Xero to delist from NZX, reports strong growth, positive EBITDA

Xero to delist from NZX, reports strong growth, positive EBITDA

Strong result from Xero, especially in the UK, sees cash burn rate decline as it departs NZX.

Rod Drury - CEO, Xero

Rod Drury - CEO, Xero

Kiwi cloud accounting company Xero is delisting from the NZX and consolidating its listing to the Australian Securities Exchange.

With a market capitalisation of $4.71 billion, Xero will cease trading on the local bourse at the close of business on Wednesday, 31 January 2018 and delist with effect from the close of business on Friday, 2 February 2018. 

“Xero is an ambitious New Zealand company. We will remain headquartered in Wellington and domiciled in New Zealand,” Xero CEO Rod Drury said.

“We thank the NZX for providing a valuable platform to support Xero’s first decade as a public company. Our success wouldn’t be possible without the support of the NZX and our shareholders.

“While more than half of Xero’s people live and work in New Zealand, 80 per cent of our revenue now comes from outside New Zealand. Our strategy is to drive further growth in markets like UK, North America and Southeast Asia. 

"As Xero continues to grow, gaining enhanced access to deeper capital markets, increased liquidity and a broader base of potential investors is critical to fulfilling our ambition to be the leading global small business platform serving millions of customers.”

The decision was made following an extensive strategic process which thoroughly canvassed all available options, the company said.

The NZX said in a statement it was disappointed with the decision but pleased to have played a "pivotal role" in the company's growth.

"Thank you @NZXGroup for your support for 10-plus years. We still believe listing locally best for aspiring tech’s," Drury tweeted today.

Xero reported positive earnings before interest, tax and depreciation (EBITDA) and strong growth for the first half of 2018.

In addition, EBITDA was positive for the first time at $5.4 million compared to an EBITDA loss of $25.9 million in the six months to September 2017.

The business recorded $417 million annualised committed monthly revenue, up 34 per cent or $113.7 million over the same period of 2017, and 1.199 million subscribers, up 337,000 over the same period.

In May, Xero announced it had hit a million subscribers.

Xero is making big inroads in the UK where it is the cloud accounting market leader, with subscribers up 54 per cent to 253,000.

Meanwhile, North American subscribers grew to 110,000 while Xero strengthened its partner channel - the rest of world recorded growth to 47,000 subscribers.

Operating revenue was up 37 per cent over the same period to $187.8 million and the company reported a net loss of $21.1 million, down from $43.9 million in the first half of 2017.

Drury said Xero delivered another strong half-year result, emerging as one of the largest and fastest growing listed technology companies in Australasia.

“We continue to cement our position as the cloud accounting leader in Australia, New Zealand and the UK, with more than half a million subscribers in Australia, and quarter of a million subscribers in each of the New Zealand and UK markets," he said.

The lifetime value per subscriber (LTV) increased 15 per cent to $2,306 adding more than $1 billion in total subscriber LTV in the past 12 months, while subscription revenue of $183 million was up 38 per cent.

Cash flows from operating activities were positive at $6.1 million for the half-year from an outflow of $13.4 million in the same period last year. 

Operating and investing cash outflows improved to $34.6 million, compared to $45.8 million for a total cash outflow of $29.4 million. Xero had $84.4 million in cash and short-term deposits at 30 September 2017.

The business also announced it has put in place a $100 million stand-by debt facility to improve the company's overall liquidity. There are no current plans to draw on that facility, the company said.

“We are well on our way to rewiring how businesses work together, leveraging our investment in Amazon Web Services with Artificial Intelligence and Machine Learning to deliver a significant wave of new products," Drury said.

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