Veteran dot com Reckon reports mixed results; shares gain 18pc
Shareholders are backing veteran accounting software maker Reckon this morning, after it reported a 6 per cent drop in half-year profit to $5.2 million.
Revenue also fell 6 per cent to $40 million compared to the same period last year.
The group said profitability had increased in the half-year, however, based on higher “underlying” EBITDA earnings and profit.
Investors seemed to support that notion, pushing the stock up 18 per cent to an intraday high of $1.02. It closed Tuesday at 99c.
That’s well down on its one-year high of $1.66 — which faded into the distance after the collapse of a $180 million deal to sell its Accountant Practice Management Group to MYOB, after the competition watchdog stepped in.
Reckon CEO Sam Allert told Stockhead support from shareholders was a reflection of the tech stalwart’s strong, profitable business.
“We’re very pleased to see a small rally in the share price — we were probably still a bit undervalued prior to the result,” Allert said.
“We’re a profit-making business, we’ve always managed the business well and we are in an exciting space. I think some have looked at us as desktop products challenged by the cloud which is true to a degree but our team has been working extremely hard in getting our products to the cloud.”
Mr Allert said the drops in revenue and profit were due to the slowdown of new business, a poor performance in its practice management legal division and the natural bumps and hurdles of conversion from desktop to the cloud.
Reckon’s shares (ASX:RKN) surged in November upon announcement of the MYOB deal, but by May MYOB had decided not to wait for the ACCC’s decision and dropped out.
However Mr Allert was philosophical about the ordeal.
“It has been challenging. It’s been uncertain, which brings distraction,” he said. “It has been disruptive and slowed down new business. But our team got really focused on continuing to drive our strategy forward and we’ve had some really positive feedback following the ACCC reviewing it from an anti-competition standpoint.”
Division still up for sale
The company says it has been approached by “several parties” interested in acquiring the Accountant Practice division since MYOB dropped out.
It has hired Investec to manage and evaluate offers it receives.
“We’ve very happy to run that division going forward, but rather than allow our team to get too distracted by any offers we’ve got Investec handling all that so our team can focus on what they do best,” Mr Allert said.
Mr Allert said the company was also well-placed to capitalise on new products and markets for growth, which include several cloud products ranging from point-of-sale to clinic practice management software.
“Our teams have been working really hard on these new products and markets, we’ve got big supportive and attractive client bases and we’re in an exciting space,” he said.
Despite the revenue hit, expenditure reduced 7 per cent, enabling a debt reduction of $7 million in the half-year.
A fully-franked interim dividend of 3c will be paid to shareholders on September 4.
“We remain positive that future growth will be achieved in all divisions,” Reckon boss Clive Rabie told investors.
“We have been focused on developing exciting new products which in turn are expected to open new markets to assist this growth over the coming years.”