Flotation is not an end in itself for ICL Plc, according to Brian Reece, managing director of outsourcing at the Putney, London-based company. But there certainly is a teleological bent to the cost-cutting and restructuring, which has been taking place over the last three years at the company, in which Fujitsu Ltd holds an 84% stake. Chairman Peter Bonfield acknowledged that following the restructuring, which is now largely at an end, the company has to turn in better results and predicts that in a year’s time he will be able to name a date for flotation. In 1994, pre-tax profits were up 21% to ú28.4m from turnover of ú2,654.5m, just 1.2% up on last year. Unlike the previous year, however, the company managed to stay in the black even after paying the dividends for its preferential shares, which cost it ú14.8m. Net profits for the year were up 194% to ú15.9m. Nokia Oy has already indicated its wish to cash in its preference shares early (CI No 2,607), but rather than find the cash, a new seven -year convertible preference issue will be sold to Fujitsu Finance Ltd this summer, redeemable in 2002. Keith Todd, director of finance and business strategy added that half the shares will be converted to ordinary share capital when the company is re-floated in London, with the conversion price being the same as the listing price. Gearing is down significantly, and is now just 2%, or ú6.4m.
Three business streams
The group now has three distinct ‘business streams’, Industry Systems, Services, and Technology. Industry Systems is concerned with integrated systems, particularly in the retail sector, where Bonfield claims it is number three in the world. The division also won 10 new financial services contracts in Europe, was part of the systems integration team on the Channel Tunnel, and has caught a lot of London commuters out with the London Underground penalty fares system. The new multimedia strategy, developed closely with Fujitsu, is central to the future of Industry Systems. On top of all this, it also supplied the terminals and staff training for the UK National Lottery. The Services stream saw its customer service arms consolidated into one business, ICL Sorbus, to provide a one-stop shop in the multi-vendor services market. There’s huge potential for growth in this market, as well as facilities management, according to Peter Bonfield. The services business is already the most lucrative of the three streams. The Technology stream comprises four units: corporate systems, volume products, D2D and multi-vendor distribution, including Technology Plc. The joint branding initiative with Fujitsu, pioneered in the client-server market, will be extended with the launch of a new brand name, Fujitsu ICL, for the high volume multimedia personal computer market, spearheaded by the launch of the PCTV yesterday. ICL will remain as the brand name in other areas at present. The sales strategy for volume products will see it move towards 75% of its sales through indirect channels. Overall, ICL is seeking to eliminate its losses in France and Germany, by focussing its operations, being big in Germany never did anything for anybody, said Keith Todd. Rationalisation costs were down ú8m to ú40m this time, and are expected to be half that next year. ICL saw its tax rate fall to 44% in 1994 from 77% in 1993, and it will continue to fall as operations are scaled back in loss-making areas. Research and development expenditure was cut to 6.6% of sales from 8%, as more is now handled by Fujitsu.
