Diversity, investment in digital technology drive Australia’s mid-market success

What's driving Australia’s mid-market success?

Companies in Australia’s mid-market sector with boardroom diversity, a dominant shareholder, or a long-serving chairperson are outperforming their peers. And those which made acquisitions for inorganic growth last year are boosting their revenues more than those that did not, but potentially squandering profit boosting synergies in the short term.

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These are just some of the headline findings from KPMG Enterprise’s first ASX300+ Report, which studied the 2016 and 2015 results of Australia’s ASX300+ companies.

Key findings:

  • Female CEOs in the ASX 300+ delivered a 9 per cent increase in revenue in 2016, compared to the group-wide average of 0.5 per cent. There are 21 companies in the ASX 300+ with a female CEO (3 per cent of companies). 
  • Companies with women on their board achieved higher revenue growth, profitability and shareholder returns in 2016. On average, ASX 300+ boards comprise only 9 per cent female directors, compared with 23 per cent in the ASX 200. ASX300+ companies have a long way to go to reach the AICD target of 30 per cent female board representation by the end of 2018.
  • Entities that completed an acquisition saw an 11 per cent boost in revenue overall for the year, compared to a backward trend of 2 per cent for the remainder of companies which did not complete an acquisition. However those entities that completed an acquisition saw a decline in profits post acquisition.
  • Companies investing in intangible assets such as digital technology are growing their revenue at a faster rate than those which are not (4 per cent growth compared to -2 per cent trend). Profitability returns are also greater in these companies. 
  • ASX 300+ companies with a dominant shareholder (>50 per cent equity) performed better than other companies in both revenue growth and profitability improvements - growing revenue in 2016 at 6 per cent, compared with 0 per cent growth for widely held entities. 
  • 15 per cent of the ASX 300+ are showing some financial distress in terms of their working capital position – and debt levels are rising overall across the ASX 300+.
  • Those with strong working capital positions grew revenue at 2 per cent overall, compared to an overall decline of 4 per cent from companies which weren't able to effectively manage working capital. 
  • Chairperson tenure of more than 10 years is linked to better financial performance, with revenue growth of 7 per cent outperforming the competition. 
  • Remuneration of directors is widely dispersed across the ASX 300+ from no remuneration to multi-million dollar packages including share based payment arrangements.

The Report identified six criteria for performance across:

  • Diversity
  • Digital technology investment
  • Acquisitions
  • Funding arrangements
  • Shareholders
  • Remuneration and tenure
     

Each was examined to highlight the opportunities and challenges facing ASX 300+ companies.

Rob Bazzani, National Managing Partner, KPMG Enterprise commented: “The mid-market sector represents over 65 per cent of the Australian economy and is Australia’s engine room. KPMG’s Report provides an unique and accurate picture of mid-market performance. While companies in this group do not have the same degree of diversity at board and senior executive level, those that do showed better results last year then their competitors. This reinforces our view that a broader range of backgrounds adds value to businesses.”

“Another key finding is that accessing new horizons through technology is a fantastic opportunity for the mid-market. And although there are worrying levels of financial distress among the companies we surveyed, those investing and making acquisitions did notably better than their peers. There is a direct correlation between acquisition and profitability. Therefore, we would encourage businesses to remain positive and seize any opportunities available.”

About the KPMG Enterprise 2017 ASX 300+ Report

KPMG Enterprise’s 2017 ASX 300+ Report analysed 664 companies, including 626 local entities and 38 foreign companies listed in Australia. The ASX300+ operate across all sectors of the economy and in all Australian states and territories.

The Report defines the ASX300+ as ASX companies by market capitalisation in June 2016 from 300-100 and does not include companies that listed or delisted from the ASX in 2016. The Report also excluded outliers in individual data sets.

Further information:

Dina Ross
National Communications Manager Enterprise
M: 0428 434 089
E: dross3@kpmg.com.au

 

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