Documents released to the ASX
ASX Foreign Exempt Listing Information Form and Checklist (19/12/16) Page 1
Information Form and Checklist
(ASX Foreign Exempt Listing)
Name of entity ABN/ARBN/ARSN
Serko Limited
611 613 980
We (the entity named above) supply the following information and documents to support our application
for admission to the official list of ASX Limited (ASX) as an ASX Foreign Exempt Listing.
Note: the entity warrants in its Appendix 1C ASX Foreign Exempt Listing Application and Agreement that the information and documents
referred to in this Information Form and Checklist are (or will be) true and complete and indemnifies ASX to the fullest extent permitted by
law in respect of any claim, action or expense arising from, or connected with, any breach of that warranty.
Terms used in this Information Form and Checklist have the same meaning as in the ASX Listing Rules.
Part 1 – Information to be supplied with Appendix 1C
Instructions: please complete each applicable item below. If an item is not applicable, please mark it as “N/A”.
All entities – corporate details
Place of incorporation or
establishment
New Zealand
Date of incorporation or
establishment
5 April 2007
Legislation under which incorporated
or established
New Zealand Companies Act 1993
Address of registered office in place
of incorporation or establishment
Saatchi Building, Unit 14d, 125 The Strand, Parnell, New Zealand
Address of registered office in
Australia (if any)
C/- Sly & Russell Legal Nominees Pty Ltd, Level 18, Grosvenor Place, 225
George Street, Sydney, NSW, 2000
Main business activity Serko is an integrated, cloud-based corporate travel booking and expense
management solution.
Home exchange and listing category
1
NZX Main Board
Any other exchanges on which the
entity is listed
Nil
Street address of principal
administrative office
Saatchi Building, Unit 14d, 125 The Strand, Parnell, New Zealand
Postal address of principal
administrative office
PO Box 47-638 Ponsonby, Auckland
New Zealand
Telephone number of principal
administrative office
+64 9 309 4754
E-mail address for investor enquiries investor.relations@serko.com
serko@linkmarketservices.co.nz (share registrar)
1
Examples: NZX Main Board, Toronto Stock Exchange, NASDAQ
ASX Foreign Exempt Listing Information Form and Checklist (19/12/16) Page 2
Website URL http://www.serko.com/investor-centre/
All entities – management details
2
Full name and title of CEO/managing
director
Darrin John Grafton, Chief Executive Officer & Co-Founder
Full name and title of chairperson of
directors
Simon John Botherway, Chairman
Full names of all existing directors
Claudia Isobel Batten
Simon John Botherway
Darrin John Grafton
Robert Clyde McConaghy
Robert James Shaw
Full names of any persons proposed
to be appointed as additional or
replacement directors
N/A
Full name and title of company
secretary
Susan Putt, Chief Financial Officer and Company Secretary
All entities – ASX contact details
3
Full name and title of ASX contact(s) Susan Putt, Chief Financial Officer and Company Secretary
Sarah Louise Miller, Assistant Company Secretary
Business address of ASX contact(s) Saatchi Building, Unit 14d, 125 The Strand, Parnell, New Zealand
Business phone number of ASX
contact(s)
+64 9 309 4754
Mobile phone number of ASX
contact(s)
+64 27 655 4461
+64 27 245 0267
Email address of ASX contact(s)
susan.putt@serko.com
Sarah.miller@serko.com
All entities – auditor details
Full name of auditor Deloitte
All entities – registry details
4
Name of securities registry Link Market Services Limited
Address of securities registry Level 12, 680 George Street, Sydney, NSW 2000, Australia
Phone number of securities registry +61 (02) 8280 7111
2
If the entity applying for admission to the official list is a trust, enter the management details for the responsible entity of the trust.
3
Under Listing Rule 1.11 Condition 9, a listed entity must appoint a person responsible for communication with ASX. You can appoint more than one
person to cater for situations where the primary nominated contact is not available.
4
If the entity has different registries for different classes of securities, please indicate clearly which registry details apply to which class of securities.
ASX Foreign Exempt Listing Information Form and Checklist (19/12/16) Page 3
Fax number of securities registry +61 (02) 9287 0303
Email address of securities registry serko@linkmarketservices.co.nz
Type of subregisters the entity will
operate
5
CHESS and issuer sponsored subregister
If the entity has or intends to have a
certificated subregister for quoted
securities, the location of the
Australian subregister
Not applicable
All entities – key dates
Annual balance date 31 March
Month in which annual meeting is
usually held (or intended to be held)
6
August
Months in which dividends or
distributions are usually paid (or are
intended to be paid)
Not applicable
Part 2 – Checklist Confirming Compliance with Admission Requirements
Instructions: please indicate in the “Location/Confirmation” column for each item below where the information or document referred to in
that item is to be found (eg in the case of information, the specific page reference in the entity’s most recent annual report or any
subsequent interim report where that information is located or, in the case of a document, the folder tab number where that document is
located). If the item asks for confirmation of a matter, you may simply enter “Confirmed”” in the “Location/Confirmation” column. If an item
is not applicable, please mark it as “N/A”.
In this regard, it will greatly assist ASX and speed up its review of the application if the various documents referred to in this Checklist
(other than the 25 copies of the entity’s most recent annual report and any subsequent interim report referred to in item 5) are provided in a
folder separated by numbered tabs.
Note that completion of this Checklist is not to be taken to represent that the entity is necessarily in full or substantial compliance with the
ASX Listing Rules or that ASX will admit the entity to its official list. Admission to the official list is in ASX’s absolute discretion and ASX
may refuse admission without giving any reasons (see Listing Rule 1.19).
All entities – key supporting documents
N
o
Item Location/Confirmation
1. A copy of the entity’s certificate of incorporation, certificate of registration or
other evidence of status (including any change of name)
See Annexure A
2. A copy of the entity’s constitution
See Annexure B
3. Confirmation that the entity is subject to, and complies with, the listing rules
(or their equivalent) of its overseas home exchange (Listing Rule 1.11
Conditions 2 and 3)
See Annexure C
4. Details of any waiver or all or part of any listing rule (or the equivalent)
provided by home exchange that will be in effect upon admission (Listing
Rule 1.11 Condition 4)
7
See Annexure D
5
Example: CHESS and issuer sponsored subregisters.
6
May not apply to some trusts.
7
ASX may require details of waivers to be released to the market (see the note to Listing Rule 1.11 Condition 4).
ASX Foreign Exempt Listing Information Form and Checklist (19/12/16) Page 4
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Item Location/Confirmation
5. 25 copies of the entity’s most recent annual report and any subsequent
interim report
To be provided under separate cover
letter
6. Original executed ASX Online agreement confirming that documents may be
given to ASX and authenticated electronically (Listing Rule 1.11
Condition 10)
8
See Annexure E
7. A specimen certificate/holding statement for each class of securities to be
quoted or a specimen holding statement for CDIs (as applicable)
See Annexure F
8. Please either enter “Confirmed” in the column to the right to confirm that the
entity has not previously applied for, and been refused or withdrawn its
application for, admission to the official list of another securities exchange, or
attach a statement explaining the circumstances and state the location of
that statement
Confirmed
9. Payment for the initial listing fee.
9
Confirmed – Payment to be made by
EFT
All entities – capital structure
10. A table showing the existing and proposed capital structure of the entity,
broken down as follows:
(a) the number and class of each equity security and each debt security
currently on issue; and
(b) the number and class of each equity security and each debt security
proposed to be issued between the date of this application and the date
the entity is admitted to the official list; and
(c) the resulting total number of each class of equity security and debt
security proposed to be on issue at the date the entity is admitted to the
official list.
Note: This applies whether the securities are quoted or not. If the entity is proposing to issue a
minimum, maximum or oversubscription number of securities, the table should be presented to
disclose each scenario.
See Annexure G
11. For each class of securities referred to in the table mentioned in item 10, the
terms applicable to those securities
Note: This applies whether the securities are quoted or not.
For equity securities (other than options to acquire unissued securities or convertible debt
securities), this should state whether they are fully paid or partly paid; if they are partly paid , the
amount paid up and the amount owing per security; voting rights; rights to dividends or
distributions; and conversion terms (if applicable).
For options to acquire unissued securities, this should state the number outstanding, exercise
prices and expiry dates
For debt securities or convertible debt securities, this should state their nominal or face value;
rate of interest; dates of payment of interest; date and terms of redemption; and conversion
terms (if applicable).
See Annexure G
8
An electronic copy of the ASX Online Agreement is available from the ASX Compliance Downloads page on ASX’s website.
9
See Guidance Notes 15 and 15A for the fees payable on the application. Payment can be made either by cheque made payable to ASX Operations Pty
Ltd or by electronic funds transfer to the following account:
Bank: National Australia Bank
Account Name: ASX Operations Pty Ltd
BSB: 082 057
A/C: 494728375
Swift Code (Overseas Customers): NATAAU3202S
If payment is made by electronic funds transfer, please email your remittance advice to ar@asx.com.au or fax it to (612) 9227-0553, describing the payment
as the “initial listing fee” and including the name of the entity applying for admission, the ASX home branch where the entity has lodged its application (ie
Sydney, Melbourne or Perth) and the amount paid.
ASX Foreign Exempt Listing Information Form and Checklist (19/12/16) Page 5
N
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Item Location/Confirmation
All entities – other information
12. A brief history of the entity
Serko Limited was incorporated on 5
April 2007 in New Zealand under the
Companies Act 1993. The Company
was listed on the NZX Main Board on 24
June 2014.
See also Annexure H
13. Details of the entity’s existing activities and level of operations
See Annexure I
14. Confirmation that there is no information not already disclosed to the entity’s
home exchange that should have been disclosed under the rules of that
exchange
See Annexure C
Entities that are trusts
15. Please enter “Confirmed” in the column to the right to indicate that no-one is
under an obligation to buy-back units in the trust or to allow a security holder
to withdraw from the trust (Listing Rule 1.11 Condition 8(c))
N/A
Entities that do not have a primary listing on NZX Main Board
16. A completed Appendix 1C Information Form and Checklist Annexure I
(Entities that do not have a Primary Listing on the NZX Main Board)
10
N/A
Entities that have a primary listing on NZX Main Board
17. A completed Appendix 1C Information Form and Checklist Annexure II
(Entities that have a Primary Listing on the NZX Main Board)
11
See Annexure J
Further documents to be provided before admission to the official list
Please note that in addition to the information and documents mentioned above, an entity may be required to provide additional
information to ASX under Listing Rule 1.17.
10
An electronic copy of this Appendix is available from the ASX Compliance Downloads page on ASX’s website.
11
An electronic copy of this Appendix is available from the ASX Compliance Downloads page on ASX’s website.
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ASX Foreign Exempt Listing Information Form and Checklist Annexure II (19/12/16) Page 1
Annexure J
Information Form and Checklist
Annexure II (Entities that have a Primary Listing
on the NZX Main Board)
Name of entity ABN/ARBN/ARSN
Serko Limited
611 613 980
This Annexure forms part of the Information Form and Checklist supplied by the entity named above to
support its application for admission to the official list of ASX Limited (ASX) as an ASX Foreign Exempt
Listing.
Instructions: please complete each applicable item below. If an item is not applicable, please mark it as “N/A”.
N
o
Item Location/Confirmation
All entities
1. For each director or proposed director,
1
a list of the countries in which they
have resided over the past 10 years (Listing Rule 1.11 Condition 11 and
Guidance Note 1 section 3.18)
2
Claudia Batten – United States
Simon Botherway – New Zealand
Darrin Grafton – New Zealand
Robert (Clyde) McConaghy – Australia
Robert (Bob) Shaw – New Zealand
2. For each director or proposed director who is or has in the past 10 years
been a resident of Australia, an original or certified true copy of a national
criminal history check obtained from the Australian Federal Police, a State or
Territory police service or a broker accredited by CrimTrac which is not more
than 12 months old (Listing Rule 1.11 Condition 11 and Guidance Note 1
section 3.18)
See Annexure K
3. For each director or proposed director who is or has in the past 10 years
been a resident of a country other than Australia, an original or certified true
copy of an equivalent national criminal history check to that mentioned in
item 25 above for each country in which the director has resided over the
past 10 years (in English or together with a certified English translation)
which is not more than 12 months old or, if such a check is not available in
any such country, a statutory declaration from the director confirming that
fact and that he or she has not been convicted in that country of:
(a) any criminal offence involving fraud, dishonesty, misrepresentation,
concealment of material facts or breach of director’s duties; or
(b) any other criminal offence which at the time carried a maximum term of
imprisonment of five years or more (regardless of the period, if any, for
which he or she was sentenced),
or, if that is not the case, a statement to that effect and a detailed
explanation of the circumstances involved (Listing Rule 1.11 Condition 11
and Guidance Note 1 section 3.18)
See Annexure L
4. For each director or proposed director who is or has in the past 10 years
been a resident of Australia, an original or certified true copy of a search of
See Annexure M
1
If the entity applying for admission to the official list is a trust, references in items 14, 2, 3, 4, 5 and 6 to a director or proposed director mean a director
or proposed director of the responsible entity of the trust.
2
The information referred to in items 1, 2, 3, 4, 5 and 6 is required so that ASX can be satisfied that the director or proposed director is of good fame and
character under Listing Rule 1.11 Condition 11.
ASX Foreign Exempt Listing Information Form and Checklist Annexure II (19/12/16) Page 2
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Item Location/Confirmation
the Australian Financial Security Authority National Personal Insolvency
Index which is not more than 12 months old (Listing Rule 1.1 Condition 11
and Guidance Note 1 section 3.18)
5. For each director or proposed director who is or has in the past 10 years
been a resident of a country other than Australia, an original or certified true
copy of an equivalent national bankruptcy check to that mentioned in item 27
above for each country in which the director has resided over the past
10 years (in English or together with a certified English translation) which is
not more than 12 months old or if such a check is not available in any such
country, a statutory declaration from the director confirming that fact and that
he or she has not been declared a bankrupt or been an insolvent under
administration in that country or, if that is not the case, a statement to that
effect and a detailed explanation of the circumstances involved (Listing
Rule 1.11 Condition 11 and Guidance Note 1 section 3.18)
See Annexure N
6. A statutory declaration from each director or proposed director confirming that:
(a) the director has not been the subject of any criminal or civil penalty
proceedings or other enforcement action by any government agency in
which he or she was found to have engaged in behaviour involving fraud,
dishonesty, misrepresentation, concealment of material facts or breach of
duty;
(b) the director has not been refused membership of, or had their membership
suspended or cancelled by, any professional body on the ground that he
or she has engaged in behaviour involving fraud, dishonesty,
misrepresentation, concealment of material facts or breach of duty;
(c) the director has not been the subject of any disciplinary action (including
any censure, monetary penalty or banning order) by a securities exchange
or other authority responsible for regulating securities markets for failure
to comply with his or her obligations as a director of a listed entity;
(d) no listed entity of which he or she was a director (or, in the case of a listed
trust, in respect of which he or she was a director of the responsible entity)
at the time of the relevant conduct has been the subject of any disciplinary
action (including any censure, monetary penalty, suspension of trading or
termination of listing) by a securities exchange or other authority
responsible for regulating securities markets for failure to comply with its
obligations under the Listing Rules applicable to that entity; and
(e) the director is not aware of any pending or threatened investigation or
enquiry by a government agency, professional body, securities exchange
or other authority responsible for regulating securities markets that could
lead to proceedings or action of the type described in (a), (b), (c) or (d)
above,
or, if the director is not able to give such confirmation, a statement to that effect
and a detailed explanation of the circumstances involved (Listing Rule 1.11
Condition 11 and Guidance Note 1 section 3.18)
See Annexure O
Entities applying under the profit test
7. Evidence that the entity is a going concern or the successor of a going
concern (Listing Rules 1.11 Condition 6(a) and 1.2.1)
N/A
8. Evidence that the entity has been in the same main business activity for the
last 3 full financial years (Listing Rules 1.11 Condition 6(a) and 1.2.2)
N/A
9. Audited accounts for the last 3 full financial years, including the audit reports
(Listing Rules 1.11 Condition 6(a) and 1.2.3(a))
N/A
10. If the entity’s last financial year ended more than 6 months and 75 days
before the date of this application, audited or reviewed accounts for the last
half year (or longer period if available), including the audit report or review
(Listing Rules 1.11 Condition 6(a) and 1.2.3(b))
N/A
ASX Foreign Exempt Listing Information Form and Checklist Annexure II (19/12/16) Page 3
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Item Location/Confirmation
11. A reviewed pro forma statement of financial position, including the review
(Listing Rules 1.11 Condition 6(a) and 1.2.3(c))
3
N/A
12. Evidence that the entity’s aggregated profit from continuing operations for
the last 3 full financial years has been at least $1 million (Listing Rules 1.11
Condition 6(a) and 1.2.4)
N/A
13. Evidence that the entity’s profit from continuing operations in the past
12 months to a date no more than 2 months before the date of this
application has exceeded $500,000 (Listing Rules 1.11 Condition 6(a) and
1.2.5)
N/A
14. A statement from all directors
4
confirming that they have made enquiries and
nothing has come to their attention to suggest that the entity is not continuing
to earn profit from continuing operations up to the date of the application
(Listing Rules 1.11 Condition 6(a) and 1.2.5A)
N/A
Entities applying under the assets test
15. Evidence that the entity has:
(a) if it is a mining exploration entity or an oil and gas exploration entity and
not an investment entity, net tangible assets of at least $3 million (after
deducting the costs of fund raising) or a market capitalisation of at least
$15 million; or
(b) if it is not a mining exploration entity or an oil and gas exploration entity
and not an investment entity, net tangible assets of at least $4 million
(after deducting the costs of fund raising) or a market capitalisation of at
least $15 million; or
(c) if it is an investment entity other than pooled development fund, net
tangible assets of at least $15 million; or
(c) if it is a pooled development fund, net tangible assets of at least
$2 million (Listing Rules 1.11 Condition 6(a), 1.3.1 and 1.3.4)
See Annexure P
Serko Limited has a market
capitalisation of at least $15 million
based on its 74,894,342 shares on
issue and the closing price of its
shares on NZX on 26 March 2018 of
NZD$2.35 (giving a market
capitalisation of
AUD$165,793,604.89
at the exchange rate of NZD:AUD
1:0.942 prevailing on 26 March 2018).
16. Evidence that the entity’s working capital is at least $1.5 million or, if it is not,
that it would be at least $1.5 million if the entity’s budgeted revenue for the
first full financial year that ends after listing was included in the working
capital (Listing Rules 1.11 Condition 6(a) and 1.3.3(b))
5
See page 20 of Serko Limited’s Annual
Report (Annexure Q) for the period
ended 31 March 2017, which discloses
working capital of NZD $4.232 million;
and page 12 of Serko Limited’s Half
Year Report (Annexure Q) for the period
ended 30 September 2017, which
disclosures working capital of NZD
$5.326 million. Serko’s working capital
has increased since 30 September
2017.
17. Audited accounts for the last 2 full financial years, including the audit reports
(Listing Rules 1.11 Condition 6(a) and Listing Rule 1.3.5(a) first bullet point)
See Annexure Q & R
18. If the entity’s last financial year ended more than 6 months and 75 days
before the date of this application, audited or reviewed accounts for the last
half year (or longer period if available), including the audit report or review or
a statement that the half year accounts not audited or not reviewed (Listing
Rules 1.11 Condition 6(a) and 1.3.5(a) second bullet point)
See Annexure Q
The half year accounts are not audited
or reviewed by the auditor.
3
Note: the review must be conducted by a registered company auditor (or if the entity is a foreign entity, an overseas equivalent of a registered company
auditor) or independent accountant.
4
If the entity applying for admission to the official list is a trust, the statement should come from all directors of the responsible entity of the trust.
5
The amount must be available after allowing for the first full financial year’s budgeted administration costs and the cost of acquiring any assets referred
to in the entity’s Offer Document, to the extent those costs are to be met out of working capital. The cost of acquiring assets includes the cost of
acquiring and exercising an option over them.
ASX Foreign Exempt Listing Information Form and Checklist Annexure II (19/12/16) Page 4
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Item Location/Confirmation
19. If the entity has in the 12 months before the date of this application acquired,
or is proposing in connection with its application for admission to acquire,
another entity or business that is significant in the context of the entity,
audited accounts for the last 2 full financial years for that other entity or
business, including the audit reports (Listing Rules 1.11 Condition 6(a) and
1.3.5(b) first bullet point)
N/A
20. If the entity has in the 12 months before the date of this application acquired,
or is proposing in connection with its application for admission to acquire,
another entity or business that is significant in the context of the entity and
the last full financial year for that other entity or business ended more than
6 months and 75 days before the date of this application, audited or
reviewed accounts for the last half year (or longer period if available) from
the end of the last full financial year for that other entity or business,
including the audit report or review (Listing Rules 1.11 Condition 6(a) and
1.3.5(a) second bullet point)
N/A
21. A reviewed pro forma statement of financial position, including the review
(Listing Rules 1.11 Condition 6(a) and 1.3.5(c))
6
Not required – no changes in the nature
of asset acquisitions or disposal or
capital raisings
6
Note: the review must be conducted by a registered company auditor or an overseas equivalent of a registered company auditor or independent
accountant.
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SERKO LIMITED
ANNUAL REPORT
For the period ended 31 MARCH 2017
TRANSFORMING
BUSINESS
TRAVEL
CONTENTS
SERKO LIMITED ANNUAL REPORT 2017
Key Highlights3
Chairman and CEO’s Report4
About Serko8
Overview of Performance10
Financial Statements and Notes to the Financial Statements12
Corporate Profiles46
Governance and Statutory Disclosures48
Glossary58
Corporate Directory59
KEY DATES
THIS REPORT IS DATED 6 JUNE 2017 AND IS SIGNED ON BEHALF OF THE BOARD OF SERKO LIMITED BY SIMON BOTHERWAY,
CHAIRMAN, AND DARRIN GRAFTON, CHIEF EXECUTIVE OFFICER.
Simon Botherway Darrin Grafton
Chairman Chief Executive Officer
23 AUG 2017
ANNUAL MEETING
31 M A R 2 018
FINANCIAL YEAR END
22 NOV 2017
HALF-YEAR RESULT
ANNOUNCED
30 SEP 2017
HALF-YEAR END
INVESTOR CENTRE: You can access our Annual Report online at www.serko.com/investor-centre/
PAGE 2
PAGE 3
KEY HIGHLIGHTS
SERKO LIMITED ANNUAL REPORT 2017
Research and development spend for FY17 was
$5.8 million and led to the launch of serko.travel,
booking on a mobile, expense submission via mobile
and Serko Zeno ready into testing phase
On track to
generate
annual
profit as
recurring
revenues
grow
Net Loss Before Tax
narrows 44% to $3.3 million,
while Revenue rises
9% to $14.3 million
44%
Online transaction growth of 18%;
recurring revenues, representing 91% of
Revenue, rises 9% to $12.9 million
18%
Annualised Transactional Monthly Revenue
(AT M R)
2
as at 31 March 2017 was $15.3 million,
a 37% increase over the same month prior year
37%
Celebrated 10 years transforming travel and expense
management on 23 May 2017
5 Years running
finalist
High Tech Company
of the year
1. EBITDA is a non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation, Depreciation and Amortisation and Impairment.
2. ATMR (Annualised Transactional Monthly Revenue) is a non-GAAP measure. Serko uses this as a useful indicator of recurring revenues from Serko products, based on
the monthly transactions from the most recent month (March 2017).
53%
EBITDA
1
loss narrows 53%
to $2.5 million, due to
increasing Revenue and
active cost management
PAGE 4
CEO AND CHAIRMAN’S LETTER
SERKO LIMITED ANNUAL REPORT 2017
SERKO ON TRACK TO GENERATE ANNUAL
PROFIT AS RECURRING REVENUES GROW
Dear Shareholder
Serko is on track to generate profit for the current financial year
as it consolidates its position as the Australasian market leader in
corporate travel and expense management solutions and readies
itself for expansion.
Serko, which this year celebrates its ten-year anniversary, has
made strong progress over the last financial year. With more than
50%
1
of all corporate travel in Australasia now booked through the
Serko enterprise platform, we are clearly the leading solution in
our home market.
Transactional travel revenue grew by 8% for the year and lagged
transaction growth (18%) owing to a higher level of minimum
contractual payments recorded in the 2016 year and adverse
currency impacts in the 2017 year. Minimum contractual payments
are received when a customer’s actual transactions fall short
of their contracted minimum. However, in looking forward it is
important to understand that transaction volumes grew strongly,
particularly in the second half. Due to this acceleration in the
second half, the overall transactional growth of 18% during the
year masks the run-forward growth rate. A comparison of March
2016 transactional revenues with March 2017 shows an increase
of 37%, which is attributable to both an increase in the number
of transactions and the Average Revenue per Booking (ARPB).
The current pipeline of new customers expected to join Serko’s
platform gives us confidence we will achieve positive profit in the
current financial year and cash flow break even for the full year.
We are also in a sound financial position. In the second half of
the 2017 financial year, net cash outflows were just $0.3 million,
sharply lower than the $2.3 million outflow in the first half as
the Company benefited from growing revenues as well as cost
synergies achieved from the integration of the Arnold booking
platform. At the end of the financial year we had $4.5 million
of cash on hand. This figure is ahead of the $3-$4 million that
we advised as our target on 23 November 2016. We expect our
cash balance to fall below $4 million following the payment of
employee performance incentives and annual prepayments due in
the first half of the year, however we have sufficient cash to fund
both our current level of activity and anticipated growth.
Contrast this result with the Company’s performance just six
years ago. Today we process the same volume of transactions
per month as we did for the total 2011 year. It is clear we have
come a long way and the team is justified in being proud of their
achievements.
transaction volumes continue to grow
strongly. today we process the same
volume of transactions per month as
we did for the total 2011 year.
Financial Results
Total revenue for the year to 31 March 2017 rose 9% to $14.3 million
from $13.1 million in the prior year, including $12.9 million from
the Serko Online and Serko Expense platforms, as well as service
revenue from customised development work.
Total income, which includes research and development grants,
rose 7% to $15.4 million from $14.4 million in 2016. Revenue
growth in the current financial year was adversely impacted
by the strength of the New Zealand dollar against the
Australian dollar as Serko’s contracts are predominantly
in Australian dollars.
Annualised Transactional Monthly Revenue (ATMR) for March
2017, an indicator of recurring revenues from the Serko products
projected annually, stood at $15.3 million, a 37% improvement on
the $11.2 million for the same month a year ago.
1. Source: GBTA (Global Business Travel Association)
PAGE 5
CEO AND CHAIRMAN’S LETTER
SERKO LIMITED ANNUAL REPORT 2017
Transaction volumes on the Serko Online platforms grew 18%. This
growth rate was lower than the prior year, however, the growth
rate in the 2016 year was boosted by a near full-year contribution
from the May 2015 acquisition of the Arnold Travel Technology
platform. There were no acquisitions in the 2017 financial year.
Serko’s annual net loss before tax narrowed by 44% to $3.3 million
from $5.4 million in the prior year. EBITDA losses narrowed by 53%
to $2.5 million from $5.4 million in the prior year. This was owing to
increased transaction volumes, careful management of operating
expenses and the benefits achieved by integrating the Arnold
platform. Overall, expenses reduced by 10% to $18.8 million from
$20.7 million a year earlier.
2017 Performance Drivers
Our purpose remains to transform the way businesses manage
travel and expenses, enabling stress-free travel so team members
can always be at their most productive and delivering tangible
benefits to the organisations that use the Serko line of products.
Over the last twelve months we have concentrated on a
three-pronged strategy towards this goal of: growing our
customer base; increasing ARPB; and delivering market-leading
technological innovations to underpin our platform for global
expansion.
We have made good progress on all three fronts. With our
With more than 50%
1
of all corporate travel in Australasia now booked through
the Serko enterprise platform, we are the undisputed leader in our home market.
WITH OUR AUSTRALASIAN CORPORATE
TRAVEL BUSINESS FIRMLY ESTABLISHED,
WE ARE LOOKING TO expand into
new markets through strategic
partnerships
Australasian corporate travel business now firmly established,
we are looking to drive uptake on the small business platform,
serko.travel, and expand into new markets through strategic
partnerships.
Partnerships
Travel Management Company (TMC) on-boarding of new
corporate customers was a key driver of Serko’s growth and
contributed to the increase in transaction volume for Serko Online
and an increase in corporate customers using Serko Expense. This
growth is expected to continue into FY18 with a strong pipeline of
new customers expected to join Serko’s platform.
We signed an agreement with Sabre Corporation, North
America’s largest provider of global airline bookings, to replace
its proprietary online booking tool (Sabre Online) with a new tool
PAGE 6
based on Serko Online. Sabre is now in the process of transferring
its customers to Sabre Powered by Serko. Serko also signed
agreements with the Helloworld and Magellan Travel Group TMCs.
These agreements have extended Serko Online to a potential 50+
new TMCs.
We have initiated an incentive program for our TMC resellers to
activate expense across our 6,000 travel customers in a drive
to increase awareness and sales of the expense management
platform. This move has started to increase revenue, with sales in
this product-line increasing 15% over the prior year. In addition,
Serko is winning expense work as customers increasingly look for
combined expense and travel platforms. The integration of the
travel and expense platforms on our mobile app has enhanced our
ability to meet this demand.
New Content
We successfully introduced new content providers such as
Expedia, Wotif and Booking.com to our platform. The initiative
has been well received by our TMC customers and is contributing
a growing revenue stream as Serko takes a share of content
sales commissions. While it is early days, around 5% of bookings
through our platform are buying services from these content
providers. Commissions on this new content grew over 900%
and is on-track to contribute significantly to Serko’s FY18 results.
Serko has signed with new content providers Hotel Hub and HRS
and their content will be available in FY18.
successful introduction of content
grows average revenue per booking
by 7%
serko.travel
In July 2016, we launched our platform for small and medium
enterprises (SME), serko.travel. It offers companies with less than
150 employees a way to book and manage their company travel
online and benefit from many of the enterprise platform’s cost
control, approval and reporting features.
serko.travel is a self-service system that uses the Serko Online
technology platform, offering users further opportunities to reduce
corporate travel management overheads. It also offers customers
the services of the Helloworld and Fight Centre TMCs if needed
on a pay-per-use basis. Users incur no initial booking fee. Instead,
Serko generates revenue from the sharing of commissions. The
system also integrates with Xero to streamline the process of
reconciling travel-related expenses.
Serko is continuing to broaden its user-base for this platform via
white-labelling arrangements. Helloworld and Flight Centre will
launch their own white-label versions of serko.travel to support
their SME businesses during 2017. We intend to further grow
uptake of the platform by sharing revenue with partners that have
CEO AND CHAIRMAN’S LETTER
SERKO LIMITED ANNUAL REPORT 2017
strong relationships with other large numbers of SMEs. We have
already signed agreements with Xero and 2degrees, and we are
in discussion with other parties. Through these partnerships, the
serko.travel platform will also be rolled out to customer bases in
Hong Kong and Singapore.
Platform Development
Serko’s leadership in travel and expense management is
dependent on the continued development of its platforms.
We were delighted this year by Callaghan Innovation’s decision
in March 2017 to extend its research and development grant by
$2 million over the next two years. In addition to the launch of
serko.travel, key product developments in the year included:
Serko Mobile: We launched a predictive booking workflow for
Serko Mobile in September 2016. This feature puts the power
of our predictive software booking technology into the hands
of the travellers themselves. This new feature is assisting our
channel partners to target new accounts.
Serko Expense: In December 2016, one of the highlights for
Serko Expense was the launch of the upgraded Serko Mobile
app, allowing users to submit expenses directly from their
phones. In an industry first, this gives business travellers end-
to-end control of their trips via a single app, from booking and
managing travel itineraries, right through to submission of
associated expenses.
Serko Zeno Zeno is our new corporate travel booking and
expense management platform and incorporates a number of
leading-edge features. The demonstration of Zeno to some of
our key accounts has been well received. It is currently being
tested and we expect to launch later in the current financial
year. It will be offered as a premium solution alongside the
existing Serko Online product.
PAGE 7
Darrin Grafton
Chief Executive Officer
Simon Botherway
Chairman
Serko is in a strong position and
is looking to the remainder of the
current financial year and beyond
with confidence.
Outlook
Serko is in a strong position and is looking to the remainder of the
current financial year and beyond with confidence. Transactional
revenue is expected to grow with our TMC partners seeing a
strong pipeline of new customers they expect will begin using
Serko Online and Serko Expense in the current financial year.
We also expect to see continued growth in content revenue
through our various platforms. We expect that content revenue
growth will accelerate as additional content providers are added
to the platform, including taxis, transfers and rental cars, as well
as other providers of hotel bookings. We expect Serko Zeno to
begin to contribute to revenue later in the current financial year
and into the 2019 financial year as we launch into new markets in
association with our partners such as Sabre.
Serko will continue to invest in its platforms to expand its product
use globally. And, through careful management of our costs,
and our financial and capital position, we expect to achieve
sustainable cash flow for the current financial year and record
positive earnings for the full year.
PAGE 8
ABOUT SERKO
SERKO LIMITED ANNUAL REPORT 2017
Corporate traveller
makes a booking
via Serko Online
Corporate books
a hotel or taxi via
Serko Online
Traveller downloads
and uses Serko
Mobile
Traveller pays, takes photo
of receipt using Serko Mobile
for use in Serko Expense
Booking and other
fees paid by TMC
to Serko
Subscription paid
to Serko per year
Monthly active
user fee paid by
corporation to Serko
Supplier commission
paid to Serko from
content suppliers
à
à
à
We’ve been the leading Online Booking Tool (OBT) for
corporate travel in Australasia since 2007. Since then
we’ve expanded into expense management and become
a publicly listed business (SKO.NZ) employing more
than 100 people across three countries and servicing
customers in more than 26 countries around the world.
Serko is growing rapidly and is one of New Zealand’s most
successful tech companies. Today, many of the largest
corporate businesses in Australia, New Zealand and Asia
trust Serko to help them manage their corporate travel
programmes and make sense of their corporate expenses.
By the numbers, more than two million people have access
to Serko’s OBT and more than 50% of Australia’s corporate
travel spend passes through Serko every year.
à
HOW SERKO GENERATEs REVENUE
à
à
cloud-based corporate
travel and expense
management solution
provider
OUR STRATEGY
Serko has concentrated on a three-pronged strategy of
growing our customer base, increasing average revenue
per booking (ARPB) and delivering market-leading
technological innovations to underpin our platform for
global expansion.
Serko is currently developing Serko Zeno, which will be
a premium offering alongside our existing Serko Online,
with a number of leading-edge features. Combined with
Expense Management and serko.travel for small and
medium businesses, we will have an integrated, globally
competitive offering where Serko can expand its customer
base through strategic alliances and reach unserved
markets. Together with growing content, this will continue
to increase our ARPB.
à
Our purpose
is to transform the way
businesses manage
travel and expenses,
enabling stress-free travel so team
members can always be at their most
productive,
delivering
tangible benefits to the
organisations that use the Serko line
of products
PAGE 9
Serko – transforming business travel & expense management
Serko Online – Making Business Travel Personal
Serko Online is an enterprise-grade independent web-based technology platform
that talks to the main Global Distribution Systems (GDSs), providing Serko users the
ability to search all the content stored in the GDSs, while applying their company’s
travel policy. Unlike GDS-owned Online Booking Tools (OBTs), Serko also talks to
a large number of other travel providers, such as low-cost carriers and discount
accommodation providers, which gives corporate users access to a huge range of
flights and hotel rooms at every price point.
Serko expense – your personal expense manager
Serko Expense is a powerful cloud-based expense management solution that
simplifies every aspect of expense management. Through Serko Expense, users can
manage cash claims, mileage, allowance and corporate credit card expenses. Unique
cloud-based matching technology makes the process of reconciling corporate card
expenses a painless experience that saves hours of admin time and dramatically
improves policy compliance.
Serko.travel – for small and medium businessES going places
For smaller businesses based in Australia and New Zealand serko.travel is a brand
new way to manage business travel. It’s a self-service system that uses the
Serko Online technology platform to give organisations with fewer than
150 employees the ability to make and change bookings online for free. Companies
simply sign up at serko.travel and can start making bookings online immediately.
serko.travel pulls together all of the local travel suppliers, including content from
Expedia, Booking.com and Wotif to ensure that users can book all the hotels, airlines
and hire car suppliers that matter. The system also integrates with Xero, the leading
small business accounting platform to streamline the process of reconciling credit
cards.
SERKO - PARTNERS WITH TMCS TO DELIVER ENTERPRISE-LEVEL
SOLUTIONS TO BLUE CHIP CORPORATES
Corporate Travel US$1.2tr
global market
Australasia
US$21.8bn enterprise
market opportunity
à
Serko addresses
66% of the
$21.8bn of
corporate spend
with its current
technology
platform
Serko’s
transacted
customer
market share
is 57%
à
Market-leading
reseller
base (TMCs)
covering large
market share
& provides
a global
footprint
Blue chip
customer base
numbering
over 6,000
corporate
entities
à
Source: GBTA (Global Business Travel Association)
PAGE 10
OVERVIEW OF PERFORMANCE
SERKO LIMITED ANNUAL REPORT 2017
TRANSACTIONAL REVENUE
Recurring revenue grew by 9% for the year and lagged
transactional travel growth of 18% owing to a higher level
of minimum contractual payments recorded in the 2016
year and adverse currency impact in the 2017 year. Minimum
contractual payments are received when a customer’s
actual transactions fall short of their contracted minimum.
However, in looking forward it is important to understand
that transaction volumes grew strongly, particularly in the
second half. Due to this acceleration in the second half, the
1. ATMR (Annualised Transactional Monthly Revenue) is a non-GAAP measure. Serko uses this as a useful indicator of recurring revenues from Serko products based
on the monthly transactions from the most recent month (March 2017).
2. Operating Costs is a non-GAvAP measure that excludes costs relating to taxtion, interest, depreciation, amortisation and impairment charges.
SELECTED OPERATIONAL METRICSFY17FY16FY15FY14FY13
Total revenue growth (%)9%27%55%39%27%
Revenue growth – Serko Online (%)8%49%62%12%41%
Operating costs
2
(excluding depreciation & amortisation) (%)-10%13%105%62%35%
No. of transactions (indexed, where FY13=100)326275179123100
Transaction growth18%54%45%23%35%
Product/recurring revenue as % of total revenue91%93%80%71%84%
Employees (number at end of year)1081271338747
Average revenue per full-time equivalent (NZ$’000)12210194100119
Research & development costs – expense and capex (NZ$000)5,8366,2685,7623,3872,340
overall transactional growth of 18% during the year masks
the run-forward growth rate. A comparison of March 2016
transactional revenue with March 2017 shows an increase of
37%, which is attributable to both an increase in the number
of transactions and the Average Revenue per Booking. The
current pipeline of new customers expected to join Serko’s
platform gives us confidence we will achieve positive profit in
the current financial year and cash flow break even for a full
year.
á
37%
INCREASE
ATMR
1
$15.3 Million
Indicator of future
growth potential
18% Increase fy17
Online transaction growth
continues
á
9%
INCREASE
revenue
$14.3 Million
Recurring Revenue
91% of Revenue
serko is emerging into profitability.
transactional revenue will increase
and we will benefit from the
scalability of our platform, while
controlLing costs.
NZD $’000FY17fy16increase
Serko Online11,79610,9198%
Serko Expense1,12598115%
Recurring Revenue12,92111,900
9%
Services1,3561,222
11%
Revenue14,27713,122
9%
16m
8m
12m
4m
14m
6m
10m
2m
-
FY14
FY13
FY15
FY16FY17
SOLExpenseServices
Recurring vs Non-Recurring Revenue Trend
FY15
FY14FY13FY16FY17
online booking trend
P A G E 11
á
44%
IMPROVEMENT
NPBT
(LOSS)
â10%
DECREASE
OPERATING
COSTS
$18.8 Million
Active reduction of
cost base
$(3.3) Million
Increase in Recurring
Revenues and on
track to achieve profit
expenses from ordinary activities
The classifications of Operating Expenses included in the
Statement of Comprehensive Income are as follows:
• Selling and Marketing Expenses comprise all direct costs
of sale that are not people or salary related
• Remuneration and Benefits are the total costs of
employees and contractors engaged within the
business during the financial year, including gross
salary, additional payroll taxes, superannuation and
KiwiSaver, bonuses, commissions and the value of any
share-based remuneration or awards
• Administration Expenses are other general overheads
and operating costs, including depreciation and
amortisation charges
• Other Expenses comprise direct technology costs
including hosting.
revenue
Serko’s main source of revenue is from its Serko Online
travel booking application. This is predominantly invoiced to
TMC resellers on a monthly basis for the total transactions
generated from the online travel bookings made by their
end user customer bases. Revenue is made up of per
transaction fees, ancillary service fees, content commissions,
and contracted minimum payments where applicable and
is stated net of volume-related rebates and discounts. It
also includes revenue from serko.travel license fees, content
commissions and Mobile license fees.
Serko also earns income from its Expense Management
application, which allows registered users of corporate
customers to process travel and expense claims for
accounting and reimbursement. Revenues are derived from
a combination of fees for active users, registered users and
reports processed.
Services revenue is derived from installation service and
customised software development undertaken on behalf of
customers. The basis of charging can vary depending on the
contractual terms with the cusotmer, which may specify time
and materials, capped or fixed pricing.
Other income is primarily related to government grants and
is related to applicable research and development projects.
NZD $’000FY17fy16change
Revenue14,27713,1229%
Other income1,0921,296-16%
TOTAL INCOME15,36914,4187%
Operating expenses (including
D&A)
Net finance income
18,763
88
20,735
374
-10%
-76 %
NET PROFIT BEFORE TAX (LOSS)(3,306)(5,943)-44%
Add back (deduct):
Depreciation and amortisation
Net finance income
858
(88)
952
(374)
-10%
-76 %
EBITDA (loss)(2,536)(5,365)-53%
Share based payments (SBP)
2
133517-74 %
EBITDA (excluding SBP)(2,403)(4,848)-50%
Research & development
(expensed)
3
Grant income relating to R&D
5,056
(1,073)
5,514
(1,296)
-8%
-17%
EBITDA (excluding SBP and R&D)1,580(630)351%
Reconciliation of NET PROFIT BEFORE TAX to ebitda
1
FY14
FY13
FY15
FY16FY17
3m
2m
1m
0
-1m
-2m
-3m
-4m
-5m
-6m
-7m
EBITDA (losses)EBITDA (Excluding SBP and R&D)
R&D Effect on ebitda
1. EBITDA is a non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation, Depreciation and Amortisation and Impairment.
2. Share Based Payments (SBP) are a non-cash expenditure.
3. Research and Development is a discretionary spend.
PAGE 12PAGE 12
FINANCIALS
SERKO LIMITED
FINANCIAL
STATEMENTS
Directors’ statement13
Independent auditor’s report14
Statement of comprehensive income18
Statement of changes in equity19
Statement of financial position20
Statement of cash flows21
Notes to the financial statements22-45
PAGE 13PAGE 13
Directors’ Statement
The Board of Directors is pleased to present the
consolidated financial statements for Serko Limited and
the auditors’ report for the year ended 31 March 2017.
The directors present financial statements for each
financial year that fairly present the financial position of
the Group and its financial performance and cash flows for
that period.
The directors consider that the financial statements of the
group have been prepared using appropriate accounting
policies consistently applied and supported by reasonable
judgements and estimates and that all relevant financial
reporting and accounting standards have been followed.
The directors believe that proper accounting records have
been kept, which enable, with reasonable accuracy, the
determination of the financial position of the group and
facilitate compliance of the financial statements with the
Financial Markets Conduct Act 2013.
The Board of Directors of Serko Limited authorised these
financial statements for issue on 25 May 2017.
For and on behalf of the Board
Simon Botherway Darrin Grafton
Director Director
PAGE 14
Report on the Audit of the Financial Statements
To the shareholders of Serko Limited
Opinion
We have audited the financial statements of Serko Limited (“the
company”) and its subsidiaries (together “the group”) on pages 18
to 45, which comprise the statement of financial position of the
group as at 31 March 2017, and the statement of comprehensive
income, statement of changes in equity and statement of cash
flows for the year then ended of the group, and the notes to
the financial statements including a summary of significant
accounting policies.
In our opinion, the financial statements on pages 18 to 45 present
fairly, in all material respects, the financial position of the group as
at 31 March 2017 and its financial performance and cash flows for
the year then ended in accordance with New Zealand equivalents
to International Financial Reporting Standards and International
Financial Reporting Standards.
This report is made solely to the company’s shareholders, as a
body. Our audit has been undertaken so that we might state to
the company’s shareholders those matters we are required to
state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and
the company’s shareholders as a body, for our audit work, for this
report, or for the opinions we have formed.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (New Zealand). Our responsibilities
under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section
of our report.
We are independent of the group in accordance with Professional
and Ethical Standard 1 (revised) Code of Ethics for Assurance
Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
We provide taxation advice and other assurance service to the
group. We have no other relationship with, or interest in, the
company or any of its subsidiaries. Partners and employees of our
firm may deal with the group on normal terms within the ordinary
course of trading activities of the business of the group.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current year. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, but we do not provide a
separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in
that context.
We have fulfilled the responsibilities described in the Auditor’s
responsibilities for the audit of the financial statements section
of the audit report, including in relation to these matters.
Accordingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our
audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the
accompanying financial statements.
independent auditor’s report
SERKO LIMITED financial statements 2017
Chartered Accountants
PAGE 15
1. ACCOUNTING FOR DEVELOPMENT EXPENDITURES
Why significantHow our audit addressed the key audit matter
Capitalised software development expenditures are significant
to our audit due to the amount of expenditures being
capitalised, the rapid technological change in the group’s
industry, and the specific criteria that have to be met for
capitalisation.
During the year ended 31 March 2017 the group capitalised
$780,000 of expenditures relating to development of software.
Judgement is required in determining development
expenditures that should be capitalised. Such judgements
include consideration of matters such as generation of future
economic benefits and distinction between development
of new software and maintenance and upgrade of existing
software. These costs are then amortised over the estimated
useful life of the software.
Disclosure regarding capitalised development costs is included
in Note 10 to the financial statements.
We performed audit procedures over the accuracy and
valuation of amounts capitalised in the current year and the
amount expensed relating to software development. Our
procedures included assessing the capitalised costs against
the recognition criteria in NZ IAS 38: Intangible Assets,
assessing the key assumptions used and estimates made in
capitalising development costs and testing the accuracy of
costs included on a sample basis.
We also assessed the adequacy of the group’s disclosure in
Note 10 Intangibles.
2. REVENUE RECOGNITION
Why significantHow our audit addressed the key audit matter
The group’s revenue of $14,277,000 is based on contracts with
customers which include a variety of arrangements such as
the recognition of actual transaction based revenue, minimum
contracted transaction based revenue, establishment or licence
fees and installation fees, all of which potentially have different
revenue recognition triggers.
There is often a mismatch between cash flows from customer
contracts and when revenues can be recognised which is based
on performance obligations.
Given the specific nature of individual customer contracts
which may bundle together several inter-related or separate
services and performance obligations, and the presence of
contingent fee arrangements where, for example, a transaction
fee is conditional on meeting future transaction volume
commitments, there is some complexity and elements of
judgement required in recognition of revenue.
Disclosures regarding this item are included in Note 4 to the
financial statements.
Our audit procedures over revenue recognition included
testing a sample of revenue transactions and reviewing
contracts with key customers to assess:
- that revenue has been recorded in the correct period;
- the amount of revenue recognised is appropriate; and
- the impact of any ongoing performance obligations have
been included.
We performed data analytical procedures focusing on
integrity of revenue data and identification of unusual
transactions.
We reviewed key judgements adopted by the group in
recognising revenue for individual revenue streams.
We concentrated in particular on contingent revenue
arrangements and assessed the group’s assumptions applied
We assessed the adequacy of the group’s disclosure in Note 4
to the financial statements.
Chartered Accountants
PAGE 16
independent auditor’s report
SERKO LIMITED FINANCIAL STATEMENTs 2017
3. IMPAIRMENT ASSESSMENT OF INTANGIBLE ASSETS
Why significantHow our audit addressed the key audit matter
The group has intangible assets of $1,603,000 recorded on
its statement of financial position. This represents 16% of
total assets. Intangibles contain the following components:
computer software and development work in progress.
NZ IAS 38 Intangible Assets requires that finite life
intangible assets be impairment tested whenever there is an
indication that the intangible assets may be impaired and
this assessment requires judgement. The assessment as
to whether there are any indicators of impairment requires
judgement as it involves consideration of both internal and
external sources of information. This includes assessing the
useful life of the assets.
Relatively small changes in assumptions may significantly
affect the outcome of impairment assessments. In addition,
recoverability of the group’s assets depend on the group’s
ability to make profits and generate sufficient cash flows
from those assets. The group suffered losses of $3,450,000
and generated negative cash flow from operating activities
of $1,595,000 for the year ended 31 March 2017, which were
indicators of impairment and therefore an impairment test was
performed.
Disclosures relating to Intangible Assets are included in Note 10
to the financial statements.
We concentrated our impairment testing audit work on
intangible assets developed internally because of the higher
uncertainty regarding recoverability of these intangibles given
continuing losses and negative operating cash flows reported
by the group.
Our procedures included assessing the assumptions and
methodologies used by the group in their assets’ value-in-use
impairment model. We compared the group’s assumptions to
our own assessments of key inputs such as revenue growth,
cost inflation and discount rates and assessed sensitivities, as
well as performed a break-even analysis on key assumptions.
We tested the group’s procedures related to the preparation
of the budget approved by the Board upon which the value-
in-use model is based, as well as compared the sum of
projected discounted cash flows to the market capitalisation
of the group to assess whether the projected cash flows
appeared consistent with the market assessment of the
group’s value.
We assessed the useful lives of finite life assets to determine
if they remained appropriate in the context of the expected
future period of economic consumption.
We assessed the adequacy of the group’s disclosure included
in Note 10 to the financial statements.
Chartered Accountants
PAGE 17
Information Other than the Financial Statements and Auditor’s
Report
The directors of the company are responsible for the Annual
Report, which includes information other than the financial
statements and auditor’s report which is expected to be made
available to us after the date of the auditor’s report.
Our opinion on the financial statements does not cover the
other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained during
the audit, or otherwise appears to be materially misstated.
When we read the Annual Report if we conclude that there is a
material misstatement therein, we are required to communicate
the matter to those charged with the governance and, if
uncorrected, to take appropriate action to bring the matter to the
attention of users for whom our autitor’s report was prepared.
Directors’ Responsibilities for the Financial Statements
The directors are responsible, on behalf of the entity, for the
preparation and fair presentation of the financial statements
in accordance with New Zealand equivalents to International
Financial Reporting Standards and International Financial
Reporting Standards, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or cease operations, or have
no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit
of the Financial Statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with International Standards on Auditing
(New Zealand) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of these consolidated financial
statements.
A further description of the auditor’s responsibilities for the audit
of the financial statements is located at External Reporting
Board’s website: https://www.xrb.govt.nz/Site/Auditing_
Assurance_Standards/Current_Standards/Page1.aspx. This
description forms part of our auditor’s report.
Report on the Other Legal and Regulatory Requirements
The engagement partner on the audit resulting in this
independent auditor’s report is Jon Hooper.
25 May 2017
Auckland
Chartered Accountants
PAGE 18
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017
Notes20172016
$(000)$(000)
Revenue414,27713,122
Other income41,0921,296
Total revenue and other income15,36914,418
Operating expenses5
Selling and marketing expenses (1,658) (1,267)
Remuneration and benefits (12,285) (13,941)
Administration expenses (3,880) (4,405)
Other expenses (940) (1,122)
Total operating expenses (18,763) (20,735)
Finance income5142430
Finance costs5 (54) (56)
Loss before income tax (3,306) (5,943)
Income tax expense6 (144) (291)
Net loss for the year (3,450) (6,234)
Other comprehensive income/(loss) to be reclassified
to profit or loss in subsequent periods (net of tax)
Movement in foreign currency reserve (140) (42)
Total comprehensive loss for the year (3,590) (6,276)
Loss for the year attributable to:
Equity holders of the parent (3,450) (6,234)
Total comprehensive loss for the year attributable to:
Equity holders of the parent (3,590) (6,276)
Earnings per share
Basic and diluted profit (loss) for the year attributable to
ordinary equity holders of the parent21 $(0.05) $(0.10)
The accompanying notes form part of these financial statements.
PAGE 19
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017
NoteS
Contributed
equity
Share-based
Payment
Reserve
Foreign
currency
reserve
Accumulated
lossesTotal
$(000)$(000)$(000)$(000)$(000)
Balance as at 1 April 201625,185888107(16,447)9,733
Net loss for the period – – – (3,450)(3,450)
Other comprehensive income/(loss) to be
reclassified to profit or loss in subsequent
periods (net of tax)
– – (140) – (140)
Total comprehensive loss for the year – – (140)(3,450)(3,590)
Transactions with owners
Allocated shares to employees15 – 372 – – 372
Forfeiture of shares from employees15 – (239) – – (239)
Interest on convertible notes – – – – –
Balance as at 31 March 201725,1851,021(33)(19,897)6,276
Balance as at 1 April 201517,604371149(10,213)7,911
Net loss for the period – – – (6,234)(6,234)
Other comprehensive income/(loss) to be
reclassified to profit or loss in subsequent
periods (net of tax)
– – (42) – (42)
Total comprehensive loss for the year – – (42)(6,234)(6,276)
Transactions with owners
Issue of share capital158,096 – – – 8,096
Cancellation of shares in Salary Sacrifice
Scheme
15(10) – – – (10)
Cost of equity issued15(505) – – – (505)
Allocated shares to employees15 – 517 – – 517
Balance as at 31 March 201625,185888107(16,447)9,733
The accompanying notes form part of these financial statements.
PAGE 20
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2017
Notes20172016
$(000)$(000)
Current assets
Cash at bank and on hand114,4517,118
Receivables73,1673,969
Derivative financial instruments8–5
7,61811,092
Non-current assets
Property, plant and equipment9886613
Intangible assets 101,6031,439
Deferred tax asset6112–
2,6012,052
Total assets10,21913,144
Current liabilities
Trade and other payables122,5822,557
Income tax payable160315
Interest-bearing loans and borrowings14399344
Derivative financial instruments8245 –
3,3863,216
Non-current liabilities
Deferred tax liability6 – 58
Trade and other payables12269137
Interest-bearing loans and borrowings14254 –
Derivative financial instruments834–
557195
Total liabilities3,9433,411
Equity
Contributed equity1525,18525,185
Share-based payment reserve151,021888
Foreign currency reserve(33)107
Retained earnings – accumulated (deficit)(19,897)(16,447)
Total equity6,2769,733
Total equity and liabilities10,21913,144
For and on behalf of the Board who authorised these financial statements for issue on 25 May 2017.
Simon Botherway Darrin Grafton
Chairman Chief Executive Officer
The accompanying notes form part of these financial statements.
PAGE 21
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2017
Notes20172016
$(000)$(000)
Cash flows from operating activities
Receipts from customers15,11312,464
Interest received9978
Receipts from grants1,0751,382
Taxation (paid)/refund received(469)(214)
Payments to suppliers and employees(17,349)(18,161)
Interest payments(16)(35)
Net Goods and Services Tax (GST) refunded (paid)(48)34
Net cash flows used in operating activities18(1,595)(4,452)
Cash flows from investing activities
Purchase of property, plant and equipment(247)(65)
Purchase of intangibles(791)(677)
Net cash flows used in investing activities(1,038)(742)
Cash flows from financing activities
Share issue – 8,096
Cost of new share issue– (470)
Net cash flows from financing activities–7,626
Net increase (decrease) in total cash(2,633)2,432
Net foreign exchange difference(34)199
Cash and cash equivalents at beginning of period7,1184,487
Cash and cash equivalents at end of period4,4517,118
Cash and cash equivalents comprises the following:
Cash at bank and on hand114,4517,118
4,4517,118
The accompanying notes form part of these financial statements.
PAGE 22
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
Notes to the financial statements
FOR THE YEAR ENDED 31 MARCH 2017
1 CORPORATE INFORMATION
The financial statements of Serko Limited (‘the company’) and
subsidiaries (‘the group’) were authorised for issue in accordance
with a resolution of directors.
The company is a limited liability company domiciled and
incorporated in New Zealand under the Companies Act 1993. Its
registered office is at Unit 14d, 125 The Strand, Parnell, Auckland.
The group is involved in the provision of computer software
solutions for corporate travel. The group is headquartered in
Auckland, New Zealand.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below and
within this notes section. These policies have been consistently
applied to all the years presented, unless otherwise stated.
a) Basis of preparation
The financial statements have been prepared in accordance with
generally accepted accounting practice in New Zealand and
the requirements of the Financial Market Conduct Act 2013. The
financial statements have been prepared on a historical cost basis,
modified by the revaluation of certain assets and liabilities as
identified in specific accounting policies.
The financial statements are presented in New Zealand dollars
and all values are rounded to the nearest thousand dollars unless
stated otherwise.
The financial statements provide comparative information in
respect of the previous period.
b) Going concern
The directors have carefully considered the ability of the group
to continue to operate as a going concern for at least the next
12 months from the date the financial statements are authorised
for issue. It is the conclusion of the directors that the group
will continue to operate as a going concern and the financial
statements have been prepared on that basis.
In reaching their conclusion, the directors have considered the
following factors:
Cash reserves at 31 March 2017 of $4.5 million provides a
sufficient level of headroom to help support the business for at
least the next twelve months
The FY18 budget has been prepared to achieve profitability and
positive net cash flow over the year
The directors have made due enquiry into the appropriateness
of the assumptions underlying the budgetary forecasts
In approving the FY18 budget, the directors have considered
detailed contingency plans presented by the management,
including the ability to adjust resource levels and reduce
operating costs, that can be implemented in the event that
adverse variances in performance versus budget exceed certain
thresholds.
A number of significant judgements have been made in preparing
the budget for FY18, the most significant relate to the timing and
level of uptake of demand for new products and services that are
expected to launch or grow significantly during the year. However,
in view of the contingencies and risk mitigations that have been
identified, the directors consider there is a reasonable expectation
that the group can continue to operate as a going concern for the
foreseeable future.
c) Statement of compliance
The financial statements have been prepared in accordance
with NZ GAAP. They comply with New Zealand equivalents to
International Financial Reporting Standards and International
Financial Reporting Standards, as appropriate for profit-oriented
entities.
d) New accounting standards and interpretations
NZ IFRS standards that have recently been issued or amended but
are not yet effective and have not been adopted by the group are:
NZ IFRS 9 Financial Instruments, effective for accounting
periods beginning on or after 1 January 2018, is replacing NZ
IAS39 Financial Instruments: Recognition and Measurement.
NZIFRS 9 includes a revised model for classification and
measurement and will result in changes to financial statement
disclosures. Management does not expect a significant change
to the way in which the group measures its financial statements
as a result but has not yet performed a full assessment.
NZ IFRS 15 Revenue Recognition, effective for accounting
periods beginning on or after 1 January 2018. Management
does not expect the recognition and measurement of revenue
to materially change under the new standard, however, a full
assessment has not yet been performed.
NZ IFRS 16 Leases, effective for accounting periods beginning
on or after 1 January 2019.
The group has assessed the impact of NZ IFRS 16 Leases.
There will be an impact on the statement of financial position
where future minimum lease payments per note 16 are
discounted back and shown as a lease liability and a
‘right-of-use asset’ for substantively all lease contracts.
The standard will not have any effect on the total amount
of cash flows reported but it is expected to have an effect on
the presentation of cash flows. This is because, applying
NZ IAS 17 Leases, cash flows relating to operating leases
are presented as cash flows from operating activities, while
applying NZ IFRS 16, will result in the presentation within
financing activities of cash flows relating to the repayment
of principal on lease liabilities.
e) Basis of consolidation
The consolidated financial statements comprise the financial
statements of Serko Limited and subsidiaries as at and for the
year ended 31 March each year.
Control is achieved when the group is exposed, or has rights, to
variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the
investee. Specifically, the group controls an investee if and only if
the group has:
Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee
PAGE 23
Exposure, or rights, to variable returns from its involvement
with the investee
The ability to use its power over the investee to affect its
returns.
When the group has less than a majority of the voting or similar
rights of an investee, the group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
The contractual arrangement with the other vote holders of the
investee
Rights arising from other contractual arrangements
The group’s voting rights and potential voting rights.
The group reassesses whether or not it controls an investee if
facts and circumstances indicate there are changes to one or more
of the three elements of control. Consolidation of a subsidiary
begins when the group obtains control over the subsidiary
and ceases when the group loses control of the subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired
or disposed of during the year are included in the financial
statements from the date the group gains control until the date
the group ceases to control the subsidiary.
A change in the ownership interest of a subsidiary, without a loss
of control, is accounted for as an equity transaction. If the group
loses control over a subsidiary, it:
Derecognises the assets (including goodwill) and liabilities of
the subsidiary
Derecognises the carrying amount of any non-controlling
interests
Derecognises the cumulative translation differences recorded
in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent’s share of components previously
recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate, as would be required if the
group had directly disposed of the related assets or liabilities.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The acquisition method of
accounting involves recognising at acquisition date, separately
from goodwill, the identifiable assets acquired, liabilities assumed
and any non-controlling interest in the acquiree. The identifiable
assets acquired and liabilities assumed are measured at their
acquisition date fair values. Acquisition-related costs are
expensed as incurred and recognised in profit or loss.
The difference between the above items and the fair value of the
consideration is recorded as either goodwill or gain on bargain
purchase. After initial recognition, goodwill is measured at cost
less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the group’s
cash-generating units expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Goodwill is tested annually for impairment, or immediately if
events or changes in circumstances indicate that it might be
impaired, and carried at cost less accumulated impairment losses.
Impairment losses on goodwill are not reversed.
Any gain on bargain purchase is recognised immediately on
acquisition to profit and loss.
Inter-company transactions, balances and unrealised gains and
losses on transactions between group companies are eliminated.
Non-controlling interests are allocated their share of
comprehensive income after tax in the statement of
comprehensive income and are presented within equity in the
consolidated statement of financial position, separately from the
equity of the owners of the parent.
f) Foreign currency translation
I) FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the ‘functional
currency’). These financial statements are presented in New
Zealand dollars, which is the group’s presentation currency.
II) TRANSACTIONS AND BALANCES
Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of
exchange ruling at balance date. Non-monetary items measured
in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value was determined.
g) Financial instruments
Financial assets in the scope of NZ IAS 39 Financial Instruments:
Recognition and Measurement are classified as either loans and
receivables or available-for-sale financial assets. When financial
assets are recognised initially they are measured at fair value plus
directly attributable transaction costs. The group determines the
classification of its financial assets on initial recognition and, when
allowed and appropriate, re-evaluates this designation at each
financial year end.
I) LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They arise when the group provides money, goods or services
directly to a debtor with no intention of selling the receivable.
Such assets are subsequently carried at amortised cost using
the effective interest method. Gains and losses are recognised in
profit or loss when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
The group’s loans and receivables comprise trade receivables,
loans and GST receivable.
The group has no financial assets classified as available for sale.
II) FINANCIAL LIABILITIES
Financial liabilities are classified as ‘other financial liabilities’. Other
financial liabilities, including borrowings, are initially measured
at fair value, net of transaction costs. Other financial liabilities
are subsequently measured at amortised cost using the effective
interest method, with interest expense recognised using an
effective interest method.
The effective interest method calculates the amortised cost of
PAGE 24
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
a financial liability and allocates the interest expense over the
relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected
life of the financial liability or, where appropriate, a shorter period
to the net carrying amount of the liability.
Financial liabilities are classified as current liabilities unless the
group has an unconditional right to defer settlement of the
liability for at least 12 months after balance date.
III) IMPAIRMENT OF FINANCIAL ASSETS
The group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred ‘loss event’)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy
or other financial reorganisation and observable data indicating
that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that
correlate with defaults.
IV) FINANCIAL ASSETS CARRIED AT AMORTISED COST
For financial assets carried at amortised cost, the group first
assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant or
collectively for financial assets that are not individually significant.
If the group determines that no objective evidence of impairment
exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial
assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is,
or continues to be, recognised are not included in a collective
assessment of impairment.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial asset’s
original effective interest rate. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current
effective interest rate (EIR).
The carrying amount of the asset is reduced through the use
of an allowance account and the loss is recognised in profit or
loss. Interest income continues to be accrued on the reduced
carrying amount and is accrued using the rate of interest used to
discount the future cash flows for the purpose of measuring the
impairment loss. The interest income is recorded as finance income
in the income statement. Loans, together with the associated
allowance, are written off when there is no realistic prospect of
future recovery and all collateral has been realised or has been
transferred to the group. If, in a subsequent year, the amount of
the estimated impairment loss increases or decreases because
of an event occurring after the impairment was recognised, the
previously recognised impairment loss is increased or reduced by
adjusting the allowance account. If a write off is later recovered,
the recovery is credited to finance costs in the income statement.
h) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of that asset. A qualifying asset is one that takes
six months or longer to prepare for its intended use or sale. Other
borrowing costs are expensed when incurred.
i) Other taxes
Revenues, expenses and assets are recognised net of the amount
of GST except where the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable. All receivables
and payables are stated GST inclusive.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in
the statement of financial position.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The preparation of the group’s consolidated financial statements
requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying disclosures.
SIGNIFICANT JUDGEMENTS
In the process of applying the group’s accounting policies,
management has made the following judgements, which have an
effect on the amounts recognised in the consolidated financial
statements.
SHARE-BASED PAYMENTS
The group measured the fair value of the first tranche of shares
granted under the restricted share plan in June 2014 to employees
using the listing price (Initial Public Offering on 24 June 2014)
of the shares when granted. Management considered this a
reasonable basis of fair value, given that the grant date and
listing date were concurrent. The fair value applied to subsequent
shares granted under the restricted share plan is the volume
weighted average price (VWAP) of shares traded in the previous
20 trading days preceding the date of grant. Vesting of the shares
is reviewed periodically to determine that the assumptions around
vesting dates and employee churn rate are still valid.
DEVELOPMENT COSTS
Development costs of a project are capitalised in accordance
with the accounting policy. Initial capitalisation of costs is based
on management’s judgement that technological and economic
feasibility is confirmed, usually when a product development
project has reached a defined milestone according to an
established project management model. In determining the
amounts to be capitalised, management makes assumptions
regarding the expected future cash generation of the project,
discount rates applied and the expected period of benefits. At
31 March 2017 the carrying amount of capitalised development
costs was $204,600 (2016: $407,019).
This amount represents development of a new innovative user
booking experience.
PAGE 25
FUNCTIONAL CURRENCY
The group periodically reviews the functional currency for
reporting purposes. Based on the assessment of the NZ IAS 21
criteria, management believes, that there is sufficient justifications
for the continued use of New Zealand dollars (NZD) as the
functional currency. The key factors behind this conclusion are:
a) Serko is NZX listed and has raised capital in NZD
b) Research and development grant funding is in NZD
c) NZD is the main currency for labour, operating cost and capital
expenditure.
IMPAIRMENT OF INTANGIBLE OR NON-FINANCIAL ASSETS
Management reviews the carrying value of intangible and
non-financial assets on an annual basis and in accordance
with NZ IAS 36. Consideration depends on a number of factors,
depending on the specific asset in question, which may include
discounted cash flow forecasts, the ability to continue to generate
discrete cash flow and returns, any changes or anticipated
changes in the business or product circumstances and the nature
of the events that originally gave rise to the recognition of any
non-financial assets. Further details are disclosed in note 10 of the
financial statements in respect of the specific adjustments and
entries reflected in the 2016 financial year.
REVENUE RECOGNITION
Serko has reseller customer agreements that contain annual
minimum transaction volume commitments that span financial
reporting periods. Based on this, management needs to make
a judgement about estimated future transaction volumes to
determine related revenue for the specific financial reporting
period.
4 REVENUE & OTHER INCOME
Revenue is recognised and measured at the fair value of the
consideration received or receivable to the extent it is probable
that the economic benefits will flow to the group and the revenue
can be reliably measured. Revenue is disclosed net of credit notes,
rebates and discounts.
I) REVENUE FROM TRANSACTION AND USAGE FEES
Revenue from transaction and usage fees is recorded at the time
travel or expense transactions are processed through Serko’s
platforms.
II) REVENUE FROM SERVICES
Revenue from a contract to provide installation services is
recognised by reference to the completion of the contract or
services delivered at balance date. When the contract outcome
cannot be estimated reliably, revenue is recognised only to the
extent of expenses recognised that are recoverable. Customised
software development services are recognised by reference to the
stage of completion at balance date.
III) LICENCE FEE REVENUE
Revenue from licence fees is recognised over the term of the
licence agreement.
III) INTEREST REVENUE
Revenue is recognised as interest accrues, using the effective
interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is the
rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount
of the financial asset.
IV) GOVERNMENT GRANTS
When the grant relates to an expense item, it is recognised as
income over the periods necessary to match the grant on a
systematic basis to the costs it is intended to compensate.
Note20172016
$(000)$(000)
Revenue – transaction and usage fees12,92111,900
Revenue – services1,3561,222
Total operating revenue14,27713,122
Other income
Government grants131,0731,296
Sundry income19 –
1,0921,296
PAGE 26
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
5 EXPENSES
Notes20172016
$(000)$(000)
Operating loss before taxation includes the following expenses:
Auditor remuneration and advisory fees11699
Amortisation of intangibles10633486
Impairment of intangibles10– 220
Depreciation9225246
Rental and operating lease expenses686658
Employee & contractor remuneration11,46212,715
Contributions to defined contribution plans416496
Share-based payment expenses15133517
Marketing expenses936540
Hosting expenses904923
Other operating expenses3,2523,835
Expenses from ordinary activities18,76320,735
Research expenses (excluding capitalised development costs)5,0565,514
Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to an intangible asset.
R&D expenses include employee & contractor remuneration related to these activities.
Research expenditure includes expenditure that meets the definition of research expenditure as defined in NZ IAS 38.
Finance income and expenses includes:
Finance income
Interest received116117
Dividends received11
Foreign exchange gains – net25312
Total finance income142430
Finance expenses
Interest expense(36)(55)
Other finance expenses(18)(1)
Total finance expenses(54)(56)
Total finance income and expenses88374
PAGE 27
AUDITOR REMUNERATION
The directors of Serko Limited appointed Ernst & Young as the auditor of the group for the year ended 31 March 2017.
Amounts received or due and receivable by:
20172016
$(000)$(000)
Ernst & Young
Audit of financial statements8259
Other assurance-related services (a)1511
Total audit fees9770
Tax services (b)1929
Total non-audit fees1929
(a) Other assurance-related services include services for research and development assurance procedures and half year agreed upon procedures.
(b) Tax services relate to compliance services.
6 INCOME TAX
Current tax assets and liabilities for the current period are
measured at the amount expected to be recovered from or paid
to the taxation authorities based on the current period’s taxable
income. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted at the
reporting date.
Current income tax relating to items recognised directly in equity
is recognised in equity and not in the statement of comprehensive
income. Management periodically evaluates positions taken in
the tax returns with respect to situations in which applicable
tax regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred income tax is provided on all temporary differences at
the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences:
Except for a deferred income tax liability arising from the initial
recognition of goodwill;
Except where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible
temporary differences and unused tax losses, to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences can be utilised. The carry-
forward of unused tax losses can be utilised except where the
deferred income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor
taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at
each balance date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax
laws) relevant to the appropriate tax jurisdiction that have been
enacted or substantively enacted at the balance date.
PAGE 28
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
6 INCOME TAX – CONTINUED
20172016
$(000)$(000)
Statement of comprehensive income
Current income tax
Current income tax charge/(credit)308272
Adjustments in respect of previous years687
314359
Deferred income tax
Origination and reversal of temporary differences(170)(2)
Adjustments in respect of previous years – (66)
(170)(68)
Income tax expense reported in the statement of comprehensive income144291
The prima facie tax payable on profit before income tax is reconciled to the income tax
expense as follows:
Accounting profit (loss) before income tax(3,306)(5,943)
At the statutory income tax rate of 28% (2016:28%) (926)(1,664)
Non-deductible items783
Adjustments in respect of current income tax of previous years621
Chinese branch tax6162
Foreign tax credits not utilised1613
Future income tax benefit, not recognised9711,768
Effect of tax on overseas subsidiaries at different rate98
144291
At effective income tax rate of:-4.4%-4.9%
PAGE 29
Deferred income tax
Deferred income tax at 31 March relates to the following:
20172016
Statement of
financial position
STATEMENT OF
ComPHENSIVE
INCOME
STATEMENT OF
FINANCIAL POSITION
STATEMENT OF
ComPHENSIVE INCOME
$(000)$(000)$(000)$(000)
Deferred income tax liabilities recognised
Intangibles – 71(71)29
Unrealised foreign exchange(51)15(66)(66)
Deferred income tax assets recognised
Intangibles8787––
Employee entitlements76(3)7939
Net deferred tax asset/(liability) recognised112170(58)2
Deferred income tax assets not recognised
Employee entitlements1073103(20)
Bonus provision9292 – –
Long-term incentive fair value adjustment43594341227
Accruals – (28)28(11)
Allowance for impairment2– 2(16)
Deferred revenue(20)(33)14(2)
616128488178
Tax losses available to be carried forward and
offset against future income4,4843,779
Total deferred tax asset not recognised5,1004,267
PAGE 30
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
7 RECEIVABLES
Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method, less
provision for impairment.
Collectibility of receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified.
A provision for impairment of receivables is established when there is objective evidence that the group will not be able to collect all
amounts due according to the original terms of the receivable, changes in credit quality and past default experience.
The impairment, and any subsequent movement, including recovery, is recognised in the statement of comprehensive income.
NOTE20172016
$(000)$(000)
Trade receivables2,5443,338
Allowance for impairment(7)(7)
Trade receivables (net)2,5373,331
GST receivable2254
Prepayments255249
nuTravel Loan receivable17353335
Total receivables3,1673,969
FOREIGN CURRENCY RISK
The carrying amounts of the group’s receivables are denominated in the following currencies:
New Zealand dollars1,4931,760
Australian dollars1,6341,745
US dollars29459
Indian rupees115
3,1673,969
ALLOWANCE FOR IMPAIRMENT LOSS
Trade receivables are non-interest bearing and are generally on 30-60-day terms. A provision for impairment loss is recognised where
there is objective evidence that an individual trade receivable is impaired. No impairment loss has been recognised (2016: $nil) by the
group in the current year. No individual amount within the impairment allowance is material.
At 31 March the ageing analysis of trade receivables is as follows:
Total0 – 30 days31 – 60 days61 – 90 days91+ days
$(000)$(000)$(000)$(000)$(000)
20172,5442,43281193
20163,3382,69724783311
Group receivables over 60 days of $103,287 (2016: $394,046) include a provision for impairment of $7,429. The balance of $95,858 is
not considered impaired as amounts outstanding are in accordance with agreed payment plans and payment record of the customers
concerned.
NUTRAVEL LOAN RECEIVABLE
On 9 April 2014 an interest-bearing loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities
Limited to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable. The loan expired on
30 June 2016. The loan is currently outstanding and action is being taken to recover the loan. There is no financial risk to Serko as
the loan receivable is back to back with the associated loan payable to Financial Equities Limited (refer note 14). Financial Equities
Limited is a company associated with directors Robert Shaw and Darrin Grafton.
PAGE 31
8 FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
The group uses derivatives in the form of forward exchange contracts (FECs) to reduce the risk that movements in the exchange rate will
affect the group’s New Zealand dollar cash flows. Such derivative financial instruments are initially recognised at fair value on the date on
which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when
the fair value is positive and as financial liabilities when the fair value is negative.
FAIR VALUE HEDGES
The change in fair value of a hedging derivative is recognised in the statement of comprehensive income as finance income. The change
in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also
recognised in the statement of comprehensive income as finance income.
The following table presents the group’s foreign currency forward exchange contracts measured at fair value:
20172016
$(000)$(000)
Current:
Foreign currency forward exchange contracts
Non-current:
Foreign currency forward exchange contracts
(245)
(34)
5
-
Contractual amounts of forward exchange contracts outstanding were as follows:
Purchase commitments forward exchange contracts13,0274,163
Derivative Financial Instruments have been determined to be within level 2 of the fair value hierarchy. Foreign currency forward exchange
contracts have been fair valued using published market foreign exchange rates. The purchase commitment increase in 2017 from 2016
represents a full hedging position of the group’s forecast net cash flow in Australian dollars for FY18.
9 PROPERTY, PLANT AND EQUIPMENT
All items of property, plant and equipment are recorded at cost less accumulated depreciation and impairment. Initial cost includes
purchase consideration and those costs attributable to bringing the asset to the location and condition necessary for its intended use.
Where an item is self-constructed, its construction cost includes the cost of materials, direct labour and an appropriate proportion of
production overheads.
Subsequent expenditure relating to an item of property, plant and equipment is added to its gross carrying amount when such
expenditure either increases the future economic benefits beyond its existing service potential or is necessarily incurred to enable future
economic benefits to be obtained and if that expenditure would have been included in the initial cost of the item had it been incurred at
that time. The carrying amount of any replaced part is derecognised.
All other repairs and maintenance expenditure is recognised in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. The residual value of assets is reviewed and
adjusted if appropriate at each balance date. The following estimates have been used:
Leasehold improvements 7%
Furniture and fittings 8.5 – 80.4%
Computer equipment 17.5 – 67%
I) IMPAIRMENT
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable.
If any such indication exists, and where the carrying values exceed the estimated recoverable amount, the assets are written down to
their recoverable amounts.
II) DISPOSAL
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from
PAGE 32
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
9 PROPERTY, PLANT AND EQUIPMENT – CONTINUED
Leasehold
improvement
Furniture
& fittings
Computer
equipmentTotal
$(000)$(000)$(000)$(000)
2017
Cost or valuation
Balance at 1 April 20162963433881,027
Additions5012710538
Disposals(29)(16)– (45)
Currency translation(1)––(1)
Balance at 31 March 20177673543981,519
Depreciation
Balance at 1 April 201648106260414
Depreciation expense6839118225
Disposals – (6)–(6)
Balance at 31 March 2017116139378633
Net carrying amount65121520886
2016
Cost or valuation
Balance at 1 April 20155293774801,386
Additions1573557
Disposals(251)(43)(131)(425)
Currency translation3249
Balance at 31 March 20162963433881,027
Depreciation
Balance at 1 April 201570100220390
Depreciation expense3544167246
Disposals(57)(39)(130)(226)
Currency translation – 134
Balance at 31 March 201648106260414
Net carrying amount248237128613
20172016
CENTSCENTS
Tangible assets per security1.180.84
Prior year has been restated based on issued capital rather than weighted average.
PAGE 33
10 INTANGIBLES
Intangible assets acquired separately or in a business combination
are initially measured at cost. The cost of an intangible asset
acquired in a business combination is its fair value as at the date
of acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and any
accumulated impairment losses. Costs related to internally
generated intangible assets, excluding capitalised development
costs, are not capitalised and expenditure is recognised in profit or
loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are amortised
over the useful life and tested for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an
intangible asset with a finite useful life is reviewed at least at
each financial year end. Changes in the expected useful life
or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for prospectively
by changing the amortisation period or method, as appropriate,
which is a change in accounting estimate. The amortisation
expense on intangible assets with finite lives is recognised in profit
or loss.
Intangible assets with indefinite useful lives are tested for
impairment annually either individually or at the cash-generating
unit level. Such intangibles are not amortised. An intangible asset
with an indefinite useful life is reviewed each reporting period
to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an accounting
estimate and is thus accounted for on a prospective basis.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in profit
or loss when the asset is derecognised.
A summary of the policies applied to the group’s intangible assets
is as follows:
Computer Software – finite, amortised on a straight line basis
40 – 60%
Capitalised software
development costs – finite, amortised on 5 years straight line
Expense software – finite, amortised on 3 years straight line
Customer contracts – finite, amortised on 3 years straight line
Key employee retention – finite, amortised on 3 years straight line
RESEARCH AND DEVELOPMENT
Research costs are expensed as incurred.
An intangible asset arising from development expenditure
on an internal project is recognised only when the group can
demonstrate the technical feasibility of completing the intangible
asset so that it will be available for use or sale, its intention to
complete and its ability to use or sell the asset. Also how the
asset will generate future economic benefits, the availability
of resources to complete the development and the ability to
measure reliably the expenditure attributable to the intangible
asset during its development. Following initial recognition of the
development expenditure, the cost model is applied requiring the
asset to be carried at cost less any accumulated amortisation and
impairment losses. Any expenditure capitalised is amortised over
the period of expected benefit from the related project.
Intangible assets under development at balance date are recorded
as capital work in progress and are not subject to amortisation.
Impairment of non-financial assets
Intangible assets that have indefinite useful lives are not subject
to amortisation and are tested annually for impairment or more
frequently if events or changes in circumstances indicate that
they might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
In undertaking an impairment review of non-financial assets that
have definite useful lives, the following assumptions were used in
the impairment model:
5-year forecast period
Discount rate of 15%
Discount factor applied using a mid-year convention.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units).
Non-financial assets, other than goodwill, that suffered
impairment are tested for possible reversal of the impairment
whenever events or changes in circumstances indicate that the
impairment may have reversed.
PAGE 34
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
10 INTANGIBLES – CONTINUED
Goodwill
Key employee
retention
Customer
contracts
Development
– work in
progress
Computer
softwareTotal
$(000)$(000)$(000)$(000)$(000)$(000)
2017
Cost
Balance at 1 April 2016220784434071,3772,525
Additions – – – 780 –780
Transfer of cost – – – (982)982 –
Currency translation – – – – 1717
Balance at 31 March 2017220784432052,3763,322
Amortisation and impairment
Balance at 1 April 201622058280 – 5281,086
Amortisation – 20163 – 450633
Balance at 31 March 201722078443 – 9781,719
Net carrying amount – – – 2051,3981,603
2016
Cost
Balance at 1 April 201517171305861,0131,646
Additions33 – 111558110812
Transfer of cost – – – (237)237 –
Currency translation16727 - 1767
Balance at 31 March 2016220784434071,3772,525
Amortisation and impairment
Balance at 1 April 2015 – 29126 – 204359
Amortisation – 26143 – 317486
Impairment220 – – – – 220
Currency translation – 311 – 721
Balance at 31 March 201622058280 – 5281,086
Net carrying amount – 201634078491,439
PAGE 35
11 CASH AT BANK AND ON HAND
Cash and short-term deposits in the statement of financial position comprise cash at bank, and in hand, short-term highly liquid
investments with an original maturity of three months or less.
20172016
$(000)$(000)
Cash at bank – New Zealand dollar balances3,0535,813
Cash at bank – foreign currency balances1,3981,305
4,4517,118
FOREIGN CURRENCY RISK
The carrying amounts of the group’s cash at bank and on hand are denominated in the following currencies:
New Zealand dollars3,0455,810
Australian dollars1,3401,266
US dollars5840
Indian rupees82
4,4517,118
12 TRADE AND OTHER PAYABLES
EMPLOYEE BENEFITS
Liabilities for wages and salaries, including non-monetary benefits, long service leave and annual leave expected to be settled within
12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are settled.
Liabilities for wages and salaries that are not expected to be settled within 12 months are measured at the present value of the
estimated future cash outflows to be made by the group in respect of services provided by employees up to the reporting date.
POST-EMPLOYMENT BENEFITS
Contributions made on behalf of eligible employees to defined contribution funds are recognised in the period they are incurred.
The defined contribution funds receive fixed contributions from the group whose legal or constructive obligation is limited to these
contributions only.
TRADE AND OTHER PAYABLES
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the group
prior to the end of the financial year that are unpaid and arise when the group becomes obliged to make future payments in respect of
the purchase of these goods and services.
20172016
$(000)$(000)
Trade payables532848
Accrued expenses1,4421,040
Lease incentive227174
Holiday pay accrual634632
GST payable16–
Total trade and other payables2,8512,694
Disclosed as:
Current2,5822,557
Non-current269137
2,8512,694
PAGE 36
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
13 GOVERNMENT GRANTS
Government grants are received for direct reimbursement of expenses to assist with research and development of software solutions to
improve service delivery and develop new enhancements to existing platforms.
There are no unfulfilled conditions or contingencies attached to these grants.
14 INTEREST-BEARING LOANS AND BORROWINGS
Note20172016
$(000)$(000)
Current
Financial Equities loan payable17353335
Obligations under finance leases– 9
Leasehold fitout loan46–
399344
Non-current
Leasehold fitout loan254–
254–
During the current and prior years, there were no defaults or breaches on any of the loans.
Financial Equities is a loan payable against a loan receivable from nuTravel (refer note 7).
Finance leases are secured over the assets specified in the leases.
PAGE 37
15 EQUITY
Ordinary share capital is recognised at the fair value of the consideration received. Transaction costs relating to the listing of new
ordinary shares and the simultaneous sale and listing of existing shares are allocated to those transactions on a proportional basis.
Transaction costs relating to the sale and listing of existing shares are not considered costs of an equity instrument as no equity
instrument is issued and consequently costs are recognised as an expense in the statement of comprehensive income when incurred.
Transaction costs relating to the issue of new share capital are recognised directly in equity as a reduction of the share proceeds received.
2017201620172016
NUMBER
OF SHARES
NUMBER
OF SHARES
$(000)$(000)(000)(000)
Ordinary shares and Share-Based Payments
Share capital at beginning of year26,07317,97572,89462,699
Issue of shares pursuant to institutional capital placement - 8,000 - 9,524
Issue of shares pursuant to Share Purchase Plan (SPP) placement - 96 - 114
Issue of new shares to employees via Restricted Share Scheme - - 2,000566
Allocated shares to employees via Restricted Share Scheme372517 - -
Forfeiture of shares from employees via Restricted Share Scheme(239) - - -
Cancellation of shares under Salary Sacrifice Scheme - (10) - (9)
Transaction costs for issue of new shares - (505) - -
Share capital at end of year26,20626,07374,89472,894
Total equity at end of year26,20626,07374,89472,894
In the prior year an institutional capital placement was completed in December 2015, which raised an additional $8 million of issued
capital. In addition, an SPP placement was completed in February 2016, which raised an additional $96,000 of issued capital.
During the year the group issued 2,000,000 (2016: 565,874) shares under the Restricted Share Scheme (RSS). In respect of the RSS
710,313 restricted shares (2016: 41,662) have been allocated to key management personnel and 228,519 (2016: 229,690) allocated to other
Serko employees. Unallocated shares are 1,819,732 (2016: 466,936).
PAGE 38
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
16 COMMITMENTS
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and
benefits incidental to ownership, and operating leases under which the lessor effectively retains substantially all such risks and benefits.
I) FINANCE LEASES
Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
II) OPERATING LEASES
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Operating lease
incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense
and reduction of the liability.
20172016
$(000)$(000)
a)Operating lease commitments
No later than one year514432
Later than one year and not later than five years1,7551,105
Later than five years193 –
2,4621,537
b)Finance lease commitments
No later than one year – 8
Total minimum lease payments – 8
Present value of minimum lease payments – 8
17 RELATED PARTIES
a) Subsidiaries
The consolidated financial statements include the financial statements of Serko Limited and subsidiaries as listed in the following table:
% equity interestInvestment $(000)
NAMEBALANCE DATE2017201620172016
Serko Australia Pty Limited31 March100%100%11
Serko Trustee Limited31 March100%100%00
Serko India Private Limited31 March99%99%22
Serko Investments Limited31 March100%100%00
33
Serko Australia Pty Limited’s principal business is the marketing and support of travel booking software solutions supplied by Serko
Limited.
Serko Trustee Limited was incorporated on 4 June 2014 to hold the shares issued to key management and staff in the Restricted Share
Scheme and Salary Sacrifice Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015 as a subsidiary for the Indian-based operations.
Serko Investments was incorporated on 5 November 2014 as a holding company. It holds 1% of the shares in Serko India Private Limited.
PAGE 39
b) Transactions with related parties
The following table provides the total amount of transactions that have been entered into with related parties, excluding key
management and director remuneration.
NOTE
Purchases
from related
parties
Interest
to related
parties
Amounts owed
to related
parties
Amounts owed
by related
parties
$(000)$(000)$(000)$(000)
Other related parties
Financial Equities Limited142017 – 20353 –
2016 – 20335 –
Simon Botherway – Chairman201770
201670 – – –
Clyde McConaghy – Non-Executive Director201760
201660 – – –
Claudia Batten – Non-Executive Director201760
201660 – – –
Total201719020353 –
201619020335 –
Non-executive directors provide services to Serko in their capacity as non-executive directors and have a service agreement with a
specified amount of fees payable per annum.
On 9 April 2014 an interest-bearing loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities
Limited to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable. The loan expired on 30 June
2016. Financial Equities Limited is a company associated with directors Robert Shaw and Darrin Grafton (refer note 7).
c) Key management remuneration
20172016
$(000)$(000)
Short-term benefits employees (*)2,9742,125
Post-employment benefits9487
Total compensation3,0682,212
(*) Key management personnel includes the executive management team, sales management team and the executive directors in their
capacity as Chief Executive Officer and Chief Strategy Officer.
d) Terms and conditions of transactions with related parties.
Outstanding balances at year end are unsecured and settlement occurs in cash.
For the year ended 31 March 2017, the group has not made any allowance for impairment loss relating to amounts owed by related parties
(2016: $nil). An impairment assessment is undertaken each financial year by examining the financial position of the related party and the
market in which the related party operates to determine whether there is objective evidence that a related party receivable is impaired.
When such objective evidence exists, the group recognises an allowance for the impairment loss.
PAGE 40
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
18 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
20172016
$(000)$(000)
Net loss after tax(3,450)(6,234)
Add non-cash items
Amortisation633486
Impairment – 220
Depreciation225246
Loss on property, plant and equipment disposal36199
Increase/(decrease) in deferred tax(170)(2)
Loss/(gain) on foreign exchange transactions(110)(113)
Share-based compensation133517
(2,703)(4,681)
Add/(less) movements in working capital items
(Increase)/decrease in receivables excluding loans820(550)
Decrease in derivative financial instruments285111
Increase/(decrease) in trade and other payables158534
Increase/(decrease) in income tax(155)134
1,108229
Net cash flow from operating activities(1,595)(4,452)
PA G E 41
19 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The group’s principal financial instruments comprise cash at bank, bank overdrafts, receivables, payables and loans.
The group manages its exposure to key financial risks, including currency risk, in accordance with the group’s financial risk management
policy. The objective of the policy is to support the delivery of the group’s financial targets while protecting future financial security.
Group capital consists of share capital and retained earnings. To maintain or adjust the capital structure, the group may adjust amounts
of dividends paid to shareholders, return capital to shareholders, issue new shares or amend capital spending plans.
The main risks arising from the group’s financial instruments are foreign currency, interest, credit and liquidity risk. The group uses different
methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to foreign
exchange risk, and assessments of market forecasts for foreign exchange. Ageing analyses and monitoring of specific credit allowances
are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Risk exposures and responses
INTEREST RATE RISK
The group has exposure to interest rate risk to the extent it borrows funds at fixed and floating interest rates. The risk specifically relates
to the variability of interest rates and the impact this will have on the group’s financial results. The group manages its cost of borrowing
by placing limits on the proportion of borrowings at floating rate and the proportion of fixed rate borrowing repriced in any year.
At balance date this year and prior year, the group did not have any financial liabilities exposed to variable interest rate risk.
LIQUIDITY RISK
Liquidity risk represents the group’s ability to meet its financial obligations on time. In terms of managing its liquidity risk, the group
generates sufficient cash flows from its operating activities and holds sufficient cash reserves to meet its obligations arising from its
financial liabilities and has credit lines in place to cover potential shortfalls.
The following table sets out the contractual cash flows for all financial liabilities settled on a gross cash flow basis.
Contractual
cash flows
6 months
or less6-12 months1-2 years2-5 years
More than
5 years
$(000)$(000)$(000)$(000)$(000)$(000)
GROUP – 2017
Accounts payable2,6242,624 – – – –
Related party loans353353 – – – –
Leasehold fitout 300232320234 –
3,2773,0002320234 –
GROUP – 2016
Accounts payable2,5202,520 – – – –
Related party loans335335 – – – –
Finance leases954 – –
2,8642,8604 – – –
PAGE 42
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
19 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES – CONTINUED
CURRENCY RISK
The group has exposure to foreign exchange risk as a result of transactions denominated in foreign currencies. The risk specifically relates
to the variability of foreign exchange rates for the currencies the group trades in and the impact this has on the group’s financial results.
The majority of the group’s trading activities occur in New Zealand dollars, however, sales to overseas customers are transacted in United
States and Australian dollars.
Refer to notes 7 and 11 for further details on the group’s foreign currency-denominated accounts receivable and cash balances.
The following table summarises the sensitivity to foreign currency exchange rate movements. A sensitivity of +/- 15% (2016: +/- 15%) has
been selected owing to exchange rate volatility observed.
Foreign currency risk
-15%+15%
CARRYING
AMOUNT
POST-TAX
PROFITEQUITY
POST-TAX
PROFITEQUITY
$(000)$(000)$(000)$(000)$(000)
2017
Foreign exchange balances
Cash at bank1,398179179(132)(132)
Trade receivables1,310223223(165)(165)
Trade payables(176)(16)(16)1212
Net exposure2,532386386(285)(285)
2016
Foreign exchange balances
Cash at bank1,305166166(123)(123)
Trade receivables1,869244244(180)(180)
Trade payables(176)(28)(28)2121
Net exposure2,998382382(282)(282)
CREDIT RISK
Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, trade receivables and other
receivables. The group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the
carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.
The group does not hold any credit derivatives to offset its credit exposure.
Receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant.
At reporting date 100% (2016: 100%) of the group’s cash and cash equivalents were with one bank. The group has no other concentrations
of credit risk.
PAGE 43
20 SEGMENT INFORMATION
The Board and senior management team monitors the results of the group’s operations as a whole for the purpose of making decisions
about resource allocation and performance assessment and therefore the Board has determined the group is a single reportable
segment.
Revenues are derived from installation and configuration projects and through the provision of support and maintenance, however, these
activities are not independent of the principal activity of the group, being the provision of software solutions for the management and
administration of corporate travel bookings.
Geographic information20172016
$(000)$(000)
New Zealand672616
Australia13,19512,229
India136167
Singapore1824
United States15847
Other9839
Total Operating Revenue 14,27713,122
Other Income
Grant Income1,0731,296
Sundry Income19–
Total Revenue & Other Income15,36914,418
New Zealand and Australia geographic information has been restated in the prior year. The total operating revenue has not changed.
As required under IFRS 8 Serko is required to report on major customers making up more than 10% of the revenue for the year. Under this
disclosure Serko advises that two customers had more than 10% of the revenue for the group. These customers accounted for $7,709,305
of the revenue for the year ended 31 March 2017.
Receivables as part of the segmental revenue above
New Zealand8177
Australia2,0892,772
India1989
Singapore14
United States1036
Other236
2,2232,984
Allowance for impairment as part of trade receivables above
India77
77
The revenue information above is based on the locations of the customers.
Non-current operating assets
New Zealand2,4641,767
Australia25285
2,4892,052
Non-current assets for this purpose consist of property, plant and equipment and intangible assets.
PAGE 44
PERFORMANCE
SERKO LIMITED FINANCIAL STATEMENTs 2017
21 EARNINGS PER SHARE (EPS)
Basic EPS amounts are calculated by dividing the loss for the year, attributable to ordinary equity holders of the parent, by the weighted
average number of ordinary shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year, plus the weighted average number of shares that would be issued on conversion
of all of the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
20172016
$(000)$(000)
Loss attributable to ordinary equity holders of the parent
Continuing operations(3,450)(6,234)
(3,450)(6,234)
20172016
NUMBERNUMBER
Basic and diluted earnings per share
Issued ordinary shares (refer note 15)74,89472,894
Weighted average of issued ordinary shares73,07464,738
Basic and diluted earnings per share (dollars)(0.05)(0.10)
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
authorisation of these financial statements.
22 SHARE-BASED PAYMENTS
Employees of the group receive remuneration at the Board’s discretion in the form of share-based payment transactions, where services
are provided as consideration for the receipt of equity instruments.
The cost of share-based payment transactions are recognised, together with a corresponding increase in equity, over the period in
which the service conditions are fulfilled. The cumulative expense recognised for share-based transactions at each reporting date, until
the vesting date, reflects the extent to which the vesting period has expired and the group’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit for a period represents the movement in cumulative expenses recognised at
the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest except where vesting is conditional upon a market condition.
PAGE 45
Employee Restricted Share Plan
The Serko Limited Employee Restricted Share Plan (RSP) was introduced for selected executives and employees of the group. Under
the RSP, ordinary shares in Serko Limited are issued to a trustee, Serko Trustee Limited, a wholly-owned subsidiary, and allocated to
participants, on grant date, using funds lent to them by the company.
The price for each share issued during the year under the RSP is the higher of the market price of the share on the date on which the
shares are allocated or the invitation price.
Under the RSP, shares are beneficially owned by the participants. The length of retention period before the shares vest is between one
and three years. If the individual is still employed by the group at the end of this specific period, the employee is awarded a cash bonus
that must be used to repay the loan and shares are then transferred to the employee. The number of shares awarded is determined by
the Remuneration Committee of the Board. The weighted average grant date fair value of restricted shares issued during the year was
$0.46 (2016: $0.95) and was determined by the volume weighted average price (VWAP) of shares traded in the previous 20 trading days
preceding the date of grant. The group has no legal or constructive obligation to repurchase the shares or settle the RSP for cash.
20172016
Unvested shares at 1 April1,275,5021,021,650
Granted938,832271,352
Forfeited(264,135)(13,500)
Vested(590,973)(4,000)
Unvested shares at 31 March – allocated to employees1,359,2261,275,502
Plus
Forfeited shares not yet reallocated – held by trustee287,59023,455
Unallocated shares - held by trustee1,532,142443,481
Total Shares in Restricted Share Plan3,178,9581,742,438
Percentage of total ordinary shares4.2%2.4%
Ageing of unvested shares
Vest within one year184,084536,364
Vest after one year2,994,8741,206,074
Total3,178,9581,742,438
The number of shares awarded pursuant to the RSP does not equal the number of shares created for the scheme, as the scheme had an
allocated pool of shares upon set up and forfeited shares are held in the trust and reissued.
Share Appreciation Rights
The group’s non-executive directors are granted share appreciation rights (SARs), settled by way of a non-recourse loan. The SARs vest
when the directors continue to be employed as non-executive directors at the vesting date. The contractual term of the SARs is three
years. The non-recourse loan is due for repayment in June 2017.
23 EVENTS AFTER BALANCE SHEET DATE
There have been no significant events occurring after balance date (2016: no significant events).
24 CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2016: $nil).
PAGE 46
BOARD OF DIRECTORS
SERKO LIMITED ANNUAL REPORT 2017
Simon Botherway
INDEPENDENT NON-EXECUTIVE CHAIRMAN, NEW ZEALAND
Appointed 30 April 2014
Simon is based in New Zealand. He holds a BCom, as well as the US-based Chartered Financial Analyst (CFA)
designation. Simon has extensive experience in corporate governance, banking and investment management.
In 2002 Simon co-founded Brook Asset Management and was Chairman from 2004 to 2008. He is also a past
President of the CFA Society of New Zealand and was a member of the CFA Asia-Pacific Advocacy Committee.
Simon was appointed as a member of the Securities Commission in 2009 and was appointed by the New Zealand
Government to chair the Financial Markets Authority Establishment Board in 2010. Simon is currently also a
director of the Callaghan Innovation Board and Fidelity Life Assurance.
CLAUDIA BATTEN
INDEPENDENT NON-EXECUTIVE DIRECTOR, UNITED STATES
Appointed 30 April 2014
Claudia is based in the United States. She holds an LLB (Hons) and BCA. Claudia has been a founding member
of two highly successful entrepreneurial ventures. Starting with Massive Incorporated, a network for advertising
in video games, she helped pioneer ‘digital’ as a media buy. Massive was sold to Microsoft in 2006. In 2009 she
co-founded Victors & Spoils (‘V&S’), the first advertising agency built on the principles of crowdsourcing. V&S was
majority acquired by French holding company Havas Worldwide in 2011.
Claudia has achieved great success in the United States market but remains a strong supporter of the New
Zealand start-up scene. Claudia runs the North American operations for New Zealand Trade & Enterprise (NZTE),
supporting New Zealand businesses as they grow internationally into that market and is the digital advisor to the
Board of Westpac New Zealand.
CLYDE McCONAGHY
INDEPENDENT NON-EXECUTIVE DIRECTOR, AUSTRALIA
Appointed 30 April 2014
Clyde is based in Australia. He holds a BBus and MBA from Cranfield University United Kingdom (UK). Clyde is
a fellow of the Australian Institute of Company Directors and a fellow of the Institute of Directors UK. He is the
founder of Optima Boards, providing independent director and advisory services to public, private, family office and
charitable entities around the world. Clyde has worked in publishing, media, online and technology sectors, living
in the UK, Germany, China and Australia. He is a director of ASX-listed technology company, Infomedia Limited and
Chairman of the Board of Chapman Eastway Pty Limited.
DARRIN GRAFTON
CO-FOUNDER, chief executive officer & EXECUTIVE DIRECTOR, NEW ZEALAND
Appointed 05 April 2007
Darrin has 25+ years’ experience in the travel technology industry and is a highly-experienced innovator. He
has been responsible for leading major changes in the corporate travel industry throughout his career and was
recognised as one of the top 25 most influential executives in the travel industry by the BTN Group in 2014. Darrin
has held senior management positions with Gullivers Travel Group (listed on the Australian and New Zealand
Stock Exchanges between 2004 and 2006) and Interactive Technologies. Darrin has previously been awarded
the NZX Hi-Tech Entrepreneur Award and been a finalist for the NZ Hi-Tech Company Leader Award and the EY
Entrepreneur of the Year Award. Darrin is a member of the Institute of IT Professionals New Zealand and the
Institute of Directors New Zealand and New Zealand CDP.
ROBERT SHAW
CO-FOUNDER, CHIEF STRATEGY OFFICER & EXECUTIVE DIRECTOR, NEW ZEALAND
Appointed 05 April 2007
Robert (Bob) has 30 years’ experience creating and commercialising technology for the travel industry. Bob has
held a number of directorships and senior management positions in various companies, including Gullivers Travel
Group (listed on the Australian and New Zealand Stock Exchanges between 2004 and 2006) and Interactive
Technologies. Bob’s strengths lie in his ability to translate opportunities into successful commercial ventures
and build the relationships necessary to see them through to fruition. Bob has previously been a finalist for
EY Entrepreneur of the Year Award. He is a Member of the Institute of IT Professionals NZ, and the Institute of
Directors NZ.
PAGE 47
EXECUTIVE TEAM
SERKO LIMITED ANNUAL REPORT 2017
DARRIN GRAFTON AND ROBERT (BOB) SHAW are also part of the executive team.
See facing page for their details.
CHARLIE NOWACZEK
CHIEF OPERATING OFFICER, NEW ZEALAND
Charlie has over 25 years’ of experience as an operations executive and management adviser, specialising in
business transformation and operational excellence. Over the last decade he has been Chief Operating Officer for a
number of technology start-ups in the United States and Canada, including most recently, Kinetic Social – a social
media and technology company, where he was part of the founding team.
Prior to these entrepreneurial endeavours, Charlie has been a consultant for PIPC, PA Consulting and Parsons
Brinckerhoff, focusing on the delivery of complex change programmes for a variety of United States and
European clients.
SUSAN PUTT
CHIEF FINANCIAL OFFICER, NEW ZEALAND
Susan has over 25 years’ experience working in New Zealand and has also worked in Australia and Canada. She
is a Chartered Accountant and Chartered Member of the Institute of Directors. Susan has worked as CFO, Head
of Strategy, and director for a number of New Zealand businesses including Airways Corporation, Genesis Power,
Metrowater, Simpl Group and Radiola Corporation.
Over the last 10 years Susan has specialised in contract Chief Financial Officer engagements working with high
growth companies.
PHILIP BALL
CHIEF TECHNOLOGY OFFICER, NEW ZEALAND
Philip has been a cornerstone of the Serko technology story since 1999. After graduating with a Bachelor of
Information Systems degree he joined Serko as a junior developer and moved up through the ranks, being
appointed Chief Technology Officer in 2013.
Philip wrote much of the original Serko Online code, having started working on the product in 2000. Since then
he has guided the company’s technology strategy and now provides leadership across the technology function.
He was a finalist for the title of New Zealand Software Developer of the year award in 2011 and is listed in New
Zealand’s CIO Top 100 for 2017.
JOHN CHALLIS
CHIEF REVENUE OFFICER, AUSTRALIA
John has 17 years’ experience in the Australian corporate travel industry, with operational, technology
implementation and sales experience. John has been with Serko for nine years and in that time has managed the
sales team to meet the demands of Serko’s growth. John specialises in market activation and technical sales for
Asia Pacific businesses. Prior to Serko, John worked at Carlson Wagonlit Travel for seven years in various roles
and was primarily responsible for technical online booking platform sales to Carlson Wagonlit Travel’s existing
and prospective clients in Asia Pacific, as well as managing a team of software implementation specialists with a
strong focus on Serko’s solution.
TONY STANLEY
CHIEF CLIENT OFFICER, NEW ZEALAND
Tony has more than 20 years’ experience managing teams and leading profit centres in technology companies (10
years with the Serko product) and travel-related organisations. Tony is responsible for the Client Services Team
at Serko where he manages Professional Services and the Customer Support Centre. Tony spent nearly five years
at Datacom Group establishing a solid client base with multimillion dollar accounts. Prior to that Tony’s travel
industry experience included Branch Manager of United Holidays and Operations Manager of Travelplan Holidays.
PAGE 48
GOVERNANCE AND STATUTORY DISCLOSURES
SERKO LIMITED ANNUAL REPORT 2017
The Board and management of Serko Limited (Serko or the
company) are very committed to ensuring that Serko maintains
corporate governance practices that are in line with, or where
possible exceed, current best practice and that Serko adheres to
the highest ethical standards.
Serko is currently listed on the New Zealand stock exchange (NZX
Main Board). The Board considers that its policies and practices
comply with the corporate governance requirements of the Listing
Rules applying to the NZX Main Board (NZX Listing Rules) and
are substantially consistent with the principles contained in the
NZX Corporate Governance Best Practice Code, and the Financial
Markets Authority Handbook ‘Corporate Governance in New
Zealand Principles and Guidelines’ (collectively, the ‘Principles’).
While Serko is not required to comply with the Australian
Securities Exchange (ASX) Corporate Governance Council
Corporate Governance Principles and Recommendations (3rd
Edition), the Board believes that its practices largely also meet
the ASX Principles and Recommendations.
This Governance Statement outlines the main corporate
governance practices adopted by Serko. Serko’s constitution
and principal governance documents are available on Serko’s
website. Go to: www.serko.com/investor-centre/. In this Corporate
Governance Statement, we report on how the company has
followed the recommendations set out in the Principles.
ETHICAL STANDARDS
Code of Ethics
The Board recognises that high ethical standards and behaviours
are central to good corporate governance and has implemented
a Code of Ethics to guide the behaviour of its directors and
employees. Serko’s Code of Ethics establishes the framework by
which directors and staff of Serko are expected to conduct their
professional lives by facilitating behaviour and decision-making
that meets Serko’s business goals and is consistent with Serko’s
values, policies and legal obligations. Serko’s Code of Ethics is
available on Serko’s intranet and forms part of the induction
process for new employees. There have been no instances
raised with either the Board or management around any alleged
breaches of the Code of Ethics. Serko encourages staff to report
any concerns they have about compliance with the Code of
Ethics, Serko policies or legal obligations by undertaking refresher
training on the Code during the year and establishing an email
address that enables employees to raise any concerns directly
with the non-executive directors.
The Code of Ethics addresses:
Serko’s Values
Conflicts of interest
Receipt of gifts
Proper use of Serko property and information
Confidentiality
Expected behaviours
Compliance with laws and Serko policies
Additional director responsibilities
Delegated Authority
Reporting issues regarding breaches of the Code, legal
obligations or other Serko policies.
Serko Culture and Values
Serko’s culture is upbeat, nimble, dynamic and inclusive. We
hire top talent from the technology and travel industries to
ensure that our people (Serkodians) have the skills and astute
judgement to make smart decisions that lead us to success –
within a strategic framework established collaboratively with our
leadership group, Executive Team and Board.
Serko’s people are incentivised for achieving results. We are
establishing OKRs (Objectives and Key Results) throughout all
teams and supporting our people with learning and development
initiatives to encourage us to keep finding new ways to innovate.
To articulate our culture we developed the following eight values
that not only describe what is important to us but also provide a
code for how we behave toward each other, influencing decisions
such as who we hire, how people select what they work on and
how our people are led. As a result we have a highly engaged,
energised culture resulting in turnover that is low compared to
industry norms.
MasterySerkodians continuously strive to become masters
of what they do
AutonomySerkodians are able to work independently and
make decisions for themselves
TeamworkSerkodians work well with people not just in their
own teams but in teams across the organisation
PassionSerkodians are passionate about what they do and
what Serko does
IntegritySerkodians deliver on their commitments, are
honest and make ethical business decisions
SuccessSerkodians strive toward their goals to ensure
Serko reaches its goals
FamilySerkodians are valued as part of the Serko family
and Serko recognises the importance of their
families to them
FunWe value humour, laughter and enjoying our time
at Serko.
Securities Trading Policy
Serko is committed to complying with legal and statutory
requirements with respect to ensuring directors and employees do
not trade Serko securities while in possession of inside information.
Serko’s Securities Trading Policy and Guidelines apply to all
directors, officers, employees and contractors of Serko and its
subsidiaries. This Policy seeks to ensure that those subject to the
Policy do not trade in Serko securities if they hold undisclosed
price-sensitive information. The Policy sets out additional rules,
which includes the requirement to seek company consent before
trading, and prescribes certain black-out periods during which
trading is prohibited.
Compliance with the Securities Trading Policy is monitored
through the consent process, through education and via
notification by Serko’s share registrar when any director or senior
manager trades in Serko securities. All trading by directors and
senior managers (as defined by the Financial Markets Conduct Act
2013) is required to be reported to NZX and recorded in Serko’s
securities trading registers.
governance
PAGE 49
BOARD OF DIRECTORS
Role of the Board
The Board of Directors (the Board) is elected by shareholders to
govern Serko in the interests of shareholders and to protect and
enhance the value of Serko’s assets. The Board is responsible for
corporate governance and Serko’s overall strategic direction and
is the overall and final body responsible for all decision-making
within Serko. The Board Charter describes the Board’s role and
responsibilities and regulates internal Board procedure.
The Board has delegated a number of its responsibilities to Board
committees. The role of each committee is described below.
To enhance efficiency, remain agile and ensure decision-making
occurs at the right level, the Board has also delegated to the Chief
Executive Officer the day-to-day leadership and management
of Serko. The Chief Executive Officer has, in some cases, formally
delegated certain authorities to his direct reports within set
limits. The Board regularly monitors and reviews management’s
performance in the execution of its delegated responsibilities and
the appropriateness of its Delegation of Authority Policy.
The Board met for 12 regularly scheduled meetings during the
financial year and additional special meetings. In addition to
formally scheduled Board meetings, the directors regularly engage
with management on areas of focus for management. There were
also separate meetings of the Board committees during the year.
The Board currently intends to meet 11 or 12 times during the
financial year ending 31 March 2018.
The Board and management also met during the year to
undertake strategic planning for the business.
Board membership, size and composition
The NZX Listing Rules state that the number of directors
must not be fewer than three and a Board must have at least
two independent directors. Subject to this limitation, and in
accordance with the provisions of Serko’s constitution and the
Board Charter, the size of the Board is determined by the Board
from time to time.
As at 31 March 2017, and the date of this Annual Report, the
Board comprised five directors – being the two co-founders
and executive directors, Darrin Grafton and Robert Shaw; and
three independent non-executive directors – Simon Botherway,
Claudia Batten and Clyde McConaghy. For biographical details of
individual directors see Board of Directors.
The Remuneration and Nominations Committee is responsible
for making recommendations to the Board regarding the Board’s
size and composition. When recommending candidates to act as
director, the Committee will take into account factors as it deems
appropriate, including the diversity of background, experience and
qualifications of the candidate. When appointing directors, the
Board undertakes appropriate background checks.
The Board’s broader commitment to diversity includes building
diversity of thought within the Board. The current Board
has a broad range of experience and skills, both locally and
internationally, that are appropriate to meet its objectives.
To assist in maintaining an appropriate mix of experience, the
Board has developed a skills matrix. Areas of expertise and
experience that have been identified as relevant to governing
Serko’s business include, among other skills:
Innovation, entrepreneurship and partnership
Digital business and high-growth technology
Travel
Marketing, sales and channel management in core markets
Governance, legal and compliance
Strategy and operations
Finance, accounting and risk management
Capital markets
Public company director experience.
The Board regularly reviews the skills matrix as part of its
succession planning.
Independence of directors
A majority of Serko’s directors are independent. A director is
considered to be independent if that director is not an executive
of Serko and if the director has no direct or indirect interest or
relationship that could reasonably influence, in a material way, the
director’s decisions in relation to Serko.
The Board has determined that each non-executive director is an
independent director for the purposes of the NZX Listing Rules
and in accordance with the Board Charter. As at 31 March 2017,
Serko had two non-independent directors and three independent
directors.
The Board will review any determination it makes on a director’s
independence on becoming aware of any new information
that may affect that director’s independence. For this purpose,
directors are required to ensure they immediately advise Serko
of any new or changed relationship that may affect their
independence or result in a conflict of interest.
The Board supports the separation of the role of Chairman and
Chief Executive Officer. The Chairman is elected by the Board from
the non-executive directors. The Chairman’s role is to manage
and provide leadership to the Board and to facilitate the Board’s
interface with the Chief Executive Officer. The current Chairman,
Simon Botherway, was appointed on 30 April 2014 and is an
independent director.
Board appointment, training and evaluation
The procedure for the appointment and removal of directors is
ultimately governed by the company’s constitution and relevant
NZX Listing Rules. A director is appointed by ordinary resolution
of the shareholders although the Board may fill a casual vacancy.
Every director appointed by the Board must submit himself or
herself for reappointment by shareholders at the next annual
meeting following his or her appointment. Directors are subject to
the rotation requirements set out in the NZX Listing Rules.
At the time of appointment, each new director signs a
comprehensive letter of appointment setting out the terms of
their appointment, including their duties and expectations in
the role. Each director also receives a copy of Serko’s Corporate
Governance Manual (comprising all of Serko’s core governance
documents) and is introduced to the business through a
specifically tailored induction programme. All directors are
regularly updated on relevant industry and company issues and
are expected to undertake training to remain current on how to
PAGE 50
GOVERNANCE AND STATUTORY DISCLOSURES
SERKO LIMITED ANNUAL REPORT 2017
best perform their duties as directors of Serko. During the Board’s
annual evaluation process, training needs are considered to
assist directors to remain upskilled on the business, industry and
legislative developments.
All directors have access to senior management to discuss issues
or obtain information on specific areas or items to be considered
at Board meetings or other areas they consider appropriate, and
each director actively utilises this access to support the company
and the executives.
The Board, Board committees and each director have the right to
seek independent professional advice at Serko’s expense to assist
them in carrying out their responsibilities.
The Board undertakes a regular review of its own and its
committees’ performance. This is to ensure it has the right
composition and appropriate skills, qualifications, experience and
background to effectively govern Serko and to monitor Serko’s
performance in the interests of shareholders. During the financial
period ended 31 March 2017, performance reviews took place in
accordance with that process, including undertaking an externally
facilitated Board evaluation process.
Conflicts of interest
The Board is conscious of its obligations to ensure that directors
avoid conflicts of interest (both real and perceived) between their
duty to Serko and their own interests. The Board Charter outlines
the Board’s policy on conflicts of interest. Serko maintains an
interests’ register in which relevant disclosures of interest and
securities dealings by the directors are recorded.
Company Secretary
The Company Secretary, Susan Putt, is responsible for supporting
the effectiveness of the Board by ensuring that its policies and
procedures are followed and for coordinating the completion
and dispatch of the Board agendas and papers. The Company
Secretary is accountable to the Board, via the Chairman, on all
governance matters.
BOARD COMMITTEES
The Board uses committees to deal with issues requiring detailed
consideration, thereby enhancing the efficiency and effectiveness
of the Board. However, the Board retains ultimate responsibility
for the functions of its committees and determines each
committee’s roles and responsibilities.
The current committees of the Board and their members are:
Audit and Risk Committee
Remuneration and Nominations Committee.
Details of the roles and responsibilities of these committees are
described in their respective charters and summarised below. From
time to time the Board may constitute an ad-hoc committee to
deal with a particular issue that requires specialised knowledge
and experience.
The table below shows the Board and Committee meeting
attendance during the year ended 31 March 2017:
director attendanceBOARD
AUDIT & RISK
COMMITTEE
REMUNERATION
& NOMINATIONS
COMMITTEE
Total number of meetings held
1264
Darrin Grafton12––
Bob Shaw12––
Simon Botherway1264
Clyde McConaghy1164
Claudia Batten1264
– Indicates the director is not a member of the Committee (although they were
in attendance for these meetings).
Audit and Risk Committee
The primary function of the Audit and Risk Committee is to
assist the Board in fulfilling its oversight responsibilities relating
to Serko’s risk management and internal control framework, the
integrity of its financial reporting and auditing processes.
Under the Audit and Risk Committee charter, the Committee must
be comprised of a minimum of three members who are each non-
executive directors, the majority of whom are also independent
directors, and at least one director with an accounting or financial
background. Further, the Chairman of the Committee is required to
be independent and not be the Chairman of the Board.
The current members of the Committee are Clyde McConaghy
(Chairman), Simon Botherway and Claudia Batten. All members
are independent, non-executive directors. Their qualifications and
experience is set out under Board of Directors.
Remuneration and Nominations Committee
The primary function of the Remuneration and Nominations
Committee is to oversee remuneration policies and practices
at Serko, oversee management succession planning, consider
the composition of the Board and recommend candidates to fill
Board vacancies as and when they arise. The Committee is also
tasked with annually monitoring and evaluating the company’s
performance with respect to its diversity policy.
Under the Remuneration and Nominations Committee Charter, the
Committee must be comprised of a minimum of three members, a
majority of whom are independent directors. All members of the
Committee are currently independent directors. The Chairman of
the Committee is required to be independent.
The current members of the Committee are Claudia Batten
(Chairman), Simon Botherway and Clyde McConaghy. All members
are independent, non-executive directors. Their qualifications and
experience is set out under Board of Directors.
PAGE 51
REPORTING AND DISCLOSURE
Market Disclosure Policy
Serko is committed to the promotion of investor confidence by
ensuring that the trading of Serko’s securities takes place in
an efficient, competitive and informed market. Serko’s Market
Disclosure Policy establishes the company’s disclosure policies for
meeting the continuous disclosure requirements of the NZX Main
Board. In addition, directors and management consider at each
Board meeting whether there are any issues that have arisen that
require disclosure to the market.
Serko has established a Disclosure Committee whose role it is
to determine whether information is ‘material information’ and
whether the material information is required to be released to the
NZX. The Disclosure Committee comprises the Board Chairman,
the Audit and Risk Committee Chairman, the Chief Executive
Officer and the Chief Financial Officer (the Disclosure Officer).
Financial Reporting
The Board is responsible for ensuring the integrity of its financial
reporting. As noted above under Board Committees, the Audit
and Risk Committee closely monitors financial reporting risks in
relation to the preparation of the financial statements. The Audit
and Risk Committee, with the assistance of management, works
to ensure that the financial statements are founded on a sound
system of risk management and internal control and that the
system is operating effectively in all material respects in relation
to financial reporting risks. As part of this process, the Chief
Executive Officer and Chief Financial Officer are required to state
in writing to the Board that, to the best of their knowledge, the
company’s financial reports present a true and fair view of the
company’s financial condition and operational results, and are in
accordance with the relevant accounting standards, and those
reports are founded on a sound system of risk management and
internal control that is operating effectively.
REMUNERATION
Non-executive director remuneration
Serko’s shareholders have approved a total cap of $350,000 per
annum for non-executive directors’ fees, for the purposes of the
NZX Listing Rules. This annual fee pool has not been increased
since it was approved by shareholders in 2014. Serko currently
pays directors’ fees which, in aggregate, amount to approximately
$190,000
1
per annum, comprising $70,000 per annum for the
Chairman and A$55,000 per annum for each of the other non-
executive directors. Currently no Committee fees are paid to
directors.
The additional level of directors’ fees is intended to provide
flexibility for Serko to appoint additional non-executive directors
in the future and to allow for an increase in directors’ fees in
the future. Serko may undertake a review of directors’ fees
during the current financial year to ensure that the company is
offering appropriate levels of remuneration to both existing and
prospective directors.
Non-executive directors do not currently take a portion of their
remuneration under an equity security plan but directors may hold
shares in the company, details of which are set out in the Director
Interest Disclosures section of this Annual Report.
1 Subject to exchange rate fluctuations.
It is Serko’s policy to encourage directors to hold shares in the
company. At the date of this Annual Report, all directors hold
shares in Serko.
The non-executive directors are entitled to be reimbursed for all
reasonable travel, accommodation and other expenses incurred by
them in connection with their attendance at Board or shareholder
meetings or otherwise in connection with Serko’s business. No
retirement benefits will be paid to the non-executive directors on
their retirement.
In addition to the remuneration detailed above, the Board has,
with the approval of Serko’s existing shareholders, introduced a
loan facility for the independent directors, which enabled them to
acquire a specified number of Serko shares at the time of the IPO
(Director Loan Shares).
Details of the total remuneration of, and the value of other
benefits received by, each non-executive Director of Serko during
the financial year ended 31 March 2017 were as follows:
total REMUNERATION
(a)
($)
Simon Botherway70,000
Clyde McConaghy60,207
Claudia Batten60,207
190,414
(a) The figures shown are gross amounts and exclude GST (where applicable).
In addition to these amounts, Serko meets costs incurred by non-executive
directors that are incidental to the performance of their duties. This includes
paying the costs of directors’ travel. As these costs are incurred by Serko to
enable directors to perform their duties, no value is attributable to them as
benefits to directors for the purposes of the above table.
Executive director remuneration
Darrin Grafton and Bob Shaw, the executive directors on the
Board for the period ended 31 March 2017, did not receive any
remuneration in their capacity as directors. They were, however,
remunerated for services as Chief Executive Officer and Chief
Strategy Officer of Serko. The executive directors each receive
a base salary of $250,000 per annum for performing these
executive roles. They are also eligible to receive a performance-
based, at-risk, short-term incentive payment if pre-determined
individual and company performance criteria is met. The executive
directors may also participate in Serko’s long-term incentive
scheme (detailed below) if specified performance criteria is met.
The executive directors’ performance is reviewed by the Board
annually. During the financial period ended 31 March 2017,
performance reviews took place in accordance with that process.
During the period ended 31 March 2017, both executive directors
were responsible for contributing to key performance indicators
relating to: (1) delivery of operational value drivers linked to Serko’s
strategy; (2) delivering shareholder value; (3) meeting performance
targets in respect of customer satisfaction and retention; and
(4) maintaining a positive and safe working environment. Delivery
of these KPIs is used to assess whether pre-performance hurdles
are met in relation to the granting of long-term incentives for the
FY18 year and determining the individual component of any short-
term incentive payable for the FY17 year. In addition, pay out of
any short-term incentive is dependent on meeting pre-determined
revenue and EBITDA targets during the financial period.
No termination payments are payable to the executive directors in
the event of serious misconduct.
PAGE 52
GOVERNANCE AND STATUTORY DISCLOSURES
SERKO LIMITED ANNUAL REPORT 2017
Details of the total remuneration earned by or paid to each
executive director of Serko during the financial year ended
31 March 2017 was as follows:
BASE
SALARY
(a)
SHORT-TERM
INCENTIVES
(b)
LONG-TERM
INCENTIVE
(c)
Darrin
Grafton
287,63621,000$25,599.82
in the form of 39,512
restricted shares
Robert Shaw285,41410,500$5,899.78
in the form of 9,106
restricted shares
(a) Darrin Grafton’s and Robert Shaw’s base salary each includes an accrual
of $62,500, which was earned during FY17 but paid in FY18. Base salary
includes employer contributions towards KiwiSaver and certain benefits (a car
allowance, carpark and medical insurance). No executive director receives any
directors’ fees.
(b) The short-term incentive stated was earned in FY17 and will be paid in FY18.
No short-term incentive was earned in FY16 and paid in FY17.
(c) The FY17 long-term incentive was granted in July 2016, following partial
achievement of pre-grant performance targets based on FY16 performance.
The restricted shares will vest three years after the allocation date.
Employee remuneration
Serko’s remuneration framework aims to support and reward
execution of its strategy; create a performance-focused culture;
and attract, develop and retain talented employees. Serko’s
remuneration framework is designed to encourage and reward
behaviour consistent with achievement of these objectives.
Serko adopts a total remuneration policy, where an employee’s
total remuneration may include, but is not limited to, their base
salary and a short-term incentive or sales plan incentive in the
form of a cash bonus upon achievement of pre-determined
targets. The base salary aims to reflect the mid-point in the
employment market when considering the position’s requirements
pertaining to skills, level of responsibility and complexity; while
the short-term incentive and sales incentive schemes reward
superior performance and enable employees to earn at the upper
end of the employment market if pre-determined performance
targets are met. No short-term incentive in respect of the FY16
financial year was paid during the year ended 31 March 2017, owing
to the organisation not reaching the target thresholds allowing
any pay out. It is anticipated that a short-term incentive payment
based on the performance of the company relative to a number of
KPI measures will be made in respect of the FY17 year during the
FY18 year.
In addition, Serko operates a long-term incentive scheme in the
form of restricted shares. This scheme is designed to attract and
retain key people within the business, to align senior managers’
remuneration with long-term shareholder value and to reward
the achievement of Serko’s strategies and business plans. During
the year ended 31 March 2017, eligible Australian and New
Zealand resident employees were only allocated a portion of their
contractual potential under this scheme owing to the organisation
only reaching some of its pre-grant company-wide performance
targets. This allocation vests three years after the allocation date.
Under the Restricted Share Scheme, no director or employee is
permitted to enter into financial products or arrangements that
operate to limit the economic risk of their unvested shares.
Serko’s senior managers are subject to regular performance
reviews, measuring their performance against pre-agreed key
performance targets (both financial and non-financial).
The performance of senior executives is undertaken by the Chief
Executive Officer with oversight from the Remuneration and
Compensation Committee. During the financial period ended
31 March 2017, performance reviews took place in accordance with
that process.
The table below shows the number of employees and former
employees of Serko and its subsidiaries, not being directors of
Serko, who, in their capacity as employees, received remuneration
and other benefits during the period ended 31 March 2017 totalling
at least NZ$100,000.
The remuneration of those employees paid outside of New Zealand
has been converted into New Zealand dollars. No employee
appointed as a director of a subsidiary company of Serko receives
any remuneration or other benefits for acting in that capacity.
REMUNERATION RANGEtotal number of employees
$100,000 – $110,0005
$110,001 – $120,00010
$120,001 – $130,0007
$130,001 – $140,0007
$140,001 – $150,0006
$150,001 – $160,0002
$160,001 – $170,0002
$200,001 – $210,0001
$220,001 – $230,0002
$430,001 – $440,000
(d)
1
$930,001 – $940,000
(d)
1
Total44
The table includes base salaries, short-term incentives and vested or exercised
long-term incentives. The table does not include long-term incentives that
have been granted and have not yet vested. Where the individual is a KiwiSaver
member, contributions of 3% of gross earnings towards that individual’s KiwiSaver
scheme are included in the above table. Where the individual works in Australia
contributions of 9.5% of gross earnings towards Australian Superannuation are
included in the above table.
(d)
Includes the vesting of long-term incentives for departing executives.
DIVERSITY & INCLUSION
The Board is committed to providing equal employment
opportunities and, as such, has a workforce consisting of many
individuals with diverse skills, values, backgrounds, ethnicity
and experiences. The company works to ensure that its
selection processes for recruitment and employee development
opportunities are free from bias and are based on merit.
The Board recognises that building diversity across Serko will
deliver enhanced business performance. Serko has adopted a
Diversity Policy and is committed to achieving diversity in the skills,
attributes and experience of its Board members, management and
staff across a broad range of criteria (including, but not limited
to, culture, gender and age). The Board as a whole is responsible
for overseeing and implementing the Diversity Policy but has
delegated to the Remuneration and Nominations Committee the
responsibility to develop and to recommend objectives to the
Board that are designed to adhere to Serko’s Diversity Policy.
As at 31 March 2017, Serko employees represented 19 different
nationalities. Serko believes this diversity is critical for
encouraging awareness of cultural experiences as we expand into
different markets. Serko’s employees range in age from early 20s
to mid 50s, with the spread peaking in early 30s.
PAGE 53
The respective numbers and proportions of men and women at various levels within the Serko workforce as at 31 March 2016 and 31 March
2017 are set out in the table below:
Femalemale
2017201620172016
No.%No.%No.%No.%
Directors120%120%480%480%
Senior executives
(a)
114%00%686%7100%
Senior employees
(b)
747%862%853%538%
Remaining workforce4044%4440.7%4756%6459.3%
NOTES:
(a) senior executives are considered to be the Chief Executive Officer and his direct reports (the Executive Team). Note that Chief Executive Officer Darrin Grafton and
Chief of Strategy Bob Shaw are included in both the number of directors and senior executives reported.
(b) Direct reports to senior executives with managerial responsibilities.
Diversity objectives
This year the Board agreed to reinforce Serko’s commitment to
diversity by extending Serko’s diversity goals to include measures
of success. The Board’s evaluation of Serko’s performance during
the financial period with respect to the objectives contained in its
Diversity Policy are set out below:
Objective: Facilitate and promote equal employment
opportunities, including (but not limited to) diversity of culture,
gender and age when considering opportunities for new and
existing Serko people. At the end of each year report the
statistics relating to new hires to demonstrate a continuation
of our current diverse talent pool, including ensuring a
diverse range of cultures, ages and genders is maintained (or
strengthened), with the long-term goal of having 50% of the
Board, Executive and Leadership Team being women.
Progress: A conscious effort has been made during FY17
to improve gender diversity in the leadership group. While
appointments were made on merit, consideration was also
given during the process to ensuring more women were
represented amongst the Leadership Team. The result is that
we now have women not only represented on our Board but
also in our Executive Team and wider leadership group. Serko
also puts effort into ensuring we maintain the diversity of
ethnicity that we have at Serko and currently have 20 different
nationalities represented amongst our employees. Our people
are encouraged to celebrate their cultures at work, with regular
fun highlights of cultural festivals taking place. This diversity of
ethnicity helps us also in bringing perspectives from around the
world to influence the way our product is developed.
Objective: Promote a merit-based environment in which
employees have the opportunity to develop and perform
to their full potential in alignment with the company’s
commitment to the ongoing training and wellbeing of its
employees. Measure and report on the gender composition of
internal movements/promotions of our people with a view to
achieving greater diversity at leadership levels.
Progress: While the organisation size shrunk during FY17, as
we had a keen eye on cost control, this also had the effect
of reducing the imbalance between men and women in the
organisation as a whole – with the gap narrowing to 56% men,
43% women. We believe this ratio of female representation to
be high in comparison to hi-tech industry standards.
While women are represented now at all levels in our
organisation (although in low numbers in leadership still) there
are a number of professions that have a dominant female
workforce and others that have very low female representation
within Serko. We believe, however, that given the cross-
functional nature of many of our working teams, we still
experience the benefit of diverse perspectives within our work
(for example, in many instances male developers and female
testers are collaborating on the same piece of work).
Objective: Reward excellence and ensure employees are
treated fairly, evaluated objectively and promoted on the basis
of their performance. Conduct an annual pay parity audit to
ensure that groups are not being disadvantaged on the basis
of their gender. Ensure this covers both internal pay equity and
also application of budget for pay review.
Progress: Our pay equality audit demonstrated general
pay parity across roles. The salary review budget was also
demonstrated to have been applied fairly across both genders.
Equal numbers of male and female employees were promoted
into new roles during the FY17 year.
RISK MANAGEMENT
Risk Management Framework
Serko has designed and implemented a comprehensive risk
management framework for the oversight and management
of financial and non-financial business risks, as well as related
internal compliance systems that are designed to:
Optimise the return to, and protect the interests of,
stakeholders
Safeguard the company’s assets and maintain its reputation
Improve the company’s operating performance
Fulfill the company’s strategic objectives
Manage the risks associated with Serko’s operations.
The Board ultimately has responsibility for risk management
processes. The Audit and Risk Committee assists the Board in
discharging its responsibilities.
The Audit and Risk Committee, in conjunction with management,
regularly reports to the Board on the effectiveness of the
company’s management of its material business risks and
whether the risk management framework and systems of internal
compliance and control are operating effectively and efficiently
in all material respects. The Audit and Risk Committee conducts
six-monthly reviews of Serko’s risk management framework, risk
appetite and principal risks and satisfied itself that the company’s
approach to risk continues to be sound.
PAGE 54
GOVERNANCE AND STATUTORY DISCLOSURES
SERKO LIMITED ANNUAL REPORT 2017
Principal risks for the group are:
Failure to execute strategy and inability to achieve planned
revenues
Reliance on Travel Management Companies (TMCs) and the
revenue concentration among our largest TMC customers
Unpredictable sales cycle and lead-time for on-boarding of key
customers
Protecting its intellectual property and competition from new
entrants
IT security and privacy breaches and interruptions to service
hosting affecting continuity of service
Key personnel, recruitment and staff retention
Global impacts to travel industry
Currency risk
Serko has in place mitigation strategies for managing each of
these risks.
Serko does not have a dedicated internal auditor, instead internal
controls are managed on a day-to-day basis by the finance team.
Compliance with internal controls is reviewed annually by Serko’s
auditor, with oversight from the Audit and Risk Committee.
Health and Safety
The Board and management have sought to establish leading
practices within Serko that promote a safe and healthy working
environment for everyone working in, or interacting with, Serko’s
business. Serko has adopted a Health and Safety Policy that
requires Serko people to endeavour to take all practicable steps
to provide a working environment that promotes health and
wellbeing, while minimising the potential for any risk, personal
injury, ill health or damage. The Board reviews health and
safety reports at each Board meeting and oversees a detailed
programme of work to ensure Serko remains compliant with its
health and safety obligations under the new Health and Safety
at Work Act 2015 that came into force in April 2016. The Accident
Compensation Corporation conducted an independent audit
of Serko’s Health and Safety Management system during the
financial period, awarding Serko with secondary accreditation.
AUDITORS
Auditor independence
Serko has adopted an External Audit Independence Policy that
requires, and sets out the criteria for, the external auditor to be
independent. The Policy recognises the importance of the Board’s
role in facilitating frank dialogue among the Audit and Risk
Committee, the auditor and management.
The Policy requires that the lead and engagement audit partners
be rotated after a maximum of five years so that no such
persons shall be engaged in an audit of Serko for more than
five consecutive years. The Ernst & Young Lead Audit Partner,
Jon Hooper, is required to rotate for the FY18 audit and the Audit
and Risk Committee is actively managing this transition.
The Audit and Risk Committee Charter requires the Committee to
facilitate the continuing independence of the external auditor by
assessing the external auditor’s independence and qualifications
and overseeing and monitoring its performance. This involves
monitoring all aspects of the external audit, including the
appointment of the auditor, the nature and scope of its audit and
reviewing the auditor’s service delivery plan.
In carrying out these responsibilities the Audit and Risk Committee
meets regularly with the auditor without executive directors or
management present and the lead audit partner has direct contact
with the Chairman of the Audit and Risk Committee.
The auditor is restricted in the non-audit work it may perform,
as detailed in Serko’s External Audit Independence Policy. In the
last financial year the audit firm has undertaken specific non-
audit work. None of that non-audit work is considered to have
compromised (or be seen to have compromised) the independence
of the auditor. For further details on the audit and non-audit fees
paid and work undertaken during the period, refer to note 5 of
the Financial Statements above. The Audit and Risk Committee
regularly monitors the ratio of fees for audit to non-audit work.
SHAREHOLDER RELATIONS
Serko is committed to maintaining a full and open dialogue with
its shareholders. The company has in place an investor relations
programme to facilitate effective two-way communication with
investors.
The aim of the company’s communication programme is to
provide shareholders with information about the company and
to enable shareholders to actively engage with the company and
exercise their rights as shareholders in an informed manner.
The company facilitates communication with shareholders
through written and electronic communication and by facilitating
shareholder access to directors, management and the company’s
auditors.
The company provides shareholders with communication through
the following channels:
The investor section of the Serko’s website.
Go to: www.serko.com/investor-centre/
The annual report
The interim report
The annual shareholders’ meeting
Regular disclosures on company performance and news via the
NZX online disclosure platform
Disclosure of presentations provided to analysts and investors
during regular briefings.
Serko’s website is an important part of the company’s shareholder
communications strategy. Included on the website is a range
of information relevant to shareholders and others concerning
the operation of the company and its subsidiaries, including
information about the company and its history, biographies of
the company’s directors and senior management, the company’s
constitution, Board Charter (and the charters of the various Board
committees) and other corporate governance policies of the
company.
Shareholders may, at any time, direct questions or requests for
information to directors or management through Serko’s website
or by sending an email to investor.relations@serko.com.
Serko provides shareholders with the option to receive
communications from, and send communications to, the company
and its share registrar electronically. A large number of Serko
shareholders have elected to receive electronic communications.
Annual Shareholders’ Meeting
Serko’s 2017 Annual Shareholders’ Meeting will be held in Auckland
on 23 August 2017. Shareholders will be given an opportunity at
the meeting to ask questions and comment on relevant matters.
In addition, Serko’s auditor Ernst & Young will be available to
answer any questions about its audit report. A Notice of Meeting
will be sent to shareholders in advance of the meeting.
PAGE 55
DIRECTOR INTEREST DISCLOSURES
Directors have given general notices disclosing interests pursuant to section 140(2) of the Companies Act 1993. Those interests (and any
changes to interests) notified and recorded in Serko’s Interests Register during the financial year ended 31 March 2017 are set out below:
DirectorEntityRelationship
Simon BotherwayFidelity Life Assurance Appointed Director
Claudia BattenWestpac New Zealand LimitedAppointed Digital Advisor to the Board
Clyde McConaghyChapman Eastway Pty LimitedAppointed Chairman
There were no entries in the Interests Register for the purposes of section 140(1) of the Companies Act 1993.
In accordance with Section 148(2) of the Companies Act 1993, directors disclosed the following acquisitions or disposals of relevant
interests in Serko ordinary shares during the financial year ended 31 March 2017:
Name
Date of
Acquisition/Disposal
Number of Shares
Acquired/(Disposed)Nature of Relevant Interest
Consideration
Paid/Received
Darrin Grafton7 July 201639,512 restricted shares
(a)
Beneficial interest in ordinary shares with
restrictive conditions allocated pursuant
to the Serko Limited Employee Restricted
Share Scheme, held in trust until vesting.$25,599.82
7 July 20162,017 restricted shares
(b)
The power to dispose of, or to control the
disposal of, 2,017 ordinary shares with
restrictive conditions issued pursuant to
the Serko Restricted Share Scheme.$1,306.81
Bob Shaw7 July 20169,106 restricted shares
(c)
Beneficial interest in Ordinary Shares with
restrictive conditions allocated pursuant
to the Serko Limited Employee Restricted
Share Scheme, held in trust until vesting.$5,899.78
NOTES:
(a) These shares are subject to a deed restricting exercise of voting rights attached to the shares.
(b) These shares are subject to a deed restricting exercise of voting rights attached to the shares. The director has the power to exercise, or to control the exercise of, a
right to vote attached to these shares by virtue of a personal relationship with the legal and beneficial holder of these shares.
(c) These shares are subject to a deed restricting exercise of voting rights attached to the shares.
In accordance with the NZX Listing Rules, as at 31 March 2017, directors had a relevant interest (as defined in the Financial Markets
Conduct Act 2013) in Serko ordinary shares as follows:
NameRelevant InterestPercentage
Darrin Grafton
(a)
14,250,56219.028%
Bob Shaw
(b)
12,893,40217.215%
Simon Botherway
(c)
2,319,0003.096%
Claudia Batten 181,8180.243%
Clyde McConaghy
(d)
181,8180.243%
NOTES:
(a) 12,667,629 shares are held via a trust in which the director is a trustee and beneficiary. Includes the power to exercise, or to control the exercise of, a right to vote
attached to 1,537,594 shares and 5,917 restricted shares by virtue of a personal relationship with the legal and beneficial holder respectively of these shares. Includes
beneficial interest in 39,512 restricted shares allocated pursuant to the Serko Employee Restricted Share Scheme and held on trust until vesting.
(b) 12,884,296 shares are held via a trust in which the director is a trustee and beneficiary. Includes beneficial interest in 9,106 restricted shares allocated pursuant to the
Serko Employee Restricted Share Scheme and held on trust until vesting.
(c) Partially held via a trust in which the director is a trustee and beneficiary.
(d) Held via a trust in which the director is a trustee and beneficiary.
For the purposes of section 161 of the Companies Act 1993, the following entries were made in the Interests Register in relation to the
payment of remuneration and other benefits to directors:
DateDirectorParticulars of Board Authorisation
21 June 2016Bob Shaw
Darrin Grafton
The payment of remuneration and the provision of other benefits by the c ompany and
making of the loan by the company under the Restricted Share Scheme on the terms set out
in the resolution dated 21 June 2016 and in accordance with the terms of the Serko Employee
Restricted Share Scheme documentation.
For the purposes of section 162 of the Companies Act 1993, an entry was made in the Interests Register in relation to insurance effected
for directors and officers of Serko, in relation to any act or omission in their capacity as directors.
PAGE 56
GOVERNANCE AND STATUTORY DISCLOSURES
SERKO LIMITED ANNUAL REPORT 2017
Shareholder information
As at 30 April 2017 there were 74,894,342 Serko Limited ordinary shares on issue, each conferring on the registered holder the right to
vote on any resolution at a meeting of shareholders, held as follows:
Size of Shareholding
Number of
Holders
(a)
%
Number of
Ordinary Shares%
1 to 1,00010113.06 81,695 0.11
1,001 to 5,00031640.88 1,005,087 1.34
5,001 to 10,00011815.27 999,276 1.33
10,001 to 50,00015920.57 3,585,772 4.79
50,001 to 100,000324.14 2,295,893 3.07
100,001 and over476.08 66,926,619 89.36
773100.00 74,894,342 100.00
(a) Includes 3,178,958 ordinary shares with restrictive conditions held by Serko Trustee Limited on behalf of 65 beneficial holders pursuant to the Serko Restricted Share
Scheme. Restricted shares have voting rights attached, which are exercised on behalf of a beneficial holder by the Trustee at the direction of the beneficial holder.
As at 30 April 2017 there were 101 shareholders holding between 1 and 1,000 ordinary shares (a minimum holding under the NZX Listing
Rules), in respect of 81,695 shares.
Set out below are details of the 20 largest shareholders of Serko as at 30 April 2017:
Shareholder
(a)
Number of Ordinary
Shares Held%
1.Robert James Shaw & Sarah Elizabeth Shaw 12,884,296 17.20
2.Darrin Grafton & Geoffrey Robertson Ashley Hosking 12,667,629 16.91
3.National Nominees New Zealand Limited 9,033,276 12.06
4.Serko Trustee Limited 3,178,958 4.24
5.Cogent Nominees Limited 2,477,462 3.31
6.Simon John Botherway & Msh Trustee (Arrow) Limited 2,034,091 2.72
7.JPMORGAN Chase Bank 1,749,992 2.34
8.Public Trust Forte Nominees Limited 1,646,893 2.20
9.Donna Bailey 1,537,594 2.05
10.Philip Rodger Ball 1,537,594 2.05
11.Michael John Thorburn 1,521,711 2.03
12.Sherie Robyn Hammond 1,485,344 1.98
13.Accident Compensation Corporation 1,380,000 1.84
14.Joanne Maree Phipps 1,345,972 1.80
15.Public Trust 1,174,174 1.57
16.Tracey Ann Shorter 1,123,041 1.50
1 7.Robert Alan Hawker & Elizabeth Anne Hawker 1,117,050 1.49
18.John S Challis & Ah Trustees (Challis Holdings) Ltd 865,762 1.16
19.Timothy Mark Bluett 814,404 1.09
20.Public Trust Rif Nominees Limited 492,123 0.66
(a) The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been re-allocated to the applicable
members.
PAGE 57
GOVERNANCE AND STATUTORY DISCLOSURES
SERKO LIMITED ANNUAL REPORT 2017
According to notices given to Serko under the Financial Markets Conduct Act 2013 (and Securities Markets Act), the following persons
were substantial product holders as at 31 March 2017. As at the balance date (31 March 2017) there were 74,894,342 Serko Limited
ordinary shares on issue.
SUBSTANTIAL PRODUCT HOLDER
NUMBER OF ORDINARY SHARES IN
WHICH RELEVANT INTEREST IS HELD
% OF CLASS HELD AT
DATE OF LAST NOTICE
Geoffrey Hosking25,573,92535.084%
Darrin Grafton14,209,03319.493%
Robert (Bob) Shaw and Sarah Shaw12,884,29617.675%
Milford Asset Management Limited6,095,8178.376%
SUBSIDIARY COMPANY DIRECTORS
Directors of Serko’s subsidiaries do not receive any remuneration or other benefits in respect of their appointments. The remuneration and
other benefits of any such directors who are employees of the group totalling $100,000 or more during the year ended 31 March 2017 are
included in the relevant bandings for remuneration disclosed on page 52 of this Annual Report.
The following persons held office as directors of subsidiary companies as at 31 March 2017:
Serko Australia Pty Limited
Darrin Grafton
Bob Shaw
John Challis
Serko Trustee Limited*
Susan Putt
Fiona Rockel
*Timothy Bluett retired as a director during the financial year.
Serko Investments Limited
Darrin Grafton
Bob Shaw
Serko India Private Limited
Darrin Grafton
Bob Shaw
Yogita Chadha
As at 31 March 2017 Serko also has a representative office in China.
There were no entries made in the subsidiary company Interest Registers during the financial reporting period.
REGULATORY MATTERS
On 22 July 2015, NZX regulation granted Serko a waiver from NZX Listing Rule 7.6.4(b)(iii) to the extent required to allow Serko to provide
financial assistance to executive directors, and an associated person of one of the executive directors, to enable them to participate in
Serko’s Restricted Share Scheme (described in more detail under Remuneration above). The full waiver is available on Serko’s website. Go
to: www.serko.com/investor-centre/.
Neither the NZX or the Financial Markets Authority has taken any disciplinary action against Serko during the financial year ending
31 March 2017.
DONATIONS
Serko made no donations during the financial reporting period.
CREDIT RATING
Serko does not currently have an external credit rating status.
DISTRIBUTIONS
There were no dividends or distributions paid to shareholders during the financial period.
PAGE 58
GLOSSARY
SERKO LIMITED ANNUAL REPORT 2017
Asia PacificVietnam, Thailand, Taiwan, Sri Lanka,
South Korea, South Africa, Singapore,
Philippines, Pakistan, New Zealand,
Malaysia, Japan, Indonesia, India, Hong
Kong, China, Bangladesh and Australia
for the purposes of this Annual Report
ATM RATMR (Annualised Transactional Monthly
Revenue) is a non-GAAP measure.
Serko uses this as a useful indicator of
recurring revenue from Serko products
based on the monthly transactions from
the most recent month (March 17)
AUD or A$Australian dollar
AustralasiaNew Zealand and Australia for the
purposes of this Annual Report
Board or Board
of Directors
The board of directors of Serko
Cloud or
cloud-based
Cloud computing is when the software
and associated data is hosted outside
the customer’s premises and delivered
over a network or the Internet as a
service, which allows immediate access
to the software
Company or
Serko
Serko Limited, a New Zealand
incorporated company that owns a
wholly-owned subsidiary in Australia
EBITDAEBITDA is a non-GAAP measure
representing Earnings Before the
deduction of costs relating to Interest,
Taxation, Depreciation and Amortisation,
and Impairment
FTEFull-time equivalent
FXForeign exchange
FYFinancial year ended, or ending, on
31 March (unless otherwise stated)
GSTGoods and Services Tax
IFRSInternational Financial Reporting
Standards
Independent
Directors
Simon Botherway, Claudia Batten and
Clyde McConaghy
IPOInitial Public Offering
ListingThe date Serko shares started trading on
the NZX Main Board, 24 June 2014
NZNew Zealand
NZD or NZ$New Zealand dollar
NZ GAAP or
GAAP
New Zealand Generally Accepted
Accounting Practice
NZ IASNew Zealand equivalents to International
Accounting Standards
NZ IFRS
or IFRS
New Zealand equivalents to International
Financial Reporting Standards
NZXNZX Limited, also known as the New
Zealand Stock Exchange
NZX Listing Rules
or Listing Rules
The Listing Rules applying to the NZX
Main Board as amended from time to
time
NZX Main BoardThe New Zealand main board equity
security market operated by NZX
R&DResearch and Development expenditure
Serko Expense
Management
business
The Australian-based travel
management expense business, Incharge
Group Pty Limited, that Serko acquired
on 20 December 2013
Serko MobileSerko’s mobile app for iPhones and
Android devices that gives users access
to information and travel booking
functionality on their mobile devices
Serko OnlineSerko’s cloud-based online travel
booking solution for large organisations
serko.travelSerko’s cloud-based online travel
booking solution for small to medium
enterprises
TMC, Travel
Agency or Travel
Management
Company
A travel management company that
provides specialised travel-related
services to corporate customers
USD or US$United States dollar
$All figures are in New Zealand dollars,
unless otherwise stated
PAGE 59
CORPORATE DIRECTORY AND SHAREHOLDER ENQUIRIES
SERKO LIMITED ANNUAL REPORT 2017
Serko is a company incorporated with limited liability under the
New Zealand Companies Act (Companies Office registration
number 1927488).
Registered OfficeUnit 14D
Saatchi & Saatchi Building
125 The Strand
Parnell
Auckland 1010
New Zealand
+64 9 309 4754
www.serko.com
ARBN: 611 613 980
Directors
(as at date of this
Annual Report)
Simon Botherway (Chariman)
Claudia Batten
Robert (Clyde) McConaghy
Darrin Grafton
Robert (Bob) Shaw
Share RegistrarLink Market Services Limited
Level 11, Deloitte House
80 Queen Street
Auckland 1010
New Zealand
+64 9 375 5998
serko@linkmarketservices.co.nz
AuditorErnst & Young Auckland
EY Building
2 Takutai Square
Britomart
Auckland 1010
+64 9 377 4790
SERKO.com
2007-2017
a decade transforming travel & expense management
---
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ABOUT
SERKO
Our
PURPOSE
About
SERKO
Our purpose is to transform the way businesses manage travel
and expenses. We do this by helping companies drive down
the cost of their travel program, using smart technology and
making the process of booking and managing travel and
reconciling expenses a positive experience for their people.
Serko is a market-leading travel and expense technology
solution, used by over 6,000 corporate entities through 50+
Travel Management Companies that combined book more than
A$6b of travel a year through Serko’s platforms. Zeno is
Serko’s next generation travel management application, using
intelligent technology, predictive workflows and a global travel
marketplace to transform business travel across the entire
journey. Listed on the New Zealand Stock Exchange Main
Board (NZX:SKO). Serko employs more than 100 people
worldwide, with its HQ in New Zealand and offices across
Australia, China, India and the United States (US) Visit
www.serko.com for more information.
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NPBT
$2.0m
Net Profit Before Tax of $2 million
$5.3m turnaround from prior year
$5.2m
Cash balances increased
$0.8m over the year
Operating Revenue Growth
to $18.3m Revenue
28%
increase
in booking transactions
20%
$2.2m
EBITDA
$4.7m turnaround from prior year
Margin of 12%
Peak
ATMR
$18.4m
24% increase over
same month prior year
$19.3m
Total Income
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CEO AND CHAIRMAN’S LETTER
Dear Fellow Shareholders,
Serko has had a strong year and it is with considerable pleasure
that we communicate this report and associated financial
results to you. During this pivotal year, we demonstrated
the scalability of our cloud-based platform and recorded a
dramatic improvement in financial performance as a result.
We have consolidated our position in our core Australasian
market as the leading online business travel and expense
management platform and we saw strong growth in recurring
revenues across all categories. We continue to win new
customers, while those already using our suite of cloud-based
services are turning to us to meet more of their travel needs.
It is exciting to have embarked on our next phase of growth as
we significantly expand our Northern Hemisphere presence.
We have made pleasing progress so far. We have recruited
highly respected and experienced leaders in the US and we are
expanding our support operations to ensure we have 24-hour
coverage for customer support.
As the launch of our new premium travel and expense
solution Zeno shows, we remain at the forefront of
technological innovation in the sector.
Total operating revenue for the year to 31 March 2018
increased 28% to $18.3 million from $14.3 million in the same
period a year ago and in line with the guidance we gave in
November 2017 of $18 million to $19 million. Total income
grew by 25% to $19.3 million.
Increasing the number of services we provide to our
customers is a core component of our strategy. In particular,
content revenues such as hotels and airport transfers
increased 72% to $1.3 million, demonstrating Serko’s latent
potential to capture an increasing share of our customers’
travel spend.
EBITDA for the full year was $2.2 million, representing a
$4.7 million turnaround on the prior year’s EBITDA loss of
$2.5 million. The full-year profit before tax was $2.0 million,
representing a turnaround of $5.3 million from the loss last
year of $3.3 million.
Peak fourth quarter (February) Annualised Transactional
Monthly Revenue (ATMR), an indicator of the company’s
recurring revenues, stood at $18.4 million, an increase of 24%
on the same period a year ago.
With the Northern Hemisphere expansion that commenced in
the 2018 financial year, Serko expected to be ‘break-even’ for
the second half. The actual results were an additional EBITDA
profit of $0.9 million over the first half $1.3 million to a total $2.2
million EBITDA profit for the year. This was primarily attributable
to savings associated with timing of new hires as well as some
operating efficiencies. The costs associated with new hires is
expected to be incurred in the first quarter of the 2019 financial
year (FY19).
We have successfully controlled costs, generated positive cash
flows and benefited from our platform scaling to serve a larger
number of customers. This is best demonstrated by reference
to the average revenue per ‘full-time equivalent’ (FTE) staff
member, which increased by $48,000 to $170,000.
Meanwhile, we have continued to invest in the further
development of our technology, including Zeno.
At the end of the financial year Serko had net cash-on-hand of
$5.2 million, up 18% on the $4.5 million cash-on-hand at the
end of the last financial year.
In short, in the 2018 financial year we continued to validate
our strategy to transform business travel and expense
management by delivering market-leading technological
innovations, growing our customer base and increasing
average revenue from each booking made on our platform.
Further detail on our financial performance is covered in the
management commentary section on pages 18 to 27 of
this report.
Total operating revenue
for the year increased
28% to $18.3 million
NPBT of $2.0 million, a
$5.3 million turnaround
from prior year
SERKO DELIVERS
MAIDEN FULL YEAR
PROFIT
This report is dated 23 May 2018 and is signed on behalf of the Board of Serko Limited by Simon
Botherway, Chairman (Chair), and Darrin Grafton, Chief Executive Officer (CEO).
DARRIN GRAFTONSIMON BOTHERWAY
CHIEF EXECUTIVE OFFICERCHAIRMAN
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GROWTH STRATEGY:
A key determinant of Serko’s future success in Australasia and
in new markets was the take up of the new Zeno platform. We
are pleased with the results we achieved this year. We have
already signed a number of our existing Travel Management
Companies (TMCs) to new contractual terms to resell Zeno as
a premium solution. These TMCs are using Zeno to win new
business and retain current business by providing the options
of both Serko Online and Zeno.
As part of the Air New Zealand partnership, Tandem Travel
(Air New Zealand’s corporate travel division) is currently
onboarding its entire customer base to Zeno, and its previous
solution provider is discontinuing its system this month.
Our global growth strategy is based on partnering with
leading TMCs to enter new markets. This is the same strategy
that has served us well in Australasia, and the success
of our relationships in our home market is now creating
opportunities in other markets.
Our new international business development team is actively
pursuing significant distribution and marquee customer
opportunities. As announced in February 2018, we have
signed a global agreement with ATPI Group and we will begin
to roll out Zeno to its customers in the United Kingdom (UK) in
the first quarter of FY19. ATPI intends to extend the roll out to
customers in Europe after the UK launch.
OUTLOOK
Serko is in a stronger position than it has ever been. We expect
total operating revenue growth of between 15% and 30% in
the year to 31 March 2019.
We are excited by the interest we have received in the
Northern Hemisphere and we are preparing the business to
maximise the return on this interest through into the next
financial year. As we undertake this expansion in Europe
and North America, we expect sales, marketing, system
development and support operation costs to increase. As a
result, we do not expect a substantial uplift in EBITDA.
The Board has a policy of maintaining a strong cash reserve
position and will monitor Serko’s capital requirements in light
of the funding needed to execute growth opportunities both
organic and inorganic.
We are preparing for a dual-listing by way of a Foreign Exempt
Listing on the ASX and are targeting a listing date of 25th
June 2018, subject to ASX approval. We believe our strong
presence in Australian markets will resonate with the deep
pool of investors across the Tasman that understand travel and
technology markets. We also believe activating this interest
will benefit all shareholders.
Serko, however, intends to remain a New Zealand domiciled
business and we are committed to our New Zealand investors.
We are naturally delighted with the rise in the value of our
shares over the past year. The Serko Team has worked hard
on our market communication to better articulate our growth
strategy and long-term prospects.
Further guidance will be provided at our Annual Shareholders
Meeting in August.
Signed Chair and CEO
20% growth in booking
transactions for 2018
DARRIN GRAFTONSIMON BOTHERWAY
CEOCHAIRMAN
Industry Recognition
Category: Most Innovative Hi-Tech Service
Category: Company of the Year
Category: Excellence in Innovation
Category: Top 16 corporate travel innovators
Category: NZX Emerging Leaders Best Investor Relations
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STRATEGIC
OVERVIEW
Offer premium,
integrated global
solutions
Expand into new territories
through strategic alliances
and reach the unserved
SME market
Grow ARPB by
offering increased
content and moving
customers to Zeno
TECHNOLOGY INNOVATION
Zeno set a new benchmark in travel & expense management and we can now expand the personalisation and monetisation
opportunities of Zeno with NDC*
What we achieved:
• Zeno was successfully deployed into general release and is being used by hundreds of corporate and government
organisations to book and manage travel
• Zeno’s technology and content were globalised to support customers in new markets, including North America and Europe
• Multiple white labelled self-service travel booking portals launched or are in development by partners (e.g. Corporate
Traveller, HelloWorld for Business and Air New Zealand) powered by serko.travel
Our focus for FY19:
• Zeno will achieve NDC Level 3 certification, providing a foundation to integrate directly with airlines to unleash
personalisation and monetisation opportunities that have not previously been possible
• We will continue to expand on Zeno’s feature set including a ‘Right to travel’ workflow to streamline business travel approval processes
• A ‘Duty of Care’ premium module will provide risk assessment, mitigation and management capabilities
GROW CUSTOMER BASE
International markets validated demand for Zeno in FY18. We are investing to unlock this growth potential in FY19
What we achieved:
• ATPI signed agreement to resell Zeno in more than 50 countries, with first UK customer going live Q1 FY19
• Serko Expense was deployed into global enterprise organisations and validated as a competitive solution in Northern
Hemisphere with sales expected in FY19
• Tandem Travel, Air New Zealand’s TMC, began migrating customers to Zeno from a competitor and is progressing towards
100% customer migration during FY19
Our focus for FY19:
• Expanding on ATPI UK’s early success with expansion into its customer base across Europe, North America and Asia
• Supporting Travel Encore, our first reseller in Canada, to build a Zeno customer base across travel & expense
• Extending the relationship with our largest TMC customer, FCM, into new markets, including North America
GROW ARPB
We have proven we can lift transaction revenue through customer migration to Zeno and we will continue to expand
opportunities for content monetisation with the Zeno Marketplace
What we achieved:
• Content revenue (derived from bookings that include content in addition to airfare, e.g. hotel, transfer, rental car) increased by 72%
• HRS Hotels, GTA Hotels and Hotel Hub were added and increased available content to three million hotels
• RouteHappy rich content for flight shopping was introduced, which enables differentiated airline merchandising
Our focus for FY19:
• Migration of existing Serko Online customers to our premium offering, Zeno, with associated increase in price per booking
• The Zeno Marketplace serves as a central content hub for global suppliers across every phase of their journey and extends revenue
opportunities into content such as ride-sharing services, restaurant bookings, meeting rooms and secure WiFi providers
• Zeno’s NDC capability outlined above will facilitate the merchandising of ancillary services, such as in-flight meals,
premium seat selection and lounge access, to generate additional content revenue per booking
*NDC (New Distribution Capability) is a travel industry-supported program launched by IATA for the development and market adoption of a new, XML-based data
transmission standard that enhances the capability of communications between airlines, travel agents and aggregators.
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The majority of Serko’s revenue comes from Travel Management Companies (TMCs)
that provide our solution to their corporate customers
OUR CUSTOMERS
OUR PRODUCTS
Zeno is Serkos next
generation travel
management
application, using
intelligent technology,
predictive workflows
and a global travel
marketplace
Serko Online is an
end-to-end online
booking tool for
corporates to book
and manage airlines,
hotels, rental cars and
airport transfers
Serko Expense is an
online expense
management solution
that enables the
capture and
processing of
corporate card and
out-of-pocket claims
Serko Mobile is a
purpose-built mobile
app for making,
changing and
managing flight and
hotel bookings and
travel expenses
Until now, corporate travel programs have had to
choose who loses.
There was a spectrum with control and compliance at one
end and choice and convenience at the other. Someone had to
compromise. Not anymore.
Zeno revolutionises the world of online travel and expense
management, providing the control that travel managers need
with the ease of use that compels travellers to get on board.
Serko conducted research that identified there are seven
phases that cover every aspect of business travel – fly, stay,
move, eat, work, play and rest.
Zeno is designed to connect travellers with preferred
suppliers across every one of these phases, which means they
will be able to turn to a single app to solve every need before
and during their trip.
Corporates can customise Zeno to show only approved
content providers and will be able to integrate directly with
their corporate accounts.
We do this with intelligent technology that provides
personalised itinerary recommendations, an intuitive
interface that makes booking travel super simple and a global
marketplace that allows travel managers to connect with
preferred suppliers at every stage of the journey.
The outcome is control and visibility over spend that was
previously opaque, expense capture and reconciliation that
provides confidence in governance and increased user
adoption that drives higher levels of compliance with
corporate travel policies.
The Connected Traveller
One of the biggest challenges for travel managers is
compliance, or rather lack thereof, with their corporate travel
policies. This is not normally a significant problem with flights
but more of a challenge with things like hotels, when
travellers will often book directly with the hotel or through
an aggregator, like booking.com or Expedia.
The reasons for this are often down to choice (i.e. I can find a
better hotel than the options shown in my corporate booking
tool) or user experience (i.e. I dont get the rich information,
such as photos, reviews and room types) in their existing
corporate booking tool.
Zeno helps to overcome this by providing rich content from
aggregators, including Booking.com, Wotif and Expedia, as
well as corporate negotiated rates, and with an intuitive user
interface that matches the consumer experience travellers
are used to.
Seamless Compliance
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BOARD OF DIRECTORSMANAGEMENT TEAM
Simon Botherway
Independent Non-Executive Chairman, New Zealand
Simon is based in New Zealand. He holds a BCom, as well as the US-based Chartered Financial Analyst
(CFA) designation. Simon has extensive experience in corporate governance, banking and investment
management. In 2002 Simon co-founded Brook Asset Management and was Chairman from 2004 to
2008. He is also a past President of the CFA Society of New Zealand and was a member of the CFA
Asia-Pacific Advocacy Committee.
Simon was appointed as a member of the Securities Commission in 2009 and was appointed by the New
Zealand Government to chair the Financial Markets Authority Establishment Board in 2010. Simon is
currently also a Director of the Callaghan Innovation Board and Fidelity Life Assurance.
Claudia Batten
Independent Non-Executive Chairman, United States
Claudia has been a founding member of two highly successful entrepreneurial ventures. Starting
with Massive Incorporated, a network for advertising in video games, she helped pioneer digital as
a media buy. Massive was sold to Microsoft in 2006. In 2009 she co-founded Victors & Spoils
(‘V&S’), the first advertising agency built on the principles of crowd-sourcing. V&S was majority
acquired by French holding company Havas Worldwide in 2011. Claudia is based in the United
States but remains a strong supporter of the New Zealand start-up scene as an active mentor and
adviser. She is also the digital adviser to the Board of Westpac New Zealand and holds an LLB
(Hons) and BCA from Victoria University (Wellington).
Clyde McConaghy
Independent Non-Executive Chairman, Australia
Clyde is based in Australia. He holds a BBus and MBA from Cranfield University United Kingdom (UK).
Clyde is a fellow of the Australian Institute of Company Directors and a fellow of the Institute of Directors
UK. He is the founder of Optima Boards, providing independent director and advisory services to public,
private, family office and charitable entities around the world. Clyde has worked in publishing, media,
online and technology sectors, living in the UK, Germany, China and Australia. He is a Director of ASX-listed
technology company, Infomedia Limited and Chairman of the Board of Chapman Eastway Pty Limited.
Darrin Grafton
Executive Director, Chief Executive Officer & Co-Founder
Darrin has more than 25 years' experience in travel technology and is highly experienced in technology
commercialisation. He previously held senior management positions with Gullivers Travel Group (listed
on the Australian and New Zealand Stock Exchanges 2004-2006) and Interactive Technologies.
Robert (Bob) Shaw
Executive Director, Chief Strategy Officer & Co-Founder
Bob has more than 25 years' experience creating and commercialising technology for the travel industry.
He has held a number of directorships and senior management positions in various high-profile ventures,
including Gullivers Travel Group (listed on the Australian and New Zealand Stock Exchanges between
2004 and 2006) and Interactive Technologies.
Appointed 30 April 2014, re-elected August 2017
Appointed 30 April 2014, re-elected August 2017
Appointed 30 April 2014, re-elected August 2016
Appointed 5 April 2007
Appointed 5 April 2007, re-elected August 2016
Murray Warner
Head of Australasian market
Murray has 20 years experience working with cloud software technology building new sales and
revenue operations. He has previously held several senior management positions with Concur
Technologies, an SAP company, across Asia-Pacific, Europe and North America.
Susan Putt
Chief Financial Officer (CFO)
Susan has over 25 years experience working in New Zealand and has also worked in Australia and
Canada. She is a Chartered Accountant and Chartered Member of the Institute of Directors. Susan has
worked as CFO, Head of Strategy, and Director for a number of New Zealand businesses and
specialises in working with high-growth companies.
Charlie Nowaczek
Chief Operating Officer (COO)
Charlie has over 25 years experience as an operations executive and management adviser, specialising
in business transformation and operational excellence. Over the last decade he has been COO for a
number of technology start-ups in the US and Canada.
John Challis
Head of Business Development
John has 18 years' experience in the corporate travel technology sector across operations,
implementations and sales. John has been with Serko for 11 years and was until recently responsible
for managing the Australasian sales team, however, as part of Serko's global expansion plans John is
now responsible for growth in new markets with a heavy focus on the Northern Hemisphere.
Darrin Grafton and Bob Shaw are also part of the executive team, see facing page for their details
Tony D’Astolfo
Senior Vice President, NORAM
Tony is a 35-year travel industry veteran, with deep expertise in travel and technology. Most recently
he was Chief Commercial Officer at Deem and prior to this Tony was Managing Director of
Phocuswright. Tony is a long-time member of GBTA and ACTE, and current Vice Chairman of WINiT
(Women In Travel).
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CORPORATE
RESPONSIBILITY
Serko aims to be a successful growth company. To
realise this ambition we must do the right thing by our
people, customers, community and our shareholders.
We aim to achieve this through:
1) Focusing on long-term growth and business
sustainability;
2) Applying best practice governance and risk
management procedures;
3) Cultivating an inclusive workplace of diverse
and engaged staff; and
4) Enabling environmentally sustainable choices
through technology.
Serko is committed to developing long-term value
creation and making positive improvements in social,
economic and environmental outcomes. This year,
we have prepared our first Environmental Social and
Governance (ESG) Report and started reporting how
the United Nations (UN) Sustainable Development
Goals are applicable to our ESG initiatives.
Further information and our full report can be found
online at www.serko.com/investor-centre/. Serko’s
ESG framework remains under development and will
continue to be progressed over time.
The Sustainable Development Goals (SDGs) are a
set of global initiatives set by the United Nations
for everyone to contribute to. For Serko, the SDGs
are a way to see which areas of sustainability we
are directly contributing to and how our community
initiatives relate to a larger vision for positive change.
The UN SDGs relevant to Serko and our actions are
as follows:
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People:UN SDGs
UN SDGs
UN SDGs
Customers:
Good health and well-being
Health and Safety Policies
Quality education
Training and intern programmes
Industry, innovation and
infrastructure
Industry recognition for innovation
Responsible consumption
and production
Privacy and security policies
Community:
Sustainable cities and
communities
Sponsorships and donations
Climate action
Environmental practices
Gender equality
Diversity and inclusion policies
Decent work and economic
growth
Remuneration policies
Diversity and inclusion policies
Reduced inequalities
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Please read the following commentary with the financial statements and the related notes in this report. Some parts of this
commentary include information regarding the plans and strategy for the business and include forward-looking statements that
involve risks and uncertainties.
Actual results and the timing of certain events may differ materially from future results expressed or implied by the forward-
looking statements contained in the following commentary. All amounts are presented in New Zealand dollars (NZD), except
where indicated. All references to a year are the financial year ended 31 March, unless otherwise stated.
Non-GAAP (generally accepted accounting practices) measures have been included, as we believe they provide useful information
for readers to assist in understanding Serko’s financial performance. Non-GAAP financial measures do not have standardised
meanings and should not be viewed in isolation or considered as substitutes for measures reported in accordance with New
Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). These measures have not been independently
audited or reviewed.
Annual total operating revenue grew by $4 million to $18.3 million from $14.3 million in
the prior year, driven by strong recurring revenue growth across all revenue categories
predominantly from our Australian operations. The company recognised $0.96 million in
Callaghan Innovation growth grants within other income, leading to total income for the year
of $19.3 million up from $15.4 million for the prior year.
Serko became profitable in the financial year in line with guidance as it benefited from the
operational efficiencies of a scalable technology platform and from tight cost control. Total
operating expenses decreased by $1.1 million to $17.7 million from the prior year
$18.8 million. This resulted in a profit after tax of $1.8 million, which represents a turnaround
of $5.3 million from a loss of $3.5 million in the prior year.
BUSINESS RESULTS
Year ended 31 March20182017Change%
$ (000)$ (000)$ (000)
Revenue18,27914,2774,00228%
Other income9941,092(98)-9%
Total income19,27315,3693,90425%
Operating expenses(17,684)(18,763)1,0796%
Percentage of revenue-97%-131%
Net finance income41488326370%
Net profit (loss) before tax2,003(3,306)5,309161%
Percentage of operating revenue11%-23%
Income tax expense(171)(144)(27)-19%
Net profit (loss)1,832(3,450)5,282153%
EBITDA improved by $4.7 million from a loss of $2.5 million to a profit of $2.2 million. This
was driven by an increase in total income of $3.9 million and decrease in operating costs
(excluding depreciation and amortisation) of $0.8 million.
EBITDA is a Non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation,
Depreciation and Amortisation and Impairment. Serko uses this as a useful indicator of cash profitability.
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA)
Year ended 31 March20182017Change%
$ (000)$ (000)$ (000)
Net profit (loss)1,832(3,450)5,282153%
Add back: income tax expense1711442719%
Deduct: net finance income(414)(88)(326)-370%
Add back: depreciation and amortisation597858(261)-30%
EBITDA profit/(loss)2,186(2,536)4,722186%
EBITDA margin12%-177%
MANAGEMENT
COMMENTARY
$5.3m
TURNAROUND
$4.7m
TURNAROUND
$2.0m
NET PROFIT
BEFORE TAX
$2.2m
EBITDA
2021
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
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MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
Monthly
user fee
Mobile
subscription
Supplier
commission
Booking &
other fees
Corporate traveller makes
a booking via Serko
Online/Zeno
Corporate books a hotel or
taxi via Serko Online/Zeno
Traveller downloads and
uses Serko Mobile
Traveller submits receipts
using Serko Expense/Zeno
How Serko makes money
Serko’s main source of revenue in 2018 was from its Serko Online travel booking platform. This is predominantly invoiced to TMC
resellers on a monthly basis for the total transactions generated from the online travel bookings made by their customers. As Zeno
was launched firstly in beta to trial customers during the second half of 2018, booking volumes for 2018 are not material.
Travel platform revenue is made up of transaction fees, ancillary service fees and contracted minimum payments (where
applicable) and is stated net of volume-related rebates and discounts.
The serko.travel platform for small and medium enterprises is a free booking service and Serko earns commission income on those
bookings direct from suppliers, therefore income from this platform is included in supplier commissions.
Serko also earns income from its expense management platform Serko Expense, which allows registered users of corporate
customers to process travel and expense claims for accounting and reimbursement. Revenues are derived from a combination of
fees for active users, registered users and reports processed.
Supplier commission revenue is earned when corporates opt to book Serko-sourced hotel and other traveller-related services.
Serko is paid directly from the suppliers of those services.
Other income includes income from Serko Mobile licence fees and other miscellaneous revenues.
Services revenue is derived from installation service and customised software development undertaken on behalf of the TMC
customers. It also includes the fees charged to develop connections to third party systems wanting to integrate with Serko’s
platforms. The basis of charging can vary depending on the contractual terms with the customer, which may specify time and
materials, capped or fixed pricing.
Other income is primarily government grants for research and development projects.
Recurring product revenue (a Non-GAAP measure) is the revenue derived from transactions and usage of Serko
products by contracted customers. It excludes services revenue.
Total operating revenue is revenue excluding grants and finance income, while total income includes grants
INCOMEHOW SERKO MAKES MONEY
Year ended 31 March20182017Change%
$ (000)$ (000)$ (000)
Travel platform booking revenue13,28310,8082,47523%
Expense platform revenue1,5391,12541437%
Supplier commissions revenue1,28875153772%
Other revenues3342389640%
Recurring product revenue16,44412,9213,52227%
Percentage of total revenue90%91%
Services revenue1,8351,35647935%
Total revenue18,27914,2774,00228%
Other income9941,092(98)-9%
Total income19,27315,3693,90425%
28%
TOTAL
REVENUE
INCREASE
25%
TOTAL
INCOME
INCREASE
Travel platform revenue grew by 23% for the year and was primarily related to a 20% increase
in booking numbers. The difference between transaction growth and booking volume growth
is owing to minimum volume commitments recognised.
Minimum volume commitments contribute to revenue when actual volumes transacted are
less than the stated contractual commitments. Revenue from these sources in 2018 was
$0.6 million, significantly higher than the contribution in the prior year. The anticipated
transactional business related to these minimums is expected to be onboarded onto the Serko
platform in the first quarter of 2019.
Expense platform revenue grew 37% to $1.5 million. This growth is a result of the successful
reseller program introduced in the prior year with our partner TMCs.
Supplier commissions revenue grew by 72% to $1.3 million. The number of bookings that
Serko earned additional commission revenue over the travel platform booking fee increased
by 77%. The average attachment rate of commission bookings versus total bookings for the
year was 5.4% up from 3.7% for the prior year.
Other revenues grew by 40%.
Total services revenue was up 35% over the prior period. This reflects the increase in
payments from content suppliers for the integration of their content to our travel platform, as
well as growth in the paid work to configure our platforms for customer needs.
Total recurring product revenues grew by 27% to $16.4 million compared to $12.9 million in
the prior year. Recurring revenue as a percentage of total revenue remains steady at 90%.
Serko launched its premium travel booking tool called Zeno during 2018. Some customers
have already transitioned to this platform, as commercial negotiations progressively
conclude with various TMC partners for the reseller rights. The volumes were not
significant and revenues are not material for this year and thus have not been separately
disclosed in this report.
2223
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ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
Serko currently earns 91% of revenue from Australia and 6% from New Zealand
sources. It is currently undertaking the development required to localise content and
integrate its systems with Northern Hemisphere markets and expects these regions
to grow during 2019.
$15m
$10m
$5m
-
$Ƒ0m
FY13FY14FY15FY16FY17FY18
Revenue Trend
Services
Supplier commissions & other
Expense platform
Travel platform
Year ended 31 March20182017Change%
$ (000)$ (000)$ (000)
Australia16,59913,1953,40426%
New Zealand1,03867236654%
North America457158299189%
India57136(79)-58%
Singapore421824133%
Other8698(12)-12%
Revenue18,27914,2774,00228%
Revenue by
Geography
37%
20%
24%
$15m
$10m
-
$Ƒ0m
20172018
Peak ATMR
Year-on-year movement
$11.2m
Mar 2016
$15.3m
Mar 2017
$14.8m
Feb 2017
$18.4m
Feb 2018
FY13FY14FY15FY16FY17FY18
Booking trend
Online booking trend over
the last 6 years*
ATMR is a Non-GAAP measure representing Annualised Transactional Monthly Revenue. Serko uses this as a useful indicator of recurring revenues from Serko
products. It is based on the monthly transactions and average revenue per booking (for its travel platform revenue) and monthly active user charges (for its
expense platform revenue) annualised on a constant currency basis. Owing to seasonality, Serko uses the latest month that is not affected by seasonality trends.
The period ended March 2018 was affected by Easter falling over the last weekend in March whereas in 2017 Easter fell in April. Thus the peak ATMR month for
2018 was February 2018. Serko’s transaction volumes over any month are driven by the number of corporate working days within that month. To aid comparison
between months from year to year, Serko now annualises the figures using the weekday average booking transactions for non-seasonal months and multiplies that
by 260 days in a year.
* Booking volumes not disclosed for commercial reasons
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
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MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
ACTIVITY
Online bookings increased 20% over the prior year, while transaction volumes also grew
strongly, driven entirely by growth in our core Australasian markets. Serko is currently
expanding into Northern Hemisphere markets, however, these regions did not make a
contribution in 2018.
ARPB increased marginally during the year by 1%, however, additional content revenue at
$1.3 million is now contributing significantly to Serko’s profit, with a 72% uplift over the
prior year.
ATMR, an indicative measure of forward revenue from currently transacting customers, rose
24% for the year to $18.4 million, lifted by increases in ARPB, total bookings and the number
of users of our Expense platform. Actual recurring product revenue of $16.4 million for 2018
was ahead of the March 2017 ATMR of $15.3 million.
Serko’s TMC partners have indicated they expect additional Australasian corporate
customers, that are not currently using an online booking tool, to transition to Serko products
over the next year. Therefore, we expect transaction growth in Australia and New Zealand
to continue. In addition, Serko is expanding into Northern Hemisphere territories and this
segment is also expected to grow over the next financial year.
While transaction growth is difficult to forecast, Serko is expecting total operating revenue to
grow between 15% and 30%.
Serko is rolling out Zeno to its Australasian customers. Zeno is a premium product that offers
a door-to-door booking experience and Marketplace hub that incorporates additional content
for hotels and other traveller services. Consequently, supplier content commissions are also
expected to grow.
With a healthy pipeline of Serko Expense management customers we expect this product line
will continue to grow. Meanwhile, as we expand into Northern Hemisphere markets we are
seeing increased interest in customers adopting integrated travel and expense solutions.
Serko uses Online bookings, Annualised Transactional Monthly Revenue (ATMR) and Average Revenue per Booking
(ARPB) as indicators of strategic achievement.
INCREASE
20%
ONLINE
BOOKINGS
INCREASE
24%
PEAK
ATMR
Total operating expenses were down 6% or $1.1 million from the prior year to $17.7 million,
mainly owing to a decrease in marketing, remuneration and benefit expenses.
Remuneration and benefits (R&B) decreased owing to the integration of the Arnold platform
in the first half of 2017 resulting in operating efficiencies owing to the reduced need to
maintain two platforms. Included in R&B was $1.3 million related to employee share-based
payments and short-term incentive performance payments for 2018, compared to $1.0 million
in the prior year.
As Serko expands in the Northern Hemisphere, R&B costs will increase, as additional
resources are hired to support growth into new territories. This will be offset somewhat by
capitalisation of internal staff time spent on development of revenue-earning modules for the
Serko platforms.
Selling and marketing expenses decreased as a result of a shift in focus from a direct sales and
marketing effort towards assisting TMC partners to resell Serko products.
With the launch of Zeno in Australasia, as well as into Northern Hemisphere markets, Serko
expects selling costs to increase to drive revenue growth in 2019 by supporting the successful
acquisition and onboarding of new customers to the product.
Administration costs were slightly lower than the prior year owing mainly to a decrease
in depreciation and amortisation (D&A). For 2018, D&A at $0.6 million was $0.2 million
lower than the prior year. Administration costs are expected to increase owing to our
growth activities.
Hosting costs increased and generally are expected to increase when revenue increases.
However, thanks to efficiencies achieved this year, these costs increased 13%, while revenues
increased 28%.
Remuneration and benefits are the total costs of employees and contractors engaged within the business during the
financial year, including gross salary, additional payroll taxes, superannuation and KiwiSaver, bonuses, commissions
and the value of any share-based remuneration or awards.
Selling and marketing expenses comprise all the direct costs of sales that are not people- or salary-related.
Administration expenses are other general overheads and operating costs, including depreciation and amortisation charges.
Other expenses comprise direct technology costs, including hosting.
OPERATING EXPENSES
Year ended 31 March20182017Change%
$ (000)$ (000)$ (000)
Remuneration and benefits11,66712,285(618)-5%
Selling and marketing expenses1,2581,658(400)-24%
Administration expenses3,6923,880(188)-5%
Other expenses1,06794012713%
Total operating expenses17,68418,763(1,079)-6%
Percentage of operating revenue97%131%-34%
6%
OPERATING
EXPENSES
DECREASE
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
R&D costs (capitalised and expensed) have declined $0.9 million during the year with
integration of the Arnold platform in the first half of 2017. Software development resources,
used to support a higher level of services revenue, has been excluded from R&D. R&D costs
represent 27% of operating revenue.
Capitalised development costs have also declined by 51% to $0.4 million. The majority of
R&D was research related. Research costs of $4.5 million mostly related to improving the
traveller booking experience in Zeno, including work on predictive booking, natural language
transactions and chat bots. These were partially funded through $1 million of government
grants received from Callaghan Innovations.
Serko expects capitalised development costs to increase with the current developer resources
focused on Zeno development for the Northern Hemisphere and new functionality that will
further contribute to increases in revenue.
Research & Development (R&D) cost is a Non-GAAP measure representing the internal and external costs related to
R&D that have been included in operating costs and capitalised as computer software development during the period.
Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to
an intangible asset. R&D expenses include employee and contractor remuneration related to these activities. It also
covers research expenditure defined by NZ IAS 38.
RESEARCH AND DEVELOPMENT (R&D) COSTS
Year ended 31 March20182017Change%
$ (000)$ (000)$ (000)
Total R&D cost (including amounts capitalised)4,9065,836(930)-16%
Percentage of operating revenue27%41%
Less: capitalised product development costs(383)(780)39751%
Percentage R&D costs8%13%
Research costs (excluding amortisation of
amounts previously capitalised)
4,5235,056(533)-11%
Less: Government grants(956)(1,073)11711%
Add: Amortisation of capitalised development
costs
412450(38)-8%
Net product development costs3,9794,433(454)-10%
Percentage of operating revenue22%31%
16%
DECREASE
R&D COSTS
Serko’s staff head count was relatively flat for the year, moving to 106 from 108 full-time
equivalent (FTE) staff at the end of 2017, with 58 staff based in New Zealand, 20 in Australia,
26 in China and two based in other countries. Average revenue per FTE increased by $48,000
to $170,000, demonstrating the economies of scale we are achieving from the platform as
revenue grows.
Receipts from customers increased by 17% over 2018 from $15.1 million to $17.8 million.
Other operating cash outflows decreased by $0.5 million resulting in positive operating cash
flows for the year of $1.4 million.
Cash outflows for property, plant and equipment and intangibles were $0.5 million lower than
prior year resulting in total net inflows of $0.8 million for the year, including foreign exchange
differences. Cash balances increased by 18% as at 31 March 2018, from $4.5 million to
$5.2 million.
EMPLOYEES AND AVERAGE REVENUE FTE
CASH FLOWS
Year ended 31 March20182017Change%
Product development and maintenance5459-5-8%
Sales and marketing129333%
Customer support2727--
Administration1313--
Total employee numbers at end of year106108-2-2%
Average revenue per FTE (NZD $000)1701224839%
Year ended 31 March20182017Change%
$(000)$(000)$(000)
Receipts from customers17,75415,1132,64117%
Grant income receipts9151,075(114)-11%
Other operating cash flows(17,253)(17,783)4843%
Total cash flows from operating activities1,416(1,595)3,011188%
Investing and financing cash flows(565)(1,038)47346%
Total net cash flows851(2,633)3,484132%
Net foreign exchange differences(70)(34)(36)-106%
Closing cash balances5,2324,45178118%
2%
DECREASE
FTE
INCREASE
18%
CASH
BALANCES
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
FINANCIAL
STATEMENTS
The directors of Serko Limited are pleased to present the
financial statements for Serko Limited and its subsidiaries (the
group) for the year ended 31 March 2018 to shareholders.
The directors are responsible for presenting financial
statements in accordance with New Zealand law and generally
accepted accounting practice, which fairly present the
financial position of the group as at 31 March 2018 and the
results of its operations and cash flows for the year ended on
that date.
The directors consider the financial statements of the group
have been prepared using accounting policies that have been
consistently applied and supported by reasonable judgements
and estimates and that all relevant financial reporting and
accounting standards have been followed.
The directors believe that proper accounting records have been
kept that enable, with reasonable accuracy, the determination
of the financial position of the group and facilitate compliance
of the financial statements with the Companies Act 1993, NZX
Main Board Listing Rules, Financial Reporting Act 2013 and the
Financial Markets Conduct Act 2013.
The directors consider they have taken adequate steps to
safeguard the assets of the group and to prevent and detect fraud
and other irregularities. Internal control procedures are also
considered to be sufficient to provide a reasonable assurance as
to the integrity and reliability of the financial statements.
The financial statements are signed on behalf of the Board on
23 May 2018 by:
CONTENTS
DARRIN GRAFTONSIMON BOTHERWAY
CHIEF EXECUTIVE OFFICERCHAIRMAN
Statement of comprehensive income
30
Statement of changes in equity31
Statement of financial position32
Statement of cash flows33
Notes to the financial statements34-62
Independent auditor’s report
63-65
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
The accompanying notes form part of these financial statements.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2018
Notes20182017
$ (000)$ (000)
Revenue418,27914,277
Other income49941,092
Total revenue and other income19,27315,369
Operating Expenses
Remuneration and benefits (11,667) (12,285)
Selling and marketing expenses (1,258) (1,658)
Administration expenses (3,692) (3,880)
Other expenses (1,067) (940)
Total operating expenses5 (17,684) (18,763)
Finance income5475142
Finance expenses5 (61) (54)
Profit/(loss) before income tax2,003 (3,306)
Income tax expense 6 (171) (144)
Net profit/(loss) attributable to the shareholders of the company1,832 (3,450)
Movement in foreign currency reserve (52) (140)
Total comprehensive income for the year1,780 (3,590)
Earnings per share
Basic profit/(loss) per share16 $0.03 $(0.05)
Diluted profit/(loss) per share16 $0.02 $(0.05)
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2018
Notes
Share
Capital
Share-based
Payment
Reserve
Foreign
Currency
Reserve
Accumulated
Losses
Total
$ (000)$ (000)$ (000)$ (000)$ (000)
Balance as at 1 April 201725,1851,021(33)(19,897)6,276
Net profit/(loss) for the year-- - 1,8321,832
Other comprehensive income/(loss)*--(52) - (52)
Total comprehensive income for the year--(52)1,8321,780
Transactions with owners
Shares allocated to employees15 - 252 - - 252
Shares forfeited from employees15 - (23) - - (23)
Share options to non-executive directors15 - 59--59
Balance as at 31 March 201825,1851,309(85)(18,065)8,344
Balance as at 1 April 201625,185888107(16,447)9,733
Net profit/(loss) for the year - - - (3,450)(3,450)
Other comprehensive income/(loss)* - - (140) - (140)
Total comprehensive income for the year - - (140)(3,450)(3,590)
Transactions with owners
Shares allocated to employees15 - 372 - - 372
Shares forfeited from employees15 - (239) - - (239)
Balance as at 31 March 201725,1851,021(33)(19,897)6,276
*Items in other comprehensive income may be reclassified to the income statement and are shown net of tax.
The accompanying notes form part of these financial statements.
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
STATEMENT OF FINANCIAL POSITION
As at 31 March 2018
Notes20182017
$ (000)$ (000)
Current assets
Cash at bank and on hand115,2324,451
Receivables73,8313,167
Derivative financial instruments8288 -
Total current assets9,3517,618
Non-current assets
Property, plant and equipment9893886
Intangible assets 101,5741,603
Deferred tax asset6155112
Total non-current assets2,6222,601
Total assets11,97310,219
Current liabilities
Trade and other payables122,7932,582
Income tax payable98160
Interest-bearing loans and borrowings14351399
Derivative financial instruments8 - 245
Total current liabilities3,2423,386
Non-current liabilities
Trade and other payables12183269
Interest-bearing loans and borrowings14204254
Derivative financial instruments8 - 34
Total non-current liabilities387557
Total liabilities3,6293,943
Equity
Share capital1525,18525,185
Share-based payment reserve151,3091,021
Foreign currency reserve(85)(33)
Accumulated losses(18,065)(19,897)
Total equity8,3446,276
Total equity and liabilities11,97310,219
For and on behalf of the Board of Directors, who authorise these financial statements for issue on 23 May 2018.
DARRIN GRAFTONSIMON BOTHERWAY
CHIEF EXECUTIVE OFFICERCHAIRMAN
The accompanying notes form part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 March 2018
Notes20182017
$ (000)$ (000)
Cash flows from operating activities
Receipts from customers17,75415,113
Interest received9399
Receipts from grants9151,075
Taxation (paid)/refund received(262)(469)
Payments to suppliers and employees(17,065)(17,349)
Interest payments(22)(16)
Net GST refunded (paid)3(48)
Net cash flows from/(used in) operating activities201,416(1,595)
Cash flows from investing activities
Purchase of property, plant and equipment(192)(247)
Purchase of intangibles(327)(791)
Net cash flows from/(used in) investing activities(519)(1,038)
Cash flows from financing activities
Net repayment of loans(46) -
Net cash flows from/(used in) financing activities(46) -
Net increase (decrease) in total cash851(2,633)
Net foreign exchange difference(70)(34)
Cash and cash equivalents at beginning of period4,4517,118
Cash and cash equivalents at end of period5,2324,451
Cash and cash equivalents comprises the following:
Cash at bank and on hand115,2324,451
5,2324,451
The accompanying notes form part of these financial statements.
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
1 CORPORATE INFORMATION
The financial statements of Serko Limited (‘the company’)
and subsidiaries (‘the group’) were authorised for issue in
accordance with a resolution of directors.
The company is a limited liability company domiciled and
incorporated in New Zealand under the Companies Act
1993 and is listed on the New Zealand Stock Exchange
(NZX). Its registered office is at Unit 14d, 125 The Strand,
Parnell, Auckland.
The group is involved in the provision of computer
software solutions for corporate travel. The group is
headquartered in Auckland, New Zealand.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the
preparation of these consolidated financial statements are
set out below and within this notes section. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
a) Basis of preparation
The financial statements have been prepared in
accordance with generally accepted accounting practice
in New Zealand (NZ GAAP) and the requirements of
the Financial Market Conduct Act 2013. The financial
statements have been prepared on a historical cost basis,
modified by the revaluation of certain assets and liabilities
as identified in specific accounting policies.
The financial statements are presented in New Zealand
dollars and all values are rounded to the nearest thousand
dollars unless stated otherwise.
The financial statements provide comparative information
in respect of the previous period.
b) Going concern
The directors have carefully considered the ability of
the group to continue to operate as a going concern for
at least the next 12 months from the date the financial
statements are authorised for issue. It is the conclusion
of the directors that the group will continue to operate as
a going concern and the financial statements have been
prepared on that basis.
In reaching their conclusion, the directors have considered
the following factors:
• Cash reserves at 31 March 2018 of $5.2 million
provides a sufficient level of headroom to help
support the business for at least the next 12 months.
• The 2019 financial year budget has been prepared to
achieve profitability and positive net cash flow over
the year.
• The directors have made due enquiry into the
appropriateness of the assumptions underlying the
budgetary forecasts.
• In approving the 2019 financial year budget, the
directors have considered detailed contingency plans
presented by the management, including the ability
to adjust resource levels and reduce operating costs,
that can be implemented in the event that adverse
variances in performance versus budget exceed
certain thresholds.
A number of significant judgements have been made in
preparing the budget, the most significant relate to the
timing and level of uptake of demand for new products and
services that are expected to launch or grow significantly
during the year. However, in view of the contingencies and
risk mitigations that have been identified, the directors
consider there is a reasonable expectation that the
group can continue to operate as a going concern for the
foreseeable future.
c) Statement of compliance
The financial statements have been prepared in
accordance with NZ GAAP. They comply with New
Zealand equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting
Standards, as appropriate for profit-oriented entities.
d) New accounting standards and interpretations
NZ IFRS standards that have recently been issued or
amended but are not yet effective and have not been
adopted by the group are:
NZ IFRS 15 Revenue from Contracts from Customers is
effective for accounting periods beginning on or after
1 January 2018. Serko will adopt the standard when
required for the year ended 31 March 2019.
The standard requires entities to recognise revenue
when control of a good or service transfers to a customer
with revenue recognised for the amount that reflects the
consideration to which the entity expects to be entitled
in exchange for the goods and services. As permitted by
the standard, Serko will apply the modified retrospective
approach on transition. Consequently, any adjustments
required to historic revenues at the date of transition will
be recognised against the opening balance of retained
earnings at 1 April 2018 and prior year comparatives will
not be restated.
To date, a sample of contracts have been analysed,
focusing initially on revenue from the Serko Online
product, which represents the majority of revenue.
Serko Online charges mostly involve transaction and
usage fees, which are recorded as revenue at the time
the initial booking is processed. Under NZ IFRS 15, we
expect that this will continue except where the transaction
fee is bundled to include ‘changes post booking’ where
some revenue may need to be deferred until subsequent
changes occur, and where there are minimum transaction
commitments where a different revenue recognition
profile is being considered.
A detailed analysis is ongoing for the remaining bespoke
customer contracts and further areas of adjustment may
still be identified.
NZ IFRS 9 Financial Instruments is effective for accounting
periods beginning on or after 1 January 2018. Serko will
adopt the standard when required for the year ended 31
March 2019.
The standard includes a revised model for classification
and measurement of financial instruments, including a
new expected credit loss model for the calculation of
impairment on financial assets, and changes to general
hedge accounting requirements.
The group considers that the standard will not have a
significant impact on the financial statements, given the
non-complex nature of financial instruments held. The
main change expected will be in respect of receivables
held at amortised cost where the new impairment model
requires the recognition of impairment provisions based
on expected credit losses rather than incurred credit
losses. While calculation of the opening expected credit
loss has not yet been determined, the impact is not
expected to be significant, given the short payment terms
and low level of past due receivables as disclosed in note 7.
The group does not apply hedge accounting and does not
propose to change this on transition to NZ IFRS 9.
NZ IFRS 16 Leases, effective for accounting periods
beginning on or after 1 January 2019. Serko does not
expect to apply the standard early.
When the standard is adopted Serko’s operating leases
will be recorded on balance sheet, with the recognition
of right-to-use assets and an obligation to make lease
payments. The right-to-use assets will be depreciated
over the lease term and the liability will be measured
at amortised cost. As a result, there will be increased
depreciation and interest expense, with a reduction in
rental expense.
Until the project is completed and decisions are made, such
as the transition method to apply and applicable discount
rate to calculate the lease obligation, it is not practicable to
quantify the effect of the standard. Existing operating lease
commitments are set out in note 18.
Amendments to NZ IFRS 2 Share-based Payment. The
following apply prospectively to annual periods beginning
on or after 1 January 2018:
• The accounting for the effects of vesting conditions on
cash-settled share-based payment transactions;
• The classification of share-based payment transactions
with net settlement features for withholding tax
obligations; and
• The accounting for a modification to the terms and
conditions of a share-based payment that changes the
transaction from cash-settled to equity-settled.
Management will assess the impact of the amendment
during the 2019 financial year.
e) Basis of consolidation
The consolidated financial statements comprise the
financial statements of Serko Limited and its subsidiaries as
at and for the year ended 31 March each year.
Control is achieved when the group is exposed, or has
rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through
its power over the investee. Specifically, the group controls
an investee if and only if the group has:
• Power over the investee (i.e. existing rights that give
it the current ability to direct the relevant activities of
the investee;
• Exposure, or rights, to variable returns from its
involvement with the investee; and
• The ability to use its power over the investee to affect
its returns.
When the group has less than a majority of the voting or
similar rights of an investee, the group considers all relevant
facts and circumstances in assessing whether it has power
over an investee, including:
• The contractual arrangement with the other vote holders
of the investee;
• Rights arising from other contractual arrangements; and
• The group’s voting rights and potential voting rights.
3637
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
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MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
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GOVERNANCE &DISCLOSURES
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CORPORATERESPONSIBILITY
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The group reassesses whether or not it controls an
investee if facts and circumstances indicate there are
changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the group
obtains control over the subsidiary and ceases when the
group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed
of during the year are included in the financial statements
from the date the group gains control until the date the
group ceases to control the subsidiary.
A change in the ownership interest of a subsidiary, without
a loss of control, is accounted for as an equity transaction.
If the group loses control over a subsidiary, it:
• Derecognises the assets (including goodwill) and
liabilities of the subsidiary;
• Derecognises the carrying amount of any non-
controlling interests;
• Derecognises the cumulative translation differences
recorded in equity;
• Recognises the fair value of the consideration received;
• Recognises the fair value of any investment retained;
• Recognises any surplus or deficit in profit or loss; and
• Reclassifies the parent’s share of components
previously recognised in other comprehensive income
to profit or loss or retained earnings, as appropriate,
as would be required if the group had directly
disposed of the related assets or liabilities.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The acquisition method
of accounting involves recognising at acquisition date,
separately from goodwill, the identifiable assets acquired,
liabilities assumed and any non-controlling interest in the
acquiree. The identifiable assets acquired and liabilities
assumed are measured at their acquisition date fair values.
Acquisition-related costs are expensed as incurred and
recognised in profit or loss.
The difference between the above items and the fair value
of the consideration is recorded as either goodwill or gain
on bargain purchase. After initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired
in a business combination is, from the acquisition date,
allocated to each of the group’s cash-generating units
expected to benefit from the combination, irrespective
of whether other assets or liabilities of the acquiree are
assigned to those units.
Goodwill is tested annually for impairment, or
immediately if events or changes in circumstances
indicate that it might be impaired, and carried at cost less
accumulated impairment losses. Impairment losses on
goodwill are not reversed.
Any gain on bargain purchase is recognised immediately
on acquisition to profit and loss.
Inter-company transactions, balances and unrealised
gains and losses on transactions between group
companies are eliminated.
Non-controlling interests are allocated their share of
comprehensive income after tax in the statement of
comprehensive income and are presented within equity
in the consolidated statement of financial position,
separately from the equity of the owners of the parent.
f) Foreign currency translation
i) Functional and presentation currency
Items included in these financial statements of each of
the group’s entities are measured using the currency of
the primary economic environment in which the entity
operates (the ‘functional currency’). These financial
statements are presented in New Zealand dollars, which
is the group’s presentation currency and the parent’s
functional currency.
ii) Transactions and balances
Transactions in foreign currencies are initially recorded
in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at balance
date. Non-monetary items measured in terms of
historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value was determined.
Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation
at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are
recognised in profit or loss.
iii) Foreign Currency Translation Reserve
For the purposes of presenting these consolidated
financial statements, the assets and liabilities of the
group’s foreign operations are translated into currency
units using exchange rates prevailing at the end of
each reporting period. Income and expense items are
translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the dates of
the transactions are used. Exchange differences arising,
if any, are recognised in other comprehensive income and
accumulated equity.
g) Financial instruments
Financial assets are classified as either loans and
receivables. When financial assets are recognised initially
they are measured at fair value plus directly attributable
transaction costs. The group determines the classification
of its financial assets on initial recognition and, when
allowed and appropriate, re-evaluates this designation at
each financial year end.
i) Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They arise when the group provides
money, goods or services directly to a debtor with no
intention of selling the receivable. Such assets are
subsequently carried at amortised cost using the effective
interest method. Gains and losses are recognised in profit
or loss when the loans and receivables are derecognised
or impaired, as well as through the amortisation process.
The group’s loans and receivables comprise trade
receivables, loans and GST receivable.
ii) Financial liabilities
Financial liabilities are classified as ‘other financial
liabilities’. Other financial liabilities, including borrowings,
are initially measured at fair value, net of transaction
costs. Other financial liabilities are subsequently
measured at amortised cost using the effective interest
method, with interest expense recognised using an
effective interest method.
The effective interest method calculates the amortised
cost of a financial liability and allocates the interest
expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial
liability or, where appropriate, a shorter period to the net
carrying amount of the liability.
Financial liabilities are classified as current liabilities
unless the group has an unconditional right to defer
settlement of the liability for at least 12 months after
balance date.
iii) Impairment of financial assets
The group assesses, at each reporting date, whether
there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or
a group of financial assets is deemed to be impaired if
there is objective evidence of impairment as a result of
one or more events that have occurred since the initial
recognition of the asset (an incurred ‘loss event’) and that
loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets
that can be reliably estimated. Evidence of impairment
may include indications that the debtors or a group of
debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments,
the probability that they will enter bankruptcy or other
financial reorganisation and observable data indicating
that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
iv) Financial assets carried at amortised cost
For financial assets carried at amortised cost, the group
first assesses whether objective evidence of impairment
exists individually for financial assets that are individually
significant or collectively for financial assets that are
not individually significant. If the group determines
that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment
loss is, or continues to be, recognised are not included in a
collective assessment of impairment.
If there is objective evidence that an impairment loss has
been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding
future expected credit losses that have not yet been
incurred). The present value of the estimated future
cash flows is discounted at the financial asset’s original
effective interest rate. If a loan has a variable interest
rate, the discount rate for measuring any impairment loss
is the current effective interest rate.
The carrying amount of the asset is reduced through the
use of an allowance account and the loss is recognised in
profit or loss. Interest income continues to be accrued
on the reduced carrying amount and is accrued using the
rate of interest used to discount the future cash flows
for the purpose of measuring the impairment loss. The
interest income is recorded as finance income in the
income statement. Loans, together with the associated
allowance, are written off when there is no realistic
prospect of future recovery and all collateral has been
realised or has been transferred to the group. If, in a
subsequent year, the amount of the estimated impairment
3839
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
loss increases or decreases, because of an event occurring
after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by
adjusting the allowance account. If a write off is later
recovered, the recovery is credited to finance costs in the
income statement.
h) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset are
capitalised as part of the cost of that asset. A qualifying
asset is one that takes 12 months or longer to prepare
for its intended use or sale. Other borrowing costs are
expensed when incurred.
i) Other taxes
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST) except where the
GST incurred on a purchase of goods and services is not
recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable. All
receivables and payables are stated GST inclusive.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
taxation authority.
j) Comparative amounts
When the presentation or classification of items is
changed, comparative amounts are reclassified unless the
reclassification is impracticable.
3 SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
The preparation of the group’s consolidated financial
statements requires management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities, and
the accompanying disclosures.
Significant judgements
In the process of applying the group’s accounting policies,
management has made the following judgements,
which have an effect on the amounts recognised in the
consolidated financial statements.
Share-based payments
The fair value applied to shares granted under the restricted
share plan is the volume weighted average price (VWAP) of
shares traded in the previous 20 trading days preceding the
date of grant. Vesting of the shares is reviewed periodically
to determine that the assumptions around vesting dates and
employee churn rate are still valid (refer note 17).
Development costs
Development costs of a project are capitalised
in accordance with the accounting policy. Initial
capitalisation of costs is based on management’s
judgement that technological and economic feasibility
is confirmed, usually when a product development
project has reached a defined milestone according
to an established project management model. In
determining the amounts to be capitalised, management
makes assumptions regarding the expected future cash
generation of the project and the expected period of
benefits (refer note 10).
Functional currency
The group periodically reviews the functional currency
for reporting purposes. The group believes, that there
are sufficient justifications for the continued use of NZD
as the functional currency. The key factors behind this
conclusion are:
• Serko is NZX listed and has raised capital in NZD;
• Research and development grant funding is in NZD;
• NZD is the main currency for labour, operating cost
and capital expenditure; and
• The group also generates certain revenues in NZD.
Impairment of intangible or non-financial assets
Management reviews the carrying value of intangible
and non-financial assets on an annual basis, in particular,
computer software and development work in progress.
Consideration is placed on a number of factors, depending
on the specific asset in question, which may include
discounted cash flow forecasts, the ability to continue
to generate discrete cash flow and returns, any changes
or anticipated changes in the business or product
circumstances and the nature of the events that originally
gave rise to the recognition of any non-financial assets
(refer note 10).
Revenue recognition
Serko has reseller customer agreements that contain
annual minimum transaction volume commitments
that span financial reporting periods. Based on this,
management needs to make a judgement about estimated
future transaction volumes to determine related revenue
for the specific financial reporting period (refer note 4).
4 REVENUE & OTHER INCOME
Revenue is recognised and measured at the fair value of
the consideration received or receivable to the extent it is
probable that the economic benefits will flow to the group
and the revenue can be reliably measured. Revenue is
disclosed net of credit notes, rebates and discounts.
a) Revenue from transaction and usage fees
Revenue from transaction and usage fees is recorded at
the time travel or expense transactions are processed
through Serko’s platforms. Contracts that have minimum
booking volume arrangements are recognised over the
period of volume commitment. Revenue from licence fees
is recognised over the term of the licence agreement.
b) Revenue from services
Revenue from a contract to provide installation services
is recognised by reference to the completion of the
contract or services delivered at balance date. When the
contract outcome cannot be estimated reliably, revenue
is recognised only to the extent of expenses recognised
that are recoverable. Customised software development
services are recognised by reference to stage of
completion at balance date.
c) Government grants
When the grant relates to an expense item, it is recognised
as income over the periods necessary to match the grant on
a systematic basis to the costs it is intended to compensate.
Notes20182017
$ (000)$ (000)
Revenue – transaction and usage fees:
Travel platform booking revenue13,28310,808
Expense platform booking revenue1,5391,125
Supplier commissions revenue1,288751
Other revenues334238
Revenue – services1,8351,356
Total revenue18,27914,277
Government grants139561,073
Sundry income3819
Total other income9941,092
Total revenue and other income19,27315,369
20182017
$ (000)$ (000)
Geographic information
Australia16,59913,195
New Zealand1,038672
US457158
India57136
Singapore4218
Other8698
Total revenue18,27914,277
4041
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
5 EXPENSES
Notes20182017
$ (000)$ (000)
Operating profit/(loss) before taxation includes the following expenses:
Auditor remuneration and advisory fees79116
Amortisation of intangibles10412633
Depreciation9185225
Rental and operating lease expenses729686
Employee remuneration10,76411,462
Contributions to pension plans480416
Share-based payment expenses15288133
Marketing expenses410936
Hosting expenses1,067904
Other operating expenses3,2703,252
Expenses from ordinary activities17,68418,763
Research expenses (excluding capitalised development costs)4,5235,056
Notes20182017
$ (000)$ (000)
Finance income and expenses includes:
Finance income
Interest received111116
Dividends received - 1
Foreign exchange gains – net36425
Total finance income475142
Finance expenses
Interest expense(43)(36)
Other finance expenses(18)(18)
Total finance expenses(61)(54)
Total finance income and expenses41488
Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to an
intangible asset. R&D expenses include employee and contractor remuneration related to these activities.
Research expenditure includes expenditure that meets the definition of research expenditure as defined in NZ IAS 38.
Notes20182017
$ (000)$ (000)
Amounts received or due and receivable by:
Audit of financial statements – Deloitte Limited79 -
Audit of financial statements – EY - 82
Other assurance-related services (a) – EY - 15
Total audit fees7997
Tax services (b) – EY - 19
Total non-audit fees - 19
Auditor remuneration
The directors of Serko Limited appointed Deloitte Limited as the auditor of the group for the year ended 31 March 2018.
Ernst & Young (EY) was the auditor for the year ended 31 March 2017. EY tax services for the year ended 31 March 2018 are
excluded from auditor remuneration below.
(a) Other assurance-related services include services for research and development assurance procedures and half year agreed
upon procedures.
(b) Tax services relate to compliance services.
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HIGHLIGHTS
04
LETTER
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STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
6 INCOME TAX
Current tax assets and liabilities for the current period are
measured at the amount expected to be recovered from
or paid to the taxation authorities based on the current
period’s taxable income. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted in the jurisdictions on which the
group operates at the reporting date.
Current income tax relating to items recognised directly
in equity is recognised in equity and not in the statement
of comprehensive income. Management periodically
evaluates positions taken in the tax returns, with respect
to situations in which applicable tax regulations are
subject to interpretation, and establishes provisions
where appropriate.
Deferred income tax is provided on all temporary
differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences:
• Except for a deferred income tax liability arising from
the initial recognition of goodwill; and
• Except where the deferred income tax liability arises
from the initial recognition of an asset or liability in
a transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all
deductible temporary differences and unused tax losses,
to the extent that it is probable that taxable profit will
be available against which the deductible temporary
differences can be utilised. The carry forward of unused
tax losses can be utilised except where the deferred
income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
The carrying amount of deferred income tax assets is
reviewed at each balance date and reduced to the extent
that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred income
tax asset to be utilised.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based
on tax rates (and tax laws) relevant to the appropriate
tax jurisdiction, that have been enacted or substantively
enacted at the balance date.
Notes20182017
$ (000)$ (000)
Current income tax
Current income tax charge/(credit)225308
Adjustments in respect of previous years(12)6
213314
Deferred income tax
Origination and reversal of temporary differences(42)(170)
Income tax expense reported in the statement of comprehensive income171144
The prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows:
Deferred income tax at 31 March relates to the following:
Notes20182017
$ (000)$ (000)
Accounting profit (loss) before income tax2,003(3,306)
At the statutory income tax rate of 28% (2017:28%) 561(926)
Non-deductible items77
Adjustments in respect of current income tax of previous years(12)6
Chinese branch tax9861
Foreign tax credits not utilised - 16
Share-based payments8137
Tax losses recognised(570) -
Future income tax benefit, not recognised - 934
Effect of tax on overseas subsidiaries at different rate69
Income tax expense171144
At effective income tax rate of:8.5%-4.4%
20182017
Statement
of financial
position
Statement of
comprehensive
income
Statement
of financial
position
Statement of
comprehensive
income
$ (000)$ (000)$ (000)$ (000)
Deferred income tax liabilities recognised
Intangibles - - - 71
Unrealised foreign exchange(10)41(51)15
Deferred income tax asset recognised
Intangibles85(2)8787
Employee entitlements80376(3)
Net deferred tax asset/(liability) recognised15542112170
Deferred income tax asset not recognised
Employee entitlements11251073
Bonus provision1951039292
Accruals - - - (28)
Allowance for impairment - (2)2 -
Leasehold liabilities(11)9(20)(33)
29611518134
Tax losses available to be carried forward and offset against
future income
3,7854,484
Total deferred tax asset not recognised4,0814,665
4445
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
7 RECEIVABLES
Receivables are recognised initially at fair value and
subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Collectibility of receivables is reviewed on an ongoing
basis. Debts that are known to be uncollectible are
written off when identified. A provision for impairment of
receivables is established when there is objective evidence
that the group will not be able to collect all amounts due
according to the original terms of the receivable, changes
in credit quality and past default experience.
The impairment, and any subsequent movement,
including recovery, is recognised in the statement of
comprehensive income.
Notes20182017
$ (000)$ (000)
Trade receivables3,0462,544
Allowance for impairment - (7)
Trade receivables (net)3,0462,537
Loan receivable19326353
Allowance for impairment(25) -
Other receivables (net)301353
GST receivable3022
Prepayments454255
Total receivables3,8313,167
The carrying amounts of the group’s receivables are denominated in the following currencies:
New Zealand dollars1,9181,493
Australian dollars1,8461,634
US dollars5229
Indian rupees1511
3,8313,167
Allowance for impairment loss
i) Trade receivables
Group trade receivables over 60 days of $108,099 (2017:
$103,287). This balance of $108,099 is not considered
impaired as amounts outstanding are in accordance
with agreed payment plans and payment record of the
customers concerned.
Trade receivables are non-interest bearing and are
generally on 30 - 60-day terms. A provision for
impairment loss is recognised where there is objective
evidence that an individual trade receivable is impaired.
No impairment loss has been recognised (2017: $nil)
by the group in the current year. No individual amount
within the impairment allowance is material.
ii) Other receivables
Other receivables consist of an interest-bearing loan
to nuTravel Technology Solutions LLC (nuTravel) of
US$200,000, which was assigned by Financial Equities
Limited (FEL) to Serko Limited in return for an interest-
bearing loan repayable on receipt of the loan receivable.
A revised repayment arrangement with nuTravel was
entered into and this receivable was reassigned back to
FEL subsequent to year end (refer note 23). There is no
financial risk to Serko as the loan receivable is back to
back with the associated loan payable to FEL (refer note
14). FEL is a company associated with directors Bob Shaw
and Darrin Grafton (refer note 19).
Total0-30 days31-60 days61-90 days91+ days
$ (000)$ (000)$ (000)$ (000)$ (000)
At 31 March, the ageing analysis of receivables is as follows:
2018
Trade receivables3,0462,922164662
Other receivables326---326
2017
Trade receivables2,5442,43281193
Other receivables353---353
4647
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
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MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
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8 FINANCIAL INSTRUMENTS
Derivative financial instruments
The group uses derivatives in the form of forward exchange contracts (FECs) to reduce the risk that movements in the
exchange rate will affect the group’s New Zealand dollar cash flows. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair
value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value
is negative.
Notes20182017
$ (000)$ (000)
Current:
Foreign currency forward exchange contracts288(245)
Non-current:
Foreign currency forward exchange contracts - (34)
Contractual amounts of forward exchange contracts outstanding were as follows:
Foreign currency forward exchange contracts10,76313,027
The following table presents the group’s foreign currency forward exchange contracts measured at fair value:
Derivative financial instruments have been determined to be within level 2 of the fair value hierarchy. Foreign currency
forward exchange contracts have been fair valued using published market foreign exchange rates and contract forward rates
discounted at a rate that reflects the credit risk of the counterparties.
9 PROPERTY, PLANT AND EQUIPMENT
All items of property, plant and equipment are recorded
at cost less accumulated depreciation and impairment.
Initial cost includes purchase consideration and those
costs attributable to bringing the asset to the location and
condition necessary for its intended use. Where an item is
self-constructed, its construction cost includes the cost of
materials, direct labour and an appropriate proportion of
production overheads.
Subsequent expenditure relating to an item of property,
plant and equipment is added to its gross carrying
amount when such expenditure either increases the
future economic benefits beyond its existing service
potential or is necessarily incurred to enable future
economic benefits to be obtained and if that expenditure
would have been included in the initial cost of the item
had it been incurred at that time. The carrying amount of
any replaced part is derecognised.
All other repairs and maintenance expenditure is
recognised in profit or loss as incurred.
Depreciation is calculated on a straight-line basis over
the estimated useful life of the asset. The residual value
of assets is reviewed and adjusted, if appropriate, at each
balance date.
The following estimates have been used:
• Leasehold improvements 7%
• Furniture and fittings 6 - 36%
• Computer equipment 17.5 - 48%
a) Impairment
The carrying values of property, plant and equipment
are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not
be recoverable.
If any such indication exists and where the carrying values
exceed the estimated recoverable amount, the assets are
written down to their recoverable amounts.
b) Disposal
An item of property, plant and equipment is derecognised
upon disposal or when no further future economic benefits
are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in
the year the asset is derecognised.
4849
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
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LEADERSHIP
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MANAGEMENTCOMMENTARY
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FINANCIAL STATEMENTS
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GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
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DIRECTORY
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Leasehold
improvement
Furniture &
fittings
Computer
equipment
Total
$ (000)$ (000)$ (000)$ (000)
2018
Cost or valuation
Balance at 1 April 20177673543981,519
Additions413176193
Currency translation(1) - - (1)
Balance at 31 March 20187703675741,711
Depreciation
Balance at 1 April 2017116139378633
Depreciation expense1063643185
Balance at 31 March 2018222175421818
Net carrying amount548192153893
2017
Cost or valuation
Balance at 1 April 20162963433881,027
Additions5012710538
Disposals(29)(16) - (45)
Currency translation(1)--(1)
Balance at 31 March 20177673543981,519
Depreciation
Balance at 1 April 201648106260414
Depreciation expense6839118225
Disposals - (6)-(6)
Balance at 31 March 2017116139378633
Net carrying amount65121520886
9 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)10 INTANGIBLES
Intangible assets acquired separately or in a business
combination are initially measured at cost. The cost of
an intangible asset acquired in a business combination
is its fair value as at the date of acquisition. Following
initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated
impairment losses. Costs related to internally generated
intangible assets, excluding capitalised development costs,
are not capitalised and expenditure is recognised in profit
or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be
either finite or indefinite. Intangible assets with finite
lives are amortised over the useful life and tested for
impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period
and the amortisation method for an intangible asset with a
finite useful life is reviewed at least at each financial year
end. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits
embodied in the asset are accounted for prospectively
by changing the amortisation period or method, as
appropriate, which is a change in accounting estimate. The
amortisation expense on intangible assets with finite lives
is recognised in profit or loss.
Intangible assets with indefinite useful lives are tested
for impairment annually either individually or at the
cash-generating unit level. Such intangibles are not
amortised. An intangible asset with an indefinite useful life
is reviewed each reporting period to determine whether
indefinite life assessment continues to be supportable.
If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an
accounting estimate and is thus accounted for on a
prospective basis.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the
asset and are recognised in profit or loss when the asset
is derecognised.
A summary of the policies applied to the group’s intangible
assets is as follows:
• Computer Software
(finite, amortised on a straight-line basis 40 - 60%).
• Capitalised software development costs
(finite, amortised on 5 years straight-line basis).
Research and development
Research costs are expensed as incurred. An intangible
asset arising from development expenditure on an
internal project is recognised only when the group can
demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or
sale, its intention to complete and its ability to use or
sell the asset. Also how the asset will generate future
economic benefits, the availability of resources to
complete the development and the ability to reliably
measure the expenditure attributable to the intangible
asset during its development. Following initial recognition
of the development expenditure, the cost model is
applied requiring the asset to be carried at cost less any
accumulated amortisation and impairment losses. Any
expenditure capitalised is amortised over the period of
expected benefit from the related project.
Intangible assets under development at balance date are
recorded as capital work in progress and are not subject
to amortisation.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or are
not yet completed are not subject to amortisation and
are tested annually for impairment or more frequently
if events or changes in circumstances indicate that they
might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
In undertaking an impairment review of non-financial
assets that have definite useful lives the following
assumptions were used in the impairment model;
• 5-year forecast period;
• Discount rate of 15%; and
• Discount factor applied using a mid-year convention.
An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its
recoverable amount. Recoverable amount is the higher of
an asset’s fair value less costs to sell, and value in use. For
the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately
identifiable cash inflows that are largely independent of
the cash inflows from other assets or groups of assets
(cash-generating units).
Non-financial assets, other than goodwill that suffered
impairment, are tested for possible reversal of the
impairment whenever events or changes in circumstances
indicate that the impairment may have reversed.
5051
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HIGHLIGHTS
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LETTER
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
Goodwill
Key employee
retention
Customer
contracts
Development
work in
progress
Computer
software
Total
$ (000)$ (000)$ (000)$ (000)$ (000)$ (000)
2018
Cost
Balance at 1 April 2017220784432052,3763,322
Additions - - - 32855383
Transfer of cost - - - (484)484 -
Balance at 31 March 201822078443492,9153,705
Amortisation and impairment
Balance at 1 April 201722078443 - 9781,719
Amortisation - - - - 412412
Balance at 31 March 201822078443 - 1,3902,131
Net carrying amount - - - 491,5251,574
2017
Cost
Balance at 1 April 2016220784434071,3772,525
Additions - - - 780 - 780
Transfer of cost - - - (982)982 -
Currency translation - - - - 1717
Balance at 31 March 2017220784432052,3763,322
Amortisation and impairment
Balance at 1 April 201622058280 - 5281086
Amortisation-20163 - 450633
Balance at 31 March 201722078443 - 9781,719
Net carrying amount---2051,3981,603
10 INTANGIBLES (CONTINUED)
11 CASH AT BANK AND ON HAND
Cash and short-term deposits in the statement of financial position comprise cash at bank, and on hand, short-term highly
liquid investments with an original maturity of three months or less.
12 TRADE AND OTHER PAYABLES
Employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, long service leave and annual leave expected
to be settled within 12 months of the reporting date
are recognised in respect of employees’ services up to
the reporting date. They are measured at the amounts
expected to be paid when the liabilities are settled.
Liabilities for wages and salaries that are not expected to
be settled within 12 months are measured at the present
value of the estimated future cash outflows to be made by
the group in respect of services provided by employees up
to the reporting date.
Post-employment benefits
Contributions made on behalf of eligible employees
to defined contribution funds are recognised in the
period they are incurred. The defined contribution
funds receive fixed contributions from the group whose
legal or constructive obligation is limited to these
contributions only.
Trade and other payables
Trade payables and other payables are carried at
amortised cost and represent liabilities for goods and
services provided to the group prior to the end of the
financial year that are unpaid and arise when the group
becomes obliged to make future payments in respect of
the purchase of these goods and services.
20182017
$ (000)$ (000)
Cash at bank – New Zealand dollar balances4,5293,045
Cash at bank – foreign currency balances7031,407
5,2324,451
The carrying amounts of the group’s cash at bank and on hand are denominated in the following currencies:
New Zealand dollars4,5293,045
Australian dollars5321,340
US dollars17158
Indian rupees-8
5,2324,451
5253
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
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HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
13 GOVERNMENT GRANTS
Government grants are received for direct reimbursement of expenses to assist with research and development of software
solutions to improve service delivery and develop new enhancements to existing platforms.
There are no unfulfilled conditions or contingencies attached to these grants.
An interest-bearing loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities Limited (FEL)
to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable (refer to note 7). FEL is a
company associated with directors Bob Shaw and Darrin Grafton (refer note 19). Subsequent to year end, the receivable was
reassigned back to FEL (refer to note 23).
The average credit period on trade payables is approximately 30 days.
14 INTEREST-BEARING LOANS AND BORROWINGS
12 TRADE AND OTHER PAYABLES (CONTINUED)
20182017
$ (000)$ (000)
Trade payables428532
Accrued expenses1,6401,442
Lease incentive223227
Annual leave accrual665634
GST payable2016
Total trade and other payables2,9762,851
Disclosed as:
Current2,7932,582
Non-current183269
2,9762,851
Notes20182017
$ (000)$ (000)
Current
Loan payable19301353
Leasehold fitout loan5046
351399
Non-current
Leasehold fitout loan204254
204254
15 EQUITY
Ordinary share capital is recognised at the fair value of the consideration received. Transaction costs relating to the listing
of new ordinary shares and the simultaneous sale and listing of existing shares are allocated to those transactions on a
proportional basis.
Transaction costs relating to the sale and listing of existing shares are not considered costs of an equity instrument as no equity
instrument is issued and, consequently, costs are recognised as an expense in the statement of comprehensive income when
incurred. Transaction costs relating to the issue of new share capital are recognised directly in equity as a reduction of the
share proceeds received.
In the current year the group issued no shares (2017: 2,000,000) under the Restricted Share Plan (RSP). In respect of the RSP
230,050 restricted shares (2017: 710,313) had been allocated to key management personnel and 116,107 (2017: 228,519)
allocated to other Serko employees. Unallocated shares are 1,592,299 (2017: 1,819,732) (refer to note 17).
2018201720182017
Number of
shares
Number of
shares
$ (000)$ (000) (000)(000)
Ordinary shares
Share capital at beginning of year25,18525,18574,89472,894
Issue of new shares to employees via Restricted Share Plan - - - 2,000
Share capital at 31 March25,18525,18574,89474,894
20182017
$ (000)$ (000)
Share-based payment reserve
Balance at beginning of year1,021888
Shares allocated to employees via Restricted Share Plan252372
Shares forfeited from employees via Restricted Share Plan(23)(239)
Share options to non-executive directors (refer note 17)59-
Share-based payment reserve at 31 March1,3091,021
5455
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HIGHLIGHTS
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STRATEGICOVERVIEW
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PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
16 EARNINGS PER SHARE (EPS)
Basic EPS amounts are calculated by dividing the loss for the year, attributable to ordinary equity holders of the parent, by the
weighted average number of ordinary shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year, plus the weighted average number of shares that would be
issued on conversion of all of the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and
the date of authorisation of these financial statements.
20182017
$ (000)$ (000)
Loss attributable to ordinary equity holders of the parent
Continuing operations1,832(3,450)
1,832(3,450)
20182017
NumberNumber
Basic earnings per share
Issued ordinary shares (refer note 15)74,89474,894
Adjusted for employee restricted share plan shares(2,991) -
Weighted average of issued ordinary shares71,90373,074
Basic earnings per share (dollars)0.03(0.05)
Diluted earnings per share
Weighted average of issued ordinary shares74,89473,074
Weighted average of issued ordinary shares for diluted earnings per share74,89473,074
Diluted earnings per share (dollars)0.02(0.05)
17 SHARE-BASED PAYMENTS
Employees of the group receive remuneration at the
Board’s discretion in the form of share-based payment
transactions, where services are provided as consideration
for the receipt of equity instruments.
The cost of share-based payment transactions are
recognised, together with a corresponding increase in
equity, over the period in which the service conditions are
fulfilled. The cumulative expense recognised for share-
based transactions at each reporting date, until the vesting
date, reflects the extent to which the vesting period has
expired and the group’s best estimate of the number
of equity instruments that will ultimately vest. The
expense or credit for a period represents the movement in
cumulative expenses recognised at the beginning and end
of that period.
No expense is recognised for awards that do not
ultimately vest except where vesting is conditional upon a
market condition.
Employee Restricted Share Plan
The Serko Limited Employee Restricted Share Plan (RSP)
was introduced for selected executives and employees
of the group. Under the RSP, ordinary shares in Serko
Limited are issued to a trustee, Serko Trustee Limited, a
wholly-owned subsidiary, and allocated to participants, on
grant date, using funds lent to them by the company.
The price for each share issued during the year under
the RSP is the higher of the market price of the share
on the date on which the shares are allocated or the
invitation price.
Under the RSP, shares are beneficially owned by the
participants. The length of retention period before
the shares vest is between one and three years. If the
individual is still employed by the group at the end of this
specific period, the employee is awarded a cash bonus
that must be used to repay the loan and shares are then
transferred to the employee. The number of shares
awarded is determined by the Board. The weighted
average grant date fair value of restricted shares
issued during the year was $0.49 (2017: $0.46) and
was determined by the volume weighted average price
(VWAP) of shares traded in the previous 20 trading days
preceding the date of grant. The group has no legal or
constructive obligation to repurchase the shares or settle
the RSP for cash.
20182017
Number of sharesNumber of shares
Unvested shares at beginning of year1,359,2261,275,502
Granted356,066938,832
Forfeited(128,633)(264,135)
Vested(187,952)(590,973)
Unvested shares at 31 March – allocated to employees1,398,7071,359,226
Plus
Unallocated shares – held by trustee1,592,2991,819,732
Total shares in Restricted Share Plan2,991,0063,178,958
Percentage of total ordinary shares4.0%4.2%
Ageing of unvested shares
Vest within one year183,810184,084
Vest within two to five years1,214,8971,175,142
Unallocated shares 1,592,2991,819,732
Total2,991,0063,178,958
20182017
CentsCents
Net tangible assets per security9.046.24
5657
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
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HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
Share options
The group’s non-executive directors were granted share options, settled by way of a non-recourse loan. The non-recourse loan
is due for repayment 30 June 2020, following an extension to the previous loan due 30 June 2017.
The following table lists the inputs to the model used for the share options for the year ended 31 March 2018:
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period
similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
17 SHARE-BASED PAYMENTS (CONTINUED)
18 LEASE COMMITMENTS
The determination of whether an arrangement is,
or contains, a lease is based on the substance of the
arrangement and requires an assessment of whether the
fulfillment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a
right to use the asset.
A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to
ownership, and operating leases under which the lessor
effectively retains substantially all such risks and benefits.
a) Operating leases
Operating lease payments are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
Operating lease incentives are recognised as a liability
when received and subsequently reduced by allocating
lease payments between rental expense and reduction of
the liability (refer note 12).
20182017
$ (000)$ (000)
Operating lease commitments
No later than one year562514
Later than one year and not later than five years1,3651,755
Later than five years - 193
1,9272,462
19 RELATED PARTIES
a) Subsidiaries
The consolidated financial statements include the financial statements of Serko Limited and subsidiaries as listed in the
following table:
Serko Australia Pty Limited’s principal business is the marketing and support of travel booking software solutions supplied by
Serko Limited.
Serko Trustee Limited was incorporated on 4 June 2014 to hold the shares issued to key management and staff in the
Restricted Share Plan and Salary Sacrifice Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015 as a subsidiary for the India-based operations.
Serko Investments Limited was incorporated on 5 November 2014 as a holding company. It holds 1% of the shares in Serko
India Private Limited.
Foshan Sige Information Technology Limited was incorporated on 7 August 2017 as a subsidiary for the China-based operations.
Serko Inc was incorporated on 30 October 2017 as a subsidiary for the US-based operations.
% Equity interestInvestment $(000)
NameBalance date2018201720182017
Serko Australia Pty Limited31 March100%100%11
Serko Trustee Limited31 March100%100%--
Serko India Private Limited31 March99%99%22
Serko Investments Limited31 March100%100%--
Foshan Sige Information Technology Limited31 March100% - --
Serko Inc31 March100% - --
33
20182017
Dividend yield (%)0.00n /a
Expected volatility (%)60.00n /a
Risk-free interest rate (%)3.00n /a
Expected life of share options (years)3n /a
Weighted average share price ($)1.10n /a
Model usedBlack Scholesn /a
5859
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
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HIGHLIGHTS
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06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
Non-executive directors provide services to Serko in their capacity as non-executive directors and have service agreements
with specified amounts of fees payable per annum. The non-executive directors also hold share options with related non-
recourse loan (refer note 17).
Financial Equities Limited (FEL) is a company associated with directors Bob Shaw and Darrin Grafton. Subsequent to year end, the
receivable from nuTravel (refer note 7) was assigned back to FEL and the loan payable (note 14) fully extinguished (refer note 23).
c) Key management remuneration
b) Transactions with related parties
The following table provides the total amount of transactions that have been entered into with related parties, excluding key
management and executive director remuneration.
d) Terms and conditions of transactions with related parties.
Outstanding balances at year end are unsecured and settlement occurs in cash.
For the year ended 31 March 2018, the group has not made any allowance for impairment loss relating to amounts owed by
related parties (2017: $nil). An impairment assessment is undertaken each financial year by examining the financial position
of the related party and the market in which the related party operates to determine whether there is objective evidence
that a related party receivable is impaired. When such objective evidence exists, the group recognises an allowance for the
impairment loss.
(*) Key management personnel includes the executive directors in their capacity as Chief Executive Officer and Chief Strategy Officer, the executive management
team and their direct reports.
Notes
Purchases from
related parties
Interest to
related parties
Amounts owed
to related
parties
Amounts owed
by related
parties
$ (000)$ (000)$ (000)$ (000)
Other related parties
Financial Equities Limited142018 - 21301 -
2017 - 20353 -
Simon Botherway – Chairman201880 - - -
201770 - - -
Claudia Batten – Non-executive Director201874 - - -
201760 - - -
Clyde McConaghy – Non-executive Director201874 - - -
201760 - - -
Total201822821301 -
201719020353 -
20182017
$ (000)$ (000)
Short-term benefits employees (*)3,2942,974
Share-based payments16292
Post-employment benefits7294
Total compensation3,5283,160
19 RELATED PARTIES (CONTINUED)20 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
20182017
$ (000)$ (000)
Net profit/(loss) after tax1,832(3,450)
Add non-cash items
Amortisation412633
Depreciation185225
Loss on property, plant and equipment disposal - 36
Increase/(decrease) in deferred tax(42)(170)
Loss/(gain) on foreign exchange transactions(556)175
Share-based compensation288133
2,119(2,418)
Add/(less) movements in working capital items
(Increase)/decrease in receivables excluding loans(764)820
Increase/(decrease) in trade and other payables123158
Increase/(decrease) in income tax(62)(155)
(703)823
Net cash flow from operating activities1,416(1,595)
6061
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
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HIGHLIGHTS
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STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The group’s principal financial instruments comprise cash at bank, bank overdrafts, receivables, payables and loans.
The group manages its exposure to key financial risks, including currency risk, in accordance with the group’s financial risk
management policy. The objective of the policy is to support the delivery of the group’s financial targets whilst protecting
future financial security.
Group capital consists of share capital and retained earnings. To maintain or adjust the capital structure, the group may adjust
amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or amend capital spending plans
The main risks arising from the group’s financial instruments are foreign currency, interest, credit and liquidity risk. The
group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring
levels of exposure to foreign exchange risk, and assessments of market forecasts for foreign exchange. Ageing analyses
and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the
development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
a) Risk exposures and responses
i) Interest rate risk
The group has exposure to interest rate risk to the extent it borrows funds at fixed and floating interest rates. The risk
specifically relates to the variability of interest rates and the impact this will have on the group’s financial results. The group
manages its cost of borrowing by placing limits on the proportion of borrowings at floating rate and the proportion of fixed
rate borrowing repriced in any year.
At balance date this year and prior year, the group did not have any financial liabilities exposed to variable interest rate risk.
ii) Liquidity and interest rate risk
Liquidity risk represents the group’s ability to meet its financial obligations on time. In terms of managing its liquidity risk, the
group generates sufficient cash flows from its operating activities and holds sufficient cash reserves to meet its obligations
arising from its financial liabilities and has credit lines in place to cover potential shortfalls.
The following table sets out the contractual cash flows for all non-derivative financial liabilities settled on a gross cash flow basis.
Weighted
average effective
interest rate %
Contractual
cash flows
6 months
or less
6-12 months1-2 years2-5 years
More than
5 years
$ (000)$ (000)$ (000)$ (000)$ (000)$ (000)
2018
Accounts payable0%2,7542,754 - - - -
Related party loans6%301301 - - - -
Leasehold fitout8%302343468166 -
3,3573,0893468166 -
2017
Accounts payable0%2,6242,624 - - - -
Related party loans6%353353 - - - -
Leasehold fitout8%300232320234 -
3,2773,0002320234 -
b) Currency risk
The group has exposure to foreign exchange risk as a result of transactions denominated in foreign companies. The risk
specifically relates to the variability of foreign exchange rates for the currencies the group trades in and the impact this has
on the group’s financial results. The majority of the group’s trading activities occur in New Zealand dollars, however, sales to
overseas customers are transacted in United States and Australian dollars.
Refer to notes 7 and 11 for further details on the group’s foreign currency denominated accounts receivable and cash balances.
The following table summarises the sensitivity to foreign currency exchange rate movements. A sensitivity of +/- 15% (2016:
+/- 15%) has been selected owing to exchange rate volatility observed.
c) Credit risk
Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, and receivables. The
group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the
carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.
The group does not hold any credit derivatives to offset its credit exposure.
Receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant.
At reporting date 100% (2017: 100%) of the group’s cash and cash equivalents were with one bank. The group has no other
concentrations of credit risk.
Foreign currency risk
-15%+15%
Carrying amountPost-tax profitEquityPost-tax profitEquity
$ (000)$ (000)$ (000)$ (000)$ (000)
2018
Foreign exchange balances
Cash at bank7038989(66)(66)
Trade receivables1,913243243(180)(180)
Trade payables(110)(14)(14)1010
Net exposure2,506318318(236)(236)
2017
Foreign exchange balances
Cash at bank1,398179179(132)(132)
Trade receivables1,310223223(165)(165)
Trade payables(176)(16)(16)1212
Net exposure2,532386386(285)(285)
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PRODUCTS
12
LEADERSHIP
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MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
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GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
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79
d) Fair value
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated
financial statements approximate their fair value.
e) Derivative offsetting
The group does not have financial assets or liabilities subject to an enforceable master netting agreement, hence has not
offset or net financial assets or financial liabilities.
22 SEGMENT INFORMATION
The Board and senior management team monitors the results of the group’s operations as a whole for making decisions
about resource allocation and performance assessment and therefore the Board has determined the group is a single
reportable segment.
Serko derives operating revenue from Serko Online, Serko Zeno, Serko Mobile and Serko Expense technology platforms. Serko
product and geographical revenue presented in note 4.
As required under IFRS 8, Serko is required to report on major customers making up more than 10% of the revenue for the
year. Under this disclosure Serko advises that two customers had revenue more than 10% of the revenue for the group. These
customers accounted for $9,219,226 of the revenue for the year ended 31 March 2018 (2017: $7,709,305).
23 EVENTS AFTER BALANCE SHEET DATE
On 8 May 2018 the receivable from nuTravel (refer note 7) was reassigned to Financial Equities Limited (FEL) (a related party
refer note 19) and the loan payable to FEL (refer note 14) was fully extinguished (2017: nil events).
In addition to its current listing on the NZX, Serko intends to list on the Australian Securities Exchange (ASX) on 25 June 2018,
subject to ASX approval.
24 CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2017: $nil).
INDEPENDENT AUDITOR’S REPORT
OPINION
We have audited the consolidated financial statements of
Serko Limited (‘the company’) and its subsidiaries (the ‘Group’),
which comprise the statement of financial position as at 31
March 2018, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows
for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial
statements, on pages 30 to 62, present fairly, in all material
respects, the consolidated financial position of the Group as
at 31 March 2018, and its consolidated financial performance
and cash flows for the year then ended in accordance with
New Zealand Equivalents to International Financial Reporting
Standards (‘NZ IFRS’) and International Financial Reporting
Standards (‘IFRS’).
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (‘ISAs’) and International Standards
on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities
under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial
Statements section of our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with
Professional and Ethical Standard 1 (Revised) Code of Ethics
for Assurance Practitioners issued by the New Zealand
Auditing and Assurance Standards Board and the International
Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor, we have no relationship
with or interests in the Company or any of its subsidiaries,
except that partners and employees of our firm deal with the
Company and its subsidiaries on normal terms within the
ordinary course of trading activities of the business of the
Company and its subsidiaries.
To the Shareholders of Serko Limited
AUDIT MATERIALITY
We consider materiality primarily in terms of the magnitude
of misstatement in the financial statements of the Group that
in our judgement would make it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced (the ‘quantitative’ materiality). In
addition, we also assess whether other matters that come to
our attention during the audit would in our judgement change
or influence the decisions of such a person (the ‘qualitative’
materiality). We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
We determined materiality for the Group financial statements
as a whole to be $195,000.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion
on these matters.
21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
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PRODUCTS
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LEADERSHIP
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FINANCIAL STATEMENTS
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Key audit matterHow our audit addressed the key audit matter
Revenue recognition
The Group has reported revenue of $18.3 million, as set out in
note 4 ‘Revenue and other income’.
Revenue is based on multiple customer contracts that contain
different pricing schedules and varying revenue recognition
triggers. Complexity exists because of the specific nature of each
customer contract, which can include transactional and usage fees,
establishment and installation fees, and chargeable work orders.
Management judgment is required to estimate revenue
recognition where cash flows do not align to contract performance
obligations, in particular when minimum transaction volume
commitments have period end dates that do not align to the
financial year end.
We have included revenue recognition as a key audit matter due
to the significance of revenue to the financial statements and the
specific nature of individual customer contracts.
We performed walkthroughs of the major
revenue processes and evaluated the design and
implementation of key controls.
We tested a sample of transactions by agreeing
invoices to signed customer contracts in order to
validate pricing inputs and assess whether revenue
has been recorded in the correct period.
We used data analytic tools to:
• identify revenue transactions that appear unusual
and agree that prices have been correctly allocated
to customer invoices
• agree travel booking transactions recorded in IT
systems to the financial ledger
• test samples of manual journal entries recorded
outside of normal business processes by profiling
for revenue impacting journals.
We assessed key judgements adopted by the Group in
recognising revenue including the timing and disclosure
of revenue net of credit notes, rebates and discounts.
We have challenged management’s revenue
recognition based on the likelihood of customers
not achieving contractual minimum volume
commitments spanning the financial year end.
Accounting for development expenditure
The Group capitalised $328,000 in relation to software
development, as set out in note 10 ‘Intangibles’.
As a Software as a Service (“SaaS”) provider, the Group incurs
significant expenditure in developing new software products to
meet the strategic objectives of the business.
Judgement is required to determine if the recognition criteria
within NZ IAS 38 Intangible Assets have been met, which include
technical feasibility, the likelihood of generating future economic
benefits and sufficient funding for completion.
NZ IAS 36 also requires the Group to assess whether any
indicators of impairment exist as at balance date.
We have included accounting for development expenditure as
a key audit matter due to the level of judgement required for
management to determine whether:
• internal staff time or external developer costs incurred meet
the criteria to be capitalised; and
• information exists as at year end that would indicate the need
to impair an intangible asset.
For each product, we have understood the nature of
expenditure, the stage of product development, and
how the Group distinguishes expenditure between
research, development and maintenance costs.
We performed audit procedures over development
costs capitalised as computer software, by testing a
sample of additions and evaluating if the recognition
criteria under NZ IAS 38 have been met.
We assessed key judgements adopted to determine
whether indicators for impairment exist. In
particular we considered existing software for
technical obsolescence, by ensuring appropriate
revenues exist for those products and corroborating
with management whether features or product
enhancements previously capitalised are still in use.
OTHER INFORMATION
The directors are responsible on behalf of the Group for
the other information. The other information comprises
the information in the Annual Report that accompanies the
consolidated financial statements and the audit report.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and
consider whether it is materially inconsistent with the
consolidated financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated.
If so, we are required to report that fact. We have nothing to
report in this regard.
DIRECTORS’ RESPONSIBILITIES FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The directors are responsible on behalf of the Group for the
preparation and fair presentation of the consolidated financial
statements in accordance with NZ IFRS and IFRS, and for such
internal control as the directors determine is necessary to
enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the
directors are responsible on behalf of the Group for assessing
the Group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with
ISAs and ISAs (NZ) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
A further description of our responsibilities for the audit of the
consolidated financial statements is located on the External
Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors-responsibilities/audit-report-1
This description forms part of our auditor’s report.
RESTRICTION ON USE
This report is made solely to the Company’s shareholders, as a
body. Our audit has been undertaken so that we might state to
the Company’s shareholders those matters we are required to
state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company’s
shareholders as a body, for our audit work, for this report, or
for the opinions we have formed.
Bryce Henderson, Partner for Deloitte Limited
Auckland, New Zealand
23 May 2018
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PRODUCTS
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LEADERSHIP
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MANAGEMENTCOMMENTARY
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FINANCIAL STATEMENTS
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CORPORATE GOVERNANCE & DISCLOSURES
For the year ended 31 March 2018
INTRODUCTION
The Board and management of Serko Limited (Serko or
the company) are very committed to ensuring that Serko
maintains corporate governance practices that are in line
with or, where possible, exceed best practice and that Serko
adheres to the highest ethical standards.
The Board has had regard to the NZX Listing Rules and a
number of corporate governance recommendations when
establishing its governance framework, including the revised
NZX Corporate Governance Code 2017 (NZX Code) and
the Third Edition of the Australian Securities Exchange
(ASX) Corporate Governance Council Principles and
Recommendations.
The NZX Listing Rules require Serko to formally report
its compliance against the recommendations contained
in the NZX Code. How Serko has implemented these
recommendations is set out in Serko’s Corporate Governance
Statement, which is included in its ESG Report and can be
found on the investor centre of the company’s website. Go
to: www.serko.com/investor-centre/. The Board considers
that Serko’s corporate governance structures, practices and
processes have followed all of the recommendations in the
NZX Code during the financial year ended 31 March 2018.
Serko’s Corporate Governance Statement and governance
charters and policies can be found on the investor centre
of the company’s website. Go to: www.serko.com/investor-
centre/. Serko’s corporate governance charters and policies
have been approved by the Board and are regularly reviewed
by the Board and amended (as appropriate) to reflect
developments in corporate governance practices.
STOCK EXCHANGE LISTINGS
Serko is listed on the New Zealand Stock Exchange (NZX
Main Board) and intends to list on the Australian Securities
Exchange (ASX) as an ASX Foreign Exempt Listing, subject to
ASX approval. As an ASX Foreign Exempt Listing, Serko will
need to comply with the NZX Listing Rules (other than as
waived by NZX) but does not need to comply with the vast
majority of the ASX Listing Rule obligations.
Serko is incorporated in New Zealand.
OVERVIEW OF SERKO’S GOVERNANCE STRUCTURE
The Serko Board has been appointed by shareholders to
protect and enhance the long-term value of Serko and to act
in the best interests of Serko and its shareholders. The Board
is the ultimate decision-making body of the company and is
responsible for the corporate governance of the company. The
role and responsibilities of the Board are set out in the Board
Charter, which can be found on the investor centre of the
company’s website.
The Board currently comprises an independent non-
executive Chair, two independent non-executive directors
and two executive directors, as detailed on page 14 of this
Annual Report.
The Board has established two standing Board Committees to
assist in the execution of the Board’s responsibilities:
• Audit and Risk Committee – The current members
of the Committee are Clyde McConaghy (Chair),
Simon Botherway and Claudia Batten. All members
are independent, non-executive directors. Their
qualifications and experience is set out under Board of
Directors in this Annual Report.
• Remuneration and Nominations Committee – The
current members of the Committee are Claudia Batten
(Chair), Simon Botherway and Clyde McConaghy. All
members are independent, non-executive directors.
Their qualifications and experience is set out under
Board of Directors in this Annual Report.
DIRECTOR REMUNERATION
Serko’s shareholders have approved a total cap of $350,000
per annum for non-executive directors’ fees, for the purposes
of the NZX Listing Rules. This annual fee pool has not been
increased since it was approved by shareholders in 2014.
Serko currently pays directors’ fees that, in aggregate, amount
to approximately $250,000 per annum, subject to exchange
rate fluctuations. More information about remuneration
payable to directors is set out in Serko’s Corporate
Governance Statement, which is located on the investor
centre of the company’s website.
The Board has agreed that the following fixed annual fees will apply to all non-executive directors for the year ending 31 March 2019:
Non-executive directors received the following directors’ fees, remuneration and other benefits from the company in the year
ended 31 March 2018:
Remuneration and value of other benefits received
1
Name of Director
Non-Executive
Directors’ Board fees
2
Audit & Risk
Committee fees
Remuneration
& Nominations
Committee fees
Shares and other
payments or benefits
3
Total remuneration
Simon Botherway
$80,000
(Chair)
---$80,000
Clyde McConaghy$63,626
$10,604
(Chair)
--$74,230
Claudia Batten$63,626-
$10,604
(Chair)
-$74,230
TOTAL$207,252$10,604$10,604-$228,460
PositionFees per annum
Board of DirectorsChairNZD$90,000
Non-executive directorsAUD$65,000
Audit & Risk CommitteeCommittee ChairAUD$10,000
Committee Member-
Remuneration & Nominations CommitteeCommittee ChairAUD$10,000
Committee Member-
1 The figures shown are gross amounts, which have been converted into NZD and exclude GST (where applicable). Increases in Chair and non-executive Directors fees
were effective from 1 October 2017, while Committee Chair fees were introduced effective 1 April 2017.
2 Board fees includes the amount of base fees payable to Mr Botherway and Ms Batten, which are used to acquire shares in the company under the non-executive
Director Fixed Trading Plan (refer to the Corporate Governance Statement on the investor centre of Serko’s website for more information on the Plan).
3 In addition to directors fees, Serko meets costs incurred by non-executive directors that are incidental to the performance of their duties. This includes paying the
costs of directors’ travel. As these costs are incurred by Serko to enable directors to perform their duties, no value is attributable to them as benefits to directors for
the purposes of the above table.
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LEADERSHIP
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MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
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GOVERNANCE &DISCLOSURES
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The executive directors, Darrin Grafton and Bob Shaw, receive remuneration and other benefits in their respective executive roles
as Chief Executive Officer and Chief Strategy Officer and, accordingly, do not receive directors fees.
The table below (and accompanying notes) sets out the total remuneration and value of other benefits earned by, or paid to, each
executive director of Serko during, and in respect of, the financial period ended 31 March 2018:
Base salary
1
Taxable
benefits
2
SubtotalPay for performanceTotal remuneration
STILT I
5
Subtotal
Darrin Grafton$282,266$30,000$312,266$85,000
3
$41,900 in the
form of 54,460
restricted shares
$126,900$439,166
Bob Shaw$256,694$30,000$286,694$50,000
4
$20,950 in the
form of 25,103
restricted shares
$70,950$357,644
1 Base salary includes employer contributions towards KiwiSaver at 3%.
2 Taxable benefits include a car allowance, carpark and medical insurance.
3 The short-term incentive stated was earned in FY18 and will be paid in FY19. Darrin Grafton’s potential short-term incentive payment for FY18 was $120,000. During
the financial period Darrin Grafton also received a short-term incentive of $21,000, which was earned in FY17 and paid in FY18.
4 The short-term incentive stated was earned in FY18 and will be paid in FY19. During the financial period Bob Shaw also received a short-term incentive of $10,500,
which was earned in FY17 and paid in FY18.
5 The FY18 long-term incentive was granted in July 2017, following partial achievement of pre-grant performance targets based on FY17 performance. The restricted
shares will vest three years after the allocation date. The value stated is the gross amount earned.
Remuneration range (NZD)
Total number of
employees
$100,000 - $110,0004
$110,001 - $120,0007
$120,001 - $130,0003
$130,001 - $140,0006
$140,001 - $150,0007
$150,001 - $160,0001
$160,001 - $170,0002
$170,001 - $180,0003
$180,001- $190,0002
$190,001 - $200,0002
$210,001 - $220,0001
$220,001 - $230,0001
$240,001 - $250,0001
$310,001 - $320,0002
$320,001 - $330,0001
$360,001 - $370,0001
Total number of employees and
former employees
44
Female
20182017
no.%no.%
Directors120%120%
Officers
1
120%114%
Senior employees
2
433%747%
Remaining workforce3539%4044%
Male
20182017
no.%no.%
Directors480%480%
Officers
1
480%686%
Senior employees
2
867%853%
Remaining workforce5461%4756%
1 Officers are considered to be the Chief Executive Officer and his direct
reports (the Executive Team). Note that Chief Executive Officer, Darrin
Grafton and Chief of Strategy, Bob Shaw, are included in both the number of
directors and Officers reported.
2 Direct reports to the Executive Team with managerial responsibilities.
EMPLOYEE REMUNERATION
The table below shows the number of employees and former
employees of Serko and its subsidiaries, not being directors
of Serko, who, in their capacity as employees, received
remuneration and other benefits during the period ended 31
March 2018 totalling at least NZ$100,000.
The remuneration of those employees paid outside of New
Zealand has been converted into New Zealand dollars. No
employee appointed as a director of a subsidiary company of
Serko receives any remuneration or other benefits for acting
in that capacity.
The table above includes base salaries, short-term incentives
and vested or exercised long-term incentives. The table does
not include long-term incentives that have been granted
and have not yet vested. Where the individual is a KiwiSaver
member, contributions of 3% of gross earnings towards that
individual’s KiwiSaver scheme are included in the above table.
Where the individual works in Australia, contributions of 9.5%
of gross earnings towards Australian Superannuation are
included in the table above.
DIVERSITY
The respective numbers and proportions of men and women at
various levels within the Serko workforce as at 31 March 2017
and 31 March 2018 are set out in the table below:
The Board’s assessment of Serko’s performance against its
Diversity and Inclusion Policy is set out in latest ESG report,
which can be found on the investor centre of the
company’s website.
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28
GOVERNANCE &DISCLOSURES
66
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DIRECTORY
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BOARD AND COMMITTEE ATTENDANCE
The table below shows the Board and Committee meeting attendance during the year ended 31 March 2018:
DIRECTOR INDEPENDENCE
The Board currently comprises five directors – being the two co-founders and executive directors, Darrin Grafton and Bob Shaw;
and three non-executive directors – Claudia Batten, Simon Botherway and Clyde McConaghy.
The Board has determined, based on information provided by directors regarding their interests, that as at 31 March 2018 and
the date of this Annual Report, Simon Botherway, Claudia Batten and Clyde McConaghy are independent directors. The Board
has also determined that Darrin Grafton and Bob Shaw are not independent directors owing to also being executives and major
shareholders in Serko.
DIRECTOR INTEREST DISCLOSURES
Directors have given notices disclosing interests pursuant to section 140(1) of the Companies Act 1993. Those interests (and
any changes to interests) notified and recorded in Serko’s Interests Register during the financial year ended 31 March 2018 are
set out below:
Director attendanceBoard
Audit & Risk
Committee
Remuneration
& Nominations
Committee
Darrin Grafton12/12**
Bob Shaw12/12**
Simon Botherway12/125/54/4
Clyde McConaghy12/125/54/4
Claudia Batten12/125/54/4
Date of disclosureDirectorEntity
20-Jun-17
Simon Botherway
Claudia Batten
Clyde McConaghy
Gave notice that they were interested in a Deed of Amendment to be entered
into between each interested director and the company extending the term
of the Director Share Loan between the director and the company (originally
approved by shareholders at the time of the IPO) for a further three-year term.
22-Nov-17
Darrin Grafton
Bob Shaw
Gave notice to the Board that Financial Equities Limited, in which they are
shareholders and directors, is interested in a Deed of Assignment to be entered
into between Serko Limited and Financial Equities Limited in respect of a loan to
nuTravel Technology Solutions.
Directors have given general notices disclosing interests pursuant to section 140(2) of the Companies Act 1993. All of those
interests, and any changes to interests notified and recorded in Serko’s Interests Register during the financial year ended 31 March
2018, are set out below:
DirectorEntityRelationship
Claudia Batten
Broadli Inc
New Zealand Trade & Enterprises
1
Serko Inc
2
Westpac New Zealand Limited
Director
Regional Director
Appointed Director
Board Adviser
Simon Botherway
Arrow Trust
Callaghan Innovation Board
EBT Capital Limited
Fidelity Life Insurance
Landcorp Board
MSH Trustee (Arrow Limited)
Trustee
Board Member
Ceased to be Director
Director
Ceased to be Board Adviser
Trustee
Darrin Grafton
Financial Equities Limited
Grafton-Howe No.2 Trust
Serko Australia Pty Limited
2
Serko Inc
2
Serko India Private Limited
2
Serko Investments Limited
2
Serko Note Limited
Travelog World for Windows Pty Limited
Director
Trustee
Director
Appointed Director
Director
Director
Director
Director
Clyde McConaghy
Chapman Eastway Pty Limited
Infomedia Limited
Optima Boards
Chairman (Advisory Board)
Director
Director
Bob Shaw
Financial Equities Limited
Ripon Trust
Serko Australia Pty Limited
2
Serko India Private Limited
2
Serko Investments Limited
2
Serko Note Limited
Travelog World for Windows Pty Limited
Director
Trustee
Director
Director
Director
Director
Director
1 Claudia Batten ceased to hold this position from 30 April 2018.
2 Serko subsidiary as detailed on page 76.
* Indicates the director is not a member of the Committee (although they were in attendance for these meetings).
7273
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
In accordance with Section 148(2) of the Companies Act 1993, directors disclosed the following acquisitions or disposals of
relevant interests in Serko ordinary shares during the financial year ended 31 March 2018:
Name
Date of
acquisition/
(disposal)
Number of shares
acquired/(disposed)
Nature of relevant interest
Consideration
paid/received
Claudia Batten5-Feb-18
5-Mar-18
2,181.63 ordinary shares
1
1,927.57 ordinary shares
1
Beneficial interest in ordinary shares held
in custody for Claudia Batten pursuant to
non-executive Director Fixed Trading Plan
Beneficial interest in ordinary shares held
in custody for Claudia Batten pursuant to
non-executive Director Fixed Trading Plan
$4,125.00
$4,125.00
Simon Botherway5-Feb-18
5-Mar-18
2,181.63 ordinary shares
1
1,927.57 ordinary shares
1
Beneficial interest in ordinary shares held in
custody for Simon Botherway pursuant to
non-executive Director Fixed Trading Plan
Beneficial interest in ordinary shares held in
custody for Simon Botherway pursuant to
non-executive Director Fixed Trading Plan
$4,125.00
$4,125.00
Darrin Grafton6-Jul-17
6-Jul-17
24-Nov-17
54,460 restricted shares
2
3,469 restricted shares
3
(320,000) ordinary shares
4
Beneficial interest in ordinary shares with
restrictive conditions allocated pursuant
to the Serko Limited Employee Restricted
Share Plan, held in trust until vesting.
Indirect interest in restricted shares
allocated pursuant to the Serko Limited
Employee Restricted Share Plan to Ms
Bailey, by virtue of a personal relationship
with Ms Bailey.
Indirect interest in the shares being disposed
of by virtue of a personal relationship with
the registered holder, Ms Bailey.
$41,900.00
5
$2,699.03
5
$464,000.00
Bob Shaw6-Jul-1725,103 restricted shares
2
Beneficial interest in Ordinary Shares with
restrictive conditions allocated pursuant
to the Serko Limited Employee Restricted
Share Plan, held in trust until vesting.
$20,950.00
5
1 Shares are acquired automatically, on a monthly basis, by an independent broker pursuant to the non-Executive Director Fixed Trading Plan. For more details refer to
Serko’s Corporate Governance Statement on the investor centre of Serko’s website. These shares may not be disposed of while the holder remains a director of Serko
and, in any event, for three years from the commencement of the Plan.
2 These shares are subject to a deed restricting exercise of voting rights attached to the shares.
3 By virtue of Darrin Grafton’s personal relationship, he is implied to have the power to exercise, or to control the exercise of, a right to vote attached to these shares
by virtue of a personal relationship with the beneficial holder of these shares. These shares are subject to a deed restricting exercise of voting rights attached to the
shares.
4 These shares were disposed of by Ms Bailey. By virtue of Darrin Grafton’s personal relationship with Ms Bailey, he is implied to have the power to dispose of or to
control the disposal of shares held by Ms Bailey. Darrin Grafton did not dispose of any of his direct interest in Serko shares.
5 Paid in the form of services to Serko.
In accordance with the NZX Listing Rules, as at 31 March 2018, directors had a relevant interest (as defined in the Financial
Markets Conduct Act 2013) in Serko ordinary shares as follows:
For the purposes of section 161 of the Companies Act 1993, the following entries were made in the Interests Register in relation to
the payment of remuneration and other benefits to directors:
For the purposes of section 162 of the Companies Act 1993, an entry was made in the Interests Register in relation to insurance
effected for directors and officers of Serko, in relation to any act or omission in their capacity as directors.
There were no entries made in the subsidiary company Interests Registers during the financial reporting period.
NameRelevant interestPercentage
Darrin Grafton
1
13,988,491 18.678%
Bob Shaw
2
12,918,50517.249%
Simon Botherway
3
2,323,109.203.102%
Claudia Batten
4
185,927.200.248%
Clyde McConaghy
5
181,8180.243%
DateDirectorParticulars of Board authorisation
20-Jun-17
Bob Shaw
Darrin Grafton
The payment of remuneration and the provision of other benefits by the company
and the making of the loan by the company under the Restricted Share Plan on
the terms set out in the resolution dated 20 June 2017 and in accordance with
the terms of the Serko Employee Restricted Share Plan documentation.
20-Jun-17
Simon Botherway
Claudia Batten
Clyde McConaghy
The extension of loans for a further three-year period to 30 June 2020 (originally
authorised on 30 April 2014) by the company to each of the non-executive
directors on the terms set out in the relevant Deed of Amendment and Original
Loan Agreement.
20-Sep-17
Simon Botherway
Claudia Batten
Clyde McConaghy
The payment of increased directors fees and the provision of other benefits
by the company to the non-executive directors on the terms detailed in the
Board minutes dated 20 September 2017 and, on the grounds, set out in the
corresponding directors’ certificate.
24-Nov-17
Simon Botherway
Claudia Batten
Clyde McConaghy
Entry into a Fixed Trading Plan for non-executive Directors
1 12,667,629 shares are held via a trust in which the director is a trustee and beneficiary. This includes an indirect interest in (and by virtue of the indirect interest
is considered to have the power to exercise, or to control the exercise of, a right to vote attached to) 1,217,594 shares and 9,296 restricted shares by virtue of a
personal relationship with the legal and beneficial holder of these shares. This includes beneficial interest in 93,972 restricted shares allocated pursuant to the Serko
Employee Restricted Share Plan and held on trust until vesting.
2 12,884,296 shares are held via a trust in which the director is a trustee and beneficiary. This includes beneficial interest in 34,209 restricted shares allocated
pursuant to the Serko Employee Restricted Share Plan and held on trust until vesting.
3 2,034,091 shares are held via a trust in which the director is a trustee and beneficiary. 284,909 shares are held directly. 4,109.20 shares are held in custody pursuant
to the Serko non-Executive Director Fixed Trading Plan.
4 4,109.20 shares are held in custody pursuant to the Serko non-Executive Director Fixed Trading Plan.
5 Held via a trust in which the director is a trustee and beneficiary.
7475
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
SHAREHOLDING INFORMATION
As at 30 April 2018 there were 74,894,342 Serko ordinary shares on issue, each conferring on the registered holder the right to
vote on any resolution at a meeting of shareholders, held as follows:
As at 30 April 2018 there were five shareholders holding between 1 and 100 ordinary shares (a minimum holding under the NZX
Listing Rules) in respect of 326 shares.
Size of shareholdingNumber of holders
1
%
Number of
ordinary shares
%
1 to 1,00018418.44 127,191 0.17
1,001 to 5,00041441.48 1,290,780 1.72
5,001 to 10,00015815.83 1,295,283 1.73
10,001 to 50,00016516.53 3,776,593 5.04
50,001 to 100,000303.01 2,199,773 2.94
100,001 and over474.71 66,204,722 88.40
TOTAL998100.00 74,894,342 100.00
1 Includes 2,991,006 ordinary shares with restrictive conditions held by Serko Trustee Limited on behalf of 37 beneficial holders pursuant to the Serko Restricted Share
Plan. Restricted shares have voting rights attached, which are exercised on behalf of a beneficial holder by the Trustee at the direction of the beneficial holder.
Set out below are details of the 20 largest shareholders of Serko as at 30 April 2018:
Shareholder
1
Number of ordinary shares held%
1Robert James Shaw & Geoffrey Robertson Ashley Hosking 12,884,296 17.20
2Darrin Grafton & Geoffrey Robertson Ashley Hosking 12,667,629 16.91
3National Nominees New Zealand Limited 9,045,214 12.08
4Serko Trustee Limited 2,991,006 3.99
5Simon John Botherway & MSH Trustee (Arrow) Limited 2,034,091 2.72
6JPMORGAN Chase Bank 1,827,835 2.44
7Public Trust Forte Nominees Limited 1,807,793 2.41
8Accident Compensation Corporation 1,569,983 2.10
9Philip Rodger Ball 1,537,594 2.05
10TEA Custodians Limited 1,255,787 1.68
11Joanne Maree Phipps 1,240,972 1.66
12Donna Bailey 1,217,594 1.63
13Sherie Robyn Hammond 1,200,544 1.60
14Citibank Nominees (NZ) Ltd 1,031,167 1.38
15Michael John Thorburn 1,021,711 1.36
16Robert Alan Hawker & Elizabeth Anne Hawker 999,750 1.33
17HSBC Nominees (New Zealand) Limited 925,396 1.24
18Tracey Ann Shorter 823,041 1.10
19Timothy Mark Bluett 814,404 1.09
20Cogent Nominees Limited 669,280 0.89
1 The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been re-allocated to the
applicable members.
7677
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
According to notices given to Serko under the Financial Markets Conduct Act 2013 (and Securities Markets Act 1978), the
following persons were substantial product holders as at 31 March 2018. As at the balance date (31 March 2018) there were
74,894,342 Serko ordinary shares on issue:
SUBSIDIARY COMPANY DIRECTORS
Directors of Serko’s subsidiaries do not receive any remuneration or other benefits in respect of their appointments. The
remuneration and other benefits of any such directors who are employees of the group totalling $100,000 or more during the year
ended 31 March 2018 are included in the relevant bandings for remuneration disclosed on page 69 of this Annual Report.
The following persons held office as directors of subsidiary companies as at 31 March 2018:
REGULATORY MATTERS
On 22 July 2015, NZX regulation granted Serko a waiver from NZX Listing Rule 7.6.4(b)(iii) to the extent required to allow Serko
to provide financial assistance to executive directors, and an associated person of one of the executive directors, to enable them to
participate in Serko’s Restricted Share Plan. The full waiver is available on Serko’s website. Go to: www.serko.com/investor-centre/.
DONATIONS
Serko did not make any donations during the financial year.
CREDIT RATING
Serko does not presently have an external credit rating status.
SubsidiaryDirectors
1
Serko Australia Pty Limited (Australia)
Darrin Grafton
Bob Shaw
John Challis
Serko Investments Limited (New Zealand)
Darrin Grafton
Bob Shaw
Serko India Private Limited (India)
Darrin Grafton
Bob Shaw
Yogita Chadha
Serko Inc (US)²
Darrin Grafton
4
Claudia Batten
4
Serko Trustee Limited (New Zealand)
Susan Putt
Fiona Rockel
Foshan Sige Information Technology Limited (China)³Gerard Neilsen
4
Substantial product holder
Number of ordinary shares in
which relevant interest is held
% Of class held at date of last
notice
Geoffrey Hosking25,573,92535.084%
Darrin Grafton14,209,03319.493%
Bob Shaw and Sarah Shaw12,884,29617.675%
Milford Asset Management Limited6,095,8178.380%
Harbour Asset Management4,611,3566.157%
1 No subsidiary directors retired during the financial year.
2 Serko Inc was incorporated on 30 October 2017.
3 Foshan Sige Information Technology Limited was incorporated on 7 August 2017. Serko also has a representative office in China.
4 Appointed during the financial year.
7879
SERKO ANNUAL REPORTSERKO ANNUAL REPORT
ABOUTSERKO
02
HIGHLIGHTS
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
14
MANAGEMENTCOMMENTARY
18
FINANCIAL STATEMENTS
28
GOVERNANCE &DISCLOSURES
66
CORPORATERESPONSIBILITY
16
DIRECTORY
79
GLOSSARYCOMPANY DIRECTORY
ARPBAverage Revenue Per Booking
Asia PacificVietnam, Thailand, Taiwan, Sri Lanka,
South Korea, South Africa, Singapore,
Philippines, Pakistan, New Zealand,
Malaysia, Japan, Indonesia, India, Hong
Kong, China, Bangladesh and Australia
for the purposes of this Annual Report
ASXASX Limited, also known as the
Australian Securities Exchange
ATMRATMR (Annualised Transactional
Monthly Revenue) is a Non-GAAP
measure. Serko uses this as a useful
indicator of recurring revenue
from Serko products based on the
monthly transaction
AUD or A$Australian dollar
AustralasiaNew Zealand and Australia for the
purposes of this Annual Report
Board or Board
of Directors
The board of directors of Serko
Cloud or cloud-
based
Cloud computing is when the software
and associated data is hosted outside
the customer’s premises and delivered
over a network or the Internet as a
service, which allows immediate access
to the software
Company or
Serko
Serko Limited, a New Zealand
incorporated company
EBITDAEBITDA is a Non-GAAP measure
representing Earnings Before the
deduction of costs relating to Interest,
Taxation, Depreciation and Amortisation
ESGEnvironmental Social Governance
FTEFull-time equivalent
FXForeign exchange
FYFinancial year ended, or ending, on
31 March (unless otherwise stated)
GSTGoods and Services Tax
IFRSInternational Financial Reporting
Standards
Independent
Directors
Simon Botherway, Claudia Batten and
Clyde McConaghy
IPOInitial Public Offering
Saatchi Building
Unit 14D
125 The Strand
Parnell, Auckland
New Zealand
+64 9 309 4754
Link Market Services Limited
Level 11, Deloitte House
80 Queen Street
Auckland
New Zealand
+64 9 375 5998
serko@linkmarketservices.co.nz
Simon Botherway (Chairman)
Claudia Batten
Robert (Clyde) McConaghy
Darrin Grafton
Robert (Bob) Shaw
Deloitte Limited
Serko is a company incorporated with limited liability under the New Zealand Company Act 1993
New Zealand Companies Office registration number 1927488
Australian Registered Body Number (ARBN) 611 613 980
For investor relations queries contact: InvestorRelations@serko.com
REGISTERED OFFICE
SHARE REGISTRAR
DIRECTORS
AUDITOR
ListingThe date Serko shares started trading on
the NZX Main Board, 24 June 2014
NZNew Zealand
NZD or NZ$New Zealand dollar
NZ GAAP or
GAAP
New Zealand Generally Accepted
Accounting Practice
NZ IASNew Zealand equivalents to International
Accounting Standards
NZ IFRS or IFRSNew Zealand equivalents to International
Financial Reporting Standards
NZXNZX Limited, also known as the New
Zealand Stock Exchange
NZX Listing
Rules or Listing
Rules
The Listing Rules applying to the NZX
Main Board as amended from time
to time
NZX Main BoardThe New Zealand main board equity
security market operated by NZX
R&DResearch and Development expenditure
SAASSoftware-as-a-service
Serko Expense
Management
business
Serko’s online expense management
solution that enables the capture and
processing of corporate credit cards and
out-of-pocket claims
Serko MobileSerko’s mobile app for iPhones and
Android devices that gives users access
to information and travel booking
functionality on their mobile devices
Serko OnlineSerko’s cloud-based online travel booking
solution for large organisations
serko.travelSerko’s cloud-based online travel
booking solution for small to medium
enterprises (SMEs)
SMESmall and medium enterprise
TMC, Travel
Agency or Travel
Management
Company
A travel management company that
provides specialised travel-related
services to corporate customers
USD or US$United States dollar
ZenoSerko’s premium cloud-based online
travel booking solution
$All figures are in New Zealand dollars,
unless otherwise stated
KEY DATES
30 SEPTEMBER 2018
Half-year End
20 NOVEMBER 2018
Half-year Results
Announced
31 MARCH 201922 AUGUST 2018
Financial-year EndAnnual Shareholders’
Meeting
Serko’s ESG Report, which includes its Corporate Governance Statement, can be found at www.serko.com/investor-centre
80
SERKO ANNUAL REPORT
Serko Limited Annual Report 2018
www.serko.com
---
Interim Report
For the period ended 30 September 2017
Serko Interim Report September 2017
2
Contents
Key Dates
Chairman and CEO’s report04
Interim Financial Statements08
Statement of comprehensive income10
Statement of changes in equity11
Statement of financial position12
Statement of cash flows13
Notes to the financial statements14
Corporate Directory and shareholders enquiries23
THIS REPORT IS DATED 22 NOVEMBER 2017 AND IS SIGNED ON BEHALF OF THE BOARD OF SERKO LIMITED
BY SIMON BOTHERWAY, CHAIRMAN, AND DARRIN GRAFTON, CHIEF EXECUTIVE OFFICER.
30 September 2017
23 May 2018
Half-year End
Full-year Results Announced
22 November 2017
June 2018
Half-year Results Announced
Annual Report Released
31 March 2018
22 August 2018
Financial-year End
Annual Shareholders Meeting
Darrin GraftonSimon Botherway
Chief Executive OfficerChairman
Chairman and CEO’s report
Dear Shareholder,
We are pleased to report we have achieved our goal of
turning a profit in the first half of the 2018 financial year
(FY18) and that we are well on our way to recording Serko’s
first full-year profit. The onboarding of new customers to
our suite of corporate travel and expense management
solutions; increased usage of the solutions by our existing
customers; and the growing contribution to revenue of
travel-related content, such as hotels and airport transfers,
resulted in strong growth in the half-year.
We have also controlled costs and generated modest
positive cashflows, while continuing to invest in the further
development of our solutions, including Serko Zeno, our new
premium solution we are offering alongside Serko Online
that was rolled out to our first customers in October.
It has been a gratifying six-month period, and we are now
looking forward to making progress on the next phase of
our growth plans, to expand our presence in the northern
hemisphere markets.
Darrin GraftonSimon Botherway
Chief Executive OfficerChairman
Serko has achieved
profitability for the
first half of FY18
Serko Interim Report September 2017
3
Serko Interim Report September 2017
4
PERFORMANCE DRIVERS IN THE FIRST
HALF OF FY18
Serko’s three-pronged strategy of delivering market-
leading technological innovations, growing its customer
base and increasing average revenue per booking (ARPB),
continues to deliver favourable financial outcomes for the
company. On all three fronts Serko has made good progress,
which has further enhanced the company’s position as
the leading online business travel booking platform in the
Australasian market.
number of planned transitions onto the Serko
platform in the second half, through agreements
with Sabre and Tandem, (Air New Zealand’s TMC).
These agreements are underpinned by minimum
transaction commitments.
•A 43% increase in revenue generated by Serko
Expense, our expense management solution,
compared to the previous corresponding period,
as a result of the successful reseller programme
introduced in the prior year with our partner TMCs.
•A 100% increase in content revenue growth over
the same period last year with 5.4% of all bookings
as of September 2017 now generating additional
content revenues. Serko continues to add content
to its platform and recently completed the
development work for accommodation providers
Hotel Hub and HRS Global Hotel Solutions. We
also recently announced a partnership with
Gullivers Travel Associates (GTA) to provide further
hotel content. This content combined with that
from Expedia, Booking.com, Wotif and Expedia
Affiliate Network makes Serko one of the world’s
largest metasearch engines for business travel
accommodation.
•The partnership with Air New Zealand to bring
the airline’s unique content to the Zeno platform,
allowing customers to book through Serko,
previously unavailable content, such as meal and
seat selection.
Key strategic achievements for the period include:
•The development and release of Zeno, a premium
and predictive door-to-door booking platform that
will allow Serko to continue to grow its customer
base and give customers the opportunities to add
additional content to their travel programmes via the
Zeno hub. Zeno will extend Serko’s content revenue
sources. We are pleased with the results from
Zeno customer trials and we expect further uptake
as commercial arrangements are finalised with
our partner Travel Management Company (TMC)
resellers. Already, we anticipate more than 1,000
corporate customers will transition to the platform.
Zeno will spearhead our Northern Hemisphere entry
strategy. It is engineered to integrate additional
content sources from multiple providers and is
therefore adaptable to new geographies.
•The continued onboarding of new customers,
resulting in a 21% increase in online booking
transactions over the same period last year.
Transactions are expected to increase with a
21%
Increase in transacted booking volume
30%
Increase in revenue
Serko Interim Report September 2017
5
FINANCIAL HIGHLIGHTS
Total Operating Revenue
1
rose 30% to $9.1 million,
reflecting the 21% increase in transacted booking volumes
(which translated into a 19% increase in transactional fee
revenue) - in the half-year period. It also reflected strong
growth in income from Serko Expense, content supplier
commissions (both through Serko Online and serko.travel)
and Serko Mobile licenses. These latter sources of revenue
contributed 29% to Total Operating Revenue.
Half-year Total Income
1
rose 26% to $9.6 million, which was
a $2 million increase over the prior half-year result of $7.6
million. Relative to last year, operating revenue income also
benefited from the hedging of the company’s net forecasted
Australian dollar position at approximately NZ$0.93. The
prior half-year result was affected by unfavourable foreign-
currency shifts.
A company-wide focus on achieving best-practice in terms of
the cost base and realising operating efficiencies, resulted in
operating costs declining by 12%, while investment spending
on intangibles such as software development and purchases
of property, plant and equipment was lower at $0.2 million
compared to the same period last year of $0.8 million.
Coupled with revenue growth, these savings resulted
in a first-half EBITDA
3
of $1.3 million, a turnaround of
$3.1 million from the EBITDA loss of $1.8 million in the
same period last year.
1. Total Operating Revenue is revenue excluding income from grants and finance income, while Total Income includes grants.
2. ATMR is a non-GAAP measure representing Annualised Transactional Monthly Revenue. Serko uses this as a useful indicator of
recurring revenues from Serko products, based on the monthly transactions and average revenue per booking, on a constant currency basis.
Due to seasonality Serko uses the latest month which is not affected by a seasonality trend. For the current period, September 2017 is
affected by Australian school holidays and as such the calculation is based on August 2017 transactions.
3. EBITDA is a non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation, Depreciation,
Amortisation and Impairment.
4. NPBT is net profit before tax.
Approximately 90% of revenue in the period was derived
from recurring revenue sources, with the remainder derived
mainly from system customisation work. Annualised
Transactional Monthly Revenue (ATMR
2
), an indicator of the
company’s recurring revenues, stood at $17.8 million at the
end of September 2017, up from $15.3 million as at the end
of March 2017.
2
$17.8m
Up 28% from same month last year
PEAK ATMR
$1.3m
EBITDA
A turn around of $3.1m from last year
loss of $1.8m
3
Serko Interim Report September 2017
6
First half net profit before tax (NPBT
4
) for the six months
to 30 September 2017 was $1.2 million, well ahead of the
$2 million loss in the same period last year and ahead of the
guidance given in October.
Serko remains in a sound financial position with cash
balances of $4.6 million, up from $4.5 million at 31 March
2017. In the same period last year net cash balances fell by
$2.4 million.
OUTLOOK FOR THE SECOND HALF OF FY18
While the second half is typically not as strong as the
first, due to the slowdown in corporate travel during the
Australasian December-to-January holiday period, Serko
is expecting revenues to continue to grow through the
onboarding of customers and commencement of revenue
from Zeno. Minimum transaction agreements, notably with
Sabre and Tandem will also underpin revenue growth.
As disclosed in October, Serko expects Total Operating
Revenue for the second half of the 2018 financial year to
be 25% to 30% higher than the same period a year ago. As a
result, we expect Total Operating Revenue for the year to 31
March 2018 to be in the range of $18 million to $19 million.
However, Serko is investing more during the second half
as we begin our expansion into northern hemisphere
territories. We expect that our cost base will increase
correspondingly. We aim to match our cost base with
guranteed minimum revenue deals with prospective
TMC partners in the Northern Hemisphere and we are
confident that we have sufficient resources to execute
our growth plans.
Serko remains committed to achieving EBITDA, NPBT and
cash flow breakeven during the second half, while expansion
opportunities are pursued.
Serko is looking forward confidently to the next phase of
our growth plan. The company now provides an integrated
globally competitive offering through the provision of Serko
Zeno, alongside Serko Online, Serko Expense as well as
serko.travel for small and medium enterprises.
Yours sincerely,
Darrin Grafton
Simon Botherway
Chief Executive Officer
Chairman
$1.2m
A turn around of $3.2m from last year
loss of $2.0m
Serko Interim Report September 2017
7
The business platform for Travel & Expense
Serko Interim Report September 2017
8
Serko Interim Report September 2017
9
Interim Financial
Statements
For the six month period ended 30 September 2017
For and on behalf of the Board of Directors, who authorise these Financial Statements
for issue on 22 November 2017
Statement of comprehensive income10
Statement of changes in equity11
Statement of financial position 12
Statement of cash flows13
Notes to the financial statements14
Darrin GraftonSimon Botherway
Chief Executive OfficerChairman
Serko Interim Report September 2017
10
Statement of comprehensive income
For the six months ended 30 September 2017
Revenue109,0707,00414,277
Other income4995941,092
Finance income158146142
Finance costs(31)(21)(54)
Income tax expense(69)(52)(144)
Movement in foreign currency reserve(17)(19)(140)
Operating expenses
Selling and marketing expenses(598)(966)(1,658)
Remuneration and benefits(5,607)(6,423)(12,285)
Administration expenses(1,832)(1,806)(3,880)
Other expenses(493)(540)(940)
Earnings per share
Basic and diluted profit/(loss) per share$0.01$(0.03)$(0.05)
Notes
6 Months
Unaudited
6 Months
Unaudited
12 Months
Audited
30 Sep 201730 Sep 201631 Mar 2017
Total revenue and other income9,5697,59815,369
Profit/(loss) before income tax1,166(2,012)(3,306)
Net profit/(loss) attributable to the shareholders of the company1,097(2,064)(3,450)
Total comprehensive profit/(loss) for the period 1,080(2,083)(3,590)
Total expenses from ordinary activities(8,530)(9,735)(18,763)
$ (000)$ (000)$ (000)
The accompanying notes form an integral part of these financial statements.
Serko Interim Report September 2017
11
Statement of changes in equity
For the six months ended 30 September 2017
Balance as at 1 April 201625,185888107(16,447)9,733
Net loss for the period---(2,064)(2,064)
Other comprehensive income/(loss)*--(19)-(19)
Balance as at 1 April 201625,185888107(16,447)9,733
Net loss for the period---(3,450)(3,450)
Other comprehensive income/(loss)*--(140)-(140)
Balance as at 1 April 201725,1851,021(33)(19,897)6,276
Net profit for the period---1,0971,097
Other comprehensive income/(loss)*--(17)-(17)
Transactions with owners
Allocated shares to employees-118--118
Forfeiture of shares from employees -(162)--(162)
Transactions with owners
Allocated shares to employees8372--372
Forfeiture of shares from employees8-(239)--(239)
Transactions with owners
Allocated shares to employees8-72--72
NotesShare Capital
Share Based
Payment
Reserve
Foreign
Currency
Reserve
Accumulated
Losses
Total Equity
Total expenses from ordinary activities--(19)(2,064)(2,083)
Total expenses from ordinary activities--(140)(3,450)(3,590)
Total comprehensive profit for the year--(17)1,0971,080
Balance as at 30 September 201625,18584488(18,511)7,606
Balance as at 31 March 201725,1851,021(33)(19,897)6,276
Balance as at 30 September 201725,1851,093(50)(18,800)7,428
$ (000)$ (000)$ (000)$ (000)$ (000)
*Items in other comprehensive income may be reclassified to the income statement and are shown net of tax.
The accompanying notes form an integral part of these financial statements.
Serko Interim Report September 2017
12
Statement of financial position
As at 30 September 2017
NotesUnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
Current Assets
Cash at bank and on hand4,5574,7714,451
Trade and other receivables
2
4,3603,8173,167
Derivative financial instruments
3
-72-
Current liabilities
Trade and other payables
6
2,8752,4912,582
Derivative financial instruments
3
154-245
Income tax payable14180160
Interest-bearing loans and borrowings
7
421333399
Non-current liabilities
Deferred tax liability-55-
Trade and other payables
6
222187269
Interest-bearing loans and borrowings
7
268369254
Derivative financial instruments
3
--34
Equity
Share capital
8
25,18525,18525,185
Share-based payment reserve
8
1,0938441,021
Foreign currency reserve(50)88(33)
Accumulated losses(18,800)(18,511)(19,897)
Non-current assets
Property, plant and equipment
4
867858886
Intangible assets
5
1,5941,6031,603
Deferred tax asset112-112
Derivative financial instruments
3
19--
Total current assets8,9178,6607,618
Total current liabilities3,5912,9043,386
Total non-current liabilities490611557
Total equity7,4287,6066,276
Total non-current assets2,5922,4612,601
Total assets11,50911,12110,219
Total liabilities4,0813,5153,943
Total equity and liabilities11,509 11,121 10,219
The accompanying notes form an integral part of these financial statements.
Serko Interim Report September 2017
13
Statement of cash flows
For the six months ended 30 September 2017
Notes
6 Months
Unaudited
6 Months
Unaudited
12 Months
Audited
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
Cash flows from operating activities
Receipts from customers8,3587,46415,113
Interest received447099
Receipts from grants4985941,075
Taxation (paid)/refund received(70)(54)(469)
Payments to suppliers and employees(8,558)(10,121)(17,349)
Interest payments(11)-(16)
Net GST refunded/(paid)4361(48)
Cash flows from investing activities
Purchase of property, plant and equipment(67)(268)(247)
Purchase of intangibles(103)(508)(791)
Cash flows from financing activities
Proceeds from borrowings-369-
Net increase (decrease) in total cash134(2,393)(2,633)
Net foreign exchange difference(28)46(34)
Cash and cash equivalents at beginning of period4,4517,1187,118
Cash and cash equivalents comprises the following:
Cash at bank and on hand4,5574,7714,451
Net cash flows from (used) in operating activities
9
304(1,986)(1,595)
Net cash flows used in investing activities(170)(776)(1,038)
Net cash flows from financing activities-369-
Cash and cash equivalents at end of period4,5574,7714,451
4,5574,7714,451
The accompanying notes form an integral part of these financial statements.
Serko Interim Report September 2017
14
Notes to the financial statements (unaudited)
For the six months ended 30 September 2017
These unaudited, interim financial statements of Serko Limited (the company) and its subsidiaries (together
“the group”) have been prepared in accordance with New Zealand Generally Accepted Accounting Practice and
comply with the requirements of International Accounting Standard (IAS) 34 Interim Financial Reporting and
with New Zealand Equivalent to International Accounting Standard (IAS) 34 Interim Financial Reporting. The
Company is a profit orientated entity.
The Company is registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange. The
Company is an FMC Reporting Entity under the Financial Markets Conduct Act 2013 and the Financial Reporting
Act 2013.
The unaudited, interim financial statements of the group for the six months ended 30 September 2017 have been
prepared using the same accounting policies and methods of computation as, and should be read in conjunction
with, the financial statements and related notes included in the group’s Annual Report for the year ended 31
March 2017.
The same significant judgements, estimates and assumptions included in the notes to the financial
statements in the group’s Annual Report for the year ended 31 March 2017 have been applied to these
interim financial statements.
Basis of presentation and accounting policies1
Serko Interim Report September 2017
15
UnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
Current assets
Trade receivables3,1032,8552,544
Provision for doubtful debts(42)(7)(7)
GST receivable499122
Prepayments898548255
NuTravel Loan receivable - refer note 12352330353
Total trade and other receivables4,3603,8173,167
Trade and other receivables
2
On 9 April 2014 an interest bearing loan to NuTravel Technology Solutions LLC of US$200,000 was assigned by Financial
Equities Limited to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable. The
loan expired on 30 June 2016. The loan is currently outstanding and action is being taken to recover the loan. There is no
financial risk to Serko as the loan receivable is back to back with the associated loan payable to Financial Equities Limited
(refer note 7). Financial Equities Limited is a company associated with directors Robert Shaw and Darrin Grafton.
NuTravel Receivable/Financial Equities Loan Payable
Serko Interim Report September 2017
16
UnauditedUnauditedAudited
UnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
$ (000)$ (000)$ (000)
Opening balance886613613
Additions67307538
Disposals-(34)(39)
Depreciation(86)(28)(225)
Currency translation--(1)
Net tangible assets per security (cents)1.161.181.18
Current:
Foreign currency forward exchange contracts(154)72(245)
Non-current:
Foreign currency forward exchange contracts19-(34)
Contractual amounts of forward exchange contracts outstanding were as follows:
Purchase commitments forward exchange contracts14,4881,22713,027
Closing balance867858886
To manage the group’s foreign exchange risk arising from future commercial transactions, the group employ forward
contracts. Management is responsible for managing exposures in each foreign currency (Australian Dollar) by using
forward foreign currency exchange contracts.
The following table presents the group’s foreign currency forward exchange contracts measured at fair value:
Derivative Financial Instruments have been determined to be within level 2 of the fair value hierarchy. Foreign
currency forward exchange contracts have been fair valued using published market foreign exchange rates.
Derivative financial instruments
Property, plant and equipment
3
4
Serko Interim Report September 2017
17
UnauditedUnauditedAudited
UnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
$ (000)$ (000)$ (000)
Opening balance1,6031,4391,439
Additions 191453780
Amortisation(200)(283)(633)
Currency translation-(6)17
Trade payables1,6741,227532
Accrued expenses5225681,442
Lease incentive223252227
GST payable--16
Employee entitlements678631634
Closing balance1,5941,6031,603
Total trade and other payables3,0972,6782,851
3,0972,6782,851
Intangible assets
Trade and other payables
5
6
Disclosed as:
Current2,8752,4912,582
Non-current222187269
Serko Interim Report September 2017
18
UnauditedUnauditedAudited
Number of
shares
Value of
equity
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
$ (000)$ (000)
Financial Equities loan payable - refer note 12352330353
Obligations under finance leases-4-
Leasehold fitout loan337368300
Balance at 1 April 201672,89426,073
Allocated shares to employees via Restricted Share Scheme-118
Forfeiture of shares from employees via Restricted Share Scheme-(162)
Balance at 1 October 201672,89426,029
Issue of new shares to employees via Restricted Share Scheme2,000-
Allocated shares to employees via Restricted Share Scheme -254
Forfeiture of shares from employees via Restricted Share Scheme-(77)
Balance at 1 April 201774,89426,206
Allocated shares to employees via Restricted Share Scheme-72
Total Interest bearing loans and borrowings689702653
Balance as at 30 September 201672,89426,029
Balance as at 31 March 201774,89426,206
Balance as at 31 March 201774,89426,278
689702653
Interest bearing loans and borrowings
Equity (share capital and share-based payment reserve)
7
8
Disclosed as:
Current421333399
Non-current268369254
Financial Equities is a loan payable against a loan receivable from NuTravel (refer note 2)
During the period the company issued 346,157 shares under a Restricted Share Scheme (RSS). In respect of the RSS, as at
30 September 2017, 932,965 restricted shares are allocated to key management personnel and 497,015 allocated to other
Serko employees. 1,589,976 restricted shares remain unallocated at 30 September 2017.
Serko Interim Report September 2017
19
UnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
Net Profit/(loss) after tax 1,097(2,064)(3,450)
Reconciliation of operating cash flows
9
1,323(1,785)(2,703)
(1,019)(201)1,108
Net cash from operating activities304(1,986)(1,595)
Adjustments
Depreciation8628225
Amortisation200283633
Increase/(decrease) in deferred tax1(3)(170)
Loss on property, plant and equipment disposal-3536
Gain/(loss) on foreign exchange transactions(133)(20)(110)
Share-based compensation72(44)133
Changes in working capital items
(Increase)/decrease in trade receivables & prepayments(858)483820
(Increase)/decrease in derivative financial instruments(144)(67)285
Increase/(decrease) in trade payables & accruals2(382)158
Decrease in current tax payable(19)(235)(155)
Serko Interim Report September 2017
20
UnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
Segments
10
9,0707,00414,277
2,5732,4612,489
Sales to external customers
New Zealand350379672
Australia8,5176,45513,195
India 2772136
Singapore241118
USA10746158
Other454198
Non current assets
New Zealand2,4382,3252,464
Australia13513625
The board of directors and senior management team monitor the results of the group’s operations as a whole for the
purpose of making decisions about resource allocation and performance assessment, and therefore the board has
determined the group is a single reportable segment.
Revenue is allocated to geographical segments on the basis of where the sale is recorded by each operating
company within the group:
New Zealand, Australia and USA geographical information has been restated in the prior period.
Operating Segment Information
Geographical Segment Information
Serko Interim Report September 2017
21
UnauditedUnauditedAudited
UnauditedUnauditedAudited
30 Sep 201730 Sep 201631 Mar 2017
30 Sep 201730 Sep 201631 Mar 2017
$ (000)$ (000)$ (000)
% equity interest
Commitments
Related parties
11
12
2,2352,3772,462
-4-
Operating lease commitments
Payable within one year557495514
Payable later than one year, but not more than five years1,6781,5701,755
Payable later than five years-312193
Serko Australia Pty Limited100%100%100%
Serko Trustee Limited100%100%100%
Serko India Private Limited99%99%99%
Serko Investments Limited100%100%100%
Foshan Sige Information Technology Limited100%--
Finance lease commitments
Payable within one year-4-
The consolidated financial statements include the financial statements of Serko Limited and subsidiaries as listed in
the following table:
Serko Australia Pty Limited’s principal business is the marketing and support of travel booking software solutions supplied by
Serko Limited. This entity has been consolidated based on management accounts for the period ended 30 September 2017.
Serko Trustee Limited was incorporated on 4 June 2014 to hold the shares issued to key management and staff in the
Restricted Share Scheme and Salary Sacrifice Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015 as a subsidiary for the India-based operations.
Subsidiaries
Serko Interim Report September 2017
22
Related parties (continued)
Contingencies
Events after balance date
12
13
14
In the current year key management personnel received 182,306 issued shares via the Restricted Share Scheme in
July 2017, which are held in trust by Serko Trustee Limited until they vest. The shares vest on 7 July 2020.
Serko Investments Limited was incorporated on 5 November 2014 as a holding company. It holds 1% of the shares
in Serko India Private Limited.
Foshan Sige Information Technology Limited was incorporated on 7 August 2017 as a subsidary for the
China-based operations.
There were no contingent liabilities as at 30 September 2017 (30 September 2016: Nil, 31 March 2017: Nil).
There were no material events subsequent to balance date.
On 9 April 2014 an interest bearing loan to NuTravel Technology Solutions LLC of US$200,000 was assigned by
Financial Equities Limited to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan
receivable. The loan expired on 30 June 2016, a notice for repayment has been provided to NuTravel. Financial
Equities Limited is a company associated with directors Robert Shaw and Darrin Grafton (refer note 2).
Other transactions with key management personnel and directors
Subsidiaries (continued)
NuTravel Receivable/Financial Equities Loan Payable
Serko Interim Report September 2017
23
Saatchi Building
Unit 14D
125 The Strand
Parnell, Auckland
New Zealand
+64 9 309 4754
Link Market Services Limited
Level 11, Deloitte House
80 Queen Street
Auckland
New Zealand
Simon Botherway (Chairman)
Claudia Batten
Robert (Clyde) McConaghy
Darrin Grafton
Robert Shaw
Deloitte Limited
Serko is a company incorporated with limited liability under the New Zealand Company Act 1993.
Companies Office registration number 1927488.
For investor relations queries contact InvestorRelations@serko.com
Registered Office
Share Registrar
Directors
Auditor
Corporate Directory
Serko Interim Report September 2017
---
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
T: +64 9 309 4754 investor.relations@serko.com Incorporated in New Zealand ARBN 611 613 980
21 June 2018
Serko Limited (SKO)
Statement setting out 20 largest holders of Shares
Set out below is a statement of the 20 largest holders of Shares, and the number and percentage of
Shares held by those holders.
Rank Name of Shareholder Number of Shares
held
% of Shares
held
1 ROBERT JAMES SHAW & GEOFFREY ROBERTSON ASHLEY
HOSKING <RIPON A/C>
12,884,296 17.20%
2 DARRIN GRAFTON & GEOFFREY ROBERTSON ASHLEY
HOSKING <GRAFTON-HOWE NO.2 A/C>
12,667,629 16.91%
3 NATIONAL NOMINEES NEW ZEALAND LIMITED 7,582,665 10.12%
4 SERKO TRUSTEE LIMITED 2,991,006 3.99%
5 JPMORGAN CHASE BANK 2,067,354 2.76%
6 SIMON JOHN BOTHERWAY & MSH TRUSTEE (ARROW)
LIMITED <ARROW A/C>
2,034,091 2.72%
7 HSBC NOMINEES (NEW ZEALAND) LIMITED 1,772,346 2.37%
8 PUBLIC TRUST FORTE NOMINEES LIMITED 1,564,460 2.09%
9 ACCIDENT COMPENSATION CORPORATION 1,550,000 2.07%
10 PHILIP RODGER BALL 1,537,594 2.05%
11 TEA CUSTODIANS LIMITED 1,296,627 1.73%
12 JOANNE MAREE PHIPPS 1,240,972 1.66%
13 DONNA BAILEY <DONNA BAILEY A/C> 1,217,594 1.63%
14 SHERIE ROBYN HAMMOND 1,200,544 1.60%
15 CITIBANK NOMINEES (NZ) LTD 1,036,597 1.38%
16 MICHAEL JOHN THORBURN 1,025,011 1.37%
17 ROBERT ALAN HAWKER & ELIZABETH ANNE HAWKER 988,650 1.32%
18 TRACEY ANN SHORTER 823,041 1.10%
19 TIMOTHY MARK BLUETT 800,000 1.07%
20 COGENT NOMINEES LIMITED 669,280 0.89%
Total Number of Shares on Issue
74,894,342
Top 20 as a percentage of total number of Shares on Issue
76.04%
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
T: +64 9 309 4754 investor.relations@serko.com Incorporated in New Zealand ARBN 611 613 980
For investor relations queries please contact:
Susan Putt
Chief Financial Officer, Serko
Phone: +64 21 388 009
investor.relations@serko.com
---
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
T: +64 9 309 4754 investor.relations@serko.com Incorporated in New Zealand ARBN 611 613 980
21 June 2018
Serko Limited (SKO)
Statement setting out the distribution of holders of Shares
Set out below is a distribution schedule of the number of holders of Shares, categorised by the size
of their holdings.
Number of Shares Number of Shareholders
1 - 1,000 224
1,001 - 5,000 455
5,001 - 10,000 182
10,001 - 100,000 218
100,001 and over 47
Total 1,126
For investor relations queries please contact:
Susan Putt
Chief Financial Officer, Serko
Phone: +64 21 388 009
investor.relations@serko.com
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.