Soul Patts lives within its means

WHSP chair Robert Millner says there is no convincing argument to break up its cross-ownership with Brickworks.

Robert Milner

THEY say it takes one generation to make a fortune, another to keep it and the third to lose it, yet money, influence and power have remained in Robert Millner's family for more than a century.

"I think we are in uncharted waters here. I'm the fourth and (son) Tom's the fifth generation. There's no public listed companies with the history I have had," Millner says.

The 62-year-old is the great-great-grandson of Lewy Pattinson, the Australian businessman who in 1903 floated a Sydney pharmacy business founded by Caleb Soul. The company has grown through the Depression and two world wars into the $3 billion public conglomerate Washington H Soul Pattinson, which owns businesses ranging from coalmines to chemists.

As chairman of WHSP and a director since 1984, Millner can find himself in the space of two weeks in a remote corner of Australia inspecting copper mine production, at a brick plant on the outskirts of Melbourne or upstairs from his Sydney office, where the WHSP-owned investment bank Pitt Capital Partners is based, discussing potential acquisitions.

When he is not working, he may be spending time with his five grandchildren. He has carried on the family tradition of supporting the Royal Flying Doctors service and also donates to the Salvation Army.

"We are very quiet -- you never see me at social functions or in the press. We just like to lie low and we are family-orientated people," says the boardroom veteran of almost 30 years.

The company, he says, has never borrowed money and never missed a dividend payment, even during the Depression and when his uncle Jim Millner was a prisoner of war in Singapore during World War II.

Robert Millner began working for his uncle at the family business after a stint as a stockbroker straight after school. The best thing he was taught by the family member who preceded him as chairman was common sense.

"Live within your means -- try not to borrow money" was his down-to-earth advice.

It is a philosophy that has helped both the Millner family, whose $810m fortune has earned them 14th place on the BRW family rich list, and the WHSP company.

Over the past decade, WHSP's shares have more than doubled to about $14 and the company continues to deliver solid profits.

The group has major stakes in seven listed companies, unlisted businesses including Newcastle engineering firm Ampcontrol and copper interests in Queensland's Cloncurry, and a share portfolio worth $4.2 billion.

WHSP businesses such as New Hope Coal and Brickworks were floated after the company was criticised for being too opaque, 15 years ago.

The other main listed interest under WHSP's umbrella is telco TPG. WHSP retains its exposure to the pharmacy business through Australian Pharmaceutical Industries, where Millner says profits are starting to improve.

The companies contributed to a $105.4m net profit for the 12 months to July, which was down 26.3 per cent on the previous year. The diversified investor blames this on lower earnings from coal company New Hope.

Lower commodity prices and higher costs made coalmining conditions tough, Millner says.

But the conglomerate moved to own its infrastructure, and New Hope's port offers a huge advantage, he says.

It is a similar case, he says, with telco TPG, a business that generates strong cashflow.

"It is very important -- you have to be able to make money in coalmining now," Millner says.

"If you are not making money in the downtime, look out.

"You can't go out and pay something silly (for something) that only makes money in the good times."

Millner says WHSP expects to be affected by volatile global investment markets and commodity prices this year but will deliver stable earnings over the long term.

The building industry, which has started to turn, is one for which he has the greatest level of optimism, because of stronger consumer confidence with the newly elected government.

"I think you would have to say at the moment, the building industry will go to another level."

While mining is still a strong sector, he believes the costs need to be addressed due to its expensive fly-in, fly-out workforce.

He says they are double those in other countries in some instances, although Australia once had one of the cheapest cost bases in the world.

Diversity is key to the WHSP business, says Millner, and this remains a long-term strategy. He cites a 13 per cent lift in the value of the group's listed equity portfolio.

The company's share portfolio includes "old-fashioned stocks" such as BHP shares purchased for $7.73, almost a quarter of their current trading price, and Brambles, bought for $1.12 each and now worth $9.15.

The equity portfolio is a "nest egg" for the business, Millner says.

The long-term performance, he says, should silence critics of conglomerates or those who say the company should unwind its cross-ownership structure with Brickworks, of which WHSP owns about 45 per cent. Some say this structure prevents the company's interests from being takeover targets.

Debate over the cross-ownership structure has been raging for the last two years, with some investors arguing the businesses would be worth more if the structure were unwound.

"As I said last year, at the two AGMs, we spent a lot of money, we have had expert legal, accounting and independent investment bank advice, and all came back saying the structure is sound, they can see no benefit, and there's a lot of capital gains taxes," he says.

"We are still mindful of it and haven't seen anything that has changed our mind about breaking it up."

In the direct WHSP business there are just 10 people, and Millner says he is in constant dialogue with the chief executives of the group's businesses.

" I don't think I'm an expert on anything," he says.

"I think I have had to get my head around a lot of different fields and try to learn it.

"In this telco business at the moment, everything is changing so dramatically, and it is hard to keep your head around it."

The real key to success, he says, is the people who manage the businesses.

"We're backing those people."

Millner strongly objects to overpaying executives and is a strong advocate of small business, which employs "massive numbers of people" and is often a victim of governments that tend to over-regulate.

The family's success before him, he says, created no pressure on him or his son, Tom, to do what they have done, but he hopes to remain the company's chairman for some time.

"I don't think it gives you advantages," he says.

"The more successful you are, the easier it is for you to fall from the top in some ways as well."