European Business News (EBN), 97-05-08

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

Page last updated Thu, May 08 6:47 PM CET

CONTENTS

[01] Sony almost trebles full year profit for '96

[02] UK retail sales growth hits six-month high Click here for audio

[03] BTR issues profit warning over strong pound

[04] Olivetti expects $58 million loss for this year's second quarter

[05] News Corp profits climb by 34% to $293 million

[06] Viacom posts first quarter loss after several units under-perform

[07] French Industry Minister opposes idea of Renault and Peugeot merging

[08] Alliance between DASA and Lagardere to be in place by 1998

[09] Lonrho's sells Lonrho Sugar to Illovo creating African sugar giant

[10] Hong Kong Telecom profit grows 12%

[11] Body Shop earnings hit by slow sales

[12] Corporate and Economic Briefs

[01] Sony almost trebles full year profit for '96

Sony said it posted an unconsolidated pretax profit of 85.73 billion yen ($680 million) for fiscal 1996 which ended March 31, up 199.9% from the year before.

The company's shares have been trading up on the news, as the figures are stronger than both Sony and analysts expected.

Net profit also showed a 36.2% surge to 39.71 billion yen on sales of 2, 169.89 billion yen, up 12.4%.

Per-share net profit came to 105.72 yen compared with 77.94 yen the previous year.

With the parent company's brisk performance, Sony's group business showed a net profit of 139.46 billion yen, up 157.1%.

Its consolidated pretax profit rose 126.1% to 312.43 billion yen on sales of 5,663.13 billion yen, up 23.3%.

The latest results exceeded Sony's forecasts for group net profit of 132 billion and group pretax profit of 275 billion yen on sales of 5.50 trillion yen.

The figures also beat expectations of analysts surveyed by Dow Jones, who forecast on average that Sony's consolidated net profit would rise 150% to 135.75 billion yen on a 21% increase in sales to 5.574 trillion yen.

[02] UK retail sales growth hits six-month high Click here for audio

And the CBI also said today that British exporters, who have suffered from sterling's dramatic appreciation over the last nine months, believe the impact on overseas sales will only worsen.

The inflationary rise in retail sales puts pressure on the new Chancellor to raise rates again or raise taxes to dampen the spending boom. But with the strong pound choking exporters, the Chancellor is under more and more pressure to raise taxes in his first budget. Although this could provide the 'golden scenario' of a weaker pound and stable inflation, the decision will be politically difficult to make given the Labour party's promises not to raise taxes before the election.

The markets, fearing an overheated economy reacted badly to the CBI report with London equities and gilts down on the news.

Alastair Eperon, chairman of the CBI's distributive trades panel, said ''retailers will be encouraged to see that the expectations for sales growth last month were fulfilled. The survey shows an encouraging growth in all sectors, signalling that consumer confidence is now improving fortunes right across the retail trade.''

The rate of growth, which was stronger than retailers had predicted, is expected to continue in May, the CBI added in its monthly distributive trades survey. The survey also showed that the average rate of growth over the past three months indicates that the underlying trend has also picked up slightly, although it remains below the rate seen between June 1996 and January 1997.

The survey showed that 59% of retailers questioned said they sold more goods in April than they did a year earlier, compared with 17% who said they sold fewer goods.

The difference between the two, a net balance of 42 percentage points, was higher than the 40 points expected by retailers and the strongest reading since the 48 points recorded in November. In May, a net balance of 42 points expect to sell more goods than they did a year ago.

[03] BTR issues profit warning over strong pound

BTR said that Germany and Australia continue to reflect depressed conditions. The two countries represent about 30% of BTR's total sales.

'The performance of Germany and Australia both continue to reflect depressed conditions and, in the case of Germany, with an inevitable spillover effect to the rest of Europe,' BTR said

'The setback is not just for the numbers, but for confidence,' said an analyst who asked not to be named. 'It says that strong growth for the company is years away.'

The company added that the full year adverse translation impact between 1996 and 1997 is weighted more to the first half.

However, despite about 15% being wiped off the value of shares, some analysts weren't completely pessimistic.

'The market has overreacted this morning,' one broker said. 'The company is very bullish for the second half.'

Chambers supported this view, arguing that German markets are picking up, the company's order books indicate that the second half will see an improvement and that 'BTR still delivers a reasonable yield.'

Chambers also expects that shareholders will remain supportive of management in the short term, but warned that positive news on restructuring and markets was expected in the September statement. 'If they don't deliver, the pressure will start,' he said.

Separately, BTR said it will buy France's Parvex from GEC Alsthom and sell the company its Mirrlees Blackstone unit. It wouldn't disclose terms, but said Parvex, a Dijon-based maker of servomotors, servoamplifiers and numerical control devices, has assets of £7 million and sales for the year ended March 31 totalled £27 million.

[04] Olivetti expects $58 million loss for this year's second quarter

No comparable second quarter year-earlier figures were released by the company at a meeting with financial analysts. By comparison, Olivetti's pre- tax, pre-Omnitel loss in the first quarter this year was 171 billion lire ($110 million).

The company expects a consolidated (again pre-tax and before results at Omnitel) loss of 264 billion lire loss in the first six months this year, narrowed from a 350 billion lire loss in the first half of 1996.

[05] News Corp profits climb by 34% to $293 million

Largely responsible for the rise were News Corp's Fox Television and Fox Films and its successful re-release of Star Wars, which has generated a total of $249 million at the box office since the first of the three movies was released in January.

Net profit before abnormal items for the three months to March 31 rose to A$376 million ($293 million) from A$281 million, a rise of around 34%, said News Corp, which is based in Australia but also listed in London and New York.

Net profits after abnormals were A$330 million, up from A$77 million in the same period last year.

Filmed Entertainment revenues rose sharply to A$1.138 billion from A$584 million, although its operating income had a more modest rise from A$82 million from A$63 million in the same period a year earlier.

But analysts warned News Corp's next two big-budget disaster movies - 'Volcano' and 'Titanic' - may erode News' profits in the final quarter and early in the next financial year. 'Overall it's not all good news for News, ' one said.

The release of 'Titanic', reputedly the most expensive movie ever made, has been pushed back past the traditional U.S. opening date of July 4.

'Overall, the result is at the higher end of market expectations but it's not enough to get people excited,' one Melbourne-based analyst said.

News said its British newspapers and satellite television unit BSkyB also made significant contributions to profits, while the main reversals came from its book publishing arm HarperCollins and Australasian newspaper and pay television.

There was an abnormal loss of A$46 million for the quarter - related in part to the end of the CD-ROM publishing divisions at HarperCollins and News International - compared with a A$204 million loss in the previous comparable quarter.

News Corp shares fell despite the third quarter result, with analysts saying investors were still wary of investing in News Corp until it sorts out its U.S. satellite TV business American Sky Broadcasting (ASkyB).

[06] Viacom posts first quarter loss after several units under-perform

After payment of preferred dividends, Viacom posted a first-quarter loss of 10 cents a share, compared with a year-earlier profit of three cents a share. For the quarter, Viacom's revenue increased 11% to $2.92 billion from $2.62 billion.

In one bright spot, Viacom's networks and broadcasting group, which includes MTV and Nickelodeon, said its earnings before interest, taxes and depreciation, a closely watched measure that the entertainment industry also refers to as cash flow, increased 17% to $160 million, based on higher advertising revenue and affiliate sales. First-quarter revenue in that division increased 11% to $577 million.

The company said the strong results at MTV were partially offset by start- up costs for cable channels, Nick at Nite TV Land, Nick Latin America and M2, a new music channel.

Cash flow at the Paramount studio and television-programming business dropped 28% to $127 million. A year earlier, Paramount's results were bolstered by a $100 million licensing agreement it struck with German media giant Kirch Group. Revenue for the entertainment group increased 14% to $1 billion. Paramount's revenue was boosted by the strong performance of the movie 'The First Wives Club' overseas and on home video.

As expected, cash flow at Blockbuster dropped 15% to $160 million. The company blamed weaker videos from Hollywood, the cost of relocating to Dallas and increased spending on rental tapes. In a conference call with analysts, Viacom

Chairman Sumner Redstone reiterated Blockbuster's plan to refocus efforts on the video-rental business, following last month's resignation of its retail-oriented chairman, Bill Fields. Blockbuster's revenue increased by 15% to $973 million.

Publishing losses at the Simon & Schuster unit widened to $19 million from a year-earlier loss of $9 million. Revenue rose 2% to $398.7 million.

[07] French Industry Minister opposes idea of Renault and Peugeot merging

'It's a very bad idea... They have almost the same strengths and the same weaknesses. It is not certain that with people who have the main weaknesses you can make a system that is more efficient,' Borotra said in an interview.

He added that the two companies had 'profoundly different' corporate cultures. Both French companies are struggling to cut their cost base and become more competitive in an increasingly fierce market. Peugeot and Renault had jointly asked the government for help in a scheme to allow older employees to retire early and hire younger workers.

Some commentators have suggested the two French groups could better combine than stay apart. Borotra said that he was convinced that there would be 'scope for two general French car companies on the European market' after the year 2000.

He added Renault and Peugeot had to 'cut their cost price, streamline the production system and be present on export markets.' 'That is why I have told Renault it should return as soon as possible to break-even in 1997 or certainly in 1998. The restructuring measures taken by the company management are indispensable to avoid running up losses and putting the future of the company at stake,' he said.

Renault in February announced the closure of its plant in Vilvoorde, Belgium, in a quest to cut costs.

[08] Alliance between DASA and Lagardere to be in place by 1998

'We hope to have this deal in place possibly during this year and at the latest by the middle of next year,' DASA's Chief Executive Bischoff said. But Bischoff also said Lagardere's bid to buy Thomson-CSF, which is being offered for privatisation in France, could alter some parts of the agreement between DASA, a unit of industrial group Daimler-Benz, and Lagardere.

If Lagardere were not to receive the go-ahead on its Thomson bid, then Bischoff predicted there could be some fundamental changes in the plans for the two groups' joint venture on defence electronics.

But Bischoff said that this did not apply to satellite technology. Bischoff also said the deal should largely be financed without any cash transactions. 'No money will flow in this deal,' Bischoff said, adding later, however, that Lagardere would need to pay something for the planned 30 percent stake in DASA's missile unit LFK.

Lagadere's bid for Thomson will in no way involve DASA, Bischoff said. 'We will not pay for anything nor will be finance anything,' Bischoff said. The planned joint venture is also not expected to cost any jobs in Germany, Bischoff added.

[09] Lonrho's sells Lonrho Sugar to Illovo creating African sugar giant

Illovo will buy Lonrho's entire 94.25% shareholding in Lonrho Sugar for 13.90 rand per share in cash, or 1,623.7 million rand ($363 million).

The acquisition ends months of speculation about the future of the sugar business of the British conglomerate, which is busy dismantling its operations under new management.

In the year ended March 31, Lonrho Sugar recorded pretax profit of £27.8 million on sales of £99.6 million. At its year-end, its assets were worth £66.2 million.

''The disposal of our shareholding in Lonrho Sugar Corp. represents a further important step in realising the inherent value of Lonrho's businesses and reducing group debt, whilst further enhancing the competitive position of LSC through its merger with Illovo,'' said Chief Executive Nicholas Morrell in a written statement.

Lonrho Sugar owns, operates and manages sugar cane plantations and factories in Malawi, Mauritius, South Africa and Swaziland.

[10] Hong Kong Telecom profit grows 12%

Richard Brown, deputy chairman of Hong Kong Telecom, pointed out that any deal would respect a range of interests. 'Anything Cable & Wireless, as parent company of Hong Kong Telecom, may elect to do, we will do based upon how we best enhance the long-term shareholder value of both the shareholders of Cable & Wireless around the world and the shareholders of Hong Kong Telecom,' Brown noted.

Meanwhile, Hong Kong Telecom reported its net profit in the year ended March 31, 1997, grew 12% to HK$11.18 billion, from HK$9.94 billion a year earlier, and was in line with expectations.

Revenue rose 11% to HK$32.58 billion, from HK$29.41 billion in the previous period. For the full year, the dividend, payable in cash or shares, will be 76.3 cents a share, up 13% and including a 41.7 cent payout for the final half.

With less than two months before Hong Kong reverts to Chinese sovereignty, company representatives spent much of the news conference addressing questions about the intensified China tie-up rumours. They revealed little.

'There is no short line of interested parties that would like to be partners with Hong kong Telecom,' Brown told reporters at a news conference to announce its earnings.

'We'll only comment when we're ready with hard achievable plans,' he said.

[11] Body Shop earnings hit by slow sales

The news came along side full year profit figures which came in as-expected at £38.2 million ($23.5 million) from £32.7 million a year ago.

While these numbers came in as analysts predicted, the market is unlikely to overlook the decline in same-store sales activity.

In the recently ended fiscal year, Body Shop said same-store sales gained 2% in Asia, 3% in Australia and New Zealand and 2% in the Americas excluding the U.S.

But same-store sales dropped 1% in Europe and 3% in the U.S. and were unchanged in the U.K., where the group said it hasn't been able to take advantage of stronger consumer spending.

In the U.S., where Body Shop has traditionally experienced difficulty, the group said its chief executive for the region has implemented structural changes and recruitment's needed to ensure continued progress there.

The company opened 118 new stores throughout the world in its last financial year.

[12] Corporate and Economic Briefs

British low price high street food retailer Kwik Save Group turned in steady half year profits and said it was encouraged by progress in its restructuring. Kwik Save, in which Hong Kong's Dairy Farm holds nearly 30%, said first half pretax, pre-exceptional profits were £44.8 million ($72.7 million) compared with 44.2 million pounds previously, and paid out an unchanged interim dividend of 5.95 pence per share.

International Business Machines said it plans to buy from Sears Roebuck & Co. the 30% of Advantis it doesn't already own for $450 million. Advantis, Schaumburg, Ill., is a data network services company. In a press release, IBM said the deal is subject to federal antitrust review and other closing conditions. Sears will record a pretax gain of $150 million on the sale in the quarter in which it closes.

U.S. jobless figures showed initial claims for state unemployment insurance were unchanged in the week ended May 3, holding steady at a seasonally-adjusted level of 347,000. Despite the decline, the four-week moving average for claims - a keystone indicator of labor market conditions - rose 5,750 to 336,250, the highest level since Jan. 25. However, the four- week average for jobless claims continues to hover near historical lows.

Mirror Group said the first two months of its current financial year have started well. 'Overall, the group has had a positive first quarter and, barring unforeseen circumstances, the board remains confident of a satisfactory outcome to the year,' Mirror Group's Chairman Sir Robert Clark said at the company's annual shareholder meeting. Clark said the group's flagship newspaper, UK tabloid The Mirror, is now brighter and more focused. He added that its circulation has increased by 84,000 copies per day since the group changed its focus. Clark said the circulation of Mirror Group's other publications remains steady. 'In the run up to the general election, advertising revenue as expected was subdued, but forward bookings are now encouraging,' said Clark.

First quarter results from Telewest Communications show the U.K.'s second largest cable operator building operating cash flow even though pretax losses widened by almost one-third from a year ago to £69.7 million. Earnings before interest, tax, depreciation and amortisation, or EBITDA, grew to £7.3 million during the quarter ended March 31, compared with a loss of £3.7 million in the year-earlier period.

Arbitration talks for about 1.3 million German construction workers ended with a shaky compromise deal between unions and employers that calls for lower sick-pay benefits and a modest wage increase.

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

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