Glaxo Wellcome, the giant drugs group, is cutting 7,500 jobs worldwide as part of a pounds 1.2bn cost saving programme resulting from the pounds 9.3bn takeover of Wellcome in March. Sir Richard Sykes, chief executive, said 1,700 jobs would go in the UK and forecast the loss of around 1,000 of the combined company's 6,000 research and development staff by 1998.
Sir Richard said the process of integration had gone ahead "extremely quickly". The structure and number of research and development sites had been determined, he said, and in manufacturing all the major decisions had been made. In June, the company announced the closure of Wellcome's main UK research site at Beckenham, Kent, employing 1,550 people.
But the latest news drew an angry response from both the Labour Party and workers' representatives. Labour trade and industry spokesman Lewis Moonie said massive unemployment was the price of large-scale takeovers.
Paul Talbot, national officer of MSF, the main trade union at the company, said the job cuts confirmed their worst fears. Wellcome in the UK was "being gutted" and talk of compulsory redundancies flew in the face of reassurances given by the company throughout the recent merger discussions. The company denied that any such assurances had been given.
On the stock market, Glaxo Wellcome's shares gained 8.5p to 795.5p as analysts welcomed the company's forecast that eventual annual cost savings would hit pounds 700m a year by 1998. John Coombe, finance director, said a pounds 1.2bn charge to be taken this year to cover the costs of the programme would be fully recovered in savings by December 1997, while the pounds 800m cost of the redundancies and other cash items would be paid back in two years.
The first pounds 700m of the charge has been taken against profits for the 12 months to June, which the company announced yesterday, calling them second interims as the year end is being switched to December. Pre-tax profits after the charge and including Wellcome from mid-March were pounds 1.56bn, compared with pounds 1.84bn from Glaxo on its own in the comparable period.
Excluding integration costs, profits rose 23 per cent to pounds 2.26bn, with earnings per share up from 42.7p to 48.5p boosted by the addition of Wellcome. A second interim dividend of 20p takes the total for 12 months to 30p, up 11 per cent.
Analysts were encouraged by the performance of Zantac, the best-selling anti-ulcer drug. Facing increasing competition from generic rivals and improved remedies such as Astra's Losec, sales slipped 3 per cent to pounds 2.31bn, at constant exchange rates in the period. All the decline was due to price reductions as the company fought back with discounts in the US and volumes were actually 2 per cent ahead.
Sir Richard said he did not see the need for another major acquisition for five years and suggested that Glaxo Wellcome would not be interested in mounting a white knight rescue for Fisons, currently the subject of a hostile bid from Rhone-Poulenc Rorer.
Comment, page 19
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