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Looking over
the horizon•
Regus plc
Annual Report and Accounts 2015
Clear global leader•
Regus is the world’s largest provider of flexible workspace solutions, with customers including
some of the most successful entrepreneurs, individuals and multi-billion dollar corporations.
Through our range of office formats, as well as our growing mobile, virtual office, and
workplace recovery businesses, we enable people and businesses to work where they want,
when they want, how they want, and at a range of price points.
Founded in Brussels, Belgium, in 1989, Regus is based in Luxembourg and listed on the
London Stock Exchange.
2,768
workplaces
106
countries
977
cities
9,290
colleagues
2.3m
members
What’s inside
Strategic report
Governance
Financial statements
1 Performance highlights
2
Industry fundamentals
10 Our business model
12 Chairman’s statement
13 Chief Executive Officer’s review
16 Our strategic objectives and KPIs
18 Chief Financial Officer’s review
21 Risk management and principal risks
25 People
26 Corporate responsibility
28 Board of Directors
30 Corporate governance
36 Nomination Committee report
38 Audit Committee report
42 Directors’ Remuneration report
53 Directors’ report
54 Directors’ statements
55 Auditors’ report
56 Consolidated income statement
57 Consolidated statement of
comprehensive income
58 Consolidated statement of
changes in equity
59 Consolidated balance sheet
60 Consolidated statement of cash flows
61 Notes to the accounts
100 Parent company accounts
102 Segmental analysis
104 Post-tax cash return on net investment
105 Five-year summary
106 Shareholder information
For more information
please visit
www.regus.com
Performance highlights
2015 – another year
of substantial progress•
Key financial highlights
Key growth highlights
• Group revenue increased 15.9% to £1,927.0m
• 554 new locations added to the network
at constant currency
• Underlying operating profit increased 37% to £144.8m
at constant currency
• Strong cash performance, with £215.7m (23.1p per share)
of cash generated before net growth capital expenditure,
dividends and disposal proceeds
• Increased returns on investment: 23.1% 2015 post-tax
cash return on all investment made up to 31 December 2011
• Conservative balance sheet maintained. Net debt of £190.6m
(0.66x net debt: EBITDA)
• 13% increase in full year dividend to 4.5p
• 22% increase in the network
• £284.9m of net capital invested in growth
• Two new countries added – Iraq and Brunei – now in 106 countries
• 145 new towns and cities added in the year to strengthen
our networks
• Now in 977 towns and cities
Cash flow before growth capital
expenditure and dividends (£m)
Number of locations
Net growth capital expenditure (£m)
215.7
175.6
2,768
2,269
1,831
284.9
260.2
206.6
112.4
115.4
97.7
1,411
1,203
147.8
71.2
11
12
13
14
15
11
12
13
14
15
11
12
13
14
15
£215.7m
2,768
£284.9m
2015 Post-tax cash return on net investment by year group (%)1
26.8
24.2
20.4
20.3
9.8
13.3
11.2
08
09
10
11
12
13
14
15
07
and
earlier
1. Turn to page 10 for details on how we calculate our
post-tax cash return on net investment.
(8.0)
(9.3)
www.regus.com
1
Strategic reportGovernanceFinancial statements Industry fundamentals
Flexible workspace –
the market opportunities•
A fast-growing industry that is rapidly developing
to serve customer needs. Workspace flexibility
is becoming the new norm.
External factors
enabling change
No limits
Technology has stripped away the
restrictions of time and place: the right
workspace is whatever people need,
when they need it.
Constant connections
No one is ever offline – colleagues and
customers are always within range and
within touch.
Network convenience
The increasing availability of flexible spaces
to work – offices, hotspots, hubs and more
– is driving increased adoption by companies
and people right across the world.
1.3 billion*
people work
on the move
2
Regus plc Annual Report and Accounts 2015
* Source: Regus and IDC data
See how we respond
to the market drivers
on the following pages
The global
facilitator
Innovation for
growth
The global
partner of
choice
84%*
of workers say flexible
working improves
productivity
Forces driving
demand
Value
Paying only for the space they need and use
means major savings for many businesses.
Rapid transformation
Short-term business cycles mean
headcounts are changing faster than
ever before.
Diverse requirements
Large organisations need many types of
space, from call centres and executive suites,
to R&D facilities and satellite networks.
The productivity challenge
Corporate space that evolves to meet
changing needs heightens business
effectiveness and efficiency.
www.regus.com
3
Strategic reportGovernanceFinancial statements The global
facilitator
Meeting market
demand.
Office
Workplace
recovery
Mobile
Home
The most
flexible office and
co-working solutions
in the world,
allowing people
to work where,
when, and how
they want.
Ensuring
businesses
can continue
in the event
of disaster.
Drop-in workplaces
and technology
services to help
people stay
productive on
the move.
Virtual office
solutions for
home-based
workers,
start-ups, and
established firms
moving into
new markets.
4
Regus plc Annual Report and Accounts 2015
Office
Home
The world’s most extensive network
Regus has 2,768 workplaces in 106 countries, serving customers ranging from
single-person start-ups to global corporations. We offer the ability to work how
you want, where you want, and at a range of price points. We see the potential
for more than 20,000 locations globally in the long term.
Virtual office solutions for home-based
workers, start-ups, and established firms
moving into new markets; ranging from
prestigious business addresses, to
telephone services, mail management,
and access to over 2,000 business lounges.
Offering a range of formats
We are seeing a generational shift in what people want from their workspace,
meaning different customers require different solutions. Our growing range of
formats enables us to deliver a working environment that matches the needs
of each customer.
Mobile
• Flexibility
• Support
• Flexibility
• Community
• Consistency
• Professionalism
• Inspiration
• Creative
workstyle
• Business
support
• Inspiration
• Connections
• Funding
• Value
• Ease
• Functional
• Convenience
• Exclusivity
• Privacy
• Luxury
• Status
• Convenience
• Productivity
• Professionalism
• Mobility
Drop-in workplaces and technology services
to help people stay productive on the move,
giving users access to over 2,000 locations
in 977 cities through our advanced web and
mobile booking system, as well as 18m
wi-fi hotspots.
Workplace recovery
Ensuring business continuity in the event of
a disaster through access to our international
network of business centres and 24/7
support from our dedicated operations
team. Our Dynamic recovery product
guarantees local recovery in the optimal
locations based upon the type of disaster.
www.regus.com
5
Strategic reportGovernanceFinancial statements Innovation for
growth
We invest significantly
in innovation every year.
Businesses large and small
pick Regus because of our understanding
of how to set up global technology networks
and provide services that help them
work more efficiently.
6
Regus plc Annual Report and Accounts 2015
Marketplace
An online trading platform that allows our customers to
promote services to each other, as well as giving them
access to specially curated offers from our partners
around the world
Access control
Cloud-based electronic access control that simplifies
lock and key administration, while providing customers
with mobile app convenience and improved control over
their workspace
Client app
An easy to use client self-service application that allows
individuals, corporates and enterprises to find locations,
book rooms, access benefits and facilitate administration
Cloud communications
Integrated audio, video, and web-based communications,
allowing customers to make and take office calls wherever
they are and whenever they want on the device of
their choice
www.regus.com
7
Strategic reportGovernanceFinancial statements The global partner
of choice
“Regus allows us to mobilise
very quickly in new markets...
a quick call to Regus and
we’re good to go.”
Our scale, range of formats, products and
service offering mean we are the only
global player equipped to offer businesses
the full range of office space they need.
8
Regus plc Annual Report and Accounts 2015
Regus allows us to mobilise
very quickly in new markets.
It certainly helps us with new
business initiatives, popping up
very quickly in cities across the
US – a quick call to Regus and
we’re good to go.”
Anthony Smith,
Director,
Real Estate and Workplace Services,
Asia Pacific,
Google
When I first saw Spaces,
I noticed the light and the room
– there’s so much here, which
is really hard to find in central
London. Everybody seems
lively and happy here, positive
and excited about the future.”
Leonora Ross-Skinner,
Exponential
It’s about break-out space,
where we can be innovative.
The first-floor space here
(Spaces, Oxford Street,
London) is great for that –
somewhere people can go
to have a conversation that’s
not structured, a casual
conversation that tends to
be where the magic happens.”
Chris Bailey-Jones,
Moneysupermarket.com
We particularly enjoy a
fantastic relationship with
our Regus Account Director.
Great relationships, flexibility,
listening to requirements,
coming to the table with
suggestions and ideas – these
factors all make me want to
stay with the company.”
Chris Spratt,
Director of Property and Facilities,
Michael Page
www.regus.com
9
Strategic reportGovernanceFinancial statements Our business model
How we create value•
Once again, our progress in 2015 has justified our confidence in
the Regus business model. Rigorous planning, stress-testing and
constant review clearly demonstrate that it remains fit for purpose.
Our
business
Customers
Returns
Customers – from self-employed
entrepreneurs to multinational
corporations – use Regus because they
want to be in the best places where they
can focus on what they are doing. They stay
because we provide them with an excellent
service at competitive rates, with a product
that flexes to meet their every requirement.
Demand continues to increase – during
2015, membership grew to over
2.3m worldwide.
Our business comprises four
fundamental elements: our people,
our network, our products and our brands.
The geographic scale of Regus‘ operations
is unmatched. Critically, as our physical
network grows, so does our lead over
other workspace alternatives.
These elements are underpinned by:
• rigorous planning processes to support
the execution of our growth strategy;
• constant investment in innovation
to differentiate Regus from all
competitors; and
• disciplined management procedures
to minimise the risks inherent in
rapid growth.
9,290
colleagues
2.3m
members
10
Regus plc Annual Report and Accounts 2015
Our approach to investment ensures we
deliver strong post-tax cash returns,
generating long-term shareholder value
through returns on investment that are
well in excess of our cost of capital.
Our focus is on optimising revenue
generation through improving the
performance of each location. This
gives us the solid foundation we need
to deliver strong returns, particularly
when combined with our discipline
on overhead costs, which continue to
fall as a percentage of revenues.
How we calculate our returns
These returns are based on the
post-tax return divided by the net
growth capital investment.
Post-tax cash return = EBITDA less
amortisation of partner contribution,
less tax based on EBIT, less maintenance
capital expenditure.
Net growth capital investment =
growth capital less partner contributions.
2015 Post-tax cash return on net
investment by year group (%)1
26.8
24.2
20.4 20.3
9.8
13.3
11.2
08
09
10
11
12
13
14
15
07
and
earlier
(8.0)
(9.3)
1. Turn to page 104 to see how our calculation of
post-tax cash return on net investment reconciles
to our audited statutory accounts.
Cash
A particularly attractive feature of the Regus
business model is our strong conversion of
profit into cash. The cash flows we generate
from our locations support a significant
proportion of our continued investment
in developing our network. Strong cash
generation underpins the Group’s
progressive dividend as well as funding
the addition of locations to our network.
Cash flow before growth capital
expenditure and dividends (£m)
Investment
in growth
We invest significant sums in growth,
both through organic openings and selective
acquisitions, and we continue to find many
high-quality opportunities that meet our
stringent returns criteria. Our network
growth is enhanced by our continued
investment in developing new location
formats and a greater diversity in partner
relationships. Together, these are enabling
us to grow in a more capital-efficient way.
Our ability to adapt our growth plans to
reflect changing market conditions is
another important aspect of our capability
to manage risk through the economic cycle.
With relatively short lead times between
contracting with a partner and opening
a new location, depending on where we are
in the economic cycle we can either rapidly
capitalise on a favourable investment
environment, or restrict growth.
£284.9million
net growth capital
expenditure
Returns to
shareholders
We have a progressive dividend policy.
2015 dividend increased by 13%.
Dividend per share (p)
Final
Interim
4.5
215.7
175.6
4.0
3.6
3.2
2.9
112.4
115.4
97.7
11
12
13
14
15
11
12
13
14
15
www.regus.com
11
Strategic reportGovernanceFinancial statements Chairman’s statement
Another year of
substantial development•
The Group has completed
another year of successfully
implementing its strategy as
evidenced by delivering both
strong results and growth.
We continue to significantly
expand the network with
convenient locations and
innovative formats for our
customers, while maintaining
attractive financial returns.
Douglas Sutherland
Chairman
I would like to thank our former CFO,
Dominique Yates, for his contribution to
Regus. He leaves us with our balance sheet
and financial returns looking strong after a
period of significant expansion. I would also
like to thank Alex Sulkowski, who retired from
the Board in May 2015, for his contribution to
the Board and Group.
An external evaluation of the performance of
the Board was carried out during the year by
an independent leadership consultancy. The
results of the review have been incorporated
into our efforts to continuously improve the
processes and effectiveness of the Board.
Our people
Every year, our success is attributable to the
energy, commitment and skills of our people
in all the markets where we operate and at
every level of the organisation. Once again,
I would like to thank them on behalf of the
Board for their outstanding contribution,
delivering another strong set of results for
the benefit of our customers, our business
and our investors.
Dividend
We remain committed to a sustainable
and progressive dividend policy. I am
therefore pleased to announce that the
Board is recommending a 13% increase
in the final dividend to 3.1p per share,
reflecting the continued strong performance
of the business. Subject to the approval
of shareholders at the 2015 AGM, this
will be paid on 27 May 2016 to shareholders
on the register at the close of business
on 29 April 2016. The full year dividend
is 4.5p (2014: 4.0p), an increase of 13%.
Douglas Sutherland
Chairman
1 March 2016
During the period, Group revenues
grew to £1,927.0m (2014: £1,676.1m),
representing an increase of 15.9% at
constant currency (up 15.0% at actual
rates). Notwithstanding the significant
growth in the network, underlying operating
profit advanced 37% at constant currency
to £144.8m (2014: £104.3m), up 39% at
actual rates. Including the non-recurring
gain of £15.3m, our reported statutory
operating profit was £160.1m, an increase
of 51% at constant currency.
This strong performance has been delivered
whilst adding 554 new locations to our
network and continuing to drive operating
efficiency, with overheads as a percentage
of revenue reducing by a further two
percentage points. Our strong cash
generation and disciplined approach
to investment in growth have also enabled
the Group to maintain a robust and
conservative capital structure.
Rigorous risk management
We continue to take a rigorous approach
to risk management across every aspect
of our business. A good illustration of this
is the process we go through to ensure that
our new locations deliver the challenging
financial returns that we seek. Every single
locality goes through a detailed process
before approval, comparing its anticipated
performance against what is being achieved
in comparable locations, the competitive
environment and considering the maximum
cash outlay and downside risk just as much
as upside potential and returns.
Our investment in growth is kept under
constant review and can be curtailed within
a short period if market conditions dictate.
Over time, we are taking an increasingly
capital-light approach to investment,
in which we will increasingly become the
facilitator between the property investor
and the end customer, with the aim of
further improving margins and reducing risk.
Board update
We welcomed Dominik de Daniel, our
new CFO and COO, to our international
management team and Board in November
2015 and look forward to his input as we
continue to deliver on our growth ambitions.
He is a proven and capable leader who brings
very relevant experience to Regus’ finance
and operations teams.
In May 2015 we welcomed François Pauly
to the Board as a new Independent
Non-Executive Director. François’ extensive
executive and board experience along with
his international business knowledge is
already contributing to the continued
strategic development of Regus.
12
Regus plc Annual Report and Accounts 2015
Chief Executive Officer’s review
A high-growth business•
51% at constant currency to £160.1m
(up 54% at actual rates).
We invested £284.9m in net growth capital
expenditure during the year, adding a further
554 new openings to the network, which stood
at 2,768 locations at the end of the year.
We generated an increased gross margin
of 28.3% on all our locations that were open
on or before 31 December 2012 and also
improved the gross margin on those
locations that were added to the network
during 2013 and 2014, both of which were
material years of growth and consequently
represent an increasingly significant
element of our overall revenue. The initial
performance of the locations added to
the network during 2015 is in line with our
expectations, albeit these are still at an
early stage of progression towards
financial maturity.
Through detailed planning and strengthening
our controls and processes, we have delivered
improved operational effectiveness of
our business, with a further reduction in
overheads as a percentage of revenues.
Total Group overheads were up only 2%
at constant currency compared to a 22%
increase in the size of our network. As a result,
total overheads as a percentage of revenues
further reduced from 16.7% to 14.7%.
Cash conversion remains a strong feature
of our business model. Cash generated before
investment in growth, dividends and share
repurchases, and excluding the £80m net
proceeds arising from the disposal of various
portfolios of property assets in the first quarter,
increased 23% to £215.7m (2014: £175.6m).
After taking the net growth capital expenditure
of £284.9m and disposal proceeds into
account, and after paying dividends of £38.8m
and spending approximately £32.0m buying
our own shares, Group net debt increased
from £138.0m at 31 December 2014 to
£190.6m at 31 December 2015. This
represents a Group net debt : EBITDA
leverage ratio of 0.66 times, which is
well below our internal 1.5 times limit and
reflects our continued prudent approach
to the Group’s capital structure.
Americas
Our Americas business achieved a good
performance and is a key growth region
in absolute terms. In total we had 1,140
locations in the region at the end of
December 2015. On a like-for-like basis
mature revenues increased 3.9% at
constant currency to £712.1m (up 7.9%
at actual rates) with an average mature
occupancy of 83.0% (2014: 79.1%).
During the year we added 180 locations
to the Americas network, expanding the
business into more parts of the region.
This expansion increased the average
number of available workstations from
131,665 to 149,414, with a total of 165,464
at the period end.
In the Americas, the USA is our predominant
market. It has performed well and we have
made good progress expanding into
secondary and tertiary markets on variable
lease deals and increasing the range of price
points by expanding the number of formats
being offered. Mexico has remained a good
market and after recent economic issues
we have seen an improvement in our
business in Brazil.
EMEA
The reported revenues of our EMEA
business have been impacted by the
appreciation of sterling against the euro.
Mature revenues on a constant currency
basis increased 5.5% to £321.2m but
were down 5.8% at actual rates.
Occupancy on the Mature business
increased from 77.6% to 79.4%. During
2015 we added 183 new locations, taking
the total number of locations to 736, and
added Iraq to the network. The average
number of workstations increased from
61,274 to 77,901. At period end we had
82,491 workstations.
We have experienced strong growth in
the incredibly diverse region of the Middle
East and Africa. In Europe, across the
many countries in which we operate,
there has been a mixture of performance,
but the overall result has been good. We
have experienced an improved performance
in Spain, whereas Russia has been a difficult
market requiring the renegotiation of rental
On a regional basis, mature* revenues and contribution can be analysed as follows:
£m
Americas
EMEA
Asia Pacific
UK
Other
Total
Revenue
2015
712.1
321.2
239.1
352.9
2.9
1,628.2
2014
660.1
341.0
230.6
340.2
0.6
1,572.5
Contribution
2015
189.0
89.6
68.7
86.8
1.0
435.1
2014
157.3
83.2
64.9
81.0
0.2
386.6
Mature gross margin (%)
2015
26.5%
27.9%
28.7%
24.6%
2014
23.8%
24.4%
28.1%
23.8%
26.7%
24.6%
* Centres open on or before 31 December 2013.
www.regus.com
13
An excellent year in the
development of our business.
Our financial results are strong
and we remain in robust
financial health. We continue
to find attractive opportunities
to build out our global network
and service the structural
changes in the world of work.
Mark Dixon
Chief Executive Officer
2015 has been another successful
year for Regus. We have continued to
see powerful structural growth drivers in
our market. More and more organisations
and individuals are reassessing their
approach to physical workspace and how
they work. These positive dynamics have
seen our business deliver strong underlying
progress; strategically, operationally, and
financially. We have added more locations
to our market-leading network than ever
before, generated attractive returns on our
investments and significantly increased our
profit through further operational efficiency.
Strong financial performance
The post-tax cash return on net growth
capital expenditure achieved from locations
opened on or before 31 December 2011
was 23.1%, an improvement on the returns
for the same estate in 2014 of 20.9% and
a level well above our cost of capital. The
2015 post-tax cash return on investment
from locations opened on or before 31
December 2012 was 21.5% (2014: 18.0%).
Group revenue increased by 15.9% at
constant currency to £1,927.0m (2014:
£1676.1m) (15.0% at actual rates).
Underlying operating profit, before the net
non-recurring gain of £15.3m, increased to
£144.8m, up 37% at constant currency (39%
at actual rates). Including the non-recurring
gain, our statutory operating profit increased
Strategic reportGovernanceFinancial statements
Chief Executive Officer’s review continued
agreements. These challenging conditions
also provided opportunities and we have
seen an increase in share-of-profit deals.
Asia Pacific
Our Asia Pacific business continues to
move forward and has been our fastest
growth region overall, with 146 new locations
being added including our first centre in
Brunei. In total we had 545 locations in the
region. Mature revenues increased 3.9%
to £239.1m at constant currency (up 3.7%
at actual rates) with an average mature
occupancy of 85.4% (2014: 78.9%) driven
by growth in lower relative REVPOW
markets. The average number of
workstations increased from 58,911 to
78,571. At the end of the period we had
91,887 workstations, making it our second
largest region.
There remains ample opportunity for
growth in Asia Pacific both from building
out in existing countries and adding new
ones, like Brunei. We have continued to
expand our business in China, which has
not experienced any impact from the recent
economic slowdown. We remain watchful
however, and look to drive growth in
secondary and tertiary areas using
capital-light deals.
UK
Our UK business has delivered a good
performance. Mature revenues advanced
3.7% to £352.9m with mature occupancy
at 81.1% (2014: 83.7%). With growth in the
UK in recent years driven primarily through
acquisitions, which started to feed into the
Mature business in 2015, this is a good
revenue improvement. The number of
occupied workstations has remained
very stable, but during 2015 expansions
increased the available inventory in the
Mature business by 3%, which largely
accounts for the occupancy reduction.
During 2015, 45 new locations were added
in the UK taking the total number of
locations to 347. We are now seeing more
growth in regional locations in the UK to
complement our presence in the major
cities. Total average workstations increased
from 60,037 to 65,721 with 70,956 at the
year-end.
We also opened our first co-working
Spaces location in Oxford Street. After
only six months this has proved a popular
format and location and has achieved
strong occupancy and good margins.
Market context
2015 was a very significant year in the
development of Regus. The change we
have seen over the past two years has
been remarkable, as an increasing number
of businesses – from large corporations
to entrepreneurial start-ups – have come
to recognise the power of flexible workspace
in helping them maximise the positive
impact of new technologies and
transform performance.
Increasing awareness of our industry,
coupled with shortening company and
project lifecycles, is leading customers to
distribute their workforces and service their
customers in new ways that drive efficiency
and reduced costs.
Our investment case
We are the number one player in a
fast-growing global market. Our strategy
addresses the clear structural growth
drivers in the market. We have detailed,
stress-tested plans for extending our
leadership across the world, outperforming
Our investment case
Market leader – No 1 player in highly
fragmented market
Structurally
growing
demand
Attractive
returns on
investment
and cash flow
Proven
ability to
manage
growth
Prudent
management
of capital
structure
Significant
runway for
growth with
expected
incremental
post tax cash
returns of at
least 20%
our competitors in our speed of expansion,
increasing operational efficiency and the
relevance and quality of our service offering.
As part of our investment case we are
constantly striving to improve our business
and future potential returns. Whilst this is
an ongoing process, we have recently
implemented two important changes.
We have changed the field structure to
introduce a clustering approach to the
local management of locations. This has
improved the cost structure of the
business going forward and will lead to
higher productivity. With the in-field
selling resource now focused on a specific
number of locations, we believe this will
better promote the active marketing of
the whole range of what is offered by the
entire cluster, including format and price
point. So, as well as improving operational
leverage, this structural change also has the
potential to deliver incremental revenues.
The other important change we have
implemented is to improve the compensation
basis for location managers. Under the
previous system bonuses consisted primarily
of sales commissions. This has now been
replaced by a quarterly profit share bonus
scheme that better aligns rewards within
the business with the interests of our
shareholders. We have, however, retained
the requirement to improve customer
service, as measured by a Net Promoter
Score, and reward export sales to locations
outside of the manager’s cluster.
Today, our return on investment is highly
attractive, our cash flow is strong, and
we have a proven, successful growth
story that has seen us significantly develop
our network over the past two years while
continuing to deliver consistently strong
returns. 2015 saw us hit many key
milestones, as we added a record 554
locations across the world to bring the
total space under our management to over
46 million square feet, entered Brunei, our
106th national market, celebrated 20 years
in China and 10 in India, opened our 500th
centre in Asia Pacific and our 1,000th
centre in North America (United States
and Canada).
We continued to differentiate our
proposition, with the launch of services
and benefits including the new Spaces
(targeting creative workers) and Signature
workspace formats, the continued growth
of Regus Express in more airports, railway
stations and shopping malls around the
world, access to 18 million Wi-Fi hotspots
and 800 airside lounges and our new
community app. Importantly, we
14
Regus plc Annual Report and Accounts 2015
Group income statement
£m
Revenue
Gross profit (centre contribution)
Overheads (inc. R&D)
Underlying operating profit*
Non-recurring items
Operating profit
Underlying profit before tax
Profit before tax
Underlying taxation
Taxation
Underlying profit for the period
Profit for the period
Underlying EBITDA
EBITDA
* After contribution from joint ventures
Gross margin
Mature 12
New 13
New 14
Pre-15
New 151
Group (including closures)
2015
1,927.0
428.4
(283.9)
144.8
15.3
160.1
130.4
145.7
(25.9)
(25.8)
104.5
119.9
290.0
305.3
2014
1,676.1
383.1
(279.6)
104.3
–
104.3
87.1
87.1
(17.2)
(17.2)
69.9
69.9
224.8
224.8
% Change
(actual
currency)
15.0%
12%
2%
39%
–
54%
50%
67%
% Change
(constant
currency)
15.9%
12%
2%
37%
–
51%
46%
63%
50%
72%
29%
36%
43%
64%
28%
34%
Revenue £m
2015
1,301.3
326.9
169.2
1,797.4
118.7
1,927.0
2014
1,289.0
283.5
62.0
1,634.5
–
1,676.1
Gross margin %
2015
28.3%
20.6%
4.2%
24.6%
(11.4)%
22.2%
2014
27.8%
9.8%
(9.4)%
23.3%
–
22.9%
1 New 15 includes any cost incurred in 2015 for centres which will open in 2016.
strengthened our business with the
appointment of senior executives to bring
additional energy, experience and intellect to
our leadership teams.
Strategic direction
Despite our existing market leadership
we have scope for significant growth.
Our future is therefore about realising
that potential, both in larger markets like
China, India and the US, where we see the
potential for a combined total of over 9,500
locations (up from over 1,000 today), and in
our most developed networks, such as the
UK where we have 347 locations and see
significant scope for further expansion.
In doing so, we want to ensure that we
can provide a solution for customers with
every potential budget. We are focused on
capturing the growth opportunity we have
and realising the potential of the business,
thereby generating significant value for
shareholders as we move towards a potential
20,000 locations. Effective planning, strong
partnerships and product innovation will be
the key factors in attaining this goal.
Planning
Business planning is critical as we go
forwards. The simpler our business is to
operate, ensuring that our people can get
it right 100 per cent of the time, the more
efficiently we can roll it out. As we enter the
next stage of growth, we have developed
a more sophisticated approach to planning,
while keeping it simple, effective and fully
aligned with our business goals.
Today, planning at Regus revolves entirely
around defining and meeting customer
needs through factors such as format,
service portfolio and price point. Our approach
is therefore structured, transparent, focused
on the detail and planned at every level. As
a result, we understand what we want to
achieve, the risks involved and how to
mitigate those risks.
Partnerships
Adding 554 locations during 2015 involved
opening more than two every working day
throughout the year. This is why we are
further industrialising our approach to
growth while keeping a very firm hand
on risk.
We already have a very successful
growth story. By changing the mix of
formats, segments, markets and models
and by streamlining our methodology
through careful planning and automation
within a new network of shared service
centres, we can grow in a far more capital-
efficient way. Increasingly, by partnering
more with the companies that own and fund
real estate, we bring together investors
in property and our fast-growing global
customer base and continue to generate
attractive returns on our investments.
Products and innovation
Our business is based on the understanding
that physical space needs to keep up with
changes in technology. For this reason,
we have invested a substantial amount
in R&D during the past three years, building
a world-class technical infrastructure and
an array of apps and services.
We will also continue to add to our line-up
of formats that deliver a bespoke workspace
environment to different parts of the
addressable market, including the
Spaces, Signature Group, OpenOffice,
KORA and Express formats.
Taking this approach means that we can
support any organisation’s office needs,
anywhere in the world. We provide a truly
global and fast-growing network, with the
right offer at the right price, in which it is
easy to buy space for as little as a few hours
or for several years. As part of this, we make
best-of-breed products and services easily
accessible to every member of the
workforce, wherever they are and
whatever their requirements.
As we move ahead, we will have partnerships
and alliances in place, building on those
we already have with the likes of Microsoft,
Google and Polycom, to bring customers
those things that they cannot get for
themselves. We will help customers
become more productive, faster than
ever before. In addition, we will increasingly
provide the means for them to extract
added value from their relationship with
Regus, by collaborating, promoting their
products and services to one another
and participating in shared communities.
2016 outlook
We remain confident in our business
model and the long-term structural drivers
of our industry. We will continue to invest
to increase our levels of customer service,
make our business relevant to a wider
market, drive greater operational efficiency
and deliver long-term shareholder value.
We will continue to adhere to our strict
financial criteria in executing our growth
plans and remain suitably vigilant given the
current global macroeconomic uncertainty,
with flexibility in both our expansion plans
and our cost base. Current trading is in line
with management’s expectations and we
remain confident in our prospects for 2016.
Mark Dixon
Chief Executive Officer
1 March 2016
www.regus.com
15
Strategic reportGovernanceFinancial statements Our strategic objectives and key performance indicators
Our strategy is clear and simple•
We seek to leverage our scale and unique position to provide
customers with convenient and innovative work environments,
while delivering attractive and sustainable returns to our investors.
Strategic objectives and KPIs
Our approach
Revenue growth achieved through the addition of new locations, the development
of incremental revenue streams and active management of the existing network to
drive efficiency, contributes to improvements in gross profit. Combined with strong overhead
cost control, this drives operating profit and cash flow, generating strong
returns on investment well ahead of the Group’s cost of capital.
Growth is demand-led as we respond to customers looking to outsource more of
their workplace needs and/or benefit from the flexibility and convenience we provide.
By expanding our networks and developing our growing range of formats, we expand
our addressable audience and provide our existing customers with additional convenience.
It is important to remember that our locations perform well in their own right and that the
network then provides incremental opportunities.
We continue to be mindful of growing only in locations where the potential investment
opportunity meets our stringent returns criteria.
We are also focused on increased partnering and using more capital-efficient
ways of expanding the network.
Cost control is achieved through operational excellence and the significant economies
of scale and operational leverage that network growth brings.
Innovation is core to Regus’ strategy and allows us to maintain our market-leading position
and customer service. We invest in R&D to ensure we stay on top of (and even help shape)
trends, by developing location formats, products and services that meet our customers’
needs and help them work more conveniently, efficiently and effectively. New product
development provides existing customers with additional reasons to use Regus and
also opens up new revenue opportunities.
Delivering
attractive,
sustainable
returns
Developing
national
networks
£
Controlling
costs
Industry-
leading
innovation
16
Regus plc Annual Report and Accounts 2015
Key performance indicators
How we did
Future ambitions and risks
2015 Post-tax cash return on
net investment (%)
Overall 2015 return on net
investment made up to 31
December 2011 of 23.1%.
26.8
24.2
20.4 20.3
9.8
13.3
11.2
Delivering profitable growth and strong,
sustainable returns is central to creating future
shareholder value. Regus is committed to
delivering these returns by optimising revenue
development and controlling costs. Our post-
2011 investments are progressing as expected.
08
09
10
11
12
13
14
15
07
and
earlier
Network location growth
554 new locations added, opening
in 145 new towns and cities, at
a net growth capital investment
of £284.9m
2,269
1,831
1,411
1,203
(8.0)
(9.3)
2,768
We will continue to add breadth and convenience
to the network through further measured
investment in high-quality assets, across our
range of formats, with the potential for attractive
returns for shareholders. We are also focused on
developing our range of location formats. As of 22
February 2016 we had visibility over approximately
£100m of net growth capital expenditure for
2016, representing some 300 locations.
11
12
13
14
15
Total overheads as a % of
revenues (%)
Overheads as a % of revenues
reduced 2.0ppt to 14.7%
19.3
18.5
18.5
16.7
14.7
We will continue to control overheads to deliver
further economies of scale, notwithstanding
continued and significant investments made
in the business to develop the network and
our operating platform, processes and people.
Investment in R&D (£m)
£10.3m invested, up 18%
11
12
13
14
15
10.3
8.7
7.2
We will continue our investment in R&D as the
Group focuses on customer requirements and
developing appropriate offerings to satisfy their
needs, thereby increasing the reasons to do
business with Regus. We believe this provides a
key point of differentiation for Regus.
4.5
3.1
11
12
13
14
15
www.regus.com
17
Strategic reportGovernanceFinancial statements Chief Financial Officer’s review
Strong growth in network
and attractive returns•
during 2012 (which are not yet fully financially
mature), the Group delivered a post-tax cash
return of 21.5% in respect of all locations
opened on or before 31 December 2012
(the equivalent return for the 12 months
to 31 December 2014 on the same estate
was 18.0%).
This strong performance reflects the
underlying progress of the business as our
locations mature, as well as our continued
focus on efficiency and productivity, and
the economies of scale on overheads that
we enjoy as the Group continues to grow.
The chart below also shows the status of
our centre openings by year of opening,
with pleasing progress in the development
of returns for centres added in 2012 and
2013 as they continue to progress towards
full maturity.
Developing the network
During 2015, we invested £284.9m of
net growth capital expenditure, adding
a further 554 locations to the network.
These locations added approximately
7.7m sq ft, taking the Group’s total space
globally to over 46m sq ft as at 31 December
2015. In 2014 we invested net growth
capital expenditure of £206.6m, adding
452 locations, the equivalent of 5.7m sq ft
of space. We remain confident that the
returns from these investments will, in
due course, be in line with the returns we
generate on our historic investments.
This investment in developing our network
continues to increase the depth and breadth
of our geographic scope, thereby building
further resilience into the business.
We continue to have a good pipeline of new
openings. As of 22 February we had visibility
on net capital expenditure so far for 2016 of
2015 has been another
successful year in delivering
against our strategy of
achieving strong returns on
investment. Good business
performance and overhead
control are driving these
improved returns.
Dominik de Daniel
Chief Financial Officer and
Chief Operating Officer
Return on investment
The focus of our strategy remains on
driving returns that achieve our post-tax
cash payback criteria, which typically is
within four years. For the 12 months to
31 December 2015, the Group delivered
a post-tax cash return of 23.1% in respect
of locations opened on or before 31
December 2011 (up from 20.9% on the same
estate for the 12 months to 31 December
2014). Incorporating the centres opened
Post tax cash return on net investment by year group –
12 months to 31 December (%)
24.2
21.9
26.8
18.0
24.3
20.4
20.3
15.3
14.9
9.8
13.3
11.2
4.2
08
09
10
11
12
0.0
13
14
15
07
and
earlier
2014 2015
(8.0)
(9.5)
(9.3)
18
Regus plc Annual Report and Accounts 2015
approximately £100m, representing
approximately 300 locations and 4m sq ft
of additional space.
Every potential investment is rigorously
evaluated by our internal Investment
Committee and has to meet our stringent
financial hurdles before being approved.
This is a process to which we apply maximum
focus, given how critical the original decision
is to our ultimate success.
Operational developments
We are constantly striving to improve our
business and future potential returns. Whilst
this is an ongoing process, we have recently
implemented changes to the operational
field structure, introducing a cluster approach
to the management and organisation of our
locations. With the in-field selling resource
focused on a specific number of locations, we
believe this will better promote the active
marketing of the whole range of what is
offered by the entire cluster, including format
and price point. Moreover, the unrivalled
scale of our business provides us with the
opportunity to automate more processes
to allow our employees to have greater focus
on customer service across more than one
location. We believe this will generate many
positives for our business, including improved
cost efficiency in the field, better productivity
and a sharper focus on ‘selling the cluster’
to unlock the full benefit of our broad offering.
We have also implemented important
changes to the compensation structure
for our colleagues operating our locations by
moving away from a largely sales
commission-based bonus system to one
based on financial performance. We believe
this will be important and better align business
behaviour with the interests of our
shareholders.
Non-recurring items
As previously disclosed, during the first
quarter of 2015 we completed the sale
of various portfolios of property assets
acquired during 2014. The disposal raised
£84m of cash before expenses and resulted
in a non-recurring profit of £21.3m after
expenses. During the second half two
non-recurring items, relating to a litigation
action in California and the Competition
and Markets Authority’s review of the
acquisition of Avanta in the UK, reduced
the overall net gain by £6m to £15.3m.
While these items have had a significant
impact on our 2015 results, except
where specifically mentioned the following
commentary and profit and loss analysis
excludes the overall profit impact from
these non-recurring items.
Financial performance
Group income statement (before non-recurring profit)
£m
Revenue
Gross profit (centre contribution)
Overheads (including R&D)
Joint ventures
Operating profit
Net finance costs
Profit before tax
Taxation
Effective tax rate
Profit for the period
Basic EPS (p)
Depreciation & amortisation
EBITDA
2015
Underlying
1,927.0
428.4
(283.9)
0.3
144.8
(14.4)
130.4
(25.9)
19.9%
104.5
11.2
145.2
290.0
% Change
(actual
currency)
15.0%
12%
(2)%
% Change
(constant
currency)
15.9%
12%
(2)%
39%
50%
50%
51%
29%
37%
46%
43%
45%
28%
2014
1,676.1
383.1
(279.6)
0.8
104.3
(17.2)
87.1
(17.2)
19.7%
69.9
7.4
120.5
224.8
Revenue
Group revenues increased 15.9% at
constant currency to £1,927.0m (2014:
£1,676.1m), an increase of 15.0% at actual
rates. This strong improvement reflects
good underlying like-for-like growth as well
as the contribution from additional locations.
Mature revenues (from 1,771 like-for-like
locations added on or before 31 December
2013) grew a healthy 4.3% at constant
currency to £1,628.2m (2014: £1,572.5m),
up 3.5% at actual rates. Mature occupancy
was 82.4% (2014: 79.6%).
Gross margin
Gross profit
Group gross profit improved 12% at
constant currency rates to £428.4m
(2014: £383.1m), up 12% at actual rates.
The slight reduction in Group gross margin
from 22.9% to 22.2% reflects the dilution
from a relatively large number of immature
locations resulting from the significant
investment in growing the network over
recent years (see table below). The
mature gross margin improved from
24.6% to 26.7%.
£m
Revenue
Cost of sales
Gross profit (centre contribution)
Gross margin
£m
Revenue
Cost of sales
Gross profit (centre contribution)
Gross margin
Continued improved
overhead efficiency
As anticipated, the Group has made further
strong progress in relation to overhead
efficiency, thereby building on the progress
achieved in recent years. We have benefited
from our investment in management,
systems and processes. As a consequence,
in spite of significant growth, total overheads
(including R&D expenditure) grew only 2%
at constant currency to £283.9m (up 2% at
actual rates). As a percentage of revenues,
total overheads declined from 16.7% in 2014
to 14.7% in 2015. We continue to maintain
a strong focus on overhead discipline and
anticipate further scale benefits.
Mature
centres
2015
1,628.2
(1,193.1)
435.1
26.7%
Mature
centres
2014
1,572.5
(1,185.9)
386.6
24.6%
New
centres
2015
287.9
(294.3)
(6.4)
(2.2)%
New
centres
2014
62.0
(67.8)
(5.8)
(9.4)%
Closed
centres
2015
10.9
(11.2)
(0.3)
(2.8)%
Closed
centres
2014
41.6
(39.3)
2.3
5.5%
Total
2015
1,927.0
(1,498.6)
428.4
22.2%
Total
2014
1,676.1
(1,293.0)
383.1
22.9%
Investment in R&D increased 18% from
£8.7m in 2014 to £10.3m for 2015.
Operating profit
(excluding non-recurring items)
As a result of the strong control of
overheads, the incremental gross profit
almost completely falls through to augment
the Group operating profit, which increased
37% at constant currency to £144.8m
(2014: £104.3m) (up 39% at actual rates).
Consequently, the underlying Group
operating margin increased from 6.2% in
2014 to 7.5% in 2015.
Net finance costs
Notwithstanding the increase in net
debt from an opening position of £138.0m
to £190.6m, the Group’s net finance costs
decreased from £17.2m to £14.4m,
reflecting strong treasury discipline and
a favourable foreign exchange movement
on inter-company balances compared with
2014. During 2015 the Group incurred the
additional cost of the €210m Schuldschein
debt security which we issued in May 2014,
but this was largely offset through subsequent
lower utilisation of the Revolving Credit Facility.
Within the overall net finance costs, the
Group also incurred a notional, non-cash,
interest charge of £1.6m (2014: £2.0m)
relating to the accounting treatment of fair
value adjustments on various acquisitions
made in past years. In addition there were
also other non-cash costs of £1.4m (2014:
£1.3m) relating to the amortisation of upfront
charges on the establishment of our various
borrowing facilities.
Tax
The underlying effective tax rate for the year
was 19.9%. The Group’s reported tax rate
was 17.7% (2014: 19.7%).
Earnings per share
Statutory Group earnings per share
increased significantly to 12.8p (2014: 7.4p).
Excluding the positive contribution from
the non-recurring items, underlying Group
earnings per share increased 51% to 11.2p,
reflecting the strong growth in underlying
Group operating profit.
The weighted average number of shares
in issue for the year was 933,457,741
(2014: 944,081,638). The weighted
average number of shares for diluted
earnings per share was 953,678,034 (2014:
972,814,973). During the year, the Group
purchased 9,543,800 shares at a cost of
approximately £24.5m designated to be
held in treasury to satisfy future exercises
under various Group long-term incentive
schemes. Over the same period, the Group
reissued 1,936,642 shares from treasury
to satisfy such exercises.
www.regus.com
19
Strategic reportGovernanceFinancial statements
Chief Financial Officer’s review continued
Cash flow and funding
The ability to generate cash is an attractive
feature of our business model and Group
cash generation continues to be strong.
Cash generated before the investment
in growth capital expenditure, dividends
and share repurchases, and excluding the
exceptional £80m disposal proceeds after
expenses, increased 23% in 2015 to
£215.7m (2014: £175.6m), reflecting the
strong growth in underlying Group operating
profit and very strong cash conversion.
Group net debt increased from £138.0m
at 31 December 2014 to £190.6m at 31
December 2015. This increase comes after
taking the growth capital expenditure and
disposal proceeds into account, and after
paying dividends of £38.8m and spending
approximately £32.0m on a combination of
buying our own shares as a further hedge
against the cost of the exercise of options by
our employees across our various option
and LTIP plans, and cash-settling
the exercise of some of those options.
This represents an underlying Group net
debt : EBITDA leverage ratio of 0.66 times,
which is well below our internal 1.5 times limit
and reflects our continued prudent approach
to the Group’s capital structure.
During the period, we extended and amended
our key £320m Revolving Credit Facility, which
is now committed until 2020 and which has
further improved our debt maturity profile.
weakening against the US dollar and
strengthening against the euro and
Japanese yen as well as a number of
other currencies. Nonetheless, overall
this decreased reported revenue and gross
profit by £16.4m and £1.0m respectively,
however, operating profit increased by
£1.9m compared to last year.
Together with the Schuldschein debt security
which we issued last year, the Group has
adequate financial headroom to continue
to execute on its strategy.
Foreign exchange
The Group’s results are exposed to
translation risk from the movement in
currencies. During 2015 key individual
currency exchange rates have moved, as
shown in the table below. The movements
were, however, mixed with sterling
Foreign exchange rates
Per £ sterling
US dollar
Euro
Japanese yen
At 31 December
Annual average
2015
1.48
1.36
179
2014
1.56
1.28
186
%
(5)%
6%
(4)%
2015
1.53
1.38
185
2014
1.64
1.25
175
%
(7)%
10%
6%
Risk management
The principal risks and uncertainties
affecting the Group remain unchanged.
A detailed assessment of the principal risks
and uncertainties which could impact the
Group’s long-term performance and the
risk management structure in place to
identify, manage and mitigate such risks
can be found on pages 21 to 24 and 38
and 39 of the Annual Report and Accounts.
Related parties
There have been no changes to the type
of related party transactions entered into
by the Group that had a material effect on
the financial statements for the period
ended 31 December 2015. Details of related
party transactions that have taken place
in the period can be found in note 31 to the
2015 Annual Report and Accounts (page 97).
Dividends
Consistent with Regus’ progressive dividend
policy and subject to shareholder approval,
we will increase the final dividend for 2015
by approximately 13% to 3.1p (2014: 2.75p).
This will be paid on Friday, 27 May 2016, to
shareholders on the register at the close
of business on Friday 29 April 2016. This
represents an increase in the full year
dividend of approximately 13%, taking
it from 4.0p for 2014 to 4.5p for 2015.
Dominik de Daniel
Chief Financial Officer and
Chief Operating Officer
1 March 2016
Cash flow
The table below reflects the Group’s cash flow:
£m
Group EBITDA
Working capital
Less: growth-related partner contributions
Maintenance capital expenditure
Taxation
Finance costs
Other items
Cash flow before growth capital expenditure, share repurchases,
dividends and non-recurring disposal proceeds
Gross growth capital expenditure
Less: growth-related partner contributions
Net growth capital expenditure5
Total net cash flow from operations
Non-recurring disposal proceeds
Less: costs of disposal
Corporate financing activities
Dividend
Opening net cash/debt
Exchange movements
Closing net debt
2015
290.0
103.5
(59.8)
(74.9)
(29.1)
(13.2)
(0.8)
2014
224.8
80.3
(47.0)
(53.8)
(20.9)
(13.5)
5.7
215.7
175.6
(344.7)
59.8
(284.9)
(253.6)
47.0
(206.6)
(69.2)
(31.0)
84.0
(4.0)
(32.0)
(38.8)
(138.0)
7.4
(190.6)
–
–
(17.3)
(35.4)
(57.2)
2.9
(138.0)
5 Net growth capital expenditure of £284.9m relates to the cash outflow in 2015. Accordingly, it includes capital expenditure related to locations added in 2014 and 2016,
as well as 2015. The total net investment in the 2015 additions amounts to £247.9m so far.
20
Regus plc Annual Report and Accounts 2015
Risk management and principal risks
Risk management remains
at the core of what we do•
Identification, mitigation and management
of risks is central to our strategy and our
enterprise-wide risk management process
allows us to understand the nature, scope
and potential impact of our key business
and strategic risks so we are able to manage
these effectively.
Regus’ business could be impacted by
various risks, leading to failure to achieve
strategic targets for growth or loss of
financial standing, cash flow, earnings, return
on investment, and reputation. Not all these
risks are wholly within the Group’s control
and it may be affected by risks which are not
yet manifested or reasonably foreseeable.
Effective risk management is critical
to achieving our strategic objectives
and protecting our personnel, assets
and our reputation. Regus therefore
has a comprehensive approach to risk
management, as set out in more detail
in the Corporate Governance Report.
A critical part of the risk management
process is to assess the impact and
likelihood of risks occurring so that
appropriate mitigation plans can be
developed and implemented.
For all known risks facing the business,
Regus attempts to minimise the likelihood
and mitigate the impact. According to the
nature of the risk, Regus may elect to take
or tolerate risk, treat risk with controls and
mitigating actions, transfer risk to third
parties, or terminate risk by ceasing particular
activities or operations. Regus has zero
tolerance of financial and ethics non-
compliance and ensures that Health,
Safety, Environmental & Security risks
are managed to levels that are as low
as reasonably practicable.
Whilst overall responsibility for the risk
management process rests with the Board,
it has delegated responsibility for assurance
to the Audit Committee. Executive
management is responsible for designing,
implementing and maintaining the necessary
systems of internal control.
A list of key risks is prepared and the
Board collectively assesses the severity
of each risk, the likelihood of it occurring
and the strength of the controls in place.
This approach allows the effect of any
mitigating procedures to be reflected in
the final assessment. It also recognises
that risk cannot be totally eliminated at an
acceptable cost and that there are some
risks which, with its experience and after
due consideration, the Board will choose
to accept.
Effective risk management requires
awareness and engagement at all levels
of our organisation. It is for this reason that
risk management is incorporated into the
day-to-day management of our business,
as well as being reflected in the Group’s core
processes and controls. The Board oversees
the risk management strategy and the
effectiveness of the Group’s internal control
framework. Risk management is at the heart
of everything we do, particularly as we look to
grow across multiple markets around the world.
For this reason, we conduct risk assessments
throughout the year as part of our business
review process and all investment decisions.
These activities include:
• Monthly business reviews of all countries
and Group functions
• Individual reviews of every new location
investment and all acquisitions
• Annual planning process for all markets
and Group functions
• Review of the status of our key risks
in each Audit Committee meeting
Board
Defines Regus’ risk appetite
and tolerance
Monitors risk identification
and assessment
Assesses overall effectiveness
of risk management
Reviews effectiveness of internal
controls
Monitors progress against internal and
external audit recommendations
Approves the annual internal
and external audit plans
Audit Committee
Senior leadership team
Accountable for the design and
implementation of risk management
processes and controls
Accountable for the regular
review and appraisal of key risks
Contributes to the identification
and assessment of key risks
General management
Responsible for compliance and ensuring
that staff are adequately trained
Business assurance function
• Assists management and the Board in conducting
• Reviews risk profiles
risk studies
• Advises and guides on policies and internal
control framework
• Tests compliance with internal controls
www.regus.com
21
Strategic reportGovernanceFinancial statements Risk management and principal risks continued
Principal risks
Risk
Strategic
Lease obligations – The single
greatest financial risk to Regus
is represented by the financial
commitments deriving from the
portfolio of leases held across
the Group.
Whilst Regus has demonstrated
consistently that it has a
fundamentally profitable
business model which works
in all geographies, the profitability of
centres is impacted by movements
in market rents, which, in turn,
impact the price at which Regus
can sell to its customers.
The fact that the outstanding
lease terms with our landlords
are, on average, significantly longer
than the outstanding terms on
our contracts with our customers
creates a potential mismatch if
rentals fall significantly, which can
impact profitability and cash flows.
Economic downturn – An economic
downturn could adversely affect the
Group’s operating revenues, thereby
reducing operating performance or,
in an extreme downturn, resulting in
operating losses.
Shifting demand and technology
trends – Technology developments
are driving demand for flexible
working. Failure to recognise these
could mean Regus’ product offering
is sub-optimal.
Financial
Funding – The Group relies on
external funding to support a net
debt position of £190.6m at the
end of 2015. The loss of these
facilities would cause a liquidity
issue for the Group.
Mitigation
Progress in 2015
This risk is mitigated in a number of ways:
1) 94% of our leases are ‘flexible’, meaning that they are either
terminable at our option within six months and / or located
in or assignable to a standalone legal entity, which is not fully
cross-guaranteed. In this way, individual centres are sustained
by their own profitability and cash flow. During the most
recent downturn we were able to negotiate revised terms
with our partners to reflect downward movements in market
rates to help recovery.
2) Over a quarter of our leases with landlords are variable in
nature, which means that payments to landlords vary with
the performance of the relevant centre. In this way the ‘risk’
to profitability and cash flow of that centre from fluctuations
in market rates is softened by the consequent adjustment to
rental costs. In a number of cases, we take no risk at all since
the lease is signed by a partner who also undertakes all of the
capital investment and pays us a fixed percentage of revenues
as well as a share of centre profit.
3) The sheer number of leases and geographic diversity
of our business reduces the overall risk to our business
as the phasing of the business cycle and the performance
of the commercial property market often varies from country
to country and region to region.
4) Each year a significant number of leases in our portfolio
reach a natural break point.
The Group has taken a number of actions to mitigate this risk:
1) More than a quarter of our leases are performance-related
to a greater or lesser extent and our rental payments, if any,
vary with revenues earned by the centre.
2) Lease contracts include break clauses when leases can
be terminated at our behest. The Group also looks to stagger
leases in locations where we have multiple centres so that
we can manage our overall inventory in those locations.
3) We review our customer base to assess exposure
to a particular customer or industry group.
4) The increasing geographic spread of the Group’s network
increases the depth and breadth of our business and provides
better protection from an economic downturn in a single
market or region.
Regus continually invests in R&D to develop new products
and services to increase its competitive advantage, protect
current revenues and unlock potential new sources of revenue.
During 2015, the number of ‘flexible’
leases as a percentage of the total
increased from 92% to 94%. At the
end of 2015, we were operating 2,768
locations in 977 towns and cities across
106 countries.
We increased the number of centres
operating on performance-related
leases by 20%.
We also increased the scale of our
network by 22% and added 145 new
towns and cities. Our monthly business
performance reviews provide early
warning of any impact on our business
performance and allow management
to react with speed. More generally,
investment in our management
team has also led to improved,
more responsive decision-making
at a country and area level.
The Group increased spend on R&D
by 18% in 2015.
The Group constantly monitors its cash flow and financial
headroom development and maintains a 12-month rolling
forecast and a three-year strategic outlook. The Group also
monitors the relevant financial ratios against the covenants
in its facilities to ensure the risk of breach is being managed.
The Group also stresses these forecasts with downside
scenario planning to assess risk and determine potential
action plans.
The Board intends to maintain a prudent approach to the
Group’s capital structure by holding the net debt : Group
EBITDA leverage ratio below c. 1.5 times.
Part of the annual planning process is a debt strategy and
action plan to ensure that the Group will have sufficient
funding in place to achieve its strategic objectives.
The Group also constantly reviews and manages
the maturity profile of its external funding.
We extended and amended our £320m
Revolving Credit Facility, which is now
committed until 2020.
Together with the Group’s €210m of
debt securities, consisting of €165m of
three-year notes and €45m of five-year
notes, this provides £474m of available
debt financing.
Regus had a net debt : EBITDA ratio at
31 December 2015 of 0.66 times. There
is significant headroom on each of the
covenant ratios.
Our A- for long-term debt and A1
for short-term debt ratings, accorded by
an independent credit rating agency,
makes additional sources of financing
potentially available.
22
Regus plc Annual Report and Accounts 2015
Risk
Financial
Exchange rates – The principal
exposures of the Group are to
the US dollar and the euro with
approximately 33.9% of the
Group’s revenues being
attributable to the US dollar
and 13.0% to the euro.
Any depreciation or appreciation
of sterling would have an adverse
or beneficial impact to the Group’s
reported financial performance
and position respectively. The
Group does not generally hedge
the translation exchange risk of
its business results. Rather, it
assumes that shareholders will
take whatever steps they deem
necessary based on their varied
appetites for exchange risk
and differing base currency
investment positions.
Interest rates – Operating in a
net debt position, an increase
in interest rates would increase
finance costs.
Operational
Cyber security – Regus has
significant experience in operating
and maintaining an enterprise
infrastructure and application
suite. The Group has ensured that
information security is part
of its ongoing business practice.
The trend towards an integrated
digital economy and use of external
cloud services combined with the
rise in malicious attacks and
increasing consequential costs
warrants particular attention
to cyber security risks.
Loss of critical systems – The
Group’s 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 financial results.
Mitigation
Progress in 2015
1) Given that transactions generally take place in the
functional currency of Group companies, the Group’s
exposure to transactional foreign exchange risk is limited.
2) Where possible, the Group attempts to create natural
hedges against currency exposures through matching income
and expenses, and assets and liabilities, in the same currency.
3) The Group, where deemed appropriate, uses currency
swaps to maintain the currency profile of its external debt.
Overall in 2015 the movement
in exchange rates decreased reported
revenue and gross profit by £16.4m and
£1.0m respectively, however operating
profit increased by £1.9m compared to
last year.
During 2015 the Group had cross-
currency swaps on €165m of debt
securities to retain the currency profile
of its external debt following the issue
of a €210m loan note (which was used
to repay sterling debt on the Group’s
Revolving Credit Facility).
The Group constantly monitors its interest rate exposure
as part of its monthly treasury review.
As part of the Group’s balance sheet management it utilises
interest rate swaps.
During 2015 the Group maintained
interest rate swaps to convert a
substantial proportion of its debt
from floating to fixed rates.
This risk is mitigated as follows:
1) The Group maintains an active information security
program under the direction of the Group CIO with oversight
by the Board
2) Both internal and external audits are conducted periodically
to review risks and ensure appropriate measures are in place
3) The Group ensures compliance with all major legislation
and directives
4) The Group maintains a mandatory training programme to
promote staff awareness of information security and
compliance best practice
5) Data, systems and access permissions are strictly
segregated to reduce exposure to risk
Regus manages this risk through:
1) Business continuity plans.
2) A detailed service agreement with our external data centre
provider which incorporates appropriate back-up procedures
and controls.
3) Ensuring appropriate business interruption insurance
is in place.
All core production applications have
been made PCI (Payment Card Industry)
– compliant and the Group no longer
stores credit card details in any of
its systems.
Internal and external audits have been
completed and an ongoing monitoring
and improvement programme is in place.
We undertake regular testing
of business continuity procedures
to ensure that they are adequate
and appropriate.
www.regus.com
23
Strategic reportGovernanceFinancial statements Risk management continued
Risk
Operational
Fraud – Landlord and supplier
and procurement related fraud
Growth
Ensuring demand is there to
support our growth – Regus has
undertaken significant growth
to develop local and national
networks. Adding capacity carries
the risk of creating overcapacity.
Failure to fill new centres would
create a negative impact on
the Group’s profitability and
cash generation.
Human Resources
Ability to recruit at the right
level – Our ability to increase
our management capacity and
capabilities through the hiring of
experienced professionals not only
supports our ability to execute our
growth strategy, but also enables
us to improve succession planning
throughout the Group.
Mitigation
Progress in 2015
Regus manages this risk through:
1) A rigorous investment approval process to review the
proposed deal structure against local market conditions
and alternatives.
2) Centralised procurement contracts with suppliers for
key services and products.
3) Standardised processes to manage and monitor spend.
4) A strong governance framework and policies on gifts and
hospitality, business conduct and bribery and corruption.
5) Regular reviews to monitor effectiveness of controls.
Regus mitigates this risk as follows:
1) Each investment or acquisition proposal is reviewed
and approved by the Investment Committee.
2) The monthly business review process monitors new
centre development against the investment case to
ensure that the anticipated returns are being generated.
3) As part of the annual planning process, a growth plan is
agreed for each country which clearly sets out the annual
growth objectives.
On aggregate, our new centres continue
to perform in line with management
expectations and are delivering
attractive returns.
Mitigating actions include:
1) Succession planning discussions are an integral part
of our business planning and review process.
2) Part of the annual planning process is the Human Resources
Plan, and performance against this Plan is reviewed through
the year.
3) Our global performance management system and quarterly
staff survey allow us to keep close to our employees and
maintain a two-way dialogue throughout the year.
4) Regular external and internal evaluation of the performance
of the Board.
Our capability to hire the best talent
continued to increase in 2015. Our
direct recruit approach saved over £2m
of search fees as our talent knowledge
around the world deepens and expands.
This has allowed us to further plan for
succession in all markets.
Our diversity continues to flourish with
our workforce split fairly evenly male/
female, which is an important factor
in hiring talent in a growth business.
Training and employee
engagement – As a service-
based business the strength
and capabilities of our increasingly
geographically diverse team
are critical to achieving our
strategic objectives.
One of the key items in the Human Resources Plan is
the Global Induction & Training Plan, which sets out the
key objectives for the forthcoming year. Performance
against these objectives is reviewed through the year.
Our employee survey also provides insight into employee
issues, which is then used to improve the Plan.
We trained our employees, many
through the Regus Online Learning
Academy, including employees from
new centre acquisitions and new talent
to Regus.
In 2015 there were over 297,000
training modules completed on-line
and face-to-face.
Our online learning curriculum was a
winner of the Most Dramatic Business
Impact Award at the Cornerstone Client
Excellence Awards 2015 for the impact
that this training had on sales performance.
This is just one example of our relevant
and easy-to-access development
initiatives for front-line employees.
24
Regus plc Annual Report and Accounts 2015
People
The people to support and drive growth•
Attracting, developing, growing and retaining the best available
leadership talent at Board, functional directorship and country
level are key components of Regus’ corporate objectives, driven
by deep planning and ongoing business review processes.
We know that our success will be defined
by having the right people in place to deliver
against our plans and make results happen.
We firmly believe that if we get most senior
layers of talent right, the rest of the
organisation will follow, particularly in the
all-important area of customer service.
Global leadership
During 2015 and throughout the first half of
2016, therefore, the focus of the Group’s
people strategy was and will continue to be
on building the global leadership teams and
succession hierarchies needed to support
flawless execution as we drive towards
20,000 locations.
This has been a very significant recruitment
and development exercise, as all joiners
need to be exceptional individuals who
are already prepared for the Regus growth
journey before they arrive at the Group.
They must already have excelled in a
high-growth organisation and have proved
they have the intellect, vision and passion
required for key roles within such an exciting,
fast-paced and rewarding environment.
We successfully built an outstandingly skilled
and experienced senior management team
during 2015. Throughout the first half of
2016, recruitment volumes will remain high
as we deliver on our succession-planning
policies and build our network of shared
service centres. Thereafter, our primary
focus will be building country teams as we
grow our local networks across the world.
Retaining talent
We aim to deliver exceptional opportunities
for personal growth and development,
and have in place a widespread programme
of interventions to maximise personal
capabilities. This starts with a high-quality
induction process, and continues throughout
each individual’s career with internal coaching
and mentoring, business-school partnerships,
bespoke training programmes and more. We
also have a competitive reward strategy, in
which we aim to lock in the talent we need
through incentives.
Maximising potential and retaining talent
is an important priority at every level of
the organisation, and we ensure that we
give people opportunities to excel, from
our intake of talented graduates to our
customer-focused staff at country and
location level. We run our staff satisfaction
survey on a quarterly basis to ensure we
are never reliant on out-dated information.
Results consistently show that our people
understand the Group vision and what
is expected of them.
An outstanding team
The challenges ahead of us are great,
but we have in place an integrated and
truly world-class team at all levels of the
organisation with the will, the capability and
the energy to help Regus meet its targets.
www.regus.com
25
Strategic reportGovernanceFinancial statements Corporate responsibility
Focused on our communities•
At Regus, we are confident that the positive impact of our
mission to provide flexible workspaces in many thousands of
places across the world is significant, wide-ranging and growing
in scope and influence as our network expands.
Economic support for communities
Our presence is helping to generate wealth
in every location where we operate, from
major cities in world-leading economies
to smaller communities in emerging states.
We give start-ups and multinationals alike
the freedom and flexibility to operate where
they need to, employing local people and
drawing on local supply chains. This in turn
helps to improve and grow the business
environment, attracting people and
organisations to the area in a virtuous circle.
Reducing environmental impact
Our services directly enable local business
communities to become more sustainable.
Not only does the offer of flexible space
reduce carbon emissions by enabling
people to work closer to where they live,
but we also provide facilities such as video
conferencing that eradicate the need
to travel for meetings.
In addition, we encourage and enable the
uptake of best practice across our network
through a range of initiatives targeting
reduced use of paper and increased
recycling. We are also continuing to
introduce carbon-reduction and energy-
efficiency policies and procedures in our
centres, including control upgrades and
energy-efficient lighting and temperature
systems. While each of these makes a
small individual contribution on its own,
across our fast-growing network they
are collectively delivering a substantial
reduction in our environmental impact.
Efficiency schemes
2015 saw our Green Committee accelerate
its efforts in reducing energy and carbon
across our UK portfolio, with particular
emphasis on acquisitions. In the two years
or so since the acquisition of MBW we have
managed through good housekeeping
and management to reduce this portfolio’s
overall energy-related carbon emissions by
circa 17%. By continuing to apply our greener
working strategies to our traditional portfolio,
we further reduced its energy carbon
footprint by 2.5%. This has given an overall
combined reduction of 5% in our
CRC returns for 2014/2015.*
2015 was also the year when the new
energy auditing (ESOS) regulations had
to be applied. We are pleased to report that
Regus embraced these new requirements
to identify further energy-saving
opportunities across our whole portfolio.
The outcomes and results will be reviewed
by our Green Committee in early 2016
for appropriate implementation.
We are also conscious that as new centres
are acquired their energy-related carbon
footprints will need to be reviewed and this
will form part of our ongoing work. To help
us we are using specialist external energy
consultancies to record our energy
consumption on a monthly basis across
all our centres and to assist and advise
us in the purchase, management and
monitoring of our energy.
Due to our business constantly changing
and expanding, we will in 2016 review the
targets set out in 2009 to ensure they
remain appropriate for the current and
future portfolios.
We continue to be voluntary participants
of the Carbon Disclosure Project and use
it to gauge our ongoing performance for
continuous improvement. We are happy
to report a disclosure score of 87% in 2015.
Our new centre refurbishments now
automatically include energy-saving
features such as LED lighting and more
efficient controls for heating and cooling.
There is also a general emphasis across
our teams to keep our carbon footprint
as low as practically possible and to keep
implementing our carbon reducing policies.
We have plans to upgrade a number of
centre BMS control systems and to
further train staff on their efficient usage.
By encouraging our clients to make more
use of local centres and nearby touchdown
facilities, we believe we are helping them
mitigate the risks of disruption by, amongst
other things, severe weather events brought
about by climate change.
In 2016 our refreshed Green Committee will
Extracting value
from waste
When Regus colleagues in Fortaleza,
Brazil, encouraged customers to
participate in a programme to collect
and segregate paper, cardboard, plastic
cups, toner cartridges and other office
detritus, the collected materials were
donated to a local orphanage. By using
the waste to make a small financial gain,
the orphanage has developed a new
income stream which is helping to
sustain its future.
be relaunching our Employee Engagement
Programmes with an emphasis on the
continued reduction of carbon, energy,
water and waste. Significant further work
is planned for these areas in 2016.
Charitable investments
We actively invest in our communities,
additionally encouraging and enabling our
colleagues and customers, suppliers and
the public to do so as well. Direct Group
investment can take the form
of financial donations to charities and
humanitarian appeals, the concession
of working space and other in-kind
donations to worthwhile causes, and
employee recognition programmes for
charity initiatives. We also provide the
support of Regus facilities for the fund-
raising activities of our staff, customers
and suppliers. These include in-centre
initiatives (such as collections campaigns,
charitable networking events and recycling
projects) as well as off-site activities like fun
runs, sponsored walks and volunteering at
venues like soup kitchens and orphanages.
In total over £209,000 was raised and used
to support 219 projects for 195 charities.
Further detail is provided in the table below:
Countries with community engagement activity
Projects
Charities supported
Donations made
2013
20
54
78
£80,500
2014
38
132
100
£155,328
2015
43
219
195
£209,905
* Excludes newly acquired Evans sites.
26
Regus plc Annual Report and Accounts 2015
Community heroes
The Regus Community heroes programme recognises and celebrates the community
initiatives our people are running across the world. The project that was most highly rated
by our internal community was profiled in our community video and received a $10,000
donation. The top three projects in 2015 were:
Make-a-Wish (India)
The Regus Mumbai team partnered with Make-a-Wish (India), which make wishes come true
for severely ill children, many of whom have life-threatening conditions. Team members ran in
the Mumbai Marathon and raised enough money to help 50 children fulfil their dreams.
Grace to be Born (the Philippines)
The Grace to be Born Maternity Home & Nursery is an orphanage and halfway house
for unmarried mothers seeking shelter. The Regus Social Action Club, made up of
colleagues from our Global Service Centre, raised funds and donated gifts-in-kind,
such as groceries, clothes and toys to help further the support that the shelter provides.
Going Pink for Susan G. Koman (USA)
The Regus Life Savers team raised US$16,994 for this highly effective US initiative that
aims to find a cure for breast cancer. Regus centres across the country ‘went pink’ for
the cure, holding numerous networking events to raise funds.
Facilitating donations
To help our customers set up and
manage their own fund-raising
programmes, we launched the My Regus
Charities and Causes platform in 2015,
enabling them to promote their own
CSR initiatives, track progress and
record donations to any of 1.6 m
registered charities. When working
in different countries, time zones and
in multiple currencies, we strive to
make everything easier so our teams and
customers can gain the most for
supported beneficiaries. We believe this
will ultimately benefit the great causes
we are all engaged with across the globe.
Responding to disaster
More than eight million people were
affected by the massive earthquake
in Nepal in 2015. We responded with a
worldwide campaign to raise awareness
and encourage support for the victims
by providing funds for the International
Federation of Red Cross and Red
Crescent Societies volunteers, who
have been helping those most in
need since the earthquake hit.
www.regus.com
27
Strategic reportGovernanceFinancial statements Board of Directors
Building our future growth•
Douglas Sutherland
Chairman
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Finance Officer and Chief
Operating Officer
Lance Browne
Senior Independent
Non-Executive Director
Committee membership
N
Appointment
18 May 2010
Experience
Douglas was Chief Financial
Officer of Skype during its
acquisition by eBay and was
also Chief Financial Officer
at SecureWave during its
acquisition by PatchLink.
Prior to this, Douglas was an
Arthur Andersen Partner with
international management
responsibilities. He has served
as a director of companies in
multiple jurisdictions and was
the founding Chairman of
the American Chamber of
Commerce in Luxembourg.
External appointments
Douglas is currently also a
Director of Median Gruppe
S.à r.l. and Socrates Health
Solutions Inc.
Founder
1 November 2015
27 August 2008
N A
R
Lance was previously CEO
then Chairman of Standard
Chartered Bank (China) Ltd,
Non-Executive Director of IMI
plc, Senior Advisor to the City
of London, Chairman of China
Goldmines plc, and Director
of Business Development
at Powergen International.
Chief Executive Officer
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.
A recipient of several awards
for enterprise, Mark has
revolutionised the way business
approaches its property needs
with his vision of the future
of work.
Dominik served for over nine
years as the Chief Financial
Officer of Adecco Group, the
world leading provider of human
resource solutions; Dominik
was also the Adecco Group’s
Head of Global Solutions and
was responsible for global
information management
and for Adecco Group’s
activity in China.
Dominik previously held the CFO
position at DIS AG, the market
leader in professional staffing in
Germany, before the company
was ultimately acquired by
Adecco Group.
Lance is Chairman of Travelex
(China), and a WS Atkins
International Advisory
Board member.
Board balance
and diversity
The role of the Board is
to provide entrepreneurial
leadership and to review
the overall strategic
development of the Group.
Board gender diversity
Balance of Non-Executive
and Executive Directors
1
1. Female: 25%
2. Male: 75%
1
2
1. Chairman: 1
2. Executive: 2
3. Non-Executive: 5
2
3
28
Regus plc Annual Report and Accounts 2015
Elmar Heggen
Independent Non-Executive
Director
Nina Henderson
Independent Non-Executive
Director
Florence Pierre
Independent Non-Executive
Director
François Pauly
Independent Non-Executive
Director
N A
R
AN
R
N
N
A
A
R
R
N
A
R
1 June 2010
20 May 2014
21 May 2013
19 May 2015
Elmar has extensive
management experience. Since
2006 he has been the Chief
Financial Officer, Head of the
Corporate Centre and a Member
of the Executive Committee
of the RTL Group, the leading
European entertainment
network. Joining the RTL Group
in 2000 he has previously held
the positions of Vice President
of Mergers and Acquisitions and
Vice President of Strategy and
Controlling. Prior to joining RTL,
Elmar was Vice President &
General Manager of Felix
Schoeller Digital Imaging
in the UK.
During her 30 year career with
Bestfoods and its predecessor
company CPC International,
Nina has held a number of
international and North
American general management
and executive marketing
positions, including Vice
President of Bestfoods and
President of Bestfoods Grocery.
She has also served as a director
of numerous companies
including AXA Financial Inc,
Royal Dutch Shell plc., Del
Monte Food Company and
Pactiv Corporation.
Florence has over 30 years of
international corporate finance
practice, holding senior
positions at BNP, Financière
Rothschild, Degroof Corporate
Finance, 3i Infrastructure plc and
her own M&A advisory boutique.
Florence has an international
perspective, having worked in
Chicago, New York, Paris and
Brussels. She has also taught
economics and finance,
published a number of books
and articles on valuation, and
has been a member of several
French entrepreneurship and
innovation committees.
François has over 30 years
of management experience
in the banking sector. Until
October 2014 François
served as Chief Executive
and Chairman of the
Management Board of Banque
Internationale à Luxembourg
(“BIL”). Previous management
experience includes Executive
appointments at BIP
Investment Partners S.A.,
Dexia Group and at Sal.
Oppenheimer jr. & Cie. S.C.A.
Elmar is Chief Financial Officer
and Member of the Executive
Committee of the RTL Group.
He is also a Board Member of
Atresmedia (Spain) and
Metropole television (France)
and Chairman of the Broadcast
Centre Europe SA.
Nina is currently a director of
CNO Financial Group and Walter
Energy Inc. She is Managing
Partner of Henderson Advisory,
a Director of the Visiting Nurse
Service of New York and the
Foreign Policy Association, and
a Trustee of Drexel University.
Florence is a director at ESL
Network, and also shares her
time between directorships,
consulting and venture
investments in companies
providing innovative and
internet services.
Length of tenure of
Non-Executive Directors
1. 0-3 years: 3
2. 3-6 years: 1
3. 6-9 years: 2
1
3
2
Key
R
Member of Remuneration Committee
A
Member of Audit Committee
N
R
A
Member of Nomination Committee
Chairman, Remuneration Committee
Chairman, Audit Committee
N
Chairman, Nomination Committee
François serves as the
Non- Executive Chairman of
the Board of BIL and Senior
Advisory Partner at Castik
Capital Partners. He also
serves as a Non-Executive
Director of Société de la
Bourse de Luxembourg
S.A., Luxair SA, Group la
Luxembourgeoise SA, BIP
Investment Partners SA,
M&C S.p.A and Cobepa
SA. François also serves
on the Boards of several
charitable organisations.
www.regus.com
29
Strategic reportGovernanceFinancial statements
Corporate Governance
Your Board is collectively responsible for
the long-term success of the Company•
Good governance starts
with a strong Board providing
entrepreneurial leadership
and setting the values for
the Group.
Douglas Sutherland
Chairman
Dear Shareholder
I am pleased to introduce the Governance
section of our Annual Report which
documents your Board’s approach
to directing and controlling Regus.
Our approach to governance
We firmly believe that good governance
starts with a strong Board providing
entrepreneurial leadership and setting
the values for the Group against a backdrop
of prudent and appropriate safeguards,
checks and balances which are regularly
reviewed and which ensure that the right
considerations underpin every decision
we make.
As a Board we regularly discuss and
review our:
• Performance and progress
• Major risks and their mitigation
• Behaviours and values
• People and how we can create a high
performing team
• Future development and succession
• Customers
• Shareholders
I hope that the reports contained in this
section provide you with an insight into how
we strive to achieve effective governance
and the progress we have made in 2015.
I also trust that you will find our reports to
be fair, balanced and understandable; this
is a reflection of how we do business and
how the Board serves its stakeholders.
Board composition
During the year we were pleased to
refresh our Board and add new skills by
appointing François Pauly as an Independent
Non-Executive Director and Dominik de
Daniel as an Executive Director holding the
combined role of Chief Financial Officer
and Chief Operating Officer.
We have seen the benefits of having
strength and diversity on the Board and
our aim is to maintain a Board which is
reflective of the broad range of skills,
backgrounds and experience necessary to
properly serve our shareholders. We have
pursued this objective by engaging Board
members based on merit who have had
broad executive responsibilities and bring
very different and complementary personal
experiences and approaches to matters
including the evaluation of opportunities
and management of risks.
Remuneration policy
As indicated in our 2014 Directors’
Remuneration Report, during 2015 the
Remuneration Committee has reviewed the
remuneration and incentive framework for
our Executive Directors and has consulted
with our major shareholders and investor
bodies on the introduction of the
remuneration policy as set out on pages
44 to 47; this policy has been designed to
promote the long-term success of the
Company and approval will be sought for
it at the 2016 annual general meeting.
Audit Committee and auditors
In view of our continuing long-term ambition
for growth and the significant investments
that have been made across the business,
the Audit Committee has again played a
substantial role in ensuring appropriate
governance and challenge around our risk
and assurance processes. This is covered
in further detail on pages 21 to 24 and
34 and 35. Full details of the work of the
Audit Committee are detailed in the Audit
Committee Report on pages 38 to 41 and
includes our intention to commence an
audit tendering process before June 2018.
Board evaluation
An external Board evaluation was performed
in respect of 2015, the process and results
are summarised on page 33.
Douglas Sutherland
Chairman
In this section
31
36
38
42
53
54
Corporate governance
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Directors’ report
Directors’ statements
30
Regus plc Annual Report and Accounts 2015
The main principles of the UK Corporate Governance Code relate
to leadership, effectiveness, accountability, remuneration and
relations with shareholders.
UK Corporate
Governance Code
The UK Corporate Governance Code,
as published by the Financial Reporting
Council in September 2014 and available
on www.frc.gov.uk (the “Code”), sets
out a series of principles and provisions
documenting good practice in governance.
Our Corporate Governance Report is
structured to report against the main
principles of the Code, which relate to:
leadership; effectiveness; accountability;
remuneration; and relations with
shareholders. Together with the Audit
Committee Report, the Nomination
Committee Report and the Directors’
Remuneration Report this Corporate
Governance Report shows how we have
applied the principles of the Code during
2015, when we complied with all the
provisions of the Code except in relation
to Senior Independent Director contact with
major shareholders. Further information on
this is provided in our Compliance Statement
on page 35.
Leadership
Role of the Board
Your Board is collectively responsible for
the long-term success of the Company.
The Board sets the strategy for the Group
and ensures that the necessary resources,
measures and controls are in place to
implement the agreed strategy and to
monitor performance. The Board also sets
the values and standards which form the
basis of the corporate culture at Regus.
The Chairman sets the Board meeting
schedule and agenda. In 2015 the Board
met eight times with all Directors present
at every Board meeting. Details of Board
membership throughout the year and
attendance at meetings is set out below.
Members
Douglas Sutherland,
Chairman
Lance Browne
Dominik de Daniel*
Mark Dixon
Elmar Heggen
Nina Henderson
François Pauly**
Florence Pierre
Alex Sulkowski***
Dominique Yates****
Attendance
(out of possible
maximum number
of meetings)
8/8
8/8
1/1
8/8
8/8
8/8
5/5
8/8
4/4
7/7
* Dominik de Daniel was appointed on
1 November 2015.
** François Pauly was appointed on
19 May 2015.
*** Alex Sulkowski left the Board on
19 May 2015.
**** Dominique Yates stepped down on
1 November 2015.
The Chairman ensures that each meeting
covers an appropriate range of topics
including operations, strategy, business
development, special projects and
administrative matters. Minutes are taken
of all Board discussions and decisions and
all Directors are encouraged to request
inclusion in the Board minutes of any
unresolved concerns that they may have.
The Board has a formal schedule of matters
reserved for its decision and which cannot
be delegated. These include:
• approval of long-term objectives and
commercial strategy;
• approval of the annual budget;
• approval of regulatory announcements
including the interim and annual
financial statements;
• approval of 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 expenditure in excess of £5m; and
• material contracts (annual value in excess
of £5m).
Board Committees
The Board is supported by the Audit
Committee, the Remuneration Committee
and the Nomination Committee (the
“Committees”) to which it has delegated
certain powers. The work of the Committees
is further detailed on pages 36 to 52 and
their terms of reference can be found on the
Company’s website: www.regus.com.
The Company Secretary acts as Secretary to
all the Committees and minutes of meetings
are circulated to all Board members.
www.regus.com
31
Strategic reportGovernanceFinancial statements Corporate Governance continued
Effectiveness
Board composition
The Board currently comprises the
Chairman, two Executive Directors and
five Independent Non-Executive Directors.
Board composition and the composition of
the Committees is regularly reviewed and
refreshed. During 2015 François Pauly was
appointed as a new Independent Non-
Executive Director and Dominik de Daniel
was appointed as a new Executive Director
holding the combined position of Chief
Financial Officer and Chief Operating Officer.
The Board considers all Non-Executive
Directors to be independent.
The Board considers that its current
composition continues to ensure that no
individual or group dominates its decision
making process and that the Board has the
right balance of skills to be able to discharge
its duties effectively.
Board appointments and succession
The Board is satisfied that succession plans
are in place for the orderly succession of
appointments to the Board and to senior
management positions. The Board has
established a Nomination Committee
with responsibility for leading the process
for Board appointments and succession
planning. Further details of the Nomination
Committee’s work and responsibilities are
contained on page 36 and 37.
Re-election of the Board
All Executive and Non-Executive Directors
submit themselves for re-election by
shareholders annually and Directors
appointed during the period since the last
annual general meeting are required to seek
election at the next annual general meeting
under the Company’s articles of association.
Dominik de Daniel, who was appointed in
2015 after the last annual general meeting,
will seek election at the 2016 annual
general meeting.
Time commitment
In accordance with the terms of their
appointment agreements, the Chairman and
all Non-Executive Directors are expected to
allocate such time as is necessary for the
proper performance of their duties as
Directors of the Company and are required
to advise the Board if there is a change in
circumstances which will impact on the time
they are able to dedicate to the Company.
Copies of all Non-Executives’ appointment
agreements are available for inspection at
the Company’s Registered Office during
normal business hours and at the annual
general meeting. Details of other
commitments held by the Directors are
disclosed on pages 28 and 29.
Development, information and support
Appropriate training is made available for
all new Directors to assist them in the
discharge of their duties. All Directors
have the opportunity to meet with major
shareholders and have access to the
Company’s operations and employees.
Training is provided on an ongoing basis to
meet particular needs with the emphasis on
governance and accounting developments.
During the year the Company Secretary
provided updates to the Board on relevant
governance matters, whilst the Audit
Committee regularly considers new
accounting developments through
presentations from management,
internal business assurance and the
external auditors.
The Board programme includes the receipt
of monthly Board reports and presentations
given at Board meetings from management
with strategic responsibilities. These,
together with site visits, increase the
Non-Executive Directors’ understanding
of the business and sector.
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. Appointment and removal
of the Company Secretary is a matter
reserved for the Board.
Should a Director request independent
professional advice to carry out his duties,
such advice is available to him or her at
the Company’s expense.
Role of Board members
There is a clear division of responsibilities
at the head of the Company between the
running of the Board and the running of
the Company’s business. No one individual
Director has unfettered powers of decision-
making and all Directors are required to act
in the best interests of the Company.
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 Officers of
the Company.
Douglas Sutherland
Chairman
Mark Dixon
Chief Executive
The Chief Executive is responsible for
formulating strategy and for its delivery
once agreed by the Board. He creates a
framework of strategy, values, organisation
and objectives to ensure the successful
delivery of key targets, and allocates
decision-making and responsibilities
accordingly.
The Chairman 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, and regularly meets with the
Non-Executive Directors without the
Executive Directors being present. In
addition, he oversees the corporate
responsibility activities of the Group,
including community projects and
environmental impact initiatives.
32
Regus plc Annual Report and Accounts 2015
Board performance evaluation
An external evaluation of the Board was
carried out by an independent leadership
consultancy, Panthea, with experience in
conducting such reviews. Panthea also
performed the last external review of the
board and was selected in order to have
the perspective on the development of
the Board during the period since the last
external review. Another independent
evaluator will be chosen for the next
external Board review in order to bring
other viewpoints to the process. The recent
evaluation included a series of one-to-one
discussions between the reviewer and each
Board member and a review of Board
materials. The evaluation results were
reviewed by the Board and suggestions
are being addressed in our efforts to
continuously improve the processes
and effectiveness of the Board and its
Committees. No reportable matters were
noted by the evaluation and we continue
to have full confidence in the Board’s
members and processes.
The Senior Independent Director
annually leads the Non-Executive Directors
performance evaluation of the Chairman
taking the views of the Executive Directors
into account.
Accountability
Financial and business reporting
In accordance with its responsibilities
the Board considers this Annual Report
and Accounts, taken as a whole to be fair,
balanced and understandable, providing
the information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
A statement by the Company’s auditor
about their responsibilities in relation to
the Annual Report and Accounts is
included on page 55.
The Board conducts regular reviews of
the Group’s strategic direction. Country
and regional strategic objectives, plans
and performance targets are set by the
Executive Directors and are regularly
reviewed by the Board in the context of the
Group’s overall objectives. Further details of
the basis on which the Company generates
and preserves value over the longer term
and the strategy for delivering the objectives
of the Company are contained in the
Strategic Report on pages 1 to 27.
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 a period of at
least 12 months from the date of approval
of the financial statements. For this reason
they continue to adopt the going concern
basis in preparing the Accounts on
pages 55 to 105.
In adopting the going concern basis for
preparing the financial statements, the
Directors have considered the further
information included in the business
activities commentary as set out on
pages 13 to 17, as well as the Group’s
principle risks and uncertainties as set
out on pages 21 to 24.
Further details on the going concern basis
of preparation can be found in note 24
of the notes to the accounts on page 81.
Lance Browne
Senior Independent Director
Non-Executive Directors
Lynsey Blair
Company Secretary
The Senior Independent Director acts
as a sounding board and confidant for
the Chairman, as an intermediary for
other Directors as necessary and leads the
appraisal of the Chairman’s performance.
He is also available to shareholders if they
have concerns that cannot be resolved
through normal channels.
The Non-Executive Directors each bring
their own senior-level experience and
objectivity to the Board. The independent
counsel and challenge brought to the Group
by the Non-Executive Directors enhances
the development of strategy and the
overall decision making of the Board.
The Non-Executive Directors scrutinise
the performance of management and are
responsible for determining appropriate
levels of executive remuneration.
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.
The Company Secretary is responsible for
advising the Board, through the Chairman,
on all governance matters and ensuring that
appropriate minutes are taken of all Board
meetings and discussions.
www.regus.com
33
Strategic reportGovernanceFinancial statements
Corporate Governance continued
Longer term viability
The Directors have also assessed the
viability of the Group and Company over a
three-year period to 31 December 2018.
This is based on three years of strategic
outlook and planning and related stress
scenario testing. Whilst the Board has no
reason to believe that the Group will not be
viable over a longer period, using a three-
year period was chosen to give greater
certainty over the assumptions used.
In making their assessment, the Directors
took account of the further information
included in the business activities
commentary as set out on pages 13 to
17, as well as the Group’s principal risks
and uncertainties and related mitigation
approaches as set out on pages 21 to 24.
They assessed potential financial and
operational aspects of various severe but
plausible scenarios in the context of these
principle risks and uncertainties and potential
combinations thereof along with the likely
effectiveness of available mitigating actions.
Based on this assessment, the Directors
have a reasonable expectation that the
Group and Company will be able to continue
in operation and meet all their liabilities
as they fall due over the period up to
31 December 2018.
Principal risks
The Board is responsible for assessing
the nature and extent of the principal risks
it is willing to take to achieve its strategic
objectives. The key risks to the Group and
the steps taken to manage and mitigate
them which were reviewed and approved
by the Board are detailed on pages 21 to 24.
The Board has delegated authority for
overseeing and reviewing the process of
identifying, managing and reviewing risks
to the Audit Committee which reports
regularly to the Board.
Remuneration
Remuneration Committee
The Board has established a Remuneration
Committee with responsibility for the design
and implementation of the remuneration
policy for both Executive Directors and the
Chairman. In doing so the Committee will pay
due regard to wider remuneration trends
across the Group, legal requirements and
best corporate governance. The aim is to
ensure our Remuneration Policy is aligned to
Company strategy, key business objectives
and the best interests of our shareholders
and stakeholders. Further details of the
Remuneration Committee’s work is
contained on pages 42 to 52. Although
not required under Luxembourg law, but
in order to maintain transparency, approval
for the Company’s Remuneration Policy and
the Annual Report on Remuneration will be
sought at the annual general meeting.
Internal control systems
The Board has delegated its responsibility
for the Company’s system of internal control
and risk management and for ensuring the
effectiveness of this system to the Audit
Committee. Details of the system and the
Committee’s review of its effectiveness
are reported on pages 39 and 40.
Audit Committee and auditors
The Board has established an Audit
Committee consisting entirely of
Independent Non-Executive Directors.
The Audit Committee has responsibility for
ensuring the integrity of financial information
and the effectiveness of financial controls
and the internal control and risk
management system. Further details
of the Audit Committee’s work and
responsibilities are contained on
pages 38 to 41.
All members of the Audit Committee
are considered by the Board to be
independent in character and judgement
and are competent in accounting and/or
auditing. Furthermore, and in compliance
with the Code, the Board regards Elmar
Heggen as the Committee member
possessing recent and relevant
financial experience.
On recommendation of the Audit
Committee it is intended that the external
audit contract should be put out to tender
before June 2018 and it is proposed that
KPMG be re-appointed as the auditor for
the financial year ending 31 December 2016.
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:
A clearly defined
organisation structure
with established
responsibilities;
An induction process
to educate new team
members on the
standards required
from them in their
role, including business
ethics and compliance,
regulations and
internal policies;
Provision to all team
members of a copy
of the ‘Team Member
Handbook’ which
contains detailed
guidance on employee
policies and the
standards of behaviour
required of staff;
34
Regus plc Annual Report and Accounts 2015
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.
Agreement with controlling
shareholder
On 23 September 2014, Mark Dixon entered
into a Relationship Agreement with the
Company so as to comply with Listing Rule
LR 9.2.2A(2)(a), which came into effect on
16 May 2014. The following undertakings
were given by Mark Dixon:
• all transactions and relationships with any
member of the Group will be conducted
on arm’s length terms and on a normal
commercial basis;
• no action will be taken that would have
the effect of preventing the Company
from complying with its obligations
under the Listing Rules; and
• no resolution will be proposed, or procured
to be proposed, which is intended to, or
appears to be intended to, circumvent the
proper application of the Listing Rules.
The Company confirms that it has complied
with its obligations under the Relationship
Agreement during the financial period
under review, and that so far as it is aware
all other parties to that agreement have
complied with it.
The Company confirms that there are
no contracts of significance between
Mark Dixon and any member of the Group,
with the exception of Mark Dixon’s service
agreement as a Director of the Company,
the terms of which are outlined in the
Directors’ Remuneration Report.
Relations with
Shareholders
Dialogue with shareholders
The Company reports formally to
shareholders twice a year, with the half-year
results typically announced in August and
the preliminary final results in March. There
are programmes for the Chief Executive
and the Chief Financial Officer and Chief
Operating Officer to give presentations of
these results to the Company’s institutional
investors, analysts and media in London
and other key locations.
The Chief Executive and the Chief
Financial Officer and Chief Operating Officer
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.
On 6 October 2015 Regus hosted a Capital
Markets Day, which focussed on providing
information to investors on the Group’s
strategy and operations.
Non-Executive Directors are given regular
updates as to the views of institutional
shareholders. The Chairman attends the
main presentations of the half year and
full year results and is also available to
meet with shareholders on request.
The principal communication with private
shareholders is through the Annual Report,
the half-year results and the annual
general meeting.
The Company continues to engage the
services of Brunswick as its investor
relations adviser.
Annual general meeting
The annual general meeting each year is held
in May in Luxembourg and is 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 also
given the opportunity to meet the
Directors informally afterwards.
Notice of the annual general meeting
together with any related documents is
required to be mailed to shareholders at
least 30 clear days before the meeting
and separate resolutions are proposed
on each issue.
The voting in respect of all resolutions to
be put to the annual general meeting is
conducted by means of a poll vote.
The level of proxy votes cast and the balance
for and against each resolution, together
with the level of abstentions, if any, are
announced following voting on a poll.
Where the Board considers that a significant
proportion of votes have been cast against
a resolution, the actions which the Board
intends to take to understand the reasons
behind the vote result will also be explained.
Financial and other information is made
available on the Company’s website:
www.regus.com.
Compliance statement
The Company has complied with the
provisions of the Code throughout the
year ended 31 December 2015, with
the exception of the following:
• Provision E.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
to 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 as well as upon request.
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, the Board
considers that the Senior Independent
Policies and procedure
manuals and guidelines
that are readily
accessible through the
Group’s intranet site;
Operational audit and
self-certification tools
which require individual
centre managers to
confirm their adherence
to Group policies and
procedures; and
To underpin the
effectiveness of controls,
it is the Group’s policy
to recruit and develop
appropriately skilled
management and
staff of high calibre
and integrity and with
appropriate disciplines.
www.regus.com
35
Strategic reportGovernanceFinancial statements Nomination Committee report
Our aim is for our Board
and senior management
team to be reflective of the
international nature of our
business and the communities
in which we operate.
Lance Browne
Chairman
Members
Lance Browne,
Chairman
Elmar Heggen
Nina Henderson
François Pauly*
Florence Pierre
Alex Sulkowski**
Douglas Sutherland
Attendance
(out of possible
maximum number
of meetings)
4/4
4/4
4/4
3/3
4/4
1/1
4/4
* François Pauly joined the Nomination
Committee on 19 May 2015.
** Alex Sulkowski left the Nomination Committee
on 19 May 2015.
Length of tenure of Non-Executive
Directors within the Committee
1. 0-3 years: 3
2. 3-6 years: 1
3. 6-9 years: 2
1
3
2
Dear shareholder
I am pleased to present to you my
report on the Nomination Committee.
2015 was an important year for the
Nomination Committee during which we
continued our work to refresh and strengthen
your Board. Key activities in 2015 included:
• Identifying and recommending
the appointment of François Pauly as
Independent Non-Executive Director;
François was subsequently appointed
to the Board at the Company’s annual
general meeting held on 19 May 2015.
• Identifying and recommending the
appointment of Dominik de Daniel as an
Executive Director holding the combined
position of Chief Financial Officer and
Chief Operating Officer. Dominik was
subsequently appointed by the Board with
effect from 1 November 2015 and offers
himself for election at the Company’s
2016 annual general meeting.
• Reviewing our succession policy
for Executive Director and senior
management roles.
Board appointments
The Committee’s regular internal Board
review process monitors effectiveness,
performance, balance, independence,
leadership and succession planning enabling
us to identify the capabilities and roles
required for a particular Board appointment.
In view of the future development of the
Group and our objective to continue to
enhance the diversity of the Board, the
Nomination Committee maintains an
ongoing programme of engagement with
highly qualified potential Non-Executive
Directors of varied backgrounds and gender;
François Pauly was engaged through this
programme and we did not need to make
use of a search agency in relation to his
appointment. Russell Reynolds Associates
provided search services to the Company in
respect of Dominik de Daniel’s appointment;
they are independent of the Company.
Our recommendations for Board
appointments are based on merit whilst
reflecting our succession policy of continuing
to increase the diversity of the Board over
time. Our eight current Board members
comprising two women and six men
represent six different nationalities and
seven countries of residence. Along with
their international operational experience,
they also bring a depth of working knowledge
covering multiple industries, business models,
corporate cultures, organisational models,
functional areas and business issues.
Biographical details of the Directors
are set out on pages 28 and 29.
Succession planning
We ensure that succession plans are in place
for the orderly succession for appointments
to the Board and senior management
positions, so that there is an appropriate
balance of skills and experience within the
Company and on the Board. Our aim is for
our Board and senior management team to
be reflective of the international nature of
our business and the communities in which
we operate and we are seeking to achieve
this through the development of people
from all parts of our business, supplemented
by the hiring of experienced professionals.
Succession planning discussions are
an integral part of the Group’s business
planning and review process and the
continued development of the management
capacity and capabilities within the business
enabled succession planning to be
addressed in a robust way in 2015.
Details of the gender balance on our Board
and within our business are included on page
37 opposite.
Terms of reference
Below is a summary of the terms of reference
of the Nomination Committee, complete
details of which are available on the
Company’s website (www.regus.com), are:
• 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 and
diverse 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.
36
Regus plc Annual Report and Accounts 2015
Gender split of Board
Gender split of business centre
employees
Gender split of Group employees
1
1. Female: 25%
2. Male: 75%
2
1. Female: 76%
2. Male: 24%
1. Female: 49%
2. Male: 51%
1
2
1
2
Our Board composition
As at the date of this report, the Board
comprises eight members: the Chairman
(Douglas Sutherland), five Non-Executive
Directors and two Executive Directors.
The Board considers all the Non-Executive
Directors to be independent.
The names of the Directors serving as at
31 December 2015 and their biographical
details are set out on pages 28 and 29.
All Directors served throughout the year
under review, except as noted below:
Dominik de Daniel – appointed 1 November 2015
François Pauly – appointed 19 May 2015
Alex Sulkowski – resigned 19 May 2015
Dominique Yates – resigned 1 November 2015
Regus aim to appoint a Board with varied
backgrounds and gender to reflect the society
in which we operate.
• Board effectiveness – to assess the role
of the Chairman and Chief Executive and
make appropriate recommendations to
the Board.
• Board performance – to assist the
Chairman with the annual performance
evaluation to assess the performance
and effectiveness of the overall Board
and individual Directors.
• 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.
Lance Browne
Chairman, Nomination Committee
www.regus.com
37
Strategic reportGovernanceFinancial statements Audit Committee report
The Committee’s key
objective is to provide
effective governance over
the Company’s financial
reporting.
Elmar Heggen
Chairman
Members
Elmar Heggen,
Chairman
Lance Browne
Nina Henderson
François Pauly*
Florence Pierre
Alex Sulkowski**
Attendance
(out of possible
maximum number
of meetings)
5/5
5/5
5/5
3/3
5/5
2/2
* François Pauly joined the Audit Committee on
19 May 2015.
** Alex Sulkowski left the Audit Committee on
19 May 2015.
Length of tenure of Non-Executive
Directors within the Committee
3
2
1. 0-3 years: 3
2. 3-6 years: 1
3. 6-9 years: 1
1
Dear shareholder
As Chairman of the Audit Committee
(the “Committee”), I am pleased to present
to you this year’s Committee report which
shows how the Committee applied the
principles of the UK Corporate
Governance Code during 2015.
• Internal audit – to monitor and review
the annual internal audit programme
ensuring that the internal audit function
is adequately resourced and free from
management restrictions, and to review
and monitor responses to the findings and
recommendations of the internal auditor.
Key Objective
Acting on behalf of the Board, the
Committee’s key objective is to provide
effective governance over the Company’s
financial reporting; this is achieved by
monitoring, reviewing and making
recommendations to the Board in
respect of:
• the integrity of the Company’s external
financial reporting;
• the Company’s system of internal control
and compliance; and
• the Company’s external auditors.
Membership and meetings
The Committee currently has five
members, all of whom are Independent
Non-Executive Directors.
Five Committee meetings were held during
2015. At the request of the Committee
Chairman, the external auditors, the
Executive Directors, the Company Secretary
(acting as secretary to the Committee),
the General Counsel and the Business
Assurance Director may attend each
meeting. The Audit Committee also
routinely meets independently, without
the presence of management, with the
Company’s external auditors and with the
Business Assurance Director to informally
discuss matters of interest.
Responsibilities
Summary terms of reference of the
Committee, the full text of which is freely
available on the Company’s website
(www.regus.com), are:
• Financial reporting – to provide support to
the Board by monitoring the integrity of
financial reporting and ensuring that the
published financial statements of the
Group and any formal announcements
relating to the Company’s financial
performance comply fully with the relevant
statutes and accounting standards.
• Internal control and risk systems –
to review the effectiveness of the
Group’s internal controls and risk
management systems.
• External audit – to advise the Board
on the appointment, reappointment,
remuneration and removal of the
external auditor.
• Employee concerns – to review the
Company’s arrangements under which
employees may in confidence raise any
concerns regarding possible wrongdoing
in financial reporting or other matters.
The Audit Committee ensures that these
arrangements allow proportionate and
independent investigation and
appropriate follow-up action.
The Chairman of the Audit Committee
routinely reports to the Board on how
the Committee has discharged its
responsibilities, as well as highlighting
any concerns that have been raised as
and when they arise.
Activities of the Audit Committee
during the year
The following sections summarise the main
areas of focus of the Committee and the
results of the work undertaken in 2015:
Financial reporting
Our main focus was the review of the
half-year results and this Annual Report
together with the formal announcements
relating thereto; before recommending
these to the Board we ensure that the
actions and judgements made by
management are appropriate.
Particular focus is given to:
• critical accounting policies and practices
and changes thereto;
• changes in the control environment;
• control observations identified by
the auditor;
• decisions requiring judgements by
management;
• adjustments resulting from the audit;
• clarity of the disclosures made and
compliance with accounting standards
and relevant financial and governance
reporting requirements; and
• the process surrounding compilation of
the Annual Report and Accounts to ensure
they are fair, balanced and reasonable.
38
Regus plc Annual Report and Accounts 2015
The Committee discussed and reviewed the
following significant issues with KPMG and
management in relation to the financial
statements for 2015:
• Fair value accounting for business
combinations: The Committee has
considered the business combinations
purchased during the year and the fair
value and goodwill accounting valuations
in relation thereto. Particular consideration
has been given to the assessment of what
qualifies as a “business combination”
under IFRS and to management’s
judgements relating to the non-current
assets acquired; The Committee is
satisfied that management have
adopted balanced accounting policies
and made appropriate judgements.
• Valuation of intangibles and goodwill:
The Committee has considered the
impairment testing undertaken and
disclosures made in relation to the value
of the Company’s goodwill and intangibles
and has challenged the key assumptions
made by management in their valuation
methodology. The Committee considers
that an appropriately cautious approach
has been used by management and is
satisfied that no impairment of intangibles
and goodwill is required. See notes 12 and
13 for further information.
Following its in depth review of this Annual
Report the Committee has advised the
Board that it considers the Annual Report,
taken as a whole, to be fair, balanced and
understandable, providing the information
necessary for shareholders to assess the
Company’s position and performance,
business model and strategy. As such the
Committee recommended the Annual
Report to the Board.
Risk management
On behalf of the Board, the Audit Committee
oversees and reviews an ongoing process
for identifying, evaluating and managing the
risks faced by the Group. Major business
risks and their financial implications are
appraised by the responsible executives
as a part of the planning process and are
endorsed by regional management. Key risks
are reported to the Audit Committee, which
in turn ensured that the Board is made aware
of them. The appropriateness of controls is
considered by the executives, having regard
to cost, benefit, materiality and the likelihood
of risks crystallising. Key risks and actions to
mitigate those risks were considered by both
the Audit Committee and the Board in the
year under review, and were formally
reviewed and approved by the Board.
Principal risks
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 integral part of the
annual planning process, as well as the
Group’s monthly review cycle.
The Group’s principal risks, together with
an explanation of how the Group manages
these risks, are presented on pages 21 to 24
of this Annual Report.
Internal control
The Committee has a delegated
responsibility from the Board for the
Company’s system of internal control
and risk management and for reviewing the
effectiveness of this system. Such a system
is designed to identify, evaluate and control
the significant risks associated with the
Group’s achievement of its business
objectives with a view to safeguarding
shareholders’ investments and the Group’s
assets. Due to the limitations that are
inherent in any system of internal control,
this system is designed to meet the
Company’s particular needs and the risks
to which it is exposed, and is designed
to manage rather than eliminate risk.
Accordingly, such a system can provide
reasonable, but not absolute, assurance
against material misstatement or loss.
In accordance with the FRC Revised
Guidance, the Committee confirms that
there is an ongoing process for identifying,
evaluating and managing the significant
risks faced by the Group.
During the year under review, the Committee
continued to revisit its risk identification and
assessment processes, inviting Board
members and senior management to
convene and discuss the Group’s key
risks and mitigating controls.
A risk-based approach has been adopted in
establishing the Group’s system of internal
control and in reviewing its effectiveness.
To identify and manage key risks:
• a number of Group-wide procedures,
policies and standards have been
established;
• a framework for reporting and escalating
matters of significance has been
maintained;
• reviews of the effectiveness of
management actions in addressing
key Group risks identified by the Board
have been undertaken; and
• a system of regular reports from
management setting out key performance
and risk indicators has been developed.
The above process is designed to provide
assurance by way of cumulative assessment
and is embedded in operational
management and governance processes.
Key elements of the Group’s system of
internal control which have operated
throughout the year under review
are as follows:
• The risk assessments of all significant
business decisions at the individual
transaction level, and as part of the annual
business planning process. A Group-wide
risk register is developed annually whereby
all Company-inherent risks are identified
and assessed, and appropriate action
plans developed to manage the risk per
the Company’s risk appetite. The Board
reviews the Group’s principal risks register
annually and management periodically
reports on the progress against agreed
actions to keep a close watch on how
we are managing our key risks.
• The annual strategic planning process,
which is designed to ensure consistency
with the Company’s strategic objectives.
The final budget is reviewed and approved
by the Board. Performance is reviewed
against objectives at each Board meeting.
• Comprehensive monthly business
review processes under which business
performance is reviewed at business
centre, area, country, regional and
functional levels. Actual results are
reviewed against targets, explanations
are received for all material movements,
and recovery plans are agreed where
appropriate.
• The documentation of key policies and
control procedures (including finance,
operations, and health and safety)
having Group-wide application. These
are available to all staff via the Group’s
intranet system.
• Formal procedures for the review and
approval of all investment and acquisition
projects. The Group Investment
Committee reviews and approves all
investments. Additionally, the form and
content of routine investment proposals
are standardised to facilitate the
review process.
• The delegation of authority limits with
regard to the approval of transactions.
www.regus.com
39
Strategic reportGovernanceFinancial statements Audit Committee report continued
• The generation of targeted, action-
oriented reports from the Group’s
sales and operating systems on a
daily, weekly and monthly basis, which
provide management at all levels with
performance data for their area of
responsibility, and which help them
to focus on key issues and manage
them more effectively.
• The delivery of a centrally co-ordinated
assurance programme by the business
assurance department that includes key
business risk areas. The findings and
recommendations of each review are
reported to both management and
the Committee.
• Annual internal control self-assessment
and management certification exercise
covering the effectiveness of financial
and operational controls. This is based
on a comprehensive internal control
questionnaire collated and reviewed
by business assurance. Results and any
necessary mitigating action plans are
presented to senior management
and the Board.
• The maintenance of high standards of
behaviour which is demanded from staff
at all levels in the Group. The following
procedures are in place to support this:
• a clearly defined organisation structure
with established responsibilities;
• an induction process to educate new
team members on the standards
required from them in their role,
including business ethics and
compliance, regulation and
internal policies;
• the availability of the ‘Team Member
Handbook’, via the Group’s intranet,
which contains the Company’s Code
of Business Conduct, detailed guidance
on employee policies and the standards
of behaviour required of staff;
• policies, procedure manuals and
guidelines are readily accessible
through the Group’s intranet site;
• operational audit and self-certification
tools which require individual managers
to confirm their adherence to Group
policies and procedures; and
• a Group-wide policy to recruit
and develop appropriately skilled
management and staff of high
calibre and integrity and with
appropriate disciplines.
The Committee and the Board regard
responsible corporate behaviour as an
integral part of the overall governance
framework and believes, that it should
be fully integrated into management
structures and systems. Therefore the
risk management policies, procedures and
monitoring methods described above apply
equally to the identification, evaluation and
control of the Company’s safety, ethical and
environmental risks and opportunities. This
approach ensures that the Company has
the necessary and adequate information to
identify and assess risks and opportunities
affecting the Company’s long-term value
arising from its handling of corporate
responsibility and corporate
governance matters.
The Committee has completed its annual
review of the effectiveness of the system of
internal control for the year to 31 December
2015 and is satisfied that it is in accordance
with the FRC Revised Guidance and
the Code. The assessment included
consideration of the effectiveness of the
Board’s ongoing process for identifying,
evaluating and managing the risks
facing the Group.
Whistle-blowing policy
The Company has an externally hosted
whistle-blowing channel (‘EthicsPoint’),
which is available to all employees via email,
and on the Company’s intranet. The aim
of the policy is to encourage all employees,
regardless of seniority, to bring matters that
cause them concern to the attention of the
Audit Committee.
The Business Assurance Director, where
appropriate and in consultation with the
senior management team, decides
on the appropriate method and level of
investigation. The Audit Committee is
notified of all material discourses made
and receives reports on the results of
investigations and actions taken on a
regular basis. The Audit Committee has
the power to request further information,
conduct its own inquiries or order additional
action as it sees fit.
External auditors
KPMG Luxembourg, Société coopérative
was the Company’s auditor for the year
ended 31 December 2015. The Audit
Committee is responsible for oversight of
the external auditor, including an annual
assessment of their independence and
objectivity and the measures in place to
safeguard this.
During the year, the external auditor audited
the consolidated financial statements of the
Company, performed control observations
throughout the Group and provided an
overview of the half-year results of
the Company.
KPMG Luxembourg, Société coopérative
did not perform any significant non-audit
services.
Measures in place to safeguard KPMG’s
independence were:
• the Company’s policy to use the external
auditor for non-audit-related services only
where the use of the external auditor will
deliver a demonstrable benefit to the
Company as compared to the use of other
potential providers of the services and
where it will not impair their independence
or objectivity;
• all proposals for permitted defined
non-audit services to use the external
auditor must be submitted to, and
authorised by, the Chief Financial Officer;
permitted non-audit services include
advice on financial accounting and
regulatory reporting matters, reviews of
internal accounting and risk management
controls, non-statutory audits (e.g.
regarding acquisitions and disposal of
assets and interests in companies) and
tax compliance and advisory services;
• prohibited non-audit services include
book-keeping and other accounting
services, actuarial valuation services,
recruitment services in relation to key
management positions and transaction
(acquisitions, mergers and dispositions)
work that includes investment banking
services, preparation of forecasts or
investment proposals and deal
execution services; and
• KPMG is required to adhere to a rotation
policy requiring rotation of the lead audit
partner at least every seven years. A new
lead audit partner took responsibility for
the audit in respect of the financial year
ended 31 December 2015.
40
Regus plc Annual Report and Accounts 2015
KPMG has been the Company’s external
auditor since 2008. In light of the new EU
legislation regarding auditor independence
and rotation, the Committee has
recommended to the Board that it is in
the best interests of the Company for the
Committee to launch a tendering process
before June 2018 in respect of the financial
year ending 31 December 2018. The
Committee has debated the advantages
and disadvantages related to tendering
the Regus external audit prior to this and
concluded that given the significant level
of other changes which remain ongoing,
including the mix of countries in which much
of the audit work is conducted, the rapid
growth and evolving structure of the Group,
changes in financial organisation and
personnel, ongoing efforts to continue to
improve audit effectiveness with the existing
external auditor, and other factors, that it was
not appropriate or in the interest of
shareholders to bring this timeline forward.
Elmar Heggen
Chairman, Audit Committee
The breakdown of the fees paid to
the external auditor during the year to
31 December 2015 can be found in note
5 of the Notes to the Financial Statements
on page 69.
In assessing the effectiveness of the
external audit process for 2015 the
Committee has considered:
• the audit process as a whole and its
suitability for the challenges facing
the Group;
• the strength and independence of the
external audit team;
• the audit team’s understanding of the
control environment;
• the culture of the external auditor in
seeking continuous improvement and
increased quality;
• the quality and timeliness of
communications and reports
received; and
• the quality of interaction with
management.
Following the Committee’s assessment
of the effectiveness of the external audit
process for 2015 and of KPMG’s continuing
independence, the Committee has
recommended to the Board that a resolution
to reappoint KPMG Luxembourg, Société
coopérative as the Company’s auditor
in respect of the financial year ending
31 December 2016 be proposed at
the annual general meeting.
www.regus.com
41
Strategic reportGovernanceFinancial statements Directors’ Remuneration report
Dear shareholder
I am pleased to present this Directors’
Remuneration Report, which follows a year
in which the Company has continued to
make excellent progress.
The Committee’s challenge is to ensure that
we set a policy that enables us to motivate
our people and recruit the calibre of talent
that will lead the Company in sustaining its
record of profitable growth. In last year’s
report, the Committee committed to review
the remuneration framework for Executive
Directors during 2015. The review’s
objectives were to create a structure that
is competitive, aligned with our strategic
objectives and is straightforward.
There are three sections to this report. This
letter summarises the 2015 highlights and
explains the changes we are making to the
Remuneration Policy with effect from 2016.
Our new Remuneration Policy follows in full
on pages 44 to 47. Finally, the Annual Report
on Remuneration on pages 48 to 52
describes the amounts paid to Directors in
respect of 2015 and describes how we
intend to implement the policy for 2016.
Context for changes
Over the last five years Regus has
demonstrated continued growth and
sustained strong performance. Revenues
have increased by over 85% and EPS has
grown from 0.3p to 12.8p. This sustained
financial growth has been reflected in our
share price and market value. Continued
strong revenue and profit growth in 2015,
combined with a return on investment of
11.4% gives us confidence in the future
and in our ability to meet our long-term
goals to continue to expand globally.
Growth of this nature brings new challenges
and demands. A key driver of the Company’s
growth has been and will continue to be its
people and their talents. The Company’s
human resource continues to evolve adding
new capabilities and skills. For example, the
creation of our new role of Chief Financial
Officer and Chief Operating Officer, with
Dominik de Daniel appointed to this role
effective from 1 November 2015.
Summary of main changes
Our Remuneration Policy for senior
management continues to evolve with the
growth in size and scale of the Company,
The policy must enable us to hire and retain
top talent with the capability to lead the
Company on its journey of continued growth.
We seek to ensure that our remuneration
structure provides alignment with our
shareholders and is straightforward
and transparent.
We are proposing three principal changes
to the Remuneration Policy for Executive
Directors. Our objective is to simplify the
Remuneration Policy, set remuneration
levels which reflect the size and scope of
the Group and our corporate strategy and
incorporate performance hurdles for variable
pay. These changes are explained below.
1. Repositioning of base salaries to reflect
the increased size and scale of the Group
Current salaries for Mark Dixon (and formerly
Dominique Yates) were set in the context of
the Company’s positioning five years ago
which was towards the bottom end of the
FTSE 350, when the scale of the Group’s
operations was significantly smaller. The
appointment of Dominik de Daniel to the
position of Chief Operating Officer and Chief
Financial Officer represents a significantly
expanded role. This newly created position
requires pay considerably above the level of
the previous stand-alone Chief Financial
Officer role. Dominik de Daniel’s salary on
appointment is £725,000.
In addition to positioning ourselves
competitively when recruiting externally, we
must also set salaries appropriately for those
already within the organisation. Accordingly,
from 1 January 2016 Mark Dixon’s salary
was increased to £825,000. While this is a
significant increase from the current level,
we believe it is the right decision for the
Company in the context of the external
environment to reflect the market rate for
an executive who has led the Company
through a period of outstanding success
and who continues to implement an
ambitious profitable growth strategy.
2. Increase to bonus potential with
compulsory deferral
Under the current policy, there is a significant
weighting towards fixed pay. This no longer
adequately reflects our philosophy of pay for
performance and longer term alignment with
equity ownership, and nor is it usual in the
market in general. We therefore propose to
raise the maximum bonus opportunity for
the Executive Directors at Regus to 150%
of salary (with 90% of salary paid for target
performance) and to introduce compulsory
deferral of half of bonus into shares, vesting
after three years.
3. Introduction of a single Performance
Share Plan (“PSP”)
Our current policy of linking long-term
reward potential under the Co-Investment
Plan (“CIP”) with the outcome of
performance under the annual bonus
is unusual. The potential reward under
the CIP is reliant entirely upon short-term
The Committee’s challenge is
to ensure that we set a policy
that enables us to motivate our
people and recruit the calibre
of talent that will lead the
Company in sustaining its
record of profitable growth.
Nina Henderson
Chairman
Members of the Committee
All members of the Committee are
independent. Committee membership
during the year and attendance at the
meetings is set out below:
Member
Nina Henderson, Chair
Lance Browne
Elmar Heggen
François Pauly*
Florence Pierre
Alex Sulkowski**
Attendance
(out of possible
maximum number
of meetings)
4/4
4/4
4/4
3/3
4/4
1/1
* François Pauly joined the Remuneration
Committee on 19 May 2015.
** Alex Sulkowski left the Remuneration
Committee on 19 May 2015.
Length of tenure of Non-Executive
Directors within the Committee
3
2
1. 0-3 years: 3
2. 3-6 years: 1
3. 6-9 years: 1
1
42
Regus plc Annual Report and Accounts 2015
Key features of our framework for 2016
Salary
• Repositioned to reflect the increased size and scale of the Group
• Repositioned to reflect increased responsibilities
Benefits/pension
• Reflect location and nature of role
Annual bonus
50% deferred
• Maximum 150% of salary
• Based on stretching operating profit targets for the year
• 50% in deferred shares
• Clawback and withholding provisions apply
Deferred shares
• Three-year holding period
Performance Share Plan awards
• Three-year performance period
• Five-year vesting period
• Maximum 200% of salary
• Based on stretching EPS, TSR and ROI targets over three years
• Clawback and withholding provisions apply
15
Earnings per share (pence)
Conclusion
You will be asked to approve four
remuneration-related resolutions at our
annual general meeting:
12.8
performance captured in the annual bonus
and subject to an executive’s ability to invest
via the voluntary deferral mechanism. This is
complex, disproportionately favourable to
higher earning executives, and not in line
with prevailing best practice. Accordingly,
from 2016, shareholder approval will be
sought for a new PSP, and the CIP will
no longer be used.
Under the PSP an annual grant policy will be
followed (initially 200% of salary). The first
awards under the PSP will be made in early
2016 and will replace any CIP grants which
would have otherwise been made in 2016.
For the first awards, the PSP will operate
with three performance metrics, designed
to align closely with our current growth
strategy. These will be relative TSR vs
the FTSE 350, EPS growth and return
on invested capital.
As before, clawback provisions will apply.
Performance and reward in 2015
As highlighted in the strategic report
on pages 1 to 27, 2015 was a strong year
delivering attractive shareholder returns.
The chart to the right shows the growth in
EPS per share achieved from 2010 (0.3p)
to 2015 (12.8p). The TSR graph on page
52 shows that as at 31 December 2015,
the value of £100 invested in Regus shares
on 31 December 2008 would be worth £789,
as compared to a value of £197 if £100
were invested in the FTSE 350 (excluding
Investment Trusts).
12
9
6
3
0
0.3
10
7.5
7.1
7.4
4.3
11
12
13
14
15
year
Annual bonus
The 2015 bonus plan was based on
performance against an operating profit
target. The achieved operating profit of
£144.8 for 2015 exceeded the operating
profit target for full bonus while maintaining
our growth objectives, therefore bonuses
were paid at 100%.
Co-Investment Plan
The performance metrics utilised in respect
of the CIP Matching Shares granted in 2013
which vested during 2015 were adjusted
EPS and relative TSR. As a result of strong
performance against both measures, the
CIP vested at 97%.
First, our revised Remuneration Policy will
be put to shareholders for approval. As a
Luxembourg registered company, this is not
a statutory requirement. However, the
Committee is committed to upholding the
highest governance standards and a full
and open dialogue with shareholders.
In developing our proposals, we actively
consulted with all of our largest institutional
shareholders. The feedback we received has
been both supportive and constructive.
Secondly, the Annual Report on Remuneration
which will be subject to an advisory vote.
Finally, approval is sought for our new
Performance Share Plan and Deferred Bonus
Share Plan.
On behalf of the Committee, I commend this
report to you and ask for your support at the
forthcoming annual general meeting.
Nina Henderson
Chairman of the Remuneration Committee
www.regus.com
43
Strategic reportGovernanceFinancial statements Directors’ Remuneration report continued
Remuneration Policy
This Remuneration Policy, as determined
by the Remuneration Committee, will be
effective from 1 January 2016 subject to
shareholder approval at the 2016 annual
general meeting. This policy supersedes
that approved by shareholders in 2014.
Overview of Remuneration Policy
The revised policy, which was developed as
part of a remuneration review carried out
during last year, has the following objectives:
• To enable the Group to recruit and retain
individuals with the capability to lead
the Company on its ambitious future
growth path;
• To ensure that our structures
are transparent and capable of
straightforward explanation
externally and to employees;
• To align the targets for variable pay
with the strategic objectives for the
Group; and
• To reflect the global operating model of
the Group while recognising governance
best practice.
As a result of this remuneration review,
the following key changes are proposed
to our remuneration arrangements for
Executive Directors:
• Annual bonus – Under the previous policy
there was a significant weighting towards
fixed pay, which was not aligned with our
philosophy of pay for performance, longer
term alignment and equity ownership. As
a result the maximum bonus potential for
Executive Directors will be increased
from 100% of base salary to 150% with
compulsory deferral of half of any bonus
paid for three years. Awards are subject
to recovery and with-holding provisions.
• Introduction of a single PSP – Our previous
share-matching arrangement, the CIP,
was linked to the outcome of performance
under the annual bonus and as a result,
the potential reward was reliant entirely
upon short-term performance. In order
to provide a clearer focus on long-term
performance, and reduce complexity, the
CIP will be terminated and replaced with
a single PSP. As with the annual bonus,
PSP awards are subject to recovery
and withholding.
• Introduction of shareholding guidelines –
In line with best practice and to ensure
long-term alignment with shareholders,
shareholding guidelines of a minimum of
200% of base salary will be introduced.
• Clarification of recruitment and
termination payments – The policy has
been clarified to ensure alignment with
best practice and to encompass new
elements of the Executive’s packages,
primarily the PSP.
Policy Table for Executive Directors
Component
Base salary
Purpose / link to
strategy
To provide
a competitive
component of fixed
remuneration to
attract and retain
people of the
highest calibre
and experience
needed to shape
and execute the
Company’s
strategy.
Benefits
To provide a
competitive
benefits package.
Pension
To provide
retirement benefits
in line with the
overall Group
policy.
Operation
Salaries are set by the Committee. The
Committee reviews all relevant factors
such as: the scope and responsibilities
of the role, the skills, experience and
circumstances of the individual, sustained
performance in role, the level of increase
for other roles within the business, and
appropriate market data.
Salaries are reviewed annually and any
changes normally made effective from
1st January.
The base salaries effective 1st January
2016 are set out on page 48 of the Annual
Report on Remuneration.
Incorporates various cash / non-cash
benefits which may include: a company car
(or allowance) and fuel allowance, private
health insurance, life assurance, and, where
necessary, other benefits to reflect specific
individual circumstances, such as housing
or relocation allowances, representation
allowances, reimbursement of school
fees, travel allowances, or other
expatriate benefits.
Provided through participation in the
Company’s money purchase (personal
pension) scheme, under which the
Company matches individual contributions
up to a maximum of base salary.
The Company may amend the form of an
Executive Director’s pension arrangements
in response to changes in legislation or
similar developments.
Performance framework
While there are no
performance targets
attached to the payment
of salary, performance is
a factor considered in the
annual salary review
process.
Maximum
There is no prescribed
maximum salary. Salary
increases will normally be
broadly in line with increases
awarded to other employees
in the business, although
the Committee retains
discretion to award larger
increases if it considers it
appropriate (e.g. to reflect a
change in role, development
and performance in role, or
to align to market data).
N/A
Benefit provision is set at
an appropriately market
competitive rate for the
nature and location of the
role. There is no prescribed
maximum as some costs
may change in accordance
with market conditions.
7% of base salary. The
Committee may set a higher
level to reflect local practice
and regulation, if relevant.
N/A
44
Regus plc Annual Report and Accounts 2015
Maximum
150% of base salary
per annum.
The normal plan limit is
250% of base salary.
Component
Annual bonus
Purpose / link to
strategy
To incentivise and
reward annual
performance and
create further
alignment with
shareholders
interests via
the delivery
and retention of
deferred equity.
Performance
Share Plan
(“PSP”)
Motivates and
rewards the
creation of
long-term
shareholder value.
Aligns Executive
Directors’ interests
with those of
shareholders.
Operation
Provides an opportunity for additional
reward (up to a maximum specified as a %
of salary) based on annual performance
against targets set and assessed by
the Committee.
Half of any annual bonus paid will be in
deferred shares which will vest after three
years, subject to continued employment
but no further performance targets. The
other half is paid in cash following the
relevant year end.
A dividend equivalent provision allows
the Committee to pay dividends, at the
Committee’s discretion, on vested shares
(in cash or shares) at the time of vesting
and may assume the reinvestment of
dividends on a cumulative basis.
Recovery and withholding provisions apply
to bonus awards (see note 1 below).
Awards will normally be made annually
under the PSP, and will take the form of
either nil-cost options or conditional share
awards. Participation and individual award
levels will be determined at the discretion
of the Committee within the policy.
Awards vest five years following grant,
subject to performance against pre-
determined targets (measured after
three years) which are set and
communicated at the time of grant.
Recovery and withholding provisions
apply to PSP awards (see note 1 below).
A dividend equivalent provision allows
the Committee to pay dividends, at the
Committee’s discretion, on vested shares
(in cash or shares) at the time of vesting
and may assume the reinvestment of
dividends on a cumulative basis.
Performance framework
Performance metrics are
selected annually based
on the current business
objectives. The majority
of the bonus will be linked
to key financial metrics, of
which there will typically
be a significant profit-
based element (see
note 3 below).
Performance below
threshold results in zero
payment, with no more
than three-fifths of the
bonus available at target.
Payments rise from 0% to
100% of the maximum
opportunity levels for
performance between
the threshold and
maximum targets.
Awards have a
performance period
of three financial years
starting at the beginning
of the financial year in
which the award is made.
Performance conditions
will measure the
long-term success
of the Company (see
note 4 below).
In respect of each
performance measure,
performance below the
threshold target results in
zero vesting. The starting
point for the vesting of
each performance
element will be no higher
than 25% and rises on
a straight-line basis to
100% for attainment of
levels of performance
between the threshold
and maximum targets.
There is no opportunity
to re-test.
Shareholding
guidelines
To align Executive
Directors’ interests
with those of
our long-term
shareholders and
other stakeholders.
Executive Directors are expected to build
a holding in the Company’s shares to a
minimum value of two times their base
salary. This must be built via the retention
of the net-of-tax shares vesting under the
Company’s equity based share plans.
Notes to the policy table:
N/A
N/A
1) Recovery and withholding provisions may be applied as a result of misconduct, material misstatement or error in calculation of performance. Awards subsequent to the
grant but before the expiry of the holding period, may be reduced or an Executive Director may be required to repay an award at any time within three years of the date
on which the award vests.
2) For the avoidance of doubt, by approval of the policy, authority has been given to the Company to honour any commitments entered into with current or former Directors
(such as the payment of a pension or the unwinding of legacy share schemes) that have been disclosed to shareholders in previous Directors’ Remuneration Reports.
Details of any payments to former directors will be set out in the Annual Report on Remuneration as they arise. The previous Remuneration Policy included the CIP which
is being replaced by the new PSP. Under the CIP, Executive Directors could defer a proportion of their bonus into shares and receive a performance based matching
award for each deferred share. The final CIP awards were made in March 2015. Details of this award are set out in the Annual Report on Remuneration. Subject to
satisfaction of the relevant performance targets, the final CIP awards will be fully vested and exercisable from 4 March 2020 until 4 March 2025.
3) Annual bonus performance measures are determined at the start of each year, based on the key business priorities for the year. The majority will be based on clear
financial targets, including a significant weighting towards profit, as this is the primary indicator of our sustainable growth.
4) PSP performance metrics are determined at the time of grant. Performance measures may include measures of profits and profitability (such as EPS), capital return
(such as EVA or ROI) and other measures of long-term success (such as relative TSR). These measures align with our long-term goal of value creation for shareholders
through underlying financial growth and above-market returns.
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45
Strategic reportGovernanceFinancial statements Directors’ Remuneration report continued
5) As Regus operates in a number of geographies employee remuneration practices vary across the Group to reflect local market practice. However, employee
remuneration policies are based on the same broad principles. Our primary objective in awarding variable pay is to drive achievement of results, according to role, and
to recognise and reward excellent performance. Accordingly, to account for variances in responsibilities, influence and seniority, incentive schemes are not uniform in
approach.
6) In order to ensure that the Remuneration Policy achieves its intended aims, the Remuneration Committee retains discretion over the operation of certain elements of
the variable pay policy. This includes the discretion to adjust the annual bonus and PSP outcome if it is not considered to be reflective of the wider performance of Regus.
In addition the Committee may adjust elements of the plans including, but not limited to:
• Participation;
• The timing of the grant of award and/or payment;
• The size of an award (up to plan limits) and/or payment;
• Discretion relating to the measurement of performance in the event of a change of control;
• Determination of a good leaver (in addition to any specified categories) for incentive plan purposes;
• Adjustments required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends); and
• The ability to recognise exceptional events within existing performance conditions.
Should any such discretions be exercised, an explanation would be provided in the following Annual Report on Remuneration and may be subject to shareholder
consultation as appropriate.
7) The Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions available to it in connection
with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed (i) before the policy came into
effect or (ii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the
individual becoming a Director of the Company. For these purposes “payments” includes the Committee satisfying awards of variable remuneration and, in relation to an
award over shares, the terms of the payment are “agreed” at the time the award is granted. The Committee may make minor amendments to the policy set out above
(for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for that
amendment.
Maximum fee
There is no prescribed maximum
although fees and fee increases
will be considered in line with the
increases of the wider workforce
and market rates.
Performance framework
Neither the Chairman nor the
Non-Executive Directors are
eligible for any performance-
related remuneration.
Policy table for the Chairman and Non-Executive Directors
Component
Chairman
fees
Operation
Reviewed, but not necessarily increased, annually
and as determined by the Remuneration Committee.
The Committee will consider, where appropriate,
pay data at companies of a similar scale.
A single fee which reflects all Board and Committee
duties.
Set at a level sufficient to attract and retain individuals
with the required skills, experience and knowledge to
allow the Board to effectively carry out its duties.
Non-
Executive
Director fees
Reviewed, but not necessarily increased, annually and
as determined by the Chairman and the Executive
Directors. The Committee will consider, where
appropriate, pay data at companies of a similar scale.
A base fee is payable with additional fees for chairing
key Board Committees and for being the Senior
Independent Director.
Set at a level sufficient to attract and retain individuals
with the required skills, experience and knowledge to
allow the Board to effectively carry out its duties.
Consideration of conditions elsewhere
in the Group
When setting the policy for the remuneration
of the Executive Directors, the Committee
has regard to the pay and employment
conditions of employees within the Group.
The Committee does not consult directly
with employees when formulating the
remuneration policy for Executive Directors.
Consideration of shareholder views
The Committee is dedicated to ensuring
that Regus shareholders understand
and support our remuneration structures.
Accordingly, where changes are being made
to the Remuneration Policy, or in the event
of a significant exercise of discretion we will
consult with shareholders, as appropriate,
to explain our approach and rationale fully.
Such an approach was followed in relation to
the changes to policy for 2016. Additionally,
the Committee considers shareholder
feedback received in relation to each annual
general meeting alongside any views
expressed during the year. We actively
engage with our largest shareholders and
consider the range of views expressed.
Except for in exception circumstances
the members of the Committee, including
the Committee Chairman, attend the
Company’s annual general meeting and
are available to listen to views and to
answer shareholders’ questions about
Directors’ remuneration.
The Committee also reviews the executive
remuneration framework in the context of
published shareholder guidelines.
Approach to recruitment remuneration
When determining the remuneration
package for a newly appointed Executive
Director, the Committee would seek to apply
the following principles:
• The package must be sufficiently
competitive to facilitate the recruitment
of individuals of the highest calibre and
experience needed to shape and execute
the Company’s strategy. At the same
time, the Committee would seek to
pay no more than necessary.
• The remuneration package for a
new Executive Director would be set
in accordance with the terms of the
approved remuneration policy in force
at the time of the appointment. Salaries
would reflect the skills and experience
of the individual, and may (but not
46
Regus plc Annual Report and Accounts 2015
Committee in its absolute discretion
determines otherwise for reasons
including, amongst others, injury, disability,
retirement, redundancy and death. In such
circumstances an Executive Director’s
award normally vests based on the
time served and in the case of the PSP,
achievement of performance criteria.
Should the Committee adjust the time
pro-rating, then this would be explained
in the following Annual Report on
Remuneration. If the Executive Director
ceases to be an employee for any reason
other than those specified above then
the award shall lapse immediately on
such cessation.
The terms of any other unvested share
awards on termination will be as set out
in the prior policy.
Awards will vest on the normal vesting
date unless the Committee determines,
in its discretion, that awards will vest at
the date of cessation.
The Committee reserves the right to
make additional exit payments where
such payments are made in good faith in
discharge of an existing legal obligation
(or by way of damages for breach of such
an obligation) or by way of settlement
or compromise of any claim arising in
connection with the termination of
a Director’s office or employment.
Policy in Respect of External Board
Appointments for Executive Directors
It is recognised that external non-executive
directorships may be beneficial for both the
Company and Executive Director. At the
discretion of the Board, Executive Directors
are permitted to retain fees received in
respect of any such non-executive
directorship.
necessarily) be set at a level to allow future
salary progression to reflect performance
in role.
• The Committee may offer additional cash
and/or share-based payments in the year
of appointment when it considers these to
be in the best interests of the Company
and, therefore, shareholders. Per the
remuneration policy the maximum level
of variable remuneration which may be
awarded is 400% of salary (of which 250%
is permitted under the PSP under the
exceptional circumstances limit and
150% under the annual bonus plan).
Performance conditions for variable
pay in the year of appointment may
be different to those applying to other
directors, which would be subject to
stretching performance conditions.
• Where an individual forfeits remuneration
at a previous employer as a result of
appointment to the Company, the
Committee may offer compensatory
payments or awards to facilitate
recruitment. Such payments or awards
could include cash as well as performance
and non-performance-related share
awards, and would be in such form as the
Committee considers appropriate taking
into account all relevant factors such as
the form, expected value, anticipated
vesting and timing of the forfeited
remuneration. The aim of any such award
would be to ensure that so far as possible,
the expected value and structure of the
award will be no more generous than
the amount forfeited.
• Any share-based awards referred to in this
section will be granted as far as possible
under the Company’s existing share plans.
If necessary, awards may be granted
outside of these plans as permitted
under the Listing Rules, and in line with
the approach and the limits set out above.
In the case of an internal appointment,
variable pay awarded in respect of the
incumbent’s prior role may pay out according
to its terms of grant. In addition, any other
ongoing remuneration obligations prior to
their appointment may continue, provided
that they are put to shareholders for
approval at the first annual general meeting
following their appointment.
The remuneration package for a newly
appointed Non-Executive Director would
normally be in line with the structure set
out in the Policy Table for Non-Executive
Directors on page 46.
Service contracts
Executive Directors have service contracts
with the Group which can be terminated
by the Company or the Director by giving
12 months’ notice. This applies to current
Executive Directors and would normally
be applied as the policy for future
appointments.
The Company may terminate employment
of the Chief Executive by making a payment
in lieu of notice which would not exceed
12 months’ salary.
Under the current service agreements Mark
Dixon’s contract provides that, on a change
of control he may terminate the contract by
giving one month’s notice and will, in addition
to contractual payments for the one-month
notice period, receive a payment equal to
12 months’ salary, and remain eligible for
a discretionary bonus.
The Chairman and Non-Executive Directors
are appointed for a three year term, which is
renewable, with six months’ notice on either
side, no contractual termination payments
being due and subject to retirement
pursuant to the Articles of Association
at the annual general meeting.
Policy on payment for loss of office
Where an Executive Director leaves
employment, the Committee’s approach
to determining any payment for loss of
office will normally be based on the
following principles:
• The Committee’s objective is to find an
outcome which is in the best interests of
the Company and its shareholders, taking
into account the specific circumstances,
contractual obligations and seeking to pay
no more than is warranted. Payments in
lieu of notice will not exceed 12 months’
salary and benefits.
• Treatment of annual bonus: There is
no contractual right to receive an annual
bonus in the year of termination. However
the Committee has discretion for certain
leavers to make a payment under the
annual bonus. This will reflect the period of
service during the year and performance
(measured at the same time as
performance for other plan participants,
if feasible). Should the Committee make
a payment in these circumstances, the
rationale would be set out in the following
Annual Report on Remuneration.
• Treatment of share plans: If an Executive
Director leaves employment with the
Company unvested PSP and deferred
bonus shares will lapse unless the
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47
Strategic reportGovernanceFinancial statements Directors’ Remuneration report continued
Annual Report on Remuneration
Illustration of Remuneration Policy
The charts opposite illustrate the application of the
Remuneration Policy set out in the Policy Table for Executive
Directors. This assumes the level of fixed remuneration (salary,
benefits and pension) as at 1 January 2016 and the following
in respect of each scenario:
• “Minimum” represents fixed remuneration only (i.e. current
salary, benefits and pension).
• “Target” represents fixed remuneration plus three-fifths of
the maximum annual bonus award and threshold (25%)
vesting of the PSP award
• “Maximum” represents the maximum annual bonus of
150% of salary and full vesting of the normal PSP grant
of 200% of base salary.
£m
£4
£3
£2
£1
0
44%
33%
11%
43%
44%
33%
11%
43%
100% 46%
23%
100% 46% 23%
Fixed
Target Maximum
Fixed
Target Maximum
Chief Executive Officer
Chief Financial Officer
and Chief Operating Officer
Fixed
Annual Bonus
PSP
Members of the Committee
All members of the Committee are independent. Committee membership during the year and attendance at the meetings is set out on
page 42. In addition to the designated members of the Remuneration Committee, the Chairman, Chief Executive Officer and Company
Secretary also attended Committee meetings during the year although none were present during discussions concerning their own
remuneration.
Terms of reference
The Committee’s terms of reference are available on the Company’s website (www.regus.com).
Implementation of the Remuneration Policy for 2016
As summarised within the introductory letter, and set out fully within the Remuneration Policy section, a series of amendments to the
Executive Directors’ Remuneration Policy are proposed. Details of how we intend to operate our policy in 2016, subject to shareholder
approval, are outlined below.
Base salaries for the Executive Directors
The salaries for the Executive Directors for 2016 (and compared to 2015) are as follows. Dominik de Daniel was appointed with effect from
1 November 2015, and his salary will first be reviewed with effect from 1 January 2017.
Mark Dixon
Dominik de Daniel
Salary 2015
£587,000
£725,000
Salary 2016
£825,000
£725,000
Percentage
increase
41%
0%
Current salaries for Mark Dixon (and formerly Dominique Yates) were set in the context of the Company’s positioning five years ago which
was towards the bottom end of the FTSE 350, when the scale of the Group’s operations was significantly smaller. With the appointment of
Dominik de Daniel as Chief Financial Officer and Chief Operating, it was necessary to pay considerably above the level of the previous Chief
Financial Officer. Dominik de Daniel’s salary on appointment is £725,000.
As well as positioning ourselves competitively when recruiting externally, we must also set salaries appropriately for those already within the
organisation. Accordingly, from 1 January 2016 Mark Dixon’s salary was increased to £825,000. While this is a significant increase from the
current level, we believe it is the right decision for the Company in the context of the external environment to reflect the market rate for
an executive who has led the Company through a period of outstanding success and is effectively implementing an ambitious profitable
growth strategy.
Annual Bonus
For 2016, the maximum bonus potential for both Executive Directors is 150% of salary. The on-target bonus is 90% of salary. Half of any
bonus paid will be deferred into shares, which will vest after three years subject to continued employment.
The 2016 annual bonus will include a measurement against an operating profit target ranging from threshhold to stretch. The target is not
being disclosed prospectively as it is commercially sensitive; however a description of relative performance will be included in next year’s
Annual Report.
Performance Share Plan (PSP)
PSP awards will be made at 200% of salary to Executive Directors, subject to shareholder approval of the revised Remuneration Policy and
the new PSP.
48
Regus plc Annual Report and Accounts 2015
The awards will be subject to three independently operated performance metrics as summarised below:
Performance conditions
EPS (33.3% weighting)
Threshold
Compound annual growth of 5%
Threshold vesting
0%
Relative TSR versus FTSE 350 (excluding
investment trusts) (33.3% weighting)
Return on investment (33.3% weighting)
25%
0%
Median
Return to be equal to 2015 performance
Maximum
Compound annual
growth of 25%
10% compound annual
growth above median
Return to be 300 basis points
above 2015 performance
The first awards under the PSP will be made in early 2016 and will replace any CIP grants that would otherwise have been made in 2016.
Chairman and Non-Executive Directors’ fees
The Directors’ fees for 2016 are as outlined below:
£’000
Non-Executive Chairman
Basic fee for Non-Executive Director
Additional fees:
Chair of Audit Committee
Chair of Remuneration Committee
Chair of Nomination Committee
Senior Independent Director
Variable dislocation allowance for non-Luxembourg directors1
2015
200
50
10
10
6
6
2.5 to 7.5
2016
200
50
Percentage
change
0%
0%
10
10
6
6
2.5 to 7.5
0%
0%
0%
0%
0%
1) The level of dislocation allowance for non-Luxembourg directors is determined according to their country of residence.
Remuneration outcomes for 2015
Single total figure of remuneration table
The following table shows the total remuneration in respect of the year ending 31 December 2015, together with the prior year comparative.
£’000
Mark Dixon
Dominik de Daniel
Dominique Yates
Non-Executive Directors
Douglas Sutherland
Lance Browne
Elmar Heggen
Nina Henderson
Florence Pierre
François Pauly
Alex Sulkowski
Salary / fees
2015
587.0
120.8
279.4
2014
587.0
–
320.8
Benefits
Pension
2015
6.0
–
111.5
2014
6.6
–
125.2
2015
41.1
8.5
26.5
2014
41.1
–
31.7
Annual bonus
2015
587.0
120.8
279.4
2014
587.0
–
320.8
CIP
Total
2015
2014
2015
2014
769.5 1,548.5 1,990.6 2,770.2
–
798.5
–
250.1
– 1,090.2
–
393.4
200.0
69.5
60.0
67.5
52.5
30.9
19.2
165.0
61.5
50.0
30.5
27.4
–
50.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200
69.5
60.0
67.5
52.5
30.9
19.2
165.0
61.5
50.0
30.5
44.5
–
50.0
The salary, benefits, pension and cash element of the bonus for Dominique Yates were paid in Swiss francs and have been converted to
sterling for the table above using the average exchange rate for the relevant year. Dominique Yates stepped down from the Board
on 1 November 2015. His salary, benefits, pension, annual bonus and CIP have been pro-rated to reflect his period of qualifying service.
Dominik de Daniel was appointed to the Board on 1 November 2015. Remuneration detailed above reflects time served.
Benefits – Include private health insurance and life insurance and for Dominique Yates, a representation allowance and expatriate allowances.
Pension – Includes pension contributions of 7% of salary into defined contribution arrangements (or cash equivalent) plus any contributions
in accordance with standard local practice or employment regulations.
Annual bonus – The bonus shown is the full awarded bonus in respect of the relevant financial year for the period served as a Director.
CIP awards – Includes the value of Matching Share awards made to Mark Dixon and Dominique Yates under the CIP in previous years which
vested in respect of a performance period ending in the relevant financial year. The vesting of the final tranche of the 2008/2009 Matching
Shares is included in the 2014 column (820,205 shares vested out of the maximum of 954,420). The vesting of the first tranche of the 2013
Matching Shares is included in the 2015 column (371,485 shares vested out of the maximum of 380,011). The figure reflects the average
market price of shares in the last quarter of 2015, being 313.028p per share.
François Pauly joined the Board with effect from 19 May 2015.
Alex Sulkowski stepped down from the Board with effect from 19 May 2015.
Determination of 2015 Annual Bonus
The 2015 bonus plan was based on performance against an operating profit target. The achieved operating profit of £144.8 exceeded the
operating profit target for full bonus while maintaining our growth objectives, therefore bonuses were paid at 100%.
Dominik de Daniel’s bonus was pro-rated for the two month period served during the year.
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Strategic reportGovernanceFinancial statements Directors’ Remuneration report continued
CIP awards vesting in respect of 2015
The 2013 Matching Share award is divided into three separate equal tranches subject to performance periods over three, four and five years
respectively from 1 January 2013. The first tranche of the 2013 Matching Share award was based on a three-year performance period to
31 December 2015. The vesting conditions for this tranche are outlined below.
TSR target (25% of tranche)
Regus TSR % achieved relative to FTSE All Share Total Return Index
Below the Index
Equal to the Index
Equal to the Index + 15% p.a.
EPS target (75% of tranche)
EPS targets for year ending 2015 (Tranche 1)
12.0p
12.6p
13.3p
14.0p
% of shares
vesting
0%
25%
100%
% of shares
vesting
25%
50%
75%
100%
The Committee has assessed performance against the TSR and EPS targets set in 2013 and concluded that 97% of the total award should
vest (and the remainder of that tranche shall lapse).
• TSR (25% of total award). From a base point of 100%, Regus achieved a TSR value of 243.3% compared to 24.9% for the FTSE All Share
Index over the performance period, equating to a vesting of 100% of this part of the award.
• EPS (75% of total award). Based on achieving a 2015 EPS of 13.9p, which reflects underlying performance delivered during the three-year
performance period, the Committee concluded that 97% of this part of the award should vest.
CIP granted during the financial year
The Executive Directors deferred 50% of their 2014 annual bonus into Investment Shares under the CIP.
For each Investment Share held the Executive Directors may earn up to a maximum of four Matching Shares. The Matching Shares will be
released in March 2020 at the end of the holding period, subject to continuous employment with the Group and the achievement of EPS and
TSR performance conditions. As the Investment Shares had a value of 50% of salary the maximum number of Matching Shares awarded in
2015 was equivalent to 200% of salary.
Details of the Investment Share and Matching Share awards made during 2015 to the Executive Directors are shown in the table below.
Executive Director
Mark Dixon
Type of interest
Investment Shares
Matching Shares
Investment Shares
Matching Shares*
Face value (£’000)
293.5
1,174.0
167.8
670.9
Threshold vesting
N/A
25%
N/A
25%
End of holding period
3 March 2018
3 March 2020
3 March 2018
3 March 2020
Dominique Yates
* Dominique Yates will leave the Group in 2016 and therefore the Matching Shares awarded to Dominique Yates will lapse.
The face value has been calculated using the share price of 221.8p, the closing price prior to the date of grant (4 March 2015).
The vesting of the Matching Shares is subject to continuous employment with the Group and to the EPS and TSR performance conditions,
as detailed below:
TSR target (25%)
The number of shares vesting will be determined by comparing the Company’s TSR to the TSR of the constituents of the FTSE 350 Index
(excluding financial services and mining companies and investment trusts) (the “FTSE 350 Constituents”) over the performance period
commencing on 1 January 2015 and ending on 31 December 2017.
Regus TSR compared to the FTSE 350 Constituents
Median
Upper quartile or above
Straightline vesting occurs between these points. No shares will vest below the threshold target.
EPS target (75%)
The number of shares vesting will be determined based on EPS performance in the year ending 31 December 2017 against the
following targets:
Compound annual growth in EPS over the Performance Period
24%
32%
50
Regus plc Annual Report and Accounts 2015
% of shares
vesting
25%
100%
% of shares
vesting
25%
100%
The target for 2017 is based on compound annual growth from an equivalent base year EPS figure for 2014 of 7.4p.
Straightline vesting occurs between these points. No shares will vest below the threshold target.
One-off award on recruitment of Dominik de Daniel
On 2 November 2015, an award over 328,751 ordinary shares of 1p each in the Company was granted to the Company’s Chief Financial
Officer and Chief Operating Officer, Dominik de Daniel. The award was structured as a conditional award and was granted under a one-off
award arrangement established under Listing Rule 9.4.2(2) in order to facilitate the recruitment of Dominik de Daniel.
The level of the award was determined by reference to compensation otherwise due to Dominik de Daniel, that he gave up upon accepting
employment with Regus.
In the normal course of events the award will vest over five years, and to the extent to which performance conditions are achieved. The
applicable performance target is set out below:
Performance metric
Compound annual growth in EPS over the performance period
Target
5%
Vesting at target
100%
Total pension benefits
During the year under review, the Executive Directors received pension contributions of 7% of salary into defined contribution arrangements
(or cash equivalent) plus any contributions in accordance with standard local practice or employment regulations. Details of the value of
pension contributions received in the year under review are set out in the Pension column of the single total figure remuneration table.
Statement of share scheme interests and shareholdings
Executive Directors are required to build up and maintain a shareholding. The following table sets out for Directors who served during the year,
the total number of shares held (including the interests of connected persons) as at 31 December 2015 alongside the interests in share
schemes for the Executive Directors. For Dominique Yates the shareholding is at the date he stepped down from the Board.
Shareholding guidelines
Interests in share/option awards
CIP
Shares held
% of salary
required
% of salary
achieved(a)
Guideline
met?
Investment
Shares(c)
Matching
Shares(d)
One-off award
Share Option
Plan (“SOP”)
294,267,501
785,262
91,700
200%
200%
200%
167,036%
784%
42%
Yes
Yes
No(b)
423,962
250,206
1,695,848
154,278
–
907,333(e)
328,751(f)
400,000
14,994
–
16,500
50,000
–
Executive Directors
Mark Dixon
Dominique Yates
Dominik de Daniel
Non-Executive Directors
Douglas Sutherland
Lance Browne
Elmar Heggen
Nina Henderson
François Pauly
Florence Pierre
a) Based on share price of 333.20p and base salary as at 31 December 2015, save for Dominique Yates whose percentage of salary achieved is based on share price of
334.6p as at 1 November 2015 and base salary as at 31 December 2015.
b) Dominik de Daniel joined the Board on 1 November 2015. Upon appointment Dominik de Daniel was granted a conditional award, details of which may be found above.
c) The CIP Investment Shares are in the form of unvested conditional shares granted on 6 March 2013, 5 March 2014 and 4 March 2015, and which vest subject to
continued employment at the end of a three-year holding period.
d) The CIP Matching Shares are in the form of unvested conditional shares which will vest subject to the achievement of EPS and TSR performance targets. The number of
share interests includes the following awards which were unvested as at 31 December 2015. For Mark Dixon, the number includes 754,340 Matching Shares granted on
6 March 2013, 412,204 Matching Shares granted on 5 March 2014, and 529,304 Matching shares granted on 4 March 2015. For Dominique Yates, the number shows
154,278 Matching Shares granted on 6 March 2013. All other Matching Shares awards granted under the CIP to Domique Yates will lapse on cessation of employment.
e) The SOP grants are vested market value share options (exercise price 74.35p) which were granted to Dominique Yates on 2 September 2011 to aid his recruitment.
f) The One-off Award is in the form of un-vested conditional shares awarded to Dominik de Daniel as a one-off award arrangement established under Listing Rule 9.4.2(2)
in order to facilitate his recruitment.
g) With the exception of the Directors’ interests disclosed in the table above, no Director had any additional interest in the share capital of the Company during the year.
Payments for loss of office to past Directors
Dominique Yates stepped down from the Board on 1 November 2015. He will remain an employee of the Group for
a period which will end no later than 31 August 2016. The Committee has determined that Dominique Yates will continue to receive his
contractual salary and contractual benefits until 31 August 2016. If he leaves his employment earlier his salary and benefits will be
appropriately adjusted.
The Committee considered the bonus of Dominique Yates at the same time as for other Executive Directors and concluded that a bonus of
£279,400 should be awarded for the ten months of the year that he was a Director.
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Strategic reportGovernanceFinancial statements Directors’ Remuneration report continued
Supporting disclosures and additional context
Percentage change in remuneration of the Chief Executive Officer
The table below shows the percentage change in remuneration
of the Chief Executive Officer and Group support employees (on a
per capita basis) between the year ending 31 December 2013 and
the year ending 31 December 2014 and between the year ending
31 December 2014 and the year ending 31 December 2015. Given
the significant scale and diversity of the overall global employee
population, the Committee considers the Group support
employees a relevant comparison.
2013 compared to 2014
Group support
employees
Chief
Executive
2014 compared to 2015
Group support
employees
Chief
Executive
Salary
Benefits
Annual bonus
–
(38)%
21%
23.4%
14.3%
39.6%
–
(9.1)%
–
1.9%
12.7%
24.4%
Relative importance of spend on pay
The table below shows total employee remuneration and
distributions to shareholders in respect of the years ending
31 December 2015, 2014 and 2013 and the percentage changes
between years.
2015
2014
2013
Change
2014 to
2015
Change
2013 to
2014
Total employee
remuneration
Distributions to
shareholders
£356.4m £334.6m £316.1m
6.5%
5.8%
£38.8m £35.4m £31.1m
9.6%
13.8%
Performance graph and table
The table below provides remuneration data for the Chief Executive Officer for each of the seven financial years over the equivalent period.
Single total figure of remuneration (£’000)
Bonus (% of maximum)
Long term incentive vesting (% of maximum)
2009
£628
–
–
2010
£759
19%
–
2011
£1,130
50%
–
2012
£1,773
100%
11%
2013
£1,854
79%
35%
2014
£2,770
100%
86%
2015
£1,990
100%
97%
The graph shows the value, by 31 December 2015, of £100 invested
in Regus on 31 December 2008 compared with the value of £100
invested in the FTSE 350 Index (excluding investment trusts). TSR
refers to share price growth plus dividends reinvested over the
relevant period. The Committee considers the FTSE 350 (excluding
investment trusts) relevant since it is an index of companies of
similar size to Regus.
pence
900
800
700
600
500
400
300
200
100
0
17.3
08
09
10
11
12
13
14
15
Regus
FTSE 350 (excl. investment trusts)
year
Advisors to the Remuneration Committee
Aon Hewitt provided independent advice to the Committee during
the year. Aon Hewitt was appointed by the Committee during 2015
following a competitive selection process undertaken by the
Committee. The fees charged by Aon Hewitt for the provision of
independent advice to the Committee during 2015 were £94,000.
The Committee is comfortable that Aon Hewitt’s engagement
partner and team are objective and independent in their provision
of advice to the Committee.
Statement of voting at the annual general meeting
The Committee is directly accountable to shareholders and, in this
context, is committed to an open and transparent dialogue with
shareholders on the issue of executive remuneration. The members
of the Committee attend the Company’s annual general meeting
and are available to answer shareholders’ questions about Directors’
remuneration. Votes cast by proxy and at the annual general meeting
held on 19 May 2015 in respect of the Annual Remuneration Report
for 2014 are shown in the table below:
Resolution
Approval of Annual Remuneration Report for
year ended 31 December 2014
Votes For
#
Votes Against
%
#
%
Total
votes cast
Votes
Withheld
771,490,952
97.8%
17,320,449
2.2% 788,811,401
1,310,016
For and on behalf of the Board
Nina Henderson
Chairman of the Remuneration Committee
1 March 2016
52
Regus plc Annual Report and Accounts 2015
Directors’ report
The Directors of Regus plc (société
anonyme) (the ‘Company’) present their
Annual Report and the audited financial
statements of the Company and its
subsidiaries (together the ‘Group’) for
the year ended 31 December 2015.
Directors
The Directors of the Company who held office
during the financial year under review were:
Executive Directors
Mark Dixon
Dominique Yates
(resigned 1 November 2015)
Dominik de Daniel
(appointed 1 November 2015)
Non-Executive Directors
Douglas Sutherland
Lance Browne
Elmar Heggen
Nina Henderson
François Pauly (appointed 19 May 2015)
Florence Pierre
Alex Sulkowski (resigned 19 May 2015)
Biographical details for the Directors are
shown on pages 28 and 29.
Details of the Directors’ interests and
shareholdings are given in the Remuneration
Report on pages 42 to 52.
The Corporate Responsibility Statement,
Corporate Governance Report, Nomination
Committee Report, Audit Committee
Report, Remuneration Report and Director
Statements on pages 26 to 54 all form part
of this report.
Principal activity
The Company is the world’s leading provider
of global office outsourcing services.
Business review
The Directors have presented a Strategic
Report as follows:
The Chief Executive Officer’s Review and
Chief Financial Officer’s Review on pages
13 to 20 respectively address:
• review of the Company’s business (pages
13 to 17);
• trends and factors likely to affect the
future development, performance and
position of the business (pages13 to 17);
• development and performance during the
financial year (pages 18 to 20);
• position of the business at the end of the
year (pages 19 to 20).
The Risk Management report, on pages 21
to 24, includes a description of the principal
risks and uncertainties facing the Company.
The Corporate Responsibility Report, on
pages 26 and 27, includes the sections of
the Strategic Report in respect of:
• environmental matters; and
• social and community issues.
The People Report on page 25 of the
Strategic Report addresses employee
development and performance. The
Nomination Committee Report on
pages 36 and 37 covers our diversity.
The Directors’ Statements on page 54
includes the statutory statement in
respect of disclosure to the auditor.
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
Profit before taxation for the year was
£145.7m (2014: £87.1m).
The Directors are pleased to recommend
a final dividend of £28.8m (2014: £25.8m),
being 3.10p per share (2014: 2.75p per share).
The total dividend for the year will therefore
be 4.50p per share, made up of the interim
dividend of 1.4p per share paid in October
2015 (2014: 1.25p per share) and, assuming
the final dividend is approved by shareholders
at the forthcoming annual general meeting, an
additional 3.10p per share (2014: 2.75p per
share) which is expected to be paid on 27 May
2016 to shareholders on the register at the
close of business on 29 April 2016.
Policy and practice on payment of
creditors
The Group does not follow a universal code
dealing specifically 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; and
• pay in accordance with contractual and
other legal obligations.
At 31 December 2015, the number of
creditor days outstanding for the Group
was 31 days (2014: 21 days) and for the
Company was 99 days (2014: 19 days).
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.
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
£209,905 during the year (2014: £155,328).
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 (2014:
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 28 and 29, and 36 and 37.
At the Company’s annual general meeting
held on 19 May 2015 the shareholders of
the Company approved a resolution giving
authority for the Company to purchase in
the market up to 93,873,657 ordinary shares
representing approximately 10% of the
issued share capital (excluding Treasury
shares) as at 17 April 2015.
9,543,800 shares were purchased pursuant
to this authority during the year under review.
Details of the Company’s employee share
schemes can be found in the report of the
Remuneration Committee on pages 42 to 52.
The outstanding awards and options do not
carry any rights in relation to the control of
the Company.
Substantial interests
At 1 March 2016, the Company has been
notified of the following substantial interests
held in the issued share capital of the
Company.
Estorn
Limited*
Prudential Plc
FMR LLC
Number of
ordinary shares
% of issued
share capital
294,267,501
91,334,639
46,612,296
31.37
9.82
5.01
* Mark Dixon indirectly owns 100% of Estorn Limited
Auditors
In accordance with Luxembourg law,
a resolution for the reappointment of
KPMG Luxembourg, Société coopérative as
auditors of the Company is to be proposed
at the forthcoming annual general meeting.
Approval
This report was approved by the Board on
16 February 2016.
On behalf of the Board
Lynsey Blair
Company Secretary
1 March 2016
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53
Strategic reportGovernanceFinancial statements Directors’ statements
Statement of Directors’ responsibilities
in respect of the Annual Report and
financial statements
The Directors are responsible for preparing
the Annual Report and the Group and parent
company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare Group and parent company financial
statements for each financial year. Under
that law, they are required to prepare the
Group financial statements in accordance
with International Financial Reporting
Standards (‘IFRSs’) as adopted by the
EU and applicable law and have elected
to prepare the parent company annual
accounts in accordance with Luxembourg
Generally Accepted Accounting Practice
and applicable law.
Under company law, the Directors must
not approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and parent company and their profit or loss
for the period.
In preparing each of the Group and parent
company financial 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 financial statements,
state whether they have been prepared
in accordance with IFRSs as adopted by
the EU;
• for the parent company annual accounts,
state whether applicable Luxembourg
accounting standards have been followed,
subject to any material departures
disclosed and explained in the parent
company annual accounts; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and the parent company will
continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company’s transactions and which disclose
with reasonable accuracy at any time the
financial position of the parent company and
to enable them to ensure that its financial
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 a Corporate Governance Statement
that complies with that law and those
regulations.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s websites.
Legislation in the UK governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.
Statutory statement as to disclosure
to auditor
The Directors who held office at the date
of approval of this Directors’ statements
confirm that:
• so far as they are each aware, there is no
relevant audit information of which the
Company’s auditor is unaware; and
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, confirm
that to the best of our knowledge:
• the financial statements prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities, financial
position and profit 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 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.
By order of the Board
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Financial Officer
• each Director has taken all the steps
1 March 2016
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 financial statements have been
approved by the Directors of the Company.
The Directors confirm that the financial
statements have been prepared in
accordance with applicable law and
regulations and that they include a
54
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In our opinion, the consolidated financial statements, as set out on
pages 56 to 99, give a true and fair view of the consolidated financial
position of Regus plc (société anonyme) as of 31 December 2015,
and of its consolidated financial performance and its consolidated
cash flows 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, including the corporate
governance statement, which is the responsibility of the Board of
Directors, is consistent with the consolidated financial statements
and includes the information required by the law with respect to
the Corporate Governance Statement.
KPMG Luxembourg, Société coopérative
Cabinet de révision agréé
Stephen Nye
Luxembourg, 1 March 2016
Auditors’ report
To the Shareholders of
Regus plc (société anonyme)
26, Boulevard Royal
L-2449 Luxembourg
Report of the Réviseur d’Entreprises
Agréé
Report on the consolidated financial statements
We have audited the accompanying consolidated financial
statements of Regus plc (société anonyme), which comprise
the consolidated balance sheet as at 31 December 2015 and
the consolidated statements of income, comprehensive income,
changes in equity and cash flows for the year then ended, and
a summary of significant accounting policies and other explanatory
information, as set out on pages 56 to 99.
Board of Directors’ responsibility for the consolidated
financial statements
The Board of Directors is responsible for the preparation and
fair presentation of these consolidated financial 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 financial 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
financial 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 financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
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 financial
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 financial 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
financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
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Consolidated income statement
Continuing operations
Revenue
Cost of sales
Gross profit (centre contribution)
Selling, general and administration expenses
Research and development expenses
Share of profit of equity-accounted investees,
net of tax
Operating profit
Finance expense
Finance income
Net finance expense
Profit before tax for the year
Income tax expense
Profit after tax for the year
Profit attributable to:
Equity shareholders of the parent
Non-controlling interests
Profit after tax for the year
Earnings per ordinary share (EPS):
Basic (p)
Diluted (p)
Year ended 31 Dec 2015
Year ended 31 Dec 2014
Notes
3
Before non-
recurring
items
1,927.0
(1,498.6)
428.4
(273.6)
(10.3)
Non-
recurring
items
(note 6)
–
–
–
15.3
–
Total
£m
1,927.0
(1,498.6)
428.4
(258.3)
(10.3)
Before non-
recurring
items
1,676.1
(1,293.0)
383.1
(270.9)
(8.7)
Non-recurring
items
(note 6)
–
–
–
–
–
Total
£m
1,676.1
(1,293.0)
383.1
(270.9)
(8.7)
5
8
8
9
10
10
0.3
144.8
(15.0)
0.6
(14.4)
130.4
(25.9)
104.5
104.5
–
104.5
11.2
11.0
–
15.3
–
–
–
15.3
0.1
15.4
15.4
–
15.4
–
–
0.3
160.1
(15.0)
0.6
(14.4)
145.7
(25.8)
119.9
119.9
–
119.9
12.8
12.6
0.8
104.3
(17.3)
0.1
(17.2)
87.1
(17.2)
69.9
69.9
–
69.9
7.4
7.2
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
104.3
(17.3)
0.1
(17.2)
87.1
(17.2)
69.9
69.9
–
69.9
7.4
7.2
56 Regus plc Annual Report and Accounts 2015
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Profit for the year
Other comprehensive income that is or may be reclassified to profit or loss in
subsequent periods:
Cash flow hedges – effective portion of changes in fair value, net of income tax
Foreign currency translation differences for foreign operations
Items of other comprehensive income that are or may be reclassified to profit
or loss in subsequent periods
Other comprehensive income that will never be reclassified to profit or loss in
subsequent periods:
Re-measurement of defined benefit liability, net of income tax
Items of other comprehensive income that will never be reclassified to profit
or loss in subsequent periods
Other comprehensive income for the period, net of income tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders of the parent
Non-controlling interests
Total comprehensive income for the year
Notes
Year ended
31 Dec 2015
£m
119.9
Year ended
31 Dec 2014
£m
69.9
0.6
(5.3)
(4.7)
(0.3)
(0.3)
(5.0)
114.9
114.9
–
114.9
(2.7)
6.1
3.4
–
–
3.4
73.3
73.3
–
73.3
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Consolidated statement of changes in equity
Attributable to equity holders of the parent(a)
Share
capital
£m
9.5
Treasury
shares
£m
(4.1)
Foreign
currency
translation
reserve
£m
6.6
Hedging
reserve
£m
–
Revaluation
reserve
£m
10.5
Other
£m
15.3
Retained
earnings
£m
476.4
Total equity
attributable
to equity
holders
£m
514.2
Non-
controlling
interests
£m
Total
equity
£m
– 514.2
69.9
69.9
–
69.9
Balance at 1 January 2014
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Re-measurement of defined benefit liability,
net of income tax (note 26)
Cash flow hedges – effective portion of changes
in fair value, net of income tax
Foreign currency translation differences for
foreign operations
Total other comprehensive income, net
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Share-based payments
Ordinary dividend paid (note 11)
Purchase of treasury shares in Regus plc
Settlement of share awards
Balance at 31 December 2014
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Re-measurement of defined benefit liability,
net of income tax (note 26)
Cash flow hedges – effective portion of changes
in fair value, net of income tax
Foreign currency translation differences for
foreign operations
Total other comprehensive income, net
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Share-based payments
Ordinary dividend paid (note 11)
Purchase of treasury shares in Regus plc
Settlement of share awards
Balance at 31 December 2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.5
–
–
(17.2)
1.4
(19.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.5
–
–
(24.5)
1.5
(42.9)
–
–
–
6.1
6.1
6.1
–
–
–
–
12.7
–
–
–
(5.3)
(5.3)
(5.3)
–
–
–
–
7.4
–
–
(2.7)
–
(2.7)
(2.7)
–
–
–
–
(2.7)
–
–
0.6
–
0.6
0.6
–
–
–
–
(2.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
69.9
–
(2.7)
6.1
3.4
73.3
–
–
–
–
–
–
(2.7)
6.1
3.4
73.3
2.6
–
(35.4)
–
(17.2)
–
(0.1)
–
– 537.4
–
–
(0.3)
0.6
(5.3)
–
– 114.9
– 114.9
–
2.2
– (38.8)
– (24.5)
–
(7.5)
– 583.7
–
–
–
–
10.5
–
–
–
–
15.3
2.6
(35.4)
–
(1.5)
512.0
2.6
(35.4)
(17.2)
(0.1)
537.4
119.9
119.9
– 119.9
(0.3)
(0.3)
–
0.6
–
119.6
119.6
(5.3)
114.9
114.9
–
–
–
–
10.5
–
–
–
–
15.3
2.2
(38.8)
–
(9.0)
586.0
2.2
(38.8)
(24.5)
(7.5)
583.7
(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 2015 treasury shares represent 20,490,613 (2014: 12,883,455) 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, 9,543,800 (2014: 9,484,516)
shares were purchased in the open market and 1,936,642 (2014: 1,858,441) treasury shares held by the Group were utilised to satisfy the
exercise of share awards by employees. As at 1 March 2016, 20,486,213 treasury shares were held.
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements
of foreign subsidiaries and joint ventures.
The revaluation reserve arose on the restatement of the assets and liabilities of the UK associate from historic to fair value at the time
of the acquisition of the outstanding 58% interest on 19 April 2006.
Other reserves include £37.9m arising from the Scheme of Arrangement undertaken on 14 October 2008, £6.5m relating to merger
reserves and £0.1m to the redemption of preference shares partly offset by £29.2m arising from the Scheme of Arrangement
undertaken in 2003.
58 Regus plc Annual Report and Accounts 2015
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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
Total non-current assets
Current assets
Trade and other receivables
Corporation tax receivable
Assets held for sale
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables (incl. customer deposits)
Deferred income
Corporation tax payable
Obligations under finance leases
Bank and other loans
Provisions
Liabilities held for sale
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Other payables
Non-current derivative financial liabilities
Obligations under finance leases
Bank and other loans
Deferred tax liability
Provisions
Provision for deficit on joint ventures
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Total assets less liabilities
Total equity
Issued share capital
Treasury shares
Foreign currency translation reserve
Hedging reserve
Revaluation reserve
Other reserves
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Total equity and liabilities
Approved by the Board on 1 March 2016
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Financial Officer
As at
31 Dec 2015
£m
As at
31 Dec 2014
£m
Notes
12
13
14
9
15
21
16
9
18
23
17
9
19
19
20
18
17
24
19
19
9
20
21
26
22
612.2
53.8
917.0
36.4
63.0
5.6
1,688.0
557.8
17.9
–
63.9
639.6
2,327.6
(816.5)
(240.7)
(14.0)
–
(9.2)
(5.3)
–
(1,085.7)
(446.1)
1,241.9
(383.8)
(15.0)
–
(245.3)
(1.6)
(7.6)
(4.1)
(0.8)
(658.2)
(1,743.9)
583.7
9.5
(42.9)
7.4
(2.1)
10.5
15.3
586.0
583.7
–
583.7
2,327.6
497.2
52.7
718.8
40.0
49.3
0.7
1,358.7
440.1
12.5
62.6
72.8
588.0
1,946.7
(670.2)
(205.3)
(10.3)
–
(1.4)
(2.6)
(2.1)
(891.9)
(303.9)
1,054.8
(292.9)
(7.7)
(0.1)
(209.3)
(2.2)
(4.3)
(0.7)
(0.2)
(517.4)
(1,409.3)
537.4
9.5
(19.9)
12.7
(2.7)
10.5
15.3
512.0
537.4
–
537.4
1,946.7
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Consolidated statement of cash flows
Profit before tax for the year
Adjustments for:
Net finance expense
Share of profit of equity-accounted investees, net of tax
Depreciation charge
Gain on disposal of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of intangible assets
Amortisation of acquired lease fair value adjustments
Increase in provisions
Share-based payments
Other non-cash movements
Operating cash flows before movements in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations (before non-recurring items)
Profit on disposal of assets held for sale
Cash generated from operations
Interest paid
Tax paid
Net cash inflow from operating activities
Investing activities
Purchase of subsidiary undertakings (net of cash acquired)
Proceeds on the sale of assets held for sale
Dividends received from joint ventures
Purchase of joint ventures
Proceeds on sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Net cash outflow from investing activities
Financing activities
Net proceeds from issue of loans
Repayment of loans
Repayment of principal under finance leases
Re-issuance of treasury shares
Purchase of shares
Settlement of share awards
Payment of ordinary dividend
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of year
60 Regus plc Annual Report and Accounts 2015
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Year ended
31 Dec 2015
£m
145.7
Year ended
31 Dec 2014
£m
87.1
14.4
(0.3)
134.2
(0.3)
0.9
11.0
(4.6)
2.8
2.2
(3.0)
303.0
(121.5)
221.0
402.5
(21.3)
381.2
(13.8)
(29.1)
338.3
(99.4)
84.0
–
(1.9)
9.5
(311.5)
(8.7)
0.6
(327.4)
383.2
(330.5)
(0.1)
1.5
(24.5)
(9.0)
(38.8)
(18.2)
(7.3)
72.8
(1.6)
63.9
17.2
(0.8)
107.5
(0.9)
–
13.0
(5.2)
1.2
2.6
–
221.7
(27.7)
108.0
302.0
–
302.0
(13.6)
(20.9)
267.5
(91.0)
–
1.0
0.6
7.3
(205.4)
(11.0)
0.1
(298.4)
438.2
(361.6)
–
1.4
(17.2)
(1.5)
(35.4)
23.9
(7.0)
84.7
(4.9)
72.8
Notes
8
21
5, 14
14
5, 13
5
20
6
27
6
21
21
14
13
8
11
23
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Notes to the accounts
1. Authorisation of financial statements
The Group and Company financial statements for the year ended 31 December 2015 were authorised for issue by the Board of Directors
on 1 March 2016 and the balance sheets were signed on the Board’s behalf by Mark Dixon and Dominik de Daniel. 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.
Regus plc S.A. owns a network of business centres which are leased to a variety of business customers. Information on the
Group’s structure is provided in note 32, and information on other related party relationships of the Group is provided in note 31.
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the European Union (‘Adopted IFRSs’). The Company prepares its parent company annual accounts in accordance
with Luxembourg GAAP; extracts from these are presented on page 100.
2. Accounting policies
Basis of preparation
The Group financial 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 annual
accounts presents information about the Company as a separate entity and not about its Group.
The accounting policies set out below have been applied consistently to all periods presented in these Group financial 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 2015 did not have a material effect on the Group financial
statements, unless otherwise indicated.
The following standards, interpretations and amendments to standards were adopted by the Group for periods commencing on or after
1 January 2015:
IAS 19
IAS 40
IFRS 3
IFRS 3
IFRS 8
IFRS 13
Various
Various
Defined Benefit Plans: Employee Contributions – Amendments to IAS 19
Investment Property – Amendments to IAS 40
Business Combinations – Contingent consideration arrangements
Business Combinations – Joint arrangements
Operating Segments – Amendments to IFRS 8
Fair Value Measurement – Amendments to IFRS 13
Annual Improvements (2010 – 2012 Cycle)
Annual Improvements (2011 – 2013 Cycle)
Judgements made by the Directors in the application of these accounting policies that have significant effect on the consolidated financial
statements and estimates with a significant risk of material adjustment in the next year are discussed in note 33.
The consolidated financial statements are prepared on a historical cost basis, with the exception of certain financial assets and liabilities
that are measured at fair value as described in note 24.
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 consolidated financial statements on pages 56 to 99.
In adopting the going concern basis for preparing the consolidated financial statements, the Directors have considered the further
information included in the business activities commentary as set out on pages 13 to 15 as well as the Group’s principal risks and
uncertainties as set out on pages 21 to 24.
Further details on the going concern basis of preparation can be found in note 24 to the notes to the consolidated financial statements
on page 81.
These Group consolidated financial statements are presented in pounds sterling (£), which is Regus plc’s functional currency, 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 significant influence, but not control, over the financial and operating policies.
The consolidated financial statements include the Group’s share of the total recognised income and expense of associates on
an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases or
the associate qualifies as a disposal group at which point the investment is carried at the lower of fair value less costs to sell and
carrying value.
Joint ventures include jointly controlled entities that are those entities over whose activities the Group has joint control, whereby the Group
has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. The consolidated financial
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 qualifies 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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2. Accounting policies (continued)
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 reflected 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.
IFRSs not yet effective
The following IFRSs have been issued but have not been applied by the Group in these consolidated financial statements as they are effective
for years beginning on or after 1 January 2015 or have not yet been endorsed by the European Union. Except for IFRS16 Leases, their
adoption is not expected to have a material effect on the consolidated financial statements:
IAS 1
IAS 16
IAS 38
IFRS 11
IFRS 14
IFRS 9
IFRS 15
IFRS 16
Disclosure Initiative (Amendment to IAS 1)
Clarification of Acceptable Methods of Depreciation and Amortisation
Clarification of Acceptable Methods of Depreciation and Amortisation
Accounting for Acquisitions of interests in Joint operations – Amendments to IFRS 11
Regulatory Deferral Accounts
Annual Improvements to IFRSs 2012-2014 Cycle
Financial Instruments
Revenue from Contracts with Customers
Leases
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2018
1 January 2018
1 January 2019
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 Group will adopt the above standards or amendments in the year in which they become effective and/or endorsed
by the European Union, whichever is later.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group controls an entity when it is exposed to, or has the rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences. The results are
consolidated until the date control ceases or the subsidiary qualifies 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 of non-financial assets
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount was
estimated at 31 October 2015. At each reporting date, the Group reviews the carrying amount of these assets to determine whether there is
an indicator of impairment. If any indicator is identified then the assets’ recoverable amount is re-evaluated.
The carrying amount of the Group’s other non-financial assets (other than deferred tax assets) are reviewed at the balance sheet date to
determine whether there is an indicator of impairment. If any such indication exists, the assets recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit (CGU) exceeds its recoverable
amount. Impairment losses are recognised in the income statement.
A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other
assets or groups of assets. The Group has identified individual business centres as the CGU.
We evaluate the potential impairment of property, plant and equipment at the centre (CGU) level where there are indicators of impairment.
Centres (CGUs) are grouped by country of operation for the purposes of carrying out impairment reviews of goodwill as this is the lowest
level at which it can be assessed.
Individual fittings and equipment in our centres or elsewhere in the business that become obsolete or are damaged are assessed and
impaired where appropriate.
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 flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset belongs.
Goodwill
All business combinations are accounted for using the purchase method. Goodwill is initially measured at cost, being the excess of the aggregate
of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable
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assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the
Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used
to measure the amounts to be recognised at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets
acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.
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.
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.
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 identified 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:
Brand – Regus brand
Brand – Other acquired brands
Computer software
Customer lists
Management agreements
Indefinite life
20 years
Up to 5 years
2 years
Minimum duration of the contract
Amortisation of intangible assets is expensed through administration expenses in the income statement.
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill
is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based
on a proportionate amount of the net assets of the subsidiary.
Assets held for sale
Assets held for sale are measured at the lower of the carrying value of the identified assets and its fair value less cost to sell.
Leases
Plant and equipment leases for which the Group assumes substantially all of the risks and rewards of ownership are classified as finance
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 finance 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 finance leases are included in creditors, net of any
future finance charges. Minimum lease payments are apportioned between the finance 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, including partner contributions 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 inflation indices or non-guaranteed rental payments based on centre turnover or
profitability 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 first break point, discounted at
an appropriate pre-tax rate that reflects the time value of money and the risks specific to the liability.
Partner contributions
Partner contributions are contributions from our business partners (property owners and landlords) towards the initial costs of opening
a business centre, including the fit-out of the property and the losses that we incur early in the centre life. The partner contribution is
treated as a lease incentive and is amortised over the period of the lease.
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:
Buildings
Leasehold improvements
Furniture
Office equipment and telephones
Computer hardware
50 years
10 years
10 years
5 years
3 – 5 years
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Notes to the accounts continued
2. Accounting policies (continued)
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 accounted for
as deferred income 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 benefits 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 benefits
The Group’s major pension plans are of the defined contribution type. For these plans the Group’s contribution and other paid and unpaid
benefits earned by the employees are charged to the income statement as incurred.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling, excluding net interest and the return on plan
assets, excluding net interest, are recognised immediately in the statement of financial position with a corresponding debit or credit to
retained earnings through other comprehensive income (OCI) in the period in which they occur. Re-measurements are not reclassified
to profit or loss in subsequent periods.
Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following
changes in the net defined benefit obligation under ‘cost of sales’, ‘selling, general and administration expenses’ and ‘research and
development expenses’ in the consolidated income statement: service costs comprising current service costs; past service costs;
and gains and losses on curtailments and non-routine settlements.
Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.
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 reflect 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.
Taxation
Tax on the profit 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 financial 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 profit 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
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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 for all unused tax losses only to the extent that it is probable that future taxable profits 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 outflow of economic benefits will be required to settle the obligation.
Restructuring provisions are made for direct expenditures of a business reorganisation where the plans are sufficiently 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 benefits expected to be delivered, discounted using an appropriate weighted average cost of capital.
Net finance expenses
Interest charges and income are accounted for in the income statement on an accruals basis. Financing transaction costs that relate to
financial liabilities are charged to interest expense using the effective interest rate method and are recognised within the carrying value
of the related financial liability on the balance sheet. Fees paid for the arrangement of credit facilities are recognised as a prepayment and
recognised through the finance 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 financial 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 finance expense or finance income as appropriate.
Costs arising on bank guarantees and letters of credit and foreign exchange gains or losses are included in other finance costs (note 8).
Interest bearing borrowings and other financial liabilities
Financial liabilities, including interest bearing borrowings, are recognised initially at fair value less attributable transaction costs. Subsequent
to initial recognition, financial 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 rate method.
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or expired.
Financial liabilities are classified as financial liabilities at fair value through profit or loss where the liability is either held for trading or is
designated as held at fair value through profit or loss on initial recognition. Financial liabilities at fair value through profit or loss are stated
at fair value with any resultant gain or loss recognised in the income statement.
Financial assets
Financial assets are classified either at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets or
loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined on initial recognition.
Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income,
are recognised in profit or loss.
Held-to-maturity financial assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, they are measured at amortised costs using the effective interest rate method.
Available-for-sale financial assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on debt
instruments, are recognised in OCI and accumulated in the fair value reserve. When these assets are derecognised, the gain or loss
accumulated in equity is reclassified to profit or loss.
Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified 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.
Customer deposits
Deposits received from customers against non-performance of the contract are held on the balance sheet as a current liability until they are
returned to the customer at the end of their relationship with the Group.
Foreign currency transactions and foreign operations
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 flows of foreign operations are
translated using the average rate for the period. Assets and liabilities, including goodwill and fair value adjustments, of foreign operations are
translated using the closing rate, with all exchange differences arising on consolidation being recognised in other comprehensive income,
and presented in the foreign currency translation reserve in equity. Exchange differences are released to the income statement on disposal.
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2. Accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of changes in value.
Derivative financial instruments
The Group’s policy on the use of derivative financial instruments can be found in note 24. Derivative financial instruments are measured
initially at fair value and changes in the fair value are recognised through profit or loss unless the derivative financial instrument has been
designated as a cash flow 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
2015
1.48
1.36
179
2014
1.56
1.28
186
2015
1.53
1.38
185
2014
1.64
1.25
175
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 financial information is available.
The business is run on a worldwide basis but managed through four principal geographical segments: Americas; Europe, Middle East and
Africa (EMEA); Asia Pacific; and the United Kingdom. These geographical segments exclude the Group’s non-trading, holding and corporate
management companies. 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.
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 2014. The performance of each segment is assessed on the basis of the segment operating profit, which excludes
internal revenue, corporate overheads and foreign exchange gains and losses arising on transactions with other operating segments.
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Americas
2015
£m
2014
£m
EMEA
2015
£m
2014
£m
Asia Pacific
2015
£m
2014
£m
United Kingdom
2015
£m
2014
£m
All other operating
segments
2015
£m
2014
£m
Total
2015
£m
2014
£m
779.2
677.9
406.6
369.5
289.1
242.0
449.2
386.1
–
779.2
0.3
678.2
0.3
406.9
0.5
370.0
–
289.1
–
242.0
1.2
450.4
1.2
387.3
2.9
–
2.9
0.6 1,927.0 1,676.1
–
2.0
1.5
0.6 1,928.5 1,678.1
171.0
149.3
90.5
79.0
58.2
60.6
107.7
94.0
(0.2)
1.1
427.2
384.0
99.7
77.6
40.5
24.4
26.0
26.6
84.6
68.8
(12.0)
(9.0)
238.8
188.4
–
(0.2)
–
–
(1.3)
–
1.1
(0.4)
0.5
1.7
(0.2)
0.3
–
(1.3)
(0.1)
–
(0.7)
(0.1)
(0.8)
(1.6)
–
(0.9)
(2.1)
0.1
72.2
(9.2)
59.5
1.3
1,247.1 1,017.4
(915.9)
(1,118.0)
101.5
129.1
21.9
(3.6)
506.6
(611.9)
(105.3)
17.8
(5.9)
347.6
(435.9)
(88.3)
19.0
(3.5)
321.4
(327.8)
(6.4)
14.7
(5.9)
257.0
(243.8)
13.2
25.2
(2.6)
842.1
(811.8)
30.3
18.5
2.2
579.9
(582.1)
(2.2)
–
–
–
4.9
(6.9)
1.7
(0.2)
1.5
–
–
–
0.3
(3.5)
0.4
0.8
(4.3)
0.3
117.9
7.4
143.2
(8.9)
(17.2)
(25.8)
1.7 2,918.9 2,203.6
(0.3) (2,869.7) (2,178.0)
25.6
1.4
49.2
146.9
118.9
48.4
35.3
58.9
31.1
46.6
19.8
–
–
300.8
205.1
Revenues from
external customers
Revenues from
internal customers
Segment revenues
Gross profit
(centre contribution)
Reportable
segment profit
Share of profit of
joint ventures
Finance expense
Finance income
Depreciation and
amortisation
Taxation (income)/charge
Assets
Liabilities
Net assets/(liabilities)
Non-current
asset additions
Revenue in the “All other operating segments” 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.
4. Segmental analysis – entity-wide disclosures
The Group’s primary activity and only business segment is the provision of global workplace solutions, 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 diversified customer base and no single customer contributes a material percentage of the Group’s revenue.
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
(a) Excluding deferred tax assets.
2015
2014
External
revenue
6.2
636.3
391.1
893.4
1,927.0
Non-current
assets(a)
2.5
720.5
282.2
646.4
1,651.6
External
revenue
4.9
524.9
386.1
760.2
1,676.1
Non-current
assets(a)
1.5
575.6
275.7
465.9
1,318.7
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Notes to the accounts continued
4. Segmental analysis – entity-wide disclosures (continued)
£m
Reportable segment results
Exclude: Internal revenue
Corporate overheads
Foreign exchange gains
and losses
Non–recurring items
Published Group total
£m
Reportable segment results
Exclude: Internal revenue
Corporate overheads
Foreign exchange gains
and losses
Non–recurring items
Published Group total
2015
Gross profit
(centre
contribution)
427.2
(1.5)
2.7
Revenue
1,928.5
(1.5)
–
Operating
profit
238.8
–
(94.3)
Share of
JV profit
0.3
–
–
–
–
–
–
1927.0
428.4
–
15.3
159.8
–
–
0.3
2014
Gross profit
(centre
contribution)
384.0
(2.0)
1.1
Operating
profit
188.4
–
(84.9)
Share of
JV profit
0.8
–
–
–
–
383.1
–
–
103.5
–
–
0.8
Revenue
1,678.1
(2.0)
–
–
–
1,676.1
Finance
expense
(3.5)
–
(12.5)
1.0
–
(15.0)
Finance
expense
(4.3)
–
(12.1)
(0.9)
–
(17.3)
Finance
income
0.4
–
0.2
Depreciation
and
amortisation
143.2
–
2.0
Profit
before tax
236.0
–
(106.6)
–
–
0.6
–
–
145.2
1.0
15.3
145.7
Finance
income
0.3
–
(0.2)
Depreciation
and
amortisation
117.9
–
2.6
Profit
before tax
185.2
–
(97.2)
–
–
0.1
–
–
120.5
(0.9)
–
87.1
£m
Reportable segment results
Exclude: Segmental inter-company amounts
Corporate overhead assets and liabilities (excluding amounts due to/from reportable segments):
Cash
Deferred taxation
Bank and other loans
Other
Published Group total
£m
Reportable segment results
Exclude: Segmental inter-company amounts
Corporate overhead assets and liabilities (excluding amounts due to/from reportable segments):
Cash
Deferred taxation
Bank and other loans
Other
Published Group total
2015
Assets
2,918.9
(726.0)
Liabilities
(2,869.7)
1,429.3
Net assets/
(liabilities)
49.2
703.3
29.8
24.3
–
80.6
2,327.6
Assets
2,203.6
(405.5)
30.0
23.6
–
95.0
1,946.7
–
–
(234.4)
(69.1)
(1,743.9)
2014
Liabilities
(2,178.0)
1,012.5
–
–
(203.6)
(40.2)
(1,409.3)
29.8
24.3
(234.4)
11.5
583.7
Net assets/
(liabilities)
25.6
607.0
30.0
23.6
(203.6)
54.8
537.4
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5. Operating profit
Operating profit has been arrived at after charging/(crediting):
Depreciation on property, plant and equipment
Owned assets
Finance leases
Amortisation of intangibles
Provision for bad debts
Profit on disposal of property, plant and equipment
Impairment of property, plant and equipment
Rents payable in respect of operating leases
Property
Contingent rents paid
Equipment
Amortisation of partner contributions
Amortisation of acquired lease fair value adjustments
Staff costs
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. Non-recurring items
Disposal of assets held for sale
Competition & Markets Authority investigation
California class action
Notes
14
14
13
24
7
18
2015
£m
133.6
0.6
11.0
6.5
(0.3)
0.9
657.5
38.4
2.9
(35.6)
(4.6)
356.4
2015
£m
0.8
1.0
–
–
2015
£m
21.3
(2.8)
(3.2)
15.3
2014
£m
107.0
0.5
13.0
4.5
(0.9)
–
572.6
26.5
2.4
(26.6)
(5.2)
334.6
2014
£m
0.7
1.0
–
–
2014
£m
–
–
–
–
Disposal of assets held for sale
During 2014 the Group completed a project to dispose of the assets and liabilities of specific non-core operations to release the related
capital originally invested in these operations. The sale of these assets and liabilities, which were previously classified as assets held for sale
(note 18), completed during February 2015 for a consideration of £84.0 million and a non-recurring profit of £21.3 million after expenses.
The following major classes of assets and liabilities were disposed of as part of the assets held for sale:
Assets
Goodwill (note 12)
Trade and other receivables
Assets held for sale
Liabilities
Trade and other payables
Liabilities held for sale
Net assets held for sale
Disposal related costs
Proceeds on disposal
Profit on disposal
2015
£m
10.3
49.6
59.9
(1.2)
(1.2)
58.7
4.0
84.0
21.3
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Notes to the accounts continued
6. Non-recurring items (continued)
Competition & Markets Authority investigation
The United Kingdom Competition & Markets Authority initiated an inquiry into competition in the serviced offices industry after the Group
acquired Avanta Serviced Offices Group plc during 2015. This inquiry is ongoing and expected to be completed during 2016. The Group
has provided for £2.8m in respect of related legal costs.
California class action
During 2015 a class action was filed against the Group alleging a breach of labour regulations in California. While the outcome of this legal
action remains uncertain, the Group has provided for £3.2m in respect of any potential settlement and related legal costs.
7. Staff costs
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 and marketing staff
Finance staff
Other staff
Americas
EMEA
Asia Pacific
United Kingdom
Corporate functions
Details of Directors’ emoluments and interests are given on pages 42 to 54 in the Remuneration Report.
8. Net finance expense
Interest payable and similar charges on bank loans and corporate borrowings
Interest payable and similar charges on finance leases
Total interest expense
Other finance costs (including foreign exchange)
Unwinding of discount rates
Total finance expense
Total interest income
Unwinding of discount rates
Total finance income
Net finance expense
2015
£m
302.5
46.5
5.2
2.2
356.4
2014
£m
281.9
45.6
4.6
2.5
334.6
2015
Average
full time
equivalents
2014
Average
full time
equivalents
6,842
467
778
1,203
9,290
3,064
2,107
1,832
996
1,291
9,290
2015
£m
(9.5)
–
(9.5)
(3.9)
(1.6)
(15.0)
0.6
–
0.6
(14.4)
6,159
601
742
1,198
8,700
3,065
1,929
1,497
1,046
1,163
8,700
2014
£m
(8.4)
–
(8.4)
(7.0)
(1.9)
(17.3)
0.1
–
0.1
(17.2)
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9. Taxation
(a) Analysis of charge in the year
Current taxation
Corporate income tax
Previously unrecognised tax losses and temporary differences
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
Under provision in respect of prior years
Total deferred taxation
Tax charge on profit
(b) Reconciliation of taxation charge
Profit before tax
Tax on profit at 29.22% (2014: 29.22%)
Tax effects of:
Expenses not deductible for tax purposes
Items not chargeable for tax purposes
Non-recurring 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
Adjustment to tax charge in respect of previous years
Differences in tax rates on overseas earnings
2015
£m
145.7
(42.6)
(8.6)
40.2
4.6
8.2
(23.3)
(4.6)
0.3
(25.8)
%
(29.2)
(5.9)
27.6
3.2
5.6
(16.0)
(3.2)
0.2
(17.7)
2015
£m
(18.1)
(3.0)
(3.5)
(24.6)
(11.3)
11.2
(1.1)
(1.2)
(25.8)
2014
£m
87.1
(25.5)
(9.5)
24.8
–
16.4
(20.2)
(5.0)
1.8
(17.2)
2014
£m
(17.6)
0.9
(3.9)
(20.6)
(11.0)
15.5
(1.1)
3.4
(17.2)
%
(29.2)
(10.9)
28.5
–
18.8
(23.3)
(5.7)
2.0
(19.8)
The applicable tax rate is determined based on the tax rate in Luxembourg which was the statutory tax rate applicable in the country of
domicile of the parent company of the Group for the financial year.
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Notes to the accounts continued
9. Taxation (continued)
(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:
2015
2016
2017
2018
2019
2020
2021
2022
2023 and later
Available indefinitely
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
2015
£m
–
3.4
6.3
10.1
18.9
45.3
8.8
13.8
54.0
160.6
226.6
387.2
113.4
500.6
2015
£m
26.7
19.4
101.2
9.2
8.2
164.7
2014
£m
0.7
3.2
13.6
12.5
17.7
29.1
9.7
14.3
31.5
132.3
210.8
343.1
107.1
450.2
2014
£m
30.4
13.5
91.0
11.3
6.6
152.8
Estimates relating to deferred tax assets, including assumptions about future profitability, are re-evaluated at the end of each
reporting period.
(d) Corporation tax
Corporation tax payable
Corporation tax receivable
2015
£m
(14.0)
17.9
2014
£m
(10.3)
12.5
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(e) Deferred taxation
The movement in deferred tax is analysed below:
Deferred tax asset
At 1 January 2014
Acquisitions
Current year movement
Prior year movement
Transfers
Exchange movement
At 1 January 2015
Acquisitions
Current year movement
Prior year movement
Transfers
Exchange movement
At 31 December 2015
Deferred tax liability
At 1 January 2014
Current year movement
Prior year movement
Transfers
Exchange movement
At 1 January 2015
Current year movement
Prior year movement
Transfers
Exchange movement
At 31 December 2015
Intangibles
£m
Property,
plant and
equipment
£m
Tax losses
£m
(33.5)
–
0.3
1.9
–
(3.1)
(34.4)
–
(2.0)
–
–
(3.2)
(39.6)
(0.2)
–
–
–
–
(0.2)
–
–
–
0.2
–
13.2
–
(4.0)
0.2
0.4
1.6
11.4
–
(9.7)
(5.6)
(0.4)
(0.1)
(4.4)
(0.6)
(0.7)
0.1
(0.4)
0.5
(1.1)
(1.0)
1.6
0.4
(1.4)
(1.5)
36.4
1.7
(4.7)
(2.2)
(0.2)
0.4
31.4
–
(3.3)
4.0
0.8
(0.9)
32.0
0.2
(0.1)
–
0.1
0.1
0.3
1.1
–
(0.8)
0.1
0.7
Short-term
temporary
differences
£m
(9.8)
(0.4)
5.2
(1.2)
0.7
0.4
(5.1)
–
3.5
–
(0.2)
(0.3)
(2.1)
(1.1)
0.5
(0.1)
(0.6)
(0.2)
(1.5)
(0.3)
(0.9)
0.2
1.7
(0.8)
Rent
£m
27.1
–
8.0
0.2
(0.2)
1.6
36.7
–
11.4
(0.2)
0.4
2.2
50.5
0.1
–
–
0.2
–
0.3
0.2
–
(0.4)
(0.1)
–
Total
£m
33.4
1.3
4.8
(1.1)
0.7
0.9
40.0
–
(0.1)
(1.8)
0.6
(2.3)
36.4
(1.6)
(0.3)
–
(0.7)
0.4
(2.2)
–
0.7
(0.6)
0.5
(1.6)
The movements in deferred taxes included above are after the offset of deferred tax assets and deferred tax liabilities where there
is a legally enforceable right to set off and they relate to income taxes levied by the same taxation authority.
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 profits in the entities concerned.
At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was £189.9m
(2014: £249.8m). The only tax that would arise on these reserves would be non-creditable withholding tax.
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Notes to the accounts continued
10. Earnings per ordinary share (basic and diluted)
Profit 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 profit 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)
Profit
2015
£m
119.9
2015
119.9
2014
69.9
933,457,741 944,081,638
195.94p
26,613,538
82.73p
270.09p
33,758,590
130.10p
Earnings per share
2014
£m
2015
pence
2014
pence
69.9
12.8
12.6
7.4
7.2
933,457,741 944,081,638
26,613,538
33,758,590
(18,516,654)
4,978,357
(4,038,193)
6,157,990
953,678,034 972,814,973
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
2015
3.1p
1.4p
2014
2.75p
1.25p
Dividends of £38.8m were paid during the year (2014: £35.4m). The Company has proposed to shareholders that a final dividend of
3.1p per share will be paid (2014: 2.75p). Subject to shareholder approval, it is expected that the dividend will be paid on 27 May 2016.
12. Goodwill
Cost
At 1 January 2014
Recognised on acquisition of subsidiaries
Transferred to assets held for sale (note 18)
Exchange differences
At 31 December 2014
Recognised on acquisition of subsidiaries
Exchange differences
At 31 December 2015
Net book value
At 31 December 2014
At 31 December 2015
£m
438.7
61.8
(10.3)
7.0
497.2
110.6
4.4
612.2
497.2
612.2
Cash-generating units (CGUs), defined as individual business centres, are grouped by country of operation for the purposes of carrying out
impairment reviews of goodwill as this is the lowest level at which it can be assessed. Goodwill acquired through business combinations is
held at a country level and is subject to impairment reviews based on the cash flows of the CGUs within that country.
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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 Pacific business segment
Carrying amount of goodwill included within the UK business segment
2015
£m
260.2
100.4
29.9
221.7
612.2
The carrying value of goodwill and indefinite life intangibles allocated to two countries, the USA and the UK, is material relative to
the total carrying value comprising 75.4% of the total. The remaining 24.6% of the carrying value is allocated to a further 40 countries.
The goodwill and indefinite life intangibles allocated to the USA and the UK are set out below:
USA
UK
Other countries
Goodwill
£m
240.0
221.7
150.5
612.2
Intangible
assets
£m
–
11.2
–
11.2
2015
£m
240.0
232.9
150.5
623.4
2014
£m
214.9
72.3
29.7
180.3
497.2
2014
£m
193.3
191.5
123.6
508.4
The indefinite life 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 value in use for each country has been determined using a model which derives the individual value in use for each country from the value
in use of the Group as a whole. Although the model includes budgets and forecasts prepared by management it also reflects external factors,
such as capital market risk pricing as reflected 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. Management believes that the projected cash flows are a reasonable reflection
of the likely outcomes over the medium to long term. In the event that trading conditions deteriorate beyond the assumptions used in
the projected cash flows, 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 country:
• Future cash flows are based on the budget for 2016 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 2016 that reflect an average annual growth rate of 3% (2015: 3%).
• These forecasts exclude the impact of both organic and acquisitive growth expected to take place in future periods.
• Management consider these projections to be a reasonable projection of margins expected at the mid-cycle position. Cash flows beyond
2019 have been extrapolated using a 2% growth rate which management believes is a reasonable long-term growth rate for any of the
markets in which the relevant countries operate. A terminal value is included in the assessment, reflecting the Group’s expectation that it
will continue to operate in these markets and the long-term nature of the businesses.
• The Group applies a country specific pre-tax discount rate to the pre-tax cash flows for each country. The country specific discount rate
is based on the underlying weighted average cost of capital (WACC) for the Group. The Group WACC is then adjusted for each country to
reflect the assessed market risk specific to that country. The Group pre-tax WACC increased marginally from 12.4% in 2014 to 12.7% in
2015 (post-tax WACC: 10.2%). The country specific pre-tax WACC reflecting the respective market risk adjustment has been set between
12.1% and 17.3% (2014: 11.3% to 17.2%).
The amount by which the value in use exceeds the carrying amounts of goodwill are sufficiently large to enable the Directors to conclude that
a reasonably possible change in the key assumptions would not result in an impairment charge in any of the countries. Foreseeable events
are unlikely to result in a change in the projections of such a significant nature as to result in the goodwill carrying amount exceeding their
recoverable amount. The forecast models used in assessing the impairment of goodwill are based on the related business centre structure
at the end of the year. These models therefore do not reflect the expected improvement in margin as new centres mature.
The key assumptions used in the US model forecasts a centre contribution of 26%, with an average centre contribution of 26% over the
next five years. Revenue and costs grow at 3% per annum from 2015, maintaining a terminal 2020 centre gross margin of 26%. Thereafter
a 2% long-term growth rate is assumed on revenue and cost into perpetuity. The cash flows have been discounted using a pre-tax discount
rate of 16% (2014: 15%).
The UK model forecasts a 2015 centre contribution of 21%, with an average centre contribution of 21% over the next five years. Revenue
and costs grow at 3% per annum from 2015, maintaining a terminal 2020 centre gross margin of 21%. Thereafter a 2% long-term growth
rate is assumed on revenue and cost into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 13% (2014: 13%).
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Notes to the accounts continued
12. Goodwill (continued)
Management has considered the following sensitivities:
Market growth and WIPOW – Management has considered the impact of a variance in market growth and WIPOW. The value in use
calculation shows that if the long-term growth rate was reduced to nil, the recoverable amount of the US and UK would still be greater
than their carrying value.
Discount rate – Management has considered the impact of an increase in the discount rate applied to the calculation. The value-in-use
calculation shows that for the recoverable amount to be less than its carrying value, the pre-tax discount rate would have to be increased
to 30% (2014: 23%) for the US and 36% (2014: 35%) for the UK.
13. Other intangible assets
Cost
At 1 January 2014
Additions at cost
Acquisition of subsidiaries
Transferred to assets held for sale (note 18)
Disposals
Exchange rate movements
At 31 December 2014
Additions at cost
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2015
Amortisation
At 1 January 2014
Charge for year
Transferred to assets held for sale (note 18)
Disposals
Exchange rate movements
At 31 December 2014
Charge for year
Disposals
Exchange rate movements
At 31 December 2015
Net book value
At 1 January 2014
At 31 December 2014
At 31 December 2015
Brand
£m
Customer
lists
£m
Software
£m
Total
£m
51.6
–
–
–
–
2.5
54.1
–
–
–
2.2
56.3
19.0
2.0
–
–
1.3
22.3
2.2
–
1.1
25.6
32.6
31.8
30.7
24.2
–
0.3
–
–
0.4
24.9
–
4.1
–
(0.2)
28.8
21.9
1.5
–
–
(0.2)
23.2
2.9
–
0.4
26.5
2.3
1.7
2.3
40.7
11.0
–
–
–
(0.5)
51.2
8.7
–
–
(1.2)
58.7
22.6
9.5
–
–
(0.1)
32.0
5.9
–
–
37.9
18.1
19.2
20.8
116.5
11.0
0.3
–
–
2.4
130.2
8.7
4.1
–
0.8
143.8
63.5
13.0
–
–
1.0
77.5
11.0
–
1.5
90.0
53.0
52.7
53.8
Included with the brand value is £11.2m 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 indefinite 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 indefinite 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-indefinite life brands is nine years.
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14. Property, plant and equipment
Cost
At 1 January 2014
Additions
Acquisition of subsidiaries
Transferred to assets held for sale (note 18)
Disposals
Exchange rate movements
At 1 January 2015
Additions
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2015
Accumulated depreciation
At 1 January 2014
Charge for the year
Transferred to assets held for sale (note 18)
Disposals
Exchange rate movements
At 1 January 2015
Charge for the year
Impairment
Disposals
Exchange rate movements
At 31 December 2015
Net book value
At 1 January 2014
At 31 December 2014
At 31 December 2015
Land and
buildings
£m
Leasehold
improvements
£m
Furniture and
equipment
£m
Computer
hardware
£m
8.1
2.0
47.3
(49.3)
(5.5)
–
2.6
11.4
–
(2.6)
–
11.4
0.9
0.7
(0.4)
(0.6)
(0.4)
0.2
–
–
(0.2)
–
–
7.2
2.4
11.4
744.7
149.7
3.9
–
(1.8)
7.5
904.0
220.0
18.1
(9.6)
3.5
1,136.0
324.5
64.5
–
(1.1)
1.9
389.8
85.1
0.9
(3.9)
(2.0)
469.9
420.2
514.2
666.1
382.3
38.7
6.8
(0.4)
(0.7)
4.2
430.9
61.6
3.3
(2.0)
3.3
497.1
220.6
32.5
–
(0.3)
0.9
253.7
37.4
–
(1.1)
0.6
290.6
161.7
177.2
206.5
59.7
15.0
0.1
–
(0.4)
1.4
75.8
18.5
2.0
(0.2)
(1.2)
94.9
40.1
9.8
–
–
0.9
50.8
11.7
–
–
(0.6)
61.9
19.6
25.0
33.0
Additions include £nil in respect of assets acquired under finance leases (2014: £nil).
The net book value of leasehold improvements, furniture and equipment includes amounts held under finance 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
2015
£m
17.9
(16.6)
1.3
2015
£m
53.5
4.0
5.5
63.0
Total
£m
1,194.8
205.4
58.1
(49.7)
(8.4)
13.1
1,413.3
311.5
23.4
(14.4)
5.6
1,739.4
586.1
107.5
(0.4)
(2.0)
3.3
694.5
134.2
0.9
(5.2)
(2.0)
822.4
608.7
718.8
917.0
2014
£m
24.1
(22.4)
1.7
2014
£m
42.9
3.7
2.7
49.3
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Notes to the accounts continued
16. Trade and other receivables
Trade receivables
Amounts owed by joint ventures
Other receivables
Acquired lease fair value asset
Deposits held by landlords against rent obligations
Prepayments and accrued income
VAT recoverable
17. Trade and other payables (including customer deposits)
Trade payables
VAT payable
Other tax and social security
Customer deposits
Deferred partner contributions
Amounts owed to joint ventures
Rent accruals
Acquired lease fair value liability
Other accruals
Other payables
Total current
Deferred partner contributions
Rent accruals
Acquired lease fair value liability
Other payables
Total non-current
2015
£m
206.2
4.9
102.6
2.5
15.8
158.5
67.3
557.8
2015
£m
94.2
60.8
10.4
331.6
48.3
1.6
112.2
3.7
133.0
20.7
816.5
2015
£m
199.5
169.6
11.0
3.7
383.8
2014
£m
160.9
2.8
78.1
2.1
14.9
138.9
42.4
440.1
2014
£m
61.9
46.6
8.7
290.4
35.2
1.4
80.1
3.8
112.8
29.3
670.2
2014
£m
154.7
121.5
13.6
3.1
292.9
18. Assets and liabilities held for sale
In 2014, the Group undertook a project to dispose of the assets and liabilities or specific non-core operations to release the related capital
originally invested in these operations. These assets and liabilities were classified as held for sale and their net realisable value is estimated
to be greater than their book value. The sale of these assets and liabilities completed during February 2015 for a consideration of £84.0m
and a non-recurring profit of £21.3m after expenses (note 6).
The major classes of assets and liabilities classified by the Group as held for sale as at 31 December 2014 are as follows:
Assets
Goodwill (note 12)
Property, plant and equipment (note 14)
Trade and other receivables
Assets held for sale
Liabilities
Trade and other payables
Liabilities held for sale
Net assets held for sale
There is no cumulative income or expense included in other comprehensive income relating to the net assets held for sale.
There are no assets or liabilities classified as held for sale in 2015.
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2014
£m
10.3
49.3
3.0
62.6
(2.1)
(2.1)
60.5
19. Borrowings
The Group’s total loan and borrowing position at 31 December 2015 and at 31 December 2014 had the following maturity profiles:
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 five years
In more than five years
Total non-current
Total current
Total bank and other loans
Obligations under finance leases
The maturity of the Group’s finance 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 five years
Less: finance charges allocated to future periods
Present value of future minimum lease payments
Total current
Total non-current
20. Provisions
At 1 January
Acquired in the period
Provided in the period
Utilised in the period
Provisions released
Exchange differences
At 31 December
Analysed between:
Current
Non-current
At 31 December
2015
2014
Onerous
leases and
closures
£m
4.0
3.0
3.9
–
(3.2)
–
7.7
0.4
7.3
7.7
Other
£m
2.9
0.1
2.9
–
(0.8)
0.1
5.2
4.9
0.3
5.2
Onerous
leases and
closures
£m
4.4
1.2
0.7
(0.5)
(1.8)
–
4.0
0.9
3.1
4.0
Total
£m
6.9
3.1
6.8
–
(4.0)
0.1
12.9
5.3
7.6
12.9
Other
£m
1.3
–
2.1
(0.5)
–
–
2.9
1.7
1.2
2.9
Onerous leases and closures
Provisions for onerous leases and closures costs relate to the estimated future costs of centre closures and onerous property leases.
The maximum period over which the provisions are expected to be utilised expires by 31 December 2021.
Other
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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2015
£m
2014
£m
3.1
208.9
33.3
245.3
9.2
254.5
2.2
207.1
–
209.3
1.4
210.7
2015
£m
2014
£m
–
–
–
–
–
–
–
–
–
–
0.1
–
0.1
–
–
–
0.1
0.1
Total
£m
5.7
1.2
2.8
(1.0)
(1.8)
–
6.9
2.6
4.3
6.9
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Notes to the accounts continued
21. Investments in joint ventures
At 1 January 2014
Additions/(disposals)
Dividends paid
Share of profit
Other
Exchange rate movements
At 31 December 2014
Additions/(disposals)
Dividends paid
Share of profit
Other
Exchange rate movements
At 31 December 2015
Investments in
joint ventures
£m
1.3
(0.6)
(1.0)
0.8
–
0.2
0.7
1.9
–
3.2
–
(0.2)
5.6
Provision for
deficit in
joint ventures
£m
(1.2)
–
–
–
0.5
–
(0.7)
–
–
(2.9)
(0.5)
–
(4.1)
The results of the joint ventures below are the full results of the joint ventures and do not represent the effective share:
Income statement
Revenue
Expenses
Profit before tax for the year
Tax charge
Profit after tax for the year
Net assets/(liabilities)
Fixed assets
Current assets
Current liabilities
Non-current liabilities
Net assets
22. Share capital
Ordinary equity share capital
2015
£m
27.6
(24.9)
2.7
(0.5)
2.2
8.4
27.1
(32.6)
(9.7)
(6.8)
Total
£m
0.1
(0.6)
(1.0)
0.8
0.5
0.2
–
1.9
–
0.3
(0.5)
(0.2)
1.5
2014
£m
26.8
(23.4)
3.4
(0.6)
2.8
6.5
14.6
(15.9)
(9.6)
(4.4)
Authorised
Ordinary 1p shares at 1 January & 31 December
Issued and fully paid up
Ordinary 1p shares at 1 January & 31 December
2015
2014
Number
Nominal value
£m
Number
Nominal value
£m
8,000,000,000
80.0
8,000,000,000
950,969,822
9.5
950,969,822
80.0
9.5
Treasury share transactions involving Regus plc shares
As at 31 December 2015, 20,490,613 (2014: 12,883,455) shares were held as treasury shares. During the year ended 31 December 2015,
Regus plc repurchased 9,543,800 (2014: 9,484,516) of its own shares in the open market and utilised 1,936,642 (2014: 1,858,441) 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 such dividends as were declared by the Company and were
entitled to one vote per share at meetings of the Company. Treasury shares do not carry such rights until reissued.
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23. Analysis of financial assets
Cash and cash equivalents
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 financial assets/(liabilities)
At
1 Jan 2015
£m
72.8
72.8
(1.4)
(209.3)
–
(0.1)
(210.8)
(138.0)
Cash flow
£m
(7.3)
(7.3)
(7.8)
(45.0)
–
0.1
(52.7)
(60.0)
Non-cash
changes
£m
–
–
–
–
–
–
–
–
Exchange
movements
£m
(1.6)
(1.6)
–
9.0
–
–
9.0
7.4
At
31 Dec 2015
£m
63.9
63.9
(9.2)
(245.3)
–
–
(254.5)
(190.6)
Cash and cash equivalent balances held by the Group that are not available for use amounted to £16.0m at 31 December 2015 (2014:
£17.4m). Of this balance, £12.5m (2014: £13.5m) is pledged as security against outstanding bank guarantees and a further £3.5m
(2014: £3.9m) is pledged against various other commitments of the Group.
Non-cash changes comprise the amortisation of the debt issue costs, finance leases and movements in debt maturity.
24. Financial instruments and financial risk management
The objectives, policies and strategies applied by the Group with respect to financial 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
Officer is responsible for policy on a day-to-day basis. The Chief Financial Officer 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.
Going concern
The Strategic Report on pages 1 to 27 of the Annual 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 financial review on pages 18 to 20 within the Strategic Report reviews the
trading performance, financial position, and cash flows of the Group. During the year ended 31 December 2015 the Group made a significant
investment in growth and the Group’s net debt position increased by £52.6m to a net debt position of £190.6 as at 31 December 2015. The
investment in growth is funded by a combination of cash flow generated from the Group’s mature business centres and debt. The Group has
a £320m revolving credit facility provided by a group of relationship banks with a final maturity in 2020. As at 31 December 2015 £205.1m was
available and undrawn.
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.
Credit risk
Credit risk could occur where a customer or counterparty defaults under the contractual terms of a financial instrument and arises principally
in relation to customer contracts and the Group’s cash deposits.
A diversified customer base, requirement for customer deposits, and payments in advance on workstation contracts 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 specific 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 reflects 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.
The maximum exposure to credit risk for trade receivables at the reporting date, analysed by geographic region, is summarised below.
Americas
EMEA
Asia Pacific
UK
2015
£m
41.2
68.9
33.7
62.4
206.2
2014
£m
28.0
57.9
28.7
46.3
160.9
All of the Group’s trade receivables relate to customers purchasing workplace solutions and associated services and no individual customer
has a material balance owing as a trade receivable.
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24. Financial instruments and financial risk management (continued)
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
2015
£m
158.4
31.2
7.4
20.8
217.8
Provision
2015
£m
–
–
–
(11.6)
(11.6)
Gross
2014
£m
120.4
25.8
7.9
15.1
169.2
Provision
2014
£m
–
–
–
(8.3)
(8.3)
At 31 December 2015, the Group maintained a provision of £11.6m against potential bad debts (2014: £8.3m) arising from trade receivables.
The Group had provided £6.5m (2014: £4.5m) in the year and utilised £3.2m (2014: £2.5m). Customer deposits of £331.6m (2014: £290.4m)
are held by the Group, mitigating the risk of default.
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 office services and requires deposits from its customers.
Cash investments and derivative financial instruments are only transacted with counterparties of sound credit ratings, and management
does not expect any of these counterparties to fail to meet their obligations.
Liquidity risk
The Group manages liquidity risk by closely monitoring the global cash position, the available and undrawn credit facilities, and forecast
capital expenditure and expects to have sufficient liquidity to meet its financial obligations as they fall due. The Group has free cash and liquid
investments (excluding blocked cash) of £47.9m (2014: £55.2m). In addition to cash and liquid investments, the Group had £205.1m available
and undrawn under its committed borrowings. The Directors consider the Group has adequate liquidity to meet day-to-day requirements.
In May 2014 the Group issued debt securities for a total amount of EUR 210.0m (£154.2m) using the German “Schuldschein” framework for
debt issuance. These securities consisted of EUR 165.0m of three year notes and EUR 45.0m of five year notes, and were sold to a number
of banks and institutional investors.
The Group maintains a £320m revolving credit facility with a final maturity date in September 2020. As at 31 December £205.1m was
available and undrawn under this facility.
Although the Group has net current liabilities of £446.1m (2014: £303.9m), 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 which will be recognised in future periods
through the income statement. Although the Group holds customer deposits of £331.6m (2014: £290.4m) 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 liabilities, excluding deferred income, were £205.4m at 31 December 2015 (2014: £98.6m).
Market risk
The Group is exposed to market risk primarily related to foreign currency exchange rates, interest rates, and the market value of our
investments in financial assets. These exposures are actively managed by the Group treasury department in accordance with a written
policy approved by the Board of Directors. The Group does not use financial derivatives for trading or speculative reasons.
Interest rate risk
The Group manages its exposure to interest rate risk through the relative proportions of fixed rate debt and floating rate debt.
The surplus cash balances are invested short-term, and at the end of 2015 no cash was invested for a period exceeding three months.
Foreign currency risk
The Group is exposed to foreign currency exchange rate movements. The majority of day-to-day transactions of overseas subsidiaries
are carried out in local currency and the underlying foreign exchange exposure is small. Transactional exposures do arise in some countries
where it is local market practice for a proportion of the payables or receivables to be in other than the functional currency of the affiliate.
Intercompany charging, funding, and cash management activity may also lead to foreign exchange exposures. It is the policy of the Group to
seek to minimise such transactional exposures through careful management of non-local currency assets and liabilities, thereby minimising
the potential volatility in the income statement. Net investments in Regus affiliates with a functional currency other than sterling are of a
long-term nature and the Group does not normally hedge such foreign currency translation exposures.
From time to time the Group uses short-term derivative financial instruments to manage its transactional foreign exchange exposures
where these exposures cannot be eliminated through balancing the underlying risks. No transactions of a speculative nature are undertaken.
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The foreign currency exposure arising from open third party transactions held in a currency other than the functional currency of the related
entity is summarised as follows:
£m
Trade and other receivables
Trade and other payables
Net statement of financial position exposure
£m
Trade and other receivables
Trade and other payables
Net statement of financial position exposure
GBP
–
(1.4)
(1.4)
GBP
0.1
(0.9)
(0.8)
2015
JPY
–
(1.2)
(1.2)
2014
JPY
–
(2.2)
(2.2)
EUR
9.1
(21.9)
(12.8)
EUR
5.7
(26.9)
(21.2)
USD
16.4
(19.4)
(3.0)
USD
11.4
(12.9)
(1.5)
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 in the
income statement.
Sensitivity analysis
For the year ending 31 December 2015 it is estimated that a general increase of one percentage point in interest rates would have
decreased the Group’s profit before tax by approximately £1.7m (2014: decrease of £0.9m) with a corresponding increase
in total equity.
It is estimated that a five percentage point weakening in the value of the US dollar against sterling would have decreased the Group’s profit
before tax by approximately £6.0m for the year ended 31 December 2015 (2014: £3.1m). It is estimated that a five percentage point
weakening in the value of the euro against sterling would have decreased the Group’s profit before tax by approximately £1.8m for
the year ended 31 December 2015 (2014: decrease of £0.1m).
It is estimated that a five percentage point weakening in the value of the US dollar against sterling would have decreased the Group’s total
equity by approximately £10.7m for the year ended 31 December 2015 (2014: £11.7m). It is estimated that a five percentage point
weakening in the value of the euro against sterling would have decreased the Group’s total equity
by approximately £5.9m for the year ended 31 December 2015 (2014: £6.4m).
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 Officer 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 page 35. In 2006, the Board approved the commencement of a progressive
dividend policy to enhance the total return to shareholders.
The Group’s Chief Executive Officer, 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 42 to 43.
In addition, the Group operates various share option plans for key management and other senior employees.
In the year ended 31 December 2015 Regus plc purchased 1,110,796 (2014: nil) of its own shares in the open market to satisfy employee
share awards. Regus plc also purchased 9,543,800 (2014: 9,484,516) of its own shares in the open market to hold as treasury shares.
1,936,642 (2014: 1,858,441) treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees.
As at 1 March 2016, 20,486,213 shares were held as treasury shares.
The Company declared an interim dividend of 1.4p per share (2014: 1.25p) during the year ended 31 December 2015 and proposed a final
dividend of 3.1p per share (2014: 2.75p per share), a 13% increase on the 2014 dividend.
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 has a net debt position of £190.6m at the end of 2015
(2014: £138.0m) and £205.1m (2014: £256.6m) of committed undrawn borrowings.
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24. Financial instruments and financial risk management (continued)
Effective interest rates
In respect of financial assets and financial 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 flow of these instruments is not materially different from the carrying value.
As at 31 December 2015
Cash and cash equivalents
Trade and other receivables
Financial assets(b)
Non-derivative financial liabilities(a):
Finance lease liabilities
Bank loans and corporate borrowings
Other loans
Customer deposits
Trade and other payables
Derivative financial liabilities:
Cross-currency interest rate swaps
– Outflow
– Inflow
Interest rate swaps
– Outflow
– Inflow
Financial liabilities
Effective
interest
rate
%(a)
0.4%
–
–
4.0%
12.4%
–
–
–
–
–
–
Carrying
value
£m
63.9
454.0
517.9
Contractual
cash flow
£m
63.9
465.6
529.5
Less than
1 year
£m
63.9
408.4
472.3
1-2 years
£m
–
26.7
26.7
2-5 years
£m
–
30.5
30.5
More than
5 years
£m
–
–
–
–
(245.3)
(9.2)
(331.6)
(191.5)
(14.2)
–
(0.8)
–
(792.6)
–
(245.3)
(9.2)
(331.6)
(191.5)
(135.3)
121.1
(0.8)
–
(792.6)
–
–
(9.1)
(331.6)
(187.8)
–
–
–
–
(528.5)
–
(124.1)
(0.1)
–
(3.7)
(135.3)
121.1
–
–
(142.1)
–
(88.0)
–
–
–
–
–
(0.8)
–
(88.8)
–
(33.2)
–
–
–
–
–
–
–
(33.2)
(a) All financial instruments are classified as variable rate instruments.
(b) Financial assets are all held at amortised cost.
As at 31 December 2014
Cash and cash equivalents
Trade and other receivables
Financial assets(b)
Non-derivative financial liabilities(a):
Finance lease liabilities
Bank loans and corporate borrowings
Other loans
Customer deposits
Trade and other payables
Derivative financial liabilities:
Cross-currency interest rate swaps
– Outflow
– Inflow
Interest rate swaps
– Outflow
– Inflow
Financial liabilities
Effective
interest rate
%(a)
0.3%
–
Carrying
value
£m
72.8
345.9
418.7
Contractual
cash flow
£m
72.8
354.1
426.9
Less than
1 year
£m
72.8
307.3
380.1
1-2 years
£m
–
21.5
21.5
2-5 years
£m
–
25.3
25.3
More than
5 years
£m
–
–
–
0.7%
3.7%
14.6%
–
–
–
–
–
–
(0.1)
(209.3)
(1.4)
(290.4)
(150.6)
(7.0)
–
(0.7)
–
(659.5)
(0.1)
(209.3)
(1.4)
(290.4)
(150.6)
(135.7)
128.7
(0.7)
–
(659.5)
(0.1)
–
(1.4)
(290.4)
(147.9)
–
–
–
–
(439.8)
–
(2.2)
–
–
(2.7)
–
–
–
–
(4.9)
–
(207.1)
–
–
(135.7)
128.7
(0.7)
–
(214.8)
–
–
–
–
–
–
–
–
–
(a) All financial instruments are classified as variable rate instruments.
(b) Financial assets are all held at amortised cost.
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Fair value disclosures
The fair values together with the carrying amounts shown in the balance sheet are as follows:
31 December 2015
Carrying amount
Fair value
£m
Cash and cash equivalents
Trade and other receivables
Finance lease liabilities
Bank loans and corporate borrowings
Other loans
Customer deposits
Trade and other payables
Derivative financial liabilities
Unrecognised gain
Loans and
receivables
63.9
454.0
–
–
–
–
–
517.9
Other financial
liabilities
–
–
–
(245.3)
(9.2)
(331.6)
(191.5)
–
(777.6)
Fair value –
hedging
instruments
–
–
–
–
–
–
–
(15.0)
(15.0)
Total
63.9
454.0
–
(245.3)
(9.2)
(331.6)
(191.5)
(15.0)
(274.7)
Level 1
–
–
–
–
–
–
–
–
–
Level 2
–
–
–
–
–
–
–
(15.0)
(15.0)
31 December 2014
Carrying amount
Fair value
£m
Cash and cash equivalents
Trade and other receivables
Finance lease liabilities
Bank loans and corporate borrowings
Other loans
Customer deposits
Trade and other payables
Derivative financial liabilities
Unrecognised gain
Loans and
receivables
72.8
345.9
–
–
–
–
–
–
418.7
Other
financial
liabilities
–
–
(0.1)
(209.3)
(1.4)
(290.4)
(150.6)
–
(651.8)
Fair value –
hedging
instruments
–
–
–
–
–
–
–
(7.7)
(7.7)
Total
72.8
345.9
(0.1)
(209.3)
(1.4)
(290.4)
(150.6)
(7.7)
(240.8)
Level 1
–
–
–
–
–
–
–
–
–
Level 2
–
–
–
–
–
–
–
(7.7)
(7.7)
Level 3
–
–
–
–
–
–
–
–
–
Level 3
–
–
–
–
–
–
–
–
–
Total
–
–
–
–
–
–
–
(15.0)
(15.0)
–
Total
–
–
–
–
–
–
–
(7.7)
(7.7)
–
During the years ended 31 December 2014 and 31 December 2015, there were no transfers between levels for fair value measured
instruments, and no financial instruments requiring level 3 fair value measurements were held.
Valuation techniques
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised
into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly; and
• Level 3: inputs for the asset or liability that are not based on observable market data.
The following tables show the valuation techniques used in measuring level 2 fair values, finance leases and methods used for financial assets
and liabilities not measured at fair value:
Type
Cash and cash equivalents, trade and other
receivables/payables and customer deposits
Finance lease liabilities
Loans and overdrafts
Foreign exchange contracts and interest rate swaps
Valuation technique
For cash and cash equivalents, receivables/payables with a remaining life of less
than one year and customer deposits, the book value approximates the fair value
because of their short-term nature.
The fair value of finance leases has been calculated by discounting future cash flows
at an appropriate discount rate which reflects current market assessments and the
risks specific to such liabilities.
The fair value of bank loans, overdrafts and other loans approximates the carrying
value because interest rates are at floating rates where payments are reset to
market rates at intervals of less than one year.
The fair values are based on a combination of broker quotes, forward pricing and
swap models.
There was no significant unobservable input used in our valuation techniques.
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Notes to the accounts continued
24. Financial instruments and financial risk management (continued)
Derivative financial instruments
The following table summarises the notional amount of the open contracts as at 31 December 2015:
Derivatives used for cash flow hedging
Committed borrowings
Schuldschein loan note
Revolving credit facility
Guarantee and letter of credit facility
Total
2015
EUR m
210.0
2014
Facility
£m
163.6
320.0
95.0
578.6
2014
EUR m
210.0
2014
Available
£m
–
256.6
15.5
272.1
2015
Facility
£m
154.2
320.0
75.0
549.2
2015
Available
£m
–
205.1
4.6
209.7
In May 2014 the Group issued debt securities for a total amount of €210.0m (£154.2m) using the German “Schuldschein” framework for debt
issuance. These securities consisted of €165.0m of three year notes and €45.0m of five year notes, and were sold to a number of banks and
institutional investors. These securities are subject to covenants which are similar to our banking facilities. The Group is in compliance with
these covenant requirements.
The underlying interest obligation on these debt securities is floating rate and in euro, however, as part of the Group’s balance sheet
management and to protect against a future increase in interest rates, €165.0 million was swapped into a fixed rate GBP liability and
€45.0m was swapped into a fixed rate euro liability. While providing the Group with protection against higher interest rates,
given the current positive yield curve, the immediate impact of this hedging is a modest increase in financing expense.
The Group maintains a £320.0m revolving credit facility and a £75.0m bank guarantee and letter of credit facility both with final maturities in
April 2020 and September 2017 respectively. Both facilities are subject to financial covenants relating to operating cash flow, net debt to
EBITDA, and EBITDA plus rent to interest plus rent. The Group is in compliance with all covenant requirements.
25. Share-based payments
There are three share-based payment plans, details of which are outlined below:
Plan 1: Regus Group Share Option Plan
During 2004 the Group established the Regus Group Share Option Plan that entitles Executive Directors and certain employees to purchase
shares in Regus plc (previously Regus Group plc). In accordance with this programme, holders of vested options are entitled to purchase
shares at the market price of the shares at the day before the date of grant.
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.
Reconciliation of outstanding share options
At 1 January
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2015
2014
Number of
share options
36,096,491
1,906,565
(4,062,226)
(4,446,206)
29,494,624
2,853,016
Weighted
average
exercise price
per share
144.20
250.80
205.94
95.12
155.35
100.00
Number of
share options
26,841,120
14,721,296
(4,407,566)
(1,058,359)
36,096,491
2,118,056
Weighted
average
exercise price
per share
125.20
186.15
155.91
98.81
144.22
103.62
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Date of grant
23/03/2010
28/06/2010
01/09/2010
01/04/2011
30/06/2011
31/08/2011
02/09/2011
13/06/2012
12/06/2013
18/11/2013 (Grant 1)
18/11/2013 (Grant 2)
18/12/2013 (Grant 1)
18/12/2013 (Grant 2)
20/05/2014
05/11/2014
19/05/2015
Total
Numbers
granted
3,986,000
617,961
160,646
2,400,000
9,867,539
300,000
1,000,000
11,189,000
7,741,000
1,053,000
600,000
200,000
1,000,000
1,845,500
12,875,796
1,906,565
56,743,007
Weighted
average
exercise price
per share
100.50
75.00
69.10
114.90
109.50
67.00
74.35
84.95
155.60
191.90
191.90
195.00
195.00
187.20
186.00
250.80
139.18
Lapsed
(3,463,777)
(546,198)
(146,728)
(954,402)
(4,900,647)
–
(92,667)
(3,703,446)
(2,993,810)
(1,053,000)
(355,000)
(200,000)
–
(1,210,300)
(766,132)
(1,500,000)
(21,886,107)
Exercisable
from
169,480 23/03/2013
33,691 28/06/2013
5,792 01/09/2013
1,124,354 01/04/2014
2,526,410 30/06/2014
200,000 31/08/2014
302,445 01/09/2014
5,988,833 13/06/2015
4,747,190 12/06/2016
– 18/11/2016
245,000 18/11/2016
– 18/12/2016
1,000,000 18/12/2016
635,200 20/05/2017
12,109,664 05/11/2017
406,565 19/05/2018
Exercised At 31 Dec 2015
(352,743)
(38,072)
(8,126)
(321,244)
(2,440,482)
(100,000)
(604,888)
(1,496,721)
–
–
–
–
–
–
–
–
(5,362,276)
29,494,624
Expiry date
23/03/2020
28/06/2020
01/09/2020
01/04/2021
30/06/2021
31/08/2021
02/09/2021
13/06/2022
12/06/2023
17/11/2023
17/11/2023
17/12/2023
17/12/2023
19/05/2024
04/11/2024
18/05/2025
Nil options awarded during the year under the Regus Share Option Plan (France) are included in the above table (2014: 311,828), 33,603 lapsed during the year
(2014: 162,250) and 13,861 were exercised during the year (2014: 5,044).
Performance conditions for share options
March, June and September 2010 share option plan
The Group and regional performance targets for the options awarded in March, June and September 2010, based on a combination of EPS
and the Regus Total Shareholder Return (‘TSR’) % achieved relative to the FTSE All Share Total Return index is at least at the median over
the performance period for the year ending 2010, were partially met. Those options that are eligible to vest will vest as follows:
2013
2014
2015
Proportion
to vest
1/3
1/3
1/3
April 2011 share option plan
The performance targets for the options awarded in April 2011, based on pre-growth profit for the year ending 31 December 2011,
were partially met. Those options that are eligible to vest will vest as follows:
April 2014
April 2015
April 2016
Proportion
to vest
1/3
1/3
1/3
June 2011 share option plan
The Group and regional performance targets for the options awarded in June 2011, based on pre-growth profit for the year ending
31 December 2011, were partially met. Those options that are eligible to vest will vest as follows:
June 2014
June 2015
June 2016
Proportion
to vest
1/3
1/3
1/3
August 2011 share option plan
The options awarded in August 2011 are conditional on the ongoing employment of the related employee for a specified period of time.
Once this condition is satisfied those options that are eligible to vest will vest as follows:
August 2014
August 2015
August 2016
Proportion
to vest
1/3
1/3
1/3
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Notes to the accounts continued
25. Share-based payments (continued)
September 2011 share option plan
The performance targets for the options awarded in September 2011, based on the pre-growth operating profit for the year ending
31 December 2012, were partially met. Those options that are eligible to vest will vest as follows:
September 2014
September 2015
September 2016
Proportion
to vest
1/3
1/3
1/3
June 2012 share option plan
The Group performance targets for the options awarded in June 2012, based on pre-growth profit for the year ending 31 December 2012,
were partially met. Once performance conditions are satisfied those options that are eligible to vest will vest as follows:
June 2015
June 2016
June 2017
June 2013 share option plan
The Group performance targets for the options awarded in June 2013, based on Group operating profit for the year ending
31 December 2013, were partially met. Those options that are eligible to vest will vest as follows:
June 2016
June 2017
June 2018
Proportion
to vest
1/3
1/3
1/3
Proportion
to vest
1/3
1/3
1/3
November 2013 (Grant 1) share option plan
The options awarded in November 2013 (Grant 1) are conditional on the ongoing employment of the related employees for a specified
period of time. Once this condition is satisfied those options that are eligible to vest will vest as follows:
November 2016
November 2017
November 2018
Proportion
to vest
1/3
1/3
1/3
November 2013 (Grant 2) share option plan
The options awarded in November 2013 (Grant 2) are partly subject to a performance target based on the earnings before tax for the
years ending 31 December 2016 and 31 December 2017, such that the number of shares vesting will be subject to the satisfaction of
a pre-determined earnings before tax target in 2016 and 2017.
Once performance conditions are satisfied those options that are eligible to vest will vest on the anniversary of the grant date in the year
following achievement of one or more of the target thresholds. Those options not subject to the performance targets are eligible to be
exercised in three equal tranches from the third anniversary of the grant date.
December 2013 (Grant 1) share option plan
The options awarded in December 2013 (Grant 1) are conditional on the ongoing employment of the related employee for a specified period
of time. Once this condition is satisfied those options that are eligible to vest will vest as follows:
December 2016
December 2017
December 2018
Proportion
to vest
1/3
1/3
1/3
December 2013 (Grant 2) share option plan
The options awarded in December 2013 (Grant 2) are subject to a performance target based on the earnings before tax for the years ending
31 December 2018 and 31 December 2021, such that the number of shares vesting will be subject to the satisfaction of a pre-determined
earnings before tax target in 2018 and 2021.
Once performance conditions are satisfied those options that are eligible to vest will vest on the anniversary of the grant date in the year
following attainment of one or more of the target thresholds. Those options not subject to the performance targets are eligible to be
exercised in three equal tranches from the third anniversary of the grant date.
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May 2014 share option plan
The options awarded in May 2014 are conditional on the ongoing employment of the related employees for a specified period of time.
Once this condition is satisfied those options that are eligible to vest will vest as follows:
May 2017
May 2018
May 2019
Proportion
to vest
1/3
1/3
1/3
November 2014 share option plan
The options awarded in November 2014 are conditional on the ongoing employment of the related employees and the achievement of
margin targets. The dates and percentage of options vesting are dependent on the year in which the margin targets are achieved, the earliest
dates on which the options are eligible to vest is as follows:
November 2017
November 2018
November 2019
November 2020
November 2021
Proportion
to vest
1/5
1/5
1/5
1/5
1/5
May 2015 share option plan
The options awarded in May 2015 are conditional on the ongoing employment of the related employees and the achievement of margin
targets. The dates and percentage of options vesting are dependent on the year in which the margin targets are achieved, the earliest dates
on which the options are eligible to vest is as follows:
May 2018
May 2019
May 2020
May 2021
May 2022
Proportion
to vest
1/5
1/5
1/5
1/5
1/5
Measurement of fair values
The fair value of the rights granted through the employee share purchase plan was measured based on the Monte Carlo simulation or the
Black-Scholes formula. The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices.
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Notes to the accounts continued
25. Share-based payments (continued)
The inputs to the model are as follows:
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
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
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
May 2015
250.80p
250.80p
27.23% –
30.12%
–
–
3–7 years
1.59%
42.35p –
69.12p
0.81% –
1.53%
November
2014
188.40p
186.00p
24.67% –
33.53%
–
–
May
2014
191.00p
187.20p
27.30%–
41.91%
–
–
3–7 years 3–5 years
2.00%
30.80p–
59.63p
0.99%–
1.47%
2.02%
27.24p –
54.58p
0.90% –
1.81%
December
2013
(Grant 2)
195.00p
195.00p
32.91%
December
2013
(Grant 1)
195.00p
195.00p
32.91%
–
–
–
–
5–8 years 3–5 years
1.46%
40.56p–
52.41p
0.85%–
1.57%
1.46%
52.41p –
65.95p
1.57%–
2.30p
November
2013
June
2013
(Grant 1)
158.00p
191.90p
155.60p
191.90p
32.69% 40.31%–
48.98%
30,000
–
June
2012
88.55p
84.95p
47.87%–
52.74%
30,000
September
2011
72.50p
74.35p
52.59%–
46.08%
30,000
August
2011
75.90p
67.00p
52.61%–
46.13%
30,000
–
3–5 years
1.46%
39.63p–
51.24p
0.85%–
1.57%
–
3–5 years
2.03%
39.21p–
58.39p
0.67%–
1.20%
–
3–5 years
3.27%
29.88p–
31.12p
0.65%–
1.11%
–
–
3–5 years 3–5 years
3.49%
27.32p–
27.01p
1.29%–
1.91%
3.66%
22.89p–
22.71p
1.16%–
1.75%
EPS
70.60p
69.10p
50.28%–
45.61%
30,000
FTSE All
Share
Index
3–5 years
3.40%
22.80p–
23.60p
1.51%–
2.17%
April 2011
TSR
70.60p
69.10p
50.28%–
45.61%
30,000
FTSE All
Share
Index
3–5 years
3.40%
21.51p–
21.51p
1.51%–
2.17%
September 2010
TSR
73.20p
75.00p
46.99%–
56.36%
30,000
FTSE All
Share
Index
EPS
94.00p
100.50p
47.02%–
64.82%
30,000
FTSE All
Share
Index
3–5 years 3–5 years
2.55%
45.49p–
61.77p
3.07%–
3.38%
3.28%
12.40p–
17.40p
2.76%–
3.05%
EPS
73.20p
75.00p
46.18%–
54.32%
30,000
FTSE All
Share
Index
3–5 years
3.28%
35.20p–
42.70p
2.76%–
3.05%
November
2013
(Grant 2)
191.90p
191.90p
32.69%
–
–
3–5 years
1.46%
45.73p
1.22%
June
2011
110.70p
109.50p
51.55%–
44.99%
30,000
FTSE All
Share
Index
3–5 years
2.35%
39.41p–
40.96p
1.81%–
2.57%
June 2010
TSR
94.00p
100.50p
46.74%–
55.98%
30,000
FTSE All
Share
Index
3–5 years
2.55%
19.50p–
26.30p
3.07%–
3.38%
Plan 2: Regus plc Co-Investment Plan (CIP) and Long-Term Incentive Plan (LTIP)
The CIP operates in conjunction with the annual bonus whereby a gross bonus of up to 50% of basic annual salary will be taken as a deferred
amount of shares (Investment Shares) to be released at the end of a defined period of not less than three years, with the balance paid in cash.
Awards of Matching Shares are linked to the number of Investment Shares awarded and will vest depending on the Company’s future
performance. 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.
The LTIP provides for the Remuneration Committee to make stand alone long-term incentive awards without reference to the annual bonus
up to a maximum of 100% of salary per calendar year.
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Reconciliation of outstanding share options
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
2015
Number of
awards
5,760,289
1,039,760
–
(1,251,836)
(1,874,545)
3,673,668
–
2014
Number of
awards
9,377,249
809,610
–
(3,056,082)
(1,370,488)
5,760,289
24,424
The weighted average share price at the date of exercise for share awards and options exercised during the year ended 31 December 2015
was 244.98p (2014: 221.64p).
Plan
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
CIP: Investment shares
CIP: Matching shares
Date of grant
03/11/2005
23/03/2010
Date of grant
18/03/2008
18/03/2008
23/03/2009
23/03/2009
06/03/2013
06/03/2013
05/03/2014
05/03/2014
04/03/2015
04/03/2015
Numbers
granted
3,723,235
2,900,472
6,623,707
Numbers
granted
1,557,391
5,922,916
2,212,734
8,614,284
304,294
1,217,176
161,922
647,688
207,952
831,808
21,678,165
Lapsed
(1,092,818)
(2,304,207)
(3,397,025)
Exercised
(2,630,417)
(596,265)
(3,226,682)
At 31 Dec
2015 Release date
03/11/2008
23/03/2013
–
–
–
Lapsed
(86,956)
(3,748,117)
(172,835)
(5,440,175)
–
(308,558)
–
(235,484)
–
(302,504)
(10,294,629)
Exercised
(1,470,435)
(1,733,223)
(2,039,899)
(2,466,293)
–
–
–
–
–
–
(7,709,850)
At 31 Dec
2015 Release date
– 18/03/2011
441,576
See below(1)
– 23/03/2012
See below(2)
See below(1)
707,816
304,294 06/03/2016
908,618
161,922 05/03/2017
412,204
207,952 04/03/2018
529,304
3,673,686
See below(4)
See below(3)
(1) 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 specific
performance conditions for Matching Shares under the CIP which were awarded in March 2008 and March 2009.
(2) The release dates for the three tranches of the March 2013 CIP Matching Shares are 6 March 2016, 6 March 2017 and 6 March 2018 respectively.
(3) The release dates for the three tranches of the March 2014 CIP Matching Shares are 5 March 2017, 5 March 2018 and 5 March 2019 respectively.
(4) The release date for the Matching Share awards of the March 2015 CIP is 4 March 2020.
Measurement of fair values
The fair value of the rights granted through the employee share purchase plan was measured based on the Monte Carlo simulation.
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
04/03/2015
CIP
225.00p
Nil
250,000
32
3 years
1.78%
06/03/2013
CIP
143.50p
Nil
250,000
32
3 years
2.23%
75.67p–114.6p 83.11p–214.33p 83.11p–134.21p
0.35%
05/03/2014
CIP
253.30p
Nil
250,000
32
3 years
1.66%
1.01% 0.99%–1.47%
23/03/2010
LTIP(a)
108.10p
Nil
250,000
32
3 years
2.22%
47.00p
1.86%
23/03/2009
CIP(b)
65.50p
Nil
200,000
32
3 years
2.72%
47.97p
1.92%
(a) The LTIP awards have a release date of 23 March 2013. There is no expiry date and therefore remaining contractual life is on the basis that the awards release
immediately. The LTIP options have a vesting date of 23 March 2013 and an expiry of 23 March 2020. The performance conditions are set out below.
(b) 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 was updated
in the year ended 31 December 2010.
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Notes to the accounts continued
25. Share-based payment (continued)
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 to assess the underlying performance
of the business.
While the Remuneration Committee reserves the right to adjust EPS as it sees fit at the time, by way of example, the following adjustments
may be considered for the 2008 and 2009 grants:
• In a fast-growing company such as Regus, costs are necessarily incurred in one year to drive profits 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 relevant periods 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 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 are as follows:
2008 and 2009 CIP Investment and matching grants
The Remuneration Committee agreed to the following modifications to the awards made in 2008 and 2009 and that the following
performance conditions would apply to these awards effective from 22 March 2010.
The total number of matching awards made in 2008 and 2009 to each participant was divided into three separate equal amounts and was
subject to future performance periods of three, four and five years respectively. Thus, conditional on meeting the performance targets, the
first amount vested in March 2013, the second vested in March 2014 and the third vested in March 2015. These vesting dates relate to the
financial years ending 31 December 2012, 31 December 2013 and 31 December 2014 respectively. The vesting of these awards was subject
to the achievement of challenging corporate performance targets. 75% of each of the three amounts was subject to defined earnings per
share (EPS) targets over the respective performance periods. The remaining 25% of each were subject to relative total shareholder
return (TSR) targets over the respective periods. The targets were as follows:
EPS targets for the financial years ending
2012
15p
16p
17p
18p
2013
17p
20p
23p
26p
2014
18p
22p
26p
30p
Regus TSR % achieved relative to
FTSE All Share Total Return index(a)
Equal to or below the index
Above 100% but below 101%
For each complete 1% above 100%
200% or above
% of awards eligible for vesting
25%
50%
75%
100%
% of awards eligible for vesting
Nil
25%
Increments of 0.75%
100%
(a) Over the three-, four- or five-year performance period.
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The total number of matching awards made in 2013 to each participant was divided into three separate equal amounts and is subject
to future performance periods of three, four and five years respectively. Thus, conditional on meeting the performance targets, the first
amount will vest in March 2016, the second will vest in March 2017 and the third will vest in March 2018. These vesting dates relate to the
financial years ending 31 December 2015, 31 December 2016 and 31 December 2017 respectively. The vesting of these awards is subject
to the achievement of challenging corporate performance targets. 75% of each of the three amounts is subject to defined 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 are 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.
% of awards eligible for vesting
Below index
Equal to index
Equal to index + 15% p.a.
(a) Over the three-, four- or five-year performance period.
EPS targets for the financial years ending
2015
12.0p
12.6p
13.3p
14.0p
2016
14.0p
14.6p
15.3p
16.0p
2017
16.0p
16.6p
17.3p
18.0p
Regus TSR % achieved relative to
FTSE All Share Total Return index(a)
0%
25%
100%
2014 CIP Investment and matching grants
The total number of matching awards made in 2014 to each participant was divided into three separate equal amounts and is subject
to future performance periods of three, four and five years respectively. Thus, conditional on meeting the performance targets, the first
amount will vest in March 2017, the second will vest in March 2018 and the third will vest in March 2019. These vesting dates relate to the
financial years ending 31 December 2016, 31 December 2017 and 31 December 2018 respectively. The vesting of these awards is subject
to the achievement of challenging corporate performance targets. 75% of each of the three amounts is subject to defined 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 are 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.
% of awards eligible for vesting
Below index
Median
Upper quartile or above
(a) Over the three-, four- or five-year performance period.
EPS targets for the financial years ending
2016
14.3p
15.2p
16.1p
17.0p
2017
16.1p
17.4p
18.8p
20.2p
2018
17.1p
18.9p
20.7p
22.5p
Regus TSR % achieved relative to
FTSE All Share Total Return index(a)
0%
25%
100%
2015 CIP Investment and matching grants
The total number of matching awards made in 2015 to each participant is subject to a future performance period of three years. Conditional
on meeting the performance targets, the matching shares will vest in March 2020. The vesting date relates to the earning per share (EPS)
performance in the last finance year of the performance period, being 31 December 2017. The vesting of these awards is subject to the
achievement of challenging corporate performance targets. 75% is subject to defined EPS targets over the performance period. The
remaining 25% will be subject to relative total shareholder return (TSR) targets over the period. The targets are as follows:
% of awards eligible for vesting
25%
100%
Compound annual growth in EPS over the
performance period
24%
32%
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Notes to the accounts continued
25. Share-based payments (continued)
The target is based on compound annual growth from an equivalent “base year” EPS figure for 2014 of 7.4p.
% of awards eligible for vesting
Below index
Median
Upper quartile or above
Regus TSR % achieved relative to
FTSE 350 Index (excluding financial services and
mining companies)
0%
25%
100%
Plan 3: One-Off Award
In November 2015, an award of 328,751 ordinary shares of 1p each in the Company was granted to the Company’s Chief Financial Officer
and Chief Operating Officer, Dominik de Daniel. The award was structured as a conditional award and was granted under a one-off award
arrangement established under Listing Rule 9.4.2(2).
In the normal course of events the award will vest over five years, if and to the extent to which performance conditions are achieved. The
applicable performance target is set out below:
Performance metric
Compound annual growth in EPS over the performance period
Reconciliation of outstanding share options
Target
5%
Vesting at target
100%
At 1 January
One-off award granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2015
Number of
awards
–
328,751
–
–
328,751
–
2014
Number of
awards
–
–
–
–
–
–
26. Retirement benefit obligations
The Group accounts for the Swiss and Philippines pension plans as defined benefit plans under IAS 19 (2011) – Employee Benefits.
The reconciliation of the net defined benefit asset/(liability) and its components is as follows:
Fair value of plan assets
Present value of obligations
Net funded obligations
2015
£m
3.9
(4.7)
(0.8)
2014
£m
3.2
(3.4)
(0.2)
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27. Acquisitions
Current period acquisitions
During the year ended 31 December 2015 the Group made a number of individually immaterial acquisitions for a total consideration of £124.8m.
£m
Net assets acquired
Intangible assets
Property, plant and equipment
Cash
Other current and non-current assets
Current liabilities
Non-current liabilities
Goodwill arising on acquisition
Total consideration
Less: Deferred consideration
Cash flow on acquisition
Cash paid
Net cash outflow
Provisional
fair value
adjustments
Provisional
fair value
Book value
–
27.5
25.5
18.0
(48.3)
(7.7)
15.0
2.6
(3.2)
–
3.8
–
(0.4)
2.8
2.6
24.3
25.5
21.8
(48.3)
(8.1)
17.8
107.0
124.8
(1.0)
123.8
123.8
123.8
The goodwill arising on the above acquisitions reflects the anticipated future benefits Regus can obtain from operating the businesses more
efficiently, primarily through increasing occupancy and the addition of value-adding products and services. £37.2m of the above goodwill is
expected to be deductible for tax purposes.
If the above acquisitions had occurred on 1 January 2015, the revenue and net retained loss arising from these acquisitions would have
been £ 94.1m and £ 2.1m respectively. In the year the equity acquisitions contributed revenue of £68.1m and net retained loss of £3.0m.
There was £1.0m contingent consideration arising on the 2015 acquisitions. Deferred consideration of £1.1m (2014: nil) was also paid during
the current year with respect to milestones achieved on prior year acquisitions.
The acquisition costs associated with these transactions were £3.8m, recorded within administration expenses within the consolidated
income statement.
For a number of the acquisitions in 2015, the fair value of assets acquired has only been provisionally assessed at the reporting date. The
main changes in the provisional fair values expected are for the fair value of the leases (asset or liability), customer relationships and plant,
property and equipment. The final assessment of the fair value of these assets will be made within 12 months of the acquisition date and, any
adjustments reported in future reports.
The Group continued to complete acquisition transactions subsequent to 31 December 2015, which will be accounted for in accordance
with IFRS 3. Due to the timing of these transactions, it is not practical to disclose the information associated with the initial accounting for
these acquisitions.
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Notes to the accounts continued
27. Acquisitions continued
Prior period acquisitions
During the year ended 31 December 2014 the Group made a number of individually immaterial acquisitions for a total consideration of £104.2m.
£m
Net assets acquired
Intangible assets
Property, plant and equipment
Cash
Other current and non-current assets
Current liabilities
Non-current liabilities
Goodwill arising on acquisition
Total consideration
Less: Fair value adjustment of historical investment in
acquired joint venture
Less: Deferred consideration
Cash flow on acquisition
Cash paid
Net cash outflow
Provisional
fair value
adjustments
Provisional
fair value
Final
fair value
adjustments
Final
fair value
Book value
0.1
61.2
9.8
9.4
(21.5)
(7.1)
51.9
1.1
(2.3)
–
–
–
(1.5)
(2.7)
1.2
58.9
9.8
9.4
(21.5)
(8.6)
49.2
55.0
104.2
(2.7)
(1.7)
99.8
99.8
99.8
1.5
(0.9)
–
0.5
(0.2)
(0.6)
0.3
2.7
58.0
9.8
9.9
(21.7)
(9.2)
49.5
58.6
108.1
(2.7)
(5.6)
99.8
99.8
99.8
The goodwill arising on the above acquisitions reflects the anticipated future benefits Regus can obtain from operating the businesses more
efficiently, primarily through increasing occupancy and the addition of value-adding products and services. £13.3m of the above goodwill is
expected to be deductible for tax purposes.
If the above acquisitions had occurred on 1 January 2014, the revenue and net retained profit arising from these acquisitions would have
been £18.7m and £2.4m respectively. In the year the equity acquisitions contributed revenue of £16.0m and net retained loss of £1.2m.
There was £5.6m contingent consideration arising on the above acquisitions.
The acquisition costs associated with these transactions were £1.3m, recorded within administration expenses within the consolidated
income statement.
28. Capital commitments
Contracts placed for future capital expenditure not provided for in the financial statements
2015
£m
46.7
2014
£m
26.3
These commitments are principally in respect of fit out obligations on new centres opening in 2016. In addition, our share of the capital
commitments of joint ventures amounted to £2.0m at 31 December 2015 (2014: £nil).
29. Non-cancellable operating lease commitments
At 31 December 2015 the Group was committed to making the following payments in respect of operating leases:
Lease obligations falling due:
Within one year
Between two and five years
After five years
2015
Motor
vehicles, plant
and equipment
£m
2014
Motor vehicles,
plant and
equipment
£m
Total
£m
Property
£m
1.3
2.0
–
3.3
717.0
2031.0
922.7
3,670.7
594.1
1,659.9
684.0
2,938.0
0.7
1.1
–
1.8
Property
£m
715.7
2,029.0
922.7
3,667.4
Total
£m
594.8
1,661.0
684.0
2,939.8
Non-cancelable 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.
The Group’s non-cancellable operating lease commitments do not generally include purchase options nor do they impose restrictions
on the Group regarding dividends, debt or further leasing.
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30. Contingent assets and liabilities
The Group has bank guarantees and letters of credit held with certain banks, substantially in support of leasehold contracts with a variety
of landlords, amounting to £122.8m (2014: £115.2m). There are no material lawsuits pending against the Group.
31. Related parties
Parent and subsidiary entities
The consolidated financial statements include the results of the Group and the subsidiaries listed in note 32.
Joint ventures
The following table provides the total amount of transactions that have been entered into with related parties for the relevant
financial year.
£m
2015
Joint ventures
2014
Joint ventures
Management
fees received
from related
parties
Amounts
owed by
related party
Amounts
owed to
related party
2.2
2.2
7.2
3.5
7.6
4.6
As at 31 December 2015, £nil of the amounts due to the Group has been provided for (2014: £nil). All outstanding balances with these
related parties are priced on an arm’s length basis. None of the balances is secured.
Key management personnel
No loans or credit transactions were outstanding with Directors or officers of the Company at the end of the year or arose during the year,
that are required to be disclosed.
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 benefits
Retirement benefit obligations
Share-based payments
2015
£m
11.3
0.4
3.2
14.9
2014
£m
9.7
0.4
2.2
12.3
Share-based payments included in the table above reflect the accounting charge in the year. The full fair value of awards granted in the year
was £3.5m (2014: £2.7m). These awards are subject to performance conditions and vest over three, four and five years from the award date.
Transactions with related parties
During the year ended 31 December 2015 the Group acquired goods and services from a company indirectly controlled by a Director of
the Company amounting to £15,466 (2014: £44,039). There was a £15,466 balance outstanding at the year-end (2014: 2,723).
All outstanding balances with these related parties are priced on an arm’s length basis and are to be settled in cash. None of the balances
is secured.
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Notes to the accounts continued
32. Principal Group companies
The Group’s principal subsidiary undertakings at 31 December 2015, their principal activities and countries of incorporation are set
out below:
Name of undertaking
Principal activity – Trading companies
Regus do Brasil Ltda
Regus Paris SAS
Regus GmbH & Co. KG
Excellent Business Centres GmbH
Regus Business Centres Italia Srl
Regus Japan KK
Regus Management de Mexico,SA de CV
Regus Amsterdam BV
Regus Business Centre LLC
Regus Management Singapore Pte Ltd
Regus Management Group (Pty) Ltd
Regus Management España SL
Regus Business Centre SA
ABC Business Centres Limited
Acorn Offices Limited
Avanta Managed Offices Ltd
MWB Business Exchange Centres Ltd
Stonemartin Corporate Centre Limited
HQ Global Workplaces LLC
RGN National Business Centre LLC
Office Suites Plus Properties LLC
Regus Business Centres LLC
Principal activity – Management
companies
Regus Australia Management Pty
Regus Business Centres SAS
RBW Global Sarl
Pathway Finance Sarl
Pathway IP Sarl
Regus Service Centre Philippines BV
Regus Global Management Centre SA
Regus Group Services Ltd
Country of
incorporation
Brazil
France
Germany
Germany
Italy
Japan
Mexico
Netherlands
Russia
Singapore
South Africa
Spain
Switzerland
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States
United States
United States
United States
Australia
France
Luxembourg
Luxembourg
Luxembourg
Philippines
Switzerland
United Kingdom
% of
ordinary
share and
votes
held
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Country of
incorporation
United Kingdom
United States
Canada
France
Germany
Hong Kong
Luxembourg
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States
United States
% of
ordinary
share and
votes
held Name of undertaking
Principal activity – Management
companies (continued)
100 Regus Management (UK) Ltd
100 Regus Management Group LLC
100 Principal activity – Holding companies
100 RGN Limited Partner Holdings Corp
100 Regus Holdings SAS
100 Regus GmbH & Co. KG
100 Regus Business Services (HK) Limited
100 Umbrella Holdings Sarl
100 Regus Group Limited
100 Marley Acquisitions Limited
100 Business Exchange Holdings Limited
100 Regus Estates UK Limited
100 Regus Centres UK Limited
100 Regus Corporation LLC
100 Regus H Holdings LLC
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
33. Key judgemental areas adopted in preparing these accounts
The preparation of consolidated financial statements in accordance with IFRS requires management to make certain judgements and
assumptions that affect reported amounts 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
sufficient information to derive an accurate valuation, management calculates an estimated fair value based on available information and
experience.
The main categories of acquired non-current assets where management’s judgement has an impact on the amounts recorded include
tangible fixed assets, customer list intangibles and the fair market value of leasehold assets and liabilities. For significant business
combinations management also obtains third-party valuations to provide additional guidance as to the appropriate valuation to
be included in the financial statements.
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Valuation of intangibles and goodwill
We evaluate the fair value of goodwill and other intangible assets 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 based on our CGUs aggregated at a country level and make that determination based upon future cash flow 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
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 2015, including the sensitivity to changes in those assumptions can be found in note 12.
Impairment of property plant and equipment
We evaluate the potential impairment of property, plant and equipment at a centre (CGU) level where there are indicators of impairment at
the balance sheet date. In the assessment of value-in-use, key judgemental areas in determining future cash flow projections include: an
assessment of the location of the centre; the local economic situation; competition; local environmental factors; the management of the
centre; and future changes in occupancy, revenue and costs of the centre.
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 reflected in the accounting estimates.
It is current Group policy to recognise a deferred tax asset when it is probable that future taxable profits will be available against which the
assets can be used. The Group considers it probable if the entity has made a taxable profit in the previous year and is forecast to continue
to make a profit 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 significant additional tax liabilities over
and above those already provided for.
Onerous lease provisions
We have identified 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 first break point. The accounts include a provision for our estimate of the net amounts payable under
the terms of the lease to the first 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 outflow will
occur and can be reliably estimated.
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Parent company accounts
Summarised extract of Company balance sheet (prepared under Luxembourg GAAP)
As at
31 Dec 2015
(Luxembourg
GAAP)
£m
As at
31 Dec 2014
(Luxembourg
GAAP)
£m
644.6
–
–
–
0.3
683.4
–
–
0.9
–
42.9
19.9
–
0.1
687.9
9.5
53.7
0.9
42.9
477.1
57.9
(17.3)
(13.0)
611.7
0.1
–
0.7
1.6
73.8
76.1
687.9
–
0.6
704.8
9.5
53.7
0.9
19.9
500.1
105.0
(9.5)
(11.8)
667.8
0.1
–
0.5
0.4
36.0
36.9
704.8
Assets
C. Fixed assets
III. Financial assets
1. Shares in affiliated undertakings
2. Loans to affiliated undertakings
4. Loans to undertakings with which the Company is linked by virtue of participating interests
D. Current assets
II. Debtors
2. Amount owed by affiliated undertakings
a) becoming due and payable within one year
4. Other receivables
a) becoming due and payable within one year
III. Transferable securities
2. Own shares
(20,490,613 shares of £0.01 per share (2014: 12,883,455 shares))
IV. Cash at bank and in hand
E. Prepayments
Total assets
Liabilities
A. Capital and reserves
I. Subscribed capital
II. Share premium and similar premiums
IV. Reserves
1. Legal reserve
2. Reserve for own shares
4. Other reserves
V. Results brought forward
VI. Results for the financial year
VII. Interim dividends
C. Provisions
2. Provisions for taxation
3. Other provisions
D. Non-subordinated debts
4. Trade creditors
a) becoming due and payable within one year
6. Amounts owed to affiliated undertakings
a) becoming due and payable within one year
b) becoming due and payable after more than one year
Total liabilities
Approved by the Board on 1 March 2016
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Financial Officer
100 Regus plc Annual Report and Accounts 2015
100 Regus plc Annual Report and Accounts 2015
Accounting policies
Basis of preparation
The annual accounts have been prepared in accordance with Luxembourg legal and regulatory requirements under the historical
cost convention, which differs in material respects from IFRS in both the measurement and presentation of certain transactions.
The Company is included in the consolidated financial statements of Regus plc.
The balance sheet has been extracted from the full accounts of Regus plc for the period ended 31 December 2015, which are available
from the Company’s registered office, 26 Boulevard Royal, Luxembourg and which will be filed with both the Luxembourg Register
of Commerce and the Jersey Register of Companies.
Financial assets
Shares in affiliated undertakings are valued at purchase price including acquisition costs. Where any permanent diminution in value is
identified, value adjustments are recorded in the profit and loss account. These value adjustments are not continued if the reasons
which caused their initial recording cease to apply.
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Segmental analysis
Segmental analysis – management basis (unaudited)
Americas
2015
EMEA
2015
Asia Pacific
2015
Mature(1)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
REVPOW
2014 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
2015 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)(5)
Closures
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Total
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Unallocated contribution (£m)
REVPAW (£)
Period end workstations(6)
Mature
2014 Expansions
2015 Expansions
Total
125,841
83.0%
712.1
189.0
6,817
12,677
59.8%
43.6
(5.7)
10,635
48.3%
22.6
(10.7)
261
72.4%
0.9
(1.6)
149,414
78.5%
779.2
171.0
–
5,215
126,073
12,614
26,777
165,464
54,548
79.4%
321.2
89.6
7,417
15,774
65.1%
56.6
5.1
7,224
51.6%
26.7
(4.0)
355
71.5%
2.1
(0.2)
77,901
73.9%
406.6
90.5
–
5,219
56,316
11,952
14,223
82,491
52,352
85.4%
239.1
68.7
5,351
16,753
61.2%
36.2
(0.9)
9,178
32.8%
13.0
(8.8)
288
74.3%
0.8
(0.8)
78,571
74.0%
289.1
58.2
–
3,679
53,027
16,829
22,031
91,887
United
Kingdom
2015
51,524
81.1%
352.9
86.8
8,441
4,302
74.2%
32.8
8.6
7,880
82.8%
56.4
10.0
2,015
74.7%
7.1
2.3
65,721
80.7%
449.2
107.7
–
6,835
52,893
4,985
13,078
70,956
Other
2015
Total
2015
–
–
2.9
(0.2)
284,265
82.4%
1,628.2
433.9
6,950
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.9
(0.2)
–
–
–
–
–
–
49,506
63.2%
169.2
7.1
34,917
34.7%
118.7
(13.5)
2,919
74.1%
10.9
(0.3)
371,607
77.0%
1,927.0
427.2
1.2
5,186
288,309
46,380
76,109
410,798
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Mature(1)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
REVPOW
2014 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)(6)
Closures(3)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Total
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Unallocated contribution (£m)
REVPAW (£)
Notes:
Americas
2014
EMEA
2014
Asia Pacific
2014
125,540
79.1%
660.1
157.3
6,647
4,977
42.7%
12.7
(7.5)
1,148
70.5%
5.1
(0.5)
131,665
77.7%
677.9
149.3
–
5,149
53,301
77.6%
341.0
83.2
8,244
6,510
49.0%
20.0
(3.8)
1,463
69.4%
8.5
(0.4)
61,274
74.4%
369.5
79.0
–
6,030
51,923
78.9%
230.6
64.9
5,629
6,170
34.9%
8.3
(5.0)
818
73.4%
3.1
0.7
58,911
74.2%
242.0
60.6
–
4,108
United
Kingdom
2014
50,082
83.7%
340.2
81.0
8,116
3,284
72.3%
21.0
10.5
6,671
76.9%
24.9
2.5
60,037
82.3%
386.1
94.0
–
6,431
Other
2014
Total
2014
–
–
0.6
1.1
–
–
–
–
–
–
–
–
–
–
–
0.6
1.1
–
–
280,846
79.6%
1,572.5
387.5
7,034
20,941
47.0%
62.0
(5.8)
10,100
74.8%
41.6
2.3
311,887
77.3%
1,676.1
384.0
(0.9)
5,374
(1) The mature business comprises centres not opened in the current or previous financial year.
(2) Expansions include new centres opened and acquired businesses.
(3) A closure for the 2014 comparative data is defined as a centre closed during the period from 1 January 2014 to 31 December 2015.
(4) Workstation numbers are calculated as the weighted average for the year.
(5) 2015 expansions includes any costs incurred in 2015 for centres which will open in 2016.
(6) Workstations available at period end.
www.regus.com 103
www.regus.com 103
Strategic reportGovernanceFinancial statements
Post-tax cash return on net investment
The purpose of this page is to reconcile some of the key numbers used in the returns calculation back to the Group’s audited statutory
accounts, and thereby, give the reader greater insight into the returns calculation drivers. The methodology and rationale for the
calculation are discussed in the Chief Financial Officer’s review on page 18 of these accounts.
Description
Revenue
Centre Contribution
(Profit)/loss on disposal of assets
Reference
Income statement, p56
Income statement, p56
EBIT reconciliation
(analysed below)
Underlying centre contribution
Selling, general and administration expenses(1) Income statement, p56
EBIT
Depreciation and amortisation
Amortisation of partner contributions
Amortisation of acquired lease fair value
adjustments
Non-cash items
Taxation (2)
Adjusted net cash profit
Maintenance capital expenditure
Partner contributions
Net maintenance capital expenditure
Post-tax cash return
Growth capital expenditure
Partner contributions(3)
Net investment
EBIT reconciliation
(analysed below)
Note 5, p69
Note 5, p69
Note 5, p69
Capital expenditure
(analysed below)
Partner contributions
(analysed below)
Capital expenditure
(analysed below)
Partner contributions
(analysed below)
2012
Aggregation
1,301.3
367.8
2013
Expansions
326.9
67.3
2014
Expansions
169.2
7.1
2015
Expansions
7
118.
(12.6)
2016
Expansions Closures
10.9
–
(0.3)
(0.9)
Total
1,927.0
428.4
–
367.8
(163.9)
203.9
79.5
(20.4)
(2.6)
56.5
(40.7)
219.7
0.1
67.4
(49.0)
18.4
31.6
(6.5)
(2.2)
22.9
(3.7)
37.6
–
7.1
(41.2)
(34.1)
20.3
(5.6)
(0.3)
14.4
6.8
(12.9)
–
(12.6)
(27.8)
(40.4)
11.8
(2.9)
0.5
9.4
8.0
(23.0)
–
(0.9)
(0.2)
(1.1)
–
–
–
–
0.2
(0.9)
(0.4)
(0.7)
(1.8)
(2.5)
2.0
(0.2)
–
1.8
0.5
(0.2)
(0.3)
428.1
(283.9)
144.2
145.2
(35.6)
(4.6)
105.0
(28.9)
220.3
61.1
13.8
–
–
–
–
74.9
(23.6)
37.5
182.2
(3.7)
10.1
27.5
–
–
(12.9)
–
–
(23.0)
–
–
(0.9)
–
–
(0.2)
(27.3)
47.6
172.7
965.0
307.5
208.4
305.2
9.5
(116.7)
848.3
(62.0)
245.5
(47.4)
161.0
(57.3)
247.9
–
–
–
–
1,795.6
(283.4)
1,512.2
11.4%
–
9.5
–
Post-tax cash return on net investment
21.5% 11.2%
(8.0%)
(9.3%)
(1) Including research and development expenses
(2) Based on EBIT at the Group’s long term effective tax rate of 20%
(3) The 2014 expansions includes £3.4m of partner contributions arising in 2015
2015
Movement in capital expenditure
2014 Growth capital expenditure
2015 Capital expenditure(4)
Property disposals
Reclassification of centres(5)
Centre closures(6)
2015 Growth capital expenditure
2012
Aggregation
970.8
9.8
–
(2.5)
(13.1)
965.0
2013
Expansions
313.0
0.3
–
–
(5.8)
307.5
2014
Expansions
240.7
26.7
(58.5)
–
(0.5)
208.4
2015
Expansions
4.3
298.4
–
2.5
–
305.2
2016
Expansions Closures
–
–
–
9.5
–
–
–
–
–
–
–
9.5
Total
1,528.8
344.7
(58.5)
–
(19.4)
1,795.6
(4) 2016 expansions relate to costs and investments incurred in 2015 for centres which will open in 2016
(5) The 2012 aggregation represents the reclassification of centres which have been refurbished, expanded or relocated and therefore taken on the profile of a new centre.
(6) The growth capital expenditure for an estate is reduced by the investment in centres closed during the year, but only where that investment has been fully recovered.
2015
EBIT reconciliation
EBIT
Profit on disposal of
assets
Share of profit on joint
ventures
Operating profit
Reference
£m
144.2
Note 5, p69
Income
statement,
p56
Income
statement,
p56
0.3
0.3
144.8
2015
Partner contributions
Opening partner
contributions
• Current
• Non-current
Acquired in the period
Received in the period
• 2013 expansions and
before
• 2014 expansions(3)
• 2015 expansions
Utilised in the period
Exchange differences
Closing partner
contributions
• Current
• Non-current
Reference
£m
189.9
Note 17, p78 35.2
Note 17, p78 154.7
–
87.1
27.3
3.4
56.4
(35.6)
6.4
Note 5, p69
247.8
Note 17, p78 48.3
Note 17, p78 199.5
2015
Capital expenditure
Maintenance capital
expenditure
Growth capital
expenditure
Total capital expenditure
Analysed as
• Purchase of subsidiary
undertakings
• Purchase of property,
plant and equipment
• Purchase of intangible
assets
Reference
CFO review, p20
CFO review, p20
Cash flow, p60
Cash flow, p60
Note 14, p77
Cash flow, p60
Note 13, p76
£m
74.9
344.7
419.6
99.4
311.5
8.7
104 Regus plc Annual Report and Accounts 2015
104 Regus plc Annual Report and Accounts 2015
t
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F
i
Five-year summary
Revenue
Cost of sales
Gross profit (centre contribution)
Administration expenses before non-recurring expenses
Research & development
Administration expenses
Operating profit (before non-recurring items)
Non-recurring items
Operating profit (including non-recurring items)
Share of post-tax profit/(loss) of joint ventures
Profit before financing costs
Finance expense
Finance income
Profit before tax for the year
Tax (charge)/credit
Profit after tax for the year
Attributable to:
Equity shareholders of the parent
Minority interests
Earnings per ordinary share (EPS):
Basic (p)
Diluted (p)
Weighted average number of shares outstanding (‘000s)
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 2015
£m
1,927.0
(1,498.6)
428.4
(273.6)
(10.3)
(283.9)
144.5
15.3
159.8
0.3
160.1
(15.0)
0.6
145.7
(25.8)
119.9
Full year ended
31 Dec 2014
£m
1,676.1
(1,293.0)
383.1
(270.9)
(8.7)
(279.6)
103.5
–
103.5
0.8
104.3
(17.3)
0.1
87.1
(17.2)
69.9
Full year ended
31 Dec 2013
£m
1,533.5
(1,159.7)
373.8
(275.9)
(7.2)
(283.1)
90.7
–
90.7
0.1
90.8
(10.5)
1.2
81.5
(14.6)
66.9
Full year ended
31 Dec 2012
£m
1,244.1
(923.4)
320.7
(225.7)
(4.5)
(230.2)
90.5
–
90.5
(0.3)
90.2
(5.9)
0.8
85.1
(14.2)
70.9
Full year ended
31 Dec 2011
£m
1,162.6
(883.5)
279.1
(221.6)
(3.1)
(224.7)
54.4
–
54.4
0.1
54.5
(6.4)
1.3
49.4
(9.0)
40.4
119.9
–
119.9
12.8p
12.6p
933,458
666.0
917.0
36.4
644.3
63.9
2,327.6
(1,085.7)
(650.6)
(7.6)
–
(583.7)
(2,327.6)
69.9
–
69.9
7.4p
7.2p
944,082
549.9
718.8
40.0
565.2
72.8
1,946.7
(891.9)
(513.1)
(4.3)
–
(537.4)
(1,946.7)
66.9
–
66.9
7.1p
7.0p
943,775
491.7
608.7
33.4
423.8
84.7
1,642.3
(758.8)
(364.4)
(4.9)
–
(514.2)
(1,642.3)
70.9
–
70.9
7.5p
7.5p
941,922
363.9
437.5
33.9
333.9
132.3
1,301.5
(612.5)
(157.0)
(4.6)
–
(527.4)
(1,301.5)
41.7
(1.3)
40.4
4.3p
4.3p
941,899
331.3
333.5
32.2
319.2
197.5
1,213.7
(578.4)
(126.4)
(8.2)
–
(500.7)
(1,213.7)
Regus plc Annual Report and Accounts 2015 105
www.regus.com 105
Strategic reportGovernanceFinancial statements
Shareholder information
Corporate directory
Secretary and Registered Office
Lynsey Blair, Company Secretary
Regus plc (Société Anonyme)
Registered Office:
22 Grenville Street
St Helier
Jersey
JE4 8PX
Registered Head Office:
26 Boulevard Royal
L-2449 Luxembourg
Registered Number
Jersey
101523
Luxembourg
R.C.S. B 141 159
Registrars
Capita (Registrars) Jersey Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Auditor
KPMG Luxembourg, Société cooperative
39, Avenue John F. Kennedy
L-1855 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
MNKS
Vertigo Polaris Building
2 – 4 rue Eugène Ruppert
L-2453 Luxembourg
Corporate stockbrokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Financial PR advisors
Brunswick Group LLP
16 Lincoln’s Inn Fields
London WC2A 3ED
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
Like for like
The financial performance from centres owned and operated for
a full 12 month period prior to the start of the financial year, which
therefore have a full year comparative
Centre contribution
Gross profit comprising centre revenues less direct operating
expenses but before administrative expenses
Mature business
Operations owned for a full 12 month period prior to the start of
the financial year, which therefore have a full year comparative
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
Post-tax cash return
EBITDA achieved, less the amortisation of any partner capital
contribution, less tax based on the EBIT and after deducting
maintenance capital expenditure.
Occupancy
Occupied workstations divided by available workstations expressed
as a percentage
Occupied workstations
Workstations which are in use by clients. This is expressed as
a weighted average for the year
REVPAW
Total revenue per available workstation
(Revenue/available workstations)
REVPOW
Total revenue per occupied workstation
WIPOW
Workstation income per occupied workstation
106 Regus plc Annual Report and Accounts 2015
106 Regus plc Annual Report and Accounts 2015
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
Regus plc S.A.
26 Boulevard Royal
L-2449 Luxembourg
www.regus.com
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