Big local players branching out
There have been many occasions during Wesfarmers’ long history when people have asked why the conglomerate continues to be based in Perth.
For many years it has been one of Australia’s largest companies, with most of its earnings coming from outside Western Australia.
That is especially the case now, when the group is powered by its retail brands: Bunnings, Kmart, and Officeworks.
Nearly 90 per cent of the group’s staff are outside of WA and most of its shares are held by institutional investors outside the state.
Rather than shift Wesfarmers’ HQ to a bigger financial centre, however, the board of directors has chosen to stay close to the company’s roots in WA.
It’s not because the board is stacked with parochial Western Australians.
Wesfarmers’ nine-member board has just four Perth-based directors: Michael Chaney, Rob Scott, Wayne Osborn, and Sharon Warburton.
Nor is it for sentimental reasons.
Wesfarmers is driven by shareholder returns and will sell any asset if it gets a suitable offer. (This was evidenced by the sale some years ago of the rural services business that provided its foundation.)
The company maintains a lean head office in Perth, with just 287 staff at last count.
That’s out of a group-wide total of nearly 108,000 across Australia and New Zealand.
Notably, the leaders of Wesfarmers’ three big retail divisions – Bunnings, Kmart, and Officeworks – are based interstate, closer to most of their staff and operations.
The rest of the 12-member leadership team, including CEO Rob Scott and CFO Anthony Gianotti, are based in Perth.
That provides a unique perspective on the Australian market.
With a long-term track record as one of Australia’s best-performing listed companies, it would be a brave move to change what is clearly a successful formula.
Rob Scott has a lean head office team at Wesfarmers. Photo: Gabriel Oliveira
Most of Wesfarmers’ peers in WA operate in the resources sector.
Perth is the logical home for big companies such as Fortescue Metals Group, Woodside Petroleum, Hancock Prospecting, and Northern Star Resources because their operations are overwhelmingly in WA.
Mining companies that operate overseas also have a good reason to keep their head office in Perth.
That’s because Perth has unsurpassed technical, legal, and financial expertise that global miners need to support their operations.
Head office location is a more interesting question for WA companies with national or international operations outside the resources sector.
A notable example is shipbuilder Austal, which generates the bulk of its earnings from its US operations but retains its head office in Perth.
Another is education services provider Navitas, which has 6,000 employees in 120 colleges and campuses across the globe, all run from Perth.
In both cases, a key factor is that the founders and major shareholders – John Rothwell and Rod Jones, respectively – are Perth residents and have no desire to move.
It’s a similar story at Australian Finance Group.
AFG has grown to be one of Australia’s largest mortgage broking groups: it deals with nearly 3,000 brokers and 70 lenders, most of whom are on the east coast.
The group runs this national business from its head office in West Perth, which has 192 out of its 238 staff.
Chief executive David Bailey said AFG’s establishment in Perth was important in shaping the company.
“The business was founded in Perth in 1994; that’s where the heart and soul of the business is, where the core expertise is with our technology platform,” he said.
Mr Bailey said the company had been offered incentives to move.
“Historically we have received offers from other state governments to relocate,” he said
“There has never really been any desire to move, we have a lot of very capable Western Australians here running a national business.
“That’s something we are quite proud of.”
Like Wesfarmers, most of AFG’s key executives, including Mr Bailey, CFO Ben Jenkins, and company secretary Lisa Bevan, are based in Perth.
Several key executives are based interstate, including: Them Lam, national manager strategic partners and recruitment, in Melbourne; Damian Percy, general manager securitisation, in Adelaide; and Chris Slater, head of sales and distribution, in Brisbane.
It also has a credit hub for the home loans business in Melbourne.
“That has allowed us to spread ourselves and attract talent,” Mr Bailey said.
“Technology has been a big player in that.”
Another success story that has grown out of Perth is ASX-listed Omni Bridgeway.
Through a combination of organic growth and mergers it has become the world’s largest litigation funder with a market capitalisation of just under $1 billion.
Reflecting the company’s history, Perth is one of the largest offices in Omni Bridgeway’s global network.
The group has about 180 staff, with 30 in Perth.
This includes a substantial legal team led by group general counsel Jeremy Sambrook.
However, Perth’s influence is waning.
Managing director Andrew Saker spent six years running the business from Perth until April this year, when he transferred to New York to focus on its expansion in the world’s largest legal market.
The company still has two Perth-based directors (out of seven) but co-founder and executive director Hugh McLernon plans to retire next year.
That will leave corporate lawyer Michael Bowen as the only Perth-based director.