Wellcome admits £78m illegal dividend payouts

Wellcome, the drugs group fighting a hostile £9bn-plus takeover bid from Glaxo, was embarrassed last night by an admission that it has illegally paid £78.7m in dividends in the past six years.

Along with its 1994 trading results, the group revealed that four interim dividends, including the two in 1994, had been paid "without the necessary filing of the interim accounts having been made with the Registrar of Companies".

Wellcome said: "As a result, payments totalling £78.7m were ultra vires [beyond the powers of the company] and could be recoverable."

Directors said an extraordinary meeting of shareholders would be called to rectify matters. The company stressed that over the period involved it had the necessary distributable reserves for the dividends.

The error yesterday accompanied a strong set of 1994 trading results from Wellcome.

John Robb, chairman and chief executive, announced a 13 per cent improvement in sales to £2.27bn, a 16 per cent jump in sales of Zovirax, the anti-herpes drug, to £858m, and profit margins showing a gain from 29.5 to 31.5 per cent.

Wellcome also refused to rule out a possible approach to the Treasury Solicitor's office to seek permission to address the judge when Wellcome Trust, the company's biggest shareholder, goes to the High Court, probably next week, to seek permission to reduce its holding below 25 per cent.

It had been widely assumed this was a private matter between the trust, which has irrevocably pledged its 39.5 per cent stake in Wellcome to Glaxo, and the court. But Mr Robb said the company was considering its position.

In 1994, Wellcome's underlying taxable profits rose 19 per cent but, after taking a £58m restructuring charge for setting up the Warner Wellcome joint venture, actual taxable profits rose 6 per cent to £680m (£640.7m).

Sales of Retrovir, the anti-Aids drug, fell 7 per cent to £206m, as people in early stages of HIV infection, with no symptoms, were still tending to use the drug less. However, Mr Robb said sales in the last quarter of 1994 showed signs of recovery. Overall drug sales were being driven by volume, rather than price.

Wellcome, which has changed its year-end to December, announced a final dividend of 16p, making a total of 30.4p.