Serko first-half profit drops 16% as R&D, expansion costs mount

Serko chief executive Darrin Grafton says his travel software company has been able to expand into the northern hemisphere while remaining profitable. Photo / Supplied.

Serko's first-half profit fell 16 per cent as the travel booking software developer ramped up spending on research and development and a launch into new Northern Hemisphere markets.

Its shares [NZX:SKO] - which have been on a tear over the past 12 months, rising 143.7% - slipped 0.91 per cent to $3.26 after the result was released.

Net profit fell to $920,000 in the six months ended September 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 per cent to $11.8m.

Operating costs were up 25 per cent at $10.7m 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 per cent to $3.8m. That amounts to 34 per cent of revenue, up from 27 per cent 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 per cent, implying sales of $21.9m to $23.8m in the year ending March 31.

Still, Serko expects earnings before interest, tax, depreciation and amortisation to be in line with last year's $2.2m as it spends more on funding its global expansion.

Ebitda rose 12 percent to $1.5m in the six months ended September 30.

"We expect that the benefits of this investment will be apparent in the 2020 financial year," chair Simon Botherway said.

"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 $15m in an over-subscribed placement to 12 institutional investors at $2.75 a share. That was a 3.2 per cent 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 $19m as at Sept. 30, up from $4.6m a year earlier. Its operating cash flow grew to $1.6m from $327,000 a year earlier, while its capitalised R&D spending of $1.9m and $226,000 purchase of plant, property and equipment took the investment outflow to $2.1m.

The company said it's using capital carefully to accelerate growth. It is also investigating potential acquisitions.