REG - IWG Plc Regus PLC - IWG FY 2023 Preliminary Results
05/03/2024 07:15
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RNS Number : 5495F IWG PLC 05 March 2024
5 March 2024
PRELIMINARY RESULTS ANNOUNCEMENT
IWG plc, the world's largest hybrid workspace platform with operations of
895,000 rooms across 3,514 locations in 120 countries through brands such as
Regus and Spaces, and in addition the digital services business Worka, issues
its preliminary results for the twelve months ended 31 December 2023.
IWG DELIVERS: GROWTH, REVENUE, CASH, DIVIDEND
Group performance: record revenue, increasing EBITDA and cash generation
· Delivering the highest-ever revenue in IWG's 35-year history with
10% constant currency growth in system-wide(1) revenue to £3.3bn, 8% growth
at actual currency
· EBITDA(2) increase of 34%(3) to £403m (2022: £311m) driven by
combination of higher revenue and cost focus
· Higher cash generation of £297m cash flow from business
activities(4) (2022: £151m) and £104m lower net financial debt vs 2022
· Expanding footprint globally across diverse locations with a
doubling in the open rate during 2023 from 2022, almost all with no capex
· Continued cost discipline with revenue growth higher than cost(5)
growth despite continued global inflationary pressure
· As previously announced, resumption of dividend payments with a
progressive policy and the Board is recommending a final dividend of 1.0p per
share
Managed & Franchised: contract signing growth continues, rooms opening,
increasing RevPAR
· Fee income from Managed & Franchised business up 49%(3) to
£50m (2022: £34m)
· Record 117k rooms signed during 2023, up 129% vs 2022 with an
estimated RevPAR of £200 at maturity
· Signings now evolving into openings at pace, with 37k rooms opened in
2023 (15k rooms opened in 2022)
· At end of 2023, a total of 115k rooms had been signed and not yet opened
· Revenue Per Available Room ("RevPAR") of £381 per month in 2023
with an estimated RevPAR of c£250 once all rooms including the signed
pipeline have opened and matured
· Increased investment in supporting this ongoing programme
Company-Owned & Leased: margin expansion on track
· Gross Profit(5) increased by 41%(3) to £528m (2022: £388m) and
margin up from 15.9% in 2022 to 20.4% in 2023
· RevPAR increase of 6%(3) to £280, delivering revenue growth of
7%(3) to £2.59bn
· Costs(5), including centre maintenance capex of £41m, held below
inflation driven by improving efficiencies, despite the high inflationary
backdrop
· New centre investment of £55m during 2023, which is a fraction
of previous expenditure and expected to decline further in 2024
Worka: investment continuing in the market-leading hybrid working platform
· Continued progress with multiple bolt-on acquisitions and
platform expansion, in-line with strategy
· Revenue increased by 18% to £319m (2022: £271m) delivering
gross profit growth of 16% to £160m (2022: £138m)
· Strong revenue improvements in new initiatives, but some
headwinds as legacy contracts roll off forecast; expectation of flat revenues
during 2024
· Gross Profit margin stable at 50.2% in 2023 (2022: 50.9%) with
continued investment in the platform expected to be a catalyst for revenue
growth and EBITDA generation in medium term
· Invested £24m through acquisitions and platform capex during
2023, continuing to build the platform
Investing for the future: controlling central overhead with focus on platform
investment and growth
· Central overhead costs down as a percentage of revenue by 50bps
as the business becomes more efficient
· Investment, including M&A, to help drive revenue growth and
further efficiencies in the future has risen to £82m for:
· Investment into the platform and systems
· Research and development into the platform, new products,
systems and processes
· We expect this trend to continue during 2024
Summary
Investment
£m System Revenue Revenue Contribution(5) Overhead(5,7) Pre-IFRS Adjusted EBITDA(2) Centre New Centre Other
Maintenance Capex (net)
Capex (net)
Investments
(incl. M&A)
Managed & Franchised 427 50 50 (70) (20)
Company-Owned & Leased 2,589 2,589 569 (272) 297 (41) (55) (58)
Worka 319 319 164 (38) 126 (24)
Total in 2023 3,335 2,958 783 (380) 403 (41) (55) (82)
Total in 2022 3,086 2,751 662 (351) 311 (58) (104) (376)
Cashflow and balance sheet: delivering as expected, resumption of dividend
• Cashflow from business activities(4) of £297m (2022: £151m) primary
driver of cashflow generation
• Net financial debt reduction towards 1.0x net financial debt / EBITDA
continues, with net financial debt reducing by £104m over the last 12 months
to £(608)m
• Resumption of dividend underpinned by confidence balance sheet
Changes to presentation of financials in 2024
• Successful adoption of USD as reporting currency, effective 1 January
2024; future reporting will be under USD
• Board continues to review the adoption of US GAAP as the Group's
accounting standard with a likely announcement regarding the company's
intentions during H1 2024
SUMMARY FINANCIALS
The Group reports results in accordance with IFRS. Some results are
additionally presented before the application of IFRS 16 (in accordance with
IAS 17 accounting standards) as it provides useful information to stakeholders
on how the Group is managed and reporting for bank covenants and certain lease
agreements. The primary difference between the two standards is the treatment
of operating lease liabilities. There is no difference between underlying cash
flow. A reconciliation between EBITDA before the application of IFRS 16 and
the IFRS 16 EBITDA is provided in the CFO review.
Continuing operations (£m) 2023 2022 Constant Actual
currency
currency
System-wide revenue(1) 3,335 3,086 +10% +8%
RevPAR per month (£) 291 280 +6% +4%
Group revenue 2,958 2,751 +9% +8%
EBITDA(2) 403 311 +34% +30%
Operating profit 145 147 +7% -2%
Earnings per share (p) (21.4) (7.0) n.m.
Cash flow from business activities(4) 297 151 +97%
Net financial (debt) (608) (712)
1. System-wide revenue represents the total of all revenue made by both
non-consolidated and consolidated locations globally
2. Adjusted EBITDA before the application of IFRS 16 as defined in the
Alternative performance measures section
3. Constant currency
4. Cash flow before tax, interest, growth capex and acquisitions (see p. 14)
5. Pre rationalisation cost
6. Gross Profit excluding depreciation before the application of IFRS 16 as
defined in the Alternative performance measures section
7. SG&A excluding depreciation before the application of IFRS 16 as
defined in the Alternative performance measures section
Mark Dixon, Chief Executive of IWG plc, said:
"We enter 2024 continuing our momentum from 2023 as we continue to grow our
customer base, our global partnerships and our best-in-class network.
While 2023 was a record year for both revenue and network size, we continue to
see significant growth potential. With 1.2 billion white-collar workers
globally and a potential audience valued at more than $2 trillion, there is
substantial room for growth and as a company, we have a laser-like focus on
capturing more of this market over the coming months and years."
Outlook and guidance
The demand for hybrid working solutions continues to grow as businesses
globally seek to reduce costs and respond to the needs of their employees. The
Group remains cautious in its outlook and continues to focus on driving
efficiencies and cost control. As a result, we are confident that 2024 EBITDA
will be in-line with management's expectations.
Whilst underlying cash generation continues to be strong, management are
expecting some catch-up during Q1 2024 due to a changeover in accounting
systems, which will result in net quarterly cash generation being flat as a
one-off impact. Capital allocation will continue as guided during our investor
day in December last year with net debt continuing to be paid down during the
year, towards our target of 1x Net Debt / EBITDA.
Financial calendar
19 March 2024 2023 Annual Report & Accounts publication
3 May 2024 Final 2023 dividend record date
7 May 2024 First quarter 2024 trading update
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 presentation of the
results today for analysts and investors at 9.00am UK time (SPACES, New Broad
Street House, 35 New Broad St,
London, EC2M 1NH).
The presentation will be available via live webcast. This will be available to
view at the following
link:https://broadcaster-audience.mediaplatform.com/event/65cb83d170f7b50d10104111/presentation
(https://broadcaster-audience.mediaplatform.com/event/65cb83d170f7b50d10104111/presentation)
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
Chairman's Statement
The rapid uptake of the hybrid model is making it the preferred way of working
for millions everywhere. This trend continues to gain momentum as ongoing
societal and behavioural change, supported by ever-advancing technology,
enables more and more people to work wherever and however they are happiest
and most productive. During the year we witnessed companies across the world
reducing their concentration on large city-centre sites, choosing instead for
state-of-the-art accommodation in the suburbs, towns and smaller communities
close to where their people live and want to work, combined with smaller,
flexible city-based workspaces.
We are proud that our conveniently located flexible workspace delivers
multiple benefits to so many different audiences, both in and out of city
centres. Clearly, to workers, who get to work where they wish, slashing the
commute which saves money and gains quality time for themselves. To
businesses, enabling them to attract and retain key talent while reducing both
their costs and environmental footprint. To communities, empowering them to
attract new business opportunities and increase their economic activity. To
property-owning partners and franchisees, providing all the services necessary
to successfully convert buildings into the flexible workspace offerings
desired by hybrid workers. And, of course, to our shareholders, through
improved financial returns.
During 2023, as we accelerated the expansion of our global network we
maintained a disciplined approach to costs and capital-light growth that
enabled us to simultaneously generate sufficient cash to reduce debt and
return to a dividend payment.
In short, this was an exceptional year in the history of IWG as we continue to
lead the way reinventing and expanding the world of flexible workspace.
Our people
We achieved this multi-faceted success during a year that no one regarded as
straightforward in light of the significant geopolitical, economic and other
challenges faced by so many. Such accomplishments were therefore not easily
delivered, and we thank our exceptional IWG people once more for the continued
professionalism and sheer hard work that have made them possible.
It is particularly important that we reward their commitment by offering every
opportunity to build great careers with IWG. We are committed to provide a
diverse and inclusive environment, together with the excellent IWG training
and development support, to enable them to realise their full potential.
Our strategy
As a result of consistently applying a long-term strategic approach over the
years we are today established as a leading pioneer of hybrid working. During
2023, we continued to refine and improve our offer by further strengthening
our market lead by focusing on a few key areas including geographic coverage,
technological excellence and people power.
The acceleration of the expansion of our global network through our
capital-light approach using management agreements, partnering and franchising
is naturally extending our market lead. This enables us to meet the needs of
evermore hybrid workers while increasing awareness and understanding among new
prospects of the benefits of the hybrid model.
We continue to develop our industry-leading platform, using the insight and
experience we've gained from operating the world's largest network of flexible
workspaces. This includes improvements to the offer and delivery of services
to our customers and partners along with the further investment in our unique
technology platform. As a result, we are able to increase both service levels
and efficiency, while helping customers and partners become ever-more
efficient and productive in achieving their own business aims and ambitions..
Another important area of focus is our continued development of the digital
Worka integrated independent workspace platform to capture the value chain
opportunities from the structural growth of the entire market of hybrid
working.
The Board
I would like to thank my Board colleagues for their continued commitment and
valued advice they have brought to IWG over the past year during which the
Group delivered improved operating results while securing the Group's position
as the leading provider for both customers and building owners as hybrid
working is creating unique opportunities in the flexible workspace market.
We have completed the induction processes for our three Board members who
joined during 2022 and continue to implement the results of our ongoing
internal board review process in our plans. We have full confidence in the
Board members and processes as we focus on delivering against our strategic
objectives and succession planning at the Board level in view of those
objectives.
Our environmental journey
Our environmental achievements during 2023 include becoming the world's
largest supplier of carbon-neutral workspace. While we accelerated our
achievement of carbon neutrality through the use of carbon removal projects,
this has not reduced our commitment and actions to continually reduce our
actual carbon footprint on our way to our target of net zero carbon emissions
by 2040. Transitioning our centres to certified green electricity is one of
our most important initiatives to reduce our carbon emissions, with the goal
to achieve this by 2030. By focusing on where it was possible to achieve this
conversion most rapidly, we converted 901 centres to certified green
electricity during 2023, demonstrating significant progress on our
environmental journey.
Our championing of the hybrid working model has a significant positive effect
on reducing carbon emissions across the planet due to the major cuts in
commuting that it enables. We also continue to progress with other related
environmental initiatives, including the use of advanced building technology,
consolidating our supply chain into regional hubs that reduces the emissions
from our logistics operations and supporting our people in their ongoing
efforts to reduce waste and promote recycling in our centres as an integral
part of our corporate culture.
Looking ahead
While we are pleased with our progress during 2023, we recognise the continued
complexity and challenges associated with doing business in 2024 and beyond.
As ever, we are determined to continue enabling our customers, people, and
partners, to have a great day at work.
We believe that the strengths which enabled us to deliver a successful 2023
will continue to keep us at the forefront of an exciting and fast-evolving
global market. This includes rapid network growth, continuous development of
new technology, great partners, a growing customer base, an expanding brand
portfolio, improving shareholder returns, and truly great people.
These are the foundations of our business today and will continue to support
our profitable growth into the future as we help people everywhere improve
their day-to-day lives by working how and where they choose. I and my
colleagues therefore look forward to the years ahead as a period of continuing
profitable growth that delivers great opportunities for us and all our
stakeholders.
Douglas Sutherland
Chairman
5 March 2024
Chief Executive Officer's Review
As somebody who's been one of the biggest advocates of hybrid working for
three decades now, I've been intrigued in recent times to see how academics,
leading industry commentators and business leaders are now recognising the
incredible benefits of this way of working.
The research of Professor Nicholas Bloom, a senior fellow at the Stanford
Institute for Economic Policy Research and acknowledged as the world's leading
authority on the hybrid model has shown that about 40% of white-collar
employees now work in this model and will continue to do so in the future.
This long-term shift towards the hybrid model is one of the mega-trends of our
time and represents a colossal financial opportunity for IWG. With 1.2 billion
white-collar workers globally, our industry has a total addressable audience
valued at more than $2 trillion and platform working is set to become the norm
for many of these employees.
The reasoning for the transition towards hybrid working is clear and
compelling for companies of all sizes and their employees with positive
impacts on, productivity, lower costs, increased flexibility and above all
significantly enhanced worker happiness, while investors, landlords and
building owners are increasingly seeing IWG as the ideal partner to capitalise
on the long-term shift towards the model.
I am consistently struck by the growing role and positive impact, hybrid
working is having on business performance, the environment, and individuals'
happiness.
In IWG's recent CEO study, business leaders are unified in their support for
the hybrid model. 9 in 10 CEOs that have adopted hybrid have seen significant
cost savings, while more than 7 in 10 say employee happiness has increased.
More than 6 in 10 cite improved productivity as one of the key business
benefits.
The groundbreaking research of Professor Bloom further highlights the
financial benefits that are helping multiple thousands of companies across the
world to reduce their operating costs.
As Professor Bloom puts it, "Firms don't do things that lose them money. They
do things that make them money. That's why every firm just about out there is
doing hybrid, because it's such a no-brainer to increase profit…" Small
wonder that he recently put it on record that he expects hybrid uptake to
increase in the years ahead, due to ongoing demand and projected improvements
in technology.
Beyond pure financial savings, hybrid gives business leaders greater
flexibility with the ability to scale up or down quickly without being locked
into lengthy and costly contracts, while also enabling them to attract and
recruit from a talent pool in diverse locations.
Driving Positive Change
The hybrid model is driving incredibly positive change for businesses and
while commentators are starting to recognise the benefits, the reality about
where and how people work is actually far more nuanced than much of the
current conversation implies. It's not just a binary choice between working
from a traditional city centre and from home.
There's a third option: working out of a local co-working space or office,
near to home, with other like-minded people. In fact, most white-collar
employees are working from a combination of all three of these locations.
The Rise of Local Working
Today, the remarkable advances in cloud technology and video conferencing
software - both vital to enabling effective hybrid working - mean workers no
longer need to travel long distances on a daily basis. As a result, we are
seeing a fundamental shift in the geography of work with the centre of gravity
moving towards local communities. Tech changes will continue to advance in
years to come and will radically underline and advance the flexibility of
location.
That's why, during the course of 2023, around 80% of the new locations we
signed were in the suburbs and smaller towns where people actually live. A
smattering of some of our most recent additions to the network including
Springfield, Virginia (USA), Chippenham, Wiltshire (UK), Serris (France) and
Hagsatra (Sweden) bring this to life powerfully.
That is not to say that businesses are abandoning city centres: far from it.
Increasingly, we are helping companies shake off the expense of the long-term
city-centre lease and replace it with a flexible, cost-effective agreement on
a smaller space in one of our city-based centres.
Strategy
Our strategic focus is as clear as ever with the objective to provide modern,
flexible workspace conveniently located where people want to work, on terms
that bring significant benefits to our customers while providing attractive
returns to our shareholders.
To accomplish this there is an unrelenting focus on growing our margin, driven
by strong performance on new and embedded price, service revenue growth and an
ongoing strict control of costs. This enables us to continue to make
significant investments into our world class platform and pursue the rapid
expansion of network coverage through capital-light growth while still
delivering cash generation that supports reductions in net debt and increasing
returns to shareholders.
We will continue to make significant investments into our world class platform
as well as focusing on the rapid growth of network coverage in partnership
with the property industry and investors using capital-light expansion methods
such as management agreements, partnering deals and franchising.
Capital-Light Growth
The shift towards hybrid and more localised working is propelling our business
forward with the fastest growth that we have ever seen in our more than
35-year history. In 2023, we added a record 867 locations globally, with 95%
in the partnership model and achieved our highest ever revenues at an improved
margin.
During the course of the year, we accelerated our capital-light growth
strategy allowing us to capitalise on the growing pipeline of property
investors seeking to maximise their returns by partnering with IWG. In fact,
we signed almost twice as many agreements in 2023 as we did in the previous
year.
Focusing on growth through the capital-light business means that growth capex
requirements will be dramatically lower in the future, generating more free
cash flow for shareholders.
We are increasingly seeing partners sign multiple locations with IWG as they
grasp the scale of the opportunity in front of them. My greatest thanks go to
all our valued property owners and investors who have chosen to partner with
us and as a business we are resolutely committed to the long-term success of
these partnerships.
Leading the Way in Innovation
As the market-leader in the structurally growing hybrid working industry, we
are exceptionally well positioned for the long term. Not only do we lead the
market on global reach, but also in a number of crucially important areas for
future growth.
IWG has invested heavily in an outstanding Research and Development team to
ensure we are at the forefront of innovation. An annual allocation of £50m
has been set aside to provide substantial funds to create new products and
services, and this investment will ultimately unlock further revenue
opportunities for the business.
Sustainable Growth
I am very pleased to say that the Group now supplies millions of customers
worldwide with carbon neutral workplaces.
At IWG, we take our collective role and responsibility in tackling the climate
crisis seriously and as part of our climate action plan, we have reduced and
are reducing further the carbon emissions from our buildings and supply chain,
while also investing in a range of carbon removal projects to achieve carbon
neutrality. Our ultimate goal is to achieve Net Zero carbon emissions by 2040.
Our purpose of helping everyone have a great day at work, whilst protecting
people and planet is at the heart of what we do and as a global employer, our
purpose and values have never been more important. We are in receipt of a
strong AA rating by the MSCI and are making substantial progress towards our
goal to source 100% certified green electricity by 2030.
Not only are we doing our part to tackle global warming, but our services have
an extraordinary opportunity to radically reduce humanity's negative
environmental impact by encouraging the adoption of hybrid working in the more
than 120 countries in which we operate.
In 2023, IWG published a landmark study with Arup, a global leader in
sustainable development, that shows that hybrid working can facilitate major
carbon savings and has the potential for significant impact on the climate
crisis. The study measured the environmental impact of hybrid working on six
cities across the US and UK: LA, New York City, Atlanta, London, Manchester
and Glasgow.
The study's key finding is simply allowing people to work close to home,
enabling them to split their time between a local workplace and home, has the
potential to reduce an employee's work-related carbon emissions by between 49%
and 90%. These figures are staggering and can make a genuine and tangible
difference in tackling the climate crisis.
The Hybrid Boost to Local Communities
Hybrid is boosting local economies too - a fact that I know firsthand as I
witness flexible workspaces spring up in communities that used to be stripped
of their talent during the working day as people travelled every day into city
centres. In recent times, we've opened new workspaces in multiple places that
formerly would simply not have had enough people working locally.
A recent report by IWG and Arup reveals that hybrid working is set to have a
major beneficial effect on US and UK commuter towns, boosting local businesses
and creating new jobs. It's a major economic shift that will bring greater
prosperity and greater opportunities to formerly sleepy satellite towns. No
longer places to escape from, these are communities on the up, transformed by
the greatest shift in working practices to have taken place in more than a
century.
Thousands are changing their working habits, shifting from daily trips to
crowded, distant city centres to working primarily in the commuter towns they
call home, with only occasional visits to city centre offices. The report
predicts that the presence of white-collar workers will increase by up to 175%
by 2043, with a 44% increase in those choosing to work from local flexible
workspaces.
Our Financial Performance in 2023
With such strong momentum globally behind the shift to hybrid working,
confirmed by our financial results for 2023, record system revenue and cash
flows from operations, we are very pleased to announce off the back of our
momentum, a restart to our progressive dividend policy.
Following our Investor Day in December 2023, and in response to investor
feedback, we are reporting in three divisions: Company-Owned & leased,
Manged & franchised, and Worka. We have also added further KPIs to our
reporting by measuring the number of rooms in our network, and the revenue
from these rooms. These KPIs are well-understood in many industries, including
hotels, as it incorporates all expenditure.
I would like to take this opportunity to thank our incredible team members
that were the driving force behind the rapid growth of our global network and
an excellent set of financial results.
Looking ahead
We enter the new year with good momentum. The future for IWG and all our
stakeholders remains bright as we continue to grow our customer base, our
global network and our best-in-class portfolio of locations and brands.
While 2023 was a record year for both revenue and network expansion, it is
clear that we're only scratching at the surface of our growth potential. With
the aforementioned 1.2 billion white-collar workers globally and a potential
audience valued at more than $2 trillion, there is substantial room for growth
and as a company, we have a laser-like focus on capturing more of this market
over the coming months and years.
Mark Dixon
Founder and CEO
5 March 2024
Chief Financial Officer's Review
2023 has been a good year for the Group, delivering both its highest-ever
system-wide revenue of £3.3bn in IWG's
35-year history whilst simultaneously growing adjusted EBITDA and cash
generation, all of which were significantly higher than in 2022. Combining the
Group's unique brand strategy and unrivalled global network with an innovative
new route to market has enabled us to grow with far less capital intensity,
leaving the business well positioned for 2024. We have delivered growth,
cashflow, lower capex, debt paydown, and we are delighted to reinstate the
dividend, as a demonstration of our financial strength and confidence in
future delivery.
In short, we have delivered growth, cash and a dividend. We also continue to
make the financials clearer to stakeholders.
Financial Performance
The Group reports results in accordance with IFRS. Under IFRS 16, while total
lease-related charges over the life of a lease remain unchanged, the lease
charges are characterised as depreciation and financing expenses with higher
total expense in the early periods of a lease and lower total expense in the
later periods of the lease.
Group income statement (£m) 2023 2022 Constant Actual
currency
Currency
System-wide revenue 3,335 3,086 +10% +8%
Group revenue 2,958 2,751 +9% +8%
Gross profit before impact of rationalisations(1) 738 559 35% 32%
Margin 24.9% 20.3% n/a +4.6ppt
Rationalisation items(1) (149) 16
Gross Profit 589 575 +5% +2%
Overheads & Joint ventures (444) (428) +5% +4%
Operating Profit before impact of rationalisations(1) 290 159 +91% +81%
Operating Profit 145 147 +7% -2%
Net finance cost (334) (252) +32%
Loss before tax from continuing operations (189) (105)
Taxation (27) 32
Effective tax rate -14% 31%
Loss after tax from continuing operations (216) (73)
Profit after tax from discontinued operations - 1
Loss for the period (216) (72)
Basic EPS (p)
From continuing operations (21.4) (7.0)
Attributable to shareholders (21.4) (6.9)
1. Rationalisations include charges related to closures, one-off impairments
and other one-off items (see p. 10)
Additions to segmental reporting
At our Investor Day in December 2023 we outlined our strategy to grow our
business both quickly and capital-light, especially through our Managed &
Franchised segment. The Group excluding Worka, the IWG Network, is managed
through a matrix organisation, i.e. by geographical regions and by ownership
structure. Hence, in addition to the three geographical regions (Americas,
Asia, and EMEA) we are additionally reporting results of IWG Network by
ownership structure (Company-Owned & Leased and Managed & Franchised).
This matrix reporting reflects how we practically manage the IWG Network on a
day-to-day basis. The management and reporting of the Worka segment remains
unchanged.
Revenue
System-wide revenue increased by 8% or 10% on a constant currency basis, to
£3,335m. Group revenue also increased by 8% or 9% at constant currency to
£2,958m. All three divisions reported excellent year-on-year revenue growth.
Our Managed & Franchised business saw fee income increase by 49% at
constant currency to £50m mainly driven by 232 centre openings. Our biggest
division, Company-Owned & Leased , reported growth of 7% at constant
currency to £2,589m and Worka reported revenue progression of 18% to £319m.
System revenue Group Revenue
Revenue (£m) 2023 2022 Actual currency Constant currency 2023 2022 Actual currency Constant
currency
Managed & Franchised system-wide 427 369 +16% +20% 50 34 +47% +49%
Company-Owned & Leased 2,589 2,446 +6% +7% 2,589 2,446 +6% +7%
Worka 319 271 +18% +18% 319 271 +18% +18%
Group 3,335 3,086 +8% +10% 2,958 2,751 +8% +9%
Revenue KPIs - RevPAR
At our Investor Day in December 2023, we announced that we will report
"RevPAR" as a new revenue performance metric. RevPAR is a monthly average KPI,
defined as the system revenue of the IWG Network (excluding Worka and
excluding centres opened and closed during the year), divided by the number of
available rooms. RevPAR is a well-understood measure used across many
industries and is particularly relevant to IWG as it incorporates all revenues
received across IWG's expansive product portfolio.
RevPAR grew by 6% on a constant currency basis to £291. Company-Owned &
Leased RevPAR grew by 6% to £280 year-over-year driven primarily by higher
pricing and ancillary revenue, with broad-based regional growth. Managed &
Franchised saw a 1% constant currency growth in RevPAR to £381.
System RevPAR (£, monthly average) 2023 2022 Actual Constant
currency
currency
Managed & Franchised 381 392 -3% +1%
Company-Owned & Leased 280 269 +4% +6%
Worka n.a. n.a. - -
IWG Network 291 280 +4% +6%
Rationalisation impact
In 2022, the Group specifically identified adjusting items in response to the
direct impacts of the COVID-19 pandemic on its financial results. However, in
2023 the measurement of the impact of COVID-19 on financial results was no
longer distinguishable. The Group consequently, has updated its classification
criteria to disclose all transactions not indicative of the underlying
performance of the Group as adjusting items. To maintain consistency and
comparability, the Group have also retrospectively restated the comparative
information to align with this refined classification.
The Group identified net adjusting items on operating profit relating to
rationalisations in the network of £(145)m compared to £(12)m in 2022, of
which £(103)m are non-cash items (2022: reversal of £12m).
These items refer to the impairment of PPE (provisions for closures which have
not yet taken place) of £(57)m (2022: reversal of £82m), closure costs (the
actual costs of closing centres, including non-cash write-downs) of £(58)m
(2022: £(59)m), asset impairment related to Russia & Ukraine of £(4)m
(2022: £(9)m) and other one-off items including legal, acquisition and
transaction cost as well as obsolete desktop phone write-offs of £(26)m
(2022: £(26)m).
The PP&E reversal in 2022 was as a result of reversing some of the
provision for closures that was made in 2020, forecasting closures as a result
of Covid-19.
Rationalisation impact (£m) 2023 2022
Closure costs (58) (59)
PP&E (impairment)/reversal (57) 82
Obsolete desktop phone write-offs & others (34) (7)
Rationalisation impact on Gross Profit (149) 16
Rationalisation impact on SG&A 4 (28)
Rationalisation impact on Operating Profit (145) (12)
Gross Profit
Gross Profit, excluding rationalisations, increased 35% at constant currency
from £559m in 2022 to £738m in 2023, resulting in 24.9% gross margin, a
4.6ppt improvement on 2022. Overall Gross Profit increased 5% at constant
currency and by 2% at actual currency to £589m (2022: £575m).
Managed & Franchised delivered a 49% constant currency improvement as more
centres opened and also reflects the high margin of this segment.
Gross Profit excluding rationalisations in Company-Owned & Leased
increased by 41% at constant currency mainly as a result of increased RevPAR
and further cost control. The rationalisation impact of £(149)m relates to
the Company-Owned & Leased segment relating to network rationalisation and
a one-off impairment charges relating to the fixed telephony system, as
technology moves away from fixed landlines.
Worka Gross Profit improved by 16%, commensurate with revenue growth.
Gross Profit (£m) 2023 2022 Actual Constant
currency
currency
Managed & Franchised 50 34 +47% +49%
Company-Owned & Leased 528 387 +36% +41%
Worka 160 138 +16% +16%
Gross Profit before impact of rationalisations 738 559 +32% +35%
Closure costs (58) (59)
PP&E (impairment)/reversal (57) 82
Obsolete desktop phone write-offs & others (34) (7)
Total rationalisation impact (149) 16
Gross Profit 589 575 +2% +5%
Overheads and Joint-Ventures
The investment in our in-country sales teams and marketing to support our
pivot to capital-light growth is translating through to earnings and we are
pleased with the returns this investment is yielding. We signed 867 new deals
in 2023 vs 462 in 2022. The Group's Overhead cost including joint-ventures
increased by 5% at constant currency to £(444)m compared to £(428)m in the
prior year. Whilst our partnership sales team is an ongoing cost, we are not
expecting it to increase linearly with signings; as a result overheads as a
percentage of revenue is expected to fall.
Operating Profit
Operating Profit before rationalisations increased strongly by 91% at constant
currency from £159m in 2022 to £290m in 2023, reflecting higher revenue and
cost control across all segments. Reported Operating Profit improved by 7% at
constant currency and was at £145m (2022: £147m). As previously mentioned,
£(145)m in 2023 (2022: £(12)m relates predominantly to network
rationalisation and desktop telephony impairment charges.
Adjusted EBITDA
The Group's Adjusted EBITDA increased by 9% to £1,472m (2022: £1,348m) and
Pre-IFRS Adjusted EBITDA increased 30% to £403m (2022: £311m). On a constant
currency basis, Pre-IFRS Adjusted EBITDA increased 34% and would have been
£415m had FX rates remained constant throughout the year.
The Group reports results in accordance with IFRS. Under IFRS 16, while total
lease-related charges over the life of a lease remain unchanged, the lease
charges are characterised as depreciation and financing expenses with higher
total expense in the early periods of a lease and lower total expense in the
later periods of the lease. Results are additionally presented before the
application of IFRS 16 (in accordance with IAS 17 accounting standards) as it
provides useful information to stakeholders on how the Group is managed, as
well as reporting for bank covenants and certain lease agreements. The primary
difference between the two standards is the treatment of operating lease
liabilities. There is no difference between underlying cash flow.
To bridge the Group's Adjusted EBITDA of £1,472m under the IFRS 16 standard
to £403m Adjusted Pre-IFRS EBITDA under IAS 17, we need to recognise rental
income in subleases which are recognised as lease receivables under IFRS 16,
rental costs on our lease portfolio reflected as lease liabilities under IFRS
16 and centre closure and other costs which are reflected as impairments under
IFRS 16.
IFRS EBITDA to pre-IFRS EBITDA bridge (£m) 2023 2022
Adjusted EBITDA 1,472 1,348
Rent income 60 50
Rent expense (1,106) (1,059)
Other costs (8) (10)
Net impact of network rationalisation charges (14) (38)
Net impact of PPE impairments vs. Closure cost provisions 8 10
Net impact of Russia & Ukraine asset impairments and other items (9) 10
Adjusted EBITDA before application of IFRS 16 403 311
Adjusted EBITDA by segment
Company Owned & Leased adjusted EBITDA increased strongly by 11% at
constant currency to £1,364m from £1,251m in 2022 driven by improving
revenue and good cost control.
Managed & Franchised in 2023 showed strong 49% revenue increase which was
largely offset by our investments into this capital-light growth model which
resulted in an EBITDA of £(20)m (2022: £(15)m). As stated previously, the
investment in Managed & Franchised is now made and will not grow
significantly anymore, so EBITDA here will naturally improve as fee revenue is
generated.
Worka delivered good results with EBITDA growth of 14% at constant currency to
£128m (2022: £112m).
Adjusted EBITDA by segment (£m) 2023 2022 Actual Constant
currency
currency
Managed & Franchised (20) (15) n.m. n.m.
Company-Owned & Leased 1,364 1,251 +9% +11%
Worka 128 112 +14% +14%
Group 1,472 1,348 +9% +11%
Foreign exchange
At 31 Dec Average
Per £ sterling 2023 2022 % 2023 2022 %
US dollar 1.27 1.21 -6% 1.25 1.23 -1%
Euro 1.15 1.13 -2% 1.15 1.17 +2%
Network growth
The success of our continued strategy to expand through partnerships is
materialising. Our network increased by 5% to 3,514 centres (2022: 3,345). We
opened 328 new centres (2022: 152 centres) and rationalised (159) centres
(2022: (121) centres).
Furthermore, 867 new centre deals were signed in 2023, 88% more than in 2022,
which will lead to new centre openings going forward. Out of the 867 new deals
signed 97% or 839 deals are capital light which underpins our success of
growing the network through capital-light partnerships.
Key KPIs 2023 2022 YoY YoY
change
change in %
Number of centres open 3,514 3,345 169 +5%
Centre openings 328 152 176 +116%
Of which capital light(1) 301 113 188 +166%
In % 92% 74%
Total new centre deals signed 867 462 405 +88%
Of which capital light(1) 839 421 418 +99%
In % 97% 91%
1. Includes locations signed/opened in Managed & Franchised and Variable
rent areas
Of the 328 centres opened in 2023, 301 centres were capital light openings
which comprised of managed partnership centres, variable rent centres,
franchised centres and joint-venture centres. Only 27 centre openings were on
a fully conventional basis.
Our estate of 3,514 centres as per the end of December 2023 is split into 19%
or 682 centres in Managed & Franchised, which increased by 41%
year-on-year, and 2,832 centres in Company-Owned & Leased (of which 780
are based on variable rents). Based on the strong growth of opening new
managed partnership centres and successful renegotiations of existing centres
we increased our estate in Managed partnerships by 174 centres or 215% to 255
centres. Strong growth in Managed partnerships will continue in 2024.
2023 System location movements by type 2022 Centre Centre Changed 2023
Openings
Rationalisations
Conventional 2,103 +27 (91) +13 2,052
Variable rent (capital light) 757 +69 (42) (4) 780
Company-Owned & Leased 2,860 +96 (133) +9 2,832
Managed & Franchised (capital light) 485 +232 (26) (9) 682
Total 3,345 +328 (159) - 3,514
2023 System rooms movements by type ('000) Dec-2022 Rooms Rooms Changed Dec-2023
Opened
Rationalised
Conventional 566 +9 (21) +4 558
Variable rent (capital light) 206 +20 (10) (2) 214
Company-Owned & Leased 772 +29 (31) +2 772
Managed & Franchised (capital light) 92 +37 (4) (2) 123
Total 864 +66 (35) 0 895
Finance costs and taxation
The Group reported a net finance expense for the year of £(334)m (2022:
£(252)m).
The net finance expense of £(334)m in 2023 mainly includes cash interest of
£(55)m related to borrowing facilities (2022: £(38)m) plus interest on the
Group's lease liabilities of £(280)m (2022: £(230)m). The increase in the
finance expense is mainly driven by increased interest rates.
The effective tax rate in 2023 is -14% (2022: 31%). The Group has adopted the
amendment to IAS 12 from 1 January 2023, first reported during H1 2023, that
also impacted the 2022 accounted deferred tax asset on leases. Following the
amendments, the Group has recognised a separate deferred tax asset in relation
to its lease liabilities and a deferred tax liability in relation to its
right-of-use assets. As a result, retained earnings as at 1 January 2023 was
restated by £77m
(1 January 2022: £29m), which required a £48m income tax credit restatement
in 2022.
Earnings per share
Earnings per share from continuing operations in 2023 was a loss of (21.4)p
(2022: (7.0)p). Earnings per share attributable to ordinary shareholders in
2023 was a loss of (21.4)p (2022: (6.9)p).
The higher loss from continuing operations was driven primarily by non-cash
costs, including one-off non-cash costs related to the write-off of legacy
telephony systems and higher one-off network rationalisation charges, and
higher lease interest costs. Many of these are not expected to recur during
2024.
The weighted average number of shares in issue during the year was
1,006,685,491 (2022: 1,006,884,755). When profitable, the weighted average
number of shares for diluted earnings per share would be 1,089,381,136 (2022:
1,090,855,142). In 2023 519,022 shares were purchased in the open market and
525,674 treasury shares held by the Group were utilized to satisfy the
exercise of share awards by employees. At 31 December 2023 the Group held
50,558,201 treasury shares (31 December 2022: 50,564,853).
Cashflow
(£m) 2023 2022
Operating profit 145 147
Depreciation & amortization 1,182 1,189
Rationalisation impact 145 12
Rent income 60 50
Rent expense (1,106) (1,059)
Other costs (8) (10)
Pre-IFRS additional rationalisation impact differences (15) (18)
Adjusted EBITDA before application of IFRS 16 403 311
Working capital (excl. amortisation of partner contributions) 92 22
Working capital related to the amortisation of partner contributions (95) (104)
Maintenance capital expenditure (net) (93) (90)
Other items(1) (10) 12
Cash inflow from business activities(2) 297 151
Tax paid (35) (24)
Finance costs on bank & other facilities (55) (37)
Cash inflow before growth capex and corporate activities 207 90
Gross growth capital expenditure (115) (180)
Growth-related partner contributions 40 39
Net growth capital expenditure (75) (141)
Purchase of subsidiary undertakings (net of cash) (10) (307)
Cash inflow/(outflow) before corporate activities 122 (358)
Purchase of shares (1) (5)
Net proceeds on transactions - 54
Net (repayments)/proceeds from loans (164) 386
Net cash (outflow)/inflow for the year (43) 77
Opening net cash 161 78
FX movements (8) 6
Closing cash 110 161
1. Includes capitalised rent related to centre openings (gross growth
capital expenditure) of £(2)m (2022: £(12)m)
2. Cash flow before growth capex, corporate activities, tax and finance cost
on bank & other facilities
We continued to manage our costs tightly, restructure centres where necessary
and improve revenue. This resulted in strong cash inflow from business
activities in 2023 of £297m compared to £151m in 2022.
Working capital, excluding the amortisation of partner contributions, saw an
inflow during the year. This was due to higher customer deposit inflows, as a
result of higher revenue and growth in rooms, controlled supplier payments and
other non-cash expenses recognised in operating profit.
Working capital relating the amortisation of partner contributions refers to
historic cash contributions made by landlords for growth capex in the
Company-Owned & Leased segment (shown as growth-related partner
contributions further down the cash flow statement) and is amortised over the
lifetime of the corresponding lease.
Cash tax paid was £(35)m in 2023 (2022: £(24)m), and primarily relates to
corporate income tax paid in various countries and a £(10)m payment of 2022
US taxes based on the estimated US tax liability as reported at year end 2022.
Finance costs on bank & other facilities was £(55)m in 2023 vs. £(37)m
in 2022.
Cash inflow before growth capex and corporate activities was £207m (2022:
£90m).
Total net investment, including acquisitions and all capex, was £(178)m
(2022: £(538)m). This comprises £(93)m net maintenance capex (of which
£(41)m vs. £(58)m in 2022 was spent on centres), £(75)m of net growth capex
(of which £(55)m vs. £(104)m in 2022 was spent on centres). Included within
the total net investment of £(178)m is £(10)m of M&A (2022: £(307)m)
and £(72)m investments into the platform and systems, new products and
processes (2022: £(69)m), which also sits within Worka.
It is worth noting that net growth capital expenditure was significantly lower
in 2023 at £(75)m compared to £(141)m in 2022 and demonstrates the benefit
of our capital-light growth strategy. Centre-related growth capex is expected
to fall further in 2024.
Net cash before FX movements in 2023 decreased by £(43)m primarily due to the
repayment of loans of £(164)m.
Net debt (£m) 2023 2022
Closing cash 110 161
Opening loans (873) (475)
Net proceeds from issue & repayment of loans 164 (386)
FX impact on loans 2 (1)
Amortisation of the Convertible Bond's derivative financial instrument (net) (11) (11)
Net financial debt (608) (712)
Opening lease liabilities (net) (5,892) (6,121)
Principal & interest payments on finance leases 1,215 1,227
Non-cash movements (net) (738) (524)
Principal & interest received on net lease investment (61) (48)
FX impact on lease liabilities & investments (net) 196 (426)
Net debt (5,888) (6,604)
Risk management
Effective management of risk is an everyday activity for the Group, and
crucially, integral to our growth planning. A detailed assessment of the
principal risks and uncertainties which could impact the Group's long-term
performance and the risk management structure in place to identify, manage and
mitigate such risk can be found on pages 44-53 of the 2022 Annual Report and
Accounts. With the exception of the exchange rate risk which was downgraded
due to the change of the reporting currency to USD as of 1(st) January 2024,
the other principal risks and uncertainties are unchanged.
Related parties
There have been no changes to the type of related party transactions entered
into by the Group that had a material effect on the financial statements for
the year 2023. Details of related party transactions that have taken place in
the period can be found in note 31.
Dividends
As previously announced, IWG proposes resuming dividend payments. Accordingly,
the Board is recommending a final dividend of 1.0p per share which, if
approved, would be payable on 31 May 2024 to shareholders on the register at
the close of business on 3 May 2024.
Financing
In June 2023 the Group successfully repaid the non-recourse bridge facility,
with a gross balance of £(270)m at 31 December 2022, by increasing its
existing multicurrency, unsecured Revolving Credit Facility ("RCF") from
£(750)m to £(875)m. Additionally, the final maturity date of the RCF is in
November 2025, previously in March 2025, and no material terms, such as
pricing, have changed.
The Group also has a convertible bond of £(329)m (face value £(350)m, 31
December 2022: £(318)m) at 31 December 2023 with an interest rate of 0.5%,
due for repayment or conversion at £4.5807 per share in December 2027 with an
option for the bondholders to put the instrument back to the Group in December
2025 at par.
Overall, net financial debt was £(608)m at 31 December 2023 (31 December
2022: £(712)m).
The Group's total debt facilities, including details of drawings, is
summarized below:
Net financial debt (£m) 2023 2022
Convertible bond (329) (318)
Non-recourse bridge facility - (330)
Revolving credit facility (RCF) (875) (750)
Total facilities (1,204) (1,398)
Revolving credit facility (RCF) (875) (750)
RCF available (undrawn) 219 173
RCF guarantee utilisation 290 313
RCF drawn (366) (264)
Non-recourse bridge facility outstanding - (270)
Convertible bond (329) (318)
Other debt (23) (21)
Closing cash 110 161
Net financial debt (608) (712)
At December 2023 the Group complied with all facility covenants.
As a result of the Group moving to USD reporting in 2024, it has also
transitioned the majority of its financial debt exposure to USD.
· In January 2024, the Group took out a forward swap on the £350m
face value of the convertible bond from GBP into USD, which is payable in
December 2025. The resulting face value of the convertible bond is fixed at
$445m.
· In February 2024, the Group reached an agreement with its banks
to swap the £875m RCF facility into USD, resulting in the facility size being
$1,107m. Although the facility is multicurrency, the majority of the drawings
are in USD.
The Group is seeking to refinance and increase the tenor of some of its debt
facilities during 2024.
Going concern
The Group reported a loss after tax of £(216)m (2022: £(73)m) from
continuing operations in 2023. However, cashflow before growth capex and
corporate activities but after interest and tax was £207m (2022: £90m).
Furthermore, net cash of £1,197m (2022: £1,147m) was generated from
operations during the same period. Although the Group's balance sheet at 31
December 2023 reports a net current liability position of £(1,685)m (31
December 2022: £(1,868)m), the Directors concluded after a comprehensive
review that no liquidity risk exists as:
(1) The Group had funding available under the Group's £(875)m revolving
credit facility of £219m (31 December 2022: £173m) which was available and
undrawn at 31 December 2023. The facility's current maturity date is November
2025;
(2) A significant proportion of the net current liability position is due to
lease liabilities which are held in non-recourse special purpose vehicles but
also with a corresponding right-of-use asset. A large proportion of the net
current liabilities comprise non-cash liabilities such as deferred revenue of
£433m (2022: £455m) which will be recognised in future periods through the
income statement. The Group holds customer deposits of £459m (2022: £447m)
which are spread across a large number of customers and no deposit held for an
individual customer is material. Therefore, the Group does not believe the net
current liabilities represents a liquidity risk; and
(3) The Group maintained a 12-month rolling forecast and a three-year
strategic outlook. It also monitored the covenants in its facility to manage
the risk of potential breach. The Group expects to be able to refinance
external debt and/or renew committed facilities as they become due, which is
the assumption made in the viability scenario modelling, and to remain within
covenants throughout the forecast period. In reaching this conclusion, the
Directors have assessed:
· the potential cash generation of the Group against a range of
illustrative scenarios (including a severe but plausible outcome); and
· mitigating actions to reduce operating costs and optimise cash flows
during any ongoing global uncertainty.
The Directors consider that the Group is well placed to successfully manage
the actual and potential risks faced by the organisation including risks
related to inflationary pressures and geopolitical tensions.
On the basis of their assessment, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence
for a period of at least 12 months from the date of approval of these Group
consolidated financial statements and consider it appropriate to continue to
adopt the going concern basis in preparing the financial statements of the
Group.
Charlie Steel
Chief Financial Officer
5 March 2024
Consolidated income statement
£m Notes Year ended Year ended
31 Dec 2023
31 Dec 2022
Unaudited Restated(1)
Revenue(2) 3 2,958 2,751
Total cost of sales (2,354) (2,182)
Cost of sales (2,205) (2,166)
Adjusting items to cost of sales(3) 10 (71) (68)
Net (impairment)/reversal of property, plant, equipment and right-of-use 3,5 (78) 52
assets(3)
Expected credit (losses)/reversal on trade receivables 5 (15) 6
Gross profit (centre contribution) 3 589 575
Total selling, general and administration expenses (443) (427)
Selling, general and administration expenses (447) (399)
Adjusting items to selling, general and administration expenses(3) 10 4 (28)
Share of loss of equity-accounted investees, net of tax 21 (1) (1)
Operating profit 5 145 147
Finance expense 7 (348) (287)
Finance income 7 14 35
Net finance expense (334) (252)
Loss before tax for the year from continuing operations (189) (105)
Income tax (expense)/credit 8 (27) 32
Loss after tax for the year from continuing operations (216) (73)
Profit after tax for the period from discontinued operations 9 - 1
Loss for the year (216) (72)
Attributable to equity shareholders of the Group (215) (69)
Attributable to non-controlling interests 23 (1) (3)
Loss per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p) 11 (21.4) (6.9)
Diluted (p) 11 (21.4) (6.9)
From continuing operations
Basic (p) 11 (21.4) (7.0)
Diluted (p) 11 (21.4) (7.0)
1. The comparative information has been restated as the Group changed its
accounting policy on deferred tax related to assets and liabilities arising
from a single transaction due to amendments to IAS 12 (note 2) and changed its
classification of adjusting items.
2. Includes a net settlement fee of £2m recognised (comprising the
settlement fee of £18m, offset by a release of related accrued income of
£16m), for TKP Corporation's sale of the Japanese master franchise agreement
to Mitsubishi Estate Co.
3. The net adjusting items charge on operating profit relating to
rationalisations in the network of £145m (2022: £12m) comprises the
following items included in the balances referenced (note 10):
The net impairment of property, plant and equipment and right-of-use assets of
£57m (2022: net reversal of £82m), closure costs of £58m (2022: £59m), the
impairment of Ukraine and Russia of £4m (2022: £9m) and other one-off items
including legal, acquisition and transaction cost as well as obsolete desktop
phone write-offs of £26m (2022: £26m).
The above consolidated income statement should be read in conjunction with the
accompanying notes.
Consolidated statement of comprehensive income
£m Notes Year ended Year ended
31 Dec 2023
31 Dec 2022
Restated(1)
Unaudited
Loss for the year (216) (72)
Other comprehensive income/(loss) that is or may be reclassified to profit or
loss in subsequent periods:
Foreign currency translation (loss)/gain for foreign operations (16) 5
Items that are or may be reclassified to profit or loss in subsequent periods (16) 5
Other comprehensive income that will never be reclassified to profit or loss
in
subsequent periods:
Items that will never be reclassified to profit or loss in subsequent periods - -
Other comprehensive (loss)/profit for the period, net of tax (16) 5
Total comprehensive loss for the year, net of tax (232) (67)
Attributable to shareholders of the Group (231) (64)
Attributable to non-controlling interests 23 (1) (3)
1. The comparative information has been restated as the Group changed its
accounting policy on deferred tax related to assets and liabilities arising
from a single transaction due to amendments to IAS 12 (note 2).
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated statement of changes in equity
£m Notes Issued Share premium Treasury Foreign Other reserves(1) Retained earnings Total Non-controlling interests Total equity
share
shares
currency
equity attributable to equity shareholders
capital
translation
reserve
Balance at 1 January 2022 10 313 (151) 16 26 82 296 9 305
Change in accounting policy 2 - - - - - 29 29 - 29
Restated balance at 1 January 2022 10 313 (151) 16 26 111 325 9 334
Total comprehensive income/(loss)
for the year:
Restated loss for the year - - - - - (69) (69) (3) (72)
Other comprehensive income:
Foreign currency translation gain for foreign operations - - - 5 - - 5 - 5
Other comprehensive income, net of tax - - - 5 - - 5 - 5
Total comprehensive income/(loss) - - - 5 - (69) (64) (3) (67)
for the year
Transactions with owners of the Company
Ordinary dividend paid 12 - - - - - - - - -
Share-based payments 6 - - - - - 4 4 - 4
Purchase of shares 22 - - (5) - - - (5) - (5)
Settlement from exercise of share awards 22 - - 4 - - (4) - - -
Total transactions with owners of the Company - - (1) - - - (1) - (1)
Acquisition of subsidiary with non-controlling interests 23 - - - - - - - 53 53
Disposal of subsidiary with non-controlling interests 23 - - - - - - - (7) (7)
Balance at 31 December 2022 10 313 (152) 21 26 42 260 52 312
Total comprehensive loss
for the year:
Loss for the year - - - - - (215) (215) (1) (216)
Other comprehensive loss:
Foreign currency translation loss for foreign operations - - - (16) - - (16) - (16)
Other comprehensive loss, net of tax - - - (16) - - (16) - (16)
Total comprehensive loss - - - (16) - (215) (231) (1) (232)
for the year
Transactions with owners of the Company
Ordinary dividend paid 12 - - - - - - - - -
Share-based payments 6 - - - - - 6 6 - 6
Purchase of shares 22 - - (1) - - - (1) - (1)
Settlement from exercise of share awards 22 - - 1 - - (1) - - -
Total transactions with owners of the Company - - - - - 5 5 - 5
Balance at 31 December 2023 (unaudited) 10 313 (152) 5 26 (168) 34 51 85
1. Other reserves include £11m for the restatement of the assets and
liabilities of the UK associate, from historic to fair value at the time of
the acquisition of the outstanding 58% interest on 19 April 2006, £38m
arising from the Scheme of Arrangement undertaken on 14 October 2008, £6m
relating to merger reserves and £nil to the redemption of preference shares,
partly offset by £29m arising from the Scheme of Arrangement undertaken in
2003.
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated balance sheet
£m Notes As at 31 Dec 2023 As at 31 Dec 2022
Restated ((1))
Unaudited
Non-current assets
Goodwill 13 919 934
Other intangible assets 14 209 214
Property, plant and equipment 15 5,399 6,234
Right-of-use assets 15 4,372 5,009
Other property, plant and equipment 15 1,027 1,225
Non-current net investment in finance leases 24 64 95
Deferred tax assets 8 451 457
Other long-term receivables 16 53 57
Investments in joint ventures 21 45 45
Other investments - -
Total non-current assets 7,140 8,036
Current assets
Inventory 1 1
Trade and other receivables 17 891 919
Current net investment in finance leases 24 33 52
Corporation tax receivable 8 27 19
Cash and cash equivalents 24 110 161
Total current assets 1,062 1,152
Total assets 8,202 9,188
Current liabilities
Trade and other payables (incl. customer deposits) 18 1,310 1,202
Deferred revenue 433 455
Corporation tax payable 8 43 45
Bank and other loans 19,24 13 285
Lease liabilities 24 924 1,002
Provisions 20 24 31
Total current liabilities 2,747 3,020
Non-current liabilities
Other long-term payables 12 11
Deferred tax liability 8 173 175
Bank and other loans 19,24 705 588
Lease liabilities 24 4,453 5,037
Derivative financial liabilities 25 - -
Provisions 20 18 37
Provision for deficit on joint ventures 21 6 6
Retirement benefit obligations 27 3 2
Total non-current liabilities 5,370 5,856
Total liabilities 8,117 8,876
Total equity
Issued share capital 22 10 10
Issued share premium 313 313
Treasury shares 22 (152) (152)
Foreign currency translation reserve 5 21
Other reserves 26 26
Retained earnings (168) 42
Total shareholders' equity 34 260
Non-controlling interests 23 51 52
Total equity 85 312
Total equity and liabilities 8,202 9,188
1. Based on the audited financial statements for the year ended 31 December
2022. The comparative information has been restated as the Group changed its
accounting policy on deferred tax related to assets and liabilities arising
from a single transaction due to amendments to IAS 12 (note 2).
The above consolidated balance sheet should be read in conjunction with the
accompanying notes.
Consolidated statement of cash flows
£m Notes Year ended Year ended
31 Dec 2023
31 Dec 2022
Restated(1)
Unaudited
Operating activities
Loss for the year from continuing operations (216) (73)
Adjustments for:
Profit from discontinued operations 9 - -
Net finance expense(2) 7 334 252
Share of loss on equity-accounted investees, net of tax 21 1 1
Depreciation charge 15 1,117 1,145
Right-of-use assets 15 919 955
Other property, plant and equipment 15 198 190
Impairment of goodwill 5,13 - 3
Impairment of other intangible assets 5,14 1 -
Loss on disposal of property, plant and equipment 5 61 34
Profit on disposal of right-of-use assets and related lease liabilities 5,15,24 (37) (31)
Net of impairment/(reversal) of property, plant and equipment 5,15 36 (13)
Net of impairment/(reversal) of right-of-use assets 5,15 42 (39)
Amortisation of intangible assets 5,14 65 44
Tax expense/(credit) 8 27 (32)
Expected credit losses/(reversal) on trade receivables 5 15 (6)
(Decrease)/increase in provisions 20 (26) 40
Share-based payments 6 6 4
Other non-cash movements (6) (3)
Operating cash flows before movements in working capital 1,420 1,326
Proceeds from partner contributions (reimbursement of costs)(3) 15 22 19
Increase in trade and other receivables (19) (97)
Increase in trade and other payables 144 191
Cash generated from operations 1,567 1,439
Interest paid and similar charges on bank loans and corporate borrowings (55) (38)
Interest paid on lease liabilities 24 (280) (230)
Tax paid (35) (24)
Net cash inflows from operating activities 1,197 1,147
Investing activities
Purchase of property, plant and equipment 15 (153) (242)
Payment of initial direct costs related to right-of-use assets (2) (1)
Interest received on net lease investment 7 6 7
Payment received from net lease investment 24 55 41
Purchase of subsidiary undertakings, net of cash acquired 28 (10) (307)
Purchase of intangible assets 14 (60) (39)
Proceeds on the sale of discontinued operations, net of cash disposed of 9 - 1
Proceeds on sale of property, plant and equipment - 1
Interest received 7 1 1
Net cash outflows from investing activities (163) (538)
Financing activities
Proceeds from issue of loans 24 985 1,340
Repayment of loans 24 (1,149) (954)
Payment of lease liabilities 24 (935) (997)
Proceeds from partner contributions (lease incentives)(3) 15 23 31
Proceeds from Non-controlling interests 23 - 53
Purchase of treasury shares 22 (1) (5)
Settlement from exercise of share awards - -
Payment of ordinary dividend 12 - -
Net cash outflows from financing activities (1,077) (532)
Net (decrease)/increase in cash and cash equivalents (43) 77
Cash and cash equivalents at beginning of the year 161 78
Effect of exchange rate fluctuations on cash held (8) 6
Cash and cash equivalents at end of the year 24 110 161
1. Based on the audited financial statements for the year ended 31 December
2022. The comparative information has been restated as the Group changed its
accounting policy on deferred tax related to assets and liabilities arising
from a single transaction due to amendments to IAS 12 (note 2).
2. The net finance expense includes mark-to-market adjustments of £nil
(2022: £27m).
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
Notes to the accounts
1. Authorisation of financial statements
The financial information presented in this preliminary release does not
constitute full statutory financial statements. The Annual Report and
Financial Statements will be approved by the Board of Directors and reported
on by the Auditor in due course. Accordingly, the financial information is
unaudited. The Group financial statements for the year ended 31 December 2022
have been published. The audit report on those financial statements was
unqualified.
IWG plc is a public limited company incorporated in Jersey and registered and
domiciled in Switzerland. The Company's ordinary shares are traded on the
London Stock Exchange.
IWG plc owns, and is a franchise operator of, a network of business centres
which are utilised by a variety of business customers. Information on the
Group's structure is provided in note 32, and information on other related
party relationships of the Group is provided in note 31.
The Group financial statements have been prepared and approved by the
Directors in accordance with Companies (Jersey) Law 1991 and International
Financial Reporting Standards as adopted by the European Union ('Adopted
IFRSs').
2. Accounting policies
Basis of preparation
The Group financial statements consolidate those of the parent company and its
subsidiaries (together referred to as the 'Group') and equity account for the
Group's interest in joint ventures. The extract from the parent company annual
accounts presents information about the Company as a separate entity and not
about its Group.
The material accounting policies set out below have been applied consistently
to all periods presented in these Group financial statements. Amendments
to adopted IFRSs issued by the International Accounting Standards Board
(IASB) and the International Financial Reporting Interpretations Committee
(IFRIC) with an effective date from 1 January 2023 did not have a material
effect on the Group financial statements, unless otherwise indicated.
The following standards, interpretations and amendments to standards were
adopted by the Group for periods commencing on or after 1 January 2023, with
no material impact on the Group:
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
These Group consolidated financial statements are presented in pounds sterling
(£), which was IWG plc's functional currency in 2023, and all values are in
million pounds, except where indicated otherwise.
The consolidated financial statements are prepared on a historical cost basis,
with the exception of certain financial assets and liabilities that are
measured at fair value.
The attributable results of those companies acquired or disposed of during the
year are included for the periods of ownership.
Judgements made by the Directors in the application of these accounting
policies that have significant effect on the consolidated financial statements
and estimates with a significant risk of material adjustment in the next year
are discussed in note 33.
Change in accounting policy - Global Minimum Top-up Tax (Amendments to IAS 12)
The Group has adopted International Tax Reform - Pillar Two Model Rules
(Amendments to IAS 12) upon their release on 23 May 2023. The amendments
provide a temporary mandatory exception from deferred tax accounting for the
top-up tax, which is effective immediately, and require new disclosures about
the Pillar Two exposure (see note 8).
The mandatory exception applies retrospectively. However, because no new
legislation to implement the top-up tax was enacted or substantively enacted
at 31 December 2022 in any jurisdiction in which the Group operates and no
related deferred tax was recognised at that date, the retrospective
application has no impact on the Group's consolidated financial statements.
Change in accounting policy - Deferred Tax related to Assets and Liabilities
arising from a Single Transaction (Amendments to IAS 12)
The Group has adopted the amendment to IAS 12 with retrospective effect from 1
January 2023. The amendments narrow the scope of the initial recognition
exemption on leases, to exclude transactions that give rise to equal and
offsetting temporary differences. Following this reassessment, the deferred
tax asset and liabilities recognised relating to the Group's leases has
resulted in a £77m impact on the opening retained earnings as at 1 January
2023 (1 January 2022: £29m). The retained earnings for the year ended 31
December 2022, required a £48m income tax credit restatement of the losses
for the period, being the increase in the deferred tax asset during the
period.
The Group has not presented a restated third balance sheet on the basis that
only the following line items in the table below have changed as a result of
the amendment to IAS 12. The adjustment to retained earnings relates to leases
which were originally dealt with using the initial recognition exemption.
The following table summarises the opening balance impact, on transition to
the IAS 12 amendment:
£m Deferred tax asset Deferred tax liability Retained Earnings
Balance reported at 1 January 2022 327 141 82
Adjustment 59 30 29
Restated balance at 1 January 2022 386 171 111
Balance reported at 1 January 2023 350 145 (35)
Adjustment 107 30 77
Restated balance at 1 January 2023 457 175 42
IFRS not yet effective
The following new or amended standards and interpretations that are mandatory
for 2024 annual periods (and future years) are not expected to have a material
impact on the Company:
Non-current Liabilities with Covenants - Amendments to IAS 1 1 January 2024
Classification of Liabilities as Current or Non-Current - Amendments to IAS 1 1 January 2024
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 1 January 2024
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 1 January 2024
The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability - 1 January 2024
Amendments to IAS 21
There are no other IFRS standards or interpretations that are not yet
effective that would be expected to have a material impact on the Group. The
Group has not early adopted any standard, interpretation or amendment that has
been issued but is not yet effective.
Climate change
The potential climate change-related risks and opportunities to which the
Group is exposed, have been assessed by management, who assessed the potential
financial impacts relating to the identified risks, primarily considering the
useful lives of, and retirement obligations for, property, plant and
equipment, the possibility of impairment of goodwill and other long-lived
assets and the recoverability of the Group's deferred tax assets. Management
has exercised judgement in concluding that there are no further material
financial impacts of the Group's climate-related risks and opportunities on
the consolidated financial statements. These judgements will be kept under
review by management as the future impacts of climate change depend on
environmental, regulatory and other factors outside of the Group's control
which are not all currently known.
Going concern
The Group reported a loss after tax of £216m (2022: £73m) from continuing
operations in 2023. However, cashflow before growth capex and corporate
activities but after interest and tax was £207m (2022: £90m). Furthermore,
net cash of £1,197m (2022: £1,147m) was generated from operations during the
same period. Although the Group's balance sheet at 31 December 2023 reports a
net current liability position of £1,685m (2022: £1,868m), the Directors
concluded after a comprehensive review that no liquidity risk exists as:
1.The Group had funding available under the Group's £875m revolving credit
facility (2022: £750m). £219m (2022: £173m) which was available and undrawn
at 31 December 2023. The facility's current maturity date is November 2025
(note 19);
2. A significant proportion of the net current liability position is due to
lease liabilities which are held in non-recourse special purpose vehicles but
also with a corresponding right-of-use asset. A large proportion of the net
current liabilities comprise non-cash liabilities such as deferred revenue of
£433m (2022: £455m) which will be recognised in future periods through the
income statement. The Group holds customer deposits of £459m (2022: £447m)
which are spread across a large number of customers and no deposit held for an
individual customer is material. Therefore, the Group does not believe the net
current liabilities represents a liquidity risk; and
3.The Group maintained a 12-month rolling forecast and a three-year strategic
outlook. It also monitored the covenants in its facility to manage the risk of
potential breach. The Group expects to be able to refinance external debt
and/or renew committed facilities as they become due, which is the assumption
made in the viability scenario modelling, and to remain within covenants
throughout the forecast period. In reaching this conclusion, the Directors
have assessed:
· the potential cash generation of the Group against a range of
illustrative scenarios (including a severe but plausible outcome); and
· mitigating actions to reduce operating costs and optimise cash flows
during any ongoing global uncertainty.
Details of the principal risks, outcomes of modelled and stress-tested
scenarios are set out in the Viability statement.
The Directors consider that the Group is well placed to successfully manage
the actual and potential risks faced by the organisation including risks
related to inflationary pressures and geopolitical tensions.
On the basis of their assessment, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
a period of at least 12 months from the date of approval of these Group
consolidated financial statements and consider it appropriate to continue to
adopt the going concern basis in preparing the financial statements of the
Group.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the
Group controls an entity, when it is exposed to, or has the rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date that control commences. The results are consolidated
until the date control ceases or the subsidiary qualifies as a disposal group,
at which point the assets and liabilities are carried at the lower of fair
value less costs to sell and carrying value.
Joint ventures are those entities over whose activities the Group has joint
control, whereby the Group has rights to the net assets of the arrangement,
rather than rights to its assets and obligations for its liabilities. The
consolidated financial statements include the Group's share of the total
recognised gains and losses of joint ventures on an equity-accounted basis,
from the date that joint control commences until the date that joint control
ceases or the joint venture qualifies as a disposal group, at which point the
investment is carried at the lower of fair value less costs to sell and
carrying value. When the Group's share of losses exceeds its interest in a
joint venture, the Group's carrying amount is reduced to nil and recognition
of further losses is discontinued except to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of a
joint venture.
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions
with owners in their capacity as owners and therefore no goodwill is
recognised as a result. Adjustments to non-controlling interests arising from
transactions that do not involve the loss of control are based on a
proportionate amount of the net assets of the subsidiary.
Goodwill
All business combinations are accounted for using the purchase method.
Goodwill is initially measured at fair value, being the excess of the
aggregate of the fair value of the consideration transferred and the amount
recognised for non-controlling interests, and any previous interest held, over
the net identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate consideration
transferred, the Group reassesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed and reviews the
procedures used to measure the amounts to be recognised at the acquisition
date. If the reassessment still results in an excess of the fair value of net
assets acquired over the aggregate consideration transferred (negative
goodwill), then the gain is recognised in profit or loss.
Positive goodwill is stated at cost less any provision for impairment in
value. An impairment test is carried out annually and, in addition, whenever
indicators exist that the carrying amount may not be recoverable. Negative
goodwill is recognised directly in profit or loss.
Intangible assets
Intangible assets acquired separately from the business are capitalised at
cost. Intangible assets acquired as part of an acquisition of a business are
capitalised separately from goodwill if their fair value can be identified and
measured reliably on initial recognition.
Intangible assets are amortised on a straight-line basis over the estimated
useful life of the assets as follows:
Brand - Regus brand Indefinite life
Brand - Other acquired brands 20 years
Computer software Up to 5 years
Customer lists - service agreements 2 years
Customer lists - sublease agreements Up to 5 years
Amortisation of intangible assets is expensed through administration expenses
in the income statement.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any impairment in value. Asset lives and recoverable amounts are reviewed
on an annual basis. Depreciation is calculated on a straight-line basis over
the estimated useful life of the assets as follows:
Right-of-use assets(1) Over the lease term
Buildings 50 years
Leasehold improvements(1) 10 years
Furniture and equipment 5 - 10 years
Computer hardware 3 - 5 years
1. 10 years represents the average useful economic life across the lease
portfolio.
Leases
The nature of the Group's leases relates primarily to the rental of commercial
office real estate premises globally.
1. Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the
lease. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any re-measurement of
lease liabilities. The initial cost of right-of-use assets includes the amount
of lease liabilities recognised and initial direct costs incurred. The
recognised right-of-use assets are depreciated on a straight-line basis over
the shorter of its estimated useful life and the lease term.
Right-of-use assets are assessed for indicators of impairment on an annual
basis.
2. Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments and variable lease payments
that depend on an index or a rate. The variable lease payments that do not
depend on an index or a rate are recognised as a rent expense in the period in
which they are incurred.
In calculating the present value of lease payments, the Group uses the
incremental borrowing rate at the lease commencement date as the interest rate
implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is re-measured if there is a modification, a
change in the lease term or a change in the fixed lease payments.
3. Lease modifications
The carrying amount of lease liabilities is re-measured where there is a
modification, a change in the lease term, a change in the lease payments (e.g.
changes to future payments resulting from a change in an index or rate used to
determine such lease payments) or a change in the assessment of an option to
purchase the underlying asset. The impact of the modification is recognised
against the carrying amount of the right-of-use assets or is recorded in
profit or loss if the carrying amount of the right-of-use assets has been
reduced to zero.
4. Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to short-term
leases (i.e. those leases that have a lease term of 12 months or less from
commencement). It also applies the lease of low-value assets recognition
exemption under IFRS 16 to leases that are considered of low value. Lease
payments on short-term leases and leases of low-value assets are recognised as
a rent expense on a straight-line basis over the lease term.
5. Partner contributions
Partner contributions are contributions from our business partners (property
owners and landlords) towards the initial costs of opening a business centre,
including the fit-out of the property. Partner contributions representing a
reimbursement to the lessee (IWG) are accounted for as agency arrangements,
and form part of the lessor's (landlord's) assets.
Partner contributions for lease incentives are received at or before the lease
commencement date for commercial reasons and, where the Group retains
ownership of the fit-out assets, are accounted for as a lease incentive and
recognised by reducing the right-of-use asset. Any other partner contributions
for lease incentives received subsequent to the commencement of the lease are
accounted for as part of the associated lease modification.
6. Lease term
The lease term is the non-cancellable period of the lease adjusted for any
renewal or termination options which are reasonably certain to be exercised.
Management applies judgement in determining whether it is reasonably certain
that a renewal or termination option will be exercised.
7. Lease break penalties
Lease break penalties, where the lease term has been determined as the period
from inception up to a break clause and when there are break payments or
penalties, have been appropriately included in the measurement of the lease
liability.
8. Net investment in finance leases
The Group acts as an intermediate lessor where certain commercial office real
estate properties, rented under separate 'head' lease agreements, are sublet
as part of a separate sublease agreements. Interest in the 'head' lease and
sublease are accounted for separately, with the classification of the sublease
assessed with reference to the right-of-use assets arising from the head lease
(not with reference to the underlying asset).
The initial net investment in finance leases is equal to the present value of
the lease receipts during the lease term that have not yet been paid. The
right-of-use asset arising from the head lease is offset by the initial
measurement of the net investment in the finance lease, plus any additional
direct costs associated with setting up the lease.
If the sublease agreement contains lease and non-lease components, the Group
applies IFRS 15 in determining the allocation of the agreement consideration.
Client contributions are contributions received from sub-lessees towards the
initial costs of preparing the commercial property for their use, including
the fit-out of the property.
Impairment of non-financial assets
For goodwill, assets that have an indefinite useful life and intangible assets
that are not yet available for use, the recoverable amount was estimated at 30
September 2023. At each reporting date, the Group reviews the carrying amount
of these assets to determine whether there is an indicator of impairment. If
any indicator is identified, then the assets' recoverable amount is
re-evaluated.
The carrying amount of the Group's other non-financial assets (other than
deferred tax assets and inventory), including right-of-use assets, is reviewed
at the reporting date to determine whether there is an indicator of
impairment. If any such indication exists, the assets' recoverable amount is
estimated.
An impairment loss is recognised whenever the carrying amount of an asset or
its cash-generating unit (CGU) exceeds its recoverable amount. Impairment
losses are recognised in the income statement.
At each reporting date, the Group assesses whether there is an indication that
a previously recognised impairment loss has reversed because of a change in
the estimates used to determine the impairment loss. If there is such an
indication, and the recoverable amount of the impaired asset or CGU
subsequently increases, then the impairment loss is generally reversed, with
the exception of goodwill.
A CGU is the smallest identifiable group of assets that generates cash inflows
that are largely independent of the cash inflows from other assets or groups
of assets. The Group has identified individual business centres as the CGU.
The potential impairment of immovable property, plant and equipment and
right-of-use assets at the centre (CGU) level are evaluated where there are
indicators of impairment.
Centres (CGUs) are grouped by country of operation for the purposes of
carrying out impairment reviews of goodwill as this is the lowest level at
which it can be assessed.
Individual fittings and equipment in centres or elsewhere in the business that
become obsolete or are damaged are assessed and impaired where appropriate.
The recoverable amount of relevant assets is the greater of their fair value
less costs to sell and value-in-use. In assessing value-in-use, the estimated
future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
Financial assets
Financial assets are classified and subsequently measured at amortised cost,
fair value through the profit or loss, or fair value through other
comprehensive income (OCI). The classification depends on the nature and
purpose of the financial assets and is determined on initial recognition.
Financial assets (including trade and other receivables) are measured at
amortised cost if both of the following conditions are met:
· The financial asset is held within a business model whose
objective is to hold assets to collect contractual cash flows; and
· Its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal
amount outstanding.
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instruments to the gross carrying amount of the financial assets.
Financial assets at fair value through profit or loss are measured at fair
value and changes therein, including any interest or dividend income, are
recognised in profit or loss.
IFRS 9 requires the Group to record expected credit losses on all of its
financial assets held at amortised cost, on either a 12-month or a lifetime
basis. The Group applies the simplified approach to trade receivables and
recognises expected credit losses based on the lifetime expected losses.
Provisions for receivables are established based on both expected credit
losses and information available that the Group will not be able to collect
all amounts due according to the original terms of the receivables.
Inventory
Inventories relate to consumable items which are measured at the lower of cost
or net realisable value. The cost of inventories is based on the first-in,
first-out principle.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and are subject to
an insignificant risk of change in value.
Interest-bearing borrowings and other financial liabilities
Financial liabilities, including interest-bearing borrowings, are recognised
initially at fair value less attributable transaction costs. Subsequent to
initial recognition, financial liabilities are stated at amortised cost with
any difference between cost and redemption value being recognised in the
income statement over the period of the borrowings on an effective interest
rate method.
The Group derecognises financial liabilities when the Group's obligations are
discharged, cancelled or expired.
Financial liabilities are classified as financial liabilities at fair value
through profit or loss where the liability is either held for trading or is
designated as held at fair value through profit or loss on initial
recognition. Financial liabilities at fair value through profit or loss are
stated at fair value with any resultant gain or loss recognised in the income
statement.
Compound financial instruments issued by the Group comprise convertible bonds
denominated in pounds sterling that can be converted to ordinary shares at the
option of the holder.
The debt component of compound financial instruments is initially recognised
at the fair value of a similar liability that does not have an equity
conversion option. The conversion option represents a derivative financial
liability and is initially recognised as the difference between the fair value
of the compound financial instrument as a whole and the fair value of the
liability component. Any directly attributable transaction costs are allocated
to the debt host.
Subsequent to initial recognition, the debt component of a compound financial
instrument is measured at amortised cost using the effective interest rate
method. The derivative component of a compound financial instrument is
re-measured at fair value through profit or loss. Interest related to the debt
is recognised as a finance expense in profit or loss.
Derivative financial instruments
The Group's policy on the use of derivative financial instruments can be found
in note 25. Derivative financial instruments are measured initially at fair
value and changes in the fair value are recognised through profit or loss
unless the derivative financial instrument has been designated as a cash flow
hedge whereby the effective portion of changes in the fair value are deferred
in equity.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event that can be
estimated reliably, and it is probable that an outflow of economic benefits
will be required to settle the obligation.
Restructuring provisions are made for direct expenditures of a business
reorganisation where the plans are sufficiently detailed and well-advanced and
where the appropriate communication to those affected has been undertaken at
the reporting date.
Provision is made for closure costs to the extent that the unavoidable costs
of meeting the obligations exceed the economic benefits expected to
be delivered.
Dilapidations
A provision is recognised for those potential dilapidation payments when it is
probable that an outflow will occur and can be reliably estimated.
Deferred revenue
Invoices issued in advance of services provided, in accordance with
contractual arrangements with customers, are held on the balance sheet as a
current liability until the services have been rendered.
Equity
Equity instruments issued by the Group are recorded at the fair value of
proceeds received, net of direct issue costs.
When shares recognised as equity are repurchased, the amount of the
consideration paid, which includes directly attributable costs, net of any tax
effects, is recognised as a deduction from equity. Repurchased shares are
classified as treasury shares and are presented in the treasury share reserve.
When treasury shares are sold or re-issued subsequently, the amount received
is recognised as an increase in equity and the resulting surplus or deficit on
the transaction is presented within retained earnings.
Non-controlling interests
Non-controlling interests are measured initially at their proportionate share
of the acquiree's identifiable net assets at the date of acquisitions.
Share-based payments
The share awards programme entitles certain directors and employees to acquire
shares of the ultimate parent company (IWG plc); these awards are granted by
the ultimate parent company (IWG plc) and are equity-settled.
The fair value of options and awards granted under the Group's share-based
payment plans outlined in note 26 is recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured
using the Black-Scholes valuation model or the Monte Carlo method, taking into
account the terms and conditions upon which the options were granted. The
amount recognised as an expense is adjusted to reflect the actual number of
share options that vest in respect of non-market conditions except where
forfeiture is due to the expiry of the option.
Revenue
The Group's primary activity is the provision of fully integrated, end-to-end
global workspace solutions.
1. Workstations
The Group recognises workstation revenue when it transfers services to a
customer. It is measured based on the consideration specified in a contract
with a customer. Services transfer to the customer equally over the contract
period based on the time elapsed. Where discounted periods are granted to
customers, service income is spread on a straight-line basis over the duration
of the customer contract. Invoices are generally issued in advance, on a
monthly basis with normal credit terms of 15 days, and initially recognised as
deferred revenue.
Workstation revenue is recognised over time as the services are provided.
Amounts invoiced in advance are accounted for as deferred revenue (contract
liability) and recognised as revenue upon provision of the service.
2. Management and franchise fees
Fees received for the provision of initial and subsequent services are
recognised over time as the services are rendered. Fees charged for the use of
continuing rights granted by the agreement are measured based on the
contractually agreed percentage of revenue, generated by the operation, except
where a different basis is determined in the contractual arrangements. Fees
charged for other services provided, during the period of the agreement, are
recognised as revenue as the services provided or the rights used. Invoices
are generally issued on a monthly basis with normal credit terms of 30 days.
3. Customer service income
Service income (including the provision of workspace bookings, meeting rooms
and inventory management) is recognised over time as the services are
delivered or at a point in time depending on contractual obligations. Invoices
are generally issued when the service is provided and subject to immediate
settlement. In circumstances where the Group acts as an agent for the sale and
purchase of goods to customers, only the commission fee earned is recognised
as revenue.
4. Membership card income
Revenue from the sale of membership cards is deferred and recognised over time
within the period that the benefits of the membership card are expected to be
provided.
5. Customer deposits
Deposits received from customers against non-performance of the contract are
held on the balance sheet as a current liability until they are either
returned to the customer at the end of their relationship with the Group, or
released to the income statement.
The Group has concluded that it is the principal in its revenue arrangements,
except where noted above.
Adjusting items
Significant transactions, not indicative of the underlying performance of the
consolidated Group are reported separately as adjusting items. The profit
before tax and adjusting items measure is not a recognised profit measure
under IFRS and may not be directly comparable with adjusted profit measures
used by other companies.
Adjusting items are separately disclosed by the Group to provide readers with
helpful, additional information on the performance of the business across
periods. Each of these items is considered to be significant in nature and/or
size. The exclusion of these items is consistent with how the business
performance is planned by, and reported to, the Board.
The classification of adjusting items requires significant management
judgement after considering the nature and intentions of a transaction.
Adjusting items recognised are based on the actual costs incurred and/or
calculated on a basis consistent with the key judgements and estimates. The
classification of adjusting items requires management judgement after
considering the nature and intentions of a transaction. Where necessary, this
judgement applied is based on a formal methodology, to determine whether or
not some, or all, of the associated costs are arising in the ordinary course
of business.
In 2022, the Group specifically identified adjusting items in response to the
direct impacts of the COVID-19 pandemic on its financial results. However, in
2023 the measurement of the impact of COVID-19 on financial results was no
longer distinguishable. The Group consequently, has updated its classification
criteria to disclose all transactions not indicative of the underlying
performance of the Group as adjusting items. To maintain consistency and
comparability, the Group have also retrospectively restated the comparative
information to align with this refined classification.
Management classifies the following as adjusting items:
1. Network rationalisation charges, representing direct closure costs and the
write-off of the book values of assets pertaining to centers closed during the
year;
2. Impairment charges and reversals, representing the impairment of property,
plant and equipment, right-of-use assets, goodwill and other assets, and the
reversals of prior impairments recorded;
3. Costs associated with acquisitions and restructurings during the year;
4. Other significant and non-recurring items, including write-off of fixed
assets due to obsolescence.
Where estimated amounts provide to be in excess of the amounts required, the
release of any amounts provided for at year-end are treated as adjusting
items.
Employee benefits
The majority of the Group's pension plans are of the defined contribution
type. For these plans the Group's contribution and other paid and unpaid
benefits earned by the employees are charged to the income statement as
incurred.
The cost of providing benefits under the defined benefit plans is determined
using the projected unit credit method.
Re-measurements, comprising actuarial gains and losses, the effect of the
asset ceiling and the return on plan assets, excluding net interest, are
recognised immediately in the balance sheet with a corresponding debit or
credit to retained earnings through other comprehensive income in the period
in which they occur. Re-measurements are not reclassified to profit or loss in
subsequent periods.
Service costs are recognised in profit or loss, and include current and past
service costs as well as gains and losses on curtailments.
Net interest is calculated by applying the discount rate to the net defined
benefit liability or asset. The Group recognises the following changes in the
net defined benefit obligation under 'cost of sales' and 'selling, general and
administration expenses' in the consolidated income statement: service costs
comprising current service costs; past service costs; and gains and losses on
curtailments and non-routine settlements.
Settlements of defined benefit schemes are recognised in the period in which
the settlement occurs.
Grants that compensate the Group for expenses incurred are recognised in
profit or loss on a systematic basis in the periods in which the expenses are
recognised.
Net finance expense
Interest charges and income are accounted for in the income statement on an
accrual basis. Financing transaction costs that relate to financial
liabilities are charged to interest expense using the effective interest rate
method and are recognised within the carrying value of the related financial
liability on the balance sheet. Fees paid for the arrangement of credit
facilities are recognised as an asset and recognised through the finance
expense over the term of the facility.
Where assets or liabilities on the Group balance sheet are carried at net
present value, the increase in the amount due to unwinding the discount is
recognised as a finance expense or finance income as appropriate.
Costs arising on bank guarantees and letters of credit and foreign exchange
gains or losses are included in other finance costs (note 7).
Taxation
Tax on the profit for the year comprises current and deferred tax. Tax is
recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax assets and liabilities are not
subject to discounting. The following temporary differences are not provided
for: the initial recognition of goodwill; the initial recognition of assets
and liabilities that affect neither accounting nor taxable profit other than
in a business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
reporting date.
A deferred tax asset is recognised for unused tax losses only to the extent
that it is probable that future taxable profits will be available against
which the asset can be utilised.
The carrying amount of a deferred tax asset or liability may change for
reasons other than a change in the temporary difference itself. Such changes
might arise as a result of a change in tax rates or laws, a reassessment of
the recoverability of a deferred tax asset or a change in the expected manner
of recovery of an asset or the expected manner of a settlement of a liability.
The impact of these changes is recognised in the income statement or in other
comprehensive income depending on where the original deferred tax balance was
recognised.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
In accordance with IFRIC Interpretation 23, the Group considers whether it has
any uncertain tax positions, particularly those relating to transfer pricing.
The Company's and the subsidiaries' tax filings in different jurisdictions
include deductions related to transfer pricing and the taxation authorities
may challenge those tax treatments. The Group determined, based on its tax
compliance and transfer pricing studies, that in most jurisdictions it is
probable that its tax treatments (including those for the subsidiaries) will
be accepted by the taxation authorities. The Group has, where considered
appropriate, provided for the potential impact of uncertain tax positions
where the likelihood of tax authority adjustment is considered to be more
likely than not. The adoption of the interpretation did not have an impact on
the consolidated financial statements of the Group.
Discontinued operations
A discontinued operation is a component of the Group's business, the
operations and cash flows of which can be clearly distinguished from the rest
of the Group and which:
· represents a separate major line of business or geographic area
of operations;
· is part of a single coordinated plan to dispose of a separate
major line of business or geographic area of operations; or
· is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal
or when the operation meets the criteria to be classified as held-for-sale.
When an operation is classified as a discontinued operation, the comparative
statement of profit or loss and OCI is re-presented as if the operation had
been discontinued from the start of the comparative year.
Foreign currency transactions and foreign operations
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the closing rate of
exchange at the balance sheet date and the gains or losses on translation are
taken to the income statement. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. The results and cash
flows of foreign operations are translated using the average rate for the
period. Assets and liabilities, including goodwill and fair value adjustments,
of foreign operations are translated using the closing rate, with all exchange
differences arising on consolidation being recognised in other comprehensive
income, and presented in the foreign currency translation reserve in equity.
Exchange differences are reclassified to the income statement on disposal.
Foreign currency translation rates
At 31 December Annual average
2023 2022 2023 2022
US dollar 1.27 1.21 1.25 1.23
Euro 1.15 1.13 1.15 1.17
3. Segmental analysis
An operating segment is a component of the Group that engages in business
activities from which it may earn revenue and incur expenses. An operating
segment's results are reviewed regularly by the chief operating decision-maker
(the Board of Directors of the Group) on a pre-IFRS 16 basis to make decisions
about resources to be allocated to the segment and assess its performance, and
for which distinct financial information is available. The segmental
information is presented on the same basis on which the chief operating
decision-maker received reporting during the year. Segmental assets and
liabilities continue to be presented in accordance with IFRS.
The business is run on a worldwide basis but managed through two operating
segments, IWG Network and Worka.
IWG Network represents the Group's segmental results excluding Worka. IWG
Network is managed through both geographical regions and ownership structure
splits. The three principle geographical regions are: the Americas, EMEA
(including UK) and Asia Pacific. The results of business centres in each of
these regions, based on time zones, economic relationships, market
characteristics, cultural similarities and language clusters, form the basis
for reporting geographical results to the chief operating decision-maker.
These geographical regions exclude the Group's non-trading, holding and
corporate management companies, which are included in Other.
The Group's IWG Network results are also managed by ownership structure and
are an additional basis for reporting results to the chief operating
decision-maker. Company-owned & Leased comprises results from business
centres owned and operated by the Group. Managed & Franchised comprises
results relating to services provided to business centres owned by third
parties.
The Worka operating segment comprises the results relating to The Instant
Group investment (note 28) and includes the Group's digital assets,
representing the world's leading fully integrated workspace platform. All
reportable segments are involved in the provision of global workplace
solutions. The Group's reportable segments operate in different markets and
are managed separately because of the different economic characteristics
that exist in each of those markets. Each reportable segment has its own
distinct senior management team responsible for the performance of the
segment.
Continuing operations on pre-IFRS 16 basis IWG Network Operating Segment Worka Operating Segment
£m
2023
By By I
geograp ow W
hy ne G
rs N
hi e
p t
w
o
r
k
Americas EMEA Asia Pacific Other Company-Owned & Leased Managed & Franchised
Revenue 1,046 1,315 273 5 2,589 50 2,639 379 3,018
Workstation revenue(1) 706 986 203 - 1,895 - 1,895 - 1,895
Fee income 9 25 14 - - 48 48 - 48
Customer Service income(2)(3) 331 304 56 5 694 2 696 379 1,075
Gross profit (centre contribution) 48 104 20 11 133 50 183 160 343
Share of loss of equity-accounted investees - (1) - - (1) - (1) - (1)
Operating (loss)/profit (27) (9) (6) (149) (171) (20) (191) 88 (103)
Finance expense (67) (9) (76)
Finance income 7 1 8
(Loss)/profit before tax for the year (251) 80 (171)
Depreciation and amortisation 155 123 25 35 338 - 338 38 376
Impairment of assets - - - 1 1 - 1 - 1
Loss on disposal of assets 37 32 9 - 78 - 78 - 78
Assets(4) 3,101 3,477 469 553 7,600 - 7,600 602 8,202
Liabilities(4) (3,070) (3,409) (496) (880) (7,855) - (7,855) (262) (8,117)
Net assets/(liabilities)(4) 31 68 (27) (327) (255) - (255) 340 85
Non-current asset additions(4)(5) 109 242 60 54 465 - 465 31 496
Non-current asset acquisitions(4)(5) 1 - 14 - 15 - 15 6 21
1. Includes customer deposits.
2. Includes membership card income.
3. Managed & Franchised relates to a net settlement fee of £2m
recognised (comprising the settlement fee of £18m, offset by a release of
related accrued income of £16m), for TKP Corporation's sale of the Japanese
master franchise agreement to Mitsubishi Estate Co.
4. Presented on a basis consistent with IFRS 16.
5. Excluding deferred taxation.
Restated Continuing operations on IWG Network Operating Segment Worka Operating Segment
pre-IFRS 16 basis (1)
£m
2022
By geography By ownership I
W
G
N
e
t
w
o
r
k
Americas EMEA Asia Pacific Other Company-Owned & Leased Managed & Franchised
Revenue((2)) 1,024 1,199 248 9 2,446 34 2,480 321 2,801
Workstation revenue(3) 709 904 188 - 1,801 - 1,801 - 1,801
Fee income 3 19 10 2 - 34 34 - 34
Customer Service income(4) 312 276 50 7 645 - 645 321 966
Gross profit (centre contribution) 82 120 26 13 207 34 241 143 384
Share of loss of equity-accounted investees - (1) - - (1) - (1) - (1)
Operating (loss)/profit (23) 23 5 (133) (113) (15) (128) 85 (43)
Finance expense (37) (13) (50)
Finance income 27 - 27
(Loss)/profit before tax for the year (138) 72 (66)
Depreciation and amortisation 166 116 27 21 330 - 330 30 360
Impairment of assets 3 - - - 3 - 3 - 3
Loss on disposal of assets 44 8 9 - 61 - 61 - 61
Assets(5) 3,587 3,782 549 582 8,500 - 8,500 688 9,188
Liabilities(5) (3,445) (3,559) (538) (782) (8,324) - (8,324) (552) (8,876)
Net assets/(liabilities)(5) 142 223 11 (200) 176 - 176 136 312
Non-current asset additions(5)(6) 157 237 38 29 461 - 461 54 515
Non-current asset acquisitions (5)(6) - - - - - - - 349 349
1. The comparative information has been restated for the separate disclosure
of the Managed & Franchised segment and as the Group changed its
accounting policy on deferred tax related to assets and liabilities arising
from a single transaction due to amendments to IAS 12 (note 2).
2. Excludes revenue from discontinued operations.
3. Includes customer deposits.
4. Includes membership card income.
5. Presented on a basis consistent with IFRS 16.
6. Excluding deferred taxation.
Operating profit in the 'Other' category is generated from services related to
the provision of workspace solutions, offset by corporate overheads.
The operating segment's results presented on a pre-IFRS 16 basis reconcile to
the financial statements as follows:
Continuing operations IWG Network Operating Segment Worka Operating Segment
£m
2023
By geography By ownership I
W
G
N
e
t
w
o
r
k
Americas EMEA Asia Pacific Other Company-Owned & Leased Managed & Franchised
Revenue - pre-IFRS 16 1,046 1,315 273 5 2,589 50 2,639 379 3,018
Rent income - - - - - - - (60) (60)
Revenue 1,046 1,315 273 5 2,589 50 2,639 319 2,958
Gross profit (centre contribution) - pre-IFRS 16 48 104 20 11 133 50 183 160 343
Rent income - - - - - - - (60) (60)
Rent 445 486 113 - 1,044 - 1,044 62 1,106
Depreciation of property, plant and equipment including right-of-use (349) (367) (87) (2) (805) - (805) (1) (806)
assets((2))
Other((1)) (16) 13 5 5 7 - 7 (1) 6
Gross profit 128 236 51 14 379 50 429 160 589
(centre contribution)
Operating (loss)/profit (27) (9) (6) (149) (171) (20) (191) 88 (103)
- pre-IFRS 16
Rent income - - - - - - - (60) (60)
Rent 445 486 113 - 1,044 - 1,044 62 1,106
Depreciation of property, plant and equipment including right-of-use (349) (367) (87) (2) (805) - (805) (1) (806)
assets((2))
Other((1)) (16) 15 5 5 9 - 9 (1) 8
Operating profit/(loss) 53 125 25 (146) 77 (20) 57 88 145
Depreciation and amortisation 155 123 25 35 338 - 338 38 376
- pre-IFRS 16
Depreciation of property, plant and equipment including right-of-use assets 349 367 87 2 805 - 805 1 806
Depreciation and amortisation 504 490 112 37 1,143 - 1,143 39 1,182
Impairment of assets - pre-IFRS 16 - - - 1 1 - 1 - 1
Net impairment/(reversal) of property, plant and equipment including 33 37 11 (3) 78 - 78 - 78
right-of-use assets
Net impairment/(reversal) of assets 33 37 11 (2) 79 - 79 - 79
Loss on disposal of assets - pre-IFRS 16 37 32 9 - 78 - 78 - 78
Loss on disposal of property, plant and equipment including right-of-use (29) (19) (5) - (53) - (53) (1) (54)
assets((3))
Loss on disposal of assets 8 13 4 - 25 - 25 (1) 24
1. Includes £78m of net impairment of property, plant and equipment
including right-of-use assets offset by losses on disposal of property, plant
and equipment including right-of-use assets of £54m.
2. Includes depreciation on right of use assets of £919m offset by reduced
depreciation on leasehold improvements under IFRS 16 due to the classification
of certain partner contributions as a reduction to property, plant and
equipment.
3. Loss on disposal under IFRS 16 is lower due to the classification of
certain partner contributions as a reduction to property, plant and equipment
under IFRS 16.
Restated Continuing operations((1) IWG Network Operating Segment Worka Operating Segment
) 2022
£m
By geography By ownership I
W
G
N
e
t
w
o
r
k
Americas EMEA Asia Pacific Other Company-Owned & Leased Managed & Franchised
Revenue - pre-IFRS 16 1,024 1,199 248 9 2,446 34 2,480 321 2,801
Rent income - - - - - - - (50) (50)
Revenue 1,024 1,199 248 9 2,446 34 2,480 271 2,751
Gross profit (centre contribution) - pre-IFRS 16 82 120 26 13 207 34 241 143 384
Rent income - - - - - - - (50) (50)
Rent 438 443 126 5 1,012 - 1,012 47 1,059
Depreciation of property, plant and equipment including right-of-use (345) (389) (90) (4) (828) - (828) (1) (829)
assets((3))
Other((2)) 9 17 (11) (3) 12 - 12 (1) 11
Gross profit 184 191 51 11 403 34 437 138 575
(centre contribution)
Operating (loss)/profit - (23) 23 5 (133) (113) (15) (128) 85 (43)
pre-IFRS 16
Rent income - - - - - - (50) (50)
Rent 438 443 126 5 1,012 - 1,012 47 1,059
Depreciation of property, plant and equipment including right-of-use (345) (389) (90) (4) (828) - (828) (1) (829)
assets((3))
Other((2)) 7 16 (15) 2 10 - 10 - 10
Operating profit/(loss) 77 93 26 (130) 81 (15) 66 81 147
Depreciation and amortisation - pre-IFRS 16 166 116 27 21 330 - 330 30 360
Depreciation of property, plant and equipment including right-of-use assets 345 389 90 4 828 - 828 1 829
Depreciation and amortisation 511 505 117 25 1,158 - 1,158 31 1,189
Impairment of assets - pre-IFRS 16 3 - - - 3 - 3 - 3
Net impairment reversal of property, plant and equipment including (30) (16) (6) - (52) - (52) - (52)
right-of-use assets
Net reversal of assets (27) (16) (6) - (49) - (49) - (49)
Loss on disposal of assets - pre-IFRS 16 44 8 9 - 61 - 61 - 61
Loss on disposal of property, plant and equipment including right-of-use (18) (29) (12) - (59) - (59) 1 (58)
assets((4))
Loss on disposal of assets 26 (21) (3) - 2 - 2 1 3
1. The comparative information has been restated for the separate disclosure
of the Managed & Franchised segment.
2. Includes £52m of net reversals of impairment of property, plant and
equipment including right-of-use assets.
3. Includes depreciation on right of use assets of £955m offset by reduced
depreciation on leasehold improvements under IFRS 16 due to the classification
of certain partner contributions as a reduction to property, plant and
equipment.
4. Loss on disposal under IFRS 16 is lower due to the classification of
certain partner contributions as a reduction to property, plant and equipment
under IFRS 16.
4. Segmental analysis - entity-wide disclosures
The Group's primary activity is the provision of global workplace solutions,
therefore all revenue is attributed to a single group of similar products and
services. Relevant product categories have; however, been included in the
segmental analysis in note 3. Revenue is recognised where the service is
provided.
The Group has a diversified customer base and no single customer contributes a
material percentage of the Group's revenue.
The Group's revenue from external customers and non-current assets analysed by
foreign country are as follows:
2023 2022
£m External Non-current External Non-current
revenue
revenue
assets(1) assets(1)
Country of tax domicile - Switzerland 6 - 5 -
United States of America 951 2,401 868 2,787
EMEA 909 1,930 804 2,166
UK 394 1,008 385 1,099
Worka 319 426 271 428
All other countries 379 924 418 1,099
2,958 6,689 2,751 7,579
1. Excluding deferred tax assets.
5. Operating profit - continuing operations
Operating profit has been arrived at after crediting/(charging):
£m Notes 2023 2022
Revenue 2,958 2,751
Depreciation on property, plant and equipment 15 (1,117) (1,145)
Right-of-use assets 15 (919) (955)
Other property, plant and equipment 15 (198) (190)
Amortisation of intangible assets 14 (65) (44)
Variable property rents payable in respect of leases 24 (64) (68)
Lease expense on short-term leases (1) -
Staff costs 6 (433) (423)
Facility and other property costs (524) (496)
Expected credit (losses)/reversal on trade receivables 25 (15) 6
Loss on disposal of property, plant and equipment (61) (34)
Profit on disposal of right-of-use assets and related lease liabilities 37 31
Impairment of goodwill 13 - (3)
Impairment of other intangible assets 14 (1) -
Net (impairment)/reversal of property, plant and equipment(1) 15 (78) 52
Net (impairment)/reversal of other property, plant and equipment 15 (36) 13
Net (impairment)/reversal of right-of-use assets 15 (42) 39
Other costs (490) (479)
Operating profit before equity-accounted investees 146 148
Share of loss of equity-accounted investees, net of tax 21 (1) (1)
Operating profit 145 147
1. The net impairment of £78m (2022: net reversal of impairment of £52m)
includes an additional impairment of £112m (2022: £39m), offset by the
reversal of £34m (2022: £91m) previously provided for (note 15).
£m 2023 2022
Fees payable to the Group's auditor and its associates for the audit of the (2) (2)
Group accounts
Fees payable to the Group's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation (3) (3)
Other services pursuant to legislation - -
Other non-audit services - -
6. Staff costs
£m 2023 2022
The aggregate payroll costs were as follows:
Wages and salaries 363 357
Social security 58 55
Pension costs 6 7
Share-based payments 6 4
433 423
Average full-time Equivalents((1)) 2023 2022
The average number of persons employed by the Group (including Executive
Directors),
analysed by category and geography, was as follows:
Centre staff 6,536 6,572
Sales and marketing staff 572 532
Finance staff 709 647
Other staff 1,238 1,005
9,055 8,756
Americas 2,837 2,778
EMEA 3,366 3,356
Asia Pacific 1,001 995
Corporate functions 1,851 1,627
9,055 8,756
1. The average full-time equivalents exclude employees for disposed entities
during 2023 of nil (2022: 2).
Details of Directors' emoluments and interests are given in the Directors'
Remuneration report.
7. Net finance expense
£m Notes 2023 2022
Interest payable and similar charges on bank loans and corporate borrowings (55) (38)
Interest payable on lease liabilities (280) (230)
Interest expense on the convertible bond (13) (12)
Total interest expense (348) (280)
Other finance costs - (7)
Unwinding of discount rates - -
Total finance expense (348) (287)
Interest income 1 1
Interest received on net lease investment 6 7
Fair value gain on financial liabilities measured at FVTPL 19 - 27
Total interest income 7 35
Other finance income 7 -
Total finance income 14 35
Net finance expense (334) (252)
8. Taxation
(a) Analysis of charge in the year
£m 2023 2022
Restated(1)
Current taxation
Corporate income tax (77) (40)
Previously unrecognised tax losses and temporary differences 44 6
Over provision in respect of prior years 8 1
Total current taxation (25) (33)
Deferred taxation
Origin and reversal of temporary differences (19) 57
Previously unrecognised tax losses and other differences 17 8
Total deferred taxation (2) 65
Tax (charge)/credit on continuing operations (27) 32
1. The comparative information has been restated to reflect the change in
the Group's accounting policy on deferred tax related to assets and
liabilities arising from a single transaction due to amendments to IAS 12
(note 2).
(b) Reconciliation of taxation charge
2023 2022 Restated(1)
£m % £m %
Loss before tax from continuing operations (189) (105)
Tax on profit at 11.9% (2022: 11.9%) 23 (12) 13 (12)
Tax effects of:
Expenses not deductible for tax purposes (82) 43 (34) 32
Items not chargeable for tax purposes 14 (8) 12 (11)
Previously unrecognised temporary differences expected to be used in the 62 (33) 14 (14)
future
Current year temporary differences not currently expected to be used (79) 42 (7) 7
Adjustment to tax charge in respect of previous years 8 (4) 1 (1)
Differences in tax rates on overseas earnings 27 (14) 33 (31)
(27) 14 32 (30)
The applicable tax rate is determined based on the tax rate in the canton of
Zug in Switzerland, which was the statutory tax rate applicable in the country
of domicile of the parent company of the Group at the end of the financial
year.
(c) Factors that may affect the future tax charge
Unrecognised tax losses to carry forward against certain future overseas
corporation tax liabilities have the following expiration dates.
£m 2023 2022
2023 - 54
2024 30 40
2025 35 56
2026 36 65
2027 31 72
2028 64 341
2029 69 71
2030 82 26
2031 and later 1,369 1,408
1,716 2,133
Available indefinitely 1,417 1,468
Tax losses available to carry forward 3,133 3,601
Amount of tax losses recognised in deferred tax assets 216 64
Total tax losses available to carry forward 3,349 3,665
The above loss expiry table excludes £123m (2022: £254m) US state tax
losses.
The following deferred tax assets have not been recognised due to
uncertainties over recoverability.
£m 2023 2022
Intangibles 358 368
Accelerated capital allowances 53 33
Tax losses 778 852
Rent 107 63
Leases 63 37
Short-term temporary differences 16 11
1,375 1,364
(d) Corporation tax
£m 2023 2022
Corporation tax payable (43) (45)
Corporation tax receivable 27 19
(e) Deferred taxation
The movement in deferred tax is analysed below:
£m Intangibles Property, Tax losses Rent Leases Other temporary differences Total
plant and equipment
Deferred tax asset
At 31 December 2021 70 - 41 68 112 36 327
Current year movement 12 (4) (16) (4) 8 25 21
Prior year movement 1 13 (14) (3) - 3 -
Transfers(1) - - - - - - -
Exchange rate movements (6) (9) 4 8 - 5 2
Change in accounting policy((2)) - - - - 932 - 932
At 31 December 2022 77 - 15 69 1,052 69 1,282
Current year movement (2) (3) 39 (58) (135) 30 (129)
Prior year movement - (1) - 6 - (6) (1)
Transfers - - - - - - -
Exchange rate movements 2 4 (1) (3) - (3) (1)
At 31 December 2023 77 - 53 14 917 90 1,151
Offset against deferred tax liabilities - - - - (700) - (700)
Net deferred tax assets 77 - 53 14 217 90 451
at 31 December 2023
Deferred tax liability
At 31 December 2021 (51) (83) - - (6) (1) (141)
Current year movement (6) 2 - (1) 2 (1) (4)
Prior year movement - - - - - - -
Transfers(1) - - - - - - -
Exchange rate movements - - - - - - -
Change in accounting policy((2)) - - - - (855) - (855)
At 31 December 2022 (57) (81) - (1) (859) (2) (1,000)
Current year movement 1 10 - 1 118 (3) 127
Prior year movement - - - - - - -
Transfers - - - - - - -
Exchange rate movements - - - - - - -
At 31 December 2023 (56) (71) - - (741) (5) (873)
Offset against deferred tax assets - - - - 700 - 700
Net deferred tax liabilities (56) (71) - - (41) (5) (173)
at 31 December 2023
1. In 2022 the Group separately presented deferred tax assets and deferred
tax liabilities on a country-by-country, or entity-by-entity basis where
available. The transfers line reflects the adjustment required to the opening
balances as at 1 January 2022 to reflect this change in presentation.
2. The comparative information has been restated to reflect the change in
the Group's accounting policy on deferred tax related to assets and
liabilities arising from a single transaction due to amendments to IAS 12
(note 2).
The Group has changed its accounting policy and adopted the amendment to IAS
12 from 1 January 2023. The amendment relates to the recognition of separate
deferred tax assets and liabilities arising from a single transaction (note
2).
The movements in deferred taxes included above are after the offset of
deferred tax assets and deferred tax liabilities where there is a legally
enforceable right to set off and they relate to income taxes levied by the
same taxation authority. The closing deferred tax position above represents
the aggregated deferred tax asset or liability position within individual
legal entities, with some companies recognising deferred tax assets and others
recognising deferred tax liabilities. The closing position is a deferred tax
asset of £451m (2022 restated: £457m) and a deferred tax liability of £173m
(2022 restated: £175m).
In evaluating whether it is probable that taxable profits will be earned in
future accounting periods for the purposes of deferred tax asset recognition,
management based their analysis on the Board-approved three-year forecasts
prepared for the purposes of reviewing goodwill for impairment.
At the balance sheet date, the temporary difference arising from unremitted
earnings of overseas subsidiaries was £12m (2022: £14m). The only tax that
would arise on these reserves if they were remitted would be non-creditable
withholding tax.
In 2023 the deferred tax asset recognised in respect of the fair market value
of IP resulting from a group restructure in 2019, in relation to which the
amortisation is deductible for Swiss corporate income tax purposes, remained
at £77m (2022: £77m) and this is included as Intangibles in the deferred tax
table above. Recognition of this deferred tax asset is based on the approved
three-year forecast.
(f) International Tax Reform - Pillar Two Model Rules
To address concerns about uneven profit distribution and tax contributions of
large multinational corporations, the Organisation for Economic Co-operation
and Development (OECD) published the Pillar Two model rules designed to
address the tax challenges arising from the digitalisation of the global
economy. Pillar Two legislation based on these rules has been enacted or
substantively enacted in certain jurisdictions in which the Group operates.
The legislation is effective for the Group's financial year beginning 1
January 2024. The Group is in scope of the enacted or substantively enacted
legislation and has performed an assessment of the Group's potential exposure
to Pillar Two income taxes based on the most recent tax filings,
country-by-country reporting and financial statements for the constituent
entities in the Group. Notwithstanding that there are a small number of
entities where the transitional safe harbour rules do not apply, the Group
does not expect a material exposure to Pillar Two income taxes in any of the
jurisdictions in which it operates.
The Group has applied the temporary exception issued by the IASB in May 2023
from the accounting requirements for deferred taxes in IAS12. Accordingly, the
Group neither recognises nor discloses information about deferred tax assets
and liabilities related to Pillar Two income taxes.
9. Discontinued operations
During the year, the Group had no discontinued operations (2022: consideration
of £1m and a gain on sale of £1m).
10. Adjusting items
In 2022, the Group specifically identified adjusting items in response to the
direct impacts of the COVID-19 pandemic on its financial results. However, in
2023 the measurement of the impact of COVID-19 on financial results was no
longer distinguishable. The Group consequently, has updated its classification
criteria to disclose all transactions not indicative of the underlying
performance of the Group as adjusting items. To maintain consistency and
comparability, the Group have also retrospectively restated the comparative
information to align with this refined classification.
The Group has recognised the following adjusting items:
2023 2022
Restated
£m Cost of sales Selling, Cost of sales Selling,
general and administration costs general and administration costs
Network rationalisation charge 58 - 59 -
Net impairment/(reversal) of property, plant and equipment (including 15 57 - (82) -
right-of-use assets) ((1))
Acquisition and restructuring costs - 2 (2) 10
Impairment of Ukraine and Russia 4 - 9 -
Impairment of goodwill - - - 3
Other one-off items 30 (6) - 15
Total adjusting items 149 (4) (16) 28
1. Net impairment of £78m (2022: net reversal of £52m) excludes
depreciation of £17m (2022: £21m) and disposals of £4m (2022: £9m) in
respect of adjusting items previously provided for (note 15).
Network rationalisation
£58m (2022: £59m) of charges were incurred relating to network
rationalisations that occurred in the year, which includes the write-off of
the book value of assets and direct closure costs related to these centres.
Impairments of property, plant and equipment (including right-of-use assets)
Management continues to carry out a comprehensive review exercise for
potential impairments across the whole portfolio at a cash-generating units
(CGUs) level. The impairment review formed part of the Group's ongoing
rationalisation process. This review compared the value-in-use of CGUs, based
on management's assumptions regarding likely future trading performance, to
the carrying values at 31 December 2023. Following this review, a net
impairment of £57m (2022: net reversal of £82m) was recognised within cost
of sales. Of this net impairment, £26m (2022: net reversal of £27m) and
£31m (2022: net reversal of £55m) were recognised against property, plant
and equipment and right-of-use assets respectively.
Acquisition and restructuring costs
During the year, the Group incurred £1m (2022: £nil) of transaction costs.
The Group also received a total of £1m (2022: £2m) in respect of worldwide
financial support schemes while incurring severance costs and restructurings
of £2m (2022: £10m).
Should the estimated charges be in excess of the amounts required, the release
of any amounts provided for at 31 December 2023 would be treated as adjusting
items.
Impairment of Ukraine and Russia
As a result of geopolitical circumstances in the Ukraine and related sanctions
against Russia, the Board has taken the decision to recognise a total
provision of £13m against the gross assets of both its Russian and Ukrainian
operations. These operations are not material to the Group, representing less
than 1% of both total revenue and net assets of the Group. Accordingly, the
Group's significant accounting judgements, estimates and assumptions have not
changed.
Impairment of goodwill
Projected cash flows for cash-generating units (CGUs), grouped by country
continued to be evaluated to determine the carrying value of the CGUs, with an
additional impairment of £nil taken during 2023 (2022: £3m).
Other one-off items
Following a review of revenues derived from desktop telephones during the
year, the Group wrote-off £30m (2022: £nil) of telephone assets and £1m
(2022: £nil) of obsolete computer software during the year.
During the year, the Group utilised closure related legal provisions of £7m
(2022: provided for £15m).
11. Loss per ordinary share (basic and diluted)
2023 2022
Restated((1))
Basic and diluted loss for the year attributable to shareholders (£m) (215) (69)
Basic loss per share (p) (21.4) (6.9)
Diluted loss per share (p) (21.4) (6.9)
Basic and diluted loss for the year from continuing operations (£m) (215) (70)
Basic loss per share (p) (21.4) (7.0)
Diluted loss per share (p) (21.4) (7.0)
Basic and diluted profit for the year from discontinued operations (£m) - 1
Basic earnings per share (p) - 0.1
Diluted earnings per share (p) - 0.1
Weighted average number of shares for basic and diluted EPS 1,006,685,491 1,006,884,755
Weighted average number of shares under option 17,380,163 35,393,807
Weighted average number of shares that would have been issued at average (13,303,122) (29,608,587)
market price
Weighted average number of share awards under the CIP, PSP, DSBP and One-off 2,210,401 1,776,964
Award
Weighted average number of shares on convertible bonds 76,408,203 76,408,203
Weighted average number of shares for diluted EPS when profitable 1,089,381,136 1,090,855,142
1. The comparative information has been restated to reflect the change in
the Group's accounting policy on deferred tax related to assets and
liabilities arising from a single transaction due to amendments to IAS 12
(note 2).
Options are considered dilutive when they would result in the issue of
ordinary shares for less than the market price of ordinary shares in the
period. The amount of the dilution is taken to be the average market price of
shares during the period minus the exercise price. All awards are considered
anti-dilutive at the reporting date.
The Group issued £350m of convertible bonds in December 2020. The bond issue
creates a potential 76,408,203 shares for bondholders. This represents a
potential 7.1% dilutive impact at time of issue.
The average market price of one share during the year was 159.96p (2022:
207.05p), with a high of 197.70p on 02 February 2023 (302.10p on 4 January
2022) and a low of 127.40p on 25 October 2023 (115.40p on 12 October 2022).
12. Dividends
£m 2023 2022
Dividends per ordinary share proposed 1.00p -
Interim dividends per ordinary share declared and paid during the year - -
The Company is returning to a progressive dividend policy and has proposed to
shareholders a final dividend of 1.00p per share (2022: nil pence per share).
Subject to shareholder approval, it is expected that the dividend will be paid
on 31 May 2024 to shareholders on the register at the close of business on 3
May 2024.
13. Goodwill
£m Total
Cost
At 31 December 2021 704
Recognised on acquisition of subsidiaries(1) 188
Goodwill derecognised on sale of subsidiaries -
Goodwill impairment (3)
Exchange rate movements 45
At 31 December 2022 934
Recognised on acquisition of subsidiaries(1) 8
Goodwill derecognised on sale of subsidiaries -
Goodwill impairment -
Exchange rate movements (23)
At 31 December 2023 919
Net book value
At 31 December 2022 934
At 31 December 2023 919
1. Net of £nil derecognised on the finalisation of the accounting for prior
year acquisitions previously reported on a provisional basis.
Cash-generating units (CGUs), defined as individual business centres, are
grouped by country of operation and Worka for the purposes of carrying out
impairment reviews of goodwill as this is the lowest level at which it can be
assessed. Goodwill acquired through business combinations is held at a country
and Worka level and is subject to impairment reviews based on the cash flows
of the CGUs within that country and the Worka segment.
The carrying amount of goodwill attributable to the reportable business
segments is as follows:
£m 2023 2022
Americas 299 314
EMEA 369 373
Asia Pacific 26 27
Worka 225 220
919 934
The carrying value of goodwill and indefinite life intangibles allocated to
the USA, UK and Worka is material relative to the total carrying value,
comprising 79% of the total. The remaining 21% of the carrying value is
allocated to a further 38 countries. The goodwill and indefinite life
intangibles allocated to the USA, UK and Worka are set out below:
£m Goodwill Intangible assets((1)) 2023 2022
USA 279 - 279 290
United Kingdom 219 11 230 230
Worka 225 - 225 220
Other countries 196 - 196 205
919 11 930 945
1. The indefinite life intangible asset relates to the Regus brand.
The value-in-use for each country and Worka has been determined using a model
which derives the present value of the expected future cash flows for each
individual country and Worka. Although the model includes budgets and
forecasts prepared by management it also reflects external factors, such as
capital market risk pricing as reflected in the market capitalisation of the
Group and prevailing tax rates, which have been used to determine the
risk-adjusted discount rate for the Group. Management believes that the
projected cash flows are a reasonable reflection of the likely outcomes over
the medium to long-term. In the event that trading conditions deteriorate
beyond the assumptions used in the projected cash flows, it is also possible
that impairment charges could arise in future periods.
The following key assumptions have been used in calculating the value-in-use
for each country and Worka:
· Future cash flows are based on forecasts prepared by management.
The model excludes cost savings and restructurings that are anticipated but
had not been committed to at the date of the determination of the
value-in-use. Thereafter, forecasts have been prepared by management for 2024,
and for a further four years, that follow a budgeting process approved by the
Board;
· These forecasts exclude the impact of acquisitive growth expected
to take place in future periods;
· Management considers these projections to be a reasonable
projection of margins expected at the mid-cycle position;
· A terminal value is included in the assessment, reflecting the
Group's expectation that it will continue to operate in these markets and the
long-term nature of the business; and
· The Group applies a country-specific, pre-tax discount rate to
the pre-tax cash flows for each country. The country-specific discount rate is
based on the underlying weighted average cost of capital (WACC) for the Group.
The Group WACC is then adjusted for each country to reflect the assessed
market risk specific to that country. The Group pre-tax WACC increased from
9.1% in 2022 to 12.4% in 2023 (post-tax WACC: 9.2%). The country-specific
pre-tax WACC reflecting the respective market risk adjustment has been set
between 11.0% and 13.6% (2022: 8.1% to 11.0%).
The amounts by which the values-in-use exceed the carrying amounts of goodwill
are sufficiently large to enable the Directors to conclude that a reasonably
possible change in the key assumptions would only result in a recognised
impairment of £nil (2022: £3m), in respect of individually immaterial
countries. Foreseeable events are unlikely to result in a change in the
projections of such a significant nature as to result in the goodwill carrying
amount exceeding their recoverable amount. The forecast models used in
assessing the impairment of goodwill are based on the related business centre
structure at the end of the year.
The US model assumes an average centre contribution of 22% (2022: 21%) over
the next five years. A terminal value centre gross margin of 25% is adopted
from 2028, with a 2.5% long-term growth rate assumed on revenue and costs into
perpetuity. The cash flows have been discounted using a pre-tax discount rate
of 11.1% (2022: 8.5%).
The UK model assumes an average centre contribution of 16% (2022: 13%) over
the next five years. A terminal value centre gross margin of 20% is adopted
from 2028, with a 2.2% long-term growth rate assumed on revenue and costs into
perpetuity. The cash flows have been discounted using a pre-tax discount rate
of 12.4% (2022: 9.1%).
The Worka model assumes an average contribution of 34% (2022: 36%) over the
next five years. A terminal value centre gross margin of 39% is adopted from
2028, with a 2.2% long-term growth rate assumed on revenue and costs into
perpetuity. The cash flows have been discounted using a pre-tax discount rate
of 12.4% (2022: 9.1%).
Management has considered the following sensitivities:
· Market growth and REVPAR - Management has considered the impact
of a variance in market growth and REVPAR. The value-in-use calculation shows
that if the long-term growth rate is nil, the recoverable amount of the US, UK
and Worka would still be greater than their carrying value.
· Discount rate - Management has considered the impact of an
increase in the discount rate applied to the calculation. The value-in-use
calculation shows that for the recoverable amount to be less than its carrying
value, the pre-tax discount rate would have to be increased to 435.9% (2022:
216.6%) for the US, 24.2% (2022: 14.4%) for the UK and 16.3% for Worka (2022:
12.0%).
· Occupancy - Management has considered the impact of a variance in
occupancy. The value-in-use calculation shows that for the recoverable amount
to be less than its carrying value, occupancy in all future years would have
to decrease by 13.4% (2022: 17.1%) for the US and 5.3% (2022: 8.1%) for the
UK.
14. Other intangible assets
£m Brand Customer lists Software Total
Cost
At 31 December 2021 67 33 118 218
Additions at cost - - 39 39
Acquisition of subsidiaries 24 77 40 141
Disposals - - - -
Exchange rate movements - 1 2 3
At 31 December 2022 91 111 199 401
Additions at cost - - 60 60
Acquisition of subsidiaries - - - -
Disposals - - (5) (5)
Exchange rate movements - (1) (2) (3)
At 31 December 2023 91 110 252 453
Amortisation
At 31 December 2021 43 32 65 140
Charge for year 2 17 25 44
Disposals - - - -
Impairment - - - -
Exchange rate movements - 2 1 3
At 31 December 2022 45 51 91 187
Charge for year 3 24 38 65
Disposals - - (5) (5)
Impairment - - 1 1
Exchange rate movements - (3) (1) (4)
At 31 December 2023 48 72 124 244
Net book value
At 31 December 2021 24 1 53 78
At 31 December 2022 46 60 108 214
At 31 December 2023 43 38 128 209
During the year ended 31 December 2022, the Group completed the investment in
The Instant Group. As part of the purchase price allocation, the Group engaged
with third party experts in recognising acquired brands valued at £24m,
customer lists from sublease agreements of £77m and digital asset software of
£40m.
Included within the brand value is £11m relating to the acquisition of the
remaining 58% of the UK business in the year ended 31 December 2006. The Regus
brand acquired in this transaction is assumed to have an indefinite useful
life due to the fact that the value of the brand is intrinsically linked to
the continuing operation of the Group.
As a result of the Regus brand acquired with the UK business having an
indefinite useful life no amortisation is charged but the carrying value is
assessed for impairment on an annual basis. The brand was tested at the
balance sheet date against the recoverable amount of the UK business segment
at the same time as the goodwill arising on the acquisition of the UK business
(see note 13).
15. Property, plant and equipment
£m Right-of-use assets(1) Land and buildings Leasehold improvements Furniture and equipment Computer hardware Total
Cost
At 31 December 2021 9,288 160 1,485 811 128 11,872
Additions 253 - 139 78 6 476
Modifications(2) 313 - - - - 313
Acquisition of subsidiaries 4 - 16 - - 20
Disposals (826) - (84) (36) (6) (952)
Exchange rate movements 622 - 149 70 10 851
At 31 December 2022 9,654 160 1,705 923 138 12,580
Additions 297 - 88 40 3 428
Modifications(2) 332 - - - - 332
Acquisition of subsidiaries 9 - 4 - - 13
Disposals (716) - (49) (140) (6) (911)
Exchange rate movements (341) - (74) (39) (6) (460)
At 31 December 2023 9,235 160 1,674 784 129 11,982
Accumulated depreciation
At 31 December 2021 4,034 11 897 451 103 5,496
Charge for the year 955 3 115 65 7 1,145
Disposals(3) (563) - (61) (25) (5) (654)
Net reversal of impairment(6) (39) - (13) - - (52)
Exchange rate movements 258 - 103 42 8 411
At 31 December 2022 4,645 14 1,041 533 113 6,346
Charge for the year(4) 919 3 122 67 6 1,117
Disposals(5) (559) - (22) (106) (6) (693)
Net Impairment(6) 42 - 36 - - 78
Exchange rate movements (184) (1) (52) (24) (4) (265)
At 31 December 2023 4,863 16 1,125 470 109 6,583
Net book value
At 31 December 2021 5,254 149 588 360 25 6,376
At 31 December 2022 5,009 146 664 390 25 6,234
At 31 December 2023 4,372 144 549 314 20 5,399
1. Right-of-use assets consist of property-related leases.
2. Modifications includes lease modifications and extensions.
3. Includes disposals related to discontinued operations for right-of-use
assets of £nil (2022: £1m) and other property, plant and equipment
of £nil (2022: £nil).
4. Depreciation is net of £17m (2022: £21m) in respect of adjusting items
previously provided for (note 10).
5. Disposals are net of £4m (2022: £9m) in respect of adjusting items
previously provided for (note 10).
6. The net impairment of £78m (2022: net reversal of £52m) includes an
additional impairment of £112m (2022: £39m), offset by the reversal of £34m
(2022: £91m) previously provided for (note 10).
The key assumptions and methodology in calculating right-of-use assets and the
corresponding lease liability remain consistent with those noted in notes 2
and 33.
Impairment tests for property, plant and equipment (including right-of-use
assets) are performed on a cash-generating unit basis when impairment triggers
arise. Cash-generating units (CGUs) are defined as individual business
centres, being the smallest identifiable group of assets that generate cash
flows that are largely independent of other groups of assets. The Group
assesses whether there is an indication that a CGU may be impaired, including
persistent operating losses, net cash outflows and poor performance against
forecasts. During the year, and as a direct result of the challenging economic
circumstances, this gave rise to impairment tests in relation to various
centres where impairment indicators were identified.
The recoverable amounts of property, plant and equipment are based on the
higher of fair value less costs to sell and value-in-use. The Group considered
both fair value less costs to dispose and value-in-use in the impairment
testing on a centre-by-centre level, on a basis consistent with the impairment
testing described in note 13. Impairment charges are recognised within cost of
sales in the consolidated income statement. In 2023, the Group recorded
impairment charges of £42m (2022: net reversal of £39m) in respect of
right-of-use assets and £36m (2022: net reversal of £13m) in respect of
leasehold improvements.
16. Other long-term receivables
£m 2023 2022
Deposits held by landlords against rent obligations 53 57
17. Trade and other receivables
£m 2023 2022
Trade receivables, net 368 395
Prepayments and accrued income 145 152
Other receivables 181 174
Partner contributions receivables 25 23
VAT recoverable 168 172
Deposits held by landlords against rent obligations 4 3
891 919
18. Trade and other payables (including customer deposits)
£m 2023 2022
Customer deposits 459 447
Other accruals 326 252
Trade payables 243 220
VAT payable 104 119
Other payables 148 147
Other tax and social security 30 17
1,310 1,202
19. Borrowings
Bank and other loans
The Group's total loan and borrowing position at 31 December 2023 and at 31
December 2022 had the following maturity profiles:
£m 2023 2022
Repayments falling due as follows:
In more than one year but not more than two years(1) 702 5
In more than two years but not more than five years(1) 1 581
In more than five years 2 2
Total non-current 705 588
Total current 13 285
Total bank and other loans 718 873
1. Includes convertible bond debt of £329m (2022: £318m).
The Group issued £350m convertible bonds in December 2020, raising £343m,
net of transaction fees. At the date of issue, the convertible bonds were
bifurcated between:
· A financial liability recognised at amortised cost of £298m, by
using the discounted cash flow of interest payments and the bonds' nominal
value; and subsequently remeasured at amortised cost of £329m (2022: £318m)
at
31 December 2023. The financial liability is included in the above, falling
due in more than one but not more than two years.
· A derivative financial liability of £52m, not being closely
related to the host financial liability, was recognised separately and
measured at fair value through profit or loss (note 25). A gain has been
recognised at 31 December 2023 of £nil (2022: £27m) through net finance
expenses, resulting in a year-end liability of £nil (2022: £nil).
Further information regarding the convertible bonds can be found in note 25.
Committed borrowings
2023 2022
£m Facility Available Facility Available
Revolving credit facility 875 219 750 173
Bridge facility - - 330 -
The Group maintains a revolving credit facility provided by a group of
international banks. At 31 December 2023, the amount of the facility rose to
£875m (2022: £750m) and the final maturity was extended in March 2020 to
November 2025 with an automatic extension until March 2026, given certain
conditions are met. As at 31 December, £219m (2022: £173m) was available and
undrawn under this facility.
The £875m revolving credit facility is subject to financial covenants which
include interest cover and net debt to EBITDA ratio. The Group continued to
operate in compliance with the covenants agreed with the lenders. It is
concluded that the amendment to the facility represents a non-substantial debt
modification in accordance with IFRS 9.
A £330m bridge facility for the Instant acquisition was repaid in full in
June 2023.
20. Provisions
2023 2022
£m Closures Other Total Closures Other Total
At 1 January 60 8 68 13 8 21
Acquired in the period - - - 7 - 7
Provided in the period 7 - 7 38 6 44
Utilised in the period (24) (8) (32) (1) (6) (7)
Exchange rate movements (1) - (1) 3 - 3
At 31 December 42 - 42 60 8 68
Analysed between:
Current 24 - 24 23 8 31
Non-current 18 - 18 37 - 37
At 31 December 42 - 42 60 8 68
Closures
Provisions for closures relate to the expected costs of centre closures,
including restructuring costs. Impairments of right-of-use assets and
property, plant and equipment (note 15) are not included above.
Other
Other provisions include the estimated costs of claims against the Group
outstanding at 31 December 2023, of which, due to their nature, the maximum
period over which they are expected to be utilised is uncertain.
The Group is involved in various disputes, primarily related to potential
lease obligations, some of which are in the course of litigation. Where there
is a dispute and where, based on legal counsel advice, the Group estimates
that it is probable that the dispute will result in an outflow of economic
resources, provision is made based on the Group's best estimate of the likely
financial outcome. Where a reliable estimate cannot be made, or where the
Group, based on legal counsel advice, considers that it is not probable that
there will be an outflow of economic resources, no provision is recognised.
There are no disputes which are expected to have a material impact on the
Group.
21. Investments in joint ventures
£m Investments in joint ventures Provision for deficit in Total
joint ventures
At 31 December 2021 45 (6) 39
Acquisition of joint ventures - - -
Share of loss (1) - (1)
Exchange rate movements 1 - 1
At 31 December 2022 45 (6) 39
Acquisition of joint ventures - - -
Share of loss (1) - (1)
Exchange rate movements 1 - 1
At 31 December 2023 45 (6) 39
The Group has 81 centres operating under joint venture agreements (2022: 82)
at the reporting date, all of which are individually immaterial. The Group has
a legal obligation in respect of its share of any deficits recognised by these
operations. No indicators of impairment were identified by management in
relation to these investments.
The results of the joint ventures below are the full-year results of the joint
ventures and do not represent the effective share:
£m 2023 2022
Income statement
Revenue 87 86
Expenses (90) (88)
Loss before tax for the year (3) (2)
Tax charge - (1)
Loss after tax for the year (3) (3)
Balance sheet
Non-current assets 142 153
Current assets 559 329
Current liabilities (558) (322)
Non-current liabilities (129) (139)
Net assets 14 21
22. Share capital
Ordinary equity share capital
2023 2022
Number Nominal value Number Nominal value
£m
£m
Authorised
Ordinary 1p shares in IWG plc at 1 January 8,000,000,000 80 8,000,000,000 80
Ordinary 1p shares in IWG plc at 31 December 8,000,000,000 80 8,000,000,000 80
Issued and fully paid up
Ordinary 1p shares in IWG plc at 1 January 1,057,248,651 10 1,057,248,651 10
Ordinary 1p shares issued for cash in the year - - - -
Ordinary 1p shares in IWG plc at 31 December 1,057,248,651 10 1,057,248,651 10
Treasury share transactions involving IWG plc shares between 1 January 2023
and 31 December 2023
During the year, 519,022 shares were purchased in the open market and 525,674
treasury shares held by the Group were utilised to satisfy the exercise of
share awards by employees. As at 5 March 2024, 50,558,201 treasury shares were
held. The holders of ordinary shares in IWG plc are entitled to receive such
dividends as are declared by the Company and are entitled to one vote per
share at meetings of the Company. Treasury shares do not carry such rights
until reissued.
2023 2022
Number of shares £m Number of shares £m
1 January 50,564,853 152 49,832,721 151
Purchase of treasury shares in IWG plc 519,022 1 2,174,738 5
Treasury shares in IWG plc utilised (525,674) (1) (1,442,606) (4)
31 December 50,558,201 152 50,564,853 152
23. Non-controlling interests
During 2022, the Group completed the investment in The Instant Group,
acquiring 100% of the equity voting rights. In a separate transaction, the
Group sold a 13.4% non-controlling equity interest in a subsidiary of the
Worka structure for a consideration of £53m.
The following table summarises the information relating to each of the Group's
subsidiaries that have a material non-controlling interest.
£m 2023 2022
NCI percentage 13.4% 13.4%
Non-current assets 426 413
Current assets 263 282
Non-current liabilities (108) (131)
Current liabilities (192) (163)
Net assets 389 401
Net assets attributable to NCI 51 52
Revenue 166 138
Loss after tax (10) (13)
Other comprehensive income - -
Total comprehensive income (10) (13)
Loss allocated to NCI (1) (3)
Other comprehensive income allocated to NCI - -
Cash flows from operating activities 29 31
Cash flows from investing activities 35 49
Cash flows from financing activities (98) (33)
Net increase in cash and cash equivalents (34) 47
24. Net debt analysis
£m 2023 2022
Cash and cash equivalents 110 161
Current net investment in finance leases 33 52
Non-current net investment in finance leases 64 95
Gross cash and lease receivables 207 308
Debt due within one year (11) (285)
Debt due after one year(1) (707) (588)
Lease due within one year(2) (924) (1,002)
Lease due after one year(2) (4,453) (5,037)
Gross debt (6,095) (6,912)
Net debt (5,888) (6,604)
1. Includes £329m (2022: £318m) convertible bond liability.
2. There are no significant lease commitments for leases not commenced at 31
December 2023.
The following table shows a reconciliation of net cash flow to movements in
net debt:
£m Cash and cash equivalents Net investment in finance leases Gross cash Bank and Convertible bond Lease liabilities Gross debt Net debt
and lease receivables
other loans
At 31 December 2021 78 - 78 (167) (308) (6,121) (6,596) (6,518)
Net increase in cash and cash equivalents 77 - 77 - - - - 77
Proceeds from issue of loans and net investment in finance leases - (41) (41) (1,340) - - (1,340) (1,381)
Repayment of loans and lease liabilities - - - 954 - 997 1,951 1,951
Interest (received)/paid - (7) (7) 36 2 230 268 261
Non-cash movements - 192 192 (37) (12) (715) (764) (572)
Interest income/(expense) - 7 7 (37) (12) (230) (279) (272)
Other non-cash movements(1) - 185 185 - - (485) (485) (300)
Exchange rate movements 6 3 9 (1) - (430) (431) (422)
At 31 December 2022 161 147 308 (555) (318) (6,039) (6,912) 6,604
Net decrease in cash and cash equivalents (43) - (43) - - - - (43)
Proceeds from issue of loans and net investment in finance leases - (55) (55) (985) - - (985) (1,040)
Repayment of loans and lease liabilities - - - 1,149 - 935 2,084 2,084
Interest (received)/paid - (6) (6) 53 2 280 335 329
Non-cash movements - 15 15 (54) (13) (753) (820) (805)
Interest income/(expense) - 6 6 (54) (13) (280) (347) (341)
Other non-cash movements(1) - 9 9 - - (473) (473) (464)
Exchange rate movements (8) (4) (12) 3 - 200 203 191
At 31 December 2023 110 97 207 (389) (329) (5,377) (6,095) (5,888)
1. Includes movements on leases in relation to new leases, lease
modifications/re-measurements of £658m (2022: £594m). Early termination of
lease liabilities represent £194m (2022: £294m) of the non-cash movements,
including £nil (2022: £1m) related to discontinued operations.
Cash and cash equivalent balances held by the Group that are not available for
use amounted to £9m at 31 December 2023 (2022: £7m). Of this balance, £1m
(2022: £1m) is pledged as security against outstanding bank guarantees and a
further £8m (2022: £6m) is pledged against various other commitments of the
Group.
Cash flows on debt relate to movements in the revolving credit facility and
other borrowings. These net movements align with the activities reported in
the cash flow statement after taking into consideration the £nil (2022:
£nil) derivative liability recognised separately.
The following amounts are included in the Group's consolidated financial
statements in respect of its leases:
£m 2023 2022
Depreciation charge for right-of-use assets (919) (955)
Principal lease liability repayments (935) (997)
Interest expense on lease liabilities (280) (230)
Expenses relating to leases of low-value assets (1) -
Expenses relating to variable lease payments not included in lease liabilities (64) (68)
Total cash outflow for leases comprising interest and capital payments (1,215) (1,227)
Additions to right-of-use assets 297 253
Acquired right-of-use assets 9 4
Interest income on net lease investment 6 7
Principal payments received from net lease investment 55 41
Total cash outflows of £1,279m (2022: £1,295m) for leases, including
variable payments of £64m (2022: £68m), were incurred in the year.
25. Financial instruments and financial risk management
The objectives, policies and strategies applied by the Group with respect to
financial instruments and the management of capital are determined at Group
level. The Group's Board maintains responsibility for the risk management
strategy of the Group and the Chief Financial Officer is responsible for
policy on a day-to-day basis. The Chief Financial Officer and Group Treasurer
review the Group's risk management strategy and policies on an ongoing basis.
The Board has delegated to the Group Audit Committee the responsibility for
applying an effective system of internal control and compliance with the
Group's risk management policies.
Going concern
The Strategic Report sets out the Group's strategy and the factors that are
likely to affect the future performance and position of the business. The
financial review within the Strategic Report reviews the trading performance,
financial position and cash flows of the Group. The Group's net debt position
decreased by £716m (2022: increased by £86m) to a net debt position of
£5,888m (2022: £6,604m) as at 31 December 2023. Excluding the IFRS 16 net
investment in finance leases and lease liabilities, the net financial debt
position improved to £608m (2022: £712m). The investment in growth is
funded by a combination of cash flow generated from the Group's mature
business centres, cash consideration received in franchising the business and
debt. The Group had a £875m revolving credit facility (RCF) provided by a
group of relationship banks with a final maturity in 2025, with an automatic
extension until March 2026, given certain conditions are met. As at 31
December 2023, £219m (2022: £173m) of the RCF was available and undrawn.
Although the Group has net current liabilities of £1,685m (2022: £1,868m),
the Group does not consider that this gives rise to a liquidity risk. A large
proportion of the net current liabilities comprise non-cash liabilities such
as deferred revenue of £433m (2022: £455m) which will be recognised in
future periods through the income statement. The Group holds customer deposits
of £459m (2022: £447m) which are spread across a large number of customers
and no deposit held for an individual customer is material. Therefore, the
Group does not believe the net current liabilities represents a liquidity
risk.
Credit risk
Credit risk could occur where a customer or counterparty defaults under the
contractual terms of a financial instrument and arises principally in relation
to customer contracts and the Group's cash deposits.
A diversified customer base, requirement for customer deposits, and payments
in advance on workstation contracts minimise the Group's exposure to customer
credit risk. No single customer contributes a material percentage of the
Group's revenue. The Group applies the simplified approach to trade
receivables and recognises expected credit losses based on the lifetime
expected losses. Provisions for receivables are established based on both
expected credit losses and information available that the Group will not be
able to collect all amounts due according to the original terms of the
receivables. Trade debtors that are more than three months overdue are
considered to be in default and therefore, under the simplified lifetime
approach, are impaired in full. This reflects the Group's experience of the
likelihood of recoverability of these trade receivables based on both
historical and forward-looking information. These provisions, which take into
consideration any customer deposits held, are reviewed on an ongoing basis to
assess changes in the likelihood of recoverability.
The Group has assessed the other receivable balances for expected credit
losses, with immaterial expected credit losses recognised due to the nature
and default history of these items.
The maximum exposure to credit risk for trade receivables at the reporting
date, not taking into account customer deposits held, analysed by geographic
region, is summarised below:
£m 2023 2022
Americas 133 151
EMEA 185 192
Asia Pacific 30 28
Worka 20 24
368 395
All of the Group's trade receivables relate to customers purchasing workplace
solutions and associated services and no individual customer has a material
balance owing as a trade receivable.
The ageing of trade receivables at 31 December was:
2023 2022
£m Gross Provision Gross Provision
Not overdue 284 - 312 -
Past due 0 - 30 days 36 - 40 -
Past due 31 - 60 days 19 - 19 -
Past due 61 - 90 days 16 - 15 -
Past due more than 90 days 19 (6) 19 (10)
374 (6) 405 (10)
At 31 December 2023, the Group maintained a provision of £6m for expected
credit losses (2022: £10m) arising from trade receivables. The Group had
provided £15m (2022: £nil) in the year, utilised £19m (2022: £12m) and
released £nil (2022: £6m). Customer deposits of £459m (2022: £447m) are
held by the Group, mitigating the risk of default.
IFRS 9 requires the Group to record expected credit losses on all of its
receivables, on either a 12-month or a lifetime basis. The Group has applied
the simplified approach to all trade receivables, which requires the
recognition of the expected credit loss based on the lifetime expected losses.
The expected credit loss is mitigated through the invoicing of contracted
services in advance and customer deposits.
Cash investments and derivative financial instruments are only transacted with
counterparties of sound credit ratings, and management does not expect any of
these counterparties to fail to meet their obligations.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its
obligations as they fall due. The Group manages liquidity risk by closely
monitoring the global cash position, the available and undrawn credit
facilities, and forecast capital expenditure, and expects to have sufficient
liquidity to meet its financial obligations as they fall due. In response to
ongoing political and economic uncertainty, the Group continues to focus on
cash generation by reducing cost, renegotiating rents and rationalising the
network, resulting in short-term or long-term cash benefits. The Group has
free cash and liquid investments (excluding blocked cash) of £101m (2022:
£154m). In addition to cash and liquid investments, the Group had £219m
(2022: £173m) available and undrawn under its committed borrowings. The
Directors consider the Group has adequate liquidity to meet day-to-day
requirements.
The Group maintained a revolving credit facility provided by a group of
international banks. At 31 December 2023, the amount of the facility is £875m
(2022: £750m) and the final maturity was extended in March 2020 to November
2025 with an automatic extension until March 2026, given certain conditions
are met.
The Group actively reviews its exposure to interest rate movements. The
issuance of the fixed rate convertible bond significantly reduces the Group's
exposure to an increase in interest rates.
Market risk
The Group is exposed to market risk primarily related to foreign currency
exchange rates, interest rates and the market value of our investments in
financial assets. These exposures are actively managed by the Group Treasurer
and Chief Financial Officer in accordance with a written policy approved by
the Board of Directors. The Group does not use financial derivatives for
trading or speculative reasons.
Interest rate risk
The Group manages its exposure to interest rate risk through the relative
proportions of fixed rate debt and floating rate debt. Any surplus cash
balances are invested short-term, and at the end of 2023 no cash was invested
for a period exceeding three months (2022: £nil).
Foreign currency risk
The Group is exposed to foreign currency exchange rate movements. The majority
of day-to-day transactions of overseas subsidiaries are carried out in local
currency and the underlying foreign exchange exposure is small. Transactional
exposures do arise in some countries where it is local market practice for a
proportion of the payables or receivables to be in other than the functional
currency of the affiliate. Intercompany charging, funding and cash management
activity may also lead to foreign exchange exposures. It is the policy of the
Group to seek to minimise such transactional exposures through careful
management of non-local currency assets and liabilities, thereby minimising
the potential volatility in the income statement. Net investments in IWG
affiliates with a functional currency other than pounds sterling are of a
long-term nature and the Group does not normally hedge such foreign currency
translation exposures.
The principal exposures of the Group are to the US dollar and the euro, with
approximately 36% (2022: 36%) of the Group's revenue being attributable
directly to the US dollar and 25% (2022: 23%) to the euro.
From time to time the Group uses short-term derivative financial instruments
to manage its transactional foreign exchange exposures where these exposures
cannot be eliminated through balancing the underlying risks. No transactions
of a speculative nature are undertaken.
The foreign currency exposure arising from open third-party transactions held
in a currency other than the functional currency of the related entity is
summarised as follows:
2023
£m GBP EUR USD
Trade and other receivables - 10 7
Trade and other payables (1) (19) (19)
Net statement of financial position exposure (1) (9) (12)
2022
£m GBP EUR USD
Trade and other receivables - 4 7
Trade and other payables (1) (11) (15)
Net statement of financial position exposure (1) (7) (8)
Other market risks
The Group does not hold any equity securities for fair value measurement under
IFRS 9 and is therefore not subject to risks of changes in equity prices in
the income statement.
Sensitivity analysis
For the year ended 31 December 2023, it is estimated that a general increase
of one percentage point in interest rates would have increased the Group's
loss before tax by approximately £4m (2022: £4m) with a corresponding
decrease in total equity.
It is estimated that a five-percentage point weakening in the value of the US
dollar against pounds sterling would have increased the Group's loss before
tax by approximately £8m for the year ended 31 December 2023 (2022: increased
by £2m). It is estimated that a five-percentage point weakening in the value
of the euro against pounds sterling would have increased the Group's loss
before tax by approximately £3m for the year ended 31 December 2023 (2022:
increased by £3m).
It is estimated that a five-percentage point weakening in the value of the US
dollar against pounds sterling would have decreased the Group's total equity
by approximately £5m for the year ended 31 December 2023 (2022: decreased by
£5m). It is estimated that a five-percentage point weakening in the value of
the euro against pounds sterling would have decreased the Group's total equity
by approximately £2m for the year ended 31 December 2023 (2022: decreased by
£2m).
Capital management
The Group's parent company is listed on the UK stock exchange and the Board's
policy is to maintain a strong capital base. The Chief Financial Officer
monitors the diversity of the Group's major shareholders and further details
of the Group's communication with key investors can be found in the Corporate
Governance Report. In 2006, the Board approved the commencement of a
progressive dividend policy to enhance the total return to shareholders. The
Company is returning to this progressive dividend policy and has proposed to
shareholders a final dividend of 1.00p per share (2022: nil pence per share).
The Group's Chief Executive Officer, Mark Dixon, is a major shareholder of the
Company. Details of the Directors' shareholdings can be found in the
Directors' Remuneration report. In addition, the Group operates various share
option plans for key management and other senior employees.
Treasury share transactions involving IWG plc shares between 1 January 2023
and 31 December 2023
During the year, 519,022 shares were purchased in the open market and 525,674
treasury shares held by the Group were utilised to satisfy the exercise of
share awards by employees. As at 31 December 2023, 50,558,201 treasury shares
were held.
The Company declared and paid no interim dividend per share during the year
ended 31 December 2023 (2022: nil pence per share) and proposed a final
dividend per share of 1.00p per share (2022: nil pence per share).
The Group's objective when managing capital (equity and borrowings) is to
safeguard the Group's ability to continue as a going concern and to maintain
an optimal capital structure to reduce the cost of capital.
Effective interest rates
In respect of financial assets and financial liabilities, the following table
indicates their effective interest rates at the balance sheet date and the
periods in which they mature.
Except for lease liabilities and the convertible bond, the undiscounted cash
flow and fair values of these instruments is not materially different from the
carrying value.
As at 31 December 2023:
£m Effective Carrying Contractual Less than 1-2 years 2-5 years More than
interest rate
value
cash flow
1 year
5 years
%
Cash and cash equivalents 0.6% 110 110 110 - - -
Trade and other receivables(1) - 746 746 746 - - -
Net investment in finance leases 6.3% 97 133 41 25 50 17
Other long-term receivables - 53 53 - 27 26 -
Financial assets(2) 1,006 1,042 897 52 76 17
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings 8.0% (375) (375) - (375) - -
Convertible bonds - debt host 3.8% (329) (354) (2) (352) - -
Lease liabilities 5.5% (5,377) (7,295) (1,216) (1,105) (2,548) (2,426)
Other loans 0.5% (14) (14) (11) - (1) (2)
Deferred consideration on acquisitions - (4) (4) (2) (2) - -
Contingent consideration on acquisitions - (6) (6) - - (6) -
Trade and other payables - (1,308) (1,308) (1,308) - - -
Other long-term payables - (4) (4) - (4) - -
Derivative financial liabilities:
Convertible bonds - embedded conversion option - - - - - - -
Financial liabilities (7,417) (9,360) (2,539) (1,838) (2,555) (2,428)
As at 31 December 2022:
£m Effective Carrying Contractual Less than 1-2 years 2-5 years More than
interest rate
value
cash flow
1 year
5 years
%
Cash and cash equivalents 0.3% 161 161 161 - - -
Trade and other receivables(1) - 767 767 767 - - -
Net investment in finance leases 5.6% 147 172 60 36 51 25
Other long-term receivables - 57 57 - 29 28 -
Financial assets(2) 1,132 1,157 988 65 79 25
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings 4.8% (266) (266) - - (266) -
Convertible bonds - debt host 3.8% (318) (356) (2) (2) (352) -
Lease liabilities 4.1% (6,039) (8,235) (1,264) (1,203) (2,795) (2,973)
Other loans 0.0% (289) (289) (283) (3) (1) (2)
Deferred consideration on acquisitions - (6) (6) (2) (2) (2) -
Contingent consideration on acquisitions - (2) (2) (2) - - -
Trade and other payables - (1,198) (1,198) (1,198) - - -
Other long-term payables - (7) (7) - (7) - -
Derivative financial liabilities:
Convertible bonds - embedded conversion option - - - - - - -
Financial liabilities (8,125) (10,359) (2,751) (1,217) (3,416) (2,975)
1. Excluding prepayments.
2. Financial assets are all held at amortised cost.
3. All financial instruments are classified as variable rate instruments.
Fair value disclosures
The fair values together with the carrying amounts shown in the balance sheet
are as follows:
31 December 2023:
£m Carrying amount Fair value
Cash, Other financial liabilities Total Level 1 Level 2 Level 3 Total
loans and receivables
Cash and cash equivalents 110 - 110 - - - -
Trade and other receivables(1) 746 - 746 - - - -
Other long-term receivables 53 - 53 - - - -
Derivative financial liabilities - - - - - - -
Bank loans and corporate borrowings - (375) (375) - - - -
Convertible bonds - (329) (329) - - (300) (300)
Other loans - (14) (14) - - - -
Deferred consideration on acquisitions - (4) (4) - - - -
Contingent consideration on acquisitions - (6) (6) - - (6) (6)
Trade and other payables - (1,308) (1,308) - - - -
Other long-term payables - (4) (4) - - - -
909 (2,040) (1,131) - - (306) (306)
31 December 2022:
Carrying amount Fair value
£m Cash, Other Total Level 1 Level 2 Level 3 Total
loans and receivables
financial liabilities
Cash and cash equivalents 161 - 161 - - - -
Trade and other receivables(1) 767 - 767 - - - -
Other long-term receivables 57 - 57 - - - -
Derivative financial liabilities - - - - - - -
Bank loans and corporate borrowings - (266) (266) - - - -
Convertible bonds - (318) (318) - - (318) (318)
Other loans - (289) (289) - - - -
Deferred consideration on acquisitions - (6) (6) - - - -
Contingent consideration on acquisitions - (2) (2) - - (2) (2)
Trade and other payables - (1,198) (1,198) - - - -
Other long-term payables - (7) (7) - - - -
985 (2,086) (1,101) - - (320) (320)
1. Excluding prepayments.
At the date of issue, the £350m was bifurcated at £298m and £52m between
corporate borrowings (debt) and a derivative financial liability respectively.
At 31 December 2023, the debt was valued at its amortised cost, £329m (2022:
£318m) and the derivative liability at its fair value, £nil (2022: £nil).
During the years ended 31 December 2023 and 31 December 2022, there were no
transfers between levels for fair value measured instruments.
Valuation techniques
When measuring the fair value of an asset or a liability, the Group uses
market observable data as far as possible. Fair values are categorised into
different levels in a fair value hierarchy based on the inputs used in the
valuation techniques as follows:
· Level 1: quoted prices in active markets for identical assets or
liabilities;
· Level 2: inputs other than quoted prices included in level 1 that
are observable for the asset or liability, either directly or indirectly; and
· Level 3: inputs for the asset or liability that are not based on
observable market data.
The following tables show the valuation techniques used in measuring level 3
fair values and methods used for financial assets and liabilities not measured
at fair value:
Type Valuation technique
Cash and cash equivalents, trade and other receivables/payables, customer For cash and cash equivalents, receivables/payables with a remaining life of
deposits and investment loan receivables less than one year and customer deposits, the book value approximates the fair
value because of their short-term nature.
Loans, overdrafts and debt element of The fair value of bank loans, overdrafts and other loans approximates the
convertible bonds carrying value because interest rates are at floating rates where payments are
reset to market rates at intervals of less than one year.
Contingent consideration, foreign exchange contracts, interest rate swaps and The fair values are based on a combination of broker quotes, forward pricing,
derivative element of convertible bonds and swap models. The fair value of the derivative element of convertible bonds
has been calculated with reference to unobservable credit spreads.
Convertible bonds
In December 2020 the Group issued a £350m convertible bond, issued by IWG
Group Holdings S.à r.l. and transferred in the year to IWG International
Holdings S.à r.l., a subsidiary of the Group and guaranteed by IWG plc, which
is due for repayment in 2027 if not previously converted into shares. If the
conversion option is exercised by the holder of the option, the issuer has the
choice to settle by cash or equity shares in the Group. The holders of the
bond have the right to put the bonds back to the Group in December 2025 at
par. The bond carries a fixed coupon of 0.5% per annum. The bond liability is
split between corporate borrowings (debt) and a derivative financial
liability. At the date of issue, the £350m was bifurcated at £298m and £52m
between corporate borrowings (debt) and a derivative financial liability,
respectively. At 31 December 2023, the debt was valued at its amortised cost,
£329m (2022: £318m) and the derivative liability at its fair value, £nil
(2022: £nil).
The derivative liability represents a level 3 instrument, which has been
valued with reference to the total convertible bond price (a level 2
valuation) minus the level 3 valuation of the debt host. A change of 10 basis
points in the credit spread that is indirectly used to value the derivative
liability would have increased or decreased profit or loss by £1m (2022:
£1m).
The Group actively reviews its exposure to interest rate movements. The
issuance of the fixed rate convertible bond significantly reduces the Group's
exposure to an increase in interest rates.
26. Share-based payments
There are three share-based payment plans, details of which are outlined
below:
Plan 1: IWG Group Share Option Plan
During 2004 the Group established the IWG Group Share Option Plan that
entitles eligible employees to purchase shares in IWG plc. In accordance with
this programme, holders of vested options are entitled to purchase shares at
the mid-market closing price of the shares at the day before the date of
grant.
The IWG Group also operates the IWG Group Share Option Plan (France) which is
included within the numbers for the IWG Share Option Plan disclosed above. The
terms of the IWG Share Option Plan (France) are materially the same as the IWG
Group Share Option Plan with the exception that they are only exercisable from
the fourth anniversary of the date of grant, assuming the performance
conditions have been met.
Reconciliation of outstanding share options
2023 2022
Number of Weighted average Number of Weighted average
share options
exercise price
share options
exercise price
per share
per share
At 1 January 52,304,124 171.48 42,827,743 195.65
Granted during the year 3,986,347 150.55 18,603,116 130.85
Lapsed during the year (2,681,896) 178.41 (7,829,580) 215.97
Exercised during the year (126,516) 158.42 (1,297,155) 118.47
Outstanding at 31 December 53,482,059 169.60 52,304,124 171.48
Exercisable at 31 December 21,477,049 198.95 12,273,441 213.23
Date of grant Numbers Weighted average Lapsed Exercised At 31 Dec Exercisable from Expiry date
granted
exercise price per share
2023
12/06/2013 7,741,000 155.60 (4,591,167) (3,149,833) - ((1)) 12/06/2016 12/06/2023
20/05/2014 1,845,500 187.20 (1,658,500) (160,300) 26,700 ((1)) 20/05/2017 19/05/2024
05/11/2014 12,875,796 186.00 (9,385,573) (1,671,285) 1,818,938 ((1)) 05/11/2017 04/11/2024
19/05/2015 1,906,565 250.80 (1,862,565) - 44,000 ((2)) 19/05/2018 18/05/2025
22/12/2015 1,154,646 322.20 (395,186) (25,000) 734,460 ((1)) 22/12/2018 22/12/2025
29/06/2016 444,196 272.50 (389,150) (11,009) 44,037 ((1)) 29/06/2019 29/06/2026
28/09/2016 249,589 258.00 (214,313) (7,055) 28,221 ((1)) 28/09/2019 28/09/2026
01/03/2017 1,200,000 283.70 - - 1,200,000 ((1)) 01/03/2020 01/03/2027
21/12/2018 (Grant 1) 300,000 203.10 (75,000) - 225,000 ((1)) 21/12/2021 21/12/2028
28/12/2018 (Grant 2) 20,900,000 199.80 (8,983,330) (166,668) 11,750,002 ((1)) 28/12/2021 28/12/2028
15/05/2019 613,872 341.90 (595,834) - 18,038 ((2)) 15/05/2022 15/05/2029
13/09/2019 196,608 402.30 (196,608) - - ((1)) 13/09/2022 13/09/2029
02/12/2019 108,349 408.60 (102,964) - 5,385 ((1)) 19/12/2022 19/12/2029
02/04/2020 20,325,000 165.00 (5,552,218) (37,916) 14,734,866 ((3)) 02/04/2023 02/04/2030
15/05/2020 450,000 202.00 (404,500) - 45,500 ((2)) 15/05/2023 15/05/2030
09/09/2020 173,148 291.00 (156,737) - 16,411 ((2)) 09/09/2023 09/09/2030
26/03/2021 466,377 342.80 (115,095) - 351,282 ((3)) 26/03/2024 26/03/2031
11/05/2021 318,645 376.60 (39,831) - 278,814 ((3)) 11/05/2024 11/05/2031
12/08/2021 580,655 310.00 (209,680) - 370,975 ((3)) 12/08/2024 12/08/2031
09/03/2022 204,659 255.00 - - 204,659 ((3)) 09/03/2025 09/03/2032
10/05/2022 (Grant 1) 1,042,774 222.10 (42,774) - 1,000,000 ((3)) 10/05/2025 10/05/2032
17/05/2022 (Grant 2) 382,791 242.30 - - 382,791 ((3)) 17/05/2025 17/05/2032
14/10/2022 (Grant 1) 15,087,586 117.95 (681,953) - 14,405,633 ((3)) 14/10/2025 14/10/2032
17/10/2022 (Grant 2) 600,000 122.25 - - 600,000 ((3)) 17/10/2025 17/10/2032
01/12/2022 1,285,306 159.35 (75,306) - 1,210,000 ((3)) 01/12/2025 01/12/2032
08/03/2023 498,336 192.05 - - 498,336 ((3)) 08/03/2026 08/03/2033
27/03/2023 571,333 144.40 - - 571,333 ((3)) 27/03/2026 27/03/2033
21/08/2023 575,000 162.00 - - 575,000 ((3)) 21/08/2026 21/08/2033
03/10/2023 1,520,264 141.00 - - 1,520,264 ((3)) 03/10/2026 03/10/2033
09/11/2023 750,000 137.50 - - 750,000 ((3)) 09/11/2026 09/11/2033
13/12/2023 71,414 158.10 - - 71,414 ((3)) 13/12/2026 13/12/2033
94,439,409 (35,728,284) (5,229,066) 53,482,059
1. These options have fully vested as of 31 December 2023.
2. The performance targets for these options have been met and they are
subject to vesting schedules as described below.
3. These options are subject to performance targets and vesting schedules as
described below.
The vesting of share options is subject to an ongoing employment condition. As
at 31 December 2023, there were 21,477,049 (2022: 12,273,441) outstanding
share options which had fully vested with no further performance or holding
period requirements and which had a weighted average exercise price of 198.95p
(2022: 213.23p).
Performance conditions for share options
May 2014 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded and vested, based on achievement against the
relevant performance targets and are now exercisable with an expiry date of
May 2024.
November 2014 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded and vested, based on achievement against the
relevant performance targets and are now exercisable with an expiry date of
November 2024.
May 2015 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded
based on achievement against the relevant performance targets and are now
vesting ratably over a five-year period beginning May 2020 and ending May
2024.
December 2015 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded and vested, based on achievement against the
relevant performance targets and are now exercisable with an expiry date of
December 2025.
June 2016 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded
based on achievement against the relevant performance targets and are now
exercisable with an expiry date of June 2026.
September 2016 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded
based on achievement against the relevant performance targets and are now
exercisable with an expiry date of September 2026.
March 2017 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded and vested, based on achievement against the
relevant performance targets and are now exercisable with an expiry date of
March 2027.
December 2018 (Grant 1) share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded based on achievement against the relevant
performance targets and are now vesting ratably over a three-year period
beginning December 2021 and ended December 2023.
December 2018 (Grant 2) share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded
based on achievement against performance targets and are now subject to
vesting ratably over a three-year period beginning December 2021 and ended
December 2023.
May 2019 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded based on achievement against the relevant
performance targets and are now vesting ratably over a three-year period
beginning May 2022 and ending May 2024.
September 2019 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded
based on achievement against the relevant performance targets and are now
vesting ratably over a five-year period beginning September 2022 and ending
September 2026.
December 2019 share options
The share options outstanding under this grant at 31 December 2023 reflect the
options that have been awarded
based on achievement against the relevant performance targets and are now
vesting ratably over a five-year period beginning December 2022 and ending
December 2026.
April 2020 share options
The share options outstanding under this grant at 31 December 2023 are subject
to a performance target for 50% of the options based on the Group achieving a
ranking at or above the median for TSR performance relative to a comparator
group over a period of four years with a minimum performance threshold of
achieving a ranking at the median TSR or above and the maximum award being
given for exceeding the comparator group median TSR performance by 10% or
more. The remaining 50% of outstanding options have met their performance
targets. Any shares awarded pursuant to these options will be subject to
vesting ratably over a three-year period beginning April 2023 and ending April
2025.
May 2020 share options
The share options outstanding under this grant at 31 December 2023 are subject
to performance targets with 50% of the options subject to the achievement of a
performance target based on the Group ranking at or above the median for TSR
performance relative to a comparator group over a period of three years with a
minimum performance threshold of achieving a ranking at the median TSR or
above and the maximum award being given for exceeding the comparator group
median TSR performance by 10% or more. The remaining 50% of outstanding
options are subject to individual and Group franchising targets for a
three-year period with a minimum performance threshold based on achieving a
minimum level of franchises and the maximum award based on achieving a stretch
target for franchises. Any shares awarded based on achievement of these
performance targets will then be subject to vesting ratably over a three-year
period beginning May 2023 and ending May 2025.
September 2020 share options
The share options outstanding under this grant at 31 December 2023 are subject
to performance targets with 50% of the options subject to the achievement of a
performance target based on the Group ranking at or above the median for TSR
performance relative to a comparator group over a period of three years with a
minimum performance threshold of achieving a ranking at the median TSR or
above and the maximum award being given for exceeding the comparator group
median TSR performance by 10% or more. The remaining 50% of outstanding
options are subject to individual and Group franchising targets for a
three-year period with a minimum performance threshold based on achieving a
minimum level of franchises and the maximum award based on achieving a stretch
target for franchises. Any shares awarded based on achievement of these
performance targets will then be subject to vesting ratably over a three-year
period beginning September 2023 and ending September 2025.
March 2021 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning March 2024 and ending March
2026.
May 2021 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning May 2024 and ending May
2026.
August 2021 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning August 2024 and ending
August 2026.
March 2022 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning March 2025 and ending March
2027.
May 2022 (Grant 1) share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning May 2025 and ending May
2027.
May 2022 (Grant 2) share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning May 2025 and ending May
2027.
October 2022 (Grant 1) share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning October 2025 and ending
October 2027.
October 2022 (Grant 2) share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning October 2025 and ending
October 2027.
December 2022 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning December 2025 and ending
December 2027.
March 2023 (Grant 1) share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning March 2026 and ending March
2028.
March 2023 (Grant 2) share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning March 2026 and ending March
2028.
August 2023 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning August 2026 and ending
August 2028.
October 2023 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. For the US
individuals, the share options outstanding at 31 December 2023 are subject to
performance target with 50% based on the previously described TSR target and
50% based on personal target focused on achieving the Group's strategic
ambitions.
Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning October 2026 and ending October 2028, or over a two-year period beginning October 2027 and ending October 2028 for the French individuals only.
November 2023 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning November 2026 and ending
November 2028.
December 2023 share options
The share options outstanding under this grant at 31 December 2023 are subject
to Group performance targets based on the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three
years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the
comparator group median TSR performance by 10% or more. Any shares awarded
based on achievement of these performance targets will then be subject to
vesting ratably over a three-year period beginning December 2026 and ending
December 2028.
Measurement of fair values
The fair value of the rights granted through the employee share purchase plan
was measured based on the Monte Carlo simulation or the Black-Scholes formula.
The expected volatility is based on the historic volatility adjusted for any
abnormal movement in share prices.
The inputs to the model are as follows:
December 2023 November 2023 October 2023 August 2023 March 2023 (Grant 2) March 2023 (Grant 1) December October
2022
2022
(Grant 2)
Share price on grant date 158.10p 137.50p 141.00p 162.00p 144.40p 192.05p 159.35p 122.25p
Exercise price 158.10p 137.50p 141.00p 162.00p 144.40p 192.05p 159.35p 122.25p
Expected volatility 40.64% - 55.49% 42.00% - 55.25% 42.97% - 55.18% 42.96% - 54.98% 53.62% - 59.37% 52.75% - 60.04% 54.01% - 59.92% 53.34% - 58.16%
Option life 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years
Expected dividend 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Fair value of option at time of grant 91.30p - 108.55p 82.73p - 95.52p 86.63p - 98.25p 99.53p - 112.66p 96.70p - 102.37p 126.16p - 136.44p 106.53p - 113.10p 81.12p -
85.29p
Risk-free interest rate 3.66% - 3.83% 4.22% - 4.38% 4.37% - 4.61% 4.37% - 4.61% 3.35% - 3.46% 3.12% - 3.21% 3.22% - 3.24% 3.22% - 3.24%
October May May March August May March September
2022
2022
2021
2022 2022 2021 2021 2020
(Grant 1)
(Grant 2) (Grant 1)
Share price on grant date 117.95p 242.30p 222.10p 255.00p 310.00p 376.60p 342.80p 291.00p
Exercise price 117.95p 242.30p 222.10p 255.00p 310.00p 376.60p 342.80p 291.00p
Expected volatility 53.30% - 58.05% 53.48% - 56.71% 54.59% - 56.66% 54.33% - 57.32% 53.67% - 57.07% 53.78% - 59.19% 53.64% - 59.13% 51.81% - 62.96%
Option life 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years 3-5 years
Expected dividend 0.00% 0.00% 0.00% 0.00% 1.12% 0.96% 1.00% 2.39%
Fair value of option at time of grant 78.24p - 82.21p 153.52p - 158.97p 142.70p - 145.61p 162.79p - 168.44p 163.92p - 171.67p 202.75p - 217.81p 183.02p - 196.95p 122.93p - 146.68p
Risk-free interest rate 3.22% - 3.24% 1.42% - 1.60% 1.42% - 1.60% 1.41% - 1.49% 0.37% - 0.49% 0.16% - 0.34% 0.15% - 0.33% (0.08%) - (0.04%)
May April December September May December December March
2020
2019
2019
2019
2018
2018
2017
2020
(Grant 2)
(Grant 1)
Share price on grant date 202.00p 165.00p 408.60p 402.30p 341.90p 199.80p 203.10p 283.70p
Exercise price 202.00p 165.00p 408.60p 402.30p 341.90p 199.80p 203.10p 283.70p
Expected volatility 50.15% - 61.06% 49.02% - 59.29% 36.24% - 44.72% 36.33% - 44.83% 38.84% - 45.75% 37.66% - 44.35% 37.63% -44.25% 27.42% -29.87%
Option life 3-5 years 3-5 years 3-7 years 3-7 years 3-5 years 3-5 years 3-5 years 3-5 years
Expected dividend 3.44% 4.21% 1.59% 1.62% 1.85% 2.95% 2.90% 1.80%
Fair value of option at time of grant 71.39p - 86.80p 50.79p - 62.29p 141.77p - 172.84p 137.79p - 169.19p 120.77p - 141.08p 58.77% - 69.33% 39.36p - 46.42p 44.51p - 76.88p
Risk-free interest rate 0.00% - 0.06% 0.00% - 0.06% 0.57% - 0.65% 0.48% - 0.50% 0.52% - 0.60% 0.87% - 1.01% 0.73% - 0.88% 0.23% - 0.56%
September June December May
2016
2016
2015
2015
Share price on grant date 258.00p 272.50p 322.20p 250.80p
Exercise price 258.00p 272.50p 322.20p 250.80p
Expected volatility 27.45% - 32.35% 27.71% - 34.81% 24.80% - 37.08% 27.23% -
30.12%
Option life 3-7 years 3-7 years 3-7 years 3-7 years
Expected dividend 1.80% 1.71% 1.40% 1.59%
Fair value of option at time of grant 40.96p - 44.28p - 29.76p - 42.35p -
67.89p
78.68p
90.61p
69.12p
Risk-free interest rate 0.09% - 0.14% - 0.14% - 0.81% -
0.38%
0.39%
0.21%
1.53%
Plan 2: IWG plc Performance Share Plan (PSP)
The PSP provides for the Remuneration Committee to make standalone awards,
based on normal plan limits, up to a maximum of 250% of base salary.
Reconciliation of outstanding share awards
2023 2022
Number of awards Number of
awards
At 1 January 2,542,212 3,160,617
PSP awards granted during the year 1,711,795 1,289,217
Lapsed during the year (609,332) (1,324,583)
Exercised during the year (226,804) (583,039)
Outstanding at 31 December 3,417,871 2,542,212
Exercisable at 31 December - -
There were 226,804 shares which were exercised during the year ended 31
December 2023 (2022: 583,039). The weighted average share price at the date of
exercise for share awards exercised during the year ended 31 December 2023 was
150.00p (2022: 256.00p).
Plan Date of grant Numbers Lapsed Exercised At 31 Dec Release date
granted
2023
PSP 01/03/2017 1,095,406 (512,367) (583,039) - 01/03/2022
PSP 07/03/2018 1,278,350 (1,051,546) (226,804) - 07/03/2023
PSP 07/03/2019 1,058,578 (848,474) - 210,104 07/03/2024
PSP 04/03/2020 915,739 (915,739) - - 04/03/2025
PSP 26/03/2021 959,015 (320,887) - 638,128 26/03/2026
PSP 09/03/2022 1,289,217 (431,373) - 857,844 09/03/2027
PSP 08/03/2023 1,711,795 - - 1,711,795 08/03/2028
8,308,100 (4,080,386) (809,843) 3,417,871
Measurement of fair values
The fair value of the rights granted through the employee share purchase plan
was measured based on the Monte Carlo simulation.
The inputs to the model are as follows:
March March March March March March
2023
2022
2021
2020
2019
2018
Share price on grant date 192.05p 255.00p 346.40p 356.50p 244.90p 240.90p
Exercise price nil nil nil nil nil nil
Number of simulations 250,000 250,000 250,000 250,000 250,000 250,000
Number of companies 32 32 32 32 32 32
Award life 5 years 5 years 5 years 5 years 5 years 5 years
Expected dividend 0.00% 0.00% 1.00% 1.95% 2.57% 2.37%
Fair value of award at time of grant 126.29p - 191.32p 167.75p - 254.14p 206.19p - 312.37p 292.36p - 192.98p 124.38p - 188.43p 124.92p - 189.26p
Risk-free interest rate 3.12% 1.45% 0.33% 0.06% 0.79% 1.21%
It is recognised by the Remuneration Committee that the EPS targets represent
a highly challenging goal and consequently, in determining whether they have
been met, the Committee will exercise its discretion. The overall aim is that
the relevant EPS targets must have been met on a run-rate or underlying basis.
As such, an adjusted measure of EPS will be calculated to assess the
underlying performance of the business.
2018 PSP investment grant
The total number of shares awarded was subject to three different performance
conditions, with one third subject to defined earnings per share (EPS)
conditions, one third subject to relative total shareholder return (TSR)
conditions and one third subject to return on investment (ROI) conditions.
These conditions are measured over three financial years commencing on 1
January 2018.
Based on results as of 31 December 2020, the relative TSR target of exceeding
the comparator group median TSR by more than 10% was achieved in full,
resulting in the vesting of 226,804 shares subject to a service period ending
March 2022. The performance targets for EPS and ROI were not met and the share
awards pursuant to these targets lapsed.
2019 PSP investment grant
The total number of shares awarded is subject to three different performance
conditions. These conditions are measured over three financial years
commencing on 1 January 2019. Thus, conditional on meeting these performance
targets, these shares will vest in March 2024. One third is subject to defined
earnings per share (EPS) conditions, one third is subject to relative total
shareholder return (TSR) conditions and one third is subject to return on
investment (ROI) conditions.
Based on results as of 31 December 2021, the relative TSR target of exceeding
the comparator group median TSR by more than 10% was achieved, resulting in
the vesting of 118,055 shares subject to a service period ending March 2023.
The performance targets for EPS and ROI were not met and the share awards
pursuant to these targets lapsed.
2020 PSP investment grant
The total number of shares awarded is subject to relative total shareholder
return (TSR) conditions, measured over three financial years commencing on 1
January 2020. Thus, conditional on meeting these performance targets, these
shares will vest in December 2025.
The relative TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group as follows:
% of the award that vests
Exceeds the median by 10% or more 100%
Exceeds the median by less than 10% On a straight-line basis between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
2021 PSP investment grant
The total number of shares awarded is subject to relative total shareholder
return (TSR) conditions, measured over three financial years commencing on 1
January 2021. Thus, conditional on meeting these performance targets, these
shares will vest in March 2026.
The relative TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group as follows:
% of the award that vests
Exceeds the median by 10% or more 100%
Exceeds the median by less than 10% On a straight-line basis between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
2022 PSP investment grant
The total number of shares awarded is subject to relative total shareholder
return (TSR) conditions, measured over three financial years commencing on 1
January 2022. Thus, conditional on meeting these performance targets, these
shares will vest in March 2027.
The relative TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group as follows:
% of the award that vests
Exceeds the median by 10% or more 100%
Exceeds the median by less than 10% On a straight-line basis between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
2023 PSP investment grant
The total number of shares awarded is subject to relative total shareholder
return (TSR) conditions, measured over three financial years commencing on 1
January 2023. Thus, conditional on meeting these performance targets, these
shares will vest in March 2028.
The relative TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group as follows:
% of the award that vests
Exceeds the median by 10% or more 100%
Exceeds the median by less than 10% On a straight-line basis between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
Plan 3: Deferred Share Bonus Plan
The Deferred Share Bonus Plan, established in 2016, enables the Board to award
options to selected employees on a discretionary basis. The awards are
conditional on the ongoing employment of the related employees for a specified
period of time. Once this condition is satisfied, those awards that are
eligible will vest three years after the date of grant.
Reconciliation of outstanding share options
2023 2022
Number of awards Number of
awards
At 1 January 947,443 376,291
DSBP awards granted during the year 180,752 683,166
Lapsed during the year - -
Exercised during the year (172,354) (112,014)
Outstanding at 31 December 955,841 947,443
Exercisable at 31 December 91,923 -
The weighted average share price at the date of exercise for share awards
exercised during the year ended 31 December 2023 was 150.00p (2022: 256.00p).
Plan Date of grant Numbers Lapsed Exercised At 31 Dec Release date
granted
2023
DSBP 07/03/2019 112,014 - (112,014) - 07/03/2022
DSBP 04/03/2020 264,277 - (172,354) 91,923 04/03/2023
DSBP 09/03/2022 171,415 - - 171,415 09/03/2025
DSBP 02/11/2022 511,751 - - 511,751 02/11/2027
DSBP 08/03/2023 180,752 - - 180,752 08/03/2026
1,240,209 - (284,368) 955,841
Measurement of fair values
The fair value of the rights granted through the employee share purchase plan
was measured based on the Black-Scholes formula. The expected volatility is
based on the historic volatility adjusted for any abnormal movement in share
prices.
The inputs to the model are as follows:
March November 2022 March March March
2022
2020
2019
2023
Share price on grant date 192.05p 131.90p 255.00p 356.50p 244.90p
Exercise price nil nil nil nil nil
Number of simulations - - - - -
Number of companies - - - - -
Award life 3 years 5 years 3 years 3 years 3 years
Expected dividend 0.00% 0.00% 0.00% 1.95% 2.57%
Fair value of award at time of grant 191.17p - 191.33p 131.18p 254.14p 292.36p 188.42p
Risk-free interest rate 3.21% 3.24% 1.41% 0.00% 0.68%
27. Retirement benefit obligations
The Group accounts for the Swiss and Philippines pension plans as defined
benefit plans under IAS 19 - Employee Benefits.
The reconciliation of the net defined benefit liability and its components is
as follows:
2023 2022
£m Switzerland Philippines Total Switzerland Philippines Total
Fair value of plan assets 6 - 6 6 - 6
Present value of obligations (8) (1) (9) (7) (1) (8)
Net funded obligations (2) (1) (3) (1) (1) (2)
28. Acquisitions
Current period acquisitions
During the year ended 31 December 2023 the Group made various individually
immaterial acquisitions for a total consideration of £16m.
£m Book value Provisional Provisional
fair value adjustments
fair value
Net assets acquired
Right-of-use assets 9 - 9
Other property, plant and equipment 4 - 4
Cash 2 - 2
Other current and non-current assets 8 - 8
Lease liabilities (9) - (9)
Current liabilities (6) - (6)
8 - 8
Goodwill arising on acquisition 8
Total consideration 16
Less: deferred consideration (2)
Less: contingent consideration (6)
Cash flow on acquisition
Cash paid 8
Less: cash acquired (2)
Net cash outflow 6
The goodwill arising on these acquisitions reflects the anticipated future
benefits IWG can obtain from operating the businesses more efficiently,
primarily through increasing occupancy and the addition of value-adding
products and services.
In the year, the acquisitions contributed revenue of £8m and net retained
profit of £1m. If the above acquisitions had occurred on 1 January 2023, the
revenue and net retained profit arising from these acquisitions would have
been £9m and £1m respectively.
The acquisition costs associated with these transactions were £nil, recorded
within administration expenses in the consolidated income statement.
Deferred consideration of £2m arose from acquisitions, £1m was released,
£3m were settled during the year. £4m deferred consideration is held on the
Group's balance sheet at 31 December 2023.
Contingent consideration of £6m arose on the 2023 acquisitions. Contingent
consideration of £1m was paid and £nil released, during the current year,
with respect to milestones, achieved or not achieved, on previous
acquisitions. £6m contingent consideration is held on the Group's balance
sheet at 31 December 2023.
For acquisitions completed in 2023, the fair value of assets acquired has only
been provisionally assessed, pending completion of a fair value assessment
which has not yet been completed. The main changes in the provisional fair
values expected are primarily for customer relationships and property, plant
and equipment. The final assessment of the fair value of these assets will be
made within 12 months of the acquisition dates and any adjustments reported in
future reports.
Goodwill of £8m arose relating to 2023 acquisitions.
Prior period acquisitions
During the year ended 31 December 2022, the Group completed the investment in
The Instant Group, acquiring 100% of the equity voting rights, for a total
consideration of £324m. In addition, the Group made various other
individually immaterial acquisitions for a total consideration of £5m.
£m Book value Provisional Final Final
fair value adjustments
fair value adjustments
fair value
Net assets acquired
Intangible assets 2 139 - 141
Right-of-use assets 4 - - 4
Other property, plant and equipment 16 - - 16
Net investment in finance leases 177 - - 177
Cash 25 - - 25
Other current and non-current assets 64 - - 64
Lease liabilities (173) - - (173)
Current liabilities (112) 6 - (106)
Provisions due after one year (7) - - (7)
(4) 145 - 141
Goodwill arising on acquisition 188
Total consideration 329
Less: deferred consideration (1)
Less: contingent consideration (1)
Cash flow on acquisition
Cash paid 327
Less: cash acquired (25)
Net cash outflow 302
Goodwill of £188m arose relating to 2022 acquisitions. The goodwill arising
on the 2022 acquisitions reflects the anticipated future benefits IWG can
obtain from operating the businesses more efficiently, primarily through
increasing occupancy and the addition of value-adding products and services.
In the year, the acquisitions contributed revenue of £105m and net retained
loss of £11m. If the above acquisitions had occurred on 1 January 2022, the
revenue and net retained loss arising from these acquisitions would have been
£123m and £10m respectively in the year ended 31 December 2022.
Deferred consideration of £1m arose on the acquisitions made in the year and
was held on the Group's balance sheet at 31 December 2022. In addition, £5m
deferred consideration relating to prior period acquisitions is held on the
Group's balance sheet at 31 December 2022.
Contingent consideration of £1m arose on the 2022 acquisitions. In addition,
£nil contingent consideration relating to prior period acquisitions is held
on the Group's balance sheet at 31 December 2022.
The acquisition costs associated with these transactions were £11m, recorded
within administration expenses in the consolidated income statement.
The prior year comparative information has not been restated due to the
immaterial nature of the final fair value adjustments recognised in 2023.
Non-controlling interests
In a separate transaction on 8 March 2022, the Group sold a 13.4%
non-controlling equity interest in a subsidiary of the Worka structure, for a
consideration of £53m.
29. Capital commitments
£m 2023 2022
Contracts placed for future capital expenditure not provided for in the 54 76
financial statements
These commitments are principally in respect of centre fit-out obligations.
There are £1m (2022: £1m) of capital commitments in respect of joint
ventures and no significant lease commitments for leases not commenced at 31
December 2023.
30. Contingent assets and liabilities
The Group has bank guarantees and letters of credit held with certain banks,
predominantly in support of leasehold contracts with a variety of landlords,
amounting to £305m (2022: £337m). There are no material lawsuits pending
against the Group.
31. Related parties
Parent and subsidiary entities
The consolidated financial statements include the results of the Group and its
subsidiaries.
Joint ventures
The following table provides the total amount of transactions that have been
entered into with related parties for the relevant financial year.
£m Management fees received from related parties Amounts Amounts
owed by
owed to
related party
related party
2023
Joint ventures 8 39 36
2022
Joint ventures 6 51 49
As at 31 December 2023, none of the amounts due to the Group have been
provided for as the expected credit losses arising on the balances are
considered immaterial (2022: £nil). All outstanding balances with these
related parties are priced on an arm's length basis. None of the balances are
secured.
Key management personnel
No loans or credit transactions were outstanding with Directors or Officers of
the Company at the end of the year or arose during the year that are required
to be disclosed.
Compensation of key management personnel (including Directors)
Key management personnel include those personnel (including Directors) that
have responsibility and authority for planning, directing and controlling the
activities of the Group:
£m 2023 2022
Short-term employee benefits 8 6
Retirement benefit obligations - -
Share-based payments 3 3
11 9
Share-based payments included in the table above reflect the accounting charge
in the year. The full fair value of awards granted in the year was £4m (2022:
£6m). These awards are subject to performance conditions and vest over three,
four and five years from the award date (note 26).
Transactions with related parties
During the year ended 31 December 2023 the Group acquired goods and services
from a company indirectly controlled by a Director of the Company amounting to
£65,122 (2022: £19,015). There was a £63,934 balance outstanding at the
year-end (2022: £5,217).
All transactions with these related parties are priced on an arm's length
basis and are to be settled in cash. None of the balances are secured.
32. Principal Group companies
The Group's principal subsidiary undertakings at 31 December 2023, their
principal activities and countries of incorporation are set out below:
Name of undertaking Country of incorporation % of ordinary shares and votes held Name of undertaking Country of incorporation % of ordinary shares and votes held
Trading companies Management companies
Regus Australia Management Pty Ltd Australia 100 RGN Management Limited Partnership Canada 100
Regus Belgium SA Belgium 100 Regus Service Centre Philippines B.V. Philippines 100
Regus do Brasil Ltda Brazil 100 Franchise International GmbH Switzerland 100
Regus Business Service (Shenzen) Ltd China 100 Pathway IP II S.à r.l. Switzerland 100
Regus Management ApS Denmark 100 Regus Global Management Centre SA Switzerland 100
Regus Management (Finland) Oy Finland 100 Regus Group Services Ltd United Kingdom 100
IWG France Management Sarl France 100 IW Group Services (UK) Ltd United Kingdom 100
RBC Deutschland GmbH Germany 100 Regus Management Group LLC United States 100
Regus CME Ireland Limited Ireland 100
Regus Business Centres Limited Israel 100 Holding and finance companies
Regus Business Centres Italia S.r.l. Italy 100 IWG Enterprise Sarl Luxembourg 100
Regus Management Malaysia Sdn Bhd Malaysia 100 IWG Group Holdings S.à r.l. Luxembourg 100
Regus Management de Mexico, SA de CV Mexico 100 IWG International Holdings S.à r.l. Luxembourg 100
Regus New Zealand Management Ltd New Zealand 100 Ibiza Holdings Limited. Jersey 86.6
Regus Business Centre Norge AS Norway 100 Global Platform Services GmbH Switzerland 100
IWG Management Sp z.o.o. Poland 100 Regus Group Limited United Kingdom 100
Regus Business Centre, Lda Portugal 100 Regus Corporation United States 100
Regus Management Singapore Pte Ltd Singapore 100 Ibiza Finance Limited. Jersey 100
Regus Management España SL Spain 100 Genesis Finance SARL Switzerland 100
IWG Management (Sweden) AB Sweden 100 Pathway Finance Sarl Switzerland 100
Avanta Managed Offices Ltd United Kingdom 100 Pathway Finance EUR 2 Sarl Switzerland 100
Basepoint Centres Limited United Kingdom 100 Pathway Finance USD 2 Sarl Switzerland 100
Green (Topco) Limited United Kingdom 86.6
HQ Global Workplaces LLC United States 100
RGN National Business Centre LLC United States 100
RB Centres LLC United States 100
Regus Management Group LLC United States 100
33. Key judgemental and estimates areas adopted in preparing these accounts
The preparation of consolidated financial statements in accordance with IFRS
requires management to make certain judgements and assumptions that affect
reported amounts and related disclosures.
Key judgements
Tax assets and liabilities
The Group is subject to income taxes in numerous jurisdictions. Significant
judgement is required in determining the worldwide provision for income taxes.
Where appropriate, the Group assesses the potential risk of future tax
liabilities arising from the operation of its business in multiple tax
jurisdictions and includes provisions within tax liabilities for those risks
that can be estimated reliably. Changes in existing tax laws can affect large
international groups such as IWG and could result in additional tax
liabilities over and above those already provided for.
Determining the lease term of contracts with renewal and termination options
IFRS 16 defines the lease term as the non-cancellable period of a lease
together with the options to extend or terminate a lease, if the lessee were
reasonably certain to exercise that option. Where a lease includes the option
for the Group to extend the lease term, the Group makes a judgement as to
whether it is reasonably certain that the option will be taken. This will take
into account the length of time remaining before the option is exercisable,
macro-economic environment, socio-political environment and other lease
specific factors.
The lease term is the non-cancellable period of the lease adjusted for any
renewal or termination options which are reasonably certain to be exercised.
Management applies judgement in determining whether it is reasonably certain
that a renewal or termination option will be exercised.
Key estimates
Impairment of intangibles and goodwill
We evaluate the fair value of goodwill and other indefinite life intangible
assets to assess potential impairments on an annual basis, or during the year
if an event or other circumstance indicates that we may not be able to recover
the carrying amount of the asset. We evaluate the carrying value of goodwill
based on our CGUs aggregated at a country level and make that determination
based upon future cash flow projections which assume certain growth
projections which may or may not occur. We record an impairment loss for
goodwill when the carrying value of the asset is less than its estimated
recoverable amount. Further details of the methodology and assumptions applied
to the impairment review in the year ended 31 December 2023, including the
sensitivity to changes in those assumptions, can be found in note 13.
Deferred tax assets
We base our estimate of deferred tax assets and liabilities on current tax
laws and rates and, where relevant, the Group's three-year business plans and
other expectations about future outcomes. Changes in existing laws and rates,
and their related interpretations, and future business results may affect the
amount of deferred tax liabilities or the valuation of deferred tax assets
over time. Our accounting for deferred tax consequences represents
management's best estimate of future events that can be appropriately
reflected in the accounting estimates. It is Group policy to recognise a
deferred tax asset to the extent that it is probable that future taxable
profits will be available against which the assets can be used. Significant
changes to the Group's forecasts and other expectations of future outcomes
could significantly impact the recognition of deferred tax assets.
Given the significant level of corporate developments in the Group and the
number of legal entities and countries in which the Group operates, the
determination of the period of time representing foreseeable future requires
judgement to be exercised. Management has determined the most suitable period
to be the three-year period corresponding to the Group's business forecasting
processes. Any changes in management's approach to this assessment could
significantly impact the recognition of deferred tax assets.
Impairment of property, plant and equipment (including right-of-use assets)
We evaluate the potential impairment of property, plant and equipment at a
centre (CGU) level where there are indicators of impairment at the balance
sheet date. In the assessment of value-in-use, key judgemental areas in
determining future cash flow projections include: an assessment of the
location of the centre; the local economic situation; competition; local
environmental factors; the management of the centre; and future changes in
occupancy, revenue and costs of the centre.
While centre costs remain relatively stable, revenue is a function of the
expected levels of occupancy and the corresponding pricing achieved. In
assessing any impairment, the value-in-use calculated is therefore assessed
for sensitivity to changes in both occupancy and pricing, to determine the
extent to which these estimates need to change before an impairment arises. On
a similar basis, overall performance is also a function of the discount rate
applied (which is based on the capital asset pricing model). The value-in-use
calculation is therefore also assessed for sensitivity to changes in this
discount rate, to determine the extent to which this discount rate needs to
change before an impairment arises.
We evaluate the potential impairment of property, plant and equipment at a
centre (CGU) level where there are indicators of impairment at the balance
sheet date and for centres which have been identified as part of the Group's
rationalisation programme. The key area of estimation involved is in
determining the recoverable amount of the rationalised centres, over what
period the rationalisation will take place, and the level of moveable assets
that will be utilised in other centres.
Estimating the incremental borrowing rates on leases
The determination of applicable incremental borrowing rates on leases at the
commencement of lease contracts also requires judgement. The Group determines
its incremental borrowing rates by obtaining interest rates from various
external financing sources and makes certain adjustments to reflect the terms
of the lease. The Group considers the relevant market interest rate, based on
the weighted average of the timing of the lease payments under the lease
obligation. In addition, a spread over the market rate is applied based on the
cost of funds to the Group, plus a spread that represents the risk
differential of the lessee entity compared to the Group funding cost.
Fair value accounting for business combinations
For each business combination, we assess the fair values of assets and
liabilities acquired. Where there is not an active market in the category of
the non-current assets typically acquired with a business centre or where the
books and records of the acquired company do not provide sufficient
information to derive an accurate valuation, management calculates an
estimated fair value based on available information and experience.
The main categories of acquired non-current assets where management's
judgement has an impact on the amounts recorded include tangible fixed assets,
customer list intangibles and the fair market value of leasehold assets and
liabilities. For significant business combinations management also obtains
third-party valuations to provide additional guidance as to the appropriate
valuation to be included in the financial statements.
34. Subsequent events
Reporting currency change
Effective 1 January 2024, the Group will report in US dollars going forward.
Forward exchange contracts
The Group entered into a series of forward exchange rate contracts on 16 and
18 January, respectively, to hedge against foreign currency fluctuations in
relation to its £350m convertible loan notes denominated in GBP. The Group
contracted to purchase £350m for $445m in 2025.
Revolving credit facility
On 21 February 2024, the Group amended its revolving credit facility's base
currency from Sterling to US dollars. At the date of amendment, the amount of
the facility was redenominated from £875m to $1.1bn.
There were no other significant events occurring after 31 December 2023
affecting the consolidated financial statements of the Group.
Reconciliation for alternative performance measures
Alternative performance measures
The Group reports certain alternative performance measures (APMs) that are not
required under International Financial Reporting Standards (IFRS) which
represents the generally accepted accounting principles (GAAP) under which the
Group reports. The Group believes that the presentation of these APMs provides
useful supplemental information, when viewed in conjunction with our IFRS
financial information as follows:
· to evaluate the historical and planned underlying results of our
operations;
· to set Director and management remuneration; and
· to discuss and explain the Group's performance with the
investment analyst community.
None of the APMs should be considered as an alternative to financial measures
derived in accordance with GAAP. The APMs can have limitations as analytical
tools and should not be considered in isolation or as a substitute for an
analysis of our results as reported under GAAP. These performance measures may
not be calculated uniformly by all companies and therefore may not be directly
comparable with similarly titled measures and disclosures of other companies.
Additional information has been provided on the following pages to bridge the
statutory information reported with the performance presented as part of the
Chief Executive Officer's and Chief Financial Officer's review.
Reconciliation of alternative performance measurement adjustments recognised
The purpose of these unaudited pages is to provide a reconciliation from the
2023 financial results to the alternative performance measures in accordance
with the previous pre-IFRS 16 policies adopted by the Group, and thereby give
the reader greater insight into the impact of IFRS 16 on the results of the
Group. The recognition of these adjustments will not impact the overall cash
flows of the Group or the cash generation per share.
1. Rent income and finance income
Under IFRS 16, where the sublease is assessed with reference to the
right-of-use assets arising from the head lease, conventional rent income is
not recognised in the profit or loss. The receipts associated with this income
instead are used to determine the net investment in finance leases noted
above. The net investment in finance leases is measured in subsequent periods
using the effective interest rate method, based on the applicable interest
rate. The related finance income arising on subsequent measurement is
recognised directly through profit or loss.
2. Rent expense and finance costs
Under IFRS 16, conventional rent charges are not recognised in the profit or
loss. The payments associated with these charges instead form part of the
lease payments used in calculating the right-of-use assets and related lease
liabilities noted above. The lease liabilities are measured in subsequent
periods using the effective interest rate method, based on the applicable
interest rate. The related finance costs arising on subsequent measurement are
recognised directly through profit or loss.
3. Depreciation, lease payments and lease receipts
Depreciation on the right-of-use assets recognised, is depreciated over the
life of the lease on a straight-line basis, adjusted for any period between
the lease commencement date and the date the related centre opens, reflecting
the lease-related costs directly incurred in preparing the business centre for
trading. Lease payments on head leases reduce the lease liabilities recognised
in the balance sheet. Lease receipts on subleases reduce the net investment in
finance leases recognised in the balance sheet.
4. Other adjustments
These adjustments primarily reflect the impairment of the right-of-use assets
and other property, plant and equipment as well as the reversal of the closure
cost provision on a pre-IFRS 16 basis. Certain parking, storage and brokerage
costs are also reversed, as they form part of the lease payments.
Consolidated EBITDA (unaudited)
Year ended 31 December 2023:
£m Notes As reported Rent income Rent expense Depreciation Other pre-IFRS 16(2)
adjustments(1)
Adjusted EBITDA 1,472 60 (1,106) (17) (6) 403
Adjusting items (145) 17 (2) (130)
Depreciation on property plant and equipment 5 (1,117) - - 806 - (311)
Amortisation of intangible assets 5 (65) - - - - (65)
Operating profit/(loss) 145 60 (1,106) 806 (8) (103)
Operating profit/(loss) from discontinued operations 9 - - - - - -
Operating profit/(loss) from continuing operations 5 145 60 (1,106) 806 (8) (103)
1. Includes £78m of net impairment of property, plant and equipment
including right-of-use assets.
2. Pre-IFRS Adjusted EBITDA on a constant currency basis was £415m.
Year ended 31 December 2022:
Restated(1) Notes As reported Rent income Rent expense Depreciation Other pre-IFRS 16
£m
adjustments(2)
Adjusted EBITDA 1,348 50 (1,059) (21) (7) 311
Adjusting items (12) - - 21 (3) 6
Depreciation on property plant and equipment 5 (1,145) - - 829 - (316)
Amortisation of intangible assets 5 (44) - - - - (44)
Operating (loss)/profit 147 50 (1,059) 829 (10) (43)
Operating (loss)/profit from discontinued operations 9 - - - - - -
Operating (loss)/profit from continuing operations 5 147 50 (1,059) 829 (10) (43)
1. The comparative information has been restated as the Group changed its
classification of adjusting items.
2. Includes £52m of net reversals of impairment of property, plant and
equipment including right-of-use assets.
Partner contributions receivables (unaudited)
£m Reference 2023 2022
Opening partner contribution receivables Note 17 23 30
Net partner contributions recognised Statement of cash flows 45 50
• Maintenance partner contributions CFO review 5 11
• Growth partner contributions CFO review 40 39
Settled in the period (42) (59)
Exchange differences (1) 2
Closing partner contribution receivables Note 17 25 23
Working capital (unaudited)
Year ended 31 December 2023:
£m Reference As reported Rent income & expense and finance income & costs Depreciation and lease payments Other adjustments pre-IFRS 16
Partner contributions - reimbursement Statement of cash flows 22 - (22) - -
(Increase)/decrease in trade and other receivables Statement of cash flows (19) 32 - - 13
Increase/(decrease) in trade and other payables Statement of cash flows 144 742 (836) (26) 24
Working capital 147 774 (858) (26) 37
Analysed as:
Working capital (excluding amortisation of partner contributions) CFO review 92
Working capital related to the amortisation of partner contributions CFO review (95)
Growth-related partner contributions CFO review 40
Year ended 31 December 2022:
£m Reference As reported Rent income & expense and finance income & costs Depreciation and lease payments Other adjustments pre-IFRS 16
Partner contributions - reimbursement Statement of cash flows 19 - (19) - -
(Increase)/decrease in trade and other receivables Statement of cash flows (97) (54) - - (151)
(Decrease)/increase in trade and other payables Statement of cash flows 191 852 (906) (29) 108
Working capital 113 798 (925) (29) (43)
Analysed as:
Working capital (excluding amortisation of partner contributions) CFO review 22
Working capital related to the amortisation of partner contributions CFO review (104)
Growth-related partner contributions CFO review 39
Capital expenditure (unaudited)
Year ended 31 December 2023:
£m Reference As reported Rent income & expense and finance income & costs pre-IFRS 16
Purchase of property, plant and equipment Statement of cash flows (153) (2) (155)
Purchase of intangible assets Statement of cash flows (60) - (60)
Total capital expenditure (213) (2) (215)
Analysed as: Net capital expenditure Partner contributions Gross capital expenditure
Maintenance capital expenditure CFO review (93) (5) (98)
Gross growth capital expenditure CFO review (75) (40) (115)
Capitalised rent related to centre openings CFO review (2) - (2)
(170) (45) (215)
Year ended 31 December 2022:
£m Reference As reported Rent income pre-IFRS 16
& expense
and finance income & costs
Purchase of property, plant and equipment Statement of cash flows (242) (12) (254)
Purchase of intangible assets Statement of cash flows (39) - (39)
Total capital expenditure (281) (12) (293)
Analysed as: Net capital expenditure Partner contributions Gross capital expenditure
Maintenance capital expenditure CFO review (90) (11) (101)
Gross growth capital expenditure CFO review (141) (39) (180)
Capitalised rent related to centre openings CFO review (12) - (12)
(243) (50) (293)
Five-year summary
£m 31 Dec 2023 31 Dec 2022 31 Dec 2021 31 Dec 2020 31 Dec 2019
Unaudited Restated(1)(2) Restated(1)(2) Restated(1) Restated(1)
Income statement (full year ended)
Revenue 2,958 2,751 2,227 2,432 2,593
Cost of sales (2,354) (2,182) (1,885) (2,377) (2,043)
Expected credit reversal/(losses) on trade receivables (15) 6 (99) (35) (2)
Gross profit (centre contribution) 589 575 243 20 548
Selling, general and administration expenses (443) (427) (328) (367) (279)
Share of (loss)/profit of equity-accounted investees, net of tax (1) (1) (2) (3) 3
Operating profit/(loss) 145 147 (87) (350) 272
Finance expense (348) (287) (198) (266) (229)
Finance income 14 35 26 3 1
(Loss)/profit before tax for the year from continuing operations (189) (105) (259) (613) 44
Income tax (expense)/credit (27) 32 (10) (30) 22
(Loss)/profit for the year from continuing operations (216) (73) (269) (643) 66
Profit/(loss) after tax for the year from discontinued operations - 1 59 (4) 385
(Loss)/profit after tax for the year (216) (72) (210) (647) 451
(Loss)/earnings per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p) (21.4) (6.9) (20.4) (67.9) 50.5
Diluted (p) (21.4) (6.9) (20.4) (67.9) 49.6
Weighted average number of shares outstanding ('000s) 1,006,685 1,006,885 1,007,215 892,738 892,738
From continuing operations
Basic (p) (21.4) (7.0) (26.2) (67.8) 7.4
Diluted (p) (21.4) (7.0) (26.2) (67.8) 7.3
Weighted average number of shares outstanding ('000s) 1,006,685 1,006,885 1,007,215 892,738 892,738
Balance sheet data (as at)
Intangible assets 1,128 1,148 782 749 720
Right-of-use assets 4,372 5,009 5,254 5,647 5,917
Property, plant and equipment 1,027 1,225 1,122 1,209 1,273
Net investment in finance leases 97 147 - - -
Deferred tax assets 451 457 386 188 195
Other assets 1,017 1,041 849 1,100 781
Cash and cash equivalents 110 161 78 71 67
Total assets 8,202 9,188 8,471 8,964 8,953
Current liabilities 2,747 3,020 2,267 2,435 2,140
Non-current liabilities 5,370 5,856 5,870 6,015 5,933
Equity 85 312 334 514 880
Total equity and liabilities 8,202 9,188 8,471 8,964 8,953
1. The comparative information has been restated to reflect the impact of
discontinued operations (note 9)
2. The comparative information has been restated as the Group changed its
accounting policy on deferred tax related to assets and liabilities arising
from a single transaction due to amendments to IAS 12 (note 2).
Glossary
Adjusted EBITDA
EBITDA excluding adjusting items.
Adjusting items
Adjusting items reflects the impact of adjustments, both incomes and costs not
indicative of the underlying performance, which are considered to be
significant in nature and/or size.
Company-Owned & Leased
Business centres operated by the Group under a conventional lease or variable
lease arrangements.
Capital-light
Business centres operating under a variable lease, joint-venture, managed and
franchised arrangements.
EBIT
Earnings before interest and tax.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
EPS
Earnings per share.
Expansions
A general term which includes new business centres established and acquired in
the year by IWG through Company-Owned & Leased and Managed &
Franchised segments.
Gross profit before impact of rationalisation
Gross profit excluding adjusting items to cost of sales.
Growth capital expenditure
Capital expenditure in respect of centres which opened during the current or
prior financial period.
Growth-related partner contributions
Partner contributions received in respect of centres which opened during the
current or prior financial period.
Maintenance capital expenditure
Capital expenditure in respect of centres owned for a full 12-month period
prior to the start of the financial year and operated throughout the current
financial year, which therefore have a full-year comparative.
Maintenance-related partner contributions
Partner contributions received in respect of centres owned for a full 12-month
period prior to the start of the financial year and operated throughout the
current financial year, which therefore have a full-year comparative.
Managed & Franchised
Business centres operating under a formal joint-venture, managed or franchise
arrangements.
Net debt
Operations cash and cash equivalents, adjusted for both short and long‑term
borrowings, lease liabilities and net investments in finance leases.
Net financial debt
Operations cash and cash equivalents, adjusted for both short and long‑term
borrowings.
Network rationalisation
Network rationalisation for the current year is defined as a centre that
ceases operation during the period from 1 January to December of the current
year. Network rationalisation for the prior year comparative is defined as a
centre that ceases operation from 1 January of the prior year to December of
the current year.
Occupancy
Occupied square feet divided by available square feet expressed as a
percentage.
Operating profit/(loss) before impact of rationalisation
Gross profit excluding adjusting items.
Pre-IFRS 16 basis / Before application of IFRS 16
IFRS accounting standards effective as at the relevant reporting date with the
exception of IFRS 16.
Rooms
The yearly average total business centre square meters divided by a standard
room of seven square meters.
REVPAR
Average monthly IWG Network revenue, excluding revenue from centres opened and
closed during the year, divided by the corresponding average number of rooms
during the period.
System wide revenue
Total revenue generated, including revenue from franchise, managed centre and
joint-venture partners, but excluding related fee income.
TSR
Total shareholder return.
Shareholder Information
Corporate directory
Secretary and Registered Office
Tim Regan, Company Secretary
IWG plc
Registered Office: Registered Head Office:
22 Grenville Street Dammstrasse 19
St Helier
CH-6300
Jersey JE4 8PX Zug
Switzerland
Registered number
Jersey
122154
Registrars
Link Market Services (Jersey) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Auditor
KPMG
1 Stokes Place
St. Stephen's Green
Dublin 2
DO2 DE03
Ireland
Legal advisors to the Company as to English law
Slaughter and May
One Bunhill Row
London EC1Y 8YY
Legal advisors to the Company as to Jersey law
Mourant Ozannes
22 Grenville Street
St Helier
Jersey JE4 8PX
Legal advisors to the Company as to Swiss law
Bär & Karrer Ltd
Brandschenkestrasse 90
CH-8027
Zurich
Switzerland
Corporate stockbrokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
Barclays Bank plc
5 The North Colonnade
Canary Wharf
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
Financial PR advisors
Brunswick Group LLP
16 Lincoln's Inn Fields
London WC2A 3ED
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