"Sometimes you're on the right side, sometimes you're on the wrong side," of major world events, Christchurch entrepreneur Doug Hastie says. Photo / Supplied
"Sometimes you're on the right side, sometimes you're on the wrong side," of major world events, Christchurch entrepreneur Doug Hastie says. Photo / Supplied
"Sometimes you're on the right side, sometimes you're on the wrong side" of major world events, says Christchurch entrepreneur Doug Hastie.
He sees his high-tech company Syft and the low-tech Chanui Tea, as being on the right side of the coronavirus outbreak.
Hastie owns 100 per cent of Chanui and does not release any financials, but he says the brand's sales were up 140 per cent in the week before lockdown and continue to be higher than usual, with supply lines from Sri Lanka and other producing countries secure.
"There was definitely some panic buying but we just drink more tea when we're sitting at home."
The Yale-educated Cantabrian is managing director and one of the three largest shareholders at his other major company, Syft. The others are ACC and Ngāi Tahu Capital.
Travel restrictions over the final two months of the company's financial year, February and March, prevented new installations, and several big orders were delayed until FY2021.
That contributed to a 77 per cent fall in net profit down to $805,000 from last year's $3.5m, and revenue that still grew, but not quite as fast as its five-year compound annual growth rate of 52 per cent. Total receipts were up 47 per cent to $30.9m.
Hastie expects Syft's revenue to grow at a similar pace over the next two years.
"Our strength is in Asia in semi-con [semiconductors or chips used for computers, TVs and other devices] and they don't appear to affected by Covid," he says. Most staff in the region are back at work, and people are buying more laptops for working from home.
"I'm scared to say it's not going to have any effect, but we feel pretty confident about the future."
Could global recession depress demand in the months and years ahead?
"I'm not sure because I look at the history of scientific instruments; there wasn't really any drop-off in demand during the GFC," he says.
Net profit before tax. Source / Syft Annual Report
That said, the immediate impact of the coronavirus is documented on the Government's wage subsidy site, which records that Syft received $732,000 for 105 staff.
"Because of covid we couldn't travel so sales fell off in the last six weeks of the [financial] year and then for the first two months of the [new financial] year we had everyone working from home so we couldn't run manufacturing.
Syft had $4.5m, from $2.4m in 2019, and $11.5m of working capital as of March 31. Two and a half years ago, it raised $7.5m in crowdfunded equity.
Source / Syft Annual Report
Hastie says with Syft and its major customers back in business as lockdown ease, "we're pretty confident about our future so there should be no need for another raise."
The $7.5m was raised as a buffer, and that now looks like a wise move. "We don't have to raise money in a down market and that gives us stability," Hastie says.
But although Hastie is broadly confident, the unpredictability of the coronavirus situation means Syft has issued no guidance for 2021.
The virus has also hit recruitment, at least temporarily.
The company, now at 120 employees, has historically found it difficult to recruit the skilled staff it requires.
Hastie says his company was interviewing in the US and Europe before the outbreak, but can't now take on new hires until travel restrictions ease.
Speaking of easing, the Syft MD is one of a number of business leaders who wants a shift to level one as soon as possible.
"The sooner we get everyone back to work, the better," he says. "When you work from home, it's great for productivity for a while, but eventually the productivity falls back. It's just not good for you to be working from home all the time.
"Getting people back to work is just so much better for our country, and for our health as well."
'Painful' transition
Syft was spun out of Canterbury University's commercialisation arm in 2003. It spent the first decade of its life burning through $29m in investors' cash with little to show for it and was down to a handful of staff when Hastie was parachuted in during 2012 to attempt a turnaround.
Tea and scientific instruments have nothing in common by most criteria, but Hastie brought the same talent to Syft and Chanui: sales acumen.
At Syft, he found a technically sophisticated product, backed by little or no marketing effort.
Syft's spectrometers were originally conceived with a relatively narrow range of uses, such as monitoring air quality in shipping containers, to detect any spoiled goods.
Today, they're being sold for an array of uses. The South Korean government is using them to measure air quality in cities. And Samsung was Syft's first customer in the semiconductor market, where dust-free air is paramount.
Carmakers including GM and Ford also came onboard, as automakers found Syft's chemical sniffers useful for calibrating cars for different markets - "Westerners like the 'new car smell' but Asian consumers find it offensive," Hastie has said.
The Samsung deal helped bring another chip-making giant onboard last year: Micron, the US semicon company that does much of its manufacturing in Taiwan.
Don't expect SMEs to appear on Syft's customer list. Its mass spectrometers sell for six-figure sums.
Profit hasn't tracked up to match revenue. Chairman Al Munro pins that on re-gearing the company so it has the capacity to fill larger contracts over the past couple of years, particularly with the Micron deal.
"The fast-track to greater scale was painful but, long-term, is hugely beneficial to our business as it has forced us to [be] better on a number of fronts," he says.
Environmental future
Munro says sales today are being "dominated by environmental and semicon applications".
And although Syft is making hay from the semiconductor sector today, "We believe that the environmental market is a much bigger market and will drive our growth in the medium-term".
The battle to save the planet, temporarily subsumed by Covid-19 and race riots, will again come to the fore.
"The Korean government is emerging as a major purchaser of our Ultra instrument for testing air quality, and we expect their requirements to increase over time," Munro says.
"We are now working with US regulatory authorities and standards bodies to extrapolate our success in Korea."
Syft is on the Unlisted Securities Exchange (USX), a vehicle for trading private equity stakes, where its shares were recently trading at 75c, valuing the company at $55m. It has a 52-week range of 60c to $1.19.
