MYOB reports record revenue, ebitda, but debt mountain grows, net loss widens

MYOB has reported record full-year ebitda and revenue, but also an increase to its debt mountain and a wider net loss.

Earnings before interest, tax, depreciation and amortisation increased 15% over 2013 to $A138 million for the year to December 31, 2014.

Revenue was up 16% to $A287 million, driven in part by MYOB's acquisition of NZ companies PayGlobal (in August ) and Banklink (for $138 millon mid-way through the prior year, funded in part by listing debt on the ASX).

The company's net loss widened from $A14.1million to $A23.2 million.

Net debt and liabilities increased from a year-ago $A725 million to $A865 million. 

Operating cash flow is up 19% driven by 86% operating cash conversion, and A$118.5 million operating cash to cover A$51.1 million of interest payments, the company says.

MYOB — Xero's chief rival in Australia and NZ — is widely tipped for an IPO. 

CEO Tim Reed skipped around directly questions about an ASX listing.

But in a signal the Melbourne-based software company recently is preparing to float, Mr Reed broke-out paying customer numbers: 500,000 across Australia in New Zealand, including 116,000 in the cloud, up from a year-ago 64,000 (Xero has 400,000 worldwide, all in the cloud; in 2014, its Aussie customers increased 100% to 158,000; its New Zealand customers were up 38% to 119,000). It's hard to see why it would reveal this commercially sensitive information if it wasn't gearing up for a listing.

Xero is challenging MYOB to detail its customer numbers by country, product and ARPU, and say how many are new customers vs transferring across from its desktop products.

On a midday conference call, CEO Tim Reed would not provide further customer breakdown details, but did reiterate that more new small-to-medium customers are choosing MYOB cloud solutions over the company's desktop products. In the December quarter, the number choosing cloud was 67% versus 48% in the year-ago-quarter and 10% three years ago.

Cloud focus
The CEO said MYOB has spent $A42 million on R&D and product development over the past year. A lot of that money has been spent on moving its two practice solutions (software for accounts), Accountants Office and Accountants Enterprise, to the cloud, with new online ledger features. At its recent Australasian roadshow, the company also demo'd a new “smart bill” that allows a user to email an invoice received as a PDF to MYOB AccountRight. The software uses optical character recognition to suck the key information from the invoice, saving data entry. MYOB also introduced a new service in 2014 that allows a smartphone to take credit card and eftpos payments.

All journalists on the conference call had the same question: Can you confirm the IPO? "All I can say today is that we're extremely proud of the operational result," Mr Reed said.

The company's finance report, just released to the ASX (where MYOB has listed debt), dryly notes: "The MYOB group of companies, of which MYOB Holdings Pty Limited is a member, are currently investigating a range of potential changes to the funding structure. At the time of signing these accounts a number of options are still being considered."

ckeall@nbr.co.nz

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