Investing in new market initiatives has adversely impacted Reckon’s (ASX:RKN) first half year results ending June 30.
The company saw its net profit dip from $8.8 million to $6.2 million in the first half, but Reckon said this disguised the fact the business achieved eight per cent of solid growth.
The vendor is confident that it remains on track to achieve its EBITDA guidance of $34 million to $36 million for the full financial year, having already reached $18.5 million in the first half.
Existing business EBITDA growth was five per cent, however $2.6 million was spent on sales and marketing initiatives for new markets. Development spend was about $11.8 million with more than 50 per cent spent on new market products.
Reckon CEO, Clive Rabie, said it made a significant investment in the past few years to convert its business group into a subscription business with a specific focus on cloud offerings.
“We are now starting to see the benefits of this with 80 per cent of available revenue being subscription and strong traction coming through on the Reckon One product in recent months, as we not only target our traditional Australian and New Zealand markets, but have also launched into the UK,” Rabie said.
Earlier this year, Reckon acquired Smart Vault, which helped to propel the business into the US document management market.
“Smart Vault has the added advantage of already being a cloud product, which will enable us to target strong future growth in a lucrative and largely untapped global market,” he said.
The company’s Practice Management Group added the highest number of large new clients, which will result in a progressive increase in revenue in the second half of the financial year.
The Document Management Group saw a 45 per cent increase in revenue, but the Business Group experienced a two per cent reduction in revenue.
Despite this, Reckon saw its cloud product revenue grow 17 per cent, which now represents 30 per cent of the division’s revenue.
The vendor released ReckonOne payroll in May, which the company said resulted in a significant increase in new customers. Reckon has about 36,000 cloud users.