Thursday, 5 November 2015

CSC 2nd Quarter 2016 Results

CSC has announced its results for the second quarter of this financial year. The results are unsurprising consisting as they do of further declines in revenue across the board, adjusted’ results like EPS meeting expectations and cash flow improvements on previous quarter. The results are also unsurprising to Mike Lawrie who kept repeating that "this (revenue decline) was expected".  
Mr Lawrie and Paul Saleh are sounding more and more like their unlamented predecessors explaining that without this special item, that charge and the other unusual item, the results are so much better than they look. In doing so they seem to have overlooked that Generally Accepted Accounting Principles (GAAP) exist for a reason, which is to clearly report the performance of a company; not just to allow executives to explain what they think the results should have been. Mr Lawrie continues to see great things on the horizon, with next generation offerings, great growth in new markets and so on. Just as his predecessor Mike Laphen did in 2010 when he told us CSC had everything needed to succeed.
Note how the figures that matter, like how much revenue did CSC earn, the ones that are difficult to adjust, show a company getting smaller every quarter; while other financial figures that are adjusted for special events’ and currency’ show improvements. Strange that dont you think?

We did learn from Mr Lawrie that CSC businesses are now "orchestrators", whatever that means. It is a pity none of the analysts asked what it means. Perhaps it means CSCers are not players any more!

On this earnings call the analysts were even more docile than usual, and allowed Mr Lawrie to push many questions to "tomorrow", meaning the Investor Conference of 5 November.

All in all, the results seem to be smoke and mirrors produced to suit investors and not much else. In this respect Mr Lawrie has been very successful. He has managed to drive CSC's share price to a level that was unthinkable when he joined the company.
He has planned a split of the company (yet to happen and running late)  which will allow investors to hedge their bets for the future, and collect a large cash dividend to be paid out very soon. The share prices been kept long enough to allow all prudent investors to cash in a good return before reality hits, which it certainly will sooner or later.

He has achieved all this while presiding over the decline of a once great company. How does that return share holder value over the long term?

The above is really why there are so few new posts recently from Cassandra. There is really nothing more to say about CSC, as it should be obvious by now to all staff and potential customers that CSC is now a vehicle for asset stripping and stock ramping.

It is Déjà Vu all over again!


Anonymous said...

This explains so much.

Middle managers, especially, can get in on the act. Those with white-collar jobs should pontificate, flip-flop, and take every decision into committee, says a section on ‘General Interference with Organizations and Production.’ “Bring up irrelevant issues as frequently as possible,” the OSS advises. Promote bad workers and complain about good ones. “Haggle over precise wordings… Hold conferences when there is more critical work to be done.”

Anonymous said...

I don't understand how they can talk about non-GAAP figures exclusively in these calls.

Or even how their EPS figures are allowed to be non-GAAP derived and trigger their bonuses...

GAAP has a purpose - its so that apples can be compared with apples.

Very surprised someone, including the SEC, hasn't jumped on their heads for this.

PS glad to see you back Cassandra, you'd be surprised at the number of people who follow you!

Anonymous said...

if it wasn't so true, it would be funny!

Anonymous said...

Paul Saleh had sold 198,109 shares of CSC, for $13,471,412.according to Octafinance

He now has "only" 42,000 shares remaining.

Why has he made such a massive sale right now? What does he know that we do not?


Anonymous said...

Whilst its not a sell just before the earnings announcement, its also not an automatic sell either. Its definitely a careful decision on the face of it.

If he had held onto the shares until the 18th of November, then he would have received a $10.5 cash payout per share, so you have to wonder why he would not want to?

On the other hand, the $10.5 doesn't come from nowhere, the current price of ~$67 is effectively made up of CSC + CSRA + $10.5.

Inevitably post split the price of both CSC and CSRA will take a tumble from where it may (or may not) recover in the longer term.

Maybe Mr Saleh needs the money more immediately than in a few months time. Maybe as a tight pursed finance man he thinks that a 10% drop on $13 million is something he doesn't see as a good news when its his wallet.

Then again Paul, look, I've done some non-GAAP figures on your wealth loss and look, they all look rosey to me. You have nothing to worry about.

That all being said, I don't think he's used any insider knowledge here to make any decisions, on the face of it, this is quite a predictable move - I guess its not too late for Mikey to follow suit.

Anonymous said...

I've noted as have others the importance of moving forward in good faith and that all bets are off once either party has vacated that posture. CSC upper crust have long since abandoned the principle of good faith. It's quite accurate, as noted in the introductory message, that what we have is a smoke and mirror presentation that could earn the praise from the master illusionist himself Harry Blackstone if he were still with us. The company is still hobbled from the disastrous policies that forced or at least encouraged many talented employees to leave. And leave they did. One can be little encouraged watching this company struggle in its ongoing damage control mode.
At some point you have to think that investors will catch on. And then.......

Anonymous said...

The investor day on Nov 5th underlines that CSC was in dangerous waters in 2011/12. FCF was at 59$. Today at $735M. Quite a change. More savings coming in at $300 M on the supply chain side until FY19. Offshoring/nearshoring of resources should go up by 50% in FY19. Locations will be cut from 236 to 180, reducing the sq ft. from 9 to 6.3 M. More acquisitions on the horizon. We are in Q3/4, so regardless of presentations everybody is all about in-year revenue generation and cost-cutting/prevention.

Anonymous said...

Re 22.53

One investor, Mr P Saleh, seems to have caught on

Anonymous said...

I don't really understand the acquisitions thing at this time. They are trying to "right size" the workforce and redeploy roles to low cost locations (both globally and also into poor areas of each country). This and other major workforce restructuring continues at a breakneck pace and has for several years now. Why add more problems to the pile by buying more companies and then having to do the same with those?

I also wonder if those figures that you are quoting there have a start position of today - ie before the NPS split. That wouldn't surprise me at all...

Anonymous said...

Mikeys latest missive .... "This week we will be taking a number of actions to simplify our operating model"
One presumes we're not meant to remember who introduced the current operating model, the one that we're now told was too complicated and inefficient.

Anonymous said...

He may have screwed up and was trying to time the split which was supposed to have happened back on Nov 2nd, but won't happen till the 18th. Missed the $10/share one time dividend.

Anonymous said...

I doubt it was a mistake, I mean afterall if anyone knew what the actual split date was, it was him!

Anonymous said...

CSC's management mercenary team described in historical terms in Wikipedia. Note the last sentence.
The earlier, medieval condottieri developed the art of war (strategy and tactics) into military science more than any of their historical military predecessors —fighting indirectly, not directly— thus, only reluctantly endangering themselves and their enlisted men, avoiding battle when possible, also avoiding hard work and winter campaigns,,,
The first well organised mercenaries in Italy were the Ventura Companies of Duke Werner von Urslingen and Count Konrad von Landau. Werner’s company differed from other mercenary companies because its code of military justice imposed discipline and an equal division of the contract’s income. The Ventura Company increased in number until becoming the fearsome “Great Company” of some 3,000 barbute (each barbuta comprised a knight and a sergeant). The first mercenary company with an Italian condottiero as its chief was the "Company of St. George" formed in 1339 and led by Lodrisio Visconti. This company was defeated and destroyed by Luchino Visconti of Milan (another condottiero and uncle of Lodrisio) in April 1339. Later, in 1377, a second "Company of St. George" was formed under the leadership of Alberico da Barbiano, also an Italian and the Count of Conio, who later taught military science to condottieri such as Braccio da Montone and Giacomuzzo Attendolo Sforza, who also served in the company.[3]

Once aware of their military power monopoly in Italy, the condottieri bands became notorious for their capriciousness, and soon dictated terms to their ostensible employers.

Anonymous said...

"This week we will be taking a number of actions to simplify our operating model" = More layoffs again?

Anonymous said...

Is there any other option?

Anonymous said...

The managers briefing had some numbers in it and a regional/role breakdown. ~400 total rings a bell, mostly administrative roles, they say. The mail to the plebs didnt mention any iirc.

Anonymous said...

They say people look back at the past with rose tinted spectacles - but its true with CSC, it only gets worse. Get the experience, make good friends and move on. There are some good and even a few great companies out there which will appreciate the experience ex-CSC staff have to offer. I just think of it as a stepping stone now and can't wait to leave. I imagine a few deluded souls left at the end (we all know a few) looking round and saying "where's everyone gone then ?"