Dynamic Business: Trends that matter in 2022 - NZ Herald
The business climate has been anything but predictable over the past two years.
The Covid-19 pandemic has caused upheaval and seen companies scramble to adapt to a rapidly changing environment — the most visible changes have been the rapid uptake of digital technologies and the rise of remote and hybrid working.
That unpredictability looks set to continue, but there are several underlying trends for businesses to keep in mind as they navigate the year ahead.
A new era of geopolitics
In response to Russia’s invasion of Ukraine, the US and EU have cut selected banks from Swift and closed airspace to Russian planes. Further sanctions have been imposed on Russia’s central bank, aimed at preventing it from accessing reserves.
While the crisis might be on the other side of the world, the economic impact will ripple through the global economy and reach NZ shores.
Russia is the world’s second-largest exporter of crude oil and refined petrol, and the world’s largest exporter of natural gas. Global crude oil prices have already reached their highest levels since 2014, and it is expected that prices will go even higher as the conflict persists. This will impact fuel, supply chains, and the cost of goods in general.
Businesses should also brace for cyberattacks, which many predict Russia will use in response to sanctions. NZ’s National Cyber Security Centre (part of the GCSB) recently released an advisory encouraging nationally significant organisations to consider their security, exercise readiness, and monitor for relevant cyber security developments.
Closer to home, the South China Sea and China’s increasing influence in the Pacific continues to cause fractures in the relationship between China and the United States.
Just prior to the Beijing Winter Olympics in a joint statement, President Xi Jinping and Russian President Vladimir Putin denounced interference from the United States in their affairs and opposed further enlargement of Nato.
While New Zealand has so far managed to carefully navigate its relationship with China, we will face increased pressure as Australia, the United States and the UK make stronger statements about China’s behaviour. At last year’s Apec CEO Summit, President Xi warned Asia-Pacific nations to not “relapse into the confrontation and division of the Cold War-era”.
Prime Minister Jacinda Ardern noted at last year’s China Business Summit that differences between NZ and China were “becoming harder to reconcile” as Beijing’s role in the world grows and changes, and that “managing the relationship is not always going to be easy and there can be no guarantees”.
With geopolitics entering a new era, businesses must walk a geopolitical tightrope and be ready to respond as events occurring elsewhere in the world impact their own operations, relationships, and people.
Increased employee turnover becoming harder to prevent
Since the start of the pandemic, the “Great Resignation” has gained momentum. The pandemic has shifted the mindset of employees, and seen them leave their jobs in search for a better work-life balance, remote work opportunities, increased flexibility or higher pay. In some cases they are moving to organisations that provide a better sense of purpose and meaning, with values that align with their own.
In order to remain competitive and attract and retain workers, companies have to rethink the benefits they offer and clearly articulate their purpose.
This is particularly true for knowledge sectors — those industries significantly reliant on the use of technology and human capital. The tight labour market around the world has seen those workplaces that don’t offer the flexibility and purpose demanded by their employees hindered by increased turnover in a market where good talent is hard to find.
But remote and hybrid has introduced new challenges for business.
The removal of a commute dramatically increases the pool of potential companies for employees. Someone living in Taranaki can now apply for remote working roles in Wellington or Auckland that might have previously been unobtainable to them.
It also limits the social ties that employees make with colleagues.
We have all been to staff farewells where we are told by the departing employee “it is the people here that makes it so hard to leave this job”. These connections that might have once encouraged employees to remain in their job have become weaker and will see the great resignation becoming a sustained challenge for business to grapple with.
Four-day work week gaining momentum
As an alternative to negotiating remuneration with employees and becoming drawn into a bidding war with other workplaces, there has been a rise in companies offering a shorter work week as a bargaining chip.
One example of reduced hours is the four-day work week, which is gaining momentum around the world.
NZ’s Perpetual Guardian trialled a four-day week in 2018 — a world-first for a privately held company.
The eight-week experiment measured productivity, motivation and output, with staff paid the same amount for working fewer hours. It discovered productivity improved 20 per cent, and employees were more creative, committed and less stressed. It has since made the move permanent.
Perpetual Guardian founder Andrew Barnes says the four-day working week is “not just having a day off a week — it’s about delivering productivity, and meeting customer service standards, meeting personal and team business goals and objectives”.
More companies are now beginning to trial shorter work weeks.
A four-day week pilot in the United Kingdom begins in June, with 30 companies signed up so far. The pilot is run by 4 Day Week Global, an organisation that advocates for the shorter week. It says similar programmes are set to start in the US and Ireland, with more planned for Canada, Australia and New Zealand.
Wellness on the way up
Covid-19 has put significant strain on the workforce. Uncertainty around job security, lockdowns, social isolation and limited social contact all contributed to the mental health crisis and exacerbated stress, anxiety and depression for both employers and employees.
The challenge of retaining good employees has seen businesses and business leaders prioritise health and build a culture of wellbeing in the workplace that openly supports mental health.
Many organisations have introduced wellbeing programmes, which include partnerships with mental health providers, subscriptions to mental health apps, fitness classes and additional days off. Last year, Westpac New Zealand introduced five days a year of wellbeing leave, and NZX-listed Vista Group introduced half-day Fridays for all its staff.
Research conducted by the New Zealand Institute of Economic Research last year on behalf of Xero showed investing in employee wellbeing can help to make a business more profitable.
It estimated that for every dollar a small business invests in company-wide wellbeing initiatives for staff, it can expect to see a return of up to 12 times within a year.
The impact of Omicron (and future variants)
Overlaying all these trends, Covid-19 remains present. While the world welcomed the news that the highly transmissible Omicron variant is associated with less severe disease than earlier variants, a pattern of new variants around every six months has emerged.
Since there is a risk of the virus mutating each time it reproduces, the greater transmissibility from Omicron brings with it an even greater chance of new variants emerging.
It was hoped by many that the vaccine rollout would bring an end to the pandemic, but it looks increasingly likely that Covid-19 — in one form or another — is here to stay.
New tools like antivirals, antibody treatments and new vaccines are coming on board this year, which will help us navigate Covid-19 as it becomes an endemic disease.
These will be important as 2022 (hopefully) becomes the year that businesses, employers, employees and government finally reach post-pandemic normality. In a year fraught with challenges of all kinds to navigate, that is something that should bring hope to us all.
Deloitte Top 200: Sustainable Business Leadership - Kathmandu - NZ Herald
When Kathmandu achieved B-Corp certification in 2019, it became the largest Australasian retailer to be certified through the stringent process which recognises the highest standards of environmental and social performance.
“Part of being a certified B-Corp is looking at how we can benefit everyone that our brand comes in contact with, from suppliers to customers,” says Kathmandu CEO Reuben Casey.
“It helps us on that path of continuous improvement and demonstrates to our customers, shareholders, investors and suppliers that we are committed to doing the right thing.”
The Deloitte Top 200 judges commended Kathmandu Holdings for putting sustainability right at the heart of its strategy, and say this is why Kathmandu has been recognised as the winner of the 2021 Sustainable Business Leadership award. They are impressed by the leadership it demonstrates across ESG (environmental, social, governance) to drive long-term value for its shareholders and for the planet.
The Kathmandu brand was established in 1987, with Kathmandu Holdings formed in 2009 as a publicly listed company. The subsequent acquisition of hiking footwear brand Oboz (2018) and surfwear brand Rip Curl (2019) has seen Kathmandu Holdings transform from an Australasian retailer to a brand-led global multi-channel business. The Group is now working to extend Kathmandu’s B-Corp accreditation across its other key brands — Rip Curl and Oboz.
“Sustainability is central to Kathmandu’s strategy and is felt by all divisions of the company,” says Top 200 judge and Direct Capital managing director Ross George. “We were impressed with this ‘whole of company’ involvement — it is transnational and embraced by the board, management, and all levels of staff.”
Last year, Kathmandu Holdings completed an ESG materiality assessment across the group, speaking with stakeholders about where it can do better and what it should be focused on.
It also recently secured NZ’s largest syndicated sustainability-linked loan. The A$100m loan is tied to ESG and will be measured against a reduction in greenhouse gas emissions, B Corp certification, and improving the transparency, wellbeing and labour conditions for workers in its supply chain. If targets are hit, the interest rate on the loan decreases.
The judges were impressed by the bold ESG targets Kathmandu has set out to achieve by 2025, as it continues to consider how it can improve at every touch point. One of these targets was to become carbon zero by 2025. Kathmandu reached this target four years ahead of schedule, after offsetting its operational carbon footprint through Toitū carbonzero certification.
Casey says while this is a huge step, Kathmandu will continue to work towards its larger goal of net zero environmental harm by 2025. In 2022, it will set science-based targets that align with the Paris Agreement, and will hold itself accountable to those targets.
“This forces us to really understand the wider impact across the wider supply chain and value chain, as opposed to just doing what we can control,” he says. “It also helps us to influence our suppliers a bit more as well.”
Another of Kathmandu’s targets is to have 100 per cent of its products designed, developed and manufactured using elements of circularity principles.
In a first step, last year Kathmandu released its Pelorus Biofleece, made from 100 per cent recycled fabric which can degrade by 93.8 per cent in landfills at the end of its life. Later this year, it will release a 100 per cent biodegradable down jacket, with every component of the jacket able to biodegrade in landfill and marine environments.
“We are trying to demonstrate leadership and push forward the boundaries of what is possible,” says Casey. Kathmandu Holdings’ other brands are making progress towards its aim to achieve B-Corp certification across the entire group.
Rip Curl undertook a carbon audit and established a new ESG team to reflect Rip Curl’s increased focus on sustainability and take steps toward B Corp certification. The business sources its sustainable cotton in line with the Better Cotton Initiative, and this year launched a wetsuit take-back programme.
Oboz has embarked on its first materiality assessment and carbon footprint audit. Over the next 12 months it aims to work aggressively to surpass the 80-point minimum requirement to become B Corp certified. The company plants a tree for every pair of footwear sold and has 95 per cent environmentally preferred leather materials in its product range.
Country Director for Lion New Zealand Craig Baldie says the company’s success hinges on its ability to operate ethically and in the best interest of society, including looking after the environment.
The beverage brewer and manufacturer’s sustainability approach aims to strengthen the resilience of the communities in which it operates, champion responsible use of its products, and ensure its environmental legacy has a positive impact now and for future generations.
The Top 200 judges commended Lion for recognising the importance of operating ethically given the product they sell, and its focus on creating a balanced portfolio of products — including low and no alcohol options.
“Lion has been a New Zealand leader in creating a culture of responsible drinking which it calls mindful consumption,” says Top 200 judge Ross George. “It runs alcohol education programmes and is a member of the responsible drinking charity, Cheers.”
“On the employment front, Lion is an inclusive, flexible and diversified workplace.”
Baldie says Lion’s ability to operate is a privilege, not a right.
“Businesses who do the right thing for the long term are the ones that will endure,” he says. “For Lion as New Zealand’s largest alcohol beverage company, this means contributing to a positive and safe drinking culture is of primary importance.”
The judges were also impressed by Lion’s very direct commitment to the circular economy concept and its responsible practices in the supply chain, which are reflected in its commitment to a net zero value chain by 2050. This involves partnering with suppliers to measure and reduce collective lifecycle emissions.
As part of this strategy, Lion has committed to use 100 per cent renewable electricity to brew its beers by 2025 and has further stretched itself by adapting its existing science-based target to limit global warming to under 1.5 degrees. This sets a reduction target of 55 per cent by 2030 for its direct emissions from a 2019 baseline. The circular economy concept is embedded in Lion’s business performance and targets, as well as parent company Kirin Holdings’ Environmental Vision 2050.
The judges note that Lion has already made good progress.
Since 2015, it has achieved a 28 per cent absolute reduction in its carbon footprint. It has become the first large-scale carbon neutral brewer in both Australia and New Zealand and New Zealand’s largest beverage manufacturer to be certified as carbon zero.
One of its core brands, Steinlager, became New Zealand’s first large-scale beer brand to achieve carbon zero certification. To reach this milestone, Lion says it focused on reducing emissions throughout Steinlager’s product lifecycle — from growing the hops and barley, and brewing the beer, to packaging and transport.
Lion has also invested in water efficiency initiatives, reduced its waste, and is making its packaging more recyclable and reusable. Already over 97 per cent of Lion’s packaging materials are recyclable and it is targeting 100 per cent of packaging to be reusable, recyclable, or compostable by 2025.
Finalist: Synlait Milk
Synlait Milk has bold ambitions to be “net positive for the planet” and instrumental in its industry’s response to climate change — a significant feat given agriculture is responsible for 30 per cent of the world’s greenhouse gas emissions and 70 per cent of freshwater use.
Synlait combines expert farming with state-of-the-art processing to produce a range of nutritional milk products for its global customers. It has put sustainability at the centre of its corporate purpose, and in 2018 set 10-year targets and an aspiration to become B-Corp certified — which it achieved last year.
“When we set these bold goals for ourselves, we didn’t know how we would achieve them,” says Hamish Reid, Synlait Director for Sustainability, Brand, Beverages and Cream.
“We are on track to beat our targets that no one thought we would achieve, and beat the timeframe as well. It’s an example of when you are really brave and put yourself out there, people galvanise around that.”
The Top 200 judges say Synlait’s executives are backing ESG strongly, and as a result the company scores well on these metrics.
“In a challenging year for the company, its focus on sustainability has not waned and it remains an industry leader with ambitious ESG targets,” says Top 200 judge Ross George.
“These are ambitious targets, both on-farm and off-farm, and have recently been updated under the Science Based Targets initiative.”
One of these targets is a reduction in emissions from the manufacturing process. Synlait is transitioning to renewable energy and has committed to not build another coal-fired manufacturing facility. A trial last year to replace a coal boiler with renewable biomass has progressed to become a permanent project.
“We now have a very clear path forward. From next financial year, we are commencing our rapid transition off coal,” says Reid. “Our original intention was early next decade, but we now think this will be entirely feasible as early as 2024 or 2025.”
Synlait works with its farmer suppliers to evolve New Zealand’s reputation as a responsible and sustainable producer of food, and help farmers understand how their management of the farm impacts on greenhouse gas emissions.
“This allows us to attract the most innovative farmers that are thinking about the future of the food system and where transitions might be happening,” says Reid. “It immediately gave us a greater supply base, because people were really interested in understanding and working together with the processor on how they might future-proof their businesses for success.”
This has resulted in on-farm emissions intensity, per kg of milk solids, reducing 5 per cent over the last year, or 10 per cent compared to its 2018 base year when its targets were first established.
Total off-farm emissions have remained stable since last year, however the emissions intensity, per kg of product, has reduced by 24 per cent compared to 2018.
“No one thought we would achieve what we have — including ourselves,” says Reid. “We didn’t think it would be possible to reduce our emissions by 10 per cent, and we have already hit the Government’s 2030 target.”
Deloitte Top 200: Chairperson of the Year: Patrick Strange — Chorus, Auckland Airport
During 2021, Strange led a group of senior business leaders that called on Government to be more transparent about its plans to get New Zealand to a “Covid normal”. He says he was motivated to speak up because he was concerned Government was failing to build a long-term strategy.
“We were complimentary about the Government on things they had done, but we did criticise them,” he says. “That is the role of business, that is the role of all New Zealanders — open debate.”
The Deloitte Top 200 judges say Strange is very effective in building relationships with Government for the organisations he chairs — Chorus and Auckland International Airport — which is vital given their importance in New Zealand’s infrastructure landscape.
Chorus has played a critical role over the past year with its fibre network, which has been under significant load with so many New Zealanders working from home during the lockdown.
“We were still connecting 800-900 customers a day, with Covid and all its restrictions,” Strange says. “We don’t hear about it, but they have done a great job not missing a beat under those constraints and added layers of difficulty.”
Strange pushed back on the Commerce Commission over its proposed price control settings for the provider’s ultrafast broadband network, and the returns it should be allowed to make on its regulated asset base. In a letter to the commission, he warned of “regulatory failure” if Chorus was prevented from earning a fair return on its investment.
“We are there to represent New Zealanders — and particularly our shareholders — and I call that out,” says Strange. “I have a constructive relationship with the Commerce Commission and get on well with them — but they know if I disagree with them, I will say it publicly.”
Judge Cathy Quinn, an independent director herself, says this has no doubt been agonising to deal with and required Strange to be heavily involved. But it is clear he did a good job that will allow Chorus to continue to invest in innovation and deliver a fair return to shareholders.
For Auckland International Airport, Strange says the biggest challenge in 2020 was its huge loss of income and the need to rapidly raise capital to redress the balance sheet. But the past year has been much more about people — particularly those that have had to continue operating remotely, which has put a lot of strain on them.
“We are spending a lot of time worrying about how to support people,” he says. “The uncertainty — the way they are having to work — they are working long hours in difficult circumstances.”
His biggest challenge for both companies he chairs has been the loss of exchange that comes from meeting face-to-face. This was also noted as a big challenge by other finalists in this category.
“We can operate well on Zoom, but nothing beats getting together and the things you learn by walking around and talking to staff,” he says.
The judges highlight this emphasis on people as another of Strange’s core strengths. “Patrick is highly regarded by his peers, the management teams he works with and broader stakeholders as an inclusive chair who brings out the best in his fellow directors and management teams,” says Quinn.
“He encourages others to contribute and offers his perspective in a constructive way.”
Strange says this isn’t hard to achieve, because he enjoys working with talented and motivated people — from fellow directors to the impressive young people involved in the companies he chairs.
“We are there to have fun, and I am just part of that,” he says. “I am just lucky enough to oversee a couple of great companies where we have that culture.”
Finalist: Barbara Chapman
Barbara Chapman’s governance career has been shaped by her interest in transformation and improving the experience of customers.
She is chair of Genesis Energy and NZME, and is a director of Fletcher Building and BNZ. Chapman is also deputy chair of public-policy think tank The New Zealand Initiative and was chair of the Apec 2021 CEO Summit. In 2019 she was awarded a Companion of the New Zealand Order of Merit (CNZM) for services to business.
When Chapman joined the NZME board in 2018, it had an enormous amount of debt. “That was really shackling the company from being able to do what it needed to do to grow,” she says.
NZME is now debt-free, succeeding in a three-year plan to eradicate $100m in debt. Its share price reached a high of $1.46 on December 15, up dramatically from its depths of $0.18 at the start of the pandemic.
“Along the way, we were balancing dropping debt with investing in things like premium, and the technology you need to drive that,” says Chapman — recognising that having cash now gives NZME far more scope to invest, such as its recent acquisition of BusinessDesk.
Judge Cathy Quinn says Chapman has shown remarkable skill while working with the board and management team of NZME throughout its transformation.
“Since joining the NZME board in 2018, Barbara has played a key role in the company’s turnaround after financial challenges and helped set foundations for future success.”
The judges also acknowledge Chapman’s leadership in astutely navigating Genesis Energy through the August power outages, as power distributors responded to Transpower’s demand to reduce the burden on the national grid. A ministerial inquiry has since shown that Genesis was wrongly blamed at the time. “As it came out, we didn’t cause any of the problem and we couldn’t have done anything different,” says Chapman. “But given we are 51 per cent owned by the government, quite rightly they were asking us some pretty strong questions.
As for her highlight over the past year, Chapman points to the success of the Apec CEO Summit, held at the end of 2021.
Soon after taking on the role at the request of the Prime Minister, a fire broke out at the International Convention Centre — the intended venue for the summit. Then Covid-19 struck, thwarting plans to host thousands of delegates in-person.
“To deliver an online event that had the reach it did, as well as the response it had, has been amazing,” she says. “I am really proud that we focused hard on gender balance and diversity with our speakers, and people tell us we ended up with what was the best CEO Summit ever. Over 3000 people watched it — amazing for something online!”
Finalist: Mark Tume
Mark Tume says boards are decision-making engines, and that there is a ‘secret sauce’ in the boards he chairs that makes the whole greater than the sum of its parts.
“To get the most out of a board, it is not about me being a leader, it is about arranging a meeting so you can get the most out of everyone and a contribution from everyone.”
Tume is chair of infrastructure investor Infratil and commercial arm of Taranaki’s largest iwi, Te Atiawa Holdings. He is also a director of Retire Australia, Precinct Properties and was chair of Ngāi Tahu Holdings Corporation until December 2021.
The Top 200 judges say Tume’s performance at Infratil has been excellent, as has been his significant contribution to the Māori economy.
“Tume was pivotal in establishing Te Atiawa Holdings, a new entity being built from the ground up,” says Quinn. “He has been on the Ngāi Tahu Holdings board in three separate instances, stepping down as chair at the end of last year.”
Tume says Māori organisations have a clear view that assets, investments and returns should be seen as multigenerational. He says there’s a real alignment between that thinking and Infratil, due to the nature of the assets needing to last a hundred years or more.
In December 2020, AustralianSuper, Australia’s largest pension fund, put in a takeover bid for Infratil worth nearly $5.4 billion — representing a 22 per cent premium on its closing share price at the time. The takeover bid resulted in a 20 per cent jump in Infratil’s share price, and was ultimately rejected. Tume says the offer materially undervalued Infratil’s high-quality and unique portfolio of assets.
“It wasn’t a hard decision, AustralianSuper’s offer wasn’t a huge premium,” he says, noting Infratil has returned an average annualised shareholder return after tax and fees in excess of 18 per cent since its inception.
“Tume’s ability to navigate challenging issues such as a hostile takeover bid from Australia and remain steadfast in his belief that the offer materially undervalued Infratil’s portfolio, is a clear demonstration of his focus to do what is best for shareholders,” says Quinn.
Infratil also dealt with another significant transaction in the past year — the sale of wind farm operator Tilt Renewables. “We had a tremendous number of board meetings, because we were dealing with a $5b takeover offer at the same time as a $3b sale process of Tilt Renewables,” Tume says. Ongoing restrictions of Covid and the border closure added to the pressure since both deals were run out of Australia.
While this period was a huge challenge due to the need to deal with so many things at the same time, including a change in CEO, completing the Tilt deal was also one of Tume’s highlights of the past year.
“You don’t get many years like this one where so much pressure and stress and bad things are happening — and yet everything lines up so nicely.”
Dynamic Business: Movement in the Top 10 - NZ Herald
Underlying earnings (ebitda) increased from $24,803m in 2020 to $26,374m in 2021. This is an increase of 6.3 per cent, compared to a 7.3 per cent decrease in 2020.
The ebitda margin, an assessment of operating profitability as a percentage of total revenue (total ebitda/total revenue), increased slightly between 2020 (13.0 per cent) and 2021 (13.8 per cent).
Total profits after tax have increased from $6505m in 2020 to $7910m in 2021. This is a 21.6 per cent increase year on year, compared to a 37.3 per cent decrease in 2020.
Net profit margin (profit after tax/total revenue) increased between 2020 (3.4 per cent) and 2021 (4.1 per cent).
Total assets have increased from $253,333m in 2020 to $264,759m in 2021, which is a 4.5 per cent increase, compared to a 9.6 per cent increase in 2020.
The number one spot on the Top 200 Index has been held by Fonterra since its formation in the early 1990s. Fonterra’s revenue increased by 1.4 per cent during the year to reach $20,565m. This increase is mainly due to increased sales volumes.
EBOS Group has maintained its number two ranking, increasing its revenue by 7.0 per cent from $9,241m in 2020 to $9,886m in 2021.
EBOS Group’s increase in revenue is attributed to growth in its community pharmacy, institutional healthcare, contract logistics and animal care businesses. The revenue gap between the top two companies has remained fairly constant, slightly decreasing by 3.3 per cent, as Fonterra (ranked first) had a revenue increase of 1.4 per cent.
Fletcher Building’s (ranked 3rd) revenue has increased by 11.1 per cent from $7,309m in 2020 to $8,120m in 2021, which is a recovery on a drop in revenue of 12.0 per cent in 2020 compared to 2019, which caused it to slip from second in 2019 to third in 2020.
The top 10 has seen some movement in 2021, with Meridian Energy re-entering in sixth place (previously 10th place in 2019 and 11th place in 2020).
Zespri has moved up to seventh place from 12th place in 2020, and Mainfreight now occupies 10th place compared to 15th place in 2020.
These movements in the top 10 see Z Energy moving down from fifth place in 2020 to 11th place in 2021, Air New Zealand moving down from sixth place in 2020 to 17th place in 2021, and BP moving down from eight place in 2020 to 15th place in 2021.
The 200th ranked entity on the Top 200 Index in 2021 is Aurecon, a newcomer to the index, with revenue of $189m.
Last year’s 200th ranked company, Airwork, had revenue of $200m. This is a 5.4 per cent decrease in revenue between 200th ranked companies year on year.
- Fonterra (ranked first in the Top 200 Index) reported the top profit for 2021 at $532m. Last year’s top profit was also held by Fonterra, reporting a net profit of $803m in 2020. This top profit amount has decreased by 33.7 per cent year-on-year.
- The decrease in Fonterra’s 2021 profit is attributed to non-recurring gain on sale of investments which boosted the 2020 profit by $467m. This has been offset by lower net interest-bearing debt and an increase in sales revenue for Fonterra in the current year.
In contrast, average profit after tax across all 200 companies has increased from $32.5m in FY20 to $39.5m in FY21, a 21.5 per cent increase.
- Respiratory products maker F&P Healthcare (22nd) has moved up to second place in 2021, from sixth in 2020, with profit after tax increasing by 82.6 per cent from $287m in 2020 to $524m in 2021.
- Auckland Airport (139th) has moved up to third place in 2021, from 14th in 2020, with profit after tax increasing by 139.2 per cent from $194m in 2020 to $464m in 2021.
- Meridian Energy (6th) has moved up to fourth place in 2021, from 15th in 2020, with profit after tax increasing by 143.2 per cent from $176m in 2020 to $428m in 2021.
- Ryman Healthcare (97th) has moved up to fifth place in 2021, from 7th in 2020, with profit after tax increasing by 59.6 per cent from $265m in 2020 to $423m in 2021.
- Infrastructure investor Infratil (38th) has moved out of the top profits, from being placed second in 2020, reporting a profit after tax of $509m in 2020, to reporting a loss of $88m in 2021.
- The biggest loss for 2021 was reported by hydrocarbon producer OMV (ranked 83rd in the Top 200 Index), with a loss of $567m.
OMV’s loss is a $614m drop from its 2020 profit after tax of $47m.
- Pacific Aluminium (58th) and Air New Zealand (17th) respectively hold the second and third biggest losses in 2021.
- This is reasonably consistent with the loss positions they occupied last year.
- Pacific Aluminium was third and Air New Zealand was first in the biggest losses for 2020.
- Air New Zealand’s continued losses are reflective of the decline in profits of the air travel industry caused by the impact the Covid-19 pandemic has had on border restrictions limiting international travel.
- Tasman Steel (54th) and Lion (71st) respectively hold the fourth and fifth biggest losses in 2021.
- Kiwirail (64th) has moved out of the top biggest losses, from being placed second in 2020, reporting a loss of $325m, to having a profit in 2021 of $43m.
Most improved profit
- Agricultural co-operative company Ravensdown (ranked 63rd in the Top 200 Index) recorded the most improved profit out of all the entities on the Top 200 Index.
- It delivered a 10,213.8 per cent increase in profit from a $0.2m loss in 2020 to a $15.4m profit in 2021. Haier (30th) has the second most improved profit, recording a profit of $29.3m in 2021 compared to a $0.6m profit in 2020.
- This is an increase of 4,834.3 per cent.
- NZPM Group (144th) holds third place for most improved profit, with an increase of 2,404.8 per cent. In the current year, NZPM Group recorded a profit of $6.8m, compared to a 2020 profit of $0.3m.
- There is no overlap in the most improved profit list in 2021 relative to 2020.
Most improved revenue
- Meat company Hellers (ranked 141st in the Top 200 Index) has reported the most improved revenue, increasing revenue to $269m in 2021 compared to $101m in 2020.
- This increase has seen Hellers enter the Top 200 Index for the first time.
- Newcomer to the Index, Wilmar Gavilon (143rd), is ranked second for most improved revenue. Wilmar Gavilon had reported revenue of $172m in 2020 which has now increased to $267m in 2021, representing a 55.1 per cent increase in revenue.
- Fisher & Paykel Healthcare (22nd) has seen a similar increase in revenue, reporting an increase of 53.0 per cent from $1,273m in 2020 to $1,948m in 2021 which places it third for most improved revenue. Fisher & Paykel Healthcare occupied 16th position for most improved revenue in 2020.
- Microsoft (72nd) is the only other company to be included in the most improved revenue index for two years in a row.
A2 Milk and Xero had been included in the most improved revenue index for the last four years, however they are not included in 2021.
- Pushpay (142nd), My Food Bag (196th), Synnex (190th) and Tasman Liquor (152nd) are new entrants to the Deloitte Top 200 Index in 2021, and also feature in the most improved revenue index.
- Hellers, Microsoft, Precinct Properties, Synnex and Tasman Liquor are included in both the most improved profit and most improved revenue index in 2021.
Top return on assets
- Return on assets (ROA) provides an indication of how efficiently a company manages its assets in order to generate earnings. It is calculated by measuring profit against total assets reported.
- Lotto NZ (ranked 26th in the Top 200 Index) holds the top spot for ROA for the third year in a row after newly entering the Top 200 Index in 2019. It has maintained a strong ROA of 194.7 per cent in 2021 compared to 214.0 per cent in 2020. The high ROA is driven by a 25.5 per cent increase in profit after tax from $333m in 2020 to $378m in 2021, with total assets of $199m in 2021.
- Holding the second spot for ROA for the second year in a row is TAB (121st) – despite a decrease in its ROA to 94.5 per cent from 102.6 per cent. This is driven by an increase in total assets from $136m in 2020 to $208m in 2021, and an increase in profit after tax from $137m in 2020 to $163m in 2021.
- Third place is held by newcomer Aurecon (200th) with a ROA of 35.3 per cent.
- Fisher & Paykel Healthcare (22nd) placed fourth in terms of ROA, rising from fifth place in 2020. Its ROA has increased from 21.8 per cent in 2020 to 29.9 per cent in 2021, which is consistent with its increase in profit.
- The general trend of increasing return on assets falls in line with the 21.6 per cent increase in average profits, with third to 20th places for 2021 increasing year-on-year against third to 20th places in 2020. Only Lotto NZ and TAB, ranked first and second respectively, saw a reduction in ROA year-on-year.
Top return on equity
- Return on equity measures how effectively a company can generate income relative to the amount of money shareholders have invested in the firm.
- It is a useful tool for investors, particularly when comparing firms within the same industry and is calculated by measuring the revenue earned against the average equity held over the past two years – to prevent changes in shareholder contributions skewing the results.
- Lotto NZ (ranked 26th in the Top 200 Index) has taken the top spot for return on equity, moving from second place in 2020, with a return on equity percentage of 661.8 per cent.
- TAB (121st), has moved up from third place to second place for its return on equity of 416.5 per cent.
- Bunnings (31st) has dropped from top spot to third place with a return on equity of 264.7 per cent for 2021.
- Kiwifruit marketer Zespri (7th) has risen to fourth place from sixth, with a return on equity of 105.0 per cent.
- Nestle (90th) has maintained its fifth-place spot with a return on equity of 101.9 per cent.
- This year, 22 companies were added to the Deloitte Top 200 Index. This compares to last year when 13 companies debuted on the Index.
- Heinz entered the Index at the highest rank (ranked 56th in the Top 200 Index) with revenue of $768m.
- Also entering the Top 200 Index within the top 100 companies were metals distributor and processor Vulcan Steel (59th) with revenue of $732m, and New Zealand Health Group (70th) with revenue of $639m.
Just missed the cut
- The 200th place in the 2020 Deloitte Top 200 is Aurecon, which recorded $189m in revenue. In last year’s Top 200 Index, Airwork was ranked 200th with revenue of $200m in 2020.
- Abano Healthcare (ranked 201st in the Top 200 Index), Whakatane Mill (202nd) and Wilson Parking (203rd) just missed the cut by $1m. Scott Technology (204th), Suzuki (205th) and China Merchant Properties (206th) were close to breaching into the Top 200 Index in the current year, all achieving revenue around the $186m mark. Of these companies, Abano Healthcare and Scott Technology have fallen out of the Top 200 in 2021, previously holding 168th and 182nd place in 2020 respectively.
In last year, not now
- After its entrance in the Top 200 Index in 2019, Scentre wasn’t in this year’s index (in 2020 it ranked 90th). Until last year, the owner and operator of Westfield retail destinations was in the most improved performance index for two years in a row.
Shell has also dropped out of the index this year after ranking 149th in 2020. In 2019 it appeared in the top profit index, recording a figure of $1,397m.
- Kordia didn’t feature in the Top 200 index this year. In 2020 it reappeared on the index ranked 183rd, after falling from the index again in 2019.
- Horizon Energy (2020: 163rd) and Scott Technology (2020: 182nd) also did not make the list this year after entering last year’s index.
Deloitte Top 200 awards: Top business leaders crowned - NZ Herald
Deloitte Top 200 awards: Top business leaders crowned – NZ Herald
Infratil has been crowned Company of the Year and Skellerup’s David Mair named Chief Executive of the Year at the prestigious Deloitte Top 200 Awards.
Rocket Lab founder, CEO and chief engineer Peter Beck took out the coveted Visionary Leader award.
In its 32nd year, the Deloitte Top 200 Awards are a showcase of the very best of New Zealand business and business leaders. They celebrate the depth and range of our business community, featuring the industries and sectors that underpin our country’s success.
This year, the awards recognise outstanding results despite the ongoing challenges resulting from Covid-19, including companies and leaders from the manufacturing, retail, media, and energy sectors, all showcasing their commercial strength and agility during challenging times.
Infratil had an outstanding year in 2021, further enhancing its reputation as a savvy infrastructure and utilities investor. The company was active with its portfolio, divesting Tilt Renewables and investing in diagnostic imaging firm Pacific Radiology.
The panel of high-profile judges — convened by NZME editorial director of business Fran O’Sullivan — said Infratil’s combination of strong performances with its investment companies, especially data centres, along with its divestments and new acquisitions have added significant shareholder value over 2021.
“In addition, the company went through a fairly seamless transition of CEO from Marko Bogoievski to Jason Boyes and won the takeover battle with Aussie Super,” say the judges.
“While Infratil has been an excellent long-term performer, its total shareholder return of 65 per cent stands out.”
Another long-term performer is Skellerup Holdings, and this year its CEO David Mair took out the award for Chief Executive Officer of the Year.
The designer, manufacturer and distributor of engineered products has been led by Mair for over 10 years, and during his tenure has achieved significant revenue and earnings growth by focusing on designing and delivering critical engineered products for OEM customers.
“David is a steady pair of hands at Skellerup,” say the judges.
“He has a knack for presenting a soft, inclusive, popular leadership style with people and in strategy, but has a hands-on near fanatical knowledge of process, plant and equipment, and design for Skellerup’s manufacturing customers.”
The Visionary Leader award is one of just two awards made without finalists. This year, the award went to founder, CEO and chief engineer of Rocket Lab, Peter Beck.
The judges recognised Beck for taking New Zealand into the world of space and becoming a global leader who is redefining the space industry with ambitions that now stretch as far as Mars and Venus. Last August, Rocket Lab listed on the Nasdaq, where its market capitalisation climbed to $7.33 billion as it raised $1.14b to fund the next phase of Beck’s bold space journey — a proud Kiwi moment and bold visionary leadership from a ‘boy from Invercargill’.
Having been a finalist in the category in 2020, Patrick Strange was named this year’s Chairperson of the Year. Chair of Auckland International Airport and Chorus, he is highly regarded as an inclusive chair who brings out the best in his fellow directors and management teams.
The judges say that over the past year, Strange has taken a leadership position in the New Zealand business community by speaking up on areas where it might not have been easy — including on aspects of the Government’s Covid-19 response. He also responded robustly to aspects of the Commerce Commission’s proposed price and quality control settings for Chorus’ ultrafast broadband network.
Mercury’s William Meek has been awarded Chief Financial Officer of the Year. Meek’s career with Mercury spans 20 years and he has served as CFO for almost 15 of those, coming into the role prior to the successful float of the company in 2013.
The judges describe Meek as a highly competent CFO who thoroughly understands the financial statements of Mercury and knows how it creates value.
“Meek has delivered exceptional long and short-term impacts for Mercury,” they say. “He supported the company’s CEO in delivering superior shareholder returns and in 2021 helped execute Mercury’s successful efforts to enhance its presence in renewable generation and retail sales through two strategic acquisitions.”
NZME took out the Most Improved Performance award this year. The integrated media company – owner of the NZ Herald, Newstalk ZB, property website OneRoof and a suite of entertainment radio brands – has put a plan in place to transform into a digitally focused media business, and this turnaround strategy has seen digital revenue play an increasingly significant role in the company’s earnings.
“The market has responded positively to this strategy, with the share price climbing from a low of 18 cents in April 2020 to above $1.40 by the end of 2021,” say the judges.
Vulcan Steel has been recognised with the Best Growth Strategy award. The judges say the steel distribution company’s growth strategy has resulted in superior absolute and relative performance in the highly competitive steel distribution sector on both sides of the Tasman.
“It has executed both parts of its growth programme well with an annual revenue growth of 8 per cent and net profit growth of 38 per cent posted in the last five years,” they say.
“Vulcan is on track for another record year in 2022.”
Tourism Holdings’ Ollie Farnsworth has been awarded the title of Young Executive of the Year. With the tourism industry facing significant challenges in the last 18 months, Farnsworth approached tough issues of cost reduction and revenue generation with a constructive outlook in his role as chief commercial & customer officer.
“An innovative mindset has seen Ollie identify and effectively execute on new business opportunities including the well-known Get Moving to Get New Zealand Moving campaign,” say the judges. “His energy and empathy for customers and his people shines through in his leadership approach.”
Te Rūnanga o Ngāi Tahu (Ngāi Tahu) took out the Diversity and Inclusion Leadership award for its Cultural Confidence Programme, an innovative and comprehensive response to a very specific diversity and inclusion challenge.
“Mō tātou, ā, mō kā uri a muri ake nei — For us and our children after us’ — had the unintended consequence of raising doubts in the minds of their staff who are not of Ngāi Tahu descent, about the company’s commitment to them,” said the judges.
Kathmandu won the Sustainable Business Leadership award, which recognises businesses working toward the creation of long-term environmental, social and economic value.
The judges also chose to award a special judges’ award to Air New Zealand, in recognition of the airline’s efforts of the past two years. The judges praised all the airline’s employees who have strived to respond to the enormous challenges brought about by Covid-19, and in doing so have maintained strong support for the brand and service offering of the airline.