As the market players are already aware, the outbreak of the COVID-19 pandemic has impacted several sectors as well as companies. Notably, this pandemic has severely impacted the travel industry as well as the companies operating in this industry. However, some companies are now expected to recover strongly. Since this company is well-funded, it could be said that this company could tackle challenges in an effective way. The stock price of this company rose by ~60.16% in 9 months. Also, in the time frame of past 6 months, it rose by ~31.95%.
- SKO is well-funded which could help the company in navigating tough conditions.
- The company is targeting an average monthly cash burn of between $2 Mn and $4 Mn per month in order to conserve the cash reserves.
- Wherever required, the company would be considering acquisitions and/or investments in order to accelerate execution of the strategic priorities.
- The company has been witnessing trends which favour the adoption of SKO’s travel as well as expense management solutions.
Serko Limited (NZX: SKO) is leading the way with innovative, integrated travel & expense solutions. It has a rich corporate customer base of over 6,000. Zeno is the company’s next generation travel management application, which uses intelligent technology, predictive workflows, as well as the global travel marketplace in order to transform business travel throughout the entire journey.
FY21 Results Performance (For the Year Ended 31 March 2021)
SKO has reported a 52% YoY decline in total operating revenue to $12.4 million, primarily impacted by the effects of Covid-19 and total travel booking volumes reduced by 63% YoY. Total operating expenses grew by 21% to $44.9 million, owing to the investment for its planned international expansion. Meanwhile, the company has recorded a significant rise in its net loss after tax to $29.4 million as compared to the prior year’s net loss of $9.4 million due to higher operating expenses and lower revenue.
Notably, North American-sourced income, mainly expense platform revenue as well as the US sourced supplier commissions, witnessed a decline of 51% to $2.4 Mn from $4.8 Mn. This decline was mainly because of the impact of COVID-19 pandemic.
Financial Snapshot (Source: Company Reports)
Business Partnership with Booking.com
In late March, the company has started to transition existing ‘Booking.com for Business’ customers to the new platform. This is the process which is due to finish by July 2021 end. Notably, the new Booking.com for Business platform is being launched globally as the additional languages as well as regional content are added. Also, subject to the recovery in the relevant markets, it was mentioned that the partnership is anticipated to make a significant contribution to the revenues in FY 2022.
Decent Balance Sheet
SKO is well funded and cash balances and short-term deposits were $79.9 million as on 31st March 2021 as compared to $42.4 million in the prior year. This was primarily attributed to the benefits of the capital raise and better cost management and investment programmes. Notably, net funds received after the capital raising costs were $65 Mn.
During FY 2021, the company has undertaken investment to scale its Zeno platform to accommodate the accelerated migration of Booking.com business customers onto the upgraded ‘Booking.com for Business’ platform, after the pilots conducted in 2020.
The company is cautiously optimistic that the global vaccination programmes would be enabling widespread travel to resume, as well as the company is continuously looking for fresh ways to lead the industry in this recovery. It believes that its target of achieving $100 Mn of revenue in the mid-term is achievable. However, it needs to be noted that it has been delayed during the Covid-affected year.
As at 30th April 2021, the company had cash and short term deposits of $77.7 Mn. The company is still planning to increase the number of employees as it scales up in order to tap the growth opportunities. However, it is targeting an average monthly cash burn in the range of $2 Mn and $4 Mn per month in order to conserve the cash reserves.
Notably, TMC resellers are operating with the fewer people, which is creating opportunities for the automation as well as technology solutions. The corporations are more focussed towards the costs as well as administration of their travel and expense budgets. However, at the same time, they are focussed towards traveller wellbeing as well as their ‘duty of care’ obligations.
It was mentioned that the timing as well as extent of the travel recovery is still uncertain. Also, the rate of return to business travel would be varying by region, the type of traveller (i.e. SME versus enterprise), as well as the type of trip (i.e. regional, domestic, or long-haul international).
The stock of the company ended the session at NZ$7.640 per share, up by 0.26% on 2nd July 2021.