GLAXOSMITHKLINE and AstraZeneca often find themselves in the same boat: as the London representatives of Big Pharma, it is often hard not to mention them in the same breath. Yesterday they looked joined at the hip, thanks to the fact that they both released third-quarter results.

The issue that undermined both shares was uncertainty. Drug development is an expensive and time-consuming business with no guarantees of eventual success. Although Astra’s bad news, involving cancellation of a drug, was more serious than GSK’s issue, which involved mere delays, both underlined the uncertainties inherent in the process.

It is hard to avoid concluding that some of the fall in the price of GSK shares came out of fear that it may suffer a similar fate to Astra some time in the future. Not only was GSK’s disappointment less serious, it also had the perfect answer to anyone who wanted to question its reliability: cash.

GSK said yesterday that it would double the size of its share buyback programme. Over the past four years it has been buying back at the rate of about £1 billion a year, yet in the next three years it expects to invest £6 billion, reducing the number of shares in issue. At the same time, GSK said that it was accelerating the rate of increases in the ordinary dividend. This year shareholders will get 48p per share where they got 44p last time. Two years ago GSK shareholders saw the divi rise 2.5 per cent. Last year it was lifted 4.5 per cent and this year it will go up by 9 per cent.

In buybacks and dividends together, GSK shareholders will receive about £4.5 billion over the coming year. That equates to considerable compensation for the risks investors shoulder. Astra is returning capital to shareholders, too: without the cash Astra shares may not have performed as well as they have. But GSK, rather than Astra, seems to offer the lesser risks and greater rewards at present.

In some ways the share price falls of yesterday serve GSK and Astra well because they demonstrate the size of the risks run by investors who provide capital backing for drug development. Critics could maintain that GSK’s buyback and dividend largesse comes as a result of ill-gotten gains from profiteering. That said, investors will be happier if shares bounce sooner not later. GSK, whose shares give a prospective dividend yield of 3.3 per cent, is most likely to oblige. Buy.

Cadbury

SALMONELLA? What salmonella? Not only did Cadbury Schweppes carefully avoid using the “s” word in its trading statement yesterday, it also managed to pin blame for weakening of UK sales on the weather rather than on the food safety scare it suffered last summer.

The sweets and soft drinks group did acknowledge that UK consumer confidence in the Cadbury brand was dented as a result of a recall of product. But confidence, it says, has returned to levels very near the “pre-recall” levels. No, it was the unusually hot summer air temperatures that undermined summer sales.

It appears that Cadbury was not alone in seeing consumer demand for chocolate melt in the heatwave. Competitors struggled in similar fashion to Cadbury although, as one of the leaders in the UK, Cadbury took a large share of the pain. Most chocolate lovers will also agree that warm confection is unappealing and so it stands to reason that the warm weather would have had a negative impact on business.

Cadbury asserts that comparisons with 2003 suggest it was the weather, not the salmonella. In 2003 sales suffered in similar fashion to this year, according to Cadbury, and since there was no food scare in 2003 it says it is safe to assume that it was weather that undermined sales this year.

Fortunately, the UK sweets business provides only about 15 per cent of group sales. Plenty of people discovered that chocolate can be kept cold in fridges and that air conditioning keeps temperatures down in office blocks. So, not only was the bad news confined to a relatively small part of the empire, but the sales decline was a relatively modest 5 per cent.

Cadbury’s is not awash with growth opportunities, however. Its goal is to raise near-term sales by 3 to 5 per cent and the UK weakness is enough to mean that it will come in towards the lower end of that range. A strategy update due next week may enliven enthusiasm for the stock but, as things stand, the shares, which have underperformed the FTSE all-share average by 16 per cent over the past 12 months, may continue to disappoint. Sell.

Halma

HALMA investors are enjoying life under the newish leadership of Andrew Williams, the chief executive. That is not to say Halma has anything but a respectable history of delivering decent returns to shareholders. It is just that the new man appears to be freshening things.

Halma is not one of the best-known London-listed companies but it is sizeable. At yesterday’s closing price of 205¼p the electrical engineer had a market capitalisation of £760 million. In smoke detectors, fire alarms and sensors designed to prevent accidents in industrial workplaces, Halma also has big market shares. Although it has no widely recognisable brand itself, its kit is in up to 50 per cent of many of the product niches that it occupies.

Updating investors yesterday ahead of interim results due for posting on December 5, Halma said it was trading at the top of the board’s expectations. Organic growth is occurring in all three of the group’s operating subsidiaries and acquisitions are contributing some additional spice. Shares are at a record high but are on course to sustain the run. Buy.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive