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PLC/98/5
ICL PLC
Board Paper
REPORT AND ACCOUNTS 1997 AND
ANNUAL GENERAL MEETING 1998
1. The draft Statutory ICL Annual Report and Accounts for the
year ended 31st December 1997 is attached. This includes the
full accounts and will be filed with the UK Government in due
course. The Review of Operations section in particular,
which is mostly in the form of case studies, is still under
review and may be changed.
Also attached is a separate ICL PLC company Profit and Loss
Account with an explanatory note, and the draft notice of the
1998 Annual General Meeting. Further attached is the
proposed letter of Representation to and Letter of Engagement
from, the Auditors. (The letter of engagement refers only to
Year 2000 issues.)
As will be explained at the Board meeting, it is proposed
that a Committee consisting of T K Todd, S Riesenfeld and
H Watanabe (with a quorum of any two of them always including
H Watanabe) be delegated the powers to finalise and approve
the Accounts.
2. We will also be issuing a non-statutory Corporate Review with
abridged financial information. This is a marketing/public
relations document with wider circulation than the Statutory
Report and Accounts. The narrative section is the same as
pages of the Statutory Annual Report.
A copy of the final printed documents will be circulated to
the Board as soon as possible.
The Board is therefore asked to RESOLVE
THAT, pursuant to the Company’s Articles of Association, a
Committee of the Board consisting of T K Todd, S Riesenfeld
and H Watanabe (with a quorum of any two of them always
including Mr Watanabe) be appointed with full powers:
1) to amend where appropriate and then approve and
authorise signature of the Company’s Report and Accounts
for the year ended 3lst December 1997;
2) to authorise signature on behalf of the Board of a
letter of representation to the auditor, Messrs Coopers
& Lybrand, in respect of the accounts for the year ended
3ist December 1997, and of a letter of engagement from
Messrs Coopers & Lybrand in respect of audit matters
generally;
3)
4)
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to convene the Company’s Annual General Meeting for
1998;
to take any necessary action and grant any necessary
authorities to finalise the Company’s Report and
Accounts for 1997 and ensure their approval on behalf of
the Board and their adoption by the Company’s
Shareholders.
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300,000 I 1,000,000 £7bn 64m
ICL employs 3,000 professionals who I 1,000,000 SmartCity multi-application smart ICL's network mediation system processes 64m people a year pass through
deliver services to over 300,000 users in i cards are being issued to employees of £7bn of BT's revenue each year. Our systems Heathrow Airport and use the information
moe tan 300 ction I OT east lingo compen chro manage te bling of 2m cl eery day proved by IC solutions.
L
. “Shaping the
ociety ”
contents
Financial Highlights
Chairman’s Statement
Chief Executive’s Review
ARWK
Review of Operations
16 Financial Review
18 Management
22 Report of the Directors
25 Report of the Auditors
26 Financial Statements
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Financial Highlights
te 8 Denno
What you are reading now is not the finished copy. And apart from one Important fact, it
bears absolutely no resemblance to the finished copy. The Important fact is this. The copy
you are now reading is set out to show you the typeface and the typesize in which the real
copy will appear. The real copy has been typed separately.
Turnover £m
Information for graph to be supplied
Profit before Tax (Services Contribution)
Financial Achievements in 1997
bes supplied :
t to be supped
oe OoOUlUUMO
ren Puc 2
a/anaan
Chief Executive's Review
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The environment in which we have chosen to do business is characterised by the radical and
the unconventional. To prosper in our world we must be flexible, fleet-footed and not afraid
to challenge convention. This demands an organisation which fosters innovative thinking,
whilst preserving vital financial and operating disciplines. We must have our ‘eyes on the
future’ whilst keeping our feet on the ground.
1997 saw ICL move
back into profit for the
first tine in three years,
delivering earnings
before tax and
exceptional items of
£4L.T million ~
pleasing &.2 million
avery
turnaround from the
losses of the prior year.
ICL © Proof2 * 3/3/1998
Over the last two years, ICL has
largely completed the transition
to a group focused on systems and
services, which is nimble and
adaptable enough to flourish in this
demanding environment. After a
period of painful restructuring, we are
now channelling our energies into
looking outward - aggressively
growing our market share and
capitalising on the opportunities that
we are helping to create.
1997, saw ICL move back into
profit for the first time in three years,
delivering earnings before tax and
exceptional items of £42.7 million - a
very pleasing £45.-million
‘turnaround from the losses of the
prior year. The strength of this
recovery is all the more encouraging
because it was struck after
substantial investment in projects
that will not generate profit for some
‘time. These include recently won
contracts such as the Automation
of the UK Post Office Network (ICL.
Pathway) and the Online Service for
the BBC {BEEB} together with bids
for future UK Government PFI (Private
Finance Initiative) contracts where we
are competing for billions of pounds
of business. We are clear that we
need to build sustainable profit
ieee 4
streams for the future. This advance
investment will help to increase ICL’s
future value.
I have said before that my
principal short-term priority is to lift
the group's margins to the point
where we are earning a realistic
return on our substantial revenues.
In 1997 we took a further step in the
right direction, moving our operating
margin closer to Z per cent from
.2per cent last year. There is still
a long way to go. We should be
delivering at the very least a 5 per
cent return on sales and all our
managers have this immediate
objective firmly in their sights over
the next two years.
I am particularly pleased that
revenues in our core outsourcing
services businesses grew over 25 per
cent in 1997, more than offsetting
the anticipated decline in some of
our older businesses. There were
many notable wins, spearheaded
by a groundbreaking new network-
outsourcing contract from BG plc
(Transco).
Our traditional businesses
chalked up some marked successes
during the year, spearheaded by the
launch of the new Trimetra range of
‘Servers. This revolutionary new
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e 2
Shaping the Information Society
“The Information Society is neither[a sci-fi fantasy hor an impossible ideal. It is
a practical reality that is already influencing the way in which we live our
lives. From leisure and work to shopping, learning and banking, ICL is playing
Leisure
6. wa ts 4b Hunter and Property Mater
the next wet site to 4 ve, ADHuntar
confident expects thet will 200030
tarrying more than one rion
‘dverttaments on its sites, Keoaatag
1 pretate new revenue seem.
ovatoped nod supprted by IL the
outa Regione! Network in Fiend
serve oa eacttone mestng
‘lace forthe los! corm, ith
1) WoL proud to be afounder of UK
atYene which aa t improve the
ste of lformation and communications
technology (167) i choot. Tis
Intative provides a amewerk for
business, the community and puble
‘sector to work In partnership to
‘enhance standard of teaching
nd tern.
{ tet Mungary is» mar priori the
Sec’ Eyes on the Future
Feet on the Ground
‘around 200 primary and 900 secondary
‘schools seross the country.
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y
Review of Operations
i, (ok and Fist Diet
> ICL worked with us in partnership, ara changing ne
sharing our vision of approaching the way we Bank
solution from the customer, not the
technology, end.’
Putting bankin ng.
@ the customers fingertips
rer pic 8
ICL © Proof 2 * 3/3/1998
Review of Operations
case Study #2: UAE Ministry of Health
Technology has the potential to revolutionise the way in which ordinary
citizens access Government services. In the United Arab Emirates, we
have helped pioneer a health card registration and issuing system
which will give medical teams instant access to a patient's health
records from any location in the country.
The ability to maintain accurate, easily-accessible
medical records is a challenge facing Government
health departments in all regions of the world.
In a country such as the United Arab Emirates
(UAE), where 32,000 square miles are home to just
2.4 million people, the challenge is great.
In the first phase of a project undertaken by ICL
in partnership with Future Trends Establishment
(FTE), 380,000 health cards will be issued from
nine centres around the UAE. Equipped with a
Fujitsu teamserver, PCs, scanning stations, card
printers and report printers, each centre is
networked to a central server over high speed
communications links. We were responsible for the
entire installation process, including all networking
and applications software.
To reduce the risk of forgery, each card is
personalised with a scanned image of the bearer
with their name and nationality printed directly on
the card. A magnetic strip and bar code can hold
additional data including blood group and potentially
life-saving information on conditions such as
diabetes or allergies. The system, which will assign
a unique national number to each cardholder,
will be used as the master key in all future health
applications.
For the Ministry of Health, the new system will
generate accurate information which will allow
officials to plan future health facilities which meet
the needs of each region.
For UAE citizens, it will mean that up-to-date
health card records are readily available via the
network when they move from one health district
to another.
Delivering ‘
instant access
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“ICL proved to be
ideal business
partners for the
project, investing
great deal of time
and effort in
ensuring that the
new system quickly
delivered improved
efficiency, retiability
‘and productivity.”
‘Shajen AM/Al Alea,
Henn Reparation Repstars
‘ana Transportation Ovecter at
he UAE Ministry of Mean.
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“I am pleased to see innovative schemes like MEON being
put into place. I am sure that both teachers and pupils at
the schools taking park in this pilot venture will benefit
greatly from their access to information technology."
Review of Operations
Case Study #4: WH Smith
‘The first on-line loyalty card to be developed
by a High Street store, the WH Smith
Clubcard delivers unique benefits to
consumers while also generating practical,
workable data for the retailer. ICL
technology is at the heart of a system that
Is the most sophisticated in Europe.
Loyalty cards are now an integral part of most retailers’
marketing armoury.
However, as supermarkets and others have rushed to introduce
their own schemes, many have found that the systems they
adopted actually create as many problems as they solve.
Databases have been swamped by a deluge of data while research
shows that customers are irritated by the time-lag between earning
points and being able to redeem them.
Not surprisingly for a High Street chain committed to re-
establishing itself as a major force in the hearts, minds and wallets
of the nation, WH Smith wanted its own loyalty scheme to offer
new, tangible advantages.
Based on ICL's PrecisionRetailing technology and customised by
the use of rapid application-development tools, the Clubcard
system is the first on-line solution of its kind. While traditional
‘systems pass details of each transaction to central databases at
the end of the working day, and advise customers by post of their
points total, the Clubcard electronic dialogue is immediate.
The point-of-sale terminal dials Head Office and pulls down
information on the customer and their points. The customer can
decide whether or not to redeem the points there and then, with
none of the time delays or vouchers that characterise other
schemes. A dedicated Helpline has also been established to
provide personal support to cardholders.
As far as the data gathered is concerned, Clubcard dovetails
neatly with WH Smith's existing system, enabling them to analyse
buying patterns across its 450 stores. The company will then use
the information to target sales promotions to the 2.5 to 3 million
customers who are expected to join the scheme.
Clubcard has already generated additional revenue for the
company. The average weekly spend by members has increased
by 22% which has created a 3% incremental effect on
sales nationally.
Loyalty pays
dividends
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48%
48% of UK shoppers like the
idea of being able to make
heir purchases from home
via a PC or TV.
£5m
In an agreement worth more than
£5m, ICL is managing the IT
services of Virgin Vie, the new
cosmetics retail organisation.
Customers’ points
‘are printed on the
‘ales receipt and
can be redeemed
at once
Wien wealth of up>
to-ente customer
Iwformation delWvered I
by Clubeard, WH
Smith a able to
target promotions
‘ith pinpotat
ecuraey, varying I
thom trom store to
store necessary.
ICL staff in Reading are
using the company's Intranet
10 order goods from the range
(0f 000 items stocked by the
local branch of Waitrose. The
‘goods are delivered to the
office for staff to take home
in the evening.
£2.5m
ICLiis installing and maintaining
hardware and software at UK
branches of Specsavers, the
leading optical retail group,
4s part of « £2.5mi contract.
Financial Review
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The group's financial performance improved substantially in 1997. We achieved operating
profits of £32. million against a loss of £4.¢million in 1996. Operating profits from
continuing operations, excluding the effect of exceptional items, rose to £¢7.0 million
in 1997 from £34,/ million in 1996, an increase of over 25%. Pre-tax profits were £M
in 1997 compared to a pre-tax loss of £1.5M in 1996, Profits after tax were £/¢ .2- million
in 1997 while in 1996 the group reported a loss of £/7.7 million.
Growth rates varied by
sector, with managed
services growing by
over 25%,
The growth in turnover from
continuing operations, which
wa’ slightly less than2%, was
adversely impacted by the strength
of Sterling during the period.
Adjusted for this negative impact
of approximately £/30 million,
turnover improved by approximately
"7% year on year. Growth rates
varied by sector, with managed
services growing by over25%.
The gross margin rate of the
group reflects not only changes with
individual business segments, but
the changing mix of higher and lower
Turnover £m
Information for graph to be supplied
Profit before Tax (Services Contribution)
Pe
Information for graph to be supplied
ICL © Proof2 * 3/3/1998
ict PLe 16
margin businesses within our
portfolio. While the composite rate
remained flat at22.4% in both 1996
and 1997, this reflected improved
margins in many of our newer
service led businesses, lower margin
rates in some more mature sectors,
and significant growth in our lower
margin low-end product distribution
activities. Margins in 1997 also
reflected costs related to the
development of certain new
market acti
While cost contro! continues
to be a major focus within the
operations, we continued to invest
significantly in Research and
Development. R&D investment in
continuing operations was £63.7M
in the year, compared with £69. 5
million in 1996.
While at a lower level than in
earlier periods, reflecting the
improved focus of the business,
divestment activity continued during
1997. We sold the UK spares repair
‘operation to its management and
divested a number of other small
non-core activities. Profits on
disposals totalled £/0 3M. We also
reached agreement with Fujitsu for it
to assume the principle development
Management
Keith Tord
See CEO's Review on pages 4-5
Andrew Bosweft
Group Teetmieal Di
In 1997 ICL continued to help our
customers exploit the technologies which
make the Information Society possible.
We developed multimedia kiosk systems,
encouraged the use of networked PCs in
education and are actively developing on-
line gaming for home entertainment.
Electronic Commerce has also been a
strong theme in 1997, while our SmartCard-
based systems are making the cashless
society a reality.
Richard Christou
Commercial & Legat Ajfairs Dizeet
‘The Commercial and Legal Affairs
Directorate ensures ICL keeps its statutory
and other legal obligations and acts as 2
good corporate citizen, who maint
good business practices with fair contracts
which benefit all parties - ICL, our clients
and our partners.
Fiona Colquhoun
Hansen Bi
ICL competes for skills globally and change
is an everyday event in managing the
business. Our people have to be smart and
effective with the real ability to deliver. We
aim to make ICL an exciting and dynamic
place to work and to create an environment
which enables ICL to be a truly exceptional
‘performance’ company.
Joho Davison
Duector, ICT. Jaterach
“eed @ the BBC", the on-line service
arising from ICL's alliance with BBC
Worldwide, was launched during 1997 and
is already one of the UK's leading Internet
sites. “beeb” consists of constantly
‘changing on-line magazines (or webzines)
extending and developing some of the BBC's
most popular brands in Motoring, Sport,
Comedy and Travel. It also provides on-line
and chat services, the latter featuring
leading personalities.
Tim Escudier
‘The Financial Services sector is facing
unprecedented change. Ata time when
technology is facilitating the provision of
Financial Services to the customer through
the convergence of distribution channels,
ICL is weil positioned to provide its systems
and services to new and traditional
customers in this dynamic market.
First Direct with their Home Banking
service, Lloyds Bank in the renewal of their
branch system, and Bital in Mexico with the
installation of 1000 ATM's illustrate how ICL
is reaching out to help its customers.
ICL © Proof2 * 3/3/1998
Alan Gibson
Managing Director.
FOL Extterprises Western @ Central Exrope
The Government division focused on
securing a strong position in several key
PFI bids, and building migration paths for
Local Government towards Citizen Centric
solutions. Telco enjoyed international,
growth in its mediation solutions, while
Travel won significant airport and rail
business. Defence Is installing the world's
largest secure, NT based, office
infrastructure, and Utilities also enjoyed
strong growth. Investment in Eastern
Europe continued, with particular growth
in countries destined for EU/NATO entry.
Robin Hacking
Gronp Sales & Marketing Director
The ICL brand has developed significantly
in 1997, Brand recognition continues to be
high in many Westem and Central European
countries, but now we see increasing
recognition in the marketplace of the
qualities and capabilities of the ‘new’ ICL
as a Designer, Builder and Operator of large
scale information systems and services.
Nigel Hartoelt
Managing Director, ICL Servicer
ICL's considerable strengths in infrastructure
and skills-based services were brought
together early in 1997 to form ICL Services.
This established a strong focus for
further rapid growth of the electronic
commerce and network-based businesses
where ICL has already established a market
leadership position.
1997 has seen a 25% growth in the
business and a large and expanding
portfolio of blue-chip clients.
Marie-Anne van Ingen
Me
The opening of Tplc’s purpose built
141,000 sq ft Customer Logistics Centre
has provided a highly automated logistics
facility capable of accommodating a £1.
billion operation, We ended 1997 with a
£370 million turnover - a 28% increase
on the previous year. The major success
for 1997 was delivering our profit target
and so achieving our business plan for
the 3rd consecutive year.
Adrian King
Presutent, ICL Retail Systems
1997 saw the launch of ICL Retail
Systems consumer-centric strategy
providing retailers with systems allowing
‘them to understand consumer purchasing
habits and then to service those
‘consumers, through both traditional in-
store environments and new techniques,
‘such as workplace or home shopping.
Understanding the consumer and
providing innovative systems to service
their needs is the Key focus for the Retail
‘Systems strategy in 1998, and we look
forward to exciting times ahead.
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David Paik
Managing Director. WL Sorbus
During 1997 we have implemented pan
European processes and consistent I.T.
architecture to enable a step function.
Improvement in customer satisfaction ~
particularly in some of our smatler
subsidiaries. For example, in Italy the
independent Prognostics survey for 1997
shows ICL as #4 for Customer Satisfaction.
Going into 1998 the key challenge for
the business is to fully exploit our unique
position in the market by accelerating our
growth whilst continuing to deliver
outstanding customer service levels.
Stefan Riesenfeld
nance & Business Planning Diree
‘See Financial Review on pages 16-17
David Teague
Managing Director Bagh Perfarmnance Systems
During my three years as Managing Director,
High Performance Systems has completely
tecreated itself, its products and its services
offerings in order to fully underpin with
technology and people skills the new ICL
and its role in the Information Society. HPS
has achieved this transition by building on
its renowned core competences of quality,
value and technical excellence.
Torsten Vieth
Managing Dizector,
worn Europe
Since I took over as Managing Director for
Enterprises Northern Europe in early 1997,
the operation has been transformed into
new lines of business, reflecting new market
opportunities and ICL's role in shaping the
future Information Society. The excellent
solutions and services supplied by ICL
matches the advanced requirements of the
IT Market in the Nordic and Benelux regions.
H Watanabe
Director, Patitsw &.
1997 is the year that ICL can be truly
called a systems and services company
and Fujitsu is very pleased that ICL has
achieved its profit target. The world-wide
growth of ICL’s systems and services
business is seen as a valuable part of the
group's globalisation strategy.
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ICL PLC at 12 March 1998
Directors ICL Management Executive
M Naruto Chairman TK Todd Chief Executive
Sir Peter Bonfield cae Deputy Chairman AJ Boswell
TK Todd Chief Executive R Christou
H Watanabe WJ Davison
T Escudier
Vicomte Davignon RM Hacking
K Fukagawa NR Hartnell
T Furukawa MA van Ingen
S Gillibrand A King
JC Monty (alternate WK Gardener) DB Palk
JJ Ollila SC Riesenfeld
H Sakai DJ Teague
TVieth
H Watanabe
Secretary
RF Scott
Auditors
Coopers & Lybrand
Registered Office From ty Uw (452
ICL He
use 16 Fitimy Somme
1 High Street w a
Putney re ECA ir5
London Swi 1sw
Registered in England
No, 142200
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Report of the Directors
ICL PLC is UK public limited company. Fujitsu holds 90.1% of the ordinagf shares and Northern Telecom of Canada has
9.9%. ICL is an information technology group, specialising in systems intfgration and services in selected markets.
Operating worldwide, with 19,000 employees, ICL generated revenues of billion in 1997.
During the yeas, the group purchased the interests of its partners in the ICL South African holding company thus
estment in that country. The UK Repairs business was divested and there were some smaller divestments,
“Buring the year an agreement was reached to demerge the TeamWARE Software business to Fujitsu.
The development of ICL's strategy is explained in the Chairman’s statement on page ... in the Chief Executive's
and in the review of operations on pages .... to ...., which together constitute a review of the
increasing its-y
coed
an
statement on pages .... tO
ICL group’s business during the year, its position at the year end and its future prospects.
1997 1996
fm im
en) -—Pretit_and dividends summary to’ laa - >)
‘fre/Profi for the financial year
Dividends paid and payable: ¢ 4-0) ¢ a6)
Preference
ortiprofietorthe-yeee carried forward (2-4) @s SD
loss
Registered Office and Headquarters
On 16 March 1998 the registered office of the Company and most of the ICL Group UK subsidiaries was [will be] changed
to 26 Finsbury Square, London EC2A 1DS. ICL Group Headquarters activities [will be] principally carried out at Finsbury
Square and at our HQ operations facility at Slough.
Research and development 2
Expenditure on research and development is shown in note =. to the accounts,
Quality
@ We continue to put our customers first and believe that everything can be continuously improved. The European model for
total quality management is the framework of our drive for continuous improvement and every ICL business is required to
review regularly its capability against the model to identify opportunities for improvement.
wer pic 22
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FU,
Report of the Directors
The board
‘The directors in office at the date of this report are shown on page .... of the report and accounts.
On 3 March 1997, K Kitazato and R E Livesey-Haworth resigned as directors and on 4 March 1997 H Sakai rejoined
the Board.
Auditors
Coopers & Lybrand have expressed their willingness to be reappointed auditors of the company. A resolution to reappoint
them and a resolution authorising the directors to fix the remuneration of the auditors will be proposed at the annual
general meeting.
Directors’ responsibilities
Company law requires the directors to prepare financial statements for each financial year which give a true and fair view
of the state of affairs of the company and the group at the end of the year, and of the profit or loss for the period to that
date. In preparing those financial statements, the directors are required to:
a) select suitable accounting policies and then apply them consistently;
b) make judgements and estimates that are reasonable and prudent;
©) follow applicable accounting standards, subject to any material departures disclosed and explained in the financial
statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will
d
continue in business.
‘The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time
the financial position of the company and the group and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets of the company and of the group and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors confirm that the
financial statements comply with the above requirements.
By order of the board
RF Scott
Secretary
fic. House
Putney
London wis 18W]
[date]
ToL PLc 24
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Notes to the financial statements
‘The ultimate holdin\company is Fujitsu Limited, a company incorporated in Japan. A copy of its financial statements can
be obtained from:
6-1 Marunouchi 1-chome
Chiyoda-ku
Tokyo 100
Japan
This is the largest group of which ye company is a member.and for which consolidated financial statements are drawn up.
Related parties
Related party disclosures
‘At 31 December 1997 Fujitsu Limited, which is the
90.1% of the voting shares of ICL PLC.
In accordance with Financial Reporting Standard 8
mpany’s controlling entity and ultimate holding company, held
related party disclosures ("FRS 8"), no disclosure is made of
transactions and balances with:
~ ICL PLC subsidiaries and investee companies which a
~ Fujitsu Limited and its subsidiaries;
— Fujitsu Limited investee companies;
— Former ICL subsidiaries which were sold within the Fujitsu
‘There are no Fujitsu group related parties who do not qualify asujitsu subsidiaries or investees with whom ICL PLC
and its subsidiaries and investee companies have traded. No FRS 8 distlosures are therefore required in this respect.
financial statements as follows:
consolidated;
coup during the year.
Certain related party disclosures are shown throughout the notes to
= Directors’ remuneration Note 12
= Investment in associated undertakings Note 15
Activities and percentage ownership of associates Page xx
— Income from other fixed asset investments Note 5
Related party transactions
Camelot Group plc
International Computers Limited ("ICL"), a wholly owned subsidiary of ICL PLC, holds
ple ("Camelot"). During the year, ICL received a cash dividend of £0,000,000 from Camelyt (1996 ~ £2,361,000).
ICL Sorbus UK Limited, a wholly owned subsidiary of ICL PLC, provided computer faciities management services to
Camelot amounting to £00,000,000, of which £00,000 (1996 ~ £82,000) was owing at the enY\of the year.
10% interest in Camelot Group
Pension funds
[ICL Data OY pension fund borrowings?]
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ICL PLC GROUP ACCOUNTS
The 1997 draft consolidated accounts for the group are attached.
The audit is now substantially complete and no material changes to
this draft are anticipated other than that noted below.
We are in continuing discussions with the auditors about the form
of a disclosure note in respect of the Pathway contract and on the
reference to this contract in the auditors’ report.
A further update on this position will be given to the Audit
Committee and Board meeting on 12 March.
Consolidated profit and loss account
for the year onded 31 December 1997
Tumover
Cost sales
Gross profit
Net operating expenses
Operating profitiloss)
Exceptional items:
Profit on disposal of discontinued operations
Loss on disposal of ied asset investments
‘Share of (losses)/profits from interests in associated undertakings
Income from other fixed asset investments
Profit on ordinary activities before interest
Nt intrest payable
Profi(loss) on ordinary activities before taxation
Taxation
Profiti{loss) on ordinary activities after taxation
Minority interests (all equity)
Profit/(loss) for the financial year
Dividends - preference
Loss carried forward
Loss per ordinary share (pence)
2127198 11:52 AM
Continuing operations Discontinued
Exceptional Total operations Total
items continuing
1997 19871997 1997 1997
Notes £m £m ém &m £m
12 I 2474.4 - 24744 30 24774
2 I 19202 - 19202 61) 1,915.4
553.9 553.9 at 562.0
2 504.9 15 5064 23.4 529.5
3 490 (1.5) 475 (15.0) 325
4
- - - 103 103
(03) - (03) : (03)
5 44 44 - 44
$3.1 15) 516 (47) 469
6 (16.9)
30.0
7 (19.8)
102
04
108
9 (14.0)
2 64)
10 03)
PL
Total
1996
€m
29168
23318
585.3
591.9
66)
170
01)
15
32
150
(175)
25)
(167)
(192)
@7
(229)
(128)
55)
)
FUJ00117476
FUJ00117476
Balance sheets
at 31 December 1997
Fixed assets
Intangible assets
Tangible assets
Investments.
Current assets
‘Stocks
Debtors - falling due within one year
= falling due after more than one year
Cash at bank and in hand
Creditors: amounts falling due within one year
Loans and overdrafts
Other labiliies
Net current assets
Total assets less current liabilities
Creditors: amounts failing due after more than one year
Loans and overdrafts
Other liabilities
Provisions for liabilities and charges
Capital and reserves
Called up share capital
‘Share premium account
Capital redemption reserve
Profit and loss account
Shareholders' funds
Minority interests (all equity)
Shareholders’ funds are analysed as follows:
Equity interests
Non-equity interests
Notes
13
“4
15
16
7
7
18
18
19
19
20
FUJ00117476
FUJ00117476
Group Group Company Company
1997 1996 1997 1996
&m &m &m &m
30.5 394 :
2.5 1765 - -
943 96.5 5120 8120
BES Ez 5120 5120)
924.6 253.5 - -
527.2 558.1 258.8 2498
272 254 . -
49.9 1178 0s 69
S85, 3545 2593 2567
(204.3) (176.5) - -
(698.8) (673.2) 78) (68)
Ea 04s 2515 250.1
arta 4173 7635 7624
(26.1) 21) - -
(47.3) (49.0) - -
(82.0) (40.6) - -
2a57 25S 7635. Text
3159 3189 3159 3159
233.9 2339 233.9 233.9
192 132 192 13.2
(303.7) 281.7) 200.5 19.4
2583 2813 7035 762.1
64 143 «
2657, 2056 7635 Tez7
920 1140 596.2 504.8
1673 167.3 1673 1673
25S, 2813 75 Tease
‘The financial statements on pages x« to xx were approved by the board on xx March 1998 and signed on its behalf by
227198 11:53AM
Bs
Statement of total recognised gains and losses
for the year ended 31 December 1997
Profil (loss) for the financial year
Currency translation difference on foreign currency net investments,
Total recognised gains and losses for the year
Note of historical cost profits and losses
‘The result as disclosed in the consolidated profit and loss account is based on the historical cost convention,
Recon
for the year ended 31 December 1997
Profit (loss) for the financial year
Dividends
Currency translation difference on foreign currency net investments
Goodwill
New share capital subscribed
‘Share issue expenses
Net (reduction in) / addition to shareholders’ funds
‘Opening shareholders funds
Closing shareholders’ funds
22798 11:53 AM
lation of movements in shareholders’ funds
Bs
Notes
BR
1997
108
69)
FUJ00117476
FUJ00117476
1996
22.9)
(224)
Ce)
(22.9)
(126)
G55)
(22.4)
20.0
200.0
02)
1618
1194
2S
FUJ00117476
FUJ00117476
Cash flow statement 1997 1997 1996 1996
{or the year ended 31 December 1997 Notes £m &m &m ém
Cash flow from operating activities i 379 673)
Returns on investment and servicing of finance
Interest received 13.4 37
Interest paid 23) 219)
Interest element of finance lease rentals (24) 28)
‘Non-equity dividends paid (125) (126)
Dividends paid to minority shareholders 9) 7)
Dividends received 45 32
Not cash outflow for servicing of finance 275) 49)
Taxation
UK Corporation tax paid (0.1) (0.4)
Overseas tax paid 4) (12.9)
Net cash outflow for tax paid ~ 85) 13.3)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1203) 59)
Proceeds of sale of fixed assets 144 26
Capitalisation of intangible fixed assets 23.0) 3.7)
Purchase of fixed asset investments 5) (13)
Proceeds of sale of fixed asset investments - 28
Not cash outfiow for capital expenditure and —_
financial investment (129.4) 28.5)
Ca75) 24.0)
‘Acquisitions and disposals
Purchase of subsidiary undertakings i (124) 143)
Disposal of subsidiary undertakings and businesses ii 125 754
Net bank balances sold with businesses ii 69) 75)
Proceeds received in respect of prior year disposals i 37.9 :
‘Net cash infow for acquisitions and disposals _ 344 533
Cash outflow before financing a4)
Financing wv
Issue and redemption of shares - 199.8
Increase/(decrease) in debt and lease financing 172 @8)
‘Net cash inflow from financing 172 1902
(Decreaseyincrease in cash in the year —ea >
Reconciliation of net cash flow to movement in net debt v
(Decreasey/increase in cash in the year 76.2) 95
Cash (inflowyfouttow from increase in debt and lease financing (172) 96
Change in net debt resulting from cash flows 34) 194
Loans sold with subsidiary : 116
Translation diference 75) 233)
Movement in net debt in the year (r0sy 74
‘Net debt at beginning of year (125.9) (193.3)
Net debt at end of year TS (25.5)
22798 11:53AM Bs )
Notes to the cash flow statement
1 Reconciliation of operating profit(loss) to net,
cash inflow/(outflow) from operating activities
Operating profiv(loss)
Depreciation
Loss/(profit) on sale of fixed assets
Cash flow relating to restructuring
Working capital -(increase)/decrease
‘Stocks
Debtors
Creditors
Increase/ (decrease) in provisions
i Purchase of subsidiary undertakings
Net assets acquired:
Tangible fixed assets
Intangible fixed assets.
Investments
‘Stocks
Debtors
Bank balances
Creditors due in less than one year
Bank loans
Minority shareholders’ interests
Goodwil
Satisfied by:
Cash
Deferred purchase consideration
Rectassification from fixed asset investment
‘Anatysis of the net cash outfiow in respect of acquisitions:
Cash consideration
Disposal of subsidiary undertakings and businesses
Net assets disposed of:
Tangible fixed assets
Intangible fixed assets
Fixed asset investments
Stocks
Debtors
Bank balances
Creditors due in iess tan one year
Bank loans
Provisions
Minosity interests
Profit on disposal before goodwill
Goodwail on disposals
Deferred sales consideration
Fixed asset investments,
‘Analysis of the net cash inflow in respect of disposals:
Cash consideration
Cash payment to acquire fixed asset investment
Net bank balances of businesses disposed of
Proceeds received in respect of prior year disposals
22788 11:53AM
Bs
1997
325
766
100
(13.3)
(728)
80.0)
295
54
378
24
03
24
52
39
78)
(09)
35
103
129
125
es)
379
465.
FUJ00117476
FUJ00117476
1996
£m
(66)
17
(0.4)
(66.8)
237)
(18.1)
(63.7)
Cr)
5,
784
50.3
762
FUJ00117476
FUJ00117476
'
Notes to the cash flow statement
1997 1996
&m em
iv Financing
Issue of ordinary share capital : 2000
Share issue expenses - 02)
—-
Repayment of short term borrowings @2) 02)
New long term borrowings 18 65
Repayment of iong term borrowings G8) a7
New finance leases 295 58
Capital element of finance lease payments @1) -
iz (er
Net cash inflow from financing 472 1902
v Analysis of net debt
att Cash Exchange Atat
Jan 1997 flow movement Dec 1987
ém &m £m em
Cash in hand and at bank 1176 (45.0) 7 499
Overdratts (173.7) @12) 12 (203.7)
Cai 762) CoE) C538)
Debt due within one year ee 22 - (06)
Debt due after one year 62.1) 20 40 (26.1)
Finance leases (34.9) (21.4) 5 (68.3)
(698) (172) 40 (630)
Total 255) wea a) (EO)
22708 11:53AM Bs
FUJ00117476
FUJ00117476
Accounting policies DAooMailYICLPLCS.xis}8S
Accounting basis
‘The financial statements are prepared on the historical cost basis of accounting and in compliance with applicable accounting standards.
Basis of consolidation
The consolidated profit and loss account and balance sheet include the financial statements of the company and its subsidiary undertakings, made up to 31
December, together with the group's share of the net assets and results of associated undertakings.
Profits and losses of subsidiary undertakings and the proportion of profits and losses of associated undertakings attributable to the group shareholding are
included from the date of acquisition or to the date of disposal,
Goodwill
Goodwill arising on the acquisition of subsidiary and associated undertakings is written off to reserves in the year of acquisition. The profit or loss on disposal
of businesses is stated after including attributable goodwill which has previously been written off to reserves.
Foreign currency
Profits and losses in foreign currencies are translated into sterting at average rates of exchange for the year. Assets and liabilities denominated in foreign
‘currency are translated into sterting at the rates of exchange ruling at the balance sheet dato.
Exchange differences arising on the retranslation of the net assets of overseas operations are taken to reserves, together with exchange gains and losses on
related foreign currency loans and other hedging instruments.
Foreign currency trading transactions are translated at the rates of exchange ruling at the date of the transactions or, where applicable, at contracted forward
currency rates. All other exchange differences are taken to the profit and loss account.
Turnover
‘Tumover comprises revenue from the sale and hire of computer hardware, sofware and systems and from maintenance and other information technology
services.
Leasing
‘Where assets are financed by leasing agreements which give rights approximating to ownership (“inance leases") the assets are capitalised in the balance sheet
at the present value of the minimum lease payments. The corresponding leasing commitments are shown as lease obligations within creditors. Depreciation on
capitalised leased assets is charged to the profit and loss account.
All other leases are “operating leases" and the annual rentals are charged to the profit and loss account on a straight line basis over the lease term.
‘Where product is supplied to customers under finance leases, tumover is recognised when the intial contractual commitments to customers have been met.
‘The corresponding lease receivables due from customers are remaved from the balance sheet where the group secures equivalent non-recourse funding
from banks on terms whereby the banks take the risks and rewards in relation to default and slow payment. Customer lease contracts for which non-recourse
bank funding is not obtained are treated as operating leases and rental income is recognised in the accounting period in which itis eamed.
Stocks
‘Stocks are valued at the lower of cost and net realisable value, full allowance having been made for obsolete or slow moving items. Cost of stocks includes
the eppropriate portion of operating overheads.
Development expenditure
‘The costs of producing software products are capitalised as intangible fixed assets once a detailed program design or working model has been established.
‘These assets are amortised on a straight line basis over their lives, which are usually 1 3 and 4 years. Costs incurred in establishing the design or
working model and the costs of maintaining existing products are written off as incurred.
‘All other development expenditure is written off in the accounting period in which itis incurred.
22708 11:52AM Policies?
FUJ00117476
FUJ00117476
Accounting policies
Depreciation
The cost of tangible fixed assets, less any grants received, is depreciated in equal annual instalments over their estimated useful lives. The principal annual
rates of depreciation are:
Equipment on rental to customers 24%
Freehold land il
Freehold buildings 2.5%
Leasehold land and buildings Over life of lease
Plant and machinery 10% -36%
Fixtures, fitings and equipment 15% - 25%
20% - 36%
‘Own use computer equipment
Long term contracts
‘Where long term contracts are in respect of the development of a system, tumover is recognised on achievement of specific contract milestones. Profit is
recognised only when the outcome of the contract can be assessed with reasonable certainty and then only as a prudent portion of the projected profit.
Provision is made for any foreseeable losses.
‘Where long term contracts relate tothe supply of standard products or services, tumover and the related costs are recognised in the accounting period in which
the service is supplied.
Taxation
Taxation is provided for the estimated liability forthe year at rates ruling in the countries where the group operates.
Deferred taxation arising on timing differences between the treatment of certain items for accounting and tax purposes is provided on the liability method, except
to the extent that it can be demonstrated with reasonable pro! ‘that the taxation will not payable in the for future, In with
Amendment to Statement of Standard Accounting Practice 15, a deferred tax benefit is recognised in respect of any excess of pension cost provided in the
financial statements over amounts paid to pension schemes.
Pensions
Most group companies operate pension schemes for the majority of employees. The United Kingdom scheme is administered by a trustee and its funds are
independent of the group's finances. Actuarial valuations are normally carried out every three years with the contributions payable and the pension cost being
determined on the advice of the actuaries.
‘The cost of providing pensions is charged against profits on a systematic basis over the service lives of employees. Pension surpluses and deficits are
‘amortised and recognised in the profit and loss account aver the average remaining service lives of the employees. Any differences between the amounts
charged to profit and contributions paid are included in debtors or creditors as appropriate.
Related parties
Financial Reporting Standard 8 (FRS8) requires the disclosure of material transactions and balances between the reporting entity and related parties. The group
takes advantage of the subsidiary undertaking exemption within FRS8 and has not disclosed trading with olher Fujitsu group companies in its financial
statements,
22798 11:52AM Policies2 )
Notes to the financial statements
1 Segment analysis
systems, software and services.
Geographic analysis
Turnover
‘Turnover by destination
‘Tumnover by origin
Inter segment sales
Sales to third partios
Profit before taxation
‘Operating profi toss)
Exceptional tems
Net interest and other income
Group share of (loss)/profit
before taxation of associated
undertakings
Group profit before taxation
Net assets
‘Segment net assets
Group share of net assets
of associated undertakings
Total net assets
FUJ00117476
FUJ00117476
Class of business The group operates in only one class of business, that of providing customer solutions incorporating computer-based information
Africa, South and
Europe West Asia Asia Pacific North America Group
19871996 1997 1996 19971996 1997 193 19971996
em tm fm fm ém ém £m em fm &m
2,169.1 2,598.8 954 1133 186 429 1740___221.9 24771 2.9169
2231.8 28224 911 106.1 - mer 1698 © 2056 24927 2,956.5
140 380 02 - : Os 14 4 166 396
2278 25644 3031061 — Bz 6842045 Qari 29169
368 (21.4) at 60 - 23 74) 65 325 (66)
103169
(125) (143)
12 24 : 5) @6) : - (03) 18
30025)
2178 ©2324 153164 - 25 221 a7 2550 ©2827
33 35 : : 74 94 - . 107 129
20S 2356. 153 tea 7208 i a7 26572856
‘The directors are of the opinion that further disclosure of geographic areas within Europe would be seriousiy prejudicial to the interests of the group.
Segment -note 1 Paormattlciples
27188
14:53 AM
2
Notes to the financial statements
Turnover, cost of sales and net operating expenses
1997 1997 1997 1996 1996 1996
Continuing Discontinued Continuing Discontinued
operations operations -—«Total_~= operations. operations. ~—Total
&m £m &m ém £m tm
Tumover 24744 30 2ATTA 24938 483.1 29169
Cost of sales 1,920.2 (6A) 4,915.4 4,988.1 443.5 23316
Net operating expenses:
Research and development 637 78 15 695 318 1013
Marketing and distribution 428.8 183 4444 4108 668 4774
‘Administration expenses 13.9 5 13.9 13.2 - 132
306.4 Zt 295 7333 Ea 5019
‘Continuing operations for 1997 include the following amounts relating to acquisitions (1996 - nil): mover £17.7 milion, cost of sales -£18.6 million and
marketing and distribution costs -£2.5 milion.
Continuing operations for 1997 include an exceptional charge of £1.5 million shown in marketing and distbution costs (1996 -a credit of £13.3 milion, of which
££3.9 milion is shown in research and development and £9.4 mition in cost of sales).
Details of exceptional items are shown in note 4.
Operating profit/(loss) 1997 1996
£m m
‘The operating profil(oss) is stated after charging:
Depreciation:
- owned assets 470 543
- finance leased assets 96 82
~ Software program products 200 292
Included within depreciation above is £5.0m (1996: £0.6m) recoverable from customers in respect of long term contracts.
‘Auditors remuneration
dit (company - £10,000 [1996 - £10,000))
~ other services to the company and its UK subsidiaries
Exchange (gains)losses
Exceptional items
Continuing operations:
Rationalisation expenditure
Provision for cost of vacant properties
Discontinued operations:
Profit on disposal of businesses and subsidiary undertakings:
Sorbus repair business.
ICL Volume Products business
Design to Distribution business
ICL Medical business
ICL Sorbus Espana SA
‘Access Manager business
Other disposals and part disposals
Profits on disposal in 1996 are stated after charging £29.8 million of goodwill.
(Loss) on disposal of fixed asset investments:
‘Sanderson Electronics PLC.
Xscribe Corporation
227108 11:53AM
Bs
76
16
19
12)
1997
O17,
63)
1133)
78)
20
145
(10.1)
187
77.0
09)
(OD)
FUJ00117476
FUJ00117476
Notes to the financial statements
5
Income from other fixed asset investments.
Dividends from fixed asset investments
Net interest payable
{Interest payable on bank loans and overdrafts
Finance lease interest
Interest payable on other loans
Interest receivable
‘During the year interest of £3.5m (1996: Enil) was capitalised in relation to long term projects.
Taxation on profit on ordinary activities
UK corporation tax, based on profit(toss) for the year:
current year
«prior years
‘Advance corporation tax
‘Tax credit on franked investment income
Overseas tax
Deferred tax
Associated undertakings
44
1997
179
18
1
62)
163
FUJ00117476
FUJ00117476
1996
UK corporation tax has been provided at 31.5% (1996 - 33%). The high tax charge is mainly the result ofthe incidence of losses for which relief is not available,
Company profit
Profit for the financial year dealt with in the accounts of ICL PLC
‘The company is exempt under Section 230 (3) of the Companies Act 1985 from presenting its own profit and loss account.
Dividends
Preference:
+ 9.15% net (formerty 9.40% gross) convertible cumulative redeemable preference shares
+ 9.15% net (formerly 9.40% gross) cumulative redeemable preference shares
272708 11:53AM
Bs
1997
&m
154
Notes to the financial statements
10 Loss per ordinary share
The loss per ordinary share is calculated by dividing the loss after charging tax, preference dividends and minority interests (€3.4 million; 1996 -
££35,6 milion) by the average number of shares in issue during the year (1,096.5 million; 1996 - 927.1 million).
Employees 1997
£m
Employee costs
Wages and salaries, 583.0
Social security costs 704
Other pension costs 234
eT
Number of employees in the group Number
‘Average weekly number of people employed by the group during the year:
‘Systems integration 9,135
‘Outsourcing 23572
‘System service 4.582
Consultancy and training 925
Specialised hardware and software solutions 1,280
Other activities 298
78,792
Discontinued activities 316
18,708
19,044
Total at 31 December r
1996 has been restated in line with current ICL business organisation
2278 11:53AM Bs
FUJ00117476
FUJ00117476
1996
679.0
18.931
3.494
Bam
19.035
FUJ00117476
FUJ00117476
Notes to the financial statements
12 Directors 197 1996
£000 £000
Directors’ emoluments
‘The emoluments of the directors of the company for the year were as follows:
‘Aggregate emoluments 525 619
‘Amounts receivable under long term incentive schemes . -
‘Company pension contributions to money purchase schemes . :
‘Company pension contributions to defined benefit schemes a 93
‘Compensation for loss of office 301 -
34 30
Pensions to former directors
Retirement benefits are accruing to two directors (1996 - three) under defined benefit schemes. No directors have accrued benefits
under money purchase schemes.
Disclosure in respect of highest paid director:
‘Aggregate emoluments and benefits under long term incentive schemes 357 338
‘Company pension contributions to money purchase schemes. : -
Defined benefit scheme:
~ Accrued annual pension entitlement at 31 December 4 73
~ Accrued lump sum entitlement at 31 December
‘Neither the highest paid director nor any other director exercised share options during the year. No directors received
‘shares under long term incentive schemes.
Directors’ interests
‘Set out below against their names are the interests of the directors ofthe company shown in the Register of Directors’ Interests required to be kept under the
Companies Act 1985. None of the other directors had any interests entered in the Register at 31 December 1997.
Number Number
31 Dec 1997 1 Jan 1997"
ICL PLC: options granted over ardinary shares of 25 pence
TK Todd 1,450,000 150,000
Fujitsu Limited: common shares of Y50
K Fukagwawa 415,000 15,000
T Furukawa 53,552 53,552
M Naruto 49,000 18,000
H Sakai 5,000 3,000
H Watanabe 8,000 8,000
* or on subsequent appointment
Notes to the financial statements
13. Intangible fixed assets
Cost
AUT January 1997
Exchange adjustments
Disposals & elimination of fully depreciated costs
‘Additions
At31 December 1997
Accumulated depreciation
‘Att January 1997
Exchange adjustments
At31 December 1997
Net book value
‘At31 December 1997
At31 December 1998
14 Tangible fixed assets
Cost
At‘ January 1997
Exchange adjustments
‘Additions
Disposals & elimination of fully depreciated costs
Transfers and rectassifications
At31 December 1997
‘Accumulated depreciation
Att January 1997
Exchange adjustments
Disposals & elimination of fully depreciated costs
‘Transters and reclassifications
Charge for the year
At31 December 1997
Net book value
At 31 December 1997
At31 December 1998
Land and buildings
Freehold
Long leasehold (over 50 years unexpired)
‘Short leasehold (under 50 years unexpired)
FUJ00117476
FUJ00117476
Software
Program products
£m
773
(17)
(18.7)
230
379
ce)
(16.4)
200
395
304
Equipment Fixtures,
Landand —Plantand =~ onrentalto fittings &
buildings machinery customers. equipment Total
&m £m £m £m £m
112.3 2659 284 TAT 481.3
1.3) 69) at) (15) (10.8)
126 92.4 37 116 120.3
(13.1) 625) @7) 1.5) (86.8)
06 (1.9) : 13 -
Ti 270 23 746 080
39.5 1859 227 867 304.8
6) 48) (9) (1.3) 74)
45) (40.2) a) 7) (61.5)
10 1.9) 0.1) 1.0 -
7A 339 29 67 566
as i794 zd aaa 2025
688 1179 38 212 25,
28 20.0 Ex 18.0 176.5
1997 1996
ém £m
165 99
122 183
39.8 448
cag
Plant and machinery includes own use data processing equipment with a net book value of £82.8 milion (1996 - £48.8 million). The net book value of tangible
fixed assets includes £10.4 milion (1996 - £19.0 million) in respect of finance leased assets,
Capital expenditure commitments
Contracted but not provided
22798 11:53AM
Bs )
FUJ00117476
FUJ00117476
Notes to the financial statements
15 Fixed assets - investments
Company &m
‘Subsidiary undertakings at cost at 1 January and 31 December 1997 5120
Shares in
associated Other
undertakings investments Total
Group £m £m &m
AL January 1997 129 836 965
Exchange adjustments @) (12) @3)
‘Additions 05 16 24
Group share of retained losses 8) - 08)
Disposals and other movements : 4) (04)
At 31 December 1997 oT" Be M3
Investments in associated undertakings are stated at the group's share oftheir undertying net asset value. The original
cost of these investments was £14.8 milion (1996 -£14.7 milion).
Other investments are stated at cost less provision for permanent diminution in value. The original cost of these investments
was £83.8 milion (1996 - £87.5 milion).
The total book value of listed investments is £1.4 million (1896 - £1.1 million). Their market vakue was £1.7 milion (1996 -£1.7 milion).
Principal subsidiary and associated undertakings are listed on page xx.
18 Stocks Group Group
1987 1996
£m fm
Work in progress 1244 86.1
Payments on account : (23.0)
i at
‘Components and raw materials 04 os
Finished goods
~ spares and other stocks 100.6 982
~ computer hardware 995 13
Tear
‘The replacement cost of stock is not considered to be materialy different from the balance sheet value.
17 Debtors Group Group Company Company
1987 1998 1997 1998
Amounts falling due within one year &m £m £m &m
Trade debtors 475 4044 : :
‘Amounts owed by group undertakings 58 63 236.0 2368
‘Amounts owed by associated undertakings 03 02 - -
Amounts owed by related parties : 59 - :
‘Advance corporation tax recoverable - 07 - :
‘Corporation tax recoverable 50 12 - :
Other debtors 375 nz : -
Prepayments and accrued income 613 877 : :
Dividends receivable - - 28 13.0
BaD Ee 2588 258
Amounts falling due after more than one year
Trade debtors 25 74 : :
‘Amounts owed by group undertakings os : :
‘Advance corporation tax recoverable : 08 : :
Other debtors 42 37 : :
Prepayments and accrued income 200 134 : :
22 2a =
5544 5835 2588 249.8
2278 11:53AM Bs )
Notes to the financial statements
18 Creditors - amounts falling due within one year
Loans and overdrafts
Bank loans and overdrafts
Portion of long term loans due with one year (Note 19)
Other liabilities
Payments received on account
Trade creditors
Obligations under finance leases
‘Amounts due to group undertakings
Amounts due to associated undertakings
Amounts due to related parties:
Corporate taxation
‘Advance corporation tax
Other taxation and social security
Other creditors
‘Accruals and deferred income
Dividends
19 Creditors - amounts falling due after more than one year
Loans
Bank loans - secured
Bank loans - unsecured
Other loans - secured
Other foans - unsecured
Less portion due within one year (Note 18)
Borrowings are repayable over the following periods:
Between one and two years
Between two and five years
Over five years
Other liabilities
Payments received on account
Obligations under finance leases:
= payable in more than one but less than five years
payable in more than five years
Other creditors
Accruals and deferred income
FUJ00117476
FUJ00117476
Group Group Company Company
1997 1996 1997 1996
em £m £m £m
203.7 1737 -
06 28
2043 765 = =
38.3 454 . .
206.0 1956 . -
26.0 185 - -
48.4 327 - -
: on - -
- 14 - -
88 45 . -
- 16 - -
53.1 674 -
1614 1363 - -
149.0 163.4 - 03
78 63 78 63
588 6732 78 66
903.4 349.7 78 66
Group Group Company Company
1997 1996 1997 1996
én em ém &m
18 25 . -
- 34 . -
- 17 -
252 273 -
8) 28) - -
261 S24 = =
06 49 -
03 - -
25.2 22 - -
264 32t z 5
- 444 - -
30.3 125 - -
- 39 : .
15.0 163 . -
20 52 . .
a3 0. z z
73.4 Bit - -
Borrowings not wholly repayable within five years include £24.9m of loans from the ICL Data OY pension fund on which interest of §.5% is payable. (See note 28.)
“Amounts due to secured creditors are subject o a floating charge on al the assets ofa subsidiary undertaking.
22798 11:53 AM
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Notes to the financial statements
20 Provisions for liabiliti
2
ind charges
Att January 1997
Transfers
Exchange adjustments
CCharge/(credit) to profit and loss account
Utlised during year
‘At31 December 1997
Rationalisation includes staff termination and vacant property costs
‘The deferred taxation provision /(asset) is made up as follows:
‘Accelerated capital allowances
‘Advance corporation tax recoverable
Tax losses
Other timing differences
FUJ00117476
There are further significant tax losses carried forward by certain subsidiaries which willbe available for offset against future profits in the subsidiaries concemed.
Called up share capital
Authorised
1,098,000,000 ordinary shares of 25 pence (1996 - 1,098,000,000)
150,688,800 unclassified shares of 25 pence (1996 - 150,688,800)
83,855,600 9.15% net convertible cumulative redeemable preference shares of 25 pence
(1996 - 83,655,600 9.40% gross shares)
89,655,600 9.15% net cumulative redeemable preference shares of 25 pence
(1996 - 83,855,600 9.40% gross shares)
1 deferred director share of 25 pence
Allotted, called up and fully paid
1,096,523,814 ordinary shares of 25 pence (1995 - 1.096,523,814)
'83,655,600 9.15% net convertible cumulative redeemable preference shares of 25 pence
(1896 - 89,655,600 9.40% gross shares)
83,655,600 9.15% net cumulative redeemable preference shares of 25 pence
(1996 - 83,655,600 9.40% gross shares)
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Deferred Rational _Litigation Total
taxation isation
m em ém m
46 345 18 406
ot - : o4
- (03) @2) (05)
(03) 37 1 54
- (13.3) - (13.3)
a 246. 30 320,
Provided Provided Unprovided — Unprovided
1997 1996 1997 1996
‘&m £m &m £m
- : (15.2) 7)
- . - 8)
- - (15.2) 7.8)
44 46 (13.8) 26)
Ex] 46 az XS)
1997 1996
&m £m
2745 2745
oT 7
209 209
209 209
354 EE)
2744 2744
209 209
209 209
EE
a
On 18 December 1997, both classes of preference shares were redesignated as 9.15% net shares following changes in UK tax legislation. These shares must
be redeemed by the company on 1 July 2002 in the event that the company's ordinary shares have not been admitted to listing on a recognised stock
‘exchange by that time. if the ordinary shares are listed before this time, sufficient of the convertible preference shares may, at the option of the holder. be
converted al the flotation price to ordinary shares equivatent to 5% of the total ordinary shares then in issue, within seven days of the admission to listing.
‘The redeemable preference shares, together with those convertible preference shares which are not subject to conversion to ordinary shares, will be
redeemed seven days after admission to listing. The redeemable preference shares and, where appropriate, the convertible preference shares, will be
redeemed at a premium of 75 pence per 25 pence share.
Each class of preference share carries the right, pari passu with the other and with any other preference shares created in accordance with the articles, but in
priority to holders of any other classes of shares, to the payment of dividends and, on a winding up, to repayment of capital. The holders of the preference
shares are not entitled to any further right of participation in the assets of the company. Preference shareholders are not entitled to vote at any general
‘meeting save where the preference dividend is six months or more in arrears or a resolution is to be proposed affecting the rights of the preference shares, to
wind up the company or to sell the undertaking of the company.
22788 11:53AM
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Notes to the financial statements
21 Called up share capital (continued)
‘At the year end the following options over ordinary shares were outstanding under employee share option schemes approved by the inland Revenue.
24
Number of shares under option Option price
{pence per share)
1,220,000 100
395,000 100
2,744,700 100
670,000 100
360,000 100
6,850,000 50
400,000 50
‘The options are exercisable only ifthe ordinary shares are listed.
Reserves Share
premium
‘account
£m
Company
Att January 1997 233.9
Retained profit for the year -
At31 December 1997 2"
Group
Att January 1997 293.9
Loss for the year :
Goodwill (Note 23) :
Exchange movements on hedging transactions -
Other exchange movements :
235
‘At31 December 1997
Goodwill
Goodwill arising in the year is as follows:
‘Acquisitions
= purchase of minority interest in ICL Technology Holding (Pty) Limited (South Aftca)
= purchase of minority interest in Post Software Intemational partnership (United States)
~ other acquisitions
Period of option
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January 1997 - January 2004
June 1997 - June
2004
July 1999 - December 1999
January 1998 - January 2005
May 2000 - May 2007
‘April 1997 - April 2007
‘September 1997 - September
Capital
cE
l
132
Bz
1997
64)
(43)
en
Profit
and loss
account
‘&m
190.1
14
200.5
(281.7)
4)
0)
149
(23.8)
BoS7)
196
65)
43)
8)
‘Goodwill in respect of discontinued operations, previously writen off to reserves : 208
=, _ 9
Cumulative goodwill written off in the consolidated accounts of ICL PLC is £287.6 milion (1996 - £257.9 milion).
Expenditure during the year on the acquisition of shares in subsidiary undertakings amounted to £13.3m. The fair value of net assets acquired was equal to
their book value of £3,6m giving rise to goodwill of 8.7m.
Contingent liabilities Group Group Company Company
1997 1998 1997 1996
£m tm £m m
Guarantees issued to third parties 213 558 432 502
Other contingencies 18 34 - :
ar Ex Bz En
“The contingent labilties arise in the normal course of business and no material losses are expected to be incurred, The majority of the guarantees issued to third parties
by the company are in respect of bank borrowings by subsidiary companies.
‘The group has commitments in respect of forward exchange contracts entered into in the normal course of business.
‘The group is involved in actual or threatened litigation but, having regard to legal advice received and provision made in the financial statements, itis not expected that
the outcome of these claims will have any material effect on the financial position of the group.
No assets have been pledged as security in respect of any of the above liabilities.
22708 11:53AM Bs
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25 Pension commitments
‘The majority of the group's UK employees are members ofthe ICL. Group Pension Pian (the "ICL Plan’). The ICL. Plan funds are administered by a trustee
‘and are independent of the group's finances. The ICL Plan is @ defined benefit scheme.
The pension cost relating to the ICL Plan has been assessed in accordance withthe advice of an independent professionally qualified actuary, using the
projected unit method. For this purpose, a formal actuarial valuation was carried out as at 5 Apa! 1997 which took into account restitions announced in the
‘July 1997 United Kingdom budget on the abilty of pension funds o reclaim tax credits. The term, the average annual average annual retum on investments
would be 3.0% higher than average pay increases, 4.25% higher than dividend growth and 5.5% higher than average pension increases,
‘tthe date of the valuation, the market value ofthe assets of the ICL Plan was £887.9 milion and the actuarial value ofthe assets was sufficient to cover
111496 of the actuarial value of he liabilities. The surplus is being amortised over the average remaining service lives of the employees.
‘Most group companies overseas have retirement plans, the form and benefits of which vary with conditions and practices in the countries concemed, In
the case of defined benefit schemes, where funds are subject to periodic actuarial valuations, payments are made on the basis of these valuations.
‘The total amounts charged to profit and loss account were £5.3 million (1986 -£8.6 milion) in respect of the ICI. Plan and £17.8 million (1996 - £54 milion)
inrespect of al ther plans. A creditor of £1.8 milion (1996 - a debtor of £1.3 milion) has been recognised in the financial statements, representing the
‘excess of pension cost over amounts paid into the Pian.
26 Leasing commitments Land and buildings Other Total
1996 1997 1996 1997 1998
m ém &m em £m
‘Commitments under non-cancellable operating leases - Group
‘The anal rentals payable under operating leases are as follows:
Expiring
within one year 87 4 125 136 182 227
= between one and five years 172 123 258 26.1 428 384
= thereafter 318 318 00 - 318 318
EX EH Ea 387, 2s x
1997 1996
Charge to profit and loss account for operating leases em ‘tm
= Plant and machinery 413 484
other 550 621
96.3 1085
Bs )
22798 4:03 PM
Notes to the financial statements
27 Ultimate holding company
‘The ultimate holding company is Fujitsu Limited, a company incorporated in Japan. A copy of its financial statements can be obtained from:
‘61 Marunouchi 1-chome
Chiyoda-ku
Tokyo 100
Japan
This is the largest group of which the company is a member and for which consolidated financial statements are drawn up.
28 Related parties
Related party disclosures
‘At31 December 1997 Fujitsu Limited, which is the company's controling entity and ultimate holding company, held
90.1% of the voting shares of ICL PLC.
In accordance with Financial Reporting Standard 8 on related party disclosures ("FRS 8"), no disclosure is made of
transactions and balances with:
ICL PLC subsidiaries and investee companies which are consolidated;
- Fujitsu Limited and its subsidiaries;
- Fujitsu Limited investee companies;
= Former ICL subsidiaries which were sold within the Fujitsu group during the year.
There are no Fujitsu group related parties who do not qualify as Fujitsu subsidiaries or investees with whom ICL PLC and
its subsidiaries and invesiee companies have traded. No FRS 8 disclosures are therefore required in this respect.
Certain related party disclosures are shown throughout the notes to the financial statements as follows:
= Directors’ remuneration Note 12
Investment in associated undertakings Note 15
Activities and percentage ownership of associates Page x«
~ Income from other fixed asset investments Note §
Related party transactions
Camelot Group ple
Intemational Computers Limited ("ICL"), a wholly owned subsidiary of {CL PLC, holds a 10% interest in Camelot Group
plc (Camelot). During the year ICL. received a cash dividend, inclusive of tax credits, of £4,375,000 from Camelot (1996 - £2,361,000).
ICL Sorbus UK Limited, a wholly owned subsidiary of ICL PLC, provided computer faclties management services to
‘Camelot amounting to £6,308,000 (1996 - £10,700,000), of which £75,000 (1996 - £82,000) was owing at the end of the year.
ICL South Africa Pension Fund
Intemational Computers (South Africa) (Pty) Limited occupies a building as leaseholder which the ICL South Aftica Pension Fund has a
Tight to acquire at market value at a future date,
Finnish Pension Funds
ICL Data OY has outstanding loans from its pension funds of £24,934,000 in accordance with normal Finnish practice, on which it pays interest
of 5.5%,
Occupation of Leasehold Flat
Mc H Watanabe, a director of the company, occupies a flat of which the company is leaseholder. The cost of this accommodation is bome by
a third party.
2278 11:53AM Bs
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