Exploiting our natural advantage

Fisher & Paykel Appliances topped the TIN 100 list with revenues of $1.4 billion last year. Photo / Glenn Jeffrey

If there is anywhere New Zealand can look to improve its economic performance - without the limitations of land, rainfall or carbon emissions - it's technology.

According to Technology Investment Network's annual survey of the sector, technology exports last year brought in $5.1 billion, putting it ahead of meat, wood, wool and wine, with only dairy products earning more for the country.

Not that the year has been easy. Revenue growth halved to 2 per cent, and the publicly listed companies among the top 100 had an average net profit before tax of only 1 per cent. Over 900 jobs were lost, 4 per cent of the total.

Rising debt was a cause for concern for many companies, and the largest company in the list, Fisher & Paykel Appliances, brought in Chinese manufacturer Haier as a cornerstone shareholder.

Electronic payments technology provider Provenco Cadmus fell over, and companies exposed to the consumer market took big hits, including Fisher & Paykel Appliances, Rakon, Irwin and Navico.

TIN managing director Greg Shanahan says New Zealand has a natural advantage in technology, because solutions are developed by small multidisciplinary teams, who are not bound by conventional wisdom.

What comes out of an action-oriented, intuitive approach are often solutions that are lower-cost and more innovative than those that can be developed elsewhere with a much greater spend.

In the past, many of these products failed the test of commercial success, but Shanahan says as the world becomes a smaller place a growing number of "Kiwi innovations" are reaching global markets in a way not before possible.

Fisher & Paykel Appliances again topped the TIN 100, with 2009 revenues of $1.37 billion. Fisher & Paykel Healthcare came in at number three, with $458 million.

Between them came firm Datacom at $609 million, illustrating the importance of IT services to New Zealand's prospects.

Fourth largest was NDA Group, whose $265 million business fabricating stainless steel is an offshoot of the dairy industry.

Making the top five by guestimate was Weta, Wingnut and related companies associated with Peter Jackson's Wellywood, which probably brought in around $200 million by doing digital and special effects for the motion picture industry.

The last of the 100 was banking software company Finzsoft, with $7.5 million in revenue, and Shanahan includes another 50 companies hovering below that point that could conceivably make the leap over the next year.

Eight foreign-owned companies dropped off the list from last year because they no longer qualified as New Zealand entities, including dental practice software designer Software of Excellence and integrator Infinity Solutions.

Another nine companies on last year's list dropped below the revenue threshold. The questions raised by such an annual accounting include whether New Zealand companies with international ambitions can become true multinationals, while remaining headquartered in New Zealand.

Fisher & Paykel Appliances' shifting of manufacturing offshore, to escape the erosion of its margins by the volatile New Zealand dollar, illustrates the dilemma.

And while it was a tough year for many companies, those catering to the healthcare and utilities sectors had opportunities to flourish.

Fisher & Paykel Healthcare, Douglas Pharmaceuticals and Orthopaedic Synergy made the list of 10 companies to watch in 2009, with the latter growing 127 per cent last year as it cashes in on an ageing population, or Americans needing hip and knee replacements.

Datacom, a privately owned IT service company, saw a 35 per cent spurt in revenue growth that landed it on the list, as its expansion into Australia gathers pace. More than half of its business now comes from outside New Zealand.

Rather than battening down the hatches in the face of the economic storm, Datacom invested $35 million in a new data centre on the North Shore.

Bathroom fittings manufacturer Methven's strategy of acquiring distributors in Australia and the UK has paid off, with revenue nearly doubling since 2007, but for now it has given up attempts to crack the US market.

Compac, which makes high-tech equipment to sort and pack fruit and vegetables, has continued its upward climb as growers seek to reduce labour costs.

The company with the biggest revenue growth, a whacking 638 per cent, was touchscreen developer NextWindow. Its technology has been picked up by HP and Dell, and Microsoft is using its Touchsmart hardware to demonstrate its wares.

Shanahan says almost all the New Zealand companies seem to be able to deliver high-value solutions at a lower cost than their competitors.

They are keeping a close eye on costs, freezing or cutting headcount, and they are also looking to spread their business around the world so they are not caught by the ups and downs of a single market.

There were more private than public companies on the list by number as well as revenue, accounting for 38 per cent of the total, $2.5 billion by revenue.

On the web: www.tinetwork.co.nz.
* adamgifford5@gmail.com