Australian software firm Reckon has announced it will sell its ReckonDocs business for AU$13 million to the Class Buyer Group.
ReckonDocs is currently part of Reckon’s account practice management group that provides company formations, trust deeds, and other related documents and services.
According to Reckon, once the sale is completed on March 1, it will use the funds to reduce company debt, which at the end of December 31 was AU$31.8 million. The acquisition funds will also be injected into Reckon’s cloud development strategy for small business accounting and payroll and practice management for accountants and lawyers, the company said.
There are also intentions to integrate Reckon’s accountant group products with class products over time, Reckon added.
“The sale of ReckonDocs, allows us to focus on our core strengths of accounting and payroll for small businesses, and practice management for accountants and lawyers,” Reckon Group CEO Sam Allert said.
“We also gain a strong integration partner with Class and will be able to offer a fully integrated suite of software for accounting firms throughout Australia with Reckon APS and Class products.”
MYOB had offered to purchase the accountant practice management group for AU$180 million back in 2018.
However, MYOB pulled out of the deal, highlighting that it wasn’t prepared for how long the regulatory process of the acquisition would take.
The rescinded offer followed the Australian Competition and Consumer Commission (ACCC) expressing concerns over the proposed acquisition, with the regulator saying that MYOB might gain a market monopoly if the acquisition were to proceed.
On Tuesday, Reckon also reported its 2020 financial results. Group net profit after tax came in at AU$9.7 million, up just over 19% from the same time last year; group earnings before interest, tax, depreciation, and amortisation (EBIDTA) totalled AU$32.6 million, a 6.6% lift from AU$30.6 million; and group revenue was up a slight 0.3% to AU$75.6 million for the full year.
The company attributed the increases to ongoing uptake of its cloud-based products, particularly in the business group, which delivered year-on-year revenue growth of 7% from AU$36 million to AU$39 million, and EBIDTA of AU$20 million.
Cloud revenue continued to also grow, Reckon said, highlighting that it was up by 29% year-on-year and now represented 56% of its business division’s available revenue. The company now has 101,000 total cloud users, after gaining 26,000 in 2020.
Meanwhile, the division that’s up for sale contributed revenue of AU$5 million and EBIDTA of AU$3 million to the 2020 Reckon results.
“Despite the uncertainty created by the pandemic, Reckon performed well across key financial metrics and in particular continued its positive cloud-based user growth trajectory within the core business group. We are also seeing our investment in product development and ongoing product launches presenting cross sell opportunities within our operating businesses,” Allert said.
Looking ahead, the company expects to push on with its cloud strategy, which includes plans to launch new mobile apps including invoicing, expenses, and timesheets in 2021. It also wants to release additional cloud modules within its practice management accountant group business.
“We have a clear growth plan for 2021, which includes more mobile apps for our small business client base, and cloud modules for our APS and Elite Accountant client base, whilst leveraging the power of Reckon One to enhance the back office and payroll function for accounting firms and small businesses alike,” Allert said.
The merge with Zebraworks has formed a new company called Nqueue Zebraworks.
It comes as the company stabilises following the aborted sale of its practice management accountant group business.
The company said it received a ‘clear’ understanding of the value of its accounting arm following the sale to MYOB falling through.
The consumer watchdog is concerned the deal would likely lessen competition in an already small accounting software market.