ICL is persisting with plans to list on the UK Stock Exchange inl results will not deflect it from UK listing. 2000, despite having had its flagship government project, Pathway, slashed in half and recording disappointing results for the fiscal year ended 31 March.
Pathway, also called Horizon, began three years ago as a private finance initiative (PFI) involving ICL, the Department of Trade and Industry and the Department of Social Security (DSS) designed to introduce social security benefit payment cards into 19,000 post offices worldwide.
The implementation was due to be completed last year, but delays to the project, which are understood to have been caused by a combination of technical problems and relationship difficulties between the three organisations, had seen the launch date put back until 2000.
As revealed by PC Dealer (12 May), the Pathway project had been subject to a Treasury review in recent months, intensifying speculation about its future.
In the wake of the review, the DSS has withdrawn from the PFI project, leaving ICL solely responsible for the task of updating the Post Office's network and banking infrastructure, including the introduction of smart-card technology.
Industry analyst Richard Holway, who had previously told PC Dealer that Pathway was 'a litmus test' for ICL's stock market ambitions, said the revised contract was a 'bitter disappointment' for the vendor.
George O'Connor, technology analyst at Granville Equity Research, added: 'There's very little of the glamorous side of the Pathway project left.
It was a great flagship product in terms of the introduction of new technology, but now it is just centred around product fulfillment.'
Ironically, the announcement that Pathway was to be scaled back came less than 24 hours before ICL released its financial results for the fiscal year ended 31 March. The results showed the vendor's annual operating profit rose 19 per cent to £81.9 million and had revenue of £2.7 billion.
ICL's operating margin on ongoing operations improved to three per cent.
Analysts said the vendor will need to improve those margins to at least 4.5 per cent next year for the IPO to succeed.
Holway also pointed out that ICL UK's software and computer services (SCS) revenue of £750 million for fiscal year 1998 was up approximately 21 per cent on the previous year, while its competitors in the top four, EDS, IBM Global Services and Cap Gemini, grew at 27, 38 and 54 per cent respectively.
He said: 'ICL's results to date, in what has been the most buoyant period ever for the SCS sector, have been decidedly disappointing. Below-average growth when the market is growing by 25 per cent and demand way outstrips supply is one thing, but what happens when growth slips to 10 per cent?'
O'Connor said ICL also needed to improve its marketing strategies ahead of its planned listing. 'ICL has a history of weak marketing and branding but it has strengths in retail and financial services and that's a huge opportunity. But it needs to concentrate on what the company can offer because it must have a solid story for growth going into the IPO.'
Holway added: 'ICL still has a steep hill to climb before an IPO can be viable.'
In a statement, Keith Todd, chief executive of ICL, said: 'Our transformation to a leading global IT services firm is accelerating. I am confident that in the remainder of this financial year we will make further progress in increasing our growth rate and improving our profitability, putting us in a good position for flotation next year.'
Chief exec Jens Montanana claims Logicalis performed well despite 'currency headwinds'
All the photos from last night's event, which saw over 600 people congregate at the Hilton London Bankside
Five year deal with Essex NHS Trust will cover 400 sites, including hospitals, clinics and GP practices
18 individuals and three companies walked away as winners at CRN's inaugural Women in Channel Awards last night