Serko's annual loss widens, targets profitability in 2017

Serko [NZX: SKO], the online travel booking business, reported a larger annual loss in line with its prospectus forecast, while delivering slower growth in sales than anticipated, and is targeting profitability in the first half of 2017.

The Auckland-based company posted a net loss of $6.43 million in the 12 months ended March 31, more than the $6.33 million forecast in offer documents when the company was floated last year. Sales rose 55% to $10.4 million, about 5.8% below the prospectus forecast and in line with Serko's warning in March that it would miss that target.

Serko has previously said some billable services won't be recognised until the 2016 financial year, while delays to its mobile app will weigh on revenue. The company cut its revenue forecast for the first half of 2016 to between $7.5-8 million, from the $8.3 million target in the offer document, and said it expects annual revenue of between $16-18 million.

"Revenue in the second half is expected to accelerate as these new and refreshed products gain traction," Serko said in a statement. "The company anticipates moving into profitability in the first half of the 2017 financial year within existing cash resources."

When Serko listed in May last year, chairman Simon Botherway said the company forecast losses over an 18-month horizon, and expected to have a positive cash flow by the end of 2016.

Last year Serko raised $17 million in new capital selling 15.5 million new shares at $1.10 a piece, via an initial public offering, to fund its growth ambitions and repay debt. Founders Darrin Grafton and Bob Shaw sold a further $5 million worth of shares into the offer, retaining about a 20% stake and have agreed not to sell any more shares until two days after Serko announces its 2016 annual result.

The shares were unchanged at 87c, and have dropped 24% this year.

The company's cash balance was lower than the offer document forecast by $400,000 at $4.5 million, and the operating cash flow of $6.6 million was more than the $5.9 million projected.

Earlier this month, Serko bought Expedia's Arnold Travel Technology which it said would lift sales by between 7% and 8% in the six months ending Sept. 30, and the financial statements show the company paid A$100,000, and assumed liabilities of A$102,345.

(BusinessDesk)