IBISWorld Australia compiles the Top 500 Private Companies list by gathering primary research, ASIC-lodged company reports and its own appraisals of company revenue based on historic data and industry analysis.
Want access to the full list of companies? Fill out the form to the right, then keep reading for in-depth analysis on how the COVID-19 pandemic and other factors have affected the Top 500 Companies this year.
The Top 500 Private Companies in Perspective
In 2020-21, the largest 500 private companies accounted for 4.4% of Australia’s $5.8 trillion revenue, and an estimated 4.2% of the nation’s workforce of 13.2 million people.
These percentages have not changed much over a decade or more. So, the largest 500 private companies remain a remarkably consistent economic contributor, despite a lot of exits and entrances. Indeed, a proclivity for privacy sees a handful of companies asking to be excluded from the annual survey. Listing on the ASX and takeovers see others depart. Some, such as Linfox, have privatised after publicly listing many years ago, and are back on the Top 500 Private Companies list.
As in past surveys, superfunds have been excluded from this year’s list. Had they been included, the revamped Top 500 would account for closer to 6.0% of the nation’s revenue.
The 2020-21 year was a brutal one, due to the COVID-19 pandemic and subsequent quarantines, lockdowns and border closures. The impact of the pandemic is apparent in the chart below, which shows our economic performance over the past six decades. This performance includes the current recession, which is the result of the COVID-19 pandemic. This recession is not yet over, when measured on a four-quarter moving basis.
We should emerge from this 12-month progressive decline in our economy in the September 2021 quarter.
While we have had only four recessions over this 60-year period, our economy has slowed from about 5.0% per annum growth in the 1950s and 1960s to a trend of just over 2.0% per annum in the 2020s. Lower growth has largely been due to progressively increasing affluence (the so-called boiling frog syndrome), but is also due to an absence of serious reforms to our labour market, taxation regime (especially the GST) and parliamentary system (namely, the undemocratically elected Senate’s power to veto reform bills). Australia’s innovation and venture capital have lagged well behind that of the United States and many other OECD nations for many years.
So, any suggestion that our economy will rebound into a long, new era of fast growth after the pandemic would be a cruel hoax. The fundamentals have to be fixed first, and they’re not being tackled.
These are serious issues for the private sector, including the Top 500 Private Companies. These issues were compounded by the red ink across the nation’s 19 industry divisions, as seen in the next chart, which shows Australia’s GDP growth – but mainly decline – over the 12 months to March 2021.
The agony in the Accommodation & Food Services industry is stark. So, too, is the devastation in the Administration & Support Services, Transport, Arts & Recreation Services, and Personal & Other Services divisions. All told, 12 of Australia’s 19 industry divisions declined during the year.
This assessment leads to a comparison between the nation’s mix of industries and that of the Top 500 Private Companies. For simplification, we have aggregated the 19 industry divisions into five sectors of the economy in the following chart.
These pie charts highlight the huge difference in the relative importance of Australia’s industries among the Top 500 Private Companies when compared with the overall nation and its 2.4 million enterprises.
The Agrarian and Industrial Age sectors, being the primary (agriculture and mining), secondary (manufacturing, utilities and construction) and tertiary (wholesaling, retailing and transport) sectors, account for 63.0% of the Top 500 Private Companies’ revenue. In comparison, only 39.2% of the nation’s GDP is allocated to these sectors.
We would have to go back to the mid-1960s to find when the nation last derived almost two-thirds of its output from those three sectors. Since then, the Post-Industrial Age has seen the rapid rise of the quaternary and quinary sectors, which now account for 60.8% of the economy, compared with just 37.0% of the Top 500 Private Companies’ revenue.
So, the Top 500 Private Companies have an old-fashioned industry mix. This bias would have been less apparent if we had included superannuation funds and their $159.0 billion in revenue – or, at least, that of the top 40 to 50 funds that would generate enough revenue to make the Top 500. Including superannuation funds would have boosted the quaternary sector’s share of Top 500 revenue to 40.0% or more; but this would still fall short of the nation’s 49.0% revenue share.
Of course, one of the main reasons for the relative shortage of post-Industrial players among the Top 500 Private Companies is that they are more likely to list on the ASX or be acquired by bigger corporations, including foreign companies.
None of this is to suggest the Top 500 Private Companies are not particularly profitable. It has been long understood that a business’s industry of operation only accounts for one-third of its risk – the other two-thirds relate to its management, strategy and performance.
Generally speaking, private companies are reluctant to release their profitability, in the form of return on shareholder funds after tax (ROSF). The data we do have suggests private companies largely hold their own against listed companies and businesses with other types of ownership. However, in aggregate, they would not match the profitability of foreign-owned businesses, due to foreign corporations’ IP and their implementation of world’s best practice operations.
Enterprise Size
Interestingly, all of this year’s Top 500 Private Companies have made it into Australia’s Top 2,000 enterprises list, which accounts for 47.0% of the nation’s $5.8 trillion revenue. So, the Top 500 Private Companies account for a quarter of the Top 2,000 enterprises’ revenue.
As we see in the breakdown below, over four out of five of this year’s Top 500 Private Companies are in the $100 million to $1 billion revenue category. One-tenth are in the $1 billion to $10 billion category, and just a single enterprise is in the over $10 billion category. The average revenue generated by the Top 500 is just over half a billion dollars per enterprise.
Ownership
The ownership structure of the Top 500 Private Companies has been largely consistent over many years. For example, proprietary companies currently account for 66.6% of the Top 500 Private Companies’ total revenue, compared with 65.9% in 2018.
As the following chart shows, with little surprise, proprietary companies (numbering 334 of the 500) accounted for two-thirds of the Top 500 Private Companies’ revenue, and unlisted public companies (111 of the 500) contributed one-fifth of the total.
Geography
The final chart reveals the closest conformity of the Top 500 Private Companies to the nation’s economy.
Of the nation’s Top 500 Private Companies, those operating in Victoria, Western Australia and New South Wales bat ahead of their economic size. While the differences are notable in the above chart, they are not overly skewed.
Future changes and challenges
We finish with a handful of glimpses into the future. They include:
- The SME sector of the Australian economy is growing faster than the big end of town, where the Top 2,000 enterprises’ share of total revenue has shrunk from 52.0% in 2016 to 47.0% today. However, the Top 500 Private Companies’ share is more stable, even if its membership is constantly evolving (for reasons given earlier).
- Entrepreneurship has renewed Australia’s SME sector, particular within the quaternary and quinary sectors. However, these businesses often grow so fast that they become listed sooner and don’t stay in the Top 500 Private Companies list for long; as was the case with Atlassian and Afterpay, for example.
- Our enterprises urgently need to match world’s best practice for their industry; and to expand offshore with unique and competitive IP, rather than diversifying into different local industries. About 98.0% of our most profitable enterprises focus on just one of the nation’s 500-plus ANZSIC classes of industry.
- The external environments for Australian businesses are becoming more demanding. Business operations must take into account a range of factors, including ESG reporting; emerging competition (and opportunities) from the Asian region; changing consumer priorities (favouring services); the need to ensure their supply chains are free from modern slavery; and more frequent pandemic activity, to name just a few.
- Best-practice financial management must be able to withstand an unusual interest rate environment, changing currency movements and the ever-increasing popularity of cryptocurrencies, among other factors.
- The arrival of the ubiquitous Digital Era in 2007, and the creation and embedding of advanced AI technology in business operations – now proceeding apace – are conditions of business survival and success.
- The economy is on a slowing growth path, which is unlikely to reverse Australia's seven-decade drift until the 2030s. By then, we will hopefully have embraced overdue reforms, developed longer-term vision that spans beyond parliamentary terms and three-year business plans, elected respected statespersons into power, and appointed more top-notch CEOs in charge of our businesses.
To the victor go the spoils. The economy can be revitalised by vanquishing the inept (and, sadly, saying goodbye to the unlucky); and by encouraging and backing new entrepreneurs. The Top 500 Private Companies have experienced, and will continue to experience, all of the above challenges. Their success in the face of these challenges shows that businesses are capable of overcoming them.
