The second coming of EH Brett (and Australian manufacturing)

In many ways the story of EH Brett & Sons is the story of Australian manufacturing.

The family-owned sailmaking business, like our manufacturing industry, started in the late 19th century, peaked in the 1950s and ‘60s, was nearly destroyed by the tariff cuts of the 1980s and is now on the way back.

Well, I’m not entirely sure that Australian manufacturing is on the way back, with car-making on the way out, but EH Brett is. Perhaps it’s a canary in the coal mine, chirping from its two perches in Sydney and Melbourne.

EH Brett & Sons became such an institution in Balmain in Sydney that there’s a street and a park named after it.

Young Edwin Brett, an immigrant from Guernsey, had started the business in Newcastle but moved to Balmain when it became clear that Sydney was going to overtake Newcastle as NSW’s busiest harbour (yes, apparently Newcastle was bigger in those days). In its heyday the business employed 70 people and was making and repairing a lot of the sails for Sydney harbour.

But by 1996 the business was losing money and going nowhere. It had three employees and more than 10 times as many shareholders: the third generation of Edwin’s descendants was numerous but had no succession plan and, it’s fair to say, no interest.

The last family managing director, Edwin’s daughter Beatrice’s grandson, John Penman, had retired in 1988 and the only part of the business now making any money was a small tarpaulin hire operation started in 1956.

Like a lot of Australian manufacturers at the time, the Bretts just decided to give up. They closed the sailmaking business and sold the land in Balmain for $3 million.

And that would have been the end of this 106-year-old Australian manufacturer, except that John Penman’s sons, Ross and Greg, had other ideas. They had been brought up on stories about the colourful history of this little Australian family business and decided to recycle their very small share of the $3m into a takeover offer for the hire business that remained.

And with 35 shareholders it did have to be a full Takeover Code process, with Part A and Part B, but for a business with less than $500,000 in turnover, the legal fees were greater than the price.

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After two years of tortuous legal red tape, it was done. In 1998 the two Penman brothers, with Greg’s father-in-law Kevin Poole, now owned the historic family business called EH Brett & Sons and set about giving it a second chance.

Ross had been working in the business since 1980 but Greg, six years younger, had become a chartered accountant in the mid-‘90s and was working as the financial controller of Len Evans’ Rothbury Estate Wines. He helped to restructure the family business part-time.

But gradually he become more and more involved, and is now managing director with 75 per cent ownership, having bought out Kevin Poole in 2005.

The first thing he and Ross did after getting the keys to the business in 1998 was to buy a shade sail business and then another tarp hire firm in Melbourne. They moved the operation in Sydney to a factory at Moorebank, near Liverpool, invested in new software and machinery and also bought a small infrared fabric business that supplied the Defence Department with camouflage materials.

Now they employ 20 people and turn over about $2.5m. EH Brett is not back to its prime, but it’s profitable and growing, which is more than can be said for a lot of Australian manufacturers.

And Greg Penman is passionate about what the industry needs, and it’s NOT a lower exchange rate and less government red tape, although those things would be nice.

Earlier this week he had a letter published in The Sydney Morning Herald agreeing with Business Council of Australia President Catherine Livingstone’s speech the other day in which she said there were too many university graduates being produced in Australia.

“Catherine Livingstone,” he wrote, “is absolutely right -- for too long we have ignored the value of design and manufacturing skills and created a population of generalist university graduates.

“This lets our young people down appallingly by letting them think there is no work out there. It also frustrates businesses and the employment sector generally -- particularly manufacturing -- with ongoing chronic skills shortages.

“As a fourth-generation manufacturing business in the area of industrial textiles, our biggest business risk is NOT the exchange rate, a flood of cheap imports or government red tape but a shortage of design and making skills -- i.e. it is people, even in these post-GFC ‘high unemployment’ times!”

This is a message we could be hearing more of in the months ahead.