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September 16, 1990

SYSTEMS RELIABILITY AIMS TO BUILD UP IBM MAINFRAME BUSINESS WITH DIVESTMENT CASH

By CBR Staff Writer

In the words of chairman Robert Evans, London-based Systems Reliability Holdings Plc has performed well in the first half of 1990, turning in pre-tax profits of UKP5m, up 66% on the same period in 1989, on turnover up 114% at UKP95m, in line with the group’s expectations. Over the last couple of months, Evans reports, the group has begun to see the benefit of selling its mainframe services direct to the end user in the UK – Systems Reliability intends shortly to introduce this direct sales approach in Europe. The group is expecting net assets to increase by around UKP9m, and debt to be reduced by UKP15m on completion of the sale of Corporate Computers, a big chunk of Systems Reliability’s personal computer division, which is going through at the moment (CI No 1,511). Info Products Holding BV, an indirect subsidiary of VRG Groep NV, is the buyer – the agreement entails a total cash payment of up to UKP13m including the repayment of inter-company debt to Systems Reliability of around UKP3m, payable in cash immediately following completion of the sale – the completion date is expected to be on or before October 1. The figure also includes up to UKP1m in cash, which will be payable dependent on the audited pre-tax profit achieved by Corporate Computers for the year ended December 31, 1990. The disposal is reported to be in line with Systems Reliability’s strategy to continue to move into higher margin activities (CI No 1,405). In 1989, Corporate Computers accounted for around 17% of Systems Reliability’s profits but financing its stock used up a substantial portion of the total group borrowings.

Release funds

In divesting Corporate Computers, the group will release these funds and enable increased investment in its other activities. Gerry Redman will resign as a main board director of Systems Reliability on completion of the disposal and will continue to manage Corporate Computers within the VRG group. In the year to December 31 1989, Corporate Computers made an audited pre-tax profit of UKP1.36m on a turnover of UKP35.9m and had net assets of UKP759,000. According to Robert Evans, the completion of the deal with Info Products should be reflected in Systems Reliability’s second half results where profits are expected to be higher again. In view of this, and of the current results, Systems Reliability is proposing to increase the interim dividend by a third to 1.0 pence net per ordinary share – this is to be paid to shareholders on November 1. Following the group’s acquisition of Optim Group Plc in July this year (CI No 1,458), Systems Reliability has merged the Optim business into its Communications division, renaming the new set-up the Business Software division which now encompasses Systems’ proprietary communications software and its integrated software packages for vertical markets. The order book for this new division is reported to be good, especially in the communications sector where it has almost doubled since 1988. The group’s current strategy is to expand and exploit the specialist skills within the Mainframe Services, Maintenance, and Business Software divisions – this will be financed by the sale of Corporate Computers. As a final comment, Evans said he expected Systems Reliability to achieve its financial targets this year and in future years.

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