Kiwi tech companies show record growth in 2015

Kiwi tech companies show record growth in 2015 with revenues up 7.3%

By Fiona Rotherham

Oct. 28 (BusinessDesk) - New Zealand’s technology export sector had record sales growth of $609 million, or 7.3 percent, in 2015 based on the 200 companies listed in the annual TIN100 Report, which chalked up combined revenue of almost $9 billion.

The eleventh annual report, produced by the Technology Investment Network (TIN), monitors the performance of New Zealand’s 200 largest technology exporters in information and communication technology, high-tech manufacturing, and biotechnology. Fisher & Paykel Appliances topped the list with revenue of $1.13 billion, followed by Datacom Group with sales of $937 million, and Fisher & Paykel Healthcare at $672 million.

TIN managing director Greg Shanahan said the gap has narrowed in recent years between the growth of a few top tech companies and the rest of the field. That’s evidenced by the standard for inclusion in the top 200 rising 290 percent in the past five years to revenue of at least $2.9 million.

“To me, that’s a sign of the majority of the eco-system," Shanahan said. "The smaller companies are showing a faster rate of growth than previously. What’s surprising this year is all the major markets in the TIN Report – Europe, Australia, New Zealand, and the UK, are all showing strong growth.”

Export revenue growth of 7.5 percent to $6.5 billion included a surprise rebound in Australia, which had the fastest growth of any market at 8.8 percent, despite a slowing economy in the wake of the mining boom. Europe and North America both rose 7.9 percent, or $80 million and $140 million respectively, and Asia dropped $1 million or 0.3 percent.

Shanahan said language issues remain a barrier to kiwi high-tech companies selling into Asia and they’re instead focusing on easier and less risky markets such as North America.

Combined revenues for the TIN100 companies were $8.2 billion and $754 million for the TIN100+ companies and Shanahan expects the top 200 to exceed $10 billion revenue within two years due to a more favourable macro-economic climate and increasing investor interest in technology companies. Greater global competition will be the biggest barrier to that being achieved, he said.

Factors driving success among the TIN’s rising stars, identified by their high compound annual growth rates over the past three years, were culture to retain talent, innovation, new business models focused on recurring revenue, selling direct to customers, acquiring bolt-on companies to fuel growth, and accessing more capital to grow faster.

While the TIN100+ rising stars had revenue growth 20 times that of the other companies, their earnings before interest, depreciation, taxation and amortisation margin sat at negative 184 percent. That highlights their dependency on external investment as they focus on acquisition and generating revenue rather than profitability, Shanahan said.

“New Zealand companies are seizing the opportunity to scale exponentially to become global players, which may not have been the case 10 years ago.” One example of that, he said, is accounting software company Xero, which ranks at number 18 on the top 100 list and as one of the top 10 companies to watch.

There were 13 public listings for TIN200 companies since 2013, more than in the previous 10 years. That investment has fuelled a 16 percent rise in research and development spend in the past year to nearly $1 billion and a 14 percent rise in sales and marketing spend.

While there was growth across all major industry sectors, the report showed a dramatic upturn in the financial services technology sector with the 11 companies in that group growing revenue by 58 percent, or $129 million combined.

One of the new contenders in the top 10 companies to watch was global direct billing solutions provider, Transaction Services Group, which had 43.3 percent revenue growth on the back of the “subscription economy” with more consumers opting for the convenience of recurring payments.

Transaction Services, whose major shareholder is private equity backer Direct Capital, got its start in the fitness industry in 1994 with its Debitsuccess billing system and now manages payment processing for a wide range of industries. It has bought two UK billing companies, DFC and Harlands Group, in the past two years to accelerate its offshore expansion and this year set up an office in the US.

Chief information officer Steven Holmes said New Zealand companies were seeing a significant worldwide shift in the payments industry where people were looking to add additional services to basic billing technology.

“That’s what we do but we’re not the only ones jumping on this bandwagon,” he said.

(BusinessDesk)

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