REG - Intnl Workplace Grp Regus PLC - Q3 2024 Trading Update

International WorkplaceAnnouncement

05/11/2024 07:00

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RNS Number : 8913K  International Workplace Group PLC  05 November 2024

 

5 November 2024

 

THIRD QUARTER TRADING STATEMENT

 

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, Spaces, HQ, Signature and Worka, issues its third
quarter trading statement for the three months ended 30 September 2024.

 

SOLID NETWORK EXPANSION AND MARGIN IMPROVEMENT CONTINUE IN Q3 2024

·      Quarterly system-wide revenue growth of 2% on a year-over-year
constant currency basis

·      Managed and Franchised system revenue up 19% on a year-over-year
constant currency basis. Net centre openings continue to accelerate, up 52%
(100 in Q3 2024 vs 66 in Q3 2023)

·      Segmental Performance:

o  Managed & Franchised: robust fee revenue growth of 46% in the quarter
on a year-over-year constant currency basis

o  Company Owned & Leased: 4% revenue growth from open centres with
contribution margin increasing to 25.2% for the quarter, representing +330bps

o  Worka: revenue flat, continuing platform investment to support improved
future revenue trajectory

·      Overhead: $21m increase year-over-year on a constant currency
basis for the nine months to September 2024, supporting marketing, systems and
managed partnership growth investment

·      Net financial debt reduced to $734m (H1 2024: $768m)

·      2024 Interim dividend of $4m (0.43c/share) was paid in October
2024

·      No change to financial outlook from the interim results statement
on 6 August 2024

Mark Dixon, Chief Executive of International Workplace Group plc, said:

"This has been a good quarter for us with strong fee revenue growth of 46% in
the Managed & Franchised segment, margin expansion in the Company-Owned
& Leased segment and further cashflow production which has reduced net
debt. We are delivering on our plan and have good visibility to our
medium-term $1bn EBITDA target. We remain committed to our strategy of growing
our network coverage and giving our customers a great day at work."

SUMMARY FINANCIALS

 Group
 ($m)                             Q3 2024  Q3 2023  Constant currency  Actual     9m 2024  9m 2023  Constant currency  Actual

currency
currency
 System-wide revenue              1,065    1,040    2%                 3%         3,153    3,100    2%                 2%
    Managed & Franchised          157      136      19%                17%        444      388      17%                14%
    Company Owned & Leased        809      808      (1%)               0%         2,422    2,427    0%                 0%
    Worka                         99       96       0%                 2%         287      285      (1%)               1%
 Group revenue                    931      919      0%                 1%         2,767    2,755    0%                 0%
 Net financial (debt)(1)          (734)    (775)                                  (734)    (775)

1. Before the application of IFRS 16 as defined in the Alternative Performance
measures section of the 2023 Annual Report and Accounts

Managed & Franchised

Managed & Franchised system revenue is developing positively (up 19%
year-over-year on a constant currency basis) as previously signed rooms evolve
into openings, delivering strong growth in fee revenue of 46% year-over-year
for Q3. At the end of the quarter, we have 169,000 rooms open with a pipeline
of 173,000 rooms signed but not yet opened.

The evolution of signings into openings is accelerating with an increase of
net centre openings of 52% year-over-year with 15,000 rooms opened (net) in Q3
2024, and more total openings in the 9 months to the end of Q3 than in the
whole of 2023.

Revenue Per Available Room ("RevPAR") continues to evolve as expected. RevPAR
across all open rooms was $412 during the period, with an estimated blended
RevPAR of c.$315 once all open rooms have matured, and signed rooms have
opened and reached maturity. As we have previously disclosed, RevPAR on these
additional Managed Partnerships rooms is targeted to be $250 at maturity. Once
all rooms currently open and signed reach maturity, this is estimated to
produce a system revenue of c.$320m per quarter.

 ($m)                                   Q3 2024  Q3 2023  Constant currency  Actual     9m 2024  9m 2023  Constant currency  Actual

currency
currency
 System (Partner) revenue ($m)          157      136      19%                17%        444      388      17%                14%
 RevPAR ($)(2)                          412      496      (15%)              (17%)      397      476      (15%)              (17%)
 Fee revenue ($m)                       23       16       46%                47%        58       44       28%                32%
 Rooms open                             169,000  110,000                     54%        169,000  110,000                     54%
 Centres open                           1,001    607                         65%        1,001    607                         65%
 Rooms opened in the period (net)(3)    15,000   9,000                       67%        46,000   18,000                      156%
 Centres opened in the period (net)(3)  100      66                          52%        319      122                         161%
 Rooms in pipeline                      173,000  110,000                     57%        173,000  110,000                     57%
 New centre deals signed                181      190                         (5%)       568      515                         10%

2. RevPAR (revenue per available room) and related growth is on a comparable
basis, based on comparability as at 30 September 2024 and includes rooms that
were open during the last 12 months in both the current and the prior year.
The principal exclusions in deriving these measures are new openings and
closures

3. 18 centres (3,000 rooms) in Q3 2024 were reclassified from Managed &
Franchised into the Company-Owned & Leased segment

Company-Owned & Leased

In line with our goal to increase margins in this segment, contribution margin
has improved to 25.2% at Q3 2024 producing a contribution of $204m for the
quarter, and $584m in the 9 months to the end of Q3. Company-Owned &
Leased continues to produce increasing cash flow as a result of both cost
control and 4% revenue growth from open centres. We signed 53 new locations
and opened 10 in the period (net); the vast majority being capital-light. Net
growth capex continues to fall year-over-year in line with our strategy to
grow via our capital-light operating model.

 ($m)                                   Q3 2024  Q3 2023  Constant currency  Actual     9m 2024  9m 2023  Constant currency  Actual

currency
currency
 Revenue ($m)(4)                        809      808      (1%)               0%         2,422    2,427    0%                 0%
 RevPAR ($)(2)                          358      353      0%                 1%         355      351      1%                 1%
 Contribution(5) ($m)                   204      177      13%                15%        584      517      12%                13%
 Contribution margin(5)                 25.2%    21.9%                       330bps     24.1%    21.3%                       280bps
 Rooms open                             772,000  776,000                     (1%)       772,000  776,000                     (1%)
 Centres open                           2,860    2,848                       0%         2,860    2,848                       0%
 Rooms opened in the period (net)(3)    1,000    (1,000)                     n.m.       -        4,000                       (100%)
 Centres opened in the period (net)(3)  10       (9)                         n.m.       28       (12)                        n.m.

2. RevPAR (revenue per available room) and related growth is on a comparable
basis, based on comparability as at 30 September 2024 and includes rooms that
were open during the last 12 months in both the current and the prior year.
The principal exclusions in deriving these measures are new openings and
closures

3. 18 centres (3,000 rooms) in Q3 2024 were reclassified from Managed &
Franchised into the Company-Owned & Leased segment

4. Network rationalisation has had an impact on revenue growth while
contributing to margin expansion

5. Gross Profit excluding depreciation before the application of IFRS 16 and
pre-rationalization cost, as defined in the Alternative performance measures
section in the 2023 Annual Report

Worka

Underlying revenue growth has offset the impact of the roll-off of one legacy
contract, however Worka has been impacted by digital product delays with
revenue remaining flat year-over-year, as previously guided.

 ($m)     Q3 2024  Q3 2023  Constant currency  Actual     9m 2024  9m 2023  Constant currency  Actual

currency
currency
 Revenue  99       96       0%                 2%         287      285      (1%)               1%

 

Financing and Net Debt

We are pleased to have completed our refinancing in June 2024 including
subsequent repurchases of the Convertible Bond, the face value of which has
reduced by 51.7% as at 30 September 2024. The refinancing included a renewal
of a $720m Revolving Credit Facility onto a 5-year term, issuance of a listed
€625m corporate bond at 6.50% and an inaugural investment-grade credit
rating of BBB (Stable) from Fitch. Combined, these give the company a
high-quality, long-term debt capital structure from which to continue its
growth trajectory.

 ($m)                                   Sept 30 2024    Jun 30 2024    Change
 Cash                                   147             160            (13)
 2027 0.5% Convertible Bond(6)          (204)           (279)          75
 2030 6.5% Corporate Bond(6)            (658)           (605)          (53)
 Other                                  (19)            (44)           25
 Net Financial Debt                     (734)           (768)          34

6. Corporate Bond and Convertible Bond principal are net of derivative hedges
to remove USD FX volatility

Net financial debt reduced by $34m in the quarter, driven by:

·      Improved cash flows from our revenue growth, cost control and
continued focus on our capital-light operating model.

·      2027 0.50% Convertible Bond: repurchases in August 2024 and
September 2024 of £37.2m (at a weighted average price of 92.9%, representing
a total consideration of £34.6m) and £25.5m (at a weighted average price of
93.6% representing a total consideration of £23.9m) respectively.

Offset by:

·      2030 6.50% Corporate Bond: bond increase of €50m in September
2024 on the same terms as the existing bond, but priced at 102.846, implying a
yield to maturity of 5.88%. This was swapped into USD. We currently have no
plans to tap the bond further as a means of a debt capital raise.

·      Foreign exchange impacts ($8m) of a weakening USD against the
Euro increasing the carrying amount of the unhedged portion of the 2030 6.50%
Corporate Bond.

2024 Interim dividend of $4m (0.43c/share) was paid in October 2024.

Further £10.8m of the 2027 0.50% Convertible Bond was repurchased in October
2024.

Outlook and guidance

The Group is confident that both 2024 EBITDA and net financial debt will be
in-line with management's expectations which have not changed during 2024, as
previously confirmed at the interim results on 5 August 2024.

Full-year signings of capital-light centres remain on track to be higher than
2023, with the accelerated evolution into openings expected to continue.

We reiterate our $1bn medium-term EBITDA target communicated at the Investor
Day in December 2023. Managed & Franchised is developing positively
relative to expectations, Company-Owned & Leased is expected to grow
in-line and Worka developing slower than previously expected.

Our capital allocation policy remains to pay down net debt as we progress
toward our short-term target of 1x Net Debt / EBITDA.

As we continue to simplify the presentation of our business for investors and
stakeholders, a data book showing segmental splits in USD is now available on
the Investor Relations website.

US GAAP will be implemented for 2025, and the Group will host investor
workshops to discuss the impact of these changes at the beginning of 2025.
Further details will be provided in the new year.

 

Financial calendar

 

4 March 2025                          2024 Full Year
Results

6 May 2025                             First
Quarter 2025 Trading Update

20 May 2025                          Annual General Meeting

5 August 2025                         2025 Interim
Results

4 November 2025                  Third Quarter 2025 Trading Update

 

Details of results presentation

Mark Dixon, Chief Executive Officer, and Charlie Steel, Chief Financial
Officer, will be hosting a conference call for analysts and investors at 9am
GMT.

Please pre-register through PC, Mac, iOS or Android, using this link
(https://brunswickgroup.zoom.us/webinar/register/WN_gMXwc-FyQzinsS7yY2uSjA)
(https://brunswickgroup.zoom.us/webinar/register/WN_gMXwc-FyQzinsS7yY2uSjA) to
attend the conference call.

 

Further information

International Workplace Group plc

Mark Dixon, Chief Executive Officer

Charlie Steel, Chief Financial Officer

Richard Manning, Head of Investor Relations

 

Brunswick Tel: +44 (0) 20 7404 5959

Nick Cosgrove

Peter Hesse

 

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