Office Space News
Regus Revenue Remains Nearly Flat in First Half of 2009
Published August 25th, 2009 by Jennifer LeClaire
Regus has been expanding rapidly and forging alliances that aim to drive growth for the executive office suites company. But Regus’ financial reports for the first half of 2009 show nearly flat year-over-year revenue.
For the first six months of 2009, Regus reports its office space revenues are up by 9.8 percent over the first half of 2008. Operating profit, however, was down 8.1 percent for the period. Still, Regus managed to cut costs and increase its net cash.
“Despite the historically challenging trading conditions, we have delivered a robust first half performance with solid profits and strong cash flow generation. In addition, we have added over eleven thousand new workstations to our global network,” said Mark Dixon, CEO of Regus. “Although we have seen an increased level of customer churn, we have also seen a large number of new customers entering Regus as they seek a cost effective solution for their business needs.”
Regus’ Long-Term View
Dixon says he’s “delighted” with the growth of Regus’ recession-busting products whose revenues have doubled. He sees a positive long-term impact from the company’s portfolio of products and services. Regus recently invested in a telepresence system that puts it on the cutting-edge of video conferencing services in the serviced office industry. Regus clients include Fortune 100s like Google and IBM.
Regus also posted some operational wins. The company’s average number of workstations rose 7.9 percent over the year-ago period. Regus now boasts 160,835 workstations in about 1,000 business centers in more than 70 countries. Regus managed to maintain an average mature occupancy rate above 80 percent. The serviced office giant also opened 23 new business centers in the first six months of the year, saw a 50 percent increase in businessworld memberships, posted a tenfold increase in businessworld revenues, and received 200 applications through its Get Started campaign.
Regus Helps Entrepreneurs
Regus’ Get Started campaign is an initiative to boost Britain’s economy by providing support to bring new business into the marketplace. Specifically, Get Started offers office space and practical support for start ups that need help getting off the ground. Regus is offering unlimited use of its business lounges and cafés worldwide by signing people up to its businessworld program. The Get Started campaign aims to help up to 50,000 budding entrepreneurs realize their business ambitions whilst mitigating some of the risk.
“Whilst we remain cautious on the outlook we are, as the global market leader with a strong financial position, well positioned to manage the business through an extended tough economic environment,” Dixon says. “This position gives the board confidence to raise the interim dividend 33.3 percent in line with its progressive policy and to explore earnings enhancing opportunities that will add to long term shareholder value.”
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About the Author
Mike Sullivan August 25th, 2009 at 7:54 am
In the Americas, Regus is at 80.3% occupancy, down 4.3% from the first half of last year. 80% occupancy is low in this business. Unless you own a building outright or have exceptional terms, you have to make up the low occupancy and rate somewhere to remain profitable. Luckily for Regus, their virtual office business seems to be growing and they have done many things to reduce risk. I sure hope others are doing the same…
Elizabeth Sanchez August 25th, 2009 at 10:35 am
Looks like Regus has hit on some economy issues of its own. I wonder if the occupancy issue is because there are so many new business centers that launch with close to zero percent occupancy. Could that be dragging down the average? Regus is a strong brand. I am surprised that they aren’t doing better, especially with all the alliances they have going on.
Bill Brookshire August 25th, 2009 at 10:50 am
It’s tough as a public company with all the transparency. Everything Regus does is under a microscope. I am not sure if that’s good for the serviced office industry or not. I mean, it’s not as if “as Regus goes, so goes the industry.” I am not sure what to make of the low occupancy, either. Could be so much competition coming into the market. I have long considered how coworking might be impacting things. It’s got to be the least expensive option, though the privacy is zilch.
Melanie Jones August 25th, 2009 at 11:44 am
Dixon is really spinning is, isn’t he? He’s definitely got his public company CEO hat on. But there should be some explanation other than a challenging economy to explain Regus down numbers. It’s great to focus on the future of the serviced office industry, but it’s vital to also focus on the here and now. If you aren’t renting your office space, then you’re in trouble!
Simon August 26th, 2009 at 6:50 am
Great post.
@Elizabeth Sanchez I don’t think the new centers would upset the overall average occupancy levels, as Regus have over 1,000 centers now.
@Milke agree that Regus make a lot from the VO product, for them it is nearly pure profit as the centers and staff are already in place. Remember also they make millions from meeting room bookings, another thing that is highly profitable for them.
Dixon is being typically bullish. Falling profit is bad for any company despite more bums on seats, more centers and more revenue, the bottom line is profit. Their costs have been going up and their revenue per workstation has been falling. That is the key, office space prices have been falling globally – nothing the company can do about that.
Regus have improved their strategy over the last year, trying to focus on start up and SME’s (a group the company willfully ignored in the past in my opinion) with the Get Started campaign.
However given that most companies involved in commercial property have lost money over the last 2 years, Regus have done well not have had a bigger cut in profits.
Jennifer LeClaire August 26th, 2009 at 9:02 am
@Simon… thanks for your insights. Great stuff!