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European Business News (EBN), 97-02-19European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated February 19 1800 CETCONTENTS
[01] France opts to privatise Thomson-CSF individually and in a private saleThe French government said it has opted to privatise Thomson SA's Thomson- CSF unit through a direct sale, with conditions, rather than a public sale.The decision ends the debate on how to sell the defence electronics company and sets the stage for a potential rematch between Lagardere and Alcatel Alsthom. Both companies have said they plan to make new bids, with Alcatel planning to link up with state-controlled aerospace Aerospatiale and Dassault Aviation in its efforts. Details on the conditions attached to the sale weren't provided, but they will now be sent to the independent privatisation commission. But the government said it will retain a ''golden share'' in the company to ''preserve the interests of national defence and to avoid a break-up'' of Thomson-CSF. The sale will be open to both French industrial companies and European firms in the defence sector, but a time frame hasn't been disclosed. Last year the French government planned to sell off Thomson SA as a single entity, and chose Lagardere over rival bidder Alcatel. However, the privatisation commission blocked that sale. This time around, the government intends to sell off Thomson-CSF before the rest of the group, and has said that Thomson Multimedia will be brought to the market later in the year after a capital injection. [02] UK retail sales outpace expectations in JanuaryBritish shoppers may have hit the post-holiday sales with gusto this year, but economists said that doesn't mean the economy is headed for a boom.The Office for National Statistics said British retail sales rose a seasonally adjusted 0.6% in January from December and were up 4.6% from a year earlier, the highest annual increase since March 1989. The data were sharply above market forecasts for rises of 0.3% on the month and 3.9% on the year. Economists said the strengthening retail-sector trend is firmly in place, but added that the figures should be taken with a grain of salt. Not only are winter sales data often erratic, but also the year-on-year growth rate was skewed by what the statistics office called an 'exceptionally low' sales report in January 1996. 'A boom I would call 6% to 7% growth in retail sales,' said Michael Saunders, UK economist at Salomon Brothers in London. 'We had that in the late 1980s.' But could retail sales grow so strongly later this year that the British economy would boom? 'I doubt it,' said Saunders. 'The background for income growth isn't strong enough' to fuel the necessary consumer spending. Economic Secretary to the Treasury Angela Knight said the data show that the economy's 'in-control recovery is continuing.' 'It's not anything like the booms we've seen in the past,' she said. 'The three-month rate is fairly stable,' said Edmund Nonis, UK economist at Nikko Europe in London. He added that even though the headline figures 'will create some nervousness' in financial markets, he still feels that 'retail sales are going at a pace which is not a threat to inflation.' (Rebecca H. Patterson, AP-Dow Jones) [03] US consumer prices show smallest gain in seven monthsUS consumer prices in January posted their smallest monthly increase in seven months, adding to the growing evidence that inflation remains largely after five years of economic expansion.Labor Department said the Consumer Price Index rose only 0.1% in the month after a 0.3% rise in December. Economists had been expecting to see a 0.3% rise again in January. The core CPI, which strips away the more volatile food and energy prices, also rose 0.1%, compared to expectations for a 0.2% rise. The latest data on inflation is good news for Federal Reserve officials and financial market participants. The lack of significant upward pressure on prices is likely to temper fears that robust economic growth and tight labour markets will boost prices. So far, that upward pressure hasn't shown up in mainstream measures of inflation. The overall January increases, while modest, followed a very impressive showing last week, when wholesale prices retreated for the first time in more than two years, falling 0.3%. Analysts have been generally surprised that inflation has remained largely contained even though the US economic expansion is one of the longest since World War II and shows no signs of a serious weakening. Food and transportation were among the components holding the overall index to its smallest monthly rise since last June. But energy prices rose significantly, while indexes for housing and transportation also registered increases. [04] Bundesbank report makes clear statement: rates are on holdThe Deutsche Bundesbank left no room for doubt that interest rates are on hold for now in its monthly report for February. The central bank council has its regular meeting Thursday, but no change in interest rates is expected, the markets taking the view instead that the downward pressure on the Deutsche mark in the foreign exchange market has removed the need for action for the foreseeable future. In the report, the Bundesbank repeated the familiar line that a cut in short-term interest rates could backfire by provoking fears of inflation and consequently higher long-term rates. But it also rammed home the message that it doesn't wish to see the mark fall further, saying that the appreciation of 1995 ''has been more than corrected.'' Bundesbank President Hans Tietmeyer himself underlined the point in an interview later in the day with Hungarian radio. All the same, in both that interview and another one with the mass-circulation German daily Bild-Zeitung, he refused to rule out a further cut in interest rates in the future and was more emphatic in dismissing a rate rise as ''unrealistic.'' It also warned that January M3 money supply may be higher than widely expected owing to a statistical quirk. A ''monetary overhang'' was created in December by a rush for housing-related loans before certain tax breaks were phased out at the end of last year, it noted. M3 data are due for release any day and are expected to show an annualised growth rate of 5.5%, a survey of economists by Dow Jones shows. Conventional wisdom now has it that the stimulus to the economy from the Deutsche mark's decline prevent, or rather remove the need for, a further easing of interest rates in this economic cycle. However, foreign exchange movements are notoriously fickle, and some analysts are beginning to sense that the mark is no longer on a one-way street. They feel that the Bundesbank may yet cut rates to take the sting out of a resurgent mark if growing uncertainties about Europe's planned currency union prompt renewed ''safe-haven flows'' into it. The mark kicked viciously upward against the lira this week after an air of desperation exuded from Italian Prime Minister Romano Prodi in his efforts to bolster German support for Italian participation in economic and monetary union in 1999. ''The exchange rate may have done all it is going to do'' to revive the economy, argued Julian Jessop, senior international economist with Nikko Europe in London. ''The rest is going to have to come from interest rates.'' Others note that the German government is coming under more domestic political pressure to stand firm on monetary union, raising the risk of rifts between Germany and other European Union states and, consequently, of financial market volatility. Gerhard Grebe, senior economist with Bank Julius Baer in Frankfurt, points to recent Emnid opinion polls showing Chancellor Helmut Kohl's popularity falling behind that of Euroskeptic Social Democrat Gerhard Schroeder. ''People focus on the dollar/mark, but the European crosses have a much bigger impact on German trade,'' and consequently on the whole export-dependent recovery, Jessop noted. (Geoffrey T. Smith, AP-Dow Jones)[05] Allianz shows 10% profits gain and expects double digit growth this yearAllianz posted a 10% rise in 1996 net profit and said it expects to show 'moderate double-digit growth' in 1997. Europe's largest insurer said net profit rose to 2.2 billion Deutsche marks last year ($1.4 billion).Allianz said the rise, which followed a 52% net profit surge in 1995, represented a 'normalisation of taxes paid.' In 1995, Allianz had used the entire remaining tax advantage on losses totalling 1.4 billion marks from its eastern German insurance subsidiary Deutsche Versicherungs. 'Barring any major claims or natural catastrophes and assuming that the capital markets will remain stable overall, Allianz projects that profits will show moderate double-digit growth this year,' the insurance giant said. A spokesman for the group added that this was the first time a large international insurance company had made a forecast of this kind at this stage in the year. Allianz said its goal was to turn an underwriting profit in 1997, after narrowing its underwriting loss by some 500 million marks to 150 million marks in 1996. The improvement was helped by fewer major natural disasters, continued risk selection measures, and a 'favourable claims experience in many markets.' Allianz also said it expects gross premium income to rise 'roughly 12%' in 1997 to around 84 billion marks, following a 6% rise in 1996 gross premium income to 74.7 billion marks. [06] WPP continues to show earnings gains as cost-cutting takes effectWPP said earnings rose 35% last year, as cost-cutting efforts took effect, but the markets took profit and the advertising agency's stock plunged in early trading.WPP said 1996 pre-tax profit rose to £153.3 million, and said the strength of the pound kept the gains down somewhat. The company said that without the pound's resurgence in the final months of 1996, earnings would have been £155 million. WPP said it will make £25 million available for share buy-backs in the open market when conditions are appropriate. Despite the good earnings report, the markets appeared to be ready to take profits on the company's stock and shares dropped 5.2% in early London trading. In the past year, WPP stock has risen 50% as the company continued to rebound from an early 1990s debt crisis. WPP noted further strength in the US market was reinforced by increased activity in the UK ahead of the General Election. 'Continental Europe continued to struggle to recover due to historically high levels of unemployment,' said the company. 'Faster growth in the markets of Asia Pacific and Latin America continued.' Combined media advertising revenue at J. Walter Thompson Co. and Ogilvy & Mather Worldwide rose by 7.2%, while Hill and Knowlton's revenue rose by 8.4%. 'Our public relations business as a whole showed operating margins in line with the groups objectives for 1996,' the company said. [07] Medeva shows strong earnings gains before charges for US purchasesMedeva showed a 31% rise in 1996 pre-tax profit before exceptional items, surpassing analysts' expectations, but warned that the strong pound could hurt this year's results.And in a reflection of the company's growing strength in the US, Medeva said it would start to trade its American Depositary Receipts on the New York Stock Exchange. The ADRs are currently listed on the American Stock Exchange. The UK drug company's pre-tax profit before exceptional items rose to £104 million ($166 million), outpacing predictions of £101 million. After a charge related to Medeva's acquisition of US businesses, pre-tax profit slipped 52% to £38.3 million, below most analysts expectations. The company raised its dividend 20% to 4.8 pence a share. Chairman John Baker said the company's underlying position is strong, particularly after the purchase of the US assets of Fisons from Rhone Poulenc Rorer for $370 million. Strong growth by the former Fisons products fuelled a 30% rise in total sales to £332 million. Medeva also said it's ''successfully building'' a product pipeline, with the help of four product-development alliances with other companies. But Medeva sounded a caution bell about this year's expectations. It said it generates most of its profits in the US and that if the pound stays at its current highs, the translation of its overseas earnings into sterling will be 'adversely affected.' Medeva wasn't more specific about how serious sterling's impact will be. [08] UK's Clarke denies country is 'hostile' to European monetary and economic unionBritish Chancellor of the Exchequer Kenneth Clarke said that the government isn't 'hostile' toward the European single currency, dismissing earlier comments by Foreign Secretary Malcolm Rifkind as 'as slip of the tongue.'Speaking in a BBC radio interview while on a visit to Bonn, Rifkind said 'there are powerful arguments against a single currency, we have no commitment in principle to joining one.' He added that the British government 'will come to a final decision on whether Britain should cooperate' with economic and monetary union 'when the decisions are taken as to whether there should be a single currency and we should join it, that is round about the end of this year.' 'It was obviously a slip of the tongue under pressure from a very skilful interviewer,' Clarke said, referring to Rifkind's remarks. In another interview, published in Germany's mass-circulation Bild newspaper, Rifkind said European economic and monetary union probably won't begin until after its Jan. 1, 1999 scheduled starting date. 'A currency union that doesn't stand on an economic foundation can cause more harm than good,' Rifkind told the journal. 'We know that many people in Germany share our concerns.' [09] Veba is in no hurry to pick a new telecommunications partnerGerman diversified trading group Veba it is holding discussions with potential telecommunications partners but that it isn't in a rush to choose a new candidate.Earlier this month, UK-based Cable & Wireless backed out of a partnership with Veba and German utility RWE. Veba Chairman Ulrich Hartmann also told journalists here that Veba and RWE hope to create up to 10,000 jobs in the telecommunications sector within the coming years. Hartmann made his remarks at the international journalists' club in Frankfurt. Hartmann denied speculation that Veba is pulling profits from its electricity business to build up its telecommunications activities. Further, the proportion of the company's earnings from electricity is likely to fall to around 40% to 45% in the coming years from more than 50% currently, due to falling consumption and lower prices resulting from sharper competition, he added. Hartmann also said Veba hopes to compete with the majority state-owned Deutsche Telekom for voice phone services. Telekom will enjoy a monopoly on voice services until the market is liberalised in January 1998. Veba is already competing with Telekom in the mobile phone service market via its 30% stake in the E-plus mobile phone network. Hartmann said negotiations with Thyssen for the 30%-Thyssen share of the network have come to a standstill due to substantial differences on price. [10] HSBC Holding to pay $1.17 billion for EversholtHSBC Holdings said it will acquire recently privatised British rolling stock leasing company Eversholt in a cash and debt deal valued at £726.5 million ($1.17 billion).HSBC said its Forward Trust Group financing unit, part of retail banking group Midland Bank, would buy Eversholt's shares from their venture capital- backed management owners for £453.4 million and repay debt of £273.1 million. Eversholt is one of the U.K.'s three rolling stock leasing companies and provides passenger rolling stock to train operating companies on operating leases. Eversholt was privatised in February 1996 and sold to a consortium of the management, employees and venture capitalists, led by Candover Partners. For the year ended Dec. 31, 1996, Eversholt reported turnover of £219.1 million and operating profit of £123 million. 'The acquisition of Eversholt will compliment our existing asset finance business and create a powerful new force in the transport sector,' said Graham Picken, chief executive of Forward Trust. [11] Corporate and Economic BriefsChristiania Bank said its 1996 operating profit before loan losses fell 7.9% to 1.545 billion kroner ($232 million) from the year earlier, pressured by 228 million kroner in restructuring costs. But net interest income rose 3.9% to 3.429 billion kroner from the year before. Borger A Lenth, Chairman of Norway's second biggest commercial bank said he was 'most pleased with the bank's income side. We have managed to increase interest income despite tough competition in the market.' Looking ahead, the bank expects the positive trend to go on, stating that Norway's strong economy should ensure 'The period of losses below normal would seem to continue for longer than assumed.' Woolwich Building Society showed an 18% rise in 1996 pre-tax profit to £392 million ($629.5 million), excluding £15.4 million in costs related to its planned conversion to a bank from a mutually-owned mortgage lender. Assets swelled 6.9% to £5.15 billion, provisions fell 11% to £41.1 million and operating expenses inched up only 1% to £380.7 million.From the European Business News (EBN) Server at http://www.ebn.co.uk/European Business News (EBN) Directory - Previous Article - Next Article |
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