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Regus Group plc
Annual Report & Accounts 2003
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Contents
Chairman’s statement 3 l Operating review 4 l Financial review 6
Directors 10 l Directors’ report 11 l Corporate governance 13
Directors’ remuneration report 16 ll Financial statements 24
Accounting policies 28 l Notes to the financial statements 32 l
Principal Group companies 52 l Shareholder information 54
AGM notice 57 l Five-year summary 60
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Regus Group now finds itself in a
significantly better position than at any
time in the past two years.
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Chairman’s statement
We are committed to delivering sustainable profits.
Regus Group made strong progress
in 2003. There was a marked
improvement in trading in the fourth
quarter - after tough conditions
in the early part of the year.
Going into 2004, trading has continued
to improve. Enquiry levels rose 28 per
cent in January and February compared
with the same period of 2003. Prices
for new workstation sales and renewals
were up 6.1 per cent on the average
for the fourth quarter of 2003. Revenues
in February were up 5.4 per cent on
January and we expect further growth
in March.
As a result, Regus Group now finds
itself in a significantly better position
than at any time in the past two years.
The Group moved closer to profitability
in 2003 and is now benefiting from
rising global occupancy, a strengthened
balance sheet, minimal debt and
a record forward order book.
In terms of 2003 business performance,
the Group’s corporate outsourcing
teams performed particularly well during
the year. The number of government
and public sector contracts increased.
Unilever, Black & Decker, Dell, ABN
Amro, and Citigroup were just a few
of the major global brands that signed
up with Regus during the period.
Such business is clearly part of a
growing trend among corporates to
outsource their property requirements.
The Group’s meeting room business
also saw impressive growth and this
was best illustrated by the landmark
deal closed with IBM to provide their
people with meeting rooms across
15 European countries.
In the year to 31 December 2003,
Group revenues (excluding the UK
business) were £256.6 million
(2002: £266.5 million), EBITDA (Earnings
before interest, tax, depreciation and
amortisation) before exceptionals was
£3.8 million (2002: loss of £22.9 million)
and EBIT loss was £24.8 million (2002:
loss of £129.4 million). On an underlying
basis, before exceptional and non-
trading items, we saw losses decreasing
steadily over the course of the year.
During 2003, Regus Group re-organised
its US business. This re-organisation
– which involved use of Chapter 11
creditor protection - was completed
in less than 12 months. As a result
of these efforts, the Group’s overall
fixed costs – as well as its variable
costs – are now under strict control.
The US is a key market for the Group
and there are clear signs that market
conditions are improving. Mark Dixon,
our Chief Executive, has relocated
to the US to oversee future
developments in this key market.
The Group strengthened its financial
position after it raised £54.8 million
through a fully subscribed rights issue
in December 2003. At the same time,
as part of its re-organisation in the US,
a new holding company for the Group,
Regus Group plc, was formally admitted
to trading on the London Stock
Exchange. This replaced Regus plc.
I must acknowledge the dedication
and hard work of our staff around
the world. They have been a great
asset to Regus and we are proud
of their commitment. Nothing would
be possible without them. I should
also like to thank our shareholders
for their loyalty and patience.
John Matthews
Chairman
Regus Group plc
And finally I would like to record
our gratitude to Stephen Stamp, who
resigned as Group Finance Director
in October, having played a major part in
the re-organisation of our business.
In summary, Regus is well placed
to benefit from the improved trading
conditions that we are now beginning
to see. 2004 has started encouragingly,
benefiting from rising occupancy and
demand. Our objective during the year is
to drive revenue growth, with a particular
focus on the corporate outsourcing
market. With costs firmly under control,
we are committed to delivering
sustainable profits.
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Operating review
Our businesses have been restructured to meet
current market demand and with our focus on
improving occupancy and margins we are well on
our way to improving the Group’s performance.
CHIEF EXECUTIVE’S REPORT
OUR CUSTOMERS AND OUR PEOPLE
Although the past year has been
a tough one for Regus, I am pleased
with the considerable progress we
made in the second half of the year.
Our businesses have been restructured
to meet current market demand and,
with our focus on improving occupancy
and margins, we are well on our way to
improving the Group’s performance.
During the second half of the year,
we successfully exited Chapter 11,
re-organised our Group through
a Scheme of Arrangement and raised
£54.8 million through a Rights Issue.
The Group’s difficulties arose largely as a
result of over-capacity in the United
States. This over-capacity coincided
with deteriorating economic conditions,
particularly on the West Coast.
However, we have now addressed the
issues we faced and with our new
streamlined business, we have been
able to move forward into 2004 on a
much stronger footing. As you would
expect, we remain vigilant and are
keeping a close watch on developments
in the US economy.
Our future success as a Group will be
based on the excellence of the service
we offer customers. For this reason, we
have invested much time and energy in
streamlining administration allowing our
people to become even more customer-
focused. We have also worked hard on
refining our product offering.
To maintain our “best value” approach,
we continue to bear down on overheads
and in many areas, we are still
adhering to the strict disciplines that
were so necessary during our Chapter
11 process.
Across the Group’s principal operating
regions, a new simplified global
management structure has allowed us to
concentrate more of our energies on our
core business with customer service and
cost control being our main objectives.
During the year, we communicated with
our customers on a regular basis. It was
important they were kept abreast of
Regus’ progress. At a time when
economic conditions were generally tough
around the world, it was also our aim to
give customers the highest quality
support possible and to provide products
and services to them within their budgets.
Out in the field, our people worked hard
to drive through change and were
supportive of the corrective measures we
took during the year. Our people remain
our best asset and the foundation of our
future success. To help our staff, we
further reduced the administrative burden
at centre level during the year. This
process – based on our “Shared Service
Centre” concept - has already delivered
benefits in terms of finance and sales. We
are confident that this process will help us
provide an even better service to Regus’
tens of thousands of customers.
SYSTEMS
Our management team has worked
tirelessly to ensure that Regus is driven
by and responsive to customer needs.
As a result, our systems – customer-
facing, operational and financial
- are more informative, transparent
and streamlined than ever before.
Our day-to-day operating processes
are also under constant review to ensure
optimal efficiency. Whether it be sales
reporting, inventory management
or the all-important yield management,
our management information systems
are robust and scalable. We have
invested in a new, world-class website
as well as best-of-breed intranet
and extranet capability. Our extranet,
in particular, gives larger international
clients the tools to manage their own
reservations as well as to review service
history and billings.
We continue to see great opportunities
in this area but remain pleased with
our progress to date.
PRODUCT AND SERVICES
The Regus product and service offering
has undergone radical transformation.
Rigorous analysis as well as detailed
feedback from our customers has led
us to review, redesign and relaunch
many of our products and services.
Examples include Regus Virtual Office
and our meeting room product, where,
as a result of repositioning, we saw
growth of 16% and 19% respectively
in 2003 over 2002. GlaxoSmithKline,
Accenture, Exxon Mobil and Procter
and Gamble are some of the many
clients we have won during the year.
Nevertheless, we believe there is
still significant scope for product
improvement and growth in 2004.
Regus now offers integrated
business solutions to its customers.
Our business addresses specific
customer needs for swing space, project
offices, meeting rooms, conference
facilities and long-term office outsourcing.
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Operating review
We are now witnessing an accelerating
trend towards corporate outsourcing of property
– in line with the already commonplace outsourcing
of facilities, transport, IT, payroll and benefits.
This is our chosen marketplace
and we tailor our offer to the customer
and price accordingly. Ease-of-use,
flexibility and cost-effectiveness are
at the heart of everything we do.
Regus’ strength is that it offers
corporate business a reliable, consistent,
cost-effective and flexible international
platform. This also presents us with
a unique opportunity.
SALES AND MARKETING
Our sales and marketing strategy now
focuses exclusively on business need –
customised solutions to client problems.
In the past 12 months, we have stepped
up recruitment and upgraded our
sales force.
Our key account management teams
have grown by almost one third to meet
demand from high-growth customer
segments around the world. At the
same time, we are seeking to diversify
our range of clients to give greater
stability to our customer base. For
instance, we have seen strong growth
in government business over the past
12 months.
In terms of sales execution, our use
of call centres has lowered the cost
of sale while enhancing service.
Increasingly, we are targeting customers
through direct mail and direct marketing
techniques that are cost-effective
and accountable.
PROSPECTS
All these developments are positive.
Indeed, if demand continues to grow
and customers continue to request
new locations, this may lead Regus to
consider some modest expansion in
its network.
For some time now, we have been
seeing an emerging trend among
our corporate clientele – towards the
outsourcing of their property needs on
a strategic, long-term and cross-border
basis. Regus is in a prime position
to benefit from this shift and we are
confident that no one is better placed
to assist corporate business with
changing property requirements
on a worldwide basis.
A report recently published by
Fraser CRE, a leading firm of real
estate management consultants,
highlights the opportunities that exist
– and the way corporate occupiers
are moving fast to respond to changing
circumstances. This is one of a number
of reports – from Gartner, the Chartered
Institute of Purchasing & Supply, Actium
Consult, and others – offering evidence
that suggests that corporate business
is increasingly viewing property
as non-core.
Our own work supports this and
indicates that we are now witnessing
an accelerating trend towards corporate
outsourcing of property – in line with
the already commonplace outsourcing
of facilities, transport, IT, payroll and
benefits. Forward-looking multinationals
such as British Gas, IBM, Compaq and
Unilever have already come to Regus
seeking a cost-effective, flexible
solution to their property needs
and we have been able to provide
an ideal outsourcing option.
Mark Dixon
Chief Executive
Regus Group plc
Looking ahead, I am confident
that we have all the elements in place
for a successful future. As a Group,
it is of course imperative that we
begin to deliver profits – and at the
earliest opportunity.
Our hard work on management and
customer service, systems, products
and services, sales and marketing, will
be critical to help us achieve that goal.
Indeed, it is already bearing fruit in terms
of increased revenue and occupancy,
tighter costs and improved productivity.
It is our belief that corporate outsourcing
of property is set to become a significant
part of our business within the next
five years. In my view, it has the
potential to become a major industry
in its own right. I am committed to
placing Regus at the forefront of these
developments, which are set to have a
large-scale impact on the way business
views and manages its property needs.
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Financial review
The Group is expected to be cash generative
in the near future.
UK BUSINESS
In December 2002, the Group sold
58% of its UK business to Alchemy
Partners for £32.3 million, including
net deferred consideration of £6.7 million
received in the first half of 2003.
The UK business accounted
for 39% of the Group’s turnover
in 2002. The sale of this controlling
interest has changed the status
of this UK entity from a 100%
fully consolidated subsidiary
to an associate accounted for under
the equity method of accounting.
The disposal has distorted the
comparable results for 2002.
The comparatives have therefore
been adjusted to aid comparison.
CHAPTER 11 PROCEEDINGS
On 14 January 2003, Regus Business
Centre Corp (principally as tenant to most
of the US leases), Regus plc and Regus
Business Centre BV (principally as
guarantors to the US leases) filed voluntary
petitions for bankruptcy relief under
Chapter 11 in the US Bankruptcy Court.
These companies filed for bankruptcy
because the Chapter 11 process offered
the best available means to facilitate
the implementation of necessary changes
to the US business to bring costs and
operations in line with the current business
environment. In addition, the protections
available under the Chapter 11 process
offered access to capital through debtor-
in-possession financing (akin to a working
capital facility) that otherwise would not
have been available.
In order to exit Chapter 11 successfully,
it was necessary to obtain the approval
and confirmation by the Bankruptcy
Court of the Plan of Reorganisation.
This occurred on 12 November 2003
and the Plan then became effective
on 12 January 2004, following cash
payments to creditors in settlement
of their claims, the bulk of which were
made up of general unsecured claims of
approximately £19.6 million ($35.0
million) and preferred claims of
approximately £2.2 million ($4.0 million).
In addition, Regus restructured the leases
of its joint venture in the US with Equity
Office Properties and issued loan stock
in return. This was redeemed at a cost
of £6.0 million ($10.7 million). The cost
of the process in terms of professional
fees incurred was £4.5 million ($8.0
million). No dilution of the interests of
Regus shareholders took place directly as
a result of the implementation of the Plan.
As a result of the Chapter 11 process,
the cost base of our US business has
been significantly reduced. With a
strengthening US economy and major
reorganisation behind us, the business
is well positioned to benefit from
a sustained upturn.
At the time of exiting Chapter 11,
the Regus group of companies was
reorganised by putting in place a new
holding company by way of a Court
approved Scheme of Arrangement.
This section should be read in conjunction
with the Financial Statements and notes thereto
included elsewhere in this Annual Report.
These financial statements have been prepared in
accordance with UK GAAP.
The analysis and commentary included in this
Financial Review are based on the Group’s
structure and reflects the manner in which the
business is currently organised and managed.
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Financial review
YEAR ENDED 31 DECEMBER 2003
COMPARED WITH YEAR ENDED
31 DECEMBER 2002
The Group recorded an operating loss
before accounting for joint ventures
and associates of £28.2 million in 2003
compared with £147.4 million in 2002.
Exceptional items of £6.4 million
in 2003 (2002: £92.9 million) relate
to costs incurred on the Chapter 11
proceedings and Scheme of
Arrangement.
Group operating losses before
exceptional items at £21.8 million
in 2003 were £32.7 million lower
than 2002.
The 2003 loss before interest and tax
of £24.8 million (2002: £129.4 million)
includes £6.7 million net profit on
disposal of the controlling interest
in the UK business and a £0.7 million
net profit from the sale of own shares
held by the Employee Benefit Trust.
No dividend was paid during the year
and the Board has not recommended
the payment of any final dividend.
GROUP REVENUE
Following the disposal of the controlling
interest in the UK business, the Group
is now managed under three regions,
EMEA (Europe, Middle East and Africa),
Americas and Asia Pacific.
£54.8 MILLION RIGHTS ISSUE
On 13 November 2003 a £54.8
million rights issue was announced.
1 new share was issued by way
of rights for 3 existing shares
and the issue was fully subscribed.
The offer closed on 29 December 2003.
Under the rights issue, 195.9 million
shares were issued at 28 pence
per share, raising £54.8 million before
issue costs of £1.8 million. The primary
reason for the rights issue was to raise
funds to repay the Chapter 11
creditors who under the agreed Plan
of Reorganisation were due to be
paid £27.8 million ($49.7 million) on
12 January 2004. The remainder is
available for working capital purposes.
The table below presents a regional
analysis of the Group’s revenue,
centre contribution before exceptional
items and available workstations.
2002 has been restated to show
the results on a comparable basis.
2003
2003
2002 Restated
2002-Restated
Revenue Contribution* Workstations
Revenue Contribution* Workstations
EMEA+
Americas
Asia Pacific
Regional total
Management fee from UK
Group excl UK Business
UK Business ++
Total
148.4
80.2
24.2
252.8
3.8
256.6
–
256.6
13.8
(4.1)
3.4
13.1
3.8
16.9
–
16.9
30,831
20,525
4,262
55,618
–
55,618
–
55,618
149.2
91.7
25.6
266.5
–
266.5
169.1
435.6
10.4
(19.6)
2.6
(6.6)
–
(6.6)
28.9
22.3
33,034
23,898
4,296
61,228
–
61,228
26,266
87,494
* Gross profit/(loss) before exceptional cost of sales
+ Europe (excluding UK), Middle East and Africa
++ A controlling interest in Regus Holdings (UK) Limited was sold on 31 December 2002.
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Financial review
At 31 December, Regus had free cash of £67.8 million.
Group revenue (excluding the UK
business and management fees
receivable from the UK) of £252.8 million
was £13.7 million, or 5%, lower than in
2002, primarily due to currency
fluctuations and the closure of
unprofitable centres, principally in the
USA. The weakening of the US dollar has
adversely impacted our US dollar
denominated revenues, which account for
approximately 30% of the Group’s
turnover. At constant currencies, the
EMEA region maintained revenues at
2002 levels, despite the closure of centres
that resulted in a 7% reduction in
workstation capacity.
Centre closures reduced available
workstations by 9% to 55,618 (2002:
61,228). This reduction in capacity
helped improve occupancy by 6
percentage points to 63%. Occupancy
in the USA, our largest country, improved
by over 15% from 2002 and reported
a 78% occupancy for the month of
December (December 2002: 60%).
In addition to the 3,373 workstation
reduction in the Americas, management
were successful in exiting committed
capacity that would otherwise have
increased volume by a further 5,500
workstations.
CENTRE CONTRIBUTION (GROSS
PROFIT/(LOSS))
Centre contribution was £16.9 million
(2002: loss of £64.4 million) which
included no exceptional items in 2003
(2002: £57.8 million).
Centre contribution before exceptional
items and UK management fee improved
by £19.7 million to £13.1 million (2002:
£6.6 million loss) mainly due to the
renegotiation of fixed costs in the USA
and some European locations.
Centre contribution per occupied
workstation reported a marked
improvement in the Americas and
Asia Pacific but a marginal decline
in Europe due to lower occupancy
in some of our smaller markets.
EXCEPTIONAL ITEMS
Exceptional items of £6.4 million (2002:
£92.9 million) relate to professional fees
incurred in connection with the Chapter
11 proceedings and the Scheme of
Arrangement. The 2002 charge of
£92.9 million includes costs relating
to onerous leases (£55.1 million),
impairment of tangible fixed assets
(£36.9 million), impairment of goodwill
(£4.0 million) and cost related to aborted
business disposals (£0.7 million), offset
by a business interruption insurance
receipt (£3.8 million).
PROFIT ON SALE OF GROUP
UNDERTAKINGS
In the first half of 2003, the Group
received a net £6.7 million of deferred
consideration from Alchemy Partners
in respect of the UK business. This
amount was not recognised in the 2002
financial statements on the basis that the
amount was contingent on the audit of
the completion accounts.
NET INTEREST PAYABLE
The £0.6 million reduction in net
interest payable to £4.4 million (2002:
£5.0 million) was partly due to the
repayment of a £40.0 million 5%
convertible bond during 2002 offset by
a £0.7 million increase in finance lease
interest (2002: £2.7 million) following the
extension of payment periods in the USA.
Interest income reduced by £1.1 million
to £0.8 million (2002: £1.9 million)
due to lower average cash balances
throughout the year as compared
to 2002.
TAX ON LOSS ON ORDINARY
ACTIVITIES
The tax credit of £2.1 million consists
of a current tax credit of £0.6 million,
a credit in respect of the deferred
tax asset of £2.0 million and a share
of the deferred tax charge in the UK
business of £0.5 million.
Most of Regus’ operating companies
have tax losses available to carry forward
against future profits. In some countries,
there are time restrictions on the carry
forward of such losses. In accordance
with FRS19 the deferred tax recognised
with respect to these losses is £2.6 million.
As the Group returns to profitability,
value will arise from the losses which
are detailed in note 7 to the accounts.
LIQUIDITY AND CAPITAL RESOURCES
At 31 December 2003, Regus had
cash at bank and in hand of £85.0
million (2002: £58.6 million) of which
£17.2 million (2002: £28.7 million)
represents deposits held as security
for the issuance of bank guarantees.
£49.9 million of cash raised through
the rights issue was received on
30 December and used in part
to settle Chapter 11 liability claims
of £27.8 million ($49.7 million)
on 12 January 2004.
Surplus funds raised from the Rights
Issue will support the working capital
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Financial review
requirements of the Group.
Indebtedness (excluding finance leases)
at 31 December 2003 of £9.2 million
(2002: £11.0 million) includes a £5.0
million loan from Regus UK (2002:
£5.0 million). Finance lease obligations
outstanding at 31 December 2003
amounted to £17.7 million (2002:
£25.2 million), of which £6.7 million
is due within one year.
The balance of the rights issue funds
of £25.2 million supports the working
capital requirements of the Group.
Current indications show the Group
is expected to be cash generative in
the near future. On this basis, we
believe the Group has sufficient cash
resources to fund its operations for the
foreseeable future.
Operating cash outflow before
exceptional items was £8.8 million in 2003
compared to a cash inflow of £5.8 million
in 2002. The reduction in 2003 is due to
the exclusion of the UK business, which
generated cash in 2002.
Net cash outflow before management
of liquid resources and financing for the
year was £17.1 million (2002: £16.9
million) following receipt of £6.7 million
deferred consideration, tax payments
of £2.0 million, net interest payments
of £4.3 million, net capital expenditure
of £1.4 million and investments in joint
ventures of £0.4 million.
At 31 December 2003, net
funds increased by £35.7 million
to £58.1 million.
Excluding the receipt in the year of the
deferred consideration from the sale of
the UK business (£6.7 million) and funds
raised from the rights issue (£49.9 million
net of expenses) the Group recorded
a cash outflow in 2003 of £21.3 million.
Receipt of the majority of the Rights
Issue funds on 30 December, 2003
improved net current assets to £14.1
million, and strengthened the balance
sheet to a net asset position. The Rights
Issue funds were in part used to settle
Chapter 11 creditor claims of £27.8
million ($49.7 million) in January 2004.
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
are 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 TRANSACTION
EXPOSURES
It is the Group’s policy to hedge
the risk arising from transactions
which give rise to transactional currency
exposures. These exposures arise
from sales or purchases in currencies
other than sterling. However, the
majority of the Group’s businesses
sell to clients and pay suppliers in their
own functional currencies and as a result
have limited transaction exposure.
FUNDING AND DEPOSITS
Outstanding borrowings comprise
office equipment financed through
finance leases as well as specific loans
from certain property owners advanced
on commercial terms. Wherever
possible, these borrowings are
matched 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.
COUNTERPARTY 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.
FUTURE UK ACCOUNTING
DEVELOPMENTS
The European Commission issued
a Regulation in 2002 requiring all listed
companies to adopt International
Accounting Standards in their
consolidated financial statements
by 2004. The Group is considering
the implications of such a requirement
and would expect first to prepare
financial statements in accordance with
the International Accounting Standards
and International Financial Reporting
Standards for the year ended 31
December 2005.
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Directors
John Matthews
Chairman, 59
Chairman since July 2002
He is also Chairman of Crest Nicholson plc
and an independent director of SDL plc,
Rotork plc, Diploma plc and Center Parcs
(UK) Group plc. A chartered accountant, he
was previously Managing Director of County
Natwest and Deputy Chief Executive of
Beazer plc, the international aggregates,
construction and housing group. He is
Chairman of the Nomination Committee
and a member of the Audit and
Remuneration Committees.
Roger Orf
Director, 51
Senior independent non-executive
Head of European Operations for
Lone Star, a property investment
company. Previously, Roger made
investments on his own account and
managed investments on behalf of Apollo
Real Estate Advisors. Prior to 1995,
Roger 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.
Mark Dixon
Chief Executive, 44
Founder of Regus Group
Martin Robinson
Director, 41
Independent non-executive
Martin was appointed as a non-
executive director in August 2002.
He is currently the Chairman of Center
Parcs (UK) Group plc and CEO of
Center Parcs Europe. He has previously
held senior executive positions with
Scottish and Newcastle, McKinsey & Co Inc
and Sara Lee Corporation. He is
Chairman of the Remuneration Committee
and a member of the Audit and
Nomination Committees.
Mark is one of Europe’s best-known
entrepreneurs and since founding
Regus in Brussels in 1989, he has achieved
a formidable reputation for leadership and
innovation. Prior to Regus, he established
businesses in the retail and wholesale food
industry. Recipient of two major international
awards for enterprise, Mark’s vision of the
future of work has revolutionised the way
business approaches its property needs.
Rudolf Lobo
Group Finance Director, 48
Rudolf joined Regus twelve years
ago and re-assumed the role of Group Finance
Director on 2 October 2003. In addition, he is
responsible for commercial operations, human
resources and for directing Regus’ IT and
e-business strategy. Rudolf is also a Director
and Trustee of the charity Great Causes
Limited. Previously, he was the Group
Company Secretary of Medicom International
Ltd, a publisher of medical journals.
010
Auditor
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Legal advisers
to the Company as to English law
Slaughter and May
One Bunhill Row
London EC1Y 8YY
Legal advisers
to the Company as to US law
Davis Polk & Wardwell
99 Gresham Street
London EC2V 7NG
Bankers
NatWest Bank plc
1 Princes Street
London EC2R 8PB
Financial advisers
NM Rothschild & Sons Limited
New Court
St Swithin’s Lane
London EC4P 4DU
Stockbrokers
KBC Peel Hunt Ltd
111 Old Broad Street
London EC2N 1PH
Registrars
Capita IRG PLC
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
Registered office and headquarters
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
Registered number
4868977
Website
www.regus.com
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Directors’ report
The Group operates an international network of
business centres managed under three geographic
regions, EMEA, Americas and Asia Pacific.
DIRECTORS’ REPORT
DIRECTORS AND DIRECTORS’
INTERESTS
The directors present their report and the
audited financial statements of the Group
for the year ended 31 December 2003.
The directors who held office
during the year were:
PRINCIPAL ACTIVITIES
The Group is engaged in the provision
of fully serviced business centres
offering clients a mix of workstations,
meeting and conference rooms and
related support services. The Group
operates an international network
of business centres managed under
three geographic regions, EMEA,
Americas and Asia Pacific.
The Chairman’s Statement and the
Operating and Financial reviews on
pages 3 to 9 describe the principal
activities of the Group during 2003.
BUSINESS REVIEW AND FUTURE
DEVELOPMENTS
The loss on ordinary activities before
taxation for the year ended 31 December
2003 was £29.2 million (2002: loss
£119.1 million). An indication of
future developments is given in the
Operating review.
DIVIDENDS
No dividend is proposed (2002: £nil).
M L J Dixon
S A Stamp (resigned 2 October 2003)
R J G Lobo
J W Matthews
R G Orf
A M Robinson
Details of the directors’ interests and
shareholdings are given in the Directors’
Remuneration report on pages 16 to 22.
In accordance with the Articles of
Association, Rudolf Lobo retires by
rotation and, being eligible, offers
himself for re-election at the Annual
General Meeting.
EMPLOYEES
It is the Group’s policy to communicate
with all employees and to encourage
them to take a wider interest in the
affairs of their employing company
and the Group. This is done in a variety
of ways, including electronic media,
in-house journals, bulletins and briefing
sessions. The Group is committed to the
principle of equal opportunity in
employment, regardless of a person’s
race, creed, nationality, sex, age, marital
status or disability. Employment policies
are fair, equitable and consistent with the
skills and abilities of the employees and
the needs of 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 third European Works
Council (EWC) meeting in September
2003 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 2003,
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 2004.The number of employees
and their remuneration are set out in
note 5 to the financial statements.
POLITICAL AND CHARITABLE
DONATIONS
The Group made no political
contributions and no donations to UK
charities in either 2003 or 2002.
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 2003 were
37 days (2002: 42 days). The Company
does not follow any code or standard
on payment practice.
The Company has no trade creditors.
011
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Directors’ report
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
SUBSTANTIAL SHAREHOLDINGS
Paramount Nominees Ltd 1
Cantor Fitzgerald Europe 2
GNI Limited
365,329,286
102,178,817
33,592,922
46.37%
12.97%
4.26%
1985 applies. The agreement creates
an interest for ICE SAS which is
disclosable pursuant to Section 208(4)
and Section 208(5) of the Act.
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 29 March 2004
T S J Regan
Company Secretary
Regus Group plc
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
The Company has been notified of the
above holders of 3% or more of its
issued share capital for the purposes
of Section 198 of the Companies Act
1985, as at 29 March 2004:
1 The beneficiary is Maxon Investments
BV. M L J Dixon owns 100% interest
in Maxon.
2 Of these 102,178,817 shares,
50,500,000 are held by Cantor
Fitzgerald Europe as Nominee for
Electronic Screen Brokerage Limited.
Electronic Screen Brokerage Limited
has a secured funding arrangement
with ICE SAS and the shares form
part of the security for the funding.
Electronic Screen Brokerage Limited
therefore also has a disclosable
interest in their 50,500,000 shares
(being 6.41% of the issued share
capital of Regus Group plc).
Pursuant to the secured funding
arrangements, ICE SAS retained a
beneficial interest in the 50,500,000
shares which is disclosable pursuant
to S208(4)(b) of the Companies Act
1985. A further 16,500,000 shares
of the 102,178,817 shares are subject
to an agreement between Cantor
Fitzgerald Europe and ICE SAS to
which Section 208(2) of the
Companies Act
Company law requires the directors
to prepare financial 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.
012
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Corporate governance
The Board is committed to high standards
of corporate governance.
CORPORATE GOVERNANCE
The Board of Directors is committed to
high standards of corporate governance.
It has complied throughout the year with
the Combined Code, issued by the UK
Listing Authority, which sets out the
Principles of Good Governance and the
Code of Best Practice.
A summary of the Company’s
procedures for applying the principles
and the extent to which the provisions
of the Combined Code have been
applied are set out below.
The new Combined Code, issued in July
2003, will apply for the reporting years
beginning on or after 1 November 2003.
However, in 2003, the Board undertook
an analysis of the Group’s compliance
with the new Combined Code and have
taken steps to ensure that it complies
with the requirements of the new
Combined Code by 31 December 2004.
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 31 December 2003.
BOARD COMPOSITION
The Board currently comprises
two executive directors, and three
non–executive directors (two of which
are independent), including a non-
executive chairman.
On 2 October 2003, Mr S A Stamp,
the Group Finance Director resigned.
Mr R J G Lobo has been appointed
Group Finance Director on an interim
basis, and will continue to carry out the
role until a suitable candidate is found.
The Board schedules eight meetings
each year, but arranges to meet
at other times, as appropriate.
It has a formal schedule of matters
specifically reserved for its decision
and approval. The Board is supplied
with appropriate and timely information
to enable it to discharge its duties
and requests additional information
or variations to regular reporting
as it requires.
A procedure exists for directors to
seek independent professional advice
at the Company’s expense in the
furtherance of their duties, if necessary.
In addition, appropriate training is made
available for all new directors to assist
them in the discharge of their
responsibilities.
All directors have access to the advice
and services of the Company Secretary,
who is responsible for ensuring that
Board procedures are followed and
that applicable rules and regulations
are complied with.
All directors submit themselves for
re-election at least every three years
and directors appointed during the
period are required to seek re-election
at the next AGM.
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
and duties:
Audit Committee – the members
of this Committee are Mr R G Orf
(Chairman and independent non-
executive director), Mr J W Matthews
(non-executive director) and Mr A M
Robinson (independent non-executive
director). Prior to 1 May 2003, it was
chaired by Mr J W Matthews.
The Audit Committee meets quarterly.
Its responsibilities, in addition to those
referred to under Internal Control, include
a critical review of the annual and interim
financial statements (including the
Board’s statement on internal control
in the annual report) prior to their
submission to the Board for approval,
when a report from the Committee
is also given.
The Committee also reviews the scope
and results of the external audit and its
cost effectiveness and the independence
and objectivity of the auditors. Although
other directors, including the Group
Finance Director, attend Audit Committee
meetings, the Committee can meet for
private discussions with the internal and
external auditors.
In respect of 2003, the Audit
Committee undertook a comprehensive
self-evaluation process. This comprised
a questionnaire covering their
performance and that of the external
and internal auditors.
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Corporate governance
It is the Group’s policy to recruit and develop appropriately
skilled management and staff of high calibre and integrity.
Nomination Committee – the members
of this Committee are Mr J W Matthews
(Chairman and non-executive director),
Mr R G Orf and Mr A M Robinson (both
independent non-executive directors).
The Committee meets as required. Its
responsibilities include reviewing the
Board structure, size and composition,
nominating candidates to the Board
to fill Board vacancies when they arise
and recommending directors who are
retiring by rotation to be put forward
for re-election.
Remuneration Committee – the
members of this Committee are Mr A M
Robinson (Chairman and independent
non-executive director), Mr J W
Matthews (non-executive director) and
Mr R G Orf (independent non-executive
director). A statement setting out the
role and responsibility of this Committee
and the Group’s remuneration policy is
shown on page 16.
INTERNAL CONTROL
The Board acknowledges its overall
responsibility for the Group’s system
of internal control and for reviewing
the effectiveness of that system
on a timely basis.
The internal control processes have
been designed to identify, evaluate
and manage the key risks that the
Group encounters in 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.
The Board conducts regular reviews
of the Group’s strategic direction.
Country and regional strategic objectives,
quarterly plans and performance targets
for 2004 have been set by the executive
directors and are regularly reviewed by
the main Board in the context of the
Group’s overall objectives.
The control framework and key
procedures which were in place
throughout the year ended 31 December
2003 comprise the following:
• The executive directors (“the Group
executive”) normally meet monthly
together with certain other senior
executives to consider Group financial
performance, business development
and Group management issues.
Directors of key operating companies
meet regularly to manage their
respective businesses.
• Major business risks and their
financial implications are appraised
by the responsible executives
as a part of the budget process
and these are endorsed by regional
management. Key risks are reported to
the Board and the Audit Committee.
The appropriateness of controls is
considered by the executives, having
regard to cost/benefit, materiality and
the likelihood of risks crystallising.
• Country and regional budgets,
containing financial and operating
targets, capital expenditure
proposals and performance
indicators, are reviewed by the
Group executive and must support
regional business strategies.
• Operational and financial reports
are prepared and distributed to the
Board on a monthly basis. Actual
results are reviewed against budget
and forecast and explanations are
received for all material movements.
The senior management team are
integrally involved in the business
and to this extent regularly discuss
and address issues and opportunities
with regional and functional teams.
Formal business review meetings,
chaired by the Chief Executive, Mark
Dixon, are held with the regional
teams and functional heads on a
monthly basis.
• There is a Group-wide policy
governing appraisal and approval
of investment and capital 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.
The Group’s internal audit remit is to
report to the Audit Committee on the
Group’s worldwide operations. Its
budget, programme of work and its
findings, including any material control
issues and resultant actions, are
reviewed quarterly.
To underpin the effectiveness of controls,
it is the Group’s policy to recruit and
develop appropriately skilled
management and staff of high calibre
and integrity.
• On a monthly basis, the Board
reviews and discusses the financial
and operational performance of the
Group and its respective regions.
High standards of business ethics
and compliance with laws, regulations
and internal policies are demanded
from staff at all levels.
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Corporate governance
COMMUNICATIONS WITH
SHAREHOLDERS
The Company has a policy of
maintaining an active dialogue
with shareholders. Group financial
reports and announcements
are accessible via the Group’s
Internet site.
Insofar as securities laws and
other applicable requirements 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 Chairmen of the Audit
and Remuneration Committees,
at the Annual General Meeting.
The following key mechanisms
were available to the Board at various
times during the year in the conduct
of its review of internal controls:
• 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;
• A series of internal audit reviews of
country/regions covering the financial,
operational and overhead functions.
These reviews are based on the
identified risks. The findings and
recommendations of each review
are reported to management
and the Audit Committee;
• An embedded system of reporting
the effectiveness of key financial,
operational and compliance controls.
This is a comprehensive self-
assessment intranet system. Results
and action plans are reviewed by
senior management and summarised
for the Board;
• A multi-disciplinary Group risk
forum, chaired by Rudolf Lobo,
reports to the Board on a quarterly
basis. This forum considers all aspects
of risk identification and management.
The forum is a key process by which
the Board assesses the overall
effectiveness of the Group’s system
of internal control.
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Directors’ remuneration report
Incentive payments are conditional upon the
Group achieving stretched performance targets.
The Committee does not make
recommendations on the remuneration
of non-executive directors, which
is a matter solely for the full Board.
The members of the Remuneration
Committee attend the Company’s Annual
General Meeting and are available to
answer shareholders’ questions about
directors’ remuneration.
There was no change in employment
terms of any of the executive or non-
executive directors during 2003. From
1 January 2004, Mr R J G Lobo’s salary
increased from £165,000 to £180,000.
The committee has used no external
consultant or expert in its deliberations.
REMUNERATION POLICY
Remuneration policy for executive
directors centres on ensuring that
remuneration packages are sufficiently
competitive to attract, retain and
motivate the right calibre of executive
directors. Incentive payments are
conditional upon the Group achieving
stretched performance targets so
to align incentive awards paid to
directors directly with the interests
of shareholders.
If appropriate the Remuneration
Committee would use the services of
external consultants to help it agree
packages reflecting the remuneration
policy. The constituent parts of
those packages are set out in the
following paragraphs.
Non-executive directors are remunerated
with fees, set at a level which will attract
individuals with necessary experience
and ability.
BASIC SALARY AND BENEFITS
Salaries are reviewed annually and
determined by the Committee, taking
into account the performance of the
individual directors over the previous
12 months and the pay and employment
conditions elsewhere in the Group.
Any increases in basic salary are effective
from 1 January in each year.
The remuneration table included within
this report also shows benefits received.
The main benefits relate to the provision
of company cars and/or company car
allowance and the provision of private
medical insurance for the directors and
their immediate family. In 2003, Mark
Dixon’s benefits principally include costs
relating to his relocation to the USA.
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 2003.
LONG-TERM INCENTIVE PLAN
Under the Regus Super Bonus Plan, the
executive directors are entitled to receive
an annual share award of up to 100% of
their basic salary (or a cash award of up
to 50% of their basic salary), which is
payable provided performance exceeds
budget targets, and is subject to the
director remaining in employment with
the Company for up to three years
following the award.
INTRODUCTION
This remuneration report sets out the
Company’s policy on the remuneration
of executive and non-executive directors
together with details of directors’
remuneration packages and service
contracts. This report will be put
to a vote of the Company’s shareholders
at the Annual General Meeting on
18 May 2004.
The following information is not
subject to audit:
THE REMUNERATION COMMITTEE
The Remuneration Committee is chaired
by Mr A M Robinson; its other members
are 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
Committee are non-executive directors.
Other directors may be invited to attend
some meetings of the Committee in an
advisory capacity as the Committee
considers appropriate. The Committee
will consider all material elements of
remuneration policy, remuneration and
incentives of executive directors
and senior management, with reference
to independent remuneration research
and professional advice, in accordance
with the Combined Code on
Corporate Governance.
The Committee will make
recommendations to the Board of
Directors on the framework for executive
remuneration and its cost. The Board of
Directors is responsible for implementing
the recommendations and agreeing the
remuneration package of individual
directors. Directors are not permitted,
under Regus Group plc’s Articles of
Association, to vote on their own terms
and conditions of remuneration.
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Directors’ remuneration report
SHARE OPTIONS
AND RESTRICTED SHARES
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 formerly
established a number of employee share
plans, including the Regus Global Share
Plan and the Regus International
Sharesave Plan.
All options under these Plans either
lapsed or were exercised on the
effective date of the Scheme of
Arrangement (1 December 2003).
The Company is proposing to adopt at
the forthcoming Annual General Meeting
the following Plans:
(i) Regus Group Restricted Award Plan;
and
(ii) Regus Group Share Option Plan
SUMMARY OF THE PRINCIPAL TERMS
OF THE REGUS GROUP RESTRICTED
AWARD PLAN (THE “AWARD PLAN”)
1. Administration
Overall responsibility for the
administration of the Award Plan will be
vested in the remuneration committee of
the Board. The remuneration committee
will also be responsible for the day-to-
day administration of the Award Plan
insofar as it relates to any director of the
Company. The remuneration committee
will thus determine the terms of the
awards granted to such persons and
exercise any discretions in relation to
such persons.
For other participants, these functions
may be carried out by the Board
or an appropriate committee of the
Board. In this summary, the term
“Appropriate Committee” means, in
relation to a director, the remuneration
committee and, in relation to any other
person, the Board or an appropriate
committee of the Board.
Awards will be personal to the participant
and may not be transferred except,
with the consent of the Appropriate
Committee, to a family member
(spouse and minor children) or family
trust of an employee or director.
2. The sub-plans
5. Plan limits
The Award Plan is divided into two
sub-plans under one of which awards
will be granted over ordinary shares
of the Company (“Shares”) and under
the other of which participants will be
granted awards that entitle them to a
cash payment calculated by reference to
the value of Shares. The remuneration
committee may create further sub-plans.
3. Eligibility
Awards may be granted to
employees and executive directors
of the Company and its subsidiaries
(the Group) at the discretion of the
Appropriate Committee. Awards may
also be granted to (or transferred to)
certain relatives (spouse and minor
children) and family trusts of an
employee or executive director.
4. Awards
Awards may take one of three
forms. An award may be a deferred
right to receive Shares or a right to
acquire, for no cost, Shares, in either
case subject, normally, to continued
employment. Alternatively, an award may
take the form of a transfer
to the participant of Shares but
on terms that those Shares will be
forfeited if conditions relating to,
for example, continued employment
are not met. Awards may be satisfied
either by the issue of Shares or by the
transfer of Shares from an employee
trust or by treasury shares.
The maximum number of unissued
Shares over which awards may be
granted on any date may not, when
added to the number of Shares issued
and remaining issuable in respect of
awards or options granted under the
Award Plan and the Regus Group Share
Option Plan in the previous 10 years,
exceed 10 per cent of the equity share
capital of the Company.
No award may be granted after the tenth
anniversary of the date on which the
Award Plan is approved by the Board.
6. Performance targets
Awards may be granted subject
to a performance target and, if so,
the achievement of that performance
target will normally be a condition
precedent to an award vesting.
The Appropriate Committee has
the discretion to change the
performance target from time to time
if events happen which make it fair
and reasonable to do so but not so
as to make the performance target
materially easier or more difficult
to satisfy.
7. Vesting and exercise
Where the award takes the form of an
option, vesting will entitle the participant
to exercise the award during such period
as the Appropriate Committee may
have specified at the time of grant.
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Directors’ remuneration report
In any other case, the vesting of an
award will result in the Shares being
transferred to the participant or, as the
case may be, the Shares ceasing to be
subject to forfeiture.
8. Termination of employment
If a participant ceases to be employed
within the Group for cause, his award
will lapse (and the Shares will be
forfeited) unless the Appropriate
Committee decides otherwise.
If a participant ceases to be employed
for any other reason, he may exercise
any awards which have vested (where the
awards take the form of options) during
such period as the Appropriate Committee
may decide. Where the award has not
vested, it will lapse (and the Shares will
be forfeited) unless the Appropriate
Committee decides otherwise.
9. Change of control
Awards will vest in the event of
a change in control, a reorganisation,
an amalgamation or a voluntary winding-
up of the Company. In the event
of any other company acquiring control
of the Company, awards may, with
the agreement of that company, be
exchanged for awards over shares
in the acquiring company.
10. Listing
Application will be made for admission
to the Official List of the UK Listing
Authority of Shares issued under the
Award Plan and for permission to trade
in those shares. Shares issued under
the Plan will rank equally in all respects
with existing Shares except for rights
which attach to Shares by reference
to a record date prior to the date
of allotment.
018
11. Variation of capital
In the event of a variation of the
Company’s share capital, or in such
other circumstances as the Appropriate
Committee considers appropriate,
it may adjust awards in such manner
as it determines to be reasonable.
12. Benefits non-pensionable
Benefits under the Award Plan will
not be pensionable.
13. Amendments
The remuneration committee may make
such amendments to the Award Plan
either as are necessary or desirable
to obtain or retain the approval, where
applicable, of the relevant tax authorities
or to take account of changes to
applicable legislation.
The remuneration committee may
also make such amendments to the
Award Plan and to any award as
may be necessary or desirable to obtain
or maintain favourable tax, exchange
control or regulatory treatment for
participants or for any company
in the Group.
Except as described above or for
amendments designed to ease the
administration of the Award Plan, no
amendment which is to the advantage
of employees or participants may be
made to those provisions dealing with
eligibility, plan limits, the terms of awards
or the adjustment of awards without
the prior approval of shareholders
at a general meeting.
SUMMARY OF THE PRINCIPAL
FEATURES OF THE REGUS
GROUP SHARE OPTION PLAN
(THE “OPTION PLAN”)
1. Administration
Overall responsibility for the administration
of the Option Plan will be vested in the
remuneration committee of the Board of
Directors. The remuneration committee
will also be responsible for the day to
day administration of the Option Plan
insofar as it relates to any director of the
Company. The remuneration committee
will thus determine the terms of the
options granted to such persons and
exercise any discretions in relation to
such persons. For other participants,
these functions may be carried out by
the Board or a committee of the Board.
In this summary, the term “Appropriate
Committee” means, in relation to a
director, the remuneration committee
and, in relation to any other person, the
Board or an appropriate committee of
the Board.
2. The sub-plans
The Option Plan is divided into a number
of sub-plans designed to allow
employees and directors to be granted
tax efficient options wherever possible.
There is also a sub-plan allowing
participants to be granted awards that
entitle them to a cash payment
calculated by reference to the increase in
the market value of shares between
grant and exercise. The remuneration
committee may create further sub-plans.
3. Eligibility
Options may be granted to employees
and directors of the Company and its
subsidiaries (the Group) at the discretion
of the Appropriate Committee.
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 19
Directors’ remuneration report
Options may also be granted to
(or transferred to) certain relatives
(spouse and minor children) and family
trusts of an employee or director.
4. Options
Options will entitle the holder to acquire
ordinary shares of the Company
(“Shares”). Options may either be
options to subscribe for newly issued
Shares or options to purchase existing
Shares from an employee trust or from
treasury. Options will be personal to the
option holder and may not be transferred
except, with the consent of the
Appropriate Committee, to a family
member (spouse and minor children) or
family trust of an employee or director.
5. Exercise price
The exercise price of each option may
not be less than the market value (as
determined in accordance with the
Taxation of Chargeable Gains Act 1992)
of a Share for the dealing day
immediately preceding the date of grant
or, where options are granted pursuant
to an invitation, the date of the invitation.
6. Plan limit
The maximum number of unissued
Shares over which options may be
granted on any date may not, when
added to the number of Shares issued
and remaining issuable in respect of
options or awards granted under the
Option Plan and the Regus Group
Restricted Award Plan in the previous
10 years, exceed 10 per cent. of the
equity share capital of the Company.
In addition, Options may not be granted
over more than 10,000,000 Shares
under that part of the Plan which
allows for the grant of tax-favoured
options to participants in the USA.
No option may be granted after the tenth
anniversary of the date on which the
Option Plan is approved by the Board.
7. Performance targets
Options may be granted subject
to a performance target and, if so,
the achievement of that performance
target will normally be a condition
precedent to the right of exercise.
The Appropriate Committee has the
discretion to change the performance
target from time to time if events happen
which make it fair and reasonable
to do so but not so as to make the
performance target materially easier
or more difficult to satisfy.
of the Company. In the event of any
other company acquiring control of the
Company, options may, with agreement of
that company, be exchanged for options
over shares in the acquiring company.
11. Listing
Application will be made for admission
to the Official List of the UK Listing
Authority of Shares issued under the
Option Plan and for permission to trade
in those shares. Shares issued on the
exercise of options will rank equally in all
respects with existing Shares except for
rights which attach to Shares by reference
to a record date prior to the date
of allotment.
8. Exercise of options
12. Variation of capital
Options are exercisable normally only
during such period as the Appropriate
Committee may decide at the time
of grant; the period may not end later
than the tenth anniversary of grant.
9. Termination of employment
If a participant ceases to be employed
within the Group for cause, his option
will lapse unless the Appropriate
Committee decides otherwise. If a
participant ceases to be employed for
any other reason, he may exercise any
options which are already exercisable
and, at the discretion of the Appropriate
Committee, any other options in the six
months following the date on which his
employment ends or during such longer
period, not exceeding 42 months, as the
Appropriate Committee may decide.
10. Change of control
Options may be exercised in the event
of a change in control, a reorganisation, an
amalgamation or a voluntary winding-up
In the event of a variation of the
Company’s share capital, or in such
other circumstances as the Appropriate
Committee considers appropriate,
it may adjust options in such manner
as it determines to be reasonable.
13. Benefits non-pensionable
Benefits under the Option Plan will not
be pensionable.
14. Amendments
The remuneration committee may
make such amendments to the Option
Plan either as are necessary or desirable
to obtain or retain the approval, where
applicable, of the relevant tax authorities or
to take account of changes to applicable
legislation. The remuneration committee
may also make such amendments to the
Options Plan and to any option as may be
necessary or desirable to obtain or
maintain favourable tax, exchange control
or regulatory treatment for participants or
for any company in the Group.
019
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Directors’ remuneration report
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.
The main benefits to executive directors,
who contribute a percentage of their
gross salaries to the scheme, are:
• 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;
TOTAL SHAREHOLDER RETURN
PERFORMANCE
The graph on the left illustrates Regus’
total shareholder return since flotation of
the Group in 2000 relative to the FTSE
250 Index, in accordance with paragraph
4 of the Director’s Remuneration Report
Regulations 2002.
Except as described above or for
amendments designed to ease the
administration of the Options Plan, no
amendment which is to the advantage
of employees or participants may be
made to those provisions dealing with
eligibility, plan limits, the terms of options
or the adjustment of options without
the prior approval of shareholders
at a general meeting.
During 1999, the Group established
the Regus Employee Trust. The Trust
is a discretionary trust for the benefit of
employees, including executive directors.
As at 29 March 2004, it held no shares
and £2.1 million in cash.
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.
• 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 the
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.
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
Regus’ relative performance.
SERVICE CONTRACTS
The Company has adopted the following
policy on directors’ service contracts:
(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 should be restricted
to the value of remuneration for the
notice period. On 1 July 2000 Mr M L J
Dixon and Mr R J G Lobo 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.
Value (£)
120
100
80
60
40
20
120
100
80
60
40
20
31 DEC 2000
31 DEC 2001
31 DEC 2002
31 DEC 2003
This graph looks at the value, by the
end of 2003, of £100 invested in Regus
on 31 December 2000 compared with that
of £100 invested in the FTSE 250 Index.
FTSE 250
Regus
020
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 21
Directors’ remuneration report
There are no provisions for
compensation for loss of office other
than payment of any outstanding salary.
Mr J W Matthews, Mr R G Orf and
Mr A M Robinson, as non-executive
directors, have entered into letters
of appointment dated 2nd October 2003.
These arrangements are for three
years, terminable on six months’
notice by the Company or
the directors.
There are no provisions for
compensation for loss of office other
than payment of any outstanding fees.
The main benefits relate to the provision
of company cars and/or company
car allowance for private cars and the
provision of private medical insurance
for the directors and their immediate
family. In 2003, Mark Dixon’s benefits
principally include costs relating to his
relocation to the USA.
The following information within the Directors’ Remuneration Report is subject to audit:
Directors’ Remuneration
Executive
Mark Dixon
Stephen Stamp*
Rudolf Lobo
Non-executive
John Matthews
Roger Orf
Martin Robinson
Salary/
fees
£’000
395.0
125.0
165.0
90.0
25.0
25.0
825.0
No bonuses were paid in either 2003 or 2002.
* Mr Stamp resigned 2 October 2003
Total
Total
Pension
Scheme
Pension
Scheme
Remuneration
Remuneration
Contributions
Contributions
Benefits
£’000
164.0
7.5
10.5
–
–
–
2003
£’000
559.0
132.5
175.5
90.0
25.0
25.0
182.0
1,007.0
2002
£’000
152.7
159.8
156.6
28.1
9.1
7.5
513.8
2003
£’000
14.1
10.8
12.4
–
–
–
2002
£’000
27.6
13.0
11.6
–
–
–
37.3
52.2
In 2002, the following contractual emoluments
were irrevocably waived by the directors.
No emoluments were waived in 2003:
Director
Amounts waived in 2002 (£’000)
Mark Dixon
Stephen Stamp
Rudolf Lobo
John Matthews
Roger Orf
Martin Robinson
270.0
35.0
20.0
29.4
5.9
2.5
Directors’ Shareholdings
Ordinary shares
Beneficial holdings
Ordinary shares
Beneficial holdings
31 December 2003
31 December 2002
365,329,286
365,329,286
127,098
479,617
–
300,000
38,462
359,724
–
300,000
Mark Dixon**
Rudolf Lobo
John Matthews
Martin Robinson
Roger Orf
**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.
021
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 22
Directors’ remuneration report
Rudolf Lobo
Stephen Stamp*
Option
Exercised
Lapsed
Exercise
Date from
Expiry
type
31 December
during
during
31 December
price
which
date
2002
2003
266,179
266,179
94,501
189,002
–
–
2003
–
94,501
189,002
2003
exercisable
–
–
–
5.0p
1/1/03
31/12/09
145.5p
145.5p
7/1/03
31/12/09
7/1/03
31/12/09
11,570,000
5,000,000
–
6,570,000
0.389p
28/11/03
–
128,866
2,661,337
4,003
–
–
–
128,866
2,661,337
4,003
–
–
–
145.5p
145.5p
242.0p
7/1/03
7/1/10
7/1/03
7/1/10
1/1/04
1/7/04
A
B
C
D
B
C
E
*Mr Stamp resigned 2 October 2003
Directors’ Share Options
A Awarded under the Regus Team
Member Share Plan for nil
consideration.
On 23 May 2003, Mr Lobo exercised
his option over 88,637 shares on
payment of £4,432. The market price
per share at the date of exercise was
30p. On 5 December 2003, Mr Lobo
exercised his option over a further
177,542 shares on payment of
£8,877. The market price per share on
5 December 2003, was 46p.
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 became capable for exercise on
28 November 2003. On 15 December
2003, Mr Lobo exercised his option
over 5,000,000 shares in Regus Group
plc on payment of £19,447 to Maxon.
The price on exercise was 55p
generating proceeds of £2.78 million.
The remaining shares subject to the
option are transferable to Mr Lobo
upon payment to Maxon of an
exercise price of £25,553, 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.
Summary particulars of the Group’s
share option schemes are given in note
21 to the Financial Statements.
All options were granted at the then
prevailing market price. The market price of
the shares at 31 December 2003 was 54p
and the range during 2003 was 10p to 61p.
None of the directors had a beneficial
interest in any contract of any significance
in relation to the business of the
022
Company or its subsidiaries at any time
during the financial year.
All share options vested as a result of the
Scheme of Arrangement, which was
effected on 1 December 2003. As a result
there are no outstanding share options
exercisable by any director, other than in
respect of Mr Lobo’s option over 6,570,000
shares as set out in the above table.
Approved by the board of directors on
29 March 2004 and signed on its behalf by:
Mark Dixon
Chief Executive
Rudolf Lobo
Group Finance Director
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 23
Independent auditors' report to the members of Regus Group plc
We have audited the financial
statements on pages 24 to 51.
We have also audited the information
in the directors' remuneration report that
is described as having been audited.
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
state to the company's members those
matters we are required to state to them
in an auditor's report and for no other
purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than
the company and the company's
members as a body, for our audit work,
for this report, or for the opinions we
have formed.
RESPECTIVE RESPONSIBILITIES
OF DIRECTORS AND AUDITORS
The directors are responsible
for preparing the Annual Report
and Accounts and the directors'
remuneration report. As described
on page 12, this includes responsibility
for preparing the financial statements
in accordance with applicable United
Kingdom law and accounting standards.
Our responsibilities, as independent
auditors, are established in the United
Kingdom by statute, the Auditing
Practices Board, the Listing Rules
of the Financial Services Authority,
and by our profession's ethical guidance.
We report to you our opinion as to
whether the financial statements give a
true and fair view and whether 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.
We also report to you if, in our
opinion; the directors' report is not
consistent with the financial statements,
if the company has not kept proper
accounting records, if we have
not received all the information and
explanations we require for our audit,
or if information specified by law
regarding directors' remuneration
and transactions with the group
is not disclosed.
We review whether the statement
on page 13 reflects the company's
compliance with the seven provisions
of the Combined Code specified
for our review by the Listing Rules,
and we report if it does not. We are not
required to consider whether the board's
statements on internal control cover
all risks and controls, or form an opinion
on the effectiveness of the group's
corporate governance procedures
or its risk and control procedures.
We read the other information
contained in the Annual Report, including
the corporate governance statement
and the unaudited part of the directors'
remuneration report, and consider
whether it is consistent with the audited
financial statements. We consider the
implications for our report if we become
aware of any apparent misstatements
or material inconsistencies with the
financial statements.
BASIS OF AUDIT OPINION
We conducted our audit in accordance
with Auditing Standards issued by the
Auditing Practices Board. An audit
includes examination, on a test basis,
of evidence relevant to the amounts
and disclosures in the financial
statements and the part of the directors'
remuneration report to be audited.
It also includes an assessment of the
significant estimates and judgements
made by the directors in the preparation
of the financial statements, and
of whether the accounting policies
are appropriate to the group's
circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit
so as to obtain all the information
and explanations which we considered
necessary in order to provide us with
sufficient evidence to give reasonable
assurance that the financial statements
and the part of the directors'
remuneration report to be audited are
free from material misstatement, whether
caused by fraud or other irregularity
or error. In forming our opinion
we also evaluated the overall adequacy
of the presentation of information
in the financial statements and the part
of the directors' remuneration report
to be audited.
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 2003 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
29 March 2004
Chartered Accountants
Registered Auditor
London
023
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 24
Report and Accounts 2003
Consolidated profit and loss account
for the year ended 31 December 2003
Note
1
1
1
3a
1
3a
1
1
1
1
3b
3c
6
2
7
18
8
31 Dec 2003
31 Dec 2002
£’000
324,904
(5,501)
(62,822)
256,581
Excluding UK
£’000
UK
£’000
£’000
272,888
172,519
445,407
(6,370)
(3,433)
(9,803)
–
–
–
266,518
169,086
435,604
(239,683)
(273,143)
(140,196)
(413,339)
–
(57,777)
805
(56,972)
(239,683)
(330,920)
(139,391)
(470,311)
16,898
(38,736)
(6,355)
(45,091)
(28,193)
(213)
(3,722)
(32,128)
6,585
708
(24,835)
(4,397)
(29,232)
2,068
(27,164)
885
(64,402)
(47,927)
(35,096)
(83,023)
29,695
(13,149)
-
(13,149)
(34,707)
(61,076)
(35,096)
(96,172)
(147,425)
16,546
(130,879)
(4,724)
–
(773)
–
(5,497)
–
(152,149)
15,773
(136,376)
22,716
–
–
–
22,716
–
(129,433)
15,773
(113,660)
(4,989)
(415)
(5,404)
(134,422)
15,358
(119,064)
12,786
(18,266)
(5,480)
(121,636)
(2,908)
(124,544)
1,145
–
1,145
(26,279)
(120,491)
(2,908)
(123,399)
(4.6)
(4.7)
(21.4)
(8.9)
(0.5)
(0.7)
(21.9)
(9.6)
Turnover (including share of joint ventures and associate)
Less: share of turnover of joint ventures
Less: share of turnover of associate
Group turnover
Cost of sales (centre costs) before exceptional items
Exceptional cost of sales
Cost of sales (centre costs) after exceptional items
Gross profit/(loss) (centre contribution)
Administration expenses before exceptional items
Exceptional administration expenses
Administration expenses after exceptional items
Group operating (loss)/profit
Share of operating loss in - joint ventures
- associate
Total operating (loss)/profit: group and share of joint ventures
Profit on sale of group undertakings
Profit on sale of own shares
(Loss)/profit on ordinary activities before interest
Net interest payable and other similar charges
(Loss)/profit on ordinary activities before tax
Tax credit/(charge) on (loss)/profit 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
and sale of own shares (p)
All results arose from continuing operations.
024
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 25
Balance sheets
as at 31 December 2003
Fixed assets
Intangible assets
Tangible assets
Investments
Investments in subsidiaries
Investment in own shares
Investment in associate
Other investments
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
Creditors: amounts falling due within one year
Net current assets/(liabilities)
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provision for deficit on joint ventures
Share of gross assets
Share of gross liabilities
Provisions for liabilities and charges
Net assets/(liabilities)
Capital and reserves
Called up share capital
Share premium account
Other reserves
Profit and loss account
Shareholders' funds/(deficit)
Equity minority interests
Group
Group
Company
31 Dec 2003
31 Dec 2002
31 Dec 2003
Note
£’000
9
10
11
11
11
11
12
12
13
14
11
16
18
18
18
18
–
67,136
–
847
8,361
5
76,349
144
873
62,290
85,001
148,308
(134,189)
14,119
90,468
(34,190)
5,076
(6,073)
(997)
(52,554)
2,727
39,442
44,364
(22,711)
(57,292)
3,803
(1,076)
2,727
Restated
£’000
–
93,772
–
3,805
12,458
29
£’000
–
–
29,256
–
–
–
110,064
29,256
293
–
59,025
58,610
117,928
(149,253)
(31,325)
78,739
(48,506)
8,630
(10,253)
(1,623)
(57,242)
(28,632)
29,110
–
286,273
(343,775)
(28,392)
(240)
(28,632)
–
–
4,651
50,163
54,814
(414)
54,400
83,656
–
–
–
–
–
83,656
39,442
44,364
–
(150)
83,656
–
83,656
Shareholders' funds includes amounts relating to both equity and non-equity interests.
The basis of restatement is explained within the basis of consolidation in the accounting policies note on page 28.
The financial statements on pages 24 to 51 were approved by the Board of Directors on 29 March 2004 and were signed on its behalf by:
Mark Dixon
Chief Executive
Rudolf Lobo
Group Finance Director
025
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 26
Report and Accounts 2003
Consolidated cash flow statement
for the year ended 31 December 2003
31 Dec 2003
31 Dec 2002
Note
£’000
£’000
Cash outflow from continuing operating activities
Net cash (outflow)/inflow before exceptional items
Outflow related to exceptional items
Net cash outflow from continuing operating activities
19(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
Sale of own shares
Acquisitions and disposals
Cash disposed with German subsidiary
Sale of subsidiary undertakings
Investment in joint ventures
Cash acquired with subsidiary
Cash outflow before management of liquid resources
and financing
Management of liquid resources
Financing
Increase in cash in the year
19(b)
19(b)
19(c)&(d)
(8,777)
(5,868)
(14,645)
797
(1,750)
(3,350)
(4,303)
(1,951)
(1,951)
(8,445)
3,345
3,689
(1,411)
(1,137)
6,695
(412)
53
5,199
(17,111)
8,511
43,950
35,350
5,820
(16,603)
(10,783)
1,901
(2,051)
(2,637)
(2,787)
(4,077)
(4,077)
(15,274)
557
–
(14,717)
–
16,236
(743)
–
15,493
(16,871)
55,426
(32,276)
6,279
026
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 27
Consolidated statement of total recognised gains and losses
for the year ended 31 December 2003
Loss for the financial year
Exchange differences
Total recognised gains and losses for the year
31 Dec 2003
31 Dec 2002
£’000
(26,279)
3,778
(22,501)
£’000
(123,399)
4,108
(119,291)
Reconciliation of movements in shareholders’ funds/(deficit)
for the year ended 31 December 2003
Loss for the financial year
Shares issued under Scheme of Arrangement
Creation of merger reserve
Net proceeds of ordinary shares issued under rights issue
Other shares issued
Exchange differences
Reclassification of fair value of warrants to non distributable reserves
Increase/(decrease) in shareholders' funds/(deficit)
Shareholders' (deficit)/funds at 1 January
Shareholders' funds/(deficit) at 31 December
Group
Group
Company
31 Dec 2003
31 Dec 2002
31 Dec 2003
£’000
(26,279)
29,256
(29,256)
52,999
1,697
3,778
–
32,195
(28,392)
3,803
£’000
(123,399)
–
–
–
4
4,108
2,450
(116,837)
88,445
(28,392)
£’000
(150)
29,256
–
52,999
1,551
–
–
83,656
–
83,656
027
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 28
Accounting policies
BASIS OF PREPARATION
The consolidated financial statements
have been prepared in accordance
with applicable accounting standards
and in conformity with accounting
principles generally accepted in the
United Kingdom (“UK GAAP”), under
the historical cost convention.
The preparation of the financial
statements in conformity with UK GAAP
requires management to make estimates
and assumptions that reflect the reported
amounts of assets and liabilities,
plus disclosure of contingent liabilities
at the date of the financial statements
and the reported amounts of revenues
and expenses for an accounting period.
Such estimates and assumptions could
change in the future as more information
becomes known or circumstances
change, such that the Group’s results
may differ from the amounts reported
and disclosed in the financial statements.
The following principal accounting policies
have been applied consistently with items
that are considered material in relation
to the Group’s financial statements.
BASIS OF CONSOLIDATION
The consolidated financial statements
include the financial statements of the
Company and its subsidiary undertakings
made up to 31 December 2003. Unless
otherwise stated, the acquisition method
of accounting has been adopted.
Under this method, the results of subsidiary
undertakings acquired or disposed of in
the year are included in the consolidated
profit and loss account from the date of
acquisition or up to the date of disposal.
An associate is an undertaking in which
the Group has a long-term interest,
usually from 20% to 50% of the equity
voting rights, and over which it exercises
significant influence. 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 associates and joint ventures
is included in the consolidated profit
and loss account and its interest in their
net assets, is included in investments
in the consolidated balance sheet.
On 29 August 2003 Regus plc
(“Old Regus”) announced its intention
to re-organise the Regus group of
companies by putting in place a new
holding company via a court approved
Scheme of Arrangement under Section
425 of the Companies Act 1985
(the “Scheme”). In accordance with
the court order under the Scheme of
Arrangement, the issued share capital
and the share premium of Old Regus
at the effective date of the Scheme was
cancelled against distributable reserves.
Under the Scheme, shareholders
received a share in the Company
for each share held in Old Regus.
Old Regus was renamed Regus
Limited and became a wholly
owned subsidiary of the Company.
The Scheme was approved by
shareholders at an Extraordinary
General Meeting held on 25 October
2003 and was sanctioned by the High
Court on 28 November 2003. It became
effective on 1 December 2003.
The Scheme has been accounted for
using merger accounting principles in
accordance with FRS 6 ‘Acquisitions
and Mergers’. Prior year share capital
and reserves in the consolidated balance
sheet reflect the nominal value of the
shares in issue had New Regus been
in existence at 31 December 2002.
Differences between the restated
amounts and the previously reported
reserves, represent the “merger
difference”, and have been reflected
in other reserves. As a consequence
of creating a new holding company
under the scheme, there are no
comparatives for the Company.
The creditor balances as at 31 December
2002 have been restated to better reflect
the ageing of the rent accruals.
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 as a movement in reserves.
Transactions in foreign currency are
recorded using the rate of exchange
at the date of the transaction.
Monetary assets 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 recognised in the profit
and loss account.
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18275_E22330_AREP.qxd 8/4/04 11:53 am Page 29
Accounting policies
GOODWILL
FIXED ASSET INVESTMENTS
DILAPIDATIONS
Fixed asset investments are accounted for
at cost less any provision for impairment.
SALE OF GROUP UNDERTAKINGS
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.
Consideration for the sale of Group
subsidiaries is not recognised until the
exact amount has been agreed.
TURNOVER
STOCK
Stock is stated at the lower of cost and
net realisable value. Stock relates to
items purchased for resale to customers
and to items intended for distribution
within the business such as office
supplies and marketing materials.
Turnover, which excludes value added
tax, represents the amount receivable
in respect of services provided to
customers and is accounted for on an
accruals basis. Revenue is recognised
monthly as services are provided.
Revenue in respect of services invoiced
in advance is deferred and recognised
on provision of the service.
TAXATION
COST OF SALES
The credit for taxation is based on the
loss for the year and takes into account
taxation deferred because of timing
differences between the treatment of
certain items for taxation and accounting
purposes. Deferred tax is recognised,
without discounting, in respect of all timing
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.
Cost of sales consists of costs from
the individual business centres, including
property lease costs, employee costs
and start-up costs.
PENSIONS
The Group operates defined contribution
schemes. Contributions are charged
to the profit and loss account on an
accruals basis.
Purchased goodwill (representing
the excess of the fair value of the
consideration given and associated costs
over the fair value of the separable net
assets acquired) arising on consolidation
is capitalised and amortised to nil
by equal annual instalments over its
estimated useful life, normally 20 years.
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.
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
• 3 years
Computer software
• 2 years
Motor vehicles
• 4 years
029
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 30
Accounting policies
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 of
the first market rent review or first break
point in the lease, whichever is sooner,
so that the amounts charged to the profit
and loss account are the same each
year over that period.
FINANCIAL INSTRUMENTS
The Group uses various derivative
financial instruments to hedge its
exposures to fluctuations in foreign
exchange risks. These include forward
currency contracts and currency options.
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.
The Group considers its derivative
financial instruments to be hedges
when certain criteria are met.
CURRENCY OPTIONS
Under hedge accounting for currency
options, the Group defers the
instrument’s 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 a prepayment.
At maturity, any realised gains and
losses on the option is recognised in
the profit and loss account in
administration expenses. Unrealised
losses are disclosed in the notes to
the accounts.
CASH AND 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.
LEASES
a) Finance leases
Where the Group enters into
a lease for furniture, fittings, equipment
or cars which entails taking substantially
all the risks and rewards of ownership
of an asset, the lease is treated
as a finance lease.
Under all such lease arrangements
the asset is recorded in the balance
sheet as a tangible asset and is
depreciated over its estimated useful
life in accordance with the policy
described above. Future instalments
under such leases, net of finance
charges, are included in creditors.
Lease payments are apportioned
between the finance element, which is
charged to the profit and loss account
on a sum of the digits basis or a post-tax
actuarial basis, and the capital element,
which reduces the outstanding obligation
for future instalments.
b) Building leases
Building leases are all accounted
for as operating leases because
substantially all the risks and rewards
of ownership remain with the lessor.
The rental on certain leases is wholly
or partly conditional on the profitability
of the centre and therefore the risk
to the business, in terms of rent,
is reduced. Once all outstanding
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.
030
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 31
These financial statements have been
prepared in accordance with UK GAAP.
031
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Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003
1 Segmental reporting
The following tables set out the Group’s segmental analysis by geographic region. The numbers reported include exceptional items.
Gross
profit/(loss)
(centre
contribution)
31 Dec 2003
£’000
–
13,767
(4,126)
3,478
3,779
16,898
Gross
profit/(loss)
(centre
contribution)
31 Dec 2002
£’000
Restated
29,695
(20,312)
(45,496)
1,371
35
(34,707)
Turnover
31 Dec 2003
£’000
62,822
148,488
85,641
24,174
3,779
324,904
256,581
68,323
Turnover
31 Dec 2002
£’000
Restated
172,519
149,155
98,109
25,589
35
445,407
435,604
9,803
Geographic analysis
UK *
EMEA+
Americas
Asia Pacific
Other++
Total Group
Total joint ventures & associate
*UK turnover for 2003 represents our 42% interest in the ordinary shares of Regus Holdings (UK) Limited.
+ EMEA represents Europe, Middle East and Africa.
++ Other represents management fees received from the UK associate and UK franchise income.
Geographic analysis
UK
EMEA
Americas
Asia Pacific
Other*
Net debt
Minority interest
Operating
profit/(loss)
Net assets/
(liabilities)
As at
Net assets/
(liabilities)
As at
31 Dec 2002
31 Dec 2003
31 Dec 2002
Operating
profit/(loss)
31 Dec 2003
£’000
(3,722)
846
(22,953)
826
168
£’000
Restated
15,773
(42,311)
(84,428)
(1,336)
(1,358)
(24,835)
(113,660)
£’000
8,361
(40,653)
(3,855)
3,216
(23,550)
(56,481)
58,132
1,076
2,727
(4,637)
7,364
£’000
Restated
12,458
(40,447)
(6,638)
5,889
(22,518)
(51,256)
22,384
240
(28,632)
(39,467)
10,835
Total Group
Total joint ventures & associate
* includes non-regional exceptional costs.
(20,900)
(3,935)
(130,879)
(5,497)
032
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 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 on sale of fixed assets
Operating leases:
– property
– equipment
Audit fees:
– company
– group
Non audit fees paid to the auditors
– Group
– business disposal
Exceptional items (note 3a)
31 Dec 2003
31 Dec 2002
£’000
£’000
19,678
9,847
–
1,686
112,496
6,764
4
622
516
–
40,283
16,113
238
894
137,990
7,198
4
611
250
130
6,355
92,068
Non-audit fees for 2003 are primarily in respect of regulatory reporting on the Scheme of Arrangement and Rights Issue.
3(a) Exceptional items
Included in the results for the year to 31 December 2003 were pre-tax exceptional charges totalling £6.4 million (2002 £92.1 million) as follows:
Cost of sales:
Onerous leases, related closure & restructuring costs
Write-down of tangible assets
Administration expenses:
Onerous leases, fixed asset impairment & restructuring costs
Professional fees relating to Chapter 11 and Scheme of Arrangement
Impairment of acquisition goodwill
Aborted business sales and mergers
Business interruption insurance receipt
3(b) Profit on the sale of group undertakings
31 Dec 2003
31 Dec 2002
£’000
£’000
–
–
337
6,018
–
–
–
6,355
20,130
36,842
34,145
–
4,002
722
(3,773)
92,068
In the year we received net £6.7 million of deferred consideration from Alchemy Partners, relating to the disposal of 58% of our interest in the
UK business in 2002. The deferred consideration received was contingent on the outcome of the audit of the completion accounts, and
therefore was not recognised in 2002.
The Group was deemed to have disposed of a German subsidiary in 2003 resulting in a loss of £0.1 million.
3(c) Profit on the sale of own shares
In the year the trust which holds the shares for the ESOP disposed of 12,000,000 shares resulting in a net profit of £0.7 million.
The remaining shares were sold subsequent to the year end (see note 21).
4 Profit and loss account of holding company
The loss for the financial period to 31 December 2003 dealt with in the financial statements of the parent company, Regus Group plc, was
£150,000 (December 2002: nil).
033
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 34
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
5 Employees and directors
Staff costs
Wages and salaries
Social security costs
Pension costs
31 Dec 2003
31 Dec 2002
£’000
£’000
40,781
6,271
435
47,487
58,318
7,958
504
66,780
The Group contributes to the personal pension schemes of a small number of employees. The amount which is included within creditors is
£17,800 (2002: £16,300).
Average number of people (including executive directors) employed
Centre staff
Sales staff
Finance staff
Other staff
31 Dec 2003
31 Dec 2002
Number
Number
1,167
170
112
83
1,532
1,742
269
151
124
2,286
Employee numbers in 2002 are inclusive of 585 UK employees who are excluded from 2003 as a result of the disposal of the controlling interest
in the UK business.
Directors
Aggregate emoluments
Company pension payments to money purchase scheme
Highest-paid director
Aggregate emoluments
Company pension payments to money purchase scheme
31 Dec 2003
31 Dec 2002
£’000
1,007
37
559
14
£’000
514
52
160
13
Retirement benefits are accruing to three directors (2002: three) 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
31 Dec 2003
31 Dec 2002
£’000
1,913
3,372
5,285
(798)
4,487
–
(90)
4,397
£’000
4,482
2,700
7,182
(1,917)
5,265
139
–
5,404
Interest payable on overdrafts and loans
Interest payable on finance leases
Interest receivable
Share of joint venture net interest payable
Share of associate net interest receivable
Net interest payable and other similar charges
034
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 35
7 Taxation
The Group current tax
United Kingdom tax
– Corporation tax
– Under provision in respect of prior years
Foreign tax
– Corporation taxes
– (Over)/under provision in respect of prior years
Total current tax
Deferred tax
Origination and reversal of timing differences
Share of associate deferred tax charge
Total tax (credit)/charge on loss on ordinary activities
Effective tax rate
31 Dec 2003
31 Dec 2002
£’000
£’000
950
406
385
(2,301)
(560)
(1,973)
465
(1,508)
(2,068)
7.1%
5,776
212
852
188
7,028
(1,548)
–
(1,548)
5,480
(4.6)%
Factors affecting the tax (credit)/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% (2002: 30%)
Effects of:
Expenses not deductable for tax purposes
Profit on disposal of interests in group companies
Non taxable income
Depreciation in excess of capital allowances
Short term timing differences
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
The tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates:
2003
2004
2005
2006
2007
2008
2009
2010 and later
Available indefinitely
Total tax losses available to carry forward
as at
31 Dec 2003
£'000
–
7,838
8,755
6,297
4,561
2,700
751
123,515
154,417
123,198
277,615
The Group has recognised a £2.6 million (2002: £0.6 million) deferred tax asset in respect of these losses.
31 Dec 2003
£'000
(29,232)
31 Dec 2002
£'000
(119,064)
(8,770)
(35,719)
5,059
(2,112)
(18,836)
(113)
2,787
(285)
22,319
1,286
(1,895)
(560)
17,987
(6,086)
–
10,771
–
(1,084)
20,684
75
400
7,028
as at
31 Dec 2002
£'000
1,850
11,504
8,536
6,487
9,321
95
3,115
117,041
157,949
41,587
199,536
035
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 36
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
8
Loss per share
Loss per share has been calculated by dividing the 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.
In 2003 and 2002 share options were not included in the computation of diluted loss per share due to losses in 2003 and 2002, resulting in
options being antidilutive.
The following summarises the calculation of loss per share for the years ended 31 December 2003 and 2002:
Loss for the year
Add: exceptional items & profit on business disposal and
sale of own shares
Less: tax on exceptional items
Loss for the year before exceptional items
& profit on business disposals and sale of own shares
(£'000)
(£'000)
(£'000)
(£'000)
31 Dec 2003
31 Dec 2002
Excluding UK
(26,279)
(938)
(120,491)
70,157
UK
(2,908)
(805)
Group
(123,399)
69,352
–
–
–
–
(27,217)
(50,334)
(3,713)
(54,047)
Weighted average ordinary shares in issue
– basic and diluted
('000's)
574,805
564,052
564,052
564,052
Loss per ordinary share
Impact of exceptional items
– basic and diluted
– basic and diluted
Loss per ordinary share before exceptional
items & profit on business disposals and sale of own shares
– basic and diluted
(p)
(p)
(p)
(4.6)
0.1
(4.7)
(21.4)
(12.5)
(8.9)
(0.5)
0.2
(0.7)
(21.9)
(12.3)
(9.6)
9
Goodwill
Cost
At 1 January and 31 December 2003
Amortisation
At 1 January and 31 December 2003
Net book value at 1 January and 31 December 2003
Group
31 Dec 2003
£’000
9,347
9,347
–
036
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 37
10 Tangible fixed assets – Group
Cost
At 1 January 2003
Exchange differences
Additions
Business acquisitions
Business disposals
Other disposals
At 31 December 2003
Accumulated depreciation
At 1 January 2003
Exchange differences
Charge for the period
Business disposals
Other disposals
At 31 December 2003
Net book value at 31 December 2003
Net book value at 31 December 2002
Furniture
and fittings
£’000
221,855
(3,755)
7,870
1,388
(3,801)
(24,008)
199,549
133,488
(2,514)
25,939
(2,872)
(19,442)
134,599
64,950
88,367
The net book value of fixed assets includes amounts held under finance leases as follows:
Cost
Accumulated depreciation
Net book value
Computers
Motor vehicles
£’000
£’000
Total
£’000
21,959
128
243,942
(13)
691
31
(428)
(1,517)
20,723
16,591
(121)
3,586
(428)
(1,063)
18,565
2,158
5,368
4
2
–
–
(23)
111
91
5
–
–
(13)
83
28
37
(3,764)
8,563
1,419
(4,229)
(25,548)
220,383
150,170
(2,630)
29,525
(3,300)
(20,518)
153,247
67,136
93,772
Group
Group
31 Dec 2003
31 Dec 2002
£’000
46,629
(31,018)
15,611
£’000
58,217
(28,114)
30,103
037
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Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
11 Investments
At 1 January 2003
Exchange differences
Additions
Disposal
Share of retained losses
At 31 December 2003
Group
Investment
Group
Interest
Group
Interest
in joint
Group
Other
in own shares*
in associates
ventures
Investments
£’000
3,805
–
–
(2,958)
–
847
£’000
12,458
–
–
–
(4,097)
8,361
£’000
(1,623)
369
259
(164)
162
(997)
£’000
29
(1)
–
(23)
–
5
Company
Shares
in Group
undertakings
£’000
–
–
29,256
–
–
29,256
Group
Total
£’000
14,669
368
259
(3,145)
(3,935)
8,216
* The nominal value of the Group's investment in own shares is £0.2 million. Note 21 provides details of the investment in own shares.
Details of investments in subsidiary companies are given on pages 52 to 53 of these accounts.
The following information is given in respect of the Group's 42% interest in the ordinary shares of its associate, Regus Holdings (UK) Limited,
which became an associate on 31 December 2002.
31 Dec 2003
£’000
31 Dec 2002
£’000
62,822
(3,632)
(465)
(4,097)
21,175
25,428
(37,909)
(333)
8,361
–
–
–
–
27,090
24,296
(38,520)
(408)
12,458
Share of associate
Share of profit and loss account:
Turnover
Loss before tax
Taxation
Loss after tax
Share of balance sheet:
Fixed Assets
Current Assets
Liabilities due within one year
Liabilities due after one year
Net assets
038
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 39
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
Deferred tax asset
VAT recoverable
Amounts falling due after one year
Deferred tax asset
Total debtors
Group
Group
Company
31 Dec 2003
31 Dec 2002
31 Dec 2003
£'000
£'000
£'000
23,310
–
3,835
21,867
9,031
1,777
2,470
62,290
873
63,163
21,622
–
1,966
20,449
10,331
–
4,657
59,025
–
59,025
–
1,375
–
3,276
–
–
–
4,651
–
4,651
As at 31 December 2003 the provision for bad and doubtful debts was £1,912,000 (2002: £2,442,000). 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
Deferred tax asset
Opening balance
Transfer in the year
Current year movement
Prior year movement
Exchange difference
At 31 December 2003
Analysed as:
Debtors < 1 year
Debtors > 1 year
Group
Group
31 Dec 2003
31 Dec 2002
£'000
2,442
2,489
(2,301)
(695)
(23)
1,912
£'000
2,858
3,243
(107)
(3,576)
24
2,442
Group
Group
31 Dec 2003
31 Dec 2002
£'000
–
649
2,353
(380)
28
2,650
1,777
873
£'000
–
–
–
–
–
–
–
–
039
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 40
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
13 Creditors – amounts falling due within one year
Group
Group
Company
31 Dec 2003
31 Dec 2002
31 Dec 2003
£'000
£'000
£'000
Bank loans and overdrafts
Other loans
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
2,507
693
6,687
–
19,285
32,142
3,295
8,403
21,450
1,150
10,713
22,659
5,205
Restated
4,079
699
11,788
–
29,188
36,430
4,439
10,529
20,351
1,241
8,714
18,150
3,645
The prior year creditor has been restated to better reflect the ageing of the rent accrual.
134,189
149,253
14 Creditors – amounts falling due after more than one year
–
–
–
2
–
–
–
–
–
–
–
412
–
414
Bank loans
Loan from associate
Other loans
Obligations under finance leases
Accruals and deferred income
Rent accruals
Other creditors
The prior year creditor has been restated to better reflect the ageing of the rent accrual.
Group
Group
31 Dec 2003
31 Dec 2002
£’000
–
5,000
1,019
10,962
632
16,577
–
34,190
£’000
Restated
5
5,000
1,262
13,393
98
28,710
38
48,506
040
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 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:
Bank loans
& overdrafts
31 Dec 2003
Other loans
Finance
leases
Total
31 Dec 2003
31 Dec 2003
31 Dec 2003
Amounts falling due:
Within 1 year or on demand
Between 1 and 2 years
Between 2 and 5 years
In 5 years or more
Amounts falling due:
Within 1 year or on demand
Between 1 and 2 years
Between 2 and 5 years
In 5 years or more
£’000
2,507
–
–
–
2,507
Bank loans
and overdrafts
31 Dec 2002
£’000
4,079
4
1
–
4,084
£’000
693
184
594
5,241
6,712
Other loans
£’000
6,687
6,195
4,596
171
17,649
Finance
leases
£’000
9,887
6,379
5,190
5,412
26,868
Total
31 Dec 2002
31 Dec 2002
31 Dec 2002
£’000
699
225
658
5,379
6,961
£’000
11,788
7,654
5,375
364
25,181
The following provides additional disclosure for bank loans, overdrafts and other loans:
Amounts falling due:
Within 1 year or on demand
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
After 5 years
Group
Group
31 Dec 2003
31 Dec 2002
£’000
3,200
184
153
130
311
5,241
9,219
£’000
4,778
229
203
146
310
5,379
11,045
£’000
16,566
7,883
6,034
5,743
36,226
Company
31 Dec 2003
£’000
–
–
–
–
–
–
–
The following provides additional finance lease disclosure including the interest components of future minimum lease payments (Company: nil):
Amounts falling due:
Within 1 year or on demand
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
After 5 years
Total commitment
Less amounts representing interest
Present value of future minimum lease payments
Within 1 year
After 1 year
Group
Group
31 Dec 2003
31 Dec 2002
£’000
9,284
7,893
4,156
996
248
270
22,847
(5,198)
17,649
6,687
10,962
£’000
13,440
8,656
3,762
1,050
491
650
28,049
(2,868)
25,181
11,788
13,393
041
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 42
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
16 Provisions for liabilities and charges
At 1 January 2003
Provided in year
Utilised in year
Transferred in year
Provision released
Disposals
Exchange differences
At 31 December 2003
Amounts falling due within one year
Amounts falling due after one year
There is no unprovided deferred tax liability (note 7).
Group
Group Onerous
Deferred tax
lease obligations
£’000
(649)
–
–
649
–
–
–
–
–
–
£’000
57,891
10,310
(5,630)
–
(6,326)
(1,845)
(1,846)
52,554
38,259
14,295
Group
Total
£’000
57,242
10,310
(5,630)
649
(6,326)
(1,845)
(1,846)
52,554
38,259
14,295
On 12 January 2004 £25.3 million ($45.1million) of the onerous lease obligation crystalised into a creditor on confirmation by the US courts that
Regus could exit Chapter 11. Payments of £27.8 million were settled on the same date in respect of Chapter 11 liabilities. The balance of these
payments relates to confirmed liabilities included within creditors at the 31 December 2003.
17 Called up share capital
Authorised
1,600,000,000 ordinary shares of 5p each
50,000 redeemable preference shares of £1 each
Allotted, called up and fully paid
787,833,632 ordinary shares of 5p each
Allotted and called up
50,000 redeemable preference shares of £1 each
Group and
Company
31 Dec 2003
£’000
80,000
50
80,050
39,392
39,392
50
39,442
The redeemable preference shares are redeemable at the option of the Company at their paid up value. The shares do not participate in any
distribution of profits or proceeds in the event of a winding up. The redeemable preference shareholders are not entitled to vote at a general meeting.
042
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 43
18 Reserves
Group
Group
Share
Profit and
Other (non
Shareholder
Group
At 1 January 2003
Scheme of Arrangement – merger accounting
At 1 January 2003 on a pro forma basis
Scheme of Arrangement – court approval
Shares issued on Rights Issue
Issue costs
Other share issues
Loss for year
Exchange
Share Capital
Premium
£ '000
£ '000
Loss
£ '000
distributable)
£ '000
29,110
–
29,110
–
9,794
–
538
–
–
279,765
(279,765)
–
–
45,051
(1,846)
1,159
–
–
(343,775)
–
(343,775)
309,021
–
–
–
(26,279)
3,741
6,508
279,765
286,273
(309,021)
–
–
–
–
37
At 31 December 2003
39,442
44,364
(57,292)
(22,711)
Company
At 1 January 2003
Scheme of Arrangement – share capital exchange
Issue of shares
Issue costs
Loss for year
–
29,256
10,186
–
–
–
–
46,210
(1,846)
–
At 31 December 2003
39,442
44,364
–
–
–
–
(150)
(150)
–
–
–
–
–
–
Equity
£ '000
(28,392)
–
(28,392)
–
54,845
(1,846)
1,697
(26,279)
3,778
–
3,803
–
29,256
56,396
(1,846)
(150)
83,656
The reorganisation of the Regus group of companies through the Scheme of Arrangement (see accounting policies, 'basis of consolidation')
was sanctioned on 28 November 2003.
As at 1 January 2003 the total issued share capital of the Group was £29,110,000. At the date of the Scheme the total share capital allotted
had increased to £29,256,000 and the share premium account amounted to £279,765,000.
In accordance with the court order under the Scheme of Arrangement, the issued share capital and the share premium of Regus plc ("Old
Regus") at the effective date of the Scheme (1 December 2003) was cancelled against distributable reserves. Distributable reserves were
therefore increased by £309,021,000.
The shareholders of Old Regus were issued with shares in Regus Group plc (the "Company") on a one for one basis. As a result, the Company
had issued share capital of £29,256,000 (being 585,120,290 ordinary shares of 5 pence each) at the effective date of the Scheme. No share
premium was recognised in the Company on the issue of these shares under s131 of the Companies Act.
On a consolidated basis, the Scheme has been accounted for using merger accounting principles in accordance with FRS6 'Acquisitions and
Mergers'. As a result of the above transactions a merger reserve of £29,256,000 arises, which is included within other non-distributable reserves.
043
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 44
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
19 Cash flow statement
(a) Reconciliation of operating profit to net cash outflow from operating activities
Continuing operating activities
Group operating loss
Depreciation charge
Goodwill amortisation
Loss on disposal of fixed assets
Impairment of goodwill
Impairment of fixed assets
(Decrease)/Increase in provisions
Decrease in stocks
Decrease in debtors
Decrease in creditors
Net cash outflow from continuing operating activities
Group
Group
31 Dec 2003
31 Dec 2002
£’000
£’000
(28,193)
29,525
–
1,686
–
–
(5,604)
138
3,608
(15,805)
(14,645)
(130,879)
56,074
238
894
4,002
36,842
31,548
104
25,114
(34,720)
(10,783)
The cash outflow for year ending 31 December 2003 includes a £5,868,000 outflow (December 2002 – outflow of £16,603,000) relating to
exceptional items charged during the year (see note 3a).
(b) Financing and management of liquid resources
Group
Group
31 Dec 2003
31 Dec 2002
£’000
£’000
(18,851)
27,362
8,511
–
(1,219)
(6,240)
53,255
(1,846)
43,950
(18,603)
74,029
55,426
5,850
(41,063)
(13,979)
16,916
–
(32,276)
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
044
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 45
19 Cash flow statement continued
(c) Reconciliation of net cash flow to movement in net funds
Increase in cash in the year
Cash outflow from change in borrowings and finance leases
Cash inflow from change in liquid resources
Change in net funds resulting from cash flows
Business acquisitions and disposals
Other non-cash items:
New finance leases
Exchange differences
Movement in net funds 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 2003
31 Dec 2002
£’000
35,350
7,710
(8,511)
34,549
(710)
–
1,910
35,749
22,384
58,133
£’000
6,279
49,192
(55,426)
45
(6,651)
(4,446)
2,407
(8,645)
31,029
22,384
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
2003
Cash flow
Disposals
changes
movements
£’000
29,065
(1,253)
27,812
(6,266)
(3,526)
(13,393)
(11,788)
(34,973)
29,545
22,384
£’000
34,939
411
35,350
244
975
10,830
(4,339)
7,710
(8,511)
34,549
£’000
£’000
£’000
–
–
–
76
15
–
19
110
(820)
(710)
(69)
–
(69)
7
(7)
(8,637)
8,638
1
68
–
170
(20)
150
(80)
205
238
783
1,146
614
1,910
2003
£’000
64,105
(862)
63,243
(6,019)
(2,338)
(10,962)
(6,687)
(26,006)
20,896
58,133
Liquid resources at 31 December 2003 include cash held on deposit of which £3.6 million (December 2002: £2.6 million) relates to collateral
against bank loans and £13.6 million (December 2002: £26.1 million) relates to deposits which are held by banks as security for the issuance of
bank guarantees and overdrafts 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 movements between categories.
045
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 46
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
20 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 9 of the financial statements.
Short term debtors and creditors and intercompany 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.
Weighted
average
fixed
interest rate
%
7.7
6.6
–
8.8
11.0
–
–
–
–
–
–
Weighted
average
period for
which rate
is fixed
Years
1.9
0.6
–
1.2
2.3
–
–
–
–
–
–
At floating
rates
£’000
(1,278)
–
(5,000)
–
(2,941)
(9,219)
605
17,371
586
54,784
5,554
6,101
85,001
75,782
20,896
(9,219)
64,105
75,782
At fixed
rates
£’000
(3,218)
(50)
–
(13,691)
(690)
(17,649)
–
–
–
–
–
–
–
(17,649)
–
(17,649)
–
(17,649)
Total
£’000
(4,496)
(50)
(5,000)
(13,691)
(3,631)
(26,868)
605
17,371
586
54,784
5,554
6,101
85,001
58,133
20,896
(26,868)
64,105
58,133
31 December 2003
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
046
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 47
20 Financial instruments continued
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
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
At fixed
rates
£’000
(5,036)
(547)
–
(18,645)
(953)
(25,181)
–
–
–
–
–
–
–
(25,181)
–
(25,181)
–
(25,181)
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
average
fixed
interest rate
%
7.7
6.6
–
8.8
11.0
–
–
–
–
–
–
Weighted
average
period for
which rate
is fixed
Years
1.9
0.6
–
1.2
2.3
–
–
–
–
–
–
047
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 48
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
20 Financial instruments continued
Maturity analysis of undrawn committed borrowing facilities
The Group had no undrawn committed borrowing facilities available at 31 December 2003 (2002: nil).
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.
Net foreign currency monetary assets/(liabilities)
Sterling
£’000
(6,462)
–
(5,301)
(5,674)
(17,437)
Sterling
£’000
(82)
–
–
1
(81)
US Dollar
£’000
(2)
(1)
–
(4,650)
(4,653)
US Dollar
£’000
135
(1,586)
–
(3,217)
(4,668)
Others
£’000
4,765
(3,705)
(186)
(3,319)
(2,445)
Others
£’000
(176)
2,225
242
(692)
1,599
Euro
£’000
–
(8,267)
3
(132)
(8,396)
Euro
£’000
–
(8,742)
(3)
(4,538)
(13,283)
Total
£’000
(1,699)
(11,973)
(5,484)
(13,775)
(32,931)
Total
£’000
(123)
(8,103)
239
(8,446)
(16,433)
31 December 2003
Functional currency
of Group operation
Euro
Sterling
US Dollar
Others
31 December 2002
Functional currency
of Group operation
Euro
Sterling
US Dollar
Others
048
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 49
20 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.
The table below is a summary of the methods and assumptions used for each category of financial instrument.
Book value
31 Dec 2003
£’000
Fair value
31 Dec 2003
£’000
Book value
Fair value
31 Dec 2002
31 Dec 2002
£’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
(9,887)
(16,981)
20,896
64,105
(9,015)
(13,681)
20,896
64,105
(16,567)
(19,659)
29,545
29,065
(15,504)
(15,899)
29,545
29,065
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.
049
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 50
Report and Accounts 2003
Notes to the financial statements
for the year ended 31 December 2003 continued
21 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 Group 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 2003 the trust held 4,028,212 shares in Regus Group plc (note 11). The market value at 31 December 2003 was £2.2 million.
Costs incurred by the trust are expensed in the profit and loss account. Subsequent to the year end the trust has sold all its remaining shares.
At 31 December 2003 awards over a total of nil (December 2002: 23,809,949) shares, net of lapses, had been granted to employees.
Details of the awards are provided below:
Award Type
Performance awards
Non-performance
awards
Date
exercisable
Exercise
price £
31 December
2002
Number of
awards
1 Jan 03 to 1 Jan 07
1 Jan 04 to 1 Jan 08
26 Mar 04 to 26 Mar 06
8 Jun 04 to 26 Mar 06
8 Jun 04 to 26 Mar 06
29 Aug 04
12 Nov 04
31 Dec 05 to 28 Aug 12
1 Jan 03 to 1 Jan 07
1 Jan 03 to 1 Jan 06
1 Jan 04 to 1 Jan 08
29 Aug 04
12 Nov 04
28 Feb 05 to 27 Feb 12
28 Mar 05 to 27 Mar 12
30 May 05 to 29 May 12
28 Apr 06
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
0.233
7,987,438
958,528
921,119
258,524
84,876
50,000
195,000
500,000
5,216,114
2,833,546
1,438,206
50,000
3,025,000
155,000
55,512
81,086
–
New
Awards
–
_
_
_
_
_
_
–
–
–
–
–
–
–
1,761
–
168,000
Exercised
awards
–
–
–
–
–
–
–
(65,500)
–
(1,102)
–
–
(2,116,800)
(134,400)
(57,273)
(71,997)
(168,000)
Lapses
(7,987,438)
(958,528)
(921,119)
(258,524)
(84,876)
(50,000)
(195,000)
(434,500)
(5,216,114)
(2,832,444)
(1,438,206)
(50,000)
(908,200)
(20,600)
_
(9,089)
–
23,809,949
169,761
(2,615,072)
(21,364,638)
31 December
2003
Number of
awards
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
On approval of the Scheme of Arrangement, on 28 November 2003, certain share options became exercisable prior to the contracted date.
At the effective date of the Scheme of Arrangement on 1 December 2003 any unexercised options lapsed.
In addition, at 31 December 2003, no awards over American Depository Shares (December 2002: 623,215), net of lapses, had been granted
to employees.
Details of the awards are provided below:
Award Type
Date
exercisable
Exercise
price $
Performance awards
26 Mar 04 to 26 Mar 06
Non-performance awards
8 Jun 04 to 26 Mar 06
8 Jun 04 to 26 Mar 06
29 Aug 04
31 Dec 05 to 29 May 09
29 Aug 04
12 Nov 04
29 Feb 05 to 27 Feb 12
18.188
18.188
16.200
3.290
2.810
3.290
2.300
2.000
31 December
2002
Number of
awards
71,645
57,621
83,949
73,000
200,000
10,000
126,000
1,000
New
Awards
Exercised
awards
–
–
–
–
–
–
–
–
24,000
7,920
–
120
(224,000)
(17,920)
(101,920)
(1,120)
Lapses
(71,645)
(57,621)
(83,949)
(73,000)
–
–
(24,080)
–
623,215
32,040
(344,960)
(310,295)
31 December
2003
Number of
awards
–
–
–
–
–
–
–
–
–
On approval of the Scheme of Arrangement certain share options became exercisable prior to the contracted date. At the effective date of the
Scheme of Arrangement any unexercised options lapsed.
050
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 51
22 Capital commitments
Contracts placed for future capital expenditure
not provided in the financial statements
23 Operating lease commitments
Group
31 Dec
2003
£’000
Group
31 Dec
2002
£’000
Company
31 Dec
2003
£’000
–
925
–
At 31 December the Group has lease agreements in respect of properties, motor 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 2003
31 Dec 2003 31 Dec 2003 31 Dec 2002
31 Dec 2002 31 Dec 2002
£’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
5,127
59,806
42,617
107,550
1,935
5,865
67
7,062
65,671
42,684
2,282
64,970
79,777
7,867
115,417
147,029
946
4,525
205
5,676
3,228
69,495
79,982
152,705
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
24 Contingent liabilities
31 Dec 2003
31 Dec 2002
Total
£’000
115,417
99,708
83,341
63,792
54,555
100,046
516,859
Total
£’000
152,705
146,038
138,232
117,317
98,014
243,823
896,129
The Group has bank guarantees and letters of credit held with certain banks totalling £17.2 million (December 2002: £28.7 million). The Company
also acts as a guarantor for certain obligations of other subsidiary entities.
At 31 December 2003 the Group had received a number of claims and, where appropriate, the Group has made provisions.
25 Related party transactions
During the year ended 31 December 2003 the Group received management fees of £5.6 million (2002: £1.3 million) from its joint venture
entities and associate as listed on pages 52 and 53. Regus rented office space from its associate incurring costs of £0.3 million.
At 31 December 2003, £3.8 million (2002: £2.0 million) was due to the Group from the joint ventures and associate. At 31 December 2003
Regus had outstanding a loan from its associate amounting to £5.0 million (2002: £5.0 million). It incurred interest of £0.4 million (2002: Nil) on
the loan during the year.
26 Post balance sheet events
On 12 January 2004 Regus confirmed its formal exit from Chapter 11. The Group paid £27.8 million to its creditors and is no longer subject to
any court or creditor supervision.
051
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 52
Report and Accounts 2003
Principal Group companies
Country of
% of equity
incorporation
and votes held
Argentina
Australia
Australia
Austria
Belgium
Belgium
Brazil
Canada
Canada
Columbia
Chile
China
Czech Republic
Denmark
Egypt
England
England
England
England
England
England
Finland
France
France
Germany
Germany
Germany
Greece
Hong Kong
Hungary
Hungary
Ireland
Ireland
Ireland
Ireland
Israel
Italy
Italy
Japan
Latvia
Luxembourg
Malaysia
Mexico
Mexico
Morocco
Morocco
Netherlands
Netherlands
Netherlands
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
42
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
100
100
100
100
100
100
100
50
100
100
60
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 Bruxelles NV
Regus Do Brasil Ltda
Regus Business Centre Ltd
Regus Business Centres Canada Ltd Partnership +++
Regus Columbia Ltda
Regus Business Centre Chile Ltda
Regus Business Services (Shanghai) Ltd
Regus Business Centre sro
Regus Copenhagen ApS
Regus Business Centre (Egypt)
Regus Business Centres (Holdings) Ltd
Regus Business Centre Trading Ltd +
Regus Holdings (UK) Ltd
Regus Management Ltd
Regus Investments Ltd
Regus Limited (formerly Regus plc)*
Regus Finland Oy
Regus Paris SA
Regus Roissy SA
RBC Deutschland GmbH
Regus GmbH and Co KG
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 Zenith SARL+++
Regus Amsterdam BV
Regus Business Centre BV
Regus International Holdings BV ++
052
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 53
Principal Group companies continued
Name of Group entity
Satellite Business Centre Schiphol BV
Skyport Business Services BV
MAATSCHAP Regus Amsterdam 2 +++
Regus Business Centre Ibsen AS
Regus Business Centre Skoyen AS
Regus Business Centre Nydalen AS
Regus Business Centre Norge 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 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
Norway
Norway
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
Vietnam
100
100
50
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
100
50
100
100
100
Investments in Group undertakings are held at cost all of which are included within the
consolidated results.
* Shares held directly by Regus Group plc
Other than Regus Limited, 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 serviced 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.
053
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 54
Section header
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
18 May 2004.
REGISTRAR
UNSOLICITED MAIL
FURTHER INFORMATION
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.
Information about Regus may
be found on the Regus website at:
www.regus.com
Registered office
Regus Group plc
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
Registered number 4868977
Tel: +44 (0) 1932 895 000
Fax: +44 (0) 1932 895 001
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
Regus Group plc
3000 Hillswood Drive
Chertsey
KT16 0RS
United Kingdom
Tel: +44 (0) 1932 895 135
Fax: +44 (0) 1932 895 261
by email: stephen.jolly@regus.com
054
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 55
AGM notice
Dear shareholder
ANNUAL GENERAL MEETING
NOTICE OF 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 10am on Tuesday
18 May 2004.
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 Registrars
(Proxies), PO Box 25, Beckenham, Kent
BR3 4BR - to arrive no later than 10am
on Sunday, 16 May 2004. You will not
be prevented from attending and voting
at the meeting, if you subsequently find
that you are able to do so.
LOCATION OF THE MEETING
The meeting is to be held at City Point
in the Regus Conference Centre
on the 9th floor.
RECOMMENDATION
We, your directors, consider that all
of the resolutions set out in the Notice
of Annual General Meeting are in the
best interests of shareholders and
recommend that you vote in their favour,
as we shall regarding our own
shareholdings.
Yours faithfully
John Matthews
Chairman
Regus Group plc
Notice is hereby given that the Annual
General Meeting of Regus Group plc
will be held at City Point, 1 Ropemaker
Street, London EC2Y 9HT, on
Tuesday 18 May 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 2003 together with
the report of the auditors.
2 Re-election of director
To re-elect Rudolf Lobo as a director
of the Company.
3 Re-appointment of auditors
To re-appoint KPMG as auditors
to the Company and to authorise the
directors to determine the auditors’
remuneration for the year.
4 Remuneration report
To approve the directors’ remuneration
report for the year ended 31 December
2003.
5 New Employee share plans
that:
(i)
The Regus Group Restricted
Award Plan and the Regus Group
Option Share Plan (the Plans),
a summary of the principal features
of which are set out on pages 17 to 20
of the Report and Accounts, be and
they are hereby approved and the
directors be and they are hereby
authorised to do all such acts and things
necessary to carry them into effect; and
(ii)
the directors be and they are
hereby authorised to establish a further
plan or plans containing such provisions
as the directors may decide subject
to the following:
(a) such plans must operate within
the limits on the number of new ordinary
shares which may be made available
from time to time under the Plans;
(b) such plans must, except to the
extent necessary or desirable to take
account of overseas tax, securities
and exchange control laws, contain
limitations so as to ensure, so far
as the directors consider practicable,
that the participants in such schemes
obtain no greater benefit than employees
participating in the Plans; and
(c) once established, the provisions
of such plans may not be amended
without the prior approval of the
Company in general meeting if
such approval would be required
to amend the comparable provisions
in the Plans; and
(iii)
the directors be and they are
hereby authorised to vote and be
counted in the quorum on any matter
connected with the Plans referred
to in this resolution (except that
no director may vote or be counted
in the quorum in respect of his own
participation) and any prohibition on
voting contained in the Articles of
Association of the Company be and
is hereby relaxed accordingly.
SPECIAL BUSINESS
To consider and, if thought fit, pass
the following resolutions of which
Resolution 6 will be proposed
as an ordinary resolution and
Resolutions 7 and 8 will be proposed
as special resolutions:
055
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 56
AGM notice
6 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 £13,130,560 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 resolution and (b) any amounts
outstanding at the date of the resolution
which have previously been approved by
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 expiry in
accordance with this authority in
pursuance of such offer or agreement.
This authority shall expire immediately
prior to the fifth anniversary of the
passing of this resolution. All unexercised
authorities vested in the directors,
immediately prior to the general meeting
at which this resolution is passed, to allot
relevant securities are hereby revoked.
Expressions used in this resolution
which are defined in the Companies Act
1985 shall have the same meaning as
used herein.
7 Directors’ power to disapply
pre-emption rights
That if Resolution 6 is passed as an
ordinary resolution, the directors be and
are hereby empowered in accordance
with section 95(1) of the Companies Act
1985 from time to time to allot equity
056
securities pursuant to the general
authority referred to in Resolution 6 to
such persons and in such 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:
the allotment of equity securities
(i)
in connection with a rights issue, open
offer or any other pre-emptive offer in
favour of shareholders and in favour of
holders of any other class of equity
security in accordance with the rights
attached to such class where the equity
securities respectively attributable to the
interests of such persons on a fixed
record date are proportionate (as nearly
as may be) to the respective numbers
of equity securities held by them 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 territory, the requirements of
any regulatory body or stock exchange
or any other matter whatsoever; and
(ii)
the allotment (otherwise than
pursuant to sub-paragraph (i) above) of
equity securities up to the aggregate
nominal amount of £1,969,584 being 5%
of the ordinary share capital in issue at
29 March 2004.
This authority shall expire immediately
prior to the fifth anniversary of the
passing of this resolution.
8 Company’s authority
to purchase ordinary shares.
That the Company be and is hereby
unconditionally and generally authorised
for the purpose of Section 166 of the
Companies Act 1985 to make market
purchases (as defined in Section 163
of that Act) of ordinary shares of the
Company provided that:
(i)
the maximum number of shares
which may be purchased is 78,783,359;
the minimum price which may be
(ii)
paid is the nominal value of each share;
(iii) the maximum price which may
be paid for a share is an amount equal
to 105% of the average of the middle
market quotations of the Company’s
ordinary shares as derived from the
Stock Exchange Daily Official List for the
five business days immediately preceding
the day on which such share is
contracted to be purchased;
(iv)
conclusion of the Annual General
Meeting of the Company held in 2005
(except in relation to the purchase of
shares the contract for which was
concluded before the expiry of such
authority and which might be executed
wholly or partly after such expiry)
unless such authority is renewed prior
to such time.
this authority shall expire at the
This power shall enable the Company
to make any offer or agreement before
the expiry of such general authority
which would or might require securities
to be allotted after such expiry and the
directors may allot equity securities
after such expiry pursuant to any such
offer or agreement. Expressions used
in this resolution which are defined
in the Companies Act 1985 shall have
the same meanings as used herein.
Registered Office:
3000 Hillswood Drive
Chertsey, Surrey
KT16 ORS
By order of the Board
T S J Regan
Regus Group plc
Company Secretary
29 March 2004
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 57
AGM notice
9.00 am Doors open to shareholders
9.15 am Auditorium opens
10.00 am Annual General Meeting begins
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 2003.
Resolution 2
Re-election of directors
The Company’s Articles of Association
require that any director appointed since
the last Annual General Meeting and,
additionally, one-third in number of the
directors must retire by rotation (including
those directors who have held 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, Rudolf Lobo
shall retire.
The retiring director offers himself
for re-election. Brief details of all the
directors, including those seeking re-
election at the meeting, are to be found
in this Annual 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.
Resolution 3 proposes the re-
appointment of the Company’s existing
auditors KPMG for a further year.
The 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
16 to 22 of the Report and Accounts.
Resolution 5
New employee share plans
The directors seek your approval
to establish two new employee share
plans, the principal features of which
are summarised on pages 17 to 20 of
this Report and Accounts. In addition,
the Directors seek authority to establish
further plans, based on the plans
summarised in pages 17 to 20, but
modified to take account of local tax,
exchange control or securities laws.
A copy of the rules of each of the Plans
will be available for inspection at the
registered office of the Company and at
the offices of Slaughter and May, One
Bunhill Row, London EC1Y 8YY during
normal business hours on any weekday
from the date of this notice until the date
of the Meeting and at the venue for a
period of at least 15 minutes before
the meeting
Resolution 6
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 2003 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 of the authority on an annual
basis. Accordingly, the directors seek
the authority to allot, at their discretion,
an amount of relevant securities up to
the aggregate nominal amount of
£13,130,560 being one-third of the
issued ordinary share 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.
This authority supersedes all previous
authorities and the directors intend to
seek its renewal at next year’s Annual
General Meeting.
Resolution 7
Directors’ power to disapply
pre-emption rights
Under Section 95 of the Companies Act
1985, the directors require the authority
of shareholders in general meeting to
disapply section 89 of the Companies
Act 1985 so that they can allot
authorised but unissued shares in the
Company for cash other than to existing
holders of ordinary shares pro rata to
their holdings or alternatively, should
appropriate circumstances arise, allot
shares in connection with a rights issue
(subject to certain limited exclusions for
arrangements). At the present time there
is no intention to exercise such authority.
The directors intend to seek renewal
of the authority given by Resolution 7
at next year’s Annual General Meeting.
057
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AGM notice
INFORMATION FOR SHAREHOLDERS
AND OTHER PARTICIPANTS
Documents
This section provides information for
shareholders and other “participants”
who have the rights in connection
with this meeting.
Shareholders
Pursuant to Regulation 41 of the
Uncertificated Securities Regulations
2001, the time by which a person must
be entered on the register of members
in order to have the right to attend or
vote at the Annual General Meeting is
10.00am on Tuesday 18 May 2004.
Entries in the register after that time will
be disregarded in determining the rights
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 Sunday 16 May 2004.
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.
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:
• The register of members;
• 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 and reception area
9.15 am
Auditorium opens
10.00 am
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.
Resolution 8
Authority to purchase own shares
In certain circumstances, it may be
advantageous for the Company to
purchase its own ordinary shares and
Resolution 8 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 may be cancelled and the
number of shares in issue will be
reduced accordingly.
Under the Companies (Acquisition
of Own Shares) (Treasury Shares)
Regulations 2003, which came into
effect on December 2003, the Company
will be permitted to hold its own shares
following a purchase as an alternative
to cancelling them.
Resolution 8 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 30 March 2004) and the
minimum and maximum prices at which
they may be bought. The authority
given by Resolution 8 will last until the
conclusion of next year’s Annual General
Meeting (or, if earlier, 15 months from 18
May 2004 being the date of the passing
of the present resolutions). The directors
intend to seek renewal of this power at
subsequent Annual General Meetings.
058
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AGM notice
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.
About the meeting
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.
Smoking
Smoking is not permitted in the building.
Regus Group plc
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
Registered number: 4868977
www.regus.com
059
18275_E22330_AREP.qxd 5/4/04 5:18 pm Page 60
Five-year summary
Profit and loss data
31 Dec 1999
31 Dec 2000
31 Dec 2001
31 Dec 2002
31 Dec 2003
Turnover (including share of joint ventures)
Less: share of turnover of joint ventures
– associate
Turnover
Cost of sales (centre costs) before exceptional items
Exceptional cost of sales
£m
200.6
–
–
200.6
(183.5)
–
Cost of sales (centre costs) after exceptional items
(183.5)
Gross profit/(loss) (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
– associate
Total operating (loss)/profit: Group and
share of joint ventures
Profit on sale of group undertakings
Profit on sale of own shares
(Loss)/profit on ordinary activities before interest
Net interest payable and similar charges
Loss on ordinary activities before tax
Tax credit/(charge) 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
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)
£m
324.9
(5.5)
(62.8)
256.6
(239.7)
–
(239.7)
16.9
(38.7)
(6.4)
(45.1)
(28.2)
(0.2)
(3.7)
(32.1)
6.6
0.7
(24.8)
(4.4)
(29.2)
2.1
(27.2)
0.9
(26.3)
(12.0)
(2.7)
(21.0)
(21.9)
(4.6)
outstanding (thousands)
469,486
497,889
563,528
564,052
574,805
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
Provisions
Equity minority interests
Equity shareholders’ (deficit)/funds
126.8
72.1
268.3
(189.9)
(102.4)
–
0.2
(23.7)
244.6
169.8
544.4
(317.9)
(23.1)
(0.8)
0.4
203.1
251.5
117.1
486.3
(344.4)
(24.8)
(28.3)
(0.4)
88.4
110.1
58.6
228.0
(149.3)
(50.1)
(57.2)
0.2
(28.4)
76.3
85.0
224.7
(134.2)
(35.2)
(52.6)
1.1
3.8
The 5 year summary reflects the reported results of the Group. No adjustment has been made for the disposal of the UK business.
060
18275_E22330_AREP_COVER_03.qxd 19/3/04 9:24 am Page 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 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.
18275_E22330_AREP_COVER_03.qxd 19/3/04 9:24 am Page 1
Regus Group plc
3000 Hillswood Drive
Chertsey
Surrey KT16 0RS
United Kingdom
www.regus.com
Registered number: 04868977