Zeneca chief hits out at SmithKline bid rumours
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Your support makes all the difference.Sir David Barnes, chief executive of pharmaceuticals giant Zeneca, hit out yesterday at what he described as "wild, wholly untruthful, fictional" stories about a proposed takeover of the company by rival drugs group SmithKline Beecham.
He said the rumours, which have circulated more or less constantly since Zeneca was spun off from ICI, its former parent, in 1993 were "irritating, verging on the irresponsible".
Sir David gave substance to Zeneca's determination to stay independent with the promise that the company had targeted average annual earnings growth of 15 per cent for the next five years. Analysts' forecasts of profits topping pounds 1bn this year were in line with expectations, he said. The fighting talk took the edge off the bid froth in Zeneca's shares, which closed last night 20p down at 1,431p.
Sir David added: "Zeneca has glowing prospects of its own in front of it, and the results we've delivered are pretty sparkling."
He was speaking after Zeneca announced interim figures showing a 21 per cent rise in pre-tax profits to pounds 610m. There was an 11 per cent jump in the half-time dividend to 12.5p after earnings per share rose to 43p from 35.8p.
On current trading, Sir David said: "We exited 1995 with considerable momentum. Progress has continued to accelerate during the first half, as is evident from the strong sale and profit growth reported today."
As well as flagging a 15 per cent earnings target, Zeneca spelt out a list of what it called aspirational targets. These included becoming the world's leading anti-cancer drug company and being an "upper quartile performer" in all its businesses through "innovation, effective marketing and leading-edge customer service".
Analysts believe a takeover of Zeneca is rather unlikely given the high price that any potential bidder would have to pay to secure control of the company. Its current market value is close to pounds 14bn and a bidder would have to pay a premium to sell out a management that has served it well over the past three years. During that time the shares have outperformed the rest of the market.
By posting a 15 per cent earnings growth target Zeneca signalled a continuation of the increases of the past two years, driven largely by new product introductions. Those pushed profits from the dominant pharmaceuticals arm 12 per cent higher on sales 17 per cent ahead. Trading margins eased due to the cost of developing and launching new products, but John Mayo, finance director, said the company's models had shown that this early spending on products was the best way to maximise returns.
By year-end Zeneca expects approval for asthma drug Accolate, submissions for schizophrenia treatment Seroquel and preparation of the 311C migraine package for filing.
Group profits were given a strong boost by agrochemicals and seeds, which benefited from a buoyant world-wide agricultural market. Sales rose 17 per cent and operating profits by 47 per cent. In speciality chemicals, the sale of the textile colours business announced last month and a restructuring within the division as a whole would lead to a pounds 30m write-down.
Investment Column, page 18
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