Hamish Fletcher

Hamish Fletcher is a business reporter for the NZ Herald

Xero's bigger $7.9m loss due to aggressive growth, says founder

Rod Drury, founder of Xero, a web-based accounting software service.
Rod Drury, founder of Xero, a web-based accounting software service.

As online accounting-software developer Xero widened its loss for the year to March 31, founder and chief executive Rod Drury says shareholders would be worried if the company wasn't in the red.

"A consequence of being a growth company is that we're going to go out and invest ... we've kept our losses under control," he said.

Focusing on the 107 per cent jump in Xero's revenue, Drury said the company was growing aggressively.

The number of the company's paying business customers more than doubled in the last financial year, rising to 78,000.

"[Xero] is quite different from a normal New Zealand company, but our model is exactly what's happening with all the US tech companies. We've got this major change going on, huge opportunity, and we just need to hire people as fast as we can," Drury said.

In its full-year result delivered on Thursday evening, Xero posted a $7.9 million loss for the 12 months to March 31, up 5 per cent on the same period the year before.

Xero indicated this loss was likely to widen in the present financial year as the company expanded its operations in offshore markets.

Forsyth Barr analyst Andrew Harvey-Green said Xero could look to turn a profit in the coming year, but the opportunity to become a "significantly larger business" would pass it by.

"The cost side of the business is still relatively stable. No-one's getting too concerned with what costs are doing ... given the game that they are in, [Xero] needs to be out there growing as fast as they can. If you sort of sit back and wait and try to get to a profit situation very quickly, what that probably means is that you're not pushing and investing out to grow your revenue base and you'll then find that opportunity will pass you by as your competitors take those customers instead of you," he said.

Xero's revenue more than doubled over the year to March 31 to $19.3 million.

Just over half of Xero's business came from the New Zealand market, and across the year the company tripled the revenue from its Australian operations and more than doubled its revenue in the United Kingdom.

With $39 million on hand from capital raising during the year, Drury said Xero had a "war chest of cash" and planned to hire between 100 and 150 people in the next 12 months.

Around half of these positions would be in New Zealand, he said.

"I think we're proving we can really build these global businesses from New Zealand," he said.

Xero shares closed at $4.00.

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n2 at 22 Aug 2014 23:03:25 Processing Time: 577ms