Servcorp on track for a rewarding 2014

Global office provider’s 2013 results show continuing improvement.

a woman

Servcorp (ASX: SRV) has released results for the 2013 year. Highlights include:

  • Revenue up 4% to $208 million
  • Net profit up 43% to $21.27 million
  • Earnings per share up 47% to 22 cents (variance with net profit due to buyback)
  • Dividend steady at 15 cents fully franked
  • Net tangible asset backing $1.96 per share
  • Unencumbered cash on hand $90.62 million
  • Free cash produced $37.22 million (before tax)
  • Mature floor occupancy 79%, targeting 85% by end of calendar 2013
  • Mature floor net profit before tax up 13% to $42.22 million
  • 38 immature floors showed losses of $14.57 million

Although no financial forecast was provided for 2014, directors expressed optimism on the outlook. With floors in Australia, USA, China, Japan, UK, Middle East, Europe, Turkey, SE Asia and New Zealand, Servcorp is exposed to the health of the global economy.

In the aftermath of the GFC, aggressive expansion into the US was undertaken and many floors in highly prestigious locations were secured in competitive deals. The current 88% occupancy in the US floors demonstrates the success of this move and all but one of the US floors is expected to mature early in FY2014.

At $3.55, Servcorp is selling at 16 times earnings. 2014 dividend yield is expected to be 4.5%. On prospects and financial capacity, this stock is undervalued.

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Motley Fool contributor Peter Andersen owns shares in Servcorp.

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