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Why this small cap ASX tech share zoomed 10% higher today

The Reckon Limited (ASX: RKN) share price has been a strong performer on the ASX on Tuesday.

In afternoon trade the software company’s shares are up 10% to 74 cents.

Why is the Reckon share price racing higher?

Investors have been buying Reckon’s shares after it released its full year results for FY 2019.

According to the release, the company delivered total revenue from continuing operations of $75.4 million in FY 2019. This was flat on the same period a year earlier.

During the 12 months the company posted a 7% increase in Business subscription revenue to $29.6 million and a 7% lift in Legal subscription revenue to $9 million. Their positive performances were offset by a 4% decline Accountant subscription revenue to $22.4 million and a 10% reduction in Other revenue to $14.4 million.

But thanks to a reduction in overheads, the company’s EBITDA came in 5% higher at $30.6 million. Reckon’s net profit after tax grew at the same rate to $8.1 million. Earnings per share came in at 7.1 cents.

Finally, its operating cash flow was strong at $26.7 million. This allowed the Reckon board to declare a fully franked final dividend of 2 cents per share, bringing its full year dividend to 5 cents per share.

Outlook.

The company’s CEO, Sam Allert, said: “Overall 2019 was a solid result for the Group, with encouraging performances from two of our divisions. We have now pivoted the business away from a desktop software company to a cloud first software company and we are excited by our expanded product suite and the product roadmap in 2020 that we believe will provide long-term sustainable revenue opportunities.”

And while no guidance was provided for FY 2020, the company advised that its sales pipeline is looking strong. As a result, it plans to invest further into its sales capability this year to take advantage of opportunities.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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