US-based contract research organisation (CRO) Parexel beat its own forecasts to deliver consolidated service revenues of US$964.3 million for the fiscal year (FY) ended 30 June 2008, 30.0% more than in FY 2007.

The guidance, adjusted upwards in April following a strong set of third-quarter results, had been for consolidated service revenues of $947 million to $957 million and earnings per diluted share of US$0.94 to US$0.96. Parexel reported net income of US$64.6 million or US$1.12 per diluted share for FY 2008, compared with US$37.3 million and US$0.66 respectively in the previous year.

Operating income for the latest fiscal year was US$86.7 million, up by 50.6% over FY 2007 and giving an operating margin of 9.0% versus 7.8% in the year to 30 June 2007. The main contributors to operating margin expansion were notable improvements in the Perceptive Informatics and Medical Communications businesses, as well as significant leverage of selling, general and administrative (SG&A) expenses due to compelling revenue growth in the CRS segment, Parexel reported.

Josef von Rickenbach, chairman and chief executive officer, said the company was entering the new fiscal year with “good momentum, a strong and diversified backlog, and a healthy business development pipeline”.

Parexel benefited from a sterling performance in its core Clinical Research Services (CRS) business, where service revenues (which do not include reimbursable out-of-pocket expenses) climbed 35.9% to US$745.6 million in the year. The gross margin for the CRS segment was 33.8% compared with 34.7% in FY 2007.

The Parexel Consulting & Medical Communications Services (PCMS) business continued to revive, with revenues 7.6% ahead at US$129.8 million and the gross margin improving from 30.0% to 33.8%. The technology division, Perceptive Informatics, Inc (PII), lifted its revenues by 22.6% to US$88.8 million while gross margin edged up from 43.6% to 44.2%.

Fourth quarter

In the fourth quarter ended 30 June, consolidated service revenues jumped 32.6% to US$272.2 million and operating income was 59.4% higher at US$26.9 million. Quarterly service revenues in the CRS business rose by 38.9% to US$212.0 million, although the gross margin slipped to 33.7% from 35.8% in the final quarter of FY 2007.

In the PCMS segment, service revenues dipped slightly from US$33.31 million to US$33.26 million in the fourth quarter but the gross margin widened from 31.6% to 35.5%. The PII business reported service revenues of US$26.9 million, an increase of 39.8%, and a gross margin of 51.1% against 44.5% in Q4 of the 2007 fiscal year.

Backlog at the end of FY 2008 came to US$2.059 billion, up by 36.6% year on year and by 8.0% over the backlog recorded at the beginning of the fourth quarter. Gross new business wins for the fourth quarter were US$545.0 million and cancellations were US$120.7 million. The net book-to-burn ratio was 1.56 for the quarter and 1.57 for the fiscal year.

According to von Rickenbach, Parexel’s priorities for the 2009 fiscal year include “solid revenue growth, as well as improved operating profitability and increased earnings per share”. The CRO is projecting consolidated service revenues in the range of US$1.125 billion to US$1.155 billion and earnings per diluted share of US$1.15 to US$1.25 for the current fiscal year.

That does not take into account the agreed acquisition of UK-based clinical technology specialist ClinPhone, which is expected to close during the first quarter and to have a dilutive impact of US$0.04 to US$0.06 on earnings per share for FY 2009, including amortisation of intangibles and other costs.