Serko Limited
Annual Report
For the period ended 31 March 2016
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 and Statutory Disclosures
Glossary
Corporate Directory
1
2
4
8
10
43
54
55
key dates
23 AUG 2016
ANNUAL MEETING
30 SEP 2016
HALF-YEAR END
23 NOV 2016
HALF-YEAR RESULT
ANNOUNCED
31 MAR 2017
FINANCIAL YEAR END
THIS REPORT IS DATED 1 JUNE 2016 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 2016
Serko Limited annual report 2016
KEY HIGHLIGHTS
YEAR-ON-YEAR PRODUCT USAGE
REVENUE GROWTH 47%
NEW SME TRAVEL BOOKING SERVICE
TO LAUNCH MID 2017
ACQUISITION AND INTEGRATION OF
ARNOLD TRAVEL TECHNOLOGY
$8.1 MILLION CAPITAL RAISE TO
SUPPORT LAUNCH OF SERKO.TRAVEL
LAUNCH OF BEST RATE OF THE DAY
TRANSACTION GROWTH 54%
BEST RATE
OF THE DAY
Page 1
CEO and ChairMAN’S Letter
WE ARE FOCUSED ON
MAXIMISING THE VALUE
OF YOUR INVESTMENT
Dear Shareholder
Introduction
In the year ended 31 March 2016 (FY16) Serko has delivered
continued growth in transactions and revenues. The acquisition
of Arnold Travel Technology (“Arnold”) in May 2015 allowed us to
accelerate the acquisition and migration of customers from a rival
platform and to enter into an important strategic relationship
with Expedia Inc, the vendor of Arnold.
Despite the strong growth in underlying transactional fee revenue,
aggregate revenue did not meet our guidance for the financial
year. Commercial negotiations with respect to the introduction
of new products and associated revenue streams proved to
be more complex than anticipated and caused a delay to the
commencement of revenues. We also experienced a decline in
ad-hoc client work orders (customised development revenues)
which, together, negatively impacted our total revenue result.
However, this allowed us to redirect our internal resources to
focus on our strategic R&D roadmap. Consequently, the requisite
products, innovations and enhancements on our roadmap are
now in place, with the exception of SME which will be delivered
soon, and we expect these to start contributing to revenue
growth in the 2017 financial year (FY17).
During FY16, we identified a new strategic opportunity in the small
to medium business (SME) market and developed a powerful new
proposition that is expected to launch in the middle of FY17 to
address this market. We have entered into partnerships with Xero
and a select group of TMC partners to target this market.
Financial Highlights
For the 12 months of FY16, total income amounted to $14.4m
($13.1m excluding grant income). Recurring product revenues (from
Serko Online and Serko Incharge) increased by 47% to $12.2m
in the financial year. The majority of our revenue growth during
the year came from transactional revenue derived from online
travel bookings which increased by 54% in volume in the period,
including the Arnold acquisition. Revenue mix in FY16 comprised
93% derived from recurring transactional fees and usage revenues
compared to 80% in FY15.
Total revenue of $13.1m (excluding grant income) was 27% higher
than the same period in FY15. Customised development revenues,
Page 2
which are not a core focus for the business, declined by $1.3m
from the previous year This provided the opportunity to focus
our resources on developing the new SME (Small to Medium
Enterprise) platform which is expected to generate revenues in
the second half of FY17.
At 31 March 2016 there was committed SME licensing revenue of
$0.2m which under accounting rules could not be recognised in
the FY16 result.
In line with our plans, the loss before tax reduced from the
previous year by $0.6m to $5.9m. This was attributable to limiting
the growth in the expense base to a total of $20.7m which was
up 14.8% compared to the previous year. Excluding depreciation,
amortisation and impairment charges, operating expenses
increased by 14% to $19.8m compared to the previous year.
The investment in R&D (total of expensed and capitalised) in FY16
amounted to $6.3m, an increase of $0.6m from the previous year.
Financial Position
During the financial period Serko successfully completed a capital
raise of $8.1m at 84c per share through an institutional placement
and a retail share purchase plan. This capital will assist to fund
business operations and support the launch of our new Small
and Medium Business (SME) offering in FY17. We are excited and
grateful to our shareholders for their continued support and
confidence in our vision.
Cash reserves at 31 March 2016 were $7.1m.
Performance Drivers in FY16
Throughout the year ended 31 March 2016 (FY16), Serko has
concentrated on executing its strategy of increasing average
revenue per transaction, whilst growing the size of the customer
base.
Our content-led strategy generates additional revenues by
offering the traveller additional content such as hotel rooms
sourced from our preferred content partners. This strategy aims
to increase average revenue per transaction or booking. We now
have agreements with reseller partners, representing over a third
of Serko’s total transaction volumes, to offer this content through
to the underlying corporate users.
IntroductionSerko Limited annual report 2016 We expect average revenue per transaction to increase through
FY17 as the proposition gains awareness and traction with end-
user customers. The process of securing reseller participation took
longer to complete than expected due to the complex nature of
the commercial negotiations with partners and content providers.
During the financial year we also introduced a new Expense
Management reseller incentive program with our TMC channel
for our Serko Incharge expense management product to increase
awareness and sales of our Incharge product and its key features.
We believe we can generate additional sales leads through our
established channels, and the program has been received well and
is starting to generate a growing volume of leads into the sales
pipeline.
In May 2015, Serko acquired the business and assets of Arnold
Travel Technologies Pty from Expedia Inc. for AUD$0.1m. This
allowed us to accelerate the acquisition and migration of
customers from a rival platform and to enter into an important
strategic relationship with Expedia Inc. In the 11 months to
31 March 2016, Arnold contributed NZ$1.3m in revenue. We are
making good progress in migrating Arnold’s customers onto the
Serko platform and expect to decommission the Arnold platform
in mid FY17.
Performance Drivers for FY17
Our purpose remains to transform the way businesses manage
travel and expense, enabling their staff to experience stress-free
travel so they can always be at their most productive, whilst
delivering tangible business benefits to the organisations that
choose to adopt, support, partner with or sell our solutions.
We aim to do this by:
• Supporting our reseller base to continue to grow their business
through new client wins and client retention. We will focus
on ensuring our products offer compelling value and by
introducing our new products, services and a broad selection of
content that help our resellers deliver to their customer needs.
• Continuing to attract new resellers and partners to Serko.
• Entering the SME market in Australia and New Zealand to
create a new, emerging and leveraged business that gives us
the path to extend our market reach and recurring revenue base.
• Focussing on those areas of the business that create value
for shareholders. We have invested heavily in R&D and we
are now in a position of having a strong product suite. The
decommissioning of Arnold along with a reduced requirement
for R&D spend presents Serko with flexibility to better align
the cost base with revenue to ensure that we utilise our capital
resources appropriately.
We aim to manage our cost base, financial and capital position to
achieve sustainable monthly break-even profitability and positive
cash-flow by the end of the FY17 year.
Looking Forward
Serko is the leading online booking platform for managed
corporate travel in the Australasian market. We are very proud
that our technology, innovation and services are so widely
adopted and valued within the industry. Our success relies
upon the success of our customers – both resellers and end-
user corporate clients – and we are committed to ensuring our
capabilities and relationships facilitate that mutual success.
However, we will take a rational approach to areas of the business
that are not meeting our expectations to ensure that our
resources are allocated to those parts of the business that will
deliver long-term value to shareholders.
The next financial year, FY17, will be an important one for Serko
and we look forward to working with all our stakeholders to
deliver value for our customers, partners and shareholders.
Yours sincerely
Simon Botherway
Chairman
Darrin Grafton
Chief Executive Officer
Page 3
serko limited annual report 2016
about serko
Best rate of the day
BEST RATE
OF THE DAY
A better way to search and
buy hotel accommodation.
With recent changes to health and safety it’s now critical that
organisations know where employees are staying whenever
they are out of the office on business. However, getting
employees to tow the party line when it comes to hotels has
always been a big challenge for travel managers, as employees
are happy to book flights through the mandated booking tool
but often go off to sites like Expedia and Booking.com to book
their accommodation.
Employees like Expedia (etc.) because it gives them more
options and there’s a familiarity that they like. To minimise
what the industry terms ‘leakage’ (hotel bookings going
outside of the defined channels) Serko has integrated content
from Expedia, Booking.com and Wotif into Serko Online so that
employees can still get what they want, from the branded supplier
that they trust, without leaving the managed travel program.
With multiple suppliers inside the portal, Serko has made it
possible for travel bookers to compare prices and availability
from multiple providers quickly and easily. This is a very powerful
concept that’s well proven in the leisure world, with sites like
Trivago now having significant market share. By removing any
incentive for employees to leave the portal, Serko has solved
one of the most challenging problems in corporate travel.
More choice, more availability, better rates every day
COMPARE PRICES AND AVAILABILITY
BETWEEN PROVIDERS INSTANTLY
ACCESS TO MORE THAN 12,000 PROPERTIES IN
AUSTRALIA AND NZ FROM THE 3 LARGEST PROVIDERS
HIGHLY VISIBLE BEST RATE
OF THE DAY ICON
FULL CORPORATE TRAVEL
POLICY OVERLAY
Benefits
RAPID REDUCTION IN HOTEL LEAKAGE
AND BETTER RISK MANAGEMENT
COST SAVINGS THROUGH IMPROVED
SUPPLIER MANAGEMENT
REDUCED RISK OF HEALTH AND SAFETY
LEGISLATION NON-COMPLIANCE
MORE SATISFIED EMPLOYEES WHO SPEND
LESS TIME BOOKING AND MANAGING TRIPS
Page 4
serko limited annual report 2016
about serko
Best rate of the day
Page 5
about serko
board of directors
// SIMON BOTHERWAY
INDEPENDENT NON-EXECUTIVE CHAIRMAN, NEW ZEALAND
Appointed 30 April 2014
Simon is based in New Zealand. He holds a BCom, as well as the US-based Chartered Financial Analyst (CFA)
designation. Simon has extensive experience in corporate governance, banking and investment management.
In 2002, Simon co-founded Brook Asset Management and was Chairman from 2004 to 2008. He is also a past
President of the CFA Society of New Zealand and was a member of the CFA Asia-Pacific Advocacy Committee.
Simon was appointed as a member of the Securities Commission in 2009 and was appointed by the New Zealand
Government to chair the Financial Markets Authority Establishment Board in 2010. Simon is currently also a
Director of the Callaghan Innovation Board.
// CLAUDIA BATTEN
INDEPENDENT NON-EXECUTIVE DIRECTOR, UNITED STATES
Appointed 30 April 2014
Claudia is based in the United States. She holds an LLB (Hons) and BCA. Claudia has been a founding member
of two highly successful entrepreneurial ventures. Starting with Massive Incorporated, a network for advertising
in video games, she helped pioneer ‘digital’ as a media buy. Massive was sold to Microsoft in 2006. In 2009 she
co-founded Victors & Spoils (‘V&S’), the first advertising agency built on the principles of crowdsourcing.
V&S was majority acquired by French holding company Havas Worldwide in 2011.
Claudia has achieved great success in the US market but remains a strong supporter of the New Zealand
start-up scene. Claudia was most recently appointed to run North American operations for New Zealand
Trade & Enterprise (NZTE), supporting New Zealand businesses as they grow internationally into that market.
// CLYDE MCCONAGHY
INDEPENDENT NON-EXECUTIVE DIRECTOR, AUSTRALIA
Appointed 30 April 2014
Clyde is based in Australia. He holds a BBus and MBA from Cranfield University (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
Appointed 5 April 2007
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
Appointed 5 April 2007
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 2016 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 (Spark). Prior to joining Serko, Tim served in
a number of senior leadership roles at Telecom New Zealand (now Spark) 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 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
TOTAL INCOME $14.4M UP 22% FROM PREVIOUS YEAR
Total revenue $13.1m
Grant income $1.3m
ADDITIONAL NOTES TO ASSIST WITH THE
UNDERSTANDING AND INTERPRETATION OF
THE FINANCIAL STATEMENTS (FROM PAGE 10):
TOTAL REVENUE $13.1M UP 27% FROM PREVIOUS YEAR
Serko Online Revenue $10.9m up 49%
Incharge Revenue $1.3m up 37%
Billable Services Revenue $0.9m down 55%
REVENUE MIX 93% FROM RECURRING PRODUCT AND
USAGE UP FROM 80% PREVIOUS YEAR
TRANSACTION GROWTH 54% FROM PREVIOUS YEAR
ACQUISITION OF ARNOLD 1 MAY 2015 FOR A$100K
Revenue contribution to Serko Online $1.3m
Transactions 16% of total
Migration to Serko Online to complete by September 2016
EXPENSES FROM ORDINARY ACTIVITIES (EXCLUDING
DEPRECIATION/AMORTISATION) $19.8M UP 14% FROM
PREVIOUS YEAR
Salaries/Remuneration $13.9m up 15%
Other opex (excluding depreciation) $5.9m up 3%
RESEARCH AND DEVELOPMENT EXPENDITURE $6.3M UP 9%
Internal (opex) $5.5m
External (capex) $0.8m
EMPLOYEES 127 DECREASE OF 6 IN THE YEAR
CASH RESERVES $7.1M
NET LOSS BEFORE TAX $5.9M DECREASED FROM
$6.4M PREVIOUS YEAR
EBITDA1 LOSS $5.4M DECREASED FROM $5.6M
PREVIOUS YEAR
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 that
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.
EXPENSES FROM ORDINARY ACTIVITIES
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.
1 EBITDA is a non GAAP measure representing Earnings or Losses before Interest
(net Finance income/cost), Tax, Depreciation, Amortisation and Impairments.
SELECTED OPERATIONAL METRICS
Total Revenue Growth (%)
Revenue Growth – Online Booking Services (%)
Operating Costs (excl depreciation & amortisation) growth (%)
No. of transactions (indexed, where FY13=100)
Transaction growth
Product/Recurring revenue as % total revenue
Employees (number at end of year)
Average Revenue per Full-time equivalent (NZ$’000)
FY16
27%
49%
14%
275
54%
93%
127
101
FY15
55%
62%
105%
179
45%
80%
133
94
FY14
39%
12%
62%
123
23%
71%
87
100
FY13
27%
41%
35%
100
35%
84%
47
119
Research and Development Costs – Expense and Capex (NZ $000)
6,268
5,762
3,387
2,340
Page 8
serko limited annual report 2016 FINANCIAL METRICS
NZD $’000
Operating Revenue
Serko Online
Serko Incharge
Services
Other Income
TOTAL INCOME
FY16 ACT
AUDITED
FY15 ACT
AUDITED
CHANGE %
13,122
10,916
1,252
954
1,296
10,361
7,342
911
2,109
1,413
14,418
11,775
27%
49%
37%
-55%
-8%
22%
14%
3%
8%
Operating Expenses (exc D&A)
(19,784)
(17,324)
(5,366)
(5,549)
(5,943)
(6,433)
7,980
5,748
EBITDA (loss)1
Net Loss Before Tax
Working Capital2
REVENUE TREND
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Serko Online
Incharge
Services
ONLINE BOOKING TREND
Notes:
1 EBITDA is a non GAAP measure representing Earnings
or Losses before Interest (net Finance income/cost), Tax,
Depreciation, Amortisation and Impairments.
Management use EBITDA as a measure of performance as
it is a useful indicator and approximation of operating net
cash flow in a given period. It excludes expenses or cash flows
connected with investment, taxation or capitalisation.
2 Working Capital is defined as net current assets. Current assets
(including cash) less current liabilities.
“REVENUE MIX 93% RECURRING”
In this chart recurring revenues comprise product
revenues (i.e. Serko Online and Serko Incharge), and
non-recurring revenues comprise Billable Services.
Please refer to the notes on the opposite page for a
description of each of those revenue categories.
“TRANSACTION GROWTH
54% IN FY16 AND 40%
CAGR3 SINCE FY13“
FY13
FY14
FY15
FY16
3 Compound annual growth rate.
Page 9
serko limited annual report 2016
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
17–42
Page 11
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 Group. We have no other relationship with, or interest in,
the Group.
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 42 present
fairly, in all material respects, the financial position of the
Group as at 31 March 2016 and the financial performance and cash
flows of the Group for the year then ended in accordance with
New Zealand Equivalents to International Financial Reporting
Standards and International Financial Reporting Standards.
25 May 2016
Auckland
Independent Auditor’s Report
To the Shareholders of Serko Limited
REPORT ON THE FINANCIAL STATEMENTS
We have audited the group financial statements of Serko Limited
and its subsidiaries (“the Group”) on pages 13 to 42, which
comprise the statement of financial position of the Group as at
31 March 2016, and the statement of comprehensive income,
statement of changes in equity and statement of cash flows for
the year then ended of the Group, and a summary of significant
accounting policies and other explanatory information.
This report is made solely to the company’s shareholders, as a
body. Our audit has been undertaken so that we might state to
the company’s shareholders those matters we are required to
state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company’s shareholders as a body, for our audit work, for this
report, or for the opinions we have formed.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL
STATEMENTS
The directors are responsible on behalf of the company for the
preparation and fair presentation of the financial statements in
accordance with New Zealand Equivalents to International
Financial Reporting Standards and International Financial
Reporting Standards, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.
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
Page 12
performanceSerko Limited annual report 2016
Statement of comprehensive income
FOR THE YEAR ENDED 31 MARCH 2016
Revenue
Other Income
Total revenue & other income
Expenses from ordinary activities
Selling and marketing expenses
Remuneration & benefits
Administration expenses
Other expenses
Finance income
Finance costs
Loss before income tax
Income tax expense
Net loss for the period
Other comprehensive income/(loss) to be reclassified
to profit or loss in subsequent periods (net of tax)
Movement in foreign currency reserve
Total comprehensive loss for the year
Loss for the year attributable to:
Equity holders of the parent
Total comprehensive loss for the year attributable to:
Equity holders of the parent
Earnings per share
NOTES
GROUP
4
4
5
5
5
6
2016
$
2015
$
13,121,566
10,361,202
1,296,264
1,413,182
14,417,830
11,774,384
(1,267,001)
(988,848)
(13,940,662)
(12,020,829)
(4,405,230)
(4,690,503)
(1,122,431)
(368,672)
(20,735,324)
(18,068,852)
430,140
209,382
(55,832)
(348,218)
(5,943,186)
(6,433,304)
(290,930)
(114,031)
(6,234,116)
(6,547,335)
(41,721)
144,247
(6,275,837)
(6,403,088)
(6,234,116)
(6,547,335)
(6,275,837)
(6,403,088)
• 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 of the parent
21
21
$(0.10)
$(0.10)
$(0.10)
$(0.10)
The accompanying notes form part of these financial statements.
Page 13
Statement of changes in equity
FOR THE YEAR ENDED 31 MARCH 2016
NOTE
CONTRIBUTED
EQUITY
SHARE-BASED
PAYMENT
RESERVE
FOREIGN
CURRENCY
RESERVE
ACCUMULATED
LOSSES
$
$
$
$
TOTAL
$
GROUP
Balance as at 1 April 2015
Net loss for the period
Other comprehensive income/(loss) to be
reclassified to profit or loss in subsequent
periods (net of tax)
Total comprehensive loss for the year
Transactions with owners
Issue of share capital
Cancellation of shares in Salary
Sacrifice Scheme
Cost of equity issued
Share-based payments
Interest on convertible notes
15
15
15
15
17,603,575
370,875
148,606
(10,212,663)
7,910,393
–
–
–
8,096,000
(9,900)
(504,866)
–
–
–
–
–
–
–
–
516,873
–
–
(6,234,116)
(6,234,116)
(41,721)
–
(41,721)
(41,721)
(6,234,116)
(6,275,837)
–
–
–
–
–
–
–
–
–
–
8,096,000
(9,900)
(504,866)
516,873
–
Balance as at 31 March 2016
25,184,809
887,748
106,885
(16,446,779)
9,732,663
Balance as at 1 April 2014
Net loss for the period
Other comprehensive income/(loss) to be
reclassified to profit or loss in subsequent
periods (net of tax)
Total comprehensive loss 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
15
15
15
15
15
239,835
–
–
–
156,644
(396,479)
19,244,848
(1,641,274)
–
–
–
–
–
–
–
–
–
–
370,875
–
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
The accompanying notes form part of these financial statements.
Page 14
performanceSerko Limited annual report 2016 Statement of financial position
AS AT 31 MARCH 2016
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
2016
$
2015
$
11
7
8
9
10
12
14
6
12
14
15
15
7,117,622
4,486,952
3,968,520
3,417,736
5,405
116,828
11,091,546
8,021,516
612,679
997,278
1,439,224
1,287,342
2,051,903
2,284,620
13,143,449
10,306,136
2,556,927
1,662,352
314,884
344,133
180,736
314,038
3,215,944
2,157,126
57,860
136,982
–
194,842
60,311
174,202
4,104
238,617
3,410,786
2,395,743
25,184,809
17,603,575
887,748
106,885
370,875
148,606
(16,446,779)
(10,212,663)
9,732,663
7,910,393
13,143,449
10,306,136
For and on behalf of the Board who authorised these financial statements for issue on 25 May 2016.
Simon Botherway
Chairman
Darrin Grafton
Chief Executive Officer
The accompanying notes form part of these financial statements.
Page 15
NOTE
GROUP
2016
$
2015
$
12,464,132
9,435,812
78,178
180,576
1,381,800
1,529,836
(213,877)
(59,436)
(18,161,444)
(17,282,736)
(34,754)
(392,550)
34,008
(49,300)
(4,451,957)
(6,637,798)
(64,760)
(655,634)
(677,676)
(782,695)
(742,436)
(1,438,329)
8,096,000
17,514,738
(470,128)
(1,361,911)
–
–
(1,819,270)
(780,000)
7,625,872
13,553,557
2,431,479
5,477,430
199,191
4,486,952
(48,965)
(941,513)
7,117,622
4,486,952
11
7,117,622
4,486,952
7,117,622
4,486,952
Statement of cash flows
FOR THE YEAR ENDED 31 MARCH 2016
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)
Net cash flows used in operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles
Net cash flows used in investing activities
Cash flows from financing activities
Share issue
Cost of new share issue
Repayment of shareholder loans
Repayment of loans
Net cash flows from financing activities
Net increase (decrease) in total cash
Net foreign exchange difference
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash and cash equivalents comprises the following:
Cash at bank and on hand
The accompanying notes form part of these financial statements.
Page 16
performanceSerko Limited annual report 2016 Notes to the financial statements
FOR THE YEAR ENDED 31 MARCH 2016
1 CORPORATE INFORMATION
c) Statement of compliance
The financial statements of Serko Limited (‘the company’) and
subsidiaries (‘the group’) were authorised for issue in accordance
with a resolution of directors.
The company is a limited liability company domiciled and
incorporated in New Zealand under the Companies Act 1993. Its
registered office is at Unit 14d, 125 The Strand, Parnell, Auckland.
The group is involved in the provision of computer software
solutions for corporate travel. The group is headquartered in
Auckland, New Zealand.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below and
within this notes section. These policies have been consistently
applied to all the years presented, unless otherwise stated.
a) Basis of preparation
The financial statements have been prepared in accordance with
generally accepted accounting practice in New Zealand and the
requirements of the Companies Act 1993. 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 group is 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.
b) Going Concern
The directors have carefully considered the ability of the group
to continue to operate as a going concern for at least the next
12 months from the date the financial statements are authorised
for issue. It is the conclusion of the directors that the group will
continue to operate as a going concern and the financial
statements have been prepared on that basis. In reaching their
conclusion, the directors have considered the following factors:
• The $8.1m capital raise completed between December 2015
and February 2016 provides a sufficient level of headroom to
help support the business for at least the next twelve months
• The FY17 budget has been prepared to achieve monthly
break-even and positive net cash flow by the end of the
financial year
• The directors have made due enquiry into the appropriateness
of the assumptions underlying the budgetary forecasts
• In approving the FY17 budget, the directors have considered
detailed contingency plans presented by the management that
can be implemented in the event that adverse variances in
performance versus budget exceed certain thresholds.
A number of significant judgements have been made in preparing
the budget for FY17, the most significant relate to the timing and
level of uptake of demand for new products and services that are
expected to launch or grow significantly during the year. However,
in view of the contingencies and risk mitigations that have been
identified, the directors consider there is a reasonable expectation
that the group can continue to operate as a going concern for the
foreseeable future.
The financial statements have been prepared in accordance
with NZ GAAP. They comply with New Zealand equivalents
to International Financial Reporting Standards and
International Financial Reporting Standards, as appropriate
for profit-oriented entities.
d) New accounting standards and interpretations
NZ IFRS standards that have recently been issued or amended but
are not yet effective and have not been adopted by the Group are:
NZ IFRS 9 Financial Instruments, effective for accounting periods
beginning on or after 1 January 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 2018.
NZ IFRS 16 Leases, effective for accounting periods beginning on
or after 1 January 2019.
The group is still assessing the impact of the above standards
issued and not yet effective and the current impact is not known.
e) Basis of consolidation
The consolidated financial statements comprise the financial
statements of Serko Limited and subsidiaries as at and for the
year ended 31 March each year.
Control is achieved when the group is exposed, or has rights,
to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the
investee. Specifically, the group controls an investee if and only
if the group has:
• Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee
• Exposure, or rights, to variable returns from its involvement
with the investee
• The ability to use its power over the investee to affect its returns.
When the group has less than a majority of the voting or similar
rights of an investee, the group considers all relevant facts
and circumstances in assessing whether it has power over an
investee, including:
• The contractual arrangement with the other vote holders of
the investee
• Rights arising from other contractual arrangements
• The group’s voting rights and potential voting rights.
The group reassesses whether or not it controls an investee
if facts and circumstances indicate there are changes to one
or more of the three elements of control. Consolidation of a
subsidiary begins when the group obtains control over the
subsidiary and ceases when the group loses control of the
subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
financial statements from the date the group gains control
until the date the group ceases to control the subsidiary.
Page 17
A change in the ownership interest of a subsidiary, without a loss
of control, is accounted for as an equity transaction. If the group
loses control over a subsidiary, it:
• Derecognises the assets (including goodwill) and liabilities
of the subsidiary
• Derecognises the carrying amount of any non-controlling
interests
• Derecognises the cumulative translation differences recorded
in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously
recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate, as would be required if the
group had directly disposed of the related assets or liabilities.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The acquisition method of
accounting involves recognising at acquisition date, separately
from goodwill, the identifiable assets acquired, liabilities assumed
and any non-controlling interest in the acquiree. The identifiable
assets acquired and liabilities assumed are measured at their
acquisition date fair values. Acquisition-related costs are
expensed as incurred and recognised in profit or loss.
The difference between the above items and the fair value of the
consideration is recorded as either goodwill or gain on bargain
purchase. After initial recognition, goodwill is measured at cost
less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the group’s
cash-generating units expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Goodwill is tested annually for impairment, or immediately if
events or changes in circumstances indicate that it might be
impaired, and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed.
Any gain on bargain purchase is recognised immediately on
acquisition to profit and loss.
Inter-company transactions, balances and unrealised gains and
losses on transactions between group companies are eliminated.
Non-controlling interests are allocated their share of comprehensive
income after tax in the statement of comprehensive income and
are presented within equity in the consolidated statement of
financial position, separately from the equity of the owners of
the parent.
f) Foreign currency translation
I) FUNCTIONAL AND PRESENTATION CURRENCY
Items included in these financial statements are measured using
the currency of the primary economic environment in which the
group operates (‘the functional currency’). These financial
statements are presented in New Zealand dollars, which is the
group’s presentation and functional currency.
II) TRANSACTIONS AND BALANCES
Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of
exchange ruling at balance date. Non-monetary items measured
in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value was determined.
Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year end exchange
rates of monetary assets and liabilities denominated in foreign
currencies, are recognised in profit or loss.
g) Financial instruments
Financial assets in the scope of NZ IAS 39 Financial Instruments:
Recognition and Measurement are classified as either loans and
receivables or available-for-sale financial assets. When financial
assets are recognised initially they are measured at fair value plus
directly attributable transaction costs. The group determines the
classification of its financial assets on initial recognition and,
when allowed and appropriate, re-evaluates this designation
at each financial year end.
I) LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the group provides money, goods or
services directly to a debtor with no intention of selling the
receivable. Such assets are subsequently carried at amortised
cost using the effective interest method. Gains and losses are
recognised in profit or loss when the loans and receivables are
derecognised or impaired, as well as through the amortisation
process.
The group’s loans and receivables comprise trade receivables,
loans and GST receivable.
The group has no financial assets classified as available for sale.
II) FINANCIAL LIABILITIES
Financial liabilities are classified as ‘other financial liabilities’.
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Other financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised 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.
Page 18
performanceSerko Limited annual report 2016 III) IMPAIRMENT OF FINANCIAL ASSETS
h) Borrowing costs
The group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets
is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that has occurred
since the initial recognition of the asset (an incurred ‘loss event’)
and that loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include
indications that the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy
or other financial reorganisation and observable data indicating
that there is a measurable decrease in the estimated future cash
flows, such as changes in arrears or economic conditions that
correlate with defaults.
IV) FINANCIAL ASSETS CARRIED AT AMORTISED COST
For financial assets carried at amortised cost, the group first
assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant
or collectively for financial assets that are not individually
significant. If the group determines that no objective evidence
of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and
collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment
loss is, or continues to be, recognised are not included in a
collective assessment of impairment.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The present value of
the estimated future cash flows is discounted at the financial
asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment
loss is the current effective interest rate (EIR).
The carrying amount of the asset is reduced through the use of
an allowance account and the loss is recognised in profit or loss.
Interest income continues to be accrued on the reduced carrying
amount and is accrued using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment
loss. The interest income is recorded as finance income in the
income statement. Loans, together with the associated allowance,
are written off when there is no realistic prospect of future recovery
and all collateral has been realised or has been transferred to the
group. If, in a subsequent year, the amount of the estimated
impairment loss increases or decreases because of an event
occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting
the allowance account. If a write-off is later recovered, the
recovery is credited to finance costs in the income statement.
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised
as part of the cost of that asset. A qualifying asset is one that
takes six months or longer to prepare for its intended use or sale.
Other borrowing costs are expensed when incurred.
i) Other taxes
Revenues, expenses and assets are recognised net of the amount
of GST except where the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable. All receivables
and payables are stated GST inclusive.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the statement of financial position.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The preparation of the group’s consolidated financial statements
requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying disclosures.
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 first tranche of shares
granted under the restricted share plan in June 2014 to employees
using the listing price (Initial Public Offering on 24 June 2014)
of the shares when granted. Management considered this a
reasonable basis of fair value, given that the grant date and
listing date were concurrent. The fair value applied to subsequent
shares granted under the restricted share plan is the volume
weighted average price (VWAP) of shares traded in the previous
20 trading days preceding the date of grant. Vesting of the shares
is reviewed periodically to determine that the assumptions around
vesting dates and employees who have left or joined the group 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 2016, the carrying amount of capitalised development
costs was $407,019 (2015: $85,526).
This amount includes significant investment in the development
of an innovative mobile application for Serko’s corporate travel
platform and a small to medium enterprise (SME) application.
Page 19
FUNCTIONAL CURRENCY
I) REVENUE FROM TRANSACTION AND USAGE FEES
The group periodically reviews the functional currency for
reporting purposes. Based on the assessment of the NZ IAS21
criteria, management believes 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) Research and development grant funding is in NZD
c) NZD is the main currency for labour, operating cost and
capital expenditure.
Revenue from transaction and usage fees is recorded at the
time travel or expense transactions are processed through
Serko’s platforms.
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.
IMPAIRMENT OF INTANGIBLE OR NON-FINANCIAL ASSETS
III) INTEREST REVENUE
Management reviews the carrying value of intangible and
non-financial assets on an annual basis and in accordance
with NZ IAS 36. Consideration is placed on a number of factors,
depending on the specific asset in question, which may include
discounted cash flow forecasts, the ability to continue to generate
discrete cash flow and returns, any changes or anticipated changes
in the business or product circumstances and the nature of the
events that originally gave rise to the recognition of any non-
financial assets. Further details are disclosed in note 10 of the
financial statements in respect of the specific adjustments and
entries reflected in the 2016 financial year.
4 REVENUE & OTHER INCOME
Revenue is recognised and measured at the fair value of the
consideration received or receivable to the extent it is probable
that the economic benefits will flow to the group and the revenue
can be reliably measured. Revenue is disclosed net of credit notes,
rebates and discounts.
Revenue is recognised as interest accrues using the effective
interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying
amount of the financial asset.
IV) GOVERNMENT GRANTS
When the grant relates to an expense item, it is recognised
as income over the periods necessary to match the grant on a
systematic basis to the costs it is intended to compensate. 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.
NOTE
GROUP
2016
2015
11,829,990
8,145,613
965,034
2,065,894
326,542
149,695
13,121,566
10,361,202
13
1,296,264
1,413,182
1,296,264
1,413,182
Revenue – transaction and usage fees
Revenue – installation services
Other
Total operating revenue
Other income
Government grants
Page 20
performanceSerko Limited annual report 2016 5 EXPENSES
Operating loss before taxation includes the following expenses:
Auditor remuneration and advisory fees
Bad and doubtful debts written off
Amortisation of intangibles
Impairment 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
NOTES
GROUP
2016
2015
7
10
10
9
15
99,197
–
486,369
219,521
245,819
658,413
471,813
14,867
273,166
–
185,045
427,747
12,714,653
11,270,807
496,076
516,873
–
342,905
370,875
482,728
5,298,403
4,228,900
20,735,324
18,068,852
Research expenses (excluding capitalised development costs)
5,513,973
5,148,637
Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to an intangible asset.
R&D expenses include employee & contractor remuneration related to these activities.
Research expenditure includes expenditure that meets the definition of research expenditure as defined in NZ IAS 38.
Finance income and expenses includes:
Finance income
– Interest received
– Dividends received
– Foreign exchange (gains)/losses – net
Total finance income
Finance expenses
Foreign exchange losses – net
Interest expense
Other finance expenses
Total finance expenses
Total finance income and expenses
117,260
1,035
311,845
208,712
670
–
430,140
209,382
–
(196,046)
(55,088)
(744)
(121,320)
(30,852)
(55,832)
(348,218)
374,308
(138,836)
Page 21
5 EXPENSES – CONTINUED
AUDITOR REMUNERATION
The directors of Serko Limited appointed Ernst & Young as the auditor of the group for the year ended 31 March 2016.
Amounts received or due and receivable by:
Ernst & Young
– Audit of financial statements
– Other assurance-related services (a)
Total audit fees
– Tax services (b)
– Advisory services (c)
Total non-audit fees
GROUP
2016
2015
58,450
11,298
69,748
29,449
–
29,449
53,350
106,000
159,350
82,213
230,250
312,463
(a) Other assurance-related services include services for research and development assurance procedures and half year agreed upon procedures (2015: IPO statutory
audit fees and research and development assurance procedures).
(b) Tax services relate to compliance and other advisory services.
(c) Advisory services include transaction advisory services related to the IPO in 2015.
6 INCOME TAX
Current tax assets and liabilities for the current period are
measured at the amount expected to be recovered from or paid to
the taxation authorities based on the current period’s taxable
income. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted at the
reporting date.
Current income tax relating to items recognised directly in equity
is recognised in equity and not in the statement of comprehensive
income. Management periodically evaluates positions taken in the
tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred income tax is provided on all temporary differences at
the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences:
• except for a deferred income tax liability arising from the initial
recognition of goodwill;
• except where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible
temporary differences and unused tax losses, to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences can be utilised. The carry-
forward of unused tax losses can be utilised except where the
deferred income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor
taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at
each balance date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws)
relevant to the appropriate tax jurisdiction that have been
enacted or substantively enacted at the balance date.
Page 22
performanceSerko Limited annual report 2016
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% (2015: 28%)
– Non-deductible items
– Adjustments in respect of current income tax of previous years
– 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:
GROUP
2016
2015
272,483
198,842
87,215
–
359,698
198,842
(2,451)
(84,811)
(66,318)
(68,769)
290,930
–
(84,811)
114,031
(5,943,186)
(6,433,304)
(1,664,092)
(1,801,325)
82,711
20,898
62,369
12,949
17,250
22,739
11,155
1,768,250
1,859,076
7,846
290,930
-4.90%
5,136
114,031
-1.77%
Page 23
6 INCOME TAX – CONTINUED
Deferred income tax
Deferred income tax at 31 March relates to the following:
GROUP
Deferred income tax liabilities recognised
Intangibles
Unrealised foreign exchange
Deferred income tax asset recognised
Employee entitlements
Net deferred tax asset/(liability) recognised
Deferred income tax asset not recognised
Employee entitlements
Long term incentive 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
2016
2015
STATEMENT
STATEMENT OF
STATEMENT
STATEMENT OF
OF FINANCIAL
COMPREHENSIVE
OF FINANCIAL
COMPREHENSIVE
POSITION
INCOME
POSITION
INCOME
29,316
(65,780)
38,915
2,451
(19,996)
226,993
(11,204)
(15,765)
(2,051)
177,977
(71,161)
(65,780)
79,081
(57,860)
103,249
340,986
28,000
2,080
13,416
487,731
3,778,906
4,266,637
(100,477)
–
40,166
(60,311)
123,245
113,993
39,204
17,845
15,467
309,754
2,591,362
2,901,116
63,833
–
20,978
84,811
47,603
113,993
4
(16,536)
23,673
168,737
The ability to carry losses forward is subject to confirmation by taxation authorities.
Page 24
performanceSerko Limited annual report 2016 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 group’s receivables are denominated in the following currencies:
New Zealand dollars
Australian dollars
Singapore dollars
US dollars
Indian rupees
NOTE
GROUP
2016
2015
3,338,565
2,774,993
(7,429)
(63,733)
3,331,136
2,711,260
53,753
248,587
335,044
–
19,745
352,605
292,416
41,710
3,968,520
3,417,736
17
1,759,658
1,549,407
1,744,784
1,493,119
–
382
458,837
374,828
5,241
–
3,968,520
3,417,736
ALLOWANCE FOR IMPAIRMENT LOSS
Trade receivables are non-interest bearing and are generally on 30–60-day terms. A provision for impairment loss is recognised where
there is objective evidence that an individual trade receivable is impaired. No impairment loss has been recognised (2015: $14,867) by
the group in the current year. No individual amount within the impairment allowance is material.
At 31 March, the ageing analysis of trade receivables is as follows:
TOTAL
0 – 30 DAYS
31 – 60 DAYS
61 – 90 DAYS
91+ DAYS
2016 group
2015 group
3,338,565
2,697,473
2,774,993
2,236,358
247,045
228,182
83,145
204,744
310,901
105,708
Group receivables over 60 days of $394,046 (2015: $310,452) include a provision for impairment of $7,429. The balance of $386,617 is not
considered impaired as amounts outstanding are in accordance with agreed payment plans and payment record of the customers concerned.
NUTRAVEL LOAN RECEIVABLE
On 9 April 2014 an interest-bearing loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities Limited
to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable. The loan expires on 30 June 2016.
Financial Equities Limited is a company associated with directors Robert Shaw and Darrin Grafton.
Page 25
8 FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
The group uses derivatives in the form of forward exchange contracts (FECs) to reduce the risk that movements in the exchange rate
will affect the group’s New Zealand dollar cash flows. Such derivative financial instruments are initially recognised at fair value on the
date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is negative.
FAIR VALUE HEDGES
The change in fair value of a hedging derivative is recognised in the statement of comprehensive income as finance 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 comprehensive income as finance costs.
The following table presents the group’s foreign currency forward exchange contracts measured at fair value:
GROUP
2016
2015
Current:
Foreign currency forward exchange contracts
5,405
116,828
Contractual amounts of forward exchange contracts outstanding were as follows:
Purchase commitments forward exchange contracts
4,163,003
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. 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 amounts.
Page 26
performanceSerko Limited annual report 2016 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 2016
Cost or valuation
Balance at 1 April 2015
Additions
Disposals
Currency translation
Balance at 31 March 2016
Depreciation
Balance at 1 April 2015
Depreciation expense
Disposals
Currency translation
Balance at 31 March 2016
Net carrying amount
GROUP 2015
Cost or valuation
Balance at 1 April 2014
Additions
Disposals
Currency translation
Balance at 31 March 2015
Depreciation
Balance at 1 April 2014
Depreciation expense
Disposals
Currency translation
Balance at 31 March 2015
Net carrying amount
LEASEHOLD
IMPROVEMENT
FURNITURE
& FITTINGS
COMPUTER
EQUIPMENT
TOTAL
529,469
14,617
377,010
6,833
480,132
34,877
1,386,611
56,327
(250,618)
(42,364)
(130,976)
(423,957)
2,865
1,891
3,676
8,432
296,333
343,370
387,710
1,027,413
69,844
35,122
99,968
44,204
219,521
166,493
389,333
245,819
(56,473)
(38,584)
(129,593)
(224,649)
239
48,732
247,601
574
106,162
237,208
3,418
259,839
127,870
4,231
414,734
612,679
228,348
302,636
–
(1,515)
170,694
207,140
–
(824)
177,570
302,562
–
576,612
812,338
–
(2,339)
529,469
377,010
480,132
1,386,611
42,128
27,767
–
(51)
69,844
459,625
52,128
48,079
–
(239)
99,968
277,042
110,322
109,199
–
–
219,521
260,611
204,578
185,045
–
(290)
389,333
997,278
The net book value of assets held under finance leases is $2,719 (2015: $10,877).
Tangible assets per security
Tangible assets per security are expressed in cents; prior year was previously reported in dollars.
GROUP
2016
2015
CENTS
CENTS
0.95
1.59
Page 27
10 INTANGIBLES
Intangible assets acquired separately or in a business combination
are initially measured at cost. The cost of an intangible asset
acquired in a business combination is its fair value as at the
date of acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and any
accumulated impairment losses. Costs related to internally
generated intangible assets, excluding capitalised development
costs, are not capitalised and expenditure is recognised in profit
or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are amortised
over the useful life and tested for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an
intangible asset with a finite useful life is reviewed at least at
each financial year end. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for prospectively by changing
the amortisation period or method, as appropriate, which is a
change in accounting estimate. The amortisation expense on
intangible assets with finite lives is recognised in profit or loss.
Intangible assets with indefinite useful lives are tested for
impairment annually either individually or at the cash-generating
unit level. Such intangibles are not amortised. An intangible asset
with an indefinite useful life is reviewed each reporting period
to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an accounting
estimate and is thus accounted for on a prospective basis.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in profit
or loss when the asset is derecognised.
A summary of the policies applied to the group’s intangible assets
is as follows:
Computer Software
– finite, amortised on a straight-line
basis 40 – 60%
Capitalised software
development costs
– finite, amortised on 5 years straight-line
Incharge software
– finite, amortised on 3 years straight-line
Customer contracts
– finite, amortised on 3 years straight-line
Key employee retention – finite, amortised on 3 years straight-line
RESEARCH AND DEVELOPMENT
Research costs are expensed as incurred.
An intangible asset arising from development expenditure on an
internal project is recognised only when the group can demonstrate
the technical feasibility of completing the intangible asset so that
it will be available for use or sale, its intention to complete and its
ability to use or sell the asset. Also, how the asset will generate
future economic benefits, the availability of resources to complete
the development and the ability to measure reliably the
expenditure attributable to the intangible asset during its
development. Following initial recognition of the development
expenditure, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and impairment
losses. Any expenditure capitalised is amortised over the period
of expected benefit from the related project.
Intangible assets under development at balance date are
recorded as capital work in progress and are not subject to
amortisation.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject
to amortisation and are tested annually for impairment or more
frequently if events or changes in circumstances indicate that
they might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units).
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 28
performanceSerko Limited annual report 2016 GOODWILL
KEY EMPLOYEE
RETENTION
CUSTOMER
CONTRACTS
DEVELOPMENT
– WORK IN
PROGRESS
COMPUTER
SOFTWARE
TOTAL
171,025
33,261
–
15,235
219,521
–
–
219,521
–
219,521
–
71,261
–
–
6,348
77,609
29,395
25,611
–
2,619
57,625
19,984
305,402
110,869
85,526
558,154
–
(236,661)
27,206
–
1,013,183
1,646,397
110,416
236,661
17,230
812,700
–
66,019
443,477
407,019
1,377,491
2,525,116
125,978
143,298
–
11,222
280,498
162,979
–
–
–
–
–
203,681
317,460
–
7,107
359,055
486,369
219,521
20,948
528,248
1,085,893
407,019
849,242
1,439,224
GROUP 2016
Cost
Balance at 1 April 2015
Additions
Transfer of cost
Currency translation
Balance at 31 March 2016
Amortisation and impairment
Balance at 1 April 2015
Amortisation
Impairment
Currency translation
Balance at 31 March 2016
Net carrying amount
GROUP 2015
Cost
Balance at 1 April 2014
182,529
76,054
325,945
Additions
Transfer of cost
Currency translation
Balance at 31 March 2015
Amortisation and impairment
Balance at 1 April 2014
Amortisation
Impairment
Currency translation
Balance at 31 March 2015
–
–
(11,504)
171,025
–
–
–
–
–
Net carrying amount
171,025
–
–
(4,793)
71,261
6,275
23,516
–
(396)
29,395
41,865
82,650
530,979
(528,103)
290,557
207,534
528,103
957,735
738,513
–
–
–
(20,543)
–
(13,011)
(49,851)
305,402
85,526
1,013,183
1,646,397
26,890
100,783
–
(1,695)
125,978
179,424
–
–
–
–
–
55,888
148,867
–
89,053
273,166
–
(1,074)
(3,164)
203,681
359,055
85,526
809,502
1,287,342
During the year the goodwill arising from the acquisition of Incharge and Arnold was impaired. The goodwill was related to the deferred
tax liability recognised on acquisition, and does not accurately reflect the true value of the businesses acquired.
Page 29
11 CASH AT BANK AND ON HAND
Cash and short-term deposits in the statement of financial position comprise cash at bank, and in hand, short-term highly liquid
investments with an original maturity of three months or less.
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
Indian rupees
12 TRADE AND OTHER PAYABLES
EMPLOYEE BENEFITS
GROUP
2016
2015
5,812,458
2,925,176
1,305,164
1,561,776
7,117,622
4,486,952
5,810,278
2,925,176
1,265,606
1,561,679
39,558
2,180
97
–
7,117,622
4,486,952
Liabilities for wages and salaries, including non-monetary benefits, long service leave and annual leave expected to be settled within
12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are settled.
Liabilities for wages and salaries that are not expected to be settled within 12 months are measured at the present value of the
estimated future cash outflows to be made by the group in respect of services provided by employees up to the reporting date.
POST-EMPLOYMENT BENEFITS
Contributions made on behalf of eligible employees to defined contribution funds are recognised in the period they are incurred.
The defined contribution funds receive fixed contributions from the group whose legal or constructive obligation is limited to these
contributions only.
TRADE AND OTHER PAYABLES
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the group
prior to the end of the financial year that are unpaid and arise when the group becomes obliged to make future payments in respect of
the purchase of these goods and services.
Trade payables
Accrued expenses
Lease incentive
Holiday pay accrual
Total trade and other payables
Disclosed as:
Current
Non-current
Page 30
GROUP
2016
2015
847,779
1,039,578
174,202
632,350
565,076
565,244
266,076
440,159
2,693,909
1,836,555
2,556,927
1,662,353
136,982
174,202
2,693,909
1,836,555
performanceSerko Limited annual report 2016 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
Financial equities loan payable
Obligations under finance leases
Leasehold fitout loan
Non-current
Obligations under finance leases
Leasehold fitout loan
NOTE
GROUP
2016
2015
17
335,044
292,416
9,089
–
6,451
15,171
344,133
314,038
–
–
–
–
4,104
4,104
During the current and prior years, there were no defaults or breaches on any of the loans.
In the prior 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 prior year. Shareholders issued a demand for interest in the prior year
of $40,841. The loans were unsecured.
The leasehold fitout loan was repaid during the year.
Finance leases are secured over the assets specified in the leases.
Page 31
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.
GROUP
GROUP
2016
2015
2016
2015
Ordinary shares and Share-Based Payments
Share capital at beginning of year
17,974,450
$
$
–
NUMBER OF
NUMBER OF
SHARES
SHARES
62,699,382
16,660
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
–
–
–
–
156,644
1,000
241,505
17,000,000
–
–
–
–
Issue of shares pursuant to institutional capital placement
8,000,000
Issue of shares pursuant to Share Purchase Plan (SPP) placement
96,000
–
–
9,523,809
114,277
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
Cancellation of shares under Salary Sacrifice Scheme
–
–
–
–
516,873
(9,900)
363,400
80,758
1,325,000
157,300
290,117
565,874
1,180,564
–
(9,000)
Transaction costs for issue of new shares
(504,866)
(1,641,274)
–
Share capital at end of year
26,072,557
17,974,450
72,894,342
62,699,382
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
–
–
–
–
239,835
156,644
(396,479)
–
–
–
–
–
5,902
217
(6,119)
–
26,072,557
17,974,450
72,894,342
62,699,382
In the current year an institutional capital placement was completed in December 2015, which raised an additional $8m of issued capital.
In addition, a SPP placement was completed in February 2016, which raised an additional $96,000 of issued capital.
In the current year the group issued 271,352 shares under the Restricted Share Scheme (RSS). In respect of the RSS, as at 31 March, 41,662
restricted shares had been allocated to key management personnel and 229,690 allocated to other Serko employees. At 31 March 2016,
466,936 restricted shares remain unallocated.
In the prior year the group raised $17 million of issued capital via an Initial Public Offering and concurrent listing on the NZX Main Board
on 24 June 2014.
In the prior year the group issued 143,000 shares under a Salary Sacrifice Scheme (SSS) and 1,180,564 under a Restricted Share Scheme
(RSS). In respect of the RSS, 775,000 restricted shares had been allocated to key management personnel and 246,650 allocated to
other Serko employees. In the prior year 158,914 shares remained unallocated.
Page 32
217
–
43,492,498
15,454,545
–
–
330,364
590,909
1,490,625
143,000
–
–
–
–
–
–
performanceSerko Limited annual report 2016 16 COMMITMENTS
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and
benefits incidental to ownership, and operating leases under which the lessor effectively retains substantially all such risks and benefits.
I) FINANCE LEASES
Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
II) OPERATING LEASES
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Operating lease
incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense
and reduction of the liability.
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
2016
2015
432,148
426,825
1,104,908
1,529,367
–
–
1,537,056
1,956,192
8,198
–
–
8,198
(274)
7,924
9,837
8,198
–
18,035
(1,226)
16,809
The group entered into a new operating lease agreement related to the head office in Auckland, NZ 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:
NAME
BALANCE DATE
2016
2015
2016
2015
% EQUITY INTEREST
INVESTMENT (PARENT) $
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%
0%
100%
99%
100%
1,247
–
100
2,118
100
3,565
1,247
–
100
2,118
100
3,565
Page 33
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 audited management accounts for the year ended 31 March each year. In the prior
year the company sold its shares in Travelog World for Windows Pty Limited (dormant company) for consideration of $10 to Empeiria
Limited. Empeiria Limited is a company associated with directors Robert Shaw and Darrin Grafton.
Serko Trustee Limited was incorporated in the prior year to hold the shares issued to key management and staff in the Restricted Share
Scheme and Salary Sacrifice Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015 as a subsidiary for the Indian-based operations.
Serko Investments was incorporated on 5 November 2014 as a holding company. It holds 1% of the shares in Serko India Private Limited.
b) Transactions with related parties
The following table provides the total amount of transactions that have been entered into with related parties, excluding key
management and director remuneration.
NOTE
14
Other related parties
Financial Equities Limited
Simon Botherway – Chairman
Clyde McConaghy – Non-executive Director
Claudia Batten– Non-executive Director
Total
PURCHASES
FROM RELATED
PARTIES
INTEREST
TO RELATED
PARTIES
AMOUNTS OWED
TO RELATED
PARTIES
AMOUNTS OWED
BY RELATED
PARTIES
$
$
$
$
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
–
–
70,000
64,167
60,406
54,252
60,406
54,252
190,812
172,671
20,334
24,780
335,044
292,416
–
–
–
–
–
–
–
–
–
–
–
–
20,334
24,780
335,044
292,416
–
–
–
–
–
–
–
–
–
–
Non-executive directors provide services to Serko in their capacity as non-executive directors and have a service agreement with a
specified amount of fees payable per annum.
On 9 April 2014 an interest-bearing loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities Limited
to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable. The loan expires on 30 June 2016.
Financial Equities Limited is a company associated with directors Robert Shaw and Darrin Grafton.
Page 34
performanceSerko Limited annual report 2016 17 RELATED PARTIES – CONTINUED
c) Key management remuneration
Short-term benefits employees (*)
Post-employment benefits
Total compensation
GROUP
2016
2015
2,125,202
1,706,825
87,213
2,212,415
54,594
1,761,419
(*) Key management personnel includes the executive management team, sales management team and the executive directors in their
capacity as Chief Executive Officer and Chief Strategy Officer.
d) Terms and conditions of transactions with related parties
Outstanding balances at year end are unsecured and settlement occurs in cash.
For the year ended 31 March 2016, the group has not made any allowance for impairment loss relating to amounts owed by related
parties (2015: $nil). An impairment assessment is undertaken each financial year by examining the financial position of the related party
and the market in which the related party operates to determine whether there is objective evidence that a related party receivable is
impaired. When such objective evidence exists, the group recognises an allowance for the impairment loss.
18 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net loss after tax
Add non-cash items
Amortisation
Impairment
Depreciation
Loss on property, plant and equipment disposal
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 in receivables excl loans
(Increase)/decrease in derivative financial instruments
Increase in trade and other payables
Increase in income tax
Less items classified as financing activity
Interest on convertible notes
Net cash flow from operating activities
GROUP
2016
2015
(6,234,116)
(6,547,335)
486,369
273,166
219,521
245,819
199,308
–
–
185,045
–
–
(2,451)
(84,812)
(112,654)
–
97,417
82,591
516,873
370,875
(4,681,331)
(5,623,053)
(549,866)
(1,076,199)
111,423
533,666
134,151
(116,828)
51,028
130,610
229,374
(1,011,389)
–
(3,356)
(4,451,957)
(6,637,798)
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 whilst protecting future financial security.
Group capital consists of share capital and retained earnings. To maintain or adjust the capital structure, the group may adjust amounts
of dividends paid to shareholders, return capital to shareholders, issue new shares or amend capital spending plans.
The main risks arising from the group’s financial instruments are foreign currency, interest, credit and liquidity risk. The group uses different
methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to foreign
exchange risk and assessments of market forecasts for foreign exchange. Ageing analyses and monitoring of specific credit allowances
are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Risk exposures and responses
INTEREST RATE RISK
The group has exposure to interest rate risk to the extent it borrows funds at fixed and floating interest rates. The risk specifically relates
to the variability of interest rates and the impact this will have on the group’s financial results. The group manages its cost of borrowing
by placing limits on the proportion of borrowings at floating rate and the proportion of fixed rate borrowing repriced in any year.
At balance date this year and prior year, the group did not have any financial liabilities exposed to variable interest rate risk.
LIQUIDITY RISK
Liquidity risk represents the group’s ability to meet its financial obligations on time. In terms of managing its liquidity risk, the group
generates sufficient cash flows from its operating activities and holds sufficient cash reserves to meet its obligations arising from its
financial liabilities and has credit lines in place to cover potential shortfalls.
The following table sets out the contractual cash flows for all financial liabilities settled on a gross cash flow basis.
CONTRACTUAL
CASH FLOWS
6 MONTHS
OR LESS
6 – 12 MONTHS
1 – 2 YEARS
2 – 5 YEARS
MORE THAN
5 YEARS
GROUP – 2016
Accounts payable
Overdraft
Bank loans
2,519,707
2,519,707
–
–
–
–
Related party loans
335,044
335,044
Convertible notes
Leasehold fitout
Finance leases
GROUP – 2015
Accounts payable
Overdraft
Bank loans
–
–
–
–
9,089
5,453
2,863,840
2,860,204
3,636
3,636
1,570,478
1,570,478
–
–
–
–
Related party loans
292,416
292,416
Convertible notes
Leasehold fitout
Finance leases
–
19,275
6,451
–
7,586
3,226
1,888,620
1,873,706
Page 36
–
–
–
–
–
–
–
–
–
–
–
7,585
3,225
10,810
–
–
–
–
–
–
–
–
–
–
–
–
–
4,104
–
4,104
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
performanceSerko Limited annual report 2016 19 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES – CONTINUED
CURRENCY RISK
The group has exposure to foreign exchange risk as a result of transactions denominated in foreign companies. The risk specifically
relates to the variability of foreign exchange rates for the currencies the group trades in and the impact this has on the group’s financial
results. The majority of the group’s trading activities occur in New Zealand dollars, however, sales to overseas customers are transacted
in United States and Australian dollars.
Refer to notes 7 and 11 for further details on the group’s foreign currency denominated accounts receivable and cash balances.
The following table summarises the sensitivity to foreign currency exchange rate movements. A sensitivity of +/- 15% (2015: +/- 15%) has
been selected owing to exchange rate volatility observed.
FOREIGN CURRENCY RISK
-15%
CARRYING
AMOUNT
POST-TAX
PROFIT
$
$
EQUITY
$
+15%
POST-TAX
PROFIT
$
EQUITY
$
1,305,164
1,868,577
165,833
244,153
165,833
244,153
(122,572)
(122,572)
(180,461)
(180,461)
(175,726)
(28,343)
(28,343)
20,949
20,949
2,998,015
381,643
381,643
(282,084)
(282,084)
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)
GROUP – 2016
Foreign exchange balances
Cash at bank
Trade receivables
Trade payables
Net exposure
Group – 2015
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 counterparty, with a maximum exposure equal to the carrying
amount of these instruments. Exposure at balance date is addressed in each applicable note.
The group does not hold any credit derivatives to offset its credit exposure.
The group 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% (2015: 100%) of the group’s cash and cash equivalents was with one bank. The group has no other concentrations
of credit risk.
Page 37
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 & Other Income
GROUP
2016
2015
615,562
674,930
12,228,852
9,501,347
166,961
23,965
47,006
39,220
116,951
14,593
20,450
32,931
13,121,566
10,361,202
1,296,264
1,413,182
14,417,830
11,774,384
New Zealand and Australia geographic information has been restated in the prior year. The total operating revenue has not changed.
As required under IFRS 8 Serko is required to report on major customers making up more than 10% of the revenue for the year. Under this
disclosure Serko advises that 1 customer made up more than 10% of the revenue for the group. This customer accounted for $3,581,932
of the revenue for the year ended 31 March 2016.
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
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.
Page 38
77,462
215,946
2,772,346
2,130,848
88,860
3,820
36,099
5,553
62,114
3,496
–
3,715
2,984,140
2,416,119
–
–
7,429
–
–
–
26,937
2,988
12,406
–
–
–
7,429
42,331
1,767,149
284,754
1,731,537
553,083
2,051,903
2,284,620
performanceSerko Limited annual report 2016 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)
2016
$
2015
$
(6,234,116)
(6,547,335)
–
–
(6,234,116)
(6,547,335)
2016
2015
NUMBER
NUMBER
72,894,342
62,699,382
64,737,767
62,699,382
(0.10)
(0.10)
64,737,767
62,699,382
–
–
64,737,767
62,699,382
(0.10)
(0.10)
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date
of authorisation of these financial statements.
Page 39
22 SHARE-BASED PAYMENTS
Employees of the group receive remuneration at the Board’s discretion in the form of share-based payment transactions, where services
are provided as consideration for the receipt of equity instruments.
The cost of share-based payment transactions are recognised, together with a corresponding increase in equity, over the period in which
the service conditions are fulfilled. The cumulative expense recognised for share-based transactions at each reporting date, until the
vesting date, reflects the extent to which the vesting period has expired and the group’s best estimate of the number of equity instruments
that will ultimately vest. The expense or credit for a period represents the movement in cumulative expenses recognised at the
beginning and end of that period.
No expense is recognised for awards that do not ultimately vest except where vesting is conditional upon a market condition.
Employee Restricted Share Plan
The Serko Limited Employee Restricted Share Plan (RSP) was introduced for selected executives and employees of the group.
Under the RSP, ordinary shares in Serko Limited are issued to a trustee, Serko Trustee Limited, a wholly-owned subsidiary, and allocated
to participants, on grant date, using funds lent to them by the company.
The price for each share issued during the year under the RSP is the higher of the market price of the share on the date on which the
shares are allocated or the invitation price.
Under the RSP, shares are beneficially owned by the participants. The length of retention period before the shares vest is between one
and three years. If the individual is still employed by the group at the end of this specific period, the employee is awarded a cash bonus
that must be used to repay the loan and shares are then transferred to the employee. The number of shares awarded is determined by
the Remuneration Committee of the Board. The weighted average grant date fair value of restricted shares issued during the year was
$0.95 (2015: $1.10) and was determined by the volume weighted average price (VWAP) of shares traded in the previous 20 trading days
preceding the date of grant. The group has no legal or constructive obligation to repurchase the shares or settle the RSP for cash.
Unvested shares at 1 April
Granted
Forfeited
Vested
Unvested shares at 31 March – allocated to employees
Forfeited shares not yet reallocated – held by trustee
Unallocated shares – held by trustee
Total
Percentage of total ordinary shares
Ageing of unvested shares
Vest within one year
Vest after one year
Total
2016
1,021,650
2015
–
271,352
1,031,605
(13,500)
(4,000)
(9,955)
–
1,275,502
1,021,650
23,455
443,481
9,955
148,959
1,742,438
1,180,564
2.4%
1.9%
536,364
–
1,206,074
1,180,564
1,742,438
1,180,564
The number of shares awarded pursuant to the RSP does not equal the number of shares created for the scheme, as the scheme had an
allocated pool of shares upon set up and forfeited shares are held in the trust and reissued.
Page 40
performanceSerko Limited annual report 2016 Share Appreciation Rights
The group’s non-executive directors are granted share appreciation rights (SARs), settled by way of a non recourse loan. The SARs vest
when the directors continue to be employed as non executive directors at the vesting date. The contractual term of the SARs is three years.
The following table lists the inputs to the model used for the SAR plan at the time of grant:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share options/SARs (years)
Weighted average share price ($)
Model used
2016
n/a
n/a
n/a
n/a
n/a
2015
0.00
20.00
3.50
2.5
1.10
Black Scholes
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.
Movements during the year
Outstanding at 1 April 2015
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 March 2016
Exercisable at 31 March 2016
2016
2015
NUMBER
WAEP
NUMBER
WAEP
590,909
–
–
–
–
590,909
590,909
–
1.10
–
–
–
1.10
1.10
–
590,909
–
–
–
590,909
590,909
–
1.10
–
–
–
1.10
1.10
Page 41
23 ACQUISITIONS
* On 1 May 2015 Serko Australia Pty Limited acquired the assets of Arnold Travel Technology Pty Limited, an Australian online corporate
travel booking business, from the Expedia Group Inc.
The fair values of the identifiable assets of Arnold Travel Technology Pty Limited as at the date of acquisition, denominated in Australian
dollars are:
Customer contracts
Goodwill
Deferred tax liability
Consideration transferred:
Cash paid
Net cash paid on acquisition
AU$
100,000
30,000
(30,000)
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 AU$102,345.
The Goodwill recognised on the customer contracts as a result of the deferred tax liability was fully impaired during the year.
24 EVENTS AFTER BALANCE SHEET DATE
There have been no significant events occurring after balance date (2015: Arnold acquisition).
25 CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2015: $nil).
Page 42
performanceSerko Limited annual report 2016 governance and Statutory disclosureS
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.
Serko is currently listed on the New Zealand stock exchange (NZX
Main Board). The Board considers that its policies and practices
comply with the corporate governance requirements of the listing
rules applying to the NZX Main Board (NZX Listing Rules) and are
consistent with the principles contained in the NZX Corporate
Governance Best Practice Code, and the Financial Markets
Authority Handbook ‘Corporate Governance in New Zealand
Principles and Guidelines’ (collectively, the ‘Principles’). While
Serko is not required to comply with the Australian Securities
Exchange (ASX) Corporate Governance Council Corporate
Governance Principles and Recommendations (3rd Edition),
the Board believes that its practices largely also meet the
ASX Principles and Recommendations.
This governance statement outlines the main corporate
governance practices adopted by Serko. Serko’s constitution and
principal governance documents are available on Serko’s website.
Go to: www.serko.com/investor-centre/. In this Corporate
Governance Statement, we report on how the company has
followed the recommendations set out in the Principles
ETHICAL STANDARDS
Code of Ethics
The Board recognises that high ethical standards and behaviours
are central to good corporate governance and has implemented a
Code of Ethics to guide the behaviour of its directors and
employees. Serko’s Code of Ethics establishes the framework by
which directors and staff of Serko are expected to conduct their
professional lives by facilitating behaviour and decision-making
that meets Serko’s business goals and is consistent with Serko’s
values, policies and legal obligations. Serko’s Code of Ethics is
available on Serko’s intranet and forms part of the induction
process for new employees. There have been no instances raised
with either the Board or management around any alleged
breaches of the Code of Ethics. Serko encourages staff to report
any concerns they have about compliance with the Code of Ethics,
Serko policies or legal obligations.
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.
Securities Trading Policy
Serko is committed to complying with legal and statutory
requirements with respect to ensuring directors and employees do
not trade Serko securities while in possession of inside information.
Serko’s Securities Trading Policy and Guidelines apply to all
directors, officers, employees and contractors of Serko and its
subsidiaries. This Policy seeks to ensure that those subject to the
Policy do not trade in Serko securities if they hold undisclosed
price-sensitive information. The Policy sets out additional rules,
which includes the requirement to seek company consent before
trading and prescribes certain periods during which trading is
prohibited.
Compliance with the Securities Trading Policy is monitored
through the consent process, through education and via
notification by Serko’s share registrar when any director or senior
manager trades in Serko securities. All trading by directors and
senior managers (as defined by the Financial Markets Conduct
Act 2013) is required to be reported to NZX and recorded in
Serko’s securities trading registers.
In addition to the restrictions outlined above, at the time of
Serko’s initial public offering and concurrent listing on the NZX
Main Board, each director and senior manager who held shares
in Serko prior to listing entered into a deed of embargo restricting
them from disposing of their Serko shares for a specified period.
All embargo arrangements entered into at that time ceases two
business days after Serko makes its preliminary announcement for
the financial year ending 31 March 2016 (on 27 May 2016).
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 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 additional special meetings. There were also
separate meetings of the Board committees during the year.
The Board currently intends to meet 11 times during the financial
year ending 31 March 2017.
Page 43
Serko Limited annual report 2016 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 2016, 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. When recommending candidates to act as
director, the Committee will take into account factors as it deems
appropriate, including the diversity of background, experience
and qualifications of the candidate. When appointing directors,
the Board undertakes appropriate background checks.
The Board’s broader commitment to diversity includes building
diversity of thought within the Board of Directors. The current
Board has a broad range of experience and skills, both locally
and internationally, that are appropriate to meet its objectives.
To assist in maintaining an appropriate mix of experience, the
Board has developed a skills matrix. Areas of expertise and
experience that have been identified as relevant to governing
Serko’s business include, among other skills:
• Innovation, entrepreneurship and partnership
• Digital business and high growth technology
• Travel
• Marketing, sales and channel management in core markets
• Governance, legal & compliance
• Strategy and operations
• Finance, accounting and risk management
• Capital markets
• Public company director experience.
Independence of directors
A majority of Serko’s directors are independent. A director is
considered to be independent if that director is not an executive
of Serko and if the director has no direct or indirect interest or
relationship that could reasonably influence, in a material way,
the director’s decisions in relation to Serko.
The Board has determined that each non-executive director
is an independent director for the purposes of the NZX Listing
Rules and in accordance with the Board Charter. As at 31 March
2016, 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.
Page 44
The Board supports the separation of the role of Chairman and
Chief Executive Officer. The Chairman is elected by the Board
from the non-executive directors. The Chairman’s role is to
manage and provide leadership to the Board and to facilitate
the Board’s interface with the Chief Executive Officer. The current
Chairman, Simon Botherway, was appointed on 30 April 2014 and
is an independent director.
Board appointment, training and evaluation
The procedure for the appointment and removal of directors is
ultimately governed by the company’s constitution and relevant
NZX Listing Rules. A director is appointed by ordinary resolution
of the shareholders although the Board may fill a casual vacancy.
Every director appointed by the Board must submit himself or
herself for reappointment by shareholders at the next annual
meeting following his or her appointment. Directors are subject
to the rotation requirements set out in the NZX Listing Rules.
At the time of appointment, each new director signs a
comprehensive letter of appointment setting out the terms
of their appointment, including their duties and expectations in
the role. Each director also receives a copy of Serko’s Corporate
Governance Manual (comprising all of Serko’s core governance
documents) and is introduced to the business through a specifically
tailored induction programme. All directors are regularly updated
on relevant industry and company issues and are expected to
undertake training to remain current on how to 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 undertakes a regular review of its own and its
committees’ performance. This is to ensure it has the right
composition and appropriate skills, qualifications, experience
and background to effectively govern Serko and to monitor
Serko’s performance in the interests of shareholders. During the
financial period ended 31 March 2016, performance reviews took
place in accordance with that process.
Conflicts of interest
The Board is conscious of its obligations to ensure that directors
avoid conflicts of interest (both real and perceived) between their
duty to Serko and their own interests. The Board Charter outlines
the Board’s policy on conflicts of interest. Serko maintains an
interests register in which relevant disclosures of interest and
securities dealings by the directors are recorded.
Company Secretary
The Company Secretary, Tim Bluett, is responsible for supporting
the effectiveness of the Board by ensuring that its policies and
procedures are followed and for coordinating the completion and
dispatch of the Board agendas and papers. The Company
Secretary is accountable to the Board, via the Chair, on all
governance matters.
governance and Statutory disclosureSSerko Limited annual report 2016 BOARD COMMITTEES
The Board uses committees to deal with issues requiring detailed
consideration, thereby enhancing the efficiency and effectiveness
of the Board. However, the Board retains ultimate responsibility
for the functions of its committees and determines each
committee’s roles and responsibilities.
The current committees of the Board and their members are:
• Audit and Risk Committee
• Remuneration and Nominations Committee.
Details of the roles and responsibilities of these committees are
described in their respective charters and summarised below.
From time to time the Board may constitute an ad-hoc committee
to deal with a particular issue that requires specialised knowledge
and experience.
Audit and Risk Committee
The primary function of the Audit and Risk Committee is to assist
the Board in fulfilling its oversight responsibilities relating to Serko’s
risk management and internal control framework, the integrity of
its financial reporting and auditing processes. The Audit and Risk
Committee held six meetings during the year ended 31 March 2016.
The Committee intends to hold at least four meetings during the
year ending 31 March 2017.
Under the Audit and Risk Committee charter, the Committee
must be comprised of a minimum of three members who are each
non-executive directors, the majority of whom are also independent
directors and at least one director with an accounting or financial
background. Further, the Chairman of the Committee is required
to be independent and not be the chairman of the Board.
The current members of the Committee are Clyde McConaghy
(Chair), Simon Botherway and Claudia Batten. All members are
independent, non-executive directors. Their qualifications and
experience is set out under About Serko – Board of Directors above.
Remuneration and Nominations Committee
The primary function of the Remuneration and Nominations
Committee is to oversee remuneration policies and practices
at Serko, oversee management succession planning, consider
the composition of the Board and recommend candidates to fill
Board vacancies as and when they arise. The Committee is also
tasked with annually monitoring and evaluating the company’s
performance with respect to its diversity policy. The Remuneration
and Nominations Committee held four meetings during the year
ended 31 March 2016. The Committee intends to hold at least four
meetings during the year ending 31 March 2017.
Under the Remuneration and Nominations Committee Charter, the
Committee must be comprised of a minimum of three members, a
majority of whom are independent directors. All members of the
Committee are currently independent directors. The chairman of
the Committee is required to be independent.
The current members of the Committee are Claudia Batten (Chair),
Simon Botherway and Clyde McConaghy. All members are
independent, non-executive directors. Their qualifications and
experience is set out under About Serko – Board of Directors above.
The table below shows the Board and Committee meeting
attendance during the year ended 31 March 2016:
BOARD
AUDIT & RISK
COMMITTEE
REMUNERATION
& NOMINATIONS
COMMITTEE
O
T
E
L
B
G
L
E
I
I
D
N
E
T
T
A
Darrin Grafton
Bob Shaw
Simon Botherway
Clyde McConaghy
Claudia Batten
12
12
12
12
12
D
E
D
N
E
T
T
A
12
12
12
12
12
O
T
E
L
B
G
L
E
I
I
*
D
N
E
T
T
A
–
–
5
5
5
D
E
D
N
E
T
T
A
–
–
5
5
4
O
T
E
L
B
G
L
E
I
I
*
D
N
E
T
T
A
–
–
4
4
4
D
E
D
N
E
T
T
A
–
–
4
4
4
* Executive directors attend Committee meetings as observers.
REPORTING AND DISCLOSURE
Financial Reporting
The Board is responsible for ensuring the integrity of its financial
reporting. As noted above under Board Committees, the Audit
and Risk Committee closely monitors financial reporting risks in
relation to the preparation of the financial statements. The Audit
and Risk Committee, with the assistance of management, works
to ensure that the financial statements are founded on a sound
system of risk management and internal control and that the
system is operating effectively in all material respects in relation
to financial reporting risks. As part of this process, the Chief
Executive Officer and Chief Financial Officer are required to state
in writing to the Board that, to the best of their knowledge, the
company’s financial reports present a true and fair view of the
company’s financial condition and operational results, and are in
accordance with the relevant accounting standards, and those
reports are founded on a sound system of risk management and
internal control that is operating effectively.
Market Disclosure Policy
Serko is committed to the promotion of investor confidence by
ensuring that the trading of Serko’s securities takes place in an
efficient, competitive and informed market. Serko’s Market
Disclosure Policy establishes the company’s disclosure policies
for meeting the continuous disclosure requirements of the NZX
Main Board. In addition, directors and management consider at
each Board meeting whether there are any issues that have
arisen that require disclosure to the market.
Serko has established a Disclosure Committee whose role it is
to determine whether information is ‘material information’ and
whether the material information is required to be released to the
NZX. The Disclosure Committee comprises the Board Chairman,
the Audit and Risk Committee Chairman, the Chief Executive
Officer and the Chief Financial Officer (the Disclosure Officer).
Page 45
REMUNERATION
Non-executive 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 currently pays directors’
fees which, in aggregate, amount to approximately $190,0001
per annum, comprising $70,000 per annum for the Chairman,
and A$55,000 per annum for each of the other non-executive
directors. The additional level of directors’ fees is intended to
provide flexibility for Serko to appoint additional non-executive
directors in the future and to allow for an increase in directors’
fees in the future. Serko may undertake a review of director fees
during the current financial year to ensure that the company is
offering appropriate levels of remuneration to both existing and
prospective directors.
Non-executive directors do not currently take a portion of their
remuneration under an equity security plan but directors may
hold shares in the company, details of which are set out in the
Director Interest Disclosures section of this Annual Report.
It is Serko’s policy to encourage directors to hold shares in the
company. At the date of this Annual Report, all directors hold
shares in Serko.
The non-executive directors are entitled to be reimbursed for all
reasonable travel, accommodation and other expenses incurred
by them in connection with their attendance at Board or
shareholder meetings or otherwise in connection with Serko’s
business. No retirement benefits will be paid to the non-executive
directors on their retirement.
In addition to the remuneration detailed above, the Board has,
with the approval of Serko’s existing shareholders, introduced a
loan facility for the independent directors, which enabled them to
acquire a specified number of Serko shares at the time of the IPO
(Director Loan Shares). The loans are interest free and repayable
after three years (on 30 April 2017) 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.
Executive director remuneration
Darrin Grafton and Bob Shaw, the executive directors on the Board for the period ended 31 March 2016, did not receive any remuneration
in their capacity as directors. They were, however, remunerated for services as Chief Executive Officer and Chief Strategy Officer of Serko.
The executive directors are eligible to receive a performance-based, at-risk, short-term incentive payment if pre-determined individual
and company performance criteria is met. No short-term incentive was paid to, or accrued by, the executive directors during the period
ended 31 March 2016.
Subject to compliance with the NZX Listing Rules, the executive directors may also participate in Serko’s long-term incentive scheme
(detailed below) if specified performance criteria is met.
FY16 Director Remuneration
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 2016 were as follows:
Darrin Grafton*
Bob Shaw*
Simon Botherway
Clyde McConaghy
Claudia Batten
2016
2015
FEES
REMUNERATION
FEES
REMUNERATION
–
–
70,000
60,406
60,406
190,812
280,004
280,000
–
–
–
560,004
–
–
64,167
54,252
54,252
172,671
280,061
280,000
33,400
10,835
22,516
626,812
* Darrin Grafton and Bob Shaw are executive directors and receive remuneration from Serko in the form of salaries 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 Bob also received KiwiSaver contributions
of $7,500 each.
1 Subject to exchange rate fluctuations
Page 46
governance and Statutory disclosureSSerko Limited annual report 2016 Employee remuneration
Serko’s remuneration framework aims to support and reward
execution of its strategy; create a performance-focused culture;
and attract, develop and retain talented employees. Serko’s
remuneration framework is designed to encourage and reward
behaviour consistent with achievement of these objectives.
Serko adopts a total remuneration policy, where an employee’s
total remuneration may include, but is not limited to, their base
salary and a short-term incentive or sales plan incentive in the
form of a cash bonus upon achievement of pre-determined
targets. The base salary aims to reflect the mid-point in the
employment market when considering the position’s requirements
pertaining to skills, level of responsibility and complexity; while
the short-term incentive and sales incentive schemes reward
superior performance and enable employees to earn at the
upper-end of the employment market. Short-term incentive
bonuses were not paid during the year ended 31 March 2016,
owing to the organisation not reaching the target thresholds
allowing any payout.
In addition, Serko is now in the second year of its long-term
incentive scheme, in the form of restricted shares. This scheme
is designed to attract and retain key people within the business,
to align senior managers’ remuneration with shareholder value
and to reward the achievement of Serko’s strategies and business
plans. During the year ended 31 March 2016, eligible Australian
and New Zealand resident employees were allocated an average
of 60% of their on-target contractual potential under this scheme
– this allocation vests three years after the allocation date.
Under the Restricted Share Scheme, no director or employee
is permitted to enter into financial products or arrangements
which operate to limit the economic risk of their unvested shares.
Serko’s senior managers are subject to regular performance
reviews, measuring their performance against pre-agreed key
performance targets (both financial and non-financial). The Chief
Executive Officer’s performance is reviewed by the Board.
The performance of senior executives is undertaken by the
Chief Executive Officer with oversight from the Remuneration
and Compensation Committee. During the financial period ended
31 March 2016, performance reviews took place in accordance
with that process.
The table below shows the number of employees and former
employees of Serko and its subsidiaries, not being directors of
Serko, who, in their capacity as employees, received remuneration
and other benefits during the period ended 31 March 2016 totalling
at least NZ$100,000.
The remuneration of those employees paid outside of
New Zealand has been converted into New Zealand dollars.
No employee appointed as a director of a subsidiary company
of Serko receives any remuneration or other benefits for acting
in that capacity.
REMUNERATION RANGE (NZD)
TOTAL NUMBER OF EMPLOYEES
$100,000 – $110,000
$110,001 – $120,000
$120,001 – $130,000
$130,001 – $140,000
$140,001 – $150,000
$150,001 – $160,000
$160,001 – $170,000
$170,001 – $180,000
$180,001 – $190,000
$190,001 – $200,000
$200,001 – $210,000
$210,001 – $220,000
$220,001 – $230,000
$230,001 – $240,000
$240,001 – $250,000
$250,001 – $260,000
9
8
11
8
4
2
1
1
3
1
1
The table includes base salaries, short-term incentives and vested or exercised
long-term incentives. The table does not include: long-term incentives that have
been granted and have not yet vested. Where the individual is a KiwiSaver
member, contributions of 3% of gross earnings towards that individual’s KiwiSaver
scheme are included in the above table. Where the individual works in Australia
contributions of 9.5% of gross earnings towards Australian Superannuation are
included in the above table.
DIVERSITY
The Board is committed to providing equal employment
opportunities and, as such, has a workforce consisting of many
individuals with diverse skills, values, backgrounds, ethnicity
and experiences. The company works to ensure that its selection
processes for recruitment and employee development
opportunities are free from bias and are based on merit.
The Board recognises that building diversity across Serko will
deliver enhanced business performance. Serko has adopted
a Diversity Policy and is committed to achieving diversity in
the skills, attributes and experience of its Board members,
management and staff across a broad range of criteria (including,
but not limited to, culture, gender and age). The Board as a whole
is responsible for overseeing and implementing the Diversity
Policy but has delegated to the Remuneration and Nominations
Committee the responsibility to develop and to recommend
objectives to the Board that are designed to adhere to Serko’s
diversity policy.
Page 47
As at 31 March 2016, Serko employees represented 20 different nationalities. Serko believes this diversity is critical for encouraging
awareness of cultural experiences as we expand into different markets. Serko’s employees range in age from early 20s to mid 50s,
with the spread peaking in early 30s.
The respective numbers and proportions of men and women at various levels within the Serko workforce as at 31 March 2015 and
31 March 2016 are set out in the table below:
FEMALE
MALE
2015
2016
2015
2016
NO.
%
NO.
%
NO.
%
NO.
%
1
0
8
47
20%
0%
57%
42%
1
0
8
20%
0%
62%
44
40.7%
4
7
6
65
80%
100%
43%
58%
4
7
5
64
80%
100%
38%
59.3%
Directors
Senior Executives (a)
Senior Employees (b)
Remaining workforce
NOTES:
a. Senior Executives are considered to be the Chief Executive Officer and his direct reports (the Executive Team). Note that Chief Executive Officer, Darrin Grafton and
Chief of Strategy, Bob Shaw, are included in both the number of directors and Senior Executives reported.
b. Direct reports to senior executives with managerial responsibilities.
Diversity objectives
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 continued to manage its
recruitment internally and, while employment decisions are
based on ensuring the organisation finds the right person for
the job, we have continued to ensure decisions are not biased
throughout the process by any identifying factor such as
gender, culture, age. This practice resulted in us onboarding
50% females during the financial year, (inclusive of both
employees and contractors). The organisation is considering
implementing measurable targets to ensure we continue to
strive toward a similar result in future years.
• 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: We have had a number of internal movements and
promotions of people into higher paying jobs during the year,
including establishing of a career path from our support and
implementations areas in our Client Services department into
our Testing team within our Technology department. This has
been highly successful in terms of bringing in well-qualified
Testers with excellent knowledge of our product and also
providing an opportunity for our employees to continue their
learning into new roles. The majority of internal movements
and promotions during FY16 have been female. The Board
has requested further work be conducted to encourage the
development of our female employees to enable their
succession into executive roles.
• Objective: Reward excellence and ensure employees are
treated fairly, evaluated objectively and promoted on the
basis of their performance.
Progress: The diverse composition of Serko’s workforce (refer
above for details) evidences Serko’s commitment to being an
equal opportunity employer. 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. The Board requested management
to conduct a pay equity audit during FY16, both of rates and
including an audit of the annual salary review process, to
ensure an equitable approach was achieved. The results of
the audit indicated that individuals in comparable roles are
earning comparable rates, regardless of gender, however,
it did highlight that there were more males in senior roles
(higher paying jobs) than females.
Page 48
governance and Statutory disclosureSSerko Limited annual report 2016 RISK MANAGEMENT
Risk Management Framework
Serko has designed and implemented a risk framework for the
oversight and management of financial and non-financial business
risks, as well as related internal compliance systems that are
designed to:
• Optimise the return to, and protect the interests of, stakeholders;
• Safeguard the company’s assets and maintain its reputation;
• Improve the company’s operating performance;
• Fulfill the company’s strategic objectives; and
• Manage the risks associated with Serko’s operations.
The Board ultimately has responsibility for internal compliance
and internal control processes. The Audit and Risk Committee
assists the Board in discharging its responsibilities.
The Audit and Risk Committee in conjunction with management,
regularly reports to the Board on the effectiveness of the
company’s management of its material business risks and
whether the risk management framework and systems of
internal compliance and control are operating effectively and
efficiently in all material respects. The Audit and Risk Committee
conducted a review of Serko’s risk management framework
during the period ended 31 March 2016 and satisfied itself that
it continues to be sound.
Serko does not have a dedicated internal auditor, instead internal
controls are managed on a day-to-day basis by the finance team.
Compliance with internal controls is reviewed annually by Serko’s
auditors, with oversight from the Audit and Risk Committee.
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 been leading a detailed programme of
work to ensure Serko remains compliant with its health and safety
obligations under the new Health and Safety at Work Act 2015
that came into force in April 2016. Our Health and Safety
Management system will be externally audited by the Accident
Compensation Corporation auditors early in the financial period
ending 31 March 2017.
AUDITORS
Auditor independence
Serko has adopted an External Audit Independence Policy that
requires, and sets out the criteria for, the external auditor to be
independent. The Policy recognises the importance of the Board’s
role in facilitating frank dialogue among the Audit and Risk
Committee, the auditor and management.
The Policy requires that the lead and engagement audit
partners be rotated after a maximum of five years so that no
such persons shall be engaged in an audit of Serko for more
than five consecutive years.
The 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.
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.
SHAREHOLDER RELATIONS
Serko is committed to maintaining a full and open dialogue with
its shareholders. The company has in place an investor relations
programme to facilitate effective two-way communication
with investors.
The aim of the company’s communication programme is to
provide shareholders with information about the company and
to enable shareholders to actively engage with the company
and exercise their rights as shareholders in an informed manner.
The company facilitates communication with shareholders through
written and electronic communication and by facilitating shareholder
access to directors, management and the company’s auditors.
The company provides shareholders with communication through
the following channels:
• The investor section of the Serko’s website
• The annual report
• The interim report
• The annual shareholders’ meeting
• Regular disclosures on company performance and news via
the NZX online disclosure platform
• Disclosure of presentations provided to analysts and investors
during regular briefings.
Serko’s website is an important part of the company’s shareholder
communications strategy. Included on the website is a range of
information relevant to shareholders and others concerning the
operation of the company and its subsidiaries, including information
about the company and its history, biographies of the company’s
directors and senior management, the company’s constitution,
Board Charter (and the charters of the various board committees)
and other corporate governance policies of the company.
Shareholders may, at any time, direct questions or requests for
information to directors or management through Serko’s website
or by sending an email to investor.relations@serko.com.
Serko provides shareholders with the option to receive
communications from, and send communications to, the company
and its share registrar electronically. A large number of Serko
shareholders have elected to receive electronic communications.
Page 49
Annual Shareholders’ Meeting
Serko’s 2016 Annual Shareholders’ Meeting will be held in Auckland on 23 August 2016. Shareholders will be given an opportunity at the
meeting to ask questions and comment on relevant matters. In addition, Serko’s auditor, Ernst & Young, will be available to answer any
questions about its audit report. A Notice of Meeting will be sent to shareholders in advance of the meeting.
DIRECTOR INTEREST 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 2016:
NAME OF DIRECTOR
NATURE OF DIRECTORS’ INTEREST IN TRANSACTION
Darrin Grafton
Bob Shaw
Darrin Grafton
Bob Shaw
Darrin Grafton
Bob Shaw
Darrin Grafton
Bob Shaw
Gave notice to the Board that they had entered into a Restricted Share Plan Deed whereby they agreed to
restrict their voting rights in any shares acquired pursuant to the Restricted Share Scheme (Relevant Shares) so
that the Relevant Share is not a voting security under the Takeovers Code.
Gave notice to the Board that Financial Equities Limited, in which they were shareholders and directors, had
entered into a Deed of Amendment (dated 28 September 2015) with Serko Limited and nuTravel Technology
Solutions in respect of a loan to nuTravel Technology Solutions.
Gave notice to the Board that Financial Equities Limited, in which they were shareholders and directors, had
entered into a Loan Agreement with Serko Limited dated 14 December 2015.
Gave notice to the Board that Financial Equities Limited, in which they were shareholders and directors, had
entered into a Second Deed of Amendment (dated 22 March 2016) with Serko Limited and nuTravel Technology
Solutions in respect of a loan to nuTravel Technology Solutions.
Directors have given general notices disclosing interests pursuant to section 140(2) of the Companies Act 1993. Those interests (or
changes to interests) notified and recorded in Serko’s Interests Register during the financial year ended 31 March 2016 are set out below:
DIRECTOR
ENTITY
RELATIONSHIP
Simon Botherway
Landcorp Board
Callaghan Innovation Board
Clyde McConaghy
Integrated Research Limited
Appointed Advisor
Appointed Board Member
Ceased to be Director
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 2016:
NAME
DATE OF
ACQUISITION/DISPOSAL
NUMBER OF SHARES
ACQUIRED/(DISPOSED)
NATURE OF RELEVANT INTEREST
CONSIDERATION PAID/RECEIVED
Darrin Grafton
5 August 2015
3,810
22 December 2015
297,619
Bob Shaw
22 December 2015
514,286
Power to exercise, or control the
exercise of, a right to vote attached
to ordinary shares (a)
Registered holder and beneficial
owner (b)
Registered holder and beneficial
owner (b)
$3,657.60
$250,000.00
$432,000.00
NOTES:
a. 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.
b. Held via a trust in which the director is a trustee. Acquired under institutional placement in December 2015.
Page 50
governance and Statutory disclosureSSerko Limited annual report 2016 In accordance with the NZX Listing Rules, as at 31 March 2016, directors had a relevant interest in Serko ordinary shares as follows:
NAME
Darrin Grafton (a)(b)
Bob Shaw (a)
Simon Botherway (c)
Claudia Batten
Clyde McConaghy (a)
RELEVANT INTEREST
14,209,033
12,884,296
2,319,000
181,818
181,818
PERCENTAGE
19.493%
17.675%
3.181%
0.249%
0.249%
NOTES:
a. Held via a trust in which the director is a trustee.
b. Includes the power to exercise, or to control the exercise of, a right to vote attached to 1,537,594 shares and 3,810 restricted shares by virtue of a personal
relationship with the legal and beneficial holder of these shares.
c. Partially held via a trust in which the director is a trustee.
There were no entries in the Interests Register for the purposes of section 161 of the Companies Act 1993.
For the purposes of section 162 of the Companies Act 1993, an entry was made in the Interests Register in relation to insurance effected
for directors and officers of Serko, in relation to any act or omission in their capacity as directors.
Page 51
Shareholder information
As at 1 May 2016 there were 72,894,342 Serko Limited ordinary shares on issue, each conferring on the registered holder the right to vote
on any resolution at a meeting of shareholders, held as follows:
SIZE OF SHAREHOLDING
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
NUMBER OF
HOLDERS*
101
335
125
156
29
39
785
NUMBER OF
ORDINARY
SHARES
82,295
1,091,822
1,046,306
3,638,323
2,084,533
64,951,063
%
12.87
42.68
15.92
19.87
3.69
4.97
100.00
72,894,342
%
0.11
1.50
1.44
4.99
2.86
89.10
100.00
*
Includes 1,742,438 ordinary shares with restrictive conditions held by Serko Trustee Limited on behalf of 72 beneficial holders pursuant to the Serko Restricted Share
Scheme. Restricted shares have voting rights attached, which are exercised on behalf of a beneficial holder by the Trustee at the direction of the beneficial holder.
As at 1 May 2016 there were 12 shareholders holding between 1 and 500 ordinary shares (a minimum holding under the NZX Listing
Rules), in respect of 2,756 shares.
Set out below are details of the 20 largest shareholders of Serko as at 1 May 2016:
SHAREHOLDER
Robert James Shaw & Sarah Elizabeth Shaw
Darrin Grafton & Geoffrey Robertson Ashley Hosking
National Nominees New Zealand Limited
Cogent Nominees Limited
Simon John Botherway & MSH Trustee (Arrow) Limited
JPMORGAN Chase Bank
Serko Trustee Limited
Robert Alan Hawker & Elizabeth Anne Hawker
Donna Bailey
Philip Rodger Ball
Sherie Robyn Hammond
Michael John Thorburn
Accident Compensation Corporation
Joanne Maree Phipps
Public Trust
Tracey Ann Shorter
John S Challis & AH Trustees (Challis Holdings) Ltd
Public Trust Forte Nominees Limited
NZ Permanent Trustees Ltd Group Investment Fund No 20
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
FNZ Custodians Limited
Page 52
NUMBER OF ORDINARY
SHARES HELD
12,884,296
12,667,629
9,122,332
2,477,462
2,034,091
1,749,992
1,742,438
1,564,994
1,537,594
1,537,594
1,537,594
1,537,594
1,374,910
1,345,972
1,174,174
1,123,041
865,762
798,983
595,238
572,248
%
17.68
17.38
12.51
3.40
2.79
2.40
2.39
2.15
2.11
2.11
2.11
2.11
1.89
1.85
1.61
1.54
1.19
1.10
0.82
0.79
governance and Statutory disclosureSSerko Limited annual report 2016 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 2016:
SUBSTANTIAL PRODUCT HOLDER
Serko Limited
Geoffrey Hosking
Darrin Grafton
Robert (Bob) Shaw and Sarah Shaw
Milford Asset Management Limited
NUMBER OF ORDINARY SHARES IN
WHICH RELEVANT INTEREST IS HELD
% OF CLASS HELD AT
DATE OF LAST NOTICE
35,910,287
25,573,925
14,209,033
12,884,296
6,095,817
57.273%
35.138%
19.523%
17.703%
8.376%
As at the balance date (31 March 2016) there were 72,894,342 Serko Limited ordinary shares on issue.
SUBSIDIARY COMPANY DIRECTORS
Directors of Serko’s subsidiaries do not receive any remuneration or other benefits in respect of their appointments. The remuneration
and other benefits of any such directors who are employees of the group totalling $100,000 or more during the year ended 31 March 2016
are included in the relevant bandings for remuneration disclosed on page 47 of this Annual Report.
The following persons held office as directors of subsidiary companies as at 31 March 2016:
Serko Australia Pty Limited
Darrin Grafton
Bob Shaw
John Challis
Serko Trustee Limited
Timothy Bluett
Fiona Rockel
Serko Investments Limited
Darrin Grafton
Bob Shaw
Serko India Private Limited
Darrin Grafton
Bob Shaw
Yogita Chadha
As at 31 March 2016, Serko also has a representative office in China.
There were no entries made in the subsidiary company Interest Registers during the financial reporting period.
REGULATORY MATTERS
On 22 July 2015, NZX regulation granted Serko a waiver from NZX Listing Rule 7.6.4(b)(iii) to the extent required to allow Serko to
provide financial assistance to executive directors, and an associated person of one of the executive directors, to enable them to
participate in Serko’s Restricted Share Scheme (described in more detail under Remuneration above). The full waiver is available on
Serko’s website. Go to: www.serko.com/investor-centre/.
Neither the NZX or the Financial Markets Authority has taken any disciplinary action against Serko during the financial year ending
31 March 2016.
DONATIONS
Serko made no donations during the financial reporting period.
CREDIT RATING
Serko does not currently have an external credit rating status.
DISTRIBUTIONS
There were no dividends or distributions paid to shareholders during the financial period.
Page 53
Glossary
Asia Pacific
Vietnam, Thailand, Taiwan, Sri Lanka,
South Korea, South Africa, Singapore,
Philippines, Pakistan, New Zealand,
Malaysia, Japan, Indonesia, India, Hong
Kong, China, Bangladesh and Australia
for the purposes of this Annual Report
AUD or A$
Australian dollar
Australasia
New Zealand and Australia for the
purposes of this Annual Report
Board or Board
of Directors
Cloud or
cloud-based
The board of directors of Serko
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
Full-time equivalent
Foreign exchange
Financial year ended, or ending, on
31 March (unless otherwise stated)
Goods and Services Tax
International Financial Reporting
Standards
Incharge
or Incharge
Expense
Management
business
The Australian-based travel management
expense business, Incharge Group Pty
Limited, that Serko acquired on
20 December 2013
Independent
Directors
Simon Botherway, Claudia Batten and
Clyde McConaghy
NZ
New Zealand
NZD or NZ$
New Zealand dollar
NZ GAAP
or GAAP
NZ IAS
NZ IFRS
or IFRS
NZX
New Zealand Generally Accepted
Accounting Practice
New Zealand equivalents to International
Accounting Standards
New Zealand equivalents to International
Financial Reporting Standards
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 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
Initial Public Offering
USD or US$
United States dollar
The date Serko shares started trading
on the NZX Main Board, 24 June 2014
$
All figures are in New Zealand dollars,
unless otherwise stated
IPO
Listing
Page 54
Serko Limited annual report 2016 Serko Limited annual report 2016
corporate directory and shareholder enquiries
Serko is a company incorporated with limited liability under the
New Zealand Companies Act 1993 (Companies Office registration
number 1927488).
Registered Office
Directors
(as at date of this
Annual Report)
Share Registrar
Auditor
Saatchi Building
Unit 14D
125 The Strand
Parnell
Auckland 1010
New Zealand
+64 9 309 4754
www.serko.com
ARBN: 611 613 980
Simon Botherway (Chairman)
Claudia Batten
Robert (Clyde) McConaghy
Darrin Grafton
Robert (Bob) Shaw
Link Market Services Limited
Level 7, Zurich House
21 Queen Street
Auckland 1010
New Zealand
+64 9 375 5998
serko@linkmarketservices.co.nz
Ernst & Young
Auckland
EY Building
2 Takutai Square
Britomart
Auckland 1010
+64 9 377 4790
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serko.com