The online strategy of British workplace provider Regus deserves particular attention, given that it could drive its expansion over time. This £2.3bn market cap group is taking it seriously, but just how good is its online reach?
On the day Regus reports its interim results, we have delved into its online set-up and its financial performance. Here are our key findings.
SEO Audit & Online Strategy
Our initial SEO assessment of regus.co.uk reveals a decent technical set-up, which combines with an excellent mobile user experience, yet its organic performance could suffer due to some structural issues and a rather poor on-page optimisation.
Moreover, what’s known as “duplication” in the SEO world could cause other side issues, which could ultimately affect its rankings. More on this topic will be released by our team on Wednesday, when we’ll publish our comprehensive SEO Audit of regus.co.uk. We have also looked at regus.com.
“We have further invested in our digital platform, MyRegus and mobile apps, now supporting over 40 languages while improving the user experience and increasing functionality,” Regus noted today in its half-year results.
“Customers can manage their bookings online, make bookings and search for locations and we will continue to expand our services to offer a 24×7 platform for customer convenience,” it said, adding that the group had “released our WorldKey app providing a digital membership card, on to which we will build our future integrated access control and vending solutions to make it even easier for customers to access our services.”
Financials
Regus’s financials today showed that the group has become a mean, lean machine — but one whose valuation is rather demanding!
Key metrics for H1:
- Return on investment rose to 23.1%
- Revenues up 16.4%; operating profit up 62%
- £79.9m, or 8.5p per share, of cash generation in H1 (before net growth capital expenditure, share buybacks, dividends and disposal proceeds), for a cash conversion of 123%
- Underlying earnings per share up 88% to 4.9p
- 12% increase in interim dividend to 1.4p (H1 2014 : 1.25p)
Management confirmed guidance, and Regus stock rallied, of course, on the back of a solid trading update, recording a +8% performance in early trade.
Yet how much value is in it?
Value
Since a two-year trough of about 165p a share in October 2014, its stock has surged 55% and now trades at 265p, which implies a rich multiple of 8x based on its forward Ebitda.
JP Morgan upgraded the stock to 280p a share last week, but at 25x forward earnings, and with a forward yield below 2%, Regus is a less obvious buy than it may seem.
True, its solid balance sheet offers reassurance, but then it will have to continue to grow at a very fast pace, while maintaining its core profitability in the region of 7%-8%, in order to command a valuation premium over time.
“We continued to grow our network and remain encouraged by the pipeline for the remainder of the year, with visibility of net investments for the whole of 2015 of approximately £230m, the equivalent of 600 new locations globally,” it said.
To achieve that, its online set-up, among other things, must be flawless.
If you want to discuss any of these topics with our team, please email us at info@hedgingbeta.com
Alessandro Pasetti and Hedging Beta are not invested in any of the shares mentioned in this article.