Holding pattern: MYOB's growth slows as it braces for private equity takeover
Accounting software provider MYOB is in a holding pattern as shareholders get ready to vote on private equity giant KKR's takeover bid , with revenue of $445 million failing to meet market expectations.
MYOB's full year results released on Thursday show revenue growth slowed to 6.9 per cent and didn't hit consensus expectations of $489 million.
Underlying earnings before interest, tax and depreciation of $189 million was flat from the previous year and fell short of consensus expectations of $200 million while profit was $63 million, up from $60 million the previous year.
MYOB continued to grow its online subscribers, with the total rising by 229,000 in the 12 months to December 2018 ahead of its aim of 200,000 online subscribers a year. It is on track to reach 1 million online subscribers by 2020.
MYOB chief executive Tim Reed said he was satisfied with the result.
"They have come in exactly where we set guidance," he said. "The financial journey is that this is a period of big investment, there was revenue growth of 7 per cent but the real progress has been in the operational matrix of the business. The business is bringing in lots of new customers and continuing to grow."
Mr Reed said the investment included accelerating the MYOB platform, which took an extra $50 million in research and development, and accelerating sales and marketing which incurred an extra $30 million.
'Magic million'
Mr Reed described the 1 million online subscriber target as the "magic million" as MYOB chases its major competitor cloud-based Xero, which recorded 1 million subscribers last year.
Investment bank Morgan Stanley previously estimated Xero will have a dominant 60 per cent share of the local accounting software subscription market by 2021, compared to MYOB's estimated 28 per cent share at that time however Reed said the methodology used was "fundamentally flawed" and MYOB is performing more strongly.
In what chairman Justin Milne described as an "eventful year" for MYOB, the accounting software provider received an unsolicited $1.75 billion offer from private equity giant KKR pitched at $3.70 a share in October 2018.
After MYOB opened its books, KKR cut its bid to $3.40.
Before KKR entered the fray, MYOB was trading at $2.98 a share and the accounting software platform had not traded above $3.40 a share since January 2018.
MYOB said an update on the takeover will be provided to the market on Friday following the conclusion of the "go shop" period.
Mr Reed said it had been business as usual at MYOB despite the takeover bid.
"The KKR proposal has had pretty minimal impact on this point of time we have worked very hard as leaders within the business to make sure we focus every day," he said.
Under the scheme implementation agreement in place with KKR, MYOB cannot declare and pay any dividend without KKR's prior written consent so MYOB did not declare a final dividend for the year.
MYOB's shares finished on Wednesday at $3.41.