Australia’s best performing companies, or those with the best return on shareholder funds (ROSF) after tax, have a few things in common, according to analysis by Phil Ruthven, the founder of IBISWorld.
Ruthven decided to look at all large enterprises in Australia, not just the home grown or ASX-listed ones, over five years to 2015.
He took out those with thin capitalisation, or those where equity was less than 5% and the rest debt.
He ended up with 1467 companies, representing about 38% of Australia’s $4.8 trillion revenue in 2015. The 1155 companies running at a profit had a ROSF of 15%.
The top 100 had a ROSF of 57%, one of the highest returns ever recorded, with combined revenue of $72 billion.
Here are the top 10:
And here are the industries where the top 100 most profitable companies sit:
Ruthven says the most common characteristic of these successful companies is that they were focused on just one industry and not spread across sectors.
Of the top 100, 95 were in one industry while the other five were conglomerates with two or more sectors of business.
Here’s what the top companies do well, the characteristics identified by Ruthven:
“We need more of our boards to understand what leads to such success, instead of settling for a good result rather than a great result,” Ruthven wrote in his analysis of the top companies for Company Director, the magazine of the Australian Institute of Company Directors.