Chanui tea guy Doug Hastie pushes $29m tech basket case into profit
A good news story to end the year: Doug Hastie has pushed Syft into the black.
The privately-held company has yet to publish its interim result, but Hastie tells NBR it made a $460,000 profit on $2.5 million for the first half of its 2014 financial year.
Syft has never made a profit before.
Last year's full-year result saw Syft lose $1.6 million on $3.4 million revenue amid a restructure.
Spun out of Canterbury University's commercialisation arm a decade ago, Syft sells electronic systems for testing air quality - for example, in shipping containers to quickly tell if product has spoiled. They can also be used to analyse air pollution, or assist customs officers in nabbing nefarious substances.
$29m financial basket case
When Mr Hastie parachuted into the CEO role in May last year, the Christchurch-based company had chewed through $29 million in investor funds - without a cent of profit to show for it.
Not mincing words, he called it a financial basket case.
At the time, Hastie told NBR it was typical of a number of NZ tech startups - it had developed a great technology, but was at times aimless with its manufacturing and distribution strategy, and put little emphasis on sales (the latter is something of a bugbear for the CEO, read New Zealanders treat sales people like dogs).
Staff numbers had fallen from 46 to 23. The company had not had a full-time chief executive for two years.
Hastie first tightened up the day-to-day operation, and management. Two of Syft's founding directors, Stephen Collins and Michael Hawkins resigned (this "changing of the guard" was announced by former finance minister Ruth Richardson, who has chaired Syft's board since 2008). Three new international distributors were signed (previously 75% of sales came through one), and manufacturing processes rejigged so Syft's main instrument is 35% cheaper to build.
Then he created a sales team - and lead a new marketing charge himself. This is familiar territory for Hastie. The South Islander followed up an engineering degree at Auckland University with an MBA at Yale and two years on Wall Street selling equities for Goldman Sachs. Along the way he picked up the sales sensibility he says so many New Zealand businesses lack.
Back in New Zealand he founded management consultancy Temple Group and started importing and sellng sellng tea under the Chanui brand - as anyone who owns a TV is keenly aware.
Syft is still a long way from justifying the $29 million plowed into it since 2002, and becoming a major export success story.
But it's heading in the right direction. Hastie says orders are coming in from new clients. Samsung has just ordered four of Syft's electronic sniffers - a big deal when the units sell for up to $300,000 each (the bad news is that Hastie says Syft needs to build more product, faster. "This production rationalisation will result in an inventory write-down in the second half of FY2014 as we remove obsolete stock and value the rest at today's prices" he wrote in a recent email to investors).
$2 million in debt has been retired, leaving the company debt-free.
And Syft will unveil a major upgrade to its core product, the Voice200 (which will get a new name), at two tradeshows early next year: Pittcon in Chicago in March, and Analytica in Germany in April.
Another question was left hanging when NBR last spoke to Hastie. Syft was looking for $3 million through issuing new private equity shares (via Unlisted). The equity issue was the final step in Hastie and the board's plan to achieve financial stability - and it would mean Syft would no longer have to borrow to buy parts.
In the event, $3.5 million was raised, with the biggest contributor being ACC, which upped its stake to 14.21% (the largest holding).
A cheap issue price meant existing investors who stood on the sidelines saw their stakes diluted. But newcomers will benefit from the millions in R&D spent so far. And some existing shareholders, like ACC, loaded up with more.
With various health and safety scandals focused government and corporate minds on health and safety this year, that's looking like a good bet.
Syft will be one to watch in 2014.
Could the year include an NZX listing? Hastie will only say it's a question that's being discussed more and more often.