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Serko share price on watch after coronavirus update

The Serko Ltd (ASX: SKO) share price will be one to watch on Tuesday following the release of an update on the impact of the coronavirus on its business.

What did Serko announce?

According to the release, the online travel booking and expense management company has been monitoring Australasian travel booking trends closely in light of the coronavirus outbreak.

It notes that year to date, transactions have continued to increase over the prior period. However, over the past week the company has seen a drop-off in bookings, which the company is attributing to a travel decline due to the coronavirus.

The company continues to monitor these trends, but currently expects softer transaction numbers to continue as corporate customers change their travel policies to limit unnecessary travel.

How was the business performing prior to the outbreak?

Prior to last week, Serko had experienced solid growth in the Australasian market from total new business and the transition of existing customers from Serko Online to Zeno.

As of the middle of February, Serko has had an increase of approximately 584 total new corporate customers year-to-date, up approximately 257 customers from the first half of the financial year.

This meant that Zeno transactions were now representing approximately 25% of online booking transactions, up from 15% in October.

FY 2020 guidance.

In May of last year the company provided total operating revenue growth guidance of between 20% and 40% for the year ended March 31 2020.

However, due to the coronavirus outbreak, which is expected to offset some of the solid growth outlined above, management advised that it expects the company to be at or about the low end of its guidance range.

In the meantime, management advised that it continues to apply significant resources towards investing in long-term strategic initiatives. These include the North American roll-out, NDC, complex international faring, and the development of the Booking.com platform.

These strategic initiatives are expected to result in mid- to long-term recurring revenue. Development work to support these initiatives is being prioritised over non-recurring, short-term services revenue.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko 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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