CSC shows first growth in two years... after ploughing half a billion into takeovers

You gotta spend money to make money, after all

Funnel of cash. Credit: via SXC – http://www.sxc.hu/profile/Leonardini

Sales at outsourcing and integrator basket case CSC are growing again – all it took was hundreds of millions of pounds worth of acquisitions.

The New York Stock Exchange-listed outfit reported revenue of $1.87bn for the three months ending 30 September – its Q2 of fiscal 2017. This was up 7.16 per cent on a year ago and the first time CSC has grown in 24 months.

CSC forked out £480m outlay for business processing outfit Xchanging in December and $428m on Aussie IT services biz UXC in March. The boost was obvious in the Global Business Services division, which grew 19.2 per cent to $1.04bn.

CEO Mike Lawrie said the two takeovers were largely integrated. "The contribution of these acquisitions to our performance has resulted in positive year-on-year growth," he told financial analysts on a conference call.

The other part of CSC didn't do so well – the top line at Global Infrastructure Services dipped 2.1 per cent to $836m.

Lawrie said GIS revenues have "historically been lumpy" and it saw "some delays in GIS purchase decisions", including a $150m contract in the healthcare sector. CSC has a reputation in healthcare, especially in the UK.

"We continue to take actions that focus on next-generation offerings, margins and cap-ex intensity as we mitigate the headwinds facing the traditional IP business," he added.

A rise in operating expenses and restructuring costs left CSC nursing an operating loss of $1m but after income tax benefits were accounted for, the firm made a net profit of $15m.

CSC has another chunky buy in the offing – it is taking on HPE's Enterprise Services business, which will again help to boost company revenues by several billion dollars, and the coffers of Lawrie and his inner circle by $90m.

According to an SEC filing earlier this week, Lawrie is on course for a $44m payout once ES is brought on board; CFO Paul Saleh could get $14m; Stephen Hilton, head of GIS, some $12m; $11.1m could go to GBS head James Smith; and William Deckleman, legal counsel, could get $9.4m. ®

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