20th Mar 2006 07:01
Regus Group PLC20 March 2006 PRESS RELEASE 20 March 2006 REGUS GROUP PLC PRELMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 FINANCIAL HIGHLIGHTS •Revenues up by 48% to £463.3m (2004: £312.2m) - Like for like growth of 13% •Centre contribution up 147% to £117.2m (2004: £47.4m) - Centre contribution margins (before non-recurring items) increased to 25% (2004: 17%) •Profit from operations up by £46.1m to £47.3m (2004: £1.2m) - Profit from operations margin increased to 10.2% (2004: 0.4%) • Profit before tax up by £43.6m to £38.7m (2004: loss of £4.9m) • Basic EPS increased by 4.8p to 4.5p (2004: 0.3p loss) • Cash from operations up by £57.1m to £78.1m (2004: £21.0m) OPERATIONAL HIGHLIGHTS •Average available workstations increased by 32% to 78,657 (2004: 59,451) •Average occupancy increased to 78% (2004: 75%) •Average revenue per available workstation (REVPAW) increased 12% from £5,251 to £5,890 Commenting on today's announcement Mark Dixon, Chief Executive of Regus Groupplc, said: "It has been an outstanding year for Regus with a strong financial performancethat stemmed from our continued investment in growing our existing businessesand our ability to identify and exploit new opportunities through both organicgrowth and acquisitions. "Our strategy is one of profitable growth through continuing to open newcentres, increasing our market penetration around the world and deliveringimproved services, products and capabilities to our customers as we benefit fromour size and reach." For further information, please contact: ------------------------- -------------------------Regus Group plc Tel: + 44 (0) 1932 Brunswick Tel: + 44 (0) 20 7404 5959895135Mark Dixon, Chief Executive Officer Simon Sporborg / Paul Scott / Robert GardenerStephen Gleadle, Chief FinancialOfficer A presentation for analysts will be held at City Point, Ropemaker Street,London, EC2 at 09:30GMT today, 20 March 2006. The preliminary announcement contains certain forward looking statements withrespect to the operations of Regus. These statements and forecasts involve riskand uncertainty because they relate to events and depend upon circumstances thatmay or may not occur in the future. There are a number of factors that couldcause actual results or developments to differ materially from those expressedor implied by these forward looking statements and forecasts. Nothing in thisannouncement should be construed as a profit forecast. Chairman's Statement 2005 was an excellent year for Regus. We have delivered solid growth inrevenues, profit from operations and earnings per share. Strategy Our strategy is one of profitable growth. We continue to drive revenue andprofits from our existing portfolio through both price and occupancy gains. Ourprogramme of new centre openings and acquisitions increases our marketpenetration around the world and delivers improved services and capabilities toour customers. In addition we have identified a number of future opportunitiessurrounding outsourcing and mobility. Our team continues to focus on capturingmore revenue from existing customers as we increase awareness of the breadth anddepth of our product offering. To achieve our strategy, we will increase investment in our people and systems.Training and development, together with investment in technology and newsystems, are core in enabling Regus to maximise the opportunities available. Financial performance Revenue increased by 48% to £463.3 million, including like-for-like growth of13%. Profit from operations grew by £46.1 million to £47.3 million. Basicearnings per share increased by 4.8p to 4.5p from a loss of 0.3p in 2004.Shareholder funds increased from £93.7 million to £152.8 million illustratingthe improved strength of the balance sheet at year-end. Average occupancyincreased to 78% from 75% in 2004 and REVPAW increased 12% from £5,251 to£5,890. Since the year-end we are pleased to have announced the signing of a new £100million credit facility. The new facility, which is structured as a five-yearrevolving credit and letter of credit facility has been negotiated onsignificantly more favourable terms, reflecting the strong progress the businesshas made since the Group's purchase of HQ in 2004. Dividend The Board is not recommending the payment of a dividend for the year to 31December 2005. However, the Board continues to keep its dividend policy underregular review. The Board Stephen Gleadle was appointed Chief Financial Officer on 31 October 2005. He hassignificant management experience gained during his time at Synstar plc. Stephenreplaces Rudy Lobo who has taken on the role of Group Chief Operating Officer.Together with the Group's Chief Executive, Mark Dixon, Stephen and Rudy willwork closely together and I am confident that as a team they will steer theGroup through its next phase of growth. Our team members On behalf of the Board and our shareholders, I would like to thank our peoplefor their substantial contributions. All successful businesses depend on thevision, skill, enthusiasm and commitment of their people and at Regus we arefortunate to have those in abundance. Outlook Growth in revenue and profitability across the Group has been substantial thisyear and we are confident that our expansion programme will continue tostrengthen our competitive position. We are committed to developing a businessthat can continue to deliver attractive rates of profit growth and cashgeneration over the long term. This philosophy underpins our future capitalexpenditure and investment plans for the roll out of new centres. I look forwardto reporting further progress in the year ahead. John Matthews , Chairman20 March 2006 Chief Executive Review Overview It has been an outstanding year for Regus. Our excellent financial performancestems from our continued investment in growing our existing businesses and ourability to identify and exploit new opportunities through both organic growthand acquisitions. During the course of the year we have continued to invest inall of our regions and they have all contributed to this strong set of results. We are constantly looking for ways to expand the business responding to theever-increasing trend towards outsourcing and the re-emergence of smallercompanies, whose support needs are different from those of larger corporations.Demographics are also changing as we see a reduction in the number of prime ageworkers. We will constantly evaluate the needs of our customers and ensure wedevelop products to meet their requirements. We continue to implement our disciplined expansion strategy, driving theperformance of our mature business and opening new centres, which will increaseour market penetration as we benefit from our size and reach. Operational Review Americas The first full year of operations following the HQ acquisition in North Americahas been very successful. Average occupancy increased from 80% to 81% withgrowth across all countries. REVPAW grew by an average of 13% year-on-year to£5,529 and we have added a total of 31 new centres in the region. The averagenumber of available workstations has increased by 72% to 47,311 (2004: 27,585),primarily reflecting the full year impact of the HQ acquisition in August 2004. In terms of marketing, our most recent campaign "That works for me" has beentargeted at both TV and Radio and has been launched to help increase customersawareness of the Regus offering. EMEA EMEA made strong progress in the year with average occupancy increasing from 68%in 2004 to 73% in December 2005. REVPAW improved 17% year-on-year to £6,397. Theaverage number of available workstations has decreased by 6% to 25,871 (2004:27,431) driven by the closure of underperforming workstations in 2004. We have strengthened our EMEA management team through recruiting specialistindividuals and restructuring the regional organisation. Asia Asia is our smallest region but continues to grow rapidly with a 33% increase inrevenue, driven by strong pricing and occupancy in Japan, Hong Kong andSingapore. Average occupancy fell slightly from 76% to 75% driven by the impactof new centre openings with low starting occupancy. REVPAW grew by 8%year-on-year to £6,137 and we have added a total of 15 new centres. The averagenumber of available workstations has increased by 23% to 5,475 (2004: 4,435). New and innovative products We are committed to broadening our product offering. During 2005 we launchedNetwork Access which provides immediate, unlimited access to the Regus networkof business lounges around the world. Pioneered by Regus, Network Accesscomprises a unique membership where members can enjoy access to the Regus globalnetwork of business centres. In response to customer demand, we have created specific management servicestailored to meet individual requirements. One such product is Netspace, afacilities management service designed to assist companies in setting up newsales operations or overseas offices. Through this service, Regus source,negotiate, acquire and lease the workspace, oversee the fit out and configurethe workspace to the client's needs in addition to manage IT and telecomsprocurement and installation. Invest in systems and technology The focus of the Regus IT strategy is to provide fast, effective, hassle freetechnology to ensure we as a business operate efficiently and our clientsachieve business success. We take pride in developing home grown systems thatare tailor made to the business requirements. Currently we are implementing newsystems in the areas of inventory, reservations and billing, customerrelationship management and financial reporting. Implementing Operational Excellence Sales and Marketing The Group's marketing and advertising spend is focused geographically and bycustomer segment. Marketing is undertaken in regions and we use a number ofchannels to promote our offer. In November 2005 we signed a significant dealwith Delta Airlines Crown Room members where 152,000 members have been providedwith Network Access cards to utilise Regus facilities across the globe. Thealliance has proved extremely popular with over 10% of members activating theircards and starting to use the Regus network in the first 2 months. We are innegotiations with a number of other airlines and look forward to signing furtherdeals in the coming months. Internet bookings We have focused on search engine optimisation through the use of "key wordsearches" and as a result our internet channel is the primary way that enquiriesare generated. We are developing end-to-end online reservation systems and areconfident that real time availability through the internet will increaseefficiency, reduce transaction costs and most importantly drive increases inbookings and revenue. Brands The Regus network has four brands - the flagship Regus brand, HQ, StratisBusiness Centres and Business Meeting Places. Both location and a diverseproduct offering are the key attributes of all four brands. In 2005 Regus UK wasawarded the coveted SuperBrand award, alongside household names such asMicrosoft and IBM. The independently judged award is given as a tribute tocompanies that demonstrate exceptional brand discipline. Brand standards andsuperior service are vital to our success and during the year we have spentsignificant time and resources on training team members to instil an ethos ofcreating a consistent, high standard of service across all our centres. We continue to expand the brand globally, particularly in emerging markets suchas China and India. We are also focused on retaining the integrity of the brandthrough rolling maintenance of our sites. Customer Loyalty Our success is built on customer loyalty. We make a point of listening to ourclients so we can add value by delivering products that meet their needs. We arefocused on providing value added benefits to customers, such as utilizing ourglobal buying power to secure exclusive deals and discounts for our customersand arranging local and global networking opportunities that facilitate ourclients business growth. The latter is facilitated by Clientnet, an innovativeonline business portal and 24/7 global interface that provides our clients withthe tools to help their businesses grow and network with other clients. Our team members Regus has a reputation for attracting and retaining exceptional people who aresuccess orientated and driven to help others and themselves achieve more. As aconsequence 98% of our customers rate the service we deliver as 'satisfactory'or higher. This has helped deliver today's results and I would like to thank theteam and recognise the contribution they have made. Mark Dixon, Chief Executive Officer 20 March 2006Financial Review Introduction 2005 saw strong profit growth driven by the full year impact of the HQacquisition in 2004 and further strengthening of the underlying business. The three key operational drivers all improved. The weighted average number ofworkstations increased by 32% to 78,657 (which includes the full year impact ofHQ). At the same time average occupancy increased from 75% to 78% and averagerevenue per occupied workstation (REVPOW) increased by 8% from £7,001 to £7,551.This results in an increase in our key indicator REVPAW of 12% from £5,251 to£5,890. Against a relatively fixed cost base these factors have contributed to a £46.1mincrease in profit from operations from £1.2m in 2004 to £47.3m in 2005. Revenue and Centre Contribution (before non-recurring costs) Revenue for the Group rose 48% to £463.3 million (2004: £312.2 million) andcentre contribution (before non recurring costs) increased 117% to £117.1m(2004: £54.0m) This year-on-year movement can be analysed as follows (£m) Revenue Centre Contribution % of Revenue 2004 312.2 54.0 17%Growth in mature(1) business 31.9 31.3Full year impact of centresadded in 2004 (principally HQ) 111.4 30.9Centres added in 2005 10.8 (0.1)Centres closed (3.0) 1.02005 463.3 117.1 25% The mature business, defined as those centres owned and operated at least 12months prior to the start of the financial year, increased revenue by £31.9mdriven by occupancy and price. This revenue increase was almost completelyreflected in contribution gains supported both by a fall in depreciation and thefull year effect of cost savings achieved in the mature business following theintegration of HQ. Centres added in 2004 (principally the HQ acquisition) contributed a further£111.4m of revenue and £30.9m of contribution. This was due to both underlyingimprovements in the performance of these sites and the impact of accounting forthem for a full 12 months. New centres added in 2005, both organic and byacquisition, contributed a further £10.8m of revenue and a small loss ofcontribution of £0.1m. This loss reflects start up costs and low rates ofoccupation when new centres are opened. Taking all this together contribution margin improved from 17% to 25%. Administration expenses (before non recurring items) Administration expenses before non-recurring items have increased by £20.7million to £64.9 million. The full year effect of HQ together with otheracquisitions contributed £11.0m of the increase. A further £3.3m relates to thecost of enhancing our business support functions and £6.4m was spent on growthrelated activities. As a percentage of revenue administrative expenses (before non recurring items)have fallen slightly to 14.0% of revenue (2004: 14.2%). Non-recurring items Results for the year include net non recurring costs of £4.9 million (2004:£8.6m). In 2005 these costs primarily relate to the integration of HQ. In 2004they primarily relate to impairment of fixed assets and provisions on onerousleases. Profit from operations Profit from operations was £47.3 million (2004: £1.2 million), representing amargin of 10.2% (2004: 0.3%). Share of operating loss in joint ventures and associate In the year ended 31 December 2005, the share of joint venture lossesattributable to Regus reduced to £0.2 million (2004: £0.7 million) as theybenefited from better trading conditions. Our UK associate reported £0.5 million profit after tax (2004: £7.1million losson a restated IFRS basis) in the 12 month period ended 31 December 2005. Our 42%shareholding resulted in a £0.2 million profit (2004: £3.0 million loss) beingcredited to our Group profit and loss account. Improved pricing and cost savingscontributed to this performance. Financing costs Financing (or interest) costs can be summarised as follows: (£m) 2005 2004Interest payable (5.6) (2.9)Interest receivable 2.2 1. 3Finance lease interest (0.9) (0.5)Deferred financing fees (4.3) (0.3) Total (8.6) (2.4) Net interest payable has risen following the arrangement of a US$155 millionloan facility in August 2004 to fund the acquisition of HQ. This has beenpartially offset by increasing interest receivable following the Group's strongcash generation, which has driven the average cash balance up from £40m in 2004to £55m in 2005. Underlying finance lease costs have fallen year on year by £0.8m after takingaccount of a one-off adjustment of £1.2m in 2004. This is consistent with thenet movement of finance leases. Deferred financing fees relate to the loan arrangement costs with respect to the$155 million facility mentioned above. Following the accelerated repayment ofthe loan and in anticipation of the repayment of the remainder early in 2006 theGroup has written off the remaining deferred financing fees consistent with theeffective rate method. Taxation As the business performance has strengthened, it has become necessary torecognise in the profit and loss account a greater proportion of the value ofthe tax losses that the Group holds. Accordingly in 2005, £15.0 million has beencredited to the profit and loss account, which has correspondingly increased thedeferred tax asset in the balance sheet. This has been partially offset by an£8.9 million (2004: £0.9 million) tax charge which resulted in a net tax creditof £6.1 million (2004: £2.6 million) to the profit and loss account. Thereforeas a consequence, despite being profitable, the Group has a net tax credit forthe year to 31 December 2005. However, on a cash tax basis the Group paid £2.6mof tax across a small number of countries. This represents approximately 7% ofprofit before tax. As at 31 December 2005, the Group had £270.2 million of tax losses to carryforward against future overseas corporation tax liabilities, of which £172million are in the US. Moving forward the cash tax rate will rise as lossesacross the Group are progressively utilised. The accounting rate will stay lowor negative as tax losses are fully recognised through the profit and loss andthen are expected to rise rapidly towards a normalised rate from fiscal year2007/08. Earnings Basic earnings per share for the year rose to 4.5p (2004: 0.3p loss). This isbased on weighted average number of shares of 984,792,040 (2004: 859,702,000). Cashflow Strong operating cash flow is a prime feature of the Group. Driven by theimprovement in profit from operations, operating cash flow increased by £57.1mto £78.1m (2004: £21.0 m). The Group's cash flow statement has been summarised below. (£m) 2005 2004Operating cash flow 78.1 21.0Tax and net interest paid (6.9) (3.2)Maintenance capex (6.4) (3.0)Free cash flow 64.8 14.8New centre openings (11.1) (2.3)Acquisitions and investments (16.8) (162.9)Financing (47.5) 171.4Other 2.4 (23.7)Change in cash (8.2) (2.7)Opening cash 82.3 85.0Closing cash 74.1 82.3 The strong cash performance has enabled the Group both to invest in growth andrepay debt early. Specifically, during the year 24 new centres were opened at acost of £11.1 million. In addition a further 11 businesses (35 centres) wereacquired for a total cash consideration of £16.8m. In addition £39.4 million ofthe term debt and £8.1m of debt associated with finance leases was repaid. Following the above the Group's net cash position can be analysed as follows (£m) 2005 2004Cash balance 74.1 82.3Term loan (22.5) (55.8)Other loans and overdrafts (7.4) (8.3)Finance leases (8.2) (13.2)Net Funds 36.0 5.0 Of the cash balance, £19.1m in 2005 and £18.1m in 2004 has been used as deposits on leases or for similar purposes. Stephen Gleadle, Chief Financial Officer20 March 2006 Consolidated Income Statement Year ended Year ended 31 Dec 2005 31 Dec 2004 £m £mRevenue 463.3 312.2 --------- --------Costs of sales before non recurring costs (346.2) (258.2)Non recurring cost of sales 0.1 (6.6) --------- -------- Cost of sales (346.1) (264.8)------------------------------- --------- -------- Gross profit (centre contribution) 117.2 47.4 --------- --------Administrative expenses before non-recurringexpenses (64.9) (44.2)Non recurring administration expenses (5.0) (2.0) --------- -------- Administrative expenses (69.9) (46.2)------------------------------- --------- -------- Profit from operations 47.3 1.2 Share of loss of joint ventures (0.2) (0.7)Share of profit/(loss) of associate 0.2 (3.0)------------------------------- --------- -------- Profit/(loss) before financing costs 47.3 (2.5) Financial expense (10.8) (3.7)Financial income 2.2 1.3------------------------------- --------- -------- Profit/(loss) before tax 38.7 (4.9) Tax - UK (1.3) 0.5Overseas 7.4 2.1------------------------------- --------- --------Profit/(loss) after tax 44.8 (2.3)------------------------------- --------- -------- Attributable to:Equity shareholders 44.5 (2.4)Minority interest 0.3 0.1------------------------------- --------- -------- 44.8 (2.3)------------------------------- --------- -------- Earnings/ (loss) per ordinary share (EPS):Basic EPS (p) 4.5 (0.3)Diluted EPS (p) 4.5 (0.3) Consolidated Balance Sheet 31 Dec 2005 31 Dec 2004 £m £mNon-current assetsGoodwill 122.1 96.0Other intangible assets 38.9 37.2Property, plant and equipment 76.6 76.1Deferred tax assets 21.9 6.2----------------- ----------- ----------- 259.5 215.5Current assetsTrade and other receivables 99.6 76.0Cash and cash equivalents 74.1 82.3----------------- ----------- ----------- 173.7 158.3Total assets 433.2 373.8----------------- ----------- -----------Current liabilitiesTrade and other payables (73.8) (64.1)Customer deposits (61.7) (48.8)Deferred income (45.6) (34.0)Corporation tax (12.3) (6.9)Obligations under finance leases (4.8) (7.3)Bank overdrafts and loans (24.5) (8.3)Provisions (7.2) (13.0)----------------- ----------- ----------- (229.9) (182.4)Net current liabilities (56.2) (24.1)Total assets less current liabilities 203.3 191.4 Non-current liabilitiesOther payables (27.9) (21.3)Obligations under finance leases (3.4) (5.9)Loans (5.4) (55.8)Provisions (7.9) (8.9)Provision for deficit on joint ventures (2.1) (1.7)Provision for deficit on associate (3.8) (4.1)----------------- ----------- ----------- (50.5) (97.7)Total liabilities (280.4) (280.1)----------------- ----------- -----------Net assets 152.8 93.7----------------- ----------- ----------- EquityShare capital 49.2 49.3Share premium account 153.5 153.5Other reserves (22.6) (22.7)Retained earnings (27.3) (85.8)----------------- ----------- -----------Equity attributable to equity holders of theparent 152.8 94.3Minority interests - (0.6)----------------- ----------- -----------Total equity 152.8 93.7----------------- ----------- ----------- Analysis of other reserves is included within the Statement of Changes in EquityApproved by the Board on 20 March 2006 2005 2004 £m £m Profit before tax 38.7 (4.9)Adjustments for: 8.6 2.4Net finance costs - 3.7Share of loss on joint ventures and associate 25.6 29.7Depreciation charge 0.3 -Loss on disposal of fixed assets 3.8 1.4Amortisation of intangible assets - 3.2Impairment of fixed assets (5.7) (5.6)Decrease in provisions 71.3 29.9Operating cash flows before movements in working capital (17.0) (1.0)Increase in trade and other receivables 23.8 (7.9)Increase/ (decrease) in trade and other payables 78.1 21.0Cash generated from operations------------------------ -------- --------- Interest paid on finance leases (1.0) (0.5)Interest paid on credit facilities (5.5) (2.8)Tax paid (2.6) (1.6)Net cash flows from operation activities pre Chapter 11 payments 69.0 16.1Chapter 11 payments - (27.8)Net cash in/(out) flows from operating activities 69.0 (11.7)------------------------ -------- --------- Investing activitiesPurchase of subsidiary undertakings (16.7) (162.9)Investment in joint venture (0.1) -Sale of tangible fixed assets 0.2 0.6Purchase of tangible fixed assets (17.5) (5.3)Interest received 2.2 1.7Cash outflows from investing activities (31.9) (165.9)------------------------ -------- --------- Financing activities Net proceeds from issue of loans - 56.5Repayment of loans (39.4) (1.6)Payment of principal under finance leases (8.1) (7.7)Net proceeds from issue of equity shares - 122.2Sale of own shares held by ESOP - 2.0 Cash outflows from financing activities (47.5) 171.4------------------------ -------- ---------Net decrease in cash and cash equivalents (10.4) (6.2)Cash and cash equivalents at beginning of period 82.3 85.0Effect of exchange rate fluctuations on cash held 2.2 3.5 Cash and cash equivalents at end of period 74.1 82.3------------------------ -------- --------- Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Attributable to equity holders of the Parent ----------------- ------- ------ ------- ------- ------ ------ ------ Share capital Share premium Foreign Other non Retained Minority Total equity currency distributable earnings interests reserves £m account translation £m £m £m £m reserve £m £m ----------------- ------- ------ ------- ------- ------ ------ ------Balance at 1January 2004 39.4 44.4 - (22.7) (77.4) (0.6) (16.9)Lossattributableto equityholders - - - - (2.4) - (2.4)Profitattributableto minorityinterest - - - - - 0.1 0.1Currencytranslationdifferences - - (8.3) - - (0.1) (8.4)Sale of sharesheld in ESOP - - - - 2.1 - 2.1Share basedpayments - - - - 0.2 - 0.2Placing andOpen Offer 9.9 112.7 - - - - 122.6Issue costs onPlacing andOpen Offer - (3.6) - - - - (3.6)Balance at 31December 2004 49.3 153.5 (8.3) (22.7) (77.5) (0.6) 93.7----------------- ------- ------ ------- ------- ------ ------ ------ Profitattributableto equityholders - - - - 44.5 - 44.5Profitattributableto minorityinterest - - - - - 0.3 0.3Currencytranslationdifferences - - 13.3 - - (0.1) 13.2Redemption ofpreferenceshares (0.1) - - 0.1 (0.1) - (0.1)Share basedpayments - - - - 0.8 - 0.8Acquired inyear (note 1) - - - - - (0.2) (0.2)Liquidation ofsubsidiary - - - - - 0.6 0.6Balance at 31December 2005 49.2 153.5 5.0 (22.6) (32.3) - 152.8----------------- ------- ------ ------- ------- ------ ------ ------ Note 1: During the year the Group acquired the minority interest of subsidiariesin South Africa and Italy. Other non distributable reserves includes £29.2m arising from the Scheme ofArrangement undertaken in 2003, partly offset by £6.5m relating to mergerreserves and £0.1m to the redemption of preference shares. Notes to the Preliminary Announcement Basis of preparation and accounting policies Regus Group plc is a public limited company incorporated and domiciled in theUnited Kingdom under the Companies Act 1985, whose shares are publicly traded onthe London Stock Exchange. The Group's financial statements have been prepared and approved by thedirectors in accordance with International Financial Reporting Standards asadopted by the EU ("IFRS"). The accounting policies are set out in full in the Annual Report, and have beenapplied consistently to all periods presented in these financial statementsexcept where the policy is indicated as relating to the implementation of IAS39which was adopted from 1 January 2005. The accounting policies have been appliedconsistently by group entities. The financial statements were authorised by the directors on 20 March 2006. Company information The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2005 or 2004 but is derivedfrom the 2005 accounts. Statutory accounts for 2004, which were prepared underUK GAAP, have been delivered to the registrar of companies, and those for 2005,prepared under International Accounting Standards adopted by the EU, will bedelivered in due course. The auditors have reported on those accounts; theirreports were (i) unqualified, (ii) did not include references to any matters towhich the auditors drew attention by way of emphasis without qualifying theirreports and (iii) did not contain statements under section 237(2) or (3) of theCompanies Act 1985. Annual report Copies of the annual report, which will be posted to shareholders at least 20working days before the AGM on 22 May 2006, may be obtained from the registeredoffice at 3000 Hillswood Drive, Chertsey, Surrey, KT16 0RS. The report will alsobe available on the company's website at www.regus.com. Note 1 - Segmental reporting Americas EMEA Asia Other Total 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 Mature Workstations 17,826 17,986 25,299 26,464 4,056 4,114 0 0 47,181 48,564 Occupancy 83% 80% 73% 69% 80% 76% - - 78% 74% Revenue 91.6 78.5 162.5 146.8 26.4 23.3 2.6 2.6 283.1 251.2 Contribution 20.3 7.0 43.2 29.5 9.2 4.9 2.6 2.6 75.3 44.0 2004 Expansions Workstations 28,431 9,468 0 0 351 152 0 0 28,782 9,620 Occupancy 80% 80% - - 72% 55% - - 80% 80% Revenue 165.6 56.0 0.0 0.0 2.5 0.7 0.0 0.0 168.1 56.7 Contribution 40.8 10.8 0.0 0.0 1.0 0.1 0.0 0.0 41.8 10.9 2005 Expansions Workstations 1,054 0 450 0 935 0 0.0 0 2,439 0 Occupancy 70% - 61% - 50% - - - 61% - Revenue 4.4 0.0 2.7 0.0 3.7 0.0 0.0 0.0 10.8 0.0 Contribution 0.4 0.0 0.0 0.0 (0.5) 0.0 0.0 0.0 (0.1) 0.0 Closures Workstations 0 131 122 967 133 169 0 0 255 1,267 Occupancy - 29% 56% 43% 87% 89% - - 72% 48% Revenue 0.0 0.3 0.3 2.8 1.0 1.2 0.0 0.0 1.3 4.3 Contribution 0.0 (0.1) 0.0 (0.9) 0.1 0.1 0.0 0.0 0.1 (0.9) -------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TotalWorkstations 47,311 27,585 25,871 27,431 5,475 4,435 0 0 78,657 59,451Occupancy 81% 80% 73% 68% 75% 76% - - 78% 75%Revenue 261.6 134.8 165.5 149.6 33.6 25.2 2.6 2.6 463.3 312.2Contribution 61.5 17.7 43.2 28.6 9.8 5.1 2.6 2.6 117.1 54.0-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ REVPAW (£) 5,529 4,887 6,397 5,454 6,137 5,681 - - 5,890 5,251 Notes: • Workstation numbers are calculated as a weighted average for the year concerned • The results above exclude non-recurring items which are analysed in note 3. Contribution after non-recurring items was £117.2 million in 2005 (2004: £47.4 million). Note 2 - Reconciliation of Profit from operations (EBIT) to adjusted EBIT andEBITDA Americas EMEA Asia Other Total 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £m Profit fromoperations 32.6 2.9 24.0 10.8 5.1 2.3 (14.4) (14.8) 47.3 1.2Non-recurringitems - - - - - - 4.9 8.6 4.9 8.6-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------Adjusted EBIT 32.6 2.9 24.0 10.8 5.1 2.3 (9.5) (6.2) 52.2 9.8Depreciation/Amortisation 22.2 17.6 5.3 10.6 1.8 2.8 0.1 0.1 29.4 31.1-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------EBITDA 54.8 20.5 29.3 21.4 6.9 5.1 (9.4) (6.1) 81.6 40.9-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Note 3 Non-recurring items Included in the results for the year to 31 December 2005 were non-recurringitems amounting to £4.9m (2004: £8.6m) 2005 2004 £m £mCost of sales: 0.1 (3.4)Onerous leases, related closure and restructuring costsWrite-down of property, plant and equipment - (3.2) ----------------------------------- --------- --------- 0.1 (6.6) ----------------------------------- --------- --------- Administration expenses:Costs relating to the integration of HQ (4.7) (2.5)Severance pay - (0.3)Onerous leases, fixed asset impairment and restructuring - 0.3costsRelease of provisions relating to Chapter 11 and Scheme ofArrangement 1.5 0.5Indemnity claim with landlord (1.8) ------------------------------------ --------- --------- (5.0) (2.0) --------- --------- --------- ---------Non-recurring items (4.9) (8.6)----------------------------------- --------- --------- The above items have been reported as non recurring items and are disclosedseparately as they are relevant to the understanding of the Group's financialperformance. Note 4 Analysis of net financial assets At Cash flow Non-cash Exchange At 1 Jan 2005 £m changes movement 31 Dec 2005 £m £m £m £m --------------------- ------- ------- ------- ------- --------Cash and cash equivalents 82.3 (10.4) - 2.2 74.1 Debt due after one year (55.8) 38.2 16.2 (4.0) (5.4)Debt due within one year (8.3) 1.2 (16.5) (0.9) (24.5)Unamortised portion ofdiscount and financingfees 4.1 - (4.3) 0.2 -Finance leases due afterone year (5.9) 2.2 0.7 (0.4) (3.4)Finance leases due withinone year (7.3) 5.9 (2.9) (0.5) (4.8)--------------------- ------- ------- ------- ------- -------- (73.2) 47.5 (6.8) (5.6) (38.1)--------------------- ------- ------- ------- ------- -------- Net financial assets 9.1 37.1 (6.8) (3.4) 36.0--------------------- ------- ------- ------- ------- -------- Cash and cash equivalents balances held by the Group that are not available foruse amounted to £19.1 million in 2005 (2004: £18.1 million). This is because itserves as collateral against certain obligations of the Group. END-------------------------- (1) The mature business defined as those centres owned and operated at least 12months prior to the start of the financial year This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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