European Business News (EBN), 97-05-22

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

Page last updated Thu, May 22 7:09 PM CET

CONTENTS

[01] Credit Lyonnais was the victim of a 'massive organised fraud'

[02] Microsoft unveils partners for its 'push' technology

[03] SAP says that insider trading allegations are 'largely refuted'

[04] Czech government ponders reshuffle as currency falls to all-time low

[05] Strong pound slows UK export rate

[06] German April M3 money supply grew more slowly than expected

[07] Kohl 'certain' of improvement in German labour market

[08] Philipp Holzmann withholds dividend this year, but aims to pay out in 1998

[09] ProSieben posts 1996 profit swollen 76% ahead of July flotation

[10] U.K. refers National Express to MMC

[11] Corporate and Economic Briefs

[01] Credit Lyonnais was the victim of a 'massive organised fraud'

The bank also reported that its unaudited 1997 first quarter results were in line with its budget forecasts and that operating income was 'much better' compared with the year earlier data. The bank didn't release any data for the quarter, and normally releases only six-month results.

Earlier, in an in-house newsletter published this month, the Consortium de Realisation, or CDR - the entity set up in 1995 to take over almost 200 billion Francs worth of the bank's bad assets - said that investigations into Credit Lyonnais and its various subsidiaries had shown how the bank's senior management had allowed the fraud to be perpetrated in a number of subsidiaries, both in France and abroad.

'The further CDR's team goes...the more clear it becomes: there was organized financial fraud until 1993...the fraud was concentrated in seven subsidiaries...which acted as the unbridled horsemen of this financial apocalypse,' said the newsletter, which wasn't intended for public release.

Although it put no figure on the extent of the damage, the newsletter added, 'the real figures involved are higher than those recently quoted, already huge.'

In March, CDR chairman Michel Rouger was quoted by a French deputy as telling a parliamentary commission that about 5 billion Francs had been embezzled by bank executives and businessmen with links to the bank. CDR officials on Wednesday declined to give further details of the estimates.

Although the mess at Credit Lyonnais has often been held up as an example of how badly wrong a state-owned bank could go - potentially costing the French taxpayer more than 100 billion over time - the latest accusations come at a sensitive time for French politicians because of the current election campaign and the intense political debate in France over the desirability of privatizing state-owned companies.

The seven Credit Lyonnais subsidiaries named by the CDR are Societe de Banque Occidentale, International Bankers, Credit Lyonnais Bank Nederland, Altus Finance, SBT-Batif, Saga and Banque Colbert.

'Taking advantage of the complacency of the former managers of the banks, fraudsters operated a veritable looting, which was often hidden behind false balance sheets,' said the report. Credit Lyonnais and the CDR have already instigated about 75 legal proceedings and are likely to file charges concerning as many as 10 more cases by the end of may, CDR officials said.

[02] Microsoft unveils partners for its 'push' technology

Microsoft's new partners include Dun & Bradstreet Corp, First Call, Forbes, Time Warner's Fortune Magazine and Dow Jones & Co. The list is the latest weapon in a fierce battle with rival Netscape Communications, of Mountain View, California, which is preparing to launch its own new web software and announced its own list of content deals Wednesday.

Both Microsoft, of Redmond, Washington, and Netscape are incorporating so- called push technology in the releases of their new browsers to let users subscribe to television-like 'channels' that are updated automatically.

The features allow users on corporate networks to create windows on their computer screens to receive continual updates of stock quotes and other information.

Netscape has released a preview version of its new communicator software, the successor to its popular navigator browser. Microsoft, which has been gaining market share against netscape in recent months, is expected to make Internet Explorer 4.0 available this summer.

Some analysts believe that even before the new browsers hit the market, however, prominent information companies have concluded that they must sign distribution deals with Microsoft because of its strong position in the pc- software business.

'This is a real strike against netscape's attempt to penetrate the enterprise market,' said Allen Weiner, an analyst with Dataquest.

[03] SAP says that insider trading allegations are 'largely refuted'

An SAP spokesman said a prosecutor had visited the company on Wednesday to say 'suspicions had been largely refuted,' although the investigation has not yet been fully concluded.

'The heavy suspicion that company insiders had engaged in insider trading has not been proven,' SAP Chairman Dietmar Hopp said in a press statement. 'Through our helpful cooperation with the Frankfurt prosecutor, so that the results of the probe will probably be released in a few weeks rather than in a year,' Hopp added.

Prosecutors had investigated whether around 100 SAP staff had dealt in shares and derivatives year to try and cash in ahead of poor quarterly results announced last October which led to a fall of nearly a quarter in the company's share price.

The SAP statement added that further preventive measures would be taken to prevent insider trading. Hopp told a magazine recently that staff would be asked to observe a ban on trading company stock in the three weeks before results are announced.

[04] Czech government ponders reshuffle as currency falls to all-time low

Czech political leaders were considering a reshuffle to restore credibility to the country's beleaguered government following a week long attack by speculators on the crown currency.

The Czech crown has been under selling pressure for more than a week reflecting fears among investors at political uncertainty stemming from the deep-seated economic problems gripping the country.

It plunged to a new low in early trade on Thursday, prompting fresh central bank action to defend it.

Prime Minister Vaclav Klaus said the crown's fall was a result of the 'nervous situation' on the political scene and to opposition demands for a change in economic course.

'I expect to take a number of clear actions. I have also talked about it with Mr President (Vaclav Havel). I'm persuaded that the coalition leaders who will show readiness to continue further in an unaltered economic course will be a stabilising factor,' he said.

The currency stood at around minus 4% percent under parity at 1530 GMT.

Both the government and central bank have ruled out the devaluation which some analysts now say is inevitable.

[05] Strong pound slows UK export rate

As a result, the CBI said in its monthly trends enquiry, manufacturers became significantly less optimistic about the prospects for output over the coming four months. The survey shows that overall demand weakened slightly in May and that manufacturers expect the prices they charge for their goods to rise slightly over the coming four months.

The CBI also revised up its predictions for gross domestic product this year and next. It now expects average GDP growth of 3.1% in 1997, instead of the 2.8% it previously forecast, and 2.7% in 1998, instead of 2.6%. The CBI said its 'buoyant outlook' reflected higher consumer spending, which it expects to grow by 4.4% this year and by 3.5% in 1998.

In a separate report, the Office for National Statistics said that UK gross domestic product rose a seasonally adjusted 0.9% in the first quarter from the fourth quarter of 1996, revised down slightly from a previous estimate of 1%.

The ONS also reported that GDP was 3% higher in the first quarter compared with the same period a year earlier, unrevised from the previous estimate. The ONS said the revision was related to industrial output growth in the first quarter. Sterling slipped lower on the data, having earlier fallen against the Deutsche mark as the German currency strengthened on European cross rates.

British retail sales volume rose a seasonally adjusted 0.1% in April from March and is 4.7% higher than the year earlier. The monthly increase, reported by the ONS, was less than the 0.4% rise forecast by economists. However, the annual rate of increase was higher than the 4.2% rise forecast.

Sales volumes rose 1.2% in the three months through April from the three months through January and were 4.5% higher than the same period a year ago. The index for the latest three months was 114.0, compared with 112.7 in the previous three months. U.K. shares were pulled into positive territory early on by rallying retail stocks, after the news that consumer spending is growing at a faster-than-anticipated rate.

The CBI sees base lending rates rising to 6.5% in the third quarter from 6.25% currently, and to 6.75% in the final quarter.

It expects the base rate to rise further to 7% in 1998. 'This forecast assumes that sterling falls back from its present level. If it remains at its present high level a further rise in interest rates will be likely,' the CBI said.

[06] German April M3 money supply grew more slowly than expected

It is the Bundesbank's preferred leading indicator of inflationary trends in Germany and the only economic measure for which it has an official target. It is thus perceived to have a uniquely strong influence on the setting of official German interest rates.

The April figure represents a slowdown from March's annualised growth rate of 8.3%, although it's still fractionally above the Bundesbank's target corridor for M3 growth of 3.5%-6.5% for this year.

It's also clearly slower than economists' forecasts of a 7.5% annualised growth rate for April. The Bundesbank said M3 was 'practically unchanged' in the month, as a number of opposing factors cancelled each other out. Meanwhile, in a separate report, the German IFO economics institute said that the business climate in west Germany improved in April.

Ifo released data showing its business climate index jumped to 94.7 from 92.6, indicating economic strength.

Analysts welcomed the number, which was at the high end of expectations. Gernot Nerb, senior economist at Salomon Brothers said: 'Of course this is a really good number. We had expected an improvement because the drop we saw in March was only a distortion in an upward trend. I would expect that mainly the export sector has boosted the index because construction and retailing remains very sluggish.'

[07] Kohl 'certain' of improvement in German labour market

The German government has forecast an average 4.1 million unemployed in 1997. In April, German jobless totalled an unadjusted 4.35 million, compared to 4.48 million in March.

Kohl also said that while the government's aim of halving German joblessness by the year 2000 remains intact, the large number of immigrants to Germany which has affected the labour market hadn't been included in previous calculations.

'I can't say whether the goal will be met,' he said, emphasising that the goal has always been a target, not a promise. Kohl made his remarks at a presentation of a joint initiative between government, industry and unions to strengthen economic growth and jobs in eastern Germany.

Yesterday, the German government announced a new program to subsidise eastern German industry to the tune of around 5.7 billion Deutsche marks ($3.36 billion) a year between 1999 and 2002, with subsidies falling to around 4.4 billion marks in the three years thereafter.

Economics Minister Guenter Rexrodt said the 5.7 billion marks would have the same economic impact as the 11 billion marks eastern German companies currently receive annually. Kohl said German industry will aim to stabilise investment in plants and equipment in eastern German manufacturing at a level which will 'facilitate above-average growth.'

The aim is made on the assumption that Germany's business and trade tax on capital will be abolished and more investment-friendly conditions will be established.

[08] Philipp Holzmann withholds dividend this year, but aims to pay out in 1998

The Frankfurt-based company also said it expects 'significantly better' operating profit in 1997. Management board chairman Lothar Mayer said Holzmann would therefore seek to pay a dividend in 1998 but would omit a dividend payout for this year.

'We will do all we can to be capable of paying dividends in 1998,' Mayer said.

The magnitude of the rise in this year's profit is dependent upon advances in restructuring, the state of the economy and the real estate market.

The company said that group construction revenue for the first three months of 1997 rose 10% to 2.68 billion Deutsche marks ($1.6 billion) from 2.43 billion a year ago.

[09] ProSieben posts 1996 profit swollen 76% ahead of July flotation

Prosieben said its group sales in the first quarter of 1997 were 479 million Deutsche marks, up 17% from a year earlier. Operating profit in the period was 84 million marks, up 33% from 63 million.

As previously reported, the company plans an initial public offering of 17.5 million preferred shares in July.

With just over a month before ProSieben's stock market debut - the first by a German broadcaster - growing profits enabled chief executive Georg Kofler to dangle the prospect of generous dividends to investors.

Management at the company was made up of people 'with a certain tendency towards generosity to shareholders', Kofler said.

ProSieben also forecast that 1997 pretax profit and group sales will grow from 1996. But group net earnings will be lower due to the merger of Kabel 1 with ProSieben a year ago, in which ProSieben swallowed the Kabel 1's loss, thus enjoying a tax break.

[10] U.K. refers National Express to MMC

Margaret Beckett, president of the Board of Trade, also announced her decision to refer National Express' acquisition of the Central Trains rail franchise in the West Midlands to the MMC for investigation.

'I consider that the acquisition by National Express of ScotRail raises competition concerns in the market for the supply of public transport passenger services in Scotland,' Beckett said in a statement.

'Separately, I consider that the acquisition by National Express of Central Trains raises competition concerns in the supply of public transport services in the West Midlands region (of England),' she added.

The MMC are required to make their reports by September 19.

Beckett said the two decisions do not prejudge the question of whether the acquisitions are against the public interest - it is for the MMC to decide on that after their investigations. Shares in National Express dropped to 492 pence on the news, down 27 pence and compared with around 514 pence before the announcement.

[11] Corporate and Economic Briefs

Novartis Geneva Pharmaceuticals unit submitted a citizen petition to the Food and Drug Administration for confirmation of marketing rights to a generic version of the anti-ulcer drug Zantac. In a press release, Geneva said the petition seeks confirmation that Geneva is the first to submit an abbreviated new drug application.

German utility group BEWAG said that it expected to report a profit of between 170 million and 180 million marks ($106.2 million) for the year to June 30, 1997, marginally above its 1995/96 profit of 169 million marks. Berliner Kraft und Licht's chief financial officer, Bernd Balzereit, said the slight improvement in profit came despite falling sales in electricity and heating. The utility group posted a pretax profit of 359 million marks for the first nine months of the current business year, down from 372 million marks in 1995/96.

Diversified trading group Inchcape said market conditions remain firm, indicating encouraging prospects for the future. Speaking at the group's annual shareholders meeting, Chairman Sir Colin Marshall commented: ''I said in March, at the time of our preliminary announcement, that we were confident of a further improvement in profits from our continuing businesses. In the first four months, trading has been encouraging and market conditions are broadly favourable, so the outlook for the full year remains very much as I indicated earlier.'' Marshall added: ''Last March we announced a new more focused strategy, and implementation is well on track. Testing Services and Bain Hogg have been successfully divested for a total sum of £540 million; and we continue to withdraw from weaker areas in our other businesses, and to invest in those with growth potential.''

Austria's current account deficit widened to 5.2 billion schillings ($437.4 million) in March from 3.5 billion schillings in February and 3 billion schillings in March 1996, the Austrian National Bank said. Also in March, the merchandise trade deficit grew to 9.6 billion schillings from 6.6 billion schillings in February and 7.3 billion schillings in March 1996.

Olivetti, the Italian information and telecommunication services company, said that its new Olivetti Solutions unit posted revenue of 890 billion lire ($533.6 million) in the first quarter 1997. Though this subsidiary didn't exist last year, the revenue is 'in line' with that of the first quarter 1996 when adjusted for the various changes Olivetti has undergone since last year, said Claudio Montagner, the unit's chief executive officer.

Jersey Central Power & Light Co., a unit of GPU, reached a settlement in a lawsuit brought by Nestle Beverage Co. (a division of Nestle SA) against it and Freehold Cogeneration Associates. GPU said the parties agreed to terminate and dismiss all pending litigation and other proceedings between them. The companies agreed to keep other terms confidential. The lawsuit stemmed from Freehold Cogeneration's decision to accept Jersey Central's April 1996 agreement to buy out the power purchase agreement for a proposed Freehold cogeneration plant. Nestle had filed suit in the New Jersey Superior Court in October 1996, seeking damages of at least $75 million for Freehold's alleged breach of a steam sales agreement and $412 million for unlawful interference by Jersey Central. Nestle also sought an unspecified amount of punitive damages.

Incoming orders to German manufacturers in March rose less than originally reported, the Deutsche Bundesbank said. The Bundesbank revised the index of new orders to German industry down to 99.5 from a level of 99.7 originally reported by the federal economics ministry at the start of May. That means that orders rose 0.9% from February, instead of the 1.1% increase calculated from the preliminary data. The Bundesbank left the index level of orders in February unrevised at 98.6.

Global pharmaceutical group Rhone-Poulenc Rorer said the US Food and Drug Administration authorized its Centeon LLC venture to distribute newly manufactured biological products following a review of its Kankakee, Illinois plant. Centeon is a joint venture between Rhone-Poulenc and Hoechst. The company said the authorization is subject to the industry's normal practice of lot release testing by the FDA prior to distribution. Centeon expects to submit newly manufactured biological products to the FDA for lot release in the next few weeks. Newly manufactured biological products are expected to become available to patients and customers based on a phased-in production schedule after samples are reviewed and released by the FDA.

Carlsberg-Tetley, the British-based brewer, logged first-half profit of £18 million ($29.6 million), down from £28 million in the same period of 1996, Carlsberg-Tetley said. Managing director Ebbe Dinsen said that, viewed as a whole, the accounts were actually stronger than in the first six months of last year, but one-off items hit the bottom line. He declined to give further details, saying that further information would be given in Carlsberg's first-half report, to be published in the week commencing June 2. Bass is seeking to buy Carlsberg's 50% of the partnership, seen as important in boosting its British business.

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

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