REG - IWG Plc Regus PLC - FIRST QUARTER TRADING STATEMENT

International WorkplaceAnnouncement

25/04/2023 07:00

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RNS Number : 2899X  IWG PLC  25 April 2023

 

 

 

25 April 2023

FIRST QUARTER TRADING STATEMENT

IWG plc, the largest provider of hybrid workspace globally including its Regus
and Spaces brands and an unrivalled network of 3,375 buildings across 120
countries, issues its first quarter trading statement for the three months
ended

31 March 2023.

RECORD REVENUE DELIVERY AND CONTINUING DEBT REDUCTION

·  Record quarterly revenue of £760m with growth of 25% year-on-year

·  Group achieved carbon neutrality for the entire quarter and expects to be
carbon neutral for all of 2023 and beyond

·  Rapid momentum in capital-light centre growth with 170 new centre
contracts signed during the quarter

·  Pro-forma(1) net financial debt reduced by £29m, with revenue growth
driving cash generation

·  Instant Group acquisition bridge financing reduced from initial balance
of £330m to £199m as of today

·  Continued pricing strength and focus on cost and efficiencies largely
mitigating inflationary pressure

·  No change in Group's financial outlook from statement at FY results on 7
March 2023

SUMMARY FINANCIALS

 £m                              3 months to    3 months to March 2022  Constant   Actual

 March 2023
currency
currency
 System-wide revenue(2)          847            692                     +18%       +22%
 Group revenue                   760            609                     +20%       +25%
 Net financial debt/(cash)(1,3)  683            764

1.  Net debt at 31 March 2023 of £683m includes £13m cash collected in
April 2023 which is usually collected in March. This was late due to system
maintenance. Normal collection timetable resumed in April 2023 and is expected
to continue hereafter.

2.  System-wide revenue represents the total of all revenue made by both
non-consolidated and consolidated locations globally.

3.  Before the application of IFRS 16 (primarily relating to operating
leases) as defined in the Alternative performance measures section of the 2022
Annual Report and Accounts.

 

Record quarterly revenue

System-wide revenue increased by 22% to a record quarterly revenue of £847m
in the quarter driven by continuing global demand for hybrid working
solutions, and the acquisition of The Instant Group in March 2022. Group
revenue increased by 25% to £760m (from £739m in Q4 2022, an increase of 4%
at constant FX) and illustrates the benefits of improved pricing, ahead of
inflation, and improving occupancy.

 

Carbon neutrality

The Group has achieved carbon neutrality for all of Q1 2023 as expected.
Growth is clearly a priority for IWG, but we are determined only to expand as
a carbon-neutral organisation. Not only is this important for the Group, but
also clients, who can reduce the significant administrative burden of
evaluating carbon neutrality themselves by simply using our buildings. After
being upgraded by MSCI to a AA rating in 2022 we are now targeting to achieve
a AAA rating. We expect to remain carbon neutral for the remainder of 2023 and
beyond.

Continuing network growth and increasing occupancy and pricing

In Q1 2023 we signed a total of 170 new centre deals (2022: 51 deals signed)
which will be added to our global and widely distributed network in the
future. 95% (161) of these were capital-light. We would expect most of these
to open through the course of 2023 and to then contribute to EBITDA gradually
as centre revenues build. The increased growth with capital-light centres will
result in reduced net growth capital expenditure investments going forward and
improve the quality of our centres simulantiously. In the first quarter of
2023 we opened 58 centres (2022: 36) and closed 28 (2022: 22). During 2023 we
continue to focus on the reduction of loss-making centres as a key lever to
drive group profitability.

                                3 months to  3 months to  YoY

March 2023
March 2022
change
 Number of centres              3,375        3,328        +47
 Centre openings                58           36
 Centre rationalisations        (28)         (22)
 Number of SQFT                 65.7m        64.4m        +2%
 Total new centre deals signed  170          51           +233%
 Of which capital light         161          40
 Average total occupancy        73.7%        73.0%        +70 bps
 Embedded price, indexed*       102          91           +12%

*   Price per square foot, Q1 2020 = 100

Worka growing strongly

Worka, the separate entity which holds IWG's digital assets and The Instant
Group, is the world's largest independent marketplace for flexible working
solutions for a smarter working world, with an innovative technology platform
and award-winning digital marketing capabilities. Including the acquisition of
The Instant Group during 2022, Worka revenue continued to grow strongly,
increasing by 76% in the first quarter of 2023.

Continuing net debt reduction

As the Group continues to perform strongly and generate increasing levels of
cash, we continue our strategy of reducing both net and gross financial debt.

The non-recourse bridge facility with an initial balance of £330m when we
acquired The Instant Group was further reduced to £199m as of today. The
Group is currently evaluating options regarding refinancing or repaying the
balance of this non-recourse debt before its maturity in September, for which
there are multiple options available. In the meantime, further payments are
expected to be made to reduce the balance further.

Mark Dixon, Chief Executive of IWG plc, said:

"In the first quarter of 2023 we continued to deliver record levels of
revenue. I'm pleased to see that we are combining this with margin expansion,
enhanced cash flow generation, and building on our capital-light growth
strategy. At the same time we managed to achieve carbon neutrality in the
quarter and expect to remain carbon neutral during all of 2023. Importantly,
we also continued to build on the world's largest digital workspace platform
which is growing strongly and delivering cash flow."

Outlook and guidance

Whilst we continue to see higher demand for hybrid working solutions globally
with companies reducing their real estate costs and responding to the needs of
their employees, there are also macroeconomic headwinds which can impact
demand. The Group continues to see pressure from inflation and interest rates
which impact costs and cash flow. In particular, the strengthening in
Sterling, the Group's reporting currency, during Q1 2023 will negatively
impact financial performance at the Group level.

We remain cautiously optimistic about the outlook for 2023 and do not change
our financial outlook from our statement at the full-year results on 7 March
2023. We are confident that EBITDA will remain in line with management's
expectations with net debt falling during the year.

 

 

Financial calendar

8(th) August 2023                  Interim 2023 results

7(th) November 2023             Third quarter 2023 trading update

 

Details of conference call

Mark Dixon, Chief Executive Officer, and Charlie Steel, Chief Financial
Officer, will host a conference call for analysts and investors at 8:30am UK
time.

Conference call dials (for the live call, no PIN or password is
required; callers just need to state they are dialling in for
the IWG call):

UK & International            +44 (0) 33 0551 200

UK Toll Free                     0808 109 0700

Replay (available for 7 days) after the LIVE call:

UK & International        +44 (0) 203451 9993

Replay PIN:                      0928107#

 

 Further information
 IWG plc                                  Brunswick Tel: + 44 (0) 20 7404 5959
 Mark Dixon, Chief Executive Officer      Nick Cosgrove

 Charlie Steel, Chief Financial Officer   Peter Hesse

 

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