NAOS CEO Insights

CEO INSIGHTS – Week Ending 11 September 2020 By NAOS Asset Management

September 11, 2020

“Labour has been the biggest issue through COVID. A lot of the work is done by backpackers and there are normally about 170,000 backpackers around and currently there are about 70,000, so getting workers is going to be an issue” David Schwartz, CEO, Vitalharvest Trust [owner of Costa Group farmland assets]

CEO INSIGHTS – Week Ending 11 September 2020 By NAOS Asset Management

“Labour has been the biggest issue through COVID. A lot of the work is done by backpackers and there are normally about 170,000 backpackers around and currently there are about 70,000, so getting workers is going to be an issue” David Schwartz, CEO, Vitalharvest Trust [owner of Costa Group farmland assets]


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.  
 
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Domestic Economy

“We feel that we are very much in the early stages of COVID-19 and its impact on the economy. The longer-term implications…are really yet to play out” Rob Scott, CEO, Wesfarmers Ltd

“The technology industry is a fast-track to Australia’s post-pandemic recovery. It’s a massive force multiplier for jobs and already makes up 6 per cent of our GDP, a number which could be much higher. Doubling down on our investment in innovation now will reward our nation 10-fold into the future” Scott Farquhar, Co-CEO, Atlassian Inc

Technology

“The economics now are demonstrating, and we have big customers who’ve shown this, that consistently [moving businesses systems to the cloud] is 30% cheaper than if it’s on-premise” Patrick Gelsinger, CEO, VMWare Inc [NASDAQ listed major cloud computing company]

Media & Entertainment

“Our biggest takeaway from capturing and analysing industry data was that e-sports is growing exponentially and traditional entertainment and sports organizations have taken notice of the successful esports model” Sam Matthews, CEO, Fnatic [global e-sports entertainment company]

“The old model from legacy television was domestic U.S. product was pushed outside of the U.S. and some of it resonated in different territories outside of the U.S. better than others. Now that we're in a streaming world, a lot of the jurisdictions have much more defined local content requirements” Christine McCarthy, CFO, Walt Disney Company

Food & Beverage

“This [COVID-19] is probably the biggest trial ever in the consumer goods industry and the big question is what is going to happen after the special circumstances the consumer is living in today is going to fade and go back to normal. We're certainly very happy what we have seen so far” Dirk Put, CEO, Mondelez International [food & beverage conglomerate/owner of Cadbury]

“You fundamentally have to think food security is one of the top three strategic imperatives of China” Juan Luciano, CEO, Archer-Daniels-Midland Company

Agriculture

“Labour has been the biggest issue through COVID. A lot of the work is done by backpackers and there are normally about 170,000 backpackers around and currently there are about 70,000, so getting workers is going to be an issue” David Schwartz, CEO, Vitalharvest Trust [owner of Costa Group farmland assets]

Travel & Leisure

“We are running around a bit shy of 30 per cent of last year’s activity [for corporate bookings] and Brisbane-Sydney-Melbourne is 45 per cent of last year’s” Jamie Pherous, CEO, Corporate Travel Management Ltd

“I think that the type of [travel insurance] product that people buy will be a lot different going forward, in part because you've had this experience that we've all gone through and so probably there'll be higher utilisation” Mark Lyons CFO, American International Group Ltd [multinational finance/insurance company]

Transport & Logistics

“Here we are in September and actually, we’ve almost recovered back to the levels we had in global container volumes compared with pre-COVID” Jeremy Nixon, CEO, Ocean Network Express [global shipping container company]

“Everybody's competing for labour and everybody's competing for volume [in the supply chain of e-commerce]; so productivity becomes the key and so we're being asked to deliver more automation with less touches, solutions that require less human intervention” John Waldren, CEO, Honeywell International Inc [multinational industrial & supply chain company]

Retail

“As trends around the world are shifting to working and sweating from home with an increased focus on health and wellness, we believe 2020 is likely an inflection point for retail” Calvin McDonald, CEO, Lululemon Athletica Inc

“BigCommerce is participating in one of the largest and fastest transformations in human economic history, the global shift in commerce from offline to online. It took 23 years for e-commerce to go from non-existent to 10% of all global consumer spending in 2017. eMarketer [market research firm] predicts it will take just 6 years for this percentage to more than double to 21% of global retail spending in 2023” Brett Bellm, CEO, BigCommerce Holdings Inc [global ecommerce software platform]

“Affordable luxury is a key trend that we've seen in all recessions. Consumers want to pamper themselves, despite the difficulties they're having” Noel Wallace, CEO, Colgate-Palmolive Company

Payment & Lending

“What the buy now, pay later sector has done well and successfully is convince [merchant] customers...they are getting more than just the payment, that they are providing an acquisition channel for new customers, they are helping to increase basket size ... Businesses are effectively funding the buy now, pay later opportunity for customers” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“[Referring to BNPL] Generally what happens, as industries or products become much larger and popular and usage expands, is there will be more scrutiny on the consequences and vulnerabilities customers may have” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

M&A

“Private equity buyout volumes in Q2 [2020] declined by more than 40%, as investors shifted to risk-off mode, focusing their attention on safeguarding their portfolio companies. During that period, it was very difficult to find the market from a valuation perspective” David Layton, Co-CEO, Partners Group Holding AG [top tier global private equity firm]

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.