Those six include Australia’s largest private company, Visy industries, second largest, 7-Eleven and third largest, Murray Goulburn Co-op. Not a bad track record, but still plenty more we can do for the fastest-growing companies in Australia.
"The younger entrepreneurs I meet are more aspirational and globally oriented."
But I digress. IBIS founder Phil Ruthven, who I had the pleasure of getting to know better at the recent Opportunity Asia events co-hosted by ANZ and Fairfax, describes the Top 500 as “ducks”.
“These large private companies are like ducks,” he says - just to stay on the list they have to paddle like crazy. About 10 to 12 per cent fall off the list every year because they go public, get acquired or go backwards.
He told me the top 500 private companies, published in ‘The Deal’, needed minimum revenue of $64.2 million just to get on the list and contribute about 7 per cent of national revenues. All private companies make up 21 per cent of the nation’s total companies.
The volatility of the large private company sector throws a spotlight on emerging trends in business. As Ruthven points out, because they are not listed and not in the limelight, they are often the quiet achievers, which is why this glimpse is so revealing.
Here are the top trends and observations from the list:
Expansion into Asia Pacific
Visy Industries, with revenue growth of 7.3 per cent in the last 12 months to $4.4 billion, is a great example of the new focus on Asia Pacific.
After two decades of successfully focusing on expansion in the US, Visy wants to double revenue from Asia over the next decade.
It will use a trading company in Singapore to sell more products in the region via plants in a raft of Southeast Asian countries.
Of course, Visy are world leaders in box making and there is no reason they won’t succeed in Asia and you can’t ignore a third of the world’s economy. But as Ruthven reminds us, competition is fierce and family cartels can be challenging so some companies will find Europe and the US better markets.
Murray Goulburn, which enjoyed 23.3 per cent revenue growth to $2.9 billion, is also targeting Asia. The group plans to spend $500 million on factory upgrades to export more customised dairy products to Asia.
Huge growth in superannuation funds
Ruthven described growing superannuation funds as monsters, so much so that the decision was made to do a separate Super list.
That list was topped by the giant AustralianSuper, which grew at a whopping 191 per cent over 12 months to $24.9 billion.
Just to get some idea of the size of our super funds, the top 35 researched by IBIS enjoyed a 36 per cent jump in revenue to more than $104 billion.
This growth was from higher investment returns and increased contribution from members.
“The super funds are smashing it growing organically and through mergers and acquisition which is good for Australia,” Ruthven says.
Stand out industries - not what you think
Given the Australian love affair with property, you would expect building construction to be the most represented industries on the list – and it is with 36 companies in the top 500.
In fact, the fastest-growing company on the list was Melbourne apartment developer Central Equity with revenue growth of 207 per cent to $326 million, while Meriton Apartments was no slacker with revenue of $2 billion.
The largest building construction company on the list, the late Len Buckeridge’s BGC, enjoyed 7 per cent growth to $2.8 billion in the last 12 months.
But the pleasant surprise was how large and fast growing the food production sector is.
As mentioned, Murray Goulburn is growing on the back of dairy exports to Asia. Others like PFD Food services, which enjoyed 23.3 per cent revenue growth to $2.9 billion, are expanding throughout Australia.
Meanwhile, Ruthven says the services sector will continue to grow in line with other developed countries, particularly as our population ages.
Retail needs to innovate
The surprise on the list this year is family owned, Melbourne-based 7-Eleven stores, which enjoyed an 11 per cent rise in revenue to $3.8 billion in the past 12 months. It jumped rank from 12th place last year.
Ruthven wishes our retailers were growing faster. Why can’t they be more adventurous, he asks? They need to innovate, adopt new technology and get over their preference to be local and stay in Australia.
A 7-Eleven spokesperson told The Deal its next stage of growth would come from Western Australia, the first time the group has entered a new market in 32 years!
New players in town
We’re starting to see the winners of the internet revolution climbing the list.
While retail is struggling, online retailers like Kogan Industries - which made the list for the first time - immediately shot to 256th place with revenue growth of 171 per cent in the last 12 months.
The company, only eight years old, has been able to get traction due to the inaction of major retailers on the internet.
Ruthven says we will see more Kogans successfully challenging the old-fashioned views people will never buy a couch or TV online, while continuing to remain a few steps ahead of the game. Gas is gas!
Before we can get to gas, Phil insists on making the point that everyone is carrying on about gas as the next ‘mining boom’.
Rather, he insists the mining boom still has a way to go. Most miners are listed and so are not private companies. But the iron ore boom which started in 2002 will run for a number of years.
Instead, it’s all about gas and the huge rise in exports in the sector has had a huge flow on affect to the service industry.
One of the beneficiaries this year is, Georgiou Group, with 51 per cent growth to $601 million, in no small part due to a big contract of $52 million for a LNG storage pond.
But a note of warning from Ruthven: the decline in iron ore will not be fully offset by extra spending on gas and the competition will be fierce. We have a freight advantage, he says, but we will need to rely on volume not price, he warns.
Growth in the healthcare sector
On the back of an ageing population and a nation that is putting more emphasis on health sits the huge growth in the size of companies in the healthcare sector, including $2.3 billion Hospitals Contribution Fund and the $2 billion St Vincent’s Health Australia.
Ruthven says this sector is still predominantly government owed although there have been little productivity gains in the sector for a long time which means it is ripe for a bit of innovation.
Tall poppy syndrome is fading
I know Ruthven has always complained about the tall poppy syndrome so I was surprised when he mentioned a major new trend is the replacement of the envy gene with a more aspirational mindset.
He says Australians love to tear down successful businesspeople - unlike Americans who see them as people to emulate. But a global generation is changing all that, he says.
The younger generation are much more mobile and are creating entrepreneurial companies that are very export focused and investing overseas. Ruthven says they are not carrying all the “localised rubbish” we have been carrying and they are not scared of the world or success.
I agree. The younger entrepreneurs I meet are more aspirational and globally orientated although I have always found the only envy gene true entrepreneurs have is when a competitor gets ahead of them!
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
09 Sep 2014
01 Jul 2014
13 May 2014