Serko first-half profit drops 16% as R&D, expansion costs mount
By Paul McBeth
Nov. 20 (BusinessDesk) - Serko's first-half profit fell 16 percent as the travel booking software developer ramped up spending on research and development and a launch into new Northern Hemisphere markets.
Net profit fell to $920,000 in the six months ended Sept. 30 from $1.2 million a year earlier. Serko achieved profitability in the March 2018 year and stayed in the black as first-half revenue climbed 23 percent to $11.8 million.
Operating costs were up 25 percent at $10.7 million as Serko hired more staff as its Zeno platform is deployed globally in a strategic partnership with ATPI Group. Headcount rose to 160 as at Oct. 31 from 106 at the end of March.
Research and development spending jumped 58 percent to $3.8 million. That amounts to 34 percent of revenue, up from 27 percent a year earlier. Serko received a smaller government grant of $461,000 in the period.
The software developer affirmed annual guidance for operating revenue to grow 20-to-30 percent, implying sales of $21.9 million to $23.8 million in the year ending March 31. Still, Serko expects earnings before interest, tax, depreciation and amortisation to be in line with last year's $2.2 million as it spends more on funding its global expansion. Ebitda rose 12 percent to $1.5 million in the six months ended Sept. 30.
"We expect that the benefits of this investment will be apparent in the 2020 financial year," chair Simon Botherway said in a statement. "Serko is looking forward confidently to the next phase of our growth plan as we take Serko’s Zeno to the world."
In August, the company raised $15 million in an over-subscribed placement to 12 institutional investors at $2.75 a share. That was a 3.2 percent discount at the time, but since then the stock has climbed as high as $3.47 in October and last traded at $3.29.
Serko held cash and equivalents of $19 million as at Sept. 30, up from $4.6 million a year earlier. Its operating cash flow grew to $1.6 million from $327,000 a year earlier, while its capitalised R&D spending of $1.9 million and $226,000 purchase of plant, property and equipment took the investment outflow to $2.1 million.
The company said it's using capital carefully to accelerate growth. It is also investigating potential acquisitions, it said, without providing details.