Last week some fascinating financial data was released by economic research firm, IBISWorld.
IBISWorld founder, Phil Ruthven decided to scrutinise all large enterprises in Australia, not just the home grown or ASX-listed ones, over five years to 2015, to identify the highest performing enterprises measured by return on shareholders’ funds (ROSF).
He removed those companies with tiny capitalisation, or those where equity was less than 5% and the rest debt. Ruthven was left with 1467 companies, representing about 38% of Australia’s $4.8 trillion revenue in 2015. The 1155 companies running at a profit had a total ROSF of 15%.
The top 10 companies across all sectors were as follows:
|Enterprise||ROSF||Revenue (AUD$ million)|
|1. Philip Morris||189||950|
|2. Fedex Australia||120||229|
|3. British American Tobacco||107||2073|
|4. Wood Group Australia||104||561|
|6. Jan De Nul (Aus)||101||768|
|7. GSM Holding Company||99||528|
|9. Hays Specialist Recruitment||95||1517|
|10. Winslow Constructors||91||331|
It’s fantastic that the recruitment industry, through Hays, is represented in the very elite bracket of enterprises. It shouldn’t be a major surprise as Hays has, since the delisting of Morgan & Banks in 1999, consistently been the most profitable recruitment company in Australia.
Ruthven analysed the very best performing enterprises and summarised the following factors as common characteristics (I have added my own comments about Hays appropriate to each point):
|Characteristic||Comment re Hays|
|They stick to one business at a time and do not diversify||When Hays listed on the London Stock Exchange in 1990 it had a number of businesses outside of recruitment: overnight business mail, document storage and chemical distribution were just some of these businesses. In 2004 the last non-recruitment business was sold and Hays has remained a specialist recruitment company ever since.|
|They aim to dominate segment(s) of their industry or market||Hays do not offer labour hire services. Hays do not offer traditional search services. Hays focuses solely on the skilled professional and technical markets where volume and margin meet in the most profitable way.|
|They are forever innovative, valuing the business' IP||You only need spend a few minutes perusing this 2013 Hays investor presentation to|
gain a basic understanding of how much emphasis Hays places on innovation and the value of their ongoing IP development.
|They outsource non-core activities to enable growth||I am not sufficiently informed about this area of Hays' business to comment.|
|They don't own ‘hard' assets||The key assets of Hays are their employees and the value they create through the work that they do.|
|They have good and professional financial management||Global Group Finance Director, Paul Venables, has just had his ten year anniversary at Hays. My understanding is that Venables is highly respected and leads a very effective global finance team.|
|They plan from the outside-in, not the inside-out||Again, you need only briefly peruse the 2013 Hays investor presentation that I referred to earlier, to see how much emphasis Hays places on understanding and predicting country-by-country employment market|
trends, as it plans for future growth.
|They anticipate any industry lifecycle changes||Hays have always understood the additional profitability that specialist temp recruitment can deliver (and been very good at it).|
In the mid-nineties Hays were one of the first recruitment agencies to understand the trend towards RPOs and develop an effective RPO offering.
|They develop strategic alliances||On the home page of Hays there are four major tabs. The fourth tab is titled Strategic Partners. Listed here are Confederation of British Industry, Google, LinkedIn, Manchester City FC, New York City FC, Oxford Economics, Seedcamp and, SEEK. Need I say more?|
|They develop unique organisational cultures||I doubt I need to add too much here to what people already know, or have heard, about the Hays culture. Perhaps it is best summarised by what NZ recruitment blogger, Jonathan Rice wrote last month.|
|They value leadership first, and management second||This interview I conducted with Hays (Aus & NZ) Managing Director, Nick Deligiannis gives plenty of insight into the leadership culture within Hays.|
Prompted by the IBIS World research, I have investigated the recent trend in the local Hays financial results and I’ll be reporting the result of those investigations in next week’s blog.