Co-working focus paying off for Servcorp
Global serviced office provider Servcorp says its move towards co-working is paying off but has forecast headwinds, particularly in China, in light of the coronavirus outbreak.
The ASX-listed group with headquarters in Sydney has a global footprint that encompasses 145 floors, in 52 cities across 22 countries.
Over the first half of the financial year it consolidated offices at several locations, closing floors in Auckland, Bangkok, Brisbane, Chengdu and Jakarta, and opening offices in Hobart and Brisbane. Net capacity is expected to remain flat over the 2020 financial year given its plans to open new offices in Manila and Shanghai.
Servcorp, which has been in the premium serviced offices business since the 1970s, has been investing in luxury co-working spaces since 2017 to take advantage of the growing awareness of the sector thanks to competitors such as WeWork.
“The strong first-half performance shows that our strategic focus on delivering a premium offering in the flexible workplace sector has paid off,” Servcorp founder and chief executive Alf Moufarrige said.
Like-for-like floor occupancy increased by 3 percentage points to 76 per cent and capital expenditure was significantly lower during the half at $6.9 million compared to $33.6 million during the last corresponding period because of the near completion of its new fit-outs to incorporate co-working spaces. Already 90 locations have been modernised with fit-outs for another five offices scheduled this financial year.
“This investment is successfully meeting the expectations of the modern workforce,” Mr Moufarrige said.
Servcorp reported revenue of $177.5 million – up 9 per cent on the previous corresponding period – with $14.8 million in net profit compared to a $12.8 million loss the year before.
While revenue grew in Servcorp’s North Asia, Europe and Middle East markets, its USA business continued to deteriorate with revenue falling from $19.4 million to $18.7 million.
The company said it expected occupancies to further increase and while Servcorp faced “significant challenges in the United States, and uncertainties around the impact of the coronavirus in Asia” its diversified business provided stability in the flexible workplace sector.
“Given our strong balance sheet and cash flow generation, the board has decided to increase the interim dividend to 11 cents per share. Our priority for the remainder of FY2020 is to drive further revenue growth as we continue to deliver a compelling offering to our clients across 52 cities and 22 countries,” Mr Moufarrige said.
Servcorp reconfirmed its FY 2020 guidance of a net profit before tax of $36 to $40 million.
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