Reckon Limited (ASX: RKN) put a difficult 2018 behind it to a post a solid result in its full-year earnings (FY18) this morning.
The company increased its underlying net profit after tax (NPAT) by 3% YoY to $8.8 million despite a 6% decrease in revenue to $75.4 million during the year. The major driver was the legal (-5%) and other revenue (-23%) line items which saw Group EBITDA decline by 2% to $30.6 million.
Cloud revenue was up 8% in FY18 with ~54,000 cloud users, while management noted the continued reduction in desktop revenue due to a user-led transition towards the cloud.
The company was busy innovating during the year, launching its point-of-sale (PoS) product in 2018 and acquiring online medical practice management product, Better Clinics, in July 2018.
The group increased net assets by 19.09% to $15.60 million despite a ~$3.00 million decrease in total assets during the year. The group repaid $6.04 million of borrowings which saw a net cash outflow from financing activities of $9.43 million for the year while operating cash flow increased by $1.2 million to $10.88 million after the de-merger of its Document Management division in 2017.
In a big win for shareholders, the Board approved the reinstatement of the company’s dividend policy, paying out a fully-franked $0.03 per share in September 2018, equating to a dividend yield of around 4.50%. The stock saw a steady increase in its dividend from $0.04 per share in 2006 to a peak of $0.09 (60% franked) in 2015, but business profitability saw this cut in 2016 and 2017.
The stock was up 6.06% yesterday ahead of the earnings announcement and I suspect the $0.03 dividend may not be enough to keep that price high. While the 4.48% year-to-date gain looks good on paper, in the context of a 55.47% decline since January 2018, it’s clear that this is more temporary speculation than good fundamentals.
While Reckon has posted a decent result this morning, it’s a stock that has continued to slide since 2016 and is trading at a P/E multiple of 36x. The company operates in a competitive industry and has found it difficult to keep pace with technological advances.
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