Xero buys Aussie payroll firm

Rod Drury. Photo / APN

Online accounting software creator Xero has announced a takeover of an Australian payroll company and revealed a 25 per cent growth in customers.

Speaking at Xero's annual meeting in Wellington yesterday, chief executive Rod Drury announced his company will acquire Australian-owned Paycycle, in a move he hopes will accelerate Xero's growth across the Tasman and gear the company up with a specialist payroll team.

"We've been working with Paycycle for some time and know they will fit well with our team. Our partners have been impressed with what they have delivered to date," he said.

The deal is worth A$1.5 million and is made up of A$500,000 in cash and A$1 million in Xero shares.

Drury also revealed Xero's customers numbers, which by June 30 had grown by 25 per cent to 45,000 since the end of March.

The company reported an annual revenue of $9.3 million for the year ending March 31, up from $3 million in 2010. Despite the growth in top-line earnings, the company posted a net loss of $7.6 million.

Other announcements made yesterday included the appointment of a new managing director for the company's push into the United States and a partnership with New Zealand Post to improve small business productivity.

Xero was founded by Drury in 2006 and Trade Me founder Sam Morgan is a director. Xero shares climbed 4.2 per cent yesterday, closing at $2.24.