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ICL PLe
MEETING OF THE BOARD OF DIRECTORS
Held at
26 FINSBURY SQUARE, LONDON, EC2A 1DS
on Thursday, 28 May 1998
at 10.00 am
PRESENT : Mr M Naruto (Chairman)
Sir Peter Bonfield (Deputy Chairman)
Mr T K Todd (Chief Executive)
Mr T Furukawa
Mr W K Gardener (alternate for Mr J C Monty)
Mr J J Ollila
Mr H Sakai
Mr H Watanabe
IN
ATTENDANCE: Mr S Riesenfeld
Mr R F Scott (Secretary)
Mr T Yurino
Mr Y Sumida
Mr J H Bennett (Item 17)
Apologies for absence were received from Vicomte Davignon,
Mr K Fukagawa, Mr J C Monty.
Sir Peter assisted Mr Naruto with the Meeting.
Action by:
98/12 MINUTES OF PREVIOUS MEETING
The minutes of the meeting held on 12 March 1998
were approved as a correct record and signed by
Sir Peter.
98/13 CHIEF EXECUTIVE’S REPORT AND PLC/98/7
FINANCIAL PERFORMANCE PLC/98/8
Mr Todd expanded on his written report, Mr
Riesenfeld gave a presentation on performance and
there was a discussion. Points arising:
a) Mr Todd referred to the encouraging first quarter
results where a profit had been made for the
first time since 1994. Quarterly budgeting
seemed to be helping. However ICL was still not
good at forecasting. This had to be improved and
perhaps this might begin to happen as a result of
building an order The most difficult
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area for ICL’s trading was the Retail business
where it would help to sell more ICL products,
particularly hardware, to our existing Retail
customers.
b) Mr Todd reported on ICL’s biggest project, the
Pathway programme to establish an electronic
benefits payment system through PCs in all of the
UK Post Offices. The project was now
considerably delayed. ICL believed the principal
cause of this was the incompatibility or
unpreparedness of the UK Government’s electronic
systems which Pathway was dependent on. Another
difficulty was that ICL was working for two
customers, Post Office Counters Limited and the
Department of Social Security Benefits Agency.
A review of the programme was being conducted by
H M Treasury and this was likely to consider
commercial aspects as well as the reasons for the
delays and other matters. A report was likely to
be issued around 22 June. Mr Todd said he
believed the outcome of the review would be a
realistic acceptance of the situation and a
positive plan for going forward which should
include, for ICL, a longer contract period with
appropriate pricing, enabling the company to make
a profit. He added however that should the
review, and the stance of Ministers based on it,
result in action unfavourable to ICL then not
only might the company take legal action (ICL
believed it would have a good case), but also Mr
Todd would reconsider the company’s preparedness
to take with other IT related public finance
initiative contracts. As well as ICL’s position,
the credibility of the Government in IT/PFI
contracts was at stake. (See also Pathway report
by Mr Bennett - minute 98/17 below.)
c) Mr Todd referred to ICL’s partnership with
Microsoft, which had just been successfully
announced. This would be good for ICL staff and
for ICL customers. The arrangement, which was
non-exclusive and would allow flexibility on both
sides, involved collaboration with software
products in four ‘go to market’ areas (Retail,
Education, Infrastructure and Public Sector), and
training of ICL staff on Microsoft skills. This
investment by would be repaid on the
basis of royalty payments by ICL on sales of the
products in and following the Year 2000. Sir
Peter said the Board hoped to see the result of
the partnership in the revenue and profits
streams of ICL, as quickly as possible.
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d) Mr Todd then referred to other major contracts
and bids, particularly in relation to the UK
Government RE! IcL was
hopeful on most of the major P.
involved in but unfortunately the
Services contract had just bee
probably on price. Mr Todd and Sir Peter
discuss the bid debrief in due course
been ICL’s partner in the bid). It was noted in
respect of Sir Peter that { as ICL’s competitor
in some of the other major bids in contention at
present.
ids we. were,
IRRELEVANT
e) Following some years during which the ICL brand
had been shown in five colours, the company was
about to standardise on the ‘ICL’ letters in the
same shade of red used by Fujitsu. This would
reflect the company’s one identity as a systems
and service provider.
£) Mr Naruto said he believed the ICL employees and
Management were more confident than in 1997 and
keen to bring about further improvements in
business performance leading to flotation.
g) Mr Riesenfeld presented on the ICL results for
the first quarter of 1998, and on the forecast
for the first half and for the full year. Profit
before tax (PbT) for quarter 1 had been £11.3m
and this had included £11.2 i 25
profit from the transfer of the
to Fujitsu. Therefore, albeit z
ICL had made a profit in the first quarter for
the first time since 1994. Reasonably good
revenue growth was being experienced in almost
all of the businesses, with the exception of
[~ In that country, ICL was taking
inci robl. i
Irrelevant I
techniolégy was proving popular but significant
advertising revenue was yet to be earned.
Discussions were taking place on how the Company
could benefit, including the possibility of a
share in a joint venture for Ich or a
compensatory payment if the [s
partner at the end of the cont
‘went to another
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‘IRRELEVANT.
Mr Todd i
successful this year so far, based mainly on
sales of ICL mainframes into its customer base.
The company’s. major trading problem was in the
had been lost in the
TAvat quarter. Mr Todd said it would be
necessary, as a short term improvement, to
increase sales of other ICL products such as PCs
and mainframes into the Retail customer base.
Over the medium to longer te
confident that ICL’s software -
precision retailing, for this market, would prove
successful.
j) Mr Todd said that the forecast profits from the
businesses for the half year and the full year
forecast were not acceptable to him. In
particular the full year PbT of £42m included
£18m non operational items such as {j }
profit from the sale of shares in the ¢
IRRELEVANT
significantly below the present indicative
budget of £40m and still further below the
stretch target necessary for a step on the road
to flotation, of £75m. Mr Todd said that much
work remained to be done, although ICL’s
forecasting was not at present reliable and he
expected the actual outturn to be better than the
forecast presented.
k) Mr Riesenfeld would present more figures relating
Mr Riesenfeld to the balance sheet, from the next meeting
onwards. a was noted that cash flow
deteriorations in Ql were however as a result of
project funding, particularly Pathway, rather
than from trading. These would be shown
Mr Riesenfeld separately in future. 7777
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1) Mr Riesenfeld showed slides of a new approach to
reporting ICL’s management accounts figures,
showing a 3-Dimensional matrix of the company’s
offerings, made to the markets we were in, by the
geographies used. Use of this format in future
would enable greater targeting on both successful
areas (to increase investments) and unsuccessful
areas (to wind down or cease).
Mr Riesenfeld would send details of working
Mr Riesenfeld capital for this to Mr Ollila
98/14
RO:
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98/15 BOARD COMMITTEES
The Board noted the minutes of the Pensions
Policy Committee held on 17 April 1998 and of the
Audit Committee held on 12 March 1998. In
connection with the Audit Committee minutes, it
was agreed that each meeting of the Board would
be given a report on progress towards conformance
Mr Todd regarding Year 2000 issues. Mr Todd added that
ICL was going back to its major customers to ask
for their confirmation that, if it was the case,
they required no further help with the Year 2000
issues. This was so that the Company would have
written confirmation on file.
98/16 UPDATED ON POTENTIAL ACQUISITION
AND _DIVESTMENTS
IRRELEVANT
98/17 ICL PATHWAY UPDATE PLC/98/10
Mr J H Bennett updated the Board on operational
aspects of the programme and there was further
discussion about the H M Treasury review of the
Pathway project.
A significant focal point on the project
milestones was January 25 1999, start of live
trials of new release 2 of the system. This
tested not only Pathway, but the DSS systems and
all the other feeders to the project. Live
national roll-out of new release 2 would then
take place from April 1999. Regarding the H M
Treasury review, Mr Bennett reiterated that ICL’s
ambition was an extension of the contract of at
least five years and a revenue target of #£180m
per annum.
98/18 DOCUMENTS SIGNED AND SEALED PLC/98/12a & b
The Board agreed:
The signing of the documents dated 23 January to
19 May 1998 inclusive set out in the Register of
Documents signed Under Hand.
The sealing of the document numbered 75430, noted
in the Register of Documents sealed between 23
January to 19 May 1! —
98/19 DATES OF NEXT MEET:
23 July 1998
26 November 1998
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