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  Accenture reported a 51 percent increase in fiscal fourth-quarter profit, while many analysts expressed relief that the company withdrew from the money-losing NHS contract without suffering any penalties.
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Accenture reports 51% increase in fourth-quarter profit

Quarterly income grew to $346.4 million, or 56 cents per share, up from $229.1 million, or 38 cents per share, last year. Stronger sales, especially from outsourcing, lifted the results according to the company.

Sales rose to $4.39 billion from $4.31 billion a year ago.

For the year, Accenture said profits were $973.3 million, compared to $940.5 million for fiscal 2005. In addition, FY2006 net revenues rose 9 percent, to $16.65 billion.

For the year, Accenture’s consulting net revenues were $9.9 billion, an increase of 6 percent, while outsourcing net revenues were $6.75 billion, an increase of 13 percent in U.S. dollars over fiscal 2005.

The company said new bookings for fiscal 2006 hit $20.4 billion.

Late last week Computer Sciences Corp. confirmed it would assume Accenture's responsibilities to the United Kingdom's National Health Services (NHS) agency.

Echoing the sentiments of other analysts, Credit Suisse analyst Eric Sledgister said the NHS contract has been a thorn in Accenture's side, and he estimates it resulted in a net loss of $700 million since the contract was signed in 2003 (excluding capital expenditures).

"The decision to walk reduces further operating losses, increases overall visibility for the company, and frees up management's time to focus on running the rest of the business. Importantly, the company is to incur no penalty payments upon contract termination (contrary to prior reports of a breakup fee amounting to $1.9 billion)," Sledgister wrote in a note to clients.

Transferring the contract, which covers north east and eastern England, removes a significant drag on Accenture's earnings after the company booked a $450 million charge on the pact in the quarter ended in March.

About 300 employees who worked on the contract will go to CSC and the remainder will be reassigned to other UK Accenture projects, Accenture said.

CSC, which currently is responsible for the IT upgrade in the north west and west midlands of England, said it would take over from Accenture on Jan. 8 and that the contract was worth as much as 1.97 billion pounds.

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