Icon shares tumble 5% as full-year forecast cut

SHARES in Icon fell 5% on New York’s NASDAQ yesterday after the Dublin-based clinical research group reported lower second quarter profits and cut its full-year forecasts.

Revenues rose 9% to $79.5 million (€60.2m) for the three months to November, while pre-tax profits came in at $7.2m, down 16% from the same period in 2003. But profits for the first six months were 3% higher at $16.8m.

Revenues were ahead by 6% when the effects of acquisitions were stripped out.

The fall in quarterly profits was the first experienced by Icon for more than five years. Chairman and co-founder John Climax said the fall was in line with company expectations and was down to an unusually high number of research contracts being cancelled.

“This high cancellation experience appears to have been an anomaly,” said Dr Climax.

Dr Climax was upbeat about the company’s prospects going into 2006, but said Icon would need to secure new business during 2005 to consolidate its position. The company won new business worth $122m during the second quarter, but this was slightly offset by lost contracts worth $2m.

Operating margins fell from 11.4% to 8.8% as costs picked up at a faster pace than revenues. The company’s cash management also came under pressure as it took longer for customers to pay their debts. But the worst news for shareholders came from the company’s decision to cut its full-year forecasts.

Earnings per share are expected to come in at between $1.68 and $1.70.

This was largely due to a poor performance from its central laboratory division, which accounts for approximately 10% of revenue.

The company, which has 37 operations in 23 countries and employs 2,600 people, spent $2.9m on capital expenditure over the three months, which helped to bring its net cash pile down from $65.6m in August to $61m in November. The market values it at more than $480m.