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September 19, 1990

FIXED PRICE SYSTEMS INTEGRATION CONTRACTS HELP PUSH SD-SCICON TO A UKP9.8M PRE-TAX LOSS

By CBR Staff Writer

The idea that systems integration contracts are a licence to print money that has caused a gadarene diversification into the market area by everyone from IBM and Unisys Corp to Norsk Data A/S and Nixdorf Computer AG is a dangerous illusion, as is pointed up by half-time provisions totalling UKP15m from SD-Scicon Plc, which are to cover losses relating to fixed price systems integration contracts in the UK plus losses on the German business, now sold. Systems integration is a great business for long-term specialists like Electronic Data Systems Corp and Computer Sciences Corp, but the fact that even a relatively experienced company like SD-Scicon can hit big trouble on such contracts suggests that it is no easy earner for virgins, and could well get them into more trouble than they are in already. At SD-Scicon, the troubled fixed price contracts are mostly in the UK public sector, but the UK Public Sector division accounts for 15% of worldwide turnover, so the company cannot just turn its back on it: instead it limiting its exposure by reducing the maximum size of contracts on which it is prepared to bid. Sale of Warrington and Scientific Control Systems GmbH has greatly strengthened the company’s balance sheet, so that net interest payable in the period was UKP520,000, down from UKP1.3m in the first half last year. SD-Scicon did its best to underpin its frail share price by maintaining the dividend, but does not hold out much hope for the immediate future – Second half margins will remain depressed but the outlook for 1991 is satisfactory, says chairman Philip Swinstead.

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