ICL reports a loss despite Irish profit

ICL Ireland contributed pre tax profits of £3.5 million sterling to British parent company ICL plc in 1995.

However, the parent group reported a pre tax loss of £188.3 million sterling after an exceptional charge of £152 million for a reorganisation programme. At the operating level, ICL had a loss of £31.2 million compared with a profit of £58.3 million for 1994. The group reported pre tax profits of £28.4 million for 1994 after exceptional charges of £40.1 million.

Announcing a five point programme to "accelerate ICL's profit recovery", group chief executive Mr Keith Todd said operating profits fell in 1995 because of "a significant reduction" in its gross margin in competitive markets. Profits fell despite a 17 per cent rise in group sales to £3.1 billion.

Margin pressure accounted for lower profits at ICL Ireland. Sales at the computer services company, which employs 640 people in Ireland, increased by 18 per cent to £64.5 million sterling. But profits fell from £4.6 million in 1994 to £3.5 million.

Margins were squeezed in the traditional hardware business and increases in market share in other areas were won at the expense of some price erosion, according to managing director Mr David MacDonald. He declined to provide a breakdown of the performance between markets in the Republic and Northern Ireland but said both showed satisfactory growth.

Under the planned reorganisation of the group, ICL's volume products business personal computers and small shared information storage systems - will be demerged and run by ICL majority shareholder Fujitsu.

Volume products account for less than 10 per cent of revenue at ICL Ireland, according to Mr MacDonald, with software and professional services producing more than 70 per cent.

There are no plans for redundancies at the Irish operations as a result of the reorganisation, he said. "We continue to trade profitably and employment levels will increase. Existing staff will be offered retraining and reskilling opportunities."

Other group reorganisation plans include a global partnership with Fujitsu of Japan to exploit its software product in the United States and Asia; a new interactive services business and spinning off the contract electronics manufacturing business, D2D. ICL is currently looking for partners for D2D.

The group plans to focus on existing specialist systems integration in the retail and financial services markets, complex systems integration for major industrial, commercial and government enterprises and multi vendor services and outsourcing.

ICL plans to strengthen its capital base with a cash injection of £200 million through a rights issue. Mr Todd said the new programme would sharpen the company's focus on systems and services, and accelerate its profit recovery.

"We already have sound revenue growth, but my overriding priority now is to increase profit and maximise shareholder value," he said in the results statement.