Global GrowthANNUAL REPORT AND ACCOUNTS 2010VIEW MORE ONLINE AT WWW.REGUS.COM
Our unrivalled footprint and   unique customer proposition   is driving growth worldwide...   Regus is the world’s only gl...
Directors’ Report: Business reviewFinancial highlightsA solid year of performance  Revenue (£m)                           ...
Directors’ Report: Business reviewGroup OverviewExtending our global networkWhat we doWe have to constantly evolve to meet...
Our products and services                                                                                                 ...
Directors’ Report: Business reviewWhere we areGrowing our global networkIn 2010 we added 125 new centresand Oman, Lithuani...
Business Review                                                                View our online operational                ...
Directors’ Report: Business ReviewChairman’s statementDetermined strategic implementation                                 ...
Directors’ Report: Business ReviewChief Executive’s reviewA strong track record of delivery                               ...
Directors’ Report: Business ReviewChief Executive’s review continuedStrategy and objectives                          servi...
the year, we opened 23 centres of which         lower risk, flexible, sustainable and is         It is important to state t...
Directors’ Report: Business ReviewFinancial reviewRobust cash generation                                               Thi...
As a result of adding workstations                   Cost reduction initiatives                       specific investments ...
Directors’ Report: Business ReviewFinancial review continuedcomparative period). This includes a            It is proposed...
Cash flow                                                                                      Our current annual property ...
Directors’ Report: Business Review  Corporate responsibility  Practicing sustainable businessBeing a global business carri...
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
Global Growth: Regus Annual Report and Accounts 2010
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Global Growth: Regus Annual Report and Accounts 2010

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Our unrivalled footprint and unique customer propositionis driving growth worldwide...
Regus is the world’s only global provider of flexible workspace.
We are 6,000 people running 1,100 business centres in 500 cities across 87 countries. We help our customers work more effectively, to work their way, every day.
To more than 800,000 people we are the mission critical platform upon which they run some or all of their business every day.
Our products and services allow our customers to concentrate on their core business, and use their talents to best effect. We help them be more flexible, more cost-effective and more agile – and better able to
face the unexpected challenges of business in the 21st century.
Regus annual report website: http://regusara2010.blacksunplc.com
Regus website: http://www.regus.com/?utm_campaign=slideshare

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Global Growth: Regus Annual Report and Accounts 2010

  1. 1. Global GrowthANNUAL REPORT AND ACCOUNTS 2010VIEW MORE ONLINE AT WWW.REGUS.COM
  2. 2. Our unrivalled footprint and unique customer proposition is driving growth worldwide... Regus is the world’s only global provider of flexible workspace. We are 6,000 people running 1,100 business centres in 500 cities across 87 countries. We help our customers work more effectively, to work their way, every day. To more than 800,000 people we are the mission critical platform upon which they run some or all of their business every day. Our products and services allow our customers to concentrate on their core business, and use their talents to best effect. We help them be more flexible, more cost-effective and more agile – and better able to face the unexpected challenges of business in the 21st century. ...We work your way.Directors’ Report – Directors’ Report – Financial Statements Shareholder andBusiness Review Corporate Governance Other InformationFinancial highlights 1 Board of directors 15 Consolidated income statement 32 Segmental analysis 77Group overview 2 Other information 16 Consolidated statement Five year summary 79Our products and services 3 Corporate governance 18 of comprehensive income 33 Shareholder information 80Where we are 4 Director statements 24 Consolidated statementChairman’s statement 6 Remuneration report 25 of changes in equity 34 Auditors’ report 31 Consolidated balance sheet 35Chief Executive’s review 7 Consolidated cash flow statement 36Financial review 10 Notes to the accounts 37Corporate responsibility 14 Parent company accounts 76
  3. 3. Directors’ Report: Business reviewFinancial highlightsA solid year of performance Revenue (£m) £1,040.4m Gross profit (£m)* £215.9m Business Review1200 3501000 300 1077.2 1055.1 305.7 1040.4 250 800 251.9 862.4 200 235.6 215.9 600 150 400 100 200 50 Corporate Governance 0 0 2007 2008 2009 2010 2007 2008 2009 2010 Operating profit (£m)* £22.5m Net cash balance (£m) £191.5m150 250 147.4 Financial Statements 237.0120 200 211.2 122.6 191.5 90 150 60 100 70.3 101.4 22.5 30 50 0 0 2007 2008 2009 2010 2007 2008 2009 2010 Shareholder and Other Information Profit after tax (£m)* £18.0m Basic earnings per share (p)* 1.9p120 12 12.0 114.9100 10 10.5 103.6 80 8 60 6 5.4 52.0 40 4 18.0 1.9 20 2 0 0 2007 2008 2009 2010 2007 2008 2009 2010 * Excludes exceptional items in 2009 and 2010. www.regus.com/investor Regus plc Annual Report and Accounts 2010 01
  4. 4. Directors’ Report: Business reviewGroup OverviewExtending our global networkWhat we doWe have to constantly evolve to meet our customers’ needs. The world of business is constantly property managers and business do best, which is run their business changing and so are we. 20 years ago advisers. Our customers want meeting- and work their way. Every modern we were an innovative provider of rooms, workstations, coffee lounges, international business, large or small, serviced offices because that was what video-communications facilities and all must be agile, able to make decisions our customers needed. Yet work today the latest IT and telecommunications quickly, change direction or shift is radically different to the early 1990s. support. We provide bookkeeping and resources at short notice. As a result we have to constantly evolve payroll services, transcription services In today’s ever more complex, ever more to meet the ever changing needs of and help our customers purchase a wide unpredictable, ever more interconnected our customers. range of ancillary business products and world, Regus helps them to do just that. services. Sometimes they even want us Yes, we still rent serviced offices. But to tell them what they need. that’s an increasingly small part of what we do now. What we provide is the Above all, we take care of the everyday means – the workspaces – from which details of running a business so that our our customers can do whatever it is customers, be they the very largest they want to do. We are facilitators, global corporate or an entrepreneur with concierges, technical support teams, an idea, can concentrate on what theyWhat our customers sayOur unrivalled customer service is driven across everything we do.Juniper Yell CAPCO Health Group Inc The Network CollectiveFounded in 1996, Juniper Yell is a leading international Toronto-based CAPCO The Network Collective is ancurrently employs more than directories company that offers Health Group, Inc. a provider independent telecommunications7,000 workers in nearly 50 quality business leads and of healthcare services in the procurement consultancy. Itcountries. Since its inception, marketing solution to small North American medical works with major UK andJuniper has been at the forefront and medium sized enterprises insurance community, has multinational organisations toof network innovation – providing in the UK, US, Spain and parts been a Regus client since 2000 help them achieve the bestsolutions that solve the most of Latin America. and has started to use Regus possible results throughcomplex networking problems. virtual offices to pursue new their telecommunications business opportunities. procurement.“With Regus we are no longer “With Regus we are far more “For as little as a few hundred “Our team travels a lot and it’s on the real estate roller coaster cost effective, lower risk, flexible dollars a month virtual offices important for us to have a high where we are constantly and sustainable but will, over allow us to move into additional quality base whilst on the road. ramping up and ramping down time, increase productivity as markets such as Mexico and Regus help us be as productive our portfolio. We can now less time is spent commuting Central America.” as we can in a cost effective way.” acquire just what we need, and working in poorly equipped when we need it for as long places such as hotels and cafes.” as we need it without risk or excessive costs.” Ernie Gershon, President John Waterhouse,Coleen Hurley, Director of Simon Taylor, and COO of CAPCO Founder and CEO ofcorporate real estate, Juniper Head of Property, Yell The Network CollectiveFor more information visit www.regus.com02 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
  5. 5. Our products and services Business ReviewServing 800,000 customers every day. Video Communication The world’s largest network of video communication suites in more than 4,000 locations worldwide. Our customers save management time, travel costs and reduce their carbon footprint by using the very latest HD technology. Corporate Governance Businessworld Our unique worldwide membership scheme – instant access to all of our 1,100 business centres. The ultimate in productive mobile working with more than half a million members. Equipped Of ces A productive, flexible and cost-efficient work environment bespoke for every Financial Statements single customer company. From start-ups and established local businesses, to satellite offices for the very largest corporates all workspace can be fully personalised to reflect the customer’s brand and culture. Mainly full-time, but also available by the hour. Virtual Of ce A professional business address and local telephone number, with call handling and message management, plus mail collection and forwarding services. Used by all types and sizes of businesses, especially those looking to enter new Shareholder and Other Information markets in a low cost, low risk way. Meeting Rooms Conveniently located, customisable meeting rooms, in a dedicated business environment. Cost-efficient and flexible, our customers are able to book by the hour not just by the day. Disaster Recovery Dedicated office space configured to our customers’ exact requirements including telephone and IT connectivity, reserved and kept ready for whenever it is required.www.regus.com/investor Regus plc Annual Report and Accounts 2010 03
  6. 6. Directors’ Report: Business reviewWhere we areGrowing our global networkIn 2010 we added 125 new centresand Oman, Lithuania and Ghana toour global network. 2011 will seesimilar levels of growth. Park Avenue, New York, USA 87 Countries 500 Cities 6,000 People American Express Retiro, Buenos Aires, Argentina 800,000 Daily customers04 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
  7. 7. Business Review View our online operational case studies in action www.regus.com/investor Corporate Governance City Point, London, England Financial Statements Shareholder and Other Information World Trade Centre, Beijing, China Bandra Kurla Complex, Mumbai , India Ark Office, Sydney, Australiawww.regus.com/investor Regus plc Annual Report and Accounts 2010 05
  8. 8. Directors’ Report: Business ReviewChairman’s statementDetermined strategic implementation This, coupled with consistent trading Board changes across all our markets, has enabled the I would like to thank Ulrich Ogiermann, Group to weather the unpredictable who resigned from the Board as of economic challenges of 2010. I am 31 December 2010, for his contribution to particularly pleased that our mature the business over the years and we wish margins have started to recover during him well for the future. 2010 and in addition the business has Dividend generated more cash year on year, with It remains the intention of the Board to cash from operations increasing to £109.7 pay dividends at a level which it believes is million (2009: £105.1 million). The strength sustainable throughout economic cycles of this cash generation has enabled the and is in line with its progressive payment business to invest significantly in growth, policy. Reflecting the underlying strength opening 125 centres, with an estimated of the Group’s trading performance, our cost to our profit and loss of £18.2 million strong cash generation, robust cash and to our cash flow of £69.7 million. It hasI am pleased to report also enabled us to increase our dividend position and future confidence in the group’s prospects, the Board isa solid performance by 22% to £23.2 million while maintaining a robust net cash position at £191.5 recommending an 8% increase in the fullby the group resulting million. The board remains confident in the year dividend per share to 2.6p per share. Subject to the approval of shareholdersfrom the determined significant opportunities for our business at the 2011 AGM, this final dividend will as the global trend towards flexible, mobileimplementation of work accelerates. be paid on Friday 27 May 2011 to shareholders on the register at the closeour strategy which Network growth of business on Tuesday 26 April 2011.has transformed our To capitalise on the significantbusiness model over opportunities created by the trend towards increased flexible working we continue to Douglas Sutherlandthe last two years. grow our network to provide these agile Chairman 21 March 2011Douglas Sutherland workers with a mobile work platform. OurChairman approach is two-fold: to open in new countries (such as Oman, Ghana and Lithuania), thus increasing our global footprint, and deepen existing in-country networks opening in cities (such as Canberra and Brasilia), thereby getting ever closer to new and existing customers. In the year to 31 December 2010, we added 20,122 workstations an increase of 13% on 2009 for a total investment of £69.7 million. Approximately half of this growth came from acquisitions in markets such as Brazil, China, UK and USA. We will continue to explore such opportunities as we look to strengthen our market position and deliver on our strategy.06 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
  9. 9. Directors’ Report: Business ReviewChief Executive’s reviewA strong track record of delivery 2010 was a solid year of performance • Strengthened Management Structure made possible by the delivery of key Business Review – To better manage our growing strategic initiatives rather than any business, within our regions, we have noticeable pick up in the world economy. started the process of organising day- That the business remained profitable and to-day management of 30 country/ in 2010 generated more cash than in 2009 market groupings. With supervisory demonstrates our strong and deep oversight from our new global foundations. management centre in Geneva, We are now a much fitter and more decision making is being accelerated nimble business which will be to the and improved. In 2010 key hires benefit of our customers and and internal promotions were made shareholders. The strategic initiatives of across all our major geographies Corporate Governance 2010 were focused on orientating the including Canada, Brazil, Mexico and business to recover occupancy and Japan amongst others. It is of crucial2009 and 2010 have been margin in 2011 regardless of the rate of economic recovery. This includes having importance that the business continues to add to this cadre of its managementmomentous years for the right business centres in the right population throughout 2011.the world economy and places on the right terms; generating • Refocused Marketing – Spend was more enquiries and increasing the salesall businesses have had conversion; streamlining processes and increased by 27% over the courseto respond and adapt in structures; continually innovating our of 2010 vs. 2009 to £33.3 million. product and service mix; and, crucially, The marketing management teamorder to progress. We investing in our people. Such investments was reorganised to deliver in-countryhave been no different. Financial Statements have come at some cost but it is planning and global campaign important to highlight these investments integration moving us away from aMark Dixon are fully self funded and we expect to see regional approach. Additionally, aChief Executive a return in 2011. number of tasks were brought back We continue to experience broad-based in-house, including web and search demand across all markets and market engine marketing. Together this sectors but especially from large resulted in a 32% increase in overall multinationals for our assistance in global enquiries but more importantly supporting their move to lower cost flexible a dynamic approach to generating working models. This accelerating trend is enquiries in the locations that most one of the key drivers of our business and need them. Shareholder and Other Information we believe will be so for years to come. • Improved Sales – Significant changes With renewed focus we have delivered to our sales structure, supporting the growth we set out to achieve at the systems and improved customer beginning of 2010; we opened 125 new targeting, together with comprehensive centres, which led us into seven new bespoke training and development, countries. It is our intention to sustain this resulted in deal volumes that were growth rate into 2011 as we look to 12% higher in 2010 than 2009. extend our global reach and strengthen in Good progress was made with our country networks giving us an ever corporate accounts team, refreshing greater addressable market. our entire product offering, providing Strategy targeted marketing support and Our vision is clear; to be where people systems, increasing headcount (from and businesses want to work and to be 30 to 79) and making four key senior the platform from which they work, be it management hires. As a result our mobile or fixed, virtual or physical, large sales picked up strongly in H2 and this company or small. As a result our team now has momentum into 2011. strategy is equally simple: to be in as • Streamlined Operations – 2010 saw many of those locations as quickly as we further significant progress with our can. That we are the only business that can aspire to this demonstrates the scale eCommerce rollout, specifically TITAN, of the opportunity in a world of more than Peoplesoft and Oracle which are now a billion mobile workers. firmly embedded within the business. A significant number of centre routines Strategic highlights and procedures were redesigned, freeing In 2010 we delivered a number of key up centre team time to dedicate to strategic initiatives which have customers. The centralisation of our back transformed the business. These are: office service functions to our shared www.regus.com/investor Regus plc Annual Report and Accounts 2010 07
  10. 10. Directors’ Report: Business ReviewChief Executive’s review continuedStrategy and objectives service centres was completed in Q4. Operational Review It is already delivering both operational Operationally 2010 has been a busy year and financial efficiencies; for example, for the Group. During Q4 alone we centralising our IT support desk has averaged a centre opening a day. Our already resulted in annualised savings strategy of controlled and disciplined Scale / growth has resulted in an increase in total of £1.5 million. 2011 will see further Density capacity (including non-consolidated centralisation including parts of the marketing, price and inventory functions. workstations) of 9% to 188,567 Partnerships Unique market workstations in the year and the number of position • Delivered Procurement, New Centre actual workstations by 8.8% to 178,084 cost efficiencies – Over 2010 we workstations as at 31 December 2010. continued our proactive approach to The group opened 125 new centres during driving cost and realising efficiency gains the year with the total number now Product throughout the business. Centralised standing at 1,084. Of these, 61 were as a and service Brand procurement programmes were put in result of organic growth of which 37 were innovation place and key hires made, the benefits opened on flexible, low risk leases. of which we believe will be felt in 2011 On a regional basis, revenues and centre Operational and beyond. Excluding the extra costs contribution can be analysed as follows: efficiency that have been incurred increasing the capacity of the business and some specific investments, since the second half of 2008 annualised savings have been made of circa £135 million. Our vision is clear; to be where people and businesses want to work and to be the platform from which they work, Revenue Contribution Mature margin (%)* be it mobile or fixed, virtual or physical, £ million 2010 2009 2010 2009 2010 2009 large company or small. As a result our Americas 436.9 423.8 99.1 92.9 24% 23% strategy is equally simple: to be in as EMEA 281.2 306.2 65.8 83.0 25% 28% many of those locations as quickly as Asia Pacific 141.7 132.3 36.4 40.3 29% 30% we can. That we are the only business UK 178.9 191.4 13.2 18.5 8% 10% that can aspire to this demonstrates Other 1.7 1.4 1.4 0.9 -- -- the scale of the opportunity in a world of more than a billion mobile workers. 1,040.4 1,055.1 215.9 235.6 22% 23% * The mature business is defined as the performance from centres owned and operated at 1 January 2009. Americas including 16 through acquisition. This Our business in the Americas comprises contributed to the increase in the average Canada, USA and the countries of Latin number of consolidated workstations from America, some 517 centres across 15 34,260 in 2009 to 36,120 in 2010. We countries. Our main business in the USA opened our first centres in Ghana, Oman, operates 411 centres. At actual exchange Tanzania and Lithuania (new cities Porto rates, the region delivered revenues of and Basel). £436.9 million – up 3.1% on 2009 with Asia Pacific average mature occupancy of 80% during Our business in Asia operates in 133 the period (2009: 79%). During the year, centres across 16 countries. The region we added 46 centres which contributed delivered revenues of £141.7 million, up to the increase in the average number of 7.1% on 2009, and achieved an average consolidated workstations from 72,277 in mature occupancy of 80% (2009: 76%). 2009 to 74,265 in 2010. During the year we opened 20 centres, The business made two key acquisitions in which increased the average number of November 2010; one in Dallas adding nine consolidated workstations from 21,390 in centres; and one in Brazil adding 16. The 2009 to 23,437 in 2010. latter acquisition makes us the number UK one workplace provider in that market. Conditions during 2010 continued to be EMEA extremely challenging with renewed Our business in EMEA encompasses 278 pressure on key performance indicators centres across 49 countries. The region and particularly price. Set against this delivered revenues of £281.2 million, down backdrop, the region delivered revenues 8.2% on 2009, and achieved an average of £178.9 million, down 6.5% on 2009 mature occupancy of 77% (2009: 80%). and achieved an average mature During the year we opened 36 centres, occupancy of 76% (2009: 78%). During08 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
  11. 11. the year, we opened 23 centres of which lower risk, flexible, sustainable and is It is important to state that our growth15 were through acquisition. This gradually increasing productivity as less strategy is based upon making our past Business Reviewincreased the average number of time is spent commuting and working in successes repeatable. We focus onconsolidated workstations from 33,528 in poorly equipped places. projects that we can do again and again,2009 to 34,851 in 2010. moving us from one level to the next. 7-11 – Leading US franchised Growth is always low risk and balanced. ItIn Q2 we embarked on a significant food retailer is never growth for its own sake.restructure of our UK lease portfolio; Since year end we have signed a deal withworking in partnership with our landlords 7-11 whereby they will close more than 35 The acquisitions we have made and themany were renegotiated and re-geared under-utilised regional offices. More than organic growth which has happenedand only three centres were closed. This 250 franchise managers will use the Regus alongside have expanded our served andprocess concluded in Q3 and will result in network establishing flexible zone offices in addressable market. We now have 1,084annualised savings of up to £15 million per Regus centres coupled with 250 days of centres worldwide Corporate Governanceannum. We are confident that in 2011 our meeting rooms per month and severalUK business will return to operating profit. hundred Businessworld cards. 7-11 will Outlook reduce overhead by eliminating small offices Against a tough economic backdrop theMarket opportunities – how from their property portfolio and franchise business delivered solid financial results inwe help our customers managers will have more time to spend with 2010, driven almost entirely by executionOur extensive geographic network offers their customers as they leverage more than of a range of key strategic initiatives; wea broad range of opportunities for Regus, 400 Regus business centres. have seen little benefit from any economicas organisations of all sizes begin to upturn. We have continued to invest in AT&T – Leading telecommunications growth, mature margins have held up wellseriously address structural inefficiencies service provider and cash flow continued to be strong,in their property portfolio and as pressure Use Regus offices in 18 countries reflecting the underlying health offrom workers increases to make work including Canada, China, Vietnam, the business. Financial Statementsmore flexible, in terms of both time and Denmark and Peru. Coupled with 500+geographic location. We remain cautious on the economy, businessworld cards AT&T rely on RegusBusinesses around the world, from the very to ensure flexibility and speed of response however we have been encouraged bylargest to the newest start-up, are especially when working on major new recent positive trends that reflect theincreasingly recognising the benefits of contracts in new or challenging markets. continued strategic delivery of the group. Inbeing property-light; reducing the number 2011 we are well positioned for a year ofof offices they lease. This then enables their Network growth solid revenue growth business improvementpeople to work where they need to, rather In an ever more mobile, nomadic world of with strong underlying cash-flow generation.than where they always have been and for work, our primary asset, our business Arguably the recession of the last two yearstheir business to realise the immediate centres, will remain the foundation for our has been good for our business; it made usbenefits of increased productivity and growth. Indeed it is our extensive take a long hard look at everything we did, Shareholder and Other Informationdecreased costs. As such, a move to network, virtually impossible to replicate in improve it and in doing so we have beenRegus is very much a commercial and the medium term, which is so attractive to transformed. That we have emerged fromfinancially driven decision; with the Regus our customers and prospects and from 2010 for the better is a testament to theadvantage regularly delivering savings of which we will create significant hard work and dedication of our global50-80% vs. a comparable traditional leased shareholder value. team of highly motivated individuals. Weoffice model. We are attractive to any size A larger network is necessary because: have restructured and streamlined ourof business and not just small and medium management; we have grown and openedsized businesses on a short term basis. • Our addressable market grows; locally up new markets; we have continued to60% of our customers use us for more from the businesses immediately innovate; we have radically improved ourthan 30 months; 40% of our customer surrounding the new location and sales and marketing; and we havebase is large corporates; and, 20% sole globally for multinational businesses that continued to automate and improve ourtraders and micro businesses. want to do business in that location; processes. We are a better business thanThe scale and density of our ever • We can leverage operational efficiencies; we were when the recession started andexpanding network, our strong track we will realise the benefits of the manyrecord of delivery, and our constant ability • Additional brand exposure; improvements made over the years toto innovate both product and service come. • We become an ever more attractivemean we are well placed to help our partner to other high profile global Finally, I would like to thank our employees,customers, both current and future, brands; and customers, shareholders, suppliers and alladdress the challenges of work, wherever other partners for their continuing support.they need us. For example:- • The barriers to competitive entry We look forward to an improved 2011 and become greater. the opportunity to grow our business andYell – UK based businessdirectory service As such continued growth is core to our in doing so lead our industry.Closed 18 under-utilised sales offices and strategy.transferred circa.700 sales consultants to Mark DixonRegus through our Businessworld model. Chief ExecutiveThis approach is more cost effective, 21 March 2010 www.regus.com/investor Regus plc Annual Report and Accounts 2010 09
  12. 12. Directors’ Report: Business ReviewFinancial reviewRobust cash generation This cash inflow has enabled the business to Revenue and gross profit (centre pay an increased dividend to shareholders contribution) (£23.2 million), buy back shares (£7.3 million), Revenue for the Group decreased 1.4% restructure the UK (£13.7 million to 31 to £1,040.4 million (2009: £1,055.1 December 2010). As well as invest in million) and gross profit (centre capacity growth (£69.7 million). contribution) decreased 8.4% to £215.9 million (2009: £235.6 million). Our net cash position at 31 December 2010 remained strong at £191.5 million compared This movement can be analysed as follows: to £237.0 million at 31 December 2009. £ million Revenue Gross profit Margin % FY 2009 1,055.1 235.6 22.3% Impact of exchange rates 16.3 4.4Despite the challenging FY 2009 at constant exchange rates 1,071.4 240.0 22.4% Change in mature business (60.8) (24.5)trading conditions Centres added in 2009 13.0 4.8experienced across Centres added in 2010 25.1 (7.0)all of our markets, the Centres closed (8.3) 2.6business has generated FY 2010 (pre exceptional costs) 1,040.4 215.9 20.8% Exceptional costs - (11.9)more cash in 2010 than it FY 2010 1,040.4 204.0did it 2009 with cash fromoperations increasing If we had translated our 2009 results The year on year impact of centre closures at 2010 rates revenue and gross profit was to reduce revenue by £8.3 million butto £109.7 million (2009 would have increased by £16.3 million increase gross profit by £2.6 million.£105.1 million). and £4.4 million respectively. On a Taking all this together margins (before constant currency basis revenue fellStephen Gleadle exceptional costs) reduced from 22.3% to by 2.9% and gross profit by 10.0%.Chief Financial Of cer 20.8%. Our mature or “like for like” business Administration expenses revenues decreased by £60.8 million and In 2010 administrative expenses (pre gross profit by £24.5 million driven by exceptional costs) increased by £28.1 reductions in price. This is partially offset million to £193.4 million. This increase by real reductions in costs and the can be broadly analysed as follows: transfer of some other costs into overheads. Administrative However, while the overall profitability has £ million costs fallen year on year mature margin has FY 2009 165.3 recovered during 2010. Impact of exchange rates 1.8 FY 2009 at constant £ million H2 2009* H1 2010* H2 2010* exchange rates 167.1 Mature revenue 494.5 489.9 490.3 Transfer of costs from centres 6.4 Mature gross Incremental costs associated profit 109.4 103.8 109.5 with capacity growth 5.3 Margin 22.1% 21.2% 22.3% 2010 investments * The above numbers are at constant currency and (sales, marketing and IT) 11.1 have been adjusted for the impact of certain costs Other cost movements 3.5 being moved into overheads during 2010. FY 2010 Centres added in 2009 contributed £13.0 (pre exceptional costs) 193.4 million of revenue and £4.8 million of Exceptional costs 3.9 gross profit, reflecting the improving FY 2010 197.3 occupancy and ability to reduce the normal start up losses as centres mature. £6.4m of costs were transferred from New centres in 2010 contributed £25.1 centres arising from both our programmes million of revenue but reduced gross profit to centralise certain functions and by £7.0 million due to the normal start up processes, previously carried out by losses incurred in establishing new centres. centre staff and from the annualised effect of other transfers made in 2009.10 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
  13. 13. As a result of adding workstations Cost reduction initiatives specific investments in 2010, since theoverhead costs are also adversely The cost management actions taken by second half of 2008 annualised savings Business Reviewaffected as we invest in such costs as the Group throughout 2009 have been have been made of circa £135 million.extra marketing, regional management, progressed in 2010, delivering further Operating profit (before exceptionallegal and other compliance costs. Year on cost savings in the underlying business. items)year the increase in these costs is The most significant savings are being Arising from the above operating profitestimated at £5.3 million. driven through centre costs, where we was £22.5 million (2009: £67.7 million), are now seeing the benefit of reducedTo drive enquiries and future revenue representing a margin of 2.2% (2009: rent and service charges. Cost savingsgrowth, the Group has invested an extra 6.4%). are also being made as we close£9.0 million in sales and marketing. In underperforming centres and the Exceptional itemsaddition, £2.1 million has been spent to centralisation of certain functions and During the year the Group has undertakencentralise our IT support structure which processes has contributed operational a UK restructuring programme and incurred Corporate Governancewill start to yield savings in 2011. efficiencies such as improved customer exceptional charges of £15.8 million. TheseNet of the above there has been an collections. costs relate to a combination of assetunderlying increase in overhead of write-downs, dilapidations, legal and The trend in the total cost base is shown£3.5 million. professional fees, relocation costs, below. Excluding the extra costs that reorganisation costs and ancillary closureGrowth costs have been incurred increasing the costs net of any onerous lease or otherAs the rate of capacity growth increases capacity of the business and some property related provision releases.the short term costs of this growth alsoincrease. To give shareholders a better Cost trend of base business at constant exchangeappreciation of the impact of this on our2010 profit and loss these costs have £million H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 Financial Statementsbeen estimated as follows: Base business 532.7 505.8 486.0 480.6 465.0 Growth costs 2.5 5.5 8.9 20.2 40.6 Growth£ million costs 2010 investments – – – 5.4 5.7Start up losses within centre Total costs 535.2 511.3 494.9 506.2 511.3contribution (including £2.7mof depreciation) (7.0) Of the net £15.8 million, £13.7 million has The lower interest payable of £0.5 millionCosts of teams that support so far been expended in cash. reflects costs associated with bankthe acquisition and overdrafts in a limited number of countries As a result of the programme annualisedimplementation of centres (4.7) and commissions on bank guarantees. rent savings have been achieved of up toIncremental marketing costs £15 million. The £0.8 million decrease in interest Shareholder and Other Informationto launch centres (1.9) receivable reflects the impact of lower Share of profit in joint venturesOther overhead costs (sales, global interest rates (reducing the Group’s The share of joint venture profitsfinance, legal, management) (4.6) average yield from 1.2% to 0.9% on a lower attributable to Regus decreased to £1.3 (18.2) average interest bearing cash balance of million (2009: £2.0 million). This reflects £204.8 million (2009: £219.2 million). the acquisition of one of our JV partnersIn arriving at this number there has been in December 2009 which is now fully Finance lease costs have remainedno allowance for general management consolidated. unchanged reflecting the continued lowtime and effort expensed across the level of finance lease liabilities held by thebusiness supporting growth which is also Financing costs Group. The amortisation of deferredlikely to be substantial. Financing costs can be summarised as financing fees relates to the facility follows:Using these estimates, before and after arrangement costs incurred for the newprofitability can then be summarised as credit facilities entered into during 2006follows: £ million FY 2010 FY 2009 and which were voluntarily surrendered in Interest payable (0.5) (1.6) April 2009 resulting in the recognition of Interest receivable 1.8 2.6 an accelerated amortisation charge of Before growth After growth £0.5 million in that year. The unwinding of£ million costs costs Finance lease interest (0.1) (0.1) discounted fair value adjustments on theEBITDA* 112.6 97.2 Non-cash: Regus UK acquisition resulted in a nonEBIT* 42.0 23.8 Amortisation of cash net financing charge of £1.4 million* Before exceptional costs. deferred financing fees – (0.5) in the period to 31 December 2010 (2009Taking into account an overall Non-cash: UK £1.5m).assessment of growth costs within the acquisition related (1.4) (1.5) Total financing Taxationbusiness and the expectation of further The Group has recognised a £5.9 millionincreases in capacity and therefore costs (0.2) (1.1) tax charge for the period (compared to arevenue, it is anticipated that an tax charge of £19.2 million in the‘ex growth’ overhead rate would becirca 12% of revenues. www.regus.com/investor Regus plc Annual Report and Accounts 2010 11
  14. 14. Directors’ Report: Business ReviewFinancial review continuedcomparative period). This includes a It is proposed, subject to shareholder position (including in particular UKdeferred tax charge of £0.5 million approval, to pay an increased final resident but non UK domiciled individualsassociated with the UK restructuring. dividend for 2010 of 1.75p (2009: 1.6p). who have elected to be taxed on a This will be paid on Friday 27 May 2011 to remittance basis) should consult their ownThe tax rate is 23.7%, excluding the shareholders on the register at the close of professional adviser without delay.exceptional item, compared to 26.9% pre business on Tuesday 26 April 2011.exceptional in the comparative period. Goodwill If approved, this will represent an 8% Regus has £282.4 million of goodwill inThe deferred tax charge of £28.4 million increase in the full year dividend the balance sheet principally arising fromincludes the reversal of previously increasing from 2.4p per share for 2009 the purchase in August 2004 of HQ Globalrecognised deferred tax assets on losses, to 2.6p per share for 2010. Holdings Inc. and the purchase in Aprilwhich no longer satisfy the Group’s 2006 of the remaining 58% interest in therecognition policy, giving rise to a decrease Since 2008, Regus shareholders have Regus UK business not already owned.in the deferred tax asset from £65.1 million been able to elect to receive eitherat 31 December 2009 to £37.1 million at Luxembourg-sourced dividends from Following the restructure of the UK31 December 2010. In addition, the Group Regus plc SA (“plc”) or UK-sourced business, the carrying value of thehas benefited from a credit in relation to dividends from a UK-resident subsidiary goodwill was tested for impairment andthe settlement of a number of tax audits in of plc (the “IAS arrangements”). The IAS this indicated that no impairment wasrelation to prior years. arrangements were put in place to allow necessary. Although the short term shareholders to choose the dividend performance of the business hasOn a cash basis, the Group paid £15.5 source which best suits their own tax worsened since the 2009 impairmentmillion in tax. Cash tax represents position. review was carried out, the adverseapproximately 65% of profit before tax impact of the resulting reduction in our(excluding the exceptional charge). This Following various changes in relevant tax anticipated future cash flows has beenarises largely because taxes paid in the year law and practice, however, the tax offset by the savings arising from the UKinclude final payments for earlier periods. implications of receiving a dividend from restructuring. It should be noted, either plc or a UK subsidiary should nowEarnings per share however, that the headroom in the UK be the same for most shareholders. InEarnings per share for the full year before goodwill calculations still remains low. It is order to enable the discontinuance of theexceptionals have decreased to 1.9p therefore possible that a future, non-cash, IAS arrangements, which are no longer(2009: 5.4p) with the impact of falling impairment may be necessary arising considered necessary, Regus hasunderlying operating profits partially offset from relatively small changes in implemented a restructuring. As a result,by cost savings. The average number of assumptions. all shareholders will be paid dividendsshares in issue decreased to 947,462,881 directly from plc, commencing with the(2009: 948,203,737) which reflects the final dividend to be paid to shareholdersnet impact of the reissue of treasury on or around Friday 27 May 2011. Allshares held by the Group in order to such dividends should be payable by plcsettle the exercise of share awards without deduction of Luxembourgpartially offset by the impact of share withholding tax, regardless of thepurchases. residence of the recipient.Dividend In general terms, UK residentA final payment relating to 2009 of shareholders receiving dividends from plc1.6p per share was paid in May 2010 in the future should be taxed in the samefollowing shareholder approval (H1 2009 way as if they had received a dividend1.2p per share). from a UK company. Tax outcomes do,An increased interim dividend relating to however, depend on the specific2010 of 0.85p per share (H1 2009 0.8p) circumstances of shareholders and anywas paid in October 2009. shareholder in doubt about their tax12 Regus plc Annual Report and Accounts 2010 www.regus.com/investor
  15. 15. Cash flow Our current annual property related leaseThe Group’s cash flow statement can be summarised as follows: rentals are circa £400 million per annum Business Review and the minimum contractual lease rentals on a GAAP basis total £1,557£ million FY 2010 FY 2009 million as disclosed in note 27 of ourCash from operations 109.7 105.1 audited Annual accounts, the NPV ofOther income 1.8 1.2 which is circa £1,100 million. HavingCash in 111.5 106.3 carried out our own analysis of what we believe to be our actual exposure, takingMaintenance capex (30.8) (20.2) into account commercial reality and from past experience, we estimate the NPV ofInterest and tax (15.4) (24.1) our minimum lease rental to be nearerFree cash flow 65.3 62.0 circa £553 million or a little less than one Corporate Governance and half years of lease rental.Acquisitions (17.0) 1.0 Principal risks and uncertaintiesNew centre openings and property purchase (42.7) (26.7) The principal risks and uncertaintiesShare buybacks, settlement of share awards and dividends (31.4) (20.4) affecting Regus plc remain unchangedExceptional (cost)/receipt (13.7) 18.3 from those detailed in the Regus plc 2009Other (3.0) (1.9) Annual Report and Accounts.Cash out (107.8) (29.7) The principal risks and uncertainties described in the 2010 Annual Report andChange in cash & cash equivalents (42.5) 32.3 Accounts are:Opening cash 245.1 219.5 Financial Statements • Risk of economic downturn inFX 2.0 (6.7) significant markets;Closing balance – Cash, cash equivalentsand liquid investments 204.6 245.1 • Exposure to movements in property markets;Cash flow from operations has increased The net cash balance can be analysed as • Exposure to movements in exchange£4.6 million from £105.1 million to £109.7 follows: rates;million despite the reduction in operatingprofit. This arose from a net working • Risks associated with the Group £ million FY 2010 FY 2009capital inflow in 2010 in contrast to an reorganisation and restructuring; andoutflow in 2009. Cash, cash equivalents and liquid • Risk associated with centrally managed Shareholder and Other InformationThe increase in free cash flow is £3.3 investments 204.6 245.1 applications and systems.million arising from lower interest and tax Bank and other loans (8.9) (6.0)payments offset by increased Related parties Finance leases (4.2) (2.1) Details of related party transactions thatmaintenance spend in our centres, in Net financial assets/ have taken place in the period can beparticular in the UK. net cash 191.5 237.0 found in note 29 to the 2010 AnnualThis cash inflow has enabled the business Report and Accounts. There have beento pay an increased dividend (£23.2 Of the balance of £191.5 million, £93.6 no changes to the type of relatedmillion), buy back shares (£7.3 million), million was held in Group immediately transactions entered into by the Group asrestructure the UK (£13.7 million to 31 available for use, £65.3 million was held in described in the Regus plc 2009 AnnualDecember 2010) as well as invest in the regions and £32.6 million is set aside Report and Accounts that had a materialcapacity growth (£54.2 million) and to support letters of credit the business effect on the financial statements for thefinance the purchase of our first property has issued and various other period ended 31 December 2010.(£5.5 million). In 2010 we have opened or commitments of the Group.acquired 125 centres. Risk management and leasing Stephen Gleadle With the recent publication of an Chief Financial Of cer Exposure Draft on lease accounting there 21 March 2011 has been increased focus on the extent of our lease liability. While the contents of any potential new accounting standard remain uncertain it is not possible to estimate how or what impact on our financial statements this might have. However, I can provide some insight into our lease exposures. www.regus.com/investor Regus plc Annual Report and Accounts 2010 13
  16. 16. Directors’ Report: Business Review Corporate responsibility Practicing sustainable businessBeing a global business carries great YTD rolling kg CO2 pa per occupied workstation (in UK business)responsibility. Even though our footprintis large, we seek to keep sustainability 180at the core of how we conduct business.Regus aims to bring employment andresponsible investment in communitiesaround the world while carefully 170considering the environment.Our representative to the Board forCorporate Responsibility in organisationalgovernance is the Company Secretary.Corporate Responsibility (CR) at Regus is 160now overseen by the Chief SustainabilityOfficer and our framework is based on ISO26000. This comprehensive standardprovides guidance on social responsibilityand has seven core subjects as its 150 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Decfoundation – the environment; humanrights; labour practices; consumer issues; 2008 2009 2010fair operating practices; organisationalgovernance and community involvement It remains our intention to reduce The above table shows a:and development. It supports principles and our carbon footprint by 50% byguidelines of the United Nations (UN) and 2020 using our 2007 baseline. • 10.28% reduction in the carbonInternational Labour Organization (ILO). footprint per occupied workstation We recognise that we have not from 2007 levels;In supporting the three dimensions of achieved our targets in waste, watersustainability – economic, social and and transport reductions as set out in • 6.23% reduction in the carbonenvironmental, CR at Regus will also our last annual report but in June 2010 footprint per occupied workstationhave three dimensions – stakeholders, we introduced a behavioural change from 2009 levels.the environment, and community programme to encourage Greenerinvolvement and development. Working. This campaign includes aAs a global company our stakeholders variety of behavioural changes coupledare diverse and include individuals, with a series of energy and carbongroups and organisations. Core to the saving practices across the estate.nature of our business, key stakeholders Each centre now has an appointedfor Regus are our employees, customers, a Greener Working Champion whoseshareholders, property agents and primary role is to reduce energy, andlandlords, and suppliers. The health, water consumption, encourage recyclingsafety and security of our stakeholders and promote greener working amongstis also paramount to our business. customers, clients and suppliers. Dry Mixed recycling was also introduced inOur environmental considerations 2010 and is being successfully adoptedinclude reviewing our carbon footprint, by our staff and customers.waste avoidance, water usage as well asprocurement and travel policies. In the UK Our community involvement andRegus continues to make solid progress development will focus on forgingin its environmental performance. The sustainable relationships with communitiesstrategy outlined in last year’s annual in the areas of education and skillsreport targeted a 20% reduction in development, particularly as they relate tocarbon footprint in 2010 based on our business creation. Our team members will2007 baseline (see table opposite). Whilst continue to support a wide variety ofthis target was not met we did achieve a charitable organisations, large and small.10.28% reduction and this coupled with Of particular note in 2010 our US teamour successful Carbon Trust Accreditation raised more than US$50,000 for thein May 2010 clearly demonstrates that Susan G Komen charity, a grassrootswe are taking our environmental impact breast cancer support network.and performance seriously. The emissionsmetric we are using to measure and trackour carbon footprint is that of kg of CO2per occupied workstation, which hasbeen accepted by the Carbon Trust asa unique measure for our business.14 Regus plc Annual Report and Accounts 2010 www.regus.com/investor

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