NAOS Asset Management

"It is sobering indeed that of the top 50 companies in Australia by market capitalisation in 1980, only 10 remain in today’s top 50.” John Mullen, Chairman, Telstra 

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.

Retail

"During the quarter (1QFY19) and in line with our strategy, the Group increased gross profit margin as it reduced its reliance on discount-based events. However, on review, this shift was not adequately supported by sufficient levels of marketing and promotional activities to drive top-line sales." 
Phil Taylor, CEO, Michael Hill International

“The continuing absence of real wage growth and increases in the cost of many basic expenses (including mortgage rates) ensures that competition for the discretionary spend of consumers remains high."
Ross Sudano, MD, The Reject Shop

Supermarkets

"We certainly won't be repeating the same level of sales growth in Q2.”
Steven Cain, Managing Director, Coles

Global Economy

"Weaker global growth would tend to increase global financial stability risks by reducing the capacity of highly leveraged borrowers to service their debt. A reassessment of the global growth outlook and risk more generally could also trigger a broad fall in asset prices."
RBA Financial Stability Review October 2018

Global Trade

"I'm aware of businesses in Australia that are moving production back from China to Australia so they can actually then export to the USA from Australia."
David Chuter, CEO and Managing Director, Innovative Manufacturing

Telecommunications

“We expect a fivefold increase in traffic on our mobile networks over the next five years…You can see a lot of potential synergies between the Telstra InfraCo and NBN."
John Mullen, Chairman, Telstra

Media

"A lot of clients are in fact spending, not huge sums more, but they are spending money and I think that’s the trend that will continue as we go forward."
John Wren, CEO, Omnicom Group

Media Streaming

"Someday there will have to be competition for wallet share, we're not naive about that, but it seems very far off from everything we've seen."
Reed Hastings, CEO, Netflix Inc

Technology

"As early as 2022, this is going to rise to 37 connected devices per household." Ben Green, Smart Space Director, Schneider Electric

Business Disruption

"Almost every day we see examples of Telco’s restructuring their businesses, laying off employees, selling business units and in other ways seeking to adapt to this unprecedented disruption… It is sobering indeed that of the top 50 companies in Australia by market capitalisation in 1980, only 10 remain in today’s top 50.”
John Mullen, Chairman, Telstra

Business Lending

“The loser is the incumbent banks, they were charging between six and nine per cent to provide loans to the people that I now provide loans to at three per cent. They’re having their business models up-ended by us and the people that win are obviously small companies and battlers who are now able to access cash at extremely low rates.”
Lex Greensill, CEO, Greensill Capital

Construction

“So not many projects ticked off over the last year or ready to start construction...There will be a shortage in 2020. Every year we need 5000 CBD apartments. There are not many developers that are getting — they cannot get a loan.”
Choong Kai Wai, CEO , SP Setia

"Certainly, from our perspective we expect the renovation space to stay robust."
Tim Salt, CEO, GWA Group

Coal

"Semi-soft sales are subdued and I think it will continue to be that way for this year."
Paul Flynn, MD, Whitehaven Coal

Airlines

"We are dropping it on quite a lot of our flights and we are not getting any bad feedback."
Richard Branson, Founder, Virgin Group

Childcare Centres

"There's no actual sign of slowing down. It will impact on a number of smaller operator's viability. For some people, it's like opening a corner shop. It doesn't seem sensible to do that in a market that has been oversupplied."
Julia Davison, CEO, Goodstart Early Learning

Thank you for reading.

Article contributed by NAOS Asset Management

Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner



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