Shares fall as Regus reveals plans for 450 new centres

Mark Dixon, chief executive of Regus
Mark Dixon, chief executive of Regus
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OFFICE PROVIDER Regus said it expected to open at least 450 business centres this year, sending its shares down more than 7 per cent as it warned the accelerated expansion will hit profits short-term.

Regus, which rents out meeting rooms, business lounges and office space, had previously planned to open at least 300 new centres this year. It opened 448 new centres last year.

New centres take 16 to 18 months to break even and about two years to be fully established, says Regus, which leases to clients such as Google and GlaxoSmithKline.

The company has stepped up expansion to meet increased demand, particularly from technology clients.

Regus has enjoyed strong demand at its established centres, which drove up first-half revenue by 8.1 per cent to £804.7m.

Excluding the adverse effect of a rising pound, it said revenue grew by 16.9 per cent.

But analysts said accelerated expansion would inflate costs and rapidly increase net debt, depressing earnings in the short term. At least 10 per cent of the new centres would be in Africa, from where Regus had seen the highest level of growth in percentage terms, Mark Dixon, the billionaire chief executive and founder of the company, said.

Pre-tax profit fell marginally to £31m in the six months ended June 30.

Only 14 per cent of Regus revenue from established centres – open two years or more – comes from the UK and Ireland, leaving it exposed to a stronger pound for the rest of its business.

The pound rose more than 3.3 per cent against the dollar in the first six months of the year.

Regus opened a drop-in business lounge and meeting rooms for mobile workers at Meadowhall shopping centre in Sheffield earlier this year.

Andrew Brown, communications director, told The Yorkshire Post that the new facility has been “very busy”.

Regus has 14 locations across Yorkshire, including offices in Leeds, Sheffield, Harrogate and York. It hopes to open a new office in Hull before the end of the year.

Mr said: “Growth has been driven by the structural shift from fixed to flexible working. Starbucks is good for one form of mobile working but it’s not good for different sorts. That’s what is driving our growth.”