Regus to add to Scottish operation as it cheers City

OFFICE space supplier Regus yesterday revealed plans to sharply expand its Scottish operation due to burgeoning demand among cost-conscious corporates as it cheered the market with a return to the black.

Mark Dixon, group chief executive, revealed there had been a pick‑up in activity both north and south of the Border in the first six months of the year as big businesses looked for temporary work space amid the economic uncertainty.

Shares in the firm closed up 4.7 per cent, or 3p, at 67p after it posted a half-year pre-tax profit of £13 million, swinging from a £6.1m loss during the same period last year.

Dixon said: “We expect to see the level of growth increase in the second half as we are still seeing very healthy levels of demand with more companies looking to cut costs and move to flexible working and we will need to open up centres to supply that demand.”

Regus has 165 UK centres, with ten in Scotland focused on Edinburgh, Glasgow and Aberdeen. Dixon said the group planned to double its properties in Scotland over the next 18 months, focusing on different cities than the current three.

“There’s a lot more demand in Scotland for people who want to work more flexibly and closer to home, when they are currently commuting quite long distances,” Dixon said. “We are looking to establish a national network in Scotland over that period.”

Half of the group’s temporary office space business is aimed at large corporates, with customers including drugs giant GlaxoSmithKline, coffee chain Starbucks and search engine Google.

About 35 per cent is aimed at small and medium-sized businesses employing just a few hundred staff, and 15 per cent is aimed at small company start‑ups and entrepreneurs.

Regus, which offers ready‑to‑use offices that can be rented for as little as half a day, said occupancy at centres opened before January 2010 was at a record level of 86.7 per cent, while its profit margins had jumped by three percentage points to 20 per cent.

Dixon added: “You might think we might [suffer in a business downturn] but it’s the opposite. People are cutting back on costs, not business. They still have to go out and do business but in a more cost‑effective way. The growth in mobile and home working is extraordinary.”

Regus operates in 90 countries, generating 80 per cent of revenues from abroad, with a strong presence in emerging markets – such as Brazil, China and India – and mature markets such as the United States.

The firm, which was set up in 1989, listed on the stock market in 2000 but had a close shave two years later when its US business filed for Chapter 11 bankruptcy and private equity group Alchemy Partners took a stake in the UK operation, which was then sold back to Regus in 2006.

The group’s interim dividend was hoisted 6 per cent to 0.9p from 0.85p. One analyst said: “Regus looks tailor‑made for this tough economic climate.”