Hallin Marine

Source: Manufacturing Digital

Date :13/11/2007 11:10:35

Hallin Marine CEO John Giddens tells Exec UK about his vision for diversification and the company’s comprehensive restructuring programme.

When compared with the average CEO, the background of Hallin Marine’s John Giddens is fascinating.

Written by James Hurley and Produced by Kiron Chavda

He spent eleven years with the Royal Navy, the last three as diving officer on board the diving vessel HMS Challenger, where he was involved in 300 metre diving trials and the development of new equipment. He has also advised the Royal Navy and Army on diving issues and commanded naval patrol operations off Hong Kong and Northern Ireland. As a Royal Navy clearance diving officer he qualified in bomb and mine disposal and dealt with clearance of live mines, ammunition and unexploded bombs.

So how did he end up in the commercial world? “I spent three years on HMS Challenger at the end of my naval career, which is a long time for a naval post,” he says. “At the end of that period, I had a choice of whether to stay in the navy or to step into the commercial world.” Of course, the nature of Giddens’ naval career meant he’d already had a lot of exposure to the commercial world. “I’d spent time offshore in the North Sea while still on the Royal Navy’s payroll. That was good experience and training, so I had a lot of very good job offers. I had to decide whether I wanted to carry on with what I had been doing or move on to something different. I chose the commercial option.”

Finance and equipment

Giddens spent eight years with major international diving contractor Fraser Diving, which specialised in portable saturation diving systems and other manned subsea intervention techniques. He worked in Brunei, Saudi Arabia, and Dubai for Fraser Diving and became Vietnam Country Manager before being appointed General Manager South East Asia operations in 1997. “Fraser was a great company and did some things that are very similar to what Hallin Marine is doing now. Its saturation diving systems were superb. But in the latter times, the management was not interested in doing anything different. I felt there were opportunities for diversification in the industry.”

He left Fraser to found Hallin Marine in 1998 and went on to become Chief Executive of the expanding Hallin group in 2003. The company provides high quality underwater services to the marine, survey, cable and offshore oil & gas industries. It provides vessels, saturation diving systems and ROVs which can be mobilised onboard offshore construction barges, and dive support vessels to carry out subsea operations.

It operates all over the globe, from Singapore, to the North Sea and the Gulf of Mexico. Typically the work undertaken by the company involves the installation, construction, maintenance, repair or survey of equipment on the seabed. Most of the projects are planned well in advance and Hallin’s role is that of a key contractor, often working as part of a larger team. The largest projects may take two or more years from a decision to go ahead to the stage where Hallin’s staff or equipment enters the sea.

Hallin was founded in October 1998, ironically at a very low point for the industry. “Oil was at just over $10 per barrel. But I felt that there were more opportunities for a medium sized company similar to Fraser but providing a broader range of services, including ROVs and vessels.”

Of course, it’s a long way from having an idea like that and “not a lot of capital” to establishing a company in what is a very capital intensive industry. “It has been slow progress,” Giddens tells me. “You may look at our nine years of growth and argue otherwise, but actually it was a question of slowly building finance and working towards building up the equipment inventory. In the early days, everything was financed through cashflow.”

As the company grew, Giddens says that equipment was everything. “In a capital intensive business, a new piece of equipment meant a significant jump forward for the company in terms of revenue and profit.” Around 2003, the company was performing well but reached a stage where it was cash strapped, and began to consider equity financing. Investment Trust Gresham House came in as an investor and remains a significant shareholder. “Gresham helped us purchase our first saturation diving system.

After they had been on board for a year, we realised the business was growing too fast and we accelerated our flotation plans.” Giddens oversaw Hallin’s floatation on the AIM market in April 2005. “That enabled us to build further saturation diving equipment and other ancillary equipment.” The company raised approximately £3.45 million, with a market capitalization of £19.5 million at placing.

Restructuring

In its most recent set of results, for the six months to June 30 2007, Hallin Marine recorded revenues of approximately £13.3 million, representing a 112 percent increase on the same period last year. Even more impressively, profits for the same period were up to £2.3 million – greater then for the whole of 2006. “Our results can be viewed in different ways,” says John Giddens. “Some people tell me our results are reasonably conservative in the market climate. But we’re very pleased with them. They’re manageable.”

But how have they been achieved? “At the end of last year we were really overstretched. We were in expansion mode and doing more than we’d ever done before. We were reaching a point where the management was too thin and we were still centred almost entirely on Singapore. Yet we had projects all the way round the globe from the North Sea to the Gulf of Mexico. We were also too thin in terms of numbers and expertise and people weren’t divided up into logical sections. We badly needed to reorganise.

“We also made some mistakes at the end of last year, one of which resulted in a fairly large contractual dispute and a write off. That gave us a shake up – it had never happened before and we had to look at the company very carefully to ensure that it didn’t happen again. We looked at the whole company pretty radically.”

The company had also just started an ROV division in the UK, so reorganisation of a rapidly growing business was crucial. “We decided to split the company into an Eastern operating group and a Western one. We stripped out all of the corporate functions from those groups – they’re purely focused on reaching the best profit and the best operation for their region. This meant we were also able to greatly improve our risk management structures.” Hallin brought in a lot of new risk management processes. “The benefits of that are enormous. Our margin has improved significantly, along with the volume of business. A lot of the credit for that goes to the restructuring.”

Giddens says that the company now has a structure capable of managing growth. “Last year we were bursting at the seams to manage a lower amount of business. Now, we have the structure that can look at new issues, for example the new manufacturing facility that we’ve set up.”

The company recently unveiled this manufacturing subsidiary - Hallin Engineering Services Pte Ltd - which produces subsea intervention assets for both Hallin Marine and for third parties. “This development is a logical progression for the business, profitably expanding our existing, well proven capabilities. It will enable us to focus and further build on our successful design, engineering and construction experience in Singapore.”

It is a 16, 000 sq ft manufacturing facility based in Loyang - but in a different location to its established operations base.

“That’s a huge change - we used to do manufacturing as a parallel activity with operations and that’s a big part of where we were falling down. Nobody had any idea which takes priority. This is a huge improvement.”

The company is now able to bring in skilled factory people on Singapore wages. “That provides a huge reduction in costs – when products were built in our operations base, people were on offshore rates and being used on an ad hoc basis. Yet we’re also improving the quality of the workmanship because we’re using a dedicated workforce. So we’ve got much better products. The whole process is a lot more efficient and the quality of manufacturing is greatly improved because all of the proper manufacturing facilities and processes are in place.”

With Hallin now in excellent shape for future growth opportunities – and with no indication of a drop off in the oil price, the company is predicting strong growth for two years – what’s next? “The next challenge is to diversify our business lines. We’re looking to add engineering to the business because it will allow us to get more involved at the front end of projects with clients and work on larger projects that combine engineering with the execution of the offshore work – the engineering side is quite fundamental to the future growth of the company in parallel with the development of our ships.

“I see nothing but a positive picture at the moment,” concludes Giddens. “Our forward order book is $48 million, which is a record high for us. That reflects a very positive, buoyant picture.”