Scroggs sacked as Fisons sees red: Pharmaceutical group shake-up to cost pounds 100m after failure to resolve problems 'by evolution, not revolution'

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The Independent Online
FISONS, the troubled pharmaceuticals company, yesterday sacked its chief executive and warned that 'substantial provisions' required to restructure the group would push it into a pounds 100m loss for the year.

The departure of Cedric Scroggs comes less than two years after his promotion to the post from his position as head of the scientific equipment division.

Much of the restructuring costs will be used to close or sell loss- making parts of that business, which is likely to incur a pounds 16m operating loss this year.

Fisons also warned that its dividend would be halved from 8.7p to 4.3p through a cut in the final payment from 5.4p to 1p, a level where it could be funded from cash flow.

The news sent Fisons shares tumbling 24p to 113p after touching a low of 102.75p.

Patrick Egan, chairman, said Mr Scroggs had 'lost the confidence of the board of directors (which) decided we must have this completely fresh strategy.

'I was trying to get Fisons out of its difficulties by evolution, not revolution. Sadly that has not worked out.'

The next chief executive will be appointed from outside the group. Mr Scroggs' compensation is still being negotiated. He was on a three- year rolling contract and was paid pounds 256,743 in 1992, but Mr Egan said 'you have to mitigate compensation for the problems caused'.

Roy Thomas, the group's finance director, also retired on Friday at the age of 57. Mr Egan said he had requested early retirement in the spring and a search for a replacement has been under way since then. An announcement should be made 'within the next couple of months'.

The departures and the restructuring are the latest in a series of disasters to hit the company in the past two years.

In September 1991, John Kerridge, the previous chairman and chief executive, revealed two of the group's drugs had been banned from sale in the US because of concern by the Food and Drug Administration over the quality of manufacturing facilities.

Although he was confident they would be reintroduced quickly, one has still to be approved for marketing and the group abandoned attempts to get the other passed by the FDA.

Mr Kerridge resigned four months later, shortly after a warning that the withdrawal of the drugs would cost pounds 65m profits in 1991.

Six months later, it became clear that the scientific equipment division also had problems when the group issued a second profits warning. Fisons' difficulties were compounded in April this year when it withdrew Tipredene, its asthma drug, after disappointing clinical trials.

Mr Egan said yesterday the restructuring was designed to give the group a 'fresh start, with a clean sheet. We should really start to motor ahead from 1994.'

The restructuring will be mainly in the scientific instruments division, where several loss-making businesses must be dealt with.

The worst are in the surface science sector, where there is excess capacity and Fisons is competing against four international companies. Much of this business is likely to be sold or closed.

The group also plans to take account of goodwill that will have to be written back on the disposal of businesses in scientific equipment and horticulture, although the sales will not be made until 1994.

Costs will also be cut in the pharmaceuticals division. The programme will cost pounds 15m - to be charged against profits as incurred - but will save at least pounds 25m by the end of 1995.

The savings will come partly from job cuts, although Mr Egan could not say how many. 'Most pharmaceutical companies have a bit of fat as they have had life so easy for such a long time.'

The group will also stop offering customers extra discounts to stock up with its drugs in December, a practice it began in the early Eighties but which, Mr Egan said, accelerated from 1989 onwards.

That will knock pounds 28m off the profits that had been expected this year.

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