Accretive Health Executive Insights: U.S. Color, Underlying Profitability

On Wednesday, Accretive Health Inc (NYSE:AH) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

U.S. Color

John David Roeg – ING: I have a couple of questions. First, on the Netherlands, can you explain why Sander van der Laan has returned to the position of CEO of Albert Heijn? Does it have anything to do with the lack of market share growth in recent quarters? Then a question on the pick-up points in the U.S. You said in the statement that results are promising, but can you give a little bit more color on this activity like what is the amount of sales growth, or what is the amount of sales that goes through these pick-up points, and does it bring you market share gains, and what does it means for your margins in those stores. Lastly, regarding the purchase of the 82 C1000 stores, though you already have in mind when you will ask approval to the Dutch authorities, and do you think that you can substantially improve your buying conditions with the branded producers in the country? Those were my questions.

Dick Boer – CEO: Let’s start with the first one – the last one I would say, (Dutch) and those approval on C1000, it’s still in the hands of Europe. So Brussels we’re expecting though very soon that it will be handed back to the Dutch and EMEA, and then of course, we have a regular timeframe which they have to keep for them to do their research. Yeah, there will be times of course how fast they will do their homework. So, we don’t know. So that’s for sure, we hope that they will do it in the timeframe they normally use for it, but let’s wait for that. Of course, we did our homework pretty well when we acquired the C1000 stores. So hopefully that’s in line also what NMa is expecting from us. On the other question on the pickup points, we of course, are testing different malls. So we’re testing different malls in the markets we are in and with different type of fee structures to be sure that we’re going to see what the reaction is of customers. What you see in general at this moment what customers, of course, have at free of charge, we don’t ask any extra fees for it. They’re really appreciated. Now, that’s a final model. We might do that or we might have some certain say contributional support for this, but in a way what you see is that the trends for our customers those are using it are quite positive on this. Yeah, we’re going to test more options with the small charge, with no charge and in the meantime, of course, working on increasing also the quality of our delivery to the stores and to the customers by our stores, which are producing the orders in the U.S. and of course working on big investments for warehouses. On the other hand, management change, the main reason is that finally looking at the structure also and the way we looked over the last year in managing Ahold Europe, we came to the conclusion that some (in its) strength is the best, of course, to running the brands all the time in a way, of course, if you look at the business Benelux, Belgium, Germany and the Netherlands it’s all under the brand of Albert Heijn. We came to a mutual conclusion that this would be the best way to move forward also with Albert Heijn and Ahold in Europe in the markets we are operating. That’s the main reason we decided it will – less layers in between Derk I was hearing from some and his team and I think this certainly is going to help all of us to continue to perform well with Albert Heijn.

Underlying Profitability

Robert Jan Vos – ABN Amro: I have two questions, if I may. I think that in an interview or so this morning, early this morning you mentioned that the first quarter underlying profitability of 4.3% is also a good indication for the remainder of the year. Can you confirm that? Second question I have, you mentioned that you’ve gained volume and value share in the U.S. Did you also gain share, for example, in Giant Carlisle country where there is a bit more competition from Wal-Mart? Those were my questions.

Jeff Carr – CFO: Robert, it’s Jeff Carr. I’ll take the first question. In terms of margins, the 4.3% is, obviously, it’s not retail operating profit margin, it’s the full company operating profit margin and that’s down (indiscernible) basis points for last year versus last year. What I’d expect to see roughly for the balance of the year, I don’t see a lot of scope for significant improvement in the U.S. I think we’ll be around those sort of numbers as we go through the balance of the year. I think in the Netherlands, as we go through the year, we will see some opportunity, some potential to improve margin. I think the number that we’re looking at in the first quarter 6%, we’ll finish the year on a slightly higher number than that. So I think there is some upside on margin at closer towards the number we achieved last year and I think that’s as far as we’d like to go in terms of specific guidance.

Dick Boer – CEO: Robert, the point I made also this morning was not about the underlying operating margin of the Group, but I referred as well as (yes) it’s about the performance of the Netherlands and the U.S. itself and the full year underlying profits is also (influenced) (indiscernible) by a headquarter cost and all kind of other thing. So I think that I gave, let’s say, similar to what Jeff did now is to give a little bit more color on that. Your second question was Giant Carlisle. Giant Carlisle continued to perform well, continued to grow market share in their respective markets. It’s good to see also that Ukrop is picking up continuously share for that market. So, in general, we’re pleased with the Giant Carlisle positioning, continue to be I’ll say in a market where Wal-Mart is very active.