Serko wants to grab the evolving business travel market; announced NZ$55 Mn Capital Raise

  • October 06, 2020 05:55 PM NZDT
  • Team Kalkine
Serko wants to grab the evolving business travel market; announced NZ$55 Mn Capital Raise

Summary

  • A Leading travel booking company, with online platform and an expenditure manager for the business travel space, Serko uses intelligent technology to make the travel process better.
  • The NZ travel Company won the PwC Hi-Tech Company of the Year category in the NZ Hi-Tech Awards and recently got included in S&P/NZX 50 & S&P/NZX 50 Portfolio Index as well as in the S&P/NZX MidCap Index.
  • Serko shares were placed under a trading halt on 1 October, while the Company commenced a $55 million capital raising, which consists of raising $45 million through a share placement and $10 million through SPP.
  • SKO is pumping up its balance sheet to brace up for more growth opportunities in a COVID-19 environment.

Tourism is a significant industry in NZ, which employs about 10% of the personnel of the nation. New Zealand is a country with beautiful landscapes, adventurous activities, and clean green environment, which attracts tourists from all over the world.

However, the COVID-19 pandemic effectively ceased the inbound tourism and international air travel in March 2020 due to border closures and travel restrictions.

ALSO READ: Is the travel bubble between Australia and New Zealand likely to go ahead?

As per Stats NZ, the number of people travelling in and out of NZ in the June 2020 quarter was down by 97.5% in the same period in 2019.

With the easing of restrictions, business travel demand has slowly started to recover in NZ. Also, Air NZ increased its capacity to about 70% of its pre-coronavirus levels during July.

Let’s have a look at how this NZX 50 Index listed company Serko has been performing amid challenging times.

Serko Limited (NZX: SKO) is a frontrunner in travel booking (online) and expense supervision in the business travel space. The Company uses intelligent technology to make the process of booking, managing, and resolving business travel and expenses easier and better.

ALSO READ: Kiwi’s Thirst for Travel Re-Ignites, Air New Zealand Sells 110k Tickets

On 6 October 2020, Serko share price was at $4.82, increasing by 3.21% from its last close.

On 24 August, the Company was chosen as the champion of the PwC Hi-Tech Company of the Year (2020) in the recently held NZ Hi-Tech Awards ceremony. Serko, recognised as the pre-eminent technology Company in NZ Hi-tech awards, was nominated for the 8th time.

One of the tech sector’s most desirable recognitions, NZ Hi-Tech Awards have been conferred to the country’s most popular high-technology entities and top achievers across the last 25 years.

Last month, Serko Limited was added to the S&P/NZX 50 & S&P/NZX 50 Portfolio Indices and later to the S&P/NZX MidCap Index on 21 September. However, the Company was removed from S&P/NZX SmallCap Index.

DO READ: S&P/NZX Indices Rejiggered; Serko Makes it to Midcap Index while NZR Moves to Small-cap

Serko plans to tap investors

On 1 October, Serko announced its plans to raise up to $55 million by selling its new shares to quicken and take advantage of the travel prospects occurring from the fluctuating business travel market.

The travel company intends to raise $45 million from the institutional investors through a share placement and $10 million from retail investors through a share purchase plan (SPP).

Serko had requested for a trading halt on 1 October, while it completed the bookbuild process and defined the price of new shares that was to be issued under the capital raising.

The Placement is likely to be conducted via a bookbuild process where investors from Hong Kong, Australia, NZ, Singapore, and the UK will be asked to take part by Craigs Investment Partners Limited and Ord Minnett Limited.

Details of the equity raising through a share placement and SPP include the following:

  • The underwritten Placement is at a floor price of $4.35/share, denoting a 3.5% reduction to the previous closing price.
  • Eligible existing Serko shareholders who want to top up at a discount will be able to subscribe for up to $50,000 of new Serko shares under SPP.
  • Detailed final terms of the SPP are likely to be revealed on 7 October 2020

Reasons for capital raising

Serko plans to raise capital to prepare itself for the growth prospects and tread carefully while managing capital amid COVID-19 situation. The Company has $33.6 million of cash on its balance sheet, but there remains considerable uncertainty about the timing of any significant revenue generation. So, Serko is sensible in raising capital at this time.

Darrin Grafton, CEO of Serko, stated that the coronavirus pandemic had established prospects of accelerating the development and rolling out the Company’s technology to assist its Travel Management Company (TMC) and reseller partners.

ALSO READ: How has Serko and Air New Zealand's share price performed in 2020?

He added that the Company has got incoming demand from these organisations as they evaluate, prepare, and seek accelerated timetables for new customers on board, deliver new characteristics and grow existing partnerships.

He also asserted that the demand had outstripped the Company’s expectations and is showcasing more significant opportunities arising from an evolving travel industry.

However, he reiterated that Serko would not be able to accurately forecast an estimated operating revenue for 2021 financial year due to uncertainty.

DO READ: Serko Board Appoints Claudia Batten as Chairperson

Serko remains confident about its growth prospects over the medium and long term, as well as about the recovery of business travel over time.

On 15 September, Serko also announced that Simon Botherway, Chairperson of Serko Board had stepped down from his designation and will be replaced by Claudia Batten.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

 

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