Fisons hit by £500m charge on profits

BY TOM STEVENSON

Deputy City Editor

Stuart Wallis, Fisons' third chief executive in three years, cleared the decks at the beleaguered drugs company yesterday by announcing a £500m exceptional charge against last year's profits, plunging the group deep into the red.

Mr Wallis, who fuelled speculation that Fisons' days of independence might be numbered by admitting that the company would consider offers for its core pharmaceuticals arm, said: "It was important that we got to the bottom of what needed to be done."

The charge, half a write-off against the goodwill element of last week's instruments division sale and half to cover the cost of restructuring the drugs operation, is the latest blow in a catalogue of disasters stretching back to the end of 1991, when the American Food and Drug Administration said it had banned two of Fisons' most important treatments.

That news marked the end of a remarkable run of success for the company during the 1980s when the company's share price increased from 12.5p to a peak of 510p. Soon after the FDA blow, John Kerridge resigned as chairman and chief executive thus setting in train a revolving-door board appointments policy, a string of profits warnings and allegations of bribery and creative accounting.

Mr Kerridge's successor was Cedric Scroggs, a Fisons' insider who many in the City felt was poorly placed to solve the company's deep-seated problems.

He lasted until the end of 1993 when continuing trading problems and the decision to halve the dividend payout forced his departure. Last September Stuart Wallis, an industry outsider with a reputation for cleaning up businesses before selling them on, took the helm and assembled the company's senior managers to warn them of the size of the task ahead of them.

The announcement of a £220.6m restructuring charge and £278.6m goodwill write-off is the fruit of his first six months in the job. Last week he sold the loss-making scientific instruments division, which Fisons had put together at the height of the market in 1990.

The last remaining non-core business, the profitable laboratory supplies distribution arm, is up for sale and could raise about £250m.

That would leave Fisons with a small amount of net cash - at the year- end it had net borrowings of £208m, which slightly exceeded net assets, giving gearing of 104 per cent.

But question marks remain over the ability of Fisons to survive in a pharmaceuticals industry increasingly dominated by a handful of global companies and under rising pressure from governments and other health- care purchasers.

Although underlying profits were higher at £75.5m (£64.6m) during the year, it is not clear that there is a place in the market for the niche players that Mr Wallis believes can compete with the large international companies.

The pharmaceutical division's sales were flattered by the ending in 1993 of the practice of selling drugs off cheaply at the end of accounting periods to boost sales. Stripping that effect out, turnover was little changed.

Despite a loss per share of 69.8p, the dividend for the year was maintained at 4.3p.

The shares closed 3p lower at 147p.