Reckon Limited's Half-Year 2024 Financial Results: Modest Growth Amid Cloud Transition
RKN (RKN) Share Update August 2024 Monday 5th
Reckon Limited Reports Modest Revenue Growth Amid Cloud Transition
Reckon Limited (ASX: RKN) has released its financial results for the half-year ended 30 June 2024, highlighting modest revenue growth and significant strides in its cloud transition strategy.
Instant Summary:
- Revenue increased by 1% to $28.4 million.
- EBITDA rose by 6% to $11.7 million.
- Net profit decreased by 18% to $3.1 million, impacted by prior year tax adjustments.
- Fully franked dividend of 2.5 cents per share declared.
- Cloud revenue in the Business Group up by 8%.
Financial Performance Overview
Reckon Limited reported a revenue of $28.4 million for the first half of 2024, marking a 1% increase from the same period in 2023. The company's EBITDA also saw a 6% rise, reaching $11.7 million. However, net profit dropped by 18% to $3.1 million, primarily due to a $0.7 million tax benefit adjustment from the previous year.
Despite the decline in net profit, Reckon has made significant progress in its transition to a cloud-based product offering. The company’s Business Group saw an 8% increase in cloud revenue, with user numbers growing by 4% to 109,000. The Legal Group also reported a 5% growth in subscription revenue, driven by its cloud products BillingQ and DataQ.
Dividend and Cash Flow
The Board declared a fully franked dividend of 2.5 cents per share, consistent with the previous year. This dividend will be paid on 2 September 2024 to shareholders recorded as of 16 August 2024.
Reckon’s operating cash flow improved significantly, with a 14% increase to $4.3 million after accounting for capitalized development costs. The company also strengthened its balance sheet by repaying $3.8 million of debt, ending the half-year with a net cash position of $0.9 million.
Operational Highlights
The Business Group's performance was bolstered by an 8% increase in cloud revenues, which now represent 58% of the division's revenue. The group’s EBITDA margin stood at 55%, or 33% after development costs. The Legal Group also showed promising growth, with a 5% increase in subscription revenues and positive market feedback for its cloud products.
The modest revenue growth and significant increase in EBITDA are positive indicators for Reckon Limited. However, the decline in net profit due to prior year tax adjustments may concern some investors. The company's focus on cloud transition is likely to yield long-term benefits, but the immediate impact on stock prices may be neutral to slightly negative.
Investor Reaction:
Analysts are likely to have mixed reactions to Reckon's financial results. While the revenue and EBITDA growth are positive, the decline in net profit and the ongoing investment in cloud transition could be seen as potential risks. However, the declaration of a consistent dividend may help maintain investor confidence.
Conclusion:
Investors should keep an eye on Reckon Limited's progress in its cloud transition strategy and its impact on future financial performance. The company's ability to maintain revenue growth and improve cash flow while managing development costs will be crucial for long-term success.