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A solid foundation on which to build

IN something of a rarity for a family company, Alex Kailis is the third member of his family to run the group, yet he is only a second generation member.

Just a few weeks ago, Mr Kailis succeeded long-term employee, consultant and family confidante Ken Palmer in the top job at the $150 million a year fishing and pearling business.

He follows in the footsteps of his brother, George, who these days presides over a faculty at another Fremantle institution, Notre Dame University, and his late father Michael, who founded the company 41 years ago.

As comfortable singing karaoke with Japanese seafood buyers as he is commenting on marketing strategies for the pearl business, Mr Kailis has grown up with company talk at the breakfast table, school holidays at seaside lobster processing plants and a youth spent diving for Broome pearls.

Most recently, he headed up the group’s seafood division, an operation which represents two thirds of MG Kailis’ turnover and which he also took over from Mr Palmer after several years’ tutelage.

But he acknowledges that, despite this background, success as group chief executive is not a forgone conclusion.

The business’ success was built as a foundation member of two sectors which have shown significant growth in the past four decades, initially rock lobster, and then pearls.

But it is unlikely these sectors will show the same level of growth in the coming 10 years, leaving Mr Kailis to work out how the group will continue to move forward in its chosen fields of expertise and how locate new opportunities.

“It is not like we are in the telecommunications industry where there are lots of new customers, we have to look for new opportunities all the time,” he said.

The company has been very successful in its most recent foray, moving into the tuna farming business in South Australia.

Mr Kailis believes the next big area is likely to come out of a more pure form of aquaculture but he is wary of some of the experimentation going on at present in WA and is not rushing into anything.

“I like to work from a clean piece of paper,” he said.

“Having said that, fortunately the business is in excellent condition. I don’t have to make change for change’s sake.

“I think over the next few months a real picture will emerge for the business for the next 10 years, that is the real challenge I face.”

For all this caution, though, Mr Kailis has clearly had time to consider what MG Kailis might need before his appointment. And these thoughts reflect as much his time as a student of business as they do his personal history with the company.

For one, he believes the back ends of the two major divisions need to be brought closer together to exploit the synergies between them.

And secondly, he is prepared to go share equity in potential new ventures with outsiders.

“One of the challenges we face in terms of setting the future of the company is there is a lot of operational synergies between the two (pearls and seafood),” Mr Kailis said.

“That is how we got into the pearls in the first place. It was a low fuel use business at a time when fuel was becoming a real issue.

“There is a similar culture between the two. Where they divide is when you go to the market – pearls are a luxury item, seafood really is a food.

“Where do we get synergies and cost savings and where do we isolate things, that is the fundamental challenge.”

In terms of growing the company, Mr Kailis is prepared to look to the outside world for capital, if necessary. Even the possibility of floating the business would be considered if the reasons were right.

“It (a float) is something that any family business has to discuss,” Mr Kailis said.

“Things change as time goes on.

“We would not use external equity in the business just to cash out.”

But Mr Kailis recognises that a business of the scale of his geographically diverse family company may find it difficult, or simply too risky, to make the next big leap using debt and family money.

“If external equity could add significant value to the business we would look at it,” he said.

“It really depends on the next bite.

“We would not necessarily own 100 per cent of every new business we go into.”

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