Serko shares on watch after delivering strong first half growth

The Serko Ltd (ASX:SKO) share price could be on the move today after releasing its half year result and guidance for the full year…

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The Serko Ltd (ASX: SKO) share price could be on the move on Wednesday following the release of its half year results.

How did Serko perform in the first half?

For the six months ended September 30, the leading travel and expense technology solution provider reported a 29% increase in total operating revenue to NZ$14.7 million.

This result means the company is currently trading in line with its guidance of an increase of 20% to 40% for the full year.

Another positive was that its total recurring revenues continue to increase and make up a significant portion of its revenue. Total recurring revenue rose 38% on the prior corresponding period to NZ$13.3 million. This means 91% of its total operating revenue is classed as recurring, giving Serko a firm foundation to build on in the second half and beyond.

Things weren't quite as positive on the bottom line. Serko posted a loss of NZ$0.9 million compared to a profit of NZ$0.9 million in the prior corresponding period.

However, it is worth noting that this result includes a NZ$0.6 million non-cash adjustment for the fair value remeasurement of the contingent consideration for the acquisition of US-based expense management business InterplX. It also includes depreciation and amortisation charges of $1.3 million.

The company's EBITDAF, which excludes these adjustments, was positive at NZ$1.4 million. Though, this was down slightly from the NZ$1.5 million in the same period last year.

That was the result of operating costs increasing 46% to NZ$15.7 million. This was driven by an increased head count, costs associated with the expansion into NORAM markets, and the consolidation of InterplX.

Outlook.

Chairman Simon Botherway appears confident on the future.

He said: "Serko continues to invest in its global expansion, specifically in North America and continental Europe. The capital raising and the expanded agreement with Booking.com will allow us to accelerate that expansion and assist Serko to achieve its medium-term aspirational target of a NZ$100 million annualised revenue run-rate."

"Serko continues to expect Total Operating Revenue to grow 20% to 40% for the year ending 31 March 2020. As previously advised, currency fluctuations and the timing of customer onboarding will be key factors in determining our final result," he added.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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