IWG reports record profit after 'transformational' year

IWG reported on what it called a “transformational” year on Tuesday, with its revenue rising 10.4% at actual currency to £2.65bn.

The FTSE 250 workspace and coworking facilities operator said its open centre revenue at constant currency was ahead 15% for the 12 months ended 31 December at £2.57bn, with all regions said to have contributed strongly.

Pre-2018 revenue and EBITDA was up 3.6% and 15.0% to £2.25bn and and £472.2m, respectively, at constant currency, while open centre operating profit was 11% higher at constant currency, at £176.2m.

IWG’s operating profit was ahead 8% year-on-year at constant currency at £137.7m, after continued “significant” investment, while the company reported a record profit before tax of £489.5m, up 253%, including profit on master franchise agreements.

The board reported “excellent” franchising momentum, with a commitment of over 400 locations as long-term master franchise agreements were completed in Japan, Taiwan and Switzerland for a total cash consideration of £424.6m.

It also completed master franchise agreements for Gibraltar and Monaco post-period end, in February, and said regional franchise agreements were signed with multiple partners across a number of geographies.

The company said it had a “strong” pipeline of master franchise agreements and regional franchises, with more than 40 transactions under discussion.

IWG also said it saw strong demand throughout the year, receiving a record number of enquiries as companies focussed on sustainable and more flexible working practices.

It reported new enterprise account wins across all geographies, and said it saw strong growth from existing enterprise accounts.

The company said its cash generation reached a record as well, with cash flow pre-growth standing at £649.2m, or 72.7p per share.

A total of £107.7m was returned to shareholders in the period via dividends and share repurchases, with the share repurchase programme being increased back to £100m.

Net debt reduced from £460.8m to £294.1m, making for a net debt-to-EBITDA ratio of 0.7x.

IWG said it was also making continued investment in its company-owned network and global platform infrastructure, adding that it was now in 3,388 locations, with 62.5 million square feet of space.

It expanded its network to two new countries and 43 new cities during 2019.

“2019 has been a transformational year for IWG,” said chief executive officer Mark Dixon.

“We made significant progress in our pivot towards becoming a franchised organisation and delivered strong revenue growth and record profits.

“We continue to see strong demand globally and to welcome more great partners to the business.”

Dixon said that, as organisations were increasingly seeking ways to address the challenges of climate change, IWG believed that more were recognising the role to be played by remote, distributed and flexible working strategies.

“The outbreak of Covid-19 has led to brief closures of our centres in China and we are closely reviewing the ongoing developments worldwide.

“Whilst we cannot be certain how long this situation will last; we continue to monitor the situation and will act swiftly where necessary to help ensure the safety and wellbeing of our customers and employees.

“We are extremely grateful for the incredible effort of our teams in dealing with this global health emergency.”

IWG would continue to work closely with its partners, develop its network and invest in its people, brands and services, to ensure that it remained the leading player in the industry, Dixon added.

“Even in this period of global, political and economic uncertainty, we are confident that the group will continue to deliver strong returns for all our stakeholders, and this is reflected in the increased proposed dividend and new £100m share repurchase programme.”

At 1020 GMT, shares in IWG were up 3.68% at 358p.