11th Sep 2006 07:01
Regus Group PLC11 September 2006 11 September 2006 REGUS GROUP PLC INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2006 Regus, the world's largest provider of outsourced workplaces, announces todayits interim results for the six months ended 30 June 2006. FINANCIAL HIGHLIGHTS •Revenues up by 40.1% to £302.6m (H1, 2005: £216.0m) - Like for like revenue growth of 14.5%•Gross profit (Centre contribution) up 67.8% to £81.7m (H1, 2005: £48.7m) - Like for like contribution growth of 49.2%•Profit from operations up 83.3% to £33.0m (H1, 2005: £18.0m) - Operating margin up 31.3% to 10.9% (H1, 2005: 8.3%)•Cash from operations up 79.7% to £56.6m (H1, 2005: £31.5m)•Profit before tax up by 124.5% to £31.2m (H1, 2005: £13.9m)•Basic EPS up 153.8% to 3.3p (H1, 2005: 1.3p) Like for Like is defined as the financial performance from centres owned andoperated at 1 January 2005. They therefore have a six month comparative STRATEGIC AND OPERATIONAL HIGHLIGHTS •Average available workstations increased by 24.6% to 96,402 (H1,2005: 77,358)•Actual workstations increased by 38% to 114,269 in the 6 months to 30 June 2006•Average occupancy increased by 5.6% to 80.5% (H1,2005: 76.2%)•Average revenue per available workstation (REVPAW) increased 12.4% to £6,279 (H1,2005 £5,584 )•On 19 April 2006, the remaining 58% interest in the UK business ("Regus UK") was acquired for a gross consideration (including fees) of £89.4m(£62.8m net of cash acquired of £26.6m).•In addition to the UK acquisition, a further 46 new centres opened in the six month period to 30 June 2006. Acquisitions accounted for 32 of these centres. Commenting on today's announcement Mark Dixon, Chief Executive of Regus Groupplc, said: "It has been an excellent first half of the year for Regus and we have delivereda strong performance across all regions. Our strategy is to maximise theperformance of our existing centres while increasing the scale of the businessin a managed and controlled way. I am pleased to report that we have achieved onboth counts having grown contribution on a like for like basis by 49% while atthe same time increasing our workstation base by 38% to 114,269 at 30 June 2006.As we grow our international position we are also guarding the business againstcyclicality through the reduction of our exposure to the impact of unfilledcentres, diversifying our customer base, increasing our forward visibility andworking from a highly profitable cash generative base." For further information, please contact: Regus Group plc Tel: + 44 (0) 1932 895135 Brunswick Tel: + 44 (0) 20 7404 5959 Mark Dixon, Chief Executive Officer Simon Sporborg / Paul Scott Stephen Gleadle, Chief Financial Officer +-----------------------------------------------------------------------------+|This interim announcement 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. |+-----------------------------------------------------------------------------+ Chairman's statement I am pleased to announce record first half results reflecting a continuedimprovement in our "like for like" business and the positive impact of openingnew centres, integrating acquisitions and product innovation. This has beenachieved while the Group continues to invest in people, facilities andtechnology as well as the necessary marketing expenditures to secure futuregrowth. Financial performance Group revenue increased by 40.1% to £302.6 million and on a "like for like"basis (excluding new centres) the growth was 14.5%. Profit from operations grewby 83.3% to £33.0 million and basic earnings per share increased by 2.0p to3.3p. Average occupancy increased to 80.5% from 76.2% in June 2005 and REVPAWincreased 12.4% from £5,584 to £6,279. Net debt was £0.3 million at 30 June2006. In March 2006 we signed a new £150 million credit facility inclusive of£50 million term debt. The latter was used to finance the acquisition of the UKbusiness. The new facility, which is structured as a five-year revolving creditand letter of credit facility has been negotiated on significantly morefavourable terms, reflecting the strong progress the business has made since thepurchase of HQ Global Holdings Inc. ("HQ") in 2004. Sustaining growth We continue to implement our disciplined expansion strategy. In the 6 months to30 June 2006 our workstation capacity has increased by 38% to 114,269workstations. Dividend The Board is not recommending the payment of an interim dividend. Our stakeholders We rely on the goodwill and commitment of our landlords, suppliers, customersand investors as we continue to maintain our record of double digit salesgrowth. Our team members have played a key role in our success to date and aspecial thanks goes out to our 3,900 team members. Outlook The Group will continue to pursue its objective of achieving, on average, doubledigit sales improvements through a combination of like for like salesimprovements, new centre openings and acquisitions. The acquisition and newcentre opening pipeline remains strong and the Group will continue to seek outnew opportunities for product and geographic diversity. Our contracted level ofdemand and current level of enquires supports our view that we will continue todeliver controlled growth over the remainder of 2006. Our proven strategy,supported by a central leadership team and strong regional organisations willensure that we continue to deliver growth and improvement in the coming year. John MatthewsChairman11 September 2006. Chief Executive's Review As well as delivering record levels of growth in sales and profits, we have, atthe same time, been building the foundations for continued growth and animproved competitive position in the future. Our strategy Our results to date demonstrate that our strategy is working and providing theright impetus for present and future success. We will continue to keep ourstrategy simple and focused on the following six key activities: •Growing through acquisitions and new centre openings •Developing new and innovative products •Investing in systems and technology •Implementing operational excellence •Expanding the brand and diversification •Developing our team members Growing through acquisitions and new centre openings Our performance over the last two years demonstrates that we can deliver doubledigit growth in revenues. We look for opportunities to grow through bolt onacquisitions and new centre openings and currently aim to invest circa £80 -£100 million per year on this type of growth. We are constantly looking foropportunities to develop our business, both within existing countries andelsewhere, as well as looking to expand the range of products that we sell andthe customer segments that we serve. Since acquisition, the UK business has contributed revenues of £34.3 million andprofit from operations of £1.8 million. At 30 June 2006, the UK operated 98centres of which 3 related to a Joint Venture. We have made significantorganisational changes to enhance performance - helped by the fact that the UKoperations were already integrated into the Regus systems. This has allowed usto focus on operational improvements, which have already started to positivelyimpact revenues and bottom line profit. As well as reacquiring our 58% share of the UK business, in June 2006 weacquired Gainsborough business centres, which contributed a further 1,986workstations to capacity. Also on 30 June 2006, we purchased Managed OfficeSolutions who specialise in short term managed sublets for multi - national andcorporate clients. Excluding the UK acquisitions, in the six months to 30 June 2006 we completedseven further bolt on acquisitions for a gross consideration of £8.9 million.Five of these acquisitions were in the Americas, one in EMEA and one in AsiaPacific. We look for our acquisitions to deliver product and geographicdiversity. We have expanded into new markets, namely, Guangzhou, Dalian andShenzhen in China, Gurgaon and Bangalore in India and Yokohama and Nagoya inJapan. As a result of our growth, we have established leadership positions inHong Kong, China, India and Australia. In July 2006 we acquired Laptop Lane, which comprises fourteen business centres/retail outlets in eight major USA airport locations. We plan to rebrand thisbusiness Regus Express, and to use it as a platform for further growth ofairport locations in the USA and other countries. In addition to the above acquisitions, we opened 14 new centres, with the splitin favour of Asia where we have opened 50% of these new centres. We stronglybelieve that each of the new businesses we acquire and new centres opened hasreal potential and offers substantial opportunity for future organic growth. Developing new and innovative products We aim to meet customer demands by providing the products and services theyneed, when and where they need them, at prices that help them achieve theirobjectives. Regus invests significant resources, both internal and external, inanticipating customers' changing needs and also in creating new and better waysof meeting those needs. In response to customer demand, we have created specific management servicestailored to meet individual requirements. One such product is Netspace, a fullyoutsourced solution designed to assist companies in setting up new salesoperations or overseas offices. Through this service, Regus sources, negotiates,acquires and leases the workspace to the client's needs in addition to managingIT, telecoms procurement and installation. Investing in systems and technology Continuous improvement is a way of life at Regus, as is working together andsharing ideas for growth and success. We understand there is always a better wayto work and we have made substantial investment in business improvementsdesigned to lay the long term foundations for the business. Over the last sixmonths we have made significant investments in technology that will enable us towork faster and more efficiently. As an example, we are currently rolling out abespoke inventory, reservation and billing system, implementing a new HR systemand developing a business data warehouse system which will hold financial andoperating data across the Group. Implementing operational excellence With operations in 60 countries, Regus has access to a wide range of experience,expertise and benefits of scale. The Group seeks to leverage this experience bysharing the benefits across the business. In recent months we have continued tofocus on establishing the optimal organisational and business structure in eachregion, supported by Group management giving leadership in areas such asstrategy, property, acquisitions, finance, human resource management, IT andlegal. This is a structure we have been working towards as a platform for thefuture, enabling us to exploit opportunities and synergies within each region aswell as between regions, whilst still allowing management to run theirbusinesses locally and to recognise market opportunities within their owngeographies. The Group is already establishing synergies in purchasing andglobal sourcing through consolidation of its global suppliers and collaboratingwith key partners. As an example we are partnering with two major IT suppliersto procure our global IT/Technology and infrastructure requirements around theworld. In addition through our School of Excellence we are sharing expertise andexperience in training, development, sales and marketing. Expanding the brand and diversification Through our brands, we provide customers with a choice of locations, featuresand pricing points. Broadening the diversity of the business has enabled theGroup to achieve a resilient business model, which can handle a variety ofeconomic cycles. We look to broaden the diversity of our business by deployingthe following measures: •Increasing our geographical coverage both in existing and new countries. •Widening our lines of business by entry into new sectors and services •Broadening the customer base •Expanding our range of products and services by continuing to invest in innovative products and product enhancements, which support our customers' evolving needs. By way of example our Network Access card has been very successful with over25,000 members joining the program since its launch in November 2005. AmericanAirlines and Citibank recently joined the programme and we expect theirmembership requirements to be in excess of 300,000 members. Developing our team members We have 3,900 team members who work for the Regus network. Our objective issimple - to improve the quality of our people in order to improve the service toour customers and grow our business. We invest in our people to ensure that wecan attract and retain talented and committed individuals who will underpin ourfuture. Efforts include the establishment of a Global School of Excellence inDallas, which will train some 400 team members per year. In addition, on a localcountry basis we operate a comprehensive induction and continuous developmentprogrammes for all our centre staff. Looking ahead Looking ahead we are confident that our growth strategy will continue tostrengthen the Group as we continue to deliver attractive rates of profit growthand strong cash generation over the long term. We have had an excellent firsthalf and I look forward to reporting further progress at the year-end. Mark DixonChief Executive11 September 2006 Financial Review Introduction The trading results for the half year reflect strong like for like growth andthe additional contribution from acquisitions and 2005 new centre openings.These results have been achieved whilst also investing in people, facilities,technology and marketing to secure future growth. The three key operational drivers have all improved. The weighted average numberof workstations increased by 24.6% to 96,402. At the same time average occupancyincreased from 76.2% to 80.5% and average revenue per occupied workstation(REVPOW) increased by 6.4% from £7,328 to £7,799. This results in our keyindicator REVPAW, increasing 12.4% from £5,584 to £6,279. Against a relatively fixed cost base these factors have delivered a £15.0million increase in profit from operations rising from £18.0 million in H1, 2005to £33.0 million in H1, 2006. Revenue and Gross profit (Centre Contribution) Revenue for the Group rose 40.1% to £302.6 million (H1, 2005: £216.0 million)and gross profit (centre contribution) increased 67.8% to £81.7million (H1,2005: £48.7 million). This movement can be analysed as follows +-----------------------------------+---------+-----------+--------------+|(£ million) | Revenue| Gross| % of Revenue|| | | profit| |+-----------------------------------+---------+-----------+--------------+|30 June 2005 | 216.0| 48.7| 22.5%|+-----------------------------------+---------+-----------+--------------+|Growth in mature business | 30.9| 23.9| |+-----------------------------------+---------+-----------+--------------+|Centres added in 2005 | 19.0| 4.4| |+-----------------------------------+---------+-----------+--------------+|Centres added in 2006 | 38.8| 5.1| |+-----------------------------------+---------+-----------+--------------+|Centres closed | (2.1)| (0.4)| |+-----------------------------------+---------+-----------+--------------+|30 June 2006 | 302.6| 81.7| 27.0%|+-----------------------------------+---------+-----------+--------------+ The mature business increased revenue by £30.9 million principally driventhrough improvements in occupancy, which increased from 76.8% to 83.2%. Thisresulted in a £23.9m increase in gross profit. Centres added in 2005 contributed a further £19.0 million of revenue and £4.4million of contribution. This was due to both underlying improvements in theperformance of these sites and the impact of accounting for them for a full sixmonths. New centres added in 2006, both organic and by acquisition, contributed afurther £38.8 million of revenue and contribution of £5.1 million. Following the purchase of the 58% interest in Regus UK, the Group acquired fullcontrol of the financial and operating policies of the UK business. As a result,in the period 19 April 2006 to 30 June 2006 the UK business was fullyconsolidated as a subsidiary and contributed £34.3 million of revenue and £5.6million of contribution. Prior to this date, the results of the UK operationwere equity accounted as an associate. Taking all this together contribution margins improved from 22.5% to 27.0%. Administrative expenses (before non recurring items) Administration expenses before non-recurring items have risen from 12.8% ofrevenue in the first half of 2005 to 16.1% of revenue in the first half of 2006. This increase arises principally from the impact of growth related investmentsmade in the second half of 2005 during which period administrative expensesbefore non recurring items were 15.0%. The year on year increase arises from three particular areas: - establishment costs to support the growing scale of the business (eg country managers, improved systems and processes)- costs necessarily incurred to secure workstation growth in a controlled and efficient manner (eg teams to identify, secure and integrate new business)- marketing costs to drive occupancy primarily in new centres As these costs are incurred ahead of the full revenue impact of growth theyconsequently rise as a proportion of revenue. Non-recurring items In the six months to June 2005 the Group incurred £3.0 million of integrationcosts associated with the HQ acquisition in the USA. No similar costs have beenincurred in the 6 months to 30 June 2006. Profit from operations Profit from operations was £33.0 million (H1, 2005: £18.0 million), representinga margin of 10.9% (H1, 2005: 8.3%). Share of profit in joint ventures and UK associate In the six months ended 30 June 2006, the share of joint venture profitsattributable to Regus increased to £0.3 million (H1, 2005: £0.1 million loss) asthey benefited from better trading conditions. During the period 1 January 2006to 19 April 2006, the UK business was equity accounted. Our 42% shareholdingresulted in a £0.7 million profit (H1, 2005: £0.9 million loss) being creditedto our Group profit and loss account. Financing costs Financing costs can be summarised as follows: +------------------------------------------+-------------+------------+|(£ million) | June 2006| June 2005|+------------------------------------------+-------------+------------+|Interest payable on bank loans and | (2.5)| (3.3)||overdrafts | | |+------------------------------------------+-------------+------------+|Interest receivable | 0.7| 1.0|+------------------------------------------+-------------+------------+|Finance lease interest | (0.3)| (0.5)|+------------------------------------------+-------------+------------+|Amortisation of deferred financing fees | (0.1)| (0.3)|+------------------------------------------+-------------+------------+|UK acquisition related - non cash item | (0.6)| -|+------------------------------------------+-------------+------------+|Total financing costs | (2.8)| (3.1)|+------------------------------------------+-------------+------------+ The reduction in interest payable reflects the repayment of the US$155 millionloan facility secured in August 2004 to fund the acquisition of HQ and thesubsequent arrangement of credit facilities on more favourable terms. Lowerinterest receivable reflects a decrease in average free cash balances of £10.0million to £47.0 million (£57.0 million in H1, 2005). The movement in the cashbalance 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 the first halfof this year. The unwinding of discounted fair value adjustments on the Regus UKacquisition resulted in a non cash net financing charge of £0.6 million in theperiod to 30 June 2006. Taxation As the business performance has strengthened, it is necessary to recognise inthe Income Statement a greater proportion of the value of the tax losses thatthe Group holds. Accordingly in 2006, £4.8 million (H1 2005: £0.9 million) hasbeen credited to the profit and loss account, which has correspondinglyincreased the deferred tax asset in the balance sheet. This has been partiallyoffset by a £3.7 million (H1, 2005: £1.8 million) tax charge which resulted in anet tax credit of £1.1 million (H1, 2005: £0.9 million tax charge) to the profitand loss account. Thus, despite being profitable, the Group has a net tax creditfor the six months to 30 June 2006. On a cash tax basis the Group paid £3.3million in tax. Cash tax represents approximately 10.6% of profit before tax. Earnings per share Earnings per share for the half year increased 153.8% from 1.3p to 3.3p. Theaverage number of shares in issue during the first half was unchanged at984,792,040 (H1, 2005: 984,792,040). Cashflow Strong operating cash flow remains a prime feature of the Group. Driven by theimprovement in profit from operations and an improved working capitalperformance, operating cash flow increased by £25.1 million to £56.6 million(H1, 2005: £31.5 million). The Group's cash flow statement has been summarisedbelow. +------------------------------------------+------------+-------------+|(£ million) |June 2006 |June 2005 |+------------------------------------------+------------+-------------+|Cash generated from operations | 56.6 |31.5 |+------------------------------------------+------------+-------------+|Tax and net interest paid | (4.9) |(3.9) |+------------------------------------------+------------+-------------+|Maintenance capex |(9.7) |(3.0) |+------------------------------------------+------------+-------------+|Free cash flow | 42.0 |24.6 |+------------------------------------------+------------+-------------+|New centre openings | (5.8) |(2.5) |+------------------------------------------+------------+-------------+|UK acquisition |(61.4) |- |+------------------------------------------+------------+-------------+|Other acquisitions and JV investments |(14.6) | (3.0) |+------------------------------------------+------------+-------------+|Financing | 42.5 |(18.5) |+------------------------------------------+------------+-------------+|Change in cash | 2.7 | 0.6 |+------------------------------------------+------------+-------------+| | | |+------------------------------------------+------------+-------------+|Opening cash | 74.1 | 82.3 |+------------------------------------------+------------+-------------+|Change in cash | 2.7 | 0.6 |+------------------------------------------+------------+-------------+|Effect of exchange rates on cash held | (1.0) | (1.4) |+------------------------------------------+------------+-------------+|Closing cash | 75.8 | 81.5 |+------------------------------------------+------------+-------------+ The strong cash performance has enabled the Group to invest in growth.Specifically, during the first six months, 14 new centres were opened at a costof £5.8 million. The UK was acquired for a net consideration before fees of£61.4m (with fees £62.8m) and a further 9 businesses plus a Joint Venture wereacquired for a net cash consideration of £14.6 million. This growth has been in part financed by bank borrowings. Following this theGroup's net cash position can be analysed as follows +------------------------------------------+------------+-------------+|(£ million) |June 2006 |June 2005 |+------------------------------------------+------------+-------------+|Cash and cash equivalents | 75.8 | 81.5 |+------------------------------------------+------------+-------------+|Debt |(71.4) |(52.9) |+------------------------------------------+------------+-------------+|Finance leases | (6.4) | (9.6) |+------------------------------------------+------------+-------------+|Un-amortised financing fees | 1.7 | 3.7 |+------------------------------------------+------------+-------------+|(Net debt )/financial assets | (0.3) | 22.7 |+------------------------------------------+------------+-------------+ Stephen Gleadle,Chief Financial Officer11 September 2006 Consolidated Income Statement Six months Six months Year ended 30 ended 30 ended June 2006 June 2005 31 Dec (unaudited) (unaudited) 2005 audited Note £m £m £mRevenue 2 302.6 216.0 463.3 Costs of sales before non recurring costs (220.9) (167.3) (346.2) Non recurring cost of sales - - 0.1 Cost of sales (220.9) (167.3) (346.1)________________________________________________________________________________ Gross profit (centre contribution) 81.7 48.7 117.2 Administrative expenses before non-recurring expenses (48.7) (27.7) (64.9) Non recurring administrative expenses - (3.0) (5.0) Administrative expenses (48.7) (30.7) (69.9)________________________________________________________________________________ Profit from operations 33.0 18.0 47.3 Share of profit/(loss) of joint ventures 0.3 (0.1) (0.2) Share of profit/(loss) of associate 0.7 (0.9) 0.2________________________________________________________________________________ Profit before financing costs 34.0 17.0 47.3 Financial expense (3.5) (4.1) (10.8)Financial income 0.7 1.0 2.2________________________________________________________________________________ Profit before tax 31.2 13.9 38.7 Tax credit/(charge) 1.1 (0.9) 6.1________________________________________________________________________________ Profit after tax 32.3 13.0 44.8________________________________________________________________________________ Attributable to: Equity shareholders 32.3 13.0 44.5Minority interest - - 0.3________________________________________________________________________________ 32.3 13.0 44.8________________________________________________________________________________ Earnings per ordinary share (EPS): Basic and diluted EPS (p) 3.3 1.3 4.5 Consolidated Balance Sheet As at As at As at 30 June 2006 30 June 31 Dec 2005 (unaudited) 2005 (audited) (unaudited) Restated £m £m £mNon-current assets Goodwill 208.3 105.9 122.1Other intangible assets 52.3 36.5 38.9Property, plant and equipment 118.2 69.8 76.6Deferred tax assets 27.3 7.2 21.9________________________________________________________________________________ 406.1 219.4 259.5Current assets Trade and other receivables 152.2 87.4 99.6Cash and cash equivalents 75.8 81.5 74.1________________________________________________________________________________ 228.0 168.9 173.7Total assets 634.1 388.3 433.2________________________________________________________________________________ Current liabilities Trade and other payables (109.5) (62.8) (73.8)Customer deposits (97.2) (52.8) (61.7)Deferred income (69.5) (39.1) (45.6)Corporation tax (22.5) (7.9) (12.3)Obligations under finance leases (4.4) (4.7) (4.8)Bank overdrafts and loans (2.5) (7.6) (24.5)Provisions for liabilities and charges (4.6) (12.0) (7.2)________________________________________________________________________________ (310.2) (186.9) (229.9)Net current liabilities (82.2) (18.0) (56.2)Total assets less current liabilities 323.9 201.4 203.3 Non-current liabilities Other payables (54.7) (25.9) (27.9)Obligations under finance leases (2.0) (4.9) (3.4)Loans (68.9) (41.7) (5.4)Provisions (10.5) (7.9) (7.9)Provision for deficit on joint ventures (3.5) (1.5) (2.1)Provision for deficit on associate - (5.3) (3.8) ________________________________________________________________________________ (139.6) (87.2) (50.5)Total liabilities (449.8) (274.1) (280.4)________________________________________________________________________________ Net assets 184.3 114.2 152.8________________________________________________________________________________ Equity Share capital 49.2 49.3 49.2Share premium account - 153.5 153.5Revaluation reserve 6.4 - -Other reserves (22.6) (22.7) (22.6)Retained earnings 151.3 (65.2) (27.3)________________________________________________________________________________ Equity attributable to equity holders of the parent 184.3 114.9 152.8 Minority interests - (0.7) -________________________________________________________________________________ Total equity 184.3 114.2 152.8________________________________________________________________________________ Analysis of other reserves is included within the Statement of Changes in Equity Consolidated Cash Flow Statement Six months Six months Year ended ended 30 ended 30 June 2006 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £m £m £m Profit before tax 31.2 13.9 38.7Adjustments for: Net finance costs 2.8 3.1 8.6Share of (profit)/ loss on joint ventures and associate (1.0) 1.0 - Depreciation charge 14.7 15.1 25.6Loss on disposal of fixed assets (0.1) 0.3 0.3 Amortisation of intangible assets 2.0 1.3 3.8Decrease in provisions (2.4) (2.0) (5.7) Operating cash flows before movements in working capital 47.2 32.7 71.3 Increase in trade and other receivables (0.3) (5.5) (17.0) Increase in trade and other payables 9.7 4.3 23.8 Cash generated from operations 56.6 31.5 78.1________________________________________________________________________________ Interest paid on finance leases (0.3) (0.5) (1.0)Interest paid on credit facilities (2.0) (3.5) (5.5)Tax paid (3.3) (0.8) (2.6)Net cash inflows from operating activities 51.0 26.7 69.0 ________________________________________________________________________________ Investing activities Purchase of subsidiary undertakings (net of cash acquired) (75.9) (2.9) (16.7) Investment in joint ventures (0.1) (0.1) (0.1)Sale of tangible fixed assets - 0.6 0.2Purchase of tangible fixed assets (15.5) (6.1) (17.5)Interest received 0.7 0.9 2.2Cash outflows from investing activities (90.8) (7.6) (31.9) Financing activities Net proceeds from issue of loans 67.5 - -Repayment of loans (22.1) (14.3) (39.4)Payment of principal under finance leases (2.9) (4.2) (8.1) Cash inflows/(outflows) from financing activities 42.5 (18.5) (47.5) ________________________________________________________________________________ Net increase/(decrease) in cash and cash equivalents 2.7 0.6 (10.4) Cash and cash equivalents at beginning of period 74.1 82.3 82.3 Effect of exchange rate fluctuations on cash held (1.0) (1.4) 2.2 Cash and cash equivalents at end of period 75.8 81.5 74.1 ________________________________________________________________________________ Consolidated Statement of Changes in Equity Attribute to equity holders of the parent______________________________________________________________________________________________ Share Share Foreign Revaluation Other Retained Minority Total capital premium currency reserve non earnings interests equity account translation distributable reserve reserves (note 1) (note 2) (note 3)______________________________________________________________________________________________ £m £m £m £m £m £m £m £m______________________________________________________________________________________________Balance at 1 49.3 153.5 (8.3) - (22.7) (77.5) (0.6) 93.7January 2005 Profitattributableto equity holders - - - - - 13.0 - 13.0 Currency translationdifferences - - 7.4 - - - (0.1) 7.3 Share based payments - - - - - 0.2 - 0.2 Balance at 30 June 2005 49.3 153.5 (0.9) - (22.7) (64.3) (0.7) 114.2 -Balance at 1 January 2006 49.2 153.5 5.0 - (22.6) (32.3) - 152.8 Profitattributes toequity holders - - - - - 32.3 - 32.3 Profit attributableto minority interest - - - - - - - - Currency translationdifferences - - (7.9) - - - - (7.9) Share based payments - - - - - 0.7 - 0.7 Acquired in the year - - - 6.4 - - - 6.4 Scheme of Arrangement - (153.5) - - - 153.5 - - Balance at 30 June 2006 49.2 - (2.9) 6.4 (22.6) 154.2 - 184.3_______________________________________________________________________________________________ note 1: Resolution 11 contained within the Notice of Annual General Meetingdated 3 April 2006 proposed a Scheme of Arrangement where the value of the sharepremium account at that date is cancelled. The effect of this would be toincrease by the same amount the distributable reserves for the Group. Thisresolution was passed at the Annual General Meeting held on 22 May 2006 and thecourt order granting the cancellation was executed on 28 June 2006. Thecancellation was undertaken in the books of Regus Group plc where the sharepremium is held. note 2: The revaluation reserve arises on the restatement of the Group's 42%investment in the UK associate from historic cost to fair value following theacquisition of the outstanding 58% interest (based upon provisional fairvalues). note 3: Other non distributable reserves at 1 January 2006 includes £29.2marising from the Scheme of Arrangement undertaken in 2003, partly offset by£6.5m relating to merger reserves and £0.1m to the redemption of preferenceshares. Notes to the Interim Accounts Note 1: 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. This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the company'spublished consolidated financial statements for the year ended 31 December 2005. Section 240 statement The comparative figures for the financial year ended 31 December 2005 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 section 237(2) or (3) of the Companies Act 1985. These accounts areavailable from the Company's website - www. regus.com Restatement of 30 June 2005 Balance Sheet In completing the 2005 year end accounts it was noted that there was £0.4m ofIFRS lease adjustments which should have been reflected in the 2005 interimaccounts. The impact of this change is to reduce other payables from £26.3m(reported in June 2005) to £25.9m (restated comparable). As a consequence netassets have increased from £113.8m to £114.2m. Additionally, the equityattributable to minority interests as at 30 June 2005 has been corrected from aloss of £1.2m to a loss of £0.7m. These adjustments have no impact on profit forthe period. Note 2: Segmental analysis Americas EMEA Asia UK Other Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Mature Workstations 45,911 45,748 25,060 25,107 4,276 4,398 - - - - 75,247 75,253Occupancy 86.4% 79.5% 77.4% 71.6% 81.7% 77.9% - - - - 83.2% 76.8%(%) Revenue (£m) 139.8 119.1 87.5 78.7 15.3 13.5 - - 0.8 1.2 243.4 212.5Contribution 39.3 24.2 26.4 19.2 6.0 4.0 - - 0.8 1.2 72.5 48.6(£m) 2005 Expansions Workstations 3,837 193 1,720 109 2,198 497 - - - - 7,755 799Occupancy (%) 81.7% 69.6% 73.1% 6.7% 60.2% 43.0% - - - - 73.7% 44.5%Revenue (£m) 8.8 0.4 5.9 0.0 5.5 0.8 - - - - 20.2 1.2Contribution 1.6 0.0 1.3 (0.1) 1.3 (0.1) - - - - 4.2 (0.2)(£m) 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 (0.2) - (0.1) - (0.2) - 5.6 - - - 5.1 -(£m) Closures Workstations 112 538 - 591 - 177 - - - - 112 1,306Occupancy (%) 92.4% 74.9% - 42.4% - 85.9% - - - - 92.4% 61.7%Revenue (£m) 0.2 1.1 - 0.6 - 0.6 - - - - 0.2 2.3Contribution (0.1) 0.2 - (0.1) - 0.2 - - - - (0.1) 0.3(£m) Totals Workstations 50,773 46,479 26,929 25,807 8,194 5,072 10,506 - - - 96,402 77,358Occupancy (%) 85.9% 79.5% 76.9% 70.6% 69.5% 74.7% 72.3% - - - 80.5% 76.2%Revenue (£m) 150.2 120.6 93.8 79.3 23.5 14.9 34.3 - 0.8 1.2 302.6 216.0 Contribution 40.6 24.4 27.6 19.0 7.1 4.1 5.6 - 0.8 1.2 81.7 48.7(£m) Profit from operations (£m)21.0 10.4 14.4 9.5 3.6 2.1 1.8 0.0 (7.8) (4.0) 33.0 18.0 REVPAW (£) 5,915 5,189 6,963 6,143 5,730 5,860 6,526 - - - 6,279 5,584 Notes: o EMEA represents Europe, Middle East and Africa ( excluding the UK)o The mature business is defined as centres owned and operated at 1 January 2005 and therefore have a 6 month comparativeo Expansions include new centres opened and acquired businesseso A closure is defined as a centre that was closed during the period 1 January 2005 through to 30 June 2006o Workstation numbers are calculated as the weighted average for the period Note 3: Reconciliation of profit from operations to adjusted EBIT and EBITDA Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) £m £m £mProfit from operations 33.0 18.0 47.3________________________________________________________________________________Add back: Non-recurring - 3.0 4.9items (impairment, onerous lease charges and integration costs) ________________________________________________________________________________Adjusted EBIT 33.0 21.0 52.2________________________________________________________________________________ Depreciation 14.7 15.1 25.6Amortisation of acquired 2.0 1.3 3.8intangibles ________________________________________________________________________________ Adjusted EBITDA 49.7 37.4 81.6________________________________________________________________________________ Note 4: Analysis of net financial assets/(debt) At Cash Non-cash Exchange At 30 1 Jan flow changes movement June 2006 2006 £m £m £m £m £m________________________________________________________________________________Cash and cash equivalents 74.1 2.7 - (1.0) 75.8 Debt due after one year (5.4) (69.0) 5.0 0.5 (68.9)Debt due within one year (24.5) 21.8 - 0.2 (2.5)Un-amortised financing fees - 1.8 (0.1) - 1.7Finance leases due after one year (3.4) 3.2 (1.9) 0.1 (2.0) Finance leases due within one year (4.8) (0.3) 0.5 0.2 (4.4)________________________________________________________________________________ (38.1) (42.5) 3.5 1.0 (76.1)________________________________________________________________________________Net financial assets/(debt) 36.0 (39.8) 3.5 0.0 (0.3)________________________________________________________________________________ Cash not available for use at 30 June 2006 includes cash held on deposit ofwhich £4.0 million (December 2005 : £3.1 million) relates to collateral againstbank loans; £10.8 million (December 2005: £14.1 million) relates to depositswhich are held by banks and landlords as security against lease commitments byRegus operating companies and £1.9 million (December 2005: £1.9 million) held bythe ESOP trust. These amounts are blocked and not available for use by thebusiness. Non-cash changes include: (1) £5m repayable to the Regus UK operations,previously reported as external debt when the UK business was treated as anassociate and (2) amortization of deferred financing fees and (3) movements infinance leases . Note 5: Acquisition of subsidiaries On 19 April 2006, the acquisition date, the Group purchased the remaining 58%equity share in the UK associate from Rex 2002 Limited, a company controlled byfunds managed by Alchemy Partners, for a cash consideration of £88.0 million.This entity has been fully consolidated into the Group's results since theacquisition date. Since acquisition, the UK has contributed revenue of £34.3million and retained profit of £1.2 million. The acquisition had the following effect on the Group's net assets: Provisional fair value £m Net assets Intangible assets 18.5Property, plant and equipment 37.9Other non current assets 2.4Cash and cash equivalents 26.6Net current liabilities (43.5)Non-current liabilities (26.8)______________________________________________________________________ 15.1______________________________________________________________________ Share of net assets acquired (58% of £15.1m) 8.7Goodwill 80.7______________________________________________________________________Total consideration 89.4 Satisfied by: Cash 88.0Directly attributable costs 1.4______________________________________________________________________ 89.4______________________________________________________________________ All consideration was paid in cash. There was no deferred consideration. Theabove fair values are provisional. The following table summaries all other acquisitions made during the six monthperiod to June 2006. In certain cases the consideration is deferred or subjectto adjustment. Consideration excluding debt and cash acquired £m______________________________________________________________________UK 5.3Americas 3.8EMEA 0.4Asia Pacific 4.7Total Group 14.2 All the acquisitions above are providers of fully serviced business centres. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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