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MYOB lifts sales, profit in NZ as Xero rival awaits clearance for Reckon acquisition

Wednesday 7th March 2018

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MYOB Group, the Australian tax, accounting and business software company, lifted sales and profit in New Zealand in 2017 while seeking regulatory clearance on both sides of the Tasman to buy accounting software firm Reckon.

Profit at MYOB New Zealand Group rose to $4.8 million in calendar 2017 from $2.98 million a year earlier, according to the company's annual report. Sales rose to $97.9 million from $83.5 million.

The Australian Competition & Consumer Commission and the Commerce Commission are currently considering the implications of MYOB's proposal to buy Reckon for A$180 million. The NZ regulator said in a letter of issues last month that it was "concerned that the proposed merger would give rise to competition issues in a number of markets for the provision of practice software to accounting practices as a result of horizontal unilateral effects." The regulator said it understood there were four providers of accounting compliance modules designed specifically for New Zealand - MYOB, Reckon, CCH and Xero. Submissions closed yesterday.

Acquisitions have helped drive MYOB's growth in recent years including Kiwi enterprise resource planning (ERP) software writer Greentree, Ace Payrolls and IMS, and Australasian payments processor Paycorp. Xero has a March 31 balance date and in its first half ended Sept. 30, revenue from New Zealand rose 28 percent to $37.5 million while its net loss narrowed to $21 million. The two companies are on different growth trajectories - last month MYOB said it was on track to reach 1 million online subscribers in Australia and New Zealand by 2020 while Xero, which isn't yet profitable after chasing sales growth, reached 1 million subscribers worldwide a year ago.

A breakdown of MYOB's New Zealand sales shows revenue from the sale of goods was little changed in 2017 at about $6.2 million from $6.3 million a year earlier. Revenue from maintenance and support services climbed to $68.8 million from $62.7 million and revenue from other parts of the MYOB group climbed to $17 million from $11.8 million.

Parent company MYOB Group, which counts private equity firm Bain Capital as its biggest shareholder, released its full-year results last month and chair Justin Milne trumpeted the company's record online growth of 60 percent. Total revenue rose 12 percent to A$417 million, or which 61 percent was sales to SMEs, and profit gained 16 percent to about A$61 million. With a final dividend of 5.75 Australian cents a share, the company returned A$73 million to shareholders last year.

It expects to launch its PayDirect Online service in New Zealand in the next 12 months, allowing SMEs to raise an online invoice and email it to a customer. It inherited client relationships with Vodafone, Telstra, Bank of New Zealand and GraysOnline with the acquisition of Paycorp. Buying Reckon "would strengthen MYOB’s growing adviser base, creating an opportunity to accelerate online SME growth via a larger referral network," the parent company said last month.

MYOB's shares last traded at A$3.10 on the ASX and have fallen 13 percent in the past 12 months while Xero last traded at A$31.77 and has soared 84 percent in the same period.


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