Our unrivalled footprint and unique customer propositionis driving growth worldwide...
Regus is the world’s only global provider of flexible workspace.
We are 6,000 people running 1,100 business centres in 500 cities across 87 countries. We help our customers work more effectively, to work their way, every day.
To more than 800,000 people we are the mission critical platform upon which they run some or all of their business every day.
Our products and services allow our customers to concentrate on their core business, and use their talents to best effect. We help them be more flexible, more cost-effective and more agile – and better able to
face the unexpected challenges of business in the 21st century.
Regus annual report website: http://regusara2010.blacksunplc.com
Regus website: http://www.regus.com/?utm_campaign=slideshare
2. Our unrivalled footprint and
unique customer proposition
is driving growth worldwide...
Regus is the world’s only global provider of flexible workspace.
We are 6,000 people running 1,100 business centres in 500 cities across
87 countries. We help our customers work more effectively, to work
their way, every day.
To more than 800,000 people we are the mission critical platform upon
which they run some or all of their business every day.
Our products and services allow our customers to concentrate on their
core business, and use their talents to best effect. We help them be
more flexible, more cost-effective and more agile – and better able to
face the unexpected challenges of business in the 21st century.
...We work your way.
Directors’ Report – Directors’ Report – Financial Statements Shareholder and
Business Review Corporate Governance Other Information
Financial highlights 1 Board of directors 15 Consolidated income statement 32 Segmental analysis 77
Group overview 2 Other information 16 Consolidated statement Five year summary 79
Our products and services 3 Corporate governance 18 of comprehensive income 33 Shareholder information 80
Where we are 4 Director statements 24 Consolidated statement
Chairman’s statement 6 Remuneration report 25 of changes in equity 34
Auditors’ report 31 Consolidated balance sheet 35
Chief Executive’s review 7
Consolidated cash flow statement 36
Financial review 10 Notes to the accounts 37
Corporate responsibility 14 Parent company accounts 76
4. Directors’ Report: Business review
Group Overview
Extending our global network
What we do
We have to constantly evolve to meet our customers’ needs.
The world of business is constantly property managers and business do best, which is run their business
changing and so are we. 20 years ago advisers. Our customers want meeting- and work their way. Every modern
we were an innovative provider of rooms, workstations, coffee lounges, international business, large or small,
serviced offices because that was what video-communications facilities and all must be agile, able to make decisions
our customers needed. Yet work today the latest IT and telecommunications quickly, change direction or shift
is radically different to the early 1990s. support. We provide bookkeeping and resources at short notice.
As a result we have to constantly evolve payroll services, transcription services
In today’s ever more complex, ever more
to meet the ever changing needs of and help our customers purchase a wide
unpredictable, ever more interconnected
our customers. range of ancillary business products and
world, Regus helps them to do just that.
services. Sometimes they even want us
Yes, we still rent serviced offices. But
to tell them what they need.
that’s an increasingly small part of what
we do now. What we provide is the Above all, we take care of the everyday
means – the workspaces – from which details of running a business so that our
our customers can do whatever it is customers, be they the very largest
they want to do. We are facilitators, global corporate or an entrepreneur with
concierges, technical support teams, an idea, can concentrate on what they
What our customers say
Our unrivalled customer service is driven across everything we do.
Juniper Yell CAPCO Health Group Inc The Network Collective
Founded in 1996, Juniper Yell is a leading international Toronto-based CAPCO The Network Collective is an
currently employs more than directories company that offers Health Group, Inc. a provider independent telecommunications
7,000 workers in nearly 50 quality business leads and of healthcare services in the procurement consultancy. It
countries. Since its inception, marketing solution to small North American medical works with major UK and
Juniper has been at the forefront and medium sized enterprises insurance community, has multinational organisations to
of network innovation – providing in the UK, US, Spain and parts been a Regus client since 2000 help them achieve the best
solutions that solve the most of Latin America. and has started to use Regus possible results through
complex networking problems. virtual offices to pursue new their telecommunications
business opportunities. procurement.
“With Regus we are no longer “With Regus we are far more “For as little as a few hundred “Our team travels a lot and it’s
on the real estate roller coaster cost effective, lower risk, flexible dollars a month virtual offices important for us to have a high
where we are constantly and sustainable but will, over allow us to move into additional quality base whilst on the road.
ramping up and ramping down time, increase productivity as markets such as Mexico and Regus help us be as productive
our portfolio. We can now less time is spent commuting Central America.” as we can in a cost effective way.”
acquire just what we need, and working in poorly equipped
when we need it for as long places such as hotels and cafes.”
as we need it without risk or
excessive costs.”
Ernie Gershon, President John Waterhouse,
Coleen Hurley, Director of Simon Taylor,
and COO of CAPCO Founder and CEO of
corporate real estate, Juniper Head of Property, Yell
The Network Collective
For more information visit www.regus.com
02 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
5. Our products and services
Business Review
Serving 800,000 customers every day.
Video Communication
The world’s largest network of video communication suites in more than
4,000 locations worldwide. Our customers save management time, travel
costs and reduce their carbon footprint by using the very latest HD technology.
Corporate Governance
Businessworld
Our unique worldwide membership scheme – instant access to all of our
1,100 business centres. The ultimate in productive mobile working with
more than half a million members.
Equipped Of ces
A productive, flexible and cost-efficient work environment bespoke for every
Financial Statements
single customer company. From start-ups and established local businesses, to
satellite offices for the very largest corporates all workspace can be fully
personalised to reflect the customer’s brand and culture. Mainly full-time, but
also available by the hour.
Virtual Of ce
A professional business address and local telephone number, with call handling
and message management, plus mail collection and forwarding services. Used
by all types and sizes of businesses, especially those looking to enter new
Shareholder and Other Information
markets in a low cost, low risk way.
Meeting Rooms
Conveniently located, customisable meeting rooms, in a dedicated business
environment. Cost-efficient and flexible, our customers are able to book by
the hour not just by the day.
Disaster Recovery
Dedicated office space configured to our customers’ exact requirements
including telephone and IT connectivity, reserved and kept ready for
whenever it is required.
www.regus.com/investor Regus plc Annual Report and Accounts 2010 03
6. Directors’ Report: Business review
Where we are
Growing our global network
In 2010 we added 125 new centres
and Oman, Lithuania and Ghana to
our global network. 2011 will see
similar levels of growth.
Park Avenue,
New York, USA
87
Countries
500
Cities
6,000
People
American Express Retiro,
Buenos Aires, Argentina
800,000
Daily customers
04 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
7. Business Review
View our online operational
case studies in action
www.regus.com/investor
Corporate Governance
City Point,
London, England
Financial Statements
Shareholder and Other Information
World Trade Centre,
Beijing, China
Bandra Kurla
Complex,
Mumbai , India
Ark Office,
Sydney, Australia
www.regus.com/investor Regus plc Annual Report and Accounts 2010 05
8. Directors’ Report: Business Review
Chairman’s statement
Determined strategic implementation
This, coupled with consistent trading Board changes
across all our markets, has enabled the I would like to thank Ulrich Ogiermann,
Group to weather the unpredictable who resigned from the Board as of
economic challenges of 2010. I am 31 December 2010, for his contribution to
particularly pleased that our mature the business over the years and we wish
margins have started to recover during him well for the future.
2010 and in addition the business has
Dividend
generated more cash year on year, with
It remains the intention of the Board to
cash from operations increasing to £109.7
pay dividends at a level which it believes is
million (2009: £105.1 million). The strength
sustainable throughout economic cycles
of this cash generation has enabled the
and is in line with its progressive payment
business to invest significantly in growth,
policy. Reflecting the underlying strength
opening 125 centres, with an estimated
of the Group’s trading performance, our
cost to our profit and loss of £18.2 million
strong cash generation, robust cash
and to our cash flow of £69.7 million. It has
I am pleased to report also enabled us to increase our dividend
position and future confidence in
the group’s prospects, the Board is
a solid performance by 22% to £23.2 million while maintaining
a robust net cash position at £191.5
recommending an 8% increase in the full
by the group resulting million. The board remains confident in the
year dividend per share to 2.6p per share.
Subject to the approval of shareholders
from the determined significant opportunities for our business
at the 2011 AGM, this final dividend will
as the global trend towards flexible, mobile
implementation of work accelerates.
be paid on Friday 27 May 2011 to
shareholders on the register at the close
our strategy which Network growth of business on Tuesday 26 April 2011.
has transformed our To capitalise on the significant
business model over opportunities created by the trend towards
increased flexible working we continue to
Douglas Sutherland
the last two years. grow our network to provide these agile
Chairman
21 March 2011
Douglas Sutherland workers with a mobile work platform. Our
Chairman approach is two-fold: to open in new
countries (such as Oman, Ghana and
Lithuania), thus increasing our global
footprint, and deepen existing in-country
networks opening in cities (such as
Canberra and Brasilia), thereby getting
ever closer to new and existing customers.
In the year to 31 December 2010, we
added 20,122 workstations an increase
of 13% on 2009 for a total investment of
£69.7 million. Approximately half of this
growth came from acquisitions in markets
such as Brazil, China, UK and USA. We
will continue to explore such opportunities
as we look to strengthen our market
position and deliver on our strategy.
06 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
9. Directors’ Report: Business Review
Chief Executive’s review
A strong track record of delivery
2010 was a solid year of performance • Strengthened Management Structure
made possible by the delivery of key
Business Review
– To better manage our growing
strategic initiatives rather than any business, within our regions, we have
noticeable pick up in the world economy. started the process of organising day-
That the business remained profitable and to-day management of 30 country/
in 2010 generated more cash than in 2009 market groupings. With supervisory
demonstrates our strong and deep oversight from our new global
foundations. management centre in Geneva,
We are now a much fitter and more decision making is being accelerated
nimble business which will be to the and improved. In 2010 key hires
benefit of our customers and and internal promotions were made
shareholders. The strategic initiatives of across all our major geographies
Corporate Governance
2010 were focused on orientating the including Canada, Brazil, Mexico and
business to recover occupancy and Japan amongst others. It is of crucial
2009 and 2010 have been margin in 2011 regardless of the rate of
economic recovery. This includes having
importance that the business continues
to add to this cadre of its management
momentous years for the right business centres in the right population throughout 2011.
the world economy and places on the right terms; generating
• Refocused Marketing – Spend was
more enquiries and increasing the sales
all businesses have had conversion; streamlining processes and increased by 27% over the course
to respond and adapt in structures; continually innovating our of 2010 vs. 2009 to £33.3 million.
product and service mix; and, crucially, The marketing management team
order to progress. We investing in our people. Such investments was reorganised to deliver in-country
have been no different.
Financial Statements
have come at some cost but it is planning and global campaign
important to highlight these investments integration moving us away from a
Mark Dixon
are fully self funded and we expect to see regional approach. Additionally, a
Chief Executive
a return in 2011. number of tasks were brought back
We continue to experience broad-based in-house, including web and search
demand across all markets and market engine marketing. Together this
sectors but especially from large resulted in a 32% increase in overall
multinationals for our assistance in global enquiries but more importantly
supporting their move to lower cost flexible a dynamic approach to generating
working models. This accelerating trend is enquiries in the locations that most
one of the key drivers of our business and need them.
Shareholder and Other Information
we believe will be so for years to come.
• Improved Sales – Significant changes
With renewed focus we have delivered to our sales structure, supporting
the growth we set out to achieve at the systems and improved customer
beginning of 2010; we opened 125 new targeting, together with comprehensive
centres, which led us into seven new bespoke training and development,
countries. It is our intention to sustain this resulted in deal volumes that were
growth rate into 2011 as we look to 12% higher in 2010 than 2009.
extend our global reach and strengthen in Good progress was made with our
country networks giving us an ever corporate accounts team, refreshing
greater addressable market. our entire product offering, providing
Strategy targeted marketing support and
Our vision is clear; to be where people systems, increasing headcount (from
and businesses want to work and to be 30 to 79) and making four key senior
the platform from which they work, be it management hires. As a result our
mobile or fixed, virtual or physical, large sales picked up strongly in H2 and this
company or small. As a result our team now has momentum into 2011.
strategy is equally simple: to be in as
• Streamlined Operations – 2010 saw
many of those locations as quickly as we
further significant progress with our
can. That we are the only business that
can aspire to this demonstrates the scale eCommerce rollout, specifically TITAN,
of the opportunity in a world of more than Peoplesoft and Oracle which are now
a billion mobile workers. firmly embedded within the business.
A significant number of centre routines
Strategic highlights and procedures were redesigned, freeing
In 2010 we delivered a number of key up centre team time to dedicate to
strategic initiatives which have customers. The centralisation of our back
transformed the business. These are: office service functions to our shared
www.regus.com/investor Regus plc Annual Report and Accounts 2010 07
10. Directors’ Report: Business Review
Chief Executive’s review continued
Strategy and objectives service centres was completed in Q4. Operational Review
It is already delivering both operational Operationally 2010 has been a busy year
and financial efficiencies; for example, for the Group. During Q4 alone we
centralising our IT support desk has averaged a centre opening a day. Our
already resulted in annualised savings strategy of controlled and disciplined
Scale / growth has resulted in an increase in total
of £1.5 million. 2011 will see further
Density capacity (including non-consolidated
centralisation including parts of the
marketing, price and inventory functions. workstations) of 9% to 188,567
Partnerships Unique market workstations in the year and the number of
position • Delivered Procurement, New Centre actual workstations by 8.8% to 178,084
cost efficiencies – Over 2010 we workstations as at 31 December 2010.
continued our proactive approach to The group opened 125 new centres during
driving cost and realising efficiency gains the year with the total number now
Product throughout the business. Centralised standing at 1,084. Of these, 61 were as a
and service Brand procurement programmes were put in result of organic growth of which 37 were
innovation place and key hires made, the benefits opened on flexible, low risk leases.
of which we believe will be felt in 2011 On a regional basis, revenues and centre
Operational and beyond. Excluding the extra costs contribution can be analysed as follows:
efficiency that have been incurred increasing the
capacity of the business and some
specific investments, since the second
half of 2008 annualised savings have
been made of circa £135 million.
Our vision is clear; to be where people
and businesses want to work and to
be the platform from which they work, Revenue Contribution Mature margin (%)*
be it mobile or fixed, virtual or physical, £ million 2010 2009 2010 2009 2010 2009
large company or small. As a result our Americas 436.9 423.8 99.1 92.9 24% 23%
strategy is equally simple: to be in as EMEA 281.2 306.2 65.8 83.0 25% 28%
many of those locations as quickly as Asia Pacific 141.7 132.3 36.4 40.3 29% 30%
we can. That we are the only business UK 178.9 191.4 13.2 18.5 8% 10%
that can aspire to this demonstrates
Other 1.7 1.4 1.4 0.9 -- --
the scale of the opportunity in a world
of more than a billion mobile workers. 1,040.4 1,055.1 215.9 235.6 22% 23%
* The mature business is defined as the performance from centres owned and operated at 1 January 2009.
Americas including 16 through acquisition. This
Our business in the Americas comprises contributed to the increase in the average
Canada, USA and the countries of Latin number of consolidated workstations from
America, some 517 centres across 15 34,260 in 2009 to 36,120 in 2010. We
countries. Our main business in the USA opened our first centres in Ghana, Oman,
operates 411 centres. At actual exchange Tanzania and Lithuania (new cities Porto
rates, the region delivered revenues of and Basel).
£436.9 million – up 3.1% on 2009 with
Asia Pacific
average mature occupancy of 80% during
Our business in Asia operates in 133
the period (2009: 79%). During the year,
centres across 16 countries. The region
we added 46 centres which contributed
delivered revenues of £141.7 million, up
to the increase in the average number of
7.1% on 2009, and achieved an average
consolidated workstations from 72,277 in
mature occupancy of 80% (2009: 76%).
2009 to 74,265 in 2010.
During the year we opened 20 centres,
The business made two key acquisitions in which increased the average number of
November 2010; one in Dallas adding nine consolidated workstations from 21,390 in
centres; and one in Brazil adding 16. The 2009 to 23,437 in 2010.
latter acquisition makes us the number
UK
one workplace provider in that market.
Conditions during 2010 continued to be
EMEA extremely challenging with renewed
Our business in EMEA encompasses 278 pressure on key performance indicators
centres across 49 countries. The region and particularly price. Set against this
delivered revenues of £281.2 million, down backdrop, the region delivered revenues
8.2% on 2009, and achieved an average of £178.9 million, down 6.5% on 2009
mature occupancy of 77% (2009: 80%). and achieved an average mature
During the year we opened 36 centres, occupancy of 76% (2009: 78%). During
08 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
11. the year, we opened 23 centres of which lower risk, flexible, sustainable and is It is important to state that our growth
15 were through acquisition. This gradually increasing productivity as less strategy is based upon making our past
Business Review
increased the average number of time is spent commuting and working in successes repeatable. We focus on
consolidated workstations from 33,528 in poorly equipped places. projects that we can do again and again,
2009 to 34,851 in 2010. moving us from one level to the next.
7-11 – Leading US franchised
Growth is always low risk and balanced. It
In Q2 we embarked on a significant food retailer
is never growth for its own sake.
restructure of our UK lease portfolio; Since year end we have signed a deal with
working in partnership with our landlords 7-11 whereby they will close more than 35 The acquisitions we have made and the
many were renegotiated and re-geared under-utilised regional offices. More than organic growth which has happened
and only three centres were closed. This 250 franchise managers will use the Regus alongside have expanded our served and
process concluded in Q3 and will result in network establishing flexible zone offices in addressable market. We now have 1,084
annualised savings of up to £15 million per Regus centres coupled with 250 days of centres worldwide
Corporate Governance
annum. We are confident that in 2011 our meeting rooms per month and several
UK business will return to operating profit. hundred Businessworld cards. 7-11 will Outlook
reduce overhead by eliminating small offices Against a tough economic backdrop the
Market opportunities – how from their property portfolio and franchise business delivered solid financial results in
we help our customers managers will have more time to spend with 2010, driven almost entirely by execution
Our extensive geographic network offers their customers as they leverage more than of a range of key strategic initiatives; we
a broad range of opportunities for Regus, 400 Regus business centres. have seen little benefit from any economic
as organisations of all sizes begin to upturn. We have continued to invest in
AT&T – Leading telecommunications growth, mature margins have held up well
seriously address structural inefficiencies
service provider and cash flow continued to be strong,
in their property portfolio and as pressure
Use Regus offices in 18 countries reflecting the underlying health of
from workers increases to make work
including Canada, China, Vietnam, the business.
Financial Statements
more flexible, in terms of both time and
Denmark and Peru. Coupled with 500+
geographic location. We remain cautious on the economy,
businessworld cards AT&T rely on Regus
Businesses around the world, from the very to ensure flexibility and speed of response however we have been encouraged by
largest to the newest start-up, are especially when working on major new recent positive trends that reflect the
increasingly recognising the benefits of contracts in new or challenging markets. continued strategic delivery of the group. In
being property-light; reducing the number 2011 we are well positioned for a year of
of offices they lease. This then enables their Network growth solid revenue growth business improvement
people to work where they need to, rather In an ever more mobile, nomadic world of with strong underlying cash-flow generation.
than where they always have been and for work, our primary asset, our business
Arguably the recession of the last two years
their business to realise the immediate centres, will remain the foundation for our
has been good for our business; it made us
benefits of increased productivity and growth. Indeed it is our extensive
take a long hard look at everything we did,
Shareholder and Other Information
decreased costs. As such, a move to network, virtually impossible to replicate in
improve it and in doing so we have been
Regus is very much a commercial and the medium term, which is so attractive to
transformed. That we have emerged from
financially driven decision; with the Regus our customers and prospects and from
2010 for the better is a testament to the
advantage regularly delivering savings of which we will create significant
hard work and dedication of our global
50-80% vs. a comparable traditional leased shareholder value.
team of highly motivated individuals. We
office model. We are attractive to any size A larger network is necessary because: have restructured and streamlined our
of business and not just small and medium management; we have grown and opened
sized businesses on a short term basis. • Our addressable market grows; locally up new markets; we have continued to
60% of our customers use us for more from the businesses immediately innovate; we have radically improved our
than 30 months; 40% of our customer surrounding the new location and sales and marketing; and we have
base is large corporates; and, 20% sole globally for multinational businesses that continued to automate and improve our
traders and micro businesses. want to do business in that location; processes. We are a better business than
The scale and density of our ever • We can leverage operational efficiencies; we were when the recession started and
expanding network, our strong track we will realise the benefits of the many
record of delivery, and our constant ability • Additional brand exposure; improvements made over the years to
to innovate both product and service come.
• We become an ever more attractive
mean we are well placed to help our partner to other high profile global Finally, I would like to thank our employees,
customers, both current and future, brands; and customers, shareholders, suppliers and all
address the challenges of work, wherever other partners for their continuing support.
they need us. For example:- • The barriers to competitive entry We look forward to an improved 2011 and
become greater. the opportunity to grow our business and
Yell – UK based business
directory service As such continued growth is core to our in doing so lead our industry.
Closed 18 under-utilised sales offices and strategy.
transferred circa.700 sales consultants to Mark Dixon
Regus through our Businessworld model. Chief Executive
This approach is more cost effective, 21 March 2010
www.regus.com/investor Regus plc Annual Report and Accounts 2010 09
12. Directors’ Report: Business Review
Financial review
Robust cash generation
This cash inflow has enabled the business to Revenue and gross profit (centre
pay an increased dividend to shareholders contribution)
(£23.2 million), buy back shares (£7.3 million), Revenue for the Group decreased 1.4%
restructure the UK (£13.7 million to 31 to £1,040.4 million (2009: £1,055.1
December 2010). As well as invest in million) and gross profit (centre
capacity growth (£69.7 million). contribution) decreased 8.4% to
£215.9 million (2009: £235.6 million).
Our net cash position at 31 December 2010
remained strong at £191.5 million compared This movement can be analysed as follows:
to £237.0 million at 31 December 2009.
£ million Revenue Gross profit Margin %
FY 2009 1,055.1 235.6 22.3%
Impact of exchange rates 16.3 4.4
Despite the challenging FY 2009 at constant exchange rates 1,071.4 240.0 22.4%
Change in mature business (60.8) (24.5)
trading conditions Centres added in 2009 13.0 4.8
experienced across Centres added in 2010 25.1 (7.0)
all of our markets, the Centres closed (8.3) 2.6
business has generated FY 2010 (pre exceptional costs) 1,040.4 215.9 20.8%
Exceptional costs - (11.9)
more cash in 2010 than it
FY 2010 1,040.4 204.0
did it 2009 with cash from
operations increasing If we had translated our 2009 results The year on year impact of centre closures
at 2010 rates revenue and gross profit was to reduce revenue by £8.3 million but
to £109.7 million (2009 would have increased by £16.3 million increase gross profit by £2.6 million.
£105.1 million). and £4.4 million respectively. On a
Taking all this together margins (before
constant currency basis revenue fell
Stephen Gleadle exceptional costs) reduced from 22.3% to
by 2.9% and gross profit by 10.0%.
Chief Financial Of cer 20.8%.
Our mature or “like for like” business
Administration expenses
revenues decreased by £60.8 million and
In 2010 administrative expenses (pre
gross profit by £24.5 million driven by
exceptional costs) increased by £28.1
reductions in price. This is partially offset
million to £193.4 million. This increase
by real reductions in costs and the
can be broadly analysed as follows:
transfer of some other costs into
overheads.
Administrative
However, while the overall profitability has £ million costs
fallen year on year mature margin has
FY 2009 165.3
recovered during 2010.
Impact of exchange rates 1.8
FY 2009 at constant
£ million H2 2009* H1 2010* H2 2010* exchange rates 167.1
Mature revenue 494.5 489.9 490.3 Transfer of costs from centres 6.4
Mature gross Incremental costs associated
profit 109.4 103.8 109.5 with capacity growth 5.3
Margin 22.1% 21.2% 22.3% 2010 investments
* The above numbers are at constant currency and (sales, marketing and IT) 11.1
have been adjusted for the impact of certain costs Other cost movements 3.5
being moved into overheads during 2010.
FY 2010
Centres added in 2009 contributed £13.0 (pre exceptional costs) 193.4
million of revenue and £4.8 million of Exceptional costs 3.9
gross profit, reflecting the improving FY 2010 197.3
occupancy and ability to reduce the
normal start up losses as centres mature. £6.4m of costs were transferred from
New centres in 2010 contributed £25.1 centres arising from both our programmes
million of revenue but reduced gross profit to centralise certain functions and
by £7.0 million due to the normal start up processes, previously carried out by
losses incurred in establishing new centres. centre staff and from the annualised
effect of other transfers made in 2009.
10 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
13. As a result of adding workstations Cost reduction initiatives specific investments in 2010, since the
overhead costs are also adversely The cost management actions taken by second half of 2008 annualised savings
Business Review
affected as we invest in such costs as the Group throughout 2009 have been have been made of circa £135 million.
extra marketing, regional management, progressed in 2010, delivering further
Operating profit (before exceptional
legal and other compliance costs. Year on cost savings in the underlying business.
items)
year the increase in these costs is The most significant savings are being
Arising from the above operating profit
estimated at £5.3 million. driven through centre costs, where we
was £22.5 million (2009: £67.7 million),
are now seeing the benefit of reduced
To drive enquiries and future revenue representing a margin of 2.2% (2009:
rent and service charges. Cost savings
growth, the Group has invested an extra 6.4%).
are also being made as we close
£9.0 million in sales and marketing. In
underperforming centres and the Exceptional items
addition, £2.1 million has been spent to
centralisation of certain functions and During the year the Group has undertaken
centralise our IT support structure which
processes has contributed operational a UK restructuring programme and incurred
Corporate Governance
will start to yield savings in 2011.
efficiencies such as improved customer exceptional charges of £15.8 million. These
Net of the above there has been an collections. costs relate to a combination of asset
underlying increase in overhead of write-downs, dilapidations, legal and
The trend in the total cost base is shown
£3.5 million. professional fees, relocation costs,
below. Excluding the extra costs that
reorganisation costs and ancillary closure
Growth costs have been incurred increasing the
costs net of any onerous lease or other
As the rate of capacity growth increases capacity of the business and some
property related provision releases.
the short term costs of this growth also
increase. To give shareholders a better Cost trend of base business at constant exchange
appreciation of the impact of this on our
2010 profit and loss these costs have
£million H2 2008 H1 2009 H2 2009 H1 2010 H2 2010
Financial Statements
been estimated as follows:
Base business 532.7 505.8 486.0 480.6 465.0
Growth costs 2.5 5.5 8.9 20.2 40.6
Growth
£ million costs
2010 investments – – – 5.4 5.7
Start up losses within centre Total costs 535.2 511.3 494.9 506.2 511.3
contribution (including £2.7m
of depreciation) (7.0) Of the net £15.8 million, £13.7 million has The lower interest payable of £0.5 million
Costs of teams that support so far been expended in cash. reflects costs associated with bank
the acquisition and overdrafts in a limited number of countries
As a result of the programme annualised
implementation of centres (4.7) and commissions on bank guarantees.
rent savings have been achieved of up to
Incremental marketing costs £15 million. The £0.8 million decrease in interest
Shareholder and Other Information
to launch centres (1.9) receivable reflects the impact of lower
Share of profit in joint ventures
Other overhead costs (sales, global interest rates (reducing the Group’s
The share of joint venture profits
finance, legal, management) (4.6) average yield from 1.2% to 0.9% on a lower
attributable to Regus decreased to £1.3
(18.2) average interest bearing cash balance of
million (2009: £2.0 million). This reflects
£204.8 million (2009: £219.2 million).
the acquisition of one of our JV partners
In arriving at this number there has been
in December 2009 which is now fully Finance lease costs have remained
no allowance for general management
consolidated. unchanged reflecting the continued low
time and effort expensed across the
level of finance lease liabilities held by the
business supporting growth which is also Financing costs
Group. The amortisation of deferred
likely to be substantial. Financing costs can be summarised as
financing fees relates to the facility
follows:
Using these estimates, before and after arrangement costs incurred for the new
profitability can then be summarised as credit facilities entered into during 2006
follows: £ million FY 2010 FY 2009 and which were voluntarily surrendered in
Interest payable (0.5) (1.6) April 2009 resulting in the recognition of
Interest receivable 1.8 2.6 an accelerated amortisation charge of
Before growth After growth
£0.5 million in that year. The unwinding of
£ million costs costs Finance lease interest (0.1) (0.1)
discounted fair value adjustments on the
EBITDA* 112.6 97.2 Non-cash: Regus UK acquisition resulted in a non
EBIT* 42.0 23.8 Amortisation of cash net financing charge of £1.4 million
* Before exceptional costs. deferred financing fees – (0.5) in the period to 31 December 2010 (2009
Taking into account an overall Non-cash: UK £1.5m).
assessment of growth costs within the acquisition related (1.4) (1.5)
Total financing Taxation
business and the expectation of further The Group has recognised a £5.9 million
increases in capacity and therefore costs (0.2) (1.1)
tax charge for the period (compared to a
revenue, it is anticipated that an tax charge of £19.2 million in the
‘ex growth’ overhead rate would be
circa 12% of revenues.
www.regus.com/investor Regus plc Annual Report and Accounts 2010 11
14. Directors’ Report: Business Review
Financial review continued
comparative period). This includes a It is proposed, subject to shareholder position (including in particular UK
deferred tax charge of £0.5 million approval, to pay an increased final resident but non UK domiciled individuals
associated with the UK restructuring. dividend for 2010 of 1.75p (2009: 1.6p). who have elected to be taxed on a
This will be paid on Friday 27 May 2011 to remittance basis) should consult their own
The tax rate is 23.7%, excluding the
shareholders on the register at the close of professional adviser without delay.
exceptional item, compared to 26.9% pre
business on Tuesday 26 April 2011.
exceptional in the comparative period. Goodwill
If approved, this will represent an 8% Regus has £282.4 million of goodwill in
The deferred tax charge of £28.4 million
increase in the full year dividend the balance sheet principally arising from
includes the reversal of previously
increasing from 2.4p per share for 2009 the purchase in August 2004 of HQ Global
recognised deferred tax assets on losses,
to 2.6p per share for 2010. Holdings Inc. and the purchase in April
which no longer satisfy the Group’s
2006 of the remaining 58% interest in the
recognition policy, giving rise to a decrease Since 2008, Regus shareholders have
Regus UK business not already owned.
in the deferred tax asset from £65.1 million been able to elect to receive either
at 31 December 2009 to £37.1 million at Luxembourg-sourced dividends from Following the restructure of the UK
31 December 2010. In addition, the Group Regus plc SA (“plc”) or UK-sourced business, the carrying value of the
has benefited from a credit in relation to dividends from a UK-resident subsidiary goodwill was tested for impairment and
the settlement of a number of tax audits in of plc (the “IAS arrangements”). The IAS this indicated that no impairment was
relation to prior years. arrangements were put in place to allow necessary. Although the short term
shareholders to choose the dividend performance of the business has
On a cash basis, the Group paid £15.5
source which best suits their own tax worsened since the 2009 impairment
million in tax. Cash tax represents
position. review was carried out, the adverse
approximately 65% of profit before tax
impact of the resulting reduction in our
(excluding the exceptional charge). This Following various changes in relevant tax
anticipated future cash flows has been
arises largely because taxes paid in the year law and practice, however, the tax
offset by the savings arising from the UK
include final payments for earlier periods. implications of receiving a dividend from
restructuring. It should be noted,
either plc or a UK subsidiary should now
Earnings per share however, that the headroom in the UK
be the same for most shareholders. In
Earnings per share for the full year before goodwill calculations still remains low. It is
order to enable the discontinuance of the
exceptionals have decreased to 1.9p therefore possible that a future, non-cash,
IAS arrangements, which are no longer
(2009: 5.4p) with the impact of falling impairment may be necessary arising
considered necessary, Regus has
underlying operating profits partially offset from relatively small changes in
implemented a restructuring. As a result,
by cost savings. The average number of assumptions.
all shareholders will be paid dividends
shares in issue decreased to 947,462,881
directly from plc, commencing with the
(2009: 948,203,737) which reflects the
final dividend to be paid to shareholders
net impact of the reissue of treasury
on or around Friday 27 May 2011. All
shares held by the Group in order to
such dividends should be payable by plc
settle the exercise of share awards
without deduction of Luxembourg
partially offset by the impact of share
withholding tax, regardless of the
purchases.
residence of the recipient.
Dividend
In general terms, UK resident
A final payment relating to 2009 of
shareholders receiving dividends from plc
1.6p per share was paid in May 2010
in the future should be taxed in the same
following shareholder approval (H1 2009
way as if they had received a dividend
1.2p per share).
from a UK company. Tax outcomes do,
An increased interim dividend relating to however, depend on the specific
2010 of 0.85p per share (H1 2009 0.8p) circumstances of shareholders and any
was paid in October 2009. shareholder in doubt about their tax
12 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
15. Cash flow Our current annual property related lease
The Group’s cash flow statement can be summarised as follows: rentals are circa £400 million per annum
Business Review
and the minimum contractual lease
rentals on a GAAP basis total £1,557
£ million FY 2010 FY 2009
million as disclosed in note 27 of our
Cash from operations 109.7 105.1 audited Annual accounts, the NPV of
Other income 1.8 1.2 which is circa £1,100 million. Having
Cash in 111.5 106.3 carried out our own analysis of what we
believe to be our actual exposure, taking
Maintenance capex (30.8) (20.2) into account commercial reality and from
past experience, we estimate the NPV of
Interest and tax (15.4) (24.1)
our minimum lease rental to be nearer
Free cash flow 65.3 62.0 circa £553 million or a little less than one
Corporate Governance
and half years of lease rental.
Acquisitions (17.0) 1.0
Principal risks and uncertainties
New centre openings and property purchase (42.7) (26.7)
The principal risks and uncertainties
Share buybacks, settlement of share awards and dividends (31.4) (20.4) affecting Regus plc remain unchanged
Exceptional (cost)/receipt (13.7) 18.3 from those detailed in the Regus plc 2009
Other (3.0) (1.9) Annual Report and Accounts.
Cash out (107.8) (29.7) The principal risks and uncertainties
described in the 2010 Annual Report and
Change in cash & cash equivalents (42.5) 32.3 Accounts are:
Opening cash 245.1 219.5
Financial Statements
• Risk of economic downturn in
FX 2.0 (6.7) significant markets;
Closing balance – Cash, cash equivalents
and liquid investments 204.6 245.1 • Exposure to movements in property
markets;
Cash flow from operations has increased The net cash balance can be analysed as
• Exposure to movements in exchange
£4.6 million from £105.1 million to £109.7 follows:
rates;
million despite the reduction in operating
profit. This arose from a net working • Risks associated with the Group
£ million FY 2010 FY 2009
capital inflow in 2010 in contrast to an reorganisation and restructuring; and
outflow in 2009. Cash, cash
equivalents and liquid • Risk associated with centrally managed
Shareholder and Other Information
The increase in free cash flow is £3.3 investments 204.6 245.1 applications and systems.
million arising from lower interest and tax Bank and other loans (8.9) (6.0)
payments offset by increased Related parties
Finance leases (4.2) (2.1) Details of related party transactions that
maintenance spend in our centres, in
Net financial assets/ have taken place in the period can be
particular in the UK.
net cash 191.5 237.0 found in note 29 to the 2010 Annual
This cash inflow has enabled the business Report and Accounts. There have been
to pay an increased dividend (£23.2 Of the balance of £191.5 million, £93.6 no changes to the type of related
million), buy back shares (£7.3 million), million was held in Group immediately transactions entered into by the Group as
restructure the UK (£13.7 million to 31 available for use, £65.3 million was held in described in the Regus plc 2009 Annual
December 2010) as well as invest in the regions and £32.6 million is set aside Report and Accounts that had a material
capacity growth (£54.2 million) and to support letters of credit the business effect on the financial statements for the
finance the purchase of our first property has issued and various other period ended 31 December 2010.
(£5.5 million). In 2010 we have opened or commitments of the Group.
acquired 125 centres. Risk management and leasing Stephen Gleadle
With the recent publication of an Chief Financial Of cer
Exposure Draft on lease accounting there 21 March 2011
has been increased focus on the extent of
our lease liability. While the contents of
any potential new accounting standard
remain uncertain it is not possible to
estimate how or what impact on our
financial statements this might have.
However, I can provide some insight into
our lease exposures.
www.regus.com/investor Regus plc Annual Report and Accounts 2010 13
16. Directors’ Report: Business Review
Corporate responsibility
Practicing sustainable business
Being a global business carries great YTD rolling kg CO2 pa per occupied workstation (in UK business)
responsibility. Even though our footprint
is large, we seek to keep sustainability 180
at the core of how we conduct business.
Regus aims to bring employment and
responsible investment in communities
around the world while carefully
170
considering the environment.
Our representative to the Board for
Corporate Responsibility in organisational
governance is the Company Secretary.
Corporate Responsibility (CR) at Regus is 160
now overseen by the Chief Sustainability
Officer and our framework is based on ISO
26000. This comprehensive standard
provides guidance on social responsibility
and has seven core subjects as its 150
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
foundation – the environment; human
rights; labour practices; consumer issues; 2008 2009 2010
fair operating practices; organisational
governance and community involvement It remains our intention to reduce The above table shows a:
and development. It supports principles and our carbon footprint by 50% by
guidelines of the United Nations (UN) and 2020 using our 2007 baseline. • 10.28% reduction in the carbon
International Labour Organization (ILO). footprint per occupied workstation
We recognise that we have not from 2007 levels;
In supporting the three dimensions of achieved our targets in waste, water
sustainability – economic, social and and transport reductions as set out in • 6.23% reduction in the carbon
environmental, CR at Regus will also our last annual report but in June 2010 footprint per occupied workstation
have three dimensions – stakeholders, we introduced a behavioural change from 2009 levels.
the environment, and community programme to encourage Greener
involvement and development. Working. This campaign includes a
As a global company our stakeholders variety of behavioural changes coupled
are diverse and include individuals, with a series of energy and carbon
groups and organisations. Core to the saving practices across the estate.
nature of our business, key stakeholders Each centre now has an appointed
for Regus are our employees, customers, a Greener Working Champion whose
shareholders, property agents and primary role is to reduce energy, and
landlords, and suppliers. The health, water consumption, encourage recycling
safety and security of our stakeholders and promote greener working amongst
is also paramount to our business. customers, clients and suppliers. Dry
Mixed recycling was also introduced in
Our environmental considerations 2010 and is being successfully adopted
include reviewing our carbon footprint, by our staff and customers.
waste avoidance, water usage as well as
procurement and travel policies. In the UK Our community involvement and
Regus continues to make solid progress development will focus on forging
in its environmental performance. The sustainable relationships with communities
strategy outlined in last year’s annual in the areas of education and skills
report targeted a 20% reduction in development, particularly as they relate to
carbon footprint in 2010 based on our business creation. Our team members will
2007 baseline (see table opposite). Whilst continue to support a wide variety of
this target was not met we did achieve a charitable organisations, large and small.
10.28% reduction and this coupled with Of particular note in 2010 our US team
our successful Carbon Trust Accreditation raised more than US$50,000 for the
in May 2010 clearly demonstrates that Susan G Komen charity, a grassroots
we are taking our environmental impact breast cancer support network.
and performance seriously. The emissions
metric we are using to measure and track
our carbon footprint is that of kg of CO2
per occupied workstation, which has
been accepted by the Carbon Trust as
a unique measure for our business.
14 Regus plc Annual Report and Accounts 2010 www.regus.com/investor