Servcorp: Result 2016

Servcorp released another fine result but there's still room for improvement.

Servcorp has recorded another year of double-digit growth, with earnings per share increasing by 18%. This is no easy feat for a 38-year-old Australian company that has a presence in 22 countries.

Table 1: Servcorp result 2016
Year to 30 June 2016 2015 /(–)
(%)
Revenue ($m) 329 277 19
EBITDA ($m) 66 52 27
D&A ($m) 17 11 55
EBIT ($m) 49 41 20
NPAT ($m) 40 33 21
EPS (c) 40.0 34.0 18
DPS (c)* 22.0 22.0 0%
* 11 cents dividend, 50% franked, ex date 6 September

The company increased its footprint by opening up another 10 new floors in the year including new offices in Sydney, Singapore and Abu Dhabi. All up, Servcorp increased its capacity by 7%. More openings are expected in the 2017 financial year including offices in Tokyo, Jakarta and Chicago.

However, it is not just new floors which could lead to further growth. Servcorp’s like for like occupancy — how much of its floor space open for at least 12 months is leased — actually fell from 79% in 2015 to 77% this financial year. Management will be hoping to lift this in future years and considers some locations such as Malaysia, Singapore, China and the United states to have underperformed.

Of all these markets the US market will be its main focus. The company was hoping 2016 would finally be the year that this market returned a profit but ended the year with a loss of $3.8 million with occupancy marginally lower than the global average.

Servcorp’s share price has increased around 12% since its half-year results. It’s been a while since we've done a detailed review of Servcorp, so look out for that some time in the future. For now, however, we continue to recommend members HOLD.

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