12/10/2004 - 22:00

Gillam looks to build at Bunnings

12/10/2004 - 22:00

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Gillam looks to build at Bunnings

John Gillam’s story gives heart to those who believe winning top accolades can signal the undoing of a career.

At the time of his 2003 40under40 win Mr Gillam was managing director of Wesfarmers’ chemicals and fertiliser business, Wesfarmers CSBP Ltd.

A little more than a year later Mr Gillam was promoted to a crucial position within the Wesfarmers group – managing director of Bunnings – at 38 years of age.

Bunnings contributed to 37 per cent of Wesfarmers’ underlying profit last financial year with its earnings before interest and tax close to $4 billion.

The hardware group employs more than 20,000 people and has 211 stores across Australia and New Zealand.

Coinciding with Mr Gillam’s appointment to the top job, however, were questions about the growth prospects for Bunnings going forward, due to a downturn in hardware retail sales, and growth from Bunnings’ $2 billion takeover of Howard Smith in 2001 all but consolidated.

But while Mr Gillam has a big job before him, his appointment will drive greater financial efficiencies through the business, according to Patersons Securities head of research Rob Brierley. 

“What [Mr] Gillam will do, having been in the Wesfarmers corporate structure for a while and moved around from company secretary to general manager of a division, is bring in the Wesfarmers culture of financial performance,” Mr Brierley said.

“Wesfarmers is built on a culture of financial discipline and quite strong financial disciplines, so much so that they are financial principles. He’ll bolster those.”

Before moving to Melbourne to take up the Bunnings job in August this year, Mr Gillam was managing CSBP, and during his tenure fought off fierce international competition to restore CSBP’s market dominance in Western Australia’s agricultural sector.

“We had to adjust to that [competition],” Mr Gillam said.

 “We grew back market share in the WA agriculture sector as the leading supplier to WA farmers and that’s where the fiercest competition had come about.

“Imports in the 1990s had chipped away at market share over a five to 10-year period but we managed to get good growth in volumes and to market share.

“We were doing things that had the business operating more effectively and developing better outcomes financially.

“There was a marked increase in safety performance and a marked increase in CSBP being seen as a trusted community participant.”

Mr Gillam believes a large part of his success during the time at CSBP came from aligning strategies and goals and getting everyone in the organisation to understand them.

“It reinforced in me the importance of having a really strong alignment with what you’re doing and how you are going about doing it,” he said. 

“You have to have good strategies and make sure they are well founded, but you have to spend more time in your business making sure your people understand what those strategies are to make them come along.”

According to Mr Brierley, the ongoing challenge for Mr Gillam will be to drive greater synergies from the 2001 Howard Smith takeover, bring about financial efficiencies and grow the company amid new competition.

“One thing Bunnings hasn’t managed well is a few redundancy inventory issues, things like shrinkage,” Mr Brierley said.

“He [Mr Gillam] will need to instill stronger disciplines through the hardware division and try to extract growth returns. And for the first time in the last couple of years have quite strong cost control mechanisms.”

Mr Brierley said hardware retail sales had been growing at 10 to 12 per cent in the past few years, and were now between 5 and 8 per cent.

Competition from Mitre 10’s roll-out of its Mega store big box concept will add further challenges.

Mr Gillam thinks there are good growth prospects for Bunnings, however.

“There is terrific opportunity for growth in the business,” he said.

“Bunnings is a large business and its turnover this year will exceed $4 billion. We have at the moment 22,000 employees and that will increase by several thousand as we continue to open more stores.”

As Bunnings’ chief financial officer at the time Mr Gillam was involved with the takeover of BBC Hardware chain, owned by Howard Smith Limited.

“We spent a lot of time assessing and analysing the opportunity.

“It was a little unique in that, from a business level, it was whether Bunnings as a business would be better off if it successfully merged with BBC or was it better of travelling on its own and keeping BBC as a competitor?

“It was difficult because we were trying to access information on a business you don’t own and you’re competing against.

“It’s three years plus and we’re comfortable that it was a good acquisition at a Wesfarmers level.”

Mr Gillam said the planning phase was only 15 per cent of the work, the execution 5 per cent, with the hard yards found in integration.

“It was executed with militaristic precision but the real work on the business came later,” he told WA Business News.

“Everyone gets excited about the 20 per cent, then you’re left to integrate the business systems and culture and that’s not easy to do.

“We reckon we are well down the path.”

Mr Gillam said ensuring Bunnings remained committed to its strategy of lowest prices, biggest range, and service meant driving efficiencies and employing the right people.

“Having the best service means getting the best people. We need to identify, engage, and motivate our people,” he said.

“It’s the guy on the floor who has the important job; they’re dealing with our customers everyday.”

Mr Gillam believes the company will continue to open stores in a similar fashion to the past decade. 

“We have opened up to 12 warehouse stores a year for a decade. We have a terrific property team and store development team and fantastic alliances with suppliers. Setting up stores is very intensive and we are well versed at it,” Mr Gillam said.

“We opened 12 last year and that is our biggest yet; I know our team will want to better that.”

 

SNAPSHOT

  • John Gillam was a 2003 40under40 winner.
  • Managing director of Bunnings.
  • Former managing director of Wesfarmers CSBP Ltd.
  • Sees “terrific opportunity” for growth in the business.

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