With the increasing transition towards business administration being fully digital, more SMEs are turning to business tech company Reckon (ASX: RKN) which is expanding its platform solutions that are now used by more than 117,000 SME customers. 

The operational highlight for Reckon was their $100m asset sale of a subsidiary business, that has no impact on their software business, to The Access Group. However, that has not distracted Reckon from driving growth in its core business. 

When removing the financials from that subsidiary business, Reckon reported a 2% increase in normalised revenue to $27m compared to the previous year on a like-for-like basis. The stronger growth came at the bottom line where normalised net profit after tax of $4m was an 8% increase on the previous year. 

For the total group, including the business that was settled on 2 August 2022, Reckon reported $39m normalised revenue (+2%) and $6m in normalised NPAT (+5%). 

These profits will be passed on to Reckon shareholders with the Company declaring a fully-franked interim dividend of $0.03 per share. This will be entirely separate to the special dividend from the $100m asset sale that settled on 2 August 2022 which will see Reckon shareholders issued a partially-franked dividend between $0.54 and $0.58 per share, with final details still to be confirmed. 

“The half-year report is reflective of strong execution across the Company’s product suite,” said Reckon CEO, Sam Allert.  

“Operational highlights for first half 2022 were led by the $100m all-cash sale of the Accountants Group division, along with consistently strong results from the Group’s continuous operations. 

“With an established market footprint for our Small Business payroll solutions and Practice Management platform for legal services, Reckon has built a platform for sustainable growth underpinned by a strong balance street and subscription-based revenue model.”

Driving Reckon’s growth from its continuous operations has been the investment they have made in their tech over recent years in response to the needs of their SME customers. Cloud functionality, complete business solutions, ease of use and low-cost alternatives is what business customers want and this is highlighted by Reckon’s 117,000 users – a figure that has increased 10% annually over the past decade. 

Uptake of Reckon Payroll products across cloud and Mobile also continues with there now being more than 400,000 employees paid via Reckon software. 

While accounting and HR are the most commonly used products on the Reckon platform, they are also expanding their digital payments services with a new integrated payments solution that allows businesses to accept digital payments from Visa or Mastercard. These services normally need to be outsourced to a third party provider (such as a major bank) but by bringing it directly onto the Reckon platform, it further adds to their total business solutions platform. The Company expects that these payment services will create additional revenue opportunities with the solution being provided in collaboration with fintech company Novatti Group (ASX: NOV) which is a 19.9% shareholder in Reckon. 

Creating digital solutions that enable businesses to pay and be paid from anywhere in the world, from corner stores to multinationals, Novatti benefits both directly through the increase in their merchant services and their strategic stake in Reckon. 

The two have agreed on a profit share agreement whereby Reckon will retain half of the profits generated from merchant fees. These services are provided by Novatti which is just one of 20 companies in Australia that are licenced by Visa and Mastercard to provide merchant services courtesy of their strong regulatory history and advanced regtech. 

Combining the interim and special dividend, Novatti is expected to secure a dividend payout of more than $12m, having themselves recently announced a 97% increase in revenue for FY22 to $32.5m.