A shortage of growth companies reduces the attraction of the NZX, particularly as far as risk orientated investors are concerned. Nevertheless there are a number of relatively low- profile listed companies that have a strong growth focus, mainly in terms of overseas expansion.

This week’s column looks at six of these – A2 Corporation, Burger Fuel Worldwide, Diligent Board Member Services, Ecoya, Pacific Edge and Xero – although there are a number of other NZX companies that could probably be included in this group.

The six companies have a strong growth orientation and their success would give a big boost to investor confidence and the NZX.

A2 was founded in 2000 by Corran McLachlan and Howard Paterson, who are both deceased. The company produces A2 milk, which is supposed to have better health qualities than the more traditional A1 milk.

A2 listed on the NZAX in April 2004 and 18 months later Cliff Cook, the founder of Metlifecare, acquired a 51 per cent stake.

Its big breakthrough occurred last year when it acquired the remaining 50 per cent of A2 Dairy Products Australia, which has exclusive rights to produce and distribute A2 milk in Australia and Japan. The shareholding was acquired from the ASX listed Freedom Nutritional Products through the issue of 120.4 million A2 shares.

Cook now owns 28.3 per cent of A2 and Freedom 24.7 per cent.

The Independent Adviser’s Report revealed that A2 Dairy Products, which is 100 per cent owned by the NZX listed company, was budgeting revenue of A$19.5 million ($26.5 million) and a net profit after tax of A$2.2 million for the June 2011 year.

A2 reported milk sales of $19 million, all in Australia, for the six months ended December 2010 and a net profit after tax of $894,000. This result shows the company is now profitable and should give it more confidence to expand overseas.

Burger Fuel
Burger Fuel listed on the NZAX in September 2007 following the issue of shares to the public at $1 each. Its major shareholders are Australasia chief executive Josef Roberts with 46.5 per cent and International chief executive Chris Mason on 41.4 per cent.

The company was promoted as a growth stock – with ambitions to expand into the Britain, Europe, the US, Canada and Asia – but was stopped short by the Global Financial Crisis.

It now has 27 outlets in New Zealand and one each in Australia, Saudi Arabia and Dubai. A strong focus has been placed on the latter two countries with two new outlets planned for Dubai.

The company reported a loss of $219,000 for the six months to September 30, 2010 compared with a loss of $296,000 for the same period in the previous year. Burger Fuel is making steady progress but is still a long way away from achieving the growth outlined in the prospectus.

Diligent listed on the NZX in November 2007 following the issue of shares to the public at $1 each but its share price quickly plunged to 5c after revelations about the previous business activities of executive director Brian Henry.

The company, which is based in New York but has an operation in Christchurch and a New Zealand dominated board of directors, sells a web based facility that allows directors to access past and present board papers through their computer, laptop or iPad.

Diligent Boardbooks are used by 450 public and private companies with over 12,000 individual users worldwide. Its clients include 109 New York Stock Exchange listed firms and 36 Fortune 500 companies.

The company reported a loss of US$2.2 million ($2.9 million), before extraordinary items, on revenue of US$8.3 million for the December 2010 year. However it generated positive operational cash flows of US$200,000 in the September quarter and $700,000 in the final quarter, the first time the company achieved positive cash flow from operations.

Diligent has established an operation in Singapore and its recently released annual report stated that “we expect to build on the positive trends and record breaking performance delivered in the 2010 financial year”.

Ecoya listed on the NZX in May 2010 following the issue of shares to the public at $1 each. Its major shareholders are Geoff Ross, Grant Baker and Stephen Sinclair, the businessmen behind 42Below.

The company, which originally focused on body and bath home fragrance, got off to a slow start but gained momentum when it acquired 100 per cent of Trilogy Natural Products, the natural skincare products company, last September.

Ecoya announced this week that it expected to report revenue of $13.8 million for the March 2011 year, compared with the prospectus forecast of $7.9 million, and a net loss of $4 million compared with an IPO forecast loss of $5.2 million. Trilogy is the major contributor to the higher sales and lower than forecast loss.

Australia is the company’s largest market but it also sells product in 20 Bloomingdale stores in the United States. Although the retail sector is going through a difficult period Ecoya “anticipates that for the new financial year commencing April 1, sales should exceed $20 million and that the group will be in profit”.

Pacific Edge
Pacific Edge, which is a Dunedin based biomedical company developing and commercialising technology for cancer detection and management, listed on the NZX in 2002. Its largest shareholders are Peter Masfen and Stephen Tindall.

The company last year launched CXbladder, bladder cancer detection technology, and announced this week that leading Australian healthcare provider Healthscope had signed an agreement to market the unit across the Tasman.

However the biggest potential market is the United States where up to 1 million individuals are tested, and in excess of 63,000 are confirmed, as having bladder cancer each year.

Pacific Edge has other development products but chief executive David Darling is particularly confident about the prospects for CXbladder because it is a relatively low cost product and outperforms its detection competitors.

Xero is the leader of the NZX’s small company growth sector, particularly in terms of sharemarket capitalisation, because of the extraordinary drive and energy of founder Rod Drury (see accompanying table).

Xero listed on the NZX in May 2007 following the issue of shares to the public at $1 each.

Drury is the largest shareholder with 26.8 per cent, followed by Craig Winkler with 22.2 per cent. Winkler was the co-founder of MYOB, the Australian small business accounting software provider.

Xero’s objective is to develop an accounting solution for small and medium sized enterprises (SMEs) that can be sold throughout the world.

This is a realistic object because Xero is a SaaS (software as a service) product that is delivered through the internet. Diligent is also a SaaS company.

Xero now has over 30,000 paying customers and reported operating revenue of $3.7 million and a loss of $4.7 million for the six months to September 2010.

The company’s interim report notes its international business strategy does take time but “the initial market assumptions are playing out as expected and Xero continues to execute on its strategy, with revenue growing strongly”.

The drive and determination of Rod Drury, and the entrepreneurs behind the other five companies mentioned above, should be admired and encouraged as we need far more of these companies listed on the NZX.

Six small listed companies going for growth


Share price

Sharemarket capitalisation

Last six month period ($000)


Net profit (deficit)






Burger Fuel















Pacific Edge










*US dollars