Shares in confident Regus reflect optimism

The company said it would see a return to revenue growth in 2011 following a restructuring and the decision to expand the business.

The group, which has four sites in Leeds and one in Sheffield, said it was looking at opening further sites across Yorkshire.

Its Yorkshire operations reported a 20 per cent increase in enquiries since the start of this year.

Regus blamed “extremely challenging conditions” in 2010 for a seven per cent drop in UK sales to £178.9m, despite opening 23 new centres and winning business from Yell, which transferred 700 sales consultants to its offices.

The UK business made an operating loss of £12.2m in the year, but Regus is confident it can return to profit after making cost savings by closing three centres and renegotiating leases with landlords.

The group’s shares closed up 16 per cent, a rise of 16p to 116.60p last night.

Investec Securities analyst Wayne Gerry, who retains a ‘buy’ rating on the stock, said: “Despite a very challenging macro environment, Regus has delivered results marginally ahead of our expectations, invested in future growth and improving the operational efficiency of the business, and delivered a year-on-year increase in operational cash flows. This robust performance, together with recent improving trends, and a persuasive long-term structural growth story continues to make Regus attractive.”

The group, which operates in 87 countries, saw total revenues decline one per cent to £1bn, while underlying profits fell 67 per cent to £23.8m after it invested £70m in opening 125 new centres.

Regus said it had seen little upturn from the global economic recovery, but said the business has emerged stronger from the recession.

It has raised its full-year dividend by eight per cent to 2.6p.

It also continued to expand its presence in new markets overseas, having opened offices in Oman, Ghana and Lithuania in the year.

A bullish statement said the company remained cautious on the economy, but was well positioned for a solid year of revenue growth and pledged to continue investing in expansion.

Chief executive Mark Dixon said: “Arguably the recession of the last two years has been good for our business.

“It made us take a long hard look at everything we did, improve it and in doing so we have been transformed.”

The group offers ready-to-use offices for rentals as short as half a day.

Mr Dixon said the group would return to growth in 2011 “whatever happens to the economy”.

Analyst Andrew Shepherd-Barron at Peel Hunt said: “A more upbeat trading statement is encouraging, but we continue to believe that the road to recovery will be bumpy.”

In August, the company said it had swung to a first half pre-tax loss of £6.1m for the six months to June 2010 after being hit by restructuring costs in the UK and tough trading conditions across its markets.

Mr Dixon said: “What we are seeing is a pretty good start to 2011, but that’s really as a result of the investments we made last year and the way we have changed the business.

“We have seen little benefit from any economic upturn but we have continued to invest in growth, mature margins have held up well and cash flow continued to be strong reflecting the underlying health of the business.”

Regus, whose clients include Yell, AT&T and most recently US food retailer 7-11, said it was talking to a large number of corporate companies and had strengthened its consulting team to drive up that business.

Mr Dixon said the group would push its footprint close to 90 countries this year with openings in Madagascar, Cambodia, Serbia, Croatia and, in the next few weeks, Uganda.

Richard Curr, head of dealing at Prime Markets said: “We have tracked Regus shares since the early December share price recovery, which as much as anything else was driven by speculation over the group’s track record of outperformance in adverse market conditions.

“Profits may have fallen, but there is a clear acceleration of revenues, and with chief executive Mark Dixon’s track record and statement of intent for the current year, any further upturn in the economy should provide further support for share price growth.

“With or without this, Prime Markets still rates Regus shares as a safe bet for continued growth back to year highs of 117p and beyond.”

The company said the business was now in better shape after making cost savings of £135m since 2008.

Bottom-line pre-tax profits declined 91 per cent to £7.8m after paying £15m in restructuring costs, mostly in the UK.

Brussels experience drove idea

entrepreneur Mark Dixon decided to start Regus during a business trip to Brussels, Belgium, where he noticed how many business people were forced to work from hotels due to the lack of a more professional environment.

He concluded that there must be a better way to work on the road and at home.

His idea was to transform the way companies manage their global real estate needs by having them outsource their office space requirements to a service provider.

With this goal in mind, he launched Regus in 1989 with a single business centre in Brussels.

Meeting strong demand, Mr Dixon quickly developed a global network of furnished and staffed business centre places to work that businesses could use on terms that met their needs.