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CSC recovery programme starts to pay off in Q2

Mike Lawrie

Virginia: IT consulting and outsourcing firm CSC has reported an improvement in profit in its second quarter 2013, though revenue fell marginally.

Financial Highlights

  • Operating income of $298 million compared with an operating loss in the same period a year ago
  • Total revenues were $3.85 billion compared with $3.97 billion in the year ago period, a decrease of 3% as reported and a 1% decline in constant currency.
  • Operating margin of 7.7% increased compared with -1.9% a year ago and 4.6% in the prior quarter.
  • Operating cash flow of $444 million for the quarter, improved by $438 million from the previous year.
  • Free cash flow of $237 million for the quarter improved by $505 million compared to the previous year, as the result of better contract management, cost takeout, and the benefit of the NHS Interim Agreement.

"Our second quarter results reflect continued progress made on our contract management performance and cost takeout program. As a result, operating margins improved across all three lines of business when compared with the prior year and we are raising our fiscal year 2013 EPS targets" said Mike Lawrie, President and CEO.

"During the quarter, we also strengthened our offering portfolio through the acquisition of a premiere software development company that specializes in big data, analytics and advanced applications. This action is consistent with our strategy of being a leader in next generation technology solutions and services. We are also taking steps to divest certain non-core assets such as a smaller business in Italy. There is much work to be completed but we are encouraged with the early results of our turnaround program."

Lines of Business

Managed Services Sector (MSS) revenue of $1.58 billion decreased by 2% from the second quarter of last year but increased 1% in constant currency mainly due to the AppLabs acquisition. Segment operating margin increased 278 basis points to 5.6% due to better contract performance and cost takeout partially offset by a $47 million workforce restructuring charge. MSS signed $2.2 billion of new business during the quarter.

Business Solutions & Services (BSS) revenue was $0.92 billion decreased by 3% from the second quarter of last year but increased 1% in constant currency. BSS operating margin expanded by 335 basis points to 6.9% primarily as the result of improved contract performance and cost takeout partially offset by a $10 million workforce restructuring charge. New business awards for BSS were $0.9 billion.

North American Public Sector (NPS) revenue of $1.38 billion declined by 4% from the second quarter last year primarily due to the Department of Defense contract completions which occurred at the end of fiscal year 2012. Operating margin of 10.9% increased significantly year over year due to the impact of the U.S. Claims settlement in the prior year. NPS bookings of $1.1 billion declined from one year ago as new business awards continue to be impacted by continued uncertainty in government procurement.

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