Xero shares leap 9.2pc as customer numbers top 2 million

Thursday, 7 November 2019

Xero chief executive Steve Vamos says topping 2 million subscribers is a milestone.

Shareholders in Wellington cloud accounting company Xero were more than $1 billion better off for a period on Thursday, after its shares soared on a strong half-year result.

Xero appears on course for its maiden annual profit after reporting a $1.3m profit for the six months to the end of September.

The profit, which follows a $1.4m profit during the second-half of its last financial year ending in March, is dwarfed by Xero's valuation on the Australian stock exchange which leapt to A$10.5b (NZ$11.3b) in mid-afternoon trading on the Australian sharemarket.

Investors sent Xero shares up more than 10 per cent to a new record high $74.54 as a result of strong sales growth, which was driven by a 51 per cent rise in revenues and subscribers in Britain where Xero now has 536,000 customers.

By 5pm it had lost some of its gains, but its shares were still up 9.2 per cent, leaving shareholders A$878m (NZ$950m) wealthier.

Founder Rod Drury remains a director and his family retains a 11.2 per cent stake in the business, now worth $1.26b.

Worldwide, more than 2 million businesses now use its software, with 30 per cent growth over the year.

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

* Xero joins elite club as value surges past $10 billion

* Drury family trims stake in Xero to below $1b

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

Rod Drury has cashed out more than $200m from Xero since he founded the firm in 2006, but his family retains a stake now worth more than $1.2b.

Revenues for the half-year were up 32 per cent to $339m.

The company's Australian chief executive Steve Vamos, who relocated to Wellington last year, said notching up 2 million subscribers was an important milestone.

It took 10 years for Xero to sign up its first million subscribers, but less than three years to get is next million.

'There are a number of significant global trends contributing to Xero's growth including industry, regulatory and technology shifts,' Vamos said.

'These include the increased use of cloud technology by small business, the digitalisation of tax and compliance systems, and innovation reshaping the financial services sector.'

Vamos said Xero remained focused on revenue and subscription growth and there remained plenty of room for growth in Britain.

Xero was continuing to build the foundations of its business in the US, he said.

The company employed 2706 staff at the end of September, up 18 per cent over the year.