Regus is a global provider of serviced offices which announced full results today. Revenues were up 9.3% to £1.6bn and operating profit was up 15% to £104m on a 24% increase in the network of offices to 2.2k locations. A further £207m of net capital was invested in growth with a lower average cost of investment due to mix and new office formats.

So why is this interesting? Lets start with a little bit of history.

Regus was founded in 1989 by Mark Dixon. Businessmen, Dixon reasoned, needed a remote location for meetings, somewhere cheap and easy but outside their usual place of work. By the late 1990s, Regus had, along with much else at this time, morphed into a tech company. Remote working was the future and Regus could provide the space, the growth potential was unlimited.

Unfortunately, this didn't happen and Mark Dixon lost over a billion pounds, on paper, in less than a year. Regus was forced to sell off part of the UK arm of the company and put the U.S. business into bankruptcy but survived to live another day.

Today, the business has returned to its former glory. Unfortunately, Dixon hasn't quite left the 1990s behind, this is a property company with an R&D budget. I have no idea how this budget is allocated but there is all the usual tech nonsense like self-driving office cars...or something. I don't think investors should be put off though, Dixon is clearly a dreamer and probably wouldn't have been able to recover from the early 2000s otherwise. His ~30% stake means he continues to be financially dependent on the future of Regus,

Now into the meat of it...this is a business with a £2.1bn market cap but only ~£80m of PBT, why on earth should investors be interested?

Yes, the headline numbers are hard to understand but if we look at how the company is allocating capital, we can see that this business is probably significantly undervalued.

So what Regus does, in simple terms, is spend a lot of money today and builds up capacity over three years until the investment starts to pay off. The difficulty for investors is that over the past three years, Regus has spent almost £600m developing new sites. Before 2012, the cumulative net growth investment in the business…

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