The a2 Milk Company's meteoric rise is one of the most spectacular sharemarket ascents in many years.

Once an "alternative" player in dairy, its 250 per cent share price rise in the year to September puts it squarely among the biggest companies on the New Zealand stock exchange.

It is also one reason why it beat the pack to take out the much coveted Deloitte & Marsh Company of the Year in this year's Top 200 awards.

But that wasn't the only figure which impressed the judges.


The dual-listed firm also grew revenue by 56 per cent in the last financial year and sold over a half a billion dollars of product.

Gross profit rose by 75 per cent, operating profit was up 160 per cent and, most importantly, net profit grew by 200 per cent to $91 million.

"This is no fluke," said judge and Forsyth Barr managing director Neil Paviour-Smith. "This is the culmination of a strategy that was put in place by the company and led by chief executive Geoff Babidge."

A former partner at Price Waterhouse, Babidge and his senior team have earned plaudits for a2's performance.

Oyvinn Rimer, senior research analyst at Harbour Asset Management, said in August that the company's 2017 result was a stellar achievement from its management.

"It shows they are very competent in navigating pretty tough market conditions," Rimmer said. "There are so many variables at play, as we have seen with so many other companies executing into the infant formula space.

"It is a testament to very solid management."

When Babidge joined in 2010, the company had been around for a decade and its shares were trading for about 9c a piece.


Beginning life nearly 18 years ago as A2 Corporation, the firm was founded by New Zealand scientist Corran McLachlan and the late Howard Paterson.

Its point of difference was that its products came from dairy cows that only make the A2 type of beta-casein protein, whereas most dairy contains both the A2 and A1 strand.

Paviour-Smith said the company "floundered" for a long time.

It picked fights with Fonterra and became preoccupied with the science of its product rather than going out into the market and selling to customers, he said.

But along came new backers, a new sense of direction and a new chief executive in Babidge.

"And he was very focused, driven, and I think determined to implement, for lack of a better word, a premium milk strategy," Paviour-Smith said.

"So not just focused on infant formula but also on high value milk in the chilled department of the supermarket where per litre you can get much more of a premium than normal milk.

"In effect over the last five years they've really fine-tuned their strategy and they've absolutely delivered on that."

The company has been strong in both the fresh milk and infant formula segments.

It is the biggest-selling fresh milk brand by value across the Tasman and in August it also started exporting fresh product from Australia to Singapore with the long-term aim of using the island state as a springboard into Southeast Asia.

While a2 Milk already airfreights a small amount of fresh milk to China, its main exports to the People's Republic are milk powder and infant formula under the Platinum brand name.

a2's sales from China and other Asian markets were up 133 per cent in the 2017 financial year, from $38.2m to $88.9m.

Paviour-Smith said the company's performance in Asia helped cement its place in the awards this year.

"a2 was on our radar a year ago given its performance even up to then.

"But we were looking for just a little bit more of an indication or evidence of their delivery into the markets beyond Australia, in particular the Asian markets — and without a shadow of a doubt they've delivered on that," he said.

In September a2 announced its infant formula partner Synlait had received registration with Chinese regulators, which will allow exports into that country to continue.

All manufacturers of infant formula are required to register brands and recipes with the Beijing authorities in order to be able to get products into the Asian giant from the start of next year.

Those rules are part of a wider Chinese effort to lift food safety standards after the likes of the melamine scandal almost a decade ago.

Both New Zealand dairy companies' shares soared to a then-record high on news of the registration and the regulatory approval has been one factor fuelling a2's stock since then.

After another flurry, some of the heat has come out of a2 shares.

At time of publication, the company's shares were trading for $8.17 apiece, down from a high of $8.75.

Paviour-Smith said the slip was a "healthy thing" and shouldn't be a surprise.

"A company that's gone up in value by 250 per cent — that's to the year of September ... at the end of October over a 13-month period the stock had gone up by 375 per cent.

And so it's only natural that shareholders with quite large investments are going to look to take profits," he said.

Finalist: Briscoe Group

Briscoe Group has been notching up record profits almost as frequently as it is advertising a sale.

The retail group — led by veteran chief executive Rod Duke — is a strong performer in a sector under siege from online shopping.

That doesn't mean it doesn't face challenges and the company's share price has come under pressure after a squeeze on margins in its half-year result in September.

The Deloitte Top 200 judges were impressed by how well the company, which has over 80 stores around the country, had delivered in regional markets. The firm's performance was testament to its operating discipline. The judges noted the company's success was "very much a Rod Duke story."

Duke acquired Briscoes in 1990 and still owns more than three-quarters of the wider group, which runs Briscoes Homeware, Living & Giving and Rebel Sport in New Zealand.

The company, which floated on the New Zealand stock exchange in 2001 and became dual-listed across the Tasman in July, notched up its seventh record annual profit in the year to January. Net profit rose 26 per cent to $59.4m and Duke said it was because Kiwis are sick of "cheap rubbish.

"Over the past seven or eight years, a new perception of value has developed," he said.
"Kiwis are over cheap rubbish, they're over lowest price guarantees. They're sick of buying things that break.

"We like to deliver good-quality brands they know, cheaply."

Duke said part of the Briscoe strategy was knowing its customers and knowing what motivates them. Surveys show that retail brands like Rebel Sport and Briscoe have a strong top-of-mind awareness.

Duke, at the time, was unconcerned about the prospect of e-commerce giant Amazon heading to our shores.

"Some product categories will suffer," he said, "but they tend to be books and women's fashion". Briscoe Group's products would be less affected, he said.

Finalist: Tourism Holdings

Tourism Holdings' (THL) value has risen steadily for the past few years as the company has delivered on what the Deloitte Top 200 Judges describe as a very clear growth strategy.

In fact as chairman Rob Campbell noted at the AGM this year: "If you purchased THL shares five years ago and, throughout that time, reinvested all your dividends, you would now have made a 1000 per cent return."

Campbell noted that reflected a return off a relatively low base after the company struggled for several years to get momentum.

But THL in 2017 is a different company — more disciplined, more flexible and, increasingly, more global.

The company exceeded guidance, in the year to June 30, net profit rose 24 per cent to $30.2m with revenue rising to $340.8m from $278.9m. It now aims to boost earnings to $50 million by 2020.

In December last year THL expanded further into the US market with the purchase of campervan rental and sales business El Monte Rentals.

The acquisition, for an enterprise value of $93.5m including transaction costs, will be funded through $82.2m of debt from its current lenders and through the issue of 3.4 million Tourism Holdings shares.

It makes THL now the second-largest RV rental operator in North America.

The US expansion was one of two highlights for the 2017 financial year, chief executive Grant Webster said last month.

The other was the New Zealand rentals business, which saw EBIT increase by over 50 per cent.

Asked about the THL turnaround story Webster credited his chairman's intense focus on Return on Funds Employed (ROFE) and the right balance of bravery and caution.

"We understand that we are an operational business," he told the AGM.

"We have hundreds of people on the frontline every day, delivering to customers' needs.

Ensuring they are focused, have the right tools and are appropriately motivated is key.

"This is a detail business and we need to get the detail right constantly."