Fujitsu beginning to feel the heat:
More than $1 billion has been wiped off the value of Fujitsu after the company’s European chief said it had a moral responsibility to provide compensation for its role in the UK Post Office Horizon scandal. https://t.co/29v9lRVMrU
— Sabah Meddings (@sabahmeddings) January 17, 2024
We learn from the FT this morning ;-
Fujitsu to suspend bidding for UK public contracts after Post Office scandal
Fujitsu has agreed to suspend bidding for UK public contracts pending the conclusion of a public inquiry into the Post Office Horizon scandal.
As I have pointed out recently, the livelihoods of thousands of people rely on the ongoing sponsorship of Fujitsu.
Thousands more rely on Fujitsu jobs for future benefits from Fujitsu’s various pension plans.
The failings of Fujitsu are not systemic but particular to the Horizon project. We should not allow those particular failings to drag down the company and impact all who work there and their many former workers in their pension schemes.
Let’s start with pensions
Despite headlines to the contrary, the deficit in Fujitsu’s pensions (principally the “ICL” plan) is not a “black hole”. It is down to the performance of assets, most notably the bond and LDI portfolios in 2022. The most recent notes to its financial statements make this clear.
IAS statement to Fujitsu’s most recent accounts
The hole can be filled and no doubt there are plans to fill it. But these plans revolve around a strong sponsor. That sponsor is indeed beginning to feel the heat.
It is in nobody’s interest that Fujitsu fails. The company is not a basket case nor the pension scheme.
Merryn Somerset Webb is right to point out that the precipitous fall in the Fujitsu valuation should have been foreseen by those exploring its governance
Where were all those activist/ESG governance focused shareholders when all this was happening? Fund managers.. remember that global stewardship role you insist you have taken on? https://t.co/UNqTszSZHK
— Merryn Somerset Webb (@MerrynSW) January 17, 2024
But the failings of Fujitsu do not appear to be systemic to the operations of the company and while the pension scheme suffered substantial losses to its asset base, there should be no implication of impropriety between trustee and sponsor. The problems of Fujitsu’s pensions are broadly the problems of the LDI crash.
The problems of Fujitsu as a sponsor are primarily to do with its governance and not its operation. Both problems can be fixed, though both problems were preventable.
Right now both the sponsor and its pension scheme is in need of capital support.
The Pensions Regulator has been promoting alternative arrangements for funding in such cases.
Capital backed journey plans can substitute for the deficit repair contributions which may become onerous if Fujitsu has to stump up mega millions for the post masters, can’t compete for new contracts and find BAU impaired by a loss in internal morale.
This looks a suitable case for a third party sponsor to bring capital backing to the plan. This could provide comfort to members of the scheme and employees of the company. It should also please the Pensions Regulator which has a duty to both members of the plan and to the PPF.