The Top Australian Enterprises in 2020

August 2021

Phil Ruthven AM, Founder and CEO

Each year we release Ruthven Institute’s Profitability Survey of the nation’s 2000 largest enterprises. The clear, and perhaps surprising, leader of Australia’s best performing enterprises of 2020 is Moose Toys.  This innovative Australian-owned toy design, development and distribution company has achieved an outstanding average return on shareholder funds (ROSF) of 107% for the three years to 2020.

Our survey, accounting for nearly half (47%) of the nation’s revenue in 2020, has shown some outstanding success stories during a time when Australian businesses and households have had to endure unprecedented uncertainty and disruption due to the COVID 19 pandemic.

Over the three-year period to 2020, nearly 13% – or one in eight – of the nation’s largest corporations achieved World’s Best Practice (WBP) profitability of 22%+ return on shareholder funds (ROSF) after tax.

The Profitability Challenge

Overall, the nation generated a net profit of $119 billion, corresponding to a return of 2.2% on $5.3 trillion invested equity (inclusive of general government activities), a massive drop from the previous year’s $232 billion net profit and 4.4% return.

Of course, the Covid pandemic continues to impact businesses, especially considering recent returns to lockdowns in major Australian cities. While many businesses have managed to survive – some have even flourished – during these challenging times, the future trajectory remains uncertain after the ‘sugar-hit’ and relief bounce-back in early 2021.

Over the course of a year, we’ve seen industries which had the potential to be a future driver of the economy – such as tourism and related sectors – faced with a huge threat to their survival due to international border closures, while other industries have outperformed in 2020 due to their dynamic nature, ability to adapt and innovate or in some cases, being at the right place at the right time.

Industry Performance Snapshot: Retail on the Rise

Retail was the best performing industry for the three years to 2020, with an average ROSF of almost 17%. Not surprisingly, the standout performers were online retailers, or those with a strong online presence, while traditional bricks-and-mortar retailers had to withstand plummeting foot traffic due to lockdowns and a growing appetite for shopping from home.

Knowing your industry and its lifecycle phase is one of Ruthven Institute’s 12 Golden Rules of Business Success to achieve WBP profitability. Recent conditions highlight the importance of this for retailers as the contrast between online and in-store shopping continues to widen.

While retail recorded the biggest year-on-year rise, mining came in second with a rise above 4% in ROSF in 2020. Within the mining sector, the best performers were iron ore (on the back of supply-side disruptions in Brazil and the Chinese economy reopening faster than anticipated) and gold, as investors increasingly looked to ‘safe’ options in an uncertain global climate.

The wholesale and construction industries also performed well with 13% and 11.9% ROSF respectively for the three years to 2020.

At the other end of the spectrum, the hospitality sector was, not surprisingly, the worst performing industry with an average ROSF loss of almost -8%. Administration and Support Services was the industry which recorded the most pronounced fall compared to the previous year’s profitability study, with a -12% fall in its ROSF. No doubt the challenges faced by travel agency and tour arrangement businesses within this sector were a key contributing factor.

Australia’s 100 Best Enterprises

Despite challenging conditions, several enterprises have managed to post exceptional results and profitability over the past year. Twenty enterprises averaged a ROSF above 50% for the three years, while 80 had an average ROSF between the WBP threshold of 22% and 49%, with the overall average for the Top 100 coming out at 40% – 4% below the previous year.

As stated before, the standout performer for the past year was toy wholesaler Moose Toys with a three-year ROSF average of 107%. While much of Melbourne’s Moose Toys’ success was founded on the Shopkins phenomenon (a range of miniatures), these days it’s riding the wave of being the exclusive maker of toys for the Bluey children’s television series, the most successful Australian children’s show since The Wiggles.

At the tail end of the Top 100 were newcomers home entertainment retailer JB Hi-Fi and furniture and manchester retailer Adairs, likely both solid performers due to a pandemic-inspired rise in online spending on home entertainment and home décor, rather than travel and entertainment.

Characteristics of 2020’s high performers

Consistency is obviously key when it comes to performance, with half of this year’s top 100 performers also appearing on last year’s list, but focus is another significant factor.

Of this year’s top 100, 98 were focused, conducting business in just one of the nation’s 500+ classes of industry, an ongoing theme of the top 100 enterprises which further reinforces rule number one of Ruthven Institute’s 12 Golden Rules of Business Success: focus on one business at a time.

Local ownership was also a notable characteristic among the outperformers, with 62 out of the top 100 locally owned, although interestingly, the remaining 38 foreign owned enterprises had a higher ROSF.

Private ownership was also a factor, with 59 out of this year’s top 100 privately owned. Again though, the remaining 41 companies rounding out the top 100 had a higher ROSF for the reporting period.

And the Winners Are…
So besides Moose Toys, who were this year’s standout performers? Rounding out the top 10 of the 100 Best Enterprises in ROSF order were: Diamond Gas Resources (85.6%); Sunstate Cement (83%); Colliers International (81.2%); Hassell (78.4%); L’Oreal Australia (73.4%); Slater & Gordon (72%); New Aim (65.1%); Grand Motors (62.8%) and Apple (62.5%).

Looking at the nation’s 100 Best Listed Enterprises based on ROSF the top performers were law firm Slater & Gordon with an impressive 72% ROSF, followed by mineral sand producer Iluka Resources (58.2%), Lovisa Holdings (55.9%), Nick Scali (51.4%) and Platinum Asset Management (48%).

It’s interesting to note that of the Top 100 Listed Enterprises only 38% achieved World’s Best Practice ROSF of over 22%, which is in stark contrast with the Best 100 Enterprises where all 100 achieved ROSF over 22% – a result which reinforces the outperformance of propriety enterprises over their listed counterparts.

 

As companies continue to face a new kind of financial crisis in 2021, the road ahead will be rocky for many, however, this may be an opportunity for underperforming corporations to bring new blood to their boards with people who understand the importance WBP success strategies.

It goes without saying that no company is perfect, but to boost their chance to achieve WBP profitability – and make it onto next year’s winner’s list – businesses are advised to follow the Ruthven Institute’s 12 Golden Rules for Business Success below:

Ruthven Institute have developed a Strategic Rating Service on companies in the S&P/ASX 300 index which is a world’s first integration of financial and strategic analysis in a longer-term outlook for companies’ performance, based on the strategic overview of the key success factors in determining companies’ long term profitability performance.

Key components of the service include an extensive interactive Strategic Rating variable database facilitating company fitness judgments, company and industry comparisons, stocks indexing and weighting, and the general optimisation of Australian share assets in portfolios. A Strategic Snapshot database, consisting of a quick financial-based initial strategic rating based on a listed company’s profitability (ROSF). And detailed Strategic Rating Diagnostic reports that analyse individual listed stocks, assessed financially and strategically for performance, sustainability and wealth creation.

For the Full Report

To access the full profitability report for 2020, and tips on how your company can take their business profitability to the next level, contact us today.

Sign up here - register for free insights

Latest Insights Subscribe
reCAPTCHA