Is ASX100 Xero share price hitting new record high levels?

Summary

• ASX100 listed, Xero share price zoomed to an all-time high AU$98.500 on 25 August, up by 0.01%, post an update concerning the acquisition of Waddle, a cloud-based lending platform.
• The acquisition would position Xero to collaborate with other lenders across the globe, to better address small firms’ working capital, as well as other financial requirements.
• Xero is uniquely positioned with its global operations at the intersection of technology and finance, to capitalise on the burgeoning need of the real-time and scalable cloud-based solutions by the small business community for managing their business better.
• In the past four months (1 April to 31 July 2020) 96,000 subscribers joined Xero, taking total subscriber numbers to 2.38 million by the end of July, driven by robust performance in its Australia and New Zealand segment solid business underpinning this growth.
• Xero has planned strategic investment towards driving long term, higher growth of its business and expand small business platforms; continually innovating and responding swiftly to the opportunities and changes in the market.

Since the beginning of 2020, human beings have come face to face with a prodigious challenge in the form of the COVID-19 pandemic. As we look for solutions to overcome the difficulties induced by the pandemic and adjust with the new normal, technology has emerged as a key enabler of smooth-running businesses across the world.

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Furthermore, technology sector seems to be seizing the attention of the market participants with the S&P/ASX All Technology Index (ASX:XTX) reaching to a record 2,530.1, up by 2.38% from its previous close (as on 25 August 2020).

On the other hand, S&P/ASX 100 (ASX:XTO) index was up 0.57% on 25 August 2020 closing at 5,075.3 points; it is short of reaching its pre-COVID-19 levels.

Notably, the performance of a sector index is influenced directly by the performance of its components.

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Notwithstanding the COVID-19 headwinds, ASX100 listed company, Xero Limited (ASX:XRO), delivering easy-to-use cloud-based accounting software to small business, globally, is sweeping the market and closed the day’s trade at AU$98.500, after reaching its 52-week high price of AU$101.240 intra-day, on 25 August 2020.

Noteworthy, XRO shares zoomed up beyond AU$100 for the first time during the day, after the release of the announcement concerning the acquisition of Waddle, as discussed in the article.

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Xero’s online accounting software service unites over 2 million subscribers with an ecosystem of more than 800 third-party application and over 200 connections to both banks as well as financial service providers.

Join us as we walk you through the latest news of the ASX 100 company, Xero

Did you read; Xero Shares Surpass A$100 Post Announcement Related To Acquisition of Waddle

Acquisition of Waddle; bridging capital accessibility

On 25 August 2020, XRO announced the acquisition of Waddle, a cloud-based lending platform that assists small firms in accessing capital via invoice financing. Notably, the acquisition is in line with Xero’s strategy to boost the small business platform; and to acknowledge crucial financial requirements of the small companies.

Furthermore, after the acquisition of Waddle, XRO would continue to examine ways to assist small entities to access capital, apart from invoice financing. The acquisition also positions Xero to collaborate with lenders across the globe, to better address small firms’ working capital as well as other financial requirements.

Details of the acquisition are as follows:

• Total consideration for the purchase of 100% of Waddle would potentially be AU$80 million, including an upfront cash payment of AU$31 million and succeeding earnout payments based on product advancement and revenue milestones, of ~AU$49 million.
• Earnout payments (if, any) are projected to be settled 50% in cash and other 50% in ordinary shares in Xero.
• Costs (Transaction, integration and operating costs) associated with the acquisition are anticipated to have minimum impact on Xero’s EBITDA for FY21.
• Transaction completion is anticipated before the end of calendar year 2020, subject to the satisfaction of closing conditions.

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2020 Annual Meeting resolutions

On 13 August 2020, Xero conducted its 2020 Annual Meeting and put across the following resolutions:

• Authorisation of the board to fix the remuneration of the auditor for the subsequent year.
• At the meeting, Lee Hatton, and Rod Drury, retired as directors of XRO and are further eligible to be re-elected for the same designation.
• Mark Cross who was appointed as a Director of Xero by the board on 1 April 2020 and retired at the meeting in line with clause 20.4 of Xero’s constitution, is eligible for election as Xero’s director.

Total subscriber update

Despite the fact that operating conditions were uncertain, Xero’s total subscribers witnessed an upsurge of 96,000 over the period of four months, 1 April to 31 July 2020, and stood at 2.38 million (as at 31 July 2020).

Owing to global operations, Xero experienced varied gross subscriber additions and churn with positive net subscriber additions.

Furthermore, Xero noted boosted net subscriber additions in its Australia and New Zealand segment in comparison with the international segment primarily due to early stage eased lockdown restrictions than other countries, and seasonality within the Australian firms backed by tax year ending in June.

Xero also witnessed bolstered business performance during the twelve months ended 31 March 2020.

Source: Company’s presentation, dated 13 August 2020

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Outlook for FY21

Owing to the continued uncertainty caused by the coronavirus pandemic, Xero continued to be speculative from commenting more on the impact of the pandemic on the business performance during FY20.

However, Xero remained determined towards long-term, higher growth of its business. Notably, Xero would continue its operations with disciplined cost management and targeted allocation of capital, authorising agility for continuous innovation, investment, assistance to customers, and swift response to opportunities and changes in the market.

Source: Company’s presentation, dated 13 August 2020

Stay tuned for Xero’s interim results providing an update on its financial performance over the first half of FY21 on 12 November 2020.