Latest / What the Flux / Woolies' profit struggles | Pointsbet major takeover bet | EY cuts jobs

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Woolies' profit struggles | Pointsbet major takeover bet | EY cuts jobs · What the Flux

• 0:05
  Speaker 1: This is what the Flux. I'm Brett and I'm just
• 0:07
  Speaker 1: it and it's Friday, the twenty eighth February, Fluxpam.
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• 1:02
  Speaker 2: Three cost conscious stories today, Jazzi boy, let's do it
• 1:05
  Speaker 2: for our first.
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  Speaker 3: Woolworths has suffered a twenty percent decline in its first.
• 1:10
  Speaker 2: Half a net profit after it struggled with strikes and
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  Speaker 2: empty shelves late last year.
• 1:15
  Speaker 1: Well well, well, looks like Coles might be popping the
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  Speaker 1: champagne this week, b man, So tell me what's going on.
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  Speaker 3: Jazy boy.
• 1:20
  Speaker 2: You might know Woolworth's as the largest supermarket across Australia with.
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  Speaker 1: More than thirty seven percent of total supermarket market share,
• 1:26
  Speaker 1: but it's also the owner of Big w pet Stock,
• 1:29
  Speaker 1: My deal man, Woolworth's a supermarket is usually the golden
• 1:33
  Speaker 1: goose laying the golden eggs, which have not been on
• 1:35
  Speaker 1: the shelves lately.
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  Speaker 3: But it wasn't the case in the last half YEA.
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  Speaker 1: In late November, Woolies is warehouse workers went on a
• 1:41
  Speaker 1: three week strike over its pay and conditions.
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  Speaker 2: Do you remember no toilet paper on shelves, no pasta,
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  Speaker 2: limited fruit and veg.
• 1:47
  Speaker 1: It was feeling like COVID all over again. I know.
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  Speaker 2: Now Woolies has worn that its first half net profit
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  Speaker 2: dropped more than twenty percent.
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  Speaker 1: Now Man, A large part of that profit drop is
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  Speaker 1: because of the worker strike, where it's struggled to get
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  Speaker 1: products on sites else.
• 2:00
  Speaker 3: But Jazzy Boy.
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  Speaker 2: Even without the strike, Woolies earnings would have declined five percent.
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  Speaker 2: So now Woolworth's will begin a cost cutting program across
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  Speaker 2: the business where it plans to cut four hundred million
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  Speaker 2: dollars in expenses.
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  Speaker 3: All the equivalent of eight hundred thousand Magi two minute noodles.
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  Speaker 1: And apart from the strike, the main reason for the
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  Speaker 1: loss was a shift in consumer behavior. So long, farewell
• 2:21
  Speaker 1: consumer inertia.
• 2:22
  Speaker 3: So what is the key learning here?
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  Speaker 1: Consumer inertia is when shoppers stick to the same soupmarket
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  Speaker 1: out of habit, or convenience or loyalty.
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  Speaker 3: Even if better deals are available elsewhere.
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  Speaker 1: Yeah, in Australia this has helped Coals and Will dominate
• 2:35
  Speaker 1: for so long, and it's given them the power to
• 2:37
  Speaker 1: keep prices high without much competition. In fact, be Man
• 2:40
  Speaker 1: research from last year shows that eighty one percent of
• 2:42
  Speaker 1: Aussie shoppers spend most of their grocery budget at just
• 2:45
  Speaker 1: one supermarket according to E sixty one.
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  Speaker 3: And over two thirds are staying loyal to Coals or
• 2:49
  Speaker 3: Woolies every month.
• 2:50
  Speaker 1: But be Man Woolworth's latest results show that maybe this
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  Speaker 1: is starting to change.
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  Speaker 2: Willy CEO mentioned that more customers are cross shopping to
• 2:57
  Speaker 2: find the best deal, mainly due to cost of living stresses,
• 3:00
  Speaker 2: and this shift may mean shoppers are breaking their usual
• 3:04
  Speaker 2: habits and exploring other retailers.
• 3:06
  Speaker 1: For our second story, points Bet, one of the largest
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  Speaker 1: bookmakers in Australia, has agreed to sell out to aid
• 3:11
  Speaker 1: to a japan based rival for three hundred and sixty
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  Speaker 1: million bacarinis. But it is not without its controversy.
• 3:17
  Speaker 2: Is anything not controversial in the betting industry. Juzzy Boy
• 3:20
  Speaker 2: go on here.
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  Speaker 1: Okay so points Bett is an Australian online book makeup
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  Speaker 1: that launched in Melbourne back in twenty seventeen.
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  Speaker 2: It made a name for itself as it raised nearly
• 3:27
  Speaker 2: five hundred million bucks to dominate betting overseas.
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  Speaker 1: Yeah, it became one of the first bookmakers to enter
• 3:32
  Speaker 1: the US market when betting was just becoming legalized across
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  Speaker 1: different states.
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  Speaker 2: But in twenty twenty three, Juzzy Boy Points Bett sold
• 3:39
  Speaker 2: its US division to the merch giant Fanatics for two
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  Speaker 2: hundred and twenty five million bucks. It was losing between
• 3:44
  Speaker 2: fifteen and thirty million dollars per quarter before selling the
• 3:47
  Speaker 2: US business, but it promised plans to double down on
• 3:49
  Speaker 2: the Ossie and Canadian markets.
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  Speaker 1: Next minute, point Betts announced plans to sell the Australian
• 3:54
  Speaker 1: and Canadian businesses for three hundred and fifty million bucks.
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  Speaker 3: Brotto, who are they selling to?
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  Speaker 1: It's a Japanese based book maker called it a mixie
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  Speaker 1: who's planning to expand into Australia.
• 4:02
  Speaker 2: But not so fast, does it, boy, Because before you
• 4:05
  Speaker 2: think this is all hunky dorrie. Another gaming operator called
• 4:08
  Speaker 2: the Blue Bet also made an offer.
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  Speaker 1: And it claims points Bet refused to even engage in
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  Speaker 1: its offer that was valued at more than three hundred
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  Speaker 1: and sixty million dollars, So a little.
• 4:17
  Speaker 3: Bit more very interesting. So what is the key learning here?
• 4:19
  Speaker 1: In merger and acquisitions? Shareholder value is king.
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  Speaker 3: And Jazzy Boy.
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  Speaker 2: Board directors always need to act in the best interests
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  Speaker 2: of their shareholders.
• 4:26
  Speaker 1: But Ben Man, it's not always about who throws the
• 4:28
  Speaker 1: biggest pile of cash on the table. Sometimes other strategic
• 4:31
  Speaker 1: factors come into play.
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  Speaker 3: In this case, Mixey offered points Bets board and shareholders
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  Speaker 3: three hundred and fifty mil in cash money today.
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  Speaker 1: That's cold, hard cash in the bank, which reduces risk
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  Speaker 1: and provides immediate cash for shareholders.
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  Speaker 2: On the other hand, blue Bet offered points bet a
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  Speaker 2: mix of two sixty million cash and up to a
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  Speaker 2: one twenty mil in blue Bet shares and the man.
• 4:50
  Speaker 1: This type of deal is known as a cash and
• 4:52
  Speaker 1: script offer. Shareholders receive a combination of cash and shares
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  Speaker 1: in the acquiring company.
• 4:56
  Speaker 2: But here is the kicker. The value of those blue
• 4:58
  Speaker 2: Bet shares is not guaranteed.
• 5:00
  Speaker 1: It all depends on how Blue Beet performs in the future.
• 5:02
  Speaker 2: And this is a good example of how M and
• 5:04
  Speaker 2: A decisions aren't only about the headline number. For our
• 5:07
  Speaker 2: third and final story, EY Australia has announced it will
• 5:11
  Speaker 2: be cutting one hundred jobs from its advisory division after.
• 5:14
  Speaker 3: A pullback in client spending.
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  Speaker 1: Ewa's advisory division facing a little profit and loss of
• 5:19
  Speaker 1: its own b man Sotel me more well.
• 5:21
  Speaker 2: EY, which used to be known as Ernst and Young,
• 5:23
  Speaker 2: is one of the global Big four professional service giants.
• 5:26
  Speaker 1: It does everything from accounting to tax, to consulting and
• 5:29
  Speaker 1: even dabbles in a little bit of Law.
• 5:30
  Speaker 2: And techka the Swiss Army Knife of the corporate world.
• 5:34
  Speaker 1: It's the third largest globally based on revenue, and the
• 5:37
  Speaker 1: second largest professional services firm in Australia thanks to Peter
• 5:40
  Speaker 1: we Sez Big four Oh.
• 5:41
  Speaker 3: But Juzzi Boy. Even the mighty and powerful professional services
• 5:44
  Speaker 3: firms are feeling the pain now.
• 5:46
  Speaker 1: Ey's announced it will cut one hundred staff from its
• 5:48
  Speaker 1: consulting art because of a slowdown in the advisory market.
• 5:51
  Speaker 2: And while these one hundred jobs are about one percent
• 5:53
  Speaker 2: of its Australian shop, it also cut five hundred jobs
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  Speaker 2: last year as well.
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  Speaker 1: One of the biggest challenges for Ey and co oh
• 6:00
  Speaker 1: is the pullback of government spending on consulting services.
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  Speaker 3: So what is the key learning right here?
• 6:04
  Speaker 1: When governments bring work in house, consultants fill the pay
• 6:08
  Speaker 1: in professional services.
• 6:09
  Speaker 3: Government contracts are often a bit of a cash.
• 6:12
  Speaker 1: Cow there, lucrative, they're often long term and they've been
• 6:14
  Speaker 1: pretty reliable in the past.
• 6:16
  Speaker 3: But when the tide turns, it can devastate the industry.
• 6:19
  Speaker 1: And that's exactly what's happened over the past few years.
• 6:21
  Speaker 2: Get this one, government spending on consulting services dropped by
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  Speaker 2: six hundred and twenty four million bucks in FY twenty
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  Speaker 2: four alone.
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  Speaker 1: Or eighty four million dollars less each month compared to
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  Speaker 1: two years ago.
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  Speaker 2: And Jazi boy, it's a nice little reminder that a
• 6:34
  Speaker 2: heavy reliance on government contracts can be a double edged sort.
• 6:37
  Speaker 1: Great in boom times, but brutal when the policy change it. Yet,
• 6:41
  Speaker 1: I was spending over fifty bucks on different streaming services
• 6:44
  Speaker 1: in the last month. I use a Flux Subscription track
• 6:46
  Speaker 1: app to see what I was spending on and bang,
• 6:48
  Speaker 1: I cut Apple TV. That for us, We've got it
• 6:51
  Speaker 1: all covered in the Flux Subscription track up they shut it,
• 6:53
  Speaker 1: download the app and check it out.
• 6:54
  Speaker 3: Thanks for listening, and we'll see you on Monday.