Normally, when troubled ‘SI sans frontieres’ CSC reports its quarterly results, we dash to the relevant SEC filing to dig the dirt on how much more dosh they have thrown into the NHS IT programme and how little return they achieved. Couldn’t do it last night as they were able to hide behind the ongoing SEC investigation into dodgy accounting in the Nordics to omit much of the detail from their 10K filing. We will have to wait till mid-June before we can start digging again. Let me return to the NHS in a mo’.
Of course, the results announcement was delayed anyway after CSC’s profit warning earlier this month (see CSC’s shares fall as NHS blamed for FY11 downgrade), so the results themselves were no great surprise. Headline revenues for the year to 1st April rose by 1% to $16b, while operating margins dropped a point to 6.7%. EPS on continuing operations fell by 14% to $4.41. What did surprise the market was the seemingly subdued guidance of 3-6% top line growth and 4-6% on EPS, apparently about 10% below consensus expectations. And the guidance assumed no change to the NHS deal (puh-leaze!) and excluded the proposed acquisition of iSOFT (see CSC to acquire iSOFT), whose software is arguably the root cause of much of the problem.
Which brings me back to the NHS deal. Our Tola Sargent has waxed lyrical about this programme for years, most recently after last week's damning report from the National Audit Office (see NAO delivers damning verdict on NPfIT). CSC has since come under extensive fire in the press, with allegations that cancelling the contract will cost more than seeing it through to the bitter end. This is, of course, complete and utter rubbish. Has the Government no idea about the concept of ‘cutting your losses’?
It should be clear to everyone involved that CSC’s NHS IT programme has deteriorated from ‘walking wounded’ to ‘do not resuscitate’. The sooner life support is removed, the better for all concerned.
As a footnote, this is all a bit of a tragedy for CSC’s UK operations. The prior year, the UK was the shining star in CSC’s firmament in terms of profitability, running a 13.2% operating margin on £1.18b in revenues. I guess we should consider those the last of the glory days.