2017 SYDNEY TOP COMPANIES 31-40
Written on the 5 December 2017 by Ben Hall, David Simmons, Paris Faint
The businesses that appear on Business News Australia's Sydney top 50 companies list are at the top of their game, having cemented their place as economic powerhouses within Australia's largest city.
The 31-40 group on the list is brimming with a collection of Australia's most well known brands.
From telecommunications and TV stations to appliance retailers, drinks manufacturers and financial advisors, the variety in this group is a true testament to the diversity of Sydney's business landscape.
The Sydney Top 50 Companies list is compiled based on market capitalisations at the end of November 2017.
31. Coca-Cola Amatil Limited
2016 Rank: 28
OVER the last year Coca-Cola Amatil has gone a bit flat, and the beverage giant says it will bring forward $40 million of investments to drive growth in its Australian drinks business as it faces tough trading conditions.
In a trading update ahead of an investment forum in Indonesia in November, the company confirmed flat underlying profit and says the $20 million in costs it planned to save in both 2019 and 2020 would be invested back into the business earlier than planned.
Coca-Cola Amatil will fast track the $40 million to 2018, lowering prices, increasing marketing and adding new drink machines and technology.
CEO Alison Watkins says the launch of new products, including Coca-Cola No Sugar and Coca-Cola Plus Coffee, had helped the bottom line but the company needs to move faster to rebalance its portfolio because it is heavily weighted towards carbonated drinks which has a much smaller market share than water, dairy and fruit juice.
The company has moved to resolve issues from stockists, and it also lost a major contract with Domino's to a new player in the zero-sugar soft drink game.
To make matters worse, an ex-Coca-Cola Amatil executive has been jailed afterreceiving more than $1.5 million in bribes.
Bryan Pereira was sentenced to a maximum six years in jail in August after it was revealed he also used a "coke slush fund" to pay for all-expenses trips to Singapore, Thailand, and Scotland.
32. TPG Telecom
2016 Rank: 32
TPG Telecom (ASX: TPM) has reported a record financial year, but will hold back some dividends from shareholders to fund its new mobile network which is expected to cost around $1.9 billion.
The company reported a net profit after tax of $413.8 million for FY17 to July 31, an increase of 9 per cent over FY16.
However, the company will retain the profits in order to reinvest the money into the group's recently acquired mobile network.
Australia's fourth-ranked internet player has forecast it will face pressure on earnings next year due to increased costs from migrating customers onto the national broadband network.
The company expects its DSL subscribers to decline by between 400,000 to 500,000 during the 2018 full-year as they shift to the NBN.
The group's capital expenditure of $576.3 million included $207.5 million of mobile spectrum purchases, including the $73.1 million Australian 1800MHz spectrum and $10 million prepayment in relation to a 700MHz Australian spectrum.
In terms of the group's rollout of its mobile networks in Singapore and Australia, TPG says it is making good progress.
The Singapore network is on track to achieve the first milestone of nationwide outdoor service coverage before the end of 2018.
In Australia, where the initial implementation of the mobile network is concentrated on the cities, implementation in Sydney, Melbourne, and Canberra is expected to be complete by mid-2018.
33. Seven Group Holdings Limited
2016 Rank: 47
SEVEN GROUP posted a 77 per cent drop in full year net profit for the financial year to June 2017 as it agreed to sell its WesTrac heavy machinery business in China for $540 million.
The sale is expected to fund potential acquisitions as the company forecast a lift in earnings for FY18.
Seven Group, which has holdings in industrial services (WesTrac, Coates Hire, AllightSkyes), media (Seven West Media), and energy (Beach Energy) was buoyed by the success of WesTrac and Coates Hire over the period.
During FY17 the company sold WesTrac China to Lei Shing Hong Machinery for $540 million, meaning the group's balance sheet strength will be significantly enhanced following the completion of the transaction.
The price was 15-times earnings, above the industry average of 11-times earnings, and the sale will allow Seven Group to capitalise on the potential as the mining industry recovers from a downturn.
34. Spark Infrastructure Group
2016 Rank: 36
THE operator of South Australia's struggling power distribution network, Spark Infrastructure Group, recorded an 87.1 per cent rise in first half profits to 30 June, 2017. Revenue rose 6.6 per cent to $507.9 million.
Spark, which owns 49 per cent of SA Power Networks, says the profit jump is mainly due to an accounting change but the company's operations will be watched closely with South Australians paying among the highest electricity prices in the world.
As Australia heads towards renewable energy chairman Doug McTaggart says the company is well positioned for the change.
"Our network businesses are well placed to support the transition towards centrally delivered renewable generation," says McTaggart.
"The Finkel Report, which represents a blueprint for re-shaping the energy market, emphasises the critical role of electricity networks and recommends that networks take a leading role in the provision of system strength and inertia and in the building of critical infrastructure to connect prospective renewable generations zones."
Managing Director of Spark Infrastructure, Rick Francis, says he hears the concerns of his consumers, but adds that to reduce costs, significant investment still needs to be made.
"Our businesses continue to maintain a sharp focus on cost management," says Francis.
"To survive and thrive in this changing market we must continue to operate and proactively deliver to customers' demands."
35. Magellan Financial Group
2016 Rank: 37
MAGELLAN Financial Group lifted its total Funds Under Management (FUM) to $56 billion at the end of October 2017, marking a rise of around 33 per cent in the space of just 12 months which has the company poised for a substantial profit growth.
The investment fund, helmed currently by founder Hamish Douglass, is also set to launch a new listed global equities fund, The Magellan Global Trust (MGT), which is expected to incur a one-off cost of $84 million. The $1 billion listing of the MGT would make it one of the biggest ASX floats in years.
Magellan Financial Group has already asked its existing shareholders to invest at least another $30,000 into units of this new Magellan fund. This could easily raise several billion dollars from the get-go. The incentive for investors will be Magellan adding another 6.25 per cent to the value of any application via additional units.
The Global Trust will be co-managed by Hamish Douglass and Stefan Marcionetti.
The fund will aim to distribute income of 4 per cent per year, while investing in blue chip stocks in the USand Europe.
36. Harvey Norman
2016 Rank: 34
BUOYED by a record full-year profit, billionaire retailer Gerry Harvey has predicted Australia will become an "Asian country" with a population of 100 million by next century.
Harvey weighed in on the immigration debate as the electrical goods and furniture retailer announced its best ever full-year result in the company's 35-year history, delivering a profit of $448.9 million in the year to June 30, a 29 per cent increase on the previous year.
The company says the result was due to strong retail spending along with "strong housing sector activity, lower levels in unemployment, a net increase in overseas migration and the wealth flow-on effect from higher home prices".
Total revenue from its three Australian and New Zealand brands - Harvey Norman, Domayne and Joyce Mayne was up by 5.4 per cent to $5.62 billion in the year to June 30.
The issue of executive pay has been a distraction with the board of Harvey Norman narrowly avoiding a so-called 'first strike' from shareholders, with a large vote in November going against its executive pay package at the retailer's annual general meeting.
37. Platinum Investment Management
2016 Rank: 43
PLATINUM'S flagship funds have performed strongly and they've beaten their benchmarks even though they have also held cash or taken short positions and its long-only global fund, Platinum Unhedged Fund, returned nearly 32 per cent after fees and costs for the 12 months to 30 June, 2017.
The company's assets under management (AUM) remained steady in the 2017 financial year at $22.7 billion and it is close to launching two new listed managed funds, which will allow investors to indirectly access the Platinum International Fund and Platinum Asia Fund on the ASX.
Managing director and founder Kerr Neilson says he remains optimistic about the future of China's economy as its government forces aggressive private firms to reduce their debt levels via asset sales.
"There have been remarkable improvements in the pricing of various basic materials, from steel, cement, float glass to PVC, which have put the remaining players on a far healthier footing to meet their debt obligations," Neilson told investors in the company's annual report.
38. Downer EDI Limited
NEW TO LIST
INVESTORS had their eyes firmly planted on Downer EDI Limited for the majority of 2017 as the company ramped up efforts to take over building services provider Spotless.
Downer EDI purchased 87.8 per cent of Spotless, in the long-running take over battle and in late November, it upgraded its full-year profit guidance after identifying larger-than-expected cost savings following the Spotless deal.
The engineering group upgraded its net profit guidance to $195 million, from April's $190 million, after a review identified $25 million of cost savings.
Opportunities to generate even more revenue from Spotless are also significant and will continue to increase, according to Downer.
Downer says they are now well positioned for growth, now that the acquisition is complete, and is looking to grow in the areas of transport infrastructure, health, education, corrections, defence, utilities and other government service markets across Australia and New Zealand.
In terms of the group's regular operations, the company performed most strongly in transport.
"Our transport service line performed strongly with highlights including the success of our New Zealand operations in securing a high proportion of long term network management contracts and the acquisition of RPQ in Australia," says Downer CEO Grant Fenn.
"The outlook for transport is very positive with increasing demand for product innovation, smart asset management and intelligent infrastructure."
The group's Melbourne and Gold Coast light rail operations performed well during the year, and recently the company was awarded the contract to operate an integrated public transport system for Newcastle.
39. Worley Parsons Limited
2016 Rank: 49
IT'S been a testing year for Worley Parsons as the designer and contractor of oil and gas plants reported a slim $35 million profit on revenues of $5.2 billion, with the boom in gas construction facilities all but over.
Overall net profit edged up, but underlying profit was down 13 per cent and revenue dropped 33 per cent.
Speaking about the transition of the industry, chief executive of WorleyParsons, Andrew Wood, says the company navigated some choppy waters in FY17.
"We have reshaped the company during one of the largest resource industry transitions in 40 years," says Wood.
"Demand for energy and resources continues to increase, while investment to meet that demand into the future has declined significantly in recent years. Many of our customers are now indicating that they are returning to modest capital and operational expenditure growth albeit in an environment of uncertainty."
"Even while activity levels appear to be improving, conditions remain challenging for our customers. We are beginning to see the benefits of increased customer activity in some areas. Our process of reshaping and resizing the business has positioned us well to take advantage of more positive developments in market activity."
40. Evolution Mining Limited
2016 Rank: 39
Evolution Mining, Australia's second biggest listed gold producer, swung back to profitability in 2017 but felt the brunt of higher energy prices with costs from its Cowal goldmine in New South Wales set to rise by 80 per cent.
That one bill alone will add between $12 to $16 million to the mine's operating costs and will make things difficult for the company to lower overall costs across the business.
The nation's biggest goldminer, Newcrest Mining, which operates the Cadia mine also in New South Wales, was similarly hit by a 90 per cent increase in its power bill when it renegotiated its long-term power supply contract earlier this year.
Evolution's $217 million full year profit was a sharp turnaround from its previous year's loss of $24.3 million.
Evolution executive chairman Jake Klein has declared the company will treat dividends as "absolutely critical and mandatory" and it delivered a higher than expected 3 cents per share fully franked final dividend as part of a new policy to return 50 per cent of after-tax earnings as dividends.
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Author: Ben Hall, David Simmons, Paris Faint