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Result: Serko delivers more strong growth in FY 2019

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The Serko Ltd (ASX: SKO) share price has dropped lower on Wednesday following the release of its full year results.

At the time of writing the leading travel and expense technology solutions company’s shares are down around 2% to $3.16.

How did Serko perform in FY 2019?

For the 12 months ended March 31, Serko achieved total operating revenue of $23.4 million. This was a 28% increase on FY 2018’s result and the upper end of its guidance range of 20% to 30% growth.

The company reported a 26% lift in recurring product revenue to $20.7 million. This accounts for 88.4% of its total operating revenue.

Also growing strongly was Serko’s earnings before interest, tax, depreciation, amortisation and fair value remeasurement on contingent consideration (EBITDAF). It increased 19% on the prior year to $2.6 million. This was ahead of the company’s guidance.

Net profit after tax was $1.6 million, down marginally on the prior year’s $1.8 million. This was impacted by the non-cash fair value remeasurement adjustment for the deferred consideration relating to its InterplX acquisition.

Serko’s chairman, Simon Botherway, appeared to be very pleased with the company’s performance in FY 2019.

He said: “Serko has delivered another successful year. In the Australasian business we have benefited from growing transactions and increasing Average Revenue per Booking as we both gain new customers and more customers transfer to our premium Zeno travel and expense management solution.”

Mr Botherway was also pleased with its international operations. Adding: “In the new North American and United Kingdom (UK) markets, it is very pleasing to note the number, and market presence, of those TMCs who have signed agreements to roll out Zeno to their customers, including Carlson Wagonlit Travel in the US, one of the world’s largest TMC’s.”

In fact, the chairman revealed that demand for its Zeno offering has been more than the company could cope with.

He said: “Demand for Zeno in North America has exceeded our in-house capacity to deliver. In response, we have boosted our resourcing and prioritised development as we configure Zeno to meet the operational and marketing needs of these customers. This includes integrating complex travel content and associated services, as well as customised TMC integration work.”

In light of this investment, FY 2020 will be another year of cash burn. However, this is expected to normalise in FY 2021 and be funded by its existing balance sheet resources.

Looking ahead, management is confident of further strong top line growth and has provided FY 2020 total operating revenue growth guidance of between 20% and 40%.

Elsewhere in the travel sector, Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB) shares have both pushed higher after being named as buys by a leading broker.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Serko Ltd and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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