TIN reveals NZ’s largest tech exporters – and the fastest-growing

Covid slowed the growth of New Zealand’s tech industry, according to an annual report that ranks our largest and fastest-growing exporters in the sector.

TIN (Technology Investment Network) principal Greg Shanahan says the report covers the financial year to March 31, so only partially captures the pandemic’s impact.

Still, it did reveal that growth eased in FY2020 as the tech sector (by TIN’s broad-strokes definition) grew 8.3 per cent or $972 million to total revenues of $12.7 billion, after three years of $1b-plus growth (last year, it increased $1.1b).

And, regardless, the sector added 4000 jobs for a total 55,167, and there are now 56 tech exporting companies reporting revenues of more than $50m, the NZTE-backed survey found.

“It’s clear there is now a critical mass of success in this sector which will provide a bedrock of resilience for this country in the years to come,” Shanahan says.

Datacom, the IT services company majority-owned by the rich-list Holdsworth family (54 per cent) and the Super Fund (39 per cent) remained at the top of the TIN200 chart with revenue of $1.34b.

(Spark, with FY2020 revenue of $3.62b, is far larger, but no telcos are included in the TIN list. Shanahan says that’s because telcos have a primarily domestic focus; TIN criteria require a company to earn at least 10 per cent of its revenue overseas).

Earlier Datacom chief executive Greg Davidson blamed a halving in FY2020 profit to $19m, in part, on the impact of Covid in the final quarter.

He said the impact of the virus was mixed.

“We’ve got customers in the transport sector, in tourism, or in the whole airport and airline world that are really down and needing us to figure out what minimal services looks like.”

Other clients, in areas like government or the health sector, were ramping up spending.

“Maybe we’ll be able to show some top-line growth [in FY2021,” Davidson said.

“No one can predict quite how deep the recession will be. What we do see is that everybody’s horizons have shortened a bit. A lot of people spent a lot of their budget for the year on helping make remote working happen for all of their teams.

“And they’re now only wanting to commit to shorter-term, more obvious payback-type activity for the foreseeable future.

Fisher & Paykel Appliances retained its number two slot, with revenue of $1.26b. The NZX-listed company’s share price is up 65 per cent for the year, in part because of robust demand for the parts it manufactures for respirators amid the pandemic.

The Chinese-owned, Auckland-based Fisher & Paykel Appliances remained in third place with $1.20b revenue. Whiteware has been one of the growth categories amid the coronavirus, with the recession outweighed by a home renovation boom as people divert funds that would have ordinarily been spent on travel.

Wellington-based, ASX-listed Xero held fourth spot as its revenue jumped from $552.8m to $718.2m.

And completing a static top five, electric fence pioneer Gallagher Group – now also involved in everything from wireless water monitoring to fuel systems – stayed in fifth with revenue of $301m.

The top 10 was rounded out by Livestock Improvement Corporation, Scott Technology, Douglas Pharmaceuticals, Weta Digital and the Auckland-founded Transaction Services Group, the Auckland-based revenue management firm that sold a majority stake to a European private equity company last year (companies sold offshore are still included in the TIN200 if the majority of their operation remains in NZ).

The fastest growing

NZX-listed Pushpay just missed this top 10 with its FY2020 revenue of $190.6m, but did make fourth sport on TIN’s Rising Star chart (see above).

The rising Rising Star list includes several tech companies who’ve chosen to list on the ASX only: Xero, Straker Translations, 9 Spokes, Volpara Technologies and Laybuy as the local exchange has struggled to attract new listings. Other risers, like Plexure and Eroad, have become dual NZX/ASX listed.

The TIN Rising Stars saw a combined a growth in ebitda of 54.1 per cent, which is considerably lower than last year’s growth, but more than double the 20.6 per cent operating earnings growth of the broader TIN200 EBIDTA -which should position them well for further capital raising, Shanahan says.

The TIN boss also notes that an increased proportion of the TIN Rising Stars group are
publicly-listed, so have used external capital to support growth and expansion. Eroad, for example, is now dual-listed, raising $42m on the ASX in September 2020, representing
a 10.3 per cent discount on their last close price on the NZX.

While it still hangs in the balance how Covid will impact the TIN200 as a whole in FY2021, Shanahan notes there’s at least as much opportunity as downsides.

“For many companies, Covid-19 has accelerated the uptake of their technologies,” he says.

“For example, the healthcare sector in terms of pandemic treatments or in cloud-based software services for remote working and contactless payment.”