Wynyard crime-fighting software is used by government agencies and large corporates around the world. The home-grown market leader has proven to be just as popular with New Zealand institutional and retail investors since it listed on the NZX in July 2013. Sally Jones speaks with Craig Richardson and Murray Page of Wynyard Group about the rewards and challenges of listing the company on the stock exchange.
From financial crime, money laundering and human trafficking, to drug smuggling, gunrunning and cyber warfare, transnational organised crime is hugely profitable. The United Nations Office on Drugs and Crime (UNODC) estimates that illicit trading generates US$870 billion each year. Governments are well aware that this disrupts and distorts local economies, while the will to beat organised crime transcends geographical borders.
The genius within this tech stock
Wynyard’s advanced crime-analytics software is used by governments, and law enforcement and national security agencies, as well as financial services and infrastructure organisations worldwide. It uses their data to extract user-friendly intelligence to help prevent and solve serious crime.
“For instance we’ve got algorithms that’ll read millions and millions of documents in a few seconds, pulling out people, places, times and events,” says Wynyard Group Chief Executive Craig Richardson. These allow organisations to investigate and consider scenarios they wouldn’t be able to otherwise.
The software evolved from a solution created to help the Australian Federal Police with their investigations back in 2007. Customers now include the New Zealand and Australian police forces, US law enforcement agencies, the London Metropolitan Police, Thai Customs, Dubai International Airport, The Reserve Bank of New Zealand, Telstra and SBS Bank.
For Wynyard, the tragic events in France have meant more inquiries from agencies deaing with countless potential threats, and those already engaged in discussions escalating their interest.
Being able to identify which threats present the greatest risk, ranking them and deploying resources to mitigate them is a daunting challenge for those agencies and one they are now looking at with greater urgency.
“We’ve focused very much on high-consequence crime groups. They’re the ones that have the most impact and the ones our customers are most motivated to solve. This inevitably means they’re also the ones our customers will pay the most money to guard against,” says Richardson.
Listing on the NZX
Wynyard Group’s executive team could see the “multibillion dollar” opportunity when they formed, but their existing shareholders didn’t have enough capital for global expansion. “So we went around the world looking at what source of capital would be best,” says Richardson.
They wanted to draw in new investors to support the company through its growth stage. This would involve investment in people, product and the company’s capability to deliver growth in years three to five.
The executive team decided a share market float was the best way forward. Wynyard went on to raise NZ$65 million in the initial public offering (IPO), a sum that was generated almost exclusively from within New Zealand. “We got huge support from the New Zealand institutions and that’s what really gave us the confidence to actually keep building and growing the business. It’s what we’ve done for the last two years really,” says Wynyard Group Chief Financial Officer Murray Page.
The rewards of listing
Overseas governments and corporations in particular, who trust Wynyard with some of their most challenging problems, like being able to see exactly who they’re partnering with.
“Most of our competitors are privately held or funded by venture capital. So that means what they do, how they do it and who they do it for is all private. So customers don’t really know what their agenda is,” says Richardson.
Since listing, raising subsequent capital has been easier and faster. Wynyard’s first capital raise of NZ$65 million came after a six-month listing process. A more recent raise of NZ$35 million in March last year was completed in less than four days.
“It was an eye-opener to us,” says Page. “You can reapproach the market and get things done very quickly, which is so much better because it doesn’t become a massive distraction.”
And they’ve done just that, expanding operations and chasing larger contracts after raising NZ$42.6 million from their share placement and share purchase plan in July 2015.
There have been non-financial benefits too. Page says Wynyard Group’s robust governance is a direct consequence of the prospectus process. “It forces you to take a good hard look at the business and identify the risks. You could have got there without it, but just having put that much thought and effort into the prospectus meant we were that much further ahead when we actually came to work with the business properly.”
They’ve also attracted and retained great staff through the listing journey, which Richardson says is down to the raised awareness of Wynyard Group.
The challenges of listing
For a pioneering business in a new-technology market, Page says the transition to becoming a publicly listed company was challenging.
While pulling together all the vital information needed for would-be investors, they were also inducting a board and forming a new management team.
“The advisors and lawyers said to achieve what we did in six months was pretty remarkable,” says Page.
Wynyard Group needed to raise awareness among investors about its sophisticated products and complex markets, but the strict prospectus requirements did not make this easy. “At the time of the IPO, it was a really difficult message for us to be able to explain to investors. I think the retail market took time to come to grips with the nature of our business,” he says.
After listing, Wynyard Group spent time building its media profile and actively talking about the business. They also announced a string of contract wins, including Thai Customs. “I think that’s when the retail market thought, oh yeah, I actually get what these guys are doing,” says Page. The level of investor interest and volume of stock transactions resulted in the fastest-growing share register Computershare had ever seen.
The nature of Wynyard Group’s services make it difficult to announce major business wins because clients can ask to remain anonymous. However, they found that providing key information, such as the value of the contract over a specific time frame, the type of agency and its region, was enough to satisfy investors and the NZX.
The ups and downs of being a growth stock
Despite growing revenue — a new NZ$4.5 million contract with a national security agency was announced on 13 November 2015 — and continued demand for their stock, Wynyard’s share price has dropped 5.6 per cent (as at 18 November 2015) this year. But Richardson and Page don’t believe that’s any reflection of the company’s performance.
“Folks and institutions that joined us at IPO with the view that this was a growth stock, and they were going to be holders through that period, are still holders. What you’re seeing is a small number of retail shareholders that are trading out for whatever reason on that particular day,” says Richardson.
He says the share price is tracking a general fall in the technology market and it’s not an indication of the company’s value. “It really is local market sentiment. If you go to the United States in the Valley at the moment, companies like ours are valued at significantly higher multiples than they are in New Zealand.”
Next on the crime-fighters’ horizon
Wynyard expects their revenue for FY15 to be NZ$40–45 million. Outside of hitting milestones in terms of the company’s growth, there’s plenty of upcoming activity at Wynyard Group to keep investors interested.
“One of the most exciting things at the moment is our extension into the cybercrime market, which we think is in itself a multibillion dollar market. The approach that we’ve used there is ground-breaking, so watch this space,” says Richardson.
Wynyard Group has engaged some of the world’s best cybercrime experts to help develop its latest solution, which detects the incredibly subtle indicators of a cybercrime breach.
Wynyard Group is also investigating an ASX listing to broaden their shareholder base, targeting institutional investors in Singapore and Hong Kong, who don’t have a mandate to trade on the NZX.
They’re also continuing to expand in established markets, in particular the Middle East.
“You can literally pick up the newspaper in any country in the world and you can’t get to page three without finding something that you think we could help with,” says Richardson.
However, in their bid to chase global market share, one thing Richardson, Page and their team don’t forget is their Kiwi roots. “We’ve got an international shareholder base and we’ve been incredibly well-supported from a loyal institutional and retail base in New Zealand. We’re proud of the fact we’ve built a global company and it’s really been funded by Kiwis.”