Shore motor-maker driving to break even

Ross Green is bullish about Wellington Technologies' future. Photo / Paul Estcourt

After more than a decade at the helm of electronic motor-maker Wellington Drive Technologies, chief executive Ross Green says some aspects of the job still keep him awake at night.

The biggest stress, he says, is the ever present need for the listed Albany technology firm to become a commercial success.

Wellington sold more than 600,000 of its energy-efficient motors, which power commercial refrigeration and ventilation systems, in the year to December 31, 2009.

But even with those sales the company reported a bottom-line loss of $14.7 million during the same period.

"My cardiovascular fitness is pretty good," says 54-year-old North Shore-born Green. "If it wasn't, this wouldn't be the sort of job to be dealing with."

Another one of his major worries, he says, is that if Wellington were to fail, New Zealanders would be put off investing in similar local start-ups in the future.

"It's vital that the investment community as a whole and the public get comfortable supporting companies like Wellington - that's really important for future national prosperity," he says.

"I think if Wellington was to fail a lot of people would look at that and say, 'See, that's a reason for not supporting [companies] like this."'

Despite the years of losses, Green is bullish about the firm's future, saying it has the potential to grow to the point where it may one day sell 1.5 billion motors each year.

That's a market worth more than $50 billion annually. To put that in perspective, Fisher & Paykel Appliances - New Zealand's biggest technology manufacturer in revenue terms - had sales of $1.16 billion in its last financial year.

Wellington, which manufactures its motors in China and Singapore, reported a bottom line loss of $6.6 million for the six months to June 30. That was an improvement on the firm's $9.9 million loss in the previous comparable period.

Green says Wellington's high overheads - a result of the company's focus on long-term growth and product development rather than short-term profits - have prolonged the time shareholders have waited for a return.

"If we adjusted the company's overhead structure we could break even easily on less than what we sell today."

Tinkering with the overhead structure and taking a more short-term view would not allow Wellington to grow to the point where it could provide its shareholders with a "substantial return", he says.

Green says Wellington has been fortunate to have had particularly loyal shareholders.

When the company had its IPO in 2001 he expected it would break even within four years, he says.

Nine years later Wellington's investors are still willing to pour more capital into the company when the need arises.

This month the motor-maker completed a successful capital rasing that netted $7.7 million from its investors - $2 million of that coming from its regular shareholders through a share-purchase plan.

Last year Hunter Hall Investment Management - an Australian "ethical" investment firm that has held shares in Wellington for about six years - committed a further $8.5 million to the motor-maker.

James McDonald, a portfolio manager for Hunter Hall, says the Australian firm did not take part in Wellington's most recent capital raising, which meant its stake in the company had dropped back to around 25 per cent.

The wait for a return on its shareholding has been longer than Hunter Hall first expected, he says.

But Wellington's underlying growth is strong, says McDonald, who hopes the North Shore company's most recent round of capital rasing will be its last.

"I would hope that by the end of next year, or early 2012, they will break even," he says.

The company that morphed into Wellington was founded in 1986 as Cadac, but significantly restructured and was given its current name before listing on the NZX in 2001.

Green says Cadac's main problem - other than its name (Americans thought it sounded like the noise a turkey makes) - was its attitude towards customers.

Cadac had the right technical ideas about electric motors, he says, but failed to connect those ideas with the needs of potential clients.

Green, who holds a doctorate in engineering, joined Wellington after many years working outside New Zealand, including stints in the oil industry in the Gulf of Mexico and Middle East.

Since taking over as head of the motor-maker he has concentrated on turning it into a customer-focused firm.

"Wellington has very carefully built a reputation around being a company that is helpful. The biggest thing we've done - outside the basic performances of our product - is that service aspect."

Green spends up to 15 weeks away from his family each year on the road visiting customers. He recently returned from a business trip that took him to Monterrey, Mexico - a city at the heart of the war being waged against drug cartels by that country's Government.