REG - Intnl Workplace Grp Regus PLC - Interim Results Announcement - ending 30 June 2024
06/08/2024 07:00
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RNS Number : 3318Z International Workplace Group PLC 06 August 2024
6 August 2024
H1 RESULTS ANNOUNCEMENT
International Workplace Group plc, the world's largest hybrid workspace
platform with a network in over 120 countries through flexible workspace
brands such as Regus and Spaces, and the services business Worka, issues its
results for the six months ended 30th June 2024.
STRATEGIC NETWORK EXPANSION DELIVERING RECORD REVENUE,
CASHFLOW AND EARNINGS GROWTH
Group Performance: Solid foundations driving record revenue, cashflow
generation and positive earnings
· Group H1 2024 results:
o Highest-ever System-wide revenue of $2.1bn (2% constant currency-growth)
o EBITDA growth of 13% to $274m (H1 2023: $245m)
o Cashflow generation of $118m from business activities leading to a net
debt reduction. Net debt of $(768)m (H1 2023: $(835)m)
o Return to positive earnings with eps of 1.6¢ underpinning an interim
dividend of 0.43¢ per share
o Managed partnership growth continues with new centre signings of 387 and
247 openings (rooms opened +173% year-on-year)
· Divisional performance:
o Managed & Franchised: Growth in new centres with both signings and
openings accelerating, fee income evolving as expected
o Company-Owned & Leased: Margin expansion continuing
o Worka: Maintained revenue as previously guided
· Capital structure: Milestone refinancing of debt, extending
maturities to 2029 / 2030 with new revolving credit facility, inaugural bond
issued backed by a debut investment grade Fitch BBB credit rating
· Stability: No change to the financial outlook set out in the Q1
Trading Update on 7 May 2024 with expected continued growth and net debt
reduction throughout 2024
Mark Dixon, Chief Executive of IWG plc, said:
"The first half of 2024 produced good year-on-year open-centre revenue growth.
We are delivering on our capital-light growth plan. Momentum continues in
signings, and importantly openings, and we are delighted to return to positive
earnings. We remain committed to our strategy of growing our network coverage
and giving our customers a great day at work."
Summary financials
($m) H1 2024 H1 2023 Constant currency Actual
currency
System-wide revenue 2,088 2,060 2% 1%
Managed & Franchised 287 252 15% 13%
Company Owned & Leased 1,613 1,619 0% 0%
Worka 188 189 -1% 0%
Group revenue 1,836 1,836 0% 0%
EBITDA 934 851 10% 10%
Adjusted EBITDA(1) 274 245 13% 12%
Earnings per share (¢) 1.6 (7.5) n.m. n.m.
Cashflow from business activities 118 204
Net financial debt (768) (835)
1. Before the application of IFRS 16 as defined in the Alternative
Performance measures section of the 2023 Annual Report and Accounts
Managed & Franchised: Room openings accelerate, momentum continues
System revenue growth (up 15% year-on-year on a constant currency basis) as
previously signed rooms evolve into openings delivering fee income in-line
with expectations (up 23% year-on-year on a constant currency basis). At the
end of the first half, we have 154,000 rooms open and a pipeline of 151,000
rooms signed but not yet opened.
Signings up 19% year-on-year with 387 Managed & Franchised locations
signed during H1 2024. The evolution of signings into openings is accelerating
with an increase in openings by 173% year-on-year with 37,000 rooms opened in
H1 2024.
Revenue Per Available Room ("RevPAR") is evolving as expected with RevPAR of
all open rooms of $378 per month during the period. Targeted RevPAR at
maturity is $250 per month which would lead to a blended estimated RevPAR of
c$315 once all 305,000 rooms have opened and matured. This would produce a
System revenue of over $1bn annually. It is worth noting that as we expand our
network coverage, a significant proportion of new rooms openings are in more
suburban locations, which generally deliver lower RevPAR on a like-for-like
basis.
As previously guided, we invested heavily into this platform during 2023 to
best position this business for growth. Direct costs have been held broadly
flat, but overheads have gone up as we allocate more central overheads towards
this division as this allocation is done on a System-revenue basis.
H1 2024 H1 2023 Constant currency Actual
currency
System (Partner) revenue ($m) 287 252 15% 13%
RevPAR ($) 378 451 -14% -16%
Fee revenue ($m) 35 28 23% 24%
Contribution(1) ($m) 35 28 23% 24%
Overhead(2) ($m) (44) (38) 17% 17%
Pre-IFRS 16 adjusted EBITDA ($m) (9) (10) n.m. n.m.
Rooms open 154,000 101,000 53%
Centres open 901 541 67%
Rooms opened in the period 37,000 14,000 173%
Centres opened in the period 247 78 217%
Rooms in pipeline 151,000 100,000 51%
New centre deals signed 387 325 19%
1. Gross Profit excluding depreciation before the application
of IFRS 16 defined in the Alternative Performance measures section of the 2023
Annual Report and Accounts
2. Pre-rationalisation costs, SG&A excluding depreciation
before the application of IFRS 16 defined in the Alternative Performance
measures section of the 2023 Annual Report and Accounts
Company-Owned & Leased: Margin expansion delivering cash flow
In line with our strategy to expand margins in this platform to deliver cash
flow, contribution margins expanded by 260bps in H1 2024 to 23.6% (H1 2023:
21.0%). Company-Owned & Leased continues to produce increasing cash flow
as a result of both cost control and 6% constant currency revenue growth from
open centres. We signed 78 new locations and opened 59 in the period; nearly
all of these are capital-light in nature.
H1 2024 H1 2023 Constant Actual
currency currency
Revenue ($m) 1,613 1,619 0% 0%
RevPAR ($) 354 351 1% 1%
Contribution(1) ($m) 380 340 13% 12%
Contribution margin(1)(%) 23.6% 21.0% 260bps
Overhead(2) ($m) (167) (162) 2% 3%
Pre-IFRS 16 adjusted EBITDA ($m) 213 178 23% 20%
Rooms open 771,000 777,000 -1%
Centres open 2,850 2,857 0%
Centres opened in the period 59 55 5%
1. Gross Profit pre-rationalisation costs and excluding
depreciation before the application of IFRS 16 defined in the Alternative
Performance measures section of the 2023 Annual Report and Accounts
2. Pre-rationalisation costs, SG&A excluding depreciation
before the application of IFRS 16 defined in the Alternative Performance
measures section of the 2023 Annual Report and Accounts
Worka: Focus on platform development
As previously guided, revenue growth for Worka has been flat. Worka is focused
on the continued development of its platform and services to capture the full
value chain from the structural growth resulting from the continued expansion
of hybrid working. Worka management is committed to delivering the benefits
from its strategy, but is not expected to be a key contributor to earnings
growth in the short term.
($m) H1 2024 H1 2023 Constant currency Actual
currency
Revenue 188 189 -1% 0%
Contribution(1) 96 99 -4% -4%
Overhead(2) (26) (22) 11% 14%
Pre-IFRS adjusted EBITDA 70 77 -9% -9%
EBITDA margin (%) 31.6% 34.1% -250bps
1. Gross Profit excluding depreciation before the application
of IFRS 16 defined in the Alternative Performance measures section of the 2023
Annual Report and Accounts
2. Pre-rationalisation costs, SG&A excluding depreciation
before the application of IFRS 16 defined in the Alternative Performance
measures section of the 2023 Annual Report and Accounts
Investing for the future: Reducing capex with focus on platform investment and
growth
As we have previously said, Group capex will continue to decline. H1 2024
Capex was $79m (H1: 2023 $102m) and will be expected to decline further.
Maintenance capex has been held flat despite inflationary pressures as we
continue to make efficiency gains, and net fitout centre capex continues to
fall as we pivot further towards Managed & Franchised. We will continue to
invest in technology and systems to increase efficiency into the future.
Cashflow and balance sheet
The business generated cashflow from business activities of $118m in the first
half of 2024 (H1 2023: $204m). Compared to H1 2023 cashflow from business
activities in H1 2024 was lower by $(86)m mainly as a result of pre-paying
rents in H1 2024. Net financial debt reduction remains our priority as we
continue to work towards our leverage target of 1.0x net financial debt /
EBITDA, with net financial debt reducing by $67m over the last 12 months to
$(768)m. In line with our previous plans, we have extended our previous debt
maturities with the issue of the €575m 2030 bond and refinancing of the RCF.
The Board has declared an interim dividend of 0.43c per share. The Group's
capital allocation priority remains net financial debt reduction, targeting
1.0x net financial debt / EBITDA at which time the Group will share the
proceeds of the business between debt and equity holders.
Changes to presentation of financials in 2024
IWG has successfully adopted USD as reporting currency, effective 1 January
2024. The Group has adopted a new name of International Workplace Group plc to
better align us with our stakeholders.
Outlook and guidance
We remain focused on improving the margin in Company-Owned & Leased,
growing fees in the Managed & Franchised business and controlling
overheads across the Group. This is expected to be achieved by increasing both
coverage and System-wide revenue in a capital-light manner. As a result, we
are confident that both 2024 EBITDA and net financial debt will be in-line
with management's expectations which have not changed since the Q1 trading
update on 7 May 2024.
Capital allocation will continue as guided previously, with net debt reduction
expected during the year as we progress towards our target of 1.0x net
financial debt / EBITDA.
Financial calendar
5 November 2024 Third quarter 2024 trading update
4 March 2025 2024 Full Year Results
6 May 2025 First quarter 2025 trading update
Details of results presentation
Mark Dixon, Chief Executive Officer, and Charlie Steel, Chief Financial
Officer, will be hosting a presentation of the results today for analysts and
investors at 9.00am UK time (SPACES, New Broad Street House, 35 New Broad St,
London, EC2M 1NH).
The presentation will be available via live webcast. This will be available to
view at the following link: weblink
(https://links.uk.defend.egress.com/Warning?crId=66b09679c72a64828b5eeeb5&Domain=iwgplc.com&Lang=en&Base64Url=eNoFwokNgCAMAMCJtAKC0W3aUiKJPIHq_ObuVu3zAqDRMDJOlbHgG7NUlrVIzNgf1NRGWbkVkE-qQghojT_NRolZDueQabeefloIGvM%3D&@OriginalLink=broadcaster-audience.mediaplatform.com)
Further information
International Workplace Group plc Brunswick Tel: + 44 (0) 20 7404 5959
Mark Dixon, Chief Executive Officer Nick Cosgrove
Charlie Steel, Chief Financial Officer Peter Hesse
Richard Manning, Head of Investor Relations
Chief Executive Officer's Review
When I look back at the first half of 2024, I see it as a period of strong
evolution and progress, with organisations everywhere accelerating their
investment in the new way of working that is set to transform millions of
lives this year and beyond.
It was a continuation of the 'Big Bang' that started in 2022 and we are
finally seeing the lift-off of the hybrid model and its need for multiple
workplace solutions that some of us have been anticipating for many years.
A fast-growing number of businesses globally are adopting and reaping the
benefits of a model that includes hybrid working. This model enables employers
and employees to work wherever it best suits them - be it at home, the HQ, or
a local office. This uptake is fueled by continuous technological advances.
Technology frees people from the burden of having to attend the same single
far-off workplace five days a week, and it confers multiple freedoms for
employers and employees.
For businesses, it allows more flexibility whilst also improving employee
engagement and continued productivity, and whilst most workers prefer to work
from an office, they do not want to commute. Hybrid working solves this
problem.
As well as being good for people, it is good for the planet. If businesses'
footprints reduce, and fewer people are commuting long distances, we are able
to help our customers reduce their emissions. International Workplace Group
has been carbon neutral since the start of 2023 and strives to go even
further.
Unique strengths to benefit from hybrid working
In contrast to the Real Estate industry, the workplace solutions industry
enabling hybrid work continues to grow. Our story and business are one to be
optimistic about. Demand for our platform is accelerating from both corporates
trying to reduce their real estate costs while creating more flexible working
environments, and their employees. We are uniquely positioned to service this
structural demand shift. Our global network of brands and locations is a huge
attraction to customers and partners, helping us to accelerate our growth in a
capital light fashion. As we enter the second half of the year, we are only at
the start of the change to hybrid work and the flywheel of more coverage as
demand is taking shape.
To meet this demand, we are focused on increasing our supply-side growth to
build a fee-based business. Alongside increasing our partner signings, we are
opening locations at an accelerating rate. In H1 2024, we opened 306
locations - more than our total openings in the whole of 2023. Due to our
business being far more capital-light, we managed to open this many locations
whilst also continuing to reduce our net growth capex spend.
Whilst our Managed & Franchised business adds additional strategic
locations to our network, our focus for the Company-Owned & Leased segment
continues to be to driving additional efficiencies resulting in margin
expansion. This combination has led to good EBITDA growth year-over-year and
gives us confidence in our longer-term goals and targets.
Looking forward
We enter the second half of the year with good momentum. The new route to
market of managed partnerships is fueling growth, and we continue to sign new
partnerships at a rate aligned to our plan. More importantly, these signings
are rapidly evolving into openings, resulting in our total network growing by
10% over the past 12 months.
The future for IWG and all our stakeholders remains bright as we continue to
grow our customer base, our global network and our best-in-class portfolio of
locations and brands.
Customers and building owners understand our unique proposition allowing us to
grow our network through the capital-light model, which, with its
significantly lower capex requirements, has demonstrated our ability to
deliver both strong growth and a strong balance sheet.
With the right business model, the right strategy, and the right people, we
are superbly placed to benefit from the fundamental changes occurring in the
workplace.
Mark Dixon
Founder and CEO
6 August 2024
Chief Financial Officer's Review
The first half of 2024 has been a strong period for the Group, delivering a
record six months of System-revenue, growth in EBITDA, continued cash-flow
generation, and a return to positive earnings for the first time in nearly
five years. Previous periods have been about setting the foundations for the
business across the three platforms and the results of those strategic
decisions are now being realised. Combining the Group's unique brand strategy
and unrivalled global network with an innovative new route to market has
enabled us to grow with far less capital intensity, positioning the business
well for the remainder of 2024 and beyond.
In line with plans, the Group successfully carried out a series of debt
transactions resulting in a comprehensive refinancing, extending maturities to
2029 / 2030.
We have delivered growth, cash generation and a dividend whilst continuing to
focus on clarity of financials to stakeholders.
Financial Performance
The Group reports results in accordance with IFRS. Under IFRS 16, while total
lease-related charges over the life of a lease remain unchanged, the lease
charges are characterised as depreciation and financing expenses with higher
total expense in the early periods of a lease and lower total expense in the
later periods of the lease.
Group income statement ($m) H1 2024 H1 2023 Constant Actual
currency
Currency
System-wide revenue 2,088 2,060 +2% +1%
Group revenue 1,836 1,836 0% 0%
Gross profit before impact of rationalisations(1) 513 383 35% 34%
Margin 28% 21% n/a +7ppt
Rationalisation items(1) 45 (15)
Gross Profit 558 368 +52% +52%
Overheads & Joint ventures (289) (252) +13% +15%
Operating Profit before impact of rationalisations(1) 231 125 +93% +85%
Operating Profit 269 116 +142% +132%
Net finance cost (225) (203) +11%
Profit/(Loss) before tax 44 (87)
Taxation (28) 11
Effective tax rate 63% 13%
Profit/(Loss) for the period 16 (76)
Basic EPS (US cents) attributable to shareholders 1.6 (7.5)
1. Rationalisations include charges related to closures, one-off impairments
and other one-off items (see p. 24)
Revenue
System-wide revenue increased by 1% (2% constant currency) to $2,088m. Group
revenue remained stable at $1,836m. Our Managed & Franchised business saw
System-wide revenue growth of 15% and fee income growth very strong at 23%
(constant currency).
System revenue Group Revenue
Revenue ($m) H1 2023 Actual currency Constant currency H1 2024 H1 2023 Actual Constant
currency
currency
Managed & Franchised system-wide 287 252 +13% +15% 35 28 +24% +23%
Company-Owned & Leased 1,613 1,619 +0% +0% 1,613 1,619 +0% +0%
Worka 188 189 +0% -1% 188 189 +0% -1%
Group 2,088 2,060 +1% +2% 1,836 1,836 +0% +0%
Revenue KPIs - RevPAR
RevPAR is a monthly average KPI, defined as the System revenue of the Group
excluding Worka, divided by the number of available rooms, excluding rooms
opened or closed in the period. RevPAR is a well-understood measure used
across many industries and is particularly relevant to IWG as it incorporates
all revenues received across IWG's expansive product portfolio.
Underlying RevPAR has grown, and it is only mix driving headline RevPAR lower
as we bring on more centres into the network in suburban locations.
RevPAR in the first half of 2024 was $357 (H1 2023: $361). Company-Owned
RevPAR grew by 1% year-on-year mainly due to improved pricing. As anticipated,
Managed & Franchised saw a 14% decline in RevPAR to $378, driven by
suburban focused capacity growth which has not yet matured. In addition, this
segment includes franchises such Japan and Switzerland which are fully mature.
System RevPAR ($, monthly average) H1 2024 H1 2023 Actual Constant
currency
currency
Managed & Franchised 378 451 -16% -14%
Company-Owned & Leased 354 351 +1% +1%
Worka n.a. n.a. - -
IWG Network 357 361 -1% -1%
Rationalisation impact
To improve the transparency and usefulness of the financial information
presented and to improve year-on-year comparability the Group identified net
adjusting items on operating profit relating to rationalisations in the
network of $38m (H1 2023: $(9)m), of which $(1)m are cash items (H1 2023:
$(3)m).
These items refer to the reversal of impairment of PPE (provisions for
closures which have not yet taken place) of $42m (H1 2023: impairment of
$(21)m), closure related credits (the actual costs of closing centres,
including non-cash write-off of the book value of assets and the related lease
liabilities) of $4m (H1 2023: $2m), asset impairment related to Russia &
Ukraine and centre-related legal costs of $(1)m (H1 2023: credit of $4m) and
other one-off items (including legal, acquisition and transaction cost) of
$(7)m (H1 2023: reversal of $6m).
Rationalisation impact ($m) H1 2024 H1 2023
Closure (cost)/credit 4 2
PP&E (impairment)/reversal 42 (21)
Others (1) 4
Rationalisation impact on Gross Profit 45 (15)
Rationalisation impact on SG&A (7) 6
Rationalisation impact on Operating Profit 38 (9)
Depreciation (21) (10)
Rationalisation impact on EBITDA 17 (19)
Gross Profit
Gross Profit, excluding rationalisations, increased 35% (constant currency) to
$513m in H1 2024 (H1 2023: $383m), resulting in a 28% gross margin, a 7ppt
improvement on H1 2023. Overall Gross Profit increased 52% to $558m (H1 2023:
$368m).
Managed & Franchised delivered a 23% year-on-year growth underpinned by
both network expansion and the positive impact of the high margins delivered
by this segment.
Gross Profit excluding rationalisations in Company-Owned & Leased
increased by 45% in predominantly due to margin expansion as a result of
greater efficiencies. The rationalisation impact of $45m relates predominantly
to the network rationalisations across the Company-Owned & Leased segment.
Gross Profit ($m) H1 2024 H1 2023 Actual Constant
currency
currency
Managed & Franchised 35 28 +24% +23%
Company-Owned & Leased 376 262 +44% +45%
Worka 102 93 +9% +9%
Gross Profit before impact of rationalisations 513 383 +34% +35%
Closure (cost)/credit 4 2
PP&E (impairment)/reversal 42 (21)
Others (1) 4
Total rationalisation impact on Gross Profit 45 (15)
Gross Profit 558 368 +52% +52%
Operating Profit
Operating profit before rationalisations increased by 93% (constant currency)
from $125m in H1 2023 to $231m in H1 2024, reflecting the impact of higher
revenue in Managed & Franchised, and margin expansion in Company-Owned
& Leased. Reported operating profit delivered was $269m (142% constant
currency growth) (H1 2023: $116m).
Adjusted EBITDA
The Group's Adjusted EBITDA increased by 6% (constant currency) to $917m (H1
2023: $870m) and Pre-IFRS Adjusted EBITDA increased by 13% (constant currency)
to $274m (H1 2023: $245m).
The Group reports results in accordance with IFRS. Under IFRS 16, while total
lease-related charges over the life of a lease remain unchanged, the lease
charges are characterised as depreciation and financing expenses with higher
total expense in the early periods of a lease and lower total expense in the
later periods of the lease. Results are additionally presented before the
application of IFRS 16 (in accordance with IAS 17 accounting standards) as it
provides useful information to stakeholders on how the Group is managed, as
well as reporting for bank covenants and certain lease agreements. The primary
difference between the two standards is the treatment of operating lease
liabilities. There is no difference between underlying cash flow.
To bridge the Group's Adjusted EBITDA of $917m under the IFRS 16 standard to
$274m Adjusted EBITDA (Pre-IFRS Adjusted EBITDA) under IAS 17, we need to
recognise rental income in subleases which are recognised as lease receivables
under IFRS 16, rental costs on our lease portfolio reflected as lease
liabilities under IFRS 16 and centre closure and other costs which are
reflected as impairments under IFRS 16.
IFRS EBITDA to pre-IFRS EBITDA bridge ($m) H1 2024 H1 2023
Adjusted EBITDA 917 870
Rent income 35 37
Rent expense (680) (674)
Other costs (16) 4
Net impact of network rationalisation charges 39 32
Net impact of PPE impairments vs. Closure cost provisions (24) (19)
Net impact of Russia & Ukraine asset impairments and other items 3 (5)
Adjusted EBITDA before application of IFRS 16 274 245
Adjusted EBITDA by segment
Company Owned & Leased Adjusted EBITDA increased by 6% (constant currency)
to $845m in H1 2024 (H1 2023: $806m), driven by increasing margins underpinned
by cost efficiencies.
Managed & Franchised in H1 2024 delivered revenue growth of 23% which was
largely offset by our investments into this capital-light growth model
resulting in an EBITDA of $(11)m (H1 2023: $(10)m). As stated previously, the
investment in Managed & Franchised has predominantly been made therefore
EBITDA is expected to scale as fee revenue is generated.
Worka delivered stable results with EBITDA growth of 11% at constant currency
to $83m (H1 2023: $74m).
Adjusted EBITDA by segment ($m) H1 2024 H1 2023 Actual Constant
currency
currency
Managed & Franchised (11) (10) n.m. n.m.
Company-Owned & Leased 845 806 +5% +6%
Worka 83 74 +11% +11%
Group 917 870 +5% +6%
Foreign exchange
At 30 Jun Average
Per US dollar 2024 2023 % H1 2024 H1 2023 %
British Pound Sterling 0.79 0.79 -1% 0.79 0.81 2%
Euro 0.93 0.86 -9% 0.93 0.87 -6%
Network growth
The success of our continued strategy to expand through partnerships is
materialising. Our network increased by 10% to 3,751 centres (H1 2023: 3,398).
We opened 306 new centres (H1 2023: 133 centres) and rationalised (69) centres
(H1 2023: (80) centres).
Furthermore, 465 new centre deals were signed in H1 2024, 16% more than in H1
2023, which will lead to new centre openings going forward. Out of the 465 new
deals signed 99% (460) deals are capital-light which underpins our success of
growing the network through capital-light partnerships.
Key KPIs H1 2024 H1 2023 YoY YoY
change
change in %
Number of centres open 3,751 3,398 353 +10%
Centre openings 306 133 173 +130%
Of which capital-light(1) 291 116 175 +151%
In % 95% 87%
Total new centre deals signed 465 400 65 +16%
Of which capital-light(1) 460 382 78 +20%
In % 99% 96%
1. Includes locations signed/opened in Managed & Franchised and Variable
rent areas
Of the 306 centres opened in H1 2024, 291 centres were capital-light openings
which comprised of managed partnership centres, variable rent centres,
franchised centres and joint-venture centres. Only 15 centre openings were on
a fully conventional basis.
Our estate of 3,751 centres as per the end of June 2024 is split into 24% or
901 centres in Managed & Franchised, which increased by 32% compared to
December 2023, and 2,850 centres in Company-Owned & Leased (of which 826
are based on variable rents). Based on all the new deals signed so far which
have not opened yet, the strong growth in Managed & Franchised centre
openings will continue in 2024 and beyond.
System location movements by type Dec 2023 Centre Centre Changed Jun 2024
Openings
Rationalisations
Conventional 2,052 +15 (39) (4) 2,024
Variable rent (capital-light) 780 +44 (19) +21 826
Company-Owned & Leased 2,832 +59 (58) +17 2,850
Managed & Franchised (capital-light) 682 +247 (11) (17) 901
Total 3,514 +306 (69) - 3,751
System rooms movements by type ('000) Dec 2023 Rooms Rooms Changed Jun 2024
Opened
Rationalised
Conventional 558 +5 (12) (4) 547
Variable rent (capital-light) 214 +10 (4) +4 224
Company-Owned & Leased 772 +15 (16) 0 771
Managed & Franchised (capital-light) 123 +37 (2) (4) 154
Total 895 +52 (18) (4) 925
Finance costs and taxation
The Group reported a net finance expense in H1 2024 of $(225)m (H1 2023:
$(203)m).
The net finance expense of $(225)m in H1 2024 includes cash interest of $(25)m
related to borrowing facilities (H1 2023: $(27)m), interest on the Group's
lease liabilities of $(182)m (H1 2023: $(168)m), interest on the convertible
bond of $(1)m (H1 2023: $(1)m), interest accretion on the convertible bond of
$(8)m (H1 2023: $(7)m) and other finance costs of $(18)m (H1 2023: $(5)m)
offset by a gain on early settlement of convertible bonds of $5m (H1 2023:
nil). The increase in interest on lease liabilities is mainly driven by
increased interest rates.
The effective tax rate in H1 2024 is 63% (H1 2023: 13%) which has been
computed in accordance with IAS 12, based on the full year estimated tax
position, applied to the half year actual results.
The Group operates across multiple jurisdictions which have varying tax
rates and taxable result profiles. Deferred tax assets are recognised only
to the extent these are expected to be utilised against future taxable profits
and this contributes to upward pressure on the effective rate for the six
months ended 30 June 2024.
Earnings per share
Earnings per share in H1 2024 was US cents 1.6 (H1 2023: US cents (7.5)).
The weighted average number of shares in issue during H1 2024 was
1,007,598,732 (H1 2023: 1,006,682,105). The weighted average number of shares
for diluted earnings per share is 1,094,612,381 (H1 2023: 1,090,178,139). In
H1 2024 118,054 shares were purchased in the open market and (5,434,703)
treasury shares held by the Group were utilized for an increased stake in the
Worka subsidiary and to satisfy the exercise of share awards by employees. At
30 June 2024 the Group held 45,241,552 treasury shares (30 June 2023:
50,560,132).
Cashflow
($m) H1 2024 H1 2023
Operating profit 269 116
Depreciation & amortisation 665 735
Rationalisation impact (17) 19
Rent income 35 37
Rent expense (680) (674)
Other costs (16) 4
Pre-IFRS additional rationalisation impact differences 18 8
Adjusted EBITDA before application of IFRS 16 274 245
Working capital (excl. amortisation of landlord contributions on leased (47) 78
centres)
Working capital related to the amortisation of landlord contributions (57) (60)
Maintenance capital expenditure (net) (47) (52)
Other items(1) (5) (7)
Cash inflow from business activities(2) 118 204
Tax paid (16) (30)
Finance costs on bank & other facilities (36) (37)
Cash inflow before growth capex and corporate activities 66 137
Gross growth capital expenditure (53) (76)
Growth-related landlord contributions on leased centres 25 34
Net growth capital expenditure (28) (42)
Purchase of subsidiary undertakings (net of cash) (4) (8)
Cash inflow/(outflow) before corporate activities 34 87
Purchase of shares - (1)
Dividend payment (13) -
Other corporate items - (1)
Net (repayments)/proceeds from loans 8 (122)
Net cash (outflow)/inflow for the year 29 (37)
Opening net cash 141 194
FX movements (10) 1
Closing cash 160 158
1. Includes capitalised rent related to centre openings (gross growth
capital expenditure) of $(2)m (H1 2023: $(2)m)
2. Cash flow before growth capex, corporate activities, tax and finance cost
on bank & other facilities
We continued to grow revenue, manage our costs effectively and restructure
centres where necessary resulting in a strong improvement of Adjusted EBITDA
before the application of IFRS 16 to $274m (H1 2023: $245m).
Working capital, excluding the amortisation of landlord contributions, was
impacted by prepaying quarterly rents upfront which resulted in an outflow of
$(47)m (H1 2023: inflow of $78m).
Working capital relating to the amortisation of landlord contributions refers
to historic cash contributions made by landlords for growth capex on a
Pre-IFRS basis in the Company-Owned & Leased segment (shown as
growth-related landlord contributions on leased centres further down the cash
flow statement) and is amortised in the Pre-IFRS income statement over the
lifetime of the corresponding lease.
Cash tax paid was $(16)m in H1 2024 (H1 2023: $(30)m) and primarily relates to
corporate income tax paid in various countries. Finance costs on bank &
other facilities was $(36)m in H1 2024 vs. $(37)m in H1 2023.
Cash inflow before growth capex and corporate activities was $66m (H1 2023:
$137m).
Total net investment, including acquisitions and all capex, was $(79)m (H1
2023: $(102)m). This comprises of $(47)m net maintenance capex, $(28)m of net
growth capex and $(4)m of M&A investments (H1 2023: $(8)m).
Total net investment of $(79)m (H1 2023: $(102)m) can also be split into
$(26)m maintenance spent on centres (H1 2023: $(29)m), $(23)m net growth capex
spent on centres (H1 2023: $(34)m), $(16)m investments into the platform and
systems, new products and processes (H1 2023: $(22)m), $(10)m investments done
within Worka (H1 2023: $(9)m) and $(4)m of M&A investments (H1 2023:
$(8)m).
It is worth noting that net growth capital expenditure was significantly
reduced in H1 2024 to $(28)m (H1 2023: $(42)m), demonstrating the benefit of
our capital-light growth strategy. Centre-related growth capex is expected to
fall further in H2 2024 and beyond.
For the first time since 2019 the Group paid a dividend of $13m in H1 2024 (H1
2023: nil).
Net cash before FX movements in H1 2024 increased by $29m after the dividend
payment and net proceeds of $8m from loans.
Net debt ($m) H1 2024 H1 2023
Closing cash 160 158
Opening loans (916) (1,054)
Net proceeds from issue & repayment of loans (8) 122
Unrealised gains on fair value financial derivative instruments (2) -
Amortisation of the Convertible Bond's derivative financial instrument (net) (8) (7)
Gain on early settlement of convertible bond 5 -
FX impact on loans & non-cash movements 1 (54)
Net financial debt (768) (835)
Opening lease liabilities (net) (6,732) (7,115)
Principal & interest payments on finance leases 826 764
Non-cash movements (net) (456) (435)
Principal & interest received on net lease investment (33) (38)
FX impact on lease liabilities & investments (net) 114 (85)
Net debt (7,049) (7,744)
Risk management
Effective management of risk is an everyday activity for the Group, and
crucially, integral to our growth planning. A detailed assessment of the
principal risks and uncertainties which could impact the Group's long-term
performance and the risk management structure in place to identify, manage and
mitigate such risk can be found on pages 50-59 of the 2023 Annual Report and
Accounts. All principal risks and uncertainties are unchanged.
Related parties
There have been no changes to the type of related party transactions entered
into by the Group that had a material effect on the financial statements for
the half year 2024. Details of related party transactions that have taken
place in the period can be found in note 13.
Dividends
A final dividend of 1p per share for 2023 was paid by the Group on 31 May 2024
following shareholder approval. In line with the Group's previously announced
dividend policy the Board has decided to pay an interim dividend of 0.43¢ per
share for 2024. The interim dividend will be paid on 4 October 2024 to
shareholders on the register at the close of business on 6 September 2024.
Financing
In June 2024 the Group successfully completed a series of debt transactions
and extended the debt maturity:
- Issued €575m Bond (investment grade rating from Fitch of BBB,
Stable) due in June 2030 of which;
o €400m has been swapped to $428m with a coupon of 8.153%, and
o €175m remains in Euro with a coupon of 6.5%
- Signed a new $720m revolving credit facility due in June 2029
- Reduced the face value of the £350m 0.5% convertible bond
(swapped to $445m) outstanding to £232m (swapped to $295m), valued at $277m
as at 30 June 2024 (30 June 2023: $419m). The convertible bond is due for
repayment or conversion at £4.5807 per share in December 2027 with an option
for the bondholders to put the instrument back to the Group in December 2025
at par.
Overall, net financial debt was $(768)m at 30 June 2024 (30 June 2023:
$(835)m).
The Group's total debt facilities, including details of drawings, is
summarised below:
Net financial debt ($m) Jun 2024 Jun 2023
Convertible bond (277) (411)
€575m bond (605) -
Revolving credit facility (RCF) (720) (1,107)
Total facilities (1,602) (1,518)
Revolving credit facility (RCF) (720) (1,107)
RCF available (undrawn) 456 143
RCF guarantee utilisation 264 412
RCF drawn - (552)
Convertible bond (277) (411)
€575m bond (605) -
Other debt (44) (30)
Derivative financial assets/(liabilities) (2) -
Closing cash 160 158
Net financial debt (768) (835)
At June 2024 the Group complied with the covenants of all facilities.
Going concern
The Group reported a profit for of $16m (H1 2023: $(76)m) in the first six
months of 2024 while net cash of $727m (H1 2023: $761m) was generated from
operations during the same period. Although the Group's balance sheet at 30
June 2024 reports a net current liability position of $(2,047)m (31 December
2023: $(2,145)m), the Directors concluded after a comprehensive review that no
liquidity risk exists as:
(1) The Group had additional funding available under the Group's $(720)m
revolving credit facility (31 December 2023: $1,116m) of which $264m was
utilised by bank guarantees with no cash drawings and $456m (31 December 2023:
$279m) was available and undrawn at 30 June 2024. This facility's current
maturity date is June 2029;
(2) A significant proportion of the net current liability position is due to
$1,026m lease liabilities which are held in non-recourse special purpose
vehicles but also with a corresponding right-of-use asset. A large proportion
of the net current liabilities comprise non-cash liabilities such as deferred
revenue of $535m (31 December 2023: $552m) which will be recognised in future
periods through the income statement. The Group holds customer deposits of
$586m (31 December 2023: $585m) which are spread across a large number of
customers and no deposit held for an individual customer is material.
Therefore, the Group does not believe the net current liabilities represents a
liquidity risk; and
(3) The Group maintained a 12-month rolling forecast and a three-year
strategic outlook. It also monitored the covenants in its facility to manage
the risk of potential breach. The Group expects to be able to refinance
external debt and/or renew committed facilities as they become due, which is
the assumption made in the viability scenario modelling, and to remain within
covenants throughout the forecast period. In reaching this conclusion, the
Directors have assessed:
· the potential cash generation of the Group against a range of
illustrative scenarios (including a severe but plausible outcome); and
· mitigating actions to reduce operating costs and optimise cash flows
during any ongoing global uncertainty.
The Directors consider that the Group is well placed to successfully manage
the actual and potential risks faced by the organisation including risks
related to inflationary pressures and geopolitical tensions.
On the basis of their assessment, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
a period of at least 12 months from the date of approval of the interim
results announcement and consider it appropriate to continue to adopt the
going concern basis in preparing the financial statements of the Group.
Charlie Steel
Chief Financial Officer
6 August 2024
$m Notes Six months ended Six months ended
30 June 2024
30 June 2023(1)(2)
Revenue 1,836 1,836
Total cost of sales (1,269) (1,456)
Cost of sales (1,314) (1,441)
Adjusting items to cost of sales(3) 4 27 20
Net reversal/(impairment) of property, plant, equipment and right-of-use 4 18 (35)
assets(3)
Expected credit losses on trade receivables (9) (12)
Gross profit 558 368
Total selling, general and administration expenses (287) (251)
Selling, general and administration expenses (280) (257)
Adjusting items to selling, general and administration expenses 4 (7) 6
Share of loss of equity-accounted investees, net of tax (2) (1)
Operating profit 269 116
Finance expense 3 (229) (208)
Finance income 3 4 5
Net finance expense (225) (203)
Profit/(loss) before tax for the period 44 (87)
Income tax (expense)/credit 8 (28) 11
Profit/(loss) for the period 16 (76)
Attributable to equity shareholders of the Group 16 (75)
Attributable to non-controlling interests - (1)
Earnings/(loss) per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (¢) 1.6 (7.5)
Diluted (¢) 1.5 (7.5)
1. Includes a net settlement fee of $2m recognised in 2023 (comprising the
settlement fee of $22m, offset by a release of related accrued income of
$20m), for TKP Corporation's sale of the Japanese master franchise agreement
to Mitsubishi Estate Co.
2. The 2023 revenue has been restated by $4m to net commissions fees for a
new product category previously recognised on a gross basis, in accordance
with IFRS 15 agent considerations.
3. The net reversal of adjusting items on operating profit of $38m (2023:
charge of $9m) comprises the following items included in the balances
referenced (note 4): a net reversal of the impairment of property, plant and
equipment and right-of-use assets of $42m (2023: net impairment of $21m),
network rationalisation credits of $4m (2023: $2m), the impairment of Ukraine
and Russia of $1m (2023: $3m), restructuring costs of $1m (2023: $3m) and
other one-off item charges of $6m (2023: utilised $16m).
The above consolidated income statement should be read in conjunction with the
accompanying notes.
$m Notes Six months ended Six months ended
30 June 2024
30 June 2023
Profit/(loss) for the period 16 (76)
Other comprehensive (loss)/income that is or may be reclassified to profit or
loss in subsequent periods:
Cash flow hedges - effective portion of changes in fair value (2) -
Foreign currency translation loss for foreign operations (1) (6)
Items that are or may be reclassified to profit or loss in subsequent periods (3) (6)
Other comprehensive loss for the period, net of tax (3) (6)
Total comprehensive profit/(loss) for the period, net of tax 13 (82)
Attributable to shareholders of the Group 14 (84)
Attributable to non-controlling interests (1) 2
The above interim consolidated statement of comprehensive income should be
read in conjunction with the accompanying notes.
$m Notes Issued Share premium Treasury Foreign Hedging reserve Other reserves((1)) Retained earnings Total Non-controlling interests Total equity
share
shares
currency
equity attributable to equity shareholders
capital
translation
reserve
Balance at 1 January 2023 13 399 (194) (331) - 41 385 313 63 376
Total comprehensive income/(loss)
for the period:
Loss for the period - - - - - - (75) (75) (1) (76)
Other comprehensive income:
Cash flow hedges - effective portion of changes in fair value - - - - - - - - - -
Foreign currency translation loss for foreign operations - - - (9) - - - (9) 3 (6)
Other comprehensive (loss)/income, net of tax - - - (9) - - - (9) 3 (6)
Total comprehensive (loss)/income - - - (9) - - (75) (84) 2 (82)
for the period
Transactions with owners of the Company
Ordinary dividend paid 5 - - - - - - - - - -
Share-based payments 11 - - - - - - 3 3 - 3
Purchase of shares - - (1) - - - - (1) - (1)
Settlement from exercise of share awards - - 1 - - - (1) - - -
Total transactions with owners of the Company - - - - - - 2 2 - 2
Balance at 30 June 2023 13 399 (194) (340) - 41 312 231 65 296
Balance at 1 January 2024 13 399 (194) (338) - 41 123 44 65 109
Total comprehensive loss
for the period:
Profit for the period - - - - - - 16 16 - 16
Other comprehensive loss:
Cash flow hedges - effective portion of changes in fair value - - - - (2) - - (2) - (2)
Foreign currency translation loss for foreign operations - - - - - - - - (1) (1)
Other comprehensive loss, net of tax - - - - (2) - - (2) (1) (3)
Total comprehensive (loss)/income - - - - (2) - 16 14 (1) 13
for the period
Transactions with owners of the Company
Ordinary dividend paid 5 - - - - - - (13) (13) - (13)
Share-based payments 11 - - - - - - 1 1 - 1
Reissuance of shares - - 12 - - - - 12 - 12
Settlement from exercise of share awards - - - - - - - - - -
Total transactions with owners of the Company - - 12 - - - (12) - - -
Purchase of non-controlling interest((2)) - - - - - - - - (14) (14)
Balance at 30 June 2024 13 399 (182) (338) (2) 41 127 58 50 108
1. Other reserves include $13m for the restatement of the assets and
liabilities of the UK associate, from historic to fair value at the time of
the acquisition of the outstanding 58% interest on 19 April 2006, $67m arising
from the Scheme of Arrangement undertaken on 14 October 2008, $11m relating to
merger reserves and $nil to the redemption of preference shares, partly offset
by $48m arising from the Scheme of Arrangement undertaken in 2003.
2. During the period the Group increased its equity voting rights to 89.3%
(2023: 86.6%) in the Worka subsidiary in accordance with the terms of election
agreements, which were originally entered into during the establishment of
Worka in 2022. As a result, the Group purchased an increased stake of a
subsidiary with a non-controlling interest for a consideration of $14m.
The above interim consolidated statement of changes in equity should be read
in conjunction with the accompanying notes.
$m Notes As at As at
30 June 2024 (unaudited)
31 December 2023
Non-current assets
Goodwill 6 1,159 1,172
Other intangible assets 247 266
Property, plant and equipment 7 6,460 6,883
Right-of-use assets 7 5,243 5,574
Other property, plant and equipment 7 1,217 1,309
Non-current net investment in finance leases 9 88 81
Deferred tax assets 8 567 576
Other long-term receivables 73 67
Investments in joint ventures 55 56
Other investments - -
Total non-current assets 8,649 9,101
Current assets
Inventory 1 1
Trade and other receivables 1,192 1,136
Current net investment in finance leases 9 30 43
Corporation tax receivable 32 34
Cash and cash equivalents 9 160 141
Total current assets 1,415 1,355
Total assets 10,064 10,456
Current liabilities
Trade and other payables (incl. customer deposits) 1,741 1,667
Deferred revenue 535 552
Corporation tax payable 58 55
Bank and other loans 9 44 17
Lease liabilities 9 1,056 1,178
Provisions 28 31
Total current liabilities 3,462 3,500
Non-current liabilities
Other long-term payables 14 16
Deferred tax liability 8 220 220
Bank and other loans 9 882 899
Lease liabilities 9 5,343 5,678
Derivative financial liabilities 9 2 -
Provisions 22 23
Provision for deficit on joint ventures 8 8
Retirement benefit obligations 3 3
Total non-current liabilities 6,494 6,847
Total liabilities 9,956 10,347
Total equity
Issued share capital 13 13
Issued share premium 399 399
Treasury shares (182) (194)
Foreign currency translation reserve (338) (338)
Hedging reserve (2) -
Other reserves 41 41
Retained earnings 127 123
Total shareholders' equity 58 44
Non-controlling interests 50 65
Total equity 108 109
Total equity and liabilities 10,064 10,456
The above interim consolidated balance sheet should be read in conjunction
with the accompanying notes.
$m Notes Six months ended Six months ended
30 June 2024
30 June 2023
Operating activities
Profit/(Loss) for the period 16 (76)
Adjustments for:
Net finance expense 3 225 203
Share of loss on equity-accounted investees, net of tax 2 1
Depreciation charge 626 703
Right-of-use assets 7 505 578
Other property, plant and equipment 7 121 125
Loss on disposal of property, plant and equipment 18 13
Profit on disposal of right-of-use assets and related lease liabilities 9 (15) (12)
Loss on disposal of intangible assets 6 -
Net (reversal)/impairment of property, plant and equipment 7 (6) 13
Net (reversal)/impairment of right-of-use assets 7 (12) 22
Amortisation of intangible assets 39 32
Tax expense/(credit) 28 (11)
Expected credit losses on trade receivables 9 12
Decrease in provisions (4) (31)
Unrealised loss on fair value of financial derivative instruments - -
Share-based payments 11 1 3
Other non-cash movements (5) 16
Operating cash flows before movements in working capital 928 888
Proceeds from landlord contributions (reimbursement of costs)(1) 7 3 14
Increase in trade and other receivables (114) (290)
Increase in trade and other payables 144 384
Cash generated from operations 961 996
Interest paid and similar charges on bank loans and corporate borrowings (36) (37)
Interest paid on lease liabilities 9 (182) (168)
Tax paid (16) (30)
Net cash inflows from operating activities 727 761
Investing activities
Purchase of property, plant and equipment 7 (75) (104)
Payment of initial direct costs related to right-of-use assets - (2)
Interest received on net lease investment 3 4 5
Payment received from net lease investment 9 28 34
Purchase of subsidiary undertakings, net of cash acquired 14 (4) (8)
Purchase of intangible assets (25) (24)
Interest received - -
Net cash outflows from investing activities (72) (99)
Financing activities
Proceeds from issue of loans 9 1,421 384
Repayment of loans 9 (1,413) (506)
Payment of lease liabilities 9 (643) (596)
Proceeds from landlord contributions (lease incentives)(1) 22 20
Purchase of treasury shares - (1)
Payment of ordinary dividend (13) -
Net cash outflows from financing activities (626) (699)
Net increase/(decrease) in cash and cash equivalents 29 (37)
Cash and cash equivalents at beginning of the year 141 194
Effect of exchange rate fluctuations on cash held (10) 1
Cash and cash equivalents at end of the period 160 158
1. The total proceeds from landlord contributions relating to the
reimbursement of costs and lease incentives of $25m (2023: $34m) are allocated
between maintenance landlord contributions of $nil (2023: $nil) and growth
landlord contributions of $25m (2023: $34m).
The above interim consolidated statement of cash flows should be read in
conjunction with the accompanying notes.
Note 1: Basis of preparation and accounting policies
International Workplace Group plc ("IWG") is a public limited company
incorporated in Jersey and registered and domiciled in Switzerland. The
Company's ordinary shares are traded on the London Stock Exchange.
International Workplace Group plc owns, and is a franchise operator of, a
network of business centres which are utilised by a variety of business
customers.
The unaudited condensed interim consolidated financial information as at and
for the six months ended 30 June 2024:
· was prepared in accordance with International Accounting Standard
34 "Interim Financial Reporting" ("IAS 34") as adopted for use in the UK
("adopted IFRS"), and therefore does not include all disclosures that would
otherwise be required in a complete set of financial statements. Selected
explanatory notes are included to understand events and transactions that are
significant to understand the changes in the Group's financial position and
performance since the last International Workplace Group plc Annual Report and
Accounts for the year ended 31 December 2023;
· was prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority;
· comprises the Company and its subsidiaries (the "Group") and the
Group's interests in jointly controlled entities;
· does not constitute statutory accounts as defined in Companies
(Jersey) Law 1991. A copy of the statutory accounts for the year ended 31
December 2023 has been filed with the Jersey Companies Registry. Those
accounts have been reported on by the Company's auditors and the report of the
auditors was (i) unqualified, and (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report. These accounts are available from the Company's
website - www.iwgplc.com (http://www.iwgplc.com) ; and
· was approved by the Board of Directors on 6 August 2024;
· Note disclosures pertaining to the interim consolidated income
statement, interim consolidated statement of comprehensive income, interim
consolidated statement of cash flows and interim consolidated statement of
changes in equity present results for the six months ended 30 June 2024 and
previously six months ended 30 June 2023. Note disclosures pertaining to the
interim consolidated balance sheet present results as at 30 June 2024 and 31
December 2023.
Effective 1 January 2024, certain strategic and financing companies within the
Group adopted the US dollar as their functional currency. Prior to 1 January
2024, the functional currency of these companies was sterling (£). The
change in the functional currency of these entities is due to the increased
exposure to the US dollar as a result of the growth in international
operations as well as redenomination of its Revolving Credit Facility and
other arrangements to US dollars.
In addition, International Workplace Group plc changed the presentation
currency of its consolidated financial statements to US dollars ($) from
pounds sterling (£). All values are in million US dollars, except where
indicated otherwise. Prior period comparatives were translated from sterling
and presented in US Dollars as follows: assets and liabilities at the rate of
exchange in effect at the applicable balance sheet date and revenues and
expenses at the average monthly rates applicable for the period.
Unrealized gains and losses resulting from the translation to US dollars are
accumulated in a separate component of shareholders' equity in a cumulative
foreign currency translation reverse.
Other than the change in presentation currency, the basis of preparation and
accounting policies set out in the Report and Accounts for the year ended 31
December 2023 have been applied in the preparation of this half yearly report,
except for the adoption of new accounting policies and new standards and
interpretations effective as of 1 January 2024. There was no material effect
on the Group's interim consolidated financial statements.
New standards and interpretations
The following standards, interpretations and amendments to standards were
applicable to the Group for periods commencing on or after 1 January 2024,
with no material impact on the Group:
Non-current Liabilities with Covenants - Amendments to IAS 1 1 January 2024
Classification of Liabilities as Current or Non-Current - Amendments to IAS 1 1 January 2024
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 1 January 2024
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 1 January 2024
The following new or amended standards and interpretations that are mandatory
for 2025 annual periods (and future years) are not expected to have a material
impact on the Company:
The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability - 1 January 2025
Amendments to IAS 21
There are no other IFRS standards or interpretations that are not yet
effective that would be expected to have a material impact on the Group. The
Group has not early adopted any standard, interpretation or amendment that has
been issued but is not yet effective.
Seasonality
The majority of the Group's revenue is not subject to significant seasonal
fluctuations.
Judgements and estimates
In preparing this condensed consolidated interim financial information,
judgment was applied in adopting the US Dollar as the functional currency of
certain head office and financing companies. Other significant judgements made
by management and the key sources of estimation of uncertainty were the same
as those that applied to the Report and Accounts for the year ended 31
December 2023.
Principal risks
As part of the half year risk assessment, the Board has considered the impact
of geopolitical factors on the principal risks of the Group. Following this
risk assessment, the Board is satisfied that the principal risks impacting the
group over the next nine months are unchanged from those noted on pages 50 to
59 of the 2023 Annual Report.
Going concern
The Group reported a profit for the period of $16m (2023: loss of $76m) in the
first six months of 2024 while net cash of $727m (2023: $761m) was generated
from operations during the same period. Although the Group's balance sheet at
30 June 2024 reports a net current liability position of $2,047m (31 December
2023: $2,145m), the Directors concluded after a comprehensive review that no
liquidity risk exists as:
1. The Group had additional funding available under
the Group's $720m revolving credit facility (31 December 2023: $1,116m) of
which $264m was utilised by bank guarantees with no cash drawing and $456m (31
December 2023: $279m) was available and undrawn at 30 June 2024. This
facility's current maturity date is June 2029;
2. A significant proportion of the net current
liability position is due to $1,026m lease liabilities which are held in
non-recourse special purpose vehicles but also with a corresponding
right-of-use asset. A large proportion of the net current liabilities comprise
non-cash liabilities such as deferred revenue of $535m (31 December 2023:
$552m) which will be recognised in future periods through the income
statement. The Group holds customer deposits of $586m (31 December 2023:
$585m) which are spread across a large number of customers and no deposit held
for an individual customer is material. Therefore, the Group does not believe
the net current liabilities represents a liquidity risk; and
3. The Group maintained a 12-month rolling forecast
and a three-year strategic outlook. It also monitored the covenants in its
facility to manage the risk of potential breach. The Group expects to be able
to refinance external debt and/or renew committed facilities as they become
due, which is the assumption made in the viability scenario modelling, and to
remain within covenants throughout the forecast period. In reaching this
conclusion, the Directors have assessed:
· the potential cash generation of the Group against a range of illustrative
scenarios (including a severe but plausible outcome); and
· mitigating actions to reduce operating costs and optimise cash flows
during any ongoing global uncertainty.
The Directors consider that the Group is well placed to successfully manage
the actual and potential risks faced by the organisation including risks
related to inflationary pressures and geopolitical tensions.
On the basis of their assessment, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
a period of at least 12 months from the date of approval of the interim
results announcement and consider it appropriate to continue to adopt the
going concern basis in preparing the financial statements of the Group.
Note 2: Segmental analysis
An operating segment is a component of the Group that engages in business
activities from which it may earn revenue and incur expenses. An operating
segment's results are reviewed regularly by the chief operating decision-maker
(the Board of Directors of the Group) on a pre-IFRS 16 basis to make decisions
about resources to be allocated to the segment and assess its performance, and
for which distinct financial information is available. The segmental
information is presented on the same basis on which the chief operating
decision-maker received reporting during the year. Segmental assets and
liabilities continue to be presented in accordance with IFRS.
The business is run on a worldwide basis but managed through two operating
segments, IWG Network and Worka.
IWG Network represents the Group's segmental results excluding Worka. IWG
Network is managed through both geographical regions and ownership structure
splits. The three principle geographical regions are: the Americas, EMEA
(including UK) and Asia Pacific. The results of business centres in each of
these regions, based on time zones, economic relationships, market
characteristics, cultural similarities and language clusters, form the basis
for reporting geographical results to the chief operating decision-maker.
These geographical regions exclude the Group's non-trading, holding and
corporate management companies, which are included in Other.
The Group's IWG Network results are also managed by ownership structure and
are an additional basis for reporting results to the chief operating
decision-maker. Company-owned and Leased comprises results from business
centres owned and operated by the Group. Managed and Franchised comprises
results relating to services provided to business centres owned by third
parties.
The Worka operating segment comprises the results relating to The Instant
Group investment and includes the Group's digital assets, representing the
world's leading fully integrated workspace platform. All reportable segments
are involved in the provision of global workplace solutions. The Group's
reportable segments operate in different markets and are managed separately
because of the different economic characteristics that exist in each of those
markets. Each reportable segment has its own distinct senior management team
responsible for the performance of the segment.
The accounting policies of the operating segments are the same as those
described in the Annual Report and Accounts for the Group for the year ended
31 December 2023.
On a pre-IFRS 16 basis IWG Network Operating Segment Worka Operating Segment
$m Six months ended
30 June 2024
By By I
geograp ow W
hy ne G
rs N
hi e
p t
w
o
r
k
Americas EMEA Asia Pacific Other Company-owned & Leased Managed & Franchised
Revenue 639 838 167 4 1,613 35 1,648 223 1,871
Workstation revenue(1) 448 632 126 - 1,206 - 1,206 - 1,206
Fee income 8 17 10 - - 35 35 - 35
Customer Service income(2) 183 189 31 4 407 - 407 223 630
Gross profit 85 123 35 1 213 35 248 91 339
Share of gain of equity-accounted investees - - 1 - - 1 1 - 1
Operating profit/(loss) 36 74 22 (122) 19 (9) 10 43 53
Finance expense (43)
Finance income -
Profit before tax for the period 10
Depreciation and amortisation 87 73 14 19 193 - 193 27 220
Impairment of assets - - - - - - - - -
Loss on disposal of assets 14 8 3 6 31 - 31 - 31
Assets(3) 3,803 4,294 568 681 9,346 - 9,346 718 10,064
Liabilities(3) (3,776) (4,157) (587) (1,158) (9,678) - (9,678) (278) (9,956)
Net assets/(liabilities)(3) 27 137 (19) (477) (332) - (332) 440 108
Non-current asset additions(3)(4) 187 318 29 17 551 - 551 10 561
Non-current asset acquisitions(3)(4) - - - - - - - 2 2
1. Includes customer deposits.
2. Includes membership card income.
3. Presented on a basis consistent with IFRS 16.
4. Excluding deferred taxation.
Restated on a IWG Network Operating Segment Worka Operating Segment
pre-IFRS 16 basis (1)
Six months ended
$m
30 June
2023
By geography By ownership I
W
G
N
e
t
w
o
r
k
Americas EMEA Asia Pacific Other Company-owned & Leased Managed & Franchised
Revenue(2) 660 814 169 4 1,619 28 1,647 226 1,873
Workstation revenue(3) 451 608 127 - 1,186 - 1,186 - 1,186
Fee income 4 15 9 - - 28 28 - 28
Customer Service income(4) (5) 205 191 33 4 433 - 433 226 659
Gross profit 57 70 13 3 115 28 143 97 240
Share of loss of equity-accounted investees - (1) - - - (1) (1) - (1)
Operating profit/(loss) 19 (5) (3) (77) (56) (10) (66) 54 (12)
Finance expense (47)
Finance income -
Loss before tax for the period (59)
Depreciation and amortisation 99 77 16 14 206 - 206 23 229
Impairment of assets - - - - - - - - -
Loss on disposal of assets 6 11 2 - 19 - 19 - 19
Assets(6) 4,178 4,713 735 763 10,389 - 10,389 751 11,140
Liabilities(6) (4,037) (4,548) (741) (1,231) (10,557) - (10,557) (288) (10,845)
Net assets/(liabilities)(6) 141 165 (6) (468) (168) - (168) 463 295
Non-current asset additions(6)(7) 114 131 56 27 328 - 328 8 336
Non-current asset acquisitions (6)(7) - - 12 - 12 - 12 - 12
IWG Network Operating Segment
Worka Operating Segment
Six months ended
30 June
2023
By geography
By ownership
IWG Network
Americas
EMEA
Asia Pacific
Other
Company-owned & Leased
Managed & Franchised
Revenue(2)
660
814
169
4
1,619
28
1,647
226
1,873
Workstation revenue(3)
451
608
127
-
1,186
-
1,186
-
1,186
Fee income
4
15
9
-
-
28
28
-
28
Customer Service income(4) (5)
205
191
33
4
433
-
433
226
659
Gross profit
57
70
13
3
115
28
143
97
240
Share of loss of equity-accounted investees
-
(1)
-
-
-
(1)
(1)
-
(1)
Operating profit/(loss)
19
(5)
(3)
(77)
(56)
(10)
(66)
54
(12)
Finance expense
(47)
Finance income
-
Loss before tax for the period
(59)
Depreciation and amortisation
99
77
16
14
206
-
206
23
229
Impairment of assets
-
-
-
-
-
-
-
-
-
Loss on disposal of assets
6
11
2
-
19
-
19
-
19
Assets(6)
4,178
4,713
735
763
10,389
-
10,389
751
11,140
Liabilities(6)
(4,037)
(4,548)
(741)
(1,231)
(10,557)
-
(10,557)
(288)
(10,845)
Net assets/(liabilities)(6)
141
165
(6)
(468)
(168)
-
(168)
463
295
Non-current asset additions(6)(7)
114
131
56
27
328
-
328
8
336
Non-current asset acquisitions (6)(7)
-
-
12
-
12
-
12
-
12
1. The comparative information has been restated for the separate disclosure
of the Managed & Franchised segment.
2. Includes $4m to net commissions fees for a new product category
previously recognised on a gross basis, in accordance with IFRS 15 agent
considerations.
3. Includes customer deposits.
4. Includes membership card income.
5. Includes a net settlement fee of $2m recognised in 2023 (comprising the
settlement fee of $22m, offset by a release of related accrued income of
$20m), for TKP Corporation's sale of the Japanese master franchise agreement
to Mitsubishi Estate Co.
6. Presented on a basis consistent with IFRS 16.
7. Excluding deferred taxation.
Operating profit in the "Other" category is generated from services related to
the provision of workspace solutions offset by corporate overheads.
The operating segments results presented on a pre-IFRS 16 basis reconcile to
the financial statements as follows:
$m IWG Network Operating Segment Worka Operating Segment Six months ended
30 June
2024
By geography By ownership I
W
G
N
e
t
w
o
r
k
Americas EMEA Asia Pacific Other Company-owned & Leased Managed & Franchised
Revenue - pre-IFRS 16 639 838 167 4 1,613 35 1,648 223 1,871
Rent income - - - - - - - (35) (35)
Revenue 639 838 167 4 1,613 35 1,648 188 1,836
Gross profit - pre-IFRS 16 85 123 35 5 213 35 248 91 339
Rent income - - - - - - - (35) (35)
Rent payable under leases 281 286 64 2 633 - 633 47 680
Depreciation of property, plant and equipment including right-of-use (208) (195) (40) (1) (444) - (444) (1) (445)
assets((1))
Other((2)) 3 22 (2) (4) 19 - 19 - 19
Gross profit 161 236 57 2 421 35 456 102 558
Operating profit/(loss) 36 73 22 (122) 19 (9) 10 43 53
- pre-IFRS 16
Rent income - - - - - - - (35) (35)
Rent payable under leases 281 286 64 2 633 - 633 47 680
Depreciation of property, plant and equipment including right-of-use (208) (195) (40) (1) (444) - (444) (1) (445)
assets((1))
Other((2)) 3 17 (4) - 18 (2) 16 - 16
Operating profit/(loss) 112 182 42 (121) 226 (11) 215 54 269
Depreciation and amortisation 87 73 14 19 193 - 193 27 220
- pre-IFRS 16
Depreciation of property, plant and equipment including right-of-use assets 208 195 40 1 444 - 444 1 445
Depreciation and amortisation 295 268 54 20 637 - 637 28 665
Impairment of assets - pre-IFRS 16 - - - - - - - - -
Net reversal of impairment of property, plant and equipment including (10) (6) (2) - (18) - (18) - (18)
right-of-use assets
Net reversal of impairment of assets (10) (6) (2) - (18) - (18) - (18)
Loss on disposal of assets - pre-IFRS 16 14 8 3 6 31 - 31 - 31
(Gain)/loss on disposal of property, plant and equipment including (17) 8 - (1) (10) - (10) (12) (22)
right-of-use assets((3))
(Gain)/loss on disposal of assets (3) 16 3 5 21 - 21 (12) 9
1. Includes depreciation on right of use assets of $505m offset by reduced
depreciation on leasehold improvements under IFRS 16 due to the classification
of certain landlord contributions as a reduction to property, plant and
equipment.
2. Includes $18m of net reversal of impairment of property, plant and
equipment including right-of-use assets offset by losses on disposal of
property, plant and equipment including right-of-use assets of $22m.
3. Loss on disposal under IFRS 16 is lower due to the classification of
certain landlord contributions as a reduction to property, plant and equipment
under IFRS 16.
( )
Restated((1) IWG Network Operating Segment Worka Operating Segment Six months ended
30 June
) 2023
$m
By geography By ownership I
W
G
N
e
t
w
o
r
k
Americas EMEA Asia Pacific Other Company-owned & Leased Managed & Franchised
Revenue - pre-IFRS 16((2)) 660 814 169 4 1,619 28 1,647 226 1,873
Rent income - - - - - - - (37) (37)
Revenue((2)) 660 814 169 4 1,619 28 1,647 189 1,836
Gross profit - pre-IFRS 16 57 70 13 3 115 28 143 97 240
Rent income - - - - - - - (37) (37)
Rent payable under leases 275 294 71 - 640 640 34 674
Depreciation of property, plant and equipment including right-of-use (218) (229) (57) (1) (505) - (505) (1) (506)
assets((3))
Other((4)) (23) 17 2 1 (3) - (3) - (3)
Gross profit 91 152 29 3 247 28 275 93 368
Operating (loss)/profit - 19 (5) (3) (77) (56) (10) (66) 54 (12)
pre-IFRS 16
Rent income - - - - - - (37) (37)
Rent payable under leases 275 294 71 - 640 - 640 34 674
Depreciation of property, plant and equipment including right-of-use (218) (229) (57) (1) (505) - (505) (1) (506)
assets((3))
Other((4)) (23) 16 2 1 (4) - (4) 1 (3)
Operating profit/(loss) 53 76 13 (77) 75 (10) 65 51 116
Depreciation and amortisation - pre-IFRS 16 99 77 16 14 206 - 206 23 229
Depreciation of property, plant and equipment including right-of-use assets 218 229 57 1 505 - 505 1 506
Depreciation and amortisation 317 306 73 15 711 - 711 24 735
Impairment of assets - pre-IFRS 16 - - - - - - - - -
Net impairment of property, plant and equipment including right-of-use assets 14 13 8 - 35 - 35 - 35
Net impairment of assets 14 13 8 - 35 - 35 - 35
Loss on disposal of assets - pre-IFRS 16 6 11 2 - 19 - 19 - 19
(Gain)/loss on disposal of property, plant and equipment including (8) (13) - - (21) - (21) 3 (18)
right-of-use assets((5))
Loss/(gain) on disposal of assets (2) (2) 2 - (2) - (2) 3 1
1. The comparative information has been restated for the separate disclosure
of the Managed & Franchised segment and to net the commissions fees
previously disclosed above.
2. Includes $4m to net commissions fees for a new product category
previously recognised on a gross basis, in accordance with IFRS 15 agent
considerations.
3. Includes depreciation on right of use assets of $578m offset by reduced
depreciation on leasehold improvements under IFRS 16 due to the classification
of certain landlord contributions as a reduction to property, plant and
equipment.
4. Includes $35m of net impairment of property, plant and equipment
including right-of-use assets offset by losses on disposal of property, plant
and equipment including right-of-use assets of $17m.
5. Loss on disposal under IFRS 16 is lower due to the classification of
certain landlord contributions as a reduction to property, plant and equipment
under IFRS 16.
( )
Note 3: Net finance expense
$m Notes Six months ended 30 June 2024 Six months ended 30 June 2023
Interest payable and similar charges on bank loans and corporate borrowings (25) (27)
Interest payable on lease liabilities (182) (168)
Interest expense on the convertible bond (1) (1)
Interest accretion on the convertible bond (8) (7)
Total interest expense (216) (203)
Other finance costs (18) (5)
Gain on early settlement of convertible bond 5 -
Total finance expense (229) (208)
Interest received on net lease investment 4 5
Total finance income 4 5
Net finance expense (225) (203)
Note 4: Adjusting items
The Group has recognised the following adjusting items during the period
ending 30 June 2024:
Six months ended 30 June 2024 Six months ended 30 June 2023
$m Notes Cost of sales Selling, Cost of sales Selling,
general and administration costs general and administration costs
Closure (credit)/cost (4) - (2) -
Net (reversal)/impairment of property, plant and equipment (including 7 (42) - 21 -
right-of-use assets)
Acquisition and restructuring costs - 1 - 3
Impairment of Ukraine and Russia 1 - 3 -
Other one-off items - 6 (7) (9)
Total adjusting items (45) 7 15 (6)
· Closure cost
A closure related credit of $4m (2023: $2m) was recognised during the year,
which includes the direct closure costs of $1m (2023: $nil) related to these
centres, $10m (2023: $5m) write-off of the book value of assets, $44m (2023:
$20m) against the right-of-use assets and $59m (2023: $27m) credits for the
related lease liabilities.
· Impairments of property, plant and equipment (including right-of-use assets)
Management continues to carry out a comprehensive review exercise for
potential impairments across the whole portfolio at a cash-generating units
(CGUs) level. The impairment review formed part of the Group's ongoing
rationalisation process. This review compared the value-in-use of CGUs, based
on management's assumptions regarding likely future trading performance, to
the carrying values at 30 June 2024. Following this review, a reversal of $42m
(2023: net impairment of $21m) was recognised within cost of sales which
consists of $18m (2023: net impairment of $35m) net reversal of impairment,
reversal of depreciation of $21m (2023: $10m) and reversal of disposals of $3m
(2023: $4m) in respect of adjusting items previously provided for (note 7).
The $18m (2023: net impairment of $35m) net reversal of impairment, consists
of $12m (2023: net impairment of $13m) recognised against property, plant and
equipment and $6m (2023: net impairment of $22m) against right-of-use assets.
· Impairment of Ukraine and Russia
As a result of geopolitical circumstances in the Ukraine and related sanctions
against Russia, the Board has taken the decision to recognise a provision
against the gross assets of both its Russian and Ukrainian operations.
Following a review of the carrying value of the CGU, an additional $1m (2023:
$3m) impairment charge was recognised, for the six months ended 30 June 2024.
These operations are not material to the Group, representing less than 1% of
both total revenue and net assets of the Group. Accordingly, the Group's
significant accounting judgements, estimates and assumptions have not changed.
· Acquisition and restructuring costs
During the year, the Group incurred $1m (2023: $3m) of transaction costs.
Should the estimated charges be in excess of the amounts required, the release
of any amounts provided for at 30 June 2024 would be treated as adjusting
items.
· Other one-off items
The Group wrote-off $6m (2023: $nil) of obsolete software during the year.
During the year, the Group utilised closure related legal provisions of $nil
(2023: provided for $16m).
Note 5: Dividends
Equity dividends on ordinary shares paid during the period:
$m Notes Six months ended 30 June 2024 Six months ended 30 June 2023
Final dividend for the year ended 31 December 2023: 1.00 pence per share 13 -
paid on 31 May 2024 (for the year ended 31 December 2022: nil pence per
share)
In line with the Group's previously announced dividend policy the Board has
decided to pay an interim dividend of 0.43¢ per share for 2024 will be paid
on 4 October 2024 to shareholders on the register at the close of business on
6 September 2024.
Note 6: Goodwill and indefinite life intangible assets
As at 30 June 2024, the carrying value of the Group's goodwill and indefinite
life intangible assets was $1,159m and $13m respectively (31 December 2023:
$1,172m and $13m respectively). The movement in goodwill and indefinite
lived intangible assets was due to $nil of acquisitions, offset by movements
due to foreign exchange.
An impairment test is carried out annually and, in addition, whenever
indicators exist that the carrying amount may not be recoverable. In
accordance with IAS 36, the Group reviewed goodwill for indicators of
impairment. Detailed impairment indicator reviews were performed on the US, UK
and Worka businesses, which represent 79% of the Group's goodwill balance,
with consideration given to key drivers of performance and actions taken by
management. These key drivers included on-going business performance, cost
mitigation actions, review of sales key performance indicators and market
specific economic trends. There were no long-term indicators of impairment
identified for the US, UK and Worka. There was no impairment recognised in the
current period in respect of individually immaterial countries (2023: $nil).
Note 7: Property, plant and equipment
$m Right-of-use assets(1) Land and buildings Leasehold improvements Furniture and equipment Computer hardware Total
Cost
At 1 January 2024 11,773 204 2,134 1,000 165 15,276
Additions 121 - 60 11 1 193
Modifications(2) 285 - - - - 285
Acquisition of subsidiaries - - - - - -
Disposals (441) - (39) (5) (2) (487)
Exchange rate movements (188) (1) (46) (18) (3) (256)
At 30 June 2024 11,550 203 2,109 988 161 15,011
Accumulated depreciation
At 1 January 2024 6,199 21 1,434 600 139 8,393
Charge for the period(3) 505 2 81 35 3 626
Disposals(4) (303) - (26) - (2) (331)
Net reversal of impairment(5) (12) - (6) - - (18)
Exchange rate movements (82) - (22) (13) (2) (119)
At 30 June 2024 6,307 23 1,461 622 138 8,551
Net book value
At 1 January 2024 5,574 183 700 400 26 6,883
At 30 June 2024 5,243 180 648 366 23 6,460
1. Right-of-use assets consist of property-related leases.
3. Modifications includes lease modifications and extensions.
4. Depreciation is net of $21m in respect of adjusting items previously
provided for (note 4).
5. Disposals are $3m in respect of adjusting items previously provided for
(note 4).
6. The net reversal of impairment of $18m includes a reversal of impairment
of $50m previously provided for (note 4), offset by an additional impairment
of $32m.
The key assumptions and methodology in calculating right-of-use assets and the
corresponding lease liability remain consistent with those noted in note 33 of
the Group's 2023 Annual Report and Accounts.
Capital expenditure authorised and contracted for but not provided for in the
accounts amounted to $5m
(30 June 2023: $40m).
Impairment tests for property, plant and equipment (including right-of-use
assets) are performed on a cash-generating unit basis when impairment triggers
arise. Cash-generating units (CGUs) are defined as individual business
centres, being the smallest identifiable group of assets that generate cash
flows that are largely independent of other groups of assets. The Group
assesses whether there is an indication that a CGU may be impaired, including
persistent operating losses, net cash outflows and poor performance against
forecasts. During the period, improved economic circumstances due to reduced
inflation and increased trading led to indicators of reversal of impairment in
relation to various previously impaired centres.
The recoverable amounts of property, plant and equipment are based on the
higher of fair value less costs to sell and value in use. The Group considered
both fair value less costs to dispose and value in use in the impairment
testing on a centre by centre level. Impairment charges are recognised within
cost of sales in the consolidated income statement. During HY 2024, the Group
recorded a reversal of impairment of $12m (HY 2023: net impairment of $22m) in
respect of right-of-use assets and $6m of impairment charges (HY 2023: net
impairment of $13m) in respect of leasehold improvements.
Note 8: Income taxes
Income tax expense for the six months ended 30 June 2024 of $28m was computed
in accordance with IAS 12. The effective tax rate of 63% was based on the full
year estimated tax position, applied to the half year actual results. The
Group operates across multiple jurisdictions which have varying tax rates and
taxable result profiles. Deferred tax assets are recognised only to the extent
these are expected to be utilised against future taxable profits and this
contributes to upward pressure on the effective rate for the six months ended
30 June 2024.
The Group's net deferred tax assets arising on an IFRS 16 basis have decreased
to $347m (31 December 2023: $356m).
The Directors have assessed the recoverability of all deferred tax balances in
response to the continuing impact of the current geopolitical environment on
the Group's performance and concluded that it is more likely than not that the
Group will earn sufficient taxable profits in order to recover these balances.
The period over which these balances are expected to be recovered is not
significantly different at 30 June 2024 than it was at 31 December 2023.
The Group estimates that the likely additional top-up taxes due in respect of
2024 under Pillar II Global Minimum Tax would be immaterial. These additional
taxes have been included in the tax position as at 30 June 2024.
Note 9: Net debt analysis
$m As at As at
30 June 2024
31 Dec 2023
Cash and cash equivalents 160 141
Debt due within one year(1) (44) (17)
Debt due after one year(2) (882) (899)
Derivatives assets/(liabilities) (2) -
Net financial debt (768) (775)
Current net investment in finance leases 30 43
Non-current net investment in finance leases 88 81
Lease due within one year(3) (1,056) (1,178)
Lease due after one year(3) (5,343) (5,678)
Net debt (7,049) (7,507)
1. Includes $44m (2023: $17m) of other loans.
2. Includes $277m (2023: $419m) convertible bond liability and $605m (2023:
$nil) bond liability.
3. There are no significant lease commitments for leases not commenced at 30
June 2024.
The following table shows a reconciliation of net cash flow to movements in
net debt:
$m Cash and cash equivalents Bank and Convertible bond Derivatives assets/(liabilities) Net financial debt Net investment in finance leases Lease liabilities Net debt
other loans
At 1 January 2023 194 (670) (384) - (860) 178 (7,292) (7,974)
Net decrease in cash and cash equivalents (37) - - - (37) - - (37)
Proceeds from issue of loans and net investment in finance leases - (384) - - (384) (34) - (418)
Repayment of loans and lease liabilities - 504 2 - 506 - 596 1,102
Interest (received)/paid - 37 - - 37 (5) 168 200
Non-cash movements - (37) (8) - (45) 4 (438) (479)
Interest income/(expense) - (27) (8) - (35) 5 (168) (198)
Other non-cash movements(1) - (10) - - (10) (1) (270) (281)
Exchange rate movements 1 (32) (21) - (52) 4 (90) (138)
At 30 June 2023 158 (582) (411) - (835) 147 (7,056) (7,744)
At 1 January 2024 141 (497) (419) - (775) 124 (6,856) (7,507)
Net increase in cash and cash equivalents 29 - - - 29 - - 29
Proceeds from issue of loans and net investment in finance leases - (1,421) - - (1,421) (28) - (1,449)
Repayment of loans and lease liabilities - 1,276 137 - 1,413 - 643 2,056
Interest (received)/paid - 36 - - 36 (4) 182 214
Non-cash movements - (46) 5 (2) (43) 29 (485) (499)
Interest income/(expense) - (25) (9) - (34) 4 (182) (212)
Other non-cash movements(1) - (21) 14 (2) (9) 25 (303) (286)
Exchange rate movements (10) 3 - - (7) (3) 117 107
At 30 June 2024 160 (649) (277) (2) (768) 118 (6,399) (7,049)
1. Includes movements on leases in relation to new leases, lease
modifications/re-measurements of $430m (2023: $352m). Early termination of
lease liabilities represents $153m (2023: $81m) of the non-cash movements.
Cash, cash equivalents and liquid investment balances held by the Group that
are not available for use (''Blocked Cash'') amounted to $10m at 30 June 2024
(31 December 2023: $11m). Of this balance, $1m (31 December 2023: $1m) is
pledged as security against outstanding bank guarantees and a further $9m (31
December 2023: $10m) is pledged against various other commitments of the
Group.
Cash flows on debt relate to movements in the revolving credit facility, the
bond liability, the convertible bond liability and other borrowings. These net
movements align with the activities reported in the cash flow statement.
The following amounts are included in the Group's consolidated financial
statements in respect of its leases:
$m Six months ended 30 June 2024 Six months ended 30 June 2023
Depreciation charge for right-of-use assets (505) (578)
Principal lease liability repayments (643) (596)
Interest expense on lease liabilities (182) (168)
Expenses relating to short-term leases - 3
Expenses relating to variable lease payments not included in lease liabilities (48) (46)
Total cash outflow for leases comprising interest and capital payments (825) (764)
Additions to right-of-use assets 121 118
Acquired right-of-use assets - 11
Interest income on net lease investment 4 5
Principal payments received from net lease investment 28 34
Total cash outflows of $873m (2023: $810m) for leases, including variable
payments of $48m (2023: $46m), were incurred in the year.
Note 10: Financial instruments
The fair values of financial assets and financial liabilities, together with
the carrying amounts included in the consolidated statement of financial
position, are as follows:
As at 30 June 2024 As at 31 Dec 2023
$m Amortised cost Fair value Amortised cost Fair value
Cash and cash equivalents 160 - 141 -
Trade and other receivables((1)) 1,023 - 1,044 -
Other long-term receivables 73 - 67 -
Derivative financial assets/(liabilities) - (2) - -
Convertible bond (277) - (419) -
Bond liability (605) - - -
Bank loans and corporate borrowings - - (480) -
Other loans (44) - (17) -
Contingent consideration on acquisitions - (7) - (7)
Deferred consideration on acquisitions (5) - (5) -
Trade and other payables (1,739) - (1,665) -
Other long-term payables (4) - (6) -
(1,418) (9) (1,340) (7)
1. Excluding prepayments.
The undiscounted cash flow and fair values of these instruments is not
materially different from the carrying value, with the exception of the
convertible bond. The fair value of the convertible bond at 30 June 2024 was
$253m
(31 December 2023: $344m). The carrying value of the convertible bond at 30
June 2024 was $277m
(31 December 2023: $419m) with a face value of $295m (31 December 2023:
$445m).
There has been no change in the classification of financial assets and
liabilities, the methods and assumptions used in determining fair value and
the categorisation of financial assets and liabilities within the fair value
hierarchy from those disclosed in the annual report for the year ended 31
December 2023.
While the Group continues to monitor liquidity risk on a basis consistent to
the approach set out on page 160 of the 2023 Annual Report and Accounts. The
Group also assessed the recoverability of trade receivables, with an increase
in expected credit losses of $9m recorded during the period (30 June 2023:
$12m).
Although the Group has net current liabilities of $2,047m (31 December 2023:
$2,145m), the Group does not consider that this gives rise to a liquidity
risk. A large proportion of the net current liabilities comprise non-cash
liabilities such as deferred revenue which will be recognised in future
periods through the income statement. The Group holds customer deposits of
$586m (31 December 2023: $585m) which are spread across a large number of
customers. Customer deposits can only be reclaimed at the termination of an
agreement over a long period of time and no deposit held for an individual
customer is material. Therefore, the Group does not believe the balance
represents a liquidity risk.
The Group fully repaid the previous drawn revolving credit facility and
entered into a new revolving credit facility ("RCF") provided by a group of
international banks. The amount of the facility is $720m (as at 31 December
2023: $1,116m) with a final maturity in June 2029.
The available liquidity of $720m under the RCF can be used by the Group as
either cash drawings or for the provision of bank guarantees (see Note 12). As
at 30 June 2024, $456m was available and undrawn under the RCF facility (as at
31 December 2023: $279m) and $264m was utilised by bank guarantees with no
cash drawing. These bank guarantees do not impact net debt as they are
undrawn.
The Group issued €575m bond on 28 June 2024 at a fixed coupon rate of 6.5%
and a bullet maturity of June 2030. The Bonds are traded on the London Stock
Exchange's International Securities Market. Both IWG as a Group and the Bond
itself have an investment-grade rating of BBB (Stable) assigned by Fitch.
Both the $720m RCF and €575m bond are subject to identical financial
covenants which include interest cover and net debt to EBITDA ratios. The
Group continued to operate in compliance with the covenants throughout the
period.
Simultaneous to closing of the bond, the Group has entered into hedging
arrangements to swap €400m of the issuance and the related interest into
$428m, with a weighted-average fixed coupon of 8.153%. The hedge will remain
in place for the life of the bond and has qualified for hedge accounting. A
mark-to-market value of $2m derivative liability (2023: $nil) was recognised
through other comprehensive income at 30 June 2024. The remaining of the
€175m issuance and the related interest at a fixed coupon of 6.50% will
remain in Euros as these amounts are anticipated to be covered by a natural
currency hedge due to the anticipated geographic diversity of operations of
the Company. Accordingly, the weighted average interest cost on the new debt
is 7.65%.
In December 2020 the Group issued a £350m convertible bond, denominated in
GBP, which is due for repayment in 2027 if not previously converted into
shares. If the conversion option is exercised by the holder of the option, the
issuer has the choice to settle by cash or equity shares in the Group. The
holders of the bond have the right to put the bonds back to the Group in 2025
at par. The bond carries a fixed coupon of 0.5% per annum.
In accordance with IFRS, the bond liability is split between corporate
borrowings (debt) and a derivative financial liability. At the date of issue,
the £350m was bifurcated at £298m and £52m between corporate borrowings
(debt) and a derivative financial liability respectively. In June 2024, the
Group repurchased £118m face value of the convertible bond at a weighted
average price of 0.9215, including accrued interest, representing a
consideration of £109m. As at 30 June 2024, the debt was valued at its
amortised cost of $277m (31 December 2023: $419m) and the derivative liability
at its fair value is $nil (31 December 2023: $nil).
The fair value of the derivative element of the convertible bond has been
calculated with reference to unobservable credit spreads and is considered to
be a level 3 instrument. To calculate the fair value of the derivative element
of the convertible bond, a convertible bond model has been applied. The
convertible bond model provides a price for the option as well as a price for
the bond component. An external valuation is obtained, where judgement is
applied in determining the fair credit spread and volatility assumptions to
use in the valuation. The model then provides a fair value output for the
embedded option which accurately reflects the trading dynamics of the
convertible in which it is embedded.
The Group entered into a series of forward exchange rate contracts on 16 and
18 January 2024, respectively, to hedge against foreign currency fluctuations
in relation to its £350m convertible loan notes denominated in GBP. The Group
contracted to purchase £350m for $445m in 2025. In June 2024, due to the
partial repurchase of the convertible bond, £118m of the forward exchange
rate contracts entered into, were closed out. As at 30 June 2024, the fair
value of the forward exchange contract and amounts recognised through other
comprehensive income was immaterial.
Note 11: Share-based payment
During the six months ended 30 June 2024, the Group awarded 250,000 options
(2023: 1,069,669) under the Share Option Plan, 1,917,709 share awards (2023:
1,711,795) under the Performance Share Plan and 471,392 share awards (2023:
180,752) under the Deferred Share Bonus Plan. During the period, a charge of
$1m was recognized (2023: $3m).
Note 12: Bank guarantees and contingent liabilities
The Group has bank guarantees and letters of credit held with certain banks,
predominantly in support of leasehold contracts with a variety of landlords,
amounting to $352m (31 December 2023: $389m). Of this $352m, $264m was
utilised under the RCF facility (see Note 10) and the remaining $88m from
separate bilateral guarantee facilities. There are no material lawsuits
pending against the Group.
Note 13: Related parties
The nature of related parties as disclosed in the consolidated financial
statements for the Group for the year ended
31 December 2023 has not changed.
$m Management fees received from related parties Amounts Amounts
owed by
owed to
related party
related party
As at 30 June 2024
Joint ventures 5 55 52
As at 31 December 2023
Joint ventures 9 49 46
As at 30 June 2024, no amounts due to the Group have been provided for (31
December 2023: $nil).
During the period the Group acquired goods and services from a company
indirectly controlled by a director of the Group amounting to $nil (31 June
2023: $537). There was a $41,967 balance outstanding at the end of the period
(31 December 2023: $81,510).
Compensation paid to the key management personnel of the Group will be
disclosed in the Group's Annual Report and Accounts for the year ending 31
December 2024.
Note 14: Acquisitions of subsidiaries
Current period acquisition
During the six months ended 30 June 2024 the Group invested $4m in purchasing
subsidiary undertakings:
· $2m consideration related to two immaterial acquisitions,
recorded in full to intangible assets.
· $2m increased stake to 89.3% (2023: 86.6%) in the Worka
subsidiary with a non-controlling interest for a consideration of $14m net of
$12m treasury share issuance.
The provisional goodwill arising on these 2024 acquisitions reflects the
anticipated future benefits IWG can obtain from operating the businesses more
efficiently, primarily through increasing occupancy and the addition of
value-adding products and services.
In relation to the acquisition completed during the six months ended 30 June
2024, the fair value of assets acquired has only been provisionally assessed,
pending completion of a fair value assessment. The main changes in the
provisional fair values expected are primarily for other intangible assets.
The final assessment of the fair value of these assets will be made within 12
months of the acquisition dates and any adjustments reported in future
reports.
Contingent consideration of $nil arose on acquisitions completed during the
six months ended 30 June 2024. Contingent consideration of $nil was paid and
$nil released, during the current year, with respect to milestones, achieved
or not achieved, on previous acquisitions. $7m contingent consideration is
held on the Group's balance sheet at 30 June 2024.
Deferred consideration of $nil arose on acquisitions completed during the six
months ended 30 June 2024. Deferred consideration of $nil was paid and $nil
released, during the current year. $5m deferred consideration is held on the
Group's balance sheet at 30 June 2024.
Prior period acquisition
During the six months ended 30 June 2023, the Group made individually
immaterial acquisitions for a total consideration of $10m.
$m Book value Provisional Final Final
fair value adjustments
fair value adjustments
fair value
Net assets acquired
Right-of-use assets 11 - - 11
Other property, plant and equipment 6 - - 6
Cash 3 - - 3
Other current and non-current assets 9 - (4) 5
Lease liabilities (11) - - (11)
Current liabilities (8) - 4 (4)
10 - - 10
Goodwill arising on acquisition -
Total consideration 10
Less: deferred consideration -
Cash flow on acquisition
Cash paid 10
Less: cash acquired (2)
Net cash outflow 8
The goodwill arising on these acquisitions reflects the anticipated future
benefits IWG can obtain from operating the businesses more efficiently,
primarily through increasing occupancy and the addition of value-adding
products and services.
In the period, the acquisitions contributed revenue of $1m and net retained
profit of $nil. If the above acquisitions had occurred on 1 January 2023, the
revenue and net retained profit arising from these acquisitions would have
been $1m and $nil respectively.
The acquisition costs associated with these transactions were $nil, recorded
within administration expenses in the consolidated income statement.
There was no contingent consideration recognised on the acquisition and no
contingent consideration was paid in the current period. Contingent
considerations of $1m are held on the Group's balance sheet as at 30 June
2023.
Deferred consideration of $1m was paid during the current period with respect
to previous period acquisitions. There are deferred considerations of $6m are
held on the Group's balance sheet as at 30 June 2023.
Note 15: Events after the balance sheet date
There were no significant events occurring after 30 June 2024 affecting the
condensed interim financial information of the Group.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
For the six months ended 30 June 2024
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
In preparing the condensed set of financial statements included within the
half-yearly financial report, the directors are required to:
· prepare and present the condensed set of consolidated financial
statements in accordance with IAS 34 Interim Financial Reporting as adopted
for use in the UK and the DTR of the UK FCA;
· ensure the condensed set of consolidated financial statements has
adequate disclosures;
· select and apply appropriate accounting policies; and
· make accounting estimates that are reasonable in the circumstances.
· assess the Entity's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Entity or to cease operations, or have no realistic alternative
but to do so.
The Directors are responsible for designing, implementing and maintaining such
internal controls as they determine is necessary to enable the preparation of
the condensed set of financial statements that is free from material
misstatement whether due to fraud or error.
We confirm that to the best of our knowledge:
1. the condensed set of consolidated financial statements included within
the half-yearly financial report of International Workplace Group plc for the
six months ended 30 June 2024 ("the interim financial information") which
comprises the Condensed Consolidated Income Statement, the Condensed
Consolidated Statement of Comprehensive Income, the Condensed Consolidated
Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Statement of Cash Flows and a summary of significant
accounting policies and other explanatory notes, have been presented and
prepared in accordance with IAS 34, Interim Financial Reporting, as adopted
for use in the UK, and the DTR of the UK FCA.
2. The interim financial information presented, as required by the DTR of
the UK FCA, includes:
· an indication of important events that have occurred during the
first 6 months of the financial year, and their impact on the condensed set of
financial statements;
· a description of the principal risks and uncertainties for the
remaining 6 months of the financial year;
· related parties' transactions that have taken place in the first
6 months of the current financial year and that have materially affected the
financial position or the performance of the enterprise during that period;
and
· any changes in the related parties' transactions described in the
last annual report that could have a material effect on the financial position
or performance of the enterprise in the first 6 months of the current
financial year.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Entity's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
On behalf of the board
Mark
Dixon
Charlie Steel
Chief Executive Officer
Chief Financial Officer
6 August 2024This half yearly announcement contains certain forward-looking
statements with respect to the operations of International Workplace Group
plc. These statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that may or may not occur in
the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements and forecasts. Nothing in this announcement should
be construed as a profit forecast.
Independent Review Report to International Workplace Group plc ('the Entity')
Conclusion
We have been engaged by the Entity to review the Entity's condensed set of
consolidated financial statements in the half-yearly financial report for the
six months ended 30 June 2024 which comprises the Condensed Consolidated
Income Statement, the Condensed Consolidated Statement of Comprehensive
Income, the Condensed Consolidated Statement of Financial Position, the
Condensed Consolidated Statement of Changes in Equity, the Condensed
Consolidated Statement of Cash Flows and a summary of significant accounting
policies and other explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2024 is not
prepared, in all material respects in accordance with International Accounting
Standard 34 Interim Financial Reporting ("IAS 34") as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Entity to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Entity will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
The directors are responsible for preparing the condensed set of consolidated
financial statements included in the half-yearly financial report in
accordance with IAS 34 as adopted for use in the UK.
The annual financial statements of the Entity for the year ended 31 December
2023 are prepared in accordance with UK-adopted international accounting
standards.
In preparing the condensed set of consolidated financial statements, the
directors are responsible for assessing the Entity's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the Entity or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Entity a conclusion on the condensed
set of consolidated financial statements in the half-yearly financial report
based on our review.
Our conclusion, including our conclusions relating to going concern, are based
on procedures that are less extensive than audit procedures, as described in
the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Entity in accordance with the terms of our
engagement to assist the Entity in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Entity
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Entity for our review work, for this
report, or for the conclusions we have reached.
KPMG
6 August 2024
Chartered Accountants,
1 Stokes Place
St. Stephen's Green
Dublin 2
D02 DE03
Ireland
Alternative performance measures
The Group reports certain alternative performance measures ('APMs') that are
not required under International Financial Reporting Standards ('IFRS') which
represents the generally accepted accounting principles ('GAAP') under which
the Group reports. The Group believes that the presentation of these APMs
provides useful supplemental information, when viewed in conjunction with our
IFRS financial information as follows:
· to evaluate the historical and planned underlying results of our
operations;
· to set director and management remuneration; and
· to discuss and explain the Group's performance with the
investment analyst community.
None of the APMs should be considered as an alternative to financial measures
derived in accordance with GAAP. The APMs can have limitations as analytical
tools and should not be considered in isolation or as a substitute for an
analysis of our results as reported under GAAP. These performance measures may
not be calculated uniformly by all companies and therefore may not be directly
comparable with similarly titled measures and disclosures of other companies.
Please refer to page 185 of the International Workplace Group plc 2023 Annual
Report and Accounts for further details.
Additional information has been provided on the following pages to bridge the
statutory information reported within this half-year announcement with the
performance presented as part of the Chief Executive Officer's and Chief
Financial Officer's review.
Reconciliation of alternative performance measurement adjustments recognised
The purpose of these unaudited pages is to provide a reconciliation from the
2023 financial results to the alternative performance measures in accordance
with the previous pre-IFRS 16 policies adopted by the Group, and thereby give
the reader greater insight into the impact of IFRS 16 on the results of the
Group. The recognition of these adjustments will not impact the overall cash
flows of the Group or the cash generation per share.
1. Rent income and finance income
Under IFRS 16, where the sublease is assessed with reference to the
right-of-use assets arising from the head lease, conventional rent income is
not recognised in the profit or loss. The receipts associated with this income
instead are used to determine the net investment in finance leases noted
above. The net investment in finance leases is measured in subsequent periods
using the effective interest rate method, based on the applicable interest
rate. The related finance income arising on subsequent measurement is
recognised directly through profit or loss.
2. Rent expense and finance costs
Under IFRS 16, conventional rent charges are not recognised in the profit or
loss. The payments associated with these charges instead form part of the
lease payments used in calculating the right-of-use assets and related lease
liabilities noted above. The lease liabilities are measured in subsequent
periods using the effective interest rate method, based on the applicable
interest rate. The related finance costs arising on subsequent measurement are
recognised directly through profit or loss.
3. Depreciation, lease payments and lease receipts
Depreciation on the right-of-use assets recognised, is depreciated over the
life of the lease on a straight-line basis, adjusted for any period between
the lease commencement date and the date the related centre opens, reflecting
the lease-related costs directly incurred in preparing the business centre for
trading. Lease payments on head leases reduce the lease liabilities recognised
in the balance sheet. Lease receipts on subleases reduce the net investment in
finance leases recognised in the balance sheet.
4. Other adjustments
These adjustments primarily reflect the impairment of the right-of-use assets
and other property, plant and equipment as well as the reversal of the closure
cost provision on a pre-IFRS 16 basis. Certain parking, storage and brokerage
costs are also reversed, as they form part of the lease payments.
System wide revenue
Period ended 30 June 2024
$m Six months ended Six months ended
30 June 2024 30 June 2023
System wide revenue 2,088 2,060
Fee revenue 35 28
System Partner revenue (287) (252)
Group Revenue 1,836 1,836
Adjusted EBITDA
Period ended 30 June 2024
$m As reported Rent income Rent expense Depreciation Other
adjustments
Pre-IFRS 16
Adjusted EBITDA 917 35 (680) - 2 274
Adjusting items(1) 17 - - - (18) (1)
Depreciation on property plant and equipment (626) - - 445 - (181)
Amortisation of intangible assets (39) - - - - (39)
Operating profit/(loss) 269 35 (680) 445 (16) 53
1. Includes $18m of net reversal of impairment of property, plant and
equipment including right-of-use assets and excludes adjusted depreciation
reversal of $21m.
2. Pre-IFRS Adjusted EBITDA on a constant currency basis was $277m.
( )
Period ended 30 June 2023
$m As reported Rent income Rent expense Depreciation Other
adjustments
Pre-IFRS 16
Adjusted EBITDA 870 37 (674) - 12 245
Adjusting items(1) (19) - - - (8) (27)
Depreciation on property plant and equipment (703) - - 506 - (197)
Amortisation of intangible assets (32) - - - - (32)
Operating profit/(loss) 116 37 (674) 506 4 (11)
1. Includes $35m of net impairment of property, plant and equipment
including right-of-use assets and excludes adjusted depreciation reversal of
$10m.
2. Pre-IFRS Adjusted EBITDA on a constant currency basis was $245m.
Landlord contribution receivables
$m References Six months ended Six months ended
30 June 2024 30 June 2023
Opening landlord contribution receivables 32 28
Net landlord contributions recognised Statement of cash flows, p17 25 34
Maintenance landlord contributions CFO review, p10 - -
Growth landlord contributions CFO review, p10 25 34
Settled in the period (30) (29)
Exchange differences (1) -
Closing landlord contribution receivables 26 33
Working capital
Six months ended 30 June 2024
$m References As reported Rent income Depreciation and lease payments Other Pre-IFRS 16
& expense
adjustments
and finance
income & costs
Landlord contributions - reimbursement Statement of cash flows, p17 3 - (3) - -
(Increase)/decrease in trade Statement of cash flows, p17 (114) (81) - - (195)
and other receivables
Increase/(decrease) in trade Statement of cash flows, p17 144 550 (590) 12 116
and other payables
Analysed as: 33 469 (593) 12 (79)
Working capital (excluding amortisation of landlord contributions) CFO review, p10 (47)
Working capital related to the amortisation of landlord contributions CFO review, p10 (57)
Growth-related landlord contributions CFO review, p10 25
Six months ended 30 June 2023
$m References As reported Rent income Depreciation and lease payments Other adjustments Pre-IFRS 16
& expense
and finance
income & costs
Landlord contributions - reimbursement Statement of cash flows, p17 14 - (14) - -
Increase in trade and other receivables Statement of cash flows, p17 (290) (4) - - (294)
Increase/(decrease) in trade Statement of cash flows, p17 384 479 (527) 10 346
and other payables
Analysed as: 108 475 (541) 10 52
Working capital (excluding CFO review, p10 78
amortisation of landlord contributions)
Working capital related to the amortisation of landlord contributions CFO review, p10 (60)
Growth-related landlord contributions CFO review, p10 34
Capital expenditure
Six months ended 30 June 2024
$m References As reported Rent income Pre-IFRS 16
& expense
and finance
income & costs
Purchase of property, plant and equipment Statement of cash flows, p17 (75) (2) (77)
Purchase of intangible assets Statement of cash flows, p17 (25) - (25)
Purchase of subsidiaries, net of cash acquired Statement of cash flows, p17 (4) - (4)
Total capital expenditure (104) (2) (106)
$m References Net capital expenditure Landlord Gross capital expenditure
contributions and capitalised rent
Maintenance capital expenditure CFO review, p10 (47) - (47)
Growth capital expenditure CFO review, p10 (28) (25) (53)
Capitalised rent related to centre openings CFO review, p10 - (2) (2)
Purchase of subsidiaries, net of cash acquired CFO review, p10 (4) - (4)
(79) (27) (106)
Six months ended 30 June 2023
$m References As reported Rent income Pre-IFRS 16
& expense
and finance
income & costs
Purchase of property, plant and equipment Statement of cash flows, p17 (104) (2) (106)
Purchase of intangible assets Statement of cash flows, p17 (24) - (24)
Purchase of subsidiaries, net of cash acquired Statement of cash flows, p17 (8) - (8)
Total capital expenditure (136) (2) (138)
$m References Net capital expenditure Landlord Gross capital expenditure
contributions
Maintenance capital expenditure CFO review, p10 (52) - (52)
Growth capital expenditure CFO review, p10 (42) (34) (76)
Capitalised rent related to centre openings CFO review, p10 - (2) (2)
Purchase of subsidiaries, net of cash acquired CFO review, p10 (8) - (8)
(102) (36) (138)
Glossary
Adjusted EBITDA
EBITDA excluding adjusting items.
Adjusting items
Adjusting items reflects the impact of adjustments, both incomes and costs not
indicative of the underlying performance, which are considered to be
significant in nature and/or size.
Company-owned
Business centres operated by the Group under a conventional lease or variable
lease arrangements.
Capital-light
Business centres operating under a variable lease, joint-venture, Managed
& Franchised arrangements.
Contribution
Gross Profit excluding depreciation before the application of IFRS 16 and
pre-rationalisation cost.
Constant Currency
A fixed exchange rate that eliminates the effects of currency fluctuations
when comparing financial performance year-over-year.
EBIT
Earnings before interest and tax.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
EPS
Earnings per share.
Expansions
A general term which includes new business centres established by IWG and
acquired centres in the year.
Gross profit before impact of rationalisation
Gross profit excluding adjusting items to cost of sales.
Growth capital expenditure
Capital expenditure in respect of centres which opened during the current or
prior financial period.
Growth-related landlord contributions
Landlord contributions received in respect of centres which opened during the
current or prior financial period.
Like-for-like
The financial performance from centres owned and operated for a full 12-month
period prior to the start of the financial year, which therefore have a
full-year comparative.
Maintenance capital expenditure
Capital expenditure in respect of centres owned for a full 12-month period
prior to the start of the financial year and operated throughout the current
financial year, which therefore have a full-year comparative.
Maintenance-related landlord contributions
Landlord contributions received in respect of centres owned for a full
12-month period prior to the start of the financial year and operated
throughout the current financial year, which therefore have a full-year
comparative.
Managed & Franchised
Business centres operating under a formal joint-venture, managed or franchise
arrangements.
Net debt
Operations cash and cash equivalents, adjusted for both short and long‑term
borrowings, lease liabilities, net investments in finance leases and
derivatives.
Net financial debt
Operations cash and cash equivalents, adjusted for both short and long‑term
borrowings and derivatives.
Network rationalisation
Network rationalisation for the current year is defined as a centre that
ceases operation during the period from 1 January to December of the current
year. Network rationalisation for the prior year comparative is defined as a
centre that ceases operation from 1 January of the prior year to December of
the current year.
Occupancy
Occupied square feet divided by available square feet expressed as a
percentage.
Operating profit/(loss) before impact of rationalisation
Operating profit excluding adjusting items.
Pre-IFRS 16 basis / Before application of IFRS 16
IFRS accounting standards effective as at the relevant reporting date with the
exception of IFRS 16.
Rooms
The yearly average total business centre square meters divided by a standard
room of seven square meters.
REVPAR
Monthly average IWG Network revenue, divided by the average available number
of rooms, excluding rooms opened and closed in the period.
System wide revenue
Total revenue generated, including revenue from franchise, managed centre and
joint-venture partners, but excluding related fee income.
TSR
Total shareholder return.
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