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Reckon maintains profit growth

Reckon maintains profit growth

Record net profit after tax of $9.3m, despite currency and weaker UK and New Zealand business challenges

The improved performance of local business and professional divisions has helped Australian accounting software firm, Reckon (ASX:RKN), record a net profit after tax of $9.3 million, up five per cent year-on-year, for the half year to 30 June 2011.

The company also recorded marginal revenue growth of $46.7 million, EBITDA of $16.6 million, up eight per cent, and earnings per share of 6.8 per cent, up seven per cent.

In contrast, the retail revenue of its business division declined 25 per cent to -$0.9 million, while its New Zealand and UK counterparts also declined by 9 per cent, with revenue coming in at -$0.5 million. Foreign exchange losses amounted to -$0.9 million.

The results follow Reckon chairman, John Thame’s, comments in May that the software provider was experiencing improved business conditions this year, as demand for its products recovered.

"The prospects for 2011 already show an improvement with the lag of the global financial crisis that hit accounting firms now showing signs of relief and renewed customer interest," Thame said at the company's annual general meeting.

Reckon operates three divisions: A business division which sells software through retail outlets, a professional division which offers products to large firms, and the nQueue BillBack division that focuses on the legal profession in the US.

In an ASX statement, the company said the EBITDA growth in the business division was attributed to growth in direct revenue — particularly in its enterprise and online offerings.

“The division was however been impacted by a substantially weaker retail channel in 2011,” the statement reads.

“We have nonetheless continued go enjoy market share growth in the retail channel and in addition the business continues to add substantial numbers of customers through its online offerings.”

The statement also noted the performance of its professional division, which had been negatively impacted both in the UK and New Zealand by tough economic conditions and weaker currencies.

“New revenue growth in the Australia professional division was especially encouraging, as was the continued addition of new customers in all countries.”

The company also noted EBITDA declines of $20 per cent in its nQueueBillback division, due to weaker currencies, economic conditions and the transition of the UK business to new management.

“Pleasingly these businesses are still growing market share at a solid rate, as is evidenced by the quantum of new sales representing circa 30 per cent of the overall revenue in this division,” the statement reads.

“Recent large contracts won in both the United Kingdom and New Zealand should help improve the results in these countries in the second half.”

Looking at future opportunities, Group chief executive, Clive Rabie, said the group was well positioned to pursue Cloud computing opportunities in all of its business, as well as expanding addressable markets in its professional and nQueueBillback Divisions.

In May Reckon paid $7.3 million to acquire a 4.97 per cent stake in domain name and hosting provider Melbourne IT Limited (ASX:MLB), as a means of establishing a commercial partnership with the company for potential future Cloud services offerings.

In April Reckon said it had grown its 2010 net profit 27 per cent to $17.2 million, from strong performance at its business division. Revenue grew six per cent over the year to $90.1 million, while EBITDA increased 20 per cent to $30.2 million.

Follow Tim Lohman on Twitter: @Tlohman

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