TIDMRGU
RNS Number : 5986G
Regus PLC
09 August 2016
9 August 2016
REGUS PLC - INTERIM RESULTS ANNOUNCEMENT - SIX MONTHSED 30 JUNE
2016
Strong profit growth and cash generation, increased dividend,
improving efficiency and attractive returns
Regus, the leading global workspace provider, today announces
its half year results for the six months ended 30 June 2016.
Key highlights:
-- Continued strong post-tax cash returns. Up 180bp on pre-12
investment to 24.8%(i)
-- Group revenues up 10.3% to GBP1,077.6m and underlying
operating profit up 30%(ii) to GBP90.0m
-- Overheads reduced 9% (ii) ; down 2.8ppt as a percentage of
revenues to 12.6%
-- Strong cash generation (before net growth capital
expenditure, share buybacks, dividends and non-recurring items) of
GBP142.6m or 15.3p per share
-- Underlying earnings per share up 36% (ii) to 7.3p
-- Prudent financial position maintained with net debt of
GBP173.8m (0.5x net debt:LTM underlying EBITDA)
-- Strong banking support: Key banking facility increased to
GBP550m and maturity extended to 2021, with option to extend to
2023
-- 11% increase in interim dividend to 1.55p (H1 2015 :
1.4p)
-- Full year profit expected to be in line with management
expectations
% change
% change constant
GBPm H1 2016 H1 2015 actual currency currency
---------------------------------------------------- -------- ------- ---------------- ---------
Revenues 1,077.6 937.0 15.0% 10.3%
Gross profit (centre contribution) 225.2 209.0 8% 3%
Overheads (135.6) (144.4) (6)% (9)%
Underlying operating profit (Inc. JV) 90.0 65.0 38% 30%
Non-recurring items (iii) (0.9) 21.3
Reported operating profit (Inc. JV) 89.1 86.3 3% (3)%
Underlying profit before tax 85.2 57.8 47% 38%
Reported profit before tax 84.3 79.1 7% 0%
Underlying earnings per share (p) 7.3 4.9 49% 36%
Reported earnings per share (p) 7.2 7.2 0% (7)%
Dividend per share (p) 1.55 1.40 11%
Underlying EBITDA 178.6 136.3 31% 24%
Post-tax cash return on Investment (i) 24.8% 23.0% Up 180bp
Cash flow before net growth capex and dividends 142.6 79.9 78%
Net debt 173.8 136.9
Net debt : EBITDA - Last 12 months (x) (underlying) 0.5x 0.5x
---------------------------------------------------- -------- ------- ---------------- ---------
(i) Calculated as: EBITDA less amortisation of partner
contributions, less tax based on EBIT, less net maintenance capital
expenditure / growth capital less partner contribution. Returns
based on those locations open on or before 31 December 2011.
Prepared on a last twelve month (LTM) basis to 30 June 2016 and for
2015 on the 12 months to 31 December 2015.
(ii) At constant currency
(iii) See note 3 to the accounts
Operational highlights
-- Returns on new investment benefiting from operational scale
and further efficiencies
-- New cluster field structure implemented in H1 2016 with
additional simplification of the business to drive productivity
-- Further network expansion, with a net growth capital
investment of GBP83.1m and 113 locations added in H1 2016
-- Now in 2,845 locations, across 1,008 towns and cities and
opened in our 107th country, Barbados
-- As of 27 July 2016 visibility on net growth capital
expenditure for the whole of 2016 of approximately GBP120m,
representing some 350 locations and 4.5m sq ft of additional
space
-- Evidence of increasing traction on partnering deals, allowing
Regus to maintain strong returns on capital invested
-- Continued strong focus on risk management
Mark Dixon, Chief Executive of Regus, said:
"We have traded in line with our expectations for the first
half, delivering strong profit growth and cash generation. The
returns profile of our business remains highly attractive, with
investments performing at or above plan. We continue to invest
where we see attractive opportunities that adhere to our strict
financial criteria and currently have visibility on net growth
capital expenditure totalling GBP120m for the whole of 2016,
representing approximately 350 locations.
As global macro-economic uncertainty has clearly increased
during 2016 and we have seen softening in revenue growth in some
markets on the back of that, we have planned prudently for 2016 and
taken specific action early in the year to improve efficiencies
across the business. We are confident in the long-term structural
drivers of the industry and that Regus, as global market leader
with a highly diversified business, will continue to strengthen its
position through its resilient and cost efficient operating model,
strong cash generation and balance sheet. We are focussed on
delivering key projects and implementing our long-term strategy to
create shareholder value, whilst maintaining our disciplined and
flexible approach to investment. We remain confident of delivering
a full year profit performance in line with management's
expectations."
Details of results presentation
Mark Dixon, Chief Executive Officer, and Dominik de Daniel,
Chief Financial Officer and Chief Operating Officer, are hosting a
presentation today for analysts and investors at 9.30am at
CityPoint, 1 Ropemaker Street, EC2Y 9HT.
For those unable to attend the presentation, please contact
Jessica Ayres to obtain details for the webcast or conference call:
jayres@brunswickgroup.com or
+44 (0) 20 7396 7466
For further information, please contact:
Regus plc Tel: +352 22 9999 5160 Brunswick Tel: +44(0) 20 7404
Mark Dixon, Chief Executive Officer 5959
Dominik de Daniel, Chief Financial Officer & Nick Cosgrove
Chief Operating Officer Gabrielle Silver
Wayne Gerry, Group Investor Relations Director Rosheeka Field
Chief Executive Officer's review
We are the leading global business in the fast-growing flexible
workplace market. Our strategy addresses the clear structural
growth drivers in the market. We are facilitating the trend towards
outsourcing and by partnering more with the companies that own and
fund real estate, we bring together investors in property and our
fast-growing global customer base. We are also helping to
facilitate the growth in the sharing economy. These trends are
being augmented by increasing awareness of our industry.
We have detailed plans for extending our leadership across the
world, outperforming our competitors in our speed of expansion,
operational efficiency and the relevance and quality of our service
offering. Business planning is therefore critical as we go forward.
The simpler our business is to operate, together with the current
roll out of a number of local service centres, the more we enhance
the service we provide to our customers. As a growth business,
having a clear and sophisticated approach to planning is critical
to our continued success. Our agile management structure also
ensures we can be nimble in the market, demonstrating both the
appropriate degree of restraint in the short term but also well
positioned to capitalise on positive sector growth at the right
time.
We are pleased with the strong financial returns, improved
operating margin, profit and significant cash generation we have
delivered in the period. The first half of 2016 has been an
important period for the continued development of Regus and we have
implemented important changes that will place the Group in an even
stronger position to address the significant structural growth
opportunity in flexible workspace. We can continue to improve our
competitive advantage to provide a more resilient business
model.
We implemented, as previously announced, the change to the field
structure by introducing a clustering approach to the local
management of locations. This has improved the cost structure of
the business going forward and will lead to higher productivity and
revenue opportunities.
We are confident that Regus, as market leader, will continue to
strengthen its position and build resilience through its cost
efficient operating model and strong cash generation and balance
sheet.
Strong first half financial performance
The last 12 month post-tax cash return on net growth capital
expenditure achieved from locations opened on or before 31 December
2011 was 24.8%, an improvement of 180bp on the returns for the same
estate in 2015 and a level well above our cost of capital. Rolling
forward one additional year group, the last 12 month post-tax cash
return on investment from locations opened on or before 31 December
2012 was up 190bp to 23.3%.
Group income statement
% Change % Change
(actual (constant
GBPm H1 2016 H1 2015 currency) currency)
=================================== ======= ======= ========== ==========
Revenue 1,077.6 937.0 15.0% 10.3%
Gross profit (centre contribution) 225.2 209.0 8% 3%
Overheads (inc. R&D) (135.6) (144.4) (6)% (9)%
=================================== ======= ======= ========== ==========
Underlying operating profit* 90.0 65.0 38% 30%
=================================== ======= ======= ========== ==========
Non-recurring items (0.9) 21.3 - -
Operating profit* 89.1 86.3 3% (3)%
=================================== ======= ======= ========== ==========
Underlying profit before tax 85.2 57.8 47% 38%
=================================== ======= ======= ========== ==========
Profit before tax 84.3 79.1 7% 0%
Underlying taxation (17.3) (11.9)
Taxation (16.9) (11.9)
Underlying profit for the period 67.9 45.9 48% 35%
Profit for the period 67.4 67.2 0% (7)%
Underlying EBITDA 178.6 136.3 31% 24%
EBITDA 177.7 157.6 13% 7%
=================================== ======= ======= ========== ==========
* After contribution from joint ventures
Group revenue increased by 10.3% at constant currency to
GBP1,077.6m (H1 2015: GBP937.0m) (15.0% at actual rates). Our
revenue growth rate at constant currency decelerated from 14.5% in
the first quarter to 6.4% in the second quarter. Approximately half
of the reduction reflects the base-line effect of acquisitions. The
remainder is primarily a function of softening demand and our
decision in certain specific markets to take a more cautious
approach to lease renewals and use the opportunity in some
instances to consolidate locations. Nonetheless quarterly revenues
are up sequentially albeit not to the same extent as last year.
Underlying operating profit, before the net non-recurring loss of
GBP0.9m, increased to GBP90.0m, up 30% at constant currency (38% at
actual rates). Including the non-recurring items, our statutory
operating profit was 3% lower at constant currency at GBP89.1m (up
3% at actual rates).
We invested GBP83.1m in net growth capital expenditure during
the period, adding a further 113 new openings to the network, which
stood at 2,845 locations at the end of the half year. This is lower
than the 231 locations added in the equivalent period last year for
a net investment of GBP120.0m, which is illustrative of our
adopting a more selective approach to new location openings and a
significantly lower level of acquisitions completed.
The deliberate attention to selectively improve pricing,
especially in high occupancy locations, at the risk of short-term
occupancy was the right decision for the long-term. Rebuilding
occupancy at these better pricing levels, we believe, will be
positive for the Group going forward. In the short-term, the
improvement in price has broadly compensated for the loss of
occupancy in those locations that were open on or before 31
December 2013, see table below. As a consequence the gross margin
on these centres for the first 6 months of 2016 was 26.0%, broadly
similar to the 26.3% achieved in the first half of 2015. The
improvement in Mature business margin from 23.8% to 24.9% for the
first half reflects the much improved margin from those locations
added during 2014 which joined the Mature business on 1 January
2016. We have also seen an improvement in the margin of those
locations added during 2015, which is in line with our
expectations. The initial margin achieved by our new 2016 locations
is on track and reflects that the openings are predominately
organic.
Gross margin
Revenue GBPm Gross margin %
================ ================
H1 2016 H1 2015 H1 2016 H1 2015
=========================== ======= ======= ======= =======
2013 Aggregation 832.7 806.6 26.0% 26.3%
New 14 100.8 80.4 15.2% (1.4)%
New 15 127.7 31.0 (2.0)% (10.0)%
=========================== ======= ======= ======= =======
Pre-16 1,061.2 918.0 21.6% 22.6%
New 16(1) 8.5 - (67.1)% -
=========================== ======= ======= ======= =======
Group (including closures) 1,077.6 937.0 20.9% 22.3%
=========================== ======= ======= ======= =======
1 New 16 includes any cost incurred in 2016 for centres which will open in 2017.
Through a clear focus on overhead costs, strengthening our
controls and processes and implementing the new cluster approach to
the field structure, we have further improved the operational
effectiveness of our business. As a result the total Group
overheads actually reduced by 9% at constant currency despite a 15%
increase in the size of our network over the last 12 months.
Accordingly, total overheads as a percentage of revenues further
reduced from 15.4% to 12.6%.
Underlying operating profit has consequently improved strongly
from GBP65.0m for the first half of 2015 to GBP90.0m for the 6
months to 30 June 2016. We have again converted this strongly into
cash. Cash flow after maintenance capital expenditure represented
158% of underlying operating profit. This remains an attractive
feature of our business model. Cash generated before investment in
growth, dividends and share repurchases, increased 78% to GBP142.6m
(H1 2015: GBP79.9m) reflecting the good level of profitability and
strong working capital management. After taking the net growth
capital expenditure of GBP83.1m and after paying dividends of
GBP28.9m and spending approximately GBP12.6m buying our own shares
as a further hedge against the cost of the exercise of options,
cash-settling the exercise of some options and settlement of the
Schuldschein related derivatives, Group net debt reduced from
GBP190.6m at 31 December 2015 to GBP173.8m at 30 June 2016. This
represents an underlying Group net debt : LTM EBITDA leverage ratio
of 0.5 times, which is well below our internal 1.5 times limit and
reflects our continued prudent approach to the Group's capital
structure.
Regional mature performance
On a regional basis, mature* revenues and contribution can be
analysed as follows:
Mature gross margin
Revenue Contribution (%)
================ ================ =====================
GBPm H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015
============= ======= ======= ======= ======= ========== =========
Americas 398.4 373.8 93.7 89.0 23.5% 23.8%
EMEA 198.7 187.7 52.1 42.9 26.2% 22.9%
Asia Pacific 146.6 136.8 37.9 32.8 25.9% 24.0%
UK 188.0 187.9 47.3 46.9 25.2% 25.0%
Other 1.8 0.8 1.0 (0.9)
Total 933.5 887.0 232.0 210.7 24.9% 23.8%
============= ======= ======= ======= ======= ========== =========
* Centres open on or before 31 December 2014.
Americas
The Americas remains our largest region. Total revenues
increased 8.5% to GBP438.0m (up 14.7% at actual rates), primarily
due to the development of the locations added most recently. On a
like-for-like basis, mature revenues increased 0.8% at constant
currency to GBP398.4m (up 6.6% at actual rates) driven by good
demand in the US partially offset by Latin America and Canada.
Brazil has continued to see an improvement in its business but
Mexico has slowed during the first half. We have a good business in
Canada but it has had to contend with challenging market conditions
in Western Canada, particularly around the region's oil industry.
Average mature occupancy was 79.5% (H1 2015: 79.6%). The gross
profit margin remained solid at 23.5% and we have since simplified
our business structure which has led to a significant reduction in
the region's overheads.
We added 48 new locations during the first half, expanding
geographically into more parts of the region. We also announced the
opening of our 107(th) country, Barbados, through a partnering
agreement. In total we had 1,180 locations in the region at 30 June
2016. The average number of available workstations increased from
144,053 to 169,828, with a total of 173,927 at the period end.
EMEA
Our EMEA business has performed well. The reported revenues of
our EMEA business have also benefited from the weakness of sterling
against the euro. Total revenues increased 9.3% to GBP229.4m at
constant currency (up 14.9% at actual rates). Mature revenues on a
constant currency basis increased 0.8% to GBP198.7m but were up
5.9% at actual rates. Occupancy on the Mature business increased
from 74.7% to 78.7%, reflecting the continued maturation of the
newer year group additions within the mature business. There was a
good improvement in the gross profit margin from 22.9% in the first
half of 2015 to 26.2% for the six months to 30 June 2016. During
the first half we added 27 new locations, taking the total number
of locations to 754. The average number of workstations increased
from 74,480 to 89,539. At period end we had 93,383
workstations.
We have experienced strong growth in the diverse regions of the
Middle East and Africa. In Europe, across the many countries in
which we operate, there has been a mixture of performance, but the
overall result has been good. We have experienced good performances
in Continental Europe and are looking to invest further in Germany,
Austria, Sweden and Italy among others. Turkey and Belgium,
however, experienced tougher market conditions. Russia has also
been a difficult market requiring the renegotiation of rental
agreements, which is now complete. As in the past, these
challenging conditions also provided opportunities and we have seen
an increase in partnership deals in the region.
Asia Pacific
Asia Pacific has been our fastest growth region overall, with 30
new locations being added to take the total locations in the region
to 573. Reflecting the growth we have seen in recent years, overall
revenues in the region increased 17.2% at constant currency to
GBP172.0m (up 23.6% at actual rates). Mature revenue growth was
stronger than the Group average with an increase of 1.7% to
GBP146.6m at constant currency (up 7.2% at actual rates). Mature
occupancy increased to 79.0% (H1 2015: 77.5%) driven primarily by
the continued maturation of the locations added during 2014. The
expansion in 2014 also saw the Group broaden its position in the
region with the addition of lower relative REVPOW markets and the
expansion of existing ones such as China, India and Indonesia.
Gross margin increased from 24.0% to 25.9%. The average number of
workstations increased from 72,612 to 93,501. At the end of the
period we had 96,257 workstations, making it our second largest
region.
There remains significant opportunity for growth in Asia Pacific
both from building out in existing countries and adding new
countries. We have continued to expand our business in India which
has remained strong. China continues to grow but the rate of growth
has decelerated and our focus now is on growth through partnership
deals. Japan has witnessed a slowdown in demand from international
companies, in part as a result of the Japanese yen/US dollar
exchange rate.
UK
Total revenues in the UK increased 9.6% to GBP236.4m. Mature
revenues were unchanged at GBP188.0m (H1 2015: GBP187.9m). In part
this reflects that we have grown our UK business predominately
through acquisitions in recent years, which generally do not
exhibit the same maturation profile of an organic opening. Growing
by acquiring portfolios of leases signed at a more attractive point
in the cycle reflected our more cautious approach to the commercial
property market, especially in London. The UK economy was also
softening slightly before the UK Referendum on EU membership.
Mature occupancy in the first half was 76.0% compared to 82.0% in
the corresponding period in 2015. A significant factor behind this
reduction was a more than 6% increase in available inventory due to
space optimisation which took place during the first 6 months of
2016. Our UK business also selectively sought improved pricing at
the expense of some occupancy in the near-term. Mature gross margin
remained strong at 25.2% (H1 2015: 25.0%). The UK, whilst already a
very operationally efficient business, contributed to the strong
overhead performance, which increased operating profit
significantly.
Reflecting our selective and prudent approach to growth, during
the first half of 2016, only 8 new locations were added in the UK,
predominately outside of London, taking the total number of
locations to 338, net of closures. We are continuing to see more
growth in regional locations in the UK, particularly through
partnership deals, to complement our presence in the major cities.
Total average workstations increased from 62,597 to 72,775 with
72,805 at the period-end.
Outlook
We have traded in line with our expectations for the first half,
delivering strong profit growth and cash generation. The returns
profile of our business remains highly attractive, with investments
performing at or above plan. We continue to invest where we see
attractive opportunities that adhere to our strict financial
criteria and currently have visibility on net growth capital
expenditure totalling GBP120m for the whole of 2016, representing
approximately 350 locations.
As global macro-economic uncertainty has clearly increased
during 2016 and we have seen softening in revenue growth in some
markets on the back of that, we have planned prudently for 2016 and
taken specific action early in the year to improve efficiencies
across the business. We are confident in the long-term structural
drivers of the industry and that Regus, as global market leader
with a highly diversified business, will continue to strengthen its
position through its resilient and cost efficient operating model,
strong cash generation and balance sheet. We are focussed on
delivering key projects and implementing our long-term strategy to
create shareholder value, whilst maintaining our disciplined and
flexible approach to investment. We remain confident of delivering
a full year profit performance in line with management's
expectations.
Mark Dixon
Chief Executive Officer
9 August 2016
Chief Financial Officer's review
Return on investment
We remain clearly focussed on driving cash returns that achieve
our post-tax cash payback criteria, which typically is within four
years. We have achieved our goal with a further improvement in the
returns delivered. For the last 12 months to 30 June 2016, the
Group delivered a post-tax cash return of 24.8% in respect of
locations opened on or before 31 December 2011 (up from 23.0% on
the same estate for the 12 months to 31 December 2015).
Incorporating the centres opened during 2012, the Group delivered a
post-tax cash return of 23.3% in respect of all locations opened on
or before 31 December 2012 (the equivalent return for the 12 months
to 31 December 2015 on the same estate was 21.4%).
This strong performance reflects the underlying progress in the
profitability of the Group from the continued focus on efficiency
and productivity, and the economies of scale on overheads that we
enjoy as the Group continues to grow.
The table below also shows the status of our centre openings by
year of opening, with pleasing progress in the development of
returns for centres added in 2012, 2013 and 2014 as they continue
to progress towards full maturity.
Post-tax cash return(1) on net investment by year group - LTM to
30 June 2016
08 &
Year of opening earlier 09 10 11 12 13 14 15 16
----------------------------- -------- ----- ----- ----- ----- ----- ----- ------ ------
(8.8)%
Post-tax cash return 25.7% 10.1% 25.9% 21.6% 16.1% 13.4% 2.7% (9.6)% (3)
----------------------------- -------- ----- ----- ----- ----- ----- ----- ------ ------
Net growth investment on
locations opened in year(2)
GBPm 544.3 20.7 52.5 78.5 142.5 242.6 160.8 255.0 84.5
----------------------------- -------- ----- ----- ----- ----- ----- ----- ------ ------
2015 Post-tax cash return on net investment by year group - 12
months to 31 December 2015
08 &
Year of opening earlier 09 10 11 12 13 14 15 16
----------------------------- -------- ---- ----- ----- ----- ----- ------ ------ ---
(8.6%)
Post-tax cash return 24.1% 8.5% 20.0% 20.7% 13.7% 10.2% (8.1)% (4) -
----------------------------- -------- ---- ----- ----- ----- ----- ------ ------ ---
Net growth investment on
locations opened in year(2)
GBPm 544.3 20.7 52.5 78.5 142.5 242.6 160.8 255.0 9.5
----------------------------- -------- ---- ----- ----- ----- ----- ------ ------ ---
(1) These returns are based on the post-tax cash return divided
by the net growth capital investment. The post-tax return is
calculated as the EBITDA achieved, less the amortisation of any
partner capital contribution, less tax based on the EBIT and after
deducting maintenance capital expenditure. Net growth capital
investment is the growth capital after any partner contributions.
We believe this provides an appropriate and conservative measure of
cash return.
(2) These amounts relate to net investment based on the year of
opening of the centre. Depending on the timing of opening, some
capital expenditure can be incurred in the calendar year before or
after opening. These amounts are also adjusted for net investment
relating to closures.
(3) 2016 return on net growth investment based on actual results
for the six-months to 30 June 2016 on investment made in 2016 up to
30 June.
(4) 2015 return on investments made in 2015 is based on the
results for the period that the locations were open.
Developing the network
We continue to grow our unrivalled network but we approached
2016 with a high level of vigilance. We have always applied maximum
focus to the investment decision process, which is so critical to
our ultimate success in meeting our stringent financial hurdles.
During the first six months of 2016 we became even more selective
given the challenging macro-economic outlook. During the first half
we invested GBP83.1m of net growth capital expenditure, adding a
further 113 locations to the network. The significant majority
being organic openings in contrast to the corresponding period last
year which included a number of acquisitions. These locations added
approximately 1.7m sq ft, taking the Group's total space globally
to approximately 47m sq ft as at 30 June 2016. In the first six
months of 2015 we invested net growth capital expenditure of
GBP120.0m, adding 231 locations, the equivalent of 5.7m sq ft of
space. We remain confident that the returns from these investments
will, in due course, be in line with the returns we generate on our
older year group investments. This investment in developing our
network continues to increase the depth and breadth of our
geographic scope, our ability to address different styles of
working and price points. This is a major differentiator for Regus
and provides a competitive advantage as well as building further
resilience into the business.
We have a good pipeline of new openings and many more are
capital light opportunities through partnering deals. As a result
we anticipate increasing the proportion of our leases with partners
that are variable in nature. As of 27 July we had visibility on net
capital expenditure so far for the whole of 2016 of approximately
GBP120m, representing approximately 350 locations and 4.5m sq ft of
additional space.
Operational developments
We have completed the implementation of some important changes
to our business which we see as crucial to maintaining our industry
leadership and competitive positioning in the long-term. In the
short-term the scale of these changes will have had an impact on
the focus of the business in the earlier months, in addition to
increasing macro uncertainties around the world. Nonetheless we
believe these were the right actions to take and will bring major
benefits to the Group, especially in the current environment.
Probably the most important change was the introduction of a
clustering approach to the management and organisation of our
locations. We believe this will better promote the active marketing
of the product range across the cluster, including format and price
point. Moreover, the unrivalled scale of our business provides us
with the opportunity to automate more processes to allow our
employees to have greater focus on customer service. We believe
these changes will generate many positives for our business, but in
addition they have also increased the productivity in our business
at a time when agility may increase in importance.
Non-recurring items
During the first six-months of 2016 we have reported a net loss
of GBP0.9m. This is in of respect of three items: the receipt of
funds following the settlement of a third-party litigation action
in the UK; additional provision relating to a litigation action in
California; and a fair value adjustment to assets held for sale,
which were disposed of subsequent to the half year.
The non-recurring gain reported in the interim results for 2015
related to the sale of various portfolios of property assets
acquired during 2014. The disposal raised GBP84m of cash before
expenses and resulted in a non-recurring profit of GBP21.3m after
expenses.
Except where specifically mentioned, the following commentary
and profit and loss analysis excludes the impact from these
non-recurring items.
Financial performance
Group income statement (before non-recurring items)
% Change % Change
H1 2016 H1 2015 (actual (constant
GBPm Underlying Underlying currency) currency)
=================================== =========== =========== ========== ==========
Revenue 1,077.6 937.0 15.0% 10.3%
Gross profit (centre contribution) 225.2 209.0 8% 3%
Overheads (including R&D) (135.6) (144.4) (6)% (9)%
Joint ventures 0.4 0.4
=================================== =========== =========== ========== ==========
Operating profit 90.0 65.0 38% 30%
Net finance costs (4.8) (7.2)
=================================== =========== =========== ========== ==========
Profit before tax 85.2 57.8 47% 38%
Taxation (17.3) (11.9)
Effective tax rate 20.3% 20.6%
=================================== =========== =========== ========== ==========
Profit for the period 67.9 45.9 48% 35%
=================================== =========== =========== ========== ==========
Basic EPS (p) 7.3 4.9 49% 36%
Depreciation & amortisation 88.6 71.3
EBITDA 178.6 136.3 31% 24%
=================================== =========== =========== ========== ==========
Revenue
Group revenues increased 10.3% at constant currency to
GBP1,077.6m (H1 2015: GBP937.0m), an increase of 15.0% at actual
rates. This strong improvement reflects stable underlying
like-for-like Mature growth and the contribution from additional
locations. Mature revenues (from 2,179 like-for-like locations
added on or before 31 December 2014) grew 0.9% at constant currency
to GBP933.5m (H1 2015: GBP887.0m), up 5.2% at actual rates. This
represents a deceleration in the pace of year-on-year growth in the
second quarter compared with the first quarter from 14.5% in Q1 to
6.4% in Q2. Approximately half of the reduction reflects the
base-line effect of acquisitions and remainder primarily a function
of softening demand. Mature occupancy was 78.6% (H1 2015:
78.5%).
Gross profit
Group gross profit improved 3% at constant currency rates to
GBP225.2m (H1 2015: GBP209.0m), up 8% at actual rates. The
reduction in Group gross margin from 22.3% to 20.9% again reflects
the dilution from a relatively large number of immature locations
resulting from the significant investment in growing the network
over recent years (see table below). The mature gross margin
improved more than one percentage point from 23.8% to 24.9%.
Gross margin
Mature New Closed
centres centres centres Total
GBPm H1 2016 H1 2016 H1 2016 H1 2016
=================================== ======== ======== ======== ========
Revenue 933.5 136.2 7.9 1,077.6
Cost of sales (701.5) (144.5) (6.4) (852.4)
=================================== ======== ======== ======== ========
Gross profit (centre contribution) 232.0 (8.3) 1.5 225.2
=================================== ======== ======== ======== ========
Gross margin 24.9% (6.1)% 19.0% 20.9%
=================================== ======== ======== ======== ========
Mature New Closed
centres centres centres Total
H1 2015 H1 2015 H1 2015 H1 2015
=================================== ======== ======== ======== ========
Revenue 887.0 31.0 19.0 937.0
Cost of sales (676.3) (34.1) (17.6) (728.0)
=================================== ======== ======== ======== ========
Gross profit (centre contribution) 210.7 (3.1) 1.4 209.0
=================================== ======== ======== ======== ========
Gross margin 23.8% (10.0)% 7.4% 22.3%
=================================== ======== ======== ======== ========
Further overhead efficiency gains
As anticipated, we have achieved further scale benefits but have
also reduced overheads in absolute terms. Some of the changes we
implemented to our business model and structure to improve future
performance and productivity also helped to streamline our overhead
further. As a consequence, in spite of further controlled growth of
the business, total overheads actually declined by 9% at constant
currency to GBP135.6m (down 6% at actual rates). As a percentage of
revenues, total overheads declined from 15.4% in the first half of
2015 to 12.6% for the first six-months of 2016. This also
represents a further significant improvement on the 14.1% achieved
in the second half of 2015 and the full year outturn of 14.7%. Our
continuing strong focus on overheads will be important in
maintaining profitability in the likelihood of a more challenging
business environment in the near to medium term.
Operating profit (excluding non-recurring items)
The achievement of an absolute reduction in Group overheads
together with the incremental gross profit resulted in Group
operating profit increasing 30% at constant currency to GBP90.0m
(H1 2015: GBP65.0m) (up 38% at actual rates). Consequently, the
underlying Group operating margin increased 150bp from 6.9% in the
six months 30 June 2015 to 8.4% in the first half of 2016,
notwithstanding the GBP78.9m of losses incurred in aggregate by the
new locations added since 2014 which are still developing
financially.
Net finance costs
The net finance charge for the six months to 30 June 2016
decreased to GBP4.8m from GBP7.2m for the corresponding six-months
in 2015. Although net debt at the end of June 2016 was higher at
GBP173.8m compared with GBP136.9m at 30 June 2015, the reduction in
the net expense reflects lower funding costs in general but
primarily a favourable foreign exchange movement, most notably in
June following the weakness of sterling after the result of the UK
Referendum on EU membership.
Within the overall net finance costs, the Group also incurred a
notional, non-cash, interest charge of GBP0.4m (H1 2015: GBP0.8m)
relating to the accounting treatment of fair value adjustments on
various acquisitions made in past years. In addition there were
also other non-cash costs of GBP1.2m (H1 2015: GBP0.7m) relating to
the amortisation of upfront charges on the establishment of our
various borrowing facilities and the settlement of derivatives
related to the Schuldschein debt securities.
Tax
We anticipate that the underlying tax rate this year will be
approximately 20.0% (H1 2015: 20.6%).
Earnings per share
Underlying Group earnings per share increased significantly in
the first six-months to 7.3p (H1 2015: 4.9p), an increase of 49%
reflecting the strong growth in underlying Group operating profit.
Including the non-recurring items, statutory Group earnings per
share were 7.2p (H1 2015: 7.2p).
The weighted average number of shares in issue for the first
six-months was 931,328,502 (H1 2015: 937,073,509). The weighted
average number of shares for diluted earnings per share was
949,079,315 (H1 2015: 956,686,475). During the first half of the
year, the Group purchased 2,707,545 shares at a cost of
approximately GBP7.5m designated to be held in treasury to satisfy
future exercises under various Group long-term incentive schemes.
Over the same period, the Group reissued 2,683,912 shares from
treasury to satisfy such exercises.
Cash flow and funding
This has been another period of excellent cash generation, which
remains an attractive feature of our business model. Cash generated
before the investment in growth capital expenditure, dividends and
share repurchases, and excluding the non-recurring items, increased
78% in the first six months of 2016 to GBP142.6m (H1 2015:
GBP79.9m), reflecting the strong growth in underlying Group
operating profit and improved working capital management. As well
as the normal positive working capital development stemming from
our network growth programme and the maturation of these locations,
we have also benefitted from more specific focus on the balance
sheet to unlock working capital.
Group net debt decreased from GBP190.6m at 31 December 2015 to
GBP173.8m at 30 June 2016. This decrease comes after taking the
growth capital expenditure and proceeds from the non-recurring
items into account, and after paying the 2015 final dividend of
GBP28.9m and spending approximately GBP12.6m on a combination of
buying our own shares as a further hedge against the cost of the
exercise of options by our employees across our various option and
LTIP plans, cash-settling the exercise of some of those options and
the settlement of the derivative related to the Schuldschein debt
securities.
We have maintained our prudent approach to the Group's capital
structure which we believe is particularly important in today's
macro-economic environment. This half year net debt position of
GBP173.8m represents an underlying Group net debt : LTM EBITDA
leverage ratio of 0.5 times, which is well below our internal 1.5
times maximum which we apply internally and significantly below our
bank covenant limitation.
In May 2016 we extended and amended our key Revolving Credit
Facility. The facility was increased from GBP320m to GBP550m and
the maturity extended to 2021 (previously 2020), with an option to
extend until 2023. The facility is predominately denominated in
sterling and can be drawn in several major currencies. This
financing has further improved our debt maturity profile and
provides the Group with adequate financial headroom to continue to
execute on its strategy. This revised credit facility was well
supported by new and existing international banking relationships.
With this new GBP550m facility in place, the Group decided to take
advantage of the attractive terms and prepay the EUR210m
Schuldschein debt prior to its final maturity.
Cash flow
The table below reflects the Group's cash flow:
GBPm H1 2016 H1 2015
============================================================ ===================== =======
Group EBITDA 178.6 136.3
Working capital 48.8 17.5
Less: growth-related partner contributions (23.7) (24.5)
Maintenance capital expenditure (33.6) (32.8)
Taxation (20.2) (9.8)
Finance costs (9.9) (6.3)
Other items 2.6 (0.5)
============================================================ ===================== =======
Cash flow before growth capital expenditure, share
repurchases, dividends and non-recurring disposal proceeds 142.6 79.9
Gross growth capital expenditure (106.8) (144.5)
Less: growth-related partner contributions 23.7 24.5
============================================================ ===================== =======
Net growth capital expenditure(5) (83.1) (120.0)
Total net cash flow from operations 59.5 (40.1)
Non-recurring disposal proceeds - 84.0
Less: costs of disposal - (4.0)
Corporate financing activities (12.6) (27.6)
Dividend (28.9) (25.8)
============================================================ ===================== =======
Opening net cash/debt (190.6) (138.0)
Exchange movements (1.2) 14.6
Closing net debt (173.8) (136.9)
============================================================ ===================== =======
(5) Net growth capital expenditure of GBP83.1m relates to the
cash outflow in first six-months of 2016. Accordingly, it includes
capital expenditure related to locations added in 2015 and to be
added in 2017, as well as 2016. The total net investment in the
2016 additions amounts to GBP84.5m so far.
Foreign exchange
The Group's results are exposed to translation risk from the
movement in currencies. During first half of 2016 key individual
currency exchange rates have moved, as shown in the table below.
For most of the first half the movement in key exchange rates was
benign but not material. This however changed in June 2016
following the UK Referendum on EU membership. This provided a boost
to the positive impact on the translation of our significant
international earnings.
Overall, the movement in exchange rates over the course of the
first six months of the year increased reported revenue, gross
profit and operating profit by GBP44.2m, GBP9.4m and GBP5.8m
respectively. If the current weakness of sterling persists, this
will benefit the translation of our second half results.
Foreign exchange rates
At 30 June Half year average
==== ========== ===== =================== =====
Per GBP sterling 2016 2015 % 2016 2015 %
================= ==== ========== ===== ========= ======== =====
US dollar 1.34 1.57 (15)% 1.42 1.53 (7)%
Euro 1.21 1.41 (14)% 1.27 1.38 (8)%
Japanese yen 138 193 (28)% 158 184 (14)%
================= ==== ========== ===== ========= ======== =====
Risk management
The principal risks and uncertainties affecting the Group remain
unchanged. Effective management of risk is an everyday activity at
Regus and, crucially, integral to our growth planning. A detailed
assessment of the principal risks and uncertainties which could
impact the Group's long-term performance and the risk management
structure in place to identify, manage and mitigate such risks can
be found on pages 21 to 24 and 38 and 39 of the 2015 Annual Report
and Accounts.
Related parties
There have been no changes to the type of related party
transactions entered into by the Group that had a material effect
on the financial statements for the six-months ended 30 June 2016.
Details of related party transactions that have taken place in the
period can be found in note 31 to the 2015 Annual Report and
Accounts (page 97).
Dividends
A final dividend of 3.1p per share for 2015 was paid by Regus on
27 May 2016 following shareholder approval (2014 : 2.75p).
In line with Regus' progressive dividend policy, the Board has
increased the 2016 interim dividend by 11% to 1.55p per share (H1
2015 : 1.40p). The interim dividend will be paid on Friday, 7
October 2016 to shareholders on the register at the close of
business on Friday, 9 September 2016.
Dominik de Daniel
Chief Financial Officer and Chief Operating Officer
9 August 2016
Condensed Consolidated Financial Information
Interim consolidated income statement (unaudited)
Six months ended 30 June Six months ended 30 June
2016 2015
------------------------------------------ -----------------------------------------
Non-recurring Non-recurring
Before items Before items
non-recurring (Note non-recurring (Note
items 3) Total items 3) Total
GBPm Notes
Revenue 2 1,077.6 - 1,077.6 937.0 - 937.0
Cost of sales (852.4) - (852.4) (728.0) - (728.0)
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Gross profit (centre
contribution) 225.2 - 225.2 209.0 - 209.0
Selling, general and
administrative
expenses (133.4) (0.9) (134.3) (139.3) 21.3 (118.0)
Research and
development
expense (2.2) - (2.2) (5.1) - (5.1)
Share of post-tax
profit
of equity accounted
investees,
net of tax 0.4 - 0.4 0.4 - 0.4
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Operating profit 90.0 (0.9) 89.1 65.0 21.3 86.3
Finance expense (4.9) - (4.9) (7.4) - (7.4)
Finance income 0.1 - 0.1 0.2 - 0.2
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Net finance expense (4.8) - (4.8) (7.2) - (7.2)
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Profit before tax for
the period 2 85.2 (0.9) 84.3 57.8 21.3 79.1
Tax charge (17.3) 0.4 (16.9) (11.9) - (11.9)
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Profit for the period 67.9 (0.5) 67.4 45.9 21.3 67.2
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Profit attributable
to:
Equity shareholders of
the parent 67.9 (0.5) 67.4 45.9 21.3 67.2
Non-controlling - - - - - -
interests
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Profit for the period 67.9 (0.5) 67.4 45.9 21.3 67.2
----------------------- ------ --------------- --------------- -------- --------------- -------------- --------
Interim consolidated statement of comprehensive income
(unaudited)
Six months ended Six months
GBPm 30 June 2016 ended
30 June 2015
Profit for the period 67.4 67.2
Other comprehensive income:
Other comprehensive income that are or may be reclassified to
profit or loss in subsequent periods:
Cash flow hedges - recycled through the income statement 2.1 0.7
Cash flow hedges - effective portion of changes in fair (0.4) -
value
Foreign currency translation differences for foreign operations 60.0 (15.8)
----------------------------------------------------------------- ----------------- --------------
Items of other comprehensive income that are or may be
reclassified to profit or loss in subsequent periods 61.7 (15.1)
----------------------------------------------------------------- ----------------- --------------
Other comprehensive income that will never be reclassified to
profit or loss in subsequent periods:
Re-measurement of defined benefit - -
liability
Income tax effect - -
----------------------------------------------------------------- ----------------- --------------
Items of other comprehensive income - -
that will never be reclassified
to profit or loss in subsequent
periods
----------------------------------------------------------------- ----------------- --------------
Other comprehensive income for the
period, net of income tax 61.7 (15.1)
Total comprehensive income for the
period, net of tax 129.1 52.1
----------------------------------------------------------------- ----------------- --------------
Total comprehensive income attributable
to:
Equity shareholders of the parent 129.1 52.1
Non-controlling interests - -
----------------------------------------------------------------- ----------------- --------------
Total comprehensive income for the
period 129.1 52.1
----------------------------------------------------------------- ----------------- --------------
Earnings per ordinary share Before non-recurring After non-recurring
(EPS): items: items:
Six months Six months Six months Six months
ended ended ended ended
30 June 2016 30 June 2015 30 June 2016 30 June 2015
Basic (p) 7.3 4.9 7.2 7.2
Diluted (p) 7.1 4.8 7.1 7.0
The above interim consolidated income statement and interim
consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Interim consolidated statement of changes in equity
(unaudited)
Attributable to equity holders of the
parent (note a)
--------------- ------ ------------------------------------------------------------------------------------- -------------------------
Share Treasury Foreign Hedging Revaluation Other Retained Total Non-controlling Total
capital shares currency reserve reserve earnings interests equity
translation
GBPm Notes reserve
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Balance at 1
January
2015 9.5 (19.9) 12.7 (2.7) 10.5 15.3 512.0 537.4 - 537.4
Total
comprehensive
income
for the
period:
Profit for the
period - - - - - - 67.2 67.2 - 67.2
Other
comprehensive
income:
Cash flow
hedges -
effective
portion of
changes in
fair value - - - 0.7 - - - 0.7 - 0.7
Foreign
currency
translation
differences
for foreign
operations - - (15.8) - - - - (15.8) - (15.8)
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Total other
comprehensive
income, net
of income
tax - - (15.8) 0.7 - - - (15.1) - (15.1)
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Total
comprehensive
income
for the
period - - (15.8) 0.7 - - 67.2 52.1 - 52.1
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Transactions
with owners,
recorded
directly in
equity:
Share based
payments - - - - - - 1.5 1.5 - 1.5
Ordinary
dividend paid 4 - - - - - - (25.8) (25.8) - (25.8)
Purchase of
treasury
shares in
Regus plc - (24.5) - - - - - (24.5) - (24.5)
Settlement of
share awards - 0.7 - - - - (3.8) (3.1) - (3.1)
Balance at 30
June 2015 9.5 (43.7) (3.1) (2.0) 10.5 15.3 551.1 537.6 - 537.6
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Balance at 1
January
2016 9.5 (42.9) 7.4 (2.1) 10.5 15.3 586.0 583.7 - 583.7
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Total
comprehensive
income
for the
period:
Profit for the
period - - - - - - 67.4 67.4 - 67.4
Other
comprehensive
income:
Cash flow
hedges -
recycled
through the
income
statement - - - 2.1 - - - 2.1 - 2.1
Cash flow
hedges -
effective
portion of
changes in
fair value - - - (0.4) - - - (0.4) - (0.4)
Foreign
currency
translation
differences
for foreign
operations - - 60.0 - - - - 60.0 - 60.0
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Total other
comprehensive
income, net
of income
tax - - 60.0 1.7 - - - 61.7 - 61.7
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Total
comprehensive
income
for the
period - - 60.0 1.7 - - 67.4 129.1 - 129.1
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
Transactions
with owners,
recorded
directly in
equity:
Share based
payments - - - - - - 1.4 1.4 - 1.4
Ordinary
dividend paid 4 - - - - - - (28.9) (28.9) - (28.9)
Purchase of
treasury
shares in
Regus Plc - (7.5) - - - - - (7.5) - (7.5)
Settlement of
share awards - 3.8 - - - - (3.1) 0.7 - 0.7
Balance at 30
June 2016 9.5 (46.6) 67.4 (0.4) 10.5 15.3 622.8 678.5 - 678.5
--------------- ------ -------- --------- ------------ -------- ------------ ------ --------- ------- ---------------- -------
(a) Total reserves attributable to equity holders of the
parent:
-- Share capital represents the nominal value arising on the
issue of the Company's equity share capital.
-- Treasury shares represent 20,514,246 (30 June 2015:
21,502,195) ordinary shares of the Group that were acquired for the
purposes of the Group's various employee share option plans. During
the period 2,707,545 (30 June 2015: 9,543,800) shares were
purchased and 2,683,912 (30 June 2015: 925,060) were utilised to
satisfy the exercise of share options by employees. At 9 August
2016, 20,514,246 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 on 19 April 2006.
-- Other reserves include GBP37.9 million arising from the
Scheme of Arrangement undertaken on 14 October 2008, GBP6.5 million
relating to merger reserves and GBP0.1 million to the redemption of
preference shares partly offset by GBP29.2 million arising from the
Scheme of Arrangement undertaken in 2003.
The above interim consolidated statement of changes in equity
should be read in conjunction with the accompanying notes.
Interim consolidated balance sheet
As at 30 June As at 30 June As at 31 December
2016 2015 2015*
GBPm Notes (unaudited) (unaudited)
Non-current assets
Goodwill 5 650.2 557.9 612.2
Other intangible assets 54.3 49.9 53.8
Property, plant and equipment 1,070.7 769.0 917.0
Deferred tax assets 35.4 36.6 36.4
Other long term receivables 72.2 52.3 63.0
Investments in joint ventures 7.2 1.1 5.6
---------------------------------- ------- -------------- -------------- ------------------
1,890.0 1,466.8 1,688.0
Current assets
Trade and other receivables 577.8 512.3 557.8
Corporation tax receivable 26.2 15.1 17.9
Assets held for sale 7 1.2 - -
Cash and cash equivalents 8 74.6 79.4 63.9
---------------------------------- ------- -------------- -------------- ------------------
679.8 606.8 639.6
Total assets 2,569.8 2,073.6 2,327.6
---------------------------------- ------- -------------- -------------- ------------------
Current liabilities
Trade and other payables
(incl. customer deposits) (876.4) (721.1) (816.5)
Deferred income (270.5) (229.9) (240.7)
Corporation tax payable (13.5) (15.4) (14.0)
Obligations under finance
leases 8 - (0.1) -
Bank and other loans 8 (7.7) (2.1) (9.2)
Provisions (5.9) (2.0) (5.3)
Liabilities held for sale 7 (0.9) - -
---------------------------------- ------- -------------- -------------- ------------------
Total current liabilities (1,174.9) (970.6) (1,085.7)
Net current liabilities (495.1) (363.8) (446.1)
Total assets less current
liabilities 1,394.9 1,103.0 1,241.9
Non-current liabilities
Other payables (464.5) (323.2) (383.8)
Non-current derivative financial
liabilities (0.4) (18.3) (15.0)
Obligations under finance 8 - - -
leases
Bank and other loans 8 (240.7) (214.1) (245.3)
Deferred tax liability (1.1) (0.9) (1.6)
Provisions (7.2) (7.6) (7.6)
Provision for deficit in
joint ventures (2.3) (1.1) (4.1)
Retirement benefit obligations (0.2) (0.2) (0.8)
(716.4) (565.4) (658.2)
Total liabilities (1,891.3) (1,536.0) (1,743.9)
Total assets less liabilities 678.5 537.6 583.7
---------------------------------- ------- -------------- -------------- ------------------
Total equity
Issued share capital 9.5 9.5 9.5
Treasury shares (46.6) (43.7) (42.9)
Foreign currency translation
reserve 67.4 (3.1) 7.4
Hedging reserve (0.4) (2.0) (2.1)
Revaluation reserve 10.5 10.5 10.5
Other reserves 15.3 15.3 15.3
Retained earnings 622.8 551.1 586.0
---------------------------------- ------- -------------- -------------- ------------------
Total shareholders' equity 678.5 537.6 583.7
Non-controlling interests - - -
---------------------------------- ------- -------------- -------------- ------------------
Total equity 678.5 537.6 583.7
---------------------------------- ------- -------------- -------------- ------------------
Total equity and liabilities 2,569.8 2,073.6 2,327.6
---------------------------------- ------- -------------- -------------- ------------------
* Based on the audited financial statements for the year ended
31 December 2015.
The above interim consolidated balance sheet should be read in
conjunction with the accompanying notes.
Interim consolidated statement of cash flows (unaudited)
Six months ended Six months ended
GBPm 30 June 30 June
Notes 2016 2015
Profit before tax for the period 84.3 79.1
Adjustments for:
Net finance expense 4.8 7.2
Share of profit on equity-accounted investees,
net of income tax (0.4) (0.4)
Depreciation charge 82.3 63.7
Profit on disposal of property, plant
and equipment (0.6) (0.8)
Amortisation of intangible assets 6.3 7.6
Increase in provisions 0.6 0.2
Share based payments 1.4 1.5
Other non-cash movements (2.4) (5.7)
--------------------------------------------------- ------ --------------------------- ---------------------------
Operating cash flows before movements
in working capital 176.3 152.4
--------------------------------------------------- ------ --------------------------- ---------------------------
Decrease/(Increase) in trade and other
receivables 23.2 (67.2)
Increase in trade and other payables 25.6 80.7
Cash generated from operations (before
non-recurring items) 225.1 165.9
--------------------------------------------------- ------ --------------------------- ---------------------------
Loss/(Profit) on disposal of assets-held-for-sale 3 0.1 (21.3)
Impairment of assets-held-for-sale 3 2.0 -
--------------------------------------------------- ------ --------------------------- ---------------------------
Cash generated from operations (after
non-recurring items) 227.2 144.6
--------------------------------------------------- ------ --------------------------- ---------------------------
Interest paid (10.0) (6.5)
Tax paid (20.2) (9.8)
Net cash inflows from operating activities 197.0 128.3
--------------------------------------------------- ------ --------------------------- ---------------------------
Investing activities
Purchase of subsidiary undertakings (net
of cash acquired) 13 (0.3) (54.9)
Dividends received from joint ventures 0.1 -
Proceeds on the sale of assets-held-for-sale 3 3.1 84.0
Proceeds on sale of property, plant and
equipment 6 13.9 4.7
Purchase of property, plant and equipment 6 (150.7) (117.1)
Purchase of intangible assets (2.5) (5.3)
Interest received 0.1 0.2
Cash outflows from investing activities (136.3) (88.4)
--------------------------------------------------- ------ --------------------------- ---------------------------
Financing activities
Net proceeds from issue of loans 8 385.8 186.6
Repayment of loans 8 (404.0) (166.2)
Repayment of principal under finance 8 - -
leases
Settlement of financial derivatives (7.0) -
Re-issuance of treasury shares 3.8 0.7
Purchase of treasury shares (7.5) (24.5)
Settlement of share awards (3.1) (3.8)
Payment of ordinary dividend 4 (28.9) (25.8)
Cash outflows from financing activities (60.9) (33.0)
--------------------------------------------------- ------ --------------------------- ---------------------------
Net (decrease)/increase in cash and cash
equivalents 8 (0.2) 6.9
Cash and cash equivalents at beginning
of period 8 63.9 72.8
Effect of exchange rate fluctuations
on cash held 8 10.9 (0.3)
Cash and cash equivalents at end of period 8 74.6 79.4
--------------------------------------------------- ------ --------------------------- ---------------------------
The above interim consolidated cash flow statement should be
read in conjunction with the accompanying notes.
Notes to the Condensed Interim Consolidated Financial
Information (unaudited)
Note 1: Basis of preparation and accounting policies
Regus plc S.A. is a public limited company incorporated in
Jersey and registered and domiciled in Luxembourg. The Company's
ordinary shares are traded on the London Stock Exchange. Regus plc
S.A. owns an international network of business centres which are
leased to a variety of business customers.
The unaudited condensed interim consolidated financial
information as at and for the six months ended 30 June 2016
included within the half yearly report:
-- was prepared in accordance with International Accounting
Standard 34 "Interim Financial Reporting" ("IAS 34") as adopted by
the European Union ("adopted IFRS"), and therefore does not include
all disclosures that would otherwise be required in a complete set
of financial statements. Selected explanatory notes are included to
understand events and transactions that are significant to
understand the changes in the Group's financial position and
performance since the last Regus plc Annual Report and Accounts for
the year ended 31 December 2015;
-- was prepared in accordance with the Disclosure and
Transparency Rules ("DTR") of the Financial Services Authority;
-- comprise the Company and its subsidiaries (the "Group") and
the Group's interests in jointly controlled entities;
-- do not constitute statutory accounts as defined in section
434 of the Companies Act 2006. A copy of the statutory accounts for
the year ended 31 December 2015 has been filed with both the
Luxembourg Register of Commerce and the Jersey Companies Registry.
Those accounts have been reported on by the Company's auditors and
the report of the auditors was (i) unqualified, and (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report. These
accounts are available from the Company's website - www.regus.com;
and
-- the condensed consolidated interim financial information was
approved by the Board of Directors on 9 August 2016.
In preparing this condensed consolidated interim financial
information, the significant judgments made by management and the
key sources of estimation of uncertainty were the same as those
that applied to the Report and Accounts for the year ended 31
December 2015. The basis of preparation and accounting policies set
out in the Report and Accounts for the year ended 31 December 2015
have been applied in the preparation of this half yearly report,
except for the adoption of new standards and interpretations
effective as of 1 January 2016, which did not have a material
effect on the Group's financial statements, unless otherwise
indicated.
The following standards, interpretations and amendments to
standards were applicable to the Group for periods commencing on or
after 1 January 2016:
IAS 1 Disclosure Initiative (Amendment to IAS 1)
IAS 16 Revaluation method - proportionate restatement of accumulated depreciation
- Amendments to IAS 16
IAS 38 Revaluation method - proportionate restatement of accumulated amortisation
- Amendments to IAS 38
Accounting for Acquisitions of interests in Joint operations - Amendments
IFRS 11 to IFRS 11
IFRS 14 Regulatory Deferral Accounts
Various Annual Improvements (2012 - 2014 Cycle)
------- --------------------------------------------------------------------------
Except for IFRS 16 Leases, the following new or amended
standards and interpretations that are mandatory for 2017 annual
periods (and future years) are not expected to have a material
impact on the Company:
1 January
IAS 7 Disclosure Initiative - Amendments to IAS 7 2017
Recognition of Deferred Tax Assets for Unrealised losses 1 January
IAS 12 - Amendments to IAS 12 2017
1 January
IFRS 9 Financial Instruments 2018
1 January
IFRS 15 Revenue from Contracts with Customers 2018
1 January
IFRS 16 Leases 2019
------- -------------------------------------------------------- ---------
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
Seasonality
The majority of the Group's revenue is contracted and is
therefore not subject to significant seasonal fluctuations. Demand
based revenue (from products such as Meeting Rooms and Customer
Services) is impacted by seasonal factors within the year,
particularly around summer and winter vacation periods. This
fluctuation leads to a small seasonal profit bias to the second
half year compared to the first half. However, this seasonal bias
is often hidden by other factors which drive changes in the pattern
of profit delivery such as the addition of new centres or changes
in demand or prices.
Going concern
After making due enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue
operational existence for the foreseeable future and therefore
continue to adopt the going concern basis in preparing the
accounts.
Note 2: Operating segments
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including those that relate to transactions with other
operating segments. An operating segment's results are reviewed
regularly by the chief operating decision maker to make decisions
about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is
available. The business is run on a worldwide basis but managed
through four principal geographical segments; Americas; Europe,
Middle East and Africa (EMEA); Asia Pacific; and the United
Kingdom. The United Kingdom segment does not include the Group's
non-trading holding and corporate management companies that are
based in the UK and the EMEA segment does not include the Group's
non-trading head office and holding companies that are based in
Luxembourg. The results of business centres in each of these
regions form the basis for reporting geographical results to the
chief operating decision maker (the Board of Directors of the
Group). All reportable segments are involved in the provision of
global workplace solutions. The Group's reportable segments operate
in different markets and are managed separately because of the
different economic characteristics that exist in each of those
markets. Each reportable segment has its own discrete senior
management team responsible for the performance of the segment. The
accounting policies of the operating segments are the same as those
described in the Annual Report and Accounts for Regus plc for the
year ended 31 December 2015. The performance of each segment is
assessed on the basis of the segment operating profit which
excludes certain non-recurring items (including provisions for
onerous contracts and asset write-downs), non-recurring gains and
losses, internal management charges and foreign exchange gains and
losses arising on transactions with other operating segments.
Americas EMEA Asia Pacific United Kingdom All other Total
segments
-------------
GBPm Six 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
months
ended 30
June
------------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- ---------- ------------
Revenues
from
external
customers 438.0 381.7 229.4 199.6 172.0 139.2 236.4 215.7 1.8 0.8 1,077.6 937.0
Revenues
from
internal
customers - 0.2 - 0.2 - - 0.5 0.6 - - 0.5 1.0
------------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- ---------- ------------
Segment
revenues 438.0 381.9 229.4 199.8 172.0 139.2 236.9 216.3 1.8 0.8 1,078.1 938.0
Reportable
segment
profit
before tax 55.2 52.5 24.4 19.0 18.0 13.2 48.6 42.4 (7.3) (5.9) 138.9 121.2
Reportable
segment
assets 1,326.4 1,078.2 519.2 447.6 389.4 280.1 954.9 684.1 1.5 1.8 3,191.4 2,491.8
Reportable
segment
liabilities (1,284.2) (930.8) (646.5) (513.1) (416.4) (259.3) (931.2) (624.1) (0.1) (0.3) (3,278.4) (2,327.6)
------------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- ---------- ------------
Reconciliation of reportable segment results to published
statements:
Six months ended Six months ended
GBPm 30 June 2016 30 June 2015
--------------------------------------------------------- ----------------- -----------------
Reportable segment profit 138.9 121.2
Elimination of inter-segment revenue (0.5) (1.0)
Corporate overheads (48.8) (55.6)
Share of post-tax profit of joint ventures 0.4 0.4
Net finance expense (4.8) (7.2)
--------------------------------------------------------- ----------------- -----------------
Published Group profit before tax (before non-recurring
items) 85.2 57.8
--------------------------------------------------------- ----------------- -----------------
At 30 June 2016
GBPm Assets Liabilities Net assets/(liabilities)
------------------------------------------ -------- ------------ -------------------------
Reportable segment results 3,191.4 (3,278.4) (87.0)
Exclude: Segmental inter-company amounts (756.3) 1,653.7 897.4
Corporate overheads (excluding amounts
due to/from reportable segments):
Cash 41.8 - 41.8
Deferred taxation 25.6 - 25.6
Bank and other loans - (230.7) (230.7)
Other 67.3 (35.9) 31.4
------------------------------------------ -------- ------------ -------------------------
Published Group total 2,569.8 (1,891.3) 678.5
------------------------------------------ -------- ------------ -------------------------
At 30 June 2015
GBPm Assets Liabilities Net assets/(liabilities)
------------------------------------------ -------- ------------ -------------------------
Reportable segment results 2,491.8 (2,327.6) 164.2
Exclude: Segmental inter-company amounts (537.0) 1,059.4 522.4
Corporate overheads (excluding amounts
due to/from reportable segments):
Cash 49.7 - 49.7
Deferred taxation 21.5 - 21.5
Bank and other loans - (203.5) (203.5)
Other 47.6 (64.3) (16.7)
------------------------------------------ -------- ------------ -------------------------
Published Group total 2,073.6 (1,536.0) 537.6
------------------------------------------ -------- ------------ -------------------------
There have been no changes to the basis of segmentation or the
measurement basis for the segment since 31 December 2015.
Note 3: Non-recurring items
2016 2015
GBPm GBPm
---------------------------------------------- ----- -----
Proceeds from litigation settlement 2.5 -
California class action (1.3) -
Loss on disposal of assets held for sale (0.1) 21.3
Fair value adjustment on assets held for sale (2.0) -
----------------------------------------------- ----- -----
(0.9) 21.3
---------------------------------------------- ----- -----
Proceeds from litigation settlement
A settlement agreement between former shareholders and directors
of a company acquired by the Group was reached during 2016. This
settlement entitled Regus to a share of any reparations agreed,
with GBP2.5 million received during the year.
California class action
During 2015 a class action was filed against the Group alleging
a breach of labour regulations in California. While the outcome of
this legal action remains uncertain, the Group has provided for an
additional GBP1.3 million in respect of any potential settlement
and related legal costs.
Loss on disposal of assets held for sale
The major classes of assets and liabilities disposed of by the
Group are as follows:
2016 2015
GBPm GBPm
------------------------------ ----- -----
Assets
Goodwill 2.2 10.3
Property, plant and equipment 1.0 49.6
------------------------------- ----- -----
Assets held for sale 3.2 59.9
Liabilities
Trade and other payables - (1.2)
------------------------------- ----- -----
Liabilities held for sale - (1.2)
Net assets held for sale 3.2 58.7
Disposal related costs - 4.0
Proceeds on disposal 3.1 84.0
------------------------------- ----- -----
(Loss) / profit on disposal (0.1) 21.3
------------------------------- ----- -----
The United Kingdom Competitions & Markets Authority inquiry
into the serviced offices industry was completed in early 2016. The
Group has disposed of specific assets and liabilities acquired as
part of the Avanta Serviced Offices Group plc acquisition in
accordance with the agreed settlement.
During 2014 the Group completed a project to dispose of the
assets and liabilities of specific non-core operations to release
the related capital originally invested in these operations. The
sale of these assets and liabilities, which were previously
classified as assets held for sale, completed during February 2015
for a consideration of GBP84.0 million and a non-recurring profit
of approximately GBP21.3 million after expenses.
Fair value adjustment on assets held for sale
A fair value adjustment of GBP2.0 million was recognised against
the Avanta Serviced Offices Group plc assets and liabilities
recognised as held for sale as at 30 June 2016 (note 7), which were
subsequently disposed of in July 2016.
Note 4: Dividends
Equity dividends on ordinary shares paid during the period:
GBPm Six months ended Six months ended
30 June 2016 30 June 2015
---------------------------------------- ----------------- -----------------
Final dividend for the year ended
31 December 2015: 3.1 pence per share
(2014: 2.75 pence per share) 28.9 25.8
---------------------------------------- ----------------- -----------------
Note 5: Goodwill and indefinite life intangible assets
As at 30 June 2016, the carrying value of the Group's goodwill
and indefinite life intangible asset was GBP650.2 million and
GBP11.2 million respectively
(31 December 2015: GBP612.2 million and GBP11.2 million
respectively). The last annual review of the carrying value of the
goodwill and indefinite life intangible was performed as at 31
October 2015 and will be reassessed during the last quarter of
2016.
Note 6: Property, plant and equipment
During the six months ended 30 June 2016, the Group acquired
assets with a cost of GBP150.7 million (30 June 2015: GBP117.1
million). Assets with a net book of value GBP14.0 million (30 June
2015: GBP3.9 million) were disposed of during the period for
GBP13.9 million (30 June 2015: GBP4.7 million).
Capital expenditure authorised and contracted for but not
provided for in the accounts amounted to GBP34.8 million (30 June
2015: GBP36.3 million).
Note 7: Assets and liabilities held for sale
The United Kingdom Competitions & Markets Authority inquiry
into the serviced offices industry was completed in early 2016. The
Group has identified the following assets and liabilities acquired
as part of the Avanta Serviced Offices Group plc acquisition as
held for sale.
2016 2015
GBPm GBPm
------------------------------ ----- -----
Assets
Goodwill 0.7 -
Property, plant and equipment 0.5 -
------------------------------- ----- -----
Assets held for sale 1.2 -
------------------------------- ----- -----
Liabilities
Trade and other payables (0.9) -
------------------------------- ----- -----
Liabilities held for sale (0.9) -
------------------------------- ----- -----
Net assets held for sale 0.3 -
------------------------------- ----- -----
There is no cumulative income or expense included in other
comprehensive income relating to the net assets held for sale.
Note 8: Analysis of net financial resources
At 1 Jan Cash flow Non-cash Exchange At 30 June
GBPm 2016 changes movement 2016
Cash and cash equivalents 63.9 (0.2) - 10.9 74.6
Gross cash 63.9 (0.2) - 10.9 74.6
--------------------------- --------- ---------- --------- ---------- -----------
Debt due within one
year (9.2) 1.9 - (0.4) (7.7)
Debt due after one year (245.3) 16.3 - (11.7) (240.7)
Finance leases due within - - - - -
one year
Finance leases due after - - - - -
one year
--------------------------- --------- ---------- --------- ---------- -----------
(254.5) 18.2 - (12.1) (248.4)
--------------------------- --------- ---------- --------- ---------- -----------
Net financial assets
/ (liabilities) (190.6) 18.0 - (1.2) (173.8)
--------------------------- --------- ---------- --------- ---------- -----------
Cash, cash equivalents and liquid investment balances held by
the Group that are not available for use ("Blocked Cash") amounted
to GBP16.3 million at
30 June 2016 (31 December 2015: GBP16.0 million).
Of this balance, GBP12.1 million (31 December 2015: GBP12.5
million) is pledged as security against outstanding bank guarantees
and a further GBP4.2 million
(31 December 2015: GBP3.5 million) is pledged against various
other commitments of the Group.
Note 9: Financial instruments
The fair values of financial assets and financial liabilities,
together with the carrying amounts included in the consolidated
statement of financial position, are as follows:
At 30 June 2016
------------------------------------------------- --------- ----------------
Carrying
amount Fair value
GBPm GBPm
------------------------------------------------- --------- ----------------
Cash and cash equivalents 74.6 74.6
Trade and other receivables (1) 456.1 456.1
------------------------------------------------- --------- ----------------
Financial assets 530.7 530.7
------------------------------------------------- --------- ----------------
(Note 1 - Excluding prepayments, accrued income and other sundry balances
which are not classified as financial assets)
Non-derivative financial liabilities
Trade and other payables (2) (337.5) (337.5)
Customer deposits (383.6) (383.6)
Obligations under finance leases - -
Bank loans & other corporate borrowings (240.7) (240.7)
Other loans (7.7) (7.7)
Derivatives used for cash flow hedging (3)
Interest rate swaps
* Outflow (0.4) (0.4)
* Inflow - -
------------------------------------------------- --------- ----------------
Financial liabilities (969.9) (969.9)
------------------------------------------------- --------- ----------------
(Note 2 - Excluding deferred income and other sundry balances which are
not classified as financial liabilities)
(Note 3 - Including interest rate and cross currency swaps. Derivatives
used for cash flow hedging are categorised as level 2 when measuring the
fair value)
Unrecognised gain -
------------------------------------------------- --------- ----------------
The carrying amount of financial assets and liabilities not
measured at fair value is considered to be a reasonable
approximation of fair value.
There has been no change in the classification of financial
assets and liabilities, the methods and assumptions used in
determining fair value and the categorization of financial assets
and liabilities within the fair value hierarchy from those
disclosed in the annual report for the year ended 31 December
2015.
Regus has a medium term credit facility provided by a group of
international banks. In the period to 30(th) June 2016, the amount
of the facility was increased from GBP320.0 million to GBP550.0
million and the maturity extended until 2021, with a further option
to extend to 2023. Following the extension of the credit facility,
the "Schuldschein" EUR 210.0 million (GBP162.7 million) debt
securities issued in 2014 and the associated hedging were repaid in
full.
The debt provided under the credit facility is floating rate,
however, as part of the Group's balance sheet management and to
protect against a future increase in interest rates, GBP50m was
swapped into a fixed rate liability for a three year period with an
average fixed rate of 0.6310% (excluding funding margin).
The GBP550 million credit facility contains financial covenants
with which the Group is in compliance.
Note 10: Share based payment
During the period the Group awarded nil options (2015: nil) and
nil conditional share awards (2015: nil) under the Long term
Incentive Plan and nil shares were granted under the Co-Investment
Plan (2015: 1,039,760 shares). During 2016 1,038,179 options (2015:
1,906,565) were granted under the Share Option Plan.
Note 11: Bank guarantees and contingent liabilities
The Group has bank guarantees and letters of credit held with
certain banks amounting to GBP137.9 million (31 December 2015:
GBP122.8 million). There are no material lawsuits pending against
the group other than the California class action referred to in
note 3.
Note 12: Related parties
The nature of related parties as disclosed in the consolidated
financial statements for the Group for the year ended 31 December
2015 has not changed.
Management fees received Amounts owed by related Amounts owed to related
GBPm from related parties party party
---------------- ------------------------- ------------------------ ------------------------
2016
Joint Ventures 1.5 12.1 10.2
2015
Joint Ventures 1.1 3.9 4.1
As at 30 June 2016, GBPnil of the amounts due to the Group have
been provided for (31 December 2015: GBPnil). Transactions with
related parties did not have a material effect on the financial
results for the six months ended 30 June 2016.
During the period the Group acquired goods and services from a
company indirectly controlled by a director of the Company
amounting to GBP10,542
(30 June 2015: GBPnil).
Compensation paid to the key management personnel of the Group
will be disclosed in the Group's Annual Report and Accounts for the
year ending
31 December 2016.
Note 13: Acquisitions of subsidiaries and non-controlling
interest
Current period acquisitions
During the six month period ended 30 June 2016 the Group made a
number of small acquisitions for a total consideration of GBP2.5
million.
Book value Provisional
on acquisition fair value
recognised
GBPm on acquisition
------------------------------------------------------ ------------------------- -------------------------
Net assets acquired
Intangible assets - -
Property, plant and equipment 1.1 1.1
Cash 1.0 1.0
Other current and non-current assets 2.2 2.2
Current liabilities (4.4) (4.4)
Non-current liabilities - -
------------------------------------------------------ ------------------------- -------------------------
(0.1) (0.1)
Goodwill arising on acquisition 2.6
------------------------------------------------------ ------------------------- -------------------------
Total consideration 2.5
Less: Fair value adjustment of historical investment
in acquired joint venture (2.5)
Less: Deferred consideration -
------------------------------------------------------ ------------------------- -------------------------
-
------------------------------------------------------ ------------------------- -------------------------
Cash flow on acquisition
Cash paid -
------------------------------------------------------ ------------------------- -------------------------
Net cash outflow -
------------------------------------------------------ ------------------------- -------------------------
The goodwill arising on the above acquisitions reflects the
anticipated future benefits Regus can obtain from operating the
businesses more efficiently, primarily through increasing occupancy
and the addition of value adding services. GBPnil of the above
goodwill is expected to be deductible for tax purposes.
If the above acquisitions had occurred on 1 January 2016, the
revenue and net retained profit arising from these acquisitions
would have been GBP3.9 million and GBP0.7 million respectively. In
the year the equity acquisitions contributed revenue of GBP3.6
million and net retained profit of GBP0.7 million
There was GBPnil contingent consideration arising on the above
acquisitions. Deferred consideration of GBP0.3 million (2015:
GBPnil) was also paid during the current year with respect to
milestones achieved on prior year acquisitions.
The external acquisition costs associated with these
transactions were GBPnil.
For the acquisitions in 2016, the fair value of assets acquired
has only been provisionally assessed at the reporting date. The
main changes in the provisional fair values expected are for the
fair value of the leases (asset or liability), customer lists and
plant, property and equipment. The final assessment of the fair
value of these assets will be made within 12 months of the
acquisition date and, any adjustments reported in future
reports.
Prior period acquisitions
During the six month period ended 30 June 2015 the Group made a
number of small acquisitions for a total consideration of
GBP81.8m.
Book value Provisional Final fair
on acquisition fair value value recognised
recognised on acquisition
GBPm on acquisition
-------------------------------------- ------------------------ ------------------------ ------------------------
Net assets acquired
Intangible assets 16.2 16.7 17.9
Property, plant and equipment 19.2 20.3 22.0
Cash 25.4 25.4 25.4
Other current and non-current assets 17.7 19.7 20.4
Current liabilities (48.4) (48.4) (47.0)
Non-current liabilities (3.8) (3.8) (5.3)
-------------------------------------- ------------------------ ------------------------ ------------------------
26.3 29.9 33.4
Goodwill arising on acquisition 51.9 48.4
-------------------------------------- ------------------------ ------------------------ ------------------------
Total consideration 81.8 81.8
Less: Deferred consideration 1.5 1.5
-------------------------------------- ------------------------ ------------------------ ------------------------
80.3 80.3
-------------------------------------- ------------------------ ------------------------ ------------------------
Cash flow on acquisition
Cash paid 80.3 80.3
-------------------------------------- ------------------------ ------------------------ ------------------------
Net cash outflow 80.3 80.3
-------------------------------------- ------------------------ ------------------------ ------------------------
The goodwill arising on the above acquisitions reflects the
anticipated future benefits Regus can obtain from operating the
businesses more efficiently, primarily through increasing occupancy
and the addition of value adding services. GBP11.1 million of the
above goodwill is expected to be deductible for tax purposes.
There was GBP1.5 million contingent consideration arising on the
above acquisitions.
The external acquisition costs associated with these
transactions were GBP1.5 million, recorded within selling, general
and administration expenses within the interim consolidated income
statement.
Note 14: Events after the balance sheet date
There were no significant events occurring after 30 June 2016
affecting the condensed interim financial information of the Group
other than the disposal of assets in July referred to in note
3.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Board of Directors approved this document on 9 August
2016.
The Directors confirm that to the best of their knowledge this
unaudited condensed interim consolidated financial information has
been prepared in accordance with IAS 34 as adopted by the European
Union and that the Interim Management Report herein includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of
the Disclosure and Transparency Rules.
After making enquires, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
existence for the foreseeable future. For this reason they continue
to adopt the going concern basis in preparing this Interim
Management Report.
The Directors of Regus Plc are listed in the Group's Annual
Report and Accounts for the year ended 31 December 2015.
A list of current Directors is maintained on the Regus plc
website: http://www.regus.com/aboutus/leadership.htm
By order of the Board
Mark Dixon Dominik de Daniel
Chief Executive Officer Chief Financial Officer
9 August 2016
This half yearly announcement contains certain forward looking
statements with respect to the operations of Regus. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that may or may not
occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those
expressed or implied by these forward looking statements and
forecasts. Nothing in this announcement should be construed as a
profit forecast.
KPMG Luxembourg Société +352 22 51
Coopérative Téléphone 51 1
+352 22 51
39, Avenue John F. Kennedy Fax 71
L-1855 Luxembourg info@kpmg.lu
www.kpmg.lu
Regus plc (société anonyme)
26, Boulevard Royal
L-2420 Luxembourg
Report of the Réviseur d'Entreprises agree on the review of the
condensed consolidated interim financial information
Introduction
We have reviewed the accompanying condensed consolidated
statement of financial position of Regus plc ("the Company") as at
June 30, 2016, the condensed consolidated statements of
comprehensive income, changes in equity and cash flows for the six
month period then ended, and notes to the interim financial
information ("the condensed consolidated interim financial
information"). Management is responsible for the preparation and
presentation of this condensed consolidated interim financial
information in accordance with IAS 34, "Interim Financial
Reporting" as adopted by the European Union. Our responsibility is
to express a conclusion on this condensed consolidated interim
financial information based on our review.
Scope of Review
We conducted our review in accordance with the International
Standard on Review Engagements 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" as
adopted, for Luxembourg, by the Institut des Réviseurs
d'Entreprises. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying condensed consolidated
interim financial information as at June 30, 2016 is not prepared,
in all material respects, in accordance with IAS 34, "Interim
Financial Reporting" as adopted by the European Union.
Luxembourg, 9 August 2016 KPMG Luxembourg Société
Coopérative
Cabinet de révision agréé
Stephen Nye
Other Information
Segmental analysis - management basis (unaudited)
Americas EMEA Asia Pacific UK All other Total
segments
2016 2016 2016 2016 2016 2016
--------- ------- ------------- ------- ---------- --------
Mature(1)
Workstations(4) 138,536 70,920 69,547 57,258 - 336,261
Occupancy (%) 79.5 78.7 79.0 76.0 - 78.6
Revenue (GBPm) 398.4 198.7 146.6 188.0 1.8 933.5
Contribution (GBPm) 93.7 52.1 37.9 47.3 1.8 232.8
REVPOW 3,617 3,560 2,669 4,323 - 3,531
2015 Expansions(2)
Workstations(4) 26,712 16,489 22,019 11,680 - 76,900
Occupancy (%) 54.8 61.0 43.1 75.6 - 56.0
Revenue (GBPm) 36.2 29.4 23.7 38.4 - 127.7
Contribution (GBPm) (7.5) 0.7 (3.4) 7.6 - (2.6)
2016 Expansions(2)
Workstations(4) 3,795 1,956 1,877 2,470 - 10,098
Occupancy (%) 17.7 22.0 25.1 59.0 - 30.0
Revenue (GBPm) 1.7 1.1 1.6 4.1 - 8.5
Contribution (GBPm) (3.6) (1.5) (1.0) 0.4 - (5.7)
Closures
Workstations(4) 785 174 58 1,367 - 2,384
Occupancy (%) 69.9 50.6 86.2 78.3 - 73.7
Revenue (GBPm) 1.7 0.2 0.1 5.9 - 7.9
Contribution (GBPm) (0.5) (0.3) (0.2) 2.5 - 1.5
Totals
Workstations(4) 169,828 89,539 93,501 72,775 - 425,643
Occupancy (%) 74.2 74.1 69.5 75.4 - 73.3
Revenue (GBPm) 438.0 229.4 172.0 236.4 1.8 1,077.6
Contribution (GBPm) 82.1 51.0 33.3 57.8 1.8 226.0
Unallocated contribution
(GBPm) - - - - - (0.8)
REVPAW (GBP) 2,579 2,562 1,840 3,248 - 2,532
---------------------------- --------- ------- ------------- ------- ---------- --------
Period end workstations(5)
Mature 138,600 72,961 69,824 57,218 - 338,603
2015 Expansions 27,796 17,045 22,415 12,462 - 79,718
2016 Expansions 7,531 3,377 4,018 3,125 - 18,051
Totals 173,927 93,383 96,257 72,805 - 436,372
---------------------------- --------- ------- ------------- ------- ---------- --------
Segmental analysis - management basis (unaudited)
(continued)
Americas EMEA Asia Pacific UK All other Total
segments
2015 2015 2015 2015 2015 2015
--------- ------- ------------- ------- ---------- --------
Mature(1)
Workstations(4) 137,000 69,235 68,691 53,878 - 328,804
Occupancy (%) 79.6 74.7 77.5 82.0 - 78.5
Revenue (GBPm) 373.8 187.7 136.8 187.9 0.8 887.0
Contribution (GBPm) 89.0 42.9 32.8 46.9 0.4 212.0
REVPOW 3,427 3,627 2,569 4,252 - 3,435
2015 Expansions(2)
Workstations(4) 5,387 3,975 3,404 4,120 - 16,886
Occupancy (%) 44.2 53.6 24.2 89.6 - 53.4
Revenue (GBPm) 4.7 9.5 1.5 15.3 - 31.0
Contribution (GBPm) (3.0) (0.6) (3.0) 3.5 - (3.1)
Closures(3)
Workstations(4) 1,666 1,270 517 4,599 - 8,052
Occupancy (%) 76.1 62.9 77.3 78.8 - 75.6
Revenue (GBPm) 3.2 2.4 0.9 12.5 - 19.0
Contribution (GBPm) (0.8) (0.3) (0.8) 3.3 - 1.4
Totals
Workstations(4) 144,053 74,480 72,612 62,597 - 353,742
Occupancy (%) 78.2 73.4 75.0 82.3 - 77.3
Revenue (GBPm) 381.7 199.6 139.2 215.7 0.8 937.0
Contribution (GBPm) 85.2 42.0 29.0 53.7 0.4 210.3
Unallocated contribution
(GBPm) - - - - - (1.3)
REVPAW (GBP) 2,650 2,680 1,917 3,446 - 2,649
-------------------------- --------- ------- ------------- ------- ---------- --------
Notes:
1. The mature business comprises centres opened on or before 31 December 2014.
2. Expansions include new centres opened and acquired businesses.
3. A closure for the 2015 comparative data is defined as a
centre closed during the period from 1 January 2015 to 30 June
2016.
4. Workstation numbers are calculated as the weighted average for the period.
5. Workstations available at period end.
Post-tax cash return on net investment
The following table provides the post-tax cash return on net
investment on a 12 month rolling basis. Additional information is
also provided to reconcile some of the key numbers used in the
return calculation back to results presented in the half year
announcement. The methodology and rationale for the calculation are
discussed in the Chief Financial Officer's review on page 6 of this
announcement.
2012 2013 2014 2015 2016
Description Aggregation Expansions Expansions Expansions Expansions Closed Total
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Post-tax cash return on
net investment 23.3% 13.4% 2.7% (9.6%) (8.8%) - 13.0%
------------------------------------- --------------- ------------ ---------- ------------ ------------ -------- ---------
Revenue 1,308.7 325.5 191.3 209.8 8.5 23.8 2,067.6
Centre Contribution 363.7 68.7 23.9 (10.7) (6.5) 5.5 444.6
(Profit)/loss on disposal
of assets 0.5 (1.0) (1.0) - - 1.5 -
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Underlying centre contribution 364.2 67.7 22.9 (10.7) (6.5) 7.0 444.6
Selling, general and administration
expenses (1) (144.9) (43.2) (35.4) (45.5) (3.7) (2.4) (275.1)
------------------------------------- --------------- ------------ ---------- ------------ ------------ -------- ---------
EBIT 219.3 24.5 (12.5) (56.2) (10.2) 4.6 169.5
Depreciation and amortisation 80.8 31.5 21.1 25.3 1.6 2.1 162.4
Amortisation of partner
contributions (22.0) (6.8) (5.9) (5.8) (0.8) (0.1) (41.4)
Amortisation of acquired
lease fair value adjustments (1.9) (2.3) (0.3) 1.1 - - (3.4)
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Non-cash items 56.9 22.4 14.9 20.6 0.8 2.0 117.6
Taxation (2) (43.9) (4.9) 2.5 11.2 2.0 (0.9) (34.0)
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Adjusted net cash profit 232.3 42.0 4.9 (24.4) (7.4) 5.7 253.1
Maintenance capital
expenditure 60.8 13.3 2.0 - - - 76.1
Partner contributions (23.8) (3.7) (1.4) - - - (28.9)
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Net maintenance capital
expenditure 37.0 9.6 0.6 - - - 47.2
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Post-tax cash return 195.3 32.4 4.3 (24.4) (7.4) 5.7 205.9
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Growth capital expenditure
(3) 954.0 303.9 207.5 315.9 104.5 - 1,885.8
Partner contributions
(4) (115.5) (61.3) (46.7) (60.9) (20.0) - (304.4)
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Net investment 838.5 242.6 160.8 255.0 84.5 - 1,581.4
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
(1) Including research and development (2) Based on EBIT at the Group's long
expenses term effective tax rate of 20%
(3) The 2014 and 2015 expansions includes (4) The 2014 and 2015 expansions includes
GBP7.8m and GBP197.3m respectively of GBP1.4m and GBP35.6m respectively of
capital expenditure arising in the 12 partner contributions arising in the
months ending June 2016 12 months ending June 2016
2016
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
Movement in capital 2012 2013 2014 2015 2016
expenditure Aggregation Expansions Expansions Expansions Expansions Closed Total
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
December 2015 - Growth capital
expenditure 965.0 307.5 208.4 305.2 9.5 - 1,795.6
2016 Capital expenditure - - - 24.9 82.2 - 107.1
Properties acquired - - - - 12.8 - 12.8
Property disposals - - - (11.4) - - (11.4)
Centre closures (5) (11.0) (3.6) (0.9) (2.8) - - (18.3)
-------------------------------- --- --------------- ------------ ---------- ------------ ------------ -------- ---------
June 2016 - Growth capital
expenditure 954.0 303.9 207.5 315.9 104.5 - 1,885.8
(5) The growth capital expenditure for an estate is reduced by the investment
in centres closed during the year, but only where that investment has been
fully recovered
2016 2016 H2 2015 H1 2016 Total
---------------------------------- -------------- ---------------------------- ------------ ------------ --------
Partner Contributions GBPm EBIT Reconciliation GBPm GBPm GBPm
---------------------------------- -------------- ---------------------------- ------------ ------------ --------
Opening partner contributions 203.3 EBIT 80.4 89.1 169.5
--------------
* Current 34.9 Profit on disposal of assets (0.5) 0.5 -
Share of profit on joint
* Non-current 168.4 ventures (6) (0.1) 0.4 0.3
-------------- ---------------------------- ------------ ------------ --------
Operating profit (before
Acquired in the period - non-recurring items) (6) 79.8 90.0 169.8
---------------------------- ------------ ------------ --------
Received in the period (6) Refer to the Group
Income
87.4 Statement on page 11
--------------
* 2013 expansions and before 27.5
* 2014 expansions(4) 0.5
* 2015 expansions(4) 39.4
* 2016 expansions 20.0
--------------
* Utilised in the period (41.4)
* Exchange differences 37.5
---------------------------------- --------------
Closing partner contributions 286.8
---------------------------------- --------------
* Current 56.4
* Non-current 230.4
--------------
2016 H2 2015 H1 2016 Total
------------------------------------------------------------------------------ ------------ ----------- ---------
Capital Expenditure GBPm GBPm GBPm
------------------------------------------------------------------------------ ------------ ----------- ---------
Maintenance capital expenditure 42.5 33.6 76.1
Growth capital expenditure 199.8 106.8 306.6
------------ ----------- ---------
* Reinvestment in mature centres 10.1 - 10.1
* 2014 expansions(3) 7.8 - 7.8
* 2015 expansions(3) 172.4 24.9 197.3
* 2016 expansions 9.5 82.2 91.7
* Properties acquired - 12.8 12.8
* Proceeds on property disposals - (13.1) (13.1)
------------------------------------------------------------------------------ ------------ ----------- ---------
Total capital expenditure 242.3 140.4 382.7
Analysed as
* Purchase of subsidiary undertakings (7) 44.5 0.3 44.8
* Purchase of property, plant and equipment (7) 194.4 150.7 345.0
* Purchase of intangible assets (7) 3.4 2.5 6.0
* Proceeds on property disposals (8) - (13.1) (13.1)
------------------------------------------------------------------------------ ------------ ----------- ---------
(7) Refer to the Group Cash Flow Statement on page 14
(8) The proceeds on the property disposals of GBP13.1m is included in the proceed on disposal of property, plant and
equipment in the Group Cash Flow Statement on page 14
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFEDTEITIIR
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