Serko to boost sales and staff after $3.6m loss

Serko has announced its results for the six months to 30 September 2014. The online travel booking and expense management for business reported revenue and losses for the period were $4.7 million and $3.6 million respectively and are in line with expectations. Cash held at 30 September 2014 was $8.3 million.

The company reported total revenue growth of 50 percent, with online transaction-based revenue up 36 percent and online transactions increased by 32 percent.

Serko says it has strong pipeline of new business commitments for FY16, and is accelerating headcount plans to support additional growth.

During the period Serko experienced growth in online bookings in line with expectations. Online transactions grew by 32% compared to the same period in FY14. Monthly run-rate growth, which is a comparison of transactions for a month against the same month last year, is accelerating and reached 59% in September 2014.

Serko chief executive officer Darrin Grafton says “Serko is currently on-track to achieve the financial forecast for the 12 months to March 2015 included in the prospective financial information (PFI) contained in the Prospectus.

“We continue to build a strong pipeline of committed new business through existing and new travel agent resellers. Engaged and motivated travel agents are key to Serko’s long-term growth in Australasia and the rest of the world.

He says a partnership between Serko’s online expense management platform, Incharge, and Discover Group (Diners) was announced in July and will help to drive the growth of that product line. “Work to integrate Serko Online, the online booking platform, and Incharge continues behind the scenes and we look forward to seeing more integrated offerings announced in the near future”.

“Operationally, we have made good progress scaling up the business since the Initial Public Offering (IPO). Total employees in Serko’s offices worldwide were 118 at the end of the period, with another 13 new starters contracted to join. Growth has been focused predominantly in our Sales, Operations and Technology teams”, he says.

Serko was awarded a further Research and Development grant worth up to $4.2 million over three years in October 2014 and we will use the funds to help boost our innovation and delivery capabilities.

“Serko Mobile, our flagship new product, has commenced commercial trial, with a full commercial launch planned for February 2015. The product has already garnered significant interest from overseas markets, with nuTravel, a leading US travel technology provider, signing a three year reseller deal for the technology”, says Grafton.

Grafton says Serko remains convinced that mobile is right at the core of our industry transformation strategy and plan to continue substantial investment in this space.

“At a macro level, the global market for travel technology remains strong and is experiencing a level of consolidation. The acquisition of our main competitor Concur by SAP in October 2014 is a clear demonstration of the value inherent in the market.

“It’s also appropriate to refer to the Ebola outbreaks in the context of the risk it could present to the travel industry in our region and to Serko’s business. At this stage we have not detected or been made aware of any material impacts to corporate travel in the Australasia and South East Asian markets. However, we are closely monitoring the situation with our Travel Agent partners.”

In respect of Serko’s outlook, Grafton says “in our Investment Statement, we also provided forecasts for the six months to September 2015. Based on our current pipeline of business alone, the outlook for this period looks promising”.

He says Serko’s sales pipleline is dependent on client and reseller readiness to on-board, making it difficult for Serko to forecast revenue growth ‘with precision’. “In other words, we are confident that we have secured the business but we cannot be certain of the exact timing of the transition of that business to our platform,” he says.

“In addition, Serko is now actively involved in a number of significant discussions concerning our mass movement “Groups” technology. These involve major global companies in the Mining, Energy & Resources sector in Australia and also the US. Our unique patented technology offers a compelling business case to these businesses. To date Serko has secured numerous clients in the Australian mining sector, but the potential to extend this product to new markets such as North America represents significant future growth potential for Serko.

“Moreover, we are seeing interest in our online and mobile technology from Travel Agents in the US market”.

Grafton says these two developments indicate that there is an opportunity to grow the business in the US. This may result in deployment of resources to North America in addition to Asia, and Grafton says Serko is currently considering how best to undertake such an expansion of the company’s footprint.

“We also expect to sign additional mobile reseller or ‘white-label’ agreements in the future”.

Grafton says Serko has made a decision to accelerate elements of its headcount plans to support these additional growth opportunities.

“The second half of this financial year promises to be an exciting and pivotal period for Serko and we believe we are positively positioned to continue to grow strongly into the future.”