Latest / What the Flux / Xero takes on AI by teaming up with AI | Diageo steps up to the crease for billions | David Jones' red flag

Transcript

Xero takes on AI by teaming up with AI | Diageo steps up to the crease for billions | David Jones' red flag · What the Flux

• 0:05
  Speaker 1: This is what the Flux.
• 0:06
  Speaker 2: I'm Brett and I'm justin and it's Monday, the thirtieth
• 0:09
  Speaker 2: of March.
• 0:09
  Speaker 1: Doze boy. April first may be April Fool's Day, but
• 0:12
  Speaker 1: private health insurance are not joking with their price increases
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  Speaker 1: on it this one. On April first, average premiums across
• 0:17
  Speaker 1: the industry will increase by four point four percent, and
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  Speaker 1: this is the biggest annual hike in almost a decade.
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  Speaker 2: Honestly, I'd justify it these days. But time as we
• 0:26
  Speaker 2: get to the end of the month, now is the
• 0:27
  Speaker 2: perfect time to see all the subscriptions that you've been
• 0:30
  Speaker 2: paying for this month. In the Flux Subscription Tracker, we
• 0:32
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• 0:35
  Speaker 2: you the ones that you might not have been using
• 0:37
  Speaker 2: so you can cancel and save some more laughs. If
• 0:39
  Speaker 2: you want to save some money to kick off April,
• 0:41
  Speaker 2: make sure to download the Flux app and check out
• 0:42
  Speaker 2: the subscription tracker.
• 0:43
  Speaker 1: Three gigantic stories Today, Josy Boy Let's do it for
• 0:46
  Speaker 1: our first zero has announced a new partnership with Anthropic
• 0:50
  Speaker 1: to bring AI into accounting and prove that its business
• 0:53
  Speaker 1: won't be eaten by AI looks.
• 0:55
  Speaker 2: Like accounting might get a bit of a chat pop
• 0:57
  Speaker 2: personality upgrade, b man, So tell me more.
• 0:59
  Speaker 1: To Zero is the New Zealand founded accounting software company
• 1:02
  Speaker 1: with over four million subscribers globally.
• 1:05
  Speaker 2: Basically, it's the home of small business owners trying to
• 1:07
  Speaker 2: make sense of invoices and receipts.
• 1:09
  Speaker 1: But over the past year, Zero investors have been sweating
• 1:12
  Speaker 1: harder than a last minute tax return.
• 1:15
  Speaker 2: Because it's been growing fear that AI could replace accounting
• 1:18
  Speaker 2: software all together.
• 1:19
  Speaker 1: And since that fear crept in, Zero share price is
• 1:22
  Speaker 1: down around thirty five percent from its peak.
• 1:24
  Speaker 2: And they man, Zero's been talking a big game, working
• 1:26
  Speaker 2: on its own AI tool called Jacks. Well that's still
• 1:29
  Speaker 2: cooking in the background. It's made another AI move yeap.
• 1:32
  Speaker 1: Zero has announced a multi year partnership with Anthropic to
• 1:35
  Speaker 1: put its claud model directly inside Zero's platform.
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  Speaker 2: So what does that actually mean?
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  Speaker 1: Zero users will be able to ask Claude questions about
• 1:42
  Speaker 1: their financials like.
• 1:43
  Speaker 2: How's my profit margin tracking here on ear?
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  Speaker 1: Or why have my entertainment expenses increased from last year?
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  Speaker 2: And they man, it'll pull it out it from Zero
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  Speaker 2: and report back to you in the Claude Chapot.
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  Speaker 1: So this move is zero saying loud and clear, we're
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  Speaker 1: not getting replaced by AI, we are becoming AI.
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  Speaker 2: Even then if it's someone else's AI doing the heavy lifting, yes,
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  Speaker 2: So what is the key learning here? AI is forcing
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  Speaker 2: a rethink of what software actually is and where the
• 2:08
  Speaker 2: value sits.
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  Speaker 1: There's a growing fear that large language models like chat,
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  Speaker 1: chipts and Claude could eat software.
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  Speaker 2: But if an AI tool can generate reports and reconcile
• 2:17
  Speaker 2: accounts and analyze data, then the value is actually shifting
• 2:20
  Speaker 2: from recording the numbers to actually explaining the numbers.
• 2:23
  Speaker 1: So SaaS companies are trying to respond as soon as possible.
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  Speaker 2: First, a lot of them are integrating with external AI
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  Speaker 2: models into their products.
• 2:29
  Speaker 1: That gets them to market quickly and instantly improves their
• 2:33
  Speaker 1: functionality overall.
• 2:34
  Speaker 2: And like zero b Man, we've seen salesforce through.
• 2:36
  Speaker 1: This, we've seen data bricks. They've done this with a
• 2:39
  Speaker 1: one hundred million dollar partnership with Anthropic.
• 2:41
  Speaker 2: And Snowflake's done it with a two hundred million dollar
• 2:43
  Speaker 2: partnership with Anthropic as well.
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  Speaker 1: Then these companies build their own internal AI tools with
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  Speaker 1: their own data and workflows.
• 2:48
  Speaker 2: It takes a lot longer, but creates a bit more defensibility.
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  Speaker 1: But here's the tension, Juzzy boy. If the external models
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  Speaker 1: keep improving faster, which they are, then the internal tools
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  Speaker 1: risk becoming a second best insight their own products.
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  Speaker 2: So be man. While zero is adding AI to stay ahead,
• 3:03
  Speaker 2: it didn't really move their share price at all.
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  Speaker 1: For our second story, Indian Premier League cricket team, the
• 3:09
  Speaker 1: Royal Challenges ben Galaru, has sold to a private equity
• 3:12
  Speaker 1: giant for nearly one point eight billion US dollars.
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  Speaker 2: Cricket teams aren't just batting and bowling anymore, be Man,
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  Speaker 2: they are global media assets. So tell me more.
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  Speaker 1: All right, Well, I'll take you back to two thousand
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  Speaker 1: and eight, when you were still eating vitaweeds every single
• 3:22
  Speaker 1: day and flow Rider was topping the charts. That was
• 3:25
  Speaker 1: when the Indian Premier League launched, and.
• 3:26
  Speaker 2: In less than two decades, the IPL has gone from
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  Speaker 2: a domestic tournament to the richest cricket league in the world.
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  Speaker 1: One of the teams, the Royal Challenges Bengalaru, was purchased
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  Speaker 1: for one hundred and eleven million US dollars by an
• 3:37
  Speaker 1: Indian alcoholic beverage company called United Spirits.
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  Speaker 2: But by twenty fourteen, Diagio, the Global beverage company, acquired
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  Speaker 2: a near fifty six percent steak in United Spirits and
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  Speaker 2: rather than sell the cricket team they owned it decided
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  Speaker 2: to hold on.
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  Speaker 1: But earlier this year, Diagio said that the cricket team
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  Speaker 1: was a non core asset to their business and put
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  Speaker 1: it up for sale.
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  Speaker 2: And now be Man. Private equity giant Blackstone, alongside other investors,
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  Speaker 2: have stepped up to the increase, acquiring the Royal Challenges
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  Speaker 2: that just stunned out one point eight billion US dollars.
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  Speaker 1: And Josey Boy Diagio's near fifty six percent stake would
• 4:07
  Speaker 1: mean they receive a payout of just over one billion
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  Speaker 1: US dollars.
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  Speaker 2: So it seems like holding on to the team for
• 4:12
  Speaker 2: the last ten years was a pretty good move.
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  Speaker 1: Cricket teams are no longer just a group of sports
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  Speaker 1: people their genuine assets.
• 4:18
  Speaker 2: So what is the key learning here?
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  Speaker 1: Private equity is not just buying professional sports teams. They're
• 4:23
  Speaker 1: buying money machines with uniform.
• 4:24
  Speaker 2: You see, be Man. Modern sports leagues have evolved into
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  Speaker 2: revenue generating machines and obviously investors are all over it.
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  Speaker 2: You've got long term broadcast deals locked in for billions.
• 4:34
  Speaker 1: Six billion US dollars in Indian Premier League media rights
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  Speaker 1: to be exac.
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  Speaker 2: You've got sponsorship and advertising revenue with massive audiences over
• 4:41
  Speaker 2: one billion total viewers during the twenty twenty five IPL season,
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  Speaker 2: and you've also got a heap of merchandising and licensing
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  Speaker 2: opportunities too.
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  Speaker 1: And with revenue sharing in the league, it's created a
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  Speaker 1: pretty predictable income stream for the franchises.
• 4:53
  Speaker 2: And that predictability is gold for private equity. For our
• 4:56
  Speaker 2: third and final story, David Jones has been delaying payments
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  Speaker 2: to some suppliers, giving itself up to sixty days after
• 5:02
  Speaker 2: a sale to actually hand over the cash, and suppliers
• 5:05
  Speaker 2: are not happy handed over DJs. What's going on here? Okay?
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  Speaker 2: So David Jones is one of the oldest department stores
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  Speaker 2: in Australia, founded nearly two hundred.
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  Speaker 1: Years ago, and we know that DJs has been on
• 5:14
  Speaker 1: a journey over the past decade.
• 5:16
  Speaker 2: It was acquired by Woolworth South Africa for two point
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  Speaker 2: one billion dollars back in twenty fourteen.
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  Speaker 1: And after years of losses, it was sold to a
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  Speaker 1: private equity player, Anchorage Capital, for just ninety two and
• 5:26
  Speaker 1: a half million bucks in twenty twenty.
• 5:27
  Speaker 2: Three and then man. While DJ's is supposedly performing a
• 5:30
  Speaker 2: little better now, it's now changed its payment terms with suppliers.
• 5:34
  Speaker 1: And suppliers are not happy jam.
• 5:37
  Speaker 2: You see, in January this year, David Jones told suppliers
• 5:39
  Speaker 2: it needed to extend the payment terms for that month
• 5:41
  Speaker 2: only because they had a new computer system.
• 5:44
  Speaker 1: And supplies were okay with one month.
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  Speaker 2: Next minute, they decided to shift paying supplies up to
• 5:48
  Speaker 2: sixty days after products are sold in store, not just
• 5:50
  Speaker 2: for January, but indefinitely into the future.
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  Speaker 1: That means they can sell an item today but not
• 5:55
  Speaker 1: pay the supply for another two months.
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  Speaker 2: And this is all part of its plan to extend
• 5:58
  Speaker 2: its working capital.
• 6:00
  Speaker 1: So what's the key learning here?
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  Speaker 2: Working capital is the difference between a company's short term
• 6:03
  Speaker 2: assets and short term liabilities.
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  Speaker 1: In plain English, it's about timing when does cash come
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  Speaker 1: in and when does cash go out.
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  Speaker 2: For retailers like David Jones, the ideal scenario is pretty simple.
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  Speaker 2: Sell products quickly and get paid immediately by customers, but
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  Speaker 2: delay paying suppliers for as long as possible because that
• 6:19
  Speaker 2: creates a big cash buffer.
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  Speaker 1: For instance, Jazie Boy. If a customer buys a one
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  Speaker 1: hundred dollars item today and David Jones doesn't pay the
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  Speaker 1: supply for sixty days, that's sixty days where David Jones
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  Speaker 1: can use that cash elsewhere to pay.
• 6:29
  Speaker 2: Rent, to pay stuff, invest in stores, or just stay
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  Speaker 2: a float.
• 6:33
  Speaker 1: This is called a positive working capital cycle and it
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  Speaker 1: is very valuable. So while stretching payment terms can help
• 6:38
  Speaker 1: a business manage cash in the short term, it can
• 6:41
  Speaker 1: damage supplier relationships and trust over time.
• 6:43
  Speaker 2: Flux adam, it is the end of the month and
• 6:45
  Speaker 2: that is when many subscriptions start coming out of your bankcount. Now,
• 6:48
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  Speaker 2: the Flux app and check out the subscription tracker.
• 6:56
  Speaker 1: Thanks for listening and we'll see you on Wednesday.