REG - IWG Plc Regus PLC - IWG plc - Q3 2023 Trading Update

International WorkplaceAnnouncement

07/11/2023 07:00

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RNS Number : 5449S  IWG PLC  07 November 2023

 

7th November 2023

THIRD QUARTER TRADING STATEMENT

IWG plc, the largest provider of hybrid workspace globally including its Regus
and Spaces brands with an unrivalled network of 3,455 locations across more
than 120 countries, issues its third quarter trading statement for the three
months ended 30th September 2023.

 

CONTINUING TO DELIVER AS WORLD LEADER IN HYBRID WORKSPACE

 

·      Quarterly system revenue of £830m, representing constant
currency growth of 8% year-on-year

·      Acceleration of capital-light centre growth: 200 capital-light
centre signings during Q3 taking the total to 582 year to date, almost 40%
more than signed during all of 2022

·      Previous signings progressing through to openings (99 in Q3 2023
vs 32 in Q3 2022). This is expected to increase further, driving higher fee
income

·      Net financial debt reduced by £24m during Q3 2023 to £634m with
revenues and continued cost discipline driving cash generation

·      No change in Group's financial outlook from the statement at H1
results on 8th August 2023

 

IWG will be hosting a Capital Markets Day in New York City on 5th December
2023.

 

Summary financials

 Continuing operations (£m)   Q3 2023  Q3 2022  Constant currency  Actual     9m 2023  9m 2022  Constant currency  Actual

Q3 YoY
currency
9m YoY
currency

Q3 YoY
9m YoY
 System revenue(1)            830      812      +8%                +2%        2,491    2,259    +11%               +10%
 Group revenue                736      726      +7%                +1%        2,219    2,013    +11%               +10%
 Net financial debt(2)        634      723                                    634      723

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

2.  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

 

Momentum in quarterly revenue

System-wide revenue increased by 8% year-on-year to £830m in the quarter
driven by continued global demand for hybrid working solutions. Group revenue
increased by 7% to £736m illustrating the benefit of network growth, pricing
strength, and ancillary services. As anticipated, FX was a headwind for the
Group during Q3 2023, which has adversely affected revenue numbers on an
actual FX basis.

 

Continued momentum in capital-light operating model

The business continues to sign new locations on a capital-light basis, meaning
the Group will have less capital-intensive exposure and lower operational
leverage. The momentum which was evident in H1 has continued with 200 new
capital-light centres signed in Q3 and 582 signed year-to-date. This adds to
an already healthy pipeline of centres signed but not yet opened. As
previously guided, capital-light centres take on average 10 months to open and
a further 18 months to reach revenue maturity. Additionally, 212 centres which
were signed up under the capital-light model have opened during 2023
(consisting of managed, franchised and variable rent centres).

 

Worka

Worka continues to perform in line with management's expectations. To ensure
Worka fully captures the value chain from the structural growth market of
hybrid working. Worka continues to invest and develop the platform adding new
services and geographies to its operations. The company continues to generate
attractive cash flows. Worka has excellent potential for the future.

 

Continuing the reduction of net financial debt

Revenue growth, coupled with ongoing cost discipline, has resulted in net
financial debt reduction of £24m in the quarter to £634m.

 

 

                                Q3 2023  Q3 2022  YoY          9m 2023  9m 2022  YoY

change
change
 Number of centres              3,455    3,323    +132         3,455    3,323    +132
 Centre openings                99       32       +67          232      102      +130
 Centre rationalisations        (42)     (44)     (2)          (122)    (93)     +29
 Total new centre deals signed  204      160      +44          604      285      +319
 Of which capital light         200      147      +53          582      252      +330
 Average total occupancy(3)     73.5%    73.4%    +10 bps      73.6%    73.4%    +20 bps
 Embedded price, indexed(4)     103      97       +6%          103      95       +8%

3. Occupancy excluding managed and franchised centres.

4. Price per square foot, Q1 2020 = 100

 

Capital Markets Day

To help the market better understand our business model, IWG will be hosting a
Capital Markets Day on 5th December 2023 in New York City. Details of the
event can be found using this link
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fassets.iwgplc.com%2Fimage%2Fupload%2Fv1699008161%2FWebsiteImagery%2FBrands%2FSettings%2FPDF%2FSave_the_date.pdf&data=05%7C01%7CRichard.Manning%40iwgplc.com%7Cf3b3bd7b25c14536702208dbdc5c80fe%7C88155c28f750401391d38347ddb3daa7%7C0%7C0%7C638346062079180628%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=rG%2BrBHKS9pMTfLL1ccG%2FWgu%2FAltPiWxTvLsK%2BqfW4r4%3D&reserved=0)
.

 

Mark Dixon, Chief Executive of IWG plc, said:

"The structural growth in hybrid working, combined with our market position,
has resulted in continued revenue momentum in the third quarter of 2023. Our
capital-light growth strategy is continuing to deliver with around 40% more
locations already signed in 2023 than in the whole of 2022. Our revenue growth
and cost control are driving cash flow enabling us to continue to pay down
debt."

 

Outlook and guidance

The increasing demand for hybrid and flexible working solutions continues to
provide growth opportunities for the Group. In particular, the market has
facilitated acceleration of the growth plans for our capital-light segment.
Our active management of costs, including those associated with supporting
this accelerated growth, has enabled us to maintain our strong financial
performance this year.

We confirm our financial outlook for 2023 and remain confident that both
EBITDA(2) and year-end net financial debt(2) will remain in-line with
management's expectations.

Further to the announcement regarding functional currency and accounting
standards consideration, IWG will report full-year 2023 results in GBP with
plans to convert to USD with effect from 1st January 2024. Adopting US GAAP
remains under evaluation, with a decision to be taken during H1 2024.

 

Financial Calendar

5th December 2023 - Capital Markets Day (New York City, USA)

5th March 2024 - 2023 FY Results (London, UK)

7th May 2024 - Q1 2024 Trading Update (Remote)

 

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 9:00am GMT.
To attend the conference call, please pre-register through PC, Mac, iOS or
Android, using this link
(https://brunswickgroup.zoom.us/webinar/register/WN_u6dz2FRNSf-w0PLldr5pOA#/registration)
.

 

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

 

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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