REG - IWG Plc Regus PLC - FIRST QUARTER TRADING STATEMENT

International WorkplaceAnnouncement

07/05/2024 07:15

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RNS Number : 3355N  IWG PLC  07 May 2024

7 May 2024

 

FIRST QUARTER TRADING STATEMENT

 

IWG 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 digital services business Worka, issues its first quarter trading
statement for the three months ended 31 March 2024.

 

STRONG Q1 2024 WITH CONTINUING MARGIN GROWTH AND NETWORK EXPANSION

·      Underlying quarterly system-wide revenue growth of 2%
year-on-year on a constant currency basis

·      All three divisions continue to perform:

o  Managed & Franchised: growth in new centres with both signings and
openings accelerating

o  Company Owned & Leased: strong margin expansion

o  Worka: moderate growth as previously guided, with visibility on
improvement during the year

·      Net debt flat, due to the one-off impact of a system change as
guided at the full-year results on 5 March 2024, with net debt reduction
expected to continue during 2024

·      No change to financial outlook from the statement at Full Year
2023 results on 5 March 2024

Mark Dixon, Chief Executive of IWG plc, said:

"The first quarter of 2024 produced good year-on-year underlying revenue
growth showing that the move to hybrid working continues. We are delivering on
our plan to grow in a capital-light way, and the momentum in signings, and
importantly openings, continues to accelerate. We remain committed to our
strategy of growing our network coverage and giving our customers a great day
at work."

 

SUMMARY FINANCIALS

 ($m)                             Q1 2024  Q1 2023(1)  Constant currency  Actual

currency
 System-wide revenue              1,035    1,021       2%                 1%
    Managed & Franchised          139      124         15%                12%
    Company Owned & Leased        799      803         0%                 0%
    Worka                         97       94          2%                 4%
 Group revenue                    912      911         0%                 0%
 Net financial (debt)(2)          (791)    (862)

1.  Excludes the impact of the previously disclosed one-off franchise fee
revenue item in Q1 2023

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

 

Managed & Franchised: momentum continues

The Managed & Franchised business system revenue is increasing (up 15%
year-on-year on a constant currency basis) as previously signed rooms evolve
into openings delivering fee income in-line with expectations. At the end of
the quarter, we have 141,000 rooms open with a pipeline of 138,000 rooms
signed but not yet opened.

Signings up 37% year-over-year with 179 Managed & Franchised locations
signed during Q1 2024. The evolution of signings into openings is accelerating
with an increase of openings of 265% year-over-year with 19,000 rooms opened
in Q1 2024.

Revenue Per Available Room ("RevPAR") evolving as expected - RevPAR of all
open rooms was $367 per month during the period, with an estimated RevPAR of
c.$315 once all 279,000 rooms have opened and matured. This would produce a
system revenue of c.$260m per quarter, nearly 2x this quarter's system
revenue. It is worth noting that as we expand our network coverage a
significant proportion of new rooms opening are in more rural and suburban
locations, which generally deliver lower RevPAR on a like-for-like basis.

                                Q1 2024  Q1 2023(1)  Constant currency  Actual

currency
 System (Partner) revenue ($m)  139      124         15%                12%
 RevPAR ($)                     367      447         -16%               -18%
 Fee revenue ($m)               16       14          14%                16%
 Rooms open                     141,000  94,000                         50%
 Centres open                   800      503                            59%
 Rooms opened in the period     19,000   7,000                          171%
 Centres opened in the period   124      34                             265%
 Rooms in pipeline              138,000  59,000                         134%
 New centre deals signed        179      131                            37%

 

Company-Owned & Leased: margin expansion delivering cash flow

Strong margin progression of 3.0ppt to 23.9% producing a contribution of
$191m. The division continues to produce increasing cash flow as a result of
both cost control and 3% revenue growth from open centres. We signed 33 new
locations and opened 18 in the period; the vast majority of these are
capital-light in nature. Net growth capex continues to fall year-on-year in
line with our strategy to grow via our capital-light operating model.

                               Q1 2024  Q1 2023  Constant   Actual

currency
currency
 Revenue ($m)(3)               799      803      0%         0%
 RevPAR ($)                    345      347      0%         0%
 Contribution(4) ($m)          191      168      13%        14%
 Contribution margin(4)        23.9%    20.9%               3.0ppt
 Rooms open                    769,000  777,000             -1%
 Centres open                  2,826    2,872               -2%
 Rooms opened in the period    5,000    7,000               -29%
 Centres opened in the period  18       24                  -25%

3. Network rationalization has had an impact on revenue growth while
contributing to the strong margin expansion

4. 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: visibility to organic revenue growth

Worka is focused on capturing the full value chain from the structural growth
market of hybrid working through continued investment in and development of
the platform through adding new services and geographies to its operations. As
previously guided, revenue growth at the start of the year has been moderate
with anticipated improvement as the year progresses.

 ($m)     Q1 2024  Q1 2023  Constant currency  Actual

currency
 Revenue  97       94       2%                 4%

 

 

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 full-year
results on 5 March 2024.

Capital allocation will continue as guided during December's investor day,
with net debt reduction expected during the year as we progress towards our
target of 1x Net Debt / EBITDA. As previously announced, dividend payments
have restarted with a progressive policy.

Looking forwards, management will continue monitoring market conditions for
opportunities to manage the maturity profile of its capital structure.
Additionally, adopting US GAAP remains under evaluation, with a decision to be
taken in the coming months. The transition to USD reporting has been
successfully completed.

 

Financial calendar

31 May 2024                       Final 2023 dividend
payment date

6 August 2024                    Interim 2024 results

5 November 2024               Third quarter 2024 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
8:30am UK time.

Please pre-register through PC, Mac, iOS or Android, using this link
(https://brunswickgroup.zoom.us/webinar/register/WN_WkIbjL5BT0ShTyLhFV-R8Q)
(https://brunswickgroup.zoom.us/webinar/register/WN_WkIbjL5BT0ShTyLhFV-R8Q) to
attend the conference call

 

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

 Richard Manning, Head of Investor Relations

 

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