Serko expects 'full recovery' in NZ, Australia travel market in the year to March 2023

Wednesday, 19 May 2021

Aeroplanes were grounded and travellers stayed home during lockdown in April 2020.

Corporate travel technology company Serko, which has been hard hit by travel restrictions during the Covid-19 pandemic, is seeing a pick up in Australia and New Zealand, and expects the regional market will fully recover in the year to the end of March 2023.

Serko’s booking volumes hit a trough in April 2020, when it handled just 11 per cent of the volumes of April 2019. In April this year, volumes have recovered to 84 per cent of their 2019 levels, the company said on Wednesday.

“The region has made good progress on travel recovery, and with the planned vaccination programme we expect corporate travel in the region will make a progressive recovery throughout the current financial year,” chief executive Darrin Grafton and chairwoman Claudia Batten said in a statement.

“Our best estimate is for a full recovery in the 2023 financial year, although this outlook is still subject to considerable uncertainty.”

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Serko’s full-year loss widened to $29.4 million in the year to the end of March 2021, from a $9.4m loss the previous year after travel booking volumes slumped 63 per cent as business travel came to an abrupt halt due to the Covid-19 pandemic.

The company’s operating expenses increased 21 per cent to $44.9m as it continued to invest in its plans to expand internationally. It added 54 staff, taking the total to 287.

Meanwhile, its operating revenue fell 52 per cent to $12.4m, due to Covid-19. In addition, the company received $3.4m of Covid-19 subsidies from New Zealand, Australia and the United States, and $1m in research and development grants.

Serko chief executive Darrin Grafton says the company is seeing a pick up in travel in New Zealand and Australia.

Grafton said the company still expects to achieve $100m of revenue in the medium term, but Covid-19 had delayed the target.

“Serko’s result reflects tough industry conditions,” said Jarden analyst Wassim Kisirwani. “The cash result was in line with our expectations with the bookings recovery tracking better than expected.”

Kisirwani said the outlook for this year remains uncertain with no revenue guidance.

However the company had enough cash to continue investment while funding operating losses until volumes recover, Kisirwani said.

The company’s shares recorded the biggest decline on the NZX, down 6.7 per cent to $6.25 in late afternoon trading.

Serko had $79.9m of cash on hand at its March 31 balance date, up from $42.4m the previous year after raising a net $65m through the sale of new shares and careful management of its costs.

Over the past year, the company has burnt through an average $2.3m a month, within its $2m to $4m guidance.

“We are still planning to increase the number of employees as we scale to capture growth opportunities, but we continue to target an average monthly cash burn of between $2m and $4m per month, to conserve cash reserves,” Grafton said.

Serko is eyeing expansion outside of Australia and New Zealand to become a significant global business.

Batten said recovery in the Northern Hemisphere markets has been subdued as persistent travel restrictions limit bookings and travel staff furloughs limit new customer growth.

“However just as we have seen in Australasia, we believe these domestic and intra-regional markets will lead a broader recovery in travel activity particularly as mass vaccination programmes are completed,” she said.