Reckon to demerge Document Management business

Press Release

17 March 2017

Reckon to demerge Document Management business

Proposed demerger and listing of Document Management business on the AIM market of the London Stock Exchange to unlock additional shareholder value

Sydney, Australia – Reckon (ASX:RKN) today announced a proposal to demerge its Document Management division and list it on the AIM market of the London Stock Exchange (LSE) under an independent company, “Document Management Newco”. The move, which will see Reckon’s Business and Practice Management divisions continue trading on the Australian Stock Exchange (ASX), aims to unlock additional shareholder value from the diverse range of operations within the group.

The proposed demerger will create two independent companies:

Reckon – Comprising the Business (Reckon Accounts, Reckon One and Reckon Loans) and Practice Management (Reckon APS, nQueue and Reckon Docs) divisions, the split will enable Reckon to fuel further growth within these areas, as well as bolster cash flow by not having to divert funds to development and new market investments in the Document Management segment.

Document Management Newco – Representing approximately 15 per cent of group turnover, the demerger will free the Document Management division to pursue an independent strategy to develop new global market leading document management offerings, while building on the existing customer base of the Virtual Cabinet and SmartVault offerings.

“The decision to demerge our business is the best course of action to unlock value from our increasingly diverse and complex range of operations. This represents a natural progression for Reckon as our business continues to undergo robust growth,” said Clive Rabie, Reckon CEO. “At its core, it will allow us to refocus and tailor independent expansion strategies for each business to better pursue their strategic priorities at their own pace and discretion.”

“The proposed demerger will bring about a myriad of growth opportunities for the group. On one hand, it enables Reckon to harness the existing momentum in our already successful cloud-based

and accounting software product lines, primarily across Australia and New Zealand. On the other, it will allow us to boost our Document Management business’ access to overseas capital markets, where a bulk of the potential clientele base stems from, to ultimately accelerate development opportunities,” he added.

Proposed Listing of Document Management Newco on AIM

Part of the LSE, AIM is the world’s most successful international market for growth-stage companies, offering businesses access to a range of institutional investors, retail investors and an unparalleled pool of international capital.

With approximately 85 per cent of Document Management revenue currently deriving from overseas, an AIM listing is expected to raise the profile of the division in its core market and enable the business to capitalise on significant growth potential.

Demerger structure and projected timeline

If the proposal proceeds, existing Reckon shareholders will not only retain, but own shares across both companies. All Reckon shareholders – with the exception of those in certain overseas jurisdictions – will receive pro rata Document Management Newco shares for Reckon shares held by way of dividend in specie.

There are also considerations to offer shareholders an opportunity to participate in a capital raising prior to the listing on AIM. This will provide the new company with funding to develop its cloud based secure information management products.

The Reckon board has indicated their full confidence and commitment to this proposal by declaring their intention to participate in the capital raising.

However, these plans are preliminary, conditional, and subject to due diligence as well as any necessary regulatory approvals. The ASX has indicated that shareholder approval is not required.

“The demerger creates an opportunity for the market to truly recognise and more accurately assign a fitting value to Reckon’s overall business,” said Rabie. “Reckon has grown significantly over the past years, with our Business and Practice Management divisions the main drivers of profitability for the brand. We believe and are confident that the demerger will enable us to sustain and drive further growth across all segments of the business.”

Based on indicative timings, Reckon expects the demerger and IPO to complete before Q3 FY2017. Following that, Reckon and Document Management Newco will continue to work closely together to facilitate integration and transition, as well as ongoing support of document management solutions to accountants who are also clients of Reckon.

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About AIM

AIM is the most successful growth market in the world. Since its launch in 1995, over 3,600 companies from across the globe have chosen to join AIM. Powering the companies of tomorrow, AIM continues to help smaller and growing companies raise the capital they need for expansion.

A wide range of businesses including early stage, venture capital backed as well as more established companies join AIM seeking access to growth capital.

At 28 February 2017 there were 973 companies admitted to trading on AIM with a combined market capitalisation of £86.8 billion, including over 100 software & computer services companies with a total market capitalisation of £8.2 billion.

Source: London Stock Exchange

About Reckon

Reckon is an ASX listed and Australian owned company with over 25 years’ experience delivering market leading solutions to accountants and bookkeepers, legal professionals and small to medium sized businesses.

Reckon’s software services are designed to make accounting faster, easier and more productive.

Find out more at www.reckon.com

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