Office Space News
Regus Turns a Profit, Admits Rough Market Conditions
Published May 20th, 2009 by Jennifer LeClaire
Regus isn’t only growing its locations, it’s also growing its revenue. But the serviced office giant’s latest earnings report demonstrates that it is not immune to the global recession.
On Tuesday, Regus reported a 16 percent increase in revenues for the first four months of the year. Despite the string of new executive office suites openings, however, the company admitted pressure on occupancy and prices has impacted its net income. Regus’ net cash balance increased to 227.6 million pounds at the end of April.
Let’s drill down into the numbers. Regus’ revenue rose to 387 pounds, or $593.9 million, in the first four months of the year. That compares to 334.5 million pounds in the year-ago period. With many companies around the world suffering losses and bankruptcy, Regus can’t really complain.
Regus revenue growth was spurred, in party, by 16 new business centers during the reporting period, including its 18th in Manhattan. Stateside, Regus recently opened new serviced office in Des Moines, St. Charles, Atlanta, North Dallas, and a Dayton suburb. Internationally, Regus opened new offices in Pune, India, Hangzhou, China, and Warsaw, Poland. The company now operates in 75 countries.
“Market conditions remain tough,” says Regus Chairman John Matthews. “We are continuing to see pressure on occupancy and price which is impacting net income, although this is partly being offset by the additional revenue opportunities arising from our portfolio of recession busting products and the benefits of our ongoing cost reduction program.”
Alex Magni, research head at investment management firm Noble, said 2009 is going to be a tough year for Regus. He published a research note that predicts profits are likely to suffer in the wake of rising unemployment. He also said Regus’ earnings lead him to believe the company’s profits could shrink slight more than he expected.
“Given that the company is highly operationally geared, ongoing price declines will impact its profitability significantly,” he wrote in a research note. Magni is cutting his earnings estimates for Regus by 15 to 20 percent.
Does this spell trouble for Regus? Less rapid expansion? If Regus is feeling the impacts, what does that mean for smaller operators that are vying for market share in an economy where small businesses are not as ready to jump into long-term leases?
“In these more challenging markets we remain confident of our future,” Matthew says. “We are in the number one market position, we have a truly international spread, we have a flexible business model and we have a strong balance sheet.”
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Marcus Hester May 20th, 2009 at 8:45 am
Hmm. Regus is seeing some softening. You would never know it from all the marketing they are doing in the serviced office space. This is a smart company; smart companies know you have to keep marketing in a recession. Perhaps no other company in the executive office suites industry has the brand recognition of Regus.
Rob Zeus May 20th, 2009 at 9:02 am
Interesting is the fact that Regus opened 16 new serviced office facilities in the first four months of the year. That means, basically, one executive office suite opening a week. That’s pretty amazing. The company didn’t give any indication as to whether or not in intends to keep up that pace over the next four months. I guess we’ll have to wait and see.
Maggie Correta May 20th, 2009 at 9:16 am
Some of the new locations mentioned in this article are actually from May, so it does seem Regus is continuing to rush ahead with its expansion strategy on the serviced office front. Rob is right. We’ll have to wait and see if they keep up the pace of executive suites openings. But I imagine they will open at least another 25 this year.
Elizabeth Sanchez May 20th, 2009 at 9:30 am
Regus being one of the only public serviced office companies, their earnings are transparent. I’m not sure what others in the executive offices suites industry can take away from this, other than that they are not immune from the recession. For companies looking at serviced office space as a possibility, you may be able to strike some good deals this summer with all the office space coming online this year.
Bill Brookshire May 20th, 2009 at 9:37 am
This is a reality check for the serviced office industry. You guys better get out there with some messages and marketing that demonstrates why folks should rent office space from you instead of traditional offices. The entire commercial real estate industry is hurting and we see here that the executive office suites sector is definitely not immune!