With revenue consistently growing for more than a decade, Burnaby-based Ritchie Bros. Auctioneers (TSX;NYSE:RBA) has managed to maintain a healthy company profit. Its auction revenue rose in 2008 and 2009 as it continued to roll out its growth plan during the downturn.
But the Great Recession of 2008 and 2009 tested the company’s assumptions about downturns. Ritchie Bros. COO Bob Armstrong said the economic pain afflicting virtually every sector in its markets was different from anything the company had seen in its 50-year history.
“As a marketplace, we’re able to help buyers in the strong markets and sellers in weak markets, but in this case, it was a unified global recession. All of a sudden, there was less for sale and it’s worth less money. It was a real challenge.”
How did the company deal with the challenge?
“We learned very quickly the need to be nimble and flexible.”
That meant Ritchie Bros.’ sales force had to look beyond its traditional stable of customers and adjust its marketing to cater to new clientele.
Flexibility and creativity were among the qualities that contributed to the relatively strong profits reported on Business in Vancouver’s inaugural list of the Top 100 Most Profitable Companies in B.C.
According to data collected for the list, most companies increased their profit in 2009. Seventeen turned a net loss in 2008 into a 2009 profit. The total profit of the top 100 rose 46% to $7.5 billion, up from $5.1 billion in 2008.
Not surprisingly, most of those profits were amassed by a handful of B.C.’s largest companies.
Teck Resources Ltd., which topped the list, contributed $1.8 billion in profit, or nearly a quarter of the profit on the list. Telecom giant Telus Corp. was second with $1 billion in net earnings.
Examining the list’s various sectors, mining companies accumulated $3.8 billion in profit, or just over half the list’s earnings, while the tech sector built an earnings chest of $1.3 billion. The finance sector, which includes institutions such as HSBC Bank Canada, Central 1 Credit Union, and most of B.C.’s largest credit unions, earned more than $856 million in profit in 2009.
Dicing up the data, it’s interesting to examine how much profit is attributable to each employee. A McKinsey and Company report suggests profit-per-employee (PPE) is another measure of corporate performance. It helps quantify a workforce’s talents and strengths and, in some cases, can act as a proxy for a company’s intangible assets, which are generally more difficult to value and treated more conservatively according to general accounting standards. A PPE metric can apply a value to some of a company’s intangibles and becomes an employee-focused measurement of the return on talent pool development.
Looking at some of the companies on the top 100 list, Silver Wheaton Corp. (TSX;SLW), which buys silver streams from mining companies to sell on the market, has the highest PPE ratio: $5.8 million. That ratio was boosted by record silver sales and profit in 2009 for the 23-person company.
Other mining companies that posted high PPEs included Western Coal Corp. ($252,390) and Teck Resources ($182,207).
Non-mining companies also did well.
Central 1 Credit Union’s PPE was $199,802, Industrial Alliance Pacific’s was $120,464 and Ritchie Bros.’ was $97,017.
The McKinsey report noted that a PPE ratio can be boosted by cutting staff, which some companies invariably had to do to survive in a difficult period. But shedding talent can reduce wealth creation, especially if more employees are needed to replace a single layoff.
Ritchie Bros. continued to invest in its business through its most challenging period.
In 2010’s first nine months, the company’s auction revenue and profit fell 4% and 26.8%, respectively, but Ritchie Bros. increased its sales staff 5%, added six new auction sites around the world and introduced its new timed auction system to eight sites in the third quarter alone.
“It’s painful to invest the money in a time when your sales aren’t growing,” Armstrong said, “but it means that when your sales are ready to grow again, you’re extremely well positioned.
“It speaks to our confidence in the future. We think we’ve increased our market share quite meaningfully in the last two to three years, and we think we’re extremely well positioned now to take advantage of the market as it returns to a more typical state. I almost said more ‘normal’ state, but, in truth, we don’t know what is normal anymore.”
Richmond
CEO: Peter Blake
Employees: 1,077
Market cap: $2.1b
P/E ratio: 29.4
EPS: $0.74
Sources: Stockwatch, TSX, globe investor