/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/020709.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, July 9, 2002, Vol. 3, No. 134 Headlines * F R A N C E * FRANCE TELECOM: Lebanese State in Talks to End GSM Contract VIVENDI UNIVERSAL: Vodafone Plans GBP 3BB Bid on Cegetel * G E R M A N Y * ADORI AG: BAFin Gives Approval to SIS Obligatory Takeover Offer BAYERISCHE LANDESBANK: Has EUR 100MM Exposure to WorldCom, Inc. BRAIN INTERNATIONAL: Files for Insolvency, Funding Talks Continue HUMMELSHEIM: Files for Insolvency as Banks Cut Credit Line KINGFISHER PLC: Bank Rules Castorama's EUR 3.2BB Bid as Fair KIRCHGRUPPE: Leo Kirch Goes on Offensive Against Springer PIXELNET AG: Court Orders Temporary Administration of Assets * N E T H E R L A N D S * KPN NV: Will Bid EUR 20MM for Major Parts of KPNQwest LAURUS NV: Agreement Concerning Payment of Wage Increases LETSBUYIT.COM NV: Announces Opening of Franchise in Sweden * P O L A N D * NETIA HOLDINGS: Receives Deferral on License Fee Payments * S P A I N * JAZZTEL: S&P Withdraws Credit Ratings at Jazztel's Request * S W E D E N * SONG NETWORKS: Will Connect 81 Locations for Retail Chain Jysk * S W I T Z E R L A N D * 4M TECHNOLOGIES: Acquisition of 100% of Share Capital of ASCII GRETAG IMAGING: Photo Finishing Says Liquidity Under Control SWISSAIR: Ballot Continues as Court Rejects Creditors' Complaints * U N I T E D K I N G D O M * CONSTRUCTION ELEMENTS: Administrators Sell Contracting Business CORUS GROUP: S&P Put BBB Ratings on CreditWatch Negative FISH! PLC: Appointment of Administrative Receivers FISH! PLC: Allan Is Keen to Buy Back Eight Top Outlets of Chain MILLER FISHER: Receivers Offer Insolvent Group's Assets for Sale PACE MICRO: Highlights of Results for Year Ending June 1, 2002 SEA ROUTE: Receivers Offer Freight Forwarding Company for Sale =========== F R A N C E =========== FRANCE TELECOM: Lebanese State in Talks to End GSM Contract ----------------------------------------------------------- According to Lebanese Telecom minister Jean-Louis Kordahi, he is "open to find a solution with France Telecom" on the early termination of the company's GSM contract license in Lebanon," a report obtained from AFX News says. In accordance with a law approved in May, Cellis, France Telecom's Lebanese GSM unit, was told its 10-year turnkey contract signed in 1994 will have to be terminated on August 31. Kordahi added he hopes to come to an agreement for the joint temporary management with France Telecom after that date. Under previous legislation, the government may lease out for 20 year two of the country's GSM networks to foreign control. Sonera Corp, France Telecom's competitor in Lebanon, sold its 14% stake in LibanCell to Lebanese Telecommunications Co SAL, for USD 22.5 million or about EUR 24 million in cash. Cellis, which is 67% owned by France Telecom, considers the Lebanese government's move as an attempt to remove monopoly from foreign operators. However, the state says the contract allows early termination under certain conditions. VIVENDI UNIVERSAL: Vodafone Plans GBP 3BB Bid on Cegetel -------------------------------------------------------- Vivendi Universal has found an interested bidder for their French mobile phone business in Vodafone, BBC news said. Citing the Observer, BBC reported that Vodafone is currently preparing for a GBP3 billion bid for Vivendi's 44% stake in Cegetel. The company already owns a stake in Cegetel but is planning to acquire Cegetel's SFR mobile unit, which serves an estimated 12 million customers in France. Vivendi's possible break-up was highly expected after its chief executive Jean-Marie Messier resigned from his post last week. The company has to produce funds in order to lessen its EUR33 million debt burden, BBC reported. Late last week, the debt-ridden company was forced to work on an immediate financial rescue package to avoid a EUR1.8 billion debt default. Its new chief executive Mr. Jean-Rene Fourtou first responsibility is to secure enough cash with only EUR2.4 billion in cash and some unused credit lines. The debt-ridden company's liquidity position is threatened so it has to secure new credit line within the month in order to honor debts and other liabilities. Vivendi's liquidity crunch worsened when Moody's put its debt ratings on junk status. ============= G E R M A N Y ============= ADORI AG: BAFin Gives Approval to SIS Obligatory Takeover Offer --------------------------------------------------------------- The German Federal Financial Services Supervisory Authority (Bundesanstalt fur Finanzdienstleistungsaufsicht) BAFin approved the Luxembourg-based investment group Satellite Internet Solutions SA's (SIS) takeover offer of minor shareholders of Adori AG. The German financial service regulator rejected a previous takeover offer made by the Luxembourg-based company. This period of acceptance for the reported offer is open until August 5. Adori AG is a German company that formerly provided internet shop services. The Luxembourg-based company is offering EUR 2.54 per share, plus interest of 7.57% for the period from May 10 to July 5. Contact Information: ADORI AG Investor Relations Straubinger road 81 D-93055 Regensburg Telephone: 0941-7088-447 Fax: 0941-7088-499 Email: ir@adori.de BAYERISCHE LANDESBANK: Has EUR 100MM Exposure to WorldCom, Inc. --------------------------------------------------------------- U.S. telecom group WorldCom is reported to have borrowed EUR100 million from German bank Bayerische Landesbank, a report from Suddeutsche Zeitung and the Financial Times said. This matter was discussed during the regional parliament despite the BayernLB's refusal to offer any comments on the speculation, the daily said. The German bank recently hit the headline for its allegedly loaning money to insolvent Kirch group. BRAIN INTERNATIONAL: Files for Insolvency, Funding Talks Continue ----------------------------------------------------------------- The board of BRAIN International AG filed for provisional insolvency proceedings with the Local Court of Freiburg, the IT consultancy group announced to the public in a statement Friday. Included in the application are BRAIN International AG itself and both its subsidiaries BRAIN Automotive Solutions GmbH and BRAIN Industries Solutions GmbH. After carefully reviewing the business and financial situation, insolvency is threatening as a result of the difficult market situation in Germany. The situation was exacerbated by a substantial drop in sales in the second quarter, mainly in Germany. Intensive discussions with potential financial investors and strategic investors continue with the aim of continuing the company as a going concern and of launching further restructuring measures. Business trends, particularly in the USA, continue to be positive. HUMMELSHEIM: Files for Insolvency as Banks Cut Credit Line ---------------------------------------------------------- Hummedlsheim GmbH & Co has filed for insolvency after the company's banks trimmed its credit line, which made it difficult for the company to finance their products for the new season, reports from Frankfurter Allgemeine Zeitung and Financial Times said. The German children's clothing manufacturer, which is a limited partnership in family hands, said it will still continue its operations, the reports said. Currently, Hummelsheim has about 122 employees working in its main site in Germany. A large part of its production has been moved abroad. Last year, the company showed a turnover of approximately EUR21.5 million, the papers said. KINGFISHER PLC: Bank Rules Castorama's EUR 3.2BB Bid as Fair ------------------------------------------------------------ Kingfisher Plc is set to launch its EUR2 billion right issue following NM Rothschild decision in favor of the company's EUR3.2 billion acquisition bid for Castorama, the Independent reported. NM Rothschild gave its findings to both Kingfisher and Castorama to give them enough time to make final representations. The independent bank was given a month to rule on the fairness of Kingfisher's offer of EUR67 per share for the 45% of Castorama, the paper said. The U.K. retail giant's takeover of Castorama is based on Kingfisher's drive to set synergies from the deal, which was not reached under partial ownership. The company will now move with a deeply discounted rights issue to fund the deal, the paper said. The retail company is now expected to push for a demerger of its electrical retailing operation in the U.K. and France. It considers floating the business on France's stock market as one of its options. Meanwhile, the Independent also reported that Castorama was disappointed over Rothschild's decision. It had wished that the bank would recommend a higher price for the offer. But considering the present conditions of the stock market, the company was left to acquiesced with the decision. KIRCHGRUPPE: Leo Kirch Goes on Offensive Against Springer --------------------------------------------------------- Leo Kirch of the fallen KirchGrupper has pressed Axel Springer Verlag AG's chief executive Mathias Dopfner last week to call for an extraordinary shareholders' meeting of the newspaper publisher to be held in August 19, the Handelsblatt reported. Kirch is a 40% major shareholder in Springer. He plans to push for a special audit at the company. He also wants to get support from shareholders regarding a claim of damages against main shareholder Friede Springer and the company's management board, the news said. Leo Kirch rekindled an old feud with Springer during a regular shareholders meeting last week. Kirch's lawyers requested for an investigation into a EUR767 million put-option, which Kirch blames as the major trigger for his media empire's fall, the paper said. Kirch's lawyers claimed that the EUR767 million put-option exercised by Springer's board crippled its own shareholders as the option became useless after Kirch filed for insolvency. They said the board never offered any alternatives aside from the put- option, the paper reported. The lawyers also countered the claims of Springer's supervisory board, which said that the board did not permit shareholders to vote on the motions at the end of the shareholder meeting. In order to pay for a EUR720 million loan from Deutsche Bank, Leo Kirch is presently aiming to sell his stake in Springer and has until August 31 to consummate the sale. PIXELNET AG: Court Orders Temporary Administration of Assets ------------------------------------------------------------ Recent insolvency proceedings ordered the temporary management of the assets of PixelNet AG, Rontgenstrasse, Gebaude 415, 06766 Wolfen, in accordance with Article 21, Section 2, Sub-section 1 of the German InsO. In accordance with Article 21, Section 2, Sub-section 2 of the InsO, it was directed that only decisions approved by the temporary trustee, Dr. Nikolaus Schmidt, Magdeburger Strasse 23, 06112 Halle, are to be considered as valid. The temporary trustee will continue to lead the Company in accordance with Article 22, Section 1, of the InsO. All incoming orders will be carried out in a regular manner, the photo- processing business announced in its statement Thursday. ===================== N E T H E R L A N D S ===================== KPN NV: Will Bid EUR 20MM for Major Parts of KPNQwest ----------------------------------------------------- KPN NV is said to be gearing up for a EUR20 million bid to acquire substantial parts of bankrupt KPNQwest NV, according to the Financial Times reported. Citing a source familiar with the negotiations, the Financial Times said that KPN NV remains the only bidder for the core operations of KPNQwest. This is after some 20 parties including Deutsche Telekom AG withdrew their interest on the company's operations. According to the daily, KPN NV, one of KPNQwest's parent companies, expressed it is mainly eyeing three fiber-optic rings linking Northwest European cities and the carrier's transatlantic cable lines. KPN NV offer for the Dutch operations is reported to be worth EUR1m million. But the company said it is not interested in the Brussels-based Ebone business and central European network. The source, according to the Financial Times, also said that the deal may still be facing imminent difficulties in the midst of disentangling complexities from bankruptcy administrators in many countries. KPN NV is yet to release an announcement next week, the paper said. LAURUS NV: Agreement Concerning Payment of Wage Increases --------------------------------------------------------- At a meeting Wednesday (July 3) between Laurus and the trade unions to discuss payment of the wage increases agreed under the collective labor deal negotiated by VGL (Association of Food Wholesalers), it was agreed that the first 1.75% increase will be paid in period 8. A meeting will be held with the trade unions towards the end of the year to discuss the start-date of the increase as from January 1, 2003 (also 1.75%). Formerly known as De Boer Unigro N.V., Laurus NV is operator of national chain of supermarket & off-license chains. The group has presence in the Netherlands, Spain & Belgium. LETSBUYIT.COM NV: Announces Opening of Franchise in Sweden ---------------------------------------------------------- As of July 5, LetsBuyIt.com NV will re-open its website in Sweden in association with its first franchise partner, L&R More Scandinavia AB in Stockholm, Sweden. More Scandinavia AB has acquired the licence to operate the LetsBuyIt.com business as a franchise in Sweden, whereby More Scandinavia benefits from the use of the LetsBuyIt.com technology and brand name, and LetsBuyIt.com N.V. takes a percentage of net revenue. LetsBuyIt.com N.V. will now have a website presence in four countries; the UK, Germany, France, and Sweden. In the future, LetsBuyIt.com N.V. intends to increase its presence in Europe through further franchise deals, and other similar partnership agreements. Letsbuyit.com is an online consumer retail group based in Amsterdam. The company has operations in Scandinavia, Netherlands, Germany, United Kingdom, France, Austria & Switzerland. =========== P O L A N D =========== NETIA HOLDINGS: Receives Deferral on License Fee Payments --------------------------------------------------------- Netia Holdings S.A. announced on July 5, 2002 that it received a decision from the Polish Minister of Infrastructure, dated June 28, 2002 to postpone the payment of installments for the license fees by certain Netia operating subsidiaries, originally due in November and December 2001, until December 31, 2002. Previously, on November 30, 2001 and January 19, 2002, the Minister of Infrastructure announced his decision to postpone the payment of these installments until January 20, 2002 and June 30, 2002, respectively. The current total amount of the postponed installments is approximately EUR 33 million. In his latest decision of June 28, 2002, the Minister of Infrastructure did not impose any postponement fees which are to be determined later. Netia holdings is Poland's largest alternative fixed-line telecommunications services provider. An industry downturn has led the company to seek bankruptcy protection. Swedish telecom firm Telia owns 48% of Netia. Contact Information: Anna Kuchnio Investor Relations Netia Holdings Telephone: +48-22-330-2061 ========= S P A I N ========= JAZZTEL: S&P Withdraws Credit Ratings at Jazztel's Request ---------------------------------------------------------- Jazztel Plc's credit ratings was withdrawn by Standard & Poor's at the company's request after its bondholders decided on a debt for equity swap last month, reports from AFX News said. Jazztel's CC corporate rating and C senior unsecured debt ratings were placed on CreditWatch with negative implications by S&P last June 19. The ratings came after the company announced its plans to restructure its debts, the report said. In its statement regarding the downgrade, S&P had noted that the debt for equity exchange offer proposed by the company is seen as a risk for bondholders. It viewed the consummation of such offer as tantamount to default if the total value of the securities offered is materially less than the original amount contracted. The ratings agency, however, said that upon the completion of the offer, it would resolve the CreditWatch placement. AFX News reported that if Jazztel's proposed debt for equity swap will be consummated, it would no longer have outstanding corporate bonds. =========== S W E D E N =========== SONG NETWORKS: Will Connect 81 Locations for Retail Chain Jysk -------------------------------------------------------------- Song Networks Holding AB -- www.songnetworks.net -- announced in its most recent statement to the press that Song Networks A/S in Denmark and the Danish listed company Jysk (formerly Jysk Sengetojslager a/s) have signed a deal for 3 years. Adding to 178 locations throughout Denmark and Sweden connected earlier this year, Jysk has ordered 51 locations in Norway and 30 in Finland to be connected by a data communications network provided by Song Networks A/S. The new order covers 36 months. The solution provided for Jysk is an IP/VPN (Internet Protocol Virtual Private Network) running on Song Networks' transmission network using the MPLS (Multi Protocol Label Switching) protocol, thus allowing for optimal usage of network capacity. The solution is prepared for distance working and travelling personnel calling in without jeopardizing network safety. "Jysk needs a data network solution which will support new technology just now being implemented throughout our retail outlets. Our new technology is centrally based, so we demand of our supplier ample bandwidth, excellent service, guaranteed availability and monitoring of lines. We deem that Song Networks are suited to meeting our specific demands in these fields and this, together with a favourable price, is the reason for choosing Song Networks as our supplier," Mrs Pia Munck, IT Manager of Jysk, earlier stated. "Jysk is one of the most successful and widely recognized businesses in all of Scandinavia and we feel honored that Jysk trusts us with its data communication throughout the Nordics," says Lars Netterstrom, MD of Song Networks A/S. Formerly Tele1 Europe, Song Networks is a data and telecommunications operator with activities in Sweden, Finland, Norway and Denmark. Song Networks is currently the only pan Nordic operator investing in local access networks with broadband capacity. The Company has built local access networks in the largest cities in the Nordic region. Founded in 1995, the company has approximately 1,000 employees. The head office is located in Stockholm and there are an additional 34 offices located in the Nordic region. Contact Information: Lars Netterstrom Song Networks AS Managing Director Telephone: +45 3690 3610 Mobile: +45 2999 3610 Email: lns@songnetworks.dk Jenny Moquist Investor Relation Manager Song Networks Holding AB Telephone: +46 8 5631 0219 Mobile: +46 701 810 219 Email: jenny.moquist@songnetworks.net ===================== S W I T Z E R L A N D ===================== 4M TECHNOLOGIES: Acquisition of 100% of Share Capital of ASCII -------------------------------------------------------------- The supplier of manufacturing systems for optical media 4M Technologies Holding announces through its most recent statement to the press the acquisition of the 100% of the share capital of ASCII Ingenieries SA, Monthey, Switzerland. ASCII is active in automation and industrial software applications, as well as in mechanics and micro-technics. 4M Management declares: "We are pleased to welcome this team of professionals in our Group. ASCII has been working for many years as a 4M sub-supplier. This acquisition will enable a significant enhancement of 4M's manufacturing and development capabilities." The details of the transaction are not disclosed. GRETAG IMAGING: Photo Finishing Says Liquidity Under Control ------------------------------------------------------------ The cash position of Gretag Imaging Holding AG is "stretched," but under control, the group announced it its latest statement. According to Swiss finance weekly Stocks, Gretag's CEO Patrick Jung in an inverview said that the company has progressed regarding its liquidity situation in recent months. Jung confirms he expects full-year sales to grow to about 4 to 6% in line with the overall market growth. In the statement, Gretag adds that current orders falls in line with expectations and majority of the demand will be for the group's digital systems. SWISSAIR: Ballot Continues as Court Rejects Creditors' Complaints ----------------------------------------------------------------- Swissair Group AG's administrator announced that the ballot in which creditors will vote on the liquidation settlement will push through, reports obtained from AFX News said. The announcement came after the complaints from three creditors asking the court to suspend the ballot were dismissed by the Zurich district court. The creditors said they have reason to believe that international banks and leasing companies were not properly represented, the paper said. Citing the administrator, AFX News reported that the Zurich court ruled against the creditors appeal based on the fact that the appeal has no grounds to stop the ballot procedure. In addition, the administrator revealed that "the conditions for concluding liquidation settlements involving the surrender of assets have been satisfied in the case of SAirGroup, SAirLines and Flightlease AG." =========================== U N I T E D K I N G D O M =========================== CONSTRUCTION ELEMENTS: Administrators Sell Contracting Business --------------------------------------------------------------- Construction Elements and Contracting Limited (In Administration) The Joint Administrative Receivers, Gerald Smith and John Whitfield, offer for sale the business and assets of the company. - Design, manufacturing and installation of architectural metalwork, fire glazed systems and cladding - Trading under the names Pollards, Fryespan and Clevco, with Blue Chip customers - Annual turnover of circa GBP10 million trading profitably with healthy order book - Workforce of 120 operating from leasehold premises in Enfield Contact Information: Martin Willis RSM Robson Rhodes Center City Tower 7 Hill Street Birmingham B5 4UU Telephone: 0121 697 6000 Fax: 0121 697 6112 CORUS GROUP: S&P Put BBB Ratings on CreditWatch Negative -------------------------------------------------------- Corus Group Plc's BBB longer-term corporate credit and senior unsecured debt ratings has been put on CreditWatch by rating agency Standard & Poor's after the company revealed its plan to acquire Bazilian steel maker, Companhia Siderurgica Nacional, a report from AFX news said. Olivier Beroud, director of S&P corporate ratings Europe said, "the acquisition, which might effectively be termed a merger, would be for shares and would not involve a cash payment. However, CSN is heavily leveraged, with total debt of USD 2.7 billion at March 31, 2002. Corus, on the other hand, is likely to be virtually debt-free once it has disposed of its stainless steel and aluminum businesses later this year." Furthermore, S&P said the planned transaction would help the combined group's cost position but the downside is that the market environment in the Federative Republic of Brazil is volatile, with intense competition, the report said. The merge with CSN will be a "heavy burden on Corus' management time" especially with the various challenges the company is currently facing. The company has to implement various divestments. It also had to rationalize its assets base in the UK and Europe, the report said. S&P further said that Corus' credit quality would rely heavily on the success of its restructuring efforts in Europe if the merger with the Brazilian company will succeed, the paper said. According to AFX, S&P also announced it also affirmed the A-3 short terms rating on Corus. In addition, the ratings agency said the BBB senior unsecured debt ratings of the company's subsidiaries Corus UK Ltd and Corus Finance Plc were also put on CreditWatch with negative outlook. The ratings agency also said it is scheduled to convene with Corus Group's management to settle the CreditWatch position of the company as soon as possible, the daily said. FISH! PLC: Appointment of Administrative Receivers -------------------------------------------------- Further to the announcement of July 2, 2002, a court order has been granted in favor of RSM Robson Rhodes to act as administrative receivers to the Company. Robson Rhodes is now responsible for the assets and running of the Company, inquiries should be directed towards them. After the Board of the restaurant chain operator underwent a comprehensive review of the Group's operations in May, the Board of Fish failed to secure facilities from the Group's bankers for the implementation of a restructuring plan. As a result, on July 2, the Boards of Fish and Marchthistle Limited, the corporate entity comprising the Group's restaurant activities, believe that they have no option but to seek the appointment of an administrator for Fish plc and Marchthistle Limited, respectively. The Board of Fish believes that this course of action provides the best option for delivering a stable environment in which all the operations of the Group will continue to trade. Accordingly, Fish has requested suspension of trading in its shares pending a further announcement. Cutty Catering Specialists Limited which trades under the names Cutty, Bentley's and West Coast Shellfish is trading profitably and will not be subject to the administration order and therefore will continue to trade as normal. FISH! PLC: Allan Is Keen to Buy Back Eight Top Outlets of Chain --------------------------------------------------------------- Tony Allan, founder of the Fish restaurant chain, which went into administration last week, is keen to buyout eight top-rated outlets from the 20-strong chain, including the main restaurant in Southwark, London, the Guardian reports. Allan stepped back from managing the business 11 months ago but remained chairman. Though Allan has not yet contacted the administrators, the paper adds, he looks at the Cohen family for support, the Telegraph reports. The Cohen family is known as the former owners of the Birmingham- based household goods distributors Betterware with about GBP120 million in fortune. City investors have witnessed Fish's shares plummet from a high of 322p to their 13.5p suspension price. When the group fell into a crisis, Allen, who said he has 30%, lost GBP15 million worth, compared to the GBP9 million in losses with creditor banks. MILLER FISHER: Receivers Offer Insolvent Group's Assets for Sale ---------------------------------------------------------------- Miller Fisher Group Plc and Certain Subsidiaries (All in Administrative Receivership) The Joint Administrative Receivers, Nick Dargan and Jamie Smith, offer for sale the sales and/or the business and assets of Miller Fisher Group and certain of its subsidiaries, a leading provider of loss adjusting and outsourcing services to the insurance and financial service industries. The assets include: - U.K. Loss adjusting and investigation services across the UK from 13 dedicated service centers and a head office based in London - including U.K. adjusting and liability, investigation and forensic and motor inspection services. Annual turnover of some GBP20-25 and 290 staff. - Business solutions division - based at a state of the art call center at Waltham Cross, providing policy sales and administrative services and a 24 hour claims management service. Turnover of some GBP6 million, with significant growth potential and 125 staff. - Shares in Farrell ATA Holdings Limited, the 100% holding company for the leading loss adjuster and third party administration company in Ireland. Annual turnover of some GBP7-8 million with an operating profit of some GBP1.5 million and 125 staff. Please note that this business continues to trade and is not in any form of insolvency. - Certain shares and business and assets on Miller International Loss Adjusters, specializing in major capital projects with offices in Dubai, Hong Kong, Singapore, Caracus and London. Annual turnover of some GBP6 million with some 100 experienced staff worldwide. - Shares in a marine inland motor transit service company, based in Austria. Annual turnover of some GBP100k per annum. High quality operational management and central operations function servicing the group. Contact Information: Phil Bowers (for UK businesses) Deloitte & Touche Telephone: 020 7303 2065 Fax: 020 7303 2180 Email: pbowers@deloitte.co.uk For further information please contact: Chris Gray (for Ireland and Overseas) Deloitte & Touche Telephone: 07768 303 736 Fax: 020 303 2180 Email: cgray@deloitte.co.uk PACE MICRO: Highlights of Results for Year Ending June 1, 2002 -------------------------------------------------------------- HIGHLIGHTS Results reflect turbulence in the broadcasting market and difficult trading environment faced by global digital TV operators; - Loss on ordinary activities after taxation, dividends -GBP38.5 million - Unit sales declined by 19% to 2.2 million units; - Turnover of GBP351.8 million (2001:GBP523.6 million); - Profit before tax, amortization of goodwill and exceptional items of GBP13.1 million (2001:GBP44.3 million); - Diluted earnings per share before amortization of goodwill and exceptional items of 2.9p (2001 as restated: 13.5p); - Diluted loss per share after amortization of goodwill and exceptional items of 16.1p (2001: earnings per share of 11.1p) - Maintained final dividend of 0.70p making total dividend for year of 1.10p (2001:1.05p); - Restructuring process underway, resulting in further cost and overhead reductions; - Entry into U.S. market place secured with Time Warner Cable shipments; - Successful launch of free-to-view products into UK and growth in Continental European retail markets. Commenting on the results, Malcolm Miller, Chief Executive stated: "Turbulent conditions in the broadcasting market have caused delay and disappointment. We have taken appropriate steps to ensure that we manage an efficient and tightly run business whilst maintaining key relationships and continuing to lead in digital television technology. For the longer term Pace is well positioned for growth as and when the market allows." Preliminary Announcement Over the previous three years Pace succeeded in growing revenues and profits. The financial period under review, however, reflects the turbulence in the broadcasting industry and the difficult trading environment faced by digital TV operators globally. Whilst the year started well, the second half reflected the decline in the global demand for home gateways (set-top boxes) and lower selling prices. The Group has addressed the challenging commercial market place and, as announced on 15 April 2002, commenced the implementation of a restructuring process to reduce the overall cost base of the business while maintaining vital technological investment. Results and Dividend Profit before tax, amortisation of goodwill and exceptional items fell to GBP13.1 million (2001: GBP44.3 million) on turnover down 33% to GBP352 million. There was a loss before tax and after amortization of goodwill and exceptional items of GBP29.5 million (2001: profit GBP38.1 million). Diluted earnings per share were 2.9p (2001: as restated: 13.5p) before amortization of goodwill and exceptional items and were a loss per share of 16.1p (2001: as restated: earnings per share of 11.1p) after amortization of goodwill and exceptional items. The exceptional items are all described below. The Board proposes a final dividend of 0.70p (2001: 0.70p) making a total dividend for the year of 1.10p (2001: 1.05p). Exceptional Items Following the announced restructuring and subsequent employee consultation, the Group is in the process of reducing its workforce by approximately 20%. The group expects to reduce overheads for the coming financial year by a similar percentage. Provision of GBP4.9 million to cover the cost of asset write-offs and redundancy payments have been set aside. The Board has also reviewed the carrying value of the goodwill in VegaStream and concluded that it would be prudent to write-off the balance of GBP17.5 million. VegaStream will continue to operate at a lower level of activity, while we track the development of the market for digital IP voice. As a result of the fall in the Company's share price it has become unlikely that the Pace Micro Technology Employee Benefits Trust will be able to pay back the loan made to it by the Company to buy shares in the market for the fulfilment of employee options. A provision of GBP17.5 million has been set up to recognize this issue. Trading and Financial Review Unit sales of Pace digital gateways fell 19% to 2.2 million (2001: 2.7 million). The fall in unit volume was largely concentrated in the U.K., as NTL Group Limited and Telewest substantially reduced their roll out of digital gateways in the second half of the financial year. Following a short suspension in deliveries to NTL, shipments re- commenced in May 2002 to fulfill a 300,000 unit order by May 2003. Pace continues to be the only company shipping in volume to the U.K. cable operators. BSkyB continued to require product, but at a lower level than in previous years as their analogue to digital conversion was completed. Recent negotiations have resulted in a substantial commitment to purchase Digiboxes over the next 12 months and significant revisions to the contractual terms under which Pace supplies the Sky+ personal video recorder to the end of 2004. Pace's Digital Television Adapter (DTVA) for free-to-view digital terrestrial television was launched with much interest and 53,000 units were sold following its retail launch at the end of March. In the same period ITV Digital and Omne Communications Ltd went into administration at a combined cost to the Group of GBP1.7m. PACE is convinced that investment in the U.S., the world's largest market for our products, will provide the long-term benefits to the group. Thus, PACE reports that the Group shipped over 250,000 gateways to Time Warner Cable, delivered mostly in the last quarter of the financial year. As it will take time for these products to be installed with cable subscribers, the Group expects a much lower level of US shipments in the first half of the forthcoming year. As Pace works to establish itself in the U.S. market, start-up losses of GBP11 million were incurred. Elsewhere, shipments were below expectations as operators generally lacked the funding to commence significant roll out of digital gateways. IPTV (digital TV over Broadband) shipments made slow progress around the world but did make a positive contribution to income. VegaStream has continued a low level of shipments of its Voice over Internet Protocol gateways. This business is still at the start-up stage, although there are signs that its market is beginning to grow. Xcom, acquired by the Group in February 2001, exceeded initial expectations, shipping a wider range of products into more territories. PACE's new low-cost free-to-view products have added to the group's U.K. range. Overall the Xcom team, now responsible for Pace's business in Continental Europe and Asia, shipped products to over 24 countries, most importantly into France, Italy, North Africa, Scandinavia and the Benelux countries. The Group's gross margin, before exceptional items, increased to 22.7% (2001: 20.1%). The increase in margin percentage rose from integration services, development fees, licensing revenues and an increase in sales of higher margin DSL and VoIP products, offset by lower margins in the USA. The Group continued its policy of providing for all currently known, and potential, claims relating to the alleged use of the intellectual property of others. PACE says that it was able to release part of the overall provision, following the successful conclusion to certain negotiations. In the last year the level of releases exceeded new provisions by GBP0.3 million. There are still a small number of unresolved matters outstanding; without any admission of liability the Group has provided against these claims and the estimated cost of litigation. Having taken legal advice, the Board considers that there are defences available and claims against third parties that should mitigate the amounts being sought. Overheads, net of other income and before amortization of goodwill, rose to GBP66.1 million (2001: GBP61.0 million), an increase totally attributable to the USA. Expenditure on development increased to GBP36.9 million (2001: GBP33.7 million). Selling, general and other administrative expenses were GBP29.2 million (2001: GBP27.3 million). Actions are already underway to reduce these costs in line with the Board's expectations for business going forward. Net assets, excluding goodwill, decreased to GBP65.7m (2001 as restated: GBP91.0 million). Within net current assets of GBP65.0 million (2001 as restated: GBP76.6 million), net borrowings were GBP18.7m (2001: net cash GBP27.5 million). The change in the cash balance came from increased finished goods stocks and from paying the first instalment of the Xcom earn-out which was GBP8.1 million. Currently Pace is net cash positive and has GBP40 million in existing committed credit lines. The debt collection period was 12 weeks (prior year-end: 8 weeks). The debtors included an amount of GBP4 million that was uninsured. Stocks at the year-end amounted to GBP46.7 million (2001: GBP39.7 million), comprising GBP15.8 million of raw materials and WIP and GBP30.9 million of finished goods. Of the finished goods GBP23.7 million relating to ntl is valued at cost, under the Board's assumption that NTL will continue to take product according to its existing agreement. As previously announced, shipments to NTL have recommenced and since the end of this year this NTL related stock has reduced to GBP19 million. The stock turnover rate reduced to 8 times at year-end (prior year-end: 13 times). Board Changes Mike McTighe was appointed to the Board as a non-executive director on June 3, 2001. Neil Gaydon, president of Pace Americas, has been with the Group since 1995 and joined the Board on June 12, 2002. Outlook Under pressure from financial markets and with less access to capital, operators are looking for ways to lower costs and increase income. One of Pace's strengths is its ability to develop both new low cost solutions and also more complex gateways that increase ARPU (average revenue per unit) and reduce churn (customer returns). The new DTVA and Sky+ are examples. Pace and BSkyB are expecting an increased rate of Sky+ shipments. As has been previously announced, the commercial agreement between the parties is that for the majority of next year the Group will invoice an amount on shipment that is below product cost and will receive a share of future subscriptions. Whilst expected to be profitable over the longer term, this will have a negative impact of GBP8 million on pre-tax profits for the next financial year. In subsequent years Pace and BSkyB have agreed usual trading terms under which Pace will recognise full revenue at the time of shipment. In the year just started we expect the Group's U.K. revenues to fall further, reflecting the difficult trading conditions. In the USA, Europe and Asia business will grow slowly. Turnover in the 2002/3 financial year is expected to be at a lower level in the first half than the second half of the year just ended, but is expected to improve in the second half to levels higher than the equivalent period as regions outside the U.K. develop. The impact of the continued investment in the USA and the investment in the Sky+ program, even though expected to be profitable in the medium-term, is expected to cause the Group to be loss making in the first half of next year. The results for the year as a whole will depend as always on the appetite of the operators for product and our success in launching new products. For the longer term, the Board believes that due to its strong core technologies and its commercial position as one of the top five global players, Pace is well positioned to exploit all opportunities in the digital TV market. To view the full report of pace, visit the group's website at: http://www.pace.co.uk SEA ROUTE: Receivers Offer Freight Forwarding Company for Sale -------------------------------------------------------------- Sea Route Ferry Limited (In Administrative Receivership) The Joint Administrative Receivers offer for sale the business and assets of Sea Route Ferry Limited. - International freight forwarding, warehousing and haulage - Outsourced logistics - Metal crate repair and refurbishment - French freight forwarding subsidiary (shares available) - Turnover this year approximately GBP15 million - Customer Base includes blue chip clients Contact Information: Antony Fanshawe Fanshaw Lofts Tel: 023 8023 3522 Email: arf@fanshawe-lofts.co.uk *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Kimberly MacAdam, Larri-Nil Veloso, Maria Lourdes Reyes and Jean Claire Dy, Editors. Copyright 2002. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *