Icon posts strong Q4 results, weak margin growth
of 2006, driven by the improved profitability of its Clinical and
Central Lab segments.
For the quarter ending 31 December the growing Irish firm recorded $13.8m (€10.5m) in operating income, a 53 per cent jump from $9m in the comparative quarter, which actually ended 30 November due to a change in the company's fiscal calendar. During the period, sales also climbed to $184.3m from $120.3m in the year-ago quarter – a 53 per cent increase. In addition, the company was awarded $171m in net new business - 22 per cent more than during the compared quarter. Icon's pre-tax profit also increased 53 per cent to for the period to reach $14.9m (€11.3m). On the flipside, costs rose substantially, in particular direct costs which soared to $73.1m – a 50 per cent increase – and also selling, general and administrative (SG&A) costs which went up 42 per cent to $38.1m. As a result, the firm's strong performance was not reflected in the operating margin, which only increased slightly from 10.2 to 10.7 per cent. The company was unavailable to comment, however, Peter Gray, Icon's CEO, said during a conference call last week: "We were hiring rapidly in 2006 a lot of new staff which has led to high costs in terms of recruitment and training." "But these costs won't be there this year and our margin will expand as a result." He did not predict by how much. Meanwhile, yearly results were also positive as pre-tax profit swelled to $51.5m, from $21.2m the previous year. What is more, sales jumped to $649.8m from $471m at the same time. The company said performance in its Central Lab unit – which recently swung back into profit – and also its Clinical business were driving these figures. "Our Central Lab achieved a significant turnaround from losses of $6.6m last year to profits of $1.3 million," said Icon's Chairman Dr John Climax in a statement. "Our clinical segment achieved very strong growth in 2006 and improved its margins from 11.9 per cent in 2005, to 12.4 per cent." Although he did not elaborate whether this was a permanent turnaround or how it had been achieved. In addition, while yearly margins went up from 4.1 per cent in 2005 to 7.3 per cent in 2006, they stayed significantly low. "Our margins in the US have been lower over the past two years than they have historically been and the reason that is happening is that we are not managing our contracts as well as we could," said Gray. "But there is room for growth within our fixed costs infrastructure and it will take a couple of years for margins to improve."