Wednesday, September 12, 2007/
A smarter, longer-lasting, underwater welding technology launched Neptune Marine Services, but it is clever and sustained marketing and management that has kept it afloat. By TIM TREADGOLD
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 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 arse.”
When that point is reached Lange might be able to execute his own “pain in the arse” exit strategy, making a lot of money for shareholders, and management, in the process.