Sydney Top Companies 31-40

Sydney Top Companies 31-40

Unlikely beneficiaries of current market dynamics such as property powerhouse Charter Hall Group (ASX: CHC) and legacy retailer Harvey Norman (ASX: HVN) have broken into the Top 40 of this list in 2020, joining a mixed bag of corporations.

The 31-40 group on the list is brimming with a collection of Australia's most well-known brands, including the return of Ampol (ASX: ALD) and emerging tech players like Appen (ASX: APX) and Altium (ASX: ALU) making their mark on the Sydney business landscape. 

It also contains AMP (ASX: AMP), which fell down to number 39 on the list.

The Sydney Top Companies list is based on market capitalisations at the end of trade on 30 September, 2020.


31. Ampol (ALD)

SO

Energy
Market Cap: $
5.98bn
1H20 revenue (operates on calendar year): $8.06b
1H20 loss (operates on calendar year): $626m
Listed: 1980
CEO: Matt Halliday
CEO salary: $1.65 million base salary + incentives

The petrol station and fuel supplier formerly listed as Caltex has been in the midst of one of the most challenging times in the oil sector's history to stay afloat, let alone undertake a nationwide rebranding exercise.

Caltex Australia (ASX: CTD) started transitioning its name to Ampol (ASX: ALD) this year as part of a three-year branding process, bringing back the name it held before a merger in 1995.

Just a few months before leaving the company, former CEO Julian Segal described Ampol (Australian Motorists Petrol Company) as an "iconic Australian name". Market research showed the brand was trusted by the public even 25 years after its withdrawal from service stations around the country.

When the CEO transition to former CFO Matt Halliday was announced in late February, the group was riding high on not just an $8.6 billion takeover offer from Canada's Alimentation Couche-Tard Inc (ATD), but a competing $3.9 billion offer for its convenience retail business from EG Group in the UK.

With conversations ongoing with ATD in early March, the board claimed the EG Group offer undervalued the company. Six days later, an oil price war kicked off between Saudi Arabia and Russia, exacerbating the impacts of COVID-19 on petroleum demand.

The company's shares lost 38 per cent of their value within 10 days and have struggled to recover ever since. Obviously, the acquisition negotiations fell through.

In May - the same month that Caltex's name formally changed to Ampol - the group used the downturn as an opportunity to bring forward maintenance works at its Lytton refinery in Brisbane, which is now starting to produce again.

Following EG Group's earlier recognition of the future growth promise of Ampol's retail business, in August the company opted to create an unlisted property trust for 203 freehold convenience sites.

Due for completion by the end of the year, the $1.4 billion trust would be 51 per cent owned by Ampol with the remainder held by a consortium comprising Charter Hall Group (ASX: CHC) and Singapore's sovereign wealth fund GIC.

As part of the deal Ampol is expected to receive $682 million from the consortium which will be used to be pay down debt given the uncertainty around the pandemic. For the longer term however, it plans to use the trust as a platform for acquiring more sites and selling more Ampol-owned properties.

In mid-September, Ampol's industry received a boost from the Commonwealth Government which committed to a detailed market design process for a refinery production payment, aimed at ensuring the country's fuel security.

Ampol is also at the receiving end of legal trademark proceedings filed recently by Caltex brand owner and oil giant Chevron, which alleges infringements at around 177 sites requiring the removal or rectification of signage and damages.

The Australian group claims it is confident in its position to defend the claim, and does not consider the matters to be significant to either party's business in the context of the brand transition plans.


32. Charter Hall Group (CHC)

Real Estate
Market Cap: $
5.79bn
FY20 revenue: $553.8m
FY20 profit: $345.9m
Listed: 2005
CEO & MD: David Harrison
CEO salary: $5.21m

To say Charter Hall's (ASX: CHC) FY20 was acquisition-heavy would be an understatement.

For the property manager it was more like an extended spending spree, with $7.3 billion spent between June 2019 and June 2020, increasing its funds under management by 33.2 per cent to $40.5 billion.

From this strong position the company was relatively unaffected by the economic effects of COVID-19, with Charter Hall delivering a statutory profit of $346.9 million, up 47 per cent year on year.

The company's shares have even recovered from a 60 per cent dive in March to return to January 2020 levels.

Managing director and CEO David Harrison agrees: this past year, Charter Hall's 15th as a publicly listed A-REIT, was characterised by acquisitions.

"FY20 was a year of two halves for Charter Hall, with the first half characterised by strong FUM growth driven by acquisitions and net valuation increased, with the second half seeing more subdued acquisition led growth and stabilising valuations as a result of COVID-19," said Harrison in CHC's FY20 annual report.

"Developments continue to be a meaningful contributor, while our focus on driving total returns has seen net revaluations also lift significantly during the period."

Major highlights for CHC included the $830m acquisition of Telstra's HQ, a $1.25 billion spending spree to buy 225 convenience properties leased to BP, and a $682 million spend for a stake in the Ampol property trust alongside GIC.

Logistics appear to be an important market for CHC moving forward, with the company recently acquiring the ALDI logistics portfolio for $648 million and another facility in Sydney for $115 million within a week.


33. Harvey Norman Holdings (HVN)

Retailing
Market Cap: $5.64bn
FY20 revenue: $$3.55b 
FY20 profit: $499.45m
Listed: 1987
CEO:  Katie Page
CEO salary: $3.32m

There was never going to be much risk that electronics and furniture retailer Harvey Norman (ASX: HVN) would flourish in FY20.

A massive shift by consumers away from traditional discretionary spending, such as restaurants, entertainment and overseas holidays, saw them pouring that into practical stay-at-home and work-at-home essentials. Apart from Bunnings, Harvey Norman had everything they wanted.

The first wave came as consumers started panicking about where to store a mountain of minced beef at the height of the toilet paper and grocery hoarding stage of the pandemic. The second wave came as more people worked from home, making the market for chest freezers, computers and home office equipment stronger than ever.

Harvey Norman operates stores in Australia, New Zealand, Ireland, Northern Ireland, Slovenia, Croatia, Singapore and Malaysia. Many of its overseas stores were closed for extended periods.

Despite this, the group enjoyed strong sales in March driven by essential technology and appliance goods. The trend continued in the fourth quarter with whitegoods, technology and home office furnishings in demand.

The frenzied period was marked by stock shortages as demand outstripped supply for some lines.

After reporting robust earnings in FY20, Harvey Norman revealed that demand continued to pick up into the new financial year after reporting a 30.3 per cent surge in aggregated sales revenue for the first quarter of FY21.

Company founder Gerry Harvey says he's never seen anything like it in his 60 years of retailing. The executive chairman also copped some flack as the pandemic unfolded, largely because he described it as a sales opportunity. No one could argue that point, as reflected in the latest financials. 

It was a great end to the financial year for Harvey, capping off a rewarding start after he sold The Byron at Byron resort in Byron Bay to Syrian billionaire Ghassan Aboud for $41.76m.


34. Washington H Soul Pattinson & Company (SOL)



Financials
Market Cap: $
5.63bn
FY20 revenue: $1.37b
FY20 profit: $953m
Listed: 1962
MD: Todd Barlow
MD salary: $3.66m

The approval of a merger between Vodafone Australia and TPG was the major driver of Washington H Soul Pattinson's (ASX: SOL) positive result in FY20, with a 284 per cent surge in profit from an accounting gain.

The result was a lesson in the importance of diversification, with the TPG uptick outweighing the effects of other major investments such as New Hope Corporation (ASX: NHC) and Brickworks (ASX: BKW), which lagged due to mine delays and lower building activity respectively.

While the All Ordinaries fell by 12.2 per cent in FY20, Washington H Soul Pattinson (WHSP) managed to keep its fall to 5.3 per cent, signifying an outperformance of 6.9 percentage points.

Chairman Robert Millner, who holds around 8 per cent of WHSP shares while his family has more still, said TPG was finally able to merge with Vodafone to create a very attractive telecommunications company.

"That merger resulted in an uplift to the value of our shareholding and facilitated a special dividend of $121 million to WHSP and a demerger of Tuas in which WHSP remains a 25 per cent shareholder," he said.

The value of the group's holding in coal miner New Hope Corporation fell by almost half during the year, as it still hadn't received approval for its new Acland Stage 3 mine which has been continuously challenged in the courts

"COVID-19 has caused a contraction in energy demand which is resulting in materially lower coal prices than we experienced last year," Millner added.

"Brickworks was impacted by lower building activity in Australia and USA as a result of COVID-19. However, the property division is benefiting from demand for logistics industrial property and lower capitalisation rates."

As one of Australia's oldest companies, WHSP is renowned for its dividend growth; a position it has been able to maintain as others cut payouts to shareholders due to the COVID-19 crisis.

However, the group made the important distinction that its subsidiaries that received small amounts of JobKeeper assistance did not pay dividends and were supported by the parent group.

"One of WHSP's key advantages is a flexible mandate to make long-term investment decisions and adjust the portfolio by changing the mix of investment classes over time," CEO Todd Barlow said.

"While the economic outlook is uncertain, we can be certain there will be some dislocation in a number of asset classes. With dislocation comes opportunity and WHSP is well positioned with adequate liquidity to take advantage of the right investment opportunities."


35. Boral (BLD)

Materials
Market Cap: $
5.59bn
FY20 revenue: $5.72b
FY20 loss: $1.13b
Listed: 2000
CEO: Zlatko Todorcevski
CEO salary: $1.9m

A slide in housing demand took its toll on Boral (ASX: BLD) in FY20, but the company had to bite the bullet the hardest in North America.

Australia's largest construction materials and building products supplier wrote off $1.2 billion from its assets in North America due to continued uncertainty over the longer term.

This number capped off a torrid time for the company in the June half which included an accounting scandal and the announced departure of long-time CEO Mike Kane.

Kane revealed his departure at the company's AGM in February. He is reported to have said at the time that the next CEO would need to be Superman to lift the company from the doldrums.

His light-hearted assessment came in the wake of an embarrassing controversy in February when it was discovered staff at Boral's North American windows division had overstated earnings by $US24.4 million between March 2018 and October 2019. That cost the jobs of senior executives in the US.

The controversy also had its sequel in March when Boral was informed it would be subject to a class action on behalf of investors who were affected by the revelation.

Kane's planned departure came on the heels of multiple earnings downgrades by Boral and puts pressure on new CEO Zlatko Todorcevski to turn the ship around. Todorcevski, a former chairman of Adelaide Brighton Ltd (ASX:ABC), took the Boral helm on July 1.

In September, Boral had another board shake-up courtesy of media baron Kerry Stokes. Seven Group Holdings (ASX: SVW) CEO Ryan Stokes and CFO Richard Richards joined the Boral board after the media company boosted its stake in Boral from 10 per cent to just under 20 per cent.

Market observers have noted similarities between Kerry Stokes' plans for Boral and his creeping share play on West Australian Newspapers in 2008 and Seven West Media in the 1990s. These led to takeovers in both instances.

The board appointments give the Stokes camp increased influence over the direction of the company, and it is understood the plan is for Boral to bring its focus back to the domestic market where construction is expected to get a boost from government stimulus measures.

Former CSR boss Rob Sindel and former Aurizon CFO Deborah O'Tool have also joined the Boral board in non-executive roles.

Meanwhile, one small positive for Boral in FY20 was winning its long-running cement dispute with Wagners Holding Company (ASX: WGN). The Queensland Supreme Court ruled in May that Wagners must 'do a Bunnings' and match a competitor's lower prices when supplying cement to Boral from its Brisbane plant at Pinkenba.

The spat started in March 2019 when Boral argued it could source cement cheaper from Cement Australia. The supply deal with Boral, which expires in 2031, represents 40 per cent of Wagner's cement production. The saga is not entirely over as Wagners is appealing the decision.


36. Worley (WOR)

Energy
Market Cap: $
4.97bn
FY20 revenue: $13.06b
FY20 profit: $171m
Listed: 2002
CEO: Chris Ashton
CEO salary: $2.37m

After shedding the WorleyParsons moniker following the $3 billion buyout of a Jacobs Energy, Chemicals and Resources in FY19, the newly minted Worley (ASX: WOR) group emerged as a resilient company in FY20.

The energy and chemicals manufacturer shed 3,000 staff globally in the second half in response to COVID-19, representing about five per cent of its workforce, but that hasn't put the brakes on its ambitious growth plans.

In July, Worley increased its exposure to renewables by taking full control of Australian energy infrastructure support group TW Power Services, buying out Spanish partner Ferrovial's 50 per cent stake for $20 million.

The deal follows the acquisition of UK-based offshore wind maintenance company 3sun in October 2019.

The company's newly extended reach has also boosted its exposure to markets in Europe and North America.

Worley now receives about 20 per cent of its revenue from the oil and gas sector, down from 65 per cent previously, while its exposure to the chemicals sector has lifted from less than 10 per cent to 37 per cent.

The bulk of revenue, some 45 per cent, comes from operating expenditure-based contracts.

Among the innovative circular-economy initiatives Worley is pursuing is the harvesting of floating plastics on the world's oceans for recycling into methanol which is used to power the ship collecting the plastic.


37. Qube Holdings (QUB)

Transportation
Market Cap: $
4.73bn
FY20 revenue: $1.9b
FY20 profit: $87.5m
Listed: 2007
CEO: Maurice James
CEO salary: $3.54m

Australia's largest import-export logistics provider has been highly acquisitive of late, and FY20 was no exception.

After weathering the second half well, Qube Holdings (ASX: QUB) shows no signs of slowing on that front with a slew of announcements that indicate its preparedness to maintain the momentum.

In September this year, the group firmed up its foothold at the Port of Melbourne until 2066 after a lease agreement was secured by Patrick Terminals, in which Qube has a 50 per cent stake.

This followed the announcement in June of the development of a major new warehouse facility on 26ha at Moorebank Logistics Park in Sydney's south-west to be leased by Woolworths (ASX: WOW).

The project comprises a 40,700sqm national distribution centre and a 34,600sqm regional distribution centre for Woolworths, which has secured a 20-year lease on the complex with options to extend this by a further 30 years.

The project represents a combined investment of more than $1.1 billion with Woolworths developing the project and Qube to fund it.

A month earlier, in May, Qube completed a $500 million entitlement offer which it said would be applied to pursue growth opportunities.

Its commitment to the Woolworths project will require between $420 million and $460 million over the next three years and is expected to deliver the company about $30 million in revenue per year once fully operational.

The freshly raised capital will also support Qube's new contracts with BlueScope Steel, Shell and BHP Nickel West.

In the first half, Qube completed the $60 million acquisition of then ASX-listed container haulage and logistics firm Chalmers Limited (ASX: CHR). The off-market buyout came on the heels of Qube acquiring mining and infrastructure services company LCR Group in May 2019 and prior to that Maritime Container Services.


38. Altium (ALU)

Information Technology
Market Cap: $
4.7bn
FY20 revenue: US$189.2m
FY20 profit: US$30.88m
Listed: 1999
CEO: Aram Mirkazemi
CEO salary: US$1.7m

The effects of COVID-19 meant Australian-American tech darling Altium (ASX: ALU) wasn't able to hit its US$200 million sales goal this year, but the pandemic did help accelerate the electronic design company's shift from perpetual licences to a subscription-based model.

In June the group catered to working from home trends with the release of its Altium 365 product - the world's only cloud-based platform for printed circuit board (PCB) design and realisation.

"We want to help the industry get back on track by making it easier than ever before to get the tools they need for PCB design, and work collaboratively in distributed work environments," COO Ted Pawela said after the launch.

Altium CEO Aram Mirkazemi said the new platform was causing excitement and gaining strong early adoption.

"This is most heartening and an early validation of our vision and strategy for this new digital platform to transform the electronics industry," he said recently.

"The current conditions and the accelerated roll out of Altium 365 is evolving Altium revenue away from perpetual licensing and maintenance subscriptions towards term-based licensing and SaaS subscriptions.

"This transition is being planned carefully and is not expected to have a material impact on short-term revenue, as a significant part of Altium's current revenue is already subscription-based, and prorated on a linear basis."

In FY20 the company surpassed 50,000 subscribers, but a lock-down in Beijing and increased COVID-19 infection rates in the US both hindered sales in June; historically a month when the group secures a significant part of its second half business.

"Altium remains firmly committed to its long-term targets. We are on track to achieve 100,000 subscribers by 2025, having just passed the half-way mark," he added.

"Due to COVID-19, however, we may take an additional six to 12 months to achieve our 2025 goal of US$500 million in revenue."


39. AMP (AMP)

Financials
Market Cap: $
4.48bn
1H20 revenue (operates on calendar year): $1.98b
1H20 profit (operates on calendar year): $215m
Listed: 1998
CEO: Francesco De Ferrari
CEO salary (2019): $13.43m

Faced with indignation over its handling of a sexual harassment complaint, AMP's (ASX: AMP) board has seen the departure of two key members in recent months as it continues to explore the prospect of more asset sales to simplify the business.

The company, whose market capitalisation has fallen by $1.6 billion since the last instalment of this list, received backlash over its announcement in June that AMP Capital's global head of infrastructure equity Boe Pahari would become CEO of the division.

The controversy stemmed from sexual harassment allegations made against Pahari from former California-based staffer Julia Szlakowski, but the board none of whom were in their positions when the alleged incidents took place stood behind a 2017 review into her complaints.

The consequences for dealmaker Pahari were described by the board as "both significant and appropriate", but the public outcry over his appointment led to a demotion around two months later.

It was an issue that also sparked the resignation of chairman David Murray and non-executive director John Fraser.

Murray said "although there is considerable support for our strategy, some shareholders did not consider Mr Pahari's promotion to AMP Capital CEO to be appropriate"

"Although the board's decision on the appointment was unanimous, my decision to leave reflects my role and accountability as chairman of the board and the need to protect continuity of management, the strategy and, to the extent possible, the board," he said.

Murray was immediately replaced by Debra Hazelton, a former chief executive of Mizuho Bank in Australia and Commonwealth Bank (ASX: CBA) in Japan, who underscored her commitment to the group's transformation strategy.

The group kicked off the new financial year by completing the $3 billion sale of life insurance business AMP Life to Resolution Life, in a deal described by CEO Francesco De Ferrari as a "major milestone" in demonstrating the ability to execute complex projects even through the difficulties of the pandemic.

But the push to "reinvent" wealth management in Australia and create a leaner business doesn't stop there. In September AMP announced it would be undertaking a portfolio review to assess the relative merits, separation costs and dis-synergies of potential asset sales

The company's bottom line has improved since FY19 when the consequences of the Royal Commission compressed profits.

According to the latest update from the Australian Securities and Investments Commission (ASIC) recently, the group has paid out or offered $145.7 million in compensation for fees for no service (FFNS), and $28.6 million for non-compliant advice.


40. Appen (APX)

Information Technology
Market Cap: $
4.15bn
1H20 revenue (operates on calendar year): $306.2m
1H20 profit (operates on calendar year): $22.3m
Listed: 2015
CEO: Mark Brayan
CEO salary (2019): $2.8m

While the USA has its FAANG technology stocks - the acronym standing for Facebook, Amazon, Apple, Netflix and Google - Australia has its much smaller but rapidly rising equivalent known as WAAAX.

Buy-now pay-later sensation Afterpay (ASX: APT) has notched by far the biggest rise in its share price out of this elite ASX club, but machine learning and artificial intelligence (AI) dataset outfit Appen comes in second with almost 45 per cent growth since the start of the year.

It is a performance that outpaced Altium (ASX: ALU), Wisetech (ASX: WTC) and NZ-based Xero (ASX: XRO) in the tech shares stakes, as part of a trend over more than five years that puts Appen in this list for the first time.

Appen has been working for more than two decades collecting and enriching datasets that power the AI revolution, comprising images, text, video data, speech and audio files.

Engaging more than one million contractors, Appen's platform is accessed in more than 180 languages worldwide and supports a wide range of industries.

Appen's management made a bold call in March 2019 to acquire San Francisco-based Figure Eight Technologies for up to $428 million, backed by a successful $285 million capital raising for the purpose.

At the time, Appen CEO Mark Brayan said the union brought "the best of both worlds", harnessing his company's highly efficient crowd management platform and scalable multi-lingual network of contractors, combined with the US counterpart's customer-facing software platform with machine learning-assisted (ML) annotation.

Eighteen months on, Appen's results are starting to show the benefits of the acquisition. For FY20 the group posted 25 per cent revenue growth to $306.2 million.

"Figure Eight is firmly part of Appen now. The almost fully integrated business is delivering on our strategic thesis," Brayan said.

"Four of our five major customers are now using our annotation platform and we signed an enterprise-wide platform agreement with one of them that included an US$80M annual commitment."

Appen recorded a number of new customer wins in the first half in the US and Europe, and notes revenue growth and customer acquisition in China has been especially pleasing.

"We are especially pleased with this result amidst the pandemic and the implementation of our growth initiatives," chairman Chris Vonwiller said.

"The strength of our business model, market exposure, competitive position and our consistent execution give us the confidence to push forward with our investments to solidify future growth."

 


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