Kendle op income down 90% on lower revenues

08-Aug-2010 - Last updated on 09-Aug-2010 at 08:10 GMT

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Kendle posted a 90 per cent drop in operating income, caused by lower revenues and continued investments, but was buoyed by pipeline growth.

Income from operations totalled $0.7m (€0.5m), down from $7.0m a year ago. Kendle attributed the decline to lower net service revenues, which dropped 23 per cent, investment in its enterprise resource planning (ERP) system and business development expenditure.

New business awards totalled $131.5m, which is a 48 per cent quarter-on-quarter increase but flat year-on-year. Compared to the second quarter of 2008 new business awards are down 36 per cent.

Cancellations in the quarter were $30.9m, down year-on-year by 36 per cent and approaching the levels seen in the corresponding period of 2008. Net book-to-bill was 1.2 and backlog totalled $778.0m as of June 30.

Early phase, late phase

Early phase had a tough quarter, with all three facilities performing worse than expected, said Candace Kendle, CEO of Kendle, in a conference call with investors. Net service revenues were down 20 per cent, totalling $5.9m, contributing to operating loss increasing from $0.1m to $0.5m.

Kendle is monitoring early phase to determine if there are opportunities for streamlining, said the CEO. In response to a question about the prospects for the site in Utrecht, the Netherlands, which recently faced a regulatory setback, Kendle said she is unwilling to comment on specifics.

Net service revenues from the late phase business declined from $96.5m to $76.0m. This contributed to a 27 per cent drop in late phase operating income, which fell from $18.9m to $13.9m.

Asia Pacific expansion

Kendle is doubling capacity at a site in India. There are also plans to open additional sites in China in response to recently won business and expand into other Asian countries, said the CEO.

Expansions are expected to increase staffing in the region to 500 people over the next 18 months and drive growth. Furthermore, Kendle said its operations in Asia Pacific and Latin America will help it broaden and deepen existing relationships, as well as add new clients.

In the second quarter results Latin America contributed 11 per cent of revenues, up from 10 per cent a year ago, and Asia Pacific accounted for four per cent. The proportion of revenues from Europe grew slightly to 40 per cent, possibly reflecting a reorganisation of sales operations.