Serko Limited
Annual Report
For the period ended 31 March 2015
TRANSFORMING BUSINESS TRAVEL Contents
Key Highlights
CEO and Chairman’s Letter
About Serko
Overview of Performance
Financial Statements and Notes to the Financial Statements
Governance, Remuneration and Statutory Disclosures
Glossary
Corporate Directory
1
2
4
8
10
46
59
60
key dates
19 AUG 2015
ANNUAL MEETING
30 SEP 2015
HALF YEAR END
20 NOV 2015
HALF YEAR RESULT
ANNOUNCED
31 MAR 2016
FINANCIAL YEAR END
THIS REPORT IS DATED 5 JUNE 2015 AND IS SIGNED ON BEHALF OF THE BOARD OF SERKO LIMITED
BY SIMON BOTHERWAY, CHAIRMAN, AND DARRIN GRAFTON, CHIEF EXECUTIVE OFFICER.
Simon Botherway
Chairman
Darrin Grafton
Chief Executive Officer
INVESTOR CENTRE: You can access our annual report online at www.serko.com/investor-centre/
Serko Limited annual report 2015
Serko Limited annual report 2015
KEY HIGHLIGHTS
INVESTMENT IN R&D $5.7M
REVENUE GROWTH 55% - $10.4M
TRANSACTION GROWTH 45%
DEVELOPED KEY NEW PRODUCTS
GREW STAFF NUMBERS BY 53%
FINALIST HI-TECH COMPANY OF
THE YEAR 2015
Page 1
CEO and ChairMAN’S Letter
1 Prospective Financial Information contained in the Prospectus dated 26 May 2014.
Page 2
WE ARE FOCUSED ON
MAXIMISING THE VALUE
OF YOUR INVESTMENT
Dear Shareholder
For the year ended 31 March 2015 we set out to build a strong
business-wide platform to support our growth ambitions in the
Australasian market, Asia Pacific and beyond. Our IPO in June
2014 allowed us to raise sufficient capital to properly invest in our
internal capabilities, develop a range of innovative new products
and establish a scalable operating model that will deliver value
to our shareholders.
We have increased employees by 46 and ended the year with
133 Serkodians spread between Auckland, Sydney, Brisbane,
Melbourne, Perth, X’ian (China), Gurgaon and Mumbai in India.
The cost associated with our Research and Development (R&D)
programmes amounted to $5.7m, which is a significant investment
for a business of our size. We anticipate that our investment
in new product innovations will drive our success in the new
financial year.
Our business has grown significantly, with revenues increasing by
55% over the prior year, despite the challenges presented by the
volatile AUD/NZD exchange rate.
Financial Highlights
The company delivered top-line revenue growth of 55% compared
to the previous trading period. Revenue and losses after tax
were $10.4 million and ($6.4 million) respectively. The bottom line
result was in line with the prospective financial information (PFI)
contained in the IPO Prospectus, despite revenue being 5.8%
lower than PFI1.
Cash and working capital balances were strong. Cash held at
31 March 2015 was $4.5 million, $0.5 million below PFI forecasts
but offset by higher net receivables.
Serko’s core product Serko Online experienced growth in
transaction volume in line with forecasts. In the second half of
the year, transactions increased by 57% compared to the second
half of FY14 and the 32% growth reported in the first half of FY15.
Serko Online revenues increased by 62% in total for the year.
Serko’s online expense management platform, Incharge,
contributed revenue in its first full year since acquisition of
$0.9 million, an increase of 15% on a like for like basis. Billable
Service Revenue from client funded software development
totalled $2.1 million, an increase of 9% year on year.
IntroductionSimon Botherway Darrin GraftonSerko Limited annual report 2015 Expenses from ordinary activities (excluding finance expenses)
totalled $18.1 million for the year, which was $0.4 million
lower than PFI.
R&D costs that were expensed through the profit and loss
account amounted to $5.1 million, with an additional $0.6 million
that was capitalized in the year. The total R&D investment
of $5.7 million increased 70% from the previous year and was
10% higher than PFI.
• Growing our user base by driving organic growth through
our travel agent partners across the region, while also looking
for inorganic opportunities to acquire a broader and more
extensive user base that we can monetize over time
• Continuing to evolve our business model, introducing
other revenue lines such as subscriptions and supply-side
revenue streams
• Maintaining investment in our core products so that we
Other income from R&D and Business Development Grants
totalled $1.4 million, which was an increase of 58% from the prior
year and 30% higher than PFI.
retain our competitive advantage in the market and develop
a content proposition that allows us to extend our business
model to new markets.
Your Board and management team considers that Serko is well
placed to serve the increasingly sophisticated and integrated
travel management needs of both our Travel Agency reseller
partners and our corporate users, and we are focused on
maximising the value of your investment over the years to come.
Yours sincerely
Simon Botherway
Chairman
Darrin Grafton
Chief Executive
Business Outlook
The last year has been a significant and exciting period of
transformation and growth for Serko. There have been some
disappointments along the way, such as the late launch of our
Mobile solution and extended sales lead times, however, overall
we are very pleased with the growth and progress we have
delivered as a business.
The acquisition of Arnold Travel Technology from Expedia on
1 May 2015 increases our traveller base by approximately 500,000,
which is significant, particularly given the nominal cost of the
transaction. The Arnold acquisition also strengthens our strategic
relationship with Expedia Inc for the distribution of their extensive
content through our platforms, putting us in a strong position
to evolve our business model and drive supply-side income.
Mobile is a key initiative and has been well received by the Travel
Agency reseller network, with several resellers progressing with
their own white label versions. In the US, nuTravel, our Mundi
partner, has also licensed a white label of the technology for
the North American market.
Over the last year Serko Incharge has been integrated into the
Serko portfolio. Serko Mobile, our mobile app now includes the
ability to capture receipts and deliver them to Incharge where
they are auto-matched to credit card data flowing in from the
banks. Further enhancements in the 2016 financial year will
see us move towards a zero-touch expense processing solution.
The objectives for the year ahead to March 2016 build on the
foundations laid last year and can be broken into three discrete
strategy streams:
Page 3
about serko
Managed Travel 3.0
MAKING BUSINESS
TRAVEL PERSONAL
Travel is an essential part of doing business, but for businesses
it’s expensive and hard to control, and for those travelling it
can be a hassle. Serko’s mission is to help corporations give
employees a safer, more personal travel experience and unlock
the next wave of budget savings through better application
of technology. What Serko calls – ‘Managed Travel 3.0’.
Managed Travel 3.0 is built on five core pillars:
TRAVELLER FIRST:
MOBILITY FIRST:
Enabling travellers to book their own travel allows corporates
to reduce their dependency on travel administrators and
unlock the next wave of productivity gains within their
Managed Travel programs
Putting the tools to book and manage business travel into
the hands of the traveller via well thought through mobile
applications helps to drive user engagement and improve
the traveller experience
PREFERENCE DRIVEN:
EXPENSE INTEGRATION:
Using a traveller’s booking history to predict what they
are likely to book before they start helps to build a more
compelling and intuitive booking experience for travellers
Integrating expense management into the travel experience
helps to reduce the post-trip expense processing burden on
the traveller and helps give customers near real-time visibility
into their spending
FREEDOM TO CHOOSE:
Letting travellers book accommodation with the suppliers
they prefer, like Expedia, within the confines of the managed
portal, helps to reduce program leakage, improve compliance
and improve traveller engagement
Page 4
serko limited annual report 2015
about serko
SERKO Incharge
SERKO INCHARGE,
YOUR PERSONAL
EXPENSE MANAGER
Expense management is an essential business process that’s
misunderstood by many organisations. The productivity gains
and cost savings that can be unlocked by organisations through
the use of a properly integrated expense management solution
are significant.
Serko Incharge is an enterprise-grade Expense Management
Solution that brings all categories of expense into one easy to
use, easy to learn solution. Supporting cash expenses, mileage
allowances, daily allowances but excelling in corporate card
management, Serko Incharge is the most powerful expense
management solution on the market today.
SUPPORT FOR ALL MAJOR TYPES OF EXPENSE
INTEGRATED TRAVEL AND EXPENSE MOBILE APP
AUTOMATED MATCHING OF CORPORATE CARD
RECEIPTS TO TRANSACTIONS
TIGHT INTEGRATION WITH SERKO ONLINE
SOPHISTICATED REPORTING AND FRAUD DETECTION
Page 5
serko limited annual report 2015
about serko
board of directors
// SIMON BOTHERWAY
INDEPENDENT NON-EXECUTIVE CHAIRMAN, NEW ZEALAND
Simon is based in New Zealand. He holds a BCom as well as the US based Chartered Financial Analyst
(CFA) designation. Simon has extensive experience in corporate governance, banking and investment
management. In 2002, Simon co-founded Brook Asset Management and was Chairman from 2004 to
2008. He is also a past President of the CFA Society of New Zealand and was a member of the CFA
Asia-Pacific Advocacy Committee. Simon was appointed as a member of the Securities Commission
in 2009 and was appointed by the New Zealand Government to chair the Financial Markets Authority
Establishment Board in 2010.
// CLAUDIA BATTEN
INDEPENDENT NON-EXECUTIVE DIRECTOR, UNITED STATES
Claudia is based in the United States. She holds an LLB (Hons) and BCA. Claudia has been a founding
member of two highly successful entrepreneurial ventures. Starting with Massive Incorporated, a network
for advertising in video games, she helped pioneer “digital” as a media buy. Massive was sold to Microsoft
in 2006. In 2009 she co-founded Victors & Spoils (“V&S”), the first advertising agency built on the principles
of crowdsourcing. V&S was majority acquired by French holding company Havas Worldwide in 2011.
Claudia has achieved great success in the US market, but remains a strong supporter of the New Zealand
start-up scene.
// CLYDE MCCONAGHY
INDEPENDENT NON-EXECUTIVE DIRECTOR, AUSTRALIA
Clyde is based in Australia. He holds a BBus, and MBA from Cranfield University (UK). Clyde is a Fellow
of the Australian Institute of Company Directors and a Fellow of the Institute of Directors UK. He is
the founder of Optima Boards, providing independent director and advisory services to public, private,
family office and charitable entities around the world. Clyde has worked in publishing, media, online
and technology sectors, living in the UK, Germany, China and Australia. He is a director of ASX-listed
technology company, Infomedia Limited, and a former director of Integrated Research Limited.
// DARRIN GRAFTON
CO-FOUNDER, CEO & EXECUTIVE DIRECTOR, NEW ZEALAND
Darrin has 25 years’ experience in the travel technology industry and is highly experienced in technology
commercialisation. Darrin had previously held senior management positions with Gullivers Travel Group
(listed on the Australian and New Zealand Stock Exchanges between 2004 and 2006) and Interactive
Technologies. Darrin was awarded the NZX Hi-Tech Entrepreneur Award in 2007 and was a finalist for
the NZ Hi-Tech Company Leader Award in 2007. In 2008, Darrin was also a finalist for EY Entrepreneur
of the Year Award. Darrin is a member of the Institute of IT Professionals NZ, the Institute of Directors
NZ and NZCDP.
// ROBERT SHAW
CO-FOUNDER, CHIEF STRATEGY OFFICER & EXECUTIVE DIRECTOR, NEW ZEALAND
Robert (Bob) has 26 years’ experience creating and commercialising technology for the travel industry.
Bob has held a number of directorships and senior management positions in various companies including
Gullivers Travel Group (listed on the Australian and New Zealand Stock Exchanges between 2004 and
2006) and Interactive Technologies. Bob’s strengths lie in his ability to translate opportunities into
successful commercial ventures and build the relationships necessary to see them through to fruition.
In 2008, Bob was a finalist for EY Entrepreneur of the Year Award. He is a member of the Institute of
IT Professionals NZ, the Institute of Directors NZ and NZCDP.
Page 6
Page 6
Serko Limited annual report 2015 executive team
// TIM BLUETT
CHIEF FINANCIAL OFFICER, NEW ZEALAND
Tim is a Chartered Accountant and has a strong international background in ICT and telecommunications
from working in the UK, the US, France, the Caribbean and New Zealand with publicly listed companies,
including British Telecom, Equant, Cable & Wireless and Telecom New Zealand. Prior to joining Serko,
Tim served in a number of senior leadership roles at Telecom New Zealand as CFO Technology & Shared
Services, CFO Telecom Retail, and Acting Group CFO.
// PHIL BALL
CHIEF TECHNOLOGY OFFICER, NEW ZEALAND
Philip has been a cornerstone of the Serko technology story for nearly 16 years. He graduated with
a Bachelor of Information Systems degree in 1999 and joined Serko immediately, starting as junior
developer before moving up through the development ranks to become a senior developer. He was
appointed CTO in 2013. Philip wrote much of the original Serko Online codebase, having started on
the product in 2000. Since then he has guided the company’s technology strategy and now provides
leadership across the technology function. He was also a finalist for the New Zealand Software
Developer of the Year Award in 2011.
// JOHN CHALLIS
CHIEF REVENUE OFFICER, SYDNEY, AUSTRALIA
John has 15 years’ experience in the Australian corporate travel industry with operational, technology
implementation and sales experience. John has been with Serko for seven years and in that time has
managed the sales team to meet the demands of Serko’s growth. John specialises in market activation
and technical sales for Asia Pacific businesses. Prior to Serko, John worked at Carlson Wagonlit Travel for
seven years in various roles and was primarily responsible for technical online booking platform sales to
Carlson Wagonlit Travel’s existing and prospective clients in Asia Pacific, as well as managing a team of
software implementation specialists with a strong focus on Serko’s solution.
// TIM NICHOLS
CHIEF PRODUCT OFFICER, NEW ZEALAND
Tim has more than 16 years’ experience helping technology companies grow and succeed in a variety of
international markets. Most recently, Tim spent two years in San Francisco as Vice President of Corporate
for Endace, one of New Zealand’s technology success stories. Prior to his time in the US, Tim worked at
2degrees mobile where he was instrumental in defining the brand and market positioning. Tim has also
spent time with Vodafone New Zealand, British Telecom and ‘3’ in the UK.
// TONY STANLEY
CHIEF CLIENT OFFICER, NEW ZEALAND
Tony has more than 20 years’ experience managing teams and leading profit centres in technology
companies (10 years with the Serko product) and travel-related organisations. Tony is responsible for the
Client Services Team at Serko where he manages Professional Services and the Customer Support Centre.
Tony spent nearly five years at Datacom Group establishing a solid client base with multimillion dollar
accounts. Prior to that, Tony’s travel industry experience included Branch Manager of United Holidays
and Operations Manager of Travelplan Holidays.
DARRIN GRAFTON AND ROBERT (BOB) SHAW are also part of the executive team.
See facing page for their details.
Page 7
Page 7
Overview of Performance
FULL YEAR REVENUE $10.4M UP 55% FROM
PREVIOUS YEAR
Serko Online Revenue $7.3m up 62%
Incharge Revenue $0.9m up 15%
Billable Services Revenue $2.1m up 9%
TRANSACTION GROWTH UP 45% FROM PREVIOUS YEAR
First Half growth 32%
Second Half Growth 57%
EXPENSES FROM ORDINARY ACTIVITIES $18.1M UP
108% FROM PREVIOUS YEAR
Salaries/Remuneration $12.0m
Includes IPO costs $0.5m in line with PFI
RESEARCH AND DEVELOPMENT EXPENDITURE $5.7M
Internal (operating expenses) $5.1m
External (capital expenditure) $0.6m
OPERATING REVENUE
Serko Online is the main source of revenue. This is predominantly
invoiced to Travel Agent resellers on a monthly basis for the
total transactions generated from the online travel bookings
made by their end user customer base. Revenue is made up of
per transaction fees, ancillary services fees, includes contracted
minimum payments where applicable and is stated net of volume
related rebates and discounts.
Serko Incharge is an Expense Management application which
allows registered users of corporate customers to process travel
and expense claims for accounting and reimbursement. Revenues
are derived from a combination of fees for active users, registered
users and reports processed.
Billable service revenues are derived from customised software
development undertaken on behalf of customers. The basis
of charging can vary depending on the contractual terms with
the customer which may specify time and materials, capped
or fixed pricing.
EMPLOYEES 133 INCREASE OF 46 IN THE YEAR
EXPENSES FROM ORDINARY ACTIVITIES
CASH RESERVES $4.5M
NET LOSS BEFORE TAX $6.4M INCREASED FROM
$1.7M IN LINE WITH EXPECTATIONS
SUMMARY OF PERFORMANCE VS PFI
Revenue $0.6m less than PFI
― Serko Online $0.1m – mainly FX currency impacts
― Incharge $0.2m – delayed new customer implementations
― Services $0.3m – customer orders delayed to FY16
Other income $0.3m higher than PFI (R&D grants)
Operating Costs $0.4m lower than PFI
― Operating costs $0.5m lower than PFI
― Depreciation & Amortisations $0.1m increase
FX losses $0.2m (vs PFI at AUD/NZD 0.93)
Net loss before tax in line with PFI at $6.4m
The classifications of Expenses included in the Statement
of Comprehensive Income are as follows:
Selling and Marketing Expenses comprise all direct
costs of sale that are not people or salary related.
Remuneration and Benefits are the total costs of employees
and contractors engaged within the business during the
financial year including gross salary, additional payroll taxes,
superannuation and KiwiSaver, bonuses, commissions and
the value of any share-based remuneration or awards.
Administration Expenses are other general overheads
and operating costs, including depreciation and
amortisation charges.
Other Expenses comprise direct technology costs
including hosting.
SELECTED OPERATIONAL METRICS
Total Revenue Growth (%)
Revenue Growth – Serko Online (%)
No. of transactions (indexed, where FY13=100)
Services revenue as % of total revenue
FTE Employees (number at end of year)
Average Revenue per FTE (NZ$’000)
FY15 PFI
65%
65%
212
22%
138
98
FY15
55%
62%
179
20%
133
94
FY14
39%
12%
123
29%
87
100
FY13
27%
41%
100
16%
47
119
Research and Development Costs – Expense and Capex (NZ $000)
5,236
5,762
3,387
2,340
Page 8
serko limited annual report 2015
FY15 REVENUE MIX
Serko Online
%
Incharge
9%
Services
20%
“55% YEAR-ON-YEAR REVENUE
GROWTH FY14 TO FY15”
ONLINE BOOKING TRENDS FY13-FY15
“71% OF REVENUE FROM SERKO
ONLINE IN FY15”
REVENUE TREND
12,000
10,000
8,000
6,000
4,000
2,000
0
FY13
FY14
FY15
FY15 PFI
Serko Online
Incharge
Services
“EXPONENTIAL GROWTH IN SERKO ONLINE
BOOKING TRANSACTIONS FROM FY14”
FY13
FY14
FY15
Page 9
Financials
FINANCIAL
STATEMENTS
Independent auditor’s report
Statement of comprehensive income
Statement of changes in equity
Statement of financial position
Statement of cash flows
Notes to the financial statements
Page 10
12
13
14
15
16
17–45
serko limited annual report 2015 Page 11
independent Auditor’s report
To the Shareholders of Serko Limited
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of Serko Limited and its
subsidiaries on pages 13 to 45, which comprise the statement of
financial position of Serko Limited and the group as at 31 March
2015, and the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then
ended of the company and group, and a summary of significant
accounting policies and other explanatory information.
This report is made solely to the company’s shareholders, as a
body, in accordance with section 461G(1) of the Financial Markets
Conduct Act 2013. Our audit has been undertaken so that we
might state to the company’s shareholders those matters we are
required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company and
the company’s shareholders as a body, for our audit work, for this
report, or for the opinions we have formed.
DIRECTORS’ RESPONSIBILITY FOR
THE FINANCIAL STATEMENTS
The directors are responsible for the preparation and fair
presentation of the financial statements in accordance with
generally accepted accounting practice in New Zealand, and for
such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on the financial
statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing
(New Zealand). These auditing standards require that we comply
with relevant ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements.
The procedures selected depend on our judgement, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error.
In making those risk assessments, we have considered the
internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
reasonableness of accounting estimates, as well as evaluating
the overall presentation of the financial statements.
We believe we have obtained sufficient and appropriate audit
evidence to provide a basis for our audit opinion.
We provide taxation advice and other assurance services to the
company and group. Ernst & Young Transaction Advisory Services
Limited has also acted as the Investigating Accountant in respect
of the company’s public offer. We have no other relationship with,
or interest in, Serko Limited or any of its subsidiaries.
Partners and employees of our firm may deal with the group on
normal terms within the ordinary course of trading activities of
the business of the group.
OPINION
In our opinion, the financial statements on pages 13 to 45:
• comply with generally accepted accounting practice in
New Zealand;
• comply with International Financial Reporting Standards; and
• present fairly, in all material respects, the financial position
of Serko Limited and the group as at 31 March 2015 and the
financial performance and cash flows of the company and
group for the year then ended.
29 May 2015
Auckland
Page 12
performanceSerko Limited annual report 2015 Statement of comprehensive income
FOR THE YEAR ENDED 31 MARCH 2015
Revenue
Other Income
Total revenue & other income
Expenses from ordinary activities*
Selling and marketing expenses
Remuneration & benefits
Administration expenses
Other expenses
Total expenses from ordinary activities
Finance income
Finance costs
Profit (loss) before income tax
Income tax (expense)/benefit
Net profit (loss) for the period
Other comprehensive income to be reclassified to
profit or loss in subsequent periods (net of tax)
Movement in foreign currency reserve
Total comprehensive income for the year
Profit (loss) for the year attributable to:
Equity holders of the parent
Total comprehensive income for the year attributable to:
Equity holders of the parent
* Expenses from ordinary activities have been reclassified in the prior year,
there has been no impact on reported profit (loss).
Earnings per share
NOTES
GROUP
2015
$
2014
$
PFI GROUP
2015
$
10,361,202
6,682,782
11,002,428
1,413,182
895,195
1,089,283
11,774,384
7,577,977
12,091,711
4
4
5
(988,848)
(420,597)
(941,900)
(12,020,829)
(5,888,846)
(12,130,993)
(4,690,503)
(2,116,717)
(4,956,714)
(368,672)
(269,672)
(433,435)
(18,068,852)
(8,695,832)
(18,463,042)
209,382
15,134
185,906
(348,218)
(622,453)
(149,496)
(6,433,304)
(1,725,174)
(6,334,921)
6
(114,031)
(16,475)
(216,855)
(6,547,335)
(1,741,649)
(6,551,776)
144,247
4,359
–
(6,403,088)
(1,737,290)
(6,551,776)
(6,547,335)
(1,741,649)
(6,551,776)
(6,403,088)
(1,737,290)
(6,551,776)
• Basic, profit (loss) for the year attributable to ordinary equity holders
of the parent
• Diluted, profit (loss) for the year attributable to ordinary equity holders
21
21
(0.10)
(104.54)
(0.10)
(77.15)
of the parent
The accompanying notes form part of the financial statements.
Page 13
Statement of changes in equity
FOR THE YEAR ENDED 31 MARCH 2015
GROUP
Balance as at 1 April 2014
Net profit (loss) for the period
Other comprehensive income to be
reclassified to profit or loss in subsequent
periods (net of tax)
Total comprehensive income for the year
Transactions with owners
Convertible notes issued accounted
in equity
Transfer of notes to share capital
Issue of share capital
Cost of equity issued
Share-based payments
Interest on convertible notes
NOTE
CONTRIBUTED
EQUITY
$
239,835
–
–
–
15
156,644
(396,479)
19,244,848
(1,641,274)
$
–
–
–
–
–
–
–
–
–
–
370,875
–
SHARE-BASED
PAYMENT
RESERVE
FOREIGN
CURRENCY
RESERVE
RETAINED
EARNINGS
$
$
TOTAL
$
4,359
(3,661,972)
(3,417,778)
–
(6,547,335)
(6,547,335)
144,247
–
144,247
144,247
(6,547,335)
(6,403,088)
–
–
–
–
–
–
–
–
–
–
–
156,644
(396,479)
19,244,848
(1,641,274)
370,875
(3,356)
(3,356)
Balance as at 31 March 2015
17,603,575
370,875
148,606
(10,212,663)
7,910,393
Balance as at 1 April 2013
Net profit (loss) for the period
Other comprehensive income (net of tax)
Total comprehensive income for the year
Transactions with owners
Convertible notes issued accounted in equity
15
Interest on convertible notes
Balance as at 31 March 2014
239,835
–
–
–
–
–
239,835
The accompanying notes form part of the financial statements.
–
–
–
–
–
–
–
–
–
4,359
4,359
–
–
(1,905,523)
(1,665,688)
(1,741,649)
(1,741,649)
–
4,359
(1,741,649)
(1,737,290)
–
–
(14,800)
(14,800)
4,359
(3,661,972)
(3,417,778)
Page 14
performanceSerko Limited annual report 2015 Statement of financial position
AS AT 31 MARCH 2015
Current assets
Cash at bank and on hand
Receivables
Derivative financial instruments
Non-current assets
Property, plant and equipment
Intangible assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Interest bearing loans and borrowings
Non-current liabilities
Deferred tax liability
Trade and other payables
Interest bearing loans and borrowings
Total liabilities
Equity
Contributed equity
Share based payment reserve
Foreign currency reserve
Retained earnings accumulated (deficit)
Total equity
Total equity and liabilities
NOTES
GROUP
2015
$
2014
$
PFI GROUP
2015
$
11
7
8
9
10
12
14
6
12
14
4,486,952
249,508
3,417,736
2,352,406
116,828
–
4,986,895
2,672,449
–
8,021,516
2,601,914
7,659,344
997,278
1,287,342
372,034
868,682
934,004
940,495
2,284,621
1,240,716
1,874,499
10,306,137
3,842,630
9,533,843
1,662,352
180,737
314,038
1,511,707
50,127
5,508,040
1,788,141
–
–
2,157,127
7,069,874
1,788,141
60,311
174,202
4,104
238,617
145,122
13,432
31,980
190,534
84,800
–
–
84,800
2,395,745
7,260,408
1,872,941
15
17,603,575
239,835
17,469,237
370,875
148,606
–
4,359
401,053
4,359
(10,212,663)
(3,661,972)
(10,213,747)
7,910,393
(3,417,778)
7,660,902
10,306,137
3,842,630
9,533,843
For and on behalf of the Board who authorised these financial statements for issue on 29 May 2015.
Simon Botherway
Chairman
Darrin Grafton
Chief Executive Officer
The accompanying notes form part of the financial statements.
Page 15
Statement of cash flows
FOR THE YEAR ENDED 31 MARCH 2015
Cash flows from operating activities
Receipts from customers
Interest received
Receipts from grants
Taxation (paid)/refund received
Payments to suppliers and employees
Interest payments
Net GST refunded (paid)
NOTES
GROUP
2015
$
2014
$
PFI GROUP
2015
$
9,435,812
6,347,483
10,087,810
180,576
334
185,906
1,529,836
753,199
1,246,674
(59,436)
(92)
(201,492)
(17,282,736)
(8,187,026)
(17,363,416)
(392,550)
(122,514)
(49,300)
1,748
(44,500)
181,494
Net cash flows from (used in) operating activities
(6,637,798)
(1,206,868)
(5,907,525)
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles
(655,634)
(148,967)
(736,457)
(782,695)
(736,322)
(309,200)
Net cash flows from (used in) investing activities
(1,438,329)
(885,289)
(1,045,657)
Cash flows from financing activities
Proceeds from bank borrowings
Issue of convertible notes
Share issue
Cost of new share issue
Repayment of shareholder loans
Repayment of loans
Net cash flows from (used in) financing activities
Net increase (decrease) in total cash
Net foreign exchange difference
–
–
780,000
1,325,000
17,514,738
(1,361,911)
(1,819,270)
–
–
–
–
–
17,399,148
(1,017,627)
(2,324,937)
(780,000)
(27,786)
(780,000)
13,553,557
2,077,214
13,276,584
5,477,430
(14,943)
5,928,408
(48,966)
–
–
Cash and cash equivalents at beginning of period
(941,513)
(926,570)
(941,513)
Cash and cash equivalents at end of period
4,486,952
(941,513)
4,986,895
Cash and cash equivalents comprises the following:
Cash at bank and on hand
Bank overdraft
The accompanying notes form part of the financial statements.
11
14
4,486,952
249,508
4,986,895
–
(1,191,021)
–
4,486,952
(941,513)
4,986,895
Page 16
performanceSerko Limited annual report 2015 Notes to the financial statements
FOR THE YEAR ENDED 31 MARCH 2015
1. CORPORATE INFORMATION
The financial statements of Serko Limited (the company) and
subsidiaries (the group) were authorised for issue in accordance
with a resolution of directors.
The company is a limited liability company domiciled and
incorporated in New Zealand under the Companies Act 1993.
The company and group are involved in the provision of
computer software solutions for corporate travel. The group is
headquartered in Auckland, New Zealand.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below and
within the notes section. These policies have been consistently
applied to all the years presented, unless otherwise stated.
a) Basis of preparation
The financial statements have been prepared in accordance with
generally accepted accounting practice in New Zealand and
the requirements of the Companies Act 1993 and the Financial
Reporting 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 company and group are required to report in accordance with
Tier 1 for-profit accounting standards. The financial statements
are presented in New Zealand dollars and all values are rounded
to the nearest dollar unless stated otherwise.
The considered view of the directors of Serko Limited is that,
after making due enquiry, there is a reasonable expectation the
group has adequate resources to continue operations at existing
levels for at least the next 12 months from the date the financial
statements are authorised for issue. The company has issued
market guidance indicating a continuation of current revenue
growth rates and an expectation of break even in early FY17 within
existing cash resources. There is a high proportion of variable
controllable costs which allows the business to control cash
consumption in line with performance. Accordingly the financial
statements have been prepared on a going concern basis.
b) Statement of compliance
The financial statements have been prepared in accordance
with Generally Accepted Accounting Practice in New Zealand
(NZ GAAP). They comply with New Zealand equivalents to
International Financial Reporting Standards (IFRS) and other
applicable Financial Reporting Standards, as appropriate for
profit-oriented entities. They also comply with International
Financial Reporting Standards.
c) New accounting standards and interpretations
NZ IFRS standards that have recently been issued or amended but
are not yet effective and have not been adopted by the company
and group are:
NZ IFRS 9 Financial instruments, effective for accounting periods
beginning on or after 1 January 2017 is replacing NZ IAS39
Financial instruments: recognition and measurement.
NZ IFRS 15 Revenue Recognition, effective for accounting periods
beginning on or after 1 January 2017.
The group is still assessing the impact of the above standards
issued and not yet effective and the current impact is not known.
d) Basis of consolidation
The consolidated financial statements comprise the financial
statements of Serko Limited and subsidiaries as at and for the
year ended 31 March.
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 (ie 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
• The ability to use its power over the investee to affect its
returns.
When the group has less than a majority of the voting or similar
rights of an investee, the group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
• The contractual arrangement with the other vote holders of
the investee
• Rights arising from other contractual arrangements
• The group’s voting rights and potential voting rights.
The group re-assesses whether or not it controls an investee
if facts and circumstances indicate there are changes to one
or more of the three elements of control. Consolidation of a
subsidiary begins when the group obtains control over the
subsidiary and ceases when the group loses control of the
subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
financial statements from the date the group gains control, until
the date the group ceases to control the subsidiary.
A change in the ownership interest of a subsidiary, without a loss
of control, is accounted for as an equity transaction. If the group
loses control over a subsidiary, it:
• Derecognises the assets (including goodwill) and liabilities of
the subsidiary
• Derecognises the carrying amount of any non-controlling
interests
• Derecognises the cumulative translation differences recorded
in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously
recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate, as would be required if the
group had directly disposed of the related assets or liabilities.
Page 17
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.
Intercompany 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.
e) Foreign currency translation
I) FUNCTIONAL AND PRESENTATION CURRENCY
Items included in these financial statements are measured using
the currency of the primary economic environment in which the
company and group operates (‘the functional currency’). These
financial statements are presented in New Zealand dollars which
is the company and group’s presentation and functional currency.
f) Financial instruments
Financial assets in the scope of NZ IAS 39 Financial Instruments:
Recognition and Measurement are classified as either loans and
receivables, or available for sale financial assets. When financial
assets are recognised initially they are measured at fair value plus
directly attributable transaction costs. The company determines
the classification of its financial assets on initial recognition and,
when allowed and appropriate, re-evaluates this designation at
each financial year end.
(I) LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the group provides money, goods or
services directly to a debtor with no intention of selling the
receivable. Such assets are carried at amortised cost using the
effective interest method. Gains and losses are recognised in
profit or loss when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
The group’s loans and receivables comprise trade receivables,
loans and GST receivable.
The group has no financial assets classified as available for sale.
(II) FINANCIAL LIABILITIES
Financial liabilities are classified as ‘other financial liabilities’.
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective interest method.
The effective interest method calculates the amortised cost of
a financial liability and allocates the interest expense over the
relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected
life of the financial liability or, where appropriate, a shorter period
to the net carrying amount of the liability.
Financial liabilities are classified as current liabilities unless the
group has an unconditional right to defer settlement of the
liability for at least 12 months after balance date.
II) TRANSACTIONS AND BALANCES
(III) IMPAIRMENT OF FINANCIAL ASSETS
Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of
exchange ruling at balance date. Non-monetary items measured
in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value was determined.
Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in profit or loss.
The group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred ‘loss event’)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy
or other financial reorganisation and observable data indicating
that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that
correlate with defaults.
Page 18
performanceSerko Limited annual report 2015 FINANCIAL ASSETS CARRIED AT AMORTISED COST
For financial assets carried at amortised cost, the group first
assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant or
collectively for financial assets that are not individually significant.
If the group determines that no objective evidence of impairment
exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial
assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is,
or continues to be, recognised are not included in a collective
assessment of impairment.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial asset’s
original effective interest rate. If a loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current
effective interest rate (EIR).
The carrying amount of the asset is reduced through the use
of an allowance account and the loss is recognised in profit or
loss. Interest income continues to be accrued on the reduced
carrying amount and is accrued using the rate of interest used
to discount the future cash flows for the purpose of measuring
the impairment loss. The interest income is recorded as finance
income in the income statement. Loans, together with the
associated allowance, are written off when there is no realistic
prospect of future recovery and all collateral has been realised
or has been transferred to the group. If, in a subsequent year, the
amount of the estimated impairment loss increases or decreases
because of an event occurring after the impairment was
recognised, the previously recognised impairment loss is increased
or reduced by adjusting the allowance account. If a write off is
later recovered, the recovery is credited to finance costs in the
income statement.
g) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of that asset. A qualifying asset is one that takes
six months or longer to prepare for its intended use or sale. Other
borrowing costs are expensed when incurred.
h) Other taxes
Revenues, expenses and assets are recognised net of the amount
of GST except where the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable. All receivables
and payables are stated GST inclusive.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in
the statement of financial position.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The preparation of the group’s consolidated financial statements
requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying
disclosures.
Judgements
In the process of applying the group’s accounting policies,
management has made the following judgements, which have
the most significant effect on the amounts recognised in the
consolidated financial statements.
SHARE-BASED PAYMENTS
The group measured the fair value of the shares granted under
the restricted share plan to employees using the listing price
of the shares when granted. Management considered this a
reasonable basis of fair value, given that the grant date and
listing date were concurrent. Vesting of the shares is reviewed
periodically to determine that the assumptions around vesting
dates and employees that have left or joined the company are
still valid.
DEVELOPMENT COSTS
Development costs of a project are capitalised in accordance
with the accounting policy. Initial capitalisation of costs is based
on management’s judgement that technological and economic
feasibility is confirmed, usually when a product development
project has reached a defined milestone according to an
established project management model. In determining the
amounts to be capitalised, management makes assumptions
regarding the expected future cash generation of the project,
discount rates applied and the expected period of benefits.
At 31 March 2015 the carrying amount of capitalised development
costs was $85,526 (2014: $82,650)
This amount includes significant investment in the development
of an innovative mobile application for Serko’s corporate travel
platform.
FUNCTIONAL CURRENCY
The group periodically reviews the functional currency for
reporting purposes. Based on the assessment of NZ IAS21 criteria,
management believe that there is sufficient justification for the
continued use of NZD as the functional currency. The key factors
behind this conclusion are:
a) Serko is NZX listed and has raised capital in NZD
b) R&D grant funding is in NZD
c) NZD is the main currency for labour, operating costs and
capital expenditure
d) Serko’s foreign operations are extensions of the reporting
entity and largely operate as sales functions selling the
product created in New Zealand.
Page 19
4. REVENUE & OTHER INCOME
III) INTEREST REVENUE
Revenue is recognised and measured at the fair value of the
consideration received or receivable to the extent it is probable
that the economic benefits will flow to the company and the
revenue can be reliably measured. Revenue is disclosed net of
credit notes, rebates and discounts.
I) REVENUE FROM TRANSACTION AND USAGE FEES
Revenue is recognised as interest accrues, using the effective
interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying
amount of the financial asset.
Revenue from transaction and usage fees is recorded at the time
travel or expenses are processed through Serko’s platforms.
IV) GOVERNMENT GRANTS
II) REVENUE FROM INSTALLATION SERVICES
Revenue from a contract to provide installation services is
recognised by reference to the stage of completion of the
contract at balance date. When the contract outcome cannot be
estimated reliably, revenue is recognised only to the extent of
expenses recognised that are recoverable.
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 that it is intended to compensate.
When the grant relates to an asset, the fair value is credited to
deferred income and is released to profit or loss over the expected
useful life of the relevant asset by equal annual instalments.
Revenue – transaction & usage fees
Revenue – installation services
Other
Total operating revenue
Other income
Government grants
5. EXPENSES
Operating surplus before taxation includes the following expenses:
Auditor remuneration
Bad and doubtful debts written off
Amortisation of intangibles
Depreciation
Rental and operating lease expenses
Employee & contractor remuneration
Contributions to defined contribution plans
Share based payment expenses
IPO related costs
Other operating expenses
Expenses from ordinary activities
NOTE
GROUP
2015
2014
8,145,614
4,723,204
2,065,894
1,783,466
149,694
176,112
10,361,202
6,682,782
13
1,413,182
1,413,182
895,195
895,195
NOTES
GROUP
2015
2014
7
10
9
471,813
14,867
273,166
185,044
427,747
117,750
87,858
64,198
62,460
326,755
11,270,807
5,712,229
342,905
370,875
482,728
176,617
–
–
4,228,900
2,147,965
18,068,852
8,695,832
Research expenses (excluding capitalised development costs)
5,148,637
3,387,097
Page 20
performanceSerko Limited annual report 2015 Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to an intangible asset.
R&D expenses include employee & contractor remuneration related to these activities.
Research expenditure includes expenditure that meets the definition of research expenditure as defined in NZ IAS 38 and is therefore
eligible expenditure in accordance with the Callaghan Growth Grant requirements.
Finance income and expenses includes:
Finance income
– Interest received
– Dividends received
Foreign exchange
(gains)/losses – net
Finance expenses
– Interest expense
– Other finance expenses
AUDITOR REMUNERATION
GROUP
2015
2014
(208,712)
(15,134)
(670)
–
196,046
176,265
121,320
30,852
138,836
346,446
99,742
607,319
The directors of Serko Limited appointed Ernst & Young as the auditor of the company for the year ended 31 March 2015.
Amounts received or due and receivable by:
Ernst & Young
– Audit of financial statements
– Other assurance-related services (a)
Total audit fees
– Tax services
– Advisory services (b)
Total non–audit fees
53,350
106,000
159,350
82,213
230,250
312,463
59,500
9,500
69,000
33,750
15,000
48,750
(a) Other assurance-related services include services for IPO statutory audit fees and research and development assurance procedures (2014: services for compilation
of statutory financial statements).
(b) Advisory services include transaction advisory services around the IPO (2014: Initial cost of transaction advisory services around the IPO).
Page 21
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 current period’s taxable income.
The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted at the reporting date.
Current income tax relating to items recognised directly in equity
is recognised in equity and not in the statement of comprehensive
income. Management periodically evaluates positions taken in
the tax returns with respect to situations in which applicable
tax regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred income tax is provided on all temporary differences at
the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences:
• except for a deferred income tax liability arising from the initial
recognition of goodwill
• except where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible
temporary differences and unused tax losses, to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences can be utilised. The carry-
forward of unused tax losses can be utilised except where the
deferred income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor
taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at
each balance date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the balance
date.
Statement of comprehensive income
Current income tax
Current income tax charge/(credit)
Adjustments in respect of previous years
Deferred income tax
Origination and reversal of temporary differences
Adjustments in respect of previous years
Income tax expense reported in the statement of comprehensive income
The prima facie tax payable on profit before income tax is reconciled to the income tax expense as
follows:
Accounting profit (loss) before income tax
At the statutory income tax rate of 28% (2014:28%)
– Non-deductible items
– Chinese branch tax
– Foreign tax credits not utilised
– Future income tax benefit, not recognised
– Effect of tax on overseas subsidiaries at different rate
At effective income tax rate of:
Page 22
GROUP
2015
2014
198,842
13,058
–
–
198,842
13,058
(84,811)
–
(84,811)
114,031
3,417
–
3,417
16,475
(6,433,304)
(1,725,174)
(1,801,325)
(483,049)
17,250
22,739
11,155
1,859,076
5,136
114,031
-1.77%
11,200
–
–
478,144
10,180
16,475
-0.95%
performanceSerko Limited annual report 2015 Deferred income tax
Deferred income tax at 31 March relates to the following:
2015
2014
STATEMENT OF
STATEMENT OF
STATEMENT OF
STATEMENT OF
FINANCIAL
COMPREHENSIVE
FINANCIAL
COMPREHENSIVE
POSITION
INCOME
POSITION
INCOME
GROUP
Deferred income tax liabilities recognised
Intangibles
(100,477)
63,833
(164,310)
14,775
Deferred income tax asset recognised
Employee entitlements
Net deferred tax asset/(liability) recognised
Deferred income tax asset not recognised
Employee entitlements
Long term incentive (LTI) fair value adjustment
Accruals
Allowance for impairment
Deferred revenue
Tax losses available to be carried forward and offset
against future income
Total deferred tax asset not recognised
20,978
84,811
47,603
113,993
4
(16,536)
23,673
168,737
40,166
(60,311)
123,245
113,993
39,204
17,845
15,467
309,754
2,591,362
2,901,116
19,188
(145,122)
75,642
–
39,200
34,381
(8,206)
141,017
969,282
1,110,299
19,188
33,963
44,970
–
36,070
11,026
(5,813)
86,253
The ability to carry losses forward is subject to confirmation by taxation authorities.
Page 23
7. RECEIVABLES
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
Collectibility of receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified.
A provision for impairment of receivables is established when there is objective evidence that the group will not be able to collect all
amounts due according to the original terms of the receivable, changes in credit quality and past default experience.
The impairment, and any subsequent movement including recovery, is recognised in the statement of comprehensive income.
Trade receivables
Allowance for impairment
Trade receivables (net)
GST receivable
Prepayments
nuTravel Loan receivable
Other loans
Total receivables
FOREIGN CURRENCY RISK
The carrying amounts of the groups receivables are denominated in the following currencies:
New Zealand dollars
Australian dollars
Singapore dollars
US dollars
NOTE
GROUP
2015
2014
2,774,993
1,973,628
(63,733)
(122,790)
2,711,260
1,850,838
19,745
352,605
292,416
61,813
199,920
–
41,710
239,835
3,417,736
2,352,406
17
1,549,407
1,493,119
382
374,828
1,071,874
1,150,601
7,185
122,746
3,417,736
2,352,406
ALLOWANCE FOR IMPAIRMENT LOSS
Trade receivables are non-interest bearing and are generally on 30-60 day terms. A provision for impairment loss is recognised where
there is objective evidence that an individual trade receivable is impaired. An impairment loss of $14,867 (2014: $87,858) has been
recognised by the group and company in the current year. No individual amount within the impairment allowance is material.
At 31 March the ageing analysis of trade receivables is as follows:
TOTAL
0 - 30 DAYS
31 - 60 DAYS
61 - 90 DAYS
91+ DAYS
2015 group
2014 group
2,774,993
2,236,358
1,973,628
1,216,475
228,182
422,682
204,744
45,622
105,708
288,849
Group receivables over 60 days of $310,452 (2014: $334,471) include a provision for impairment of $63,733, the balance of $246,719 is not
considered impaired.
NU TRAVEL LOAN RECEIVABLE
On 9 April 2014 a loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities Limited to Serko
Limited in return for an interest bearing loan repayable on receipt of the loan receivable. The loan expires on 30 June 2015. Financial
Equities Limited is a company associated with directors, Robert Shaw and Darrin Grafton.
Page 24
performanceSerko Limited annual report 2015 8. FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
The group uses derivatives in the form of forward exchange contracts (FECs) to reduce the risk that movements in the exchange rate will
affect the group’s New Zealand dollar cash flows. Such derivative financial instruments are initially recognised at fair value on the date
on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair value is negative.
FAIR VALUE HEDGES
The change in fair value of a hedging derivative is recognised in the statement of profit or loss as finance costs. The change in fair value
of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in
the statement of profit or loss as finance costs.
The following table presents the group’s foreign currency forward exchange contracts measured at fair value:
Current:
Foreign currency forward exchange contracts
Contractual amounts of forward exchange contracts outstanding were as follows:
Purchase commitments forward exchange contracts
GROUP
2015
2014
116,828
1,745,638
–
–
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.
9. PROPERTY, PLANT AND EQUIPMENT
All items of property, plant and equipment are recorded at cost less accumulated depreciation and impairment. Initial cost includes purchase
consideration and those costs attributable to bringing the asset to the location and condition necessary for its intended use. Where an item
is self constructed, its construction cost includes the cost of materials, direct labour and an appropriate proportion of production overheads.
Subsequent expenditure relating to an item of property, plant and equipment is added to its gross carrying amount when such
expenditure either increases the future economic benefits beyond its existing service potential, or is necessarily incurred to enable future
economic benefits to be obtained, and if that expenditure would have been included in the initial cost of the item had it been incurred at
that time. The carrying amount of any replaced part is derecognised.
All other repairs and maintenance expenditure is recognised in profit or loss as incurred.
Depreciation is calculated on a straight line basis over the estimated useful life of the asset. This is a change in basis from the prior
year where diminishing value was used. The residual value of assets is reviewed and adjusted if appropriate at each balance date.
The following estimates have been used:
• Leasehold improvements
• Furniture and fittings
• Computer equipment
8.5 – 80.4%
17.5 – 67%
7%
I) IMPAIRMENT
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to
their recoverable amount.
Page 25
9. PROPERTY, PLANT AND EQUIPMENT – CONTINUED
II) 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.
GROUP 2015
Opening net carrying amount 1 April 2014
Additions
Depreciation
Currency translation
LEASEHOLD
IMPROVEMENT
FURNITURE &
FITTINGS
COMPUTER
EQUIPMENT
TOTAL
186,220
302,636
(27,767)
(1,464)
118,566
207,140
67,248
302,562
372,034
812,338
(48,078)
(109,199)
(185,044)
(586)
–
(2,050)
Closing net carrying amount 31 March 2015
459,625
277,042
260,611
997,278
At 31 March 2015
Cost
530,984
377,834
480,132
1,388,950
Accumulated depreciation and impairment
(69,895)
(100,206)
(219,521)
(389,622)
Currency translation
Net carrying amount
GROUP 2014
Opening net carrying amount 1 April 2013
Additions
Depreciation
(1,464)
(586)
–
(2,050)
459,625
277,042
260,611
997,278
156,481
41,992
(12,253)
104,368
38,415
(24,217)
24,678
68,560
285,527
148,967
(25,990)
(62,460)
Closing net carrying amount 31 March 2014
186,220
118,566
67,248
372,034
At 31 March 2014
Cost
228,348
170,694
177,570
576,612
Accumulated depreciation and impairment
(42,128)
(52,128)
(110,322)
(204,578)
Net carrying amount
186,220
118,566
67,248
372,034
The net book value of assets held under finance leases is $10,877 (2014: $19,035).
Tangible assets per security
GROUP
2015
0.02
2014
16.48
In the comparative period of 31 March 2014 the securities held at that time have not been adjusted for the share split and new issue of
shares that occurred at IPO on 24 June 2014.
Page 26
performanceSerko Limited annual report 2015 10. INTANGIBLES
Intangible assets acquired separately or in a business combination
are initially measured at cost. The cost of an intangible asset
acquired in a business combination is its fair value as at the date
of acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and any
accumulated impairment losses. Costs related to internally
generated intangible assets, excluding capitalised development
costs, are not capitalised and expenditure is recognised in profit or
loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are amortised
over the useful life and tested for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an
intangible asset with a finite useful life is reviewed at least at
each financial year end. Changes in the expected useful life
or the expected pattern of consumption of future economic
benefits embodied in the asset, are accounted for prospectively
by changing the amortisation period or method, as appropriate,
which is a change in accounting estimate. The amortisation
expense on intangible assets with finite lives is recognised in
profit or loss.
Intangible assets with indefinite useful lives are tested for
impairment annually either individually or at the cash-generating
unit level. Such intangibles are not amortised. Intangible assets
with indefinite useful lives are reviewed at each reporting period
to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an accounting
estimate and is thus accounted for on a prospective basis.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in profit
or loss when the asset is derecognised.
A summary of the policies applied to the group’s intangible assets
is as follows:
Software
– finite, amortised on a straight line
basis 40 – 60%
Incharge software
– finite, amortised on 3 years straight
line
Customer contracts
– finite, amortised on 3 years straight
line
Key employee retentions – finite, amortised on 3 years straight
line
RESEARCH AND DEVELOPMENT
Research costs are expensed as incurred.
An intangible asset arising from development expenditure on
an internal project is recognised only when the company and
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, how
the asset will generate future economic benefits, the availability
of resources to complete the development and the ability to
measure reliably the expenditure attributable to the intangible
asset during its development. Following initial recognition of the
development expenditure, the cost model is applied requiring the
asset to be carried at cost less any accumulated amortisation and
impairment losses. Any expenditure capitalised is amortised over
the period of expected benefit from the related project.
Intangible assets under development at balance date are
recorded as capital work in progress and are not subject to
amortisation.
Impairment of non-financial assets
Intangible assets that have indefinite useful lives and are not
subject to amortisation 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).
Non-financial assets other than goodwill that suffered impairment
are tested for possible reversal of the impairment whenever
events or changes in circumstances indicate that the impairment
may have reversed.
Page 27
10. INTANGIBLES – CONTINUED
GROUP 2015
Opening net carrying amount
1 April 2014
Additions
Transfer of cost
Amortisation
Currency translation
Closing net carrying amount
31 March 2015
At 31 March 2015
Cost
Accumulated amortisation
Transfer of cost
Currency translation
Net carrying amount
GROUP 2014
Opening net carrying amount
1 April 2013
Additions
Amortisation
Closing net carrying amount
31 March 2014
At 31 March 2014
Cost
GOODWILL
KEY EMPLOYEE
RETENTION
CUSTOMER
CONTRACTS
DEVELOPMENT
– WORK IN
PROGRESS
COMPUTER
SOFTWARE
TOTAL
182,529
69,779
299,055
82,650
234,669
868,682
–
–
(11,504)
–
(23,516)
(4,398)
530,979
–
(528,103)
207,534
528,103
738,513
–
(100,783)
(18,848)
–
–
(148,867)
(273,166)
(11,937)
(46,687)
171,025
41,865
179,424
85,526
809,502
1,287,342
182,529
–
–
(11,504)
171,025
76,054
(29,791)
–
(4,398)
41,865
325,945
(127,673)
613,629
498,091
1,696,248
–
(204,755)
(362,219)
–
(528,103)
528,103
–
(18,848)
179,424
–
(11,937)
(46,687)
85,526
809,502
1,287,342
–
–
–
–
182,529
76,054
325,945
82,650
14,029
251,673
14,029
918,851
–
(6,275)
(26,890)
–
(31,033)
(64,198)
182,529
69,779
299,055
82,650
234,669
868,682
182,529
76,054
325,945
82,650
290,557
957,735
Accumulated amortisation
–
(6,275)
(26,890)
–
(55,888)
(89,053)
Net carrying amount
182,529
69,779
299,055
82,650
234,669
868,682
Page 28
performanceSerko Limited annual report 2015 11. CASH AT BANK AND ON HAND
Cash and short-term deposits in the statement of financial position comprise cash at bank, and in hand, and short-term highly liquid
investments with an original maturity of three months or less. Bank overdrafts are shown within interest bearing borrowings.
Cash at bank – New Zealand dollar balances
Cash at bank – foreign currency balances
FOREIGN CURRENCY RISK
The carrying amounts of the group’s cash at bank and on hand are denominated in the following currencies:
New Zealand dollars
Australian dollars
US dollars
12. TRADE AND OTHER PAYABLES
EMPLOYEE BENEFITS
GROUP
2015
2014
2,925,176
1,561,776
4,486,952
1,643
247,865
249,508
2,925,176
1,561,679
97
1,643
247,742
123
4,486,952
249,508
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the
reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected
to be paid when the liabilities are settled.
Liabilities for wages and salaries that are not expected to be settled within 12 months are measured at the present value of the
estimated future cash outflows to be made by the group in respect of services provided by employees up to reporting date.
POST-EMPLOYMENT
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 company whose legal or constructive obligation is limited to these
contributions only.
TRADE AND OTHER PAYABLES
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the group
prior to the end of the financial year, that are unpaid and arise when the group becomes obliged to make future payments in respect of
the purchase of these goods and services.
Trade payables
Accrued expenses
Lease incentive
Holiday pay accrual
Total trade and other payables
Disclosed as:
Current
Non-current
GROUP
2015
2014
565,076
1,005,935
565,244
266,076
440,159
260,308
57,394
201,502
1,836,555
1,525,139
1,662,353
1,511,707
174,202
13,432
1,836,555
1,525,139
Page 29
13. GOVERNMENT GRANTS
Government grants are received for direct reimbursement of expenses to assist with research and development of software solutions to
improve service delivery and develop new enhancements to existing platforms.
There are no unfulfilled conditions or contingencies attached to these grants.
14. INTEREST BEARING LOANS AND BORROWINGS
Current
Bank overdrafts
Bank loans
Financial Equities loan payable
Obligations under finance leases
Related party loans
Convertible notes
Leasehold fitout loan
Non-current
Obligations under finance leases
Leasehold fitout loan
NOTE
GROUP
2015
2014
17
17
17
–
–
292,416
6,451
–
–
1,191,021
780,000
–
5,976
2,193,298
1,325,000
15,171
12,745
314,038
5,508,040
–
4,104
4,104
16,809
15,171
31,980
During the current and prior years, there were no defaults or breaches on any of the loans.
During the year the bank loan of $780,000 to finance the acquisition of assets of Incharge Pty Limited was fully repaid.
Related party loans from shareholders were repaid in the year. Shareholders issued a demand for interest during the year of $40,841
(2014: $233,649). The loans were unsecured.
The leasehold fitout loan is personally guaranteed by the directors.
Finance leases are secured over the assets specified in the lease.
Convertible notes
The company issued 1,325,000 convertible notes in March 2014 each with a face value of $1 to key management personnel and a director
appointed post balance date. The notes were fully paid up prior to balance date. The convertible notes were converted to shares at IPO
per note 15.
Page 30
performanceSerko Limited annual report 2015 15. EQUITY
Ordinary share capital is recognised at the fair value of the consideration received. Transaction costs relating to the listing of new
ordinary shares and the simultaneous sale and listing of existing shares are allocated to those transactions on a proportional basis.
Transaction costs relating to the sale and listing of existing shares are not considered costs of an equity instrument as no equity
instrument is issued and consequently costs are recognised as an expense in the statement of comprehensive income when incurred.
Transaction costs relating to the issue of new share capital are recognised directly in equity as a reduction of the share proceeds
received.
Ordinary shares and share based payments
Share capital at beginning of year
Shares issued for the benefit of convertible note holders
Shares issued to management paid up prior to IPO
Subdivision of shares prior to IPO
Issue of shares pursuant to IPO
Issue of new shares in lieu of advisory fees
Issue of share options to non-exec directors
Convertible notes converted to shares at IPO
Issue of new shares to staff via Salary Sacrifice Scheme
Issue of new shares to employees via Restricted Share
Scheme
Transaction costs for issue of new shares
Share capital at end of year
Convertible notes
Convertible notes at beginning of year
Convertible notes issued during the year
Convertible notes converted to shares
Convertible notes at end of year
Total equity at end of year
GROUP
GROUP
2015
2014
2015
2014
$
–
156,644
1,000
241,505
17,000,000
363,400
80,758
1,325,000
157,300
290,117
(1,641,274)
17,974,450
$
–
–
–
–
–
–
–
–
–
–
–
–
NUMBER OF
NUMBER OF
SHARES
SHARES
16,660
16,660
217
–
43,492,498
15,454,545
330,364
590,909
1,490,625
143,000
1,180,564
–
–
–
–
–
–
–
–
–
–
–
62,699,382
16,660
239,835
156,644
(396,479)
239,835
–
–
–
239,835
5,902
217
(6,119)
–
17,974,450
239,835
62,699,382
5,902
–
–
5,902
22,562
The company raised $17 million of issued capital via an Initial Public Offering and concurrent listing on the NZX Main Board on
24 June 2014.
During the period the company issued 143,000 shares under a Salary Sacrifice Scheme (SSS), and 1,180,564 under a Restricted Share
Scheme (RSS). In respect of the SSS, as at 31 March, 140,000 shares had been allocated and 3,000 shares remain unallocated. In respect
of the RSS, as at 31 March, 775,000 restricted shares had been allocated to key management personnel and 246,650 allocated to other
Serko employees, each at an issue price of $1.10 per share. 158,914 restricted shares remain unallocated at 31 March 2015.
In April 2014 the company issued 67 convertible notes each with a face value of $40.63 and 150 convertible notes to key management
personnel each with a face value of $1,026.14. These were converted to shares at IPO.
Page 31
16. COMMITMENTS
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases that effectively transfer from the lessor to the lessee substantially all the risks and benefits
incidental to ownership, and operating leases under which the lessor effectively retains substantially all such risks and benefits.
I) FINANCE LEASES
Finance leases, which transfer to the company substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
II) OPERATING LEASES
Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term. Operating lease
incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense
and reduction of the liability.
a) Operating lease commitments
No later than one year
Later than one year and not later than five years
Later than five years
b) Finance lease commitments
No later than one year
Later than one year and not later than five years
Later than five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
GROUP
2015
2014
426,825
1,529,367
–
227,851
156,493
–
1,956,192
384,344
9,837
12,690
–
22,527
(2,810)
19,717
9,837
22,527
–
32,364
(2,810)
29,554
Prior year comparitives for 31 March 2014 have been restated to correct for an overstatement of operating lease commitments in the
annual report note disclosure. Current year includes an operating lease commitment related to the sales office in Sydney signed after
balance date.
17. RELATED PARTIES
a) Subsidiaries
The consolidated financial statements include the financial statements of Serko Limited and subsidiaries as listed in the following table:
% EQUITY INTEREST
INVESTMENT (PARENT) $
NAME
BALANCE DATE
2015
2014
Serko Australia Pty Limited
Travelog World for Windows Pty Limited
Serko Trustee Limited
Serko India Private Limited
Serko Investments Limited
31 March
31 March
31 March
31 March
31 March
100%
0%
100%
99%
100%
100%
89%
0%
0%
0%
2015
1,247
–
–
2,118
–
3,365
2014
1,247
–
–
–
–
1,247
Page 32
performanceSerko Limited annual report 2015 Serko Australia Pty Limited’s principal business is the marketing and support of travel booking software solutions supplied by Serko
Limited. This entity has been consolidated based on management accounts for the year ended 31 March each year. On 17 April 2014 the
company sold its shares in Travelog World for Windows Pty Limited for consideration of $10 to Empeiria Limited. Empeiria is a company
associated with directors Robert Shaw and Darrin Grafton.
Serko Trustee Limited was incorporated on 4 June 2014 to hold the shares issued to key management and staff in the Restricted Share
Scheme and Salary Sacrifice Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015.
Serko Investments Limited was incorporated on 5 November 2014 as a holding company. It holds 1% of the shares in Serko India
Private Limited.
b) Transactions with related parties
The following table provides the total amount of transactions that have been entered into with related parties, excluding key
management and director remuneration.
NOTES
7
14
Other related parties
nuTravel
Financial Equities Limited
Simon Botherway – Chairman
Clyde McConaghy – Non-exec Director
Claudia Batten – Non-exec Director
Parent
Subsidiaries
Total
PURCHASES FROM
RELATED PARTIES
INTEREST FROM/
(TO) FROM
RELATED PARTIES
AMOUNTS OWED
TO RELATED
PARTIES
AMOUNTS OWED
BY RELATED
PARTIES
$
–
–
–
–
64,167
–
54,252
–
54,252
–
3,335,738
1,905,460
2,663,195
1,905,460
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
$
(24,780)
–
$
–
–
$
292,416
–
24,780
292,416
–
–
–
–
–
–
–
–
915,138
404,189
–
–
–
–
–
–
–
–
–
292,416
1,207,554
–
404,189
–
–
–
–
–
–
–
–
–
–
–
Non-executive directors provide services to Serko in their capacity as non-executive directors and have a service agreement with a
specified amount per annum.
The non-executive directors also provided consultancy services during the IPO period before being appointed as non-executive
directors on 30 April 2014. Simon Botherway received shares in lieu of consultancy services for the amount of $33,400.00 during the
year. Simon Botherway also received shares in lieu for consultancy services provided in the prior year for $30,000. Claudia Batten
received payment for consultancy services of $22,516 during the year. Claudia Batten also received payment for consultancy services
provided in the prior year of $21,302. Clyde McConaghy received payment for consultancy services of $10,835 during the year. Clyde
McConaghy also received payment for consultancy services provided in the prior year of $21,302.
Page 33
17. RELATED PARTIES – CONTINUED
c) Key management and director remuneration
Short-term benefits employees (*)
Post-employment benefits
Total compensation
GROUP
2015
2014
1,706,825
54,594
736,916
32,348
1,761,419
769,264
(*) Key management personnel includes the executive management team, sales management team and the directors in their capacity as
Chief Executive Officer and Chief Strategy Officer.
d) Other transactions with key management personnel and directors
The directors received remuneration as contractors for services, in their capacity as Chief Executive Officer and Chief Strategy Officer,
provided to the group as follows:
Robert Shaw
Darrin Grafton
2015
–
–
2014
86,100
97,282
Key management personnel were issued nil (2014: nil) convertible notes at face value during the year, recognised in equity. The group
advanced a loan for the purchase of notes and no loans were outstanding at year end (2014: $21,984). Interest was accrued at nil (2014:
$1,835). Refer to notes 7 and 15 for terms of issue.
Key management personnel were issued nil (2014: 325,000) convertible notes at face value during the year, recognised in interest
bearing loans. Refer to note 14 for terms of issue.
e) Terms and conditions of transactions with related parties.
Outstanding balances at year end are unsecured and settlement occurs in cash.
For the year ended 31 March 2015, the company has not made any allowance for impairment loss relating to amounts owed by related
parties (2014: $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 company recognises an allowance for the impairment loss.
f) Loans with shareholders
The terms of loans entered into with shareholders are disclosed in note 14. There are no loans in existence at balance date.
Page 34
performanceSerko Limited annual report 2015 18. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net profit/(loss) after tax
Add non-cash items
Amortisation
Impairment
Depreciation
Interest on shareholder loans
Increase/(decrease) in deferred tax
Loss/(gain) on foreign exchange transactions
Shares taken in lieu of advisory fees
Share-based compensation
Add/(less) movements in working capital items
(Increase)/decrease in receivables excl loans
(Increase)/decrease in derivative financial instruments
Increase/(decrease) in trade and other payables
Increase/(decrease) in income tax
Less items classified as financing activity
Interest on convertible notes
Net cash flow from operating activities
GROUP
2015
2014
(6,547,335)
(1,741,649)
273,166
64,198
–
185,044
–
–
62,460
233,649
(84,812)
(33,962)
97,417
82,591
370,875
–
–
–
(5,623,054)
(1,415,304)
(1,076,199)
(807,379)
(116,828)
51,028
130,610
–
980,270
50,345
(1,011,388)
223,236
(3,356)
(14,800)
(6,637,798)
(1,206,868)
Page 35
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The group’s principal financial instruments comprise cash at bank, bank overdrafts, receivables, payables and loans.
The group manages its exposure to key financial risks, including currency risk, in accordance with the group’s financial risk management
policy. The objective of the policy is to support the delivery of the group’s financial targets while protecting future financial security.
Group capital consists of share capital, convertible notes and retained earnings. To maintain or adjust the capital structure,
the group may adjust amounts of dividends paid to shareholders, return capital to shareholders, issue new shares, or amend capital
spending plans.
The main risks arising from the group’s financial instruments are foreign currency, interest, credit and liquidity risk. The group uses
different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure
to foreign exchange risk and assessments of market forecasts for foreign exchange. Ageing analyses and monitoring of specific credit
allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow
forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Risk exposures and responses
INTEREST RATE RISK
The group has exposure to interest rate risk to the extent it borrows funds at fixed and floating interest rates. The risk specifically relates
to the variability of interest rates and the impact this will have on the group’s financial results. The group manages its cost of borrowing
by placing limits on the proportion of borrowings at floating rate and the proportion of fixed rate borrowing repriced in any year.
At balance date, the group had the following mix of financial liabilities exposed to New Zealand variable interest rate risk that are not
designated in cash flow hedges. Sensitivity analysis has been performed based on an interest rate sensitivity of +/- 1% (2014: +/- 1%).
The impact on post-tax profit and equity, with all other variables remaining constant, has also been disclosed.
INTEREST RATE RISK
-1%
+1%
CARRYING
AMOUNT
POST-TAX
PROFIT
EQUITY
POST-TAX
PROFIT
EQUITY
$
–
–
–
–
$
–
–
–
–
$
–
–
–
–
$
–
–
–
–
$
–
–
–
–
1,191,021
780,000
2,193,298
4,164,319
8,575
5,616
15,792
29,983
8,575
5,616
15,792
29,983
(8,575)
(5,616)
(15,792)
(8,575)
(5,616)
(15,792)
(29,983)
(29,983)
GROUP AND PARENT – 2015
Bank overdraft
Bank loans
Related party loans
Net exposure
GROUP AND PARENT – 2014
Bank overdraft
Bank loans
Related party loans
Net exposure
LIQUIDITY RISK
Liquidity risk represents the group’s ability to meet its financial obligations on time. In terms of managing its liquidity risk, the group
generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and has credit lines
in place to cover potential shortfalls.
Page 36
performanceSerko Limited annual report 2015 The following sets out the contractual cash flows for all financial liabilities settled on a gross cash flow basis.
CONTRACTUAL
CASH FLOWS
6 MONTHS
OR LESS
6-12 MONTHS
1-2 YEARS
2-5 YEARS
MORE THAN
5 YEARS
GROUP – 2015
Accounts payable
Overdraft
Bank loans
1,570,479
1,570,479
–
–
–
–
Related party loans
292,416
292,416
Convertible notes
Leasehold fitout
Finance leases
GROUP – 2014
Accounts payable
Overdraft
Bank loans
–
19,275
6,451
–
7,586
3,226
1,888,621
1,873,706
1,467,745
1,467,745
1,191,021
1,191,021
780,000
780,000
Related party loans
2,193,298
2,193,298
–
–
–
–
–
7,586
3,226
10,811
–
–
–
–
–
–
–
–
–
4,104
–
4,104
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,110
3,110
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Convertible notes
Leasehold fitout
Finance leases
CURRENCY RISK
1,325,000
–
1,325,000
27,916
22,785
6,373
4,919
6,373
4,919
15,171
9,837
7,007,765
5,643,356
1,336,292
25,008
The group has exposure to foreign exchange risk as a result of transactions denominated in foreign companies. The risk specifically
relates to the variability of foreign exchange rates for the currencies the group trades in and the impact this has on the group’s financial
results. The majority of the group’s trading activities occur in New Zealand dollars, however, sales to overseas customers are transacted
in United States and Australian dollars.
Refer to notes 7 and 10 for further details on the group’s foreign currency denominated accounts receivable and cash balances.
Page 37
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES – CONTINUED
The following table summarises the sensitivity to foreign currency exchange rate movements.
A sensitivity of +/- 15% (2014: +/- 15%) has been selected due to exchange rate volatility observed.
FOREIGN CURRENCY RISK
-15%
+15%
CARRYING
AMOUNT
POST-TAX
PROFIT
EQUITY
POST-TAX
PROFIT
EQUITY
$
$
$
$
$
1,561,776
1,575,913
198,437
199,713
198,437
199,713
(175,726)
(22,328)
(22,328)
(146,671)
(147,614)
16,503
(146,671)
(147,614)
16,503
2,961,963
375,822
375,822
(277,782)
(277,782)
247,865
1,273,347
(218,225)
31,494
161,291
(27,727)
31,494
161,291
(27,727)
(23,278)
(119,215)
20,494
(23,278)
(119,215)
20,494
1,302,987
165,058
165,058
(121,999)
(121,999)
GROUP – 2015
Foreign exchange balances
Cash at bank
Trade receivables
Trade payables
Net exposure
GROUP – 2014
Foreign exchange balances
Cash at bank
Trade receivables
Trade payables
Net exposure
CREDIT RISK
Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, trade receivable and other
receivables. The group’s exposure to credit risk arises from potential default of the counter party, 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 trades only with recognised, creditworthy third parties and as such collateral is not requested. Receivable balances are
monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant.
At reporting date 100% (2014: 100%) of the group’s cash and cash equivalents was with one bank. The group has no other
concentrations of credit risk.
Page 38
performanceSerko Limited annual report 2015 20. SEGMENT INFORMATION
The board of directors and senior management team monitors the results of the group’s operations as a whole for the purpose of
making decisions about resource allocation and performance assessment and therefore the board has determined the group is a single
reportable segment.
Revenues are derived from installation and configuration projects and through the provision of support and maintenance, however,
these activities are not independent of the principal activity of the group, being the provision of software solutions for the management
and administration of corporate travel bookings.
GEOGRAPHIC INFORMATION
New Zealand
Australia
India
Singapore
US
Other
Total operating revenue
Other income
Grant income
Total Revenue and other income
GROUP
2015
2014
1,202,676
8,973,601
116,951
14,593
20,450
32,931
641,299
5,931,027
79,890
30,566
–
–
10,361,202
6,682,782
1,413,182
895,195
11,774,384
7,577,977
As required under IFRS 8 Serko is required to report on major customers making up more than 10% of the revenue for the year.
Under this disclosure Serko advises that Flight Centre Limited made up more than 10% of the revenue for the group. Flight Centre
Limited accounted for $2,749,847 of the revenue for the year ended 31 March 2015.
Receivables as part of the segmental revenue above
New Zealand
Australia
India
Singapore
US
Other
Allowance for impairment as part of trade receivables above
New Zealand
Australia
India
Singapore
US
Other
215,946
2,130,848
62,114
3,496
–
3,715
2,416,119
26,937
2,988
12,406
–
–
–
42,331
The revenue information above is based on the locations of the customers.
NON-CURRENT OPERATING ASSETS
New Zealand
Australia
Non-current assets for this purpose consist of property, plant and equipment and intangible assets.
1,731,537
553,083
454,378
786,338
2,284,620
1,240,716
Page 39
21. EARNINGS PER SHARE (EPS)
Basic EPS amounts are calculated by dividing the loss for the year, attributable to ordinary equity holders of the parent, by the weighted
average number of ordinary shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year, plus the weighted average number of shares that would be issued on conversion
of all of the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
Loss attributable to ordinary equity holders of the parent
Continuing operations
Discontinued operations
Basic earnings per share
Issued ordinary shares (refer Note 15)
Weighted average of issued ordinary shares*
Basic earnings per share (dollars)
Diluted earnings per share
Weighted average of issued ordinary shares
Adjusted for redeemable preference shares and share options
Weighted average of issued ordinary shares for diluted earnings per share
Diluted earnings per share (dollars)
2015
$
2014
$
(6,547,335)
(1,741,649)
–
–
(6,547,335)
(1,741,649)
2015
2014
NUMBER
NUMBER
62,699,382
62,699,382
16,660
16,660
(0.10)
(104.54)
62,699,382
–
62,699,382
(0.10)
16,660
5,914
22,574
(77.15)
* The weighted average number of shares takes into account the weighted average effect of convertible notes issued during the year.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
authorisation of these financial statements.
Prior year includes an adjustment to net loss after tax (the prior year in the annual report used net loss after comprehensive income
rather than net loss before comprehensive income) affecting basic earnings and diluted earnings per share.
Page 40
performanceSerko Limited annual report 2015 22. PFI VARIANCE ANALYSIS
Statement of comprehensive income
Revenue
Other Income
Total revenue and other income
Expenses from ordinary activities
Selling and marketing expenses
Remuneration & benefits
Administration expenses
Other expenses
GROUP
$
PFI
$
VARIANCE
VARIANCE
$
%
10,361,202
11,002,428
(641,226)
1,413,182
1,089,283
323,899
11,774,384
12,091,711
(317,327)
(988,848)
(941,900)
(46,948)
(12,020,829)
(12,130,993)
(4,690,503)
(4,956,714)
(368,672)
(433,435)
110,164
266,211
64,763
-6%
23%
-3%
-5%
1%
6%
18%
2%
11%
-57%
-2%
90%
0%
n/a
2%
Total expenses from ordinary activities
(18,068,852)
(18,463,042)
394,190
Finance income
Finance costs
Profit (loss) before income tax
Income tax (expense)/benefit
Net profit (loss) for the period
Other comprehensive income (net of tax)
209,382
185,906
23,476
(348,218)
(149,496)
(198,722)
(6,433,304)
(6,334,921)
(98,383)
(114,031)
(216,855)
102,824
(6,547,335)
(6,551,776)
4,441
Movement in foreign currency reserve
144,247
–
144,247
Total comprehensive income for the year
(6,403,088)
(6,551,776)
148,688
Key Variances:
• Revenue is down 6% to PFI owing to the late delivery of Serko Mobile and the Incharge product refresh, coupled with a change in
demand for software customisation.
• Other income is up 23%. Grant income received was higher than forecast in PFI.
• Finance income is up 11%. This relates mainly to interest accrued on the nuTravel loan receivable (see note 7).
• Finance costs are up 57%. This relates mainly to an unfavourable exchange rate movement during the year.
• Income tax (expense)/benefit. The PFI period assumed a higher tax expense relating to transfer pricing arrangements for
Serko Australia Pty Limited.
• Movement in foreign currency reserve is owing to the exchange adjustment on subsidiary reserves during the period.
Page 41
22. PFI VARIANCE ANALYSIS – CONTINUED
Statement of Financial Position
Current assets
Cash at bank and on hand
Receivables
Derivative financial instruments
Non-current assets
Property, plant and equipment
Intangible assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Interest bearing loans and borrowings
Non-current liabilities
Deferred tax liability
Trade and other payables
Interest bearing loans and borrowings
Total liabilities
Equity
Contributed equity
Share-based payment reserve
Foreign currency reserve
Retained earnings accumulated (deficit)
Total equity
Total equity and liabilities
GROUP
$
PFI
$
VARIANCE
$
4,486,952
4,986,895
(499,943)
3,417,736
2,672,449
116,828
–
8,021,516
7,659,344
997,278
1,287,342
934,004
940,495
2,284,621
1,874,499
10,306,137
9,533,843
745,287
116,828
362,172
63,274
346,848
410,122
772,293
1,662,352
1,788,141
(125,789)
180,737
314,038
–
–
180,737
314,038
2,157,127
1,788,141
368,987
60,311
174,202
4,104
238,617
84,800
(24,489)
–
–
84,800
174,202
4,104
153,817
2,395,745
1,872,941
522,803
17,603,575
17,469,237
370,875
148,606
401,053
4,359
(10,212,663)
(10,213,747)
7,910,393
7,660,902
10,306,137
9,533,843
134,338
(30,178)
144,247
1,084
249,491
772,294
• Cash is lower than PFI owing to a higher receivables position at balance date.
• Receivables are higher than PFI owing to delayed settlement and the introduction of a loan receivable from nuTravel during the period.
• Derivative financial instruments are related to forward contracts in place at balance date, with a favourable exchange rate valuation.
• Intangible assets are higher than PFI owing to increased development spend on Serko Mobile during the year.
• Interest bearing loans and borrowings are higher owing to a loan payable to Financial Equities Limited in relation to the loan
receivable from nuTravel (see note 17).
• Trade and other payables relates to incentives for the leasehold in Auckland and a computer hardware incentive provided as part
of a hosting agreement.
Page 42
performanceSerko Limited annual report 2015 23. SHARE-BASED PAYMENTS
Employees of the group receive remuneration at the Board’s discretion in the form of share-based payment transactions where services
are provided as consideration for the receipt of equity instruments.
The cost of share-based payment transactions are recognised, together with a corresponding increase in equity, over the period in
which the service conditions are fulfilled. The cumulative expense recognised for share-based transactions at each reporting date, until
the vesting date, reflects the extent to which the vesting period has expired and the group’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit for a period represents the movement in cumulative expenses recognised at
the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest except where vesting is conditional upon a market condition.
Employee Restricted Share Plan
The Serko Limited Employee Restricted Share Plan (RSP) was introduced for selected executives and employees of the group. Under
the RSP, ordinary shares in Serko Limited are issued to a trustee, Serko Trustee Limited, a wholly-owned subsidiary, and allocated to
participants on grant date using funds lent to them by the company.
The price for each share issued during the year under the RSP is the higher of the market price of the share on the date on which the
shares are allocated or the invitation price.
Under the RSP, shares are beneficially owned by the participants. The length of retention period before the shares vest is between one
and three years. If the individual is still employed by the group at the end of this specific period, the employee is given 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 $1.10
(2014: n/a) and was determined by the share price on grant date. The group has no legal or constructive obligation to repurchase the
shares or settle the RSP for cash.
Unvested shares at 1 April
Granted
Forfeited
Vested
Unvested shares at 31 March – allocated to employees
Forfeited shares not yet reallocated – held by trustee
Unallocated shares – held by trustee
Total
Percentage of total ordinary shares
Ageing of unvested shares
Vest within one year
Vest after one year
Total
2015
2014
–
1,031,605
(9,955)
–
1,021,650
–
158,914
1,180,564
1.9%
–
1,180,564
1,180,564
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The number of shares awarded pursuant to the RSP does not equal the number of shares created for the scheme, as the scheme had an
allocated pool of shares upon set up. Forfeited shares are held in the trust and reissued.
Page 43
23. SHARE-BASED PAYMENTS – CONTINUED
Share Appreciation Rights
The group’s non-executive directors are granted share appreciation rights (SARs), settled by way of a non-recourse loan. The SARs vest
when the directors continue to be employed as non-executive directors at the vesting date. The contractual term of the SARs is three years.
The following table lists the inputs to the model used for the SAR plan for the year ended 31 March 2015:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share options/SARs (years)
Weighted average share price ($)
Model used
2015
2014
0.00
20.00
3.50
2.5
1.10
Black Scholes
n/a
n/a
n/a
n/a
n/a
n/a
The expected life of the SARs is based on historical data and current expectations and is not necessarily indicative of exercise patterns
that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options
is indicative of future trends, which may not necessarily be the actual outcome.
2015
2014
NUMBER
WAEP
NUMBER
WAEP
–
590,909
–
–
–
590,909
590,909
–
1.10
–
–
–
1.10
1.10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Movements during the year
Outstanding at 1 April 2014
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 March 2015
Exercisable at 31 March 2015
Page 44
performanceSerko Limited annual report 2015 24. EVENTS AFTER BALANCE SHEET DATE
On 1 May 2015 Serko Australia Pty Limited acquired the assets of Arnold Travel Technology Pty Limited from the Expedia Group,
an Australian online corporate travel booking business.
The provisional fair values of the identifiable assets of Arnold Travel Technology Pty Limited as at the date of acquisition,
denominated in Australian dollars, were:
Customer contracts
Consideration transferred:
Cash paid
Net cash paid on acquisition
AU$
100,000
100,000
100,000
100,000
As part of the acquisition Serko Australia Pty Limited had related redundancy costs for some existing Arnold Travel Technology Pty
Limited employees of $102,345.
There have been no other significant events occurring after balance date.
25. CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2014: $nil).
Page 45
governance
The Board and management of Serko Limited (Serko or the
Company) are committed to ensuring that Serko maintains
corporate governance practices in line with current best practice
and adheres to the highest ethical standards.
The Board considers that its policies and practices comply
with the corporate governance requirements of the listing rules
applying to the NZX Main Board (NZX Listing Rules) and are
consistent with the principles contained in the NZX Corporate
Governance Best Practice Code except to the extent referred to
below. The Board also considers that the governance practices
Serko has in place are consistent with the Financial Markets
Authority handbook ‘Corporate Governance in New Zealand
Principles and Guidelines’.
The NZX Corporate Governance Best Practice Code encourages
directors to take a portion of their remuneration under a
performance-based equity security plan, or to otherwise invest
a portion of their cash directors’ remuneration in purchasing
the company’s equity securities. Serko does not consider such a
plan or formal encouragement of investment is necessary, as all
directors either hold shares directly or indirectly, including by way
of Director Loan Shares (refer Remuneration – Non-executive
Director Remuneration below for more details).
This governance statement outlines the main corporate
governance practices adopted by Serko. Serko’s constitution and
principal governance documents are available on Serko’s website.
Go to: www.serko.com/investor-centre/.
ETHICAL STANDARDS
The Board recognises that high ethical standards and behaviours
are central to good corporate governance and has implemented
a Code of Ethics to guide the behaviour of its directors and
employees. Serko’s Code of Ethics establishes the framework by
which directors and staff of Serko are expected to conduct their
professional lives by facilitating behaviour and decision-making
that meets Serko’s business goals and is consistent with Serko’s
values, policies and legal obligations. Serko’s Code of Ethics is
available on Serko’s intranet and forms part of the induction
process for new employees. There have been no instances
raised with either the Board or management around any alleged
breaches of the Code of Ethics. Serko encourages staff to report
any concerns they have about compliance with the Code of Ethics,
Serko policies or legal obligations.
The Code of Ethics addresses:
• 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.
Page 46
BOARD OF DIRECTORS
Role of the Board
The Board of Directors (the Board) is elected by shareholders to
govern Serko in the interests of shareholders and to protect and
enhance the value of Serko’s assets. The Board is responsible for
corporate governance and Serko’s overall strategic direction and
is the overall and final body responsible for all decision-making
within Serko. The Board Charter describes the Board’s role and
responsibilities and regulates internal Board procedure.
The Board has delegated a number of its responsibilities to Board
committees. The role of each committee is described below.
To enhance efficiency, the Board has also delegated to the Chief
Executive Officer and subsidiary company boards the day-to-day
leadership and management of Serko. The Chief Executive Officer
has, in some cases, formally delegated certain authorities to
his direct reports within set limits. The Board regularly monitors
and reviews management’s performance in the execution of its
delegated responsibilities.
The Board met for 12 regularly scheduled meetings during the
financial year and six special meetings. There were also separate
meetings of the Board Committees during the year. The Board
intends to meet 11 times during FY16.
Board Membership, Size and Composition
The NZX Listing Rules state that the number of directors
must not be fewer than three and a Board must have at least
two independent directors. Subject to this limitation, and in
accordance with the provisions of Serko’s constitution and the
Board Charter, the size of the Board is determined by the Board
from time to time.
As at 31 March 2015, (and the date of this annual report), the
Board comprised five directors being the two co-founders Darrin
Grafton and Robert Shaw and three independent non-executive
directors Simon Botherway, Claudia Batten and Clyde McConaghy.
For biographical details of individual directors see About Serko -
Board of Directors above.
The Remuneration and Nominations Committee is responsible
for making recommendations to the Board regarding the Board’s
size and composition. The Board’s broader commitment to
diversity includes building diversity of thought within the Board
of Directors. The current Board has a broad range of experience
and skills, both locally and internationally, that are appropriate to
meet its objectives.
The Board supports the separation of the role of chairman and
chief executive officer. The chairman is elected by the Board from
the non-executive directors. The chairman’s role is to manage
and provide leadership to the Board and to facilitate the Board’s
interface with the chief executive officer. The current chairman,
Simon Botherway, was appointed on 30 April 2014 and is an
independent director.
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 Board Appointment, Training and Evaluation
BOARD COMMITTEES
At the time of appointment, each new director signs a
comprehensive letter of appointment setting out the terms of
their appointment, including their duties and expectations in
the role. Each director also receives a copy of Serko’s Corporate
Governance Manual (comprising all of Serko’s core governance
documents) and is introduced to the business through a
specifically tailored induction programme. All directors are
regularly updated on relevant industry and company issues and
are expected to undertake training to remain current on how to
best perform their duties as directors of Serko.
All directors have access to senior management to discuss issues
or obtain information on specific areas or items to be considered
at the board meeting or other areas they consider appropriate.
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 intends to undertake 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 monitor Serko’s
performance in the interests of shareholders. The non-executive
directors were appointed by Serko’s shareholders on 30 April
2014 and the first annual review of the Board and committees’
performance was undertaken in May 2015.
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.
Independence of Directors
A director is considered to be independent if that director is not
an executive of Serko and if the director has no direct or indirect
interest or relationship that could reasonably influence, in a
material way, the director’s decisions in relation to Serko.
The Board has determined that each non-executive director is an
independent director for the purposes of the NZX Listing Rules
and in accordance with the Board Charter. As at 31 March 2015,
Serko had two non-independent directors and three independent
directors.
The Board will review any determination it makes on a director’s
independence on becoming aware of any new information
that may affect that director’s independence. For this purpose,
directors are required to ensure they immediately advise Serko
of any new or changed relationship that may affect their
independence or result in a conflict of interest.
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.
The Board uses committees to deal with issues requiring detailed
consideration, thereby enhancing the efficiency and effectiveness
of the Board. However, the Board retains ultimate responsibility
for the functions of its committees and determines each
committee’s roles and responsibilities.
The current committees of the Board and their members are:
• Audit and Risk Committee
Clyde McConaghy (Chair), Simon Botherway and Claudia Batten
• Remuneration and Nominations Committee
Claudia Batten (Chair), Simon Botherway and Clyde McConaghy
• Disclosure Committee
Simon Botherway (Chair), Clyde McConaghy, Darrin Grafton
and Tim Bluett.
Details of the roles and responsibilities of these committees
are described in their respective charters (or in the case of the
Disclosure Committee, in the Market Disclosure Policy). The Board
has determined that Clyde McConaghy and Simon Botherway
each meet the criteria for being a “financial expert” in accordance
with the Audit and Risk Committee’s Charter.
From time to time, the Board may constitute an ad-hoc
committee to deal with a particular issue that requires specialised
knowledge and experience.
DIVERSITY
The Board recognises that building diversity across Serko will
deliver enhanced business performance. Serko has adopted
a Diversity Policy and is committed to achieving diversity in
the skills, attributes and experience of its Board members,
management and staff across a broad range of criteria (including,
but not limited to, culture, gender and age).
Diversity Objectives
The Board’s evaluation of Serko’s performance during the financial
period with respect to the objectives contained in its Diversity
Policy are set out below:
• Objective: Facilitate and promote equal employment
opportunities including (but not limited to) diversity of culture,
gender and age when considering opportunities for new and
existing Serko people.
Progress: The Company has made a change this year to carry
out the majority of its recruiting efforts internally, giving
Serko the ability to ensure diversity is encouraged from the
commencement of any recruitment campaign through to
hiring. As part of this change Serko undertook a programme of
work to refresh our Serko Careers site, with particular emphasis
on reflecting the diversity that exists within our organisation to
encourage people from any culture, gender or age to consider
applying to Serko as an employer.
Page 47
• Objective: Promote a merit-based environment in which
employees have the opportunity to develop and perform
to their full potential in alignment with the Company’s
commitment to the ongoing training and wellbeing of its
employees.
Progress: All employees are encouraged to participate in
development activity with a focus on who they are, what is
important to them and where they wish to take their career.
In addition, in FY15 Serko established an internal ‘Thrive’
programme, which aims to encourage peak performance
through education, activity, and employee benefits. The
programme focuses on four elements – Wellbeing, Wisdom,
Wonder, and Giving.
• Objective: Reward excellence and ensure employees are
treated fairly, evaluated objectively and promoted on the basis
of their performance.
Progress: The composition of Serko’s workforce (refer below
for details) demonstrates that it is an equal opportunity
employer that does not discriminate on any of the prohibited
grounds of discrimination. Serko’s annual salary reviews are
merit-based and reflect the responsibilities of each position
and the employment market. These reviews provide visibility
to management in relation to parity of working conditions and
pay across its workforce.
Diversity at Serko
At the end of FY15 Serko employees represented 22 different
nationalities (up from 12 different nationalities at the end of FY14).
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 their early 30s.
The proportions of men and women at various levels within the
Serko workforce as at 31 March 2014 and 31 March 2015 are set out
in the table below:
%
FEMALE
2014
%
FEMALE
2015
%
MALE
2014
%
MALE
2015
0%
20%
100%
80%
0%
55%
43%
0%
100%
100%
57%
42%
45%
57%
43%
58%
Serko Limited Board
of Directors
Officersa
Senior Employeesb
Overall workforce
a. The Executive Team (CEO and his direct reports)
b. Direct reports to the Executive Team with managerial responsibilities
HEALTH AND SAFETY
Serko has adopted a Health and Safety Policy and both the Board
and management are committed to promoting a safe and healthy
working environment for everyone working in or interacting with
Serko’s business. The Health and Safety Policy requires Serko
people to endeavour to take all practicable steps to provide a
working environment that promotes health and wellbeing, while
minimising the potential for any risk, personal injury, ill health or
damage. The Board has agreed a detailed programme of work,
which aims to ensure Serko remains compliant with its health and
safety obligations.
FINANCIAL REPORTING
The Board is responsible for ensuring the integrity of its financial
reporting.
Part of the role of the Audit and Risk Committee is to assist the
Board in fulfilling its responsibilities for financial statements
and external financial reporting, and ensuring the quality and
independence of Serko’s external audit process. This role is
described in detail in the Audit and Risk Committee Charter.
The Audit and Risk Committee and the Board undertake
appropriate inquiry of management and the auditor. The Chief
Executive Officer and Chief Financial Officer are required to certify
to the Board that Serko’s financial report presents a true and
fair view, in all material respects, of Serko’s financial position for
the relevant financial period and that operational results are in
accordance with relevant accounting standards.
AUDITORS
Serko has adopted an External Audit Independence Policy that
requires, and sets out the criteria for, the external auditor to be
independent. The Policy recognises the importance of the Board’s
role in facilitating frank dialogue among the Audit and Risk
Committee, the auditor and management.
The Policy requires that the lead and engagement audit partners
be rotated after a maximum of five years so that no such
persons shall be engaged in an audit of Serko for more than five
consecutive years.
The 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.
Non-Audit Work
The auditor is restricted in the non-audit work it may perform.
In the last financial year the audit firm has undertaken specific
non-audit work. None of that non-audit work is considered
to have compromised (or be seen to have compromised) the
independence of the auditor. For further details on the audit and
non-audit fees paid and work undertaken during the period, refer
to Note 5 of the Financial Statements above.
Page 48
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 RISK MANAGEMENT
Serko has designed and implemented a risk and compliance
framework that sets out the policies and standards by which all
Serko businesses will operate. In addition, Serko has established
a monitoring and reporting process that registers Serko’s key
compliance and operational risks, rates their potential impact and
likelihood of occurring, and describes the mitigations and controls
Serko has in place in respect of each risk.
The Audit and Risk Committee monitors compliance with the risk
and compliance framework and assists the Board in discharging
its responsibilities in overseeing Serko’s risk management and
internal control processes.
TRADING IN SERKO SECURITIES
Serko’s Share Trading Policy and Guidelines applies to all
directors, officers, employees and contractors of Serko and its
subsidiaries who intend to trade in Serko’s listed securities. This
Policy seeks to ensure that those subject to the Policy do not
trade in Serko securities if they hold undisclosed price-sensitive
information. The Policy sets out additional rules, which includes
the requirement to seek company consent before trading and
prescribes certain periods during which trading is permitted.
Compliance with the Share Trading Policy will be 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.
In addition to the restrictions outlined above, each director
has entered into a deed of embargo with Serko such that they
are restricted from disposing of any of their shares until the
date falling two business days after Serko makes a preliminary
announcement for the financial year ending 31 March 2016, except
with the prior approval of the directors that are not “interested”
for the purposes of the Companies Act 1993 (the “Non-Interested
Directors”). Some senior employees are also embargoed from
selling any shares during this period, except with the prior
approval of the Non-Interested Directors.
SHAREHOLDER RELATIONS
The Board is committed to maintaining a full and open dialogue
with its shareholders.
Disclosure to the Market
Serko is committed to ensuring that all of its shareholders have
timely access to full and accurate material information about
Serko and its prospects, and to ensure that Serko, its employees
and its directors comply with the requirements for full and timely
disclosure to the market of material information, thus ensuring
equal access to information.
Serko has established a Disclosure Committee whose role it is
to determine whether information is “material information” and
whether the material information is required to be released to the
NZX. The Disclosure Committee comprises the Board Chairman,
the Audit and Risk Committee Chairman, the Chief Executive
Officer and the Chief Financial Officer (the Disclosure Officer).
Further information on Serko’s procedures for dealing with
information disclosure is set out in Serko’s Market Disclosure
Policy. In addition to the procedures set out in that Policy,
directors and management consider at each meeting whether
there are any issues that require disclosure to the market.
Information for shareholders
The Investor Centre section of Serko’s website includes copies of
Serko’s key governance documents, reports, announcements and
media releases.
Serko’s Annual Meeting will be held in Auckland on 19 August
2015. Shareholders will be given an opportunity at the meeting to
ask questions and comment on relevant matters. In addition, the
auditor, Ernst & Young, will be available to answer any questions
about its audit report. A Notice of Meeting will be sent to
shareholders in advance of the meeting.
INTEREST REGISTER DISCLOSURES
In accordance with Section 140(1) of the Companies Act 1993, directors disclosed the following interests in transactions
with Serko during the financial year ending 31 March 2015:
DATE OF ENTRY
NAME OF DIRECTOR
NATURE OF DIRECTOR’S INTEREST IN TRANSACTION
30-Apr-14
Darrin Grafton
Gave notice to the Board that:
(a) he is a trustee and beneficiary of the Grafton-Howe Family No. 2 Trust (the Grafton-
Howe Trust) and accordingly is to be regarded as interested in any transaction that
may be entered with the Grafton-Howe Trust
(b) he is a director of Serko Note Limited (Serko Note), and accordingly is to be regarded
as interested in any transaction that may be entered with Serko Note
(c) he is interested in an Executive Employment Agreement dated 30 April 2014
(d) he is interested in the Restricted Share Scheme documentation dated 30 April 2014
(e) he is interested in an Agreement for sale and purchase of shares in Serko Limited
between the Company, Serko Note, the Grafton-Howe Trust, the Ripon Trust, and
noteholders dated 30 April 2014
(f) he is interested in a Deed of Embargo dated 30 April 2014.
Page 49
DATE OF ENTRY
NAME OF DIRECTOR
NATURE OF DIRECTOR’S INTEREST IN TRANSACTION
30-Apr-14
Robert Shaw
Gave notice to the Board that:
(a) he is a trustee and beneficiary of the Ripon Trust (the Ripon Trust) and accordingly is
to be regarded as interested in any transaction that may be entered with the Ripon
Trust;
(b) he is a director of Serko Note Limited (Serko Note), and accordingly is to be regarded
as interested in any transaction that may be entered with Serko Note;
(c) he is interested in an Executive Employment Agreement dated 30 April;
(d) he is interested in the Restricted Share Scheme documentation dated 30 April 2014
(e) he is interested in an Agreement for sale and purchase of shares in Serko Limited
between the Company, Serko Note, the Grafton-Howe Trust, the Ripon Trust, and
noteholders dated 30 April 2014
(f) he is interested in a Deed of Embargo dated 30 April 2014.
30-Apr-14
Simon Botherway
Gave notice that he is interested in a Deed of Embargo dated 30 April 2014.
30-Apr-14
Claudia Batten
Gave notice that she is interested in a Deed of Embargo dated 30 April 2014.
30-Apr-14
Clyde McConaghy
Gave notice that he is interested in a Deed of Embargo dated 30 April 2014.
Directors have given general notices disclosing interests pursuant to section 140(2) of the Companies Act 1993. Those interests (or
changes to interests) notified and recorded in Serko’s Interests Register during the financial year ended 31 March 2015 are set out below:
DIRECTOR
ENTITY
Claudia Batten
Podscape Holdings Limited
Broadli Inc
Icehouse Limited
Vend Limited
RELATIONSHIP
Directora
Directora
Directora
Appointed Director
New Zealand Trade and Enterprise
Appointed Regional Director (North America)
Simon Botherway
Arrow Trustee
Darrin Grafton
Serko Trustee Limited
MSH Trustee (Arrow) Limited
Serko Investments Limited
Serko India Private Limited
Clyde McConaghy
Infomedia Limited
Trusteea
Trusteea
Appointed Director
Appointed Director
Appointed Director
Directora
Integrated Research Limited
Directora and ceased to be a Director
Robert Shaw
Serko Trustee Limited
Serko Investments Limited
Serko India Private Limited
a. Interest held at time of appointment
Appointed Director
Appointed Director
Appointed Director
Page 50
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 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 2015:
NAME
DATE OF
ACQUISITION/
DISPOSAL
NUMBER OF
SHARES ACQUIRED/
(DISPOSED)
Claudia Batten
23 June 2014
181,818a
Simon Botherway
23 June 2014
1,125,000
23 June 2014
57,636b
23 June 2014
227,273a
23 June 2014
909,091c
NATURE OF RELEVANT INTEREST
Registered holder and beneficial owner
of shares
Registered holder and beneficial owner
of shares and having the power to
exercise a right to vote attached to, and
to dispose of, the sharesd
Registered holder and beneficial owner
of shares
Registered holder and beneficial owner
of shares
Registered holder and beneficial owner
of shares and having the power to
exercise a right to vote attached to, and
to dispose of, the sharesd
Darrin Grafton
29 April 2014
109e
Registered holder of ordinary sharesj
29 April 2014
21,747,538f
Registered holder and beneficial owner
of 13,813,071 ordinary shares Registered
holder of 7,942,906 ordinary shares
23 June 2014
(7,942,906)g
Registered holder of ordinary shares
23 June 2014
(1,443,061)h
24 June 2014
1,537,594i
Registered holder and beneficial owner
of ordinary shares
The power to exercise, or to control the
exercise of, a right to vote attached to
ordinary shares
NOTES:
a. Director Loan Shares issued pursuant to a Loan Agreement
b. Shares issued in lieu of director fees
c. Subscribed for as part of IPO process
d. Partially held via a trust in which the director is a trustee
e. Shares issued to correspond with the number of convertible notes then on issue and were
held as nominee for the benefit of the relevant holders of those convertible notes. They were
transferred to those holders upon conversion of the convertible notes as part of the IPO
process.
f. Share sub-division undertaken at time of IPO
g. Shares held as nominee for convertible note holders transferred to convertible note holders
upon conversion of convertible notes as part of the IPO process.
h. Shares sold-down as part of founder sell-down of shares into IPO offer
i. The director has the power to exercise, or to control the exercise of, a right to vote attached to
these shares by virtue of a personal relationship with the legal and beneficial holder of these
shares.
j. Held via a trust in which the director is a trustee.
CONSIDERATION
PAID/RECEIVED
$200,000
Consideration for shares
previously provided
through subscription of
underlying convertible
notes
$63,400
$250,000
$1,000,000
Consideration for shares
previously provided
through subscription
of the underlying
convertible notes
$Nil
Consideration for shares
previously provided
through subscription
of the underlying
convertible notes
$1,587,367
$Nil
Page 51
NAME
DATE OF
ACQUISITION/
DISPOSAL
NUMBER OF
SHARES ACQUIRED/
(DISPOSED)
NATURE OF RELEVANT INTEREST
Clyde McConaghy
23 June 2014
181,818a
Registered holder and beneficial owner
and the power to exercise a right to vote
attached to, and to dispose of, the shares.j
Robert Shaw
29 April 2014
109e
Registered holder of ordinary sharesj
29 April 2014
21,747,538f
Registered holder and beneficial owner
of 13,813,071 ordinary shares Registered
holder of 7,942,906 ordinary shares
23 June 2014
(7,942,906)g
Registered holder of ordinary shares
23 June 2014
(1,443,061)h
Registered holder and beneficial owner
of ordinary shares
CONSIDERATION
PAID/RECEIVED
$200,000
Consideration for shares
previously provided
through subscription
of the underlying
convertible notes
$Nil
Consideration for shares
previously provided
through subscription
of the underlying
convertible notes
$1,587,367
NOTES:
a. Director Loan Shares issued pursuant to a Loan Agreement
b. Shares issued in lieu of director fees
c. Subscribed for as part of IPO process
d. Partially held via a trust in which the director is a trustee
e. Shares issued to correspond with the number of convertible notes then on issue and were held as nominee for the benefit of the relevant holders
of those convertible notes. They were transferred to those holders upon conversion of the convertible notes as part of the IPO process.
f. Share sub-division undertaken at time of IPO
g. Shares held as nominee for convertible note holders transferred to convertible note holders upon conversion of convertible notes as part of the IPO process.
h. Shares sold-down as part of founder sell-down of shares into IPO offer
i. The director has the power to exercise, or to control the exercise of, a right to vote attached to these shares by virtue of a personal relationship with the legal
and beneficial holder of these shares.
j. Held via a trust in which the director is a trustee.
Page 52
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 In accordance with the Listing Rules, as at 31 March 2015, directors had a relevant interest in Serko ordinary shares as follows:
NAME
Claudia Batten
Simon Botherway
Darrin Grafton
Clyde McConaghy
Robert Shaw
RELEVANT INTEREST
PERCENTAGE
181,818a
2,319,000a,b
13,907,604c,d
181,818a,c
12,370,010c
0.29%
3.70%
22.18%
0.29%
19.75%
NOTES:
a. Of the shares held by Simon Botherway, 227,273 are Director Loan Shares and 57,636 shares have been issued in lieu of advisory fees. The 181,818 shares held
by Clyde McConaghy and Claudia Batten respectively are Director Loan Shares. For more information on the Director Loan Shares, see Non-Executive Director
Remuneration below.
b. Partially held via a trust in which the director is a trustee.
c. Held via a trust in which the director is a trustee.
d. Includes the power to exercise, or to control the exercise of, a right to vote attached to 1,537,594 shares by virtue of a personal relationship with the legal and
beneficial holder of these shares.
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:
DATE OF ENTRY
NAME OF DIRECTOR
PARTICULARS OF BOARD AUTHORISATION
30 June 2014
30 June 2014
30 June 2014
Simon Botherway
Claudia Batten
Clyde McConaghy
Simon Botherway
Claudia Batten
Clyde McConaghy
Simon Botherway
Claudia Batten
Clyde McConaghy
30 June 2014
Bob Shaw
Darrin Grafton
The payment of remuneration and the provision of other benefits by the
Company to each non-executive director on the terms set out in the relevant
Director Appointment Letter.
The making of loans by the Company to each non-executive director on the
terms set out in the relevant Director Loan Agreement.
The payment of advisory fees (and issue of shares in lieu of advisory fees)
in recognition of services provided to the Company relating to the IPO, in
anticipation of becoming a director on the terms set out in the Director
Appointment Letter.
The payment of remuneration and the provision of other benefits by the
Company to each executive director in their capacity as executives of Serko
on the terms set out in the relevant Executive Employment Agreement.
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 of Serko, in relation to any act or omission in their capacity as directors and in respect of prospectus liability insurance. Deeds
of indemnity were also granted to each director during the year and particulars were entered in the Interests Register.
Page 53
Remuneration
NON-EXECUTIVE DIRECTOR REMUNERATION
FY15 DIRECTOR REMUNERATION
Prior to listing, Serko’s shareholders approved a total cap of
$350,000 per annum for non-executive director fees, for the
purposes of the NZX Listing Rules. Serko does not currently intend
to pay directors’ fees exceeding, in aggregate, approximately
$190,0006 per annum, comprising $70,000 per annum for Simon
Botherway, as Chairman, and A$55,000 per annum for each other
non-executive director. The additional level of directors’ fees is
intended to provide flexibility for Serko to appoint additional
non-executive directors in the future and allow for an increase in
directors’ fees in future years.
The non-executive directors are entitled to be reimbursed for all
reasonable travel, accommodation and other expenses incurred by
them in connection with their attendance at Board or shareholder
meetings or otherwise in connection with Serko’s business. No
retirement benefits will be paid to the non-executive directors on
their retirement.
In addition to the remuneration detailed above, the Board has,
with the approval of Serko’s existing shareholders, introduced a
loan facility for the independent directors, which enabled them to
acquire a specified number of Serko shares at the time of the IPO
(Director Loan Shares). The loans are interest-free and repayable
after three years, or earlier at the discretion of the independent
director or upon the independent director ceasing to be a Serko
director. Further details are set out in the IPO Prospectus dated
26 May 2014. For details of restrictions applying to the sale of
shares held by directors, see Trading in Serko Securities above.
EXECUTIVE DIRECTOR REMUNERATION
Darrin Grafton and Robert Shaw, the executive directors on the
Board for the period ended 31 March 2015, did not receive any
remuneration in their capacity as directors. They were, however,
remunerated for services as Chief Executive Officer and Chief
Strategy Officer of Serko.
Details of the total remuneration of, and the value of other
benefits received by, each Director of Serko during the financial
year ended 31 March 2015 were as follows:
Darrin Graftona
Robert Shawa
Simon Botherwayb
Clyde McConaghyc
Claudia Battend
FEES
REMUNERATION
–
–
64,167
54,252
54,252
280,061
280,000
33,400
10,835
22,516
172,671
626,812
a. Darrin Grafton and Robert Shaw are executive directors and receive
remuneration from Serko in the form of a salary and short-term incentives.
They did not participate in the Serko Employee Restricted Share Scheme
this year or receive remuneration in their capacity as Directors. Darrin
and Robert also received Kiwisaver contributions of $3,797 and $10,000
respectively.
b. Simon Botherway was issued shares in lieu of advisory fees during the year
of $63,400. $33,400 related to advisory fees for this year and $30,000 in
the prior year. The advisory fees were provided before being appointed as a
non-executive director and chairman.
c. Clyde McConaghy provided advisory services during the year before
being appointed as a non-executive director of $10,835 and $21,302 in the
prior year.
d. Claudia Batten provided advisory services during the year before being
appointed as a non-executive director of $22,516 and $21,302 in the
prior year.
6. Subject to exchange rate fluctuations.
Page 54
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 EMPLOYEE REMUNERATION
Remuneration Range
Remuneration Framework
At the beginning of the financial period, Serko introduced a
new remuneration framework that aims to support and reward
execution of its strategy; create a performance-focused culture;
and attract, develop and retain talented employees. Serko’s
remuneration framework is designed to encourage and reward
behaviour consistent with achievement of these objectives. Serko
adopts a total remuneration policy, where an employee’s total
remuneration may include, but is not limited to, their base salary
and a short-term incentive or sales plan incentive in the form
of a cash bonus upon achievement of pre-determined targets.
The base salary aims to reflect the mid-point in the employment
market when considering the position’s requirements pertaining
to skills, level of responsibility and complexity, while the short-
term incentive and sales incentive schemes reward superior
performance and enable employees to earn at the upper end of
the employment market.
In addition, Serko has introduced a long-term incentive, in
the form of restricted shares. This is designed to attract and
retain key people within the business, to align senior managers’
remuneration with shareholder value and to reward the
achievement of Serko’s strategies and business plans. At the time
of the IPO, restricted shares were granted to eligible Australian-
and New Zealand-resident employees by way of a one-off grant
under the restricted share scheme. The grant was made to reward
employees’ contributions to the listing and align their interests
with shareholder value.
At the time of the IPO, Serko also offered employees resident in
Australia and New Zealand the opportunity to participate in a
salary sacrifice scheme (Salary Sacrifice Scheme) enabling the
participant to acquire up to 4,000 shares at the IPO price and pay
those shares off in equal instalments over a 12 month period.
The table below shows the number of employees and former
employees of Serko and its subsidiaries, not being directors of
Serko, who, in their capacity as employees, received remuneration
and other benefits during the period ended 31 March 2015 totalling
at least NZ$100,000. The table does include the remuneration
paid to Darrin Grafton and Robert Shaw in their capacity as
executive officers of Serko.
The remuneration of those employees paid outside of New Zealand
has been converted into New Zealand dollars. No employee
appointed as a director of a subsidiary company of Serko receives
any remuneration or other benefits for acting in that capacity.
REMUNERATION RANGE (NZD)a
TOTAL NUMBER OF EMPLOYEES
$100,000–$109,999
$110,000–$119,999
$120,000–$129,999
$130,000–$139,999
$140,000–$149,999
$150,000–$159,999
$160,000–$169,999
$170,000–$179,999
$180,000–$189,999
$190,000–$199,999
$200,000–$209,999
$210,000–$219,999
$220,000–$229,999
$230,000–$239,999
$240,000–$249,999
$250,000–$259,999
7
5
1
4
1
4
1
–
1
1
1
–
–
–
1
2
a. The table includes base salaries, short-term incentives and vested or exercised
long-term incentives. The table does not include: long-term incentives
that have been granted and have not yet vested; and doesn’t include any
repayable loan made to employees under the Salary Sacrifice Scheme. Where
the individual is a KiwiSaver member, contributions of 3% of gross earnings
towards that individual’s KiwiSaver scheme are included in the above table.
Where the individual works in Australia contributions of 9.5% of gross earnings
towards Australian Superannuation are included in the above table.
Page 55
Shareholder information
The total number of issued ordinary voting securities of Serko as at 31 March 2015 was 62,699,382.
SUBSTANTIAL PRODUCT HOLDERS
According to notices given to Serko under the Financial Markets Conduct Act 2013 (and Securities Markets Act), the following persons
were substantial product holders as at 31 March 2015:
NUMBER OF
ORDINARY SHARES
IN WHICH ‘RELEVANT
INTEREST’ IS HELD
42,012,181
24,762,020
% OF CLASS
HELD AT DATE
OF LAST NOTICE
68.451%
39.493%
13,907,604
22.660%
12,370,010
20.155%
NUMBER OF
SHAREHOLDERS
TOTAL NUMBER
OF SHARES
%
ISSUED SHARES
99
337
132
174
28
39
81,524
1,104,784
1,114,696
4,165,480
2,066,917
0.13
1.76
1.78
6.64
3.3
54,165,981
86.39
SUBSTANTIAL PRODUCT HOLDER
Serko Limited
Geoffrey Hosking
Darrin Grafton
Robert Shaw and Sarah Shaw
SPREAD OF SHARES
Set out below are details of the spread of shareholders of Serko as at 1 May 2015:
RANGE
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 100,000
100,001 and over
Page 56
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 TWENTY LARGEST SHAREHOLDERS
Set out below are details of the 20 largest shareholders of Serko as at 1 May 2015:
RANK
HOLDER NAME
1
2
3
4
5
6
7
8
9
Robert James Shaw & Sarah Elizabeth Shaw
Darrin Grafton & Geoffrey Robertson Ashley Hosking
New Zealand Central Securities Depository Limited
Simon John Botherway & MSH Trustee (Arrow) Limited
Michael Thorburn
Robert Alan Hawker & Elizabeth Anne Hawker
Sherie Robyn Hammond
Donna Bailey
Philip Rodger Ball
10
Joanne Phipps
11
12
13
14
15
16
17
18
19
Serko Trustee Limited
Tracey Ann Shorter
FNZ Custodians Limited
John S Challis & AH Trustees (Challis Holdings) Ltd
Thomas Anthony Stanley
Investment Custodial Services Limited
Public Trust
Adam James De Baugh
Timothy Mark Bluett
20
Carolyn P Colbey & Geoffrey Robertson Ashley Hosking
HOLDING
12,370,010
12,370,010
8,434,543
2,034,091
1,537,594
1,537,594
1,537,594
1,537,594
1,537,594
1,345,972
1,323,564
1,152,041
876,408
865,762
480,210
479,971
401,882
383,244
365,625
346,305
%
19.73
19.73
13.45
3.24
2.45
2.45
2.45
2.45
2.45
2.15
2.11
1.84
1.40
1.38
0.77
0.77
0.64
0.61
0.58
0.55
Page 57
SUBSIDIARY COMPANY DIRECTORS
The following persons held office as directors of subsidiary companies as at 31 March 2015:
Serko Australia Pty Limited
Darrin Grafton
Robert Shaw
John Challis
Serko Trustee Limited
Timothy Bluett
Fiona Rockel
Serko Investments Limited
Darrin Grafton
Robert Shaw
Serko India Private Limited
Darrin Grafton
Robert Shaw
Yogita Chadha
As at 1 May 2015, Serko also has a representative office in China.
Except as stated below, there were no entries made in the subsidiary company Interest Registers during the financial reporting period:
COMPANY
Serko Trustee Limited
DIRECTOR
Timothy Bluett
Fiona Rockel
INTEREST DISCLOSURE (s140)
Is interested in the Serko Limited
Restricted Share Scheme for which Serko
Trustee Limited is the registered holder of
shares held on trust for employees.
NZX WAIVERS
No waivers have been sought from NZX Limited, or relied upon by Serko, during the 12-month period preceding the date two months
before the publication of this Annual Report.
DONATIONS
Serko made no donations during the financial reporting period.
Page 58
governance, remuneration and Statutory disclosureSSerko Limited annual report 2015 Serko Limited annual report 2015
Glossary
Asia Pacific
Vietnam, 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
AUD or A$
Australian dollar
Australasia
New Zealand and Australia for the
purposes of this Annual Report
Board or Board
of Directors
The board of directors of Serko
CEO
CFO
Cloud or
cloud-based
Chief Executive Officer
Chief Financial Officer
Cloud computing is when the software
and associated data is hosted outside the
customer’s premises and delivered over a
network or the Internet as a service, which
allows immediate access to the software
Company or
Serko
Serko Limited, a New Zealand
incorporated company that owns a
wholly-owned subsidiary in Australia
FTE
FX
FY
GST
IFRS
Incharge or
Incharge
Expense
Management
business
Full time equivalent
Foreign exchange
Financial year ended, or ending, on
31 March (unless otherwise stated)
Goods and Services Tax
International Financial Reporting Standards
The Australian based travel management
expense business, Incharge Group Pty
Limited, that Serko acquired on
20 December 2013
NZ
New Zealand
NZD or NZ$
New Zealand dollar
NZ GAAP or
GAAP
New Zealand Generally Accepted
Accounting Practice
NZ IAS
New Zealand equivalents to International
Accounting Standards
NZ IFRS or IFRS
New Zealand equivalents to International
Financial Reporting Standards
NZX
NZX 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 Board
The New Zealand main board equity
security market operated by NZX
PFI
Prospective Financial Information
Prospectus or
IPO Prospectus
The prospectus in respect of Serko’s IPO
dated 26 May 2014
R&D
Research and Development expenditure
Serko or the
Company
Serko Mobile
Serko Limited
Serko’s mobile app, to be introduced in
FY15, for iPhones and Android devices
that gives users access to information
and travel booking functionality on their
mobile devices
Serko Online
Serko’s cloud-based online travel booking
solution for large organisations
TMC, Travel
Agency or Travel
Management
Company
A travel management company that
provides specialised travel related services
to corporate customers
Independent
Directors
Simon Botherway, Claudia Batten and
Clyde McConaghy
USD or US$
United States dollar
IPO
Listing
Initial Public Offering
The date Serko shares started trading on
the NZX Main Board, 24 June 2014
$
All figures are in New Zealand dollars,
unless otherwise stated
Page 59
Serko Limited annual report 2015
corporate directory and shareholder enquiries
Serko is a company incorporated with limited liability under the
New Zealand Company Act 1993 (Companies Office registration
number 1927488).
Registered Office
Directors
(as at date of this
annual report)
Share Registrar
Saatchi Building
Unit 14D
125 The Strand
Parnell
Auckland 1010
New Zealand
+64 9 309 4754
www.serko.com
Simon Botherway (Chairman)
Claudia Batten
Robert (Clyde) McConaghy
Darrin Grafton
Robert Shaw
Link Market Services Limited
Level 7, Zurich House
21 Queen Street
Auckland 1010
New Zealand
+64 9 375 5998
serko@linkmarketservices.co.nz
Auditor
Ernst & Young
Auckland
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