Xero shares have risen 5.5% in early trading, up 10c to $1.92 as investors respond positively to today's half-year results announcement.Chief executive Rod Drury has maintained his forecast for the accounting software company to break even next year
Xero shares have risen 5.5% in early trading, up 10c to $1.92 as investors respond positively to today's half-year results announcement.
Chief executive Rod Drury has maintained his forecast for the accounting software company to break even next year, after it announced a big jump in half-year revenue.
Xero (NZX:XRO) achieved operating revenue of $3.7 million in the six months to September 30, nearly tripling its$1.3 million revenue from the same period the previous year.
In fact, it pulled in more revenue in the six months to September than it did in the entire 2010 financial year ($3.4 million).
It still made a net loss of $4.7 million in the six months to September 30, up 24% from the same period last year but similar to the result for the six months to March 31.
The company says this is expected to be its biggest loss and losses will reduce from now on as it drives towards break-even.
Mr Drury told NBR the big revenue increase was in line with the company's expectation, as was the loss.
"It's quite a big leap in revenue but that's the nature of the business we're in. There's a lot of hard work to do in the early days and everything gets better and better from there."
He said he was "really delighted" with the annualised revenue, which is "starting to snowball", while he confirmed the company is still on track to break even by the end of next year.
As in indication of Xero's broadening reach Mr Drury said about half the accountants in New Zealand have Xero customers.
"We've got plenty of cash at the moment so we could accelerate more," he said.
Xero's international expansion has been the most pleasing aspect of the last six months, Mr Drury said: "I think that what we've proven is that we're now operating globally."
He said the biggest opportunity for the company in the next 12 months is in the US market, which also presents a big challenge.
One thing that has been more difficult than anticipated, he said, has been marketing to small businesses, who are often reached best through word of mouth.
"We have a lot of marketing partnerships, which are great for the brand but don't necessarily develop customers."
A successful recruitment drive in New Zealand, Australia and the UK lifted the company’s headcount from 73 to 101 and resulted in a rise in operating costs of 59% to $7.9 million.
27,000 customers
Annualised subscriptions are running at about $9.0 million and as of today the company has about 27,000 paying business customers.
It had $16.6 million cash in the bank as at September 30, a figure that excludes an extra $4 million raised by the strategic placement to American billionaire Peter Thiel in October.
Shares in Xero were trading at $1.82 at the close of trading yesterday.Xero has had a crack at its competitors Intuit, Sage and MYOB, saying it is successfully winning market share against them while operating at a fraction of their costs.
It said the current operating model of “the incumbents” commonly features separate retail and accountants’ business divisions.
“The incumbents now face the double challenge of preserving revenue from these product lines, while also overcoming the technical hurdles to redevelop disparate products into an integrated ‘single ledger’ solution.”
The UK operation is on target to achieve monthly break-even in the fourth quarter of this calendar year, while the Australian operation is expected to follow in the first quarter of the 2011 calendar year.
Xero recently delivered the infrastructure for bank feeds by US online banking solution provider Yodlee, which will provide access to over 11,000 global bank account sources.
