Investors fear a GSK dividend cut
THE last thing long-suffering shareholders of GlaxoSmithKline wanted to hear is that there is a strong possibility the dividend will be cut in 2016. Its dividend growth of 6pcplus in recent years has provided solace to miffed investors who have seen the share price collapse on increased generic drugs competition and corruption charges in China, one of GSK’s biggest markets.
Down from a May 2013 high of £18-plus, the shares touched a low of 1296p in October 2014 and closed last year 13pc lower.
The stock was yesterday sold down to 1361p after Mark Clark, analyst at Deutsche Bank, warned that the arrival of new chairman Sir Philip Hampton, who joins between April and September, may well herald a change in the business. He believes that while the commitment to a maintained 2015 dividend is supportive short-term, he sees a cut in 2016 as the 80pc pay-out ratio is unsustainable and a constraint on the company’s strategic options, especially given the potential £8bnplus cost of buying out Novartis’s 36.5pc stake in the Consumer joint venture in 2018. The close was 17.5p better at 1413p.
Trials of GSK’s experimental Ebola vaccine, based on a chimpanzee virus, which carries material from two strains of the Ebola virus, are expected to move to phase two trials next month. The World Health Organisation recently said that two leading Ebola vaccines, including GSK’s, will soon be tested in healthy volunteers in Africa.
The Swiss National Bank’s out-of-the-blue decision to abandon its four-year- old currency ceiling against the euro, and slash interest rates to a level of minus-0.75pc caused absolute mayhem in financial markets. Dealers took the view the shock move is a sign that the SNB must know that the European Central Bank will embark on Quantitive Easing (QE) at next week’s meet- ing, and the size of its QE programme could be a lot bigger than the market expects – around $1trillion, not the $500bn figure leaked last week.
Still smarting from Wednesday’s 153-point fall, the fragile Footsie found itself another 90 points down on the Swiss currency chaos before being pulled up by its bootlaces by a strong rally in oversold miners as the gold price jumped more than 2pc to a four-month high of $1,260.30. It ended 110.32 points up at 6498.78, while the FTSE 250 retrieved a 120point deficit to finish 43.2 points up at 15,915.29. Wall Street closed 106.38 points off at 17,320.71.
Gold miner Randgold Resources led the rally with a gain of 315p to 5265p. Last week’s low was £36. BHP Billiton recovered 63p to 1348p and Polymetal International 51.5p to 591p. Still shellshocked by the recent stunning sell- off of copper, Vedanta Resources fell 32.4p more to 375.8p and Glencore 3.4p further to 240.6p.
Information services group Experian advanced 56p to 1121p in response to a mixed third- quarter trading update. In the core Credit division, growth was stronger than broker Shore Capital’s forecasts in North and South America at 7pc and 6pc respectively, while the UK performance was 3pc.
In normal circumstances, extreme volatility in forex and equity markets is just what the doctor ordered for IG Group, the daddy of all spreadbetters. But yesterday’s megaextreme movements in the euro and Swiss franc left many unfortunate clients potless and hoisting the white flag.
IG confirmed that depending on its ability to recover client debts, total debts will not exceed £30m from market and credit exposure. IG’s shares dropped to 691.5p before closing 32.5p down at 709.5p. If IG has caught a cold, other smaller fry spreadbetters could be in a right mess.
PLUS 500, which provides an online service for retail punters to trade CFDs (contract for differences) internationally, slumped 31.5p to 602.5p. The company attempted to reassure the market by saying that the exceptional movement in the value of the Swiss franc has had no material impact on its financial and trading position.
Ladies retailer Bonmarche firmed 7p to 308.5p after reporting strong online sales over Christmas. Like-for-like sales increased by 6.4pc, driven by a 44pc leap in online sales in the year to date.
Rosslyn Data Technologies, a global data technology company, improved 0.75p to 17.25p on contract news. Its subsidiary, Rosslyn Analytics, has won a significant contract with one of the world’s biggest pharmaceutical companies.
Braemar Shipping Services steamed 31.5p ahead to 431.25p after reporting the depressed oil price has helped it to improve shipbroking rates and its revenues in the sector, which are driven by an increased demand for oil tankers. ÷ INDEPENDENT utility cost management consultancy Utilitywise rose 11p to 251p ahead of today’s visit by institutional investors to its new HQ in Newcastle. Directors are obviously confident, as they piled in for stock yesterday. Chief executive Geoff Thompson bought 120,000 shares at 246p, while director Jeremy Middleton paid the same price for 40,000 shares. Chairman Richard Feigen acquired 2,008 at 244p. Read the market latest updated
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