There are plenty of positives to be found in the latest numbers from flexible workspace provider Regus (RGU). Revenue grew by more than 10 per cent at constant currency, post-tax cash returns on investment grew 180 basis points to 24.8 per cent - a level well above the cost of capital - and underlying operating profit is up 30 per cent to £90m.
So why did the share price fall briefly following this result announcement? The answer, it seems, is in the detail. Revenue growth at constant currency slowed from 14.5 per cent in the first quarter to 6.4 per cent in the second, reflecting not just a like-for-like adjustment for acquisitions, but also softening demand and the group's decision to take a more cautious approach regarding lease renewals and site consolidation in certain markets. Margins have held up for newer openings, which is encouraging given that management took the short-term decision to lower prices in an attempt to build occupancy levels.
Also interesting was management's decision to shy away from any currency-driven upgrades for the full financial year. Analysts at Peel Hunt took the plunge instead, and now expect pre-tax profit of £174m for the year ending December 2016, giving EPS of 14.6p, compared with £130m and 11p in 2015.
| REGUS (RGU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 307p | MARKET VALUE: | £2.86bn | |
| TOUCH: | 307.1-307.5p | 12-MONTH HIGH: | 357p | LOW: 243p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 73p* | NET DEBT: | 26% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 0.94 | 79.1 | 7.2 | 1.4 |
| 2016 | 1.08 | 84.3 | 7.2 | 1.55 |
| % change | +15 | +7 | - | +11 |
Ex-div: 8 Sep Payment: 7 Oct *Includes intangible assets of £705m, or 76p a share | ||||
