Sunny outlook for MetService

LESLEY SPRINGALL
Last updated 05:00 01/12/2014
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The MetService's weather graphics package, Weatherscape is used is more than 20 countries.

Kevin Stent/DominionPost
Peter Lennox, chief executive of MetService.
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The MetService partnered with Britain’s BBC to create the weather graphics package, Weatherscape.
Leah-Anne Thompson
Sydney’s port authority is a key MetService client.
Andy Jackson / Taranaki Daily News
Peter McComb, chief executive of MetOcean Solutions.

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Weather: it's a funny old business. Perhaps that's why you have to have a sense of humour to be involved. Take Peter McComb, chief executive of MetOcean Solutions, the marine weather-focused Kiwi company which is now part of our national weather company, MetService. He describes ocean forecasting as the same as weather forecasting, only it's wet. Seriously!

Then there's Peter Lennox, the Irish-born chief executive of MetService, or the Meteorological Service of New Zealand to give it its proper name, who laughs conspiratorially when explaining why he changed MetService's 10-year-old international commercial brand from Metra to MetraWeather when he took on the top job in mid-2011. 

"I asked my board if we had any sales in Greece and they said, no. So I said, 'do you want to know why?' Because 'Metra' in Greek means 'uterus' or 'womb'," he grins.

However the money to be made in weather is no joke.

MetService is lauded as a global leader in the supply of innovative weather information services, and in the last financial year reported an eight per cent increase in revenue to $45.6 million - less than half of which was derived from its role as government weather forecaster.

MetService versus metservice

Our MetService is unique at the annual United Nations gathering of 180 government-mandated weather agencies, the World Meteorological Organisation (WMO). Yes, the Kiwi outfit is required to supply vital weather information to keep New Zealanders safe and our industries forewarned of events likely to impact their livelihoods. And yes, it has to adhere to the UN's gold-plated standards and help protect the world from weather extremes. But New Zealand's MetService has a far wider remit than its fellow state-owned metservices.

One of our oldest government agencies (dating back to the storm-warning department of 1874), it became a State-owned Enterprise (SOE) in 1992 and thus tasked with making a return for its governmental shareholder. It took a few years, but eventually it realised there were great opportunities in developing tools to help the private sector tap the power of weather data. 

Its first big foray overseas was a partnership with Britain's BBC to develop a new broadcast-friendly weather graphics package called Weatherscape. The days of stick-on-clouds were over. 

Today Weatherscape XT is a constantly evolving, state-of-the-art weather presentation tool offering a wealth of customisation options for broadcasters wherever they're from and whatever their budget. It's one of MetService's biggest sellers with customers in more than 20 countries. 

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The New Zealand government's $20 million MetService contract (which includes MetService's WMO mandates) now accounts for just 44 per cent of the agency's revenues. It has delivered steadily increasing profits in recent years – its 2014 pre-tax profit was up 13 per cent to $4.23 million, although a hefty tax bill and costs kept net profit at $2.6 million. 

The organisation has customers in 54 countries and employs 264 full-time staff in offices in New Zealand, Australia, England and Thailand. It also has people in Europe, the US and Asia and there are plans afoot to open branches in Korea, the Philippines, and possibly the US, Lennox says, depending on contract wins.

Its commercial work is focused on four main areas: 

– Transport, which includes marine; 

– Aviation, which is so specialised it's its own department; 

– Media, which includes Weatherscape, all the public-friendly apps we can now download and even advertising on its website (much in demand as the fifth most-visited website in the country); and 

– Industry, including energy companies, mining, oil traders, retailers and the growing world of weather risk-management, as companies increasingly look to insure themselves against erratic weather patterns.

The international market for weather

Getting a handle on the actual size of the weather market is tricky, Lennox says. A lot of the areas MetService now focuses on didn't exist a decade ago. Take energy trading: five years ago few brokers gave a damn about what the weather might do, but now it's commonplace for detailed weather forecasts to be bandied around the dealing room, with investment banks paying top dollar for information to help them judge potential price fluctuations.

In the UK, MetService's customers include most of the big brand supermarkets and retailers, including Tesco, Asda and Marks & Spencer, as they too latch on to how powerful weather information can be. 

"The biggest sin retailers make is not overstocking, it's not having enough to sell," Lennox says. Retailers need to know if there's going to be a heatwave so they can stock up on icecream, but even that's passé now, he says. As well as helping them stock their shelves correctly, they are using MetService's weather analysis tools to look for trends, such as how the weather impacts on traffic or parking. 

"We provide them with solutions to problems they didn't even know they had. Nobody thought that way before us; nobody else thought laterally." 

The trouble is as the business of weather grows and technology develops, more are looking to capitalise on the market. 

In 2008, private equity companies Bain Capital and the Blackstone Group, and media and entertainment giant NBC Universal snapped up the US's Weather Channel for an unverified $US3.5 billion. Meanwhile European private equity firm EQT is said to have paid hundreds of millions of dollars for a majority stake in Swedish-based, oil and gas industry-focused weather company StormGeo earlier this year.

Based on US data, MetService estimates the current value of the global market for weather is $US3.9 billion. But that could be a gross underestimate, Lennox says.

With all the money being pumped into the sector, he admits MetService has to expand quickly to avoid being smothered. Its 260-plus meteorologists, mathematicians, engineers and software developers are always looking for new products to develop and new markets for its existing products, he says. 

"Our IP (intellectual property) is not about weather data, which anyone can buy, it's what we do with that weather data."

The company's focus isn't on the man in the street; it's on blue chip customers who will pay for the most accurate information they can get from a proven and reliable supplier, he says. "Anyone can take great pictures on their phones these days, but would you want just anybody to take your wedding pictures with their iPhone?

"There is a growing spectrum of information and providers out there, but if there are lives or a lot of money at stake you want the most accurate information you can get."

Part of MetService's growth strategy is to acquire companies such as Weather Commerce in the UK, and MetOcean Solutions. Weather Commerce enabled MetService to rapidly gain a foothold in the UK by consolidating a group of disparate weather forecasters with a few blue chip clients; while MetOcean allows it to expand its marine forecasting offering and combine it with its own atmospheric expertise to offer a more attractive solution to the energy, port and shipping markets. "We're always actively looking [for other acquisitions]," Lennox says. 

He is also keen to help other state-owned weather services become more commercially focused. Government departments around the world are under increasing pressure to become less of a cost burden on their nations, so there are revenues to be made helping them commercialise, he says. But it's also a huge opportunity to sell MetService's products, while making them less interested in the offerings of private sector competitors. "We have to stay ahead. That's our focus."

MetOcean: the power of two 

Not everyone is happy with MetService's expansion strategies. 

When the SOE bought 49 per cent of MetOcean for $3 million in August last year, it was criticised by some for not joining forces with its old government-owned ally, NIWA – the National Institute of Water and Atmospheric Research, which was spun off from MetService in 1992 into a standalone Crown Research Institute. 

Lennox stresses he has a great relationship with NIWA. But the MetService's focus is far more commercial, he says. "NIWA doesn't have the contracts with the oil and gas companies MetOcean has, and they don't have the product innovation streams it has."

For both MetService and MetOcean the deal made sense because their cultures were so similar, Lennox and McComb say. The power of both businesses lies with the skills of its people, says Lennox, so it was important to stage the purchase to give MetOcean's founders and staff confidence this was the right move. MetService will "definitely" be taking up its option to purchase the rest of the company within the three-year timeframe stipulated, he says. "It's a marriage made in heaven."

MetOcean's staff numbers have increased by almost a third to 20 since joining forces with MetService, and it's surpassing turnover targets, McComb says. Since coming together the two organisations have won contracts for a number of customers neither would probably have won on their own. 

A key one is the Port Authority of New South Wales in Australia, which now employs tools provided by MetService and MetOcean to monitor wave, tide and wind movements and how these might affect its operations. Captain Philip Holliday, Sydney Harbour chief operating officer and harbour master says it opted for MetService because of the accuracy of its forecasting tools and the organisation's responsiveness to answering enquiries.

Like MetService, MetOcean is bringing out new tools all the time and has just launched an under-keel clearance tool to help ships enter and leave harbours despite waves, winds or depth. "It's very efficient and cost effective. We built it for smaller ports which can't afford the expensive current systems," McComb says. "Shipping is the lifeblood of international trade… and vessels are getting larger and larger, putting more pressure on ports, so it's a growing market."

Far from being a hindrance, MetOcean's location in New Zealand is a positive, he says, as the company can attract top notch oceanographers who selected their profession because of their love of the sea – many are surfers. New Zealand also offers some of the most challenging weather and sea conditions for weather forecasters and oceanographers alike to hone their skills, he says.

Government parents: good or bad

For Sydney Harbour's Holliday, the New Zealand government's involvement adds a degree of confidence. "Theoretically it made no real difference to our requirements; however there is an added comfort from dealing with a reputable government-owned organisation with access to the range of information available to MetraWeather."

Lennox, however, says MetService's parentage is a double-edged sword. One large private sector client he didn't wish to name was initially put off doing business with MetraWeather because it had had a bad experience working with another government metservice, which was slow and unresponsive, but once Lennox and his team were able to show they weren't a typical government organisation the business was back on the table.

David Porter, general manager of news and public affairs at Australia's Seven Network, a Weatherscape customer, says MetraWeather's government ownership wasn't an issue. What was important was Weatherscape's reliability, support, flexibility and ease of use. 

"MetraWeather blew us away with their presentation. They turned up with a black box, put it on the boardroom table and demonstrated real time rendering weather animations on the spot. We'd seen presentations from big US weather graphics companies that couldn't manage that and required implementation of cumbersome systems, costly add-on features and heavy support. Then along came a system that produced beautiful animations, capable of being produced by presenters without strong graphics skills or meteorological qualifications. Sold."

Porter says in his industry at least, MetraWeather's competitors are still a long way behind, which is somewhat ironic since Weatherscape is the organisation's oldest commercial product.

Lennox is confident MetService will more than double its profits in the next five years. The company is adapting many of its successful products for customers overseas, including its ground-breaking roading tools which tell workers when it's a good time to paint or de-ice roads, which could save local authorities millions, improve safety and reduce environmental impacts. 

Both McComb and Lennox are also proud their organisations are built on science and research & development, which McComb calls "the engine room of prosperity". New Zealand is awash with weather forecasters, he laughs. "Everyone in New Zealand has an opinion on the weather, which means we have a lot of critics as well. So if we make it work here, we're doing pretty well."  

- Stuff

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