Jade heading back to black after $15m loss

By ADAM GIFFORD

Christchurch software developer Jade has swallowed its medicine and is heading back towards profit after declaring a $15.6 million after-tax loss for 2003.

Chief executive Rod Carr said redundancies and restructuring last August had cut operating costs by 25 per cent, bringing them more in line with revenues.

"We did lose money. We are not losing money now," said Carr, a former Reserve Bank Deputy Governor brought in last July to turn the company around.

Operating revenue dropped to $30.3 million last year from $45.3 million in 2002, while operating expenses rose from $43.1 million to $45.9 million.

Total revenue was boosted to $36.8 million, in large part through a $5.3 million property sell-off, including the former Avalon television centre and Jade's Christchurch headquarters.

Carr said that money was used to pay off the bank.

"If I have one business model for an IT company it is don't carry bank debt. You can carry debt but make sure it is aligned with the people who derive the benefit," he said.

Carr said the company was budgeting for an 11 per cent increase in operating revenue this year to $36 million, against $34.7 million in salaries and overheads.

First-quarter revenue was on plan at $8.3 million, compared with $7.5 million in the same quarter last year.

Earnings before interest, tax and depreciation were a minuscule $35,000, but that compared with a $3.5 million loss in the first quarter of last year, so the turnaround was real.

Carr said more than half the revenue was sticky, meaning it came from recurring sources such as royalties and application support.

It is clear from the results that Jade was carrying a high cost structure before the restructuring as 60 New Zealand staff and 48 overseas staff were earning more than $100,000.

The company makes Jade, a technology used to build large transaction processing software systems which can run on relatively lightweight hardware.

Under its previous guise, Aoraki Corporation, it made and supported Linc, a development environment for Unisys mainframe computers.

Since the launch of Jade Technology in 1996, Linc revenue has shrunk to less than $1 million while revenue from Jade software, applications and services has grown by 19 per cent a year.

"We are pulling off a very difficult transition. Few technology companies manage to reinvent themselves once they abandon a previous technology," Carr said.

Although Jade is still a private company, it now has more than 25 per cent non-resident ownership so must file accounts with the Companies Office.

That follows the conversion in December of $12.5 million in mandatory convertible notes into shares, diluting founder Sir Gil Simpson's 90 per cent stake.

USA Health Investors, represented on the Jade board by Roger Bhole, emerged as the largest single shareholder with 32.77 per cent, followed by venture capital fund I-Cap Nominees on 17.1 per cent and Sir Gil with 10.6 per cent.

Carr said USA Health Investors had agreed to underwrite a further $5 million in new capital, and an as-yet-confidential overseas investor introduced by I-Cap is expected to invest a further $15 million.

"While it has not been signed yet, I am confident enough it will happen to call the annual meeting for May 14 to approve the new securities for the new investors," Carr said.

He said the new capital would make the company's balance sheet look better for potential customers.

Yesterday Jade announced the sale of a student administration system to Canterbury University, the first sale of such a system in the local market since Waikato University bought a $4 million Jade system in 2001.

Jade Software Corporation