Serko widens 1H loss, boosts sales and staff

Thursday 20th November 2014

Serko, the online travel booking business, widened its first-half loss in line with its May prospectus as it hired more staff to chase sales growth.

The Auckland-based company increased its loss to $3.6 million in the six months ended Sept. 30, from a loss of $347,146 a year earlier, it said in a statement. Sales rose 50 percent to $4.7 million. Expenses increased 127 percent to $8.9 million, fuelled by a 129 percent increase in remuneration and benefits to $5.3 million as it increased its payroll to 84 from 65.

In June, Serko raised $17 million in new capital selling 15.5 million new shares at $1.10 a piece, via an initial public offering to fund its growth ambitions and repay debt. Founders Darrin Grafton and Bob Shaw sold a further $5 million worth of shares into the offer, retaining about a 20 percent stake and have agreed not to sell any more shares until two days after Serko announces its 2016 annual result.

The software-as-a-service company has forecast losses for its 18-month forecast horizon, but chairman Simon Botherway told investors in May the company doesn't anticipate raising more funds with Serko expected to be operationally cash-flow positive by the end of 2016. According to its prospectus, Serko expects a net loss of $6.6 million in the 12 months ending March 31 next year, from a loss of $1.7 million in 2014, and a first-half loss of $2.5 million the following year. Revenue is seen climbing 53 percent to $11 million in 2015, with sales of $8.3 million in the six months ending Sept. 30, 2015.

“Serko is currently on-track to achieve the financial forecast for the 12 months to March 2015 included in the prospective financial information contained in the prospectus," chief executive Grafton said. “At a macro level, the global market for travel technology remains strong and is experiencing a level of consolidation. The acquisition of our main competitor Concur by SAP in October 2014 is a clear demonstration of the value inherent in the market.

The company flagged Ebola as a risk to the travel industry and its business, but had "not detected or been made aware of any material impacts to corporate travel is Australasia and South East Asian market" and would continue to closely monitor the situation.

Serko generates revenue by providing customers and travel agencies greater control over their travel budgets to improve efficiency and uses travel agents as resellers of its software. In the six month period the company trialed Serko Mobile, and plans to launch the product commercially next year.

"The product has already garnered significant interest from overseas markets, with nuTravel, a leading US travel technology provider, signing a three year reseller deal for the technology," Grafton said. “We remain convinced that mobile is right at the core of our industry transformation strategy and plan to continue substantial investment in this space."

Cash held at Sept. 30 was $8.3 million, having forecast net cash of $9.9 million on listing, and anticipates spending $2.4 million in the current financial year and $2.5 million in the first half of the 2016 financial year.

Shares of Serko last traded at 96 cents, and have largely traded below its offer price.

BusinessDesk.co.nz

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