TIDMRGU
RNS Number : 1959O
Regus PLC
03 November 2016
THIRD QUARTER TRADING STATEMENT - 3 November 2016
Regus plc, the leading global workplace provider, today issues
its trading statement for the period ended 30 September 2016.
Strong Group profit, cash performance and returns
development
The Group has generated revenue growth of 8.1% for the nine
months to 30 September 2016 at constant currency, enjoying strong
profit performance with excellent cash conversion. Importantly,
post-tax cash returns on net growth investment have also increased
further. Overall we are pleased with this result and remain
confident of delivering a full year performance in line with
management's expectations.
This year has been an important transitional period in the
development of the Group. As previously announced we have
implemented a new field structure and made significant progress
towards our goals of cost leadership and achieving more
capital-light growth.
In the three months ended 30 September 2016, Group revenue
increased to GBP566.9m compared with GBP478.8m in the corresponding
period last year, an increase of 3.8% at constant currency rates
(up 18.4% at actual rates). For the nine months ended 30 September
2016, Group revenue increased to GBP1,644.5m compared with
GBP1,415.8m for the same period last year, an improvement of 8.1%
at constant currency rates (up 16.2% at actual rates).
Group underlying operating profit performance has been strong
and for the nine months ended 30 September 2016, in constant
currency, remains consistent with the 30% improvement reported with
the interim results. The operating profit at actual rates has
benefitted further from prevailing exchange rates which have
provided a tailwind on the translation of our results during the
third quarter.
The Group's focus remains on building long-term shareholder
value through delivering attractive returns from our existing
business and continuing with the disciplined investment in new
locations. Returns on our existing business have developed well and
the returns to 30 September 2016 are ahead of those reported with
our interim results, on a 12 month rolling basis. For those
locations open on or before 31 December 2012 the returns are at
record levels, driven by continued operational leverage.
Underlying cash generation(1) has remained strong. For the nine
months ended 30 September 2016 underlying cash generation has
increased 52% year-on-year to GBP208.9m (nine months to September
2015: GBP137.8m), reflecting the strong profit performance.
During the third quarter we added 56 new locations to our global
network with associated net growth capital investment(2) of
GBP43.1m. This investment included GBP12.9m spent on acquiring
properties in which we will establish centres. As with previous
property investments we expect strong returns. In the nine months
ended 30 September 2016 the Group has added 169 new locations and
net capex of GBP126.2m, representing over 2.4m sq. ft. of space
added to the network, which now totals more than 47m sq. ft.
globally. These new locations were predominately organic
openings.
We have used this period as an opportunity to refresh some of
our existing estate and in accordance with the CMA ruling have
disposed of certain acquired locations in the UK. These factors
have driven the closure of 54 locations in the year to date, which
is a slightly higher level of closures than has been seen in recent
years.
As at 30 September 2016, the Group had a total of 2,883
locations, with the total number of co-working seats / workstations
(including non-consolidated) increasing to 467,507 (459,747 as at
30 June 2016)(3) .
The Group had net debt at 30 September 2016 of GBP158.1m, a
decrease on the 30 June 2016 position of GBP173.8m, notwithstanding
the GBP43.1m investment in the quarter in net growth capital
expenditure and GBP7.8m on share repurchases. Achieving this
reflects the continuation of a good profit performance which has
converted strongly into cash.
2016 growth plans
We have continued to maintain our selective approach to growth
during the third quarter and only to invest where we expect strong
returns. Our pipeline of new openings remains solid, with a number
of previously scheduled late 2016 openings now anticipated to open
in early 2017 and the majority of the associated investment having
been incurred in 2016. Accordingly, our visibility on net capital
expenditure for the whole of 2016 is now approximately GBP150m,
representing c240 locations and 3.4m sq. ft. of additional
space.
Mature performance
Revenues for the three months ended 30 September 2016 from our
mature business (centres opened on or before 31 December 2014, now
comprising a total of 2,171 locations representing approximately
75% of our global portfolio), decreased 2.6% at constant currency
to GBP481.0m (up 11.4% at actual exchange rates). This reflects
some variation in market conditions across certain geographies and
an element of cannibalisation from the enlarged Group network.
For the nine months ended 30 September 2016 mature revenues
increased to GBP1,406.5m compared to GBP1,310.1m for the comparable
period in 2015, broadly flat at constant currency (up 7.4% at
actual rates). Based on this stable revenue performance together
with the strong discipline in respect of overheads, operating
profit and return on investment has been strong.
Year-on-year mature occupancy for the nine months ended 30
September 2016 reduced 0.7 percentage points on a like-for-like
basis to 78.5%.
Change of Name and Scheme of Arrangement
In a separate statement released today, the Group announces a
proposed scheme of arrangement (the "Scheme") and alongside this is
taking this opportunity to change the name of its group holding
company to IWG plc (International Workplace Group). This change is
to reflect the continuing progression of the Group in its provision
of a broad spectrum of flexible work solutions across multiple
brands. It is also in recognition of the Board's view of the
broader market opportunities that the Group can develop.
The proposed Scheme is to create a new holding company, with a
head office in Switzerland.
As the Group continues to develop worldwide there has been an
increasing presence of senior management located in Switzerland.
The Group's financial control, treasury and procurement functions
are all now run from Switzerland and, as the business continues to
centralise its key functions in order to achieve synergies of
scale, the Board considers that this hub will continue to grow
further.
There will be no substantive changes to corporate governance and
investor protection measures. In particular, upon implementation of
the Scheme, the Takeover Code will apply to IWG and IWG intends to
comply with the Corporate Governance Code to the same extent that
the Group does currently.
Summary
We are pleased with the continued strong profit, cash generation
and returns performance of our business which remain in line with
management expectations. Having anticipated an increase in global
macro-economic uncertainty, we took specific actions early in the
year to improve efficiencies across the business and our continued
progress reflects those early actions.
We have continued to build our national networks globally,
whilst maintaining our disciplined and flexible approach to
investment throughout the economic cycle. Our investments are
continuing to deliver attractive returns, well ahead of our cost of
capital.
Looking forward to the remainder of 2016, we remain confident of
delivering a full year performance in line with management's
expectations.
1Underlying cash generation is cash generated before the
investment in growth capital expenditure, dividend payments and the
purchase of shares
2Net capital expenditure in new locations equals gross capital
expenditure less any contributions received towards fit-out
costs
Growth Capital Expenditure H1 2016 Q3 2016 YTD 2016
(GBPm)
---------------------------- -------- -------- ---------
Gross Growth Capital
Expenditure 106.8 61.0 167.8
---------------------------- -------- -------- ---------
Net Growth Capital
Expenditure 83.1 43.1 126.2
---------------------------- -------- -------- ---------
3Consolidated co-working seats / workstations as at 30 September
2016 were 443,337 (30 June 2016: 436,372)
Conference call details
Regus will be hosting a call for analysts and investors at 08.30
GMT this morning. Details are set out below:
Dial in number: +44 (0) 1452 555 566
Conference ID: 3889467
There will also be a replay facility available for 7 days after
the call (until 10 November, 11.30am):
Dial in number: +44 (0) 1452 550 000
Playback ID: 3889467
For further information, please contact:
Regus plc Tel: + 352 22 9999 5160 Brunswick Tel: + 44 (0)
Mark Dixon, Chief Executive Officer 20 7404 5959
Dominik de Daniel, Chief Financial Nick Cosgrove
Officer & Chief Operating Officer Gabrielle Silver
Wayne Gerry, Group Investor Relations Rosheeka Field
Director
This trading update 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.
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This information is provided by RNS
The company news service from the London Stock Exchange
END
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November 03, 2016 03:00 ET (07:00 GMT)
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