Thursday, 18 April 2013

A Look at CSC Results over 11 years

This table contains figures taken directly from CSC's own financial reports. The only derived figures are those for 2013 where we have used the 3 quarters year to date factored to a full year, and the calculations per employee.





Employees
Revenue
Revenue Per Employee

OI
Assets
OI Per Empee
Margin
2013 Factored on 3 Qtrs
93000
$11,592,000,000
$165,778

$404,000,000
$11,189,000,000
$4,344
3.49%
2012
98000
$15,900,000,000
$162,245

-$4,242,000,000
$11,189,000,000
-$43,286
-26.68%
2011
91000
$16,000,000,000
$175,824

$725,000,000
$16,120,000,000
$7,967
4.53%
2010
94000
$16,100,000,000
$171,277

$830,000,000
$16,455,000,000
$8,830
5.16%
2009
92000
$16,740,000,000
$181,957

$1,115,000,000
$15,619,000,000
$12,120
6.66%
2008
89000
$16,500,000,000
$185,393

$545,000,000
$15,775,000,000
$6,124
3.30%
2007
79000
$14,855,000,000
$188,038

$389,000,000
$13,731,000,000
$4,924
2.62%
2006
79000
$14,650,000,000
$185,443

$577,000,000
$12,943,000,000
$7,304
3.94%
2005
79000
$14,059,000,000
$177,962

$496,000,000
$12,610,000,000
$6,278
3.53%
2004
80000
$13,448,000,000
$168,100

$476,000,000
$11,804,000,000
$5,950
3.54%
2003
81000
$11,162,000,000
$137,802

$429,000,000
$10,433,000,000
$5,296
3.84%









11 year average
86818
$14,636,909,091
$172,711

$158,545,455
$13,442,545,455
$1,826
1.08%


Looking at the results over the 11 years listed shows some very odd years and raises many questions which we leave to our readers and commentators to ask. But they do in part show why there are some very unhappy investors investors out there.


Thursday, 11 April 2013

How is the CSC Turnaround going?

In the 3rd quarter FY2013 results presentation it states "Turnaround is on track". This can mean many things to different people as just what 'The Turnaround' is in measurable terms is not stated in the reports. How Mr Lawrie got away with not stating clearly what The Turnaround looks like is an interesting question that we hope the analysts will now ask.

Looking at one statistic, employee productivity, it seems to us there is a long way to go. Although staff numbers are reducing the actual revenue per employee is way off where it used to be in what might be called the bad old days. 
Just look at this chart of numbers taken from CSC's reports. Note the 2013 figure is for first three quarters only. That is why revenue perhead is factored.



Employees
Revenue
Revenue Per Employee


2013
93000
$11,592,000,000
$165,778
RPE Factored for full year effect as 2013 is Q3 YTD 
2012
98000
$15,900,000,000
$162,245


2011
91000
$16,000,000,000
$175,824


2010
94000
$16,100,000,000
$171,277


2009
92000
$16,740,000,000
$181,957


2008
89000
$16,500,000,000
$185,393


2007
79000
$14,855,000,000
$188,038


2006
79000
$14,650,000,000
$185,443




This shows that revenue per employee, never mind EPS and O/I margin post tax etc., has declined these last 8 years. 
We appreciate that readers of this blog can calculate their forecast on what it will take to get back to say 2007 the best of these years. But to help save you the effort here is what we have done (we have assumed headcount increases are not possible especially as many key offices and locations have been closed or sold. You might say the bridges have been burnt:-

Case 1 - Cut More Heads - Assume revenue is $16bln. Then to achieve best ever, which may not necessarily be good enough but bear with us, the headcount would have to be 85,000. A reduction of 8,000 more people. Is such a headcount reduction in the plans and are they costed? It is difficult to tell as the one statement from Mike Lawrie we can find on this subject was to achieve 'turnaround' by reducing 2,000 staff not in the front line.

Case 2 - Go For Growth with current heads. Assume headcount reductions are done, as per 2,000 target and business unit disposals, and try to go for growth with say 90,000 people. That delivers revenue of $16.9bln with best ever Revenue Per Head, which is hardly a 'turnaround'. Also is the growth there? It is not possible to say from the little information disclosed in CSC's reports.

Case 3 -  Go for Growth and Headcount Reductions. No Messing as they say in Texas. Target Revenue of $17bln and Revenue per head of $200,000 assuming this is what the shareholders want. That gives a headcount of 85,000. This unfortunately all leads to the same questions as in cases 1 and 2. 

Whichever way you look at it CSC has the same classic restructuring problem as the US and European economies. After years of bad management and under investment too much austerity hurts growth yet there is no money for investment and there are too many people. However the USA Treasury and European ECB can print money but CSC can't.
Comments would be welcome on this.

Footnote: recognising that people and revenue are just two of the key factors in business success we will look at other factors in future posts.

Note 1: The $ figures do not take account of inflation or restatements. They are from the financial statements of each year in question. Thus current productivity is worse than ever. 

Note 2: A quick look at USA Treasury official inflation rate tables shows that taking inflation into consideration the performance gap between 2013 YTD and 2007, the best year, is $44,824 or 21.3% lower now than then. That is one heck of a gap to bridge. Are the current plans on target to achieve anything like this?

posted by Will Scarlett

For Mr. lawrie and his management team

Judging by all the comments being posted the Lawrie restructuring of CSC is not going well. 

Perhaps he has missed one of the key points of business which is to motivate the people. Here is one view on how it might be done.

http://www.ted.com/talks/dan_ariely_what_makes_us_feel_good_about_our_work.html