The biggest and smallest New Zealand tech companies have proved to be the most resilient to ongoing disruptions caused by the pandemic, according to the industry’s annual survey.
This year’s TIN200 report of tech 200 companies indicates the industry generated $13.95 billion, a gain of 11.5 percent or $1.4b on 2020.
“I think the outlook for the sector is really strong. We were growing in really difficult times,” Technology Investment Network (TIN) managing director Greg Shanahan said.
Exports rose more than 14 percent to a record $10.5b.
“So you’re starting to move into the levels of magnitude previously only occupied by say, tourism or dairy products,” he said.
Listed companies grew strongly
The largest 11 companies, with revenues over $200 million, saw the fastest rate of growth at 20 percent, while the smallest, with revenue less than $10m, also expanded at a higher than average rate of nearly 14 percent.
Publicly listed companies, which accounted for 13 percent of the TIN200 companies, generated 23 percent more in revenue, an increase of $846m to $4.5b, and employed 28 percent of the sector’s staff.
The two biggest were Xero, which saw a 59 percent gain in market value over the year, and Fisher & Paykel Healthcare, which saw a 112 percent increase in its market cap.
Pandemic hardest on mid-size companies
The 26 mid-size companies with revenues between $50m and $100m, had an especially challenging year, with revenues dropping more than 5 percent, while revenue for the group earning between $20m and $50m, which accounted for more than a quarter of the businesses in the top 200, dropped 6 percent.
“The larger companies have obviously more resources and are less affected by issues of not being able to send people from New Zealand to other places,” Shanahan said.
“So a company like Fisher and Paykel or Xero has already got an established sales force across the world and resources to deal with each market as it fits, whereas (mid-size) companies that are more reliant on global supply chains or travel are more affected.”
Tech manufacturers outperformed the rest of the sector over the year with a 14 percent increase in revenue from sales, with Fisher & Paykel Healthcare the major contributor to the sector’s growth, gaining 78 percent in revenue, with a 71 percent increase in employment.
The manufacturing sector’s revenue per employee was up 38 percent to $280,550, driving up the sector’s profitability, which was nearly double the rate of the information and communications technology (ICT) companies.
The healthcare sector remained the largest in terms of total revenue and employment growth, about double that of the second fastest growing fintech sector.
Shanahan said some companies would be struggling more than others but thought there would be fewer failures than in the years following the global financial crisis of 2008, because of the investment available to scale up.
“One of the other key trends in the sector are increasing levels of investment both within New Zealand and outside of New Zealand, and so I think it will cause companies to make sure that they’ve got stronger balance sheets, they’ve got investment and the financial resources to weather out the storm.
More investment in R&D
Tech companies spent 14 percent more on research and development (R&D) over the year expenditure, building on last year’s 10.5 percent increase.
ICT companies spent 21 percent more on R&D, which is double what manufacturers spent.
The report also indicates early-stage investment in tech businesses is strong with 95 deals closed in the calendar year of 2020 for a total investment of $160m.
Funding from angel investors and venture capital funds increased 48 percent with a slight decrease in the number of investors, but an increase in the average size of the deals.
Auckland had the highest number of early-stage companies to receive funding, while investment from private equity and venture capital funds grew 111 last year.