Dynamic Business: Moving the line upwards

New Zealand’s Top 200 companies have seen increases in revenue, profits, and total assets this year writes Tim McCready.

The high-level view of the 2018 Deloitte Top 200 Index shows total revenues for Top 200 companies increasing from $177.4b in 2017 to $191.1b in 2018 — a jump of 7.7 per cent, and up from the 4.3 per cent increase seen in the 2017 Index.

The increase in total revenues has also driven an increase in underlying earnings (EBITDA), from $24.4b in 2017 to $26.1b in 2018. This is an increase of 6.9 per cent, compared to a 2.9 per cent increase in the 2017 Index.

The EBITDA margin, an assessment of operating profitability as a percentage of total revenue (total EBITDA/total revenue), remained relatively constant between 2017 (13.8 per cent) and 2018 (13.7 per cent).

Total profits after tax have increased from $8.6b in 2017 to $9.3b in 2018. This is an 8.8 per cent increase year-on-year (compared to a 6.4 per cent decrease seen from 2016 to 2017 in last year’s Index).

Net profit margin (profit after tax/total revenue) stayed relatively constant between 2017 (4.8 per cent) and 2018 (4.7 per cent).

Fonterra, the top ranked entity on the Top 200 in 2018, has revenue of $20.4b compared to 2017 where it had revenue of $19.2b — a 6.3 per cent increase, due to continued growth in the China market.

The 200th ranked entity on the Top 200 Index in 2018 is now NZ Investment Holdings, with revenue of $191m. Last year’s 200th ranked company, Honda (now 196th) had revenue of $177m. This is a 12 per cent increase in revenue between 200th ranked companies year on year.

Total Assets have increased from $218.5b in 2017 to $231.1b in 2018, a 5.8 per cent increase.

Fonterra (1st) and Fletcher Building (2nd) have held the top two spots in the Deloitte Top 200 for the past three years. However, these companies come in ranked 198th and 197th respectively in terms of profit after tax – Fonterra made a loss this year of $196m and Fletcher Building made a loss of $179m.

Fonterra’s losses have largely been a result of a $439m write down on its investment in Chinese infant formula company Beingmate, and a payment made to Danone due to a legal claim. Fletcher’s losses are driven by the deteriorating performance of its buildings and interiors business within Fletcher’s construction division.

The gap between these two companies in terms of revenue has also widened, as Fonterra has increased revenue by 6.3 per cent while Fletcher Building has only increased revenue by 0.8 per cent.

Foodstuffs NI has moved to 4th place overall, trading places with Woolworths (now 5th) since the 2017 rankings. In 2018 these companies reported revenue of $6.6b and $6.4b respectively.

The top 10 has remained fairly consistent, with BP the only new entrant who has now claimed the 10th spot, replacing The Warehouse Group (which has moved to 12th). BP has reported revenue of $3.2b in the current year while The Warehouse Group has reported revenue of $3.0b. The rise in BP’s revenue is primarily from increase in global oil prices.

The overall increase in revenue this year has been reflected in the Government’s tax take from the companies that comprise the Top 200.

Tax paid jumped 9.8 per cent on last year’s figure, from $3.3b to $3.6b — contributing to the Coalition Government’s strong surplus.