14th Mar 2008 07:00
Regus Group PLC14 March 2008 14 March 2008 REGUS GROUP PLC - PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Regus, the world's largest provider of outsourced workplaces, announces todayits preliminary results for the year ended 31 December 2007. FINANCIAL HIGHLIGHTS • Revenues up by 26.8% to £862.4m (2006: £680.0m) • Operating profit up 49.1% to £122.6m (2006: £82.2m) • Profit before tax up by 54.1% to £119.4m (2006: £77.5m) • Basic EPS up 25.0% to 10.5p (2006: 8.4p) • Net cash up 333% to £101.4m (2006: £23.4m) • Proposed full year dividend up 66.7% to 1.0p per share (2006: 0.6p per share) STRATEGIC AND OPERATIONAL HIGHLIGHTS • Grew average available workstations by 23.9% to 132,938 (2006: 107,257) • Total capacity including workstations under managed contracts, franchise operations and joint ventures now stands at 155,270. • Opened a further 146 new centres in the year to 31 December 2007 (2006: 218 centres including 91 with the UK acquisition) •Revenue increased in emerging markets by 40% to £113.9m (2006: £81.4m) Commenting on today's announcement Mark Dixon, Chief Executive of Regus Groupplc, said: "I am delighted that we have produced another record performance deliveringearnings of over £100 million with our net cash also now exceeding £100 million.We continue to produce market leading global growth, driven by centre openings,strategic acquisitions and substantial ongoing investment in our infrastructure,people and processes. Looking forward, while we are mindful of the economic climate we continue to beencouraged by our leading indicators which show no sign of a slowdown at thisstage. We believe that our flexible offering, strong brand, extensive geographicreach and range of innovative products are proving even more attractive toglobal businesses and small and medium enterprises during these uncertaintimes." 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 / Catherine CollomsStephen Gleadle, Chief Financial Officer This 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 I am pleased to report that Regus has delivered another year of record resultsthis year surpassing £100 million of post-tax earnings for the first time. The business model continues to work well with profitability growth from ourmature sites and recent expansions driving our ability to both return cash tostakeholders as well as invest in further capacity growth. In the year to 31 December 2007 we grew our average available workstations by23.9%. At the same time as increasing capacity we have also returned £20.6million to shareholders and still increased our net cash balance from £23.4million to £101.4 million. Financial performance Group revenue has increased by 26.8% to £862.4 million and gross profit by 36.8%to £251.9 million. Excluding the impact of new centre growth the "like for like"improvement was 7.0% and 20.9% respectively. This overall result was driven byaverage occupancy increasing to 82.7% from 81.8% in 2006 and revenue peravailable workstation ("REVPAW") increasing 2.3% from £6,340 to £6,487. Earnings(profit after tax) grew by 25.9% to £103.6 million and basic earnings per shareincreased by 25.0% to 10.5p. Sustaining growth Our strategic expansion remains a controlled blend of organic growth andcarefully targeted acquisitions. During the financial year, we opened 146centres for a total investment of £68.7 million. Looking forward we expect to be able to continue this balanced expansionprogramme. Dividend Given this strong performance the Board is recommending a 67% increase in thetotal dividend per share to 1.0p for the year. Subject to the approval ofshareholders at the 2008 AGM, this final dividend will be paid on 30 May 2008 toshareholders on the register at the close of business on 2 May 2008. Our stakeholders The Group recognises its economic, social and environmental impacts on societythrough its operations and interaction with all key stakeholders, including ourinvestors, customers, landlords, suppliers and employees. Accordingly, wecontinue to be focused on, and committed to, managing our business in aresponsible and positive manner to address these impacts. Critical to achievingthis will be our people, who continue to play a pivotal role in delivering ourgoals and ensuring our customers experience continually high standards. Ipersonally want to extend my thanks to all of our staff for their continuedcommitment and efforts throughout 2007. Looking forward While clearly aware of potential adverse market conditions we believe ourbusiness model is capable of delivering further profitable growth in 2008. John MatthewsChairman14 March 2008 Chief Executive's Review Overview 2007 has been another very successful year for the Group, with excellent growthin revenues, profitability, earnings per share and cash generation all resultingin a 4th successive year of record results. I am particularly pleased to havepassed for the first time the milestone of achieving £100 million of earnings. By keeping focused on our consistent, long term strategy - that of measured,sustainable growth - we have been able to demonstrate our ability to delivercontinued benefits for all of our stakeholders. Operational Review On a regional basis, revenues and centre contribution can be analysed asfollows: (£ million) Total Revenue Total Mature Margin Mature Contribution Occupancy 2007 2006 2007 2006 2007 2006 2007 2006Americas 336.3 305.9 102.7 86.5 34% 30% 87% 87%EMEA 240.3 195.9 80.3 60.0 36% 32% 87% 79%Asia 77.7 50.9 27.5 16.0 40% 36% 82% 77%PacificUK 208.1 126.6 41.4 20.9 22% 16% 84% 77%Other -- 0.7 -- 0.7 -- 100% -- -- 862.4 680.0 251.9 184.1 32% 28% 87% 84% OVERALL Through the ongoing implementation of our core strategy of controlled,disciplined growth - via both organic expansion in existing and new markets andacquisitions - the Group has delivered substantial workstation growth in allregions during 2007. Average workstations grew 25,681 or 23.9% to 132,938 during2007. The total number of available workstations at 31 December 2007 was142,601. If non-consolidated workstations arising from franchise operations,joint ventures and managed offices are also taken into account, the total numberof workstations under management increases to 155,270. We have seen the number of centres we operate increase by 128, includingfranchises, joint ventures and managed offices. New locations include Kolkata inIndia, Winnipeg in Canada, Lille in France, Turin in Italy and we opened ourfirst centres in Bulgaria, Qatar, Jordan, Kenya and New Zealand. The largestRegus centre, the Regus Silver Centre in Shanghai, with over 1,400 workstations,opened for business in January 2007. AMERICAS Our business in the Americas comprises Canada, USA and South America and has 493centres across 13 countries, with our main business in the USA operating 399centres. During the year we added 71 centres and closed 8 centres, whichincreased the average number of workstations from 52,611 in 2006 to 61,160 in2007. Acquisitions accounted for 35 of these new centres, with the balancecoming from the opening of 36 fully owned centres. The region delivered revenuesof £336.3 million - up 9.9% on 2006 - and achieved an average mature occupancyof 87% through the year (2006: 87%). Looking ahead into 2008 we will continue our aim to maximise yield in ourexisting centres and look to grow our portfolio in key cities where we haveminimal representation. The trends toward flexible working practices andstrengthening environmental awareness both act to further increase the demandfor our product. EMEA Our business in EMEA encompasses 210 centres across 41 countries. During theyear we opened 30 new centres and closed 8 centres, which increased the averagenumber of workstations from 27,139 in 2006 to 29,125 in 2007. Acquisitionsaccounted for 3 of these new centres, with the balance of 27 coming from organicgrowth - 22 fully owned centres, 2 joint ventures and 3 managed centres. Weopened centres in 4 new markets - Bulgaria, Qatar, Jordan and Kenya. The regiondelivered revenues of £240.3 million - up 22.7% on 2006 and achieved an averagemature occupancy of 87% through the year (2006: 79%). Looking ahead into 2008 we look to further improve occupancy and margin in ourexisting centres and expand our network into new markets. ASIA Our business in Asia operates in 92 centres across 13 countries. During the yearwe opened 25 new centres, which increased the average number of workstationsfrom 9,009 in 2006 to 14,748 in 2007. Acquisitions accounted for 3 of these newcentres, with the balance of 22 coming from the opening of 21 fully ownedcentres and 1 managed centre. During the year, we opened 1 centre in the newmarket of New Zealand. The region delivered revenues of £77.7 million - up 52.7%on 2006 - and achieved an average mature occupancy of 82% through the year(2006: 77%). Looking ahead into 2008 we will continue to consolidate and develop our positionas the largest provider of serviced offices across all Asia Pacific markets. Toachieve this objective we plan to continue our aggressive growth plan whilecontinuing to improve the efficiency of our current portfolio of centres. Tofacilitate this increase in demand and capitalise on scale efficiencies we willbe adding a new customer service centre in the Philippines to handle allcustomer enquiries. UK Our business in the UK operates in 123 centres. During the year we opened 20 newcentres and closed 2 centres, which increased the average number of workstationsfrom 18,498 in December 2006 to 27,905 in 2007. Acquisitions accounted for 2 ofthese new centres, with the balance of 18 coming from the opening of 6 fullyowned centres and 12 managed centres. The region delivered revenues of £208.1million - up 23.6% on the full year 2006 - and achieved an average occupancy inthe 2006 acquired centres of 84% through the year (2006: 77% post-acquisition). On 19 April 2006, the remaining 58% interest in Regus UK was acquired for agross consideration (including fees) of £89.4 million. At the date ofacquisition our UK business operated 91 centres. In the full year 2006, Regus UKgenerated revenues of £168.4 million. Since acquisition, we have seen a significant increase in occupancy, rising from72% at April 2006 to 84% during 2007. A restructured management team, renewedinvestment in our centres and in targeted marketing and a drive on enquirydevelopment and conversion have all helped to achieve this improved performance. Strategy and objectives Throughout 2007, we have remained clear on our strategic approach, which at itscore, seeks to ensure continued profitable growth and cash generation driven bya scalable business model with considerable potential for further development.With a substantial existing footprint of established, performing centres forminga network across 70 countries, we have been able to leverage these assets forlong term growth and value creation for shareholders, and also to continue togrow in line with our strategic short and longer term goals. Central to this strategy is driving continued improvement in: • our brand and products • our systems & technology • our processes and more generally, in our knowledge of existing and future markets. Our peoplewill continue to be the engineers of change in this respect and we are committedto ensuring they are supported as much as possible in making these goals happen. Brand and Product development By continuing to develop and refine our product and service portfolio, werecognise that our customers' needs are continually evolving, in different ways,around our global network. Our core business continues to be driven byregionally targeted campaigns, which focus on local specifics but also leverageglobal strategies. Examples of such targeted campaigns, which have driven ourbrand and product recognition, include 1.2 million mail shots to homes in the UK, and 870,000 targeted e-mail communications to prospective office customersacross the 41 countries in EMEA. In addition, during 2007, we have launched our Business Lounge concept in boththe UK and US, and have continued to invest in our Membership card initiative.Both concepts recognise the mobility demands of our customers, and we areconfident that as our scale increases, the ability for Regus to offer continued,enhanced operational benefits to our customers will also increase. I amdelighted to see our card membership levels doubling in 2007 and we willcontinue to extol the clear benefits that this initiative provides to ourthousands of customers worldwide. Systems and technology We have also continued to invest in our systems and technology. The roll-out of our internally developed, inventory, reservation and billingsystem across our worldwide network has proceeded well. By December 31, 2007, wehad 495 of our centres utilising this technology in their day to day operations.This system will deliver tangible improvements in our customers' day to dayexperiences with Regus, and we anticipate its implementation within our entirenetwork by the end of 2008. The second half of 2007 saw a refresh of our web site - part of our objective ofdeveloping further the Regus brand. This refresh has now encompassed 33countries, with another 26 in test and due for implementation in early 2008.This has already started to show measurable improvements in our customers' website experience, notably in site navigation, as well as driving an increase inenquiry conversion levels globally. Finally, Regus continues to operate the world's largest video-conferencingnetwork from the perspective of global reach. We have continued to see anincrease in demand and usage for this product during 2007, reflecting what webelieve to be an increasing recognition by our customers of environmentalconcerns coupled with a desire for a cost-effective business driver. Processes During 2007, we have further developed our business processes and proceduresthroughout our network. The roll out of our internally developed inventory, reservation and billingsystem has been a significant enabler of this allowing us to drive consistentstructured processes across all our regions of operation. We see benefits inthis scalable model not only to our existing centres, but also to all future newcentre openings and acquisitions. We have implemented improvements to our Human Resources systems in certain ofour regions, allowing us to capture more effectively all HR data in one place,with substantial process benefits for employees and for managing our growingworkforce. An example of this is the successful implementation of HR.Net, aweb-enabled system throughout EMEA, which has allowed us to move away from alarge number of local, limited functionality, manually managed HR applications. Throughout the year, we have also continued to ensure our growth plans aresupported by strong administration frameworks, encompassing local finance, HR,procurement and operations teams where required, whilst at the same timeemploying subject matter experts in regional centres or head office. A centraloperations function, based in the UK and established in 2007, has also allowedus to identify areas of operational compliance improvement throughout ournetwork, with the result being stronger controls and tangible revenue benefits. People Our results in 2007 would not have been possible had it not been for our 4,730team members throughout the world and I extend my thanks to each of them fortheir commitment and enthusiasm. Their continued customer-focused ethos andapproach have seen improvements in operational execution and levels ofsatisfaction throughout our network. We will continue to seek to employ the bestcandidates, and to encourage their growth and development through vestingappropriate levels of responsibility and challenge for each role. We recognise our employees' achievements in a variety of ways, be it throughinternal recognition or in ongoing career development within our regionaltraining centres. During 2007, Regus invested a substantial amount in thetraining and development of its people, with several significant programsoffered including: • Structured on-boarding training for newly hired General Managers ("GM's") and Operational Managers ("OM's"). Throughout our regions, over 485 GM's and OM's completed this 3 week induction course during the year. • Sales and Operations Training for GM's and OM's (all regions) • On-line learning programs accessed and delivered via the web • Management Development for Area Directors ("AD's") in the Americas (to be launched globally in 2008) • General Human Resources and Supervisory training led by the EMEA HR Team The outputs of these courses have been significant, with positive feedback fromparticipants coupled with tangible outputs in increased sales levels shortlythereafter. Regus has also invested in establishing professional trainers in Asia Pacific,EMEA and the UK to complement the internal training team in the Americas, and weanticipate continuing to strengthen the Global Training teams' resources andglobal reach during 2008. Outlook While clearly the current economic climate remains uncertain we believe we arein a good position to continue growing profitably. Our global footprint means that we can capitalise on opportunities wherever theyexist and in particular in the developing markets. Our revenues in the BRIC*economies and the "N11"* grew 45.7% and 28.6% respectively in 2007 and we expectthese significant growth rates to continue. As the business has grown, inherent risk has been extensively diversified as wehave acquired a broader range of customers across geographies, business segmentsand size categories. Our cost base is also significantly more flexible as weincrease the number of flexible leases in our portfolio and we reduce ourexposure to longer leases. The year has started well with enquiries showing no sign of weakness. We believethat we are in a good position to capitalise on our flexible product offeringwhich makes us an ideal choice for many companies in times of uncertainty. Overall we look forward to generating further profitable growth in 2008. Mark DixonChief Executive Officer14 March 2008 * BRIC includes Brazil, Russia, India & China; N11 includes Egypt, Indonesia, South Korea, Mexico, Nigeria, Philippines, Turkey and Vietnam. Financial Review Introduction The business model continues to work well. In addition to seeing profitability improvements from the sites we opened andacquired in 2006 we are continuing to see the profitability of our older moremature sites improve. This has enabled us to both grow the strength of ourbalance sheet while at the same time continue our expansion programme which thenforms the basis for future profitable growth. Taking the business as a whole, we grew its capacity as measured by the weightedaverage number of workstations by 23.9% to 132,938. At the same time the averageoccupancy of these workstations increased from 81.8% to 82.7% and we sold eachone on average for 1.4% more. This was despite the effect of adverse exchangerate movements. At constant exchange rates the price increase would have been5.3%. These factors have delivered a £40.4 million increase in operating profit risingfrom £82.2 million in 2006 to £122.6 million in 2007. Revenue and Gross profit (Centre Contribution) Revenue for the Group rose 26.8% to £862.4 million (2006: £680.0 million) andgross profit (centre contribution) increased 36.8% to £251.9 million (2006:£184.1 million). This movement can be analysed as follows (£ million) Revenue Gross profit % of Revenue31 December 2006 680.0 184.1 27.1%Impact of exchange rates (24.8) (7.1)31 December 2006 at constant exchangerates 655.2 177.0 27.0%Growth in mature business 61.1 41.5Growth in centres added in 2006 115.7 39.7Growth in centres added in 2007 36.6 (4.7)Centres closed (6.2) (1.6)31 December 2007 862.4 251.9 29.2% Sterling strengthened in value against the US dollar by an average of 8.7% in2007 when compared to 2006, although this was partially offset by a weakening ofsterling against the euro. This reduced our revenue by £24.8 million andcontribution by £7.1 million. However, this exchange impact was then more thanoffset by improvements in the underlying business. Our mature or "like for like" business increased its revenues by £61.1 millionand its contribution by £41.5 million driven by improvements in occupancy andprice. Centres that were added in 2006 contributed a further £115.7 million of revenueand £39.7 million of contribution, heavily driven by the impact of the UKacquisition and its continued growth. The Group purchased the remaining 58%interest in Regus UK and acquired full control of the financial and operatingpolicies of the UK business on the 19th April 2006. The overall increase arising from 2006 centres can be analysed as follows: (£ million) Revenue Gross profitImprovement arising from UK 74.2 23.2Improvements elsewhere in Group 41.5 16.5Overall improvement from 2006 centres 115.7 39.7 New centres added in 2007, both organic and by acquisition, contributed afurther £36.6 million of revenue but reduced contribution by £4.7 million due tothe normal start up losses incurred in establishing new centres. The year on year impact of centre closures was to reduce revenue by £6.2 millionand contribution by £1.6 million. Taking all this together contribution margins improved from 27.1% to 29.2%. Administrative expenses Administrative expenses increased by £27.4 million in 2007 compared to 2006although remained at a constant 15% of revenues. This investment reflects the year on year impact of the UK acquisition as wellas substantial and continued investment in our infrastructure, in our people andin process efficiencies, with a particular focus on leveraging savings inprocurement and centre operations as our network continues to expand. Inaddition, there has been considerable investment in enhancing our marketingcapabilities, incorporating a re-launch of our website, recruitment of a corenumber of sector experts, and a strengthening of our regional teams to ensure aconsistent marketing message globally. Operating profit Operating profit was £122.6 million (2006: £82.2 million), representing a marginof 14.2% (2006: 12.1%). Share of profit in joint ventures and associates In the twelve months ended 31 December 2007, the share of joint venture profitsattributable to Regus increased to £0.8 million (2006: £0.1 million loss). Thisreflected the improving profitability in mature joint ventures in the Americasand EMEA regions as well as improved performance from joint ventures in theMiddle East that commenced trading at the end of 2006. These were partiallyoffset by normal losses from new joint ventures commenced in 2007. 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 analysed as follows: (£ million) 2007 2006Interest payable on bank loans and overdrafts (4.4) (4.6)Interest receivable 3.4 1.8Finance lease interest (0.2) (0.5)Non-cash: Amortisation of deferred financing fees (0.5) (0.4)Non-cash: UK acquisition related (2.3) (2.1)Total financing costs (4.0) (5.8) The lower interest payable reflects the reduction in the Group's average debtover the year, largely offset by the impact of rising interest rates in theGroup's primary markets. The average Libor rate for 2006 was 4.79% compared to5.85% for 2007. The substantial increase in interest receivable reflects a continued increase inthe Group's average free cash balance to £81.4 million (£49.7 million in 2006)and the average increase in global interest rates year over year. The movementin the cash balance has been explained in the cash flow 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 reflects a full twelve 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 £2.3 million in the period to 31 December 2007, an increase comparedto 2006 reflecting the timing of the UK acquisition in 2006. Taxation The continued improvements in the Group results have meant that there are lessunrecognised losses available to be offset in the income statement againstrising current tax charges. Consequently the Group has recognised a £15.8million tax charge for the period (representing an accounting tax rate of 13% ofprofit before tax) compared to a credit of £4.8 million in the comparativeperiod. The current tax charge for the period was £22.3 million (2006: £8.1 millioncharge) - an increase from 10% to 19% of profit before tax. Deferred tax was a£6.5 million credit in the period (2006: £12.9 million credit) which includesthe adverse impact of the reduction in the UK corporation tax rate on thedeferred tax asset. On a cash tax basis the Group paid £16.1 million in tax.This represents approximately 13.5% of profit before tax compared to 8.5% in thesame period in 2006. Earnings per share Earnings per share for the year increased 25.0% from 8.4p to 10.5p. The averagenumber of shares in issue during the year reflected the re-purchase of12,853,001 Regus shares in June and December 2007 and therefore reduced to980,961,569 (2006: 984,791,524). Cash flow Strong operating cash flow remains a prime feature and continued objective ofthe Group. The improvement in operating profit and an improved working capitalperformance resulted in the operating cash flow increasing by £78.3 million to£211.1 million (2006: £132.8 million). The Group's cash flow statement has beensummarised below. (£ million) 2007 2006Cash generated from operations 211.1 132.8Tax and net interest paid (16.9) (10.1)Maintenance capex (29.8) (19.7)Free cash flow 164.4 103.0New centre openings (50.9) (26.7)UK acquisition -- (61.4)Other acquisitions and JV investments (17.8) (27.1)Loan repayment, share buy back and dividend (37.6) 23.0Exercises of share options 0.5 --Change in cash 58.6 10.8 Opening cash 80.9 74.1Change in cash 58.6 10.8Effect of exchange rates on cash held 3.4 (4.0)Closing cash 142.9 80.9 The strong cash performance has enabled the Group to invest in growth.Specifically, during the year, 101 new centres were opened at a cost of £50.9million. A further 43 business centres plus 2 joint ventures were acquired for anet cash consideration of £17.8 million. To highlight, during the year, the Group has: • repaid to our investors £20.6 million through both our share-buyback and dividend activity• reduced our debt by £17.0 million and still ended the year with an increased cash position. This can be can be analysed as follows: (£ million) 2007 2006Cash and cash equivalents 142.9 80.9Bank and other loans (40.3) (54.2)Finance leases (1.5) (3.9)Un-amortised financing fees 0.3 0.6Financial assets 101.4 23.4 Overall the Group enters 2008 in a strong financial position to capitalise onopportunities as they arise. Stephen Gleadle,Chief Financial Officer14 March 2008 Consolidated Income Statement £m Note Year ended Year ended 31 Dec 2007 31 Dec 2006 Revenue 2 862.4 680.0 Cost of sales (610.5) (495.9)-------------------------------------------------------------------------------- Gross profit (centre contribution) 251.9 184.1 Administration expenses (129.3) (101.9)-------------------------------------------------------------------------------- Operating profit 122.6 82.2 Share of post-tax profit/(loss) of jointventures 0.8 (0.1)Share of post-tax profit of associate -- 1.2-------------------------------------------------------------------------------- Profit before financing costs 123.4 83.3 Finance expense (8.1) (8.0)Finance income 4.1 2.2-------------------------------------------------------------------------------- Profit before tax for the year 119.4 77.5 Tax (charge)/credit (15.8) 4.8--------------------------------------------------------------------------------Profit after tax for the year 103.6 82.3-------------------------------------------------------------------------------- Attributable to:Equity shareholders of the parent 103.1 82.3Minority interests 0.5 ---------------------------------------------------------------------------------- 103.6 82.3-------------------------------------------------------------------------------- Earnings per ordinary share (EPS):Basic (p) 10.5 8.4Diluted (p) 10.4 8.3 Consolidated Balance Sheet £m As at 31 Dec As at 31 Dec 2007 2006 RestatedNon-current assetsGoodwill 223.0 212.1Other intangible assets 46.9 51.0Property, plant and equipment 184.7 127.2Deferred tax assets 46.8 36.1Other long term receivables 24.1 20.7Investments in joint ventures 1.6 0.9-------------------------------------------------------------------------------- 527.1 448.0Current assetsTrade and other receivables 186.4 148.2Corporation tax receivable 5.1 2.9Cash and cash equivalents 142.9 80.9-------------------------------------------------------------------------------- 334.4 232.0Total assets 861.5 680.0--------------------------------------------------------------------------------Current liabilitiesTrade and other payables (168.9) (124.6)Customer deposits (130.4) (103.4)Deferred income (96.0) (73.5)Corporation tax payable (33.2) (25.5)Obligations under finance leases (0.8) (2.5)Bank and other loans (15.5) (8.2)Provisions (3.4) (3.1)-------------------------------------------------------------------------------- (448.2) (340.8)Net current liabilities (113.8) (108.8)Total assets less current liabilities 413.3 339.2Non-current liabilitiesOther payables (62.4) (51.8)Obligations under finance leases (0.7) (1.4)Bank and other loans (24.5) (45.4)Deferred tax liability (6.4) (1.7)Provisions (7.4) (11.7)Provision for deficit on joint ventures (2.1) (2.7)-------------------------------------------------------------------------------- (103.5) (114.7)Total liabilities (551.7) (455.5)--------------------------------------------------------------------------------Total assets less liabilities 309.8 224.5--------------------------------------------------------------------------------Total equityIssued share capital 49.2 49.2Treasury shares (13.4) --Foreign currency translation reserve (20.1) (17.5)Revaluation reserve 10.0 10.0Other reserves (22.6) (22.6)Retained earnings 306.2 205.4--------------------------------------------------------------------------------Total shareholders' equity 309.3 224.5--------------------------------------------------------------------------------Minority interests 0.5 ----------------------------------------------------------------------------------Total equity 309.8 224.5-------------------------------------------------------------------------------- Approved by the Board on 14 March 2008 Mark Dixon Stephen GleadleChief Executive Officer Chief Financial Officer Consolidated Cash Flow Statement £m Year ended Year ended 31 Dec 2007 31 Dec 2006 Profit before tax for the year 119.4 77.5Adjustments for:Net finance costs 4.0 5.8Net share of profit on joint ventures and associate (0.8) (1.1)Depreciation charge 39.2 31.8Loss on disposal of property, plant and equipment 0.2 0.4Amortisation of intangible assets 6.4 6.0Decrease in provisions (4.2) (0.6)Other non-cash movements - share based payment 4.5 1.8Operating cash flows before movements in working capital 168.7 121.6Increase in trade and other receivables (28.2) (31.3)Increase in trade and other payables 70.6 42.5Cash generated from operations 211.1 132.8-------------------------------------------------------------------------------- Interest paid on finance leases (0.2) (0.5)Interest paid on credit facilities (4.0) (5.2)Tax paid (16.1) (6.6)Net cash inflows from operating activities 190.8 120.5-------------------------------------------------------------------------------- Investing activitiesPurchase of subsidiary undertakings (net of cash acquired) (17.8) (88.5)Purchase of interest in joint venture (0.3) --Sale of property, plant and equipment 0.3 0.3Purchase of property, plant and equipment (79.2) (46.3)Purchase of intangible assets (1.5) (0.4)Interest received 3.4 2.2Cash outflows from investing activties (95.1) (132.7)-------------------------------------------------------------------------------- Financing activitiesNet proceeds from issue of loans -- 62.7Repayment of loans (14.5) (33.5)Repayment of principal under finance leases (2.5) (5.0)Facility arrangement fees -- (1.2)Purchase of treasury shares (14.7) --Payment of ordinary dividend (5.9) --Exercise of share options 0.5 --Cash (outflows)/inflows from financing activities (37.1) 23.0-------------------------------------------------------------------------------- Net increase in cash and cash equivalents 58.6 10.8Cash and cash equivalents at beginning of year 80.9 74.1Effect of exchange rate fluctuations on cash held 3.4 (4.0)Cash and cash equivalents at end of year 142.9 80.9-------------------------------------------------------------------------------- Consolidated Statement of Changes in Equity ------------------------------------------------------------------------------------------------------------------------ Attribute to equity holders of the parent (note a)------------------------------------------------------------------------------------------------------------------------ £m Share capital Treasury shares Share Foreign Revaluation Other Retained Minority Total premium currency reserve earnings interests equity account translation reserve ------------------------------------------------------------------------------------------------------------------------ Balance at 1 Jan 2006 49.2 -- 153.5 5.0 -- (22.6) (32.3) -- 152.8Profit attributableto equity holders -- -- -- -- -- -- 82.3 -- 82.3Currency translationdifferences -- -- -- (22.5) -- -- -- -- (22.5)Acquisitions -- -- -- -- 10.0 -- -- -- 10.0Deferred tax on shareoptions -- -- -- -- -- -- 0.1 -- 0.1 ------------------------------------------------------------------------------------------------------------------------Total recognisedincome and expense for the period (22.5) 10.0 -- 82.4 -- 69.9Share based payments -- -- -- -- -- -- 1.8 -- 1.8Scheme of Arrangement(note b) -- -- (153.5) -- -- -- 153.5 -- --Balance at 31 Dec 2006 49.2 -- -- (17.5) 10.0 (22.6) 205.4 -- 224.5------------------------------------------------------------------------------------------------------------------------Profit attributableto equity holders -- -- -- -- -- -- 103.1 -- 103.1Profit attributableto minority interests -- -- -- -- -- -- -- 0.5 0.5Currency translationdifferences -- -- -- (2.6) -- -- -- -- (2.6)Deferred tax effect ofshare options -- -- -- -- -- -- (0.1) -- (0.1)------------------------------------------------------------------------------------------------------------------------Total recognised income and expense for the period (2.6) -- -- 103.0 0.5 100.9Share based payments -- -- -- -- -- -- 4.5 -- 4.5Ordinary dividend paid -- -- -- -- -- -- (5.9) -- (5.9)Exercise of share options -- 1.3 -- -- -- -- (0.8) 0.5Purchase of treasuryshares -- (14.7) -- -- -- -- -- -- (14.7)Balance at 31 Dec 2007 49.2 (13.4) -- (20.1) 10.0 (22.6) 306.2 0.5 309.8------------------------------------------------------------------------------------------------------------------------ (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 11,947,702 ordinary shares of the Group that were acquired for the purposes of the Group's employee share option plans and the share buyback programme. During the year 12,853,001 shares were purchased. 905,299 shares were utilized to satisfy the exercise of share options by employees. At 14 March 2008, 33,972,702 treasury shares were held. • 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 cancellation of the share premium account under a Scheme of Arrangement. The effect of this was to increase by the same amount the distributable reserves for the Group. The cancellation was undertaken in the books of Regus Group plc where the share premium was held. Details of the Scheme of Arrangement were contained within the notice 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's financial statements have been prepared and approved by thedirectors in accordance with International Financial Reporting Standards asadopted by the EU ("Adopted IFRSs"). The basis of preparation and accounting policies are set out in full in theAnnual Report, and have been applied consistently to all periods presented inthese financial statements. The accounting policies have been appliedconsistently by group entities. The financial statements were approved by the directors on 14 March 2008. The comparative information for the balance sheet at 31 December 2006 has beenrestated for the following item: (i) Certain amounts included in the financial statements for the period ending 31 December 2006 relating to business combinations completed in that period were included in those financial statements on a provisional basis. These provisional amounts were finalised during the 12 month period following the acquisition. Adjustments to the acquisition accounting have been reflected as if they had been recognised at the acquisition date. As a result the following changes have been made: - The carrying value of goodwill has reduced by £0.4 million as a result of the finalization of the acquisition accounting in relation to deferred tax assets with a corresponding increase in deferred tax assets of £0.7 million and a credit to deferred consideration of £0.3 million; - The carrying value of goodwill was increased by £0.4 million as a result of the finalization of the fair value adjustments in relation to property, plant and equipment. This has also reduced the carrying value of property, plant and equipment by £0.4 million. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2007 or 2006 but is derivedfrom those accounts. Statutory accounts for 2006 have been delivered to theregistrar of companies, and those for 2007 will be delivered in due course. Theauditors have reported on those accounts; their reports were (i) unqualified,(ii) did not include references to any matters to which the auditors drewattention by way of emphasis without qualifying their reports, and (iii) did notcontain statements under section 237(2) or (3) of the Companies Act 1985. Annual Report Copies of the annual report, which will be posted to shareholders at least 20working days before the AGM on 20 May 2008, 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 2: Segmental analysis - management basis (unaudited) Americas EMEA Asia UK Other TotalYear ended 31 Dec 2007 2007 2007 2007 2007 2007 Mature Workstations 50,127 25,968 6,821 -- -- 82,916 Occupancy (%) 86.9 87.2 81.9 -- -- 86.6 Revenue (£m) 293.7 219.3 47.5 -- -- 560.5 Contribution (£m) 100.0 78.5 19.2 -- -- 197.7 2006 Expansions Workstations 6,653 1,307 4,732 25,914 -- 38,606 Occupancy (%) 77.8 84.7 77.5 83.5 -- 81.8 Revenue (£m) 28.1 9.4 24.7 196.8 -- 259.0 Contribution (£m) 4.0 3.2 8.8 43.2 -- 59.2 2007 Expansions Workstations 4,092 1,520 3,195 1,548 -- 10,355 Occupancy (%) 69.1 54.4 33.1 63.8 -- 55.0 Revenue (£m) 13.0 9.2 5.5 8.9 -- 36.6 Contribution (£m) (1.2) (1.9) (0.5) (1.1) -- (4.7) 2007 Closures Workstations 288 330 -- 443 -- 1,061 Occupancy (%) 76.5 86.2 -- 85.8 -- 83.4 Revenue (£m) 1.5 2.4 -- 2.4 -- 6.3 Contribution (£m) (0.1) 0.5 -- (0.7) -- (0.3)-------------------------------------------------------------------------------- Totals Workstations 61,160 29,125 14,748 27,905 -- 132,938 Occupancy (%) 84.7 85.3 69.9 82.4 -- 82.7 Revenue (£m) 336.3 240.3 77.7 208.1 -- 862.4 Contribution (£m) 102.7 80.3 27.5 41.4 -- 251.9 Operating profit (£m) 48.2 43.3 12.5 8.3 10.3 122.6 REVPAW (£) 5,497 8,251 5,267 7,460 -- 6,487-------------------------------------------------------------------------------- Americas EMEA Asia UK Other TotalYear ended 31 Dec 2006 2006 2006 2006 2006 2006 Mature Workstations 49,429 25,726 6,501 -- -- 81,656 Occupancy (%) 86.9 79.4 76.9 -- -- 83.5 Revenue (£m) 292.2 188.9 41.8 -- 0.7 523.6 Contribution (£m) 87.8 59.9 15.1 -- 0.7 163.5 2006 Expansions Workstations 2,608 479 2,508 17,916 -- 23,511 Occupancy (%) 76.1 55.1 61.0 77.2 -- 75.0 Revenue (£m) 9.6 2.3 9.1 122.6 -- 143.6 Contribution (£m) (1.3) (0.3) 0.9 20.0 -- 19.3 2006 Closures Workstations 214 307 -- -- -- 521 Occupancy (%) 82.1 69.0 -- -- -- 74.0 Revenue (£m) 1.2 1.4 -- -- -- 2.6 Contribution (£m) (0.1) 0.6 -- -- -- 0.5 2007 Closures Workstations 360 627 -- 582 -- 1,569 Occupancy (%) 77.6 79.2 -- 78.6 -- 78.6 Revenue (£m) 2.9 3.3 -- 4.0 -- 10.2 Contribution (£m) 0.1 (0.2) -- 0.9 -- 0.8-------------------------------------------------------------------------------- Totals Workstations 52,611 27,139 9,009 18,498 -- 107,257 Occupancy (%) 86.0 79.0 72.0 77.0 -- 81.8 Revenue (£m) 305.9 195.9 50.9 126.6 0.7 680.0 Contribution (£m) 86.5 60.0 16.0 20.9 0.7 184.1 Operating profit (£m) 43.1 26.2 6.1 5.3 1.5 82.2 REVPAW (£) 5,813 7,219 5,647 6,843 -- 6,340-------------------------------------------------------------------------------- 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 12 month comparative. • Expansions include new centres opened and acquired businesses. • A 2007 closure is defined as a centre closed during the 12 month period to 31 December 2007. A 2006 closure is defined as a centre closed during the 12 month period to 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 £m Year ended Year ended 31 Dec 2007 31 Dec 2006Operating profit 122.6 82.2EBIT 122.6 82.2-------------------------------------------------------------------------------- Depreciation 39.2 31.8Amortisation of acquired intangibles 6.4 6.0--------------------------------------------------------------------------------EBITDA 168.2 120.0-------------------------------------------------------------------------------- Note 4: Analysis of financial resources £m At Cash flow Non-cash Exchange At 31 Dec 1 Jan 2007 changes movement 2007--------------------------------------------------------------------------------Cash and cash equivalents 80.9 58.6 -- 3.4 142.9 Debt due after one year (45.4) 10.2 10.9 (0.2) (24.5)Debt due within one year (8.2) 4.3 (11.3) (0.3) (15.5)Finance leases due afterone year (1.4) 0.8 (0.1) -- (0.7)Finance leases due withinone year (2.5) 1.7 -- -- (0.8)-------------------------------------------------------------------------------- (57.5) 17.0 (0.5) (0.5) (41.5)-------------------------------------------------------------------------------- Net financial assets 23.4 75.6 (0.5) 2.9 101.4-------------------------------------------------------------------------------- Cash and cash equivalents balances held by the Group that are not available foruse amounted to £14.4 million at 31 December 2007 (31 December 2006: £17.1million). This cash serves as collateral against certain obligations of theGroup. Cash not available for use at 31 December 2007 includes cash held on deposit ofwhich £2.1 million (December 2006: £5.5 million) relates to collateral againstbank loans; £10.2 million (December 2006: £9.6 million) relates to depositswhich are held by banks and landlords as security against lease commitments byRegus operating companies and £2.1 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, the amortisation of debt issue costs, new finance leases enteredinto and movements in debt maturity. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RGU.L