IWG warns on profits as market weakness continues

Flexible workspace provider IWG updated the market on its current trading on Thursday, reporting that the previously-anticipated sales improvement in the third quarter from the increase experienced in sales activity was weaker than expected, which resulted in a pause in the recovery of its mature business.

The FTSE 250 firm said that as a result, the year-to-date reduction in mature revenues to 30 September remained similar to that of the first half, with a decline of 1.9% at constant currency.

“This is disappointing, although the very strong uplift in sales activity so far in October would suggest that this is in part potentially a timing issue,” the company’s board said in its statement.

“We also remain encouraged by the revenue growth across all our open centres - excluding closed centres - in the third quarter of 4.4% at constant currency and the improving trends in sales activity, most notably in the fourth quarter to date.”

The board said it remained “very positive” about the opportunity for the so-called ‘workspace-as-a-service’ (WaaS) market and its “leading” position within it.

It therefore intended to continue to invest further in growing its national networks, especially in relation to leveraging its network to benefit corporate account customers, where it had won further new contracts.

“We are also investing in our development capabilities to establish a strong pipeline of growth in future years,” the board said.

“In the short-term, however, this will lead to additional overhead costs and new centre losses due to the timing of openings.

“In addition, we have seen some weakness in London and disruption to other parts of our business globally from recent natural disasters.”

IWG said group operating profit for 2017 was now expected to be “materially below” market expectations and in a range of £160m to £170m.