​Subscription move boosts Reckon profit

Australian online accounting and legal software player Reckon has seen an 18 percent increase in cash flow for the year ending 2014, with the company attributing part of the boost to its new subscription model.
Written by Leon Spencer, Contributor

Shifting to a subscription model has helped Australian-listed online accounting and legal software provider Reckon increase its operating profit for the year ending 2014.

Reckon CEO Clive Rabie told shareholders in a statement published on February 10 that the company had seen an improvement in its working capital since introducing its new subscription-based model.

"We have experienced both strong volume growth and profit growth whilst we have stepped up our investment in the cloud by increasing our sales teams, enhancing our infrastructure, and investing in product development," said Rabie in the statement. "We have also successfully improved our working capital, largely as a result of moving to a subscription business."

Reckon plays in a sector populated by the likes of New Zealand cloud accounting provider Xero and Australia's accounting software incumbent MYOB, both of which have benefited from employing a subscription model for their services.

While Reckon's operating cash flow has increased by 18 percent, its statutory revenue for 2014 increased by 3 percent, to AU$100.8 million, compared to the previous year's result of AU$98.1 million.

The company's statutory earnings before interest, tax, depreciation, and amortisation for the year came to AU$37.1 million, a 5 percent increase from the previous year's AU$35.3 million.

Looking forward, Rabie told shareholders that he expects the company to further increase its revenue over the coming year.

"We anticipate that we will see higher revenue growth in 2015 and beyond from the groundwork done over the last few years," he said. "We remain committed to reinvesting some of this additional revenue growth into sustaining the long-term success of the business, with a particular focus in further expanding our cloud capability and reach, as well as targeting new markets for our product range."

The company has clearly recovered from the software upgrade meltdown it suffered in August last year, which saw around 1,000 clients impacted by interruptions to their service.

At the time, Reckon's online forum was inundated with complaints from customers claiming to have lost files and been unable to log in to their accounts, according to reports.

The problematic upgrade, which was also rolled out in New Zealand, came as the company delivered its half-yearly results.

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