Daily ShareChat: Xero

By Jenny Ruth

Tuesday 13th October 2009

If accounting software company Xero continues adding customers at its current rate of about 1,000 a month, its disclosed break-even level of 30,000 customers should be reached in less than 18 months from now, says First NZ Capital retail research manager Barry Lindsay.

"There is nothing to say that (growth) should slow; in fact, it may well accelerate, given the additional sales staff that have been employed and the strategic partnerships set up with Telstra and British Telecom," Lindsay says.

The indications are Xero needs annual revenue of about $12 million to cover its operating costs. "The $12 million in annual sales could also be reached sooner than earlier suggested as the company has recently moved to a new pricing scale," he says.

This will see Xero charging large customers, who need additional features such as multi-currency options, more.

Lindsay estimates Xero could achieve a $1.5 million net profit in the year ended March 2012 and that could jump to $4 million the following year.

"The operating leverage this company enjoys is enormous - it costs very little to add a new customer. Our 2012 assumption is based on 45,000 customers by year end and, by the end of 2013, 60,000 customers." Xero had more than 12,000 customers at September 30.

BROKER CALL: First NZ Capital rate Xero as "should appeal to those investors who are willing to back the skilled, committed people driving this business."

Comments from our readers

No comments yet