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MONTREAL - Garda World Security Corp. (TSX:GW) said its profit rose 31 per cent in the second quarter as the addition of new contracts and extensions of existing work helped it beat analysts' expectations.
The Montreal-based company, which operates armoured trucks and provides cash logistics services to the banking industry along with security at airports and other locations, said net income was $5.3 million, equal to 17 cents per diluted share.
That beat expectations of 15 cents per share, according to analyst predictions compiled by Thomson Reuters.
Garda stock closed up 7.85 per cent, or 64 cents, at $8.79 on the Toronto Stock Exchange.
In the same quarter last year, earnings were $4 million or 13 cents a share.
Revenues increased to $280 million from $273 million.
The decline of the U.S. dollar reduced revenues by $12.2 million. At constant exchange rates, revenues would have increased by 7.5 per cent or $19.2 million, the company said.
Garda said that throughout the second quarter it signed several multi-year contracts with North American financial institutions, amounting to $340 million.
The company's physical security division outperformed internal expectations with organic growth of 17.3 per cent.
"Given that our second quarter is usually the weakest, we achieved excellent results in what continues to be a challenging economic climate," said senior vice-president and chief financial officer Patrick Prince in a release.
"We continue to benefit from our strong focus on execution, the strength of our platforms and the momentum we established in the first quarter."
During the quarter, Garda began to benefit from enhanced security requirements at Canadian airports and from new contracts, including one from the Foreign Commonwealth Office in Iraq.
Physical security revenues increased by 13.3 per cent in Canada. Revenues outside Canada grew by 41.2 per cent at constant exchange rate.
Cash logistics revenues continued to be affected by reduce economic activity in the United States, which lowered organic revenues by one per cent. The segment's margins were also affected by the July startup of several new bank contracts in Canada and the U.S.
Expenses decreased by 12.2 per cent or $4.9 million.
Martin Landry of Desjardins Securities said the results were slightly below his expectations on start-up costs for new contracts for the cash logistics business.
The division's performance was slightly weaker than its main competitor Brink's, which recorded organic growth of one per cent.
Net debt increased to $588 million from $582 million in the first quarter.
Although Garda remains heavily leveraged following years of acquisitions, the sale of non-core assets and restructuring of its debt has again positioned the company for growth, Jessy Hayem of TD Newcrest wrote in a report last week.
"Management's credibility, which had taken a beating following the company's struggles, is still being put to test, and we acknowledge that the high debt leverage and trading illiquidity make the stock less suitable for the faint of heart," she wrote, adding that her 12-month target was nevertheless C$12 per share.
