European Business News (EBN), 97-09-25

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Page last updated Thu, September 25 7:10 PM CET

CONTENTS

[01] Promodes raises the stakes in battle for Casino, boosts takeover bid to $5.2 billion

[02] Carlsberg to slash its UK workforce 41%, close 3 breweries

[03] US durables goods orders surged 2.7% in August

[04] Sears to take $241.8 million charge for the sale of British Shoe Corporation

[05] Redland shares drop 20% on German woes Redland shares hits new low on German woes

[06] Intel's business practices to be probed by US regulators

[07] 63% of Russia's Rosneft to be privatised

[08] Travelers acquisition is likely to send European banks on a buying spree in US

[09] Skis Rossignol says it is not for sale, expects profit upturn

[10] Pearson's Recoletos agrees alliance with Telefonica de Espana

[11] EU says it will accept WTO verdict on banana imports

[12] UK July trade deficit narrows to $450 million

[13] German price data does not back rate rise case, economists say

[14] French consumer prices rose 0.3% in August, confirming earlier figures

[15] Seita posts 8.6% dip in first half profit

[16] Italy's July unemployment rate 11.7%, down from April's 12.5%

[17] Sprint expected to give Motorola, Nortel contracts for GSM rival technology

[18] Laura Ashley says first-half results were 'disappointing'

[19] Japan prosecutors raid Nikko Securites over suspected illegal payments

[20] IMF Round-Up

[21] Corporate and Economic Briefs

[01] Promodes raises the stakes in battle for Casino, boosts takeover bid to $5.2 billion

In its original September 1 bid, Promodes offered 340 francs per ordinary share, 272 francs per preferred share and 120 francs for each share warrant.

The European Union Commission also confirmed that it has launched a preliminary investigation into the takeover. The development is despite the fact Promodes' hostile bids for Rallye and Casino haven't been accepted.

The increased offer followed news yesterday that the French financial market authority, Conseil des Marches Financiers, had asked Rallye to revise its complex counter-offer for Casino.

The CMF said that Promodes also raised its offer to 300 francs from 272 francs for priority Casino shares and to 155 from 120 francs for equity warrants.

Promodes' new offer values Casino at 31 billion francs ($5.2 billion), up from the previous 28 billion bid.

Promodes didn't increase its related offer for Rallye, which stands at 420 francs for ordinary shares and 470.4 francs for Rallye warrants. Rallye owns 29% of Casino's equity and 36% of its voting rights.

The Promodes bid was higher than some analysts had expected and came earlier than expected. Promodes had said it would decide whether or not to increase its offer only after the CMF made a decision on Rallye. The CMF on Wednesday gave Rallye two days to revise its offer before making a final judgment.

'I thought that they would raise their bid but not to this price. I was looking for around 360 francs ,' said analyst Jean-Noel Vielle at Meeschart- Rousselle in Paris.

'I don't understand why Promodes is putting itself in the situation where Rallye knows the situation before it has to revise its offer,' he said.

The Commission routinely probes mergers involving companies with global sales over 5 billion European Currency Units and EU sales of over 250 million ECU. Its one-month preliminary inquiry allows for interested parties to submit comments while the EU determines whether to launch a deeper, four-month probe, if it has suspicions the merger would distort competition.

The Commission can alter or block ventures it finds would weaken competition. However, 90% of cases investigated are approved after one month.

[02] Carlsberg to slash its UK workforce 41%, close 3 breweries

The unit of Danish brewer Carlsberg also said it will invest £40 million ($64 million) in its plants.

The markets had been expecting staff cuts and restructuring plans both because of the failed attempt to expand its share of the UK beer market and because of increasing competition.

In August 1996, the UK brewer Bass said it would buy Allied Domecq's 50% stake in Carlsberg-Tetley for £200 million. This deal would have given Carlsberg a 20% stake in the UK's largest brewer but the deal was blocked by the UK Department of Trade and Industry in June this year on competition grounds.

Carlsberg announced a three-year plan centred on reducing the British unit's workforce over two years to 2,200 from 3,700.

'Carlsberg-Tetley will retain its two main breweries, the Tetley brewery in Leeds and Carlsberg's Northampton brewery. The company said it would invest £40 million at both those sites to boost production and capacity.

'Carlsberg-Tetley's remaining three breweries, at Burton, Alloa and Wrexham are to be closed down, or if possible, sold,' the company said.

A Carlsberg statement presented a three-year plan centred on reducing the British unit's workforce over two years to 2,200 from 3,700 and cutting the number of production sites.

[03] US durables goods orders surged 2.7% in August

The Commerce Department said total orders for durable goods rose 2.7% to a seasonally adjusted $186.6 billion, after a revised 0.1% gain in July.

A panel of 20 economists surveyed by Dow Jones Newswires forecast a 1.0% rise in August durable goods orders. Durable goods data are not adjusted for inflation. Orders for electronic equipment skyrocketed 28.4% in August, led by increases in computer chips and other electronic components. It was the largest increase in electronic equipment since the Commerce Department began keeping records in 1958. The August rise followed a 12.3% drop in July.

Orders for defence capital goods rose 1.1% in August after dropping 4.7% in July. Without the defence component, overall new orders for durable goods rose 2.8% last month after rising 0.2% in July.

New orders for non-defence capital goods, considered a barometer of future plant and equipment spending, rose 0.9% in August following a 0.4% increase in July.

Orders for transportation equipment rose 5.2% in August, as increases in aircraft and parts more than offset declines in other components.

Excluding the transportation sector, durable goods orders in August rose 2.0% after increasing 0.9% in July.

Durable goods shipments in August fell 1.4%, the first decline since May. Unfilled orders rose 1.1% in August, the third increase in four months.

[04] Sears to take $241.8 million charge for the sale of British Shoe Corporation

The company said David James, who took charge of British Shoe earlier this year, had decided selling the business was the preferred option, but the restructuring would involve the closure of around 150 Shoe Express stores.

Sears said its half year results included an exceptional charge of £80 million ($129 million) for 'impairment of assets of the footwear business.'

The board said it expected to make further provisions of around £70 million in the second half to cover the restructuring and sale of British Shoe, which also includes Dolcis and Shoe City stores. But the net cash effect of the plan was expected to be broadly neutral.

The shake-up of British Shoe follows several failed attempts by former chief executive Liam Strong to rationalise the business. Strong quit in May after five years in the job, following investor discontent about his lack of success in turning around the firm's rambling retail empire.

Sears said its plans to demerge department store Selfridges were on track and it expected the British competition authorities the Monopolies and Mergers Commission to make a decision in November on its plans to sell its mail order business Freemans to Littlewoods .

[05] Redland shares drop 20% on German woes Redland shares hits new low on German woes

Pretax profit in the half fell to £34.5 million ($55.9 million) from £95.5 million a year ago. Losses on a series of disposals totaling £36.2 billion accounted for over half the downturn, but the poor showing in Germany and the negative effects of strong sterling were also to blame.

About half the group's profit, and about 23% of its turnover, comes from Germany. Redland supplies concrete roof tiles to the German housing and construction industry.

Even factoring out the disposal losses, a pretax figure of £70.7 million was still well below forecasts of between 80 million to £105 million.

After seeing the results, investors began dumping Redland shares in pre- market trading, and when the company's presentation to analysts didn't do much to lift sentiment, the shares fell again. Volume was unusually high, as their stock dropped 20%.

One analyst said Redland 'got off lightly after filibustering its way through the meeting. The management have lost the confidence of a lot of investors by failing to act faster in dealing with the German downturn.' The Germany exposure could be Redland's undoing, said Simon Brown, building sector analyst at broker Williams de Broe.

Other building-sector shares in London also fell in partial sympathy with Redland, with analysts pointing out that all the companies have at least some German exposure.

[06] Intel's business practices to be probed by US regulators

Intel said yesterday it was not aware of the specific reason for probe and its lawyers were still reviewing the subpoenas.

The Federal Trade Commission notified the company about the investigation yesterday afternoon.

'The FTC did not say why they are investigating or what prompted the investigation,' said company spokesman Chuch Mulloy.

'The request and subpoenas are very broad in scope.'

Intel said it will cooperate fully with the FTC. The company, however, also said it has a program to make sure that its business practices are in accord with the law.

Four years ago, the FTC conducted a similar investigation, then declared that no additional action was called for and that the probe was closed.

'Intel expects that the current investigation will come to a similar conclusion,' the company said in a statement.

Intel, based in Santa Clara, makes the microprocessors that are the brains of 85% of all personal computers. The company learned of and disclosed the probe after financial markets closed. Its stock ended the day at $95.62 1/2, down $3.50 on the Nasdaq Stock Market.

The FTC said it wants to determine if Intel has acted 'to monopolise, attempt to monopolise or otherwise restrict price or non-price competition in the development or sale of microprocessor or other computer components or related intellectual property,' Mulloy said, reading from the subpoena.

He doubted the FTC probe was related to the agency's recent request for more information about Intel's planned $420 million purchase of Chips and Technologies. Such requests are not unusual in major acquisitions.

Intel is still answering questions in connection with that earlier request, Mulloy said.

[07] 63% of Russia's Rosneft to be privatised

Officials have said the government expects to raise at least $1 billion from the sale. Viktoria Vergelskaya, spokeswoman for Deputy Prime Minister Maxim Boiko, said the plan calls for selling-off all of the government's 100% stake in Rosneft over a period covering the fourth quarter of 1997 and the first half of next year.

Under the plan, 63% of Rosneft shares would be sold in several lots at cash auctions, while another 33% would be sold in a single block at a commercial tender aimed at finding a strategic investor for the company.

Vergelskaya said these sales are open to both foreign and domestic investors.

The remaining 4% of Rosneft's shares would be distributed at a sharp discount to company employees.

With the privatization plan approved, all that remains is for the relevant agencies to set auction dates.

'It's a working-level issue,' said Vergelskaya.

[08] Travelers acquisition is likely to send European banks on a buying spree in US

Travelers plans to acquire Salomon in a $9 billion stock swap, and combine it with Smith Barney Holdings to form Salomon Smith Barney Holdings Inc. The companies' boards approved the deal, which is expected to be completed by the end of the year after shareholder and regulatory review.

The merger will create an investment powerhouse that will boost the global dominance of U.S. firms, already regarded by some banks as their principal rivals in Europe. And Europe's banks are expected to scour Wall Street in search of investment banks in an effort to fight back.

Though neither US company has outlined how the asset-management divisions will be combined, analysts say the merger would allow Smith Barney Asset Management to increase its international presence, bolster its product line with international funds and further expand its insurance and annuities offerings. What Salomon will get from it is greater retail potential for its products, through access to Smith Barney's network of more than 10,000 broker-dealers and their five million customers.

'The key to success is distribution, distribution, distribution,' says Louis Harvey, president of Dalbar Financial Services, a Boston research firm. Good management and good products are important, he explains, but a firm has to be able to reach the customers.

Salomon, in recent years, has come up short. The firm's 11 mutual funds -- mostly fixed-income -- hold just $1.7 billion in assets, according to Chicago fund-tracker Morningstar. The company just hasn't had much success selling them.

Now that product line, if it remains intact, 'will be able to gather assets at rate the firm never dreamed of by itself,' Mr. Harvey says. Salomon brings 'prestige to the distribution of funds, but not volume,' he explains, while Smith Barney is a retail giant, ranking behind only the likes of Morgan Stanley Dean Witter Discover and Merrill Lynch.

Smith Barney has about 50 funds, Morningstar reports, with about $31 billion in assets.

With its international contacts in banking and insurance, Salomon is well positioned to help Travelers establish a global presence, analysts say.

'It establishes, for Smith Barney, a legitimate international capacity which they really don't have,' says Kurt Cerulli, president of Cerulli Associates, a Boston consulting firm. 'What Salomon brings is an expanded money management ability that is outside the U.S.'

'Salomon probably has international relationships they have never been able to capitalise on because they were a trading powerhouse and not a retail powerhouse,' adds consultant Burton Greenwald, president of B.J. Greenwald Associates in Philadelphia.

Analysts say the purchase will speed up consolidation in the U.S. and put European banks with global aspirations like Deutsche Bank, Dresdner Bank and SBC under increased pressure to make their own bids.

Under threat in their own back yard by the so-called 'bulge bracket' elite of Goldman Sachs, Merrill Lynch, Morgan Stanley Dean Witter and J.P. Morgan, the Europeans now fear they could be left further behind unless they take part in the Wall Street shake-up, analysts say.

'It has clearly initiated another period of consolidation frenzy on Wall Street and as European banks want to get a presence there they may get sucked into that frenzy,' said Bryan Crossley, banking analyst at ABN Amro Hoare Govett.

Lehman Brothers, Donaldson Lufkin & Jenrette, Bankers Trust and PaineWebber are now being touted as takeover candidates which may also attract European interest, particularly from Swiss and German banks.

[09] Skis Rossignol says it is not for sale, expects profit upturn

Laurent Voix-Zives, chairman and primary shareholder of the French winter sports company, said he has no plans to sell the company to US sports apparel group Nike.

Speaking to shareholders, Voix-Zives said: 'I don't have any intention to be seduced by Nike.' Rossignol had reportedly been in talks with Nike, but those talks broke off earlier this year. Voix-Zives added he has no intention to change the family shareholding structure of Rossignol, which gives him effective control of the company through a minority stake of 41.4%, but a majority 59.5% hold over stock with voting rights.

Also, Rossignol will change its management structure to have both a management board and a board of directors by July 1998, Boixvives said. Boixvives will head the board of directors while the management board will be lead by Claude Janpet, currently Rossignol's managing director.

Speaking after the shareholder meeting, Rossignol Secretary General Jean- Jacques Bompard said the company's net profit should rebound in the year ended March 31, 1999 from the expected low level for the year ended March 31, 1998.

'Our profit will definitely rise starting from 1998-1999,' Bompard said. 'In that year we will have a foreign exchange gain and everything on paper, the world ski market, fewer competitors in winter sports and rising sales in golf and in-line skates are all better than the current year.' Bompard explained that Rossignol hedges against foreign exchange risk and was therefore already assured of a foreign exchange gain in 1998-1999 having bought a series of forward and future contracts.

But turning back to Boixvives' denial that Rossignol could be on the block, Annick Thevenon, analyst at French brokerage EIFB, said she still expects the company to be sold eventually.

'It's not going to happen tomorrow, but one day or another they will come to that conclusion,' Thevenon said. She added that the company may well be waiting until it improves its earnings and until it changes its management structure in order to boost its attractiveness and raise any offer price. 'I think Rossignol will again try to copy Salomon, as they did in going into golf,' Thevenon said.

Rival French sports company rival Salomon announced last week that it would be bought by German sports company Adidas.

[10] Pearson's Recoletos agrees alliance with Telefonica de Espana

Pearson said Telefonica would pay 23.1 billion pesetas ($154.8 million) to buy 20% of Recoletos. Pearson said Recoletos would then pump 11.55 billion pesetas into buying a 10% stake in Antena 3, a Spanish commercial television channel. Pearson said the tie-up would provide new programming opportunities for Pearson Television.

It said it would send a representative from both Recoletos and Pearson Television to join the Antena 3 board.

Pearson said Recoletos would be able to extend its media businesses into other media and to the wider Spanish-speaking markets in Latin America, in particular its Marca sports newspaper and its business daily Expansion.

'The alliance with Telefonica creates opportunities for its growth, across the boundaries of geography and media, that we could not have contemplated on our own. Our ambition, which we share with Recoletos and Telefonica, is to become one of the most profitable and creative media companies working in the Spanish language,' Pearson chief executive Marjorie Scardino said in a statement.

Pearson said Telefonica earned profits before tax last year of £1.1 billion.

[11] EU says it will accept WTO verdict on banana imports

'We are accepting the verdict,' said an EU representative on entering a meeting of the World Trade Organization which is formally to adopt the ruling.

EU acceptance was a foregone conclusion unless the 15-nation bloc wanted to destroy the operations of the trade organization.

The WTO decision, handed down earlier this month, was in the dispute between the EU and a group of other countries, including the United States, Mexico, Ecuador, Guatemala and Mexico.

The ruling was a blow to some producers, especially islands in the Caribbean which are heavily dependent on revenue from banana sales to Europe. They maintain they cannot compete with huge corporations without preferential treatment.

The only way the decision could have been overturned was if all the victors had changed their minds. Decisions of the WTO dispute settlement process are final unless all the more than 130 member countries agree unanimously to a change.

The next step is for the EU to explain how it plans to change its system of tariff quotas and licensing restrictions on banana imports.

The United States, home of large banana companies with big operations in Latin America, argued that the EU rules amounted to unfair discrimination.

Latin American producers said the EU restriction cost them hundreds of millions of dollars in lost exports.

The meeting was expected to last most of Thursday because many countries wanted to make statements, officials said.

[12] UK July trade deficit narrows to $450 million

Exports rose 4.2% in July from June and imports went up 0.7%. The figures are seasonally adjusted.

The July deficit was less than the median forecast from a Dow Jones Newswires survey of a £500 million shortfall.

The release of slightly better-than-expected U.K. trade data failed to ignite any significant movement in sterling against the dollar or the Deutsche mark.

The pound was at 2.8652 marks, up slightly from 2.8637 marks just before the figures were released. The pound was also up at $1.649 from $1.6131.

The release of slightly better-than-expected UK trade data failed to ignite any significant movement in sterling against the dollar or the Deutsche mark.

A currency dealer at a major UK bank said the narrowing of the trade deficit to £450 million in July from 950 million a month earlier was only marginally better than forecasts of a 500 million gap.

'We really needed something more erratic from market expectations to prompt any breakout,' he said.

The pound was at 2.8652 marks, up slightly from 2.8637 marks just before the figures were released. It was also up at $1.649 from $1.6131.

[13] German price data does not back rate rise case, economists say

Import prices rose 5.4% in August from the year-earlier level, the strongest gain since May 1989.

That jump conflicted with the picture presented on Wednesday by a decline in September consumer price inflation to 1.8% from 2% in August, but anlaysts said the CPI data took precedence.

'The rise in import prices was expected, due to the weaker mark, if perhaps not on that scale,' said economist Gernot Nerb at Salomon Brothers in Frankfurt. 'But it is old news. The CPI data is fresher.'

Heating oil and fuel were a major reason behind the rise in August import prices, but dropped again in September.

The mark initially showed no reaction to the data, but foreign exchange traders said they expected renewed talk of an early rate rise to bolster the curreny in the coming week.

Bund futures prices fell initially after the import price news, but quickly recoverd as traders realised the data were backward-looking.

The benchmark 10-year Bund cash bond was down slightly at 103.53 at midday from 103.64 earlier, yielding 5.52 percent. 'We had an idea that the August (import price) data were bad, thanks to the dollar,' Holger Schmieding at Merrill Lynch in Frankfurt said.

'CPI at 1.8% is not nice -- last year we had 1.4% -- but it is still not in a phase of strong increases. We won't have that until next year,' Schmieding said.

After Wednesday's CPI data, Bundesbank council member Franz-Christoph Zeitler warned that the lower CPI increase in September did not give reason to sound the 'all clear' in monitoring inflation.

Both Nerb and Schmieding said they were sticking to their view that more positive news on domestic demand or unemployment was unlikely to prompt the Bundesbank to do more than raise its weekly securities repurchase rate by perhaps 0.25 percentage points by around November.

'They have to say things like that, but for the next one to two months they will just keep an eye on things,' Nerb said.

Schmieding said, 'There is a significant chance of a (repo) rise in November, since the economy is strong, particularly if the mark remains weak'.

August import prices rose 0.9% from the previous month, exceeding a 0.6% gain in July. Import prices for precious metals, which rose 9.4% from July, and petroleum products, which rose 7.7%, were among the strongest gainers. Natural gas prices fell 2.3%.

Export prices, meanwhile, rose 0.3% from July and 2.4% from August 1996. The rates were up from increases of 0.2% and 1.9% respectively, in July.

[14] French consumer prices rose 0.3% in August, confirming earlier figures

August's 0.3% rise, compared with a 0.3% decline in August 1996, brought the increase in consumer prices over the previous 12 months to 1.5%. Still, the index showed an increase of only 0.1% over the three months ended August. Over the 12 months through July, the consumer price index rose by 1.0%.

The institute said the CPI, base 1990 equals 100, came in at 115.3 in August, up from 115.0 in July and 113.6 in August 1996.

The government projects a rise of 1.4% in consumer prices in 1998, compared with 1.3% in 1997. The state-run institute attributed the rise in the CPI in August to an unusually small seasonal decline in retail prices of fresh food produce, manufactured goods and higher energy prices.

Food prices overall declined by 0.2% in August from July. That reflects a 2.6% fall in the fresh produce sector, which compares with a 9.6% decline in August 1996. Excluding fresh produce, food prices rose 0.2%.

Retail prices of manufactured goods rose 0.6% in August, reflecting a 2.8% rise in prices of clothing and footwear, compared with 1.7% in August 1996. Prices of other manufactured goods were stable, the institute said.

Prices in the private-sector services sector rose 0.1% in August, the same increase as in a year earlier.

Energy prices climbed 1.2% in August from July, bringing the increase over 12 months to 2.9%. The rise reflected a 2% increase in the prices of petroleum products due to the appreciation of the dollar that had a direct impact on the price of imported crude oil. Excluding energy, public tariffs were on the whole steady in August.

Rents and water tariffs increased by 0.2% in August, while health costs to the consumer were unchanged.

[15] Seita posts 8.6% dip in first half profit

The French tobacco company attributed the decline to the impact of a rise in the rate of French corporate income tax decided by the government for 1997. Seita estimated the impact on its 1997 first-half accounts at around 30 million francs.

Looking ahead, Seita said its full-year performance will be negatively affected by the French market, where Seita's sales fell by 5% in the first six months due to stiff price competition.

But it nevertheless predicted that full-year 1997 profit will show an increase over 1996 thanks to tighter management and control on spending, international development and eventual external growth.

Operating profit rose by 4.3% to 591 million francs on the back of a 4.6% rise in sales to 8.89 billion francs.

Seita said financial income fell by 26 million francs to 42 million francs, and noted that latent capital gains of 51 million francs hadn't been accounted for in the first-half accounts, although they will be in the full- year results. Non-recurring items made a negative contribution of 36 million francs to first-half earnings, including a 22 million francs provision against the sale of Seita's unit in Paraguay in the second half, as well as a 10 million francs provision against computing costs engendered by the millennium.

[16] Italy's July unemployment rate 11.7%, down from April's 12.5%

ISTAT's data comes from a study done during the week of July 6-12.

The number of employed rose 1.1% from the level in April to 20.310 million people, ISTAT said. The number of employed, however, was unchanged from July 1996. ISTAT said the fall in the unemployment rate was due largely to higher employment in Italy's northern region led by jobs in the construction and manufacturing sectors.

Still, the rise in employment in the service sectors seen in previous months came to a halt, ISTAT said.

The total number of people looking for work was 2.688 million, registering a fall of 6.5% compared with April. The unemployment rate was highest in the underdeveloped south, which registered an unemployment rate of 21.9% in July, up from 21.4% in the same quarter of 1996.

The south accounted for some 59% of the unemployed in the country. Unemployment in central Italy fell to 9.4% in July from 9.7% in the same period in 1996, while unemployment in the north fell to 6.0% from 6.2%.

[17] Sprint expected to give Motorola, Nortel contracts for GSM rival technology

According The Wall Street Journal, the hardware consists of about 3,500 digital cellular telephone 'sites,' or communications hubs, and will be used by Sprint PCS, a wireless venture 40%-owned by Sprint, to fill out its national communications network.

The award is important as the first large contract for a new version of a digital wireless technology, called code-division multiple access, or CDMA. That technology is the chief rival in the global digital mobile phone market to the GSM standard. That technology has gained widespread popularity by offering an open manufacturing specification similar to CDMA's open manufacturing specification.

CDMA is based on a standard set of published specifications. That means a buyer can mix and match its technology purchases and not be tied to one company's proprietary standard.

By offering hardware that works with products from multiple vendors, CDMA, a complex technology that has become popular for promising greater efficiency and call clarity, will be easier to market.

Wireless switches and radio equipment will go into territories Sprint recently purchased from the Federal Communications Commission in auctions of the so-called D and E blocks of wireless spectrum.

Lucent Technologies had bid for the contract but apparently lost out to Motorola and Nortel over pricing terms, people close to the talks said.

Motorola is expected to take about 60% of the new contract from Sprint, with Nortel winning the balance. The win is sweet for Motorola, which had quit bidding for an earlier Sprint PCS contract because of strict financing terms.

By Quentin Hardy, The Wall Street Journal

[18] Laura Ashley says first-half results were 'disappointing'

Laura Ashley made a pretax loss of £4.5 million ($7.3 million) in the first half of the year against a profit of £5.2 million a year ago, despite an upturn in sales to £174.6 million from £156.1 million at last year's half- way stage and a 4% rise in like-for-like sales.

'These are disappointing results for the company and our shareholders. We are taking decisive action to restart the turnaround, including the appointment of David Hoare as chief operating officer, addressing poor performance in North America, improving our supply chain, and pursuing cost savings,' said Ann Iverson, group chief executive.

Laura Ashley CEO Iverson said while the initiatives taken in the last two years improved the company and helped it to deliver £26 million of pretax profit in the period, it was 'too fast, too soon' and without the proper infrastructure in place to support growth and expansion.

'Performance deteriorated significantly in the first half as a result of the garment overbuy in the spring and the need to clear home furnishing stock as a result of disappointing sales,' said Iverson.

She said this led to higher mark-downs and consequently lower margins which was compounded in the latter part of the half by problems replenishing best- selling product lines in home furnishings. 'Our rapid growth also exposed problems with the supply chain and our cost base remains too high,' said Iverson.

[19] Japan prosecutors raid Nikko Securites over suspected illegal payments

The sweep by 100 agents came just a day after prosecutors arrested Atsuo Miki, the former president of Yamaichi Securities, for his role in the scandal, which has already ensnared Japan's biggest brokerage, Nomura Securities, Daiwa Securities, and Dai-Ichi Kangyo Bank Ltd, a leading commercial bank.

Tokyo prosecutors said in a statement that Nikko was suspected of funnelling 14 million yen ($116,000) in illegal payoffs to Ryuichi Koike, a 'sokaiya' racketeer currently in police custody and accused of similar dealings with Nikko's competitors.

The statement said prosecutors suspected that Nikko as a company and one of its managing directors were involved in the payoffs.

On Wednesday, Daiwa Securities, Japan's second-largest brokerage, said its president, chairman and five other top executives would resign at the end of this month. Daiwa joined the list of brokerages caught up in the scandal when prosecutors raided its offices last week on suspicion that it made 67.28 million yen ($560,000) in illegal payments to Koike.

Payoffs to sokaiya, racketeers who extort money from firms by threatening to expose dubious business practices or disrupt their shareholders' meetings, have been illegal since 1983, but firms have found it hard to sever underworld ties.

[20] IMF Round-Up

Group of Seven nations said they were happy with the international response to Thailand's recent currency woes, but added they expected Bangkok to 'implement vigorously' the IMF's rescue programme.

U.S. officials said they had kept up pressure on Japan to rein in its ballooning surplus and kick-start domestic demand to boost flagging growth rates and prevent undue fluctuations on the world's foreign exchange markets.

Malaysian Prime Minister Mahathir Mohamad said in a speech foreign exchange trading was immoral. The local Sunday Morning Post quoted him as saying he would ban speculative currency trading.

Financier George Soros called the Mahathir's suggestion a recipe for disaster. 'Dr Mahathir is a menace to his own country,' Soros said.

The Group of Seven issued a statement on currencies that said: 'We agreed that exchange rates should reflect economic fundamentals and that excess volatility and significant deviations from fundamentals were undesirable. In this context, we emphasise the importance of avoiding excessive depreciation where this could lead to the reemergence of large external imbalances.'

A proposal for an emergency fund to bail out troubled Asian nations may still work despite strong opposition from Western states and a wary reception from the International Monetary Fund, officials said. The success of the proposal, floated on the sidelines of the annual World Bank/IMF meeting, now hinges on how Asia would meet reservations from the United States and link the use of the fund to IMF economic programmes, they said. Estimates on the size of fund range from $60 billion to $100 billion, but IMF and monetary officials have not confirmed a total amount.

IMF head Michel Camdessus said European monetary union looked sure to happen and Europe should now set its mind on scaling back 'very high- cost' unemployment and social security benefit systems. Labour market reform and greater 'flexibility', along U.S., British or Dutch lines, was what continental European countries involved in the euro currency project needed now, he said. Reuters

[21] Corporate and Economic Briefs

Sweden's producer price index rose 0.2% in August from July 1997, according to figures released by SCB, the national statistics agency. The increase in producer prices brought the annual change in the index to a rise of 2.5% from a rise of 1.9% in July. Market economists were expecting a 0.1% rise on the month and a 2.4% rise on the year, according to SIX market estimates. The rise in export prices was largely due to rising prices for petroleum products, SCB said.

Sweden's balance of trade showed a preliminary 7.9 billion krona ($1.05 billion) surplus in August, up modestly from a surplus of 7.8 billion kronor in August 1996, according to figures released by national statistics agency SCB. The August surplus was below the median market expectation of 9.5 billion kronor, SCB said.

Swedish holding company Incentive said that it will sell its Haegglund's Vehicle unit to UK industrial group Alvis for 975 million kronor ($129.3 million), making a capital gain of 550 million kronor ($73 million). Haegglunds Vehicle, with annual sales of around 1.4 billion kronor, is one of Europe's leading supplier of light and medium-heavy tracked special military vehicles, and holds a world leading position in camouflage, Incentive said.

French industrial group Cie Generale des Eaux said its US Air and Water Technologies will undergo a capital increase of between $245 million to $270 million. Generale des Eaux said it will subscribe to the offer for between $200 million to $245 million, depending on the participation of minority shareholders, increasing its stake in the company to between 67% and 89% from the current 42%. Generale des Eaux said it will use its debt and preference shares into capital to finance the operation.

The Norwegian power concern Hafslund said its pretax profit for the first eight months of the year rose 36% to 288 million kroner ($40.2 million), from the corresponding period last year, on increased power production. According to Hafslund, power production in the first eight months swelled to 1,892 gigawatt hours compared to 1,465 GWH in the same period 1996. The main reasons for the increased generation compared to 1996 are the high water level in the Glomma river system, and the takeover of Fellesanlegget Kykkelsrud-Fossumfoss (FKF) power plant.

D'Ieteren posted a sharp rise in net profit for the first half of 1997, due largely to the successful flotation of its Avis Europe unit on the London stock exchange in April. The Belgian car importing and leasing group said extraordinary items - mostly comprising the gains made from the Avis flotation - totalled 2.16 billion Belgian francs ($58 million) and sent the bottom line figure soaring to 3.09 billion francs, from 589 million francs during the first half of last year. Current profit also rose substantially. The 42% rise in net current profit to 1.27 billion francs from 900 million francs a year ago 'came mostly from D'Ieteren's car rental activities,' said Executive Vice President Gilbert Van Marcke.

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

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