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Regus Net Falls 41% as Recession Hits Small Business

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 March 22 (Bloomberg) -- Regus Plc, the world’s largest operator of serviced offices, reported a 41 percent decline in full-year profit as the economic slowdown curbed demand from small businesses.

Net income fell to 67 million pounds ($100 million), or 7 pence a share, from 113.9 million pounds, or 11.8 pence, a year earlier, the Chertsey, England-based company said today in a statement. Revenue declined 2.1 percent to 1.06 billion pounds.

Small and medium-sized companies cut back on office space as the economic crisis hurt their earnings. Occupancy rates fell at Regus’s 1,000 office centers in 78 countries and the company was forced to lower prices and offer greater incentives to attract tenants.

“While the outlook remains unclear, particularly for the U.K., we are cautiously optimistic across our other three geographies,” Chief Executive Officer Mark Dixon said in the statement. The company plans to accelerate the opening of new centers this year, he said.

Regus climbed 3.4 pence, or 3.8 percent, to 90.55 pence at 9:38 a.m. in London trading, the biggest increase since Jan 6. The shares gained 74 percent in the 12 months to March 19, compared with a 52 percent gain for the FTSE All-Share Support and Services Index in the same period.

Average revenue per available workstation fell 7 percent to 6,535 pounds from a year earlier and occupancy declined to 77.7 percent from 82.9 percent a year earlier. In the U.K., where a fifth of Regus’s workstations are located, revenue dropped 13 percent to 191.4 million pounds.

Rent Negotiations

Regus is seeking lower rents and other cost reductions from some of the landlords it leases office space from in the U.K., Dixon said.

“We need rents down to a market level so that the centers can trade normally,” the CEO said in a telephone interview. “We are trying to do it consensually,” by offering to sign long leases and share profits when business recovers, he said.

Regus lifted its second-half dividend to 1.6 pence from 1.2 pence a year earlier. That lifted the total payment for 2009 to 2.4 pence a share, up from 1.8 pence in 2008.

The company has net cash of 237 million pounds, which Dixon said will be used to finance an expansion into 10 new countries, including Oman, Senegal and Estonia.

The company plans to increase the number of workstations it operates this year by as much as 15 percent, chiefly in Asia, the U.S. and Brazil, Dixon said.

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