Toll pipped in the growth stakes

The SmartCompany Dun & Bradstreet Industry Growth List for the transport and logistics sector reveals a fast-growing sector that is expanding through specialisation and acquisition, with small to medium-sized firms leading the charge.

A tidal wave of consolidation has changed the face of the industry as fast growing, mid-sized businesses gobble up the mum and dad operations that were once its bedrock.

That shift is reflected in the SmartCompany Dun & Bradstreet Industry Growth List for the transport and logistics sector, with the majority of businesses in the $10 million to $100 million revenue range.

The top of the list is peppered with small-to-medium-sized players: Basslink Logistics, Express Logistics Australia, Mermaid Marine Australia and Boyle’s Livestock Transport are just a few examples.

It is not just emerging companies that are doing well, however – some of the big fish have also prospered, chief among them industry giant Toll Holdings.

But while acquisitions are part of the growth story for most of the businesses at the top of the list, they are not the only factor. Especially for the smaller businesses, dominance of a relatively narrow industry niche has also been a key strategy.

Several businesses at the top end of the transport and logistics SmartCompany Dun & Bradstreet Industry Growth list fit the specialisation model.

Both Basslink Logistics (now called Totalcare Logistics) and Express Logistics have achieved some growth through acquisition, but both also have a distinct geographical niche.

The Express Logistics business has been built around servicing the trans-Tasman route, according to the company’s group commercial manager Dave Lovegrove.

The business’s focus on that niche has enabled it to combine significant organic growth and acquisitions to achieve impressive 80.4% revenue growth to more than $36 million in 2006-07.

Other high performers on the transport and logistics Industry Growth List have chosen the opposite strategy; working to make a virtue of sheer size and comprehensiveness.

The third company on the Industry Growth List, Toll, exemplifies this strategy. For the last 15 years Toll has pursued an aggressive strategy of acquisitions that has seen it become Australia’s largest transport and logistics company.

Despite its massive size – Toll’s revenue topped $7 billion in 2006-07 – the company achieved an impressive 68.7% growth over that period.

The scale of Toll’s acquisition program is illustrated by the fact that it now controls number four on the list, former Virgin Blue freight business Express Blue Air Freight, while the eighth business on the list, Patrick Autocare, is now controlled by Toll spin-off Asciano.

Challenges ahead

Businesses that achieve high growth in the transport and logistics sector over the years ahead will have to figure out how to overcome two key obstacles – soaring petrol prices and the skills shortage.

Rising petrol prices are putting the squeeze on margins, with those companies that are unable to pass the increased costs on to customers – mostly smaller firms – finding conditions particularly difficult.

The experience of one of the list’s top 10, Boyle’s Livestock Transport, reflects that of many other smaller businesses in the sector.

“Fuel costs are a huge concern. Fuel has gone up 20 cents in the last six weeks – five years ago fuel was 25% of turnover, now its 40%. Redoing your costings to make that work is pretty tough,” Anthony Boyle says.

As for the skills shortage, the industry will continue to struggle with the fact that it is not seen as a glamorous or lucrative career option by many school leavers.

You can read the full report and see the rankings here.


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