Home Health Index | June 2012

Stoneridge Partners | Home Health Index June 2012: What a lousy month! Both the Stoneridge Partners Home Health Index (HH Index), and the market in general were down. The S&P 500 put in its worst month in two years, while our HH Index did even worse.

We started out the year with such optimism. For the first three months our HH Index showed a very nice increase.  But in April we dropped 4%, and now May has knocked us down another 14%. We are still up for the year however…. about 18% while the S&P 500 is up only 4%.  But we are definitely headed the wrong way.

The only stock down for the year is Gentiva. Almost Family has turned in the best result for the year….up over 34%.

Our HH Index now sits at 13.89. The high was set in September, 2008 at 41.75.  Quite a difference.

All four companies were down for the month of May. LHC Group turned in the best performance, down only 5.4%, while Gentiva turned in the worst performance, down over 32%.

Here are the results:

Chart6

We also note that Addus HealthCare’s stock was down 13.6% but remains up about 12% for the year.  They closed May at 3.99.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

 

 

HOT OFF THE PRESS: 

This was earnings season for the public companies.  We took a look at revenue and gross profit margins for the previous four quarters.  If you are looking for growth you are looking in the wrong place.

The revenue run rate for the four public companies at the end of the 1st quarter in 2011 was about $4.29 billion vs. $4.22 billion for the 1st quarter in 2012….down about 1.7%.

Even worse however was the gross profit….down about $11.4 million or 7.2%.

The only company showing a positive result was Almost Family, and their increase was due in a large part to their acquisition in the 3rd quarter, 2011 of Cambridge Home Health.

The result:

Wo Graphs

Totals in chart form:

Graph Final

“THE PARTNERSHIP FOR QUALITY HOME HEALTH CARE” is a consortium of home health care providers including the large public companies and NAHC.  Previously they put forth a proposal to limit “Outliers”, which was adopted and is reported to have produced savings to the Medicare program of $860 million.

The Partnership has made additional proposals to CMS for further controls.  According to the Almost Family earnings report, “The Partnership couldn’t be more aligned with the government to put controls in place that will be effective in impacting fraud and abuse”.

MERGER & ACQUISITION ACTIVITY

For another month there have no announcements from these public companies regarding any acquisition activity at all.

We believe this will soon change as there has been very little in the way of organic growth among these public companies.  We believe that acquisitions are an engine that can and will provide growth!

Here at Stoneridge Partners we are now seeing more acquisition activity coming from private equity rather than the public companies.

Announcements in the news:

We are pleased to announce that Jordan Health Services acquired Providence Homecare Services, a Medicare home care provider in Lufkin, Texas.   We provided sell side representation.

The KPC Group, based in Riverside, California, announced their acquisition of Ramona VNA & Hospice.  Their name has been changed to Empire Home Health & Hospice.

This is truly a global business.  Linde Healthcare, one of Linde Group’s three strategic growth pillars, announced that it has completed its acquisition of Air Product’s Continental European home care business.  This comprises homecare operations in Belgium, France, Portugal and Spain, with sales of €390 million, 250,000 patients and 850 employees.

EBITDA Multiples:  Multiples of EBITDA from earnings results through the 1st quarter 20012 with stock prices as of May 31, 2012.

Company Multiple of EBITDA
Almost Family 5.1
Amedisys 2.1
Gentiva 0.8

 

A Favorite Cartoon:

Stoneridge Partners | Home Health Index June 2012

 

Quote of the Month: “The power to tax involves the power to destroy”  Chief Justice John Marshall, 1819


Stoneridge Partners | Home Health Index June 2012: The Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly. If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to partners@stoneridgepartners.com.