IDP Education has warned investors of a major earnings downgrade, which saw its share price tumble 48% in a single day.
Treasury Wine Estates, the Aussie winemaker behind Penfolds, has just suffered a major hiccup in its big, bad, bold US strategy.
McKinsey, the leading management consulting company, has cut its workforce by over 10%, as it lets AI tools like take the wheel.
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Episode Transcript
This is what the flax. I'm Brett and I'm Justin
and it's Wednesday, the fourth of June.
Speaker 2 (00:09):
Douzzy boy. It's good news for two point six million Australians.
The Fair Work Commission announced the three and a half
percent increase to the national minimum wage, meaning the national
minimum is now twenty four dollars and ninety four cents
per hour or forty seven, six hundred and twenty seven
dollars a year.
Speaker 1 (00:27):
Very good boost beann in line with inflation. Foxham. One
of the most popular questions we get asked is where
to even start investing? So if you're looking to start investing,
they have no idea what to do? We have got
you with this month's academy. It's called what even is
an ETF? And it dishes up what they are, why
everyone's talking about them, and they how to actually use
them to build a diversified portfolio and fox Am this
(00:47):
month we are giving away five hundred dollars worth of
prizes to the top three in the Flex Academy leader boards.
If you want to win cash prizes and learn a
heap about ETFs, make sure to download the Flex app
and check out the ETF Academy.
Speaker 2 (00:58):
Three mouth watering stories. Today juzzy boy, let's do it
for our first. IDP Education has warned investors of a
major earnings downgrade, which saw its share priced humble forty
eight percent in a single day.
Speaker 1 (01:10):
At a lazy seventy five percent slide this year as well.
Be Man, so tell me more, okay so.
Speaker 2 (01:14):
IDP Education was founded in nineteen sixty nine and helps
place international students in universities and runs English language testing.
Speaker 1 (01:22):
Be Man back in two thousand and six seek quite
a fifty percent share in IDP, but sold a share
when IDP listed on the ASEX in twenty fifteen and.
Speaker 2 (01:29):
Probably is not regretting that decision at the moment.
Speaker 1 (01:32):
But while international students have been a hot sector for
the past decade, it certainly slowed down lately.
Speaker 2 (01:37):
Juzzy Boy IDP has announced its earnings will drop by
thirty percent in FY twenty five, and.
Speaker 1 (01:42):
The reason stricter migration policies across some key markets like Canada,
the UK and the US.
Speaker 2 (01:48):
In fact, student placement volumes are expected to slump by
about twenty eight to thirty percent, and while clearly this
came as a surprise to some investors. It seems like
other investors had kind of predicted this.
Speaker 1 (01:58):
Yeah, it was actually the sixth most shorted company on
the ASEX, with nearly twelve percent of its shares sold short.
Speaker 2 (02:04):
And those short sellers are laughing all the way to
the Education Bank Canal.
Speaker 1 (02:08):
Yep. So what is the key learning here?
Speaker 2 (02:10):
Short Selling is when an investor borrows a stock, sells
it on the market, and hopes to buy it back
later at a lower price.
Speaker 1 (02:17):
And then they pocket the difference.
Speaker 2 (02:19):
Basically, you're betting that the company's going to a lot.
Speaker 1 (02:22):
And they man. Shorting can be pretty profitable when a
business stumbles, but it is pretty risky too.
Speaker 2 (02:27):
Yeah. The upside is cap because the most of stock
can fall is one hundred percent, but the downside.
Speaker 1 (02:32):
Is unlimited if the share price continues to rise and
rise and rise.
Speaker 2 (02:36):
That's what made the game Stop saga. In twenty twenty one,
such a popcorn moment. GameStop was heavily shortened by a
hedgehunt called Melvin Capital. Reddit uses pump the stock so
high that it forced Melvin Capital to buy back shares
at enormous losses just to cover their position.
Speaker 1 (02:50):
Melvin Capital lost six point eight billion US dollars as
part of the short squeeze and then it eventually shut down.
But do it.
Speaker 2 (02:56):
In idp's case, the short sellers were correct.
Speaker 1 (02:58):
Yeah, migration policy ship were a fundamental risk to idp's business,
and when those risks materialized, the stock plummeted.
Speaker 2 (03:06):
For our second story, Treasury Wine Estates, the Australian wine
maker behind Penfolds and others, has just suffered a major
hiccup in its big band bowld US strategy.
Speaker 1 (03:17):
Talk about putting a cork in its US ambitions, b Man,
what's going on here?
Speaker 2 (03:21):
Okay? So, Treasury Wine Estates was spun off from Fosters
in twenty eleven and has since grown into one of
the world's biggest wine makers.
Speaker 1 (03:27):
Owned some of the big wine brands across the world
like Squealing Pig and Nineteen Crimes and Jack.
Speaker 2 (03:32):
But Jazzy Boy. You can't leave out its cash Cow
and Golden Goose Penfolds, but be Man.
Speaker 1 (03:37):
It went even further in the premium market. Back in
twenty twenty three, Treasury acquired the US wine group Dow
Vineyards for one point six billion dollars, now be Man
Treasury's key distributor in California, the biggest wine state in
the US, is pulling out completely.
Speaker 2 (03:50):
Next minute, Treasury downgraded its FY twenty five earnings forecast
by ten million bucks.
Speaker 1 (03:55):
So now Treasury is scrambling to find a new route
to market to distribute in the US, which is one
of its key focuses. That's interesting, So what's the key
learning here? In the world of US wine. Having a
great product isn't enough because you need someone to actually
sell it.
Speaker 2 (04:09):
This is known as the route to market, and.
Speaker 1 (04:11):
It's critical to getting your product into customers hands. In
the US, you.
Speaker 2 (04:14):
See Juzy Boy. In the US has a pretty unique
three tier alcohol system.
Speaker 1 (04:18):
Under this system, alcohol producers like Treasury wine can't sell
directly to retailers.
Speaker 2 (04:23):
Instead, they need to go through a wholesaler or a distributor,
who then sells to stores, bars and restaurants.
Speaker 1 (04:28):
So when a key distributor pulls out of a market,
it creates a huge operational and revenue risk.
Speaker 2 (04:33):
In fact, that single distributor accounted for twenty five percent
of Treasuries US sales.
Speaker 1 (04:37):
And ten percent of its global sales.
Speaker 2 (04:39):
So while in Australia Treasury can send a few cases
to Dan Murphy's, but in the US, quality distributor is
basically your access to the market.
Speaker 1 (04:47):
For our third and final story, McKinsey, one of the
global leaders in management consulting, has cut its workforce by
over ten percent after letting AI tools take the wheel.
Speaker 2 (04:56):
Junior consultants are really coppying the hit here, Juzy boy,
tell me more so.
Speaker 1 (05:00):
McKinsey's one of the world's most powerful consulting firms.
Speaker 2 (05:03):
It advises many of the top companies and big governments
across the world and loves to include buzzwords. All buzzwords
under the sun.
Speaker 1 (05:10):
We're talking digital strategies, transformation projects, synergy levers.
Speaker 2 (05:13):
But now McKinsey has boiled the ocean to find the
low hanging fruit.
Speaker 1 (05:19):
And it's cut around five thousand staff since late twenty
twenty two, and.
Speaker 2 (05:22):
This is one of the biggest workforce reductions in its
one hundred year history.
Speaker 1 (05:26):
The reason b man it's new employee, Lily.
Speaker 2 (05:28):
Yep. It's developed an in house AI assistant named Lily,
who has taken over tasks that junior burgers used to do.
Speaker 1 (05:35):
We're talking generating slides, drafting reports, and a heap of
other tasks that wants entry level jobs and unlike the staff,
Lily ain't pushing for a promotion, and the biggest cohort
suffering that would be entry level employees. So what is
the key learning here? AI could replace grad jobs in
major consulting houses. There's a classic path from analysts to
(05:55):
partner and it relies on a very deliberate apprenticeship model.
Speaker 2 (05:59):
You start doing research, building decks and triple checking data
at two am.
Speaker 1 (06:03):
And over time you take on more strategic responsibility and say,
let's unpack that in board rooms.
Speaker 2 (06:08):
But with AI taking over a lot of that grunt work,
that entry level training ground is vanishing. Ye.
Speaker 1 (06:14):
On the one hand, new hives can skip to more
strategic or creative.
Speaker 2 (06:17):
Work, but on the other hand, they might miss out
on the basics or not even get a job in
the first place.
Speaker 1 (06:22):
In fact, the Man A McKinsey report estimates that between
four hundred million and eight hundred million jobs worldwide could
be displaced by AI by twenty thirty.
Speaker 2 (06:30):
The irony is certainly not lost on us here.
Speaker 1 (06:33):
Man McKinsey might just be consulting its way out of
its own junior roles. Sam, we're giving away five hundred
dollars in the flex Academy this month to the top
three competitors. It's all in our academy what even is
in ETF? So if you're looking to level up on
understanding ETFs, your investment strategy, or want to win some
big prizes, make sure to check out the Academy this month.
Speaker 2 (06:51):
Thanks for listening, and we'll see you on Friday.
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