Slide 1: 2014 Full Year Results Presentation
2014 Full Year Results Presentation Mark Dixon, Chief Executive Officer Dominique Yates, Chief Financial Officer 3 March 2015 1
Slide 2: Caution statement
Caution statement No representations or warranties, express or implied are given in, or in respect of, this presentation or any further information supplied. In no circumstances, to the fullest extent permitted by law, will the Company, or any of its respective subsidiaries, shareholders, affiliates
Slide 3: A Transformational Year
A Transformational Year • Strong cash performance, with £176m (18.6p per share) of cash generated before net growth capital expenditure and dividends • Grew the network by 24% at a significantly lower average cost of investment • Pro-forma net debt of £55m (0.3x EBITDA). Adjusting for post year end
Slide 4: Highlights
Highlights Financial • Group revenue increased by 15.8%* to £1,676.1m • Group operating profit increased 27*% to £104.3m • 11% increase in full year dividend to 4.0p Operational • Strengthened management team • Material improvements in systems and processes • Significant improvement in overhead effi
Slide 5: Strong growth of national networks
Strong growth of national networks • Net growth capex of £207m New location additions 500 • 166 new towns and cities added in year, 450 increasing depth and breadth of national 448 452 networks 400 448 • Now in 850 cities 350 • 452 new locations added 300 • Increased network to 2,269 locations 250 •
Slide 6: Improved investment profile
Improved investment profile Strong pipeline in place Net capital investment in growth 300 • As of 28 February had clear visibility on c. £120m of net capital investment 250 relating to c. 400 locations 260.2 • Anticipate some further additional 200 investment later in the year, which we will 206.6 u
Slide 7: Generating attractive returns
Generating attractive returns Achieving c20% by year-end • We have consistently generated Achieving c20% 30 Unusual mix by year-end Post-tax Cash Returns based on 2014 results returns in excess of our cost of capital 25 of locations • For all locations opened on or before 26.8% 24.3% 20 31 December
Slide 8: Driven by existing & fast developing demand
Driven by existing & fast developing demand 1. Smartphones 2. Broadband 3. Work at home 4. Work 5. Company 6. Employee anywhere adoption popularity 7. Network 8. Marketing 9. Environmental convenience visibility 8
Slide 9: Size of opportunity / Timing
Size of opportunity / Timing • At least 20,000 locations mapped • 2014 best investment/growth ratio • Envisage more partnering/JV’s, less capital • Continued focus on returns • Grow at a rate we can manage/finance • Prudent balance sheet ceiling – 1.5x Net Debt/Group EBITDA Growth rate Benchmarks 20
Slide 10: Our brands
Our brands Exclusive Mid-price Budget Media / Tech DROP IN LOCATIONS Road Rail Air Retail Libraries Unis 10
Slide 11: Summary
Summary • Transformational year • Good set of results with Regus performing well • Attractive cash returns on net investment • Firm control of overheads • Excellent rates of network growth and healthy pipeline • New openings performing in line with expectations • All achieved whilst continuing our p
Slide 12: Financial review
2014 Results Financial review 12
Slide 13: Continued attractive returns
Continued attractive returns 30 • A conservative measure of 26.8% cash return 24.3% 20 • Simplified approach to 21.4% overhead split to calculate 18.0% individual year group return Post-tax Cash Returns based on 2014 results 14.9% 15.3% 10 on net investment with no weighting for growth 0 4.2% 0.0% •
Slide 14: 2014 post-tax cash return on net investment
2014 post-tax cash return on net investment A worked example – 2011 aggregated locations Description 2011 aggregation £m Gross profit 334.5 Elimination of profit on asset disposals (1.8) Adjusted gross profit 332.7 Overheads (166.9) Adjusted operating profit 165.8 Tax @ 20% of adjusted operating pro
Slide 15: Recent year groups maturing as expected
Recent year groups maturing as expected Post tax return on net investment Post-tax cash return on net investment • New year groups progressing NCO year NEW YEAR NEW YEAR NEW YEAR 2011 group 2014 2013 2012 and before as expected 20 20.9% 16.8% 10 111.4% 4.2% 0 0.0% -5.9% -5.1% -10 -9.5% Return on net
Slide 16: Revenue indicators
Revenue indicators Gross margin Workstations 2014 (before Index Occupancy (Period end) REVPOW depreciation and amortisation) Mature 224,460 100 82.0% 7,134 33.0% 2013 62,080 95 70.6% 6,677 19.6% 2014 56,187 65 * * * Total 342,727 *As these locations opened during the year, REVPOW and Gross Margin da
Slide 17: A good set of numbers
A good set of numbers Group income statement % change % change • Revenue up 15.8% (up 9.3% £ million 2014 2013 (actual (constant currency) currency) at actual rates reflecting significant currency Revenue 1,676.1 1,533.5 9.3% 15.8% headwinds) Gross profit 383.1 373.8 2% 9% (centre contribution) • Op
Slide 18: Improved overhead efficiency
Improved overhead efficiency • Strong performance on overheads despite 20 Total overheads as a % of revenues significant investment in building scalability 19 • Overall up only 4% at constant currency 19.3% 19.0% compared to 24% increase in network 18 18.5% 18.5% % • Overheads as a percentage of rev
Slide 19: Strong cash flow
Strong cash flow £ million 2014 2013 • Group EBITDA increased by Group EBITDA 224.8 188.3 29% at constant currency (19% at actual rates) Working capital 75.1 64.1 Less growth related partner (47.0) (60.4) contributions • Cash generated before net Maintenance capital (53.8) (53.2) growth investment i
Slide 20: A healthy balance sheet
A healthy balance sheet £ million 2014 2013 Balance Sheet Cash flow before growth expenditure 175.6 115.4 • Prudent approach to balance Net growth capital expenditure (206.6) (260.2) sheet management Total net cash flow from operations (31.0) (144.8) • Generated £23m of net cash in H2 • Reported net
Slide 21: Post balance sheet event
Post balance sheet event • On February 26, Regus sold various properties to a third party for £84m • Long-term management agreement secures these locations for Regus • Significantly reduces our net investment in 2014 locations • ‘Exceptional’ profit of c£20m in 2015 • No other knock-on impact 21
Slide 22: Financial summary
Financial summary • Business continues to deliver attractive returns • A good Group result despite continued investment in growth and currency headwind • Pro-forma net debt of £55m (0.3x EBITDA) despite 24% network growth • Healthy balance sheet maintained with significant borrowing headroom • Furth
Slide 23: Outlook
i | =- oe 2014 Results Resus ; A
Slide 24: Continued confidence in growth
Continued confidence in growth • 2014 was a transformational year • Business performing well and continuing to improve – particularly on capital efficiency and overheads • Significant opportunity ahead of us and strong balance sheet • Look to the future with confidence • As of 28 February we had vis
Slide 25: Questions
2014 Results Questions 25
Slide 26: Appendices
ud . 2014 Results Resus . & Appendices
Slide 27: 2014 results – historic presentation format
2014 results – historic presentation format 27
Slide 28: Financial performance by maturity
2014 results – historic presentation format Financial performance by maturity 2014 2013 Mature New Closed Mature New Closed Total Total £m centres centres centres centres centres centres Revenue 1,305.5 363.9 6.7 1,676.1 1,348.7 156.8 28.0 1,533.5 Cost of sales (944.2) (341.0) (7.8) (1,293.0) (986.6
Slide 29: Income statement – mature locations
2014 results – historic presentation format Income statement – mature locations % change % change £ million 2014 2013 (actual (constant currency) currency) Revenue 1,305.5 1,348.7 (3.2)% 3.1% Gross profit (centre contribution) 361.3 362.1 0% 7% Gross margin 27.7% 26.8% Overheads (155.1) (194.9) 20%
Slide 30: Regional performance – mature locations
2014 results – historic presentation format Regional performance – mature locations Mature revenue Mature contribution Mature margin (%) £ million 2014 2013 2014 2013 2014 2013 Americas 579.8 603.9 166.6 171.8 28.7% 28.4% EMEA 290.9 310.7 77.8 81.3 26.7% 26.2% Asia Pacific 214.7 219.8 65.5 60.6 30.5
Slide 31: Cash flow – mature locations
2014 results – historic presentation format Cash flow– mature locations £ million 2014 2013 EBITDA 287.7 249.0 Working capital (8.8) 13.8 Maintenance capital expenditure (53.8) (53.2) Other items 14.5 7.8 Net finance costs (4.3) (5.2) Taxation (40.5) (32.4) Mature free cash flow 194.8 179.8 Mature f
Slide 32: Net investment in new locations
2014 results – historic presentation format Net investment in new locations £ million 2014 2013 EBITDA (62.4) (63.8) Working capital 83.9 50.3 Growth capital expenditure (253.6) (320.6) Other items 0.2 (2.1) Finance costs (12.9) (4.1) Taxation 19.6 15.3 Net investment in new locations (225.2) (325.0
Slide 33: Income statement – new locations
2014 results – historic presentation format Income statement – new locations £ million 2014 2013 New centres 2013 Revenues 291.1 156.8 Gross profit 29.4 6.4 Growth overheads (45.9) (84.9) Operating loss (16.5) (78.5) New centres 2014 Revenues 72.8 - Gross profit (6.5) - Growth overheads (77.8) - Ope
Slide 34: Investor relations contact details
Investor relations contact details Wayne Gerry Group Investor Relations Director +44 (0) 7584 376533 wayne.gerry@regus.com 34