Serko profit falls as expansion costs mount

AUCKLAND: Serko’s firsthalf profit fell 16% as the travel booking software developer increased spending on research and development and on a launch into new northern hemisphere markets.

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 firsthalf revenue climbed 23% to $11.8 million.

Operating costs were up 25% at $10.7 million, Serko hiring more staff as its Zeno platform was deployed globally in a strategic partnership with ATPI Group. Headcount rose to 160 on October 31 from 106 at the end of March.

Research and development spending jumped 58% to $3.8 million. That amounts to 34% of revenue, up from 27% 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%, implying sales of $21.9 million to $23.8 million in the year ending March 31. Still, Serko expects earnings before interest, tax, depreciation and amortisation to be in line with last year’s $2.2 million as it spends more on funding its global expansion. Ebitda rose 12% to $1.5 million in the six months ended September 30.

‘‘We expect that the benefits of this investment will be apparent in the 2020 financial year,’’ chairman Simon Botherway said in a statement.

‘‘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 $15 million in an oversubscribed placement to 12 institutional investors at $2.75 a share. That was a 3.2% 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 $19 million on September 30, up from $4.6 million a year earlier. Its operating cash flow grew to $1.6 million from $327,000 a year earlier, while its capitalised R&D spending of $1.9 million and $226,000 purchase of plant, property and equipment took the investment outflow to $2.1 million.

The company said it was using capital carefully to accelerate growth. It was also investigating possible acquisitions, it said, without providing details. — BusinessDesk