Published on the 16/10/2013 | Written by Newsdesk
Listed accounting software house Xero has signalled that its $NZ180 million capital raising to fund global expansion won’t diminish its attention to local customers and the new Australian tax platform…
New Zealand based Xero this week announced it had completed a $NZ180 million capital raising through the issue of 9.92 million new shares to fund global – and particularly US – growth. Although $NZ147 million of the capital raised came from US investors, Australian managing director Chris Ridd said that although the primary intention of the capital raising was to support international operations, “for local users this is good news”.
He said: “We have got $A200 million in the bank and can expand unencumbered. Australia is a fast growing market still,” adding that the Melbourne-based R&D development team working on Xero’s new tax platform should benefit from the funds injection. “This means that we have got funding to expand teams across all our operations,” he added.
As far as the Melbourne development team was concerned he said, “before the capital raising we had plans to continue to hire – now we are unencumbered”. The company has already pledged that by the second quarter of 2014 it will have a cloud-based tax system available for Australian users.
Investors signaled their support for the strategy with shares in Xero surging 5.78 percent to $A18.30 the day after the capital raising was announced. Since April Xero’s share prices have doubled.
Ridd said that the latest round of investment meant that the organisation would continue to move away from its New Zealand centred development toward a more global R&D approach. While this would add complexity to the organisation Ridd said it would help grow the company globally. It already has a team of around 60 people in the US (it has more than 500 staff worldwide) which will now be expanded.
The company, which has 211,000 customers worldwide, announced in early October that its half year revenues had risen to $NZ30.3 million compared to $NZ16.5 million in the similar period a year earlier.
Xero has however yet to make a profit. Ridd said that while achieving profitability remained important to the company, “We have made some strategic investments ahead of profitability. What we are seeing is that the sharemarket is favouring the approach we are taking.”
