Transport and logistics firms take the fast road to growth
Wednesday, 30 April 2008
Last Updated: Monday, 5 May 2008
By Mike Preston
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.
It may be one of Australia’s oldest and most established industries, but the transport and logistics sector has experienced a pace and degree of change matched by few others in recent years.
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.
Rob O’Byrne, managing director of industry consultancy Logistics Bureau, says these two trends – consolidation and specialisation – have characterised the transport and logistics sector over the past two to five years.
“Consolidation was really inevitable. There were too many players in a small market, and as greater international competition squeezed margins, rationalisation has continued,” O’Byrne says.
“Hand in hand with that has been a tendency for players to become much more specialised as an alternative way of maintaining adequate margins.”
Specialise or perish
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 expanded 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.
“Express Logistics is the leading service provider of trans-Tasman distribution, freight and logistics services, and we have continued to lead this market over the past 18 months,” Lovegrove says.
Others have pursued specialisation within a service sector. Number 11 on the list, Paloga, is a specialised service provider to the floor covering industry, while number nine, Boyle’s Livestock Transport, has stayed true to its name.
“We have bought a few small businesses, but basically we specialise in moving livestock. We just want to specialise in what we do best, and it has worked for us,” Boyle’s director Anthony Boyle says.
Big players get bigger
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.
A transport industry analyst, who commented on condition of anonymity, says while much of Toll’s growth has been acquisition driven, it has also been able to achieve organic growth through the economies of scale those acquisitions have enabled.
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