31st Oct 2014 10:24
LONDON (Alliance News) - Regus PLC shares jumped higher on Friday after the company said it produced a strong financial performance in the third quarter, with underlying revenue increasing, though held back by sterling strength, and analysts suggesting Regus was achieving growth on a lower-than-expected capital expenditure.
Regus shares were up 6.9% to 197.4 pence in early trade on Friday, making it the best performer in the FTSE 250.
The group said revenue in the third quarter to the end of September was GBP413.6 million, up from GBP386.6 million a year earlier, a 7% rise on a reported basis. On a constant currency basis, Regus said revenue rose 13.5%.
Revenue for the first nine months was up 15.7% on a constant currency basis but only 7.7% on actual rates, up to GBP1.2 billion against GBP1.1 billion last year.
Its mature business, which includes locations opened on or before December 31, 2012 and which makes up 65% of its portfolio, performed well on an underlying basis. Revenue was down 4.4% on actual currency rates to GBP320.8 million, though up 1.9% on a constant currency basis.
The group said that despite the impact of currency translation, its margin performance has not been impacted, with margins remaining strong and its mature business proving cash generative in the quarter.
Revenue per occupied workstation in the quarter in the mature arm was GBP1,755, up 2.2% at constant currency but down 4.1% at actual foreign exchange rates. Average occupancy was 81.5% in the quarter.
In its new business arm, Regus said it was making strong progress against its growth targets, with GBP92.7 million in revenue produced from its new sites in the quarter.
Regus maintained its guidance for 450 new additions to its portfolio for the full year, adding it expects a busy fourth quarter in line with the weighting of its investment plans to the second half. It expects associated full year net capital expenditure on the expansion of its portfolio to be around GBP210 million.
Looking ahead to 2015, the company said it intends to start considering its future growth through the spectrum of anticipated net growth capital expenditure rather than by reference to new locations. It currently has visibility on GBP60 million net capital expenditure for the year in its pipeline, representing around 200 new locations.
It said it has significant financial headroom available to back its plans, with GBP490 million in available debt financing.
The group said it retains its confidence of meeting expectations for the full year, saying its mature and new business arms are performing in line with forecasts.
Investec analyst Andrew Gibb said the interim statement from Regus showed "another period of good growth", with the revenue rise reported being delivered on the back of a lower-than-expected net capital expenditure. That results in the broker estimating around a GBP55 million improvement to its net debt forecasts for Regus for the full year.
Gibb said the balance sheet of the company is in "good shape" and said its growth opportunities are continuing to offer returns in excess of the cost of capital, as underlined by the capital-efficient growth Regus unveiled on Friday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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