Mooring Systems draws up a blueprint for success on back of new contract

Friday 5th April 2002

A recent announcement from New Capital Market (NCM) company Mooring Systems about an overseas contract included general comments that deserved the widest possible dissemination among investors and new companies.

Mooring Systems had won a contract with a major Scandinavian-based organisation with considerable shipping interests to build a working model of the New Zealand company's QuaySailor mooring system.

The company said QuaySailor was a shore-based automatic docking system that incorporated a "stepping mechanism for tidal changes and a sideways function for ship positioning."

Winning the contract was important for the company, its shareholders, an informed market and anyone with a general interest in investment and business.

The inclusion of five sentences related to Mooring systems' general philosophy and development strategy had wider application.

They were in the company's statement in a different order from that quoted here but the latter approach seemed better suited to general corporate principles.

"It must not be forgotten that Mooring is very much in its infancy and should be judged as a startup company with revolutionary products in a traditionally conservative market segment.

"The board of Mooring is adopting a conservative approach in committing further funds to research and development and preserving shareholders' funds for the long-term benefit of all shareholders.

"An accelerated approach of commencing development on several fronts would stretch financial resources and potentially divert the attention of a very capable engineering team too thinly.

"The company continues to receive expressions of interest in its products from a number of major trading countries.

"Mooring must now concentrate on proving the functionality, reliability and cost benefits of its product portfolio."

Mooring Systems should have a sound future, assuming it sticks to those principles, has appropriate products and can create and satisfy demand at suitable prices.

The company had earlier acknowledged automatic docking of ships existed since the 1950s but believed its systems had some innovative features.

That point was covered in the comment about "revolutionary products." Companies with revolutionary products are often "very much in their infancy." Investors should therefore be patient and judge them as "startup" organisations.

They need assurance that such companies see themselves as in their infancy, as startup organisations and so on.

There is also the requirement of revolutionary products: the "better mousetrap" principle. It is no good reproducing or just copying a current product, subject to the point that the market will always perceive a much cheaper "mousetrap" as a "better" one, in the absence of price snobbery.

Investors should apply Mooring Systems' test of a conservative approach to funds commitment when assessing a new company's prospects.

Too many companies in the comparatively recent high-tech stock boom raised funds from the public and found them insufficient to fund research and development of the perceived revolutionary products.

Preservation of shareholders' funds should be the goal of all companies, although there will be a rundown of funds during the development phase.

Biotechnology company Genesis Research and Development Corporation's report for the year ended December showed the financial structure required to fund new product research.

The company emphasised its cash reserves of $47.9 million before noting the operating result, but the cash was real and the main reason Genesis had no debt and a shareholders equity/total assets relationship of 86.8%.

Genesis, like Mooring Systems, has a compact number of projects on hand, relative to financial resources. Soundly based development ("startup") companies understand the necessity to conserve financial resources and to ensure human resources are confined to manageable projects.

Development companies must resist the temptation to take up all the "expressions of interest" they receive and "concentrate on proving the functionality, reliability and cost benefits" of their product portfolios.

It was unfortunate Mooring Systems' announcement of a new contract received little publicity.

A blueprint for the potential success of development companies consequently got no publicity.

Comments from our readers

No comments yet