Profit hopes shore up Zeneca defence

MAGNUS GRIMOND

The drugs and chemicals group Zeneca has in effect shored up its bid defences by announcing a pounds 60m charge to improve efficiency and indicating that profits for last year will be at the upper end of expectations.

Forecasts, previously pitched at between pounds 820m and pounds 885m ahead of exceptional charges, were being edged up to a consensus figure of about pounds 870m for the year ending last December following yesterday's announcement.

Bid rumours, centring on Swiss drugs giant Roche Holding of Switzerland, have swirled around Zeneca for months. The profits estimate, coming alongside moves by the company to further boost efficiency in the pharmaceuticals operation, will push up any price a bidder might have to pay, while limiting the scope for a new owner to further cut costs.

The shares dipped 14p to pounds 12.85 yesterday, although dealers said this had less to do with punctured bid hopes than the aftermath of an issue of warrants in the shares by brokers Barclays de Zoete Wedd on Monday. Zeneca traditionally updates the market on current trading in January, while the pounds 60m provision comes half-way through a two-year programme to "re-engineer" the pharmaceuticals business to cut costs and working capital. None the less, yesterday's news will have done it no harm in fending off a bid, should it emerge.

Zeneca's healthy profits for last year have come on the back of strong fourth-quarter sales in pharmaceuticals, which have pushed growth in the whole of 1995 ahead of the trend for the first nine months.