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Interview

with Mike Jessop, Managing Director, Unique Hydra

18.01.2012 / Energyboardroom

Back in the 1990s, you were active in the South African Navy followed by a few years of activity at Southern Oceanics. You left that position to start Unique Hydra’s predecessor Hydra Marine in 2000. What drove you to set up the company back then?

The local industry as a whole saw an increased interest in the manufacturing of commercial diving equipment and there was a clear need for well-engineered diving systems. The initial contract we obtained was for the project management and engineering of a saturation diving system refurbishment for our client SMIT Subsea. As far as I know, this was the first system of its kind in South Africa. Following this project, we had the opportunity to become involved in the actual construction of a saturation system. As a result, we built a second system for SMIT Subsea and with that expanded our staff and infrastructure. Many of the staff and directors of the company are still part of the original team, it is a great team.

Naturally, you make some mistakes in the first years too. How was this learning curve for you?

It was frustrating! For me, it is always about having the right people in the right place. When you get that wrong, you normally end up having to deal with problems. We always look for character first, Chemistry (teamwork) 2nd and Competence last. While you can always work on improving someone’s competences, the first two need to be right as they are almost impossible to change.

SMIT Subsea was obviously the key to getting the company started. But how challenging was it to build up a track record across the industry?

The relationship has to be symbiotic, and in 2000 this was indeed the case. In those first years, I probably spent more time out of the country than in the country. I spent a lot of time traveling and knocking on the subsea construction company’s doors and working networks of contacts and acquaintances.
Our business has never been local; we were immediately focused on the international market and looking for foreign clients. In those first years, we also worked for Stolt, a company that later became Acergy and is today part of Subsea 7. We completed the refurbishment of a system in Gabon and had to travel regularly into West Africa.
Networking has really been the key part in this process, in combination with an international focus and West Africa in particular. This also meant that we attended all the international shows to better understand what the clients needed. In many cases, clients would approach us with specific requirements and needs that could not yet be answered in the industry. We would sit with our design team and work out new solutions to meet the clients’ needs. In a later stage, the industry as a whole would start asking for these new products – our product lines were then main stream.

Where does the company stand today in terms of complexity of projects it is able to take on?

In the early days, we dealt a lot with non code related equipment, with code referring to classed by DNV, Lloyd’s, etc. Today everything is code related while we have a staff of 28 engineers to handle the engineering of these sorts of systems. In the early days, we were only 3, so there is a significant difference in terms of capabilities of projects we can handle.

You also built up a working relationship with Unique Maritime Group, which eventually led to the Group taking a majority stake in 2007. How big of a step was this for the company?

It was a very big step for the company. In 2007, we were about to establish 3 contracts on saturation systems. However, with an excess of 40% growth in the previous years we were not able to foresee the right funding. Unique Maritime Group had vast financial resources and already acted as our agent in the United Arab Emirates (UAE). Moreover, the relationship with the Group CEO Harry Gandhi was excellent.
In a next step, the new structure was defined, our CEO actively pursuing the expansion of diving manufacturing globally and as a result, we managed to expand and open offices in the US and India, while continuing to expand the office in UAE to manufacture diving equipment. 2010/2011 we opened offices in Aberdeen (UK), Oman (UAE) and St-Petersburg (Russia). Diving now represents about 45% of the Unique Maritime Group’s income stream.
Now part of the group, we no longer look at our entity alone but aim to grow the group as a whole. Moreover, we are no longer just a diving equipment manufacturer. We have 7 engineers to maintain and service Kongsberg DP vessels in West Africa. Through the merger, we were able to grow and add a variety of different services and products that we did not have before.

How did the clients respond to the merger?

The Unique Maritime Group had a very good name. Furthermore, our clients were pleased to see their risk exposure decline by dealing with a larger company. We were no longer a small privately-owned South African company, but part of a medium sized international group.

The merger went hand in hand with the relocation to new premises in Cape Town. What was the vision behind this move?

At that time, we were located in a 1,000m2 facility while we had just received an order for 3 systems. The relocation was already part of our plans, the ability to invest in the property with the extra capital from Unique Maritime Group obviously facilitated this greatly. Our new facility is now 10,000m2 and has many subsea service facilities unique in South Africa.

Today, you are about to complete another expansion phase of the Cape Town facilities, including a new office block and an expansion of the workshop. How will this benefit the company in terms of business development?

In the last 4 years, we have experienced frustrations of working in an environment that was not designed to build larger systems. To solve the inefficiencies and frustrations we faced, the expansion was a logical next step. I want our local and European customers to be impressed when they walk in here. We now run on European-type safety norms, which are top notch for the industry. Our clients are international oil and gas players, and they expect such standards as a minimum.
On the organizational side, we want to facilitate all of our interests into one area. At the moment, we for example have a DP training center that will also be moved here. We started this center 2 years ago, and I believe we are now the only Nautical Institute (NI) qualified training center in Africa. We do the majority of the training requirements of West Africa.

Do you feel that some international companies still hesitate to rely on South African companies when it comes to safety and quality standards?

We are DNV accredited, an accreditation body we selected particularly because it is more stringent in auditing than the South African accreditation bodies. I personally feel that the South Africans Accreditation bodies are weaker than the international accreditation bodies. If you want to work on the international markets, you need to comply with the international standards and using an international accreditation body helps. South African companies build well engineered product and we can be proud of this. However, we need to challenge ourselves (South African’s) in the marine industry to position ourselves as leaders in technology and product development rather than just simply manufacturing the currently accepted product.

How do you brief your staff on this culture?

You can implement all the right procedures, processes and documents, but at the end of the day it is still up to the employee to take up the right safety attitude. We obviously deal with employees that step out of line, but what we do is mainly try to remind them of why it is important. Of course, from an infrastructure perspective, the company needs to ensure that all safety standards are met. We also have one particular person that oversees this.

In terms of projects, in last year’s press you were visibly proud of the successful completion of 2 turnkey design and build saturation diving systems for McDermott International. In your own words, you were “extremely pleased”. Why was this project so pleasing for the company?

It is the first time that DNV has approved a portable saturation diving system, which was very satisfactory to McDermott. We sat with our client from the design phases and kept them involved until the final product was ready, which is now fully operational. It was very good to see what type of requirements such operator had, to factor in elements such as productivity, reliability, and so on. McDermott is a very good client and our relationship is ongoing.

From an engineering point of view, the project sounds rather complex. What would you regard as the main technical challenges on this project?
DNV has a strong focus on ship build systems. Taking their rules and applying it to a portable system can be quite a challenge. This is where we had some learning to do. All in all, we are very pleased with the outcome.

You mentioned earlier that the company has been international from the start. Where do you see most growth potential?

We have a number of different market segments. In terms of portable saturation systems, we see a plateau at the moment and may even face a situation of oversupply from the general manufacturers. We do not see much further growth but are rather entering into maintenance mode. For the diving side, we are into the shallow water market.
On our marine services side however, we are active on deepwater vessels, with services such as dynamic positioning, automation and different types of communication services. Apart from that, we have also developed the rental side of the business. As the economic climate tightens up and companies try to limit their capex, we generally see this side of the business growing.

How do new E&P developments on the African East Coast reflect on Unique Hydra?

Our clients are the subsea contractors that work for the oil majors. As we see more and more of these contractors heading in that direction, we are clearly interested to provide the support to these operations. We also have a small office in Durban now, which allows us to provide support in that area. In a next step, we could open up in Mozambique or even in Tanzania.
In Angola, Nigeria and so on, we have representatives that allow us to provide support at a local level. In Angola, we remain a bit hesitant due to the complexity of doing business there. While Nigeria is easier in this respect, we are also positive for our prospects in Namibia.

On a more personal note, you stayed on board after the 2007 merger. What kept you motivated, rather than enjoying your returns?

I reinvested in the group as I see great prospects for the group, we are currently structuring for an IPO. Furthermore, I enjoy the leadership challenges. From starting as an engineer to running a small company, to being part of a 500 people international group, has been interesting from a leadership strategy perspective.

How was this switch for you?

Starting your own company, you become a project manager and general do it all.
Leadership is part of the game, but strategy in particular becomes more interesting. I am about to finish my MBA with a focus on mergers and acquisitions (M&A), a topic I am very interested in.

Once Unique Hydra reaches its 15th birthday, in 3 years from now, where will the company ideally stand?

I think you will see an increase in rental opportunities. Our strategy is obviously to grow a lot bigger on this front. We will have a better footprint in West Africa for this business unit, as well as for our services & marine side.
On the commercial diving systems, we will look back on some successful projects I am sure, and we will have developed product for the future needs in commercial diving. Some of them are on the drawing board at the moment and they are exciting.

Is Unique Hydra evolving more and more into a servicing company?

In this regard, we will go where our clients take us, at the moment, we do about 2 to 3% of services and maintenance of diving. This is mainly because most of the contractors have their own technicians. In the future as the products are more technology based, we see an opportunity to provide specialized services to our clients in our worldwide offices.

Do you have a final message for the readers?

We need to attract young people to our industry; it is a growing industry and an exciting one.

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