The continuing rise in export revenue and job numbers in New Zealand's technology sector is providing some encouraging pointers to the future, TIN100 report publisher Greg Shanahan says.
The TIN100 report, now in its eighth year, monitors the performance of New Zealand's 200 largest technology exporters in the areas of ICT, high-tech manufacturing and biotechnology. The report is published in conjunction with Industrial Research Ltd (IRL).
The report showed that in the 2011-12 financial year, the top 100 companies increased their combined revenue by 2.2% to $7.28 billion. The next 100 companies ranked by revenue grew by 4% to $679 million.
Dunedin companies Scott Technology (33rd) and ADInstruments (48th) feature in the latest report. Dunedin businessman Stuart McLauchlan is the chairman of Scott Technology and the non-executive director on ADInstruments.
In an interview, Mr Shanahan said that in the past few years the technology sector had been New Zealand's third largest export sector but this year dropped to fourth behind the meat industry. Dairy remained the top export earner followed by tourism.
"The technology sector, in my view, is one of few sectors with highly sustainable growth not dependent on commodities. The encouraging thing is the increase in the manufacturing sector of the industry."
The South Island had performed well this year. Although only making up 17% of the nearly $8 billion in turnover, South Island companies grew their revenue by 5% compared with the national growth of 2.2%. ADInstruments grew by 9% to $35 million.
Privately owned TIN100 companies, like ADInstruments, continued to outperform publicly owned companies when it came to revenue growth, he said.
Publicly listed companies remained a large part of the index, but the backbone of the sector was the number of private companies, Mr Shanahan said.
"Private companies are not accountable to shareholders so they can plough any profits back into research and development (R&D). They can take a longer-term view of their company which may not be easy when you are a public company with shareholders looking for a short-term gain."
Private companies had become debt averse in recent years, were conservative but ambitious, and were focused on building a company of the future, not something for the next financial quarter, he said.
However, the importance of R&D was being recognised by companies, the report showed.
IRL chief executive Shaun Coffey said there was an impressive range of increasingly R&D-focused companies who had achieved "phenomenal" revenue growth.
"Major tech sector success stories over the year included a diverse array of IRL research partners and clients, both large and small, past and present.
"What this year's data shows is that the companies featuring in the TIN100 report accept now more than ever the importance of business investment in innovation and R&D as a strategy for achieving economic gain in both the short and long term," Mr Coffey said.
Far from succumbing to difficult business conditions, many of those companies met the economic challenges by increasing investment in R&D by 8% to stay ahead of their competitors.
Dunedin-based Scott Technology won a key Australian meat industry automation contract worth $11 million and graduated from the $20 million to $49 million category into the $50 million to $99 million level with revenue of $53.6 million during the report's preparation period. But in its August year-end results, the company reported 19% revenue growth to $65 million.
Many successful companies were playing to New Zealand's traditional advantage of innovating early in commercial solutions that helped offset the poor economies of scale in a nation the size of New Zealand, Mr Coffey said.
They included computer outsourcing, primary sector technologies, payments and financial service solutions and production and material handling equipment.
This year, all of the top eight companies in the primary industry technology sector reported revenue growth. In part, that reflected the global focus on efficient food production and New Zealand's success through its strong agricultural base and heritage of creating such efficiencies through technology, he said.
Mr Shanahan said the changing global economic environment had resulted in a shift in the technology export markets. Sales by TIN100 companies into North America and Europe fell while sales into Australia grew by 7% to 30% of total TIN100 revenue.
