BUILDING a global business from scratch is never easy, but when you’re creating a new safety-critical product, it can be even tougher.
While revenues are now looking healthy and SRJ is set to list on the Australian stock exchange, CEO Alex Wood explained why it has not always been an easy few years.
‘We’ve obviously had the general bumpy ride that you get when you invent something, and try and develop it for probably the most conservative market in the world, the oil and gas, hydrocarbon sector,’ he said. ‘It’s not making widgets you can go and put in the pound shop and people will buy them – this is mission-critical kit.
‘So Shell and BP are very difficult to sell to and it takes a long time to do that, which has required a lot of patience. We’re now qualified with the American Bureau of Shipping, Lloyds Registry, and have the professional requirements, which takes a lot of time in terms of you’ve got to test these things, break them and prove they’re fit for purpose; that costs a lot of money.
‘So there’s this very uncomfortable period of time when you are spending a lot of money, and it’s very unclear when this becomes revenue-positive. As many people can attest, when the oil and gas industry works, it can be very profitable.’
The product is a weld-less pipe connection, designed because it is sometimes not possible to weld the mixed alloy metals which are often required, and because obviously in a live situation in oil and gas, hot welding isn’t a great idea. The IP is registered in Jersey, where the products are designed, and they’re manufactured wherever they are required.
SRJ received a £500,000 loan from the now defunct Jersey Innovation Fund, as well as invaluable investment support from a local family office in the early days. That JIF loan turned out to be somewhat of a poisoned chalice when the fund was heavily criticised, and Mr Wood said their association with it has at times put Jersey- based investors off. The business has now paid off that loan early, in full and with interest. While some local investors were put off by the JIF link, Mr Wood said they had received extensive support from other local businesses in the Island, including legal, financial and technology advisers. ‘I think one of the benefits of the Jersey market has been it is small enough for those physical relationships to have that connectivity.’
What it also has not done is put off global interest. In addition to support from former motorsport champions Mick Doohan and Eddie Jordan, they have attracted former Petrofac and BP industry expert Rob Pinchbeck as non-executive chairman, as well as three other former Petrofac staff with extensive experience in their field. Petrofac is a provider of services to the oil and gas sector and is also registered in Jersey. 2018 revenue is recorded at $5.829billion. Mr Pinchbeck was a part of the senior management team which led Petrofac to their successful London listing and was also group head of strategy.
Meanwhile, Mick Doohan is an accomplished businessman. He owns Global Jet International, a big jet business in Australia, and also invests in engineering and property. He has become an ambassador for SRJ in Australia.
While SRJ is now generating good revenues for its investors and expanding rapidly, Mr Wood said that early start-up support was essential for Jersey businesses. The Innovation Fund is no longer available, and Jersey’s government currently has no plans to replace it.
‘Jersey needs something like the Innovation Fund and we’re hopefully one way of setting the record straight a bit that these things don’t always go wrong,’ he said. ‘It will be detrimental to the Island if there isn’t some form of incubator.’
SRJ is more than 60% owned in the Channel Islands, revenues which will stay here, and it has also been employing people for several years. Add to this the low footprint model of the IP and design team based here, but manufacturing based in the country requiring the products, and Mr Wood said it was an interesting model for the Island to adopt and do more of.
‘The thing that’s often missed by the general public, with the greatest respect, is it’s not about the return of the grant, it’s about the effect of the whole pool.
‘So the pool might fall short by 20%. So the 10 million becomes a return of £8 million, for example, but if one of those companies, like ours, is mainly owned in Jersey, that £10 million of investment becomes £20 million. What does that £20m going back into the Jersey economy do? It more than compensates for the £2m the government didn’t get back. Plus there’s all those people who’ve made money out of supporting that early business and there’s people employed, who’ve all paid taxes.’
SRJ is forging ahead. They have already rejected a couple of competitor bids for the business and believe there is a vast potential. ‘Our intention is to stay at the cutting edge. We’ve got two or three new products coming to market and are just completing our first digital technology. We’ve already completed testing of our digitally enabled coupling and we’re going to be releasing a thought leadership piece on this in the next few weeks. There should be enough inertia for this business to become very substantial.’