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Xero has formally responded to enquiries by the ASX concerning the company’s disclosure practices leading up to and through its recent earnings announcement.
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Xero responds to ASX questions on disclosure practices
04 May 2015
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8 minute read
The ASX enquiries came after Xero released its 2015 financial results in which the company claimed a net loss of $67.56 million, a jump of 96 per cent from the previous year.
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In the statement, Xero said it believes it has complied with the ASX's listing rules and, in particular, with its continuous disclosure obligation under Listing Rule 3.1.
This rule, entitled Immediate notice of material information states that, “Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities, the entity must immediately tell ASX that information."
Xero was asked whether the company considers the loss to be information that a reasonable person would expect to have a material effect on the price or value of its securities. In response, Xero has issued a statement noting it does not believe this to be so and defending its reporting practices.
“In the Company’s opinion, the key indicators for the value of the Company’s shares are the same as for other high growth SaaS companies,” it said.
“Bearing that in mind, overall, Xero’s results for the 12 months to 31 March 2015 were very positive, with strong results for critical indicators such as customer growth and subscription revenue, and an end of financial year cash balance that is in line with consensus analyst estimates.
“Xero believes that EBIT and NPAT figures are far less relevant indicators of the value of Xero’s shares,” the statement read.
“A reasonable person would not regard EBIT and NPAT figures as key indicators in determining the value of Xero’s shares, particularly given Xero’s stage of growth and the nature of its business as a Software as a Service (SaaS) company.”
Xero added that the resignation of CFO Douglas Jeffries on the day the results were announced “amplified any negative market sentiment relating to the Results Announcement”.
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