Drury family stake in Xero soars to $1.1b after Xero moves into profit

Thursday, 16 May 2019

News that Xero has made a profit gave its share price a boost.

The Drury family's stake in Xero is worth more than $1.1 billion after Xero moved into profit for the second half of its financial year, sending its share price surging past A$60.

Xero delisted from the NZX last year to trade only on the Australian stock market, but in a boost to the company's Kiwi credentials its new chief executive, Australian Steve Vamos, revealed he moved from Australia to Wellington a couple of months ago.

'I haven't made a big deal of it. It may mean something for other people, but for me I am lucky I get to live in Wellington which is where about 1000 of our people are,' he said.

'We are a Kiwi company and always will be in terms of our roots, but our aspiration is to be a very successful global technology company.'

The hardest blow was in early 2018 when tech darling Xero, founded by Rod Drury, dropped its NZX listing altogether in favour of Australia.

* Loss-making Xero continues on growth path

* Xero halves losses, grows sales by 38pc

* Rod Drury stands down as CEO of Xero, replaced by Aussie

* Xero boss Rod Drury makes biggest raid so far on the 'bottom drawer'**

Xero shares jumped to a record high after it moved into the black by posting an A$1.4 million (NZ$1.5m) profit for the second half of its financial year ending on March 31.

Xero shares were up 11.4 per cent at A$60.51 on the ASX in afternoon trading, valuing the company at A$8.5 billion (NZ$9 billion).

The company reported an increased loss of A$27m for the year to the end of March, up A$2m on the previous year, but that was mainly due to write-downs during its first half.

The revenues of the cloud accounting firm rose 36 per cent to A$553m over the year, and its subscriber numbers were up 31 per cent to just over 1.8 million.

Although its rate of growth has been slowing, the company succeeded in adding a record 432,000 subscribers during the year, up on 351,000 last year.

Xero chief executive Steve Vamos says second half profit and strong growth in UK are milestones.

Vamos described it as a strong result in which Xero achieved its first positive free cash flow.

Adding more than 100,000 subscribers in the UK over six months was an important milestone, he said, as was the second-half profit.

Vamos said Xero had benefited from an initiative by Britain's Revenue and Customs department to encourage businesses on to digital channels.

'All accounting software providers get benefit from that and we get benefit too.'

Xero was making great progress towards its goal of driving cloud accounting adoption globally, he said.

Xero founder Rod Drury handed over the chief executive position to Vamos earlier last year, but has retained a role as a non executive director.

He remains a major shareholder with a 12.58 per cent family stake in the business.

That stake is worth $1.132b based on Xero's share price during afternoon trading on Thursday and the exchange rate at the time.

Drury sold 3 million shares in Xero in 2017 for $31.50 each netting $95m, some of which he indicated would be used for good causes.

'The transaction will provide an important foundation for my future plans to pursue a range of philanthropic and social endeavours,' he said in a statement to the NZX at the time.

Vamos said that, for first time, Xero had added more customers outside of Australia and New Zealand than within them.

He was giving 'pretty even' consideration to investing in the US versus other new markets, he said.

Canada and South Africa were both markets Xero was investing in, and it had a footprint in Asia with Singapore and Hong Kong, he said.

'Those, together with the US, are all opportunities that we think are worthy of investment because of the longer term potential.'

* An earlier version of this story incorrectly said Rod Drury had stepped down from his non-executive role.