Office Space News
Regus Profits Drop 41 Percent in Down Economy
Published March 22nd, 2010 by Jennifer LeClaire
Last week, the Wall Street Journal hinted that Regus was seeing some rough waters. This week, the financial press reports that the serviced office giant saw a whopping 41 percent decline in full-year profit in the midst of a global economic downturn.
“Despite pressure on our price and occupancy, our strategy of creating a long-term balanced business mix has proven successful over the past year as we increased global brand awareness, further diversified our product mix, and achieved controlled, geographic growth including the opening of 45 new centers,” said Regus CEO Mark Dixon.
Here’s the rundown on the losses:
- Net income declined by $100 million
- Overall revenue declined 2.1 percent as Regus was forced to lower prices
- UK revenue dipped 13 percent
- Occupancy rates declined to 77.7 percent from 82.9 percent
- Average revenue per workstation fell 7 percent
“While the outlook remains unclear, particularly for the U.K., we are cautiously optimistic across our other three geographies,” said Dixon, adding that the company plans to expand rapidly in 2010.
Regus boasts 237 million pounds of cash reserve, which equals more than $357 million U.S. dollars. That should come in handy as the company sets out to raise the number of serviced office centers that bear its name by as much as 15 percent, with a focus on the U.S. Asia and Brazil.
“While the outlook remains unclear, particularly for the UK, we are cautiously optimistic across our other three geographies,” said Dixon. Last year, Regus reached the 1,000 business centers mark.
“Regus is a clear market leader in what we consider to be a growth market,” Investec analyst Wayne Gerry told Reuters. “The group’s trading and cash performance through this challenging economic environment demonstrates the resilience of its business model.”
Can Regus do a better job of filling its office space in 2010? That remains to be seen, as competition increases and the economy remains in a weakened position. One thing is certain: Regus has a long-term view, evidenced by its continual expansion despite recorded losses in key areas.
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Bill Brookshire March 22nd, 2010 at 9:41 am
Regus appears to be charging ahead without looking back. Some companies in the serviced office space might think this is a risk, and I suppose it is. But it’s not like Regus is the only one expanding. I think the occupancy rates at Regus are probably fairly closely aligned to the industry average. In any case, Regus is looking to drive its dominance deeper this year. It may take years before we see if it pays off.
Elizabeth Sanchez March 22nd, 2010 at 10:03 am
Public companies always have to give the positive outlook. I wonder, though, how worried Regus really is with these results and with Servcorp looking to challenge more. @Bill is right that the competition is increasing. Since many still aren’t familiar with the executive office suites industry, I’m not sure brand familiarity will be the end all for Regus. Innovative smaller brands in local markets should be able to compete with pricing and by finding their own niche.