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20/11/2015 08:30
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REL: 0830 HRS Serko Limited
HALFYR: SKO: Serko FY16 Half Year Results
Market Release
20 November 2015
Serko FY16 Half Year Results Announcement
Unaudited Results for the 6 months ending 30 September 2015
Serko Limited (NZX:SKO) is pleased to announce its unaudited interim results
for the six months to 30 September 2015. Highlights from the six-month period
include:
o Recurring usage revenue growth of 62%
o Total Income increased by 34%1
o Online transactions increase by 69%1
o R&D investment increase by 21%1
o Completed acquisition and integration of Arnold Travel Technology business.
Financial Results
Serko's interim results for the first six months of FY16 mark the completion
of the eighteen-month period covered by the prospective financial information
(PFI) contained in the IPO Prospectus2, and reflect the acquisition of the
Arnold Travel Technology business from Expedia on 1 May 2015.
In the first six months of FY16 total income amounted to $7.1m ($6.4m
excluding grant income), which was within the guidance given at the 2015
Annual Meeting and represented a 34% increase from the same period in FY15.
Recurring usage revenues increased 62% to $5.9m on the back of a 69% increase
in online booking transactions. Recurring usage revenues represented over 90%
of total revenue compared to around 80% in the same period in FY15. Excluding
Arnold, recurring usage revenues increased by 43% and online booking
transactions by 41%.
The investment in R&D amounted to $3.3m in the six-month period, a 21%
increase from the same period in FY15. Operating costs in total increased by
25% to $10.2m and the net loss before tax was $3.3m.
As previously signalled, the results were below the PFI detailed in the IPO
Prospectus. This was attributable to the later launch of new products and
services and the shortfall in expected customised software development
revenues. The company has nonetheless managed cash reserves to a closing cash
balance of $2.5m, which is in line with PFI and is after the costs of the
Arnold acquisition, which was not included in the PFI.
Serko's Chief Executive Officer, Darrin Grafton said: "We have made good
progress in establishing the necessary building blocks for future growth in
the second half. This includes establishing new supply-side content
relationships, the acquisition and integration of the Arnold Travel
Technology business from Expedia, and the delivery of new technology."
Delivery of Strategic Objectives
Growing the customer base
Serko successfully grew transaction volumes in the half-year through a
combination of organic growth and the acquisition of Arnold. This acquisition
accelerated the on-boarding of anticipated customer wins. The company
estimates that about US$5bn of corporate travel will be transacted across its
platforms this financial year, which is a US$2bn increase from the prevailing
annualised rate at the time of the IPO. The Serko Incharge expense management
solution is now successfully on-boarding a pipeline of contracted new
business, with the growth-rate having doubled to 29% from the same period in
FY15.
As previously highlighted, the demand for customised software development has
reduced significantly compared to prior years and the company does not see
this trend changing in the short-to-medium term. However, this has enabled
the associated development teams to be redirected onto strategic initiatives
that will build long-term value.
It was also pleasing to sign a Reseller Agreement with BCD Travel during the
half-year, the last of the major global travel management companies without a
Serko relationship.
Increasing revenue per transaction
The establishment of direct content supply relationships with leading brands
such as Expedia, Booking.com and Air New Zealand Taxis is strategically
important for the business. The ability to earn commission revenue, in
addition to transactional revenue, allows the business to be more competitive
and offer greater value to our customers. In addition this has led to the
identification of new and important market opportunities that were previously
unable to be addressed. The company expects to make further announcements
relating to both new products and delivery channels in the second half.
Innovation
Serko has continued to invest in product development and expects to bring
additional functionality to its customers in the second half of the 2016
financial year (FY16). These products are important steps in the mission to
transform the way corporate travel is offered and supported within the
industry. We aim to significantly improve and enhance the corporate travel
experience from the initial booking right through to post-travel expense
reconciliation.
The integration of Serko's online booking suite with its expense management
product is now being delivered through the Serko mobile solution. Serko
Mobile gives users the ability to make, change and manage complex travel
itineraries, automatically capture and reconcile expenses, and comply with
the strict policy requirements of our corporate customers, all from the palm
of their hand. Serko's product is the leader in its class and the company
intends to continue to invest to maintain its competitive advantage.
A number of our resellers have licensed and are preparing to launch their own
white label versions of Serko's mobile technology in order to maintain their
brand connection with their customers who use Serko. The Serko branded Mobile
application is also available for all Serko customers to download via the
Apple and Google App Stores.
Awards
Serko was delighted to again be a finalist in the 2015 NZ Hi-Tech Awards, and
was recognised at number three in the Ten Hot Emerging Companies by the
Technology Investment Network (TIN).
Outlook
In the second half, the key focus will be on continuing to grow online
bookings; developing a small to medium-sized business solution; and
monetising the new products launched during the first half of FY16. Serko is
working closely with its resellers to assist with the roll-out of our new
products across their channels, although it is difficult to accurately
forecast how long this process will take.
The reduced demand for non-recurring customised software development and the
longer lead times for the commercialisation of new products now lead the
company to anticipate that full-year revenues will be 15% below the guidance
of $16m provided at the 2015 Annual Meeting. However, recurring usage
revenues remain on track to deliver over 50% year-on-year growth in FY16.
Serko is considering options to raise some additional capital to support the
company's growth aspirations and the roll-out of additional product
initiatives.
The company now expects to reach its goal of breakeven at the end of FY17.
Serko remains confident that the future value potential of its product
offering is significant and is encouraged by the level of attention and
support Serko's technology is receiving from global travel management
companies and other industry participants.
ENDS
For more information contact:
Tim Bluett, Chief Financial Officer, Serko
+64 9 309 4754
[email protected]
About Serko
Serko is Australasia's leading online travel booking and expense management
company for businesses and is listed on the New Zealand Stock Exchange Main
Board (SKO.NZ). With its HQ in Auckland New Zealand, and with offices in
Sydney Australia, Xi'an City China and Gurgaon, India, Serko employs more
than 130 people worldwide.
Serko Online is an integrated Online Booking Tool used by administrators and
travellers to book flights, accommodation and car hire from the broadest
possible set of travel providers. The OBT ensures that travel bookings comply
with corporate travel management policy without limiting the users choice of
travel provider.
Visit www.serko.com for more information. Serko's interim results are
available for downloading from Serko's website at
http://www.serko.com/investor-centre/.
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1. Comparing the six months ended 30 September 2015 to the six months ended
30 September 2014
2. Registered on 26 May 2014
End CA:00273750 For:SKO Type:HALFYR Time:2015-11-20 08:30:57
