1 00:00:05,240 --> 00:00:08,720 Speaker 1: This is what the flux and I'm justin and it's Wednesday, 2 00:00:08,760 --> 00:00:09,840 Speaker 1: the twenty fifth of February. 3 00:00:09,920 --> 00:00:12,400 Speaker 2: Does boy. There may be a global software sell off 4 00:00:12,400 --> 00:00:15,160 Speaker 2: at the moment, but rather than feel threatened, old Canvas 5 00:00:15,280 --> 00:00:18,360 Speaker 2: is seeing this as an opportunity for cheap buys. Canvas 6 00:00:18,320 --> 00:00:21,079 Speaker 2: has announced the acquisition of two new AI companies to 7 00:00:21,120 --> 00:00:24,040 Speaker 2: continue its growth, a new animation software company and a 8 00:00:24,120 --> 00:00:27,440 Speaker 2: marketing tool Jusei boy. That is canvas fifth acquisition in 9 00:00:27,560 --> 00:00:28,800 Speaker 2: just the last two years on. 10 00:00:28,840 --> 00:00:31,280 Speaker 1: A buying spree. Bee Man, I like it, thinking, Pam. 11 00:00:31,360 --> 00:00:34,280 Speaker 1: We know that superannuation is not the sexiest of topics, 12 00:00:34,280 --> 00:00:35,879 Speaker 1: but it is one of the most important. And in 13 00:00:35,880 --> 00:00:38,600 Speaker 1: the Flux Out today, we've broken down different types of 14 00:00:38,640 --> 00:00:42,320 Speaker 1: investing in superannuation. There's the full funds, that's direct investing. 15 00:00:42,360 --> 00:00:43,960 Speaker 1: If you don't know what any of that means, don't 16 00:00:44,000 --> 00:00:45,960 Speaker 1: worry because we haven't covered in the Flux Out. Make 17 00:00:46,000 --> 00:00:46,800 Speaker 1: sure to check it out. 18 00:00:46,840 --> 00:00:49,559 Speaker 2: Three Mammoth stories today, Juzy boy, let's do it for 19 00:00:49,600 --> 00:00:52,680 Speaker 2: our first. Southern Cross Media has suffered a seventeen percent 20 00:00:52,800 --> 00:00:55,760 Speaker 2: drop in profit in its first results since merging with 21 00:00:55,960 --> 00:00:59,960 Speaker 2: seven West Media, but it's CEO did not deliver this update. 22 00:01:00,120 --> 00:01:02,280 Speaker 1: Oo, wasn't this merger man to turn them into a 23 00:01:02,280 --> 00:01:04,360 Speaker 1: power couple? B men? Yeah, it's looking like a bit 24 00:01:04,400 --> 00:01:05,560 Speaker 1: of a rocky relationship. 25 00:01:05,680 --> 00:01:07,679 Speaker 2: So tell me all so JOI what just a little 26 00:01:07,680 --> 00:01:10,920 Speaker 2: reminder for you. Southern Cross Media is an Australian broadcasting 27 00:01:10,959 --> 00:01:13,800 Speaker 2: giant that owns FM radio brands like Triple M and 28 00:01:14,080 --> 00:01:15,160 Speaker 2: Hit Network. 29 00:01:14,800 --> 00:01:18,479 Speaker 1: I think nineties anthems, drive time Banter, the occasional cash 30 00:01:18,480 --> 00:01:19,200 Speaker 1: giveaway yep. 31 00:01:19,200 --> 00:01:21,560 Speaker 2: And it recently merged with seven West Media, the owner 32 00:01:21,600 --> 00:01:25,040 Speaker 2: of Channel seven TV seven plus streaming and the West 33 00:01:25,080 --> 00:01:26,000 Speaker 2: Australian newspaper. 34 00:01:26,040 --> 00:01:27,959 Speaker 1: And the man. That was roughly a four hundred million 35 00:01:28,000 --> 00:01:30,679 Speaker 1: dollar mergerut that was finalized in January this year and 36 00:01:30,800 --> 00:01:33,280 Speaker 1: pitched as the cross platform power couple. 37 00:01:33,400 --> 00:01:36,400 Speaker 2: And then the first combined results came in and it 38 00:01:36,600 --> 00:01:37,480 Speaker 2: wasn't pretty. 39 00:01:37,240 --> 00:01:39,320 Speaker 1: No, no, no. It's revenue came in at just over 40 00:01:39,360 --> 00:01:41,920 Speaker 1: one billion dollars, which was down one and a half percent. 41 00:01:42,040 --> 00:01:43,920 Speaker 2: Well, it's a net profit fell sixteen and a half 42 00:01:43,920 --> 00:01:46,160 Speaker 2: percent to just under thirty five million bucks. 43 00:01:46,160 --> 00:01:49,320 Speaker 1: And the man they warned that advertising conditions were weak 44 00:01:49,560 --> 00:01:50,840 Speaker 1: and volatile. 45 00:01:50,400 --> 00:01:52,960 Speaker 2: Not exactly the source of words that investors are excited 46 00:01:52,960 --> 00:01:53,760 Speaker 2: to hear Jasi boy. 47 00:01:53,800 --> 00:01:56,280 Speaker 1: But to make things even spicier, the CEO of the 48 00:01:56,320 --> 00:02:00,960 Speaker 1: merged company, Jeff Howard, unexpectedly retired the night before results 49 00:02:00,960 --> 00:02:01,800 Speaker 1: were to be announced. 50 00:02:01,880 --> 00:02:05,280 Speaker 2: Yes, retired the night before the results. 51 00:02:05,560 --> 00:02:07,360 Speaker 1: And less than two months into the new role. 52 00:02:07,440 --> 00:02:11,320 Speaker 2: So the company effectively fronted its big first earnings update 53 00:02:11,400 --> 00:02:13,399 Speaker 2: with its lead presenter not there. 54 00:02:13,360 --> 00:02:15,359 Speaker 1: No anchor at the desk, no host of the mic. 55 00:02:15,560 --> 00:02:17,800 Speaker 2: And does I must say it's pretty interesting that despite 56 00:02:17,800 --> 00:02:21,000 Speaker 2: only a small drop in revenue, its net profit got whacked. 57 00:02:21,520 --> 00:02:22,919 Speaker 1: So what is the key learning here? 58 00:02:23,000 --> 00:02:25,800 Speaker 2: Operating leverage can explain how a small drop in revenue 59 00:02:25,840 --> 00:02:28,639 Speaker 2: can cause a much larger drop in profit. 60 00:02:28,360 --> 00:02:32,280 Speaker 1: Foot simply, Operating leverage measures the ratio of a company's 61 00:02:32,320 --> 00:02:34,640 Speaker 1: fixed costs to its variable costs. 62 00:02:34,440 --> 00:02:38,200 Speaker 2: And media companies typically have high fixed costs. Yeah, there's 63 00:02:38,240 --> 00:02:41,800 Speaker 2: the studio infrastructure. There's the broadcast equipment, the talent contracts, 64 00:02:41,840 --> 00:02:45,040 Speaker 2: the content production, the transmission costs. And these expenses do 65 00:02:45,120 --> 00:02:46,799 Speaker 2: not fluctuate dramatically month to month. 66 00:02:46,840 --> 00:02:50,600 Speaker 1: So when revenue dips slightly, those fixed costs don't automatically shrink. 67 00:02:50,639 --> 00:02:53,120 Speaker 2: Let's say revenue falls one or two percent, if costs 68 00:02:53,120 --> 00:02:57,240 Speaker 2: stay largely the same that lost revenue flows almost entirely 69 00:02:57,360 --> 00:02:59,600 Speaker 2: through to lower profit and that's why the Merge Group 70 00:02:59,680 --> 00:03:02,680 Speaker 2: is now promised to make thirty million bucks in cost 71 00:03:02,720 --> 00:03:06,000 Speaker 2: cuts over the next financial year. For our second story, 72 00:03:06,080 --> 00:03:09,760 Speaker 2: Adore Beauty's profit has face planted seventy percent after Black 73 00:03:09,800 --> 00:03:12,800 Speaker 2: Friday blowouts, but it's betting on bricks and mortar to 74 00:03:12,880 --> 00:03:13,560 Speaker 2: save that glow. 75 00:03:13,680 --> 00:03:15,960 Speaker 1: Nothing like a bit of a retail therapy, but also 76 00:03:16,040 --> 00:03:18,120 Speaker 1: a big margin hangover. B man, So tell me. 77 00:03:18,080 --> 00:03:20,799 Speaker 2: More, Okay. So, Adore Beauty started as an online only 78 00:03:20,919 --> 00:03:23,400 Speaker 2: beauty retailer all the way back in nineteen ninety nine, 79 00:03:23,440 --> 00:03:23,640 Speaker 2: and it. 80 00:03:23,680 --> 00:03:26,040 Speaker 1: Listed on the ASEX in twenty twenty at a six 81 00:03:26,120 --> 00:03:27,880 Speaker 1: hundred and fifty million dollar valuation. 82 00:03:28,120 --> 00:03:30,320 Speaker 2: Since then it's market value who's fall into less than 83 00:03:30,360 --> 00:03:31,280 Speaker 2: eighty million bucks? 84 00:03:31,280 --> 00:03:33,480 Speaker 1: Wow? And then man. Even though Adoor Beauty sales grew 85 00:03:33,520 --> 00:03:35,840 Speaker 1: nearly nine percent over one hundred and ten million dollars 86 00:03:35,840 --> 00:03:37,840 Speaker 1: for the half, it's net profit also plummeted. 87 00:03:38,000 --> 00:03:40,720 Speaker 2: Yeah, it's net profit dropped seventy percent to just one 88 00:03:40,800 --> 00:03:42,960 Speaker 2: hundred and eighty nine thousand bucks for the half. 89 00:03:43,160 --> 00:03:44,800 Speaker 1: That is not a blow up. That is what you 90 00:03:44,880 --> 00:03:47,200 Speaker 1: call a big margin in the makeup world. And so 91 00:03:47,320 --> 00:03:50,920 Speaker 1: what's the culprit here? Three words, my friend, Black Friday discounting. 92 00:03:51,000 --> 00:03:53,880 Speaker 2: Now, yes, these sales may have helped drive revenue, but 93 00:03:53,960 --> 00:03:55,360 Speaker 2: it's seriously dented margins. 94 00:03:55,360 --> 00:03:57,960 Speaker 1: So now a door is leading into physical stores, with 95 00:03:58,080 --> 00:03:59,840 Speaker 1: ten new stores open in the last half to take 96 00:03:59,840 --> 00:04:02,640 Speaker 1: the total to eighteen physical source. But even so, b 97 00:04:02,720 --> 00:04:05,680 Speaker 1: men Adoor shares dropped nearly seven percent on the result. 98 00:04:05,840 --> 00:04:07,080 Speaker 2: Quite the fall from grace. 99 00:04:07,120 --> 00:04:10,480 Speaker 1: But I must say raises the big strategic question these deep, 100 00:04:10,520 --> 00:04:12,600 Speaker 1: deep Black Friday discounts actually worth it? 101 00:04:12,680 --> 00:04:14,880 Speaker 2: A very good question. So what is the key learning here? 102 00:04:14,920 --> 00:04:18,080 Speaker 1: Discounting can boost sales, but it often crushes profits. 103 00:04:18,200 --> 00:04:21,560 Speaker 2: Adores revenue increased almost nine percent, which on the surface 104 00:04:21,600 --> 00:04:25,159 Speaker 2: looks healthy, but profit tells the real story. The problem, Well, 105 00:04:25,240 --> 00:04:29,800 Speaker 2: it's Black Friday promotions meant slashing prices and slashing margins. 106 00:04:29,320 --> 00:04:32,400 Speaker 1: And when you're in beauty, those discounts are often very deep. 107 00:04:32,440 --> 00:04:35,360 Speaker 2: In fact, Jasi Boite Salesforce found that the average Black 108 00:04:35,360 --> 00:04:38,040 Speaker 2: Friday discount was around twenty four percent. 109 00:04:37,720 --> 00:04:40,520 Speaker 1: But categories like beauty and skincare and make up typically 110 00:04:40,560 --> 00:04:43,239 Speaker 1: with the highest at more than thirty three percent discount. 111 00:04:43,320 --> 00:04:47,000 Speaker 2: So you can see why Adore Beauty's profit margin was mayish. 112 00:04:46,680 --> 00:04:49,039 Speaker 1: And be man. For some retailers, black fridays can be 113 00:04:49,120 --> 00:04:50,320 Speaker 1: quite strategic, yep. 114 00:04:50,360 --> 00:04:53,240 Speaker 2: Clear old inventory, attract new customers, get them buicked on 115 00:04:53,279 --> 00:04:54,359 Speaker 2: your hero products. 116 00:04:54,440 --> 00:04:57,360 Speaker 1: But if your brand becomes trained around discounting, you risk 117 00:04:57,440 --> 00:04:58,479 Speaker 1: a race to the bottom. 118 00:04:58,640 --> 00:05:02,280 Speaker 2: For our third and final story, Donald J. Trump has 119 00:05:02,320 --> 00:05:05,680 Speaker 2: promised to hike global tariffs to fifteen percent across the 120 00:05:05,760 --> 00:05:09,240 Speaker 2: board after the US Supreme Court blocked his tariffs. 121 00:05:09,400 --> 00:05:12,360 Speaker 1: US Supreme Court says, Donald Trump, but your tariffs are fired, 122 00:05:12,839 --> 00:05:13,440 Speaker 1: we will be man. 123 00:05:13,560 --> 00:05:16,599 Speaker 2: So you obviously remember, juzzy boy, Donald Trump implemented tariffs 124 00:05:16,640 --> 00:05:18,280 Speaker 2: across the world in April last year. 125 00:05:18,320 --> 00:05:20,640 Speaker 1: Yep. We'd be talking. India whacked with a fifty percent 126 00:05:20,640 --> 00:05:22,400 Speaker 1: tariff on goods exported to the US. 127 00:05:22,480 --> 00:05:24,640 Speaker 2: Then there were tariffs on China. They got whacked with 128 00:05:24,680 --> 00:05:26,279 Speaker 2: a tariff over one hundred percent. 129 00:05:26,360 --> 00:05:29,159 Speaker 1: At one stage, even poor old Australia got whacked with 130 00:05:29,200 --> 00:05:31,240 Speaker 1: a ten percent tariff. But juzzy boy, there was a 131 00:05:31,240 --> 00:05:33,760 Speaker 1: plot twist last week because the US Supreme Court ruled 132 00:05:33,760 --> 00:05:37,680 Speaker 1: that Donald Trump's global tariffs were unconstitutional. So what did 133 00:05:37,680 --> 00:05:39,400 Speaker 1: Donald Trump do? He doubled down? 134 00:05:39,600 --> 00:05:42,320 Speaker 2: Yep. Just days later, Trump announced plans to raise the 135 00:05:42,360 --> 00:05:45,200 Speaker 2: global tariff rate on imports from ten percent to fifteen 136 00:05:45,240 --> 00:05:46,960 Speaker 2: percent across the board and they man. 137 00:05:47,080 --> 00:05:51,000 Speaker 1: The announcement sent governments and businesses into a mild paddy. 138 00:05:50,800 --> 00:05:53,680 Speaker 2: And jusey boy. While some countries will be well ahead 139 00:05:53,720 --> 00:05:58,080 Speaker 2: with just fifteen percent tariffs, others like Australia are the losers. 140 00:05:57,800 --> 00:06:00,800 Speaker 1: Especially because Australia won't have the same advent over other 141 00:06:00,839 --> 00:06:02,280 Speaker 1: countries like it previously did. 142 00:06:02,640 --> 00:06:03,920 Speaker 2: So what is the key learning here? 143 00:06:04,040 --> 00:06:06,680 Speaker 1: In global trade? Sometimes it's not about being the cheapest, 144 00:06:06,800 --> 00:06:10,159 Speaker 1: it's about being less expensive than everyone else. Australia just 145 00:06:10,200 --> 00:06:13,120 Speaker 1: happened to be in the only ten percent tariff club 146 00:06:13,160 --> 00:06:15,200 Speaker 1: while parts of Asia and Europe were hit with tariffs 147 00:06:15,240 --> 00:06:17,720 Speaker 1: of up to fifty percent, and man that advantage helped 148 00:06:17,800 --> 00:06:20,479 Speaker 1: drive a nineteen percent lift in exports to the US 149 00:06:20,560 --> 00:06:24,760 Speaker 1: last year, particularly in beef, in aircraft components and medical instruments. 150 00:06:24,880 --> 00:06:27,600 Speaker 1: But now with a blanket fifteen percent tariff for everyone, 151 00:06:27,720 --> 00:06:30,560 Speaker 1: the edge that Australia had has disappeared. And to be clear, 152 00:06:30,600 --> 00:06:33,240 Speaker 1: Australia isn't worse off than its competitive countries, but it's 153 00:06:33,320 --> 00:06:36,040 Speaker 1: no longer better off and in trade, losing an edge 154 00:06:36,080 --> 00:06:38,920 Speaker 1: can feel like a setback even if nothing else changes. 155 00:06:39,000 --> 00:06:41,599 Speaker 1: Foxam ever heard the term about pulled investments? Well, in 156 00:06:41,600 --> 00:06:44,920 Speaker 1: the superindustry, it's these premixed investment options you've probably heard of, 157 00:06:44,960 --> 00:06:47,800 Speaker 1: like conservative balance growth, but there's also other ways to 158 00:06:47,880 --> 00:06:49,400 Speaker 1: invest in your soup back so that you can have 159 00:06:49,480 --> 00:06:51,800 Speaker 1: more control. You want to learn more about our superannuation 160 00:06:51,880 --> 00:06:54,080 Speaker 1: investing actually where they sure to download the Fox app 161 00:06:54,120 --> 00:06:55,359 Speaker 1: and check out our latest article. 162 00:06:55,440 --> 00:06:58,000 Speaker 2: Thanks for listening and we'll see you on for Friday.