14/06/2005 - 22:00

Tim Treadgold: Briefcase - Branch office syndrome due for return

14/06/2005 - 22:00


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Brance office syndrome, the inferiority complex that rears its head every few years in Western Australia, is overdue for a return if stock exchange pecking order is a guide.

Brance office syndrome, the inferiority complex that rears its head every few years in Western Australia, is overdue for a return if stock exchange pecking order is a guide. In fact, the syndrome could reach a peak next time around if a second measure is applied; the decline in relevance of state governments.

At the corporate level there is no doubting the deterioration of Perth as the head office home for nationally important companies. When Briefcase did a stock exchange call-of-the-card the tally was five in the top 100 – soon to become four, and maybe just three.

Top of the list were the obvious suspects, Woodside and Wesfarmers, at 12th and 14th respectively. But after the top two came a yawning gap to Foodland at 67th, Alinta at 78th and Multiplex at 90th.

Astute followers of the market will quickly see why Briefcase is suggesting that WA is heading for a fresh fall. Foodland will soon disappear inside Metcash and Woolworths, and Multiplex is hanging on to its top 100 berth by its corporate fingernails.

Assuming Multiplex hangs on (and Foodland goes) then the WA count is four out of 100, or 4 per cent of the top-listed companies, while even to a relatively youthful observer like Briefcase (using Methuselah as the yardstick) it seems like only yesterday that WA’s contribution was much larger.

Even using a few alternative measures shows significant slippage. On population, WA’s 10 per cent of the nation implies 10 companies in the top 100. On an export contribution of 25-to-30 per cent of Australia there should be more than 10 – and on an entrepreneurial measure (drifting into the nefarious) there are some critics who believe WA should be even higher still.

The fact that head offices have relocated to Sydney and Melbourne is an easy-to-measure function of globalisation, and there is no reason to suspect that it will change. Alinta, for example, is an obvious target for consumption, and might even be thinking about a move east itself because so much of the business is now in other states.

Lamenting the loss of corporates is one issue Briefcase accepts as the inevitable, and perhaps not such a big issue when the WA economy is looked at through eyes not fixated on the importance of brass shingles in St Georges Terrace declaring a head office (more on that later).

The more interesting issue for the next time WA submits itself to the psychiatric couch and blubs on about declining relevance should be focused on government. Since Gough Whitlam started his centralisation revolution in 1972 the real levers of power have been transferring to Canberra (and Sydney) at a dramatic rate.

The next wave of centralisation under the Howard Government promises to deliver even more telling blows to state pride (and rights). Industrial relations is a goner, no matter what Geoff Gallop says. Control over education is in jeopardy, and even NSW Premier Bob Carr has suggested that hospitals ought to be a federal responsibility.

If these things come to pass, what, Briefcase asks with some sincerity, is the purpose of state governments given that around 90 per cent of the budget is pre-committed every year on salaries and capital work in the labour intensive (and highly inefficient areas) of police, teachers, nurses, and ministerial staff?

Learning to live with branch office syndrome is something WA will get used to, simply because the forces at work are so powerful and capital flows so easily. That’s the bad news.

The good news is that it really doesn’t matter. Do a second call of the stock exchange card and you get a different picture of where money is being made, and jobs (except head office) created. Of the top 12 stocks, four with head offices elsewhere (one-third) generate much of their profits in WA – BHP Billiton, Alcoa, Rio Tinto and Woodside.

Travel down the list and the profit centre picture repeats itself. Placer Dome, Alumina, and Newcrest are three more in the top 50 that make fat profits in WA but have a head office elsewhere.

In terms of capital flows, future jobs and careers, and economic expansion, it becomes a question of which would you prefer: (a) a shingle in the street such as BHP Billiton and Rio Tinto have in Melbourne, while their head offices are really in London; or (b) have the money spent in your backyard because you have the resources and a world-class investment climate (despite the best efforts of the state government to re-unionise the workforce).

Small resource stocks have been off the boil lately for a number of reasons – too many dodgy new floats making it hard to separate the good from the bad, and a belief that, after two years, the boom has run out of legs.

Briefcase, with the standard warning that it does not give investment advice (and if you were to act on the stocks about to be mentioned then you should take a long, hard look at your strategies), has been fascinated to note the re-emergence of two old mineral discoveries everyone had forgotten.

The first is Cerro Negro, a gold prospect in Argentina, which fascinated MIM Holdings for a few years before Xstrata struck and the exploration division was sold. Cerro Negro has returned inside Andean Resources, and is continuing to yield excellent drill results, which have pushed the share price up from 10c to 16c over the past month.

The second is the Angas zinc prospect in South Australia, which was discovered by Aberfoyle and sold just before it was acquired by Western Metals, which soon collapsed under a shower of debt. Angas today is the prime asset of Terramin, and shaping as a reasonable mine, which will have the distinction of being the closest mine to a capital city, located near Strathalbyn in the Adelaide Hills.

For more information, do your own research on the stock exchange website, www.asx.com.au and look up the codes AND (Andean) and TZN (Terramin).

Everything in life is relative, even road deaths. But how can any country live with 680 dead a day (yes, 680 every day) which is China’s current score – not to mention the 45,000 injured daily. For this sobering factoid, Briefcase thanks The Economist and its report on China’s fascination with cars.

By comparison, and this is equally sobering, the road toll rate in the US is 115 deaths a day – which puts a few deaths a week in Iraq into perspective.


“A single death is a tragedy, a million deaths is a statistic.” Joseph Stalin.


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