European Business News (EBN), 96-11-18

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated November 18 1630 CET

CONTENTS

[01] Deutsche Telekom ends first day of trading up 2% from its opening price

[02] French Government calls for the resignation of GAN Chairman

[03] Clarke says Britain will meet borrowing forecast for the year

[04] Thorn earnings increase 11% in first set of interims since split from EMI

[05] CS Holdings posts flat earnings for the nine months

[06] P&O and Royal Nedlloyd sign deal merging container business

[07] New twist to the Sumitomo case

[08] Investor nine month profit up five fold

[01] Deutsche Telekom ends first day of trading up 2% from its opening price

The Frankfurt closing price of 33.90 DM was just off the intraday high of 34 marks, but well above the 28.5 mark issue price, and higher than the debut price of 33.2 marks. Dealers said the main impact on the stock had been buying by institutions seeking to top up small allocations in the heavily-oversubscribed issue.

A massive 37.7 million Telekom shares changed hands, dwarfing volumes in other blue-chip stocks on the Frankfurt Stock Exchange.

The company's stock will be included in the weighted 30-share DAX stock index starting Tuesday.The shares will have an initial weighting of 'around 4.5%' in the DAX index , according to the head of the German stock exchange. Deutsche Boerse Chairman Werner Seiffert said the weighting will make Telekom the 10th-largest company in the DAX, which is composed of 30 German blue-chip stocks.

Seiffert noted that the introduction of Telekom into the index will also affect the index weightings of other stocks. Insurer Allianz AG, which is the largest company in the index, will have its weighting cut to 9.6% from 10%. Seiffert added that the need for portfolio adjustments arising from the general change in weighting may cause a flood of orders from investors over the next few days.

The shares were trading at around 33.50 marks in the grey market Friday. They grey market refers to trading provided by brokers before a formal offering.

Shares will trade on all eight of Germany's regional stock exchanges with the first price quotes expected by mid-morning and will move to the New York Stock Exchange later in the day when Telekom shares are listed there for the first time.

On Tuesday, Telekom shares will trade on the Tokyo Stock Exchange in what could be Japan's largest ever foreign listing. With annual sales of 66 billion marks, Deutsche Telekom is Europe's largest telecommunications group and one of Germany's biggest corporations. Its listing is second in size only to the huge offering of Japan's Nippon Telegraph and Telephone.

Bankers have heralded the offering as a watershed event for Germany's financial markets as the enormous public interest in the issue has attracted some two million private investors.

Private investors, stereotyped as cautious and afraid of high-stakes gambling on the stock market, caught investment fever with Telekom's issue, cracking open piggy banks in a bid to cash in on what has been sold as a sure thing.

With a third of the issue placed abroad, the Telekom offering also marks a huge infusion of foreign capital into Germany, a fact that could indicate heightened interest by foreign investors in German share issues.

While some analysts considered the issue price to be fair, others thought it was still too expensive compared to other international phone companies and urged caution.

[02] French Government calls for the resignation of GAN Chairman

A finance ministry spokeswoman said the decision was made last week after Finance Minister Jean Arthuis suspended the privatization of GAN banking unit CIC and criticized the way the proposed sale had been handled.

A spokeswoman at the prime minister's officer said the government was looking for ''a new team.'' The new GAN chairman will be charged with finding a replacement for CIC president Bernard Yoncourt, a finance ministry source said.

[03] Clarke says Britain will meet borrowing forecast for the year

The figures reinforced speculation that Clarke will announce a pre-election tax giveaway in his budget next week and trim his borrowing forecast for next year.

The Office for National Statistics said that government revenues outstripped spending by £4.39 billion ($6.98 billion) in October. That was more than double the £1.8 billion economists were expecting and the largest October surplus since records began in 1968.

It left the cumulative borrowing requirement for the first seven months of the 1996-97 financial year, which began in April, at £11.4 billion, down from £8.7 billion the year before. Excluding privatization proceeds, the cumulative total stood at 15.3 billion pounds, down from 18.8 billion pounds a year ago.

Public finances are usually in surplus in October, which is one of two months - the other is January - when the Treasury receives large tax payments from companies.

However, the figures showed tax revenue growing strongly across a broad front, outstripping growth in government spending. At £9.11 billion , corporation tax receipts were 24% higher than in October 1995 and value- added tax, levied on sales of many goods and services, was up 20% at £4.47 billion . Income-tax revenue rose 20% to £5.48 billion.

The figures prompted a confident claim from Clarke that the government is 'on course' to meet its £26.9 billion forecast for public-sector borrowing in 1996-97.

With revenues running well ahead of net spending, economists think Clarke also may use the budget to cut his 1997-98 borrowing forecast to between £20 billion and £21 billion from the £23 billion he predicted in the summer.

Jonathan Loynes, U.K. economist at HSBC James Capel in London, believes that Clarke is preparing to pull off the 'hat trick' of cutting taxes, reducing current public-spending plans and - by lowering next year's public- borrowing forecast - announcing that Britain is set to meet the Maastricht treaty's public-sector-deficit criterion for joining European economic and monetary union.

European Union countries aiming to qualify for EMU at the planned launch on Jan. 1, 1999, must hold their budget deficits to 3% of gross domestic product by the end of 1997 as well as meet other targets for inflation, debt and exchange and interest rates.

Economists warned, however, that despite the improved outlook for public borrowing, Clarke has room for little more than a modest tax giveaway if he is not to alarm financial markets.

Clarke has repeatedly played down expectations of big tax cuts, saying he would not put his goal of balancing the budget over the medium term at risk with short-term reductions that may have to be reversed later.

[04] Thorn earnings increase 11% in first set of interims since split from EMI

This excludes exceptional items related to the demerger. The rentals company took £41.5 million in charges for the half, bringing pretax profit including exceptionals to £37.8 million.

According to Thorn chairman, Sir Colin Southgate, as Thorn continues to make changes to operations 'the new corporate structure and functions have been successfully put in place, enabling Thorn to enjoy a seamless transformation to independent public company status.'

For the full year, Southgate said he expects the business to continue to show growth, but he noted that a competitive environment may hamper the next full year's outlook.

'Despite competitive trading conditions in some key markets, particularly in the U.S., and the delay in achieving cost efficiencies in the U.K., Thorn anticipates 1996/97 will be a year of further progress,' he said. 'However, these factors will have some impact on the outlook for the next financial year.'

[05] CS Holdings posts flat earnings for the nine months

The Swiss parent of a group with banking and industrial interests, said it expected a higher operating profit for the full year. But it added that its business performance in the final quarter hinges on the financial markets. The group also said its full-year net profit will depend upon provisions for credit risks. Provisions, it said, 'will remain at a high level.'

In discussing the third quarter, CS Holding said the rate of growth in its profit slowed. But its consolidated gross income in the first nine months still came in 12% above the year-earlier period.

'With provisions for endangered credit positions still high as expected, and with costs recording a further slight rise, the net result for the first three quarters of the year was on a par with last year's,' the group said.

By segment, the company said gross earnings from its three main sources of banking income - balance sheet operations, commissions and trading - came in between 3.5% and 6.5% below the average for the first half of this year. Still, the figures for the first nine months were 18% higher than the same period a year earlier.

'Staff expenses and other operating costs developed in the third quarter much as they had in the first half of the year,' the group said, recalling that it had said at that time that performance-related staff compensation had risen markedly. Overall costs rose 18% in the first nine months from the like period of 1995. But the company labelled its higher expenses as a 'slight rise' in view of the group's stronger business performance.

The sluggish Swiss economy, meanwhile, led to higher credit-related provisions, the company said.

[06] P&O and Royal Nedlloyd sign deal merging container business

The new company, P&O Nedlloyd Container Line Ltd., is on track to commence operations no later than January 1, 1997, the companies said in a press release. They added that the Royal Nedlloyd N.V. central works council has agreed to the merger. P&O stock is up 2.5 pence at 595.5 pence by 1013 GMT.

[07] New twist to the Sumitomo case

Mr. Hamanaka, in discussing the 1985 trade, says he and his then supervisor 'did it together,' Mr. Hamanaka's lawyer said. That supervisor, Saburo 'Steve' Shimizu, remained Mr. Hamanaka's boss until 1987, when he left to start his own copper-trading concerns. Tokyo copper traders say the two maintained close ties thereafter.

Mr. Hamanaka's assertion gives new weight to questions about just who set in motion the 11-year trading binge that led to his arrest last month. Mr. Hamanaka's lawyer, Hidesato Sekine, said his client admits to all charges against him, including allegations of fraud and forgery. But Mr. Sekine also said Mr. Shimizu, Mr. Hamanaka's former boss, may have played a bigger role at an early stage in the allegedly illicit trades than has been reported.

That notion corresponds with the sentiments of some of Mr. Shimizu's former business associates in Tokyo. 'Mr. Ha manaka didn't have Mr. Shimizu's brilliance,' said Tatsuo Oka, the president of a small Tokyo-based metals trader called Tosho Trading Co., which collaborated with Mr. Shimizu in marketing copper in recent years. 'Mr. Shimizu was the smart one; Mr. Hamanaka was his side show.' A Sumitomo spokesman declined to comment, citing the investigation into the scandal by Tokyo prosecutors. Mr. Shimizu didn't return calls made to his home and office requesting comment.

[08] Investor nine month profit up five fold

The value of Investor's large share holdings - which includes Swedish blue chips such as pharmaceutical company Astra, truck maker Scania, investment company Incentive, forestry group Stora and telecommunications group Ericsson - rose to 53.12 billion kronor on Sept. 30 from 49.28 billion kronor at the end of 1995 and to 54.14 billion kronor on Nov. 13, 1996, the company said. Regarding its 50-50 joint venture with General Motors Corp. of the U.S., Saab Automobile, Investor posted a 2.48-billion-kronor charge, part of which was related to infusing new capital in Saab Automobile.

Investor's aircraft, space and high-tech subsidiary Saab AB reported that nine-month pretax profit dropped to 84 million kronor from 223 million kronor in the corresponding year-earlier period, following higher costs. Saab's nine-month revenues rose to 5.65 billion kronor from 4.87 billion kronor. But operating loss after depreciation widened to 311 million kronor from 268 million kronor.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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