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Xero cracks $2 bln market cap, lifting Drury's paper fortune to $388M

Thursday 4th July 2013

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Xero, the cloud-based accounting software firm, has doubled its market capitalisation in just four months, rising above $2 billion today, having still to turn a profit.

The shares rose 3.9 percent to $17.40 on turnover of some $935,000, valuing the company at $2.04 billion and adding to its 120 percent jump this year. That makes it the 11th biggest company on the stock exchange, leapfrogging online auction site Trade Me, which is valued at $1.96 billion.

The Wellington-based company joined the billion-dollar club in March when its stock price reached $8.60 and is seen as the frontrunner for locally listed tech companies alongside governance app maker Diligent Board Member Services. Spy software maker Wynyard Group will be the latest addition to the growing tech sector on the bourse when it lists on July 19.

In May, Xero chairman Sam Knowles and chief operating officer Alastair Grigg cashed in some of their shares at the end of a 'black-out' period when the share price was about $13 for $1 million and $2.8 million respectively.

Xero director Sam Morgan, of Trade Me fame, sold 1 million shares at $7.40 in December, reducing his stake to 4.37 percent, a month after the company's three biggest shareholders - chief executive Rod Drury, director Craig Winkler and co-founder Hamish Edward - sold a total of $22 million shares at $6 apiece.

As at March 31, Drury was still the biggest shareholder with a stake of 21.7 million shares, or about 19 percent, worth $387.6 million at today's price. He's followed by Winkler with 18.5 million shares, or 16 percent, then Matrix Capital with 9.8 percent and Thiel with 7 percent.

The company has 4,715 shareholders on its register, with 54 of them holding 83.7 percent.

The accounting firm reported an annual loss of $14.4 million in the year ended March 31 as it continues to chase sales growth at the expense of short-term profits, doubling sales to $39 million. That means the company is valued at 52 times sales.

Xero has managed to attract 157,000 customers, the bulk of which are in Australia and New Zealand, giving it annualised monthly revenue of about $51.5 million, or about $328 per client.

The company is looking to reach one million paying clients, with about 350,000 in Australia and 360,000 in the US, according to Xero's investor presentation in May.

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