ICL PLC
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Minutes of the meeting of the Board of ICL Pathway Limited
Held at 12.40 am on Wednesday 15" September 1999
At 26 Finsbury Square, London, EC2A 1SL
Present: Sir Michael Butler
Mr T K Todd
Mr R Christou
Mr J H Bennett
Mr A E Oppenheim
Mr H Kurokawa
Mr M Stares
(Chairman)
Mr R F Scott
Mr A Nagai
Mr H Hirata
In attendance: (Secretary)
Apologies were received from: Mr T Escudier
Action by: 1. Minutes of previous meeting
The Minutes of the meeting held on 20" July 1999 were
approved as a correct record and signed by the Chairman.
2, Matters Arising
4f) Parliamentary Committees etc — Contact had been made
with the National Audit Office.
The Public Accounts
Mr Bennett
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Committee would probably produce a report on Pathway
which could lead to appearances by Pathway before the
Committee. In addition Ian McCartney had been asked
by the Prime Minister to head a project concerning all IT
programmes across Government. We would try to
contribute constructively to these through Mr Bennett and
Mr Hall. Mr Todd added that he had seen Mr Bourne of
the National Audit Office and noted that in this process
ICL had to retain creditability and try to avoid any
criticism of its position.
5d) Recovery plan for the Project's profitability — the
Chairman emphasised it was important for the Board to
be appraised of how profitability on the project could be
Mr Bennett
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recovered. Mr Bennett would be asked to present to the
next Board meeting together with moves to enhance the
partnership with the Post Office for the future.
This subject will receive appropriate management time
after the issues of Acceptance and Go Live were cleared.
Statutory Accounts for the 15 month period to 31° March
1999 — the Secretary confirmed these had now been
signed and would shortly be filed at Companies House.
Managing Director’s Report
Mr Bennett, with Mr Oppenheim reported and then there was
a discussion. Points noted:
a)
b)
c)
The implementation programme continued — effectively
national roll out although it was not yet called this — week
3 beginning on 6" September produced 47 outlets
installed. The present week, week 4 was expected to
produce nearly 80 installations.
It had been intended to achieve 1,800 outlets installed by
the week ending 7 November but this now seemed
unlikely to happen before Christmas. POCL appeared to
want to stop new installations from 5‘ November and
negotiations with them were taking place so that, if 1,800
was not achieved, a pro-rata payment from the £90m
agreed for national roll out could be received.
However, progress with national roll out depended on the
crucial issue of Acceptance. This had been delayed from
the date forecast at the time of the last Board meeting, of
16" August and was now targeted for 24'" September.
There was still three high severity incidents not yet
resolved, which could delay Acceptance.
A negotiation, both technical and commercial, with the
customer would be needed to resolve these three
incidents. Also another significant issue had arisen to be
covered in the negotiations. This was that POCL were
concerned that until Acceptance took place there was a
possibility they could not reconcile their financial
position with their customers, particularly the DSS but
also Giro Bank, in some circumstances as a result of the
effect of the incidents not yet closed. They had reached
an estimate of £20m as their maximum possible exposure
from this eventuality and were requiring an indemnity
from ICL Pathway which would provide them with
recompense if the worst happened.
i
Mr Christou
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e) The Board discussed this and it was accepted that because
of the strength of the systems in place and the data/
reconciliations which ICL Pathway undertook, the risks
involved are extremely small. There was therefore the
possibility that an indemnity could be accepted as a last
resort in the negotiations, particularly if this would avoid
aretention from the £68m payable on full Acceptance.
f) The Board then discussed a further report that the POCL
legal advisers were suggesting that the Fujitsu guarantee
of ICL Pathway performance of the project would not
cover this indemnity. (Le. if ICL Pathway was liable
under the indemnity and could not pay, then the Fujitsu
guarantee could not be used by the customer to obtain
payment.) The customer had then suggested that a letter
of clarification be obtained from Fujitsu to confirm that
the guarantee would cover the indemnity and after
discussion Mr Kurokawa advised that this might be
possible in the limited circumstances applying to the
indemnity, namely that it would only be in existence until
satisfactory installation of a new reconciliation function,
forecast to be achieved by mid-January 2000.
g) However, it was agreed that Mr Christou would fully
review the situation before beginning negotiations with
the customer and would discuss the matter with
Mr Kurokawa. The Board members therefore delegated
resolution of the indemnity/guarantee issue to
Mr Christou and Mr Kurokawa.
Commercial and Financial Director’s Report
Mr Oppenheim referred to his report which had been
circulated and there were questions and discussion, which
concentrated on the financial effects of Acceptance, which
clearly depended on the date Acceptance was achieved.
The most likely scenario, as noted in the Managing Director’s
Report above was that we would not achieve roll out of all
1,800 installations before the date at which POCL wished to
stop for consolidation etc. over the Christmas period.
This could be as early as 5‘ November. It was considered
that we might achieve a proportional payment of £75m to
£80m, which, including the effect of VAT brought us close to
the figure in the original business plan (£90m). This would
leave the remainder of the 1,800 outlets to be installed in the
Mr Bennett/
Mr Hirata
Mr Escudier
Mr Stares
All please
note
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first few weeks of January
If the above was not achieved, the position could worsen
considerably with only a relatively small proportion of outlets
installed by November/December and the milestone of 1,800
delayed into March or April 2000 with consequent cash flow
effects. However at present it was believed this would not
happen.
Fujitsu Project Team
Mr Hirata outlined the activities of the team from Fujitsu
assisting ICL Pathway. They had been concentrating on
Acceptance and National Roll Out and also on the robustness
of the system to go beyond 1,800 installed outlets.
Fast communication channels were in place with
Mr Kurokawa in Tokyo
Mr Todd praised the Fujitsu team’s report on the project and
asked Mr Hirata if he would kindly make it available to
Mr Escudier and Mr Stares.
Visit to Feltham
Mr Escudier and Mr Stares would make arrangements to visit
the ICL Pathway operation, for a full briefing.
Date of Next Meeting
The next meeting was proposed for 24'" November, the date
of the next ICL ISC meeting and it was agreed the start time
would be provisionally set for 8.00 am. There was a
Pathway Project Review with POCL later in the day.