Xero willing to foot higher losses

19:21, Nov 14 2012
Rod Drury
ROD DRURY: Speculation about Xero listing on a US stock exchange was "a little early''.

Xero has signalled it will go for broke and run higher losses as it tries to snare a bigger chunk of the global market for online accounting software.

A little of the heat came off its share price yesterday after it reported an interim net loss of $7 million for the six months to the end of September, up from a $3.7m loss in the same period last year.

Interim revenues rose 119 per cent to $17.3m.

Chief executive Rod Drury said Xero's losses were likely to grow in the second half of the year, but he also expected its operating revenues to double.

More than three-quarters of Xero's revenues are still generated from customers in New Zealand and Australia. Revenues from the rest of the world, including the United States market, which will be crucial in determining just how big Xero could become, rose from $1.5m to $3.6m. Drury said Xero was still doing the groundwork in the US, "winning over influencers" and adding features for the local market.

"We haven't completely put our foot on the throttle in the US yet, but the buzz about Xero feels quite good.


"We are now being presented as the real challenger to [online accounting market leader] Intuit in the US."

Xero's shares, which had been up more than $1 on the month, edged down 12 cents to $6.24.

Xero began signalling more than a year ago that it would chase growth instead of trying to break even quickly, as its confidence grew that it would succeed in becoming a significant international player in the accounting software market. Drury said it would now "go even faster".

"With our proven execution ability, we believe it is in the best interests of shareholders to continue to grow the business aggressively."

Xero had $30.6m of cash on hand and the ability to raise significantly more if required.

The firm added 130 staff in the year to the end of September, taking its workforce to 278, and Drury said it had another 100 roles to fill.

It would embark on four new projects, including increasing the size of its sales and support teams in Australia, Britain and the US, and adding new features for its Australian customers.

Contact Tom Pullar-Strecker
Infotech editor
Email: tom.pullar-strecker@dompost.co.nz
Twitter: @PullarStrecker

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