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So let's talk about DAGIO. So you know companies can have little hiccups u go through sort of short-term issues. Uh and I think lots of the market at the time thought okay maybe you know we we'll give Dio the benefit of the doubt but then there was nagging concerns that people were you know drinking less.
What does that structural uh headwind for Dio as a business? What does it mean longer term? And then I don't know it just seemed to be succession of bad news after bad news. What what what do you do in this situation? Obviously you've you've you you've stayed patient. Other people would have just sold out and said we think that actually the future is different for Dio and we don't want to be in it.
Let's just say one thing. Okay. So so in 2019 before COVID this business had annual revenues of 17 billion 17 billion. Um, today it has revenues of 20 billion. I think last year its sales were down 200 million. Okay. On a 20 billion revenue line. So, so, so I mean, you're right. The share price has more than haveved, but actually the business is a significantly bigger business today than it was precoid.
and the difficulties that you're talking about and I I'm not denying them but to date at least all that's happened is that Diagio's revenues have have gone sideways. Um you know who knows what the revenues will be this year but but I think the median forecast is just a tad under 20 billion. So so the share price has more than haveved and yet revenues maybe at their worst are going to be down three or four percent.
I mean, I know earnings are going to be down more than that, but it's not like the business is imploding. I mean, it really isn't imploding. We were talking about Guinness beforehand that that's booming, you know. Um, some of its brands are doing well. But again, listen, I I I fully acknowledge the risks of sounding complacent here.
I I I I absolutely get it. And and and in the end, who knows? But but why haven't we sold Diagio? Well, because it's one of the very rare UK companies, and I that's what I do. I have to pick UK companies. It's one of the very rare UK companies that is self-evidently the best in the world at what it does.
It's the biggest. It has the best brands. It's the best diversified by product and by geography. you know, it it it's it's an exceptional business, DHO. And I think even more to the point, you know, I mentioned investors focusing on the short term, and I, you know, I'm not saying it's not important, but but so few corporate assets, so few of them can you confidently predict will in 25 years time, let's say I'm still running Finsbury in 25 years time, be a nice idea.
I promise you in 25 years time Guinness, Johnny Walker, Tanker, Bailey's, Nennessy th those brands will still be being enjoyed around the world probably in higher volumes than today assuming the world economy grows. And that's really, really rare. It just is. You know, when you look back at financial and industrial history, most companies don't survive and prosper for really long stretches of time.
So, in theory, it ought to be very very valuable indeed. Um, but I agree the the thesis is being tested today. What I thought was quite interesting is they've they've hired Dave Lewis, formerly of Tesco, but the share price has not rebounded. I mean clearly he's got a very good track record of creating value for businesses.
Why is it that the market's still very skeptical about a turn turnaround? Is it because they think that the scale of the job in hand is is not simple to achieve. The truth is that trading for Diagio clearly remains difficult. Right now it's still difficult. uh we can see the statistics coming out of the US spirits market that market is shrinking maybe for cyclical reasons maybe there's some long-term effects here as well and and I can understand why investors are reluctant to start bidding up DIO shares until at least that US market begins to stabilize and who knows when that will be there's also um the recognition that I agree.
I mean, Sir Dave Lewis has a great track record and a great track record in businesses that have relevance for for Diagio. But what's he going to do in his first six months? I mean, maybe that's when you take the maximum amount of pain and maybe the smart money would be to buy when he announces the big cost cutting or the big hit to I mean, who knows?
I I don't know that. But I can understand people wanting to try and time the recovery. Um but but you know I I know that it's sort of boilerplate PR but I I I just quote what Sir Dave Lewis said when he took this job on. Um he said, you know, th this is um this is one of the world's great consumer companies with great brands and in the long term great opportunities and actually we've spoken to him and we know that he's sincere in that appreciation of the strength of the brands and the opportunities.
Um at the moment no one believes it. Is he trying to still decide as Dagio's problems it's of his own making or is it simply the environment's changed and the company hasn't adapted or not been created enough with its marketing for example he's interested that in the United States which is where people are most concerned he's interested that so-called Gen Z in the United States that is the first generation in US history that is drinking more spirits than beer and wine.
Uh that hasn't happened before and he he certainly tabled that as a sign that maybe the backdrop isn't as catastrophic as the share price might be implying. Well, let's let's talk about um I want to talk about Right Move and Sage and about how they might be disrupted by AI. I think lots of people assume that companies like that might embrace AI to help themselves run more efficiently, but you know, if we right move, you're looking for a house.
I don't know. I mean, could is there a part of right move that you perhaps don't need in five years time or that AI could do for you? um Sage as well. This is like the sort of the the old school accounting software stuff. It feels like that could be something that AI could do for you. Are you worried at all about sort of these these threats or do you see AI as opportunities to these companies?
Well, listen, we we we see it as as an opportunity. um that is a thesis that will be tested by the development of the businesses and the AI phenomenon in itself and and there is no certainty of their success. Um but there's not much certainty of success of any company in any industry and and you have to take you have to take a view.
One of our concerns about the UK stock market is that companies haven't been aggressive enough in investing behind their growth opportunities. And I think both Right Move and Sage have a very significant opportunity to grow their businesses and grow their businesses very very profitably by multiple times the their current revenue base if they make the investments now that are necessary to capture um the the the the utility and efficiencies that AI can bring.
Um both those companies as I'm sure you know um have explicit public and I think credible strategies um to [snorts] utilize digital technology including AI to increase their utility to their customers. You know, it's only 12 months ago that Right Move won an award as the tech company of the year in the UK in recognition of the investment that Right Move's been making in its digital and AI services.
And you can see that the company's growth rate has accelerated uh as a result. Um, Sage, um, last year grew its earnings at 18% with its revenues up 10%. And Sage grew at those rates because it's cloud-based AI enhanced services are selling very well. So new technologies do bring the risk of disruption but new technologies for companies with high recurring revenues and strong market positions it's an opportunity for them to um to to enhance their growth rates and yeah very much hope that that's the case for for both of those.
just on right move. I think it's so interesting. Um could could people look for property listings on on chat? Well, maybe. Um but in the United States, chat has decided already taken the decision to collaborate with Zillow, which is the biggest uh property portal business in the United States. Doesn't have the same share as Right Move, by the way, but nonetheless, it's the biggest.
So rather than go directly to compete with Zillow, ChatGpt has actually gone into partnership with Zillow. And that kind of makes sense to me. I mean, sure, these you can do fun things with these agents, can't you? But you're always just slightly uncertain whether everything's there. And I I think for for business users, for professionals, for people um uh uh considering the most important decision they make in their lives, which is which is choosing the right property, relying on chatbt when you know that right move absolutely has all of the inventory and all of the ancillary services built.
I I it's it's a pretty steep moat. It's a pretty deep moat. Were you surprised at the market reaction sort of I don't know maybe two three months ago when right move came out and said you know here's our earnings we're doing fine we're going to spend this extra money and the market reaction was incredibly negative is I wonder whether people going
I wasn't surprised um I you know I didn't like it uh and I wasn't surprised um but was it the right thing for the company to do and when you settle down a bit And listen, I'm just going to quote um the company's own investment adviser, the company's own broker. I mean the the the that kind of third party okay it's related to right move.
It's their adviser. I mean they're talking right move has annual [snorts] revenues today of around 400 million. Um there are forecasts not for the next couple of years but maybe on a 5 to sevenyear view that right move could if it gets this right be more like a one and a half to two billion peranom revenue business.
That's the scale of the opportunity for the business that gets AI services right in the context of the UK residential uh real estate market. And at the very very very very least, I think everyone would have to acknowledge that from this start point with 85% of all the time spent by people looking at properties being spent on Right Move, it's definitely theirs to lose.
Do you know what I mean? I mean, no one's going to walk in and just take that mind share away from that company. In the meantime, with every single passing hour or day, you know, there's a billion and a half minutes a month spent on right moves platform that's providing data and insights for that company that's not available to anybody else.
It's a it's a it's it's a strong franchise and it's getting stronger. So, yeah. um UK investors, you know, who am I to say? But but some sometimes investors get scared when companies point out that they've got a big growth opportunity, but it's going to cost a bit in the short term. I mean, to me, we've got to encourage them to to to make those investments and fundamentally change the scale of the business upwards.
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