3rd Sep 2007 07:01
Regus Group PLC03 September 2007 3 September 2007 REGUS GROUP PLC INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2007 Regus, the world's largest provider of outsourced workplaces, announces todayits interim results for the six months ended 30 June 2007. FINANCIAL HIGHLIGHTS •Revenues up by 36.0% to £411.5m (H1, 2006: £302.6m) - At constant exchange rates the growth was 45.0% - Like for like revenue growth of 5.6% (13.6% at constant exchange rates) •Gross profit (Centre contribution) up 43.8% to £117.5m (H1, 2006: £81.7m) - At constant exchange rates the growth was 53.6% - Like for like contribution growth of 26.0% (35.3% at constant exchange rates) •Operating profit up 70.9% to £56.4m (H1, 2006: £33.0m) - At constant exchange rates the growth was 86.1% - Operating margin up 2.8 points to 13.7% (H1, 2006: 10.9%) • Cash from operations up 50.4% to £85.1m (H1, 2006: £56.6m) • Profit before tax up by 71.8% to £53.6m (H1, 2006: £31.2m) • Basic EPS up 36.4% to 4.5p (H1, 2006: 3.3p) Like for Like is defined as the financial performance from centres owned andoperated at 1 January 2006. They therefore have a six month comparative STRATEGIC AND OPERATIONAL HIGHLIGHTS •Average available workstations increased by 32.6% to 127,858 (H1,2006: 96,402) •Actual workstations increased by 10.3% to 132,448 in the six months to 30 June 2007 •Average occupancy increased by 2.3 points to 82.8% (H1,2006: 80.5%) •Average revenue per available workstation (REVPAW) increased 2.5% to £6,436 (H1,2006 £6,279 ) •A further 61 new centres opened in the six month period to 30 June 2007 (H1,2006: 46). Acquisitions accounted for 17 of these centres Commenting on today's announcement Mark Dixon, Chief Executive of Regus Groupplc, said: "We have delivered another outstanding performance across all regions showinggood progress in all our key performance drivers. This is the sixth consecutivehalf of growth, demonstrating our consistency. Looking forward, we are alive tothe market conditions but all the key drivers and lead indicators remainpositive, which gives us reason to look to the future with confidence. We willcontinue to seek profitable opportunities to grow our business through improvingmargins, opening new centres and further acquisitions." For further information, please contact: Regus Group plc Tel: + 44 (0) 1932 895135 Brunswick Tel: + 44 (0) 20 7404 5959Mark Dixon, Chief Executive Officer Simon Sporborg / Robert GardenerStephen Gleadle, Chief Financial Officer This interim 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 The strong first half results for 2007 reflect a consistent focus on our corestrategic goals, with ongoing improvements in our like for like business (defined as the financial performance from centres owned and operated at 1January 2006 - a six month comparative), coupled with continued new centreopenings and acquisitive growth. Our business model has delivered significantlyimproved profits and strong operating cash flows and there remain continuedopportunities for expansion in our product and service offerings globally. Financial Performance Group revenue increased by 36.0% to £411.5 million and, on a like for likebasis, the growth was 5.6%. Operating profit grew by 70.9% to £56.4 million andbasic earnings per share increased by 1.2p to 4.5p. Average occupancy increasedto 82.8% from 80.5% in June 2006 and REVPAW increased 2.5% from £6,279 to£6,436. Net cash was £46.1 million at 30 June 2007. Sustaining Growth We continue to implement our disciplined expansion strategy through a mix ofacquisitions and organic growth. In the six months to 30 June 2007, ourworkstation capacity has increased by 10.3% to 132,448 workstations. Dividend In March 2007, the Board initiated a progressive annual dividend policy. Thefirst payment under this policy, of 0.6p per share, was paid in June 2007following shareholder approval in May. In line with this policy of single annualdividends, the Board is not proposing the payment of an interim dividend. Corporate Responsibility We continue to develop our commitment to Corporate Responsibility and firmlybelieve in identifying and addressing the concerns of all our stakeholders on anongoing basis. We aim to be a socially responsible organisation and, throughoutthe first half of 2007, have continued to support different projects, be itthrough developing, for example, our environmental policies and processes, ourcharitable support or our ongoing commitments to our employees. Stakeholders Critical to our ongoing achievement against our goals is the continuing goodwilland commitment we receive from our landlords, suppliers, customers andinvestors. Our 4,700 team members are integral to driving our success to dateand special thanks goes out to all of them. Outlook The key drivers of our business remain positive and with targeted investment inpeople, infrastructure and marketing, we remain well placed to sustain futuregrowth and improve our strong financial position. We are confident of continuedprogress into the second half of the year led by our experienced managementteam. John MatthewsChairman3 September 2007. Chief Executive's Review Overview I am delighted that this is the sixth consecutive announcement showing strongand improved financial results. We have delivered strong, disciplined growth andimproved performance in all of our key business metrics including revenues,profit and earnings per share. Our performance continues to demonstrate thebenefits of our longer term approach to the development of the business. Wecontinue to improve financial performance through growing our network ofbusiness centres and developing new products and services to meet the evolvingneeds of our clients. Operational Review On a regional basis, revenues and centre contribution can be analysed asfollows: (£ million) Revenue Contribution Margin Mature Occupancy 2007 2006 2007 2006 2007 2006 2007 2006Americas 162.0 150.2 48.8 40.6 30% 27% 87% 86%EMEA 114.5 93.8 38.6 27.6 34% 29% 86% 77%Asia Pacific 34.9 23.5 12.2 7.1 35% 30% 82% 74%UK 100.1 34.3 17.9 5.6 18% 16% 83% 72%Other 0.8 0.8 411.5 302.6 117.5 81.7 29% 27% 86% 82% OVERALL The Group has continued to pursue its strategy of controlled growth - expandinginto new markets and strengthening our position in existing markets - through acombination of opening new centres and acquiring existing businesses. Actualworkstations grew 10% in the first six months of 2007 and were 33% higher thanthe same period in 2006 - we now have 132,448 workstations worldwide. We haveseen the number of locations we operate in increase by 61, including franchises,joint ventures and managed offices. New locations include Winnipeg in Canada,Lille in France, Turin in Italy, Kolkutta in India and we opened our firstcentres in Bulgaria, Qatar, Jordan and Kenya. The largest Regus centre, theRegus Silver Centre in Shanghai, with over 1,400 workstations, opened forbusiness in January AMERICAS Our business in the Americas comprises Canada, USA and South America,encompassing 454 centres across 13 countries. Our main business in the USAoperates 376 centres. During the half year, we have continued to experiencecontinued improvement in our business performance through a measured approach toboth organic growth and acquisitions. During the first half, we added 26 centreswhich increased the average number of workstations from 50,773 in 2006 to 58,594in 2007. Acquisitions accounted for 12 of these new centres, with the balancecoming from the opening of 14 fully owned centres. At actual exchange rates, theregion delivered revenues of £162.0 million - up 7.9% on 2006. At constantexchange rates, this would have been 19.1%. Mature occupancy increased 1% to87%. Looking ahead, we will continue our aim to maximise yield in our existingcentres and, given the uncertain economic climate, to grow our portfoliocautiously in existing and new key cities on a regionally diverse basis. EMEA Our business in EMEA encompasses 200 centres across 41 countries. During thehalf year we opened 14 new centres, which increased the average number ofworkstations from 26,929 in 2006 to 28,598 in 2007. Acquisitions accounted forthree of these new centres, with the balance of 11 coming from organic growth:seven fully owned centres, two joint ventures, one managed centre and onefranchise operation. We opened centres in new markets including Bulgaria, Qatar,Kenya and Jordan, with a continued focus on low-risk transactions in potentiallyvolatile markets. The region delivered a strong performance, with revenues of£114.5 million - up 22.1% on 2006 - and achieved an average mature occupancy of86% (2006: 77%) Looking ahead, we will continue to seek to improve occupancy and margin in ourexisting centres and expand our network into new markets. ASIA Our business in Asia operates in 81 centres across 12 countries. During the halfyear we opened 14 new centres, which increased the number of workstations from8,194 in 2006 to 13,157 in 2007. Acquisitions accounted for two of these newcentres, with the balance of 12 coming from the opening of 10 fully ownedcentres and two managed centres. With the 14 new locations, we added three newmarkets - Kolkatta, Hyderabad and Brisbane - to the network. Of particular notein the half year was the opening of the Silver Centre in Shanghai, - at 140,000sq ft our largest centre to date - offering a full business centre and 25,000 sqft of state of the art conference centre, alongside our standard full suite ofservices. The region delivered revenues of £34.9 million - up 48.5% on 2006 andachieved an average mature occupancy of 82% (2006: 74%). Looking ahead, we will continue to consolidate and grow our position as thelargest provider of serviced offices across all Asia Pacific markets. To achievethis objective we plan to continue our focused, aggressive growth plan whilecontinuing to improve the efficiency of our current portfolio of centres. Coreto these improvements are continued developments in our internal infrastructureto enhance the efficiency of our enquiry handling and sales process. UK Our business in the UK encompasses 107 centres, an increase of one during thefirst half. The number of workstations increased from 26,921 in June 2006 to27,721 in June 2007, principally reflecting the acquisition of the eightLongford business centres in 2006. The UK was wholly consolidated from 19 April 2006 when we acquired the remaining58% interest in Regus UK. Hence the reported revenue in 2006 of £34.3 million isfor a period of approximately two and a half months compared to the 2007 revenueof £100.1 million which is for a period of six months. We continue to feel that there is further strong potential for improvement anddevelopment of our business in the UK and, looking ahead, we will continue tofocus on improving the margin of the business and add new centres asopportunities arise. Strategy We remain highly focused on our core strategy of measured growth and, in thisrespect, there is no change to our direction. Our excellent first half hasdemonstrated that by maximising the profitability of our existing networkalongside the growing of our global network, through organic and acquisitiveactivity, we are well placed for further progress. We remain committed to ourdrive for continued improvement in our brand and product portfolio, systems,technology and people and it is critical that we maintain this given theincreased demands and expectations of our customers throughout the world. Product and Brand development The evolving nature of the global workplace has resulted in increased demandsfor improvements in our existing product and service offerings and has providedopportunities for us to broaden our portfolio and differentiate ourselves fromour competitors. New products and services will only be launched followingextensive testing and customer trials, which ensures that we are providing new -but long term - solutions to what our customers need. Our new Business Loungeconcept, introduced today, responds directly to the needs of increasingly mobilecommercial users, for high quality, accessible and flexible space which can beused either for business purposes or simply to relax in. Initial roll-out willbe in the UK and then the US shortly thereafter. Systems and technology Ongoing investment in systems and technology - with an aim to achieve a "best inclass", low cost, efficient operating model - is an important part of ourforward-looking direction. During the first half, we have seen the commencementof operational use of our own, internally developed, inventory, reservation andbilling system throughout our worldwide network. At the same time, we havecontinued to invest heavily in our e-commerce tools, which we expect to allow usto deliver substantial benefits to our current and future customers, as well asdriving reductions in operating costs. We recognise the need for a flexible,adaptable technology platform to give us the operational nimbleness required tocontinue to grow. In short, we cannot stand still. People We recognise that core to our brand and the continued provision of a highquality service are our people. We now have over 4,700 team members who work forthe Regus network and, through continuous training and development initiativesfor our customer-facing staff, we are well placed to meet customer expectationsas well as providing personal and professional growth for our people. Therevamping of our training programmes for all field employees, through acombination of formal class-based training and multimedia on-line certification,has already yielded beneficial results to customers, to staff and to Regus.Recent additions to our management team globally have also demonstrated thecontinued need to recruit high quality individuals who are recognised as best inclass functional experts. The future We will continue to seek profitable opportunities to grow our business either inour core mature centres by improving margins or by the opening of new centres.New product developments will continue to provide additional value to ourcustomers and opportunities for enhanced profitability for the Group. Our results for the first half of 2007 reflect the ongoing success of ourstrategy and I remain confident, given the current order book and continuinghigh level of enquiries, that the Group will continue to deliver on this throughthe remainder of the year. Mark DixonChief Executive3 September 2007 Financial Review Introduction Our strong half year trading results reflect robust like for like growth and theadditional contribution from acquisitions and 2006 new centre openings. Theseresults have been achieved while also investing in people, facilities,technology and marketing to secure future growth. Our key operational drivers indicate that we are continuing in the rightdirection. We have seen improvements in the weighted average number ofworkstations which have increased by 32.6% to 127,858. At the same time averageoccupancy has also increased from 80.5% to 82.8%. While average revenue peroccupied workstation (REVPOW) has remained flat (£7,780 in 2006 compared to£7,772 in 2007) due to the impact of exchange rates. At constant exchange ratesit would have been an increase of 6.8%. Overall, despite the exchange effect,our key indicator REVPAW has increased 2.5% from £6,279 to £6,436. These factors have delivered a £23.4 million increase in operating profit,rising from £33.0 million in H1, 2006 to £56.4 million in H1, 2007. Revenue and Gross profit (Centre Contribution)Revenue for the Group rose 36.0% to £411.5 million (H1, 2006: £302.6 million)and gross profit (centre contribution) increased 43.8% to £117.5 million (H1,2006: £81.7 million). This movement can be analysed as follows: (£ million) Revenue Gross profit % of Revenue30 June 2006 302.6 81.7 27.0%Impact of exchange rates (18.9) (5.3)30 June 2006 at constant exchange rates 283.7 76.4 26.9%Growth in mature business 33.4 25.2Centres added in 2006 86.5 18.9Centres added in 2007 8.1 (3.1)Centres closed (0.2) 0.130 June 2007 411.5 117.5 28.6% Sterling strengthened in value between the first half of 2006 and the first halfof 2007 which reduced our revenue by £18.9 million and contribution by £5.3million. This was then more than offset by improvements in the underlyingbusiness. Our mature or like for like business increased its revenues by £33.4 million andcontribution by £25.2 million driven by improvements in occupancy and price. Centres added in 2006 contributed a further £86.5 million of revenue and £18.9million of contribution, heavily driven by the impact of the UK acquisition andits continued growth. The Group purchased the remaining 58% interest in Regus UKand acquired full control of the financial and operating policies of the UKbusiness on 19 April 2006. The overall increase arising from 2006 centres can be analysed: (£ million) Revenue Gross profitImprovement arising from UK 62.7 13.2Improvements elsewhere in Group 23.8 5.7Overall improvement from 2006 centres 86.5 18.9 New centres added in 2007, both organic and by acquisition, contributed afurther £8.1 million of revenue but reduced contribution by £3.1 million due tothe normal start up losses incurred in establishing new centres. Taking all this together contribution margins improved from 27.0% to 28.6%. Administrative expenses In the second half of 2005 and the first half of 2006, investments were madewithin administrative expenses to: - support the growing scale of the business- secure workstation growth in a controlled and efficient manner- drive occupancy primarily in new centres Consequently administrative expenses as a proportion of revenue peaked in thefirst half of 2006 at 16.1%. As growth has subsequently taken place,administrative costs have fallen to 14.9% in the first half of 2007. Operating profit Operating profit was £56.4 million (H1, 2006: £33.0 million), representing amargin of 13.7% (H1, 2006: 10.9%). Share of profit in joint ventures and associates In the six months ended 30 June 2007, the share of joint venture profitsattributable to Regus decreased to £nil (H1, 2006: £0.3 million profit) althoughimproved from the second half of 2006 (£0.4 million loss) reflecting thereduction in losses from new joint ventures started in the second half of 2006. During the period 1 January 2006 to 19 April 2006, the UK business was equityaccounted as an associate. Following the acquisition of the UK business on 19April 2006, the business became fully consolidated as a subsidiary. Financing costs Financing costs can be summarised as follows: (£ million) June 2007 June 2006Interest payable on bank loans and overdrafts (2.3) (2.4)Interest receivable 1.1 0.6Finance lease interest (0.1) (0.3)Amortisation of deferred financing fees (0.3) (0.1)UK acquisition related - non cash item (1.2) (0.6)Total financing costs (2.8) (2.8) The broadly unchanged interest payable reflects the reduction in the Group'saverage debt over the half year, partially offset by the impact of risinginterest rates in the Group's primary markets. The average Libor rate for thefirst half of 2006 was 4.6% compared to 5.5% for 2007. The substantial increase in interest receivable reflects a continued increase inaverage free cash balances of £22.3 million to £69.3 million (£47.0 million inH1, 2006) and the positive impact from rising global interest rates. Themovement in the cash balance has been explained in the cashflow section below. Underlying finance lease costs have fallen in line with the reduction in financeleases. The amortisation of deferred financing fees relates to loan arrangementcosts incurred for the new credit facilities entered into during 2006 to fundthe UK acquisition and reflect a full six months of amortisation in 2007compared to a partial period in 2006. The unwinding of discounted fair valueadjustments on the Regus UK acquisition resulted in a non cash net financingcharge of £1.2 million in the period to 30 June 2007, an increase compared to2006 reflecting the timing of the UK acquisition in 2006. Taxation The continued improvements in the Group results have meant that there are fewerunrecognised losses available to be offset in the income statement againstrising current tax charges. Consequently, the Group has recognised a £9.1million tax charge for the period (representing an accounting tax rate of 17% ofprofit before tax) compared to a credit of £1.1 million in the comparativeperiod. The current tax charge for the period was £8.8 million (2006: £3.7million charge), an increase from 12% to 16% of profit before tax. Deferred taxbecame a £0.3 million charge in the period (2006: £4.8 million credit) whichincludes the adverse impact of the reduction in the UK corporation tax rate onthe deferred tax asset. On a cash tax basis the Group paid £6.1 million in tax.Cash tax represents approximately 11.4% of profit before tax compared to 10.4%in the same period in 2006. Earnings per share Earnings per share for the half year increased 36.4% from 3.3p to 4.5p. Theaverage number of shares in issue during the first half reflected there-purchase of Regus shares in mid-June 2007 for the purposes of employee shareplans and reduced slightly to 984,382,474 (H1, 2006: 984,792,040). Cashflow Strong operating cash flow remains a prime feature and continued objective ofthe Group. Driven by the improvement in operating profit and an improved workingcapital performance, operating cash flow increased by £28.5 million to £85.1million (H1, 2006: £56.6 million). The Group's cash flow statement has beensummarised below: (£ million) June 2007 June 2006Cash generated from operations 85.1 56.6Tax and net interest paid (7.3) (4.9)Maintenance capex (11.1) (9.7)Free cash flow 66.7 42.0New centre openings (21.5) (5.8)UK acquisition -- (61.4)Other acquisitions and JV investments (5.0) (14.6)Loan repayment, share buy back and dividend (31.6) 42.5Change in cash 8.6 2.7 Opening cash 80.9 74.1Change in cash 8.6 2.7Effect of exchange rates on cash held (0.6) (1.0)Closing cash 88.9 75.8 The strong cash performance has enabled the Group to invest in growth.Specifically, during the first six months, 38 new centres were opened at a costof £21.5 million. A further 22 business centres plus 2 joint ventures wereacquired for a net cash consideration of £5.0 million. To highlight, during the half year, the Group has: - repaid to our investors £16.4m through both our share-buyback and dividend activity- reduced our debt by £15.2m- invested £26.5m in growing our business through adding new centres and still ended the half-year with an increased cash position. This can be canbe analysed as follows: (£ million) June 2007 June 2006Cash and cash equivalents 88.9 75.8Debt (41.7) (71.4)Finance leases (1.7) (6.4)Un-amortised financing fees 0.6 1.7Financial assets / (net debt ) 46.1 (0.3) Stephen Gleadle,Chief Financial Officer3 September 2007 Consolidated Income Statement Six months Six months Year ended ended 30 June ended 30 June 31 Dec 2006 2007 2006£m Note (unaudited) (unaudited) (audited) Restated* Revenue 2 411.5 302.6 680.0 Cost of sales (294.0) (220.9) (495.9)--------------------------------------------------------------------------------------------------Gross profit (centre contribution) 117.5 81.7 184.1Administrative expenses (61.1) (48.7) (101.9)--------------------------------------------------------------------------------------------------Operating profit 56.4 33.0 82.2 Share of profit/(loss) of joint ventures -- 0.3 (0.1)Share of profit of associate -- 1.2 1.2--------------------------------------------------------------------------------------------------Profit before financing costs 56.4 34.5 83.3 Finance expense (4.2) (3.5) (8.0)Finance income 1.4 0.7 2.2--------------------------------------------------------------------------------------------------Profit before tax 53.6 31.7 77.5Tax (charge)/credit (9.1) 1.1 4.8--------------------------------------------------------------------------------------------------Profit after tax 44.5 32.8 82.3--------------------------------------------------------------------------------------------------Attributable to:--------------------------------------------------------------------------------------------------Equity shareholders of the parent 44.5 32.8 82.3--------------------------------------------------------------------------------------------------Earnings per ordinary share (EPS):Basic (p) 4.5 3.3 8.4Diluted (p) 4.5 3.3 8.3 * See note 1 for details of the restatement Consolidated Balance Sheet £m As at 30 June As at 30 June As at 31 Dec 2007 2006 2006 (unaudited) (unaudited) (audited) RestatedNon-current assetsGoodwill 214.6 207.9 212.1Other intangible assets 47.8 53.7 51.0Property, plant and equipment 143.8 116.8 127.6Deferred tax assets 36.2 26.4 35.4Other long term receivables 21.6 20.0 20.7Investments in joint ventures 1.1 0.7 0.9------------------------------------------------------------------------------------------------- 465.1 425.5 447.7Current assetsTrade and other receivables 160.2 131.6 148.2Corporation tax receivable 2.9 2.6 2.9Cash and cash equivalents 88.9 75.8 80.9------------------------------------------------------------------------------------------------- 252.0 210.0 232.0Total assets 717.1 635.5 679.7-------------------------------------------------------------------------------------------------Current liabilitiesTrade and other payables (118.2) (110.2) (124.3)Customer deposits (114.2) (97.2) (103.4)Deferred income (82.5) (63.7) (73.5)Corporation tax payable (28.1) (25.1) (25.5)Obligations under finance leases (0.7) (4.4) (2.5)Bank and other loans (5.6) (2.5) (8.2)Provisions for liabilities and charges (3.7) (4.6) (3.1)------------------------------------------------------------------------------------------------- (353.0) (307.7) (340.5)Net current liabilities (101.0) (97.7) (108.5)Total assets less current liabilities 364.1 327.8 339.2 Non-current liabilitiesOther payables (63.7) (55.6) (51.8)Obligations under finance leases (1.0) (2.0) (1.4)Bank and other loans (35.5) (68.9) (45.4)Deferred tax liability (1.3) -- (1.7)Provisions for liabilities and charges (7.8) (10.5) (11.7)Provision for deficit on joint ventures (2.7) (2.4) (2.7)------------------------------------------------------------------------------------------------- (112.0) (139.4) (114.7)Total liabilities (465.0) (447.1) (455.2)-------------------------------------------------------------------------------------------------Total assets less liabilities 252.1 188.4 224.5-------------------------------------------------------------------------------------------------Total equityIssued share capital 49.2 49.2 49.2Treasury shares (10.5) -- --Foreign currency translation reserve (21.8) (2.9) (17.5)Revaluation reserve 10.0 10.0 10.0Other reserves (22.6) (22.6) (22.6)Retained earnings 247.8 154.7 205.4-------------------------------------------------------------------------------------------------Total equity 252.1 188.4 224.5------------------------------------------------------------------------------------------------- Approved by the Board on 3 September 2007Mark Dixon Stephen GleadleChief Executive Officer Chief Financial Officer Consolidated Cash Flow Statement Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 Dec 2006£m (unaudited) (unaudited) (audited) Profit before tax for the period 53.6 31.7 77.5Adjustments for:Net finance costs 2.8 2.8 5.8Net share of profit on joint ventures and associate -- (1.5) (1.1)Depreciation charge 17.8 14.7 31.8(Profit)/loss on disposal of fixed assets -- (0.1) 0.4Amortisation of intangible assets 3.2 2.0 6.0Decrease in provisions (3.3) (2.4) (0.6)Operating cash flows before movements in working capital 74.1 47.2 119.8Increase in trade and other receivables (18.0) (0.3) (31.3)Increase in trade and other payables 26.8 9.0 42.5Other non-cash movements - share based payment 2.2 0.7 1.8Cash generated from operations 85.1 56.6 132.8---------------------------------------------------------------------------------------------------------------------Interest paid on finance leases (0.1) (0.3) (0.5)Interest paid on credit facilities (2.2) (2.0) (5.2)Tax paid (6.1) (3.3) (6.6)Net cash inflows from operating activities 76.7 51.0 120.5---------------------------------------------------------------------------------------------------------------------Investing activitiesPurchase of subsidiary undertakings (net of cash acquired) (5.0) (75.9) (88.5)Purchase of interest in joint venture (0.1) (0.1) --Sale of tangible fixed assets 0.1 -- 0.3Purchase of tangible fixed assets (32.3) (15.5) (46.3)Purchase of intangible assets (0.3) -- (0.4)Interest received 1.1 0.7 2.2Cash outflows from investing activties (36.5) (90.8) (132.7)---------------------------------------------------------------------------------------------------------------------Financing activitiesNet proceeds from issue of loans 1.3 68.7 62.7Repayment of loans (14.4) (22.1) (33.5)Repayment of principal under finance leases (2.1) (2.9) (5.0)Facility arrangement fees -- (1.2) (1.2)Purchase of treasury shares (10.5) -- --Payment of ordinary dividend (5.9) -- --Cash (outflows)/inflows from financing activities (31.6) 42.5 23.0--------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 8.6 2.7 10.8Cash and cash equivalents at beginning of period 80.9 74.1 74.1Effect of exchange rate fluctuations on cash held (0.6) (1.0) (4.0)Cash and cash equivalents at end of period 88.9 75.8 80.9--------------------------------------------------------------------------------------------------------------------- Consolidated Statement of Changes in Equity (Restated) Attribute to equity holders of the parent (note a) -------------------------------------------------------------------------------------------- Share Treasury Share Foreign Revaluation Other Retained Total capital shares premium currency reserve earnings equity account translation reserve£m -----------------------------------------------------------------------------------------------------------------------Balance at 1 January 2006 49.2 -- 153.5 5.0 -- (22.6) (32.3) 152.8 Profit attributable to equity holders -- -- -- -- -- -- 32.8 32.8Currency translationdifferences -- -- -- (7.9) -- -- -- (7.9)Acquisitions -- -- -- -- 10.0 -- -- 10.0-----------------------------------------------------------------------------------------------------------------------Total recognised income and expense for the period (7.9) 10.0 32.8 34.9Share based payments -- -- -- -- -- -- 0.7 0.7Scheme of Arrangement (note b) -- -- (153.5) -- -- -- 153.5 --Balance at 30 June 2006 49.2 -- -- (2.9) 10.0 (22.6) 154.7 188.4 Balance at 1 January 2007 49.2 -- -- (17.5) 10.0 (22.6) 205.4 224.5 Profit attributable to equity holders -- -- -- -- -- -- 44.5 44.5Currency translation differences -- -- -- (4.3) -- -- -- (4.3)Deferred tax effect of share options -- -- -- -- -- -- 1.6 1.6-----------------------------------------------------------------------------------------------------------------------Total recognised income and expense for the period (4.3) -- -- 46.1 41.8Share based payments -- -- -- -- -- -- 2.2 2.2Ordinary dividend paid -- -- -- -- -- -- (5.9) (5.9)Purchase of treasury shares -- (10.5) -- -- -- -- -- (10.5)Balance at 30 June 2007 49.2 (10.5) -- (21.8) 10.0 (22.6) 247.8 252.1 -----------------------------------------------------------------------------------------------------------------------(a) Total reserves attributable to equity holders of the parent: • Share capital and share premium represents the net proceeds (both the nominal value and any premium paid) on the issue of the Company's equity share capital. • Treasury shares represent 7,300,000 ordinary shares of the Group that were acquired for the purposes of the Group's employee share option plans. • The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and joint ventures. • The revaluation reserve arose on the restatement of the assets and liabilities of the UK associate from historic cost to fair value at the time of the acquisition of the outstanding 58% interest. • Other reserves include £29.2 million arising from the Scheme of Arrangement undertaken in 2003, partly offset by £6.5 million relating to merger reserves and £0.1 million to the redemption of preference shares. (b) On 28 June 2006 the Group executed a court order granting the cancellationof the share premium account under a Scheme of Arrangement. The effect of thiswas to increase by the same amount the distributable reserves for the Group. Thecancellation was undertaken in the books of Regus Group plc where the sharepremium was held. Details of the Scheme of Arrangement were contained within thenotice of the Annual General Meeting dated 3 April 2006. Notes to the Interim Accounts Note 1: Basis of preparation and accounting policies Regus Group plc is a public limited company incorporated and domiciled inEngland and Wales under the Companies Act 1985. The Company's ordinary sharesare traded on the London Stock Exchange. The Group financial statements have been prepared and approved by the directorsin accordance with International Financial Reporting Standards as adopted by theEU ("Adopted IFRSs"). The basis of preparation and accounting policies set out in the Report andAccounts for the year ended 31 December 2006 have been applied in thepreparation of these summary financial statements. The comparative figures for the financial year ended 31 December 2006 are notthe Company's statutory accounts for that financial year. Those accounts havebeen reported on by the company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder 237(2) or (3) of the Companies Act 1985. These accounts are available fromthe Company's website - www.regus.com. The comparative information for the period ended 30 June 2006 and the balancesheet at that date has been restated for the following items: (i) Certain amounts included in the interim statements for the period ending 30June 2006 relating to business combinations completed in that period wereincluded in those financial statements on a provisional basis. These provisionalamounts were finalised during the 12 month period following the acquisition.Adjustments to the acquisition accounting have been reflected as if they hadbeen recognised at the acquisition date. As a result the following changes havebeen made: - £0.5 million has been restated in the income statement in share of post-tax profit of associates to reflect adjustments to the allocation of profit between the pre- and post-acquisition period in the UK business through the finalisation of the UK acquisition balance sheet;- £3.6 million has been restated in the revaluation reserve reflecting 42% of the fair value adjustments made on the UK acquisition after the June 2006 balance sheet date;- The carrying value of goodwill has reduced by £0.4 million as a result of the finalisation of the acquisition accounting for the UK business, Managed Office Solutions Ltd and the Gainsborough Business Centres;- £1.4 million has been transferred from tangible to intangible assets to reflect the allocation of the purchase price on software and customer lists;- Other long term assets and deferred tax assets reduced by £2.9 million arising from the finalisation of the acquisition accounting on the UK business;- Current assets increased by £1.4 million, current liabilities reduced by £5.1 million and long term liabilities decreased by £0.9 million as a result of the finalisation of the acquisition accounting for the UK business, Managed Office Solutions Ltd and the Gainsborough Business Centres. (ii) In addition, the Group made certain presentational changes to the financialstatements for the year ended 31 December 2006 and as a consequence has restatedthe balance sheet as at 30 June 2006 to ensure the information is presented on acomparative basis for all periods presented. The following changes have beenmade: - £0.7 million relating to the share of net assets of joint ventures has been reclassified from provision for deficits in joint ventures to assets;- £22.0 million relating to long term assets, principally landlord deposits, amounts due from joint ventures and fair value adjustments, have been reclassified from current assets;- £2.6 million of corporation tax recoverable has been presented separately from corporation tax payable. Note 2: Segmental analysis Americas EMEA Asia UK Other Total 2007 2007 2007 2007 2007 2007 Mature Workstations 50,376 26,283 6,753 -- -- 83,412 Occupancy (%) 86.8 86.2 82.3 -- -- 86.2 Revenue (£m) 147.0 107.9 23.2 -- -- 278.1 Contribution(£m) 48.6 38.4 9.5 -- -- 96.5 2006 Expansions Workstations 6,533 1,301 4,595 26,398 -- 38,827 Occupancy (%) 74.4 79.1 74.2 82.8 -- 80.2 Revenue (£m) 12.9 4.1 11.0 97.0 -- 125.0 Contribution(£m) 0.7 1.1 3.4 18.8 -- 24.0 2007 Expansions Workstations 1,685 880 1,809 1,111 -- 5,485 Occupancy (%) 63.4 52.2 19.5 67.7 -- 48.0 Revenue (£m) 2.1 2.2 0.7 3.1 -- 8.1 Contribution(£m) (0.5) (1.0) (0.7) (0.9) -- (3.1) 2007 Closures Workstations -- 134 -- -- -- 134 Occupancy (%) -- 95.0 -- -- -- 95.0 Revenue (£m) -- 0.3 -- -- -- 0.3 Contribution(£m) -- 0.1 -- -- -- 0.1------------------------------------------------------------------------------- Totals Workstations 58,594 28,598 13,157 27,509 -- 127,858 Occupancy (%) 84.7 84.9 70.8 82.2 -- 82.8 Revenue (£m) 162.0 114.5 34.9 100.1 -- 411.5 Contribution(£m) 48.8 38.6 12.2 17.9 -- 117.5 Operating profit (£m) 27.6 27.3 7.4 6.8 (12.7) 56.4 REVPAW (£) 5,531 8,009 5,295 7,277 -- 6,436------------------------------------------------------------------------------- Americas EMEA Asia UK Other Total 2006 2006 2006 2006 2006 2006 Mature Workstations 49,748 26,578 6,474 -- -- 82,800 Occupancy (%) 86.0 76.9 74.4 -- -- 82.2 Revenue (£m) 148.6 93.1 20.8 -- 0.8 263.3 Contribution(£m) 40.9 27.6 7.3 -- 0.8 76.6 2006 Expansions Workstations 913 149 1,720 10,506 -- 13,288 Occupancy (%) 75.9 50.2 50.9 72.3 -- 69.6 Revenue (£m) 1.4 0.4 2.7 34.3 -- 38.8 Contribution(£m) (0.2) (0.1) (0.2) 5.6 -- 5.1 2006 Closures Workstations 112 -- -- -- -- 112 Occupancy (%) 92.4 -- -- -- -- 92.4 Revenue (£m) 0.2 -- -- -- -- 0.2 Contribution(£m) (0.1) -- -- -- -- (0.1) 2007 Closures Workstations -- 202 -- -- -- 202 Occupancy (%) -- 96.4 -- -- -- 96.4 Revenue (£m) -- 0.3 -- -- -- 0.3 Contribution(£m) -- 0.1 -- -- -- 0.1------------------------------------------------------------------------------- Totals Workstations 50,773 26,929 8,194 10,506 -- 96,402 Occupancy (%) 85.9 76.9 69.5 72.3 -- 80.5 Revenue (£m) 150.2 93.8 23.5 34.3 0.8 302.6 Contribution(£m) 40.6 27.6 7.1 5.6 0.8 81.7 Operating profit (£m) 21.0 14.4 3.6 1.8 (7.8) 33.0 REVPAW (£) 5,915 6,963 5,730 6,526 -- 6,279------------------------------------------------------------------------------- Notes: • The mature business is defined as those centres owned and operated at least 12 months prior to 1 January 2006 and therefore have a full six month comparative. • Expansions include new centres opened and acquired businesses. • A 2007 closure is defined as a centre closed during the period 1 January 2007 - 30 June 2007. A 2006 closure is defined as a centre closed during the period 1 January 2006 - 31 December 2006. • Workstation numbers are calculated as the weighted average for the period. • EMEA represents Europe (excluding UK), Middle East and Africa. Note 3: Reconciliation of operating profit to adjusted EBIT and EBITDA Six months Six months Year ended ended ended 30 June 2007 30 June 2006 31 Dec 2006£m (unaudited) (unaudited) (audited)Operating profit 56.4 33.0 82.2EBIT 56.4 33.0 82.2-------------------------------------------------------------------------------- Depreciation 17.8 14.7 31.8Amortisation ofacquired intangibles 3.2 2.0 6.0--------------------------------------------------------------------------------EBITDA 77.4 49.7 120.0-------------------------------------------------------------------------------- Note 4: Analysis of net financial assets/(debt) At Cash flow Non-cash Exchange At 30 June£m 1 Jan 2007 changes movement 2007--------------------------------------------------------------------------------Cash and cash equivalents 80.9 8.6 - (0.6) 88.9 Debt due after one year (45.4) 10.2 (0.3) - (35.5)Debt due within one year (8.2) 2.9 (0.2) (0.1) (5.6)Finance leases due afterone year (1.4) 0.4 - - (1.0)Finance leases due withinone year (2.5) 1.7 - 0.1 (0.7)-------------------------------------------------------------------------------- (57.5) 15.2 (0.5) - (42.8)-------------------------------------------------------------------------------- Net financial assets 23.4 23.8 (0.5) (0.6) 46.1-------------------------------------------------------------------------------- Cash and cash equivalents balances held by the Group that are not available foruse amounted to £18.7 million at 30 June 2007 (2006: £16.7 million). This cashserves as collateral against certain obligations of the Group. Cash not available for use at 30 June 2007 includes cash held on deposit ofwhich £6.4 million (December 2006: £5.5 million) relates to collateral againstbank loans; £10.3 million (December 2006: £9.6 million) relates to depositswhich are held by banks and landlords as security against lease commitments byRegus operating companies and £2.0 million (December 2006: £2.0 million) held bythe ESOP Trust. These amounts are blocked and not available for use by thebusiness. Non-cash changes comprise the issue of loan notes in relation to businessacquisitions and the amortisation of debt issue costs. Note 5: Acquisition of subsidiaries The following table summarises the acquisitions made during the six month periodto June 2007. In certain cases the consideration is subject to adjustment. Allthe acquisitions above are providers of outsourced workplace solutions. -------------------------------------------------------------------------------- Consideration paid net of debt and cash£m acquired--------------------------------------------------------------------------------Americas 3.5EMEA 1.3Asia Pacific 0.1Adjustments toconsideration on prior year acquisitions 0.1--------------------------------------------------------------------------------Total Group net cash out flow on the purchase of subsidiary undertakings 5.0Deferred consideration - loan notes issued 0.4--------------------------------------------------------------------------------Total consideration, net of cash acquired 5.4 END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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