ICL Plc’s chief executive, Keith Todd, is adamant that his company will be re-floated on the London Stock Exchange in the year 2000, despite the group’s lack of profitability and its hitherto open-ended postponement of the flotation date. A slim profit in 1997 has given the company cause for optimism, while impending returns on investment from some massive long term contracts will pull profits up into the realms of respectability in the next two years, the company promised. After heavy losses in 95 and further losses in 96, ICL has reported net profits for the year to December 31 of just 10.6m pounds on revenue that fell 15% to 2.48bn pounds; a fall resulting from a shift in business focus. ICL (or ‘New’ ICL as the marketing masterminds would have us call it) is now a systems integration and IT services company, without a single factory to its name. But back in 1990, when it still had substantial hardware manufacturing facilities, it was purchased by Fujitsu Ltd; and at the time, Fujitsu promised us a float within five years; and here we are in 1998, still waiting. But according to Todd, The date for the flotation has not moved one inch since I have been chief executive. Year 2000 it is then. ICL has certainly been winning some large and prestigious contracts recently, including big deals with British Gas Plc’s Tranco division and the successful high street retailer Marks & Spencer Plc. But its profit margins are painfully thin when compared to the more successful systems and services houses in the UK and Europe. Operating profit was a little over 1% of revenue in 1997, a figure that Todd says will be elevated to 6% by flotation time. CMG Plc, the Anglo-Dutch consulting group, made over 12% this year, showing what can be done without the mainframe maintenance baggage and poor performing legacy that ICL has to contend with. ICL’s continuing revenue streams grew by only 1.7% last year, although finance director Stefan Riesenfeld calculates this at 7% in constant currency terms. ICL will be desperate to turn a profit in the run up to 2000, and with a minimum of three years of audited accounts required for a London listing, this year’s tiny 10m pound profit will have been the subject of some interesting debate between Riesenfeld and the group’s auditors. Especially with the large long-term contracts on ICL’s books, a notoriously difficult and subjective area of accounting, with scope for shuffling attributable profits between the balance sheet and profit and loss account. Still, the board will need something more concrete than the 0.4% net profit margin achieved in 1997 to lay before investors if the flotation is to become a successful reality.
