Serko FY20 Full-Year Results Announcement
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
Market Release
24 June 2020
Audited Financial Results for the Year Ending 31 March 2020
Corporate travel and expense management leader Serko (NZX/ASX:SKO) today reported its results for the
financial year ended 31 March 2020.
Ms Batten, Serko Acting Chair, said: “The
first three quarters of the financial year ended 31 March 2020 were
characterised by monthly revenue growth and the achievement of a number of key milestones. However,
Serko’s performance was impacted in the fourth quarter of the financial year as the Covid-19 pandemic
became widespread, significantly affecting booking volumes. This resulted in an adverse impact on the full-
year result.”
“Government responses to the pandemic worldwide, including lockdowns and the suspension of all non-
essential travel, continue to have a material adverse effect on booking transaction volumes on Serko’s
online travel booking platforms, which generate the majority of Serko’s revenue.”
“Clear evidence of a pattern of declining booking activity became apparent in mid-February 2020 and this
was followed by a precipitous decline in March 2020 as lockdown measures were implemented. At its
lowest point during the financial year in March 2020, daily booking volumes were down in excess of 90%
compared to similar days in March 2019.
“In response to the operational and economic impacts of Covid-19, Serko has reduced cash burn and re-
prioritised strategic initiatives to position the business for the materially changed operating environment.
The implementation of these initiatives was largely undertaken after the balance date.
“It should, however, be noted that Serko has carefully chosen to retain resource and capacity on key growth
initiatives to ensure we are well positioned to participate in the recovery of corporate travel”, said Ms Batten.
The Serko Board has exercised judgement on a number of important areas in the Income Statement and
Statement of Financial Position and we draw your attention to the commentary in this release, the Financial
Statements themselves and the Notes to the Financial Statements for more detailed explanations.
Summary of FY20 Performance:
• Total Operating Revenue
1
rose 11% to $25.9 million, up $2.5 million from the prior year.
• Recurring Product Revenues
2
rose 16% to $24.1 million and Total Income (including grants)
increased 9% to $26.8 million.
• Travel booking transactions grew 2% on the previous year.
• Peak Annualised Transactional Monthly Revenue (ATMR)
3
at the end of February 2020 (historically
the month with the highest average daily transaction volume) was up 6% to $27.5 million from $26.0
million in February 2019, and subsequently materially declined in March 2020.
• Total Operating expenses
4
increased by 59% to $37.1 million, reflecting investment for our planned
international expansion, including a net increase of 60 people.
• Research & Development (R&D)
5
costs increased by 48% to $13.6 million representing the
significant investment in platform development for expansion into new markets and the delivery of
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
white-label platforms. Of the $13.6 million of R&D costs, Serko capitalised $11.0 million, up $4.2
million from the prior year.
• Net loss after tax for the year was $9.4 million, due to increased operating expenses.
• EBITDAF
6
declined $8.7 million to a loss of $6.1 million, down from $2.6 million profit in the prior year.
• Cash balances of $42.4 million as at 31 March 2020 included the net funds received from the 2019
capital raise of $43.2 million. Cash burn for the year was $16.5 million.
Other notable developments during FY20:
During the financial year, Serko entered into an agreement with Booking.com to supply a ‘white-label’
version of our Zeno booking tool for Booking.com, targeting its business customer base internationally. The
‘Booking.com for Business' version of Zeno is currently in pilot phase and is expected to be rolled out to
additional Northern Hemisphere markets following achievement of agreed performance targets.
Booking Holdings (owner of Booking.com) also participated in Serko’s successful oversubscribed capital
raising of $45 million ($43.2 million net of costs), completed in late 2019.
Ms Batten said: “This capital raise was intended to provide funding for Serko’s planned expansion into new
markets. Although we did not anticipate an event as catastrophic as Covid-19, the Serko Board has always
maintained a prudent approach to balance sheet management. By raising additional capital, the
company’s strong cash position has provided a comfortable level of liquidity that meant we have had no
requirement to raise capital in distressed circumstances.”
“This has allowed us to maintain our operating capacity and retain our key people to best position Serko
when travel volumes recover.”
“We have however responded to the decline in activity and the uncertainty of the future environment by
reducing costs across all expense categories to target a maximum cash burn average of no more than $2
million per month.”
SUMMARY FINANCIAL RESULTS
Revenue:
Total Operating Revenue for the year to 31 March 2020 rose 11% to $25.9 million from $23.4 million in the
same period a year ago, substantially lower than our initial guidance range of 20%-40% for the year. We
revised revenue expectations to the low end of the range on 25 February 2020 and then abandoned guidance
completely on the 16 March 2020, in both cases due to the effects of Covid-19.
Under IFRS15 (Revenue from Contracts) Serko records revenue from its portfolio of contracts with reference
to actual transactions, forecast transactions and minimum contracted commitments. Serko has agreed to a
number of changes to contracts as a result of the impact of Covid-19 on the entire industry, this includes
changes to schedules of contracted minimum revenues. This has had the effect of reducing the revenue that
Serko expected to record in the current year. The Board has also made decisions with respect to Expected
Credit Losses (IFRS9) that reflect the prevailing level of uncertainty in the travel industry.
Total income from all sources for the year to 31 March 2020 was up 9% to $26.8 million from $24.6 million in
the prior year.
Recurring Product Revenues increased 16% during the year, lifted by a full year contribution from InterplX and
organic business growth prior to the Covid-19 outbreak. Peak ATMR at the end of February 2020, historically
a forward-looking indicator of recurring revenues, stood at $27.5 million up over 14% from a peak of $26.0
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
million in the same period of the prior year. By the end of March ATMR had fallen to $15 million based on
the drop that occurred within the month, ending the year with travel booking revenues up only 2% to $16.3
million from $15.9 million in the prior year. Subsequently ATMR has dropped further post year-end.
Serko Expense platform revenues were up 115% to $5.8 million for the financial year from $2.7 million reflecting
the full year contribution of the InterplX acquisition of $3.7 million versus $0.9 million for a single quarter for
FY19. Excluding InterplX, Serko Expense platform revenues were up 16% at $2.1 million from $1.8 million the
prior year.
Services revenue and grant income were down 33% on the same period a year ago, reduced to $1.8 million
due to Serko’s development resources being directed toward product development for new markets. Supplier
commissions revenues declined marginally by $111,000 (7%) to $1.4 million.
Expenses and Investment Activity:
Operating costs increased 59% to $37.1 million reflecting a full-year of InterplX operating costs and the scale-
up of our international presence. Costs included $4.7 million non-cash costs relating primarily to depreciation,
amortisation, final fair-value adjustment related to the issue of the final tranche of Serko shares for the InterplX
acquisition and share based payments.
Serko has capitalised $11 million of development costs for FY20, compared to $6.7 million in FY19. Total R&D
at $13.6 million was 53% of net operating income compared to 39% in the prior year. Although there remains
considerable uncertainty as to the future operating environment, the Serko Board remains of the view that
this investment will produce an acceptable commercial return in the future.
Cash flow and Cash Balance:
Serko remains well funded following the completion of an oversubscribed capital raise of $45 million in
November 2019, with cash balances up from $15.7 million in the prior year. Net funds received after capital
raising costs were $43.2 million. Excluding these funds, Serko’s net cash burn for the year, including capitalised
development, was $16.5 million. Cash balances at 31 March 2020 were $42.4 million.
Earnings:
Net loss after tax for the year was $9.4 million, down from an FY19 profit of $1.6 million and EBITDAF fell to a
loss of $6.1 million from a profit of $2.6 million in the same period a year ago.
AUSTRALASIAN MARKET UPDATE
The New Zealand and Australian markets together generated a majority of total bookings on our platform,
and travel booking revenues, during the financial year. The majority of these transactions were domestic
bookings.
During the financial year we achieved year-on-year booking growth each month through to February 2020.
This was despite softer economic conditions in Australia in the first half, followed by the Australian bushfires
negatively impacting corporate travel. Serko continued to grow customer numbers during the financial year
with the number of corporates transacting through the travel platforms increasing by over 700 (comparing
February 2020 to February 2019).
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
We also saw a significant transition to the premium Zeno product from Serko Online during the period. Zeno
was carrying approximately 25% of transactions across our platforms at the end of the financial year up from
approximately 6% of transactions at the beginning of the year.
Zeno is now being used by 42% of corporate customers in Australia and New Zealand, up from 9% at the
beginning of the year.
In February a peak of over 24,000 bookings were processed in a single day (up from a peak of 21,000 in the
same month in the prior year). However, with the gradual decline in bookings becoming evident in mid-
February, and the subsequent rapid decline in March 2020, total bookings for the entire financial year were
up only 2% over the prior year.
Impacts of Covid-19
The Covid-19 pandemic and related travel restrictions resulted in an observable declining trend in February
followed by a dramatic reduction in March 2020. By the end of March 2020, daily transaction volumes had
declined by ~90% compared to the equivalent days in March 2019.
We currently believe that the Australian and New Zealand domestic and trans-Tasman travel markets, which
presently generate most of our revenue, are poised to recover more quickly than international routes outside
of Australasia.
Travel volumes have gradually started to recover in May 2020 with the easing of domestic travel restrictions
in New Zealand. We are yet to see any material increase in domestic travel in Australia due to the significant
travel restrictions that remain in place. Essential travel in Australia has, however, continued and we continue
to manage a small number of Australian transactions across our platforms.
During the first three weeks of June 2020, over 3,200 corporate customers have made a travel booking as
New Zealand moved down to Level 1 restrictions. This has resulted in daily booking volumes on Serko’s
platforms steadily increasing in June 2020 to about 25% of the daily booking volumes in June 2019 (from a
low of 9% in April).
Although the outlook is highly uncertain we anticipate our core Australasian markets will be operating at 40%
- 70% of their pre-Covid-19 activity levels by March 2021. Beyond that we are taking a conservative approach
to growth as most industry reports indicate a slow, and largely unpredictable, return to full pre-Covid-19
activity levels.
We have been working proactively with our travel management partners to support their recovery. In some
instances this has required amendment of contractual obligations that has adversely impacted our previously
noted FY20 revenue recognition.
NORTH AMERICAN & EUROPEAN EXPANSION UPDATE
North America
During the financial year we invested heavily in our Zeno platform for expansion into North America.
Transactions commenced in this market following the transition of several travel management resellers from
pilot phase to onboarding their first corporate customers. As expected, revenue numbers from this market
were not significant for the financial year.
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
Travel management reseller onboarding slowed materially in the last quarter due to the impact of Covid-19
and we expect further corporate onboarding to be slow until travel resumes in that market.
Transactions have effectively ceased due to the lockdown restrictions in this market.
Despite the impacts of Covid-19, Serko has signed an additional three resellers since 31 March 2020.
Development work will continue in the market, expanding local air, rail and hotel content as well as completing
reseller integrations to support the migration of additional corporates on to our platforms.
United Kingdom & Europe
In the United Kingdom and Europe we have been undertaking the development work required for the launch
of ‘Booking.com for Business’, a white label version of Zeno to be offered internationally to Booking.com’s
small and medium-sized enterprise (SME) customers.
The impacts of Covid-19 delayed the beta-launch of ‘Booking.com for Business’ from March 2020 to May
2020. However, initial bookings have been completed in the United Kingdom and Ireland and the roll-out in
these two markets will continue for most of FY21. Additional key markets will be developed and ‘localised’
(e.g. for content and language) as we progressively roll-out the solution across Europe.
Impacts of Covid-19
Serko’s business plans in North America and Europe are not contingent on the revival of long-haul
international travel. In excess of 95% of the revenue opportunities we were pursuing prior to the pandemic
were domestic or intra-regional bookings and the total addressable market remains significant.
Domestic travel in the United States (US), and domestic and cross-border intra-regional travel to nearby
countries within Europe, are expected to be the first segments of these travel markets to recover post-Covid-
19.
SERKO EXPENSE PLATFORM INITIATIVES
As noted above, the Serko Expense platform has provided solid revenue growth during the financial year and
represents an important diversification from travel revenues for Serko.
In North America the development work required to bring the InterplX expense platform in-line with the Zeno
user experience continues and we expect to launch the new Zeno Expense offering in Q3 FY21, bringing
greater scalability and a richer set of features to our combined Travel & Expense offering.
In Australasia a direct marketing campaign and activation of a reseller incentive programme across our travel
management company partners, along with the introduction of a rapid implementation programme that
materially reduces our set-up time to onboard new accounts, is resulting in an increased pipeline of Serko
Expense platform opportunities.
COST MANAGEMENT INITIATIVES IN RESPONSE TO COVID-19
Our immediate response to the Covid-19 pandemic was to introduce measures to look after our people. All
business travel was halted. We moved to working from home and enforced rigorous social distancing for the
few who needed to be in our offices.
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
These initiatives were rapidly followed by a cost reduction programme designed to preserve our strong cash
balance position and target an average cash burn rate of no more than $2 million per month through to the
end of FY21. We balanced cost savings with investment in core areas to maintain our capability to deliver on
our key growth initiatives.
This cost reduction programme saw the removal of non-essential expenditure, scaled down operating
expenses (such as cost of sales and hosting), as well as the rationalisation of our contractor resources
(including the conversion of some of this resource to full-time employment). Serko has aimed to keep as many
people employed during this period as possible, as we recognise the personal impact to employees if they
were to lose their jobs and the cost to the business of losing skilled people, especially as our ambition to grow
in new markets remains undiminished.
We acknowledge and thank the various Government programmes and subsidy schemes that have assisted in
the retention of our people during this challenging period. We accessed $1.6 million of Government-backed
Covid-19 relief schemes to date across the countries in which Serko operates, including receipt of $871,670 in
salary subsidies from the New Zealand Government.
In addition, employees agreed to take a salary reduction for three months from May 2020, and the non-
executive directors agreed to either take a reduction in their directors’ fees or receive a portion of their
directors’ fees in shares for the first three months of FY21.
BUSINESS TRAVEL OUTLOOK
The rate of return to business travel will vary by region and type of trip (i.e. domestic, regional, long-haul
international). Volumes are very difficult to model. Travel Management resellers are operating with fewer
human resources, creating opportunities for automation and technology solutions. Additionally, we are seeing
greater cost management by corporations and a focus on traveller wellbeing, duty of care obligations and
change management. We are actively assessing changes in corporate and traveller needs to ensure that we
can support the market, our customers and our growth as the industry recovers.
FY21 OUTLOOK
We consider the business is well positioned for growth when trading conditions improve and the travel
industry starts to recover:
• We occupy a strong market position in Australasia, with the majority of our transactions being
domestic and Trans-Tasman in our home markets. There remains a pipeline of new customers to be
onboarded from our existing reseller partners.
• We are focussing predominantly on domestic travel within North America, where we continue to add
resellers to our platform and continue development work to localise content in that region.
• ‘Booking.com for Business’ white-label is now live in the United Kingdom and Ireland, and our
agreement with Booking.com presents an opportunity to continue to expand use of the Zeno
booking tool internationally.
• We have a strong balance sheet and ongoing commitment to investment, which will benefit existing
and prospective customers.
• We have retained resource and capacity on key growth initiatives.
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
We believe these factors position us well to continue to prosper in our home markets and to roll-out our
products globally as confidence returns to corporate travel markets.
Timing, however, remains uncertain. As a result, we are unable to forecast our likely operating revenue for
the 2021 financial year with any certainty.
As at 31 May 2020, Serko had net cash and cash equivalents of $39.9 million. We believe these cash resources,
at the current rate of cash burn, will be sufficient to see the company through to cash flow breakeven again
should our anticipated recovery scenario be achieved.
We will continue our rigorous focus on cash flow throughout the remainder of FY21, targeting an average
monthly cash burn of no more than $2 million per month, to conserve cash reserves.
Notes:
Non-GAAP (generally accepted accounting practices) financial measures do not have standardised meanings prescribed by GAAP and
therefore may not be comparable to similar financial information presented by other entities. The Non-GAAP financial information
included in this release has not been subject to review by the auditors. Non-GAAP measures are used by management to monitor the
business and are useful to provide information to investors to assess business performance. A reconciliation of Net Profit to EBITDAF
can be found in the Annual Report and Investor Presentation dated the same date as this announcement.
1
Total Operating Revenue (a Non-GAAP measure) is revenue excluding income from grants and finance income, while Total Income
includes grants.
2
Recurring product revenue (a Non-GAAP measure) is the recurring revenue derived from transactions and usage of Serko products by
contracted customers. It excludes revenues from customised software development (services revenue).
3
Peak 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 (for its travel platform
revenue) and monthly active user charges (for its expense platform revenue). This is calculated on an annualised basis on a constant
currency basis based on the daily weekday average multiplied by standard 260 weekdays in a year. Peak ATMR month was February for
both 2019 and 2020 financial years. ATMR has subsequently been materially adversely affected following the impacts of Covid-19.
5
Research & Development (R&D) costs is a non-GAAP measure representing the internal and external costs related to R&D both
expensed and capitalised.
4
Operating expenses is a Non-GAAP measure which excludes costs relating to taxation, interest, depreciation, and amortisation charges.
6
EBITDAF is a Non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation, Depreciation,
Amortisation and Fair value remeasurement on contingent consideration. Serko uses this as a useful indicator of cash profitability.
Note: all dollar amounts are New Zealand dollars unless otherwise stated.
For and on behalf of Serko Limited by the Board.
Ends
For investor relations queries please contact:
Susan Putt
Chief Financial Officer
Serko +64 21 388 009
investor.relations@serko.com
About Serko
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
Serko is a market leading travel and expense technology solution in Australasia, used by over 6,800 corporate
entities. 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.
Serko is listed on the New Zealand Stock Exchange Main Board (NZX:SKO) and Australian Securities Exchange
(ASX:SKO). Serko employs more than 200 people worldwide, with its headquarters in New Zealand, and offices
across Australia, China, and the U.S. Visit www.serko.com for more information.
---
Results Announcement
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, company.secretary@serko.com
Incorporated in New Zealand ARBN 611 613 980
Results for announcement to the market
Name of issuer Serko Limited
Reporting Period 12 months to 31 March 2020
Previous Reporting Period 12 months to 31 March 2019
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
26,791 9%
Total Revenue 26,791 9%
Net profit/(loss) from
continuing operations
(9,364) -673%
Total net profit/(loss) (9,364) -673%
Interim/Final Dividend
Amount per Quoted Equity
Security
No dividends have been paid on ordinary shares and it is
currently not proposed to pay dividends.
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.47 $0.19
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
This document should be read in conjunction with the audited
consolidated financial statements contained in the Annual
Report for the year ended 31 March 2020, and the Annual
Report generally.
The audited consolidated financial statements for the year ended
31 March 2020 have been prepared in accordance with Generally
Accepted Accounting Practice in New Zealand and comply with
New Zealand equivalents to International Financial Reporting
Standards (“NZIFRS”). Further detail on the accounting policies
adopted is set out in the notes to the financial statements.
Net tangible assets per security increased due to cash on hand
due to capital raise and higher level of capitalisation of internally
developed software. Refer to the Annual Report, management
commentary on research and development costs.
For additional commentary on the results, please refer to the
Management Commentary in the Annual Report, and the Annual
Report generally.
Pursuant to ASX listing rule 1.15.3, Serko Limited confirms that it
continues to comply with the rules of its home exchange (NZX
Main Board).
Copies of Serko’s prior Annual Reports and Interim Reports can
be found on Serko’s
website, at www.serko.com/investor-centre/.
Authority for this announcement
Name of person authorised
to make this announcement
Susan Putt
Contact person for this
announcement
Susan Putt
Contact phone number +64 21 388 009
Contact email address
investor.relations@serko.com
Date of release through MAP 24 June 2020
Audited financial statements accompany this announcement.
---
•This presentation has been prepared by Serko Limited. All information is current at the date of this presentation, unless stated otherwise. All currency amounts are in
NZ dollars unless stated otherwise.
•Information in this presentation
•is for general information purposes only, and does not constitute, or contain, an offer or invitation for subscription, purchase, or recommendation of securities
in Serko Limited for the purposes of the Financial Markets Conduct Act 2013 or otherwise, or constitute legal, financial, tax, financial product, or investment
advice;
•should be read in conjunction with, and is subject to Serko’s Financial Statements and Annual Reports, market releases and information published on Serko’s
website (www.serko.com);
•includes forward-looking statements about Serko and the environment in which Serko operates, which are subject to uncertainties and contingencies outside
Serko’s control –Serko’s actual results or performance may differ materially from these statements, particularly as a result ofthe impacts of Covid-19;
•includes statements relating to past performance information for illustrative purposes only and should not be relied upon as (and is not) an indication of future
performance;
•may contain information from third-parties believed to be reliable, however, no representations or warranties are made as to theaccuracy or completeness of
such information.
•Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information
presented by other entities. The non-GAAP financial information included in this release has not been subject to review by auditors. Non-GAAP measures are used by
management to monitor the business and are useful to provide investors to access business performance.
DISCLAIMER
2
CEO Welcome
‹#›
3
AGENDA
CEO
Welcome
Covid-19:
Serko’s
Response
Strategic
Updates
Financial
Summary
Outlook
Statement
4
COVID-19 : SERKOs RESPONSE
5
•For 11 months of the financial year ended 31 March 2020 Serko achieved monthly revenue growth over
the prior year. However, in March transactions fell sharply as the Covid-19 pandemic became
widespread.
•Serko responded by implementing strategies under the themes of “Survive, Optimise and Thrive”;
•Took steps to ensure our people were safe and supported the transition to work from home
•Reduced cash burn through cost reduction program
•Retained resource and capacity on key growth initiatives
•Re-prioritisedstrategic initiatives to re-position the business for the new operating environment
•Booking volumes gradually started to recover in May2020, steadily increasing by June 2020 to about
25% of the daily booking volumes of June 2019.
•3,200 corporate customers made a booking during the first three weeks of June 2020.
•Target average cash burn rate of no more than $2 million per month to the end of FY21
•Cash reserves of $42.4 million as of 31 March 2020 provides sufficient headroom based on current
assumptions.
Strategic Updates
‹#›
6
SERKO STRATEGY
7
SUPPORTING THE FUTURE OF BUSINESS TRAVEL
8
BOOKING.COM AGREEMENT
9
•As announced in October 2019, Booking Holdings’ made a cornerstone investment in Serko and Booking.com
expanded its existing agreement with Serko, so that Booking.comcan offer and promote Zeno to its business traveller
customers.
•Serko expects the expanded agreement with Booking.comto result in significant benefits for Serko’s customers and
TMC partners by broadening and improving ‘whole of journey’ content, accelerating the global rollout of Serko Zeno,
and increasing commissions to the TMC community.
•Zeno will be white-labeled as Booking.com for Business and the intention is to progressively roll this offering out to its
business customer base internationally subject to Serko meeting prescribed performance criteria.
•Closed pilot of Zeno white-label solution for existing Booking.com for Business in the United Kingdom and Ireland has
been launched.
AUSTRALASIA MARKET UPDATE
•The majority of Serko’s revenues came from Australia and New Zealand domestic bookings.
•Year on year booking growth each month throughtoFebruary2020. Peak of 24,000 bookings daily bookings in
February 2020*.
•Gradual decline in bookings in February, followed by sharp decline in March 2020.
•Total travel corporate customers (Serko Online and Zeno) grew by over 700 for the year to a total of approximately
6,800**.
•Zeno transaction volumes grew to 25% of total bookings by March 2020, up from approximately 6% a year prior.
•In June 2020 42% of all transacting corporate customers were using Zeno.
•In response to Covid-19 a Serko Expense Express offering was launched in the Australian and New Zealand markets in
March 2020 with a low-cost, rapid implementation solution that has resulted in an increased pipeline of expense
opportunities.
10
*Note: Bookings have subsequently materially reduced as a result of Covid-19
** Comparing February 2019 and February 2020
NORTH AMERICA MARKET UPDATE
•We have invested heavily in the Serko Zeno platform for expansion into the North American
markets during the year.
•Serko had its first live bookings in North America following beta release in September 2019, but
in line with our expectations revenue from this market was not significant for the year.
•Some Travel Management Company resellers were completing their user acceptance testing
when Covid-19 hit in February and onboarding progress has slowed.
•Transactions effectively ceased due to lockdown restrictions in market.
•Since March we have added three new Travel Management Company resellers and are in the
process of activating these partners.
•Signed Zeno Expense reseller partnership with buying group Omnia Partners and joined the
Oracle NetSuite SuiteApppartner program.
11
FY20 Financial Summary
‹#›
12
PERFORMANCE DASHBOARD –FY20
PROFIT (LOSS)REVENUEACTIVITYCOSTS
FY20 VS FY19
NET LOSS AFTER
TAX
($9.4m)
EBITDAF
1
loss
$(6.1m)
OPERATING
REVENUE
11%
Operating revenue
from core products
plus services revenue
$25.9m
RECURRING
REVENUE
2
16%
Recurring revenue
(core product
revenue only)
93% of total
operating revenue
$24.1m
TOTAL
INCOME
9%
Total income from all
sources including
grants
$26.8m
PEAK ATMR
3
6%
Indicator of future
growth potential
based on current
trading
$27.5m*
TRAVEL
BOOKINGS
2%
Travel platform
bookings for the
period
4.2m
R&D COSTS
4
48%
53% of Revenue
Opex $2.6m
Capex $11.0m
$13.6m
OPERATING
EXPENSES
59%
Net FTE
5
increase in
the period of 60 to
233 employees
$37.1m
Notes 1 –5: Refer to Appendix for definitions.
*Note: ATMR has subsequently reduced materially as a result of Covid-19
13
NET PROFIT SUMMARY/ EBITDAF RECONCILATION
•Revenue of $25.9m up 11% (Slide 15)
•Total income (including grants) up 9% to $26.8m
•Operating expenses of $37.1m up 59% (Slide 16)
•EBITDAF loss of ($6.1m) versus profit of $2.6m in prior
year
•Net loss for the period of ($9.4m) includes:
•Depreciation and amortisation of $3.2m includes
$1.0m being depreciation on right of use assets
(leased premises)
•Non-cash fair value adjustment relating to
contingent consideration of $1.1m for InterplX
acquisition with the final tranche of shares issued
in February 2020
•Net finance income primarily related to interest
income ($0.4m) and foreign exchange gains
($0.7m)
FY20
$000
25,869
922
26,791
(37,092)
-143%
(9,326)
-36%
975
(38)
(9,364)
38
(975)
3,156
1.056
(6,089)
-24%
Net Profit Summary
EBITDAF Reconciliation
Revenue
Other income (including grants)
FY19
$000
23,361
1,215
Total income
Operating expenses
24,576
(23,320)
Percentage of operating revenue-100%
Net profit before tax1,546
Percentage of operating revenue7%
Net finance income 290
Income tax (expense)/benefit87
Net (loss)/profit after tax 1,633
Add back (deduct): income tax expense (benefit)
Add back (deduct): net finance (income)/expenses
Add back: depreciation and amortisation
1
Add back: fair value measurement
2
(87)
(290)
1,048
287
EBITDAF 2,591
EBITDAF margin11%
change
$000
2,508
(293)
2,215
(13,772)
(10,872)
685
(125)
(10,997)
125
(685)
2,108
769
(8,680)
%
11%
-24%
9%
-59%
-703%
236%
-144%
-673%
-144%
236%
201%
268%
-335%
1 Depreciation includes building rental costs of $1.0 million which have been reclassified as Right of Use Assets and depreciated under IFRS16 (Leases) adoption
2 Fair value remeasurement of contingent consideration on deferred consideration for InterplXacquisition added to EBITDAF as non-cash expense
change
14
REVENUE ANALYSIS
•Recurring revenue (excluding Services revenue) at $24.1m up 16%;
93% of total operating revenue.
•Travel platform booking revenue up 2% was Covidimpacted during
Q4
•Travel platform total bookings at 4.2m versus 4.1m in the prior
year, up 2%
•Online transactions down at 3.72m vs 3.74m in the prior year
•Covidimpact on Travel platform revenue: IFRS15 adverse
minimum revenue adjustments due to declining forecasts for
remainder of contracts
•Serko Expense platform revenue at $5.8m up 115%, includes
full year contribution from the Dec 2018 InterplXacquisition
of $3.7m (3 months FY19: $0.9m). Expense revenue related to
Serko Expense at $2.1m up 16%.
•Supplier commissions revenue down marginally against prior year at
$1.4m.
•Services revenue at $1.8m down on prior year as development
resources focused on NORAM activation and Booking.com for
Business platform.
•Average Revenue per Booking (based on total recurring
revenue/total online bookings) for the year was $6.46 up 17% from
$5.52 in prior year, primarily attributable to InterplX.
Revenue and Other Income
by Type
Travel platform booking revenue
Expense platform revenue
Supplier commissions revenue
Other revenue
Recurring revenue
Recurring revenue % operating revenue
Services revenue
Total revenue
Total income
Australia
New Zealand
North America
Other
Operating Revenue by Geography
FY20
$000
16,307
5,831
1,427
485
24,050
93%
1,819
25,869
26,791
18,218
2,465
4,823
363
25,869
Total operating revenue
FY19
$000
15,948
2,710
1,538
467
20,663
89%
2,698
23,361
24,576
19,335
2,343
1,471
212
23,361
change
$000
359
3,121
(111)
18
3,387
(879)
2,508
2,215
(1,117)
122
3,352
151
2,508
%
2%
115%
-7%
4%
16%
-33%
11%
9%
-6%
5%
228%
71%
11%
change
Total other income
Government grants
Sundry income
922
-
1,208
7
(286)
(7)
-24%
-100%
9221,215(293)
-24%
15
OPERATING EXPENSES/HEAD COUNT
•Operating Costs increased by 59% to $37.1m, includes
full year of InterplXand expansion costs.
•Remuneration and benefits increased 48% to $19.4m
(Head count increases –refer below).
•Selling and marketing increased $1.3m primarily related
to new third party connection charges introduced in
AUS/NZ.
•Hosting expense of $3.4m increased 74% primarily due
to increased infrastructure for system stability and set
up of data bases in new territories.
•Administration costs at $10.3m increased 64% and
includes increased charges for:
•depreciation and amortisation increase of $2.1m
•computer licenses increase of $0.7m
•professional fees increase of $0.5m
FY20
$000
37,092
2,989
3.362
19,419
10,266
1,056
143%
Operating Expenses
Total Operating Expense
FY19
$000
23,320
Selling and marketing
Hosting expense
Remuneration and benefits
Administration expenses
Fair value remeasurement
1,691
1,931
13,135
6,276
287
100%
change
$000
13.772
1,298
1,431
6,284
3,990
769
%
59%
77%
74%
48%
64%
268%
change
Percentage of Operating Revenue
FY20
$000
233
146
18
52
17
Head count
Total employee numbers at end of year (FTE*)
FY19
$000
173
Product development and maintenance
Sales and marketing
Customer support
Administration
100
16
40
17
change
$000
60
46
2
12
0
%
35%
46%
13%
30%
0%
change
•Increase of 60 FTE* -(FY19 increase 67).
•Subsequent to year-end employee count has increased to 240
*FTE (Full time equivalent)
16
RESEARCH & DEVELOPMENT (R&D)
•Total R&D costs increased by $4.4m (48%)
over prior year to $13.6m due to investment
into market requirements for the Northern
Hemisphere.
FY20
$000
2,593
13,606
53%
(683)
1,705
(11,013)
3,615
14%
R&D Costs
Research costs (excluding amortisation of
amounts previously capitalised)
FY19
$000
2,425
Total R&D costs (including amounts capitalised)
9,165
Percentage of operating revenue39%
Less: Government grants relating to research
Add: Amortisation of capitalised development costs
(810)
754
Less: capitalised product development costs(6,740)
Net product development costs expensed2,369
Percentage of operating revenue10%
change
$000
168
4,441
127
951
(4,273)
1,246
%
7%
48%
-16%
126%
63%
53%
change
81%Percentage of R&D costs74%
10%Percentage of operating revenue10%
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 capitalisedas
computer software development during the period. Research expenditure includes all reasonable expenditure associated with R&Dactivities 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.
17
Outlook Statement
‹#›
•The businessis well positionedforgrowthwhentrading conditionsimproveand the travel industry starts to recover.
•Timing,however,remains uncertain.As a result, we are unable to forecast our likely operating revenue for the 2021
financial year with any certainty.
•Wewill continueourrigorous focus on cashflow throughout the remainder of FY21, targetinganaverage monthlycash
burn ofno more than$2millionper month,to conserve cashreserves.
•As at 31 May 2020,Serko had net cash and cash equivalents of $39.9million.We believe these cash resources, at the
current rate of cash burn, will be sufficient to see the company through tocashflow breakevenagainshould our
anticipated recovery scenario be achieved.
FY21 OUTLOOK
19
Q&A
‹#›
Appendices:
‹#›
Company Snapshot
Definitions
ABOUT SERKO
FOUNDED IN 2007
Innovative Solutions
Serko is a technology company focused on
innovative solutions that address the
challenges of corporate travel and expense
management. The majority of Serko’s
revenue comes from Travel Management
Companies (TMCs) (“Resellers”), who
provide our online travel booking (OBT)
solution to their corporate customers.
Serko also sells Expense management
solutions to corporate customers directly.
Market Leader
Serko is a leading supplier of travel
technology solutions for TMCs in Australasia
and is now expanding into Northern
Hemisphere markets with multiple signed
reseller agreements in North America and a
global agreement with ATPI and
Booking.com.
NZX/ASX Listed
Serko listed on the New Zealand stock
exchange in June 2014. In June 2018, Serko
listed as a foreign exempt listing on the
Australian Securities Exchange. Serko
trades under the ticker ‘SKO’ on both
exchanges.
Serko employs around 240 people
worldwide with its HQ in New Zealand, and
offices across Australia, the U.S. and China
For further information refer to Serko’s website www.serko.comand its 2020 Annual Report which can be found under Investor Centre.
22
Zeno TravelZeno Expense
Zeno Travel is an Online
Booking Tool (OBT) that
corporate travellers use to
book flights, trains, hotels,
rental cars and airport
transfers in line with their
corporate travel policies.
Zeno Expenseautomates
the process of corporate
card and out-of-pocket
expense submission,
reconciliation and
reimbursement
SERKO PRODUCTS
23
$
Corporate travellermakes a
booking via Serko
Online/Zeno
Booking and other fees
Serko charges the TMCs a fee per booking
(which varies based on volume).
Year Ended 31 March2020
Travel platform booking revenue
Expense platform revenue
Supplier commissions revenue
Other revenue
$000
16,307
5,831
1,427
485
Recurring Product Revenue24,050
Services revenue1,819
Total Revenue25,869
Percentage of total revenue93%
a
$
Supplier commission
Serko also generates revenue through
commissions on hotels, rental cars, airport
transfers and other travel providers that are
booked through its platform.
$
Travellerbooks hotel or
taxi via Serko Online/Zeno
Mobile subscription
$
Travellerdownloads and
uses Serko Mobile
Travellersubmits receipts
using Serko Expense/Zeno
Monthly user fee
Serko Expense customers pay a fee based on
the number of active users each month
directly to Serko.
Additional Services
Serko earns other miscellaneous revenue
such as mobile licenses
Services Revenue
$
Paid customisation, marketplace integration
or implementation assistance
COMMERCIAL MODEL
24
Selected Operational MetricsFY13FY14FY15FY16FY17FY18FY19
1 –Online bookings exclude Offline and Custom bookings (system generated bookings) which are included in Online booking pricingor at a reduced rate
2 –Operating costs are Operating Expenses excluding depreciation and amortisation and fair value remeasurements of contingent consideration
* –indicates not previous measured or reported
# –FY17 revenue was affected by adverse foreign exchange rates; FY20 revenue was affected by Covid-19 pandemic
HISTORIC MEASURES for financial years (31 March)
Total revenue growth (%)
Revenue growth –Travel Platforms (%)
Total travel booking transactions (000s)
Online booking transactions
1
(000s)
Online transaction growth (%)
Recurring product revenue as % total revenue
Operating costs
2
(% change)
Employees (number at end of year -FTE)
Average revenue per FTE (NZD$000)
Research & development costs -expense and capex (NZD$000)
Peak annualisedtransactional monthly revenue (ATMR) (NZD$m)
27%
41%
987
821
35%
84%
35%
47
119
2,340
*
39%
12%
1,107
1,011
23%
71%
62%
87
100
3,387
*
55%
62%
1,588
1,468
45%
80%
105%
133
94
5,762
*
27%
49%
2,407
2,262
54%
93%
13%
127
101
6,268
11.2
9%#
8%
2,913
2,673
18%
91%
(10%)
108
122
5,836
15.3
28%
23%
3,526
3,207
20%
90%
(5%)
106
170
4,906
18.4
28%
20%
4,138
3,743
17%
89%
29%
173
167
9,165
26.0
FY20
11%#
2%
4,214
3,724
-1%
93%
59%
233
121
13.606
27.5
25
•Peak ATMR (AnnualisedTransactional Monthly Revenue) is a non-GAAP measure. Serko uses this as a useful indicator of recurring revenues
from Serko products. It is calculated by annualisingthe combination travel and expense platform monthly revenues for the most recent non-
seasonal month. The travel platform revenue is annualisedby taking the monthly online booking transactions divided by the number of
weekdays for that month multiplied by the average ARPB and multiplied by 260 days. The expense platform revenue is based on the monthly
revenue from active users multiplied by 12 months.
•ARPB (Average Revenue Per Booking) is a non-GAAP measure. Serko uses this as a useful indicator of the combined value from transactional
booking fees and the supplier commissions earned from the travel platform. It is calculated by taking total travel platform booking revenue
and supplier commission revenue divided by the total number of bookings.
•Recurring product revenue is a non-GAAP measure and is the recurring revenue derived from transactions and usage of Serko products by
contracted customers. It excludes revenues from customisedsoftware development (services revenue).
•Operating revenue is a non-GAAP measure excluding income from grants and finance income, while total income includes grants.
•R&D (Research & Development) costs is a non-GAAP measure representing the internal and external costs related to R&D both expensed and
capitalised.
•Operating Costs is a non-GAAP measure which excludes costs relating to taxation, interest, depreciation, and amortisationcharges.
•EBITDAF is a non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation, Depreciation and
Amortisationand Fair value remeasurement of contingent consideration.
•FTE = Full time equivalent employee.
DEFINITIONS
Serko Limited, Saatchi Building, Unit 14D 125 The Strand, Parnell, Auckland, New Zealand
PO Box 47-638, Ponsonby, T: +64 9 309 4754, F: +64 9 377 0545, investor.relations@serko.com
Incorporated in New Zealand ARBN 611 613 980
26
Thank you
27
---
1
Serko ESG report
ENVIRONMENTAL
SOCIAL
GOVERNANCE
2
Serko ESG report
ENVIRONMENTAL
SOCIAL
GOVERNANCE
3
Serko ESG report
This Environmental, Social and Governance (ESG) Report, which
incorporates Serko’s Corporate Governance Statement, was
approved by the Board of Serko Limited on 23 June 2020 and
is accurate as at that date. The Board does not undertake any
obligation to revise this Report to reflect events or circumstances
after 23 June 2020 (other than in accordance with the continuous
disclosure requirements of the applicable Listing Rules).
CONTENTS
Introduction4
Environmental6
Social8
Governance12
Risk Management23
4
Serko ESG report
People:
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
Introduction
Serko aims to be a successful growth company. To
realise this ambition we must do the right thing by our
people, customers, communities 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.
Further information and our full Annual Report can be
found on the investor centre of Serko’s website.
Serko’s first Environmental Social and Governance
(ESG) Report was produced in 2018. The United
Nations (UN) Sustainable Development Goals (SDGs)
have been adopted for Serko’s ESG initiatives to be
reported against. Serko’s ESG framework remains
under development and will continue to be progressed
over time.
The SDGs are a set of global initiatives set by the UN
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 initiatives relate
to a larger vision for positive change.
The UN SDGs relevant to Serko and our actions are
as follows:
5
Serko ESG report
6
Serko ESG report
ENVIRONMENTAL
7
Serko ESG report
•
We are committed to continually improving our
recycling methods. We already:
–
reuse IT equipment and parts where possible.
–
recycle IT equipment using IT recycling companies
that seek to reduce carbon emissions via their
recycling efforts, by following the e-Waste practices
outlined in AS/NZS5377:2013 and complying with
the Basel Convention standards for the export of
e-Waste material.
–
recycle paper, glass, hard plastic, aluminium and tin
cans and cardboard.
–
undertake composting where these services
are available.
–
minimise the use of disposable coffee cups and
single-use water bottles by using reusable cups and
jugs, giving all staff a reuseable water bottle, and
providing filtered water taps.
IN THE FUTURE
As a company providing travel-related booking tools and
information, we recognise we could play an increasing role in
helping to provide information on travel-related CO2 emissions
to our customers and enabling travellers to offset their carbon
footprints. These environmental initiatives will be considered
as part of our product innovation roadmap.
Serko recognises that it has a responsibility to the
environment beyond legal and regulatory requirements. We
are committed to reducing our environmental impact and
continually improving our environmental performance as an
integral part of our business strategy and operating methods.
We encourage customers, suppliers and other stakeholders to
do the same.
As a software development company Serko has a low
environmental impact. But where possible Serko aims to
reduce this to the minimum level practicable. Serko’s current
environmental goal is to continually look to reduce the
impact of our business on the environment and as we grow
as an organisation to ensure that any negative impact on the
environment is minimised.
LOWERING OUR CARBON FOOTPRINT
Serko is committed to progressively lowering its carbon
footprint, towards our initial goal of offsetting 100% of our
carbon emissions.
•
We are conscientious when booking travel and, where
possible, combine meetings to minimise our trips and
resulting emissions.
•
We provide flexibility for our employees to work from
home, reducing the carbon emissions associated
with commuting.
•
Wherever possible we host information technology
(IT) services in the cloud, lowering our on-premise
energy consumption.
•
We look to partner responsibility. Serko uses Microsoft
as our cloud services platform partner. Microsoft has
been carbon neutral since 2012 and is committed to
become carbon negative by 2030.
Environmental
We are committed
to reducing our
environmental impact
8
Serko ESG report
SOCIAL
9
Serko ESG report
that our employees were not exposed to the virus. This was
soon followed by the closure of our offices worldwide. In
response to the emergence of the pandemic, Serko has been
engaging its workforce through initiatives such as our ‘Isolation
Innovation’ programme, involving webinars, online social
gatherings and online resources. We established new ways of
working remotely and ensured that people had the equipment
and resources available to remain productive and succeed
in their roles from home. Serko’s recent (May 2020) culture
survey results show the strongest engagement scores in five
years of surveying and our employees voiced their gratitude for
the leadership and support shown during such a trying period.
Serko operates in an industry that is highly competitive for
talent. We aim to provide an environment and culture that
people want to be a part of. Our culture is not created via words
on a wall but by a way of working throughout our organisation
that encourages and enables people to be the best they
can be and to do so in an environment that focuses on fun,
performance and energy. There are a variety of initiatives that
contribute to our culture – each of which are underpinned by
our values and contributed to by the diversity of perspectives
that make up Serko.
As a result, Serko has low employee turnover (just 8% voluntary
turnover as at 31 March 2020) and high employee engagement
scores relative to industry norms. Serko’s employees (known
in-house as Serkodians) are generally motivated, excited about
our future and feel our organisation is a great place to work.
As an example, more than 98% of our employees reported that
they strive to do their best work every day, as they want the
company to be successful.
SERKO CULTURE AND VALUES
Serko’s culture remains upbeat, nimble, dynamic and inclusive,
notwithstanding the impact Covid-19 is having on the travel
industry. 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 be successful.
Serko’s people are incentivised for achieving exceptional
results. We have established OKRs (Objectives and Key Results)
throughout all teams and support 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 high
employee engagement.
These values were demonstrated during the recent lockdown
as a result of the Covid-19 pandemic. Serko was quick to act
to protect and care for its employees when the pandemic
first emerged, rapidly closing our China offices to ensure
Social
Mastery
Serkodians continuously strive to become
masters of what they do
Autonomy
Serkodians are able to work independently
and make decisions for themselves
Teamwork
Serkodians work well with people not just
in their own teams but in teams across the
organisation
Passion
Serkodians are passionate about what they
do and what Serko does
Integrity
Serkodians are honest, respectful of others,
deliver on their commitments and make
ethical business decisions
Success
Serkodians strive toward their goals to
ensure Serko reaches its goals
Family
Serkodians are valued as part of the Serko
family and Serko recognises the importance
of their families to them
Fun
We value humour, laughter and enjoying our
time at Serko
10
Serko ESG report
DIVERSITY & INCLUSION
Serko is committed to providing equal employment opportunities and, as such, has a workforce consisting of many individuals with
diverse skills, values, backgrounds, ethnicities 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 and Inclusion 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 and Inclusion Policy but has delegated to the
Remuneration and Nominations Committee the responsibility to develop and to recommend measurable objectives to the Board
that are designed to adhere to Serko’s Diversity and Inclusion Policy.
As at 31 March 2020, Serko employees represent more than 20 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 60s, with the spread peaking in the early 30s. Serko has commenced measuring employee’s feelings of inclusion and
belonging at Serko, with positive results showing that employees generally feel respected, included and that they are able to have a
fair balance of work and home life as employees.
The respective numbers and proportions of men and women at various levels within the Serko workforce are set out in the latest
Annual Report.
11
Serko ESG report
ObjectiveFY20 Progress
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 gender is maintained (or strengthened) with the long-term
goal of having 50% of the Board, Executive and Leadership
team being women.
Over the past year:
- We continued to increase the diversity of our people, hiring
people from a diverse range of cultures, nationalities and age
groups. The appointments spanned a range of disciplines,
including sales, technology and services. The number of
female appointments increased from 29% in FY19 to 43%
in FY20. While it remains difficult to recruit females into
technology roles, 26% of our recruitment for these roles
resulted in females being appointed, deepening the diversity of
thought within the technology team.
- We continued to champion females in technology via our
graduate intern programme.
- We continued to foster an inclusive working environment by
promoting flexible working arrangements that are designed
to assist our people to manage their personal and work
commitments successfully.
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 to help achieve
greater diversity at leadership levels.
Over the past year:
- We have been able to offer many employees internal role
changes and promotions as we scaled both in our home
markets and globally. This has served to not only support the
ongoing development of our people but also retain our key
talent. Almost half the promotions of technology leaders within
the business during FY20 were female, enhancing the diversity
of thought leadership within Serko.
- We have delivered a range of wellbeing activities, including
resilience workshops, mindfulness programmes and initiatives
to promote physical health and mental wellbeing while we
rapidly scale our business. We also continued to support
the wellbeing of our employees via our Employee Assistance
Programme.
- We have delivered surveys to capture employee feedback on
the extent to which they feel Serko is an inclusive place to work
and supports their ability to perform to their full potential.
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
application of budget for pay reviews.
Over the past year:
- We conducted our annual pay equity review and benchmarked
remuneration against market data.
- We undertook annual performance reviews, that are peer
reviewed, to inform fair and transparent remuneration
and promotion decisions, resulting in a number of internal
promotions within the organisation.
DIVERSITY OBJECTIVES
Serko has set measurable objectives to reinforce its commitment to diversity. The Board’s evaluation of Serko’s performance with
respect to these objectives during the financial period are set out below. These objectives will remain our focus for the financial
year ending 31 March 2021.
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Serko ESG report
GOVERNANCE
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Serko ESG report
The Board currently comprises an independent non-executive
Chair, two independent non-executive directors and two
executive directors, as detailed on the investor centre of the
company ’s website and in the latest 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 are set out in the latest
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 are set out in the
latest Annual Report.
Principle 1
Code of Ethical Behaviour
Directors should set high
standards of ethical behaviour,
model this behaviour and hold
management accountable for
these standards being followed
throughout the organisation.
ETHICAL DEALINGS
The Board recognises that high ethical standards and
behaviours are central to good corporate governance and has
implemented a Code of Ethics (Code) 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 to staff on Serko’s intranet and forms part
of the induction process for new employees.
The Board and management of Serko 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 1 January 2020 (NZX Code)
and the Third and Fourth Editions 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 this Corporate Governance
Statement. 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 2020.
Serko’s 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 on the Australian Securities Exchange (ASX) as an
ASX Foreign Exempt Listing. As an ASX Foreign Exempt Listing,
Serko needs 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.
Governance
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Serko ESG report
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.
Principle 2
Board Composition &
Performance
To ensure an effective Board,
there should be a balance of
independence, skills, knowledge,
experience and perspectives.
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 roles 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 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 Code of Ethics addresses:
•
Serko’s Values (see page 9 of this Report)
•
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 has also implemented an Anti-Bribery and Corruption
Policy to reflect Serko’s commitment to conducting its
business in an honest and ethical manner. Serko takes a
zero-tolerance approach to bribery and corruption, and is
committed to acting professionally, fairly and with integrity in
all business dealings and relationships.
Serko regularly reminds staff of their obligation to comply with
and report any concerns they have about compliance with the
Code of Ethics, Serko policies or legal obligations via staff-
wide communications on the Code. Serko has established a
designated email address, accessible only by non-executive
directors, for staff to confidentially raise any concerns they
may have. The Board reviews the Code at least six-monthly
and also expects any incidents arising under the Code to be
brought to directors’ attention immediately.
In addition, Serko has implemented a stand-alone
Whistleblowing Policy to support the application of the Code
and define the process for raising concerns about actual,
suspected or anticipated wrongdoings within the Serko Group.
Serko’s Code of Ethics, Whistleblowing Policy and Anti-Bribery
& Corruption Policy are available on the investor section of the
Company ’s website.
SECURITIES TRADING
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
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Serko ESG report
The Board regularly reviews its skills matrix as part of its
succession planning and considers the appropriate mix of
skills required to govern Serko as its strategy evolves and
Serko expands internationally. The Board has identified
that the appointment of a new director will be required over
the next couple of years to support Board renewal and is
currently considering the appointment of an additional non-
executive director. The average tenure of non-executive
directors is six years.
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 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 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 and each director actively
utilises this access to support the company and its 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 2020, performance reviews
took place in accordance with that process.
During the financial year, the Board met for 12 regularly
scheduled meetings. Directors also met for additional special
meetings and to undertake strategic planning for the business.
Board and Committee meeting attendance during the year
ended 31 March 2020 is set out in the latest Annual Report.
BOARD MEMBERSHIP, SIZE AND COMPOSITION
The size of the Board is determined by the Board from time to
time, in accordance with the limitations prescribed in the NZX
Listing Rules and in accordance with the provisions of Serko’s
Constitution and the Board Charter.
As at 31 March 2020, 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. A biography of each director can be found on the
investor section of the company ’s website and in the latest
Annual Report.
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 a director, the Committee will take into account
factors 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 comprehensive skills matrix. Areas
of expertise and experience that have been identified as
particularly relevant to governing Serko’s business include,
among other skills:
•
Innovation, entrepreneurship and partnership;
•
Digital business and high-growth technology;
•
International travel industry knowledge;
•
Marketing, sales and channel management in
core markets;
•
Governance, legal and compliance;
•
Strategy and operations;
•
Finance, accounting and risk management;
•
Capital markets; and
•
Public company director experience.
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Serko ESG report
DIVERSITY & INCLUSION
Serko has adopted a Diversity and Inclusion 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 and Inclusion
Policy but has delegated to the Remuneration and Nominations
Committee the responsibility to develop and to recommend
measurable objectives to the Board that are designed to adhere
to Serko’s Diversity and Inclusion Policy. See pages 10-11 of this
Report for further information regarding Serko’s Diversity and
Inclusion Policy and practices, and the Board’s assessment of
Serko’s progress towards achieving its diversity objectives.
Principle 3
Board Committees
The Board should use committees
where this will enhance its
effectiveness in key areas, while
still retaining Board responsibility.
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 standing committees of the Board are:
•
Audit and Risk Committee; and
•
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.
INDEPENDENCE OF DIRECTORS
A majority of Serko’s directors are independent. The factors
the company takes into account when assessing the
independence of its directors are set out in the revised NZX
Code and the Board Charter. Generally speaking, a director
is considered to be independent if that director is not an
employee of Serko and if the director has no direct or indirect
interest or relationship that could reasonably influence or
be perceived to influence, in a material way, the director’s
decisions in relation to Serko.
The Board has determined that each of the non-executive
directors are independent directors for the purposes of the NZX
Listing Rules and in accordance with the Board Charter criteria.
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 Chair and
Chief Executive Officer. The current Chair has been elected by
the Board from the independent directors, in accordance with
the terms of the Board Charter. The Chair’s role is to manage
and provide leadership to the Board and to facilitate the
Board’s interface with the Chief Executive Officer.
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 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 Chair, on all
governance matters.
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Serko ESG report
Principle 4
Reporting & Disclosure
The Board should demand
integrity in financial and non-
financial reporting and in the
timeliness and balance of
corporate disclosures.
Serko is committed to the promotion of investor confidence
by ensuring that the trading of company shares takes place
in an efficient, competitive and informed market. The Board
is tasked with ensuring the integrity of financial and non-
financial reporting to shareholders.
MARKET DISCLOSURE POLICY
Serko has adopted a Market Disclosure Policy that guides
the company ’s compliance with 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
Chair, the Audit and Risk Committee Chair, the Chief Executive
Officer and the Chief Financial Officer (the Disclosure Officer).
GOVERNANCE POLICIES AND PROCEDURES
Serko’s governance charters and policies can be found on the
investor centre of the company ’s website.
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 its
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 Chair of the
Committee is required to be independent and not be the Chair
of the Board. The Chair of the Committee is not permitted
to have been an audit partner or senior manager at Serko’s
external audit firm within the past three years.
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 are set out in the latest Annual Report.
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 and
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 and Inclusion 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 Chair of the Committee is required to be independent.
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 are set out in the latest Annual Report.
TAKEOVER RESPONSE GUIDELINES
Serko’s independent directors have received comprehensive
legal advice on their directors’ duties, and the process to
be followed, in the event of a takeover offer. The Board has
formally adopted this advice as the guidelines to be applied in
the event of a takeover offer.
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Serko ESG report
Principle 5
Remuneration
The remuneration of directors and
executives should be transparent,
fair and reasonable.
Serko is committed to remunerating its non-executive
directors, executive directors and employees fairly,
transparently and reasonably.
NON-EXECUTIVE DIRECTOR REMUNERATION
In August 2019, Serko’s shareholders approved a total cap of
NZ$450,000 per annum for non-executive directors’ fees for the
purposes of the NZX Listing Rules, providing flexibility for Serko
to appoint an additional non-executive director in the future.
The non-executive directors do not receive any performance-
based remuneration to ensure incentives do not conflict with
non-executive directors’ obligation to bring an independent
judgement to matters before the Board. However, it is Serko’s
policy to encourage directors to hold shares in the company,
details of which are set out in the latest Annual Report.
The fixed annual fees to apply to all non-executive directors
during FY21, and actual fees paid to non-executive directors
during FY20, are set out in Serko’s latest Annual Report. In
light of the challenging operating environment caused by
Covid-19 and related travel restrictions (which have materially
impacted Serko’s revenues), the non-executive directors
have either agreed to take a reduction in their directors’ fees
or receive a portion of their directors’ fees in shares for the
first three months of FY21. This is to assist Serko to manage
expenditure during this challenging period.
In 2017, a fixed trading plan (Plan) was established in
accordance with section 260 of the Financial Markets Conduct
Act 2013 to enable non-executive directors to invest a portion
of their annual directors’ fees in Serko shares on a monthly
basis and over a fixed term of three years (Term). Under
the Plan, an independent broker automatically applies the
designated fees to the monthly acquisition of shares on-
market during the Term. Once a non-executive director has
entered the Plan, they have no ability to influence share trading
decisions and no ability to withdraw from the Plan before the
end of the Term. Further, the directors are not permitted to
trade any shares acquired under the Plan for the duration of
their tenure as directors of Serko (except in the event of a
takeover). The Plan is intended to further align non-executive
FINANCIAL REPORTING
The Board is responsible for ensuring the integrity of its
financial reporting. 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, also 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: (1) Present a true and fair view of the company ’s
financial condition and operational results; (2) Are prepared in
accordance with the relevant accounting standards; and (3) Are
founded on a sound system of risk management and internal
control that is operating effectively.
NON-FINANCIAL REPORTING
To assist shareholders to make meaningful investment
decisions, in addition to reporting historical statutory financial
information, Serko is committed to providing shareholders
with a balanced and understandable assessment of its
performance, business model, strategic objectives and
progress against meeting those objectives at each earnings
announcement and in its half-year and full-year reports.
Serko is committed to developing long-term value creation. As
part of this commitment, Serko’s Board is focused on delivering
a sustainable future for its business, people, customers and
communities by doing what is right. To demonstrate this, Serko
has chosen to report against the UN Sustainable Development
Goals (SDGs). 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 it is directly contributing to and how they
relate to a larger vision for positive change (see pages 4-5).
Information about Serko’s ESG initiatives are set out in this
Report. Serko’s ESG framework remains under development
and will continue to be progressed over time.
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Serko ESG report
•
Be equitable and flexible;
•
Appropriately reflect market conditions and
organisational context;
•
Recognise individual performance and competency,
rewarding individuals for achieving high performance; and
•
Recognise team and company performance and the
creation of shareholder value.
The Remuneration Policy is available on the investor section of
the company ’s website.
Under Serko’s remuneration framework, remuneration paid to
the Chief Executive Officer and senior officers includes a mix
of the following fixed and variable components:
•
Fixed remuneration, which includes base salary
and employer KiwiSaver (or overseas equivalent)
contributions (where relevant).
•
A discretionary short-term incentive (STI) may be
offered for permanent employees, at the discretion of
the Chief Executive Officer (or the Board in the Chief
Executive Officer’s and Chief Strategy Officer’s case).
Serko’s STI is performance based, with any STI payment
being conditional on satisfaction of pre-determined
company and individual performance objectives.
•
A discretionary sales/business development incentive
plan (SIP) may be offered to sales and business
development staff, at the discretion of the Chief
Executive Officer. The structure of such incentives
is approved by the Board. The SIP is designed to
incentivise sales and business development staff to
meet or exceed sales/business development targets.
•
A long-term incentive (LTI) may be offered, as approved
by the Board. Serko’s LTI schemes are designed to: (1)
Attract and retain key people within the business; (2)
Align senior managers’ remuneration with long-term
shareholder value; and (3) Reward the achievement of
Serko’s strategies and business plans. KPIs are used
to assess whether pre-performance hurdles have
been met before the Board authorises the granting of
long-term incentives for the upcoming financial year.
In some cases, post-grant performance hurdles are
also applied to individual LTI grants. Serko operates
long-term incentive schemes that offer participants
a future right to acquire Serko shares in the form of
restricted share units and options. Restricted share
units generally vest (meaning they can be exercised)
three years after the allocation date. Options generally
vest in four tranches commencing two years after they
are granted, subject to continued employment. No
director or employee is permitted to enter into financial
products or arrangements that operate to limit the
economic risk of their vested or unvested entitlements.
directors’ interests with those of the shareholders of the
company and demonstrate non-executive directors’ support
of Serko’s long-term strategy. Mr Botherway and Ms Batten
currently participate in the Plan. The current Term is set to
expire on 1 January 2021.
In addition to the remuneration detailed above, at the time of
the initial public offering (IPO), the Board introduced (with the
approval of Serko’s existing shareholders) a loan facility for the
independent directors, which enabled non-executive directors
to acquire a specified number of Serko shares at the time
of the IPO (Director Loan Shares). This loan was extended in
June 2017 for a further three years expiring on 30 June 2020.
Mr Botherway ’s and Mr McConaghy ’s loans have been further
extended until 30 January 2021 and 30 June 2021 respectively.
This is owing to the inability to sell down a portion of the
Director Loan Shares to off set the loan amount and associated
tax obligations as a result of the impacts of Covid-19 on the
finalisation of Serko’s financial statements and the escrow
agreement entered into by Mr Botherway at the time of the
latest capital raising in October 2019. Ms Batten repaid her
loan during the financial year.
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. Due to Australian legislative requirements,
superannuation is payable to our Australian resident non-
executive director for time dedicated to Serko while working
in Australia. No retirement benefits will be paid to other non-
executive directors on their retirement.
REMUNERATION POLICY
Serko has adopted a Remuneration Policy. The purpose of the
Policy is to outline the remuneration principles that apply to
all directors and employees to ensure remuneration practices
within Serko are fair and appropriate and there is a clear link
between remuneration and employee performance.
Serko’s Remuneration Policy supports the company to attract,
retain and motivate high–calibre people to achieve the
company ’s business objectives and create shareholder value.
Serko’s Remuneration Policy is guided by the principles that
remuneration practice should:
•
Be clearly aligned with Serko’s values, culture and
corporate strategy;
•
Support the attraction, retention and engagement of
employees;
•
Be understood by employees;
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Serko ESG report
Principle 6
Risk Management
Directors should have a sound
understanding of the material
risks faced by the issuer and how
to manage them. The Board
should regularly verify that the
issuer has appropriate processes
that identify and manage
potential and material risks.
Serko Limited is committed to proactively and consistently
managing risk to:
•
Enhance and protect Serko’s value by delivering on its
commitments and meeting stakeholders’ expectations;
•
Allow Serko to pursue opportunities in an informed way
and aligned with the Board’s risk appetite; and
•
Ensure a safe and secure environment for Serko people
(employees and contractors) partners and customers.
Serko’s Risk Management Policy is included in Serko’s
Corporate Governance Manual (published on Serko’s website).
Serko has designed and implemented a comprehensive risk
management framework for oversight and management of
financial and non-financial business risks, as well as related
internal compliance systems.
The Board has ultimate responsibility for Serko’s risk
management and internal control system, setting the
‘tone at the top’ with regards to risk culture. The Audit and
Risk Committee, under delegation from the Board and 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 at least six-monthly
reviews of Serko’s risk management framework, risk appetite
and principal risks, to satisfy itself that the company ’s
approach to risk continues to be sound. Further details on
Serko’s risks and risk management processes are detailed on
pages 23-25 of this Report.
In addition, Serko may offer provisions that have a monetary
benefit to employees but which are not considered part
of remuneration.
Each year a review is carried out to benchmark salaries, with
market increases and adjustments made accordingly.
The Remuneration and Nominations Committee is responsible
for overseeing the remuneration of the company ’s senior
executives in consultation with the Chief Executive Officer. The
company ’s senior executives are subject to regular performance
reviews. The performance of senior executives is reviewed
by the Chief Executive Officer who meets with each senior
executive to discuss their performance, as measured against
agreed key performance targets (both financial and non-
financial). During the year ended 31 March 2020, performance
reviews took place in accordance with that process.
EXECUTIVE DIRECTOR REMUNERATION
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. Their remuneration
packages are set by the Board to reflect the scope and complexity
of each role, with reference to comparative market data.
Mr Grafton and Mr Shaw ’s remuneration comprises: a fixed
base salary; a short-term incentive up to a maximum target
value of 40% of their base salary; and a long-term incentive up
to a maximum target value of 100% of their base salary. The
total remuneration and value of other benefits earned by, or
paid to, each executive director during, and in respect of, the
financial period ended 31 March 2020 is included in the latest
Annual Report. This remuneration composition will carry
forward into FY21.
KPIs are used to assess whether pre-performance hurdles
are met in relation to the granting of long-term incentives for
the upcoming financial year and for determining the individual
component of any short-term incentive payable for the current
financial year.
The executive directors’ performance is reviewed by the
Board annually. Following the financial period ended 31 March
2020, performance reviews took place in accordance with
that process.
No termination payments are payable to the executive
directors in the event of serious misconduct.
21
Serko ESG report
INTERNAL AUDIT FUNCTION
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. The Board and finance team
regularly consider how Serko can improve its internal audit and
risk management practices during Serko’s annual governance
review, quarterly risk reviews, preparation of interim and full-
year financial statements and following Serko’s annual audit.
Principle 8
Shareholder Rights & Relations
The Board should respect the
rights of shareholders and foster
constructive relationships with
shareholders that encourage
them to engage with the issuer.
INFORMATION FOR SHAREHOLDERS
Serko is committed to maintaining a full and open dialogue
with its shareholders (and other interested stakeholders).
The company has in place an investor relations programme
to facilitate effective two-way communications
with shareholders.
The aim of the company ’s communications programme is to
provide shareholders with information about the company
and to enable them to actively engage with the company and
exercise their rights as shareholders in an informed manner.
The company facilitates communications with shareholders
through written and electronic communications and by
facilitating shareholder access to directors, management and
the company ’s auditor.
Principle 7
Auditors
The Board should ensure the
quality and independence of the
external audit process.
EXTERNAL 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 prescribes the services that can and cannot be
undertaken by the external auditor, which are designed to
ensure that services provided by Serko’s external auditor are
not perceived as conflicting with its independent role.
The Policy requires that the key audit partner is changed at
least every five years so that no such persons shall be engaged
in an audit of Serko for more than five consecutive years. Serko
last rotated its audit firm in 2017, in accordance with this Policy
and the NZX Listing Rules. In addition, three years must expire
between the rotation of an audit partner and that partner’s
next engagement by Serko.
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 Chair 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. For
further details on the audit fees paid and work undertaken
during the period, refer to the latest Annual Report. The Audit
and Risk Committee regularly monitors the ratio of fees for
audit to non-audit work.
22
Serko ESG report
The company provides shareholders with communications
through the following channels:
•
The investor section of the company ’s website;
•
Full-year and half-year reporting;
•
The annual shareholders’ meeting;
•
Regular disclosures on company performance and news
via stock exchange online disclosure platforms; and
•
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. In addition, this year,
Serko has prepared and published on its website this Corporate
Governance Statement, outlining its governance practices.
Shareholders may, at any time, direct questions or requests
for information to directors or management through Serko’s
website or by sending emails 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.
SHAREHOLDER VOTING RIGHTS
In accordance with the Companies Act 1993, Serko’s Constitution
and the NZX Listing Rules, Serko refers major decisions that
may change the nature of Serko to shareholders for approval.
Serko conducts voting at its shareholder meetings by way
of polls, reflecting the principle of one share, one vote.
Further information on shareholder voting rights is set out in
Serko’s Constitution.
ANNUAL SHAREHOLDERS’ MEETING
Serko’s 2020 Annual Shareholders’ Meeting will be held
in August 2020 and shareholders will be provided with
the opportunity to participate in the meeting virtually.
Shareholders will be given an opportunity at the meeting to
ask questions and comment on relevant matters. In addition,
Serko’s auditor, Deloitte, 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.
23
Serko ESG report
RISK
MANAGEMENT
24
Serko ESG report
STRATEGICOPERATIONALFINANCIALEXTERNAL
INHERENT RISKS OF DOING BUSINESS
RISK APPETITE
ARC
1
BI
ANNUALLY
ON
STRATEGY RISKS
CONTROL AND MITIGATION
PRINCIPAL RISKS
ARC BI
ANNUALLY
CONTROL/DFA
2
FRAMEWORK
MONTHLY BOARD REVIEW
OPERATIONAL RISKS
PRINCIPAL RISKS
FINANCIAL RISKS
OPERATIONAL EXPOSURES
Zero Tolerance:
O -Strategy, Compliance, Health and
safety risks to be avoided.
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;
•
Fulfil the company ’s strategic objectives; and
•
Manage the risks associated with Serko’s operations.
RISK MANAGEMENT
Serko Limited is committed to proactively and consistently
managing risk to:
•
Enhance and protect Serko’s value by delivering on our
commitments and meeting stakeholders’ expectations;
•
Allow Serko to pursue opportunities in an informed way
and aligned with the Board’s risk appetite; and
•
Ensure a safe and secure environment for Serko people
(employees and contractors), partners and customers.
Serko’s Risk Management Policy is included in Serko’s
Corporate Governance Manual (published on Serko’s website).
RISK MANAGEMENT
1 Audit and Risk Committee
2 Delegated Financial Authority
25
Serko ESG report
During the year Serko has overachieved against its health and
wellness targets of keeping sick leave taken to below four days
per person per year and had an overall lost time to incidents
rate of below 0.001 days per annum.
In addition to ensuring employee safety, Serko is very focused
on the wellbeing of all Serko people. Serko supports its
people with an outsourced globally accessible Employee
Assistance Programme, which is promoted to encourage
usage. To support a busy workplace, with high ambitions and
performance expectations, this year Serko ran a wellness
programme focusing on improving individual resilience. This
programme received very positive feedback from participants
and was reinforced throughout our period of remote working
(during the Covid-19 pandemic) through a programme
encouraging personal innovation, resilience and personal
support. Further similar initiatives are planned for FY21.
Serko’s Health and Safety Policy and supporting practices
were applied to actively support the heightened risks to
employee health and wellbeing as a result of the Covid-19
pandemic. Refer to page 9 of this Report for more information
on these initiatives.
CYBER SECURITY RISKS
A key risk we face has been highlighted by the worldwide
increase in cyber attacks and several high-profile privacy
data breaches. Regulators are appropriately responding by
increasing penalties for such breaches and introducing new
legislative protections for the handling of private information.
Serko takes these risks seriously and has a dedicated Chief
Information Security Officer to manage these risks and ensure
that our processes and software maintain best practice
standards of protection. Serko maintains its software to be
Payment Card Industry Data Security Standard (PCI) compliant
and has put in place processes to meet local requirements,
including the European Union’s General Data Protection
Regulation and Californian Consumer Privacy Act, which came
into effect on 1 January 2020. Serko regularly reviews the
management of its cyber security risks and related systems
and processes, using external parties for independent testing
as appropriate. Serko strives to continually improve these
systems as it scales.
PRINCIPAL BUSINESS RISKS:
Principal business risks for Serko are:
•
Maintaining product integrity through protecting its
intellectual property against competition, protecting
the security of its systems and sensitive data against
cyber attacks and/or accidental disclosure and
ensuring continuity of service;
•
Remaining a leader in corporate travel technology and
not being disrupted through the emergence of new
technology or competition;
•
Achieving a sustainable financial position, while
growing into new markets, an unpredictable sales
cycle and lead time for on-boarding of TMCs’
corporate customers, managing the reliance on
travel management resellers (TMCs) and the revenue
concentration among the largest TMC customers;
•
Retaining and attracting the resources and talent
necessary to deliver enhancements and manage
growth; and
•
Non-controllable global geopolitical or environmental
impacts that could affect corporate travel volumes.
Serko has in place mitigation strategies for managing each
of these risks to within Board-defined tolerances based
on the approved risk appetite statement. In addition to its
key mitigation strategies Serko maintains comprehensive
insurance coverage.
As a result of the increased risk ratings for a number of Serko’s
principal risks owing to the material change in operating
environment caused by Covid-19 , the Board significantly
increased its monitoring of principal risks to ensure increased
risks were appropriately managed and mitigated.
HEALTH AND SAFETY RISKS
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 adopted a Health and Safety Policy that
requires Serko people to take all practicable steps to provide
a working environment that promotes health and wellbeing,
while minimising the potential for 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 relevant health and safety legislation.
In addition, the Remuneration and Nominations Committee
carries out a detailed review of health and safety risks and
strategy each quarter.
Serko Environmental, Social & Governance Report 2020
www.serko.com
---
1
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Serko 2020 Annual Report
2
Serko annual report
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 in Australasia, used by
over 6,800 corporate entities. Zeno is Serko’s next generation travel management
application, using intelligent technology, predictive work!ows, and a global travel
marketplace to transform business travel across the entire journey. Serko is listed on the
New Zealand Stock Exchange Main Board (NZX:SKO) and Australian Securities Exchange
(ASX:SKO). Serko employs more than 240 people worldwide, with its headquarters in New
Zealand, and o"ces across Australia, China, and the U.S.
Visit www.serko.com for more information.
About Serko
Our Purpose
SERKO 2020
ANNUAL REPORT
This Annual Report is dated 24 June 2020 and is signed on behalf of the Board of Directors (Board) of Serko
Limited by Claudia Batten, Acting Chair, and Darrin Grafton, Chief Executive O!cer (CEO).
DARRIN GRAFTON
CHIEF EXECUTIVE OFFICER
CLAUDIA BATTEN
ACTING CHAIR
3
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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 in Australasia, used by
over 6,800 corporate entities. Zeno is Serko’s next generation travel management
application, using intelligent technology, predictive work!ows, and a global travel
marketplace to transform business travel across the entire journey. Serko is listed on the
New Zealand Stock Exchange Main Board (NZX:SKO) and Australian Securities Exchange
(ASX:SKO). Serko employs more than 240 people worldwide, with its headquarters in New
Zealand, and o"ces across Australia, China, and the U.S.
Visit www.serko.com for more information.
About Serko
Our Purpose
4
Serko annual report
11%
Operating Revenue Growth to $25.9m
2%
$26.8m
$42.4m
Cash balances increased
from $15.7m post net capital
raise of $43.2m
Net Loss After Tax EBITDAF
*
loss
(
$9.4m
)
(
$6.1m
)
5
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
11%
Operating Revenue Growth to $25.9m
Increase in booking
transactions
2%
$26.8m
Total Income
$42.4m
Cash balances increased
from $15.7m post net capital
raise of $43.2m
Net Loss After Tax EBITDAF
*
loss
(
$9.4m
)
(
$6.1m
)
* EBITDAF = earnings before interest, taxation, depreciation, amortisation and fair value
6
Serko annual report
Company ’s strong cash position has provided a comfortable
level of liquidity that meant we have had no requirement to
raise capital in distressed circumstances.
This has allowed us to maintain our operating capacity and
retain our key people to best position Serko when travel
volumes recover.
SUMMARY FINANCIAL RESULTS
The Serko Board has exercised judgement on a number of
important areas in the Income Statement and Statement
of Financial Position and we draw your attention to the
commentary in this Annual Report, the Financial Statements
themselves and the Notes to the Financial Statements for
more detailed explanations.
Revenue
Total Operating Revenue for the year to 31 March 2020 rose 11%
to $25.9 million from $23.4 million in the same period a year
ago, substantially lower than our initial guidance range of 20%
- 40% for the year. We revised revenue expectations to the
low end of the range on 25 February 2020 and then abandoned
guidance completely on 16 March 2020, in both cases owing to
the effects of Covid-19.
Under IFRS 15 (Revenue from Contracts) Serko records
revenue from its portfolio of contracts with reference to actual
transactions, forecast transactions and minimum contracted
commitments. Serko has agreed to a number of changes to
contracts as a result of the impact of Covid-19 on the entire
industry, this includes changes to schedules of contracted
minimum revenues. This has had the effect of reducing the
revenue that Serko expected to record in the current year. The
Board has also made decisions with respect to Expected Credit
Losses (IFRS 9) that reflect the prevailing level of uncertainty
in the travel industry.
Total income from all sources for the year to 31 March 2020 was
up 9% to $26.8 million from $24.6 million in the prior year.
Recurring Product Revenues increased 16% during the year,
lifted by a full-year contribution from InterplX and organic
business growth prior to the Covid-19 outbreak. Peak
Annualised Transactional Monthly Revenue (ATMR) at the end
of February 2020, historically a forward-looking indicator
of recurring revenues, stood at $27.5 million, up from $26.0
Dear Fellow Shareholders,
The first three quarters of the financial year ended 31 March
2020 were characterised by monthly revenue growth and
the achievement of a number of key milestones. However,
Serko’s performance was impacted in the fourth quarter of the
financial year as the Covid-19 pandemic became widespread,
significantly affecting booking volumes. This resulted in an
adverse impact on the full-year result.
Government responses to the pandemic worldwide, including
lockdowns and the suspension of all non-essential travel,
continue to have a material adverse effect on booking
transaction volumes on Serko’s online travel booking platforms,
which generate the majority of Serko’s revenue.
Clear evidence of a pattern of declining booking activity
became apparent in mid-February 2020 and this was followed
by a precipitous decline in March 2020 as lockdown measures
were implemented. At its lowest point during the financial year
in March 2020, daily booking volumes were down in excess of
90% compared to similar days in March 2019.
In response to the operational and economic impacts of
Covid-19, Serko has reduced cash burn and reprioritised
strategic initiatives to position the business for the materially
changed operating environment. The implementation of these
initiatives was largely undertaken after the balance date.
It should, however, be noted that Serko has carefully chosen
to retain resource and capacity on key growth initiatives to
ensure we are well positioned to participate in the recovery of
corporate travel.
Of note during the financial year, Serko entered into an
agreement with Booking.com to supply a ‘white-label’ version
of our Zeno booking tool for Booking.com, targeting its
business customer base internationally. The ‘Booking.com
for Business’ version of Zeno is currently in pilot phase and is
expected to be rolled out to additional Northern Hemisphere
markets following achievement of agreed performance targets.
Booking Holdings (owner of Booking.com) participated in
Serko’s successful oversubscribed capital raising of $45 million
($43.2 million net of costs), completed in late 2019.
This capital raise was intended to provide funding for Serko’s
planned expansion into new markets. Although we did not
anticipate an event as catastrophic as Covid-19, the Serko
Board has always maintained a prudent approach to balance
sheet management. By raising additional capital, the
CEO and Chairman’s letter
7
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
million in the same period of the prior year. However, by the
end of March ATMR had fallen to $15 million, based on the drop
that occurred within the month, ending the year with travel
booking revenues up only 2% to $16.3 million from $15.9 million
in the prior year. Subsequently ATMR has dropped further post
year-end.
Serko Expense platform revenues were up 115% to $5.8 million
for the financial year from $2.7 million reflecting the full-year
contribution of the InterplX acquisition of $3.7 million versus
$0.9 million for a single quarter for FY19. Excluding InterplX,
Serko Expense platform revenues were up 16% at $2.1 million
from $1.8 million the prior year.
Services revenue and grant income were down 33% on the
same period a year ago, reduced to $1.8 million owing to
Serko’s development resources being directed toward product
development for new markets. Supplier commissions revenues
declined marginally by $111,000 (7%) to $1.4 million.
Expenses and Investment Activity
Operating costs increased 59% to $37.1 million reflecting a
full year of InterplX operating costs and the scale up of our
international presence. Costs included $4.7 million non-
cash costs relating primarily to depreciation, amortisation,
final fair-value adjustment related to the issue of the final
tranche of Serko shares for the InterplX acquisition and
share based payments.
Serko has capitalised $11 million of development costs for
FY20, compared to $6.7 million in FY19. Total Research &
Development (R&D) at $13.6 million was 53% of net operating
income compared to 39% in the prior year. Although there
remains considerable uncertainty as to the future operating
environment, the Serko Board remains of the view that this
investment will produce an acceptable commercial return in
the future.
Cash Flow and Cash Balance
Serko remains well funded following the completion of an
oversubscribed capital raise of $45 million in November 2019,
with cash balances up from $15.7 million in the prior year. Net
funds received after capital raising costs were $43.2 million.
Excluding these funds, Serko’s net cash burn for the year,
including capitalised development, was $16.5 million. Cash
balances at 31 March 2020 were $42.4 million.
Earnings
Net loss after tax for the year was ($9.4 million), down from
a FY19 profit of $1.6 million and EBITDAF fell to a loss of ($6.1
million) from a profit of $2.6 million in the same period a
year ago.
AUSTRALASIAN MARKET UPDATE
The New Zealand and Australian markets together generated a
majority of total bookings on our platform, and travel booking
revenues, during the financial year. The majority of these
transactions were domestic bookings.
During the financial year we achieved year-on-year booking
growth each month through to February 2020. This was
despite softer economic conditions in Australia in the first
half, followed by the Australian bushfires negatively impacting
corporate travel.
Serko continued to grow customer numbers during the
financial year with the number of corporates transacting
through the travel platforms increasing by over 700 (comparing
February 2020 to February 2019).
We also saw a significant transition to the premium Zeno
product from Serko Online during the period. Zeno was carrying
approximately 25% of transactions across our platforms at
the end of the financial year, up from approximately 6% of
transactions at the beginning of the year.
Zeno is now being used by 42% of corporate customers in
Australia and New Zealand, up from 9% at the beginning of
the year.
In February a peak of over 24,000 bookings were processed
in a single day (up from a peak of 21,000 in the same month in
the prior year). However, with the gradual decline in bookings
becoming evident in mid-February, and the subsequent rapid
decline in March 2020, total bookings for the entire financial
year were up only 2% over the prior year.
Impacts of Covid-19
The Covid-19 pandemic and related travel restrictions resulted
in an observable declining trend in February 2020 followed by a
dramatic reduction in March 2020. By the end of March 2020,
daily transaction volumes had declined by ~90% compared to
the equivalent days in March 2019.
We currently believe that the Australian and New Zealand
domestic and trans-Tasman travel markets, which presently
generate most of our revenue, are poised to recover more
quickly than international routes outside of Australasia.
Travel volumes have gradually started to recover in May 2020
with the easing of domestic travel restrictions in New Zealand.
We are yet to see any material increase in domestic travel
in Australia owing to the significant travel restrictions that
remain in place. Essential travel in Australia has, however,
continued and we continue to manage a small number of
Australian transactions across our platforms.
8
Serko annual report
During the first three weeks of June 2020, over 3,200
corporate customers have made travel bookings as New
Zealand moved down to Level 1 restrictions. This has resulted
in daily booking volumes on Serko’s platforms steadily
increasing in June 2020 to about 25% of the daily booking
volumes in June 2019 (from a low of 9% in April). Although the
outlook is highly uncertain, we anticipate our core Australasian
markets will be operating at 40% - 70% of their pre-Covid-19
activity levels by March 2021. Beyond that we are taking a
conservative approach to growth as most industry reports
indicate a slow, and largely unpredictable, return to full pre-
Covid-19 activity levels.
We have been working proactively with our travel
management partners to support their recovery. In some
instances this has required amendment of contractual
obligations that has adversely impacted our previously noted
FY20 revenue recognition.
NORTH AMERICAN & EUROPEAN EXPANSION UPDATE
North America
During the financial year we invested heavily in our Zeno
platform for expansion into North America. Transactions
commenced in this market following the transition of several
travel management resellers from pilot phase to onboarding
their first corporate customers. As expected, revenue numbers
from this market were not significant for the financial year.
Travel management reseller onboarding slowed materially in
the last quarter owing to the impact of Covid-19 and we expect
further corporate onboarding to be slow until travel resumes in
that market.
Transactions have effectively ceased due to the lockdown
restrictions in this market.
Despite the impacts of Covid-19, Serko has signed an additional
three resellers since 31 March 2020. Development work will
continue in the market, expanding local air, rail and hotel
content, as well as completing reseller integrations to support
the migration of additional corporates onto our platforms.
United Kingdom & Europe
In the United Kingdom and Europe we have been undertaking
the development work required for the launch of ‘Booking.
com for Business’, a white-label version of Zeno to be offered
internationally to Booking.com’s small and medium-sized
enterprise (SME) customers.
The impacts of Covid-19 delayed the beta-launch of ‘Booking.
com for Business’ from March 2020 to May 2020. However,
initial bookings have been completed in the United Kingdom
and Ireland and the roll out in these two markets will continue
for most of FY21. Additional key markets will be developed and
‘localised’ (e.g. for content and language) as we progressively
roll out the solution across Europe.
Impacts of Covid-19
Serko’s business plans in North America and Europe are not
contingent on the revival of long-haul international travel. In
excess of 95% of the revenue opportunities we were pursuing
prior to the pandemic were domestic or intra-regional
bookings and the total addressable market remains significant.
Domestic travel in the United States (US), and domestic and
cross-border intra-regional travel to nearby countries within
Europe, are expected to be the first segments of these travel
markets to recover post-Covid-19.
SERKO EXPENSE PLATFORM INITIATIVES
As noted above the Serko Expense platform has provided solid
revenue growth during the financial year and represents an
important diversification from travel revenues for Serko.
In North America the development work required to bring the
InterplX expense platform in line with the Zeno user experience
continues and we expect to launch the new Zeno Expense
offering in Q3 FY21, bringing greater scalability and a richer set
of features to our combined Travel & Expense offering.
In Australasia a direct marketing campaign and activation of a
reseller incentive programme across our travel management
company partners, along with the introduction of a rapid
implementation programme that materially reduces our set-up
time to onboard new accounts, is resulting in an increased
pipeline of Serko Expense platform opportunities.
RESPONSE TO COVID"19
Our immediate response to the Covid-19 pandemic was to
introduce measures to look after our people. We already had
in place a pandemic plan that informed our planning for a crisis
such as Covid-19. Our crisis management team convened when
our China office was forced to close. This team, with close
Board oversight, focussed on ensuring the ongoing health
and safety of our people and the seamless continuation of our
operations as we transitioned to remote working.
We maximised the use of digital technology to retain our
productivity and interconnectedness. We also worked hard
to ensure we communicated effectively with our people
throughout the crisis and ran a digital resilience programme
to support and engage our people as they worked remotely.
Serko’s most recent (May 2020) culture survey results show the
strongest engagement scores in five years of surveying and
our employees voiced their gratitude for the leadership and
support shown during such a challenging period.
9
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
DARRIN GRAFTONCLAUDIA BATTEN
CHIEF EXECUTIVE OFFICER
ACTING CHAIR
These initiatives were rapidly followed by a cost-reduction
programme designed to preserve our strong cash balance
position and target an average cash burn rate of no more than
$2 million per month through to the end of FY21. We balanced
cost savings with investment in core areas to maintain our
capability to deliver on our key growth initiatives.
This cost-reduction programme saw the removal of non-
essential expenditure, scaled down operating expenses (such
as cost of sales and hosting) as well as the rationalisation of
our contractor resources (including the conversion of some
of this resource to full-time employment). Serko has aimed to
keep as many people employed during this period as possible,
as we recognise the personal impact to employees if they were
to lose their jobs and the cost to the business of losing skilled
people, especially as our ambition to grow in new markets
remains undiminished.
We acknowledge and thank the various Government
programmes and subsidy schemes that have assisted in the
retention of our people during this challenging period. We
accessed $1.6 million of Government-backed Covid-19 relief
schemes to date across the countries in which Serko operates,
including receipt of $871,670 in salary subsidies from the New
Zealand Government.
In addition, employees agreed to take a salary reduction for
three months from May 2020, and the non-executive directors
agreed to either take a reduction in their directors’ fees or
receive a portion of their directors’ fees in shares for the first
three months of FY21.
BUSINESS TRAVEL OUTLOOK
The rate of return to business travel will vary by region and type
of trip (i.e. domestic, regional, long-haul international). Volumes
are very difficult to model. Travel Management resellers are
operating with fewer human resources, creating opportunities
for automation and technology solutions. Additionally, we are
seeing greater cost management by corporations and a focus
on traveller wellbeing, duty of care obligations and change
management. We are actively assessing changes in corporate
and traveller needs to ensure that we can support the market,
our customers and our growth as the industry recovers.
FY21 OUTLOOK
We consider the business is well positioned for growth when
trading conditions improve and the travel industry starts to recover:
•
We occupy a strong market position in Australasia, with
the majority of our transactions being domestic and
Trans-Tasman in our home markets. There remains a
pipeline of new customers to be onboarded from our
existing reseller partners;
•
We are focusing predominantly on domestic travel within
North America, where we continue to add resellers to
our platform and continue development work to localise
content in that region;
•
‘Booking.com for Business’ white-label is now live in the
United Kingdom and Ireland and our agreement with
Booking.com presents an opportunity to continue to
expand use of the Zeno booking tool internationally;
•
We have a strong balance sheet and ongoing
commitment to investment, which will benefit existing
and prospective customers; and
•
We h ave ret a i n e d re s o u rce a n d c a p a c i t y o n key
growth initiatives.
We believe these factors position us well to continue to prosper
in our home markets and to roll out our products globally as
confidence returns to corporate travel markets.
Timing, however, remains uncertain. As a result, we are unable
to forecast our likely operating revenue for the 2021 financial
year with any certainty.
As at 31 May 2020, Serko had net cash and cash equivalents of
$39.9 million. We believe these cash resources, at the current
rate of cash burn, will be sufficient to see the Company through
to cash flow break even again, should our anticipated recovery
scenario be achieved.
We will continue our rigorous focus on cash flow throughout the
remainder of FY21, targeting an average monthly cash burn of no
more than $2 million per month, to conserve cash reserves.
THANK YOU TO OUR PEOPLE
We want to take this opportunity to thank our people for
their continuing dedication and hard work during the 2020
financial year and also, most importantly, since the Covid-19
pandemic dramatically changed our industr y and our way of
working. We acknowledge this been an incredibly difficult
period personally for many of our employees. Our people
have adapted quickly to working remotely during the lock
down period in each of our offices and have continued to
work hard to deliver on Serko’s goals. We thank them for their
continuing commitment to Serko.
Signed
10
Serko annual report
O!er premium,
integrated global
solutions
Expand into new
territories through
strategic alliances and
reach the unserved SME
market
Grow average revenue
per booking (ARPB) by
o!ering increased
content and moving
customers to Zeno
STRATEGIC
OVERVIEW
Grow Customer
Base
Technology
Innovation
Grow ARPB
11
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
O!er premium,
integrated global
solutions
Expand into new
territories through
strategic alliances and
reach the unserved SME
market
Grow average revenue
per booking (ARPB) by
o!ering increased
content and moving
customers to Zeno
STRATEGIC
OVERVIEW
Grow Customer
Base
Technology
Innovation
Grow ARPB
TECHNOLOGY INNOVATION
GROW CUSTOMER BASE
GROW ARPB
1 Comparing February 2019 to February 2020.
2 In February 2020, before the impact of Covid-19 hit. Note transactions have materially declined since February 2020 as a result of Covid-19.
•
Developed Zeno into a white-label platform under the Booking.com for Business brand to target SME customers
•
Launched Zeno Labs, an innovation program that plugs our customers directly into our product development research and development
•
Continued to expand our integrations with content partners, enriching travel options for users (e.g. Southwest Airlines through New
Distribution Capability (NDC), train bookings)
Our focus for FY21:
•
Develop a strategy of architecting our technology to become an extensible platform that can be built on by partners in future
•
Accelerate our ability to scale internationally by enabling additional content and service partners to build onto the Zeno platform
•
Implement the learnings from our partnership with Booking.com to deliver a more consumer-grade shopping and booking experience
•
700 new customers were added to Zeno during the year
1
, bringing total customers to more than 6,800 globally, with a peak of 24,000
bookings per day
2
•
Developed content and systems integration needed to deploy Zeno through our reseller partners in North America and the !rst
corporate customers in the US and Canada went live
•
Launched a best-in-class sales enablement programme to support reseller partners globally to win and retain more customers with Zeno
Our focus for FY21:
•
Support Booking.com to roll out the Zeno powered white-label Booking.com for Business platform to their existing customers and drive
new customer acquisition
•
Extend our self on-boarding white-label solution to additional resellers and markets
•
Drive adoption and market share of Zeno across the customer base of our North American travel management partners
•
Grew the adoption of Zeno across the Serko customer base from approximately 6% of transactions at the beginning of the !nancial year
to approximately 25%
•
Developed a pipeline of partnerships with revenue share business models that are higher than our transactional ARPB to date (e.g.
Booking.com for Business) presenting future opportunities for growth
•
Rolled out the Zeno self-onboarding portal to enable partners to cost-effectively add customers to our online booking platform
Our focus for FY21:
•
Invest in product development of value-add functionality across cost, risk and change management that can be commercialised on a
transaction or subscription basis
•
Launch our new Zeno Expense platform into the North American market
•
Support the migration to Zeno of the remaining 50%+ of Serko Online customers, with the associated uplift in transaction fees
Our vision of building Zeno as a platform for the future of travel supported us into new
markets and strategic partnerships
Zeno helped our travel management partners win new business and the first Zeno
customers in the US and Canada went live
We signed a significant new agreement to launch Booking.com for Business powered by
Zeno on a revenue share model
12
Serko annual report
Our Products
Zeno travel
Zeno Travel is an Online Booking Tool (OBT) that is used by
corporate travellers to book
!
ights, trains, hotels, rental cars and
airport transfers in line with their corporate travel policies.
This provides the oversight and control that travel managers need
to ensure that spend is effectively managed, with the ease of use
and personalised experience that draws corporate travellers to
use the OBT and avoid travel program ‘leakage’ to supplier
websites or leisure travel retailers.
Zeno does this with an intuitive interface that makes booking
business travel super simple, intelligent technology that provides
personalised itinerary recommendations based on traveller
preferences, and a global marketplace that allows travellers to
connect with preferred suppliers at every stage of the journey.
The result is greater traveller adoption, increased compliance
and greater control over the entire travel program compared with
legacy corporate booking tools.
Zeno is an integrated travel and expense platform that is designed to revolutionise
the world of corporate travel and expense management globally.
Serko generates revenue through corporate
customers paying a booking fee per transaction and
through supplier commission.
Serko earns revenue through corporate customers
paying a fee per active user and/or per expense
report submitted.
Zeno expense
Zeno Expense automates the process of corporate card and
out-of-pocket expense submission, reconciliation and
reimbursement. Employees capture receipts via the mobile app,
or email receipts directly to Zeno, add a description or cost
centre if needed and submit for approval there and then. To
make it even simpler, Zeno also offers automated integrations
with providers such as Uber for Business.
Zeno’s intelligent technology proactively identi
"
es and manages
out of policy claims, detecting and minimising expense claim fraud
and dramatically streamlining the expense administration function.
Zeno Expense also provides managers and
"
nance teams with a full
suite of analysis tools that help them to run their Travel & Expense
budgets more effectively, identify problem areas and optimize
expense policies.
The result is better spend management and less time wasted
preparing, approving and processing expense reports.
BOOKING.COM FOR BUSINESS
powered by Zeno
In October 2019 Booking Holdings invested in Serko as part of
a capital raising, and extended the Serko partnership to
eventually enable Booking.com to leverage the Zeno platform
as a white-label solution under the Booking.com for Business
brand, with a commercial partnership based on a revenue
share model between Booking.com and Serko.
Teams at both companies have worked together to rapidly
bring to market an initial product which is currently being
tested in a few key markets.
For small to medium sized businesses who don't have the
complex managed travel needs that a travel management
company would support, the new Booking.com for Business
platform will in time provide them with a one-stop-shop for all
their business travel needs, helping them save time and money
and making life easier for their travellers and their
administration teams alike.
About Booking Holdings: Booking Holdings is the world’s
leading provider of online travel & related services, provided to
consumers and local partners in more than 225+ countries and
territories through six primary consumer-facing brands:
Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com and
OpenTable
13
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Our Products
Zeno travel
Zeno Travel is an Online Booking Tool (OBT) that is used by
corporate travellers to book
!
ights, trains, hotels, rental cars and
airport transfers in line with their corporate travel policies.
This provides the oversight and control that travel managers need
to ensure that spend is effectively managed, with the ease of use
and personalised experience that draws corporate travellers to
use the OBT and avoid travel program ‘leakage’ to supplier
websites or leisure travel retailers.
Zeno does this with an intuitive interface that makes booking
business travel super simple, intelligent technology that provides
personalised itinerary recommendations based on traveller
preferences, and a global marketplace that allows travellers to
connect with preferred suppliers at every stage of the journey.
The result is greater traveller adoption, increased compliance
and greater control over the entire travel program compared with
legacy corporate booking tools.
Zeno is an integrated travel and expense platform that is designed to revolutionise
the world of corporate travel and expense management globally.
Serko generates revenue through corporate
customers paying a booking fee per transaction and
through supplier commission.
Serko earns revenue through corporate customers
paying a fee per active user and/or per expense
report submitted.
Zeno expense
Zeno Expense automates the process of corporate card and
out-of-pocket expense submission, reconciliation and
reimbursement. Employees capture receipts via the mobile app,
or email receipts directly to Zeno, add a description or cost
centre if needed and submit for approval there and then. To
make it even simpler, Zeno also offers automated integrations
with providers such as Uber for Business.
Zeno’s intelligent technology proactively identi
"
es and manages
out of policy claims, detecting and minimising expense claim fraud
and dramatically streamlining the expense administration function.
Zeno Expense also provides managers and
"
nance teams with a full
suite of analysis tools that help them to run their Travel & Expense
budgets more effectively, identify problem areas and optimize
expense policies.
The result is better spend management and less time wasted
preparing, approving and processing expense reports.
BOOKING.COM FOR BUSINESS
powered by Zeno
In October 2019 Booking Holdings invested in Serko as part of
a capital raising, and extended the Serko partnership to
eventually enable Booking.com to leverage the Zeno platform
as a white-label solution under the Booking.com for Business
brand, with a commercial partnership based on a revenue
share model between Booking.com and Serko.
Teams at both companies have worked together to rapidly
bring to market an initial product which is currently being
tested in a few key markets.
For small to medium sized businesses who don't have the
complex managed travel needs that a travel management
company would support, the new Booking.com for Business
platform will in time provide them with a one-stop-shop for all
their business travel needs, helping them save time and money
and making life easier for their travellers and their
administration teams alike.
About Booking Holdings: Booking Holdings is the world’s
leading provider of online travel & related services, provided to
consumers and local partners in more than 225+ countries and
territories through six primary consumer-facing brands:
Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com and
OpenTable
14
Serko annual report
Managed travel
Mid to large sized organisations generally have well
developed corporate travel policies and signi!cant annual
travel spend, relying on the services of Travel Management
Companies (TMC) to manage their corporate travel
programs. These services generally include travel booking,
risk management, traveller support, supplier negotiation and
reporting. TMCs provide Zeno to their corporate customers
as their online booking channel, as a standalone app or as
part of a suite of digital tools to support business travel.
Small to medium sized organisations (SMEs) generally have
lower annual spend and less developed corporate travel
policies. Travel bookings are generally made directly with
suppliers or through online travel booking sites, meaning
they miss out on corporate negotiated rates and often make
multiple bookings for a single trip. This can make it di"cult
to deal with disruption and change management,
expenditure reconciliation and traveller support.
Un-managed travel
$$$$$$
HIGHLY
MANAGED
LIGHTLY
MANAGED
UNMANAGED
Enterprise
Highly complex
High touch
Direct + TMC
Zeno Travel
& Expense
Mid-Large Corporate
Moderate
Low touch
TMC
Zeno Travel & Expense
Self on-boarding
SME
Simple
Self-service
TMC
Booking.com for Business
Booking.com for Business
powered by Zeno
Zeno Travel & Expense Self
on-boarding
TRAVEL SPEND
CORPOR ATE PROFILE
TRAVEL POLICY
SERVICING NEEDS
CHANNEL TO MARKET
OUR SOLUTIONS
The markets we serve
What is more certain, however, is that as business travel
resumes, factors such as cost, risk and change management
are likely to be top-of-mind priorities for organisations.
Cost management is a key consideration because most
organisations will be returning from a near zero dollar spend on
travel, and each trip and each dollar proposed to be spent will
be reviewed with a greater level of scrutiny than before.
Risk management is likely to be of increased importance to
ensure traveller wellbeing is certain and that duty of care
obligations are being met.
Change management is also expected to be a critical priority,
not just to support an organisation’s travellers as they navigate
a much more unpredictable landscape of disruptions but also
to ensure that credits are effectively tracked and utilised.
The future
Business travel in a
post-pandemic world
We’re built for the future
In a post-pandemic world, the rate of return to business travel will vary by region and type of trip
(i.e. domestic, regional, long-haul international) and nobody can say with a great deal of certainty
what volumes will look like.
The managed sales channel offers a solution to these
requirements. Flights or hotels booked directly with
suppliers across multiple airline or hotel websites make it
di!cult for the organisation to effectively address cost, risk
or change management.
Adoption of the corporate booking tool and the subsequent
corporate travel policy compliance has become
increasingly important.
This is the future of business travel that Zeno is built for:
A traveller-centric platform that is easy to use, with rich
content presented in a way that is familiar to any traveller to
drive adoption,
Seamless policy application at point of purchase to ensure
compliance, and
Intelligent technology to support changes and cancellations
with dynamic application of ticket credits.
The world of business travel has changed, and Serko is well
positioned to support this change.
15
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Managed travel
Mid to large sized organisations generally have well
developed corporate travel policies and signi!cant annual
travel spend, relying on the services of Travel Management
Companies (TMC) to manage their corporate travel
programs. These services generally include travel booking,
risk management, traveller support, supplier negotiation and
reporting. TMCs provide Zeno to their corporate customers
as their online booking channel, as a standalone app or as
part of a suite of digital tools to support business travel.
Small to medium sized organisations (SMEs) generally have
lower annual spend and less developed corporate travel
policies. Travel bookings are generally made directly with
suppliers or through online travel booking sites, meaning
they miss out on corporate negotiated rates and often make
multiple bookings for a single trip. This can make it di"cult
to deal with disruption and change management,
expenditure reconciliation and traveller support.
Un-managed travel
$$$$$$
HIGHLY
MANAGED
LIGHTLY
MANAGED
UNMANAGED
Enterprise
Highly complex
High touch
Direct + TMC
Zeno Travel
& Expense
Mid-Large Corporate
Moderate
Low touch
TMC
Zeno Travel & Expense
Self on-boarding
SME
Simple
Self-service
TMC
Booking.com for Business
Booking.com for Business
powered by Zeno
Zeno Travel & Expense Self
on-boarding
TRAVEL SPEND
CORPOR ATE PROFILE
TRAVEL POLICY
SERVICING NEEDS
CHANNEL TO MARKET
OUR SOLUTIONS
The markets we serve
What is more certain, however, is that as business travel
resumes, factors such as cost, risk and change management
are likely to be top-of-mind priorities for organisations.
Cost management is a key consideration because most
organisations will be returning from a near zero dollar spend on
travel, and each trip and each dollar proposed to be spent will
be reviewed with a greater level of scrutiny than before.
Risk management is likely to be of increased importance to
ensure traveller wellbeing is certain and that duty of care
obligations are being met.
Change management is also expected to be a critical priority,
not just to support an organisation’s travellers as they navigate
a much more unpredictable landscape of disruptions but also
to ensure that credits are effectively tracked and utilised.
The future
Business travel in a
post-pandemic world
We’re built for the future
In a post-pandemic world, the rate of return to business travel will vary by region and type of trip
(i.e. domestic, regional, long-haul international) and nobody can say with a great deal of certainty
what volumes will look like.
The managed sales channel offers a solution to these
requirements. Flights or hotels booked directly with
suppliers across multiple airline or hotel websites make it
di!cult for the organisation to effectively address cost, risk
or change management.
Adoption of the corporate booking tool and the subsequent
corporate travel policy compliance has become
increasingly important.
This is the future of business travel that Zeno is built for:
A traveller-centric platform that is easy to use, with rich
content presented in a way that is familiar to any traveller to
drive adoption,
Seamless policy application at point of purchase to ensure
compliance, and
Intelligent technology to support changes and cancellations
with dynamic application of ticket credits.
The world of business travel has changed, and Serko is well
positioned to support this change.
16
Serko annual report
Simon Botherway CFA
Independent Non-executive Director, Chair, New Zealand
Appointed 30 April 2014, re-elected August 2018
Simon is based in New Zealand. He is a Chartered Member of the NZ Institute of Directors. 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-Paci!c Advocacy Committee.
Simon was appointed as a member of the Securities Commission in 2009 and chaired the Financial Markets Authority Establishment
Board in 2010. Simon is currently a Director of Fidelity Life Assurance and is a Guardian of the New Zealand Superannuation Fund.
Claudia Batten
Independent Non-executive Director, Acting Chair, United States
Appointed 30 April 2014, re-elected August 2017
Claudia is based in the United States. She holds an LLB (Hons) and BCA from Victoria University (Wellington). Claudia has been a founding
member of two highly successful entrepreneurial ventures. The !rst venture was 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 !rst advertising agency built on the principles of crowdsourcing. V&S was majority acquired by French holding company
Havas Worldwide in 2011. Claudia is 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.
Clyde McConaghy
Independent Non-executive Director, Australia
Appointed 30 April 2014, re-elected August 2019
Clyde is based in Australia. He holds a BBus, and an MBA from Cran!eld 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 o"ce 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 O!cer & Co-Founder
Appointed 5 April 2007, elected August 2019
Darrin has more than 25 years’ experience in travel technology and is a recognised industry innovator. He has been responsible
for leading major changes in the corporate travel industry throughout his career and was named one of the top 25 most in#uential
executives in the travel industry by the BTN Group in 2014.
Darrin has held directorships and senior management positions across various companies, including the Gullivers Travel Group (listed
on the Australian and New Zealand Stock Exchanges between 2004 and 2006). Darrin has previously been awarded the NZX Hi-Tech
Entrepreneur Award, has been a past !nalist for the NZ Hi-Tech Company Leader Award and the EY Entrepreneur of the Year Award.
He is also a member of the Institute of IT Professionals NZ, the Institute of Directors NZ.
Robert (Bob) Shaw
Executive Director, Chief Strategy O!cer & Co-Founder
Appointed 5 April 2007, re-elected August 2018
Since 1987, Bob has been involved in transforming the travel industry, collaborating with the World’s leading airlines, travel agencies
and global distribution systems. He has held a number of directorships and senior management positions in various high-pro!le
ventures, including Gullivers Travel Group (listed on the Australian and New Zealand Stock Exchanges between 2004 and 2006) and
Interactive Technologies.
Bob has been a past !nalist for the EY Entrepreneur of the Year Award.
He is also a member of the Institute of IT Professionals NZ and the Institute of Directors NZ.
1. Mr Botherway continues as a director of Serko (attending all Board and Committee meetings) but took a leave of absence from the Chair role on 12 March 2020 for
medical reasons. Ms Batten assumed the role of Acting Chair from this date.
1
1
Board of Directors
17
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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.
Tony D’Astolfo
Senior Vice President, NORAM
Tony is a 35-year travel industry veteran, with rich expertise in travel and technology and a passion for moving the industry forward. His
career includes senior leadership positions at Deem, Phocuswright, GroundLink, Sabre/GetThere and United Airlines. Tony is a long-time
member of GBTA and ACTE and a former member of the Board of Directors of both ACTE and WINiT for Women.
Susan Putt
Chief Financial O!cer (CFO)
Susan has over 30 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 O!cer (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.
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-Paci!c, Europe and North America.
Duanne O’Brien
Chief Technology O!cer
Duanne is a technology leader with over 25 years’ experience, specialising in building global enterprise SaaS (software as a service)
platforms. Duanne leads the largest of our global teams, designing, building and running Serko’s platforms and products.
Nick Whitehead
Chief Marketing O!cer
Nick has a 20-year track record of commercialising technology through the development of effective go-to-market strategies and leads
Serko’s global marketing and communications function.
Management Team
18
Serko annual report
People:
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
Corporate Responsibility
Serko aims to be a successful growth company. To
realise this ambition we must do the right thing by our
people, customers, communities 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.
Further information and our full Annual Report can be
found on the investor centre of Serko’s website.
Serko’s first Environmental Social and Governance
(ESG) Report was produced in 2018. The United
Nations (UN) Sustainable Development Goals (SDGs)
have been adopted for Serko’s ESG initiatives
to be reported against. Serko’s ESG framework
remains under development and will continue to be
progressed over time.
The SDGs are a set of global initiatives set by the UN
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 initiatives relate
to a larger vision for positive change.
The UN SDGs relevant to Serko and our actions are
as follows:
19
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
People:
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
20
Serko annual report
MANAGEMENT
COMMENTARY
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.
21
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Operating revenue excludes other income, which is primarily grants.
Total income from all sources for the year to 31 March 2020 was up 9% to $26.8 million from
$24.5 million in the prior year. However, as operating costs increased, Serko recorded a
net loss result after tax of ($9.4 million) against prior year net profit of $1.6 million. The
result includes non-cash elements of $4.7 million for depreciation, amortisation, fair value
remeasurement adjustments and share-based payments.
Annual total operating revenue grew by $2.5 million (11%) to $25.9 million from $23.4 million
in the prior year, primarily related to Expense platform revenue, with Travel platform revenue
affected by the Covid-19 pandemic. Refer to further analysis under Income on page 22.
The Company recognised $0.9 million in grants from Callaghan Innovation and New Zealand
Trade and Enterprise (NZTE) within other income, down $0.3 million (24%) from the prior year.
Total operating expenses increased by $13.8 million to $37.1 million from $23.3 million in the
prior year. Refer to further analysis under Operating Expenses on page 27.
Net finance income increased by $0.7 million to $1 million, primarily through increased foreign
exchange gains.
BUSINESS RESULTS
Ye a r e n d e d 3 1 M a r c h20202019Change%
$ (000)$ (000)$ (000)
Revenue25,869 23,361 2,508 11%
Other income922 1,215 (293)-24%
To t a l i n c o m e26,791 24,576 2,215 9%
Operating expenses(37,092)(23,320)(13,772)-59%
Percentage of operating revenue-143%-100%
Net finance income975 290 685 236%
Net (loss)/pro!t before tax(9,326)1,546 (10,872)-7 0 3 %
Percentage of operating revenue-36%7%
Income tax benefit (expense)(38)87 (125)-144%
Net (loss)/pro!t after tax(9,364)1,633 (10,997)-673%
Percentage of operating revenue-36%7%
NET LOSS AFTER TAX
22
Serko annual report
EBITDAF is a Non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation,
Depreciation, Amortisation and Fair value remeasurement of contingent consideration. Serko uses this as a useful
indicator of cash profitability.
EBITDAF declined by $8.7 million from a profit of $2.6 million to a loss of ($6.1 million).
Depreciation and amortisation increased by $2.1 million over the prior year, owing to increased
amortisation of capitalised software of $1 million, as well as the inclusion of depreciation of
right-of-use assets (leased premises) under IFRS-16 (Leases) adoption of $1 million.
The second tranche of InterplX acquisition shares were issued in February 2020 resulting in a
fair value remeasurement adjustment of contingent consideration of $1.1 million owing to the
increase in share price since March 2019.
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION, AMORTISATION AND FAIR VALUE
#EBITDAF$
INCOME
Ye a r e n d e d 3 1 M a r c h20202019Change%
$ (000)$ (000)$ (000)
Travel platform booking revenue16,307 15,948359 2%
Expense platform revenue5,831 2,7103,121 115%
Supplier commissions revenue1,427 1,538(111)-7%
Other revenues48546718 4%
Recurring product revenue24,050 20,663 3,387 16%
Percentage of operating revenue93%89%
Services revenue1,8192,698(879)-33%
To t a l r eve n u e25,869 23,361 2,508 11%
Other income9221,215(293)-24%
To t a l i n c o m e26,791 24,576 2,215 9%
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 revenue is operating revenue excluding grants and finance income, while total income includes grants.
Ye a r e n d e d 3 1 M a r c h20202019Change%
$ (000)$ (000)$ (000)
Net (loss) profit after tax
(9,364)1,633(10,997)-673%
Add back/(deduct): income tax38 (87)125 -144%
Deduct: net finance income(975)(290)(685)236%
Add back: depreciation and
amortisation
3,156 1,048 2,108 201%
Add back: Fair value remeasurement
of contingent consideration
1,056 287769 268%
EBITDAF (Loss)(6,089)2,591 (8,680)-335%
Percentage of operating revenue-24%-11%
EBITDAF LOSS
11%
TOTAL REVENUE
INCREASE
9%
TOTAL INCOME
INCREASE
23
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Under Serko IFRS-15 (Revenue from Contracts) records revenue from its portfolio of contracts with reference to actual transactions,
forecast transactions and minimum contracted commitments. Owing to Covid-19 impacting the entire travel industry, Serko has agreed
to a number of changes to contracts, including changes to schedules of contracted minimum revenue. This has had the effect of
reducing the revenue that Serko expected to record in the current year.
Travel booking transactions were up year on year each month for the year through to February 2020 despite being adversely affected
by a subdued economic climate in the first half, then the Australian bush fires in November. In the fourth quarter of the financial year
the Covid-19 pandemic became widespread, significantly affecting booking volumes and materially impacting Serko’s performance.
Governmental responses to the pandemic worldwide, including lockdowns and the suspension of all non-essential travel, has had
a material adverse effect on booking transactions made on Serko’s online travel booking platforms, which generate the majority of
Serko’s revenue.
Clear evidence of a pattern of declining booking activity became apparent in mid-February 2020 and this was followed by a precipitous
decline in March 2020 as lockdown measures were implemented. At its lowest point during the financial year in March 2020, daily
booking volumes were down in excess of 90% compared to similar days in March 2019.
Travel booking transactions grew 2% on the previous year, with a February peak of over 24,000 bookings processed in a single day (up
over 14% from a peak of 21,000 in the prior year) before the impacts of Covid-19 were felt. February has historically been the month with
the highest average daily transaction volume.
During the year Serko continued to grow customer numbers, with the number of corporates transacting through the travel platforms
for the year increasing by over 700 when comparing February 2020 with February 2019. This was owing to the continued onboarding of
corporate customers by TMC resellers.
We also had significant transition to Zeno, Serko’s premium travel booking tool launched in 2018. As of 31 March 2020, Zeno was carrying
approximately 25% of transactions across our platforms at the end of the financial year, up from approximately 6% of transactions at the
beginning of the year. Zeno is being used by 42% of the corporate TMC customers, up from 9% at the beginning of the year.
Travel platform revenue grew by 2% for the year to $16.3 million from $15.9 million.
Serko Expense platform revenues were up 115% to $5.8 million, up from $2.7 million in the prior year reflecting the full-year contribution
from the InterplX acquisition of $3.7 million versus $0.9 million for a single quarter for FY19. Excluding InterplX, Serko Expense platform
revenues were up 16% at $2.1 million from $1.8 million the prior year.
Supplier commissions revenue declined marginally by $111,000 (7%) to $1.4 million from $1.5 million. Other revenues remained in line with
the prior year at $0.5 million.
Recurring product revenue was up 16% to $24 million from $20.7 million on the prior year, lifted by a full year of contribution from
InterplX and growth in the underlying business ahead of the Covid-19 outbreak. Recurring revenue as a percentage of total revenue
increased to 93%, up from the prior year 89%. Total income including grants was up 9% to $26.8 million.
Services revenue are non-recurring revenues and primarily reflect revenue associated with customising Serko’s travel platform as white-
label solutions for its TMCs. Total services revenue declined by 33% over the prior period to $1.8 million from $2.7 million. This revenue
was higher in the 2019 financial year owing to work performed on behalf of Flight Centre for its SAVI product. This year development
work has been prioritised for the launch of the Booking.com for Business platform, a white-label version of our Zeno booking tool for
Booking.com. Under the agreement with Booking.com, Serko will receive a revenue share of commission rather than development fees.
The platform is currently being trialled in the UK and Ireland.
HOW SERKO MAKES MONEY
Corporate traveller
makes a booking via
Serko Online/Zeno
Corporate traveller
books a hotel, car or taxi
via Serko Online/Zeno
Corporate traveller
downloads and uses
Serko Mobile
Corporate traveller
submits receipts using
Serko Expense/Zeno
Monthly
user fee
$
Mobile
subscriptions
$
Supplier
commissions
$
Booking &
other fees
$
24
Serko annual report
Serko’s main source of revenue is Travel platform revenue from Serko Online and Zeno.
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. This platform is now being
adapted to become the Booking.com for Business platform in partnership with Booking.com. The commissions earned through this
platform will be split and recognised under 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. In December 2018 Serko acquired US based InterplX. The two expense platforms will
be brought together as Zeno Expense and with further development to link directly to Zeno travel platform to enable automation of the
travel expenses filing.
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 these 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 TMCs.
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 and international growth grants.
REVENUE BY GEOGRAPHY
*Note the prior year figures have been adjusted as a result of a reclass of grant revenue resulting in a movement between Australia and New Zealand-sourced income.
Serko currently earns 70% (FY19: 83%) of revenue from Australia and 10% (FY19: 10%) from New Zealand sources, with New Zealand
sourced income up 5% and Australian sourced income down 6% over the prior year. The decline in Australian revenue is owing to the
Covid-19 impact on travel and declining services revenue. The portion of income from New Zealand has increased primarily with the
onboarding of Orbit customers, which commenced last year (signed July 2018). Both Australia and New Zealand have been adversely
affected by Covid-19 travel restrictions. While the travel market is expected to be impacted for a considerable period, there remains a
pipeline of new customers to be onboarded onto Serko’s platforms by Serko’s travel management resellers.
The portion of North American income has grown year on year, primarily owing to Expense platform revenue from the InterplX
acquisition. Within North America, TMC onboarding and customer trials had commenced prior to Covid-19, with live bookings being
made. However, transactions and further onboarding have been delayed in line with lockdown restrictions in this market. Serko has
signed three new mid-sized TMCs since 31 March 2020.
Ye a r e n d e d 3 1 M a r c h20202019*Change%
$ (000)$ (000)$ (000)
Australia18,218 19,335(1,117)-6%
New Zealand2,465 2,343122 5%
North America4,823 1,4713,352 228%
Other363 212151 71%
Revenue25,869 23,361 2,508 11%
HOW SERKO MAKES MONEY CONTINUED
Revenue trend
$15m
41%
20192020
$18.4m
$26m
$26m
$27.5m
Travel platform booking trend
over the last 8 years
6%
FY13FY14FY15FY16FY17FY18FY19FY20
Booking trend
1
Ye a r - o n - y e a r m o v e m e n t
Peak ATMR
2
3m
2m
1m
0m
4m
Online bookings
Other and custom bookings
FY13FY14FY15FY16FY17FY18FY19FY20
$30m
$15m
$10m
$5m
$0m
$20m
$25m
Travel platform
Expense platform
Suplier commissions and other
Services
25
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Revenue trend
$15m
41%
20192020
$18.4m
$26m
$26m
$27.5m
Travel platform booking trend
over the last 8 years
6%
FY13FY14FY15FY16FY17FY18FY19FY20
Booking trend
1
Ye a r - o n - y e a r m o v e m e n t
Peak ATMR
2
3m
2m
1m
0m
4m
Online bookings
Other and custom bookings
FY13FY14FY15FY16FY17FY18FY19FY20
$30m
$15m
$10m
$5m
$0m
$20m
$25m
Travel platform
Expense platform
Suplier commissions and other
Services
1 Booking volumes are total volumes and include Offline and and Custom Bookings, which can be either bundled into a price per Online booking or at a reduced rate, as these
are primarily automated bookings but processed through the booking tool.
2 Peak ATMR is a Non-GAAP measure representing Annualised Transactional Monthly Revenue (ATMR). Serko uses this as a useful indicator of future recurring revenues from
Serko products. It is based on the monthly transactions and average revenue per booking (for its Travel platform revenue) and monthly user charges (for its Expense platform
revenue) annualised on a constant currency basis. Peak ATMR was February for both 2019 and 2020. However, ATMR declined at the end of March 2020 to $15 million based on
the drop in transactions that occurred in the month following the impact of Covid-19.
26
Serko annual report
ACTIVITY
Travel platform bookings increased 2% over the prior year, driven mainly by growth in our core
Australasian markets. Total travel bookings during FY20 were 4.22 million, up from 4.14 million,
representing 58% of an estimated addressable market of 7.2 million corporate travel bookings
in Australia and New Zealand. Total travel bookings include 0.5 million Offline bookings (system
automated bookings) which don’t contribute significantly to revenue or are bundled into the
‘Online’ booking rate. Online bookings for the year were 3.72 million and, with 1% decline, were
Covid-19 impacted, with more Offline bookings completed during March 2020. Online volumes
dropped for March 2020 to around 50% of the previous March 2019 volumes.
With border restrictions and in-country lockdowns in place, both domestic and international
travel dropped, and Serko experienced a low of less than 10% of previous year volumes in April
2020. During the first three weeks of June 2020, over 3,200 corporate customers have made
a travel booking as New Zealand moved down to Level 1 restrictions. This has resulted in daily
booking volumes on Serko’s platforms steadily increasing in June 2020 to about 25% of the daily
booking volumes in June 2019. The Australian and New Zealand domestic and trans-Tasman
travel markets, which presently generate the majority of our travel revenue, are poised to recover
more quickly than international routes outside Australasia.
Serko is currently expanding into Northern Hemisphere markets. However, these regions did
not make a significant contribution to volumes in 2020 owing to being in development and trial
stages. Once travel does start to increase in these markets, Serko is expecting to gain volume
both from its TMC resellers, as well as its recently launched Booking.com for Business (powered
by Zeno) platform, which commenced trials in the UK and Ireland in May 2020.
Average Revenue Per Booking (ARPB) for travel-related revenue (Travel platform and supplier
commissions) increased marginally during the year by 2% to $4.76 from $4.67 based on Online
bookings and was largely related to increases in pricing for the Zeno platform. ARPB for recurring
revenue (total recurring revenue divided by Online bookings) at $6.46 improved by 17% from $5.52
in the prior year mainly attributable to the inclusion of InterplX income.
Peak Annualised Transactional Monthly Revenue (ATMR), a useful indicator of recurring revenue
from Serko products, rose to $27.5 million in February 2020 from $26.0 million in the same period
of the prior year. However, ATMR declined at the end of March 2020 to $15 million based on the
drop in transactions that occurred in the month following the impact of Covid-19.
2%
TRAVEL PLATFORM
BOOKINGS
INCREASE
6%
PEAK ATMR
INCREASE
27
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
OPERATING EXPENSES
Selling and marketing expenses comprise all the direct costs of sales 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.
Ye a r e n d e d 3 1 M a r c h20202019Change%
$ (000)$ (000)$ (000)
Marketing expenses1,469 1,171 298 25%
Third party connection costs885 62 823 1327%
Other selling costs635 458 177 39%
To t a l s e l l i n g a n d m a r ke t i n g e x p e n s e s2,989 1,691 1,298 77%
Hosting expenses3,362 1,931 1,431 74%
Employee renumeration17,161 11,924 5,237 44%
Contribution to pension plans662 433 229 53%
Share-based payment expenses959 576 383 66%
Other remuneration and benefits637 202 435 215%
To t a l r e m u n e r a t i o n a n d b e n e !t s19,419 13,135 6,284 48%
Auditor remuneration and other
assurance fees
153 109 44 40%
Directors’ fees357 283 74 26%
Expected credit loss allowance on
receivables
237 (7)244 -3486%
Amortisation of intangibles1,705 754 951 126%
Depreciation1,451 294 1,157 394%
Rental and operating lease expenses83 804 (721)-90%
Professional fees1,571 1,057 514 49%
Computer licences925 260 665 256%
Other administration expenses3,784 2,722 1,062 39%
To t a l a d m i n i s t r a t i o n e x p e n s e s10,266 6,276 3,990 64%
Fair value remeasurement on
contingent consideration
1,056 287 769 268%
To t a l o p e r a t i n g e x p e n s e s37,092 23,320 13,772 59%
Percentage of operating revenue143%100%
Total operating expenses were up 59%, or $13.8 million, from the prior year to $37.1 million, owing
to increases across all categories of expenses as Serko expands its operations.
Selling and marketing expenses increased to $3.0 million from $1.7 million in the prior year.
Selling costs increased owing to increased third party connection costs, primarily related to
Sabre Global Distribution technology fees introduced in May 2019. Marketing costs increased
owing to increased presence at North American travel conferences in advance of launching the
product. This had led to a healthy pipeline of customer interest prior to Covid-19 but onboarding
has been delayed owing to a significant number of TMC staff being furloughed in the region
during the lockdown period.
59%
OPERATING EXPENSES
INCREASE
28
Serko annual report
Hosting costs at $3.4 million increased with the volume increases and set-up costs associated with new data centres for new territories
as well as infrastructure improvements to increase speed and stability of the product.
Remuneration and benefits (R&B) increased by $6.3 million to $19.4 million owing to the increased head count from 173 full-time
equivalent (FTE) to 233 FTE as at 31 March 2020. Share-based payments of $0.9 million related to employee share-based payments
and options (long-term incentives) for 2020, compared to $0.6 million in the prior year. Short term incentives included in the prior year
were $1.4 million. Owing to Covid-19 cost saving measures, no short-term incentives have been accrued for the 2020 financial year.
Serko was planning on hiring additional staff as it expanded, however, owing to Covid-19 additional hiring will be subject to a recovery
in travel revenues.
Administration costs at $10.3 million were up from $6.3 million on the prior year. Administration costs included significant increases
for depreciation and amortisation, up $2.1 million of which $1.0 million related to reclassification of premises costs due to adoption of
IFRS-16 (
Leases). An increase in professional fees included $0.4 million related to one-off costs related to partnership owing diligence
activity prior to the share capital raise. An increase in computer licences relates to head count increases, as well as more sophisticated
collaboration tools and software monitoring. Other administration costs also increased with expansion, including increases in travel,
recruitment and insurance. An increase in Expected Credit Loss (ECL) provision was also related to Covid-19 impact owing to the
prevailing level of uncertainty in the travel industry.
The fair value measurement adjustment on contingent consideration, relating to the InterplX acquisition, was $1.0 million, compared
to the prior year value of $0.3 million. The total value of shares issued in February 2020 for the final tranche was $2.9 million for a final
increase in value of $1.3 million owing to the increase in share price since acquisition.
The InterplX acquisition consideration was by way of issuance of Serko shares, half of which was deferred and contingent on InterplX
achieving key milestones. As a result the liability for the deferred component of this acquisition varied with the trading price of the
shares at the date of issue. An increase in the Serko price therefore resulted in an accounting entry that reduced Serko’s profit and
increased the contingent consideration liability, which was then extinguished on share issue.
OPERATING EXPENSES CONTINUED
29
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Serko has capitalised more development costs for FY20 than in FY19, at $11.0 million compared
to $6.7 million in FY19. Total R&D at $13.6 million was 53% of net operating income compared to
39% in the prior year. While there remains considerable uncertainty as to the future operating
environment, Serko remains of the view that this investment will produce an acceptable
commercial return in the future.
Continued investment in the Travel platforms for Northern Hemisphere expansion, as well as the
further development of the Serko Expense platform will see Serko continue in a development
phase for the next financial year as the products continue to be localised for each market.
RESEARCH AND DEVELOPMENT #R&D$ COSTS
Ye a r e n d e d 3 1 M a r c h20202019Change%
$ (000)$ (000)$ (000)
To t a l R & D c o s t s ( i n c l u d i n g a m o u n t s
capitalised)
13,606 9,165 4,441 48%
Percentage of operating revenue53%39%
Less: capitalised product development
costs
(11,013)(6,740)(4,273)63%
Percentage R&D costs81%74%
Research costs (excluding
amortisation of amounts previously
capitalised)
2,593 2,425 168 7%
Less: Government grants for R&D(683)(810)127 -16%
Add: Amortisation of capitalised
development costs and intellectual
property
1,705 754 951 126%
Net product development costs3,615 2,369 1,246 53%
Percentage of operating revenue14%10%
Research & Development (R&D) costs 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 intangible
assets. R&D expenses include employee and contractor remuneration related to these activities. It also covers research
expenditure defined by NZ IAS 38.
48%
R&D COSTS
INCREASE
30
Serko annual report
Serko’s staff numbers increased during the year moving to 233 from 173 full-time equivalent
(FTE) staff at the end of 2019. Head count was 237 with 120 staff based in New Zealand, 23 in
Australia, 48 in China and 46 in the US. The increase in staff is primarily in product development
and reflects the investment Serko is making in its product to service the Northern Hemisphere
markets. Post year end staff numbers have increased to 240.
Average revenue per FTE decreased by $46,000 to $121,000, reflecting the investment into
additional staff as Serko expands.
EMPLOYEES AND AVERAGE REVENUE PER FTE
Ye a r e n d e d 3 1 M a r c h20202019Change%
Product development and maintenance146 100 46 46%
Sales and marketing18 16 2 13%
Customer support52 40 12 30%
Administration17 17 0 0%
To t a l e m p l oye e n u m b e r s a t e n d o f t h e
year (FTE)
233 173 60 35%
Average revenue per FTE (NZD $000)121 167 (46)-28%
35%
FTE
INCREASE
31
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Receipts from customers increased by 2% over the year from $21.9 million to $22.3 million. Other
operating cash outflows increased by $7.3 million to $26.8 million mainly owing to increased
payments to employees and suppliers. Net operating cash outflows for the year were $3.8 million.
Cash outflows for property, plant and equipment and intangibles, reflecting capitalised internal
development, were $11.8 million. A capital raise to fund expansion resulted in a net $43.2
million contribution to cash balances. Lease liabilities recorded under finance activities under
new IFRS 16 adoption were $1.1 million. Previously, rental payments were recorded under
operating activities.
Cash balances increased 169% as at 31 March 2020, from $15.7 million to $42.4 million.
CASH FLOWS
Ye a r e n d e d 3 1 M a r c h20202019Change%
$ (000)$ (000)$ (000)
Receipts from customers22,318 21,855 463 2%
Grant income receipts649 1,264 (615)-49%
Other operating cash flows(26,756)(19,472)(7,284)37%
Total cash "ows from operating
activities
(3,789)3,647 (7,436)-204%
Investing cash flows(11,812)(7,279)(4,533)62%
Financing cash flows42,273 14,220 28,053 197%
To t a l n e t c a s h "ows26,672 10,588 16,084 152%
Net foreign exchange differences(13)(88)75 -85%
Closing cash balances42,391 15,732 26,659 169%
169%
CASH BALANCES
INCREASE
32
Serko annual report
FINANCIAL
STATEMENTS
33
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
CONTENTS
Consolidated statement of comprehensive income34
Consolidated statement of changes in equity35
Consolidated statement of financial position36
Consolidated statement of cash flows37
Notes to the financial statements38-73
Independent auditor’s report74-77
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 2020 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 2020 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
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 su"cient to provide a reasonable assurance as
to the integrity and reliability of the !nancial statements.
The financial statements are signed on behalf of the Board of
Directors 24 June 2020 by:
DARRIN GRAFTONCLAUDIA BATTEN
CHIEF EXECUTIVE OFFICER
ACTING CHAIR
34
Serko annual report
Notes20202019
$ (000)$ (000)
Revenue4 25,869 23,361
Other income4 922 1,215
To t a l i n c o m e26,791 24,576
Operating Expenses
Selling and marketing expenses(2,989)(1,691)
Hosting expenses(3,362)(1,931)
Remuneration and bene!ts(19,419)(13,135)
Administration expenses(10,266)(6,276)
Fair value remeasurement on contingent consideration(1,056)(287)
To t a l o p e r a t i n g e x p e n s e s5 (37,092)(23,320)
Finance income5 1,137 360
Finance expenses5 (162)(70)
(Loss)/pro!t before income tax(9,326)1,546
Income tax (expense)/benefit6 (38)87
Net (loss)/pro!t attributable to the shareholders of the company(9,364)1,633
Movement in foreign currency reserve(11)(126)
To t a l c o m p r e h e n s i ve i n c o m e / ( l o s s ) fo r t h e ye a r(9,375)1,507
Earnings per share
Basic pro!t per share18 ($0.10) $0.02
Diluted pro!t per share18 ($0.11) $0.02
Consolidated Statement of
Comprehensive Income
The accompanying notes form part of these financial statements.
For the year ended 31 March 2020
35
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Consolidated Statement of
Changes in Equity
Notes
Share
capital
Share-
based
payment
reserve
Foreign
currency
reserve
Accumulated
losses
To t a l
$ (000)$ (000)$ (000)$ (000)$ (000)
Balance as at 1 April 201940,993 1,885 (211)(16,432)26,235
Net loss for the year - - - (9,364)(9,364)
Adjustment on adoption of new IFRS162(d) - - - (323)(323)
Other comprehensive income/(loss)* - - (11) - (11)
To t a l c o m p r e h e n s i ve i n c o m e / ( l o s s ) fo r t h e ye a r - - (11)(9,687)(9,698)
Transactions with owners
Issue of share capital17 45,000 - - - 45,000
Cost of equity issued17 (1,793) - - - (1,793)
Shares allocated to employees17 353 682 - - 1,035
Shares forfeited from employees17 - (17) - - (17)
Share-based payments — employee share options17 74 (133) - - (59)
Non-executive directors settlement of non-recourse loan17 243 (43) - - 200
Shares issued in respect of InterplX acquisition17 2,881 - - - 2,881
Balance as at 31 March 202087,751 2,374 (222)(26,119)63,784
Balance as at 1 April 201825,185 1,309 (85)(18,065)8,344
Net pro!t for the year - - - 1,633 1,633
Other comprehensive income/(loss)* - - (126) - (126)
To t a l c o m p r e h e n s i ve i n c o m e fo r t h e ye a r--(126)1,633 1,507
Transactions with owners
Issue of share capital17 15,048 15,048
Cost of equity issued17 (778)(778)
Shares allocated to employees17 - 406 - - 406
Shares forfeited from employees17 - (24) - - (24)
Share-based payments — employee share options17 - 194 - - 194
Shares issued in respect of InterplX acquisition17 1,538 1,538
Balance as at 31 March 201940,993 1,885 (211)(16,432)26,235
*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.
For the year ended 31 March 2020
36
Serko annual report
Consolidated Statement of Financial Position
For and on behalf of the Board of Directors, who authorise these financial statements for issue on 24 June 2020
Notes20202019
$ (000)$ (000)
Current assets
Cash at bank and on hand11 42,391 15,732
Receivables7 6,578 5,493
Income tax receivable84 -
Derivative !nancial instruments8 557 421
To t a l c u r r e n t a s s e t s49,610 21,646
Non-current assets
Property, plant and equipment9 3,382 1,129
Intangible assets 10 20,110 10,553
Deferred tax asset6 250 84
To t a l n o n - c u r r e n t a s s e t s23,742 11,766
To t a l a s s e t s73,352 33,412
Current liabilities
Trade and other payables12 7,073 4,791
Contingent consideration14 - 1,825
Income tax payable - 224
Interest-bearing loans and borrowings16 58 54
Lease liabilities13 1,280 -
To t a l c u r r e n t l i a b i l i t i e s8,411 6,894
Non-current liabilities
Trade and other payables12 - 134
Interest-bearing loans and borrowings16 92 149
Lease liabilities13 1,065 -
To t a l n o n - c u r r e n t l i a b i l i t i e s1,157 283
To t a l l i a b i l i t i e s9,568 7,177
Equity
Share capital17 87,751 40,993
Share-based payment reserve17 2,374 1,885
Foreign currency reser ve(222)(211)
Accumulated losses(26,119)(16,432)
To t a l e q u i t y63,784 26,235
To t a l e q u i t y a n d l i a b i l i t i e s73,352 33,412
As at 31 March 2020
The accompanying notes form part of these financial statements.
DARRIN GRAFTON
CLAUDIA BATTEN
CHIEF EXECUTIVE OFFICERACTING CHAIR
37
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Consolidated Statement of Cash %ows
Notes20202019
$ (000)$ (000)
Cash flows from operating activities
Receipts from customers22,318 21,855
Interest received418 304
Receipts from grants649 1,264
Taxation (paid)/received(529)(142)
Payments to suppliers and employees(26,275)(19,395)
Interest payments(126)(20)
Net GST refunded (paid)(244)(219)
Net cash "ows (used in)/from operating activities21 (3,789)3,647
Cash flows from investing activities
Purchase of property, plant and equipment(794)(466)
Capitalised development costs and other intangible assets10 (11,018)(6,813)
Net cash "ows (used in) investing activities(11,812)(7,279)
Cash flows from financing activities
Issue of ordinary shares17 45,000 15,048
Cost of new share issue17 (1,793)(778)
Payment of lease liabilities13 (1,080)-
Non-executive directors non-recourse loan 200-
Net repayment of loans(54)(50)
Net cash "ows from !nancing activities42,273 14,220
Net increase in total cash26,672 10,588
Net foreign exchange difference(13)(88)
Cash and cash equivalents at beginning of period15,732 5,232
Cash and cash equivalents at the end of the period42,391 15,732
Cash and cash equivalents comprises the following:
Cash at bank and on hand11 42,391 15,732
42,391 15,732
The accompanying notes form part of these financial statements.
For the year ended 31 March 2020
38
Serko annual report
For the year ended 31 March 2020
In light of the severe impact of Covid-19 on Serko’s core
business of the provision of online travel booking software,
the Board has given careful consideration to 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.
Serko completed an oversubscribed capital raising of $45
million ($43.2 million net of costs) in late 2019. This capital
raise was intended to provide funding for Serko’s anticipated
strategic initiative of expansion into new markets. Although
we did not anticipate an event as catastrophic as Covid-19,
the Serko Board has always maintained a prudent and
conservative approach to balance sheet management. By
raising more capital than the Board believed Serko required,
the Company ’s a strong cash position that has provided a
comfortable level of liquidity. It also allowed us to;
•
Maintain our operating capacity;
•
Retain resource and capability to put Serko into a strong
position to reassure our customers of our ongoing viability;
•
Retain our key people to quickly recover from the impact
of the pandemic when travel volumes recover.
We have, however, responded to the decline in activity and
the uncertainty of the future environment by reducing cash
costs across all expense categories.
The Group has made significant changes to the way we
operate and addressed Serko’s cost base in anticipation
of a subdued operating environment. The Company
has undertaken modelling of future results based on
three alternative scenarios and has then weighted those
scenarios to formulate a plan for the ongoing solvency of the
business. Serko has applied a weighting of 50% to the most
pessimistic scenario.
In reaching their conclusion the Board has considered the
following factors:
•
Cash reserves at 31 March 2020 of $42.4 million provides
a sufficient level of headroom to help support the
business for at least the next 12 months;
1 CORPORATE INFORMATION
The financial statements of Serko Limited (‘the Company ’)
and subsidiaries (‘the Group’) were authorised for issue in
accordance with a Board resolution.
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) and
the Australian Securities Exchange (ASX) as an ASX Foreign
Exempt Listing. 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 in
the respective notes and in this note. 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
Markets 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 Board has 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 Board that
the Group will continue to operate as a going concern and
the financial statements have been prepared on that basis.
Notes to the Financial Statements
39
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
•
Covid–19 cost saving initiatives introduced post year end
to target maximum cash burn of $2 million per month on
average for FY21 through the following initiatives:
–
Seeking government Covid-19 wage subsidy schemes,
in New Zealand, Australia and the US
–
Implementing hiring and salary freezes and
terminating non-essential contractors and staff
–
Scaling-down hosting environment for reduced
transactions
–
Negotiating reduced rental on leasehold premises
–
Reducing other expenditure (i.e. marketing and travel)
to essential only
–
Implementing voluntary staff salary reductions for
three months from May 2020
–
Non-executive directors agreeing to take either
a reduction of directors’ fees or receive a portion
of their directors’ fees in shares for the first three
months of FY21
•
The Board has made due enquiry into the
appropriateness of the assumptions underlying the
budgetary forecasts.
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) Application of new and revised standards, amendments
and interpretations
Apart from the changes noted below, the accounting policies
adopted are consistent with those of previous years.
NZ IFRS 16 (Leases) is effective for annual periods beginning
on or after 1 January 2019. The standard deals with the
recognition, measurement, presentation and disclosure
of leases and replaces the current guidance in NZ IAS
17 Leases (NZ IAS 17). The new standard introduces a
single model for lessees that recognises all leases on the
balance sheet through an asset representing the rights
to use the leased item during the lease term and a liability
for the obligation to make lease payments. This removes
the distinction between operating and finance leases
and aims to provide users of the financial statements
relevant information to assess the effect that leases
have on the statement of financial position, statement of
comprehensive income and cash flows of the reporting
entity. Lessor accounting remains largely unchanged from
NZ IAS 17 for the Group.
The Group adopted NZ IFRS 16 using the modified
retrospective approach with the right-of-use (ROU) asset
being determined as if NZ IFRS 16 had been applied from
lease commencement but using the incremental borrowing
rate as at 1 April 2019. Leases recognised relate to
building leases at different geographical locations and an
incremental borrowing rate of between 4% and 6% has been
applied. The Group has made use of the practical expedient
available on transition to NZ IFRS 16 not to reassess whether
a contract is or contains a lease. Accordingly, the definition
of a lease in accordance with NZ IAS 17 will continue to be
applied to those leases entered or modified before 1 April
2019. Comparative numbers have not been restated.
40
Serko annual report
Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate at 1 April 2019. Key changes to the financial statements are set out below:
•
Recognition of an ROU asset and lease liability for operating leases, adjusted for any incentives on the statement of financial
position; and
•
Recognition of interest and depreciation expense (refer to note 5) instead of operating lease rental expense in the statement of
financial performance. The change in accounting standard has impacted retained earnings by $323,000 and resulted in a credit
to profit before tax of $203,000 in the current financial year; and
•
Interest-bearing loans and borrowings relating to leasehold improvements have been reclassified.
In accordance with the transition provisions of NZ IFRS 16, comparatives have not been restated, with the cumulative effect being
recognised in opening retained earnings at transition (1 April 2019).
A reconciliation of operating lease commitments at 31 March 2019 to the lease liability recognised at 1 April 2019 is shown below:
$ (000)
Operating lease commitments disclosed at 31 March 20191,688
The effect of discounting(196)
Adjustments as a result of a different treatment of extension and termination options987
Lease liabilities recognised as at 1 April 20192,479
Classified as:
Less than one year768
Later than one year but not more than five years1,711
Lease liabilities recognised as at 1 April 20192,479
Serko Limited also entered into a lease agreement to sub-lease additional premises through to December 2020, with these premises
being available for use in October 2019.
Practical expedients applied
In applying NZ IFRS 16 for the first time, Serko has used the following practical expedients permitted by the standard:
•
Use of a single discount rate to leases with reasonably similar characteristics;
•
Accounted for each lease component and any associated non-lease components as a single lease component;
•
Excluded lease contracts of insignificant value;
•
Excluded lease contracts less than 12 months; and
•
Exclusion of initial direct costs for the measurement of the lease asset at the date of initial application.
41
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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.
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 ceases 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
cease of control, is accounted for as an equity transaction.
If the Group ceases 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.
42
Serko annual report
i) Amortised cost
Financial assets measured at amortised cost are those
held within a business model whose objective is to hold
financial assets in order to collect contractual cash
flows and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount
outstanding. 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. Expected credit loss movements are recognised
in profit or loss when the contract assets and liabilities
are derecognised or impaired, as well as through the
amortisation process.
ii) Financial liabilities
Financial liabilities are classified as ‘other financial
liabilities’. Other financial liabilities, including
interest-bearing loans and 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.
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 recognises a loss allowance for expected credit
losses (ECL) on investments in debt instruments that
are measured at amortised cost or at fair value through
comprehensive income, lease receivables, trade receivables
and contract assets, as well as on financial guarantee
contracts. The amount of expected credit losses is updated
at each reporting date to reflect changes in credit risk since
initial recognition of the respective financial instrument.
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 of exchange rates for monetary assets and
liabilities denominated in foreign currencies, are recognised
in profit or loss.
iii) Foreign Currency Translation Reser ve
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 in the
foreign currency translation reserve.
g) Financial instruments
Cash at bank and on hand and receivables are financial
assets measured at amortised cost. 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.
Derivative financial instruments are recognised at fair value
through profit or loss.
43
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
The Group always recognises lifetime ECL for trade
receivables, contract assets and lease receivables. The
expected credit losses on these financial assets are
estimated using a provision matrix based on the Group’s
historical credit loss experience, adjusted for factors that
are specific to the debtors, general economic conditions
and an assessment of both the current as well as the
forecast direction of conditions at the reporting date,
including time value of money where appropriate.
Special consideration has been given to ECL in light of
the economic impact of Covid-19 throughout the travel
industry and the capacity of our customers to meet their
obligations to us.
For all other financial instruments the Group recognises
lifetime ECL when there has been a significant increase
in credit risk since initial recognition. However, if the
credit risk on the financial instrument has not increased
significantly since initial recognition, the Group measures
the loss allowance for that financial instrument at an
amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will
result from all possible default events over the expected
life of a financial instrument. In contrast, 12-month ECL
represents the portion of lifetime ECL that is expected to
result from default events on a financial instrument that are
possible within 12 months after the reporting date.
The Group writes off a financial asset when there is
information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery, e.g.
when the debtor has been placed under liquidation or has
entered into bankruptcy proceedings or, in the case of trade
receivables, when the amounts are over two years past due,
whichever occurs sooner.
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) Comparatives
Certain comparative amounts have been reclassified to
conform to the current year’s presentation.
44
Serko annual report
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.
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.
Covid-19 Pandemic
On 11 March 2020 the World Health Organization (WHO)
declared a global pandemic as a result of the outbreak and
spread of Covid-19. However, as Serko announced on 25
February 2020, the Company had detected an adverse trend
in travel bookings prior to the WHO declaration. On 14 March
the New Zealand Government announced it was closing its
borders to non-New Zealand residents and on 25 March the
New Zealand Government raised its Alert Level to 4 (full
lockdown other than ‘essential’ services) for an initial four-
week period. Covid-19 related travel restrictions were also
enacted within Australia and within Northern Hemisphere
markets where Serko expects to grow. New Zealand
domestic travel resumed when the country moved to Level
2 on 11 May. However, travel is still restricted in Australia
to essential travel only. Northern Hemisphere travel is also
restricted but varies between regions.
Revenue from Serko’s online booking tools is almost
exclusively directly related to booking volumes.
The Governmental policy responses, including lockdowns
and the suspension of all travel other than essential
services, has had a severe adverse effect on bookings on
Serko’s Travel booking platform.
The actions taken by Serko are outlined as per Going
Concern disclosure (note 2b). It should, however, be noted
that Serko has carefully chosen to retain resource and
capacity on key growth initiatives to ensure it is positioned
to participate in the eventual recovery of corporate travel.
The Serko Board has exercised judgement on a number of
important areas in the income statement and statement
of financial position and we draw your attention to the
commentary in the notes to the financial statements for
more detailed explanations.
Development costs (note 10)
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. The effects that Covid-19 has had on
travel have been considered in assessing expected future
cash flows.
Functional and presentation currency
The Group periodically reviews the functional currency
for reporting purposes. The Group believes that there
is sufficient justification 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 as
per note 4.
45
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Impairment (note 10 – Intangibles and note 7 -
Receivables)
Management reviews the carrying value of intangible and
non-financial assets on an annual basis, in particular,
goodwill, 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. Management has considered reduced travel owing
to Covid-19 and estimated the recovery profile of travel
in various geographies and its effect on growth plans. No
impairment to intangibles is considered necessary.
Serko has updated its expected credit loss assumptions and
the provision was increased to $237,000 from the prior year
$7,000 due to Covid-19 impacts.
Revenue recognition (note 4)
Serko has 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. The effects of Covid-19
have been considered and as a result of reduced forecasts
adjustments on contractual revenue have been recognised.
3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS CONTINUED
46
Serko annual report
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 entity will collect the consideration
to which it will be entitled in exchange for the goods or
services that will be transferred to the customer. 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 fixed minimum
booking volume arrangements are recognised over the
period of volume commitment. For contracts without
fixed consideration we have applied the ‘as invoiced’ basis.
Serko records revenue from its portfolio of contracts with
reference to actual transactions, forecast transactions
and minimum contracted commitments. Owing to Covid-19
impacting the entire travel industry, Serko has agreed to a
number of changes to contracts with customers, including
changes to schedules of contracted minimum revenue.
This has had the effect of reducing the revenue that Serko
expected to record in the current year.
Serko Expense revenue is invoiced monthly on an active
user basis and revenue recognised at a point in time.
Supplier commission revenue, predominantly from hotel
bookings, is recognised at a point in time, once the
performance obligation is fulfilled.
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. If services relate to one-off
chargeable work orders, these can be invoiced as and when the
performance obligation is satis!ed. Revenue is recognised at a
point in time by applying the ‘as invoiced’ practical expedient. If
these relate to customised set up or installation, the revenues
are recognised over the contract term.
c) Contract assets
Contract assets relate to accrued revenue for contractual
minimum guarantees (refer note 7).
d) 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.
Revenue is recognised once the criteria of the grant
application is met.
47
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Notes20202019
$ (000)$ (000)
Revenue – transaction and usage fees:
Travel platform booking revenue16,307 15,948
Expense platform revenue5,831 2,710
Supplier commissions revenue1,427 1,538
Services revenue1,819 2,698
Other revenue485 467
To t a l r eve n u e25,869 23,361
Government grants15 922 1,208
Sundry income - 7
To t a l o t h e r i n c o m e922 1,215
To t a l r eve n u e a n d o t h e r i n c o m e26,791 24,576
20202019
$ (000)$ (000)
Geographic informationrestated*
Australia18,218 19,335
New Zealand2,465 2,343
US4,823 1,471
Other363 212
To t a l r eve n u e25,869 23,361
4 REVENUE & OTHER INCOME CONTINUED
*Note the prior year figures have been adjusted as a result of a reclass of grant revenue resulting in a movement between Australia and New Zealand sourced income.
48
Serko annual report
5 EXPENSES
20202019
$ (000)$ (000)
Operating profit before taxation includes the following expenses:
Marketing expenses1,469 1,171
Third party connection costs885 62
Other selling costs635 458
To t a l s e l l i n g a n d m a r ke t i n g e x p e n s e s2,989 1,691
Hosting expenses3,362 1,931
Employee remuneration17,161 11,924
Contributions to pension plans662 433
Share-based payment expenses959 576
Other remuneration and benefits637 202
To t a l r e m u n e r a t i o n a n d b e n e !t s19,419 13,135
Auditor remuneration and other assurance fees153 109
Directors’ fees*357 283
Expected credit loss allowance on receivables237 (7)
Amortisation of intangibles1,705 754
Depreciation1,451 294
Rental and operating lease expenses83 804
Professional fees1,571 1,057
Computer licences925 260
Other administration expenses3,784 2,722
To t a l a d m i n i s t r a t i o n e x p e n s e s10,266 6,276
Fair value remeasurement of contingent consideration1,056 287
Expenses from ordinary activities37,092 23,320
*Directors’ fees include $12,500 earned by a director of subsidiary, Serko India Private Limited.
49
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Auditor remuneration
20202019
$ (000)$ (000)
Finance income and expenses includes:
Finance income
Interest received418 305
Dividends received1 1
Foreign exchange gains – net718 54
To t a l !n a n c e i n c o m e1,137 360
Finance expenses
Interest expense(14)(20)
Interest expense on lease liabilities(111)-
Other finance expenses(37)(50)
To t a l !n a n c e e x p e n s e s(162)(70)
To t a l !n a n c e i n c o m e a n d e x p e n s e s975 290
*Other assurance services relate to review of the Group’s compliance with Callaghan Innovation Grant requirements.
20202019
$ (000)$ (000)
Amounts for services performed by Deloitte Limited:
Audit of financial statements146 79
Other assurance services*7 7
To t a l a u d i t fe e s153 86
5 EXPENSES CONTINUED
50
Serko annual report
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
20202019
$ (000)$ (000)
Current income tax
Current income tax charge318493
Adjustments in respect of income tax(113)(225)
205268
Deferred income tax
Origination and reversal of temporary differences(167)(355)
Income tax expense/(bene!t) reported in the statement of comprehensive income38(87)
•
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 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.
51
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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:
*Net of lease liabilities.
20202019
Statement
of !nancial
position
Statement of
comprehensive
income
Statement
of !nancial
position
Statement of
comprehensive
income
$ (000)$ (000)$ (000)$ (000)
Deferred income tax liabilities recognised
Intangibles(320)86 (406)20
Unrealised foreign exchange - (13)13 22
Deferred income tax asset recognised
Intangibles and non-current assets*106 5155 (30)
Provision for ECL65 63 2 2
Employee entitlements350 102 248 169
Bonus provision8 (163)172 172
Share-based payments41 41 --
Net deferred tax asset recognised250 167 84 355
Deferred income tax asset not recognised
Employee entitlements - - - (112)
Bonus provision - - - (195)
Leases - - - 11
- - - (296)
20202019
$ (000)$ (000)
Accounting (loss)/profit before income tax(9,326) 1,546
At the statutory income tax rate of 28% (2019:28%) (2,611)433
Non-deductible items456 143
Adjustments in respect of income tax(113)(225)
Foreign taxes72 18
Share-based payments182 170
Tax losses unrecognised/(recognised)2,132 (545)
Effect of tax on overseas subsidiaries at different rate(80)(81)
Income tax expense/(bene!t)38(87)
At effective income tax rate of:-0.4%-5.6%
Tax losses carried forward are attributable to those generated in New Zealand of $20,437,000, subject to shareholder continuity
rules being met.
6 INCOME TAX CONTINUED
52
Serko annual report
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. Trade receivables are assessed for
impairment and an expected credit loss (ECL) provision
made based on lifetime expected credit losses. The ECL
model considers various aspects of credit risk within a risk
20202019
$ (000)$ (000)
Trade receivables4,049 3,040
Expected credit loss provision(237)(7)
Trade receivables (net)3,812 3,033
GST receivable473 229
Sundry debtors34 58
Contract assets1,368 1,593
Prepayments845 551
Funds held in trust46 29
To t a l r e c e i va b l e s6,578 5,493
Foreign currency risk
The carrying amounts of the group’s receivables are denominated in the following
currencies:
New Zealand dollars3,098 2,981
Australian dollars2,748 1,841
US dollars717 666
British pounds15 5
6,578 5,493
To t a l0-30 days31-60 days61-90 days91+ days
$ (000)$ (000)$ (000)$ (000)$ (000)
At 31 March the ageing analysis of receivables was as
follows:
2020
Trade receivables4,049 1,996 1,726 173 154
2019
Trade receivables3,0402,25263048110
matrix, considering history of debtor write off, ageing of
invoices, country, market and product risk.
Serko has also made decisions with respect to Expected
Credit Losses that reflect the prevailing level of uncertainty
in the travel industry and the impact of Covid-19 on our
customers’ businesses and their capacity to pay.
The impairment, and any subsequent movement,
including recovery, is recognised in the statement of
comprehensive income.
53
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Allowance for impairment loss – Trade receivables
Group trade receivables over 60 days were $327,000 (2018: $158,000. This balance of $327,000 has been assessed as part of Covid-
19’s impact on the recovery of trade receivables. An ECL provision of $237,000 (2019: $7,000) has been made as required under NZ
IFRS 9. Additionally, the Group recognises an allowance of individual receivables if there is objective evidence of credit impairment.
Trade receivables are non-interest bearing and are generally on 30 - 60-day terms. Serko has historically low levels of impairment on
trade receivables.
20202019
$ (000)$ (000)
Current:
Foreign currency for ward exchange contracts557 421
Contractual amounts of forward exchange contracts outstanding were as follows:
Foreign currency for ward exchange contracts18,81911,016
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.
7 RECEIVABLES CONTINUED
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.
The following table presents the Group’s foreign currency forward exchange contracts measured at fair value:
54
Serko annual report
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
bene!ts beyond its existing service potential or is necessarily
incurred to enable future economic bene!ts 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 - Term of lease (7% - 16.7%)
•
Furniture and fittings - 6% - 36%
•
Computer equipment - 17.5% - 48%
•
Right-of-use asset - Term of lease (16.7% - 100%)
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.
55
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
*Right-of-use assets relate to premises leases.
Leasehold
improvement
Furniture &
!ttings
Computer
equipment
Right-of-use
asset*
To t a l
$ (000)$ (000)$ (000)$ (000)$ (000)
2020
Cost or valuation
Balance at 1 April 2019812 556 873 1,970 4,211
Additions53 251 490 946 1,740
Disposals(230) - - (60)(290)
Currency translation(25)7 27 4554
Balance at 31 March 2020610 814 1,390 2,901 5,715
Depreciation
Balance at 1 April 2019333 223 556 - 1,112
Depreciation expense133 70 264 984 1,451
Disposals(223)--(17)(240)
Currency translation(25)5 181210
Balance at 31 March 2020218 298 838 979 2,333
Net carrying amount3925165521,922 3,382
2019
Cost or valuation
Balance at 1 April 2018770 367 574 -1,711
Additions28 166 270 -464
Acquisition through business combinations14 24 30 -68
Currency translation-(1)(1)-(2)
Balance at 31 March 2019812 556 873 -2,241
Depreciation
Balance at 1 April 2018222 175 421 -818
Depreciation expense111 48 135 -294
Balance at 31 March 2019333 223 556 -1,112
Net carrying amount479333317-1,129
9 PROPERTY, PLANT AND EQUIPMENT CONTINUED
56
Serko annual report
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 lives 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 pro!t or loss when the asset is derecognised.
A summary of the policies applied to the Group’s intangible
assets is as follows:
•
Goodwill and Other intangible assets (indefinite useful
life, tested annually for impairment)
•
Intellectual property (finite, amortised on 5 years
straight-line basis)
•
Capitalised software development costs (finite,
amortised on 5 years straight-line basis)
•
Computer software (finite, amortised on a straight-line
basis 40% - 60%).
Research and development
Research and maintenance 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 considered is 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 indefinite useful lives 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.
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 (‘CGUs’). Non-financial assets, including development
work in progress and computer software are assessed for
impairment at a Group level under one reporting segment.
For the year ended 31 March 2019, InterplX Inc goodwill
was assessed as a separate CGU. In the current year, the
InterplX product has been developed to bundle with travel,
it no longer has separately identifiable cash flows and is
assessed as part of the one Group CGU.
57
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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.
The recoverable amount of the cash-generating unit is
determined from a value-in-use calculation that uses a
discounted cash flow analysis. The key assumptions for the
value-in-use calculation are those regarding the discount
rate, growth rates and forecast financial performance and
cash flows. Management estimates the discount rate using
rates that reflect current market assumptions of the time
value of money and risk specific to the cash-generating
unit. The growth rates are based on management’s best
estimate. Forecast revenues, direct and indirect costs,
are based on historical experience/past practices and
expectations of future changes in the markets the Group
operates in and services.
Owing to Covid-19 there is uncertainty around forecasts
for domestic and international air travel and consequently
uncertainty relating to Serko’s forecast cash #ows, which is
an indicator of possible impairment. Serko has forecast a
signi!cant reduction in travel bookings and Serko Expense
platform system use for the year ending 31 March 2021. These
forecasts are based on the information available to the
Group at the time of preparing these !nancial statements
and were arrived at with reference to various data sources,
including airlines, the International Air Transport Association
(‘IATA’), external management consultancy reports and Travel
Management Company resellers.
Serko’s estimates of travel recovery and growth rates
remain uncertain and dependent on a number of factors
with respect to Covid-19, including timing of return to
domestic travel, border controls for international travel and
public demand and behaviour with respect to travel and
airline scheduling. Cash flows are sensitive to the ability
of the Group to return to pre-Covid-19 revenue by the end
of FY2022 and to achieve its Northern Hemisphere growth
plans over the five-year period. The longer-term effects
of Covid-19 on Serko’s business remain uncertain and the
potential impacts of the pandemic continue to evolve.
In undertaking an impairment review of the cash-
generating unit the following assumptions were used in the
impairment model:
•
Cash flow projections across a five-year forecast period
•
Three distinct scenarios were modelled and probability
weighted at 10% to the highest case, 40% to the mid case
and 50% to the lowest case. As a result, the major approved
assumptions for impairment testing are as follows:
–
The Australian and New Zealand travel industry
recovers over two years to pre-Covid-19 levels
–
Northern Hemisphere travel markets are assumed to
have a lag relative to Australasia and forecasts return
to pre-Covid-19 levels in FY23
–
Serko Expense platform revenue growth, supplier
commissions and services and other revenues are
relative to Travel platform recovery and growth in each
territory
•
Discount rate of 11.7% (FY19: 11.5%)
•
Discount factor applied using a mid-year convention
•
Te r m i n a l g r ow t h r a te o f 2 % ( F Y 1 9 : 2 . 4 % ) .
10 INTANGIBLES CONTINUED
58
Serko annual report
Goodwill
Intellectual
property
Key
employee
retention
Customer
contracts
Other
intangible
assets
Development
work in
progress
Computer
software
To t a l
$ (000)$ (000)$ (000)$ (000)$ (000)$ (000)$ (000)$ (000)
2020
Cost
Balance at 1 April 20191,405 1,477 - - 73 4,766 4,775 12,496
Additions - - - - 5 11,013 - 11,018
Assets no longer in use - - - - - - (36)(36)
Transfer of cost - - - - - (11,215)11,215 -
Currency translation117 237 - - - - - 354
Balance at 31 March 20201,522 1,714 - - 78 4,564 15,954 23,832
Amortisation and impairment
Balance at 1 April 2019 - 76 - - - - 1,867 1,943
Amortisation - 332 - - - - 1,373 1,705
Currency translation - 74 - - - - - 74
Balance at 31 March 2020 - 482 - - - - 3,240 3,722
Net carrying amount1,5221,232 - - 784,56412,71420,110
2019
Cost
Balance at 1 April 2018220 - 78443 - 492,9153,705
Additions - - - - 736,740 - 6,813
Assets no longer in use(220) - (78)(443) - - (201)(942)
Transfer of cost - - - - - (2,023)2,023 -
Acquisition through business
combinations (refer note 13)
1,4441,523 - - - - 393,006
Currency translation(39)(46) - - - - (1)(86)
Balance at 31 March 20191,405 1,477 - - 73 4,766 4,775 12,496
Amortisation and impairment
Balance at 1 April 2018220 - 78443 - - 13902,131
Amortisation - 76 - - - - 678 754
Assets no longer in use(220) - (78)(443) - - (201)(942)
Balance at 31 March 2019 - 76 - - - - 1,867 1,943
Net carrying amount1,4051,401 - - 734,7662,90810,553
In assessing the sensitivity of the forecasts to errors in assumptions, an analysis in key underlying assumptions was performed
and applied to the weighted average scenario. This included reducing the estimated growth rate by 10%, reducing the terminal
growth rate by 1% and increasing the discount rate by 1%. These reasonably possible changes in assumptions did not result in any
impairment to intangible assets.
10 INTANGIBLES CONTINUED
59
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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.
20202019
$ (000)$ (000)
Cash at bank – New Zealand dollar balances34,776 8,945
Cash at bank – foreign currency balances7,615 6,787
42,391 15,732
The carrying amounts of the group’s cash at bank and on hand are denominated in the
following currencies:
New Zealand dollars34,776 8,945
Australian dollars6,751 6,356
Chinese Yuan429 290
US dollars412 119
Indian rupees23 22
42,391 15,732
The Group has an indemnity guarantee over the Australian leased property of $108,000.
60
Serko annual report
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 out#ows 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 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.
20202019
$ (000)$ (000)
Trade payables3,032 1,144
Accrued expenses2,743 2,701
Lease incentive* - 193
Annual leave accrual1,298 887
To t a l t r a d e a n d o t h e r p a ya b l e s7,073 4,925
Disclosed as:
Current7,073 4,791
Non-current - 134
7,073 4,925
* The lease incentive has been reclassified upon transition to NZ IFRS 16.
The average credit period on trade payables is approximately 30 days.
61
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
13 LEASE LIABILITIES
Recognition and measurement of Serko leasing activities
Serko leases property for fixed periods of between one and six years and some include extension options. These extension options
are usually at the discretion of Serko and are included in the measurement of the lease asset if management intends to exercise the
extension.
Prior to 31 March 2019 leases of property, plant and equipment were classi!ed as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to pro!t or loss on a straight-line basis over the period of the lease.
Now assets and liabilities arising from a lease are initially measured on a present value basis. Lease incentives are recognised as
part of the measurement of the right-of-use asset and lease liabilities, whereas under NZ IAS 17 they resulted in the recognition of a
lease incentive liability, amortised as a reduction of rental expense on a straight-line basis. Lease liabilities include the net present
value of fixed payments less any lease incentives receivable. The lease payments are discounted using the lessee’s incremental
borrowing rate, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
The amortisation of the discount applied on recognition of the lease liability is recognised as interest expense in the income statement.
Key movements relating to lease balances are presented below.
2020
$ (000)
Balance at 1 April 2019 due to first-time adoption of NZ IFRS 162,479
Leases entered into during the period900
Principal repayments(1,080)
Foreign exchange adjustment46
Closing balance2,345
Classified as:
Current1,280
Non-current1,065
Closing balance2,345
Maturity analysis - contractual undiscounted cash flows:
Less than 1 year1,423
Later than 1 year and not later than 2 years848
Later than 2 years and not later than 3 years347
To t a l u n d i s c o u n t e d l e a s e l i a b i l i t i e s a t 3 1 M a r c h2,618
62
Serko annual report
14 CONTINGENT CONSIDERATION & INTERPLX
Consideration for the InterplX Inc. acquisition was part settled in shares at the market price on 20 December 2018, with the purchase
agreement including contingent consideration that was settled on 12 February 2020 in the form of further Serko shares (tranche
2). Contingent consideration was calculated based on the achievement of InterplX revenue performance over the period 1 January
2019 to 31 December 2019. The fair value remeasurement of shares issued in respect of tranche 2 was $1,342,977 with $1,056,016
recognised as an expense in 2020 (2019: $286,961).
20202019
$ (000)$ (000)
Current
Leasehold fitout loan58 54
58 54
Non-current
Leasehold fitout loan92 149
92 149
16 INTEREST"BEARING LOANS AND BORROWINGS
20202019
$ (000)$ (000)
Callaghan R&D grant683 810
Callaghan student experience grant34 66
NZTE international growth grant205 332
To t a l c o m p e n s a t i o n922 1,208
15 GOVERNMENT GRANTS
Income relating to grants is presented in the table below
63
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
17 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.
During the year the Group allocated the following restricted shares to Serko employees (refer to note 19):
•
In respect of the Restricted Share Plan (RSP), the Group allocated 25,000 shares (2019: 346,157). Unallocated shares are
1,256,846 (2019: 1,268,628); and
•
In respect of Restricted Share Units (RSU), the Group allocated 671,117 (2019: nil).
2020201920202019
Number of
shares
Number of
shares
$ (000)$ (000)(000)(000)
Ordinary shares
Share capital at the beginning of the year40,993 25,185 80,923 74,894
Issue of shares pursuant to institutional capital placement40,000 15,048 9,900 5,455
Issue of shares pursuant to Share Purchase Plan (SPP) placement5,000 - 1,238 -
Transaction costs for issue of new shares(1,793)(778) - -
Non-executive directors settlement of non-recourse loan243 - - -
Issue of shares pursuant to US Options plan74 - 25 -
Issue of shares pursuant to Restricted Share Units (RSU) scheme353 - 79 -
Shares issued in respect of InterplX acquisition2,881 1,538 574 574
Share capital at 31 March87,751 40,993 92,739 80,923
Share-based payment reserve
Balance at 1 April1,885 1,309 - -
Shares allocated to employees via Restricted Unit Scheme659 - - -
Shares allocated to employees via Restricted Share Plan23 406 - -
Shares forfeited from employees via Restricted Share Plan(17)(24) - -
Non-executive directors settlement of non-recourse loan(43) - - -
Share-based payments - employee share options(133)194 - -
Share-based payment reserve at 31 March2,374 1,885 - -
64
Serko annual report
18 EARNINGS PER SHARE #EPS$
Basic EPS amounts are calculated by dividing the profit 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 profit 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:
Subsequent to the reporting date but prior to the date of authorisation of these !nancial statements, Serko issued a total of 472,243 RSUs.
20202019
$ (000)$ (000)
(Loss)/profit attributable to ordinary equity holders of the parent
Continuing operations(9,365)1,633
(9,365)1,633
Notes20202019
NumberNumber
(000)(000)
Basic earnings per share
Issued ordinary shares1792,739 80,923
Adjusted for employee restricted share plan shares(1,919)(2,769)
Weighted average of issued ordinar y shares90,820 78,154
Basic earnings per share (dollars)(0.10)(0.02)
Diluted earnings per share
Weighted average of issued ordinar y shares86,893 77,584
Weighted average of issued ordinar y shares for diluted earnings per share86,893 77,584
Diluted earnings per share (dollars)(0.11)0.02
20202019
CentsCents
Net tangible assets per security47.09 19.38
65
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
19 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
ful!lled. The cumulative expense recognised for share-based
transactions at each reporting date, until the vesting date,
re#ects 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 cumulative 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 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.
20202019
Number of sharesNumber of shares
Unvested shares at 1 April1,499,943 1,398,707
Granted25,000 345,890
Forfeited(13,218)(22,219)
Vested(849,433)(222,435)
Unvested shares at 31 March - allocated to employees662,292 1,499,943
Ageing of unvested shares
Vest within one year312,475 842,911
Vest within two to five years349,817 657,032
Ageing of unvested shares at 31 March - allocated to employees662,292 1,499,943
Unallocated shares - held by trustee1,256,846 1,268,628
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 vested 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 grant 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 $3.17 (2019: $2.96) and was determined
by the volume weighted average price (VWAP) of shares
traded in the previous 20 trading days preceding the date of
grant. The Group has no legal or constructive obligation to
repurchase the shares or settle the RSP for cash.
66
Serko annual report
Employee Restricted Share Units scheme (RSUs)
The Serko Limited Employee Restricted Share Units scheme (RSU) was introduced during the year to replace the RSP. Under the RSU
scheme, ordinary shares in Serko Limited are allocated to employees at grant date with a zero-exercise price and will be taxable to
the employee in the income year when the awards vest.
Vesting conditions are based on:
•
Period of continuous employment (usually three years, however, it can be up to five years) and/or;
•
Performance hurdles, such as performance against revenue targets.
The weighted average grant date fair value of RSUs issued during the year was determined by either the volume weighted average
price (VWAP) of shares traded in the previous 20 trading days preceding the date of grant or closing price the day before issue.
20202019
Weighted
average price
NZ$
Number of RSUsNumber of RSUs
Allocated to employees during the year4.31671,117 -
Cancelled during the year3.95(1,979) -
Vested during the year4.49(78,521) -
To t a l R S U s g r a n t e d590,617 -
2020202020192019
Weighted average
exercise price ($)
Options
We i g h te d ave ra g e
exercise price ($)
Options
Outstanding at 1 April 2.90 286,901 - -
Granted 4.45 44,169 2.90 286,901
Cancelled 2.90 (177,783) - -
Exercised 2.97 (25,000) - -
Outstanding at 31 March 128,287 286,901
Employee incentive share options scheme
Options are granted to selected employees. The exercise price of the granted options is set at the closing price the day before issue.
Options are conditional on the completion of the necessary years of service (the vesting period) as appropriate to that tranche. The
options are considered graded equity instruments that vest in tranches over two to five years from the grant date. No options can be
exercised later than five years from grant date. There were 14 holders of options at 31 March 2020 (2019: 14).
The Group has no legal or constructive obligation to repurchase or settle the options in cash.
Movements in the number of options outstanding and their related weighted average exercise prices are as follows:
19 SHARE"BASED PAYMENTS CONTINUED
67
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
During the year a further 32,394 options were granted, however, these were subsequently cancelled or forfeited prior to 31 March 2020.
Options outstanding at 31 March fall within the following ranges:
The weighted average fair value of options granted during the year, determined using the Black-Scholes valuation model, was $1.84
per option (2019: $1.64).
The significant inputs into the valuation model were the market share price at grant date, the grant price as shown above, expected
annualised volatility of between 50% and 56% (FY19: 55% and 66%), a dividend yield of 0%, an expected option life of between two
and five years (FY19: two and five) and an annual risk-free interest rate of between 0.7% and 1.2% (FY19: 3%).
The volatility input measured is the standard deviation of continuously compounded share returns and is based on a statistical
analysis of daily share prices in the past one to five years.
Non-executive director shares
The Group’s non-executive directors were granted shares in 2014 that are to be settled by way of a non-recourse loan. The non-
recourse loans were due for repayment on 30 June 2020, following an extension to the previous loan due 30 June 2017. These were
valued using Black-Scholes model at the time of loan extension. During the year Ms Batten settled her loan in full. Subsequent to
year end Mr Botherway ’s and Mr McConaghy ’s loans were extended to 30 January 2021 and 30 June 2021 respectively. Post balance
date these have been valued using the Black-Scholes model, with the incremental fair value recognised in the profit and loss.
20202019
GrantedExpiry date
Grant price
(NZ$)
OptionsOptions
2018-19 2020-21 2.68 - 3.32 84,118 286,901
2019-20 2021-22 3.95 - 4.49 44,169 -
128,287 286,901
19 SHARE"BASED PAYMENTS CONTINUED
68
Serko annual report
20 RELATED PARTIES
a) Subsidiaries
The consolidated !nancial statements include the !nancial 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 Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015 as a subsidiary for the India-based operations. As of 1 January
2020 Serko India Private Limited was non-trading.
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 subsidiar y for the China-based operations.
Serko Inc was incorporated on 30 October 2017 as a subsidiary for the US-based operations.
InterplX Inc was acquired on 20 December 2018 and its principal business is the sale of expense management solutions.
% Equity interestInvestment $(000)
Balance date2020201920202019
Serko Australia Pty Limited31 March100%100%1 1
Serko Trustee Limited31 March100%100% - -
Serko India Private Limited31 March99%99%2 2
Serko Investments Limited31 March100%100% - -
Foshan Sige Information Technology Limited31 March100%100% - -
Serko Inc31 March100%100% - -
InterplX Inc31 March100%100%3,076 3,076
3,079 3,079
69
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
b) Transactions with related par ties
The following table provides the total amount of transactions that have been entered into with related parties, excluding key
management and executive director remuneration.
*Mr Botherway continues as a director of Serko (attending all Board & Committee meetings) but took a leave of absence from the Chair role on 12 March 2020 for medical
reasons. Ms Batten assumed the role of Acting Chair from this date.
d) Te r m s a n d c o n d i t i o n s o f t r a n s a c t i o n s w i t h r e l a t e d p a r t i e s
Outstanding balances at year end are unsecured and settlement occurs in cash.
For the year ended 31 March 2020 the Group has not made any allowance for impairment loss relating to amounts owed by related
parties (2019: $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. Short-term benefits include salaries, short-term incentives related to FY19 paid in FY20 and the bonus payments related to Restricted Share Plan
(RSP) long-term incentives granted in previous years and vested during the financial year to 31 March 2020.
20202019
$ (000)$ (000)
Purchases from related parties
Simon Botherway - Chair (to 12 March*)121 108
Clyde McConaghy - Non-executive Director110 83
Claudia Batten - Acting Chair (from 12 March*)113 83
To t a l344 274
20202019
$ (000)$ (000)
Short-term benefits employees (*)5,779 3,800
Share-based payments733 427
Post-employment benefits201 121
To t a l c o m p e n s a t i o n6,713 4,348
c) Key management remuneration
20 RELATED PARTIES CONTINUED
70
Serko annual report
20202019
$ (000)$ (000)
Net (loss)/profit after tax(9,364)1,633
Add non-cash items
Amortisation1,705 754
Depreciation1,451 294
Loss on property, plant and equipment disposal50 -
Fair value remeasurement of contingent consideration1,056 287
Deferred tax bene!t(167)(72)
Gain on foreign exchange transactions(370)(153)
Share-based compensation959 576
(4,680)3,319
Add/(less) movements in working capital items
(Increase) in receivables(1,084)(1,795)
Increase in trade and other payables2,283 1,998
(Decrease)/increase in income tax(308)125
891328
Net cash "ow from operating activities(3,789)3,647
21 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise cash at bank, derivatives, 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 the 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.
71
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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 "ows
6 months
or less
6-12
months
1-2 years2-5 years
More than 5
years
$ (000)$ (000)$ (000)$ (000)$ (000)$ (000)
Group - 2020
Trade and other payables0% 7,074 7,074 - - - -
Leasehold fitout loan8% 165 34 34 68 29 -
7,239 7,108 34 68 29 -
Group - 2019
Trade and other payables0% 4,732 4,732 - - - -
Leasehold fitout loan8% 233 27 27 82 97 -
4,965 4,759 27 82 97 -
21 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES CONTINUED
72
Serko annual report
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 (receivables), 11 (cash at bank and on hand) and 12 (trade and other payables) 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% (2019: +/- 15%)
has been selected owing to exchange rate volatility observed.
Foreign currency risk
-15%+15%
Carrying
amount
Post-tax
pro!t
Equity
Post-tax
pro!t
Equity
$ (000)$ (000)$ (000)$ (000)$ (000)
2020
Foreign exchange balances
Cash at bank 7,615 968 968 (715)(715)
Trade receivables 3,480 430 430 (337)(337)
Trade payables(1,178)(150)(150) 111 111
Net exposure 9,917 1,248 1,248 (941)(941)
2019
Foreign exchange balances
Cash at bank 6,787 862 862 (637)(637)
Trade receivables 2,507 315 315 (239)(239)
Trade payables(173)(22)(22) 16 16
Net exposure 9,121 1,155 1,155 (860)(860)
c) Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, receivables and contract assets.
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.
The Group monitors and manages the exposure to credit risk by ensuring customers have an appropriate credit history. The credit
risk associated with Expense customers is small owing to the inherently low transaction value and the distribution over a large
number of customers.
At reporting date 99% (2019: 99%) of the Group’s cash and cash equivalents were with one bank. The Group has no other
concentrations of credit risk.
d) Fair value
The Board considers that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial
statements approximate their fair value.
21 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES CONTINUED
73
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
23 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 operating segment.
This reporting segment is predominantly made up of revenue generated from Travel platform bookings and Expense revenue.
Revenues have been disaggregated at note 4.
As required under NZ 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 $10,814,032 of the revenue for the year ended 31 March 2020 (2019: $10,721,614).
24 EVENTS AFTER BALANCE SHEET DATE
The non-recourse loans for directors have been extended in May 2020. These have been valued using the Black-Scholes model with
the incremental fair value recognised in the profit and loss for the FY21 (refer to note 19).
In May 2020 Serko issued a total of 472,243 RSUs (refer to note 18).
The Group has applied for Government Covid-19 wage subsidy schemes in New Zealand, Australia and the US (refer to note 2b)) and
received $1.6 million post year end of which $871,670 was received from the New Zealand government.
There have been no other events subsequent to 31 March 2020 that materially impact the results reported (2019: nil).
25 CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2019: $nil).
74
Serko annual report
Independent Auditor’s Report
OPINION
We have audited the consolidated financial statements of Serko
Limited and its subsidiaries (the ‘Group’), which comprise the
consolidated statement of financial position as at 31 March
2020, and the consolidated statement of comprehensive
income, statement of changes in equity and statement of cash
flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial
statements, on pages 34 to 73, present fairly, in all material
respects, the consolidated financial position of the Group as
at 31 March 2020, 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.
To t h e S h a r e h o l d e r s o f S e r ko L i m i t e d
Other than in our capacity as auditor and the provision of
assurance services, we have no relationship with or interests in
the Company or any of its subsidiaries, except that partners and
employees of our !rm 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.
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 $450,000.
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.
75
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Key audit matterHow our audit addressed the key audit matter
REVENUE RECOGNITION
The Group has reported revenue of $25.9 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 judgement 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.
The recognition of revenue is a key audit matter due to the
significance of revenue to the financial statements and the
specific nature of individual customer contracts.
We considered the application of NZ IFRS 15: Revenue from
Contracts with Customers for new contracts entered into in
the year.
We evaluated the systems, processes and controls in place over
the major operating revenue streams.
We engaged our Information Technology specialists to test the
IT environment in which bookings occur and interface with the
general ledger.
We recalculated revenue recognised for a sample of customers
by reconciling transactions recorded in the relevant IT systems
to the financial ledger, and validating pricing inputs to invoices
and signed customer contracts.
We tested samples of manual journal entries recorded outside
of normal business processes by profiling for unusual 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 and the
extent that forecast volumes are impacted by Covid-19.
76
Serko annual report
CAPITALISATION OF SOFTWARE DEVELOPMENT
INCLUDING IMPAIRMENT CONSIDERATIONS
The Group capitalised $11.0 million in relation to software
development, as set out in note 10 ‘Intangibles’, of which $4.6
million relates to development work in progress at balance date.
Capitalisation of software development costs
As a Software as a Service (‘SaaS’) provider, the Group
incurs significant expenditure in developing and enhancing
software products.
Judgement is required to determine if the recognition criteria
under NZ IAS 38: Intangible Assets have been met in order to
capitalise the applicable costs of development. This includes
considering whether the costs are directly attributable to
the development of an asset, and whether the Group can
demonstrate that the asset is in the development stage. This
includes demonstrating the technical feasibility of completing
the intangible asset so that it will be available for use or sale,
the Group’s intention to complete the asset, how the asset will
generate future economic benefits, the availability of resources
to complete the asset development and the ability of the
Group to reliably measure the expenditure attributable to the
intangible asset.
Impairment assessment due to Covid-19
The Group must also assess each period whether there are any
indications that the software development assets are impaired
and must perform impairment testing on any capitalised
development costs for which there are indicators of impairment
or which relate to software that is not yet available for use.
Serko has done an impairment test because there is uncertainty
around forecasts for travel bookings and Serko Expense
platform use, as a result of Covid-19, particularly around
domestic and international air travel assumptions.
The Group has performed an impairment assessment using
a discounted cash flow analysis for its cash-generating unit.
Expected cash flows were adjusted with reference to Covid-19,
with three distinct scenarios used to factor in the uncertainty
involved in determining the timing of return to domestic travel,
border controls for international travel and public demand and
behaviour with respect to travel and airline scheduling.
Other key assumptions include the discount rates and
growth rates.
We have included capitalisation and impairment considerations
of software development as a key audit matter due to the level
of judgement required.
Capitalisation of software development costs
We evaluated the nature of expenditure, the stage of product
development, and how the group distinguishes expenditure
between research, development and maintenance costs.
We assessed the Group processes and controls for recording
time spent on products and the allocation between research or
software development to be capitalised under NZ IAS 38.
We tested a sample of additions to evaluate if the recognition
criteria under NZ IAS 38 have been met.
Impairment assessment due to Covid-19
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.
We challenged the key assumptions within the cash
flow forecasts by considering historical cash flows, our
understanding of the business strategy and other relevant
external information. This included considering the three
scenarios used due to Covid-19 uncertainties.
We used our internal valuation specialists to assist in evaluating
the assumptions used in the Group’s discounted cash #ow model,
speci!cally the discount rate and terminal growth rates used, to
support the carrying value of assets as at 31 March 2020.
We performed sensitivity analysis over key drivers in the Group’s
impairment model, particularly forecast travel bookings and
Serko Expense platform use.
Key audit matterHow our audit addressed the key audit matter
77
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Bryce Henderson, Partner for Deloitte Limited
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 other wise 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.
Auckland, New Zealand
24 June 2020
78
Serko annual report
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 16 of this Annual
Report. These directors held office throughout the financial
year ended 31 March 2020.
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 are set out under Board of
Directors in this Annual Report; and
•
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 are set out under
Board of Directors in this Annual Report.
For the year ended 31 March 2020
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 best practice and that Serko adheres to the highest
ethical standards.
The Board has considered the NZX Listing Rules and a number
of corporate governance recommendations when establishing
its governance framework, including the revised NZX Corporate
Governance Code dated 1 January 2020 (NZX Code) and
the Third and Fourth Editions 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 2020.
Serko’s governance charters and policies can also be found
on the investor centre of the Company ’s website. 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 on the Australian Securities Exchange (ASX) as an
ASX Foreign Exempt Listing. As an ASX Foreign Exempt Listing,
Serko needs 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.
Corporate Governance & Disclosures
79
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
NON"EXECUTIVE DIRECTOR REMUNERATION
In 2019 Serko’s shareholders approved a total cap of $450,000 per annum for non-executive directors’ fees for the purposes of the NZX
Listing Rules.
The Board has agreed that the following fixed annual fees will apply to all non-executive directors for the year ending 31 March 2021:
In light of the challenging operating environment caused by Covid-19 and related travel restrictions (which have materially impacted
Serko’s revenues), the non-executive directors have either agreed to take a reduction in their directors’ fees or receive a portion of their
directors’ fees in shares for the first three months of FY21. This is to assist Serko to manage expenditure during this challenging period.
Non-executive directors received the following directors’ fees, remuneration and other benefits from the Company in the year ended 31
March 2020:
* Indicates Chair of the Board/Committee. Mr Botherway continues as a director of Serko (attending all Board and Committee meetings) but took a leave of absence from the
Board Chair role on 12 March 2020 for medical reasons. Ms Batten assumed the role of Acting Chair from this date.
1 The figures shown are gross amounts, which have been converted into NZD and exclude GST (where applicable).
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 ESG Report 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.
4 Includes Australian superannuation payable.
5 Fees include special fees of NZ$15,000 paid to Mr McConaghy and Ms Batten respectively for ad hoc committee meetings held during the year in respect of a capital raising
and merger & acquisition (M&A) transaction.
More information about remuneration payable to directors is set out in Serko’s Corporate Governance Statement, which is included in the
ESG Report located on the investor centre of the Company ’s website.
Remuneration and value of other bene!ts received
Name of director
Non-executive
directors’ Board
fees
Audit & Risk
Committee fees
Remuneration
& Nominations
Committee fees
Shares and other
payments or
benefits
To t a l r e m u n e r a t i o n
Simon Botherway$71,533*--$50,000$121,533
Clyde McConaghy$94,465 $15,625*--$110,090
Claudia Batten$47,493*-$15,625*$50,000$113,118
TOTAL$213,491 $15,625 $15,625 $100,000 $344,741
1
2
4, 5
5
3
PostionFees per annum
Board of Directors
ChairAUD$120,000
Non-executive directorsAUD$75,000
Audit & Risk Committee
Committee ChairAUD$15,000
Committee Member-
Remuneration & Nominations Committee
Committee ChairAUD$15,000
Committee Member-
80
Serko annual report
EXECUTIVE DIRECTOR REMUNERATION
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. Their remuneration packages are set
by the Board to reflect the scope and complexity of each role, with reference to comparative market data.
Mr Grafton and Mr Shaw ’s remuneration comprises a fixed base salary, a short-term incentive up to a maximum target value of 40% of
their base salary; and a long-term incentive up to a maximum target value of 100% of their base salary. This remuneration composition
will carry forward into FY21.
During the period ended 31 March 2020, both Darrin Grafton’s and Bob Shaw ’s variable remuneration components were based on key
performance indicators (KPIs) relating to:
•
Delivery of operational value drivers linked to Serko’s strategy;
•
Delivering shareholder value;
•
Meeting performance targets in respect of customer satisfaction and retention; and
•
Maintaining a positive culture 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 upcoming financial year and determining the individual component of any short-term incentive payable for the current financial
year. In addition, pay out of any short-term incentive is dependent on meeting pre-determined revenue and EBITDA targets during
the financial period. Owing to Covid-19 related cost savings initiatives that were implemented at the beginning of FY21, no short-term
incentive was paid out in respect of FY20.
Similar criteria will be applied for assessing the performance of the executive directors in FY21.
81
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Base salary
Taxable
bene!ts
SubtotalPay for performance
Total
remuneration
STILTISubtotal
Darrin Grafton$370,564 $30,000 $400,564 -
$126,000 in the form of
31,899 restricted share units
$126,000 $526,564
Bob Shaw$256,652 $30,000 $286,652 -
$54,000 in the form of 13,671
restricted share units
$54,000 $340,652
1 Base salary includes employer contributions towards KiwiSaver at 3%.
2 Taxable benefits include a car allowance, carpark and medical insurance.
3 For FY20 no short-term incentive was allocated owing to Covid-19 cost saving initiatives. Darrin Grafton’s potential short-term incentive payment for FY20 was $140,000.
During the financial period Darrin Grafton received a short-term incentive of $50,400, which was earned in FY19 and paid in FY20.
4 For FY20 no short-term incentive was allocated owing to Covid-19 cost saving initiatives. During the financial period Bob Shaw received a short-term incentive of $21,600,
which was earned in FY19 and paid in FY20.
5 The FY20 long-term incentive was granted in July 2019, following partial achievement of pre-grant performance targets based on FY19 performance. The restricted share
units will vest three years after the allocation date. The value stated is the gross amount earned.
1
DirectorGrant yearSecuritiesPerformance period Shares vested Value on vesting
Darrin GraftonFinancial Year 2017Restricted sharesJuly 2016 - July 2019 39,512 $167,926.00
Bob ShawFinancial Year 2017Restricted sharesJuly 2016 - July 2019 9,106 $38,700.50
The following long-term incentives previously granted to the executive directors vested during the financial period ended 31 March 2020:
1 Represents the NZX closing price of SKO ordinary shares on the vesting date multiplied by the number of securities vested.
3
5
4
2
1
The tables below (and accompanying notes) set 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 2020:
82
Serko annual report
EMPLOYEE REMUNERATION
The table below shows the number of employees and former employees of Serko and its subsidiaries, not being directors (including
executive directors) of Serko, who, in their capacity as employees, received remuneration and other benefits during the period ended 31
March 2020 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 below 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 below table. Where the individual works in Australia,
contributions of 9.5% of gross earnings towards Australian Superannuation are included in the below table.
Remuneration range (NZD)
Number of employees
whose remuneration
includes vested LTI
Total number of
employees in range
$100,000 - $110,000212
$110,001 - $120,000114
$120,001 - $130,000115
$130,001 - $140,00058
$140,001 - $150,00038
$150,001 - $160,000-9
$160,001 - $170,00026
$170,001 - $180,00022
$180,001 - $190,00011
$190,001 - $200,00015
$200,001 - $210,000-1
$210,001 - $220,00033
$220,001 - $230,000-2
$230,001 - $240,00012
$240,001 - $250,000-1
$250,001 - $260,00012
$260,001 - $270,000-1
$290,001 - $300,00011
$410,001 - $420,000-1
$420,001 - $430,00011
$580,001 - $590,00011
To t a l n u m b e r o f e m p l oye e s a n d fo r m e r e m p l oye e s2696
1 Specifies total number of employees within the range whose remuneration includes long-term incentives that have vested during the period.
1
83
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
DIVERSITY
The respective numbers and proportions of men and women at various levels within the Serko workforce as at 31 March 2019 and 31
March 2020 are set out in the table below:
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.
The Board’s assessment of Serko’s performance against its Diversity and Inclusion Policy is set out in the latest ESG report, which can be
found on the investor centre of the Company ’s website.
Female
20202019
no.%no.%
All directors120%120%
Non-executive directors133%133%
Officers113%114%
Senior employees320%429%
Remaining workforce8640%6139%
Male
20202019
no.%no.%
All directors480%480%
Non-executive directors266%266%
Officers787%686%
Senior employees1080%1071%
Remaining workforce12860%9461%
1
1
2
2
84
Serko annual report
Director attendanceBoard
Audit & Risk
Committee
Remuneration
& Nominations
Committee
Darrin Grafton12/12**
Bob Shaw12/12**
Simon Botherway11/126/64/4
Clyde McConaghy12/126/64/4
Claudia Batten12/126/64/4
BOARD AND COMMITTEE ATTENDANCE
The table below shows the Board and Committee meeting attendance during the year ended 31 March 2020:
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, which has been evaluated against the
criteria in the Board Charter, that as at 31 March 2020 and the date of this Annual Report, Claudia Batten, Simon Botherway 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.
In addition, during the year directors participated in 22 additional Special Board Meetings and Board Sub-Committee meetings primarily
associated with M&A activity, the 2019 capital raising and managing risks associated with the Covid-19 pandemic.
*Indicates the director is not a member of the Committee (although they may have been in attendance for these meetings).
85
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
DirectorEntityRelationship
Claudia Batten
AIDER International Limited
Broadli Inc
Serko Inc
Westpac New Zealand Limited
Adviser
Director
Director
Board Adviser
Simon Botherway
Arrow Trust
Fidelity Life Assurance Company Limited
Guardians of NZ Super Fund
MSH Trustee (Arrow Limited)
Trustee
Director
Guardian
Trustee
Darrin Grafton
Financial Equities Limited
Grafton-Howe No.2 Trust
InterplX Inc.
Serko Australia Pty Limited
Serko Inc
Serko India Private Limited
Serko Investments Limited
Travelog World for Windows Pty. Limited
Director
Trustee
Director
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
Serko India Private Limited
Serko Investments Limited
Travelog World for Windows Pty. Limited
Director
Trustee
Director
Director
Director
Director
Date of disclosureDirectorEntity
22 October 2019
Darrin Grafton
Simon Botherway
Gave notice that they intend to participate in an offer of existing shares by certain
shareholders and, accordingly, were to be considered as interested in the transaction
and entry into the associated Underwriting Agreement.
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 2020 are set out below:
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 2020 and
subsequently, are set out below:
1 Serko subsidiary as detailed on page 92.
1
1
1
1
1
1
1
1
1
86
Serko annual report
NameNature of relevant interest
Number of securities
acquired/(disposed)
Consideration
paid/received
Date of
acquisition/
disposal
Claudia BattenOn-market acquisition of beneficial
interest in ordinary shares (held in
custody for Claudia Batten pursuant
to Non-executive Director Fixed
Trading Plan)
1,283.10
1,108.61
993.63
909.44
1,088.69
862.67
77.06
1,001.03
821.05
801.34
799.22
783.28
995.82
108.57
$4,041.77
$3,990.79
$3,984.44
$3,976.07
$4,093.46
$3,916.54
$323.65
$4,014.13
$3,965.65
$3,995.70
$3,994.98
$3,994.71
$4,082.85
$184.57
2-Apr-19
2-May-19
6-Jun-19
2-Jul-19
6-Aug-19
3-Sep-19
19-Sep-19
3-Oct-19
5-Nov-19
3-Dec-19
7-Jan-20
4-Feb-20
4-Mar-20
17-Mar-20
On-market disposal of registered and
beneficial interest in ordinary shares held
pursuant to the Serko Non-executive
Director Loan Facility
(100,000)$523,755.50 31-Jan-20
Simon BotherwayOn-market acquisition of beneficial
interest in ordinary shares (held in
custody for Simon Botherway pursuant
to Non-executive Director Fixed
Trading Plan)
1,283.00
1,108.55
993.56
909.37
1,088.63
862.62
77.06
1,001.00
821.01
801.74
798.78
783.23
995.78
110.88
$4,041.45
$3,990.79
$3,984.16
$3,975.76
$4,093.24
$3,916.31
$323.64
$4,014.02
$3,965.49
$3,997.66
$3,992.79
$3,994.47
$4,082.69
$188.50
2-Apr-19
2-May-19
6-Jun-19
2-Jul-19
6-Aug-19
3-Sep-19
19-Sep-19
3-Oct-19
5-Nov-19
3-Dec-19
7-Jan-20
4-Feb-20
4-Mar-20
17-Mar-20
Off-market disposal of beneficial
interest in ordinary shares pursuant to
an underwritten primary placement by
Serko Limited and secondary sell down
by various existing shareholders of
Serko Limited
(1,150,000)$4,646,000.00 30-Oct-19
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 2020:
5
1
1
DIRECTOR INTEREST DISCLOSURES CONTINUED
87
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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 any voting rights attached to the shares/any shares issued upon vesting.
3 By virtue of Darrin Grafton’s personal relationship, he is implied to have the power to exercise, or to control the exercise of, any 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 Paid in the form of services to Serko. Represents the NZX closing price of SKO ordinary shares on the vesting date multiplied by the number of securities vested.
5 The consideration for on-market trades is stated as the market price paid, excluding fees and taxes.
Darrin GraftonRegistered holder and beneficial interest
in ordinary shares issued upon vesting of
restricted shares pursuant to the Serko
Limited Employee Restricted Share Plan
39,512$167,926.00 29-Jul-19
Indirect interest in ordinary shares issued
upon vesting of restricted shares pursuant
to the Serko Limited Employee Restricted
Share Plan, by virtue of a personal
relationship with the registered holder
2,017$8,572.25 29-Jul-19
Beneficial interest in unlisted restricted
share units granted under the Serko
Limited Employee Long Term Incentive
Scheme (ANZ)
31,899Nil / Services30-Jul-19
Indirect interest in unlisted restricted
share units granted under the Serko
Limited Employee Long Term Incentive
Scheme (ANZ), by virtue of a personal
relationship with the registered holder
762Nil / Services30-Jul-19
Off-market disposal of bene!cial interest
in ordinary shares pursuant to an
underwritten primary placement by Serko
Limited and secondary sell down by various
existing shareholders of Serko Limited
(1,800,000)$7,272,000.00 30-Oct-19
Bob ShawRegistered holder and beneficial interest
in ordinary shares issued upon vesting of
restricted shares pursuant to the Serko
Limited Employee Restricted Share Plan
9,106$38,700.5029-Jul-19
Beneficial interest in unlisted restricted
share units granted pursuant to the Serko
Limited Employee Long Term Incentive
Scheme (ANZ)
13,671Nil / Services30-Jul-19
24
2
24
2
2,34
2,3
DIRECTOR INTEREST DISCLOSURES CONTINUED
88
Serko annual report
NameRelevant interestPercentage
Bob Shaw12,943,42613.957%
Darrin Grafton12,232,868 13.191%
Simon Botherway1,200,986.061.295%
Clyde McConaghy181,8180.196%
Claudia Batten113,802.760.123%
In accordance with the NZX Listing Rules, as at 31 March 2020, directors had a relevant interest (as defined in the Financial Markets
Conduct Act 2013) in Serko shares as follows:
1 The relevant interest includes: 12,884,296 shares are held via a trust in which the director is a trustee and beneficiary; 9,106 ordinary shares held directly; and a beneficial
interest in 50,024 restricted shares allocated pursuant to the Serko Employee Restricted Share Plan and held on trust until vesting.
Mr Shaw is also the registered holder and beneficial owner of 13,671 unlisted restricted share units allocated pursuant to the Serko Employee Long Term Incentive Scheme.
2 The relevant interest includes: 10,867,629 ordinary shares are held via a trust in which the director is a trustee and beneficiary; 39,512 ordinary shares held directly; 97,712
restricted shares allocated pursuant to the Serko Employee Restricted Share Plan and held on trust until vesting; and an indirect interest in 1,223,421 ordinary shares and
4,594 restricted shares by virtue of a personal relationship with the beneficial holder of these shares. The 12,232,868 shares are subject to a 12-month contractual lock up on
sale or disposition expiring in October 2020.
Mr Grafton is also the registered holder and beneficial owner of 31,899 unlisted restricted share units allocated pursuant to the Serko Employee Long Term Incentive Scheme
and has an indirect interest in 762 unlisted restricted share units by virtue of a personal relationship with the beneficial owner.
3 884,091 ordinary shares are held via a trust in which the director is a trustee and beneficiary. 284,909 ordinary shares are held directly. 31,986.06 ordinary shares are held
in custody pursuant to the Serko Non-executive Director Fixed Trading Plan. These shares are subject to a 12-month contractual lock up on sale or disposition expiring in
October 2020.
4 Held via a trust in which the director is a trustee and beneficiary.
5 31,876.19 ordinary shares are held in custody pursuant to the Serko Non-executive Director Fixed Trading Plan.
1
2
4
3
5
DIRECTOR INTEREST DISCLOSURES CONTINUED
89
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Date of disclosureDirectorParticulars of Board authorisation
21-May-19
Bob Shaw
Darrin Grafton
The payment of remuneration and the provision of other benefits (annual remuneration
review) by the Company to the executive directors on the terms detailed in the Board
minutes dated 21 May 2019 and on the grounds set out in the corresponding directors’
certificate.
23-Jul-19
Bob Shaw
Darrin Grafton
The payment of remuneration and the provision of other benefits (the granting of long-
term incentives) by the Company to the executive directors on the terms detailed in
the Board minutes dated 23 July 2019 and on the grounds set out in the corresponding
directors’ certificate.
22-Oct-19
Darrin Grafton
Simon Botherway
The provision of benefits to the directors who were participating in the sell down in the
form of entry into the Underwriting Agreement pursuant to the capital raising being
undertaken on or about the date of the certificate.
11-Nov-19
Claudia Batten
Clyde McConaghy
The payment of remuneration (in the form of Special Fees) by the Company to the non-
executive directors on the terms detailed in the resolution dated the same date as this
certificate and on the grounds set out in the corresponding directors’ certificate.
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 Register during the financial reporting period.
SHAREHOLDING INFORMATION
As at 30 April 2020 there were 92,738,865 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:
Size of shareholdingNumber of holders%Number of ordinary shares%
1 - 1,000 2,141 48.12 1,080,725 1.17
1,001 - 5,000 1,612 36.23 3,826,164 4.13
5,001 - 10,000 334 7.51 2,436,609 2.63
10,001 - 50,000 269 6.05 5,439,768 5.87
50,001 - 100,000 37 0.83 2,451,010 2.64
100,001 and over 56 1.26 77,504,589 83.57
TOTAL 4,449 100 92,738,865 100
1 Includes 1,919,138 ordinary shares with restrictive conditions held by Serko Trustee Limited on behalf of 40 individual beneficial holders (with 662,292 of those ordinary
shares allocated) 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.
1
DIRECTOR INTEREST DISCLOSURES CONTINUED
90
Serko annual report
As at 30 April 2020, 1,919,138 ordinary shares with restrictive conditions held by Serko Trustee Limited on behalf of 40 individual
beneficial holders (with 662,292 of those ordinary shares allocated) pursuant to the Serko Restricted Share Plan; 14 participants holding
a total of 128,287 options pursuant to the Serko (US) Share Incentive Plan and 53 participants holding a total of 590,617 restricted share
units pursuant to the Serko Employee Long Term Incentive Scheme (ANZ) and Serko Employee Share Incentive Plan (US). Further
information on these incentive plans is contained in note 19 to the financial statements and in Serko’s ESG Report, which can be found on
the investor centre of the Company ’s website. Go to: www.serko.com/investor-centre.
Set out below are details of the 20 largest shareholders of Serko as at 30 April 2020:
1 The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been reallocated to the applicable members.
Shareholder Number of ordinary shares held %
1Robert James Shaw & Geoffrey Robertson Ashley Hosking 12,884,296 13.89
2Darrin Grafton & Geoffrey Robertson Ashley Hosking 10,867,629 11.72
3TEA Custodians Limited 8,490,874 9.16
4National Nominees New Zealand Limited 5,128,273 5.53
5Coronado Pte Limited 4,331,683 4.67
6Citibank Nominees (NZ) Ltd 3,276,738 3.53
7HSBC Nominees (New Zealand) Limited 3,007,745 3.24
8HSBC Custody Nominees (Australia) Limited 2,268,826 2.45
9Serko Trustee Limited 1,919,138 2.07
10PT Booster Investments Nominees Limited 1,218,334 1.31
11Donna Bailey 1,217,594 1.31
12Philip Rodger Ball 1,162,517 1.25
13Chuck Buckner 1,035,014 1.12
14Investment Custodial Services Limited 1,007,360 1.09
15Skip Enterprises Pty Limited 1,000,000 1.08
16Accident Compensation Corporation 954,931 1.03
17Simon John Botherway & MSH Trustee (Arrow) Limited 884,091 0.95
18JPMORGAN Chase Bank 830,198 0.9
19Robert Alan Hawker & Elizabeth Anne Hawker 822,812 0.89
20Cogent Nominees (NZ) Limited 784,819 0.85
1
SHAREHOLDING INFORMATION CONTINUED
91
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
According to notices given to Serko under the Financial Markets Conduct Act 2013, the following persons were substantial product
holders as at 31 March 2020. As at the balance date (31 March 2020) there were 92,738,865 Serko ordinary shares on issue:
Substantial product holder
Number of ordinary shares in which relevant
interest is held
% of class held at balance date
Geoffrey Hosking 23,751,925 25.612
Robert Shaw 12,943,426 13.957
Darrin Grafton 12,232,868 13.191
Harbour Asset Management Limited 8,223,424 8.867
Milford Asset Management Limited 5,773,273 6.225
Jarden Securities Limited40,0150.043
1 Jarden Securities Limited (formerly First NZ Capital Group Limited) and Harbour Asset Management Limited file joint substantial product holder notices.
2 Based on last substantial product holder notice filed prior to 31 March 2020.
3 Based on issued share capital of 92,738,865 as at 31 March 2020.
1
2
3
1
SHAREHOLDING INFORMATION CONTINUED
92
Serko annual report
SubsidiaryDirectors
Foshan Sige Information Technology Limited (China)Gerard Neilsen
InterplX Inc. (US)
Darrin Grafton
To n y D ’A s to l fo
Serko Australia Pty Limited (Australia)
Darrin Grafton
Bob Shaw
John Challis
Serko Inc (US)
Darrin Grafton
Claudia Batten
Serko India Private Limited (India)
Darrin Grafton
Bob Shaw
Yo g i t a C h a d h a
Serko Investments Limited (New Zealand)
Darrin Grafton
Bob Shaw
Serko Trustee Limited (New Zealand)
Susan Putt
Fiona Rockel
SUBSIDIARY COMPANY DIRECTORS
With the following exception, 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 2020 are included in the relevant bandings for remuneration disclosed on page 82 of this Annual Report.
Serko has agreed to pay Ms Chadha NZ$30,000 per year in relation to acting as a director of Serko India Private Limited. During the
financial year ended 31 March 2020, she earned NZ$12,500 (of which $7,500 was paid during FY20) in her capacity as a director of this
entity, representing a pro rating of director fees for five months of the financial year. Prior to that time, she was an employee and did not
receive any directors’ fees for this role.
The following persons held office as directors of subsidiary companies as at 31 March 2020:
1 No subsidiary directors retired during the financial year.
1
93
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
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/investors/. The Restricted Share
Plan has now been grandfathered and there is no intention to grant the executive directors (and their associates) any further restricted
shares in reliance on this waiver.
For completeness it is noted that post-year end, Serko has relied on the NZX class waiver dated 3 April 2020, which provides listed
companies with an additional 30 days to prepare and release their full-year FY20 results in acknowledgement of the challenges caused
by Covid-19.
DONATIONS
Serko did not make any donations during the financial year.
CREDIT RATING
Serko does not presently have an external credit rating status.
DISTRIBUTIONS / DIVIDENDS
There were no dividends or distributions paid to shareholders during the financial period.
Dividends and other distributions with respect to the Shares are only made at the discretion of the Serko Board. Serko is a growth
technology company and is not intending to pay a dividend for FY21.
94
Serko annual report
Glossary
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
AT M RATMR (Annualised Transactional Monthly
Revenue) is a Non-GAAP measure. It is
based on the monthly transactions and
average revenue per booking (for its
Travel platform revenue) and monthly
user charges (for its Expense platform
revenue) annualised on a constant
currency basis.
AUD or A$Australian dollars
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 SerkoSerko Limited, a New Zealand
incorporated company
EBITDAF (refer
page 22)
EBITDAF is a Non-GAAP measure
representing Earnings Before the
deduction of costs relating to Interest,
Taxation, Depreciation, Amortisation and
Fair value remeasurement
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
ListingThe date Serko shares started trading on
the NZX Main Board, 24 June 2014
NZNew Zealand
NZD or NZ$New Zealand dollars
NZ GAAP or GAAPNew Zealand Generally Accepted
Accounting Practice
NZ IFRS or IFRSNew Zealand equivalents to International
Financial Reporting Standards
NZXNZX Limited, also known as the New
Zealand Stock Exchange
NZX Listing Rules
or Listing Rules
The Listing Rules applying to the NZX
Main Board as amended from time to time
NZX Main BoardThe New Zealand main board equity
security market operated by NZX
R&DResearch and Development expenditure
SAASSoftware-as-a-service
Serko Expense
Management
business
Serko’s online expense management
solutions that enables the capture and
processing of corporate credit cards and
out-of-pocket claims
Serko MobileSerko’s mobile app for iPhones and
Android devices that gives users access
to information and travel booking
functionality on their mobile devices
Serko OnlineSerko’s cloud-based online travel booking
solution for large organisations
serko.travelSerko’s cloud-based online travel booking
solution for small to medium enterprises
(SMEs)
SMESmall and medium enterprise
TMC, Travel
Agency or Travel
Management
Company
A travel management company that
provides specialised travel-related
services to corporate customers
USD or US$United States dollars
ZenoSerko’s premium cloud-based online
travel booking solution
Zeno ExpenseSerko’s Expense management solutions
$All figures are in New Zealand dollars,
unless otherwise stated
95
Serko annual report
ABOUTSERKO
03
SUMMARY
04
LETTER
06
STRATEGICOVERVIEW
10
PRODUCTS
12
LEADERSHIP
16
MANAGEMENTCOMMENTARY
20
FINANCIAL STATEMENTS
32
GOVERNANCE &DISCLOSURES
78
CORPORATERESPONSIBILITY
18
GLOSSARY & DIRECTORY
95
Company Directory
Key Dates
30 SEPTEMBER 2020
Half-Year End
18 NOVEMBER 2020
Half-year Results Announced
31 MARCH 2021
Financial-Year End
19 AUGUST 2020
Annual Shareholders’ Meeting
Serko’s ESG Report, which includes its Corporate Governance Statement, can be found at www.serko.com/investor-centre.
New Zealand
Saatchi Building
Unit 14D
125 The Strand
Parnell, 1010
+64 9 309 4754
New Zealand
Saatchi Building
Unit 14D
125 The Strand
Parnell, 1010
+64 9 309 4754
Australia
Level 8
75 Elizabeth Street
Sydney 2000
NSW, Australia
+61 2 9435 0380
Australia
Link Market Services Limited
Level 12
680 George Street
Sydney 2000
NSW, Australia
+61 1300 554 474
Australia
c/- Sly & Russell Legal
Nominees Pty Ltd
Level 18
225 George Street
Sydney 2000
NSW, Australia
New Zealand
Link Market Services Limited
Level 11, Deloitte House
80 Queen Street
Auckland 1140, New Zealand
+64 9 375 5998
serko@linkmarketservices.co.nz
Deloitte Limited
Deloitte Centre
80 Queen Street
Auckland 1040, New Zealand
+64 9 303 0700
Simon Botherway (Chairman)
Claudia Batten (Acting Chair from 12 March 2020)
Robert (Clyde) McConaghy
Darrin Grafton
Robert (Bob) Shaw
Serko is a company incorporated with limited liability under the New Zealand Companies Act 1993
New Zealand Companies Office registration number 1927488
Australian Registered Body Number (ARBN) 611 613 980
For investor relations queries contact: investor.relations@serko.com
PRINCIPAL
ADMINISTRATION
OFFICE
REGISTERED OFFICESHARE
REGISTRAR
DIRECTORSAUDITOR
96
Serko annual report
Serko Limited Annual Report 2020
www.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.
Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- SVR — Savor Limited: Moa Group announces annual results2020-06-26
“SVR | Savor Limited | 2020-06-26 | FLLYR | Moa Group announces annual results…”
- SKL — Skellerup Holdings Limited: FY20 Result Release Date2020-07-05
“Skellerup 2020 Full Year Result Announcement Date Skellerup Holdings Limited (SKL) plans to release its financial results for the year ended 30 June 2020 to the market by 9.00am on Friday 21 August 2020. Graham Leaming Chief Financial Officer…”
- SKL — Skellerup Holdings Limited: Skellerup FY20 NPAT equals prior year record result2020-08-20
“SKELLERUP ANNUAL REPORT 2020 0 0 2 2 ANNUAL REPORT 2020 Contents Business Review Highlights 2020 3 Chair’s Review 4 CEO’s Review 6 Financial Commentary 10 Our Business Strengths 14 What we do – Industrial 16 What we do – Agri 18 Our Brands 20 Strategic Acquisitions…”