Good afternoon. I've even got a mic on today, which is unusual. I guess everybody has seen the Servcorp numbers, so I will just touch on the highlights. The underlying result – $84.9 million free cash. Net profit up 23%, $69 million. Underlying operating revenue – $332 million. Underlying operating profit up 27%, $68 million. Underlying earnings per share up 25%. Statutory results, I'll just go down to what I normally look at – earnings per share $53.8, which is an all-time record for Servcorp. I go straight on to record underlying net profit before tax, record earnings per share, record dividend. That's Servcorp. The thing that amazes me when I look at the video is how Servcorp's grown. What a fantastic team we have. Sometimes at the biannual international management meeting, I get amazed by the quality of the teams. A winning team is always a much happier team.
When I look at the Servcorp teams, and I think we've got about 5 million options out there, maybe a little more. I look at the areas we're winning in, that's a happy group. If you look at the world, Australia just had its best five months for seven or eight years. The U.S. is not just cash positive, it's in profits. Last month, being last month, July, made around $300,000. Last year, it lost about $19,000. The only reason I quote that one number is not because it's so spectacular. It's because it's an example of what's happened in Servcorp overall. Culturally, our own teams are starting to understand the difference between Servcorp and the competition. I never see anybody mention, and I see all these write-ups on WeWork, that the very first operator of coworking in the world was Servcorp.
It wasn't just the first coworking operator by a short amount. It was the first coworking operator by close to 20 years. It started it and it was called Company Headquarters. It then became networking, and then computers came, so networking disappeared. We now call it coworking because WeWork and the American company spent so much money promoting the shared space concept, that coworking was a name that became more widely known. We started to call ours coworking. Across the globe, we've got just over 60,000 clients pay us rent every month. We have a different view on the world. If you look at everybody else in this business, they are looking at AI so that they can drop the number of people they have on a per-office basis. Right now, the industry average is around 1.7 per 100 offices. Servcorp runs 10 people per 100 offices.
Most of these operators don't have communication systems, switchboards, incoming and outgoing lines. If you look at spaces, the last one I looked at had three incoming and three outgoing lines. Servcorp next door had 30 and 30. Generally, it's about 20/20. We've got about 40. They've got about max six. When a client takes a Servcorp office or coworking, when they walk through the door, there's a receptionist that is live and on the spot. Their first month is free, and there's no further obligation. They don't have to sign a contract. If they don't like it, they can leave. The average cost is about $400 a month. A bit less, but across the world, it's about $400.
When you take it that we pay $12 million a month in rent, and they get access to every one of our locations, and $400, I know I can see the look on these guys' faces, is right at the top of the tree. That's the most expensive, but it goes from $150- $400. They get access to every Servcorp location. We signed for 10 years to try and give them security of tenure. I might add in this building, we were here for, we go back a long way, guys. I signed with Bond Corporation, who built this building. There was level 41 and 42. Krug had their own Krug Bar. Their family had the Krug Bar upstairs before it was taken over by, and that was all encouraged and funded by Alan Bond. He was going to take the top two floors as his personal apartment.
The whole thing went pear-shaped, same shape as Alan Bond, I might say. It was pear-shaped. Those guys I thought sort of rode roughshod over Servcorp because they just looked at little Servcorp and thought, well, these guys don't count much. In Australia, it hasn't changed all that much. If I look at Australia, obviously, it's the bloody Lebanese mafia's late as usual, but that's okay. We don't mind. They're the second biggest shareholder. Just in time to hear my whinge, which will come in a minute. I look at AI as an empowering tool because I've always looked at Servcorp as a corporation that would grow, that not only its job is to make money for its shareholders, but it's got to take care of its team members, and it's got to play a role in its community. Being an Australian company has its problems sometimes.
If you use this building, we were here for 30 years. 30 years now, isn't it? Pretty well. We'd always paid our rent. We'd signed with Bond Corp, but when Credit Suisse merged with... merged, that was a funny word, actually. Anyway, was gobbled up by UBS. Best deal of the century, I thought. Was gobbled up by UBS. They just said, "Your lease has ended. We won't renew it even though you've paid your rent for 30 years. Piss off." I'll remember. Takes a while, but we remember. It's a little difficult. People think we're shared space, and all the big guys thought they'd never go into it. They're the competition. We've now got close to 2,000 competitors in Japan. In Australia, in this city, I'm guessing about 200. That's a guess because I haven't looked closely. Nobody's put the infrastructure in.
People look at AI as an enabling product to reduce team members, not empower them. I disagree with that. The cost to build a Servcorp floor is between $4 million and $6 million a location now, whereas if you read our biggest competitors' annual report, they come in at less than $1 million, less than one quarter of what we spend. They run between seven and eight team members per location or per 100 offices, less than Servcorp. They all use external software, whereas we've written our own data system, which gives our clients a lot of power. We can put clients up and take them down in pretty fast time. I think I mentioned this at the last analyst meeting. The Wombat was being developed in Japan. The Japanese had called it Wombat because it was an Australian company.
I looked at that and thought, "Christ, we'll never keep that name." Of course, it got rolled out as Wombat. We're stuck with the bloody name. The name doesn't aptly describe it because a wombat's warm, cuddly, slow, thoughtful. I think they say in Australia, "Built like a brick shithouse." This is fast. Updates every 15 minutes. It's in all of our currencies. It's global. It's in all of the languages that we have. It will interact with the AI avatars that we are slowly but surely putting together. Unless you had a data system, general ledger, and interaction through your IT systems, and unless you had an in-house IT team, you wouldn't have a database globally of all of your clients. We're the only business center operator that has all their clients on one database across the globe. We will build. We are building.
You have to actually have a little bit of patience, but we've started building our first avatars in Japan. One will be to help answer questions verbally and in writing on the website. Then we'll have a 24-hour avatar concierge that will have access to all the LLMs. That will mean you'll have an avatar which is a genius and trained on Servcorp. We've started. When you have a look at what we've spent and written off over the years, in the last seven years, I would guess it's between $20 million and $30 million just on our IT systems. We haven't capitalized very much of them. In fact, very little. We try to write as much off as we can as we go. There is only one complaint from this Chief Executive.
I sat in a board meeting and, of course, we've given out 5 million options, which waters Alf's equity, which always gives me a pain. My meds decided that even though it was legal, my options couldn't be at the same strike price as the rest of the Servcorp guys' options. I think my salary is about $350,000. My options had to be after the announcement and when you were allowed to buy shares. Now, while it's only a very small amount of money compared to the way the share price went up and the number of shares I own, in principle, as Chief Executive, I hate it. I'll talk more about it at the annual general meeting. It just pisses me right off. I don't want any more. I just want exactly the same as my own team gets. I'm not scared of the regulator.
I am not scared of the regulator or the meds, I might add. I do respect my own team, and I want to be treated exactly the same as every other team member in Servcorp because they've all played a role, and I've been a part of that role over the last five or six years. Let's have a quick look at our avatar. This is a Susie, and she's only been trained on Japan so far, and she's pretty clunky. Boy, that's our landing page. I might add, when you talk about the infrastructure, nobody else has got an interactive landing page that takes you in three steps to a sign-up, which everybody asks, "Why is nobody else making money?" Hi, Susie. That's a pretty good demonstration. Susie, hi. Why can't I hear Susie, guys? Hi. I have a question, Susie. Does Servcorp have coworking in Marunouchi in Tokyo?
You've come to the right place. In Marunouchi, Tokyo, we have coworking options available at several locations, including the Marunouchi Trust Tower and the Marunouchi Nijubashi Building.
How much is a hot desk in Nijubashi?
At the Marunouchi Nijubashi Building, a coworking hot desk is available for JYP 27,500 a month on a month-to-month basis. You can start with your first month completely.
Do you have Coworking Spaces in Ebisu as well?
We do. In Ebisu, Tokyo, we offer Coworking Spaces at the Ebisu Garden Place Tower.
Do they have service? Does Servcorp have Serviced Offices in Ebisu?
Servcorp does offer Serviced Offices in Ebisu at the Ebisu Garden Place Tower. If you need more information or assistance with booking, just let me know.
Thanks, Susie. You can kill Susie. This AI is real, as you all know, because you keep reading about it. When you look at the way we are training our avatars, we are so far ahead of anybody else because nobody else can put the infrastructure in. Nobody else has got a database so that they can use an avatar as a genius. It's all part of it because you see, God gave us a lot of, when I think about it, He gave us the air, all this stuff that we get for free. In Japan, the railway works, and the infrastructure makes a massive difference to everybody's business. Every little business guy needs the infrastructure. My problem is training my own team to understand how much better Servcorp is than everybody else. As we slowly but surely train the team, I think we will continue to see improvement.
Expansion in Servcorp only goes with the management team. As we get managers that can handle more, we'll spend more money. We'll continue to throw excess cash. It's not the excess cash. It's what's in it for the client. When they walk in, if they've got six or seven people to delegate to, that gives them a real chance to make money. If their Wi-Fi is rocket fast, that gives them a real chance to make money. If they want to look or they want to use a concierge that has access to ChatGPT-5 and all the other LLMs, that's a real asset to them. They can ask verbally or they can do it in writing. They can use a mobile device.
John and his whole team around the world are currently working on building the avatar who will seamlessly work with and be able to monetize, be able to be monetized so that we will be able to bill our clients through Wombat. I'm getting tired of talking. That was all I wrote down. I've run out of stuff. Critical mass, I will say, though. Funnily enough, even though you've got WeWork and all of these guys, we currently probably have a few more coworking clients per location than anybody else on the globe. Anybody got any questions? I'm done. The Middle East is sort of booming or burning. It hasn't changed. The Middle East has its risks. If you go into Lebanon, we lose money. You go into the UAE, where we've now got, if you look five years ago, we had no competitors in the UAE.
We now got about 100. We've just got a better product. We've got more critical mass because we've been there for a while. Critical mass allows you to advertise because if you're running advertisements and you've got as many clients as we have, it's a small amount of their spend. It costs them less too. We started first and we're way ahead. If you looked at Dubai, we were first. If you looked at Saudi Arabia, we were first. Qatar first. First player in the market gets a few advantages.
What do you think the runway is over there? I mean, providing there's no burning happening or anything, it's.
I think the runway for the countries in the Middle East is a lot longer than a lot of people that are coming out of university right now when I have a look at the power of AI. I think they've got a shorter runway. I'm taking less risk than they are with their degrees. If I look at some of the coders and what you can do, and even writing ads, you can just put an ad in and say, "I want a cartoon ad," and chat just chucks it out. The average Joe talks about AI, but you should be worried about it. There'll be a lot more small businesses and a lot less hours worked. The Middle East has got a really young dynamic population.
The Middle East have woken up to the fact that private equity and all of these guys and all the other charlatans used to roll into the place and roll out with their money had no better brains than they had. Now they're investing in their own countries. I would think between five and ten years, if you're Servcorp, and I mean it. Sorry.
Maybe you could touch on Japan and China. Obviously, China was a bit weaker, and Japan obviously is still strong.
Japan's got a great management team, and it's been consistent for in profit on its revenue for the last 10 years, longer. It took us right through the COVID crisis. If you have a look at Servcorp as a company, it's currently got more money in the bank than it raised ever in its whole life. That's everything from the initial float on. It's got more money, it's got 140 centers, and it's got no debt. It's paid 50 dividends in a row, and it's got a pissed-off Chief Executive . I mean, hello. Other than that, it's an okay company.
Which brings us to dividends. You've talked $0.30 next year. You've got a lot of cash available.
Not for you guys. $0.30 is, well, it's like buybacks. I have this real aversion, and maybe dividend reinvestments, which was suggested. Buybacks are often driven by major shareholders that want to increase their percentage holding, or they're driven by a board that doesn't quite know exactly how to effectively invest their money. This is my opinion. I look at Servcorp Limited and say, when you look at the cash flow and what's happening in the world, there'll be some great opportunities in the property market, particularly now that we've got critical mass, some real estate. We looked at a little real estate play the other day that we thought we could turn into coworking. It went at 30% above the price we'd pay for it. Maybe the time's not right. Remembering that we're not geographically tied, there are ample opportunities.
My view on gearing is that if you buy real underlying real estate, you could borrow 50% but no more because markets can go up and markets can go down. If I look at the $0.30 dividend, if you go back to the original shareholding, right, we've now got more money in the bank than we've ever raised in cash. We've paid close to 300%, 400%, Greg. We've paid 395% back to the shareholders. That's enough.
We're very grateful.
Oh, wow. Maybe you will vote for me to get my options at the same price as everybody else.
Online questions, Faraj?
Yeah.
From Anonymous, is there a management succession plan in place?
I'll worry about that if I die. Right now, I'm staying here.
Second question from.
If you want to sell your shares, I know somebody that'll buy them.
Second question from Stella Wang. Last year, the company hired Illity to build a tenant-facing platform, an extension from existing Servcorp Community or Servcorp Home, and potentially would monetize it. Is this still the plan? Is there any progress on that front?
No. It's another heap of cash I threw in the bin because, if you look at Servcorp Home and then you look at the speed of evolution, which is AI. When I look at the developers that I had working on it, that I told we didn't need them because they were outdated by the enterprise AI that we will use and will monetize within the marketplace. The marketplace that we were building, like a lot of other things, I was probably a little earlier than most to recognize it, was gobbled up by the AI abilities. The AI abilities will far outweigh anything that we were building at a faster rate. How was that? Nobody else got any questions? Nobody? Game. Oh, come on, a bird. What's your problem?
I was going to ask about a buyback. I know that's a.
Dead ass.
No, I was going to say about Australia. Are we seeing signs of life for the first time? I remember I asked you six months ago, and Australia's been pretty lackluster. I know it's part of Southeast Asia, Australia. That second half and second half last year, we just started to see a bit of a tick up. Are you seeing signs of life here?
The answer is that if I have a look at Australia, it's been slower than I'd wanted, but Australia's picking up and will be a normal contributor again, particularly, I reckon, from the second half of this year. The first half, though, I reckon the first half will be its best year, best half in six, seven years. Australia's looking good. I've seen the revenue numbers for the coming month. They look pretty good. I would guess that will transmit into some greater net income. You know that we're in a business with a lot of nuts and bolts and people and clients. My guess is we still, no, I know, we still spill one or two, at least $1 million a month. That's just life. We will probably pick that up. I was asked a question as I came in. Weren't our projections a bit conservative?
It's a lot better to come out on the right side of the numbers and to upgrade at the half rather than downgrade. We did one downgrade or two downgrades a couple of six years ago, seven years ago. We're still living with it. The other thing that really hassles me is once upon a time, you'd just get an annual report, and in five years, it would all fall off the end. With the internet, it's always there. There's no way I'm going to miss the numbers again. It's just too bloody hard. Yeah.
Anonymous again online. Nice set of numbers from an old fossil. I got to throw that at you, Alf. Question, in which region do you have the most managerial talent to continue to expand?
If I was a smartass, I'd say where I'm sitting. We're still expanding in Japan because we've got stable management. I think the management in the UAE is very stable. Now we're slowly getting the management under control in the U.S. It's pretty broad-based. I think the guys, because we've done a fair bit of expansion in Saudi Arabia, are pretty stretched. The fact is that more and more Servcorp team members are starting to understand how the infrastructure works and how different it is. We don't try to just make an arb on the space. We try to provide a service level so that our own clients can succeed. Over the years, I've always hoped that if you got 1,000 clients, that they talk to other clients. Now we're about 50,000. If they use more than one operator, they will understand that there is a difference in infrastructure.
My biggest problem is that they often go to another operator before Servcorp because it's based upon just price. They don't know that there's a difference. Coming back, my biggest problem is training. I guess that will continue to be the biggest problem.
Second question from Stella.
Come on, Stella. This is enough. You're only allowed three questions. Last question.
With the backdrop of all the tariff uncertainty, any green shoots seen in China yet? Do you see the Japanese economy continue in the current strength?
I think China is still going downhill. That's my personal opinion. The rents are still dropping. The property market is still shot. I think that the Japanese currency is undervalued. I know, Alfred, you asked a question last year, why didn't we make more on our cash? Because the idiot Chief Executive 's got JYP 40 million in yen. Soon it'll be JYP 50 million. If you had any influence, you would talk to the BOJ and see if you could change the interest rates and fix my currency problem. That's it. She's not allowed to have any more questions anyway. What time is it? Somebody please. Sorry? Oh, oh, beer time. Thanks, guys. Hold on.