MYOB and Xero appeal equally to shareholders

Published on the 27/08/2015 | Written by Beverley Head


performance dropping

The fortunes of accounting software rivals MYOB and Xero are at a curious inflexion point with shareholders valuing them equally at $1.7billion…

The fierce rivalry between accounting software vendors MYOB and Xero is well documented. Both claim to be more innovative than the other; both claim the other’s claims are inflated. But Australian investors – at least for now – have put them on an equal footing.

Since relisting on the Australian share market earlier this year MYOB’s share price has slid from $3.89 to $3.10 – a fall of 20.31 percent. However Xero’s share price has fallen by 33.42 percent over the same period, to $12.55 at time of writing which pegs the sharemarket valuation of each company level at $1.7 billion.

MYOB released its first half results today – the first set of six monthly figures since the IPO. It claimed revenues of $161 million and a net after profit tax of $40 million. The company also claimed that 94 percent of its revenues were recurring, suggesting that its move to an as a service, or cloud model, is paying off.

MYOB said that it had grown the number of small and medium enterprise cloud subscriptions to 142,000 by the end of June, and that this was now sitting at around 150,000. It is in this space that it competes head on with Xero.

Earlier this month Xero claimed that it now had 250,000 Australian users of its cloud accounting platform – so ahead of MYOB’s stake in that market. Overall however MYOB claims that it has 528,000 paying customers for its spectrum of software which is broader than that offered by Xero.

In its year to the end of March Xero reported revenues of $123 million, and a net loss of $69.5 million. Although the company has yet to report a profit, preferring to invest in growth, Xero CEO Rod Drury said that the company, which has cash reserves north of $240 million, could switch to profitability any time it wanted.

Neither company is resting on its laurels. MYOB CEO Tim Reed today said that the company had invested more than $115 million in research and development in the past three years.

“We are investing 13 to 16 percent of our revenue to drive innovation in the cloud. For instance, we plan to take the very popular BankLink product to the cloud in the future so that accountants can leverage the same functionality they love with all the benefits of working online.”

Xero meanwhile is continuing to ramp its US plans, although its oft touted US listing seems unlikely now until well into 2016.

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