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Greg Cross Address - Advantage CEO and Director

Advantage Group Special Meeting of Shareholders

23 June 2000

Address from Greg Cross, CEO and Director, Advantage Group

Since our last shareholder meeting in November the world of eCommerce and the Internet has changed substantially.
B2C companies that were HOT last century are definitely NOT.
B2B companies that were HOT at the beginning of this century are definitely luke warm.
Internet Incubators that were flavour dejour just months ago are now very unfashionable.
eBags - the e stands for EMPTY - are everywhere, including here in NZ!
There are many that think the Internet boom is over, the bubble has burst and life will return to normal. Let me assure you that while there have been some major adjustments in the world financial markets, the revolution is only just beginning – the size, scale and scope of the internet continues to expand, and at an ever-increasing rate.
So where’s the focus now? Back on the basics.
Real companies, companies with Real revenues, Real profits and Real growth. Companies with Real people working to provide products and services to Real customers.
And I’m delighted to say that the description fits Advantage extremely well.
Not only are we real, we’re one of the largest web services companies in Asia Pacific.
And we’re continuously investing to accelerate that growth: acquiring businesses, and recruiting new team members. Today’s meeting is about producing for us the platform necessary to continue our growth to meet the ever-increasing demand for our services from our customers.
Ours is an international story – we have operations in five countries and we employ some of the smartest, most innovative, most exciting, best-qualified web people in the world.
In that context, let’s look at Advantage’s performance during what I refer to as the first innings of what will be a very, very long game.
As you will recall at the end of Q3, YTD revenues were $42.6m, up 176% on the same period the previous year, and YTD profits after tax and before goodwill were $4.87m, up 103% (if we exclude the sale of the building, that’s up 200%).
This puts us on track to meet our growth targets for the year. The profit figure is especially pleasing during a nine month period which has seen dramatic growth in the size of the company. These results are a real credit to my Advantage team, all 524 of them!
As we reach the end of the final quarter, I would note that a number of analysts have published reports on the company and, I am pleased to say, we are comfortable that we will meet their expectations for the full year.
One of the greatest things about the e-commerce space that Advantage occupies – Web Services or eServices – is that it’s a picks and shovel business during a gold rush. It’s is a high demand, tight supply business.
By Web Services or eServices I mean the people who are the architects, builders and maintenance crew of e-business infrastructure. You can see from the IDC forecasts graphed above we are at the beginning of a strong growth curve.
The market for eServices is strong and expanding as companies in all industry sectors invest in building e-Business infrastructure. The supply of skilled people is limited as top talent seeks hot projects, stock options and access to new technologies. That makes it a good business today. And it’s also good business tomorrow, as initial engagements turn into follow on projects, the projects become larger which creates strong ongoing revenue streams. And throughout Asia Pacific, demand for eServices is at a peak due to the lack of existing B2B infrastructure in Asian countries and a shortage of eService resources.
That makes for considerable opportunity in what has become the fastest growing sector of Internet economy. International acceptance of the Internet business model has grown and businesses are reworking their enterprise systems and more importantly their business relationships to leverage Internet technologies. Companies in every industry are under intense pressure to build e-businesses. They are prepared to make substantial investments to make their operations more efficient and competitive using the Internet and electronic commerce.
Under that broad eServices umbrella Advantage has operational interests in two areas and properties in a third.
The first is pure eServices. That includes web consulting, development, integration and implementation services. Our aim is to scale rapidly in Asia Pacific, which we’ll do through acquisitions, aggressive recruiting campaigns and by developing strategic relationships with international companies.
The second are our eTechnologies. These are the enabling technologies and platforms – including application development platforms, payment and POS applications and wireless solutions – that make possible the deployment of sophisticated, large scale e-commerce solutions.
Finally, there are our eInvestments. Theses are the means by which we participate in strategic e-markets and accelerate their growth. And you see examples of what I mean in the shape of our investments or holding in listed companies like Strathmore (a company that has not invested in dotcom stocks but core IP) or joint venture inititatives such as SupplyNet and FlyingPig (both of which are focussed clicks and mortar strategies leveraging the customers and revenue streams of real businesses).
In that context I should point out that we’re strongly committed to FlyingPig. It’s a clicks and mortar e-tail business, operating alongside two of New Zealand’s largest retailers. Its revenue forecasts are ahead of target; it is operating in the key e-tail product categories and it’s the most visited e-tail site in New Zealand. The last week has seen it make some hard decisions to focus more closely on meeting the needs and demands of its customers. As shareholders we remain committed to the long term success of FlyingPig. As a result of our work with FlyingPig, Advantage has one of the best qualified etail teams in the world.
We’re focused on acquiring companies and the first of today’s resolutions addresses just that point. To scale rapidly we have to be able to acquire good quality eServices companies in other markets.
Our acquisition activities are currently clearly focussed in the Australian eServices market and when the first of these deals are concluded we will complete the dual listing of Advantage on ASX.
We will continue to partner with international technology leaders such as Microsoft, and CommerceOne and Concur. They bring intellectual property, expertise, established relationships, and a considerable pedigree to the table and allow us to enhance our vertical market capabilities and offerings.
Above all we must attract and motivate the smartest people in the world to ensure we continue our development as a world class eServices company.
My team – our people are our most important asset – they are the subject of the other three resolutions that you will consider today.
We have grown from 60 employees in June 1999 to over 500 today, that’s a faster rate of growth than any other company I know of in New Zealand today. To keep pace we have hired our own full-time in-house recruitment specialist.
You may recall that a well-known international technology company is thinking of setting up an operation in New Zealand. The Government is pulling out all the stops to persuade them to base here. The Christchurch Chamber of Commerce is rolling out the Canterbury red carpet. And they expect that to create 130 new jobs.
Since January 1 this year we have recruited 82 people and we still have vacancies for another 95 people. That’s 177 new jobs in what the government likes to refer to as the knowledge economy. We’ve done it without government support and without subsidies. We’ve done it from a New Zealand base. And we are, as a result, a highly successful creator and exporter of intellectual property.
What we have built is a team of very high quality developers, who develop applications that are as good as anywhere in the world. And because New Zealand is, in comparison with the U.S., still a relatively low cost economy in terms of people and overhead cost, we have a very real competitive advantage.
What we must do to keep building a great eServices team is to continue attracting smart young people and keep the highly engaged and motivated.
International research shows that talented web-savvy people look for three things. Firstly the opportunity to participate in the growth of their company through an ESOP. Secondly, they seek out flexible, open working conditions with low bureaucracy and thirdly they seek the opportunity to work on the best projects using the latest technologies. All these things are offered by Advantage.

ENDS

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