Xero shares jumped 9.3 per cent to a record A$59.37 after it reported its first cashflow positive result and a maiden net profit in the second half - giving the company a market cap of A$8.4b ($8.86b).

Had it remained on the NZX, it would now be one of our 10 largest listed companies.

For its year to March 31, the ASX-listed, NZ-headquartered cloud-accounting company posted a net loss that expanded to $27.1 million from the year-ago $24.9m.

But beneath the headline loss were some numbers that got investors pumped.


Xero had positive free cash inflow for the first time of $6.45m, 1.2 per cent of revenue, in the year compared with a $28.5m outflow the previous year.

And in the second half of the year it made a net profit of $1.4m - the first time the company had been in the black since it was founded by Rod Drury back in 2006.

Revenue jumped 36 per cent to $552m.

Subscribers rose from 1.37m to 1.82m, a 31 per cent increase.

Craigs Investment Partners deputy head of institutional research Stephen Ridgewell had a more measured approach to the result. He called it "solid" but also noted that Xero's free cashflow forecast - the only guidance metric that could be eked out of the company today - was, at around $9m for 2020, only a third of the analyst consensus.

Ridgewell had a hold rating, based on valuation, and a A$45.70 12-month price target, ahead of today's conference call.

"The highlight of the result, and driver of the share price uptick today, was the very strong second half from their UK business," the analyst told the Herald.

However, he also noted that growth in Australia and New Zealand had slowed, and that progress in North America improved but was weaker than expected.

Xero is entering new markets, including Canada, South Africa and Hong Kong, and has a large addressable market.

"But Xero's unit economics outside Australia and NZ are far from impressive," Ridgewell said.

"Its model requires significant up-front investment in time and money in each end-market in building partnerships with accountants, banks and other partners."

With chief Steve Vamos giving little away about the year ahead, investors were very much cheering the results filed with the ASX.

Vamos is as buttoned-down as his predecessor was expansive; he would not yield any guidance bar that free cash flow would remain at a "similar" percentage of revenue in 2020.

On profit/loss, revenue, capex and subscriber forecasts, he kept mum.

He did offer that regulatory changes in the UK and Australia, requiring small businesses to adopt "single-touch" payroll and tax systems, had helped gee things along.

Earlier, Craigs Investment Partners noted Xero's ability to make hay from the law changes, but also had a "hold" rating on Xero due to valuation.

And across the Tasman, Wilson Asset Management pointed out earlier this week that high PE stocks on the ASX are now trading at higher multiples than seen before the dot-com crash - although giddy investors can take some succour from the fact Wilson says the current crop of ASX tech darlings are in better shape financially.

The net loss for the year is primarily due to impairments taken in the first half.

Subscriber numbers in Australia and New Zealand passed a million and were up 22 per cent, British subscribers rose 48 per cent to 463,000 and North American subscribers rose 48 per cent to 195,000 – excluding Hubdoc, the increase was 44,000, or 33 per cent.

Xero is challenging the US incumbent Intuit, which is due to report its third-quarter results next week. Intuit had nearly 3.9 million subscribers to its online QuickBooks product at January 31, of which 2.9 million are in the US.

Xero raised US$300m from convertible notes in October last year, "demonstrating investor confidence in the business. Funds raised provide the flexibility to execute acquisitions and investments that will enhance and extend Xero's small business platform and ecosystem," it says.

The company had $121.5m in cash at March 31, up from $21m a year earlier.

During the year just gone, it bought Hubdoc, a data capture solution, and Instafile, a British tax filing and compliance tool.

With most of the convertible note haul yet to be spent, Vamos said his company was "actively" looking for further acquisitions.

Gross margin increased by 2.1 per cent to 83.6 per cent, though Vamos indicted it was closed to maxed out. Big gains in the past couple of years had been driven by Xero's move from Rackspace to Amazon Web Services (AWS), he said.

The CEO told the Herald there are no regrets about Xero's decision to abandon the NZX at the start of 2018 and go ASX.

He said the US$300m convertible note issue was enabled by the move.

And for now, he's happy to say on the Australian bourse. His predecessor's ambition for a Nasdaq listing remains parked.

Drury, who now describes himself in his Twitter profile as "funemployed", has been keeping a lower profile in recent months, dropping his former habit of front-foot tweets in favour of retweeting a few company announcements and links.

Vamos says he still frequently talks with the founder, however, who regularly chips in feedback in his role as a non-executive director.

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