How is the Needle on the Tech Sector?

By the end of the day’s trading on 15th July 2019, the S&P/ASX 200 Information Technology (Sector) declined by 2.28%, demonstrating the weakest performance for the day as compared to the other sectors. Amongst all the sectors, S&P/ASX All Ordinaries Gold (Sub Industry) was the best performer for the day.

If we see the index movement of S&P/ASX 200 Information Technology (Sector) from 1st January 2019 till 1st May 2019, the index was continuously following an uptrend. If compared to the performance of the index from the close on 1st May 2019 to 15th July 2019, there was a fall of 4.04%.

The impact of the sectoral performance was experienced in the IT stocks as well, as can be seen at the closure of the trading session on 15th July 2019.

Let’s see the recent updates of these companies.

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Xero Limited (ASX: XRO)

The information technology sector company, Xero Limited (ASX: XRO) is a provider of online accounting software for small businesses. The company’s accounting software has tools, which save users’ time and helps them grow their business. It has more than 2,500 employees, one global team and above 1.8 million subscribers.

Recent Update/s: On 12th July 2019, Xero Limited provided the disclosure document related to the giving of the financial assistance to purchase shares in the company. The document was provided to the shareholders of the company, which contains all the details related to the company’s intention to make certain loans as well as pay some amounts as a part of its restricted share plan, which was made available to the selected employees.

As per the Restricted Share Plan adopted by the company in May 2008, the participants are eligible to receive shares of the company based on certain terms and condition like continued employment for a stated period, among others. The company will be providing an interest free loan to the participants, which will enable them to buy shares. These shares will be held in the trust for a particular duration. After the fulfilment of all the conditions, the employee will have unrestricted ownership of the shares, which will be released to the employee at that point of time.

The company will also provide financial assistance to the employees who participate in the restricted share plan as well as restricted share plan. In case, the employee joins the plan during the next 12 months, then the financial assistance will be provided to that particular employee in a similar manner.

FY2019 Highlights: In the company’s FY2019 Annual Report ended on 31st March 2019, CEO, Steve Vamos highlighted that XRO’s operating revenues increased by 36% to $552.8 million. There was an improvement of $35.0 million in the cash flow. The company witnessed an increase in the number of subscribers by 31% to 1.82 million. The EBITDA, apart from the impairments, increased by 84% to $91.8 million. However, the company’s posted a net loss of $27.143 million. The total shareholders’ equity for the period was $353.309 million. At the end of the year, XRO had net cash and cash equivalents worth $121.527 million.

Stock Information: The shares of XRO have given a decent YTD return of 50.97%. At present (AEST 01:15 PM, 16th July 2019), the stock of XRO is trading at $60.600, down 0.705%. XRO holds a market cap of $8.94 billion and approximately 141.14 million outstanding shares.

IRESS Limited (ASX: IRE)

IRESS Limited (ASX: IRE) is comprised of 1,950 people working around the clock to develop software, which enables the financial services industry to perform at its best. The company provides IT solutions to financial market participants as well as wealth managers.

Recent Update/s: On 15th July 2019, the company released an announcement related to the change of one of the director’s interest. Andrew Walsh, the Managing Director of the company, had interest in total number of 526,714 ordinary shares of the company. He had a direct interest of 481,805 shares and indirect interest of 44,909 ordinary shares. Post the change of interest, effective 12 June 2019, he had disposed 120,000 shares of the company at an average price per share of $13.34 per share. The total proceeds on sale by disposing of 120,000 shares were at $1,597,733.

Recently, on 31st May 2019, the company announced that it acquired a leading international provider of market data and trading infrastructure, QuantHouse for €38.9 million in the form of cash and debt. The acquisition will also depend on earnout performance criteria through to the end of 2021.

QuantHouse has global operations, with an emphasis on Europe, North America and Asia. It provides 145+ data feeds from exchanges and other providers of the data to the customers worldwide. The acquisition of QuantHouse is highly complementary as well as strategically aligned to the prevailing and future activities of the company along with the international offering. This acquisition will strengthen the company’s international market data business as well as provide further opportunities in achieving cost synergies along with the scale.

QuantHouse is being sold by Pierre Feligioni, who is a Co-Founder as well as the Chief Executive Officer. After the acquisition, the QuantHouse team will be led by Mr Feligioni within IRE. All the individuals related to QuantHouse along with the senior management will now become a core part of the company’s team.

Stock Information: The shares of IRE have given a YTD return of 30.83%. At present (AEST 1:30 PM, 16th July 2019), the stock of IRE is trading at $13.620, down 0.511%. IRE holds a market cap of $2.47 billion with approximately 174.75 million outstanding shares, a PE ratio of 37.58x and a dividend yield of 3.26%.

NEXTDC Limited (ASX: NEXT)

An IT sector company, NEXTDC Limited (ASX: NXT) is engaged in the establishment, development and operation of data centre facilities. NXT is also listed on ASX200-listed technology index and provides business to transform via innovative data centre outsourcing solutions, connectivity services as well as infrastructure management software.

Recent Update/s: Recently, on 28th June 2019, the company released an announcement to the market related to the appointment of Mr Stephen M. Smith as the Non-Executive Director of the company with effect from 1st July 2019.

Mr Smith holds extensive experience in managing market leading technology businesses and is an expert in the data centre industry. He was also the former CEO and President of Equinix Inc., where he worked for 10 years, transforming it into an industry leader in the Internet infrastructure sector as well as the largest enterprise data centre platform in the world. Under his leadership, Equinix was able to expand from 17 data centres with operations in 10 markets and US$2 billion market cap to ~200 data centres with US$38 billion market cap, operating in 24 countries across five continents.

At present, Mr Smith is also a Managing Director of a US-based investment fund, GI Partners, which focuses on data centre, data transport, wireless as well as technology enabled infrastructure investments in North America.

In addition, Mr Smith has around eight years of experience in the US Army as well.

On 4th June 2019, the company announced that it raised $200 million in senior unsecured debt through an added fixed and floating rate tranche of its prevailing $300 million Notes IV, due 9th June 2022.

1H FY2019 Highlights: NEXTDC Limited reported a 17% increase in its revenues from ordinary activities as compared to its previous corresponding period. The company reported a significant loss of 137% to $3.143 million during the period. The total shareholders’ equity for the period was $881.738 million. At the end of 1H FY2019, NXT had net available cash worth $343.609 million.

Stock Performance: The shares of NXT have given a YTD return of 11.02%. At present (AEST 01:45 PM, 16th July 2019), the stock of NXT is trading at $6.440, down by 1.075%. NXT holds a market cap of $2.33 billion, with approximately 344.52 million outstanding shares.


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