscal 2011 and in the first quarter of fiscal 2012.

Gross profit

The gross profit for the first quarter was $64.4 million compared with $64.7 million last year, a decrease of $0.3 million or 0.4%. The US dollar depreciation reduced the gross profit by $2.4 million. The gross profit at constant exchange rate was $65.6 million compared with $63.5 million last year, an increase of $2.1 million or 3.3%, mainly due to cash logistics' organic growth.

Security solutions' gross profit was $18.0 million compared with $18.5 million last year, a decrease of $0.5 million or 2.6%. At constant exchange rate, the security solutions' gross profit was $18.1 million compared with $18.4 million last year. Excluding the contribution of Kolossal's acquisition of $0.8 million, the gross profit for the quarter decreased by $1.1 million, mainly attributable to last year special measures at Canadian airports division and cost reduction initiatives imposed by CATSA on screening operations in Canadian airports.

Cash logistics' gross profit amounted to $46.4 million compared with $46.2 million last year. At constant exchange rate, cash logistics' gross profit was $47.5 million versus $45.1 million last year, an increase of $2.4 million or 5.4% attributable to several contracts start-up.

The gross profit as percentage of revenues was 33.7% compared with 34.2%, this reduction is mainly attributable to start-up costs of the new contracts.

Graphic 2: Gross profit by sector (CER) is available at the following address: http://media3.marketwire.com/docs/Graphic2_Gross_profit_by_sector.pdf.

Operating profit

Operating profit was $29.5 million compared with $30.9 million last year, a decrease of $1.4 million or 4.6%, of which $1.0 million is attributable to decline in US dollar. The Kolossal's acquisition had a positive impact of $0.2 million.

At constant exchange rate the operating profit was $30.1 million compared with $30.4 million last year, a decrease of $0.3 million or 1.2%. Of this, $1.0 million is attributable to security solutions' segment, while cash logistics' segment increased their operating profit by $0.7 million.

Graphic 3: Operating profit is available at the following address: http://media3.marketwire.com/docs/Graphic3_Operating_profit.pdf.

During the quarter, security solutions' operating profit reached 5.2% of revenues, compared with 6.4% last year. Operating profit for the cash logistics segment reached 15.9% of revenues in the quarter, compared with 16.4% last year, decrease due to the effects of start-up of contracts in the US.

Cash flows

Cash position as at April 30, 2011 amounted to $8,983, a decrease of $5,995 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 $29,279, a decrease of $1,789 or 5.8% over the cash flow generated by the operations last year.

Net change in non-cash working capital balances items generated cash of $1,179 compared with cash used in the amount of $17,608 last year. This is mostly attributable to an increase in accounts receivable and a reduction in accounts payable in 2010.

Financing activities

Cash used for financing activities amounted to $25,048 compared with cash used of $3,404 last year. The revolving facilities and the long-term debt variation generated $906 during the quarter compared with $78,221. In 2010, the Corporation used $47,441 related to the SWAP termination payment and $19,962 in borrowings costs related to the refinancing of its long term debt.

The interest paid on debt increased by $14.2 million, due to the semi-annual payment of interests on the US and Canadian notes.

Investing activities

Cash used in investing activities amounted to $10,440 compared with cash used of $5,055 last year. This increase is mainly attributable to payments made for Kolossal's acquisition of $4,580 (including bank indebtedness).

Additions to property, plant and equipment were $5,336 versus $5,503 last year. Intangible assets additions totalled $557 versus $399 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 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.

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 first quarter ended April 30, 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 and Chief Financial Officer, will discuss the first quarter results today, May 26, 2011 at 10:00 AM ET during a conference call with financial analysts and institutional investors. Listeners may access the call by dialing 1.416.981.9000 or 1.800.891.9945 for international calls.

MD&A FILING

Garda's Management's Discussion and Analysis for the first quarter ended April 30, 2011 was filed with SEDAR on May 26, 2011 and is available on the web site http://www.gardaglobal.com in the investors' section as of May 26, 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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