Xero halves losses, closes in on profitability

Xero chief executive Steve Vamos. Photo / supplied

Accounting software firm Xero is closing in on profitability, narrowing its full-year losses by 60 per cent to $27.9 million and continuing to grow sales.

In the 2018 financial year to March 31, the Wellington-based company delivered its first positive operating performance of $26m since it was founded in 2006, compared with a $28.6m loss last year.

It also increased operating revenue by 38 per cent to $406.6m and added 351,000 subscribers, reaching total subscriber numbers of just under 1.4 million.

Annualised monthly revenue also rose by 33 per cent to $484.4m.

The company said it has made a conscious effort to improve efficiency, something which was often put to one side when companies were focusing on expansion.

In the last five months Xero has undergone a number of changes, first delisting from the NZX and then appointing a new chief executive Steve Vamos with founder Rod Drury taking a step back from day-to-day management.

The founder has stayed on the board as a non-executive director and still owns just under 13 per cent of the company.

In its shareholder presentation, Xero said the decision to consolidate its listing on the ASX had given it access to a larger market, increased liquidity and broader analyst and broker coverage; including from the likes of Bank of America, Merrill Lynch and the Royal Bank of Canada.

Thirty-year tech veteran Vamos, who took over the reins on April 1, said the company's focus was on continuing its growth, and despite delisting from the NZX, he said it was still "a proud New Zealand business".

"In my first six weeks as Xero's CEO, I've come to appreciate how special our business is, how important our purpose is and how big and exciting the opportunities are ahead," Vamos said.

"Over half of our team work and live in New Zealand and we remain headquartered in Wellington. Our vision for Xero and our mission remains - to rewire the global economy, connecting millions of businesses to their banks, advisers and each other."

Based on customer numbers, New Zealand is now the company's third largest market behind Australia and the UK.

In March, Drury said with the company breaking even, on an earnings before interest, taxes, depreciation and amortisation basis, and passing one million subscribers, it was the right time to change the leadership and bring on a chief executive that could help continue the company's expansion.

Vamos has been charged with making Xero a $100 million a month global firm.

Xero operates in 180 countries and has more than 2,000 staff. Vamos said the company would continue to expand into new countries in the coming year.

MYOB, Xero's major competitor in the Australia and New Zealand space, said it grew subscriber numbers for its cloud accounting service by 60 per cent over the year – from 306,000 to 399,000 – while Xero's growth was 31 per cent – from 692,000 to 884,000.

"MYOB is in fact speeding up while [Xero] is slowing down," spokesman Conor Roberts said. "The positive news for us is we're now speeding up in the New Zealand and Australian markets."

Xero shares opened this morning at $41.28 on the ASX.