30 October 2009
Solid performance in the lead-up to the global crisis left Australia's top private firms well placed to weather the storm and they are expected to take full advantage of the opportunities the recovery presents, driving the nation's growth in the months ahead, according to a new D&B report.
Corporate Australia's private side utilises information from the Company360 service to examine the characteristics and performance of Australia's top 100 private companies (as defined by revenue) across financial years 2006-2008.
The report reveals that as the first effects of a stalling global and national economy took hold, some sectors boomed while other industries began to wane. In addition, the pressures of the crisis caused year-on-year growth to slow, business returns to decline and payment performance to deteriorate.
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Despite these shifts, the nation's top private companies still managed to produce relatively solid results in 2008. The group delivered a median profit of more than three million in the 2008 financial year and median revenue growth of 14.7 percent (from 2007 to 2008). According to Christine Christian, CEO of Dun & Bradstreet Australia, the solid position of Australia's top private firms prior to the crisis indicates they are well placed to ramp up performance as the economic recovery takes hold. "There is no doubt the global economic crisis has impacted the Australian business environment," said Ms Christian. "Its affects were clearly evident in the changes that began to take shape within the private company landscape between 2006 and 2008. Growth slowed, returns decreased and payment behaviours began to impact cash flow. "However, the top private firms were in a strong position before the nation entered the storm and they continued to perform relatively well into 2008. Therefore, they should be well placed to begin the journey back to the solid performances of 2006 and 2007 as the economic recovery takes hold." |
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Key Financial Indicators Median profit increased across all three years from around 1.7 million to above three million in 2008. A significant jump (62 percent) in median profit occurred between 2006-2007, however private firms were unable to replicate this level of performance the following year. Revenue performance followed a similar trend, with the median increasing by nearly 22 percent, from $53.27 million in 2006 to $64.91 million in 2007. A further 11 percent increase occurred in 2008 - a strong result but only half the gains made a year earlier. Examining the total debt to net worth data reveals that companies took advantage of the strong economic conditions in 2007, reducing their exposure to debt relative to shareholder equity. However, by 2008 the median ratio had become largely flat as growth across the broader economy slowed and uncertainty crept in. Key Performance Indicators The effectiveness of firms' income generation through existing assets improved in the first two years before declining in the third year to reverse the gains made in 2007. A direct correlation between companies with a higher return on asset ratio and an ability to maintain those levels during the slowdown was evident. The upper quartile value slipped just eight percent between 2007 and 2008, while the lower quartile fell by approximately 30 percent. |
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Return on equity and return on investment indicators followed a similar trend. Return on equity rose from a median value of 28.45 percent in 2006 to 29.76 in 2007 before falling back to 26.75 in 2008. Meanwhile, the median percentage return on investment rose from 35.53 to 39.47 before dropping back to almost equal the 2006 level.
Key Payment Indicators
A trend towards increasing payment days was evident across the three year period, with the firms that performed the worst on this indicator maintaining an average collection period that exceeded 95 days in all three years. Even those at the other end of the spectrum experienced an increase in payment periods of around five days, taking terms for this group beyond the standard term.
Positively, Australia's top companies maintained a sound ratio of assets to liabilities across the three years, with a median ratio of around 1.3 percent. Consequently, although payment indicators revealed a concerning trend with the potential to have significant detrimental impacts on cash flow, Australia's top firms had the capacity to liquidate assets to fund any short term debt requirements.
"Australia's private companies play a vital role in our economy and their performance will be critical to the nation's return to prosperity," said Ms Christian.
"These firms are incredibly diverse therefore, whether they are being assessed from an investment perspective or as potential prospects or partners, it is critical they are understood."
For further information or to arrange an interview please contact:
Danielle Woods
D&B Corporate Affairs Manager
02 8270 2926
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
