Latest / What the Flux / IDP Education plummets 48% | Treasury Wine's major hiccup | McKinsey cuts 10% of its workforce

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IDP Education plummets 48% | Treasury Wine's major hiccup | McKinsey cuts 10% of its workforce · What the Flux

• 0:05
  Speaker 1: This is what the flax. I'm Brett and I'm Justin
• 0:07
  Speaker 1: and it's Wednesday, the fourth of June.
• 0:09
  Speaker 2: Douzzy boy. It's good news for two point six million Australians.
• 0:12
  Speaker 2: The Fair Work Commission announced the three and a half
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  Speaker 2: percent increase to the national minimum wage, meaning the national
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• 0:21
  Speaker 2: per hour or forty seven, six hundred and twenty seven
• 0:25
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• 0:27
  Speaker 1: Very good boost beann in line with inflation. Foxham. One
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• 0:58
  Speaker 2: Three mouth watering stories. Today juzzy boy, let's do it
• 1:01
  Speaker 2: for our first. IDP Education has warned investors of a
• 1:05
  Speaker 2: major earnings downgrade, which saw its share priced humble forty
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  Speaker 2: eight percent in a single day.
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  Speaker 1: At a lazy seventy five percent slide this year as well.
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  Speaker 1: Be Man, so tell me more, okay so.
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  Speaker 2: IDP Education was founded in nineteen sixty nine and helps
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  Speaker 2: place international students in universities and runs English language testing.
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  Speaker 1: Be Man back in two thousand and six seek quite
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  Speaker 1: a fifty percent share in IDP, but sold a share
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  Speaker 1: when IDP listed on the ASEX in twenty fifteen and.
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  Speaker 2: Probably is not regretting that decision at the moment.
• 1:32
  Speaker 1: But while international students have been a hot sector for
• 1:34
  Speaker 1: the past decade, it certainly slowed down lately.
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  Speaker 2: Juzzy Boy IDP has announced its earnings will drop by
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  Speaker 2: thirty percent in FY twenty five, and.
• 1:42
  Speaker 1: The reason stricter migration policies across some key markets like Canada,
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  Speaker 1: the UK and the US.
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  Speaker 2: In fact, student placement volumes are expected to slump by
• 1:51
  Speaker 2: about twenty eight to thirty percent, and while clearly this
• 1:54
  Speaker 2: came as a surprise to some investors. It seems like
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  Speaker 2: other investors had kind of predicted this.
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  Speaker 1: Yeah, it was actually the sixth most shorted company on
• 2:01
  Speaker 1: the ASEX, with nearly twelve percent of its shares sold short.
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  Speaker 2: And those short sellers are laughing all the way to
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  Speaker 2: the Education Bank Canal.
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  Speaker 1: Yep. So what is the key learning here?
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  Speaker 2: Short Selling is when an investor borrows a stock, sells
• 2:14
  Speaker 2: it on the market, and hopes to buy it back
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  Speaker 2: later at a lower price.
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  Speaker 1: And then they pocket the difference.
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  Speaker 2: Basically, you're betting that the company's going to a lot.
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  Speaker 1: And they man. Shorting can be pretty profitable when a
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  Speaker 1: business stumbles, but it is pretty risky too.
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  Speaker 2: Yeah. The upside is cap because the most of stock
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  Speaker 2: can fall is one hundred percent, but the downside.
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  Speaker 1: Is unlimited if the share price continues to rise and
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  Speaker 1: rise and rise.
• 2:36
  Speaker 2: That's what made the game Stop saga. In twenty twenty one,
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  Speaker 2: such a popcorn moment. GameStop was heavily shortened by a
• 2:42
  Speaker 2: hedgehunt called Melvin Capital. Reddit uses pump the stock so
• 2:45
  Speaker 2: high that it forced Melvin Capital to buy back shares
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  Speaker 2: at enormous losses just to cover their position.
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  Speaker 1: Melvin Capital lost six point eight billion US dollars as
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  Speaker 1: part of the short squeeze and then it eventually shut down.
• 2:55
  Speaker 1: But do it.
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  Speaker 2: In idp's case, the short sellers were correct.
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  Speaker 1: Yeah, migration policy ship were a fundamental risk to idp's business,
• 3:02
  Speaker 1: and when those risks materialized, the stock plummeted.
• 3:06
  Speaker 2: For our second story, Treasury Wine Estates, the Australian wine
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  Speaker 2: maker behind Penfolds and others, has just suffered a major
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  Speaker 2: hiccup in its big band bowld US strategy.
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  Speaker 1: Talk about putting a cork in its US ambitions, b Man,
• 3:20
  Speaker 1: what's going on here?
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  Speaker 2: Okay? So, Treasury Wine Estates was spun off from Fosters
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  Speaker 2: in twenty eleven and has since grown into one of
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  Speaker 2: the world's biggest wine makers.
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  Speaker 1: Owned some of the big wine brands across the world
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  Speaker 1: like Squealing Pig and Nineteen Crimes and Jack.
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  Speaker 2: But Jazzy Boy. You can't leave out its cash Cow
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  Speaker 2: and Golden Goose Penfolds, but be Man.
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  Speaker 1: It went even further in the premium market. Back in
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  Speaker 1: twenty twenty three, Treasury acquired the US wine group Dow
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  Speaker 1: Vineyards for one point six billion dollars, now be Man
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  Speaker 1: Treasury's key distributor in California, the biggest wine state in
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  Speaker 1: the US, is pulling out completely.
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  Speaker 2: Next minute, Treasury downgraded its FY twenty five earnings forecast
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  Speaker 2: by ten million bucks.
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  Speaker 1: So now Treasury is scrambling to find a new route
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  Speaker 1: to market to distribute in the US, which is one
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  Speaker 1: of its key focuses. That's interesting, So what's the key
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  Speaker 1: learning here? In the world of US wine. Having a
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  Speaker 1: great product isn't enough because you need someone to actually
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  Speaker 1: sell it.
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  Speaker 2: This is known as the route to market, and.
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  Speaker 1: It's critical to getting your product into customers hands. In
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  Speaker 1: the US, you.
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  Speaker 2: See Juzy Boy. In the US has a pretty unique
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  Speaker 2: three tier alcohol system.
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  Speaker 1: Under this system, alcohol producers like Treasury wine can't sell
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  Speaker 1: directly to retailers.
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  Speaker 2: Instead, they need to go through a wholesaler or a distributor,
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  Speaker 2: who then sells to stores, bars and restaurants.
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  Speaker 1: So when a key distributor pulls out of a market,
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  Speaker 1: it creates a huge operational and revenue risk.
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  Speaker 2: In fact, that single distributor accounted for twenty five percent
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  Speaker 2: of Treasuries US sales.
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  Speaker 1: And ten percent of its global sales.
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  Speaker 2: So while in Australia Treasury can send a few cases
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  Speaker 2: to Dan Murphy's, but in the US, quality distributor is
• 4:45
  Speaker 2: basically your access to the market.
• 4:47
  Speaker 1: For our third and final story, McKinsey, one of the
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  Speaker 1: global leaders in management consulting, has cut its workforce by
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  Speaker 1: over ten percent after letting AI tools take the wheel.
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  Speaker 2: Junior consultants are really coppying the hit here, Juzy boy,
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  Speaker 2: tell me more so.
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  Speaker 1: McKinsey's one of the world's most powerful consulting firms.
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  Speaker 2: It advises many of the top companies and big governments
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  Speaker 2: across the world and loves to include buzzwords. All buzzwords
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  Speaker 2: under the sun.
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  Speaker 1: We're talking digital strategies, transformation projects, synergy levers.
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  Speaker 2: But now McKinsey has boiled the ocean to find the
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  Speaker 2: low hanging fruit.
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  Speaker 1: And it's cut around five thousand staff since late twenty
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  Speaker 1: twenty two, and.
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  Speaker 2: This is one of the biggest workforce reductions in its
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  Speaker 2: one hundred year history.
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  Speaker 1: The reason b man it's new employee, Lily.
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  Speaker 2: Yep. It's developed an in house AI assistant named Lily,
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  Speaker 2: who has taken over tasks that junior burgers used to do.
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  Speaker 1: We're talking generating slides, drafting reports, and a heap of
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  Speaker 1: other tasks that wants entry level jobs and unlike the staff,
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  Speaker 1: Lily ain't pushing for a promotion, and the biggest cohort
• 5:45
  Speaker 1: suffering that would be entry level employees. So what is
• 5:49
  Speaker 1: the key learning here? AI could replace grad jobs in
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  Speaker 1: major consulting houses. There's a classic path from analysts to
• 5:55
  Speaker 1: partner and it relies on a very deliberate apprenticeship model.
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  Speaker 2: You start doing research, building decks and triple checking data
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  Speaker 2: at two am.
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  Speaker 1: And over time you take on more strategic responsibility and say,
• 6:06
  Speaker 1: let's unpack that in board rooms.
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  Speaker 2: But with AI taking over a lot of that grunt work,
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  Speaker 2: that entry level training ground is vanishing. Ye.
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  Speaker 1: On the one hand, new hives can skip to more
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  Speaker 1: strategic or creative.
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  Speaker 2: Work, but on the other hand, they might miss out
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  Speaker 2: on the basics or not even get a job in
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  Speaker 2: the first place.
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  Speaker 1: In fact, the Man A McKinsey report estimates that between
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  Speaker 1: four hundred million and eight hundred million jobs worldwide could
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  Speaker 1: be displaced by AI by twenty thirty.
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  Speaker 2: The irony is certainly not lost on us here.
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  Speaker 1: Man McKinsey might just be consulting its way out of
• 6:35
  Speaker 1: its own junior roles. Sam, we're giving away five hundred
• 6:39
  Speaker 1: dollars in the flex Academy this month to the top
• 6:41
  Speaker 1: three competitors. It's all in our academy what even is
• 6:44
  Speaker 1: in ETF? So if you're looking to level up on
• 6:46
  Speaker 1: understanding ETFs, your investment strategy, or want to win some
• 6:49
  Speaker 1: big prizes, make sure to check out the Academy this month.
• 6:51
  Speaker 2: Thanks for listening, and we'll see you on Friday.