ICL Plc has pushed back the timeframe for its stock market flotation, saying that it will most likely be towards the back end of the two to five year target it set when Fujitsu Ltd took its 80% stake. ICL, suffering under the recession like everyone else, yesterday reported a 30% drop in trading profits […]
ICL Plc has pushed back the timeframe for its stock market flotation, saying that it will most likely be towards the back end of the two to five year target it set when Fujitsu Ltd took its 80% stake. ICL, suffering under the recession like everyone else, yesterday reported a 30% drop in trading profits to #78m in 1991, after a 5 percentage points reduction in gross margins – attributed to higher sales of low-margin personal computers and Unix systems – and a #10m rationalisation charge above that of 1990. Nokia Data, acquired last year and included in the 1991 figures from October 1, made a small contribution to profits. Chairman Peter Bonfield maintained that to be profitable at all is an achievement in the current climate, and pointed out that most of ICL’s competitors are currently trading at a loss. Net earnings were down 40% at #39m. Revenues grew 16% to #1,870m, though 14% of this was related to acquisitions, most notably Nokia Data. The company claims to have generated positive cash flow of some #129m before acquisition costs, tax and dividends. Research and development spend was up at #223m, from #215m and net borrowings were steep at #51m, up from #2m. Finance director Keith Todd was proud to announce that ICL has gained one point of market share in the UK, in a declining overall market stealing back a little of the market share that IBM UK has won from ICL over the past 20 years. The results, he said, do not reflect any benefit from the #250m Corporate Headquarters Office Technology System UK Ministry of Defence contract, nor from the #200m British Gas Plc coup, both of which will be deleivered over the next six years. Not surprisingly, the Nokia Data acquisition was named as a highlight of the year. The merger was effected at the end of September; Nokia Oy now has a seat on the ICL board and will convert up to #90m of its #180m ICL preference shares to 5% of the ordinary shares when the company is relisted. The Nokia acquisition, Bonfield said, has increased threefold ICL’s presence on the continent, particularly in Germany where ICL is now turning over around #100m, compared with #10m to #15m before the merger. And it was thanks to the Nokia acquisition that ICL won #35m of business from the Deutsche Bundespost Telekom (CI No 1,838). Meanwhile, ICL would like to reiterate that its relationship with majority owner Fujitsu remains strictly at arm’s length, and that the recent transactions between the two companies, such as ICL’s acquisition of Fujitsu Systems Business-Europe (CI No 1,865), were purely on a commercial basis. ICL has also swapped its retail systems business in Australia for Fujitsu’s in North America. Bonfield added that the technology exchange between Fujitsu and ICL nowadays is more of a two-way process than it had been, and he cited Fujitsu’s take-up of the DRS 6000 for international distribution as evidence that Fujitsu recognises ICL’s strengths. ICL’s continental revenues rose by 71%, organic growth being particularly strong in Spain at 200%, Portugal at 47% and Italy at 37%. The company would like to be much stronger in Germany and France – the day before the figures came out, ICL France SA, where a handful of the equity is not owned by ICL, reported operating profit up 12.8% at about #2.3m and pre-tax up 5.6% at #3m, on sales up 6.7% at #75m. Software and services revenues grew 18%, to account for 50% of ICL’s total turnover ICL is pleased to have maintained this proportion, given that the Nokia Data acquisition bumped up hardware revenues. ICL is placing increasing emphasis on the software and services side of the business, and hinted more than once that appropriate acquisitions are likely. Todd said ICL didn’t have a specific company in mind at the moment, but noted that it would be looking for something with added value in ICL’s core markets retail and financial services. The investments in Sorbus and Computer Field Maintenance, coupled with the formation of Guardian – ICL’s disaster recovery business merged with that of Sherwood Computer Services Plc – boosted ICL’s position in fac
ilities management and total managed services in Europe. OfficePower sales grew 65%, with over 50,000 licences sold in the year, bringing the total installed base to 300,000. On the hardware side of the business, personal computer revenues rose 92% – though only 15% of this growth was organic; Unix system revenues grew 28% organically. ICL hopes to ship 200,000 personal computers this year. Retail hardware shipments were down, though #100m of business was won in the US, Australia and Europe for the new in-store ISS 400 systems, due to ship next year.
Expects to remain profitable
While profit margins have suffered, ICL has worked hard to keep its cost base down, reducing this as a percentage of revenue to 25%. ICL’s rationalisation plan includes an annual 3% headcount reduction, which in 1991 involved between 600 and 700 redundancies – most of these took advantage of the company’s early retirement programme. The current headcount, after acquisitions, stands at 26,000. Bonfield said the first quarter of 1992 is progressing to plan and, though hesitant to make any real forecast, he said ICL expected to remain profitable this year. The planned flotation is still very much in the forefront of ICL’s thinking, but Bonfield concedes that ICL is now further away from a sustainable share price of #2.25 than was thought.