Wellington Drive Technologies MD, Dr Ross Green

Friday 12th October 2001

Following is a ShareChat Investor Interview with Wellington Drive Technologies (NZSE: WDT) MD, Ross Green. This interview was conducted during October 2001 and posted on ShareChat on October 12th, 2001.

SC Investor: I note you are developing a high efficiency brushless electric motor, but my impression is that most electric motors are already highly efficient. Could you define more precisely what you mean by 'high efficiency'? (To a lay person it might seem you are investing a considerable sum of money to develop something that at the end of the day has only a marginal benefit over today's existing technology.)
Ross Green: Large electric motors (say >3 hp) usually are efficient, giving figures of 70% or better; smaller ones in the "fractional horsepower" range (less than 1 hp) that Wellington Drive targets most often behave poorly. Many small motors, including the most common types that are used in appliances, show energy efficiency of 18% or less; more than 80% of the energy they use is wasted. "Good" motors in this category show a figure of 30%. To be considered "high efficiency" in the fractional horsepower region an efficiency figure of greater than 60% is needed. Wellington Drive is able to deliver this performance at an affordable price, achieving a marked improvement in performance compared with most existing products.
SC Investor: What companies, internationally do you see as your competition?
Ross Green: Several companies offer traditional electronically commutated motors, and are beginning to achieve worthwhile commercial returns. Wellington Drive's products offer a range of capabilities that are not easily or cost-effectively matched using conventional motor techniques, and we are presently injecting these into niches where we believe we have major advantages. As yet, we haven't encountered other companies using the same technical approach that we promote. This may be partly due to our patent coverage on some core techniques. However, the real competition for us is market inertia. It is easier for customers to continue with their established buying patterns than change, so our mission is to make the change process straightforward while demonstrating compelling advantages.
SC Investor: Since listing there has been virtually no news for investors from the company - 5 months and 7 days between press releases, according to your web site - during which time the share price has steadily declined. Do you think there may be some co-relation between these facts?
Ross Green: Given the events of the past year - with the NASDAQ at roughly one third of its high, and several local companies trading at prices one fifth or less than a year ago - it is impossible to say whether there is a correlation between our conservative publicity policy or not. We are moving steadily forward according to the plan described in our Listing Profile earlier this year. In addition, all of the companies that we are negotiating with intend to our methods to obtain a major competitive advantage. The market in which they operate is stable, populated by many organizations offering identical products. Early disclosures might damage their competitive position, and thereby damage our own. In most cases we have signed bi-directional non-disclosure arrangements. Furthermore, as several of the companies that we are working with are market leaders, any releases that we could make at the moment would necessarily be in veiled terms, and we believe this would not be helpful for any parties concerned.
SC Investor: How long can your company continue at its current cash-burn rate?
Ross Green: The Annual Report for 2001, recently released, shows that we have sufficient funds to continue as we are until approximately the end of (calendar) 2002 at the present burn rate.
SC Investor: The name "Wellington Drive Technologies" tells me nothing about what your company does. Surely a more-focused company name would help to promote your products overseas?
Ross Green: Internationally, we are known as "Wellington" or "Wellington Drive", and these names are much better received than something that is product specific. Names that describe the product are the exception rather than the rule, and can become a millstone as the business evolves. The website www.wdtl.com gives a clear description of the products and services that we offer. In the markets in which we operate, the "Wellington" name, and our base in New Zealand, are excellent differentiating factors.
SC Investor: My image of a low noise design is something slow revving and bulky. Could you explain in layman's terms how your low noise design concept gets away from this stereotype?
Ross Green: Simply stated, our proprietary techniques permit us to "not generate" noise and vibration. The methods we have developed are not applicable to conventional motors, and do not attract additional size and bulk.
SC Investor: What is your marketing budget this year and are you expecting to increase or decrease it next year, and by how much?
Ross Green: Approximately 35% of the Company's expenditure is related to sales, marketing and promotional activities. One third of the staff are dedicated to sales and marketing, and our engineering team is frequently active on sales support work. We are holding expenditure approximately at current levels until the actual success rate in appointing new licensees is known.
SC Investor: Ten years seems a long time between applying for patents and finally getting on and selling something. Why has it taken this long to get going?
Ross Green: The history of the Company and its predecessors is well known; in effect, we re-launched in 1998. Actually, ten years is not long in the technology field. Particularly in Europe, the fact that the Company (and some of its designs) have been around for ten years is seen as an advantage. We can now show credible and saleable products and designs, not just ideas. All of our prospects have considerable experience of their own developments, understand how long it takes, and can see that we have now done many of the "hard yards". By comparison, some variants on traditional motors we have encountered have been in development since the nineteen seventies. Even explosive areas such as mobile communications began slowly. Cell phone research began in the late seventies, with first commercial deployments in the mid-eighties and little genuine commercial success until the nineties. The motor industry in which we operate has been largely stable for over a century. In the context of the industry the changes we are making are radical. Ten years is not a long time, and progress over the past three years, and particularly over the last two years, has been rapid.
SC Investor: I have been to your website and read about your motors and they seem to be a good idea but if they are so great why are so few companies buying them or licensing them?
Ross Green: The industry is conservative. It has been largely stable for over a century, and in industry terms the change we are promoting is substantial. This also means that the motor is ripe for change, and we are positioning ourselves with care to realize the maximum gains we can from this. Establishing sales of anything new is difficult and requires stamina. Checking the early history of organizations such as AOL, Nokia, Microsoft and others is interesting - none of these were "overnight" successes. We are taking care to select new partners, and agree commercial terms, that we believe will give our Company the best opportunity for medium-term growth.
SC Investor: What kind of negative feedback did the company get when it displayed the products at the technology fair earlier this year in Germany? How are you working to combat the concerns that were raised?
Ross Green: The largest negative that we received was a disbelief that a small company, based in what is viewed as a tourist destination, had been able to achieve so much. "Which German company are you part of?" was perhaps a compliment to the standards our team is able to reach - but also underlines the magnitude of the task we are undertaking. We have addressed this by focusing on a small range of products and services, working with a selected group of leading companies who we can serve well, and striving to maintain good response times, with high standards of documentation and samples.
SC Investor: Where did your income come from in the past six months and what are your income projections for the next six months? When do you hope to start breaking even?
Ross Green: We derive income from royalties, proof-of-concept work for licensees and prospective licensees, engineering services for licensees, sale of samples and components and non-operating sources such as interest. We expect revenues to increase over the next six months as new licensees are appointed, and will bring the Company to break even as soon as that is commensurate with securing our medium and longer-term aims.
SC Investor: In the past your company has talked about getting listed on the NZSE and how that is important for dealing with overseas companies and so on. Since listing what kind of response have you been getting - has it improved?
Ross Green: If we were not Listed, we believe that it would be extremely difficult to deal with the organizations we are presently engaged with. The industry we work in is conservative and risk-averse. The additional degree of regulation and transparency that Listing requires helps to drop the barriers with our targets. In that sense, I guess response has "improved" - it would be low otherwise in my opinion.
SC Investor: What are your business contacts, especially in the US, saying about the current uncertainty in the global economy and how it could affect their business development plans? To me in the current environment I would imagine companies are looking to be conservative in their R&D spending because it could take a much longer time frame than normal to recoup costs.
Ross Green: It is still too early to judge the effects of the atrocious terrorist attacks on the USA last month. However, early indications are that prospects find our offering of greater vertical integration - with more things under their direct control, and less reliance on suppliers in possibly unstable locations - to be more compelling under present circumstances. Companies are always looking for better value from their R&D dollar. They also emphasize sectors that are growing and offer good margins. Licensing technology from Wellington Drive is cost effective, while we also offer a quick entry into the highest margin, and most rapidly growing, sector of the motor market.
SC Investor: If you don't mind me saying your business seems kind of low-tech in straight terms of manufacture - some plastics and magnets. Am I being unfair? Would you describe your company as high-tech or leading edge?
Ross Green: The plastics that we use are advanced materials whose industrial applications are still in their infancy. Wellington Drive has broken new ground in the application of these materials in motors. A great deal of effort has also gone into making the manufacturing processes as simple as they are. Some interesting science has been applied to the electromagnetic circuits in our motors, while the electronic controls and software that we use have some novel (proprietary) features. That said, all our techniques have been shaped for "market readiness" rather than aiming for the "bleeding edge".
SC Investor: What difficulties have there been for the company in trying to sell this technology from New Zealand? Have you found it harder to gain credibility coming from New Zealand or do people consider this country to be technologically innovative, in your experience?
Ross Green: What is important to customers is whether one can deliver and meet their needs, rather than where you come from. If you can't deliver on your promises, being next door is only of limited help. Properly handled, being from New Zealand can be an advantage, as it is a differentiating factor. Frankly most prospects have little knowledge or opinion of New Zealand as such, other than vague ideas that we are a vacation destination. The distance factor has to be acknowledged as a barrier during the early relationship-building phase. Nothing can yet replace face-to-face contact across the table to build initial trust, although we've found our use of video conferencing and the web to be useful in relationship maintenance. Provided the targets are well chosen, though, they appreciate the effort you've made in coming to see them - it makes them feel special. There are worse things, also, than a visit to New Zealand as far as our contacts in European and North American companies are concerned!
SC Investor: If I was to buy shares in your company when might you begin to pay a dividend?
Ross Green: Dividends will be paid when the Board considers the Company is in a position to do so.
SC Investor: Consider if you could give budding entrepreneurs developing a product out there the benefit of your experience to date. Can you name three things you would have done just a little differently, given the benefit of hindsight, in your goal to take your company to wherever you see it ending up?
Ross Green: Wellington Drive is something of a special case, given its lengthy history. Nonetheless, the three basic rules for entrepreneurs are simple: focus, completion, delivery. Don't promise the world, do what you said you would do, finish things to the stage they are saleable, and follow up with customers to ensure they are satisfied - don't just assume they must have been.
SC Investor: How much if any state funding has your company received?
Ross Green: Very little, although in fairness we haven't spent a lot of time working our way through the available schemes, preferring instead to get out in the market and on with the job.
SC Investor: Can you name the specific products or companies that are taking priority for your marketing team to sell your technology to?
Ross Green: Premium ventilation and air handling products are good areas for us, and we have been placing increasing emphasis on established, mainstream motor manufacturers.
SC Investor: Is it possible to keep the market more informed of which companies you are proceeding with regard to negotiations on the use of your company's technology? There is little but uninformed speculation and as time goes by, even this is withering. I would like to see a clearer direction and some indication of where your business plan is taking you.
Ross Green: Given the highly competitive nature of the markets in which our prospects and customers operate, it would be inappropriate for us to openly discuss who we are proceeding with. Doing so merely forewarns and forearms THEIR competitors, and our own. We also particularly want to separate ourselves from the "hype" which seems often to surround new technology-based products these days. Ultimately, hype does nobody any good. Steady progress is being made, and we will continue to release news when doing so is compatible with our commercial aims and responsibilities.

ShareChat thanks Ross Green for taking part in this Investor Interview.

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