ASX 200 companies that notably outperform their peers

Between January 2014 and January 2019, companies part of the ASX 200 index achieved an average total shareholder return (TSR) of 32 per cent. A group of eight leading companies have however managed to substantially outperform their peers, delivering nearly seven times higher returns – meet Australia’s transformation champions.

To gain insight into what large Australian companies are doing differently and better to edge their peers, consulting firms Innosight and Inventium teamed up to conduct the ‘Australia’s Transformation Champions’ study. The research sought to identify those companies that have achieved exceptional and sustained growth, above and beyond their peers, and subsequently unravel the ingredients behind their successful recipe.

The analysis of Australia’s 200 largest listed companies shows that in an era of digital disruption, it is possible for any player – a digital entrant or even a legacy company in a seemingly stagnant market – to outperform the market. A solid strategy is key: outperformers all were able to turn disruption from a threat into a growth opportunity.

“In doing so, these firms have not undertaken one big monolithic change, but instead have created outsized returns by simultaneously reinventing their core business whilst, in parallel, creating successful new growth engines to serve new markets. This is not the incremental change often ascribed as transformation, but true change in substance or form transformation. The caterpillar has become a butterfly,” said Scott Anthony, a senior partner at Innosight and one of the lead authors.

The exploration looked into three main dimensions. First, companies were analysed from a financial viewpoint, with revenue growth and stock performance used as the key performance indicators. Then, a more qualitative analysis was performed to shed light on the degree to which companies have managed to reposition their core business and to which degree they have been successful in developing meaningful new business. 

Based on the benchmark of Australia’s public companies, eight players have been found to markedly outperform their ASX 200 peers. These are:

Aristocrat
Founded: 1953
Industry: Gambling & Casinos
Headquarter: North Ryde, New South Wales
The gaming machine provider and casino manager has branched into the growing market of social and digital gaming. 

Caltex
Founded: 1900
Industry: Oil & Energy
Headquarter: Sydney, New South Wales
Traditionally focussed on fuel refining, this company is now pursuing a retail strategy including a café business with outlets not necessarily attached to petrol stations.

Downer EDI
Founded: 1933
Industry: Civil Engineering
Headquarter: North Ryde, New South Wales
The mining and engineering services business has acquired facilities management company Spotless to diversify its offerings and secure its place in the integrated facilities management market.

Orora
Founded: 2013
Industry: Packaging
Headquarter: Hawthorn, Victoria
This packaging company has entered a new market in visual communication solutions, providing end-to-end services from creative solutions right to the point of distribution.

Qantas
Founded: 1920
Industry: Aviation
Headquarter: Mascot, New South Wales
The national carrier has deftly mitigated its risks by transforming Qantas Loyalty, its frequent flyer and business rewards programme, into a cash generation machine.

REA Group
Founded: 1995
Industry: Online Media
Headquarter: Richmond, Victoria
This leading residential real estate portal has broadened its remit beyond advertising by launching a portal through which it can offer aligned products such as financial services, home loans and lifestyle content.

Seek
Founded: 1997
Industry: Online Media
Headquarter: Melbourne, Victoria
This global, online employment marketplace has extended its footprint to not only offer job search functionality, but also provide education services.

Webjet
Founded: 1998
Industry: Travel & Tourism
Headquarter: Melbourne, Victoria
The online travel agency (OTA) has transformed from a consumer-focussed business to a B2B offering by providing hotel room aggregation and intermediary services to other OTAs.

Notably, the group of transformation leaders are quite diverse. The largest company, Caltex, has revenues of over $21 billion, making it more than 25x larger than the smallest player, REA Group. And while Webjet is a mere 21 years old, Orora is 159 years old. In addition, there is a mix of product-oriented and service-oriented offerings in both B2B and B2C markets.