Business accounting and software solutions provider Reckon Limited (ASX: RKN) has released its half year results for the period ending 30 June 2015.
With a market capitalisation of $232 million the company is perhaps not as well known or followed as its larger peers Myob Group Ltd (ASX: MYO) and XERO FPO NZ (ASX: XRO). However investors in any of these three stocks would be well served by keeping an eye on the other two as well.
Here's what you need to know about Reckon's results:
- Revenue growth of 6% was achieved; revenues grew to $54 million from $51.1 million in the prior corresponding period.
- While profits actually recorded a decline of 1% from $9.5 million to $9.3 million, thanks to a buyback of Intuit's shareholding, earnings per share actually increased 8% to 7.9 cents per share (cps).
- Reckon's shares will trade ex-dividend on 24 August and will pay a 60% franked interim dividend of 4.25 cps on the 9 September, which is in line with the prior period.
The group operates across three divisions, here are some key points to note:
- Accountant Group – Revenues and earnings grew with the standout performer being the 'Reckon Docs' content business. Pleasingly, subscription revenue grew 8% and now represents 91% of practice management revenues.
- Business Group – Revenues and earnings slipped as Reckon aggressively moved this division towards a subscription only model which had a near term negative effect on revenue recognition. Subscription revenue is up 42% on the prior year and now represents 71% of core product revenue in this division.
- International Group – This division reported the strongest growth with revenue and earnings jumping 19% and 44% respectively. The International division now represents 19% of overall group revenue and further growth is expected as it expands into both the UK and the USA. A subscription model is also being implemented in this division with subscription revenue growing 18% on the last year and now representing 77% of divisional revenue.
Buy, Hold, or Sell?
According to data, Thomson Consensus estimates suggest Reckon should earn 15.4 cps for the full year. With the share price up 1.2% today to $2.08 this implies a price-to-earnings ratio of 13.5x, which is hardly expensive should the group successfully turn the positive subscription momentum into bottom line earnings growth.
