Higher confidence among SMEs sends Reckon profit up 26%

Reckon software recorded a 26% increase in profit for the first-half of 2011 yesterday, and chief executive Clive Rabie says the result is due to more SMEs becoming optimistic about their economic outlook for the next 12 months.

But Rabie says accountants are still relatively timid and haven’t started spending as much as the company would have expected.

Yesterday Reckon, which produces the QuickBooks, Quicken and nQueueBillback software, recorded operating revenue growth of 6% to $90.1 million, with EBITDA up 20% to $30.2 million. Net profit after tax grew by 27% to $17.2 million.

But when the results are divided into segments, the results are slightly different. Reckon has three divisions – the business division, which covers SMEs, the professional division, which services accountants, and the nQueueBillback division, which covers cost management software in the US and Britain.

Higher confidence regarding the economy and employment expectations has pushed Reckon sales higher, Rabie says.

While operating revenue in the business division grew by 12% to $56 million, revenue among the professional division dropped by 5% to $26.8 million. Rabie says there is still some hesitancy among accountants to spend.

“In the accounting market, we’ve found that accountants were reluctant to invest in technology or make decisions around that, and we’re waiting to see what’ll happen in the future.”

“However, towards the last quarter of the year we had some indications of what was happening, and accountants are looking more favourably at investing. There is definitely more activity around in this area.”

The company is also being impacted by poor trading conditions in Britain, Rabie said, where its nQueueBillback business is mostly located. He says accountants may be biding their time before they start hiring and focus on expansion.

“We’ve had the business for six years, and we’ve always enjoyed 8-9% growth in that market. We’ve still added a lot of customers, but we didn’t grow at the rate we usually do. We did find that there was a sort of reluctance from accounting firms to go into new concepts.”

“We do believe that accountants are working hard to increase their headcounts. That’s a positive thing, they’re looking at new projects, and we’re confident that’s going to increase in the year ahead.”

Overall, however, Rabie says the results indicate small businesses are becoming more confident about the year ahead, and higher sales also shows employment expectations are on the rise.

“Last year there was definitely a strong response from small businesses, in terms of buying new accounting technology or renewing their account technology. That was good in 2010 and we feel that will continue in the New Year.”

“When you look at the US business, we’ve also had some very good response from people about investing in the legal market, and that’s going very strongly.”