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*RMH Stock Doubles, Then Slips With Receivables News

RMH Teleservices Inc., Bryn Mawr, PA, a call center operator providing inbound and outbound teleservices for telecommunications and financial services companies, saw its stock price more than double during the past month before it slipped this week after it announced an Internet joint venture and strong year-end financial results that were tempered by an unusually large volume of receivables in the fourth quarter.

In anticipation of the strong year-end results, the company’s stock traded up to just over $7 last week, before losing more than a point after a conference call in which it revealed details about the receivables and its new Web venture.

William Sutherland, an analyst with Janney Montgomery Scott, Philadelphia, said investors might have bid up the stock expecting that the company’s year-end financial results would be even better than they were. In addition, he said, investors might have been disappointed that the company had a dramatic increase in receivables – money owed to RMH by its clients – for the quarter, which he attributed to billing complications associated with a new contract with telecommunications giant MCI Worldcom, Jackson, MS.

“There was an explosion of growth at the end of the fourth quarter,” he said. “Because that growth all came at the end of the fourth quarter, they said the day after they closed their receivables came down considerably.”

The company reported profits of $1.6 million, or 19 cents per diluted share, for the fiscal year that ended Sept. 30, compared with profits of $504,000, or 6 cents per share, in the preceding year. Revenues increased 53 percent, to $80.32 million, from $52.43 million a year ago. Fourth-quarter revenues increased 81 percent, to $26.56 million, from $14.64 million a year ago.

RMH brought in a new CEO, John Fellows, in September 1998 and a new executive vice president and chief financial officer, Noah Asher, in February of this year.

Fellows has directed a strategy in which the company has increased the ratio of inbound-to-outbound service it provides, saying that inbound contracts tend to be longer-lasting. The company said it finished the year with 2,700 workstations, including 700 dedicated to inbound calling. Another 500-800 workstations are planned for the coming fiscal year, including an expansion of its presence in Canada, where 400 of the inbound seats are housed and where it said it benefits from lower labor costs. The firm also has decreased its risk by diversifying its client base.

In addition, the company last week announced an Internet joint venture called 365Biz.com, in which it will team with Advanta Partners, Spring Hill, PA, to offer Web design, hosting and membership services to small- and medium-sized businesses. RMH will own slightly less than 50 percent of the new company, Fellows said.

Investment in the new venture decreased earnings in the most recent quarter by about a penny per share, the company said, and additional investments could cost up to about 2 cents per share in the near future.

“Over time, as the business matures, that will reverse itself” if the business performs up to expectations, Fellows said in a conference call with analysts.

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