REGUS PLC 
INTERIM MANAGEMENT STATEMENT - 31 October 2014
Regus plc, the global workplace provider, today announces its Interim Management
Statement covering the period to 30 October 2014.
The financial performance of Regus' business remained strong in the third quarter to 30
September 2014, notwithstanding the continued translation impact from the strength of sterling.
In the quarter to 30 September 2014, Group turnover increased to £413.6m compared with
£386.6m in the corresponding period last year; an increase of 13.5% at constant currency rates (7.0% at actual rates). For the nine months ended 30 September 2014, Group turnover increased to £1,218.3m compared with £1,131.4m for the same period last year; an improvement of 15.7% at constant currency rates (7.7% at actual rates). As at 30 September
2014, the Group had a total of 2,076 centre locations and 338,553 workstations (including non-consolidated¹) compared with 2,004 centre locations and 329,123 workstations at 30
June 2014.
Our underlying business remains very cash generative, delivering £18m of net cash in the quarter, despite continued investment in the growth of our network. As a result our net debt position improved by £18m in the quarter to £144m at 30 September 2014.
Below we provide an update on the interlinked parts of our business - Mature and New -
which both continue to make good progress, in line with expectations.
Our Mature business (which includes locations opened on or before 31 December 2012) makes up over 65% of our global portfolio. The performance of this business remains strong, with third quarter revenue of £320.8m; an increase of 1.9% at constant currency (down 4.4% at actual exchange rates). This like-for-like constant currency increase reflects the continuing trend of incremental yield improvement. In the quarter, Revenue Per Occupied Workstation (REVPOW) was £1,755; a 2.2% (£39) improvement at constant currency rates (down 4.1% (£76) at actual rates). Average occupancy remained robust at 81.5% for the quarter.
Although currency headwinds continue to impact the translation of our revenues and profits, our margin performance is unaffected. Margins remain strong and our mature business continued to be highly cash generative in the third quarter.
We added 84 locations in the third quarter of 2014 at a net growth capital expenditure2 cost of
£29m, bringing the total number of new additions so far this year to 278. In the nine months ended 30 September 2014, we have incurred a total net growth capital expenditure of £150m associated with these locations.
Our new business portfolio now consists of 716 locations, added on or after 1 January 2013. In total, these locations contributed revenue of £92.7m in the three months ended 30
September 2014 compared with £46.2m in the corresponding period last year. Most importantly, our new additions continue to develop as anticipated on their path to revenue and margin maturity. In particular we have seen continued improvement from the 2013 openings
as these locations, many of which opened late in 2013, progress towards maturity. The 2014
additions, although in early stages of development, are progressing in accordance with our expectations.
Consistent with previous years, the results of our Third Place business are included within the New business performance. Third Place remains an important part of our innovation agenda alongside our investment in new product development.
In line with previous years, our investment in growth is weighted towards the second half of the year and we expect a busy fourth quarter. Our guidance of around 450 new additions in total this year remains unchanged, with an associated full year net capital expenditure of approximately £210m.
As announced at our interim results, we intend to discuss future growth by reference to anticipated net growth capital expenditure rather than by reference to new locations. This approach is consistent with our returns driven growth strategy and we believe will provide a better understanding of the returns generated by our growth programme, and the long-term value creation of our growing business. Adopting this approach is particularly appropriate as we are now seeing a greater diversity in the deal type and structure of investment opportunities that meet our clear returns criteria. We currently have visibility of c£60m of net capital expenditure for 2015 in the pipeline, representing some 200 locations. As this number increases we will provide updates on this position through the year as part of our regular reporting to the market.
Strong cash generationAs highlighted above, the business remains highly cash generative and delivered £18m of net cash during the quarter, despite our continued investment in growth. Accordingly, our net debt position improved in the quarter to £144m as at 30 September 2014.
Prudent financial position
The Group maintains appropriate financial headroom to support its growth programme (with
£490m of available debt financing). Notwithstanding this, as previously indicated, the Board intends to maintain a prudent approach to the Group's capital structure by holding the net debt : Group EBITDA leverage ratio below c 1.5 times. This ratio has improved slightly during the quarter to 0.7 times.
We are pleased with the continued strong performance of our business.
The Mature business has delivered a strong underlying performance and continues to generate good profitability and very strong cash conversion.
We remain confident that our New business will develop in line with the Group's expectations, and will deliver strong returns over the medium term.
We continue to find attractive opportunities to invest in growth that generates returns well in excess of our cost of capital. Our growth plans are regularly reappraised and can be quickly adjusted if market conditions dictate that it would be prudent to do so.
We remain vigilant in our control of overheads, ensuring we continue to benefit from our scale advantages while investing to support the Group's growth strategy.
Looking forward to the remainder of 2014, we remain confident that our business will continue to perform strongly and develop in line with our expectations.
Regus will be hosting a call for analysts and investors at 8.30am GMT this morning. Details are set out below:
Dial in number: +44 (0) 1452 580111
Conference ID: 22676852
There will also be a replay facility available four hours after the call's completion until 6
November 2014, 9.30am:
Dial in number: +44 (0) 1452 550000
Playback ID: 22676852
¹ Consolidated workstations as at 30 September 2014 were 325,048 (30 June 2014: 315,857 workstations)
2 Net growth capital expenditure equals gross capital expenditure less any contributions received towards fit-out costs
Growth Capital Expenditure (£m) | H1 2014 | Q3 2014 | YTD 2014 |
Gross Growth Capital Expenditure | 136.3 | 36.3 | 172.6 |
Net Growth Capital Expenditure | 121.4 | 28.6 | 150.0 |
Mark Dixon, Chief Executive Officer Dominique Yates, Chief Financial Officer Wayne Gerry, Group Investor Relations
Director
Simon Sporborg Nick Cosgrove Marleen Geerlof
This interim management statement contains certain forward looking statements with respect to the operations of Regus. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be
construed as a profit forecast.
About Regus
Regus is the global workplace provider.
Its network of more than 2000 business centres in 104 countries provides convenient, high- quality, fully serviced spaces for people to work, whether for a few minutes or a few years. Companies like Google, Toshiba and GlaxoSmithKline choose Regus so that they can work flexibly and make their businesses more successful.
The key to flexible working is convenience and so Regus is opening wherever its 1.8 million members want support - city centres, suburban districts, shopping centres and retail outlets, railway stations, motorway service stations and even community centres.
Founded in Brussels, Belgium, in 1989, Regus is based in Luxembourg and listed on the
London Stock Exchange. For more information, please visit: www.regus.com
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