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ICL_PLC
MEETING OF THE BOARD OF DIRECTORS
Held at
ICL House, 1 High Street, Putney, London SW15 1SW
on Wednesday, 23 July 1997
at 2.00 pm
PRESENT: Mr M Naruto (Chairman)
Sir Peter Bonfield (Deputy Chairman
- In the Chair)
Mr TK Todd (Chief Executive)
Vicomte Davignon
Mr T Furukawa
Mr WK Gardener
Mr § Gillibrand
Mr JJ Ollila
Mr H Watanabe
IN
ATTENDANCE: Mr S_~ Riesenfeld
Mr RF Scott (Secretary)
Mr T Yurino
Mr Y Sumida
Mr RHE Powell (Item 24)
Mr DB Palk (Item 25)
Apologies for absence were received from Mr K Fukagawa,
Mr J C Monty and Mr H Sakai
97/22 MINUTES OF PREVIOUS MEETING
The minutes of the meeting held on 16 May 1997
were approved as a correct record and signed by
Sir Peter.
97/23 CHIEF EXECUTIVES REPORT - JULY 1997 PLC/97/12
FINANCIAL PERFORMANCE PLC/97/13
HALF YEARLY ACCOUNTS PLC/19/14
Mr Todd and Mr Riesenfeld reported, points noted:
a) Mr Todd said that although ICL was in loss at
the half year we were ahead of budget and last
year. Aggressive action continued to deliver
£25m profit before tax budget for the year, with
short term revenue the main trading priority.
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b) Mr Todd had said he had asked the BBC to re-
invest more of its share of income, from our
contract with them. We could also work with the
BBC on public service broadcasting. Microsoft
might partner ICL in these relationships with the
BBC.
c) Progress had slowed on the Pathway contract with
Release 1C slipping from 18 August to 13 October.
Release 2 would now be March 1998. Reasons
included complexity of the solution. ICL Project
Management had been strengthened and after
October 13 ICL would work on improving the
commercial/financial position. Before this
negotiation borrowing for the project would peak
at £334m (up from £250m before the delay).
d) ComputaCentre was a threat as a small systems
integrator and as a hardware and service
provider. Also, EDS seem now to perceive ICL as
a direct threat to their British Government
business.
e) ICL had recently won a significant order from
Marks & Spencer (referred to in the ICL Retail
presentation below) and a major outsource
contract with Transco (part of the former British
Gas). Relations with Microsoft were very good
and they had praised us as a partner.
£) Mr Todd went on the say that ICL had bought, for
around £10m, the holding of Malbak in the South
African business. It was likely we would run
other African subsidiaries from South Africa and
agree that the black empowerment groups take a
larger shareholding. In the meantime the
business was being reviewed to improve
performance.
g) The recent UK budget had made changes on the
payment of tax credits on dividends. This
affected the UK Pension Plan (see minute 26
below) and also the Preference Shares in the
Company held by the Fujitsu UK Finance company,
which could no longer claim back a tax credit on
the Preference share dividend paid. Mr Todd said
discussion would take place to find an acceptable
way forward.
h) Changes had been made to the ICL Group banking
covenants. Lending from Fujitsu is excluded from
the covenants up to £100m, the quarter end
gearing ratio is raised from 80% to 100% (with no
interim monthly test) and the intangibles cap
raised to 25% (ie intangibles are excluded from
IcL’s net worth only to the extent that they
exceed 25% of the total value of net worth). The
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restrictions in regard to the covenants on
project and facilities management indebtedness
had been eased.
i) Mr ‘Todd emphasised the actions needed to improve
underlying profitability for the medium term
(1998 - 2000), including elimination of loss
making activities. (The businesses in France and
Ireland, and TeamWARE were under review.) Mr
Todd said ICL needed a step change in
performance, not just an advance up our existing
improvement curve. The Customer Satisfaction
Interview Programme was important in fully
restoring our credibility.
j) Mr Riesenfeld said ICL had exceeded PbT budget by
£8.8m at the half year and were forecasting to
meet £25m budget for the full year. Customer
revenue and margins were behind budget and the
profit performance had been supported by cost
savings and ndn-operating income such as the
amortisation of the surplus in the Pensions
scheme. The "new" strategically important
businesses were performing significantly better
than last year but still not producing sufficient
profit to offset declines in the traditional
businesses and produce acceptable returns.
k) High Performance Systems, were above budget at
the half year although less than last year.
Trimetra (SY) appeared to be a successful way
forward for ICL’s VME customers but sale of the
UNIX system, Award, outside of the ICL base and
marketing spend on this, was still under review.
TeamWARE, which continued to cause concern,
Services, Sorbus, South Africa and also ICL
Retail were significantly down on budget. Strong
sterling had the effect of reducing European
profit, through currency translation.
1) A considerable profit improvement (£18.2m loss in
first half to £43.2m profit in second half) was
needed to reach PbT budget for the year.
m) The Board agreed the unaudited half year Profit &
Loss Account and Balance Sheet and
RESOLVED
THAT the unaudited consolidated Profit and Loss
Account for the six months ended 30th June 1997
and the unaudited consolidated Balance Sheet at
30th June 1997 be and are hereby approved and
that any Director of the Company be and is hereby
authorised to sign the same on behalf of the
Company.
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97/24 PRESENTATION BY MR RHE POWELL ON ICL RETAIL
ICL Retail’s goal, with Fujitsu, was to be the
"number one consumer centric technology partner
in retailing" with $2bn revenue by year 2000.
Profit before tax in millions of dollars had been
minus 37.6 in 1995, minus 8.7 in 1996 was
expected to be around break-even in 1997, then go
into profit from 1998 onwards.
ICL had an important new product "GlobalStore”
developed on microsoft architecture and this had
brought a significant order recently from Marks &
Spencer who were going to roll it out through all
their stores worldwide. However, the in-store
systems market generally was not growing quickly
and the business performance was below budget at
present. One high growth area was Precision
Retailing, basically "loyalty systems" where
there was a considerable opportunity for ICL
(since competitors were weaker) but some
investment might be needed.
Mr Powell would put together a list of those
larger European retailers who were customers of
competitors and who were opening up in new areas,
for example in Eastern Europe. This could
provide a sales opportunity for ICL Retail in
Precision Retailing and Vicomte Davignon would
MR POWELL assist with approaches to appropriate CEOs/
Chairmen.
97/25 PRESENTATION BY MR DB PALK ON ICL SORBUS
ICL Sorbus had experienced a decline in customer
satisfaction towards the end of last year so the
business had been re-focused on break-fix
maintenance with some elements of the former ICL
Sorbus transferred to ICL Services. There had
since been signs that quality of service and
customer satisfaction were improving.
Mr Palk said the way forward was through a
centralised support capability, which would
enable infrastructure cost to be taken out in
individual countries. Investment in a European
infrastructure "Project DAWN" would bring this
about. Thus ICL Sorbus should avoid having to
leave individual European countries because of
lack of critical mass. Mr Ollila said he felt
the way forward was by a growth effort rather
than cost cutting.
97/26 BOARD COMMITTEES
The Board noted the minutes of the Pension Policy
Committee held on 4 July.f4
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The recent UK budget had stopped Pension Funds
claiming a tax credit on dividend income from UK
equities. By affecting valuations by the
actuary, this change could significantly reduce
the surplus existing on the main UK ICL Pension
Plan and reduce the time during which ICL enjoyed
a "holiday" from contributions to the Plan, with
consequent Profit and Loss account effects.
Mr Todd drew the Board’s attention to the remarks
in the minutes about the investment performance
of the managers of the UK Common Investment Fund.
One manager, Mercury, had performed extremely
well but the other, PDFM, rather badly although
the net result was that the investment
performance was meeting the Trustee target. The
situation remained under review by ICL and the
Pension Trustees.
97/27 DOCUMENTS SIGNED & SEALED PLC/97/15a & b
The Board agreed:
The signing of the documents dated between 23
April and 30 June 1997 set out in the Register of
Documents signed Under Hand.
The sealing of the documents numbered 75404 to
75406 and execution of several deeds, noted in
the Register of Documents sealed, between 5 April
and the 17 June 1997.
97/28 UPDATE ON POTENTIAL ACQUISITIONS & DISPOSALS
Mr Todd said that the disposal of the business
concerned with Powersolve and Prosper Financial
Systems was proceeding. Also parts of the ICL
Sorbus business which were regarded as non-core
were being identified for possible sale or other
action.
97/29 DATE OF NEXT MEETING
Friday, 21 November 1997
BOARD MEMBERS. The Secretary tabled a proposed 1998 schedule of
dates and Board members were asked to reply to
him regarding availability.
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