2014 Navigate Australias Business Agenda

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    The Business Agenda in Australia

    Discussion document

    November 17th, 2013

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    OBJECTIVEUNDERSTAND THE THEMES OF CHANGE IN

    CORPORATE AUSTRALIA

    Objective

    Method

    Understand what is top of mind of Australian CEOs

    Identify key themes of change over the past 5 years

    Reviewed 42 annual reports of top 50 Australian companiesfor the years 2008/09 and 2012/13

    Examined CEO and Chairman reports

    Recorded mentions and top priorities for each issue within 5 broad

    areas of focusgrowth, corporate responsibility, cost management,people/organisation and portfolio management

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    EXECUTIVE SUMMARY4 KEY THEMES EMERGING

    Cost Management Is Now Top of Mind Step change in corporate responsibility

    Increasing focus on cost Shift to human/behavioural organisational levers

    82

    80

    77

    63

    575. People/Organisation

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Percent of companies

    mentioning theme

    7

    9

    10

    14

    20

    34Corporate governance

    Regulation

    Community

    Risk management

    Environment

    Health and safety

    Change in mentions

    82

    60

    2008/09 2012/13

    22%

    Number of mentions

    47 62

    53 38

    74 81100% =

    Percent of total mentions

    Human/behavioural

    Structural/decision based

    2008/09 2012/13

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    EXECUTIVE SUMMARY4 KEY THEMES EMERGING

    Cost Management Is Now Top of Mind Step change in corporate responsibility

    Increasing focus on cost Shift to human/behavioural organisational levers

    82

    80

    77

    63

    575. People/Organisation

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Percent of companies

    mentioning theme

    7

    9

    10

    14

    20

    34Corporate governance

    Regulation

    Community

    Risk management

    Environment

    Health and safety

    Change in mentions

    82

    60

    22%

    Number of mentions

    47 62

    53 38

    74 81100% =

    Percent of total mentions

    Human/behavioural

    Structural/decision based

    2008/09 2012/132008/09 2012/13

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    COST MANAGEMENT IS THE MOST IMPORTANT THEME ON THE

    STATED CORPORATE AGENDA

    Importance in 2012/13

    Percent of companies mentioning themeTheme

    5. People

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    16

    27

    38

    44

    70 82

    80

    77

    63

    57

    Top priority

    Source: 42 annual reports of Australian top 50

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    5

    0

    5

    10

    15

    20

    25

    30

    35

    0 5 10 15 20 25 30 35

    ALL INDUSTRIES BUT CONSUMER HAVE INCREASED THEIR FOCUS ON

    ORGANIC GROWTH

    Resources

    ConsumerFinancial

    Primary

    Inorganic

    Organic

    Number of mentions 2008/09-2012/132008/09

    2012/13

    What are the

    drivers of

    this change?

    Source: 42 annual reports of Australian top 50

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    ORGANIC GROWTH LEVERS DIFFER BY INDUSTRYNumber of mentions 2012/13: Percent

    2721

    70

    4541

    3353

    14

    30 34

    40

    26

    16

    25 25

    Consumer Finance Resources Primary Total

    Product serviceinnovation

    Geographicexpansion

    Investmentfor increasedcapacity

    Key organicgrowth lever

    Source: 42 annual reports of Australian top 50

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    EXECUTIVE SUMMARY4 KEY THEMES EMERGING

    Cost Management Is Now Top of Mind Step change in corporate responsibility

    Increasing focus on cost Shift to human/behavioural organisational levers

    82

    80

    77

    63

    575. People/Organisation

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Percent of companies

    mentioning theme

    7

    9

    10

    14

    20

    34Corporate governance

    Regulation

    Community

    Risk management

    Environment

    Health and safety

    Change in mentions

    82

    60

    2008/09 2012/13

    22%

    Number of mentions

    47 62

    53 38

    2012/132008/09

    74 81100% =

    Percent of total mentions

    Human/behavioural

    Structural/decision based

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    8

    0

    5

    5

    11

    26

    5

    13

    0

    -6

    32

    50

    31

    0

    34

    42

    11

    33

    22

    16

    16

    17

    25

    25

    -17

    THE CORPORATE RESPONSIBILITY AGENDA EXTENDS BEYOND

    GOVERNANCE ISSUES

    Sector

    Percentage point changes to mentions

    Initiative Consumer Financial Resources Primary

    1. Growth

    2.Corporate responsibility

    3. Performance execution

    4. People and organisation

    5. Portfolio management

    Theme

    Key driver for sector

    Healthand safety

    Environment

    Community

    Regulation

    Corporategovernance

    Riskmanagement

    Source: 42 annual reports of Australian top 50

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    EXECUTIVE SUMMARY4 KEY THEMES EMERGING

    Cost Management Is Now Top of Mind Step change in corporate responsibility

    Increasing focus on cost Shift to human/behavioural organisational levers

    82

    80

    77

    63

    575. People/Organisation

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Percent of companies

    mentioning theme

    7

    9

    10

    14

    20

    34Corporate governance

    Regulation

    Community

    Risk management

    Environment

    Health and safety

    Change in mentions

    82

    60

    2008 2012

    22%

    Number of mentions

    47 62

    53 38

    20122008

    74 81100% =

    Percent of total mentions

    Human/behavioural

    Structural/decision based

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    FOCUS ON COSTS HAVE INCREASED SUBSTANTIALLY

    Importance in 2012

    Percent of companies mentioning themeTheme

    5. People

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    16

    27

    38

    21

    70

    41

    36

    39

    59

    12 82

    80

    77

    63

    57

    Source: 42 annual reports of Australian top 50

    Top priority

    Mentions

    0

    -4

    14

    22

    Change 2008 to 2012

    Percentage points

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    GREATER FOCUS ON COST MANAGEMENT IS BEING DRIVEN BY CAPEX

    BLOW OUTS

    Mentions

    77

    58

    61

    50

    108

    2008

    138

    2012

    Cost/operational

    Cost/Capex

    Theme

    5. People

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Source: 42 annual reports of Australian top 50

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    RESOURCES ARE NOT THE ONLY INDUSTRY INCREASING FOCUS ON

    COST

    0

    5

    10

    15

    20

    25

    0 5 10 15 20 25

    Financial

    Primary

    Revenue

    Cost/operations

    Number of mentions 2008-2012

    Resources

    2008

    2012

    What are the

    drivers of

    this change?Consumer

    Source: 42 annual reports of Australian top 50

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    Revenue of all analysed companies

    $ Billions

    Operating expense of all analysed companies

    $ Billions

    Operating margin

    Percent

    125

    2007/08

    113

    08/09

    124

    09/10

    147

    10/11

    194

    11/12

    237

    2012/13

    13.6%

    22.7

    2007/08

    23.1

    08/09

    21.1

    09/10

    20.5

    10/11

    20.7

    11/12

    24.4

    2012/13

    +1.5%

    102

    2007/08

    90

    08/09

    102

    09/10

    121

    10/11

    160

    11/12

    188

    201/132

    13.0%

    Employees

    Thousands

    793 804 864 923 987 1,130

    Source: Bloomberg, ASX and Company Reports

    TRENDS IN OPERATING MARGINSviz-a-viz COSTS AND REVENUE

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    EXECUTIVE SUMMARY4 KEY THEMES EMERGING

    Cost Management Is Now Top of Mind Step change in corporate responsibility

    Increasing focus on cost Shift to human/behavioural organisational levers

    82

    80

    77

    63

    575. People/Organisation

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Percent of companies

    mentioning theme

    7

    9

    10

    14

    20

    34Corporate governance

    Regulation

    Community

    Risk management

    Environment

    Health and safety

    Change in mentions

    82

    60

    2008/09 2012/13

    22%

    Number of mentions

    47 62

    53 38

    2012/132008/09

    74 81100% =

    Percent of total mentions *Indicates multiple mentions by each company

    Human/behavioural

    Structural/decision based

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    SHIFT FROM STRUCTURAL TO HUMAN/BEHAVIOURAL PEOPLE

    LEVERS

    2008/09 2012/13

    Theme

    5. People/Organisation

    3. Portfolio Management

    1. Cost Management

    4. Corporate Responsibility

    2. Growth

    Source: 42 annual reports of Australian top 50

    Total mentions*

    62

    47

    38

    53

    74 81100% =

    Structural/

    decision-making

    Human/

    behavioural

    * Includes multiple mentions by each company

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    ORGANISATIONAL INITIATIVES DIFFER BY INDUSTRY SECTORPercentage point change in mentions

    Sector

    Initiative Consumer Financial Resources Primary

    -16

    0

    0

    -11

    6

    0

    6

    -6

    -6

    19

    6

    6

    -9

    7

    6

    19

    -18

    -6

    38

    0

    27

    0

    0

    11

    22

    53

    51

    8

    33

    8

    -17

    -25

    0

    -17

    3

    17

    Culture/engagement

    Values

    Peopledevelopment

    Capabilitybuilding

    Recruitment

    Succession

    Performancemanagement/accountability

    Incentives

    Organisationalstructure

    Human/

    behavioural

    Structural/decision

    making

    Main changes on initiativesby industry