The Objective Corporation Limited (ASX: OCL) share price is trading lower on Tuesday despite reporting strong first half profit growth.
At the time of writing the software company's shares are down 2.5% to $5.60.
How did Objective Corp perform in the first half?
During the first half of FY 2020, Objective Corp delivered a 14% increase in revenue on the prior corresponding period to $33.3 million.
Growing even strongly during the half was its annual recurring revenues (ARR), which were up 28% to $54.1 million at the end of the period.
This supported a 21% increase in half year EBITDA to $6.8 million and a 17% lift in net profit after tax to $4.3 million. The latter was achieved despite an increase in its effective tax rate from 10% to 18%.
At the end of the period the company had a cash balance of $34 million, up 16% from a year earlier. This was despite paying $6.7 million for the acquisitions of Alpha Group and Master Business Systems and $5.6 million of dividends.
Consistent with prior half year results, no interim dividend was declared. Management expects to declare a final dividend with its full year results.
What were the drivers of its growth?
Management advised that its successful transition to subscription-based contracts continued during the half.
This led to the proportion of revenue derived from recurring contracts reaching 75% of total revenue. This was a record for Objective Corp.
This was driven by strong growth from its core subscription software products. This includes a 54% increase for ECMaaS, a 32% lift for Connect, a 14% rise for Keystone, and a sizeable 158% jump in Planning Solutions subscription revenue.
Outlook.
No guidance was provided for the full year. However, the company's CEO, Tony Walls, appears positive on the future.
He said: "Our customer footprint of over 500 local government customers provides a significant future growth opportunity as we direct a greater proportion of our R&D efforts to developing market leading solutions for these customers."
