V-100 Cover Story | Growth is on the Horizon

With balance sheets written in red last year, companies are betting on a better year ahead

By Alberta Venture staff & PricewaterhouseCoopers LLP | Illustration by Yarek Waszul

For most of the companies on this year’s Venture 100 list, 2009 was a year they’d probably like to forget. The global recession squeezed bottom lines across the corporate world, mind you, but they hit those operating in Alberta’s resource-oriented economy particularly hard. Total revenues for the companies that make up this year’s Venture 100 list came in 29 per cent lower than those on last year’s list, dropping from $380.6 billion in 2008 to just $269 billion.

The decline in global oil prices  was a significant factor in the less-than-stellar year that many of the companies on the Venture 100 list endured in 2009. After peaking at US$145 a barrel in July of 2008, the spot price of West Texas Intermediate crude collapsed to US$30.28 a barrel on December 23, 2008, and spent 2009 trading between US$35 and US$82, while the price of natural gas followed a similar trajectory. As a result, virtually all of the 55 companies on the Venture 100 list whose operations are concentrated in the resource sector (including the entire top 10) suffered decreased revenues. Among the top 10 (excluding Suncor Energy Inc., whose year-over-year revenues were spiked by the merger with Petro-Canada) – with their combined revenues of $154 billion accounting for approximately 57 per cent of the Venture 100’s aggregate total – the average decline in annual revenues was nearly 30 per cent.

For most of the companies on this year’s venture 100 list, 2009 was a year they’d probably like to forget. The global recession squeezed bottom lines across the corporate world, mind you, but they hit those operating in Alberta’s resource-oriented economy particularly hard. Total revenues for the companies that make up this year’s Venture 100 list came in 29 per cent lower than those on last year’s list, dropping from $380.6 billion in 2008 to just $269 billion.

It’s not all bad news, though. The Venture 100 has a new king of the hill, as Suncor’s takeover of Petro-Canada launched it to the top of the rankings. While Suncor’s 160 per cent increase in revenues over 2008 has plenty to do with its digestion of Petro-Canada’s operations, at $45 billion in revenues it has transformed itself into a major global player. Last year’s leader, Encana Corporation (#5), is moving in the opposite direction, siphoning its oil operations into a new corporate vessel, Cenovus Energy Inc. (#6), and focusing its efforts on becoming a pure natural gas player. Both companies promise to be major factors in the Alberta economy in the years to come.

Not every company listed had a bad year in 2009, either. Peace Hills General Insurance jumped from #192 on last year’s list to #112, and looks poised to make the leap into the Venture 100 in 2011. SCM Insurance Services made a similar move, from #195 to #124, while High River’s Western Financial Group Inc. catapulted its way up from #173 to #111, putting it in good shape to join the Venture 100 list next year. There were some resource companies that managed to improve their standing during an otherwise difficult year. Two Calgary companies, Grande Cache Coal Corporation and Progress Energy Resources Corp., both made the move to the Venture 100 list, with Grande Cache jumping from #159 last year to #97 and Progress Energy vaulting from #146 to #90.

Somewhat surprisingly, perhaps, given the financial turmoil south of the border, 2009 was also a good year for those in the business of lending money. Cash Store Financial Services Inc. saw its fortunes rise in 2009, moving from #167 on last year’s list to #116. Given the continuing uncertainty in the financial and labour markets, the payday loan company looks like a solid bet to appear in next year’s Venture 100. DirectCash Income Fund, meanwhile, also made a move up the list in 2010, improving by nearly 50 spots from #199 on 2009’s list to #150.

Other companies managed to make gains in 2009. The Venture 100 has 19 newcomers: Cenovus (#6), Capital Power Corp. (#31), Petrobakken Energy Ltd. (#73), Fountain Tire (#79), Cervus Equipment Corporation (#80), Niko Resources Ltd. (#81), Fortis Alberta Inc. (#83), Supreme Steel Group Inc. (#84), Enbridge Income Fund (#85), NuVista Energy Ltd. (#86), Meyers Norris Penny LLP (#89), Progress Energy Resources Corp. (#90), Daylight Resources Trust (#91), the Sovereign General Insurance Company (#92), Q’Max Solutions Inc. (#93), AltaLink (#94), Sureway Construction Group (#96), Grande Cache Coal (#97) and TerraVest Income Fund (#100).

Most of the companies on the Venture 100, Next 100 and PWC Private 50 lists spent much of 2009 retrenching, but they’re not prepared to retreat. In the bigger picture, they remain focused on growth and expansion. That is the most common observation on what lies ahead for businesses in Alberta’s recovering economy, among both public and private companies making submissions to the Venture 100.

New questions about research and development, capital investment and how companies would make decisions in a recovering economy versus recessionary times were added to this year’s survey, and the results were illuminating. Far from battening down their collective hatches, most companies that answered those questions indicated that they’re preparing to charge forward in 2010 and beyond and recapture lost ground.

Their strategies for doing that are focused on making sure they have the resources and tools to do the job, particularly when it comes to utilizing new and emerging technologies and building an adequate inventory of new equipment to cope with anticipated growth. There is also an underlying current of firms wanting to ensure they have also added to their corporate bench strength through new hiring. As ATB Financial put it, “As the labour market tightens, we want to ensure that our reward, recognition and retention strategies are sharp and enhanced.”

Companies, both public and private, indicated their approach in 2010 is much more aggressive than the defensive stance many adopted last year. A focus on market growth, the expansion of their client base, and an increase in business investment were recurring themes among submissions.

Many companies also said they would reinvest more substantially in human capital and employee retention than they had in 2009. Some, however, indicated there are still challenges ahead in terms of liquidity, maintaining capacity, and leaner operations as part of their recovery plan.

All the same, there were some surprises when it came to how companies approach the challenge of capital spending in 2009. In response to the question, “Did you defer any capital expenditures last year due to the recession?” 22 per cent more private companies indicated they continued their capital programs and did not defer such spending.

Among public companies, it was a near-even split between those that deferred capital spending compared to those that did not change their capital plans. However, capital programs among public companies were much more ambitious when compared to their private counterparts. Private companies largely dealt in the single-digit millions of dollars and hundreds of thousands for capital programs, with some notable exceptions among those private firms in the power-transmission business.

By comparison, the capital spending programs upon which Alberta’s public companies embarked often totalled in the tens and even hundreds of millions of dollars, with those involved in electricity generation and transmission being among the biggest spenders.

However, both private and public companies were in agreement when it came to where they plan to make capital investments over the next year. Capital equipment and technology is the most popular area of planned spending, trailed only slightly by expenditures in business expansion.

Likewise, both private and public companies expressed a distinct lack of interest in making domestic and foreign acquisitions. They also aren’t planning to put much money into research and development spending, with a surprising number of companies indicating that they do not invest in it whatsoever.

Unlike capital spending, where the expenditures of many resource firms are in the millions, only one Alberta company spends a similarly impressive amount on research and development. Syncrude invested $50 million in environmental stewardship and energy efficiencies last year, a figure that is twice as much as all other reporting companies combined.

With the global economy still looking to find its sea legs, it’s not clear what the future holds for the companies on the Venture 100. What is clear, though, is that they’re better prepared for a wider range of possible outcomes than they were a year ago. If nothing else, that prudent posture will position them for whatever might lie ahead.

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