New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Serko (SKO) FY22 Result – Initial Impressions</h2>
Serko (SKO) reported a mixed FY22 result with segment revenue at the midpoint of guidance, although lower-than-expected revenue outlook commentary for FY23 is likely to weigh on investor sentiment. That said EBITDA losses of -NZ$28m was better than our (-NZ$38m) and Visible Alpha consensus (-NZ$30m) expectations. The long-term growth pathway remains heavily reliant on the success of the company’s Booking.com for Business JV, which continues to have a wide range of outcomes. The company is still considering the potential acquisition of a travel technology business, suggesting that the acquisition would be earnings accretive. We expect FY23 consensus downgrades with revenues lower than anticipated and continued investment in growth weighing on costs.
Outlook
SKO expects revenue to approximately double in FY23 (which implies ~NZ$40m), versus our expectations (~NZ$45m) and Visible Alpha consensus (~NZ$50m). SKO also reaffirmed its aspiration of achieving NZ$100m of revenue over the medium term, but notes that impacts of the pandemic and other factors make it difficult to determine the timing (consensus and our expectations are for this to be achieved by FY25). The company also plans to increase the rate of investment in products and marketing over 1H23 to support growth.
Key takeouts
<ul>
<li>Booking.com for Business
<ul>
<li>Customer numbers: added an additional +54,000 taking total registered companies to &gt;420,000 (the company noted &gt;400,000 at its mid-March trading update)</li>
<li>Average revenue per booking (ARPB): Was reported as being greater than the company’s NZ$20 target (ARPB was just below NZ$20m at the half year)</li>
</ul>
</li>
<li>Acquisition opportunities: As flagged at the Nov-21 capital raise a portion (~NZ$21m) was expected to be used to fund a potential acquisition opportunity. The company remains in acquisition discussions.</li>
<li>ARPB (based on total recurring revenue/online bookings): ARPB contracted to NZ$7.83 (from NZ$7.86 in 1H22 and NZ$8.76 in FY21). This was predominantly the result of expense revenue decreasing whilst travel booking volumes grew more rapidly</li>
<li>ANZ: Australasian booking volumes have recovered to 78% of pre-COVID (March-19) levels, with positive momentum continuing into April (83% of April-19)</li>
<li>North America: SKO noted positive travel recovery signs in the North American market. Furthermore, that Visa has selected SKO’s Zeno as its corporate booking tool and the company also noted that Zeno had been named as a “Globally Preferred Booking Tool” by its partner CWT. Whilst positive this will need to translate into bookings to signal success</li>
<li>Cash balance: The company’s cash balance was ~NZ$125m; up +56% on FY21; boosted by the NZ$85m capital raise conducted in November 2021</li>
<li>Monthly cash burn: Average monthly cash burn during the second half was NZ$3m, below company guidance for ~NZ$4m, partially attributed to non-recurring payments from customers</li>
</ul>
FY22 Result summary
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 86.8pt; height: 15.5pt;">
&nbsp;
</td>
<td style="width: 62.05pt; height: 15.5pt;">
FY21
</td>
<td style="width: 70.9pt; height: 15.5pt;">
FY22
</td>
<td style="width: 42.5pt; height: 15.5pt;">
Chg
</td>
<td style="width: 70.9pt; height: 15.5pt;">
Forsyth Barr
</td>
</tr>
<tr>
<td style="width: 86.8pt; height: 15.5pt;">
Revenue
</td>
<td style="width: 62.05pt; height: 15.5pt;">
17
</td>
<td style="width: 70.9pt; height: 15.5pt;">
20
</td>
<td style="width: 42.5pt; height: 15.5pt;">
17%
</td>
<td style="width: 70.9pt; height: 15.5pt;">
20
</td>
</tr>
<tr>
<td style="width: 86.8pt; height: 15.5pt;">
EBITDA
</td>
<td style="width: 62.05pt; height: 15.5pt;">
(22)
</td>
<td style="width: 70.9pt; height: 15.5pt;">
(28)
</td>
<td style="width: 42.5pt; height: 15.5pt;">
26%
</td>
<td style="width: 70.9pt; height: 15.5pt;">
(38)
</td>
</tr>
<tr>
<td style="width: 86.8pt; height: 15.5pt;">
EBITDA margin %
</td>
<td style="width: 62.05pt; height: 15.5pt;">
-132%
</td>
<td style="width: 70.9pt; height: 15.5pt;">
-142%
</td>
<td style="width: 42.5pt; height: 15.5pt;">
n/a
</td>
<td style="width: 70.9pt; height: 15.5pt;">
-189%
</td>
</tr>
<tr>
<td style="width: 86.8pt; height: 15.5pt;">
NPAT
</td>
<td style="width: 62.05pt; height: 15.5pt;">
(29)
</td>
<td style="width: 70.9pt; height: 15.5pt;">
(36)
</td>
<td style="width: 42.5pt; height: 15.5pt;">
22%
</td>
<td style="width: 70.9pt; height: 15.5pt;">
(41)
</td>
</tr>
<tr>
<td style="width: 86.8pt; height: 15.5pt;">
EPS (cps)
</td>
<td style="width: 62.05pt; height: 15.5pt;">
(30)
</td>
<td style="width: 70.9pt; height: 15.5pt;">
(34)
</td>
<td style="width: 42.5pt; height: 15.5pt;">
14%
</td>
<td style="width: 70.9pt; height: 15.5pt;">
(34)
</td>
</tr>
</tbody>
</table>
Source: SKO, Forsyth Barr analysis
Conference call
Management will host an analyst call at 11:30am NZT. Dial-in for New Zealand 0800 423 972; for Australia 1 800 590 693. Confirmation code: 696244

Serko (SKO) FY22 Result – Initial Impressions
Serko (SKO) reported a mixed FY22 result with segment revenue at the midpoint of guidance, although lower-than-expected revenue outlook commentary for FY23 is likely to weigh on investor sentiment. That said EBITDA losses of -NZ$28m was better than our (-NZ$38m) and Visible Alpha consensus (-NZ$30m) expectations. The long-term growth pathway remains heavily reliant on the success of the company’s Booking.com for Business JV, which continues to have a wide range of outcomes. The company is still considering the potential acquisition of a travel technology business, suggesting that the acquisition would be earnings accretive. We expect FY23 consensus downgrades with revenues lower than anticipated and continued investment in growth weighing on costs.
Outlook
SKO expects revenue to approximately double in FY23 (which implies ~NZ$40m), versus our expectations (~NZ$45m) and Visible Alpha consensus (~NZ$50m). SKO also reaffirmed its aspiration of achieving NZ$100m of revenue over the medium term, but notes that impacts of the pandemic and other factors make it difficult to determine the timing (consensus and our expectations are for this to be achieved by FY25). The company also plans to increase the rate of investment in products and marketing over 1H23 to support growth.
Key takeouts

Booking.com for Business

Customer numbers: added an additional +54,000 taking total registered companies to &gt;420,000 (the company noted &gt;400,000 at its mid-March trading update)
Average revenue per booking (ARPB): Was reported as being greater than the company’s NZ$20 target (ARPB was just below NZ$20m at the half year)


Acquisition opportunities: As flagged at the Nov-21 capital raise a portion (~NZ$21m) was expected to be used to fund a potential acquisition opportunity. The company remains in acquisition discussions.
ARPB (based on total recurring revenue/online bookings): ARPB contracted to NZ$7.83 (from NZ$7.86 in 1H22 and NZ$8.76 in FY21). This was predominantly the result of expense revenue decreasing whilst travel booking volumes grew more rapidly
ANZ: Australasian booking volumes have recovered to 78% of pre-COVID (March-19) levels, with positive momentum continuing into April (83% of April-19)
North America: SKO noted positive travel recovery signs in the North American market. Furthermore, that Visa has selected SKO’s Zeno as its corporate booking tool and the company also noted that Zeno had been named as a “Globally Preferred Booking Tool” by its partner CWT. Whilst positive this will need to translate into bookings to signal success
Cash balance: The company’s cash balance was ~NZ$125m; up +56% on FY21; boosted by the NZ$85m capital raise conducted in November 2021
Monthly cash burn: Average monthly cash burn during the second half was NZ$3m, below company guidance for ~NZ$4m, partially attributed to non-recurring payments from customers

FY22 Result summary




&nbsp;


FY21


FY22


Chg


Forsyth Barr




Revenue


17


20


17%


20




EBITDA


(22)


(28)


26%


(38)




EBITDA margin %


-132%


-142%


n/a


-189%




NPAT


(29)


(36)


22%


(41)




EPS (cps)


(30)


(34)


14%


(34)




Source: SKO, Forsyth Barr analysis
Conference call
Management will host an analyst call at 11:30am NZT. Dial-in for New Zealand 0800 423 972; for Australia 1 800 590 693. Confirmation code: 696244

Serko (SKO): FY22 Result – Initial Impressions

Serko Ltd

Serko (SKO): FY22 Result – Initial Impressions