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Goldman, Airbnb, Google: Business news in brief Thursday 30 June 2016

Dixons, Stagecoach results, Lloyds cuts jobs and tourists flock to London to 'buy, buy, buy,' after Brexit result

Ben Chapman
Thursday 30 June 2016 17:23 BST
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Tesla CEO Elon Musk now wants his firm to become the 'Apple store' of solar power
Tesla CEO Elon Musk now wants his firm to become the 'Apple store' of solar power

Dixons Carphone sales jump after Brexit vote

Dixons Carphone, Britain's biggest consumer electricals and mobile phone retailer, said on Wednesday it was confident it would continue to grow its market share even if the vote to leave the European Union leads to an economic downturn.

The company, which trades as Carphone Warehouse, Currys and PC World, has been one of the worst hit stocks following last week's Brexit vote, given its exposure to “big ticket” electrical items and potential vulnerability to any fall off in consumer demand.

But finance chief Humphrey Singer said UK sales had actually increased since Britons voted to quit the bloc.

“In the four days after the referendum sales were up...So the world keeps turning,” he told reporters after Dixons Carphone reported a 17 per cent rise in 2015-16 profit and raised its total dividend by 15 per cent.

Shares in Dixons Carphone were down 1.7 per cent by 0920 GMT, taking their fall over the last week to 21 per cent.

© Bloomberg

The complaint alleged that a bus driver repeatedly failed to stop for Muslim passengers

Stagecoach focuses on UK business as it forecasts Brexit disruption

Ben Chapman

Stagecoach Group has been hit by a 37 per cent fall in pre-tax profits in a tough UK market and warned of more disruption in the wake of Brexit.

chief executive Martin Griffiths announced the sale of its European Megabus retail arm which includes timetabling, marketing and ticket sales owing to “economic, consumer and political uncertainty”.

In full year results released on Wednesday, the group reported revenue growth in the UK bus division has been low forcing it to low fare increases to stimulate demand, said the group.

It said the outlook for UK rail was more challenging than a year ago and overall the industry had slowed.

Revenues were up, hitting £3.9bn, from £3.2bn a year earlier and the firm had made significant investment in new coaches and apps to aid future growth, Griffiths said.

(Justin Sullivan/Getty Images

Pub firm Greene King expects to win market share post-Brexit

Esha Vaish

Brewer Greene King expects to win market share this year, despite the risk that Britain's vote to leave the European Union will deter people from drinking and dining out at a time when pub firms are already fighting for every pound in consumers' pockets.

Chief executive Rooney Anand said the company would be able to lure more customers as over 300 of its pubs were switching to more food-driven formats, currently in vogue, and it had gained popular food brands by acquiring Spirit Pubs last year.

Shares in Greene King, which brews ales such as Old Speckled Hen, rose as much as 5 per cent on Wednesday, after full-year profit beat consensus, but by 11:45 GMT were up just 0.26 per cent. They are down nearly 15 per cent since last week's Brexit vote, amid concerns about potential vulnerability to any fall-off in consumer demand.

The company said like-for-like retail sales rose 2.8 per cent over the first eight weeks of the current financial year, as better weather in May and England's involvement in the European soccer championship drove many to its outlets despite reluctance among consumers to spend before the June 23 referendum.

© Reuters

40-Suzuki. (Getty)

Suzuki Motor appoints scion as CEO to rebuild after testing scandal

Suzuki Motor Corp on Wednesday tapped the son of the company patriarch to become chief executive, keeping management of Japan's fourth-largest automaker with the founding family as it tries to recover from a testing scandal.

The announcement followed an annual shareholders meeting earlier in the day, when the company said it anticipated “major” impact from volatility in currency markets after Britain voted to leave the European Union.

Toshihiro Suzuki, 57, assumes his role after his father, long-serving chairman Osamu, last month said he would step down as CEO to take responsibility for the firm's use of incorrect testing methods to calculate vehicle mileage. Osamu, 86, will remain chairman.

Analysts said that while succession had been a long time coming, having father and son in the top two positions means Osamu would reign as he has for nearly 40 years.

“So long as Osamu-san remains chairman, nothing much is going to change,” Marusan Securities analyst Hiroaki Mochida said.

But Mochida said in the near term, Osamu was the best hope in fighting off competition in emerging markets including India, where Suzuki commands a market share of around 40 per cent.

© Reuters

The Tesla logo on the bonnet of one of the company's electric cars

‘Tesla Solar’ Wants to Be the Apple Store for Electricity

When chief executive Officer Elon Musk came out last week with his $2.86bn plan to acquire the biggest US rooftop solar installer SolarCity Inc., it was almost universally derided as a risky financial move that threatens to derail the electric car maker.

However, Tesla and SolarCity have complementary product announcements coming up that make sense for the timing of a deal. Tesla is about to cut the ribbon on the world’s biggest battery factory and unveil the next version of its Powerwall battery pack.

SolarCity is getting ready to reveal a new line of high-efficiency panels that it developed from its acquisition of California startup Silevo Inc. in 2014. Musk said he wants to put his mark on those panels, which will be produced in the largest US solar panel plant, which is still under construction.

Like Tesla’s cars, SolarCity’s new panels will be made in the US and sold by the company’s thousands of in-house installers.

The firm’s new Buffalo, New York factory will have capacity to produce 10,000 panels a day, the equivalent of 1 gigawatt of industry-leading efficiency panels per year. Musk promises new aesthetics that add value to the home and a product ready by 2017.

© Bloomberg

Lloyds is shedding jobs as part of a long term plan 

Lloyds Cuts 640 Jobs, Closes Branches as Part of 2014 Plan

Richard Partington

Lloyds Banking Group Britain’s largest mortgage lender, will eliminate about 640 jobs and close 23 branches as part of a cost-cutting program that started in October 2014, according to a labour union.

The cuts are part of the plan to pare about 9,000 roles by 2017, the Accord labour union, which represents the bank’s employees, said in an e-mailed statement. The job losses, which take cuts to about 7,300, are in consumer banking, retail wealth management and technology operations. The bank is creating about 115 new jobs as part of the changes.

“We expect to continue to have the biggest branch network in the UK,” Lloyds said in an e-mailed statement confirming the reductions. “The group’s policy is always to use natural turnover and to redeploy people wherever possible”

Chief executive Officer Antonio Horta-Osorio is facing a bigger challenge to boost dividend payments after Britain voted to leave the European Union on Thursday, tipping the country toward a potential recession and policy easing from the Bank of England. With almost all of its assets in Britain, Lloyds may be harder hit than other UK banks with global operations like HSBC, analysts have said.

The internal announcement of the job cuts and branch closures comes a day after the chief executive wrote to reassure staff following the outcome of the referendum, and bought 100,000 Lloyds shares after the stock plunged by 25 per cent in two days. He said the bank’s strategy “remains unchanged” and that the “fundamentals of the group are strong,” according to a memo obtained by Bloomberg.

“We will work to ensure that employees are treated with the dignity and respect that they are entitled to expect at this worrying time,” Ged Nichols, general secretary of the Accord labour union, said in a statement. “We’ll do everything we can to assist them.”

Lloyds is considering deeper cuts beyond the 2014-2017 plan, and could complete the current program ahead of schedule, two people with knowledge of the matter said in April. The bank and other major lenders are pushing to reduce costs as rising competition for loans and record-low interest rates erode earnings.

The UK government still owns a 9.1 per cent stake in the bank after spending £20.5bn ($27.5bn) rescuing it during the financial crisis.

© Bloomberg

British Airways: Brexit will sends tourists flocking to London to ‘buy, buy, buy’

Andrew Roberts and Monami Yui

By voting to leave the European Union, Britons have delivered a potential windfall to tourists eager to snatch up Burberry trenchcoats, Harrods Stilton and Liberty scarves on the cheap.

The outcome of Thursday’s referendum sent the British currency plunging, making the country’s goods and services cheaper for foreign buyers. Consumers reacted immediately:

Searches by Chinese for UK holidays “skyrocketed” on Ctrip.com International travel booking app, the company said, while Chinese news site Phoenix implored visitors to London to “Buy, Buy, Buy.”

A slumping pound is a much-needed shot in the arm for UK luxury companies as the Chinese are the biggest buyers of high-end goods and make most of their purchases overseas. They made 270,000 trips to the UK last year, up 46 per cent, according to tourism website VisitBritain. British Airways said Tuesday that the weaker pound will boost tourist flows to the UK

“I wouldn’t be surprised to see Chinese and Middle Eastern tourists flocking to the UK as their purchasing value has increased,” said Edouard Meylan, chief executive officer of Swiss watchmaker H. Moser & Cie. “People are ready to travel to get a 5 to 10 to 20 per cent discount.”

More visitors to the UK would be a boon for British companies such as Burberry and Mulberry that have struggled amid slowing luxury demand and terror attacks in Europe. The UK is the world’s sixth-largest market for luxury spending, at €15.5bn (£12.75bn). Britain’s gain could come at the expense of retailers in Japan, casinos in Macau and jewelers in Hong Kong.

‘Feeling Good’

Any short-term fall in the pound will affect the number of visitors to London, said Harrods managing director Michael Ward. But those benefits could take time to materialize as Chinese tourists sort out visas and book hotels, according to Ctrip.com.

Some luxury companies may also raise UK prices if the pound’s weakness persists. And investors are bearish on what the EU referendum means for the broader sector, as reflected in sliding stock prices for France’s LVMH and Gucci owner Kering.

“You only purchase luxury products for one reason: if you’re feeling good about yourself,” HSBC analysts said in a note. The EU referendum “will likely put another layer of doubt on a consumer who already has accumulated many.”

Still, a 10 per cent drop in sterling could add as much as £90m to Burberry’s pre-tax earnings, according to MainFirst Bank analyst John Guy. Burberry gets about 10 per cent of its revenue in the UK, and 60 per cent of that comes from tourists, estimates Citigroup analyst Thomas Chauvet.

A surge in tourism to London could hurt Tokyo’s fashionable Ginza shopping district. Chinese visitors to Japan increased 31 per cent last month compared with a year earlier, though visits have slowed recently as the yen has strengthened.

© Bloomberg

TGoogle is being investigated by the EU

Google Search Antitrust Probe Said to Be Boosted by EU

Aoife White

The European Union is bolstering its original antitrust investigation into Google’s search engine as regulators asked the company’s critics to declassify details of meetings and e-mail exchanges related to the probe, according to people familiar with the case.

That’s typically a final step before the EU files an antitrust complaint, meaning Google could have to defend itself against a supplementary statement of objections over its shopping-search service.

Officials frequently ask companies for permission to use confidential information before it sends out a so-called statement of objections, said the two people, who asked not to be named because the case isn’t public.

The EU has expanded its investigations into Google’s business practices since Margrethe Vestager took over as the bloc’s antitrust chief in late 2014. It’s opened probes into Google’s Android mobile operating system, filing a formal complaint in April, and people familiar with the inquiry into advertising services said Monday that the regulator is taking steps toward a statement of objections in that matter, too.

The European Commission declined to comment. Google representatives in Brussels didn’t respond to requests for comment.

A new statement of objections may delay a final EU ruling on search services until next year at the earliest. The EU has been slow to move forward with its first case into Alphabet Inc.’s Google unit. Vestager has said regulators were wading through “truckloads of data” to counter the company’s arguments.

Kate Sutton of UK mapping service Streetmap said in a Facebook post on Monday that the EU had asked her to approve adding a mention of an October 2015 meeting with investigators to their file.

Streetmap is a frequent critic of Google. It lost a separate London lawsuit against the company earlier this year. Two other people said they’d also received similar requests from the EU.

Aside from Google antitrust scrutiny on at least three fronts — search, advertising and Android — the EU is also probing complaints on its use of copyrighted content from publishers. EU technology regulators have hinted at possible rules on legal liability for online platforms like Google.

This adds to lengthy cases on privacy. Google is fighting the French privacy regulator which wants it to remove links to personal information worldwide in the wake of a 2014 court ruling confirming a right to be forgotten on the internet.

© Bloomberg

The new fundraising round puts an eye-watering valuation on the house-sharing firm (John MacDougal/Getty)

Airbnb fundraising means $30bn valuation

Eric Newcomer

Home-sharing company Airbnb is raising money at a $30bn (£22.2bn) valuation, a person familiar with the matter said.

The company recently raised $1bn in debt. This latest round is equity to support new investments and growth opportunities, the person said. Airbnb had previously raised money at a $25.5bn (£18.9bn) valuation. The New York Times reported the company’s new fund-raising push earlier.

Airbnb has grown rapidly since its founding in 2008. It is already the second most-valuable private startup in the San Francisco Bay Area, behind Uber Technologies Inc.’s nearly $68bn (£50.4bn) valuation. Airbnb spends far less money than its competitor, shelling out about $250m over its lifetime, a person familiar with the matter told Bloomberg earlier this month.

Airbnb has faced continued legal and regulatory trouble though. The company filed to sue the city of San Francisco on Monday over rules that would require Airbnb to kick certain hosts off of its home-sharing service.

© Bloomberg

Goldman Sachs bosses explained their role in the BHS sale 

Goldman Sachs exec apologises to BHS parliamentary committee for forgetting $40m loan proposal

Ben Chapman

Michael Sherwood, co-head of Goldman Sachs in Europe, has apologised to a UK parliamentary hearing for not disclosing that the bank had received a request to provide a £40m loan to finance the sale of BHS.

“I missed it — I should have mentioned it to our lawyers,” Mr Sherwood said. “I can only apologise.”

The chair of the business, innovation and skills committee, Ian Wright questioned how he could fail to remember a potential £40m transaction?”

The Goldman Sachs vice-chairman said the request for the loan, which would have been used to fund the sale of BHS for £1 last year, was “around for an incredibly short period of time”.

Earlier this month Goldman gave MPs a log of calls, meetings and emails that had taken place regarding the sale of BHS. On Monday it wrote to the parliamentary inquiry again to disclose two more conversations Sir Philip had with Mr Sherwood.

Sherwood was summoned to explain to MPs his role in the decision to sell BHS to a consortium led by three-times bankrupt Dominic Chappell last year for £1.

After just 13 months before the high street chain collapsed. The failure left a huge hole in the retirement incomes of thousands of former employees and required a £275m rescue by the Pension Protection Fund.

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