Serko shares climb to 6-month high as annual loss shrinks

Tuesday 23 May 2017 11:58 AM

UPDATE: Serko shares climb to 6-month high as annual loss shrinks

(Updates shares, adds broker comment, fixes cash flow forecast in 9th paragraph)

By Paul McBeth

May 23 (BusinessDesk) - Serko shares jumped to a six-month high after the online travel booking software firm said it boosted sales and scaled back spending, allowing it to almost halve its annual loss and affirm its target of making a profit in 2018.

The loss narrowed to $3.3 million, or 5 cents per share, in the 12 months ended March 31, from a loss of $6.3 million, or 10 cents, a year earlier, it said in a statement. Trading revenue rose 9 percent to $14.3 million and operating costs were trimmed by 10 percent to $18.8 million.

"Serko, which celebrates its 10-year anniversary, has made strong progress over the last financial year," chairman Simon Botherway said. "The current pipeline of new customers expected to join Serko's platform gives us confidence we will achieve positive profit in the current financial year and cash flow break even for the full year."

The company's shares jumped 21 percent to 46 cents, having already climbed 52 percent from a record low last month.

Grant Williamson, a director at Hamilton Hindin Greene, said the company was showing "nice growth" and had reasonable cash reserves, but was "really a speculative stock" with investors uneasy about software companies since the collapse of Wynyard Group last year.

"Only a couple of investors have got excited at this stage - the stock won't be researched and won't be on the radar of many investors' portfolios," Williamson said.

In 2014, the company raised $17 million selling shares at $1.10 apiece and existing investors sold a further $5 million into the offer, however, the stock has been punished as a slowing Australian economy and late product launches weighed on Serko's revenue.

Serko raised $8.1 million from institutional and existing investors at 84 cents apiece in late 2015 to help fund a marketing push and product launch, having previously signalled it didn't plan to go back to the market after its June 2014 initial public offering.

The software developer trimmed its cash burn, with an operating cash outflow of $1.6 million in the year compared to $4.5 million a year earlier, and after investing and finance activity, left it with cash on hand of $4.5 million, ahead of the forecast $3 million-to-$4 million.

Botherway said the cash balance will likely drop below $4 million in the first half of the current financial year due to staff performance incentive payments and annual prepayments, "however we have sufficient cash to fund both our current level of activity and anticipated growth", and the financial statements note the level of cash reserves give "sufficient level of headroom to help support the business for at least the next 12 months".

Chief executive Darrin Grafton, who owns about 19.5 percent of the company, said management achieved "good progress" in growing Serko's customer base, boosting the average revenue per booking, and rolling out new technology.

"With our Australasian corporate travel business now firmly established, we are looking to drive uptake on the small business platform, serko.travel, and expand into new markets through strategic partnerships," he said.

Serko scaled back spending on research and development in the 2017 year to $5.8 million from $6.3 million in 2016, and received government grant income of $1.1 million in the 12 months ended March 31, down from $1.3 million a year earlier. Its R&D grant from Callaghan Innovation was extended by $2 million over the next two years, adding to the $4.2 million, three-year R&D subsidy it was awarded in 2014.

(BusinessDesk receives assistance from Callaghan Innovation to cover the commercialisation of innovation.)

(BusinessDesk)

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