Durable businesses ride the ups and downs

Danny Breckler and Todd Wilner blanch almost imperceptibly at the term dynasty.

While the Betts Group they run may be one of the oldest, continuously owned, family businesses in the country, their headquarters shows little sign of the trappings of oil wealth which a US TV series made synonymous with the word.

Dynasty, when applied to Betts, is less ostentatious. The Osborne Park office is a modest affair.

Tributes to advertising campaigns on the walls suggest the business puts its flair into marketing its wares – dress and fashion shoes.

Perhaps that is a key to Betts great survivability, a rare national retailer based in Perth, one that has a track record taking it back to 1892 under the same family, surviving so many ups and downs along the way.

That includes occasionally buying out family members in order to reduce the dilution of ownership.

But it is hard to imagine even long-standing ownership could prepare management for arrival of COVID-19.

Pandemic restrictions in Sydney, Melbourne and the ACT from July to October last year pushed the company to an almost $1.2 million loss for the year ending June 2022 after recording an $800,000 profit the previous year even though revenue at the fifth-generation Perth-based business rose to $48.3 million from $45.3 million.

It is probably a sign of the commitment to the longevity of the business the group opened a new store in the heart of Melbourne on the day that lockdowns ended, having circumnavigated all the pandemic controls to get the shop fitted out, stocked and staffed for that day.

In late March 2020, Betts decided to close its entire network of 70 stores and stand down its workforce as it worked with suppliers, landlords and bankers to keep the business intact.

Betts chair Danny Breckler, who ran the business for about four decades, said the industry collaboration brought on by COVID was astounding and, ultimately, important to Betts’ survival.

“We had 10 containers on the water and tens of thousands of pairs about to be sent,” Mr Breckler said.

“What were we going to do with the shoes and how were we going to pay for them?

“Half our business is dress shoes.

“You don’t need them when you are locked down.

“We said we would take the shoes, but we needed a payment plan that would work for everyone.”

Mr Breckler, the fourth-generation descendant of company founder Yoel Breckler, said: “I think our brand and our name and reputation helped us.

“It is never one-way with business journeys over time.”

Todd Wilner, who represents the fifth generation to manage the business, became chief executive in 2019, returning to the family business after many years doing his own thing.

Mr Wilner recalls that over the past two to three years Perth was a lonely place for a business executive in his shoes.

“Everyone else was booming,” he said, pointing to the resources sector, which thrived throughout the pandemic.

“No-one understood our problems.

“When I started, we put together a new strategy for the business.

“That gave us direction, even in the difficult times.

“We wanted to reposition the business as a house of brands.”

Mr Wilner said an initiative that came from that strategy was the development of a sustainable fashion brand called Zeroe, which, despite the pandemic, was launched in 2020 and had been a major success story.

It already represents almost 30 per cent of sales, a remarkable outcome which suggests that responding to what customers want is still in Betts’ DNA.

Mr Breckler suggests it is also about making sure staff feel good about what their employer does.

Private equity

On the face of it, global education business Navitas could hardly be classified as a family business.

Started in the early 1990s, it listed in 2004 and 15 years later the company delisted following its acquisition by a private equity consortium led by BGH Capital.

However, what looks like a very corporate trajectory fails to highlight the continuous involvement of co-founder Rod Jones.

Mr Jones led the company for much of its lifetime, retained a big shareholding and was a major backer of the private equity acquisition in 2019, with a stake that still represents about 11 per cent of the equity.

Not only is the 75-year-old a major owner of shares in Marron Group Holdings, Navitas’ parent company, but he also chairs the board.

Perhaps more relevant to this discussion is that his son, Scott, is chief executive of the business, which turned over $770 million in the past financial year and employs more than 5,500 people.

While it may be a stretch to call Navitas a family business, it does appear more so now that it is in private hands than when it was a listed entity.

Scott Jones said that even the relationship with major backer BGH Capital was atypical of what many would expect from a private equity owner.

Melbourne-based BGH was established in 2017 by Robin Bishop, Ben Gray and Simon Harle.

Navitas was its first big investment and Mr Jones said the relationship had been much different than the traditional perception of private equity.

“It is kind of like a family business,” the Navitas chief said. “They have made an investment and their name is on the door.

“They are intimately involved, although not in the running of the business.”

Navitas’ focus on global education made it vulnerable to the challenges created by COVID, but Mr Jones said the business had navigated its way through this volatile period, in which each market responded differently.

In Australia, Navitas pivoted to the domestic market because foreign students were locked out by shut borders and local high school graduates enrolled in high numbers because gap-year travelling was unavailable.

In contrast, the UK never shut its borders and many international students headed there because Britain’s COVID risk was much lower than in their home countries.

Mr Jones sees a V-shaped recovery occurring, especially as many young people have finished high school under-prepared for university because of the impacts of the pandemic.

Navitas’ main role is to support students as they bridge the gap between their schooling and university, so Mr Jones believes there is more work for his company in this environment.

Navitas did reduce its workforce, making about 8 per cent of staff redundant in the early stages of COVID but as the pandemic dragged on it shifted its stance, guaranteeing employment if all employees would take a 20 per cent pay cut.

Mr Jones said this strategy, which lasted nine months, was successful, reducing costs during a time when revenue was under threat but retaining skills required by the business as economies reopened.

“That allowed us enough capital for growth and to service debt,” he said.

In fact, Navitas expanded during this time, adding new tertiary education providers to its books, including United Academy 92, a leadership-focused institution founded by a group of Manchester United soccer players.

Not all change is a threat

Just over 40 years ago, the first version of the farm-focused accounting software called Agrimaster was sold, starting the commercial journey of family from sheep farming to technology.

When Kent Egerton-Warburton started writing software in the early 1980s, little did he know that the language he was using was far more readily understood in the bush than the BASIC code he used.

According to Kojonup pastoralists, the cash management program he developed “spoke farmer”, an advantage that helped the software, now known as Agrimaster, become a major force in the local market.

Four decades later, Mr Egerton-Warburton has passed control of his business on to the next generation, but the family still believes the Agrimaster software retains that essence of ‘farm-speak’ despite the multiple iterations over the decades that now use code that is increasingly unrecognisable to the former sheep breeder.

The disruption for Agrimaster, one which turned out to be positive, was the introduction of the GST which introduced significant complexity for farmers, especially with the need to report quarterly to tax authorities.

The GST transition in the early 2000s, which came with significant threat of severe penalties for non-compliance by the federal government, also coincided with a major change in the payment system operated by Australian Wheat Board, the monopoly grain exporter, which affected many Western Australian Agrimaster customers.

“It is hard to underestimate how difficult that combination of the GST and AWB’s payment system changesreally was,” Mr Egerton-Warburton said.

The impact on Agrimaster was immense and was a catalyst for the transition in ownership that occurred around that time.

Mr Egerton-Warburton’s son, David, had stopped farming and moved to Perth with wife, Natalie, to drive their internet training business, while Kent’s role as the company’s programmer of new software was about to end.

Disruption

Another second-generation business to survive and subsequently thrive through a disruptive cycle is Kenwick-based Quickmail, a family owned specialist third-party logistics and fulfilment business providing both warehousing and logistics solutions.

Quickmail managing director Sophie Stott has just competed a leasing deal to roughly double the business’ space by taking over a neighbouring property, a big signal regarding the strength of the business that was expected to go the way of the dodo with the arrival of the internet and paperless communications.

The business started in 1992 when Ms Stott’s father, Jean Paul Tedeschi, acquired a part of catalogue distribution and direct mail company Salmat’s operations.

Over time, Mr Tedeschi evolved the business, automating many processes with the acquisition of machines in order to stay competitive.

While Quickmail was not in the bulk transactional mail business, such as power bills, the increasing digitisation of that work through conversion of customer communications to email affected the business and loomed as a threat.

“We did not have that massive decrease in work but as a pool the amount of work around was reducing,” Ms Stott said.

Ms Stott said things changed with a contract Quickmail won from the state government to provide storage for Community Resource Centres, a Royalties for Regions-funded initiative for rural towns.

The centres provided a wide array of information and services, much of it in forms or documents that could not be easily stored in volume at each location.

It was the beginning of a trend that, at first, met the needs of government departments, but has increasingly been driven by the rise of small private sector players who sell goods online.

Those businesses need cost-effective storage and distribution at volumes that may exceed the ability of someone working from home, both in terms of availability for receivals and dispatches as well as space.

“The customer we want is doing small orders and shipping every day,” Ms Stott said.

“It is a bit of a new thing, but there are more and more companies out there targeting that market.”

Ms Stott said it had been hard work and was not without risk.

“We had to believe in ourselves that it was going to work,” she said.

“I got a couple of very good clients.

“One, in particular, grew and grew.

“He was a startup doing 10 orders a day, now he does 200 a day three years later.”

Ms Stott said the pandemic had played a role in the escalation of her business, both in the exponential rise of online sales due to lockdowns and because she had acquired customers from interstate businesses that had withdrawn from WA.

“Over the past 12 months our parcel numbers have increased by 90 per cent,” she said. “I see that increasing."

See Special Reports for separate stories on Betts Group, Agrimaster and Quickmail with additional content beyond this article.