UPDATE 2-Regus says to open 300 new centres in 2014

Tue Mar 4, 2014 10:17am EST

* Says focus on new markets, smaller cities

* Full-year pretax profit falls 4 pct to 81.5 mln stg

* Full-year revenue 23 pct to 1.53 bln stg

* Co opened 448 work centres in 2013

* Investment for new centres to hurt earnings - analysts

By Esha Vaish

March 4 (Reuters) - Office space supplier Regus Plc said it would open at least 300 work centres this year, adding to the 448 it opened last year, as it moves into smaller cities and expands into new markets such as Africa.

Regus, which rents out meeting rooms, business lounges and office spaces, has been increasingly focusing on leasing spaces at unconventional locations such as railway stations, libraries and universities.

"You can always sit down and work in a coffee shop, but we're providing something that's an improvement over that," Regus's billionaire founder and Chief Executive Mark Dixon told Reuters.

Regus, which has seen growing demand for flexible work spaces from larger clients, said about 10 percent of the centres it would open this year would be in new markets.

"In 2014, there's an emphasis on growing in Africa," Dixon said.

Regus, which runs about 1,800 work centres in more than 100 countries in the Americas, Asia Pacific, Africa and Europe.

Some analysts, however, warned that costs associated with opening more centres weigh on the company's profit.

"A faster rate of new openings would also have a bigger negative impact on profits than we forecast," Goldman Sachs analysts said in a note. They cut their price target on the stock to 222 pence from 233 pence.

Regus shares were down 2 percent at 225 pence at 1516 GMT on the London Stock Exchange on Tuesday. They fell as much as 7 percent in early trading but fast recouped most of the losses.

Peel Hunt analyst Andrew Shepherd-Barron flagged higher net debt associated with opening more centre as a concern and cut his target price on the stock to 270 pence from 290 pence.

The company had net debt of 57.2 million pounds ($95.6 million) on Dec. 31.

New centres opened by Regus take 16-18 months to break even, and about two years to fully mature.

Analysts also warned that a strengthening sterling would weigh on the company's results. The currency has gained 0.7 percent against the dollar since the beginning of the year.

Regus, whose clients include GlaxoSmithKline Plc, Google Inc and Toshiba Corp, gets only about 17 percent of its revenue from the UK and Ireland.

The company said pretax profit fell to 81.5 million pounds in the year ended Dec. 31 from 85.1 million pounds a year earlier.

Revenue rose 23.3 percent to 1.53 billion pounds. Revenue per occupied workstation (RevPOW) - a key metric in the space rental business - rose 4.3 percent to 7,750 pounds, said the company.

Analysts on an average had expected pretax profit of 83.38 million pounds on revenue of 1.53 billion pounds, according to Thomson Reuters I/B/E/S.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.