Serko seeks up to $22 mln in IPO to fund growth plans across Asia Pacific
By Paul McBeth
May. 26 (BusinessDesk) - Serko, the online business travel booking company, is seeking up to $22 million in an initial public offer, which it will use to fund growth aspirations across the Asia Pacific region
The Auckland-based company will sell 15.5 million new shares at $1.10 apiece, raising some $17 million, and a further 4.5 million existing shares worth $5 million will be sold into the offer as part of a main board listing on the NZX.
The offer will have a retail component, and open on June 4, closing on June 19, with a listing expected on June 24. Founders Darrin Grafton and Bob Shaw will each retain about 20 percent and have agreed not to sell any more shares until ,two days after Serko announces its 2016 annual result.
Of the $17 million raised, $11.3 million will be held to fund capital initiatives and pay for the $438,000 cost of the IPO, $3.4 million will repay bank debt and $2.3 million will repay shareholder loans, according to its prospectus lodged with the Companies Office. Serko forecasts net cash of $9.9 million at next month's 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.
Serko is the first of two software companies announcing NZX listings today, a trend that's been growing on the local bourse as investors become more comfortable with the strategy of eschewing short-term profits in the hope of grabbing larger market share. Xero, which develops cloud-based accounting software, has been the pin-up child for the strategy, raising $180 million to fund a push into the US.
Chief executive Darren Grafton name-checked Xero several times during a media briefing in Auckland, saying Serko's use of travel agencies as a reseller of its software was similar to Xero's use of accountants. Five travel management companies accounted for 70 percent of Serko's revenue in the year ended March 31.
The software-as-a-service company is forecasting losses for its 18-month forecast horizon, but chairman Simon Botherway said he doesn't anticipate raising more funds with Serko expected to be operationally cash-flow positive by the end of 2016.
"We anticipate that we won't have to come back to market," Botherway said. "We're not out there in the never-never with endless calls on capital."
Had Serko been chasing immediate profits it would have missed out on the existing growth opportunities in Asia, he said.
Serko forecasts 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.
Botherway said the initial plan is to focus on growing in the Asia Pacific, though the company is investigating expanding into other regions.
Serko generates revenue by providing customers and travel agencies greater control over their travel budgets to improve efficiency. Travel accounts for between 8 percent and 12 percent of corporate budgets, it said.