SmithKline makes pounds 250m US provision

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SmithKline Beecham has put aside pounds 250m to cover two separate pieces of litigation in the US, the pharmaceuticals giant said yesterday. The size of the provision surprised some analysts and the A shares slipped 17.5p to 714.5p, despite an otherwise bumper set of full-year figures.

Yesterday's results were also marked by a decision to replace the current dual-share structure with a single class of shares, which the company said would give it greater flexibility to raise money in the markets if and when it needed to.

Jan Leschly, chief executive, refused to give any more information on the provision against the litigation, but said he was confident that pounds 250m would more than cover SmithKline's potential liability. The cases involve a dispute between SmithKline's clinical laboratories arm and the US government over payments to the company by Medicare and a class suit by a group of pharmacies demanding better discounts.

Analysts said the decision to simplify the share structure reflected SmithKline's persistently high gearing of just over 100 per cent, which ran the risk of constraining its ambitions in the fast-consolidating global drugs market.

As far as underlying trading was concerned, 1995 was a successful year of consolidation after the busy acquisitions and disposals that characterised 1994. Excluding the exceptional charge, pre-tax profits increased 7 per cent to pounds 1.36bn from a 16 per cent rise in continuing sales to pounds 7.01bn.