Stellar Year For Australian Retail, Banking, Telecoms

Stellar Year For Australian Retail, Banking And Telecommunication Brands

Brand Finance, the leading global brand valuation and marketing experts have released their annual study of the top 500 most valuable global brands. The study shows that Australia’s continuing economic boom has allowed its brands to flourish. Eight Australian brands across the Retail, Banking and Telecommunication sectors feature in the BrandFinance® Global 500 and all have achieved double digit brand value growth and improved their global rankings this year.

Australian Retail sector brands included in the Brand Finance league table have posted significantly larger gains than their overseas counterparts with an average increase in brand value of 21% compared to the Global Retail sector achieving just 9% growth. At the top of the Australian retail list is Woolworths holding its position as Australia’s most valuable brand. Woolworth’s achieved brand value growth of US$1.5bn, a 20% improvement on last year. It has also strengthened its brand rating, which has been upgraded to AA+.

ANZ is this year’s standout performer overall and has assisted the Australian Banking sector’s growth to outperform the Global Banking sector. Following reported profits of AUS$5.7bn in the year to September 30th, ANZ achieved a 6% increase on the previous year, and increased its brand value by 70%: US$2.4bn of brand value growth takes its total to US$5.8bn, moving the bank 137 places higher in the global rankings at 183rd overall. With an overall achievement of 32% increase in the Australian Banking sector’s brand values, Australian Banks have displayed their strength and stability since the GFC, compared to the slow recovery of banks overseas which averaged just 15%.

In Telecommunications, Telstra and Optus achieved an average brand growth of 16%; double that of the Global Telecommunications sector at 8%.

Commenting on the results, Brand Finance Australia Managing Director, Xander Bird said: “The continuing relative strength of the Australian economy is allowing Australian brands to show the world what they’re really made of. Management must continue to nurture their brands even when times are good as a strong brand helps to sustain a company’s long-term health.”

Globally, Apple is world’s most valuable brand for a second consecutive year with a value US$87.3bn. Apple’s battles with rival Samsung both in the marketplace and in the courtroom are well documented but in terms of brand value, Samsung has made significant inroads into Apple’s formidable lead this year. The Korean conglomerate has shown the biggest brand value growth of any brand this year, increasing by US$20.6bn and, in the process, jumping from 6th to 2nd in the rankings and biting nearly US$4bn out of Apple’s lead.

Note to Editors

The full results of the BrandFinance® Global 500 and further analysis are published in the latest edition of Review and on our website.

The methodology used in compiling the Global 500 uses a discounted cash flow (DCF) technique to discount estimated future royalties at an appropriate discount rate and to arrive at a new present value (NPV) of the trademark and associated intellectual property rights in order to compute brand value.

Royalty Relief Approach

The royalty relief methodology determines the value of the brand in relation to the royalty rate that would be payable for its use if it were owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value.

There is a six-step process involved in making the brand value calculations:

1. Obtain specific financial and revenue data.

2. Model the market to identify market demand and the position of individual brands in the context of all other market competitors. There are three forecast periods used:

• historical financial results up to 2012. Where these are not available using Institutional Brokers Estimate System (IBES), consensus forecasts are used;

• a five-year forecast period (2012-2016), based on three data sources (IBES, historic growth and GDP growth); and

• perpetuity growth, based on a combination of growth expectations (GDP and IBES).

3. Calculate the royalty rate for each brand by:

• calculating brand strength – on a scale of 0-100, according to the number of attributes such as financial, brand equity, market share and profitability, among others;

• using brand strength to determine randeta® index score; and

• applying Brand Strength Score to the royalty rate range to determine the royalty rate for the brand. The royalty rate is determined by a combination of the sector of operations, historic royalties paid in that sector and profitability of the company.

4. Calculate the future post-tax royalty income stream.

5. Calculate the discount rate specific to each brand, taking account of its size, geographical presence, reputation, gearing and brand rating.

6. Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value – ie. the brand value

Brand Ratings

These are calculated using Brand Strength analysis, which benchmarks the strength, risk and future potential of a brand relative to its competitors on a scale ranging from AAA to D. It is conceptually similar to a credit rating. The data used to calculate the ratings is taken from a variety of sources including Bloomberg, annual reports and proprietary research by Brand Finance. Note: The AAA to A ratings can be altered by including a plus (+) or minus (-) sign to show their more detailed positioning.

Valuation Date

All brand values in the Global 500 are for the end of the year, 31 December 2012.

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