/raid1/www/Hosts/bankrupt/TCREUR_Public/031124.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
Monday, November 24, 2003, Vol. 4, No. 232
Headlines
B E L G I U M
REAL SOFTWARE: Q3 Net Negative; Sees Q4 Even More 'Difficult'
REAL SOFTWARE: Local Management Buys out Swiss Subsidiary
F R A N C E
BULL SA: Details Key Steps in Proposed Rehabilitation Plan
G E R M A N Y
BERTELSMANN AG: Exceptional Gains Prop up Latest Results
BERTELSMANN AG: Supervisory Board Chairman to Leave Next Month
PFLEIDERER AG: Pre-tax Earnings for First Nine Months Down 50%
PFLEIDERER AG: Fitch Downgrades Rating to 'BB'; Outlook Negative
WESTLB AG: Loses Key Revenue Earners to Collins Stewart
H U N G A R Y
AES KFT: Abandons Unsustainable Local Mine
I R E L A N D
ELAN CORPORATION: Pays US$99.6 Mln for Royalty Rights to 3 Drugs
R U S S I A
WIMM-BILL-DANN: Talks with Danone Stalls Anew; Reason Unknown
S W I T Z E R L A N D
ABB LTD.: Shareholders Approve US$2.5 Billion Capital Hike
SAS: Cost Reduction Plan Exceeding Expectations, Says CEO
U N I T E D K I N G D O M
AMP LTD.: Ratings Affirmed Despite Uncertain Outcome of Lawsuit
BRITISH AIRWAYS: Hints of More Redundancies to Cut Pension Gap
CABLE & WIRELESS: CEO Douses Hope of U.S. Exit this Year
CHRISTIAN SALVESEN: Appoints New Finance Director
COLT TELECOM: Ratings Unaffected by Early Redemption of Notes
EMI GROUP: Time Warner Turns Back on Merger Offer
HOLLINGER INC.: Telegraph Partly Liable for Parent's Borrowings
KINGSTON COMMUNICATIONS: New CEO to Hasten Sale, Breakup
MG ROVER: Union Remains Skeptical; Wants Third Party Opinion
MOTHERCARE PLC: Reports Better-than-expected Half-year Results
MYTRAVEL GROUP: Wraps up Sale of WCT to Travelocity
NETWORK RAIL: Books GBP95 Mln Operating Loss for April-September
NORTHUMBRIAN WATER: To Convince Rating Agencies to Upgrade Marks
NTL INC.: Downsizing Plan to Involve 3,000 Jobs
ROYAL & SUNALLIANCE: Nine-month Operating Profit Down to 94%
ROYAL & SUNALLIANCE: S&P Not Surprised by Profit Slide
ROYAL & SUNALLIANCE: Fitch Affirms Ratings; Outlook Negative
SAFEWAY PLC: Takeover Uncertainties Hit Profits
SSL INTERNATIONAL: Interim Results Support Expectations
SURFACE TECHNOLOGY: 50 Jobs to go in Cost-cutting Program
WEMBLEY PLC: Confirms Negotiations with Potential Buyers
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B E L G I U M
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REAL SOFTWARE: Q3 Net Negative; Sees Q4 Even More 'Difficult'
-------------------------------------------------------------
Results for third quarter of 2003
Due to seasonal factors in the ICT business, the third quarter is
traditionally the weakest in the year. Real Software recorded a group
turnover of EUR40.1 million during the third quarter of 2003, or EUR0.7
million more than in the third quarter of 2002. At -EUR1.5 million, the
operating profit (EBIT) for the third quarter of 2003 was EUR2.8 million
less than in the same period in 2002.
The net ordinary group result (excluding depreciation of goodwill)
was -EUR3.5 million, this is EUR2.6 million lower than in the third quarter
of last year. The net group result was
-EUR6.5 million, or EUR2.4 million lower than in the same period last year.
Results for first nine months of 2003
Real Software recorded a group turnover of EUR125.1 million during the first
nine months of 2003, or EUR3.5 million less than the EUR128.6 million
turnover for the first nine months of 2002. At EUR2.0 million, the
operating profit (EBIT) in the first nine months of 2003 was EUR6.6 million
less than the EUR8.6 million recorded in the same period in 2002.
(a) Group turnover for the first nine months of 2003 was EUR125.1 million.
Versus the comparable figure (1) for the same period of the previous
financial year (EUR128.6 million), this represents a EUR3.5 million decrease
(down 2.7%).
(1) The Business & Government division succeeded in
achieving a slight increase in turnover compared with
the same period last year. This was primarily due to
the slight increase in license and infrastructure sales.
(2) The Industry division experienced a slight fall in
turnover compared with the same period last year.
Turnover increased from license sales relating to in-
house products, on which higher margins are generated.
Revenue from system integration fell. This trend
confirms the implementation of the strategy of
developing more towards solutions based on in-house
products.
(3) The Retail division's turnover, which is traditionally
characterized by a higher proportion of license revenue,
remained stable due to the migration from the old
product range to the new one.
(4) The Banking & Insurance division and international
activities' turnover fell back, with lower license sales
and fewer system integration assignments resulting from
the continuing economic crisis.
(b) In the first nine months of 2003 an operating profit (EBIT) of EUR2.0
million (1.6%) was recorded. Versus the comparable figure for 2002 (EUR8.6
million or 6.7%), this represents a decrease of EUR6.6 million, mainly as a
result of:
(1) General price pressure due to the difficult overall
market situation, and only partly offset by stronger
license sales.
(2) Lower margins due to general pressure on prices and the
later recognition of license revenue due to the delay in
the delivery of the new Retail product suite.
(c) As already communicated at the publication of the half-year results, the
group is pursuing its investment drive, despite the difficult economic
conditions. In the area of investments in product development (as opposed
to R&D costs in general), following on from the preparations for the
application of IAS revenue recognition rules (IAS18, see above), which Real
Software has applied since the end of 2002, the Group decided at the end of
the second quarter to likewise start on preparations for IAS38. For this
reason, Real Software did not charge development costs for its new products
against its profit for the first half of the year, booking them instead as
EUR3.9 million of prepaid expenses. During the fourth quarter, Real
Software will, where necessary, value these intangible fixed assets as part
of its preparations for IAS38.
(d) The net ordinary group result (excluding depreciation of goodwill and
extraordinary results) for the first nine months of 2003 was -EUR4.6
million, or EUR4.4 million lower than the comparable figure from the same
period of the previous year (-EUR-0.2 million), due to the lower operating
profit, which was only partially offset by the lower financial charges (due
to lower interest rates) and lower taxes for the foreign subsidiaries.
(e) The net group result for the first nine months of 2003 was -EUR11.7
million, this is EUR4.0 million lower than the -EUR7.6 million recorded in
the same period of 2002.
(f) At the end of the first nine months of 2003, the group's capital and
reserves in the extended definition 2 was -EUR2.1 million, out of a
balance-sheet total of EUR187.0 million. Cash at bank and in hand fell from
EUR9.5 million at the end of 2002 to EUR6.6 million, a decrease of EUR2.9
million. Cash flow from operating activities was -EUR1.3 million, from
investment activities -EUR1.3 million and from financing activities -EUR0.2
million.
Debt restructuring
The company confirms the principles of the debt restructuring arrangements,
which should constitute the basis for the group's short-term continuity and
its long-term development.
The negotiations with the banking consortium will be pursued with the new
Board of Directors as a result of the Special Shareholders Meeting of
November 24, 2003. The current moratorium on interest payments and capital
reimbursement has, for this purpose, been moved up by the banks until March
15, 2004.
Prospects
The Real Software Group is still anticipating a difficult final quarter in
2003, with budgets for ICT investments coming under further pressure. In
this uncertain and difficult economic climate, and in the light of the
recent events, the group has therefore decided not to issue any specific
forecast for the financial year as a whole. With all due caution, the group
is able to state that the results as of October 2003 are in line with the
management's expectations.
To view key results: http://bankrupt.com/misc/Key_Results.pdf
RESULTS FOR 2003
(a) Group turnover
Group turnover per division
The Business & Government and Infrastructure divisions reported a turnover
increase. Retail recorded stable turnover. Industry, Banking & Insurance
and international activities reported lower turnover figures due to the
continuing malaise.
To view group turnover key results:
http://bankrupt.com/misc/Group_Turnover_Key_Results.pdf
Banking & Insurance recorded a turnover of EUR17.3 million; this is EUR0.9
million less than the same period last year. The lower turnover in system
integration (down EUR1.7 million) and software products and maintenance
(down EUR0.1 million) was only partially offset by higher turnover in
infrastructure (up EUR0.9 million).
Business & Government generated a turnover increase of EUR0.8 million
(EUR23.3 million), versus the same period last year. The lower turnover in
system integration (down EUR0.7 million) was fully offset by higher turnover
in software products and maintenance (up EUR0.5 million) and infrastructure
(up EUR1.0 million).
Industry recorded a fall in turnover compared with the same period last
year, down to EUR32.1 million versus EUR34.0 million last year. The share
of system integration in turnover fell heavily (down EUR2.8 million) and was
not fully offset by higher turnover in software products and maintenance (up
EUR0.5 million) and infrastructure (up EUR0.4 million).
Retail recorded a turnover of EUR15.7 million, in line with last year. The
lower turnover from system integration (down EUR1.1 million) was fully
offset by an increase in turnover from software products and maintenance (up
EUR0.7 million) and infrastructure (up EUR0.6 million).
International activities (i.e. non-banking activities in Luxembourg and
activities in France and Switzerland) recorded a turnover of EUR29.9 million
during the first nine months of 2003, down EUR4.4 million from the same
period last year. Turnover from system integration fell by EUR1.9 million,
that from software products and maintenance by EUR1.7 million and that from
infrastructure by EUR0.7 million.
Infrastructure booked a turnover of EUR6.9 million, an increase of EUR2.8
million versus the same period last year. Turnover from system integration
decreased by EUR1.0 million. Turnover from software products and
maintenance increased by EUR0.6 million. Infrastructure sales rose EUR3.2
million.
Activity mix
Group turnover was EUR125.1 million in the first nine months of 2003,
compared with EUR128.6 million in the same period of the previous year.
This represents a decrease of EUR3.4 million, and is due to lower turnover
from system integration, which was only partially offset by higher turnover
from software products and maintenance and infrastructure.
2003 2002
3Q03 YTD 3Q02 YTD (1) 3Q03ytd-3Q02ytd(1)
Group turnover In mEUR In % In mEUR In % In mEUR In %
System integration 90,3 72,1% 99,4 77,3% -9,1 -9,2%
Software products and maintenance
16,5 13,2% 16,1 12,5% 0,4 2,8%
Infrastructure 18,4 14,7% 13,1 10,2% 5,3 40,3%
Total 125,1 100,0% 128,6 100,0% -3,4 -2,7%
Group turnover from system integration was EUR90.3 million, down EUR9.1
million (9.2%) from the same period last year. The pressure on turnover in
system integration was experienced in all divisions, especially Industry
(down EUR2.8 million) and Banking & Insurance (down EUR1.7 million) and in i
nternational activities (down EUR1.9 million).
Group turnover from products (software licenses and associated maintenance
revenue) was EUR16.5 million, compared with a corresponding turnover of
EUR16.1 million last year, a rise of EUR0.4 million (2.8%). Rising sales in
all divisions apart from Banking & Insurance and in international activities
are confirming the successful implementation of the strategic model, which
has involved opting to develop more towards solutions based on in-house
products, generating higher license revenue and margins.
Turnover from infrastructure was EUR18.4 million, up EUR5.3 million (+
40.3%) from the same period last year.
Geographical distribution of group turnover
In the first nine months of 2003, 75.1 % of consolidated group turnover was
recorded in Benelux, 2.4% more than in the same period last year. France
remained in second place with 17.9% of group turnover, slightly down on last
year. Switzerland's share fell from 5.1% to just 3.1%.
2003 2002
3Q03 YTD 3Q02 YTD(1)
Geographical turnover analysis
In mEUR In % In mEUR In %
Belgium 61,1 48,8% 58,1 45,1%
The Netherlands 23,4 18,7% 23,2 18,2%
Luxemburg 9,5 7,6% 12,5 9,4%
France 22,4 17,9% 22,8 18,2%
Switzerland 3,9 3,1% 6,2 5,1%
Germany 3,9 3,1% 4,3 2,8%
Other 0,9 0,7% 1,3 1,2%
Total 125,1 100,0% 128,6 100,0%
(b) EBIT margin, net ordinary group result and net group result
EBIT margin
In the first nine months of 2003, the EBIT margin was under pressure as a
result of general pressure on prices, the general malaise in the bank
sector, diminished results from international activities and the later
recognition of licensee revenue due to the delay in the delivery of the new
Retail product suite.
Out of a total turnover of EUR125.1 million, the group achieved an EBIT of
EUR2.0 million in the first nine months of 2003, representing an EBIT margin
of 1.6% of turnover. In the same period of last year, an EBIT of EUR8.6
million was achieved, representing an EBIT margin of 6.7%.
The net ordinary group result (excluding depreciation of goodwill and
extraordinary results) for the first nine months of 2003 was -EUR4.6
million, EUR4.4 m lower than the comparable figure from the previous year
(-EUR0.2 million), due to the lower operating profit, which was only
partially offset by the lower financial charges (due to lower interest
rates) and lower taxes for the foreign subsidiaries.
To view net ordinary group results:
http://bankrupt.com/misc/Net_Ordinary_Key_Results.pdf
Net group result
The net group result, including EUR6.5 million of depreciation on goodwill
and an extraordinary result of -EUR0.6 million, came to -EUR11.7 million,
this is EUR4.0 million lower than the -EUR7.6 million recorded in the same
period of 2002.
To view net group results: http://bankrupt.com/misc/Net_Group_Results.pdf
(c) Capital and reserves, cash flow
At the end of the first nine months of 2003, the group's capital and
reserves in the extended definition 3 was -EUR2.1 million, out of a
balance-sheet total of EUR187.0 m.
Taking the ongoing negotiations with the bank consortium into account, the
Board of Directors has issued the third-quarter results as of September 30,
2003 on a going concern basis.
Cash at bank and in hand fell from EUR9.5 million at the end of 2002 to
EUR6.6 million, a decrease of EUR2.9 million. Cash flow from operating
activities was -EUR1.3 million, from investment activities -EUR1.3 million
and from financing activities -EUR0.2 million.
(d) Number of employees
As at September 30, 2003, the Real Software Group had 1,533 employees,
compared with 1,547 on 30 June 2003.
To view financials: http://bankrupt.com/misc/Real_Software_Financials.pdf
CONTACT: REAL SOFTWARE
Dina Boschmans
Corporate & Marketing Communications Manager
Prins Boudewijnlaan 26, 2550 Kontich
Phone: +32.3.290.23.11
Fax: +32.3.290.23.00
Direct: +32.3.290.25.30
Mobile: +32.477.619.682
E-mail: Dina.Boschmans@realsoftware.be
Homepage: http://www.realsoftwaregroup.com
REAL SOFTWARE: Local Management Buys out Swiss Subsidiary
---------------------------------------------------------
Real Software signed a letter of intent regarding a management buyout of
Full Speed Systems AG, its Swiss subsidiary, which, due to its activities
and location, is no longer considered to be strategic to the group.
The three managers of Full Speed Systems will pay the purchase price of
approximately EUR2,400,000 partly in cash and partly by compensation with
their claims on the company. The lock up on the Real Software shares these
managers received in December 2001 is lifted.
Parties expect closing the transaction by the end of the financial year
2003. The impact of the transaction on the current result will be
immaterial. The impact on the net result will amount to approximately -EUR6
million mainly due to goodwill write-offs.
CONTACT: REAL SOFTWARE
Dina Boschmans
Corporate & Marketing Communications Manager
Prins Boudewijnlaan 26, 2550 Kontich
Phone: +32.3.290.23.11
Fax: +32.3.290.23.00
Direct: +32.3.290.25.30
Mobile: +32.477.619.682
E-mail : Dina.Boschmans@realsoftware.be
Theo Dilissen
Afgevaardigd Bestuurder - CEO
Mobile: +32.475.482.693
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F R A N C E
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BULL SA: Details Key Steps in Proposed Rehabilitation Plan
----------------------------------------------------------
The Board of Bull met on November 20, 2003 to agree on the most appropriate
of three proposals under consideration for the reshaping of the Company's ca
pital. The decision was taken to implement the solution most likely to
provide an appropriate, positive framework for the future of the company.
This solution, known as the 'shareholders and partners' option, will be
submitted for the approval of all the relevant parties involved over the
next few weeks.
Bull's proposed recapitalization plan: key principles
The restructuring of Bull's equity is the third and final stage in the
corporate rescue plan presented by Pierre Bonelli and adopted by the Board
in March 2002.
Bull had signaled that -- despite its successful operational turn-around --
the Company would not have the means to repay its underlying debt. As a
consequence of this, only a fundamental debt restructuring, coupled with a
minimum injection of EUR30 million in new cash, would enable Bull to find a
solution to its recapitalization to achieve the necessary reshaping of its
financial situation.
The chosen solution involves:
(a) Firstly, a very significant reduction in the economic value of the
existing debt, currently shown in the parent Company's balance sheet,
including EUR204 million in 'Oceanes' convertible bonds issued in 2000 and
the French state loan of EUR490 million (including interest) granted in
2002;
(b) In addition, an offer to Oceanes' bondholders either to convert their
holdings into shares or shares and warrants, and for the State, a
relinquishment of part of its debt up to approximately 90% and profit
sharing agreement for the remaining debt;
(c) Finally, a rights issue of between EUR30 and 50 million, underwritten by
a group of investors.
These three elements constitute an inseparable and essential overall plan
designed to return the company's equity -- currently standing at a deficit
of EUR726 million -- to the minimum level required under French law.
Arrangements for Oceanes bondholders
At a meeting convened by the Board for December 11, 2003, a proposal will be
put before holders of Oceanes bonds to modify the terms of their contract
as:
(a) postpone the maturity date to January 1, 2033
(b) reduce the coupon to 0.1% starting January 1, 2004
(c) redemption value fixed to 100% of the bond's nominal value (against
116.5% to 117.5% initially) i.e. EUR15.75
(d) renounce the parity conversion adjustment, which will result in the
implementation of the planned increase in capital by the Board
The operation will lead to a decrease of approximately 90% of the bonds
economic value.
Should these changes be accepted by the bondholders, the Board will submit
the necessary resolutions to an Extraordinary General Meeting of
shareholders, to enable the launch of a share exchange offer covering all
Oceanes bonds and offering two options for each Oceane bond:
(a) Either 20 new shares for each bond
(b) Or 16 new shares and 8 warrants, each warrant carrying with it the
right -- for a period of one month after the issue date -- to subscribe to
one share at the subscription price otherwise set for the public rights
issue, i.e. EUR0.1 per share
This operation is designed as far as possible to safeguard the interests of
the Oceanes bondholders and will result in an increased liquidity of their
assets.
Arrangements for dealing with the state loan
The French State loan will be treated in a similar way to the one agreed by
the EGM for the Oceanes bondholders, leading to a similar reduction in its
value, i.e. approximately 90%.
The remaining part of the debt will be written off in exchange for a profit
sharing agreement structured in the form of a royalty based upon a
predetermined percentage of the Company's consolidated pre-tax profit over
EUR10 million for the next eight years. The royalty rate, which has yet to
be finalized, will in any case not exceed 30%.
'Shareholders and Partners' recapitalization plan
Bull's recapitalization will be preceded by a reduction in capital designed
to reduce the nominal share price from EUR2 per share to EUR0.01 per share.
The total current number of share is 170.2 millions
Following this, the plan will take the form of a capital increase of EUR44
million, with preferential subscription rights for current shareholders,
enabling them to subscribe to 440 million new shares at a unit price of
EUR0.1. This capital increase will be 75% underwritten by a group of
investors -- acting on an individual basis -- and providing EUR33 million,
apportioned as:
NEC [1] EUR7.5 million
France Telecom [2] EUR7.5 million
AXA Private Equity EUR7 million
Debeka EUR3 million
Artemis EUR2 million
350 senior Bull Group managers EUR6 million
It is important to stress that, in addition to the massive commitment by
Bull's managers, this solution illustrates the support for the Company from
one of its major technology partners, NEC, very important customers such as
France Telecom and Debeka, and well-known investment funds and private
investors.
The final distribution of the Company's equity is likely to be:
One major technological partner (NEC) 11%-15%
Two important clients
(France Telecom and Debeka) 14%-19%
Investment fund/private investors 10%-13%
Bull management 6.5%-8.5%
Float
(Oceanes bondholders, former shareholders) 58.5%-44.5%
Following the completion of this recapitalization plan, the Company's
financial structure would lead to a pro forma positive net equity at end
December 2003 of about EUR13 million (based on a capital increase of EUR44
million) and an improvement of the cash situation of EUR44 million based on
the same assumption [3].
Conditions precedent and timescales
Taking into account the urgent need to restore the Company's finances, this
plan will be put into action without delay.
Beside the approval by the market regulatory authorities for the planned
operation, the implementation of this plan is dependent on these conditions:
(a) The agreement of the Oceanes bondholders to the amendment of the
issuance contract
(b) Approval by the European Commission
(c) Approval by the General Shareholder Meeting on the Capital increase
The French State, well-informed that the European Commission has expressed
its intent to refer to the European Court of Justice, has given its approval
in principle, pending the approval of the European Community for the
restructuring of its debt.
The capital increase and the return to a positive net equity situation will
be achieved during the quarter following the E.C. approval, following the
fulfillment of the mentioned conditions.
The agreement of the Oceanes bondholders will be sought at the EGM on
December 11, 2003.
A fresh start for Bull
This recapitalization plan -- which appears to be the most favorable
solution for Bull, its employees, customers, financial creditors and
shareholders -- could not have been conceived without the remarkable
turnaround in the Company's operational performance. It also bears witness
to the underlying credibility of its financial model and its strategic
choices.
The program of disengagement from the French State, the confidence which
Bull's key technological partners and major shareholders have shown in the
Company, and the massive commitment from its management team all point to a
strong future for Bull. A future where the Company has the resources and
ability to attract the investment and talent it needs, to support its
development as a genuine player in the global information technology market.
---------
Footnotes
[1] Current shareholder with 16.9% of capital
[2] Current shareholder with 16.9% of capital
[3] At end June 2003, the negative cash situation of EUR581
million would have become with this operation a net positive
cash situation of EUR142 million
CONTACT: BULL
68 route de Versailles
78434 Louveciennes Cedex - France
Marie-Claude Bessis
Director Corporate and Financial Communication
Phone: +33(0)1 39 66 70 55
Mobile: +33(0)6 80 64 18 81
E-mail: marie-claude.bessis@bull.net
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G E R M A N Y
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BERTELSMANN AG: Exceptional Gains Prop up Latest Results
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Bertelsmann has further improved its operating performance in the first nine
months of the year. From January to September 2003, the international media
and entertainment company has increased its Operating EBITA to EUR435
million, from EUR291 million in 2002. Third-quarter Operating EBITA
amounted to EUR207 million (previous year: EUR116 million). Revenues in the
first nine months were EUR11.7 billion from EUR13.0 billion in the previous
year. Stripping out exchange rate effects and changes in the portfolio,
revenues remained nearly even year-on-year. Third-quarter revenues amounted
to EUR3.9 billion after EUR4.2 billion the previous year.
In addition to the operational improvement, the nine-months total result was
mainly influenced by EUR761 million in capital gains. These were generated
primarily by the sale of the Bertelsmann Springer specialist-publishing
group and the stake in barnesandnoble.com. The previous year's high
comparative figure (EUR2.85 billion) is attributable to the disposal of AOL
Europe shares. Furthermore, special items, mainly due to the integration of
the Zomba music company and restructuring measures at BMG, amounted to minus
EUR76 million for the first nine months (previous year: -EUR32 million).
The group's regular amortization of goodwill and similar rights amounted to
EUR530 million (previous year: EUR630 million). Set off against net
interest (minus EUR89 million), other financial expenses and income (-EUR147
million) and taxes (-EUR155 million), net income before minority interests
for the first nine months totaled EUR162 million (previous year: EUR1.3
billion). Third-quarter net income before minority interests totaled EUR20
million (previous year: -EUR367 million). At the end of September 2003, net
financial debt amounted to EUR1.45 billion (Dec 31, 2002: EUR2.7 billion).
Bertelsmann Chief Financial Officer Siegfried Luther said: "Bertelsmann has
continued its development of the previous year in the first nine months and
has further improved its operational performance. The fourth quarter of the
year is traditionally the strongest in our media business. Therefore,
despite the slight decrease in revenues, we maintain our forecast for the
full year, and expect to achieve an Operating EBITA above last year's
levels."
Overview of key figures (in EURmillions)
Jan. 1 - Sept. Jan. 1 - Sept.
2003 2002
Revenues 11,733 12,991
Operating EBITA by divisions 536 418
Corporate/consolidations (101) (127)
Operating EBITA 435 291
Special items (76) (32)
Amortization of goodwill* and similar rights
- regular (530) (630)
- impairments (37) (1,100)
Capital gains/losses 761 2,850
Earnings before financial result and taxes
553 1,379
Net interest (89) (38)
Other financial expenses and income (147) (157)
Income taxes (155) 81
Net income before minority interests 162 1,265
Minority interests (39) (35)
Net income after minority interests 123 1,230
Investments 590 2,298
Sept. 30, 2003 Dec. 31, 2002
Net financial debt 1,450 2,741
No. of Employees 73,774 80,632
* Including amortization of goodwill from associated companies
About Bertelsmann AG
Bertelsmann, a media and entertainment company, commands globally leading
positions in the major markets. Its core business is the creation of
first-class media content: Bertelsmann includes RTL Group, Europe's No. 1 in
television and radio, as well as the world's biggest book publishing group,
Random House, with more than 100 publishing imprints (Alfred A. Knopf,
Bantam, Siedler Verlag, Goldmann). Gruner + Jahr, the European No.1 in
magazine publishing (stern, GEO, Capital, Femme Actuelle, Family Circle,
Parents) and Bertelsmann Music Group
(BMG) with its roughly 200 labels (RCA, Arista, Jive, J Records) and artists
such as Alicia Keys, Dido and Pink also stand for creativity and powerful
brands. Bertelsmann's direct-to-customer businesses are bundled in Direct
Group: book and music clubs with more than 40 million members all over the
world. The Arvato corporate division bundles the group's media services,
which include the expanding units Arvato Logistics Services and Arvato
Direct Services (distribution, service centers, customer relationship
management), along with state-of-the-art printers, storage media production
and comprehensive IT-services.
BERTELSMANN AG: Supervisory Board Chairman to Leave Next Month
--------------------------------------------------------------
Gerd Schulte-Hillen, Chairman of the Bertelsmann Supervisory Board and Vice
Chairman of the Bertelsmann Foundation Executive Board, is leaving
Bertelsmann and the Bertelsmann Foundation at the end of 2003. Bertelsmann'
s shareholders -- the Bertelsmann Verwaltungsgesellschaft and Groupe
Bruxelles Lambert -- and Gerd Schulte-Hillen have agreed to mutually and
friendly end his mandate.
Prior to the decision, there had been different views between the
Supervisory Board Chairman and Bertelsmann Chairman & CEO Gunter Thielen on
the strategic direction of the company. As a consequence, Mr.
Schulte-Hillen announced his resignation as Supervisory Board Chairman and
Vice Chairman of the Bertelsmann Foundation.
Bertelsmann's shareholders thank Gerd Schulte-Hillen for his more than 34
years of extraordinarily successful work and for his great services to
Bertelsmann. Until the Supervisory Board Chairman's successor has been
elected, Deputy Supervisory Board Chairman Dieter Vogel will chair
Bertelsmann's Supervisory Board.
PFLEIDERER AG: Pre-tax Earnings for First Nine Months Down 50%
--------------------------------------------------------------
SDAX-listed Pfleiderer AG, ISIN DE0006764749, managed to stabilize its
operative earnings (EBT) at EUR7.1 million in Q3 2003 (2002: EUR9.9
million), achieving a cumulative EBT of EUR16.8 million for the period
January to September 2003 (2002: EUR32.5 million).
The economic environment continues to remain difficult, preventing the
company's two Business Centers Engineered Wood and Infrastructure Technology
from matching last year's sales and earnings figures. However, the
quarterly developments in fiscal 2003 clearly show that the company's key
figures have stabilized.
Following a disappointing start in the first quarter, the picture
improved -- and despite the seasonal decline during the summer months --
total EBT as of September 30, 2003 came to EUR3.5 million (2002: -EUR28.1
million).
In the first nine months of 2003, the Pfleiderer Group recorded sales of
EUR738.4 million (2002: EUR761.2 million). EBITDA of EUR63.8 million (2002:
EUR84.5 million) and EBIT stand at EUR30.0 million (2002: EUR44.1 million)
and remain depressed by persistent weakness in the economy and poor demand,
as well as by competitive and price pressure.
This particularly applies to the engineered wood and furniture industries in
Germany. On the other hand, the savings package to safeguard earnings has
had a positive effect, with the Pfleiderer Group managing to make savings of
over EUR34.2 million in production and personnel costs by the end of
September 2003.
After deducting charges from discontinued operations of -EUR13.2 million
(2002: -EUR60.6 million), overall EBT as of September 30, 2003 stands at
EUR3.5 million (2002: -EUR28.1 million). Looking at the full fiscal 2003,
Pfleiderer AG's Board of Management expects to be able to confirm its
forecast of a positive operative result in the low positive double-digit
million euros. The overall result will depend on how negotiations proceed
in relation to discontinued operations, but also from the results of the
annual impairment tests on goodwill according to U.S.-GAAP. Bearing in mind
the nature of business in the engineered wood sector in Germany, total sales
are expected to reach around EUR1 billion by the end of 2003.
PFLEIDERER AG: Fitch Downgrades Rating to 'BB'; Outlook Negative
----------------------------------------------------------------
Fitch Ratings downgraded the German diversified manufacturing group
Pfleiderer AG Group's Senior Unsecured rating to 'BB' from 'BB+' and
affirmed the Short-term rating at 'B'. The rating Outlook remains Negative.
The downgrade reflects Pfleiderer's low FY03 cash generation and the group's
continuing weak credit profile. Pfleiderer has been hit by raw material
pricing pressures in its largest division, engineered wood, while it is
undergoing a prolonged restructuring and repositioning of its operations and
product ranges. The Outlook reflects the execution risks involved in this
process as well as the continuing mature market conditions in engineered
wood. A decline in the German furniture sector has increased downward
pricing pressures on engineered wood, which are exacerbated by the
insolvency of a major domestic player now under liquidation.
Although a cost-saving initiative launched in March 2003 will help cushion
the deterioration in the group's performance, Fitch notes that any material
earnings improvement can only be realized after the refocus is finalized and
the domestic pricing pressure in engineered wood eases. While the company's
infrastructure technology business enjoys stable cash flows, its
telecommunication masts face delayed capex from mobile phone operators
installing the German UMTS infrastructure.
In FY02 Pfleiderer announced its plan to reduce exposure to the German
construction sector. Cash proceeds from divesting the insulation material
and structural elements divisions have improved the balance sheet structure.
However, write-downs of book values upon these disposals led to a EUR53
million charge (FY01: EUR14.2 million) and a EUR40 million net loss affected
the equity base. While its gearing fell considerably, YE02 net debt/EBITDA
only temporarily improved to 2.7x (YE01: 3.1x), before rising above 3.0x
again due to lower 9-month 2003 annualized EBITDA. After adjusting YE02 net
debt for operating leases and securitization, the revised net debt to
lease-adjusted EBITDA ratio stood at 3.4x. Fitch expects FY02 net fixed
charges cover of 1.8x will deteriorate further during FY03.
Ongoing margin pressure in wood-based materials during FY03 has caused
management to delay expansion capex in order to keep balance sheet ratios at
an acceptable level. The divesting of the remaining discontinued operations
(wind energy business and table surfaces) by FYE03 could involve realizing
further book losses, while c.25% of investments are subject to annual
impairment tests mandatory under U.S. GAAP.
Fitch expects Pfleiderer's financial profile to remain constrained by the
need to fund internal and external growth required to re-position its core
businesses, and to migrate the product range into higher value-added
materials. In this context the agency stresses the importance of markets in
Central and Eastern Europe for the group's expansion plan. Fitch also
believes that given the erosion of the equity base since FY02, a capital
increase will be a pre-requisite for the realization of this expansion.
Group debt is largely located at Pfleiderer Finance B.V. under parental
guarantee, while the parent holds the balance and partly backs minor
operating subsidiaries' debt. Refinancing has extended the maturity
profile, which consists of 24% short-term and 56% long-term debt, with
EUR300 million maturing in FY07 or later. For short-term funding Pfleiderer
can use a variety of instruments, including structured transactions, while
substantial long-term committed facilities are in place. Fitch also notes
that funding is on an unsecured basis, with no financial covenants included
in the loan documentation.
Pfleiderer Group, founded in 1894 in Germany, is an internationally active
supplier of engineered wood for the furniture industry, as well as of
railway sleepers and masts for the telecommunication and energy sector, and
holds leading market positions.
WESTLB AG: Loses Key Revenue Earners to Collins Stewart
-------------------------------------------------------
Panmure Gordon, the U.K. brokerage business that WestLB is trying to sell,
lost a group of key executives, The Telegraph learned last week.
Its highly rated convertible team, made up of Ian Francis, Richard Boast,
Colin Matthews and Rob Cowell, are understood to have signed up with Collins
Stewart, the report said. The group accounts for a "significant" amount of
Panmure's revenues, according to people with knowledge of the firm.
Convertibles, a hybrid between equities and debt, are popularly used by
companies to raise money recently. Their transfer to Collins Stewart is
expected to provide a new earnings stream for the group, which is trying to
benefit from the gradual recovery of the stock market.
Panmure Gordon, which employs about 70 people in total, services small- and
mid-cap companies sector. It was put up for sale by WestLB as part of the
German bank's effort to retreat from a number of businesses after posting
huge losses last year.
=============
H U N G A R Y
=============
AES KFT: Abandons Unsustainable Local Mine
------------------------------------------
AES Kft is shutting down its mine in Lyukobanya after seven years of
operating it, the Budapest Business Journal said Friday. According to the
paper, the company cited "the combined effects of increasingly strict
environmental regulations and the liberalization of the electricity market"
as the main triggers for the decision. The company, however, won't
completely withdraw from the area, which still hosts its three power
stations. Said stations are not affected by the decision.
=============
I R E L A N D
=============
ELAN CORPORATION: Pays US$99.6 Mln for Royalty Rights to 3 Drugs
----------------------------------------------------------------
Elan Corporation, plc (ELN) has completed its purchase of royalty rights in
respect of Zonegran(TM), Frova(TM) and Zanaflex(TM) from Pharma Operating
Ltd., a wholly owned subsidiary of Pharma Marketing Ltd., for US$99.6
million. As a result, no further royalty payments will be made to Pharma
Marketing and all of Elan's agreements with Pharma Marketing were
terminated. As previously announced, this transaction will result in a
charge of US$99.6 million in the fourth quarter of 2003.
About Elan
Elan is focused on the discovery, development, manufacturing, sale and
marketing of novel therapeutic products in neurology, severe pain and
autoimmune diseases. Elan shares trade on the New York, London and Dublin
Stock Exchanges
CONTACT: ELAN CORPORATION
Investors:
Emer Reynolds
Phone: 353-1-709-4000 or 800-252-3526
===========
R U S S I A
===========
WIMM-BILL-DANN: Talks with Danone Stalls Anew; Reason Unknown
-------------------------------------------------------------
Talks between fruit juice and dairy products maker, Wimm-Bill-Dann, and
agro-food group, Danone, have been "amicably terminated," the Russian firm
announced Friday.
The company did not say what caused the breakdown, but the Financial Times
said both sides could not agree on the structure, price, strategy and the
future of existing management. WBD did not advice whether it would revive
the talks soon or whether it would entertain other buyers. Accordingly, it
rejected Danone's suggestion to temporarily halt talks for two months.
According to the paper, this is not the first time the talks between the two
had stalled. In fact, the sale of WBD to Danone has been on the negotiating
table for two years now. This autumn, talks stalled anew over rumored
disagreements among WBD's shareholders.
"One proposal had been for the sale of the entire group, followed by the
resale of some of its individual businesses in a second stage to another
multinational agro-food group. But no negotiations with other companies are
underway," the Financial Times said.
The paper says Danone remains interested in the Russian firm; thus, it is
not true the latest hitch has something to do with the economic uncertainty
in Russia in the wake of investigations involving Yukos. The French group
currently operates local factories for dairy products and owns the former
Bolshevik biscuit factory. It holds a 7% stake in WBD.
Last year, WBD reported net income of US$36 million on sales of US$852
million, according to the Financial Times. In the first half this year, the
company had net income of US$18 million on sales of US$473 million. WBD
controls 24 factories in 18 locations in Russia as well as in Kyrgyzstan and
Ukraine.
CONTACT: Wimm-Bill-Dann Foods OJSC
16 Yauzsky Boulevard, Moscow, Russia
Phone: +7 095 733-97-26/9727
Fax: +7 095 733-97-25
Homepage: http://www.wbd.com
E-mail: kiryuhina@wbd.ru
=====================
S W I T Z E R L A N D
=====================
ABB LTD.: Shareholders Approve US$2.5 Billion Capital Hike
----------------------------------------------------------
ABB shareholders approved Thursday a share capital increase expected to
raise about US$2.5 billion, at an extraordinary general meeting held in
Zurich. ABB now plans to issue and list 840 million new shares, at an offer
price of CHF4 per share on the SWX, Stockholm, London and Frankfurt stock
exchanges.
A total of 1,241 shareholders attended the extraordinary general meeting,
representing 48.7% of the total share capital entitled to vote. Holders of
about 99% of the shares represented at the meeting voted in favor of the
plan. The share capital increase is the key part of a three-component
capital-strengthening program announced by ABB on October 28, 2003. As part
of the plan, ABB recently signed a three-year US$1 billion credit facility
agreement with a group of banks, and successfully sold EUR650 million bonds
Wednesday last week.
ABB (http://www.abb.com)is a leader in power and automation technologies
that enable utility and industry customers to improve performance while
lowering environmental impact. The ABB Group of companies operates in
around 100 countries and employs about 120,000 people.
SAS: Cost Reduction Plan Exceeding Expectations, Says CEO
---------------------------------------------------------
The cost-cutting program of Scandinavian airline, SAS, is bearing fruit
ahead of schedule, according to CEO Jorgen Lindegaard, who spoke last week
at an industry seminar.
"The measures we are taking are proceeding as planned and even a bit faster.
After the third quarter we have reached 40 percent of the effects," he said,
according to Reuters.
The program he was referring to is the company's lay-off plan that will
slash a fifth of its workforce. The carrier hopes to save as much as SEK14
billion out of the program and restore profitability next year. The flag
carrier of Sweden, Denmark and Norway, SAS expects to book around SEK2
billion in losses this year. Like most European carriers, SAS is reeling
from the effects of the war in Iraq and the price war by no-frills carriers
in the past two years.
In the same forum, Mr. Lindegaard also predicted transcontinental mergers
will happen soon once politicians get their act together. "I expect mergers
between continents to be possible as it is in all global business. And I
hope a complete deregulation will lead to a totally open sky to the U.S.,"
he said.
Efforts to remove air travel restrictions across the Atlantic have fallen
short due to red tape, according to Reuters, which cited, among others,
Britain's refusal to expand access to London's Heathrow airport. London has
limited the number of available U.S. flights at the airport, considered
Europe's largest, to only two U.S. airlines.
===========================
U N I T E D K I N G D O M
===========================
AMP LTD.: Ratings Affirmed Despite Uncertain Outcome of Lawsuit
---------------------------------------------------------------
Moody's Investors Service affirmed all the ratings of AMG Group after the
financial services company announced that the trustee for its income trust
is seeking judicial advice on the impact of AMP's proposed demerger on the
securities. AMP has AU$1.24 billion of income securities on issue.
The trustee would like to know in particular whether the proposed demerger
would constitute an event of default for these securities. AMP said on its
explanatory memorandum on the demerger proposal it believes the demerger
does not constitute an event of default.
Moody's said: "[I]f a court were ultimately to find that a default had
occurred as a result of the demerger, it is possible that under the
cross-default provisions present within AMP's other debt securities, the
company may be forced to accelerate the repayment on its senior corporate
debt." AMP's liability amounts to approximately a further AU$1.25 billion.
(a) The ratings affirmed with a negative outlook are:
AMP Life Ltd. Insurance financial strength at A1
AMP Group Holdings Ltd Senior debt at Baa1
AMP (U.K.) Finance Services plc Senior debt at Baa1
AMP Group Finance Services Ltd. Senior debt at Baa1; subordinated debt at
Baa2
AMP Henderson Global Investors Ltd. Preferred stock at Baa3
AMP Bank Ltd. Long-term deposit rating at Baa1
Long-term senior debt at Baa1
Long-term subordinated debt at Baa2
Long-term junior subordinated debt at Baa2
National Provident Life Insurance financial strength at Baa3
Pearl Assurance plc Insurance financial strength at Baa3
NPI Finance plc Subordinated debt at Ba3
(b) The ratings affirmed with a stable outlook are:
AMP (U.K.) Finance Services plc P-2 commercial paper
AMP Group Finance Services Ltd P-2 commercial paper
AMP Bank Ltd P-2 commercial paper
D Bank financial strength
BRITISH AIRWAYS: Hints of More Redundancies to Cut Pension Gap
--------------------------------------------------------------
British Airways is to meet U.K. staff and trade unions to discuss what they
can do to plug a huge hole in its pension funds, according to the Financial
Times. The GBP900 million (US$1.5 million) deficit will need an extra
GBP133 million a year contribution from the company starting January.
When airlines officials met for the first time after the company's discovery
of the shortfall, they agreed that the funding requirements represented "a
significant increase in employment costs," according to the report. British
Airways already has a program to cut annual costs by GBP1.1 billion over
three years to March 2005. It plans to cut 1,000 jobs in the current
financial year to reduce workforce by 23% between August 2001 and next
March.
The airlines' chief executive, Rod Eddington, said two weeks ago there might
be additional job-cuts. This is even after the company met internal targets
of paring annualized costs by GBP701 million since spring 2001.
Chief Financial Officer John Rishton called the funding increases "a
substantial additional burden... but not one that will cripple us." He
assured that the airline will continue to support its existing pension
scheme.
CABLE & WIRELESS: CEO Douses Hope of U.S. Exit this Year
--------------------------------------------------------
Cable & Wireless shareholders let out a collective groan late last week
after hearing their chief executive's announcement that the exit from the
U.S. will not happen this year.
Speaking at a conference in Barcelona, CEO Francesco Caio confirmed that the
group would continue to saddle the loss-making U.S. operations for a while.
"I don't think it's going to be December," the Telegraph quoted Mr. Caio as
saying. The chief executive is referring here to the possibility of selling
or closing the U.S. business within the year. Most likely, he said, either
move will be finalized before the end of next year, adding he would complete
it sooner if possible.
Cable & Wireless shares fell 3.25 to 127.25 before Mr. Caio's comments were
published Friday, according to the Telegraph.
CHRISTIAN SALVESEN: Appoints New Finance Director
-------------------------------------------------
Christian Salvesen PLC has appointed Julian Steadman as Group Finance
Director and an executive director with immediate effect. He was appointed
in July 2003 to cover the role of finance director following the departure
of Peter Aspden. Mr. Steadman, 50, was previously Group Finance Director at
Biocompatibles International plc and Eyecare Products Plc, and has extensive
international experience with The Clorox Company in the USA and Procter &
Gamble in Europe.
David Fish, Chairman of Christian Salvesen PLC, said: "Julian Steadman has
made a significant contribution to Christian Salvesen in the short time
since he took on the role of interim Finance Director. I am delighted that
we are now able to appoint Julian to the permanent position, from a strong
list of candidates."
Julian Steadman said, "I am delighted to be joining Christian Salvesen on a
permanent basis. This is a challenging time for the company, and for the
industry as a whole, but I look forward to working with the strengthened
management team to return the company to growth."
There are no other disclosures required under Section 6.F.2 (b-g) of the
Listing Rules.
*****
The European logistics company said in October trading remains difficult in
all sectors in the U.K., but it anticipates improvement in the second half
when the impact of its restructuring and management changes will be felt.
Christian Salvesen reported loss before tax of GBP5.5 million for financial
year to March 31, 2003.
CONTACT: CHRISTIAN SALVESEN PLC
Edward Roderick, Chief Executive
Frances Gibson-Smith, Head of Investor Relations
Phone: 01604 662600
HOGARTH PARTNERSHIP LIMITED
John Olsen
Tom Leatherbarrow
Phone: 020 7357 9477
COLT TELECOM: Ratings Unaffected by Early Redemption of Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services said its ratings on U.K.-based
telecommunications operator COLT Telecom Group PLC (B-/Stable/--) are not
affected by news that the group has given notice of the redemption of its
12% U.S. dollar senior discount notes due 2006.
COLT held substantial cash and liquid resources of GBP934 million ($1.55
billion) at Sept. 30, 2003, of which about GBP122 million will be absorbed
by the redemption, expected on Dec. 22, 2003. The residual cash should
still allow COLT to meet Standard & Poor's expectation that the group's
liquidity will remain sufficient on a rolling basis to cover commitments due
within the following 18 months. The early redemption should result in net
interest savings of about GBP30 million and demonstrates COLT's continued
focus on cost control.
EMI GROUP: Time Warner Turns Back on Merger Offer
-------------------------------------------------
Eric Nicoli, Chairman of EMI Group plc said: "On 19 November, we said that
our discussions with Time Warner Inc. concerning the acquisition of the
recorded music division of the Warner Music Group were progressing well and
at an advanced stage. Time Warner has informed us that they are now
considering a possible proposal from another party as an alternative to our
own firm offer.
"Following a rigorous assessment of the business and the opportunity to
create value, we have put forward a full and fair offer with the interests
of our shareholders uppermost in our minds. When we reach a definitive
conclusion, we will make a further announcement."
CONTACT: EMI GROUP
Jeanne Meyer
Phone: 212-786-8850
BRUNSWICK GROUP
Steve Lipin/Cindy Leggett-Flynn
Phone: 212-333-3810
HOLLINGER INC.: Telegraph Partly Liable for Parent's Borrowings
---------------------------------------------------------------
The latest accounts of The Telegraph Group showed it has guaranteed the
borrowings of its parent company Hollinger International Inc., according to
the Financial Times.
The loan made last year, which is under a US$310 million credit facility,
amounts to US$265 million. The guarantees are secured by fixed and floating
charges over all the assets of the U.K. newspaper business, its 2002
accounts show.
Daniel Colson, chief executive of the Telegraph Group, insisted the
transaction was not out of the ordinary. He said: "The credit facilities
provided by our banking syndicates are guaranteed by operating subsidiaries,
and the banks insist on cross-guarantees."
Mr. Colson assures the complex cross-guarantees would not complicate any
asset sale. The Telegraph Group itself is debt free as the group's
borrowings are consolidated at the Hollinger International parent company.
The Telegraph Group became an attractive acquisition after Hollinger
International became embroiled in controversial payments made to several of
its executives. Express Newspaper and Daily Mail & General Trust are
thought to be interested in the Telegraph titles.
KINGSTON COMMUNICATIONS: New CEO to Hasten Sale, Breakup
--------------------------------------------------------
Acting Kingston Communications CEO and concurrent finance director, Malcolm
Fallen, is expected to be promoted full-time tomorrow, when the company
announces its interim results.
Mr. Fallen as been wielding the chief's powers since the resignation of
Steve Maine in September, following a "disastrous profit warning," the
Telegraph said. The warning "followed three years of misery for the city's
residents who bought shares in Kingston's 1999 flotation."
One unnamed analyst told the paper Mr. Fallen's appointment will lead to the
group's disintegration: "Once Malcolm is firmly in place, the doors will be
open to appoint bankers to work on a sale or breakup. He has thought for
some time that a deal of some sort is the best way to go."
Another analyst also said Kingston could be worth as much as 100p a share, a
premium to Thursday's closing price of 60p, down 2.5, but a 66% discount to
the 225p flotation price.
Mr. Fallen's plan, however, could come under heavy scrutiny by the city
council, which owns a 41% stake in the company. Facing a budget shortfall
next year, the city is expected to demand a deal that would not
substantially undervalue its investment in the company.
MG ROVER: Union Remains Skeptical; Wants Third Party Opinion
------------------------------------------------------------
The directors of Phoenix Venture Holdings, which holds the property assets
of MG Rover, met with representatives from Amicus and T&G unions last week
to clarify certain issues affecting MG Rovers and its employees. In
attendance were former CEO John Towers, Peter Beale and MG Rover chief
executive Kevin Howe. The senior officials assured workers' representatives
they are willing to use the company's property assets to save the car
business should it fall into financial difficulties, according to The
Telegraph.
Four local businessmen, led by Mr. John Towers, bought MG Rover for GBP10 in
April 2000, after which they separated its property assets under a new
holding company called Phoenix Venture Holdings. The set-up triggered
speculations the carmaking operation might not be able to touch the company
land should it fall into administration. MG Rover reported narrowed losses
of GBP111 million last year.
Duncan Simpson, Amicus' national officer raised the question about a GBP12.9
million trust fund set up last year to provide "long-term and
post-retirement benefits" for Phoenix's directors and their families.
According to him, the directors assured this does not disadvantaged MG Rover
as the fund does not come from MG Rover. He also brought up questions about
the directors' salary levels, as well as the GBP73 million deficit in
Phoenix's pension fund, and the GBP10 million-loan note handed to the four
owners of Phoenix when the company was restructured in December 2000. The
note, which has so far paid interest of GBP1.2 million and is due in 2003,
was not yet paid, Phoenix said, according to Mr. Simpson.
Mr. Simpson said his group is not satisfied with all the answers. They will
be calling some experts to look into the explanations of the company.
Company officials, on the other hand, said they are willing to show the
structure of the company to an independent accountant.
MOTHERCARE PLC: Reports Better-than-expected Half-year Results
--------------------------------------------------------------
Highlights of Results for the 28 weeks ended October 11:
Key Financials
(a) Company sales up 4.1% to GBP237.3 million (2002: GBP228.0
million)
(b) Like for like U.K. store sales up 6.4% (2002: down 2.1%)
(c) Gross margins up 5.9 percentage points to 46.9% (2002:
41.0%)
(d) Operating profit GBP9.5 million (2002: loss GBP9.9 million)
(e) Non-operating exceptional credit of GBP3.8 million relating
to property disposals
(f) Profit before tax GBP13.4 million (2002: loss before tax of
GBP10.0 million)
(g) Basic earnings per share 20.0p (2002: 0.0p)
(h) Earnings per share (before exceptional items) 13.1p (2002:
loss per share 14.9p)
(i) Net cash balances of GBP28.4 million (2002: net debt of
GBP0.9 million)
Operational Highlights
(a) Good progress in five key turnaround projects
(b) Improvement in product quality and availability has resulted
in good trading performance
(c) High street store trials successfully completed and phase
two fully underway
(d) Distribution working effectively and cost reduction ahead of
schedule
(e) Further rationalization of supply chain achieved
(f) Continuing good performance from Mothercare Direct and
Mothercare International
Current Trading
(a) Like for like U.K. store sales for the five weeks to 14
November were up 4.6%
(b) Gross margin improvement sustained
Commenting on the results, Ben Gordon, Chief Executive said: "We are
encouraged by the performance of Mothercare in the first half of the year.
The results demonstrate that we are making good progress in delivering our
turnaround plans and that improvements in our product ranges have been well
received by our customers. Trading for the first five weeks into the second
half has got off to a good start. However, we do have the key Christmas
trading period ahead of us and face tougher comparatives as we move forward.
We are in the first year of a three-year turnaround, so much remains to be
done to achieve a sustained recovery and continued profit growth."
To view full financial report: http://bankrupt.com/misc/Mothercare_plc.htm
CONTACT: MOTHERCARE PLC
Ben Gordon, Chief Executive
Phone: 01923 206001
Steven Glew, Finance Director
Phone: 01923 206140
BRUNSWICK GROUP LIMITED
Susan Gilchrist/ Philippa Power
Phone: 020 7404 5959
MYTRAVEL GROUP: Wraps up Sale of WCT to Travelocity
---------------------------------------------------
MyTravel Group plc announces the completion of the sale of WCT, which was
approved by shareholders on November 17, 2003, for US$50 million (GBP29.9
million) in cash.
*****
On October 22, 2003, the Board announced that MyTravel had reached an
agreement to dispose of WCT to Travelocity in a separate transaction. The
WCT Disposal comprises the Group's Internet-based distributor of hotel rooms
and travel related products in the U.S.
CONTACT: BRUNSWICK
Phone: 0207 404 5959
Fiona Antcliffe
Sophie Fitton
NETWORK RAIL: Books GBP95 Mln Operating Loss for April-September
----------------------------------------------------------------
Network Rail published Thursday its interim financial results, covering the
period April 1, 2003 to September 30, 2003. In summary:
Financial performance
(a) Turnover is broadly flat at GBP1,501 million (2002: GBP1,522
million)
(b) Operating loss of GBP95 million (2002: profit GBP121
million)
(c) Loss before taxation of GBP233 million (2002: GBP3 million)
(d) Net debt GBP10.3 billion (2002: GBP9.4 billion) -- below
previous forecast of GBP10.7 billion
(e) Net cash inflow from operating activities GBP1,048 million
(2002: GBP211 m million)
Significant increase in investment in rail infrastructure
(a) Maintenance expenditure increased from GBP583 million to
GBP685 million
(b) Renewals expenditure increased from GBP1,050 million to
GBP1,494 m million
(c) Enhancement expenditure of GBP334 million (2002: GBP404
million)
Demanding efficiency savings being introduced
(a) Efficiency Improvement Program targeting GBP1.3 billion
annual cost savings by 2006/7 (equivalent to 20% costs) --
published in June
(b) Total headcount reduction of 2000 within three years.
Performance beginning to improve
(a) 82.4% of trains running on time compared to 81.8% in first
half of 2002 despite significant delays caused by
exceptional heat related speed restrictions in summer and
the August power blackout
(b) Network Rail caused delay minutes for the financial year to
date (periods 1-8) are 8.5 million minutes down from 8.7
million for the same period in 2002
Substantial organizational change to improve performance and reduce costs
(a) Common organizational structure introduced across the U.K.
affecting over 8,000 staff
(b) Functional reorganization recently announced to streamline
decision-making and improve operational focus
(c) Single integrated rail maintenance operation to be created -
Reading maintenance contract already taken back in-house,
other 19 to follow
Interim review and financing plans progressing
(a) Interim Review of Track Access Charges nearing completion
(b) GBP4 billion commercial paper Program signed
Ian McAllister, Chairman of Network Rail, said: "These results are largely
in line with the performance we predicted upon acquisition. Our inheritance
was a poor one, with low train punctuality, a degraded infrastructure and an
explosion in costs. As we said on October 3, 2002 when Network Rail
acquired Railtrack, it will be three to five years before we deliver
sustainable change. [Today], one year on, we stand by that analysis.
"Some indices such as net debt show significantly better performance than
predicted just over one year ago. On this measure, for instance, we
projected net debt at this point would be GBP10.7 billion, rather more than
the GBP10.3 billion we actually have. Other measures showing pleasing
performance include the number of broken rails and category A signals passed
at danger, for instance, which are at historically low levels. We must be
eternally vigilant, but rail continues to be an extremely safe mode of
transport.
"Train punctuality, the measure which matters most to the traveling public,
shows frustratingly slow improvement with 82.4% of trains running on time
over the six months compared to 81.8% during the same period last year.
"The six months covered by this Interim Report were challenging but the
important thing is that an enormous amount of change is being initiated, and
this puts us on the right path towards much improved performance in the
future. The changes we have put in place provide this solid foundation and
my fellow Directors and I are determined that we will deliver the
improvements that the Company, and our customers, want to see."
NORTHUMBRIAN WATER: To Convince Rating Agencies to Upgrade Marks
----------------------------------------------------------------
Northumbrian Water is meeting Standard & Poor's and Fitch this week to
update them on its progress in addressing rating concerns. Suez sold the
utility to a consortium led by Deutsche Bank and Ecofin earlier this year.
The transaction included Northumbrian's assumption of GBP536 million in debt
in addition to its own GBP1.2 billion, prompting Standard & Poor's to take a
cut on its ratings.
Water industry regulator, Ofwat, then expressed worries about the company's
ability to tap capital markets. It warned that a "credit rating of BBB
might mean a company would have to pay a disproportionate premium to
maintain access to the debt market, or at worst find access to the bond
markets closed."
The regulator has given the company nine months to restore confidence among
financial markets after its sale. The next Ofwat review is scheduled in
June. Aside from these issues, Northumbrian also has to convince the
European Investment Bank to extend a waiver stating that it will not seek
early repayment of GBP365.9 million of loans. The Financial Times said
Northumbrian Water looks cheap against a sum-of-the-parts valuation of about
150p a share, but that its stock will continue to be held back until credit
ratings improve and the company reaches an accord with EIB.
Northumbrian was able to regain full listing on the London Stock Exchange in
September as promised. It had Pre-tax profits after exceptional charges and
fees of GBP15.5 million in the four months to September 30, on turnover of
GBP184.7 million. Fitch has a long-term rating of A minus for the company.
NTL INC.: Downsizing Plan to Involve 3,000 Jobs
-----------------------------------------------
NTL Inc. Chief Executive Officer Simon Duffy announced plans to reduce
company workforce by up to 20% in the next two to three years at a
technology conference in Barcelona, Spain, according to Bloomberg.
Mr. Duffy said U.K.'s biggest cable television operator will trim down the
company's approximately 14,600 employees by as much as 3,000, the report
said. The jobs-cuts will come hand in hand with reductions in software and
billing systems, said spokeswoman Alison Kirkwood.
NTL Inc. is downsizing after a buying spree during the telecommunications
boom left it staggering with heavy debt. It emerged from Chapter 11
bankruptcy protection in the U.S. in January. Last month, it reported
third-quarter net loss of GBP117.3 million pounds. It recently raised
US$1.37 billion from a rights offering, the proceeds of which are intended
to repay high-interest notes due 2010. It expects to cut GBP124 million
annually from interest payment, and be cash flow positive on an annual basis
because of the savings.
ROYAL & SUNALLINCE: Nine-month Operating Profit Down to 94%
-----------------------------------------------------------
Highlights of Nine-month Results:
(a) Underlying combined ratio of 96.2% for ongoing operations
meets target
(b) Result impacted by claims strengthening announced with
rights issue
(c) Underlying third quarter consistent with first half of year
(d) Good progress being made on U.S. restructuring
(e) Good progress on performance improvements
9 Months 9 Months
2003 2002
GBP million GBP million
General business net premiums written
(after impact of quota share - page 9) 5,125 6,184
Group operating result (based on LTIR)
(after GBP500 million additional claims
strengthening) 1 27 471
Group operating
(loss)/profit (based on LTIR)1, 2 (212) 180
Loss before taxation (146) (156)
Ratios
Combined ratio
- Overall 108.1% 104.0%
- Ongoing operations 96.2%
Balance sheet Sept. 30 Dec. 31
2003 2002
GBP million GBP million
Shareholders' funds 2,680 3,043
Net asset value per share (adding back equalization provisions net of tax)3
156p 175p
Tangible net asset value per share 145p 160p
Group Chief Executive Andy Haste commented: "This has been a quarter of
important progress in many areas. The underlying performance of our ongoing
operations, with a combined ratio of 96.2%, has been good. We have taken
steps to address the legacy issues of the past, but we recognize that there
is still a lot of work to do to ensure that we achieve our target of an
average combined ratio of 100% across the insurance cycle."
To see full financial results:
http://bankrupt.com/misc/RoyaSun_Results.pdf
CONTACT: ROYAL & SUNALLIANCE
Analysts contact:
Helen Pickford
Phone: +44(0)20 7569 6212
ROYAL & SUNALLIANCE: S&P Not Surprised by Profit Slide
------------------------------------------------------
Standard & Poor's Ratings Services said that its ratings and outlook on
U.K.-based insurer Royal & Sun Alliance Insurance PLC (A-/Negative/A-2) and
related subsidiaries of Royal & Sun Alliance Insurance Group PLC (R&SA) are
unaffected by R&SA's announcement of a sharp decline in group operating
result to GBP27 million (US$45 million) for the first three quarters of 2003
compared with the same period in 2002.
The decline in operating profits was attributable primarily to reserve
strengthening at the U.S. operations. This strengthening was announced in
September 2003 as part of a package of measures funded by a GBP960 million
rights issue.
Excluding the impact of this reserve strengthening, Standard & Poor's
expects R&SA to meet its earnings expectations and to record a combined
ratio of less than 102% for 2003. In addition, Standard & Poor's expects
R&SA to continue with the execution of its restructuring and capital-release
program to restore capital adequacy to a strong level from 2004.
ROYAL & SUNALLIANCE: Fitch Affirms Ratings; Outlook Negative
------------------------------------------------------------
Fitch Ratings affirmed Royal & Sun Alliance Insurance PLC's (RSAIP) Insurer
Financial Strength rating at 'BBB' and the Long-term rating at 'BB+'. At
the same time, the agency has affirmed the rating on the subordinated debt
issued by Royal & Sun Alliance Insurance Group (RSAIG) at 'BB'. All ratings
have also been removed from Rating Watch Negative, which was assigned on
September 4, 2003 following the H1 results announcement. The Outlook on all
ratings is Negative.
The ratings reflect the continuing challenges faced by RSAIP in
restructuring the group as well as dealing with negative external factors
including litigation and a toughening regulatory environment. Set against
these heightened risk factors are the strong profile and business position
R&SA maintains in numerous areas along with improving underwriting results
on continuing business.
The rating actions follow R&SA's third quarter results announcement, which
reported good underlying insurance results for the group but a substantial
reserve strengthening as had been indicated at the half year. The agency
considers that some room for improved performance exists in some core
business areas. Although the agency notes that reserves established of
GBP500 million are below the level required to reach the external actuaries
best estimate, an additional contingent liability for adverse claims
development of GBP300 million has been identified at the group level. Fitch
welcomes the start that R&SA has made in moving out of non-core lines of
business but notes that in the U.S. this has principally been through the
sale of renewal rights, therefore retaining the risks previously accepted
within the group and an economic capital requirement.
Despite the completed rights issue and improved underlying results, Fitch
continues to regard risk factors affecting the group as being high relative
to the group's ability to absorb them. It is likely that regulatory capital
requirements will increase over the near to medium term and, in Fitch's
view, this could significantly affect the future plans of the group. In
addition, the group still has significant outstanding litigation (especially
in the U.S. student loans case where the preliminary decision against them
has been appealed), as well as some exposure to collateralized debt
obligations. A further concern relates to the restricted fungibility of
capital between the U.S. and U.K. operations.
Finally, Fitch continues to believe that further deterioration in U.S.
reserving remains a possibility over the medium term and that this could
represent a significant drag on the group's prospective earnings. Fitch
expects RSAIP to make significant further progress along the lines already
announced in restructuring and enhancing the group in order to maintain the
current rating level, a failure to do so could result in further rating
action.
SAFEWAY PLC: Takeover Uncertainties Hit Profits
-----------------------------------------------
Safeway reported 7.5% fall in interim profits as suppliers refuse to offer
cut-price deals with the supermarket group amidst uncertainty over its
future ownership structure. It posted underlying pre-tax profits for the
six months to early October of GBP173 million. Margins dropped 0.5% showing
clearly reduction in supplier support. By contrast its same-store sales
rose 0.1% just like that of rival chain J Sainsbury. Safeway considered its
"solid" first half performance as a "pleasing outcome" considering its
limited resources and uncertain corporate situation.
The company is being rocked by regulatory inquiries into its long-running
takeover. It is now in the process of accepting bids for the 39 stores,
which would be divested under Morrisons merger plans to satisfy watchdog
concerns. Offers for the stores valued the assets at more than the GBP543
million-valuation of property consultants.
SSL INTERNATIONAL: Interim Results Support Expectations
-------------------------------------------------------
Highlights of Interim Results for the Six Months to September 30, 2003:
6 Months To:
September 30, 2003 September 30, 2002
GBP'm GBP'm
Sales 317.7 308.5
Operating Profit* 32.8 30.5
Operating Margin* 10.3% 9.9%
Pre-Tax Profit 9.5 10.6
Free Cash flow 13.9 (2.4)
Basic EPS* 7.9 7.0
Basic EPS 3.2 3.5
*Before charging exceptional costs of GBP12.0 million (2002: GBP8.4 million)
(a) Sales up 3% to GBP318 million; Durex grows strongly and currency
movements are positive
(b) Gross and operating margins improved as underlying cost reductions are
achieved
(c) Free cash flow generated of GBP14 million
(d) Interim dividend maintained at 3.9 pence
(e) Marigold Industrial gloves business sold on October 31
(f) Medical division divestment is on track
Ian Martin, Chairman, commented: "The transformation of SSL into a focused
consumer products group continues. Marigold industrial gloves has been sold
and we are now in the final stages of selling our medical division.
Extensive due diligence has been completed, and discussions are underway
with a view to reaching an agreement soon. We remain on track to achieve
our expectations."
Brian Buchan, Chief Executive, added: "In an extraordinarily busy and
challenging period we have continued to drive growth in Durex across all our
markets. The rejuvenation of Scholl, which was hit by the downturn in the
Far East, is underway and has the potential to generate similar returns in
the future."
To view full report and financials:
http://bankrupt.com/misc/SSL_International_Interim_Results.htm
CONTACT: SSL INTERNATIONAL PLC
Phone: 020 7367 5760
Brian, Buchan, Chief Executive
Garry Watts, Group Finance Director
Jan Young, Head of Investor Relations
THE MAITLAND CONSULTANCY
Phone: 020 7379 5151
William Clutterbuck
Brian Hudspith
SURFACE TECHNOLOGY: 50 Jobs to go in Cost-cutting Program
---------------------------------------------------------
Surface Technology said it would cut jobs to reduce personnel costs as part
of a strategy to improve the financial strength of the business. The
U.K.-based company that sells process equipment into a variety of markets
including photonics, wireless, data storage and MEMS, will eliminate around
50 positions to reduce its workforce to 150.
In October, concurrent with the resignation of its chief executive, Ian
Smith, the company acknowledged that its markets have been very difficult
and that it has made significant losses.
"The Board is committed to returning the business to profitability and good
health and to building on the restructuring work already delivered," it said
in a statement.
The company's loss before tax for the first half of 2003 was GBP4.3 million,
compared with GBP8.4 million in the same period in 2002. Sales for six
months ended June 30, 2003 was down to GBP6.8 million (US$11.5 million) from
GBP17.1 million) in the same period in 2002. The reduction was due to both
the fall in demand for capital equipment in STS' served markets, as well as
a 10.7% fall in the average selling price of machines.
CONTACT: SURFACE TECHNOLOGY SYSTEMS
Nigel Randall, Chairman
Phone: 01633 652 400
Paul Webb, Finance Director
Phone: 01633 652 400
Binns Winningtons
Ken Rees
Phone: 0117 317 9477
ROWAN DARTINGTON & CO. LIMITED
Barrie Newton
Phone: 0117 933 0011
WEMBLEY PLC: Confirms Negotiations with Potential Buyers
--------------------------------------------------------
Troubled gaming club, Wembley, admitted last week it is putting itself up
for sale after receiving a number of interest from potential bidders. The
dog racing and slot machines group was forced to announced the plan after
Penn National Gaming, an operator of casinos, horse racing tracks and slot
machines, disclosed the agenda of their recent meetings.
Nasdaq-listed Penn recently said it was "in discussions with Wembley" over
the "possible cash acquisition of some or all of its assets." It is
particularly interested in Lincoln Park in Rhode Island, the crux of a
bribery case that had rocked the group.
Wembley said it wants to stay independent as much as possible, but it is
looking into whether the approaches would "result in attractive proposals
being made."
U.S. casino operators Harrah's, Park Place and Kerzner International, could
be interested in Wembley, analysts say.
Active Value, Schroders and Fidelity, hold almost half the group's shares.
*********
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., Fairless Hills, Pennsylvania, USA, and
Beard Group, Inc., Frederick, Maryland USA. Larri-Nil Veloso, Ma. Cristina
Canson, and Laedevee Gonzales, Editors.
Copyright 2003. All rights reserved. ISSN 1529-2754.
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