Jade invests $30 million for future growth

JADE SOFTWARE CORPORATION NEWS RELEASE

5 March 2008

Jade invests $30 million for future growth

Jade Software Corporation Limited (Jade) today announced an $8 million net profit after tax on revenues of $42 million after a year of investment in products and markets which saw it outlay nearly $30 million on product and market research and development and the acquisition of two new businesses.

In announcing the result, Jade’s Managing Director Dr. Rod Carr drew attention to a year in which the Christchurch based software company won major new contracts with The Warehouse, Fonterra, Air New Zealand, the New Zealand Electricity Commission, World Vision, Australian Federal Police and the Department of Health and Community Services in Australia’s Northern Territory.

“It was satisfying to note the major new contracts and improvements in customer satisfaction as well as improved returns to our shareholders. While total revenue increased 7% year on year, we grew our core revenue from software and services by 12% year on year through organic growth and acquisitions but there were more one off items in 2006 than in 2007 so overall revenue growth appears more modest,”
Dr. Carr said.

“The company acquired two new businesses which will add around 20 percent to our revenue on an annual basis. Our global reach is strengthened in the case of Methodware which offers software to support Governance, Risk and Compliance requirements in over 600 organisations, and our trans-Tasman capability in Human Resources (HR) and Payroll systems are extended by the acquisition of Empower, which together with JADE Star makes Jade one of the largest suppliers of HR management information systems in Australasia.

“Our acquisitions, increased investment in product and market development, constrained our profitability in 2007,” Dr Carr said. During the year Jade reinvested 16 percent of its gross revenue in research and development and about 7 percent of revenue on market development, finding and servicing new customers. As a New Zealand based yet substantially foreign-owned business, Dr.Carr acknowledged the support of Jade’s shareholders who invested $25 million in the business in December 2004 and have since reinvested 100 percent of earnings, nearly $20 million, in the business over the past three years.

“In an industry based on creative, motivated and skilled people it is reassuring to see voluntary turnover among our development staff below 8 percent and to record significant improvements in staff satisfaction,” Dr. Carr said.

However, he warned that wage pressure from skill shortages, domestic inflation, high tax rates and the impact of Working for Families tax rebates made it very difficult for skill intensive exporters to improve the household income of many mid-career professionals when only a fraction of the cost increases employers faced from wage increases made staff better off.

“In some cases we have to pay our people three or four dollars of gross income to make them a dollar better off after tax and abatements. Recovering that kind of cost increase in a competitive global market is tough. We continue to invest in technology to make our people more productive, but then so does the competition.”

Looking ahead Dr. Carr said, “The company has a full order book for the medium term and we continue to look for new business and ways to increase capacity.”

ENDS

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