Lorenzo supplier says profits hit by failure to reach ‘milestone deliverables’ to Department of Health
CSC’s 2012 annual report says that its overall profitability has been “adversely impacted” by delays in the delivery of its contracts with the Department of Health (DH). Its revenues declined by $165m, of which $46m was due to delays in “milestone deliverables” to the DH.
“We are currently in negotiations with the United Kingdom’s NHS to modify the terms of our contractual relationship,” the report says. “Failure to conclude a satisfactory resolution could materially adversely affect our consolidated financial condition, results of operations and cash flows.”
Overall, the report says that it has been a “difficult year” for the company and that its results were unacceptable to investors.
In March health secretary Andrew Lansley said that the DH had reached an agreement for a reduction in its contract with CSC, the largest supplier to the now defunct National Programme for IT (NPfIT).
He said that the total saving to the DH from NPfIT contracts had reached some £1.8bn and that the money would be released back to the NHS.
In a conference call with investors about CSC’s first quarter results for 2013, Mike Laurie, the company’s chief executive officer, was more positive.
“We have delivered to three trusts in the UK, and as a result the NHS has agreed to pay us for that milestone,” he said.
Laurie also said the company was “seeing early signs of improvement in its financial performance” and in “troubled contracts” which have underperformed.
Earlier this month Cambridgeshire and Peterborough NHS foundation trust, which had been due to take CSC’s Lorenzo patient records system under NPfIT, said that its own tender had enabled it to purchase a patient records system at a cost more than £7m below that paid by the DH.