Woolies' profit struggles | Pointsbet major takeover bet | EY cuts jobs

This is what the Flux. I'm Brett and I'm just it and it's Friday, the twenty eighth February, Fluxpam.

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Three cost conscious stories today, Jazzi boy, let's do it for our first.

Woolworths has suffered a twenty percent decline in its first.

Half a net profit after it struggled with strikes and empty shelves late last year.

Well well, well, looks like Coles might be popping the champagne this week, b man, So tell me what's going on.

Jazy boy.

You might know Woolworth's as the largest supermarket across Australia with.

More than thirty seven percent of total supermarket market share, but it's also the owner of Big w pet Stock, My deal man, Woolworth's a supermarket is usually the golden goose laying the golden eggs, which have not been on the shelves lately.

But it wasn't the case in the last half YEA.

In late November, Woolies is warehouse workers went on a three week strike over its pay and conditions.

Do you remember no toilet paper on shelves, no pasta, limited fruit and veg.

It was feeling like COVID all over again. I know.

Now Woolies has worn that its first half net profit dropped more than twenty percent.

Now Man, A large part of that profit drop is because of the worker strike, where it's struggled to get products on sites else.

But Jazzy Boy.

Even without the strike, Woolies earnings would have declined five percent. So now Woolworth's will begin a cost cutting program across the business where it plans to cut four hundred million dollars in expenses.

All the equivalent of eight hundred thousand Magi two minute noodles.

And apart from the strike, the main reason for the loss was a shift in consumer behavior. So long, farewell consumer inertia.

So what is the key learning here?

Consumer inertia is when shoppers stick to the same soupmarket out of habit, or convenience or loyalty.

Even if better deals are available elsewhere.

Yeah, in Australia this has helped Coals and Will dominate for so long, and it's given them the power to keep prices high without much competition. In fact, be Man research from last year shows that eighty one percent of Aussie shoppers spend most of their grocery budget at just one supermarket according to E sixty one.

And over two thirds are staying loyal to Coals or Woolies every month.

But be Man Woolworth's latest results show that maybe this is starting to change.

Willy CEO mentioned that more customers are cross shopping to find the best deal, mainly due to cost of living stresses, and this shift may mean shoppers are breaking their usual habits and exploring other retailers.

For our second story, points Bet, one of the largest bookmakers in Australia, has agreed to sell out to aid to a japan based rival for three hundred and sixty million bacarinis. But it is not without its controversy.

Is anything not controversial in the betting industry. Juzzy Boy go on here.

Okay so points Bett is an Australian online book makeup that launched in Melbourne back in twenty seventeen.

It made a name for itself as it raised nearly five hundred million bucks to dominate betting overseas.

Yeah, it became one of the first bookmakers to enter the US market when betting was just becoming legalized across different states.

But in twenty twenty three, Juzzy Boy Points Bett sold its US division to the merch giant Fanatics for two hundred and twenty five million bucks. It was losing between fifteen and thirty million dollars per quarter before selling the US business, but it promised plans to double down on the Ossie and Canadian markets.

Next minute, point Betts announced plans to sell the Australian and Canadian businesses for three hundred and fifty million bucks.

Brotto, who are they selling to?

It's a Japanese based book maker called it a mixie who's planning to expand into Australia.

But not so fast, does it, boy, Because before you think this is all hunky dorrie. Another gaming operator called the Blue Bet also made an offer.

And it claims points Bet refused to even engage in its offer that was valued at more than three hundred and sixty million dollars, So a little.

Bit more very interesting. So what is the key learning here?

In merger and acquisitions? Shareholder value is king.

And Jazzy Boy.

Board directors always need to act in the best interests of their shareholders.

But Ben Man, it's not always about who throws the biggest pile of cash on the table. Sometimes other strategic factors come into play.

In this case, Mixey offered points Bets board and shareholders three hundred and fifty mil in cash money today.

That's cold, hard cash in the bank, which reduces risk and provides immediate cash for shareholders.

On the other hand, blue Bet offered points bet a mix of two sixty million cash and up to a one twenty mil in blue Bet shares and the man.

This type of deal is known as a cash and script offer. Shareholders receive a combination of cash and shares in the acquiring company.

But here is the kicker. The value of those blue Bet shares is not guaranteed.

It all depends on how Blue Beet performs in the future.

And this is a good example of how M and A decisions aren't only about the headline number. For our third and final story, EY Australia has announced it will be cutting one hundred jobs from its advisory division after.

A pullback in client spending.

Ewa's advisory division facing a little profit and loss of its own b man Sotel me more well.

EY, which used to be known as Ernst and Young, is one of the global Big four professional service giants.

It does everything from accounting to tax, to consulting and even dabbles in a little bit of Law.

And techka the Swiss Army Knife of the corporate world.

It's the third largest globally based on revenue, and the second largest professional services firm in Australia thanks to Peter we Sez Big four Oh.

But Juzzi Boy. Even the mighty and powerful professional services firms are feeling the pain now.

Ey's announced it will cut one hundred staff from its consulting art because of a slowdown in the advisory market.

And while these one hundred jobs are about one percent of its Australian shop, it also cut five hundred jobs last year as well.

One of the biggest challenges for Ey and co oh is the pullback of government spending on consulting services.

So what is the key learning right here?

When governments bring work in house, consultants fill the pay in professional services.

Government contracts are often a bit of a cash.

Cow there, lucrative, they're often long term and they've been pretty reliable in the past.

But when the tide turns, it can devastate the industry.

And that's exactly what's happened over the past few years.

Get this one, government spending on consulting services dropped by six hundred and twenty four million bucks in FY twenty four alone.

Or eighty four million dollars less each month compared to two years ago.

And Jazi boy, it's a nice little reminder that a heavy reliance on government contracts can be a double edged sort.

Great in boom times, but brutal when the policy change it. Yet, I was spending over fifty bucks on different streaming services in the last month. I use a Flux Subscription track app to see what I was spending on and bang, I cut Apple TV. That for us, We've got it all covered in the Flux Subscription track up they shut it, download the app and check it out.

Thanks for listening, and we'll see you on Monday.