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Interview

with Chris Lloyd, Chairman, MSIS

28.10.2008 / Energyboardroom

Would you please give us an overview of the company’s history and the primary sectors of activity focus at present?

I set up Steminic as a holding company with investment from Aberdeen Asset Management in 2007. Our first acquisition was MS Industrial Services (MSIS) in April of that year. MSIS was incorporated in 1998 by the two co-founders of the business, Dave Skinner and Jimmy MacAskill. The company was, and still is, headquartered in Invergordon, but was previously more of an onshore and rig cleaning services business, dealing with the distillery, construction, and utilities sectors in the Highlands and Islands of Scotland. Primarily they offer cleaning, inspection, environmental and waste management services, the latter available through their licensed waste transfer station in Invergordon. Although initially very much aimed at the onshore sector, there were opportunities via the Invergordon Service Base to carry out tank and vessel cleaning works for the rigs that came into the base for maintenance work, refitting, etc. Several years after the formation of the company, MSIS developed its Premier Transfer System technology which allowed the company to offer specialist tank cleaning services to the offshore oil and gas market – particularly FPSOs and this has helped to transform the company to where it is today as a leading provider of cleaning and environmental services to the offshore as well as the onshore markets. Our main objectives now are to extend the range of services offered by MSIS and to continue to look for innovative products and services that will help to improve overall efficiency and quality of operations. The evolution of MSIS into a provider of environmental services to a range of customers and markets is testimony to the quality of its management team and their desire to grow their business without compromising the quality and safety in what they do.

At the current stage of its evolution, what is the split between MSIS’s original markets and the newly discovered offshore focus?

Offshore has grown to a point where it now represents over two thirds of the company’s overall turnover, which this year will be close to £6 million, compared to just £1-2 million five years ago. The growth has been fundamentally due to the offshore market and the services developed therein.

Going from the Managing Director of logistics company ASCO, what was your motivation to becoming involved at a small firm like MSIS?

An area of particular interest to me has been environmental services, in which ASCO was involved via one of its subsidiaries. I always felt in terms of the growth opportunity within oil and gas and other sectors, that environmental services would play an important role. For one, the overall market was increasing due to higher activity in oil and gas, but also, legislation was becoming tougher, so the need for better processing options has increased year over year. Looking at increasing demand and legislation, MSIS has a range of services that can be provided anywhere in the world. Environmental legislation in other regions is as tough if not tougher than the UK. Kazakhstan, for instance, will not allow disposal of any waste material over the sides of rigs, and requires all waste to be returned for onshore processing. Worldwide there is demand for these services, and what attracted me to MSIS in particular was the quality of the people, and the prospects for growth. When I acquired the business our offshore services focused primarily on cleaning and waste removal, but beyond that there is a whole series of steps in processing and treatment where, for a service company like ourselves, there are compelling margin and business opportunities. MSIS is looking to extend its range such that we can offer a more complete array of waste management services, won by the highest standards of safety and the quality of our work, plus the ability to provide it when operators want it.

In grasping more of this pie, which services do you see as being the most attractive to offer?

We have looked at what happens to the material we pump out of tanks, and considered what normally happens to contaminated sludge as it goes into a processing unit. That unit could be supplied by any number of contractors, but if MSIS had its own cleaning and processing capability unit, separating out and cleaning the constituent parts, all in situ, this would represent a tremendous extension to our service reach. We are investing in such technology now so that this offshore processing capability becomes part of our service range. If material needs to come onshore for further treatment, MSIS can offer those services as well. It’s about following the supply chain, and taking care of waste material, cradle to grave. At the moment, MSIS has the cradle, and is rocking the baby, but we want to extent the analogy.

In terms of expanding to other markets or expanding the company’s reach within the UK, where is the geographic focus?

At present we are concentrating our marketing efforts on the UK and Norway and have established a strategic alliance in Norway to help us access that market. Given our particular success on FPSO’s we are obviously interested in West Africa and in due course Brazil but we can do a lot of work in Aberdeen and London to raise awareness in the operator community about our services before committing to local presence in those markets. Fundamentally, because MSIS is a small business, we must look domestically first. It wouldn’t make sense to set up an operation in Africa or South America just yet. Where MSIS has an advantage is that the technology is used on FPSOs and is mobile, we can go where the problem is, and we don’t need to be present in-country to get the work. The major contract MSIS completed for Amerada Hess in Equatorial Guinea, came about from a local Aberdeen demonstration of our equipment capabilities. Within the UK our focus is on providing innovative solutions to other markets and we have been successful in winning work within the nuclear and water industries with new remote camera inspection equipment. Additionally the looming presence of decommissioning is of great interest to us as the range of services offered is well suited to that developing sector. In order to be noticed, however, we need to be innovative and responsive to the very specialized needs of the industry and that is where a smaller company such as MSIS has an advantage.

What’s the growth potential, in going from £1-2 million to £5-6 million in a relatively short time span?

At the Steminic our holding company level we believe we can grow turnover from £6m to between £30m and £40 m in three to four years. MSIS will be a key part of that growth but as with all growth stories we need to manage our development very carefully. Too much at once and we’re likely to fail. Yes, MSIS can always bring in and acquire new resources, but it takes time to deliver them to the same quality level. We will always strive to ensure that our quality and safety and customer service levels are never compromised in our drive for growth.

Speaking to this technology MSIS’s growth is on the back of, is it produced in-house, or is it imported from another industry?

It has been taken by another industry and adapted by our engineers for use within MSIS. Because MSIS lies in a fairly specialized area of the market, and the types of people we compete with will be larger maintenance contractors, who offer a much broader range of services, with specialist cleaning services featured as a small part of the overall range of services. The type of situation in which MSIS is called is less common and more difficult than overall fabric maintenance, requiring quite a bit of investment and a degree of focus that is challenging for a company without a niche focus to the particular problems of FPSOs and deep tanks on installations, where for whatever reason things are mixed together and operational efficiency can be adversely affected.
Outside of the offshore market we continue to look for new technologies that could give us an edge when combined with the particular skills of our people.

In this growth from £6 to £30-40 million, do you see other businesses coming on board?

My concept is that Steminic will look to acquire other businesses that fit together in terms of the nature of the services under the overall banner of environmental services, largely to the oil and gas industry, but also to onshore industries. MSIS is the platform business and we will build on to that platform. We are currently investigating a number of acquisition opportunities to extend the range of services provided and also give a different geographic footprint within the UKCS, not just in the Central and Northern North Sea, but in the Southern North Sea and onshore into the downstream sector in England.

In pursuing this acquisition path, how do you view the current credit climate’s impact on these ambitions?

Even from six weeks ago the credit markets are completely different. The knock-on effect of that to smaller companies means it’s impossible to be as confident as you once were regarding the bank response to finance acquisition or development opportunities. Private equity is different, in a sense coming into the position of putting up the money in place of the bank. Time will tell. If it’s a good deal, money will still be available, but it might be more expensive than the recent past.

What’s your vision for Steminic/MSIS over the next five to 10 year time horizon?

My vision is for Steminic as a group, but MSIS as a key element of that, to build up a very successful environmental services business, offering a range of services that can be supplied internationally to a number of selected markets. That’s in terms of strategy, but in terms of the stile, I want to maintain the quality of operations, speed, and flexibility that having a small business allows. I don’t want to become a big business that’s slow and inflexible, but I would rather develop a number of business streams that fit logically together that people enjoy working in, and apply the highest standards. Bottom line performance will be paramount.

Translating that into a trickle-down management stile, how would you characterize your leadership?

I want people to be enthusiastic, and build upon the identity with their own business but also with Steminic, and buy into the concept of extending the range of services and geographic spread of the business. So far, it has been successful, and I will continue to be ambitious when it comes to setting targets. As a chairman, you must be set the vision, be ambitious, and set high standards, but also ensure you have the right team of people to help achieve that vision. That, means working with a whole range of people and recognizing their strengths and weaknesses but more importantly my own. I enjoy this aspect of the job, and it’s important that the people who are key managers in the individual businesses not only buy into the overall vision, but maintain high standards of quality and want to develop their own businesses and services.

What is your final message to OGFJ readers about MSIS, Steminic, and where you want to take them?

In terms of the aspirations for the business, both Steminic and MSIS are founded on quality of service and being able to respond to industry needs, and seek to offer an ever-widening range of services suitable for the relevant industry. I want to build a business that people enjoy working for, that has a reputation for innovation and customer focus and that maintains and indeed seeks to improve its standards as it grows.

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