Kiwi tech firm Serko reports 50% growth revenue

“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."

Kiwi tech firm Serko has today reported total revenue growth of 50%, reporting revenue and losses for the period at $4.7 million and $3.6 million respectively.

In announcing its results for the six months to 30 September 2014 via the New Zealand Stock Exchange, the Parnell-based firm says the figures are "in line with expectations."

During the period, Serko experienced growth in online bookings in line with expectations, with online transactions growing 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 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," says Darrin Grafton, CEO, Serko.

“We continue to build a strong pipeline of committed new business through existing and new Travel Agent 4 resellers.

"Engaged and motivated Travel Agents are key to Serko’s long-term growth in Australasia and the rest of the world."

Grafton believes a partnership between Serko’s online expense management platform, Incharge, and Discover Group (Diners), which was announced in July, 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," he adds.

Operationally, Grafton says the company has made "good progress" scaling up the business since the Initial Public Offering (IPO) earlier this year.

As a result, 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 adds.

Serko was awarded a further Research and Development grant worth up to $4.2 million over three years in October 2014, money which Grafton says will be used "to help boost our innovation and delivery capabilities."

Serko Mobile, the company's "flagship new product", has also 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," Grafton adds.

“We remain 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, Grafton says the global market for travel technology remains strong and is experiencing a level of consolidation, with the acquisition of the company's main competitor Concur by SAP in October 2014 "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," he explains.

"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.”

Outlook:

In respect of Serko’s outlook, Grafton says that based on the current pipeline of business alone, the outlook for 2015 "looks promising."

However, as highlighted at the Annual Meeting in August the timing of new contract implementation delivered from Serko's sales pipeline is dependent on client and reseller readiness to on-board, which makes it difficult for the company 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," Grafton explains.

In addition, Grafton says Serko is now "actively involved" in a number of significant discussions concerning the company's 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," Grafton adds.

"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 believes that 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 we are currently considering how best to undertake such an expansion of the company’s footprint," he adds.

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

“In light of the above, we have made a decision to accelerate elements of our 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.”

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