Global Growth
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ANNUAL REPORT AND ACCOUNTS 2010
VIEW MORE ONLINE AT WWW.REGUS.COM
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Our unrivalled footprint and
unique customer proposition
is driving growth worldwide...
Regus is the world’s only global provider of flexible workspace.
We are 6,000 people running 1,100 business centres in 500 cities across
87 countries. We help our customers work more effectively, to work
their way, every day.
To more than 800,000 people we are the mission critical platform upon
which they run some or all of their business every day.
Our products and services allow our customers to concentrate on their
core business, and use their talents to best effect. We help them be
more flexible, more cost-effective and more agile – and better able to
face the unexpected challenges of business in the 21st century.
...We work your way.
Directors’ Report –
Business Review
Financial highlights
Group overview
Our products and services
Where we are
Chairman’s statement
Chief Executive’s review
Financial review
Corporate responsibility
1
2
3
4
6
7
10
14
Directors’ Report –
Corporate Governance
Board of directors
Other information
Corporate governance
Director statements
Remuneration report
Auditors’ report
15
16
18
24
25
31
Financial Statements
33
32
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement
of changes in equity
34
35
Consolidated balance sheet
Consolidated cash flow statement 36
37
Notes to the accounts
76
Parent company accounts
Shareholder and
Other Information
Segmental analysis
Five year summary
Shareholder information
77
79
80
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Directors’ Report: Business review
Financial highlights
A solid year of performance
Revenue (£m)
£1,040.4m
Gross profit (£m)*
£215.9m
2
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7
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5
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350
300
250
200
150
100
50
0
2007
2008
2009
2010
2007
2008
2009
2010
Operating profit (£m)*
£22.5m
Net cash balance (£m)
£191.5m
4
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7
4
1
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2
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150
120
90
60
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250
200
150
100
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4
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1
2007
2008
2009
2010
2007
2008
2009
2010
Profit after tax (£m)*
£18.0m
Basic earnings per share (p)*
1.9p
9
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6
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80
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2008
2009
2010
2007
2008
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2010
* Excludes exceptional items in 2009 and 2010.
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Regus plc Annual Report and Accounts 2010 01
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Directors’ Report: Business review
Group Overview
Extending our global network
What we do
We have to constantly evolve to meet our customers’ needs.
The world of business is constantly
changing and so are we. 20 years ago
we were an innovative provider of
serviced offi ces because that was what
our customers needed. Yet work today
is radically different to the early 1990s.
As a result we have to constantly evolve
to meet the ever changing needs of
our customers.
Yes, we still rent serviced offi ces. But
that’s an increasingly small part of what
we do now. What we provide is the
means – the workspaces – from which
our customers can do whatever it is
they want to do. We are facilitators,
concierges, technical support teams,
property managers and business
advisers. Our customers want meeting-
rooms, workstations, coffee lounges,
video-communications facilities and all
the latest IT and telecommunications
support. We provide bookkeeping and
payroll services, transcription services
and help our customers purchase a wide
range of ancillary business products and
services. Sometimes they even want us
to tell them what they need.
Above all, we take care of the everyday
details of running a business so that our
customers, be they the very largest
global corporate or an entrepreneur with
an idea, can concentrate on what they
do best, which is run their business
and work their way. Every modern
international business, large or small,
must be agile, able to make decisions
quickly, change direction or shift
resources at short notice.
In today’s ever more complex, ever more
unpredictable, ever more interconnected
world, Regus helps them to do just that.
What our customers say
Our unrivalled customer service is driven across everything we do.
Juniper
Founded in 1996, Juniper
currently employs more than
7,000 workers in nearly 50
countries. Since its inception,
Juniper has been at the forefront
of network innovation – providing
solutions that solve the most
complex networking problems.
“ With Regus we are no longer
on the real estate roller coaster
where we are constantly
ramping up and ramping down
our portfolio. We can now
acquire just what we need,
when we need it for as long
as we need it without risk or
excessive costs.”
Yell
Yell is a leading international
directories company that offers
quality business leads and
marketing solution to small
and medium sized enterprises
in the UK, US, Spain and parts
of Latin America.
“ With Regus we are far more
cost effective, lower risk, fl exible
and sustainable but will, over
time, increase productivity as
less time is spent commuting
and working in poorly equipped
places such as hotels and cafes.”
CAPCO Health Group Inc
Toronto-based CAPCO
Health Group, Inc. a provider
of healthcare services in the
North American medical
insurance community, has
been a Regus client since 2000
and has started to use Regus
virtual offi ces to pursue new
business opportunities.
The Network Collective
The Network Collective is an
independent telecommunications
procurement consultancy. It
works with major UK and
multinational organisations to
help them achieve the best
possible results through
their telecommunications
procurement.
“ For as little as a few hundred
dollars a month virtual offi ces
allow us to move into additional
markets such as Mexico and
Central America.”
“ Our team travels a lot and it’s
important for us to have a high
quality base whilst on the road.
Regus help us be as productive
as we can in a cost effective way.”
Coleen Hurley, Director of
corporate real estate, Juniper
Simon Taylor,
Head of Property, Yell
Ernie Gershon, President
and COO of CAPCO
John Waterhouse,
Founder and CEO of
The Network Collective
For more information visit www.regus.com
02 Regus plc Annual Report and Accounts 2010
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Our products and services
Serving 800,000 customers every day.
Video Communication
The world’s largest network of video communication suites in more than
4,000 locations worldwide. Our customers save management time, travel
costs and reduce their carbon footprint by using the very latest HD technology.
Businessworld
Our unique worldwide membership scheme – instant access to all of our
1,100 business centres. The ultimate in productive mobile working with
more than half a million members.
Equipped Offi ces
A productive, fl exible and cost-effi cient work environment bespoke for every
single customer company. From start-ups and established local businesses, to
satellite offi ces for the very largest corporates all workspace can be fully
personalised to refl ect the customer’s brand and culture. Mainly full-time, but
also available by the hour.
Virtual Offi ce
A professional business address and local telephone number, with call handling
and message management, plus mail collection and forwarding services. Used
by all types and sizes of businesses, especially those looking to enter new
markets in a low cost, low risk way.
Meeting Rooms
Conveniently located, customisable meeting rooms, in a dedicated business
environment. Cost-effi cient and fl exible, our customers are able to book by
the hour not just by the day.
Disaster Recovery
Dedicated offi ce space confi gured to our customers’ exact requirements
including telephone and IT connectivity, reserved and kept ready for
whenever it is required.
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Regus plc Annual Report and Accounts 2010 03
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Directors’ Report: Business review
Where we are
Growing our global network
In 2010 we added 125 new centres
and Oman, Lithuania and Ghana to
our global network. 2011 will see
similar levels of growth.
Park Avenue,
New York, USA
American Express Retiro,
Buenos Aires, Argentina
Cities
87Countries
500
6,000
800,000
People
Daily customers
04 Regus plc Annual Report and Accounts 2010
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View our online operational
case studies in action
www.regus.com/investor
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City Point,
London, England
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World Trade Centre,
Beijing, China
Bandra Kurla
Complex,
Mumbai , India
Ark Offi ce,
Sydney, Australia
www.regus.com/investor
Regus plc Annual Report and Accounts 2010 05
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Directors’ Report: Business Review
Chairman’s statement
Determined strategic implementation
I am pleased to report
a solid performance
by the group resulting
from the determined
implementation of
our strategy which
has transformed our
business model over
the last two years.
Douglas Sutherland
Chairman
Board changes
I would like to thank Ulrich Ogiermann,
who resigned from the Board as of
31 December 2010, for his contribution to
the business over the years and we wish
him well for the future.
Dividend
It remains the intention of the Board to
pay dividends at a level which it believes is
sustainable throughout economic cycles
and is in line with its progressive payment
policy. Reflecting the underlying strength
of the Group’s trading performance, our
strong cash generation, robust cash
position and future confidence in
the group’s prospects, the Board is
recommending an 8% increase in the full
year dividend per share to 2.6p per share.
Subject to the approval of shareholders
at the 2011 AGM, this final dividend will
be paid on Friday 27 May 2011 to
shareholders on the register at the close
of business on Tuesday 26 April 2011.
Douglas Sutherland
Chairman
21 March 2011
This, coupled with consistent trading
across all our markets, has enabled the
Group to weather the unpredictable
economic challenges of 2010. I am
particularly pleased that our mature
margins have started to recover during
2010 and in addition the business has
generated more cash year on year, with
cash from operations increasing to £109.7
million (2009: £105.1 million). The strength
of this cash generation has enabled the
business to invest signifi cantly in growth,
opening 125 centres, with an estimated
cost to our profi t and loss of £18.2 million
and to our cash fl ow of £69.7 million. It has
also enabled us to increase our dividend
by 22% to £23.2 million while maintaining
a robust net cash position at £191.5
million. The board remains confi dent in the
signifi cant opportunities for our business
as the global trend towards fl exible, mobile
work accelerates.
Network growth
To capitalise on the signifi cant
opportunities created by the trend towards
increased fl exible working we continue to
grow our network to provide these agile
workers with a mobile work platform. Our
approach is two-fold: to open in new
countries (such as Oman, Ghana and
Lithuania), thus increasing our global
footprint, and deepen existing in-country
networks opening in cities (such as
Canberra and Brasilia), thereby getting
ever closer to new and existing customers.
In the year to 31 December 2010, we
added 20,122 workstations an increase
of 13% on 2009 for a total investment of
£69.7 million. Approximately half of this
growth came from acquisitions in markets
such as Brazil, China, UK and USA. We
will continue to explore such opportunities
as we look to strengthen our market
position and deliver on our strategy.
06 Regus plc Annual Report and Accounts 2010
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Directors’ Report: Business Review
Chief Executive’s review
A strong track record of delivery
2010 was a solid year of performance
made possible by the delivery of key
strategic initiatives rather than any
noticeable pick up in the world economy.
That the business remained profi table and
in 2010 generated more cash than in 2009
demonstrates our strong and deep
foundations.
We are now a much fi tter and more
nimble business which will be to the
benefi t of our customers and
shareholders. The strategic initiatives of
2010 were focused on orientating the
business to recover occupancy and
margin in 2011 regardless of the rate of
economic recovery. This includes having
the right business centres in the right
places on the right terms; generating
more enquiries and increasing the sales
conversion; streamlining processes and
structures; continually innovating our
product and service mix; and, crucially,
investing in our people. Such investments
have come at some cost but it is
important to highlight these investments
are fully self funded and we expect to see
a return in 2011.
We continue to experience broad-based
demand across all markets and market
sectors but especially from large
multinationals for our assistance in
supporting their move to lower cost fl exible
working models. This accelerating trend is
one of the key drivers of our business and
we believe will be so for years to come.
With renewed focus we have delivered
the growth we set out to achieve at the
beginning of 2010; we opened 125 new
centres, which led us into seven new
countries. It is our intention to sustain this
growth rate into 2011 as we look to
extend our global reach and strengthen in
country networks giving us an ever
greater addressable market.
Strategy
Our vision is clear; to be where people
and businesses want to work and to be
the platform from which they work, be it
mobile or fi xed, virtual or physical, large
company or small. As a result our
strategy is equally simple: to be in as
many of those locations as quickly as we
can. That we are the only business that
can aspire to this demonstrates the scale
of the opportunity in a world of more than
a billion mobile workers.
Strategic highlights
In 2010 we delivered a number of key
strategic initiatives which have
transformed the business. These are:
• Strengthened Management Structure
– To better manage our growing
business, within our regions, we have
started the process of organising day-
to-day management of 30 country/
market groupings. With supervisory
oversight from our new global
management centre in Geneva,
decision making is being accelerated
and improved. In 2010 key hires
and internal promotions were made
across all our major geographies
including Canada, Brazil, Mexico and
Japan amongst others. It is of crucial
importance that the business continues
to add to this cadre of its management
population throughout 2011.
• Refocused Marketing – Spend was
increased by 27% over the course
of 2010 vs. 2009 to £33.3 million.
The marketing management team
was reorganised to deliver in-country
planning and global campaign
integration moving us away from a
regional approach. Additionally, a
number of tasks were brought back
in-house, including web and search
engine marketing. Together this
resulted in a 32% increase in overall
global enquiries but more importantly
a dynamic approach to generating
enquiries in the locations that most
need them.
• Improved Sales – Signifi cant changes
to our sales structure, supporting
systems and improved customer
targeting, together with comprehensive
bespoke training and development,
resulted in deal volumes that were
12% higher in 2010 than 2009.
Good progress was made with our
corporate accounts team, refreshing
our entire product offering, providing
targeted marketing support and
systems, increasing headcount (from
30 to 79) and making four key senior
management hires. As a result our
sales picked up strongly in H2 and this
team now has momentum into 2011.
• Streamlined Operations – 2010 saw
further signifi cant progress with our
eCommerce rollout, specifi cally TITAN,
Peoplesoft and Oracle which are now
fi rmly embedded within the business.
A signifi cant number of centre routines
and procedures were redesigned, freeing
up centre team time to dedicate to
customers. The centralisation of our back
offi ce service functions to our shared
Regus plc Annual Report and Accounts 2010 07
2009 and 2010 have been
momentous years for
the world economy and
all businesses have had
to respond and adapt in
order to progress. We
have been no different.
Mark Dixon
Chief Executive
www.regus.com/investor
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Directors’ Report: Business Review
Chief Executive’s review continued
Strategy and objectives
Scale /
Density
Partnerships
Unique market
position
Product
and service
innovation
Brand
Operational
effi ciency
Our vision is clear; to be where people
and businesses want to work and to
be the platform from which they work,
be it mobile or fi xed, virtual or physical,
large company or small. As a result our
strategy is equally simple: to be in as
many of those locations as quickly as
we can. That we are the only business
that can aspire to this demonstrates
the scale of the opportunity in a world
of more than a billion mobile workers.
service centres was completed in Q4.
It is already delivering both operational
and fi nancial effi ciencies; for example,
centralising our IT support desk has
already resulted in annualised savings
of £1.5 million. 2011 will see further
centralisation including parts of the
marketing, price and inventory functions.
• Delivered Procurement, New Centre
cost effi ciencies – Over 2010 we
continued our proactive approach to
driving cost and realising effi ciency gains
throughout the business. Centralised
procurement programmes were put in
place and key hires made, the benefi ts
of which we believe will be felt in 2011
and beyond. Excluding the extra costs
that have been incurred increasing the
capacity of the business and some
specifi c investments, since the second
half of 2008 annualised savings have
been made of circa £135 million.
Operational Review
Operationally 2010 has been a busy year
for the Group. During Q4 alone we
averaged a centre opening a day. Our
strategy of controlled and disciplined
growth has resulted in an increase in total
capacity (including non-consolidated
workstations) of 9% to 188,567
workstations in the year and the number of
actual workstations by 8.8% to 178,084
workstations as at 31 December 2010.
The group opened 125 new centres during
the year with the total number now
standing at 1,084. Of these, 61 were as a
result of organic growth of which 37 were
opened on fl exible, low risk leases.
On a regional basis, revenues and centre
contribution can be analysed as follows:
£ million
Americas
EMEA
Asia Pacifi c
UK
Other
Revenue
Contribution
Mature margin (%)*
2010
436.9
281.2
141.7
178.9
1.7
1,040.4
2009
423.8
306.2
132.3
191.4
1.4
1,055.1
2010
99.1
65.8
36.4
13.2
1.4
215.9
2009
92.9
83.0
40.3
18.5
0.9
235.6
2010
24%
25%
29%
8%
--
22%
2009
23%
28%
30%
10%
--
23%
* The mature business is defi ned as the performance from centres owned and operated at 1 January 2009.
Americas
Our business in the Americas comprises
Canada, USA and the countries of Latin
America, some 517 centres across 15
countries. Our main business in the USA
operates 411 centres. At actual exchange
rates, the region delivered revenues of
£436.9 million – up 3.1% on 2009 with
average mature occupancy of 80% during
the period (2009: 79%). During the year,
we added 46 centres which contributed
to the increase in the average number of
consolidated workstations from 72,277 in
2009 to 74,265 in 2010.
The business made two key acquisitions in
November 2010; one in Dallas adding nine
centres; and one in Brazil adding 16. The
latter acquisition makes us the number
one workplace provider in that market.
EMEA
Our business in EMEA encompasses 278
centres across 49 countries. The region
delivered revenues of £281.2 million, down
8.2% on 2009, and achieved an average
mature occupancy of 77% (2009: 80%).
During the year we opened 36 centres,
including 16 through acquisition. This
contributed to the increase in the average
number of consolidated workstations from
34,260 in 2009 to 36,120 in 2010. We
opened our fi rst centres in Ghana, Oman,
Tanzania and Lithuania (new cities Porto
and Basel).
Asia Pacifi c
Our business in Asia operates in 133
centres across 16 countries. The region
delivered revenues of £141.7 million, up
7.1% on 2009, and achieved an average
mature occupancy of 80% (2009: 76%).
During the year we opened 20 centres,
which increased the average number of
consolidated workstations from 21,390 in
2009 to 23,437 in 2010.
UK
Conditions during 2010 continued to be
extremely challenging with renewed
pressure on key performance indicators
and particularly price. Set against this
backdrop, the region delivered revenues
of £178.9 million, down 6.5% on 2009
and achieved an average mature
occupancy of 76% (2009: 78%). During
08 Regus plc Annual Report and Accounts 2010
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the year, we opened 23 centres of which
15 were through acquisition. This
increased the average number of
consolidated workstations from 33,528 in
2009 to 34,851 in 2010.
In Q2 we embarked on a signifi cant
restructure of our UK lease portfolio;
working in partnership with our landlords
many were renegotiated and re-geared
and only three centres were closed. This
process concluded in Q3 and will result in
annualised savings of up to £15 million per
annum. We are confi dent that in 2011 our
UK business will return to operating profi t.
Market opportunities – how
we help our customers
Our extensive geographic network offers
a broad range of opportunities for Regus,
as organisations of all sizes begin to
seriously address structural ineffi ciencies
in their property portfolio and as pressure
from workers increases to make work
more fl exible, in terms of both time and
geographic location.
Businesses around the world, from the very
largest to the newest start-up, are
increasingly recognising the benefi ts of
being property-light; reducing the number
of offi ces they lease. This then enables their
people to work where they need to, rather
than where they always have been and for
their business to realise the immediate
benefi ts of increased productivity and
decreased costs. As such, a move to
Regus is very much a commercial and
fi nancially driven decision; with the Regus
advantage regularly delivering savings of
50-80% vs. a comparable traditional leased
offi ce model. We are attractive to any size
of business and not just small and medium
sized businesses on a short term basis.
60% of our customers use us for more
than 30 months; 40% of our customer
base is large corporates; and, 20% sole
traders and micro businesses.
The scale and density of our ever
expanding network, our strong track
record of delivery, and our constant ability
to innovate both product and service
mean we are well placed to help our
customers, both current and future,
address the challenges of work, wherever
they need us. For example:-
Yell – UK based business
directory service
Closed 18 under-utilised sales offi ces and
transferred circa.700 sales consultants to
Regus through our Businessworld model.
This approach is more cost effective,
lower risk, fl exible, sustainable and is
gradually increasing productivity as less
time is spent commuting and working in
poorly equipped places.
7-11 – Leading US franchised
food retailer
Since year end we have signed a deal with
7-11 whereby they will close more than 35
under-utilised regional offi ces. More than
250 franchise managers will use the Regus
network establishing fl exible zone offi ces in
Regus centres coupled with 250 days of
meeting rooms per month and several
hundred Businessworld cards. 7-11 will
reduce overhead by eliminating small offi ces
from their property portfolio and franchise
managers will have more time to spend with
their customers as they leverage more than
400 Regus business centres.
AT&T – Leading telecommunications
service provider
Use Regus offi ces in 18 countries
including Canada, China, Vietnam,
Denmark and Peru. Coupled with 500+
businessworld cards AT&T rely on Regus
to ensure fl exibility and speed of response
especially when working on major new
contracts in new or challenging markets.
Network growth
In an ever more mobile, nomadic world of
work, our primary asset, our business
centres, will remain the foundation for our
growth. Indeed it is our extensive
network, virtually impossible to replicate in
the medium term, which is so attractive to
our customers and prospects and from
which we will create signifi cant
shareholder value.
A larger network is necessary because:
• Our addressable market grows; locally
from the businesses immediately
surrounding the new location and
globally for multinational businesses that
want to do business in that location;
• We can leverage operational effi ciencies;
• Additional brand exposure;
• We become an ever more attractive
partner to other high profi le global
brands; and
• The barriers to competitive entry
become greater.
As such continued growth is core to our
strategy.
It is important to state that our growth
strategy is based upon making our past
successes repeatable. We focus on
projects that we can do again and again,
moving us from one level to the next.
Growth is always low risk and balanced. It
is never growth for its own sake.
The acquisitions we have made and the
organic growth which has happened
alongside have expanded our served and
addressable market. We now have 1,084
centres worldwide
Outlook
Against a tough economic backdrop the
business delivered solid fi nancial results in
2010, driven almost entirely by execution
of a range of key strategic initiatives; we
have seen little benefi t from any economic
upturn. We have continued to invest in
growth, mature margins have held up well
and cash fl ow continued to be strong,
refl ecting the underlying health of
the business.
We remain cautious on the economy,
however we have been encouraged by
recent positive trends that refl ect the
continued strategic delivery of the group. In
2011 we are well positioned for a year of
solid revenue growth business improvement
with strong underlying cash-fl ow generation.
Arguably the recession of the last two years
has been good for our business; it made us
take a long hard look at everything we did,
improve it and in doing so we have been
transformed. That we have emerged from
2010 for the better is a testament to the
hard work and dedication of our global
team of highly motivated individuals. We
have restructured and streamlined our
management; we have grown and opened
up new markets; we have continued to
innovate; we have radically improved our
sales and marketing; and we have
continued to automate and improve our
processes. We are a better business than
we were when the recession started and
we will realise the benefi ts of the many
improvements made over the years to
come.
Finally, I would like to thank our employees,
customers, shareholders, suppliers and all
other partners for their continuing support.
We look forward to an improved 2011 and
the opportunity to grow our business and
in doing so lead our industry.
Mark Dixon
Chief Executive
21 March 2010
www.regus.com/investor
Regus plc Annual Report and Accounts 2010 09
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Directors’ Report: Business Review
Financial review
Robust cash generation
This cash infl ow has enabled the business to
pay an increased dividend to shareholders
(£23.2 million), buy back shares (£7.3 million),
restructure the UK (£13.7 million to 31
December 2010). As well as invest in
capacity growth (£69.7 million).
Our net cash position at 31 December 2010
remained strong at £191.5 million compared
to £237.0 million at 31 December 2009.
Revenue and gross profi t (centre
contribution)
Revenue for the Group decreased 1.4%
to £1,040.4 million (2009: £1,055.1
million) and gross profi t (centre
contribution) decreased 8.4% to
£215.9 million (2009: £235.6 million).
This movement can be analysed as follows:
Despite the challenging
trading conditions
experienced across
all of our markets, the
business has generated
more cash in 2010 than it
did it 2009 with cash from
operations increasing
to £109.7 million (2009
£105.1 million).
Stephen Gleadle
Chief Financial Offi cer
£ million
FY 2009
Impact of exchange rates
FY 2009 at constant exchange rates
Change in mature business
Centres added in 2009
Centres added in 2010
Centres closed
FY 2010 (pre exceptional costs)
Exceptional costs
FY 2010
If we had translated our 2009 results
at 2010 rates revenue and gross profi t
would have increased by £16.3 million
and £4.4 million respectively. On a
constant currency basis revenue fell
by 2.9% and gross profi t by 10.0%.
Our mature or “like for like” business
revenues decreased by £60.8 million and
gross profi t by £24.5 million driven by
reductions in price. This is partially offset
by real reductions in costs and the
transfer of some other costs into
overheads.
However, while the overall profi tability has
fallen year on year mature margin has
recovered during 2010.
£ million
Mature revenue 494.5
Mature gross
profi t
Margin
H2 2009* H1 2010* H2 2010*
490.3
489.9
109.5
103.8
109.4
22.1% 21.2% 22.3%
* The above numbers are at constant currency and
have been adjusted for the impact of certain costs
being moved into overheads during 2010.
Centres added in 2009 contributed £13.0
million of revenue and £4.8 million of
gross profi t, refl ecting the improving
occupancy and ability to reduce the
normal start up losses as centres mature.
New centres in 2010 contributed £25.1
million of revenue but reduced gross profi t
by £7.0 million due to the normal start up
losses incurred in establishing new centres.
Revenue Gross profi t
235.6
1,055.1
4.4
16.3
240.0
1,071.4
(24.5)
(60.8)
4.8
13.0
(7.0)
25.1
2.6
(8.3)
215.9
1,040.4
(11.9)
-
204.0
1,040.4
Margin %
22.3%
22.4%
20.8%
The year on year impact of centre closures
was to reduce revenue by £8.3 million but
increase gross profi t by £2.6 million.
Taking all this together margins (before
exceptional costs) reduced from 22.3% to
20.8%.
Administration expenses
In 2010 administrative expenses (pre
exceptional costs) increased by £28.1
million to £193.4 million. This increase
can be broadly analysed as follows:
£ million
FY 2009
Impact of exchange rates
FY 2009 at constant
exchange rates
Transfer of costs from centres
Incremental costs associated
with capacity growth
2010 investments
(sales, marketing and IT)
Other cost movements
FY 2010
(pre exceptional costs)
Exceptional costs
FY 2010
Administrative
costs
165.3
1.8
167.1
6.4
5.3
11.1
3.5
193.4
3.9
197.3
£6.4m of costs were transferred from
centres arising from both our programmes
to centralise certain functions and
processes, previously carried out by
centre staff and from the annualised
effect of other transfers made in 2009.
10 Regus plc Annual Report and Accounts 2010
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As a result of adding workstations
overhead costs are also adversely
affected as we invest in such costs as
extra marketing, regional management,
legal and other compliance costs. Year on
year the increase in these costs is
estimated at £5.3 million.
To drive enquiries and future revenue
growth, the Group has invested an extra
£9.0 million in sales and marketing. In
addition, £2.1 million has been spent to
centralise our IT support structure which
will start to yield savings in 2011.
Net of the above there has been an
underlying increase in overhead of
£3.5 million.
Growth costs
As the rate of capacity growth increases
the short term costs of this growth also
increase. To give shareholders a better
appreciation of the impact of this on our
2010 profi t and loss these costs have
been estimated as follows:
£ million
Start up losses within centre
contribution (including £2.7m
of depreciation)
Costs of teams that support
the acquisition and
implementation of centres
Incremental marketing costs
to launch centres
Other overhead costs (sales,
fi nance, legal, management)
Growth
costs
(7.0)
(4.7)
(1.9)
(4.6)
(18.2)
In arriving at this number there has been
no allowance for general management
time and effort expensed across the
business supporting growth which is also
likely to be substantial.
Using these estimates, before and after
profi tability can then be summarised as
follows:
£ million
EBITDA*
EBIT*
* Before exceptional costs.
Before growth
costs
112.6
42.0
After growth
costs
97.2
23.8
Taking into account an overall
assessment of growth costs within the
business and the expectation of further
increases in capacity and therefore
revenue, it is anticipated that an
‘ex growth’ overhead rate would be
circa 12% of revenues.
www.regus.com/investor
Cost reduction initiatives
The cost management actions taken by
the Group throughout 2009 have been
progressed in 2010, delivering further
cost savings in the underlying business.
The most signifi cant savings are being
driven through centre costs, where we
are now seeing the benefi t of reduced
rent and service charges. Cost savings
are also being made as we close
underperforming centres and the
centralisation of certain functions and
processes has contributed operational
effi ciencies such as improved customer
collections.
The trend in the total cost base is shown
below. Excluding the extra costs that
have been incurred increasing the
capacity of the business and some
specifi c investments in 2010, since the
second half of 2008 annualised savings
have been made of circa £135 million.
Operating profi t (before exceptional
items)
Arising from the above operating profi t
was £22.5 million (2009: £67.7 million),
representing a margin of 2.2% (2009:
6.4%).
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Exceptional items
During the year the Group has undertaken
a UK restructuring programme and incurred
exceptional charges of £15.8 million. These
costs relate to a combination of asset
write-downs, dilapidations, legal and
professional fees, relocation costs,
reorganisation costs and ancillary closure
costs net of any onerous lease or other
property related provision releases.
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Cost trend of base business at constant exchange
£million
Base business
Growth costs
2010 investments
Total costs
H2 2008
532.7
2.5
–
535.2
H1 2009
505.8
5.5
–
511.3
H2 2009
486.0
8.9
–
494.9
H1 2010
480.6
20.2
5.4
506.2
H2 2010
465.0
40.6
5.7
511.3
Of the net £15.8 million, £13.7 million has
so far been expended in cash.
As a result of the programme annualised
rent savings have been achieved of up to
£15 million.
Share of profi t in joint ventures
The share of joint venture profi ts
attributable to Regus decreased to £1.3
million (2009: £2.0 million). This refl ects
the acquisition of one of our JV partners
in December 2009 which is now fully
consolidated.
Financing costs
Financing costs can be summarised as
follows:
£ million
Interest payable
Interest receivable
Finance lease interest
Non-cash:
Amortisation of
deferred fi nancing fees
Non-cash: UK
acquisition related
Total fi nancing
costs
FY 2010
(0.5)
1.8
(0.1)
FY 2009
(1.6)
2.6
(0.1)
–
(0.5)
(1.4)
(1.5)
(0.2)
(1.1)
The lower interest payable of £0.5 million
refl ects costs associated with bank
overdrafts in a limited number of countries
and commissions on bank guarantees.
The £0.8 million decrease in interest
receivable refl ects the impact of lower
global interest rates (reducing the Group’s
average yield from 1.2% to 0.9% on a lower
average interest bearing cash balance of
£204.8 million (2009: £219.2 million).
Finance lease costs have remained
unchanged refl ecting the continued low
level of fi nance lease liabilities held by the
Group. The amortisation of deferred
fi nancing fees relates to the facility
arrangement costs incurred for the new
credit facilities entered into during 2006
and which were voluntarily surrendered in
April 2009 resulting in the recognition of
an accelerated amortisation charge of
£0.5 million in that year. The unwinding of
discounted fair value adjustments on the
Regus UK acquisition resulted in a non
cash net fi nancing charge of £1.4 million
in the period to 31 December 2010 (2009
£1.5m).
Taxation
The Group has recognised a £5.9 million
tax charge for the period (compared to a
tax charge of £19.2 million in the
Regus plc Annual Report and Accounts 2010 11
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Directors’ Report: Business Review
Financial review continued
comparative period). This includes a
deferred tax charge of £0.5 million
associated with the UK restructuring.
The tax rate is 23.7%, excluding the
exceptional item, compared to 26.9% pre
exceptional in the comparative period.
The deferred tax charge of £28.4 million
includes the reversal of previously
recognised deferred tax assets on losses,
which no longer satisfy the Group’s
recognition policy, giving rise to a decrease
in the deferred tax asset from £65.1 million
at 31 December 2009 to £37.1 million at
31 December 2010. In addition, the Group
has benefi ted from a credit in relation to
the settlement of a number of tax audits in
relation to prior years.
On a cash basis, the Group paid £15.5
million in tax. Cash tax represents
approximately 65% of profi t before tax
(excluding the exceptional charge). This
arises largely because taxes paid in the year
include fi nal payments for earlier periods.
Earnings per share
Earnings per share for the full year before
exceptionals have decreased to 1.9p
(2009: 5.4p) with the impact of falling
underlying operating profi ts partially offset
by cost savings. The average number of
shares in issue decreased to 947,462,881
(2009: 948,203,737) which refl ects the
net impact of the reissue of treasury
shares held by the Group in order to
settle the exercise of share awards
partially offset by the impact of share
purchases.
Dividend
A fi nal payment relating to 2009 of
1.6p per share was paid in May 2010
following shareholder approval (H1 2009
1.2p per share).
An increased interim dividend relating to
2010 of 0.85p per share (H1 2009 0.8p)
was paid in October 2009.
It is proposed, subject to shareholder
approval, to pay an increased fi nal
dividend for 2010 of 1.75p (2009: 1.6p).
This will be paid on Friday 27 May 2011 to
shareholders on the register at the close of
business on Tuesday 26 April 2011.
If approved, this will represent an 8%
increase in the full year dividend
increasing from 2.4p per share for 2009
to 2.6p per share for 2010.
Since 2008, Regus shareholders have
been able to elect to receive either
Luxembourg-sourced dividends from
Regus plc SA (“plc”) or UK-sourced
dividends from a UK-resident subsidiary
of plc (the “IAS arrangements”). The IAS
arrangements were put in place to allow
shareholders to choose the dividend
source which best suits their own tax
position.
Following various changes in relevant tax
law and practice, however, the tax
implications of receiving a dividend from
either plc or a UK subsidiary should now
be the same for most shareholders. In
order to enable the discontinuance of the
IAS arrangements, which are no longer
considered necessary, Regus has
implemented a restructuring. As a result,
all shareholders will be paid dividends
directly from plc, commencing with the
fi nal dividend to be paid to shareholders
on or around Friday 27 May 2011. All
such dividends should be payable by plc
without deduction of Luxembourg
withholding tax, regardless of the
residence of the recipient.
In general terms, UK resident
shareholders receiving dividends from plc
in the future should be taxed in the same
way as if they had received a dividend
from a UK company. Tax outcomes do,
however, depend on the specifi c
circumstances of shareholders and any
shareholder in doubt about their tax
position (including in particular UK
resident but non UK domiciled individuals
who have elected to be taxed on a
remittance basis) should consult their own
professional adviser without delay.
Goodwill
Regus has £282.4 million of goodwill in
the balance sheet principally arising from
the purchase in August 2004 of HQ Global
Holdings Inc. and the purchase in April
2006 of the remaining 58% interest in the
Regus UK business not already owned.
Following the restructure of the UK
business, the carrying value of the
goodwill was tested for impairment and
this indicated that no impairment was
necessary. Although the short term
performance of the business has
worsened since the 2009 impairment
review was carried out, the adverse
impact of the resulting reduction in our
anticipated future cash fl ows has been
offset by the savings arising from the UK
restructuring. It should be noted,
however, that the headroom in the UK
goodwill calculations still remains low. It is
therefore possible that a future, non-cash,
impairment may be necessary arising
from relatively small changes in
assumptions.
12 Regus plc Annual Report and Accounts 2010
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Cash fl ow
The Group’s cash fl ow statement can be summarised as follows:
£ million
Cash from operations
Other income
Cash in
Maintenance capex
Interest and tax
Free cash fl ow
Acquisitions
New centre openings and property purchase
Share buybacks, settlement of share awards and dividends
Exceptional (cost)/receipt
Other
Cash out
Change in cash & cash equivalents
Opening cash
FX
Closing balance – Cash, cash equivalents
and liquid investments
Our current annual property related lease
rentals are circa £400 million per annum
and the minimum contractual lease
rentals on a GAAP basis total £1,557
million as disclosed in note 27 of our
audited Annual accounts, the NPV of
which is circa £1,100 million. Having
carried out our own analysis of what we
believe to be our actual exposure, taking
into account commercial reality and from
past experience, we estimate the NPV of
our minimum lease rental to be nearer
circa £553 million or a little less than one
and half years of lease rental.
Principal risks and uncertainties
The principal risks and uncertainties
affecting Regus plc remain unchanged
from those detailed in the Regus plc 2009
Annual Report and Accounts.
The principal risks and uncertainties
described in the 2010 Annual Report and
Accounts are:
• Risk of economic downturn in
signifi cant markets;
FY 2010
109.7
1.8
111.5
(30.8)
(15.4)
65.3
(17.0)
(42.7)
(31.4)
(13.7)
(3.0)
(107.8)
(42.5)
245.1
2.0
FY 2009
105.1
1.2
106.3
(20.2)
(24.1)
62.0
1.0
(26.7)
(20.4)
18.3
(1.9)
(29.7)
32.3
219.5
(6.7)
204.6
245.1
• Exposure to movements in property
markets;
The net cash balance can be analysed as
follows:
• Exposure to movements in exchange
rates;
FY 2010
FY 2009
• Risks associated with the Group
reorganisation and restructuring; and
Cash fl ow from operations has increased
£4.6 million from £105.1 million to £109.7
million despite the reduction in operating
profi t. This arose from a net working
capital infl ow in 2010 in contrast to an
outfl ow in 2009.
The increase in free cash fl ow is £3.3
million arising from lower interest and tax
payments offset by increased
maintenance spend in our centres, in
particular in the UK.
This cash infl ow has enabled the business
to pay an increased dividend (£23.2
million), buy back shares (£7.3 million),
restructure the UK (£13.7 million to 31
December 2010) as well as invest in
capacity growth (£54.2 million) and
fi nance the purchase of our fi rst property
(£5.5 million). In 2010 we have opened or
acquired 125 centres.
£ million
Cash, cash
equivalents and liquid
investments
Bank and other loans
Finance leases
Net fi nancial assets/
net cash
204.6
(8.9)
(4.2)
245.1
(6.0)
(2.1)
191.5
237.0
Of the balance of £191.5 million, £93.6
million was held in Group immediately
available for use, £65.3 million was held in
the regions and £32.6 million is set aside
to support letters of credit the business
has issued and various other
commitments of the Group.
Risk management and leasing
With the recent publication of an
Exposure Draft on lease accounting there
has been increased focus on the extent of
our lease liability. While the contents of
any potential new accounting standard
remain uncertain it is not possible to
estimate how or what impact on our
fi nancial statements this might have.
However, I can provide some insight into
our lease exposures.
• Risk associated with centrally managed
applications and systems.
Related parties
Details of related party transactions that
have taken place in the period can be
found in note 29 to the 2010 Annual
Report and Accounts. There have been
no changes to the type of related
transactions entered into by the Group as
described in the Regus plc 2009 Annual
Report and Accounts that had a material
effect on the fi nancial statements for the
period ended 31 December 2010.
Stephen Gleadle
Chief Financial Offi cer
21 March 2011
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Regus plc Annual Report and Accounts 2010 13
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Directors’ Report: Business Review
Corporate responsibility
Practicing sustainable business
YTD rolling kg CO2 pa per occupied workstation (in UK business)
180
170
160
150
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
The above table shows a:
• 10.28% reduction in the carbon
footprint per occupied workstation
from 2007 levels;
• 6.23% reduction in the carbon
footprint per occupied workstation
from 2009 levels.
2008
2009
2010
It remains our intention to reduce
our carbon footprint by 50% by
2020 using our 2007 baseline.
We recognise that we have not
achieved our targets in waste, water
and transport reductions as set out in
our last annual report but in June 2010
we introduced a behavioural change
programme to encourage Greener
Working. This campaign includes a
variety of behavioural changes coupled
with a series of energy and carbon
saving practices across the estate.
Each centre now has an appointed
a Greener Working Champion whose
primary role is to reduce energy, and
water consumption, encourage recycling
and promote greener working amongst
customers, clients and suppliers. Dry
Mixed recycling was also introduced in
2010 and is being successfully adopted
by our staff and customers.
Our community involvement and
development will focus on forging
sustainable relationships with communities
in the areas of education and skills
development, particularly as they relate to
business creation. Our team members will
continue to support a wide variety of
charitable organisations, large and small.
Of particular note in 2010 our US team
raised more than US$50,000 for the
Susan G Komen charity, a grassroots
breast cancer support network.
Being a global business carries great
responsibility. Even though our footprint
is large, we seek to keep sustainability
at the core of how we conduct business.
Regus aims to bring employment and
responsible investment in communities
around the world while carefully
considering the environment.
Our representative to the Board for
Corporate Responsibility in organisational
governance is the Company Secretary.
Corporate Responsibility (CR) at Regus is
now overseen by the Chief Sustainability
Offi cer and our framework is based on ISO
26000. This comprehensive standard
provides guidance on social responsibility
and has seven core subjects as its
foundation – the environment; human
rights; labour practices; consumer issues;
fair operating practices; organisational
governance and community involvement
and development. It supports principles and
guidelines of the United Nations (UN) and
International Labour Organization (ILO).
In supporting the three dimensions of
sustainability – economic, social and
environmental, CR at Regus will also
have three dimensions – stakeholders,
the environment, and community
involvement and development.
As a global company our stakeholders
are diverse and include individuals,
groups and organisations. Core to the
nature of our business, key stakeholders
for Regus are our employees, customers,
shareholders, property agents and
landlords, and suppliers. The health,
safety and security of our stakeholders
is also paramount to our business.
Our environmental considerations
include reviewing our carbon footprint,
waste avoidance, water usage as well as
procurement and travel policies. In the UK
Regus continues to make solid progress
in its environmental performance. The
strategy outlined in last year’s annual
report targeted a 20% reduction in
carbon footprint in 2010 based on our
2007 baseline (see table opposite). Whilst
this target was not met we did achieve a
10.28% reduction and this coupled with
our successful Carbon Trust Accreditation
in May 2010 clearly demonstrates that
we are taking our environmental impact
and performance seriously. The emissions
metric we are using to measure and track
our carbon footprint is that of kg of CO2
per occupied workstation, which has
been accepted by the Carbon Trust as
a unique measure for our business.
14 Regus plc Annual Report and Accounts 2010
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Directors’ Report: Corporate Governance
Board of directors
The board has a
blend of experience
demonstrating
both depth and
global perspective
Notes
(a) Member of the Remuneration Committee
(b) Member of the Nomination Committee
(c) Member of the Audit Committee
www.regus.com/investor
Douglas Sutherland (b,c)
Chairman
Douglas was appointed Non-Executive
Director of Regus on 27 August 2008
and was appointed Non-Executive
Chairman on 18 May 2010; he also
serves as Chairman of the Nomination
Committee. Douglas was Chief Financial
Offi cer of Skype during its acquisition by
eBay in October 2005 and was also Chief
Financial Offi cer at SecureWave during
its acquisition by PatchLink in July 2007.
Prior to this, Douglas enjoyed a career
with Arthur Andersen, serving as a
Partner with management responsibilities
for over a decade. Douglas is currently
also a Director of HosCo Kliniken S.à.r.l.
and HosCo Gruppe S.à.r.l.
Mark Dixon
Chief Executive Offi cer
Chief Executive and founder, Mark Dixon is
one of Europe’s best known entrepreneurs.
Since founding Regus in Brussels, Belgium
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 several awards for enterprise,
Mark has revolutionised the way business
approaches its property needs with his
vision of the future of work.
Stephen Gleadle
Chief Financial Offi cer
Stephen was appointed Chief Financial
Offi cer of Regus in 2005. Previously he
served as Chief Financial Offi cer for
LastMinute.com plc, Europe’s leading
independent online travel and leisure
group. Prior to this, he served as Group
Finance Director and Company Secretary
at Synstar plc, a pan-European provider
of IT infrastructure availability services.
Stephen’s extensive experience also
includes fi nancial management positions
at Tarmac plc, NFC plc and Mars
Confectionery. He qualifi ed with
Price Waterhouse.
Lance Browne (a,b,c)
Senior Independent
Non-Executive Director
Lance Browne was appointed a Non-
Executive Director of Regus on 27 August
2008 and became Senior Independent
Director on 18 May 2010. Lance is Vice
Chairman of Standard Chartered Bank
(China) Limited, Chairman of China
Goldmines plc, Non-Executive Vice
Chairman of Earthport plc and Chairman
of the IMI China Advisory Board. He was
previously China Senior Advisor to the City
of London, Non-Executive Director of IMI
plc and Director of Business Development
at Powergen International (HK).
Alex Sulkowski (a,b,c)
Independent Non-Executive Director
Alex was appointed Non-Executive
Director of Regus on 1 June 2010;
he also serves as Chairman of the
Audit Committee. Alex has over 30 years
of experience in international fi nance
structures, private equity, tax advice and
real estate. He is currently the Managing
Director of Third Millennium Investments
SA and serves on the board of Taxand,
the largest global network of independent
tax advisers. Prior to this Alex enjoyed a
career with Arthur Andersen, responsible
for the Belgium and Luxembourg tax
practices, prior to joining Ernst and Young
in 2002 as the Partner responsible for
the Luxembourg tax practice and then
serving as the Managing Partner of Atoz
Tax Advisors from 2004 through 2009.
Elmar Heggen (a,b,c)
Independent Non-Executive Director
Elmar was appointed Non-Executive
Director of Regus on 1 June 2010 and
became Chairman of the Remuneration
Committee on 24 November 2010. Elmar
has extensive management experience and
is currently Chief Financial Offi cer and Head
of the Corporate Centre at RTL Group, the
leading European entertainment network,
where he has held various roles since 2000.
Elmar is currently responsible for Finance,
Legal, Strategy and Business Development,
as well as RTL Group’s operations in the
Netherlands, France (radio), Luxembourg,
Spain and UFA Sports. Elmar began his
career at the Felix Schoeller Group,
becoming Vice President & General
Manager of Felix Schoeller Digital
Imaging in the UK in 1999.
Regus plc Annual Report and Accounts 2010 15
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Directors’ Report: Corporate Governance
Other statutory information
The Directors of Regus plc (société anonyme) (the “Company”)
present their Annual Report and the audited fi nancial statements
of the Company and its subsidiaries (together the “Group”) for
the year ended 31 December 2010.
Directors
The Directors of the Company who held offi ce during the
fi nancial year were:
Executive Directors
Mark Dixon
Stephen Gleadle
Non-Executive Directors
John Matthews (resigned 18 May 2010)
Martin Robinson (resigned 18 May 2010)
Lance Browne
Ulrich Ogiermann (resigned 31 December 2010)
Douglas Sutherland
Elmar Heggen (appointed 1 June 2010)
Alex Sulkowski (appointed 1 June 2010)
Biographical details for the Directors are shown on page 15.
Details of the Directors’ interests and shareholdings are given
in the Remuneration Report on pages 25 to 30.
The Corporate Responsibility Statement, Corporate Governance
Statement, Remuneration Report and Director Statements on
pages 14 to 30 all form part of this report.
Principal activity
The Company is the world’s leading provider of global offi ce
outsourcing services.
Business review
The Directors have presented a business review as follows:
The Chief Executive’s Review and Financial Review on pages
7 to 13 respectively address:
• Review of the Company’s business (pages 8 to 9)
• Trends and factors likely to affect the future development,
performance and position of the business (page 9)
• Development and performance during the fi nancial year
(pages 10 to 12)
• Position of the business at the end of the year (page 13)
• Principal risks and uncertainties (page 13)
The Corporate Responsibility Report on page 14 includes
the sections of the Business Review in respect of:
• Environmental matters
• Employees
• Social and community issues.
The Corporate Governance Statement on pages 18 to 23
includes a description of the principal risks and uncertainties
facing the Company.
The Directors Statements on page 24 include the statutory
statement in respect of disclosure to auditors.
The Directors do not consider any contractual or other relationships
with external parties to be essential to the business of the Group.
Results and dividends
Profi t before taxation for the year was £7.8 million (2009:
£86.9 million).
The Directors are pleased to recommend a fi nal dividend for
2010 of £16.5 million (2009: £15.2 million), being 1.75 pence
per share. The total dividend for the year will be made up of the
interim dividend of 0.85 pence per share paid in October 2010
(2009: 0.8 pence per share paid by Regus Group Limited) and
an additional 1.75 pence per share (2009: 1.6 pence per share)
which is expected to be paid on 27 May 2011 to shareholders
on the register at the close of business on 26 April 2011.
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:
• Agree the terms of payment upfront with the supplier
• Ensure that suppliers are made aware of these terms of payment
• Pay in accordance with contractual and other legal obligations.
At 31 December 2010, the number of creditor days outstanding
for the Group was 25 days (2009: 21 days) and the Company
54 days (2009: 48 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 32 to 74.
In adopting the going concern basis for preparing the fi nancial
statements, the Directors have considered the further
information included in the business activities commentary
as set out on pages 8 to 9 as well as the Group’s principal
risks and uncertainties as set out on pages 20 and 21.
Based on the performance of the Group, its fi nancial position
and cash fl ows, the Board is satisfi ed that the Group Is well
placed to manage its business risks successfully despite the
current uncertain economic outlook.
Further details on the going concern basis of preparation can
be found in note 23 to the notes to the accounts on page 57.
Employees
The Group treats applicants for employment with disabilities
with full and fair consideration according to their skills and
capabilities. Should an employee become disabled during their
employment, efforts are made to retain them in their current
employment or to explore opportunities for their retraining or
redeployment elsewhere within the Group.
16 Regus plc Annual Report and Accounts 2010
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Political and charitable donations
It is the Group’s policy not to make political donations either
in the UK or overseas. The Group made charitable donations
of £0.05 million during the year (2009: £0.1 million).
Capital structure
The Company’s share capital comprises 950,969,822 issued
and fully paid up ordinary shares of 1p nominal value in Regus plc
(2009: 950,969,822). All ordinary shares have the same rights to
vote at general meetings of the Company and to participate in
distributions. There are no securities in issue that carry special
rights in relation to the control of the Company. The Company’s
shares are traded on the London Stock Exchange.
Details of the role of the Board of Directors (the “Board”) and the
process for the appointment of directors can be found on pages
18 to 20.
At the Company’s Annual General Meeting held on 18 May 2010
the shareholders of the Company approved a resolution giving
authority for the Company to purchase in the market up to
95,096,982 ordinary shares representing approximately 10%
of the issued share capital (excluding treasury shares) as at
16 April 2010.
Details of the Company’s employee share schemes can be
found in the report of the Remuneration Committee on pages
25 to 30. The outstanding awards and options do not carry any
rights in relation to the control of the Company.
Substantial interests
At 21 March 2011, the Company has been notifi ed of the following
interests held in the issued share capital of the Company.
Estorn Limited*
Prudential plc
Standard Life Group
BlackRock Inc
Ameriprise Financial Inc
Tree Top Convertible SICAV**
Number of
ordinary shares
322,028,792
132,865,719
46,538,104
46,064,455
46,441,761
45,167,670
% of issued
share capital
33.86%
14.04%
4.93%
4.85%
4.92%
4.75%
* Mark Dixon indirectly owns 100% of Estorn Limited
** The interest held by Tree Top Convertible SICAV relates to a fi nancial instrument
convertible into ordinary shares of the company.
Auditors
In accordance with the Articles of Association of the ccompany,
a resolution for the re-appointment of KPMG Audit S.à.r.l. as
auditors of the company is to be proposed at the forthcoming
Annual General Meeting.
Approval
This report was approved by the board on 21 March 2011.
On behalf of the Board
Tim Regan
Company Secretary
21 March 2011
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Regus plc Annual Report and Accounts 2010 17
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Directors’ Report: Corporate Governance
Corporate governance
The Board is committed to the high standards of corporate
governance set out in the Combined Code published in June
2008 (“the Code”) for fi nancial periods beginning after 29 June
2008. The Board is accountable to the Company’s shareholders
and this report describes how the Board applied the principles
of good governance. In its prospectus dated 8 September 2008
the Company stated its intention to voluntarily comply with the
Combined Code so far as it is practical for a Luxembourg
company to do so.
The Board
At 31 December 2010, the Board of Directors was made up of
six members comprising the Chairman, two Executive Directors
and three Non-Executive Directors. Biographical details of the
Directors are set out on page 15.
Role of the Board
The primary role of the Board is to provide entrepreneurial
leadership and to review the overall strategic development of
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 and 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 (the “Committees”) have authority to make
decisions in their areas of expertise.
Frequency of meetings
There were eleven board meetings during 2010.
The number of meetings of the Board and Committees and
individual attendance by the Directors are shown below.
Total meetings
Mark Dixon
Stephen Gleadle
John Matthews
Martin Robinson
Lance Browne
Ulrich Ogiermann
Douglas Sutherland
Elmar Heggen
Alex Sulkowski
Main Board
11
11
9
3
3
9
8
11
5
6
Audit
Committee
5
Remuneration
Committee
7
Nomination
Committee
5
3
5
5
5
2
2
2
6
6
7
4
4
2
2
4
4
5
2
2
Matters reserved for the Board
The Board has a formal schedule of matters reserved to it for its
decision, to ensure that no one individual has unfettered powers
of decision. These include:
• Approval of regulatory announcements including the interim
and annual fi nancial statements
• Terms of reference and membership of the Board and
its Committees
• Changes to the Group’s capital structure
• Changes to the Group’s management and control structure
• Capital investment in excess of £5 million
• Material contracts (annual value in excess of £5 million)
Minutes are taken of all Board discussions and decisions and all
Directors, are encouraged to request inclusion of any unresolved
concerns that they may have in the Board minutes.
Roles of Board members
There is a clear division of responsibilities between the Chairman
and the Chief Executive.
The Chairman
Douglas Sutherland 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.
The Chairman, together with the 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.
The Chairman is deemed to be independent.
John Matthews retired from the Board with effect from
18 May 2010 and was replaced as Chairman by Douglas
Sutherland, who joined the Board in August 2008.
The Chief Executive
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.
Non-Executive Directors
The Non-Executive Directors each bring their own senior level
of experience and objectivity to the Board. The independent
counsel brought to the group by the Non-Executives enhances
the overall decision making of the Board. Non-Executives are
appointed for an initial three year term, subject to election by
shareholders at each Annual General Meeting (“AGM”) after
their appointment.
On 18 May 2010 Martin Robinson, Senior Independent
Non-Executive director and Chairman of the Remuneration
committee, retired from the Board. On 31 December 2010
Ulrich Ogiermann, Independent Non-Executive Director and
Chairman of the Remuneration Committee, retired from the
Board. On 1 June 2010 Elmar Heggen and Alex Sulkowski
were each respectively appointed as an Independent
Non-Executive Director.
Company Secretary
The Company Secretary, Tim Regan, is responsible for advising
the Board, through the Chairman, on all governance matters
and for ensuring that appropriate minutes are taken of all Board
meetings and discussions. The appointment and removal of the
Company Secretary is a matter reserved for the Board.
18 Regus plc Annual Report and Accounts 2010
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Board Committees
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 the Committees have been documented
and approved by the Board and are available on the Company’s
website www.regus.com. A brief summary of the members, activities
and terms of reference of the Committees is provided below.
Audit Committee
Alex Sulkowski (Chairman) (appointed 1 June 2010)
Douglas Sutherland (Chairman) (resigned 18 May 2010)
Elmar Heggen (appointed 1 June 2010)
Martin Robinson (resigned 18 May 2010)
Ulrich Ogiermann (resigned 31 December 2010)
Lance Browne
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. At the
request of the Chairman, the external auditors, the Executive
Directors, the Company Secretary and the Head of Risk
Management 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 – the Audit Committee advises the Board on
the appointment, re-appointment, remuneration and removal
of the external auditors.
• Employee concerns – the Audit 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 Audit Committee
ensures that these arrangements allow proportionate and
independent investigation and appropriate follow-up action.
The Audit Committee also meets independently with the
Company’s auditors and with the Head of Risk Management
to informally discuss matters of interest.
External auditors:
KPMG Audit S.à.r.l. were the Company’s auditors for the year
ended 31 December 2010. For 2011, the Audit Committee
has recommended to the Board that a resolution to re-appoint
KPMG Audit S.à.r.l. as the Company’s auditors be proposed
at the AGM. The Audit 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.
The scope and extent of non-audit work undertaken by the
Company’s external auditor is monitored by and, above certain
thresholds, requires prior approval from the Audit 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.
Remuneration Committee
Elmar Heggen (Chairman) (appointed 1 June 2010 as a member
of the Committee and 31 December 2010 as Chairman)
Martin Robinson (Chairman) (resigned 18 May 2010)
Lance Browne
Alex Sulkowski (appointed 1 June 2010)
Ulrich Ogiermann (Chairman) (appointed as Chairman 18 May
2010 and resigned from Committee 31 December 2010)
Douglas Sutherland (resigned 18 May 2010)
Details of the Remuneration Committee are set out in the
Remuneration Report on pages 25 to 30.
Nomination Committee
Douglas Sutherland (Chairman) (appointed 18 May 2010)
John Matthews (Chairman) (resigned 18 May 2010)
Martin Robinson (resigned 18 May 2010)
Lance Browne
Ulrich Ogiermann (resigned 31 December 2010)
Alex Sulkowski (appointed 1 June 2010)
Elmar Heggen (appointed 1 June 2010)
The Committee meets as required during the year to consider
matters delegated to it under its terms of reference. Board
effectiveness, performance and leadership were discussed
informally by the Board as a whole.
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.
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Regus plc Annual Report and Accounts 2010 19
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Directors’ Report: Corporate Governance
Corporate governance continued
• 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.
Principal risks and uncertainties
There are a number of risks and uncertainties which could have
an impact on the Group’s long-term performance. The Group
has a risk management structure in place designed to identify,
manage and mitigate business risks. Risk assessment and
evaluation is an essential part of the annual planning, budgeting
and forecasting cycle.
The Directors have identifi ed the following principal risks and
uncertainties affecting the company. These do not constitute
all of the risks facing the Group.
Economic downturn in signifi cant markets
The Group has a signifi cant proportion of its centres in the
Americas (predominantly the USA) and Europe. An economic
downturn in these markets could adversely affect the Group’s
operating revenues thereby reducing operating performance
or, in an extreme downturn, resulting in operating losses.
Generally, the terms on which the Group earns revenues from
customers and pays its suppliers (principally landlords) are
matched to reduce working capital needs. However, a reduction
in revenues, with no immediate decline in the cost base, could
result in signifi cant funding shortfalls in the business. Any
funding shortfall may require the Group to seek external
funding or sell assets in the longer term.
In addition, competition may increase as a result of landlords
offering surplus space at discounted prices and companies
seeking to reduce their costs by sub-letting space. These
factors could result in reduced revenue for the Group as the
prices it is able to charge customers would be reduced.
The Group has taken a number of actions to mitigate this risk:
• The Group has entered into performance based leases
with landlords where rent costs vary with revenues earned
by the centre.
• Building lease contracts include break clauses at periodic
intervals to allow the Group to exit leases should they become
onerous. In cities with a number of centres this allows the
Group to stagger leases such that an orderly reduction in
exposure to the location may be facilitated.
• The profi le of clients in a centre is continually reviewed to
avoid undue reliance on a particular client or clients in a
particular industry group.
Additionally, in the event of a downturn, the Group has a number
of options for mitigating losses, for example by closing centres
at lease break points.
The Group’s strategy also focuses its growth into emerging
markets that will reduce the proportion of the Group’s revenue
generated from the USA and Europe over time and provide
better protection to the Group from an economic downturn
in a single market.
Exposure to movements in property markets
A number of the Group’s lease contracts contain market rent
review clauses. This means that the costs of these leases may
vary as a result of external movements in the property market.
In particular, in the UK, lease contracts typically contain ‘upward
only’ rent reviews which means that should open market rents
decrease, then Regus could be exposed to paying higher than
market rent in these locations.
If the Group is unable to pass on increased rent costs to customers
due to local property market conditions then this could result in
reduced profi tability or operating losses in these markets.
Equally, for Group lease contracts without market rent review
clauses, the Group may benefi t from paying below market rent
in a market with increasing open market rents. This may allow
the Group to improve profi tability if the movements in open
market rents are passed on to clients.
The length of the Group’s leases (or the period after which the
Group can exercise any break option in the leases) is usually
signifi cantly longer than the duration of the Group’s contracts
with its customers. If demand falls, the Group may be unable
to increase or maintain occupancy or price levels and if revenue
declines the Group may be unable to reduce the lease cost
base. Additional costs could be incurred if the Group disposes
of unprofi table centres.
Changes in assumptions underlying the carrying value
of certain Group assets could result in impairment.
Regus completes a review of the carrying value of its assets
annually to assess whether those carrying values can be
supported by the net present value of future cash-fl ows
derived from such assets. This review examines the continued
appropriateness of the assumptions in respect of which the
carrying values of certain of the Group’s assets are based. This
includes an assessment of discount rates and long-term growth
rates, and timing and quantum of future capital expenditure. Due
to the Group’s substantial carrying value of goodwill under IFRS,
the revision of any of these assumptions to refl ect current or
anticipated changes in operations or the fi nancial condition of the
Group could lead to an impairment in the carrying value of certain
assets in the Group. While impairment does not impact reported
cash fl ows, it does result in a non-cash charge in the consolidated
income statement and thus no assurance can be given that any
future impairments would not affect the Company’s reported
distributable reserves and therefore its ability to make distributions
to its shareholders or repurchase its shares.
The Group’s geographic expansion may increase exposure
to unpredictable economic, political and legal risks.
Political, economic and legal systems in emerging markets
historically are less predictable than in countries with more
developed institutional structures. As the Group increasingly
enters into emerging markets, the value of the Group’s
investments may be adversely affected by political, economic
and legal developments which are beyond the Group’s control.
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Exposure to movements in exchange rates
The Group has signifi cant overseas operations whose businesses
are generally conducted in the currency of the country in which
they operate. The principal exposures of the Group are to the
US dollar and the euro with approximately 38% of the Group’s
revenues being attributable to the US dollar and 18% to the
euro respectively.
Given that transactions generally take place in the functional
currency of Group companies, the Group’s exposure to
transactional foreign exchange risk is limited. However, the
translation into sterling of overseas profi ts and net assets will be
affected by prevailing exchange rates. In the event that either the
US dollar or euro were to signifi cantly depreciate or appreciate
against sterling, this would have an adverse or benefi cial impact
on the Group’s reported performance and position respectively.
The fi nancial risk management objectives and policies of the
Group, together with an analysis of the exposure to such risks
are set out in note 23 of the Accounts. Wherever possible, the
Group attempts to create natural hedges against currency
exposures through matching income and expense and
assets and liabilities in the same currency.
Given the continued volatility in exchange rates in January 2009
the Board approved a policy which allows the Group to hedge,
subject to strict limits, the rates at which overseas earnings are
translated. This will enable the Group to have more certainty
over the sterling value of these earnings.
Group Structure
As a Jersey-incorporated company having its place of central
administration (head offi ce) in Luxembourg and being tax
resident in Luxembourg, Regus plc is required to comply with
both Jersey law and Luxembourg law, where applicable. In
addition, Regus plc’s ordinary shares are listed on the Offi cial
List of the UKLA and admitted to trading on the main market
of the London Stock Exchange. It is possible that confl icts may
arise between the obligations of Regus plc under the laws of
each of these jurisdictions or between the applicable laws and
the Listing Rules. If an irreconcilable confl ict were to occur then
Regus plc may not be able to maintain its status as a company
tax resident in Luxembourg.
The Group manages the risk that a signifi cant tax liability could
arise by taking appropriate advice, both in carrying out the
Group reorganisation and on an ongoing basis. In addition, the
Group believes that under current laws and regulations the risk
of irreconcilable confl icts between current laws and regulations
impacting Regus plc is also low.
Centrally managed applications and systems
The Group has moved to a centrally managed applications and
systems environment with the resultant effect that all systems
and applications are housed in a central data centre. Should the
data centre be impacted as a result of circumstances outside
the Group’s control there could be an adverse impact on the
Group’s operations and therefore its fi nancial results. This risk
is managed through a detailed service arrangement with our
external data centre provider which incorporates appropriate
back-up procedures and controls.
Internal controls
The Board has ultimate responsibility for maintaining a
sound system of internal control and for periodically reviewing
its effectiveness.
In accordance with the guidance set out in the Turnbull Report
“Internal Control: Guidance for Directors on the Combined
Code”, an ongoing process has been established for identifying,
managing and evaluating the risks faced by the Group. The
Group’s system of internal controls is designed to:
• facilitate an effective and effi cient response to risks which
might affect the achievement of the Group’s objectives;
• safeguard assets from inappropriate use or from loss or fraud;
• help ensure the quality of internal and external fi nancial
reporting; and
• help ensure compliance with applicable laws and regulations.
No system of internal control can provide absolute assurance
against material misstatement or loss. The Group’s system of
controls helps 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.
Strategy and risk management
The Board conducts regular reviews of the Group’s strategic
direction. Country and regional strategic objectives, quarterly
plans and performance targets for 2011 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.
Control environment
High standards of behaviour are demanded from staff at all
levels in the Group. The following procedures are in place to
support this:
• the induction process is used to educate new team members on
the standards required from them in their role, including business
ethics and compliance, regulations and internal policies;
• all team members are provided with a copy of the ‘Team
Member Handbook’ which contains detailed guidance on
employee policies and the standards of behaviour required
of staff;
• policies and procedures manuals and guidelines are readily
accessible through the Group’s intranet site; and
• operational audit and self-certifi cation tools which require
individual centre managers to confi rm their adherence to
Group policies and procedures.
www.regus.com/investor
Regus plc Annual Report and Accounts 2010 21
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Directors’ Report: Corporate Governance
Corporate governance continued
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.
Regular staff communications include general information on
the business from senior management as well as operational
guidance on changes in policies and procedures.
The Group has also established an externally hosted
whistle-blowing channel to all staff to report issues and
concerns in confi dence.
Control processes
The Company has had procedures in place throughout the year
and up to 21 March 2011, the date of approval of this Annual
Report, which accord with the Internal Control Guidance for
Directors on the Combined Code. These include the following:
• The Board normally meets with regional executives every six
months to carry out a wide-ranging review of Group and
regional fi nancial performance, business development
opportunities, Group infrastructure and general Group
management issues;
• The annual budget process is driven from senior management
meetings. Budgets are prepared at a detailed level by business
centre and roll-up at a country and regional level. The Executive
Directors review regional budgets to ensure consistency with
regional strategic objectives, and the fi nal budget is reviewed
and approved by the Board. The approved budget forms the
basis of business management throughout the year;
• Operational reports and fi nancial reports are prepared and
distributed to the Board on a monthly basis. Actual results are
reviewed against budget and forecast and explanations are
received for all material movements;
• 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 Board has formal procedures in place for the review and
approval of investment and acquisition projects. The Group
Investment Committee (comprising the Executive Directors)
reviews all investments prior to approval by the Board.
Additionally the form and content of investment proposals
are standardised to facilitate the review process;
• The Group has clearly delegated authority limits with regard
to the approval of transactions. Purchase orders must be
obtained in advance for all purchases in excess of £1,000; and
Sales staff and operational management periodically attend
regional sales or management conferences at which information
on operational issues is shared. Delegates present the key
messages to employees who did not attend the event.
Monitoring effectiveness
The following key mechanisms were available to the Board at
various times during the year in the conduct of its review of
internal controls:
• Review of the Group’s monthly management accounts which
contain detailed analysis of fi nancial performance for the Group
and each of the Group’s geographic reporting segments;
• An ongoing process of review, 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;
• Internal audit reviews of key risk areas. The fi ndings and
recommendations of each review are reported to
management and the Audit Committee;
• Quarterly post-investment reviews are presented to the
Audit Committee to allow appraisal of the effectiveness
of investment activity; and
• A bi-annual internal control self-assessment and management
certifi cation exercise covering the effectiveness of fi nancial
and operational controls. This is based on a comprehensive
internal control questionnaire collated and reviewed by Internal
Audit. Results and any necessary mitigating action plans are
presented to senior management and the Board.
Other matters
Board Performance Evaluation
A formal evaluation of the performance of the Board was
carried out by the Chairman. The aim is to ensure continuous
improvement in the functioning of the Board.
Arising from the review carried out in 2010, the Board has
agreed to ongoing development in the following areas:
• Strategy planning at Board level; and
• Submission of information to the Board.
• Numerous reports are generated from the Group’s sales and
operating systems on a daily, weekly and monthly basis to
provide management at all levels with performance data for
their area of responsibility which helps them to focus on
operational issues that may require their input.
Training and resources
Appropriate training is made available for all new Directors to
assist them in the discharge of their responsibilities. Training
is provided on an ongoing basis to meet particular needs with
the emphasis on governance and accounting developments.
Information and communications processes
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.
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,
internal audit and the external auditors. The Board programme
includes presentations from management which, together with
site visits, increase the Non-Executive Directors understanding
of the business and sector.
22 Regus plc Annual Report and Accounts 2010
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Re-election of the Board
From 1 January 2011, all Directors submit themselves
for re-election by shareholders annually 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.
Compliance statement
The Company has complied with the provisions set out in
section 1 of the Combined Code throughout the year ended
31 December 2010, with the exception of the following:
• Provision D.1.1 – The Senior Independent Non-Executive
Director Lance Browne does not have regular meetings
with major external shareholders.
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 participates in investor
meetings and makes himself available for questions, in person,
at the time of major announcements. 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.
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.
Directors and Offi cers Insurance
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.
Dialogue with shareholders
Regus reports formally to shareholders twice a year, with
the interim results announced in August/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 investors, analysts and media in London and other
locations. The Chief Executive and Chief Financial Offi cer
maintain a close dialogue with institutional investors 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.
The Company has engaged the services of Brunswick Group plc
as their Investor Relations adviser.
AGM
The AGM will be held in May in Luxembourg and will be
attended, other than in exceptional circumstances, by all
members of the Board. In addition to the formal business of
the meeting, there is normally a trading update and 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. Substantial resolutions of the shareholders require a
poll to be taken.
Financial and other information is made available on the
Company’s website www.regus.com.
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Regus plc Annual Report and Accounts 2010 23
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Directors’ Report: Corporate Governance
Director statements
Statement of Directors responsibilities
in respect of the annual report and
fi nancial statements
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 they are required to prepare the Group fi nancial
statements in accordance with IFRSs as adopted by the EU and
applicable law and have elected to prepare the parent company
fi nancial statements in accordance with Luxembourg Generally
Accepted Accounting Practice and applicable law.
Under company law the Directors must not approve the fi nancial
statements unless they are satisfi ed that they give a true and fair
view of the state of affairs of the Group and Company and their
profi t or loss for the period.
In preparing each of the Group and parent company fi nancial
statements, the Directors are required to:
• Select suitable accounting policies and then apply
them consistently;
• Make judgements and estimates that are reasonable
and prudent;
• For the Group fi nancial statements, state whether they
have been prepared in accordance with IFRSs as adopted
by the EU;
• For the parent company fi nancial statements, state whether
applicable Luxembourg accounting standards have been
followed, subject to any material departures disclosed and
explained in the parent company fi nancial statements; and
• Prepare the fi nancial statements on the going concern basis
unless it is inappropriate to presume that the parent company
and Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are suffi cient to show and explain the companies’
transactions and which disclose with reasonable accuracy
at any time the fi nancial position of the parent company and
to enable them to ensure that its fi nancial statements comply
with applicable law and regulations. 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, a Remuneration
Report and Corporate Governance Statement that comply
with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and fi nancial information included on the
Company’s website. The legislation in Jersey and Luxembourg
governing the preparation and dissemination of fi nancial
statements may differ from legislation by jurisdiction.
The Directors who held offi ce at the date of approval of this
Directors’ Report confi rm that:
• so far as they are aware, there is no relevant audit information
of which the Company’s auditor is unaware, and
• each Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
These annual accounts have been approved by the Directors
of Regus plc. The Directors confi rm that the annual accounts
have been prepared in accordance with applicable law and
regulations and that they include a fair review of the development
and performance of the business and the position of the parent
company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
We, the Directors of the Company, confi rm that to the best
of our knowledge:
• the fi nancial statements prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, fi nancial position and profi t or
loss of the Company and the undertakings included in the
consolidation as a whole; and
• The Directors’ Report, including content contained by
reference, includes a fair review of the development and
performance of the business and the position of the Issuer
and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks
and uncertainties that they face.
By order of the Board
Mark Dixon
Chief Executive Offi cer
Stephen Gleadle
Chief Financial Offi cer
24 Regus plc Annual Report and Accounts 2010
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Directors’ Report: Corporate Governance
Remuneration report
The report has been prepared by the Remuneration Committee
(the “Committee”) of Regus plc (société anonyme) (the “Company”)
and approved by the Company’s Board of Directors (the “Board”).
The report complies with the UK Directors’ Remuneration
Report Regulations 2002 and, in compliance with such
regulations, a separate resolution approving this report will be
put to shareholders at this year’s Annual General Meeting.
This report sets out the Company’s policy on Directors’
remuneration for the forthcoming year as well as information
on remuneration paid to directors during the year.
Information relating to the emoluments and pension contributions
of the Directors, and Directors’ interests in the Company’s shares
and under Employee Share Plans has been audited.
Unaudited Information
Membership and responsibilities of the Committee
The Committee is made up of Non-Executive Directors and
chaired by Elmar Heggen, the Company’s Senior Independent
Non-Executive Director. During the year the members of the
Committee were:
• Elmar Heggen (appointed 1 June 2010)
• Lance Browne
• Alex Sulkowski (appointed 1 June 2010)
• Ulrich Ogiermann (resigned 31 December 2010)
• Douglas Sutherland (resigned 18 May 2010)
• Martin Robinson (resigned 18 May 2010)
The Committee met seven times during the year.
The Committee has responsibility for determining, in consultation
with the Chairman and/or Chief Executive as appropriate, the
total remuneration package of each executive director and
senior manager, including bonuses, incentive payments and
share options or other share awards.
The Board has delegated to the Committee responsibility to:
• determine and agree with the Board the remuneration policy
for the Executive Directors and other senior management
positions within the Regus Group (the “Group”); and
• approve the design of, and determine targets for, any
performance-related pay schemes operated by the
Company and approve the total annual payments
made under such schemes.
The Committee received advice on executive
remuneration from Deloitte.
The Committee’s terms of reference are available on the
Company’s website, www.regus.com. The members of the
Committee attend the Company’s Annual General Meeting
and are available to answer shareholders’ questions about
directors’ remuneration.
Compliance with the best practice provisions
In accordance with the Board’s commitment to maintaining
high standards of Corporate Governance, the Committee
has complied with all remuneration-related aspects of the
Combined Code on Corporate Governance during the year.
Remuneration policy
The principal objectives of the Committee’s remuneration
policy are:
• to focus on rewarding exceptional pay for exceptional
performance: executives should be focused on delivering
exceptional returns to shareholders over both the short and
long term and be given the opportunity to receive exceptional
levels of reward if such performance is delivered. Conversely
if returns are conservative compensation levels should be
extremely conservative.
• 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
exceptional shareholder value.
The guiding principles which the Committee has regard to
and balances, as far as practicable, in determining policy
and objectives for 2010 and future years are:
• to maintain a competitive package of total compensation,
commensurate with comparable packages available with
similar companies operating in similar markets;
• to make a signifi cant percentage of potential maximum
reward conditional on short and long-term performance;
• to ensure that the interests of the executives are closely
aligned with those of the Company’s shareholders through
the provision of share-based incentives;
• to link reward to the satisfaction of targeted objectives
which are the main drivers of shareholder value; and
• to be sensitive in determining Executive Directors’
remuneration to pay and employment conditions
throughout the Group.
In 2011, the Committee intends to review the long-term
incentive arrangements for executive directors.
The table below illustrates the balance between fi xed
and performance-related (variable) compensation for each
Executive Director for the year ended 31 December 2010:
Fixed
Variable
Mark Dixon
Chief Executive Offi cer
45.0
55.0
Stephen Gleadle
Chief Financial Offi cer
46.8
53.2
Fixed compensation comprises salary, benefi ts and pension
contributions. Variable compensation only comprises the total fair
value of share awards granted in the year and the annual cash
bonus payable in relation to the year ended 31 December 2010.
The main elements of the packages and the performance
conditions are described below.
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
appropriate expenses, nor do they participate in any bonus
or share option schemes.
www.regus.com/investor
Regus plc Annual Report and Accounts 2010 25
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Directors’ Report: Corporate Governance
Remuneration report continued
Service contracts
Details of contracts currently in place for Directors are as follows:
Effective
date of contract
Term
Notice period
and maximum
provision for
compensation
14.10.08
18.08.08
01.06.10
27.08.08
01.06.10
–
–
12 months
12 months
3 yrs
3 yrs
3 yrs
6 months
6 months
6 months
27.08.08
3 yrs
6 months
Executive
Mark Dixon
Stephen Gleadle
Non-Executive
Elmar Heggen
Lance Browne
Alex Sulkowski
Douglas
Sutherland
Remuneration packages
The remuneration for Executive Directors during the year
comprised a basic salary, a benefi t package, participation in the
annual bonus scheme and participation in the Company’s share
incentive arrangement, the Regus plc Co-Investment Plan (“CIP”).
For 2011, the remuneration framework for Executive Directors
will remain unchanged with the exception that no awards will be
made under the Co-Investment Plan. The Committee intends to
review the Company’s long-term incentive arrangements for
Executive Directors in 2011.
Basic salary and benefi ts
The Committee is intending to review the salaries for the Chief
Executive Offi cer and Chief Financial Offi cer during 2011. At the
moment, they are unchanged from 2009, being £522,750 and
£300,000 respectively.
Benefi ts comprise a company car or allowance, fuel, private
medical insurance and a disturbance allowance.
Annual bonus scheme
The Committee believes fi rmly in the fi nancial effectiveness
of short-term incentives. Accordingly, incentive schemes are
widely used across the business.
The Committee sets bonus targets and eligibility each year.
The maximum bonus potential, for the Executive Directors, for the
year ending 31st December 2010 was 200% of salary, consisting
of a standard bonus (100% of salary) and a discretionary bonus
(100% of salary) for exceptional performance.
The Committee has determined that the fi nancial measures
and targets required for the discretionary bonus were not
achieved and therefore no bonus will be paid in respect of this
element. The Committee has determined that there was a partial
achievement against the criteria for the standard bonus and, as
such, the Chief Executive Offi cer and Chief Financial Offi cer will
each receive a cash bonus equal to 37.5% of salary (19% of
the maximum bonus potential). The Committee believes that
this level of payout provides a fair reward for the Company’s
performance during the year. However, no awards will be made to
the Executive Directors under the Co-investment Plan in 2011.
For the year ending 31 December 2011, the Committee has
decided that the maximum bonus potential for Executive Directors
will remain unchanged at a maximum of up to 200% of salary.
The annual bonus will be assessed against the achievement of
stretching short term fi nancial and individual performance targets.
It is intended that up to the fi rst 100% of salary will be paid in
cash and the remainder (up to 100% of salary) will be deferred
for a period of up to three years and delivered in the form of
ordinary shares in the Company.
The vesting of the deferred element will be subject to the
achievement of a relative Total Shareholder Return (“TSR”) target
over a three year period, as follows:
Regus TSR % achieved relative to
FTSE All Share Total Return Index*
100%
Above 100% but below 101%
For each complete 1% above 100%
200% or above
* Over three years’ performance.
% of shares vesting
Nil
25%
+ 0.75%
100%
Note: The All Share index was considered the most appropriate relative
measure, three being no obvious comparator group or sector that relates
to the Company’s business.
The deferred shares award will be made under the LTIP section
of CIP (discussed in more detail below).
Bonuses are non-pensionable.
Non-Executive Directors do not receive a bonus.
Pension benefi ts
The Executive Directors participate in the Company’s Money
Purchase (Personal Pension) Scheme. The Company matches
contributions up to a maximum of 7.0% of basic salary. The
Committee considers that the pension benefi ts of the Executive
Directors are low compared with comparative companies but
prefers to offer enhanced variable compensation (rather than
a fi xed additional pension contribution).
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
The Company operates three long-term incentive plans; the CIP,
the Regus plc Share Option Scheme and the Regus plc 2008
Value Creation Plan (the “VCP”).
Co-investment plan (“CIP”)
The Committee is keen to encourage Executive Directors and
senior executives to build signifi cant shareholdings in relation
to their remuneration.
As such, as a condition of participation in the CIP, it is expected
that members will over time build up a shareholding equivalent
to two times their salary using shares acquired from the scheme.
There are two elements to the CIP:
The fi rst element operates in conjunction with the annual bonus
whereby a gross bonus of up to 50% of salary will be taken as a
deferred amount of shares (“Investment Shares”) to be released
at the end of a defi ned period of not less than three years, with
the balance paid in cash.
26 Regus plc Annual Report and Accounts 2010
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Awards of Matching Shares are linked to the number of
Investment Shares awarded and will vest depending on the
Company’s future performance (see below). Matching Shares
are awarded at no cost to the participants.
The maximum number of Matching Shares which can be
awarded to a participant in any calendar year under the CIP
is 200% of salary. As such the maximum number of Matching
Shares which can be awarded based on Investment Shares
awarded is in the ratio of 4:1.
stretching fi xed share price targets to determine the number
of shares subject to the VCP Entitlement which a VCP Option
will be granted over. If a lower share price target is achieved
a VCP Option shall be granted over a lesser number of shares
with the ability for the balance to be received at a subsequent
measurement date subject to relevant share price targets
being achieved.
The share price targets for the VCP Entitlements granted
in 2008 are as set out in the following table:
The second element of the CIP provides for the Committee to
make stand-alone long-term incentive awards (“LTIPs”) without
reference to annual bonus up to a maximum of 100% of salary
per calendar year. An LTIP is a conditional right over a specifi ed
number of shares with the release being dependent on the
extent to which (if at all) the challenging performance conditions
set by the Committee at the time of the LTIP award are satisfi ed.
Grants during the Year Ending 31 December 2010:
LTIP Award Face Value (%age salary)
Fair Value* of LTIP Award
Fair Value of LTIP Award as a
%age of salary
Mark Dixon
100%
£492,580
Stephen
Gleadle
100%
£282,685
94%
94%
*The fair value was calculated by taking the face value of the shares on the date of
award and adjusting this value by the historic probability of performance conditions
being satisfi ed at this date (in accordance with the principles of IFRS 2).
During 2011, the Committee intends to review the Company’s
policy on long-term incentive awards to Executive Directors.
No awards will be made to the Executive Directors under the
CIP in 2011.
Share Option Scheme
The options granted to Executive Directors prior to the
introduction of the CIP are set out below. The Company
continues to grant options on an ad hoc basis to certain
non-participants of the CIP.
Regus plc 2008 Value Creation Plan (the “VCP”)
The VCP was introduced in 2008 as a one-off award with
the objective of delivering exceptional rewards to participants
provided absolute returns to shareholders are exceptional.
The VCP operates over a fi ve year period from May 2008 to March
2013. Participants in the VCP are granted entitlements (“VCP
Entitlements”) to receive a maximum number of shares which shall
be earned by the conversion of the VCP Entitlements into an option
or series of options (the “VCP Options”) which may be granted on
certain dates (the “Measurement Dates”) based on the Company’s
share price performance. The exercise price for VCP Options will be
the closing share price on the date of the Company’s 2008 AGM.
VCP entitlements granted in 2008:
Number of shares subject
to VCP entitlement*
*VCP Entitlements hold no value.
Mark Dixon Stephen Gleadle
3.5m
3.0m
The share price of the Company will be calculated at each
measurement date and compared against a matrix of extremely
Measurement date
31/03/2010 31/03/2011 31/03/2012 31/03/2013
{Shares awarded less shares already earned}
–
–
–
–
2.5m
1.8m
1.2m
0.6m
3.5m
2.5m
1.8m
1.2m
3.5m
2.5m
1.8m
Share price less
than £2.60
Share price is
more than £2.60
but less than £3.50
Share price is
more than £3.50
but less than £4.50
Share price is £4.50
or more
The number of ordinary shares above are based on the entitlements of the Chief
Executive Offi cer. For the Chief Financial Offi cer the number of ordinary shares will
be lower but based on the same ratios.
In respect of the fi rst and second measurement dates
(31 March 2010 and 31 March 2011, respectively), the
Company’s share price was below the target and no VCP
Entitlements vested.
Total Shareholder Return (TSR)
140%
120%
100%
80%
60%
40%
20%
0%
(20%)
2003
2004
2005
2006
2007
2008
2009
2010
Regus
FTSE All Share
FTSE 250
The above graph shows the Company’s performance,
measured by TSR for the Group compared with the
performance of the FTSE 250 Index and the All Share Index.
The Committee consider the FTSE 250 Index relevant since
it is an index of companies of similar size to the Company.
As detailed earlier in the report, the Company considers its
TSR performance for share awards under the CIP in
comparison to that of the All Share Index.
External appointments
As at 31 December 2010 the Executive Directors did not hold
any external positions for which they received fees. 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 would be retained directly by
the relevant Executive Director.
www.regus.com/investor
Regus plc Annual Report and Accounts 2010 27
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Directors’ Report: Corporate Governance
Remuneration report continued
Directors’ emoluments
The aggregate emoluments, excluding pensions of the directors were as follows:
Chairman
Douglas Sutherland
Executive
Mark Dixon
Stephen Gleadle
Non Executive
Lance Brown
Elmar Heggen
Alex Sulkowski
John Matthews
Martin Robinson
Ulrich Ogiermann
Chairman
John Matthews
Executive
Mark Dixon
Stephen Gleadle
Non Executive
Martin Robinson
Lance Browne
Ulrich Ogiermann
Douglas Sutherland
Salary
£’000
522.8
300.0
822.8
Salary
£’000
522.8
300.0
822.8
Fees
£’000
101.3
–
–
51.2
23.8
26.8
97.7
27.6
43.7
372.1
Fees
£’000
137.9
–
–
2.3
47.5
40.0
46.0
273.7
Benefi ts
£’000
Compensation
for loss of offi ce
£’000
3.4
26.7
Bonus
£’000
196.0
112.5
30.1
308.5
Benefi ts
£’000
Compensation for
loss of offi ce
£’000
Bonus
£’000
68.2
26.4
73.1
57.2
94.6
130.3
–
–
–
2010
Total
£’000
101.3
722.2
439.2
51.2
23.8
26.8
97.7
27.6
43.7
1,533.5
2009
Total
£’000
211.0
591.0
326.4
59.5
47.5
40.0
46.0
1,321.4
Mark Dixon was the highest paid Director in both 2010 and 2009. Benefi ts include car and fuel allowance, medical insurance and
life assurance and, for Stephen Gleadle, a disturbance allowance up to 30 September 2010.
Pension contributions
£’000
Mark Dixon
Stephen Gleadle
2010
36.6
21.0
57.6
2009
36.6
21.0
57.6
28 Regus plc Annual Report and Accounts 2010
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Directors’ share interests
The following Directors held benefi cial interests in the share capital of the Company at 31 December 2009, 31 December 2010
and 21 March 2011:
i
B
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n
e
s
s
R
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v
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w
i
21 March 2011
Ordinary Shares of 1p
31 December 2010
Ordinary Shares of 1p
31 December 2009
Ordinary Shares of 1p
322,028,792
326,387
322,028,792
326,387
320,141,288
121,500
N/A
N/A
0
N/A
350,000
0
0
N/A
N/A
0
71,134
350,000
0
0
1,031,082
215,978
0
17,146
350,000
0
0
C
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e
Executive
Mark Dixon(a)
Stephen Gleadle
Non-Executive
John Matthews
Martin Robinson
Lance Browne
Ulrich Ogiermann
Douglas Sutherland
Elmar Heggen
Alex Sulkowski
(a) The interests of Mark Dixon are held indirectly through Estorn Limited, an entity in which Mark Dixon controls 100% of the share capital.
Directors’ share options
As at 31 December 2010, the benefi cial interests of the Directors in options granted under the Regus plc Share Option Plan are
shown below.
Director
Mark Dixon
Interest in options
over Ordinary Shares
at 1 January 2010
1,708,108
Options
exercised
1,708,108
Balance as at 31
December 2010
0
Directors’ interests under the Long Term Incentive Plan (“LTIP”)
Details of awards over ordinary shares in the Company granted to the Directors under the LTIP, as nil cost options, are as follows:
Mark Dixon
Stephen Gleadle
* exercised 23 March 2010 – market price 109.75 p.
At 1 January
2010
0
260,162
Awards granted
March 2010
520,149
298,507
Awards lapsed
0
0
LTIP
Awards
exercised*
0
260,162
At 31 December
2010
520,149
298,507
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www.regus.com/investor
Regus plc Annual Report and Accounts 2010 29
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Directors’ Report: Corporate Governance
Remuneration report continued
Directors’ interests under the CIP
Details of awards over ordinary shares in the Company granted to the Directors under the CIP, all for nil consideration, are as
follows:
At 1 January
2010
Awards released
March 2010
Awards lapsed
2010
Awards exercised
2010*
Awards made
2010
At 31 December
2010
CIP
Investment Shares
Mark Dixon
Stephen Gleadle
Matching shares
Mark Dixon
Stephen Gleadle
895,211
472,118
2,863,260
1,537,144
* exercised 23 March 2010 – market price 109.75 p.
179,396
87,832
0
0
179,396
87,832
0
0
717,584
351,328
0
0
0
0
0
0
715,815
384,286
2,863,260
1,537,144
During the year the CIP Investment Shares awarded in March 2007 were released. All of the Matching Shares awarded in
March 2007 (normal vesting date March 2010) failed to meet the related performance conditions and therefore lapsed.
The market price of the Company’s ordinary shares at 31 December 2010 was 86.3p and the range during the year was 66.05p to 120p.
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 17 May 2011.
Audit requirement
Under Luxembourg law and regulations there is no requirement for the sections on Directors’ remuneration, shareholdings and
pension benefi ts on pages 28 to 30 inclusive to be audited; therefore all sections of the Remuneration Report are un-audited.
On behalf of the Board
Elmar Heggen
Chairman,
Remuneration Committee
21 March 2011
30 Regus plc Annual Report and Accounts 2010
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Opinion
In our opinion, the consolidated fi nancial statements give
a true and fair view of the consolidated fi nancial position of
Regus plc (société anonyme) as of 31 December 2010, and
of its consolidated fi nancial performance and its consolidated
cash fl ows for the year then ended, in accordance with
International Financial Reporting Standards as adopted by
the European Union.
Report on other legal and regulatory requirements
The consolidated Directors’ report, which is the responsibility
of the Board of Directors, is consistent with the consolidated
fi nancial statements.
KPMG Audit S.à r.l.
Cabinet de révision agréé
Thierry Ravasio
Luxembourg, 21 March 2011
Auditors report
To the Shareholders of
Regus plc S.A.
26, Boulevard Royal
L-2449 Luxembourg
REPORT OF THE RÉVISEUR D’ENTREPRISES AGRÉÉ
Report on the consolidated fi nancial statements
We have audited the accompanying consolidated fi nancial
statements of Regus plc (société anonyme), which comprise
the consolidated balance sheet as at 31 December 2010
and the consolidated statements of income, comprehensive
income, changes in equity and cash fl ows for the year then
ended, and a summary of signifi cant accounting policies and
other explanatory information.
Board of Directors’ responsibility for the consolidated
fi nancial statements
The Board of Directors is responsible for the preparation and
fair presentation of these consolidated fi nancial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control
as the Board of Directors determines is necessary to enable the
preparation of consolidated fi nancial statements that are free
from material misstatement, whether due to fraud or error.
Responsibility of the Réviseur d’Entreprises agréé
Our responsibility is to express an opinion on these consolidated
fi nancial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing
as adopted for Luxembourg by the Commission de Surveillance
du Secteur Financier. Those standards require that we comply
with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated
fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated fi nancial
statements. The procedures selected depend on the judgement
of the Réviseur d’Entreprises agréé, including the assessment of
the risks of material misstatement of the consolidated fi nancial
statements, whether due to fraud or error. In making those risk
assessments, the Réviseur d’Entreprises agréé considers internal
control relevant to the entity’s preparation and fair presentation
of the consolidated fi nancial statements in order to design audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board
of Directors, as well as evaluating the overall presentation of
the consolidated fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient
and appropriate to provide a basis for our audit opinion.
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www.regus.com/investor
Regus plc Annual Report and Accounts 2010 31
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Financial Statements
Consolidated
income statement
Continuing operations
Revenue
Cost of sales
Gross profi t (centre contribution)
Administration expenses
Net income from legal settlement
Operating profi t
Share of post-tax profi t of joint
ventures
Profi t before fi nancing costs
Finance expense
Finance income
Profi t before tax for the year
Tax charge
Profi t after tax for the year
Attributable to:
Equity shareholders of the parent
Non-controlling interests
Profi t for the year
Earnings per ordinary share
(EPS) after exceptional items:
Basic (p)
Diluted (p)
notes
3
6
6
6
5
20
8
8
9
10
10
Year ended 31 Dec 2010
Year ended 31 Dec 2009
Before
exceptional
items
Total
£m
1,040.4
(824.5)
215.9
(193.4)
–
22.5
Exceptional
items
note 6
Total
£m
–
(11.9)
(11.9)
(3.9)
–
(15.8)
Before
exceptional
items
Total
£m
1,055.1
(819.5)
235.6
(165.3)
–
70.3
Exceptional
items
note 6
Total
£m
–
–
–
(2.6)
18.3
15.7
Total
£m
1,040.4
(836.4)
204.0
(197.3)
–
6.7
1.3
23.8
(2.0)
1.8
23.6
(5.6)
18.0
17.6
0.4
18.0
–
(15.8)
–
–
(15.8)
(0.3)
(16.1)
(16.1)
–
(16.1)
2.0
72.3
(4.4)
3.3
71.2
(19.2)
52.0
51.3
0.7
52.0
–
15.7
–
–
15.7
–
15.7
15.7
–
15.7
1.3
8.0
(2.0)
1.8
7.8
(5.9)
1.9
1.5
0.4
1.9
0.2
0.2
Total
£m
1,055.1
(819.5)
235.6
(167.9)
18.3
86.0
2.0
88.0
(4.4)
3.3
86.9
(19.2)
67.7
67.0
0.7
67.7
7.1
7.0
32 Regus plc Annual Report and Accounts 2010
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Financial Statements
Consolidated statement
of comprehensive income
Profi t for the year
Other comprehensive income:
Foreign currency translation differences for foreign operations
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders of the parent
Non-controlling interests
notes
Year ended
31 Dec 2010
£m
1.9
Year ended
31 Dec 2009
£m
67.7
15.5
15.5
17.4
17.0
0.4
17.4
(29.9)
(29.9)
37.8
37.1
0.7
37.8
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www.regus.com/investor
Regus plc Annual Report and Accounts 2010 33
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Financial Statements
Consolidated statement
of changes in equity
Balance at 1 January 2009
Profi t for the year
Other comprehensive income
Total comprehensive income for the year:
Transactions with owners, recorded
directly in equity:
Share-based payments
Ordinary dividend paid
Dividend paid to non-controlling interest
Revaluation of acquisition
Deferred tax effect of share options
Settlement of share awards
Balance at 31 December 2009
Profi t for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity:
Revaluation of acquisition
Share-based payments
Ordinary dividend paid
Dividend paid to non-controlling interest
Purchase of treasury shares in Regus plc
Deferred tax effect of share options
Settlement of share awards
Balance at 31 December 2010
Attributable to equity holders of the parent(a)
Foreign
currency
translation
reserve
£m
67.0
–
(29.9)
(29.9)
Treasury
shares
£m
(1.4)
–
–
–
Revaluation
reserve
£m
10.0
–
–
–
Share
capital
£m
9.5
–
–
–
–
–
–
–
–
–
9.5
–
–
–
–
–
–
–
–
–
–
9.5
–
–
–
–
–
1.0
(0.4)
–
–
–
–
–
–
–
(7.3)
–
0.6
(7.1)
–
–
–
–
–
–
37.1
–
15.5
15.5
–
–
–
–
–
–
–
52.6
–
–
–
0.5
–
–
10.5
–
–
–
–
–
–
–
–
–
–
10.5
Total equity
attributable
to equity
holders
£m
480.0
67.0
(29.9)
37.1
Retained
earnings
£m
379.6
67.0
–
67.0
Non-
controlling
interests
£m
0.3
0.7
–
0.7
0.7
(19.0)
–
–
0.6
(1.4)
427.5
1.5
–
1.5
–
1.2
(23.2)
–
–
(0.8)
(1.3)
404.9
0.7
(19.0)
–
0.5
0.6
(0.4)
499.5
1.5
15.5
17.0
–
1.2
(23.2)
–
(7.3)
(0.8)
(0.7)
485.7
–
–
(1.0)
–
–
–
–
0.4
–
0.4
–
–
–
(0.3)
–
–
–
0.1
Other
£m
15.3
–
–
–
–
–
–
–
–
–
15.3
–
–
–
–
–
–
–
–
–
–
15.3
Total
equity
£m
480.3
67.7
(29.9)
37.8
0.7
(19.0)
(1.0)
0.5
0.6
(0.4)
499.5
1.9
15.5
17.4
–
1.2
(23.2)
(0.3)
(7.3)
(0.8)
(0.7)
485.8
(a) Total reserves attributable to equity holders of the parent:
• Share capital represents the net proceeds (the nominal value) on the issue of the Company’s equity share capital .
• At 31 December 2010 Treasury shares represent 9,070,906 (2009: 1,576,498) ordinary shares of the Group that were acquired for the purposes of the Group’s employee
share option plans and the share buy back programme. During the period, 9,385,000 shares were purchased in the open market and 1,890,592 of treasury shares
held by the Group were utilised to satisfy the exercise of share awards by employees. As at 21 March 2011, 9,070,906 treasury shares were held. As a result of the
settlement of share awards, the distributable reserves of the Group were reduced by £1.3 million.
• The foreign currency translation reserve is used to record exchange differences arising from the translation of the fi nancial statements of foreign subsidiaries and joint ventures.
• Other reserves include £37.9 million arising from the Scheme of Arrangement undertaken on 14 October 2008, £6.5 million relating to merger reserves and £0.1 million
to the redemption of preference shares partly offset by £29.2 million arising from the Scheme of Arrangement undertaken in 2003.
34 Regus plc Annual Report and Accounts 2010
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Financial Statements
Consolidated balance sheet
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Other long term receivables
Investments in joint ventures
Current assets
Trade and other receivables
Corporation tax receivable
Liquid investments
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Customer deposits
Deferred income
Corporation tax payable
Obligations under fi nance leases
Bank and other loans
Provisions
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Other payables
Obligations under fi nance leases
Bank and other loans
Deferred tax liability
Provisions
Provision for defi cit on joint ventures
Total liabilities
Total assets less liabilities
Total equity
Issued share capital
Treasury shares
Foreign currency translation reserve
Revaluation reserve
Other reserves
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Total equity and liabilities
As at
31 Dec 2010
£m
As at
31 Dec 2009
£m
notes
12
13
14
9
15
20
16
9
22
22
17
18
18
19
17
18
18
9
19
20
21
282.4
48.4
270.8
37.1
34.0
3.9
676.6
248.7
13.3
10.4
194.2
466.6
1,143.2
(225.2)
(163.2)
(125.8)
(17.0)
(2.3)
(5.5)
(2.8)
(541.8)
(75.2)
601.4
(99.1)
(1.9)
(3.4)
(0.1)
(9.8)
(1.3)
(115.6)
(657.4)
485.8
9.5
(7.1)
52.6
10.5
15.3
404.9
485.7
0.1
485.8
1,143.2
259.1
48.3
240.9
65.1
33.0
4.4
650.8
202.8
10.1
40.0
205.1
458.0
1,108.8
(176.7)
(149.3)
(114.7)
(52.5)
(1.4)
(6.0)
(3.9)
(504.5)
(46.5)
604.3
(94.1)
(0.7)
–
(0.7)
(8.2)
(1.1)
(104.8)
(609.3)
499.5
9.5
(0.4)
37.1
10.5
15.3
427.5
499.5
–
499.5
1,108.8
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Approved by the Board on 21 March 2011.
Mark Dixon
Chief Executive Offi cer
Stephen Gleadle
Chief Financial Offi cer
www.regus.com/investor
Regus plc Annual Report and Accounts 2010 35
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Financial Statements
Consolidated cash fl ow
statement
Profi t before tax for the year
Adjustments for:
Net fi nance costs
Net share of profi t after tax on joint ventures
Depreciation charge
Loss on disposal of property, plant and equipment
Amortisation of intangible assets
Increase in provisions
Other non-cash movements – share-based payments
Exceptional costs/(net income)
Operating cash fl ows before movements in working capital
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations (before exceptional items)
Cash (outfl ow)/infl ow from exceptional item
Cash generated from operations (after exceptional items)
Interest paid on fi nance leases
Interest paid on credit facilities
Tax paid
Net cash infl ow from operating activities
Investing activities
Purchase of subsidiary undertakings (net of cash acquired)
Dividends received from joint ventures
Sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Decrease/(increase) in liquid investments
Net cash outfl ow from investing activities
Financing activities
Net proceeds from issue of loans
Repayment of loans
Repayment of capital elements of fi nance leases
Purchase of treasury shares
Settlement of share awards
Payment of ordinary dividend
Payment of dividend to non-controlling interest
Net cash outfl ow from fi nancing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fl uctuations on cash held
Cash and cash equivalents at end of year
notes
Year ended
31 Dec 2010
£m
7.8
Year ended
31 Dec 2009
£m
86.9
0.2
(1.3)
67.2
1.6
6.2
0.4
1.2
15.8
99.1
(30.1)
40.7
109.7
(13.7)
96.0
(0.1)
(1.6)
(15.5)
78.8
(17.0)
1.6
0.3
(73.5)
(2.4)
1.8
29.6
(59.6)
2.9
(1.4)
(2.1)
(7.3)
(0.7)
(23.2)
(0.3)
(32.1)
(12.9)
205.1
2.0
194.2
1.1
(2.0)
66.4
0.7
6.7
2.3
0.7
(18.3)
144.5
18.6
(58.0)
105.1
18.3
123.4
(0.1)
(1.5)
(24.3)
97.5
1.0
1.0
0.2
(46.9)
(1.6)
1.8
(40.0)
(84.5)
1.5
(0.4)
(1.4)
–
(0.4)
(19.0)
(1.0)
(20.7)
(7.7)
219.5
(6.7)
205.1
25
22
36 Regus plc Annual Report and Accounts 2010
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Financial Statements
Notes to the accounts
1. Authorisation of fi nancial statements
The Group and Company fi nancial statements for the year ended
31 December 2010 were authorised for issue by the Board of
Directors on 21 March 2011 and the balance sheets were signed
on the Board’s behalf by Mark Dixon and Stephen Gleadle. Regus
plc S.A. is a public limited company incorporated in Jersey and
registered and domiciled in Luxembourg. The Company’s ordinary
shares are traded on the London Stock Exchange.
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 prepares its parent company fi nancial
statements in accordance with Luxembourg GAAP; extracts
from these are presented on page 76.
2. Accounting policies
Basis of preparation
The Group fi nancial statements consolidate those of the parent
company and its subsidiaries (together referred to as the “Group”)
and equity account the Group’s interest in the associate and
jointly controlled entities. The extract from the parent company
fi nancial statements presents information about the Company
as a separate entity and not about its Group.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in
these Group fi nancial statements. Amendments to adopted
IFRSs issued by the International Accounting Standards Board
(IASB) and the International Financial Reporting Interpretations
Committee (IFRIC) with an effective date from 1 January 2010
did not have a material effect on the Group fi nancial statements.
• IFRS 3 Business Combinations (Revised) and IAS 27
Consolidated and Separate Financial Statements (Amended);
the revised business combinations standard introduces
signifi cant changes in the accounting for business combinations.
Changes affect the valuation of non-controlling interests, the
accounting for transaction costs, the initial recognition and
subsequent measurement of contingent consideration and
business combinations achieved in stages. These changes will
impact the amount of goodwill recognised, the reported results in
the period that an acquisition occurs and future reported results.
• IAS 27 (Amended) requires that a change in the ownership
interest of a subsidiary (without loss of control) is accounted
for as a transaction with owners in their capacity as owners.
Therefore such transactions will no longer give rise to goodwill,
nor will they give rise to a gain or loss. Furthermore the
amended standard changes the accounting for losses
incurred by a subsidiary as well as the loss of control of
a subsidiary. The changes by IFRS 3 Revised and IAS 27
(Amended) will affect future acquisitions or loss of control of
subsidiaries and transactions with non-controlling interests.
• IFRS 2 Share Based Payment – Group Cash-Settled Share
Based Payment Transactions; the standard has been amended
to clarify the accounting for Group cash-settled share based
payment transactions. This amendment also supersedes IFRIC 8
and IFRIC 11. The adoption of this amendment did not have any
impact on the fi nancial position or performance of the Group.
• Improvements to IFRSs in April 2009; the International
Accounting Standards Board issued its second omnibus
of amendments to its standards, primarily with a view to
removing inconsistencies and clarifying wording. The adoption
of these amendments, which are effective from 1 January
2010, did not have any impact on the fi nancial position or
performance of the Group.
• IFRIC 17 Distribution of Non-cash Assets to Owners; this
interpretation provides guidance on accounting for arrangements
whereby an entity distributes non-cash assets to shareholders
either as a distribution of reserves or as dividends. The
interpretation had no effect on the fi nancial position or
performance of the Group
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 31.
The fi nancial statements are prepared on a historical cost basis,
with the exception of certain fi nancial assets and liabilities that
are measured at fair value.
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 32 to 75.
In adopting the going concern basis for preparing the fi nancial
statements, the Directors have considered the further information
included in the business activities commentary as set out on
pages 8 to 9 as well as the Group’s principal risks and uncertainties
as set out on pages 20 and 21.
Further details on the going concern basis of preparation can
be found in note 23 to the notes to the accounts on page 58.
The Group and Company fi nancial statements are presented
in pounds sterling and all values are in million pounds, rounded
to one decimal place, except where indicated otherwise.
The attributable results of those companies acquired or disposed
of during the year are included for the periods of ownership.
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 or the associate qualifi es as a disposal Group
at which point the investment is carried at the lower of fair value
less costs to sell and carrying value.
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Regus plc Annual Report and Accounts 2010 37
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Financial Statements
Notes to the accounts continued
2. Accounting policies continued
Joint ventures include jointly controlled entities that 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 or the jointly
controlled entity qualifi es as a disposal Group at which point the
investment is carried at the lower of fair value less costs to sell
and carrying value.
When the Group’s share of losses exceeds its interest in a joint
venture, 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 a joint venture.
On 19 April 2006 the Group acquired the remaining 58% of the
shares of the UK business that were not already owned by the
Group. As a result the Group fully consolidated the UK business
from that date. The acquisition was accounted for through the
purchase method and as a consequence the entire assets and
liabilities of the UK business were revalued to fair value. The
effect of these adjustments on the 42% of the UK business
already owned was refl ected in the revaluation reserve.
On 14 October 2008, Regus plc acquired the entire share capital
of Regus Group plc in exchange for the issue of new shares of
Regus plc on the basis of one share in Regus plc for one share
held previously in Regus Group plc. At the date of the transaction,
Regus plc had nominal assets and liabilities and therefore the
transaction was accounted for as a reverse acquisition of Regus
plc by Regus Group plc. Consequently no fair value acquisition
adjustments were required and the aggregate of the Group
reserves have been attributed to Regus plc.
Goodwill
All business combinations are accounted for using the purchase
method. Goodwill represents the difference between the cost of
acquisition over the share of the fair value of identifi able assets
(including intangible assets), liabilities and contingent liabilities
of a subsidiary, associate or jointly controlled entity at the date
of acquisition.
Business combinations that took place prior to the Group’s transition
date to IFRS on 1 January 2004 have not been restated under
the requirements of IFRS.
Positive goodwill is stated at cost less any provision for impairment
in value. An impairment test is carried out annually and, in
addition, whenever indicators exist that the carrying amount
may not be recoverable. Positive goodwill is allocated to cash
generating units for the purpose of impairment testing.
Adopted IFRSs not yet applied
The following Adopted IFRSs have been issued but have not
been applied by the Group in these fi nancial statements. Their
adoption is not expected to have a material effect on the fi nancial
statements unless otherwise indicated:
• Amendments to IAS 32 ‘Financial Instruments: Presentation:
Classifi cation of Rights issues (mandatory for years
commencing on or after 1 February 2010).
• IFRIC 19 ‘Extinguishing Financial Liabilities with Equity
Instruments’ (mandatory for years commencing on or after
1 July 2010).
• Amendments to IFRIC 14 IAS 19 ‘The limit on a defi ned
benefi t – assets, minimum funding requirements and their
interaction (mandatory for years commencing on or after
1 January 2011).
• Revised IAS 24 ‘Related Party Disclosure’ (mandatory
for years commencing on or after 1 January 2011).
• Improvements to IFRSs (issued May 2010) (mandatory for years
commencing on or after 1 July 2010 or 1 January 2011).
The Group did not adopt any standards, interpretations and
amendments to standards which were available for optional
early adoption and relevant to the Group.
The adoption of any of the above standards or amendments
to standards is not expected to have a material impact on the
Group’s fi nancial statements.
The Group will be adopting the above standards or
amendments at the year ended 31 December 2011.
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. The results are consolidated until the date control
ceases or the subsidiary qualifi es as a disposal group at which
point the assets and liabilities are carried at the lower of fair
value less costs to sell and carrying value.
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, and intangible assets that have an indefi nite useful
life and intangible assets that are not yet available for use, the
recoverable amount was estimated at 31 October 2010 and
updated in February 2011.
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 the cash generating unit and then to reduce the
carrying amount of 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.
Calculation of recoverable amount
The recoverable amount of relevant assets is the greater of their
fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash fl ows are discounted to their
38 Regus plc Annual Report and Accounts 2010
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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 identifi ed and measured
reliably on initial recognition.
Intangible assets are amortised on a straight-line basis over the
estimated useful life of the assets as follows:
Exceptional Items
Exceptional items are those items which are separately
disclosed by virtue of their size or incidence to enable a full
understanding of the Group’s fi nancial performance. Such items
are included within the income statement caption to which they
relate, and are separately disclosed either in the notes to the
consolidated fi nancial statements or on the face of the
consolidated income statement.
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:
Brand – Regus brand
Brand – Other acquired brands
Computer software
Customer lists
Management agreements
Indefi nite life
20 years
3 – 5 years
1 – 2 years
Minimum duration of the
contract
Buildings
Fixtures and fi ttings
Furniture
Offi ce equipment and telephones
Motor vehicles
Computer hardware
20 years
Over the shorter of the
lease term and 10 years
10 years
5 – 10 years
4 years
3 – 5 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.
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.
Onerous lease provisions are an estimate of the net amounts
payable under the terms of the lease to the fi rst break point,
discounted at an appropriate weighted average cost of capital.
Revenue
Revenue from the provision of services to customers is measured
at the fair value of consideration received or receivable (excluding
sales taxes). Where rent free periods are granted to customers,
rental income is spread on a straight line basis over the length
of the customer contract.
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
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.
Membership card income
Revenue from the sale of membership cards is deferred and
recognised over the period that the benefi ts of the membership
card are expected to be provided.
These categories represent all material sources of revenue
earned from the provision of global workplace solutions.
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.
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Regus plc Annual Report and Accounts 2010 39
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Financial Statements
Notes to the accounts continued
2. Accounting policies continued
Share based payments
The share option programme entitles certain employees 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
the Black-Scholes valuation model or the Monte Carlo method,
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 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 recognised 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 Group also operates a Value Creation Plan which awards
entitlements to certain employees and directors of the Group.
These entitlements are convertible into options over ordinary shares
subject to the Group’s share price reaching certain targets.
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 recognised at the date of the
award of the entitlements and spread over the period during
which the entitlements are convertible into ordinary shares.
The fair value of the entitlements is based on the Monte Carlo
valuation model, taking into account the terms and conditions
upon which the instruments were granted.
Taxation
Tax on the profi t 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 and
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.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event that can be estimated reliably, and it is probable
that an outfl ow of economic benefi ts will be required to settle
the obligation.
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.
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 an appropriate weighted average cost of capital.
Finance charges
Interest charges and income are accounted for in the income
statement on an accruals basis. Financing transaction costs that
relate to fi nancial liabilities are charged to interest expense using
the effective interest rate method and are recognised within the
carrying value of the related fi nancial liability on the balance sheet.
Fees paid for the arrangement of credit facilities are recognised as
a prepayment and recognised through the fi nance expense over
the term of the facility. In the event of a facility being drawn the
relevant unamortised portion of the fee is recognised within the
carrying value of the fi nancial liability and charged to the interest
expense using the effective interest rate method.
Where assets or liabilities on the Group balance sheet are
carried at net present value, the increase in the amount due to
unwinding the discount is recognised as a fi nance expense or
fi nance income as appropriate.
Interest bearing borrowings and other fi nancial liabilities
Financial liabilities, including interest bearing borrowings, are
recognised initially at fair value less attributable transaction
costs. Subsequent to initial recognition, fi nancial liabilities 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.
The Group derecognises fi nancial liabilities when the Group’s
obligations are discharged, cancelled or expire.
Financial liabilities are classifi ed as fi nancial liabilities at fair value
through profi t or loss where the liability is either held for trading
or is designated as held at fair value through profi t or loss on
initial recognition. Financial liabilities at fair value through profi t
or loss are stated at fair value with any resultant gain or loss
recognised in the income statement.
40 Regus plc Annual Report and Accounts 2010
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Financial assets
Financial assets are classifi ed as either at fair value through profi t
or loss, held to maturity investments, available for sale fi nancial
assets or loans and receivables. The classifi cation depends on
the nature and purpose of the fi nancial assets and is determined
on initial recognition.
Trade and other receivables that have fi xed or determinable
payments that are not quoted in an active market are classifi ed
as loans and receivables. Loans and receivables are measured
at amortised cost using the effective interest rate method, less
any impairment. Interest income is recognised by applying the
effective interest rate, except for short term receivables when
recognition would be immaterial.
Liquid investments compose held to maturity bonds and deposits.
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. Under the
transition requirements of IFRS, cumulative translation differences
for all foreign operations have been set to zero at 1 January 2004.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand
and are subject to an insignifi cant risk of changes in value.
Derivative fi nancial instruments
The Group’s policy on the use of derivative fi nancial instruments
can be found in note 23. Derivative fi nancial instruments are
measured initially at fair value and changes in the fair value are
recognised through profi t or loss unless the derivative fi nancial
instrument has been designated as a cash fl ow hedge whereby the
effective portion of changes in the fair value are deferred in equity.
Foreign currency translation rates
US dollar
Euro
Japanese yen
At 31 December
Annual average
2010
1.55
1.16
126
2009
1.61
1.12
149
2010
1.54
1.17
135
2009
1.57
1.12
147
3. Segmental analysis – statutory basis
An operating segment is a component of the Group that
engages in business activities from which it may earn revenues
and incur expenses, including those that relate to transactions
with other operating segments. An operating segment’s results
are reviewed regularly by the chief operating decision maker (the
Board of Directors of the Group) to make decisions about resources
to be allocated to the segment and assess its performance, and
for which discrete fi nancial information is available.
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The business is run on a worldwide basis but managed through
four principal geographical segments; Americas; Europe, Middle
East and Africa (EMEA); Asia Pacifi c; and the United Kingdom.
The United Kingdom segment does not include the Group’s
non-trading holding and corporate management companies that
are based in the UK and the EMEA segment does not include
the Group’s non-trading head offi ce and holding companies that
are based in Luxembourg. The results of business centres in
each of these regions form the basis for reporting geographical
results to the chief operating decision maker. All reportable segments
are involved in the provision of global workplace solutions.
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The Group’s reportable segments operate in different markets
and are managed separately because of the different economic
characteristics that exist in each of those markets. Each
reportable segment has its own discrete senior management
team responsible for the performance of the segment.
The accounting policies of the operating segments are the
same as those described in the Annual Report and Accounts
for Regus plc for the year ended 31 December 2009. The
performance of each segment is assessed on the basis of the
segment operating profi t which excludes certain non-recurring
items (including provisions for onerous contracts and asset
write-downs), exceptional gains and losses, internal management
charges and foreign exchange gains and losses arising on
transactions with other operating segments.
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Financial Statements
Notes to the accounts continued
3. Segmental analysis – statutory basis continued
Americas
2010
£m
2009
£m
2010
£m
EMEA
2009
£m
Asia Pacifi c
United Kingdom
All other operating
segments
2010
£m
2009
£m
2010
£m
2009
£m
2010
£m
2009
£m
2010
£m
Total
2009
£m
436.9
423.8 281.2 306.2 141.7
132.3 178.9
191.4
1.7
1.4 1040.4 1,055.1
–
436.9
–
0.9
423.8 282.3 307.3 141.7 132.3 179.8 192.3
1.1
0.9
1.1
–
–
–
1.7
–
2.0
2.0
1.4 1,042.4 1,057.1
99.1
92.9
65.8
84.1
36.4
40.3
13.2
19.4
1.4
1.0 215.9 237.7
32.5
35.0
17.3
38.7
18.7
25.3
(12.2)
(2.9)
0.8
0.4
57.1
96.5
–
–
–
0.9
(0.1)
0.1
1.3
(0.2)
0.4
1.0
(0.1)
0.4
–
(0.5)
0.1
–
(0.8)
0.3
–
(1.5)
–
0.1
(2.0)
0.7
32.6
26.1
32.5
7.0
14.7
3.4
14.6
5.7
11.1
3.9
10.0
5.9
14.0
(28.6)
15.6
–
524.7 469.5 247.9
(202.8)
(256.6)
(251.5)
273.2 266.7
(8.7)
258.8 162.5 129.4 306.4 292.2
(231.4)
(113.4)
(230.6)
60.8
16.0
28.2
(276.6)
29.8
(143.4)
19.1
–
–
–
–
1.1
1.3
(0.6)
0.7
–
–
–
1.3
(2.2)
0.5
2.0
(3.0)
1.5
–
0.6
72.4
5.9
72.7
19.2
1.4
(1.1)
0.3
1,242.8 1,151.3
(779.3)
(928.7)
314.1 372.0
27.8
21.5
12.9
11.4
13.7
5.0
20.1
8.9
–
–
74.5
46.8
Revenues from external
customers
Revenues from internal
customers
Segment revenues
Gross profi t
(centre contribution)
Reportable segment
profi t
Share of profi t of
joint ventures
Finance expense
Finance income
Depreciation and
amortisation
Taxation charge/(income)
Assets
Liabilities
Net assets/(liabilities)
Non-current asset
additions
Revenue in the other segmental category is generated from services related to the provision of workplace solutions including fees
earned from franchise agreements and commissions earned from the sale of outsourced workplace solution products. Revenue
from internal customers is determined by reference to current market prices.
£m
Reportable segment results
Exclude: Internal revenue
Corporate overheads
Central costs
Foreign exchange gains and losses
Exceptional items:
2010 Restructuring Plan
Published Group total
Gross profi t
(centre
contribution)
215.9
(2.0)
0.3
1.7
–
Revenue
1,042.4
(2.0)
–
–
–
Operating
profi t
57.1
–
(34.5)
–
(0.1)
Share of
JV profi t
1.3
–
–
–
–
Finance
expense
(2.2)
–
0.2
–
–
Finance
income
0.5
–
1.3
–
–
Depreciation
and
amortisation
72.4
–
1.0
–
–
2010
Profi t
before tax
56.7
–
(33.0)
–
(0.1)
–
1,040.4
(11.9)
204.0
(15.8)
6.7
–
1.3
–
(2.0)
–
1.8
–
73.4
(15.8)
7.8
42 Regus plc Annual Report and Accounts 2010
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£m
Reportable segment results
Exclude: Internal revenue
Corporate overheads
Central costs
Foreign exchange gains and losses
Exceptional items:
2009 Restructuring Plan
Exceptional net income from legal settlement
Published Group total
Gross profi t
(centre
contribution)
237.7
(2.0)
(0.1)
–
–
Operating
profi t
96.5
–
(25.2)
(1.8)
0.8
–
–
235.6
(2.6)
18.3
86.0
Revenue
1,057.1
(2.0)
–
–
–
–
–
1,055.1
Finance
expense
(3.0)
–
(1.4)
–
–
–
–
(4.4)
Finance
income
1.5
–
1.8
–
–
Depreciation
and
amortisation
72.7
–
0.4
–
–
2009
Profi t
before tax
97.0
–
(24.8)
(1.8)
0.8
–
–
3.3
–
–
73.1
(2.6)
18.3
86.9
The 2010 exceptional charge of £15.8 million and the 2009 exceptional charge of £2.6 million are split between the reportable segments
and central costs. As set out in Note 6, they constitute respectively part of a re-organisation plan and a formal restructuring plan and
therefore, in the Group’s view are differentiated from other on-going charges within the operations of the business.
£m
Reportable segment results
Exclude: Segmental inter-company amounts
Corporate overheads assets and liabilities
(excluding amounts due to/from reportable segments)
Cash
Deferred Taxation
Other
Published Group total
£m
Reportable segment results
Exclude: Segmental inter-company amounts
Corporate overheads assets and liabilities
(excluding amounts due to/from reportable segments)
Cash
Deferred Taxation
Other
Published Group total
Assets
1,242.8
(265.5)
Liabilities
(928.7)
309.7
2010
Net assets/
(liabilities)
314.1
44.2
109.9
27.3
28.7
1,143.2
–
–
(38.4)
(657.4)
109.9
27.3
(9.7)
485.8
Assets
1,151.3
(255.2)
Liabilities
(779.3)
218.6
2009
Net assets/
(liabilities)
372.0
(36.6)
120.6
45.8
46.3
1,108.8
–
–
(48.6)
(609.3)
120.6
45.8
(2.3)
499.5
4. Segmental analysis – entity-wide disclosures
The Group’s primary activity and only business segment is the provision of global workplace solutions and therefore all revenue is attributed
to a single Group of similar products and services. It is not meaningful to separate this Group into further categories of products. Revenue
is recognised where the service is provided.
The Group has a diversifi ed customer base and no single customer contributes a material percentage of the Group’s revenue.
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Financial Statements
Notes to the accounts continued
4. Segmental analysis – entity-wide disclosures continued
The Group’s revenue from external customers and non-current assets analysed by foreign country is as follows:
£m
Country of domicile – Luxembourg
United States of America
United Kingdom
All other countries
5. Operating profi t
Operating profi t has been arrived at after charging/(crediting):
Depreciation on property, plant and equipment
Owned assets
Finance leases
Amortisation of intangibles
Provision for bad debts
Loss on disposal of fi xed assets (excludes £0.4 million charged in exceptional)
Exchange differences recognised in the income statement – loss/(gain)
Movement in fair value of derivative fi nancial instruments
Rents payable in respect of operating leases
Property
Equipment
Contingent rents paid
Amortisation of UK acquisition fair value adjustments
Staff costs (see note 7)
Fees payable to the Group’s auditor for the audit of the Group accounts
Fees payable to the Group’s auditor and its associates for other services:
The audit of the Company’s subsidiaries pursuant to legislation
Other services pursuant to legislation
Tax services
Other services
6. Exceptional items
Revenue:
Exceptional net income from legal settlement
Administration expenses:
2010 Restructuring Plan charges:
2009 Restructuring Plan charges:
External
revenue
4.0
350.7
180.4
505.3
1,040.4
2010
Non-current
assets
0.4
285.2
168.5
185.4
639.5
External
revenue
4.5
353.6
191.4
505.6
1,055.1
2009
Non-current
assets
0.7
276.6
145.3
163.1
585.7
2010
£m
65.8
1.4
6.2
4.1
1.6
0.5
0.5
393.2
1.8
10.0
(4.4)
201.5
2010
£m
0.2
1.4
0.1
0.4
2010
£m
–
(15.8)
–
(15.8)
2009
£m
65.2
1.2
6.7
14.1
0.7
(2.8)
(2.2)
380.6
2.1
14.4
(3.3)
189.8
2009
£m
0.2
1.2
0.1
0.1
2009
£m
18.3
–
(2.6)
15.7
44 Regus plc Annual Report and Accounts 2010
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During the year ended 31 December 2010 the Group undertook a UK restructuring programme at a net cost of £15.8 million. This
balance consists of expenditure on the following categories: asset write down, reorganisation costs, space reduction costs, centre
closure costs and other costs. An onerous lease and other property related provisions, which were identifi ed during the restructure
as being no longer required, were released.
During the year ended 31 December 2009 the Group received a net amount of £18.3 million in relation to the settlement of a dispute
with a supplier. The amount represents the cash received in settlement of the dispute less the directly attributable costs associated
with the successful outcome of the negotiations.
In December 2009 the Group initiated a new restructuring plan to develop and accelerate the actions which had commenced in
2009 focused on the simplifi cation and rationalisation of the sales and back offi ce processes and to address the parts of the Regus
network not generating a suffi cient level of profi tability. In the year ended 31 December 2009, charges of £2.6 million were
recognised in relation to the delivery of Phase 1 and Phase 2 of the restructuring plan.
The above items have been reported as exceptional items and are disclosed separately as they are relevant to the understanding
of the Group’s fi nancial performance.
7. 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
Americas
EMEA
United Kingdom
Asia Pacifi c
Corporate functions
Details of directors’ emoluments and interests are given on pages 28 to 30 of the Remuneration Report.
2010
£m
168.6
30.3
1.4
1.2
201.5
2009
£m
158.3
29.1
1.7
0.7
189.8
2010
Average
full time
equivalents
2009
Average
full time
equivalents
3,577
780
668
662
5,687
2,246
1,466
896
832
247
5,687
3,656
668
514
549
5,387
2,207
1,396
865
782
137
5,387
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Financial Statements
Notes to the accounts continued
8. Net fi nance expense
Interest payable and similar charges on bank loans
Interest payable and similar charges of fi nance leases
Total interest expense
Deferred fi nancing fees
Unwinding of discount rates
Total fi nance expense
Total interest income
Unwinding of discount rates
Total fi nance income
Net fi nance expense
2010
£m
(0.5)
(0.1)
(0.6)
–
(1.4)
(2.0)
1.8
–
1.8
(0.2)
2009
£m
(1.6)
(0.1)
(1.7)
(0.5)
(2.2)
(4.4)
2.6
0.7
3.3
(1.1)
Deferred fi nancing fees relate to facility fees on the £150 million senior credit facilities signed in March and April 2006 and voluntarily
surrendered in part on November 2008 and in April 2009.
9 Taxation
(a) Analysis of charge in the year
Current taxation
Corporate income tax
Previously unrecognised tax losses and temporary differences
Over/(Under) provision in respect of prior years
Total current taxation
Deferred taxation
Origination and reversal of temporary differences
Previously unrecognised tax losses and temporary differences
Over provision in respect of prior years
Total deferred taxation
Tax charge on profi t
(b) Reconciliation of taxation charge
Profi t before tax
Tax on profi t at 28.6% (2009: 28.6%)
Tax effects of:
Exceptional items not deductible for tax purposes
Expenses not deductible for tax purposes
Items not chargeable for tax purposes
Recognition of previously unrecognised deferred tax assets
Movements in temporary differences in the year not recognised
in deferred tax
Other movements in temporary differences
Adjustment to tax charge in respect of previous years
Differences in tax rates on overseas earnings
2010
£m
(10.3)
0.9
31.9
22.5
(28.9)
–
0.5
(28.4)
(5.9)
£m
86.9
(24.9)
–
(4.5)
16.2
2.6
(19.0)
7.9
1.1
1.4
(19.2)
2009
£m
(12.7)
0.7
(0.5)
(12.5)
(10.2)
1.9
1.6
(6.7)
(19.2)
2009
%
(28.6)
–
(5.2)
18.7
3.0
(21.9)
9.1
1.3
1.6
(22.0)
£m
7.8
(2.2)
(4.2)
(9.0)
14.2
0.9
(45.3)
6.6
32.4
0.7
(5.9)
2010
%
(28.6)
(53.8)
(115.4)
182.1
11.5
(580.8)
84.6
415.4
9.0
(75.6)
The applicable tax rate is determined based on the tax rate in Luxembourg which was the effective tax rate applicable in the country
of domicile of the parent company of the Group for the fi nancial year.
The Group has benefi tted from a credit in relation to the settlement of a number of tax audits in respect of previous years.
46 Regus plc Annual Report and Accounts 2010
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(c) Factors that may affect the future tax charge
Unrecognised tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates:
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018 and later
Available indefi nitely
Tax losses available to carry forward
Amount of tax losses recognised in the deferred tax asset
Total tax losses available to carry forward
The following deferred tax assets have not been recognised due to uncertainties over recoverability.
Intangibles
Accelerated capital allowances
Tax losses
Rent
Short term timing differences
(d) Corporation tax
Corporation tax payable
Corporation tax receivable
2010
£m
–
–
0.9
4.1
1.6
3.6
3.8
1.2
3.1
95.4
113.7
120.5
234.2
52.7
286.9
2010
£m
328.9
5.5
77.1
0.8
7.5
419.8
2010
£m
(17.0)
13.3
2009
£m
0.1
1.9
2.0
4.9
1.1
3.7
–
–
–
49.3
63.0
82.1
145.1
24.4
169.5
2009
£m
324.8
0.6
43.1
0.1
0.8
369.4
2009
£m
(52.5)
10.1
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Financial Statements
Notes to the accounts continued
9 Taxation continued
(e) Deferred taxation
The movement in deferred tax is analysed below:
Deferred tax asset
At 1 January 2009
Current year movement
Prior year movement
Direct reserves movement
Acquisitions
Transfers
Exchange movement
At 1 January 2010
Current year movement
Prior year movement
Direct reserves movement
Acquisitions
Transfers
Exchange movement
At 31 December 2010
Deferred tax liability
At 1 January 2009
Current year movement
Prior year movement
Acquisitions
Transfers
Exchange movement
At 1 January 2010
Current year movement
Prior year movement
Acquisitions
Transfers
Exchange movement
At 31 December 2010
Intangibles
£m
Property,
plant and
equipment
£m
Tax losses
£m
(6.1)
(5.2)
(0.5)
–
(0.4)
(4.6)
3.3
(13.5)
(6.5)
0.1
–
–
0.1
(1.3)
(21.1)
(4.3)
–
–
–
4.2
–
(0.1)
–
–
–
(0.1)
–
(0.2)
25.0
2.2
3.6
–
–
0.1
(2.1)
28.8
(3.0)
1.6
–
–
(0.7)
1.4
28.1
(1.3)
0.2
–
–
0.1
–
(1.0)
0.2
0.1
–
0.7
–
–
19.7
(1.0)
(3.3)
–
–
0.2
(1.7)
13.9
1.7
(1.1)
–
–
0.3
0.2
15.0
0.1
0.5
–
–
(0.2)
–
0.4
–
(0.1)
–
(0.3)
–
–
Short term
temporary
differences
£m
18.2
(5.0)
1.9
0.8
–
0.9
(1.1)
15.7
(20.0)
0.6
(0.8)
–
–
0.8
(3.7)
0.1
0.1
(0.1)
–
(0.1)
–
–
(0.2)
0.1
–
–
–
(0.1)
Rent
£m
22.2
(0.3)
–
–
–
–
(1.7)
20.2
(1.1)
(0.8)
–
–
(0.2)
0.7
18.8
–
–
–
–
–
–
–
–
–
–
0.2
–
0.2
Total
£m
79.0
(9.3)
1.7
0.8
(0.4)
(3.4)
(3.3)
65.1
(28.9)
0.4
(0.8)
–
(0.5)
1.8
37.1
(5.4)
0.8
(0.1)
–
4.0
–
(0.7)
–
0.1
–
0.5
–
(0.1)
Deferred tax assets recognised on short-term temporary differences consist predominantly of provisions deductible when paid and
share based payments. Deferred tax assets have been recognised in excess of deferred tax liabilities on the basis that there are
forecast taxable profi ts in the entities concerned.
At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was £64.3 million
(2009: £46.6 million). The only tax that would arise on these reserves would be non-creditable withholding tax.
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10. Earnings per ordinary share (basic and diluted)
Profi t attributable to equity shareholders of the parent (£m)
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
Basic and diluted profi t for the year attributable
to shareholders and basic earnings per share
Diluted earnings per share
Weighted average number of shares for basic EPS (number)
Weighted average number of shares under option during the year
Weighted average number of shares that would have been issued
at average market price
Weighted average number of awards under the CIP and LTIP
Weighted average number of shares for diluted EPS (number)
2010
£m
1.5
Profi t
2009
£m
67.0
2010
1.5
2009
67.0
947,462,881 948,203,737
76.8p
6,356,625
60.6p
86.6p
4,228,848
58.8p
Earnings per share
2010
pence
2009
pence
0.2
0.2
7.1
7.0
947,462,881 948,203,737
6,356,625
4,228,848
(2,872,755)
4,513,161
(5,016,457)
6,833,211
953,332,135 956,377,116
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.
11. Dividends
Dividends per ordinary share proposed
Interim dividends per ordinary share declared and paid during the year
2010
1.75p
0.85p
2009
1.6p
0.8p
Dividends of £23.2 million were paid during the year (2009: £19.0 million). The Company has proposed to shareholders that a fi nal
dividend of 1.75p per share will be paid (2009: 1.6p). Subject to shareholder approval it is expected that the dividend will be paid
on 27 May 2011.
12. Goodwill
Cost
At 1 January 2009
Recognised on acquisition of subsidiaries
Exchange differences
At 1 January 2010
Recognised on acquisition of subsidiaries
Exchange differences
At 31 December 2010
Net book value
At 1 January 2010
At 31 December 2010
£m
274.5
0.8
(16.2)
259.1
15.2
8.1
282.4
259.1
282.4
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Financial Statements
Notes to the accounts continued
12. Goodwill continued
Cash generating units (CGUs), comprising individual business centres, are grouped by country of operation for the purpose of carrying
out impairment reviews of non-current assets as this is the lowest level at which goodwill can be assessed. Goodwill acquired through
business combinations is held at a country level and is subject to impairment reviews based on the cash fl ows of these CGUs.
The goodwill attributable to the reportable business segments is as follows:
Carrying amount of goodwill included within the Americas business segment
Carrying amount of goodwill included within the EMEA business segment
Carrying amount of goodwill included within the Asia Pacifi c business segment
Carrying amount of goodwill included within the UK business segment
2010
£m
168.8
6.6
11.1
95.9
282.4
2009
£m
153.2
5.4
10.2
90.3
259.1
The carrying value of goodwill and indefi nite lived intangibles allocated to two CGUs, the USA and UK, is material relative to the total
carrying value comprising 90% of the total. The remaining 10% of the carrying value is allocated to a further 23 countries (23 cash
generating units). The goodwill and indefi nite lived intangibles allocated to the USA and the UK cash generating units are set out below:
USA
UK
Other cash generating units
Goodwill
£m
148.1
95.9
38.4
282.4
Intangible
assets
£m
–
11.2
–
11.2
2010
£m
148.1
107.1
38.4
293.6
2009
£m
140.9
101.5
27.9
270.3
The indefi nite lived intangible asset relates to the brand value arising from the acquisition of the remaining 58% of the UK business
in the year ended 31 December 2006 (see note 13).
The recoverable amount of each of the CGUs above has been determined based on their value in use, calculated as the present
value of future cash fl ows attributable to the unit.
The value in use for each CGU has been determined using a model which derives the individual value in use for each unit from the
value in use of the Group as a whole. Although the model includes budgets and forecasts prepared by management it also refl ects
external factors, such as capital market risk pricing as refl ected in the market capitalisation of the Group and prevailing tax rates, which
have been used to determine the risk adjusted discount rate for the Group. While management believe that the projected cashfl ows are
a reasonable refl ection of the likely outcomes over the medium to long term, in the event that trading conditions deteriorate beyond the
assumptions used in the projected cashfl ows, it is also possible that impairment charges could arise in future periods.
The following key assumptions have been used in calculating value in use for each Group of CGUs:
• Future cash fl ows are based on budget for 2011 approved by the Board. The model excludes cost savings and restructurings that
are anticipated but had not been committed to at the date of the determination of the value in use. Thereafter forecasts have been
prepared by management for a further four years from 2012 that refl ect an average annual growth rate of 3-5.4% and an increase
in gross margins driven by improving global economic conditions from 2011. This compared to forecasts used in the evaluation in
the year ended 31 December 2009 that projected 3-5.5% growth but refl ected a higher level of baseline cash fl ows.
• These forecasts exclude the impact of both organic and acquisitive growth expected to take place in future periods. As a result
gross margins and real operating profi ts at the end of the fi ve year period remain either at or below the levels achieved in the year
ended 31 December 2008. Management consider these projections to be a reasonable projection of margins expected at the
mid-cycle position refl ecting the current uncertain global economic conditions. Cash fl ows beyond 2015 have been extrapolated
using a 2.25% growth rate which management believe is a reasonable long term growth rate for any of the markets in which the
relevant CGUs operate. A terminal value is included in the assessment refl ecting the Group’s expectation that it will continue to
operate in these markets and the long term nature of the businesses.
50 Regus plc Annual Report and Accounts 2010
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• The Group conducts a market risk assessment of CGUs in each country, with a country specifi c pre-tax discount rate being
applied to the future pre-tax cash fl ows for each CGU based on the underlying weighted average cost of capital for the Group.
This was unchanged from 2009 at 9%. The underlying pre-tax rate therefore refl ects current market assessments of the Group
as a whole and is adjusted for risks specifi c to such businesses in each country, giving a risk adjusted range of 12% to 17%
(2009: 12% to 17%) for the underlying CGUs. A detailed review has been performed of the ‘value in use’ models and the
appropriate rate at which its cash fl ows are discounted for impairment test purposes. The market risk adjustments added
to the underlying CGU discount rates remain unchanged from 2009.
The trading conditions in which the Group operates are subject to competitive and economic pressures that can have a material
effect on the operating performance of the business. Current market conditions remain challenging for the Group and the current
global conditions makes forecasting medium term cash fl ows more diffi cult than is traditionally the case. The forecast cash fl ows
used to derive the value in use are sensitive to changes in revenues (driven by changes in prices, occupancy or a combination
of both), costs and discount rates (including the market assessment of the risks of the Group refl ected in the Group’s market
capitalisation). Actual conditions could result in either better or worse cash fl ows than included in the value in use calculation.
Should current economic conditions prove to be more severe or more prolonged than currently expected this would adversely
impact the forecast cash fl ows and could result in impairments to goodwill and indefi nite lived intangible assets in future periods.
The amount by which the value in use exceeds the carrying amount of the US CGU is suffi ciently large to enable the Directors to
conclude that a reasonably possible change in the key assumptions would not result in an impairment charge for this CGU. The key
assumptions used in the US model are that in 2011 the forecast centre contribution rises to 24% from 18%. Revenue and costs grow
at 3% per annum from 2011 giving a terminal 2015 centre gross margin of 26%. Thereafter a 2.25% long-term growth rate is assumed
on revenue and cost into perpetuity. The cash fl ows have been discounted using a pre-tax discount rate of 12% (2009: 12%).
Foreseeable events are unlikely to result in a change in the projections of such a signifi cant nature so as to result in most cash
generating units carrying amount exceeding their recoverable amount. For the UK CGUs, however, a reasonably possible change
in the key assumptions used to determine the cash generating unit’s recoverable amount could cause the unit’s carrying amount
to exceed its value in use.
For the UK, the goodwill and the indefi nite life intangible brand in this CGU arose on acquisitions completed in 2006 – principally
the acquisition of the remaining 58% of the UK business. The value in use exceeded its carrying amount by £37 million (2009:
£20 million) and therefore no impairment was necessary at 31 December 2010. During the year the Group re-negotiated a number
of lease commitments, this has signifi cantly lowered its cost base and contributed to the margin improvement in the forecast period.
The forecast cash fl ows assume an interim recovery reverting to mid-cycle revenue and occupancy being achieved in 2015 prior to
the application of the long-run growth rate and the discount rate used. Our model incorporates a recovery in pricing but not at the
same rate as the decline in pricing experienced in recent years, the terminal value assumed in 2015 is below that experienced in
2008. Whilst occupancy levels are forecast to increase over the period, the level set for the terminal value calculation represents
a mid-cycle occupancy. Revenue over the forecast period grows at an average of 5.4% p.a. from 2010. All other variables held
constant, a reduction in the growth rate of 0.5% would result in the carrying amount being equal to the value in use. Management
maintain that this would be offset by an increase in occupancy so that the carrying amount would be greater than the value in use.
A fall of 1.6% in the average gross margins from 2011 in the forecast period would result in the recoverable amount being equal to
the carrying amount. Similar to 2009 the model assumes a mid-cycle gross margin in 2015 of 17%. A reduction to 15% would result
in the value in use being equal to the carrying amount. The cash fl ows have been discounted using a pre-tax discount rate of 14%
(2009:14%). The discount rate used is based on a risk adjusted Group WACC, refl ecting the specifi c risk profi le of the UK business
such as the greater degree of competition in the UK market. An increase in the pre-tax discount rate used from 14% to 17.5%
would result in its value in use being equal to its carrying amount.
There is no goodwill relating to the Group’s joint ventures.
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Financial Statements
Notes to the accounts continued
13 Other intangible assets
Cost
At 1 January 2009
Additions at cost
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 1 January 2010
Additions at cost
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2010
Amortisation
At 1 January 2009
Charge for the year
Disposals
Exchange rate movements
At 1 January 2010
Charge for year
Disposals
Exchange rate movements
At 31 December 2010
Net book value
At 31 December 2010
At 31 December 2009
Brand
£m
56.9
–
–
–
(4.7)
52.2
–
–
–
1.6
53.8
10.2
2.1
–
(1.1)
11.2
2.1
–
0.5
13.8
40.0
41.0
Customer
lists
£m
Software
£m
17.9
–
1.9
–
(0.6)
19.2
–
2.2
–
0.7
22.1
12.2
2.9
–
(0.5)
14.6
2.2
–
0.2
17.0
5.1
4.6
12.3
1.6
–
(0.2)
(0.1)
13.6
2.4
–
–
0.3
16.3
8.9
1.7
(0.2)
0.5
10.9
1.9
–
0.2
13 .0
3.3
2.7
Total
£m
87.1
1.6
1.9
(0.2)
(5.4)
85.0
2.4
2.2
–
2.6
92.2
31.3
6.7
(0.2)
(1.1)
36.7
6.2
–
0.9
43.8
48.4
48.3
Included with the brand value is £11.2 million relating to the acquisition of the remaining 58% of the UK business in the year ended
31 December 2006. The Regus brand acquired in this transaction is assumed to have an indefi nite useful life due to the fact that
the value of the brand is intrinsically linked to the continuing operation of the Group.
As a result of the Regus brand acquired with the UK business having an indefi nite useful life no amortisation is charged but
the carrying value is assessed for impairment on an annual basis. The brand was tested at the balance sheet date against the
recoverable amount of the UK business segment at the same time as the goodwill arising on the acquisition of the UK business
(see note 12). The remaining amortisation life for non-indefi nate life brands is 14 years.
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14. Property, plant and equipment
Cost
At 1 January 2009
Additions
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 1 January 2010
Additions
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2010
Accumulated depreciation
At 1 January 2009
Charge for the year
Disposals
Exchange rate movements
At 1 January 2010
Charge for the year
Disposals
Exchange rate movements
At 31 December 2010
Net book value
At 31 December 2010
At 31 December 2009
Land and
buildings
£m
Furniture,
fi ttings and
motor vehicles
£m
Computers
£m
–
–
–
–
–
–
5.6
–
–
–
5.6
–
–
–
–
–
–
–
–
–
5.6
–
587.8
44.3
0.6
(11.2)
(44.4)
577.1
66.6
12.3
(4.5)
21.2
672.7
322.7
59.8
(10.3)
(26.7)
345.5
61.0
(2.5)
12.1
416.1
256.6
231.6
37.9
3.5
–
(1.5)
(2.3)
37.6
5.0
0.2
(1.7)
1.4
42.5
25.0
6.6
(1.5)
(1.8)
28.3
6.2
(1.7)
1.1
33.9
8.6
9.3
Total
£m
625.7
47.8
0.6
(12.7)
(46.7)
614.7
77.2
12.5
(6.2)
22.6
720.8
347.7
66.4
(11.8)
(28.5)
373.8
67.2
(4.2)
13.2
450.0
270.8
240.9
Additions include £3.8 million in respect of assets acquired under fi nance leases (2009: £0.9 million). The property purchased during
the year is subject to a charge under the terms of the loan agreement.
The net book value of furniture, fi ttings and motor vehicles includes amounts held under fi nance leases as follows:
Cost
Accumulated depreciation
Net book value
15. Other long term receivables
Deposits held by landlords against rent obligations
Amounts owed by joint ventures
Prepayments and accrued income
2010
£m
23.9
(16.5)
7.4
2010
£m
29.9
0.8
3.3
34.0
2009
£m
15.7
(11.2)
4.5
2009
£m
29.0
0.7
3.3
33.0
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Financial Statements
Notes to the accounts continued
16. Trade and other receivables
Trade receivables
Amounts owed by joint ventures
Other receivables
Deposits held by landlords against rent obligations
Prepayments and accrued income
VAT recoverable
17. Trade and other payables
Trade payables
Other tax and social security
Deferred landlord contributions
Amounts owed to joint ventures
Rent accruals
Other accruals
Other payables
Total current
Accruals and deferred income
Rent accruals
Other payables
Total non-current
2010
£m
102.6
4.0
18.1
20.2
84.2
19.6
248.7
2010
£m
50.7
26.1
13.0
1.6
37.3
74.7
21.8
225.2
2010
£m
45.6
51.1
2.4
99.1
2009
£m
97.3
3.2
13.5
11.4
64.1
13.3
202.8
2009
£m
36.0
18.8
11.6
1.0
31.9
63.5
13.9
176.7
2009
£m
38.6
52.6
2.9
94.1
18.Borrowings
The Group’s total loan and borrowing position at 31 December 2010 and at 31 December 2009 had the following maturity profi les:
Bank and other loans
Repayments falling due as follows:
Amounts falling due after more than one year:
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
Total non-current
Total current
Total bank and other loans
2010
£m
2009
£m
–
3.4
–
3.4
5.5
8.9
–
–
–
–
6.0
6.0
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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
Less: fi nance charges allocated to future periods
Present value of future minimum lease payments
Total current
Total non-current
19. Provisions for liabilities and charges
Onerous
leases and
closures
£m
8.8
5.5
(1.1)
(2.5)
–
10.7
2.1
8.6
10.7
Restructuring
£m
2.1
–
(0.4)
(0.9)
(0.1)
0.7
0.7
–
0.7
Other
£m
1.2
–
–
–
–
1.2
–
1.2
1.2
2010
Total
£m
12.1
5.5
(1.5)
(3.4)
(0.1)
12.6
2.8
9.8
12.6
Onerous leases
and closures
£m
9.0
2.1
(1.8)
–
(0.5)
8.8
Restructuring
£m
–
2.1
–
–
–
2.1
1.7
7.1
8.8
2.1
–
2.1
At 1 January
Provided in the period
Utilised in the period
Provisions released
Exchange differences
At 31 December
Analysed between:
Current
Non-current
At 31 December
2010
£m
2.3
1.4
0.6
4.3
(0.1)
4.2
2.3
1.9
4.2
Other
£m
1.5
–
–
(0.1)
(0.2)
1.2
0.1
1.1
1.2
2009
£m
1.4
0.7
0.1
2.2
(0.1)
2.1
1.4
0.7
2.1
2009
Total
£m
10.5
4.2
(1.8)
(0.1)
(0.7)
12.1
3.9
8.2
12.1
Provisions for onerous leases and closure costs relate to the estimated future costs on centre closures and onerous property leases.
The maximum period over which the provisions are expected to be utilised expires by 31 December 2018. The onerous lease release
relates to the UK restructuring and has been credited to the income statement through exceptional items.
The restructuring provision of £0.7 million is expected to be utilised during the next fi nancial year. Other provisions include the
estimated costs of claims against the Group outstanding at the year end, of which, due to their nature, the maximum period
over which they are expected to be utilised is uncertain.
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Financial Statements
Notes to the accounts continued
20. Investments in joint ventures
At 1 January 2009
Dividends paid
Share of profi t/(losses)
Acquisition of the remaining 50% of Regus Equity Business Centres
Exchange rate movements
At 1 January 2010
Dividends paid
Share of profi t/(losses)
Acquisition
Exchange rate movements
At 31 December 2010
Entity
Joint ventures
Regus Algerie S.à.r.l
Park Business Centres Limited
Regus Jordan PSC
Regus Lebanon S.à.r.l
Skyport International Ing Vastgoed Beleggingen WTC1
Skyport International Ing Vastgoed Beleggingen WTC2
Regus Herengracht
Regus Al Jaidah Business Centres LLC
Qatar Westbay
Regus Senegal S.à.r.l
Regus Istanbul Is Merkezi Isletmeciligi AS
Asya Kozyatagi Is Merkezi Isletmeciligi AS
Regus Abu Dhabi Business Centres LLC
Abidjan Business Centre CIVSL
Regus Business Centre (Oman) S.à.r.l
Country
Algeria
England
Jordan
Lebanon
Netherlands
Netherlands
Netherlands
Qatar
Qatar
Senegal
Turkey
Turkey
UAE
Ivory Coast
Oman
Provision for
defi cit in joint
ventures
£m
(1.0)
–
(0.1)
–
–
(1.1)
–
(0.2)
–
–
(1.3)
Investments
in joint ventures
£m
4.0
(1.0)
2.1
(0.6)
(0.1)
4.4
(1.6)
1.5
–
(0.4)
3.9
Total
£m
3.0
(1.0)
2.0
(0.6)
(0.1)
3.3
(1.6)
1.3
–
(0.4)
2.6
Ownership
2010
%
2009
%
60
50
50
30
50
50
50
25
25
50
30
50
49
50
50
60
50
50
30
50
50
50
25
25
50
30
50
49
–
–
As at 31 December 2009, the Group acquired the remaining 50% membership interest in Regus Equity Business Centers LLC from
EOP LLC and the entity was reclassifi ed from a joint venture to a subsidiary undertaking effective from that date.
The results of the joint ventures opposite are the full results of the joint ventures and do not represent the effective share:
56 Regus plc Annual Report and Accounts 2010
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Income Statement
Revenue
Expenses
Profi t before tax for the year
Tax charge
Profi t after tax for the year
Net assets/(liabilities)
Fixed assets
Current assets
Current liabilities
Non-current liabilities
Net assets/(liabilities)
21. Share capital
Ordinary equity share capital
2010
£m
23.6
(20.2)
3.4
(0.5)
2.9
7.3
14.7
(16.6)
(3.0)
2.4
2009
£m
39.7
(34.7)
5.0
–
5.0
7.8
14.2
(15.2)
(2.7)
4.1
Authorised
Ordinary 1p shares at 1 January & 31 December
Issued and fully paid up
Ordinary 1p shares at 1 January & 31 December
2010
Number
Nominal value
£m
2009
Nominal value
£m
Number
8,000,000,000
80.0
8,000,000,000
80.0
950,969,822
9.5
950,969,822
9.5
Treasury share transactions involving Regus plc shares between 1 January and 31 December 2009.
At 1 January 2009 5,950,000 shares were held as Treasury shares. During the year ended 31 December 2009, Regus plc re-purchased
627,258 of its own shares in the open market and utilised an additional 4,373,502 of treasury shares held by the Group to satisfy
the exercise of share awards by employees.
Treasury share transactions involving Regus plc shares between 1 January 2010 and 31 December 2010.
As at 1 January 2010, 1,576,498 shares were held as treasury shares. During the year ended 31 December 2010, Regus plc
re-purchased 9,385,000 of its own shares in the open market and utilised an additional 1,890,592 of treasury shares held by
the Group to satisfy the exercise of share awards by employees.
The holders of ordinary shares in Regus Group plc were entitled to receive dividends as were declared by the Company and were
entitled to one vote per share at meetings of the Company. Treasury shares did not carry such rights until reissued.
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Financial Statements
Notes to the accounts continued
22. Analysis of fi nancial resources
Cash and cash equivalents
Liquid investments
Gross cash
Debt due within one year
Debt due after one year
Finance leases due within one year
Finance leases due after one year
Net fi nancial assets
At 1 Jan 2010
£m
205.1
40.0
245.1
(6.0)
–
(1.4)
(0.7)
(8.1)
237.0
Cash fl ow
£m
(12.9)
(29.6)
(42.5)
1.9
(3.4)
0.9
1.2
0.6
(41.9)
Non-cash
changes
£m
–
–
–
(1.0)
–
(1.4)
(2.2)
(4.6)
(4.6)
Exchange
movements
£m
2.0
–
2.0
(0.4)
–
(0.4)
(0.2)
(1.0)
1.0
At 31 Dec 2010
£m
194.2
10.4
204.6
(5.5)
(3.4)
(2.3)
(1.9)
(13.1)
191.5
Cash and cash equivalents balances held by the Group that are not available for use amounted to £32.6 million at 31 December 2010
(December 2009: £64.3 million).
Of this balance, £23.4 million (2009: £47.0 million) is pledged as security against outstanding bank guarantees and a further
£9.2 million (2009: £17.3 million) is pledged against various other commitments of the Group. These amounts are blocked
and not available for use by the business.
Liquid investments represent corporate bonds and cash placed on deposit by the Group with a maturity over three months. Non-cash
changes comprise the amortisation of debt issue costs, new fi nance leases entered into and movements in debt maturity.
23. Financial instruments and fi nancial risk management
The objectives, policies and strategies applied by the Group with respect to fi nancial instruments and the management of capital
are determined at Group level. The Group’s Board maintains responsibility for the risk management strategy of the Group and the
Chief Financial Offi cer is responsible for policy on a day to day basis. The Chief Financial Offi cer and Group Treasurer review the
Group’s risk management strategy and policies on an ongoing basis. The Board has delegated to the Group Audit Committee
the responsibility for applying an effective system of internal control and compliance with the Group’s risk management policies.
The Audit Committee is supported by the Head of Risk Management in performing this role.
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.
Going concern
The Business Review on pages 8 to 9 of the Report and Accounts sets out the Group’s strategy and the factors that are likely
to affect the future performance and position of the business. The fi nancial review on pages 10 to 13 within the Business Review
reviews the trading performance, fi nancial position and cash fl ows of the Group. A feature of the Group has been its strong cash
fl ows and during the year ended 31 December 2010, despite the diffi cult trading conditions, the Group has maintained its cash
levels at comparable levels to the position at the start of the fi nancial year. Although many countries that the Group operates in
continue to experience diffi cult economic conditions, the directors believe that the Group is taking the necessary actions and
expect to strengthen the current market leading position of the Group.
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future and accordingly, continue to adopt the going concern basis in preparing the annual report
and accounts.
Following an internal review of the Group’s facility arrangements in March 2009, and given the strength of the Group’s cash position,
the Board approved the early surrender of the £100 million revolving credit facility. This decision does not impact the judgment of
the directors that it is appropriate for the Group to adopt the going concern basis in preparing these accounts.
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Credit risk
Credit risk could occur where a customer or counterparty defaults under the contractual terms of a fi nancial instrument and arises
principally in relation to customer contracts and the Group’s cash deposits.
A diversifi ed customer base and requirement for customer deposits and payments in advance on workstation contracts which
contribute the majority of the Group’s revenue minimise the Group’s exposure to customer credit risk. No single customer contributes
a material percentage of the Group’s revenue. The Group’s policy is to provide against trade receivables when specifi c debts are
judged to be irrecoverable or where formal recovery procedures have commenced. A provision is created where debts are more
than three months overdue which refl ects the Group’s historical experience of the likelihood of recoverability of these trade receivables.
These provisions are reviewed on an ongoing basis to assess changes in the likelihood of recoverability.
Cash assets 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.
The maximum exposure to credit risk for trade receivables at the reporting date, analysed by geographic region, is summarised below:
Americas
EMEA
Asia Pacifi c
UK
2010
£m
18.9
42.9
16.6
24.2
102.6
2009
£m
21.0
38.7
14.2
23.4
97.3
All of the Group’s trade receivables relate to customers purchasing workplace solutions and no individual customer has a material
balance owing as a trade receivable.
The ageing of trade receivables at 31 December was:
Not overdue
Past due 0 – 30 days
Past due 31 – 60 days
More than 60 days
Gross
2010
£m
94.3
6.6
2.3
11.2
114.4
Provision
2010
£m
(0.6)
(0.3)
(0.4)
(10.5)
(11.8)
Gross
2009
£m
86.5
8.8
3.3
12.8
111.4
Provision
2009
£m
(0.2)
(0.7)
(0.8)
(12.4)
(14.1)
At the year end 31 December 2010, the Group maintained a provision of £11.8 million against potential bad debts (2009: £14.1 million)
arising from trade receivables. The Group had provided £4.1 million (2009 £14.1 million) in the year and utilised £7.0 million (2009
£7.1 million).
The Group believes no provision is generally required for trade receivables that are not overdue as the Group collects the majority
of its revenue in advance of the provision of offi ce services and requires deposits from its customers.
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Financial Statements
Notes to the accounts continued
23. Financial instruments and fi nancial risk management continued
Liquidity risk
The Group manages liquidity risk by reviewing its global cash position on a weekly basis and expects to have suffi cient liquidity to meet
its fi nancial obligations as they fall due. The Group has free cash and liquid investments (excluding blocked cash) of £172.0 million
(2009: £180.8 million) which the directors consider adequate to meet the Group’s day to day requirements.
In November 2010 the Group signed a three-year unsecured £80 million Bank Guarantee & Letter of Credit facility with Lloyds TSB bank.
This will allow the Group to release cash previously set aside to support guarantees. The facility is subject to fi nancial covenants
covering operating cash-fl ows, the ratio of Gross Debt to consolidated tangible net worth and the ratio of EBITDAR to net interest
and rental charges.
The Group’s undrawn senior committed facility of £100 million was scheduled to expire on 19 March 2011, subject to the Group
continuing to comply with the covenants of the facility agreement. The covenants included the ratio of net debt to EBITDA; the ratio
of cash fl ow to net debt service (including net interest expense and scheduled debt repayments) and the ratio of EBITDAR to net
interest and rental charges.
In March 2009, the Board approved the early surrender of the £100.0 million revolving credit facility following an internal review
of the Group’s facility arrangements. Of the facility approximately £50.0 million had been set aside to support bank guarantees
provided against obligations of the Group. In order to continue to support these, the Group deposited suffi cient funds with the
guaranteeing banks which reduced free cash available for use by an equivalent amount. In so doing the directors considered the
Group’s forecast and sensitised cash fl ow projections and do not believe that this will have an adverse impact on the Group’s
liquidity given the strength of the Group’s cash position.
Although the Group has net current liabilities of £75.2 million (2009: £46.5 million) the Group does not consider that this gives
rise to a liquidity risk. A large proportion of the net current liabilities comprise non-cash liabilities such as deferred income that will
be recognised in future periods through the income statement. Although the Group holds customer deposits of £163.2 million
(2009;£149.3 million) these are spread across a large number of customers and no deposit held for an individual customer
is material. Therefore the Group does not believe the balance represents a liquidity risk.
The net current assets, excluding deferred income, were £50.6 million at 31 December 2010 (2009: £68.2 million). It is considered
appropriate to exclude deferred income in assessing the liquidity of the Group as it refl ects the future non-refundable contractual
revenue of the Group to be recognised as revenue in future periods.
Market risk
Interest rate risk
Surplus cash balances are invested to achieve maximum interest returns on a day to day basis. In order to maximise interest returns,
surplus cash is also invested in AAA-rated corporate bonds and deposits with a maturity in excess of three months. At the balance
sheet date no corporate bond or deposit had a maturity in excess of three months. Whenever possible, and subject to the operational
requirements of the Group, cash is repatriated to the head offi ce and managed by the Group Treasury department.
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. Working capital balances are generally held in the functional currency of the overseas
subsidiary and therefore the impact of the retranslation of monetary assets and liabilities in the income statement of overseas
subsidiaries is not considered to have a material impact on the Group.
The majority of the Group’s net assets are in pounds sterling, US dollars and euros. During the year ended 31 December 2010 the
Group continued the policy of partially hedging the translation effect of certain profi ts incurred in foreign currencies (including the US
dollar, euro, Japanese yen and certain East European currencies). The policy aimed to reduce the impact on the reported profi ts of
the Group from changes in the value of pounds sterling against the hedged currencies. As at 31 December 2010, all foreign exchange
derivative fi nancial instruments had matured and no open positions were held.
Historically the Group has occasionally used derivative fi nancial instruments to manage its exposure to foreign currency fl uctuations,
although natural hedges limit the exposure to these risks. In the year ended 31 December 2010, the Group used derivative fi nancial
instruments to manage the translation risk of certain foreign currencies on the reported profi ts of the Group.
No transactions of a speculative nature are undertaken.
Other market risks
The Group does not hold any available-for-sale equity securities and is therefore not subject to risks of changes in equity prices.
60 Regus plc Annual Report and Accounts 2010
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Capital management
The Group’s parent company is listed on the UK stock exchange and the Board’s policy is to maintain a strong capital base. The
Chief Financial Offi cer monitors the diversity of the Group’s major shareholders and further details of the Group’s communication with
key investors can be found in the corporate governance report on pages 18 to 23. In 2006, the Board approved the commencement
of a progressive dividend policy to enhance the total return to shareholders.
The Group’s Chief Executive Offi cer, Mark Dixon, is the major shareholder of the Company and all executive members of the Board
hold shares in the Company. Details of the Directors’ shareholdings can be found in the report of the Remuneration Committee on
pages 25 to 30. In addition the Group operates various share option plans for key management and other senior employees.
At the 2008 Annual General Meeting shareholders approved a resolution for the Group to re-purchase up to 10% of its issued share
capital in the market. In June 2007, the Group commenced a share buyback programme to meet both the need to issue shares
under the Group’s share option programme and, more generally, as a means of returning cash to shareholders.
In the year ended 31 December 2010 Regus plc purchased 1,353,188 (2009: 627,258) of its own shares in the open market and
utilised these to satisfy employee share awards. Regus plc re-purchased 9,385,000, of its own shares in the open market and held
these shares as treasury shares. As at 21 March 2011, 9,070,906 shares were held as treasury shares.
The Company declared an interim dividend of 0.85p per share (2009: 0.8p) during the year ended 31 December 2010 and
proposed a fi nal dividend of 1.75p per share (2009: 1.6p per share) an 8% increase on the 2009 dividend.
There were no other changes to the Group’s approach to capital management during the year.
The Group’s objective when managing capital (equity and borrowings) is to safeguard the Group’s ability to continue as a going
concern and to maintain an optimal capital structure to reduce the cost of capital. The Group holds minimal debt and is in a strong
cash position therefore it is majority equity funded. The Board balances the higher returns possible with higher levels of borrowings
with the stability and security afforded by a sound capital position. The Group’s return on capital employed for the year ended
31 December 2010, defi ned as operating profi t divided by total shareholders’ equity, was 1.4% (2009: 17.2%).
Effective interest rates
In respect of fi nancial assets and fi nancial liabilities, the following table indicates their effective interest rates at the balance sheet
date and the periods in which they mature. Interest payments are excluded from the table.
The undiscounted cash fl ow of these instruments is not materially different from the carrying value.
As at 31 December 2010
Cash and cash equivalents
Liquid investments –
corporate bonds
Other liquid investments
Trade and other receivables
Finance lease liabilities
Secured bank loans
Other loans
Customer deposits
Trade and other payables
Effective
interest rate
%
0.9
Carrying value
£m
194.2
Contractual
cash fl ow
£m
194.2
Less than
1 year
£m
194.2
1-2 years
£m
–
2-5 years
£m
–
More than
5 years
£m
–
2.1
–
–
3.9
2.4
7.3
–
–
10.4
–
190.0
(4.2)
(3.7)
(5.2)
(163.2)
(176.3)
10.4
–
201.8
(4.2)
(3.7)
(5.2)
(163.2)
(176.3)
10.4
–
171.8
(2.3)
(0.4)
(5.2)
(163.2)
(173.8)
–
–
15
(1.3)
–
–
–
(2.5)
–
–
15
(0.6)
(3.3)
–
–
–
–
–
–
–
–
–
–
–
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Financial Statements
Notes to the accounts continued
23. Financial instruments and fi nancial risk management continued
As at 31 December 2009
Cash and cash equivalents
Liquid investments –
corporate bonds
Other liquid investments
Trade and other receivables
Finance lease liabilities
Secured bank loans
Other loans
Customer deposits
Trade and other payables
Effective
interest rate
%
0.9
3.7
1.5
–
3.9
–
12.1
–
–
Carrying
value
£m
205.1
10.0
30.0
168.2
(2.1)
(0.7)
(5.3)
(149.3)
(138.1)
Contractual
cash fl ow
£m
205.1
Less than
1 year
£m
205.1
1-2 years
£m
–
2-5 years
£m
–
More than
5 years
£m
–
10.0
30.0
182.4
(2.1)
(0.7)
(5.3)
(149.3)
(138.1)
10.0
30.0
153.2
(1.4)
(0.7)
(5.3)
(149.3)
(135.2)
–
–
14.6
(0.6)
–
–
–
(2.9)
–
–
14.6
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
Sensitivity analysis
At 31 December 2010 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 £1.4 million (2009: £1.7 million) with a corresponding increase in total equity.
It is estimated that a fi ve percentage point weakening in the value of the US dollar against pounds sterling would have decreased
the Group’s profi t before tax by approximately £0.3 million for the year ended 31 December 2010 (2009: £0.9 million). It is estimated
that a fi ve percentage point weakening in the value of the euro against pounds sterling would have decreased the Group’s profi t
before tax by approximately £0.4 million for the year ended 31 December 2010 (2009: £1.1 million).
It is estimated that a fi ve percentage point weakening in the value of the US dollar against pounds sterling would have decreased
the Group’s total equity by approximately £7.9 million for the year ended 31 December 2010(2009: £9.1 million). It is estimated that
a fi ve percentage point weakening in the value of the euro against pounds sterling would have increased the Group’s total equity by
approximately £0.6 million for the year ended 31 December 2010 (2009: £0.7 million).
Fair value disclosures
The fair values together with the carrying amounts show in the balance sheet are as follows:
Cash and cash equivalents
Liquid investments – corporate bonds
Other liquid investments
Trade and other receivables
Finance lease liabilities
Secured bank loans
Other loans
Customer deposits
Trade and other payables
Unrecognised gain
Carrying
amount
£m
194.2
10.4
–
190.3
(4.2)
(3.7)
(5.2)
(163.2)
(176.3)
42.3
2010
Fair value
£m
194.2
10.4
–
190.3
(3.9)
(3.7)
(5.2)
(163.2)
(176.3)
42.6
0.3
Carrying
amount
£m
205.1
10.0
30.0
168.2
(2.1)
(0.7)
(5.3)
(149.3)
(138.1)
117.8
2009
Fair value
£m
205.1
10.0
30.0
168.2
(1.8)
(0.7)
(5.3)
(149.3)
(138.1)
118.1
0.3
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Summary of methods and assumptions:
Trade and other receivables/payables and customer deposits
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 an appropriate discount rate which refl ects
current market assessments and the risks specifi c to such liabilities.
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.
Derivative fi nancial instruments
The Group held several foreign currency swaps in the year, all of which matured during the year. The aggregate movement of the fair
value of these instruments was a loss of £0.5 million (2009: gain £2.2 million). The instruments were not designated as hedges and
the gain has been recognised in the income statement. No derivative fi nancial instruments were held at the year end (2009: nil).
Committed borrowing facilities
At 31 December 2010
At 31 December 2009
Principal
£m
–
–
Available
£m
–
–
In November 2010 the Group signed a three-year unsecured £80 million Bank Guarantee & Letter of Credit facility with Lloyds TSB
bank. This will allow the Group to release cash previously set aside to support guarantees. The facility is subject to fi nancial covenants
covering operating cash fl ows, the ratio of Gross Debt to consolidated tangible net worth and the ratio of EBITDAR to net interest
and rental charges.
In March 2009, the Board approved the early surrender of the £100.0 million revolving credit facility following an internal review of the
Group’s facility arrangements. Of the facility approximately £50.0 million had been set aside to support bank guarantees provided
against obligations of the Group. In order to continue to support these, the Group deposited suffi cient funds with the guaranteeing
banks which reduced the cash available for use by an equivalent amount. The directors do not believe that this decision had an
adverse impact on the Group’s liquidity given the strength of the Group’s cash position.
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Financial Statements
Notes to the accounts continued
24. Share based payment
Regus Group Share Option Plan
During 2004 the Group established the Regus Group Share Option Plan which entitles executive directors and certain employees to
share options in Regus plc (previously 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.
At 1 January
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2010
2009
Weighted
average
exercise price
per share
Number of
share options
67.95 12,394,287
–
97.08
(2,334,587)
81.27
–
64.26
80.42 10,059,700
6,356,625
57.00
Weighted
average exercise
price per share
78.75
–
125.30
–
67.95
60.64
Number of
share options
10,059,700
4,603,961
(3,823,075)
(3,186,486)
7,654,100
3,170,139
Date of grant
23/07/2004
08/09/2004
21/03/2007
20/04/2007
18/03/2008
18/05/2010
28/06/2010
Total
Numbers granted
4,106,981
3,884,170
2,148,258
707,506
4,331,641
3,986,000
617,961
19,782,517
Weighted
average exercise
price per share
57.00
64.75
131.50
146.50
80.50
100.50
75.00
84.29
Lapsed
–
(729,227)
(2,148,258)
(707,506)
(4,331,641)
(120,000)
–
(8,036,632)
Exercised
(936,842)
(3,154,943)
–
–
–
–
–
(4,091,785)
At 31 Dec 2010 Exercisable from
3,170,139 23/07/2007
– 08/09/2007
21/03/2010
–
–
20/04/2010
– 18/03/2011
18/05/2015
28/06/2013
3,866,000
617,961
7,654,100
Expiry date
23/07/2014
08/09/2014
21/03/2017
20/04/2017
18/03/2018
23/03/2020
28/06/2020
The Regus Group also operates the Regus Group Share Option Plan (France) which is included within the numbers for the Regus
Share Option Plan disclosed above. The terms of the Regus Share Option Plan (France) are materially the same as the Regus Group
Share Option Plan with the exception that they are only exercisable from the fourth anniversary of the date of grant assuming the
performance conditions have been met. 447,773 options awarded under the Regus Group Share Option Plan (France) are included in
the above table (2009: 416,146,), 416,146 lapsed during the year (2009: 231,935) and nil were exercised during the year (2009: nil).
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Performance conditions for share options
The options awarded in 2004 included certain performance criteria that needed to be met in order for the share options to vest. The
share options vested based on the basic earnings per share (adjusted for non-recurring items and goodwill and intangible amortisation)
that exceeded the targets linked to the Retail Price Index. The basic earnings per share for performance purposes was 1p. 100% of
the options awarded in July and September 2004 vested during 2007.
The awards of options made in March 2007 and April 2007 failed to meet the related performance conditions and lapsed in prior years.
The March 2008 options failed to meet the related performance conditions and lapsed in the year ended 31 December 2010.
The options awarded in March and June 2010 contain the following performance conditions:
50% of the options will be eligible to vest if the Regus Total Shareholder Return (‘TSR’) % achieved relative to FTSE All Share Total
Return index is at least at the median over the performance period. 50% of the options will be eligible to vest subject to the EPS
conditions in the table below:
Vesting Scale
25%
50%
75%
100%
Once performance conditions are satisfi ed those options that are eligible to vest will vest as follows:
March 2013
March 2014
March 2015
EPS target Y/E 2012
15p
16p
17p
18p
Proportion to vest
1/3
1/3
1/3
The share options awarded in 2004 were valued using the Black-Scholes model. The share options awarded in 2010 were valued
using a Monte Carlo for TSR and the Black-Scholes for EPS method. The inputs to the model are as follows:
June 2010
March 2010
Share price on grant date
Exercise price
Expected volatility
Number of simulations
Number of companies
Option life
Expected dividend
Fair value of option at time of grant
Risk free interest rate
TSR
73.20p
75.00p
46.99 – 56.36%
30,000
EPS
73.20p
75.00p
46.18 – 54.32%
30,000
TSR
94.00p
100.50p
46.74 – 55.98%
30,000
FTSE All Share Index FTSE All Share Index FTSE All Share Index FTSE All Share Index
3 – 5 years
2.55%
19.50p – 26.30p
3.07 – 3.38%
EPS
94.00p
100.50p
47.02 – 64.82%
30,000
3 – 5 years
3.28%
12.40p – 17.40p
2.76 – 3.05%
3 – 5 years
3.28%
35.20p – 42.70p
2.76 – 3.05%
3 – 5 years
2.55%
45.49p – 61.77p
3.07 – 3.38%
The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices.
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Financial Statements
Notes to the accounts continued
24. Share based payment continued
Regus plc Co-Investment Plan (CIP) and Long Term Incentive Plan (LTIP)
2010
2009
At 1 January
CIP awards granted during the year
LTIP awards granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Number of
awards
–
2,900,472
Number of
awards
19,724,642 18,346,549
10,827,018
–
(4,448,165)
(5,000,760)
(1,510,333)
21,114,781 19,724,642
872,879
167,852
1,510,333 options or conditional share awards were exercised during the year ended 31 December 2010 (2009: 5,000,760). The
weighted average share price at the date of exercise for share awards and options exercised during the year ended 31 December
2010 was 96.06p (2009 69.74p).
Plan
LTIP
LTIP
LTIP
Plan
CIP: Investment shares
CIP: Matching shares
CIP: Investment shares
CIP: Matching shares
CIP: Investment shares
CIP: Matching shares
CIP: Investment shares
CIP: Matching shares
Date of grant
03/11/2005
28/09/2006
23/03/2010
Numbers
granted
3,723,235
140,184
2,900,472
6,763,891
Lapsed
(1,092,819)
(140,184)
–
(1,233,003)
Exercised
(2,462,564)
–
–
(2,462,564)
At 31 Dec 2010
Release date
167,852 03/11/2008
– 28/09/2009
23/03/2013
2,900,472
3,068,324
Date of grant
21/03/2006
21/03/2006
21/03/2007
21/03/2007
18/03/2008
18/03/2008
23/03/2009
23/03/2009
Numbers
granted
772,196
3,088,784
833,823
3,240,144
1,557,391
5,922,916
2,212,734
8,614,284
26,242,272
Lapsed
–
(617,757)
(28,517)
(3,240,144)
(86,956)
(173,912)
–
–
(4,147,286)
At 31 Dec 2010
Exercised
(772,196)
(2,471,027)
(805,306)
–
–
–
–
–
Release date
– 21/03/2009
– 21/03/2009
– 21/03/2010
– 21/03/2010
18/03/2011
1,470,435
5,749,004
* See below
2,212,734 23/03/2012
* See below
8,614,284
(4,048,529) 18,046,457
*
As indicated in the Remuneration Report in the Annual Report for the year ended 31 December 2009, the Remuneration Committee felt it inappropriate to set specifi c
performance conditions for Matching Shares under the CIP which were awarded in March 2008 and March 2009. Further details of the release dates and performance
conditions set for 2010 can be found below.
The fair value of services received in return for share based payments is measured by reference to the fair value of the equity
instruments granted.
The awards of matching shares made in March 2007 failed to meet the related performance conditions and lapsed in prior years.
Of the awards of investment and matching shares under the LTIP on 23 March 2010, 1,028,539 were conditional share awards
and 1,871,933 were nil cost options.
The LTIP/CIP awards are valued using the Monte Carlo method.
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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
23/03/2010
23/03/2009
18/03/2008
21/03/2007
28/09/2006
21/03/2006
03/11/2005
LTIP (d)
108.10p
nil
250,000
32
3 years
2.22%
47.00p
1.86%
CIP (c)
80.50p
nil
CIP (c)
65.50p
nil
CIP (b)
131.50p
nil
200,000 200,000 200,000
35
3 years
0.44%
103.05p
5.34%
32
3 years
2.72%
47.97p
1.92%
36
3 years
1.19%
61.21p
3.86%
LTIP (a)
107.00p
nil
60,000
29
3 years
nil
79.00p
4.38%
CIP (b)
107.25p
nil
60,000
29
3 years
nil
79.94p
4.16%
LTIP (a)
92.25p
nil
60,000
29
3 years
nil
65.00p
4.47%
(a) The LTIP Awards of 3 November 2005 and 28 September 2006 had a release date of 3 November 2008 and 28 September 2009 respectively. There was no expiry
date and therefore remaining contractual life on the basis that the awards release immediately. The LTIP nil cost options had a vesting date of 3 November 2008
and 28 September 2009 and an expiry date of 3 November 2015 and 28 September 2016 respectively. The performance conditions for the LTIP awards made
on 3 November 2005 were based on the fi nancial results for the year ended 31 December 2008 and, based on the fi nancial performance of the Group, 80%
of the awards and options vested on 20 March 2009. The remainder of the awards and options made on 3 November 2005 and all the awards made on
28 September 2006 lapsed.
(b) The CIP awards have a release date of 21 March 2009 and 21 March 2010. There is no expiry date and therefore remaining contractual life on the basis that the
awards release immediately. The CIP nil cost options have a vesting date of 21 March 2009 and 21 March 2010 and an expiry date of 21 March 2016 and 21 March
2017. The performance conditions for the CIP matching awards made on 21 March 2006 were based on the fi nancial results for the year ended 31 December 2008
and, based on the fi nancial performance of the Group, 80% of the awards vested on 20 March 2009. The remainder of the matching awards made on 21 March 2006
lapsed. The proportion of the CIP awards that represented the deferred bonus for the year ended 31 December 2005 were released on 20 March 2009.
(c) The CIP Matching Shares and Share Option Plan awards made in 2008 and 2009 did not have performance conditions set by the Remuneration Committee at
the date of the award. A valuation was performed for those awards based on the terms that applied to similar awards made in previous years. The Remuneration
Committee set the performance conditions for the awards made in 2008 and 2009 effective from 22 March 2010 and the valuation of these awards has been
updated in the year ended 31 December 2010.
(d) The LTIP awards have a release date of 23 March 2013. There is no expiry date and therefore remaining contractual life on the basis that the awards release
immediately. The LTIP nil cost options have a vesting date of 23 March 2013 and an expiry of 23 March 2020. The performance conditions are set out below.
The performance conditions for the grant of awards under the LTIP are set out in the following table:
For November 2005 and March 2006 awards: Adjusted EPS* (p) for the year ended 31 Dec 2008
For September 2006 awards: % increase in adjusted EPS* for year ended 30 June 2009 compared to EPS
of prior year
Growth in free cash fl ow per share
10%
15%
20%
25%
11p
15%
6%
13%
19%
25%
12p
20%
13%
25%
38%
50%
13p
25%
19%
38%
56%
75%
14p
30%
25%
50%
75%
100%
* Adjusted EPS
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:
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Financial Statements
Notes to the accounts continued
24. Share based payment continued
• In a growth company such as Regus, costs are necessarily incurred in one year to drive profi ts in future years. Thus 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.
• Any one-off or non-recurring costs will be excluded.
• 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.
The performance conditions for awards under the matching share element of the CIP made in March 2007 are set out below:
% increase in published EPS for the year ended 31 December 2009 compared to the published EPS for the prior
year
15%
20%
25%
30%
Growth in free cash fl ow per share over 3 years
10%
15%
20%
25%
6%
13%
19%
25%
13%
25%
38%
50%
19%
38%
56%
75%
25%
50%
75%
100%
% denotes the % of the 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 the grant subject to the discretion of the
Remuneration Committee.
The associated Investment Share awards made in March 2007 will be released to participants (subject to any tax liabilities in
accordance with the rules of the CIP).
As indicated in the Remuneration Report in the Annual Report for the year ended 31 December 2008, the Remuneration Committee
felt it inappropriate to set specifi c performance conditions for Matching Shares under the CIP and options awards under the Share
Option Plan awarded in March 2008 and March 2009 but were committed to carrying out a thorough review of the matter during 2009.
The Remuneration Committee has agreed that the following modifi cations will be made to the awards made in 2008 and 2009 and
that the following performance conditions will apply to these awards effective from 22 March 2010.
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The total number of awards made in 2008 and 2009 to each participant will be divided into three separate equal amounts and will
be subject to future performance periods of three, four and fi ve years respectively. Thus, conditional on meeting the performance
targets, the fi rst amount will not vest until March 2013, the second will not vest until March 2014 and the third will not vest until
March 2015. These vesting dates relate to the fi nancial years ending 31 December 2012, 31 December 2013 and 31 December
2014 respectively. The vesting of these awards will be subject to the achievement of challenging corporate performance targets.
75% of each of the three amounts will be subject to defi ned earnings per share (EPS) targets over the respective performance
periods. The remaining 25% of each will be subject to relative total shareholder return (TSR) targets over the respective periods.
The targets will be as follows:
% of awards eligible for vesting
25%
50%
75%
100%
No shares will vest in each respective year unless the minimum EPS target for that year is achieved.
EPS targets for the fi nancial years ending
2012
15p
16p
17p
18p
2013
17p
20p
23p
26p
2014
18p
22p
26p
30p
% of awards eligible for vesting
Nil
25%
Increments of 0.75%
100%
* over three, four or fi ve year performance period.
Regus plc Value Creation Plan
At 1 January
VCP entitlements awarded during the year
Lapsed during the year
Outstanding at 31 December
Regus TSR % achieved relative to FTSE All Share Total Return index*
100%
Above 100% but below 101%
For each complete 1% above 100%
200% or above
2010
2009
Number of
entitlements
Number of
entitlements
21,000,000 21,000,000
–
–
21,000,000 21,000,000
–
–
Plan
VCP Tier 1 awards
VCP Tier 2 awards
VCP Tier 3 awards
VCP Tier 4 awards
Date of
award
20/05/2008
20/05/2008
20/05/2008
20/05/2008
Numbers
awarded
3,500,000
6,000,000
10,000,000
3,000,000
Lapsed
–
–
–
(1,500,000)
Exercised
–
–
–
–
At 31 Dec 2010
3,500,000
6,000,000
10,000,000
1,500,000
22,500,000
(1,500,000)
–
21,000,000
Measurement
date
–
–
–
–
31/03/2010 –
31/03/2013
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Financial Statements
Notes to the accounts continued
24. Share based payment continued
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 were exercisable at the year-end (2009: nil).
The VCP awards are valued using the Monte Carlo method.
The inputs to the model are as follows:
Share price on award date
Exercise price
Number of simulations
Number of companies
Award life
Expected dividend
Total fair value of awards at time of grant
Risk free interest rate
21/05/2008
VCP
107.00p
107.00p
200,000
36
1.86 – 4.86 yrs
0.93%
£1.3m
4.71%
The VCP awards have measurement dates of 31 March 2010, 31 March 2011, 31 March 2012 and 31 March 2013. If at the measurement
dates, the share price targets have been met the eligible VCP entitlements will be converted into options over ordinary shares.
The options are not subject to further performance conditions but are exercisable on the following basis:
Percentage of entitlements converted to options at the 31/03/2010
measurement date that can be exercised
Percentage of entitlements converted to options at the 31/03/2011
measurement date that can be exercised
Percentage of entitlements converted to options at the 31/03/2012
measurement date that can be exercised
Percentage of entitlements converted to options at the 31/03/2013
measurement date that can be exercised
In year ended
31/12/2010
In year ended
31/12/2011
In year ended
31/12/2012
In year ended
31/12/2013
40%
–
–
–
20%
40%
–
–
20%
30%
40%
20%
30%
60%
–
100%
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The performance conditions of the VCP entitlements are as follows:
First measurement
date 31/03/2010
Share price less than £2.60
Share price is £2.60 or more but less than £3.50
Share price is £3.50 or more
–
2,500,000
3,500,000
–
–
7,142,857
4,285,714
6,000,000 10,000,000
–
2,142,857
3,000,000
Number of shares earned less those earned at any prior measurement date
Tier 1 awards
Tier 2 awards
Tier 3 awards
Tier 4 awards
Second measurement
date 31/03/2011
Share price less than £2.60
Share price is £2.60 or more but less than £3.50
Share price is £3.50 or more but less than £4.50
Share price is £4.50 or more
–
1,800,000
2,500,000
3,500,000
–
–
5,142,857
3,085,714
4,285,714
7,142,857
6,000,000 10,000,000
–
1,542,857
2,142,857
3,000,000
Third measurement
date 31/03/2012
Fourth measurement
date 31/03/2013
Share price less than £2.60
Share price is £2.60 or more but less than £3.50
Share price is £3.50 or more but less than £4.50
Share price is £4.50 or more
–
1,200,000
1,800,000
2,500,000
–
2,057,143
3,085,714
4,285,714
–
3,428,571
5,142,857
7,142,857
–
1,028,571
1,542,857
2,142,857
Share price less than £2.60
Share price is £2.60 or more but less than £3.50
Share price is £3.50 or more but less than £4.50
Share price is £4.50 or more
–
600,000
1,200,000
1,800,000
–
1,028,571
2,057,143
3,085,714
–
1,714,286
3,428,571
5,142,857
–
514,285
1,028,571
1,542,857
Where the share price targets have not been met by 31 March 2013 then the VCP Entitlement will not convert, no ordinary shares
will be earned and no VCP Options will be granted under the VCP.
In respect of the fi rst and second measurement dates (31 March 2010 and 31 March 2011, respectively), the Company’s share
price was below the target and no VCP entitlements vested.
25. Acquisitions
During the year ended 31 December 2010 the Group made the following acquisitions (2009: None).
Name
100% Equity Share Capital acquisitions:
Abbey Business Centres Limited & Abbey Offi ces Limited
HQ Do Brazil Administracao de bens e servicos Ltda.
Business Facilities International S.A.
Asset Acquisition:
Advanced Business Technology Inc.
Purchase
consideration
including costs
£m
Percentage of
equity and voting
rights acquired
Date of
acquisition
3.0
10.2
1.8
3.2
100% 03/12/2010
100% 30/09/2010
100% 15/01/2010
N/A 11/01/2010
Region
UK
Americas
EMEA
Americas
In addition to the above, a further £2.7 million of purchase consideration was paid to complete a further 12 business and net
asset acquisitions.
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Financial Statements
Notes to the accounts continued
Net assets acquired
Intangible assets*
Property, plant and equipment (note 14)
Other non-current assets
Cash
Other current assets
Current liabilities
Non current liabilities
Goodwill arising on acquisition
Total consideration
Deferred consideration
Cash fl ow on acquisition
Cash acquired
Overdrafts and loans acquired
Cash paid
Net cash outfl ow
Book value
£m
Fair value
adjustments
£m
Fair value
£m
0.1
10.2
2.6
3.9
7.5
(18.9)
(2.9)
2.5
2.3
2.3
–
–
(1.4)
–
–
3.2
2.4
12.5
2.6
3.9
6.1
(18.9)
(2.9)
5.7
15.2
20.9
–
20.9
(3.9)
–
20.9
17.0
*
Intangible assets comprise the fair value of customer contracts or, in the case of managed centres, the fair value of the management contract acquired.
There was no contingent consideration arising on the above acquisitions.
If the above equity acquisitions had occurred on 1 January 2010, the revenue and net retained loss arising from these acquisitions
would have been £40.7 million and £1.4 million respectively. In the year these equity acquisitions contributed revenue of £11.8 million
and a net retained loss of £1.8 million.
The goodwill arising on the above acquisitions refl ects the anticipated future benefi ts Regus can obtain from operating the businesses
more effi ciently, primarily through increasing occupancy and the addition of value adding services. £1.2 million of the above goodwill
is expected to be deductable for tax purposes.
The acquisition costs associated with these transactions were £1.0m (2009: £nil), recorded within administration expenses within
the Consolidated Income Statement.
Adjustments to acquisitions and the payment of contingent consideration in relation to acquisitions completed prior to 1 January 2009.
Additional consideration of £nil (2009: £0.3 million) was accrued as a result of the improved fi nancial performance of acquisitions
under contractual earn-out provisions. There were no amendments in 2010 to provisional purchase price allocations on acquisitions
completed in previous years (2009: £0.5 million).
There were no signifi cant acquisitions completed after 31 December 2010.
26. Capital commitments
Contracts placed for future capital expenditure not provided in the fi nancial statements
2010
£m
11.6
2009
£m
2.5
These commitments are principally in respect of fi t out obligations on new centres opening in 2011. In addition our share of the
capital commitments of joint ventures amounted to £nil at 31 December 2010 (2009: £nil).
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27. Non-cancellable operating lease commitments
At 31 December 2010 the Group was committed to make the following payments in respect of operating leases:
Lease obligations falling due:
Within one year
Between two and fi ve years
After fi ve years
Motor vehicles,
plant and
equipment
£m
2010
Total
£m
7.7
25.1
4.3
37.1
382.8
877.8
333.8
1,594.4
Property
£m
375.1
852.7
329.5
1,557.3
Motor vehicles,
plant and
equipment
£m
2.2
5.9
2.4
10.5
Property
£m
367.8
822.6
350.5
1,540.9
2009 (restated)
Total
£m
370.0
828.5
352.9
1,551.4
Non-cancellable operating lease commitments exclude future contingent rental amounts such as the variable amounts payable under
performance based leases where the rents vary in line with a centre’s performance. Following a detailed review of the Group’s lease
database during the year, the prior year lease obligation disclosures were deemed to have overstated the minimum non-cancellable
lease commitments. The disclosure has been restated accordingly.
28. Contingent assets and liabilities
The Group has bank guarantees and letters of credit held with certain banks amounting to £102.2 million (December 2009:
£47.0 million). A number of lawsuits are pending against the Group, the outcome of which in the aggregate is not expected
to have a material effect on the Group.
29. Related parties
Joint ventures
During the year ended 31 December 2010 the Group received management fees of £1.6 million (2009: £3.5 million) from its joint
venture entities. At 31 December 2010 £2.9 million (2009: £2.9 million) was due to the Group from joint ventures of which £nil
of this debt has been provided for at 31 December 2010 (2009: £nil).
Key management personnel
No loans or credit transactions were outstanding with directors or offi cers of the Company at the end of the year or arose during
the year that need to be disclosed.
During the year ended 31 December 2010 the Group acquired goods and services from a company indirectly controlled by
a director of the Company amounting to £30,738 (2009: £30,118). The goods and services were acquired in arm’s-length
transactions. There was a nil balance outstanding at year end (2009: nil).
Compensation of key management personnel (including directors):
Key management personnel include those personnel (including directors) that have responsibility and authority for planning,
directing and controlling the activities of the Group:
Short term employee benefi ts
Share based payments
2010
£m
3.1
1.4
4.5
2009
£m
2.8
1.0
3.8
Share based payments included in the table above refl ect the accounting charge in the year. The full fair value of awards granted in
the year was £2.7 million (2009: £4.9 million). These awards are subject to performance conditions and vest three years from the
award date.
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Financial Statements
Notes to the accounts continued
30. Principal Group companies
The Group’s principal subsidiary undertakings at 31 December 2010, their principal activities and countries of incorporation are set
out below:
Name of undertaking
Principal activity –
Trading companies
Regus Business Centres
(UK) Limited
Stonemartin Corporate
Centres Limited
Regus Paris SAS
Regus GmbH & Co. KG
Regus Business Centres Italia Srl
Regus Japan KK
Regus Management de Mexico,
SA de CV
Regus Amsterdam BV
Country of
incorporation
% of ordinary
share and
votes held
England
100
Name of undertaking
Principal activity –
Holding companies
Regus H Holdings Inc
England
100
RGN General Partner Holdings Corp
France
Germany
Italy
Japan
Mexico
100
100
100
100
100
RGN Limited Partner Holdings Corp
Insignia Partnership
Regus Management de Chile Ltda
Regus Denmark Holding AS
Regus Group Limited
Netherlands
100
Regus Limited S.à.r.l
Regus Business Centre SA
Regus Business Centre AG
HQ Global Workplaces, LLC
Regus Business Center LLC
Spain
Switzerland
United States
United States
Regus Equity Business Centers LLC United States
Principal activity –
Management companies
Regus Australia Management
Pty Limited
Regus do Brasil Ltda
Regus Management sro
Regus EMEA FSC sro
Regus Management AS
Regus Management Limited
Regus Management (UK) Limited
Regus Business Centre SAS
Australia
Brazil
Czech Republic
Czech Republic
Denmark
England
England
France
Regus Asia Pacifi c Management
Limited
Regus Centre Management Limited
Regus Businessworld Limited
Regus Amsterdam BV
Regus Service Centre Philippines BV
RMG South Africa Pty Limited
Regus Business Ventures
(Pty) Limited
Regus Business World (Pty) Limited
Regus Management Espana SL
Regus Management Group LLC
Regus International Services LLC
Hong Kong
Hong Kong
Jersey
Netherlands
Netherlands
South Africa
South Africa
South Africa
Spain
United States
Uruguay
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Regus Centres Limited
Regus Investments Limited
Regus Business Centres (Holding)
Regus Business Centres (Trading)
Limited
Regus H Holdings
Regus H (UK)
Regus Centres UK Limited
Regus Holdings UK Limited
Regus Holdings SAS
Regus Deutschland GmbH
Regus Germany Holding GmbH
& Co. KG
Regus Management GmbH
Regus Europe Limited
Regus No.1 S.à.r.l
Regus No.2 S.à.r.l
Regus Businessworld
(Luxembourg) S.à.r.l
Regus Middle East S.à.r.l
Regus India Holdings Limited
Regus Pakistan Holdings Limited
Regus Mexico S. de RL de CV
Regus Netherlands BV
Regus Business Centres BV
Regus Business Centre Norge AS
Regus Holding GmbH
Regus Corporation LLC
Regus Holdings LLC
Regus H Holdings LLC
Regus International Services SA
Country of
incorporation
% of ordinary
share and
votes held
British Virgin
Islands
Canada
Canada
Canada
Chile
Denmark
England
England/
Luxembourg
England
England
England
England
England
England
England
England
France
Germany
Germany
Germany
Jersey
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Mauritius
Mauritius
Mexico
Netherlands
Netherlands
Norway
Switzerland
United States
United States
United States
Uruguay
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
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31. 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 affect reported statements and related disclosures.
Fair Value accounting for business combinations
For each business combination, we assess the fair values of assets and liabilities acquired. Where there is not an active market in
the category of the non-current assets typically acquired with a business centre or where the books and records of the acquired
company do not provide suffi cient information to derive an accurate valuation, management calculate an estimated fair value based
on available information and experience.
The main categories of acquired non-current assets where management’s judgment has an impact on the amounts recorded include
tangible fi xed assets, customer list intangibles and the fair market value of leasehold assets and liabilities. For signifi cant business
combinations management also obtain third party valuations to provide additional guidance over the appropriate valuation to be
included in the fi nancial statements.
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 carrying
value of goodwill at the appropriate cash-generating 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 recoverable amount. Further details of the methodology and assumptions
applied to the impairment review in the year ended 31 December 2010, including the sensitivity to changes in those assumptions,
can be found in note 12.
Tax assets and liabilities
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 when it is probable that future taxable profi ts will be available
against which the assets can be used. The Group considers it probable if the entity has made a taxable profi t in the previous year
and is forecast to continue to make a profi t in the foreseeable future. Where appropriate the Group assesses the potential risk of
future tax liabilities arising from the operation of its business in multiple tax jurisdictions and includes provisions within tax liabilities
for those risks that can be estimated reliably. Changes in existing tax laws can affect large international Groups similar to Regus
and could result in signifi cant additional tax liabilities over and above those already provided for.
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, where appropriate.
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 exits the property so the
Group estimates the costs at each balance sheet date. However, given that landlords often regard the nature of changes made
to properties as improvements, the Group estimates that it is unlikely that any material dilapidation payments will be necessary.
Consequently provision has been made only for those potential dilapidation payments when it is probable that an outfl ow will
occur and can be reliably estimated.
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Financial Statements
Parent company accounts
Summarised extract of company balance sheet (prepared under Luxembourg GAAP)
Assets
C. Fixed assets
III. Financial assets
1. Shares in affi liated undertakings
2. Loans to affi liated undertakings
D. Current assets
II. Debtors
2. Amount owed by affi liated undertakings becoming due and payable within one year
III. Transferable securities
2. Own shares or corporate units (9,070,906 shares of £0.01 per share (2009: 1,576,498 shares))
IV. Cash at bank and in hand
E. Prepayments and accrued income
Total assets
Liabilities
A. Capital and reserves
I. Subscribed capital
II. Share premium account
IV. Reserves
1. Legal reserve
2. Reserve for own shares
4. Other distributable reserve
V. Profi t or loss brought forward
Interim dividend of the year
VI. Profi t or loss for the fi nancial year
B. Provisions for liabilities and charges
3. Other provisions
C. Creditors
4. Trade creditors becoming due and payable within one year
6. Amounts owed to affi liated undertakings
becoming due and payable within one year
Total liabilities
Approved by the Board on 21 March 2011.
Mark Dixon
Chief Executive Offi cer
Stephen Gleadle
Chief Financial Offi cer
As at
31 Dec 2010
(Luxembourg
GAAP)
£m
As at
31 Dec 2009
(Luxembourg
GAAP)
£m
224.5
578.9
20.8
7.1
0.6
0.7
832.6
9.5
53.7
0.9
7.1
512.9
259.7
(3.1)
(19.1)
0.3
–
10.7
832.6
287.4
563.1
3.9
0.4
0.1
0.6
855.5
9.5
53.7
0.9
0.4
519.6
255.2
(3.3)
13.4
0.2
0.1
5.8
855.5
Accounting policies
Basis of preparation
The fi nancial statements have been prepared in accordance with applicable Luxembourg accounting standards and under the historical
cost accounting rules which differ in material respects from IFRS in both the measurement and presentation of certain transactions.
The Company is included in the consolidated accounts of Regus plc.
The balance sheet has been extracted from the full accounts of Regus plc for the period ended 31 December 2010 which are
available from the Company’s registered offi ce, Boulevard Royal, Luxembourg and which will be fi led with both the Luxembourg
Chamber of Commerce and the Jersey Register of Companies.
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Shareholder and Other Information
Segmental analysis
Segmental analysis – management basis (unaudited)
Mature
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
2009 Expansions
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
2010 Expansions
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
Closures
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
Total
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
Unallocated contribution (£m)
Americas
2010
EMEA
2010
Asia Pacifi c United Kingdom
2010
2010
Other
2010
Total
2010
70,384
79.7
420.0
100.6
33,149
77.4
266.5
66.4
20,772
79.6
131.6
37.9
1,185
67.0
5.3
(0.2)
2,013
62.0
8.7
(0.6)
683
75.3
2.9
(0.7)
1,180
62.0
4.8
0.3
1,706
61.5
9.4
(2.1)
85
70.2
0.5
1.2
734
54.1
5.0
2.7
1,838
41.7
4.8
(3.7)
93
50.5
0.3
(0.5)
32,571
75.8
171.6
13.6
1,278
50.0
3.9
0.1
666
51.6
2.2
(0.6)
336
57.0
1.2
0.1
–
–
1.7
1.4
156,876
78.4
991.4
219.9
–
–
–
–
–
–
–
–
–
–
–
–
4,377
58.5
19.0
2.9
6,223
54.8
25.1
(7.0)
1,197
67.9
4.9
0.1
74,265
79.0
436.9
99.1
36,120
76.1
281.2
65.8
23,437
75.8
141.7
36.4
34,851
74.3
178.9
13.2
–
–
1.7
1.4
168,673
76.9
1,040.4
215.9
REVPAW (£)
5,883
7,785
6,046
5,133
–
6,168
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Shareholder and Other Information
Segmental analysis continued
Mature
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
2009 Expansions
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
2009 Closures
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
2010 Closures
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
Americas
2009
69,088
79.1
409.4
93.8
707
46.0
2.1
(1.2)
1,158
66.9
4.8
(0.8)
1,324
72.7
7.5
1.1
EMEA
2009
Asia Pacifi c United Kingdom
2009
2009
33,085
79.6
299.1
85.1
20,809
75.8
129.1
39.2
32,370
77.9
187.2
19.6
Other
2009
–
–
1.4
1.0
Total
2009
155,352
78.4
1,026.2
238.7
657
41.3
2.0
(0.8)
225
63.2
2.8
(0.2)
293
88.8
2.3
(1.1)
260
34.9
1.5
1.0
25
91.0
0.2
–
296
93.5
1.5
0.1
439
31.1
0.6
(0.8)
221
79.1
2.1
0.4
498
87.2
1.5
(0.7)
–
–
–
–
–
–
–
–
–
–
–
–
2,063
39.9
6.2
(1.8)
1,629
68.4
9.9
(0.6)
2,411
78.4
12.8
(0.6)
–
–
1.4
1.0
–
–
161,455
77.7
1,055.1
235.7
(0.1)
6,535
Total
Workstations
Occupancy (%)
Revenue (£m)
Contribution (£m)
Unallocated contribution (£m)
72,277
78.4
423.8
92.9
–
34,260
78.6
306.2
83.0
–
21,390
75.1
132.3
40.3
–
33,528
77.1
191.4
18.5
–
REVPAW (£)
5,864
8,938
6,185
5,706
• The mature business is defi ned as those centres owned and operated at least 12 months prior to 1 January 2009 and that
therefore have a full 12 month comparative.
• Expansions include new centres opened and acquired businesses.
• A 2010 closure is defi ned as a centre closed during the 12 months ended 31 December 2010 for which there is a 12 month
comparative in 2009. A 2009 closure is defi ned as a centre closed during the 12 months ended 31 December 2009.
• Workstation numbers are calculated as the weighted average for the year.
• EMEA represents Europe (excluding UK), Middle East and Africa.
• Contribution in 2010 is £2.0 million (2009: 2.0 million) less when compared to Note 3 owing to the exclusion of internal revenue.
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Shareholder and Other Information
Five year summary
Revenue
Cost of sales before non-recurring costs
Exceptional cost of sales
Cost of sales
Gross profi t (centre contribution)
Administration expenses before non-recurring expenses
Exceptional administration expenses
Administration expenses
Operating profi t (before exceptional)
Exceptional income from legal settlement
Operating profi t (after exceptional)
Share of post-tax profi t/(loss) of joint ventures
Share of post-tax profi t of associate
Profi t/(loss) before fi nancing costs
Finance expense
Finance income
Profi t/(loss) before tax for the year
Tax (charge)/credit
Profi t/(loss) after tax for the year
Attributable to:
Equity shareholders of the parent
Minority interests
Earnings/(loss) per ordinary share (EPS):
Basic (p)
Diluted (p)
Weighted average number of shares outstanding (‘000’s)
Balance sheet data (as at 31 December)
Intangible assets
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Cash, cash equivalents and liquid investments
Total assets
Current liabilities
Non-current liabilities
Provisions
Equity minority interests
Equity shareholders funds’
Total liabilities and shareholders’ funds
Full year ended
31 Dec 2010
£m
1,040.4
(824.5)
(11.9)
(836.4)
215.9
(193.4)
(3.9)
(197.3)
22.5
–
6.7
1.3
–
8.0
(2.0)
1.8
7.8
(5.9)
1.9
Full year ended
31 Dec 2009
£m
1,055.1
(819.5)
–
(819.5)
235.6
(165.3)
(2.6)
(167.9)
67.7
18.3
86.0
2.0
–
88.0
(4.4)
3.3
86.9
(19.2)
67.7
Full year ended
31 Dec 2008
£m
1,077.2
(771.5)
–
(771.5)
305.7
(158.3)
–
(158.3)
147.4
–
147.4
2.3
–
149.7
(6.8)
6.3
149.2
(34.3)
114.9
Full year ended
31 Dec 2007
£m
862.4
(610.5)
–
(610.5)
251.9
(129.3)
–
(129.3)
122.6
–
122.6
0.8
–
123.4
(8.1)
4.1
119.4
(15.8)
103.6
Full year ended
31 Dec 2006
£m
680.0
(495.9)
–
(495.9)
184.1
(101.9)
–
(101.9)
82.2
–
82.2
(0.1)
1.2
83.3
(8.0)
2.2
77.5
4.8
82.3
1.5
0.4
1.9
67.0
0.7
67.7
113.9
1.0
114.9
103.1
0.5
103.6
82.3
–
82.3
0.2p
0.2p
947,463
7.1p
7.0p
948,204
12.0p
11.8p
950,320
10.5p
10.4p
980,962
8.4p
8.3p
984,792
330.8
270.8
37.1
299.9
204.6
1,143.2
541.8
105.8
9.8
0.1
485.7
1,143.2
307.4
240.9
65.1
250.3
245.1
1,108.8
504.5
96.6
8.2
–
499.5
1,108.8
330.3
278.0
79.0
282.4
219.5
1,189.2
592.3
108.1
8.5
0.3
480.0
1,189.2
269.9
184.7
46.8
217.2
142.9
861.5
448.2
96.1
7.4
0.5
309.3
861.5
263.1
127.2
36.1
172.7
80.9
680.0
340.8
103.0
11.7
–
224.5
680.0
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www.regus.com/investor
Regus plc Annual Report and Accounts 2010 79
RG012_p32-79_vAW.indd 79
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Shareholder information
Corporate directory
Secretary and Registered Offi ce
Tim Regan, Company Secretary
Regus plc (Société Anonyme)
Registered Offi ce:
22 Grenville Street
St Helier
Jersey
JE4 8PX
Registered Head Offi ce:
26 Boulevard Royal
L-2449 Luxembourg
Luxembourg
R.C.S. B 141 159
Registered Number
Jersey
101523
Registrars
Equiniti (Jersey) Limited
PO Box 63
11 – 12 Esplanade
St Helier
Jersey
JE4 8PH
Auditor
KPMG Audit S.à.r.l.
9 allée Scheffer
L-2520 Luxembourg
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 Luxembourg law
Noble & Scheidecker
Avocats à la Cour
398, route d’Esch
L-1471 Luxembourg
Corporate Stockbrokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
Goldman Sachs
Peterborough Court
133 Fleet Street
London EC4A 2BB
Reservations
UK telephone:
US telephone:
Websites
www.regus.com
www.hq.com
0870 880 8484
1.877.REGUS.87 or
001 954 331 1647
Glossary
Available workstations
The total number of workstations in the Group (also termed
Inventory). During the year, this is expressed as a weighted
average. At period ends the absolute number is used.
BRIC economies
BRIC economies include Brazil, Russia, India and China.
Centre Contribution
Gross profi t comprising centre Revenues less direct operating
expenses but before administrative expenses.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
EBITDAR
Earnings before interest, tax, depreciation, amortisation
and rent.
Enquiries
Client enquiries about Regus products or services.
Expansions
A general term which includes new business centres established
by Regus and acquired centres in the year.
Forward Order Book
The future workstation revenue already contracted with clients
at a point in time.
Like for like
The fi nancial performance from centres owned and operated
for a full 12 months prior to the start of the fi nancial year which
therefore have a full year comparative.
Mature business
Operations owned for a full 12 month period prior to the start of
the fi nancial year which therefore have a full year comparative.
‘N11’ economies
‘N11’ economies include Egypt, Indonesia, South Korea,
Mexico, Nigeria, Philippines, Turkey and Vietnam.
Occupancy
Occupied workstations divided by available workstation
expressed as a percentage.
Occupied workstations
Workstations which are in use by clients. This is expressed
as a weighted average for the year.
Organic growth
Growth attributable to the mature portfolio and from new
business centres established by Regus.
REVPAW
Total Revenue per available workstations (Revenue/Available
workstations).
REVPOW
Total Revenue per occupied workstation.
WIPOW
Workstation income per occupied workstation.
80 Regus plc Annual Report and Accounts 2010
www.regus.com/investor
RG012_p80.indd 80
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The Forest Stewardship Council® (FSC) is an international
network which promotes responsible management of the
world’s forests. Forest certification is combined with a system
of product labelling that allows consumers to readily identify
timber-based products from certified forests.
Designed and produced by Black Sun Plc | www.blacksunplc.com
Printed in England by the Pureprint Group.
RG012_Covers_vAW.indd 7
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Regus plc S.A.
26 Boulevard Royal
L-2449 Luxembourg
www.regus.com
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