Exchange Rates Hit Allied Healthcare
Allied Healthcare International Inc. a leading provider of flexible healthcare staffing services in the United Kingdom, has issued financial results for its fiscal 2009 third quarter.
To provide investors with an increased understanding of the Companys business, as in previous quarters, Allied is providing a breakdown of its revenues, gross profits, selling, general and administrative costs and operating income at constant exchange rates using the comparable prior period weighted average exchange rate. In addition, as the Companys revenues and gross profits are generated in the United Kingdom, an analysis is included, within the management discussion below, of the last seven quarters revenues and gross profits in pounds sterling to enable investors to fully understand the underlying trends over these periods without the effects of currency exchange rates. As noted in the reported numbers, recent fluctuations in foreign exchange rates have significantly impacted the Companys current period results.
For the third quarter of fiscal 2009, at constant exchange rates, revenues increased by $5.5 million, or 7.3%, to $80.5 million, compared with $75.0 million reported during the same period in fiscal 2008. Contributing to the increase in revenues was Allieds Homecare revenues, which grew by 17.3% to $67.5 million. Nursing Home revenues declined by 25.3% to $7.3 million. Hospital revenues decreased by 26.0% to $5.7 million. After the unfavourable impact of currency exchange of $17.4 million, revenues decreased to $63.1 million.
At constant exchange rates, total gross profit for the third fiscal quarter increased 5.8% to $24.5 million, compared with $23.1 million reported for the comparable quarter in fiscal 2008. Gross profit margin for the third quarter was 30.4%, as compared to 30.8% for the comparable prior period. Foreign exchange decreased gross profit by $5.3 million to $19.2 million for the quarter.
At constant exchange rates, SG&A for the third fiscal quarter was $20.5 million, compared with $19.4 million reported last year. As a percent of revenues, SG&A costs were 25.8%, compared to 25.9% in the comparable prior year period. Foreign exchange decreased costs by $4.2 million to $16.3 million for the quarter.
At constant exchange rates, operating income for the third quarter of fiscal 2009 increased to $4.0 million, compared to operating income of $3.7 million reported during the 2008 third fiscal quarter. Foreign exchange decreased operating income by $1.1 million to $2.9 million for the quarter.
Net income for the third quarter of fiscal 2009 was $2.4 million, as compared with $2.5 million reported during the 2008 third fiscal quarter. Diluted earnings per share was $0.05 for the quarter, compared to diluted earnings per share of $0.05 last year.
For the fiscal nine months ended June 30, 2009, at constant exchange rates, revenues increased by $12.8 million, or 5.7%, to $236.4 million, compared with $223.6 million reported during the same period in fiscal 2008. Contributing to the increase in revenues was Allieds Homecare revenues, which grew by 13.8% to $191.2 million. Nursing Home revenues declined by 21.1% to $25.3 million. Hospital revenues decreased by 15.2% to $19.9 million. After the unfavorable impact of currency exchange of $56.4 million, revenues decreased to $180.0 million.
At constant exchange rates, total gross profit for the fiscal nine months ended June 30, 2009, increased 7.4% to $72.5 million, compared with $67.5 million reported for the comparable period in fiscal 2008. Gross profit margin for the fiscal nine months ended June 30, 2009, increased to 30.6% from 30.2% for the comparable prior period. Foreign exchange decreased gross profit by $17.3 million to $55.2 million for the quarter.
Net income for the nine months ended June 30, 2009, increased to $7.4 million, as compared with $5.9 million reported during the 2008 fiscal nine-month period. Diluted earnings per share was $0.16 for the nine-month period, which includes $0.01 from discontinued operations due to the release of reserves as a result of the warranty period within the sales agreement, related to the sale of the respiratory business in fiscal 2007, having expired. This compares to $0.13 for the same prior year period.
We continue to see good growth in our homecare business, which now represents almost 84% of our business, commented Sandy Young, Chief Executive Officer of Allied. The revenue growth in the quarter of 17.3% was particularly pleasing and was ahead of the 10- 15% growth range that we have recently been operating within. Our Continuing Care continues to grow strongly and accounts for over 15% of the revenues of this business.
Continuing Care has benefitted from the restructuring we carried out earlier this year. We have low penetration in this market and our proposition of providing homecare with a lower level medical requirement via support staff under nurse supervision is popular with hospital trusts.
Mr. Young continued: Our nursing homes and hospital staffing business results continue to struggle but following our acceptance onto the new PASA framework agreements, which come into effect in October 2009, we are hopeful that the higher charges under this revised contract will give us opportunities going forward. The higher charges are necessary to enable us to effectively recruit staff to service this business. We currently have plans in the next financial year to re-launch this service line in a few of our regional offices as well as our existing London operation.
While current period SG&A running costs of 25.8% of revenues are lower than the prior year period, we are continuing to invest in certain areas of our business that includes such items as continuing care, learning disability, IT systems, and business improvement projects to ensure that we support future growth in revenues. At the same time, we maintain tight controls over other areas of SG&A costs so as to maintain our objective of reducing SG&A costs as a percent of revenues.
We currently have several business improvement initiatives under way with project management support. These projects cover winning new business, carer retention, bid implementation, and branch operations. There are also other projects supporting service delivery. We believe that being a high quality service provider is a key driver to increased revenue and profit growth.
The third quarter also concluded the successful pilot phase of our Coldharbour IT replacement. We now have thirteen branches successfully running on Coldharbour. The cost of the project is within the original budget and time projections with a total capital expenditure of $2.4 million and operating expense of $4.5 million. To date, expenditures have been $2.7 million split between $2.2 million capital and $0.5 million operating expense. The project will allow us to make further efficiencies in the way we process transactions and will also improve service delivery.
Mr. Young concluded: As noted in our previous quarters press release, with nearly all our operations in the United Kingdom, we believe it is important for investors to see the underlying revenues and gross profits in pound currency as detailed below. This shows growth in our gross margins year to date of 7.4% and our third quarter gross margin of 30.4% is well within our expectations. Our SG&A costs year to date, excluding exchange effects, increased by 1.5%, compared to the prior year despite the increase in revenues that we have generated.