The ASX-listed Reckon (ASX:RKN) says its focus on cloud, mobile and new products in 2019 powered “robust revenue growth” for the company, particularly across the Business Group and Legal Group.
Reckon reported that cashflow continually improved in the year, enabling a debt reduction of $7 million and a fully franked final dividend of 2 cents per share – taking the total dividend to 5 cents per share in respect of the 2019 year (2018: 3 cents) - while overall, total group revenue closed at $75.4 million and EBITDA stood at $30.6 million.
Reckon says its focus on cloud, mobile and new products in 2019 powered “robust revenue growth” for the company, particularly across the Business Group and Legal Group.
The Business Group saw a 6% increase in revenue in the second half of 2019, driven by a 38% year-on-year rise in users for cloud products. “Strong performance on this front has led to 9% year-on-year growth in cloud revenue for the Business Group, with cloud representing 47% of available revenue for the division”, Reckon said.
Reckon notes that its new payroll app for mobile, launched in late May 2019 to leverage the opportunity presented by the ATO’s introduction of Single Touch Payroll (STP), saw 29,000 signups in 2019, taking the company’s total cloud subscriber base to more than 100,000 user - with over 260,000 pay runs for 55,000 employees having already been processed using the app.
The accounting sofware group says strong traction gained by next generation products in the Legal Group – such as Reckon’s Scan & Print software – has generated the majority of new revenue in that division, powering a 9% growth in revenue and 34% increase in EBITDA.
Reckon Group CEO Sam Allert said 2019 has seen the company’s “future-focused strategy bearing fruit”.
“We are shifting the business with an eye to the future. Our increasing profitability in 2019 is powered by Reckon’s fundamental resilience and an unwavering focus on the forward horizon.
“While 2018 was a year centred on creating stability and certainty, 2019 has been a year of transformation and overall progress. For 2020, we expect to pick up momentum as our cloud and subscription growth strategy continues to accelerate,” said Allert.
According to Reckon, its successful cloud and subscription growth strategy has fuelled its business momentum.
Reckon says the Legal Group’s transition from an upfront sales model to a subscription model is well underway, and its traditional cost recovery business has stabilised, providing the opportunity to benefit from its competitive position. “Its sales pipeline is strong going into 2020 and Reckon plans to invest further into sales capability this year to take advantage of the opportunities this presents,” says Reckon.
For the Accountants Group, Reckon said its Accounting Practice Management Software (APS) remains entrenched as the “product of choice” amongst the major accounting firms, and substantial progress has been made on the APS’ new cloud suite, with the first module set for release in the first half of 2020 - with the cloud product expected to widen the addressable market for the Accountants Group.
According to Reckon, the Accountants Group has also seen major firms re-committed, with two of its largest customers extending their contracts in the second half of the year, “thereby showing faith in the strategic direction of the division”.
Reckon noted that he Business Group’s white label partnership with the Institute of Public Accountants (IPA) has been extended for a further five years, “continuing to strengthen the recommender channel”.
“Over 700 IPA practices are now trained and certified as Cloud Advisors, with Reckon providing every IPA public practice with five cloud licences to help them better cater to the needs of small business. Across the membership this is a minimum of 22,500 new Books per annum and we expect IPA members to add new small business clients as Reckon extends certification and members become increasingly familiar with the Reckon One product,” Reckon said.
Sam Allert said the launch of further cloud and mobile capabilities across the business in 2020 will provide long-term sustainable revenue opportunities.
“The business is constantly looking to the future and our approach is backed by the results we have delivered in 2019,” Allert concluded.