Chanticleer
From Seven Group to Coles, from Domino’s to WiseTech, the challenges in securing staff are perhaps the biggest issue facing Australian business.
Seven chief executives. Six separate sectors. One huge day of reporting season and a very clear message on what’s stopping Australia’s economy from reaching its full potential: labour.
Chanticleer’s Big Wednesday started bright and early with Ryan Stokes, chief executive of Seven Group.
Coles Group CEO Steven Cain is flanked by Seven Group’s Ryan Stokes and The Lottery Corporation’s Sue van der Merwe. The trio joined a host of other corporate executives on Wednesday to bemoan Australia’s labour shortage. David Rowe
With the exception of Seven’s 70 per cent-owned building materials giant Boral, this was an impressive result, with operating leverage (earnings growing faster than revenue) across its WesTrac heavy equipment business, its Coates industrial hire business, its Beach Energy oil and gas business, and even Seven West Media.
Over the past five years, Stokes has carefully shaped a portfolio of what he describes as “privileged assets” that are built to withstand the inflationary environment we’re in; the pricing power at WesTrac and Coates is strong, and Stokes believes Boral can substantially bolster its margins, too.
With his bird’s-eye view of the economy, Stokes believes inflationary pressures are “moderating from extremes”, but the huge challenge for Seven, its suppliers and its customers is getting workers.
Clearly, the lack of immigration in the COVID-19 years is a factor here. But Stokes also says the changing nature of the economy is playing a role, too.
In mining, for example, a new era of cost discipline means miners are running their heavy equipment for much longer than they have in the past. That’s good for WesTrac, as demand for complete equipment rebuilds is hotter than ever. But meeting that demand for servicing and maintenance requires a big lift in staff numbers, and that’s not easy.
“The challenge around labour is probably the most acute issue because we see it directly, and we see it for any business touching our sectors, or indeed most sectors of the economy,” Stokes says.
At supermarket giant Coles Group, chief executive Steve Cain has a similar challenge.
“There’s no doubt that we’re not maximising the potential of the Australian economy and that we need more skilled and unskilled people,” he says.
Tech staff are a particular challenge for Coles, as are bakers and delivery drivers, who Cain says are inundated with options right now.
The Coles boss will attend the Albanese government’s Jobs and Skills Summit next week and says he’s keen to see a focus on a smaller number of practical ideas that can both improve labour supply in the short term and deliver longer-term gains.
Immigration will help, but Cain warns it’s no silver bullet.
Even if migrant numbers are lifted, as is widely expected, practical issues such as visa processing need to be ironed out.
He also wonders if “brand Australia potentially isn’t what it used to be” for potential migrants, who may be put off by the high cost of travel here and the attitude Australian governments took towards strict lockdowns during the past two years.
Cain also questions whether the summit will need to think beyond migration for certain skilled roles or sectors.
“Just to make sure that all industries can keep going and we don’t get this wage spiral, which could lead to another round of inflationary pressure.”
That’s a theme close to the heart of Clint Feuerherdt, chief executive of Kelsian Group (formerly SeaLink Travel Group), which runs bus and ferry services in Australia and around the world.
Kelsian is a classic defensive stock, in that its revenue largely comes from government contracts that move up and down with inflation; underlying net profit for 2022 climbed 12.6 per cent to $48.5 million.
But Feuerherdt is desperate for bus drivers. He’s noticed a sharp decrease in job applicants and training program attendees from overseas, and says Kelsian is trying to train people with zero heavy-vehicle experience for the first time in years.
“The federal government really needs to broaden their lens and look at challenges that essential services as a whole are facing,” he says.
“When people are talking about essential services, we gravitate to nurses and teachers and doctors. But it’s our staff getting the doctors and nurses and teachers to work.”
The changing nature of the economy is also compounding the labour challenge of Domino’s Pizza chief executive Don Meij.
While the acquisition of 287 stores in Malaysia, Singapore and Cambodia appeared to get investors excited – the stock, down 41 per cent this year, leapt more than 7 per cent on Wednesday – the strategy at the heart of the company’s expansion is what Meij grandly calls the “age of delivery”.
Essentially, this is a bet that the COVID tilt towards fast-food being delivered is here to stay, and Meij says pizza is the best food to meet that demand.
But to win this race, he’ll need more stores closer to customers (the target is for growth of 8 per cent to 10 per cent a year over the next three to five years), but also plenty of people.
While Meij says Domino’s has not experienced shortages big enough to hit operations and opening hours, labour costs are clearly an issue; the group pushed through price increases in 2022 (including, for the first time, specific delivery fees), and expects to lift prices again to mitigate inflationary pressures, particularly in Europe.
The rise and rise of digital sales is also a challenge for Adam Rytenskild of wagering giant Tabcorp, and Sue van der Merwe, of The Lottery Corporation.
On Wednesday, the two companies delivered their first profit results since demerging in May, with the numbers showing businesses in two very different places.
The Lottery Corporation’s infrastructure-like qualities were on display, with a 9.4 per cent increase in revenue and a 13.8 per cent rise in underlying earnings, suggesting the group will have no issues hanging on to its share of consumer spending.
Tabcorp is in recovery mode, but strong trading in July and the promise of digital market share growth as Rytenskild prepares to launch a new app and digital wagering platform (using Google technology) saw the stock jump more than 4 per cent on Wednesday.
Rytenskild says he feels like the introduction of new technology means the shackles are off Tabcorp and it can chase its big online rivals for the first time in years.
But like van der Merwe, who grew Lottery Corp’s digital sales from 33 per cent to 38 per cent, economy-wide shortages of top quality tech staff are not making it easier to keep pace with the shift in customer behaviour.
But some light at the end of that tunnel was provided by Richard White, founder and chief executive of WiseTech; it is picking up staff around the world who are being laid off by struggling tech start-ups.
Many are joining WiseTech’s overseas offices, and hiring in Australia still isn’t easy.
But White senses a shift. “From what I can see now it’s changed in the last three to four months, and it’s changed quite dramatically. We are hiring at quite a high rate.”
One final point from Chanticleer’s sweep across the economy on Big Wednesday: if inflation is peaking, no one seems to have told corporate Australia.
As fund manager Ben McGarry of Totus Capital says, it does feel like every company is passing through higher wage costs and input costs through higher prices.
Chanticleer would add that most companies see their pricing power as a virtue and have indicated they intend to continue to raise prices into the 2023 financial year.
If inflation expectations aren’t embedded among households, as Reserve Bank of Australia governor Philip Lowe has repeatedly said, they do seem to be rising in corporate Australia.
Follow the topics, people and companies that matter to you.
Fetching latest articles
The Daily Habit of Successful People