MCN Direct Newswire

Vol. 2 No. 30, 18 August 2003

This issue is sponsored by:

Epicor, Xansa and The UK Consulting Industry 2002/3

This issue news

1. NHS names finalists for key contract
2. CSC shines in first quarter
3. BearingPoint suffers slow growth in Europe
4. Detica makes debut acquisition
5. MCG down at the interim
6. Further information - feedback/forward to a colleague/unsubscribe

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1. NHS NAMES FINALISTS FOR KEY CONTRACT

The NHS has chosen IBM, BT and Lockheed as finalists in the race for its key national application service provider contract.

The shortlist of bidders to become 'local service providers' has also been published as the National Programme for IT (NPfIT) prepares to spend $3.7 billion on an overhaul of the health service's IT systems (MCN Direct 2-21).

IBM, BT and Lockheed have been picked from a long-list of eight suppliers for a contract covering the design, delivery and operation of a nationally accessible patient record system - described by NPfIT as the core national information repository and called the NHS spine.

Local service provider contracts will cover five regional areas, each being hotly contested by three or four consortia. London is being pursued by BT and Perot; IBM, Cerner and Atos KPMG Consulting; and Lockheed Martin and HP.

This contract will be awarded by the end of October, along with a contract covering the north east. This latter is being contested by Accenture, Siemens and Microsoft; Cerner, SchlumbergerSema, Serco, HP and TCS; and Patient First Alliance led by Jarvis and including SAIC.

The other local service provider contracts will be signed before the end of the year. The south east and south west region is being pursued by Fujitsu working with PwC and TCS; Lockheed Martin and HP; PlexusCare, EDS, iSoft, Microsoft and LogicaCMG; and SchlumbergerSema.

The east of England shortlist comprises Accenture, with Siemens and Microsoft; Cerner, SchlumbergerSema, Serco, HP and TCS; Cap Gemini Ernst & Young; and PlexusCare.

The west Midlands and north west contract is being contested by BT and Perot; CSC; Fujitsu, PwC and TCS; IBM, Cerner and Atos KPMG Consulting; and the Patient First Alliance.

Commenting on the progress to shortlists, director general of NHS IT Richard Granger, said: "We were very pleased by the quality of the submissions from shortlisted suppliers. It is encouraging that the IT sector is able to respond so positively to the quality and competency requirements of the NHS."

One obvious absentee from the shortlists is Capita. The company declined to comment on its exclusion, but is expected to turn up as a subcontractor once leading suppliers are selected.

2. CSC SHINES IN FIRST QUARTER

CSC made a cracking start to fiscal 2004, reporting first-quarter net profit up 17% at $92.3 million, on revenues rising 29% to $3.6 billion.

The company attributed much of the gain to its March 2003 acquisition of US federal government service provider Dyncorp. Revenues in this sector rose 87% to $1.5 billion, or 42% of total quarterly revenue.

CSC's European operations also contributed to revenue growth, pushed up by favourable currency exchange rates.

In total, global commercial revenues were up 6% at $2.1 billion in the quarter to 4 July, with US commercial revenue down 2% at $962.1 million, European revenue up 21% at $819.2 million, and non-European international revenue up 2% at $293.3 million.

Noting a 32-month federal pipeline worth a potential $38 billion and solid demand for global commercial IT infrastructure outsourcing, CSC chairman and CEO Van Honeycutt said: "Our consulting and systems integration activities in North America, while not showing a significant uplift, seem to have stabilised. However, the demand for similar short-term commercial IT services in Europe and Asia remains soft. Our recent outsourcing wins in Europe have served to offset that softness and solid European outsourcing opportunities continue to provide encouragement."

Looking forward, CSC forecast a second-quarter revenue gain of 27-29%, with earnings per share of 58-60 cents against first-quarter earnings per share of 49 cents.

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3. BEARINGPOINT SUFFERS SLOW GROWTH IN EUROPE

BearingPoint has reported 'disappointing' revenues in Europe, the Middle East and Africa. The consultancy made a gain in its full-year financial results, but failed to meet fourth-quarter forecast earnings per share of 14-17 cents. In the wake of slow sales in EMEA, it achieved earnings of just 4 cents.

Net profit in the quarter to 30 June was $8.3 million, up from $400,000 a year ago when BearingPoint took a $23.7 million charge mainly against job cuts.

Gross revenue for the quarter rose 32.9% to $774.8 million, pushed up by contributions from the Andersen Business Consulting units and the German, Austrian and Swiss consulting practices of KPMG Consulting that BearingPoint acquired in the first half of the year.

For the full year, BearingPoint reported net profit of $41.5 million, reversing a loss of $26.9 million in fiscal 2002, on gross revenue up 33% at $3.1 billion. This growth was attributed in part to the company's acquisitions, but also to growth in its pre-acquisition business and a strong performance in the public services sector in North America.

The EMEA region contributed 18% to total turnover in fiscal 2003, up from 0.7% in the previous year, while Asia-Pacific generated 9.6% of total, up from 5.4%, and Latin America provided 2.3%, up from 1.9%.

BearingPoint chairman and CEO Rand Blazer said: "Although the fourth-quarter results were disappointing due primarily to weakness in the EMEA economy and our revenue performance in that region, we are encouraged by continued positive signs of stability in certain sectors of our business, including key North American industries and our Asia-Pacific and Latin American business units."

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4. DETICA MAKES DEBUT ACQUISITION

Customer management and UK national security specialist Detica has made its first acquisition, paying $4.2 million cash for Rubus, a systems integrator focusing on content management and customer interaction solutions.

Rubus has 64 employees - six jobs will be axed as a result of the acquisition - and in the year to 30 April generated revenues of $12.2 million. A pre-tax loss of $2.6 million in the year is expected to be reversed following a reduction in overhead costs resulting from the acquisition.

The transaction will put $5.1 million of goodwill, to be amortised over five years, on Detica's balance sheet, with acquisition costs of $300,000-$450,000 being charged against this year's income.

Describing the acquisition as "tactical rather than strategic", Detica chief executive Tom Black said: "Detica's successful IPO in 2002 provided us with the balance sheet strength to fund continued growth and make selective acquisitions. The addition of the Rubus skills to the existing Detica team is a perfect fit."

Rubus works predominantly in the financial services, telecoms and media, and legal and publishing sectors, adding clients including Aon, Swapstream, Carlton, Datamonitor, Allen & Overy and Reed to Detica's customer roster.

Michael Walton, founder and CEO of Rubus, will join Detica as business unit director for corporate accounts.

5. MCG DOWN AT THE INTERIM

Management Consulting Group (MCG) has fallen into the red, reporting a first-half net loss of $5.6 million on turnover down 22% at $69.4 million.

The loss reverses a net profit of $5.9 million in the first half of 2002 and is partly the result of continuing losses at Parson Consulting, the US-based financial management consultancy acquired by MCG in May 2002.

The group has also suffered a fall in the profitability of Proudfoot Consulting, its operational improvement consultancy. With 61% of the group's turnover generated in North America, the weak US dollar relative to sterling also took its toll.

MCG chairman Rolf Stomberg said: "The results reflect the low order book that we had at the beginning of the year, together with a slowdown in client decision making in the second quarter of 2003."

Chief executive Kevin Parry added: "We are now seeing a greater volume of prospects in Proudfoot Consulting than at any time in the last year. New senior management is in place at Parson Consulting and the turnaround is progressing satisfactorily and in line with our plans."

Following a warning in July that first-half turnover would be down on expectations, MCG reported a 37% drop to $54.2 million at Proudfoot and turnover of $15.3 million at Parson - the comparable 2002 period included only one month's turnover of $3.9 million.

Looking forward, Stomberg said: "Our current order book is 40% higher than it was at the start of the year. On the basis of this improved order book and strong enquiry levels, the board believes that turnover for the second half of 2003 is likely to exceed that achieved in the first half of the year."

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