Record profit growth for techs
New Zealand’s top technology companies enjoyed 38 per cent operating profit growth in the year to March, according to the latest TIN Report.
That’s the highest rate of growth since the NZTE-backed Technology Investment Network began its ranking of our largest tech companies by revenue in 2005.
This year’s list — which will be released next month — also sees a record 19 new entrants, despite the threshold to make the “TIN200” ranking of our largest tech companies by revenue rising to $3 million. More than $100m revenue is now required to make the cut for the top 25.
TIN founder Greg Shanahan hopes this year’s report sees New Zealanders finally take the tech sector seriously.
Over the past few years, the success of companies like Datacom, Xero, F&P Healthcare, Rocket Lab, PushPay, Serko and Gallagher Group has seen the tech sector become one of our largest generators of export receipts.
In 2017, total tech sector revenue increased 7.9 per cent to $10.0 billion while their revenue from exports jumped 8.5 per cent to $7.34b. That placed tech third in our export stakes behind dairy ($14b) and international tourism ($10.8b) and well ahead of staples like meat ($6.6b) and forestry ($4.7b) in NZ’s total exports of $53.7b last year, according to Stats NZ figures.
But in Shanahan’s eyes, tech is just not getting the respect it deserves.
“If you read a lot of the blogs and media, there’s a perception that some kind of technology is some sort of joy ride that will never make any money, that it’s some sort of bubble-like phenomenon rather than mainstream business,” he says.
He hopes this year’s report will help open a “new chapter” in how people regard the industry.
“Tech companies are not only growing but growing profitably and there are no signs of any slowdown,” he says.
“There are now the foundations for widespread, self-sustaining and stable growth.”
Shanahan says he’s especially encouraged by the fact there are growth signals across the board. Ebitda is up, revenue is up, R&D spending is on the rise, hiring is up, more investment is coming in and export receipts are up (the latter helped by the low dollar).
The TIN founder says growth is happening from startups to established companies, and across both privately-held and publicly-listed companies, with notable growth in the regions.
Shanahan has been part of the action himself. When not chronicling the industry for the TIN200, he runs med-tech company Veriphi, which in March raised $2m to fund international expansion.
But some of the largest growth is happening at the top end of town, he says.
Nine of the top 10 TIN companies saw revenue growth, he says, with the 10 largest enjoying 17.3 per cent growth overall.
Seven of the top 10 are now ebitda positive, compared to five in 2017.
And nine of the top 10 saw their share price increase in the year to March, with PushPay, fleeting tracking software company Eroad, and travel software outfit Serko all seeing their market cap at least double.
The TIN200 survey canvasses any technology company that has the bulk of its operations in New Zealand, so includes businesses which are majority-owned by offshore interests.
There will be an update on overseas ownership trends when the full TIN200 report is released on October 24.