John Klein, chairman and chief executive of MDIS Group Plc, formerly McDonnell Information Systems Plc, has decided it is time to stick his head above the parapet for the first time in three years, and talk about the future of a restructured company which for a long time looked like it didn’t have one. Following a shareholders’ meeting on August 12, Klein has the backing of shareholder confidence, borne out to the tune of 27m pounds of new funding, or 24.3m pounds net in the company coffers (CI No 3,227).
By Joanne Wallen
He says he was determined to remain quiet until he had delivered on promises to turn the company around, and now he obviously feels he has achieved something worth talking about. The turnaround involved completely restructuring the board, changing the balance of non-executive to executive directors, so that the balance is now actually tipped towards external leadership with three non-execs to two executive directors, those being Klein and group finance director Richard Barfield. Klein has also put an entirely new management team in place – none of the 17 executives with the company at the time of its flotation in 1994 (CI No 2,364) is still there – and all of the new management bought shares in the August issue, amounting to some 600,000 pounds.
Global mindset
Finally, Klein restructured, or rather broke up, the group’s 12 profit and loss centers, which he accused of having parochial business values, and spread their skill sets throughout the business. He then looked at the company’s strategy, which he says told him it needed to concentrate on its core competencies and get rid of its non-core, non-profitable businesses. Hence it sold its International Banking Systems business and its Libraries business (CI No 2,902) amongst others. It also sold its Australian and New Zealand subsidiaries (CI No 2,938) as well as its Spanish business, which was losing 1m pounds a year, because, according to Klein, these were a long way from being profitable, and the company could not afford to take the losses any more. Basically, he attributes these failures to the ‘global mindset’ of the previous management, which, he says, encouraged them to stick a flag in a new territory, and then try to build a business around it. Under Klein’s new model, the company will venture into new geographic locations only when customers demand support in that region, and then the company will decide how best to provide that support while remaining profitable. Klein says he has also changed the company’s mindset from proprietary, in the sense that they did everything in house, to a partnering strategy. However, by partners, Klein says he is not talking simply about a long list of names.
Hoodwink the investors
He means six to ten major players, all of whom need us as much as we need them. That current partners include Sun Microsystems Inc in the Unix arena, Data General Corp for Windows NT, Cognos Inc and Netscape Communications Corp on internet access, speaks volumes, Klein says, for those companies’ confidence in MDIS – the company officially changed its name last month to break with the past, but not so much as to try to hoodwink the investors, Klein says. It simply finally dropped the McDonnell Douglas connection. All of these partners came on board during the company’s ‘quiet’, some may say bad, period in the past couple of years, and will, Klein insists, have carried out careful due diligence. MDIS’ criteria for choosing partners are that they need to be a well known brand in their market sector, that they must be growing a compound 40% or more annually in that sector, that their strategy needs to complement that of MDIS, for example Data General needed high value-added distribution for its NT boxes, which MDIS says it provides, and most importantly for Klein, that the partnership works at the most senior level – Klein talks directly to Data General chief Ron Skates, Cognos chief Ron Zambonini, and so on. Do I trust them?, Klein says, is the final and ultimate question in the partnering. The man who cut his teeth on Wall Street, where he says deals were done and sealed on a handshake, needs to feel his partners will deliver on their promises. Equally, after more than 30 years in the business, he says he has seen it all go around and come around. Fortunately for MDIS, so have men like Skates, he says, so while the press has been showing a lack of confidence in the company, Klein says his partners are more than happy it will recover and get back on track. So what are the revamped company’s core competencies? In the UK, MDIS provides a complete systems integration business, where it will sell not only its own products, such as its Human Resource System written in its own PRO-IV fourth generation language, but also those of other vendors. It also provides full facilities management services and is prominent in the health sector, local and central government, the police, as well as retail and finance sectors. Internationally, it is about to start pushing sales of its PRO-IV application development toolset, the HRS human resources suite – which so far has been marketed only in the UK, and its ERP Enterprise Resource Planning software Chess, originally bought from Xerox Corp three years ago (CI No 2,507), which it is now developing through its joint venture with Futitsu Ltd, Los Angeles-based Glovia International LLC, into which Fujitsu put $29m for a 36% stake (CI No 3,188).
Opening doors
Naturally enough, Fujitsu is opening significant doors into Asia. It is also working on Java and internet capabilities in partnership with Sun and Netscape, particularly targeted at the financial and pharmaceutical markets, to extend applications out to the internet and intranet. Klein truly believes the past is now behind MDIS, and the future is looking very healthy. The fact that the company’s shares were suspended on July 1 (CI No 3,195) due to late reporting of year end results was a ‘technicality’ says Klein, based on his own request to hold the accounts so as to include the Fujitsu financing and the share issue in the year end. The UK is now profitable, and the Fujitsu venture should quickly be cash generative, he says, so the only reason he can see for going back to the markets in the future is to grow the business or to make more acquisitions. We can expect to hear a lot more from the company from now on, Klein concludes.
