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Why the Servcorp Limited share price is down 17% today

Servcorp Limited (ASX: SRV) downgraded their FY 18 net profit before tax guidance from a previous upper limit of $55 million to $30 million.

This was due to disappointing performance of their USA operations which are now expected to deliver an FY 18 net loss of $9 million up from the previously expected $1 million loss. The Servcorp CEO is now expected to travel to the USA this week to help turnaround the business.

The company also expects the performance of its operations in Singapore and Saudi Arabia to be $4 million below expectations.

Foolish Takeaway

The US has long been a challenge for Servcorp with competition from the innovative WeWork. This has led to previous share price crashes with institutional investors Commonwealth Bank of Australia (ASX: CBA) and Perpetual Limited (ASX: PPT) decreasing their holdings.

While the decrease in price might tempt investors looking for a bargain, I would avoid this one for now.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

The Motley Fool Australia has recommended Servcorp Limited. 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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