Xero to quit NZX for ASX sole listing

Xero, one of New Zealand’s most prominent listed companies, has turned its back on the NZX, announcing yesterday it would delist and consolidate its listing solely on the Australian Stock Exchange.

The drift away from the NZX will be concerning to both the exchange and investors.

Xero chairman Graham Smith said in a statement to the NZX Xero was an ambitious New Zealand business and would remain headquartered and domiciled in New Zealand.

As Xero continued to grow, gaining better access to deeper capital markets, increased trading liquidity and a broader base of potential investors was critical to fulfilling the company’s aspirations.A sole listing on the ASX would advance those goals,  he said.

Although more than half of Xero’s employees lived and worked in New Zealand, 90% of the company’s revenue now came from outside the country.

The company’s strategy was to drive further growth in markets, including the United Kingdom, North America and Southeast Asia.

"We thank the NZX for providing a valuable platform to support Xero’s first decade as a public company," Mr Smith said.

Craigs Investment Partners broker Chris Timms said the announcement caught the market by surprise.

He understood the reasoning behind Xero’s move, but exciting companies like Xero were hard to replace on the NZX.

"This was one of those companies which added enthusiasm and a little bit of spice to our market."

The NZX was getting smaller with takeovers or other companies moving to the ASX, he said.

"Xero is not unloved. Eleven analysts cover the company and I assume that is on both sides of the Ditch. They may feel listing solely in Australia will improve their visibility and if Xero needs funding, it is easier to do over there."

Some of the other companies which had left the NZX were small but they still left a hole for investors, Mr Timms said.

It was not easy to attract significant firms or replace the ones which were lost.

The news of the move to Australia overshadowed some pleasing financial results for the cloud-based accounting software firm, he said. Xero’s net loss was $21million in the six months ended September 30 from a loss of $43.9million a year earlier. Earnings before interest, tax, depreciation and amortisation was $5.4million compared with an ebitda loss of $25.9million a year earlier. Its ebitda margin turned positive at 3% from negative 19% a year earlier. Operating revenue jumped 37% to $187.8million.

The company recorded positive operating cash flow of $6.1million in the first half, a $19.4million improvement on a year earlier.

Mr Timms said some investors would be disappointed the company had decided to reinvest its positive cash flow back into growth. A few investors would have expected a return on their investment at this stage.

Xero’s shares last traded at $32.59, down more than a $1 on the opening price. Mr Timms said that was probably a joint reaction to the no-dividend payout and the move to Australia. Some investors might not be comfortable with the sole ASX listing.