CSC happy with NHS IT

CSC profits more than doubled last quarter after the Information technology contractor benefited from a tax audit settlement. CSC reported that its earnings rose 110% in its fiscal 2009 fourth quarter to $382.3 million, compared with $181.7 million, or $1.15 per diluted share, in the year previously. CSC said that it benefited from a net favourable tax audit settlement that added $1.11 per share to the bottom line.

Revenue in the quarter declined 8.3% to $4.11 billion.  For all of fiscal 2009, CSC reported revenue up 1.5% to $16.74 billion and net income of $1.12 billion compared with $544.6 million in fiscal 2008.

CEO Mike Laphen said it was an encouraging set of results for the firm that has just celebrated its half century. “We believe that CSC's strategic direction, competitive position, and our current results provide a strong foundation for our next 50 years,” he said. “Our fiscal 2009 and its fourth quarter were successful and important steps in our drive to improve our financial performance. For the full fiscal year, we accomplished unprecedented cash performance; achieved our margin improvement goal; successfully completed our NHS milestones; and remediated our tax accounting related material weakness, while delivering a major tax benefit to our bottom line results.

“We plan to sustain our financial performance in fiscal year ’10. In particular, we plan to continue to position CSC for new business opportunities and profitable growth, and achieve earnings improvement despite an anticipated modest overall revenue decline by maintaining focus on cash management and cost management, and by removing risk and uncertainty surrounding our major benefit plans and by continuing our solid NHS performance.”

Laphen is unusual in the outsourcing business in so far as he's happy to talk up the firm's role in the NHS IT programe.  “Fiscal year 2009 marked another successful year for CSC and the NHS program as we accomplished our deployment objectives and met our financial objectives,| he said, “We successfully achieved our major milestone for Lorenzo Release 1 in the fourth quarter, with our third early adopter, Bradford, going live in March. In addition, we achieved an important milestone to our ambulance solution and successfully completed the build of a contingency pack solution for the NHS in the South of England, both of which also made a positive contribution to the quarter.

“To date in our work on the NHS program, CSC has successfully completed well over 1,800 system deployments in settings across the entire healthcare system, in GP practices, communities, mental health and child health, as well as in acute hospitals and emergency care. With over 100,000 NHS professionals currently using these systems, CSC is making contributions to the delivery of improved health services across England.”

He's also not interested in the widespread criticism of the project nor does he regard the November deadline for improvement that has been set as particularly troublesome. “We are continuing to work with the NHS jointly and in I think a very strong partnership fashion to achieve success in November,” he said.  

“We anticipate success in November, as we anticipated success in March. You have to put some of the press remarks in a bit of a context. We continued to have favourable feedback from the customer. The customer I expect will continue to put pressure on us to continue with successful delivers, as do most customers, and we will continue to march down that path.”

On the wider outsourcing front, Laphen is encouraged.  “Year over year, global outsource bookings grew from $100 million to $800 million in the fourth quarter and from $2.2 billion to $4.4 billion for the full year” he said. “Our outsourcing pipeline for fiscal years ’10 through ’12 period currently stands at approximately $10 billion of qualified opportunities. Importantly, expressions of interest and outsourcing are now turning into deal flow.”