Unease persists despite Unilever backing off GSK

RELIEF at Unilever’s decision not to raise the stakes on its GlaxoSmithKline offer today failed to mask investor unease over the “structural challenges” still facing the Marmite maker.

Unilever shares rose 1.5% or 54p to 3729p after last night revealing it would not up its bid for Glaxo’s consumer healthcare arm from the £50 billion tabled before Christmas.

But the FTSE 100-listed stock remains short of the level seen before the weekend as pressure on Unilever boss Alan Jope continues ahead of February 10 annual results.

Analysts at UBS said: “We continue to worry that Unilever’s current portfolio faces structural challenges that will prevent the company from consistently meeting its multi-year targets of 3-5% underlying sales growth along with some margin expansion.”

They described the failure to land Glaxo’s consumer healthcare arm as a “double whammy” from a portfolio standpoint, given that it deprives Unilever of owning a large, higher margin business and postpones its own dispo salo flower growth brands and busin es ses.UBSh as a“sell“recommendation on Unilever, with the Swiss bank favouring London-listed Reckitt Benckiser as well as L’Oréal and Nestlé.

Shares in GlaxoSmithKline, which is pressing ahead with an existing plan to spin off the Panadol-to-Sensodyne joint venture, fell 2% or 27.2p to 1639.2p.

The wider FTSE 100 index was 11.46 points lower at 7578.47, despite gains of more than 1% for Hong Kong-based Prudential and luxury goods group Burberry as China delivered an economic boost through a further cut in key lending rates.

A weaker session for oil prices left BP and Royal Dutch Shell lower, while lenders Lloyds Banking Group and NatWest gave up recent gains by falling 3% and 2% respectively.

The FTSE 250 index rose 27.02 points to 22,682.21, with Spirent Communications among the biggest risers after it said operating profits will be slightly ahead of City expectations. Spirentjumped 6% or 14.6p to 245p.