The Serko Ltd (ASX: SKO) share price is dropping lower this morning following the release of its half year results.
At the time of writing, the travel and expense technology solution provider's shares are down 3% to $5.11.
How did Serko perform in the first half?
Given its exposure to the travel market, Serko unsurprisingly had a very tough first half of FY 2021.
For the six months ended 30 September, the company reported a 66% decline in total operating revenue to NZ$5.1 million.
The company's recurring product revenue was also impacted by the COVID-19 pandemic travel disruptions. It was down 65% on the prior corresponding period to NZ$4.6 million.
During the half, total travel booking volumes were down 77% on the prior corresponding period. However, booking trends are now improving. Volumes have lifted from 23% of last year's levels to 35% during October.
On the bottom line, Serko recorded a sizeable loss after tax of NZ$10.1 million. This compares to a net loss of NZ$0.9 million in the first half of FY 2020.
This loss was driven by the tough trading conditions and also its investments in growth opportunities. Serko has been investing in its expansion into the Northern Hemisphere markets ahead of an anticipated travel market recovery.
This led to a net cash burn average of NZ$1.8 million per month for the six-month period, which is within the NZ$2 million COVID-19 cost saving cap set by the company.
Despite this cash burn, the company finished the period with a cash balance of NZ$31.5 million. However, since then Serko has completed a capital raising, which leaves it with over NZ$90 million of cash on hand. Management believes this positions Serko well for an anticipated travel market recovery.
Outlook.
Serko's Chief Executive, Darrin Grafton, remains very positive on the company's prospects on the other side of the pandemic.
He said: "We consider that Serko's prospects within the travel industry remain significant over the medium to long-term, notwithstanding the currently known impacts of the COVID-19 pandemic, and we remain confident in the recovery of travel over time. We are committed to supporting our partners through this period of change and accelerating our drive to transform business travel and expense management globally."
However, at this stage, it is unable to provide any guidance for FY 2021 due to the uncertain timing of the travel market recovery.
Though, the company's Chair, Claudia Batten, has provided investors with an idea of how Serko expects travel volumes to trend in the coming months.
She said: "Serko continues to assume in its forecasts that travel volumes will be in the range of 40-70% of pre-COVID levels by March 2021. The extent of travel restrictions in place within Australia and New Zealand will be determinative of where, within this range, actual travel volumes fall."
Ms Batten also commented on the company's cash burn expectations.
She added: "Serko continues to target an average monthly cash consumption of between $2 million and $4 million during the remainder of FY21 and through to FY22. We continue to invest in growing our global footprint, managing investment based on travel resumption and achievement of key performance metrics (including the Booking.com opportunity and NORAM customer onboarding)."
