/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/030804.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Monday, August 4, 2003, Vol. 4, No. 152 Headlines F I N L A N D RAUTE GROUP: Low Order Volume to Result in Full-year Loss F R A N C E FRANCE TELECOM: May Use Shares to Buyout Minority Investors NEXANS: Wins Subsea Electrical Heating Cable Contract in Norway VIVENDI UNIVERSAL: Net Debt Down to EUR13 Billion G E R M A N Y BANKGESELLSCHAFT BERLIN: Expects Positive Results by Year's End ENERGIE BADEN-WURTTEMBERG: To Shed 143 Companies from Portfolio FLENDER HOLDING: Assigned B+ Rating on Expected Recapitalization GERLING-KONZERN: S&P Raises Long-term Ratings to 'BBB-' HVB GROUP: 2nd Quarter Results Reaffirm Operational Turnaround INTERSHOP COMMUNICATIONS: Q2 Revenue Down 66% Year-on-year I R E L A N D AN POST: Reports Biggest Ever Deficit I T A L Y CIRIO FINANZIARA: Walking a Tightrope, Says Report FIAT SPA: Bottom Line Close to Breakeven, Interim Results Claim FIAT SPA: Closes Sale of Toro Assicurazioni to de Agostini TELECOM ITALIA: Rated BBB+/A-2; Outlook Stable L U X E M B O U R G MILLICOM INTERNATIONAL: To Hold Conference Call Wednesday N E T H E R L A N D S ROYAL PHILIPS: Discloses Details of Business Realignment N O R W A Y PETROLEUM GEO-SERVICES: S&P Lowers Corporate Credit Rating 'D' SMEDVIG ASA: Ordered to Pay Esso NOK509 Mln in Compensation P O L A N D POLSKIE HUTY: LNM Targets Due Diligence Completion this Week S W E D E N SAAB AB: Seeks Capital Injection to Cover Deficit TELIASONERA: Reports Significant Improvement in Operating Income S W I T Z E R L A N D ABB LTD.: Candover Expected to Enter Exclusive Buyout Talks FANTASTIC CORPORATION: Net Loss Declines 23% in Second Quarter U N I T E D K I N G D O M AES DRAX: American Parent Appoints New Independent Directors BRITISH AIRWAYS: Posts GBP45 Million Pre-tax Loss in 1st Quarter EINSTEIN GROUP: David Rubin & Partners Appointed Administrator EUROSTAR U.K.: Belgian Partner Plans to Sell Partial Stake HAMLEYS PLC: Baugur's Bid Vehicle Extends Offer Deadline HEYWOOD WILLIAMS: Issues Update on Trading, Board Changes IMPERIAL CHEMICAL: Profits Partially Recover in First-half IMPERIAL CHEMICAL: Ratings Unchanged by Profit Improvement KYNDAL: Adopts New Identity, Strategic Vision ROYAL MAIL: New Accounts Expose Flaws in Regulator's Plans ROYAL & SUNALLIANCE: To End Partnership with HBOS Household SIMON GROUP: Passes Proposal to Dispose Seawheel Holdings TELEWEST COMMUNICATIONS: Discloses Interim 2003 Results TRINITY MIRROR: Bares Group Interim Results for 2003 TRINITY MIRROR: To Sell Newspaper Division in Northern Ireland ********* ============= F I N L A N D ============= RAUTE GROUP: Low Order Volume to Result in Full-year Loss --------------------------------------------------------- The Raute Group posted consolidated net sales of EUR33.0 million (EUR45.9 million) and an operating loss of EUR7.4 million (a loss of EUR 4.1 million). Loss before extraordinary items came to EUR 7.3 million (a loss of EUR 4.2 million). The Group's period-end value of orders, EUR 58.7 million (EUR 35.7 million), and the value of orders received during the report period, EUR59.9 million (EUR 43.0 million), were markedly higher than a year ago. For 2003 as a whole, it is estimated that consolidated net sales and profit performance will improve from those reported in 2002. However, the Group's 2003 results will be in the red, due to the low volume of orders at the beginning of the year and new contracts taking effect slower than anticipated. BUSINESS GROUPS RAUTE WOOD Raute Wood reported net sales of EUR19.9 million (EUR 30.6 million) and an operating loss of EUR6.0 million (a loss of EUR3.1 million). The period-end value of orders, EUR48.4 million (EUR 22.4 million), and the value of new orders received during the report period, EUR 47.6 million (EUR 24.2 million), increased considerably over the previous year. The largest project implementations included main machinery for a plywood mill in Chile, machinery for an LVL plant in Australia, and an automatic veneer patching line in Finland. In addition to the orders already received, negotiations on delivering production equipment to an LVL plant are nearing completion, as evidenced by the conclusion of a preliminary contract and the manufacturing process underway for critical components. Economic uncertainty is still affecting panel-industry investment decisions in all market areas, with the focus being on smaller modernization projects and maintenance services. Several fairly large-scale investment projects are also in hand in different market areas, but their schedules are unpredictable. The improvement in order volumes during the second quarter will provide good opportunities for higher net sales and a better profit performance in 2003. However, it is estimated that the business group will show a loss. RAUTE PRECISION Raute Precision recorded net sales of EUR13.5 million (EUR 16.0 million) and an operating loss of EUR 1.1 million (a loss of EUR 0.7 million). The value of orders, EUR 10.4 million (EUR 13.7 million), and the value of new orders received during the report period, EUR12.7 million (EUR 19.5 million), began to increase slightly during the second quarter, but were still lower than a year ago. The largest project implementations included a batch plant for the fiberglass industry in Slovakia, alloying element system modernization for a steel works in Sweden, and a conveyor system for a paper mill in China. Raute Precision estimates that its market prospects will be brighter. Negotiations over a number of investment projects are approaching completion, for example in Russia and North America. Negotiations over projects in China are about to resume after a hiatus. The volume of orders is expected to increase during the third quarter. Raute Precision is expected to maintain its net sales for the current year at the previous year's level, and to improve its operating results. FINANCIAL POSITION The Group's liquid assets totaled MEUR 14.0 (MEUR 11.9), gearing stood at -19.1% (-4.4%) and its solvency ratio at 40.5% (48.8%). SHARES January-June share trading volume totaled 47,040, valued at EUR363,067, the highest and lowest quotation coming to EUR8.80 and EUR6.20, respectively. Raute Oyj share closed at EUR7.30 on June 30, 2003. The period-end number of shareholders totaled 724. NOTIFICATION OF SUBSIDIARY MERGER REGISTRATION The merger of Jymet-Engineering Oy, Raute Oyj's wholly owned subsidiary, with Raute Oyj was registered on June 30, 2003, as forecast earlier. PROSPECTS The current economic uncertainty is still affecting the investment decisions of the Raute Group's customer industries. Although there are several major investment projects in hand in different market areas, the focus will remain on plant upgrading and modernization projects, as well as maintenance services. For 2003 as a whole, it is estimated that consolidated net sales and profit performance will improve from those reported in 2002. However, the Group's 2003 results will be in the red, due to the low volume of orders at the beginning of the year and new contracts taking effect slower than anticipated. RAUTE OYJ Board of Directors To See Financial Statements: http://bankrupt.com/misc/Raute_Group.htm CONTACT: RAUTE GROUP Risto Makitalo, President and CEO Phone: +358-3-829 3266 Risto Tuuri, Director of Finance Phone: +358-3-829 3580 +358-400-701 018 =========== F R A N C E =========== FRANCE TELECOM: Full Privatization Forthcoming, Report Says ----------------------------------------------------------- The full privatization of France Telecom could follow soon after the French government adopted a draft bill that will allow the state's holding in the telecoms company to fall below 50%, according to the Financial Times. The bill is expected to be passed through the parliament this autumn. Once it becomes law, it would allow the government to sell its 58% stake in the former national monopoly; and the state is seen likely to do so promptly as it is expected to almost certainly breach the European Union's stability pact rules on budget deficits in 2004. The report, however, says "for political reasons, the government is not expected to start selling shares in the market before its stake has been diluted below the symbolic 50% threshold in the course of an acquisition by France Telecom or by the company's issuance of a convertible bond or other equity-linked instrument." France's stake in the company is valued at about EUR29 billion (US$33 billion). FRANCE TELECOM: May Use Shares to Buyout Minority Investors ----------------------------------------------------------- Speculations circulate last week that France Telecom may issue shares to repurchase minorities in Orange and Wanadoo, its listed mobile telephone and Internet access subsidiaries. The rumors, which sent shares in both companies soaring during the day, follow reports that the French government has adopted a draft bill that will allow the state's holding in the telecoms company to fall below 50%. The French government previously maintained a majority stake in the former national monopoly, constraining France Telecom's former management from paying for major acquisitions, including Orange, with shares. The move could unwind the decentralization of the group that ousted chief executive Michel Bon initiated during his term. He floated Orange and Wanadoo on the stock market in early 2001 to allow them to issue shares for acquisitions. France Telecom owns 72% of Wanadoo and 87% of Orange. NEXANS: Wins Subsea Electrical Heating Cable Contract in Norway --------------------------------------------------------------- Nexans has won a EUR15 million contract from Statoil to supply electrical heating cables, heating cable risers and protective equipment for the subsea flowlines on the Kristin field in the Norwegian Sea. The operator Statoil placed the contract on behalf of the licenses for this Norwegian Sea field. It covers heating cables, electrical risers and a mechanical-protection solution for installation piggyback on the flowlines, which connect the subsea installations with the floating production platform on the Kristin field. The heating system will prevent hydrate (hydrocarbon ice) from forming in the pipelines during unplanned production shutdowns. "This is the third direct electrical heating system Statoil has ordered, indicating that the system is successful and something that the company wants to focus on in future," said Yvon Raak, Nexans' Executive Vice President, Europe Area. The electrical heating system, which is installed on the Asgard field in the Norwegian Sea and the Huldra field in the North Sea, has been developed by Statoil in collaboration with Nexans and other Norwegian suppliers. The wellstream of the Kristin Field has a particularly high temperature, which has required further development of the piggyback system. The equipment will be manufactured at Nexans' Halden factory, south of Oslo, with installation work being carried out under an existing contract awarded to Technip Offshore Norge. The Kristin field is due to produce from 12 subsea wells tied back to a floating platform. Its production capacity will be an estimated 126,000 barrels of condensate and 18 million cubic meters of gas per day. Production is planned to start in the summer of 2005. About Nexans Nexans is the worldwide leader in the cable industry. The Group brings an extensive range of advanced copper and optical fiber cable solutions to the infrastructure, industry and building markets. Nexans cables and cabling systems can be found in every area of people's lives, from telecommunications and energy networks, to aeronautics, aerospace, automobile, railways, building, petrochemical, medical applications, etc. With an industrial presence in 28 countries and commercial activities in 65 countries, Nexans employs 17,150 people and had sales in 2002 of EUR4.3 billion. Nexans is listed on the Euronext Paris stock exchange. ***** Nexans continued to show a decline in revenues and operating profits in the first half of the year. The company warned it would still be in the red for full year after narrowing net loss from EUR11 million to EUR2 million in the first half. CONTACT: NEXANS Investor Relations Michel Gedeon Phone: + 33 (0)1 56 69 85 31 E-mail: Michel.gedeon@nexans.com VIVENDI UNIVERSAL: Net Debt Down to EUR13 Billion ------------------------------------------------- Vivendi Universal provided preliminary, unaudited revenue information on a French GAAP basis for the second quarter and the first half 2003 to 'Balo' an official French business newspaper for publication in accordance with French regulatory requirements. Highlights: (a) The Group perimeter has fundamentally changed within the last twelve months, resulting in a substantial decline in revenues. In the same period, the Group's net debt has been reduced from EUR35.1 billion to an estimated EUR13.6 billion, despite the EUR4 billion investment in Cegetel in January 2003. (b) Telecommunications and Pay TV contributed a good performance in the quarter. (c) Entertainment revenues suffered from adverse currency movements as well as contrasted results at VUE and revenue declines at UMG and VUG compared with exceptionally strong quarter in 2002. (d) Despite the negative impact of the euro/dollar exchange rate, Vivendi Universal reiterates its 2003 full year operating guidance: (e) Strong improvement in operating income, with a more than 39% growth in continuing operations. (f) Strong improvement in cash flow from operations(1) on a like-for-like basis. Proportionate cash flow(2) expected to double compared with 2002. (g) During this transitional year, Vivendi Universal maintains its adjusted net income target (before exceptional items and goodwill amortization), which should be positive for the first time since its creation. Second Quarter 2003: Vivendi Universal's (Paris Bourse: EX FP; NYSE: V) consolidated revenues for the second quarter of 2003 amounted to EUR6,132 million compared with EUR15,341 million for second quarter of 2002. On a pro forma basis(3) (i.e. excluding Veolia Environnement, the publishing businesses divested in 2002 and 2003, and including VUE as if the InterActiveCorp -- formerly known as USA Interactive and prior thereto as USA Networks, Inc. -- entertainment assets had been acquired as of January 1, 2002), and excluding exchange rate fluctuations, second quarter 2003 revenues decreased 6%. (1) Net cash provided by operating activities net of capital expenditures and before financing costs and taxes. (2) Defined as cash flow from operations excluding the minority stake in all less than 100% entities. (3) The pro forma information illustrates the effect of the acquisition of the entertainment assets of InterActiveCorp and the disposal of VUP assets in 2002 & 2003, as if these transactions had occurred at the beginning of 2002. It also illustrates the accounting of Veolia Environnement using the equity method at January 1, 2002 instead of December 31, 2002. The pro forma information is calculated as a simple sum of the actual revenues of Vivendi Universal's businesses (excluding businesses sold) with the actual revenues reported by each of the acquired businesses in each period presented. Additionally, the revenues of Universal Studios international television networks are reported by Vivendi Universal Entertainment. This reclassification has no impact on the total revenues of Vivendi Universal. The pro forma revenues are not necessarily indicative of the combined revenues that would have occurred had the transactions actually occurred at the beginning of 2002. First Half 2003: For the first half of 2003, Vivendi Universal's consolidated revenues amounted to EUR12,364 million compared with EUR29,990 million for the first half of 2002. On a pro forma basis(1) (i.e. excluding Veolia Environnement, the publishing businesses divested in 2002 and 2003, and including VUE as if the InterActiveCorp entertainment assets had been acquired as of January 1, 2002), and excluding exchange rate fluctuations, first half 2003 revenues decreased 4%. Comments for the six main businesses SFR-Cegetel: Actual/Actual 2nd Quarter Half Year -------------------------------------------------- 2003 2002 % 2003 2002 % in millions of euros Actual Actual variation Actual Actual variation ---------------------------------------------------------------- Revenue 1,831 1,729 6% 3,612 3,442 5% ================================================================ Second Quarter 2003 Highlights: For the second quarter of 2003, SFR/Cegetel reported consolidated revenues of EUR1.8 billion, up 6%. Mobile telephony generated revenues of EUR1.6 billion, up 8% despite the slowdown in market growth. During the second quarter 2003, SFR added 203,100 new customers to 13.9 million customers (including SRR, its subsidiary in La Reunion) of which 55.4% are postpaid customers vs. 50.3% at end June 2002. SFR ARPU from prepaid customers increased 4% to EUR21.5 and ARPU from postpaid customers decreased 3% to EUR56.5 mainly due to fixed incoming call tariff decrease imposed by regulator (-15% as from January 1, 2003). Fixed telephony revenues declined 9% to EUR213 million mainly explained by unfavorable impact of year-end 2002 voice price decreases and unfavorable traffic mix. First Half 2003 Highlights: For the first half of 2003, SFR/Cegetel reported consolidated revenue of EUR3.6 billion, up 5%. Mobile telephony revenues increased 7% to EUR3.2 billion. During the first semester 2003, SFR added 367,400 new customers to 13.9 million customers and increased market share on the French mobile market to 35.3% against 34.4% at end June 2002. ARPU from prepaid customers increased 3% to EUR21.4 and ARPU from postpaid customers decreased 3% to EUR56.2 mainly due to fixed incoming call tariff decreases imposed by regulator (-15% as from January 1, 2003 after -10% as from March 1, 2002). Data and Services monthly revenues per average customer rose significantly (+49%) to EUR4, i.e. out of which nearly 10% of blended ARPU. Fixed telephony revenues declined 8% to EUR435 million mainly explained by unfavorable impact of year-end 2002 voice price decreases and unfavorable traffic mix. Maroc Telecom: Actual/Actual 2nd Quarter Half Year ------------------------------------------------------------- in % % millions variation variation of euros at % at 2003 2002 % constant 2003 2002 var- constant Actual Actual variation currency Actual Actual iation currency Revenue 357 361 -1% 4% 714 716 0% 5% ================================================================ Second Quarter 2003 Highlights: Second quarter 2003 revenues amounted to EUR357 million, a 4% increase at constant currency. First Half 2003 Highlights: First half 2003 revenues amounted to EUR714 million, flat on an actual basis, a 5% increase at constant currency. Mobile revenues increased 6%. Maroc Telecom had 4,865,000 customers in mobile telephony (a 19% increase year-on-year) and 1,148,000 customers in fixed-line telephony (a 2% increase year-on-year). Universal Music Group (UMG): Actual/Actual 2nd Quarter Half Year ------------------------------------------------------------- % % in variation variation millions at % at of 2003 2002 % constant 2003 2002 var- constant euros Actual variation currency Actual Actual iation Currency ---------------------------------------------------------------- Revenue 1,068 1,509 -29% -19% 2,168 2,873 -25% -15% ================================================================ Second Quarter 2003 Highlights: Fewer major international releases, adverse currency movements and continued weakness in the global music market contributed to a 29% decline compared to the second quarter of 2002 that had been particularly strong with albums from Eminem, Nelly, Sheryl Crow and the debut release from Ashanti. In constant currency sales were down 19% with strong growth in Japan and growth in the United Kingdom and France offset by lower sales in North America, Germany and the smaller European markets and UMG's European Music Clubs. Best sellers in the period were 50 Cent, new releases from Marilyn Manson and Metallica and carryover sales from 2002 releases by t.A.T.u. and Eminem. First Half 2003 Highlights: Universal Music Group's (UMG's) revenues declined 25% compared to the first half of 2002 due to adverse currency movements, particularly the strengthening of the Euro against the U.S. dollar and the ongoing weakness in the global music market. Sales were down 15% in constant currency. Best sellers included the new release from 50 Cent that has now shipped over 7 million copies and strong carryover sales from 2002 releases by t.A.T.u. and Eminem. The 8 Mile OST featuring Eminem and Eminem's 'The Eminem Show' sold an additional 5 million copies in the period. Vivendi Universal Entertainment (VUE): Actual/Actual 2nd Quarter Half Year ------------------------------------------------------------- % % variation variation in % at % at millions 2003 2002 var- constant 2003 2002 var- constant of euros Actual iation currency Actual Actual iation currency ---------------------------------------------------------------- Revenue 1,516 1,776 -15% 6% 2,962 3,151 -6% 16% ================================================================ Actual/Proforma 2nd Quarter Half Year --------------------------------------------------------------- % % 2002 variation variation Pro % at 2002 at 2003 forma var- constant 2003 Pro % constant Actual (4) iation currency Actual forma variation currency ---------------------------------------------------------------- Revenue 1,516 1,974 -23% -4% 2,962 3,825 -23% -5% ================================================================ Second Quarter 2003 Highlights: On an actual exchange rate basis VUE revenues decreased 15%. Had InterActiveCorp been acquired at January 1, 2002, VUE revenues would have decreased 23%. However, excluding the adverse impact of exchange, VUE revenues decreased only 4% on a pro forma basis. At constant rates and on a pro forma basis, improved Universal Pictures Group and Universal Television Networks revenue was offset by declines in Universal Television Production, and Universal Parks & Resorts and others. Universal Pictures Group made box office history by becoming the first studio to have three consecutive $50+ million opening weekends (Bruce Almighty, 2 Fast, 2 Furious, and The Hulk). On a pro forma constant currency basis, second quarter revenues increased 1% when compared to the second quarter of 2002, which included box office performance of The Scorpion King and video/DVD results from A Beautiful Mind. On a pro forma constant currency basis, Universal Television Group revenues declined 8%. Revenues for Universal Television Networks, which includes USA Network and the Sci Fi Channel, increased 15% due to stronger ad sales and increased affiliate revenues. This was offset by a 20% decline at Universal Television Production, primarily reflecting the recognition of significant off-network syndication revenue from Just Shoot Me in the prior year. On a pro forma constant currency basis, at Universal Parks and Resorts, the sale of Spencer Gifts resulted in a decrease of E47 million compared to the same period in 2002. Recreation revenue decreased 15% due to lower theme park attendance at Universal Studios Hollywood, as a result of continued softness in the tourism market. First Half Highlights: Had InterActiveCorp been acquired at January 1, 2002, VUE revenues would have decreased 23%. However, excluding the adverse impact of exchange, VUE revenues decreased only 5% on a pro forma basis: improved Universal Television Networks revenue was more than offset by lower revenue from Universal Pictures Group, Universal Television Production, and Universal Parks & Resorts. In particular, the sale of Spencer Gifts, effective on May 30, 2003, had an adverse effect on revenues during this period. (4) Pro forma basis as if the InterActiveCorp entertainment assets had been consolidated from January 1st, 2002 and the results of Universal Studio international television networks had been reported by Vivendi Universal Entertainment instead of Canal Plus Group. Canal Plus Group: Actual/Actual 2nd Quarter Half Year ------------------------------------------------------------- % % variation variation in % at % at millions 2003 2002 var- constant 2003 2002 var- constant of euros Actual iation currency Actual Actual iation currency ---------------------------------------------------------------- Revenue 1,049 1,145 -8% -8% 2,215 2,344 -6% -5% ================================================================ Actual/Pro forma 2nd Quarter Half Year ------------------------------------------------------- % % 2002 variation variation En Pro at 2002 % at millions 2003 forma % constant 2003 Pro var- constant d'EUR Actual (5) variation currency Actual forma iation currency ---------------------------------------------------------------- Revenue 1,049 1,124 -7% -6% 2,215 2,298 -4% -3% ================================================================ Second Quarter 2003 Highlights: On a pro forma basis, revenues for Canal Plus Group were down 7%. Excluding all scope changes, principally Telepiu, revenues increased 6% during the second quarter of 2003. French pay-television revenues grew 7% on an actual basis driven by the strong performances of CanalSatellite and Media Overseas, while premium channel revenues were stable. Revenues for the movie business increased 7% during the same period thanks to the higher performance on home video selling. First Half 2003 Highlights: On a pro forma basis, revenues for Canal Plus Group were down 4%. Excluding all scope changes, principally Telepiu, revenues increased 2% during the first half of 2003. The 5% growth in French pay-television revenues was mainly driven by the solid performances of CanalSatellite, while the premium channel revenues were slightly down (-3%). Revenues for the movie business were down 11% since no major film release was recorded in first half 2003. Vivendi Universal Games: Actual/Actual 2nd Quarter Half Year ------------------------------------------------------------- % % variation variation in % at % at millions 2003 2002 var- constant 2003 2002 var- constant of EUR Actual iation currency Actual Actual iation currency ---------------------------------------------------------------- Revenue 134 211 -36% -26% 240 336 -29% -17% ================================================================ Second Quarter 2003 Highlights: Vivendi Universal Games posted net revenue of E134 million. This was a 36% decline versus the prior year quarter, and excluding the unfavorable impact of currency was a 26% decline. The successful launches of The Hulk and the Warcraft III Expansion Pack in June 2003 did not offset the launch of Warcraft III in June 2002 and net revenue generated from Empire Earth. First Half 2003 Highlights: Vivendi Universal Games generated net revenue of EUR240 million. This was fueled by the worldwide product launch in June of The Hulk on all platforms and the Warcraft III Expansion Pack on PC in the North America and Asia Pacific regions. This represented a 29% decline versus a strong prior year, however, excluding the unfavorable impact of currency was a 17% decline. The prior year included the very successful launch of Blizzard's Warcraft III title in the N.A. and Asia Pacific regions in June, as well as strong sales from the Crash V, Crash I and Empire Earth titles. To See Financial Statements: http://bankrupt.com/misc/VIVENDI_UNIVERSAL2Q.htm ============= G E R M A N Y ============= BANKGESELLSCHAFT BERLIN: Expects Positive Results by Year's End --------------------------------------------------------------- In the first half of 2003, the Bankgesellschaft Berlin Group generated a positive result, thus continuing the earnings trend. "The good development is continuing," stated Hans-Jorg Vetter, Chairman of the Bankgesellschaft Berlin Board of Management, but the order of the day remains cautious optimism. For Bankgesellschaft still needs to work unabatedly and hard to achieve its objectives." In view of the positive development in the first half-year, the outlook was now for a positive consolidated operating result for 2003. The basis for the updated forecast for the whole year is a very positive operating result of EUR143 million (without changes to section 340f HGB reserve) as of 30 June 2003. Vetter stated that during the ongoing reconstruction, increasing attention is being paid to the client business. Income from operating business stabilized in the first six months of 2003. With continuing and consistent savings, administrative expenditure was reduced 12% to EUR714 million year-on-year (PY: EUR811 million). Stabilizing income, cost reductions and a positive trading result generated an operating result before provisioning of EUR318 million (PY: EUR173 million). Provisions of EUR175 million (PY: EUR231 million) were booked, with the planning figure being used for establishing lending business provisioning level. This resulted in a group operating result (without changes to the section 340f HGB reserve) of plus EUR143 million after minus EUR58 million for the first six months of 2002. At plus EUR134 million, the earnings after tax position was very positive (PY: minus EUR154 million), an increase of EUR288 million. The individual components of the half-year result developed as: (a) at EUR867 million net interest income was slightly up on the previous year (PY: EUR858 million). (b) Net commission income declined by EUR12 million to EUR161 million (PY: EUR173 million. Overall, the trading result developed in a positive fashion. At plus EUR33 million, the net result from financial transactions (PY: minus EUR49 million) was considerably above the figure of the previous year. As scheduled, administrative expenditure was further reduced to EUR714 million (PY: EUR811 million). In combination with the trading result, this made a considerable contribution to the overall result. Chairman of the Board of Management, Hans-Jorg Vetter, states: "Gradually the bank can once again deploy its resources for sales and marketing and for servicing its clients." After the progress made on the cost side and initial improvements in income, a rigorous push needs to be made on the revenues side. Vetter continued: "We are not quite there yet. But we are on track to becoming a strong regional bank and have moved much closer back to normality." ENERGIE BADEN-WURTTEMBERG: To Shed 143 Companies from Portfolio --------------------------------------------------------------- The Management Board of EnBW Energie Baden-Wurttemberg AG has taken specific decisions to drastically reduce the scope of the Group's holding portfolio. In line with these decisions, the current investment portfolio comprising 395 companies, 299 of which are in the consolidated Group, will be downsized by a total 143 companies. This reduction in the structural complexity of the Group by almost 40% is to take the form of mergers, dissolutions, sell-offs (disinvestment) and integration in partnerships. An appropriate solution has been chosen for each of the holdings in question. Many of the necessary measures are to be implemented before the end of 2003. The above decisions are the first concrete steps the Group will take to achieve the objective of drastically simplifying its structural complexity. They reflect the endeavor to concentrate on core business activities (energy and near-energy services), to eliminate loss-making holdings that cannot be restructured in the short term, to integrate or merge holdings with promising synergistic potentials, and to sell off the Salamander operations in the near future. These measures are aimed at improving the strength and efficiency of the EnBW Group on the operative front as well as increasing transparency. In a second phase, all the companies that do not currently meet the ROI targets of the Group -- and which are therefore in need of either operative or structural changes -- will be subjected to a critical review. EnBW CEO Prof. Dr. Utz Claassen welcomes these decisions: "It is right and important that we have wasted no time in following up our announcements with the necessary decisions. We owe it to our shareholders and our employees to adopt a clear-cut strategy geared towards improving our earnings potential: both shareholders and employees need to be assured that our core business strengths will no longer be diluted by almost 100 loss-making holdings. To wait any longer would be uneconomical, unjustifiable and unsocial." FLENDER HOLDING: Assigned B+ Rating on Expected Recapitalization ---------------------------------------------------------------- Standard & Poor's Ratings Services said it assigned its 'B+' long-term corporate credit rating to Germany-based power transmission component manufacturer Flender Holding GmbH. The outlook is stable. At the same time, Standard & Poor's assigned its 'B-' debt rating to the proposed EUR250 million senior secured notes that Flender Holding GmbH plans to issue. The notes will rank behind senior secured debt, but ahead of mezzanine capital. "The rating on Flender Holding reflects its very aggressive financial profile, as total debt will be high at about EUR530 million following a recapitalization transaction that the company is expected to complete within the next few months," said Standard & Poor's credit analyst Martin Amann. "But it also reflects its fair financial flexibility and leading positions within a variety of niche industrial markets." EBITDA is expected to remain relatively flat at about EUR120 million, but debt levels are likely to decline gradually. Flender is expected to generate free cash flow of about EUR20 million per year on average in the foreseeable future. In the medium term, free cash flow is expected to remain consistent with the relatively strong historical levels of the past few years, except for substantially lower levels in fiscal years 2003 and 2004, owing to onetime cash outflows from the Retrofit program. "Nevertheless, Standard & Poor's also expects that total debt to EBITDA will strengthen modestly within the 4.0x-4.5x range," said Mr. Amann. "EBITDA to net cash fixed charges are expected to improve gradually, but to remain within the 2.75x-3.25x range. The outlook is also based on the expectation that liquidity will remain sufficient and that Flender will remain comfortably in compliance with its financial covenants." GERLING-KONZERN: S&P Raises Long-term Ratings to 'BBB-' ------------------------------------------------------- Standard & Poor's Ratings Services said it raised to 'BBB-' from 'BB+' its long-term counterparty credit and insurer financial strength ratings on Germany-based non-life insurer, Gerling-Konzern Allgemeine Versicherungs-AG. "The rating action reflects legally binding commitments for Gerling-Konzern Allgemeine's planned equity capital increase, which amounts to EUR62.5 million," said Standard & Poor's credit analyst Joerg Ritthaler. The ratings remain on CreditWatch with positive implications, however. The ratings were initially placed on CreditWatch with developing implications on Oct. 29, 2002, and the implications were revised to positive on July 11, 2003. Standard & Poor's understands that investors, including at least seven large German industrial groups, have signed letters of intent to participate in an equity capital increase for Gerling-Konzern Allgemeine. Total commitments received as at July 31, 2003, exceeded EUR130 million, of which EUR62.5 million are legally binding. Additional commitments to achieve a total capital increase of up to EUR150.0 million are being sought from other parties that have expressed interest. The remaining commitments are expected to be received during August with a view to legal completion in September 2003. "The ratings remain on CreditWatch with positive implications, reflecting the possibility for a further upgrade if Gerling-Konzern Allgemeine succeeds in raising the full EUR150.0 million sought, and provided that the sale of the Gerling group's reinsurance operation, Gerling-Konzern Globale Rueckversicherungs-AG (BB/Negative/--), has been completed," said Mr. Ritthaler. The sale of Gerling-Konzern Globale will allow the Gerling group to deconsolidate Gerling-Konzern Globale from its balance sheet and thereby meet regulatory group solvency requirements. Although it is not obliged to do so under German law, Gerling is expected to wait for the approvals of U.K. and U.S. regulators before completing the sale. HVB GROUP: 2nd Quarter Results Reaffirm Operational Turnaround -------------------------------------------------------------- Highlights: (a) Half-year operating profit totals EUR238 million, with Q2 profit of EUR127 million 14% better than Q1 (i) robust trend continues for operational revenues in core segments (ii) more efficiency gains through sharp reduction of general administrative expenses (down 11.3% from June 2002, Q2 2.4% lower than Q1) (iii) cost-income ratio improves to 65.5% (69.1% at end of 2002) (iv) Risk provisions (including total risk provisions of Hypo Real Estate Group without deduction of risk coverage) chopped as planned by 19.8% (b) Pre-tax income of EUR77 million per 06/03 does not include profits from sales non-core activities but does include substantial one-off burdens due to the spin-off amounting to EUR279 million (c) Continued implementation of 2003 transformation program: (i) clear reduction of risk assets; capacity adjustments on target (ii) BA-CA IPO contributes approximately EUR1 billion to strengthen capital base (iii) disposal of non-strategic investments: sale of norisbank in July (iv) Vereins- und Westbank will be merged into HVB in 2004: Reduction of complexity and strengthening of business activities in Germany (d) HVB Group new remains well within 2003 target corridor HVB Group continued in the second quarter to build on the solid operational trend seen during the first three months of the year. In core revenues, the bank performed even better than in Q1/03. General administrative expenses actually decreased 2.4% as compared with the first quarter. In a difficult market environment, risk provisions remained stable as compared with the first quarter. The bank had operating profits in Q2 of EUR127 million, a 14.4% improvement over Q1. The operational turnaround remained on schedule. Dieter Rampl, chairman of the Board of Managing Directors of HVB Group comments: "The positive trend in our operational activities during the first half of the year underscores the consistent implementation of our transformation process, which aims to produce sustainable improvements in our operational performance and substantially strengthen our capital base. We are very much on schedule with the goals we have set for ourselves, and our employees in Germany, Austria and Emerging Europe are doing a good job. The integration of Vereinsund Westbank into HypoVereinsbank is a further step in strengthening our operations in Germany and in reducing the complexity." The developments in detail: Net interest income, at EUR1,627 million, was slightly up in the second quarter as compared with the first three months of the year. Strict, risk-adjusted pricing more than compensated for the sharp reduction in risk assets. Interest income for the first six months of the year was down just 3.2% year-on-year to EUR3,247 million despite substantial foreign-exchange effects as well as the sharp reduction in risk assets. The interest margin -- measured against the average risk assets -- thereby increased by 11 basis points to 2.16 %. Net commission income in Q2, at EUR669 million, matched the Q1 level in a persistently difficult capital market environment. At EUR1,342 million, it was 4.5% lower than the figure for the same period in the prior year, primarily due to weaker revenues in the security and custodial business. The trend in the trading profit is particularly gratifying. The EUR246 million trading profit again marked a slight increase over the good result posted in the first quarter. Compared with the first half of 2002, the trading profit was up 12% to EUR487 million. Despite a drop in the balance of other income and expenses to -EUR5 million in the second quarter, total operating revenues (EUR2,537 million) were only slightly lower than in the previous quarter. The half-year figure, EUR5,101 million, was just 2.9% lower than for the same period in 2002 despite much more difficult operating conditions. The bank succeeded in reducing general administrative expenses by another 2.4% in the second quarter as compared with the first three months of the year, to EUR1,650 million, by staying on target with capacity-adjusting efforts. Compared with the first six months of the prior year, general administrative expenses were down sharply by 11.3%. The cost-income ratio improved to 65.5% from 66.0% in the first quarter (year-end 2002: 69.1%). As for the year 2004, when the recalibration of capacities of the year 2003 becomes fully effective, the Bank expects further substantial reductions of personnel costs. Risk provisions remained stable in the second quarter at EUR760 million (this amount already includes the total risk provisions of Hypo Real Estate Group without deduction of pro-rata risk coverage of EUR230 million) despite continuing economic stagnation and persistently high bankruptcy rates. As planned, risk provisions were down sharply at the half-year mark to EUR1,522 million, a 19.8% drop as compared with the prior year. HVB Group is confident that it can meet the budgeted target of EUR3,043 million for risk provisions for this year (including total risk provisions of Hypo Real Estate Group without deduction of maximum EUR460 million risk coverage). The operating profit of EUR127 million in the second quarter represented a strong increase of 14.4% over the EUR111 million posted in the first quarter. This is clear confirmation of the operational turnaround. Net income before taxes totaled EUR53 million in the second quarter (Q1:EUR24 million), yielding a result of EUR77 million for the first half of the year (a 35.1% increase on the same period in 2002). No tangible gains on disposals have been included in this total yet. However, this result does include substantial one-off burdens related to the spin-off amounting to EUR279 million. Of this, EUR230 million is for the additional risk sheltering for the Hypo Real Estate Group and EUR49 million for transaction costs, in particular for IT write-offs. After deducting taxes and minority interests, HVB Group has in the first half of 2003 a negative result of EUR144 million. In view of the continued weakness of the business cycle, particularly in Germany, the Bank sees the robust development of earnings in its core business as a promising basis for business expansion up to the end of the year and beyond. "Implementation of our transformation is binding less and less management capacity compared with the first half of the year. We can now concentrate entirely once again on growing customer business in our European markets," Dieter Rampl continued. The three business segments of HVB Group new - pro-forma following the spin-off of Hypo Real Estate Group - have performed well in pro-forma comparisons. In the Germany segment, slightly higher revenues coupled with additional cost cuts produced an improved cost income ratio of 70.5% (end of 2002: 78.3%). Furthermore, the sharp reduction in loan-loss provisions greatly curbed the pre-tax losses on the operational side of the business. The Austria/CEE segment continued to progress well. Operating profits for the first half of the year were EUR194 million, a rise of 18% compared with the first quarter of 2003 and 6% compared with the prior year. Corporates & Markets, with operating income of EUR457 million, made the largest contribution to income during the first six months of the year. The cost-income ratio improved sharply from 52.3% to 47.9%. As planned, HVB Group moved ahead rapidly with its transformation program during the first six months of the year. The IPO of Bank Austria Creditanstalt in July represents an important success for HVB Group and the first major milestone of the transformation. The proceeds from the IPO flotation amount to approximately EUR1 billion. This result fully confirms our expectation of the IPO as an efficient means of bolstering the capital base of HVB Group. The announced sale of norisbank in July, slated for completion on September 30, 2003, will generate a considerable book profit and, through the focus on the "HVB Sofortkredit" product, help to eliminate overlapping activities in consumer finance. It will also make an important contribution to a stronger capital base at HVB Group. In the area of risk assets, we have made good progress since the end of 2002, reducing total risk assets by EUR18.9 billion. At June 30, 2003, the core capital ratio had improved to 5.8% (including BA-CA IPO pro-forma: 6.1%). HVB Group will drastically reduce its risk assets this year. The Hypo Real Estate Group, due to be spun off in the fourth quarter, alone accounts for EUR57 billion in risk assets. The Annual General Meeting of Shareholders in May of this year gave near-unanimous approval to this move. The bank will continue to act decisively to sell non-strategic shareholdings and activities and implement securitization measures. The measures aimed at adjusting our capacity led to the elimination of 2,198 positions within the group (excluding the 1,798 staff of the initially consolidated Biochim Bank, Bulgaria). This means that more than 50% of the planned job cuts have been carried out at the half year. We defined clear target corridors for HVB Group new - proforma after the spin-off of Hypo Real Estate Group - in 2003. On a prorated basis, the Bank reached these target corridors in the first half of the year. HVB Group new 2003 budget Prorated January 1 - in EUR million projection June 30, 2003 Total operating revenues 9,500 - 9,900 4,750 - 4,950 4,743 Provisions for losses on loans and advances 2,300 - 2,600 1,150 - 1,300 1,164 General administrative expenses 6,500 - 6,700 3,250 - 3,350 3,233 Cost-income ratio, in % 66 - 70 66 - 70 68.2 HVB Group new Q2/03 Q1/03 Change % in EUR million Net interest income 1,464 1,413 +3.6 Provisions for losses on loans and advances 581 583 -0.3 Net commission income 659 670 -1.6 Gains less losses arising from trading securities (trading profit) 246 241 +2.1 General administrative expenses 1,603 1,630 -1.7 Balance of other operating income and expenses 10 40 -75.0 Operating profit 195 151 +29.1 FINANCIAL HIGHLIGHTS HVB Group 1/1-6/30/2003 2002 Key indicators (in %) Return on equity after taxes (excl. amortization of goodwill) (0.4) (2.3) Return on equity after taxes (1.6) (4.4) Cost-income ratio (based on operating revenues) 65.5 69.1 Ratio of net commission income to operating revenues 26.3 26.2 Earnings 1/1-6/30/2003 1/1-6/30/2002 Operating profit (in EUR m) 238 (413) Profit/Loss (in EUR m) (144) 53 Earnings per share (excl. amortization of goodwill in EUR) (0.07) 0.30 Earnings per share (in EUR) (0.27) 0.10 Balance sheet figures (in EUR bn) 6/30/2003 12/31/2003 Total assets 669.1 691.2 Total lending volume 466.8 487.9 Shareholders' equity 12.1 14.2 Key capital ratios compliant with the BIS1) 6/30/2003 12/31/2003 Core capital (in EUR bn) 18.8 19.1 Equity funds (in EUR bn) 33.0 33.4 Risk assets (in EUR bn) 321.7 340.6 Core capital ratio (in %) 5.8 5.6 Core capital ratio including BA/CA-IPO pro-forma (in %) 6.1 -- Equity funds ratio (in %) 9.4 9.1 Equity funds ratio including BA/CA-IPO pro-forma (in %) 9.8 - Share information 1/1-6/30/2003 2002 Share price: Year-end (in EUR) 14.39 15.22 High (in EUR) 16.50 42.55 Low (in EUR) 6.88 11.75 Market capitalization (in EUR bn) 7.7 8.2 6/30/2003 2002 Employees 65,526 65,926 Branch offices 2,197 2,104 INTERSHOP COMMUNICATIONS: Q2 Revenue Down 66% Year-on-year ---------------------------------------------------------- Intershop Communications AG announced financial results for the second quarter of 2003, ended June 30, 2003. Second quarter 2003 revenue totaled EUR5.6 million, as compared to EUR6.4 million in the first quarter of 2003 and EUR12.1 million in the second quarter of 2002. In the second quarter of 2003, Intershop further reduced its total operational cost (cost of revenue plus operating expense). Total operational cost declined 14%, from EUR14.6 million in the first quarter of 2003 to EUR12.6 million in the second quarter of 2003. Intershop reduced its total operational cost by EUR5.4 million or 30% compared to the second quarter of 2002. Intershop reduced its net loss in the second quarter of 2003 by 22%, from EUR8.4 million or EUR 0.44 per share in the first quarter of 2003 to EUR 6.6 million or EUR 0.33 per share in the second quarter of 2003. Intershops net loss in the second quarter of 2002 was EUR 5.8 million or EUR0.31 per share. As of June 30, 2003, total cash including cash, cash equivalents, marketable securities, and restricted cash amounted to EUR10.8 million compared to EUR16.7 million as of March 31, 2003. Included in total cash was freely available cash of EUR3.8 million as of June 30, 2003, as compared to EUR9.7 million as of March 31, 2003. As a result of far-reaching restructuring initiatives announced on July 2, 2003, Intershop has implemented measures to reduce its global headcount to approximately 250 employees at the end of the fourth quarter of 2003. Against the backdrop of a weak global IT spending environment and weaker than expected first half of 2003 financial results, the company forecasts revenue of approximately EUR25 million for fiscal 2003. As a result of the restructuring measures introduced, the company forecasts total full-year operational costs in the range of EUR40 million to EUR45 million for fiscal 2003. The company expects fourth quarter total operational costs will be approximately EUR7 million. Intershop expects to incur restructuring costs of approximately EUR 1.5 million in the third quarter of 2003. Furthermore, the company expects approximately EUR5 million of cash which is currently restricted will become unrestricted in the near future. About Intershop Intershop Communications (Nasdaq: ISHP; Prime Standard: ISH1) is the market leader in Unified Commerce Management, which can create strategic differentiation for companies by integrating online commerce processes across the extended enterprise. Intershop Enfinity, based on the best practices of Unified Commerce Management, enables companies to manage multiple business units from a single commerce platform, optimize their business relationships, improve business efficiencies and cut costs to increase profit margins. By streamlining business processes, companies can achieve a higher return on investment at a lower total cost of ownership, increasing the lifetime value of customers and partners. Intershop has more than 300 enterprise customers worldwide in a broad range of industries, including multi-channel retail and high technology. Customers including Hewlett-Packard, Bosch, BMW, TRW, Bertelsmann, Otto and Homebase have selected Intershop's Enfinity as the cornerstone of their global online commerce strategies. More information about Intershop can be found on the Web at http://www.intershop.com CONTACT: INTERSHOP COMMUNICATIONS Investor Relations Klaus F. Gruendel Phone: +49-40-3641-50-1307 Fax: +49-40-3641-50-1002 E-mail: k.gruendel@intershop.com ============= I R E L A N D ============= AN POST: Reports Biggest Ever Deficit ------------------------------------- The An Post Group reported a pre-tax operating loss of EUR17.4 million in 2002. Group turnover increased by 9.4% to EUR683.7 million, but costs, which rose 11% have for a second year, pushed it into deficit. When an exceptional charge of EUR52.5 million -- for restructuring -- is included, the total losses reported for 2002 are EUR70.5 million, its biggest ever deficit since An Post was established as a commercial State company in 1984. Describing the results as a cause for serious concern, An Post Group chairperson Margaret McGinley identified rising labor costs as the dominant element in group expenditure and warns that recent increases in prices are inadequate. Following a lengthy approval process an interim increase for domestic and some international letters services was approved in April 2002. It merely restored the standard letter tariff to the levels of 1991 when the last increase took effect, Ms. McGinley said. "Few businesses would be able to sustain operating margins in such circumstances and given the particularly high inflation rate in Ireland, it is not surprising that the company should now find itself in some difficulty," the chairperson added. The Group annual report, which was presented to its annual meeting on Wednesday, reveals that its three core businesses - Letter Post, the mail division, PostTS (formerly Post Offices division) and SDS, the parcels and courier division -- all increased turnover but lost money. There is particular concern about SDS -- which pushed its turnover to EUR80 million, a rise of EUR2 million -- but where major restructuring has been agreed to transform the business. The introduction of owner/drivers and a new Dublin collection and delivery system will commence in September. Letter Post, the mails business, saw its turnover increase by EUR28 million to EUR427 million. It is dependant on further realistic price increases, the achievement of major savings from its automation program and the introduction of delivery boxes to make profits. PostTS, the rebranded Post Offices division, made good progress. Helped by an increase in price for its social welfare payments service and continuing network adjustment, it raised its turnover by EUR18.2 million to EUR125.8 million and reduced losses from EUR13 million to EUR1.3 million. Ms. McGinley said that in an environment of high inflation and market liberalization, pricing assumed critical importance. Inadequate progress had been made but the company was pursuing, with ComReg, an application to raise the basic tariff to 48c. The new Group Chief Executive Donal Curtin said the current financial position of An Post was unsustainable. His primary objective was to stabilize the finances of the company and return the company to profitability as soon as possible. A complete review of the business is under way in the context of preparing a new strategic plan for the Group, he added. ========= I T A L Y ========= CIRIO FINANZIARA: Walking a Tightrope, Says Report -------------------------------------------------- Italian canned goods maker Cirio was seen to have little choice but to file for bankruptcy on Friday, according to the Financial Times. Previously, TCR-Europe, citing Agenzia Giornalistica Italia, said Cirio's restructuring plan stand unlikely to get approval from its bondholders. The owner of the Lazio football club defaulted on EUR1.1 billion (US$1.25 billion) on ungraded bonds in November. It afterwards was unable to repay bonds totaling EUR1.1 billion, forcing it to seek new financing from creditor banks. But it failed to persuade creditors from dumping in more cash. The Italian government also had little to say about a bailout. On Monday the board presented to bondholders a debt-for-equity swap that they claimed could stave off bankruptcy. But bondholders could prove hard to convince, Food Navigator said prior to the meeting. Many bondholders believe they could actually get at least part of their investment under bankruptcy, according to the report. Cirio, though, could still avoid liquidation by being placed under a court-appointed administrator who would oversee its restructuring for one year, the Financial Times said. It further mentioned that two small Italian food companies this week said they were willing to pull Cirio from the brink of bankruptcy. Stock market regulator Consob is currently investigating Cirio's accounting on allegations of "disappearance" of one quarter of the company's listed assets. FIAT SPA: Bottom Line Close to Breakeven, Interim Results Claim --------------------------------------------------------------- The Board of Directors of Fiat S.p.A. met in Turin under the chairmanship of Umberto Agnelli to review the Group's consolidated results for the second quarter and first half of 2003. Second Quarter Overview The achievements for the quarter are: (a) A significant reduction in the Group's operating losses, thanks to the progress made by Fiat Auto, as it begins to implement its restructuring program despite a difficult market environment; (b) A bottom line close to breakeven thanks to the gain on the sale of Toro Assicurazioni; (c) An improved net financial position compared with the beginning of the quarter due to a positive contribution of about EUR1.2 billion from the sale of Toro Assicurazioni and lower than expected funding requirements. The quarter was also characterized by: (a) The presentation to the financial markets at the end of June of the Group's Industrial and Financial Relaunch Plan. The Plan calls for the Group's operating income to rise to more than 4% of revenues by 2006 as a result of cost savings of EUR3.1 billion and higher margins on new products for EUR1.6 billion, net of additional costs of EUR1.8 billion. (b) An acceleration of the pace of divestitures, with the closing of the sale of Toro Assicurazioni to the DeAgostini Group (proceeds of about EUR2.4 billion and gross gain of about EUR390 million) and the final signing on July 1 of an agreement to sell FiatAvio (proceeds of about EUR1.5 billion). (c) The programs implemented during the quarter were followed by additional developments in July, including: (d) A EUR1.8-billion Fiat SpA capital increase to support the implementation of the Relaunch Plan. (e) The issue of about US$750 million in eight-year CNH senior notes. With this transaction, more than 60% of CNH's indebtedness will be due in five or more years. Overall, the transactions completed in the first half of 2003 and those slated for closing later in the year will provide the Group with over EUR9 billion in fresh liquidity, which it can use for its relaunch and development programs and to repay maturing indebtedness. Results for the Quarter The financial results achieved by the Fiat Group in the second quarter of 2003, while indicative of a situation that remains challenging, are better than those for the same period last year and for the first quarter of 2003. Consolidated Group revenues totaled EUR12,460 million, down from EUR14,608 million in the second quarter of 2002, when the figure included the contribution of divested operations. On a comparable consolidation basis, the decrease amounts to about 6%, mainly on account of changes in exchange rates. The Group's operating loss narrowed to EUR25 million, compared with operating losses of EUR127 million in the second quarter of 2002 and EUR342 million in the first three months of 2003. The quarter-on-quarter improvement increases to about EUR150 million when the data are restated on a comparable consolidation basis. The reduction in operating loss is due almost entirely to the improved results that Fiat Auto was able to achieve despite difficult market conditions. The consolidated net loss amounted to EUR38 million (loss of EUR27 million after minority interests), compared with net losses of EUR140 million (loss of EUR34 million after minority interests) in the second quarter of 2002 and EUR699 million (loss of EUR681 million after minority interests) in the first quarter of 2003. In addition to the reduction in operating losses, the decrease in consolidated net loss reflects higher income from equity investments, a decrease in financial expenses (due mainly to the reversal of the loss on the total return equity swap on the General Motors shares) and the net gain of EUR279 million earned on the sale of Toro Assicurazioni. However, the contribution provided by extraordinary items was significantly lower in the second quarter of 2003 than in the same period last year, when it included a EUR547million net gain earned on the sale of a 34% interest in Ferrari. At June 30, 2003, the net financial position showed net indebtedness of about EUR4.8 billion, or about EUR360 million less than at March 31, 2003. This improvement reflects the net contribution (about EUR1.2 billion) from the sale of Toro Assicurazioni, offset in part by the effects of the sale of 51% of Fidis Retail Italia (about -EUR440 million), changes in working capital and the net loss for the quarter. Fiat Auto During the second quarter of 2003, demand for automobiles continued to decrease compared with the same period last year, falling by 2.8% for all of Western Europe and a steeper 6.8% in Italy. Over the same period, the market contracted by a further 14% in Brazil, but the turnaround in Poland is continuing, with shipments up 15%. Fiat Auto had revenues of EUR5,221 million in the three months ended June 30, 2003, compared with EUR5,777 million in the same period a year ago (-9.6%, but -7.5% on a comparable consolidation basis). The Sector sold 448,000 vehicles worldwide. The decrease of 5.7% compared with the second quarter of 2002 is due mainly to market weakness in Europe and Brazil and to delays in buying decisions in anticipation of the introduction of new models in key market segments for Fiat Auto (the new Fiat Punto, the Lancia Ypsilon and, in the second half of the year, the new Fiat Panda and Idea). Compared with 2002, Fiat Auto's share of the automobile market declined from 30% to 28% in Italy and from 7.7% to 7% in Europe. Sales of light commercial vehicles remained strong, despite a rapidly contracting market, especially in Italy. Fiat Auto incurred an operating loss of EUR234 million in the second quarter of 2003, down from losses of EUR394 million in the same period last year and EUR334 million in the first three months of 2003. While still negative, this performance is indicative of the significant progress made thanks to incisive restructuring and cost-cutting measures and the growing synergies developed through the industrial alliance with General Motors. The resulting improvements were able to offset the negative impact of lower sales and sales incentive programs offered to counter the effect of an increasingly aggressive competition. CNH Global The market for agricultural equipment contracted in Europe (-3.9%), recovered in Latin America (+11.6%) and benefited from an accelerating growth rate (+22.1%) in North America, particularly in the segment of low-horsepower tractors. Demand for construction equipment remained under pressure in Europe (-3.4%) and Latin America (-20.2%), but turned around in North America (+7.9%). CNH, which uses the U.S. dollar as its reporting currency, had revenues of $2,906 million, up from $2,719 million in the second quarter of 2002. Translated into euros, revenues for the quarter declined to EUR2,566 million, down from EUR2,971 million in the same period last year, due to the negative impact of an unfavorable exchange rate. Unit sales of agricultural equipment were about the same as in the second quarter of 2002 in all of the major geographic regions, but overall shipments of construction equipment were down due to lower demand in Europe and South America and increased competition in North America. CNH reported operating income of US$125 million, compared with US$118 million in the same quarter of 2002. When stated in euros, operating income declines to EUR113 million, down from EUR131 million for the three months ended June 30, 2002. Better margins on new products launched this year, higher prices charged for agricultural equipment and the positive impact of profitability-enhancing programs contributed to the improvement in the Sector's operating performance. However, in the comparison with 2002, these positive factors were offset not only by an unfavorable exchange rate, but also by a change in the sales mix, the reduction of production volumes to cut company and dealer inventories, and higher medical benefit and pension plan funding costs, primarily in the United States. Iveco The weakness experienced by the European market for commercial vehicles (-3.8%) was caused almost entirely by the sudden drop in demand that occurred in Italy (-24.4%) once the investment tax credits provided by the government through the Tremonti Law expired. An analysis by market segment shows a sharp contraction in medium trucks (-10.6%) and less pronounced declines in light (-3.5%) and heavy vehicles (-2.2%). Iveco had revenues of EUR2,171 million in the second quarter of 2003, compared with EUR2,407 million in the same period a year ago. In addition to unfavorable market conditions, which primarily affected sales of light and medium vehicles, the decrease in revenues chiefly reflects the deconsolidation of Fraikin (sold at the beginning of the year) and the Naveco joint venture in China. On a comparable consolidation basis, revenues show a decline of 3.5%. New models introduced late in the second quarter to broaden and round out the Sector's product line (New Eurocargo in the intermediate segment and Stralis Active Time and Active Day in the heavy-load segment) are expected to develop their full sales potential in the coming months. Iveco reported operating income of EUR20 million, down from EUR25 million in the second quarter of 2002. On a comparable consolidation basis, operating income is about the same as in the second quarter of 2002. Ferrari Ferrari posted slightly higher revenues (+1.8%), but operating income fell to EUR7 million (EUR28 million in the second quarter of 2002). The main reason for this decline is a substantial increase in research and product development outlays, incurred mainly to relaunch the Maserati brand. Other Sectors The Sectors that produce components and production systems were affected to different degrees by the difficult conditions facing carmakers and by the negative impact of an unfavorable dollar-euro exchange rate. Unfavorable exchange rates and the divestiture of the Aluminum Division in September 2002 had a particularly strong impact on Teksid revenues and operating income, which decreased to EUR4 million. Magneti Marelli's revenues were about the same as in the second quarter of 2002, but operating income improved to EUR13 million thanks to production efficiency gains. Comau posted an increase in revenues, especially in North America thanks to a healthy order portfolio, and was able to return to profitability with operating income totaling EUR19 million. The revenues booked by Business Solutions in the second quarter of 2003 were basically unchanged from the comparable period a year ago, but operating income decreased to EUR5 million due to the combined impact of the sale of IPI and increased price competition, offset in part by efficiency gains. Itedi reported operating income of EUR3 million. Results for the First Six Months of the Year The overall results for the first half of 2003 are reviewed below. Consolidated Group revenues totaled EUR24,774 million, compared with EUR28,755 million in the first six months of 2002. On a comparable consolidation basis, the revenue decline amounts to about 8% and is largely attributable to changes in exchange rates. The operating loss totaled EUR367 million, most of which attributable to the first quarter (-EUR342 million), down from the EUR426 million loss in the first half of 2002. On a comparable consolidation basis, operating result improves by about EUR110 million. The consolidated net loss amounted to EUR737 million (EUR708 million after minority interests), most of which incurred in the first quarter, as compared with a net loss of EUR803 million (EUR563 million after minority interests) in the first six months of 2002. At June 30, 2003, the net financial position showed net indebtedness of EUR4.8 billion (net indebtedness of EUR5.8 billion at June 30, 2002). The increase compared with December 31, 2002 is due to the net loss for the period, a rise in working capital requirements and a decrease in discounted receivables (both of which occurred mainly during the first three months of 2003), offset in part by divestitures. Outlook for the Balance of the Year During the balance of 2003, the Fiat Group will continue to face difficulties and challenges due to uncertain market conditions and the resulting increase in competitive pressures. In this environment, the results achieved thus far point to a further improvement in the Group's key operating and financial performance indicators. The pace at which ongoing restructuring and cost-cutting measures are being implemented is in line with expectations. During the second half of 2003, and especially in the fourth quarter, the Group will begin to benefit from the fresh momentum developed thanks to the 2003-2006 Relaunch Plan and, more specifically, from an acceleration in the launch of new products by all Sectors, which will be vital in enhancing profitability. Given this scenario, it is reasonable to expect for 2003 a further decrease in the operating loss, which should be significantly lower than in 2002, and a healthier financial position than at the end of last year. Capital increase After having been informed of the preliminary results of the capital increase, the Board of Directors noted with appreciation that at the end of the exercise period of the option rights, over 98% of the capital increase has been subscribed. ***** Given the significant changes in the Group's structure that occurred or are being completed in 2003, in accordance with the provision of Article 39, Section 3, of Legislative Decree Law No. 127/91, the Quarterly Report of the Fiat Group (which will be published in the coming days and will be viewable online at http://www.fiatgroup.com)includes schedules showing supplemental financial statements with information that make comparisons with previous periods more readily understandable. These schedules show separately for each period consolidated data for the continuing and discontinuing operations. Discontinuing operations include the principal businesses that were sold (Toro Assicurazioni, Fraikin, IPI, Fidis Retail Italia, the Brazilian sales financing operations) or are in the process of being sold (FiatAvio) in 2003. To see financials: http://bankrupt.com/misc/FIAT_SPA_Financials.pdf FIAT SPA: Closes Sale of Toro Assicurazioni to de Agostini ---------------------------------------------------------- After obtaining all necessary approvals from relevant regulatory agencies, the Fiat Group and the De Agostini Group have closed the agreement for the sale of Toro Assicurazioni, by means of the transfer of the shares to Ronda SpA, a company fully owned by the De Agostini Group, and the payment of the final price set at EUR2,378 million to the Fiat Group. ***** Fiat previously said the imminent sale of Toro Assicurazioni SpA (BBBpi/--/--) and of unrated FiatAvio SpA will reduce Fiat's ongoing earnings and cash flow generating ability. The operating loss of Fiat for the quarter totaled EUR342 million, compared with EUR299 million in the first three months of 2002, after the bottom line benefited from higher gains (about EUR50 million) earned on the sale of real estate assets, especially by Toro Assicurazioni. TELECOM ITALIA: Rated BBB+/A-2; Outlook Stable ---------------------------------------------- Standard & Poor's Ratings Services said that, following the completion of the merger between Italian telecommunications operators Telecom Italia SpA and parent company Olivetti SpA, it has raised its long-term corporate credit rating on Olivetti to 'BBB+' from 'BBB', equalizing it with that of its subsidiary. The rating was removed from CreditWatch, where it had been placed on March 12, 2003; the outlook is stable. At the same time, Standard & Poor's affirmed its 'BBB+' long-term and 'A-2' short-term corporate credit ratings on Telecom Italia; the outlook remains stable. The merger becomes effective on Aug. 4, 2003, at which time the enlarged entity will take the name of Telecom Italia SpA and all ratings on Olivetti will be withdrawn. Telecom Italia, with 'BBB+' long-term and 'A-2' short-term corporate credit ratings, will remain the only group entity rated by Standard & Poor's. All assets and liabilities, including all debt obligations, of the two pre-existing companies will be assumed by the new Telecom Italia. The outlook for the new Telecom Italia is stable. The ratings on Telecom Italia reflect the group's superior business fundamentals, which are mitigated by the high leverage following the merger. "Although the transaction and related public tender offer (PTO) for the voting and savings shares of Olivetti and Telecom Italia have resulted in a EUR5.3 billion increase in consolidated debt, Standard & Poor's believes that the merger will carry substantial credit benefits," said Milan-based Standard & Poor's credit analyst Guy Deslondes. It will significantly increase discretionary cash flow (after dividends), thereby enhancing debt-reduction potential. It will also eliminate the weakest credit factor of the group in its previous structure, i.e., the poor coverage of Olivetti's debt and interest expenses by its subsidiaries' dividend payments. Olivetti's creditors will now enjoy full access to the strong cash flow generation of Telecom Italia's fixed-line business. "In addition, the debt arising from the PTO is substantially lower than the EUR9 billion initially forecast by both Telecom Italia's management and Standard & Poor's, representing a material credit improvement," added Mr. Deslondes. This debt has also been to a large extent offset by the disposal of Telecom Italia's directories business (which enabled debt reduction of about EUR3.74 billion) and the expected realization of substantial tax assets over the next few years. Nevertheless, the transaction will leave the merged entity substantially leveraged. Solid cash flow generation, strong operating performance, and management's expected continued focus on debt reduction are the key credit factors supporting the ratings and stable outlook on the new Telecom Italia. "Upside potential for the ratings will depend upon the trend in debt reduction over the course of the next 12 months, as well as on the continued predictability of management's financial policy. In this respect, the group's expansion plans outside Italy and future dividend policy will remain major rating considerations," =================== L U X E M B O U R G =================== MILLICOM INTERNATIONAL: To Hold Conference Call Wednesday --------------------------------------------------------- Millicom International Cellular (Nasdaq:MICC) Conference Call Announcement: Financial Results for the Second Quarter of 2003: Wednesday, August 6, 2003 16:00 (CET - Luxembourg) 10:00 (EST - New York) Presenter: Marc Beuls, President and CEO To register for the conference call, (which will also be broadcast live over the web at http://www.millicom.com),please send an e-mail to mic@sharedvalue.net by 12.00 CET on Tuesday 5 August, 2003. Millicom International Cellular S.A. is a global telecommunications investor with cellular operations in Asia, Latin America and Africa. It currently has a total of 16 cellular operations and licenses in 15 countries. The Group's cellular operations have a combined population under license (excluding Tele2) of approximately 382 million people. In addition, MIC provides high-speed wireless data services in five countries. MIC also has a 6.0% interest in Tele2 AB, the leading alternative pan-European telecommunications company offering fixed and mobile telephony, data network and Internet services to 17.7 million customers in 22 countries. The Company's shares are traded on the Luxembourg Bourse and the Nasdaq Stock Market under the symbol MICC. ***** Moody's Investors Service placed the ratings of Millicom International Cellular under review for potential upgrade this month following the completion of the company's exchange offer earlier this year. The decision affected Millicom's 'Caa1' senior implied rating, 'Caa2' issuer rating, and 'Caa3' 13.5% senior subordinated discount notes due 2006. Moody's said it will focus its review on Millicom's improved financial flexibility; the company's longer-term strategy for investments, acquisitions, and leverage levels; notching considerations with respect to the company's new capital structure; and the overall prospects of the company's different operations. ===================== N E T H E R L A N D S ===================== ROYAL PHILIPS: Discloses Details of Business Realignment -------------------------------------------------------- Royal Philips Electronics (AEX: PHI, NYSE: PHG) announced more details about the realignment of its consumer electronics division. The division will increase its focus on three main product areas: displays, which are becoming more and more connected, entertainment hubs (networked multimedia devices), and infotainment (mobile audio, video and communications products), and further build on home entertainment, personal expression and productivity as marketing domains, CEO Gottfried Dutine wrote in a letter to employees from his division around the world. Citing fierce and relentless competition from existing brands and new entrants to the market, Mr. Dutine also announced a program to reduce organizational complexity and identify opportunities to realize annual savings in the division's cost base of EUR400 million by year-end 2005. "To secure our future in consumer electronics we need to operate a business model that will consistently provide us with operating margins of 2 to 2.5% supplemented by a 2% margin from licenses, while generating a positive cash flow and turning over our capital 20 to 25 times a year," Mr. Dutine wrote. "Much has already been achieved in our division in the past years as we migrated from analog to digital, from manufacturing to marketing, and from a broad to a more focused product portfolio," Mr. Dutine explained. "We expect that market developments are towards a more converged world, with increased competition and tougher rules of the game," he continued. "We will compete on the basis of marketing driven differentiation, lifecycle management, better business model designs, innovation, operational excellence, scale (organic or through alliances) and last but not least, a more competitive operating cost base. With regard to this latter point, we aim to accelerate our programs to make our organization more market oriented, lean, agile, fast and entrepreneurial," Mr. Dutine wrote. The annual savings of EUR400 million in Consumer Electronics come on top of the EUR1 billion cost reduction by year-end 2003 resulting from the Philips-wide TOP program ("Towards One Philips") and do not include possible one-time restructuring charges the size of which will have to be decided in the third quarter of 2003. Philips announced its intention for a business realignment of its Consumer Electronics division to improve time to market and global execution on July 21, 2003 when Mr. Rudy Provoost and Mr. Frans van Houten, two of the division's top executives, were appointed to the company's Group Management Committee as CEO of Philips Consumer Electronics Global Sales and Services and CEO of Philips Consumer Electronics Business Groups respectively. =========== N O R W A Y =========== PETROLEUM GEO-SERVICES: S&P Lowers Corporate Credit Rating 'D' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Petroleum Geo-Services ASA to 'D' from 'CC' following the company's announcement that it has voluntarily filed for Chapter 11 bankruptcy protection. The ratings were removed from CreditWatch with negative implications, where they were placed Dec. 30, 2002. The ratings on Oslo Seismic Services Inc. continue to be rated 'CC' and are on CreditWatch with developing implications, where they will remain until PGO either emerges from bankruptcy protection or Oslo Seismic becomes entangled in PGO's bankruptcy proceedings. "After PGO emerges from bankruptcy protection, Standard & Poor's will assign new ratings to PGO and Oslo Seismic based on their prospective creditworthiness," said Standard & Poor's credit analyst Bruce Schwartz. PGO's bankruptcy filing follows a previously announced agreement with a majority of PGO's banks and bondholders and its largest shareholders to support its plan of reorganization. This bankruptcy filing will be at the parent company (PGS) level only and is not intended to involve the company's operating subsidiaries, which should leave subsidiary creditors (i.e., Oslo Seismic) unaffected. If the prepackaged bankruptcy process works as intended, PGO's creditors will receive less than par value on their debt holdings although the company will have a capital structure that should enable it to better weather turbulent conditions. The proposed restructuring will reduce PGO's total debt to about $1.3 billion from approximately $2.5 billion through conversion of the existing bank and bond debt into new debt and a majority of PGS's post-restructuring equity. PGO intends for the restructuring to be completed before year-end. SMEDVIG ASA: Ordered to Pay Esso NOK509 Mln in Compensation ----------------------------------------------------------- The Stavanger District Court reached on Wednesday its decision in the dispute between Smedvig (NYSE:SMVa) (NYSE:SMVb) and Esso with regard to the completion of the Balder production vessel. The court concluded that Esso had the right to terminate the sales and purchase contract and the operating contract. On the other hand, the court has concluded that all contractual limitations of responsibility are applicable. Furthermore, the court has rejected Esso's claim of gross negligence on Smedvig's part. Smedvig has to pay NOK509 million to Esso as compensation for completion and guarantee work and US$3.5 million as part refund of the purchase price. In addition to these amounts, a preliminary estimated net interest of NOK150 million will apply. Esso has to pay Smedvig NOK23.5 million as compensation for extra work, undisputed change orders and income earned under the operations agreement. The court concluded that each party is responsible for their own litigation costs. Smedvig's contract with Esso is, on most issues, "back-to-back" with the building contract with the construction yard in Singapore. Any claims for damages Smedvig is instructed to pay Esso in a final ruling, will be claimed from the yard and under relevant insurance coverage. The results of the ruling will be reflected in the Company's result for the second quarter this year. "We are disappointed with the court's decision, and must conclude that we did not succeed in convincing the Stavanger District Court of our view. On the other hand, it should be pointed out that Esso has only succeeded with less than 20 percent of its total claim. We will now use the next four weeks to assess whether or not we will appeal the ruling. Should the ruling be final, Smedvig has the financial strength to cover this loss from its own cashflow and existing loan arrangements," says CEO Kjell E. Jacobsen in Smedvig asa. Please note that this news release and the statements included therein are based on the court's short summary of the rulings. Smedvig makes reservation with regard to the complete content of the rulings, as this has not yet been examined in detail. Smedvig asa is an offshore drilling contractor headquartered in Stavanger, Norway. The company provides drilling and well services in the North Atlantic and Southeast Asia. Smedvig's main activities are divided into mobile units, tender rigs and platform drilling. Smedvig has a fleet of three modern drilling rigs, one drillship and nine tender rigs and has one tender rig under construction. The company holds contracts for production drilling, well services and maintenance on fixed installations. CONTACT: SMEDVIG ASA P.O. Box 110, 4001 Stavanger Phone: +47 51 50 99 00 Fax: +47 51 50 96 88 Homepage: http://www.smedvig.no E-mail: smedvig@smedvig.no Kjell E Jacobsen, Chief Executive Officer Phone: +47 51 50 99 19 Alf C Thorkildsen, Chief Financial Officer Phone: +47 51 50 99 19 Jim Datland, Investor Relations Manager Phone: + 47 51 50 99 19 =========== P O L A N D =========== POLSKIE HUTY: LNM Targets Due Diligence Completion this Week ------------------------------------------------------------ Global steel producer LNM Holdings looks forward to completing its due diligence on the assets of Polish steel group Polskie Huty Stali on August 8, according to Interfax-Europe. LNM, which outbid rival U.S. Steel in the possible acquisition, was given until August 22 to hold exclusive negotiations with the Polish government, Polskie's management and trade unions. The thrust of the company to finish the due diligence on August 8 is aimed at possibly coming up with an initial deal by the time the exclusivity runs out, according to LNM Holdings CEO Lakshmi Mittal. "We want to sign the privatization agreement with the Polish government before the set deadline of August 22. Currently, we are holding various talks with all sides," Mittal told reporters in Krakow, according to the report. The other party with which LNM wants to have talks with is the group comprising PHS labor representatives. "Based on an agreement with the Polish government signed in January, we were not allowed any contacts with Polskie's labor-union representatives. Now, we have asked the Treasury Ministry for the chance to meet with labor unions and present our social package and general strategy," LNM Holdings deputy CEO Aditya Mittal told reporters. A deal regarding workers' benefit is included in the terms that the government is asking from potential investors. Poland wants investors to buyout at least PLN1.6 billion of Polskie's debt, fund around US$150 million capital rise, accept the terms of Poland's steel support scheme agreed with the EU, and take the state's shareholdings on an agreed timetable. =========== S W E D E N =========== SAAB AB: Seeks Capital Injection to Cover Deficit ------------------------------------------------- Swedish carmaker Saab AB admitted it needed help from its parent, General Motors, to repair its balance sheet eroded by continuing losses, according to the Financial Times. The report quoted Chief Executive Peter Augustsson saying: "Saab AB needs to have a capital injection because of the losses we have had in the last two years...The balance sheet needs to be restored." The company recently posted its largest ever annual loss of SEK4.5 billion (US$548 million) with the Swedish authorities. The document also showed the firm has negative equity of SEK168 million at the end of 2002. According to Mr. Augustsson Saab has been for some times in discussions with General Motors. The parties have to reach agreement by the end of September to satisfy Swedish rules on capital requirements. He did not reveal the amount the company needs, but said it would have to cover for the capital deficit, the continuing losses, and the company's new model program. Saab made cumulative losses of around SEK19 billion since 1989. The company, which reported an annual profit only twice, is again warning of another loss this year. The result, however, will be "substantially better" than last year, according to Mr. Augustsson. He had to cut around 1,400 jobs this year to report improvements in this year's results. CONTACT: SAAB AB Broderna Ugglas gata Linkoping SE-581 88 SWEDEN Phone: +46 13 18 00 00 +46 13 18 18 02 Home Page: http://www.saab.se/ TELIASONERA: Reports Significant Improvement in Operating Income ---------------------------------------------------------------- Q2 in Brief: (a) Net sales in line with previous year, SEK20,275 million (20,290). (b) Operating income improved to SEK2,744 million (-37,974). Excluding non-recurring items, operating income improved to SEK3,963 million (800). (c) Net income improved to SEK1,499 million (-27,510) and earnings per share to SEK0.32 (-5.88). (d) EBITDA improved to SEK7,747 million (1,734). Excluding non-recurring items, EBITDA improved to SEK8,070 million (6,241) and the margin increased to 40% (31). (e) Free cash flow increased to SEK5,155 million (2,534). First Half-Year in Brief (a) Net sales increased 1.7% to SEK40,624 million (39,932). (b) Operating income improved to SEK5,971 million (-33,349). Excluding non-recurring items, operating income improved to SEK7,190 million (2,810). (c) Net income improved to SEK3,101 million (-23,632) and earnings per share to SEK0.66 (-5.05). (d) EBITDA improved to SEK15,309 million (8,306). Excluding non-recurring items, EBITDA improved to SEK15,632 million (12,213) and the margin increased to 38% (31). (e) Free cash flow increased to SEK9,052 million (2,245). Comments from Anders Igel, President and CEO "At the end of the second quarter we could see positive effects from our market efforts, although we have further improvements to make. Profits improved across the company and delivered a SEK3.2 billion increase in operating income." "It is satisfying to see that the Danish fixed-line operations and the international carrier operations reached their turnaround targets and that efficiency improvements delivered faster than expected. The integration of Telia and Sonera and the new governance model are thus yielding results." "Focus is now on improving business within our current footprint. Longer-term, strong cash flow gives TeliaSonera the flexibility to grow the business in a consolidating European industry." * Pro forma presentation as if the merger of Telia and Sonera had taken place on January 1, 2002 and excluding Telia's Finnish mobile operations and Swedish cable TV operations. Convenience translation only, conversion rate SEK 1 = EUR 0.108888. To See Full Financial Release: http://bankrupt.com/misc/TELIASONERA_AB_Q2.htm ===================== S W I T Z E R L A N D ===================== ABB LTD.: Candover Expected to Enter Exclusive Buyout Talks ----------------------------------------------------------- The exclusive negotiations for the sale of ABB Ltd.'s oil, gas, and petrochemicals unit to Candover, the European buy-out company, is expected to commence Tuesday, according to the Financial Times. Candover has offered a little more than US$1 billion for the Swedish engineering group's asset, and is understood to have reached an agreement with ABB to hold more detailed exclusive talks after preliminary price discussions during the weekend. ABB executives were believed to have discussed the offer on Monday, according to the report. A sale of the division is crucial to restoring the reputation of ABB, which is currently plagued by asbestos liabilities and deteriorating trading performance. The oil, gas and petroleum unit itself is found to be suffering from worsening trading performance in the last two quarters. The discovery led some analysts to reduce its potential sale price to US$900 million or less. ABB initially hoped to raise US$1.5 billion for the unit. Market estimates also narrowed its valuation of the unit to US$1.2 billion as it emerged that part of the business would be affected by efforts to limit the group's asbestos liabilities in the U.S. The limit of ABB's exposure to claims is still unclear. While a sale remains a possibility, observers cautioned that the exclusive talks do not mean a deal could surely be reached. Other buyers interested in the oil, gas and petroleum business include U.S. oil services group, Cooper Cameron, according to the report. A sale could bring ABB's US$4.6 billion debt to US$3.7 billion, according to Morgan Stanley. FANTASTIC CORPORATION: Net Loss Declines 23% in Second Quarter -------------------------------------------------------------- The Fantastic Corporation (Prime Standard Frankfurt: FAN), a provider of software products that optimize data distribution within corporate networks, announced its financial results for the quarter ending June 30, 2003. Revenues were US$0.3 million, 34% lower than in Q1 and 73% lower than in same quarter last year. The company continued to reduce its operating expenses (excluding depreciation, non-cash compensation expenses, impairments and restructuring costs) to US$2.7 million. This is a decrease of 10% percent compared to the first quarter 2003 and 48% percent less than in the second quarter last year. The negative EBITDA (earnings before interest, tax, depreciation and amortization) was US$2.4 million in the second quarter of this year. Net loss declined by 23% percent, from US$6.0 million in the first quarter of 2003 to US$4.6 Million. This translates into a net loss per share of US$0.04 in the second quarter of this year. Total revenue for the half-year period 2003 was US$0.6 million, 55% less than the US$1.4 million generated in the first half of 2002. The negative EBITDA was at US$5.0 million, 42% less than the first-half of 2002. This amount excludes non-recurring restructuring costs, impairments and non-cash compensation expenses. Net loss fell by 34%, from US$16.0 million to US$10.6 million, which represents a net loss per share of US$0.08 in the first half of 2003. As of June 30, 2003, the company had US$8.8 million in cash and cash equivalents. The company believes that its concentrated efforts to succeed in the United States, while at the same time looking for potential alternatives, remain the best way to protect shareholder value. Fantastic is planning to hold a general meeting at the end of September 2003 to update its shareholders. =========================== U N I T E D K I N G D O M =========================== AES DRAX: American Parent Appoints New Independent Directors ------------------------------------------------------------ U.S. energy group, AES, installed two new independent directors at its loss-making unit, AES Drax in Yorkshire, in a bid to resolve a dispute over a rival restructuring offer from International Power, according to the Financial Times. International Power said last week it is willing to pay GBP80 million, or 55p in a pound for a 36% stake and 15% of the plant's GBP1.3 billion-debt. The offer was made just days before the expiry of a one-month extension to a standstill agreement with Drax's lenders. AES, meanwhile, has offered 47p in the pound for the debt. It gave the Yorkshire power station until August 5 to accept its restructuring plan, or they would withdraw the offer. BRITISH AIRWAYS: Posts GBP45 Million Pre-tax Loss in 1st Quarter ---------------------------------------------------------------- Highlights of Result: (a) Pre-tax loss of GBP45 million (b) Operating profit of GBP40 million (c) Revenue down 10.7% versus last year to GBP1.8 billion (d) Net costs down 5.4% and unit costs improve 4.5% versus last year (e) Net debt down by GBP226 million in the quarter British Airways posted a pre-tax loss of GBP45 million (2002: GBP65 million profit) for the first quarter to June 30, 2003. The operating profit for the first quarter was GBP40 million (2002: GBP158 million profit). The deterioration in operating profit reflects the significant reduction in revenue due to continuing economic weakness, the war in Iraq and the impact of SARS. This was partially offset by cost savings delivered through the airline's Future Size and Shape recovery program. Passenger capacity, measured in available seat kilometers, reduced by 0.2% for the quarter. Revenue passenger kilometers were up 1.7%for the quarter. Yield measured as pence per revenue passenger kilometers deteriorated by 12.7%. Seat factor was up 1.3 points at 71.8% in the quarter. Net debt was GBP4,923 million, down GBP226 million since the start of the financial year and GBP1.6 billion from the December 2001 peak. Net costs were down 5.4% for the quarter at GBP1,649 million, and unit costs improved by 4.5% in the same period. Revenue in the quarter, at GBP1,832 million, was down 10.7%. Reductions were achieved in most areas of operating cost; aircraft operating lease costs, selling and distribution costs, landing fees, en route charges and engineering costs. Employee and handling costs were flat. Fuel costs increased by 7% to GBP229 million. Rod Eddington, British Airways Chief Executive, said: "This is the most testing period in aviation history. It continues to be an extremely challenging revenue environment due to the effect of SARS, the war in Iraq plus the ongoing economic weakness. Future Size and Shape cost efficiencies have partially offset the weak revenue in the first quarter. "We must continue to modernize our business. "The direct cost of the unofficial industrial disruption in July will be in the range of GBP30 million to GBP40 million reflecting costs incurred and lost revenue. The uncertainty has also impacted forward bookings and will reduce revenue. "We will work hard to restore British Airways reputation with our customers. Lord Marshall, British Airways Chairman, said: "The demand for air travel, while improving, remains unpredictable. Seat factors are expected to continue at close to last year's levels but yield improvements will be difficult to achieve. We expect that revenue in our second quarter will be lower than last year. "The implementation of our Future Size and Shape program and other cost initiatives continues to deliver larger than expected cost savings. To see financials: http://bankrupt.com/misc/BRITISH_AIRWAYS_Financials.pdf EINSTEIN GROUP: David Rubin & Partners Appointed Administrator -------------------------------------------------------------- Einstein announces that it has successfully applied to the High Court for an Order appointing administrators. The order was granted on July 30, 2003 for three months for purposes which include attempting to secure the survival of the company and the whole or any part of its undertaking as a going concern. The joint administrators are Lane Bednash and Asher Miller of insolvency practitioners David Rubin & Partners. Einstein continues to negotiate with third parties with regard to its future funding and certain of the subsidiaries continue to trade. EUROSTAR U.K.: Belgian Partner Plans to Sell Partial Stake ---------------------------------------------------------- Belgian railway company SNCB is reportedly planning to exit from Eurostar, the troubled high-speed train that links London with Paris and Brussels, AFX News reported, citing newspaper L'Echo. According to the report, SNCB is selling part of its 15% stake in Intercapital Regional Railways, which runs Eurostar U.K in a bid to cut costs. SNCB spokesman Philippe Thiels was, however, quoted to have said that no decision on the matter is expected before the end of the year. Eurostar is jointly owned by Societe Nationale des Chemins de Fer, which owns 35% of the company, France's state-owned railway; SNCB, its Belgian counterpart, and National Express, which holds 40%. Hurt by stories of travel nightmares, the troubled train operator says it is losing more than GBP55 million a year. In the first half of this year, fewer than three million tickets were sold, a decline of more than 10% from a year earlier. HAMLEYS PLC: Baugur's Bid Vehicle Extends Offer Deadline -------------------------------------------------------- The board of Soldier announces that the Revised Increased Offer [for Hamleys] has been extended for 7 days and therefore remains open for acceptance until 3.00 p.m. on August 7, 2003. Hamleys Shareholders who have not yet accepted the Revised Increased Offer and who wish to do so are strongly encouraged to take the necessary action set out in the Revised Increased Offer document. As at 3.00 p.m. on July 31, 2003, valid acceptances of the Revised Increased Offer had been received in respect of, in aggregate, 15,463,760 Hamleys Shares representing approximately 66.9% of the entire existing issued ordinary share capital of Hamleys. This total includes: (a) valid acceptances received from the Independent Directors pursuant to the irrevocable undertakings, which they have given in respect of 62,250 Hamleys Shares, representing approximately 0.3% of the entire existing issued ordinary share capital of Hamleys; (b) valid acceptances received from Hamleys Shareholders pursuant to irrevocable undertakings given in respect of 2,845,175 Hamleys Shares, representing approximately 12.3% of the entire existing issued ordinary share capital of Hamleys; and (c) a valid acceptance from A Holding SA, a subsidiary of Baugur Group hf and a party acting in concert with Soldier, in respect of 2,556,264 Hamleys Shares, representing approximately 11.1% of the entire existing issued ordinary share capital of Hamleys. Since the commencement of the Offer Period, A Holding SA has purchased 2,556,264 Hamleys Shares and conditionally agreed to purchase 3,513,548 Hamleys Shares, representing in aggregate approximately 26.3% of the entire existing issued ordinary share capital of Hamleys, at a price of 254 pence per Hamleys Share. The conditions to the agreement to purchase 3,513,548 Hamleys Shares have now been satisfied and A Holding SA expects to complete the purchase of these Hamleys Shares shortly. A Holding SA has assented all of the 2,556,264 Hamleys Shares, which it has purchased to the Revised Increased Offer, as described above. In addition, by virtue of the Hamleys Management Share Exchange Agreement (which was amended by a supplemental agreement dated June 27, 2003), Soldier has conditionally contracted to acquire, in aggregate, 36,585 Hamleys Shares from Hamleys Management, representing approximately 0.2% of Hamleys' entire existing issued ordinary share capital, together with a further 439,741 Hamleys Shares upon exercise of certain options held under the Hamleys plc Unapproved Executive Share Option Scheme. This agreement is conditional upon the Revised Increased Offer becoming or being declared unconditional in all respects and Soldier legally and beneficially holding more than 25% of Hamleys' entire existing issued ordinary share capital. Accordingly, Soldier and its concert parties have acquired or contracted to acquire, or have received acceptances of the Revised Increased Offer in respect of, in aggregate, 19,013,893 Hamleys Shares currently in issue, representing approximately 82.3% of Hamleys' entire existing issued ordinary share capital. In addition, Soldier has conditionally contracted to acquire 439,741 Hamleys Shares upon exercise of certain options under the Hamleys plc Unapproved Executive Share Option Scheme. Prior to the Offer Period, Soldier held no Hamleys Shares and Hamleys Management held an interest in 36,585 Hamleys Shares, representing approximately 0.2% of the entire existing issued ordinary share capital of Hamleys. In addition, prior to the Offer Period, the Hamleys Management held options to subscribe for, in aggregate, a maximum of 515,819 Hamleys Shares under the Hamleys Share Schemes. Words and expressions defined in the Original Offer Document dated June 19, 2003 and Revised Increased Offer document dated July 17, 2003 shall apply for the purposes of this announcement. CONTACT: GAVIN ANDERSON & COMPANY Phone: 020 7554 1400 Neil Bennett Halldor Larusson SOLDIER Phone: 020 7479 7313 John Watkinson KPMG Corporate Finance Phone: 020 7311 1000 David McCorquodale Michael McDonagh HEYWOOD WILLIAMS: Issues Update on Trading, Board Changes --------------------------------------------------------- In the light of a loss in the six month period ending June 30, 2003, an expected shortfall in full year profits against current expectations, and the resignation of the group's chief executive, Heywood Williams, following its board meeting Thursday, issues a trading update ahead of the formal announcement of the full interim results on September 3, 2003. In summary, the scheduled improvements in U.K. operations are not materializing as quickly as anticipated, and U.S. markets remain depressed. Performance Profit before tax (before exceptional items and goodwill amortization) for the first half of 2003 is expected to be a loss of approximately GBP1.7 million (H1 2002: profit of GBP10 million) reflecting the delayed turnaround in the U.K. operations and poor market conditions in the U.S. Net debt at June 30, 2003 is expected to be approximately GBP43.8 million (2002: GBP35.9 million) after the receipt of GBP8.9 million in part settlement of the legacy product rectification claim first announced in August 2002. The balance sheet was further strengthened on July 23, 2003 with the receipt of the gross proceeds to date of GBP34.8 million following the sale of the Creation Group to Dura. This could be increased by a further amount of up to GBP1.8 million dependent on Creation sales over the next year. This successful divestment builds on Creation's record setting financial performance in 2002 and maximizes value for the group's shareholders. Board Change Ian Stuart has tendered his resignation as group chief executive in order to seek a new business challenge. With immediate effect, Hamish Bryce has been appointed executive chairman, and fulfils the responsibilities previously undertaken by Ian Stuart. Roger Boyes, a non-executive director, has become deputy chairman and William Schmuhl has assumed executive responsibilities for US operations. In due course, a search for a new group chief executive will be initiated. Dividend In its circular to shareholders proposing the disposal of the Creation Group, the company undertook to maintain the 2003 dividend at 2002's level of 15 pence per share, in the absence of unforeseen circumstances. The board confirms it will maintain this undertaking post this announcement. Operational Reviews The U.K. turnaround has not progressed at the rate expected, particularly in the Plastic Systems Division and Coldseal. At Plastic Systems costs have to be reduced further and demand has yet to recover to the levels anticipated following the supply chain disruption which arose in late 2002 and early 2003...The situation is slowly improving and all efforts are being directed towards accelerating this process. Coldseal, our retail double glazing business, underperformed our expectations. Efforts to raise margins, improve productivity and strengthen management did result in a better second quarter performance, but there is still a long way to go to return this division to satisfactory profitability. Mila, our specialized component wholesale division, performed satisfactorily, although its results were held back because of the weakness of Sterling versus the Euro. In the U.S., the manufactured housing market remains depressed and well below the level of the previous year. Pipe volumes and margins have weakened as recently distributor stocks have temporarily run ahead of final demand. We anticipate some recovery in pipe markets later in the year, but the timing of the long awaited MH recovery remains uncertain. Prospects Overall, the second quarter showed an improving trend on the first and was profitable. Looking forward, we expect the second half to be below prior year levels. In the U.K. we will continue to drive the operational turnaround in the Plastic Systems Division and at Coldseal. Mila will build on its inherent strengths to improve margin and grow market share. The remaining U.S. businesses will continue their strong and proven focus on operational efficiency and cost control as they await a return to more normal market conditions. With the group's strong balance sheet, inherently cash generative businesses and significant market positions in each of its five principal areas of activity, the board, whilst fully recognizing the challenges ahead, remains confident for the longer term prospects of the group. ***** In the U.K., Heywood Williams is the market leader in PVC windows, doors and conservatories; in the U.S. it is a leading supplier of components to the manufactured housing and recreational vehicle market; and a major producer of plastic pipe products. CONTACT: HEYWOOD WILLIAMS Phone: 01484 487200 Hamish Bryce, Executive Chairman FINANCIAL DYNAMICS Phone: 020 7831 3113 Jon Simmons Meg Baker IMPERIAL CHEMICAL: Profits Partially Recover in First-half ---------------------------------------------------------- Highlights: (a) Group sales for the quarter 5% lower than 2002, but comparable* International Business sales 2% ahead. (b) Comparable International Business trading profit* 5% lower for the quarter, due to shortfalls in Quest and Uniqema. National Starch performance improved from Q1. (c) Group profit before tax* GBP98 million for the quarter (2002: GBP125 million) and GBP150 million for the half year (2002: GBP191 million). (d) Group profit before tax* includes an additional ongoing GBP9 million non-cash pension charge for the quarter. (e) Interest cover improved to 5.3 times (2002: 5.2 times) for the quarter and 4.1 times (2002: 3.9 times) for the half year. (f) Cash outflow before financing for the half year GBP137 million better than 2002. Net debt at half year GBP1,695 million. (g) Interim dividend 2.75p per share (2002: 3.0p), consistent with policy. (h) Second stage of structural cost reduction program announced. (i) Agreement reached on refinancing of Ineos Chlor. John McAdam, Chief Executive, said: "ICI's performance improved from the first to the second quarter. Paints continued to perform well, and National Starch improved considerably, delivering comparable trading profit in line with last year for the quarter. Results for both Quest and Uniqema were somewhat better than Q1, and discretionary costs were reduced across the Group. "Nevertheless, profits remain disappointing overall, and the economic outlook remains uncertain. Action is therefore required to further reduce costs. "We are announcing the second stage of the structural cost reduction program we initiated at Q1. These plans are far-reaching, impacting each of the International Businesses and the Corporate Center. We intend to fund them by reducing capital expenditure and by making a number of small divestments. The total program, including the initiatives announced at Q1, is expected to deliver savings of more than GBP100 million per annum by 2005, equivalent to around 2% of present sales." Further information * References to 'comparable' performance exclude the effect of currency translation differences and the impact of acquisitions and divestments on the results reported by the International Businesses. All references to the Group's performance are 'as reported'. Trading profit and profit before tax figures are quoted before goodwill amortization and exceptional items throughout this statement unless otherwise stated. To view full report and financials: http://bankrupt.com/misc/IMPERIAL_CHEMICAL.htm IMPERIAL CHEMICAL: Ratings Unchanged by Profit Improvement ---------------------------------------------------------- Standard & Poor's Ratings Services said its ratings on U.K.-based specialty chemicals and paints manufacturer Imperial Chemical Industries PLC (ICI; BBB/Stable/A-2), are unaffected by announcement by ICI of its first-half year results. "The group's cash flow generation during the six months ended June 30, 2003, was better than expected, despite seasonal working capital requirements, top-up pension payments, and ICI's poor performance in the first quarter", said Standard & Poor's credit analyst Ralf Kortuem. "Most importantly, however, the group's underlying profits in its core activities have improved in the second quarter when compared with the first quarter," added Mr. Kortuem. The financial performance at National Starch, ICI's largest specialty chemicals division, recovered in line with expectations, primarily as a result of price increases and cost control. Uniqema, the group's oleochemicals division, staged a slight cyclical recovery, and the Paints division remains a mainstay in terms of earnings stability. By contrast, the flavors activities of ICI's Quest division continue to struggle with low customer demand following production problems experienced last year. Nevertheless, no further market shares appear to have been lost at Quest. The group's remaining non-core activities performed poorly. ICI also announced the second stage of a group-wide restructuring program that is targeting in excess of GBP100 million in annual cost savings by 2005. Under the entire program, charges of GBP231 million are expected, GBP162 million of which are cash costs. In addition, the program will require about GBP52 million in extraordinary capital expenditure. "The cash portion of the program will be partly financed by reduced regular capital expenditure and small divestitures so that a slight reduction in the group's net indebtedness by year-end 2003 should still be achievable", said Mr. Kortuem. At June 30, 2003, ICI had net debt of about GBP1.7 billion. In addition, ICI had a high pension funding gap of about GBP820 million at year-end 2002. EBITDA before special items for the 12 months ended June 30, 2003, was GBP654 million. An agreement on the level of annual top-up pension payments for 2004 onward has not yet been reached, but the estimated actuarial deficit at the end of March 2003 implies that annual payments will likely increase to GBP60 million or slightly more. The new financing package agreed with Ineos Chlor Ltd. will result in manageable cash payouts of about GBP85 million (including undrawn loans) by 2005. These payments will be partly offset by separate payments of GBP30 million to be received from Ineos Group over the next four years. Standard & Poor's continues to expect improvements in the group's financial profile over the next 18 months, supported by moderate further deleveraging, and cash flow improvements through restructuring measures. The financial performance of the group's core specialty chemicals business is expected to recover further. No debt-financed acquisitions and only moderate dividend payments are expected. KYNDAL: Adopts New Identity, Strategic Vision --------------------------------------------- Whyte and Mackay (previously Kyndal Spirits Ltd.) announced a new corporate strategy to increase revenues, market share, and profitability for future long-term growth. This vision includes a significant investment in branding and own label initiatives, an intense focus on customer and consumer satisfaction, and a thorough restructuring program, which includes consolidation of its bottling facilities. "It is appropriate we are naming the company after our founders, Whyte and Mackay, two Scottish businessmen who were highly focused on quality and customer needs. Their commitment to product quality is deeply entrenched in our culture and still garners our products industry recognition," said Vivian Imerman, Chairman and CEO of Whyte and Mackay. 'We have renamed the company in line with the new vision and strategic focus, which will, together with the significant investment, reverse our slowly deteriorating market position. The restructured company will enable the senior executive team and Whyte and Mackay's hard working employees to free the untapped potential of the company's own label and branded business.' The investment of GBP70 million will be broken down into two areas. GBP50 million will be invested in strategic marketing supporting Whyte and Mackay' s core brands -- Whyte and Mackay, Vladivar and the malt portfolio which includes Isle of Jura and The Dalmore and the own label business and GBP20 million will be spent on restructuring the operations of Whyte and Mackay to create a lean and highly competitive company. "Our portfolio of products, both branded and own label, have suffered from a lack of investment over the past five years and the GPB50 million that we will spend on strategic marketing will rectify this and help the brands to meet their potential," said Vivian Imerman. "Part of this process is already under way with, for example, Whyte and Mackay's new TV advertising campaign and similar initiatives will be put in place for Vladivar. We will focus on brand extensions to support our portfolio similar to the recent launches of Isle of Jura Superstition and Isle of Jura 1984." Restructuring the operation will include creating a new bespoke bottling factory with high speed bottling lines. This will consolidate Whyte and Mackay's existing factories in Grangemouth and Leith into one of the sites. The consolidation and improvements in technology will result in redundancies predominantly from the bottling hall, but will also include a small number of general administrative jobs, leaving Whyte and Mackay with a headcount of around 500 people from approximately 700. Whyte and Mackay will work with the Scottish Executive, the TGWU and local politicians to aid the re-employment of those affected. ***** Headquartered in Scotland, Whyte and Mackay has a 9% share of the worldwide Scotch whisky market with brands such as Whyte and Mackay, The Dalmore, and Isle of Jura. Whyte and Mackay owns and operates four malt distilleries, a grain distillery and bottling and packaging facilities in Scotland. In the year ended September 2002, Whyte and Mackay generated an operating profit of GBP20.6 million from sales of GBP157.2 million, representing 9.3 million cases of spirits. In addition to its brand sales, which include Vladiar, Veba and Glayva, Whyte and Mackay is the world's leading supplier of private label Scotch whisky. CONTACT: Scotland Lesley Alexander Citigate SMARTS Phone: 0141 222 2040 Mobile: 07968 525783 London Benjamin Perlzweig Coltrin & Associates Inc Phone: Tel: 020 7494 4748 Mobile: 07786 698309 ROYAL MAIL: New Accounts Expose Flaws in Regulator's Plans ---------------------------------------------------------- Royal Mail said Thursday that its regulatory results exposed further flaws in the regulator's plans compelling the company to deliver mail from courier firms for less than half the cost of a basic 28p First Class stamp. The new figures showed that for letters weighing up to 100g -- which amounts to 75% of the 82 million letters in a typical day's postbag -- Royal Mail lost almost GBP500 million last financial year. The heavy loss in the core part of Royal Mail's business underlines how vulnerable the company is to the risk of creamskimming if courier firms are given a green light by Postcomm, the regulator, to target the profitable parts of the mailbag. Heavier items of mail, such as packets, make up the profitable part of the mailbag. Overall, Royal Mail made a small operating profit of less than GBP80 million on its GBP5.6 billion of revenue from delivering letters to the UK's 27 million addresses -- an unrealistically low return of 1.4%. Creamskimming, if it is permitted, will increase losses in the core part of the mail market of letters weighing less than 100g, and reduce the profit in the profitable sector -- a double whammy. Royal Mail's Chief Executive, Adam Crozier, said: "Royal Mail, in charging uniform prices for postage -- irrespective of the final destination in the UK of a letter -- makes a profit on some mail and loses money on the rest. That's the bedrock of Royal Mail's postal service, which underpins the one-price-goes-anywhere service to the U.K.'s 27 million addresses." The extent of the cross-subsidies in the mailbag shows up - in much more detail than previously -- in a set of regulatory accounts, which Royal Mail is required to prepare for Postcomm, the postal regulator. They are being given to the regulator today and they reveal details of the financial performance of different categories of mail. The regulatory accounts don't change Royal Mail's overall results for last financial year -- a pre-tax loss of GBP611million, which Royal Mail announced in May. But they confirm the threat to Royal Mail's ability to provide a one-price-goes anywhere service as a result of Postcomm's introduction of access arrangements, and competition at a much faster pace than in the rest of the E.U. Mr. Crozier said: "When you have wide variations in profit and loss in the mail we handle, then inevitably rival firms will focus on the profitable parts of the mailbag. "Under Postcomm's access plans, courier firms will be able to collect mail and then give it to Royal Mail for delivery over 'the final mile.' The price Royal Mail will get under Postcomm's plans is as low as 11�p, even though for most parts of the country, Royal Mail's costs are in excess of this. The big flaw in Postcomm's thinking is that it does not take enough account of the cross-subsidies that are needed to provide a one-price-goes-anywhere service. "Royal Mail has calculated -- in an analysis which has been independently verified -- that it will lose up to GBP650 million of profit over the next three years if Postcomm confirms the access arrangements it has proposed. This runs counter to Postcomm's assurances that its access plans will be revenue and profit neutral for Royal Mail. "Far from being neutral, the regulator's access plans have a huge negative impact on Royal Mail," said Mr Crozier. He said setting access prices too low -- and 11�p was unacceptable -- would inevitably result in business bulk mailers demanding bigger discounts than those they already received from Royal Mail. Bulk mailers -- "Who would blame them," said Mr. Crozier -- would seek bigger reductions to bring them into line with low access prices. "The end result would not be an increase in competition -- as Postcomm intends -- but simply a tool for stripping out revenue and profit from Royal Mail. Someone would have to pay -- and big rises in the cost of stamps used by individual consumers and small business would be inevitable, unless Postcomm changes its plans to ensure the impact of their access proposals has a neutral impact on Royal Mail's future profits," said Mr Crozier. "Royal Mail has consistently said it welcomes competition which is introduced in a fair way so that Royal Mail can compete without its hands tied. Postcomm's access proposals do not deliver competition in a fair way. They will, in fact, encourage inefficient competition. "Another problem is that if stamp prices rise, and the gap widens between stamp prices and access prices, then it encourages even more creamskimming of the mail market by courier firms using access. That brings pressure for further stamp price rises. It's a vicious circle and a direct threat to Royal Mail's ability to continue providing a one-price-goes-anywhere universal service to the U.K.'s 27 million addresses." Mr. Crozier said: "What Postcomm should do is recognize that their access prices are too low and come forward with prices that make commercial sense. Royal Mail accepts the principle of access arrangements - but it has to be done in a way that does not pose a threat to the future of the universal service." ***** Royal Mail will submit a formal response to Postcomm on the regulator's access proposals by the close of the consultation period on August 20. CONTACT: ROYAL MAIL GROUP PLC 148 Old Street LONDON EC1V 9HQ Home Page: http://www.royalmail.com/group ROYAL & SUNALLIANCE: To End Partnership with HBOS Household ----------------------------------------------------------- Royal & SunAlliance has announced that its household insurance partnership agreement with HBOS will end with effect from December 31, 2003. After this date new premiums under the scheme will be written by a HBOS subsidiary. Under the current agreement Royal & SunAlliance underwrites around GBP400 million of premium annually. Ending the agreement is another step in the action plan announced by the Group last year and will release around GBP160 million of capital by the end of 2004, based on its own internal risk based capital assessment. CONTACT: For Analysts Malcolm Gilbert Phone: +44 (0)20 7569 6138 SIMON GROUP: Passes Proposal to Dispose Seawheel Holdings --------------------------------------------------------- The company announces that the resolution proposed at Wednesday's extraordinary general meeting was duly passed and completion of the disposal of Seawheel Holdings Limited is anticipated to take place on Monday August 4, 2003. ***** Simon Group, which reported continuing loss (pre exceptional items) of GBP7.6 million for 2002, has conditionally agreed to sell Seawheel Holdings to Silbury 274 Limited for a cash consideration of GBP1. The company said in May it was reviewing the progress of the business performance of Seawheel, which it said remained slow, and is unlikely to return to profit for the year. CONTACT: SIMON GROUP PLC Phone: 01737 372660 Timothy Chadwick Tim Redburn HOARE GOVETT LIMITED Phone: 020 7678 8000 Philip Dayer Andrew Chapman GAVIN ANDERSON & COMPANY Phone: 020 7457 2345 Elizabeth Morley Ken Cronin TELEWEST COMMUNICATIONS: Discloses Interim 2003 Results ------------------------------------------------------- Summary of Interim Report: Half-year Half-year 2003 2002 % change GBP million GBP million Total turnover * 674 674 - EBITDA ** 220 184 up 20% EBITDA margin ** 33% 27% up 6% pts Total operating loss (41) (119) down 66% Net loss (208) (239) down 13% Capex 104 241 down 57% Free cash flow *** 31 (248) up GBP279 million * includes Telewest's proportionate share of UKTV. ** includes Telewest's proportionate share of UKTV and in 2003 is before exceptional items of GBP7 million. *** net cash inflow/(outflow) before use of liquid resources and financing. Highlights (a) Positive free cash flow for third quarter in a row (b) Record EBITDA and margin (c) Record ARPU of GBP43.61 for the quarter (d) Broadband leadership reinforced with launch of 2Mb service (e) Restructuring discussions progress Commenting on the results, Charles Burdick, managing director of Telewest Communications, said: "Through our focus on cost control, customer service and targeted marketing, we have delivered another set of solid results and positive free cash flow for the third quarter in a row. "The heavy investment on our network is behind us and we are now benefiting from our advanced infrastructure quality requiring lower capital expenditure. We are also continuing to improve the quality of our customer base, increase the number of our 'triple play' customers and introduce targeted new offers and services, all of which are driving average customer revenue and reducing churn. "We expect to build on this in the second half, and July shows our initiatives starting again to grow sales. The launch of U.K. cable's first 2Mb broadband service is reinforcing our leadership position and soon we will also be launching a wireless self-installation broadband option for existing digital customers. "We continue to progress our restructuring. We are working on revised term sheets reflecting new economics of 98.5% equity for bondholders and 1.5% of the equity for existing holders. We will update everyone as soon as it is possible. In the meantime, we are focused on running the business as the results indicate." To View Full Report and Financials: http://bankrupt.com/misc/Telewest_Communications.htm CONTACT: TELEWEST COMMUNICATIONS PLC Charles Burdick, Managing director Phone: 020 7299 5000 Jane Hardman, Director of corporate communications Phone: 020 7299 5888 Richard Williams, Head of investor relations Phone: 020 7299 5479 CITIGATE Dewe Rogerson Phone: 020 7638 9571 Anthony Carlisle Phone: 07973 611888 Sue Pemberton Phone: 07779 572711 TRINITY MIRROR: Bares Group Interim Results for 2003 ---------------------------------------------------- Trinity Mirror plc announces the Group's interim results for the 26 weeks ended June 29, 2003. Chief Executive's review (a) Committed to effectively driving Group assets to unlock value. (b) Performance based strategy to stabilize, revitalize and grow (c) GBP25 million net of re-investment annualized cost savings in 2005, GBP4 million in 2003 and incremental GBP16 million in 2004 (d) Disposal of titles in Northern Ireland (e) Increase in interim dividend of 3.8%, the first increase since 2000 and a policy to progressively increase dividends (f) Commitment to reduce net debt. Operational highlights (a) Group operating profit(1)(2) up 5.8%. (b) Operating margins(1)(2) increased from 17.3% to 18.4% with regional newspaper titles (excluding Metros) improving operating margin(1) from 24.3% to 25.2% and National titles improving operating margin from 15.0% to 15.6%. (c) Strong operating cash flow with net debt falling GBP16.9 million to GBP649.2 million (d) Incremental cost savings of GBP5.6m. This is in addition to savings of GBP32.8 million achieved in 2002. On target to achieve GBP42.0 million of cost savings by end of 2003. Financial highlights Like-for-like(1) Actual (pre exceptional items(2) (post exceptional items) (3)) 2003 2002 % 2003 2002 % GBPm GBPm Change GBPm GBPm Change Turnover 551.5 553.6 -0.4% 551.6 559.6 -1.4% Group operating profit 101.4 95.8 +5.8% 100.3 89.9 +11.6% Profit before tax 80.4 78.4 +2.6% 79.4 72.1 +10.1% Earnings per share 19.0p 18.4p +3.3% 18.9p 16.9p +11.8% Dividend per share 5.5p 5.3p +3.8% Net debt 649.2 666.1 (1) Adjusted to exclude the results of Post Publications Limited and Ethnic Media Group Limited, which were disposed of in June 2002, Channel One, which ceased trading in November 2002, and Wheatley Dyson & Son Limited, which was disposed of in February 2003. During the 26 weeks ended 29 June 2003 these businesses achieved operating profit of GBPnil (2002: GBP0.5 million). (2) Excludes operating exceptional items of GBP1.1 million pre tax (2002: GBP6.4 million). (3) Excludes net exceptional items of GBP1.0 million pre tax (2002: GBP6.3 million). Sir Victor Blank, Chairman of Trinity Mirror plc, commented: "The Group has performed well against a difficult external environment. Our priority in February was to improve the earnings growth in 2003 and we are on track to achieve this. Sly Bailey has made a very important contribution in the last six months and has breathed new life into the business. Today, Sly has provided a clear plan highlighting what this business needs to improve its performance and returns to our shareholders. The Board is enthusiastic about the plans and the progress being made." Sly Bailey, Chief Executive of Trinity Mirror plc, commented: "My vision for Trinity Mirror is to unlock its hidden potential for growth. The actions I am putting in place will transform our business so that its value as a whole is undeniably more than the sum of the parts. I am confident that we will achieve our objective of creating a fundamentally stronger and better performing company." To View Financial Statements: http://bankrupt.com/misc/TRINITY_MIRROR_Financials.htm TRINITY MIRROR: To Sell Newspaper Division in Northern Ireland -------------------------------------------------------------- Trinity Mirror plc on Thursday announced that it is planning to dispose of its newspaper division located in Northern Ireland. The division comprises the Derry Journal and Century Press & Publishing businesses which publish 6 titles in Northern Ireland and 3 titles in the north of the Republic of Ireland. Century publishes The News Letter in Belfast, the Belfast News and Farming Life. Derry publishes the Derry Journal, the Donegal Democrat, the Donegal People's Press, the Letterkenny Listener, the Foyle News and the City News. The titles are amongst the longest established newspapers in the country and have made an important contribution to Trinity Mirror's performance over the last few years. However, following a review of Trinity Mirror's newspaper operations the Board has concluded that although performing strongly, the Northern Ireland newspaper division is non-core to the Group's business operations. ********* 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. Larri-Nil Veloso, Ma. Cristina Canson, and Laedevee Gonzales, Editors. Copyright 2003. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$575 per half-year, delivered via e-mail. 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