Regus plc
Annual Report & Accounts 2002
1
Contents
Statement from the Chairman
Financial review
Directors
Directors’ report
Corporate governance
Directors’ remuneration report
Auditors’ report
Consolidated profit & loss account
Balance sheets
Consolidated cash flow statement
Recognised gains & losses
Accounting policies
Notes to the financial statements
Principal Group companies
Shareholder information
AGM notice
Five-year summary
2
4
9
10
12
15
20
22
23
24
25
26
32
52
54
55
60
2
Report and Accounts 2002
Chairman’s Statement
2002 was perhaps the most
challenging year in the history
of the company.
The economic slowdown that began
in the United States in the first half
of 2001 deepened during 2002
and was exacerbated by growing
geopolitical uncertainty.
It became clear early in 2002 that Regus had over expanded
in some markets, most notably in the US and in particular on
the West Coast of the US. Fuelled by the technology boom
in the late 1990s, the West Coast economy became
overheated and when the boom came to an end in early
2001, it was the West Coast that suffered most. Regus has
around one third of its US centres on the West Coast.
In 2001, we had already cut costs by over £50 million a
year but with overall revenues continuing to fall in 2002,
we set about attacking the fixed cost base. In a number
of our key markets we sought – with some success – to re-
negotiate and re-structure our lease portfolio. Notwithstanding
this, we continued to consume cash month-on-month.
3
Accordingly, the Board took two decisive steps around the
stabilised. Global occupancy rose throughout the year and,
turn of the year:
• In December, we sold a 58% majority interest in our
successful UK business to Alchemy Partners, bringing
£25.6 million into the Group immediately and at the same
time, putting an additional £16.3 million of capital into the
including the UK, almost 60,000 customers across 51
countries now use Regus on a daily basis. This represents
an increase of 11% compared with the same period in
2001. We continue to see high levels of customer
satisfaction and it is clear that businesses, large and small,
appreciate the significant benefits of outsourcing their
UK business. Further contingent consideration payments
property requirements.
are expected from Alchemy in 2003 and 2004,
dependent on the EBITDA of the UK business.
• In January, we decided to seek creditor protection for our
US business in order to allow our American subsidiary
time to reorganise its business and return it to profitability.
Although Chapter 11 allows lessees to terminate leases in
Looking ahead, we believe we are taking the necessary
steps to secure a successful future for Regus. This includes
accounting for a number of exceptional items in 2002. As
the world’s largest provider of serviced offices, we have
efficient systems in place and our people remain committed
to delivering the very best in service to our customers
a cost effective way, our intention is to agree space
around the globe.
and/or rent reductions with as many landlords as
possible. This is important if we are to protect the
integrity of our network. Chapter 11 has no impact on the
The transition has been a tough one and we thank our
staff, shareholders, landlords, suppliers and customers for
day-to-day running of our centres in the US and we plan
their patience and support.
to exit Chapter 11 sometime later in the year.
We continue to look for ways to address our few remaining
cash negative businesses. The largest of these, Germany, is
currently being re-structured.
Our determined drive to attract and retain customers has
resulted in increased occupancy and prices in general have
John Matthews
Chairman
4
Report and Accounts 2002
Financial review
Introduction
Restructuring
The Group recorded an operating loss before exceptional
In 2001, the cost base was reduced by over £50 million
items of £44.3 million (2001: £19.0 million) on Group
with particular emphasis on variable costs.
turnover of £435.6 million (2001: £512.6 million). After an
In line with continued deterioration in the wider economy
exceptional charge of £92.1 million (2001: £90.5 million)
during 2002, the Group sought ways of further
plus a net profit on business disposals of £22.7 million the
reducing the cost base, in particular fixed costs by
loss before interest and taxation was £113.7 million
re-negotiating and re-structuring the Group’s lease
(2001: £109.5 million).
portfolio. Although these bi-lateral negotiations yielded
some success, the net improvement in cashflow proved
insufficient and, accordingly, the Board decided:
• In December 2002, to sell a 58% majority interest in the
UK business to Alchemy Partners, bringing £25.6 million
into the Group immediately and at the same time putting
an additional £16.3 million of capital into the UK business.
Further contingent consideration payments are expected
from Alchemy in 2003 and 2004, dependent on the
EBITDA of the UK business. The transaction closed on 30
December 2002. The Group consolidated the results of
the UK business for 2002 and accounted for the UK
business as an associate at 31 December 2002. The
Group recorded a profit on the sale of the UK business
of £23.0 million which excludes any deferred
Group turnover
£m
600
512.6
421.1
435.6
200.6
111.6
1998
1999
2000
2001
2002
EBITDA before exceptional items
53.0
45.1
500
400
300
200
100
0
£m
60.0
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-5.8
-23.0
consideration.
12.1
• In January 2003, to seek creditor protection for the US
business in order to allow the US subsidiary time to
reorganise its business and return to profitability. Although
the filing took place after the year end, the Group has
determined that it would be prudent to make impairment
1998
1999
2000
2001
2002
provisions in respect of certain assets and to provide for
the cost of exiting from certain onerous leases.
The Group has also taken steps to address its other
remaining cash negative businesses, in particular Germany,
and similar provisions have been made in respect of those
businesses. The total provisions for onerous leases and
related closure costs and impairment of tangible assets
were £54.3 million and £36.8 million respectively.
5
Convertible Bond Issue
The £40m Convertible Bond issue was repaid in full during 2002 and no charges are outstanding with respect to this issue.
Results of Operations
The following table sets forth the Group’s revenue, centre contribution before exceptional cost of sales of £57.0 million
(2001: £38.0 million) and workstations (i.e. weighted average number of workstations) by geographic region.
Year ended 31 December
Revenue
Contribution
Workstations
Revenue
Contribution
Workstations
2002
2001
173.3
140.1
91.7
30.5
435.6
30.5
8.9
(19.7)
2.6
22.3
(in £ millions, except workstations)
26,912
30,807
23,898
5,877
87,494
213.6
151.9
113.7
33.4
512.6
59.4
24.9
(10.0)
3.5
77.8
25,471
26,262
21,285
5,473
78,491
UK & Ireland
Rest of Europe
Americas
Rest of World
Total
The following table sets forth the Group’s revenue, centre contribution (gross profit) before exceptional items and workstations by
established vs. new centres.
Year ended 31 December
Revenue
Contribution
Workstations
Revenue
Contribution
Workstations
2002
2001
Established Centres
New Centres
Total
408.1
27.5
435.6
29.9
(7.6)
22.3
(in £ millions, except workstations)
80,469
7,025
87,494
410.8
101.8
512.6
103.1
(25.3)
77.8
53,693
24,798
78,491
Revenue
Revenue on a global basis decreased 15% to £435.6 million
Accordingly, REVPAW in established centres decreased
in 2002 from £512.6 million in 2001 with weighted average
from £7,650 in 2001 to £5,072 in 2002.
workstations increasing 11% to 87,494 in 2002 from 78,491
in 2001. As a result, total revenue per available workstation
(REVPAW) decreased from £6,531 in 2001 to £4,979 in
2002. REVPOW (the total revenue per occupied workstation)
also fell by 26% during these very difficult trading conditions
(falling from £11,147 in 2001 to £8,272 in 2002).
Revenue from established centres decreased slightly to
£408.1 million in 2002 and weighted average workstations
in established centres increased 50% to 80,469.
Revenue from new centres decreased 73% to £27.5 million
in 2002 and workstations in new centres decreased 72% to
7,025. REVPAW in new centres decreased 5% to £3,914 in
2002 from £4,105 in 2001.
Average occupied workstations increased during 2002
ending the year up 15% to 52,659 (2001: 45,986).
6
Report and Accounts 2002
Financial review continued
Available Workstations
No.
90000
24,798
7,025
80,469
Centre Contribution (Gross Profit)
Centre contribution before exceptional items on a global
basis decreased 71% from £77.8 million in 2001 to £22.3
million in 2002.
19,392
53,693
Centre contribution before exceptional cost of sales from
established centres decreased 71% to £29.9 million in
13,005
30,941
2002. The centre contribution margin (centre contribution
16,772
7,223
9,070
1998
1999
2000
2001
2002
Established
New
as a percentage of revenue) from established centres fell
from 25% to 7% between 2002 and 2001. Centre
contribution from new centres increased to negative
£7.6 million in 2002 from negative £25.3 million.
Occupied Workstations
52,659
45,986
37,497
19,386
11,065
1998
1999
2000
2001
2002
REVPAW - established centres
£
10000
9,489
Administrative Expenses
Administrative expenses before exceptional items
decreased 33% to £61.1 million in 2002. Administrative
expenses also fell as a percentage of revenue decreasing
from 18% in 2001 to 14% in 2002. Sales and marketing
costs decreased 30% to £33.8 million in 2002 (or 55% of
administrative expenses) from £48.2 million in 2001 (or
53% of administrative expenses). Regional and central
overheads decreased 37% to £27.3 million in 2002 (or 45%
of administrative expenses) from £43.0 million in 2001 (or
47% of administrative expenses).
Exceptional Items
£92.1 million exceptional items include costs relating to
onerous leases (£54.3 million), impairment of tangible
assets (£36.9 million), impairment of goodwill (£4.0 million)
and costs related to aborted business disposals (£0.7
million), offset by a business interruption insurance receipt
7,872
7,990
7,650
(£3.8 million).
Profit/(loss) on Sale of Group Undertakings
5,072
In the year, two Group undertakings were sold which
generated a £22.7 million net profit. The most significant
transaction was the sale of a 58% interest in the UK
business to Alchemy Partners, which contributed £23.0
million. In addition, the Romanian business was sold to a
1998
1999
2000
2001
2002
franchisee at a small loss of £0.3 million.
80000
70000
60000
50000
40000
30000
20000
10000
0
No.
60000
50000
40000
30000
20000
10000
0
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
7
Contribution before exceptional items
adjustment was made to the balance sheet as at that date.
103.1
92.3
The impact on the tax charge for 2002 was just £0.1 million.
£m
110.0
90.0
70.0
50.0
30.0
23.0
41.7
8.0
29.9
-7.6
Established
New
-8.6
-24.6
-25.3
1998
1999
2000
2001
2002
Overheads
29.9
26.5
20.6
17.8
% of
Revenues
10.0
-10.0
-30.0
-50.0
35
30
25
20
15
10
5
0
Liquidity and Capital Resources
Cash at bank and in hand at 31 December 2002 was £58.6
million (2001: £117.1 million) of which £29.9 million was free
cash, including the net cash impact of £15.6 million received
so far, from the sale of 58% of the UK business.
Total indebtedness at 31 December 2002 was £11.0 million
(2001: £48.1 million), including a £5.0 million loan from
Regus UK. The Group also had outstanding finance lease
obligations at 31 December 2002 of £25.2 million (2001:
£38.0 million), of which £11.8 million is due within one year.
14.1
Operating cash inflow before exceptional items was £5.8
Sales and
marketing
General and
administrative
million in 2002 compared with £56.1 million in 2001.
Decreased trading levels resulted in net working capital
outflows of £9.5 million in the year.
1998
1999
2000
2001
2002
Net Interest Payable
The increase in interest payable was due primarily to the £3.5
million interest paid on Regus’ £40 million convertible bond,
which was fully repaid during 2002.
Net cash outflow before management of liquid resources
and financing for the year was £16.9 million after paying tax
of £4.1 million, interest (net) of £2.8 million, net capital
expenditure of £14.7 million and investments in joint
ventures of £0.7 million, offset by a net cash benefit of
There was also a reduced level of interest received as cash
£16.2 million from the sale of a share of the UK business
balances fell steadily over the year.
and other acquisitions and disposals.
Tax on loss on ordinary activities
Despite Regus’ overall loss making position in 2001 and
2002, Regus provided for tax liabilities in both periods
primarily because tax liabilities arose on profits arising in the
UK & Ireland and several countries within continental Europe.
By the end of December, the Group had repaid all of the
5 percent unsecured, senior convertible debentures issued
in December 2001. No further charge will be incurred in
relation to this financing.
These taxable profits could not be offset by the tax losses
Net cash (cash at bank less total indebtedness and finance
arising in other countries where Regus operates. The majority
leases) decreased from £31.0 million at 31 December 2001
of Regus’ operating companies have tax losses available to
to £22.4 million at 31 December 2002.
carry forward against future profits. In some countries, there
are time restrictions on the carry forward of such losses. The
Group adopted FRS 19 Deferred tax during the year. The
impact of FRS 19 on the financial position of the Group at 31
December 2001 was deemed not material and so no
Maintaining adequate liquidity in the Regus Group
continues to be the Board’s highest priority. The sale of a
majority stake in the UK business and the filing under
Chapter 11 in the US are evidence of this. Based upon the
8
Report and Accounts 2002
Financial review continued
assumptions set out under Accounting Policies – Going
Funding and deposits
Concern on page 26, the directors have prepared the
Outstanding borrowings comprise office equipment
accounts on a going concern basis. In particular, the
financed through finance leases as well as specific loans
directors recognise that the outcome of Chapter 11
from certain property owners advanced on commercial
proceedings is unpredictable and the Group is reliant upon
terms. Wherever possible, these borrowings are matched
the timely receipt of substantially all of the first tranche of
to the local currency of the borrower.
Surplus funds are deposited in investment grade instruments
that carry low credit risk and which are readily realisable.
Counter-party risk
The Group actively manages its relationships with a panel
of high-quality financial institutions. Cash assets,
borrowings and other financial instruments are distributed
according to predetermined limits approved by the Board
to control exposure to any particular institution.
Interest rate risk
The Group’s policy is to borrow and invest funds using both
fixed and floating interest rates. The Group manages
interest rate risk using forward rates or interest rate swaps
as appropriate to minimise the risk to the Group of adverse
movements in interest rates.
the deferred consideration from Alchemy.
Treasury Management
The Group’s treasury policy seeks to ensure that adequate
financial resources are available for day-to-day operations
while managing its currency, interest rate and counter-party
credit risks. Group Treasury strategy and policy is
developed centrally, with subsidiary companies being
required to operate within a framework of controls
approved by the Board. Our policy on each of the major
areas of treasury activity is set out below.
Currency translation
The results of the Group’s foreign subsidiaries are
translated into Sterling at the average exchange rates for
the period concerned. The balance sheets of foreign
subsidiaries are translated into Sterling at the closing
exchange rates. Any gains and losses resulting from the
translation are recorded in reserves where they are
matched with the gains and losses on related borrowings,
foreign exchange contracts, currency swaps or currency
options, used to hedge the net assets of subsidiaries.
Group Treasury makes proposals to a Treasury Risk
Committee of the Board on a quarterly basis regarding the
hedging policy for overseas assets and liabilities.
Currency transaction exposures
Currency transaction exposure arises where sales and
purchases are transacted by a business unit in a currency
other than its own, local, functional currency. The majority of
the Group’s businesses, however, sell to clients and pay
suppliers in their local markets in their own functional
currencies and as a result, have limited transaction exposure.
9
Directors
John Matthews
Stephen Stamp
Non-executive Chairman, age 58
Group Finance Director, age 41
Appointed in 1995. He is also a director of Crest Nicholson plc
Mr Stamp joined Regus in January 2000 from Shire
(Chairman), SDL plc, Rotork plc and several private companies.
Pharmaceuticals Group plc, where he was Group Finance
A chartered accountant, he has held senior executive positions
Director. Prior to joining Shire in 1994, he was an assistant
in investment banking and in industry. He is Chairman of the
director of corporate finance at Lazard Brothers and before that
nomination committee and a member of the audit and
spent four years at KPMG London, qualifying as a chartered
remuneration committees.
accountant in 1987.
Mark Dixon
Chief Executive, age 43
Martin Robinson
Independent non-executive Director, age 40
Founder of Regus. His entrepreneurial skill and drive have
Mr Robinson was appointed as a non-executive director in August
made him a major contributor to the growth of the serviced
2002. He is currently the Chairman of Center Parcs UK and CEO of
office industry. He is a member of the nomination committee.
Center Parcs Europe, before which he was commercial director of
Rudy Lobo
Executive Director, age 47
S&N retail. He is Chairman of the remuneration committee and a
member of the audit and nomination committees.
Mr Lobo joined Regus eleven years ago and was previously
Group Finance Director. He is responsible for commercial
Roger Orf
Senior independent non-executive Director, age 50
operations and has responsibility for directing Regus’ IT and
Head of European Operations for Lone Star, a property
e-business strategy. Previously, Mr Lobo was the Group
investment company. Previously, Mr Orf made investments for
Company Secretary of Medicom International Ltd, a publisher
his own account and managed investments on behalf of Apollo
of medical journals, and a director of several of its subsidiaries.
Real Estate Advisors. Prior to 1995, Mr Orf was in charge of
Goldman Sachs’ European real estate department. He is
Chairman of the audit committee and a member of the
remuneration and nomination committees.
Auditors
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Legal advisers to the
Financial advisers
Company as to US law
NM Rothschild & Sons
Davis Polk & Wardwell
New Court
99 Gresham Street
London EC2V 7NG
St Swithin’s Lane
London EC4P 4DU
Registered office
and headquarters
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
Website
www.regus.com
Registrars
Capita IRG Plc
Bourne House
34 Beckenham Road
Registered number
Kent BR3 4TU
3548821
Legal advisers to the
Company as to English law
Bankers
Slaughter and May
1 Bunhill Row
London EC1Y 8YY
NatWest Bank Plc
1 Princes Street
London EC2R 8PB
Stockbrokers
Merrill Lynch International
2 King Edward Street
London EC1A 1HQ
10
Report and Accounts 2002
Director’s report
The directors present their report and the audited
a variety of ways, including electronic media, in-house
financial statements of Regus plc for the year ended 31
journals, bulletins and briefing sessions.
December 2002.
Principal activities
The Group is committed to the principle of equal
opportunity in employment, regardless of a person’s race,
The Group is engaged in the provision of fully-serviced
creed, nationality, sex, age, marital status or disability.
business centres. The Chairman’s Statement and the
Employment policies are fair, equitable and consistent with
Financial Review on pages 2 to 8 describe the principal
the skills and abilities of the employees and the needs of
activities of the Group during 2002.
Business review and future developments
The loss on ordinary activities before taxation for the year
ended 31 December 2002 was £119.1 million (2001: loss
£110.1 million). An indication of future developments is
given in the Chairman’s statement.
Dividends
No dividend is proposed (2001: £nil).
Directors and directors’ interests
The directors who held office during the year were :
M L J Dixon
S A Stamp
R J G Lobo
J W Matthews
R G Orf
the Group’s businesses. These policies ensure that
everyone is accorded equal opportunity for recruitment,
training and promotion. Where an employee becomes
disabled while employed by a Group company, every effort
is made to enable that person to continue in employment.
Regus held its second European Works Council (EWC)
meeting in June 2002, including all internally elected
councillors from the member states, and chaired by Mr R J
G Lobo. The agenda covered Regus’ global strategy and
key goals for 2002, Health and Safety updates, IT news,
corporate communications and HR issues such as salaries,
security and training and development. Agreed actions and
minutes were documented and circulated. A further
meeting of the EWC is planned for mid 2003.
The number of employees and their remuneration are set
out in note 5 to the financial statements.
G G Gray (resigned 30 June 2002)
A M Robinson (appointed 7 August 2002)
Political and charitable donations
Details of the directors’ interests and shareholdings are given
in the Directors’ Remuneration report on pages 15 to 19.
In accordance with the Articles of Association, Martin
Robinson, Mark Dixon and John Matthews retire by rotation
and, being eligible, offer themselves for re-election at the
Annual General Meeting.
Employees
The Group made no political contributions and no
donations to UK charities in either 2002 or 2001.
Payment of creditors
It is the policy of the Group to agree terms of payment for
its business transactions with its suppliers. Payment is then
made in accordance with these, subject to the terms and
conditions being met by the supplier. Trade creditor days of
the Group for the year ended 31 December 2002 were 56
It is the Group’s policy to communicate with all employees
days (2001: 48 days). The Company does not follow any
and to encourage them to take a wider interest in the affairs
code or standard on payment practice. The Company has
of their employing company and the Group. This is done in
no trade creditors.
11
Statement of directors’ responsibilities
1 The beneficiary is Maxon Investments BV. M L J Dixon owns 100%
Company law requires the directors to prepare financial
interest in Maxon (page 18).
2 The beneficiary of half of this holding is R J G Lobo (page 18).
3. Part of these shares are subject to a contract for difference with
Indigo Capital, LLC.
Auditors
Pursuant to Section 384 of the Companies Act 1985, a
resolution for the re-appointment of KPMG Audit Plc as
auditors of the Company is to be proposed at the
forthcoming Annual General Meeting.
By order of the Board 4 June 2003
T S J Regan Company Secretary
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
statements for each financial year which give a true and fair
view of the state of affairs of the Company and Group and
of the profit or loss for that period. In preparing these
financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and estimates that are reasonable and
prudent;
• state whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company and Group will continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any
time the financial position of the Company and to enable
them to ensure that the financial statements comply with
the Companies Act 1985. They have general responsibility
for taking such steps as are reasonably open to them to
safeguard the assets of the Company and of the Group
and to prevent and detect fraud and other irregularities.
Substantial shareholdings
The Company has been notified of the following holders of
3% or more of its issued share capital for the purposes of
Section 198 of the Companies Act 1985, as at 30 May 2003:
Paramount Nominees Ltd1
365,329,286
62.46%
HSBC Trustee (Jersey) Ltd2
23,140,000
3.96%
Cantor Fitzgerald Europe3
92,256,000
15.77%
GNI Limited
29,365,000
5.02%
12
Report and Accounts 2002
Corporate Governance
The Board of Directors intends to maintain standards of
Board procedures are followed and that applicable rules
corporate governance in line with the Combined Code,
and regulations are complied with. All directors submit
issued by the London Stock Exchange in 1998, which sets
themselves for re-election at least every three years and
out the Principles of Good Governance and the Code of
directors appointed during the period are required to seek
Best Practice. A summary of the Company’s procedures for
re-election at the next AGM.
applying the principles and the extent to which the provisions
of the Combined Code have been applied are set out below.
Compliance statement
The Company has complied with the provisions set out in
section 1 of the Code of Best Practice prepared by the
Committee on Corporate Governance and published in June
1998 (‘the Combined Code’) throughout the year ended
The independent non-executive directors understand
that the Board will not automatically recommend
their re-election.
Board committees
The Board has a number of standing committees, which all
have written terms of reference setting out their authority
31 December 2002, with the exception of provision
and duties:
D2 – Internal Control. The circumstances which caused this
situation and the necessary focus on other priorities in the
second half of 2002 in particular are described below.
Board composition
Audit committee – the members of this committee are
Mr J W Matthews, Mr R G Orf (Chairman) and
Mr A M Robinson (all independent non-executive directors).
Prior to 1 May 2003, it was chaired by Mr J W Matthews.
The Board currently comprises three executive directors, and
The audit committee meets as required, but not less than
three independent non–executive directors, including a non-
four times a year. Its responsibilities, in addition to those
executive chairman. Dr. G G Gray resigned as independent
referred to under Internal Control, include a critical review of
non-executive Chairman on 30 June 2002 and was
the annual and interim financial statements (including the
succeeded as Chairman by Mr J W Matthews. Mr R G Orf
Board’s statement on internal control in the annual report)
succeeded Mr J W Matthews as senior independent
prior to their submission to the Board for approval, when a
non-executive director. Mr A M Robinson joined the Board
report from the committee is also given. The committee
on 7 August 2003 as an independent non-executive director.
also reviews the scope and results of the external audit and
The Board schedules six meetings each year, but arranges to
its cost effectiveness and the independence and objectivity
meet at other times, as appropriate. It has a formal schedule
of the auditors. Although other directors, including the
of matters specifically reserved for its decision and approval.
Group Finance Director, attend audit committee meetings,
The Board is supplied with appropriate and timely information
the committee can meet for private discussions with the
to enable it to discharge its duties and requests additional
information or variations to regular reporting as it requires. A
internal and external auditors.
procedure exists for directors to seek independent
Nomination committee – the members of this committee
professional advice at the Company’s expense in the
are Mr J W Matthews (Chairman), Mr R G Orf and Mr A
furtherance of their duties, if necessary. In addition,
M Robinson (all independent non-executive directors),
appropriate training is made available for all new directors to
and Mr M L J Dixon. The committee meets as required.
assist them in the discharge of their responsibilities. All
Its responsibilities include reviewing the Board structure,
directors have access to the advice and services of the
size and composition, nominating candidates to the
Company Secretary, who is responsible for ensuring that
Board to fill Board vacancies when they arise and
13
recommending directors who are retiring by rotation to be
The control framework and key procedures in place
put forward for re-election.
throughout the year ended 31 December 2002 comprise
Remuneration committee – the members of this committee
the following:
are Mr J W Matthews, Mr R G Orf and Mr A M Robinson
• The executive directors (‘the Group executive’) normally
(Chairman) (all independent non-executive directors) and
meet monthly together with certain other senior
Mr M L J Dixon. A statement setting out the role and
executives to consider Group financial performance,
responsibility of this committee and the Group’s
business development and Group management issues.
remuneration policy is shown on page 15.
Directors of key operating companies meet regularly to
Going Concern
manage their respective businesses.
The directors continue to adopt the going concern basis in
• Major business risks and their financial implications are
preparing the financial statements. In determining that a
appraised by the responsible executives as a part of the
going concern basis is appropriate, the Directors have made
budget process and these are endorsed by regional
four key assumptions which are set out in the accounting
management. Key risks are reported to the Board and the
policies on pages 26 to 28.
audit committee. The appropriateness of controls is
Internal control
The Board acknowledges its overall responsibility for the
considered by the executives, having regard to cost/benefit,
materiality and the likelihood of risks crystallising.
Group’s system of internal control and for reviewing the
• Country and regional budgets, containing financial and
effectiveness of that system on a timely basis. The internal
operating targets, capital expenditure proposals and
control processes have been designed to identify, evaluate
performance indicators, are reviewed by the Group
and manage the key risks that the Group encounters in
executive and must support regional business strategies.
pursuing its objectives. Internal control processes within the
Regus Group encompass all controls, including financial,
operational and compliance controls and risk management.
However, such a system is designed to manage rather than
eliminate the risk of failure to achieve business objectives,
and can only provide reasonable and not absolute
assurance against material misstatement.
• Monthly reports on Group and regional performances are
provided to the Group executive. Quarterly summaries and
forecasts are presented to the Board and discussed at
Board meetings. Performance against both budgets and
objectives are reviewed with regional management, as are
forecasts and material sensitivities. The Board regularly
receives reports from key executives and functional heads
The Board conducts regular reviews of the Group’s
covering areas such as forecasts, business development,
strategic direction. Country and regional strategic
strategic planning, legal and corporate matters.
objectives, quarterly plans and performance targets for
2003 have been set by the executive directors and are
regularly reviewed by the main Board in the context of the
Group’s overall objectives.
• There is a Group-wide policy governing appraisal and
approval of investment expenditure and asset disposals.
Post investment reviews are undertaken.
• Other key policies and control procedures (including finance,
operations, and health and safety) having Group-wide
application are available to all staff on web-based systems.
14
Report and Accounts 2002
Corporate Governance continued
The Group’s internal audit remit is to report to management
• From the third quarter of 2001 through mid 2002 there
on the Group’s worldwide operations. Its budget,
was an embedded system of reporting the effectiveness
programme of work and its findings, including any material
of key financial, operational and compliance controls.
control issues and resultant actions, are reviewed by the
This is a comprehensive self-assessment system built up
audit committee. However most of the available resource
from centre-level using the Group’s intranet. Results and
within the internal audit department in the second half of
action plans are then reviewed by senior management
the year was deployed in helping with the relocation of the
and summarised for the Board;
UK accounting function in mid year.
• A multi-disciplinary Group Risk forum, chaired by the
To underpin the effectiveness of controls, it is the Group’s
Company Secretary, generally reports to the Board on a
policy to recruit and develop appropriately skilled management
quarterly basis. Although this lapsed in the second
and staff of high calibre and integrity. High standards of
quarter of 2002, the forum’s mandate is to consider all
business ethics and compliance with laws, regulations and
aspects of risk identification and management and its
internal policies are demanded from staff at all levels.
reports represent a key feature of the process by which
As noted in the Chairman’s Statement on pages 2 and 3,
2002 was a difficult year for the Group. Adverse trading
the Board assesses the overall effectiveness of the
Group’s system of internal control.
conditions required the Group to undertake extensive cost-
Communications with shareholders
cutting measures. This inevitably had an impact on the
The Company has a policy of maintaining an active dialogue
integrity of the system of internal control. Nevertheless the
with shareholders. Group financial reports and
following key mechanisms were available to the Board at
announcements are accessible via the Group’s internet site.
various times during the year in the conduct of its review of
Insofar as securities laws and other applicable requirements
internal controls:
allow, the Company corresponds on a range of subjects
with its individual shareholders who also have an opportunity
to question the Board, as well as the chairman of the
audit and remuneration committees, at the Annual
General Meeting.
• An ongoing process, through Board meetings, senior
management meetings and divisional reviews as well as
other management meetings, for the formal identification
of significant operational risks and mitigating control
processes;
• The Treasury Risk Committee comprising the Group
Finance Director, Company Secretary and Group
Treasurer, which meets to consider the specific risks
associated with treasury transactions, including the
approval of all transactions in financial derivatives;
15
Directors’ Remuneration Report
Introduction
There was no change in any of the employment terms of
This remuneration report sets out the company’s policy on
any of the executive directors during 2002 or subsequently
the remuneration of executive and non-executive directors
(until 4 June 2003). As regards the fees of the independent
together with details of directors’ remuneration packages
non-executive directors, Mr J W Matthews’ fee was
and service contracts. This report will be put to a vote of
increased from £25,000 to £90,000 per annum from 1 July
the Company’s shareholders at the Annual General Meeting
2002, on his appointment as Chairman. In addition, it was
on 9 July 2003.
The following information is not subject to audit:
The remuneration committee
agreed by the Board that, on his appointment,
Mr A M Robinson receive a fee of £25,000 per annum.
The committee has used no external consultant or
expert in its deliberations.
The remuneration committee is chaired by Mr A M
Remuneration policy
Robinson, its other members are Mr M L J Dixon, Mr R G
Orf and Mr J W Matthews. Prior to 1 May 2003, it was
chaired by Mr J W Matthews. All members of this
Remuneration policy for executive directors centres on
ensuring that remuneration packages are sufficiently
competitive to attract, retain and motivate the right calibre
committee are independent non-executive directors, other
of executive directors. Incentive payments are conditional
than the Group Chief Executive. Other directors may be
upon demanding performance criteria so as to align
invited to attend some meetings of the committee in an
incentive awards paid to directors directly with the interest
advisory capacity as the committee considers appropriate.
of shareholders. If appropriate the remuneration committee
The committee will consider all material elements of
would use the services of external consultants to help it
remuneration policy, remuneration and incentives of
agree packages reflecting the remuneration policy. The
executive directors and senior management, with reference
constituent parts of those packages are set out in the
to independent remuneration research and professional
following paragraphs.
advice, in accordance with the Combined Code on
Corporate Governance, and will make recommendations to
the Board of Directors on the framework for executive
remuneration and its cost. The Board of Directors is then
responsible for implementing the recommendations and
agreeing the remuneration package of individual directors.
Non-executive directors are remunerated with fees, set at a
level which will attract individuals with necessary experience
and ability. The remuneration committee does not believe
that it is appropriate to reward independent non-executive
directors with options or other share-based incentives.
Directors are not permitted, under Regus’ Articles of
Basic salary and benefits
Association, to vote on their own terms and conditions of
Salaries are reviewed annually and determined by the
remuneration. The committee does not make
committee, taking into account the performance of the
recommendations on the remuneration of non-executive
individual directors over the previous 12 months and the
directors, which is a matter solely for the full Board. The
pay and employment conditions elsewhere in the Group.
members of the remuneration committee attend the
Any increases in basic salary are effective from 1 January in
Company’s Annual General Meeting and are available to
each year. For 2003, the remuneration committee has
answer shareholders’ questions about directors’ remuneration.
recommended that salary levels of each of the executive
directors remain at the amounts agreed with each in 2000.
16
Report and Accounts 2002
Directors’ Remuneration Report continued
The remuneration table included within this report also
The main benefits to executive directors, who contribute a
shows benefits received. The main benefits relate to the
percentage of their gross salaries to the scheme, are:
provision of company cars and/or fuel for private cars and
the provision of private medical insurance for the director
and their immediate family.
Annual performance bonus
Under the annual bonus scheme the executive directors are
entitled to an annual bonus of up to 40% of their basic salary,
which is payable provided the budget targets for the relevant
financial year are achieved. No bonuses are payable for 2002.
Long-term incentive plan
Other than share options, the executive directors do not
participate in any of the long-term incentive plans offered to
senior management.
Share options
The Group believes that share ownership by employees,
including the executive directors, strengthens the link
between their personal interests and those of ordinary
shareholders. Regus has established a number of employee
share plans, including the Regus Global Share Plan and the
Regus International Sharesave Plan. No additional option
grants were made to any director during 2002.
During 1999, the Group established the Regus Employee
Trust. The Trust is a discretionary trust for the benefit of
employees, including executive directors. The Trust may
• A pension, based on the value of fund built up from
personal contributions, at any age between 50 and
the normal pension age of 65;
• A tax-free cash sum, payable when taking the benefits;
• Life assurance cover based on the level of contributions
with the opportunity to purchase additional cover, subject
to Inland Revenue limit of 5% of net relevant earnings; and
• Pension to spouse payable on death.
All executive directors are subject to the Inland Revenue
cap on the amount of salary which may be treated as
pensionable.
Total shareholder return performance
The following graph illustrates the Company’s total
shareholder return since flotation in 2000 relative to the
FTSE 250 Index, in accordance with paragraph 4 of the
Director’s Remuneration Report Regulations 2002.
The Company was a member of the FTSE 250 Index at the
time of flotation and the performance awards under the
share option schemes are linked to that index. Accordingly
this is considered to be the most appropriate broad equity
market index for the purpose of measuring the Company’s
relative performance.
issue shares to the Group’s employees (including directors) at
Value (£)
120
the discretion of the Company. The Trust has purchased
some of the shares in the Company which would be required
if participants were entitled to exercise options under the
share option plans.
Pensions
The executive directors participate in the Company’s Money
Purchase (Personal Pension) Scheme. The Company
matches employee contributions up to a maximum of 10%
of basic salary.
100
80
60
40
20
0
31 December 2000
31 December 2001
31 December 2002
FTSE250
Regus Plc
This graph looks at the value, by the end of 2002, of £100
invested in Regus on 31 December 2000 compared with
that of £100 invested in the FTSE 250 Index.
120
100
80
60
40
20
0
17
Service contracts
Mr J W Matthews, Mr R G Orf and Mr A M Robinson, as
The Company has adopted the following policy on directors’
non-executive directors, have entered into letters of
service contracts:
appointment dated 26 October 1999 (replaced by a letter
(i) executive directors and the Company are each required to
give 12 months’ notice of termination (there being no fixed term);
(ii) non-executive directors enter into 3 year appointment
letters, which may be terminated by the director or the
Company on 6 months’ notice.
The Company’s policy is that payments on termination
of appointment as Non-Executive Chairman dated
1 July 2002), 29 August 2000 (as amended by a letter of
amendment dated 28 November 2002) and 7 August 2002
(as amended by a letter of amendment dated 28 November
2002) respectively. These arrangements are for three years,
terminable on six months’ notice (three months’ in the case
of Mr R G Orf) by the Company or the directors. There are
no provisions for compensation for loss of office other than
should be restricted to the value of remuneration for the
payment of any outstanding fees.
notice period.
On 1 July 2000 Mr M L J Dixon, Mr R J G Lobo and Mr S A
Remuneration Report is subject to audit:
The following information within the Directors’
Stamp entered into full-time rolling service agreements with
Regus Management Limited. These are terminable by either
party giving not less than 12 months’ notice to the other
party or automatically on the respective directors reaching
the age of 65. There are no provisions for compensation for
loss of office other than payment of any outstanding salary.
Directors’ remuneration table
Salary/
fees
£’000
125.0
150.0
145.0
–
–
28.1
9.1
7.5
464.7
Bonus
£’000
Benefits
£’000
–
–
–
–
–
–
–
–
27.7
9.8
11.6
–
–
–
–
–
49.1
Total
Total
Pension
scheme
Pension
scheme
remuneration
remuneration
contributions
contributions
2002
£’000
152.7
159.8
156.6
–
–
28.1
9.1
7.5
513.8
2001
£’000
228.6
109.3
160.5
37.5
6.3
14.6
5.0
–
561.8
2002
£’000
27.6
13.0
11.6
–
–
–
–
–
2001
£’000
22.7
12.5
11.6
–
–
–
–
–
52.2
46.8
Executive
Mark Dixon
Stephen Stamp
Rudy Lobo
Non-executive
George Gray*
Robert Kuijpers*
John Matthews
Roger Orf
Martin Robinson
* Former director
18
Report and Accounts 2002
Directors’ Remuneration Report continued
During 2002, the following contractual emoluments were irrevocably waived by the directors:
Director
Mark Dixon
Stephen Stamp
Rudy Lobo
John Matthews
Roger Orf
Martin Robinson
George Gray*
* Former Director
Directors’ shareholdings
Mark Dixon**
Rudy Lobo
Stephen Stamp
John Matthews
Martin Robinson
Roger Orf
Amount Waived (£)
270,000
35,000
20,000
29,375
5,937
2,490
40,000
Ordinary shares
Ordinary shares
Beneficial holdings
Beneficial holdings
31 December 2002
31 December 2001
365,329,286
364,329,286
38,462
384,615
359,724
–
300,000
38,462
384,615
359,724
–
300,000
** Mr Dixon’s beneficial ownership of shares is calculated by attributing to him all shares owned by Maxon Investments BV, an entity in which Mr Dixon holds 100% of
the share capital.
Directors’ share options
Option
31 December
during
during
31 December
Exercise
Granted
Lapsed
Date from
which
type
2001
2002
2002
2002
price
exercisable
Rudy Lobo
Stephen Stamp
A
B
C
D
E
B
C
E
266,179
94,501
189,002
11,570,000
4,003
128,866
2,661,337
4,003
–
–
–
–
–
–
–
–
–
–
–
–
4,003
–
–
–
266,179
94,501
189,002
11,570,000
–
128,866
2,661,337
4,003
5.0p
145.5p
145.5p
0.375p
242.0p
145.5p
145.5p
242.0p
1/1/03
7/1/03
7/1/03
31/12/03
1/1/04
7/1/03
7/1/03
1/1/04
Expiry
date
31/12/09
31/12/09
31/12/09
–
1/7/04
7/1/10
7/1/10
1/7/04
A Awarded under the Regus Team Member Share Plan for nil consideration.
B Awarded under the Regus Team Member Share Plan for nil consideration.
C Awarded under the Regus Team Member Share Plan for nil consideration.
D Awarded to Mr Lobo by Maxon pursuant to an agreement dated 17 September 1999 recording the terms of an agreement entered into on 11 November 1992
between Mr Lobo and Maxon, as amended on 30 June 2000. These shares are currently held by HSBC Trustees (Jersey) Limited and will not be capable of
exercise before 31 December 2003 other than in defined circumstances (which include the discretion of Maxon). The shares subject to the option are transferable
to Mr Lobo upon payment to Maxon of an exercise price of £45,000, which is equivalent to the market value of the relevant shares at the time the parties entered
into the option arrangements.
E
Awarded under the Regus International Sharesave Plan, the maximum monthly contribution for which may not exceed the amount permitted by the Income and
Corporation Taxes Act 1988.
19
Summary particulars of the Group’s share option schemes
The performance target was missed entirely on 1 January
are given in note 22 to the Financial Statements.
2003 and therefore that part of Mr S A Stamp’s options
All options were granted at the then prevailing market price,
save for the grant of 11,570,000 options to Mr Lobo,
since lapsed (42,995 shares).
exercisable on the first vesting date (7 January 2003) have
referred to in note D above.
C The performance target requires the share price of the
The market price of the shares at 31 December 2002 was
10.25p and the range during 2002 was 3.25p to 57.75p.
None of the directors had a beneficial interest in any contract
of significance in relation to the business of the Company or
its subsidiaries at any time during the financial year.
Performance conditions
The above table shows the share options and interests
under long-term incentive schemes held by directors of the
Company. The exercise of these options and the vesting of
these interests are both subject to the achievement of
performance conditions as follows:
Option type
A No performance targets are applicable to this grant.
It was designed to reward long service within the Group
in the period up to flotation in October 2000.
B No performance targets are applicable to Mr R J G
Lobo’s grant. The grant was made to him at the same
time and using the same formula as all other employees
of the Group. No performance targets were applied to this
Group-wide grant.
Mr S A Stamp’s grant is subject to a performance target
linked to the market capitalisation of the Company on the
Company to outperform the FTSE-250 by 30%, 40% or
50%, depending on the date of exercise.
In addition, Mr S A Stamp has additional performance
targets linked to the market capitalisation of the
Company on the relevant vesting date. Unless the
market capitalisation of the company exceeds £1,000
million, none of these options will be exercisable; for all of
them to be exercisable, the market capitalisation of the
Company would have to exceed £6,000 million, on each
of 1 January 2003, 2004 and 2005, being the respective
performance measurement dates of the options.
The performance target was missed entirely on
1 January 2003 and therefore that part of Mr S A
Stamp’s options exercisable on the first vesting date
(7 January 2003) have since lapsed (887,112 shares).
D No performance targets are applicable to this grant which
was made pursuant to an agreement made in 1992.
It was not appropriate to include performance targets,
given the size of the Group at that time.
E This is an Inland-Revenue approved SAYE scheme to
which no performance targets apply.
Approved by the board of directors on 4 June 2003 and
relevant vesting date. Unless the market capitalisation of
signed on its behalf by:
the company exceeds £1,000 million, none of these
options will be exercisable; for all of them to be
exercisable, the market capitalisation of the Company
would have to exceed £6,000 million, on each of
1 January 2003, 2004 and 2005, being the respective
performance measurement dates of the options.
Mark Dixon
Chief Executive
Stephen Stamp
Group Finance Director
20
Report and Accounts 2002
Independent Auditors’ report to the members of Regus Plc
We have audited the financial statements on pages 22 to 51.
Services Authority, and we report if it does not. We are
We have also audited the information in the directors’
not required to consider whether the Board’s
remuneration report that is described as having been audited.
statement on internal control cover all risks and controls,
This report is made solely to the company’s members, as a
body, in accordance with section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might
or form an opinion on the effectiveness of the Group’s
corporate governance procedures or its risk and
control procedures.
state to the company’s members those matters we are
We read the information contained in the annual report,
required to state to them in an auditor’s report and for no
including the corporate governance statement and the
other purpose. To the fullest extent permitted by law, we do
audited part of the directors’ remuneration report, and
not accept or assume responsibility to anyone other than the
consider whether it is consistent with the audited financial
company and the company’s members as a body, for our
statements. We consider the implications for our report if
audit work, for this report, or for the opinions we have formed.
we become aware of any apparent misstatements or
Respective responsibilities of directors and auditors
The directors are responsible for preparing the annual report
Basis of audit opinion
material inconsistencies with the financial statements.
and the directors’ remuneration report. As described on
We conducted our audit in accordance with Auditing
page 11 this includes responsibility for preparing the financial
Standards issued by the Auditing Practices Board. An audit
statements in accordance with applicable United Kingdom
includes examination, on a test basis, of evidence relevant
law and accounting standards. Our responsibilities, as
to the amounts and disclosures in the financial statements
independent auditors, are established in the United Kingdom
and the part of the directors’ remuneration report to be
by statute, the Auditing Practices Board, the Listing
audited. It also includes an assessment of the significant
Rules of the UK Listing Authority and by our profession’s
estimates and judgements made by the directors in the
ethical guidance.
preparation of the financial statements, and of whether the
We report to you our opinion as to whether the financial
accounting policies are appropriate to the Group’s
circumstances, consistently applied and adequately
statements give a true and fair view and whether the financial
statements and the part of the directors’ remuneration report
disclosed.
to be audited have been properly prepared in accordance
We planned and performed our audit so as to obtain all the
with the Companies Act 1985. We also report to you if, in our
information and explanations which we considered
opinion, the directors’ report is not consistent with the
necessary in order to provide us with sufficient evidence to
financial statements, if the Company has not kept proper
give reasonable assurance that the financial statements are
accounting records, if we have not received all the information
free from material misstatement, whether caused by fraud,
and explanations we require for our audit, or if information
other irregularity or error. In forming our opinion we also
specified by law regarding directors’ remuneration and
evaluated the overall adequacy of the presentation of
transactions with the Group is not disclosed.
information in the financial statements and the part of the
We review whether the statement on page 12 reflects the
directors’ remuneration report to be audited.
company’s compliance with the seven provisions of the
In forming our opinion, we have considered the adequacy of
Combined Code specified for our review by the Financial
the disclosure in the Accounting Policies Note on pages 26
21
to 28 concerning the uncertainties over the future funding
of the Group which is dependent upon :
• A Plan of Reorganisation acceptable to Regus being
approved by US creditors and the US courts. A Plan of
Reorganisation acceptable to Regus is one which will
enable Regus US to achieve net cash generation within a
reasonably short timeframe and will result in a payment
profile of claims which can be met out of future
cashflows of the Group;
• Regus’ German business also being successfully
restructured so as to achieve cash break-even within a
reasonably short timeframe;
• Regus receiving all or substantially all of the first tranche
of the deferred consideration receivable from Alchemy in
respect of the sale of a majority stake in the UK business
on a timely basis; and
• There being no significant deterioration in current trading.
In view of the significance of these uncertainties, we
consider that the basis of preparation note within the
Accounting Policies Note on pages 26 to 28 should be
brought to your attention but our opinion is not qualified in
this respect.
Opinion
In our opinion:
• the financial statements give a true and fair view of the
state of affairs of the company and the Group as at 31
December 2002 and of the loss of the Group for the year
then ended, and;
• the financial statements and the part of the directors’
remuneration report to be audited have been properly
prepared in accordance with the Companies Act 1985.
KPMG Audit Plc
4 June 2003
Chartered Accountants, Registered Auditor
22
Report and Accounts 2002
Consolidated profit and loss account
for the year ended 31 December 2002
Turnover (including share of joint ventures)
Less: share of turnover of joint ventures
Group Turnover
Cost of sales (centre costs) before exceptional items
Exceptional cost of sales
Cost of sales (centre costs) after exceptional items
Gross (loss)/profit (centre contribution)
Administration expenses before exceptional items
Exceptional administration expenses
Administration expenses after exceptional items
Group operating loss
Share of operating loss in joint ventures
Total operating loss: Group and share of joint ventures
Profit on sale of group undertakings
Loss on ordinary activities before interest
Net interest payable and other similar charges
Loss on ordinary activities before tax
Tax on loss on ordinary activities
Loss on ordinary activities after tax
Equity minority interests
Retained loss for the financial year
Loss per ordinary share:
Basic and diluted (p)
Basic and diluted before exceptional items & business disposals (p)
All results arose from continuing operations.
Note
1
1
3(a)
1
3(a)
1
1
1
3(b)
6
2
7
19
8
31 Dec 2002
31 Dec 2001
£’000
445,407
(9,803)
435,604
(413,339)
(56,972)
(470,311)
(34,707)
(61,076)
(35,096)
(96,172)
(130,879)
(5,497)
(136,376)
22,716
(113,660)
(5,404)
(119,064)
(5,480)
(124,544)
1,145
(123,399)
(21.9)
(9.6)
£’000
524,622
(11,989)
512,633
(434,787)
(37,955)
(472,742)
39,891
(91,255)
(52,591)
(143,846)
(103,955)
(5,572)
(109,527)
–
(109,527)
(554)
(110,081)
(10,090)
(120,171)
1,933
(118,238)
(21.0)
(5.2)
23
Balance sheets
as at 31 December 2002
Fixed assets
Intangible assets
Tangible assets
Investments
Investments in subsidiaries
Investment in own shares
Investment in associates
Other investments
Interest in joint ventures:
Share of gross assets
Share of gross liabilities
Current assets
Stock
Debtors: amounts falling due after more than one year
Debtors: amounts falling due within one year
Cash at bank and in hand
Group
Group
Company
Company
31 Dec 2002
31 Dec 2001
31 Dec 2002
31 Dec 2001
Note
£’000
£’000
£’000
£’000
9
10
11
11
11
11
11
12
12
–
4,307
93,772
242,299
–
3,805
12,458
29
–
–
–
–
3,805
–
33
15,656
(14,562)
1,094
110,064
251,538
293
–
59,025
58,610
117,928
392
3,000
114,288
117,074
234,754
–
–
1
–
–
–
–
–
–
1
–
–
–
5,631
–
–
–
–
–
–
5,631
–
62,598
274,235
734
13,794
77,126
256
69,985
344,476
Creditors: amounts falling due within one year
13
(177,963)
(344,392)
(11,842)
(52,933)
Net current (liabilities)/assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provisions for deficit on joint ventures
Share of gross assets
Share of gross liabilities
Provisions for liabilities and charges
Net (liabilities)/assets
Capital and reserves
Called-up share capital
Share premium account
Other reserves
Profit and loss account
Equity shareholders’ (deficit)/ funds
Equity minority interests
14
11
16
17
18
19
19
(60,035)
(109,638)
50,029
(19,796)
141,900
(24,806)
65,284
65,285
291,543
297,174
–
–
–
–
–
–
–
(28,302)
88,792
(10,057)
55,228
29,106
279,765
4,056
29,110
279,765
55,767
8,630
(10,253)
(1,623)
(57,242)
(28,632)
29,110
279,765
6,508
(343,775)
(224,482)
(309,414)
(28,392)
(240)
(28,632)
88,445
347
88,792
55,228
–
55,228
297,174
–
–
–
–
–
297,174
29,106
279,765
8,948
(20,645)
297,174
–
The financial statements on pages 22 to 51 were approved by the Board of Directors on 4 June 2003 and were signed on its behalf by:
Mark Dixon
Chief Executive
Stephen Stamp
Group Finance Director
24
Report and Accounts 2002
Consolidated cash flow statement
for the year ended 31 December 2002
31 Dec 2002
31 Dec 2001
Note
£’000
£’000
Cash (outflow)/inflow from continuing operating activities
Net cash inflow before exceptional items
Outflow related to exceptional items
Net cash (outflow)/inflow from continuing operating activities
20(a)
Returns on investments and servicing of finance
Interest received
Interest paid
Interest paid on finance leases
Taxation
Tax paid
Capital expenditure and financial investment
Purchase of tangible fixed assets
Sale of tangible fixed assets
Purchase of investments
Acquisitions and disposals
Sale/(purchase) of subsidiary undertakings
Investment in joint ventures
Cash outflow before management of liquid resources and financing
Management of liquid resources
Financing
Increase/(decrease) in cash in the year
20(b)
20(b)
20(c)&(d)
5,820
(16,603)
(10,783)
1,901
(2,051)
(2,637)
(2,787)
(4,077)
(4,077)
56,140
(12,144)
43,996
3,906
(252)
(3,351)
303
(6,275)
(6,275)
(15,274)
(105,633)
557
–
3,052
(26)
(14,717)
(102,607)
16,236
(743)
15,493
(16,871)
55,426
(32,276)
6,279
(5,712)
(5,631)
(11,343)
(75,926)
45,643
22,714
(7,569)
25
Consolidated statement of total recognised gains and losses
for the year ended 31 December 2002
Loss for the financial year
Exchange differences
Total recognised gains and losses for the year
31 Dec 2002
31 Dec 2001
£’000
(123,399)
4,108
(119,291)
£’000
(118,238)
197
(118,041)
Reconciliation of movements in shareholders’ (deficit)/funds
Loss for the financial year
Net proceeds of ordinary shares issued
Exchange differences
Reclassification of fair value of warrants to non distributable reserves
Decrease in shareholders’ funds
Shareholders’ funds at 1 January
Shareholders’ (deficit)/funds at 31 December
31 Dec 2002
31 Dec 2001
£’000
(123,399)
4
4,108
2,450
(116,837)
88,445
(28,392)
£’000
(118,238)
3,396
197
–
(114,645)
203,090
88,445
26
Report and Accounts 2002
Accounting policies
Description of business
million. In 2002, Regus UK was the largest cash generative
Regus plc (the “Company”) and its consolidated subsidiaries
business although, following its sale in December 2002, the
(the “Group”) are engaged in the provision of fully serviced
Group no longer has access to these cash flows. The
business centres offering clients a mix of workstations,
remainder of the Regus Group, comprises a mixture of
conference rooms and related support services. The Group
cash positive and cash negative businesses, the most cash
operates an international network of business centres and is
negative of which are the US and German businesses.
divided into four geographic regions, UK & Ireland, Rest of
Europe, Americas and Rest of World. Maxon Investments
BV (“Maxon”) is the ultimate parent company and Mr M L J
Dixon, the Chief Executive of the Company, has an effective
controlling interest in the equity shares of the Company
via Maxon.
Basis of preparation
United States of America
In the year ended 31 December 2002, Regus’ US business
recorded an operating loss before exceptional items of
£35.5 million. Regus had invested significantly in new
centres on the West Coast of the US in response to
demand from technology companies in particular. As the
general economic downturn took effect, which was felt
The consolidated financial statements have been prepared
most acutely in the technology sector, losses in Regus’ US
in accordance with applicable accounting standards and in
business widened as demand for serviced offices fell.
conformity with accounting principles generally accepted in
Throughout most of 2002, Regus sought to restructure the
the United Kingdom (“UK GAAP”), under the historical cost
terms of its leases and related guarantees through bilateral
convention.
negotiation with US landlords with the objective of bringing
The preparation of the financial statements in conformity
Regus US to cash break-even or better.
with UK GAAP requires management to make estimates
Despite substantial progress towards a negotiated
and assumptions that reflect the reported amounts of
settlement, Regus was unable to reach a satisfactory
assets and liabilities, plus disclosure of contingent liabilities
settlement with US landlords within the necessary
at the date of the financial statements and the reported
timeframe and therefore on 14 January 2003 Regus’ US
amounts of revenues and expenses for an accounting
subsidiaries, Regus Business Centre Corp (“Regus US”)
period. Such estimates and assumptions could change in
and Stratis Business Centers Inc (”Stratis”) each filed a
the future as more information becomes known or
voluntary petition for relief under Chapter 11 of the US
circumstances change, such that the Group’s results may
Bankruptcy Code in the Court of the Southern District of
differ from the amounts reported and disclosed in the
New York. Regus plc and Regus Business Centre BV,
financial statements. The following principal accounting
which are holding companies for the Regus Group and
policies have been applied consistently with items that are
have both given guarantees in relation to certain leasehold
considered material in relation to the Group’s financial
liabilities of the US business, also filed for relief under
statements.
Going Concern
Excluding the cash impact from the sale of the UK
Chapter 11. Regus plc and Regus Business Centre BV are
not engaged in any form of administrative proceedings or
other arrangement with creditors outside the US.
business, the Group recorded a cash outflow in 2002 of
Chapter 11 gives each Regus company which has filed for
£9.3 million. At 31 December 2002, the Group has net
Chapter 11 legal protection from its US creditors by
current liabilities of £60.0 million and net liabilities of £28.6
immediately freezing all pre-existing financial claims of those
27
creditors both in US and non-US Courts. Thus, although
confirmed by the US Court, payment of settlements to US
US landlords may have claims pursuant to guarantees
creditors can begin and each Regus Chapter 11 Company
given by either Regus plc or Regus Business Centre BV,
can emerge from Chapter 11 protection. The process of
notwithstanding that neither Regus entity is US domiciled,
preparing, agreeing, filing and approving a Plan of Re-
any such claims against those entities fall within the
organisation is likely to take a number of months.
jurisdiction of the US Courts and benefit from the
protections afforded by Chapter 11.
The Group is conducting its Chapter 11 proceedings in the
belief that they will be concluded successfully, that the
Under Chapter 11, Regus US is able to elect whether it
group will achieve its projected cash flows and thereby be
wishes to affirm or reject leases on a case-by-case basis.
able to meet the Court-approved plan of re-organisation.
To the extent that a lease is rejected, the statutory
maximum claim, in respect of future rent that the landlord
would have against each of the relevant lessee companies
and the relevant guarantor will be limited to the higher of (i)
one year’s rent or (ii) 15% of the remaining lease term, not
to exceed three years, in each case under the relevant
lease. In the absence of Chapter 11, the termination of a
lease would require the lessee (or the guarantor) to pay all
the rent due on the balance of lease, subject to any
mitigation by the landlord.
Regus US is party to 74 real property leases and a further 8
equipment leases in the US and, through a joint venture
company, is party to a further 12 real property leases. Most
real property leases have 8-10 years unexpired term. Regus
US expects to use the provisions of Chapter 11 to reject
some property leases. In respect of the remaining US
property leases, including leases held by joint venture
companies, negotiations with US landlords are at an
advanced stage. These negotiations anticipate modifications
to existing leases including reductions in space and/or rent
in return for a compensation payment by Regus.
Germany
In the year ended 31 December 2002, Regus’ German
business recorded an operating loss before exceptional
items of £3.0 million. The German business has also been
re-organised with a view to bringing the German business
to cash break-even or better on a run rate basis. This
reorganisation has involved re-negotiation of certain leases
and may ultimately result in the closure of one cash-
negative German subsidiary.
Other factors
On 30 December 2002, Regus sold a 58% interest in its
UK business to Alchemy Partners (“Alchemy”). Alchemy
subscribed £16.3 million for new shares and paid Regus
£25.6 million for existing shares in the UK business. At the
same time, Regus repaid a £10.5 million loan from the UK
business, leaving the Regus Group with net cash from the
transaction of £15.1 million. In addition, deferred
consideration is receivable by Regus in two tranches: the
first tranche of up to £10 million is dependent upon the
EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) for the year ended 31 December 2002 and
Once negotiations with US landlords and other US
net current liabilities and net cash at 31 December 2002 of
creditors are concluded, Regus will prepare a Plan of Re-
the UK business meeting certain parameters; and a second
organisation which will include proposals for the payment of
tranche equivalent to 70% of the amount by which EBITDA
claims and compensation payments. These payments are
for the year ended 31 December 2003 exceeds £29 million.
likely to be paid over an extended period of time out of the
Regus is also entitled to receive 42% of any dividends
projected cash flows of the Regus Group. Once the Plan of
declared by the UK business.
Re-organisation has been agreed by US creditors and
28
Report and Accounts 2002
Accounting policies continued
At 31 December 2002, the Group had available free cash
accounting has been adopted. Under this method, the results
balances of £29.9m, but no other undrawn bank facilities.
of subsidiary undertakings acquired or disposed of in the year
Accordingly, the Group is reliant upon existing cash resources
are included in the consolidated profit and loss account from
and operating cash flows to fund its ongoing activities.
the date of acquisition or up to the date of disposal.
The financial statements have been prepared on the going
An associate is an undertaking in which the Group has a
concern basis, which assumes that:
long-term interest, usually from 20% to 50% of the equity
• A Plan of Re-organisation, acceptable to Regus, will be
approved by US creditors and the US courts. A Plan of
Re-organisation acceptable to Regus is one which will
enable Regus US to achieve cash break-even within a
reasonably short timeframe and will result in a payment
profile of claims which can be met out of future cash
flows of the Group;
• Regus’ German business will also be successfully
restructured so as to achieve cash break-even within a
reasonably short timeframe;
voting rights, and over which it exercises significant influence.
The Group's share of the profits less losses of associates is
included in the consolidated profit and loss account and its
interest in their net assets, other than goodwill, is included in
investments in the consolidated balance sheet.
A joint venture is an undertaking in which the group has a
long-term interest and over which it exercises joint control.
The Group's share of the profits less losses of joint
ventures is included in the consolidated profit and loss
account and its interest in their net assets, other than
• Regus receives all or substantially all of the first tranche
goodwill, is included in investments in the consolidated
of the deferred consideration receivable from Alchemy in
balance sheet.
respect of the sale of a majority stake in the UK business
on a timely basis; and
• No significant deterioration in current trading.
Nevertheless, the outcome of the Chapter 11 proceedings
is unpredictable and so there is uncertainty over the
Group’s ability to continue as a going concern in its present
form. The Directors recognise that there is a risk that this
will not be possible. If the going concern basis were to be
an inappropriate basis of preparation, it would be
necessary to provide for the expenses of realising the group
assets, reducing their values to realisable amounts in these
circumstances and provide for unsettled claims to the
Under section 230(4) of the Companies Act 1985, the
company is exempt from the requirement to present its
own profit and loss account.
Transactions in foreign currencies
Assets and liabilities of foreign subsidiaries and related
hedging instruments are translated into sterling at the
closing exchange rate prevailing at the balance sheet date.
Results of overseas undertakings are translated into sterling
at the average rates of exchange for the relevant period.
Differences arising from the re-translation of the results of
overseas undertakings are dealt with through reserves.
extent that these are not covered by existing provisions for
Transactions in foreign currency are recorded using the rate
asset impairments and onerous lease obligations.
of exchange at the date of the transaction. Monetary assets
Basis of consolidation
The Group accounts include the accounts of the company
and its subsidiary undertakings made up to 31 December
2002. Unless otherwise stated, the acquisition method of
and liabilities denominated in foreign currencies are
translated using the rate of exchange prevailing at the
balance sheet date and the gains or losses on translation
are included in the profit and loss account.
29
Goodwill
Taxation
Purchased goodwill (representing the excess of the fair value of
The charge for taxation is based on the loss for the year
the consideration given and associated costs over the fair value
and takes into account taxation deferred because of timing
of the separable net assets acquired) arising on consolidation is
differences between the treatment of certain items for
capitalised and amortised to nil by equal annual instalments
taxation and accounting purposes. Deferred tax is
over its estimated useful life, normally 20 years.
recognised, without discounting, in respect of all timing
On the subsequent disposal or termination of a business,
the profit or loss on disposal or termination is calculated
after charging the unamortised amount of any related
goodwill (negative goodwill).
Tangible fixed assets and depreciation
Depreciation is provided on a straight line basis at rates
calculated to write off the cost of fixed assets to their
estimated residual value over their estimated useful lives at
the following rates:
Furniture
- 5 years
Fixtures and fittings
- shorter of the lease term,
the first break point of the
building lease or 10 years
Telephones and office equipment
- 5 years
Computer hardware
Computer software
Cars
- 3 years
- 2 years
- 4 years
differences between the treatment of certain items for
taxation and accounting purposes which have arisen but
not reversed by the balance sheet date, except as
otherwise required by FRS 19.
Refurbishment
The terms of most building leases require Regus to make
good dilapidation or other damage occurring during the
rental period. Accruals for dilapidations are only made when
it is known that a dilapidation has occurred.
Turnover
Turnover represents the value of services provided to third
parties in the year and is exclusive of VAT and similar taxes.
Cost of sales
Cost of sales consists of costs from the individual business
centres, including property lease costs, employee costs
and start-up costs.
Pensions
Fixed asset investments
The Group operates defined contribution schemes.
Fixed asset investments are generally accounted for at cost
Contributions are charged to the profit and loss account on
less provision for impairment.
Sale of Group Undertakings
Consideration for the sale of Group subsidiaries is not
recognised until the exact amount has been agreed.
an accruals basis.
Leases
a) Finance leases
Stock
Where the Group enters into a lease for furniture, fittings,
equipment or cars which entails taking substantially all the
Stock is stated at the lower of cost and net realisable value.
risks and rewards of ownership of an asset, the lease is
Stock relates to items purchased for resale to customers
treated as a finance lease. This also includes occasions
and to items intended for distribution within the business
where the Group takes interest bearing extended credit
such as office supplies and marketing materials.
from suppliers and certain loans from landlords.
30
Report and Accounts 2002
Accounting policies continued
Under all such lease arrangements the asset is recorded in
of the first market rent review or first break point in the
the balance sheet as a tangible asset and is depreciated
lease, whichever is sooner, so that the amounts charged to
over its estimated useful life in accordance with the policy
the profit and loss account are the same each year over
described above. Future instalments under such leases, net
that period.
of finance charges, are included in creditors.
Financial instruments
Lease payments are apportioned between the finance
The Group uses various derivative financial instruments to
element, which is charged to the profit and loss account on
hedge its exposures to fluctuations in foreign exchange
a sum of the digits basis or a post-tax actuarial basis, and
risks. These include forward currency contracts and
the capital element, which reduces the outstanding
currency options.
obligation for future instalments.
b) Building leases
Building leases are all accounted for as operating leases
because substantially all the risks and rewards of
The accounting method used for derivative financial
instruments is determined by whether or not the instrument
is designated as a hedge of an existing exposure and, if so
by the accounting method used for the item being hedged.
ownership remain with the lessor.
The Group considers its derivative financial instruments to
The rental on certain leases is wholly or partly conditional
on the profitability of the centre and therefore the risk to the
Forward currency contracts
be hedges when certain criteria are met.
business, in terms of rent, is reduced. Once all outstanding
The Group’s criteria to qualify for hedge accounting are:
rent has been paid, landlords receive a share of the profits
of the centre.
For leases which are wholly or partly conditional on the
profitability of the centre, an estimate is made of the likely
rent payable based on profitability in respect of the period
up to the date of the first market rent review or first break
point in the lease, whichever is sooner, and this is spread
on a straight line basis over that period. Any subsequent
changes in estimates are spread over the remaining period
to the date of the first market rent review or first break point
in the lease, whichever is sooner. Amounts payable in
respect of profit shares are accrued once a sufficient net
surplus has been made which would result in a profit share
being paid.
Any incentives or rent free periods on conventional leases
and the conventional element of leases which are partly
conventional and partly conditional on profitability, are
spread on a straight line basis over the period to the date
• The instrument must be related to a foreign currency
asset or liability
• It must involve the same currency as the hedged item
• It must reduce the risk of foreign currency exchange
movements on the Group’s operations;
The Group has established policies and procedures
for risk assessment and the approval, reporting and
monitoring of derivative financial instruments. The Group
does not enter into financial instruments for trading or
speculative purposes.
Forward currency contracts are marked to market at the
period end, with the resulting exchange gains or losses
taken to administration expenses in the profit and loss
account, except where the hedged item’s exchange
difference is reflected in reserves (such as quasi equity
loans). In this situation the gain or loss is taken to reserves.
The gains or losses on the forward contracts are
31
recognised when the gains or losses on the underlying
hedged transactions are recognised. The net resulting
unrealised asset or liability is reflected in debtors or
creditors as appropriate.
Premiums or discounts on derivative financial instruments that
hedge an existing exposure are charged or credited to interest
income or cost over the life of the instrument, the related asset
or liability is classified as an accrual or prepayment.
Derivative financial instruments that are not designated as
hedges are marked to market using period end market rates
and gains or losses are taken to the profit and loss account.
Gains or losses arising on hedging instruments which are
cancelled due to the termination of the underlying exposure
are taken to administration expenses immediately.
Currency options
Under hedge accounting for currency options, the Group
defers the instruments impact on profit until it fully recognises
the underlying hedged item in the profit and loss account.
Option costs are charged to the interest cost over the
life of the option contract. The related asset is classified
as prepayments.
At maturity, any realised gain on the option is recognised in
the profit and loss account in administration expenses.
Cash & liquid resources
Cash for the purpose of the cash flow statement,
comprises cash in hand and deposits repayable on
demand, less overdrafts payable on demand. Liquid
resources are current asset investments which are
disposable without curtailing or disrupting the business and
are either readily convertible into known amounts of cash at
or close to their carrying values or traded in an active
market. Liquid resources comprise term deposits of less
than one year (other than cash), government securities and
investments in money market managed funds.
32
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002
1
Segmental reporting
The following tables set out the Group’s segmental analysis by geographic region and by established and new centres. Established centres are
those that have been open for a period of at least 18 months as at the end of the relevant period and new centres are those that have been
open for less than 18 months as at the end of the relevant period. The numbers reported include exceptional costs.
Turnover
Turnover
31 Dec 2002
31 Dec 2001
£’000
£’000
Gross
profit/(loss)
(centre
contribution)
31 Dec 2002
£’000
Gross
profit/(loss)
(centre
contribution)
31 Dec 2001
£’000
31,370
(20,633)
(45,490)
46
(34,707)
(27,077)
(7,630)
(34,707)
56,916
9,132
(28,752 )
2,595
39,891
90,859
(50,968)
39,891
215,188
151,879
124,096
33,459
524,622
512,633
11,989
410,804
101,829
512,633
Re-stated
Operating
profit/(loss)
Net assets/
(liabilities)
As at
Net assets/
(liabilities)
As at
31 Dec 2001
31 Dec 2002
31 Dec 2001
£’000
£’000
£’000
44,267
(8,341)
(67,937)
(2,729)
(74,787)
(109,527)
(103,955)
(5,572)
6,227
(76,478)
(137,421)
(31,716)
210,756
(28,632)
(27,009)
(1,623)
46,932
(39,183)
(65,110)
(29,596)
175,749
88,792
87,698
1,094
Geographic analysis
UK and Ireland
Rest of Europe
Americas
Rest of World
Total Group
Total joint ventures
Established centres
New centres
Total
Geographic analysis
United Kingdom and Ireland
Rest of Europe
Americas
Rest of World
Other*
Total Group
Total joint ventures
176,680
140,116
98,109
30,502
445,407
435,604
9,803
408,121
27,483
435,604
Operating
profit/(loss)
31 Dec 2002
£000
18,031
(39,514)
(86,179)
(3,274)
(25,440)
(136,376)
(130,879)
(5,497)
Figures for 2001 have been re-stated to exclude internal management fees
* includes non-regional exceptional costs.
Exceptional charges to the profit and loss account for 2002 by region were: United Kingdom and Ireland credit £0.8 million
(2001: £1.1 million); Rest of Europe £31.8 million (2001: £13.7 million); Americas £47.9 million (2001: £28.0 million);
Rest of World £2.5 million (2001: £0.9 million); and, Other £10.7 million (2001: £46.8 million).
There is no difference between segmental information on an origin basis and on a destination basis.
The directors are of the opinion that the whole of the turnover is derived from the same class of business.
33
2
Loss on ordinary activities before tax
Loss before tax is stated after charging:
Depreciation of tangible fixed assets:
– owned assets
– assets under finance leases
Goodwill amortisation
Loss/(profit) on sale of fixed assets
Operating leases:
– property
– equipment
Audit fees:
– company
– group
Non audit fees paid to the auditors and their associates:
– UK companies
– Group
– Business disposal reporting
Exceptional items (note 3a)
Non-audit fees are primarily in respect of tax compliance services.
3(a) Exceptional items
31 Dec 2002
31 Dec 2001
£’000
£’000
40,283
16,113
238
894
137,990
7,198
4
611
–
250
130
92,068
47,827
16,060
196
(32)
191,842
9,426
5
782
153
397
1,100
90,546
Included in the results for the year to 31 December 2002 were pre-tax exceptional charges totalling £92.1 million (2001: £90.5 million) as follows:
Cost of sales:
Onerous leases, related closure & restructuring costs
Write-down of tangible assets
Administration expenses:
Onerous leases, related closure & restructuring costs
Write-down of software assets
Impairment of acquisition goodwill
Impairment of investment in own shares
Aborted business sales and mergers
Non-recoverable Ryder Cup expenditure
Business interruption insurance receipt
31 Dec 2002
31 Dec 2001
£’000
20,130
36,842
34,145
–
4,002
–
722
–
(3,773)
92,068
£’000
37,955
–
4,955
4,566
4,916
32,621
3,283
2,250
–
90,546
The impact of exceptional items on the tax charge is given in note 8.
3(b) Profit on the sale of group undertakings
In the year two group undertakings were sold which generated a £22.7 million profit. The most significant transaction was the sale of a
58% interest in the UK business to Alchemy Partners, which contributed £23.0 million. In addition the Romanian business was sold to a
franchisee at a small loss of £0.3 million.
4
Profit and loss account of holding company
The loss for the financial year 2002 dealt with in the financial statements of the parent company, Regus plc, was £288,043,000
(December 2001: profit of £2,881,000).
34
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
5
Employees and directors
Staff costs
Wages and salaries
Social security costs
Pension costs
31 Dec 2002
31 Dec 2001
£’000
£’000
58,318
7,958
504
66,780
71,672
11,127
360
83,159
The Group contributes to the personal pension schemes of a small number of employees. The amount which is included within creditors is
£16,300 (2001: £18,000).
Average number of people (including executive directors) employed
Centre staff
Sales staff
Finance staff
Other staff
Directors
Aggregate emoluments
Company pension payments to money purchase scheme
Highest-paid director
Aggregate emoluments
Company pension payments to money purchase scheme
31 Dec 2002
31 Dec 2001
Number
Number
1,742
269
151
124
2,286
1,923
363
170
200
2,656
31 Dec 2002
31 Dec 2001
£’000
£’000
514
48
160
13
562
47
229
23
Retirement benefits are accruing to three directors under a money purchase scheme.
More detailed information on directors emoluments is provided in the report of the Remuneration Committee.
6
Net interest payable and other similar charges
Interest payable on overdrafts and loans
Interest payable on finance leases
Interest income
Share of joint venture net interest payable
Net interest payable and other similar charges
31 Dec 2002
31 Dec 2001
£’000
4,482
2,700
7,182
(1,917)
139
5,404
£’000
842
3,339
4,181
(3,877)
250
554
35
7
Taxation
Current tax
United Kingdom tax
- Corporation tax
- Under provision in respect of prior years
Foreign tax
- Corporation taxes
- Under provision in respect of prior years
Total current tax
Deferred tax
Origination and reversal of timing differences
Total deferred tax
Total tax on loss on ordinary activities
31 Dec 2002
31 Dec 2001
£’000
£’000
5,776
212
852
188
7,028
(1,548)
(1,548)
5,480
5,588
–
4,440
–
10,028
62
62
10,090
Factors affecting the tax charge for the year
The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to
the loss before tax is as follows:
Loss on ordinary activities before tax
Tax on loss on ordinary activities at 30% (2001: 30%)
Effects of:
Expenses not deductable for tax purposes
Profit on disposal of interests in group companies
Depreciation in excess of capital allowances
Utilisation of tax losses
Losses carried forward to future periods
Differences in tax rates on overseas earnings
Adjustment to tax charge in respect of previous periods
Total current tax
31 Dec 2002
£ '000
(119,064)
31 Dec 2001
£ '000
(110,081)
(35,719)
(33,024)
17,987
(6,086)
10,771
(1,084)
20,684
75
400
7,028
26,128
–
6,541
(953)
17,938
(6,602)
–
10,028
Factors that may affect future tax charge
No deferred tax has been provided on the unremitted accumulated reserves of the subsidiary undertakings as accumulated reserves of
subsidiary undertakings are retained to finance their business. At 31 December 2002, the total unremitted accumulated reserves of the sub-
sidiary undertakings were £15,525,000 (2001: £6,168,000).
The tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates:
2002
2003
2004
2005
2006
2007
2008
2009 and later
Available indefinitely
As at
31 Dec 2002
£ '000
–
1,850
11,504
8,536
6,487
9,321
95
120,156
157,949
41,587
199,536
As at
31 Dec 2001
£ '000
727
1,682
12,395
8,712
7,848
3,479
3,350
62,898
101,091
25,470
126,561
36
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
8
Loss per share
Loss per share has been calculated by dividing the retained loss for the financial year by the weighted average number of ordinary shares in
issue excluding those held under the employee share trust.
There were no adjustments to the retained loss for the year for the diluted loss per share computations.
The 2002 and 2001 diluted shares were not included in the computation of diluted loss per share due to losses in 2002 and 2001, resulting in
options being antidilutive.
The following summarises the calculation of loss per share for the years ended 31 December 2002 and 2001:
31 Dec 2002
31 Dec 2001
Loss for the year
Add: exceptional items & profit on business disposal
Less: tax on exceptional items
Loss for the year before exceptional items & profit on business disposal
Weighted average ordinary shares in issue
– basic and diluted
Loss per ordinary share
Impact of exceptional items
– basic and diluted
– basic and diluted
Loss per ordinary share before exceptional items
& profit on business disposal
– basic and diluted
(£’000)
(£’000)
(£’000)
(£’000)
(‘000’s)
(p)
(p)
(p)
(123,399)
69,352
–
(54,047)
564,052
(21.9)
(12.3)
(9.6)
9 Goodwill
Cost
At 1 January 2002
Additions
Exchange differences
At 31 December 2002
Amortisation
At 1 January 2002
Charge for the period
Provision for impairment
Exchange differences
At 31 December 2002
Net book value at 31 December 2002
Net book value at 31 December 2001
(118,238)
90,546
(1,614)
(29,306)
563,528
(21.0)
(15.8)
(5.2)
£’000
9,419
12
(84)
9,347
5,112
238
4,002
(5)
9,347
–
4,307
In April 2001 the Group acquired three subsidiaries for a total consideration of £9.1 million, Stratis Business Centres Inc in the US and Satellite and Skyport
Business Centres in the Netherlands, consisting of £5.7 million cash and shares of £3.4 million. The net liabilities of the companies at the date of acquisition were
£0.3 million resulting in goodwill on acquisition of £9.4 million.There were no material fair value adjustments. Subsequently the Directors have determined that
there has been a full impairment to the value of goodwill arising from these three acquisitions and, accordingly, it is prudent that the goodwill be written down.
37
10 Tangible fixed assets – Group
Cost
At 1 January 2002
Exchange differences
Additions
Business disposals
Other disposals
At 31 December 2002
Aggregate depreciation
At 1 January 2002
Exchange differences
Charge for the period
Business disposals
Provision for impairment
Other disposals
At 31 December 2002
Net book value at 31 December 2002
Net book value at 31 December 2001
The impairment provision has been calculated as follows:
Furniture
and fittings
£’000
Computers
Motor vehicles
£’000
£’000
354,427
(10,221)
18,202
(136,873)
(3,680)
221,855
123,986
(3,294)
49,069
(70,840)
36,842
(2,275)
133,488
88,367
230,441
32,426
(686)
2,063
(6,963)
(4,881)
21,959
20,677
(448)
7,290
(6,066)
–
(4,862)
16,591
5,368
11,749
288
–
–
–
(160)
128
179
1
37
–
–
(126)
91
37
109
Total
£’000
387,141
(10,907)
20,265
(143,836)
(8,721)
243,942
144,842
(3,741)
56,396
(76,906)
36,842
(7,263)
150,170
93,772
242,299
- where a centre has been identified for closure or partial closure the fixed assets concerned have been fully written down.
- for other centres with a negative EBITDA in 2002 and an anticipated negative EBITDA for 2003 the total fixed assets have been written down to the
value of the expected cash flows for the five year period 2003 to 2007, discounted at a rate of 7%.
The net book value of tangible fixed assets includes amounts in respect of fixed assets held under finance leases as follows:
Cost
Depreciation
Net book value
Group
Group
31 Dec 2002
31 Dec 2001
£’000
58,217
(28,114)
30,103
£’000
96,282
(43,169)
53,113
38
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
11 Investments
At 1 January 2002
Exchange differences
Additions
Disposal
Provision for impairment
Share of retained losses
At 31 December 2002
Group
Investment
Group
Interest
Group
Interest
in joint
Group
Other
in own shares*
in associates
ventures
Investments
£’000
3,805
–
–
–
–
–
£’000
–
–
12,458
–
–
–
3,805
12,458
£’000
1,094
(6)
746
2,181
–
(5,638)
(1,623)
£’000
33
(4)
–
–
–
–
29
Company
Shares
in Group
undertakings
£’000
5,631
–
6,205
(5,631)
(6,204)
–
1
Group
Total
£’000
4,932
(10)
13,204
2,181
–
(5,638)
14,669
* The nominal value of the Group’s investment in own shares is £0.9 million. Note 22 provides details of the investment in own shares.
Details of investments in subsidiary companies are given on pages 52 to 53 of these accounts.
Results of Regus UK
Turnover
Profit before tax
Taxation
Profit after tax
Fixed Assets
Current Assets
Liabilities due within one year
Liabilities due after one year
Net assets
Group
31 Dec 2002
£’000
Group
31 Dec 2001
£’000
–
–
–
–
27,090
24,296
(38,520)
(408)
12,458
–
–
–
–
–
–
–
–
–
Regus UK became an associate on 31 December 2002 and hence, there are no material profit and loss items.
39
Group
Group
Company
Company
31 Dec 2002
31 Dec 2001
31 Dec 2002
31 Dec 2001
£’000
£’000
£’000
£’000
21,622
–
1,966
20,449
10,331
4,657
59,025
–
–
–
45,103
–
4,136
30,144
23,804
11,101
114,288
–
3,000
3,000
–
528
–
–
206
–
734
62,598
–
62,598
63,332
–
–
–
–
256
–
256
274,235
–
274,235
274,491
12 Debtors
Amounts falling due within one year
Trade debtors
Amounts owed by Group undertakings
Amounts owed by participating interest
Other debtors
Prepayments and accrued income
VAT recoverable
Amounts falling due after one year
Amounts owed by Group undertakings
Amounts owed by participating interest
Total debtors
59,025
117,288
As at 31 December 2002 the provision for bad and doubtful debts was £2,442,000 after releasing £3,576,000 in respect of the UK disposal
(2001: £2,858,000). An allowance for bad and doubtful debts is recorded at the end of each period based upon the expected collectability
of all trade receivables.
An analysis of the bad and doubtful debt provision is as follows:
Opening balance
Additional charges to profit and loss account
Provision utilisation
Provision released on sale of business
Exchange difference
Closing balance
Group
31 Dec 2002
£’000
Group
31 Dec 2001
£’000
2,858
3,243
(107)
(3,576)
24
2,442
1,701
1,916
(724)
–
(35)
2,858
40
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
13 Creditors – amounts falling due within one year
Group
Group
Company
Company
31 Dec 2002
31 Dec 2001
31 Dec 2002
31 Dec 2001
Bank loans and overdrafts
Non-convertible bond
Loan from associate
Obligations under finance leases
Amounts owed to Group undertakings
Trade creditors
Customer deposits
Other tax and social security
Corporation tax
Deferred income
Deferred landlord contributions
Rent accruals
Other accruals
Other creditors
£’000
4,079
–
699
11,788
–
29,188
36,430
4,439
10,529
20,351
1,241
37,424
18,150
3,645
£’000
6,018
40,000
724
14,909
-
44,452
72,584
12,364
13,396
31,847
7,195
65,715
31,818
3,370
177,963
344,392
£’000
–
–
–
–
10,027
–
–
–
1,162
–
–
–
–
653
11,842
£’000
10,865
40,000
–
–
–
–
–
–
301
–
–
–
–
1,767
52,933
Certain bank loans are secured on the assets of the applicable subsidiaries and bear interest at local commercial rates.
All other creditors are unsecured and non-interest bearing.
14 Creditors – amounts falling due after more than one year
Bank loans
Loan from associate
Other loans
Obligations under finance leases
Accruals and deferred income
Other creditors
Group
Group
31 Dec 2002
31 Dec 2001
£’000
5
5,000
1,262
13,393
98
38
19,796
£’000
8
–
1,322
23,064
365
47
24,806
Certain bank loans are secured on the assets of the applicable subsidiaries and bear interest at local commercial rates.
All other creditors are unsecured and non-interest bearing.
As at 31 December 2002 the Group had no other available credit facilities (2001: nil).
41
15 Maturity of debt
The maturity profile of the carrying amount of the Group’s financial liabilities as at 31 December was as follows:
Within one year
Between one and two years
Between two and five years
After five years
Within one year
Between one and two years
Between two and five years
After five years
Non-convertible
Bank loans
bond
& overdrafts
Other loans
Finance
leases
Total
31 Dec 2002
31 Dec 2002
31 Dec 2002
31 Dec 2002
31 Dec 2002
£’000
–
–
–
–
–
£’000
4,079
4
1
–
4,084
£’000
699
225
658
5,379
6,961
Non-convertible
Bank loans
bond
and overdrafts
Other loans
£’000
11,788
7,654
5,375
364
25,181
Finance
leases
£’000
16,566
7,883
6,034
5,743
36,226
Total
31 Dec 2001
31 Dec 2001
31 Dec 2001
31 Dec 2001
31 Dec 2001
£’000
40,000
–
–
–
£’000
6,018
4
4
–
40,000
6,026
£’000
724
260
716
346
2,046
£’000
14,909
11,231
11,196
637
37,973
£’000
61,651
11,495
11,916
983
86,045
The following provides additional disclosure for bank loans, overdrafts and other loans:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Group
Group
Company
Company
31 Dec 2002
31 Dec 2001
31 Dec 2002
31 Dec 2001
£’000
4,778
229
203
146
310
5,379
11,045
£’000
46,742
264
221
383
116
346
48,072
£’000
–
–
–
–
–
–
–
£’000
50,865
–
–
–
–
–
50,865
The following provides additional finance lease disclosure including the interest components of future minimum lease payments (Company: nil):
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Total commitment
Less amounts representing interest
Present value of future minimum lease payments
Within one year
After one year
Group
Group
31 Dec 2002
31 Dec 2001
£’000
13,440
8,656
3,762
1,050
491
650
28,049
(2,868)
25,181
11,788
13,393
£’000
17,370
12,597
8,188
3,403
569
492
42,619
(4,646)
37,973
14,909
23,064
42
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
16 Provisions for liabilities and charges
At 1 January 2002
Provided in year
Utilised in year
Provisions released on sale of business
Exchange differences
At 31 December 2002
Amounts falling due within one year
Amounts falling due after one year
There is no unprovided deferred tax liability (note 7).
17 Called up share capital
Authorised
800,000,000 (2001: 800,000,000) Ordinary shares of 5p each
Allotted, called up and fully paid
582,193,517 (2001: 582,112,320) Ordinary shares of 5p each
Group
Group Onerous
Deferred tax
lease obligations
£’000
856
–
(1,506)
–
1
(649)
–
(649)
£’000
27,446
50,785
(19,250)
(563)
(527)
57,891
17,214
40,677
Group
Total
£’000
28,302
50,785
(20,756)
(563)
(526)
57,242
17,214
40,028
Group and
Company
Group and
Company
31 Dec 2002
31 Dec 2001
£’000
£’000
40,000
40,000
29,110
29,110
40,000
40,000
29,106
29,106
During 2002, 81,197 new ordinary shares of 5 pence each were issued in respect of exercised share options, see note 22.
As at 31 December 2002 warrants for 5,000,000 shares with an exercise price of 5p per share were held by the convertible debenture holders
who took up the company's £40 million convertible bond offer in December 2001. These are exercisable at any time between 14 February 2003
and 14 February 2005. Warrants for 2,500,000 shares have been exercised so far in 2003.
18 Share premium account
At 1 January and 31 December 2002
Group and
Company
(non
distributable)
£’000
279,765
43
19 Reserves
At 1 January 2002
Loss for the year
Reclassify fair value of warrant interest to non-distributable reserves
Transfer to/from capital reserve
Revaluation reserve on formation of new group investment company
Exchange differences
At 31 December 2002
20 Cash flow statement
Group Profit
Group Other
Company
Company Other
and loss (non distributable)
Profit and loss (non distributable)
£’000
(224,482)
(123,399)
–
19
4,087
(343,775)
£’000
4,056
–
2,450
(19)
21
6,508
£’000
(20,645)
(288,043)
–
–
–
(726)
(309,414)
£’000
8,948
–
2,450
–
44,369
–
55,767
(a) Reconciliation of operating profit to net cash (outflow)/inflow from operating activities
Continuing operating activities
Group operating loss
Depreciation charge
Goodwill amortisation
Loss/(profit) on disposal of fixed assets
Impairment of goodwill
Impairment of fixed assets
Impairment of investment in own shares
Increase in provisions
Decrease/(increase) in stocks
Decrease in debtors
Decrease in creditors
Group
Group
31 Dec 2002
31 Dec 2001
£’000
£’000
(130,879)
56,074
238
894
4,002
36,842
–
31,548
104
25,114
(34,720)
(103,955)
63,887
196
(32)
4,916
12,166
41,395
28,165
(109)
17,208
(19,841)
Net cash (outflow)/inflow from continuing operating activities
The cash outflow includes a £16,603,000 outflow (2001: outflow £12,144,000) relating to the exceptional items charged during the year (see
note 3(a)).
(10,783)
43,996
(b) Financing and management of liquid resources
Management of liquid resources
New cash deposits
Repayment of cash deposits
Financing
New loans
Repayment of loans
Payment of principal under finance leases
Issue of equity shares
Issue costs
Group
Group
31 Dec 2002
31 Dec 2001
£’000
£’000
(18,603)
74,029
55,426
5,850
(41,063)
(13,979)
16,916
–
(32,276)
(50,981)
96,624
45,643
42,180
(4,566)
(16,793)
1,985
(92)
22,714
44
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
20 Cash flow statement continued
(c) Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash in the year
Cash outflow/(inflow) from change in borrowings and finance leases
Cash inflow from change in liquid resources
Change in net funds/borrowings resulting from cash flows
Business acquisitions and disposals
Other non-cash items:
New finance leases
Translation difference
Movement in net funds/borrowings in the year
Net funds at 1 January
Net funds at 31 December
(d) Analysis of changes in net funds in the period
31 Dec 2002
31 Dec 2001
£’000
6,279
49,192
(55,426)
45
(6,651)
(4,446)
2,407
(8,645)
31,029
22,384
£’000
(7,569)
(20,821)
(45,643)
(74,033)
(783)
(22,901)
(1,267)
(98,984)
130,013
31,029
Cash at bank and in hand
Overdrafts
Debt due after 1 year
Debt due within 1 year
Finance leases due after 1 year
Finance leases due within 1 year
Liquid resources
At
1 January
Other
At
Non-cash
Exchange
31 December
2002
Cash flow
Acquisitions
changes
movements
£’000
24,247
(2,781)
21,466
(1,330)
(43,961)
(23,064)
(14,909)
(83,264)
92,827
31,029
£’000
4,833
1,446
6,279
(5,671)
40,883
11,103
2,877
49,192
(55,426)
45
£’000
£’000
£’000
–
–
–
–
–
408
941
1,349
(8,000)
(6,651)
(2)
–
(2)
744
(745)
(2,898)
(1,547)
(4,446)
2
(4,446)
(13)
82
69
(9)
297
1,058
850
2,196
142
2,407
2002
£’000
29,065
(1,253)
27,812
(6,266)
(3,526)
(13,393)
(11,788)
(34,973)
29,545
22,384
Liquid resources at 31 December 2002 include cash held on deposit of which £2.6 million (2001: £3.2 million) relates to collateral against bank
loans and £26.1 million (2001: £28.4 million) relates to deposits which are held by banks as security for the issuance of bank guarantees to
support lease commitments by Regus operating companies. These amounts are blocked and are not available for use by the business.
There are arrangements in place where cash balances and deposits with banks in the UK and the Netherlands can be offset against overdrawn
accounts in the same bank.
Non-cash changes comprise new finance leases and reclassifications between categories.
45
21 Financial instruments
Details of the role that financial instruments have had during the year in managing the risks that the Group faces are discussed in the financial
review on page 8.
Short-term debtors and creditors and inter-company balances
Short term debtors and creditors and intercompany balances have been excluded from all the following disclosures other than the currency
risk disclosure.
Interest rate risk and currency profile of financial liabilities and assets
The following table analyses the currency and interest rate composition of the Group’s financial liabilities and assets, comprising gross
borrowings and deposits where applicable.
31 December 2002
Financial liabilities
Euro
Japanese Yen
Sterling
US Dollar
Others
Financial assets
Chinese Rmb
Euro
Japanese Yen
Sterling
US Dollar
Others
Of which:
Liquid resources
Gross borrowings
Cash
At floating
At fixed
Non-interest
rates
£’000
(1,533)
–
(5,000)
(745)
(3,767)
(11,045)
731
15,978
372
30,046
5,578
5,905
58,610
47,565
29,545
(11,045)
29,065
47,565
rates
£’000
(5,036)
(547)
–
(18,645)
(953)
(25,181)
–
–
–
–
–
–
–
(25,181)
–
(25,181)
–
(25,181)
bearing
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
(6,569)
(547)
(5,000)
(19,390)
(4,720)
(36,226)
731
15,978
372
30,046
5,578
5,905
58,610
22,384
29,545
(36,226)
29,065
22,384
Weighted
Weighted
average
average
period for
fixed
which rate
interest rate
%
7.7
6.6
–
8.8
11.0
–
–
–
–
–
–
is fixed
Years
1.9
0.6
–
1.2
2.3
–
–
–
–
–
–
46
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
21 Financial instruments continued
31 December 2001
Financial liabilities
Euro
Japanese Yen
Sterling
US Dollar
Others
Financial assets
Australian Dollar
Euro
Japanese Yen
Sterling
US Dollar
Others
Of which:
Liquid resources
Gross borrowings
Cash
At floating
At fixed
Non-interest
rates
£’000
(3,380)
–
–
–
(4,692)
(8,072)
812
21,518
511
80,904
8,511
4,818
117,074
109,002
92,827
(8,072)
24,247
rates
£’000
(5,552)
(1,067)
(42,926)
(28,428)
–
(77,973)
–
–
–
–
–
–
–
(77,973)
–
(77,973)
–
109,002
(77,973)
bearing
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
(8,932)
(1,067)
(42,926)
(28,428)
(4,692)
(86,045)
812
21,518
511
80,904
8,511
4,818
117,074
31,029
92,827
(86,045)
24,247
31,029
Weighted
average
fixed
interest rate
%
7.7
6.6
5.5
8.8
11.0
–
–
–
–
–
–
Weighted
average
period for
which rate
is fixed
Years
2.3
1.3
1.0
2.0
2.4
–
–
–
–
–
–
47
21 Financial instruments continued
Maturity analysis of undrawn committed borrowing facilities
The Group had no undrawn committed borrowing facilities available at 31 December 2002.
Currency exposure
As explained in the Financial Review, to mitigate the effect of the currency exposures arising from its net investments overseas the Group
borrows, where appropriate, in the local currencies arising from its net investments. Gains and losses arising on net investments overseas are
recognised in the statement of total recognised gains and losses.
The tables below show the extent to which Group companies have monetary assets and liabilities in currencies other than their local currency.
Foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the Group companies
and the Group.
31 December 2002
Functional currency
of Group operation
Euro
Sterling
US Dollar
Others
31 December 2001
Functional currency
of Group operation
Euro
Sterling
US Dollar
Others
Euro
£’000
–
(8,742)
(3)
(4,538)
(13,283)
Euro
£’000
–
817
(43)
(4,123)
(3,349)
Japanese
Yen
£’000
–
–
–
–
–
Japanese
Yen
£’000
10,976
–
–
–
10,976
Net foreign currency monetary assets/(liabilities)
Sterling
US Dollar
Others
£’000
(82)
–
–
1
(81)
£’000
135
(1,586)
–
(3,217)
(4,668)
Net foreign currency monetary assets/(liabilities)
Sterling
£’000
(56)
–
–
(137)
(193)
US Dollar
£’000
66,572
(3,349)
–
(7,712)
55,511
£’000
(176)
2,225
242
(692)
1,599
Others
£’000
2,053
6,458
1,196
(1,245)
8,462
Total
£’000
(123)
(8,103)
239
(8,446)
(16,433)
Total
£’000
79,545
3,926
1,153
(13,217)
71,407
48
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
21 Financial instruments continued
Fair value disclosures
The following table provides a comparison by category of the carrying amounts and the fair value of the Group’s financial assets and liabilities at
31 December.
Fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction between informed and willing
parties, other than a forced or liquidation sale, and excludes accrued interest.
Set out below the table is a summary of the methods and assumptions used for each category of financial instrument.
Book value
31 Dec 2002
£’000
Fair value
31 Dec 2002
£’000
Book value
Fair value
31 Dec 2001
31 Dec 2001
£’000
£’000
Primary financial instruments held or
issued to finance the Group’s operations
Short-term borrowings
Long-term borrowings
Short-term deposits
Cash at bank and in hand
(16,567)
(19,659)
29,545
29,065
(15,504)
(15,899)
29,545
29,065
(61,651)
(24,394)
92,827
24,247
(60,499)
(17,712)
92,827
24,247
Summary of methods and assumptions
Forward foreign currency contracts and currency options
Fair value is based on market price of comparable instruments at the balance sheet date.
Short-term deposits and borrowings
The fair value of short-term deposits, loans and overdrafts approximates to the carrying value because of the short maturity of these
instruments. The fair value of finance leases has been calculated by discounting future cash flows at the Group’s weighted average
cost of capital.
Long-term borrowings
The fair value of bank loans and other loans approximates to the carrying value because the majority are floating rate where payments are reset
to market rates at intervals of less than one year. The fair value of finance leases has been calculated by discounting future cash flows at the
Group’s weighted average cost of capital.
Hedges
There were no off-balance sheet (unrecognised) or on-balance sheet (deferred) gains or losses in respect of financial instruments used as
hedges at the end of the year.
49
22 Employee share ownership plan (“ESOP”)
During 1999 the Group established the Regus Employee Trust. The Trustee is Mourant & Co Trustees Limited which is an independent professional
trust company residing in Jersey. The trust is a discretionary trust for the benefit of employees (including directors). The ESOP provides for the
issue of options and the payment of bonuses to the Group's employees (including directors) at the discretion of the Company. Regus plc is not
deemed to be the sponsor of the ESOP for the purposes of UITF 17. The Trustee is not entitled to receive dividends.
At 31 December 2002 the trust held 18,120,670 shares in Regus plc (note 11). The market value at 31 December 2002 was £1.9 million. Costs
incurred by the trust are expensed in the profit and loss account. The trust has subsequently sold 12 millions shares.
At 31 December 2002 awards over a total of 23,809,949 (December 2001: 25,317,932) shares, net of lapses, had been granted to employees.
The awards have been issued in fourteen tranches and some of the awards had been granted subject to the performance of the group
(performance awards). Details of the awards are provided below:
Award Type
Date
exercisable
Exercise
price £
Performance awards
1 January 03 to 1 January 07
1 January 04 to 1 January 08
26 March 04 to 26 March 06
8 June 04 to 26 March 06
8 June 04 to 26 March 06
29 August 04
12 November 04
31 December 05 to 28 August 12
Non-performance
1 January 03 to 1 January 07
awards
1 January 03 to 1 January 06
1 January 04 to 1 January 08
29 August 04
12 November 04
28 February 05 to 27 February 12
28 March 05 to 27 March 12
30 May 05 to 29 May 12
1.455
2.600
2.560
2.560
2.275
0.475
0.335
0.068
1.455
0.050
2.600
0.475
0.335
0.248
0.440
0.385
31 December
2001
Number of
awards
8,312,868
971,034
1,391,537
301,491
84,876
50,000
195,000
New
Awards
–
_
_
_
_
_
_
–
500,000
5,916,803
3,160,555
1,728,768
50,000
3,155,000
–
–
–
–
–
–
–
–
155,000
55,512
81,086
Lapses
(325,430)
(12,506)
(470,418)
(42,967)
–
–
–
–
(700,689)
Exercised
awards
–
–
–
–
–
–
–
–
–
31 December
2002
Number of
awards
7,987,438
958,528
921,119
258,524
84,876
50,000
195,000
500,000
5,216,114
(245,812)
(81,197)
2,833,546
(290,562)
–
(130,000)
–
–
–
–
–
–
–
–
–
1,438,206
50,000
3,025,000
155,000
55,512
81,086
25,317,932
791,598
(2,218,384)
(81,197)
23,809,949
In addition at 31 December 2002, awards over 623,215 American Depository Shares (December 2001: 547,369), net of lapses, had been
granted to employees. The awards have been issued in six tranches and some of the awards had been granted subject to the performance of
the group (performance awards). Details of the awards are provided below:
31 December
2001
31 December
2002
Date
Exercise
Number of
New
Exercised
Number of
Award Type
exercisable
Performance awards
26 March 04 to 26 March 06
Non-performance awards
8 June 04 to 26 March 06
8 June 04 to 26 March 06
29 August 04
31 December 05 to 29 May 09
29 August 04
12 November 04
29 February 05 to 27 February 12
price $
18.188
18.188
16.200
3.290
2.810
3.290
2.300
2.000
awards
Awards
Lapses
awards
awards
134,741
99,679
83,949
73,000
–
–
–
–
–
200,000
(63,096)
(42,058)
–
–
–
20,000
136,000
–
–
(10,000)
(10,000)
–
1,000
–
547,369
201,000
(125,154)
–
–
–
–
–
–
–
–
–
71,645
57,621
83,949
73,000
200,000
10,000
126,000
1,000
623,215
The Group also operates a SAYE share ownership plan however the number of shares involved is immaterial.
50
Report and Accounts 2002
Notes to the financial statements
for the year ended 31 December 2002 continued
23 Capital commitments
Contracts placed for future capital expenditure
not provided in the financial statements
24 Operating lease commitments
Group
31 Dec
2002
£’000
Group
31 Dec
2001
£’000
Company
Company
31 Dec
31 Dec
2002
£’000
2001
£’000
925
5,246
–
–
At 31 December 2002 the Group had lease agreements in respect of properties, vehicles, plant and equipment, for which the payments extend
over a number of years.
Vehicles, plant
Vehicles, plant
Property and equipment
Total
Property
and equipment
Total
31 Dec 2002
31 Dec 2002 31 Dec 2002 31 Dec 2001
31 Dec 2001 31 Dec 2001
£’000
£’000
£’000
£’000
£’000
£’000
Annual commitments under
non-cancellable operating
leases expiring:
Within one year
Between one and five years
After five years
2,282
64,970
79,777
147,029
946
4,525
205
5,676
3,228
69,495
79,982
152,705
4,285
54,452
157,112
215,849
1,311
4,012
182
5,505
5,596
58,464
157,294
221,354
Minimum future lease payments under non-cancellable operating leases:
Amounts due within one year
Amounts due between one and two years
Amounts due between two and three years
Amounts due between three and four years
Amounts due between four and five years
Amounts due after five years
31 Dec 2002
31 Dec 2001
Total
£’000
152,705
146,038
138,232
117,317
98,014
243,823
896,129
Total
£’000
221,354
217,154
202,742
189,295
171,033
748,401
1,749,979
51
25 Contingent liabilities
The Group has bank guarantees and letters of credit held with certain banks totalling £26,134,000 (2001: £28,358,000).
The Company also acts as a guarantor for certain obligations of other subsidiary entities.
At 31 December 2002 the Group had received a number of claims, principally from landlords relating to the terms of building leases.
Where appropriate the Directors have made provisions.
26 Related party transactions
During the year ended 31 December 2002 the Group received management fees of £1.3 million (2001: £4.2 million) from its joint venture
entities as listed on pages 52 and 53. At 31 December 2002, £2.0 million (2001: £4.1 million) was due to the Group from the joint ventures.
27 Post balance sheet events
On 14 January 2003 Regus' US subsidiaries, Regus Business Centre Corp ("Regus US") and Stratis Business Centers Inc ("Stratis"), each filed
a voluntary petition for relief under Chapter 11 of the US Bankruptcy Code in the Court of the Southern District of New York. Regus plc and
Regus Business Centre BV, which are holding companies for the Regus Group and have both given guarantees in relation to certain leasehold
liabilities of the US business, also filed for relief under Chapter 11. Regus plc and Regus Business Centres BV are not engaged in any form of
administrative proceedings or other arrangement with creditors outside the US.
Similarly, on 22 April 2003, one of the Group's German subsidiaries was placed in voluntary administration which subsequently may become an
insolvent liquidation.
28 Ultimate parent company and controlling party
Maxon Investments BV, a company incorporated in the Netherlands, is considered as the ultimate parent company. Mr M L J Dixon is considered
the ultimate controlling party by virtue of his effective controlling interest in the equity shares of the Company via Maxon Investments BV.
52
Report and Accounts 2002
Principal Group companies
Name of Group entity
Regus Business Centre SA
Regus Centres Pty Ltd
Regus Asia Pacific Pty Ltd
Regus Business Centre GmbH
Regus Belgium NV
Skyport International BV
Regus Do Brasil Ltda
Regus Business Centre Ltd
Regus Business Centre Chile Ltda
Regus Business Service Co Ltd
Regus Business Services (Shanghai) Ltd
Regus Copenhagen ApS
Regus Business Centre (Egypt)
Regus Business Centres (Holdings) Ltd
Regus Business Centre Trading Ltd +
Regus Management Ltd
Regus Holdings (UK) Ltd
Regus Finland Oy
Regus Roissy SA
Regus Business Centre GmbH
Regus GmbH & Co KG
RBC Deutschland GmbH
Regus Verwaltungs GmbH
Regus Hellas SA
Regus Business Centre Ltd
Regus Central Europe Trading and Servicing Ltd
Regus Kft
Europa Business Centre Ltd
Regus Ireland Ltd
Regus Finance
Regus Franchise International Ltd
Regus Business Centres Ltd
Regus Business Centre Srl
Regus Milano Centrale Business Centre S.p.A +++
Regus Japan KK
SIA Regus Business Centre
Regus Luxembourg SA
Regus Centres Sdn Bhd
Regus Business Centre SA de CV
Regus Services SA de CV
Regus Maroc SARL
Regus Amsterdam BV
Regus Business Centre BV
Country of
% of equity
incorporation
and votes held
Argentina
Australia
Australia
Austria
Belgium
Belgium
Brazil
Canada
Chile
China
China
Denmark
Egypt
England
England
England
England
Finland
France
Germany
Germany
Germany
Germany
Greece
Hong Kong
Hungary
Hungary
Ireland
Ireland
Ireland
Ireland
Israel
Italy
Italy
Japan
Latvia
Luxembourg
Malaysia
Mexico
Mexico
Morocco
Netherlands
Netherlands
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
42
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
100
100
100
100
100
100
100
100
100
53
Name of Group entity
Regus International Holdings BV ++
Satellite Business Centre Schiphol BV
Skyport Business Services BV
Regus Business Centre Oslo AS
Regus Business Centre (Panama) SA
Regus Business Centre (Peru) SA
Regus Centres Inc
Regus Business Centre SP zoo
Regus Business Centre Lda
LLC Regus Business Centre
Regus Centres Pte Ltd
Regus Business Services Marina Pte Ltd
Regus Singapore Business Centre Pte Ltd
Regus Business Centre Bratislava sro
Regus Business Centre SA
Business Centre Gothenburg AB
Business Centre Stockholm AB
Business Centre Sweden AB
Regus Business Centre (S) SA
Regus Business Centre (Tanzania) Ltd
Regus Centres (Thailand) Ltd
Regus Tunisie SARL
Regus Is Merkezi Isletmeciligi Ltd Sirketi
Regus Business Centres (Ukraine)
Regus International Services SAFI
Regus Business Centre Corp
Regus Crescent Business Centres LLC +++
Regus Equity Business Centres LLC +++
Regus Business Centre Latin LLC
Stratis Business Centres Inc
Regus Centre (Vietnam) Ltd
Country of
% of equity
incorporation
and votes held
Netherlands
Netherlands
Netherlands
Norway
Panama
Peru
Philippines
Poland
Portugal
Russia
Singapore
Singapore
Singapore
Slovakia
Spain
Sweden
Sweden
Sweden
Switzerland
Tanzania
Thailand
Tunisia
Turkey
Ukraine
Uruguay
USA
USA
USA
USA
USA
Vietnam
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
100
100
Investments in Group undertakings are held at cost all of which are included within the consolidated results. Shares listed above are held
directly by Regus plc. where indicated by an asterisk.
Other than Regus Business Centre BV, Regus Business Centres (Holdings) Ltd, Regus Finance, Regus Investments Ltd, Regus Asia Pacific Ltd,
Regus Holdings UK Ltd and Regus International Services SAFI which are investment holding companies and Regus Management Ltd which is a
management company employing head office staff, the principal activity of all other companies is the provision of fully services business centres.
+ Our Azerbaijan business operates as a branch of this company.
++ Our South African business operates as a branch of this company.
+++ These are joint ventures.
54
Report and Accounts 2002
Shareholder information
Annual General Meeting
The Annual General Meeting will be held at Regus City Point,
1 Ropemaker Street, London EC2Y 9HT, at 10.00am on
Wednesday 9 July 2003.
The proxy card accompanies this report.
Registrar
Administrative enquiries about the holding of Regus shares should
be directed in the first instance to the Registrar whose address is:
Capita IRG Plc
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Tel: +44 (0) 20 8639 2000
www.capita-irg.com
Investor relations
For investor enquiries, please contact:
Stephen Jolly
Group Communications Director
Regus plc
3000 Hillswood Drive
Chertsey
KT16 0RS
United Kingdom
by telephone
+44 (0) 1932 895 135
by fax
+44 (0) 1932 895 262
by email
stephen.jolly@regus.com
American Depositary Receipts (ADRs)
In the US, the Company’s ordinary shares are traded in the form of
American Depositary Receipts, evidenced by ADRs.
Each ADR represents five ordinary shares in Regus plc. Morgan
Guaranty Trust Company of New York is the authorised Depositary
Bank for the Regus ADR Programme. For enquiries on the ADR
service please contact our representatives at:
Morgan Guaranty Trust Company of New York
PO Box 842006
Boston
MA 02284-2006
USA
Tel: +1 781 575 4328
Unsolicited mail
The Company is obliged by law to make its share register available to
other organisations who may then use it for a mailing list. If you wish
to limit the receipt of unsolicited mail you may do so by writing to:
The Mail Preference Service (MPS)
Freepost 22
London W1E 7EZ
United Kingdom
Tel: +44 (0) 845 703 4599
MPS will then notify the organisations which support its service that
you do not wish to receive unsolicited mail.
Further information
Information about Regus may be found on the Regus website at:
www.regus.com, or telephone +44 (0) 845 303 3004 (international
direct dial).
Registered office
Regus plc
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
Registered number 3548821
Tel: +44 (0) 1932 895 000
Fax: +44 (0) 1932 895 001
55
AGM Notice
Dear shareholder
Notice of Annual General Meeting
Annual General Meeting
I am pleased to give you information about the Annual
General Meeting, to be held at City Point, 1 Ropemaker
Street, London EC2Y 9HT at 10.00am on Wednesday
9 July 2003.
Action to be taken
A form of proxy is enclosed for you to complete according
to the instructions printed on it and to send to the
Company’s registrar, Capita IRG Plc, PO Box 25,
Notice is hereby given that the Annual General Meeting of
Regus plc will be held at City Point, 1 Ropemaker Street,
London EC2Y 9HT, on Wednesday 9 July at 10.00am to
consider and, if thought fit, pass the following resolutions:
Ordinary business
1 Report and accounts
To receive the report of the directors and the financial
statements for the year ended 31 December 2002 together
with the report of the auditors.
Beckenham, Kent BR3 4BR, to arrive no later than
2 Re-election of directors
10.00am on 7 July 2003. You will not be prevented from
To re-elect each of Martin Robinson, John Matthews and
attending and voting at the meeting, if you subsequently
Mark Dixon as directors of the Company.
find that you are able to do so.
3 Re-appointment of auditors
Location of the meeting
To re-appoint KPMG as auditors to the Company and
The meeting is to be held at City Point in the Regus
to authorise the directors to determine the auditors’
Conference Centre on the 9th floor. Further details are
remuneration for the year.
provided on page 59.
Recommendation
4 Remuneration report
To approve the directors’ remuneration report for the year
We, your directors, consider that all of the resolutions set
ended 31 December 2002.
out in the Notice of Annual General Meeting are in the best
interests of shareholders and recommended that you vote
in their favour, as we shall regarding our own shareholdings.
Yours faithfully
John Matthews
Chairman
Special business
To consider and, if thought fit, pass the following
resolutions of which Resolution 5 will be proposed as an
ordinary resolution and Resolutions 6 and 7 will be
proposed as special resolutions:
5 Directors’ authority to allot ordinary shares
That the directors be and are hereby authorised, generally
and unconditionally, for the purposes of Section 80 of the
Companies Act 1985, to exercise all powers of the
Company to allot relevant securities up to the aggregate
nominal amount of £9,748,776, being the lesser of (i) the
Company’s authorised but unissued share capital at the
date of the resolution and (ii) the sum of (a) one-third of the
Company’s issued ordinary share capital at the date of the
56
Report and Accounts 2002
AGM Notice continued
resolution and (b) any amounts outstanding at the date of
territory, the requirements of any regulatory body or stock
the resolution which have previously been approved by
exchange or any other matter whatsoever; and
shareholders to satisfy the Company’s obligations to issue
shares. The Company may make any offer or agreement
prior to the expiry of this authority which would or might
require relevant securities to be allotted after such expiry
and the directors may allot relevant securities after such
(ii) the allotment (otherwise than pursuant to sub-paragraph
(i) above) of equity securities up to the aggregate nominal
amount of £2,924,633 being 10% of the ordinary share
capital in issue at 30 May 2003.
expiry in accordance with this authority in pursuance
This power shall enable the Company to make any offer
of such offer or agreement. This authority shall expire
or agreement before the expiry of such general authority
immediately prior to the fifth anniversary of the passing
which would or might require securities to be allotted after
of this resolution. All unexercised authorities vested in the
such expiry and the directors may allot equity securities
directors immediately prior to the general meeting at which
after such expiry pursuant to any such offer or agreement.
this resolution is passed to allot relevant securities are
Expressions used in this resolution which are defined in the
hereby revoked. Expressions used in this resolution which
Companies Act 1985 shall have the same meanings as
are defined in the Companies Act 1985 shall have the same
used herein. This authority shall expire immediately prior
meaning as used herein.
to the fifth anniversary of the passing of this resolution.
6 Directors’ power to disapply pre-emption rights
7 Company’s authority to purchase ordinary shares
That if Resolution 5 is passed as an ordinary resolution, the
That the Company be and is hereby unconditionally and
directors be and are hereby empowered in accordance with
generally authorised for the purpose of Section 166 of
section 95(1) of the Companies Act 1985 from time to time
the Companies Act 1985 to make market purchases
to allot equity securities pursuant to the general authority
(as defined in Section 163 of that Act) of ordinary shares
referred to in Resolution 4 to such persons and in such
of the Company provided that:
manner as the directors may think fit as if Section 89(1) of
the Companies Act 1985 did not apply to any such
allotment, provided that this power shall be limited to:
(i) the maximum number of shares which may be
purchased is 58,492,660;
(ii) the minimum price which may be paid is the nominal
(i) the allotment of equity securities in connection with
a rights issue, open offer or any other pre-emptive offer
value of each share;
in favour of shareholders and in favour of holders of any
(iii) the maximum price which may be paid for a share
other class of equity security in accordance with the rights
is an amount equal to 105% of the average of the middle
attached to such class where the equity securities
market quotations of the Company’s ordinary shares as
respectively attributable to the interests of such persons
derived from the Stock Exchange Daily Official List for the
on a fixed record date proportionate (as nearly as may be)
five business days immediately preceding the day on which
to the respective numbers of equity securities held by them
such share is contracted to be purchased;
or are otherwise allotted in accordance with the rights
attaching to such equity securities subject to such
exclusions or other arrangements as the Board may deem
necessary or expedient to deal with fractional entitlements
or legal or practical problems arising in any overseas
(iv) this authority shall expire at the conclusion of the Annual
General Meeting of the Company held in 2004 (except in
relation to the purchase of shares the contract for which
was concluded before the expiry of such authority and
57
which might be executed wholly or partly after such expiry)
Resolution 3 proposes the re-appointment of the
unless such authority is renewed prior to such time.
Company’s existing auditors KPMG for a further year. The
Registered Office:
3000 Hillswood Drive, Chertsey, Surrey KT16 ORS
By order of the Board
T S J Regan
Company Secretary
4 June 2003
Any member entitled to attend and vote at the meeting is
entitled to appoint a proxy to attend and vote instead of the
member. A proxy need not be a member of the Company.
Explanatory notes to the resolutions
Resolution 1 - Report and accounts
The directors are required to present to the Annual
General Meeting, the directors’ and auditors’ reports
and the accounts of the Company for the year ended
31 December 2002.
Resolution 2 - Re-election of directors
resolution also gives authority to the directors to determine
the auditors’ remuneration.
Resolution 4 - Remuneration report
New legislation which came into effect in August 2002
requires all listed companies with financial years ending on or
after 31 December 2002 to put their directors’ remuneration
report to a vote by shareholders. Accordingly, a resolution is
proposed to approve the remuneration report set out on
pages 15 to 19 of the Report and Accounts.
Resolution 5 - Directors’ authority to allot ordinary shares
Under Section 80 of the Companies Act 1985, the directors
require the authority of shareholders in general meeting to
allot unissued shares of the Company and this resolution
seeks to renew the authority last granted to the directors at
the 2002 Annual General Meeting. Although this authority is
not due to expire until the fifth anniversary of the date of the
passing of the resolution, the directors consider it
appropriate, and in line with current practice, to seek renewal
The Company’s Articles of Association require that any
of the authority on an annual basis. Accordingly, the directors
director appointed since the last Annual General Meeting
seek the authority to allot, at their discretion, an amount of
and, additionally, one-third in number of the directors must
relevant securities up to the aggregate nominal amount of
retire by rotation (including those directors who have held
£9,748,776 being one-third of the issued ordinary share
office at the time of the preceding two Annual General
Meetings and who did not retire at either of them).
In accordance with the Articles of Association, Martin
Robinson, John Matthews and Mark Dixon shall retire.
capital of the Company at the date of the resolution. The
directors do not have any present intention of exercising this
authority other than in respect of the Company’s share
option schemes and if necessary to satisfy the consideration
payable for businesses acquired or to be acquired.
All the retiring directors offer themselves for re-election.
This authority supersedes all previous authorities and the
Brief details of all the directors, including those seeking
directors intend to seek its renewal at next year’s Annual
re-election at the meeting, are to be found in this Annual
General Meeting.
Report and Accounts.
Resolution 3 - Re-appointment of auditors
The auditors of a company must be appointed at each
general meeting at which accounts are presented.
58
Report and Accounts 2002
AGM Notice continued
Resolution 6 - Directors’ power to disapply
Information for shareholders and other participants
pre-emption rights
This section provides information for shareholders and
other “participants” who have the rights in connection
Under Section 95 of the Companies Act 1985, the directors
require the authority of shareholders in general meeting to
with this meeting.
disapply section 89 of the Companies Act 1985 so that
Shareholders
they can allot authorised but unissued shares in the
Pursuant to Regulation 41 of the Uncertificated Securities
Company for cash other than to existing holders of ordinary
Regulations 2001, the time by which a person must be
shares pro rata to their holdings or alternatively, should
entered on the register of members in order to have the
appropriate circumstances arise, allot shares in connection
right to attend or vote at the Annual General Meeting is
with a rights issue (subject to certain limited exclusions for
10.00am on Monday 7 July 2003. Entries in the register
arrangements). At the present time there is no intention to
after that time will be disregarded in determining the rights
exercise such authority.
The directors intend to seek renewal of the authority given
by Resolution 6 at next year’s Annual General Meeting.
Resolution 7 - Authority to purchase own shares
In certain circumstances, it may be advantageous for
the Company to purchase its own ordinary shares and
Resolution 7 seeks authority from the shareholders to
make such purchases in the market. The directors consider
it desirable for this general authority to be available to
provide additional flexibility in the management of the
Company’s capital resources. The directors have no
specific intention of using such authority and would do
so only when, in the light of market conditions prevailing
at the time, they believe that the effect of such purchases
is in the best interests of shareholders generally. Any shares
purchased under this authority will be cancelled and the
number of shares in issue will be reduced accordingly.
Resolution 6 specifies the maximum number of shares which
may be purchased (representing up to 10% of the Company’s
ordinary share capital in issue as at 8 March 2002) and the
minimum and maximum prices at which they may be bought.
The authority given by Resolution 7 will last until the conclusion
of next year’s Annual General Meeting (or, if earlier, 15 months
from 9 July 2003 being the date of the passing of the present
resolutions). The directors intend to seek renewal of this power
at subsequent Annual General Meetings.
of any person to attend or vote at the meeting. Such a
shareholder is entitled to appoint a proxy or proxies to
attend and, on a poll, to vote instead of him or her.
A proxy need not be a shareholder of the Company.
A prepaid proxy card is enclosed and, to be valid, it must
be completed according to the instructions printed on it
and sent to the Company’s registrar Capita IRG Plc, PO
Box 25, Beckenham, Kent BR3 4BR, to arrive no later than
10.00am on Monday 7 July 2003.
Shareholders who return completed proxy voting forms
may still attend the meeting instead of their proxies and
vote in person if they wish. In the event of a poll in which
the shareholders votes in person, his/her proxy votes
lodged with the Company will be excluded.
Regus plc Employee Trust
If you only hold shares through the Regus plc Employee
Trust, you cannot participate in the Annual General Meeting.
Documents
Copies of the following items will be available for inspection
at the registered office of the Company during normal
business hours on any weekday excluding Saturdays,
Sundays and public holidays, from the date of this notice
until the date of the meeting. They will also be available for
inspection at the place of the meeting for a period of at
least 15 minutes before the meeting and until the
conclusion of the meeting:
59
• The register of members;
About the meeting
• The register of directors’ shareholdings;
• Directors’ service contracts;
• Memorandum of Association;
• The Company’s current Articles of Association.
9.00 am Doors open to shareholder registration desk
At the meeting you will be asked to vote on the resolutions
which are set out in this Notice of Meeting. Explanatory notes
are also provided. You may therefore find it helpful to bring
this document with you. However, you do not need to bring
any other documents. During the meeting the Chairman will
give shareholders the opportunity to ask questions.
and reception area
Smoking
9.15 am Auditorium opens
Smoking is not permitted in the building.
The Annual General Meeting will be held on Wednesday
9 July 2003 at 10.00am. The venue is the Regus Conference
Centre at City Point, 1 Ropemaker Street, London, EC2Y
9HT, and is on the 9th floor of the tower, accessible by lifts
from the ground floor.
10.00 am The Annual General Meeting begins
Shareholders will be asked to vote on each of the
resolutions set out in this Notice of Annual General
Meeting. Shareholders will have an opportunity to ask
questions at the meeting.
Who may attend ?
Only shareholders and their proxies are entitled to
attend the meeting. Non-shareholders will be admitted,
as non-participating observers, at the discretion of
the Company.
Admission
You will be asked to register at the shareholder reception
desk. If you have been appointed as a shareholder proxy,
you should make this fact known to the shareholder
reception desk.
Security
Shareholders are reminded that briefcases, cameras, laptop
computers, tape-recorders, etc. are not allowed in the
meeting room. We also ask that mobile phones be
switched off during the meeting.
60
Report and Accounts 2002
Five-year summary
Profit and loss data
31 Dec 1998
31 Dec 1999
31 Dec 2000
31 Dec 2001
31 Dec 2002
Turnover (including share of joint ventures)
Less: share of turnover of joint ventures
Turnover
Cost of sales (centre costs) before exceptional items
Exceptional cost of sales
Cost of sales (centre costs) after exceptional items
Gross (loss)/profit (centre contribution)
Administration expenses before exceptional items
Exceptional items
Administration expenses after exceptional items
Group operating (loss)/profit
Share of operating loss in joint ventures
Total operating (loss)/profit: Group and
share of joint ventures
Profit on sale of group undertakings
(Loss)/profit on ordinary activities before interest
Net interest payable and similar charges
Loss on ordinary activities before tax
Tax on loss on ordinary activities
Loss on ordinary activities after tax
Minority interests
Retained loss for the financial period
Loss per ordinary share:
Basic and diluted (p)
Weighted average number of shares
£m
111.6
–
111.6
(97.2)
–
(97.2)
14.4
(29.6)
–
(29.6)
(15.2)
–
(15.2)
–
(15.2)
(2.0)
(17.2)
(0.8)
(18.0)
0.1
(17.9)
£m
200.6
–
200.6
(183.5)
–
(183.5)
17.1
(60.0)
(5.1)
(65.1)
(48.0)
(0.1)
(48.1)
–
(48.1)
(6.8)
(54.9)
(1.5)
(56.4)
–
(56.4)
£m
429.2
(8.1)
421.1
(320.8)
–
(320.8)
100.3
(86.9)
(9.5)
(96.4)
3.9
(1.0)
2.9
–
2.9
(6.8)
(3.9)
(9.9)
(13.8)
0.3
(13.5)
£m
524.6
(12.0)
512.6
(434.7)
(38.0)
(472.7)
39.9
(91.3)
(52.5)
(143.8)
(103.9)
(5.6)
(109.5)
–
(109.5)
(0.6)
(110.1)
(10.1)
(120.2)
1.9
(118.3)
£m
445.4
(9.8)
435.6
(413.3)
(57.0)
(470.3)
(34.7)
(61.1)
(35.1)
(96.2)
(130.9)
(5.5)
(136.4)
22.7
(113.7)
(5.4)
(119.1)
(5.5)
(124.6)
1.2
(123.4)
(4.2)
(12.0)
(2.7)
(21.0)
(21.9)
outstanding (thousands)
427,729
469,486
497,889
563,528
564.052
Balance sheet data (at year end):
Fixed assets and investments
Cash
Total assets
Creditors: amount falling due within one year
Creditors: amounts falling due after more than one year
Equity minority interests
Equity shareholders’ (deficit)/funds
54.7
48.0
142.2
(99.3)
(29.1)
(0.2)
13.9
126.8
72.1
268.3
(189.9)
(102.4)
(0.2)
(23.7)
244.6
169.8
544.4
(317.9)
(23.8)
(0.4)
203.1
251.5
117.1
486.3
(344.4)
(53.1)
0.4
88.4
110.1
58.6
228.0
(178.0)
(78.7)
(0.2)
(28.4)
THE “SAFE HARBOUR” STATEMENT UNDER THE US PRIVATE SECURITIES REFORM ACT OF 1995
This Annual Report contains statements concerning the Group’s business, financial condition, results of operations and certain of the Group’s plans, objectives,
assumptions, projections, expectations or beliefs with respect to these items. These statements are intended as forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements include, without limitation, those concerning: the Group’s future cash flow position, the Group’s cost
reduction programme, expectations regarding sales, trading profit and growth, the Group’s possible or assumed future results of operations and/or those of the Group’s
associates and joint ventures, capital expenditure, adequacy of capital and liquidity, financing plans, and those preceded by, followed by, or that included the words
“believe”, “expect”, “intend”, “plan”, “anticipate” or similar expressions.
The Company cautions that any forward-looking statements in this Annual Report may and often do vary from actual results and the differences between these
statements and actual results can be material. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only at their
respective dates. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date of this press release, including, without limitation, changes in the Company’s business or acquisition strategy or planned capital
expenditures, or to reflect the occurrence of unanticipated events.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward looking
statements. These factors include, among other things, the impact of the Company’s bankruptcy proceedings in the United States, the nature of the serviced office
market, the long-term nature of the Company’s lease commitments, its financing requirements, foreign exchange, risks of litigation, and other risks and uncertainties
described in the Company’s filings with the Securities and Exchange Commission.
www.regus.com
Regus plc
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
Registered number: 3548821