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MYOB adds 57% more subscribers in 2018 but total online customers still lag Xero's

Thursday 21st February 2019

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Accounting software firm MYOB has been adding online customers at more than twice the rate of arch-rival Xero but its total subscriber numbers are still two-thirds of Xero’s numbers for Australia and New Zealand.

MYOB added 229,000 online subscribers in calendar 2018, a 57 percent increase, taking total online customer numbers to 628,000 and chair Justin Milne says the company is on track to reach 1 million online subscribers in 2020.

That compares to Xero’s Australasian customer numbers of 981,000 at Sept. 30, a 24 percent increase, but that means only 192,000 customers were added – Xero’s total customers at that date were 1.58 million but MYOB doesn’t compete outside of Australasia.

Xero's growth rate used to be faster when it had fewer customers and MYOB's rate of growth is also starting to slow a little now - subscriber numbers grew 60 percent in 2017.

But MYOB just can’t seem to get used to the idea that Xero is the dominant player in its market.

“The superior growth we’ve seen in online subscribers has placed us in the leadership position in the online accounting market,” says chief executive Tim Reed.

Xero founder Rod Drury started his company in 2007 and stole a march on MYOB, which was then the Australasian market leader for desktop software, a part of the market that is now slowly dying as online products gain ever greater market traction.

While MYOB operates in other markets, notably with its enterprise product which is aimed at the larger end of town, it says its online figures are comparable to those of its competitors.

Another slide in the company’s presentation shows it had 388,000 paying small and medium enterprises (SMEs) at Dec. 31 and MYOB says the balance are practice ledgers used by accountants to complete compliance work for SMEs that don’t use one of MYOB’s SME solutions.

“Our competitors include practice ledgers in their online subscription count, so it’s all consistent in terms of reporting.”

MYOB does still have 253,000 paying customers still using its desktop software, but that number has dropped from 314,000 a year ago.

It says it is converting those customers to its online products at an accelerating rate – they were converting at a 6 percent pace in 2016, at 10 percent in 2017 and at 12 percent in 2018.

Nevertheless, those converted customers are accounting for a smaller proportion on new SME customer gains – they went from 60 percent in 2017 to 54 percent in 2018 – because MYOB’s sales to new SMEs are growing faster.

MYOB’s annual net profit rose 5 percent to A$63.8 million. The company has agreed to a scheme of arrangement with private equity giant KKR whose offer is A$3.40 per share.

Part of the agreement allowed MYOB to seek a higher offer – KKR had agreed to sell into any higher offer that materialised – up until close of business today. MYOB says it will announce the outcome of its “go shop” period on Friday.

The market appears sceptical a rival offerer will emerge because the shares are trading at A$3.37, down 4 cents from Wednesday.

(BusinessDesk)

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