one of the best articles found, but not by me.
Neptune rises
Thursday, 13 September 2007
Last Updated: Thursday, 13 September 2007
By Tim Treadgold
Building a better mousetrap, despite what the fable says, does not always mean
that the world beats a path to your door. Marketing and managing are the second
half of creating a successful business, as Neptune Marine is discovering as it
rides a worldwide surge of interest in its underwater welding technology.
Invented more than 10 years ago, the Nepsys welding system failed to attract
much attention in its early years, even in its home town of Perth.
Today, Nepsys is being used to help repair offshore oil rigs in the Gulf of
Mexico, being assessed for work in the North Sea, and serving as a key part of
the remarkable growth of Neptune.
Nothing better illustrates the growth of Neptune than its sales figures. In
2005, the then struggling business generated revenue of $900,000. Last financial
year revenue hit $15.5 million, with pre-tax profit rising to $1.5 million. This
year, the budget is for sales of between $60 million and $70 million.
The rise is reflected on the sharemarket where the company’s share price is up
400%, from a lowly 17 ¢ at this time last year to recent sales at 85 ¢, lifting
the value of the firm from $35 million to $176 million.
Some of that growth has come from a series of acquisitions, which have boosted
total employment numbers to more than 200. But the heart and soul of Neptune is
a technology that hasn’t really changed except for the fact that it is being
cleverly marketed.
The underwater welding system was invented by Clive Langley, owner of an
engineering and industrial training business called XLT Industrial Training. His
objective was to find a way to improve the quality of underwater welds. He
succeeded, and listed Neptune on the stock exchange in early 2004, mainly to
raise capital to continue research and development, and to look for ways to
commercialise the Nepsys technology.
For a while Neptune was a star, with its share price hitting $1.17 a year after
listing, but then fell into a two year slide, bottoming at 17 ¢ last October.
The sharemarket fall begs the question, what happened at Neptune? The answer:
not a lot.
The Nepsys technology didn’t change – it remains a very clever system that
permits dry welding of metal in a marine environment by erecting a housing
around the structure needing repair. For tech-heads needing a “weld fix”, go to
http://www.neptunems.com/.
Anyone more interested in business, and how to build a smart company, read on,
because Neptune is a case study in how to leverage value off technology, and
much of the credit for that goes to Christian Lange, an engineer who took the
chief executive’s role at Neptune two years ago.
“All of the original credit for Nepsys and Neptune belongs to Clive Langley,”
Lange told SmartCompany from his hotel room in the Scottish city of Aberdeen.
“He spent 10 years looking for a way to improve underwater weld quality when not
training welders. We’ve always been able to weld underwater, but the quality of
the welds is substantially less than a dry weld.”
For the offshore oil and gas industry, and for any engineering work in a
submarine environment, quality is critical.
Lange, who was in Aberdeen pitching for North Sea work, said the early years of
Neptune as a listed company were not happy.
“There was a revolving door at the executive level as management came and went,”
he says. “There was no single cause. It was a combination of factors. Some
people in the business didn’t really understand the public company environment.
The commercialisation strategy was flawed, and you probably had a number of
personality clashes. It’s a common story.”
In late 2005, after two years of “fumbling around”, as Lange describes it, the
board recognised that it had to bring in management that knew how to grow a
small company, and had the right technical and corporate experience.
Enter Lange, for 16 years an employee of Schlumberger, a French oilfield
services giant, and a former managing director of SDS Corporation, a mining and
oilfield tool supplier.
Joining him on the Neptune board were David Agostini, a former general manager
of Woodside Petroleum’s North West Shelf joint venture; Robert Scott, an
accountant who is also director of small oil explorer, Amadeus Energy; Ross
Kennan, one-time executive with US technology company, Honeywell; and management
consultant Cathryn Curtin.
“My view was that the technology had been operationally proven,” Lange says.
“Neptune had done a number of jobs for the Royal Australian Navy, and cleared
the hurdles which demonstrated that it was a permanent repair method.
“Really there was a need to establish Neptune as a service business and move
away from R&D. That’s how we developed a business plan, and set about trying to
build a complete engineering services and solutions business supporting the
offshore oil and gas industry.”
Having a smart technology is one thing. Being seen as a “one-trick” pony is
something less desirable.
“We moved away from being a one-trick pony in December last year when we made
our first acquisition,” Lange says.
That initial deal, the takeover of a business called Allied Diving Services, was
followed by the acquisition of five more businesses: Territory Diving Services,
Subsea Developments, US Underwater Services, Link Weld Engineering, and Tri-Surv
Geomatics, a specialist marine survey business.
“We now have a complete business providing an integrated project service to the
offshore oil and gas industry, from engineering right through to delivery of a
solution in the field,” Lange says.
The Nepsys welding system is how Neptune started. But the real growth of the
company has come from management being able to weld together a series of
complementary service companies working to high profit margins because of the
skills involved.
The success of Neptune’s business development strategy can be seen in the
acquisitions and rising sales figures. But another measure is through the
quality of clients buying the company’s services, including big oil and gas
producers such as Woodside, Apache Energy, ConocoPhillips, Origin Energy, Alinta
and the Italian oil giant, ENI, in the Gulf of Mexico.
Neptune’s growth, both organic in the form of the founding technology and
through acquisition, has been so rapid over the past year that a point could
well be reached where it becomes a tasty takeover target for bigger oilfield
players, such as Lange’s old firm, Schlumberger, or its US rival Halliburton.
“We’re on a journey, and we’ve only just started,” Lange says to the takeover
question. “My intention is to get under the skin of several large organisations
over the coming years, and at some point we’ll be seen as a general pain in the
****.”
When that point is reached Lange mightbe able to execute his own “pain in the
arse” exit strategy, making a lot of money for shareholders, and management, in
the process.