A Glance at the Steam of Tech Software businesses – XRO,TNE,HSN

  • May 20, 2020 AEST
  • Team Kalkine
A Glance at the Steam of Tech Software businesses – XRO,TNE,HSN

Technology sector is the transformation driver across all the sectors with various new technologies such as 5G, Artificial Intelligence, cybersecurity, cloud computing etc.

During this time of economic turmoil, Technology players are taking all the proactive measures to mitigate the risks posed by COVID-19, thereby helping businesses in sailing past this storm. Businesses are struggling to stay afloat by adopting various cost-cutting measures along with considerable technological evolution with new normal of social distancing, online learning, e-commerce, and work from home culture.

These opportunities have been aiding the technology players to grow their business rapidly as per paradigm shift in market preferences and thereby optimise their balance sheets. This revamp driver, without a doubt, is making the technology stocks attract steam amid this pandemic.

During this time of turmoil in the economy, let’s look at three ASX listed software service businesses, which are running the show while managing the risks posed by COVID-19:

Xero Limited (ASX:XRO) Sailing Through Covid-19 Outbreak

XRO, a 2012 ASX listed company, is a global provider of SaaS-based business platform offering services via business and accounting software to small businesses and their advisors.

COVID- 19 outbreak did impact the company’s performance at a modest level as much of the impact was fell post the financial year.  AMRR did see some drop in its progress during March 2020. The outcome of this drop will be reflected in FY’21 business results.

Notably, even though COVID-19 has created uncertainty in the business environment, XRO has not changed its long term strategic plans. Also, XRO has preferred driving cloud accounting across the globe and upgrade small business platforms.

Strong business performance during FY’20

On 14 May 2020, XRO released its full-year results (FY) for the year ended 31 March 2020. The company delivered a stable business outlook with positive free cash flow and net profit outcome.

  • Operating revenue grew by 30 per cent to NZ$0.72 billion. The growth was driven majorly by the rise in subscriber across all markets.
  • During the year, the company’s annualised monthly recurring revenue (AMRR) grew by 29 per cent to reach at NZ$820.6 million.
  • The number of subscribers grew 26% to 2.285 million globally and lifetime value (LTV) per subscriber was at NZ$2,422.
  • The company’s net profit during the period was NZ$3.3 million reflecting enhancement of ~ NZ$30.5 million y-o-y due to growth in the operating revenue, disciplined management of operating costs along with improved gross margin.

 

Image Source: XRO's investor presentation

 

Launch Of Array Of New Tools – An Aid For Cash Flow Management Amid COVID-19

On 19 May 2020, XRO announced upgraded financial reporting tools available across the world to support small businesses and its advisors in revenue and cash flow management. These financial reporting tools are inclusive of Xero HQ, E-invoicing, Pay with TransferWise, Short-Term Cash Flow, Business Snapshot. The two tools namely, Short-Term Cash Flow and Business Snapshot are still in the testing phase but are rolled out for free until 31 August 2020 in business Edition plans.

 

Also, XRO launched Xero HQ payroll on 8 April 2020, to aid advisors during the COVID-19. This new tool offers understandings into Single Touch Payroll compliance so that advisors can support their small businesses to use their data and get access to the stimulus programs provided by the Government.

The XRO shares traded at AU$80.160, up 0.96% on 20 May 2020 (12:33 PM AEST). XRO has a market cap of AU$11.27 billion with ~141.91million outstanding shares.

Did you read: 3 IT Stocks Trading Cheap on ASX - IRE, WTC, HSN

Technology One Limited (ASX: TNE) - Positive Business Outlook During 1HFY20 Results

TNE is an information technology company engaged in Software Sales, Services and R&D. TNE is also involved in the development, implementation, marketing and support of enterprise business software solutions.

TNE recently announced its business performance results for the half-year ending 31 March 2020. Technology One Global SaaS ERP Solution continued demand represents TNE’s positive business performance. Following are the business highlights from its released results:

  • Revenue grew by 7 per cent to AU$138.4 million.
  • Growth in Profit before tax and profit after tax by 6 per cent y-o-y to reach AU$25.9 million and AU$19.1 million, respectively.
  • SaaS Annual Recurring Revenue (ARR) reached AU$110.2 million, upsurge by 33 per cent y-o-y.
  • Expenses increased by 7 per cent y-o-y and reached AU$112.5 million.
  • Cash and cash Equivalents increased by 23 per cent to reach AU$84 million.
  • Dividend declared of 3.47 cents per share, an increment of 10 per cent y-o-y.

 

Considering COVID-19 pandemic to be evolving, TNE has emulated this in their full-year guidance. Also, TNE witnessed minimal impact on the company’s performance due to coronavirus.

 

Image Source; TNE's presentation

 

The TNE shares traded at AU$9.930, up 2.16% on 20 May 2020 (12:50 PM AEST) with a market cap of AU$3.1 billion and ~319 million outstanding shares.

Did you read; 5G, Cloud Computing, Bundling – the three pieces of pie in Australian Telecom

Hansen Technologies Limited (ASX: HSN) - Revision of FY’20 guidance amid COVID-19

HSN is a global provider of software and services across the energy, communications and water businesses. HSN caters to over 500 clients and ensures that its products help clients deliver to its customers, cost-effective end-to-end business solutions. 

Considering the volatile environment caused by the COVID-19 pandemic, there were several initiatives taken by HSN in minimising its effect on business.In light with the uncertainty caused by the virus on upcoming business performance, HSN had earlier withdrawn its earnings guidance by releasing an operating and guidance update on 3 April 2020.

On 19 May 2020, HSN published an operating update which is a further update to its apr’20 statement. In the latest announcement it has revised its earnings guidance for FY’20 and outlined the below guidance:

  • Operating revenues range revised to AU$298 – AU$300 million.
  • EBITDA updated between AU$75-AU$76 million. This EBITDA range excludes the impact of IFRS 16 and costs associated with restructuring.

 

Strong financial performance during 1H FY2020

  • Operating revenue increased by 28.4 per cent to AU$144.3 million, driven by Sigma’s contribution post-acquisition in June 2019. Also, HSN’s revenue excluding Sigma reached to AU$109.4 million, down by AU$3 million from 1H FY2019.
  • Underlying EBITDA grew by 20 per cent to AU$34.1m y-o-y.
  • Underlying NPATA for the period was AU$18.2 million, up by 3 per cent y-o-y.

 

HSN shares traded at AU$3.30 on 20 May 2020 (12:50 PM AEST) with a market cap of ~AU$652 million and 198.19million outstanding shares.

With burgeoning opportunities in tech space, market players are keenly eyeing fundamental and technical analysis of attractive stocks trading at undervalued prices to beef their portfolio with a long-term view.

 


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