Making Tax Digital drives Xero revenue growth

Cloud accounting software provider Xero has reported a 36% hike in operating revenue to NZ $552.8m (£283m) for the 2019 financial year and signed a record 151,000 new users in the UK

The UK customer base increased 48% to 463,000 over a single year and Xero said new customers in the second half of FY19 were strong at 108,000, driven partly by the introduction of Making Tax Digital, the government’s new mandatory digital VAT reporting. UK revenue was up by 50% at £62m.

Global subscriber numbers rose by 31% to 1.8m, and Xero reported 32% growth in annualised monthly recurring revenue (AMRR) to $638.2m. New international subscriber numbers hit 239,000, overtaking those from Australia and New Zealand for the first time, with 151,000 new users signed up in the UK.

However, despite the growth in subscriber numbers, net loss for the year increased to NZ$27.1m which the company said was primarily due to impairments in the first half of the year, with a net profit of NZ$1.4m achieved in the second half of the year. EBITDA of $73.2m increased from $48.2m in the prior period year, while EBITDA excluding impairments increased 84% to $91.8m.

Xero said this meant it delivered a positive free cashflow result, of $6.5m, for the first time, equating to 1.2% of operating revenue.

The company also made a number of strategic acquisitions during FY19, including Hubdoc, a data capture solution, and Instafile, a UK tax filing and compliance tool.

Steve Vamo, Xero CEO, said: ‘We’ve delivered a strong result with a number of major milestones for Xero including our first positive free cashflow result, and the UK adding more than 100,000 subscribers within a six-month period. Another important milestone was the positive bottom line result delivered in the second half, which demonstrates our improving profitability.

‘As we head into FY20, we’re making great progress towards our strategic priority of driving cloud accounting adoption globally. We have a genuine competitive edge by prioritising investment in growth, and partnering closely with accountants and bookkeepers, to deliver a human-centered technology experience for small business communities.’

A serious IT outage in September affected the worldwide customer base and was attributed to problems with a network reconfiguration which menat customers were unable to use the system for seven and a half hours, but the company confirmed at the time that there was no risk to data security due to the downtime. 

Pat Sweet

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