Want to invest ethically for a brighter future?
(but still make lots of money)?

Want to invest ethically for a brighter future? (but still make lots of money)?

 Take Rask’s FREE Ethical Investing course today.

  • Online & 100% free
  • ETFs, shares & Super
Want to invest ethically for a brighter future? 
(but still make lots of money)?

 Take Rask’s FREE online Ethical Investing course.

Xero Limited (ASX: XRO) share price in focus: HY report summary

Xero Limited (ASX: XRO) reported its FY21 half-year result to investors showing more strong growth. Is the Xero share price a buy after this report?

Xero’s record subscribers

The cloud accounting software business revealed that its operating revenue went up by 21% to NZ$410 million.

This was driven by total subscribers rising by 19% to 2.45 million, though the net subscriber additions decreased by 30% to 168,000. The average revenue per user or APRU decreased by 4% to NZ$29.81.

Annualised monthly recurring revenue grew by 15% to NZ$877.5 million, showing that revenue can grow further with just the existing client base.

As a sign of Xero’s growing profitability, the gross profit margin improved by another 50 basis points (0.5%) to 85.7%.

Xero’s EBITDA (click here to learn what EBITDA means) went up by 86% to NZ$120.7 million. Net profit after tax (NPAT) grew from NZ$1.3 million to NZ$34.5 million. Finally, free cash flow grew from NZ$4.8 million to NZ$54.3 million.

Looking at individual country subscriber growth:

  • Australian subscribers grew 21% to 1.01 million
  • UK subscribers grew 19% to 638,000 (and revenue rose 33%)
  • New Zealand subscribers went up 13% to 414,000
  • North America subscribers rose by 17% to 251,000 , and
  • The ‘rest of world’ subscribers surged 37% to 136,000.

Other important highlights

Xero said it continued to prioritise investing in the product for customers, with product development spending of $140 million in the first half of FY21, which was 29% higher than last year.

The ASX tech share said that it reduced sales & marketing costs by 10% compared to the prior corresponding period, demonstrating its disciplined financial management during this uncertain period. This is partly why EBITDA, free cash flow and net profit grew so much this period. It expects to return to normal marketing spending as conditions normalise.

Xero reported that overall monthly recurring revenue churn in the first half was 1.11%, similar to the first half of FY20.

Steve Vamos says result demonstrates value

Xero CEO Steve Vamos said: “This result demonstrates the value our customers attribute to their Xero subscription and the underlying strength of Xero’s business model. We continue to prioritise investment in customer growth and product development in line with the long term opportunity we see.

During a difficult period, it’s pleasing to report we grew to exceed one million subscribers in both Australia and in our international segment.”

Time to buy Xero?

Xero said it still has ambitions for high growth with disciplined cost management and targeted allocation of capital whilst innovating and investing in new products and customer growth.

It’s doing extremely well at growing subscribers and revenue, despite its customer base (of smaller businesses) bearing the brunt of this pandemic recession.

The Xero share price has gone up 54% over the past year. Investors are pricing in a lot of growth, and the value is being further boosted by low-interest rates.

If you invest for the long term then Xero could still be worth owning. But I think Pushpay Holdings Ltd (ASX: PPH) looks the best value out of the great ASX growth shares, and it’s earlier on in its growth journey.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.