Serko co-founder and chief executive Darrin Grafton
Serko co-founder and chief executive Darrin Grafton
serko
NZX-listed travel booking and expenses software maker Serko has booked a $9.4 million loss for its year ended March 31 against a $1.6m profit last year.
FY2020 was a roller coaster year for Serko.
The Auckland-based company surged after US giant Booking.com took a stake in October last year, andthe pair agreed to partner on new products and services - sparking a bull run that saw shares hit $5.60 in January. The Booking.com tie-up helped FY2020 revenue to grow 11 per cent overall to $25.9m.
But in February, Serko warned that coronavirus would hurt its business. Shares tanked to just 89c before recovering some ground as New Zealand came out of domestic lockdown. Serko closed at $3.16 on Tuesday and slipped 1.9 per cent to $3.10 in trading following today's result. The stock is down 24.30 per cent for the year.
This morning, Serko confirmed it had been well and truly clobbered by coronavirus toward the end of FY2020.
"The Covid-19 pandemic and related travel restrictions resulted in an observable declining trend in February followed by a dramatic reduction in March 2020," the company said in management commentary accompanying its result.
"By the end of March 2020, daily transaction volumes had declined by around 90 per cent compared to the equivalent days in March 2019."
Return to breakeven in 2022
Travel bookings hit a low of just 9 per cent of the prior year's level in April before they started to "gradually recover" in May.
June will come in about 25 per cent of the prior year's level of bookings. Serko says it expects Australian and New Zealand domestic travel, which generates most of its revenue, to recover before international routes.
But for now, it has seen "no material increase" in Australian domestic travel, which remains subject to heavy restrictions.
Serko has made no financial forecasts for FY2021, at this point.
But chief executive Darrin Grafton told the Herald that in general business terms, it expects Australia and New Zealand will be at somewhere between 40 per cent and 70 per cent of their pre-Covid level by March 2021, based on discussions with airlines and other industry players.
Grafton saw Serko returning to cashflow breakeven in FY2022, subject to no further shocks.
Serko finished the year with $42.4m in cash (or $39.9m net debt). It is targeting a burn of below $2m a month until the end of FY2021.
Grafton said he saw no need for a capital raise over the next 12 months, unless a distressed competitor came up for sale, or a similar Covid opportunity.
The CEO said the current situation had validated his long-held strategy that it was better to raise cash during the good times, as Serko did last year as Booking.com took its cornerstone stake and it increased its cash balance from $15.7m to $43.2m.
"Cash is more important than your mother," Grafton said.
Thanks to expansion around the time of its Booking.com deal, Serko actually finished FY2020 with 233 staff, or 60 more than it started, although Grafton said it did cull contractors, among other cost-cutting measures.
The Serko chief executive acknowledged the "new normal" had benefits for some. His own company's productivity had "skyrocketed" during the lockdown, then a hybrid home/office model.
But he added that the nascent recovery in bookings this month showed that people would always want face-to-face meetings in the mix. He saw Zoom fatigue setting in, and said there was no substitute for the subtle reactions you pick up in real-life, or the creativity of a collaborate whiteboarding session.
Another silver lining to the grim Covid cloud: Grafton says those who do travel now prefer a single booking service, like Serko, for tighter management and expense control.
The Air New Zealand credits-over-refunds policy is also keeping his company busy. Grafton said his company was helping one travel reseller manage some $16m in credits.
Work with Booking.com on a "white label" version of Serko's Zeno online booking platform - marketed as Booking.com for Business - also continued. Booking.com for Business was launched for the UK and Ireland during May.
