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‘Os ir jaruto
Mr T K Todd POH -1534D.
Mr T Furukawa —
Mr K Fukagawa
Mr H Sakai
Mr H Watanabe
Mr R Christou s, L
cc: Mr S Riesenfeld f
Mr Y Sumida
Date: 15 December 1997
INVESTMENT AND STRATEGY COMMITTEE MEETING:
Thursday, 20 November 1997
Please find attached the Minutes from
the above meeting for your records.
¢
Att
ICL PLC
1 High Street
Putney
London
SW15 1SW
et ple
Registered in England no 142200
Registered office
1 High Street
Putney
Loncon swis 1sW
FUJ00077836
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icL_ PLC
INTERNATIONAL COMPUTERS LIMITED
ICL GLOBAL INVESTMENTS LIMITED
MEETING OF THE INVESTMENT & STRATEGY COMMITTEE
held at ¢
ICL House, High Street, Putney, London 'SW15_1SW
On Thursday, 20 November 1997 at 10.00 am
PRESENT? Mr T K Todd (In the Chair)
Mr M Naruto
Mr H Watanabe
Mr R Christou
Mr T Furukawa
IN ATTENDANCE: Mr S Riesenfeld ,
Mr R F Scott (Secretary)
Mr T Yurino
Mr Y Sumida
Mr N R Hartnell (Items 66c) & 69)
Mr J H Bennett (Item 65)
Mr A Gibson (Items 66c):& 69)
Apologies for absence received from Mr K Fukagawa and Mr H Sakai.
ACTION BY:
97/59 MINUTES OF PREVIOUS MEETING
The minutes of the meeting held on 22 July 1997
were approved as a correct record and signed by
Mr Todd.
97/60 MATTERS ARISING
97/42 - Fujitsu Research and Development in the
UK - Mr Todd and Mr Watanabe would put together
Mr Todd an estimate of total spend, for use with the UK
Government.
97/61 CHIEF EXECUTIVE'S REPORT - OCTOBER 97 PLC/97/16
FINANCIAL PERFORMANCE PLC/97/17
1998 BUDGET Isc/97/57
Mr Todd and Mr Riesenfeld reported, points
noted: :
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a) To the end of October the total ICL Group
Revenue was down 17.5% compared to 1996, with
pretax profit improved by £46.5m. Operations
divested in 1996 significantly impacted these
comparisons.
At the end of each quarter we had been ahead of
budget. To the end of October, we-+were £1.5m
worse than’ budget, reporting a loss of £24.7m
before tax. Growth varied significantly by
business. The Services and TPLC units: projected
growth in excess of 20% per annum. Overall
growth for the year is projected to be'7% for
Systems and Services.
b) The individual businesses performance was
reviewed. High Performance Systems was
performing exceptionally well, at £62.1lm profit
to October, £26.9m better than budget. Sales of
Trimetra were excellent.
c) Any arrangements for sale of I.500 would include
continued use within TeamWARE. Mr Todd would
Mr Christou arrange for a paper to be written to clarify the
issue. TeamWARE had lost £14m so far this year,
£9.8m worse than budget. Discussions continued
on the transfer to Fujitsu) and also on the
advance payment of $5m royalties outstanding.
d) Mr Naruto said he thought ICL’s budgeted £25m
profit should arise from operations. Mr Todd
Mr Riesenfeld and Mr Riesenfeld would draw up a_ schedule
showing the effect of this policy decision on
the tasks ICL had to achieve for £25m for (1997.
Both emphasised. ICL was committed to achieving
its £25m committed PbT.
e) Technology PLC was slightly behind budget’ but
recovering after loss of the GCAT contract and
increased logistics spend. At ICL Enterprises
West & Central Europe, control of the business
was tightening since Mr A Gibson had arrived and
contract management procedures had improved in
the UK in particular. The MAV (Hungarian
Railway) contract was due to be signed ina
ceremony in Hungary involving Robin Cook, the UK
Foreign Secretary. Mr Naruto said Fujitsu was
reviewing operations in Hungary, which were too
Mr Todd cumbersome and Mr: Todd would assist in this.
£) There had been concern recently over. the Pathway
contract but Mr Todd was able to report progress
following initiation of a review, with the heads
of POCL and the Benefits Agency. (Pathway
review, Minute 65 below.)
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g) The trading position at ICL Retail continued to
deteriorate at loss of £18.7m so far during
1997, £15.1m worse than budget. Mr Todd said
that the transition to the Globalstore product
was slow, although the product was a _ world-
beater and customers were slowing orders for
existing ICL products. Similarly, although we
were winning precision retailing pilots, mainly
loyalty cards, build up of profitable business
here was also slow. The end-to-end supply chain
Mr Todd/Mr King of product from Fujitsu to installation in ICL
. customers was too long and would be examined.
Finally ICL France Retail was losing £3-4m this
year as.a result of poor management, now being
rectified.
h) In ICL Services, profit was down £8.1m to budget
and being closely managed to maximise the year
end situation. IcL Sorbus was also
significantly down on budget and much worse than
last year, but. plans were being put in place to
improve 1998.
i) The .South Africa business was £8.2m below
budget. Mr Christou said the management team,
including John Jones the new Managing Director,
had promised an improvement. Changes were being
made to the organisation in South Africa, - where
at present there being too many decentralised,
uneconomic, business units, and Mr Christou. was
reconsidering the kind of black empowerment
shareholding we should have for the future..
3) Mr Todd referred to the BBC contract where he
still wished to proceed. He was working with
the BBC management to ensure the contract would
ultimately be profitable for ICL. He. drew
attention to significant spin-offs arising
through our knowledge and experience .on this
contract.
k) For 1998, Mr Todd said that all measures: in
place to maximise opportunities and save costs
in Q4 would continue into 1998. ICL would break
even in Q1 or better and this would provide a
springboard for £40m PbT for 1998. However he
also believed that £40m could be exceeded and
stretched targets were being set for the
businesses to bring this about.
1) The Committee discussed financing of ICL. Our
1998 needs were for cash of around £230m but of
this £190m was project financing and the rest
“corporate financing". Discussions were ongoing
with Fujitsu on corporate financing but, as Mr
Naruto explained, project financing, eg for the
PFIs should be arranged in the market probably
without a Fujitsu guarantee.
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97/62 ICL’S STRATEGIC PLAN 1998-2002
Mr Todd presented on the plan, as it would be_
presented to the Board the following day and in
Tokyo in December.
Amongst points covered in the presentation and
discussions were that ICL planned to float on
the London Stock Exchange around May 2000; . ICL
might change its year end to coincide with
Fujitsu (31 March); and there would be less -
emphasis on geographic organisation in future.
Mr Todd referred to the individual centred
information society of the future, to be.
serviced by our customers (who depended on our
understanding of trends and mastering of
technology) and possibly also ‘directly. by
ourselves (for example as an agent for operation
of the next stage of ‘smartcards’).
97/63 . PROPERTY UPDATE ISC/97/56
Isc/97/45
Mr Christou referred to a forward property
strategy involving outsource of the ICL property
estate to a property manager. At the moment,
generally speaking, ICL’s property was poor .and
inefficiently operated and it was planned to
increase flexibility, save cost and allow ICL
staff to enjoy an appropriate physical
environment through the new strategy. The
Committee agreed Mr Christou would present in
Mr Christou more detail to the March -meeting of the
Committee.
The vacant property update was noted.
97/64 TREASURY ITEMS
a) Preference Shares ISC/97/46.
Mr Riesenfeld referred to the proposal to change
the terms of ICL’s preference shares following
the change in the UK budget by which Fujitsu
Finance UK PLC, holder of the shares, could no
longer receive the benefit of the tax credit ICL
had to pay on dividends. Discussions were
continuing with Northern Telecom with a view to
finalising the matter before the end of the year
and the situation would be explained to the
Board the following day.
b) Recapitalisation of Subsidiary ISC/97/47
Companies
Mr Riesenfeld referred to the -proposal to
recapitalise two subsidiaries for legal reasons,
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in Hungary and Norway. He then referred to
other capital structure changes in other
subsidiaries in Germany, Finland, Sweden and
Denmark to optimise their financial position and
these were also agreed. Mr Todd added that the
proposal for a recapitalisation of ICL France
remained under review although a legal minimum
capitalisation would probably be needed in 1998.
Other action would await success in ICL’s
management strategies in France.
97/65 ICL_ PATHWAY UPDATE
Mr Bennett presented. He referred particularly
to success on installing release 1C in almost
all. targeted Post Offices. This release
included order book control systems and benefits
payment system for child benefit payments only.
He then referred to plans to implement release 2
beginning 1998 with full roll out in the second
half of year 2000.
Mr Todd and Mr Bennett then referred to the
independent review of the project Mr Todd had
sponsored with the Chief. Executives of Post
Office Counters Limited and the Benefits Agency.
The atmosphere with them was good and they
understood that ICL needed to make a profit on
the project. The contract might move to ten
years rather than five, an extension based .on
modern understanding and practice of the way PFI
contracts were working. Review work would
continue through December with a view to
presenting to senior eivil servants and
politicians towards the end of that month. It
Mr Todd was agreed Mr Bennett would go to Tokyo with Mr
Todd to present to Fujitsu during December.
97/66 UPDATE PAPERS
a) -ICIM, India . 1sc/97/49
It was hoped that Fujitsu would still purchase
the systems and engineering services division
although a sale to IBM, who could exploit the
business by introducing product sales, was also
a possibility.
b) Softbank Flotation 1sc/97/51
The flotation was unlikely to take place in
December as previously planned, but ICL might be
able to take profit from the sale, in 1997.
Mr Riesenfeld (Position to be finalised by Mr Riesenfeld.)
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c) Network Services Isc/97/50
Following the discussion at the last Committee
meeting, Mr Hartnell updated the Committee on
discussions with Fujitsu. ICL saw much value in
the Fujitsu family controlling a _ worldwide
network, much of which could be contributed by
customers (for example Transco) and for which
ICL’s investment might be limited to only
Mr Todd/ sufficient equipment etc to control the network
Mr Hartnell and the bandwidths available, and guarantee
service. Discussions would continue.
97/67 JASMINE
Mr Furukawa presented on Jasmine, a suite of
products jointly developed and marketed by
Fujitsu and Computer Associates based on their
strategic alliance. Essentially Jasmine would
be the successor to ODB2 as an object database,
working within the "commands" environment.
After discussion Mr Todd agreed ICL would
Mr Todd consider the use of Jasmine and Mr Boswell would
be asked to look at the place it could occupy
within ICL’s © ‘product range and technical
infrastructure. Jasmine would also be a_ factor
within the Microsoft discussions. ICL might
sell it as a distributor for Computer Associates
on a licence/royalty basis as reseller, thus
taking advantage of the Computer Associates
spend on marketing. Regarding Computer
Associates, ICL had questions for them following
the sale of OSMC four years ago and Mr Christou
Mr Christou would ask Mr Pyle to report to him on the
situation. Furthermore, the effect of Jasmine
Mr Christou on ICL’s plans for commands would also be
considered.
97/68 ACQUISITIONS AND DIVESTMENTS Isc/97/52
Mr Christou reported on the existing position
regarding several acquisitions and divestments.
It was noted that Celestica had withdrawn from
interest in purchase of ICL’s repairs business
although Mr Christou was. in discussion of a
potential new purchaser.
Sale of the HPS software products, particularly
Mr Christou 1500 would be reviewed in connection with the
TeamWARE transaction.
Progress was noted with the other proposals
mentioned in the paper and Mr Christou was
Mr Christou delegated authority to continue discussions
subject to presenting final details on any
disposal to the Committee in due course. The
Committee also agreed in principle that ICL
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should take an investment in Escher, the Boston
based software house involved in the Pathway
project.
97/69 UPDATES ON MAJOR BIDS
Mr Gibson and Mr Hartnell presented on a group
of 9 major opportunities for ICL, as sét out. in
the paper.
Almost all of the proposals were going through a
very high activity stage at present with awards
due to be announced on at least. four in Q2 1998,
two more later in 1998 and one in 1999. The
implications for ICL and the position regarding
the competition was noted. The predominance of
EDS in large Government IT projects in the UK
was noted but this was bringing disadvantages to
EDS as Government were beginning to fear over
concentration. However ICL would (and it was
assumed EDS would also), propose to Government
various combinations of projects in one
supplier’s hands to enable further
rationalisation of activity by Government = and
ICL in future. :
The Committee also considered the range of
activity under the various large opportunities,
from full business process, organisation, which
could involve-a full outsource’ as -Mr Hartnell
was dealing with on the DNS opportunity, to
technology-only . outsource possibly including
applications, in a more limited approach. The
position of the bids was noted on all _.the
opportunities and Mr Todd, Mr Christou,. Mr
Riesenfeld, Mr Gibson and Mr Hartnell authorised
to proceed as necessary.
The other £50m opportunities set out in Paper
ISC/97/54 were 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.
97/70 CHAIRMAN AND MANAGING DIRECTORS ISsc/97/55
OF TRADING SUBSIDIARIES .
The position was noted and appointments since
the last meeting of the Committee were. ratified
and approved.
97/71 BOARD COMMITTEE MINUTES
The Pension Policy Committee and Audit Committee
minutes, to be considered by the Board the
following day were noted.
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97/72 DOCUMENTS SIGNED AND SEALED PLC/97/22a&b
The papers, for the Board the following day, was
noted. 4
97/73 DATES OF MEETINGS IN 1998
The meeting date for March 1998 was still under
discussion but the following were the
provisional dates for later in 1998:
27. May 1998
22> July 1998
25 November 1998.
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