MYOB buys third NZ company

MYOB has signed an agreement to acquire Wellington company Ace Payroll Plus for $7 million. Ace stands to receive a further $7 million next year if "certain conditions" are met.

According to Companies Office records, Ace is 90% owned by Julian Eriksen and Philip Erikson.

MYOB refused to detail Ace's revenue and earnings but chief financial officer Richard Moore did tell NBR ONLINE, “It is a profitable business that will be immediately accretive to both our earnings and earnings per share, although the timing of the deal will mean the first-half earnings impact will not be material.  Due to the sizeable overlap with our existing MYOB client base, the increase in our number of paying users will also be small but it will help bolster our arpu (average revenue per user) in New Zealand. And it will deepen our relationship with many New Zealand clients, as we will now provide them with both accounting and payroll software.”

Ace is the third New Zealand company the Melbourne-based MYOB has bought over the past three years, following Christchurch company PayGlobal ($9.2 million) and Auckland-based Banklink (for $136 million).

MYOB competes against the globally-focused Xero across Australia and New Zealand.

Both companies have bought payroll software providers recently to beef up their offerings.

Ace's payroll software is a desktop product, but CEO Tim Reed says it will be migrated to the cloud as part of his company's broader push to create a "next-generation billing system".

MYOB [ASX:MYO] listed on the ASX on May 4, with its shares closing at $A3.89. Yesterday it closed at $A3.59, giving the company a market cap of $A2.1 billion. 

In its prospectus, MYOB said it expects to make a statutory net loss of $A43.6 million for 2015, and a $A52.5 million profit on a pro forma basis. Mr Reed says the pro forma number reflects the debt pay-down that took place with the IPO, and the impact of recent acquisitions if they were extrapolated to a full financial year. The company is positioned to deliver on its plan to pay out 70% of earnings or around $A50 million to $A60 million in dividends within a year of listing, he says.