Good chemistry

Disparaged for playing things safe, the descendants of chemists Washington Soul and Lewy Pattinson are having the last laugh,presiding over a fortune gleaned from diverse investments.

"Washington H. Soul Pattinson & Co, chemists and druggists, 1886", reads the quaint ye olde English sign set above the eponymous company's one remaining retail outlet in Sydney's busy Pitt Street mall. Founded by Caleb Soul and his son Washington in 1872, the store's facade evokes memories of a bygone era.To its right, a discreet slidingdoor leads to a modern, elegant office.

Here, Washington H. Soul Pattinson chairman Robert Millner, Lewy Pattinson's great-grand child, presides over the family business, surrounded by neatly framed black-and-white photographs-Sir Donald Bradman was a nearly investor-and the odd cluster of glass apothecary bottles.

The third-oldest company on the Australian Securities Exchange, WHSP, like most listed entities, has copped something of a hiding in the latest stockmarket rout. But it has never gone to shareholders to raise money, it has never got into any great debt, and it has never missed a dividend payment.

Soul Pattinson has been called boring and staid, but in a market where leverage and gearing have become dirty words, it is Millner who is having the last laugh. "We are criticised for being conservative, but I think the family generally is that way inclined,"says Millner,who celebrates his 58th birthday later this year. "It's our upbringing, we're not flashy people and we're not seen in the social pages. We just try to go about our business quietly. But we're having a wonderful time at the moment because we're sitting on a pile of cash."

He recalls a favourite saying of his great-uncle, Fred Pattinson: "The thicker the carpet, the thinner the dividend." (Another is: "If the company you're investing in buys a boat, sell your shares.") "That's the sort of mantra we've all grown up with," Millner says. "Yes, we're probably a bit risk-averse and some people might think we under-utilise our balance sheet from time to time, but we're comfortable with that. It means we're in a position now where we can go into the market and buy stocks." If anything, however, WHSP is in the process of exiting more businesses than it is entering.

Incorporated in January 1903, having traded previously as two separate companiesPattinson & Co and Washington H. Soul & Co -the group listed that same month and now has five main operating subsidiaries and three investments in associated companies.

Its main operating subsldiaries are coal, through New Hope Corporation; media and communications (Soul); merchant banking (Pitt Capital Partners); funds management (Souls Funds Management); and food (KH Foods).

Associated company investments include Australian Pharmaceutical Industries, Brickworks and Clover Corporation, which all count WHSP as a big shareholder. The family's other main investment is a large holding in Milton Corporation, an investment firm which incorporated in 1938 and listed on the stock exchange in 1958.

A long-term investor in companies, trusts, fixed-interest securities and property, Milton's total shareholder return over the past decade (to June 30, 2007) was 17.6 per cent compounded compared with the S&P/ASX All Ordinaries Index which delivered a 13 per cent annual return. Addressing investors at the release of WHSP's first-half results in late March, Millner said the continued strength in world coal prices and Brickworks' decision to diversify away from building products meant it and New Hope were strong performers.

More recently, the company received a "please explain" notice from the ASX after its shares rose from a low of $7.05 on March 27 to $9.20 in mid-April.
WHSP's letter in response noted its substantial shareholdings in New Hope, 61.2 per cent, and Brickworks, 49.5 per cent. "New Hope ... has benefited from significant increases in coal prices. Its share price has increased by 28.2 per cent since March 27. The share price of Brickworks has increased by 11.3 per cent," it read.

However, losses from KH Foods mean WHSP is selling out of the business.

"That hasn't been terribly successful, we are in the process of winding all that up," Millner says. "That's been a financial disaster for us, unfortunately. We were trying to do too much for too many people and at the end of the day, our two major customers, Coles and Woolworths, wouldn't give us the margins."
Millner also says he doesn't know how long WHSP will be in the telco business. "We are dealing with a gorilla in Telstra and need a stronger base beneath us."

This no-nonsense approach is emblematic of Millner's style and is fundamental to WHSP's success. The company didn't deliver investors a 17 per cent increase in first-half profit to $45 million and an interim dividend of 12¢ a share, up 4 per cent, by mixing emotions into the investment equation.

"As the world changes, you need to be stronger in the investments you have," Millner says. "Whether we own 40 per cent or 15 per cent, I'm not averse as long as it's [earnlnqs-per-share] positive. We're always happy to be watered down to make the company bigger and stronger. At the end of the day, we're an investment house and everything is for sale at a price."

As such, Millner says WHSP will probably invest in less rather than more in the future. But at least prudent management in the past means it has the cash to play ball any time it wants.

"That's how we got into television," Millner says, referring to Nine Network Newcastle affiliate, NBN Television, which WHSP owned previously through Soul Pattinson (then known as SP Telemedia) but sold last May to PBL Media for an unexpectedly high $250 million. (WHSP bought NBN from entrepreneur and former BRWRich 200 member Kevin Parry for $37 million in the late 1980s shake-out of TV ownership).

"Parry, Skase, Bond ... they ran out of money overnight, and whereas everyone else had to go to and fro with the banks, we could buy it tomorrow," Millner recalls.

Until another temptation like that comes along, Millner and his board, which includes cousin Michael Millner and cousin-in-law Peter Robinson, are content to sit tight.

Inviting Michael Millner, 54, into the room for added context, Millner says making it onto the Rich 200 doesn't mean a thing to him. "I certainly don't lie awake waiting for the May issue to come out," he says. "If we were a private company with private investments you wouldn't have any idea what we were worth, but we aren't so I've just got to grin and bear it." The stoicism is understandable, given that the Millner name has been a fixture on the list since 1996, With several appearances in earlier editions.

Michael Millner is perhaps more honest about his wealth. "We don't flaunt it like some people do. If any of us want to travel, we travel. We are comfortable enough to do those sorts of things but we're careful not to blow it. Besides, with some of the events of late, some of the guys worth millions last year will be worth nothing this year."

And while the Millners do enjoy some indulgences, such as the occasional four-day working week and big rural retreats, both are acutely aware of their place in the family's sprawling inter-generational history. Robert Millner's son, Tom, works in the funds management business, while Michael Millner's son, James, works for Pitt Capital Partners. Robert's uncle and Michael's father, Jim Millner, who chaired the company until 1999, died a little over 12 months ago.

Millner says the decision of James and Tom to enter the family business was theirs alone. "They came to us and said that's what they would like to do," he says. "But it is difficult. I'm fourth generation and he's fifth and While I wouldn't say there is pressure, you've always got to bear in mind you don't want to be the one that sends the ship under the water."

Millner is also now a grandfather, but admits that Tom junior, at two-and-a-half, is a little too young to be contemplating his future. "Again, you've just got to hope and pray they make the right decisions in life," he says. "That they end up, weill don't know what normal is these days, but just good, honest people."

Robert Millner
Born: Sydney
Lives: Sydney
Age: 57
Position: Chairman, Washington H. Soul Pattinson
Career: A graduate of Sydney'S Newington College, Millner spent the first decade of his working life as a farmer near Cowra, central New South Wales. In 1984, the fourth-generation member of the Soul Pattinson dynasty was invited by his uncle, then company chairman Jim Millner, to join the board. He became chairman on his uncle's retirement. Miilner takes pride in the company's conservative nature and his family's lack of flamboyance.
Wealth: $580 miilion (Millner family)