Serko targets profitability in 2018

Serko [NZX: SKO], the online travel booking company, expects to become profitable in 2018 after missing its downgraded guidance for operating revenue in its latest year.

The company posted a loss of $6.2 million, or 10c a share, in the 12 months ended March 31, from $6.5 million, or 10c a year earlier, it said in a statement. Revenue rose to $13.1 million from $10.4 million in a year, while other income from Crown entity Callaghan Innovation for research and development fell 8.3% to $1.3 million.

Serko had downgraded its 2016 revenue outlook twice due to late product rollouts and a slowing Australian economy, with its guidance suggesting it expected revenue of $13.6 million.

"Despite the strong growth in underlying transactional fee revenue, aggregate revenue did not meet our guidance for the financial year," Serko said. "The process of securing reseller participation in our content programme took longer to complete than expected due to the complex nature of the commercial negotiations with our partners and content providers."

The Auckland-based company expects to start turning profits starting in the 2018 financial year and is aiming to break even on a cashflow basis from February next year.

"We will take a rational approach to areas of the business that are not meeting our expectations to ensure that our resources are allocated to those parts of the business which will deliver long-term value to shareholders," chief executive Darrin Grafton said. "The 2017 financial year will be an important one for Serko and we look forward to working with all our stakeholders to deliver value for our customers, partners, and shareholders."

Serko raised $8.1 million from institutional and existing investors last year to help fund a marketing push and product launch, having previously signalled it didn't plan to go back to the market after its June 2014 initial public offering.

The company slowed its operational cash outflow to $4.5 million from $6.6 million and halved its investment spending to $742,000 in the year. With the capital raising, Serko had cash and equivalents of $7.1 million as at March 31.

Serko increased spending on R&D by 11% to $6.3 million and expects to scale back that spending as it integrates customers from the Arnold Travel Technologies, acquired last year, on its own platform.

"The decommissioning of Arnold along with a reduced requirement for R&D spend presents Serko with flexibility to better align the cost base with revenue to ensure that we utilise our capital resources appropriately," Serko said.

The company didn't provide guidance for the 2017 financial year, saying it will update investors at the annual meeting in August.

Serko shares last traded at 76c and have dropped 16% this year.

(BusinessDesk)

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