Servcorp Expands Operations, FY25 Outlook Strong with Higher Dividends and Global Growth

About Servcorp Limited

Servcorp Limited (Servcorp, the Group, ASX: SRV) is a multinational organisation that sells Serviced Offices, Virtual Offices, Coworking Spaces, Meeting Rooms, Community Packages, and IT, Communications and Secretarial Services to entrepreneurs, startups, SMEs and large enterprises. It was established in 1978 and listed on the Australian Securities Exchange in 1999.

Expanding global footprint

Servcorp continues to expand its operations from the currently operated 132 floors in 40 cities across 20 countries. In the first quarter of the 2025 financial year Servcorp has commenced 4 new operations, 2 in Australia and 2 in the Middle East and 3 additional locations are currently under construction and expected to open in April 2025. Two expansion opportunities are reaching final stages of agreement execution, and several more are in the pipeline under active discussion.

Servcorp is committed to growth in Saudi Arabia, having established the Servcorp Middle East Group, including a new regional headquarters in Riyadh. The business is performing well, and new locations are being built in the region to capture future growth.

Preliminary measures are in place for the potential listing of Servcorp’s Middle East and European operations in the second half of calendar year 2025. Servcorp has been granted a regional headquarter licence issued by the Saudi Ministry of Investment and is the first foreign corporation in the shared workplace sector to obtain such approval. Servcorp intends to retain a 55 percent controlling interest in the entity post listing. Preliminary indications are that based on current multiples being achieved in the Saudi market for growth businesses, Servcorp may see a significant value uplift for shareholders, should the transaction be successfully completed. The listing may also enable a substantial cash injection to flow into Servcorp. However, it must be noted that projections up to a year in advance relating to potential transactions in foreign jurisdictions carry execution risk.

FY25 outlook and dividend

The first quarter FY25 results have exceeded the prior year levels. This enables Servcorp management to reaffirm FY25 Underlying Net Profit Before Impairment and Tax (NPBIT) guidance within the range of $61 to $65 million. Underlying Free Cash Flow (UFCF) is estimated at more than $75 million. This outcome is comfortably ahead of the FY24 NPBIT of $56 million, and UFCF of $72.5 million. The FY25 dividend is estimated by management to be 26 cents per share, slightly above the 25 cents dividend paid in FY24. The dividend will be 80 percent unfranked.

The FY25 guidance is based on ‘Mature’ revenues generated from mature floors in locations that have moved beyond the emerging and ramp-up phase. This removes the distortion that arises from recently established, immature floors that are yet to capture their full revenue potential but are incurring full operational costs. Using mature floors for the purposes of performance comparisons provides an unambiguous representation of underlying year-to-year performance of the business.

The outlook beyond FY25 remains positive as demand for Coworking continues to increase as businesses throughout the world evolve to adopt flexible workspace capability. Servcorp has provided this capability for four decades and remains ahead of the game in this evolving landscape.

Servcorp’s global reach, strong cash generation and an unmatched technology platform to serve client needs positions the Group as the world’s premium provider of Workspace Solutions. This commanding market position should ensure steady share value accretion in the period ahead.