TOP PRIVATE COMPANI E S
FOOD & SHELTER TOP THE LEAGUE TABLE
E enjoy the fact that we are the masters of our destiny.” PFD Food Services chief executive, Kerry Smith, could easily be talking for most of Australia’s leading companies featured in this year’s IBIS World Top 500 Private Companies. Smith’s family-run food distribution business took the number 14 spot with revenue of $1.43 billion, and Smith says the challenge is to keep growing. “We are always seeking to bring new customers on board but also working with our current customers and looking at how we can sell more to them … we are focused to continue growing that top line in sales. Going backwards is not acceptable.”
IBIS World has been compiling the list of Australia’s Top 500 private companies for 20 years. Lead analyst Tommy Wu says the most represented industries in the 2014 list are building construction and food product manufacturing.
It would come as no surprise that Anthony Pratt’s Visy Industries takes out the top spot in the 2014 list, with annual revenue of $4.4bn but the runner-up, petrol retailing giant 7-Eleven Stores, is intriguing. The Melbourne-based company that has the license to operate and franchise some 600 7-Eleven stores in Australia from the US based 7-Eleven is majority owned by Russell Withers and his sister Beverley Barlow.
Withers chairs the company, which saw an 11.3 per cent jump in revenue to $3.86bn in 2014. The company ranked second in this year’s list, up from 12 the year before, after buying the Australian Starbucks chain from its US parent, taking over a group of 24 stores. Little is known publicly about the business strategy behind the great success of the company run by a family that has been in the retail grocery business since 1912. Wu says 7-Eleven has experienced significant growth during the year that was particularly impressive given its size. The acquisition of the Starbucks was clearly a factor. “They have had a few partnerships over the years, with Krispy Kreme and with the fuel retailing. The revenue from 7-Eleven has shifted it towards fuel retailing. It is levelling out the playing field with Coles and Woolworths. They have a lot of promotions happening and increased their general presence in the economy. They have put more money into advertising, you see them around.” Wu says it will be interesting to see how the Starbucks acquisition adds to revenue growth over the next five years.
The fastest growing companies include Melbourne apartment developer Central Equity, whose revenue grew 207 per cent to $326 million, and Ruslan Kogan’s online electronics company Kogan Technologies. A newcomer to the Top 500, Kogan’s revenues grew 171 per cent to more than $200m, shooting it into 256th in the rankings.
PFD Food Services’ Smith hopes her company’s winning strategy will see it continue to grow its market share and increase its revenue as it seeks new opportunities. She celebrates the fact that PFD has tripled its growth and revenue over the past 10 years, which she says has been by acquisition and organic growth. “Our strategy had been to become a national organisation, which we finally achieved last year when we made an acquisition in the Northern Territory,” she says. “Prior to that, we had a little gap in the market. Over the last 10 to 15 years we have expanded outside of Victoria to every other state and then Darwin was that last piece in the puzzle. We can get to 98 per cent of the population through our distribution network now, which we see as an advantage.”
Many of PFD’s customers are in hospitality and tourism, basically anything that caters for people eating outside of the home. It is also in the non-discretionary space, including institutional hospitals, schools and prisons – customers who have to buy all the time. “It is anywhere where people are consuming outside of the home,” says Smith. “We provide all of their needs – fresh meat and seafood, dried goods, dairy, chiller products, frozen goods.” Smith says it is important the company stays ahead of market trends and is prepared for a change in people’s tastes. “We supply everything we can according to our customer needs,” she says. “It is an endless need from our customers. They are looking for innovation and they are looking for a point of difference. It is a nice industry to work in that regard.”
Providers of day-to-day needs are chart toppers but sport springs some surprises
Murray Goulburn took out the third spot in the 2014 with revenue of $2.9bn. Increasing exports of its dairy products pushed it to a podium finish, after sitting at number 17 last year. IBIS World tips that the food production sector will continue to thrive as it benefits from similar demand trends to agriculture industries – the burgeoning middle classes of Asia are demanding more Australian products.
Another star performer this year has been Queenslandbased Murphy Pipe and Civil, which recorded a 425 per cent growth in revenue. Wu says that growth is compared to a six-month period from last year, but even compared to their last full-year report it has been tremendous. “They have recently merged with a UK company. Ever since, the size of their resources has given them the ability to tender for big contracts, which has contributed to their growth, which is fourfold,” Wu says. Jim Campbell, managing director of Murphy Pipe and Civil, said while the company’s growth had been swift, it had been “very strategic”. “Our strategy to invest in the coal-seam gas industry early, and to offer an innovative approach, has been a key factor in our success,” he said.
The Georgiou Group, which specialises in construction, engineering and property development, also enjoyed a healthy lift in revenue due to the booming gas sector. It jumped from 137 last year to 61, pushed up by a suite of new projects. One of its big contract wins was a $52m project for a LNG storage pond in Queensland. Stephen Gargano, a senior industry analyst at IBIS World, said the gas sector had benefited dramatically from a rise in exports and it was having a flow-on effect to support industries. “Australia plans on becoming one of the largest exporters of natural gas by 2018; that dramatically impacts on companies like Murphy because now there is substantially more investment going into the infrastructure behind natural gas.” The country is on track to be the world’s top gas exporter by 2020 and he says the mining sector also still has healthy growth ahead of it despite concerns about the boom cooling.
Building construction was a leading sector with 36 organisations represented in the Top 500. Wu says two companies to watch are NSW-based ADCO Construction which has jumped from 99 to 55 and Queensland-based home builder Coral, which moved from 437 to 346. He says Coral’s growth can be attributed to franchising that has seen it expand its business in Queensland and into South Australia. “ADCO’s growth is coming from nonresidential construction, where they are gaining market share,” he says. “The average growth in that sector is 15 per cent, which is significantly higher than the general economy.” Stephen Gargano says that over the past five years construction has been constrained. He says that housing construction shrunk at an annualised 1 per cent over the past five years. “When you look at the current year figures, in an industry that has been going backwards for sometime forecasts are to grow at 4.6 per cent, that is a dramatic turnaround.”
The list also included entities in sports and recreation, with Cricket Australia and the Australian Rugby League recording surprising lifts in revenue. Wu says both had experienced significant growth after securing new television deals. CA climbed to 169 from 337 and the ARL from 311 to 158. “Cricket Australia has had a new deal worth almost $600m, which is more than double its last deal,” Wu explains. “For Rugby League, they secured a new deal worth over $1bn with Nine and Fox Sports.”
It was not all good news. Some companies dramatically decreased revenue, some dropping out of the Top 500. Gargano says manufacturing had clearly been suffering, reflected in export figures. “It is expensive for foreign nations to afford Australian goods and for those in Australia wanting to buy a manufactured product, it is becoming increasingly cheap for local consumers to purchase these products being produced abroad.”