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sae ICL GLOBAL INVESTMENTS LIMITED
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I I ICL PLC
INTERNATIONAL COMPUTERS LIMITED
MEETING OF THE INVESTMENT & STRATEGY COMMITTEE
held at
Observatory House, Windsor Road, Slough, Berks, SL1 2EY
On Wednesday, 22 July 1998 at 1.00 pm
PRESENT: Mr T K Todd (In the Chair)
Mr M Naruto
Mr R Christou
Mr H Sakai
IN ATTENDANCE: Mr S Riesenfeld
Mr R F Scott (Secretary)
Mr T Yamada
Mr Y Katsuya
Mr T Yurino :
Mr Y Sumida 7
Mr D J Teague (Item 45 onwards)
Mr R M Hacking (Item 48)
Mr J Polatch (Item 49)
Mr P Eames (Item 50)
Mr G Pickup (Item 50) I
ACTION BY:
98/40 COMMITTEE MEMBERSHIP I
Messrs Fukagawa, Furukawa and Watanabe were
standing down from the Committee, on leaving the
ICL PLC Board. It was noted that the ICL ‘PLC
Board would be asked to appoint Mr Sekizawa,
Mr Kurokawa and Mr Yurino to the Committee.
98/41 MINUTES OF PREVIOUS MEETING
The minutes of the meeting held on 27 May 1998
were approved as a correct record and signed by
Mr Todd.
98/42 MATTERS ARISING
98/23b - ICL was now unlikely to invest in
Escher at this time, but the matter would be
kept under review.
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I
Mr
Mr
Mr
Mr
Hartnell
Palk
Teague
Escudier
Christou
Gibson
Teague
98/43
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98/24b - A paper on ECRC would be brought to the
next meeting of the Committee.
Help desks were being identified as investment
priority for ICL, and there would also be a
paper on this for the next meeting.
98/24e - Mr Teague would ask Fujitsu Systems
Europe to ensure that Japanese companies in the
UK would be treated as their target customers.
98/27 - Persona - Ahead of the next meeting of
the Committee, in September or October, ICL
would consider whether to go ahead.
IRRELEVANT; Mr Todd
“be” .sent to
would arrange for the ICL view
Mr Furukawa.
98/32 - IRRELEVANT:~ Mx Todd said a services joint
venture with ANT:might still be arranged.
On Year 2000 issues, Mr Sakai said there was
concern in Fujitsu over the possibility of legal
action from customers and others, not only in
Japan but in Courts throughout the World.
This could also happen to ICL. Mr Todd and
Mr Christou were keeping the situation under
review and also writing to customer CEOs to
again raise the issue. Mr Todd added reports
would be made to the ICL PLC Board on Year 2000
from now on.
CHIEF EXECUTIVE'S REPORT JULY 1998 PLC/98/14
Mr Todd expanded on his written report. Points
noted.
a) Mr Todd said that in the second quarter of
1998 ICL had achieved a profit from
operations. However growth in the second
quarter was poor at 4.8% compared to 13% in
the first quarter.
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b) Goldman Sachs were valuing the IPR and
other assets likely to arise from the BBC
contract, as it was now accepted this would
have some value on termination of the
project.
c) The Microsoft partnership could be greatly
expanded by exploiting exchange based
systems over the next few years.
98/44 FINANCIAL PERFORMANCE PLC/98/15
AND HALF YEARLY ACCOUNTS PLC/98/16
Mr Riesenfeld reported and there was a
discussion.
a) Year to date profit before tax was £18.5m,
including the benefit of the sale of
Teamware to Fujitsu and flotation
profit on part of thi
However Q2 had sappointing
particularly in slow growth. For the first
time at this meeting the global business
picture was presented based on the ICL
"Cube" reporting system which showed the
business gained in "verticals" i.e. the
businesses ICL was in, from the business
offerings er products etc through the
various geographies in which we operated.
This system, which was capable of further
refinement, would enable sharpened focus on
problem areas and a -prioritisation of
investment etc in promising areas. The
Committee noted the list of ICL’s top 20
customers and the predominance of business
with them in ICL’s total results.
b) From Mr Riesenfeld’s slides, the Committee
noted the trend of profit this year,
significantly above 1997. The order
backlog was also noted. Mr Todd emphasised
the importance of making a profit in
Quarter 3 of 1998 and referred to efforts
led by Mr Teague to greatly expand short
term revenue opportunities (by £250m in the
rest of 1998). Originally we had planned
13% growth for 1998 but he now hoped for
more.
c) The Committee noted the trading issues in
Central Europe, Retail (where Mr Mullinder
in the US in particular was improving the
situation significantly) and Services
(where the education and ECRC businesses
were a concern)
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da) The Quarter 3 forecast from the Divisions
was a loss of £11lm but Mr Todd and
Mr Riesenfeld had judged that ICL would in
fact make a small profit, based on our
increased sales efforts and the fact that
the divisions’ forecasts were usually
pessimistic. When this was achieved, the
outlook for Quarter 4 would be good. The
"Stretch" profit target for the year
remained at £75m although the post-
judgement forecast now stood at £58.7m PbT.
Mr Todd said the EMC understood the
importance of accelerating profit towards
flotation in May 2000. Falling into loss
in even one quarter was not acceptable.
e) For the Fujitsu year, ending 31st March
1999, ICL operating profit forecast was
£67.5m compared to £50.3m achieved last
Fujitsu year.
£) Mr Riesenfeld explained changes to ICL’s
banking facilities including a borrowing
limit increase and a relaxation of elements
of the covenants the banks imposed.
Mr Todd praised Mr Riesenfeld and Mr Hill’s
efforts in achieving this. The Committee
approved the changes.
g) The Half Yearly Accounts being prepared for
the banks, which would also considered by
the Audit Committee and the Board were
noted. They showed a profit on the bottom
line after tax, minorities and preference
dividends.
98/45 ICL‘S MARKETS PLC/98/17
Mr Teague gave a presentation on ICL’s markets
and Mr Todd emphasised that the Executive
Management team would be using this information,
continually updated, for strategic and other
purposes particularly in the run up to
flotation. The market situation would be
Mr Teague reviewed at each committee meeting in future.
98/46 FLOTATION UPDATE Isc/98/24
Mr Riesenfeld- gave a presentation of material
obtained from ARC Associates showing the
potential ICL had for a stock market listing
although pointing out the improvements necessary
in profitability. He also referred to the
preparatory work being undertaken and timing
issues. After discussion it was agreed that ICL
Mr Christou would continue to plan for listing in May 2000
Mr Riesenfeld but with a contingency plan for listing up to
12 months earlier.
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98/47 MAJOR CONTRACTS AND BIDS
a) ICL Pathway project update PLC/98/18
Mr Todd referred to recent relatively good
progress operationally on the project and
to the review by HM Treasury which it was
expected would lead to commercial
negotiations in which ICL intended to
achieve a realistic return on the
investment. The project. would be further
discussed at the Audit Committee and the
ICL PLC Board meetings.
b) PFI Projects Update Isc/98/25
Mr Todd referred to progress with HM
Customs and Exercise, the Magistrate Courts
opportunity (ICL was now in a single
negotiator position and Mr Christou was
Mr Christou asked to ensure a_ satisfactory margin
. return). The DTI the Home Office IT 2000
project and the Accord project. Concerns
on Accord included that it was bigger than
Pathway, that there was a poor business
case and that the Department of Social
Security might not prove to bé a good
customer.
c) Major Bids Report ISC/98/26
The paper was noted and Mr Todd and
Mr Christou were authorised to sign or
approve any contracts of more than £50m
arising prior to the next meeting of the
Committee.
It was noted that ,....the.....contractual
documentation on the IIRRELEVANTjopportunity
was nearing. signature and that a full
resolution giving appropriate authorities,
as required by the various parties, would
be circulated to the Committee for
signature. The resolution would be
accompanied by an update paper including
Mr Gibson details of the margin.
98/48 ICIM INDIA
IRRELEVANT
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IRRELEVANT
Mr Hacking
98/49 CUSTOMER SATISFACTION
Mr Polatch joined the meeting and gave a
presentation covering the activities of the
Customer Satisfaction Action Centre the Customer
Satisfaction Interview Programme, Customer
Issues Reporting, Customer Red Alerts and Root
Cause Analysis. He concluded by referring to
the One ICL acceleration model by which problems
were accelerated in an orderly fashion to become
"red alerts" and dealt with appropriately.
Mr Todd emphasised that when ICL was able to
report overall satisfaction scores of an average
of 9 (at present we were around 7 having
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previously been at 6.4) this should be worth 2
to 3 points of margin to ICL. Therefore, on
£3bn revenue we could increase profits by £90m.
The presentation covered reliability of PC
products from Fujitsu Computers Europe Ltd and
Secretary the Secretary would advise the EMC to ensure
proper identification of this company in future.
Mr Polatch and Mr Teague were having monthly
reviews with Mr Urano of FCEL in order to deal
quickly with any problems.
98/50 APPROVALS AND CONFIRMATIONS
a) Acquisitions and Divestments ISC/98/28
Mr Christou reported on progress with the
various acquisition and divestment
propositions. It was noted that Celestica
to whom ICL had sold the design and
distribution business had obtained a stock
exchange quotation and repaid early the
loan note they owed ICL. Also the volumes
of business we placed with them were close
to the committed levels, which should
enable us to. obtain bonuses shortly.
Mr Christou referred to the opportunity to
realise some value from the Intexner
Service roviding business in German, /'RReLevaw
The business
currently loss making but as Internet
related might be valued in accordance with
other factors.
b) PTI - Approval to Proceed 1sc/98/29
Mr Eames and Mr Pickup gave a presentation
on the proposed PTI acquisition. It was
noted the price to be paid for the shares
was $3m initially plus a further $3m over
three years, subject. to some conditions
placed on the Vendors. Additionally they
would have incentives to perform well with
Ich.
Mr Escudier The need for on the spot ICL management
supervision of PTI was emphasised.
Mr Todd wished further information on the
high growth expected between 1998 and 1999
in revenue and profits, also, development
spend had to be analysed. We had to be
sure significant further development spend
would not be necessary to bring the product
Mr Escudier up to the level at which it could satisfy
the market at which it was aimed. Also,
the attitude of other Fujitsu group
companies to this would be ascertained as
Mr Sakai they should be committed to this product
rather than develop their own.
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Mr
Mr
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Subject to,the points mentioned, on which
Escudier clarification would be provided to Mr Todd,
the proposal was approved and a resolution
setting out the final terms will be
circulated to the Committee for signature
Escudier/Secretary in due course. Mr Sekizawa was visiting
ICL in September and a presentation would
Escudier be made to him on PTI and other ICL
smartcard activity.
c) Capitalisation of Subsidiaries ISC/98/30
The proposals were approved. In future
Riesenfeld Mr Riesenfeld would ensure there was a
summary of the three year business plan for
each company requiring capital, showing the
way back to profit.
d) Year 2000 PLC/98/19
The paper was noted.
e) Chairman and Managing Directors of Trading
Subsidiaries ISC/98/33
Changes since the last meeting were
approved.
f) Pension Policy Minutes dated 10th July 1998
These were noted.
h) Documents signed and sealed PLC/98/20a&b
The paper was noted.
98/51 ‘DATE OF NEXT MEETINGS
Wednesday 25 November 1998
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