Lessons from the top 40 utilities.
Jack Azagury is a senior executive with Accenture’s Enterprise Transformation Practice, specializing in utilities.
The Fortnightly 40 ranking celebrates a significant achievement for companies that have delivered superior financial performance on a number of critical balance-sheet and profit and loss (P&L) metrics over the past three years.
While the performance of the top 40 companies is commendable, our analysis of high-performance organizations reveals that less than one in 10 companies outperform their industry peer group over a period of more than 10 years. Given this finding, and the long-term nature of our industry, the question becomes not just what drives high performance in this year’s list, but how to fast forward 10 years and try to predict what characteristics will drive the top 40 list in 2017, as well as what companies need to do to remain or become high performers over the next 10 years.
In our analysis of the Fortnightly 40, we broadened the number of financial metrics to further shine light on the attributes of high performers. We looked at items such as return on invested capital (ROIC), and a number of market metrics, including total return to shareholders (TRS), P/E and PEG (price to five-year-earnings-growth ratio). We also ran correlations and tried to distill some of the key drivers of high performance in this year’s ranking.
• Capital markets get it right (for the most part). Cap-ex discipline is key.