REG - IWG Plc Regus PLC - THIRD QUARTER TRADING STATEMENT - 1 NOVEMBER 2022

International WorkplaceAnnouncement

01/11/2022 07:00

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RNS Number : 7915E  IWG PLC  01 November 2022

THIRD QUARTER TRADING STATEMENT - 1 November 2022

 

IWG plc, the largest provider of hybrid workspace globally with an unrivalled
network of 3,323 locations across 120 countries, issues its trading update for
the period ended 30 September 2022.

Continued delivery of profitable and cash generative growth in line with
strategic objectives

·    25% year-on-year growth in revenue during third quarter

·    Rapid momentum in capital-light growth with 252 new centre contracts
completed to date

·    Revenue and EBITDA developing in line with plan, supporting outlook
for the year

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

·    Strong revenue and margin momentum at Instant and integration
proceeding to plan

·    Continuing strong cash generation - c£45m before investment in
growth - and £18m reduction in net debt

                           3 months to September 30(th)                  9 months to September 30(th)
 £m / % change             2022      2021      Constant ccy  Actual ccy  2022      2021      Constant ccy  Actual ccy
 System-wide revenue(1,2)  825       619       +24%          +33%        2,296     1,793     +23%          +28%
 Group revenue(1)          737       551       +25%          +34%        2,047     1,595     +24%          +28%
 Net financial debt(1)     723       (H1 2022: 741)

 1. Pre-IFRS16 basis 2. System-wide revenue represents the total of all
revenue made by both non-consolidated and consolidated locations globally

Increasing demand for hybrid driving strong revenue growth and improved EBITDA
performance

Group revenue increased by 25% in the quarter (+16% excluding Instant), driven
by continuing global demand for hybrid working solutions.  Group revenue
growth in the year to date illustrates the benefits of substantially improved
pricing, ahead of inflation, and improving occupancy (+650bps year-on-year
across the total estate). Ongoing inflationary pressures also continue to be
mitigated through our strong focus on costs and efficiency.

This has translated into continued improvement in EBITDA performance across
all regions, albeit weighted towards suburban and provincial centres, with
some city-centre and Asia-Pac locations continuing to recover at a slightly
slower pace.

Increasing traction in capital-light agreements

Capital-light contracts such as franchise agreements and management or
partnership contracts typically involve a fee structure, no capex spend by IWG
and no lease liabilities.  We completed 252 capital-light contracts during
the first nine months of the year, representing c90% of all new agreements.
With nearly 60% of these signed during the third quarter and with the rate of
monthly signings continuing to grow, we have strong line of sight to our
year-end target of 500 agreements. We would expect most of these to open
through the course of 2023 and to then contribute to EBITDA gradually as
centre revenues build.

Instant growing strongly and integration of digital assets on track

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.  Instant grew
strongly during the quarter, showing strong year on year progress, accompanied
by continuing growth in EBITDA.  The integration of IWG's digital assets with
the Instant platform is progressing as planned and we are seeing the EBITDA
benefits of this coming through as expected.

Strong cashflow generation pre-growth investment is expected to drive lower
net debt at year-end

Pre-growth investment, the business generated nearly £45m of cashflow during
the quarter.  As a result, we reduced net debt by £18m from the level at the
end of June 2022.  With improving EBITDA through the fourth quarter, we
remain on track to further reduce net debt and the Group leverage ratio by the
year-end.

 

Outlook

In an environment of economic and geopolitical uncertainty the demand for
hybrid working solutions continues to grow as businesses seek to reduce their
real estate costs and respond to the needs of their employees.  We have
strong visibility over our forward order book and revenues and are
successfully mitigating the inflationary pressures on costs. Monthly
profitability is continuing to grow, and we remain cautiously optimistic about
the outlook for the full year, with adjusted EBITDA expected to be towards the
lower end of the range of market estimates (£304m - £380m).

Mark Dixon, Group CEO commented:

"The significant move to hybrid working is driving strong demand for our
flexible work products and creating a long-term tailwind for IWG as businesses
all over the world respond to the twin effects of economic uncertainty and
their employees' desire to work flexibly. To meet this demand, our innovative
capital-light growth strategy allows us to capitalise on the growing pipeline
of commercial property owners and landlords seeking to maximise their returns
by partnering with IWG.  The third quarter has shown continuing strong
revenue growth, margin improvement and underlying cash generation.  We are
well placed to deliver the full year results and enter 2023 with a strong
foundation for delivering further growth and reducing leverage."

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Conference call details

There will be conference call for analysts and investors at 08.30 GMT this
morning.

Dial in numbers

UK & International          +44 (0) 33 0551 0200

UK Toll Free                        0808 109 0700

Replay (available for 7 days) dial-in number: +44 (0) 20 8196 1480 / 0800 633
8453 Access PIN: 9411844#

 

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

 Mal Patel, Group Investor Relations Director

 mal.patel@iwgplc.com

 
This trading update contains certain forward-looking statements with respect to the operations of IWG 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.

 

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