GlaxoSmithKline, Asda, IBM: Business news in brief, Thursday 9 February

Brexit boost for pharmaceuticals giant; Walmart aims to battle Aldi and Lidl; Tech company to train 25 million Africans for free

WalMart boss admits it was too slow to respond effectively to the threat posed by the discount supermarkets (iStock)

GlaxoSmithKline reveals earnings boost from Brexit-hit pound

GlaxoSmithKline has revealed a boost to annual earnings from the Brexit-hit pound but warned over a potential hit from looming competition to its blockbuster asthma drug.

The FTSE 100 drugs giant, which makes a significant amount of its earnings overseas, posted a 36 per cent surge in underlying operating profits to £7.8bn for 2016 thanks to the pound’s plunge since the EU referendum.

It said it hopes to make “continued progress” in 2017 but cautioned over “uncertainty” if US regulators allow generic competitors to its asthma drug Advair.

The group said if generic competition to Advair launched in the US in the summer, it could wipe out earnings growth and even leave earnings per share lower.

Outgoing chief executive Sir Andrew Witty said: “Clearly, this year we face some uncertainty as to the level of our earnings performance, given the possibility of substitutable generic competition to Advair in the US.”

But the group is hoping its new asthma medicines will help offset the sales blow.

Presenting his last set of results, Sir Andrew unveiled a 17 per cent surge in annual revenues to £27.8bn and a 21 per cent leap in the fourth quarter.

With the benefit of the weak pound on overseas earnings stripped out, full-year revenues were 6 per cent higher, while operating profits lifted 14 per cent.

PA

Walmart aims to bring struggling Asda back to health

Walmart is throwing its weight as the world’s largest retailer behind its struggling British arm Asda after admitting it was too slow to respond effectively to the threat posed by the discount supermarkets.

Asda thrived for a decade as the country’s cheapest supermarket after it was bought by Walmart in 1999 and remains the third biggest in the country.

But German-owned Aldi and Lidl have steadily cut into Asda’s market share. The two discounters started opening stores in the UK in 1990 and 1994, respectively, but their big breakthrough came when the economic crisis hit in 2008 and more shoppers were prepared to give them a go.

Declining sales show signs of tapering off since Walmart veteran Sean Clarke became Asda’s president and chief executive last July, with a focus on improving the look and feel of the stores as well as enhancing product lines.

Walmart will provide further firepower by ensuring Asda leverages the parent’s purchasing strength in everything from refrigerators to own-brand products and real estate to drive down prices and costs, said Scott Price, chief administrative officer of Walmart International.

“One thing that maybe we would criticise ourselves for is that we didn’t start the repositioning of the business sooner, that we didn’t focus more on the leverage opportunities so that Asda was able to invest more aggressively in price,” Price told Reuters in an interview.

Reuters

Profits surge for Hargreaves Lansdown after Brexit shares frenzy

Financial services group Hargreaves Lansdown has seen half-year profits surge by more than a fifth thanks to share dealing frenzy in the wake of the Brexit vote.

The Bristol-based investment supermarket said it saw client-driven share deals jump by 51 per cent to 1.95 million in the six months after the EU referendum.

It added there was no sign yet of a slowdown in share trading, as the so-called Trump Bump following the US president’s election continues to boost global stock markets.

The share dealing boost helped pre-tax profits leap 21 per cent to £131m in the last six months of 2016, while the group also notched up another record for assets under administration – up 13 per cent since June 30 at £70bn.

But the uncertainty caused by the decision last June to leave the EU also saw nervous investors withdraw cash and invest less, with net new business falling by 16 per cent in its first half, at £2.34bn against £2.77bn a year earlier.

The group said it saw a “partial recovery” in investor confidence after the US presidential election, while it continues to benefit from an ongoing share dealing boom.

PA

IBM to Train 25 million Africans for free to build workforce

IBM is ramping up its digital-skills training programme to accommodate as many as 25 million Africans in the next five years, looking toward building a future workforce on the continent.

The US tech giant plans to make an initial investment of 945m rand ($70m) to roll out the training initiative in South Africa, a country where 31 per cent of 15-to-24 year-olds are unemployed, according to Statistics South Africa. At the same time, the programme will be started at IBM’s offices in Nigeria, Kenya, Morocco and Egypt, enabling an expansion of the project across the rest of the continent.

The move may help bring and keep digital jobs in Africa instead of losing them to India, said Hamilton Ratshefola, IBM’s country manager for South Africa. As many as 50,000 such jobs are currently farmed out from Africa, predominantly to India, Ratshefola said.

The company has worked in partnership with the United Nations in extending the initiative throughout Africa. IBM is also talking to a number of other potential partners, including mobile phone companies, to further scale the programme, Ratshefola said.

Bloomberg

Dunelm slumps as retailer warns of ‘transitional year’

UK home furnishings retailer Dunelm reported a slide in first-half profit and indicated that the rest of the year may not be any easier, sending its shares tumbling.

The company is in “a transitional year”, chief executive John Browett said in a statement on Wednesday. Dunelm shares fell as much as 11 per cent in London to the lowest in more than four years.

Browett’s comment “sounds a bit ominous”, Nick Bubb, an independent retail analyst, said in a note. “When you say that ‘this is a transitional year’, then it usually means that profits will be down.”

The retailer, which has doubled its store numbers since going public just over a decade ago, is experiencing growing pains at a time when sterling’s Brexit-induced drop is causing it to raise prices and online competition is intensifying.

Business in the first half of the year was “slightly softer than normal”, Browett said by phone, adding that conditions remain challenging.

Bloomberg

VW labour bosses accuse brand chief of breaking cost-cutting deal

Volkswagen’s works council has accused top executives of breaching a cost-cutting deal, risking fresh turmoil at the German carmaker as it struggles to overcome its emissions scandal.

In a letter to VW brand chief Herbert Diess, seen by Reuters, the labour leaders said he and personnel boss Karlheinz Blessing had breached the terms of November’s “future pact” by ruling out possible hirings in the first half of 2017 and cutting temporary jobs more quickly and deeply than agreed.

“The management board with its actions is undermining the terms of the future pact,” the labour leaders said in the letter delivered to Diess on Tuesday.

VW is under pressure to make cuts at high-cost operations in Germany to fund a shift to electric cars and mobility services in the wake of its emissions scandal, while still grappling with billions of euros in costs related to that scandal.

Reuters

Denmark joins race to host EU drug agency instead of London after Brexit

The Danish government on Wednesday teamed up with the former head of drug company Novo Nordisk in its campaign to become the new host of the London-based European Medicines Agency (EMA) after Britain's vote to leave the European Union.

“EMA should be situated in a place where there is a strong tradition of putting the patient in focus... We have that in Denmark,” said Foreign Minister Anders Samuelsen in a statement.

Denmark is not the only country courting to EMA and will compete with offers from other EU members including Sweden, Spain, France and Poland.

Denmark is home to a cluster of pharmaceutical and biotech companies, including Novo Nordisk, the world’s largest diabetes drug maker, Lundbeck and Genmab.

The government appointed former Novo Nordisk chief execuutive Lars Rebien Sorensen as a special envoy being tasked with promoting the Danish offer.

Reuters

Barcelona rejects Airbnb plan to limit rentals in fresh clash

Barcelona’s city hall rejected a proposal by Airbnb to limit the number of home rentals in the city, setting off a fresh clash between the platform and local authorities vowing to clamp down on unregulated tourism.

The city hall said the plan to limit home listings in the central Barcelona area of Ciutat Vella doesn’t go far in enough in tackling the use of unlicensed rentals for tourists. While Airbnb hoped the new limits would ease tensions after a year marred by sanctions and public backlash from locals complaining about crowds in central Barcelona, the city hall said Airbnb must stop advertising all properties without a licence while adding that it would keep sanctions against the home-rental platform unchanged.

“Airbnb’s response is a joke,” said Agusti Colom, Barcelona’s councillor for companies and tourism, at a press conference on Tuesday after the plan was made public. “The law is clear. You can’t advertise tourist apartments on these platforms if they don’t have a licence number, so what Airbnb needs to do is to remove them.”

Bloomberg

EU fines 3 battery recycling companies for forming cartel

The European Union has fined three battery recycling companies a combined $72m (£57.5m) for forming a cartel that artificially kept the purchasing price for used car batteries low.

EU Antitrust chief Margrethe Vestager said Wednesday the companies were purposely “reducing competition in this essential link of the recycling chain”.

The US company Johnson Controls received full immunity because it revealed the cartel to the EU, but British firm Eco-Bat Technologies was ordered to pay €32.7m (£28m) and Recyclex from France €2.7m. Campine of Belgium has to pay €8.1m.

The EU recycles practically all of its car batteries. By keeping the purchasing price low, the companies hurt used battery sellers, mainly small and medium-sized companies.

AP