Regus Group Plc Annual Report 2005

FY2005 Annual Report · Regus Group Plc
Loading PDF…
R
E
G
U
S
G
R
O
U
P
P
L
C
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
5

REGUS GROUP PLC
3000 HILLSWOOD DRIVE
HILLSWOOD BUSINESS PARK
CHERTSEY
SURREY KT16 0RS
UNITED KINGDOM

WWW.REGUS.COM

 
 
 
 
 
REGUS GROUP PLC
ANNUAL REPORT 2005

CHANGING

 THE WAY PEOPLE WORK

As the leading global ofﬁ ce outsourcing provider
we continue to pursue selective growth opportunities
and acquisitions that will bring positive impact to our
business in the future.

CONTENTS
02 Chairman’s Statement
04 Chief Executive’s Review
06 Spotlight on Our Regions
12 Financial Review
14 Board of Directors
16 Directors’ Report
18 Corporate Governance
22 Remuneration Report
28 Statement of Directors’ Responsibilities
29 Independent Auditors’ Report
30 Financial Statements
34 Notes to the Accounts
60 Parent Company Accounts
63 Five Year Summary
64 Corporate Directory

HIGHLIGHTS

REVENUE
£463.3m (2004: £312.2m)

  £151.1m

PROFIT FROM OPERATIONS
£47.3m (2004: £1.2m)

  £46.1m

CASH FROM OPERATIONS
£78.1m (2004: £21.0m)

  £57.1m

CENTRE CONTRIBUTION
£117.2m (2004: £47.4m)

  £69.8m

PROFIT BEFORE TAX
£38.7m (2004: £4.9m loss)

  £43.6m

BASIC EARNINGS PER SHARE (EPS)
4.5p (2004: 0.3p loss)

  4.8p

We will continue to invest in the long term growth of
the business. Favourable market drivers and strong
cash generation have provided a catalyst for the Group
to focus on a disciplined expansion programme.

(cid:203)

02

Regus Report & Accounts 2005

Chairmanʼs Statement

JOHN MATTHEWS

2005 was an excellent year for 
Regus. We have delivered solid 
growth in revenues, proﬁ t from 
operations and earnings per 
share.

REVENUE

£463.3m

(2004: £312.2m)

STRATEGY
Our strategy is one of proﬁ table growth. 
We continue to drive revenue and proﬁ ts from 
our existing portfolio through both price and 
occupancy gains. Our programme of new 
centre openings and acquisitions increases 
our market penetration around the world and 
delivers improved services and capabilities to 
our customers. In addition we have identiﬁ ed 
a number of future opportunities surrounding 
outsourcing and mobility. Our team continues to 
focus on capturing more revenue from existing 
customers as we increase awareness of the 
breadth and depth of our product offering.

To achieve our strategy, we will increase 
investment in our people and systems. Training
and development, together with investment 
in technology and new systems, are core in 
enabling Regus to maximise the opportunities 
available.

Increased 
market
penetration 
around the 
world.

Regus Report & Accounts 2005

03

(cid:1)(cid:32)(cid:1)(cid:29)(cid:57)(cid:45)(cid:22)(cid:45)(cid:202)(cid:34)(cid:19)(cid:202)(cid:47)(cid:34)(cid:47)(cid:1)(cid:29)(cid:202)(cid:44)(cid:13)(cid:54)(cid:13)(cid:32)(cid:49)(cid:13)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:206)(cid:163)(cid:211)(cid:176)(cid:211)

(cid:1)(cid:31)(cid:13)(cid:44)(cid:22)(cid:10)(cid:1)(cid:45)
(cid:163)(cid:206)(cid:123)(cid:176)(cid:110)

(cid:13)(cid:31)(cid:13)(cid:1)
(cid:163)(cid:123)(cid:153)(cid:176)(cid:200)

(cid:1)(cid:45)(cid:22)(cid:1)(cid:202)(cid:42)(cid:1)(cid:10)(cid:22)(cid:19)(cid:22)(cid:10)
(cid:211)(cid:120)(cid:176)(cid:211)

(cid:34)(cid:47)(cid:21)(cid:13)(cid:44)
(cid:211)(cid:176)(cid:200)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:123)(cid:200)(cid:206)(cid:176)(cid:206)

(cid:1)(cid:31)(cid:13)(cid:44)(cid:22)(cid:10)(cid:1)(cid:45)
(cid:211)(cid:200)(cid:163)(cid:176)(cid:200)

(cid:13)(cid:31)(cid:13)(cid:1)
(cid:163)(cid:200)(cid:120)(cid:176)(cid:120)

(cid:1)(cid:45)(cid:22)(cid:1)(cid:202)(cid:42)(cid:1)(cid:10)(cid:22)(cid:19)(cid:22)(cid:10)
(cid:206)(cid:206)(cid:176)(cid:200)

(cid:34)(cid:47)(cid:21)(cid:13)(cid:44)
(cid:211)(cid:176)(cid:200)

FINANCIAL PERFORMANCE
Revenue increased by 48% to £463.3 million, including like-for-
like growth of 13%. Proﬁ t from operations grew by £46.1 million 
to £47.3 million. Basic EPS increased by 4.8p to 4.5p from
a loss of 0.3p in 2004. Shareholder funds increased from
£93.7 million to £152.8 million illustrating the improved strength
of the balance sheet at year-end. Average occupancy increased
to 78% from 75% in 2004 and revenue per available workstation
(REVPAW) increased 12% from £5,251 to £5,890.

Since the year-end we are pleased to have announced the 
signing of a new £100 million credit facility. The new facility, 
which is structured as a ﬁ ve year revolving credit and letter 
of credit facility has been negotiated on signiﬁ cantly more 
favourable terms, reﬂ ecting the strong progress the business 
has made since the Group’s purchase of HQ in 2004.

DIVIDEND
The Board is not recommending the payment of a dividend for 
the year to 31 December 2005. However, the Board continues 
to keep its dividend policy under regular review.

THE BOARD
Stephen Gleadle was appointed Chief Financial Ofﬁ cer on 
31 October 2005. He has signiﬁ cant management experience 
gained during his time at Synstar plc. Stephen replaces
Rudy Lobo who has taken on the role of Group Chief Operating 
Ofﬁ cer. Together with the Group’s Chief Executive, Mark Dixon,
Stephen and Rudy will work closely together and I am conﬁ dent
that as a team they will steer the Group through its next phase 
of growth.

OUR TEAM MEMBERS
On behalf of the Board and our shareholders, I would like 
to thank our people for their substantial contributions. All 
successful businesses depend on the vision, skill, enthusiasm 
and commitment of their people and at Regus we are fortunate 
to have those in abundance.

OUTLOOK
Growth in revenue and proﬁ tability across the Group was 
substantial in 2005 and we are conﬁ dent that our expansion
programme will continue to strengthen our competitive position.
We are committed to developing a business that can continue 
to deliver attractive rates of proﬁ t growth and cash generation
over the long term. This philosophy underpins our future capital
expenditure and investment plans for the roll-out of new centres.
I look forward to reporting further progress in the year ahead.

JOHN MATTHEWS
CHAIRMAN
20 March 2006 

04

Regus Report & Accounts 2005

Chief Executiveʼs Review

MARK DIXON

OVERVIEW 
It has been an outstanding year for Regus. 
Our excellent ﬁ nancial performance stems from
our continued investment in growing our existing
businesses and our ability to identify and exploit
new opportunities through both organic growth 
and acquisitions. During the course of the year
we have continued to invest in all of our regions
and they have all contributed to this strong set 
of results.

We are constantly looking for ways to expand 
the business responding to the ever-increasing 
trend towards outsourcing by companies both 
large and small. In addition, the growing trend 
towards home, mobile and remote working is 
also driving growth in our business. We will 
constantly evaluate the needs of our customers
and ensure we develop products to meet their 
requirements. 

We continue to implement our disciplined 
expansion strategy, driving the performance of 
our mature business and opening new centres, 
which will increase our market penetration as 
we beneﬁ t from our size and reach.

Continued 
investment 
in growing 
our existing 
businesses.

SPOTLIGHT ON OUR REGIONS

TURN TO PAGES 6 AND 7 TO SEE OUR REVIEW OF THE AMERICAS

TURN TO PAGES 8 AND 9 TO SEE OUR REVIEW OF EMEA

TURN TO PAGES 10 AND 11 TO SEE OUR REVIEW OF ASIA PACIFIC

NEW AND INNOVATIVE PRODUCTS
We are committed to broadening our product offering. During 
2005 we launched Network Access which provides immediate, 
unlimited access to the Regus network of business lounges 
around the world. Pioneered by Regus, Network Access 
comprises a unique membership where members can enjoy 
access to the Regus global network of business centres.  

In response to customer demand, we have created speciﬁ c 
management services tailored to meet individual requirements.
One such product is Netspace, a fully outsourced solution
designed to assist companies in setting up new sales 
operations or overseas ofﬁ ces. Through this service, Regus 
sources, negotiates, acquires and leases the workspace, 
oversees the ﬁ t out and conﬁ gures the workspace to the client’s
needs in addition to manage IT and telecoms procurement 
and installation. 

INVEST IN SYSTEMS AND TECHNOLOGY
The focus of the Regus IT strategy is to provide fast, effective, 
hassle free technology to ensure we as a business operate 
efﬁ ciently and our clients achieve business success. We take 
pride in developing home grown systems that are tailor-made 
to the business requirements. Currently we are implementing 
new systems in the areas of inventory, reservations and billing, 
customer relationship management and ﬁ nancial reporting.

IMPLEMENTING OPERATIONAL EXCELLENCE
Sales and marketing
The Group’s marketing and advertising spend is focused 
geographically and by customer segment. Marketing is 
undertaken in regions and we use a number of channels to 
promote our offer. In November 2005 we signed a signiﬁ cant 
deal with Delta Airlines Crown Room members where 152,000 
members have been provided with Network Access cards to
utilise Regus facilities across the globe. The alliance has proved
extremely popular with over 10% of members activating their
cards and starting to use the Regus network in the ﬁ rst two 
months. We are in negotiations with a number of other airlines 
and look forward to signing further deals in the coming months.

Internet bookings 
During the year we have invested signiﬁ cantly in our website 
application through the launch of multi-language websites. 
Further investment to improve our web presence will continue 
in 2006.

Regus Report & Accounts 2005

05

OPERATIONAL HIGHLIGHTS
AVERAGE AVAILABLE WORKSTATIONS INCREASED BY

32% to 78,657 (2004: 59,451)

AVERAGE OCCUPANCY INCREASED TO

78% (2004: 75%)

AVERAGE REVPAW INCREASED

12% from £5,251 to £5,890

PROFIT FROM OPERATIONS

£47.3m

(2004: £1.2m)

Committed to 
broadening 
our product 
offering.

BRANDS
The Regus network has four brands – the ﬂ agship Regus brand,
HQ, Stratis Business Centres and Business Meeting Places. 
Both location and a diverse product offering are the key 
attributes of all four brands. In 2005 Regus UK was awarded 
the coveted SuperBrand award, alongside household names 
such as Microsoft and IBM. The independently judged award is
given as a tribute to companies that demonstrate exceptional 
brand discipline. Brand standards and superior service are vital
to our success and during the year we have spent signiﬁ cant 
time and resources on training team members to instil an ethos 
of creating a consistent, high standard of service across all 
our centres.

We continue to expand the brand globally, particularly in 
emerging markets such as China and India. We are also 
focused on retaining the integrity of the brand through quality 
and service audits. 

CUSTOMER LOYALTY
Our success is built on customer loyalty. We make a point 
of listening to our clients so we can add value by delivering 
products that meet their needs. We are focused on providing
value added beneﬁ ts to customers, such as utilizing our global 
buying power to secure exclusive deals and discounts for 
our customers and arranging local and global networking 
opportunities that facilitate our clients business growth. The 
latter is facilitated by ClientNet, an innovative online business 
portal and 24/7 global interface that provides our clients with 
the tools to help their businesses grow and network with 
other clients.  

OUR TEAM MEMBERS
Regus has a reputation for attracting and retaining exceptional 
people who are success orientated and driven to help others 
and themselves achieve more. As a consequence 98% of our
customers rate the service we deliver as ‘satisfactory’ or higher.
This has helped deliver today’s results and I would like to thank 
the team and recognise the contribution they have made.

MARK DIXON
CHIEF EXECUTIVE OFFICER
20 March 2006

06

Regus Report & Accounts 2005

AMERICAS

AMERICAS: AT A GLANCE (a)

(cid:1)(cid:54)(cid:13)(cid:44)(cid:1)(cid:20)(cid:13)(cid:202)(cid:32)(cid:49)(cid:31)(cid:9)(cid:13)(cid:44)(cid:202)(cid:34)(cid:19)(cid:202)(cid:55)(cid:34)(cid:44)(cid:28)(cid:45)(cid:47)(cid:1)(cid:47)(cid:22)(cid:34)(cid:32)(cid:45)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:199)(cid:93)(cid:120)(cid:110)(cid:120)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:44)(cid:13)(cid:54)(cid:13)(cid:32)(cid:49)(cid:13)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:10)(cid:13)(cid:32)(cid:47)(cid:44)(cid:13)(cid:202)(cid:10)(cid:34)(cid:32)(cid:47)(cid:44)(cid:22)(cid:9)(cid:49)(cid:47)(cid:22)(cid:34)(cid:32)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:123)(cid:199)(cid:93)(cid:206)(cid:163)(cid:163) (cid:49)(cid:42)(cid:202)(cid:199)(cid:211)(cid:175)

(cid:163)(cid:206)(cid:123)(cid:176)(cid:110)

(cid:211)(cid:200)(cid:163)(cid:176)(cid:200) (cid:49)(cid:42)(cid:202)(cid:153)(cid:123)(cid:175)

(cid:163)(cid:199)(cid:176)(cid:199)

(cid:200)(cid:163)(cid:176)(cid:120) (cid:49)(cid:42)(cid:202)(cid:211)(cid:123)(cid:199)(cid:175)

(a) Owned centres excluding joint ventures and franchises.

REVIEW 
The ﬁ rst full year of operations following the HQ acquisition in 
North America has been very successful. Average occupancy 
increased from 80% to 81% with growth across all countries. 
REVPAW grew by an average of 13% year-on-year to £5,529 
and we have added a total of 31 new centres in the region. The 
average number of available workstations has increased by 72% 
to 47,311 (2004: 27,585), primarily reﬂ ecting the full year impact 
of the HQ acquisition in August 2004.

In terms of marketing, our most recent campaign “That works 
for me” has been targeted at both TV and Radio and has 
been launched to help increase customers awareness of the 
Regus offering. 

“The people make Regus 
successful and fun to work for. 
I am very proud to be a member of 
a company that has such a strong 
team and vision and will ultimately 
change the way people work.”

LORRAINE VEBER, 
GLOBAL DIRECTOR SALES OPERATIONS, REGUS

Regus Report & Accounts 2005

07

08

Regus Report & Accounts 2005

EMEA

EMEA: AT A GLANCE (a)

(cid:1)(cid:54)(cid:13)(cid:44)(cid:1)(cid:20)(cid:13)(cid:202)(cid:32)(cid:49)(cid:31)(cid:9)(cid:13)(cid:44)(cid:202)(cid:34)(cid:19)(cid:202)(cid:55)(cid:34)(cid:44)(cid:28)(cid:45)(cid:47)(cid:1)(cid:47)(cid:22)(cid:34)(cid:32)(cid:45)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:199)(cid:93)(cid:123)(cid:206)(cid:163)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:44)(cid:13)(cid:54)(cid:13)(cid:32)(cid:49)(cid:13)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:10)(cid:13)(cid:32)(cid:47)(cid:44)(cid:13)(cid:202)(cid:10)(cid:34)(cid:32)(cid:47)(cid:44)(cid:22)(cid:9)(cid:49)(cid:47)(cid:22)(cid:34)(cid:32)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:211)(cid:120)(cid:93)(cid:110)(cid:199)(cid:163)

(cid:12)(cid:34)(cid:55)(cid:32)(cid:202)(cid:200)(cid:175)

(cid:163)(cid:123)(cid:153)(cid:176)(cid:200)

(cid:163)(cid:200)(cid:120)(cid:176)(cid:120) (cid:49)(cid:42)(cid:202)(cid:163)(cid:163)(cid:175)

(cid:211)(cid:110)(cid:176)(cid:200)

(cid:123)(cid:206)(cid:176)(cid:211) (cid:49)(cid:42)(cid:202)(cid:120)(cid:163)(cid:175)

(a) Owned centres excluding joint ventures, UK associate and franchises.

REVIEW 
EMEA made strong progress in the year with average 
occupancy increasing from 68% in 2004 to 73% in 2005. 
REVPAW improved 17% year-on-year to £6,397. The average
number of available workstations has decreased by 6% to 
25,871 (2004: 27,431) driven by the closure of underperforming 
workstations in 2004.

We have strengthened our EMEA management team through 
recruiting specialised individuals and restructuring the regional 
organisation.

“Regus gives me a unique 
opportunity to change the way
our customers are working.
It is a great proposition and 
customers are realising the 
opportunities we can offer them 
to help grow their businesses 
efﬁ ciently and without the risks.”

GARRY GÜRTLER, 
REGIONAL GENERAL MANAGER, REGUS

Regus Report & Accounts 2005

09

10

Regus Report & Accounts 2005

ASIA PACIFIC

ASIA PACIFIC: AT A GLANCE (a)

(cid:1)(cid:54)(cid:13)(cid:44)(cid:1)(cid:20)(cid:13)(cid:202)(cid:32)(cid:49)(cid:31)(cid:9)(cid:13)(cid:44)(cid:202)(cid:34)(cid:19)(cid:202)(cid:55)(cid:34)(cid:44)(cid:28)(cid:45)(cid:47)(cid:1)(cid:47)(cid:22)(cid:34)(cid:32)(cid:45)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:123)(cid:93)(cid:123)(cid:206)(cid:120)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:44)(cid:13)(cid:54)(cid:13)(cid:32)(cid:49)(cid:13)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:10)(cid:13)(cid:32)(cid:47)(cid:44)(cid:13)(cid:202)(cid:10)(cid:34)(cid:32)(cid:47)(cid:44)(cid:22)(cid:9)(cid:49)(cid:47)(cid:22)(cid:34)(cid:32)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)
(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:120)(cid:93)(cid:123)(cid:199)(cid:120)

(cid:49)(cid:42)(cid:202)(cid:211)(cid:206)(cid:175)

(cid:211)(cid:120)(cid:176)(cid:211)

(cid:206)(cid:206)(cid:176)(cid:200)

(cid:49)(cid:42)(cid:202)(cid:206)(cid:206)(cid:175)

(cid:120)(cid:176)(cid:163)

(cid:153)(cid:176)(cid:110)

(cid:49)(cid:42)(cid:202)(cid:153)(cid:211)(cid:175)

(a) Owned centres excluding joint ventures and franchises.

REVIEW 
Asia is our smallest region but continues to grow rapidly with a 
33% increase in revenue, driven by strong pricing and occupancy
in Japan, Hong Kong and Singapore. Average occupancy fell 
slightly from 76% to 75% driven by the impact of new centre 
openings with low starting occupancy. REVPAW grew by 8% 
year-on-year to £6,137 and we have added a total of 15 new 
centres. The average number of available workstations has 
increased by 23% to 5,475 (2004: 4,435).

“As a sales orientated person 
I feel immensely inspired by 
the Regus vision, the business 
model and the great concepts of 
changing the way people work. 
The satisfaction comes from not 
just closing a deal or helping 
customers ﬁ nd an ofﬁ ce, but to 
tailor a Regus solution applicable 
to the global needs of different 
corporations.”

ESTHER YEE, 
BUSINESS DEVELOPMENT DIRECTOR, REGUS

Regus Report & Accounts 2005

11

12

Regus Report & Accounts 2005

Financial Review

STEPHEN GLEADLE

INTRODUCTION
2005 saw strong proﬁ t growth driven by the full year impact 
of the HQ acquisition in 2004 and further strengthening of the 
underlying business.

The three key operational drivers all improved. The weighted 
average number of workstations increased by 32% to 78,657 
(which includes the full year impact of HQ). At the same time 
average occupancy increased from 75% to 78% and average 
revenue per occupied workstation (REVPOW) increased by 
8% from £7,001 to £7,551. This results in an increase in our 
key indicator REVPAW of 12% from £5,251 to £5,890. 

Against a relatively ﬁ xed cost base these factors have 
contributed to a £46.1 million increase in proﬁ t from operations 
from £1.2 million in 2004 to £47.3 million in 2005. 

REVENUE AND CENTRE CONTRIBUTION
(BEFORE NON-RECURRING ITEMS)
Revenue for the Group rose 48% to £463.3 million (2004: 
£312.2 million) and centre contribution (before non-recurring 
items) increased 117% to £117.1 million (2004: £54.0 million).

This year-on-year movement can be analysed as follows:

Revenue 
£m 
312.2 
31.9 

2004 
Growth in mature business (a) 
Full year impact of centres
added in 2004 (principally HQ)  111.4 
10.8 
Centres added in 2005 
(3.0) 
Centres closed 
463.3 
2005 

Centre
contribution 
£m 
54.0 
31.3 

30.9 
(0.1) 
1.0 
117.1 

% of
revenue
17
–

–
–
–
25

(a) The mature business deﬁ ned as those centres owned and operated at 

least 12 months prior to the start of the ﬁ nancial year.

The mature business, deﬁ ned as those centres owned and 
operated at least 12 months prior to the start of the ﬁ nancial 
year, increased revenue by £31.9 million driven by occupancy 
and price. This revenue increase was almost completely reﬂ ected
in contribution gains supported both by a fall in depreciation 
and the full year effect of cost savings achieved in the mature 
business following the integration of HQ. 

Centres added in 2004 (principally the HQ acquisition) 
contributed a further £111.4 million of revenue and £30.9 million
of contribution. This was due to both underlying improvements 
in the performance of these sites and the impact of accounting 
for them for a full 12 months. New centres added in 2005, both 
organic and by acquisition, contributed a further £10.8 million 
of revenue and a small loss of contribution of £0.1 million. This 
loss reﬂ ects start up costs and low rates of occupation when 
new centres are opened.

Taking all this together contribution margin improved from 17% 
to 25%.

ADMINISTRATION EXPENSES (BEFORE NON-RECURRING ITEMS)
Administration expenses before non-recurring items have 
increased by £20.7 million to £64.9 million. The full year effect 
of HQ together with other acquisitions contributed £11.0 million 
of the increase. A further £3.3 million relates to the cost of 
enhancing our business support functions and £6.4 million 
was spent on growth related activities.

As a percentage of revenue, administrative expenses (before 
non-recurring items) have fallen slightly to 14.0% of revenue 
(2004: 14.2%).

NON-RECURRING ITEMS
Results for the year include net non-recurring costs of 
£4.9 million (2004: £8.6 million). In 2005 these costs primarily 
relate to the integration of HQ. In 2004 they primarily relate 
to impairment of ﬁ xed assets and provisions on onerous leases.

PROFIT FROM OPERATIONS
Proﬁ t from operations was £47.3 million (2004: £1.2 million), 
representing a margin of 10.2% (2004: 0.3%).

SHARE OF OPERATING LOSS IN JOINT VENTURES AND ASSOCIATE
In the year ended 31 December 2005, the share of joint 
venture losses attributable to Regus reduced to £0.2 million 
(2004: £0.7 million) as they beneﬁ ted from better trading 
conditions. 

Our UK associate reported £0.5 million proﬁ t after tax 
(2004: £7.1 million loss on a restated International Financial 
Reporting Standard (IFRS) basis) in the 12 month period ended
31 December 2005. Our 42% shareholding resulted in a 
£0.2 million proﬁ t (2004: £3.0 million loss) being credited to 
our Group proﬁ t and loss account. Improved pricing and cost 
savings contributed to this performance.

FINANCING COSTS
Financing (or interest) costs can be summarised as follows:

Interest payable 
Interest receivable 
Finance lease interest 
Deferred ﬁ nancing fees 
Total 

2005 
£m 
(5.6) 
2.2 
(0.9) 
(4.3) 
(8.6) 

2004
£m
(2.9)
1.3
(0.5)
(0.3)
(2.4)

Net interest payable has risen following the arrangement 
of a US $155 million loan facility in August 2004 to fund the 
acquisition of HQ. This has been partially offset by increasing 
interest receivable following the Group’s strong cash generation,
which has driven the average free cash balance up from 
£40 million in 2004 to £55 million in 2005.

Underlying ﬁ nance lease costs have fallen year on year by 
£0.8 million after taking account of a one-off adjustment of 
£1.2 million in 2004. This is consistent with the net movement 
of ﬁ nance leases. 

Deferred ﬁ nancing fees relate to the loan arrangement costs 
with respect to the US $155 million facility mentioned above. 
Following the accelerated repayment of the loan and in 
anticipation of the repayment of the remainder early in 2006 
the Group has written off the remaining deferred ﬁ nancing 
fees consistent with the effective rate method.

TAXATION
As the business performance has strengthened, it has become 
necessary to recognise in the proﬁ t and loss account a greater 
proportion of the value of the tax losses that the Group holds. 
Accordingly in 2005, £15.0 million has been credited to the 
proﬁ t and loss account, which has correspondingly increased 
the deferred tax asset in the balance sheet. This has been 
partially offset by an £8.9 million (2004: £0.9 million) tax 
charge which resulted in a net tax credit of £6.1 million (2004: 
£2.6 million) to the proﬁ t and loss account. Therefore as a 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

13

(cid:1)(cid:54)(cid:13)(cid:44)(cid:1)(cid:20)(cid:13)(cid:202)(cid:32)(cid:49)(cid:31)(cid:9)(cid:13)(cid:44)(cid:202)(cid:34)(cid:19)(cid:202)(cid:55)(cid:34)(cid:44)(cid:28)(cid:45)(cid:47)(cid:1)(cid:47)(cid:22)(cid:34)(cid:32)(cid:45)

(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:120)(cid:153)(cid:93)(cid:123)(cid:120)(cid:163)

(cid:199)(cid:110)(cid:93)(cid:200)(cid:120)(cid:199) (cid:49)(cid:42)(cid:202)(cid:206)(cid:211)(cid:175)

(cid:1)(cid:54)(cid:13)(cid:44)(cid:1)(cid:20)(cid:13)(cid:202)(cid:34)(cid:10)(cid:10)(cid:49)(cid:42)(cid:1)(cid:32)(cid:10)(cid:57)(cid:202)(cid:173)(cid:175)(cid:174)

(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:199)(cid:120)

(cid:199)(cid:110)

(cid:44)(cid:13)(cid:54)(cid:42)(cid:34)(cid:55)(cid:202)(cid:173)(cid:203)(cid:174)

(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:44)(cid:13)(cid:54)(cid:42)(cid:1)(cid:55)(cid:202)(cid:173)(cid:203)(cid:174)

(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

(cid:199)(cid:93)(cid:228)(cid:228)(cid:163)

(cid:199)(cid:93)(cid:120)(cid:120)(cid:163) (cid:49)(cid:42)(cid:202)(cid:110)(cid:175)

(cid:120)(cid:93)(cid:211)(cid:120)(cid:163)

(cid:120)(cid:93)(cid:110)(cid:153)(cid:228) (cid:49)(cid:42)(cid:202)(cid:163)(cid:211)(cid:175)

consequence, despite being proﬁ table, the Group has a net 
tax credit for the year to 31 December 2005. However, on 
a cash tax basis the Group paid £2.6 million of tax across a 
small number of countries. This represents approximately 7% 
of proﬁ t before tax.

As at 31 December 2005, the Group had £270.2 million of tax 
losses to carry forward against future overseas corporation tax 
liabilities, of which £172 million are in the US. Moving forward 
the cash tax rate will rise as losses across the Group are 
progressively utilised. The accounting rate will stay low or 
negative as tax losses are fully recognised through the proﬁ t 
and loss and then are expected to rise rapidly towards a 
normalised rate from ﬁ scal year 2007/08.

EARNINGS
Basic EPS for the year rose to 4.5p (2004: 0.3p loss). This is 
based on weighted average number of shares of 984,792,040 
(2004: 859,702,000).

CASHFLOW
Strong operating cash ﬂ ow is a prime feature of the Group. 
Driven by the improvement in proﬁ t from operations, operating
cash ﬂ ow increased by £57.1 million to £78.1 million (2004: 
£21.0 million). 

The Group’s cash ﬂ ow statement has been summarised below. 

Operating cash ﬂ ow 
Tax and net interest paid   
Maintenance capex 
Free cash ﬂ ow 
New centre openings 
Acquisitions and investments 
Financing 
Other 
Change in cash 
Opening cash 
Closing cash 

2005 
£m 
78.1 
(6.9) 
(6.4) 
64.8 
(11.1) 
(16.8) 
(47.5) 
2.4 
(8.2) 
82.3 
74.1 

2004
£m
21.0
(3.2)
(3.0)
14.8
(2.3)
(162.9)
171.4
(23.7)
(2.7)
85.0
82.3

The strong cash performance has enabled the Group both to 
invest in growth and repay debt early. Speciﬁ cally, during the 
year 24 new centres were opened at a cost of £11.1 million. 
In addition a further 11 businesses (35 centres) were acquired 
for a total cash consideration of £16.8 million. In addition 
£39.4 million of the term debt and £8.1 million of debt associated
with ﬁ nance leases was repaid. 

Following the above the Group’s net cash position can be 
analysed as follows:

Cash balance 
Term loan 
Other loans and overdrafts 
Finance leases 
Net funds 

2005 
£m 
74.1 
(22.5) 
(7.4) 
(8.2) 
36.0 

2004
£m
82.3
(55.8)
(8.3)
(13.2)
5.0

Note: Of the cash balance, £19.1 million in 2005 and £18.1 million in 2004 
served as collateral against certain obligations of the Group.

STEPHEN GLEADLE
CHIEF FINANCIAL OFFICER
20 March 2006

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14

Regus Report & Accounts 2005

BOARD OF DIRECTORS

MARK DIXON
CHIEF EXECUTIVE OFFICER
Chief Executive and Founder, Mark (46) is one of Europe’s 
best-known entrepreneurs. 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 
awards for enterprise, Mark’s vision of the future of work has 
revolutionised the way business approaches its property needs.

STEPHEN GLEADLE
CHIEF FINANCIAL OFFICER
Stephen (47) joined Regus as Chief Financial Ofﬁ cer on 
31 October 2005. Stephen was Group Financial Controller of 
Tarmac plc, after which he was Finance Director of Synstar plc
and of lastminute.com plc. Stephen replaced Rudy Lobo 
who has held the post since October 2003. Rudy has taken 
up the role of Chief Operating Ofﬁ cer. Stephen is a Chartered 
Accountant. 

RUDY LOBO
CHIEF OPERATING OFFICER
Rudy (50) joined Regus in 1992 as Chief Financial Ofﬁ cer 
and reassumed the role in October 2003. In October 2005 
he relinquished this role to Stephen Gleadle and took up the 
role of Chief Operating Ofﬁ cer. In this role, he is responsible 
for commercial operations, human resources and for directing 
Regus’ IT and e-business strategy. Rudy is also a Director and 
Trustee of the charity Great Causes Ltd. Previously, Rudy was 
Head of Finance and Group Company Secretary of Medicom 
International Ltd, a publisher of medical journals. Rudy is a 
Certiﬁ ed Accountant.  

BOARD COMMITTEES
AUDIT COMMITTEE
Roger Orf Chairman
Martin Robinson
Stephen East

NOMINATION COMMITTEE
John Matthews Chairman
Martin Robinson
Roger Orf
Stephen East

REMUNERATION COMMITTEE
Martin Robinson Chairman
Roger Orf
Stephen East

Regus Report & Accounts 2005

15

JOHN MATTHEWS
CHAIRMAN
John (61) joined Regus in 1995 as a non-executive director and
was appointed Chairman in July 2002. He is currently Chairman
of Crest Nicholson plc and an independent director of Center 
Parcs (UK) Group plc, Diploma plc, Rotork plc and SDL plc. 
A Chartered Accountant, he was previously Managing Director 
of County Natwest and Deputy Chairman as well as Deputy 
Chief Executive of Beazer plc, the international aggregates, 
construction and housing group. John is Chairman of the 
Nomination Committee.

ROGER ORF
INDEPENDENT SENIOR NON-EXECUTIVE DIRECTOR
Roger (53) was appointed a non-executive director of Regus 
in 1998 and he is Chairman of the Audit Committee. Roger 
is Head of European Property Investments for Citigroup. 
He was formerly Head of European Operations for Lone Star, 
an investment company. Prior to this, Roger made investments 
for his own account, managed investments on behalf of Apollo 
Real Estate Advisors and was in charge of Goldman Sachs 
European real estate department.

STEPHEN EAST
INDEPENDENT NON-EXECUTIVE DIRECTOR
Stephen (48) was appointed to the Board as a non-executive 
director on 11 March 2005. Stephen was formerly Finance 
Director of MEPC plc and is currently Finance Director at 
Woolworths Group plc. Prior to that he had run his own 
consultancy business and held senior positions with Redland 
PLC. He is a non-executive director of Star Energy Group plc. 
He has been appointed as a member of the Audit, Remuneration
and Nomination Committees. Stephen is a Chartered Accountant
and Deputy President of the Association of Corporate Treasurers.

MARTIN ROBINSON
INDEPENDENT NON-EXECUTIVE DIRECTOR
Martin (43) joined the Board of Regus in August 2002 and is 
Chairman of the Remuneration Committee. Martin is Chairman
of Holmes Place and is also a Director of the Supervisory Board
of EuroDisney SCA. He has held senior management positions 
with Scottish and Newcastle plc and Sara Lee Corporation 
and worked as a Management Consultant for four years with 
McKinsey & Co Inc.

16

Regus Report & Accounts 2005

DIRECTORS’ REPORT

The directors present their report and the audited ﬁ nancial 
statements of Regus Group plc for the year ended 
31 December 2005. 

PRINCIPAL ACTIVITY AND BUSINESS REVIEW
The Group is the world’s leading supplier of global ofﬁ ce 
outsourcing solutions. The Group’s trading results are set out in
the ﬁ nancial statements on pages 30 to 33. Details of the Group’s
future prospects and review of operations are described in 
the Chairman’s Statement, Chief Executive’s Review and 
Operational and Financial Review on pages 2 to 13.

RESULTS AND DIVIDENDS
Proﬁ t for the year before tax was £38.7 million (2004: £4.9 million
loss), which after adding back non-recurring items of £4.9 million
(2004: £8.6 million) amounted to a proﬁ t of £43.6 million (2004: 
£3.7 million).

The directors do not recommend the payment of a dividend. 

DIRECTORS AND DIRECTORS’ INTERESTS
The directors who held ofﬁ ce since the last Annual Report were:

Executive directors
Mark Dixon 
Rudy Lobo 
Stephen Gleadle (appointed 31 October 2005)

Non-executive directors
John Matthews 
Roger Orf 
Martin Robinson
Stephen East 

Biographical details for all current directors are shown on 
pages 14 and 15.

Details of the directors’ interests and shareholdings are given 
in the Remuneration Report on pages 22 to 27.

CORPORATE AND SOCIAL RESPONSIBILITY 
The Board recognises its responsibilities in respect of social, 
environmental and ethical (SEE) matters. The directors 
continually monitor risks to its businesses, including SEE 
risks, which may impact the Group’s short and long term 
value. During 2005 no signiﬁ cant risks were identiﬁ ed.

PEOPLE AND CULTURE
Employee involvement
It is the Group’s policy to communicate with all employees and 
to encourage employees to contribute to the management of 
the business. Communication with employees is carried out 
through the Company’s intranet, employee newsletters, brieﬁ ng
meetings conducted by senior management and formal and 
informal discussions. Interim and Annual Reports are available 
to all staff. Informal communication is further facilitated by the 
Group’s regional organisational structure. 

The workplace
Empowered employees are key to delivering value for the 
organisation. Clear accountabilities have been established and 
reward strategies have been aligned with ﬁ nancial and non-
ﬁ nancial performance measures. In our centres we operate 

ﬂ exible working practices which give us the edge in retaining 
experienced and well trained staff and allows us to align our 
team members’ hours to the evolving needs of the business 
and our customer requirements.

Equal opportunity
The Group endorses and supports the principal of equal
employment opportunity. It is the policy of the Group to provide
equal employment opportunity to all qualiﬁ ed individuals, which
ensures that all employment decisions are made, subject 
to legal obligations, on a non-discriminatory basis. Due 
consideration is given to the recruitment, promotion, training 
and working environment of all staff including those with 
disabilities. It is the Group’s policy to encourage the training 
and further development of all its employees where this is of 
beneﬁ t to the individual and to the Group.

HEALTH AND SAFETY
The Board recognises the importance of maintaining 
high standards of health and safety. This means taking all 
reasonable and practicable steps to safeguard the health, safety
and welfare of our employees, customers, visitors and other 
persons who may be affected by our activities. The effective 
management of health and safety is a legal issue and it is also 
business critical as it effects reputation, investor conﬁ dence, 
supplier relationships, staff morale and overall proﬁ tability.

In order to meet these responsibilities the Group:

(cid:127)  Assesses the risks to health and safety
(cid:127)  Implements safe systems at work 
(cid:127)  Provides information, instruction and training
(cid:127)  Establishes and maintain emergency procedures
(cid:127)  Regularly reviews health and safety policies and procedures.

We are proactive in our approach to health and safety by 
monitoring proposed changes in legislation and implementing 
policies accordingly.

THE ENVIRONMENT
The Group does not operate in a business sector which causes
signiﬁ cant pollution but the Board recognises that the business
does have an impact on the environment. The Board is 
committed to managing and improving the ways in which 
our activities affect the environment by: 

(cid:127)  Optimising the use of energy – with over 700 locations it 
is important that we continually identify ways to improve 

  energy efﬁ ciency across all our operations. We have 

implemented certain initiatives to reduce our energy use. 
  These include, among others, resetting boiler controls, 
  amending time settings for air conditioning and using timing 
  switches for hot water supply. 

(cid:127)  Encouraging the re-use and recycling of paper and toner 
  cartridges, mixed ofﬁ ce paper, packaging, bottles, 
  aluminium cans and plastic cups.

POLITICAL AND CHARITABLE DONATIONS
The Group made no charitable donations during the year 
(2004: £nil). It is the Group’s policy not to make political 
donations either in the UK or overseas.

 
 
Regus Report & Accounts 2005

17

POLICY AND PRACTICE ON PAYMENT OF CREDITORS
The Group does not follow a universal code dealing speciﬁ cally
with payments to suppliers but, where appropriate, our practice
is to:

(cid:127)  Agree the terms of payment upfront with the supplier
(cid:127)  Ensure that suppliers are made aware of these terms 
  of payment
(cid:127)  Pay in accordance with contractual and other legal 
  obligations.

At 31 December 2005, the number of creditor days outstanding
for the Group was 27 days (2004: 35 days) and the Company, 
nil days (2004: nil days).

GOING CONCERN
The directors, having made appropriate enquiries, have a 
reasonable expectation that the Group and the Company have 
adequate resources to continue in operational existence for 
the foreseeable future. For this reason they continue to adopt 
the going concern basis in preparing the Accounts on pages 
30 to 62.

SUBSTANTIAL INTERESTS
As at 20 March 2006, the Company has been notiﬁ ed of the 
following interests held in more than 3% of the issued share 
capital of the Company.

Holder
Maxon Investments BV (a) 
Merrill Lynch Investment
Managers (UK) 
Artemis Investment Managers 
Standard Life Investment
Management 
M & G Investment Management  
Morley Fund Management 

Number of 
ordinary shares 

% of issued
shared capital

331,958,286 

33.71

91,167,220 
81,718,211 

66,761,400 
60,958,778 
30,233,099 

9.26
8.30

6.78
6.19
3.07

(a) Mark Dixon owns the 100% interest in Maxon.

AUDITORS
In accordance with 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 (AGM). 

On behalf of the Board

TIM REGAN
COMPANY SECRETARY
20 March 2006

 
 
 
 
18

Regus Report & Accounts 2005

CORPORATE GOVERNANCE

The Board is committed to high standards of corporate 
governance and has applied the principles of corporate 
governance recommended in Section 1 of the Combined Code 
published in July 2003 (the Combined Code) and applicable 
to all reporting periods beginning after 1 November 2003. 

COMPLIANCE WITH THE NEW COMBINED CODE
The Company has complied with the provisions set out in 
section 1 of the Combined Code throughout the year ended 
31 December 2005, with the exception of the following:

(cid:127)  Provision D.1.1 – The senior independent non-executive 
  director, Roger Orf does not have regular meetings with 
  major external shareholders. However he is available to 
  meet them as requested. 

THE BOARD
The Board is chaired by John Matthews. At the year-end the 
Board consisted of three executive directors and four non-
executive directors. Biographical details of the directors are 
set out on pages 14 and 15.

DIVISION OF RESPONSIBILITIES
There is a clear division of responsibilities between the Chairman
and the Chief Executive. John Matthews is responsible for 
leadership of the Board, setting its agenda and monitoring 
its effectiveness. He ensures effective communication with 
shareholders and that the Board is aware of the views of major 
shareholders. He facilitates both the contribution of the non-
executive directors and constructive relations between the 
executive directors and non-executive directors. He ensures 
that the Chief Executive develops a strategy which is supported
by the Board as a whole. Mark Dixon is responsible for 
formulating strategy and for its delivery once agreed by the 
Board. He creates a framework of strategy, values, organisation
and objectives to ensure the successful delivery of key targets, 
and allocates decision making and responsibilities accordingly.

The Chairman participates in investor meetings and makes 
himself available for questions, in person, at the time of major 
announcements. This direct contact, together with feedback 
from management and from the Company’s two in-house 
brokers (Dresdner Kleinwort Wasserstein and Credit Suisse 
First Boston), is used to brief the Board. The Board considers 
it appropriate for the Chairman to be the main conduit with 
investors, rather than the senior independent non-executive 
director. The Chairman regularly updates the Board and 
particularly the senior independent non-executive director on 
the results of his meetings and the opinions of investors. On 
this basis, Regus considers that the senior independent non-
executive director is able to gain full awareness of the issues 
and concerns of major shareholders. Notwithstanding this 
policy, all directors have a standing invitation to participate in 
meetings with investors.

ROLE OF THE BOARD
The Board considers that its primary role is to provide leadership
and to develop a coherent long term strategy for the Group. 
The Board approves the corporate plan and the annual budget
and reviews performance against targets at every meeting.
Through the Audit Committee, the directors ensure the integrity
of ﬁ nancial information, the effectiveness of ﬁ nancial controls 
and the internal control and risk management system. 

The Board has delegated authority to the Remuneration 
Committee to set the remuneration policy for directors and 
senior management. The Nomination Committee recommends 
the appointment of Board directors and has responsibility 
for succession planning at Board level. The various Board 
Committees have authority to make decisions in their areas of 
expertise.

Matters reserved for the Board are considered by the Board 
and no one individual has unrestricted powers of decision. 
There are well documented procedures and controls, including 
a schedule of matters that require the Board’s speciﬁ c approval.
This provides the framework for decisions to be taken by the 
Board and those that are delegated to Committees of the 
Board. All capital expenditure projects over £1 million require 
Board approval. 

The Chairman and Company Secretary are responsible for 
ensuring all directors are properly briefed on issues arising at 
Board meetings and that they have full and timely access to 
relevant information.

All directors, both executive and non-executive, are encouraged
to request inclusion of any unresolved concerns that they may 
have in the Board minutes. 

All directors have access to the advice and services of the 
Company Secretary, who is responsible for ensuring that 
Board procedures, corporate governance and regulatory 
compliance are followed and complied with. Should a director 
request independent professional advice to carry out his duties,
such advice is available to him at the Company’s expense.

The Group’s insurance programme is reviewed annually and 
appropriate insurance cover is obtained to protect the directors
and senior management in the event of a claim being brought 
against any of them in their capacity as directors and ofﬁ cers 
of the Company.

ATTENDANCE AT MEETINGS
There were ﬁ ve scheduled Board meetings during 2005 and 
seven additional meetings to consider matters, which were 
time critical and not appropriate to be dealt with by way of 
written resolution. 

The number of meetings of the Board and Committees and 
individual attendance by the directors are shown below.

Total meetings 
Executive
Mark Dixon 
Stephen Gleadle (a) 
Rudy Lobo 
Non-executive
John Matthews (b) 
Roger Orf 
Martin Robinson 
Stephen East (c) 

Main 
Board 
12 

Audit  Remuneration 
Committee 
5 

Committee 
3 

Nomination
Committee
2

11 
2 
11 

10 
9 
11 
9 

– 
– 
– 

1 
3 
3 
1 

– 
– 
– 

1 
3 
5 
4 

–
–
–

2
2
2
1

(a) Appointed 31 October 2005.
(b) Resigned from Audit and Remuneration Committees 11 March 2005.
(c) Appointed 11 March 2005.

 
 
 
 
Regus Report & Accounts 2005

19

INDEPENDENCE AND NON-EXECUTIVE DIRECTORS
The Chairman is not deemed to be independent because he 
has been a non-executive director for more than ten years. All 
of the other non-executive directors who have served during 
the year are considered to be independent. The non-executive
directors bring wide and varied commercial experience to 
Board and Committee deliberations. They are appointed for 
an initial three year term, subject to election by shareholders 
at the ﬁ rst AGM after their appointment. 

TRAINING AND PROFESSIONAL DEVELOPMENT
Appropriate training is made available for all new directors to
assist them in the discharge of their responsibilities. Subsequent
to joining, Stephen Gleadle completed a formal induction 
programme including centre visits and meetings with senior 
management and external advisers. Training is provided on 
an ongoing basis to meet particular needs with the emphasis 
on governance and accounting developments. During the 
year the Company Secretary, Tim Regan, provided updates 
to the Board on relevant governance matters, whilst the Audit 
Committee regularly considers new accounting developments 
through presentations from management and the external 
auditors. The Board programme includes presentations from 
management at every meeting which, together with site visits, 
increases the non-executive directors understanding of the 
business and sector. 

PERFORMANCE EVALUATION
During 2005, a formal annual performance evaluation has been
conducted in respect of the Board and its Committees by means
of an internally produced written questionnaire. The results of 
these evaluations were presented to the Board and actions to 
improve the effectiveness of the Board and the Committees 
were agreed and have been implemented accordingly. Fellow 
directors conducted a performance evaluation of each of 
the directors. The results of this process were collated and 
presented by the Chairman in one to one meetings. Evaluation 
of the Chairman’s performance was collated by Roger Orf. 

RE-ELECTION OF THE BOARD
All directors submit themselves for re-election by shareholders 
at least every three years and directors appointed during the 
period are required to seek re-election at the next AGM.

Non-executive directors are subject to the re-election 
requirements and serve the Company under letters of 
appointment, which have an initial three year term. 

COMPANY SECRETARY
The Company Secretary, Tim Regan, is responsible for advising
the Board, through the Chairman, on all governance matters. 
The appointment and removal of the Company Secretary is a 
matter reserved for the Board. 

BOARD COMMITTEES AND TERMS OF REFERENCE
The Board has delegated certain of its governance 
responsibilities to the Audit, Nomination and Remuneration 
Committees. The Company Secretary acts as secretary to 
all of the Board Committees and minutes of meetings are 
circulated to all Board members. The terms of reference of 
these Committees have been documented and approved 
by the Board.

Audit Committee
Roger Orf Chairman
Martin Robinson 
Stephen East 

The Board has delegated the responsibility for applying an 
effective system of internal control and compliance, accurate 
external ﬁ nancial reporting, fulﬁ lling its obligations under law 
and the Combined Code, and managing the relationship with 
the Company’s external auditors to the Audit Committee. The 
Committee consists entirely of non-executive directors.

The Audit Committee meets at least three times a year with 
representatives of the external auditors. At the request of the 
Chairman, the Chief Financial Ofﬁ cer, the Company Secretary 
and the Head of Internal Audit attend each meeting.

  SUMMARY TERMS OF REFERENCE:

  Financial Reporting – provide support to the Board 
  by monitoring the integrity of and ensuring that the 
  published ﬁ nancial statements of the Group and any 

formal announcements relating to the Company’s ﬁ nancial 

  performance comply fully with the relevant statutes and 
  accounting standards. 

Internal control and risk systems – review the 

  effectiveness of the Group’s internal controls and risk 
  management systems.

Internal audit – monitor and review the annual internal 
  audit programme ensuring that the internal audit function 
is adequately resourced and free from management 
restrictions, review and monitor responses to the ﬁ ndings 

  and recommendations of the internal auditors.

  External audit – oversee the relationship with the 
  external auditor including (but not limited to) approval of 

their remuneration, approval of their terms of engagement, 

  assessing annually their independence and objectivity.

  Employee concerns – the Committee reviews the 
  Company’s arrangements under which employees may 
in conﬁ dence raise any concerns regarding possible 
  wrongdoing in ﬁ nancial reporting or other matters. The 
  Committee ensures that these arrangements allow 
  proportionate and independent investigation and 
  appropriate follow up action. 

  THE FULL TERMS OF REFERENCE CAN BE FOUND ON
  WWW.REGUS.COM

External auditors – KPMG
The Committee advises the Board on the appointment, 
re-appointment, removal and remuneration of external auditors.
KPMG Audit Plc were the Company’s auditors for the year 
ended 31 December 2005. For 2006, the Committee has 
recommended to the Board that a resolution to re-appoint 
KPMG Audit Plc as the Company’s auditors be proposed at the
2006 AGM. The Committee will continue to keep under review 
the independence and objectivity of the external auditors, the 
effectiveness of the audit process and the rotation of the lead 
audit partner.

 
 
 
 
 
 
 
20

Regus Report & Accounts 2005

CORPORATE GOVERNANCE 

The Committee also meets independently with the Company’s
auditors and with the Head of Internal Audit to informally discuss
matters of interest.

Policy on non-audit services
The scope and extent of non-audit work undertaken by
the Company’s auditor is monitored by and, above certain 
thresholds, requires prior approval from the Committee to 
ensure that the provision of non-audit services does not impair 
their independence or objectivity. During the year, KPMG
performed due diligence work on certain acquisitions. KPMG 
is prohibited from providing services that would be considered
to jeopardise their independence such as book keeping services,
valuations and system design.

Nomination Committee
John Matthews Chairman
Martin Robinson
Roger Orf
Stephen East 

  SUMMARY TERMS OF REFERENCE:

  Board appointment and composition – to regularly 

review the structure, size and composition of the Board 
  and make recommendations on the role and nomination of 
  directors for appointment and reappointment to the Board 
for the purpose of ensuring a balanced Board in respect of 

  skills, knowledge and experience.

  Board Committees – to make recommendations to 

the Board in relation to the suitability of candidates for 
  membership of the Audit and Remuneration Committees.
  The appointment and removal of directors are matters 

reserved for the full Board.

  Board effectiveness – to assess the role of Chairman and 
  Chief Executive and make appropriate recommendations to 

the Board.

  Board performance – assist the Chairman with the annual 
  performance evaluation to assess the overall and individual 
  performance and effectiveness of the Board. 

  Leadership – to remain fully informed about strategic issues
  and commercial matters affecting the Company and to 
  keep under review the leadership needs of the organisation 

to enable it to compete effectively. 

  THE FULL TERMS OF REFERENCE CAN BE FOUND ON
  WWW.REGUS.COM

The Committee meets as required and met during the year to 
consider the appointment of a new Chief Financial Ofﬁ cer to 
replace Rudy Lobo. Spencer Stuart were appointed to provide 
assistance in the search and selection procedure of a suitable 
candidate. Following a rigorous selection process the Committee
recommended to the Board the appointment of Stephen Gleadle
who was duly appointed on the 31 October 2005.

Remuneration Committee
Martin Robinson Chairman
Roger Orf
Stephen East 

The Remuneration Report is set out on pages 22 to 27. 

Disclosure Committee
The Disclosure Committee comprises Rudy Lobo (Chairman), 
Mark Dixon, Stephen Gleadle, Tim Regan and Robert Blyth 
(Head of Internal Audit). The Committee meets as required 
to deal with all matters concerning public announcements of 
the Company and the Company’s compliance with disclosure 
controls and procedures.

DIALOGUE WITH SHAREHOLDERS
Regus reports formally to shareholders twice a year, with 
the interim results announced normally in September and the 
preliminary ﬁ nal results announced normally in March. There 
are programmes for the Chief Executive and Chief Financial 
Ofﬁ cer to give presentations of these results to the Company’s
institutional shareholders, analysts and media in London and 
other locations. The Chief Executive and Chief Financial Ofﬁ cer 
maintain a close dialogue with institutional shareholders on the 
Company’s performance, governance, plans and objectives. 
These meetings also serve to develop an ongoing understanding
of the views and any concerns of the Company’s major 
shareholders. The non-executive directors are given regular 
updates as to the views of the institutional shareholders and 
the Chairman is available to meet with these shareholders on 
request. The principal communication with private shareholders
is through the Annual Report, the Interim Report and the AGM.

AGM
The AGM is held normally in May in London and is attended, 
other than in exceptional circumstances, by all members of the 
Board. Shareholders are invited to ask questions and are given 
the opportunity to meet the directors informally afterwards.

Notice of the AGM, together with any related documents are 
mailed to shareholders at least 20 working days before the 
meeting and separate resolutions are proposed on each issue.  
The level of proxy votes cast and the balance for and against 
each resolution, together with the level of abstentions, if any, 
are announced to the meeting following voting by a show 
of hands.

FINANCIAL AND OTHER INFORMATION IS MADE AVAILABLE ON 
WWW.REGUS.COM

INTERNAL CONTROL
The Board has ultimate responsibility for the system of internal 
control operating throughout the Group and for reviewing its 
effectiveness. 

No system of internal control can provide absolute assurance 
against material misstatement or loss. The Group’s system is 
designed to manage rather than eliminate the risk of failure to 
achieve business objectives, and can only provide reasonable 
assurance that potential problems will normally be prevented 
or will be detected in a timely manner for appropriate action.

 
 
 
 
 
 
Regus Report & Accounts 2005

21

To underpin the effectiveness of controls, it is the Group’s policy
to recruit and develop appropriately skilled management and 
staff of high calibre, integrity and with appropriate disciplines.

High standards of business ethics and compliance with laws, 
regulations and internal policies are demanded from staff at 
all levels. 

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 identiﬁ cation of signiﬁ cant
operational risks and mitigating control processes.

A series of internal audit reviews of country/regions covering
the ﬁ nancial, operational and overhead functions. These 
reviews are based on the identiﬁ ed risks. The ﬁ ndings and 
recommendations of each review are reported to management 
and the Audit Committee.

System of reporting the effectiveness of key ﬁ nancial, 
operational and compliance controls. This is based on a 
comprehensive internal control self-assessment questionnaire 
collated and reviewed by Internal Audit. Results and action 
plans are reviewed by senior management and summarised 
for the Board.

The Company has had procedures in place throughout the 
year, and up to 20 March 2006, the date of approval of this 
Annual Report, which is in accordance with the Internal Control 
Guidance for Directors on the Combined Code.

The Board conducts regular reviews of the Group’s strategic 
direction. Country and regional strategic objectives, quarterly 
plans and performance targets for 2006 have been set by the 
executive directors and are regularly reviewed by the main 
Board in the context of the Group’s overall objectives. 

There is an ongoing process for identifying, evaluating and 
managing the risks faced by the Group. Major business risks 
and their ﬁ nancial 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/beneﬁ t, materiality and the likelihood of risks crystallising. 
Key risks and actions to mitigate those risks are regularly 
considered by the Board and are formally reviewed and 
approved by the Board annually.

The control framework and key procedures, which were 
in place throughout the year ended 31 December 2005, 
comprise the following:

The Board normally meets every six months together with 
certain other senior executives to consider Group ﬁ nancial 
performance, business development and Group management
issues. The directors and ofﬁ cers of Group subsidiaries 
comprise executives with appropriate functional responsibilities.
Executives of key operating companies meet regularly to 
manage their respective businesses. 

Country and regional budgets, containing ﬁ nancial and operating
targets, capital expenditure proposals and performance 
indicators, are reviewed by the Group executive and must 
support regional business strategies. The consolidated Group 
budget is approved by the Board.

Operational and ﬁ nancial reports are prepared and distributed 
to the Board on a monthly basis. Actual results are reviewed 
against budget 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 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, capital expenditure and asset disposals.

Key policies and control procedures (including ﬁ nance, 
operations, and health and safety) are documented in manuals 
having Group-wide application. These are available to all staff 
on the Group’s intranet system.

The Group’s internal audit remit is to report to the Audit 
Committee on the Group’s worldwide operations. Its resourcing
programme of work and ﬁ ndings, including any material 
control issues and resultant actions, are reviewed by the 
Audit Committee.

22

Regus Report & Accounts 2005

REMUNERATION REPORT

The report has been prepared by the Remuneration Committee
(the “Committee”) of Regus Group plc and approved by the 
Board of Regus Group plc. The report complies with the UK 
Directors’ Remuneration Report Regulations 2002 and, in 
compliance with such regulations, a separate resolution 
approving this report is being put to shareholders at this 
years AGM.

Information relating to the emoluments and pension 
contributions of the directors, directors’ interests in the 
Company’s shares and under Employee Share Plans has 
been audited.

UNAUDITED INFORMATION
MEMBERSHIP AND RESPONSIBILITIES OF THE REMUNERATION 
COMMITTEE 
The members of the Remuneration Committee throughout 
the year were the Company’s independent non-executive 
directors, Roger Orf, Stephen East and, the Chairman of the 
Committee, Martin Robinson.

The Committee met ﬁ ve times during the year.

The Committee has responsibility for making recommendations
to the Board on the compensation of senior executives and 
determining, within agreed terms of reference, the speciﬁ c 
remuneration packages for each of the executive directors.

The Board has delegated to the Remuneration Committee 
responsibility to:

(cid:127)  Make recommendations to the Board in respect of 

COMPLIANCE WITH THE BEST PRACTICE PROVISIONS
In accordance with the Board’s commitment to maintaining 
high standards of Corporate Governance, the Committee has 
complied during the year with all remuneration related aspects 
of the Code during the year. 

REMUNERATION POLICY
The principal objective of the Committee’s remuneration policy 
is to provide remuneration packages that will attract, retain and 
motivate people of the highest calibre and experience needed 
to shape and execute the Company’s strategy and to deliver 
shareholder value. 

The guiding principles which the Committee has regard to and 
balances as far as is practicable, in determining policy and 
objectives for 2005 and future years are:

(cid:127)  to ensure that it maintains a competitive package of total 
  compensation, commensurate with comparable packages 
  available with other similar companies operating in similar 
  markets (the Comparator Group);

(cid:127)  to make a signiﬁ cant percentage of potential maximum 
reward conditional on short and long term performance;

(cid:127)  to ensure that the interests of the executives are closely 
  aligned with those of the Company’s shareholders through 

the provision of share incentives;

(cid:127)  to link reward to the satisfaction of targeted objectives which
  are the main drivers of shareholder value; and

remuneration policy for the executive directors and the 

(cid:127)  to be sensitive in determining executive directors’ 

  Group’s other senior management.

(cid:127)  Approve any new service agreement entered into between 

the Group and any executive director.

(cid:127)  Make recommendations to the Board on the implementation
  of the Group’s performance bonus schemes and share 
  schemes.

The Committee has appointed Halliwell Consulting, an 
external consultancy which has wide experience of executive 
remuneration in UK listed companies, to advise in developing 
its performance related remuneration policy. Halliwell Consulting
has no other connection with the Company.

The Committee has also sought advice from the Company’s 
solicitors, Slaughter and May, in connection with the terms of 
service contracts for executive directors, other members of 
senior management and in relation to the operation of the 
Regus Group plc Co-Investment Plan (the “CIP”) described 
later in this report.

Directors are not permitted, under Regus Group plc’s Articles 
of Association, to vote on their own terms and conditions 
of remuneration. 

The members of the Remuneration Committee attend the 
Company’s AGM and are available to answer shareholders’ 
questions about directors’ remuneration. 

remuneration to pay and employment conditions around 
the Group.

In order to achieve the above policy, the Committee sets the 
ﬁ xed elements of the executives’ compensation package at 
a conservative level, taking into account the median level of 
salaries in the Comparator Group. This is balanced with the 
opportunity for overall compensation packages to be in the 
upper quartile of the Comparator Group dependent upon 
the degree to which the associated stringent performance 
conditions attached to the short and long term incentive 
schemes have been satisﬁ ed.

The tables below illustrate the balance between ﬁ xed and 
performance related (variable) compensation and the total 
expected value of the remuneration package for each executive
director for the year ended 31 December 2005 (Stephen 
Gleadle’s employment having commenced on 31 October 2005):

Mark Dixon 
Chief Executive Ofﬁ cer 
% 
57.61 
42.39 

Fixed 
Variable 

Rudy Lobo 
Chief Operating Ofﬁ cer 
% 
53.72 
46.28 

Stephen Gleadle
Chief Financial Ofﬁ cer
%
10.26
89.74

 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

23

(cid:9)(cid:62)(cid:143)(cid:62)(cid:152)(cid:86)(cid:105)(cid:202)(cid:76)(cid:105)(cid:204)(cid:220)(cid:105)(cid:105)(cid:152)(cid:202)(cid:118)(cid:136)(cid:221)(cid:105)(cid:96)(cid:202)(cid:62)(cid:152)(cid:96)(cid:202)(cid:171)(cid:105)(cid:192)(cid:118)(cid:156)(cid:192)(cid:147)(cid:62)(cid:152)(cid:86)(cid:105)(cid:202)(cid:76)(cid:62)(cid:195)(cid:105)(cid:96)
(cid:86)(cid:156)(cid:147)(cid:171)(cid:105)(cid:152)(cid:195)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:173)(cid:203)(cid:147)(cid:174)

(cid:19)(cid:136)(cid:221)(cid:105)(cid:96)(cid:202)(cid:86)(cid:156)(cid:147)(cid:171)(cid:105)(cid:152)(cid:195)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)

(cid:54)(cid:62)(cid:192)(cid:136)(cid:62)(cid:76)(cid:143)(cid:105)(cid:202)(cid:86)(cid:156)(cid:147)(cid:171)(cid:105)(cid:152)(cid:195)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)

(cid:45)(cid:204)(cid:105)(cid:171)(cid:133)(cid:105)(cid:152)(cid:202)(cid:20)(cid:143)(cid:105)(cid:62)(cid:96)(cid:143)(cid:105)

(cid:44)(cid:213)(cid:96)(cid:222)(cid:202)(cid:29)(cid:156)(cid:76)(cid:156)

(cid:31)(cid:62)(cid:192)(cid:142)(cid:202)(cid:12)(cid:136)(cid:221)(cid:156)(cid:152)

(cid:228)

(cid:228)(cid:176)(cid:163)

(cid:228)(cid:176)(cid:211)

(cid:228)(cid:176)(cid:206)

(cid:228)(cid:176)(cid:123)

(cid:228)(cid:176)(cid:120)

(cid:228)(cid:176)(cid:200)

(cid:228)(cid:176)(cid:199)

(cid:228)(cid:176)(cid:110)

(cid:228)(cid:176)(cid:153)

(cid:163)(cid:176)(cid:228)

Fixed compensation comprises salary, beneﬁ ts and pension 
contributions. Variable compensation comprises the annual 
bonus paid in relation to the year ended 31 December 2005 
and the expected value of the long term incentive plan 
(LTIP) awards. 

The main elements of these packages and the performance 
conditions are described below. 

The Remuneration Committee will continue to review the policy 
on an annual basis to ensure that it is in line with the Company’s
objectives and shareholders’ interests.

Non-executive directors are remunerated with fees, set at levels
that are sufﬁ cient to attract and retain their services and are 
in line with market rates. The non-executive directors do not 
receive any pension or other beneﬁ ts, other than out of pocket 
expenses, nor do they participate in any bonus or share option 
schemes.

Martin Robinson and Roger Orf have chosen until further 
notice to use the whole of their directors’ fees (net of tax) to 
purchase Regus shares in the open market on a quarterly 
basis. In addition, John Matthews has chosen to use part of 
his fees (£90,000 less tax) to purchase Regus shares in the 
open market.

SERVICE CONTRACTS
Details of contracts currently in place for directors are as follows:

Executive
Mark Dixon 
Rudy Lobo 
Stephen Gleadle 
Non-executive
John Matthews 
Roger Orf 
Martin Robinson 
Stephen East 

Date of contract 

Term 

Notice period
and provision for
compensation

28/02/05 
04/03/05 
19/10/05 

– 
– 
– 

12 months
12 months
12 months

02/10/03 
02/10/03 
02/10/03 
11/03/05 

3 years 
3 years 
3 years 
3 years 

6 months
6 months
6 months
6 months

REMUNERATION PACKAGES
The remuneration for executive directors during the year 
comprised a basic salary, a beneﬁ t package, an annual 
performance based short term incentive award paid partly 
in cash and partly in shares and participation in the 
Company’s share incentive arrangement, the CIP. 

BASIC SALARY AND BENEFITS
The Committee establishes salaries and beneﬁ ts by reference 
to those prevailing in the employment market generally for 
executive directors of companies of comparable status and 
market value.

Each executive director receives a salary, which reﬂ ects his 
responsibilities, experience and performance. Salaries are 
reviewed annually in the context of individual and related 
business performance. Any increases in basic salary are 
effective from 1 January in each year. 

The salaries of the Chief Executive, Chief Operating Ofﬁ cer 
and Finance Director will be £471,814, £253,000 and £231,000 
respectively effective from 1 January 2006. This equates 
to an increase of 10% for each executive director based on 
their salaries as at 31 December 2005. It is the opinion of the 
Remuneration Committee that such rises were necessary to 
reﬂ ect the performance of the individuals and the additional 
responsibilities undertaken by them during the year.

Beneﬁ ts comprise a company car or allowance, fuel, private 
medical insurance and a living allowance for the Chief Executive.

ANNUAL BONUS SCHEME
Overview
The Committee believes ﬁ rmly in the ﬁ nancial effectiveness 
of short term incentives. Accordingly, every employee in the 
Group participates in some form of incentive scheme. 

Old Policy
Up until 2004 executive directors were eligible to participate in 
the annual bonus plan and the Regus Super Bonus Plan with 
a maximum bonus potential of 140% of salary. However as 
set out in the circular to shareholders prior to the 2005 AGM, 
the Super Bonus Plan has been discontinued during the 2005 
ﬁ nancial year following the introduction of the CIP. 

New Policy
With effect from and including the 2005 ﬁ nancial year, maximum
individual bonuses payable to executive directors and senior 
management have been reduced and are now capped at 100%
of basic annual salary of which a maximum 50% can be taken 
as cash and 50% is deferred to purchase “Investment Shares” 
in Regus Group plc. These shares are awarded under the CIP 
with the opportunity of an additional award of Matching Shares 
released after a three year period, subject to certain conditions. 

For the year ended 31 December 2005, the executive directors
satisﬁ ed the stretching EBITDA targets in full. As such the 
total bonus payable will be 100% of salary. In reporting the 
calculation of awards, the Committee is mindful of the 
commercial sensitivity of the structure of the Group’s bonus 
arrangements and considers that more detailed disclosure is 
inappropriate in the circumstances. As stated above, 50% of 
the total bonus payable will be paid in cash and 50% will be 
used to purchase Investment Shares. However, at the time of 
the drafting of this report, the award of Investment Shares and 
associated Matching Shares has not been made due to the 
Company being in a close period. The Committee will provide 
full details of the award and relevant performance conditions in 
its Remuneration Report for the year ending 31 December 2006.

 
 
 
 
 
 
 
24

Regus Report & Accounts 2005

REMUNERATION REPORT 

The maximum number of awards granted to the executive 
directors will be based on the price of an ordinary share at the 
time of the grant and the monetary value will not exceed 50% 
of the total bonus paid.

Bonus targets are reviewed and agreed by the Committee 
at the beginning of each ﬁ nancial year. The performance 
measures for the bonus are reviewed annually by the Committee
to ensure that they are appropriate to the current market 
conditions and position of the Company, so that they remain 
challenging. The structure of the bonus targets for the year 
ending 31 December 2006 will be similar to those operated 
for 2005.

The maximum bonus potential available for the executive 
directors for the year ending 31 December 2006 remains 
the same.

Bonuses are non-pensionable. 

Non-executive directors do not receive a bonus. 

PENSION BENEFITS
The executive directors participate in the Company’s Money 
Purchase (Personal Pension) Scheme. The Company matches 
contributions up to a maximum of 7.5% of basic salary. 

The Group does not operate a deﬁ ned beneﬁ t pension scheme 
and has no plans to introduce such a scheme.

LONG TERM INCENTIVES
Overview
During the year the Remuneration Committee reviewed its 
share incentive policy and concluded that the interests of 
shareholders and executives would be better aligned through 
a new long term incentive policy, the CIP which was approved 
by shareholders at the 2005 AGM. In accordance with the 
new policy, the Remuneration Committee will not grant any 
further awards under the Company’s existing arrangements 
to executives who participate in the CIP.

Old Policy
Prior to the change of policy, the Remuneration Committee
granted options under the Regus Group Share Option Scheme.

For grants made in 2004, performance conditions are based 
on the Company’s earnings per share (EPS) performance over 
a three year period. The options may be exercised between 
the third and tenth anniversaries of the date of the grant after 
which they will lapse. 

The Remuneration Committee believed that a sliding scale 
of EPS growth of 3%-6% per annum in excess of the Retail 
Price Index was the most appropriate performance target (as 
the Company had been in loss, a notional starting EPS of 1p per
share was used). This represented a challenging performance 
condition in light of the Company’s circumstances at the time. 
The number of options that become exercisable for real growth 
of 3% per annum will not exceed 50% of salary.

EPS has been selected as the performance measure as 
it was considered a good indicator of long term corporate 
performance. 

The Company and its predecessor has never retested 
performance conditions or re-priced options and the 
Remuneration Committee has no intention of changing their 
policy. There will be no automatic waiving of performance 
conditions in the event of a change of control or where 
grants are ‘rolled over’ on a change in capital structure. 
No performance targets were waived on the Scheme of 
Arrangement in 2003.

The Company also adopted the Regus Group Restricted 
Award Plan at the 2004 AGM. No awards have been made 
under this Plan.

New Policy
At the 2005 AGM, shareholders approved the CIP following 
a review by the Remuneration Committee of long term 
incentive arrangements for executive directors and other 
senior executives.

The Committee views the CIP, introduced in 2005, as the 
most appropriate vehicle for long term incentivisation for the 
executive directors and other senior executives. Details of the 
awards made to executive directors during the year are set 
out below.

There are two elements to the CIP:

The ﬁ rst element operates in conjunction with the annual 
bonus whereby 50% of any gross bonus payment will be 
paid in cash, with the other 50% taken as a deferred award 
of Investment Shares to be released at the end of a three 
year period.

Matching Shares will be awarded linked to the number of 
Investment Shares awarded and will vest depending on the 
Company’s growth in free cash ﬂ ow per share (FCF), EPS 
and relative total shareholder return (TSR) measured against 
the FTSE 350 Support Services Index. Matching Shares are 
awarded at no cost to participants.

The maximum number of Matching Shares which can be 
awarded to a participant in the CIP is 200% of salary. As 
such, the maximum number of Matching Shares which can 
be awarded based on Investment Shares awarded is 4:1 
– however this level of award is subject to full payout of the 
annual bonus. In order to ensure that the executive directors 
and senior executives are motivated to consistently perform 
on an annual basis, the maximum matching ratio will only 
apply to participants who receive a bonus pay-out of 50% of 
salary or more. For bonus payout of less than 50% of salary 
the matching participants will only be eligible to receive two 
Matching Shares to one Investment Share. 

The second element is that the Remuneration Committee may 
also make stand alone whole share awards (“LTIP Awards”) 
without reference to annual bonus, up to a maximum of 100% 
of salary per annum under the CIP. Under the LTIP Award, 
executives are awarded a conditional right over a whole number
of shares with the release being dependent on the extent to 
which (if at all) the challenging performance conditions set by 
the Remuneration Committee at the time the LTIP Award is 
made are satisﬁ ed.

Regus Report & Accounts 2005

25

Grants during the year ending 31 December 2005

LTIP award face value
(% age of salary) 
Expected value of 
LTIP award (a) 
Expected value of 
LTIP award as a 
% age of salary 

Mark Dixon 

Rudy Lobo  Stephen Gleadle

75% 

75% 

143%

£196,088  £103,383 

£189,000

47.25% 

47.25% 

90%

(a) The expected value was calculated by taking the face value of the shares 
  on the date of award and discounting this value by the probability of the 
  performance condition being satisﬁ ed at this date (in accordance with the 
  principles of IFRS 2).

It should be noted that as part of his recruitment, the LTIP 
Award granted to Stephen Gleadle was under a stand alone 
arrangement in accordance with the provisions of 13.13A(b) of 
the Listing Rules. However this award has been granted on the 
same terms and conditions as the LTIP Awards made to the 
other executive directors on the same date. 

In addition, it is unlikely that future stand-alone LTIP Awards 
will be made to existing executive directors unless there are 
exceptional circumstances. 

The performance conditions for the grant of awards under the 
LTIP are set out in the following table:

Growth in FCF
per share
10% 
15% 
20% 
25% 

EPS (p) for the year ending 31 Dec 2008

11p 

12p 

13p 

14p

6% 
13% 
19% 
25% 

13% 
25% 
38% 
50% 

19% 
38% 
56% 
75% 

25%
50%
75%
100%

Note: % denotes the % of LTIP Award which will be released at the end of 
the performance period.

In addition, no awards will be released unless the Company’s 
TSR is at least at the median when compared against that of 
the companies comprising the FTSE 350 Support Services 
Sector at the date of grant.

It is recognised by the Remuneration Committee that the 
additional EPS targets represent a highly challenging goal and 
consequently in determining whether they have been met the 
Committee will exercise its discretion. The overall aim is that 
the relevant EPS targets must have been met on a run rate or 
underlying basis.

As such an adjusted measure of EPS will be calculated 
designed to assess the underlying performance of the business.

While the Remuneration Committee reserves the right to adjust 
EPS as it sees ﬁ t at the time, by way of example, the following 
adjustments are currently anticipated:

(cid:127)  In a growth company such as Regus, costs are necessarily 
incurred in one year to drive proﬁ ts in future years. As such 
it is important to ensure management is not incentivised to
  cut back on these investments to meet EPS targets in any
  one year. Accordingly those costs, incurred in the vesting 
  year, which it considers necessary to drive future growth will 
  be excluded from the EPS calculation. These would include, 
inter alia, the costs of the business development departments,
  excess marketing expenditures and current year losses from

investing in new locations.

(cid:127)  Any one-off or non-recurring items will be excluded.

(cid:127)  It is expected that in the period between 2006 and 2008 the
  cash tax rate will rise as cumulative tax losses are utilised 
thereby increasing progressively the challenge of achieving
  a 14p EPS target. This will then be further complicated by 
the need to recognise deferred tax assets as the business 
  strengthens reducing the accounting rate of tax in one year 
  and increasing it in the next. To provide greater clarity and 

incentive to management EPS will be calculated based upon 
the cash tax rate up to a maximum of 30%.

The Remuneration Committee is of the opinion that the EPS 
and free cash ﬂ ow performance targets are a transparent 
and accurate measure of the Company’s performance at this 
time and are the key corporate metrics for driving long term 
shareholder value. In addition, the TSR condition will ensure 
that executives are encouraged to focus on ensuring that the 
Company’s return to shareholders is competitive compared to 
comparable companies.

As mentioned above, awards under the CIP in respect of the 
bonus paid for the year ended 31 December 2005 will be 
made subsequent to the publication of this report. However 
the maximum number of awards granted to the executive 
directors will be based on the price of an ordinary share at the 
time of grant and the monetary value will not exceed 50% of 
basic salary. Full details of the levels of award and performance 
conditions will be disclosed in the Committee’s Remuneration 
Report for the year ending 31 December 2006.

EXTERNAL APPOINTMENTS
Executive directors are permitted to accept appointments 
on external boards or committees so long as these are not 
deemed to interfere with the business of the Group. Any fees 
received in respect of these appointments are retained directly 
by the relevant executive director. At 31 December 2005, the 
executive directors did not hold any external positions for 
which they receive fees.

TSR
THE GRAPH SHOWS THE COMPANY’S PERFORMANCE, MEASURED
BY TSR FOR THE GROUP COMPARED WITH THE PERFORMANCE OF 
THE FTSE 250 INDEX AND THE FTSE 350 SUPPORT SERVICES INDEX. 
THE COMMITTEE CONSIDER THE FTSE 250 INDEX RELEVANT SINCE 
IT IS AN INDEX OF COMPANIES OF SIMILAR SIZE TO REGUS GROUP PLC.
AS DETAILED EARLIER IN THE REPORT THE COMPANY CONSIDERS 
ITS TSR PERFORMANCE FOR SHARE AWARDS UNDER THE CIP IN 
COMPARISON TO THAT OF THE FTSE 350 SUPPORT SERVICES INDEX.

(cid:163)(cid:211)(cid:228)

(cid:163)(cid:228)(cid:228)

(cid:110)(cid:228)

(cid:200)(cid:228)

(cid:123)(cid:228)

(cid:211)(cid:228)

(cid:228)

(cid:163)(cid:211)(cid:228)

(cid:163)(cid:228)(cid:228)

(cid:110)(cid:228)

(cid:200)(cid:228)

(cid:123)(cid:228)

(cid:211)(cid:228)

(cid:228)

(cid:44)(cid:105)(cid:125)(cid:213)(cid:195)(cid:202)(cid:20)(cid:192)(cid:156)(cid:213)(cid:171)(cid:202)(cid:171)(cid:143)(cid:86)

(cid:19)(cid:47)(cid:45)(cid:13)(cid:202)(cid:206)(cid:120)(cid:228)
(cid:45)(cid:213)(cid:171)(cid:171)(cid:156)(cid:192)(cid:204)(cid:202)(cid:45)(cid:105)(cid:192)(cid:219)(cid:136)(cid:86)(cid:105)(cid:195)

(cid:19)(cid:47)(cid:45)(cid:13)(cid:202)(cid:211)(cid:120)(cid:228)

(cid:211)(cid:228)(cid:228)(cid:206)

(cid:211)(cid:228)(cid:228)(cid:123)

(cid:211)(cid:228)(cid:228)(cid:120)

 
 
 
 
 
 
 
 
 
 
 
 
26

Regus Report & Accounts 2005

REMUNERATION REPORT 

AUDITED INFORMATION
DIRECTORS’ EMOLUMENTS

The aggregate emoluments, excluding pensions of the directors were as follows:

Chairman
John Matthews 
Executive
Mark Dixon  
Rudy Lobo  
Stephen Gleadle 
Non-executive
Roger Orf 
Martin Robinson 
Stephen East 

Stephen Gleadle was appointed on 31 October 2005.

Stephen East was appointed on 11 March 2005.

Chairman
John Matthews 
Executive
Mark Dixon  
Rudy Lobo  
Non-executive
Roger Orf 
Martin Robinson 

Salary 
£’000 

Fees 
£’000 

Beneﬁ ts 
£’000 

– 

190.0 

415.0 
218.8 
35.0 

– 
– 
– 
668.8 

– 
– 
– 

36.0 
36.0 
24.2 
286.2 

– 

126.8 
12.9 
2.2 

– 
– 
– 
141.9 

Salary 
£’000 

Fees 
£’000 

Beneﬁ ts 
£’000 

– 

115.0 

395.0 
180.0 

– 
– 
575.0 

– 
– 

35.0 
35.0 
185.0 

– 

120.2 
13.2 

– 
– 
133.4 

Bonus 
£’000 

– 

207.5 
109.4 
157.5 

– 
– 
– 
474.4 

Bonus 
£’000 

– 

233.0 
122.0 

– 
– 
355.0 

2005

Total
£’000

190.0

749.3
341.1
194.7

36.0
36.0
24.2
1571.3

2004

Total
£’000

115.0

748.2
315.2

35.0
35.0
1248.4

Mark Dixon was the highest paid director in both 2005 and 2004.

Beneﬁ ts include a housing allowance for Mark Dixon (2005: £108,329.87; 2004: £75,000) car and fuel allowance, medical 
insurance and life assurance.

PENSION CONTRIBUTIONS

Mark Dixon  
Rudy Lobo  
Stephen Gleadle 

2005 
£’000 
29.1 
15.3 
2.4 
46.8 

2004
£’000
31.6
12.4
–
44.0

DIRECTORS’ SHARE INTERESTS
The following directors held beneﬁ cial interests in the share capital of the Company at 31 December 2005 and 20 March 2006.

Executive
Mark Dixon (a) 
Rudy Lobo 
Non-executive
John Matthews 
Roger Orf 
Martin Robinson 
Stephen East 

20 Mar 2006 

31 Dec 2005 

31 Dec 2004

Direct Holding Ordinary Shares of 5p

366,329,326 
4,697,098 

366,329,326 
4,697,098 

366,329,326
4,697,098

577,678 
712,617 
37,617 
– 

577,678 
712,617 
37,617 
– 

550,000
687,280
12,280
–

(a) The interests of Mark Dixon are held indirectly through Maxon Investments BV, an entity in which Mark Dixon holds 100% of the share capital. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

27

DIRECTORS’ SHARE OPTIONS
As at 20 March 2006, the beneﬁ cial interest of the directors in options granted under the Regus Group Share Option Plan are 
shown below.

Mark Dixon  
Rudy Lobo  

Interest in
options and
awards over 
Ordinary Shares 
1,708,108 
778,378 

Grant date 
08/09/04 
08/09/04 

Exercise price 
p 
64.75 
64.75 

Date from which 
exercisable 
08/09/07 
08/09/07 

Expiry date of
grant or award
08/09/14
08/09/14

All options were granted at the then prevailing market price. There have been no movements in the year.

DIRECTORS’ INTERESTS UNDER THE LTIP
Details of awards over ordinary shares in the Company granted to the directors under the LTIP, all for nil consideration, are as 
follows:

Mark Dixon
At 1 January 2005 
Awards granted 
At 31 December 2005 

Rudy Lobo
At 1 January 2005 
Awards granted 
At 31 December 2005 

Stephen Gleadle
At 1 January 2005 
Awards granted 
At 31 December 2005 

LTIP

–
337,398
337,398

–
186,992
186,992

–
325,203
325,203

No LTIP awards vested and no matching shares were granted during the year.

The entitlement to shares under the LTIP is subject to achieving the performance conditions referred to in the LTIP section on 
page 25.

The performance period for the LTIP awards is 3 November 2005 to 31 December 2008.

The mid market price of the Company’s ordinary shares at 31 December 2005 was 105.5p and the range during the year was 
75.5p to 124.0p.

None of the directors had a beneﬁ cial interest in any contract of any signiﬁ cance in relation to the business of the Company or 
its subsidiaries at any time during the ﬁ nancial year.

ANNUAL RESOLUTION
Shareholders will be given the opportunity to approve the Remuneration Report at the AGM on 22 May 2006.

AUDIT REQUIREMENT
Within the Remuneration Report, the sections on director’s remuneration, shareholdings and pension beneﬁ ts on pages 26 to
27 inclusive, are audited. All other sections of the Remuneration Report are unaudited.

On behalf of the Board

MARTIN ROBINSON
CHAIRMAN, REMUNERATION COMMITTEE
20 March 2006

 
 
 
 
 
 
 
 
28

Regus Report & Accounts 2005

STATEMENT OF DIRECTORS’ 
RESPONSIBILITIES

The directors are responsible for preparing the Annual Report 
and the Group and parent company ﬁ nancial statements, in 
accordance with applicable law and regulations.

Company law requires the directors to prepare Group and parent
company ﬁ nancial statements for each ﬁ nancial year. Under 
that law the directors are required to prepare the Group ﬁ nancial
statements in accordance with IFRSs as adopted by the EU 
and have elected to prepare the parent company ﬁ nancial 
statements in accordance with UK Accounting Standards.

The Group ﬁ nancial statements are required by law and IFRSs 
as adopted by the EU to present fairly the ﬁ nancial position and 
performance of the Group; the Companies Act 1985 provides 
in relation to such ﬁ nancial statements that references in the 
relevant part of that Act to ﬁ nancial statements giving a true and
fair view are references to their achieving a fair presentation.

The parent company ﬁ nancial statements are required by law 
to give a true and fair view of the state of affairs of the parent 
company.

In preparing each of the Group and parent company ﬁ nancial 
statements, the directors are required to:

(cid:127)  select suitable accounting policies and then apply them 
  consistently;

(cid:127)  make judgments and estimates that are reasonable and 
  prudent;

(cid:127)  for the Group ﬁ nancial statements, state whether they have 
  been prepared in accordance with IFRSs as adopted by 

the EU;

(cid:127)  for the parent company ﬁ nancial statements, state whether 
  applicable UK Accounting Standards have been followed, 
  subject to any material departures disclosed and explained 

in the parent company ﬁ nancial statements; and

(cid:127)  prepare the ﬁ nancial statements on the going concern basis
  unless it is inappropriate to presume that the Group and the 
  parent company will continue in business.

The directors are responsible for keeping proper accounting 
records that disclose with reasonable accuracy at any time the 
ﬁ nancial position of the parent company and enable them to 
ensure that its ﬁ nancial 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 
Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also 
responsible for preparing a Directors’ Report, Directors’ 
Remuneration Report and Corporate Governance Statement 
that comply with that law and those regulations.

 
 
INDEPENDENT AUDITORS’ 
REPORT

Regus Report & Accounts 2005

29

We have audited the Group and parent company ﬁ nancial 
statements (the ‘‘ﬁ nancial statements’’) of Regus Group plc 
for the year ended 31 December 2005 which comprise the 
Group Income Statement, the Group and Parent Company 
Balance Sheets, the Group Cash Flow Statement, the Group 
Statement of Change in Shareholders’ Equity and the related 
notes. These ﬁ nancial statements have been prepared under 
the accounting policies set out therein. 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’ responsibilities for preparing the Annual Report 
and the Group ﬁ nancial statements in accordance with 
applicable law and International Financial Reporting Standards 
(IFRSs) as adopted by the EU, and for preparing the parent 
company ﬁ nancial statements and the Directors’ Remuneration 
Report in accordance with applicable law and UK Accounting 
Standards (UK Generally Accepted Accounting Practice) 
are set out in the Statement of Directors’ Responsibilities on 
page 28.

Our responsibility is to audit the ﬁ nancial statements and the 
part of the Directors’ Remuneration Report to be audited in 
accordance with relevant legal and regulatory requirements 
and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the ﬁ nancial 
statements give a true and fair view and whether the ﬁ nancial 
statements and the part of the Directors’ Remuneration Report 
to be audited have been properly prepared in accordance 
with the Companies Act 1985 and whether, in addition, the 
Group ﬁ nancial statements have been properly prepared in 
accordance with Article 4 of the IAS Regulation. We also report 
to you if, in our opinion, the Directors’ Report is not consistent
with the ﬁ nancial 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 speciﬁ ed by law regarding directors’ remuneration 
and other transactions is not disclosed.

We review whether the Corporate Governance Statement 
reﬂ ects the Company’s compliance with the nine provisions 
of the 2003 FRC Combined Code speciﬁ ed for our review by 
the Listing Rules of the Financial Services Authority, 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 other information contained in the Annual Report 
and consider whether it is consistent with the audited ﬁ nancial 
statements. We consider the implications for our report if 
we become aware of any apparent misstatements or material
inconsistencies with the ﬁ nancial statements. Our responsibilities
do not extend to any other information.

BASIS OF AUDIT OPINION
We conducted our audit in accordance with International 
Standards on Auditing (UK and Ireland) issued by the Auditing 
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the 
ﬁ nancial statements and the part of the Directors’ Remuneration
Report to be audited. It also includes an assessment of the 
signiﬁ cant estimates and judgments made by the directors 
in the preparation of the ﬁ nancial statements, and of whether 
the accounting policies are appropriate to the Group’s and 
Company’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 sufﬁ cient evidence to give reasonable
assurance that the ﬁ nancial 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 
ﬁ nancial statements and the part of the Directors’ Remuneration
Report to be audited.

OPINION
In our opinion: 

(cid:127)  the Group ﬁ nancial statements give a true and fair view, 

in accordance with IFRSs as adopted by the EU, of the state 

  of the Group’s affairs as at 31 December 2005 and of its 
  proﬁ t for the year then ended;

(cid:127)  the Group ﬁ nancial statements have been properly prepared 
in accordance with the Companies Act 1985 and Article 4 

  of the IAS Regulation;

(cid:127)  the parent company ﬁ nancial statements give a true and fair 
  view, in accordance with UK Generally Accepted Accounting
  Practice, of the state of the parent company’s affairs as at 
  31 December 2005; and  

(cid:127)  the parent company ﬁ nancial 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
CHARTERED ACCOUNTANTS AND REGISTERED AUDITOR
London
20 March 2006

 
 
 
30

Regus Report & Accounts 2005

CONSOLIDATED INCOME STATEMENT

Revenue 

Costs of sales before non-recurring costs 
Non-recurring cost of sales 

Cost of sales 

Gross proﬁ t (centre contribution) 

Administration expenses before non-recurring expenses 
Non-recurring administration expenses 

Administrative expenses 

Proﬁ t from operations 

Share of loss of joint ventures 
Share of proﬁ t/(loss) of associate 

Proﬁ t/(loss) before ﬁ nancing costs 

Financial expense 
Financial income 

Proﬁ t/(loss) before tax 

Tax credit 

Proﬁ t/(loss) after tax 

Attributable to:
Equity shareholders 
Minority interest 

Earnings/(loss) per ordinary share (EPS):
Basic EPS (p) 
Diluted EPS (p) 

notes 
2 

5 

5 

4 

17 
17 

7 

8 

9 
9 

Year ended 
31 Dec 2005 
£m 
463.3 

Year ended
31 Dec 2004
£m
312.2

(346.2) 
0.1 

(258.2)
(6.6)

(346.1) 

(264.8)

117.2 

(64.9) 
(5.0) 

(69.9) 

47.3 

(0.2) 
0.2 

47.3 

(10.8) 
2.2 

38.7 

6.1 

44.8 

44.5 
0.3 
44.8 

4.5 
4.5 

47.4

(44.2)
(2.0)

(46.2)

1.2

(0.7)
(3.0)

(2.5)

(3.7)
1.3

(4.9)

2.6

(2.3)

(2.4)
0.1
(2.3)

(0.3)
(0.3)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED BALANCE SHEET

Regus Report & Accounts 2005

31

notes 

As at 
31 Dec 2005 
£m 

As at
31 Dec 2004
£m

Non-current assets
Goodwill 
Other intangible assets 
Property, plant and equipment 
Deferred tax assets 

Current assets
Trade and other receivables 
Cash and cash equivalents 

Total assets 

Current liabilities
Trade and other payables 
Customer deposits 
Deferred income 
Corporation tax 
Obligations under ﬁ nance leases   
Bank overdrafts and loans 
Provisions for liabilities and charges 

Net current liabilities 

Total assets less current liabilities 

Non-current liabilities
Other payables 
Obligations under ﬁ nance leases   
Loans 
Provisions for liabilities and charges 
Provision for deﬁ cit on joint ventures 
Provision for deﬁ cit on associate 

Total liabilities 

Net assets 

Equity
Share capital 
Share premium account 
Other reserves 
Retained earnings 

Equity attributable to equity holders of the parent 
Minority interests 

Total equity 

Analysis of other reserves is included within the Statement of Changes in Equity.

Approval by the Board on 20 March 2006.

MARK DIXON 
CHIEF EXECUTIVE OFFICER 

STEPHEN GLEADLE
CHIEF FINANCIAL OFFICER

10 
11 
12 
8 

13 

14 

15 
15 
16 

14 
15 
15 
16 
17 
17 

18 

122.1 
38.9 
76.6 
21.9 
259.5 

99.6 
74.1 
173.7 

433.2 

(73.8) 
(61.7) 
(45.6) 
(12.3) 
(4.8) 
(24.5) 
(7.2) 
(229.9) 

96.0
37.2
76.1
6.2
215.5

76.0
82.3
158.3

373.8

(64.1)
(48.8)
(34.0)
(6.9)
(7.3)
(8.3)
(13.0)
(182.4)

(56.2) 

(24.1)

203.3 

191.4

(27.9) 
(3.4) 
(5.4) 
(7.9) 
(2.1) 
(3.8) 
(50.5) 

(21.3)
(5.9)
(55.8)
(8.9)
(1.8)
(4.0)
(97.7)

(280.4) 

(280.1)

152.8 

93.7

49.2 
153.5 
(22.6) 
(27.3) 

152.8 
– 

152.8 

49.3
153.5
(22.7)
(85.8)

94.3
(0.6)

93.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32

Regus Report & Accounts 2005

CONSOLIDATED CASH FLOW 
STATEMENT

Proﬁ t before tax 

Adjustments for:
Net ﬁ nance costs 
Share of loss on joint venture and associate 
Depreciation charge 
Loss on disposal of ﬁ xed assets 
Amortisation of intangible assets 
Impairment of ﬁ xed assets 
Decrease in provisions 

Operating cash ﬂ ows before movements in working capital 

Increase in trade and other receivables 
Increase/(decrease) in trade and other payables 

Cash generated from operations 

Interest paid on ﬁ nance leases 
Interest paid on credit facilities 
Tax paid 

Net cash ﬂ ows from operating activities pre Chapter 11 payments 

Settlement of liabilities under Chapter 11 

Net cash in/(out) ﬂ ows from operating activities 

Investing activities
Purchase of subsidiary undertakings (net of cash acquired) 
Investment in joint venture 
Sale of tangible ﬁ xed assets 
Purchase of tangible ﬁ xed assets 
Interest received 

Cash outﬂ ows from investing activities 

Financing activities
Net proceeds from issue of loans 
Repayment of loans 
Payment of principal under ﬁ nance leases 
Net proceeds from issue of equity shares 
Sale of own shares held by ESOP 

Cash (out)/inﬂ ows from ﬁ nancing activities 

Net decrease in cash and cash equivalents 
Cash and cash equivalents at beginning of period 
Effect of exchange rate ﬂ uctuations on cash held 

Cash and cash equivalents at end of period 

Year ended 
31 Dec 2005 
£m 
38.7 

Year ended
31 Dec 2004
£m
(4.9)

8.6 
– 
25.6 
0.3 
3.8 
– 
(5.7) 

71.3 

(17.0) 
23.8 

78.1 

(1.0) 
(5.5) 
(2.6) 

69.0 

– 

69.0 

(16.7) 
(0.1) 
0.2 
(17.5) 
2.2 

2.4
3.7
29.7
–
1.4
3.2
(5.6)

29.9

(1.0)
(7.9)

21.0

(0.5)
(2.8)
(1.6)

16.1

(27.8)

(11.7)

(162.9)
–
0.6
(5.3)
1.7

(31.9) 

(165.9)

– 
(39.4) 
(8.1) 
– 
– 

56.5
(1.6)
(7.7)
122.2
2.0

(47.5) 

171.4

(10.4) 
82.3 
2.2 

74.1 

(6.2)
85.0
3.5

82.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

33

CONSOLIDATED STATEMENT OF 
CHANGES IN EQUITY

Attributable to equity holders of the parent

Balance at 1 January 2004 

Loss attributable to equity holders 
Proﬁ t attributable to minority interest 
Currency translation differences 
Sale of shares held in ESOP 
Share based payments 
Placing and Open Offer 
Issue costs on Placing and Open Offer 

Share capital 
£m 
39.4 

– 
– 
– 
– 
– 
9.9 
– 

Share 
premium 
account 
£m 
44.4 

– 
– 
– 
– 
– 
112.7 
(3.6) 

Foreign 
currency 
translation 
reserve 
£m 
– 

Other non-
distributable 
reserves (a) 
£m 
(22.7) 

Retained 
earnings 
£m 
(77.4) 

Minority
interests 
£m 
(0.6) 

Total equity
£m
(16.9)

– 
– 
(8.3) 
– 
– 
– 
– 

– 
– 
– 
– 
– 
– 
– 

(2.4) 
– 
– 
2.1 
0.2 
– 
– 

– 
0.1 
(0.1) 
– 
– 
– 
– 

Balance at 31 December 2004 

49.3 

153.5 

(8.3) 

(22.7) 

(77.5) 

(0.6) 

Proﬁ t attributable to equity holders 
Proﬁ t attributable to minority interest 
Currency translation differences 
Redemption of preference shares 
Share based payments 
Acquired in year (b) 
Liquidation of subsidiary 

– 
– 
– 
(0.1) 
– 
– 
– 

– 
– 
– 
– 
– 
– 
– 

Balance at 31 December 2005 

49.2 

153.5 

– 
– 
13.3 
– 
– 
– 
– 

5.0 

– 
– 
– 
0.1 
– 
– 
– 

44.5 
– 
– 
(0.1) 
0.8 
– 
– 

– 
0.3 
(0.1) 
– 
– 
(0.2) 
0.6 

(22.6) 

(32.3) 

– 

152.8

(a) Other non-distributable reserves includes £29.2 million arising from the Scheme of Arrangement undertaken in 2003, partly offset by £6.5 million relating to merger 

reserves and £0.1 million to the redemption of preference shares.

(b) During the year the Group acquired the minority interest of subsidiaries in South Africa and Italy.

(2.4)
0.1
(8.4)
2.1
0.2
122.6
(3.6)

93.7

44.5
0.3
13.2
(0.1)
0.8
(0.2)
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

1  ACCOUNTING POLICIES
Regus Group plc (the “Company”) is a company incorporated in the UK.

Basis of preparation
The Group ﬁ nancial statements consolidate those of the Company 
and its subsidiaries (together referred to as the “Group”) and equity 
account the Group’s interest in associates and jointly controlled entities.
The parent company ﬁ nancial statements present information about 
the Company as a separate entity and not about its Group.

The Group ﬁ nancial statements have been prepared and approved 
by the directors in accordance with International Financial Reporting 
Standards as adopted by the EU (“Adopted IFRSs”). The Company 
has elected to prepare its parent company ﬁ nancial statements in 
accordance with UK GAAP; these are presented on pages 60 to 62.

Amendments to IAS 39: “Financial Guarantee Contracts” applicable 
for accounting periods commencing on or after 1 January 2006. The 
impact on the Group’s ﬁ nancial statement of the initial application 
of this standard is the requirement to recognise the fair value of the 
guarantees given to landlords.

Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when 
the Group has the power, directly or indirectly, to govern the ﬁ nancial 
and operating policies of an entity so as to obtain beneﬁ ts from its 
activities. In assessing control, potential voting rights that are currently
exercisable or convertible are taken into account. The ﬁ nancial 
statements of subsidiaries are included in the consolidated ﬁ nancial 
statements from the date that control commences until the date that 
control ceases.

The accounting policies set out below have, unless otherwise stated, 
been applied consistently to all periods presented in these Group 
ﬁ nancial statements and in preparing an opening IFRS balance sheet 
at 1 January 2004 for the purposes of the transition to Adopted IFRSs.
The principal exception is that, as more fully explained below, ﬁ nancial 
instruments accounting is determined on different bases in 2005 and 
2004 due to the transitional provisions of IAS 39.

Judgements made by the directors, in the application of these 
accounting policies that have signiﬁ cant effect on the ﬁ nancial 
statements and estimates with a signiﬁ cant risk of material adjustment 
in the next year are discussed in note 28.

The ﬁ nancial statements are prepared on the historical cost basis.

Transition to Adopted IFRSs
The Group is preparing its ﬁ nancial statements in accordance with 
Adopted IFRS for the ﬁ rst time and consequently has applied IFRS 1. 
An explanation of how the transition to Adopted IFRSs has affected 
the reported ﬁ nancial position, ﬁ nancial performance and cash ﬂ ows 
of the Group is provided in note 29.

In addition to exempting companies from the requirement to restate 
comparatives for IAS 39, IFRS 1 grants certain exemptions from 
the full requirements of IFRSs in the transition period. The following 
exemptions have been taken in these ﬁ nancial statements:

(cid:127)  Business combinations – Business combinations that took place
  prior to transition date have not been restated.

(cid:127)  Cumulative translation differences – Cumulative translation 
  differences for all foreign operations have been set to zero at 
  1 January 2004.

The Group adopted IAS 39 with effect from 1 January 2005. IAS 39 
has not had any impact on the accounts.

Adopted IFRSs not yet applied
The following adopted IFRSs were available for early application but 
have not been applied by the Group in these ﬁ nancial statements: 

Associates are those entities in which the Group has signiﬁ cant 
inﬂ uence, but not control, over the ﬁ nancial and operating policies. 
The consolidated ﬁ nancial statements include the Group’s share of 
the total recognised income and expense of associates on an equity 
accounted basis, from the date that signiﬁ cant inﬂ uence commences 
until the date that signiﬁ cant inﬂ uence ceases. When the Group’s 
share of losses exceeds its interest in an associate, the Group’s 
carrying amount is reduced to nil and recognition of further losses is 
discontinued except to the extent that the Group has incurred legal or 
constructive obligations or made payments on behalf of an associate.

Jointly controlled entities are those entities over whose activities the 
Group has joint control, established by contractual agreement. The 
consolidated ﬁ nancial statements include the Group’s share of the 
total recognised gains and losses of jointly controlled entities on an 
equity accounted basis, from the date that joint control commences 
until the date that joint control ceases.

Goodwill
All business combinations are accounted for using the purchase 
method. Goodwill represents the difference between cost of 
acquisition over the share of the fair value of identiﬁ able net assets 
(including intangible assets) of a subsidiary, associate or joint venture 
at the date of acquisition.

Positive goodwill is stated at cost less any provision for impairment 
in value. An impairment test is carried out annually. Positive goodwill 
is allocated to cash generating units for the purpose of impairment 
testing.

Impairment
The carrying amounts of the Group’s assets other than deferred 
tax assets, are reviewed at each balance sheet date to determine 
whether there is any indication of impairment. If any such indication 
exists, the asset’s recoverable amount is estimated. 

For goodwill, assets that have an indeﬁ nite useful life and intangible 
assets that are not yet available for use, the recoverable amount is 
estimated at each balance sheet date.

IFRS 7 “Financial Instruments: Disclosure” applicable for accounting 
periods commencing on or after 1 January 2007. The impact on the 
Group’s ﬁ nancial statement on the initial application of this standard is 
not expected to be signiﬁ cant as the applicable requirements of this 
standard are similar to the disclosure requirements of IAS 32, which 
has already been adopted by the Group.

An impairment loss is recognised whenever the carrying amount of 
an asset or its cash-generating unit exceeds its recoverable amount. 
Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash-generating units are 
allocated ﬁ rst to reduce the carrying amount of any goodwill allocated 
to cash-generating units and then to reduce the carrying amount of 

Regus Report & Accounts 2005

35

the other assets in the unit on a pro rata basis. A cash generating unit 
is the smallest identiﬁ able group of assets that generates cash inﬂ ows 
that are largely independent of the cash inﬂ ows from other assets or 
groups of assets.

Contingent rentals include rent increases based on future inﬂ ation 
indices or non-guaranteed rental payments based on centre turnover 
or proﬁ tability and are excluded from the calculation of minimum lease 
payments. Contingent rentals are recognised in the income statement 
as they are incurred.

Goodwill, assets that have an indeﬁ nite useful life and intangible assets
that are not yet available for use were tested for impairment as at 
31 October 2005, even though no indication of impairment existed.

Calculation of recoverable amount
The recoverable amount of relevant assets is the greater of their net 
selling price and value in use. In assessing value in use, the estimated 
future cash ﬂ ows are discounted to their present value using a pre-tax 
discount rate that reﬂ ects current market assessments of the time value
of money and the risks speciﬁ c to the asset. For an asset that does not
generate largely independent cash inﬂ ows, the recoverable amount is 
determined for the cash-generating unit to which the asset belongs.

Intangible assets
Intangible assets acquired separately from the business are capitalised
at cost. Intangible assets acquired as part of an acquisition of a 
business are capitalised separately from goodwill if their fair value 
can be measured reliably on initial recognition.

Intangible assets are amortised on a straight-line basis over the 
estimated useful life of the assets as follows:

Brand 
Computer software  
Customer lists  

20 years
3-5 years
1-2 years

Amortisation of intangible assets is expensed through administration 
expenses in the income statement.

Leases
Plant and equipment leases for which the Group assumes substantially
all of the risks and rewards of ownership are classiﬁ ed as ﬁ nance 
leases. All other leases, including all of the Group’s property leases 
are categorised as operating leases.

Finance leases
Plant and equipment acquired by way of a ﬁ nance lease is capitalised 
at the commencement of the lease at the lower of its fair value and 
the present value of the minimum lease payments at inception. Future 
payments under ﬁ nance leases are included in creditors, net of any 
future ﬁ nance charges. Minimum lease payments are apportioned 
between the ﬁ nance charge and the reduction of the outstanding 
liability. Finance charges are recognised in the income statement over 
the lease term so as to produce a constant periodic rate of interest on 
the remaining balance of the liability.

Operating leases
Minimum lease payments under operating leases are recognised in 
the income statement on a straight-line basis over the lease term. 
Lease incentives and rent free periods are included in the calculation 
of minimum lease payments. The commencement of the lease term is 
the date from which the Group is entitled to use the leased asset. The 
lease term is the non-cancellable period of the lease, together with 
any further periods for which the Group has the option to continue to 
lease the asset and when at the inception of the lease it is reasonably 
certain that the Group will exercise that option.

Non-recurring items
Non-recurring items are those signiﬁ cant items, which are separately 
disclosed by virtue of their size or incidence to enable a full 
understanding of the Group’s ﬁ nancial performance. Transactions 
which may give rise to non-recurring items are restructuring, 
integration costs and onerous commitments.

Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated 
depreciation and any impairment in value. Depreciation is calculated 
on a straight-line basis over the estimated useful life of the assets 
as follows:

Fixtures and ﬁ ttings:  Over the shorter of the lease term and 10 years
10 years
Furniture: 
5-10 years
Ofﬁ ce equipment and telephones: 
4 years
Motor vehicles: 
3-5 years
Computer hardware: 

With effect from 1 January 2005 the Group changed its estimate of 
the useful economic life of furniture from a period of ﬁ ve years to ten 
years. This re-liﬁ ng of furniture has reduced depreciation of furniture 
in the period by £2.4 million to £8.8 million. Asset lives have also been 
changed for computer hardware, software and telecoms for which 
there was no impact in 2005. It is not practical to estimate the future 
impact of this change in accounting estimate.

Revenue
Revenue from the provision of services to customers is measured 
at the fair value of consideration received or receivable (excluding 
sales taxes).

Workstations
Workstation revenue is recognised when the provision of the service is
rendered. Amounts invoiced in advance are deferred and recognised 
as revenue upon provision of the service.

Customer service income
Service income (including the rental of meeting rooms) is recognised 
on a monthly basis as services are rendered. In circumstances 
where Regus acts as an agent for the sale and purchase of goods to 
customers, only the commission fee earned is recognised as revenue.

Management and franchise fees
Fees received for the provision of initial and subsequent services are 
recognised as revenue as the services are rendered. Fees charged 
for the use of continuing rights granted by the agreement, or for other 
services provided during the period of the agreement, are recognised 
as revenue as the services are provided or the rights used.

Employee beneﬁ ts
The Group’s contributions to deﬁ ned contribution plans and other 
paid and unpaid beneﬁ ts earned by employees are charged to the 
income statement as incurred. 

36

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

Provision is made for onerous contracts to the extent that the 
unavoidable costs of meeting the obligations under a contract exceed 
the economic beneﬁ ts expected to be delivered, discounted using the 
Group’s weighted average cost of capital.

Foreign currencies
Transactions in foreign currencies are recorded using the rate of 
exchange ruling at the date of the transaction. Monetary assets and 
liabilities denominated in foreign currencies are translated using the 
closing rate of exchange at the balance sheet date and the gains or 
losses on translation are taken to the income statement. Non-monetary
assets and liabilities that are measured in terms of historical cost in a 
foreign currency are translated using the exchange rate at the date of 
the transaction.

The results and cash ﬂ ows of overseas operations are translated 
using the average rate for the period. Assets and liabilities, including
goodwill and fair value adjustments, of overseas operations are 
translated using the closing rate with all exchange differences arising 
on consolidation being recognised in the foreign currency translation 
reserve. Exchange differences are released to the income statement 
on disposal.

Finance charges
Interest charges and income are accounted for in the income statement
on an accruals basis. Deferred ﬁ nance fees are charged to the 
income statement, through interest using the effective rate method. 

Interest bearing borrowings
Interest bearing borrowings are recognized initially at fair value less 
attributable transaction costs. Subsequent to initial recognition, interest
bearing borrowings are stated at amortised cost with any difference 
between cost and redemption value being recognised in the income 
statement over the period of the borrowings on an effective interest 
basis. 

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.

Share based payments
The share option program entitles certain key management and 
directors to acquire shares of the ultimate parent company; these 
awards are granted by the ultimate parent. The fair value of options 
granted is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured
using Black Scholes valuation model, taking into account the terms 
and conditions upon which the options were granted. The amount 
recognised as an expense is adjusted to reﬂ ect the actual number of 
share options that vest except where forfeiture is due only to share 
prices not achieving the threshold for vesting. 

Share appreciation rights (CIP) are also granted by the Company 
to certain key employees. The fair value of the amount payable to 
the employee is recognised as an expense with a corresponding 
increase in equity. The fair value is initially measured at grant date 
and spread over the period during which the employees become 
unconditionally entitled to payment. The fair value of the share 
appreciation rights is measured based on the Monte Carlo valuation 
model, taking into account the terms and conditions upon which the 
instruments were granted. The liability is re-measured at each balance
sheet date and at settlement date and any changes in fair value 
recognised in proﬁ t or loss spread equally over the vesting period.

Taxation
Tax on the proﬁ t or loss for the year comprises current and deferred 
tax. Tax is recognised in the income statement except to the extent 
that it relates to items recognised directly in equity, in which case it is 
recognised in equity.

Current tax is the expected tax payable on the taxable income for the 
year, using tax rates enacted or substantively enacted at the balance 
sheet date, and any adjustment to tax payable in respect of previous 
years.

Deferred tax is provided on temporary differences between the 
carrying amounts of assets and liabilities for ﬁ nancial reporting 
purposes and the amounts used for taxation purposes. The following 
temporary differences are not provided for: the initial recognition of 
goodwill; the initial recognition of assets or liabilities that affect neither 
accounting nor taxable proﬁ t other than in a business combination, 
and differences relating to investments in subsidiaries to the extent 
that they will probably not reverse in the foreseeable future. The amount
of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax 
rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable 
that future taxable proﬁ ts will be available against which the asset can 
be utilised. 

Provisions
Provisions are recognised when an obligation exists for a future liability
in respect of a past event and where the amount of the obligation can 
be reliably estimated.

Restructuring provisions are made for direct expenditures of a business
reorganisation where the plans are sufﬁ ciently detailed and well 
advanced, and where the appropriate communication to those 
affected has been undertaken at the balance sheet date.

Regus Report & Accounts 2005

37

2  SEGMENTAL ANALYSIS – STATUTORY BASIS
Segment information is presented in respect of the Group’s geographical segments. The Group’s only business segment is the provision of serviced 
ofﬁ ces. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable 
basis. There is no inter-segment trading. Management fees is in consideration of subsidiaries use of intellectual property and Group services including 
but not limited to business development services, purchasing, information technology, sales and marketing, ﬁ nance and treasury, human resources 
and legal. Unallocated items comprise mainly interest bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital 
expenditure is the total cost (calculated on an accruals basis) incurred during the period to acquire segment assets that are expected to be used 
for more than one year. The serviced ofﬁ ce business is run on a worldwide basis, but managed through three principal geographical segments 
– Americas; Europe, Middle East and Africa (EMEA) and Asia Paciﬁ c. The results of business centres in each of these regions form the basis for 
reporting geographical results.

Revenue 

2005 
£m 
261.6 

Americas 

2004 
£m 
134.8 

2005 
£m 
165.5 

EMEA 

2004 
£m 
149.6 

Asia Paciﬁ c 

(including UK associate) 

Other

2005 
£m 
33.6 

2004 
£m 
25.2 

2005 
£m 
2.6 

2004 
£m 
2.6 

2005 
£m 
463.3 

Total

2004
£m
312.2

Gross proﬁ t (centre contribution) 

61.5 

17.7 

43.2 

28.6 

9.8 

5.1 

2.7 

(4.0) 

117.2 

47.4

Management fees – income 
Management fees – charges 
Proﬁ t/(loss) from operations 

Share of (loss)/proﬁ t of joint ventures 
Share of proﬁ t/(loss) of UK associate 

Financial expense 
Financial income 

Proﬁ t/(loss) before tax 
Tax credit/(charge) 
Proﬁ t/(loss) after tax 

0.2 
(0.3) 
32.5 

(0.3) 
– 

(2.7) 
2.3 

31.8 
0.5 
32.3 

1.7 
(0.1) 
4.5 

(0.8) 
– 

(1.3) 
0.3 

2.7 
(0.1) 
2.6 

2.4 
(10.7) 
15.7 

0.1 
– 

(1.8) 
0.6 

14.6 
2.1 
16.7 

2.8 
(3.4) 
10.2 

0.1 
– 

(1.4) 
0.4 

9.3 
(0.4) 
8.9 

0.8 
(2.9) 
3.0 

– 
– 

0.4 
(1.1) 
1.6 

– 
– 

(3.4) 
13.9 
(3.9) 

– 
0.2 

(0.5) 
0.2 

(0.3) 
0.1 

(5.8) 
(0.9) 

2.7 
0.1 
2.8 

1.4 
0.9 
2.3 

(10.4) 
3.4 
(7.0) 

(4.9) 
4.6 
(15.1) 

– 
(3.0) 

(0.7) 
0.5 

(18.3) 
2.2 
(16.1) 

– 
– 
47.3 

(0.2) 
0.2 

(10.8) 
2.2 

38.7 
6.1 
44.8 

–
–
1.2

(0.7)
(3.0)

(3.7)
1.3

(4.9)
2.6
(2.3)

EBITDA (see note 3) 

54.8 

20.5 

29.3 

21.4 

6.9 

5.1 

(9.4) 

(6.1) 

81.6 

40.9

Depreciation 
Amortisation 
Share based payments 

Assets 
Liabilities 

18.4 
3.8 
– 

16.2 
1.4 
– 

5.3 
– 
– 

10.6 
– 
– 

1.8 
– 
– 

2.8 
– 
– 

0.1 
– 
0.8 

0.1 
– 
0.2 

25.6 
3.8 
0.8 

29.7
1.4
0.2

275.3 
(92.2) 

233.5 
(94.3) 

66.7 
(111.6) 

58.1 
(109.2) 

28.2 
(22.0) 

17.1 
(13.8) 

63.0 
(54.6) 

65.1 
(62.8) 

433.2 
(280.4) 

373.8
(280.1)

Net assets/(liabilities) 

183.1 

139.2 

(44.9) 

(51.1) 

6.2 

3.3 

8.4 

2.3 

152.8 

93.7

Capital expenditure incurred 

8.2 

6.8 

5.3 

1.4 

5.8 

0.7 

0.1 

0.1 

19.4 

9.0

 
 
 
 
 
 
 
 
 
 
 
38

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

3  SEGMENTAL REPORTING – MANAGEMENT BASIS

Mature
Workstations 
Occupancy (%) 
Revenue (£m) 
Contribution (£m) 

2004 Expansions
Workstations 
Occupancy (%) 
Revenue (£m) 
Contribution (£m) 

2005 Expansions
Workstations 
Occupancy (%) 
Revenue (£m) 
Contribution (£m) 

Closures
Workstations 
Occupancy (%) 
Revenue (£m) 
Contribution (£m) 

Total
Workstations 
Occupancy (%) 
Revenue (£m) 
Contribution (£m) 

Americas 

2005 

2004 

2005 

EMEA 

2004 

Asia Paciﬁ c 

(including UK associate) 

Other

2005 

2004 

2005 

2004 

2005 

Total

2004

17,826 
83 
91.6 
20.3 

17,986  25,299 
73 
162.5 
43.2 

80 
78.5 
7.0 

26,464 
69 
146.8 
29.5 

4,056 
80 
26.4 
9.2 

4,114 
76 
23.3 
4.9 

– 
– 
2.6 
2.6 

– 
– 
2.6 
2.6 

47,181 
78 
283.1 
75.3 

48,564
74
251.2
44.0

28,431 
80 
165.6 
40.8 

9,468 
80 
56.0 
10.8 

1,054 
70 
4.4 
0.4 

– 
– 
– 
– 

– 
– 
– 
– 

131 
29 
0.3 
(0.1) 

– 
– 
– 
– 

450 
61 
2.7 
– 

122 
56 
0.3 
– 

– 
– 
– 
– 

– 
– 
– 
– 

967 
43 
2.8 
(0.9) 

351 
72 
2.5 
1.0 

935 
50 
3.7 
(0.5) 

133 
87 
1.0 
0.1 

152 
55 
0.7 
0.1 

– 
– 
– 
– 

169 
89 
1.2 
0.1 

– 
– 
– 
– 

– 
– 
– 
– 

– 
– 
– 
– 

– 
– 
– 
– 

– 
– 
– 
– 

– 
– 
– 
– 

28,782 
80 
168.1 
41.8 

9,620
80
56.7
10.9

2,439 
61 
10.8 
(0.1) 

–
–
–
–

255 
72 
1.3 
0.1 

1,267
48
4.3
(0.9)

47,311 
81 
261.6 
61.5 

27,585 
80 
134.8 
17.7 

25,871 
73 
165.5 
43.2 

27,431 
68 
149.6 
28.6 

5,475 
75 
33.6 
9.8 

4,435 
76 
25.2 
5.1 

– 
– 
2.6 
2.6 

– 
– 
2.6 
2.6 

78,657 
78 
463.3 
117.1 

59,451
75
312.2
54.0

REVPAW (£) 

5,529 

4,887 

6,397 

5,454 

6,137 

5,681 

– 

– 

5,890 

5,251

Notes:
(cid:127)  The mature business is deﬁ ned as those centres owned and operated at least 12 months prior to 1 January 2005 and therefore have a full 12 month comparative.
(cid:127)  Expansions include new centres opened and acquired businesses.
(cid:127)  Workstation numbers are calculated as the weighted average for the year.
(cid:127)  The results above exclude non-recurring items, which are analysed in note 5. Contribution after non-recurring items was £117.2 million in 2005 (2004: £47.4 million).

Reconciliation of proﬁ t from operations to adjusted EBIT and EBITDA

Proﬁ t from operations 
Non-recurring items 

Adjusted EBIT 
Depreciation/amortisation 
EBITDA 

Americas 

2004 
£m 
2.9 
– 

2.9 
17.6 
20.5 

2005 
£m 
32.6 
– 

32.6 
22.2 
54.8 

2005 
£m 
24.0 
– 

24.0 
5.3 
29.3 

EMEA 

2004 
£m 
10.8 
– 

10.8 
10.6 
21.4 

Asia Paciﬁ c 

2005 
£m 
5.1 
– 

5.1 
1.8 
6.9 

2004 
£m 
2.3 
– 

2.3 
2.8 
5.1 

2005 
£m 
(14.4) 
4.9 

(9.5) 
0.1 
(9.4) 

Other 

2004 
£m 
(14.8) 
8.6 

(6.2) 
0.1 
(6.1) 

2005 
£m 
47.3 
4.9 

52.2 
29.4 
81.6 

Total

2004
£m
1.2
8.6

9.8
31.1
40.9

Notes:
(cid:127)  Proﬁ t/(loss) from operations excludes internal management fees.
(cid:127)  Adjusted EBIT and EBITDA excludes the results of the joint ventures and UK associate.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

39

4  PROFIT FROM OPERATIONS
Proﬁ t from operations has been arrived at after charging:

Depreciation on property, plant and equipment:
  owned assets 
  ﬁ nance leases 

Impairment of trade and other receivables 
Amortisation of intangibles 
Loss on disposal of ﬁ xed assets 

Rents payable in respect of operating leases:
  property 
  equipment 

Group audit fees (worldwide) 

Non-audit fees paid to Group Auditors – due diligence on acquisitions 
Non-audit fees paid to Group Auditors – regulatory reporting 
Staff costs (see note 6) 

2005 
£m 

20.6 
5.0 

2.5 
3.8 
0.3 

168.1 
2.9 

0.7 

0.1 
– 
88.6 

5  NON-RECURRING ITEMS
Included in the results for the year to 31 December 2005 were non-recurring items amounting to £4.9 million (2004: £8.6 million).

Cost of sales:
Onerous leases, related closure and restructuring costs (a)  
Write-down of property, plant and equipment (b) 

Administration expenses:
Costs relating to the integration of HQ 
Severance pay 
Onerous leases, ﬁ xed asset impairment and restructuring costs 
Release of surplus provisions relating to Chapter 11 and Scheme of Arrangement 
Indemnity claim with landlord 

Non-recurring items 

2005 
£m 

0.1 
– 
0.1 

(4.7) 
– 
– 
1.5 
(1.8) 
(5.0) 
(4.9) 

2004
£m

20.0
9.7

0.8
1.4
–

130.3
4.3

0.6

0.4
0.6
59.9

2004
£m

(3.4)
(3.2)
(6.6)

(2.5)
(0.3)
0.3
0.5
–
(2.0)
(8.6)

The above items have been reported as non-recurring items and are disclosed separately as they are relevant to the understanding of the Group’s
ﬁ nancial performance.

Prior year non-recurring operating items
(a) As a result of a detailed review of our lease portfolio, three centres were identiﬁ ed for divestment at an estimated cost of £3.4 million.
(b) Fixed asset impairment charge of £3.2 million relates to loss making centres.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

6  STAFF COSTS AND NUMBERS

The aggregate payroll costs were as follows:
Wages and salaries 
Social security 
Pension costs 
Share based payments 

The average number of persons employed by the Group ( including executive directors),
  analysed by category and geography, was as follows:
Centre staff 
Sales staff 
Finance staff 
Other staff 

Corporate functions 
EMEA 
Americas 
Asia Paciﬁ c 

Details of directors’ emoluments and interests are given in the Remuneration Report on pages 26 to 27.

7  NET FINANCIAL EXPENSE

Interest payable and similar charges on bank loans and overdrafts 
Interest payable and similar charges on ﬁ nance leases 
Deferred ﬁ nancing fees 

Total ﬁ nancial expense 

Interest receivable on cash balances 

Net ﬁ nancial expense 

2005 
£m 

75.5 
11.9 
0.4 
0.8 
88.6 

2004
£m

50.8
8.5
0.4
0.2
59.9

2005 
Average full 
time equivalents 

2004
Average full
time equivalents

2,043 
209 
170 
183 
2,605 

45 
909 
1,443 
208 
2,605 

2005 
£m 
(5.6) 
(0.9) 
(4.3) 

(10.8) 

2.2 

(8.6) 

1,442
203
125
111
1,881

43
873
801
164
1,881

2004
£m
(2.9)
(0.5)
(0.3)

(3.7)

1.3

(2.4)

Deferred ﬁ nancing fees relate to loan arrangement costs on the US $110 million term loan, which was due for ﬁ nal repayment in 2010. During the 
year the Group accelerated the repayment of the loan and has recognised the cost accordingly based on the effective rate. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

41

2005 
£m 

– 
(1.3) 

(7.6) 
– 
(8.9) 

12.8 
2.2 
15.0 
6.1 

£m 
(4.9) 

1.5 

(2.2) 
0.1 
2.6 
0.1 
0.5 
2.6 

2005 
£m 
– 
3.1 
3.6 
5.4 
4.5 
2.2 
1.0 
177.7 
197.5 
72.7 
270.2 

2004
£m

–
0.5

(1.5)
0.1
(0.9)

3.5
–
3.5
2.6

2004

%

30.0

(44.9)
2.3
53.2
2.3
10.2
53.1

2004
£m
3.2
3.7
2.3
8.0
3.9
1.2
1.3
171.0
194.6
45.3
239.9

8  TAXATION
(a) Analysis of credit/(charge) in the year

Current taxation
United Kingdom tax
  Corporation tax 

(Under)/over provision in respect of prior years 

Overseas tax
  Corporation tax 
  Over provision in respect of prior years 
Total current taxation 

Deferred taxation
Origination and reversal of timing differences 
Under provision in respect of prior years 
Total deferred taxation 
Tax credit on proﬁ t 

(b) Reconciliation of taxation credit

Proﬁ t/(loss) before tax 

Tax on proﬁ t/(loss) at 30% (2004: 30%) 

Tax effects of:
Expenses not deductible for tax purposes 
Non-taxable income 
Movement in deferred tax assets not recognised in the tax charge 
Differences in tax rates on overseas earnings 
Adjustment to tax charge in respect of previous periods 
Tax credit for the year 

2005 

% 

£m 
38.7 

(11.6) 

(30.0) 

(4.5) 
1.5 
21.6 
(1.8) 
0.9 
6.1 

(11.6) 
3.9 
55.8 
(4.7) 
2.3 
15.7 

(c) Factors that may effect the future tax charge
Tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates:

2005 
2006 
2007 
2008 
2009 
2010 
2011 
2012 and later 

Available indeﬁ nitely 
Tax losses available to carry forward 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

8  TAXATION CONTINUED
(d) Deferred taxation
Deferred taxation is included in the balance sheet as follows:

Intangibles 
Property, plant and equipment 
Tax losses 
Short term timing differences 

The movement in deferred tax is analysed below:

Deferred tax asset
At 1 January 
Current year movement 
Prior year movement 
Acquisitions 
Transfers 
Exchange movement 
At 31 December 

9  EARNINGS/(LOSS) PER ORDINARY SHARE (BASIC AND DILUTED)

Proﬁ t/(loss) attributable to ordinary equity holders of the Parent 
Weighted average number of shares outstanding during the year 
Average market price of one share during the year 
Weighted average number of shares under option during the year 
Exercise price for shares under option during the year 

Calculation of 2005 EPS

Proﬁ t attributable to ordinary equity holders of the Parent 
Weighted average number of shares outstanding in the year 

Basic EPS 

Weighted average number of shares under option during the year 

Weighted average number of shares that would have been issued at
  average market price (7,261,924 x 60.37p)/99.8p 

Weighted average number of awards under the CIP £1,632,905/105.5p 

2005 
£m 
(17.3) 
15.0 
15.7 
8.5 
21.9 

2005 
£m 

6.2 
12.8 
2.2 
0.2 
0.3 
0.2 
21.9 

2004
£m
–
2.7
2.4
1.1
6.2

2004
£m

2.7
3.5
–
–
–
–
6.2

2005 
£44.5m 
  984,792,040 
99.8p 
7,261,924 
60.37p 

2004
(£2.4m)
859,702,000
–
–
–

Earnings 
£44.5m

Shares 

Per share

  984,792,040

£44.5m  984,792,040 

4.5p

7,261,924

(4,392,809)

1,547,777

Diluted EPS 

£44.5m  989,208,932 

4.5p

Note: Options are considered dilutive when they would result in the issue of ordinary shares for less than the market price of ordinary shares in the period. The amount 
of the dilution is taken to be the average market price of shares during the period minus the issue price. The number of awards granted under the CIP are an indicative 
number based on the year-end share price.

Calculation of 2004 EPS

Loss attributable to ordinary equity holders of the Parent 
Weighted average number of shares outstanding in the year 

Basic and diluted loss per share 

Earnings 
(£2.4m)

Shares 

Per share

  859,702,000

(£2.4m)  859,702,000 

(0.3p)

Note: In 2004 share options were not included in the computation of diluted loss per share due to them being anti-dilutive. As a result the basic loss per share is equal to 
the diluted loss per share. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

43

£m

–
102.6
(6.6)
96.0

96.0
15.3
10.8
122.1

–

122.1
96.0
–

10   GOODWILL

Cost
At 1 January 2004 
Recognised on acquisition of subsidiaries 
Exchange differences 
At 31 December 2004 

At 1 January 2005 
Recognised on acquisition of subsidiaries 
Exchange differences 
At 31 December 2005 

Accumulated impairment losses
At 1 January 2004 and 31 December 2004 and 2005 

Net book value
At 31 December 2005 
At 31 December 2004 
At 1 January 2004 

The recoverability of goodwill attributed to the USA was calculated on 31 October 2005 by comparing the net book value of goodwill to the fair value 
of the USA. The fair value is computed by allocating the total market capitalisation of the Group to the USA.

11   OTHER INTANGIBLE ASSETS

Cost
At 1 January 2004 
Additions at cost 
Acquisition of subsidiaries 
Exchange rate movements 
At 31 December 2004 

At 1 January 2005 
Additions at cost 
Acquisition of subsidiaries 
Disposals 
Exchange rate movements 
At 31 December 2005 

Amortisation
At 1 January 2004 
Amortisation charge for the year 
Exchange rate movements 
At 31 December 2004 

At 1 January 2005 
Amortisation charge for the year 
Exchange rate movements 
At 31 December 2005 

Net book value
At 31 December 2005 
At 31 December 2004 
At 1 January 2004 

Brand 
£m 

Customer lists 
£m 

Software 
£m 

– 
– 
36.8 
(2.6) 
34.2 

34.2 
– 
– 
– 
3.7 
37.9 

– 
0.7 
– 
0.7 

0.7 
1.9 
– 
2.6 

35.3 
33.5 
– 

– 
– 
2.0 
– 
2.0 

2.0 
– 
1.1 
– 
0.2 
3.3 

– 
0.3 
– 
0.3 

0.3 
1.1 
0.1 
1.5 

1.8 
1.7 
– 

5.9 
0.4 
2.0 
(0.2) 
8.1 

8.1 
0.5 
– 
(0.2) 
0.5 
8.9 

5.7 
0.4 
– 
6.1 

6.1 
0.8 
0.2 
7.1 

1.8 
2.0 
0.2 

Total
£m

5.9
0.4
40.8
(2.8)
44.3

44.3
0.5
1.1
(0.2)
4.4
50.1

5.7
1.4
–
7.1

7.1
3.8
0.3
11.2

38.9
37.2
0.2

 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

12   PROPERTY, PLANT AND EQUIPMENT

Furniture,
ﬁ ttings and
motor vehicles 
£m 

Computers 
£m 

Cost
At 1 January 2004 
Additions 
Acquisition of subsidiaries 
Disposals 
Exchange rate movements 
At 31 December 2004 

At 1 January 2005 
Additions 
Acquisition of subsidiaries 
Disposals 
Exchange rate movements 
At 31 December 2005 

Accumulated depreciation
At 1 January 2004 
Charge for the year 
Impairment losses (see note 5) 
Disposals 
Exchange rate movements 
At 31 December 2004 

At 1 January 2005 
Charge for the year 
Disposals 
Exchange rate movements 
At 31 December 2005 

Net book value
At 31 December 2005 
At 31 December 2004 
At 1 January 2004 

199.7 
8.4 
38.0 
(3.3) 
(8.8) 
234.0 

234.0 
17.7 
2.3 
(15.3) 
14.1 
252.8 

134.7 
28.2 
3.2 
(2.7) 
(3.7) 
159.7 

159.7 
24.1 
(13.8) 
7.9 
177.9 

74.9 
74.3 
65.0 

Additions include £1.9 million in respect of assets acquired under ﬁ nance leases (2004: £3.7 million).

The net book value of furniture, ﬁ ttings and motor vehicles include amounts held under ﬁ nance leases as follows:

Cost 
Accumulated depreciation 
Net book value 

13   TRADE AND OTHER RECEIVABLES

Trade receivables 
Amounts owed by joint ventures and associate 
Other receivables 
Prepayments and accrued income 
VAT recoverable 
Total current 

14.8 
0.6 
0.9 
(0.6) 
(0.3) 
15.4 

15.4 
1.7 
– 
(0.5) 
0.5 
17.1 

12.9 
1.5 
– 
(0.5) 
(0.3) 
13.6 

13.6 
1.5 
(0.2) 
0.5 
15.4 

1.7 
1.8 
1.9 

2005 
£m 
51.9 
(45.6) 
6.3 

2005 
£m 
46.1 
5.5 
26.7 
18.1 
3.2 
99.6 

Total
£m

214.5
9.0
38.9
(3.9)
(9.1)
249.4

249.4
19.4
2.3
(15.8)
14.6
269.9

147.6
29.7
3.2
(3.2)
(4.0)
173.3

173.3
25.6
(14.0)
8.4
193.3

76.6
76.1
66.9

2004
£m
47.4
(37.7)
9.7

2004
£m
34.8
5.1
22.0
13.0
1.1
76.0

 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

45

14   TRADE AND OTHER PAYABLES

Trade payables 
Other tax and social security 
Deferred landlord contributions 
Rent accruals 
Other accruals 
Other creditors 
Total current 

Accruals and deferred income 
Rent accruals 
Unamortised ﬁ nancing fees 
Other creditors 
Total non-current 

2005 
£m 
20.0 
7.1 
2.0 
6.4 
27.5 
10.8 
73.8 

2005 
£m 
1.7 
25.6 
– 
0.6 
27.9 

15   BORROWINGS
The Group’s total loan and borrowing position at 31 December 2005, and at previous year-end had the following maturity proﬁ les:

Bank loans and other loans

Repayments fall due as follows
Amounts falling due after more than one year:
In more than one year but no more than two years 
In more than two years but not more than ﬁ ve years 
In more than ﬁ ve years (a) 
Total non-current 
Total current 
Total bank loans and other loans 

2005 
£m 

0.1 
0.3 
5.0 
5.4 
24.5 
29.9 

(a) Loans not wholly repayable within ﬁ ve years total £5.0 million and mature in 2012. The average year-end interest on these loans is 8.6% (2004: 8.4%).

Obligations under ﬁ nance leases
The maturity of the Group’s ﬁ nance obligations is as follows:

Amounts payable
Within one year or on demand 
In more than one year but not more than two years 
In more than two years but not more than ﬁ ve years 
In more than ﬁ ve years 

Less: ﬁ nance charges allocated to future periods 
Present value of future minimum lease payments 

Total current 
Total non-current 

2005 
£m 

5.2 
2.7 
1.1 
0.1 
9.1 
(0.9) 
8.2 

4.8 
3.4 

2004
£m
19.2
4.4
1.0
10.1
24.1
5.3
64.1

2004
£m
1.0
21.1
(4.1)
3.3
21.3

2004
£m

7.3
34.9
13.6
55.8
8.3
64.1

2004
£m

7.5
4.8
2.2
0.1
14.6
(1.4)
13.2

7.3
5.9

 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

16   PROVISIONS FOR LIABILITIES AND CHARGES

At 1 January 
Provided in the period 
Utilised in the period 
Provisions released 
Exchange differences 

At 31 December 

Analysed between:
Current 
Non-current 

The above provision is in respect of onerous leases and closure provisions.

17   PROVISION FOR DEFICIT ON JOINT VENTURES AND ASSOCIATE

At 1 January 2005 
Additions 
Share of proﬁ t/(losses) 
Exchange rate movements 
At 31 December 2005 

Entity 
Associate
Regus Holdings (UK) Limited 
Joint ventures
Regus Equity Business Centers L.L.C. 
Skyport International Ing Vastgoed Beleggingen WTC1 
Skyport International Ing Vastgoed Beleggingen WTC2 
Regus Istanbul Is Merkezi Isletmeciligi AS 

Country 

England 

USA 
Netherlands 
Netherlands 
Turkey 

2005 
£m 
21.9 
2.3 
(7.2) 
(2.0) 
0.1 

15.1 

7.2 
7.9 

Investment in 
UK associate 
£m 
(4.0) 
– 
0.2 
– 
(3.8) 

Investments
in joint ventures 
£m 
(1.8) 
0.1 
(0.2) 
(0.2) 
(2.1) 

2004
£m
52.6
2.7
(32.1)
(0.6)
(0.7)

21.9

13.0
8.9

Total
£m
(5.8)
0.1
–
(0.2)
(5.9)

2005 
% 

42 

50 
50 
50 
30 

Ownership

2004
%

42

50
50
–
–

The following information is given in respect of Regus Holdings (UK) Limited, which became an associate on 31 December 2002. 2004 is restated 
under IFRS.

The Group’s interest in the ordinary shares of the associate equates to 42%. The results stated below are the results of the UK associate and do 
not represent the effective share of 42%.

UK associate
Income statement
Turnover 
Proﬁ t/(loss) before tax 
Tax  
Proﬁ t/(loss) after tax 

Net liabilities
Fixed assets 
Current assets 
Current liabilities 
Non-current liabilities 
Net liabilities 

2005 
£m 

2004
£m

161.4 
0.5 
– 
0.5 

36.2 
72.6 
(116.0) 
(1.9) 
(9.1) 

156.4
(7.9)
0.7
(7.2)

41.9
66.2
(114.0)
(3.8)
(9.7)

 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

47

18   SHARE CAPITAL
(a) Ordinary equity share capital

Authorised
Ordinary 5p shares 

Issued and fully paid up:
At 1 January 

Issued during 2004
Placing and Open Offer 
At 31 December 

(b) Non-equity £1 redeemable preference shares

Allotted and called up
5p shares 

2005 

Nominal value 
£m 

Number 

2004

Nominal value
£m

Number 

 1,600,000,000 

80.0  1,600,000,000 

80.0

  984,792,040 

49.2  787,833,632 

39.4

– 
  984,792,040 

–  196,958,408 
49.2  984,792,040 

9.8
49.2

2005 

Nominal value 
£m 

Number 

2004

Nominal value
£m

Number 

– 

– 

50,000 

0.1

On 31 December 2005, the preference shares were redeemed in full at par out of the distributable proﬁ ts of the Company.

19   ANALYSIS OF NET FINANCIAL ASSETS

Cash and cash equivalents 

Debt due after one year 
Debt due within one year 
Unamortised portion of discount and ﬁ nancing fees 
Finance leases due after one year 
Finance leases due within one year 

Net ﬁ nancial assets 

At 1 Jan 2005 
£m 
82.3 

Cash ﬂ ow 
£m 
(10.4) 

Non-cash 
changes 
£m 
– 

Exchange
movements 
£m 
2.2 

At 31 Dec 2005
£m
74.1

(55.8) 
(8.3) 
4.1 
(5.9) 
(7.3) 
(73.2) 
9.1 

38.2 
1.2 
– 
2.2 
5.9 
47.5 
37.1 

16.2 
(16.5) 
(4.3) 
0.7 
(2.9) 
(6.8) 
(6.8) 

(4.0) 
(0.9) 
0.2 
(0.4) 
(0.5) 
(5.6) 
(3.4) 

(5.4)
(24.5)
–
(3.4)
(4.8)
(38.1)
36.0

Cash and cash equivalents balances held by the Group that are not available for use amounted to £19.1 million in 2005 (2004: £18.1 million).  
This cash serves as collateral against certain obligations of the Group.

Cash not available for use at 31 December 2005 includes cash held on deposit of which £3.1 million (December 2004: £2.7 million) relates to 
collateral against bank loans; £14.1 million (December 2004: £13.5 million) relates to deposits which are held by banks and landlords as security 
against lease commitments by Regus operating companies and £1.9 million (December 2004: £1.9 million) held by the ESOP Trust. These amounts 
are blocked and not available for use by the business.

Non-cash changes comprise new ﬁ nance leases, amortisation of deferred ﬁ nance fees, acquired debt and movements between categories.

20   FINANCIAL INSTRUMENTS
The objectives, policies and strategies applied by the Group with respect to ﬁ nancial instruments are determined at Group level. Exposure to credit, 
interest rate and currency risks arise in the normal course of business. The principal ﬁ nancial instruments used by the Group to ﬁ nance its operations 
are cash and loans.

Credit risk
A diversiﬁ ed customer base and requirement for customer deposits and payments in advance on workstation contracts minimizes the Group’s 
exposure to customer credit risk.

Cash assets, borrowings and derivative ﬁ nancial instruments are only transacted with counterparties of sound credit ratings, and management 
does not expect any counterparty to fail to meet its obligations.

 
   
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
   
 
 
48

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

20   FINANCIAL INSTRUMENTS CONTINUED
Interest rate risk
The Group’s debt is held at variable interest rates because further early repayment of the debt is probable. Surplus cash balances are invested to 
achieve maximum interest returns on a day to day basis. 

Foreign currency risk
The Group’s exposure to currency risk at a transactional level is minimal as the majority of day to day transactions of overseas subsidiaries are 
carried out in local currency.

The majority of the Group’s net assets are in US dollars and euros, and the Group limits the translation exposure and resulting impact on 
shareholders’ funds by borrowing in US dollars. The Group does not hedge the translation effect of exchange rate movements on the income statement.

Derivative ﬁ nancial instruments
Historically the Group has occasionally used derivative ﬁ nancial instruments to hedge its exposure to foreign currency and interest rate ﬂ uctuations, 
although natural hedges limit the exposure to these risks. At 31 December 2005 there were no derivative ﬁ nancial instruments outstanding. 

No transactions of a speculative nature are undertaken.

Effective interest rates and repricing analysis
In respect of income-earning ﬁ nancial assets and interest-bearing ﬁ nancial liabilities, the following table indicates their effective interest rates at the 
balance sheet date and the periods in which they reprice.

As at 31 December 2005

Cash and cash equivalents 
Loan payable to UK associate 
Finance lease liabilities 
Secured bank loans 
Other loans and overdrafts 
Net ﬁ nancial assets 

As at 31 December 2004

Cash and cash equivalents 
Loan payable to UK associate 
Finance lease liabilities 
Secured bank loans 
Other loans and overdrafts 
Unauthorised portion of discount and ﬁ nancing fees 
Net ﬁ nancial assets 

Effective 
interest rate 
% 
3.0 
8.6 
8.6 
9.9 
9.3 

Effective 
interest rate 
% 
1.7 
8.4 
8.7 
8.1 
9.0 
0.0 

Total 
£m 
74.1 
(5.0) 
(8.2) 
(22.5) 
(2.4) 
36.0 

Total 
£m 
82.3 
(5.0) 
(13.2) 
(55.8) 
(3.3) 
4.1 
9.1 

Less than 
1 year 
£m 
74.1 
(5.0) 
(4.8) 
(22.5) 
(2.4) 
39.4 

Less than 
1 year 
£m 
82.3 
(5.0) 
(7.3) 
(55.8) 
(3.3) 
4.1 
15.0 

1-2 years 
£m 
– 
– 
(2.4) 
– 
– 
(2.4) 

1-2 years 
£m 
– 
– 
(3.7) 
– 
– 
– 
(3.7) 

2-5 years 
£m 
– 
– 
(0.9) 
– 
– 
(0.9) 

2-5 years 
£m 
– 
– 
(2.1) 
– 
– 
– 
(2.1) 

More than
5 years
£m
–
–
(0.1)
–
–
(0.1)

More than
5 years
£m
–
–
(0.1)
–
–
–
(0.1)

Sensitivity analysis
At 31 December 2005 it is estimated that a general increase of one percentage point in interest rates would increase the Group’s proﬁ t before tax 
by approximately £0.4 million (2004: £0.1 million).

It is estimated that a general increase of one percentage point in the value of the US dollar against other foreign currencies would have decreased 
the Group’s proﬁ t before tax by approximately £0.3 million for the year ended 31 December 2005 (2004: £nil). It is estimated that a general increase 
of one percentage point in the value of the euro against other foreign currencies would have decreased the Group’s proﬁ t before tax by approximately 
£0.2 million for the year ended 31 December 2005 (2004: £0.1 million). 

Fair value disclosures
The fair values together with the carrying amounts shown in the balance sheet are as follows:

Cash and cash equivalents 
Trade and other receivables 
Loan payable to UK associate 
Finance lease liabilities 
Secured bank loans 
Other loans and overdrafts 
Trade and other payables 

Unrecognised gain 

  Carrying amount 
£m 
74.1 
99.6 
(5.0) 
(8.2) 
(22.5) 
(2.4) 
(73.8) 
61.8 

2005 
Fair value 
£m 
74.1 
99.6 
(5.0) 
(7.0) 
(22.5) 
(2.4) 
(73.8) 
63.0 
1.2 

Carrying amount 
£m 
82.3 
76.0 
(5.0) 
(13.2) 
(55.8) 
(3.3) 
(64.1) 
16.9 

2004
Fair value
£m
82.3
76.0
(5.0)
(10.6)
(55.8)
(3.3)
(64.1)
19.5
2.6

 
   
 
 
 
 
   
 
   
 
 
   
 
 
 
 
   
 
   
 
 
   
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
Regus Report & Accounts 2005

49

20   FINANCIAL INSTRUMENTS CONTINUED
Summary of methods and assumptions
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reﬂ ect the fair value.

Finance lease liabilities
The fair value of ﬁ nance leases has been calculated by discounting future cash ﬂ ows at the Group’s weighted average cost of capital.

Loans and overdrafts
The fair value of bank loans, overdrafts and other loans approximates to the carrying value because interest rates are at ﬂ oating rates where 
payments are reset to market rates at intervals of less than one year.

Gains and losses on hedges
There were no off-balance sheet (unrecognised) or on-balance sheet (deferred) gains or losses in respect of ﬁ nancial instruments used as hedges 
at the end of the year.

Committed borrowing facilities

At 31 December 2005 
At 31 December 2004 

Principle 
£m 
44 
76 

Available
£m
15
13

Principal committed facilities include US $64.0 million (2004: US $132.0 million) of senior credit facilities, which the Group entered into in 2004, 
of which US $25.0 million (2004: US $25.0 million) is available. 

On 13 March 2006, the Group signed a new ﬁ ve year £100 million revolving credit facility agreement. 

Foreign currency exposure as at 31 December 2005
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 consolidated statement of 
changes in equity.

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 income statement of the Group companies and 
the Group.

31 December 2005
Functional currency of Group operation
Euro 
Sterling 
US dollar 
Others 

31 December 2004
Functional currency of Group operation
Euro 
Sterling 
US dollar 
Others 

Net foreign currency monetary assets/(liabilities)

Euro 
£m 

Sterling 
£m 

US dollar 
£m 

Others 
£m 

– 
(3.6) 
(0.3) 
(0.6) 
(4.5) 

– 
(4.2) 
– 
(0.1) 
(4.3) 

– 
– 
(0.2) 
– 
(0.2) 

1.9 
– 
– 
– 
1.9 

0.6 
3.6 
– 
(6.7) 
(2.5) 

0.6 
(1.8) 
– 
(4.0) 
(5.2) 

0.7 
(1.4) 
2.9 
3.6 
5.8 

0.5 
(3.7) 
0.7 
0.8 
(1.7) 

Total
£m

1.3
(1.4)
2.4
(3.7)
(1.4)

3.0
(9.7)
0.7
(3.3)
(9.3)

 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
50

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

21   SHARE BASED PAYMENTS
Regus Group Share Option Plan
During 2004 the Group established the Regus Group Share Option Plan which entitles executive directors and key management to share options 
in Regus Group plc.

The table below presents the options outstanding and their exercise price together with an analysis of the movements in the number of options 
during the year.

23/07/2004 
08/09/2004 

Date of grant  Numbers granted 
4,106,981 
3,884,170 
7,991,151 

Weighted 
average 
exercise price 
per share 
p 
57.00 
64.75 
60.37 

Lapsed 
nil 
(729,227) 
(729,227) 

At 31 Dec 2005 
4,106,981 
3,154,943 
7,261,924

Exercisable from 
23/07/2007 
08/09/2007 

Expiry date
23/07/2014
08/09/2014

Total 

Performance conditions for share options
The plan includes certain performance criteria that need to be met in order for share options to vest. A proportion of the share options vest as 
shown below should the basic earnings per share, adjusted for non-recurring items and goodwill and intangible amortisation exceed targets linked 
to the Retail Price Index. The basic earnings per share for perfomance purposes was 1p. No options are exercisable at the year-end.

Target over performance period 
RPI  
RPI + 3% 
RPI + 4% 
RPI + 5% 
RPI + 6% 

Portion of share options vested
20%
40%
60%
80%
100%

The share options are valued using the Black Scholes model. The inputs to the model are as follows:

Share price on grant date 
Exercise price 
Expected volatility 
Option life 
Expected dividend 
Fair value of option at time of grant 
Risk free interest rate 

July 2004 
57.00p 
57.00p 
59.11% 
3 years 
nil 
25.0p 
5.1% 

Grant date

September 2004
64.75p
64.75p
59.06%
3 years
nil
28.0p
5.1%

The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices.

Regus Group plc Co-Investment Plan (CIP) and Long Term Incentive Plan (LTIP)

Plan   
LTIP 

Date of grant 
03/11/2005 

Number of
awards granted 
3,723,235 

Lapsed 
nil 

At 31 Dec 2005 
3,723,235 

Release date
03/11/2008

The fair value of services received in return for share based payments are measured by reference to the fair value of the equity instruments granted. 
No awards are exercisable at the year-end.

The LTIP/CIP awards are valued using the Monte Carlo method.

 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
   
 
   
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
Regus Report & Accounts 2005

51

CIP 
(a) 
nil 
60,000 
29 
3 years 
nil 
(a) 
4.4670% 

LTIP (b)
92.25p
nil
60,000
29
3 years
nil
65.0p
4.4670%

21   SHARE BASED PAYMENTS CONTINUED
The inputs to the model are as follows:

Share price on grant date 
Exercise price 
Number of simulations 
Number of companies 
Award life 
Expected dividend 
Fair value of award at time of grant 
Risk free interest rate 

(a) The CIP awards will be granted on the 21 March 2006 and will have a release date of 21 March 2009. There is no expiry date and therefore remaining contractual 

life on the basis that the awards release immediately.

(b) The LTIP awards have a release date of 3 November 2008. There is no expiry date and therefore remaining contractual life on the basis that the awards release 

immediately.

The performance conditions for the grant of awards under the LTIP are set out in the following table:

Growth in FCF per share
10% 
15% 
20% 
25% 

11p 

12p 

13p 

14p

EPS (p) for the year ending 31 Dec 2008

6% 
13% 
19% 
25% 

13% 
25% 
38% 
50% 

19% 
38% 
56% 
75% 

25%
50%
75%
100%

Note: % denotes the % of LTIP Award which will be released at the end of the performance period.

In addition, no awards will be released unless the Company’s TSR is at least at the median when compared against that of the companies 
comprising the FTSE 350 Support Services Sector at the date of grant.

It is recognised by the Remuneration Committee that the additional EPS targets represent a highly challenging goal and consequently in determining 
whether they have been met the Committee will exercise its discretion. The overall aim is that the relevant EPS targets must have been met on a run 
rate or underlying basis. As such an adjusted measure of EPS will be calculated designed to assess the underlying performance of the business. 

While the Remuneration Committee reserves the right to adjust EPS as it sees ﬁ t at the time, by way of example, the following adjustments are 
currently anticipated:

(cid:127)  In a growth company such as Regus, costs are necessarily incurred in one year to drive proﬁ ts in future years. As such it is important to ensure 
  management is not incentivised to cut back on these investments to meet EPS targets in any one year. Accordingly those costs, incurred in the 
  vesting year, which it considers necessary to drive future growth will be excluded from the EPS calculation. These would include, inter alia, the 
  costs of the business development departments, excess marketing expenditures and current year losses from investing in new locations.

(cid:127)  Any one-off or non-recurring costs will be excluded.

(cid:127)  It is expected that in the period between 2006 and 2008 the cash tax rate will rise as cumulative tax losses are utilised thereby increasing 
  progressively the challenge of achieving a 14p EPS target. This will then be further complicated by the need to recognise deferred tax assets as 
the business strengthens reducing the accounting rate of tax in one year and increasing it in the next. To provide greater clarity and incentive to 

  management EPS will be calculated based upon the cash tax rate up to a maximum of 30%.

(cid:127)  The Remuneration Committee is of the opinion that the EPS and free cash ﬂ ow performance targets are a transparent and accurate measure 
  of the Company’s performance at this time and are the key corporate metrics for driving long term shareholder value. In addition, the TSR 
  condition will ensure that executives are encouraged to focus on ensuring that the Company’s return to shareholders is competitive compared 

to comparable companies.  

As mentioned above, awards under the CIP in respect of the bonus paid for the year ended 31 December 2005 will be made subsequent to the 
publication of this report. However, the maximum number of awards granted will be based on the price of an ordinary share at the time of grant 
and the monetary value will not exceed 50% of basic salary. Full details of the levels of award and performance conditions will be disclosed in the 
Committee’s Remuneration Report for the year ending 31 December 2006.

 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
52

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

22   ACQUISITIONS
Details of all acquisitions made during 2005 are set out in the following table:

Name 
Regus Shui On Center (Hong Kong) 
Regus Jongro Ltd (South Korea) 
Vantas Ciudad de Mexico, S de RL de CV 
Buffalo Acquisition Sub, LLC 
DelVal Acquisition Sub, LLC 
EOS Holdings SAS (formerly HQ France) 
Regus Strategic Consulting (Shanghai) Ltd 
Florida Business Centers Acquisition Sub, LLC 
HQ Global Workplaces, Inc (formerly Sienna) 
Insignia Acquisition Sub, LLC and Insignia Ofﬁ ce Centres (Vancouver), Inc 
Regus Executive Serviced Ofﬁ ce (Shanghai) Ltd 

All of the acquisitions above are providers of fully serviced business centres.

Purchase
consideration 
including costs 
£m 
0.2 
– 
3.0 
0.3 
6.2 
0.7 
0.1 
1.8 
0.2 
2.1 
0.3 

Percentage of
equity and voting 
rights aquired 
100% 
100% 
100% 
100% 
100% 
100% 
100% 
100% 
100% 
100% 
100% 

Date of
acquisition
01/01/2005
01/03/2005
06/05/2005
01/09/2005
01/09/2005
30/09/2005
30/09/2005
01/11/2005
01/12/2005
01/12/2005
06/12/2005

On 28 February 2005 the Group acquired the 35% minority interest holding in Regus Business Centres Italia Spa (now Regus Business Centres Italia 
Srl) for £0.5 million. On 22 November 2005 the Group acquired the 40% minority interest holding of Regus International Holding BV for £1.3 million. 

All acquisitions made in the year have been aggregated as no single acquisition is material. These transactions have been accounted for using the 
purchase method of accounting.

Book value 
£m 

Fair value
adjustments 
£m 

Fair value
£m

Net assets acquired
Property, plant and equipment 
Fair value of lease adjustments 
Customer list 
Trade and other receivables 
Trade and other payables 
Bank loans 
Deferred tax assets 
Other 

Goodwill 

Total consideration
Satisﬁ ed by:
Cash 
Directly attributable costs 

The above fair values are provisional.

Net cash outﬂ ow arising on acquisition
Cash consideration and directly attributable costs 
Cash and cash equivalents acquired 

2.2 
– 
– 
2.9 
(5.6) 
(0.4) 
0.2 
0.5 
(0.2) 

0.1 
0.5 
1.1 
– 
– 
– 
– 
– 
1.7 

2.3
0.5
1.1
2.9
(5.6)
(0.4)
0.2
0.5
1.5

15.3

16.7
0.1
16.8

Fair value
£m

16.8
(0.1)
16.7

If the above acquisitions had occurred on 1 January 2005, the revenue and net retained loss arising from these acquisitions would have been 
£9.6 million and £0.6 million respectively. In the year these acquisitions contributed revenue of £5.7 million and net retained loss of £0.2 million. 

The following cash generating unit (CGU) has signiﬁ cant amount of goodwill:

USA 

2005 
£m 
111.3 

2004
£m
95.8

 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

53

22   ACQUISITIONS CONTINUED
Acquisition of HQ Global Holdings Inc (HQ)
On 20 August 2004, the Group acquired HQ, a company incorporated in the USA. The total consideration for the acquisition was £173.5 million after 
accounting for expenses and professional fees.

The net assets of HQ on acquisition and the fair vales were as follows:

Intangible assets – brand (a) 
Customer list and software 
Property, plant and equipment (b) 
Working capital (c and d) 
Current and deferred tax 
Cash and cash equivalents 
Net assets acquired 

Consideration
Cash (including costs of £0.5m) 
Goodwill 

Book values 
of acquired 
business 
£m 
– 
2.0 
42.4 
(20.8) 
(2.0) 
15.9 
37.5 

To align 
accounting 
policies 
£m 
– 
– 
– 
(0.1) 
– 
– 
(0.1) 

Adjustments

Revaluations 
£m 
36.8 
2.0 
(3.6) 
(1.5) 
– 
– 
33.7 

Fair value
at date of
acquisition
£m
36.8
4.0
38.8
(22.4)
(2.0)
15.9
71.1

173.5
102.4

All consideration was paid in cash. There was no deferred consideration.

The accounting policy and fair value adjustments include:
(a) An independent valuation of the HQ brand name was conducted at the date of acquisition. “Relief from Royalty” approach was used as the valuation method. Under this 
  method the fair value is equal to the amount saved through the avoidance of royalty payments in perpetuity. A 3% royalty rate and 15% weighted average cost of capital 
  was used for the valuation.
(b) The valuation of property, plant and equipment was based on a cost and market valuation approach resulting in a fair value adjustment of £3.6 million.
(c) Incremental provision of £0.1 million was required to align HQ bad debt provision to Regus Group policy.
(d) Leasehold interest valuations were based on the difference between contract rent and market rent over the lease term discounted to net present value at a weighted 
  average cost of 15%.

Summary of results of HQ prior to acquisition
Set out below are summary proﬁ t and loss accounts of HQ. The pre acquisition period has been prepared under UK GAAP using HQ accounting 
policies, translated into sterling using the average rates for the respective period.

Sales 
Operating expenses 
Operating proﬁ t 
Interest 
Proﬁ t before tax 
Tax  
Proﬁ t attributable to HQ ordinary shares 

1 Jan 2004 to 
19 Aug 2004 
£m 
97.8 
(96.8) 
1.0 
(0.8) 
0.2 
– 
0.2 

20 Aug 2004 to
31 Dec 2004 
£m 
55.7 
(52.3) 
3.4 
– 
3.4 
– 
3.4 

Total
£m
153.5
(149.1)
4.4
(0.8)
3.6
–
3.6

HQ contributed £3.4 million to the Group’s net operating cash ﬂ ows and paid £1.8 million for capital expenditure in the post acquisition period ending 
31 December 2004.

There were no other recognised gains and losses other than those recognised in the proﬁ t and loss account.

Acquisition of Interlink Business Plaza – Korea
On 6 August 2004, the Group acquired Interlink Plaza in Korea for £0.2 million comprising £42,000 ﬁ xed assets and the balance being goodwill.  
There have been no material fair value adjustments.

23   CAPITAL COMMITMENTS

Contracts placed for future capital expenditure not provided in the ﬁ nancial statements 

2005 
£m 
5.1 

2004
£m
0.7

These commitments are in respect of ﬁ t out obligations on new centres opening in 2006. In addition our 42% share of the UK associate capital 
commitments amounted to £0.3 million at 31 December 2005 (2004: £0.6 million). 

 
   
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
54

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

24   NON-CANCELLABLE OPERATING LEASE COMMITMENTS
At 31 December 2005 the Group was committed to make the following payments in respect of operating leases:

Leases which expire:
Within one year 
Between two and ﬁ ve years 
After ﬁ ve years 

  Motor vehicles, 
plant and 
equipment 
£m 

Property 
£m 

190.0 
514.2 
151.9 
856.1 

5.6 
4.6 
– 
10.2 

2005 

Total 
£m 

195.6 
518.8 
151.9 
866.3 

Motor vehicles, 
plant and 
equipment 
£m 

6.5 
5.1 
– 
11.6 

Property 
£m 

173.5 
425.9 
150.4 
749.8 

2004

Total
£m

180.0
431.0
150.4
761.4

25   CONTINGENT LIABILITIES
The Group has bank guarantees and letters of credit held with certain banks amounting to £24.8 million (December 2004: £22.9 million). The Group 
acts as a guarantor for certain lease obligations of its UK associate.

26   RELATED PARTIES
During the year ended 31 December 2005 the Group received management fees of £3.6 million (2004: £3.7 million) from its joint venture entities and 
UK associate. Regus rented ofﬁ ce space from its associate incurring costs of £0.2 million (2004: £0.2 million). At 31 December 2005, £5.8 million 
(2004: £5.8 million) was due to the Group from the joint ventures and associate of which £0.3 million of this debt has been provided for at 
31 December 2005. At 31 December 2005 Regus had outstanding a loan from its associate amounting to £5.0 million (2004: £5.0 million).  
It incurred interest of £0.4 million (2004: £0.4 million) on the loan during the year.

27   PRINCIPAL GROUP COMPANIES
The Group’s principal subsidiary undertakings at 31 December 2005, their principal activities and countries of incorporation are set out below:

Name of undertaking 
Regus Business Centre SA 
Regus Centres Pty Ltd 
Regus Clarence Street Pty Ltd 
Regus Business Centre Melbourne Pty Ltd (a) 
Regus Business Centre GmbH 
Regus Belgium NV  
Skyport Bruxelles NV 
Regus Business Centre NV 
Regus do Brasil Ltda (a) 
Regus H Holdings Inc 
Regus Canadian Holding Corporation 
Regus Business Centre Ltd  
Regus Business Centres Canada Limited Partnership 
Insignia Partnership 
Insignia Ofﬁ ce Centres (Vancouver) Inc 
Regus Columbia Ltda 
Regus Business Centre Chile Ltda  
Regus Business Centre (Shanghai) Ltd (a) 
Regus Business Service Co Ltd  
Regus Business Services (Shanghai) Ltd (a) 
Regus Business Centre (Beijing) Ltd 
Regus Business Service (Dalian) Ltd 
Regus Strategic Consulting (Shanghai) Ltd 
Regus Business Service (Shenzhen) Ltd 
Regus Executive Serviced Ofﬁ ce (Shaghai) Ltd 

Country of incorporation 
Argentina 
Australia 
Australia 
Australia 
Austria 
Belgium 
Belgium 
Belgium 
Brazil 
British Virgin Islands 
Canada 
Canada 
Canada 
Canada 
Canada 
Columbia 
Chile 
China 
China 
China 
China 
China 
China 
China 
China 

Principal activity 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Holding 
Trading 
Trading 
Trading 
Trading 
Holding 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 

% of ordinary share and votes held
100
100
100
100
100
100
100
100
97
100
100
100
59
100
100
100
100
100
100
100
100
100
100
100
100

 
   
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
   
 
 
   
 
 
 
 
 
   
 
Regus Report & Accounts 2005

55

Principal activity 
Trading 
Trading 
Trading 
Holding 
Trading 
Trading 
Trading 
Trading 
Trading 
Management 
Holding 
Holding 
Holding 
Holding 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Holding 
Holding 
Trading 
Trading 
Trading 
Trading 
Holding 

% of ordinary share and votes held
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
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
100
100
100
100
100

27   PRINCIPAL GROUP COMPANIES CONTINUED

Name of undertaking 
Regus Business Centre sro (a) 
Regus Empiria sro (a) 
Regus Sydhavn Aps 
Regus Holding Denmark A/S 
Regus Kobenhavn Aps 
Regus Tuborg A/S 
Regus Business Centre Trading FZCO 
Regus Business Centre LLC (Egypt)  
Regus Business Centres (Holdings)  
Regus Management Ltd (a) 
Regus Investments Ltd 
Regus Limited (a) 
Regus H Holdings Ltd 
Regus H  
HQ Merc (UK) Management Limited 
HQ Merc (UK) Partnership Limited 
Regus Finland Oy  
Regus Roissy SAS (a) 
Regus Paris SAS (a) 
Regus Centre D’Affaires SAS (a) 
Regus Opera SAS (a) 
HQ Holdings SAS (a) 
Regus GmbH & Co KG (a) 
RBC Deutschland GmbH (a) 
Regus Verwaltungs GmbH (a) 
Regus Hellas SA (a) 
Regus Business Centre Ltd (a) 
Regus Business Services (Hong Kong) Ltd (a) 
Regus Kft  
Regus EMKE Kft (a) 
Regus Kalman Kft (a) 
Regus Business Centre Private Ltd (a) 
Regus Ofﬁ ce Centre Services Private Ltd (a) 
Europa Business Centre Ltd  
Regus Ireland Ltd (a) 
Regus Franchise International Ltd  
Regus Business Centre Ltd  
Regus Business Centre Srl  
Regus Business Centres Italia Srl  
Regus Japan KK  
Regus Luxembourg SA  
Regus Centres Sdn Bhd 
Regus Business Centre SA de CV 
Regus Services SA de CV 
Regus Mexico S de RL de CV (a) 
Centros Regus de Mexico SA de CV 
Centros de Negocious Regus SA de CV 
Centros Corporativos Regus SA de CV 
Regus Maroc SARL  
Regus Amsterdam BV 
Regus Business Centre BV 
Regus Netherlands BV (a) 
Regus International Holding BV (b) 
Satellite Business Centre Schiphol BV 
Skyport International BV 
Skyport Amsterdam BV 
Regus H Holdings Inc BV 

Country of incorporation 
Czech Republic 
Czech Republic 
Denmark 
Denmark 
Denmark 
Denmark 
Dubai 
Egypt 
England 
England 
England 
England 
England 
England 
England 
England 
Finland 
France 
France 
France 
France 
France 
Germany 
Germany 
Germany 
Greece 
Hong Kong 
Hong Kong 
Hungary 
Hungary 
Hungary 
India 
India 
Ireland 
Ireland 
Ireland 
Israel 
Italy 
Italy 
Japan 
Luxembourg 
Malaysia 
Mexico 
Mexico 
Mexico 
Mexico 
Mexico 
Mexico 
Morocco 
Netherlands 
Netherlands 
Netherlands 
Netherlands 
Netherlands 
Netherlands 
Netherlands 
Netherlands 

56

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

27   PRINCIPAL GROUP COMPANIES CONTINUED

Name of undertaking 
Regus Business Centre Ibsen AS 
Regus Business Centre Skoyen AS 
Regus Business Centre Nydalen AS 
Regus Business Centre Norge AS (a) 
Regus Business Centre (Panama) SA 
Regus Business Centre (Peru) SA 
Regus Business Centres Inc 
Regus Business Centre SP z.o.o. (a) 
Regus Plaza SP z.o.o. (a) 
Regus Wisniowy SP z.o.o. (a) 
Regus Business Centre Lda (a) 
LLC Regus Business Centre 
Regus Business Centre Avrora LLC (a) 
Regus Business Centre Capital Plaza LLC (a) 
Regus Centres Pte Ltd (a) 
Regus Business Services Marina Pte Ltd (a) 
Regus Business Centre Bratislava sro (a) 
Regus Korea Ltd (a) 
Regus Jongro Ltd (a) 
Regus Business Centre SA (a) 
Business Centre Gothenburg AB 
Business Centre Stockholm AB (a) 
Business Centre Sweden AB 
Regus Garda AB (a) 
Regus Solna Strand AB (a) 
Regus Lilla Bommen AB (a) 
Regus Uppsala AB (a) 
Regus Business Centre (S) SA 
Regus Centres (Thailand) Ltd (a) 
Regus Tunisie SARL 
Regus Is Merkezi Isletmeciligi Ltd Sirketi 
Regus Business Centres (a) 
Regus International Services SA 
Regus International Services LLC 
Regus Corporation (a) 
Regus Southeast Investments LLC 
Regus H Holdings LLC 
Regus Business Centre LLC 
Regus Business Centre Latin Corp 
Stratis Business Centres, Inc 
HQ Global Holdings LLC 
HQ Global Workplaces LLC 
HQ Subsidiaries LLC 
HQ Network Systems Inc 
Regus Management Group LLC 
Regus Business Centers LLC 
Regus Property Group, LLC 
Insignia Acquisition Sub LLC 
Delval Acquisition Sub LLC 
Buffalo Acquisition Sub, LLC 
Florida Business Centers Acquisition Sub LLC 
Regus Business Centre Venezuela CA 
Regus Centre (Vietnam) Ltd 

Country of incorporation 
Norway 
Norway 
Norway 
Norway 
Panama 
Peru 
Philippines 
Poland 
Poland 
Poland 
Portugal 
Russia 
Russia 
Russia 
Singapore 
Singapore 
Slovakia 
South Korea 
South Korea 
Spain 
Sweden 
Sweden 
Sweden 
Sweden 
Sweden 
Sweden 
Sweden 
Switzerland 
Thailand 
Tunisia 
Turkey 
Ukraine 
Uruguay 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
USA 
Venezuela 
Vietnam 

Principal activity 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Holding 
Trading 
Holding 
Trading 
Management 
Trading 
Holding 
Holding 
Holding 
Trading 
Management 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 

% of ordinary share and votes held
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100

(a) Shares held directly by Regus Group plc.
(b) Our South African business operates as a branch of this company.

Investments in Group subsidiaries are held at cost all of which are included within the consolidated results. The principal activity of all trading 
companies is the provision of fully serviced business centres. 

Regus Report & Accounts 2005

57

28   KEY JUDGMENTAL AREAS ADOPTED IN PREPARING THESE ACCOUNTS
The preparation of ﬁ nancial statements in accordance with IFRS requires management to make certain judgements and assumptions that 
effect reported amounts and related disclosures.

Valuation of intangibles and goodwill
We evaluate the fair value of goodwill and intangibles to assess potential impairments on an annual basis, or during the year if an event or other 
circumstance indicates that we may not be able to recover the carrying amount of the asset. We evaluate the fair value of goodwill at the reporting 
unit level and make that determination based upon future cash ﬂ ow projections, which assume certain growth projections which may or may not 
occur. We record an impairment loss for goodwill when the carrying value of the intangible asset is less than its estimated fair value.

Deferred tax assets 
We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other 
expectations about future outcomes. Changes in existing laws and rates, and their related interpretations, and future business results may affect 
the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax consequences represents 
management’s best estimate of future events that can be appropriately reﬂ ected in the accounting estimates. It is current Group policy to recognise 
a deferred tax asset if the entity has made a taxable proﬁ t in the previous year and is forecast to make a proﬁ t in the forthcoming year. Deferred tax 
assets are not recognised for the period in excess of 12 months from this year-end.

Onerous lease provisions
We have identiﬁ ed certain poor performing centres where the lease is considered onerous i.e. the Group does not expect to recover the unavoidable 
lease costs up to the ﬁ rst break point. The accounts include a provision for our estimate of the net amounts payable under the terms of the lease to 
the ﬁ rst break point, discounted at the Group weighted average cost of capital.

Dilapidations
Certain of our leases with landlords include a clause obliging the Group to hand the property back in the condition as at the date of signing the 
lease. The costs to bring the property back to that condition are not known until the Group exit the property so the Group estimates the costs at 
each balance sheet date. However, given that the nature of the changes made to properties are improvements, likely to be of value to the landlord 
and also taking into account the Group’s experience to date, no provision has been made for these potential costs at 31 December 2005.

29   RESTATEMENT OF FINANCIAL INFORMATION FOR 2004 UNDER IFRS
As stated in note 1, these are the Group’s ﬁ rst consolidated ﬁ nancial statements prepared in accordance with Adopted IFRSs.

The accounting policies set out in note 1 have been applied in preparing the ﬁ nancial statements for the year ended 31 December 2005, the 
comparative information presented in these ﬁ nancial statements for the year ended 31 December 2004 and in the preparation of an opening IFRS 
balance sheet at 1 January 2004 (the Group’s date of transition).

1 Analysis of impact
The tables below illustrate the impact of IFRS restatement on previously reported results under UK GAAP.

(a) Income statement

Group operating loss reported under UK GAAP 
Lease accounting 
Reclassify proﬁ t on sale of subsidiaries 
Share based payments 
Amortisation of goodwill 
Amortisation of intangible assets 

Proﬁ t from operations on an IFRS basis 
Share result of joint ventures 
Share of result of UK associate 
Net ﬁ nance costs 
Tax  

Loss for the period on an IFRS basis 

(a) Group operating loss reported under UK GAAP includes proﬁ t from sale of subsidiaries.
(b) The share of result of joint ventures and UK associate includes associated ﬁ nance costs and tax.

notes 

2.1 

2.2 
2.3(a) 
2.3(b) 

2.4 

2.5 

Year ended
31 Dec 2004
£m
(3.2)
2.8
0.1
(0.2)
2.0
(0.3)

1.2
(0.7)
(3.0)
(2.4)
2.6

(2.3)

 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58

Regus Report & Accounts 2005

NOTES TO THE ACCOUNTS

29   RESTATEMENT OF FINANCIAL INFORMATION FOR 2004 UNDER IFRS CONTINUED
(b) Equity

Equity reported under UK GAAP 
Lease accounting 
Goodwill and intangible assets 
Share of net liabilities of UK associate 
Deferred revenue – franchise fees 
Holiday pay 

Net assets/(liabilities) on an IFRS basis 

(c) Cash ﬂ ow

Net cash outﬂ ows from operating activities 
Tax and returns on investment and ﬁ nancing activity 
Cash outﬂ ows from investing activities 
Cash inﬂ ows from ﬁ nancing activities 
Decrease in cash and cash equivalents 

2 Notes on restatement

2.1 Lease accounting
The following differences were identiﬁ ed between UK GAAP and IFRS:

notes 

2.1 
2.3 
2.4 
2.6 
2.7 

notes 
2.8 
2.9 
3.0 
3.1 
3.2 

31 Dec 2004 
£m 
109.0 
(5.9) 
1.7 
(10.2) 
(0.8) 
(0.1) 

1 Jan 2004
£m
1.9
(8.7)
–
(9.4)
(0.8)
(0.1)

93.7 

(17.1)

Year ended 
31 Dec 2004 
IFRS 
£m 
(11.7) 
– 
(165.9) 
171.4 
(6.2) 

Year ended
1 Jan 2004
UK GAAP
£m
(6.8)
(3.2)
(167.6)
165.0
(12.6)

a  During the Group’s Chapter 11 process a number of lease contracts were renegotiated to a more favourable cost. Under UK GAAP, rent accruals
  were released to the proﬁ t and loss account when negotiations were completed. In contrast, IFRS requires rent accruals to be spread over the 
remaining lease term and consequently an adjustment has been made to reinstate these accruals in the transition balance sheet and recognise 
them over the lease term with a favourable impact to centre proﬁ tability.

b  Under UK GAAP, minimum lease payments (net of lease incentives) are spread on a straight line basis over the shorter of the period to the ﬁ rst 
  contractual break point or the ﬁ rst market rent review date. IFRS requires that, minimum lease payments be assessed over the period to the ﬁ rst 
  contractual break point only. As a result of this change, certain operating lease incentives are spread over a longer period and additional rental 
  periods are brought into the assessment of minimum lease payments. Consequently an adjustment has been made to increase the rent accrual 

in the transition balance sheet.

c  Under UK GAAP the Group made an accrual for rental costs which are dependent on centre performance (e.g. turnover or proﬁ tability) based on 
the best estimate of the future liability by spreading the expected cost over the lease term. Under IFRS accruals are only made for contingent 
rents in the period in which they arise. Consequently, an adjustment has been made to release accruals in the transition balance sheet relating to 
rentals that were anticipated but were not contractually due at that date.

The total impact of the adjustments described above is to instate an accrual of £8.7 million in the transition balance sheet and to reduce the charge 
for rent costs in 2004 by £2.8 million.

2.2 Share options
In accordance with IFRS 2 and the transitional exemption permitted by IFRS 1, the Group has recognised a charge of £0.2 million reﬂ ecting the fair 
value of outstanding share options granted to employees since 7 November 2002. The fair value has been calculated using a Black Scholes valuation 
model and is charged to income statement over the vesting period of the options.

2.3 Goodwill and intangible assets
There are two adjustments arising in relation to the acquisition of HQ, which effect the carrying value and amortisation of goodwill and intangible assets.

a  IFRS 3 prohibits the amortisation of goodwill but requires an impairment test to be carried out on an annual basis. Consequently the UK GAAP 
  amortisation charge of £2.0 million has been reversed.

b  IFRS requires certain intangible assets to be recognised separately when it is capable of being separated from the business or arises from 
  contractual or other legal rights. Accordingly, an intangible asset of £2.0 million representing the value of the customer list acquired with HQ has 
  been separately recognised. This is being amortised over a period of two years resulting in a 2004 charge of £0.3 million.

 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

59

29   RESTATEMENT OF FINANCIAL INFORMATION FOR 2004 UNDER IFRS CONTINUED
2.4 UK associate
The Group will continue to apply the equity method of accounting for its UK associate.

Changes to Group accounting policies, in particular lease accounting, when applied to the UK associate have the effect of increasing the reported 
loss of the UK associate and reducing net assets. The impact on the Group is to increase the share of the net loss in 2004 by £0.8 million and to 
reduce the carrying value of the UK associate in the transition balance sheet by £9.4 million.

2.5 Tax
Tax on an IFRS basis is restated to exclude tax attributable to the UK associate. The respective tax is now included within ‘Share of result of 
associate’. On an IFRS basis the tax credit for the year ended 31 December 2004 was £2.6 million compared with £2.9 million on a UK GAAP basis.

Due to the uncertainty of recovering tax losses the Group has not recognised the related deferred tax assets on either a UK GAAP or IFRS basis. 
None of the IFRS conversion adjustments result in a change in the position with regard to the recoverability of these losses and consequently there 
is no adjustment to the tax credit for the year.

2.6 Deferred revenue – franchise fees
Under UK GAAP, franchise fees are recognised as income in the period received. IFRS requires franchise fees charged for the use of continuing 
rights granted by the agreement, or for other services provided during the period of the agreement to be recognised as revenue as the services are 
provided or the rights used. The income recognised prior to 1 January 2004, which under IFRS is spread over the period of the franchise contract, 
amounted to £0.8 million and is unchanged at 31 December 2004.

2.7 Holiday pay
UK GAAP does not require the recognition of a holiday accrual for unpaid holiday carried over a period end. An accrual is only recognised where a 
liability to pay employees for holiday earned exists at the balance sheet date.

Under IFRS, full provision is made for paid leave accrued by employees and therefore an accrual of £0.1 million has been established in the opening 
balance sheet. There has been no movement in this accrual subsequent to the transition balance sheet.

2.8 Net cash outﬂ ows from operating activities
Under IFRS net cash ﬂ ows from operating activities include interest paid on ﬁ nance leases of £0.5 million, interest paid on credit facilities of £2.8 
million and tax paid of £1.6 million.

2.9 Tax and returns on investment and ﬁ nancing activity
Under UK GAAP tax and returns on investments and ﬁ nancing activity are separately disclosed in the cash ﬂ ow statement. Under IFRS tax paid, 
interest paid on ﬁ nance leases and interest paid on credit facilities is included in net cash ﬂ ows from operating activities. Interest received is 
included in cash outﬂ ows from investing activities. 

3.0 Cash outﬂ ows from investing activities
Under UK GAAP interest received of £1.7 million is classiﬁ ed separately under ﬁ nancing activities. Under IFRS interest received is included in cash 
outﬂ ows from investing activities.

3.1 Cash inﬂ ows from ﬁ nancing activities
Under UK GAAP liquid resources of £6.4 million are included within cash inﬂ ows from ﬁ nancing activities. Under IFRS liquid resources are not 
included in this category.

3.2 Movement in cash and cash equivalents
Under UK GAAP liquid resources of £6.4 million were shown separately as a movement in the cash ﬂ ow statement. Under IFRS this balance is in-
cluded within the deﬁ nition of cash and cash equivalents.

60

Regus Report & Accounts 2005

REGUS GROUP PLC
PARENT COMPANY ACCOUNTS

COMPANY BALANCE SHEET

Investments
Investment in subsidiaries 

Current assets
Debtors 
Cash at bank and in hand 

Total assets 

Creditors falling due within one year 

Total assets less current liabilities 
Amounts owed to Group undertakings 

Total liabilities 
Net assets 

Capital and reserves 
Share capital 
Share premium account 
Other reserves 
Proﬁ t and loss account 
Shareholder funds 

notes 

1 

2 

3

As at 
31 Dec 2005 
(UK GAAP) 

£m 

As at
31 Dec 2004
(UK GAAP)
Restated
£m

307.7 

304.3

93.0 
9.6 
102.6 

77.9
21.2
99.1

410.3 

403.4

(1.2) 

(20.5)

409.1 
(25.6) 

(26.8) 
383.5 

49.2 
153.5 
0.1 
180.7 
383.5 

382.9
–

(20.5)
382.9

49.3
153.5
–
180.1
382.9

ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s 
ﬁ nancial statements.

Basis of preparation
The ﬁ nancial statements have been prepared in accordance with applicable United Kingdom accounting standards and under the historical cost 
accounting rules.

The Company is included in the consolidated accounts of Regus Group plc.

The Company has taken advantage of the exemption contained in FRS8 and has therefore not disclosed transactions or balances with entities 
which form part of the Group.

In accordance with FRS1 (revised), the Company is exempt from the requirement to prepare a cash ﬂ ow statement within these ﬁ nancial statements. 

As permitted by Section 230 of the Companies Act 1985, the proﬁ t and loss account of the Company has not been included as part of these 
accounts. The Company’s proﬁ t for the ﬁ nancial year was £0.7 million (2004: £33.1 million)

Investments
Fixed asset investments are stated at cost less provision for impairment.

Taxation
The charge for taxation is based on the proﬁ t 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.

Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities 
denominated in foreign currencies are translated using the rate ruling at the balance sheet date and the gains or losses on translation are included 
in the proﬁ t and loss account.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regus Report & Accounts 2005

61

£m
304.3
4.4
(1.0)
307.7

1  INVESTMENTS

At 1 January 2005 
Additions 
Provision for impairment 
At 31 December 2005 

The Company’s principal subsidiary undertakings at 31 December 2005, their principal activities and countries of incorporation are set out below:

Name of undertaking 
Regus Business Centre Melbourne Pty Ltd  
Regus Clarence Street Pty Ltd 
Regus do Brasil Ltda 
Regus Business Services (Shanghai) Ltd  
Regus Business Centre (Shanghai) Ltd  
Regus Business Centre sro  
Regus Empiria sro  
Regus Management Ltd  
Regus Limited  
Regus Roissy SAS  
Regus Paris SAS  
Regus Centre D’Affaires SAS 
Regus Opera SAS 
HQ Holdings SAS 
Regus GmbH & Co KG 
RBC Deutschland GmbH  
Regus Verwaltungs GmbH  
Regus Hellas SA 
Regus Business Centre Ltd 
Regus Business Services (Hong Kong) Ltd 
Regus EMKE Kft 
Regus Kalman Kft 
Regus Business Centre Private Ltd 
Regus Ofﬁ ce Centre Services Private Ltd 
Regus Ireland Ltd  
Regus Mexico S de RL de CV 
Regus Netherlands BV 
Regus International Holding BV 
Regus Business Centre Norge AS 
Regus Business Centre Sp z.o.o.  
Regus Plaza SP z.o.o. 
Regus Wisniowy SP z.o.o. 
Regus Business Centre Lda 
Regus Business Centre Avrora LLC 
Regus Business Centre Capital Plaza LLC 
Regus Centres Pte Ltd 
Regus Business Services Marina Pte Ltd 
Regus Business Centre Bratislava sro  
Regus Korea Ltd 
Regus Jongro Ltd 
Regus Business Centre SA  
Business Centre Gothenburg AB 
Business Centre Stockholm AB 
Business Centre Sweden AB 
Regus Garda AB 
Regus Solna Strand AB 
Regus Lilla Bommen AB 
Regus Uppsala AB 
Regus Centres (Thailand) Ltd  
Regus Business Centres  
Regus Corporation  

Country of incorporation 
Australia 
Australia 
Brazil 
China 
China 
Czech Republic 
Czech Republic 
England 
England 
France 
France 
France 
France 
France 
Germany 
Germany 
Germany 
Greece 
Hong Kong 
Hong Kong 
Hungary 
Hungary 
India 
India 
Ireland 
Mexico 
Netherlands 
Netherlands 
Norway 
Poland 
Poland 
Poland 
Portugal 
Russia 
Russia 
Singapore 
Singapore 
Slovakia 
South Korea 
South Korea 
Spain 
Sweden 
Sweden 
Sweden 
Sweden 
Sweden 
Sweden 
Sweden 
Thailand 
Ukraine 
USA 

Principal activity 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Management 
Holding 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Holding 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Trading 
Holding 

% of ordinary share and votes held
100
100
97
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
40
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
62

Regus Report & Accounts 2005

REGUS GROUP PLC
PARENT COMPANY ACCOUNTS

2  CREDITORS FALLING DUE WITHIN ONE YEAR

Amounts due to Group undertakings 
Other creditors 

3  CAPITAL AND RESERVES

At 1 January 2005 
Prior year dividend from a Group company 
At 1 January 2005 (restated) 

Preference share redemption 
Retained proﬁ t for year 
At 31 December 2005 

2005 
£m 
1.0 
0.2 
1.2 

2004
£m
20.5
–
20.5

Share 
capital 
£m 
49.3 
– 
49.3 

(0.1) 
– 
49.2 

Share 
premium 
account 
£m 
153.5 
– 
153.5 

– 
– 
153.5 

Capital 
redemption 
reserve 
£m 
– 
– 
– 

0.1 
– 
0.1 

Proﬁ t and 
loss reserve 
(distributable) 
£m 
1.0 
– 
1.0 

Proﬁ t and 
loss reserve 
(non-distributable) 
£m 
31.9 
147.2 
179.1 

(0.1) 
0.7 
1.6 

– 
– 
179.1 

Total
£m
235.7
147.2
382.9

(0.1)
0.7
383.5

The balance sheet as at 31 December 2004 has been restated to reﬂ ect the dividend received prior to 31 December 2004 for £147.2 million.

4  CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At 31 December 2005 the Company had no annual commitments under operating leases (2004: £nil) or contingent liabilities (2004: £nil).

5  DIRECTORS AND EMPLOYEES
The remuneration of all the directors was borne by Regus Management Limited. Details are available in the Group Remuneration Report. 

The Company had no employees during the period (2004: nil). 

6  COMPANY AUDIT FEES
The Company incurred audit fees of £4,000 in 2004 and 2005.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIVE YEAR SUMMARY

Regus Report & Accounts 2005

63

Revenue 

Full year ended 
31 Dec 2001 
UK GAAP 
£m 
512.6 

Full year ended 
31 Dec 2002 
UK GAAP 
£m 
435.6 

Full year ended 
31 Dec 2003 
UK GAAP 
£m 
256.6 

Full year ended 
31 Dec 2004 
IFRS 
£m 
312.2 

Full year ended
31 Dec 2005
IFRS
£m
463.3

Cost of sales before non-recurring costs 
Non-recurring cost of sales 

(434.7) 
(38.0) 

(413.3) 
(57.0) 

(239.7) 
– 

(258.2) 
(6.6) 

(346.2)
0.1

Cost of sales 

(472.7) 

(470.3) 

(239.7) 

(264.8) 

(346.1)

Gross proﬁ t/(loss) (centre gross proﬁ t) 

39.9 

(34.7) 

16.9 

47.4 

Administration expenses before non-recurring expenses 
Non-recurring administration expenses  

(91.3) 
(11.1) 

(61.1) 
(35.1) 

(38.7) 
(6.4) 

(44.2) 
(2.0) 

Administration expenses 

(102.4) 

(96.2) 

(45.1) 

(46.2) 

Proﬁ t/(loss) from operations 

(62.5) 

(130.9) 

(28.2) 

Share of loss of joint ventures 
Share of (loss)/proﬁ t of associate 

(5.6) 
– 

(5.5) 
– 

(0.2) 
(3.7) 

Proﬁ t/(loss) before ﬁ nancing costs 

(68.1) 

(136.4) 

(32.1) 

Proﬁ t on sale of subsidiaries 
Financial income 
Financial expense 

Proﬁ t/(loss) before tax 
Tax (charge)/credit 
Proﬁ t/(loss) after tax 

Attributable to:
Equity shareholders 
Minority interest 

Earnings/(loss) per ordinary share:
Basic (p) 
Diluted (p) 

– 
– 
(0.6) 

(68.7) 
(10.1) 
(78.8) 

(80.7) 
1.9 
(78.8) 

22.7 
– 
(5.4) 

(119.1) 
(5.5) 
(124.6) 

(125.8) 
1.2 
(124.6) 

(13.6p) 
– 

(21.9p) 
– 

6.6 
– 
(4.4) 

(29.9) 
2.1 
(27.8) 

(28.7) 
0.9 
(27.8) 

(4.7p) 
– 

1.2 

(0.7) 
(3.0) 

(2.5) 

– 
1.3 
(3.7) 

(4.9) 
2.6 
(2.3) 

(2.4) 
0.1 
(2.3) 

(0.3p) 
– 

117.2

(64.9)
(5.0)

(69.9)

47.3

(0.2)
0.2

47.3

–
2.2
(10.8)

38.7
6.1
44.8

44.5
0.3
44.8

4.5p
4.5p

Weighted average number of shares outstanding (thousands) 

563,528 

564,052 

574,805 

859,702 

984,792

Balance sheet data (as at 31 December)
Intangible assets 
Property, plant and equipment 
Deferred tax assets 
Trade and other receivables 
Cash and cash equivalents 
Total assets 
Current liabilities 
Non-current liabilities 
Provisions for liabilities and charges 
Equity minority interests 
Equity shareholders funds’/(deﬁ cit) 

– 
247.7 
– 
117.7 
117.1 
482.5 
(344.4) 
(24.8) 
(28.3) 
(0.4) 
84.6 

– 
106.3 
– 
59.3 
58.6 
224.2 
(149.3) 
(50.1) 
(57.2) 
0.2 
(32.2) 

– 
75.5 
– 
62.3 
85.0 
222.8 
(134.2) 
(34.2) 
(52.6) 
1.1 
2.9 

133.2 
76.1 
6.2 
76.0 
82.3 
373.8 
(182.4) 
(88.8) 
(8.9) 
0.6 
94.3 

161.0
76.6
21.9
99.6
74.1
433.2
(229.9)
(42.6)
(7.9)
–
152.8

Results are presented under IFRS for 2005 with comparatives restated under IFRS for 2004. If the prior years were to be restated then the main 
adjustments would be in respect of lease accounting.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64

Regus Report & Accounts 2005

CORPORATE DIRECTORY

Secretary and Registered Ofﬁ ce
Tim Regan, Company Secretary
Regus Group plc
3000 Hillswood Drive 
Hillswood Business Park
Chertsey 
Surrey KT16 0RS 

Registered Number 
4868977

Registrars 
Capita IRG PLC
Bourne House 
34 Beckenham Road 
Beckenham
Kent BR3 4TU

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 

Advisers on corporate acquisitions
Bear, Stearns & Co. Inc.
383 Madison Avenue
New York
NY 10179

Corporate Stockbrokers 
Dresdner Kleinwort Wasserstein 
20 Fenchurch Street
London EC3P 3DB

Credit Suisse First Boston
One Cabot Square
London E14 4QJ

Reservations
UK telephone:  0870 880 8484
US telephone:  1.877.REGUS.87 or

001 954 331 1647

Websites
www.regus.com
www.hq.com
www.stratisnet.com
www.businessmeetingplaces.com

 
The Regus Group Network

Designed & produced by                                www.forepoint.co.uk
Printed by St Ives Westerham Press