Xero Earnings Begin To Add Up
Get More Commentary, Discussion & Market Information On -
Accounting software company, Xero, which shifted its primary market listing to Australia recent says it has made its first positive earnings before interest, tax, depreciation and amortisation (but a bottom line loss nevertheless).
In its 2017-18 results yesterday, the company said EBITDA for the year was $NZ26 million, on a 38% jump in revenue to $NZ407 million ($A378 million).
EBITDA improved sharply from the loss of $NZ28.6 million in 2016-17.
The company said the number of subscribers to its accounting software packages rose 351,000 (around a third) over the year to a record 1.386 million
With the company firmly in a growth phase, Xero management said no dividend would be paid any time soon.
Despite all the good news and more, Xero shares eased 3.3% to $39.39 yesterday as investors realised the improvement was as promised when it moved its primary listing to Australia over late 217 and early this year.
The expected net loss of $NZ27.9 million was also a lot better than the previous year - 60% netter than the $NZ69.1 million of red ink in 2016-17.
Cash flows from operating activities also moved into positive territory, rising to $NZ41.2 million. Operating cashflow in the previous year was negative $NZ4.4 million.
Total cash outflow across operating activities was ($NZ36.9 million), down from an outflow of ($NZ70.1 million) in FY17.
“Xero is managing the business to cash flow break-even within its current cash balance (without drawing on its debt facility) through operational efficiencies,” the company said in yesterday’s statement.
“Following cash flow break-even, it is intended that surplus cash flow will be reinvested, subject to investment criteria, to drive long-term shareholder value.”
In early February, Xero consolidated it’s dual-share listing in Australian and New Zealand onto the ASX, to gain access to deeper capital markets.
“These results have taken more than a decade of strategy execution and responsible investment of shareholder funds,” Xero’s newish CEO Steve Vamos said in the statement.
“We are well poised to leverage Xero’s international market leading positions as we continue to build a diversified growth profile. The Xero team is focussed on delivering a scalable, world-class product and customer service experience as we expand further into new and existing markets.”
Interestingly, the company said there had been a 200% jump in the liquidity in dealings in its shares, compared to when it was dual-listed on the ASX and the NZX. That sort of improvement is what the company was looking to come from the move across the Tasman to the deeper investment markets in Australia.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.