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Outsourcing tanker CSC sales growth torpedoed

But $490m lower expenses paved way for profits ... real profits this time

Leaky outsourcing tanker CSC saw sales growth drift off on the horizon for yet another quarter – the first of its fiscal 2016 – but the services slinger is back in the black, without the help of tax benefits.

The fact CSC slashed costs and expenses by nearly half a billion dollars had nothing to do with bottom line beefiness, nothing at all, nope. And for the company’s investors, profit that feeds into dividends is a rare treat these days.

Just one division grew in the three months to 3 July, as revenues plunged by 14.7 per cent to $2.76bn (down 9.8 per cent in constant currency).

Global Business Services shrank 15.5 per cent to $919m, falling below the magic billion mark for the first time in years; Global Infrastructure Services slumped by 21.8 per cent; and even the seemingly hardy perennial, breakaway North America Public Sector, reported a six per cent dip in turnover to $957m.

CEO Mike Lawrie could be forgiven for blushing during last night’s conference call, but no, the exec blamed a strong US dollar for the flop in the commercial units with overseas operations.

He highlighted the extra week in the quarter a year ago as one factor, admitted the GBS US consulting business was down, as was application revenue. As for GIS, he said:

“As we’ve talked about before, we’re continuing to live through and experience the effects of the price downs, restructuring and contract completions, which more than offset the new work we’ve won both in our traditional infrastructure business and our next generation offering, like cloud.”

The commercial units will be bulked up by the addition of managed services outfit Fixnetix which operations in the finance space, and by Fruition Partner, which sells enterprise service management stuff and partners Service Now.

The North America Public Sector division is to be spun out of the group as a separately listed entity by October.

Lawrie didn’t talk about the reasons why the unit’s revenues fell but presumably it has something to do with the split; the inward focus of management and any uncertainty for customers.

He said there are “dozens of separation works streams spanning everything from finance and contracts to facilities and HR and IT”.

CSC slashed costs and expenses including sales, general & admin, and the costs of services by $490m to $2.53bn. This left an operating profit of $228m, up from $214m. Net profit was $160m, up from $146m. ®

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