Income Statement 12 Months Break Even by wjo51440

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									Xero limited interim report
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
PagE 2                 Xero INTerIM reporT
                       FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




 CONTENTS

Results	overview	                                                                                                                                           2
Highlights                                                                                                                                                  2
Commentary	                                                                                                                                                 3
Consolidated	income	statement	                                                                                                                              4
Consolidated	statement	of	comprehensive	income	                                                                                                             4
Consolidated	statement	of	changes	in	equity	                                                                                                                5
Consolidated	statement	of	financial	position	                                                                                                               6
Consolidated	statement	of	cash	flows	                                                                                                                       7
Notes to the condensed financial statements                                                                                                                 8




 RESulTS OvERviEw


 Reporting period                                                                                                             6 months to 30 September 2010

 Previous reporting period                                                                                                    6 months to 30 September 2009

                                                                                                        Amount ($000s)                  Percentage Change
 Revenues from ordinary activities                                                                                   3,727                             193%

 Profit / (loss) from ordinary activities after tax attributable to security holder                                 (4,726)                             24%

 Net profit / (loss) attributable to security holder                                                                (4,726)                             24%

                                                                                                                 Amount                   Imputed Amount
 Interim / Final Dividend                                                                                    per Security                     per Security
 No dividend is proposed                                                                                   Not applicable                     Not applicable



 Record date                                                                                               Not applicable

 Dividend payment date                                                                                     Not applicable




 HigHligHTS


 •	 Near	tripling	of	half	year	operating	revenues	from	$1.3	million	                  •	 Net	loss	of	$4.7	million	–	an	increase	of	24%,	is	expected	to	be	the	
    to	$3.7	million.	This	compares	with	2010	full-year	revenues	of	                      maximum	loss	incurred	as	the	company	drives	toward	break-even.
    $3.4	million.	Annualised	subscriptions	are	running	at	                            •	 Cash	at	bank	of	$16.6	million	as	at	30	September	2010	–	excludes	
    approximately	$9.0	million.                                                          $4	million	additional	monies	raised	by	the	Peter	Thiel	strategic	
 •	 Successful	recruitment	to	resource	our	operating	model	in	                           placement	in	October.	Xero	anticipates	having	significant	cash	
    New	Zealand,	Australia	and	the	United	Kingdom	lifted	headcount	                      reserves	at	its	planned	break-even	point.
    from 73 to 101 and therefore a planned rise in operating costs
    to	$7.9	million	–	up	59%.	
                                                                                                           Xero INTerIM reporT                 PagE 3
                                                                                     FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




 COmmENTaRy

Financial performance                                                      To	assist	accountants	with	the	move	to	the	cloud,	Xero	has	taken	the	
Xero	is	seeing	the	benefit	of	its	substantial	investment	and	focused	      lead in defining a full suite of cloud solutions tailored for accountancy
strategy,	with	a	near	tripling	of	revenues	for	the	six	months	to	30	       practices.	Working	closely	with	Microsoft	and	other	best	of	breed	
September	2010.	As	at	the	date	of	this	release,	the	company	had	           partners,	Xero’s	Modern	Practice	initiative	allows	accounting	practices	
27,000	paying	business	customers.	                                         to migrate from expensive internally managed server infrastructure
                                                                           to	commodity	priced	cloud	services.	This	solution	includes	document	
Cost	levels	directly	reflect	the	company’s	strategy	to	build	a	team	       management, practice management, accounts preparation,
and platform to exploit the substantial opportunity and compete            eMarketing,	website	development,	content	management	and	tax.
with	Intuit,	Sage	and	MYOB.	Xero	is	successfully	winning	market	share	
against	the	incumbents	while	operating	at	a	fraction	of	their	costs	–	     Xero	made	its	first	outside	investment	of	$200,000	to	buy	a	15.9%	
this	new	operating	mode	dramatically	changes	the	economics	of	             stake	in	Max	Solutions	Limited	to	develop	a	tax	lodgement	system.	
this	sector.	                                                              New	Zealand	Tax	is	an	important	companion	product,	but	not	part	
                                                                           of	the	company’s	core	product	strategy.
The	loss	of	$4.7	million	for	the	six	months	to	30	September	was	
comparable	with	the	loss	for	the	preceding	six	month	period	ended	31	      Investment	from	other	companies	connecting	to	Xero’s	interfaces	
March	2010.	This	signals	the	turning	point	towards	profitability.	The	     continued	to	be	strong	for	the	period.	Numerous	new	companies	
board	expects	losses	will	reduce	from	now	on	as	the	company	heads	         have	developed	solutions	leveraging	Xero’s	high	value	ecosystem,	
towards	its	break-even	target.	                                            including	new	stock	and	point-of-sale	solutions.

The	UK	operation	is	on	target	to	achieve	monthly	break-even	in	the	        Continued expansion
fourth	quarter	of	calendar	2010	and	is	expected	to	benefit	from	the	
                                                                           The	company	demonstrated	competence	in	operating	across	multiple	
delivery	of	UK	bank	feeds	through	Yodlee	in	the	coming	months.	The	
                                                                           geographies.	The	solid	market	position	in	New	Zealand	and	experience	
Australian	operation	will	follow	in	the	first	quarter	of	calendar	2011.	
                                                                           gained	in	Australia	and	the	UK	provides	a	stable	foundation	for	
Company	monthly	break-even	remains	on	track	for	the	second	half	of	
                                                                           entering	larger	markets	over	time.	Xero	continues	to	take	a	measured	
calendar	2011	as	per	previous	guidance.
                                                                           approach	to	its	entry	into	the	vast	US	market	and	plans	to	establish	
                                                                           an	initial	team	on	the	ground	during	the	current	financial	period.	
Product update
Xero	continued	to	release	innovative	features,	taking	a	leadership	        The	latest	step	in	the	company’s	US	strategy	was	the	private	placement	
position	in	the	emerging	online	accounting	space.	During	the	period,	      by	Facebook	investor	Peter	Thiel	of	2.6	million	ordinary	shares	at	
Xero	delivered	best	in	class	support	for	the	New	Zealand	GST	change	       $1.4918,	raising	a	total	of	$4.0	million	in	cash.	Xero’s	ability	to	secure	
and	delivered	the	infrastructure	for	bank	feeds	by	US	online	banking	      significant	investment	and	access	to	networks	of	such	industry	leaders	
solution	provider	Yodlee,	which	will	provide	access	to	over	11,000	        provides	confidence	that	the	company	is	on	track.
global	account	sources.                                                    Summary
The	company	continued	its	strategic	investment	in	Xero	Personal	           Taking	on	the	large	but	fragmented	international	small	business	
and	delivered	several	feature	updates.	                                    market	is	a	significant	challenge	and	does	take	time.	However,	the	
                                                                           initial	market	assumptions	are	playing	out	as	expected	and	Xero	
Competitive position                                                       continues	to	execute	on	its	strategy,	with	revenue	growing	strongly.	
The	inability	of	the	incumbents	to	deliver	online	products	with	the	
                                                                           Xero	thanks	its	supportive	shareholders	who	provide	the	resources	
quality,	service,	reliability	and	innovation	of	Xero	is	consistent	with	
                                                                           for	the	company	to	continue	to	build	a	world	class	business.
our	assumptions	when	we	started	the	business.	There	is	significant	
market	share	to	be	obtained	over	the	next	two	years	as	online	
accounting brings together client side products and accountant
side	professional	tools.	The	current	operating	model	of	the	
incumbents	commonly	features	separate	retail	and	accountants’	
business	divisions.	The	incumbents	now	face	the	double	challenge	
of	preserving	revenue	from	these	product	lines,	while	also	
overcoming the technical hurdles to redevelop disparate                    Phil Norman                         Rod Drury
products	into	an	integrated	‘single	ledger’	solution.                      Chairman                            Chief	Executive

This	disruption	is	already	evident	in	the	New	Zealand	market	
where	Xero’s	strategic	accountant	channel	grew	significantly	              10 November 2010
over	the	period	–	up	63%	to	1500	compared	with	the	six	months	
to	31	March	2010.	More	than	half	the	accountants	in	New	Zealand	
have	Xero	customers.	A	growing	number	of	early	adopter	
accountants	are	100%	Xero	and	mainstream	firms	are	
preparing	for	the	transition	over	the	next	two	years.
PagE 4                Xero INTerIM reporT
                      FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




 CONSOlidaTEd iNCOmE STaTEmENT

                                                                                  6 months       6 months         12 months
                                                                                 Unaudited      Unaudited     Audited Group
                                                                                Group 2010     Group 2009     31 March 2010
                                                                        Notes      ($000s)        ($000s)           ($000s)
 Operating revenue & other income                                          2        3,780          	1,350	           	3,395	
 Operating expenses                                                                 (7,970)       	(5,020)          (11,466)
 Depreciation & amortisation                                                         	(957)          (638)           (1,408)
 Operating deficit                                                                  	(5,147)       (4,308)          (9,479)


 Interest
 Interest	income                                                                      	435	          496             1,029
 Interest	expense                                                                       	–	             (1)              	–	
 Net (loss) before tax                                                              (4,712)        (3,813)          	(8,450)
 Income	tax	                                                                           (14)            	–	               	–	
 Net (loss) after tax attributable to the shareholders of the company               (4,726)        (3,813)          	(8,450)


 Earnings per share
 Basic	earnings	per	share	(dollars)                                                 	(0.05)         	(0.05)           	(0.10)
 Diluted earnings per share (dollars)                                               	(0.05)         	(0.05)           	(0.10)




 CONSOlidaTEd STaTEmENT Of COmPREHENSivE iNCOmE

                                                                                  6 months       6 months         12 months
                                                                                 Unaudited      Unaudited     Audited Group
                                                                                Group 2010     Group 2009     31 March 2010
                                                                                   ($000s)        ($000s)           ($000s)
 Net loss after tax for the period                                                  (4,726)        (3,813)          	(8,450)


 Other comprehensive income
 Exchange	difference	on	translation	of	international	subsidiaries                       	–	           (28)               31
 Other comprehensive income for the period, net of tax                                  	–	           (28)               31
 Total comprehensive loss for the period attributable
 to the shareholders of the company                                                 (4,726)        (3,841)          (8,419)
                                                                                            Xero INTerIM reporT            PagE 5
                                                                      FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




CONSOlidaTEd STaTEmENT Of CHaNgES iN EquiTy

                                                                                                       Foreign
                                                                                                     currency
                                                                            Accumulated            translation
                                                       Share capital              losses               reserve     Total equity
                                                            ($000s)             ($000s)               ($000s)          ($000s)
Group (unaudited 30 September 2010)
Balance	at	1	April	2010                                     	45,123	             	(20,560)                  31         	24,594	
Net (loss) after tax                                             	–	               (4,726)                  	–	         (4,726)
Currency	translation	movements                                   	–	                    	–	                 	–	             	–	
Total comprehensive income                                       	–	               (4,726)                  	–	         (4,726)
Issue	of	ordinary	shares                                         	–	                    	–	                 	–	             	–	
Issue	of	shares	under	Employee	Restricted	Share	Plan           	859	                    	–	                 	–	           	859	
Forfeited	shares	re-issued	/	(not	re-issued)                   144                      	–	                 	–	            144
Balance at 30 September 2010                                46,126                (25,286)                  31         20,871


Group (unaudited 30 September 2009)
Balance	at	1	April	2009                                      17,130                (12,110)                 	–	         	5,020	
Net (loss) after tax                                             	–	                (3,813)                 	–	         (3,813)
Currency	translation	movements                                   	–	                    	–	                (28)            (28)
Total comprehensive income                                        –                (3,813)                 (28)         (3,841)
Issue	of	ordinary	shares                                    29,046                      	–	                 	–	        29,046
Cost	of	issue                                                 	(975)                    	–	                 	–	          	(975)
Buyback	of	shares                                             (740)                     	–	                 	–	          (740)
Forfeited	shares	re-issued	/	(not	re-issued)                    (19)                    	–	                 	–	            (19)
Balance as at 30 September 2009                             44,442                (15,923)                 (28)        28,491


Group (audited 31 March 2010)
Balance	at	1	April	2009                                      17,130                (12,110)                 	–	         	5,020	
Net (loss) after tax                                             	–	              	(8,450)                  	–	        	(8,450)
Currency	translation	movements                                   	–	                    	–	                 31              31
Total comprehensive income                                        –                (8,450)                  31          (8,419)
Issue	of	ordinary	shares                                     28,140                     	–	                 	–	        28,140
Buyback	of	shares                                             (740)                     	–	                 	–	           (740)
Issue	of	shares	under	Employee	Restricted	Share	Plan           602                      	–	                 	–	           602
Forfeited	shares	re-issued	/	(not	re-issued)                     (9)                    	–	                 	–	             (9)
Balance as at 31 March 2010                                  45,123              (20,560)                   31         24,594
PagE 6                 Xero INTerIM reporT
                       FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




 CONSOlidaTEd STaTEmENT Of fiNaNCial POSiTiON

                                                                              6 months      6 months         12 months
                                                                             Unaudited     Unaudited     Audited Group
                                                                            Group 2010    Group 2009     31 March 2010
                                                                    Notes      ($000s)       ($000s)           ($000s)
 Assets
 Non-current assets
 Property,	plant	&	equipment                                                      406            397              367
 Intangible	assets                                                              3,634          2,371            2,948
 Other	non-current	assets                                               4       1,484           496               	725	
 Total	non-current	assets                                                       	5,524	        3,264            4,040


 Current assets
 Cash	&	cash	equivalents                                                       	16,564	      	25,996	           21,397
 Current	tax	receivable                                                             	–	            9                	–	
 Trade	receivables	&	other	assets                                       4        1,707          970             	1,235	
 Total	current	assets                                                           18,271       	26,975	          22,632
 Total assets                                                                  23,795        30,239            26,672


 Liabilities
 Current liabilities
 Trade	payables	&	other	liabilities                                     5       2,909          1,748            2,078
 Current	tax	payable                                                               	15	            	–	              	–	
 Total	current	liabilities                                                      2,924          1,748            2,078
 Total liabilities                                                              2,924          1,748            2,078


 Net assets                                                                    20,871        28,491            24,594


 Equity
 Share capital                                                          3       46,126       44,442            	45,123	
 Accumulated	losses                                                           	(25,286)      	(15,923)        	(20,560)
 Foreign currency translation reserve                                               31           (28)               31


                                                                               20,871        28,491            24,594
                                                                       Xero INTerIM reporT             PagE 7
                                                 FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




CONSOlidaTEd STaTEmENT Of CaSH flOwS

                                                           6 months            6 months           12 months
                                                          Unaudited           Unaudited       Audited Group
                                                         Group 2010          Group 2009       31 March 2010
                                                            ($000s)             ($000s)             ($000s)
Operating activities
Cash was provided from
Receipts from customers                                       	3,450	               1,437            	2,851	
GST	received                                                       –                   48               64
Other income                                                      	58	                 74              123
Interest	received                                               	545	                 188              881
                                                              	4,053	               1,747            3,919


Cash was applied to
Payments to suppliers & employees                             (7,399)             	(5,056)          (10,714)
GST	paid                                                         	(55)                  (1)              –
Income	tax	paid	(RWT)                                              –                    –                –
                                                              	(7,454)            	(5,057)          (10,714)
Net cash flows from operating activities                      (3,401)              (3,310)          (6,795)


Investing activities
Cash was applied to
Purchase	of	property,	plant	&	equipment                          (137)               (117)            (198)
Capitalised	development	costs                                 	(1,252)               (711)           (1,749)
Intangible	assets                                                  (9)                  –               (33)
Sale of other assets                                               –                   13                –
Net cash flows from investing activities                      (1,398)                (815)          (1,980)


Financing activities
Cash was provided from
Share	buyback                                                      –                (744)             (740)
Share issue                                                        –             	28,050	           28,046
                                                                   –              27,306            27,306


Cash was applied to
Cost	of	share	issue                                                –                (944)             	(915)
Finance lease repayments                                           –                  (20)             (20)
                                                                   –                (964)             	(935)
Net cash flows from financing activities                           –              26,342            26,371


Net increase / (decrease) in cash held                        (4,799)              22,217           17,596
Foreign currency translation adjustment                          (34)                 (28)               (6)
Cash	&	cash	equivalents	at	beginning	of	period                21,397               3,807             3,807
Cash & cash equivalents at end of period                     16,564               25,996            21,397
PagE 8               Xero INTerIM reporT
                     FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




 NOTES TO THE CONdENSEd fiNaNCial STaTEmENTS


 1. BASIS OF PRESENTATION & ACCOUNTING POLICIES
 These	unaudited	consolidated	condensed	interim	financial	statements	of	Xero	Limited	(the	Company)	and	its	subsidiaries	(together	“the	
 Group”)	have	been	prepared	in	accordance	with	New	Zealand	Generally	Accepted	Accounting	Practice	and	comply	with	the	requirements	of	
 International	Accounting	Standard	(IAS)	34	Interim	Financial	Reporting	and	with	New	Zealand	Equivalent	to	International	Accounting	Standard	
 (IAS)	34	Interim	Financial	Reporting	issued	by	the	New	Zealand	Institute	of	Chartered	Accountants.	The	Company	and	Group	are	profit	
 oriented	entities.

 The	Company	is	an	issuer	for	the	purposes	of	the	New	Zealand	Financial	Reporting	Act	1993.

 The	unaudited	consolidated	condensed	interim	financial	statements	of	the	Group	for	the	six	months	ended	30	September	2010	have	
 been	prepared	using	the	same	accounting	policies	and	methods	of	computation	as,	and	should	be	read	in	conjunction	with,	the	financial	
 statements	and	related	notes	included	in	the	Group’s	Annual	Report	for	the	year	ended	31	March	2010.

 The	same	significant	judgements,	estimates	and	assumptions	included	in	the	notes	to	the	financial	statements	in	the	Group’s	Annual	Report	
 for	the	year	ended	31	March	2010	have	been	applied	to	these	interim	financial	statements.



                                                                                           6 months           6 months           12 months
                                                                                          Unaudited          Unaudited       Audited Group
                                                                                         Group 2010         Group 2009       31 March 2010
                                                                                            ($000s)            ($000s)             ($000s)
 2. OTHER DISCLOSURES
 Operating revenue                                                                             3,727               1,271              	3,158	


 Other income
 Government	grants                                                                                	53	               69                   101
 Rent received                                                                                     –                 10                   136
                                                                                                  	53	               79                   237
 Total operating revenue & other income                                                        3,780              1,350               3,395


 Acquisition & disposal of assets
 Property, plant & equipment
 	–	Acquisitions                                                                                 137                 128                  198
 	–	Disposals                                                                                      –                 (21)                 (19)


 Intangibles
 	–	Acquisitions	(capitalised	development	costs)                                               	1,252	              876               2,129
 	–	Acquisitions	(domain	names)                                                                    9                  –                    –


 Net tangible assets per share (dollars)                                                        0.20               0.30                0.25
                                                                                                     Xero INTerIM reporT              PagE 9
                                                                               FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




NOTES TO THE CONdENSEd fiNaNCial STaTEmENTS

                                                                                          6 months            6 months           12 months
                                                                                         Unaudited           Unaudited       Audited Group
                                                                                        Group 2010          Group 2009       31 March 2010
                                                                                           ($000s)             ($000s)             ($000s)
3. SHARE CAPITAL
Balance	as	at	1	April                                                                       	45,123	              17,130            17,130
Issue	of	ordinary	shares                                                                       	859	            29,046              	29,115	
Cost	of	issue                                                                                     –                	(975)            	(975)
Issued share capital                                                                        45,982               45,201            45,270
Buyback	of	shares                                                                                 –                (740)              (740)
Net	cost	of	shares	issued	under	Employee	Restricted	Share	Plan                                    –                    –              602
Forfeited	shares	re-issued	/	(not	re-issued)                                                    144                  (19)                (9)
Treasury stock                                                                                 144                 (759)              (147)
Balance as at end of period                                                                 46,126              44,442              45,123


                                                                                    Shares ('000s)      Shares ('000s)       Shares ('000s)
Movement	in	ordinary	shares	on	issue
Balance	as	at	1	April                                                                        87,631             	55,460	           	55,460	
Issue	of	ordinary	shares                                                                       	598	             32,273             32,273
Issued share capital                                                                        88,229               87,733             87,733
Buyback	of	shares                                                                                 –               	(500)             	(500)
Shares	issued	under	Employee	Restricted	Share	Plan                                                –                    –              407
Forfeited	shares	re-issued	/	(not	re-issued)                                                    102                  	(15)               (9)
Treasury stock                                                                                  102                 (515)             (102)
Balance as at end of period                                                                 88,331               87,218             87,631


During	the	period	the	Company	granted	690,981	shares	under	the	Employee	Restricted	Share	Plan,	at	an	average	price	of	$1.44.




4. TRADE RECEIvABLES & OTHER ASSETS
Trade	receivables                                                                              462                   138              	536	
Prepayments                                                                                    320                  179                178
Interest	receivable                                                                              87                 366                197
Employee	loans                                                                                 	517	                 111               277
Other accrued income                                                                            321                 176                 37
GST	receivable                                                                                    –                    –                10
                                                                                              1,707                 970              1,235


Other non-current assets
Loans	to	Directors                                                                              336                 324                336
NZX	bond                                                                                        	75	                 	75	               	75	
Employee	loans                                                                                1,073                  97                314
                                                                                             1,484                  496                725
PagE 10                 Xero INTerIM reporT
                        FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




 NOTES TO THE CONdENSEd fiNaNCial STaTEmENTS

                                                                                             6 months           6 months           12 months
                                                                                            Unaudited          Unaudited       Audited Group
                                                                                           Group 2010         Group 2009       31 March 2010
                                                                                              ($000s)            ($000s)             ($000s)
 5. TRADE PAYABLES & OTHER LIABILITIES
 Trade	payables                                                                                    	510	               332                   491
 Income	in	advance                                                                                  36                 	215	                  98
 Employee	entitlements                                                                           	1,975	              869                  	1,256	
 Other payables & accrued expenses                                                                 303                 332                   214
 GST	payable                                                                                        	85	                 –                     19
                                                                                                2,909                1,748                 2,078


 6. RECONCILIATION OF OPERATING CASH FLOWS
 Reconciliation from the net loss after tax to the net cash flows from operations
 Net (loss) after tax                                                                           (4,726)             (3,813)            	(8,450)


 Adjustments for
 Depreciation                                                                                       99                 103                   198
 Amortisation                                                                                     	858	               	535	                 1,210
 Net	loss	on	disposal	of	property,	plant	&	equipment                                                 –                    2                     –
 Translation	of	foreign	operations                                                                   –                 (28)                   	59	
 Deferred compensation                                                                               –                 136                      –
 Interest	on	loans	to	Directors                                                                      (6)                 –                    (12)


 Changes in working capital items
 (Increase)/decrease	in	trade	receivables	&	other	assets                                          (242)              	(568)                 (680)
 Increase/(decrease)	in	trade	payables	&	other	liabilities                                         108                  111                  	359	
 Decrease	in	GST	receivable                                                                        	(55)                 3                    10
 Increase	in	employee	entitlements                                                                	625	                 79                   498
 Increase	in	income	in	advance                                                                      (62)               130                     13
 Net cash flows from operating activities                                                       (3,401)             (3,310)                (6,795)


 7. RELATED PARTIES
 There	have	been	no	movements	in	the	Directors	loans	in	the	current	period.
 All	transactions	with	other	related	parties	are	priced	on	an	arm’s	length	basis	and	are	settled	in	cash	under	normal	commercial	terms.	
 None	of	the	balances	are	secured.

 8. EvENTS AFTER THE BALANCE SHEET DATE
 On	28	October	2010	the	Group	through	its	Parent	Company	completed	a	private	placement	of	2.6	million	new	ordinary	shares	at	
 $1.4918	raising	$4.0	million	in	cash.
 There	were	no	other	subsequent	events.

 9. COMMITMENTS & CONTINGENCIES
 On	29	September	2010	the	Group	announced	that	it	had	reached	agreement	to	acquire	15.9%	of	Max	Solutions	Limited	for	$200,000,	
 but	this	has	not	yet	been	settled. 		  	          	           	          	
 There	were	no	other	capital	commitments	or	contingent	liabilities	as	at	30	September	2010,	30	September	2009	or	31	March	2010.	
                                                                                                       Xero INTerIM reporT                  PagE 11
                                                                                 FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010




NOTES TO THE CONdENSEd fiNaNCial STaTEmENTS



10. SEGMENT INFORMATION
The	Group	has	three	reporting	segments	based	on	the	geographical	locations	of	the	operations	and	revenue	streams.

The	Group’s	management	and	internal	reporting	structures	are	aligned	to	these	segments.	        	        	            	              	

The	Group	currently	operates	in	one	business	segment,	providing	an	online	accounting	solution	for	small	businesses.


                                                                                    United                         Inter-segment
                                                             New Zealand          Kingdom           Australia       eliminations            Total
                                                                 ($000s)           ($000s)           ($000s)             ($000s)         ($000s)

2010 Group (unaudited) For the six months ended 30 September 2010
Total	segment	revenue                                                3,664           1,339             1,772                   –          	6,775	
Inter-segment	revenue                                                 (948)            (833)          (1,267)                  –          (3,048)
Revenue from external customers                                      2,716            	506	             	505	                  –           3,727
Depreciation & amortisation                                          	(945)              	(5)                (7)               –           	(957)
Interest                                                               434                –                   1                –            	435	
Segment net (loss) / profit before tax                              (4,769)              18              	35	                  4          (4,712)
Non-current	asset	additions                                          1,367               10                  21                –           1,398
Segment assets                                                      24,213             766               986               (2,170)       	23,795	
Segment liabilities                                                  3,371             637               886              (1,970)          2,924


2009 Group (unaudited) For the six months ended 30 September 2009
Total	segment	revenue                                                1,693           1,462              444                    –          	3,599	
Inter-segment	revenue                                                 (636)          (1,319)            (373)                  –          (2,328)
Revenue from external customers                                     	1,057	             143                  71                –           1,271
Depreciation & amortisation                                           (633)              (4)                 (1)               –            (638)
Interest                                                              	495	               –                   –                –            	495	
Segment net (loss) / profit before tax                              (3,830)              18                  (1)               –          (3,813)
Non-current	asset	additions                                            981                9                  14                –          1,004
Segment assets                                                      30,918              817              338              (1,834)        30,239
Segment liabilities                                                   2,111            	512	             163              (1,038)          1,748


2010 Group (audited) For the year ended 31 March 2010
Total	segment	revenue                                                3,868           	2,645	           1,493                   –          8,006
Inter-segment	revenue                                               (1,346)          (2,292)           (1,210)                 –          (4,848)
Revenue from external customers                                     	2,522	            	353	             283                   –           	3,158	
Depreciation & amortisation                                         (1,396)              (6)                 (6)               –          (1,408)
Interest	revenue                                                     1,028                –                   1                –           1,029
Segment net (loss) / profit before tax                              (8,410)               8                   8              	(56)       	(8,450)
Non-current	asset	additions                                          2,264               	15	                49               	–	          2,328
Segment assets                                                     26,469             	1,153	          1,107              	(2,057)        26,672
Segment liabilities                                                  1,848           1,040             1,034              (1,844)         2,078
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