Who is biggest? A survey of our largest companies

Press, 17 July 1979, Page 24

Who is biggest? A survey of our largest companies

Who is biggest? Who is best? Ranking things in a preffered order has long been the delight and the weakness of man.

The tables on these pages show the ranking order of 70 of New Zealand’s largest companies, in four categories — industrial, merchandising, finance, and other services.

The companies in the table only include those that are" listed on the Stock Exchange, where their shares may be traded every day. Every New Zealander can buy himself a share of action, by going to a sharebroker, and discussing with him the purchase of a parcel of shares.

Because the table contains only “listed” companies, some large companies are excluded, who otherwise would quite possibly make the list. Local examples would be such companies as Ballantynes, Pyne, Gould Guinness, or Tait Electronics. Comalco is not included because it is an overseas company.

The companies are ranked by profit. This excludes, therefore, large projects which have not come to profit yet. A further point that must be borne in mind is that the list is based on the latest published formal accounts to shareholders. For instance, many companies have issued preliminary profit reports for the current year, but no balance sheet details yet. Thus the figures included are based on the latest published balance sheet, for two reasons: they are audited, and only from them can the ratios be worked out. Needless to say, this type of list is likely to change from year to year. Companies report throughout the year, and the scene is like a motion picture — it goes on. The table is like a snapshot, taken at one point of time: the date of this “photograph” is

Already we know that some of the firms on the list would not make it

next year, but that cannot be helped. The 70 companies on the list form a “milliondollar club” with regard to their profit.

But there are a few more’ companies with a profit of SIM or better, that did not make the first 50 — they are (not ranked): Deanes, Alliance Textiles, Wilson Neill, General Finance, and U.D.C.

One might argue that

profit is not the best criterion for ranking — it is a bit like judging howrich a person is by noting how much he saves. We tend to rank persons by income, and it is probably better to rank companies by sales — how much money they handle. Unfortunately, ’ a number of companies are reticent about their sales, and therefore this criterion cannot be used.

Another possible yardstick would be a person’s assets, minus, of course, his liabilities. The equivalent for a company is net worth, or shareholders’ funds. For companies there is still another yardstick: market capitalisation. This is the value the sharemarket puts on the company — what you might buy it for if you could buy all the shares,

through the market, in one fell swoop. This is a practical impossibility, of course, and in any case a company is almost invariably worth more as a going concern. That is why a take-over bid is almost always made at a share-price higher than the current market value of those shares. To overcome all these objections, the table also gives ranking orders for

market vlaue (column 4), net worth (column 7) and earning rate on shareholders’ funds — which many financial analysts consider the most important yardstick of all. But when this rate is being considered, it should be done by industry grouping. For instance, perusal of the table shows that the rubber industry and the base metals industry are much more

profitable than say breweries. Finally, there are two anomalies in the table: Goodman Group has changed to such an extent that, although a preliminary profit report has been made, all other figures are only guesswork. Also Brierley Investments. with a profit of $2.6M, is not in the list — where would you put it. It is of its own kind.