/raid1/www/Hosts/bankrupt/TCREUR_Public/030425.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
Friday, April 25, 2003, Vol. 4, No. 81
Headlines
F I N L A N D
FINNAIR OYJ: Cuts Flights to Beijing Temporarily Due to SARS
F R A N C E
ALSTOM SA: In Advanced Talks with Siemens Over Turbine Unit
RHODIA SA: Pierre Letzelter Resigns From Board of Directors
SUEZ SA: Sells Stake in Fortis on the Market Through Bought Deal
G E R M A N Y
DEUTSCHE TELEKOM: Expects Mild Losses from New Call Policy
HVB GROUP: Expected To Gain From Loan Repackaging Venture
INFINEON TECHNOLOGIES: Banks Advise Investors to "Sell"
KIRCHMEDIA GMBH: French TV to Pitch EUR100 Mln to Saban's Bid
I T A L Y
FIAT: Aims To Sell More Cars After Good Results in China
FIAT SPA: IFIL S.p.A. Buys Stake From IFI S.p.A.
N E T H E R L A N D S
AEGON NV: Issues Final Dividend for Fiscal Year 2002
KLM ROYAL: Renews Ground and In-flight Product on UK Routes
UNITED PAN-EUROPE: Announces Appeal to Ratification of Akkoord
R U S S I A
KAZKOMMERTS INTERNATIONAL: Fitch Assigns 'BB' Rating To Eurobond
S W E D E N
TELIASONERA: To Sell Com Hem to EQT Northern Europe
S W I T Z E R L A N D
ABB LTD.: Court Likely to Delay Asbestos Settlement Approval
U N I T E D K I N G D O M
BAE SYSTEMS: Proposal to Finmeccanica Seeks Control of Alenia
CORUS GROUP: Unions Praise Firing of Executive Chairman
CORUS GROUP: Appoints New Chief Executive and Chairman
IMPERIAL CHEMICAL: Quest Division Eyed by Denmark's Danisco
MYTRAVEL PLC: Revoked License Could Cause Industry-wide Crisis
ROYAL & SUNALLIANCE: Disposal of Healthcare Unit Completed
SOMERFIELD PLC: Issues Response to Proposed Offer
STANDARD LIFE: Survival Tied to Staying "Mutual," Says CEO
STANDARD LIFE: Presents Resolutions at Annual General Meeting
TELEWEST COMMUNICATIONS: Chairman Says 2002 Was a Difficult Year
THISTLE HOTELS: Bil International Receives Low Acceptances
WORLD TRAVEL: Says Group Was Loss-making in 4Q and Whole 2002
- - - - - - - -
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F I N L A N D
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FINNAIR OYJ: Cuts Flights to Beijing Temporarily Due to SARS
------------------------------------------------------------
Finnair is temporarily cutting the number of its flights between
Helsinki and Beijing due to the SARS disease, which has brought
down the demand of flights to China.
In May, seven flights between Helsinki and Beijing will be
cancelled. The passengers will be transferred to other Finnair
flights.
In June Finnair will operate three weekly flights on Mondays,
Wednesdays and Fridays from June 2 to June 30. Flights from
Beijing to Helsinki depart on Tuesdays, Thursdays and Saturdays.
In July Finnair will operate four weekly flights on Mondays,
Wednesdays, Fridays and Sundays from July 1 to July 31. The
return flights from Beijing to Helsinki depart the following day.
Finnair flights between Helsinki and Beijing will return to the
published timetable as of August 2003.
CONTACT: FINNAIR OYJ
Mr. Christer Haglund, VP Corporate Communications
Phone: +358 9 818 4007
Mr. Taneli Hassinen, Financial Communications Officer
Phone: +358 9 818 4976
Tuomas Kanninen, Manager Analyses
Phone: +358 9 818 5472
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F R A N C E
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ALSTOM SA: In Advanced Talks with Siemens Over Turbine Unit
-----------------------------------------------------------
The chairman of Siemen's AG has confirmed that the company is in
advanced talks to buy the Transmission & Distribution unit of
Alstom, the engineering company currently disposing assets to
offset expected losses.
Chairman Heinrich von Pierer said: "I can confirm that we are in
advanced negotiations with Alstom about their industrial turbine
business. All I can say at this point is that talks are on
track."
Earlier, TCR-EU reported that Alstom's industrial turbines unit
may be sold off to German engineering group Siemens AG for
USD1.07 billion. Both companies, however, declined on the
matter.
If pushed through, the deal would plug a gap in Siemens's power
engineering portfolio and may help the French heavy engineering
group, whose interests range from ultra-fast trains to ships and
turbines, keep its business afloat.
It is known that Alstom is currently disposing assets to offset
an expected EUR1.3 billion loss in the year to March 2003. It
was able to secure credit lines of EUR1 billion to stave off a
crisis in the short term, but it is reliant on the capital
increase working.
The Transmission & Distribution unit delivered sales worth
EUR3.16 billion last year, generating operating profit of EUR203
million.
Earlier this month Alstom pre-announced a EUR1.3 billion net loss
for 2002, along with an admission that Alstom would not achieve
financial targets set out in its March 2002 "Restore Value"
restructuring plans.
2002 losses are blamed on the provisions taken to cover technical
faults with some gas turbines sold by ABB Ltd. that were later
acquired by Alstom.
The company's troubles started when Renaissance Cruises Inc., its
biggest customer, filed for Chapter 11 protection. The latter
suffered a sharp fall in demand for cruises after the September
11 terrorist attack in the U.S.
RHODIA SA: Pierre Letzelter Resigns From Board of Directors
-----------------------------------------------------------
Rhodia announced Wednesday the resignation of Pierre Letzelter
from Rhodia's Board of Directors for personal reasons.
Pierre Letzelter was named during the October 25, 2002 Board of
Directors meeting and his appointment would have been submitted
for ratification at the Annual Shareholders Meeting of April 29,
2003.
Rhodia is one of the world's leading manufacturers of specialty
chemicals. Providing a wide range of innovative products and
services to the consumer care, food, industrial care,
pharmaceuticals, agrochemicals, automotive, electronics and
fibers markets, Rhodia offers its customers tailor-made solutions
based on the cross-fertilization of technologies, people and
expertise. Rhodia subscribes to the principles of Sustainable
Development communicating its commitments and performance openly
with stakeholders. Rhodia generated net sales of ?6.6 billion in
2002 and employs 24,500 people worldwide. Rhodia is listed on the
Paris and New York stock exchanges.
Contact: RHODIA SA
Investor Relations
Marie-Christine Aulagnon
Phone: 01 55 38 43 01
Fabrizio Olivares
Phone: 01 55 38 41 26
SUEZ SA: Sells Stake in Fortis on the Market Through Bought Deal
----------------------------------------------------------------
SUEZ, the lead shareholder of Fortis with 140 million shares
(10.8% ownership stake), has carried out the following
transactions, in concert with the latter:
- 50 million Fortis shares were sold on the market through a
"bought deal", with a view to a further sale to institutional
investors;
-70 million shares were cashed in through the issue of a
mandatory exchangeable bond into Fortis, carrying an exit price
between 17 euros and 20 euros with a 3-year maturity.
These combined transactions allow the Group to cash in 1.8
billion euros and enable it to reduce net debt by the same
amount.
Following this transaction, SUEZ holds 1.5% of Fortis capital (20
million shares). This stake constitutes an underlying position
for the exchangeable bond issued in July 2000.
These transactions were carried out at a time when Fortis share
reached levels close to the share price at the end of 2002.
SUEZ is no longer present on the Board of Directors of Fortis and
thus demonstrates its divestment of this company, which has been
the historical partner of SUEZ.
These transactions demonstrate SUEZ will to divest its non-
strategic assets before the end of the 2003-2004 action plan.
These transactions have been carried out by UBS Warburg.
SUEZ, a worldwide industrial and services Group, provides
innovative solutions in Energy - electricity and gas - and the
Environment - water and waste services.
It generated 2002 revenues of EUR 40.218 billion (excluding
energy trading). The Group is listed on the Euronext Paris,
Euronext Brussels, Luxemburg, Zurich and New York Stock
Exchanges.
CONTACT: SUEZ SA
Homepage: http://www.suez.com
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G E R M A N Y
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DEUTSCHE TELEKOM: Expects Mild Losses from New Call Policy
----------------------------------------------------------
The introduction of call-by-call services in Germany beginning
today is expected to cut Deutsche Telekom's local phone call
sales, AFX News says.
The new innovation allows callers to select the service provider
with the most favorable rate for each call, explains the
newswire. Germany first implemented this policy in the long-
distance service.
The company, currently undergoing restructuring, is not planning,
however, to increase connection charges. "The bottom line is, we
expect a sales decline of a low double-digit million euro
amount," T-Com Chairman Josef Brauner told AFX News in an
interview.
"An increase of the connection charge is currently not planned.
The measures by the authorities does not allow for any leeway at
present," he added.
HVB GROUP: Expected To Gain From Loan Repackaging Venture
---------------------------------------------------------
Losing German bank, HVB Group, may benefit from a joint venture
aimed at repackaging and selling loans in the form of asset-
backed bonds designed to let commercial banks offload more loans.
The venture, announced on Wednesday, involved Germany's five
biggest banks, and the Kreditanstalt fur Wiederaufbau, a
government-backed development bank. Institutional investors are
seen as the main buyers. The venture also takes advantage of tax
changes due by the end of the year.
The plan will sell portfolios with an AAA credit rating; however,
individual packages may include some lower-rated loans.
According to the Financial Times, HVB may dominate any initial
transfer of loans to a new entity, as it is having difficulties
selling debt under its own name.
Last year, the Bank posted a EUR85 million net loss, and had to
sell a 25 percent stake in Bank Austria.
In the meantime, Commerzbank, which designed the scheme, is not
expected to join immediately. Other banks that signed up are
Deutsche Bank, Dresdner, a unit of the Allianz financial group,
and DZ Bank, the co-operative banking network.
The report added that the venture would allow the banks to lend
to small and medium-sized companies while shifting enough risk
off their books.
However, Torsten Althaus from Standard& Poor's commented, "We
have not yet got a concrete proposal. The programme is not clear
to us at all."
INFINEON TECHNOLOGIES: Banks Advise Investors to "Sell"
-------------------------------------------------------
Several investment banks gave a "sell" recommendation on Infineon
Technologies stocks, after the company posted wider year-on-year
net losses for the quarter to March 31, the Financial Times said
recently.
Deutsche Bank led the way, changing its recommendation to "sell"
from "hold," noting the EUR328 million net loss incurred by the
German DRAM maker during the period. Deutsche Bank now expects
the loss on earnings per share for the full 2003 financial year
to reach EUR1.34 from EUR0.95 previously.
Morgan Stanley also reduced its earnings per share forecast for
financial year 2003 to a EUR0.55 loss from a EUR0.37 loss and for
financial year 2004 to EUR0.29 from EUR0.31, the paper said.
Morgan semiconductor analyst, Stuart Adam, retained an "under-
weight" stock rating for Infineon, citing ongoing pricing
pressures as likely to offset some of the benefits of further
cost reductions.
Goldman Sachs, on the other hand, reiterated its "in-line" rating
for Infineon. Goldman has made minor changes to their forecasts,
lowering their estimates for DRAM costs in the second quarter but
said: "We do not see a significant downside risk to DRAM pricing
in 2003 currently."
Nomura, for its part, revealed the company is still selling chips
below the cost of production. Chip prices crashed by over 90%
between their peak in July 2000 and the end of 2001, the paper
says. Lately, however, a significant rally in chip prices has
been noted, but Deutsche Bank believes, "the recent DRAM pricing
momentum is now largely behind us."
The company recently reported a 13% increase in revenues, but it
is not enough to erase the stigma of its 91.9% dive in the stock
market since peaking at EUR92.3 in June 2000. Infineon stocks
are currently trading at EUR7.36, down more than two-thirds over
the past 12 months.
The making of basic DRAM memory chips makes up for 35% of
Infineon's overall business.
KIRCHMEDIA GMBH: French TV to Pitch EUR100 Mln to Saban's Bid
-------------------------------------------------------------
TF1, France's largest private television broadcaster, confirmed
earlier this week that it is joining the group of U.S.
billionaire Haim Saban in bidding for the TV assets of defunct
KirchGruppe.
TF1 CEO Patrick Le Lay told the Financial Times shareholders have
already approved the release of between EUR100 million and EUR150
million as contribution to the bid of Mr. Saban. The American
businessmen has agreed to buy a 36% stake in ProSiebenSAT.1,
giving him a voting majority in Germany's largest television
operator. It will also secure the film library of the defunct
Kirch group.
Right now the deal is estimated to cost Mr. Saban and his
partners EUR1 billion. Some say this price tag could increase
sharply if a public offer for the broadcaster's listed shares and
an expected capital increase is executed.
But Mr. Le Lay says his group is not worried. Whatever the
outcome, the French group expects to get 10% of the new company.
The Financial Times says TF1 has exclusive negotiating rights
with Mr. Saban until the end of next month.
Meanwhile, according to the paper, TF1 shareholders approved Mr.
Saban's appointment to the French group's board of directors on
Wednesday.
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I T A L Y
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FIAT: Aims To Sell More Cars After Good Results in China
--------------------------------------------------------
Fiat Auto S.P.A. (FIA) expects to sell between 50,000 to 60,000
cars in China after selling 23,000 cars in the country last year.
Within the next two years, the Company hopes to increase the
number of units it sells in China annually to 150,000.
Last year, Nanjing Fiat, the Company's joint venture with Nanjing
Automotive Group, posted revenues of CNY2.3 billion.
Dow Jones reports that the Company will have to improve the
models it is offering, and not only focus on se3lling family
cars.
Nanjing Fiat makes Palio, a small-sized sedan, and Siena, a
medium-sized model.
On the issue of the growing price war in the market, Fiat's chief
representative in China Flavio Ciappa commented that his company
may "adjust prices when necessary."
Nanjing Fiat was established in 1999 with a total investment of
CNY3 billion.
Recently, controlling shareholder and chairman of Fiat SpA
Umberto Agnelli indicated hopes that the struggling Italian
industrial group will return to profit next year even with a
tough 2003.
Fiat reported a consolidated net loss of EUR4.2 billion for 2002
as a result of operating losses at its core auto-making unit and
to write-downs on some of its equity investments.
It was forced to borrow money from Italian banks to keep up with
its chronic cash burn. It eventually had to unload a large part
of non-core assets to pay the loan.
FIAT SPA: IFIL S.p.A. Buys Stake From IFI S.p.A.
------------------------------------------------
Shareholders of holding company Ifil Finanziaria di
Partecipazioni S.p.A. (IFIL) approved a proposal to buy an 18%
stake in Fiat SpA and other assets from its majority owner Ifi
Istituto Finanziario Industriale S.p.A. IFI).
Dow Jones Newswires said IFIL plans to issue 167 million new
shares to IFI in exchange for the stake in the struggling Italian
industrial group, Fiat.
A 1.1% stake in Sanpaolo IMI SpA and 62% stake in Juventus
Football Club SpA are also included in the plan. The deal would
result to a rise in IFI's stake in IFIL from 55% to 60%.
Meanwhile, IFI's combined 30% controlling stake in Fiat will be
concentrated exclusively in IFIL as a result of the transaction.
TCR-EU recently reported, citing sources, that industrial group
Fiat may raise as much as EUR2 billion through a stock offering
to current investors.
The company reported a record loss of EUR3.9 billion last year.
It is also in need of some EUR2 billion a year to launch new
models through 2004 after partner General Motors Corp. stopped
investing more cash.
Fiat decided to sell assets and has so far raised at least EUR5
billion this year. EUR2.4 billion of this was raised from the
sale of Toro, EUR1.6 billion from FiatAvio, EUR160 million from
real estate, and EUR805 million from truck rental company Fraikin
SA.
CONTACT: FIAT SPA
250 Via Nizza
10126 Turin, Italy
Phone: +39-011-686-1111
Fax: +39-011-686-3798
Toll Free: 800-804027
Home Page: http://www.fiatgroup.com/e-index.htm
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N E T H E R L A N D S
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AEGON NV: Issues Final Dividend for Fiscal Year 2002
----------------------------------------------------
At the Annual General Meeting of Shareholders of AEGON N.V. held
on April 17,2003, the dividend for the fiscal year 2002 was fixed
at EUR0.74 per common share of EUR0.12 par value. After the
deduction of the interim dividend of EUR 0.37 already paid, the
final dividend amounts to EUR 0.37 per common share of EUR 0.12
par value.
The final dividend for the fiscal year 2002 will be paid out
entirely in stock to be paid out of the paid-in surplus. For
every 25 shares held, one new common share will be paid. The
share dividend has been based upon the average price of the AEGON
share on Euronext Amsterdam for the five trading days from
February 27 up to and including March 5, 2003. AEGON shares will
be quoted ex-dividend on April 23, 2003. Any remaining fractions
will be settled in cash. There will be no trading in dividend
coupons on Euronext Amsterdam.
The schedule in respect of the final dividend 2002 will be as
follows:
April 23, 2003 Ex-dividend quotation on Euronext
Amsterdam
April 23 through May 9, 2003 Delivery Period of dividend rights
May 13, 2003 Start delivery new common shares
The new common shares of EUR 0.12 par value paid out as part of
the final dividend qualify for the dividend for the fiscal year
2003 and subsequent years.
The final dividend will be payable as from May 13, 2003 at the
head of offices of: ABN AMRO Bank N.V., Dexia Bank Nederland
N.V., Radobank Nederland, Fortis Bank (NL), The Netherlands;
Kredietbank N.V., Brussels; Kredietbank S.A. Luxembourgeoise,
Luxemburg; UBS AG, Credit Suisse First Boston, Credit Suisse,
Switzerland, Switzerland; Deutsche Bank AG, Frankfurt am Main and
Capita Trust Company Limited, London.
Holders of K-certificates (certificates of shares to bearer
provided with a dividend sheet consisting of separate dividend
coupons) are given the opportunity to surrender their dividend
coupon sheets No. 6 at the offices of N.V. Nederlandsch
Administratie- en Trustkantoor, Herengracht 420, 1017 BZ
Amsterdam, The Netherlands. Delivery of new common shares to
holders of K-certificates shall solely take place on the basis of
surrendered dividend coupon sheets No. 6.
Rights to the dividend payment in stock will be made available to
holders of CF-Certificates through those institutions which have
been acting as custodians of the coupon sheets for their shares
at the close of business on April 22, 2003. The custodians are
requested to deliver the dividend rights to the offices of N.V.
Nederlandsch Administratie- en Trustkantoor not later than close
of trading on Euronext Amsterdam on May 9, 2003.
Institutions registered with Euronext Amsterdam N.V. shall
receive a provision in respect of the delivery of dividend
coupons so as to allow the holder to receive his dividend coupon
sheets in other places than N.V. Nederlandsch Administratie- en
Trustkantoor may be charged a provision by the receiving
institution.
If and to the extent on May 9, 2003 any dividend rights are still
outstanding, the corresponding new common shares will be sold
with the net proceeds being held for the benefit of the holders
of the dividend rights not surrendered.
Holders of registered shares will receive separate notice from
AEGON regarding the distribution of dividend.
For holders of New York shares, a different dividend payment
procedure applies. They will be contacted by AEGON's US Transfer
Agent: Citibank, N.A., 111 Wall Street, New York, NY 10043.
The Executive Board
KLM ROYAL: Renews Ground and In-flight Product on UK Routes
-----------------------------------------------------------
Effective June 1, 2003, KLM Royal Dutch Airlines will renew its
ground and in-flight product on European routes, allowing
customers a choice of three service concepts and associated
fares: Base Fares, Economy Fares and Select Fares. Booking
options vary from limited to flexible and service on board and on
the ground varies from simple to full service. Furthermore, KLM's
existing European Business Class will be replaced by the so-
called "KLM Europe Select" service and the current Economy Class
will be re-branded "KLM Economy". By offering a transparent fare
structure and a straightforward product, KLM meets changing
customer requirements and demands.
With the new product KLM expects to transport 10% more passengers
within Europe, strengthen its European market position, and
reduce unit costs. Moreover, this product renewal fits in KLM's
aim to achieve structural yield improvement. The new concept will
be implemented on all European routes, except on routes operated
by KLM cityhopper and KLM exel.
Select Fares Passengers who choose a Select Fare, profit from
flexible booking conditions and an extensive range of "KLM Europe
Select" services on board and on the ground. Select Fare
passengers will be offered comfortable and efficient ground
handling procedures. They will have access to separate check-in
desks, as well as special fast-lane service during boarding. They
will have free access to KLM lounges and a range of additional
services, including fast-lane service at passport control and
valet parking at the departure hall (at a cost, but with a 10%
discount on regular fees charged at Schiphol Airport). These and
other facilities will be available at KLM's home base, Amsterdam
Airport Schiphol. KLM will strive to introduce a similar level of
service at other European airports, wherever possible.
The in-flight service offered in KLM Europe Select will be almost
identical to that currently offered in Business Class, including
a wide range of beverages, meals and other facilities. The seats
will, however, be slightly narrower, with rows of six abreast
instead of five, but the legroom will stay the same (33 inches).
As of June 1, KLM will begin introducing this new seat
configuration aboard its Boeing 737-300s and 400s. Depending on
local market conditions, KLM will reduce its current Business
Class fares. For the Dutch market this implies a reduction of
between five and 13 percent on average. The new seat
configuration, which will allow KLM to carry more passengers in
KLM Europe Select, will offset the effects of lower fares.
Economy Fares and Base Fares Passengers who require fewer booking
options and less service, can opt for an Economy Fare or Base
Fare with "KLM Economy" service on board and on the ground. KLM
will offer a limited number of seats at discount prices.
Passengers must book and pay Base Fares at least 14 days in
advance and will not have the option of canceling or rebooking
their flight. The Economy Fares are slightly more expensive, but
offer more flexible conditions. Flights may be canceled or
rebooked at a cost.
KLM will serve coffee, tea or soft drinks on board, as well as a
sandwich or meal box (depending on the duration of the flight).
Passengers in KLM Economy will no longer be served alcoholic
beverages, nor will they be offered a choice of newspapers.
Whatever the fare, passengers will continue to profit from KLM's
qualities and services as a network carrier. This includes access
to a global network, flights to primary airports, and service
recovery in the event of unforeseen circumstances, such as flight
cancellations.
CONTACT: Youssef Eddini, KLM Media Relations
Phone: +31 20 649 45 45
UNITED PAN-EUROPE: Announces Appeal to Ratification of Akkoord
--------------------------------------------------------------
United Pan-Europe Communications N.V. ("UPC" or the "Company")
(EURONEXT Amsterdam: UPC) gives notice that, following the
confirmation of the Akkoord (plan of composition) by the Dutch
Court of Appeals, InterComm Holdings L.L.C. ("ICH"), a creditor
in the Dutch moratorium proceeding with a EUR 1.00 claim and one
vote, has appealed the ratification of the Akkoord to the Dutch
Supreme Court (Hoge Raad).
The Supreme Court will be the final point of appeal for ICH in
relation to the ratification of the Akkoord by the district court
in Amsterdam on March 13th 2003. It is expected that the Supreme
Court will deal with the matter expediently. UPC believes the
appeal is without merit. As previously highlighted the U.S. Court
and the Dutch Court of Appeals have already overruled objections
brought by ICH.
In addition, UPC announces a further extension to the Dutch
Implementing Offer, until June 30, 2003, for holders of ordinary
shares A of UPC, domiciled outside of the United States. The
Company will provide more information on the expected timing of
completion of the restructuring as soon as it is available.
United Pan-Europe Communications N.V. is one of the leading
broadband communications and entertainment companies in Europe.
Through its broadband networks, UPC provides television, Internet
access, telephony and programming services. UPC's shares are
traded on Euronext Amsterdam Exchange (UPC) and in the United
States on the Over The Counter Bulletin Board (UPCOY). UPC is
majority owned by UnitedGlobalCom, Inc. (NASDAQ: UCOMA).
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R U S S I A
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KAZKOMMERTS INTERNATIONAL: Fitch Assigns 'BB' Rating To Eurobond
----------------------------------------------------------------
Fitch Ratings, the international rating agency, has assigned a
Long-term rating of 'BB' to the USD350 million 8.5% notes due
2013 issued by Kazkommerts International B.V., guaranteed by
Kazkommertsbank (KKB).
KKB is the largest Kazakh bank by assets and equity. It has
historically focused on large corporations, but SME and retail
banking now accounts for a significant part of its balance sheet.
KKB recently acquired banks in Kyrgyzstan and Russia. The
principal shareholders of KKB, who together hold more than 40%,
also have substantial industrial interests, including stakes in
Kazakh Telecom and Hurricane Hydrocarbons. A share issue,
expected to reach completion in April 2003, will give the
European Bank for Reconstruction and Development a 15% stake in
KKB.
CONTACT: Alexander Giles, Moscow
Phone: +7 095 956 9903
Libor Slechta, Frankfurt
Phone: +49 69 7680 7615
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S W E D E N
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TELIASONERA: To Sell Com Hem to EQT Northern Europe
---------------------------------------------------
TeliaSonera (LSE:TLSNq) (Nasdaq:TLSN) has signed an agreement to
sell com hem AB to EQT Northern Europe for MSEK 2,150.
Com hem is the largest cable television operator in Sweden,
providing cable television services to approximately 1.39 million
households. The company also provides pay television (including
pay per view) and broadband Internet access services. In fiscal
year 2002, com hem generated EBITDA of MSEK 53 on turnover of
MSEK 1,071.
EQT is a northern European private equity group that was
established in 1994 and consists of five private equity funds, of
which one is EQT Northern Europe, with total equity commitments
exceeding EUR 3 billion.
Telia agreed to dispose of com hem as part of its undertakings to
the European Commission in the context of the merger between
Telia and Sonera. The disposal is expected to generate a capital
gain in excess of MSEK 1,600 for TeliaSonera and a positive one
off cash flow effect of more than MSEK 1,900.
Completion of the sale is conditional upon approvals by the
European Commission and relevant competition authorities, which
is expected within the first half-year of 2003.
CONTACT: TELIASONERA
Phone: +46-8-713 58 30
=====================
S W I T Z E R L A N D
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ABB LTD.: Court Likely to Delay Asbestos Settlement Approval
------------------------------------------------------------
The approval of ABB Ltd.'s complex asbestos settlement in the
U.S. could be delayed by at least another week, but this
development is not expected to change the auditor's opinion on
the company's annual report.
According to the Financial Times, the 2002 results will be
released today. The paper does not expect the liabilities
related to asbestos claims in the U.S. to be heavily underscored
in the report.
The paper says the market is pretty confident the U.S. court will
approve the US$1.2 billion asbestos settlement plan, which is
part of the "pre-packaged" Chapter 11 filing for Combustion
Engineering. The U.S. subsidiary is mainly responsible for the
group's asbestos liabilities. ABB's share price has rallied in
recent weeks, reflecting optimism of investors that the
settlement will get the nod.
The court decision had been expected at the beginning of April,
but got postponed until April 24. ABB said Tuesday the court may
not finish hearing evidence until next week. It is understood
that two further court dates on May 1 and May 2 have been set
aside.
Cheuvreux Analyst Simon Marshall-Lockyer, in an interview with
the Financial Times, said ABB's asbestos problems, which had
haunted the group's share price for most of last year, had now
taken a "back seat."
He said the key issue now is for ABB's management to deliver on
its promise to rebuild the company's capital base with a US$2
billion divestment program, including its oil and gas and
building systems divisions.
Deutsche Bank's Mark Cusack, however, is keeping his fingers
crossed. "Dealing with the US legal system is always fraught
with danger," he told the Financial Times in a separate
interview.
He said if the US court judgment goes against ABB its fallback
plan is to go for a "free fall" Chapter 11.
"This will give them resolution, but it could mean that the
settlement terms have to be haggled over and renegotiated. This
uncertainty is unhelpful but at least the company is acting to
resolve the asbestos problem which has caused them such grief in
the past," Mr. Cusack said.
===========================
U N I T E D K I N G D O M
===========================
BAE SYSTEMS: Proposal to Finmeccanica Seeks Control of Alenia
-------------------------------------------------------------
The Farnborough, U.K.-based defense supplier, which was forced to
take a GBP750 million write-off in its annual report, has issued
another proposal to Finmeccanica SpA seeking control of the joint
venture Alenia Marconi Systems.
According to Il Sole 24 Ore, BAE Systems PLC rejected a 50:50
venture in defense electronics and instead proposed a reshuffle
of joint interests in electronics, avionics and communications.
The new plan, proposed by BAE chairman Sir Richard Evans at a
lunch in London in mid-April with Finmeccanica chairman
Pierfrancesco Guarguaglini, allows BAE to take the majority in
the present 50:50 radar joint venture Alenia Marconi Systems.
Finmeccanica would take the majority in avionics, since these
activities would be less prestigious because BAE has transferred
its major operations to its North American unit.
In communications, Finmeccanica would have the majority because
it is recognised as larger after last year's Marconi Mobile
acquisition.
BAE, however, would not make any cash payment to Finmeccanica for
control of Alenia Marconi Systems and would settle the deal via
contribution of avionics and communication activities.
The original proposal to put all the two groups' electronics
activities into a single joint venture was blocked by the Italian
government, which did not want BAE to have the majority, the
report said.
Finmeccanica is examining the latest proposal and has yet to make
an official comment on the project.
BAE was forced to take a GBP750m write-off because of cost and
time overruns on two big equipment programs - the Nimrod
surveillance aircraft and the Astute nuclear-powered attack
submarine.
It also lost out on two other big Ministry of Defense program and
has to share a GBP10 billion aircraft carrier program for the
Royal Navy with Thales of France.
CONTACT: BAE SYSTEMS
Farnborough, Hampshire GU14 6YU, UK
Phone: +44 (0) 1252 384605
Fax: +44 (0) 1252 383947
Homapge: http://www.baesystems.com
Contact:
Phil Soucy, Corporate Communications
Phone: +44 (0) 1252 384797
E-mail: phil.soucy@baesystems.com
Richard Coltart, Corporate Communications
Phone: +44 (0) 1252 384875
E-mail: Richard.coltart@baesystems.com
CORUS GROUP: Unions Praise Firing of Executive Chairman
-------------------------------------------------------
UK steel union, ISTC, credited itself for the ouster of Corus
Group Plc Executive Chairman Sir Brian Moffat this week, after
members and colleagues at Corus' German, Dutch and UK plants
staged protests last week.
The group called on newly appointed CEO Philippe Varin to make a
"wholesale review" on the company and reassure unions that there
would be no repeat of the "previous poor management."
"We want the new Board to look at things afresh," Ken Penton, a
spokesman for ISTC told AFX News.
Mr. Varin, commenting on his appointment, said: "Whilst I do not
under-estimate the challenge ahead, I believe that with the right
leadership and commitment Corus can become united,
internationally competitive and profitable."
A former Pechiney Group executive, Mr. Varin will be paid a
salary of 690,000 pounds annually before bonus and share options.
He will assume his post beginning May 1, while Corus Deputy
Chairman Jim Leng will ascend to the Chairman's post on June 1
after Mr. Moffat retires.
CORUS GROUP: Appoints New Chief Executive and Chairman
------------------------------------------------------
Corus Group plc is pleased to announce the appointment of
Mr Philippe Varin as Chief Executive, effective May 1, 2003.
Philippe Varin is 50 years of age and has held a number of
executive positions in Pechiney Group including latterly Senior
Executive Vice President and Group Executive Committee Member.
In welcoming this appointment the Chairman of Corus, Sir Brian
Moffat, said: 'Philippe Varin is a very experienced international
manager having spent over 25 years in the metals industry. I am
confident he will provide the leadership and energy necessary to
develop the plans to reverse the UK losses and agree the future
financial programme.'
On his appointment, Philippe Varin said:
'Whilst I do not under-estimate the challenge ahead, I believe
that with the right leadership and commitment Corus can become
united, internationally competitive and profitable. Corus has
great strengths and I am determined to realize its true
potential'.
Corus is also pleased to announce the appointment of Jim Leng as
Chairman with effect from June 1. Mr Leng joined the Board in
June 2001 and is currently Deputy Chairman of Corus. He will
succeed Sir Brian Moffat on his retirement from the Board on May
31.
Mr Varin will have a service contract for the first year of his
employment, which is terminable by the Company giving not less
than two years' notice. The notice period will then gradually
reduce over the second year of his employment to an ongoing one-
year notice period.
His annual salary will be œ690,000 (equivalent to EUR1 million)
and he will also receive a pension allowance (equal to 30 per
cent of his salary). He will participate in the Executive
Directors Bonus Scheme, subject to a guaranteed bonus of 20 per
cent in the first year.
He has agreed to buy 1.1 million Corus shares and has been
granted a matching contingent award over 1.1 million shares by
the Company which will vest after three years generally subject
to his continuing employment. In addition, he will be granted
options over 3.3 million Corus shares which will be exercisable
in equal tranches on the third, fourth and fifth anniversaries of
the date of grant subject to him retaining at least the 1.1
million shares purchased in the ongoing Corus. In lieu of his
agreement to forfeit all his options in Pechiney, he will receive
a payment of EUR800,000 which avoids any possibility of any
potential future conflicts.
Notes to Editors
Philippe Varin was born on August 8, 1952 and is of French
nationality. He was educated at Ecole Polytechnique and Ecole des
Mines de Paris, is married with four children and currently lives
in Paris. He will relocate to London with his family. He joined
Pechiney Group in 1978 and held a number of senior positions in
France and the USA before becoming Senior Executive Vice
President Aluminium Sector and Group Executive Committee Member
in 1999.
IMPERIAL CHEMICAL: Quest Division Eyed by Denmark's Danisco
-----------------------------------------------------------
A division of Imperial Chemicals Industries (ICI), the U.K.
specialty chemicals and paints group which is facing several
shareholder lawsuits, is being considered for acquisition by
Danish sugar and ingredients group Danisco.
Danisco is reportedly considering making a pitch for Quest, the
flavor and fragrance division of ICI.
The Danish group has previously revealed that it is conducting a
study of all potential takeover candidates in the area of enzymes
and flavors. It added that it has a war chest of some EUR10
billion (USD1.098 billion) to invest in expanding its core
operations.
Speculations that Quest could become a takeover target sparked
when ICI's projection that a drop in sales and a rise in raw
material costs would result in a 24% year-on-year decline in
profits at the flavor and fragrance division to GBP50 million
(USD50 million).
ICI recently issued a warning that first quarter profits will
fall by 24%, as troubles at Quest and National Starch mounts.
The news was immediately followed by a 44% (more than STG800
million) wipeout of the company's value and a fall of 39% in ICI
shares.
Several shareholders have launched lawsuits against the company,
alleging that ICI violated federal securities laws by issuing a
series of materially false and misleading statements to the
market throughout the Class Period which statements had the
effect of artificially inflating the market price of the
Company's securities.
MYTRAVEL PLC: Revoked License Could Cause Industry-wide Crisis
--------------------------------------------------------------
The Civil Aviation Authority is not about to revoke the license
of MyTravel Plc contrary to earlier reports that have caused
jitters in the tour industry in recent days, AFX News said,
citing a well-placed industry source.
Since the reports first appeared over the weekend, other tour
operators are understood to be wary of the possible revocation of
MyTravel's license since they could be forced to contribute in
reimbursing customers for their cancelled holidays.
AFX News says all holiday companies contribute to so-called "Atol
bonds," which answer for reimbursement costs such as when
customers are stranded abroad in the event a travel firm goes
bust.
"If an operator such as MyTravel goes bust, Atol draws on the
industry-wide pool, meaning rival operators such as First Choice
Holidays PLC could be left nursing a bill amounting to tens of
millions," AFX News explains.
A spokesman for the Civil Aviation Authority declined to comment
on the issue, but assured that the agency is in regular dialogue
with MyTravel.
ROYAL & SUNALLIANCE: Disposal of Healthcare Unit Completed
----------------------------------------------------------
Royal & SunAlliance confirm that the disposal of their Healthcare
& Assistance business, announced on April 4 has now completed.
The transaction completed on originally announced terms.
Note:
As part of the program of actions outlined in November 2002,
Royal & SunAlliance has announced the sale of its UK Healthcare &
Assistance business to Oxfordway Limited for a consideration of
GBP147m, payable in cash. As at December 31, 2002 the net assets
of the business that is the subject of the transaction were
around GBP9m and net written premiums for the year were around
GBP273m. The deal is expected to release capital of around
GBP247m, from a combination of the profit on disposal and the
reduction in premium income, and this will be used to support
Royal & SunAlliance's other general insurance business. The
profit for 2002 of the Healthcare & Assistance business was
GBP45m, which included a one off profit of GBP13m relating to
releases of prior year claims provisions.
SOMERFIELD PLC: Issues Response to Proposed Offer
-------------------------------------------------
On April 15, 2003 the Board of Somerfield announced that it had
received a conditional proposal relating to a possible offer for
the Company. The proposal was conditional on a number of matters,
including the unanimous recommendation of the proposed offer by
the Somerfield Board.
On April 17, 2003 Messrs Lovering and Mackenzie made an
announcement confirming that they had put a conditional proposal
to Somerfield.
The value indicated in the proposal was 103p per share.
The Board met Wednesday with its advisers to consider the
proposal. The Board concluded unanimously that the proposal from
Messrs Lovering and Mackenzie substantially undervalues
Somerfield.
Commenting, John von Spreckelsen, Chairman of Somerfield, said:
'The Board considers that the price indicated fails to reflect
the value of the business. Somerfield has strong brands in Kwik
Save and Somerfield, a solid strategy for delivering value to
shareholders and excellent prospects.'
The Directors of Somerfield accept responsibility for the
information contained in this announcement. To the best of the
knowledge and belief of the Directors (who have taken all
reasonable care to ensure that such is the case), the information
contained in this announcement is in accordance with the facts
and does not contain anything likely to affect the import of such
information.
Dresdner Kleinwort Wasserstein and Deutsche Bank are acting for
Somerfield and for no-one else in connection with the potential
offer for Somerfield and will not be responsible to anyone other
than Somerfield for providing the protections afforded to clients
of Dresdner Kleinwort Wasserstein or Deutsche Bank or for
providing advice in relation to such potential offer.
CONTACT: Cubitt Consulting
Fergus Wylie
Phone: 020 7367 5100
STANDARD LIFE: Survival Tied to Staying "Mutual," Says CEO
----------------------------------------------------------
A highly charged annual meeting failed to convince the board of
Standard Life to give way to calls for the company to be de-
muatalized, The Telegraph said Wednesday.
CEO Iain Lumsden said the key to the company's survival is
retaining its mutual status: "By concentrating on what we know
best, and providing our customers with improved products at lower
costs, we will ensure that our company prospers. In this, our
mutual status plays an important role, because as a mutual we can
provide better value to our with-profit policyholders."
The call for de-mutualization is being led by retired teacher
David Stonebanks, who claims to have enough support to force an
extraordinary meeting and a vote in July.
Meanwhile, policyholders also attacked executives over
performance-related bonuses and pension payments. In 2002, the
company's top six executives received nearly GBP500,000 in
bonuses, according to The Telegraph. An additional GBP1.5
million windfall, under Standard's long-term incentive plan, was
also rewarded to them for performance dating from 1998.
Policyholders chided the executives for receiving the bonus even
as the insurer cut bonuses on life and pensions with-profits
policies three times in just over a year. But Chairman John
Trott said attractive packages were necessary to retain good
staff.
"We believe as a matter of principle we should pay bonuses for
success and not for mediocrity," he said.
Mr. Lumsden warned members should expect terminal bonuses and
payouts to be lower in future. "This simply reflects the fact
that investment returns generally have been falling and payouts
must reflect the returns over the period of investment."
STANDARD LIFE: Presents Resolutions at Annual General Meeting
-------------------------------------------------------------
Standard Life held its 177th Annual General Meeting in Edinburgh
Wednesday. The following ordinary resolutions were passed:
Resolution 1: To receive and consider the Report of the Directors
and the Accounts for the year ended 15 November 2002.
Resolution 2: To re-appoint PricewaterhouseCoopers LLP as
auditors of the Company to hold office until the conclusion of
the next General Meeting at which accounts are laid before the
Company.
Resolution 3: To authorize the Directors to fix the remuneration
of the auditors for the year to 15 November 2003.
Resolution 4: To re-elect Mr David Newlands as Director of the
Company.
Resolution 5: To re-elect Mr Hugh Stevenson as Director of the
Company.
Resolution 6: To re-elect Sir Brian Stewart as Director of the
Company.
Resolution 7: To re-elect Mr Jean-Claude Delorme as Director of
the Company.
Resolution 8: To authorize the Company to make donations to EU
political organizations and to incur EU political expenditure,
not exceeding 50,000 pounds sterling in total, during the period
beginning with the date of the passing of this resolution and
ending at the conclusion of the day on which the 2004 Annual
General Meeting is held. In this resolution, "donations", "EU
political organizations" and "EU political expenditure" have the
meanings set out in Part XA of the Companies Act 1985.
Notes to editors
1. Assets under management:
Standard Life is Europe's largest mutual life assurance company
with assets under management of GBP83.3 billion (as at 15
November 2002). The company's financial position is regarded as
"very strong" by Standard & Poor's (AA) and "excellent" by
Moody's (Aa2).
2. Website:
Further details of the AGM can be found at
http://www.standardlife.com
3. Photographs:
Note to picture editors: photographs are available at
http://www.newscast.co.uk
CONTACT: Patricia Corrigan
Press Office
Phone: 0131 245 5916
Mobile: 0774 092 4558
Allan MacLean,
Press Office
Direct line 0131 245 5422
Mobile 0776 497 6137
Barry Cameron,
Press Office
Direct line 0131 245 6165
Mobile 0771 248 6463
TELEWEST COMMUNICATIONS: Chairman Says 2002 Was a Difficult Year
----------------------------------------------------------------
Telewest's vision is to be the UK's leading broadband
communications company. We will do this by building on our
strengths in local access to the residential and business
customer; by bundling multiple services; and leveraging our
unique position in content.
To achieve this vision we will focus our business around the
strategic themes of:
-- Broadband leadership
-- Customer focus
-- Cost control
This will create a profitable company and a stable platform for
future growth.
Chairman's Statement
2002 was an extremely difficult year for our Company, its
employees and its shareholders. Despite building on our
leadership position in broadband Internet, our steady operational
performance has been overshadowed by a combination of
circumstances, which led to the decision to restructure our
balance sheet. These included the well-publicized downturn in
telecoms, media and technology equities, coupled with
increasingly tight capital markets, and the downgrading of the
Company's corporate credit ratings, which severely limited the
Group's access to financing and its future financial flexibility.
All of this contributed to a further severe decline in our share
price.
The decision to restructure was taken having looked at all the
available options to secure the Company's financial future. Our
financial advisors (Schroder Salomon Smith Barney and Gleacher &
Co) shared the board's view that a debt for equity swap was the
most appropriate solution to our financing issues, allowing us to
balance the interests of all stakeholders as fairly and equitably
as possible. In September, we reached a preliminary non-binding
agreement with an ad hoc committee of our bondholders to cancel
approximately GBP3.5 billion of debt for 97% of the enlarged
equity in the Company. Under this agreement, existing
shareholders would retain a 3% interest in Telewest post-
restructuring. As part of the proposed restructuring, we have
also negotiated a preliminary agreement on revised bank
facilities which we believe will provide the Group with
sufficient liquidity to meet its funding needs going forward. It
is in everyone's interests to conclude this process as speedily
as possible and we are working with our advisors to achieve this.
We will continue to give shareholders updates on our progress as
necessary.
Charles Burdick, previously group finance director, was appointed
managing director following the resignation of the group chief
executive, Adam Singer, in July. Mark Luiz replaced Charles as
group finance director. Charles and his management team have made
significant progress in redefining and implementing a new and
more focused strategy in line with the changed external
environment in which we operate. A strong cash focus will speed
the Group's progress towards a positive free cash flow position
after the completion of restructuring.
In May, Microsoft withdrew its three non-executive directors -
Dennis Durkin, Salman Ullah and Henry Vigil - from our board of
directors, as it felt it would be in a better position to manage
its investment in Telewest without board representation.
Microsoft subsequently announced its intention to sell its 23.6%
interest in Telewest - as yet no sale has been announced. In
July, Liberty Media also withdrew its three non-executive
directors - Robert Bennett, Miranda Curtis and Graham Hollis -
from our board of directors, as Liberty Media wished to eliminate
any potential conflict of interest or appearance of a conflict in
any upcoming restructuring discussions.
Amidst the turbulence of last year, we have emerged with a strong
management team who have a clear understanding of what needs to
be done to make our Company profitable. However, this has not
been without considerable personal cost to our staff, as we have
undertaken a substantial redundancy programme. I would like to
thank all our employees, including those who have left during the
year, for their contribution to the business. I look forward to
the continued support of our present employees as we work
together to build a stable and secure future.
Cob Stenham
Chairman
Managing Director's Review
As we review 2002, it is a tribute to all of my colleagues at
Telewest that the underlying operating performance of this
business continues to progress satisfactorily. Having said that,
both as a shareholder and long time employee, it has been a
frustrating and disappointing year. Due to the inability to raise
new capital and refinance existing debt, we reluctantly
concluded, after an extensive review with our financial advisors,
Schroder Salomon Smith Barney and Gleacher & Co, that a
recapitalisation of the balance sheet was the only course of
action available to us. As mentioned in the Chairman's Statement,
this will involve significant dilution to the holdings of our
existing shareholders as we swap approximately œ3.5 billion of
debt for equity. This was a difficult decision, but looking
forward, your board's commitment to both the new and existing
shareholders is to create real sustainable value.
Nevertheless, we achieved a modest growth in revenue to GBP1.3
billion and 20% improvement in EBITDA (before exceptional items)
to GBP368 million. This is at a time when we reduced headcount
and significantly cut capital expenditure. The reduction in
investment necessitated by market conditions has resulted in a
reassessment in the carrying value of our assets. We are not
alone in this, as many of our peer companies have had to do the
same. This has resulted in GBP1.6 billion of non-cash impairment
charges; the majority of such charges relate to the elimination
of goodwill established on the acquisition of cable and content
assets over the past four years. Under UK accounting standards
the write-down against fixed assets was only GBP87 million, hence
our cable infrastructure remains largely unimpaired. Together
with a higher interest charge following the planned increase in
the level of group debt, we report an increase in the overall net
loss for the year.
We have changed the way we think, work and do business
The new strategy for Telewest is based on broadband leadership,
customer focus and cost control and we have made significant
progress across all three in 2002. During the year, we undertook
a thorough review of our business and refocused our strategy to
ensure we have the right customer base and the correct product
set to achieve profitable growth. There has been a strategic
shift in focus from subscriber acquisition to churn reduction. We
will build on our strengths in local access to the residential
and business customer; the power of bundling multiple services;
and our unique position in content through our ownership of
Flextech.
We are a leader in broadband to the residential and business
customer
Our broadband internet products easily provide our highest
margins and our broadband customers are most likely to become
valuable, low churning, "triple play" customers subscribing to
broadband internet, telephony and television. As at today, we
have 297,000 broadband customers connected and 80% broadband
market-share in our cabled areas. In June, we launched our 1 Mb
blueyonder broadband internet service, which was voted the Best
New Telecommunications Product for 2002 at the Computing Industry
Awards. Including dial-up, we have over 540,000 internet
subscribers. We believe one day every one of them will be a
broadband customer. This significant presence is resulting in
partnerships with Microsoft, Sony and others and will enable us
to consolidate our broadband leadership position.
At the end of 2002, we had 183,000 broadband triple play
subscribers representing 10% of all of our residential customers.
This, together with price rises, has contributed to a 4% increase
in average monthly revenue per household to GBP41.80, the highest
of any cable company in Europe. However, overall revenue growth
has been impacted by net household customer losses of 7,000 in
2002, resulting from price rises and more rigorous enforcement of
installation fees and disconnection policies in line with our
objective of focusing on more cash generative customers.
Nevertheless, Consumer Division revenues (pre-exceptionals) have
grown by 6% to GBP910 million in 2002.
In the Business Division, we have continued to focus on high
margin data and internet products. The business IP market is
growing at around 20% annually whilst the data market is growing
at 11%. Our goal is to leverage our local network and product set
and achieve revenue growth in excess of the market. We have
extended our portfolio of data services, with services such as
IPVPN (internet protocol virtual private network) - a secure and
scalable private network solution that enables companies to send
voice, video and data through one single, efficient connection.
Data and internet revenues now make up 26% of the division's
revenues (excluding Carrier Services).
We are also taking a more focused approach to customer
acquisition, targeting corporations, medium-to-large enterprises
and the public sector, including local and national government
departments. We continue to focus on cross-selling additional
data and internet services to our existing customers, who are
increasingly taking a range of products and services from us.
Excluding the weak carrier market, Business revenues have
increased by 5% in the year.
A programming force in pay-TV
Flextech, through its wholly owned channels combined with its
share of UKTV (our joint venture with the BBC), continues to grow
advertising revenues in excess of the market overall and with a
20.4% basic pay-TV viewing share, is the UK's leading provider of
basic pay-TV programming. We have achieved this as we continued
our transition from being primarily an aggregator of acquired
programming to more of an asset-based company through investment
in original British programming. As an extension of this
strategy, Ftn was launched on Freeview in January 2003, giving
Flextech access to the free-to-air market for the first time. Not
only does this give us potential additional viewing share and a
subsequent increase in advertising revenue, but it also provides
a cross-promotion vehicle to encourage free-to-air viewers to
migrate to pay-TV. We also continue to strengthen our
relationship with the BBC with UKTV's launch of two channels
across all platforms - UK History and UK Bright Ideas. We have
also recently extended our brands by launching new time-shifted
versions of our most popular channels, UK Gold+1, LivingTV+1 and
Bravo+1. Content Division revenues are down œ22 million compared
with 2001 due primarily to the closure or sale of businesses and
other one-off events, including the closure of ITV Digital which
resulted in lost UKTV revenues.
We are maintaining a customer focus while controlling costs
We know the only way to be truly successful and to retain
valuable customers is by offering exemplary customer service. We
need to effectively match our products to our customers' needs
and improve their experience by giving them the ability to be
more in control of their service. We have made progress in this
area through selective investments in 2002 to improve our
products, systems and processes. These improvements have helped
drive down digital fault rates, reduced incoming call volumes to
our service centers and improved call answer times.
This has been achieved through a digital improvement program
focused on every aspect of the digital experience from the
digital head-end to the customer's TV. We have also established a
national fault center at Albert Dock in Liverpool and a national
liaison center in Sheffield to meet the needs of our customers.
Customer service hours have been extended and we now carry out
installations and fault repairs seven days a week. We recognize
the importance of the Internet as a cost-effective medium
delivering high levels of customer satisfaction and have
therefore introduced a range of web-based customer service
interfaces such as E-billing. We also provide self help tools for
our broadband customers. This allows customers to check their PC
specifications before booking an install date. This is all part
of our drive to change both the reality and the perception of
customer service in this Company and the industry.
These improvements have been made during a time when we have had
to make significant cost reductions to adapt to the changing
capital markets and lower growth options available to the
Company. By reducing activity levels, by not chasing growth where
the cost is not merited and focusing spend on those projects
yielding the most immediate returns, we have taken substantial
costs out of the business. Capital expenditure has fallen 27% in
2002 to œ477 million and will be even lower in 2003. We question
the value of every single expenditure undertaken and unless it
meets our objectives of broadband leadership or customer focus,
the money is not spent. As a result of our focus on core
competencies and the stabilization of our network and products,
we have had to make a number of our colleagues redundant. Our
staff levels have reduced by around 1,450 during 2002. This was a
difficult and painful process but necessary for the underlying
health of the business.
Your management
We also have a new management team in place. Mark Luiz succeeded
me as group finance director. Gavin Patterson now heads up the
Consumer Division and Tony Grace manages the Business Division.
These appointments combined with the technical expertise of
Howard Watson as managing director of networks means that we have
an experienced and knowledgeable cable management team to execute
the business strategy.
Jane Lighting who managed Flextech was recently recruited as the
new head of Five, the terrestrial television channel. We are
sorry to see her go, but have a strong team which will be managed
by Mark Luiz, previously head of Flextech, while we search for a
replacement.
REGULATORY
Telecommunications
In January 2003, following a ruling by the Competition
Commission, Oftel stated that a one-off 15% cut in the price of
calls to mobiles will be imposed, followed by further inflation-
linked annual price reductions of up to 15% for a period of four
years. These reductions will be effective from July 25, 2003,
provided the mobile operators are not successful in challenging
this ruling via judicial review. As Telewest originates a
significant volume of calls to mobiles, Oftel's decision will
have a considerable downward effect on the costs we incur in
delivering these calls to mobile operators. We are exploring
options to provide even more innovative telephone packages, so
that we can pass value on to our customers.
Broadcast
In December 2002, the OFT announced that although BSkyB had been
found to have a dominant position in the market for the wholesale
supply of premium sports and movie channels, it had not abused
that dominant position contrary to the Chapter II prohibition of
the Competition Act 1998. While disappointed by the ruling,
Telewest did not appeal. We anticipate renegotiating a new
premium channel deal with BSkyB, which will allow the Company to
profitably expand and promote these channels and gain incremental
customers in the process.
General
The Communications Bill was introduced by the Government in the
House of Commons in November 2002 and is progressing through
Parliament. Once enacted, this legislation will transfer the
regulatory functions of Oftel, the ITC, the Broadcasting
Standards Commission, the Radio Authority and the
Radiocommunications Agency to OFCOM. We look forward to the
streamlining of the number of regulatory authorities we deal with
and continuing deregulation of the markets within which we
operate. We support the move away from specific forms of market
regulation to reliance on the use of general competition law
where and when appropriate.
SUMMARY
The repositioning of the Company in 2002 provides a sound
platform for growth after our financial restructuring is
completed. With a strong management team and a clearly defined
strategy, we believe we are well positioned to speed our progress
to profitability and realize our vision of being the leading
broadband communications company in the UK.
Charles Burdick
Managing Director
26 March 2003
Financial Review
Telewest Communications plc prepares financial statements under
UK and US generally accepted accounting principles, (GAAP). The
UK GAAP Financial Statements and Notes to the Accounts and US
GAAP Consolidated Financial Statements and Notes to the
Consolidated Financial Statements are all included in this
report.
FINANCIAL RESTRUCTURING
On 30 September 2002, we announced that we had reached a
preliminary agreement relating to a financial restructuring (the
"Financial Restructuring") with an ad hoc committee of our
bondholders (the "Bondholder Committee"). That agreement provides
for the cancellation of all outstanding notes and debentures (the
"Notes"), representing approximately œ3.5 billion of
indebtedness, issued by the Company and Telewest Finance (Jersey)
Limited and certain other unsecured foreign exchange hedge
contracts (the "Hedge Contracts") of the Company in exchange for
New Ordinary Shares ("New Shares") representing 97% of the issued
share capital of the Company immediately after the Financial
Restructuring. The Company's current ordinary shareholders will
receive the remaining 3% of the Company's issued ordinary share
capital.
We also announced on September 30, 2002 that we were deferring
payment of interest under certain of our Notes and the settlement
of the Hedge Contracts. Such non-payment continues and has
resulted in defaults under the Group's bank facilities and a
number of other financing arrangements. Based on one such
default, in respect of non-payment of approximately GBP10.5
million to a Hedge Contract counter-party, that counter-party has
filed a petition for the winding-up of the Company with a UK
court. The Company intends to deal with this claim as part of the
overall restructuring of its unsecured debt obligations and does
not believe that the legal action will delay or significantly
impede the Financial Restructuring process. The Company will of
course continue to meet its obligations to its suppliers and
trade creditors and this legal action is expected to have no
impact on customer service.
On January 15, 2003, we announced that we had reached a non-
binding agreement with respect to the terms of amended and
restated credit facilities, with both the steering committee of
our senior lenders and the Bondholders Committee. In addition,
the terms of these facilities have received credit committee
approval, subject to documentation and certain other issues, from
all of our senior lenders, save for those banks which are also
creditors by virtue of the unsecured Hedge Contracts with which
we will deal in the overall Financial Restructuring.
The terms of the amended and restated bank facilities are as
follows:
-- the amended facilities total GBP2,155 million, comprising term
loans of GBP1,840 million, GBP190 million of committed overdraft
and revolving credit facilities and an uncommitted term facility
of GBP125 million;
-- the amended facilities do not amortize; and the majority of
the facilities will mature on December 31, 2005 with the balance
maturing on June 30, 2006;
-- financial covenants will be re-set to reflect the Company's
new business plan; and
-- the pricing on the facilities will be increased to reflect
market sentiment.
These amended facilities will replace the Group's existing bank
facilities, (the "Senior Secured Facility") and are, as noted
above, conditional on various matters, including the satisfactory
finalization of arrangements for dealing with foreign exchange
creditors and the completion of our balance sheet restructuring.
These amended credit facilities will provide the Company with
substantial liquidity, which is expected to be sufficient to see
the Company through to cash flow positive after completion of the
Financial Restructuring.
Negotiations are continuing with the Bondholder Committee, the
Company's senior lenders and certain other major stakeholders
with a view to the timely completion of the Financial
Restructuring.
GOING CONCERN
These financial statements have been prepared on a going concern
basis and do not include any adjustments that would arise as a
result of the going concern basis of preparation being
inappropriate. The board of directors have confidence in the
successful conclusion of a restructuring of the Company's balance
sheet (and any required amendments to the Senior Secured
Facility) and, together with and on the basis of cash flow
information that they have prepared, the directors consider that
the Group will continue to operate as a going concern for a
period of at least 12 months from the date of issue of these
financial statements. Any restructuring will require the approval
of the Company's bankers and various stakeholders. Inherently,
there can be no certainty in relation to any of these matters.
OVERVIEW OF GROUP RESULTS
Except where stated otherwise, this overview is before all
exceptional items and is based on UK GAAP.
Total turnover (including our share of UKTV, our joint venture
with the BBC) for the year ended December 31, 2002 increased 2%
to GBP1,347 million compared to 2001, driven mainly by 6% growth
in the Consumer Division to GBP910 million. Content Division
revenues, including UKTV, fell by GBP22 million primarily due to
the disposal of non-core businesses and the closure of ITV
Digital. Business Division revenues fell by GBP7 million
reflecting continuing weakness in the carrier market.
Gross margin improved from 63% to 68% for the year with strong
improvements in CATV margins, rising telephony margins and a
growing number of high margin broadband subscribers. CATV margins
improved from 57% to 62% as a result of selected price rises, a
reduction in the proportion of subscribers taking lower margin
BSkyB premium channels and cost reductions in programming.
Telephony margins have improved from 69% to 71% as a result of
selected price increases, an improvement in the mix of telephony
revenue, improved routing of telephony traffic and a reduction in
termination rates for certain calls. Gross margin is stated after
having taken into account cost of sales, before depreciation.
Selling, general and administrative expenses ("SG&A") for the
year were GBP499 million, up œ8 million on 2001. SG&A includes
GBP25 million of redundancy costs.
As a result of the continuing improvements in revenue, gross
margin and cost control, EBITDA for the year was GBP368 million,
up 20% on 2001. EBITDA margin grew from 24% to 29% for the year.
Including our GBP11 million share of UKTV's EBITDA, the Group's
EBITDA grew 19% to GBP379 million.
Net loss for the year improved from GBP801 million to GBP506
million. The improvement was as a result of the 19% improvement
in EBITDA, net foreign exchange gains relating to our US Dollar-
denominated debt, and lower goodwill amortization costs,
partially offset by higher depreciation and interest charges.
Exceptional Items
The Group has provided GBP16 million against turnover as a result
of a VAT & Duties Tribunal judgement in a dispute over the VAT
status of our cable TV listings magazines. Previously this was
disclosed as a contingent liability. The amount arises from VAT
payable in the period from January 2000 to July 2002. The Company
has appealed against this ruling. An exceptional amount of GBP2
million has also been provided for interest on the amount in
dispute.
The Group has provided GBP22 million for the exceptional legal
and professional costs of its Financial Restructuring incurred in
2002. Additionally, GBP29 million is included in interest payable
relating to an exceptional write-off of bank facility fees
previously expensed over the life of our Senior Secured Facility.
This is being renegotiated as part of our Financial
Restructuring.
On March 14, 2003, Telewest notified its Senior Lenders that, as
a result of these exceptional items and their impact on
Telewest's net operating cash flow, it would breach certain
financial covenants under its bank facility in respect of the
quarter ended December 31, 2002.
Reflecting the current market conditions, the Group has performed
impairment tests on the carrying value of its assets. The
impairment review was carried out in accordance with UK
Accounting Standards to ensure that the carrying value of our
separately identifiable assets in both Cable and Content
Divisions are stated at no more than recoverable amounts being
the higher of net realisable value and value in use. This has
resulted in GBP1,643 million of exceptional non-cash charges in
the year. The charge comprises of impairment to the goodwill on
acquisition of the following assets: GBP1,110 million in respect
of our acquired cable franchises, GBP376 million relating to
Flextech and GBP70 million for UKTV. There has been an additional
impairment charge of GBP87 million to the Cable Division's
tangible fixed assets. Non-cash impairment charges were GBP1,130
million in 2001.
Net loss after exceptional items for the year was GBP2,218
million compared to GBP1,935 million last year.
In the discussion of the financial results that follows, unless
specifically noted, all references to figures are identical under
UK and US GAAP.
CONSUMER DIVISION REVENUE
Consumer Division revenues (before the exceptional VAT item)
increased GBP53 million, or 6% to GBP910 million in 2002. This is
a result of the increased take-up of broadband products,
increased multi-service penetration and selected price rises.
These contributed to monthly average revenue per household
growing 4% to GBP41.80.
The percentage of subscribers taking two or more services grew
from 69% to 70% by the end of 2002. The number of triple play
customers (our most profitable customer segment), has grown
three-fold to 183,143. They account for 10% of our customer base
compared with 3% at the end of 2001.
In line with our strategic focus on more cash generative
customers, we introduced selected price rises and implemented
more rigorous enforcement of installation fees and disconnection
policies during 2002. These policies contributed to net household
customer losses of 6,994. Additional initiatives implemented in
2003 include the introduction of a GBP50 up-front payment by all
new customers, which can be offset against any installation fee
or subscription payment. We have also continued to tighten our
credit control policy and no longer actively market our Entry TV
package to new subscribers. We believe such initiatives will
result in higher revenue and lower cost contributing to increased
profitability, cash generation and churn reduction although they
may not lead to overall subscriber growth in the short term.
Telewest has previously reported churn on a product basis for
broadband internet, residential telephony and CATV. We have now
added household churn, which measures those customers who
disconnect entirely from Telewest (the full definition is
provided in the operating statistics which follow this Financial
Review). Household churn was 18.2% in 2002 overall, although this
had fallen to 15.7% in the fourth quarter. This measure includes
"uncontrollable disconnections" being customers disconnecting
when they move out of our addressable areas (being approximately
20% of the UK's households).
After the exceptional VAT item, Consumer Division revenues
increased GBP37 million or 4% to GBP894 million in 2002. This is
the same under both UK and US GAAP.
Internet and other
Internet and other revenues (before the exceptional VAT item)
increased 98% to GBP79 million in 2002. Broadband subscribers
tripled to 262,219 by the end of 2002, paying an average of
GBP25.12 per month. 70% of broadband customers subscribe to the
full triple play and 93% take at least one other product.
Broadband is also successful in attracting new customers to
Telewest, with 33% of broadband installations being subscribers
who are new to Telewest. We have, however, seen an increase in
broadband churn from 7.5% to 12.4% as some customers, who were
initially attracted by promotions, disconnected.
In June, we added to our standard 512 Kb blueyonder broadband
service, with the launch of a 1 Mb service priced at GBP35 a
month for those customers taking additional Telewest services or
GBP39.99 if taken alone. At 31 December 2002, 26,676 customers,
or 10% of all our broadband subscribers took this service.
Broadband growth has continued and as at 26 March 2003 we had
297,000 broadband subscribers, of which 31,000 took the 1Mb
service.
Together with dial-up internet services, we had 540,445 internet
customers by the end of 2002, representing growth of 39% during
the year. Dial-up is led by SurfUnlimited, our fixed-fee
unmetered service, which despite a œ1 increase in the price to
GBP13, remains one of the lowest cost unmetered services in the
UK today. At the end of 2002, we had 193,201 SurfUnlimited
customers. We continue to see a migration of internet customers
from dial-up services to broadband. As a result, 28% of the
broadband customers we added during 2002 were upgraded from
SurfUnlimited. The price of our metered Pay-As-You-Go internet
service has also risen from 1.5p per minute to 2p as we encourage
these subscribers to upgrade to an unmetered service.
Other revenues, before the GBP16 million exceptional VAT item
described above, were GBP5 million in 2002 (GBP9 million in
2001). These derived from the sales of cable TV listings
publications which ceased in November 2002.
After the VAT exceptional item, Internet and other revenues
increased 58% to GBP63 million, which is the same under both UK
and US GAAP.
Residential telephony
Residential telephony revenues increased GBP7 million, or 1% to
GBP495 million in 2002. Residential telephony subscribers
remained relatively flat at 1,614,324 at the end of 2002, with
penetration at 34.4%, although residential telephony lines fell
3% to 1,717,191, as second line penetration decreased with the
migration of dial-up internet customers to broadband. Average
telephony subscriber churn increased from 16.5% to 17.3%.
Average monthly revenue per line increased 2% to GBP23.16 in
2002. Average monthly revenue per subscriber has decreased
GBP0.17 to GBP24.92. The benefits of selected price rises and the
continued success of Talk Unlimited, have been offset by a
decrease in call volumes as a result of subscribers substituting
mobile for fixed line telephone calls, falling second line
penetration and the transfer of telephony traffic for calls made
by our subscribers to a large ISP, from our Consumer Division to
our Carrier Services Unit, which will now be billed on a flat
rate basis.
The number of subscribers to Talk Unlimited, our 24-hour, 7 days-
a-week flat rate unmetered residential voice service for local
and national calls in the UK, has continued to increase. By the
end of the year we had 360,662 Talk Unlimited subscribers
representing 22% of our residential telephony base.
In 2003, we further improved our flat rate telephony services by
launching Talk Evenings and Weekends, a telephony service
offering unlimited local and national evening and weekend calls
to anywhere in the UK, including line rental for only GBP17.50
per month. Early indications of take-up are encouraging. On 1
March, we expanded this range further by launching Talk
International for GBP3 per month, which offers reduced rates to
all international destinations. We are also improving the value
for our telephony consumers by offering free voicemail.
Cable television (CATV)
CATV revenues increased GBP7 million to GBP336 million in 2002,
due to selected price rises in April and August and the continued
migration of analogue subscribers to digital. This has been
offset by a reduction in the number of Sky premium channels sold
(with the pay-to-basic ratio falling to 72% from 80%), a change
in the mix of basic packages selected and a decrease in CATV
subscribers. Subscribers have fallen 47,973 to 1,293,811 with
penetration down from 28.5% to 27.5%, as CATV subscriber churn
increased to 21.5% from 18.7%. Average CATV revenue per customer
remained flat for the year at œ20.82 per month.
As CATV requires the highest up-front investment of all of our
products and provides the lowest margins, it has been
disproportionately affected by our new focus on cash generation
and on more profitable customer segments. The initiatives we have
implemented to improve mix and target more profitable customers
have led to fewer acquisitions and price rises have inevitably
led to higher disconnections, hence a fall in overall TV
subscribers. The initiatives implemented include a price rise in
August on our Entry package for new customers, the decision to
stop marketing our Entry TV package for sale to new subscribers
and the requirement that any customer who wishes to subscribe to
CATV as a stand-alone product must take our top-tier basic
package, Supreme. We have also withdrawn the Essential Plus
package for new subscribers to encourage customers to take the
Supreme package.
Despite this, the number of digital TV subscribers increased 18%
to 857,472, representing 66% of our CATV subscribers although the
migration of analogue customers to digital has slowed in the
second half of the year following the increased focus on cash
generation. However, digital TV remains a core product within our
bundled offering and we continue to enhance the value offered. In
2002, we added Sky One, the Hallmark Channel, UK Gold+1 and
LivingTV+1 to our Essential package and we introduced Sky Sports
News and UK History to our digital starter pack. We also enhanced
our TV platform with red button functionality permitting
customers to interact with eTV-enabled programmes. 50% of digital
customers accessed the Football World Cup service, 43% accessed
the Wimbledon Tennis service and 850,000 Big Brother votes were
registered using this service. In 2003, improvements to our
digital TV packages continue with the addition of ten new basic
entertainment channels and Sky Multiplex (offering nine extra
movie channels), providing even more choice and value.
BUSINESS DIVISION REVENUE
The Business Division comprises our Business Services Division
and our Carrier Services Unit. Total revenues decreased 3% to
GBP267 million in 2002, due mainly to a weak carrier services
market. However, business telephony lines increased 5% to 466,820
and overall customer accounts grew 1% to 73,746 in 2002.
Business Services Division revenues, which include the sale of
voice and data services, primarily to SMEs (small to medium sized
enterprises), corporates and the public sector, increased GBP11
million or 5% to GBP224 million in 2002. This division has
benefited from both revenue growth and margin improvement from
the strategic focus on high margin data and internet products. We
also continue to leverage our local network and product set and
focus on upselling to existing customers.
This focus has resulted in existing customers renewing contracts
and extending services with us. For example, `The Scotsman'
newspaper, which extended its existing contract with us for
another three years and is taking additional data services
including IPVPN (Internet Protocol Virtual Private Network) with
MPLS (Multi Protocol Label Switching) across various sites. It is
also implementing a new Automatic Call Distribution (ACD) system
to enhance call handling services in its call centre and is
adopting a new internet structure.
Other new data contracts include one providing Littlewoods
Leisure with the capacity to run a VOIP (Voice Over Internet
Protocol) service. This service ensures the delivery of high
quality voice communications across our IP Network, which is
constantly monitored to ensure that there is sufficient bandwidth
to prioritise the customer's delivery requirements.
Public sector activity has also been strong during 2002. A major
contract was signed with Newcastle City Council to manage the
joining of 15 local libraries to the Telewest Schools Wide Area
Network, into which 113 schools are connected. The contract is
worth GBP2.1 million over five years. In addition we signed a
contract with neighbouring Gateshead City Council to provide a
voice and data network in their Housing/Neighbourhood offices.
Our Carrier Services Unit offers our fibre optic national network
to other carriers and operators (such as T-Mobile) for voice and
data communications. Revenues from carrier services tend to be
derived from a relatively small number of high value, short and
long-term contracts and therefore can fluctuate from year-to-
year. Revenues fell GBP18 million to GBP43 million in 2002 as the
overall carrier market in the UK weakened.
In the Business Division the difference between UK and US GAAP
revenues is primarily due to the revenue recognition conventions
on certain carrier services contracts. Under US GAAP, our
Business Division revenues increased œ15 million or 6% to GBP283
million in 2002, as the Carrier Services Unit's results benefited
after one of its customers, Atlantic Telecommunications, was
placed in administration. This led to the release of GBP8 million
of deferred revenue previously being recognised over 20 years.
There was no cash impact arising from this treatment.
CONTENT DIVISION REVENUE
Our Content Division's turnover (including its share of UKTV
turnover and before elimination of inter-divisional trading) was
GBP185 million, compared with GBP206 million in 2001. This is a
result of the sale of certain businesses during 2001 and 2002 and
the non-recurrence of one-off revenue benefits arising in 2001.
The closure of ITV Digital also had an impact through lost
subscription revenue for UKTV although none of the wholly owned
channels were carried on the ITV Digital platform. Subscription
revenues were down 4% to GBP65 million (including our 50% share
of UKTV) in 2002. This was partially offset by strong subscriber
growth at BSkyB and improved tiering at NTL.
Advertising revenues of GBP73 million (including our 50% share of
UKTV) for the year were up 12% in a market that saw only a 5%
overall rise. The Content Division's advertising revenue
performance derives from the relative viewing strength of its
channels, with its viewing share in pay-TV homes growing from
6.1% to 6.6% and its share of basic viewing remaining stable at
20.4% in spite of increased competition in the multichannel
market. In 2002, UK Gold was the second most watched basic-pay
channel in pay-TV homes, with LivingTV the sixth. The Content
Division grew its market share with a 3.4% share of the TV
advertising market in the UK, up from 3.0% in 2001.
Under UK and US GAAP Content Division revenues are reported after
inter-company elimination and exclude our share of UKTV revenues.
In 2002, Content Division revenues decreased to GBP106 million
compared with GBP129 million in 2001, for the reasons given
above.
OPERATING EXPENSES (before depreciation and amortisation)
Increased cost control led to a GBP39 million, or 4% reduction in
operating expenses (before exceptional items) to GBP915 million
including redundancy costs of GBP25 million in 2002. Operating
expenditure consists of costs of programming, telephony expenses,
the acquisition of programming content for our Content Division
and SG&A. After an exceptional item of GBP22 million relating to
costs incurred as a result of the Financial Restructuring,
operating expenses fell GBP17 million to GBP937 million in 2002.
Consumer programming expenses fell œ14 million or 10% to œ128
million in 2002. As a percentage of CATV revenues, programming
expenses improved to 38% from 43% in 2001. Programme costs
reflect payments to programme providers generally based on the
numbers of subscribers to individual channels under long-term
contracts or, in the case of BSkyB's premium programming, an
industry rate-card. These costs have fallen as a result of an
increase in the number of our TV subscribers taking packages with
fewer or no premium channels and favourable contract
renegotiations with certain programme suppliers. This is
partially offset by increased costs of programming for our
digital packages which have more channels than their analogue
counterparts.
Telephony expenses fell 8% to GBP218 million in 2002. These are
principally payments to third-party network providers for
terminating calls which originate on Telewest networks. This
decrease resulted from improved re-routing of traffic to least-
cost providers, a reduction in termination rates for certain
calls, an improvement in the mix of telephony revenue and the
non-recurrence of GBP7 million of cost relating to our Carrier
Services Unit expensed in 2001.
The Content Division's cost of sales for 2002 was GBP70 million
compared with GBP83 million for 2001. This consists mainly of the
costs of programming shown on its TV channels and the costs of
advertising sales those channels receive. The decrease has
resulted from lower costs following the closure of transactional
businesses in 2001 and 2002 and the costs of a one-off sale of
programming rights in 2001.
Excluding Financial Restructuring costs, SG&A was GBP499 million
in 2002, up GBP8 million on 2001. Staff costs increased GBP18
million to GBP275 million (after capitalisation) reflecting
redundancy costs of GBP25 million as a result of an employee
reduction programme completed during 2002, offset by decreased
ongoing payroll costs following completion of this programme
which reduced our workforce 14% to approximately 9,200. Including
Financial Restructuring exceptional costs, SG&A increased GBP30
million to GBP521 million in 2002.
Operating expenses before depreciation, amortisation and
impairment of assets under US GAAP fell GBP15 million or 2% to
GBP942 million in 2002. The difference between UK and US GAAP is
due primarily to the treatment of telephony installation costs
included within SG&A. SG&A under US GAAP totalled GBP526 million
in 2002 (GBP497 million in 2001).
EBITDA
The Group's consolidated EBITDA increased GBP24 million or 8% to
GBP330 million in 2002. Pre-exceptional EBITDA, which improved in
each successive quarter of 2002, was GBP368 million, a growth of
20%. Under US GAAP, EBITDA increased 15% to GBP341 million in
2002.
DEPRECIATION AND AMORTISATION
Depreciation expense increased to GBP577 million in 2002. This
increase of GBP132 million is principally attributable to an
exceptional write-down of GBP87 million in 2002 for the fixed
asset impairment of certain Cable Division assets. The remainder
of the increase related to additional capital expenditure for the
installation of new subscribers and the upgrade of parts of our
network.
Under US GAAP depreciation expense before impairment of tangible
assets (GBP841 million) increased GBP26 million to GBP495 million
in 2002, due to additional expenditure for the installation of
new subscribers and the upgrade of parts of our network.
Following impairment reviews in both years, amortisation of
goodwill increased to GBP1,605 million in 2002 from GBP1,173
million. In 2002 the exceptional non-cash impairment charge was
GBP1,486 million (GBP1,110 million in respect of Cable Division
assets and GBP376 million in respect of Content Division assets),
which compares with GBP992 million for Content Division assets in
2001.
Under US GAAP, with effect from January 2002, goodwill is no
longer amortised but is subject to annual review for impairment.
Following such a review the impairment charge was GBP1,445
million for 2002 compared with GBP766 million in 2001.
OTHER INCOME AND EXPENSE
Interest payable and similar charges increased GBP109 million to
GBP603 million in 2002. This consisted of interest payable of
GBP477 million (GBP453 million in 2001), foreign currency
exchange losses of GBP74 million (GBP15 million in 2001) and
other financing costs of GBP52 million (GBP26 million in 2001).
Other financing costs include an exceptional GBP29 million write-
off of bank facility fees, which were previously being amortised
over the lifetime of our Senior Secured Facility. The balance of
other financing costs are fees incurred for the issuance of
financing instruments, our share of interest of associated
undertakings and joint ventures and interest charges in respect
of the exceptional VAT adjustment. The increase in interest
payable was primarily a result of additional borrowing to fund
the installation of new subscribers and the upgrade of parts of
our network and general working capital.
Interest receivable and similar income totalled GBP309 million
(GBP15 million in 2001). GBP290 million of this related to
exchange gains on foreign currency translation as a result of the
US Dollar movement against the pound sterling. Previously our US
Dollar-denominated debt was substantially hedged; however,
following the termination of our derivative arrangements our
Dollar-denominated liabilities are no longer hedged and have been
translated at year-end exchange rates. Interest income was also
higher at GBP19 million (GBP15 million in 2001) due to higher
cash balances.
Under US GAAP, interest income and expense differs largely due to
the treatment of foreign exchange gains and losses and bank
facility fees. Under US GAAP foreign exchange gains and losses
are netted and shown separately from interest. Also, until the
revised bank facility becomes unconditional, bank facility fees
are not written-off under US GAAP and continue to be amortised
over the life of the original bank facility which has a final
maturity date of 2008. Interest expense under US GAAP increased
to GBP515 million (GBP487 million in 2001), and interest income
was GBP19 million (GBP15 million in 2001).
Amounts written-off investments under UK GAAP totalled GBP117
million, comprising of an exceptional non-cash impairment charge
for UKTV of GBP70 million plus other non-cash impairment charges
of GBP47 million relating to other investments principally SMG.
Under US GAAP, the charge against these investments is GBP130
million, which is greater due to higher values assigned to these
investments under US GAAP on acquisition. This charge is included
in share of net losses of affiliates and impairment which amounts
to GBP118 million (GBP216 million in 2001).
During 2002, the Group sold its investments in subsidiary
undertakings The Way Ahead Group and Maidstone Studios and in its
associated undertakings TV Travel Group and SMG making an
aggregate gain on disposals of GBP36 million. In 2001, the Group
closed HSNDI (a Florida-based subsidiary) incurring a loss of
GBP4 million.
NET LOSS
After exceptional items of GBP1,712 million in 2002 and GBP1,134
million in 2001, net loss for the year was GBP2,218 million
compared to GBP1,935 million in 2001.
Net loss for the year before exceptional items decreased GBP295
million to GBP506 million as EBITDA increased GBP62 million and
net exchange gains on foreign currency translation increased
GBP231 million as explained above, together with lower goodwill
amortisation costs, which were partially offset by higher
depreciation and interest charges.
Under US GAAP, after the impairment charges for tangible assets
of GBP841 million (GBP nil in 2001), intangible assets of
GBP1,445 million (GBP766 million in 2001) and affiliates of
GBP130 million (GBP202 million in 2001) the final net loss for
the year was GBP2,776 million (GBP1,741 million in 2001).
FINANCING
The Group had gross debt of GBP5,659 million at 31 December 2002
(GBP5,132 million in 2001). Gross debt comprised GBP2,000 million
of bank debt, GBP231 million of leasing and vendor financing,
GBP9 million of other loans and GBP3,419 million consisting of a
series of long-term high yield and convertible bonds. At the
year-end, the quoted market price of these bonds was GBP777
million. After cash at bank and in hand of GBP390 million and
restricted cash deposits of GBP12 million net debt at 31 December
2002 was GBP5,257 million (GBP5,098 million in 2001).
In view of the continuing progress with the Financial
Restructuring, on 31 October 2002 the Company announced that it
had determined to continue to defer the payment of interest under
certain of its Notes and the settlement of foreign exchange hedge
contracts. Failure to pay interest on these Notes beyond a 30 day
grace period, gave the holders of 25% of each series of affected
Notes the right to demand repayment of the principal amount of,
and accrued interest on, those Notes. As anticipated, in addition
to creating a default under the affected bonds, the decision to
defer such payments had resulted in defaults under the Group's
bank facilities and a number of other financing arrangements.
Those financing arrangements which were either in default (or
which were capable of being accelerated based on an ongoing event
of default) at the year-end have been reclassified as current
liabilities. Since the Balance Sheet date a number of interest
payments, which became due but were not paid, resulted in events
of default occurring in respect of additional financing
arrangements. As at the date of this financial review, the Senior
Notes due 2006, Senior Discount Notes due 2007, Senior Notes due
2008, Senior Convertible Notes due 2005, Senior Convertible Notes
due 2007 and Senior Notes due 2010 (both Sterling and US Dollar-
denominated) were all subject to acceleration in accordance with
the terms of the indentures under which they were issued. In
addition, as a result of existing defaults in respect of the
Group's bank facilities, a two-thirds majority of our senior
lenders could require that we repay all amounts outstanding under
those bank facilities and/or restrict our ability to access our
otherwise available cash.
Operating cash inflow under UK GAAP was GBP391 million and GBP348
million in 2002 and 2001, respectively. Net cash outflow from
interest and similar charges was impacted by the decision to
defer interest payments as part of the Financial Restructuring
process and totalled GBP287 million compared with GBP379 million
in 2001. As a result of our more cash generative approach to
capital expenditure and cash proceeds of GBP73 million from the
disposal of non-core subsidiaries and associates, cash outflow in
funding investing activities totalled GBP376 million net compared
with GBP570 million in 2001.
Cash flow in respect of capital expenditures amounted to GBP447
million in 2002 (GBP546 million in 2001). This related to the
installation of new subscribers and the upgrade of parts of our
network.
In total, net cash inflow from financing activities was GBP639
million (GBP560 million in 2001). Drawdowns from our bank
facility totalled GBP640 million in 2002, we benefited from net
proceeds of GBP76 million from the maturity of forward contracts
(as detailed below) and GBP9 million from UKTV for loan
repayments. Outflows included GBP51 million for the capital
element of finance leases and GBP33 million outflow relating to
the repayment of a loan secured on our shareholding in SMG which
was sold during the year. The balance relates to the repayments
of other loans.
As mentioned above we have terminated a number of foreign
exchange contracts during 2002. In March 2002, we terminated
certain US Dollar/pound sterling exchange rate hedging
arrangements with a nominal amount of US$999 million (GBP688
million); termination of these arrangements netted GBP74 million
cash inflow to us. A further GBP30 million cash inflow was
realized by us in May 2002 through the termination of additional
foreign exchange rate hedging arrangements with a nominal amount
of US$367 million (GBP253 million). During the third quarter of
2002, we terminated further foreign exchange hedging arrangements
with a nominal value of GBP2.3 billion (approximately GBP1.5
billion). Contracts with a nominal value of US$1 billion were
settled in cash resulting in an outflow of GBP28 million.
Remaining contracts with a nominal value of US$1.3 billion have
yet to be settled for a total cost of GBP33 million of which
GBP19 million was due on 1 October 2002. We have deferred such
payments and will consider them in the context of our Financial
Restructuring.
As a result of drawdowns from our Senior Secured Facility, cash
realized on the termination of certain foreign exchange contracts
and the proceeds of the disposal of our shareholdings in certain
subsidiaries and associates, the Group had cash and short-term
deposit balances of GBP390 million at 31 December 2002.
CAPITAL EXPENDITURES
The Group's capital expenditures during the year related to the
installation of new subscribers and the upgrade of parts of our
network. Additions to fixed assets in 2002 totalled GBP477
million, a decrease over 2001 of GBP176 million or 27%.
As at 31 December 2002, our broadband network was capable of
providing 77% of the homes in our franchises with our services.
94% of our homes passed and marketed are now broadband enabled to
provide our full suite of broadband internet, digital TV and
telephony services. We anticipate that capital expenditures
associated with our existing and currently planned services will
be largely driven by connecting subscribers and will vary
depending upon the take-up of our services.
MARKET RISK
Interest rate risk
Our outstanding long-term bank debt is denominated in pounds
sterling and bears interest at variable rates. Our exposure to
interest rate fluctuations on borrowings under the Senior Secured
Facility is managed by using interest rate swaps. The effective
dates of the interest rate swaps are between 2 January 1997 and 1
July 2002, and the agreements mature between 31 December 2003 and
31 March 2005. The aggregate notional principal amount of the
swaps is a maximum of GBP900 million. At 31 December 2002, the
aggregate amount outstanding under the Senior Secured Facility
was GBP2,000 million.
The minimum proportion fixed is higher in the near-term than in
the longer-term, with the aim of reducing the volatility of near-
term interest costs whilst maintaining the opportunity to benefit
from the movements in longer-term rates.
Foreign currency exchange risk
Until recently we used forward foreign currency contracts or
cross currency swaps to fix the pound sterling amount of future
US Dollar-denominated interest payments and principal repayments
up to their first call dates or other such dates where we could
have, at our option, redeemed the instruments before maturity. We
have discontinued the use of hedge accounting as US Dollar-
denominated debt will be included in the proposed debt for equity
swap and therefore we will no longer have any further exposure to
foreign exchange movements after the Financial Restructuring.
However, until the Financial Restructuring is completed,
financial results may continue to be materially affected by
movements in exchange rates.
Further information on the exchange rate instruments is disclosed
in note 18 to the UK GAAP financial statements and note 4 to the
US GAAP financial statements.
Mark Luiz
Group Finance Director
26 March 2003
To see financials:
http://bankrupt.com/misc/TelewestCommunications.pdf
THISTLE HOTELS: Bil International Receives Low Acceptances
----------------------------------------------------------
The Board of Thistle* notes the announcement relating to the very
low level of acceptances received by BIL in relation to its offer
for the shares in Thistle it does not own.
In particular, The Board of Thistle* notes that BIL has received
acceptances in respect of a total of only 1,363,845 Thistle
shares, representing approximately 0.3 per cent. of the issued
share capital of Thistle.
The Board of Thistle* continues to advise shareholders to reject
BIL's offer and not to complete any form of acceptance.
David Newbigging, Chairman of Thistle, said:
'This very low level of acceptances shows that our shareholders
find BIL's arguments unconvincing. BIL's offer significantly
undervalues Thistle and the Board of Thistle* urges shareholders
to continue to reject this attempt to acquire Thistle at a wholly
inadequate price.'
* The Board of Thistle for these purposes comprises all of the
directors of Thistle, other than Tan Sri Quek Leng Chan and Mr
Arun Amarsi, who in view of their positions as Chairman and CEO,
respectively, of BIL have not participated in the deliberations
of the Thistle board in relation to BIL's offer.
Merrill Lynch International and Deutsche Bank AG are acting for
Thistle Hotels Plc and for no-one else in connection with BIL's
offer for Thistle Hotels Plc and will not be responsible to
anyone other than Thistle Hotels Plc for providing the
protections afforded to clients of Merrill Lynch International or
Deutsche Bank AG or for providing advice in relation to such
offer.
CONTACT: THISTLE HOTELS PLC
Phone: 020 7895 2304
Contact: Ian Burke, Chief Executive Officer
MERRILL LYNCH INTERNATIONAL
Phone: 020 7995 2000
Contacts: Simon Mackenzie-Smith, Managing Director
Richard Nourse, Managing Director
DEUTSCHE BANK
Phone: 020 7545 8000
Contact: Charles Wilkinson, Managing Director
FINANCIAL DYNAMICS
Phone: 020 7831 3113
Contacts: Andrew Dowler
Ben Foster
WORLD TRAVEL: Says Group Was Loss-making in 4Q and Whole 2002
-------------------------------------------------------------
World Travel Holdings plc ('World Travel') announces that on
April 17, 2003 it sold the entire share capital of its Canadian
consolidated fares distribution business, Netfaresonline.com Inc.
('NFO'), to Logiciels OpenFares Inc., a Canadian software
development company, for a cash consideration of CND$450,000
(GBP196,507). Of this amount, CND$112,500 will be paid to the
chairman of NFO, as previously agreed in exchange for his waiving
any salary entitlement, leaving net proceeds of CND$337,500
(GBP147,380). This amount has been paid to Culver Holdings plc
('Culver'), a secured creditor of World Travel, in settlement of
part of World Travel's liabilities to Culver. Culver in turn has
acquired debtor obligations in ITAL Limited, a 45.5% owned
associate of World Travel, to a value of GBP126,816 for a cash
consideration of 98.5 per cent. of that value.
ITAL Limited is the company through which the World Travel
Group's travel trading is effected and the cash received from
Culver will be used to fund its immediate working capital
requirements.
The net liabilities of NFO at December 31, 2002 were CND$377,055
(GPB164,653) and the loss before tax for the 12 months ended on
that date was CND$66,838 (GBP29,187).
World Travel's results for the third quarter ended September 30,
2003 noted that the Group's cash position was tight and this
continues to be the case even allowing for the proceeds of the
NFO disposal. World Travel's board is currently considering
options for the Group's future, including changes to the
strategic direction and management of the Group and the
possibility of raising further funding. A further announcement
will be made in due course.
The results for the year ended December 31, 2002, which will also
be released in due course, will show that the Group was loss-
making in the final quarter and for the year as a whole.
Note: Currency translation in this announcement - GBP1:CND$2.29
CONTACT: WORLD TRAVEL HOUSE
Llanmaes, St Fagans
Cardiff
CF5 6DU
United Kingdom
Phone: (029) 2073 5000
Fax: (029) 2073 9204
Contact: John Biles, Chairman
Phone: 020 7456 1351
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, Ma. Cristina Canson, and Laedevee Gonzales,
Editors.
Copyright 2003. All rights reserved. ISSN 1529-2754.
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