MYOB cuts 130 jobs and warns of 'artificial economy'

Accounting software provider MYOB has cut 130 jobs as chief executive Greg Ellis warns Australia is operating an artificial economy propped up by JobKeeper and JobSeeker programs.

Mr Ellis said the job cuts were not a result of the coronavirus pandemic and instead reflected changes to MYOB's operating structure.

"About 130 of our staff have unfortunately had to leave the company and that's a very sad thing to do given this time of the economic cycle," Mr Ellis said. "But those changes were unfortunately necessary ... as we try and achieve our stated objective of improving the speed and quality with which we deliver software."

MYOB chief executive Greg Ellis cut 130 staff last week. Credit: Eamon Gallagher

Mr Ellis took over from long-serving MYOB chief executive Tim Reed in September last year, months after the business returned to private equity ownership following a $1.6 billion takeover from KKR Group.

He is now seeking to restructure MYOB as its small business customer base battles the impact of the coronavirus pandemic with MYOB's customer data showing invoices down in every sector of the economy by up to 45.3 per cent and weekly deposits in the accommodation and food services sector down 30.3 per cent.

Mr Ellis said the falling invoicing volume was in line with subdued business activity with the data showing the hardest hit sectors were accommodation, food services and the arts.

"If invoices aren’t being raised, that’s a fair indication SMEs will hit cashflow problems down the track," he said. "This is particularly pertinent considering the recovery work to be done as restrictions are lifted and businesses seek to rescale on the other side."

On top of this Mr Ellis said the coronavirus pandemic was acting as a constant suppressant on demand.

"Frankly because of the necessary government stimulus you've actually got an artificial economy at the moment," he said. "It's not a private public economy at the moment it's pretty much a public supported economy".

Mr Ellis was circumspect about the impact on MYOB's business which he said was in a "healthy position relative to COVID-19".

As a private company MYOB no longer provides financial information but when the company last reported to the market over a year ago it posted revenue of $445 million and was approaching 1 million subscribers, putting it significantly behind rival Xero which last week reported it had 2.2 million subscribers.

Mr Ellis said accounting software was an essential service for businesses and their accountants and subscriber numbers had remained "relatively constant" because of the government support schemes.

However he said the crisis had only accelerated MYOB's ambitions to provide broader services beyond accounting software with the platform completing a trial with OnDeck Australia providing working capital loans to customers.

He said the critical time for MYOB and its customer base would be when economic assistance was adjusted with the JobKeeper and JobSeeker programs set to finish in September.

"It's certainly not going to be adjusted up, it's going to be adjusted down, and then at that particular point in time we're going to get a true indication of the underlying health of the economy," he said.

MYOB's customer data shows an increase in payroll expenditure but Mr Ellis said that related to the flow through of the JobKeeper program.

"Unfortunately there are no signs of any empirical evidence of the recovery being underway," he said.

"It's a crystal ball full of smoke at the moment and it really comes down to our ability to either get an effective treatment regime or a vaccine."