Reckon (ASX:RKN) share price jumps 8% after strong first half profit growth

This software company's shares are storming higher today…

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The Reckon Limited (ASX: RKN) share price has been a strong performer on Tuesday following the release of its half year results.

In afternoon trade, the software company's shares are up 8% to a 52-week high of $1.05.

Reckon share price jumps on half year update

  • Normalised revenue increased 2.4% on the prior corresponding period to $37.5 million
  • 88% of revenue is recurring and from subscriptions
  • Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) up 7.1% to $16.7 million
  • Normalised net profit after tax jumped 18.6% to $5.4 million
  • Fully franked interim dividend per share of 3 cents

What happened in the first half for Reckon?

Investors have been bidding the Reckon share price higher today after management revealed that its transition to a cloud software business continued to gather pace during the half.

It advised that the company's revenue and earnings growth was driven by the continuing uptake of its cloud-based products, particularly through the Business segment. This is supporting strong ongoing profitability.

Another positive supporting the Reckon share price was its improving balance sheet. During the period, the company reduced its debt by $17 million to $13 million through the sale of the ReckonDocs business and a continued focus on capital management.

What did management say?

Reckon's CEO, Sam Allert, was pleased with the first half. And while no guidance was given for the second half, Mr Allert appears optimistic that the positive form will continue.

He said: "Our transition from a desktop software business to a cloud software business continues at pace. It is pleasing to see cloud adoption across all business divisions, with growth achieved through both APS clients and our small business clients."

"We have returned the overall business to revenue growth and with our expansive client bases, our talented team, and new cloud product launches across all groups, we are very well positioned to continue this trend," he added.

Reckon share price continues to outperform

Following today's gain, the Reckon share price is now up 35% since the start of the year.

This compares very favourably to the ASX 200's gain of 13% year to date.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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