Wynyard failure may halt lucrative relationship for Jade Software

Wednesday 26th October 2016

The collapse of Wynyard Group is likely to slash returns for former parent Jade Software, which had about six-and-a-half years left to run on a lucrative 10-year services contract with the intelligence software developer.

Christchurch-based Jade said it will cooperate fully with Wynyard and its voluntary administrators to the extent that it can but wouldn't comment on its former subsidiary's current situation.

Jade spun out Wynyard as a standalone business in early 2013, just nine months after the launching the crime-fighting software maker with high expectations the subsidiary would be unleashed to blossom into a contender on an international stage. Six months later Wynyard was listed on the NZX, raising $65 million in an initial public offering, though it kept just $26 million to fund its plans for expansion, with the remainder paying out Jade for the intellectual property and covering outstanding debt.

The split also included a services agreement where Wynyard would pay Jade for the sale and support of licences, managed services, development, consulting services and administrative support. The other leg of the deal saw Jade buy development services from Wynyard in a relationship that netted out in Jade's favour.

That 10-year agreement has been tilted in favour of Jade over the past three-and-a-half years, generating about $25.4 million of revenue while attracting just $8.6 million in costs. As at June 30, Wynyard's first-half balance date, Jade was owed $714,000 by its former subsidiary and had a $198,000 payment due to Wynyard.

On an annual basis, that works out at about a net gain of $4.8 million each year for Jade, a significant portion of the $29.8 million of revenue the software developer generated in 2015.

The Christchurch company returned $14.9 million to its shareholders through a share buyback in early 2014 after the float of Wynyard left it flush with cash, but bereft of compelling new investment opportunities.

This month Jade appointed Sue Suckling as its new chair, replacing the long-serving Ruth Richardson. Suckling also chairs Callaghan Innovation, which allocates government research and development grants, of which both Jade and Wynyard have been beneficiaries.

Jade's current focus is in building out its logistics business - which mainly reflects its Master Terminal port management software - which is underpinning its forecast return to profitability in late 2017.

BusinessDesk.co.nz

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