Provided by NZX
  • XRO21.4

    $0.060.28%

  • Open 21.46 High 21.5 Low 21.25 Bid Price 21.3

    Offer Price 21.4 Value 2425606.09 Volume 113676

Current as of 02/10/14 07:40PM NZST

Hamish Fletcher

Business reporter for the NZ Herald

Business leader of the year: Rod Drury

Rod Drury
Xero founder and chief executive Rod Drury says the company is only getting started. Photo / Mark Mitchell
Xero founder and chief executive Rod Drury says the company is only getting started. Photo / Mark Mitchell

Rod Drury lives a double life.

In one, the serial entrepreneur is in the technology epicentre of the world among the cut-throat bustle of Silicon Valley.

In the other, the father-of-three is back enjoying the "eased, relaxed lifestyle" of New Zealand, at home with family in Hawkes Bay or surfing at nearby Waimarama.

But with Drury's NZX-listed software firm Xero doubling its market value and the company's overseas customer-base up 75 per cent since March, the 46-year-old has probably been spending more time on long-haul flights than at the beach.

"It's been more intense lately," he told the Herald last week from an airport lounge in California.

"We've just so much going on," Drury said, who is today named as the New Zealand Herald Business Leader of the Year.

Looking at Xero's year in review, this is hard to dispute.

The Wellington-based company has hired more than 100 staff in the past year, listed on the ASX, and doubled its half-yearly revenue to $16.7 million in the six months to September 30. The software firm's customers numbers have followed a similar trajectory and Xero now has more than 110,000 clients paying to use its product.

That product - online accounting tools aimed at the small business market - may not be the hippest of merchandise, but Drury is convinced he is on to a winner.

"We're delighted that we've been doubling our revenue, but we're really only getting started. The market size is hundreds of millions of small businesses," Drury said.

Drury's track record of growing successful technology start-ups suggests this is no idle boast.

In 1995, the Napier Boys' High School old boy co-founded the software firm Glazier Systems, which sold four years later for $7.5 million.

His next project, AfterMail, was bought in early 2006 by California-based Quest Software for an amount thought to be as high as US$65 million ($85 million).

Soon after this sale, a cashed-up Drury formed Xero with accountant Hamish Edwards and a year later floated the start-up on the local stock exchange.

Since then, the company's share price - $1.00 at listing - has ballooned and in late trade was yesterday at $7.60 giving the company a market capitalisation of $891 million.

That's seeing it rub shoulders on the exchange with the Warehouse Group, which recorded revenue of $1.7 billion in the last financial year.

Drury admits Xero's value looks "pretty remarkable from a local perspective", but when viewed through "a global technology company lens" he said it did not look expensive.

The software executive pointed to Microsoft's purchase of corporate social network builder Yammer for US$1.2 billion in July.

"We've probably got more revenue than them and I think we're more strategic than them ... people understand what we're doing and the quality of our execution and the size of our opportunity," he said.

"We're still seeing sophisticated investors coming in at these [share] prices. We're talking to the biggest and best companies in the world and they're investing in what we're doing," he said.

But the twist in this story - and all good stories have a twist - is that Xero has yet to turn a profit.

It's a point Xero's critics crow about as they line up to ask just when exactly the six-year-old company will provide a return to its shareholders.

Drury's response seems well-rehearsed. "I love getting that question," he said, with a hint of wryness.

"Our investors have said 'here's the resources, go and build the biggest business you possibly can'.

"No one wants to turn a profit quicker than I do but when you look at it in the cold light of day, and the board does this every month, the right thing to do is to use the capital we've been given to grow the business and yeah, doing that in the New Zealand sharemarket publicly people are going to throw some arrows at you, but you can't worry about that too much. Clearly the investors like what we're doing, so we've just got to keep on doing it."

The type of growth Drury envisions requires Xero to crack the US market, where it faces tough competition from tech giants such as 30-year-old Intuit, which recorded revenue of US$3.5 billion last year.

While some detractors doubt if the tiny Xero is any match to such Goliaths of software, Drury is bullish about his company's prospects in North America.

"We're definitely on the global landscape now - no doubt about it."

With the Australian leg of the business "practically running itself" , the company is focused on its push into the US and UK in an effort to grow overseas revenues.

Around half of the next 200 staff Xero may hire are likely to be in these territories driving sales and trying to win market share. Past this, Drury has loftier ambitions. "Looking to the Olympics being in Rio in 2016, wouldn't it be great to have a product in Brazil in four years' time? So in the long-term there's lots and lots to do."

And although Drury will take a few weeks off to enjoy a Kiwi Christmas, he is not ready to give up the hectic life of running a company.

"I think we're just having too much fun. Our goal is certainly to drive this business for the next five to ten years and see what happens. Yes we could sell it for a big cheque, but then what do you do [with] it?" he asked. "What would you do with [the money] when the best thing to invest in is Xero?"


Pacific fibre failure only downer in year of ups

In a year of highs for Xero, Rod Drury says his one disappointment was a side project - the stalled Pacific Fibre cable venture.

Drury was a co-founder and director of Pacific Fibre, which wanted to build a 12,900km internet cable between Auckland, Sydney and Los Angeles at an estimated cost of $400 million.

The company hoped to rival the Southern Cross Cable Network's system, which is the only link transporting internet traffic in and out of New Zealand, and help bring down the price of international capacity.

This, it argued, would allow internet companies to increase the monthly data allowances they offered customers so users could take advantage of the Government's billion dollar ultra-fast broadband network.

Despite backing from high-profile investors Facebook billionaire Peter Thiel and Trade Me founder Sam Morgan, it was announced in August that the company had failed to generate enough funding for the venture.

"Sam and I were gutted we didn't get Pacific Fibre away. It was looking really good right to the end," Drury said. "If there was one thing that could step-change New Zealand, it would be a new fibre cable so we could have better pricing [to do] more live meetings, more conferencing and do more selling from New Zealand."

While no plans were set in stone, the software executive said he was in discussions with the Government about reviving the project as a public-private partnership.

"We just got to keep educating the Government how important it is and how we can create more jobs and earn more expert revenue [with the cable]. It's just a no-brainer," he said.

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n4 at 03 Oct 2014 01:33:40 Processing Time: 138ms