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1
SERKO ANNUAL REPORT
ABOUT
SERKO
Our PURPOSE
Our purpose is to transform the way businesses manage travel
and expenses. We do this by helping companies drive down
the cost of their travel program, using smart technology and
making the process of booking and managing travel and
reconciling expenses a positive experience for their people.
About SERKO
Serko is a market-leading travel and expense technology
solution, used by over 6,000 corporate entities through 50+
Travel Management Companies that combined book more than
A$6b of travel a year through Serko’s platforms. Zeno is
Serko’s next generation travel management application, using
intelligent technology, predictive workflows and a global travel
marketplace to transform business travel across the entire
journey. Listed on the New Zealand Stock Exchange Main
Board (NZX:SKO). Serko employs more than 100 people
worldwide, with its HQ in New Zealand and offices across
Australia, China, India and the United States (US) Visit
www.serko.com for more information.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
$19.3m
Total Income
28%
Operating Revenue Growth
to $18.3m Revenue
20%
increase
in booking transactions
Peak
ATMR
$18.4m
24% increase over
same month prior year
$2.2m EBITDA
$4.7m turnaround from prior year
Margin of 12%
$5.2m
Cash balances increased
$0.8m over the year
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$2.0m
NPBT
Net Profit Before Tax of $2 million
$5.3m turnaround from prior year
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
CEO AND CHAIRMAN’S LETTER
Dear Fellow Shareholders,
Serko has had a strong year and it is with considerable pleasure
representing a turnaround of $5.3 million from the loss last
that we communicate this report and associated financial
year of $3.3 million.
results to you. During this pivotal year, we demonstrated
the scalability of our cloud-based platform and recorded a
dramatic improvement in financial performance as a result.
Peak fourth quarter (February) Annualised Transactional
Monthly Revenue (ATMR), an indicator of the company’s
recurring revenues, stood at $18.4 million, an increase of 24%
We have consolidated our position in our core Australasian
on the same period a year ago.
market as the leading online business travel and expense
management platform and we saw strong growth in recurring
revenues across all categories. We continue to win new
customers, while those already using our suite of cloud-based
services are turning to us to meet more of their travel needs.
It is exciting to have embarked on our next phase of growth as
we significantly expand our Northern Hemisphere presence.
We have made pleasing progress so far. We have recruited
highly respected and experienced leaders in the US and we are
expanding our support operations to ensure we have 24-hour
coverage for customer support.
NPBT of $2.0 million, a
$5.3 million turnaround
from prior year
With the Northern Hemisphere expansion that commenced in
the 2018 financial year, Serko expected to be ‘break-even’ for
the second half. The actual results were an additional EBITDA
As the launch of our new premium travel and expense
profit of $0.9 million over the first half $1.3 million to a total $2.2
solution Zeno shows, we remain at the forefront of
million EBITDA profit for the year. This was primarily attributable
technological innovation in the sector.
Total operating revenue for the year to 31 March 2018
to savings associated with timing of new hires as well as some
operating efficiencies. The costs associated with new hires is
expected to be incurred in the first quarter of the 2019 financial
increased 28% to $18.3 million from $14.3 million in the same
period a year ago and in line with the guidance we gave in
year (FY19).
November 2017 of $18 million to $19 million. Total income
We have successfully controlled costs, generated positive cash
grew by 25% to $19.3 million.
Total operating revenue
for the year increased
28% to $18.3 million
flows and benefited from our platform scaling to serve a larger
number of customers. This is best demonstrated by reference
to the average revenue per ‘full-time equivalent’ (FTE) staff
member, which increased by $48,000 to $170,000.
Meanwhile, we have continued to invest in the further
development of our technology, including Zeno.
At the end of the financial year Serko had net cash-on-hand of
$5.2 million, up 18% on the $4.5 million cash-on-hand at the
end of the last financial year.
Increasing the number of services we provide to our
customers is a core component of our strategy. In particular,
In short, in the 2018 financial year we continued to validate
content revenues such as hotels and airport transfers
our strategy to transform business travel and expense
increased 72% to $1.3 million, demonstrating Serko’s latent
management by delivering market-leading technological
potential to capture an increasing share of our customers’
innovations, growing our customer base and increasing
travel spend.
average revenue from each booking made on our platform.
EBITDA for the full year was $2.2 million, representing a
Further detail on our financial performance is covered in the
$4.7 million turnaround on the prior year’s EBITDA loss of
management commentary section on pages 18 to 27 of
$2.5 million. The full-year profit before tax was $2.0 million,
this report.
SERKO DELIVERS
MAIDEN FULL YEAR
PROFIT
This report is dated 23 May 2018 and is signed on behalf of the Board of Serko Limited by Simon
Botherway, Chairman (Chair), and Darrin Grafton, Chief Executive Officer (CEO).
SIMON BOTHERWAY
CHAIRMAN
DARRIN GRAFTON
CHIEF EXECUTIVE OFFICER
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
GROWTH STRATEGY:
A key determinant of Serko’s future success in Australasia and
The Board has a policy of maintaining a strong cash reserve
in new markets was the take up of the new Zeno platform. We
position and will monitor Serko’s capital requirements in light
are pleased with the results we achieved this year. We have
of the funding needed to execute growth opportunities both
already signed a number of our existing Travel Management
organic and inorganic.
Companies (TMCs) to new contractual terms to resell Zeno as
a premium solution. These TMCs are using Zeno to win new
business and retain current business by providing the options
of both Serko Online and Zeno.
We are preparing for a dual-listing by way of a Foreign Exempt
Listing on the ASX and are targeting a listing date of 25th
June 2018, subject to ASX approval. We believe our strong
presence in Australian markets will resonate with the deep
As part of the Air New Zealand partnership, Tandem Travel
pool of investors across the Tasman that understand travel and
(Air New Zealand’s corporate travel division) is currently
technology markets. We also believe activating this interest
onboarding its entire customer base to Zeno, and its previous
will benefit all shareholders.
solution provider is discontinuing its system this month.
20% growth in booking
transactions for 2018
Our global growth strategy is based on partnering with
leading TMCs to enter new markets. This is the same strategy
that has served us well in Australasia, and the success
of our relationships in our home market is now creating
Serko, however, intends to remain a New Zealand domiciled
business and we are committed to our New Zealand investors.
We are naturally delighted with the rise in the value of our
shares over the past year. The Serko Team has worked hard
on our market communication to better articulate our growth
strategy and long-term prospects.
Further guidance will be provided at our Annual Shareholders
Meeting in August.
Industry Recognition
Category: Most Innovative Hi-Tech Service
Category: Company of the Year
opportunities in other markets.
Signed Chair and CEO
Category: Excellence in Innovation
SIMON BOTHERWAY
CHAIRMAN
DARRIN GRAFTON
CEO
Our new international business development team is actively
pursuing significant distribution and marquee customer
opportunities. As announced in February 2018, we have
signed a global agreement with ATPI Group and we will begin
to roll out Zeno to its customers in the United Kingdom (UK) in
the first quarter of FY19. ATPI intends to extend the roll out to
customers in Europe after the UK launch.
OUTLOOK
Serko is in a stronger position than it has ever been. We expect
total operating revenue growth of between 15% and 30% in
the year to 31 March 2019.
We are excited by the interest we have received in the
Northern Hemisphere and we are preparing the business to
maximise the return on this interest through into the next
financial year. As we undertake this expansion in Europe
and North America, we expect sales, marketing, system
development and support operation costs to increase. As a
result, we do not expect a substantial uplift in EBITDA.
Category: Top 16 corporate travel innovators
Category: NZX Emerging Leaders Best Investor Relations
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
STRATEGIC
OVERVIEW
Grow ARPB by
offering increased
content and moving
customers to Zeno
Offer premium,
integrated global
solutions
Expand into new territories
through strategic alliances
and reach the unserved
SME market
TECHNOLOGY INNOVATION
Zeno set a new benchmark in travel & expense management and we can now expand the personalisation and monetisation
opportunities of Zeno with NDC*
What we achieved:
• Zeno was successfully deployed into general release and is being used by hundreds of corporate and government
organisations to book and manage travel
• Zeno’s technology and content were globalised to support customers in new markets, including North America and Europe
• Multiple white labelled self-service travel booking portals launched or are in development by partners (e.g. Corporate
Traveller, HelloWorld for Business and Air New Zealand) powered by serko.travel
Our focus for FY19:
• Zeno will achieve NDC Level 3 certification, providing a foundation to integrate directly with airlines to unleash
personalisation and monetisation opportunities that have not previously been possible
• We will continue to expand on Zeno’s feature set including a ‘Right to travel’ workflow to streamline business travel approval processes
• A ‘Duty of Care’ premium module will provide risk assessment, mitigation and management capabilities
GROW CUSTOMER BASE
International markets validated demand for Zeno in FY18. We are investing to unlock this growth potential in FY19
What we achieved:
• ATPI signed agreement to resell Zeno in more than 50 countries, with first UK customer going live Q1 FY19
• Serko Expense was deployed into global enterprise organisations and validated as a competitive solution in Northern
Hemisphere with sales expected in FY19
• Tandem Travel, Air New Zealand’s TMC, began migrating customers to Zeno from a competitor and is progressing towards
100% customer migration during FY19
Our focus for FY19:
• Expanding on ATPI UK’s early success with expansion into its customer base across Europe, North America and Asia
• Supporting Travel Encore, our first reseller in Canada, to build a Zeno customer base across travel & expense
• Extending the relationship with our largest TMC customer, FCM, into new markets, including North America
GROW ARPB
We have proven we can lift transaction revenue through customer migration to Zeno and we will continue to expand
opportunities for content monetisation with the Zeno Marketplace
What we achieved:
• Content revenue (derived from bookings that include content in addition to airfare, e.g. hotel, transfer, rental car) increased by 72%
• HRS Hotels, GTA Hotels and Hotel Hub were added and increased available content to three million hotels
• RouteHappy rich content for flight shopping was introduced, which enables differentiated airline merchandising
Our focus for FY19:
• Migration of existing Serko Online customers to our premium offering, Zeno, with associated increase in price per booking
• The Zeno Marketplace serves as a central content hub for global suppliers across every phase of their journey and extends revenue
opportunities into content such as ride-sharing services, restaurant bookings, meeting rooms and secure WiFi providers
• Zeno’s NDC capability outlined above will facilitate the merchandising of ancillary services, such as in-flight meals,
premium seat selection and lounge access, to generate additional content revenue per booking
*NDC (New Distribution Capability) is a travel industry-supported program launched by IATA for the development and market adoption of a new, XML-based data
transmission standard that enhances the capability of communications between airlines, travel agents and aggregators.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
OUR PRODUCTS
Until now, corporate travel programs have had to
choose who loses.
We do this with intelligent technology that provides
personalised itinerary recommendations, an intuitive
There was a spectrum with control and compliance at one
end and choice and convenience at the other. Someone had to
compromise. Not anymore.
Zeno revolutionises the world of online travel and expense
management, providing the control that travel managers need
with the ease of use that compels travellers to get on board.
interface that makes booking travel super simple and a global
marketplace that allows travel managers to connect with
preferred suppliers at every stage of the journey.
The outcome is control and visibility over spend that was
previously opaque, expense capture and reconciliation that
provides confidence in governance and increased user
adoption that drives higher levels of compliance with
corporate travel policies.
Zeno is Serko’s next
generation travel
management
application, using
intelligent technology,
predictive workflows
and a global travel
marketplace
Serko Online is an
end-to-end online
booking tool for
corporates to book
and manage airlines,
hotels, rental cars and
airport transfers
Serko Expense is an
online expense
management solution
that enables the
capture and
processing of
corporate card and
out-of-pocket claims
Serko Mobile is a
purpose-built mobile
app for making,
changing and
managing flight and
hotel bookings and
travel expenses
OUR CUSTOMERS
The majority of Serko’s revenue comes from Travel Management Companies (TMCs)
that provide our solution to their corporate customers
The Connected Traveller
Seamless Compliance
Serko conducted research that identified there are seven
phases that cover every aspect of business travel – fly, stay,
move, eat, work, play and rest.
Zeno is designed to connect travellers with preferred
suppliers across every one of these phases, which means they
will be able to turn to a single app to solve every need before
and during their trip.
Corporates can customise Zeno to show only approved
content providers and will be able to integrate directly with
their corporate accounts.
One of the biggest challenges for travel managers is
compliance, or rather lack thereof, with their corporate travel
policies. This is not normally a significant problem with flights
but more of a challenge with things like hotels, when
travellers will often book directly with the hotel or through
an aggregator, like booking.com or Expedia.
The reasons for this are often down to choice (i.e. I can find a
better hotel than the options shown in my corporate booking
tool) or user experience (i.e. I don’t get the rich information,
such as photos, reviews and room types) in their existing
corporate booking tool.
Zeno helps to overcome this by providing rich content from
aggregators, including Booking.com, Wotif and Expedia, as
well as corporate negotiated rates, and with an intuitive user
interface that matches the consumer experience travellers
are used to.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
BOARD OF DIRECTORS
MANAGEMENT TEAM
Simon Botherway
Independent Non-Executive Chairman, New Zealand
Appointed 30 April 2014, re-elected August 2016
Simon is based in New Zealand. He holds a BCom, as well as the US-based Chartered Financial Analyst
(CFA) designation. Simon has extensive experience in corporate governance, banking and investment
management. In 2002 Simon co-founded Brook Asset Management and was Chairman from 2004 to
2008. He is also a past President of the CFA Society of New Zealand and was a member of the CFA
Asia-Pacific Advocacy Committee.
Simon was appointed as a member of the Securities Commission in 2009 and was appointed by the New
Zealand Government to chair the Financial Markets Authority Establishment Board in 2010. Simon is
currently also a Director of the Callaghan Innovation Board and Fidelity Life Assurance.
Claudia Batten
Independent Non-Executive Chairman, United States
Appointed 30 April 2014, re-elected August 2017
Claudia has been a founding member of two highly successful entrepreneurial ventures. Starting
with Massive Incorporated, a network for advertising in video games, she helped pioneer ‘digital’ as
a media buy. Massive was sold to Microsoft in 2006. In 2009 she co-founded Victors & Spoils
(‘V&S’), the first advertising agency built on the principles of crowd-sourcing. V&S was majority
acquired by French holding company Havas Worldwide in 2011. Claudia is based in the United
States but remains a strong supporter of the New Zealand start-up scene as an active mentor and
adviser. She is also the digital adviser to the Board of Westpac New Zealand and holds an LLB
(Hons) and BCA from Victoria University (Wellington).
Clyde McConaghy
Independent Non-Executive Chairman, Australia
Appointed 30 April 2014, re-elected August 2017
Clyde is based in Australia. He holds a BBus and MBA from Cranfield University United Kingdom (UK).
Clyde is a fellow of the Australian Institute of Company Directors and a fellow of the Institute of Directors
UK. He is the founder of Optima Boards, providing independent director and advisory services to public,
private, family office and charitable entities around the world. Clyde has worked in publishing, media,
online and technology sectors, living in the UK, Germany, China and Australia. He is a Director of ASX-listed
technology company, Infomedia Limited and Chairman of the Board of Chapman Eastway Pty Limited.
Darrin Grafton
Executive Director, Chief Executive Officer & Co-Founder
Appointed 5 April 2007
Darrin has more than 25 years' experience in travel technology and is highly experienced in technology
commercialisation. He previously held senior management positions with Gullivers Travel Group (listed
on the Australian and New Zealand Stock Exchanges 2004-2006) and Interactive Technologies.
Robert (Bob) Shaw
Executive Director, Chief Strategy Officer & Co-Founder
Appointed 5 April 2007, re-elected August 2016
Bob has more than 25 years' experience creating and commercialising technology for the travel industry.
He has held a number of directorships and senior management positions in various high-profile ventures,
including Gullivers Travel Group (listed on the Australian and New Zealand Stock Exchanges between
2004 and 2006) and Interactive Technologies.
Charlie Nowaczek
Chief Operating Officer (COO)
Charlie has over 25 years’ experience as an operations executive and management adviser, specialising
in business transformation and operational excellence. Over the last decade he has been COO for a
number of technology start-ups in the US and Canada.
Susan Putt
Chief Financial Officer (CFO)
Susan has over 25 years’ experience working in New Zealand and has also worked in Australia and
Canada. She is a Chartered Accountant and Chartered Member of the Institute of Directors. Susan has
worked as CFO, Head of Strategy, and Director for a number of New Zealand businesses and
specialises in working with high-growth companies.
John Challis
Head of Business Development
John has 18 years' experience in the corporate travel technology sector across operations,
implementations and sales. John has been with Serko for 11 years and was until recently responsible
for managing the Australasian sales team, however, as part of Serko's global expansion plans John is
now responsible for growth in new markets with a heavy focus on the Northern Hemisphere.
Murray Warner
Head of Australasian market
Murray has 20 years’ experience working with cloud software technology building new sales and
revenue operations. He has previously held several senior management positions with Concur
Technologies, an SAP company, across Asia-Pacific, Europe and North America.
Tony D’Astolfo
Senior Vice President, NORAM
Tony is a 35-year travel industry veteran, with deep expertise in travel and technology. Most recently
he was Chief Commercial Officer at Deem and prior to this Tony was Managing Director of
Phocuswright. Tony is a long-time member of GBTA and ACTE, and current Vice Chairman of WINiT
(Women In Travel).
Darrin Grafton and Bob Shaw are also part of the executive team, see facing page for their details
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
CORPORATE
RESPONSIBILITY
Serko aims to be a successful growth company. To
realise this ambition we must do the right thing by our
people, customers, community and our shareholders.
We aim to achieve this through:
1) Focusing on long-term growth and business
sustainability;
2) Applying best practice governance and risk
management procedures;
3) Cultivating an inclusive workplace of diverse
and engaged staff; and
4) Enabling environmentally sustainable choices
through technology.
Serko is committed to developing long-term value
creation and making positive improvements in social,
economic and environmental outcomes. This year,
we have prepared our first Environmental Social and
Governance (ESG) Report and started reporting how
the United Nations (UN) Sustainable Development
Goals are applicable to our ESG initiatives.
Further information and our full report can be found
online at www.serko.com/investor-centre/. Serko’s
ESG framework remains under development and will
continue to be progressed over time.
The Sustainable Development Goals (SDGs) are a
set of global initiatives set by the United Nations
for everyone to contribute to. For Serko, the SDGs
are a way to see which areas of sustainability we
are directly contributing to and how our community
initiatives relate to a larger vision for positive change.
The UN SDGs relevant to Serko and our actions are
as follows:
UN SDGs
People:
Good health and well-being
Health and Safety Policies
Quality education
Training and intern programmes
Gender equality
Diversity and inclusion policies
Decent work and economic
growth
Remuneration policies
Reduced inequalities
Diversity and inclusion policies
UN SDGs
Customers:
Industry, innovation and
infrastructure
Industry recognition for innovation
Responsible consumption
and production
Privacy and security policies
UN SDGs
Community:
Sustainable cities and
communities
Sponsorships and donations
Climate action
Environmental practices
SERKO ANNUAL REPORT
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MANAGEMENT
COMMENTARY
Please read the following commentary with the financial statements and the related notes in this report. Some parts of this
commentary include information regarding the plans and strategy for the business and include forward-looking statements that
involve risks and uncertainties.
Actual results and the timing of certain events may differ materially from future results expressed or implied by the forward-
looking statements contained in the following commentary. All amounts are presented in New Zealand dollars (NZD), except
where indicated. All references to a year are the financial year ended 31 March, unless otherwise stated.
Non-GAAP (generally accepted accounting practices) measures have been included, as we believe they provide useful information
for readers to assist in understanding Serko’s financial performance. Non-GAAP financial measures do not have standardised
meanings and should not be viewed in isolation or considered as substitutes for measures reported in accordance with New
Zealand Equivalents to International Financial Reporting Standards (NZ IFRS). These measures have not been independently
audited or reviewed.
$2.0m
NET PROFIT
BEFORE TAX
$5.3m
TURNAROUND
BUSINESS RESULTS
Year ended 31 March
Revenue
Other income
Total income
Operating expenses
Percentage of revenue
Net finance income
Net profit (loss) before tax
Percentage of operating revenue
Income tax expense
Net profit (loss)
2018
2017
$ (000)
$ (000)
18,279
994
19,273
14,277
1,092
15,369
Change
$ (000)
4,002
(98)
3,904
%
28%
-9%
25%
(17,684)
(18,763)
1,079
6%
-97%
414
2,003
11%
(171)
1,832
-131%
88
(3,306)
-23%
(144)
(3,450)
326
370%
5,309
161%
(27)
-19%
5,282
153%
Annual total operating revenue grew by $4 million to $18.3 million from $14.3 million in
the prior year, driven by strong recurring revenue growth across all revenue categories
predominantly from our Australian operations. The company recognised $0.96 million in
Callaghan Innovation growth grants within other income, leading to total income for the year
of $19.3 million up from $15.4 million for the prior year.
Serko became profitable in the financial year in line with guidance as it benefited from the
operational efficiencies of a scalable technology platform and from tight cost control. Total
operating expenses decreased by $1.1 million to $17.7 million from the prior year
$18.8 million. This resulted in a profit after tax of $1.8 million, which represents a turnaround
of $5.3 million from a loss of $3.5 million in the prior year.
$2.2m
EBITDA
$4.7m
TURNAROUND
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA)
Year ended 31 March
Net profit (loss)
Add back: income tax expense
Deduct: net finance income
Add back: depreciation and amortisation
EBITDA profit/(loss)
EBITDA margin
2018
2017
$ (000)
$ (000)
Change
$ (000)
%
1,832
171
(414)
597
2,186
12%
(3,450)
5,282
153%
144
(88)
858
(2,536)
-177%
27
19%
(326)
-370%
(261)
-30%
4,722
186%
EBITDA is a Non-GAAP measure representing Earnings Before the deduction of costs relating to Interest, Taxation,
Depreciation and Amortisation and Impairment. Serko uses this as a useful indicator of cash profitability.
EBITDA improved by $4.7 million from a loss of $2.5 million to a profit of $2.2 million. This
was driven by an increase in total income of $3.9 million and decrease in operating costs
(excluding depreciation and amortisation) of $0.8 million.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
28%
INCREASE
TOTAL
REVENUE
25%
INCREASE
TOTAL
INCOME
INCOME
Year ended 31 March
Travel platform booking revenue
Expense platform revenue
Supplier commissions revenue
Other revenues
Recurring product revenue
Percentage of total revenue
Services revenue
Total revenue
Other income
Total income
2018
2017
$ (000)
$ (000)
Change
$ (000)
13,283
1,539
1,288
334
16,444
90%
10,808
1,125
751
238
12,921
91%
1,835
1,356
18,279
14,277
994
1,092
19,273
15,369
2,475
414
537
96
3,522
479
4,002
(98)
3,904
%
23%
37%
72%
40%
27%
35%
28%
-9%
25%
HOW SERKO MAKES MONEY
How Serko makes money
Corporate traveller makes
a booking via Serko
Online/Zeno
Corporate books a hotel or
taxi via Serko Online/Zeno
Traveller downloads and
uses Serko Mobile
Traveller submits receipts
using Serko Expense/Zeno
Booking &
other fees
Supplier
commission
Mobile
subscription
Monthly
user fee
Serko’s main source of revenue in 2018 was from its Serko Online travel booking platform. This is predominantly invoiced to TMC
resellers on a monthly basis for the total transactions generated from the online travel bookings made by their customers. As Zeno
was launched firstly in beta to trial customers during the second half of 2018, booking volumes for 2018 are not material.
Travel platform revenue is made up of transaction fees, ancillary service fees and contracted minimum payments (where
applicable) and is stated net of volume-related rebates and discounts.
Recurring product revenue (a Non-GAAP measure) is the revenue derived from transactions and usage of Serko
products by contracted customers. It excludes services revenue.
The serko.travel platform for small and medium enterprises is a free booking service and Serko earns commission income on those
Total operating revenue is revenue excluding grants and finance income, while total income includes grants
bookings direct from suppliers, therefore income from this platform is included in supplier commissions.
Serko also earns income from its expense management platform Serko Expense, which allows registered users of corporate
customers to process travel and expense claims for accounting and reimbursement. Revenues are derived from a combination of
fees for active users, registered users and reports processed.
Supplier commission revenue is earned when corporates opt to book Serko-sourced hotel and other traveller-related services.
Serko is paid directly from the suppliers of those services.
Other income includes income from Serko Mobile licence fees and other miscellaneous revenues.
Services revenue is derived from installation service and customised software development undertaken on behalf of the TMC
customers. It also includes the fees charged to develop connections to third party systems wanting to integrate with Serko’s
platforms. The basis of charging can vary depending on the contractual terms with the customer, which may specify time and
materials, capped or fixed pricing.
Other income is primarily government grants for research and development projects.
Travel platform revenue grew by 23% for the year and was primarily related to a 20% increase
in booking numbers. The difference between transaction growth and booking volume growth
is owing to minimum volume commitments recognised.
Minimum volume commitments contribute to revenue when actual volumes transacted are
less than the stated contractual commitments. Revenue from these sources in 2018 was
$0.6 million, significantly higher than the contribution in the prior year. The anticipated
transactional business related to these minimums is expected to be onboarded onto the Serko
platform in the first quarter of 2019.
Expense platform revenue grew 37% to $1.5 million. This growth is a result of the successful
reseller program introduced in the prior year with our partner TMCs.
Supplier commissions revenue grew by 72% to $1.3 million. The number of bookings that
Serko earned additional commission revenue over the travel platform booking fee increased
by 77%. The average attachment rate of commission bookings versus total bookings for the
year was 5.4% up from 3.7% for the prior year.
Other revenues grew by 40%.
Total services revenue was up 35% over the prior period. This reflects the increase in
payments from content suppliers for the integration of their content to our travel platform, as
well as growth in the paid work to configure our platforms for customer needs.
Total recurring product revenues grew by 27% to $16.4 million compared to $12.9 million in
the prior year. Recurring revenue as a percentage of total revenue remains steady at 90%.
Serko launched its premium travel booking tool called Zeno during 2018. Some customers
have already transitioned to this platform, as commercial negotiations progressively
conclude with various TMC partners for the reseller rights. The volumes were not
significant and revenues are not material for this year and thus have not been separately
disclosed in this report.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
Revenue Trend
Travel platform
Expense platform
Supplier commissions & other
Services
Booking trend
Online booking trend over
the last 6 years*
FY13
FY14
FY15
FY16
FY17
FY18
FY13
FY14
FY15
FY16
FY17
FY18
* Booking volumes not disclosed for commercial reasons
Revenue by
Geography
Year ended 31 March
2018
2017
$ (000)
$ (000)
Change
$ (000)
Australia
New Zealand
North America
India
Singapore
Other
Revenue
16,599
13,195
3,404
1,038
457
57
42
86
672
158
136
18
98
366
299
(79)
24
(12)
18,279
14,277
4,002
%
26%
54%
189%
-58%
133%
-12%
28%
Serko currently earns 91% of revenue from Australia and 6% from New Zealand
sources. It is currently undertaking the development required to localise content and
integrate its systems with Northern Hemisphere markets and expects these regions
to grow during 2019.
Peak ATMR
Year-on-year movement
20%
$15.3m
Mar 2017
24%
$18.4m
Feb 2018
$14.8m
Feb 2017
37%
$11.2m
Mar 2016
2017
2018
ATMR is a Non-GAAP measure representing Annualised Transactional Monthly Revenue. Serko uses this as a useful indicator of recurring revenues from Serko
products. It is based on the monthly transactions and average revenue per booking (for its travel platform revenue) and monthly active user charges (for its
expense platform revenue) annualised on a constant currency basis. Owing to seasonality, Serko uses the latest month that is not affected by seasonality trends.
The period ended March 2018 was affected by Easter falling over the last weekend in March whereas in 2017 Easter fell in April. Thus the peak ATMR month for
2018 was February 2018. Serko’s transaction volumes over any month are driven by the number of corporate working days within that month. To aid comparison
between months from year to year, Serko now annualises the figures using the weekday average booking transactions for non-seasonal months and multiplies that
by 260 days in a year.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT$15m$10m$5m-$20m$15m$10m-$20m
20%
INCREASE
ONLINE
BOOKINGS
24%
INCREASE
PEAK
ATMR
ACTIVITY
Online bookings increased 20% over the prior year, while transaction volumes also grew
strongly, driven entirely by growth in our core Australasian markets. Serko is currently
expanding into Northern Hemisphere markets, however, these regions did not make a
contribution in 2018.
ARPB increased marginally during the year by 1%, however, additional content revenue at
$1.3 million is now contributing significantly to Serko’s profit, with a 72% uplift over the
prior year.
ATMR, an indicative measure of forward revenue from currently transacting customers, rose
24% for the year to $18.4 million, lifted by increases in ARPB, total bookings and the number
of users of our Expense platform. Actual recurring product revenue of $16.4 million for 2018
was ahead of the March 2017 ATMR of $15.3 million.
Serko’s TMC partners have indicated they expect additional Australasian corporate
customers, that are not currently using an online booking tool, to transition to Serko products
over the next year. Therefore, we expect transaction growth in Australia and New Zealand
to continue. In addition, Serko is expanding into Northern Hemisphere territories and this
segment is also expected to grow over the next financial year.
While transaction growth is difficult to forecast, Serko is expecting total operating revenue to
grow between 15% and 30%.
Serko is rolling out Zeno to its Australasian customers. Zeno is a premium product that offers
a door-to-door booking experience and Marketplace hub that incorporates additional content
for hotels and other traveller services. Consequently, supplier content commissions are also
expected to grow.
With a healthy pipeline of Serko Expense management customers we expect this product line
will continue to grow. Meanwhile, as we expand into Northern Hemisphere markets we are
seeing increased interest in customers adopting integrated travel and expense solutions.
Serko uses Online bookings, Annualised Transactional Monthly Revenue (ATMR) and Average Revenue per Booking
(ARPB) as indicators of strategic achievement.
6%
DECREASE
OPERATING
EXPENSES
OPERATING EXPENSES
Year ended 31 March
2018
2017
$ (000)
$ (000)
Remuneration and benefits
11,667
12,285
Selling and marketing expenses
Administration expenses
Other expenses
Total operating expenses
Percentage of operating revenue
1,258
3,692
1,067
17,684
97%
1,658
3,880
940
18,763
131%
Change
$ (000)
(618)
(400)
(188)
127
(1,079)
%
-5%
-24%
-5%
13%
-6%
-34%
Remuneration and benefits are the total costs of employees and contractors engaged within the business during the
financial year, including gross salary, additional payroll taxes, superannuation and KiwiSaver, bonuses, commissions
and the value of any share-based remuneration or awards.
Selling and marketing expenses comprise all the direct costs of sales that are not people- or salary-related.
Administration expenses are other general overheads and operating costs, including depreciation and amortisation charges.
Other expenses comprise direct technology costs, including hosting.
Total operating expenses were down 6% or $1.1 million from the prior year to $17.7 million,
mainly owing to a decrease in marketing, remuneration and benefit expenses.
Remuneration and benefits (R&B) decreased owing to the integration of the Arnold platform
in the first half of 2017 resulting in operating efficiencies owing to the reduced need to
maintain two platforms. Included in R&B was $1.3 million related to employee share-based
payments and short-term incentive performance payments for 2018, compared to $1.0 million
in the prior year.
As Serko expands in the Northern Hemisphere, R&B costs will increase, as additional
resources are hired to support growth into new territories. This will be offset somewhat by
capitalisation of internal staff time spent on development of revenue-earning modules for the
Serko platforms.
Selling and marketing expenses decreased as a result of a shift in focus from a direct sales and
marketing effort towards assisting TMC partners to resell Serko products.
With the launch of Zeno in Australasia, as well as into Northern Hemisphere markets, Serko
expects selling costs to increase to drive revenue growth in 2019 by supporting the successful
acquisition and onboarding of new customers to the product.
Administration costs were slightly lower than the prior year owing mainly to a decrease
in depreciation and amortisation (D&A). For 2018, D&A at $0.6 million was $0.2 million
lower than the prior year. Administration costs are expected to increase owing to our
growth activities.
Hosting costs increased and generally are expected to increase when revenue increases.
However, thanks to efficiencies achieved this year, these costs increased 13%, while revenues
increased 28%.
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A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
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C
L
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U
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G
O
V
E
R
N
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E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
RESEARCH AND DEVELOPMENT (R&D) COSTS
EMPLOYEES AND AVERAGE REVENUE FTE
16%
DECREASE
R&D COSTS
Year ended 31 March
2018
2017
Change
%
Total R&D cost (including amounts capitalised)
Percentage of operating revenue
Less: capitalised product development costs
Percentage R&D costs
Research costs (excluding amortisation of
amounts previously capitalised)
$ (000)
$ (000)
$ (000)
4,906
27%
(383)
8%
5,836
41%
(780)
13%
(930)
-16%
397
51%
4,523
5,056
(533)
-11%
Less: Government grants
(956)
(1,073)
117
11%
Add: Amortisation of capitalised development
costs
412
450
(38)
-8%
Net product development costs
Percentage of operating revenue
3,979
22%
4,433
31%
(454)
-10%
Research & Development (R&D) cost is a Non-GAAP measure representing the internal and external costs related to
R&D that have been included in operating costs and capitalised as computer software development during the period.
Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to
an intangible asset. R&D expenses include employee and contractor remuneration related to these activities. It also
covers research expenditure defined by NZ IAS 38.
R&D costs (capitalised and expensed) have declined $0.9 million during the year with
integration of the Arnold platform in the first half of 2017. Software development resources,
used to support a higher level of services revenue, has been excluded from R&D. R&D costs
represent 27% of operating revenue.
Capitalised development costs have also declined by 51% to $0.4 million. The majority of
R&D was research related. Research costs of $4.5 million mostly related to improving the
traveller booking experience in Zeno, including work on predictive booking, natural language
transactions and chat bots. These were partially funded through $1 million of government
grants received from Callaghan Innovations.
Serko expects capitalised development costs to increase with the current developer resources
focused on Zeno development for the Northern Hemisphere and new functionality that will
further contribute to increases in revenue.
2%
DECREASE
FTE
18%
INCREASE
CASH
BALANCES
Year ended 31 March
2018
2017
Change
%
Product development and maintenance
Sales and marketing
Customer support
Administration
Total employee numbers at end of year
Average revenue per FTE (NZD $000)
54
12
27
13
106
170
59
9
27
13
108
122
-5
3
-
-
-8%
33%
-
-
-2
-2%
48
39%
Serko’s staff head count was relatively flat for the year, moving to 106 from 108 full-time
equivalent (FTE) staff at the end of 2017, with 58 staff based in New Zealand, 20 in Australia,
26 in China and two based in other countries. Average revenue per FTE increased by $48,000
to $170,000, demonstrating the economies of scale we are achieving from the platform as
revenue grows.
CASH FLOWS
Year ended 31 March
2018
2017
Change
%
Receipts from customers
Grant income receipts
Other operating cash flows
$(000)
$(000)
$(000)
17,754
15,113
915
1,075
(17,253)
(17,783)
2,641
(114)
484
17%
-11%
3%
Total cash flows from operating activities
1,416
(1,595)
3,011
188%
Investing and financing cash flows
(565)
(1,038)
473
46%
Total net cash flows
851
(2,633)
3,484
132%
Net foreign exchange differences
Closing cash balances
(70)
(34)
5,232
4,451
(36)
781
-106%
18%
Receipts from customers increased by 17% over 2018 from $15.1 million to $17.8 million.
Other operating cash outflows decreased by $0.5 million resulting in positive operating cash
flows for the year of $1.4 million.
Cash outflows for property, plant and equipment and intangibles were $0.5 million lower than
prior year resulting in total net inflows of $0.8 million for the year, including foreign exchange
differences. Cash balances increased by 18% as at 31 March 2018, from $4.5 million to
$5.2 million.
26
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04
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06
L
E
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R
10
O
V
E
R
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I
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W
S
T
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A
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E
G
C
I
12
P
R
O
D
U
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S
14
L
E
A
D
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R
S
H
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16
C
O
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P
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R
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P
O
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18
M
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A
G
E
M
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N
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C
O
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E
N
T
A
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Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
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S
66
D
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79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
FINANCIAL
STATEMENTS
The directors of Serko Limited are pleased to present the
financial statements for Serko Limited and its subsidiaries (the
group) for the year ended 31 March 2018 to shareholders.
The directors are responsible for presenting financial
statements in accordance with New Zealand law and generally
accepted accounting practice, which fairly present the
financial position of the group as at 31 March 2018 and the
results of its operations and cash flows for the year ended on
that date.
The directors consider the financial statements of the group
have been prepared using accounting policies that have been
consistently applied and supported by reasonable judgements
and estimates and that all relevant financial reporting and
accounting standards have been followed.
The directors believe that proper accounting records have been
kept that enable, with reasonable accuracy, the determination
of the financial position of the group and facilitate compliance
of the financial statements with the Companies Act 1993, NZX
Main Board Listing Rules, Financial Reporting Act 2013 and the
Financial Markets Conduct Act 2013.
The directors consider they have taken adequate steps to
safeguard the assets of the group and to prevent and detect fraud
and other irregularities. Internal control procedures are also
considered to be sufficient to provide a reasonable assurance as
to the integrity and reliability of the financial statements.
The financial statements are signed on behalf of the Board on
23 May 2018 by:
SIMON BOTHERWAY
CHAIRMAN
DARRIN GRAFTON
CHIEF EXECUTIVE OFFICER
CONTENTS
Statement of comprehensive income
Statement of changes in equity
Statement of financial position
Statement of cash flows
Notes to the financial statements
Independent auditor’s report
30
31
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34-62
63-65
28
29
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04
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06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
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Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
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O
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2018
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2018
Notes
2018
2017
Notes
Share
Capital
Share-based
Payment
Reserve
Foreign
Currency
Reserve
Accumulated
Losses
Total
Revenue
Other income
Total revenue and other income
Operating Expenses
Remuneration and benefits
Selling and marketing expenses
Administration expenses
Other expenses
Total operating expenses
Finance income
Finance expenses
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) attributable to the shareholders of the company
Movement in foreign currency reserve
Total comprehensive income for the year
Earnings per share
Basic profit/(loss) per share
Diluted profit/(loss) per share
4
4
5
5
5
6
16
16
$ (000)
18,279
994
19,273
$ (000)
14,277
1,092
15,369
Balance as at 1 April 2017
Net profit/(loss) for the year
Other comprehensive income/(loss)*
Total comprehensive income for the year
(11,667)
(12,285)
Transactions with owners
(1,258)
(3,692)
(1,067)
(1,658)
(3,880)
(940)
Shares allocated to employees
Shares forfeited from employees
Share options to non-executive directors
(17,684)
(18,763)
Balance as at 31 March 2018
$ (000)
$ (000)
$ (000)
$ (000)
$ (000)
25,185
1,021
(33)
(19,897)
-
-
-
-
-
-
-
-
-
252
(23)
59
-
1,832
(52)
(52)
-
1,832
-
-
-
-
-
-
6,276
1,832
(52)
1,780
252
(23)
59
25,185
1,309
(85)
(18,065)
8,344
25,185
888
107
(16,447)
9,733
-
-
-
-
-
-
-
-
-
(3,450)
(3,450)
(140)
(140)
-
(140)
(3,450)
(3,590)
372
(239)
1,021
-
-
-
-
(33)
(19,897)
372
(239)
6,276
15
15
15
15
15
Balance as at 1 April 2016
Net profit/(loss) for the year
Other comprehensive income/(loss)*
Total comprehensive income for the year
Transactions with owners
Shares allocated to employees
Shares forfeited from employees
Balance as at 31 March 2017
25,185
475
(61)
2,003
(171)
1,832
(52)
1,780
$0.03
$0.02
142
(54)
(3,306)
(144)
(3,450)
(140)
(3,590)
$(0.05)
$(0.05)
The accompanying notes form part of these financial statements.
The accompanying notes form part of these financial statements.
*Items in other comprehensive income may be reclassified to the income statement and are shown net of tax.
30
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06
L
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R
10
O
V
E
R
V
I
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W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
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Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
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U
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&
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
STATEMENT OF FINANCIAL POSITION
As at 31 March 2018
STATEMENT OF CASH FLOWS
For the year ended 31 March 2018
Current assets
Cash at bank and on hand
Receivables
Derivative financial instruments
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Interest-bearing loans and borrowings
Derivative financial instruments
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Derivative financial instruments
Total non-current liabilities
Total liabilities
Equity
Share capital
Share-based payment reserve
Foreign currency reserve
Accumulated losses
Total equity
Total equity and liabilities
Notes
2018
$ (000)
2017
$ (000)
11
7
8
9
10
6
12
14
8
12
14
8
15
15
5,232
3,831
288
9,351
893
1,574
155
2,622
4,451
3,167
-
7,618
886
1,603
112
2,601
11,973
10,219
2,793
98
351
-
3,242
183
204
-
387
2,582
160
399
245
3,386
269
254
34
557
3,629
3,943
25,185
1,309
(85)
(18,065)
8,344
11,973
25,185
1,021
(33)
(19,897)
6,276
10,219
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 from/(used in) operating activities
20
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangibles
Net cash flows from/(used in) investing activities
Cash flows from financing activities
Net repayment of loans
Net cash flows from/(used in) 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
11
Notes
2018
$ (000)
17,754
93
915
(262)
2017
$ (000)
15,113
99
1,075
(469)
(17,065)
(17,349)
(22)
3
1,416
(192)
(327)
(519)
(46)
(46)
851
(70)
4,451
5,232
5,232
5,232
(16)
(48)
(1,595)
(247)
(791)
(1,038)
-
-
(2,633)
(34)
7,118
4,451
4,451
4,451
For and on behalf of the Board of Directors, who authorise these financial statements for issue on 23 May 2018.
SIMON BOTHERWAY
CHAIRMAN
DARRIN GRAFTON
CHIEF EXECUTIVE OFFICER
The accompanying notes form part of these financial statements.
The accompanying notes form part of these financial statements.
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L
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10
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14
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E
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16
C
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18
M
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28
F
I
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A
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M
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66
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
1 CORPORATE INFORMATION
The financial statements of Serko Limited (‘the company’)
In reaching their conclusion, the directors have considered
and subsidiaries (‘the group’) were authorised for issue in
the following factors:
accordance with a resolution of directors.
The company is a limited liability company domiciled and
incorporated in New Zealand under the Companies Act
1993 and is listed on the New Zealand Stock Exchange
(NZX). Its registered office is at Unit 14d, 125 The Strand,
Parnell, Auckland.
• Cash reserves at 31 March 2018 of $5.2 million
provides a sufficient level of headroom to help
support the business for at least the next 12 months.
• The 2019 financial year budget has been prepared to
achieve profitability and positive net cash flow over
the year.
The group is involved in the provision of computer
• The directors have made due enquiry into the
software solutions for corporate travel. The group is
appropriateness of the assumptions underlying the
headquartered in Auckland, New Zealand.
budgetary forecasts.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the
preparation of these consolidated financial statements are
set out below and within this notes section. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
a) Basis of preparation
The financial statements have been prepared in
accordance with generally accepted accounting practice
in New Zealand (NZ GAAP) and the requirements of
the Financial Market Conduct Act 2013. The financial
statements have been prepared on a historical cost basis,
modified by the revaluation of certain assets and liabilities
• In approving the 2019 financial year budget, the
directors have considered detailed contingency plans
presented by the management, including the ability
to adjust resource levels and reduce operating costs,
that can be implemented in the event that adverse
variances in performance versus budget exceed
certain thresholds.
A number of significant judgements have been made in
preparing the budget, the most significant relate to the
timing and level of uptake of demand for new products and
services that are expected to launch or grow significantly
during the year. However, in view of the contingencies and
risk mitigations that have been identified, the directors
consider there is a reasonable expectation that the
group can continue to operate as a going concern for the
foreseeable future.
as identified in specific accounting policies.
c) Statement of compliance
The financial statements are presented in New Zealand
The financial statements have been prepared in
dollars and all values are rounded to the nearest thousand
accordance with NZ GAAP. They comply with New
dollars unless stated otherwise.
The financial statements provide comparative information
in respect of the previous period.
Zealand equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting
Standards, as appropriate for profit-oriented entities.
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.
d) New accounting standards and interpretations
NZ IFRS standards that have recently been issued or
amended but are not yet effective and have not been
adopted by the group are:
NZ IFRS 15 Revenue from Contracts from Customers is
effective for accounting periods beginning on or after
1 January 2018. Serko will adopt the standard when
required for the year ended 31 March 2019.
The standard requires entities to recognise revenue
when control of a good or service transfers to a customer
with revenue recognised for the amount that reflects the
consideration to which the entity expects to be entitled
in exchange for the goods and services. As permitted by
the standard, Serko will apply the modified retrospective
approach on transition. Consequently, any adjustments
required to historic revenues at the date of transition will
be recognised against the opening balance of retained
earnings at 1 April 2018 and prior year comparatives will
not be restated.
To date, a sample of contracts have been analysed,
focusing initially on revenue from the Serko Online
product, which represents the majority of revenue.
Serko Online charges mostly involve transaction and
usage fees, which are recorded as revenue at the time
the initial booking is processed. Under NZ IFRS 15, we
expect that this will continue except where the transaction
fee is bundled to include ‘changes post booking’ where
some revenue may need to be deferred until subsequent
changes occur, and where there are minimum transaction
commitments where a different revenue recognition
profile is being considered.
A detailed analysis is ongoing for the remaining bespoke
customer contracts and further areas of adjustment may
still be identified.
NZ IFRS 9 Financial Instruments is effective for accounting
periods beginning on or after 1 January 2018. Serko will
adopt the standard when required for the year ended 31
March 2019.
The standard includes a revised model for classification
and measurement of financial instruments, including a
new expected credit loss model for the calculation of
impairment on financial assets, and changes to general
hedge accounting requirements.
The group considers that the standard will not have a
significant impact on the financial statements, given the
non-complex nature of financial instruments held. The
main change expected will be in respect of receivables
held at amortised cost where the new impairment model
requires the recognition of impairment provisions based
on expected credit losses rather than incurred credit
losses. While calculation of the opening expected credit
loss has not yet been determined, the impact is not
expected to be significant, given the short payment terms
and low level of past due receivables as disclosed in note 7.
The group does not apply hedge accounting and does not
propose to change this on transition to NZ IFRS 9.
NZ IFRS 16 Leases, effective for accounting periods
beginning on or after 1 January 2019. Serko does not
expect to apply the standard early.
When the standard is adopted Serko’s operating leases
will be recorded on balance sheet, with the recognition
of right-to-use assets and an obligation to make lease
payments. The right-to-use assets will be depreciated
over the lease term and the liability will be measured
at amortised cost. As a result, there will be increased
depreciation and interest expense, with a reduction in
rental expense.
Until the project is completed and decisions are made, such
as the transition method to apply and applicable discount
rate to calculate the lease obligation, it is not practicable to
quantify the effect of the standard. Existing operating lease
commitments are set out in note 18.
Amendments to NZ IFRS 2 Share-based Payment. The
following apply prospectively to annual periods beginning
on or after 1 January 2018:
• The accounting for the effects of vesting conditions on
cash-settled share-based payment transactions;
• The classification of share-based payment transactions
with net settlement features for withholding tax
obligations; and
• The accounting for a modification to the terms and
conditions of a share-based payment that changes the
transaction from cash-settled to equity-settled.
Management will assess the impact of the amendment
during the 2019 financial year.
e) Basis of consolidation
The consolidated financial statements comprise the
financial statements of Serko Limited and its subsidiaries as
at and for the year ended 31 March each year.
Control is achieved when the group is exposed, or has
rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through
its power over the investee. Specifically, the group controls
an investee if and only if the group has:
• Power over the investee (i.e. existing rights that give
it the current ability to direct the relevant activities of
the investee;
• Exposure, or rights, to variable returns from its
involvement with the investee; and
• The ability to use its power over the investee to affect
its returns.
When the group has less than a majority of the voting or
similar rights of an investee, the group considers all relevant
facts and circumstances in assessing whether it has power
over an investee, including:
• The contractual arrangement with the other vote holders
of the investee;
• Rights arising from other contractual arrangements; and
• The group’s voting rights and potential voting rights.
34
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L
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T
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10
O
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E
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A
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E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
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A
T
E
R
E
S
P
O
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I
B
I
L
I
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Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
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E
S
G
O
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E
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The group reassesses whether or not it controls an
indicate that it might be impaired, and carried at cost less
investee if facts and circumstances indicate there are
changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the group
obtains control over the subsidiary and ceases when the
group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed
of during the year are included in the financial statements
from the date the group gains control until the date the
group ceases to control the subsidiary.
A change in the ownership interest of a subsidiary, without
a loss of control, is accounted for as an equity transaction.
If the group loses control over a subsidiary, it:
• Derecognises the assets (including goodwill) and
liabilities of the subsidiary;
• Derecognises the carrying amount of any non-
controlling interests;
• Derecognises the cumulative translation differences
recorded in equity;
• Recognises the fair value of the consideration received;
• Recognises the fair value of any investment retained;
• Recognises any surplus or deficit in profit or loss; and
• Reclassifies the parent’s share of components
previously recognised in other comprehensive income
to profit or loss or retained earnings, as appropriate,
as would be required if the group had directly
disposed of the related assets or liabilities.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The acquisition method
of accounting involves recognising at acquisition date,
separately from goodwill, the identifiable assets acquired,
liabilities assumed and any non-controlling interest in the
acquiree. The identifiable assets acquired and liabilities
assumed are measured at their acquisition date fair values.
Acquisition-related costs are expensed as incurred and
recognised in profit or loss.
The difference between the above items and the fair value
of the consideration is recorded as either goodwill or gain
on bargain purchase. After initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired
in a business combination is, from the acquisition date,
allocated to each of the group’s cash-generating units
expected to benefit from the combination, irrespective
of whether other assets or liabilities of the acquiree are
assigned to those units.
Goodwill is tested annually for impairment, or
immediately if events or changes in circumstances
accumulated impairment losses. Impairment losses on
goodwill are not reversed.
Any gain on bargain purchase is recognised immediately
on acquisition to profit and loss.
Inter-company transactions, balances and unrealised
gains and losses on transactions between group
companies are eliminated.
Non-controlling interests are allocated their share of
comprehensive income after tax in the statement of
comprehensive income and are presented within equity
in the consolidated statement of financial position,
separately from the equity of the owners of the parent.
f) Foreign currency translation
i) Functional and presentation currency
Items included in these financial statements of each of
the group’s entities are measured using the currency of
the primary economic environment in which the entity
operates (the ‘functional currency’). These financial
statements are presented in New Zealand dollars, which
is the group’s presentation currency and the parent’s
functional currency.
ii) Transactions and balances
Transactions in foreign currencies are initially recorded
in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at balance
date. Non-monetary items measured in terms of
historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value was determined.
Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation
at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are
recognised in profit or loss.
iii) Foreign Currency Translation Reserve
For the purposes of presenting these consolidated
financial statements, the assets and liabilities of the
group’s foreign operations are translated into currency
units using exchange rates prevailing at the end of
each reporting period. Income and expense items are
translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the dates of
the transactions are used. Exchange differences arising,
if any, are recognised in other comprehensive income and
accumulated equity.
g) Financial instruments
Financial assets are classified as either loans and
receivables. When financial assets are recognised initially
they are measured at fair value plus directly attributable
transaction costs. The group determines the classification
of its financial assets on initial recognition and, when
allowed and appropriate, re-evaluates this designation at
each financial year end.
i) Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They arise when the group provides
money, goods or services directly to a debtor with no
intention of selling the receivable. Such assets are
subsequently carried at amortised cost using the effective
interest method. Gains and losses are recognised in profit
or loss when the loans and receivables are derecognised
or impaired, as well as through the amortisation process.
The group’s loans and receivables comprise trade
receivables, loans and GST receivable.
ii) Financial liabilities
Financial liabilities are classified as ‘other financial
liabilities’. Other financial liabilities, including borrowings,
are initially measured at fair value, net of transaction
costs. Other financial liabilities are subsequently
measured at amortised cost using the effective interest
method, with interest expense recognised using an
effective interest method.
The effective interest method calculates the amortised
cost of a financial liability and allocates the interest
expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future
cash payments through the expected life of the financial
liability or, where appropriate, a shorter period to the net
carrying amount of the liability.
Financial liabilities are classified as current liabilities
unless the group has an unconditional right to defer
settlement of the liability for at least 12 months after
balance date.
iii) Impairment of financial assets
The group assesses, at each reporting date, whether
there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or
a group of financial assets is deemed to be impaired if
there is objective evidence of impairment as a result of
one or more events that have occurred since the initial
recognition of the asset (an incurred ‘loss event’) and that
loss event has an impact on the estimated future cash
flows of the financial asset or the group of financial assets
that can be reliably estimated. Evidence of impairment
may include indications that the debtors or a group of
debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments,
the probability that they will enter bankruptcy or other
financial reorganisation and observable data indicating
that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
iv) Financial assets carried at amortised cost
For financial assets carried at amortised cost, the group
first assesses whether objective evidence of impairment
exists individually for financial assets that are individually
significant or collectively for financial assets that are
not individually significant. If the group determines
that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment
loss is, or continues to be, recognised are not included in a
collective assessment of impairment.
If there is objective evidence that an impairment loss has
been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding
future expected credit losses that have not yet been
incurred). The present value of the estimated future
cash flows is discounted at the financial asset’s original
effective interest rate. If a loan has a variable interest
rate, the discount rate for measuring any impairment loss
is the current effective interest rate.
The carrying amount of the asset is reduced through the
use of an allowance account and the loss is recognised in
profit or loss. Interest income continues to be accrued
on the reduced carrying amount and is accrued using the
rate of interest used to discount the future cash flows
for the purpose of measuring the impairment loss. The
interest income is recorded as finance income in the
income statement. Loans, together with the associated
allowance, are written off when there is no realistic
prospect of future recovery and all collateral has been
realised or has been transferred to the group. If, in a
subsequent year, the amount of the estimated impairment
36
37
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04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
loss increases or decreases, because of an event occurring
after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by
adjusting the allowance account. If a write off is later
recovered, the recovery is credited to finance costs in the
income statement.
h) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset are
capitalised as part of the cost of that asset. A qualifying
asset is one that takes 12 months or longer to prepare
for its intended use or sale. Other borrowing costs are
expensed when incurred.
i) Other taxes
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST) except where the
GST incurred on a purchase of goods and services is not
recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable. All
receivables and payables are stated GST inclusive.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
taxation authority.
j) Comparative amounts
When the presentation or classification of items is
changed, comparative amounts are reclassified unless the
reclassification is impracticable.
3 SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
The preparation of the group’s consolidated financial
statements requires management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities, and
the accompanying disclosures.
Significant judgements
In the process of applying the group’s accounting policies,
management has made the following judgements,
which have an effect on the amounts recognised in the
consolidated financial statements.
Share-based payments
The fair value applied to shares granted under the restricted
share plan is the volume weighted average price (VWAP) of
shares traded in the previous 20 trading days preceding the
date of grant. Vesting of the shares is reviewed periodically
to determine that the assumptions around vesting dates and
employee churn rate are still valid (refer note 17).
Development costs
Development costs of a project are capitalised
in accordance with the accounting policy. Initial
capitalisation of costs is based on management’s
judgement that technological and economic feasibility
is confirmed, usually when a product development
project has reached a defined milestone according
to an established project management model. In
determining the amounts to be capitalised, management
makes assumptions regarding the expected future cash
generation of the project and the expected period of
benefits (refer note 10).
Functional currency
The group periodically reviews the functional currency
for reporting purposes. The group believes, that there
are sufficient justifications for the continued use of NZD
as the functional currency. The key factors behind this
conclusion are:
• Serko is NZX listed and has raised capital in NZD;
• Research and development grant funding is in NZD;
• NZD is the main currency for labour, operating cost
and capital expenditure; and
• The group also generates certain revenues in NZD.
4 REVENUE & OTHER INCOME
b) Revenue from services
Revenue is recognised and measured at the fair value of
Revenue from a contract to provide installation services
the consideration received or receivable to the extent it is
is recognised by reference to the completion of the
probable that the economic benefits will flow to the group
contract or services delivered at balance date. When the
and the revenue can be reliably measured. Revenue is
contract outcome cannot be estimated reliably, revenue
disclosed net of credit notes, rebates and discounts.
is recognised only to the extent of expenses recognised
a) Revenue from transaction and usage fees
Revenue from transaction and usage fees is recorded at
the time travel or expense transactions are processed
through Serko’s platforms. Contracts that have minimum
that are recoverable. Customised software development
services are recognised by reference to stage of
completion at balance date.
c) Government grants
booking volume arrangements are recognised over the
When the grant relates to an expense item, it is recognised
period of volume commitment. Revenue from licence fees
as income over the periods necessary to match the grant on
is recognised over the term of the licence agreement.
a systematic basis to the costs it is intended to compensate.
Revenue – transaction and usage fees:
Travel platform booking revenue
Expense platform booking revenue
Supplier commissions revenue
Other revenues
Revenue – services
Total revenue
Government grants
Sundry income
Total other income
Notes
13
2018
$ (000)
13,283
1,539
1,288
334
1,835
18,279
956
38
994
2017
$ (000)
10,808
1,125
751
238
1,356
14,277
1,073
19
1,092
Impairment of intangible or non-financial assets
Total revenue and other income
19,273
15,369
Management reviews the carrying value of intangible
and non-financial assets on an annual basis, in particular,
computer software and development work in progress.
Consideration is placed on a number of factors, depending
on the specific asset in question, which may include
discounted cash flow forecasts, the ability to continue
to generate discrete cash flow and returns, any changes
or anticipated changes in the business or product
circumstances and the nature of the events that originally
gave rise to the recognition of any non-financial assets
(refer note 10).
Revenue recognition
Serko has reseller customer agreements that contain
annual minimum transaction volume commitments
that span financial reporting periods. Based on this,
management needs to make a judgement about estimated
future transaction volumes to determine related revenue
for the specific financial reporting period (refer note 4).
Geographic information
Australia
New Zealand
US
India
Singapore
Other
Total revenue
2018
$ (000)
16,599
1,038
457
57
42
86
2017
$ (000)
13,195
672
158
136
18
98
18,279
14,277
38
39
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
5 EXPENSES
Auditor remuneration
Notes
2018
$ (000)
2017
$ (000)
The directors of Serko Limited appointed Deloitte Limited as the auditor of the group for the year ended 31 March 2018.
Ernst & Young (EY) was the auditor for the year ended 31 March 2017. EY tax services for the year ended 31 March 2018 are
excluded from auditor remuneration below.
Amounts received or due and receivable by:
Audit of financial statements – Deloitte Limited
Audit of financial statements – EY
Other assurance-related services (a) – EY
Total audit fees
Tax services (b) – EY
Total non-audit fees
Notes
2018
$ (000)
2017
$ (000)
79
-
-
79
-
-
-
82
15
97
19
19
(a) Other assurance-related services include services for research and development assurance procedures and half year agreed
upon procedures.
(b) Tax services relate to compliance services.
Operating profit/(loss) before taxation includes the following expenses:
Auditor remuneration and advisory fees
Amortisation of intangibles
Depreciation
Rental and operating lease expenses
Employee remuneration
Contributions to pension plans
Share-based payment expenses
Marketing expenses
Hosting expenses
Other operating expenses
Expenses from ordinary activities
10
9
15
79
412
185
729
116
633
225
686
10,764
11,462
480
288
410
1,067
3,270
17,684
416
133
936
904
3,252
18,763
Research expenses (excluding capitalised development costs)
4,523
5,056
Research expenditure includes all reasonable expenditure associated with R&D activities that does not give rise to an
intangible asset. R&D expenses include employee and contractor remuneration related to these activities.
Research expenditure includes expenditure that meets the definition of research expenditure as defined in NZ IAS 38.
Finance income and expenses includes:
Finance income
Interest received
Dividends received
Foreign exchange gains – net
Total finance income
Finance expenses
Interest expense
Other finance expenses
Total finance expenses
Total finance income and expenses
Notes
2018
$ (000)
2017
$ (000)
111
-
364
475
(43)
(18)
(61)
414
116
1
25
142
(36)
(18)
(54)
88
40
41
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
6
INCOME TAX
The prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows:
Current tax assets and liabilities for the current period are
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.
measured at the amount expected to be recovered from
or paid to the taxation authorities based on the current
period’s taxable income. The tax rates and tax laws used
to compute the amount are those that are enacted or
substantively enacted in the jurisdictions on which the
group operates at the reporting date.
Current income tax relating to items recognised directly
in equity is recognised in equity and not in the statement
of comprehensive income. Management periodically
evaluates positions taken in the tax returns, with respect
to situations in which applicable tax regulations are
subject to interpretation, and establishes provisions
where appropriate.
Deferred income tax is provided on all temporary
differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences:
• Except for a deferred income tax liability arising from
the initial recognition of goodwill; and
• Except where the deferred income tax liability arises
from the initial recognition of an asset or liability in
a transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
Notes
2018
$ (000)
2017
$ (000)
Current income tax
Current income tax charge/(credit)
Adjustments in respect of previous years
Deferred income tax
Origination and reversal of temporary differences
Income tax expense reported in the statement of comprehensive income
225
(12)
213
(42)
171
308
6
314
(170)
144
Accounting profit (loss) before income tax
At the statutory income tax rate of 28% (2017:28%)
Non-deductible items
Adjustments in respect of current income tax of previous years
Chinese branch tax
Foreign tax credits not utilised
Share-based payments
Tax losses recognised
Future income tax benefit, not recognised
Effect of tax on overseas subsidiaries at different rate
Income tax expense
At effective income tax rate of:
Deferred income tax at 31 March relates to the following:
Notes
2018
$ (000)
2,003
561
7
(12)
98
-
81
(570)
-
6
171
8.5%
2017
$ (000)
(3,306)
(926)
7
6
61
16
37
-
934
9
144
-4.4%
Deferred income tax liabilities recognised
Intangibles
Unrealised foreign exchange
Deferred income tax asset recognised
Intangibles
Employee entitlements
Net deferred tax asset/(liability) recognised
Deferred income tax asset not recognised
Employee entitlements
Bonus provision
Accruals
Allowance for impairment
Leasehold liabilities
Tax losses available to be carried forward and offset against
future income
Total deferred tax asset not recognised
2018
2017
Statement
of financial
position
Statement of
comprehensive
income
Statement
of financial
position
Statement of
comprehensive
income
$ (000)
$ (000)
$ (000)
$ (000)
-
(10)
85
80
155
112
195
-
-
(11)
296
3,785
4,081
-
41
(2)
3
42
5
103
-
(2)
9
115
-
(51)
87
76
112
107
92
-
2
(20)
181
4,484
4,665
71
15
87
(3)
170
3
92
(28)
-
(33)
34
42
43
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
7 RECEIVABLES
Receivables are recognised initially at fair value and
that the group will not be able to collect all amounts due
subsequently measured at amortised cost using the
according to the original terms of the receivable, changes
effective interest method, less provision for impairment.
in credit quality and past default experience.
Collectibility of receivables is reviewed on an ongoing
The impairment, and any subsequent movement,
basis. Debts that are known to be uncollectible are
including recovery, is recognised in the statement of
written off when identified. A provision for impairment of
comprehensive income.
receivables is established when there is objective evidence
Notes
19
Trade receivables
Allowance for impairment
Trade receivables (net)
Loan receivable
Allowance for impairment
Other receivables (net)
GST receivable
Prepayments
Total receivables
The carrying amounts of the group’s receivables are denominated in the following currencies:
New Zealand dollars
Australian dollars
US dollars
Indian rupees
2018
$ (000)
3,046
-
3,046
326
(25)
301
30
454
2017
$ (000)
2,544
(7)
2,537
353
-
353
22
255
3,831
3,167
1,918
1,846
52
15
3,831
1,493
1,634
29
11
3,167
At 31 March, the ageing analysis of receivables is as follows:
Total
0-30 days
31-60 days
61-90 days
91+ days
$ (000)
$ (000)
$ (000)
$ (000)
$ (000)
2018
Trade receivables
Other receivables
2017
Trade receivables
Other receivables
Allowance for impairment loss
3,046
326
2,544
353
2,922
-
2,432
-
16
-
8
-
46
-
11
-
62
326
93
353
i) Trade receivables
ii) Other receivables
Group trade receivables over 60 days of $108,099 (2017:
Other receivables consist of an interest-bearing loan
$103,287). This balance of $108,099 is not considered
to nuTravel Technology Solutions LLC (nuTravel) of
impaired as amounts outstanding are in accordance
US$200,000, which was assigned by Financial Equities
with agreed payment plans and payment record of the
Limited (FEL) to Serko Limited in return for an interest-
customers concerned.
Trade receivables are non-interest bearing and are
generally on 30 - 60-day terms. A provision for
impairment loss is recognised where there is objective
evidence that an individual trade receivable is impaired.
No impairment loss has been recognised (2017: $nil)
by the group in the current year. No individual amount
within the impairment allowance is material.
bearing loan repayable on receipt of the loan receivable.
A revised repayment arrangement with nuTravel was
entered into and this receivable was reassigned back to
FEL subsequent to year end (refer note 23). There is no
financial risk to Serko as the loan receivable is back to
back with the associated loan payable to FEL (refer note
14). FEL is a company associated with directors Bob Shaw
and Darrin Grafton (refer note 19).
44
45
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
8 FINANCIAL INSTRUMENTS
Derivative financial instruments
The group uses derivatives in the form of forward exchange contracts (FECs) to reduce the risk that movements in the
exchange rate will affect the group’s New Zealand dollar cash flows. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair
value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value
is negative.
The following table presents the group’s foreign currency forward exchange contracts measured at fair value:
Notes
2018
$ (000)
2017
$ (000)
Current:
Foreign currency forward exchange contracts
288
(245)
Non-current:
Foreign currency forward exchange contracts
-
(34)
Contractual amounts of forward exchange contracts outstanding were as follows:
Foreign currency forward exchange contracts
10,763
13,027
Derivative financial instruments have been determined to be within level 2 of the fair value hierarchy. Foreign currency
forward exchange contracts have been fair valued using published market foreign exchange rates and contract forward rates
discounted at a rate that reflects the credit risk of the counterparties.
9 PROPERTY, PLANT AND EQUIPMENT
The following estimates have been used:
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
• Leasehold improvements 7%
• Furniture and fittings 6 - 36%
• Computer equipment 17.5 - 48%
self-constructed, its construction cost includes the cost of
a) Impairment
materials, direct labour and an appropriate proportion of
production overheads.
The carrying values of property, plant and equipment
are reviewed for impairment when events or changes in
Subsequent expenditure relating to an item of property,
circumstances indicate the carrying value may not
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
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.
had it been incurred at that time. The carrying amount of
b) Disposal
any replaced part is derecognised.
All other repairs and maintenance expenditure is
recognised in profit or loss as incurred.
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
Depreciation is calculated on a straight-line basis over
difference between the net disposal proceeds and the
the estimated useful life of the asset. The residual value
carrying amount of the asset) is included in profit or loss in
of assets is reviewed and adjusted, if appropriate, at each
the year the asset is derecognised.
balance date.
46
47
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
9 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
10 INTANGIBLES
Research and development
2018
Cost or valuation
Balance at 1 April 2017
Additions
Currency translation
Balance at 31 March 2018
Depreciation
Balance at 1 April 2017
Depreciation expense
Balance at 31 March 2018
Net carrying amount
2017
Cost or valuation
Balance at 1 April 2016
Additions
Disposals
Currency translation
Balance at 31 March 2017
Depreciation
Balance at 1 April 2016
Depreciation expense
Disposals
Balance at 31 March 2017
Net carrying amount
Leasehold
improvement
Furniture &
fittings
Computer
equipment
Total
$ (000)
$ (000)
$ (000)
$ (000)
354
13
-
367
139
36
175
192
343
27
(16)
-
354
106
39
(6)
139
215
398
176
-
574
378
43
421
153
388
10
-
-
1,519
193
(1)
1,711
633
185
818
893
1,027
538
(45)
(1)
398
1,519
260
118
-
378
20
414
225
(6)
633
886
767
4
(1)
770
116
106
222
548
296
501
(29)
(1)
767
48
68
-
116
651
48
Intangible assets acquired separately or in a business
Research costs are expensed as incurred. An intangible
combination are initially measured at cost. The cost of
asset arising from development expenditure on an
an intangible asset acquired in a business combination
internal project is recognised only when the group can
is its fair value as at the date of acquisition. Following
demonstrate the technical feasibility of completing the
initial recognition, intangible assets are carried at cost
intangible asset so that it will be available for use or
less any accumulated amortisation and any accumulated
sale, its intention to complete and its ability to use or
impairment losses. Costs related to internally generated
sell the asset. Also how the asset will generate future
intangible assets, excluding capitalised development costs,
economic benefits, the availability of resources to
are not capitalised and expenditure is recognised in profit
complete the development and the ability to reliably
or loss in the year in which the expenditure is incurred.
measure the expenditure attributable to the intangible
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
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.
finite useful life is reviewed at least at each financial year
Intangible assets under development at balance date are
end. Changes in the expected useful life or the expected
recorded as capital work in progress and are not subject
pattern of consumption of future economic benefits
to amortisation.
embodied in the asset are accounted for prospectively
by changing the amortisation period or method, as
appropriate, which is a change in accounting estimate. The
amortisation expense on intangible assets with finite lives
is recognised in profit or loss.
Intangible assets with indefinite useful lives are tested
for impairment annually either individually or at the
cash-generating unit level. Such intangibles are not
amortised. An intangible asset with an indefinite useful life
is reviewed each reporting period to determine whether
indefinite life assessment continues to be supportable.
If not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an
accounting estimate and is thus accounted for on a
prospective basis.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the
asset and are recognised in profit or loss when the asset
is derecognised.
A summary of the policies applied to the group’s intangible
assets is as follows:
• Computer Software
(finite, amortised on a straight-line basis 40 - 60%).
• Capitalised software development costs
(finite, amortised on 5 years straight-line basis).
49
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or are
not yet completed are not subject to amortisation and
are tested annually for impairment or more frequently
if events or changes in circumstances indicate that they
might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
In undertaking an impairment review of non-financial
assets that have definite useful lives the following
assumptions were used in the impairment model;
• 5-year forecast period;
• Discount rate of 15%; and
• Discount factor applied using a mid-year convention.
An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its
recoverable amount. Recoverable amount is the higher of
an asset’s fair value less costs to sell, and value in use. For
the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately
identifiable cash inflows that are largely independent of
the cash inflows from other assets or groups of assets
(cash-generating units).
Non-financial assets, other than goodwill that suffered
impairment, are tested for possible reversal of the
impairment whenever events or changes in circumstances
indicate that the impairment may have reversed.
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
10 INTANGIBLES (CONTINUED)
11 CASH AT BANK AND ON HAND
Goodwill
Key employee
retention
Customer
contracts
Development
work in
progress
Computer
software
Total
$ (000)
$ (000)
$ (000)
$ (000)
$ (000)
$ (000)
2018
Cost
Balance at 1 April 2017
Additions
Transfer of cost
Balance at 31 March 2018
Amortisation and impairment
Balance at 1 April 2017
Amortisation
Balance at 31 March 2018
Net carrying amount
2017
Cost
Balance at 1 April 2016
Additions
Transfer of cost
Currency translation
Balance at 31 March 2017
Amortisation and impairment
Balance at 1 April 2016
Amortisation
Balance at 31 March 2017
Net carrying amount
220
-
-
220
220
-
220
-
220
-
-
-
220
220
-
220
-
78
-
-
78
78
-
78
-
78
-
-
-
78
58
20
78
-
443
-
-
443
443
-
443
-
443
-
-
-
443
280
163
443
-
205
328
(484)
49
-
-
-
49
407
780
(982)
-
205
-
-
-
2,376
55
484
3,322
383
-
2,915
3,705
978
412
1,390
1,525
1,377
-
982
17
1,719
412
2,131
1,574
2,525
780
-
17
2,376
3,322
528
450
978
1086
633
1,719
1,603
205
1,398
Cash and short-term deposits in the statement of financial position comprise cash at bank, and on hand, short-term highly
liquid investments with an original maturity of three months or less.
Cash at bank – New Zealand dollar balances
Cash at bank – foreign currency balances
2018
$ (000)
4,529
703
5,232
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
4,529
532
171
-
5,232
2017
$ (000)
3,045
1,407
4,451
3,045
1,340
58
8
4,451
Employee benefits
Trade and other payables
Liabilities for wages and salaries, including non-monetary
Trade payables and other payables are carried at
benefits, long service leave and annual leave expected
amortised cost and represent liabilities for goods and
to be settled within 12 months of the reporting date
services provided to the group prior to the end of the
are recognised in respect of employees’ services up to
financial year that are unpaid and arise when the group
the reporting date. They are measured at the amounts
becomes obliged to make future payments in respect of
expected to be paid when the liabilities are settled.
the purchase of these goods and services.
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.
50
51
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
12 TRADE AND OTHER PAYABLES (CONTINUED)
15 EQUITY
Trade payables
Accrued expenses
Lease incentive
Annual leave accrual
GST payable
Total trade and other payables
Disclosed as:
Current
Non-current
2018
$ (000)
428
1,640
223
665
20
2,976
2,793
183
2,976
2017
$ (000)
532
1,442
227
634
16
2,851
2,582
269
2,851
The average credit period on trade payables is approximately 30 days.
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
Loan payable
Leasehold fitout loan
Non-current
Leasehold fitout loan
Notes
19
2018
$ (000)
2017
$ (000)
301
50
351
204
204
353
46
399
254
254
An interest-bearing loan to nuTravel Technology Solutions LLC of US$200,000 was assigned by Financial Equities Limited (FEL)
to Serko Limited in return for an interest-bearing loan repayable on receipt of the loan receivable (refer to note 7). FEL is a
company associated with directors Bob Shaw and Darrin Grafton (refer note 19). Subsequent to year end, the receivable was
reassigned back to FEL (refer to note 23).
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.
2018
2017
2018
2017
Number of
shares
Number of
shares
$ (000)
$ (000)
(000)
(000)
Ordinary shares
Share capital at beginning of year
25,185
25,185
74,894
Issue of new shares to employees via Restricted Share Plan
-
-
-
Share capital at 31 March
25,185
25,185
74,894
72,894
2,000
74,894
Share-based payment reserve
Balance at beginning of year
Shares allocated to employees via Restricted Share Plan
Shares forfeited from employees via Restricted Share Plan
Share options to non-executive directors (refer note 17)
Share-based payment reserve at 31 March
2018
$ (000)
2017
$ (000)
1,021
252
(23)
59
1,309
888
372
(239)
-
1,021
In the current year the group issued no shares (2017: 2,000,000) under the Restricted Share Plan (RSP). In respect of the RSP
230,050 restricted shares (2017: 710,313) had been allocated to key management personnel and 116,107 (2017: 228,519)
allocated to other Serko employees. Unallocated shares are 1,592,299 (2017: 1,819,732) (refer to note 17).
52
53
02
S
E
R
K
O
A
B
O
U
T
04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
O
S
U
R
E
S
G
O
V
E
R
N
A
N
C
E
&
79
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
16 EARNINGS PER SHARE (EPS)
17 SHARE-BASED PAYMENTS
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
Basic earnings per share
Issued ordinary shares (refer note 15)
Adjusted for employee restricted share plan shares
Weighted average of issued ordinary shares
Basic earnings per share (dollars)
Diluted earnings per share
Weighted average of issued ordinary shares
Weighted average of issued ordinary shares for diluted earnings per share
Diluted earnings per share (dollars)
2018
$ (000)
1,832
1,832
2017
$ (000)
(3,450)
(3,450)
2018
Number
2017
Number
74,894
(2,991)
71,903
0.03
74,894
74,894
0.02
74,894
-
73,074
(0.05)
73,074
73,074
(0.05)
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
Limited are issued to a trustee, Serko Trustee Limited, a
wholly-owned subsidiary, and allocated to participants, on
grant date, using funds lent to them by the company.
The price for each share issued during the year under
the RSP is the higher of the market price of the share
on the date on which the shares are allocated or the
invitation price.
Under the RSP, shares are beneficially owned by the
participants. The length of retention period before
the shares vest is between one and three years. If the
individual is still employed by the group at the end of this
specific period, the employee is awarded a cash bonus
that must be used to repay the loan and shares are then
transferred to the employee. The number of shares
awarded is determined by the Board. The weighted
average grant date fair value of restricted shares
issued during the year was $0.49 (2017: $0.46) and
was determined by the volume weighted average price
(VWAP) of shares traded in the previous 20 trading days
preceding the date of grant. The group has no legal or
constructive obligation to repurchase the shares or settle
The Serko Limited Employee Restricted Share Plan (RSP)
the RSP for cash.
was introduced for selected executives and employees
of the group. Under the RSP, ordinary shares in Serko
Unvested shares at beginning of year
Granted
Forfeited
Vested
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and
Unvested shares at 31 March – allocated to employees
the date of authorisation of these financial statements.
Net tangible assets per security
2018
Cents
9.04
2017
Cents
6.24
Plus
Unallocated shares – held by trustee
Total shares in Restricted Share Plan
Percentage of total ordinary shares
Ageing of unvested shares
Vest within one year
Vest within two to five years
Unallocated shares
Total
54
55
2018
2017
Number of shares
Number of shares
1,359,226
356,066
(128,633)
(187,952)
1,398,707
1,275,502
938,832
(264,135)
(590,973)
1,359,226
1,592,299
2,991,006
1,819,732
3,178,958
4.0%
4.2%
183,810
1,214,897
1,592,299
2,991,006
184,084
1,175,142
1,819,732
3,178,958
02
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L
E
T
T
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R
10
O
V
E
R
V
I
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W
S
T
R
A
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G
C
I
12
P
R
O
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S
14
L
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16
C
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P
O
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18
M
A
N
A
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E
M
E
N
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C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
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C
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U
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
17 SHARE-BASED PAYMENTS (CONTINUED)
Share options
The group’s non-executive directors were granted share options, settled by way of a non-recourse loan. The non-recourse loan
is due for repayment 30 June 2020, following an extension to the previous loan due 30 June 2017.
The following table lists the inputs to the model used for the share options for the year ended 31 March 2018:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share options (years)
Weighted average share price ($)
Model used
2018
0.00
60.00
3.00
3
1.10
Black Scholes
2017
n/a
n/a
n/a
n/a
n/a
n/a
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period
similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
18 LEASE COMMITMENTS
The determination of whether an arrangement is,
or contains, a lease is based on the substance of the
arrangement and requires an assessment of whether the
fulfillment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a
right to use the asset.
A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to
ownership, and operating leases under which the lessor
effectively retains substantially all such risks and benefits.
Operating lease commitments
No later than one year
Later than one year and not later than five years
Later than five years
a) Operating leases
Operating lease payments are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
Operating lease incentives are recognised as a liability
when received and subsequently reduced by allocating
lease payments between rental expense and reduction of
the liability (refer note 12).
2018
$ (000)
2017
$ (000)
562
1,365
-
1,927
514
1,755
193
2,462
19 RELATED PARTIES
a) Subsidiaries
The consolidated financial statements include the financial statements of Serko Limited and subsidiaries as listed in the
following table:
Name
Balance date
2018
2017
2018
2017
% Equity interest
Investment $(000)
Serko Australia Pty Limited
Serko Trustee Limited
Serko India Private Limited
Serko Investments Limited
Foshan Sige Information Technology Limited
Serko Inc
31 March
31 March
31 March
31 March
31 March
31 March
100%
100%
99%
100%
100%
100%
100%
100%
99%
100%
-
-
1
-
2
-
-
-
3
1
-
2
-
-
-
3
Serko Australia Pty Limited’s principal business is the marketing and support of travel booking software solutions supplied by
Serko Limited.
Serko Trustee Limited was incorporated on 4 June 2014 to hold the shares issued to key management and staff in the
Restricted Share Plan and Salary Sacrifice Scheme in trust until vesting.
Serko India Private Limited was incorporated on 18 February 2015 as a subsidiary for the India-based operations.
Serko Investments Limited was incorporated on 5 November 2014 as a holding company. It holds 1% of the shares in Serko
India Private Limited.
Foshan Sige Information Technology Limited was incorporated on 7 August 2017 as a subsidiary for the China-based operations.
Serko Inc was incorporated on 30 October 2017 as a subsidiary for the US-based operations.
56
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06
L
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R
10
O
V
E
R
V
I
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W
S
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R
A
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C
I
12
P
R
O
D
U
C
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S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
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Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
I
S
C
L
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S
U
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E
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E
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
20 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net profit/(loss) after tax
Add non-cash items
Amortisation
Depreciation
Loss on property, plant and equipment disposal
Increase/(decrease) in deferred tax
Loss/(gain) on foreign exchange transactions
Share-based compensation
Add/(less) movements in working capital items
(Increase)/decrease in receivables excluding loans
Increase/(decrease) in trade and other payables
Increase/(decrease) in income tax
Net cash flow from operating activities
2018
$ (000)
1,832
412
185
-
(42)
(556)
288
2,119
(764)
123
(62)
(703)
1,416
2017
$ (000)
(3,450)
633
225
36
(170)
175
133
(2,418)
820
158
(155)
823
(1,595)
19 RELATED PARTIES (CONTINUED)
b) Transactions with related parties
The following table provides the total amount of transactions that have been entered into with related parties, excluding key
management and executive director remuneration.
Notes
Purchases from
related parties
Interest to
related parties
Amounts owed
to related
parties
Amounts owed
by related
parties
$ (000)
$ (000)
$ (000)
$ (000)
Other related parties
Financial Equities Limited
14
Simon Botherway – Chairman
Claudia Batten – Non-executive Director
Clyde McConaghy – Non-executive Director
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
-
-
80
70
74
60
74
60
228
190
21
20
-
-
-
-
-
-
21
20
301
353
-
-
-
-
-
-
301
353
-
-
-
-
-
-
-
-
-
-
Non-executive directors provide services to Serko in their capacity as non-executive directors and have service agreements
with specified amounts of fees payable per annum. The non-executive directors also hold share options with related non-
recourse loan (refer note 17).
Financial Equities Limited (FEL) is a company associated with directors Bob Shaw and Darrin Grafton. Subsequent to year end, the
receivable from nuTravel (refer note 7) was assigned back to FEL and the loan payable (note 14) fully extinguished (refer note 23).
c) Key management remuneration
Short-term benefits employees (*)
Share-based payments
Post-employment benefits
Total compensation
2018
$ (000)
3,294
162
72
3,528
2017
$ (000)
2,974
92
94
3,160
d) Terms and conditions of transactions with related parties.
Outstanding balances at year end are unsecured and settlement occurs in cash.
For the year ended 31 March 2018, the group has not made any allowance for impairment loss relating to amounts owed by
related parties (2017: $nil). An impairment assessment is undertaken each financial year by examining the financial position
of the related party and the market in which the related party operates to determine whether there is objective evidence
that a related party receivable is impaired. When such objective evidence exists, the group recognises an allowance for the
impairment loss.
(*) Key management personnel includes the executive directors in their capacity as Chief Executive Officer and Chief Strategy Officer, the executive management
team and their direct reports.
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I
12
P
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S
14
L
E
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R
S
H
I
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16
C
O
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O
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18
M
A
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E
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N
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O
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E
N
T
A
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Y
28
F
I
N
A
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C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
b) Currency risk
The group’s principal financial instruments comprise cash at bank, bank overdrafts, receivables, payables and loans.
The group has exposure to foreign exchange risk as a result of transactions denominated in foreign companies. The risk
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
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.
amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or amend capital spending plans
The following table summarises the sensitivity to foreign currency exchange rate movements. A sensitivity of +/- 15% (2016:
+/- 15%) has been selected owing to exchange rate volatility observed.
The main risks arising from the group’s financial instruments are foreign currency, interest, credit and liquidity risk. The
group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring
levels of exposure to foreign exchange risk, and assessments of market forecasts for foreign exchange. Ageing analyses
and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the
development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
a) Risk exposures and responses
i) Interest rate risk
The group has exposure to interest rate risk to the extent it borrows funds at fixed and floating interest rates. The risk
specifically relates to the variability of interest rates and the impact this will have on the group’s financial results. The group
manages its cost of borrowing by placing limits on the proportion of borrowings at floating rate and the proportion of fixed
rate borrowing repriced in any year.
At balance date this year and prior year, the group did not have any financial liabilities exposed to variable interest rate risk.
ii) Liquidity and interest rate risk
Liquidity risk represents the group’s ability to meet its financial obligations on time. In terms of managing its liquidity risk, the
group generates sufficient cash flows from its operating activities and holds sufficient cash reserves to meet its obligations
arising from its financial liabilities and has credit lines in place to cover potential shortfalls.
The following table sets out the contractual cash flows for all non-derivative financial liabilities settled on a gross cash flow basis.
Weighted
average effective
interest rate %
Contractual
cash flows
6 months
or less
6-12 months
1-2 years
2-5 years
More than
5 years
$ (000)
$ (000)
$ (000)
$ (000)
$ (000)
$ (000)
2018
Accounts payable
Related party loans
Leasehold fitout
2017
Accounts payable
Related party loans
Leasehold fitout
0%
6%
8%
0%
6%
8%
2,754
2,754
301
302
301
34
3,357
3,089
2,624
2,624
353
300
353
23
3,277
3,000
-
-
34
34
-
-
23
23
-
-
68
68
-
-
20
20
-
-
166
166
-
-
234
234
-
-
-
-
-
-
-
-
Foreign currency risk
-15%
+15%
Carrying amount
Post-tax profit
Equity
Post-tax profit
$ (000)
$ (000)
$ (000)
$ (000)
Equity
$ (000)
703
1,913
(110)
2,506
1,398
1,310
(176)
2,532
89
243
(14)
318
179
223
(16)
386
89
243
(14)
318
179
223
(16)
386
(66)
(180)
10
(236)
(132)
(165)
12
(285)
(66)
(180)
10
(236)
(132)
(165)
12
(285)
2018
Foreign exchange balances
Cash at bank
Trade receivables
Trade payables
Net exposure
2017
Foreign exchange balances
Cash at bank
Trade receivables
Trade payables
Net exposure
c) Credit risk
Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, and receivables. The
group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the
carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.
The group does not hold any credit derivatives to offset its credit exposure.
Receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad debts is not significant.
At reporting date 100% (2017: 100%) of the group’s cash and cash equivalents were with one bank. The group has no other
concentrations of credit risk.
60
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O
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04
I
H
G
H
L
I
G
H
T
S
06
L
E
T
T
E
R
10
O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
C
I
12
P
R
O
D
U
C
T
S
14
L
E
A
D
E
R
S
H
I
P
16
C
O
R
P
O
R
A
T
E
R
E
S
P
O
N
S
I
B
I
L
I
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Y
18
M
A
N
A
G
E
M
E
N
T
C
O
M
M
E
N
T
A
R
Y
28
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
66
D
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C
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
d) Fair value
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated
financial statements approximate their fair value.
e) Derivative offsetting
INDEPENDENT AUDITOR’S REPORT
The group does not have financial assets or liabilities subject to an enforceable master netting agreement, hence has not
offset or net financial assets or financial liabilities.
To the Shareholders of Serko Limited
22 SEGMENT INFORMATION
OPINION
AUDIT MATERIALITY
We have audited the consolidated financial statements of
We consider materiality primarily in terms of the magnitude
Serko Limited (‘the company’) and its subsidiaries (the ‘Group’),
of misstatement in the financial statements of the Group that
The Board and senior management team monitors the results of the group’s operations as a whole for making decisions
which comprise the statement of financial position as at 31
in our judgement would make it probable that the economic
about resource allocation and performance assessment and therefore the Board has determined the group is a single
March 2018, and the statement of comprehensive income,
decisions of a reasonably knowledgeable person would be
reportable segment.
Serko derives operating revenue from Serko Online, Serko Zeno, Serko Mobile and Serko Expense technology platforms. Serko
product and geographical revenue presented in note 4.
As required under IFRS 8, Serko is required to report on major customers making up more than 10% of the revenue for the
year. Under this disclosure Serko advises that two customers had revenue more than 10% of the revenue for the group. These
customers accounted for $9,219,226 of the revenue for the year ended 31 March 2018 (2017: $7,709,305).
23 EVENTS AFTER BALANCE SHEET DATE
On 8 May 2018 the receivable from nuTravel (refer note 7) was reassigned to Financial Equities Limited (FEL) (a related party
refer note 19) and the loan payable to FEL (refer note 14) was fully extinguished (2017: nil events).
In addition to its current listing on the NZX, Serko intends to list on the Australian Securities Exchange (ASX) on 25 June 2018,
subject to ASX approval.
24 CONTINGENT LIABILITIES
There were no contingent liabilities at balance date (2017: $nil).
statement of changes in equity and statement of cash flows
changed or influenced (the ‘quantitative’ materiality). In
for the year then ended, and notes to the financial statements,
addition, we also assess whether other matters that come to
including a summary of significant accounting policies.
our attention during the audit would in our judgement change
In our opinion, the accompanying consolidated financial
statements, on pages 30 to 62, present fairly, in all material
respects, the consolidated financial position of the Group as
or influence the decisions of such a person (the ‘qualitative’
materiality). We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
at 31 March 2018, and its consolidated financial performance
We determined materiality for the Group financial statements
and cash flows for the year then ended in accordance with
as a whole to be $195,000.
New Zealand Equivalents to International Financial Reporting
Standards (‘NZ IFRS’) and International Financial Reporting
Standards (‘IFRS’).
BASIS FOR OPINION
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These
We conducted our audit in accordance with International
matters were addressed in the context of our audit of the
Standards on Auditing (‘ISAs’) and International Standards
consolidated financial statements as a whole, and in forming
on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities
our opinion thereon, and we do not provide a separate opinion
under those standards are further described in the Auditor’s
on these matters.
Responsibilities for the Audit of the Consolidated Financial
Statements section of our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with
Professional and Ethical Standard 1 (Revised) Code of Ethics
for Assurance Practitioners issued by the New Zealand
Auditing and Assurance Standards Board and the International
Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor, we have no relationship
with or interests in the Company or any of its subsidiaries,
except that partners and employees of our firm deal with the
Company and its subsidiaries on normal terms within the
ordinary course of trading activities of the business of the
Company and its subsidiaries.
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06
L
E
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T
E
R
10
O
V
E
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V
I
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W
S
T
R
A
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E
G
C
I
12
P
R
O
D
U
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S
14
L
E
A
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R
S
H
I
P
16
C
O
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P
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R
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S
P
O
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S
I
B
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18
M
A
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
Key audit matter
How our audit addressed the key audit matter
Revenue recognition
The Group has reported revenue of $18.3 million, as set out in
note 4 ‘Revenue and other income’.
Revenue is based on multiple customer contracts that contain
different pricing schedules and varying revenue recognition
triggers. Complexity exists because of the specific nature of each
customer contract, which can include transactional and usage fees,
establishment and installation fees, and chargeable work orders.
Management judgment is required to estimate revenue
recognition where cash flows do not align to contract performance
obligations, in particular when minimum transaction volume
commitments have period end dates that do not align to the
financial year end.
We have included revenue recognition as a key audit matter due
to the significance of revenue to the financial statements and the
specific nature of individual customer contracts.
We performed walkthroughs of the major
revenue processes and evaluated the design and
implementation of key controls.
We tested a sample of transactions by agreeing
invoices to signed customer contracts in order to
validate pricing inputs and assess whether revenue
has been recorded in the correct period.
We used data analytic tools to:
•
identify revenue transactions that appear unusual
and agree that prices have been correctly allocated
to customer invoices
• agree travel booking transactions recorded in IT
systems to the financial ledger
• test samples of manual journal entries recorded
outside of normal business processes by profiling
for revenue impacting journals.
We assessed key judgements adopted by the Group in
recognising revenue including the timing and disclosure
of revenue net of credit notes, rebates and discounts.
We have challenged management’s revenue
recognition based on the likelihood of customers
not achieving contractual minimum volume
commitments spanning the financial year end.
Accounting for development expenditure
The Group capitalised $328,000 in relation to software
For each product, we have understood the nature of
development, as set out in note 10 ‘Intangibles’.
expenditure, the stage of product development, and
As a Software as a Service (“SaaS”) provider, the Group incurs
significant expenditure in developing new software products to
meet the strategic objectives of the business.
Judgement is required to determine if the recognition criteria
within NZ IAS 38 Intangible Assets have been met, which include
technical feasibility, the likelihood of generating future economic
how the Group distinguishes expenditure between
research, development and maintenance costs.
We performed audit procedures over development
costs capitalised as computer software, by testing a
sample of additions and evaluating if the recognition
criteria under NZ IAS 38 have been met.
benefits and sufficient funding for completion.
We assessed key judgements adopted to determine
NZ IAS 36 also requires the Group to assess whether any
indicators of impairment exist as at balance date.
We have included accounting for development expenditure as
a key audit matter due to the level of judgement required for
management to determine whether:
• internal staff time or external developer costs incurred meet
the criteria to be capitalised; and
• information exists as at year end that would indicate the need
to impair an intangible asset.
whether indicators for impairment exist. In
particular we considered existing software for
technical obsolescence, by ensuring appropriate
revenues exist for those products and corroborating
with management whether features or product
enhancements previously capitalised are still in use.
OTHER INFORMATION
The directors are responsible on behalf of the Group for
the other information. The other information comprises
A further description of our responsibilities for the audit of the
consolidated financial statements is located on the External
the information in the Annual Report that accompanies the
Reporting Board’s website at:
consolidated financial statements and the audit report.
https://www.xrb.govt.nz/standards-for-assurance-
Our opinion on the consolidated financial statements does not
practitioners/auditors-responsibilities/audit-report-1
cover the other information and we do not express any form of
assurance conclusion thereon.
This description forms part of our auditor’s report.
RESTRICTION ON USE
This report is made solely to the Company’s shareholders, as a
body. Our audit has been undertaken so that we might state to
the Company’s shareholders those matters we are required to
state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company’s
shareholders as a body, for our audit work, for this report, or
for the opinions we have formed.
Bryce Henderson, Partner for Deloitte Limited
Auckland, New Zealand
23 May 2018
Our responsibility is to read the other information and
consider whether it is materially inconsistent with the
consolidated financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated.
If so, we are required to report that fact. We have nothing to
report in this regard.
DIRECTORS’ RESPONSIBILITIES FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
The directors are responsible on behalf of the Group for the
preparation and fair presentation of the consolidated financial
statements in accordance with NZ IFRS and IFRS, and for such
internal control as the directors determine is necessary to
enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the
directors are responsible on behalf of the Group for assessing
the Group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have
no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with
ISAs and ISAs (NZ) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
CORPORATE GOVERNANCE & DISCLOSURES
For the year ended 31 March 2018
INTRODUCTION
OVERVIEW OF SERKO’S GOVERNANCE STRUCTURE
The Board and management of Serko Limited (Serko or
The Serko Board has been appointed by shareholders to
the company) are very committed to ensuring that Serko
protect and enhance the long-term value of Serko and to act
maintains corporate governance practices that are in line
in the best interests of Serko and its shareholders. The Board
with or, where possible, exceed best practice and that Serko
is the ultimate decision-making body of the company and is
adheres to the highest ethical standards.
responsible for the corporate governance of the company. The
The Board has had regard to the NZX Listing Rules and a
number of corporate governance recommendations when
establishing its governance framework, including the revised
role and responsibilities of the Board are set out in the Board
Charter, which can be found on the investor centre of the
company’s website.
NZX Corporate Governance Code 2017 (NZX Code) and
The Board currently comprises an independent non-
the Third Edition of the Australian Securities Exchange
executive Chair, two independent non-executive directors
(ASX) Corporate Governance Council Principles and
and two executive directors, as detailed on page 14 of this
Recommendations.
Annual Report.
The NZX Listing Rules require Serko to formally report
The Board has established two standing Board Committees to
its compliance against the recommendations contained
assist in the execution of the Board’s responsibilities:
in the NZX Code. How Serko has implemented these
recommendations is set out in Serko’s Corporate Governance
Statement, which is included in its ESG Report and can be
found on the investor centre of the company’s website. Go
to: www.serko.com/investor-centre/. The Board considers
that Serko’s corporate governance structures, practices and
processes have followed all of the recommendations in the
• Audit and Risk Committee – The current members
of the Committee are Clyde McConaghy (Chair),
Simon Botherway and Claudia Batten. All members
are independent, non-executive directors. Their
qualifications and experience is set out under Board of
Directors in this Annual Report.
NZX Code during the financial year ended 31 March 2018.
• Remuneration and Nominations Committee – The
Serko’s Corporate Governance Statement and governance
charters and policies can be found on the investor centre
of the company’s website. Go to: www.serko.com/investor-
centre/. Serko’s corporate governance charters and policies
have been approved by the Board and are regularly reviewed
by the Board and amended (as appropriate) to reflect
developments in corporate governance practices.
STOCK EXCHANGE LISTINGS
Serko is listed on the New Zealand Stock Exchange (NZX
Main Board) and intends to list on the Australian Securities
Exchange (ASX) as an ASX Foreign Exempt Listing, subject to
ASX approval. As an ASX Foreign Exempt Listing, Serko will
need to comply with the NZX Listing Rules (other than as
waived by NZX) but does not need to comply with the vast
majority of the ASX Listing Rule obligations.
Serko is incorporated in New Zealand.
current members of the Committee are Claudia Batten
(Chair), Simon Botherway and Clyde McConaghy. All
members are independent, non-executive directors.
Their qualifications and experience is set out under
Board of Directors in this Annual Report.
DIRECTOR REMUNERATION
Serko’s shareholders have approved a total cap of $350,000
per annum for non-executive directors’ fees, for the purposes
of the NZX Listing Rules. This annual fee pool has not been
increased since it was approved by shareholders in 2014.
Serko currently pays directors’ fees that, in aggregate, amount
to approximately $250,000 per annum, subject to exchange
rate fluctuations. More information about remuneration
payable to directors is set out in Serko’s Corporate
Governance Statement, which is located on the investor
centre of the company’s website.
The Board has agreed that the following fixed annual fees will apply to all non-executive directors for the year ending 31 March 2019:
Board of Directors
Audit & Risk Committee
Position
Chair
Non-executive directors
Committee Chair
Committee Member
Fees per annum
NZD$90,000
AUD$65,000
AUD$10,000
-
Remuneration & Nominations Committee
Committee Chair
AUD$10,000
Committee Member
-
Non-executive directors received the following directors’ fees, remuneration and other benefits from the company in the year
ended 31 March 2018:
Name of Director
Non-Executive
Audit & Risk
Directors’ Board fees2
Committee fees
Remuneration
& Nominations
Committee fees
Shares and other
payments or benefits3
Total remuneration
Remuneration and value of other benefits received1
Simon Botherway
$80,000
(Chair)
Clyde McConaghy
$63,626
-
$10,604
(Chair)
Claudia Batten
$63,626
-
TOTAL
$207,252
$10,604
-
-
$10,604
(Chair)
$10,604
-
-
-
-
$80,000
$74,230
$74,230
$228,460
1 The figures shown are gross amounts, which have been converted into NZD and exclude GST (where applicable). Increases in Chair and non-executive Directors fees
were effective from 1 October 2017, while Committee Chair fees were introduced effective 1 April 2017.
2 Board fees includes the amount of base fees payable to Mr Botherway and Ms Batten, which are used to acquire shares in the company under the non-executive
Director Fixed Trading Plan (refer to the Corporate Governance Statement on the investor centre of Serko’s website for more information on the Plan).
3
In addition to directors fees, Serko meets costs incurred by non-executive directors that are incidental to the performance of their duties. This includes paying the
costs of directors’ travel. As these costs are incurred by Serko to enable directors to perform their duties, no value is attributable to them as benefits to directors for
the purposes of the above table.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
The executive directors, Darrin Grafton and Bob Shaw, receive remuneration and other benefits in their respective executive roles
EMPLOYEE REMUNERATION
DIVERSITY
as Chief Executive Officer and Chief Strategy Officer and, accordingly, do not receive directors fees.
The table below shows the number of employees and former
The respective numbers and proportions of men and women at
The table below (and accompanying notes) sets out the total remuneration and value of other benefits earned by, or paid to, each
employees of Serko and its subsidiaries, not being directors
various levels within the Serko workforce as at 31 March 2017
executive director of Serko during, and in respect of, the financial period ended 31 March 2018:
of Serko, who, in their capacity as employees, received
and 31 March 2018 are set out in the table below:
Base salary1
Taxable
benefits2
Subtotal
Pay for performance
Total remuneration
remuneration and other benefits during the period ended 31
March 2018 totalling at least NZ$100,000.
The remuneration of those employees paid outside of New
Zealand has been converted into New Zealand dollars. No
employee appointed as a director of a subsidiary company of
Serko receives any remuneration or other benefits for acting
STI
LTI5
Subtotal
in that capacity.
Darrin Grafton
$282,266
$30,000
$312,266
$85,0003
Bob Shaw
$256,694
$30,000
$286,694
$50,0004
$41,900 in the
form of 54,460
restricted shares
$20,950 in the
form of 25,103
restricted shares
$126,900
$439,166
$70,950
$357,644
1 Base salary includes employer contributions towards KiwiSaver at 3%.
2 Taxable benefits include a car allowance, carpark and medical insurance.
3 The short-term incentive stated was earned in FY18 and will be paid in FY19. Darrin Grafton’s potential short-term incentive payment for FY18 was $120,000. During
the financial period Darrin Grafton also received a short-term incentive of $21,000, which was earned in FY17 and paid in FY18.
4 The short-term incentive stated was earned in FY18 and will be paid in FY19. During the financial period Bob Shaw also received a short-term incentive of $10,500,
which was earned in FY17 and paid in FY18.
5 The FY18 long-term incentive was granted in July 2017, following partial achievement of pre-grant performance targets based on FY17 performance. The restricted
shares will vest three years after the allocation date. The value stated is the gross amount earned.
Female
2018
2017
no.
%
no.
%
Directors
Officers1
Senior employees2
1
1
4
20%
20%
33%
1
1
7
20%
14%
47%
Remaining workforce
35
39%
40
44%
Male
2018
2017
no.
%
no.
%
Directors
Officers1
Senior employees2
4
4
8
80%
80%
67%
4
6
8
80%
86%
53%
Remaining workforce
54
61%
47
56%
1 Officers are considered to be the Chief Executive Officer and his direct
reports (the Executive Team). Note that Chief Executive Officer, Darrin
Grafton and Chief of Strategy, Bob Shaw, are included in both the number of
directors and Officers reported.
2 Direct reports to the Executive Team with managerial responsibilities.
The Board’s assessment of Serko’s performance against its
Diversity and Inclusion Policy is set out in latest ESG report,
44
which can be found on the investor centre of the
company’s website.
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
$210,001 - $220,000
$220,001 - $230,000
$240,001 - $250,000
$310,001 - $320,000
$320,001 - $330,000
$360,001 - $370,000
Total number of employees and
former employees
4
7
3
6
7
1
2
3
2
2
1
1
1
2
1
1
The table above includes base salaries, short-term incentives
and vested or exercised long-term incentives. The table does
not include long-term incentives that have been granted
and have not yet vested. Where the individual is a KiwiSaver
member, contributions of 3% of gross earnings towards that
individual’s KiwiSaver scheme are included in the above table.
Where the individual works in Australia, contributions of 9.5%
of gross earnings towards Australian Superannuation are
included in the table above.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
BOARD AND COMMITTEE ATTENDANCE
Directors have given general notices disclosing interests pursuant to section 140(2) of the Companies Act 1993. All of those
interests, and any changes to interests notified and recorded in Serko’s Interests Register during the financial year ended 31 March
The table below shows the Board and Committee meeting attendance during the year ended 31 March 2018:
2018, are set out below:
Director attendance
Darrin Grafton
Bob Shaw
Simon Botherway
Clyde McConaghy
Claudia Batten
Board
12/12
12/12
12/12
12/12
12/12
Audit & Risk
Committee
Remuneration
& Nominations
Committee
*
*
5/5
5/5
5/5
*
*
4/4
4/4
4/4
* Indicates the director is not a member of the Committee (although they were in attendance for these meetings).
DIRECTOR INDEPENDENCE
The Board currently comprises five directors – being the two co-founders and executive directors, Darrin Grafton and Bob Shaw;
and three non-executive directors – Claudia Batten, Simon Botherway and Clyde McConaghy.
The Board has determined, based on information provided by directors regarding their interests, that as at 31 March 2018 and
the date of this Annual Report, Simon Botherway, Claudia Batten and Clyde McConaghy are independent directors. The Board
has also determined that Darrin Grafton and Bob Shaw are not independent directors owing to also being executives and major
shareholders in Serko.
DIRECTOR INTEREST DISCLOSURES
Directors have given notices disclosing interests pursuant to section 140(1) of the Companies Act 1993. Those interests (and
any changes to interests) notified and recorded in Serko’s Interests Register during the financial year ended 31 March 2018 are
set out below:
Date of disclosure
Director
Entity
20-Jun-17
Simon Botherway
Claudia Batten
Clyde McConaghy
Gave notice that they were interested in a Deed of Amendment to be entered
into between each interested director and the company extending the term
of the Director Share Loan between the director and the company (originally
approved by shareholders at the time of the IPO) for a further three-year term.
22-Nov-17
Darrin Grafton
Bob Shaw
Gave notice to the Board that Financial Equities Limited, in which they are
shareholders and directors, is interested in a Deed of Assignment to be entered
into between Serko Limited and Financial Equities Limited in respect of a loan to
nuTravel Technology Solutions.
Director
Entity
Relationship
Claudia Batten
Simon Botherway
Darrin Grafton
Broadli Inc
New Zealand Trade & Enterprises1
Serko Inc2
Westpac New Zealand Limited
Arrow Trust
Callaghan Innovation Board
EBT Capital Limited
Fidelity Life Insurance
Landcorp Board
MSH Trustee (Arrow Limited)
Financial Equities Limited
Grafton-Howe No.2 Trust
Serko Australia Pty Limited2
Serko Inc2
Serko India Private Limited2
Serko Investments Limited2
Serko Note Limited
Travelog World for Windows Pty Limited
Director
Regional Director
Appointed Director
Board Adviser
Trustee
Board Member
Ceased to be Director
Director
Ceased to be Board Adviser
Trustee
Director
Trustee
Director
Appointed Director
Director
Director
Director
Director
Clyde McConaghy
Chapman Eastway Pty Limited
Infomedia Limited
Optima Boards
Chairman (Advisory Board)
Director
Director
Bob Shaw
Financial Equities Limited
Ripon Trust
Serko Australia Pty Limited2
Serko India Private Limited2
Serko Investments Limited2
Serko Note Limited
Travelog World for Windows Pty Limited
Director
Trustee
Director
Director
Director
Director
Director
1 Claudia Batten ceased to hold this position from 30 April 2018.
2 Serko subsidiary as detailed on page 76.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
In accordance with Section 148(2) of the Companies Act 1993, directors disclosed the following acquisitions or disposals of
In accordance with the NZX Listing Rules, as at 31 March 2018, directors had a relevant interest (as defined in the Financial
relevant interests in Serko ordinary shares during the financial year ended 31 March 2018:
Markets Conduct Act 2013) in Serko ordinary shares as follows:
Name
Date of
acquisition/
(disposal)
Number of shares
acquired/(disposed)
Nature of relevant interest
Claudia Batten
5-Feb-18
2,181.63 ordinary shares1
Beneficial interest in ordinary shares held
in custody for Claudia Batten pursuant to
non-executive Director Fixed Trading Plan
Consideration
paid/received
$4,125.00
5-Mar-18
1,927.57 ordinary shares1
Beneficial interest in ordinary shares held
in custody for Claudia Batten pursuant to
non-executive Director Fixed Trading Plan
$4,125.00
Simon Botherway
5-Feb-18
2,181.63 ordinary shares1
5-Mar-18
1,927.57 ordinary shares1
Darrin Grafton
6-Jul-17
54,460 restricted shares2
6-Jul-17
3,469 restricted shares3
24-Nov-17
(320,000) ordinary shares4
Bob Shaw
6-Jul-17
25,103 restricted shares2
Beneficial interest in ordinary shares held in
custody for Simon Botherway pursuant to
non-executive Director Fixed Trading Plan
$4,125.00
Beneficial interest in ordinary shares held in
custody for Simon Botherway pursuant to
non-executive Director Fixed Trading Plan
$4,125.00
Beneficial interest in ordinary shares with
restrictive conditions allocated pursuant
to the Serko Limited Employee Restricted
Share Plan, held in trust until vesting.
$41,900.005
Indirect interest in restricted shares
allocated pursuant to the Serko Limited
Employee Restricted Share Plan to Ms
Bailey, by virtue of a personal relationship
with Ms Bailey.
$2,699.035
Indirect interest in the shares being disposed
of by virtue of a personal relationship with
the registered holder, Ms Bailey.
$464,000.00
Beneficial interest in Ordinary Shares with
restrictive conditions allocated pursuant
to the Serko Limited Employee Restricted
Share Plan, held in trust until vesting.
$20,950.005
1 Shares are acquired automatically, on a monthly basis, by an independent broker pursuant to the non-Executive Director Fixed Trading Plan. For more details refer to
Serko’s Corporate Governance Statement on the investor centre of Serko’s website. These shares may not be disposed of while the holder remains a director of Serko
and, in any event, for three years from the commencement of the Plan.
2 These shares are subject to a deed restricting exercise of voting rights attached to the shares.
3 By virtue of Darrin Grafton’s personal relationship, he is implied to have the power to exercise, or to control the exercise of, a right to vote attached to these shares
by virtue of a personal relationship with the beneficial holder of these shares. These shares are subject to a deed restricting exercise of voting rights attached to the
shares.
4 These shares were disposed of by Ms Bailey. By virtue of Darrin Grafton’s personal relationship with Ms Bailey, he is implied to have the power to dispose of or to
control the disposal of shares held by Ms Bailey. Darrin Grafton did not dispose of any of his direct interest in Serko shares.
5 Paid in the form of services to Serko.
Name
Darrin Grafton1
Bob Shaw2
Simon Botherway3
Claudia Batten4
Clyde McConaghy5
Relevant interest
Percentage
13,988,491
12,918,505
2,323,109.20
185,927.20
181,818
18.678%
17.249%
3.102%
0.248%
0.243%
1 12,667,629 shares are held via a trust in which the director is a trustee and beneficiary. This includes an indirect interest in (and by virtue of the indirect interest
is considered to have the power to exercise, or to control the exercise of, a right to vote attached to) 1,217,594 shares and 9,296 restricted shares by virtue of a
personal relationship with the legal and beneficial holder of these shares. This includes beneficial interest in 93,972 restricted shares allocated pursuant to the Serko
Employee Restricted Share Plan and held on trust until vesting.
2 12,884,296 shares are held via a trust in which the director is a trustee and beneficiary. This includes beneficial interest in 34,209 restricted shares allocated
pursuant to the Serko Employee Restricted Share Plan and held on trust until vesting.
3 2,034,091 shares are held via a trust in which the director is a trustee and beneficiary. 284,909 shares are held directly. 4,109.20 shares are held in custody pursuant
to the Serko non-Executive Director Fixed Trading Plan.
4 4,109.20 shares are held in custody pursuant to the Serko non-Executive Director Fixed Trading Plan.
5 Held via a trust in which the director is a trustee and beneficiary.
For the purposes of section 161 of the Companies Act 1993, the following entries were made in the Interests Register in relation to
the payment of remuneration and other benefits to directors:
Date
Director
Particulars of Board authorisation
20-Jun-17
Bob Shaw
Darrin Grafton
20-Jun-17
20-Sep-17
24-Nov-17
Simon Botherway
Claudia Batten
Clyde McConaghy
Simon Botherway
Claudia Batten
Clyde McConaghy
Simon Botherway
Claudia Batten
Clyde McConaghy
The payment of remuneration and the provision of other benefits by the company
and the making of the loan by the company under the Restricted Share Plan on
the terms set out in the resolution dated 20 June 2017 and in accordance with
the terms of the Serko Employee Restricted Share Plan documentation.
The extension of loans for a further three-year period to 30 June 2020 (originally
authorised on 30 April 2014) by the company to each of the non-executive
directors on the terms set out in the relevant Deed of Amendment and Original
Loan Agreement.
The payment of increased directors fees and the provision of other benefits
by the company to the non-executive directors on the terms detailed in the
Board minutes dated 20 September 2017 and, on the grounds, set out in the
corresponding directors’ certificate.
Entry into a Fixed Trading Plan for non-executive Directors
For the purposes of section 162 of the Companies Act 1993, an entry was made in the Interests Register in relation to insurance
effected for directors and officers of Serko, in relation to any act or omission in their capacity as directors.
There were no entries made in the subsidiary company Interests Registers during the financial reporting period.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
SHAREHOLDING INFORMATION
As at 30 April 2018 there were 74,894,342 Serko ordinary shares on issue, each conferring on the registered holder the right to
Set out below are details of the 20 largest shareholders of Serko as at 30 April 2018:
vote on any resolution at a meeting of shareholders, held as follows:
Size of shareholding
Number of holders1
%
Number of
ordinary shares
%
Shareholder1
Number of ordinary shares held
%
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
TOTAL
184
414
158
165
30
47
998
18.44
127,191
0.17
41.48
1,290,780
1.72
15.83
1,295,283
1.73
16.53
3,776,593
5.04
3.01
4.71
2,199,773
2.94
66,204,722
88.40
100.00
74,894,342
100.00
1
Includes 2,991,006 ordinary shares with restrictive conditions held by Serko Trustee Limited on behalf of 37 beneficial holders pursuant to the Serko Restricted Share
Plan. Restricted shares have voting rights attached, which are exercised on behalf of a beneficial holder by the Trustee at the direction of the beneficial holder.
As at 30 April 2018 there were five shareholders holding between 1 and 100 ordinary shares (a minimum holding under the NZX
Listing Rules) in respect of 326 shares.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Robert James Shaw & Geoffrey Robertson Ashley Hosking
12,884,296
Darrin Grafton & Geoffrey Robertson Ashley Hosking
12,667,629
National Nominees New Zealand Limited
9,045,214
Serko Trustee Limited
2,991,006
Simon John Botherway & MSH Trustee (Arrow) Limited
2,034,091
JPMORGAN Chase Bank
1,827,835
Public Trust Forte Nominees Limited
1,807,793
Accident Compensation Corporation
1,569,983
Philip Rodger Ball
TEA Custodians Limited
Joanne Maree Phipps
Donna Bailey
Sherie Robyn Hammond
Citibank Nominees (NZ) Ltd
Michael John Thorburn
1,537,594
1,255,787
1,240,972
1,217,594
1,200,544
1,031,167
1,021,711
Robert Alan Hawker & Elizabeth Anne Hawker
999,750
HSBC Nominees (New Zealand) Limited
925,396
Tracey Ann Shorter
Timothy Mark Bluett
Cogent Nominees Limited
823,041
814,404
669,280
17.20
16.91
12.08
3.99
2.72
2.44
2.41
2.10
2.05
1.68
1.66
1.63
1.60
1.38
1.36
1.33
1.24
1.10
1.09
0.89
1 The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been re-allocated to the
applicable members.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
According to notices given to Serko under the Financial Markets Conduct Act 2013 (and Securities Markets Act 1978), the
REGULATORY MATTERS
following persons were substantial product holders as at 31 March 2018. As at the balance date (31 March 2018) there were
74,894,342 Serko ordinary shares on issue:
On 22 July 2015, NZX regulation granted Serko a waiver from NZX Listing Rule 7.6.4(b)(iii) to the extent required to allow Serko
to provide financial assistance to executive directors, and an associated person of one of the executive directors, to enable them to
participate in Serko’s Restricted Share Plan. The full waiver is available on Serko’s website. Go to: www.serko.com/investor-centre/.
Substantial product holder
Geoffrey Hosking
Darrin Grafton
Bob Shaw and Sarah Shaw
Milford Asset Management Limited
Harbour Asset Management
SUBSIDIARY COMPANY DIRECTORS
Number of ordinary shares in
% Of class held at date of last
which relevant interest is held
notice
25,573,925
14,209,033
12,884,296
6,095,817
4,611,356
35.084%
19.493%
17.675%
8.380%
6.157%
DONATIONS
Serko did not make any donations during the financial year.
CREDIT RATING
Serko does not presently have an external credit rating status.
Directors of Serko’s subsidiaries do not receive any remuneration or other benefits in respect of their appointments. The
remuneration and other benefits of any such directors who are employees of the group totalling $100,000 or more during the year
ended 31 March 2018 are included in the relevant bandings for remuneration disclosed on page 69 of this Annual Report.
The following persons held office as directors of subsidiary companies as at 31 March 2018:
Subsidiary
Serko Australia Pty Limited (Australia)
Serko Investments Limited (New Zealand)
Serko India Private Limited (India)
Serko Inc (US)²
Serko Trustee Limited (New Zealand)
Directors1
Darrin Grafton
Bob Shaw
John Challis
Darrin Grafton
Bob Shaw
Darrin Grafton
Bob Shaw
Yogita Chadha
Darrin Grafton4
Claudia Batten4
Susan Putt
Fiona Rockel
Foshan Sige Information Technology Limited (China)³
Gerard Neilsen4
1 No subsidiary directors retired during the financial year.
2 Serko Inc was incorporated on 30 October 2017.
3 Foshan Sige Information Technology Limited was incorporated on 7 August 2017. Serko also has a representative office in China.
4 Appointed during the financial year.
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
GLOSSARY
COMPANY DIRECTORY
ARPB
Average Revenue Per Booking
Asia Pacific
ASX
ATMR
Vietnam, Thailand, Taiwan, Sri Lanka,
South Korea, South Africa, Singapore,
Philippines, Pakistan, New Zealand,
Malaysia, Japan, Indonesia, India, Hong
Kong, China, Bangladesh and Australia
for the purposes of this Annual Report
ASX Limited, also known as the
Australian Securities Exchange
ATMR (Annualised Transactional
Monthly Revenue) is a Non-GAAP
measure. Serko uses this as a useful
indicator of recurring revenue
from Serko products based on the
monthly transaction
AUD or A$
Australian dollar
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
EBITDA
ESG
FTE
FX
FY
GST
IFRS
EBITDA is a Non-GAAP measure
representing Earnings Before the
deduction of costs relating to Interest,
Taxation, Depreciation and Amortisation
Environmental Social Governance
Full-time equivalent
Foreign exchange
Financial year ended, or ending, on
31 March (unless otherwise stated)
Goods and Services Tax
International Financial Reporting
Standards
Independent
Directors
Simon Botherway, Claudia Batten and
Clyde McConaghy
IPO
Initial Public Offering
Listing
The date Serko shares started trading on
the NZX Main Board, 24 June 2014
NZ
New Zealand
NZD or NZ$
New Zealand dollar
NZ GAAP or
GAAP
New Zealand Generally Accepted
Accounting Practice
NZ IAS
New Zealand equivalents to International
Accounting Standards
Serko is a company incorporated with limited liability under the New Zealand Company Act 1993
New Zealand Companies Office registration number 1927488
Australian Registered Body Number (ARBN) 611 613 980
For investor relations queries contact: InvestorRelations@serko.com
NZ IFRS or IFRS New Zealand equivalents to International
REGISTERED OFFICE
Saatchi Building
Financial Reporting Standards
NZX
NZX Limited, also known as the New
Zealand Stock Exchange
NZX Listing
Rules or Listing
Rules
The Listing Rules applying to the NZX
Main Board as amended from time
to time
NZX Main Board The New Zealand main board equity
security market operated by NZX
R&D
SAAS
Research and Development expenditure
Software-as-a-service
Serko Expense
Management
business
Serko’s online expense management
solution that enables the capture and
processing of corporate credit cards and
out-of-pocket claims
Serko Mobile
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
serko.travel
Serko’s cloud-based online travel
booking solution for small to medium
enterprises (SMEs)
SME
Small and medium enterprise
TMC, Travel
Agency or Travel
Management
Company
A travel management company that
provides specialised travel-related
services to corporate customers
USD or US$
United States dollar
Zeno
$
Serko’s premium cloud-based online
travel booking solution
All figures are in New Zealand dollars,
unless otherwise stated
Unit 14D
125 The Strand
Parnell, Auckland
New Zealand
+64 9 309 4754
SHARE REGISTRAR
Link Market Services Limited
Level 11, Deloitte House
80 Queen Street
Auckland
New Zealand
+64 9 375 5998
serko@linkmarketservices.co.nz
DIRECTORS
Simon Botherway (Chairman)
Claudia Batten
Robert (Clyde) McConaghy
Darrin Grafton
Robert (Bob) Shaw
AUDITOR
Deloitte Limited
KEY DATES
22 AUGUST 2018
Annual Shareholders’
Meeting
30 SEPTEMBER 2018
Half-year End
20 NOVEMBER 2018
Half-year Results
Announced
31 MARCH 2019
Financial-year End
Serko’s ESG Report, which includes its Corporate Governance Statement, can be found at www.serko.com/investor-centre
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SERKO ANNUAL REPORTSERKO ANNUAL REPORT
Serko Limited Annual Report 2018
www.serko.com
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