Garda World Security Corp. saw its profit erode in the latest quarter owing to the costs of integrating recent acquisitions and contracts, but expects to boost its bottom line in the next few quarters, chief executive officer Stephan Cretier said Thursday.
Mr. Cretier said the Montreal company has a history of successfully integrating acquired businesses and contracts that it has won, which should help improve its finances.
“This is why I am so confident that the growth will hit positively the bottom line over the next few quarters,” he told analysts on a conference call to discuss the quarterly results.
“We're expecting a solid second half of the year and an even better 2012. Garda is doing well. It is in a growth mode.”
Garda recently won a contract worth more than $650-million to provide enhanced security at 15 Canadian airports including Toronto’s Pearson International and a multimillion-dollar contract to protect the Foreign Commonwealth Office in Iraq. It also has won contracts that boost its cash logistics services in the United States.
Garda also recently acquired Kolossal Security, one of Canada’s largest privately held security services providers, for almost $7-million.
Some of the contracts and acquisitions were about a year ago but are “coming on the books now and there's new contracts that have started also in the last quarter,” Mr. Cretier told analysts.
When you look at Garda over a year, the operation looks “extremely sharp,” he said, but on a quarterly basis the financial results can be uneven.
The security services provider with global operations said its quarterly profit fell to $3.8-million in the quarter ended July 31. That was down from $5.3-million a year earlier owing to the costs related to recent acquisitions.
Earnings per share were 12 cents, compared with 17 cents in the same period a year earlier, said Garda.
Mr. Cretier noted that Garda missed analysts' expectations on profit and earnings per share, but pointed out increased revenue of $296.5-million from $280-million.
He said there's a “little short-term pressure on margins as we ramp up to accommodate the increased volume of business, but we will be back on track, very, very shortly.”
Laurentian Bank Securities analyst Vincent Perri said the quarter's earnings per share were below his estimate of 22 cents and consensus average of 20 cents.
“The difference from our expectations is explained by slightly lower profitability, compounded by the unfavourable effects and continued startup costs on new contracts,” Mr. Perri said in a research note.
Mr. Perri added that revenue was below his expectation of $307.5-million.
He said Garda is continuing to focus on managing its costs and its debt levels have increased “modestly.” The company's net debt stood at $577.8-million at the end of the quarter, Mr. Perri said.
Mr. Cretier also said Garda’s Global Risk Consulting Group “is responding to the security demands of the rapid, sweeping changes throughout the Middle East.”
“In response, we are creating the capacity to drive our future growth. … We see strong margin improvement in the second half of the year as we continue to build upon the excellent momentum we have established.”
Garda operates armoured trucks and provides cash-handling services to the banking industry and provides security at Canadian airports. In emerging markets, it provides security for embassy personnel, reconstruction agencies and the oil and gas sector.
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