Will ASX: XRO Retain Its Upward Momentum?

  • Apr 28, 2019 AEST
  • Team Kalkine
Will ASX: XRO Retain Its Upward Momentum?
Xero Limited (ASX: XRO) is a software and service company and has a cloud-based accounting software, which links people across the world on any equipment. The company has more than 1.6 million subscribers in more than 180 nations and an ecosystem, which assimilates with beyond 700 apps. It is domiciled in New Zealand and was founded in 2006. Mr Steve Vamos is the chief executive officer of the company. The company delivers its services to diverse businesses like retail, healthcare, hospitality, e-commerce, legal, tourism, etc. The company officially got listed on 8th November 2012 on ASX. Xero Limited notified the market about the issue of 85,405 fully paid ordinary shares on 2nd April 2019. The shares were issued on vesting of restricted stock units (RSUs) granted under the Xero Limited Restricted Stock Unit, and Option Plan (RSU & Option Plan) as part of the remuneration package of employees based in New Zealand, Singapore, Hong Kong, Canada and South Africa, and under the Xero Limited USA Incentive Scheme (the US Scheme) as part of the remuneration package of employees based in the United States. In a push towards increasing efficiency of accounting and bookkeeping partners in the UK, Xero announced some strategic initiatives on 15th November 2018 including:
  • Acquisition of Instafile, a London based start-up that provides cloud-based accounts and tax production.
  • Xero’s market-ready Making Tax Digital for VAT offering.
  • Registration of Xero with the UK Financial Conduct Authority as an Account Information Services Provider.
These initiatives were taken to enable Xero accountants to file the tax returns efficiently and saving their time, so that they can focus on providing advisory services to their small business customers. Early in November 2018, Xero released its half-yearly results for the period between April 2018 to September 2018. The company delivered strong financial results in the half-year to 30 September 2018. The half-yearly results of the company are presented in the below table:
Items Amount % change (YoY)
Operating Revenue $256.5 million + 37%
Annualised Monthly Recurring Revenue $589.1 million + 40%
Operating Cash Flows $36 million + 139%
Total Lifetime Value of Subscribers $3.9 billion + 41%
Average revenue per user $31.1 + 6%
EBITDA $16.8 million + 7%
As per ASX announcement dated 8th November 2018 There were net subscriber additions of 193,000 during the half-year that took the total subscribers to 1.579 million on 30th September 2019. The company’s net loss increased to $28.6 million in H2 FY18 from the loss of $19.6 million in H1 FY18. An upward trend has been observed in the company’s stock price since 4th Feb 2019. The company’s stock price has improved from AUD 42.160 (as on 4th Feb 2019) to AUD 51.310 (as on 18th April 2019), that is a 21.7% rise over the period. The YTD of the company is recorded at 29.39% while the last six month’s growth in the company’s stock price is reported at 33.01%. The company’s stock closed at AUD 53.950 (as on 26th April 2019), down by 0.608% than the previous day’s market price. 483,898 number of shares were in trade today with 140.85 million shares outstanding. The market capitalisation of the company was recorded at AUD 7.65 billion. The 52-week high and low values were reported at AUD 55.060 and AUD 36.100 respectively. Investors may keep a close watch over the company’s stock if it retains its momentum.

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