Serko reports FY15 full year result, delivers 55% Year on Year Revenue Growth
Serko Limited (NZX:SKO) today announced its first set of full year unaudited financial results as a publicly listed business for the year ended 31 March 2015. The company delivered top-line revenue growth of 55% compared to the previous period. Revenue and losses after tax for the period were $10.4 million and ($6.4 million) respectively. The bottom line result was in line with the prospective financial information (PFI) contained in the IPO Prospectus, despite revenue being 5.6% lower than PFI.
Cash and working capital balances were strong. Cash held at 31 March 2015 was $4.5 million, $0.5 million below PFI forecasts but offset by higher net receivables.
Serko’s core product Serko Online experienced growth in transaction volume in line with forecasts. In the second half of the year, transactions increased by 57% compared to the second half of FY14 and the 32% growth reported in the first half. Serko Online revenues increased by 62% in total for the year.
Serko’s online expense management platform, Incharge, contributed revenues in its first full year since acquisition of $0.9 million, an increase of 15% on a like for like basis.
Billable Service Revenues from client funded software development totaled $2.1 million, an increase of 9% year on year.
Serko Incharge and Billable Services revenues were in line with the adjusted guidance issued in early March and respectively were $0.2 million and $0.3 million below the PFI forecast.
Expenses from ordinary activities (excluding finance expenses) totaled $18.0 million for the year, which was $0.4 million lower than PFI.
Research and Development costs that were expensed through the profit and loss account amounted to $5.1 million, with an additional $0.6 million that was capitalized in the year. The total R&D investment of $5.7 million increased 70% from the previous year and was 10% higher than PFI.
Other income from R&D and Business Development Grants totaled $1.4 million, which was an increase of 58% from the prior year and 30% higher than PFI.
Following Serko’s IPO in June last year the company has been focused on building the product and operational platform required to support the growth ambitions in the Australasian market, Asia Pacific and beyond. We raised sufficient capital to invest in growing internal capabilities, developing a range of innovative new products and establishing a scalable operating model that will deliver long-term value to shareholders.
The business added 46 new employees ending the year with 133 employees spread between Auckland, Sydney, Brisbane, Melbourne, Perth, X’ian (China), Gurgaon and Mumbai in India.
During the course of last year a number of key milestones were announced which are important to the long term strategy. These included the award of the travel expense automation patent by the US Patent Office in July, strategic partnerships with third parties including Intelligent Travel and Routehappy, the integration of Expedia Hotel Inventory into Serko’s Online Booking Tool, the launch of Serko Mobile and the first licensing agreement for the Mobile App.
Although the effect of delayed implementations and contract confirmations had an impact on our run rate in the final quarter and caused us to fall 5% short of the PFI revenue target, the business has delivered solid growth and progress.
The strategy for FY16 is consistent with our 2015 activity and can be broken into 3 discrete strategy streams:
Darrin Grafton, Chief Executive of Serko, said that “The results clearly demonstrate that demand for Serko products across the APAC region is strong and our product vision is aligned with the needs of the market. The R&D investments that we made during FY15 mean that we go into FY16 with a market leading integrated travel and expense proposition and a set of reseller relationships that should allow us to deliver on our growth ambitions.
“The acquisition of Arnold Travel Technology, an Australian Corporate Online Booking Tool Competitor, on 1 May 2015 from Expedia/Wotif has significantly increased Serko’s share of the Australian corporate travel sector and will further accelerate growth in on line transactions through FY16. As a result of the acquisition of Arnold, we expect around 30% of Australia’s corporate travel expenditure to be flowing through Serko’s systems by the end of FY16.”
As previously signaled, the belated delivery of the Serko Mobile app and the Incharge product refresh, coupled with the change in demand for software customization and the acquisition of Arnold Travel Technology, resulted in an adjustment to first half FY16 revenue forecasts. More recently, the demand for software customization has remained below expectation and as a result the company is forecasting a revenue range of between $7.5 million and $8.0 million for the first half of FY16, compared to PFI of $8.3 million. However software customisation is non-recurring low margin business and those resources have been re-allocated within the organisation offsetting our hiring requirements. Revenue in the second half is expected to accelerate as these new and refreshed products gain traction. For the full year, we expect revenue to be between $16 million and $18 million. The company anticipates moving into profitability in the first half of FY17 within existing cash resources.
For more information:
Chief Financial Officer, Serko
+64 9 309 4754
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). Headquartered in Auckland, New Zealand and with offices in Sydney Australia, Xi’an City China and Gurgaon, India, Serko employs 140 people worldwide.
Serko Online is an integrated Online Booking Tool (OBT) 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.
 Comparing the twelve months ended 31 March 2015 to the twelve months ended 31 March 2014
 Prospective Financial Information contained in the Prospectus dated 26 May 2014