Servcorp cuts US footprint in half, closes 12 offices
29 June 2020, Written by Matt Ogg
Serviced offices provider Servcorp (ASX: SRV) has finally bit the bullet with its underperforming US business with a major reorganisation announced today.
The company will close 12 locations including some of the country's largest cities and leading startup hubs, leaving only 10 remaining offices for its US footprint.
The locations to be closed will be Atlanta (2), Boston (1), Dallas (2), Los Angeles (2), Miami (1), Philadelphia (1), San Francisco (2) and Washington DC (1).
The remaining footprint in the USA comprises Chicago (2), Houston (2), New York (5) and Washington DC (1).
Servcorp expects the reorganisation will lead to a one-off cash cost $5.5 million, and implies the deconsolidation of legal entities which will mean a further loss on that figure.
"Servcorp has proven over the more than forty years of its existence to be a robust business, and this remains the circumstance today. We are confident following this reorganisation that Servcorp USA will emerge a stronger business," the company said.
"Our reorganisation of the USA does not mean Servcorp's global footprint will shrink. Indeed, in this time of opportunity, we are passively looking for locations in which to expand in early calendar year 2021."
The move shows Servcorp CEO and founder Alf Moufarrige is acting on his promise late last year to take "drastic action" if no improvements were seen within six months.
In November Mouffarige told Business News Australia the US side of the business was at rock bottom, and had struggled by being too culturally Australian for American standards.
The outbreak of COVID-19 compounded Servcorp's troubles and set back what had been a broad-based recovery for most parts of the business since March 2019.
On April 3 the group announced it had stood down 100 staff, while most remaining team members took 20 per cent pay cut and Mouffarige took a 50 per cent cut to his salary.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Author: Matt Ogg