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Profit at Abbey Healthcare Up 35% for Quarter : Earnings: Chairman says provider of home health services has reached 'turning point' in absorbing recent acquisitions.

October 21, 1994|DEBORA VRANA | TIMES STAFF WRITER

COSTA MESA — Though struggling to absorb a string of recent acquisitions, Abbey Healthcare Group Inc. reported Thursday that its profit jumped 35% from the same quarter last year.

The Costa Mesa-based provider of home health care reported earnings of $5 million, or 36 cents a share, for the quarter ending Oct. 1, compared with $3.7 million, or 38 cents a share, during the same period last year.

Chairman Timothy Aitken called the third-quarter results "a turning point" and predicted that Abbey's earnings will continue to improve as it absorbs and integrates recent purchases.

"It will take some time to see all the things we've talked about come true," he said. "This third quarter is the turning point."

Besides buying more than 20 small companies this year, Abbey made headlines in 1993 when it purchased Total Pharmaceutical Care Inc. in Torrance for $195 million. In March, 1994, it paid $12 million in cash and stock for Protocare Inc. of Boston, which provides home infusion and nursing services.

"Usually when a company of that size makes the quantity of acquisitions that it has, it faces a not insignificant challenge in digesting those entities and creating a cohesive final organization," said Dave Anast, publisher of the Biomedical Market Newsletter in Costa Mesa. "It would appear that Abbey has been far more successful than others in the past, but their earnings reflect the inherent challenges."

Officials at Abbey, which provides home care services through a network of more than 200 facilities in 46 states, earlier this week called some analysts' predictions of earnings ranging from 33 to 35 cents a share "conservative." Other analysts had predicted earnings of about 40 cents a share.

But on Tuesday, Helen O'Donnell, an industry analyst at PaineWebber Group Inc. in New York, cut her estimate of Abbey's third-quarter earnings from 40 cents a share to 35 to 38 cents, saying that recent acquisitions were were proving a longer-than-expected drag on earnings.

But a frustrated Aitken slammed those analysts Thursday, saying the wide-ranging predictions were a reflections of analysts' laxity in updating their forecasts.

"I think these analysts sit on Wall Street and they think managing a business day-to-day is about quarterly results," he said. "It's not. It's about managing people, growing a company. It's not about quarterly results."

For the quarter, Abbey said revenue from continuing operations increased 62.7% to $111.2 million, up from $68.3 million in the previous year's third quarter. Profit increased 86.7% to $14.3 million from $7.7 million in 1993. Operating margins improved 12.9%, up 1.7 percentage points from 11.2% in the prior year to 12.9%.

During the quarter, combined net income from continuing operations, discontinued operations and a gain on the sale of Abbey Pharmaceutical Services was $7.6 million, or 52 cents a share.

The company sold its 51% stake in Abbey Pharmaceutical this year for an after-tax gain of $3.1 million, in a move to concentrate on its core businesses.

Through the first nine months, net income from continuing operations increased to $11.6 million, or 87 cents per share, compared to $10 million or $1.05 a share last year.

Additionally, Abbey announced this week that it has entered into an infusion-services agreement with the HMO subsidiary of PacifiCare Health Systems Inc.

Abbey Infusion Services, a wholly owned Abbey subsidiary, will provide home infusion services for 165,000 patients represented by specific provider groups in PacifiCare's commercial and Medicare HMO plans throughout Southern California.

In Nasdaq trading, the Abbey shares were up 50 cents, closing at $18. The company's earnings were announced after the market closed.

Abbey Healthcare Earnings

In the third quarter ended Oct. 1, Abbey Healthcare Group Inc. reported a net operating income of $5 million, or 36 cents per share, compared to $3.7 million or 38 cents per share the previous year. Figures in thousands of dollars, except per-share data:

3rd qtr 3rd qtr 9 months 9 months 1993 1994 1993 1994 Revenue $68.3 $111.2 $191.8 $317.8 Net income (loss) $3.7 $5.0 $10.0 $11.6 Per share (loss) $0.38 $0.36 $1.05 $0.87

Source: Abbey Healthcare

Researched by DEBORA VRANA / Los Angeles Times

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