Jade Software loss widens in 2015 as global slowdown weighs on logistics unit

Wednesday 25th May 2016

Jade Software, the privately-owned software developer, posted a wider loss in 2015 as a weaker global economy slowed sales in its logistics business and kept a lid on revenue.

The Christchurch-based company reported a loss of $3.5 million in calendar 2015, up from a loss of $1.1 million a year earlier, according to its annual report filed with the Companies Office. Revenue was largely flat at $29.8 million while expenditure rose 6.4 percent to $30.1 million.

Jade said its logistics business - which mainly reflects its Master Terminal port management software - had to contend with declining global freight and skinnier margins for shipping lines and terminal operators, which led to a doubling of the lead times for the company to close a deal to between 12 to 24 months from what had been six to 12 months.

Managing director David Lindsay told BusinessDesk the availability of money around the world to spend on software had shrunk as the global economy contended with issues as diverse as the volatility in financial markets, the slump in oil prices, the US presidential election, and the Syrian conflict. Still, Lindsay said that slowdown hadn't led to a drop in market share for the logistics business.

"Demand's still there, there's just a massive amount of caution and people are only now starting to close deals and complete contracts for things that have been in the pipeline for the past 24 months," Lindsay said.

Jade's revenue from the logistics unit was up 30 percent in the three months ended March 31 from the same period a year earlier and Lindsay said he expects "significant or greater growth" from that division in 2016.

"Predominantly for the logistics business, we're expecting that growth out of Europe and Indonesia, to a lesser extent the US market," he said.

Jade's long-serving chair Ruth Richardson resigned from the board after this month's annual meeting and the software developer has started looking for a replacement, although an announcement isn't expected before the next board meeting in July.

The software developer's solutions business, which develops digital and enterprise products primarily for the utilities and finance sectors, lifted revenue 8 percent in 2015 and Lindsay said sales were up 15 percent in the first quarter of the current year as firms move away from a mobile-first strategy to seeking applications that provided services on any device with a focus on systems and data integration.

"That's great for us as we've had that 30-year history doing that big enterprise stuff," he said.

The company is still investing in product development across all lines of business, and spending on research and development was up 24 percent to $2.2 million in 2015.

Jade is forgoing short-term profits to support international expansion, and has built its plans around the level of cash flow on the idea it will be moving towards a return to profit in 2017.

"The question is, if we have more cash could we accelerate that revenue growth and that market share, and that's one of the things we're looking at at the moment," Lindsay said. "If we wanted to go down that accelerated route, we'de definitely need to introduce more capital into the business in the next two years."

The company generated an operational cash inflow of $853,000 in 2015, turning around an outflow of $858,000 a year earlier, and reduced its investment spending to $2.5 million from $3.4 million. It held cash and equivalents of $9.9 million as at Dec. 31.

BusinessDesk.co.nz

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