AI assistant
XERO LIMITED — Interim / Quarterly Report 2013
Nov 13, 2012
66106_rns_2012-11-13_bab086f9-e479-4be3-b9ab-883be6314be6.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
==> picture [157 x 56] intentionally omitted <==
"#$%!&'(')#*!
+,)#$'(!-#.%$)!-#/#01#!)%!23"!0,!45"! 6%$!)7#!1'8!(%,)71!#,#*!9:!5#.)#(;#$!<:=<!
>%,)#,)1!
?0$@#)!-#/#01#!
4..#,'8!=!-#/#01#!A01!$#BC'$#!;D!23"!&'1)',E!-C/#1F!
- 4..#,'8!GH!-#/#01#!A01!$#BC'$#!;D!45"!&'1)',E!-C/#1F!!
+,)#$'(!-#.%$)!',I/C*',E!
-
%((#,)0$D!
-
J,0C')#!>%,#,1#!6',0,I'0/!5)0)#(#,)1!
-
+,#.#,#,)!4II%C,)0,)1!-#K'#L!-#.%$)!
H#)0'/1!%M!H'$#I)%$1!0,*!H'$#I)%$1�!H#I/0$0)'%,!
(Note: All currency amounts in this release are in New Zealand dollars)
- "#!$%&'()'*!+,"+
1
==> picture [156 x 56] intentionally omitted <==
MARKET RELEASE
Xero continues to double revenue, accelerates investment
14 November 2012
(Note: All currency in this release is in New Zealand dollars)
Growth and momentum
revenue and other income doubled that in the same period last year to $17.3 million. For the year to 30 September 2012 Xero’s paying customer base grew an additional 118% to 111,800. Annualised monthly committed revenue at 30 September was $38.7 million, up from $18.0 million a year ago, with 58% of committed revenue now from offshore.
Performance highlights
| Performance highlights | Performance highlights | ||
|---|---|---|---|
| 6 months ended 30 September 2012 | 6 months ended 30 September 2011 | Increase | |
| Total revenue & other income | $17.3m | $7.9m | +119% |
| Operating expenses | $22.8m | $11.1m | +105% |
| EBITDA | ($5.5m) | ($3.2m) | +72% |
| Net loss after tax | ($7.0m) | ($3.7m) | +89% |
| Cash & cash equivalents | $30.6m | $11.4m | +168% |
| Paying business customers | 111,800 | 51,300 | +118% |
| Annualised Monthly Committed Revenue | $38.7m | $18.0m | +115% |
Regional
operations in the key markets of Australia, the United Kingdom and the United States.
Regional Operating Revenue
| 6 months ended | 6 months ended | 6 months ended | |
|---|---|---|---|
| 30 September 2012 | 30 September 2011 | 30 September 2010 | |
| New Zealand | $7.7m | $4.6m | $2.5m |
| Australia | $5.6m | $1.8m | $0.5m |
| United Kingdom | $2.4m | $1.1m | $0.5m |
| US/Rest of world | $1.2m | $0.4m | $0.2m |
| Total Operating Revenue | $16.9m | $7.9m | $3.7m |
2
Outlook
the business will create the best long-term value for shareholders. Xero has added 130 new jobs in the last 12 months, reaching 278 staff as at 30 September 2012. The company has significant cash reserves and will expand the team and services further to take advantage of the efficiency and proven execution ability of the organisation at a time when incumbent competitors are struggling to bring their desktop business online.
Xero is embarking on a number of strategic new projects including:
-
Tax features for Australia, leveraging the work done to deliver tax features in New Zealand
-
Payroll for the United States market, extending the work done to successfully deliver integrated payroll for the Australian market
-
Further expansion of sales and support teams in Australia, United Kingdom and the USA
-
Further investments in operational capacity to provide a platform to support one million customers
Xero Chief Executive Rod Drury says while these investments will increase losses in the immediate future, both management and the Board are acutely focused on building a long-term highly profitable business. “We have $30.6 million of cash on hand and the ability to raise significantly more cash if required. The transition of the accounting industry into the cloud is in full swing and we are very well positioned. With our proven execution ability, we believe it is in the best interests of shareholders to continue to grow the business aggressively.”
In line with the company’s historic growth the company expects to continue doubling operating revenue for the full year to 31 March 2013. After reporting a 6 month after tax loss to 30 September 2012 of $7.0m the company expects to incur an increased loss for the second six month period to 31 March 2013.
Additional commentary is included in our 2012 Interim Report, which has also been released today.
Xero is holding an Interim Results conference call for analysts:
Date: Thursday 15 November Time: NZ 10.30am (AEST 8.30am) – please dial-in 5 minutes prior Confirmation Code (required on dial-in): 6561188 Dial-in New Zealand: 0800 450 585 Dial-in Australia: Sydney 8113 1400, Melbourne 8338 0900, Other 1800 554 798 Dial-in UK: 0808 234 8407 Dial-in US: 1866 839 8029 Dial-in other global: email [email protected] for other international dial-in numbers.
of our ongoing product and company strategy. Register here: http://events.xero.com/au/events/405-xero-analyst-briefng
For more information contact:
Rod Drury Xero Chief Executive [email protected] +64 27 6000 007
3
==> picture [157 x 56] intentionally omitted <==
"##$%&'(!)!*$+$",$!
)-!%./01203!45)4
���������������������������������������������������������������������������������������������������������!
!"#$%&'(')"*%�%+",-.),%/$#%011$-12"("1)%)$%)3"%(0#4")%%
==> picture [455 x 241] intentionally omitted <==
----- Start of picture text -----
||||
|---|---|---|
|!"#$%&'()+"%'$,|6!1.789:!8.!;5!,0<801203!45)4|
|+%"-'$./!"#$%&'()+"%'$,|6!1.789:!8.!;5!,0<801203!45))!|
|5($-1)%6777,8%|9"#2"1)0:"%;301:"|
|!"-"(."/0%$12%,'(3%4|=%>!)6?@A4!|B<!));C!|
|56&'-'&'"/|
|+%$0'&78$//90%$12%,'(3%4|=%>!D6?EA)F!|B<!@GC!|
|56&'-'&'"/30&"%:3;3&&%'<.&3<="|
|:$>"6.%'&4?$=,"%|
|@"&+%$0'&78$//93&&%'<.&3<="|=%>!D6?EA)F!|B<!@GC!|
|:$>"6.%'&4?$=,"%|
|<1)"#'(%=%>'10.%?'@'"1%|5($-1)%A"#%B"2-#')C%|<(A-)"%5($-1)%A"#%B"2-#')C%|
|%.!HI/IH07H!I:!<3.<.:0H!|%.8!J<<KILJ2K0!|%.8!J<<KILJ2K0!|
|!"6$%,,3&"|%.8!J<<KILJ2K0!|
|A'-',"(,+341"(&A3&"|%.8!J<<KILJ2K0!|
----- End of picture text -----
4
==> picture [157 x 56] intentionally omitted <==
"##$%&'(!)&!
)!%+,-./-0!121!
"#$%!&'(')#*!
"3%!*42!156!462! '78+09+0:;-<!=7!%->!?-:@:7<!
+,-.!/#,$!0#1%$)!
==> picture [334 x 21] intentionally omitted <==
----- Start of picture text -----
|||
|---|---|
|!"#$%&'()+"%'$,|!"90=@!121!;+!62!A-9;-./-0!121|
|+%"-'$./!"#$%&'()+"%'$,|!"90=@!12!;+!62!A-9;-./-0!12*!|
----- End of picture text -----
0#23-)2!.%$!455%356#(#5)!)%!)7#!8,$9#)!
==> picture [455 x 207] intentionally omitted <==
----- Start of picture text -----
||||
|---|---|---|
|:;<!=>>>2?!|@#$6#5),A#!B7,5A#|
|0#"%1&'()!"-"(."2%$3|
|0%,'(1%456&'-'&'"/|4BCD1!|E9!6F!|
|+%$2'&78$//92%$30%,'(1%4|G4B5DH!|E9!CIF!|
|56&'-'&'"/12&"%:1;1&&%'<.&1<="|
|:$>"6.%'&4?$=,"%|
|@"&+%$2'&78$//91&&%'<.&1<="|G4B5DH!|E9!CIF!|
|:$>"6.%'&4?$=,"%|
|<'C'#52!�!D$'5,$E!F7,$#2!|4(%35)!1#$!F#63$')E!!|G(13)#!4(%35)!1#$!F#63$')E!|
|:;<!|:;<!|
|'7;-0=.!&=,=<-7<!|J!|J!|
|#:K.-7;!&:;-!|J!|J!|
----- End of picture text -----
!H'5,56',-!'5.%$(,)'%5!
LM-!:99-7<=N!)&!OM+E@<!/-!0-:<!=7!8+7PE78;=+7!>=;M!;M-!E7:E<=;-<!8+7<-7O-<!8+7O+@=<:;-<!Q=7:78=:@!O;:;-.-7;O!Q+0!;M-!O=N! .+7;MO!-7<-<!62!A-9;-./-0!12*1!:O!8+7;:=7-<!=7!;M-!'7;-0=.!R-9+0;!:;;:8M-<S!
5
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
==> picture [47 x 47] intentionally omitted <==
Beautiful accounting software www.xero.com
6
XERO INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
XERO LIMITED INTERIM REPORT 2012
| Commentary | 1 |
|---|---|
| Income statement | 3 |
| Statement of comprehensive income | 3 |
| Statement of changes in equity | 4 |
| Statement of financial position | 5 |
| Statement of cash flows | 6 |
| Notes to the condensed financial statements | 7 |
| Independent accountant’s review report | 12 |
2007
2008
2009
2010
2011
2012
7
XERO INTERIM REPORT
PAGE 1
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
COMMENTARY
Growth and momentum
Xero has continued its growth and momentum for the first six months of the financial year, significantly increasing development and support capabilities in New Zealand and expanding regional operations in key markets of Australia, the United Kingdom and the United States.
The first half year operating revenue more than doubled that in the same period last year to $16.9 million. For the year to 30 September 2012 Xero’s paying customer base also more than doubled, to 111,800. Annualised monthly committed revenue at 30 September was $38.7 million, up from $18.0 million a year ago, with 58% of committed revenue now from offshore.
Revenue attributable to each of New Zealand, Australia and the UK is covering service delivery costs as well as sales and marketing expenditure and providing a contribution to corporate and product development costs. The US is at an earlier stage in the growth cycle and following a customer acquisition pattern similar to these other regions.
Investment
With a goal of being able to support a million customers, investment has been spread across all four areas of the business. Globally 130 new jobs have been created, reaching 278 staff in total at 30 September.
Sales and Marketing – a significant investment has been made in sales and support in all offshore markets to drive channel-led sales. Selling through accountants and bookkeepers has been proven in New Zealand and is well advanced in Australia.
Service Delivery – a substantial investment is being made in building and managing a scalable and resilient delivery platform. Xero is now
one of Rackspace’s major customers and operates at a class-leading 99.99% uptime.
Product Development – product development capacity has doubled in the past 12 months. Xero continues to deliver significant new features and innovations rapidly. New major development projects have been initiated during the period involving Australian tax, Australian and US payroll, mobile, accountant tools and business intelligence.
Corporate – managing more than 100% annual growth in a sustainable manner has required a substantial investment in general and administrative resources - both people and systems.
Emerging as a platform
Key to Xero’s strength has been the development of an effective accountants and bookkeepers channel that provides a cost-effective pathway to the small business market. This complements direct sales and a growing group of solution partners.
The strategy of supplying accountants with free partner tools such as financial statement production, practice management, electronic tax filing and electronic workpapers (through the recently acquired Spotlight Workpapers) is disrupting the accounting software market and provides a real incentive for these valuable partners to switch to Xero.
The rich ecosystem of solution providers that connect seamlessly to the Xero application has seen Xero evolve from not only an accounting solution to a powerful small business cloud platform providing a wide range of business solutions for accountants and small business owners. The third-party investment in this platform is substantial as are the referral benefits and network effects in having hundreds of cloud solution vendors working together.
==> picture [497 x 303] intentionally omitted <==
----- Start of picture text -----
Performance Highlights
6 months ended 6 months ended
30 September 2012 30 September 2011
Total revenue & other income $17.3m $7.9m
Operating expenses $22.8m $11.1m
EBITDA ($5.5m) ($3.2m)
Net loss after tax ($7.0m) ($3.7m)
At 30 September 2012 At 30 September 2011
Cash & cash equivalents $30.6m $11.4m
Paying business customers 111,800 51,300
Annualised Monthly Committed Revenue $38.7m $18.0m
----- End of picture text -----
8
PAGE 2
XERO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
Regional Revenue Growth – for the six months ended 30 September 2012
==> picture [82 x 5] intentionally omitted <==
----- Start of picture text -----
2010 2011 2012
----- End of picture text -----
==> picture [186 x 6] intentionally omitted <==
----- Start of picture text -----
New Zealand Australia
----- End of picture text -----
United Kingdom United States + Rest of the World
Regional activity
New Zealand paying customers:
30 September 2012 – 57,300 (previous year – 30,600)
In New Zealand Xero is being used by virtually all significant accounting firms, with a growing number of 100% Xero practices. The focus in New Zealand is now on winning more business from each practice. Sales costs have flattened as the team reaches operating efficiency.
Australia paying customers:
30 September 2012 – 32,500 (previous year – 10,400)
The Australian region has shown particularly strong growth, with a tripling of the number of paying customers on the back of the integrated payroll release and significant growth in the number of accounting and bookkeeping partners. The planned development of electronic tax filing with the Australian Taxation Office will provide further impetus. The Australian business will have more than 60 staff by year end and is completing a new fit-out for the Australian HQ in Melbourne. Australia is expected to be the revenue growth engine for the Company for the next 18 months.
United Kingdom paying customers:
30 September 2012 – 15,100 (previous year – 7,300)
The UK growth path is beginning to accelerate with more than 200 accountants and bookkeepers attending the inaugural Xero UK Partner conference in September. The UK team is operating effectively in its new Milton Keynes office and staff appointments have included the addition of experienced senior staff into core roles such as Marketing Manager and National Sales Manager.
United States/Rest of World paying customers:
30 September 2012 – 6,900 (previous year – 3,000)
Xero has continued to build its capability and presence in the US market, seeing good growth and a growing profile. A Xero Partner Advisory Council has been formed, there is a good pipeline of partners in the initial stages of working with Xero, and numerous advocates are emerging. The positive reception given to the delivery of US-specific product features this year is providing confidence that Xero is well positioned against the incumbent competitor.
Governance
As announced at the 2012 Annual Meeting, Xero has listed on the ASX. This secondary listing on 8 November is aimed at making Xero shares more readily available to Australian parties, including partners and clients.
In September Xero appointed US-based high-tech executive Craig Elliott to the Xero Board of Directors and as Chair of the Xero US Advisory Board. Mr Elliott is co-founder and CEO of Silicon Valley based cloud networking provider Pertino Networks and a strategic advisor to New Zealand Trade and Enterprise with respect to angel, venture capital and private equity markets.
Outlook
The Board is continuing to follow a growth agenda focused on creating longer-term shareholder value rather than short-term profitability. The investment in staffing, infrastructure and the strengthening of regional management and operations puts Xero in a strong position as it drives towards its next target of one million customers globally.
In line with the company’s historic growth the company expects to double operating revenue for the full year to 31 March 2013 and incur a increased loss for the second 6 month period to 31 March 2013.
Xero has emerged as the company to watch in the small business accounting space, winning mind and market share from the incumbent providers. The nimbleness demonstrated by Xero and the continued execution of its strategy gives confidence in its ability to become a significant player in the global accounting market.
==> picture [99 x 39] intentionally omitted <==
==> picture [86 x 39] intentionally omitted <==
Sam Knowles Chairman 14 November 2012
Rod Drury Chief Executive
9
XERO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
PAGE 3
| XERO LIMITED – INCOME STATEMENT – FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | |||
|---|---|---|---|
| 6 months | 6 months | 12 months | |
| Unaudited | Unaudited | Audited | |
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| ($000s) | ($000s) | ($000s) | |
| Operating revenue | 16,852 | 7,913 | 19,370 |
| Government grants | 434 | – | 401 |
| Total revenue & other income | 17,286 | 7,913 | 19,771 |
| Operating expenses | (22,770) | (11,115) | (26,491) |
| Depreciation & amortisation | (1,961) | (820) | (1,894) |
| Operating loss | (7,445) | (4,022) | (8,614) |
| Interest income | 636 | 308 | 612 |
| Net operating loss before tax | (6,809) | (3,714) | (8,002) |
| Gain on investment in associate | – | – | 170 |
| Share of profit of associate | – | 32 | 38 |
| Net loss before tax | (6,809) | (3,682) | (7,794) |
| Income tax expense | (142) | (39) | (110) |
| Net loss after tax attributable to the shareholders of the company | (6,951) | (3,721) | (7,904) |
| Earnings per share | |||
| Basic & diluted earnings per share (dollars) | (0.07) | (0.04) | (0.08) |
| XERO LIMITED – STATEMENT OF COMPREHENSIVE INCOME – FOR THE SIX MONTHS ENDED 30 SEPTEMBER | XERO LIMITED – STATEMENT OF COMPREHENSIVE INCOME – FOR THE SIX MONTHS ENDED 30 SEPTEMBER | 2012 | ||
|---|---|---|---|---|
| 6 months | 6 | months | 12 months | |
| Unaudited | Unaudited | Audited | ||
| Group | Group | Group | ||
| 2012 | 2011 | 31 March 2012 | ||
| ($000s) | ($000s) | ($000s) | ||
| Net loss after tax | (6,951) | (3,721) | (7,904) | |
| Other comprehensive income | ||||
| Exchange difference on translation of international subsidiaries | 6 | (33) | (39) | |
| Total other comprehensive income/(expense) for the period, net of tax | 6 | (33) | (39) | |
| Total comprehensive loss | ||||
| attributable to the shareholders of the company | (6,945) | (3,754) | (7,943) |
10
PAGE 4
XERO INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
| XERO LIMITED – STATEMENT OF CHANGES IN EQUITY – FOR | THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | ||
|---|---|---|---|---|---|---|
| Share- | Foreign | |||||
| based | currency | |||||
| Share | Treasury | payments | Accumulated | translation | Total | |
| capital | stock | reserve | losses | reserve | equity | |
| ($000s) | ($000s) | ($000s) | ($000s) | ($000s) | ($000s) | |
| Group (unaudited 30 September 2012) | ||||||
| Balance at 1 April 2012 | 93,251 | (6,874) | 1,883 | (35,951) | (61) | 52,248 |
| Net loss after tax | – | – | – | (6,951) | – | (6,951) |
| Currency translation movements | – | – | – | – | 6 | 6 |
| Total comprehensive income | – | – | – | (6,951) | 6 | (6,945) |
| Issue of shares under employee restricted share plan | 1,818 | (1,818) | – | – | – | – |
| Accrual of share based employee benefits | – | – | 506 | – | – | 506 |
| Issue of shares – Spotlight Workpapers Limited (Note 9) | 300 | – | – | – | – | 300 |
| Accrual for equity portion of purchase of Max Solutions | ||||||
| Holdings Limited | – | – | 1,222 | – | – | 1,222 |
| Accrual for equity portion of purchase of Paycycle assets | – | – | 314 | – | – | 314 |
| Vesting of ordinary shares – purchase of Paycycle assets | – | 431 | (431) | – | – | – |
| Balance at 30 September 2012 | 95,369 | (8,261) | 3,494 | (42,902) | (55) | 47,645 |
| Group (unaudited 30 September 2011) | ||||||
| Balance at 1 April 2011 | 50,168 | (1,113) | 702 | (28,047) | (22) | 21,688 |
| Net loss after tax | – | – | – | (3,721) | – | (3,721) |
| Currency translation movements | – | – | – | – | (33) | (33) |
| Total comprehensive income | – | – | – | (3,721) | (33) | (3,754) |
| Issue of shares under employee restricted share plan | 1,248 | (1,248) | – | – | – | – |
| Accrual of share based employee benefits | – | (39) | 838 | – | – | 799 |
| Issue of shares – purchase of Paycycle assets | 1,294 | (1,294) | – | – | – | – |
| Accrual for equity portion of purchase of Paycycle assets | – | – | 128 | – | – | 128 |
| Balance at 30 September 2011 | 52,710 | (3,694) | 1,668 | (31,768) | (55) | 18,861 |
| Group (audited 31 March 2012) | ||||||
| Balance at 1 April 2011 | 50,168 | (1,113) | 702 | (28,047) | (22) | 21,688 |
| Net loss after tax | – | – | – | (7,904) | – | (7,904) |
| Currency translation movements | – | – | – | – | (39) | (39) |
| Total comprehensive income | – | – | – | (7,904) | (39) | (7,943) |
| Issue of ordinary shares | 36,365 | – | – | – | – | 36,365 |
| Accrual of share based employee benefits | – | – | 1,219 | – | – | 1,219 |
| Vestingof ordinary shares in employee restricted share plan | – | 957 | (957) | – | – | – |
| Issue of ordinary shares – purchase of Paycycle assets | 1,294 | (1,294) | – | – | – | – |
| Issue of ordinary shares – purchase of Max Solutions | ||||||
| Holdings Limited | 4,000 | (4,000) | – | – | – | – |
| Issue of shares under employee restricted share plan | 1,424 | (1,424) | – | – | – | – |
| Accrual for equity portion of purchase of Paycycle assets | – | – | 512 | – | – | 512 |
| Accrual for equity portion of purchase of Max Solutions | ||||||
| Holdings Limited | – | – | 407 | – | – | 407 |
| Balance as at 31 March 2012 | 93,251 | (6,874) | 1,883 | (35,951) | (61) | 52,248 |
11
XERO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
PAGE 5
| XERO LIMITED – STATEMENT OF FINANCIAL POSITION – AS AT 30 SEPTEMBER 2012 | ||||
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| Group | Group | Group | ||
| 2012 | 2011 | 31 March 2012 | ||
| Notes | ($000s) | ($000s) | ($000s) | |
| Assets | ||||
| Current assets | ||||
| Cash & cash equivalents | 30,581 | 11,383 | 38,976 | |
| Trade receivables & other assets | 2 | 4,166 | 2,243 | 3,023 |
| Total current assets | 34,747 | 13,626 | 41,999 | |
| Non-current assets | ||||
| Property, plant & equipment | 3 | 4,692 | 947 | 4,195 |
| Intangible assets | 3 | 13,380 | 6,378 | 10,260 |
| Investment in associate | – | 230 | – | |
| Deferred tax benefit | 137 | 54 | 85 | |
| Other non-current assets | 4 | 1,273 | 104 | 1,234 |
| Total non-current assets | 19,482 | 7,713 | 15,774 | |
| Total assets | 54,229 | 21,339 | 57,773 | |
| Liabilities | ||||
| Current liabilities | ||||
| Trade & other payables | 5 | 3,633 | 1,544 | 3,046 |
| Employee entitlements | 2,711 | 905 | 2,408 | |
| Income tax | 240 | 29 | 71 | |
| Total current liabilities | 6,584 | 2,478 | 5,525 | |
| Net assets | 47,645 | 18,861 | 52,248 | |
| Equity | ||||
| Share capital | 6 | 87,108 | 49,016 | 86,377 |
| Share based payment reserve | 3,494 | 1,668 | 1,883 | |
| Accumulated losses | (42,902) | (31,768) | (35,951) | |
| Foreign currency translation reserve | (55) | (55) | (61) | |
| 47,645 | 18,861 | 52,248 |
12
PAGE 6
XERO INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
| XERO LIMITED – STATEMENT OF CASH FLOWS – FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | XERO LIMITED – STATEMENT OF CASH FLOWS – FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | XERO LIMITED – STATEMENT OF CASH FLOWS – FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 | ||
|---|---|---|---|---|
| 6 months | 6 months | 12 months | ||
| Unaudited | Unaudited | Audited | ||
| Group | Group | Group | ||
| 2012 | 2011 | 31 March 2012 | ||
| Notes | ($000s) | ($000s) | ($000s) | |
| Operating activities | ||||
| Cash was provided from | ||||
| Receipts from customers | 15,847 | 7,493 | 18,560 | |
| Interest received | 575 | 376 | 632 | |
| Government grants | 319 | – | 283 | |
| GST received | – | 79 | – | |
| Dividends received | – | 9 | 26 | |
| 16,741 | 7,957 | 19,501 | ||
| Cash was applied to | ||||
| Payments to suppliers & employees | (19,793) | (11,249) | (23,379) | |
| GST paid | (657) | – | (833) | |
| Income tax paid | (25) | (90) | (150) | |
| (20,475) | (11,339) | (24,362) | ||
| Net cash flows from operating activities | 8 | (3,734) | (3,382) | (4,861) |
| Investing activities | ||||
| Cash was provided from | ||||
| Cash acquired on acquisition of subsidiary | – | – | 259 | |
| Disposal of property, plant & equipment | 20 | – | – | |
| 20 | – | 259 | ||
| Cash was applied to | ||||
| Purchase of property, plant & equipment | (1,194) | (614) | (3,963) | |
| Capitalised development costs | (3,401) | (1,155) | (3,519) | |
| Intangible assets | (68) | – | (37) | |
| Acquisition of subsidiary (Note 9) | (100) | – | (1,000) | |
| Purchase of Paycycle business | – | (377) | – | |
| Other assets | (18) | (11) | (299) | |
| (4,781) | (2,157) | (8,818) | ||
| Net cash flows from investingactivities | (4,761) | (2,157) | (8,559) | |
| Financing activities | ||||
| Cash was providedfrom | ||||
| Repayment of director’s & other loans | 100 | – | 200 | |
| Share issue | – | – | 35,638 | |
| 100 | – | 35,838 | ||
| Cash was applied to | ||||
| Cost of share issue | – | – | (364) | |
| – | – | (364) | ||
| Net cash flows from financingactivities | 100 | – | 35,474 | |
| Net (decrease)/increase in cash held | (8,395) | (5,539) | 22,054 | |
| Cash & cash equivalents at the beginningof the period | 38,976 | 16,922 | 16,922 | |
| Cash & cash equivalents at the end of the period | 30,581 | 11,383 | 38,976 |
13
XERO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
PAGE 7
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION & ACCOUNTING POLICIES
These unaudited consolidated condensed interim financial statements of Xero Limited (the Company) and its subsidiaries (together “the Group”) have been prepared in accordance with New Zealand Generally Accepted Accounting Practice and comply with the requirements of International Accounting Standard (IAS) 34 Interim Financial Reporting and with the New Zealand Equivalent to International Accounting Standard NZ (IAS) 34 Interim Financial Reporting. The Company is a profit oriented entity.
The Company is an issuer for the purposes of the New Zealand Financial Reporting Act 1993.
The unaudited consolidated condensed interim financial statements of the Group for the six months ended 30 September 2012 have been prepared using the same accounting policies and methods of computation as, and should be read in conjunction with, the financial statements and related notes included in the Group’s Annual Report for the year ended 31 March 2012.
The same significant judgements, estimates and assumptions included in the notes to the financial statements in the Group’s Annual Report for the year ended 31 March 2012 have been applied to these consolidated condensed interim financial statements.
2. TRADE RECEIVABLES & OTHER ASSETS
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| ($000s) | ($000s) | ($000s) | |
| Trade receivables | 1,891 | 1,098 | 1,347 |
| Accrued income | 1,130 | 506 | 687 |
| Prepayments | 412 | 192 | 311 |
| Interest receivable | 198 | 99 | 138 |
| Government grants receivable | 285 | – | 170 |
| Loans to Directors | – | 232 | 120 |
| Rental bonds | 250 | – | 250 |
| Other loans | – | 116 | – |
| 4,166 | 2,243 | 3,023 |
3. ACQUISITION & DISPOSAL OF NON-CURRENT ASSETS
| 6 months | 6 months | 12 months | |
|---|---|---|---|
| Unaudited | Unaudited | Audited | |
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| ($000s) | ($000s) | ($000s) | |
| Property, plant & equipment | |||
| – Acquisitions | 956 | 614 | 4,197 |
| – Disposals | (54) | – | (625) |
| Intangible assets | |||
| – Acquisitions (capitalised development costs) | 4,547 | 2,292 | 7,091 |
| – Acquisitions (software licences) | 67 | – | – |
| – Acquisitions (trademarks) | 1 | – | – |
| Net tangible assets per share (dollars) | 0.32 | 0.13 | 0.39 |
14
PAGE 8 XERO INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
4. OTHER NON-CURRENT ASSETS
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| ($000s) | ($000s) | ($000s) | |
| Loans to key management | 1,116 | – | 1,094 |
| NZX & rental bonds | 157 | 104 | 140 |
| 1,273 | 104 | 1,234 |
5. TRADE & OTHER PAYABLES
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| ($000s) | ($000s) | ($000s) | |
| Trade payables | 732 | 518 | 969 |
| Other payables & accrued expenses | 1,140 | 531 | 651 |
| Onerous lease provision | 191 | – | 275 |
| Income in advance | 111 | 20 | 90 |
| GST payable | 559 | 224 | 61 |
| Amounts payable on acquisition of subsidiary | 500 | – | 1,000 |
| Contingent consideration on acquisition of subsidiary (Note 9) | 400 | 251 | – |
| 3,633 | 1,544 | 3,046 |
6. SHARE CAPITAL
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| Shares | Shares | Shares | |
| (000s) | (000s) | (000s) | |
| Movement in ordinary shares | |||
| Balance at 1 April | 106,782 | 91,012 | 91,012 |
| Issue of ordinary shares | – | – | 13,352 |
| Shares issued – Paycycle | – | 606 | 606 |
| Shares issued – Max Solutions Holdings Limited | – | – | 1,262 |
| Shares issued – Spotlight Workpapers Limited (Note 9) | 58 | – | – |
| Shares issued under Employee Restricted Share Plan | 347 | 550 | 550 |
| Ordinary shares on issue | 107,187 | 92,168 | 106,782 |
| Treasury stock | (2,828) | (1,919) | (2,683) |
| 104,359 | 90,249 | 104,099 |
During the period the Company issued 347,438 shares under the Employee Restricted Share Plan, at an average price of $5.31 per share.
During the period the Company granted 282,397 options to selected employees with exercise prices of $3.83 to $5.31 per share, being the market price on the date the options were granted. The options are exercisable in equal amounts over three years from the grant date. No options can be exercised later than the first anniversary of the final vesting date (a total of four years from the grant date). Any unvested and unexercised options wil be cancelled should an employee cease to be employed.
15
XERO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
PAGE 9
7. SEGMENT INFORMATION
The Group has six operating segments based on the geographical locations of its operations and revenue streams, and five reporting segments at 30 September 2012. These segments have been determined based on the reports reviewed by the Board to make strategic decisions.
The Group currently operates in one business segment, providing an online accounting solution for small businesses and their advisors.
The segment information shows the operating performance of each country, as currently reviewed by the Board. Prior period information has been restated where appropriate.
Country operating expenses represent the sales and marketing costs and the service delivery costs including both in-country and an allocation of centrally managed costs. Operating expenses for Corporate represent all development and general and administration expenses.
The assets and liabilities of the Group are reported to and reviewed by the Board in total and are not allocated by operating segment. Therefore, operating segment assets and liabilities are not disclosed.
| United | Rest of | |||||
|---|---|---|---|---|---|---|
| New Zealand | Australia | Kingdom | World | Corporate | Total | |
| ($000s) | ($000s) | ($000s) | ($000s) | ($000s) | ($000s) | |
| 2012 – Group (unaudited) | ||||||
| For the six months ended 30 September 2012 | ||||||
| Revenue from external customers | 7,690 | 5,602 | 2,420 | 1,140 | – | 16,852 |
| Government grants & associate earnings | – | – | – | – | 434 | 434 |
| Interest revenue | – | – | – | – | 636 | 636 |
| Total | 7,690 | 5,602 | 2,420 | 1,140 | 1,070 | 17,922 |
| Operating expenses | (4,792) | (5,278) | (2,134) | (2,109) | (10,418) | (24,731) |
| Segment profit/(loss) before tax | 2,898 | 324 | 286 | (969) | (9,348) | (6,809) |
| 2011 – Group (unaudited) – restated | ||||||
| For the six months ended 30 September 2011 | ||||||
| Revenue from external customers | 4,607 | 1,805 | 1,101 | 400 | – | 7,913 |
| Government grants & associate earnings | – | – | – | – | 32 | 32 |
| Interest revenue | – | – | – | – | 308 | 308 |
| Total | 4,607 | 1,805 | 1,101 | 400 | 340 | 8,253 |
| Operating expenses | (3,033) | (2,222) | (1,049) | (154) | (5,477) | (11,935) |
| Segment profit/(loss) before tax | 1,574 | (417) | 52 | 246 | (5,137) | (3,682) |
| 2012 – Group (audited) – restated | ||||||
| For the year ended 31 March 2012 | ||||||
| Revenue from external customers | 10,325 | 5,024 | 2,723 | 1,298 | – | 19,370 |
| Government grants & associate earnings | – | – | – | – | 609 | 609 |
| Interest revenue | – | – | – | – | 612 | 612 |
| Total | 10,325 | 5,024 | 2,723 | 1,298 | 1,221 | 20,591 |
| Operating expenses | (6,951) | (5,455) | (2,528) | (1,227) | (12,224) | (28,385) |
| Segment profit/(loss) before tax | 3,374 | (431) | 195 | 71 | (11,003) | (7,794) |
16
PAGE 10
XERO INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
8. RECONCILIATION OF OPERATING CASH FLOWS
| 6 months | 6 months | 12 months | |
|---|---|---|---|
| Unaudited | Unaudited | Audited | |
| Group | Group | Group | |
| 2012 | 2011 | 31 March 2012 | |
| ($000s) | ($000s) | ($000s) | |
| Reconciliation from the net loss after tax to the net cash flows from operations | |||
| Net loss after tax | (6,951) | (3,721) | (7,904) |
| Adjustments for | |||
| – Depreciation | 699 | 133 | 320 |
| – Amortisation | 1,262 | 687 | 1,574 |
| – Deferred tax | (52) | (19) | (50) |
| – Associated company profit | – | (23) | (38) |
| – Gain on investment in associate | – | – | (170) |
| – Loss/(gain) on foreign exchange transactions | 369 | (33) | (8) |
| – Loss on disposal of property, plant & equipment | 17 | – | 119 |
| – Employee entitlements | 1,555 | 418 | 1,380 |
| – Interest on loans | – | – | (18) |
| Changes in working capital items | |||
| (Increase)/decrease in trade receivables & other assets | (1,285) | (392) | (1,162) |
| (Decrease)/increase in trade payables & other liabilities | (90) | (93) | (202) |
| Increase/(decrease) in GST | 499 | 79 | (84) |
| Increase/(decrease) in current tax | 169 | (32) | 10 |
| Increase/(decrease) in employee entitlements | 53 | (155) | 1,282 |
| Increase/(decrease) in income in advance | 21 | 20 | 90 |
| (3,734) | (3,131) | (4,861) | |
| Add: Items classified as investing activities | |||
| Accrual for Paycycle business | – | (251) | – |
| Net cash flow from operating activities | (3,734) | (3,382) | (4,861) |
17
XERO INTERIM REPORT PAGE 11
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
9. BUSINESS COMBINATIONS
In July 2012 the Group acquired the assets and business of Spotlight Workpapers Limited. The transaction will cost a total of $800,000 comprising a cash component and an equity component.
The following table summarises the consideration paid and the amount of assets acquired. No liabilities were assumed.
| ($000s) | |
|---|---|
| Cash consideration at 20 July 2012 | 100 |
| Equity consideration | 300 |
| Contingent consideration | 400 |
| Total consideration | 800 |
| Recognised amounts of identifiable assets acquired | |
| Software development costs | 800 |
| Goodwill | – |
| Total identifiable assets | 800 |
The equity component of the consideration at 20 July 2012 comprised the issue of 58,366 shares in Xero Limited to the owners of Spotlight Workpapers Limited at the Volume Weighted Average Price (“VWAP”) market share price on 20 July 2012, which was $5.14. The equity component of this issue was $300,000.
The contingent consideration comprises:
-
The contingent cash consideration arrangements require the Group to pay the owners of Spotlight Workpapers Limited $100,000 in cash on the meeting of certain commercial and technical success factors.
-
The contingent equity consideration arrangements require the Group to issue the owners of Spotlight Workpapers Limited with shares using the VWAP market share price at that date to the value of $300,000 on the meeting of certain commercial and technical success factors.
The Workpapers software solution is due for commercial release in 2013 and no revenues in respect of the acquisition have been included in the Group’s Income Statement for the period ended 30 September 2012.
10. RELATED PARTIES
The loans to Directors have now been fully repaid.
On 1 October 2012 a total of 100,000 options were granted to Craig Elliott (Director) under the Xero Limited Employee (USA) Share Option Scheme in his capacity as the Chairman of the Xero US Advisory Board.
11. EVENTS AFTER THE BALANCE SHEET DATE
On 8 November 2012 the Company completed a secondary listing on the Australian Securities Exchange (ASX). There were no other subsequent events.
12. COMMITMENTS & CONTINGENCIES
At 30 September 2012 the Company had capital commitments of $1.2 million in respect of the contract for the fitout of its new Melbourne office (30 September 2011: nil, 31 March 2012: nil).
There are no contingent liabilities as at 30 September 2012, 30 September 2011 or 31 March 2012.
18
PAGE 12
XERO INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
To the shareholders of Xero Limited
REVIEW REPORT ON THE INTERIM FINANCIAL STATEMENTS
We have reviewed the interim condensed financial statements (“financial statements”) of Xero Limited (“the Company”), and the entities it controlled at 30 September 2012 or from time to time during the period (“the Group”) on pages 3 to 11, which comprise the statement of financial position as at 30 September 2012, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the six month period ended 30 September 2012, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information.
Directors’ Responsibility for the Interim Financial Statements
The Company’s Directors are responsible for the preparation and presentation of the financial statements that present fairly the financial position of the Group as at 30 September 2012, and its financial performance and cash flows for the period ended on that date.
Opinion
Based on our review, nothing has come to our attention that causes us to believe that the financial statements which have been prepared in accordance with International Accounting Standard 34 and New Zealand Equivalent to International Accounting Standard 34: Interim Financial Reporting do not present fairly the financial position of the Group as at 30 September 2012 and its financial performance and cash flows for the period ended on that date.
Restriction on Distribution or Use
This report is made solely to the Company’s shareholders, as a body. Our review work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an accountants’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our review procedures, for this report or for the opinions we have formed.
Accountants’ Responsibility
We are responsible for reviewing the financial statements presented by the Directors in order to report to you whether, in our opinion and on the basis of the procedures performed by us, anything has come to our attention that would indicate that the financial statements do not present fairly the matters to which they relate.
A review is limited primarily to enquiries of company personnel and analytical review procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit on the financial statements and, accordingly, we do not express an audit opinion.
Chartered Accountants Wellington, New Zealand 14 November 2012
We have reviewed the financial statements of the Group for the period ended 30 September 2012 in accordance with the Review Engagement Standards issued in New Zealand.
We have no relationship with or interests in, Xero Limited other than in our capacities as accountants performing this review, and providers of taxation and other assurance services. These services have not impaired our independence as auditors of the Group.
==> picture [88 x 68] intentionally omitted <==
19
20
REGISTERED OFFICE:
DIRECTORS:
3 MARKET LANE SAM KNOWLES PO BOX 24 537 CHAIRMAN WELLINGTON 6142 ROD DRURY TELEPHONE: +64 4 819 4800 CRAIG ELLIOTT FACSIMILE: + 64 4 819 4801 SAM MORGAN WEBSITE: GRAHAM SHAW WWW.XERO.COM CRAIG WINKLER
MANAGEMENT:
AUDITOR:
ROD DRURY CHIEF EXECUTIVE, CO–FOUNDER
PRICEWATERHOUSECOOPERS LEGAL ADVISOR: BELL GULLY
HAMISH EDWARDS CO–FOUNDER ROSS JENKINS CHIEF FINANCIAL OFFICER
COMPANY SECRETARY: ROSS JENKINS
ALASTAIR GRIGG CHIEF OPERATING OFFICER
NATASHA HUBBARD GENERAL MANAGER HUMAN RESOURCES PAULA JACKSON GENERAL MANAGER MARKETING NATHAN MCLEAN GENERAL MANAGER GLOBAL FACILITIES
NIGEL PIPER GENERAL MANAGER CUSTOMER SUPPORT DUNCAN RITCHIE GENERAL MANAGER OPERATIONS
PAUL WILLIAMS
BANKERS:
ASB BANK LIMITED BANK OF NEW ZEALAND LIMITED HSBC LIMITED NATIONAL AUSTRALIA BANK LIMITED SILICON VALLEY BANK
SHARE REGISTRAR:
NEW ZEALAND: LINK MARKET SERVICES LIMITED LEVEL 16, BROOKFIELDS HOUSE 19 VICTORIA STREET PO BOX 91 976, AUCKLAND 1142 TELEPHONE: +64 9 375 5999 FACSIMILE: +64 9 375 5990
AUSTRALIA:
LINK MARKET SERVICES LIMITED LEVEL 12, 680 GEORGE STREET SYDNEY, NSW 2000 LOCKED BAG A14 SYDNEY SOUTH NSW 1235 TELEPHONE: 1 300 554 474, +61 2 8280 7111 FACSIMILE: +61 2 9287 0303
GENERAL MANAGER FINANCE
LEANNE GRAHAM COUNTRY MANAGER
– NEW ZEALAND
CHRIS RIDD MANAGING DIRECTOR
– AUSTRALIA
GARY TURNER MANAGING DIRECTOR
– UNITED KINGDOM
JAMIE SUTHERLAND PRESIDENT
– UNITED STATES
Beautiful accounting software O8OO GET XERO
21
==> picture [46 x 13] intentionally omitted <==
==> picture [91 x 9] intentionally omitted <==
==> picture [125 x 97] intentionally omitted <==
==> picture [452 x 53] intentionally omitted <==
==> picture [441 x 175] intentionally omitted <==
==> picture [19 x 8] intentionally omitted <==
==> picture [28 x 11] intentionally omitted <==
==> picture [75 x 27] intentionally omitted <==
==> picture [43 x 5] intentionally omitted <==
==> picture [46 x 14] intentionally omitted <==
==> picture [91 x 9] intentionally omitted <==
==> picture [29 x 27] intentionally omitted <==
==> picture [24 x 14] intentionally omitted <==
==> picture [453 x 261] intentionally omitted <==
==> picture [27 x 10] intentionally omitted <==
==> picture [71 x 44] intentionally omitted <==