TIDMIWG TIDMTTM
RNS Number : 2317S
IWG PLC
05 November 2019
THIRD QUARTER TRADING STATEMENT - 5 November 2019
IWG plc, the leading global operator of co-work and workspace
brands, today issues its trading update for the period ended 30
September 2019.
Continuing strong revenue growth, excellent franchising and
enterprise account momentum and strong financial position
Key Highlights(1)
-- Q3 Open centre revenue up 15.5%(2) (19.5% at actual rates),
all regions contributing strongly
-- Q3 Pre-20183 revenue up 3.3%(2) (7.0% at actual rates)
-- Q3 Pre-2018(3) occupancy up 2.2 percentage points to 76.4% from 74.2% in Q3 2018
-- Excellent franchising momentum; strategic partnerships signed
in Japan, Taiwan and Switzerland
-- 27 franchise partners across 22 countries, with a combined commitment of over 400 locations
-- Improving UK momentum, with positive Q3 Pre-2018(3) revenue
growth and strong occupancy gains
-- Continued strong growth in enterprise accounts
-- 66 new locations added in Q3, taking worldwide total to 3,348 locations
-- Cash flow(4) pre-growth to 30 September 2019 of GBP466.4m, 52.1p per share
-- Share repurchase programme commenced - 5.5m shares acquired in Q3 for GBP22.4m
-- Net debt(4) substantially reduced year-to-date to GBP301.2m; Net Debt to EBITDA of 0.8x
Third quarter performance(1)
Sales activity across the Group remains very buoyant and this
continues to drive our strong revenue growth trend. In the three
months ended 30 September 2019 revenue growth across all our open
centres increased 15.5% at constant currency (19.5% at actual
rates). Total revenue for the Group (including closed centres and
adjusted for discontinued activities) increased to GBP692.3m
compared with GBP611.6m in the same period last year, an increase
of 9.4% at constant currency (13.2% at actual rates). This
performance continues to be driven by the Americas and EMEA, our
two largest markets and very encouraging contributions from the
2018 and 2019 centre additions.
Revenue from ancillary services also continues to grow strongly.
Approximately 27% of Group revenue is currently derived from these
services. We believe that this provides a strong and unique
competitive advantage which underpins our profitable, cash
generative business model.
Pre-2018 revenue in the three months to 30 September increased
to GBP591.4m from GBP552.8m in the comparable quarter last year.
This represents a constant currency increase of 3.3% (7.0% at
actual rates). Encouragingly the UK has started to contribute to
the pre-2018 revenue growth and this provides an early indication
that the actions we have implemented are starting to have a
positive impact.
Pre-2018 occupancy improved year-on-year, up 2.2 percentage
points on a like-for-like basis to 76.4%, with particularly strong
performances in Brazil, China, India, North America, Spain,
Switzerland and the UK. This is the highest level of mature
occupancy since Q4 2016.
Year-to-date performance(1)
For the nine months to 30 September 2019, revenue growth across
all our open centres was strong at 15.4% at constant currency
(18.3% at actual rates). Total Group revenue increased to
GBP1,990.1m compared with GBP1,767.9m (adjusted for discontinued
operations) for the same period last year, an increase of 9.9% at
constant currency (12.6% at actual rates).
Pre-2018 revenue for the nine months to 30 September 2019
increased to GBP1,724.8m from GBP1,607.1m, an increase at constant
currency of 4.7%, (7.3% at actual rates). Pre-2018 occupancy
improved 3.1 percentage points on a like-for-like basis to
76.0%.
Network development
During the third quarter, we added 66 new organic locations and
2.2m sq. ft. of additional space to our global network, with net
growth capital investment5 of GBP64.4m. In the nine months ended 30
September 2019 the Group has added 180 new locations, approximately
one-third by partnering, and 5.2m sq. ft. of space, taking the
Group's total network at 30 September 2019 to 60.4m sq. ft. and
3,348 locations worldwide. This includes the opening of 82 new
Spaces locations and 3.5m sq. ft. of new space. Net growth capital
investment in the nine months to 30 September 2019 was
GBP249.9m.
In addition to the organic development of the network, we are
seeing increasing opportunities to grow the scale of the business
and further advance our multi-brand strategy through M&A. Where
it makes strategic sense, we are ready to use our strong financial
position to undertake such activity. Recently in the UK we acquired
Clubhouse, a multi-location meeting room and membership business,
from the administrator for a nominal sum. We expect to grow this
brand in the years to come.
This year we have been increasingly proactive and accelerated
the rationalisation of the network, where locations no longer fit
into our network or were unlikely to contribute to value creation.
We rationalised approximately 4% of the network in the nine months
to 30 September 2019. Although this impacts profitability in the
short term (by GBP27.9m for the year to date), it will deliver
improved returns and value creation in the future. This focus is
expected to continue in the fourth quarter and into the early part
of 2020.
At the end of October 2019, we had visibility on net growth
capital expenditure for the whole of 2019 of approximately GBP280m,
260 locations and 7.5m sq. ft. of new space.
Excellent franchising momentum
We continue to experience excellent momentum in our franchising
activities. Following the master franchise agreements in Japan,
Taiwan and Switzerland, in total we have 27 franchise partners
across 22 countries, with combined commitments of over 400 new
centre locations.
During the third quarter we entered into our second strategic
partnership with TKP with the divestment of our Taiwan business for
a gross consideration of GBP22.7m and related exclusive master
franchise agreement for that territory. This has been supplemented
with strong traction in our traditional franchise activities. In
the third quarter we added two new franchise partners, in Southern
Germany and the Cayman Islands. Together with Taiwan, these
franchises included commitments to open over 30 new locations. This
continuation of excellent momentum brings the year to date progress
to eight new franchisees and commitments for new centres to over
210.
As reported on 4 November 2019 we have entered into a strategic
partnership in Switzerland with the J. Safra Group and the P.
Peress Group. This transaction follows similar deals completed
earlier this year between IWG and TKP. IWG will receive gross
consideration of CHF120m for the entire issued share capital of
IWG's subsidiaries in Switzerland, which had 38 flexible co-working
locations as at 30 September 2019. We have also entered into a
long-term master franchise agreement which provides the franchise
partner with exclusive rights to the use of IWG's brands in
Switzerland. The partner will continue to operate the existing
centres under IWG's brands and operating platform and has committed
to a development plan which will add significantly to IWG's centre
network in Switzerland.
With the increasing interest in our partnering approach from a
diverse range of parties across our regions, we anticipate
reporting on further deals in the future to continue to unlock
value for our shareholders.
Strong financial position
The Group has substantially strengthened its financial position
in the nine months to 30 September 2019, reaching a relatively low
third quarter net debt to EBITDA leverage ratio of 0.8x. This has
been achieved by a combination of our strong trading performance,
excellent profit to cash conversion and pivot to franchising.
The net debt position at 30 September 2019, excluding the lease
liabilities under IFRS 16, was GBP301.2m, which represents a
substantial decrease on the 31 December 2018 position of GBP460.8m.
This reflects the receipt of the proceeds from the Japan and Taiwan
partnering transactions but not the recently announced partnering
transaction in Switzerland, where completion is expected to occur
at the end of November 2019.
During the third quarter we also acquired approximately 5.5m
shares for a total consideration of GBP22.4m under the recently
announced GBP100m share repurchase programme.
This strong and improved financial standing places the Group in
a position of strength to capitalise on opportunities that may
arise in the future to create further shareholder value.
Summary(1)
Strong sales activity has continued to drive good revenue
momentum. Open centre revenue, a good indicator of future
performance, increased by 15.5% in the third quarter and 15.4% for
the nine months to 30 September 2019, at constant currency. Growth
in the pre-2018 revenue for the nine months of 4.7% at constant
currency reflects a further improvement in occupancy in both the
centres opened in 2017 and those opened in earlier years. Occupancy
for the nine months to 30 September 2019 improved 3.1 percentage
points to 76.0%.
Also encouraging for future Group performance is the strong
development of the newer centres. Locations opened in 2018 are
developing strongly and those opened in the current year are
already exhibiting the potential to be even better than the 2018
cohort of openings.
The strong momentum of our enterprise accounts business has had
a beneficial impact on the average initial duration of our customer
contracts, which has strengthened our forward order book. We expect
to see the benefit of this in future quarters.
We have a very strong pipeline of franchising opportunities
across the globe, with excellent progress made in our pivot to a
franchising business model and we look forward to reporting on
further progress on this strategy.
We remain very confident in the structural, long-term growth in
the flexible workspace market and IWG's leading position within it,
which we continue to extend. We believe our transition to a
franchising model by partnering with a growing and diverse range of
third parties will deliver a quicker and more asset light approach
to growth, which benefits all stakeholders. We are making excellent
progress in shaping the business to benefit from this significant
growth opportunity. We continue to invest in our leading global
platform and management to support our strategy and look forward to
the rest of the year with confidence.
(1) Excluding the financial performance of Japan and Taiwan,
franchised during 2019 and now disclosed as discontinued operations
under IFRS accounting standards.
(2) At constant currency.
3Pre-2018 refers to the performance in the reported period for
all operations opened on or before 31 December 2017 and were open
throughout the period. Previously referred to as the mature
performance.
(4) Presented on a pre-IFRS 16 basis.
5Net capital expenditure in new locations equals gross capital
expenditure less any contributions received towards fit-out
costs.
Conference call details
IWG plc will be hosting a call for analysts and investors at
08.30 GMT this morning. Details are set out below:
Dial in number: +44 (0) 20 7192 8000
Conference ID: 1499033
There will also be a replay facility available until 1.30pm GMT
on 12 November 2019:
Dial in number: +44 (0) 33 3300 9785
Playback ID: 1499033
This announcement contains inside information.
For further information, please contact:
IWG plc Tel: + 41 (0) 41 723 2353 Brunswick Tel: + 44 (0)
Mark Dixon, Chief Executive Officer 20 7404 5959
Eric Hageman, Chief Financial Nick Cosgrove
Officer Oli Sherwood
Wayne Gerry, Group Investor Relations
Director
This trading update contains certain forward looking statements
with respect to the operations of IWG plc. These statements
and forecasts involve risk and uncertainty because they relate
to events and depend upon circumstances that may or may not
occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements
and forecasts. Nothing in this announcement should be construed
as a profit forecast.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTUGGUGGUPBPGC
(END) Dow Jones Newswires
November 05, 2019 02:00 ET (07:00 GMT)
Grafico Azioni Iwg (LSE:IWG)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Iwg (LSE:IWG)
Storico
Da Apr 2023 a Apr 2024
