TOP PRI­VATE COM­PANI E S

FOOD & SHEL­TER TOP THE LEAGUE TA­BLE

The Australian - The Deal - - Front Page - Story by: Sarah-Jane Tasker

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.”

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