Dividend fears drive down GSK
SHARES in GlaxoSmithKline were on their sick bed yesterday amid unease that the drug giant could abandon plans to return £4bn of cash to investors.
The stock weakened 3p to 1511.5p as City analysts speculated that the company may use cash from its asset swap deal with rival Novartis to prop up its dividend.
GlaxoSmithKline said last year it planned to return £4bn to shareholders in 2015 through a share scheme following the £13.2bn deal with the Swiss drug firm, which it sealed earlier this year.
But the company is under pressure to support annual shareholder payouts, as growth has faltered in the face of the strong pound and competition from copy-cat rival drugs in Europe and the US.
Berenberg analyst Alistair Campbell said momentum behind the cash hand- out seemed to have stalled.
‘With the dividend commitment under pressure, we think there’s now a credible possibility the company will cancel the capital return,’ he said.
However, Goldman Sachs suggested the move could help to firm up confidence in the dividend, and said in a note: ‘ Greater certainty on the dividend in 2016 and beyond might be well received by investors.’
Meanwhile, US regulators approved the sale of GSK and Theravance’s Breo Ellipta as a once-daily asthma treatment for patients aged 18 and older.
The FTSE 100 Index ended the session and the week 25.32 points up at 6985.95 as miners advanced on hopes of fresh economic stimulus in China.
The country’s factories struggled to expand output in April as home and overseas demand stayed lacklustre.
Anglo American led the natural resources sector higher with a 60p gain to 1165p. Rio Tinto sparkled 112p to 2997p and BHP Billiton lifted 46.5p to 1607.5p. Lloyds also boosted the market by reporting an underlying pre-tax profit of £2.2bn for the three months to the end of March, up 21pc on the year. Its shares rose 5.49p to 82.87p.
But British manufacturing data dampened spirits, with the Markit/Chartered Institute of Purchasing & Supply UK Manufacturing Purchasing Managers Index showing its biggest fall in more than two years in April.
General Election jitters and higher bond yields also put pressure on sectors such as utilities and property.
Midlands water group Severn Trent leaked 41p to 2084p and United Utilities sank 13p lower to 958p. Housebuilders Persimmon and Barratt Developments subsided 9p to 1691p and 6p to 513.5p respectively.
IG analyst Chris Beauchamp said: ‘ This boost to safe-haven yields has meant sectors such as utilities and housebuilders – known for their high dividend pay-outs – have seen some profit-taking.’
But Capital & Counties Properties, the developer behind Earls Court and Covent Garden, firmed 3.5p to 398.5p after reporting ‘a positive and active start to 2015’.
X- ray scanner maker Smiths Group retreated 11p to 1134p as it appointed Chris O’Shea, top number cruncher at engineer Vesuvius, as its new finance chief. Vesuvius shares reversed 0.7p to 454.2p.
Elsewhere, investors dialled into Sepura by 13.5p to 144.5p after the communications group bought Teltronic, which supplies wireless voice and data equipment to the safety, transport and utility industries, for £94.3m.
Another telecoms company Colt rang up a penny to 150p as underlying earnings advanced 3.1pc to £56.5m in the three months to the end of March despite lower revenue.
News of the first commercial sale from Hydrodec’s relocated Australian plant boosted shares in the industrial oil re-refining company by 0.25p to 8.25p. However, Roxi Petroleum leaked 1.12p to 13.75p after the Central Asian oil & gas outfit reported a well blockage at its BNG scheme in Kazakhstan.
Shares in Nostra Terra Oil & Gas also headed 3.12pc south to 0.16p as the USfocused explorer and producer said operators had slowed down drilling until oil prices rise.
Chariot Oil & Gas gave up early gains to close 0.01p off at 9.61p despite news of potentially transformational drilling prospects off the coast of Mauritania.
But the collapse of talks about a tie-up with Wood Group hit shares in North Sea, Canada and Jordan-focused explorer Enegi Oil by 0.12p to 0.72p. Wood’s fell 3p to 686.5p.
Sirius Petroleum also backtracked 0.02p to 1.05p as the investing company dropped the idea of new equity and convertible loans to fund its Ororo field in Nigeria.
Shares in speciality chemical group Haike evaporated by 4.75p to 18.25p after it forecast stable profits from existing products but said growth potential would be limited without new facilities and resources. ÷ SHARES in Oxford Instruments sparked 37.5p to 967.5p as the high-tech company, which provided X-ray kit for Nasa’s Curiosity rover searching for life on Mars, bought US firm Medical Imaging Resources (MIR) for up to £13.4m. MIR makes, leases and services mobile medical imaging laboratories for hospitals and clinics.