Wednesday, March 21, 2007
ArmorGroups' profits fall after failure to win more Iraq contracts
Business, Security
(Financial Times) ArmorGroup's profit fell sharply last year after the armed security provider failed to win new contracts for its Iraqi training camp. David Seaton, chief executive at the Westminster-based company, blamed the lack of business at the Camp Ghassan facility on a "slowdown in coalition-funded training of Iraqi security forces and a continued lack of funds for training from Iraq's ministries".
In 2005, profit was boosted by a contract to train close protection officers for the Iraqi judiciary. However, this was not replaced with new business. As a result, pre-tax profit fell in the year to December 31 to $9.5m (£4.85m), down from $12.1m the previous year. The training problems overshadowed an improvement in Armor's protective security division, which accounts for most of its sales.
The company reduced its reliance on Iraq, cutting revenues from 59 per cent of group sales to 49 per cent after winning new contracts in the Middle East, Afghanistan and Africa. It also managed to improve margins in Iraq by reducing costs, hiring more locals and lowering capital investment.
Sales rose 17 per cent to $273.5m ($233m) on the back of growing business in protective security in Iraq, Afghanistan and Nigeria. Earnings per share were 13.35 cents (16.24 cents) and the recommended final dividend is 1.5p, giving a yearly total of 2.75p, the same as 2005. Its shares, which have rallied 43 per cent in the past three months because of the improved Iraq performance, fell 3p to 87p yesterday.
In 2005, profit was boosted by a contract to train close protection officers for the Iraqi judiciary. However, this was not replaced with new business. As a result, pre-tax profit fell in the year to December 31 to $9.5m (£4.85m), down from $12.1m the previous year. The training problems overshadowed an improvement in Armor's protective security division, which accounts for most of its sales.
The company reduced its reliance on Iraq, cutting revenues from 59 per cent of group sales to 49 per cent after winning new contracts in the Middle East, Afghanistan and Africa. It also managed to improve margins in Iraq by reducing costs, hiring more locals and lowering capital investment.
Sales rose 17 per cent to $273.5m ($233m) on the back of growing business in protective security in Iraq, Afghanistan and Nigeria. Earnings per share were 13.35 cents (16.24 cents) and the recommended final dividend is 1.5p, giving a yearly total of 2.75p, the same as 2005. Its shares, which have rallied 43 per cent in the past three months because of the improved Iraq performance, fell 3p to 87p yesterday.
The private security market has expanded from $900m in 2003 to $2.6bn last year, with about half of that outside Iraq, showing that the industry is maturing. However, operating margins of 4.7 per cent in the armed guard business, while good for the industry, are slim, especially for a company that experienced 450 "hostile actions" against staff last year. Armor's future attractiveness will lie in higher margin training work and consulting services, similar to those of Control Risks, its non-listed rival.
Labels: Armorgroup, Camp Ghassan, contracts, David Seaton, private security companies
