In early May each year, we have the opportunity to join top investment managers to hear from the CEOs of leading Australian companies at Macquarie's annual investor conference. While this year was certainly different, via webcast rather than in person, it could not have come at a better time. It was a great opportunity to hear how executives were positioning their companies to deal with the fallout from COVID-19 and how they're planning for the future.
While the number of companies presenting was understandably down on previous years, there was good representation amongst resource, financial, technology, property and retailing industries. There were a number of key themes to come from the conference.
- The current environment will only accelerate the structural changes that were occurring prior to the COVID-19 pandemic. Trends such as online retailing and video conferencing will likely see their adoption expedited.
- This environment may also see some unexpected structural changes. For example:
- Business travel will be very different for some time. Will this be permanent?
- With a workforce operating from home, many are questioning the value of office properties. Six weeks on and the reality for most is that face-to-face collaboration is incredibly important, not only for efficiency but also mental well-being. With "hot desking" out and the need for social distancing, will many end up requiring more space?
- With a potential acceleration of the shift in retail to online, how will retail property fare?
- There is no substitute for having a strong balance sheet and positive cash flow during these times. Companies have sought to promptly shore up their financial capacity and banks have shown a willingness to extend credit lines and provide much-needed support.
- Management were unwilling to provide forward-looking guidance. Notwithstanding some incremental signs of a recovery in domestic activity (such as modest increases in east coast traffic) and discussion of easing social restrictions, it's too early to make a call.
- Where possible, companies are looking to wind back spending on growth projects. However, there were many notable exceptions, where those with balance sheet strength continue to invest, seeking to further increase their competitive advantages and capitalise on new opportunities.
While none of the takeaways were ground-breaking, they supported many of our existing views.
we have a hit list of quality investment ideas and will continue to look for opportunities to prudently invest in these for the long term.