Slide 1: 2014 Interim Results Presentation
2014 Interim Results Presentation Mark Dixon, Chief Executive Officer Dominique Yates, Chief Financial Officer 26 August 2014
Slide 2: Caution statement
2014 Interim Results 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, sha
Slide 3: Agenda
2014 Interim Results 1 Highlights 2 Operational update 3 Evaluating our business 4 Financial review 5 Summary and outlook 3
Slide 4: Strong returns and impressive network growth
Highlights Strong returns and impressive network growth Good financial performance • Group revenues up 16.9%* to £804.7m and operating profit up 41%* to £39.9m • Group overheads (excluding R&D) as % of sales down from 19.2% to 16.8% • Dividend up 14% to 1.25p • Sterling has significantly impacted re
Slide 5: Network growth and scale benefits drive earnings
Operational update Network growth and scale benefits drive earnings Mature portfolio • Scale benefits on 2009 2010 2011 2012 2013 2014** overheads drive improvements to operating margin • Increasing EPS as 948 1029 1144 1372 1810 2260+ mature estate grows (tempered by FX headwinds in 2014) Mature EP
Slide 6: A good mature performance
Operational update A good mature performance Mature portfolio • Continued good performance from this mature group 2009 2010 2011 2012 2013 2014*** • Biggest addition of centres to Mature – 239 centres • Mature revenue up 3.2%* 948 1029 1144 to £647.5m 1372 1810 2260+ • Revenue growth and cost effici
Slide 7: 2013 centre openings progressing well
Operational update 2013 centre openings progressing well Mature portfolio • A significant year of growth 2009 2010 2011 2012 2013 2014** for the group • 438 centres added to network • Financial development on target 948 1029 1144 1372 1810 2260+ • Revenue of £137.9m • Gross profit of £7.0m • MWB con
Slide 8: Strong growth in 2014
Operational update Strong growth in 2014 Mature portfolio • Six months of strong growth 2009 2010 2011 2012 2013 2014** • 194 new centres opened • Three countries added – Botswana, Bangladesh, Namibia 948 1029 1144 1372 1810 2260+ • Third Place locations increasing customer choice - good pipeline of
Slide 9: Improving overhead efficiency
Operational update Improving overhead efficiency • Group overheads* as a percentage of revenue decreased Overheads* as a % of sales from 19.2% to 16.8% 21 • Cost reductions delivered through: • Scale advantages of an ever larger network 20 20.1% • Further automation of back office 19 19.2% • Managem
Slide 10: Understanding growth
Evaluating our business Understanding growth • Increasingly diverse range of opportunities makes the concept of the ‘average centre’ less relevant • Different configurations • Location mix • Wide variety of capital structure • We are also seeing a far wider range of deal types on favourable terms •
Slide 11: Joint-venture with Singapore government
Evaluating our business Joint-venture with Singapore government 11
Slide 12: Partnership with Moto service stations
Evaluating our business Partnership with Moto service stations 12
Slide 13: Evoluon centre in Netherlands
Evaluating our business Evoluon centre in Netherlands 13
Slide 14: 150 sqm centre in Tokyo
Evaluating our business 150 sqm centre in Tokyo 14
Slide 15: Business lounge in Terminal 5 with BAA
Evaluating our business Business lounge in Terminal 5 with BAA 15
Slide 16: Joint venture with British Land at Meadowhall
Evaluating our business Joint venture with British Land at Meadowhall 16
Slide 17: Understanding growth
Evaluating our business Understanding growth • We have a far more diverse business which current data – workstations, occupancy etc – are less relevant for • Investment decision consider the following: • Can we generate returns well in excess of our cost of capital? • Is the growth manageable? • Is
Slide 18: Summary
Summary A strong half year Progress made against all Increased investment in performance our strategic objectives innovation and R&D (+34%) • Improved profitability • Strong network growth • Excellent control of overheads Achieving attractive Expect to have opened at Business is in good shape return
Slide 19: Financial review
2014 Interim Results Financial review 19
Slide 20: Income statement – mature centres
Financial review Income statement – mature centres • Continued strong progress % change % change £ million H1 2014 H1 2013 (actual (constant • Largest new year group addition to date of 239 centres currency) currency) • REVPOW up 2.3%* to £3,523 Revenue 647.5 682.5 (5.1)% 3.2% • Occupancy healthy at
Slide 21: Regional performance – mature centres
Financial review Regional performance – mature centres Mature revenue Mature contribution Mature margin (%) £ million H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 Americas 284.9 308.1 82.7 87.2 29.0% 28.3% EMEA 147.6 158.8 37.2 40.5 25.2% 25.5% Asia Pacific 104.5 110.3 32.7 28.1 31.3% 25.5% UK 10
Slide 22: Cash flow – mature centres
Financial review Cash flow– mature centres • Mature free cash flow per share up 33% to 7.6p £ million H1 2014 H1 2013 (100% EPS cash conversion) EBITDA 132.6 113.5 • Working capital outflow 1.1% of gross Group working capital – mainly timing Working capital (16.6) (2.2) • Maintenance capital expendi
Slide 23: Net investment in new centres
Financial review Net investment in new centres • 194 centres added £ million H1 2014 H1 2013 • New centres continue to have positive impact on EBITDA (35.7) (33.4) working capital Working capital 22.8 13.3 • Investment continues to be supported by strong mature free cash flow and increased external
Slide 24: Income statement – new centres
Financial review Income statement – new centres New centres - 2013 £ million H1 2014 H1 2013 • MWB delivering expected contribution to operating profit New centres 2013 • 2013 organic openings impacted profits in H1 Revenues 137.9 51.8 Gross profit 7.0 3.9 New centres - 2014 Growth overheads (24.6)
Slide 25: Consolidated cash flow
Financial review Consolidated cash flow • Generated strong mature cash flows £m H1 2014 H1 2013 • Invested significantly in growth Mature free cash flow 71.8 53.8 • Paid the 2013 final dividend • Net debt of £161.3m New investment in new centres (148.5) (167.4) Closed centres cash flow (0.6) (0.3) T
Slide 26: A prudent balance sheet
Financial review Net cash / (debt) A prudent balance sheet 200 188 • Prudent approach to balance sheet funding 100 120 • Raised £170m via a loan note – well received by investor base £m 0 • Available funding of £490m (57) • Target to maintain net debt: Group EBITDA leverage ratio 100 below c. 1.5x (
Slide 27: Group overheads (excluding R&D)
Financial review Group overheads (excluding R&D) As expected, a very strong performance Overheads as a % of sales Total Group overheads 21 275.9 132.5 20 20.1% 221.6 225.7 107.9 109.1 19 19.2% 194.6 19.1% 95.6 18.4% % 18 £m 143.4 135.0 17 113.7 116.6 16.8% 99.0 16 15 H1 H1 H1 H1 H1 2010 2011 2012 20
Slide 28: Group results - overview
Financial review Group results - overview £ million H1 2014 H1 2013 Revenue 804.7 744.7 • Revenue up 16.9% and operating profit up 41% Gross profit at constant currency 178.8 180.6 (centre contribution) • R&D spend up 34% Gross margin 22.2% 24.3% • Dividend up 14% Overheads (135.0) (143.4) Investmen
Slide 29: The way we look at growth
Financial review The way we look at growth Growth strategy is returns driven Increasing diversity in centre size, Increasing variety of capital – 25% return on investment from configuration and location structures - high and low capital 2010 and 2011 centres intensity, management contracts, Joint-Ve
Slide 30: Financial summary
Financial review Financial summary Another strong performance Guidance •Good mature operating profit growth of 44% at constant •Maintenance capital expenditure 4-5% of revenues currency and excellent cash conversion •Effective tax rate remains at 20% •Strong discipline over cost control with further
Slide 31: Summary and outlook
2014 Interim Results Summary and outlook 31
Slide 32: Summary
Summary and outlook Summary 2014 priorities •Focus on continued strong returns for the mature estate •Ensure new centres continue to develop in line •Maintain tight grip on overheads and deliver further economies of scale Outlook •Expect to add at least 450 new business centres, as well as additiona
Slide 33: Questions
2014 Interim Results Questions 33
Slide 34: Appendices
2014 Interim Results Appendices 34
Slide 35: Financial performance by maturity
2014 Interim Results Financial performance by maturity H1 2014 H1 2013 Mature New Closed Mature New Closed Total Total centres centres centres centres centres centres £m Revenue 647.5 154.4 2.8 804.7 682.5 51.8 10.4 744.7 Cost of sales (471.7) (150.8) (3.4) (625.9) (506.4) (47.9) (9.8) (564.1) Gross
Slide 36: Investor relations contact details
2014 Interim Results Investor relations contact details Wayne Gerry Group Investor Relations Director +44 (0) 7584 376533 wayne.gerry@regus.com 36