Episode 199: Heidi Health, Canva, Mecca's Rise and Rise, NDIS Flesh Wound, CTM Disaster Gets Worse, Temple & Webster CEO Shock and Copilot Fail
The guys deep dive into Heidi Health, Canva's dog and pony show, is Mecca Australia's best business, Labor fails with NDIS, CTM worsens, Temple & Webster changes CEOs and Microsoft's Copilot woes.
The Contrarians catchup
Adam finally had a good Qantas international Wi-Fi experience on the way back from the US. “Pretty special. They finally started putting Wi-Fi on these international flights, which was a long time coming, like obviously the rest of the world did it 10 years ago.” Then domestically it failed both ways - “I was about to give Qantas this massive slap on the back, and then unfortunately didn’t work domestically, which was a bit frustrating.”
Adam shared a quote from RFK Jr. describing Trump’s maths: “He’s got a different way of doing percentages. For example, if something goes from $600 to $10, he says that’s a 600% improvement.” The comment underneath it on YouTube: “Eventually the party says two plus two equals five and everybody agrees it equals five, which was the end of 1984.”
A Group of Eight university has given 80,000 students a $50 gift voucher each to use on campus, costing $4M. Adir: “How can you on one hand say we need more money? And on the other hand, do that. It’s just completely bizarre.” Adam: “They need to be zero-based budgeting. Go back to zero and build it up again. Because they’re just so rotten to the core, these institutions. They’re not fit for purpose now.”
Microsoft is reportedly removing Copilot branding from its AI products. Adir: “Brand equity can be negative. Would you pay more for AI knowing that it was Copilot AI? No, I’d pay less. You would all pay less because it’s so bad that Microsoft is taking the sticker of Copilot off their AI.”
Intel is rocketing back. Adir: “Things went badly for them, but they’re in the right space. They’ve got a great brand. They’ll figure it out. There wasn’t much more predictable than that Intel would come back.”
Microsoft and the biggest bet in modern corporate history
Microsoft announced voluntary redundancies for 8,000 staff, the first time in the company’s history, as it continues to funnel its entire free cash flow into AI infrastructure. The stock is now off 23% from its high, trading at a PE of 26, levels not seen since the dot-com crash.
Adir: “I can’t think of a larger bet in modern history by established businesses than this enormous investment in AI. It’s possible it will pay off, but there’s no ultra high probability argument that it’s all gonna pay off. It’s gonna be one of the craziest, most dramatic bets in history for large companies.”
Adam: “It’s crazy how the market just accepts this bet. And so Microsoft’s off 23% of its high. It’s valued at $3T now. And it’s got a PE multiple of 26. This has been a long time since Microsoft’s been priced at these levels.”
Adam: “Satya Nadella 18 months ago was probably considered one of the best CEOs in the world. And I think if you look now, that was when ChatGPT was flying and Copilot was looking good. He’s fallen so far now.”
Temple & Webster: CEO out, tough times ahead
Mark Coulter stepped down as CEO of Temple & Webster after a decade, moving to executive chairman. Susie Sugden, a long-time team member, has been promoted to CEO. Adir gave Coulter enormous credit, but is clear-eyed about what lies ahead.
Adam: “A shout out to Mark Coulter, who’s been an incredible CEO. It’s worth $700M now. That was a business that was worth zero essentially when he came in. So he’s created an enormous amount of value for the shareholders. He has been probably one of the best performed CEOs in Australia in the last 20 years.”
Adir: “Temple and Webster does not have the differentiation of Nick Scali as a brand. Their brand is basically, I go online, I search for stuff, and if that bed or sofa or whatever the price is good, I’ll go and buy that one. My feeling is you’ll see in these results the beginnings of a pivot towards improving margins. All of this talk about we’re just going to keep growing the top line, my guess is this is going to be the beginning of a change.”
Adam: “I think Susie’s got a chance of really growing this business. I think she’s a really good operator. This is almost a business that probably should be private again, to be honest. Like somebody should take this business private, let them focus on making money, make twenty, thirty million bucks and just run it for profit.”
The fraud worsens at CTM
Corporate Travel Management admitted it had known since 2022 that it overcharged the British government, but chose not to tell the market. The overcharge quantum has now grown from $160M to $240M. The company has pinned the entire mess on one UK executive, Michael Healy, who was never a director and wasn’t even running the business when the alleged fraud started. New auditors uncovered what the old ones apparently didn’t.
Adir: “CTM is claiming that their UK managing director forged letters on behalf of the British government. Like that is a dramatic claim.”
Adam: “This whole excuse they made, that this is the Lee Harvey Oswald lone shooter on the grassy knoll, just makes no sense at all. But this whole thing just stinks to high heaven.”
Adam: “Every announcement these guys make seems worse than the next. It’s quite staggering. A public company is now ten months late on its reports. Somehow ASIC let these guys continue to trade, which itself is a disgrace. And now they’ve just announced, oh by the way, we didn’t rip off $160 million. It’s actually $240M.”
Adir: “My suspicions are that the previous auditors, I think they might have been PwC, I suspect they picked up on something here and they started panicking and putting a lot of pressure on. And so I suspect that may be what has happened.”
NDIS: a feather on an elephant
The Albanese government announced reforms to the NDIS, cutting the scheme’s growth rate from 10% to 5% a year, which will still see it cost $55B by 2030. Health Minister Mark Butler conceded that flawed design under the previous Labor government was the key culprit. Adam argued it barely scratches the surface.
Adam: “By 2030, Australian taxpayers are still paying $55B for this, which means $2,000 for every single Australian person. And bear in mind only about half Australians pay tax. Every taxpayer is paying $4,000 a year. So think about that. You’re listening to this podcast, you’re paying on average $4,000 a year to cover the cost of this disgrace.”
Adam: “Of the probably a hundred comments in The Age, 98 of them were saying it’s a rort, it’s a waste, it’s a fraud. This isn’t the Herald Sun readers. This isn’t just Contrarians listeners who think it’s a fraud and waste. The only people who like this thing are the 700,000 people who are rorting it.”
Adam: “They should get rid of the whole thing and seriously say people should get a great safety net like they need, 200,000 seriously disabled people, and build it properly. Not the way they built it. They stuffed it up. And start again. You can’t tinker with this thing. This thing is a dead dog.”
Mecca: Australia’s greatest retail story
Mecca reported revenue of $1.43B for the last year, with a profit of $126M and a dividend to founders Jo Horgan and Peter Wetenhall of $87M. For context, Sephora, owned by LVMH, reported Australian sales of $337M and lost $13M. Mecca is four times the size and makes money. It opened its flagship $50M Bourke Street store last year, which attracts 70,000 visitors a week.
Adam: “If you look at what Jo’s done, competing with Myer and David Jones who dominated this space. I actually rate the Mecca business story as probably one of the best retailers in the world in terms of what it’s been able to achieve in the Australian market. If they took this international, this could be a $50B business. They’ve smashed Sephora, which is a brilliant business. They’ve destroyed it. These guys are world-class. There’s almost no comparison in terms of what they’ve been able to build in Australia, in terms of the degree of difficulty and what they’ve built.”
Adir: “What is going to happen is you will see, Mecca is unique amongst large third-party retailers in that it absolutely does not compete on price. They’ve got exclusive deals with brands. And they do their own stuff as well, but the thing is if you have an exclusive deal with a brand that is almost like being vertically integrated. It means that you can control the discounting.”
Deep dive: Heidi Health
Melbourne-founded Heidi Health, an AI medical scribe business used by GPs and hospitals, has surged from US$1M to US$50M ARR in two years and is now valued at $660M after raising US$100M including backing from Blackbird. Adam gave the business a thorough technical assessment, contextualising its claims and comparing it to competitors.
Adir: “I think Heidi is fascinating. Is it worth six hundred and whatever million dollars? Heidi’s growing fast, but like if you’re in AI now, your revenue’s not your problem. Like, you’re rocketing.”
Adir: “Harrison AI has trained up a radiologist who reads films that is this good. It can identify 130 individual diagnoses on a chest X-ray. And it did the radiology test. If you give the radiology test to become a radiologist, if you give that to Claude, Claude will do about as well as like random guessing. Harrison AI scored eighty-five percent on that test.”
Adir: “When I get pitched AI businesses, everyone says yeah, we train the model. And so the thing is, are you changing the weightings? That’s the question to ask. If you’re using Anthropic or ChatGPT or Gemini as your foundational model, you’re not training it. The weightings are not yours and you don’t really know what they are. Mostly when people say they’re training models, what they mean is they’ve written really long and sophisticated prompts that they put into context before they answer a question.”
Adam: “What else can I buy for $660M? I can buy Temple & Webster. I’d rather own this business, to be honest.”
Five other stories worth following:
Startup Astor raised $5M to deliver AI-driven financial advice via text or voice, connecting to portfolios. With 4,000 users paying subscriptions, human agents verify outputs, blending automation with compliance in a tightly regulated industry.
Noscroll, built by former OpenSea CTO Nadav Hollander, uses an AI bot to filter feeds, avoiding doomscrolling and rage bait. It scans X and other sources, texting users relevant updates based on personalised preferences.
Scientists identified a mysterious golden orb discovered in Alaska’s Gulf as remains of a giant deep-sea anemone after years of DNA analysis, highlighting how little is known about deep ocean ecosystems and ongoing discoveries.
AI companies are recruiting from struggling software firms, poaching executives from Salesforce, Snowflake, Datadog, and Palantir. As enterprise demand rises, experience in sales and go-to-market strategy is becoming especially valuable talent in this shift.
Two runners broke the two-hour marathon barrier in London, led by Kenya’s Sabastian Sawe’s record 1:59:30, with Yomif Kejelcha close behind. Adidas benefits as running shoe demand continues strong growth, in the US market.