TOP 200: Company of the Year

Unlike many large organisations, Dunedin-based roading contractor, unlisted company Fulton Hogan has spent lot of time managing the small bits – looking after staff, implementing strict control measures and developing unique business systems. While the company is rapidly becoming trans-Tasman tour de force – its “down to business” value proposition underscores culture built on its deep-south roots. In fact, the company’s unassuming Dunedin base, built on former sandpit – gives few clues to the size of this business.

Since its origins in the early 1930s the company has grown from two-man family business (started by Jules Fulton and Bob Hogan) into multinational operation employing 2800 staff (500 in Australia) – with 30 percent share of the national road construction market. Having moved out of its Dunedin home-turf by the early 1970s, the company went on to acquire (then) publicly listed road contracting business, British Pavements. major player in road construction globally, Shell (UK) took 25 percent stake in Fulton Hogan during the early 1980s. In 1989 Shell took its stake to 33 percent when it bought out the remaining half of the Fletcher-owned Reliable Group. With the help of more robust balance sheet, the company continued to expand throughout the North Island during the 1990s, and by the end of that decade had covered most of the country. Further afield, Fulton Hogan has had small foothold in the Brisbane market for around 20 years. Major acquisitions made in Australia earlier in 2002 not only expand the Brisbane operation, they also give the company strong entree into Sydney and Melbourne markets.

Factoring in the Australian operation, total budgeted revenue this year is at NZ$780 million. In fact, when total turn-over exceeds the NZ$1 billion level within the next five years – managing director Dave Faulkner expects Australia to have eclipsed total revenue generated locally.

Mindful of Fulton Hogan’s more recent non-roading activities, Faulkner prefers to describe the company as resource-based, diversified construction business. But while the company does have associate companies involved in: treatment plants, forestry, civil construction, waste collection, landfill operations, sand land developments – road construction, quarrying and highway maintenance remain by far the company’s core business. The largest purchaser of bitumen in New Zealand, back-of-envelope estimates by Faulkner suggest that in the 50 years since its first AGM, Fulton Hogan has laid close to two million tonnes of bitumen on New Zealand roads for range of government, local body and private clients.

One of the key things setting Fulton Hogan apart, says Faulkner, is the company’s strong staff shareholding scheme. While Shell still owns 37 percent of the business (market cap round $320 million), staff members between them hold another 13 percent. “The company’s 50-year-plus reputation is big plus in winning ongoing business. The main thing is to maintain that reputation and not rest on former achievements – to this end, we’re very reliant on staff,” says Faulkner.

In highly competitive market where value for money frequently outweighs price, Faulkner says the company continues to win competitive bids based on its no-frills culture, cost control practices and business systems.

Best known to Kiwis for its 1000-plus signature-blue trucks scattered through the Kiwi countryside, Australian acquisitions will give the Fulton Hogan name greater prominence across the Tasman. The acquisition of Melbourne-based roading contractor/specialist pipe layer, Standard Roads, together with manufacturer Astec, operator of hotmix plants in Melbourne, Sydney and Brisbane – will give Fulton Hogan’s combined Australian operation (FHR Group) annual revenue this year of A$200 million.

With numerous long-term maintenance contracts in all locations and ongoing project work to complete, FHR can look forward to positive year ahead. In addition to FHR business, RoadCare, the company’s joint venture with Pioneer Road Services in Western Australia is now into its third year of 10-year road maintenance contract.

A strong local economy helped the company deliver record 38 percent increase in profit for the June-year of $41.2 million on revenue of $672 million – up 35 percent on last year.

JUDGES’ COMMENTS

Winner

Fulton Hogan
Fulton Hogan’s drive to the top has been paved with bitumen. This former Otago-based road and runway contracting company is now more diversified international contracting business. Astute and canny South Island direction and management has created an enterprise which, while still tad reluctant to take bow, is destined by its own deliberate progress to become success story with all the accompanying acknowledgement that brings. Fulton Hogan has moved into waste management, the Australian market and the headlines. Still no-frills operation, and an annual report that proves it, the company delivers for shareholders and customers. The rise and rise of Fulton Hogan is case study aspiring New Zealand enterprises should look to emulate and the market place should applaud.

Finalists

Auckland International Airport
Auckland International is rated one of the best airports in the world. And the company has been listed as one of the world’s best “small businesses”. It is, without overshooting the rhetoric, an outstandingly well-managed enterprise that year-on-year delivers for its stakeholders. The company has successfully diversified its activities to professionally manage its risk, and so become top shelf retail and property business without at any stage compromising on its core activity of safely delivering and departing passengers to and from Auckland city. Despite the disruptions to international travel caused by last year’s September 11 tragedy in New York and the vagaries of trans-Tasman air travel rivalry, the Airport delivered another record surplus-after-tax result. It is testament to the company’s sound management and financial resilience.

Cavalier Corporation
Cavalier is top-of-the-range corporate enterprise. Customers might walk all over its products but when it comes to delivering returns for its shareholders Cavalier is showpiece of consistency. The company is not afraid to make tough decisions, such as its exit from its wool scouring activities. The judges believe other enterprises could take note of the company’s outstanding management of capital. Cavalier increased its market share in both New Zealand and Australia and for the fifth year in row surpassed its record of quantity of carpet produced. Cavalier is simply an outstandingly well-managed manufacturing and marketing business.

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