Annual Financial Report

RNS Number : 9913D

IWG PLC

08 March 2022

 

8 March 2022

IWG plc - ANNUAL FINANCIAL REPORT ANNOUNCEMENT - YEAR ENDED 31 DECEMBER 2021

IWG plc, the world's leading provider of hybrid work solutions, today announces its annual results for the year ended 31 December 2021

During 2021 the Group has delivered a decisive recovery in trading performance as the adoption of hybrid working patterns has become established practice for most employers

Key Highlights ⁽¹⁾

Highlights

-  Strengthening trading recovery from April 2021

-  Strong momentum into 2022

-  Significant increased demand with shift to hybrid working

-  Group-wide strategic review completed

-  Merger of digital assets with The Instant Group to create world's only fully integrated independent workspace platform

Financial performance recovery evident

-  Strong and increasing demand for our products as interest and adoption of hybrid working grows

-  Open centre revenue increased 0.6% year-on-year, with a strong H2 recovery with growth over H1 of 14.9%

-  Pre-2020 centres ended the year at 74.5% occupancy

-  Adjusted EBITDA of £79.6m for 2021, almost all delivered in H2

-  Cash flow improved each month sequentially following Q1

-  Growth continues into 2022

Record customer demand

-  Sequential occupancy growth since March 2021 and the Group reported its highest ever demand in Q4 2021 eclipsing pre-pandemic levels

-  83% of the Fortune 500 now amongst IWG's global customer base

Significant advance on capital-light growth

-  Strategy of moving to capital-light franchise and managed centres is working

-  Pipeline of increased growth in 2022

-  Mix between company owned and partnered / franchised will be close to 50/50 by end 2022

-  Several small MFAs completed and more discussions in the pipeline

Strong performance of company owned new investments

-  Both 2020 and 2021 investments developing strongly

-  Continuing investment in our network as we see growing demand in both the demand and supply side of the market

-  During 2020 and 2021 287 new centres were opened, delivering on our strategy of operating near-to-home centres in commuter areas along with prestige locations in metropolitan zones

Record visibility of revenue

-  Strong end to 2021 and excellent momentum into Q1, 2022

-  High level of revenue visibility driven by a progressive mix-shift towards multi-site and enterprise clients

Merger of digital assets with The Instant Group

-  Merger of digital assets with The Instant Group separately announced today

Annual results
£m	2021 (As reported)	2020 (As reported)	2021 (Pre-IFRS 16)	2020 (Pre-IFRS 16)	% change constant currency (As reported)	% change actual currency (As reported)
System-wide revenue	2,498.5	2,721.9	2,498.5	2,721.9	(4.2)%	(8.2)%
Revenue	2,2 27.9	2,43 1.9	2,2 27.9	2,4 31.9	(4 .7 )%	(8.4)%
Open centre revenue	2,180.1	2,254.3	2,180.1	2,254.3	0.6%	(3.3)%
Pre-2020 revenue	2,028.0	2,210.1	2,028.0	2,210.1	(4.6)%	(8.2)%
Operating loss - continuing operations	(87.4)	(350.0)	(248.0)	(555.5)
Adjusted operating (loss) / profit - continuing operations	(56.0)	39.8	(226.9)	(176.0)
L oss before tax - continuing operations	(259.4)	(613.3)	(253.1)	(566.3)
Adjusted loss before tax - continuing operations	(228.0)	(223.5)	(232.0)	(186.8)
Loss after tax - continuing operations	(269.7)	(645.3)	(265.5)	(609.3)
Adjusted EPS - from continuing operations (p)	(17.2)	(26.4)	(23.7)	(24.2)
Adjusted EBITDA	1,057.7	1,233.9	79.6	133.8
Adjusted cash flow before net growth capex, investments, repurchases, dividends & adjusting items	111.1	74.4	(239.1)	140.7
Net debt	6,518.2(5)	6,909.6(5)	397.0	351.1

⁽¹⁾   Results presented in accordance with pre-IFRS 16 accounting standards (as defined in Alternative performance measures section)

⁽²⁾   At constant currency

⁽³⁾   Pre-2020 refers to the performance for all operations opened on or before 31 December 2019 and which were open throughout the period

⁽⁴⁾   Adjusting items are separately disclosed as they are considered to be significant in nature and/or size

⁽⁵⁾   Net debt in accordance with IFRS 16 includes lease liabilities of £6,121.2m (2020: £6,558.5m)

 

Mark Dixon, Chief Executive of IWG plc, said:

"2021 has been a year of extraordinary transformation for IWG, for our employees, clients and for the markets we serve. Hybrid working is now an established model and businesses of all sizes are planning for a hybrid future. The shift from fixed workspace to flex is now accelerating and irreversible.

Scale is essential for us to offer the convenience that employers and employees everywhere are looking for and it is our unrivalled network with four times the number of locations, compared to our nearest competitor, that provides a unique opportunity to capitalise upon these structural changes to drive improved returns. Looking forward, the strength of our balance sheet, the flexibility of our technology and the reach of our teams give us the ability to build momentum and deliver strong growth, both with enterprises and on-line. Our strategy is delivering, and, with a strong start to the year, we look forward to continuing and accelerating the momentum achieved so far in 2022 as businesses of all sizes continue to embrace the hybrid model."

 

Details of results presentation

Mark Dixon, Chief Executive Officer, and Glyn Hughes, Chief Financial Officer, are hosting a conference call today for analysts and investors at 9.00am GMT.  You must pre-register to gain access to the call. Please contact [e-mail] for the link if you have not already received it.

A replay facility will be available for 7 days following the call:

Replay dial-in number :  08445718951

Access PIN :  2937735

For further information, please contact:
 

IWG plc Tel: [phone] Mark Dixon, Chief Executive Officer Glyn Hughes, Chief Financial Officer Wayne Gerry, Group Investor Relations Director For more information, please visit www.iwgplc.com

Brunswick Tel: [phone] Nick Cosgrove Peter Hesse

 

Chairman's statement
 

Strong finish despite the challenges
 

The last year has proven beyond all doubt that people around the world wish to work flexibly. With the widespread and accelerating adoption of hybrid working, the structural growth opportunity is clearly defining the runway that lies ahead of us. IWG is a business in the right place at the right time.

In last year's Annual Report, I wrote about how a year that started with enormous promise rapidly became one of the most difficult and challenging in IWG's history.

This year, our experience was the virtual opposite. 2021 was a year that started with a pandemic induced decline in demand across our global footprint as governments imposed unprecedented curbs on travel and work practices, yet ended with a significant uplift to our business as more and more companies across the world took action to gain the benefits inherent in the hybrid-working model.

The Delta and Omicron variants introduced new challenges during the year, but with focused sales efforts and building on the benefits of our efforts to reduce operating costs, we have now delivered a meaningful transition to revenue and EBITDA growth during the second half of the year. 

As a result, we ended 2021 with a sustained uplift to our business, including the strongest period for sales in our history. This positive development shows every sign of continuing as we support our customers' safe return to the office. Our improving financial results provide a powerful springboard for accelerating our growth strategy in 2022.

ESG journey

As described further in this report, we are committed to our ESG journey and during 2021 we continued to deliver against the objectives we have identified across our Environmental, Social and Governance pillars. We are proud to be a global organisation that is doing so much to promote and enable the uptake of the hybrid-working model, which is at the forefront of efforts to reduce the global impact of the daily commute. The transition to hybrid working not only allows corporations to more efficiently provide office space, reducing their overall property footprint by up to 50%, it also enables workers to eliminate the commute, reducing both the environmental impact and personal time loss associated with travel.

I would like to highlight here the progress we are making on our commitment to achieving net-zero emissions. We are working hard on multiple fronts to reduce our own carbon footprint through initiatives to switch to renewable energy sources and reduce energy consumption. Colleague-led initiatives are underway across the business to reduce waste and promote recycling. After the benefits from our efforts to continuously reduce our carbon footprint, we will be investing in carbon offset projects to eliminate the remaining net effect of IWG's operating activities. As a result of these collective efforts, we are bringing forward our objective to achieve being carbon neutral during 2023.

Strategic review

Companies are being driven by the need to reduce their real-estate costs and carbon footprint while attracting and retaining talent. Employees want the choice to work in a metropolitan headquarters, at home, or to collaborate with colleagues in a suburban location closer to their home. We had begun planning for this shift at IWG well before the pandemic and, with the continued development of our capital-light expansion model through franchising and management agreements, are well placed to take the next major steps forward in our growth story.

We understand our success depends on executing against a strategy which provides value for all of our stakeholders, including customers, partners, employees and communities, as well as shareholders. For our customers we are committed to ensuring that our products and services continue to empower them to attract and retain the best talent and manage their real estate efficiently and sustainably. We are developing new ways of working with our partners to maximise and share the opportunities being created by the shift to hybrid working. For our shareholders, we are working to realise the full potential of their investment through improving our operating results and the implementation of our strategy.

As previously announced, we conducted a strategic review to address and capture the opportunities being created by the rapid shift to hybrid working. We believe the value of our industry-leading digital and technology assets, services, and network of physical locations will be better recognised through their being separately organised for focused management and development. In this regard, we are pleased to announce the transfer of certain of our digital assets into a business to be merged with and operated by The Instant Group to create the world's leading fully integrated independent workspace platform.

Our people

For our people, we aim to provide every opportunity to build a great career with us, developing their talent and capabilities in a diverse and inclusive environment and representing IWG as a progressive force in the countries where we operate. I would like to take this opportunity to extend my personal thanks to everybody who has been responsible for IWG's outstanding achievements during the year. I would especially like to thank all those team members at every level who have continued to represent the company so brilliantly in all our markets across the world. Despite the many challenges they have faced during the pandemic, they have shown great resolve to continuing to provide great service to our customers to maintain the IWG difference and our position at the forefront of one of the world's most exciting business sectors.

Our Board

I am immensely grateful to my Board colleagues for their continued dedication to fulfilling the IWG vision and the outstanding quality of advice that they have brought to the business during another very active year. The recommendations of the external evaluation of Board performance conducted during the year have been incorporated into our plans and we continue to have full confidence in the Board members and processes. Succession planning at Board level will remain a key focus area for 2022.

We are committed to increasing the ethnic diversity of the board and are pleased to announce that Tarun Lal will be joining the Board as a Non-Executive Director with effect from 10 May 2022, subject to applicable law including shareholder approval at the Company's upcoming annual general meeting. Tarun will bring extensive franchising expertise to the Board from his over 20 years of experience with Yum! Restaurants where he has held executive roles including Global Chief Operating Officer KFC and his current role as Managing Director, Middle East, Turkey, Africa and India. 

Looking ahead

The case for hybrid has been accelerated to the forefront of employer and employee thinking across the world by the pandemic. As hybrid working becomes the operational model for many organisations, we are confident about the continuing structural growth drivers at play in our industry. For many businesses embracing these changes, IWG is the automatic first port of call due to the advantages offered by the geographic coverage of our network, our differentiated technology platform and the experience of our people.

We are all watching with great concern the increasing geopolitical uncertainties and devastating humanitarian crises arising from the conflict in Ukraine, where our thoughts are with those directly impacted, including our own colleagues and customers.

IWG has strong momentum as we prepare to address the challenges and capture the opportunities in 2022 and beyond. Our ability to address new challenges has been demonstrated repeatedly during the pandemic. We look forward to the opportunity to further strengthen both our lead and role as a facilitator of positive change and improvement for employers and employees as we deliver on our mission to provide a great day at work.

Douglas Sutherland

Chairman

8 March 2022

 

Chief executive officer's review
 

Right business,



right place, right time
 

As more people around the world want to work flexibly, IWG is a business in the right place at the right time.

The rapid global rise in the adoption of the hybrid-working model, where companies use technology to give their employees effective remote access and home working, in combination with easy-to-access local centres and traditional head-office sites, is here to stay. These structural changes in the way that people across the world work are driving an irreversible change in the office market. As a result, opportunities to grow our business are accelerating strongly.

The global pandemic presented IWG with many challenges throughout 2020 and the first half of 2021. However, these proved to be short-term issues, and during the second half of 2021 we made a rapid return to business growth, which is continuing strongly into 2022.

Today, we are enhancing our strategy to enable us to deliver our full potential by leveraging our global leadership position in two key areas. The first of these is our focus on growing our network through the increasing use of capital-light expansion methods such as franchising, management agreements and partnering deals. The second is our parallel focus on developing and deploying our digital assets to create an improved customer experience and build strong long-term growth with recurring revenues.

As we enter 2022, our focus is sharper than ever. Our goals are clear. I believe that with 3,314 centres, we are operating at only a fraction of our underlying potential of 30,000 centres. I also believe that the optimal proportion of IWG-owned centres in the future will be 10% at most. Today, conventional leases represent approximately 65% of our global portfolio, we expect to end the year with franchises, partnerships and management agreements reaching close to 50%.

During 2021, we entered into many attractive new franchising and management agreements. These included the sale of existing units to franchise partners, as well as entering new relationships with new partners on new properties. These actions significantly improved the quality and diversity of our global portfolio and are designed to accelerate our activities in this area throughout 2022 and the years ahead as we drive IWG towards achieving its full potential.

Our business performance in 2021

Throughout 2021, a period once again dominated by the global impact of the COVID-19 pandemic, we have shown that we are well-positioned to meet the needs of individuals and organisations who wish to change the way they work.

This was a year of two halves that culminated in a period of significant positive change. In a matter of a few months, we moved from one of the most challenging moments in our company's history at the beginning of 2021 when we experienced the highest concentration of lockdowns, which contributed to the losses reported for the year ended 31 December 2021, to a point where sales growth is now ahead of pre-pandemic levels.

In fact, we experienced the best-selling months in our more than 30-year history in the year's fourth quarter. Our global membership continues to grow and over the year we added 2 million new network users. This was complemented with a major inflection in profitability and a cash positive performance that gathered strength as the year went on.

We delivered our first franchise deals in new countries such as the USA, India, Malaysia, Poland, Brazil, Spain and Scotland.  We have good momentum in the pipeline providing a positive outlook. We also continued to invest in capital-light network growth during 2021, adding 146 new centres to our global network at a cost of £142.5m (£111.8m on a pre-IFRS 16 basis). We used an approach based on our franchise and management-agreement model for 80 of these new centre openings.

This accelerating growth in our franchise footprint is highly significant. Scale is essential for us to offer the convenience that employers and employees everywhere are looking for, and the fast-increasing coverage provided by our global network is a key competitive advantage. Working with new and existing franchise partners will therefore continue to be at the heart of our growth.

Expansion through partnership rather than investment delivers the capital-light growth that we and our shareholders are looking for, enabling us to invest in the brands, technologies and people that are our true differentiators. It also empowers us to add higher-quality centres to our network, with the full engagement of owners who retain a powerful interest in making our franchise partnerships, management agreements and partnership deals work. As a result of this expansion in 2021, we have significantly improved the quality of our portfolio overall and will continue to do so throughout 2022 and beyond as we grow our global network.

In addition, to underscore the relevance of our network to new and existing users across the world, we have progressively rebased our portfolio to deliver more choice and supply to commuter towns and rural areas. In this way, we continue to bring the workplace closer to home, helping to reduce the need for commuting and all the environmental and wellbeing challenges it brings.

Recognising that it is essential for us to offer customers brands that cater to everybody's working style, we also further developed our market leadership in this area during 2021.

The new brands in our portfolio include The Wing in the US and the Italian-based Copernico, both of which have ambitious expansion plans. The Wing, for example, is a female-focused co-working business and its acquisition gives us an exciting opportunity to expand its offer to women during a time of growing demand for alternative work environments.

We also launched a new retail-based office-space concept: 'OpenDesks', with a more open plan environment. In addition, we continued to invest in industry-leading technology and focused on ensuring that our people have the opportunity to fulfil their talent with us.

Ultimately, IWG creates value by enabling our customers to operate more cost-effectively and efficiently. We also maximise our own success by ensuring we have the skills and resources needed at every level to minimise the unnecessary use of resources, both physical and in terms of time and effort.

Our unique technology platform has evolved over many years to ensure our customers have access to some of the world's most innovative and effective tools to streamline and simplify the working day. We made significant investments in our platform during the year, recording a total IT spend of £50m. Innovations we introduced during the year include solutions supporting very large enterprise customers with tens of thousands of employees in multiple locations, to apps that help the smallest SMEs comply with local legislation. We have also continued to develop our solutions supporting hybrid working, cloud telephony and cloud printing around the world. We have invested to further support home working through our virtual products including HomeToWork, our leading platform providing access to useful daily content, a carefully curated programme of events and resources, and valuable benefits from industry-leading companies. HomeToWork enables members to make home a great place to work. We also invested in our own systems and processes, including new enterprise ERP systems, leadership succession, and redesigned processes for forecasting and business review.

In addition, we took the opportunity to improve efficiency by reducing our discretionary expenditure, with a notable reduction in our overheads while investing in technology, brand and growth.

Success on this scale is very exciting, and it continues to fuel our ambition to create the global coverage that will enable people to work anywhere and everywhere, no matter where they are located.

As a result, as we enter 2022, the company is clearly very well positioned for the future. Our network coverage is already four times the size of our nearest competitor's, and now we are on a powerful trajectory of business wins, new partnerships and capital-light network expansion.

Our financial performance in 2021

My greatest thanks go to all our team members, who were the driving force behind our success in achieving excellent results in very difficult circumstances.

The first half of 2021 was challenging, with a revenue decline of 15.3% at constant currency and a significant impact on our EBITDA and cashflow. However, this gave way to a strong second half, with a return to trading profit, reduced overheads and clear visibility into 2022. We saw an increase in sales in every quarter from March onwards, with progressive increases in occupancy and price, giving excellent momentum for further improvement in the year ahead. With the improvement in occupancy and price, a recovery in service revenues has followed, with further improvement expected in 2022.

During 2021, we saw a significant recovery in the profitability of our existing company-owned assets. Encouragingly, we are witnessing this strength of performance in multiple markets across the world, driven in part by the strong performance of our new centres which have improved the overall quality of our estate.

To take maximum advantage, we amended our financing facilities in early 2022, further securing our liquidity and strengthening our borrowing capacity for the medium term.

Overall, these achievements and trends are delivering tangible evidence that we have entered 2022 as a much stronger business than we entered 2021.

 

Group income statement

£m	2021 (As reported)	IFRS 16 Impact	2021 (Pre-IFRS 16)	2020 (Pre-IFRS 16)	IFRS 16 Impact	2020 (As reported)	% Change (constant currency) (Pre-IFRS 16)	% Change  (actual currency) (Pre-IFRS 16)
Revenue	2,227.9	-	2,227.9	2,431.9	-	2,431.9	(4.7)%	(8.4)%
Gross profit / (loss) (centre contribution)	242.6	161.3	81.3	(173.7)	193.8	20.1	(146)%	(147)%
Overheads	(327.8)	(0.7)	(327.1)	(379.2)	11.7	(367.5)	(11)%	(14)%
Operating loss(1)	(87.4)	160.6	(248.0)	(555.5)	205.5	(350.0)
Operating (loss)/profit before adjusting items(1)	(56.0)	170.9	(226.9)	(176.0)	215.8	39.8
(Loss) before tax from continuing operations	(259.4)	(6.3)	(253.1)	(566.3)	(47.0)	(613.3)
Taxation	(10.3)	2.1	(12.4)	(43.0)	11.0	(32.0)
Effective tax rate	(4.0)%		(4.9)%	(7.6)%		(5.2)%
(Loss) after tax from continuing operations	(269.7)	(4.2)	(265.5)	(609.3)	(36.0)	(645.3)
Adjusted EBITDA(1)	1,057.7		79.6	133.8		1,233.9	(39)%	(41)%

1.  Including joint ventures

Revenue and gross margin by maturity

	Revenue					Gross margin % (Pre-IFRS 16)
Continuing	2021	2020	% Change (constant currency)	% Change  (actual currency)		2021	2021 Adjusted	2020
2018 Aggregation	1,808.6	2,002.6	(6.0)%	(9.7)%		8.5%	9.9%	6.2%
New 19	219.4	207.5	9.5%	5.7%		13.4%	(7.0)%	(54.0)%
Pre-2020	2,028.0	2,210.1	(4.6)%	(8.2)%		9.0%	8.1%	0.5%
New 2020	120.4	44.2	179.6%	172.4%		(6.0)%	(20.8)%	(176.0)%
New 2021	31.7	-	-	-		-	-	-
Open centre revenue	2,180.1	2,254.3	0.6%	(3.3)%		6.7%	5.2%	(3.0)%
Closures	47.8	177.6	(72.2)%	(73.1)%		(133.9)%	(92.7)%	(60.3)%
Group	2,227.9	2,431.9	(4.7)%	(8.4)%		3.6%	3.1%	(7.1)%

Open centre revenue performance by region

On a regional basis, open centre revenue performance can be analysed as follows:

£m	FY 2021	FY 2020	% Change (constant currency)	% Change  (actual currency)
Americas	911.1	1,005.3	(3.7)%	(9.3)%
EMEA	692.3	662.3	8.0%	4.5%
Asia Pacific	228.4	228.4	2.2%	(0.1)%
UK	342.4	352.7	(2.1)%	(2.1)%
Other	5.9	5.6	-	-
Total	2,180.1	2,254.3	0.6%	(3.3)%

Americas

The Americas, our largest region, was significantly impacted by the pandemic reaching its trough occupancy in February 2021 and has recovered strongly since then. The recovery in performance is mainly being driven by the US and the business in Canada also showed good recovery momentum in the second half of the year.

£m	FY 2021	FY 2020	% Change (constant currency)	% Change  (actual currency)
Total revenue	923.6	1,066.5	(8.0)%	(13.4)%
Open centre revenue	911.1	1,005.3	(3.7)%	(9.3)%
Pre-2020 revenue	866.1	994.3	(7.4)%	(12.9)%
Pre-2020 occupancy - Square feet	70.9%	73.9%	-	(300) bps
Number of centres	1,257	1,271	-	-

Major Central Business Districts (CBDs) were challenged most in early 2021 but recovered well in the second half of the year which bodes well for a continuing trend in 2022. Regional districts achieved a higher level of occupancy and customer activity in the centres. In-line with increasing occupancies, promotions were removed, and discounts tightened which will result in improved pricing in 2022. Sales in the Americas continued its positive trend into 2022.

According to IWG research, 6 in 10 Americans want to work in the hybrid model and since the onset of the pandemic only 1 in 5 are now willing to commute for more than 30 minutes.

Revenue from open centres declined 3.7% at constant currency to £911.1m. In the fourth quarter open centre revenue grew strongly by 25.0% at constant currency. It was a similar positive trend in Q4 in the pre-2020 estate with revenue growth of 18.4% at constant currency, while full year revenue decreased 7.4% at constant currency to £866.1m.

Average occupancy for the region in the pre-2020 business was 70.9% (FY 2020: 73.9%), with strong occupancy recovery in the second half. Pre-2020 occupancy reached 74.7% in Q4 2021, being 555 bps higher compared to Q4 2020.

Meeting room and day office revenues in the Americas improved strongly throughout the second half of 2021. The recovery of occupancy in LATAM improved in the fourth quarter with strong occupancy improvements in markets like Brazil, Peru and Chile.

There were 25 new locations added in the region in 2021 and 39 locations were rationalised. After these movements, the total number of locations in the region was 1,257 at 31 December 2021.

EMEA

Our EMEA business has seen a clear turnaround in performance since February 2021, with turnover and occupancy improving strongly, especially in the second half of the year. The momentum of occupancy recovery improved in the second half of the year in all EMEA countries. Similarly, increased customer activity in centres led to improved ancillary service revenues with the fourth quarter being the strongest of the year.

Open centre revenue increased by 8.0% at constant currency, with strong year-on-year growth of 25.6% in Q4. Pre-2020 revenue improved by 0.4%, while occupancy increased to 72.1% (FY 2020: 71.5%). Pre-2020 occupancy reached 76.8% in Q4 2021, being 775 bps higher compared to Q4 2020.

£m	FY 2021	FY 2020	% Change (constant currency)	% Change  (actual currency)
Total revenue	707.1	715.1	2.2%	(1.1)%
Open centre revenue	692.3	662.3	8.0%	4.5%
Pre-2020 revenue	624.6	642.2	0.4%	(2.7)%
Pre-2020 occupancy - Square feet	72.1%	71.5%	-	56 bps
Number of centres	1,128	1,093	-	-

COVID-19 restrictions in EMEA have been diverse across countries with respective impacts on our business, but the recovery in the second half of the year was across all markets. Our major markets like France, Germany, Italy and Spain all gained momentum in the recovery of occupancy in the second half of the year. Occupancy recovery was also strong in smaller countries, especially in markets like Ireland, Luxembourg, Norway and Portugal.

Growth of our network in EMEA is progressively accelerating with the benefit of new franchise locations, management agreements and acquisitions. A total of 84 new locations were added across this region in 2021. After these additions and the rationalisation of 49 locations, the total locations in the region were 1,128 at 31 December 2021.

Asia Pacific

The impact of COVID-19 on our business in Asia Pacific was quite diverse. Revenue from all open centres increased 2.2% at constant currency to £228.4m. Revenue growth improved throughout the second half of the year. Pre-2020 revenue was down 2.2% to £214.5m (FY 2020: £223.9m) and pre-2020 occupancy decreased to 67.3% (FY 2020: 69.5%). Q4 occupancy was at 67.8%, up 144bps compared to Q4 2020.

£m	FY 2021	FY 2020	% Change (constant currency)	% Change (actual currency)
Total revenue	237.1	255.9	(5.4)%	(7.4)%
Open centre revenue	228.4	228.4	2.2%	(0.1)%
Pre-2020 revenue	214.5	223.9	(2.2)%	(4.3)%
Pre-2020 occupancy - Square feet	67.3%	69.5%	-	(222) bps
Number of centres	644	645	-	-

Trading in the second half of the year improved in major countries like Australia, China, Hong Kong, India, Singapore and Pakistan. In other markets the business environment remained challenging with recoveries anticipated in 2022.

A total of 32 new locations were added and 33 were rationalised in the region in 2021. We are seeing a clear acceleration in variable rent and management agreement deals in the region. At 31 December 2021 we had a total of 644 centres in the region.

Good progress is being made on franchising in the region. During the year we entered into a 50:50 joint venture with Hysan Development Company Limited to operate a flexible workspace business across Hong Kong, Macau and Guangdong ("the Greater Bay Area" ("GBA")).

 

UK

Lockdown restrictions had a significant impact on the UK business, with lower demand throughout the CBD of London. Outside of London our business has been more robust. Since the announcement of easing restrictions in March 2021, demand for more distributed working has further increased sales in many of the satellite towns and cities outside of London, and since summer, also in CBD of London. As a result, pre-2020 occupancy improved from March to exit the year at 70.8%. Pre-2020 occupancy for the period averaged 69.2% (FY 2020: 72.6%).

Enquiries are good and sales conversion is improving. Lower discounting and the removal of COVID-19 promotions is helping pricing on new sales. Retention is improving and is now at its highest level since the start of the pandemic. Renewal pricing is also strengthening. Meeting room demand came back strongly in June and revenue from other services is recovering with footfall improvement.

£m	FY 2021	FY 2020	% Change (actual currency)
Total revenue	354.2	388.8	(8.9)%
Open centre revenue	342.4	352.7	(2.1)%
Pre-2020 revenue	316.9	344.1	(7.9)%
Pre-2020 occupancy - Square feet	69.2%	72.6%	(336) bps
Number of centres	285	304	-

Revenue from open centres reduced by 2.1% to £342.4m, with the growth rate improving to 20.1% in Q4 year-on-year. Pre-2020 revenue declined by 7.9% to £316.9m (FY 2020: £344.1m), with the rate of growth improving in Q4 to 11.5%.

Five new locations were added and 24 rationalised in the UK in 2021. The net of these additions and the network rationalisation led to an overall reduction of locations in the region to 285 at 31 December 2021.

Strategic review

The case for hybrid working has never been clearer.

At its simplest, employers wish to reduce their real-estate costs and minimise their carbon footprint while successfully attracting the best available talent to help them compete as effectively as possible.

Hybrid working is projected to save organisations an average of £8,000 every year for every person who works remotely for half of the week. The estimated savings have been calculated based on conservative assumptions by Global Workplace Analytics. The research-based consulting firm had noted that the primary savings will come from increased productivity, lower real-estate costs, reduced absenteeism and turnover and better disaster preparedness.

Employees, meanwhile, want the freedom to choose to work in a metropolitan headquarters or at home, and to collaborate with colleagues in a rural or suburban centre close to where they live. Research commissioned by IWG shows that 70% of job candidates are insisting that companies have a hybrid work policy and half of existing employees would quit their job if forced back to the office five days a week.

Enabling companies and individuals alike to gain from all these benefits takes more than just a global network of high-quality business centres. Technology also plays an essential role, and IWG is unique in having a true platform strategy that enables us to bring together the users of hybrid space and the owners of real estate across the world.

In a very important strategic review of our organisational structure, we set in motion a major programme of work in 2021 that will shape our future direction, not only throughout 2022 but for many years to come.

The Group will continue to maintain a clear strategic focus on capital light growth. Our franchise and partnering proposition is successful and growing. Discussions in respect of small company-owned MFAs have recommenced.  We are also doing more management agreements and establishing investment partnerships, all of which contribute to capital light growth.

The Group's ongoing investment in its intellectual and digital assets will further improve efficiency and the customer experience. Together with reducing unit overhead, these are important components of our strategy to continue to maximise the performance of our company-owned locations.

The Board has also concluded that customers and shareholders would benefit from a structural separation of some of the Group's operating assets and capabilities.

We have subsequently completed the separation of certain of our digital assets and, as separately announced today, these digital assets will be merged with The Instant Group to create the world's leading fully integrated independent workspace platform. The merged business will be run by Instant's current management, led by CEO Tim Rodber, who have achieved c. 31% Compound Average Growth Rate in EBITDA over the period 2019 - 2021. The transaction comprises a net cash investment of £270m, provided by a fully underwritten debt facility, to acquire the shares of selling shareholders and provide capital for growth with Instant management investing a further £50m into the merged business. The merger underpins the new company's independent leadership position in the flexible workspace market and creates a preferred platform for the booking of flexible office space, services and inventory management, similar to models already operating in the travel and hospitality sectors. The merged business creates the largest digital platform, accessing over 30,000 buildings in more than 175 countries, served 24/7 through an integrated platform operating in more than 40 languages. The next step anticipated is a formal separation from the Group via a listing on the US or UK markets within the next two years.

In a separate strategic strand, the Group continues to review the potential separation of the property investing activities.

With these clear strategic objectives in place, the Group is in a strong position to generate enhanced free cash flow.

Focusing on what matters most to IWG

During the pandemic, I believe our purpose - creating a better day at work - became stronger, more clearly defined, and more relevant for our stakeholders than ever before.

This new strength has manifested itself in several ways over the last year, enabling us to articulate what matters most to us. For our customers, we aim always to ensure that our offering enables them to create value and flexibility in their working days, helps them to attract the best talent, and supports them with the sustainable management of their real estate.

For our people, we continuously invest in our teams, ensuring diversity and equal opportunities in all the communities across over 120 countries where we operate.

For the environment, we are empowering thousands of businesses and millions of people to reduce their carbon footprint. We achieve this simply by growing our network of centres to bring more and more workspaces into the local communities, small towns and suburbs where people actually live, raise their families and socialise with their friends.

Over the last two years, market demand has led us to open almost all our new centres in non-city centre environments.

This approach is having three important positive results. First, by driving down the need to commute, it is significantly reducing the carbon footprint of millions of workers across the world. Second, it is enabling companies to play more than lip service to the concept of work-life balance by giving people more of their own time by enabling them to work close to where they live. And third, it is supporting local economies and small businesses by encouraging people to spend more in local communities, once again making them vibrant places to live and work.

In short, it is making the much-vaunted concept of the 15-minute city a reality for millions by providing all the facilities required for hybrid working in self-sustaining local neighbourhoods.

In our 2020 Annual Report, I announced our commitment to being a carbon-neutral organisation by 2025. Throughout 2021, we have refined further our carbon-neutral programme. We accelerated our activities around minimising carbon emissions that arise from our supply chain and will be investing in carbon offset projects. As a result, we are bringing forward our ambition of becoming carbon-neutral during 2023.

Looking forward to 2022 and beyond

I believe that today IWG is uniquely well-positioned to continue to grow strongly in 2022, benefiting from the trends I have already described. We have a clear strategy and are capitalising on continuing structural tailwinds. As a result, our scale, our history, our profile and our franchise offer make us the obvious partner for property owners everywhere.

Our presence in markets across the world, long-established in urban centres and growing fast in suburban and rural communities, make us globally the most visible, the most reputable and the most experienced provider of high-quality hybrid and flexible office accommodation, membership and home-work products and associated services.

Looking to 2022 and beyond, I firmly believe that these advantages will drive our success and further strengthen our leadership position. We are committed to further improvement as accelerating capital-light growth, enabled by an expanding base of franchise and property partners, helps us serve the fast-increasing demand we are witnessing.

We already have a strong balance sheet, a superior and differentiated technology offering and strong team. More innovation, an ever-better platform and even stronger brands will improve our market-leading position yet further. This will enable us to bring new employment opportunities, a reduced carbon footprint, better work-life balance and heightened efficiency to businesses, workers and communities everywhere.

We have all been watching with horror the devastating humanitarian crisis unfolding in Ukraine, where our thoughts are with those impacted, including some of our own people. Our commitment to our colleagues and customers in Ukraine is unwavering and we are supporting humanitarian relief efforts.  Our centres in neighbouring countries are organising collections of essential supplies including clothing and food for the Ukrainian people displaced by the conflict. Additionally, a fund in aid of UNICEF has also been created.

Notwithstanding geopolitical uncertainties, I am confident that IWG has the energy, agility and momentum required for the significant opportunities ahead. Our trading momentum and forward order book are giving us clear visibility for strong growth in 2022 and an increasingly positive future, which confirms we are in the right place at the right time as businesses continue to embrace hybrid working.

Mark Dixon

Founder and CEO

8 March 2022

 

Chief financial officer's review
 

2021 dominated by COVID-19, but good


progress achieved
 

COVID-19 continued to present challenges globally, but it has also increased awareness and adoption of hybrid working. This, together with the swift actions the Group has taken since the onset of the pandemic, has delivered a sequentially improving financial performance commencing in the second quarter."

Financial performance

The review below highlights the reported 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.

The Group also presents the results in accordance with pre-IFRS 16 accounting standards as it provides useful information to stakeholders on how the Group is managed, operating performance targets are measured, and reporting for bank covenants and certain lease agreements are prepared.

Adjusting items

The continuation of COVID-19 in most of the Group's markets had a significant impact on our business in early 2021 which initially slowed the pace of recovery and directly contributed to the reduced revenue reported in 2021 (when compared to 2020) and the net losses. Consequently, the Group in 2021 continued to take measures to build greater resilience into the business and future-proof it for the long-term structural growth opportunity. The success of these measures became evident in the momentum that built in the business during the remainder of 2021. These actions, together with the slower than originally anticipated recovery caused directly by COVID-19, have resulted in further charges. These adjusting items totalled £31.4m (2020: £389.8m), £8.4m of which are non-cash items.

 

Group income statement

£m	2021 (As reported)	IFRS 16 impact	2021 (Pre-IFRS 16)	2020 (Pre-IFRS 16)	IFRS 16 impact	2020 (As reported)
System-wide revenue	2,498.5	-	2,498.5	2,721.9	-	2,721.9
Revenue	2,227.9	-	2,227.9	2,431.9	-	2,431.9
Gross profit/(loss) (centre contribution)	242.6	161.3	81.3	(173.7)	193.8	20.1
Gross profit before adjusting items(1)	240.9	171.6	69.3	149.4	204.1	353.5
Overheads(2)	(327.8)	(0.7)	(327.1)	(379.2)	11.7	(367.5)
Joint ventures	(2.2)	-	(2.2)	(2.6)	-	(2.6)
Operating loss	(87.4)	160.6	(248.0)	(555.5)	205.5	(350.0)
Operating (loss)/profit before adjusting items(1)	(56.0)	170.9	(226.9)	(176.0)	215.8	39.8
Net finance costs	(172.0)	(166.9)	(5.1)	(10.8)	(252.5)	(263.3)
Loss before tax from continuing operations	(259.4)	(6.3)	(253.1)	(566.3)	(47.0)	(613.3)
Taxation	(10.3)	2.1	(12.4)	(43.0)	11.0	(32.0)
Effective tax rate	(4.0)%		(4.9)%	(7.6)%		(5.2)%
Loss after tax from continuing operations	(269.7)	(4.2)	(265.5)	(609.3)	(36.0)	(645.3)
Profit/(loss) after tax from discontinued operations	59.3	9.9	49.4	4.9	(6.4)	(1.5)
(Loss)/profit for the period	(210.4)	5.7	(216.1)	604.4	(42.4)	(646.8)
Basic EPS (p)
-  From continuing operations before adjusting items(1)	(17.2)		(23.7)	(24.2)		(26.4)
-  Attributable to shareholders	(20.3)		(20.9)	(63.5)		(67.9)
Depreciation & amortisation	1,109.4		305.6	307.3		1,195.0
Adjusted(1) EBITDA	1,057.7		79.6	133.8		1,233.9

1.  Adjusting items relate to income and costs arising specifically from the impact of COVID-19

2.  Overheads for 2021 include COVID-19 non-recurring items of £33.1m (2020: £56.4m).

On a pre-IFRS 16 basis these adjusting items totalled £21.1m (2020: £379.5m), of which a net benefit of £1.9m was non-cash. These adjusting items primarily reflect network rationalisation, Group restructuring costs and provision for expected credit losses.

Network rationalisation

With the uncertainty caused directly by COVID-19 persisting through 2021, further marginal centres were eliminated from the network. This led to a charge of £83.1m (2020: £58.5m). This charge was offset by a £125.2m reversal of impairment of property, plant and equipment (2020: impairment of £244.8m).

Under pre-IFRS 16, COVID-19 related rationalisation of the network led to a charge of £59.8m which was more than fully offset by utilising £124.6m of the previously established provision, resulting in a net benefit of £64.8m (2020: net charge of £312.0m).

Restructuring costs

A charge of £32.6m (2020: £43.3m) is included within adjusting items to cover legal and other professional costs, including costs associated with the significant number of individual centre renegotiations undertaken during 2021.

Provision for expected credit losses

The prolonged impact of COVID-19 and the emergence of new variants of the virus in some markets continued to present an unprecedented challenge to many customers who may struggle to navigate through these challenges. The Group has therefore further reviewed the recoverability of its debtor profile and recognised an additional £53.5m (2020: £17.5m) in credit losses. The increase is low compared to the overall debtor profile as the Group has not historically incurred significant credit losses and continues to maintain customer deposits as additional security in the event of non-performance of customer contracts.

Other one-off items

During the year the Group incurred £0.5m of transaction costs in respect of aborted transactions that did not complete due to COVID-19 (2020: £8.2m). In addition, during the year, the Group received a total of £0.7m (2020: £6.4m) in respect of worldwide support schemes.

 

 

Cost benefit

The swift actions taken to mitigate the impact of the global pandemic on the business, together with the ongoing sharp focus on all costs, has resulted in significant savings in overheads and centre-related costs, despite the operating losses incurred in 2021. Overall, the cost optimisation programme has delivered an annualised run rate cost reduction of approximately £324m.

These cost savings exclude the c. £129m of cost investment in new centres. After the new centre investment, the net cost benefit in 2021 was c. £148m.

Revenue

System-wide revenue decreased from £2,721.9m to £2,498.5m, a 4.2% decline at constant currency. This is a new additional performance measurement for the Group and one we consider provides a better reflection of the scale of the business, which will become increasingly relevant as we progress our strategy of faster, capital-light growth, with the resultant increased emphasis on franchising, management agreements and other partnering arrangements.

On a reported basis, total Group revenue decreased from £2,431.9m to £2,227.9m, a 4.7% decline when compared at constant currency. This is a good outcome given the on-going impact of the pandemic and one that demonstrates the growing sequential momentum achieved from the second quarter onwards. The reported decline in Group revenue in Q1 was 20.9%, down 15.3% for the first half and down 9.9% for the nine months to 30 September, all at constant currency. Full year revenue declined 4.7% reflecting the first half decline of 15.3% being offset by year-on-year growth in the second half of 7.3%.

This improving momentum in the business from March 2021 was similarly reflected in the revenue from open centres and the like-for-like pre-2020 estate. Open centre revenue declined 10.4% in H1 but increased 12.6% in H2 year-on-year, delivering a 0.6% increase at constant currency to £2,180.1m (2020: £2,254.3m). Pre-2020 revenue increased by 7.1% in H2 which, after a H1 decline of 15.0%, resulted in a revenue decline of 4.6% at constant currency to £2,028.0m (2020: £2,210.1m).

Occupancy in the pre-2020 estate for 2021 was 70.6% (2020: 72.5%), with momentum improving during the year. Fourth quarter occupancy was 270 bps higher than the third quarter at 71.2%, with a December exit rate of 74.5%. Encouragingly, this performance has continued into the start of 2022, with most major markets contributing. The breadth of our coverage in satellite towns and suburban locations continues to be beneficial.

The continued maturation of the locations opened in 2019 and 2020 has been good. Revenue from centres opened in 2019 increased by 9.5% at constant currency. The new locations opened in 2020 have performed strongly, with occupancy increasing from 33.9% to 54.2%. The initial revenue contribution from the new 2021 openings has also been strong with exit occupancy in December 2021 of 44.5%.

Gross profit

The adjusted gross profit reported for the period was £240.9m, which compares to £353.5m for 2020. Reported gross profit including the adjusting items was £242.6m (2020: £20.1m).

Under pre-IFRS 16 the adjusted gross profit was £69.3m (2020: £149.4m). With a loss of £15.1m reported for the first half of 2021, this full year gross profit illustrates the improved profitability of the business in the second half. Adjusting for the negative contribution from closures of £44.3m and the contribution drag of £50.9m from the new centres added in 2020 and 2021, the gross profit generated by the pre-2020 estate was £164.5m (2020: £211.6m).

2021 performance, £m	Pre-2020 centres	New centres	Closed centres	Total centres
Revenue	2,028.0	152.1	47.8	2,227.9
Cost of sales	(1,751.1)	(189.0)	(46.8)	(1,987.0)
Gross profit/(loss) (centre contribution)	276.9	(36.9)	1.0	240.9
Gross margin	13.7%			10.8%
Cost of sales(1)	(1,863.5)	(203.0)	(92.1)	(2,158.6)
Gross profit/(loss) (centre contribution)(1)	164.5	(50.9)	(44.3)	69.3
Gross margin(1)	8.1%			3.1%

2020∫ performance, £m	Pre-2020 centres	New centres	Closed centres	Total centres
Revenue	2,210.1	44.2	177.6	2,431.9
Cost of sales	(1,821.0)	(78.9)	(178.5)	(2,078.4)
Gross profit/(loss) (centre contribution)	389.1	(34.7)	(0.9)	353.5
Gross margin	17.6%			14.5%
Cost of sales(1)	(1,998.5)	(77.0)	(207.0)	(2,282.5)
Gross profit/(loss) (centre contribution)(1)	211.6	(32.8)	(29.4)	149.4
Gross margin(1)	9.6%			6.1%

1.  Results presented in accordance with pre-IFRS 16 accounting standards and before adjusting items.

EBITDA

Adjusted EBITDA as reported reduced to £1,057.7m (2020: £1,233.9m), due to the continued impact of COVID-19 on our business performance. Reported EBITDA including the adjusting items was £1,026.3m (2020: £844.1m).

Under pre-IFRS 16, adjusted EBITDA declined from £133.8m to £79.6m. Adjusted EBITDA reflects the significant drag from the investment in growth, which in 2021 was £50.1m (2020: £36.0m), and a further £42.6m in respect of closed centres (2020: £23.3m).

Pre-IFRS 16 EBITDA including the adjusting items was £58.5m (2020: a loss of £245.7).

 

 

Overhead investment

Reported Group overheads, excluding adjusting items of £33.1m, decreased 2.4% at constant currency to £294.7m (2020: £311.1m).

Under pre-IFRS 16, Group overheads excluding adjusting items reduced by 6.2% at constant currency to £294.0m (2020: £322.8m). This is another good performance, building on the decisive actions which commenced in 2020. As a percentage of Group revenue, overheads were 13.2% which is 10bps lower than the 13.3% of revenue they represented in 2020, notwithstanding the £204.0m reduction in Group revenue from 2020. We also invested in building our in-country sales teams and our marketing to support our pivot to capital-light growth.

Operating loss - continuing operations

Adjusted operating loss as reported was £56.0m (2020: profit of £39.8m). Including the adjusting items, the operating loss was £87.4m compared to a loss of £350.0m in 2020.

Under pre-IFRS 16, the adjusted operating loss for the year was £226.9m (2020: loss of £176.0m). The operating profit continues to reflect the drag from growth investment of £83.8m (2020: £51.0m) as well as losses of £49.4m from centres closed during 2021 (2020: £49.4m from closures in 2021 and 2020). Including the adjusting items of £21.1m, the operating loss was £248.0m (2020: loss of £555.5m).

Net finance costs

The Group has reported net finance costs under IFRS 16 for the year of £172.0m (2020: £263.3m), including interest on the Group's lease liabilities.

Under pre-IFRS 16, the Group reported a net finance expense for the year of £5.1m (2020: £10.8m). The reduction in the net finance expense primarily reflects the significant gain on the mark-to-market of the option element of the convertible bond, resulting in a gain of £22.5m (2020: £2.4m gain). Excluding the mark-to-market of the convertible bond and a small foreign exchange translation gain of £0.1m (2020: £3.2m gain), the total net financial expense was £27.7m (2020: £16.4m).

Taxation

The reported effective tax rate for 2021 is (4.0)% (2020: (5.2)%) on continuing operations. The effective tax rate on continuing operations under pre-IFRS 16 is (4.9)% (2020: (7.6)%). Despite reporting a loss for the year, the Group incurred a tax charge due to the continuing profitability of certain countries and entities within the overall Group.

Looking forward, factors that may potentially influence the effective tax rate include the shape of the recovery in the Group's trading performance, the availability of tax losses and the continuing ownership of specific countries or regions which may change due to future potential franchise agreements.

Earnings per share

Reported basic earnings per share for the year was a loss of 20.3p (2020: loss of 67.9p). The loss per share from continuing operations before adjusting items was 17.2p (2020: loss of 26.4p).

Under pre-IFRS 16, earnings per share improved in the year from a loss 63.5p to a loss per share of 20.9p. Earnings per share from continuing operations was a loss of 25.8p compared to a loss of 64.0p in 2020. Excluding the adjusting items, the loss per share was 23.7p (2020: loss of 24.2p).

Diluted earnings per share for the year was a loss of 20.9p (2020: loss of 63.5p). Diluted earnings per share on a continuing basis before adjusting items for the year was a loss of 23.7p (2020: loss of 24.2p).

The weighted average number of shares in issue for the year was 1,007,214,854 (2020: 951,890,712). The weighted average number of shares for diluted earnings per share was 1,102,442,649 (2020: 1,045,771,886). No shares were acquired during 2021 to be held in treasury. The Group reissued 844,559 shares from treasury to satisfy exercises under various Group long-term incentive schemes during 2021.

Cash flow

The Group reported cash inflow for the year of £111.1m before net investment in growth capital expenditure (2020: £74.4m), which is a strong improvement on the cash outflow of £230m in the six months to 30 June 2021. This reflects the inflection of our trading performance and an improvement in working capital after the payment of deferred rents in H1 which were retained in 2020.

Overall, the Group reported a reduction in net debt for the year of £391.4m. This was after the investment in net growth capital expenditure of £142.5m (2020: £203.8m), purchase of investments in joint ventures £33.4m, proceeds from franchise agreements of £52.3m, the return from an aborted potential acquisition of £283.7m and a currency translation benefit of £119.6m. Net debt at 31 December 2021 reduced to £6,518.2m from £6,909.6m at 31 December 2020.

On a pre-IFRS 16 basis, the Group experienced a cash outflow of £239.1m before investment in growth compared to a cash inflow of £140.7m for 2020. The full year cash outflow reflects an improvement on the £303.0m outflow in the six months to 30 June 2021.

The overall increase in net debt on a pre-IFRS 16 basis was £45.9m, primarily through the planned reduction in net growth capital expenditure to £111.8m (2020: £250.9m) and the £283.7m return of cash from an aborted potential acquisition. Net debt at 31 December 2021 was £397.0m (2020: £351.1m). With the Group generating positive cash flow in the second half of 2021, the year-end position is better than the interim net debt position of £414.6m at 30 June 2021.

Capital investment in the network

In line with the Group's expectations, net growth capital expenditure in 2021 reduced by £61.3m to £142.5m (2020: £203.8m) whilst adding a similar number of new locations and space, representing clear evidence of the increasing success of our capital light growth strategy.

Under pre-IFRS 16, net growth capital expenditure reduced by £139.1m to £111.8m (2020: £250.9m).

 

Cash flow

The table below reflects the Group's cash flow:

£m	2021 (As reported)	IFRS 16 impact	2021 (Pre-IFRS 16)	2020∫ (Pre-IFRS 16)	IFRS 16 impact	2020∫ (As reported)
Adjusted EBITDA	1,057.7	978.1	79.6	133.8	1,100.1	1,233.9
Working capital(1)	(146.1)	28.0	(174.1)	242.3	(203.0)	39.3
Growth-related partner contributions	-	50.4	(50.4)	(106.6)	106.6	-
Maintenance capital expenditure	(101.1)	_	(101.1)	(96.9)	_	(96.9)
Maintenance-related partner contributions	5.2	_	5.2	15.0	_	15.0
Tax paid	(5.4)	-	(5.4)	(21.9)	_	(21.9)
Finance costs	(182.6)	(167.1)	(15.5)	(17.0)	(249.4)	(266.4)
Finance lease liability arising on new leases(2)	(561.6)	(561.6)	-	-	(917.0)	(917.0)
Proceeds from partner contributions (lease incentives)	35.9	35.9	-	-	111.0	111.0
Other items	9.1	(13.5)	22.6	(8.0)	(14.6)	(22.6)
Cash flow before growth capital expenditure, investments, share repurchases and dividends	111.1	350.2	(239.1)	140.7	(66.3)	74.4
Gross growth capital expenditure	(192.9)	(30.7)	(162.2)	(357.5)	47.1	(310.4)
Growth-related partner contributions	50.4	-	50.4	106.6	-	106.6
Net growth capital expenditure	(142.5)	(30.7)	(111.8)	(250.9)	47.1	(203.8)
Cash flow before investments, share repurchases and dividends	(31.4)	319.5	(350.9)	(110.2)	(19.2)	(129.4)
Purchase of shares	_	-	_	(43.7)	-	(43.7)
Dividend	-	-	-	-	-	-
Corporate financing activities	0.6	-	0.6	1.8	-	1.8
Net proceeds from the issue of shares	_	-	_	313.9	-	313.9
Proceeds on convertible bond	_	-	_	343.2	-	343.2
Less: Debt element of convertible bond	_	-	_	(291.4)	-	(291.4)
Investment-related loan receivable	283.7	-	283.7	(276.2)	-	(276.2)
Net proceeds on transactions	18.9	-	18.9	3.3	-	3.3
Exchange movement	119.6	117.8	1.8	2.3	6.7	9.0
Decrease/(increase) in net debt	391.4	437.3	(45.9)	(57.0)	(12.5)	(69.5)
Opening net debt	(6,909.6)	(6,558.5)	(351.1)	(294.1)	(6,546.0)	(6,840.1)
Closing net debt	(6,518.2)	(6,121.2)	(397.0)	(351.1)	(6,558.5)	(6,909.6)

1.  Consists of proceeds from partner contributions of £19.7m (2020: £38.4m), an increase in trade and other receivables of £127.3m (2020: £76.4m) and a decrease in trade and other payables of £38.5m (2020: increase of £77.3m) as disclosed in the consolidated cash flow statement on page 21.

2.  The financial liability arising on new leases consists of the non-cash movements arising on new leases recognised less lease related finance costs.

During 2021 we added 146 new locations (2020: 141) and rationalised 145 locations (2020: 217), mostly directly COVID-19 related. At 31 December 2021, the Group's physical network comprised 3,314 locations globally, providing the largest global and most widely distributed network. The new locations added 4.1m sq. ft. of gross space. This, together with the impact of the rationalisation programme, resulted in the Group having 64.1m sq. ft. of gross space at 31 December 2021 (2020: 62.9m sq. ft.).

Maintenance capital expenditure, both as reported and on a pre-IFRS 16 basis, increased modestly to £101.1m from £96.9m. After partner contributions received, net maintenance capital expenditure increased from £81.9m to £95.9m.

Strong financial position

Reported net debt at 31 December 2021 reduced to £6,518.2m (2020: £6,909.6m), representing the renegotiation of existing leases and increased success of our capital-light growth strategy.

Net debt at 31 December 2021 on a pre-IFRS 16 basis was £397.0m (2020: £351.1m). This is an improvement on the net debt position at 30 June 2021 of £414.6m, reflecting positive cash generation in the second half. The 31 December 2021 net debt position reflects the previously highlighted return of the £283.7m investment on an aborted potential acquisition and the higher-than-normal cash outflows resulting from the completion of more deals with landlords, which triggered the release of previously deferred rent payments held over by the Group in 2020.

In February 2022, the Group reduced the £950m revolving credit facility to £750m with an unchanged maturity date in 2025.

In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023.

Foreign exchange

The Group's results are exposed to translation risk from the movement in currencies. During 2021 key individual exchange rates have moved, as shown in the table below. Overall, these exchange rate movements had a mixed impact on the Group's results. Revenue and gross profit were reduced by £88.8m and £0.5m respectively, but operating profit increased by £7.6m, reflecting the relative contribution to Group profit from our US business.

Foreign exchange rates

Per £ sterling	At 31 December			Annual year average
	2021	2020	%	2021	2020	%
US dollar	1.35	1.37	(1.5)%	1.38	1.29	7.0%
Euro	1.19	1.11	7.2%	1.16	1.13	2.7%

Risk management

Effective management of risk is a key area of focus for the Group and, crucially, integral to our strategic 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 risks can be found on pages 66 to 75 of the 2021 Annual Report and Accounts.

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 period ended 31 December 2021. Details of related party transactions that have taken place in the period can be found in note 30.

Dividends and share repurchase programme

For the purposes of liquidity, we are ensuring that the Group maintains sufficient funding especially in a period of significant centre rationalisation. Our capital allocation policy remains in place, prioritising investment in the long-term development of our business and dividend distribution to shareholders. However, given the prolonged uncertainty caused by COVID-19, we believe it is prudent to protect our liquidity and as a result, future dividend payments and a restart of our share repurchase programme are placed on hold for the moment with a clear intention of the earliest possible return to our stated shareholder return policy.

Going concern

The Group reported a loss after tax of £269.7m (2020: £645.3m) from continuing operations for the year, while net cash of £734.8m (2020: £968.9m) was generated from operations during the year. Although the Group's balance sheet at 31 December 2021 reports a net current liability position of £1,439.4m (2020: £1,330.4m), which could indicate a potential liquidity risk, the Directors concluded after a comprehensive review that no liquidity risk exists as:

1. The Group had funding available under the Group's £950.0m Revolving Credit Facility. £530.1m (2020: £731.3m) was available and undrawn at 31 December 2021. This facility was committed until March 2025 with an option to extend until 2026 (note 24); and

2. The Group maintained a 12-month rolling forecast and a three-year strategic outlook. It also monitored the covenants in its facilities to manage the risk of potential breach. The Group expects 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 restrictions.

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 COVID-19.

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.

In February 2022, the £950m revolving credit facility was reduced to £750m, with an unchanged maturity date in 2025. The facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio.

In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants.

On the basis of these actions and assessments, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group.

Glyn Hughes

Chief Financial Officer

8 March 2022

 

Consolidated income statement

	£m	Notes	Year ended 31 Dec 2021	Year ended 31 Dec 2020 Restated(1)
	Revenue	3	2,227.9	2,431.9
	Total cost of sales		(1,885.8)	(2,377.0)
	Cost of sales		(1,870.0)	(2,059.9)
	Adjusting items to cost of sales(2)		(70.0)	(71.1)
	Reversal of/(loss) on impairment of property, plant, equipment and right-of-use assets(2)	3,5	54.2	(246.0)
	Expected credit losses on trade receivables(2)	5	(99.5)	(34.8)
	Gross profit (centre contribution)	3	242.6	20.1
	Total selling, general and administration expenses		(327.8)	(367.5)
	Selling, general and administration expenses		(294.7)	(311.1)
	Adjusting items to selling, general and administration expenses	10	(33.1)	(56.4)
	Share of loss of equity-accounted investees, net of tax	21	(2.2)	(2.6)
	Operating loss	5	(87.4)	(350.0)
	Finance expense	7	(198.0)	(266.4)
	Finance income	7	26.0	3.1
	Net finance expense		(172.0)	(263.3)
	Loss before tax for the year from continuing operations		(259.4)	(613.3)
	Income tax expense	8	(10.3)	(32.0)
	Loss after tax for the year from continuing operations		(269.7)	(645.3)
	Profit/(loss) after tax for the period from discontinued operations	9	59.3	(1.5)
	Loss for the year		(210.4)	(646.8)
	Attributable to equity shareholders of the Group		(204.8)	(646.8)
	Attributable to non-controlling interests	27	(5.6)	-
	Loss per ordinary share (EPS):
	Attributable to ordinary shareholders
	Basic (p)	11	(20.3)	(67.9)
	Diluted (p)	11	(20.3)	(67.9)
	From continuing operations
	Basic (p)	11	(26.2)	(67.8)
	Diluted (p)	11	(26.2)	(67.8)

1.  The comparative information has been restated to reflect the impact of discontinued operations (note 9).

2.  The net reversal of adjusting items of £1.7m (2020: charge of £333.4m) comprises the following items included in the balances referenced (note 10):

A reversal of the impairment of property, plant and equipment and right-of-use assets of £125.2m (2020: charge of £244.8), the adjusting items to costs of sales of £70.0m (2020: £71.1m) and £53.5m (2020: £17.5m) of the expected credit losses on trade receivables balances reported.

The above consolidated income statement should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

£m	Notes	Year ended 31 Dec 2021	Year ended 31 Dec 2020
Loss for the year		(210.4)	(646.8)
Other comprehensive income/(loss) that is or may be reclassified to profit or loss in subsequent periods:
Cash flow hedges - effective portion of changes in fair value		0.2	-
Foreign exchange recycled to profit or loss from discontinued operations	9	(0.5)	-
Foreign currency translation (loss)/gain for foreign operations		(20.4)	1.3
Items that are or may be reclassified to profit or loss in subsequent periods		(20.7)	1.3
Other comprehensive income that will never be reclassified to profit or loss in subsequent periods:
Re-measurement of defined benefit liability, net of income tax	26	-	-
Items that will never be reclassified to profit or loss in subsequent periods		-	-
Other comprehensive (loss)/profit for the period, net of tax		(20.7)	1.3
Total comprehensive loss for the year, net of tax		(231.1)	(645.5)
Attributable to shareholders of the Group		(225.5)	(645.5)
Attributable to non-controlling interests	27	(5.6)	-

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Issued share capital	Share premium	Treasury shares	Foreign currency translation reserve	Hedging reserve	Other reserves(1)	Retained earnings	Total equity attributable to equity shareholders	Non-controlling interests	Total equity
Balance at 1 January 2020	9.2	-	(116.9)	34.9	(0.2)	25.8	927.7	880.5	-	880.5
Total comprehensive income/(loss) for the year:
Loss for the year	-	-	-	-	-	-	(646.8)	(646.8)	-	(646.8)
Other comprehensive income:
Foreign currency translation differences for foreign operations	-	-	-	1.3	-	-	-	1.3	-	1.3
Other comprehensive income, net of tax	-	-	-	1.3	-	-	-	1.3	-	1.3
Total comprehensive income/(loss) for the year	-	-	-	1.3	-	-	(646.8)	(645.5)	-	(645.5)
Transactions with owners of the Company
Share-based payments	-	-	-	-	-	-	6.4	6.4	-	6.4
Ordinary dividend paid	-	-	-	-	-	-	-	-	-	-
Proceeds from issue of ordinary shares, net of costs	1.3	312.6	-	-	-	-	-	313.9	-	313.9
Purchase of shares	-	-	(43.7)	-	-	-	-	(43.7)	-	(43.7)
Proceeds from exercise of share awards	-	-	6.5	-	-	-	(4.3)	2.2	-	2.2
Total transactions with owners of the Company	1.3	312.6	(37.2)	-	-	-	2.1	278.8	-	278.8
Balance at 31 December 2020	10.5	312.6	(154.1)	36.2	(0.2)	25.8	283.0	513.8	-	513.8
Total comprehensive income/(loss) for the year:
Loss for the year	-	-	-	-	-	-	(204.8)	(204.8)	(5.6)	(210.4)
Other comprehensive income/(loss):
Cash flow hedges - effective portion of changes in fair value	-	-	-	-	0.2	-	-	0.2	-	0.2
Foreign exchange recycled to profit or loss from discontinued operations	-	-	-	(0.5)	-	-	-	(0.5)	-	(0.5)
Foreign currency translation differences for foreign operations	-	-	-	(20.4)	-	-	-	(20.4)	-	(20.4)
Other comprehensive income/(loss), net of tax	-	-	-	(20.9)	0.2	-	-	(20.7)	-	(20.7)
Total comprehensive income/(loss) for the year	-	-	-	(20.9)	0.2	-	(204.8)	(225.5)	(5.6)	(231.1)
Transactions with owners of the Company
Share-based payments	-	-	-	-	-	-	5.8	5.8	-	5.8
Ordinary dividend paid	-	-	-	-	-	-	-	-	-	-
Proceeds from issue of ordinary shares, net of costs	-	-	-	-	-	-	-	-	-	-
Purchase of shares	-	-	-	-	-	-	-	-	-	-
Proceeds from exercise of share awards	-	-	2.8	-	-	-	(2.0)	0.8	-	0.8
Total transactions with owners of the Company	-	-	2.8	-	-	-	3.8	6.6	-	6.6
Acquisition of subsidiary with non-controlling interests	-	-	-	-	-	-	-	-	15.2	15.2
Balance at 31 December 2021	10.5	312.6	(151.3)	15.3	-	25.8	82.0	294.9	9.6	304.5

1. Other reserves include £10.5m 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, £37.9m arising from the Scheme of Arrangement undertaken on 14 October 2008, £6.5m relating to merger reserves and £0.1m to the redemption of preference shares, partly offset by £29.2m 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 2021	As at 31 Dec 2020
	Non-current assets
	Goodwill		13	703.8	695.5
	Other intangible assets		14	78.0	53.3
	Property, plant and equipment		15	6,376.5	6,855.9
	Right-of-use assets		15	5,254.1	5,646.9
	Other property, plant and equipment		15	1,122.4	1,209.0
	Deferred tax assets		8	326.6	188.2
	Other long-term receivables		16	49.7	55.0
	Investments in joint ventures		21	44.9	11.3
	Other investments			0.3	-
	Total non-current assets			7,579.8	7,859.2
	Current assets
	Inventory			1.2	1.3
	Trade and other receivables		17	734.2	1,003.7
	Corporation tax receivable		8	18.5	29.1
	Cash and cash equivalents		23	77.8	71.0
	Total current assets			831.7	1,105.1
	Total assets			8,411.5	8,964.3
	Current liabilities
	Trade and other payables (incl. customer deposits)		18	926.6	1,007.6
	Deferred revenue			346.4	328.9
	Corporation tax payable		8	35.9	40.0
	Bank and other loans		19,23	21.5	21.9
	Lease liabilities		23	932.5	1,019.6
	Provisions		20	8.2	17.5
	Total current liabilities			2,271.1	2,435.5
	Non-current liabilities
	Other long-term payables			5.6	5.9
	Deferred tax liability		8	140.6	0.2
	Bank and other loans		19,23	453.3	400.2
	Lease liabilities		23	5,188.7	5,538.9
	Derivative financial liabilities		24	26.9	49.6
	Provisions		20	12.4	13.5
	Provision for deficit on joint ventures		21	6.5	4.6
	Retirement benefit obligations		26	1.9	2.1
	Total non-current liabilities			5,835.9	6,015.0
	Total liabilities			8,107.0	8,450.5
	Total equity
	Issued share capital		22	10.5	10.5
	Issued share premium		22	312.6	312.6
	Treasury shares		22	(151.3)	(154.1)
	Foreign currency translation reserve			15.3	36.2
	Hedging reserve			-	(0.2)
	Other reserves			25.8	25.8
	Retained earnings			82.0	283.0
	Total shareholders' equity			294.9	513.8
	Non-controlling interests		27	9.6	-
	Total equity			304.5	513.8
	Total equity and liabilities			8,411.5	8,964.3

The financial statements on pages 117 to 162 were approved by the Board on 8 March 2022

Mark Dixon  Glyn Hughes

Chief Executive Officer    Chief Financial Officer

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

	£m	Notes	Year ended 31 Dec 2021	Year ended 31 Dec 2020 Restated(1)
	Operating activities
	Loss for the year from continuing operations		(269.7)	(645.3)
	Adjustments for:
	Profit/(loss) from discontinued operations	9	4.0	(0.9)
	Net finance expense(2)	7	172.0	263.3
	Share of loss on equity-accounted investees, net of income tax	21	2.2	2.6
	Depreciation charge	15	1,095.9	1,186.3
	Right-of-use assets	15	892.9	946.0
	Other property, plant and equipment	15	203.0	240.3
	Loss on impairment of goodwill	13	-	4.9
	Loss on disposal of property, plant and equipment	5	64.2	93.1
	Profit on disposal of right-of-use assets and related lease liabilities	5, 23	(41.5)	(25.7)
	Profit on sales of current assets		(1.4)	-
	Loss on disposal of intangible assets	5	0.3	0.1
	(Reversal)/loss on impairment of property, plant and equipment	5, 15	(7.4)	82.1
	(Reversal)/loss on impairment of right-of-use assets	5, 15	(46.8)	163.9
	Amortisation of intangible assets	5, 14	13.5	8.7
	Negative goodwill arising on an acquisition	27	(1.7)	-
	Loss on disposal of other investments	21	-	1.6
	Tax expense	8	10.3	32.0
	Expected credit losses on trade receivables	5	99.5	34.8
	(Decrease)/increase in provisions	20	(14.5)	15.2
	Share-based payments		5.8	6.4
	Other non-cash movements		(12.3)	(4.6)
	Operating cash flows before movements in working capital		1,072.4	1,218.5
	Proceeds from partner contributions (reimbursement of costs)(4)	15	19.7	38.4
	Increase in trade and other receivables		(127.3)	(76.4)
	(Decrease)/increase in trade and other payables		(38.5)	77.3
	Cash generated from operations		926.3	1,257.8
	Interest paid and similar charges on bank loans and corporate borrowings		(19.0)	(17.6)
	Interest paid on lease liabilities	23	(167.1)	(249.4)
	Tax paid		(5.4)	(21.9)
	Net cash inflows from operating activities		734.8	968.9
	Investing activities
	Purchase of property, plant and equipment	15	(220.5)	(257.4)
	Payment of initial direct costs related to right-of-use assets		(1.3)	(0.8)
	Purchase of subsidiary undertakings, net of cash acquired	27	10.6	(26.8)
	Purchase of intangible assets	14	(33.7)	(16.5)
	Purchase of other investments		(0.3)	-
	Proceeds from/(purchase of) other current receivables(3)	17	283.7	(276.2)
	Proceeds on the sale of discontinued operations, net of cash disposed of	9,21	18.9	3.3
	Proceeds on sale of property, plant and equipment		1.0	8.2
	Interest received	7	3.5	0.6
	Net cash inflows/(outflows) from investing activities		61.9	(565.6)
	Financing activities
	Proceeds from issue of loans		983.1	876.5
	Repayment of loans		(946.7)	(1,109.8)
	Proceeds from issue of convertible bonds (net of transaction costs)	19	-	343.2
	Payment of lease liabilities	23	(864.8)	(897.3)
	Proceeds from partner contributions (lease incentives)(4)	15	35.9	111.0
	Proceeds from issue of ordinary shares, net of costs	22	-	313.9
	Purchase of treasury shares	22	-	(43.7)
	Proceeds from exercise of share awards		0.8	2.2
	Payment of ordinary dividend	12	-	-
	Net cash outflows from financing activities		(791.7)	(404.0)
	Net increase/(decrease) in cash and cash equivalents		5.0	(0.7)
	Cash and cash equivalents at beginning of the year		71.0	66.6
	Effect of exchange rate fluctuations on cash held		1.8	5.1
	Cash and cash equivalents at end of the year	23	77.8	71.0

1.  The comparative information has been restated to reflect the impact of discontinued operations (note 9).

2.  The net finance expense includes mark-to-market adjustments of £22.5m (£2.4m).

3.  Included in other receivables at 31 December 2020 was mezzanine and senior debt recognised at amortised cost of £276.2m. This receivable balance was fully repaid to the Group in February 2021, together with the reimbursement of associated costs, resulting in an additional £1.4m gain on settlement.

4.  The total proceeds from partner contributions relating to the reimbursement of costs and lease incentives of £55.6m are allocated by estate in the post-tax cash return on net investment, on page 171.

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

IWG plc is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Group and Company financial statements for the year ended 31 December 2021 were authorised for issue by the Board of Directors on 8 March 2022 and the balance sheets were signed on the Board's behalf by Mark Dixon and Glyn Hughes. The Company's ordinary shares are traded on the London Stock Exchange. The audited Group accounts are included from pages 117 to 162.

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 31, and information on other related party relationships of the Group is provided in note 30.

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').

The Company prepares its parent company annual accounts in accordance with accounting policies based on the Swiss Code of Obligations; extracts from these unaudited accounts are presented on page 163.

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 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 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 2021 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 2021, with no material impact on the Group:

Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

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 32.

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.

These Group consolidated financial statements are presented in pounds sterling (£), which is IWG plc's functional currency, and all values are in million pounds, rounded to one decimal place, except where indicated otherwise.

The attributable results of those companies acquired or disposed of during the year are included for the periods of ownership.

Going concern

The Group reported a loss after tax of £269.7m (2020: £645.3m) from continuing operations for the year, while net cash of £734.8m (2020: £968.9m) was generated from operations during the year. Although the Group's balance sheet at 31 December 2021 reports a net current liability position of £1,439.4m (2020: £1,330.4m) which could give rise to a potential liquidity risk. The Directors concluded after a comprehensive review that no liquidity risk exists as:

3. The Group has funding available under the Group's £950.0m revolving credit facility. £530.1m (2020: £731.3m) was available and undrawn at 31 December 2021. This facility is committed until March 2025 with an option to extend until 2026 (note 24); and

4. The Group maintains a 12-month rolling forecast and a three-year strategic outlook. It also monitors the covenants in its facilities to manage the risk of potential breach. The Group expects 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 restrictions.

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 COVID-19.

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.

In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. In addition, the Group agreed revised covenants for the period to March 2023. The amended financial covenants include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio requirements.

The Directors performed an updated going concern assessment to reflect the impact of the amended revolving credit facility and concluded that the facility remains sufficient for the Group to retain sufficient cash reserves to continue as a going concern, for a period of at least 12 months from the date of approval of these group consolidated financial statements.

In addition, a £330.0m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants.
 

IFRS not yet effective

The following new or amended standards and interpretations that are mandatory for 2022 annual periods (and future years) are not expected to have a material impact on the Group financial statements, unless otherwise stated:

Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)	1 January 2022
Annual Improvements to IFRS Standards 2018-2020	1 January 2022
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)	1 January 2022
Reference to the Conceptual Framework - Amendments to IFRS 3	1 January 2022
Classification of Liabilities as Current or Non-Current (Amendment to IAS 1)	1 January 2023
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts	1 January 2023
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition	1 January 2023
of Accounting Estimates
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)	1 January 2023

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.

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.

Leases

The nature of the Group's leases relates 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 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 subject to impairment review 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. Lessor accounting

There are no lessor arrangements in the Group as a result of the contractual arrangements in place with customers which convey the right to use an identified asset.

6. 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.

7. Lease term

The lease term represents the period from lease inception up to either:

• The earliest point at which the lease could be broken, where break clauses exist;

• The point at which the lease could be extended, but no further, where extension options exist; or

• To the end of the contractual lease term in all other cases.

8. 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.

Dilapidations

A provision is recognised for those potential dilapidation payments when it is probable that an outflow will occur and can be reliably estimated.

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 2021. 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.

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.

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	2 years

Amortisation of intangible assets is expensed through administration expenses in the income statement.

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.

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.

Revenue

The Group's primary activity and only business segment is the provision of 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 meeting rooms) 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 infrequent transactions not indicative of the underlying performance of the consolidated Group are reported separately as non-recurring/adjusting items.

Adjusting items are separately disclosed by the Group to provide readers with helpful, additional information on the performance of the business across periods. Items arising specifically from the impact of the COVID-19 pandemic have been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board. 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.

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 disclosed in note 32. 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, including the comparison of current centre performance against pre-COVID-19 performance, to determine whether or not some, or all, of the associated costs are arising in the ordinary course of business.

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.

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 25 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.

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.

Upon adoption of IFRIC Interpretation 23, the Group considered 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.

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.

Equity

Equity instruments issued by the Group are recorded at the 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.

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.

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).

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 24. 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.

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.

Financial assets (including trade and other receivables) are measured at fair value through OCI if both of the following conditions are met:

-  The financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets; 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.

IFRS 9 requires the Group to record expected credit losses on all of its financial assets held at amortised cost, either on a 12-month or 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.

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.

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.

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 co-ordinated 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
	2021	2020	2021	2020
US dollar	1.35	1.37	1.38	1.29
Euro	1.19	1.11	1.16	1.13

 

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 four principal geographical segments (the Group's operating segments): the Americas; EMEA (Europe, Middle East and Africa); Asia Pacific; and the United Kingdom. These geographical segments exclude the Group's non-trading, holding and corporate management companies, which are included in the "Other" segment. The results of business centres in each of these regions form the basis for reporting geographical results to the chief operating decision-maker. 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.

	Americas		EMEA		Asia Pacific		United Kingdom				Other				Total
Continuing operations	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m	2021 £m	2020 Restated(5) £m		2021 £m		2020 £m		2021 £m		2020 £m		2021 £m		2020 Restated(5) £m
Revenue from external customers(1)	923.6	1,066.5	707.1	715.1	237.1	255.9	354.2		388.8		5.9		5.6		2,227.9		2,431.9
Mature(2)	866.1	994.3	624.6	642.2	214.5	223.9	316.9		344.1		5.9		5.6		2,028.0		2,210.1
2020 Expansions(2)	40.2	11.0	45.8	20.1	10.5	4.5	23.9		8.6		-		-		120.4		44.2
2021 Expansions(2)	4.8	-	21.9	-	3.4	-	1.6		-		-		-		31.7		-
Closures(2)	12.5	61.2	14.8	52.8	8.7	27.5	11.8		36.1		-		-		47.8		177.6
Gross profit/(loss) (centre contribution)	41.1	(101.7)	40.8	23.0	6.9	(17.7)	(5.3)		(80.0)		(2.2)		2.7		81.3		(173.7)
Share of loss of equity-accounted investees	-	-	(1.2)	(0.1)	(0.1)	(0.2)	(0.9)		(2.3)		-		-		(2.2)		(2.6)
Operating loss	(46.6)	(184.6)	(28.7)	(60.4)	(15.3)	(47.0)	(28.2)		(116.7)		(129.2)		(146.8)		(248.0)		(555.5)
Finance expense															(31.1)		(13.9)
Finance income															26.0		3.1
Loss before tax for the year															(253.1)		(566.3)
Depreciation and amortisation	146.7	161.4	65.8	60.9	26.8	27.8	44.8		41.2		17.9		10.6		302.0		301.9
Impairment of assets	-	-	-	-	-	-	-		-		-		-		-		-
Assets(3)	3,364.2	3,460.0	2,480.4	2,542.0	532.1	676.5	1,456.1		1,925.4		578.7		360.4		8,411.5		8,964.3
Liabilities(3)	(3,235.3)	(3,334.6)	(2,346.0)	(2,398.3)	(540.0)	(685.3)	(1,326.7)		(1,562.3)		(659.0)		(470.0)		(8,107.0)		(8,450.5)
Net assets/(liabilities)	128.9	125.4	134.4	143.7	(7.9)	(8.8)	129.4		363.1		(80.3)		(109.6)		304.5		513.8
Non-current asset additions(4)	52.8	288.1	149.3	300.8	48.4	77.2	23.1		114.6		79.6		15.9		353.2		796.6

1.  Excludes revenue from discontinued operations (note 9).

2.  Revenue has been disaggregated to reflect the basis on which it is reported to the chief operating decision-maker. Further information can be found in the unaudited "Segmental analysis -- management basis" on pages 168 and 169.

3.  Presented on a basis consistent with IFRS 16.

4.  Excluding deferred taxation.

5.  The comparative information has been restated to reflect the impact of discontinued operations.

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:

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m
Gross profit/(loss) (centre contribution) - pre-IFRS 16	41.1	(101.7)	40.8	23.0	6.9	(17.7)	(5.3)	(80.0)	(2.2)	2.7	81.3	(173.7)
Rent	413.8	445.4	316.1	308.4	115.8	126.6	131.8	147.9	4.8	1.2	982.3	1,029.5
Depreciation of property, plant and equipment including right-of-use assets	(317.5)	(339.5)	(270.8)	(275.7)	(91.1)	(112.0)	(107.3)	(130.9)	(4.4)	(1.0)	(791.1)	(859.1)
Other	(15.3)	(9.0)	2.3	17.5	(8.3)	8.1	17.5	7.1	(0.8)	(0.3)	(29.9)	23.4
Gross profit/(loss) (centre contribution)	122.1	(4.8)	88.4	73.2	23.3	5.0	11.4	(55.9)	(2.6)	2.6	242.6	20.1

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m
Operating (loss)/profit - pre-IFRS 16	(46.6)	(184.6)	(28.7)	(60.4)	(15.3)	(47.0)	(28.2)	(116.7)	(129.2)	(146.8)	(248.0)	(555.5)
Rent	413.8	445.5	316.1	308.4	115.8	126.7	131.8	160.8	5.3	2.2	982.8	1,043.6
Depreciation of property, plant and equipment including right-of-use assets	(317.5)	(339.5)	(270.8)	(275.7)	(91.1)	(112.0)	(107.6)	(131.5)	(5.3)	(2.9)	(792.3)	(861.6)
Other	(15.7)	(9.1)	1.9	17.1	(8.6)	7.8	(7.8)	7.0	0.3	0.7	(29.9)	23.5
Operating profit/(loss)	34.0	(87.7)	18.5	(10.6)	0.8	(24.5)	(11.8)	80.4	(128.9)	(146.8)	(87.4)	(350.0)

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m
Depreciation and amortisation - pre-IFRS 16	146.7	161.4	65.8	60.9	26.8	27.8	44.8	41.2	17.9	10.6	302.0	301.9
Depreciation of property, plant and equipment including right-of-use assets	317.5	339.5	270.8	275.7	91.1	112.0	107.6	131.5	5.3	2.9	792.3	861.6
Depreciation and amortisation	464.2	500.9	336.6	336.6	117.9	139.8	152.4	172.7	23.2	13.5	1,094.3	1,163.5

	Americas		EMEA		Asia Pacific		United Kingdom		Other		Total
Continuing operations	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m	2021 £m	2020 £m	2021 £m	2020 £m	2021 £m	2020 Restated(5) £m
Impairment of assets - pre-IFRS 16	-	-	-	-	-	-	-	-	-	-	-	-
(Reversal)/impairment of property, plant and equipment including right-of-use assets	(56.1)	161.3	0.1	25.2	4.7	14.1	(2.9)	45.4	-	-	(54.2)	246.0
Impairment of assets	(56.1)	161.3	0.1	25.2	4.7	14.1	(2.9)	45.4	-	-	(54.2)	246.0

 

4. Segmental analysis - entity-wide disclosures

The Group's primary activity and only business segment is the provision of global workplace solutions, therefore all revenue is attributed to a single group of similar products and services. It is not meaningful to separate this group into further categories of products. 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:

	2021		2020
£m	External revenue	Non-current assets(2)	External revenue	Non-current assets(2)
Country of tax domicile - Switzerland	3.5	-	3.5	-
United States of America	753.9	2,763.2	899.7	3,140.2
United Kingdom	354.2	1,328.8	388.8	1,613.5
All other countries(1)	1,116.3	3,161.2	1,139.9	2,917.3
	2,227.9	7,253.2	2,431.9	7,671.0

1.  Revenue of £33.8m (2020: £50.2m) is included in discontinued operations (note 9).

2.  Excluding deferred tax assets.

5. Operating loss - continuing operations

Operating loss has been arrived at after charging/(crediting):

		Notes	2021 £m	2020 £m(4)
	Revenue		2,227.9	2,431.9
	Depreciation on property, plant and equipment(1)	15	1,080.8	1,154.8
	Right-of-use assets	15	879.8	919.1
	Other property, plant and equipment	15	201.0	235.7
	Amortisation of intangible assets	14	13.5	8.7
	Variable property rents payable in respect of leases	23	62.8	64.9
	Lease expense on low-value assets	23	1.0	3.4
	Staff costs	6	342.3	343.7
	Facility and other property costs		414.4	424.5
	Expected credit losses on trade receivables(2)	24	99.5	34.8
	Loss on disposal of property, plant and equipment		64.2	93.1
	Loss on disposal of right-of-use assets and related lease liabilities		(41.5)	(25.7)
	Impairment of goodwill	13	-	4.9
	Loss on disposal of intangible assets	14	0.3	0.1
	(Reversal of impairment)/impairment of property, plant and equipment(3)	15	(54.2)	246.0
	(Reversal of impairment)/impairment of other property, plant and equipment		(7.4)	82.1
	(Reversal of impairment)/impairment of right-of-use assets		(46.8)	163.9
	Negative goodwill arising on acquisition	13	(1.7)	-
	Other costs		331.7	426.1
	Operating loss before equity-accounted investees		(85.2)	(347.4)
	Share of loss of equity-accounted investees, net of tax	21	(2.2)	(2.6)
	Operating loss		(87.4)	(350.0)

1.  Excludes depreciation expenses related to discontinued operations for right-of-use assets of £13.1m (2020: £26.9m) and other property, plant and equipment of £2.0m (2020: £4.6m).

2.  Of the £99.5m (2020: £34.8m) expected credit loss, £53.5m (2020: £17.5m) relates to COVID-19 adjusting items (note 10).

3.  The reversal of impairment of £54.2m includes an additional impairment of £96.9m (2020: £246.0m), offset by the reversal of £151.1m (2020: £nil) previously provided for (note 5).

4.  The comparative information has been restated to reflect the impact of discontinued operations.

 

	2021 £m	2020 £m
Fees payable to the Group's auditor and its associates for the audit of the Group accounts	1.3	1.4
Fees payable to the Group's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation	3.0	2.9
Other services pursuant to legislation:
Tax services	-	-
Other services	0.3	0.2
Other non-audit services	0.3	1.2

6. Staff costs

	2021 £m(1)	2020 £m(1)
The aggregate payroll costs were as follows:
Wages and salaries(2)	282.0	282.0
Social security	49.5	49.7
Pension costs	5.0	5.6
Share-based payments	5.8	6.4
	342.3	343.7

1.  Excludes staff costs related to discontinued operations of £2.0m (2020: £2.9m).

2.  Includes worldwide financial support schemes disclosed in note 10.

	2021 Average full-time  equivalents(1)	2020 Average full-time equivalents(1)(2)
The average number of persons employed by the Group (including Executive Directors), analysed by category and geography, was as follows:
Centre staff	6,142	6,367
Sales and marketing staff	117	247
Finance staff	640	631
Other staff	1,340	1,209
	8,239	8,454
Americas	2,518	2,431
EMEA	2,450	2,592
Asia Pacific	998	1,149
United Kingdom	679	683
Corporate functions	1,594	1,599
	8,239	8,454

1.  The average full-time equivalents exclude employees for disposals during 2021 of 65 (2020: 100).

2.  Following internal restructuring in 2021, the allocation of staff between departments has been amended. The apportionment by department of 2020 staff numbers has been restated to reflect the revised allocation.

Details of Directors' emoluments and interests are given on pages 94 to 108 in the Directors' Remuneration report, with audited schedules identified where relevant.

7. Net finance expense

	2021 £m	2020 £m(3)
Interest payable and similar charges on bank loans and corporate borrowings	(42.1)	(12.8)
Interest payable on lease liabilities(1)	(165.7)	(244.6)
Total interest expense	(207.8)	(257.4)
Other finance costs	9.8	(8.9)
Unwinding of discount rates	-	(0.1)
Total finance expense	(198.0)	(266.4)
Fair value gain on financial liabilities measured at FVTPL (note 19)	22.5	2.4
Total interest income(2)	3.5	0.7
Total finance income	26.0	3.1
Net finance expense	(172.0)	(263.3)

1.  Excludes lease liability finance expense related to discontinued operations of £1.4m (2020: £4.8m).

2.  Excludes interest income related to discontinued operations of £nil (2020: £0.1m).

3.  The comparative information has been restated to reflect the impact of discontinued operations.

8. Taxation

(a) Analysis of charge in the year

	2021 £m	2020 £m(1)
Current taxation
Corporate income tax	(23.9)	(42.4)
Previously unrecognised tax losses and temporary differences	8.0	8.5
Over provision in respect of prior years	4.6	11.0
Total current taxation	(11.3)	(22.9)
Deferred taxation
Origin and reversal of temporary differences	1.0	(9.1)
Total deferred taxation	1.0	(9.1)
Tax charge on continuing operations	(10.3)	(32.0)

1.  The comparative information has been restated to reflect the impact of discontinued operations.

(b) Reconciliation of taxation charge

	2021		2020(1)
	£m	%	£m	%
Loss before tax from continuing operations	(259.4)		(613.3)
Tax on profit at 11.9% (2020: 11.9%)	30.9	(11.9)	73.0	(11.9)
Tax effects of:
Expenses not deductible for tax purposes	(29.4)	11.3	(44.9)	7.3
Items not chargeable for tax purposes	34.1	(13.1)	155.0	(25.3)
Previously unrecognised temporary differences expected to be used in the future	8.0	(3.1)	8.5	(1.4)
Current year temporary differences not currently expected to be used	(112.9)	43.5	(452.2)	73.7
Adjustment to tax charge in respect of previous years	4.6	(1.8)	11.0	(1.8)
Differences in tax rates on overseas earnings	54.4	(21.0)	217.6	(35.5)
	(10.3)	3.9	(32.0)	5.1

1.  The comparative information has been restated to reflect the impact of discontinued operations.

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.

	2021 £m	2020 £m
2021	-	24.9
2022	33.6	43.1
2023	41.1	45.9
2024	48.2	49.3
2025	49.1	53.8
2026	69.7	38.8
2027	36.5	18.5
2028	36.7	16.6
2029 and later	1,455.6	1,090.3
	1,770.5	1,381.2
Available indefinitely	1,301.8	919.3
Tax losses available to carry forward	3,072.3	2,300.5
Amount of tax losses recognised in deferred tax assets	125.0	1,029.0
Total tax losses available to carry forward	3,197.3	3,329.5

Additional tax losses have been generated in 2021. There is a reduction in total tax losses recognised as deferred tax assets as a result of the overestimation of losses arising in certain head office entities in 2020 (£486.0m).

 

The following deferred tax assets have not been recognised due to uncertainties over recoverability.

	2021 £m	2020 £m
Intangibles	390.4	420.0
Accelerated capital allowances	29.8	26.4
Tax losses	757.8	564.5
Rent	49.1	48.6
Leases	29.7	22.7
Short-term temporary differences	6.7	3.7
	1,263.5	1,085.9

(d) Corporation tax

	2021 £m	2020 £m
Corporation tax payable	(35.9)	(40.0)
Corporation tax receivable	18.5	29.1

(e) Deferred taxation

The movement in deferred tax is analysed below:

	Intangibles £m	Property, plant and equipment £m	Tax losses £m	Rent £m	Leases £m	Other temporary differences £m	Total £m
Deferred tax asset
At 1 January 2020	39.4	(31.5)	115.5	54.1	93.6	(76.1)	195.0
Current year movement	(19.0)	(42.7)	137.6	9.6	13.4	(105.6)	(6.7)
Prior year movement	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Transfers	(0.2)	(4.6)	4.2	0.6	-	-	-
Exchange rate movements	1.8	0.8	(0.3)	(1.7)	(0.1)	(0.6)	(0.1)
At 31 December 2020	22.0	(78.0)	257.0	62.6	106.9	(182.3)	188.2
Current year movement	-	1.1	(17.2)	5.3	4.0	17.6	10.8
Prior year movement	-	(0.4)	(198.2)	-	-	-	(198.6)
Disposals		-	-	-	-	-	-
Transfers	47.7	77.0	-	(0.3)	0.7	200.8	325.9
Exchange rate movements	-	0.3	-	-	-	-	0.3
At 31 December 2021	69.7	-	41.6	67.6	111.6	36.1	326.6
Deferred tax liability
At 1 January 2020	(0.2)	(4.6)	4.2	0.6	-	-	-
Current year movement	-	-	-	-	(0.2)	-	(0.2)
Prior year movement	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Transfers	0.2	4.6	(4.2)	(0.6)	-	-	-
Exchange rate movements	-	-	-	-	-	-	-
At 31 December 2020	-	-	-	-	(0.2)	-	(0.2)
Current year movement	(3.1)	(5.7)	-	(0.3)	(4.9)	1.3	(12.7)
Prior year movement	-	-	-	-	-	198.5	198.5
Disposals	-	-	-	-	-	-	-
Transfers	(47.7)	(77.0)	-	0.3	(0.7)	(200.8)	(325.9)
Exchange rate movements	-	(0.3)	-	-	-	-	(0.3)
At 31 December 2021	(50.8)	(83.0)	-	-	(5.8)	(1.0)	(140.6)

 

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 net deferred tax asset of £326.6m and a deferred tax liability of £140.6m. 

In 2021 the Group has separately presented deferred tax assets and deferred tax liabilities on a country by country, or entity by entity basis where available. The transfers line in the table above reflects the adjustment required to the opening balances as at
1 January 2021 to reflect this change in presentation.

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.

Recognised deferred tax assets in respect of tax losses (£41.6m) include losses that have arisen in the United States where despite recent losses the Group considers it probable that sufficient taxable profits will be available against which these unused tax losses can be utilised over a period of three years, based on the period corresponding to the Group's business forecasting processes. The losses recorded in the United States were incurred during a period of uncertainty as a result of the global COVID-19 pandemic. Management is confident that the Group will return to profitability in this region within the aforementioned period. No reasonably possible change in any of the key assumptions would result in a significant reduction in projected tax profits such that the recognised deferred tax asset would not be realised.

At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was £15.0m
(2020: £11.9m). The only tax that would arise on these reserves if they were remitted would be non-creditable withholding tax.

In 2019 the Group recognised a deferred tax asset of £89.8m, and a corresponding deferred tax credit, in respect of the expected future value of annual amortisation on the fair market value of IP resulting from a Group restructure, which is deductible for Swiss corporate income tax purposes. Further restructuring of Group cost allocations in 2020 resulted in a reduction in the recognition of the deferred tax asset to £69.7m, and a deferred tax debit of £20.1m, based on the updated future value of amortisation deductions. In 2021 the deferred tax asset remains unchanged at £69.7m and is included as Intangibles in the deferred tax table above. Recognition of this deferred tax asset is based on the approved three-year forecast.

In October 2021, the OECD published the model rules for part of the second pillar of the proposed two-pillar solution to address the tax challenges of the digitalisation of the economy. Pillar Two is the so-called Global Anti-Base Erosion (GloBE) rule, which is designed to ensure that large multinational enterprises pay a minimum level of tax of 15% on the income arising in each jurisdiction where they operate. The minimum tax will apply to MNEs with revenue above €750.0m and so is expected to apply to the Group. These changes have not been enacted or substantively enacted and therefore do not have any impact on the tax reporting position of the Group. IWG will continue to monitor developments in these areas and consider the potential tax impact for the Group at the relevant time.

9. Discontinued operations

During 2021, the Group completed the sale of various operations through the signing of franchise agreements. The financial impact of these transactions is treated as discontinued operations in accordance with IFRS 5, however these operations under franchise will continue to be an important strategic component of the overall Group network. These transactions form part of the larger change in strategy of the Group towards adopting a franchising model. Fees from franchising activities subsequent to sale are reflected as franchise revenues in continuing operations.

Disposal of operations

During the year, the Group completed the sale of individually immaterial operations for the consideration of £52.3m (2020: £3.3m). The results of these operations up to the date of disposal were as follows:

	2021 £m	2020 £m
Revenue	33.8	50.2
Expenses	(31.3)	(56.0)
Profit/(loss) before tax for the year	2.5	(5.8)
Income tax (expense)/credit	(3.6)	1.5
Loss after tax for the year	(1.1)	(4.3)
Gain on the sale of discontinued operations	60.4	2.8
Profit/(loss) for the year, net of tax	59.3	(1.5)

 

The assets and liabilities of these operations at their respective dates of disposal were as follows:

	2021 £m	2020 £m
Total assets	72.6	2.9
Total liabilities	(81.5)	(2.2)
Net (liabilities)/assets	(8.9)	0.7
Costs directly associated with the disposal	1.3	(0.2)
Foreign exchange recycled to profit and loss	(0.5)	-
	(8.1)	0.5
Consideration on disposal (net of cash and debt)(1)	52.3	3.3
Gain on sale of discontinued operations	60.4	2.8

1.  The consideration recognised includes a non-cash element of £33.4m.

The net cash flows incurred by these operations are as follows:

	2021 £m	2020 £m
Operating	48.0	28.3
Investing	(2.1)	(1.3)
Financing	(45.8)	(27.3)
Net cash inflow/(outflow)	0.1	(0.3)

10. COVID-19 related adjusting items

Following the declaration by the World Health Organization of the COVID-19 pandemic (COVID-19) and subsequent global government restrictions, the Group has been unable to operate at full capacity. Given the political and economic uncertainty resulting from COVID-19, the Group continues to see significant volatility and business disruption, reducing expected performance in 2021 and potentially 2022.

The impact that COVID-19 has had on underlying trading performance is not recognised within adjusting items.

In order to improve the transparency and usefulness of the financial information presented and improve year-on-year comparability, the Group has identified net charges of £31.4m (2020: £389.8m) relating to directly attributable charges resulting from COVID-19. These charges are considered to be adjusting items as they meet the Group's definition, as disclosed in previous annual reports, of being both significant in nature and value to the results of the Group in the current period. Reversals of £1.7m (2020: expenses of £333.4m) have been recognised as adjusting items to cost of sales and £33.1m (2020: £56.4m) of these charges have been recognised as adjusting items to selling, general and administration expenses in the Group's income statement.

The charges relate to several separately identifiable areas of accounting judgement and estimates as follows:

	Year ended 31 Dec 2021	Year ended 31 Dec 2020
Impairments of property, plant and equipment (including right-of-use assets)(1) - net of reversals	(125.2)	244.8
Impairments of goodwill(2)	-	4.9
Provision for expected credit losses(1)	53.5	17.5
Network rationalisation(1)	70.7	77.5
Other one-off items including restructuring(3)	32.4	45.1
Total adjusting items	31.4	389.8

1.  Included as an adjusting item in cost of sales.

2.  Included as an adjusting item in selling, general and administration.

3.  Included as adjusting items in selling, general and administration except for £0.7m (2020: £6.4m) in respect of worldwide financial support schemes which is included in costs of sales.

-  Impairments of property, plant and equipment (including right-of-use assets)

The continuation of COVID-19, including new and extended preventative measures in most of the Group's markets, is expected to prolong the impact on our business in 2022. As a result of these measures, management carried 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 rationalisation process undertaken throughout the year due to the impact of COVID-19. 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 2021. Following this review, a reversal of £125.2m (2020: charge of £244.8m) was recognised within net operating expenses. Of this reversal, £38.1m (2020: charge of £80.9m) and £87.1m (2020: charge of £163.9m) were recognised against property, plant and equipment and right-of-use assets respectively.

-  Impairments of goodwill

COVID-19 and linked restrictions have impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for these markets continue to be evaluated to determine the carrying value of the CGUs, with no additional impairment taken during 2021 (2020: impairment of £4.9m).
 

-  Provision for expected credit losses

In light of the temporary closure of centres globally, the Group reviewed the recoverability of its trade receivables profile and incurred further credit losses of £53.5m (2020: £17.5m). This increase reflects the increase in credit default by the Group's debtors directly attributable to the impact of COVID-19 and the significant change in the ageing profile of trade receivables as a direct consequence of COVID-19.

-  Network rationalisation

£70.7m (2020: £77.5m) 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. A separate rationalisation charge of £5.7m (£2020: £15.3m) has also been recorded which is not included as adjusting items.

-  Other one-off items including restructuring

During the year, the Group incurred £0.5m (2020: £8.2m) of transaction costs in respect of master franchise agreements that did not complete due to the outbreak of COVID-19. The Group fully expects to resume its pivot towards a franchising model in due course.

Other charges of £32.6m (2020: £43.3m) were also incurred, including severance costs and restructurings arising from mitigating actions taken by the Group in respect of COVID-19, completed by 31 December 2021 as well as claims in respect of centre closures. In addition, during the year, the Group received a total of £0.7m (2020: £6.4m) in respect of worldwide financial support schemes to fund staff costs.

Should the estimated charges not prove to be in excess of the amounts required, the release of any amounts provided for at year-end would be treated as adjusting items.

11. Earnings per ordinary share (basic and diluted)

	2021	2020
Basic and diluted loss for the year attributable to shareholders (£m)	(210.4)	(646.8)
Basic loss per share (p)	(20.3)	(67.9)
Diluted loss per share (p)	(20.3)	(67.9)
Basic and diluted loss for the year from continuing operations (£m)	(269.7)	(645.3)
Basic loss per share (p)	(26.2)	(67.8)
Diluted loss per share (p)	(26.2)	(67.8)
Basic and diluted profit for the year from discontinued operations (£m)	59.3	(1.5)
Basic earnings per share (p)	5.9	(0.1)
Diluted earnings per share (p)	5.9	(0.1)
Weighted average number of shares for basic EPS	1,007,214,854	951,890,712
Weighted average number of shares under option	39,512,057	41,016,473
Weighted average number of shares that would have been issued at average market price	(22,437,997)	(25,287,994)
Weighted average number of share awards under the CIP, PSP, DSBP and One-off Award	1,747,819	1,744,492
Weighted average number of shares on convertible bonds	76,405,916	76,408,203
Weighted average number of shares for diluted EPS	1,102,442,649	1,045,771,886

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. There were no material awards considered anti-dilutive at the reporting date.

The Group issued £350.0m of convertible bonds in December 2020. The bond issue creates a potential 76,405,916 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 321.95p (2020: 296.88p), with a high of 383.60p on 3 March 2021 and a low of 285.80p on 13 December 2021.

12. Dividends

	2021	2020
Dividends per ordinary share proposed	-	-
Interim dividends per ordinary share declared and paid during the year	-	-

Due to the prolonged uncertainty caused by COVID-19, we believe it is prudent to protect our liquidity and as a result, no final dividend will be paid for the year ended 31 December 2021 (2020: £nil).

Our capital allocation policy remains unchanged, prioritising investment in the long-term growth of our business and dividend distribution to shareholders. Given the uncertainty caused by COVID-19 and in order to protect our liquidity in the short term, future dividend payments have been placed on hold with the intention to review the return to our progressive dividend policy when appropriate.

 

13. Goodwill

	£m
Cost
At 1 January 2020	674.6
Recognised on acquisition of subsidiaries	28.7
Goodwill impairment	(4.9)
Exchange rate movements	(2.9)
At 31 December 2020	695.5
Recognised on acquisition of subsidiaries(1)	15.7
Goodwill on derecognised on sale of subsidiaries	(0.9)
Goodwill impairment	-
Exchange rate movements	(6.5)
At 31 December 2021	703.8
Net book value
At 31 December 2020	695.5
At 31 December 2021	703.8

1.  Net of £3.7m 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 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 level and is subject to impairment reviews based on the cash flows of the CGUs within that country.

The goodwill attributable to the reportable business segments is as follows:

Carrying amount of goodwill included within:	2021 £m	2020 £m
Americas	311.9	307.0
EMEA	147.3	142.5
Asia Pacific	25.2	26.6
United Kingdom	219.4	219.4
	703.8	695.5

The carrying value of goodwill and indefinite life intangibles allocated to two countries, the USA and the UK, is material relative to the total carrying value, comprising 73% of the total. The remaining 27% of the carrying value is allocated to a further 38 countries. The goodwill and indefinite life intangibles allocated to the USA and the UK are set out below:

	Goodwill £m	Intangible assets(1) £m	2021 £m	2020 £m
USA	290.3	-	290.3	286.1
United Kingdom	219.4	11.2	230.6	230.6
Other countries	194.1	-	194.1	190.0
	703.8	11.2	715.0	706.7

1.  The indefinite life intangible asset relates to the Regus brand.

The value in use for each country has been determined using a model which derives the present value of the expected future cash flows for each individual country. 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:

-  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 2022, 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 decreased from 8.2% in 2020 to 7.5% in 2021 (post-tax WACC: 6.1%). The country-specific pre-tax WACC reflecting the respective market risk adjustment has been set between 7.2% and 9.7% (2020: 7.9% to 10.6%).

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 not result in an impairment charge in any of the 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 24.0% (2020: 11.0%) over the next five years. A terminal value centre gross margin of 28.0% is adopted from 2026, with a 0.0% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 8.3% (2020: 10.0%).

The UK model assumes an average centre contribution of 18.0% (2020: 14.0%) over the next five years. A terminal value centre gross margin of 22.0% is adopted from 2026, with a 0.0% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 7.5% (2020: 8.3%).

Management has considered the following sensitivities:

-  Market growth and WIPOS - Management has considered the impact of a variance in market growth and WIPOS. The value in use calculation shows that if the long-term growth rate is nil, the recoverable amount of the US and UK 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 88.1% (2020: 31.0%) for the US and 25.3% (2020: 18.0%) for the UK.

-  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 23.0% (2020: 13.0%) for the US and 12.0% (2020: 8.0%) for the UK.

14. Other intangible assets

	Brand £m	Customer lists £m	Software £m	Total £m
Cost
At 1 January 2020	62.2	31.8	77.3	171.3
Additions at cost	-	-	16.5	16.5
Acquisition of subsidiaries	-	0.1	0.2	0.3
Disposals (including discontinued operations)	-	(0.6)	(11.2)	(11.8)
Exchange rate movements	2.9	(0.6)	0.2	2.5
At 31 December 2020	65.1	30.7	83.0	178.8
Additions at cost	-	-	33.7	33.7
Acquisition of subsidiaries	2.2	1.5	1.4	5.1
Disposals (including discontinued operations)	-	-	(0.3)	(0.3)
Exchange rate movements	-	(0.2)	(0.5)	(0.7)
At 31 December 2021	67.3	32.0	117.3	216.6
Amortisation
At 1 January 2020	38.8	31.6	55.9	126.3
Charge for year	1.1	-	7.6	8.7
Disposals (including discontinued operations)	-	(0.6)	(11.1)	(11.7)
Exchange rate movements	2.3	(0.4)	0.3	2.2
At 31 December 2020	42.2	30.6	52.7	125.5
Charge for year	0.7	0.8	12.0	13.5
Disposals (including discontinued operations)	-	-	-	-
Exchange rate movements	-	(0.1)	(0.3)	(0.4)
At 31 December 2021	42.9	31.3	64.4	138.6
Net book value
At 1 January 2020	23.4	0.2	21.4	45.0
At 31 December 2020	22.9	0.1	30.3	53.3
At 31 December 2021	24.4	0.7	52.9	78.0

Included within the brand value is £11.2m 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

	Right-of-use  assets(1) £m	Land and buildings £m	Leasehold improvements £m	Furniture and equipment £m	Computer hardware £m	Total £m
Cost
At 1 January 2020	9,439.4	156.4	1,469.5	749.7	132.5	11,947.5
Additions	501.4	2.2	267.3	89.5	9.4	869.8
Modifications(2)	664.1	-	-	-	-	664.1
Acquisition of subsidiaries	3.0	-	4.1	0.9	0.1	8.1
Disposals(4)	(1,073.5)	(8.7)	(193.7)	(54.6)	(10.9)	(1,341.4)
Exchange rate movements	(4.5)	-	(26.2)	(10.5)	(2.1)	(43.3)
At 31 December 2020	9,529.9	149.9	1,521.0	775.0	129.0	12,104.8
Additions	176.2	10.7	109.8	73.3	7.0	377.0
Modifications(2)	478.9	-	-	-	-	478.9
Acquisition of subsidiaries	78.3	-	23.1	1.7	-	103.1
Disposals(4)	(851.8)	(0.1)	(146.4)	(33.0)	(5.4)	(1,036.7)
Exchange rate movements	(123.2)	-	(22.8)	(6.1)	(2.3)	(154.4)
At 31 December 2021	9,288.3	160.5	1,484.7	810.9	128.3	11,872.7
Accumulated depreciation
At 1 January 2020	3,522.0	6.8	703.7	422.4	101.9	4,756.8
Charge for the year(3) (6)	946.0	2.5	173.8	54.1	9.9	1,186.3
Disposals(4) (5)	(736.5)	(0.7)	(108.1)	(46.4)	(10.2)	(901.9)
Impairment	163.9	-	82.1	-	-	246.0
Exchange rate movements	(12.4)	0.1	(16.0)	(9.3)	(0.7)	(38.3)
At 31 December 2020	3,883.0	8.7	835.5	420.8	100.9	5,248.9
Charge for the year(3) (6)	892.9	2.6	134.0	58.1	8.3	1,095.9
Disposals(4) (5)	(675.1)	(0.1)	(67.0)	(23.7)	(4.5)	(770.4)
Net reversal of impairment(7)	(46.8)	-	(7.4)	-	-	(54.2)
Exchange rate movements	(19.8)	(0.1)	1.9	(4.0)	(2.0)	(24.0)
At 31 December 2021	4,034.2	11.1	897.0	451.2	102.7	5,496.2
Net book value
At 1 January 2020	5,917.4	149.6	765.8	327.3	30.6	7,190.7
At 31 December 2020	5,646.9	141.2	685.5	354.2	28.1	6,855.9
At 31 December 2021	5,254.1	149.4	587.7	359.7	25.6	6,376.5

1.  Right-of-use assets consist of property related leases.

2.  Modifications includes lease modifications and extensions.

3.  Includes depreciation expenses related to discontinued operations for right-of-use assets of £13.1m (2020: £26.9m) and other property, plant and equipment of £2.0m (2020: £4.6m).

4.  Includes disposals related to discontinued operations for right-of-use assets of £38.8m (2020: £0.7m) and other property, plant and equipment of £24.4m (2020: £1.2m).

5.  Disposals is net of £18.6m (2020: £nil) in respect of COVID-19 related adjusting items previously provided for (note 10).

6.  Depreciation is net of £25.2m (2020: £nil) in respect of COVID-19 related adjusting items previously provided for (note 10).

7.  The reversal of impairment of £54.2m includes an additional COVID-19 related impairment of £69.7m (2020: £244.8m), offset by the reversal of £151.1m (2020: £nil) 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 1 and 32.

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 arising from COVID-19, 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 2021, the Group recorded a net reversal of impairment charges of £46.8m (2020: charge of £163.9m) in respect of right-of-use assets and a net reversal of £7.4m (2020: charge of £82.1m) in respect of leasehold improvements.

 

 16. Other long-term receivables

	2021 £m	2020 £m
Deposits held by landlords against rent obligations	49.5	54.5
Other receivables	0.2	0.5
Amounts owed by joint ventures	-	-
Total non-current	49.7	55.0

17. Trade and other receivables

	2021 £m	2020 £m
Trade receivables, net	262.4	285.1
Prepayments and accrued income	133.7	128.4
Acquired debt receivable	-	276.2
Other receivables	145.5	106.0
Partner contributions receivables	30.2	33.8
VAT recoverable	159.4	171.8
Deposits held by landlords against rent obligations	3.0	2.4
Total current	734.2	1,003.7

The amount of £276.2m recognised in 2020, related to mezzanine and senior debt in an acquisition target that the Group did not control as at 31 December 2020. This classification as a current asset reflected the status of the counterparty in default and that the debt was technically repayable on demand. The balances were recognised at amortised cost of £276.2m at 31 December 2020 as the acquisition did not complete. The debts were fully repaid to the Group in February 2021.

18. Trade and other payables (including customer deposits)

	2021 £m	2020 £m
Customer deposits	384.5	423.6
Other accruals	188.5	160.0
Trade payables	167.4	270.7
VAT payable	104.1	125.6
Other payables	67.2	12.9
Other tax and social security	14.9	14.8
Total current	926.6	1,007.6

During 2021 the Group conducted a review of its customer deposits for inactive customer accounts. Based on this review, the Group has released the financial liabilities in respect of such deposits where the obligation qualifies for derecognition. The effect of these changes was an increase in operating profit of £21.9m in 2021.

19. Borrowings

The Group's total loan and borrowing position at 31 December 2021 and at 31 December 2020 had the following maturity profiles:

Bank and other loans

	2021 £m	2020 £m
Repayments falling due as follows:
In more than one year but not more than two years	4.7	6.6
In more than two years but not more than five years(1)	446.5	392.8
In more than five years	2.1	0.8
Total non-current	453.3	400.2
Total current	21.5	21.9
Total bank and other loans	474.8	422.1

1.  Includes convertible bond debt of £308.3m (2020: £298.8m).

The Group issued £350.0m convertible bonds in December 2020, raising £343.2m, net of transaction fees. At the date of issue, the convertible bonds were bifurcated between:

-  A financial liability recognised at amortised cost of £298.2m, by using the discounted cash flow of interest payments and the bonds' nominal value; and subsequently remeasured at amortised cost of £308.3m (2020: £298.8m) at 31 December 2021. The financial liability is included in the above, falling due in more than two but not more than five years.

-  A derivative financial liability of £51.8m, not being closely related to the host financial liability, was recognised separately and measured at fair value through profit or loss (note 24). A gain has been recognised at 31 December 2021 of £22.5m (2020: £2.4m) through net finance expenses, resulting in a year-end liability of £26.9m (2020: £49.4m).

Further information regarding the committed borrowings and the convertible bonds can be found on page 149 in note 24.

 

20. Provisions

	2021			2020
	Closures £m	Other £m	Total £m	Closures £m	Other £m	Total £m
At 1 January	23.9	7.1	31.0	13.0	2.8	15.8
Acquired in the period	-	4.3	4.3	-	-	-
Provided in the period	12.4	2.7	15.1	40.3	4.5	44.8
Utilised in the period(1)	(22.5)	(6.5)	(29.0)	(29.0)	-	(29.0)
Exchange rate movements	(0.6)	(0.2)	(0.8)	(0.4)	(0.2)	(0.6)
At 31 December	13.2	7.4	20.6	23.9	7.1	31.0
Analysed between:
Current	0.8	7.4	8.2	11.5	6.0	17.5
Non-current	12.4	-	12.4	12.4	1.1	13.5
At 31 December	13.2	7.4	20.6	23.9	7.1	31.0

1.  Includes provisions release related to discontinued operations of £0.2m (2020: £nil).

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 2021, 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

	Investments in joint ventures £m	Provision for deficit in joint ventures £m	Total £m
At 1 January 2020	13.8	(2.9)	10.9
Share of loss	(0.9)	(1.7)	(2.6)
Disposals	(1.6)	-	(1.6)
Exchange rate movements	-	-	-
At 31 December 2020	11.3	(4.6)	6.7
Acquisition of joint ventures(1)	33.4	-	33.4
Share of loss	0.1	(2.3)	(2.2)
Exchange rate movements	0.1	0.4	0.5
At 31 December 2021	44.9	(6.5)	38.4

1.  The acquisition of joint ventures was settled via a non-cash transaction of £33.4m.

The Group has 82 centres operating under joint venture agreements (2020: 46) 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.

The results of the joint ventures below are the full-year results of the joint ventures and do not represent the effective share:

	2021 £m	2020 £m
Income statement
Revenue	35.3	28.3
Expenses	(38.2)	(36.9)
Loss before tax for the year	(2.9)	(8.6)
Tax charge	(0.4)	(0.7)
Loss after tax for the year	(3.3)	(9.3)
Balance sheet
Non-current assets	136.9	43.1
Current assets	168.6	50.8
Current liabilities	(160.1)	(68.8)
Non-current liabilities	(125.6)	(36.4)
Net assets/(liabilities)	19.8	(11.3)

 

22. Share capital

Ordinary equity share capital

	2021		2020
	Number	Nominal value £m	Number	Nominal value £m
Authorised
Ordinary 1p shares in IWG plc at 1 January	8,000,000,000	80.0	8,000,000,000	80.0
Ordinary 1p shares in IWG plc at 31 December	8,000,000,000	80.0	8,000,000,000	80.0
Issued and fully paid up
Ordinary 1p shares in IWG plc at 1 January	1,057,248,651	10.5	923,357,438	9.2
Ordinary 1p shares issued for cash in the year	-	-	133,891,213	1.3
Ordinary 1p shares in IWG plc at 31 December	1,057,248,651	10.5	1,057,248,651	10.5

On 28 May 2020 the Group announced the placement of 133,891,213 new ordinary shares, with a par value of 1.0 pence each. The price of 239.0 pence represented a discount of 8.1% to the middle market closing price of 260.2 pence on 27 May 2020, with the Group recognising net proceeds of £313.9m, with share premium of £312.6m recognised.

Treasury share transactions involving IWG plc shares between 1 January 2021 and 31 December 2021

During the year, nil shares were purchased in the open market and 49,832,721 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 8 March 2022, 49,832,721 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.

	2021		2020
	Number of shares	£m	Number of shares	£m
1 January	50,677,280	154.1	39,055,369	116.9
Purchase of treasury shares in IWG plc	-	-	13,590,080	43.7
Treasury shares in IWG plc utilised	(844,559)	(2.8)	(1,968,169)	(6.5)
31 December	49,832,721	151.3	50,677,280	154.1

23. Net debt analysis

	Cash and cash equivalents £m	Gross cash £m	Debt due within one year £m	Debt due after one year(2) (3) £m	Lease due within one year(1) £m	Lease due after one year(1) £m	Gross debt £m	Net debt £m	Derivative liability £m	Total £m
At 1 January 2020	66.6	66.6	(9.7)	(351.0)	(977.4)	(5,568.6)	(6,906.7)	(6,840.1)	(0.2)	(6,840.3)
Cash flow	(0.7)	(0.7)	(13.1)	(45.0)	151.6	995.1	1,088.6	1,087.9	(51.8)	1,036.1
Non-cash movements(4)	-	-	-	(0.5)	(200.5)	(965.4)	(1,166.4)	(1,166.4)	2.4	(1,164.0)
Exchange rate movements	5.1	5.1	0.9	(3.7)	6.7	-	3.9	9.0	-	9.0
At 31 December 2020	71.0	71.0	(21.9)	(400.2)	(1,019.6)	(5,538.9)	(6,980.6)	(6,909.6)	(49.6)	(6,959.2)
Cash flow	5.0	5.0	1.1	(37.5)	149.1	882.8	995.5	1,000.5	0.2	1,000.7
Non-cash movements(4)	-	-	(0.9)	(15.5)	(81.6)	(630.7)	(728.7)	(728.7)	22.5	(706.2)
Exchange rate movements	1.8	1.8	0.2	(0.1)	19.6	98.1	117.8	119.6	-	119.6
At 31 December 2021	77.8	77.8	(21.5)	(453.3)	(932.5)	(5,188.7)	(6,596.0)	(6,518.2)	(26.9)	(6,545.1)

1.  There are no significant lease commitments for leases not commenced at 31 December 2021.

2.  Includes £308.3m (2020: £298.8m) convertible bond liability.

3.  Excludes the convertible bond derivative liability element at 31 December 2021 of £26.9m (2020: £49.4m) and a cash flow hedging liability at 31 December 2021 of £nil (2020: £0.2m).

4.  Includes early termination of lease liabilities of £231.7m (2020: £362.8m) of which £52.3m (2020: £0.8m) is related to discontinued operations.

Cash and cash equivalent balances held by the Group that are not available for use amounted to £7.4m at 31 December 2021 (2020: £4.1m). Of this balance, £2.6m (2020: £1.6m) is pledged as security against outstanding bank guarantees and a further £4.8m (2020: £2.5m) is pledged against various other commitments of the Group.

Cash flows on lease liabilities consist of principal payments of £864.8m (2020: £897.3m) and interest payments of £167.1m (2020: £249.4m). Total cash outflows of £1,094.7m (2020: £1,211.6m) for leases, including variable payments of £62.8m (2020: £64.9m), were incurred in the year.

Non-cash movements of £712.3m (2020: £1,165.9m) represent the movements on lease liabilities in relation to new leases, lease modifications/re-measurements and lease cessations.

Cash flows on debt due within, and after, one year 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 £26.9m (2020: £49.4m) derivative liability and a £nil (2020: £0.2m) cash flow hedging liability recognised separately.

 

The following amounts are included in the Group's consolidated financial statements in respect of its leases:

	2021	2020
Depreciation charge for right-of-use assets	(892.9)	(946.0)
Principal lease liability repayments	(864.8)	(897.3)
Interest expense on lease liabilities	(167.1)	(249.4)
Expenses relating to leases of low-value assets that are not shown above as short-term leases	1.0	3.4
Expenses relating to variable lease payments not included in lease liabilities	62.8	64.9
Total cash outflow for leases comprising interest and capital payments	1,031.9	1,146.7
Additions to right-of-use assets	176.2	501.4
Acquired right-of-use assets	78.3	3.0

24. 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.

Exposures to credit, interest rate and currency risks arise in the normal course of business.

Going concern

The Strategic Report on pages 1 to 75 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 on pages 46 to 51 within the Strategic Report reviews the trading performance, financial position and cash flows of the Group. The Group's net debt position decreased by £391.4m (2020: increased by £69.5m) to a net debt position of £6,518.2m (2020: £6,909.6m) as at 31 December 2021. Excluding the IFRS 16 lease liabilities, the net debt position increased to 397.0m (2020: £351.1m). 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 has a £950.0m revolving credit facility (RCF) provided by a group of relationship banks with a final maturity in 2025 with an option to extend until 2026. As at 31 December 2021, £530.1m (2020: £731.3m) of the RCF was available and undrawn.

Although the Group has net current liabilities of £1,439.4m (2020: £1,330.4m), 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 £346.4m (2020: £328.9m) which will be recognised in future periods through the income statement. The Group holds customer deposits of £384.5m (2020: £423.6m) 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.

In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. In addition, the Group agreed revised covenants for the period to March 2023. The amended financial covenants include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio requirements.

The Directors performed an updated going concern assessment to reflect the impact of the amended revolving credit facility and concluded that the facility remains sufficient for the Group to retain sufficient cash reserves to continue as a going concern, for a period of at least 12 months from the date of approval of these group consolidated financial statements.

In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants.

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's policy is to provide against trade receivables when specific debts are judged to be irrecoverable or where formal recovery procedures have commenced. 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 no 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.

	2021 £m	2020 £m
Americas	103.7	113.6
EMEA	88.5	82.7
Asia Pacific	21.9	31.6
United Kingdom	48.3	57.2
	262.4	285.1

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:

	Gross 2021 £m	Provision 2021 £m	Gross 2020 £m	Provision 2020 £m
Not overdue	219.9	-	161.5	-
Past due 0 - 30 days	20.8	-	27.9	-
Past due 31 - 60 days	7.3	-	16.9	-
Past due 61 - 90 days	4.3	-	3.9	-
Past due more than 90 days	37.7	(27.6)	100.6	(25.7)
	290.0	(27.6)	310.8	(25.7)

The Group conducted a review of the expected credit risk associated with accounts receivable balances during 2021. This review was performed in response to changing commercial circumstances, with the Group recognising an increase in the expected credit losses of £6.1m.

At 31 December 2021, the Group maintained a provision of £27.6m for expected credit losses (2020: £25.7m) arising from trade receivables. The Group had provided £99.5m (2020: £34.8m) in the year, utilised £97.6m (2020: £16.8m) and released £nil (2020: £nil). Customer deposits of £384.5m (2020: £423.6m) 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, either on a 12-month or 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 the COVID-19 pandemic, the Group continues to focus on cash generation by reducing cost, renegotiating rents and rationalising the network, resulting in short or long-term cash benefits. The Group has free cash and liquid investments (excluding blocked cash) of £70.4m (2020: £66.9m). In addition to cash and liquid investments, the Group had £530.1m (2020: £731.3m) available and undrawn under its committed borrowings. The Directors consider the Group has adequate liquidity to meet day-to-day requirements.

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2021, the amount of the facility remains £950.0m (2020: £950.0m) and the final maturity was extended in March 2020 to March 2025 with an option to extend until 2026.

In February 2022, the £950m revolving credit facility was reduced to £750m, with an unchanged maturity date in 2025. In addition, the Group agreed revised covenants for the period to March 2023. The amended financial covenants include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio requirements.

The Directors performed an updated going concern assessment to reflect the impact of the amended revolving credit facility and concluded that the facility remains sufficient for the Group to retain sufficient cash reserves to continue as a going concern, for a period of at least 12 months from the date of approval of these group consolidated financial statements.

In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants.

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. The final interest rate swap taken to hedge against the floating interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This had a nominal amount of £30.0m and a fixed rate of 1.2%.

 

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 2021 no cash was invested for a period exceeding three months (2020: £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 35% (2020: 37%) of the Group's revenue being attributable to the US dollar and 23% (2020: 22%) 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:

	2021
£m		GBP	EUR	USD
Trade and other receivables		-	2.3	0.4
Trade and other payables		(0.9)	(8.6)	0.2
Net statement of financial position exposure		(0.9)	(6.3)	0.6

	2020
£m		GBP	EUR	USD
Trade and other receivables		0.1	1.8	1.3
Trade and other payables		(0.4)	(4.1)	(1.8)
Net statement of financial position exposure		(0.3)	(2.3)	(0.5)

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 2021, 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 £1.2m (2020: £1.8m) 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 £1.5m for the year ended 31 December 2021 (2020: £2.9m). 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 £0.4m for the year ended 31 December 2021 (2020: £1.0m).

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 £8.0m for the year ended 31 December 2021 (2020: £6.3m). 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 £4.5m for the year ended 31 December 2021 (2020: £5.4m).

 

 

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 on page 78. In 2006, the Board approved the commencement of a progressive dividend policy to enhance the total return to shareholders.

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 on pages 94 to 108. 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 2021 and 31 December 2021

During the year, no shares were purchased in the open market and 844,559 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 31 December 2021, 49,832,721 treasury shares were held.

The Company declared and paid no interim dividend per share during the year ended 31 December 2021 (2020: nil pence) and proposed no final dividend per share (2020: 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 2021

	Effective interest rate %	Carrying value £m	Contractual cash flow £m	Less than 1 year £m	1-2 years £m	2-5 years £m	More than 5 years £m
Cash and cash equivalents	0.0%	77.8	77.8	77.8	-	-	-
Trade and other receivables(1)	-	600.5	600.5	600.5	-	-	-
Other long-term receivables	-	49.7	49.7	-	25.0	24.7	-
Financial assets(2)		728.0	728.0	678.3	25.0	24.7	-
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings	4.0%	(136.5)	(136.5)	(0.2)	(0.3)	(136.0)	-
Convertible bonds - debt host	3.8%	(308.3)	(357.2)	(1.8)	(1.8)	(353.6)	-
Lease liabilities	3.3%	(6,121.2)	(7,869.2)	(1,094.7)	(1,068.9)	(2,564.0)	(3,141.6)
Other loans	0.0%	(30.0)	(30.0)	(21.3)	(4.4)	(2.2)	(2.1)
Contingent consideration on acquisitions	-	(6.8)	(6.8)	(6.8)	-	-	-
Trade and other payables	-	(919.8)	(919.8)	(919.8)	-	-	-
Other long-term payables	-	(5.6)	(5.6)	-	(5.6)	-	-
Derivative financial liabilities:
Convertible bonds - embedded conversion option	-	(26.9)	(26.9)	-	-	(26.9)	-
Interest rate swaps
-  Outflow	-	-	-	-	-	-	-
-  Inflow	-	-	-	-	-	-	-
Financial liabilities		(7,555.1)	(9,352.0)	(2,044.6)	(1,081.0)	(3,082.9)	(3,143.7)

 

As at 31 December 2020

	Effective interest rate %	Carrying value £m	Contractual cash flow £m	Less than 1 year £m	1-2 years £m	2-5 years £m	More than 5 years £m
Cash and cash equivalents	0.1%	71.0	71.0	71.0	-	-	-
Trade and other receivables(1)	-	875.3	875.3	875.3	-	-	-
Other long-term receivables	-	55.0	55.0	-	27.8	27.2	-
Financial assets(2)		1,001.3	1,001.3	946.3	27.8	27.2	-
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings	2.8%	(91.7)	(91.7)	-	(1.0)	(90.7)	-
Convertible bonds - debt host	3.8%	(298.8)	(358.8)	(1.8)	(1.8)	(355.2)	-
Lease liabilities	3.4%	(6,558.5)	(9,073.8)	(1,159.3)	(1,074.1)	(2,538,7)	(4,301.7)
Other loans	1.2%	(31.6)	(31.6)	(21.9)	(5.6)	(3.3)	(0.8)
Trade and other payables	-	(1,007.6)	(1,007.6)	(1,007.6)	-	-	-
Other long-term payables	-	(5.9)	(5.9)	-	(5.9)	-	-
Derivative financial liabilities:
Convertible bonds - embedded conversion option	-	(49.4)	(49.4)	-	-	(49.4)	-
Interest rate swaps
-  Outflow	-	(0.2)	(0.2)	(0.2)	-	-	-
-  Inflow	-	-	-	-	-	-	-
Financial liabilities	-	(8,043.7)	(10,619.0)	(2,190.8)	(1,088.4)	(3,037.3)	(4,302.5)

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 2021	Carrying amount										Fair value
£m	Cash, loans and receivables		Other financial liabilities		Cash flow - hedging instruments		Total				Level 1	Level 2	Level 3	Total
Cash and cash equivalents	77.8		-		-		77.8				-	-	-	-
Trade and other receivables	600.5		-		-		600.5				-	-	-	-
Other long-term receivables	49.7		-		-		49.7				-	-	-	-
Derivative financial liabilities	-		(26.9)		-		(26.9)				-	-	(26.9)	(26.9)
Convertible bonds	-		(308.3)		-		(308.3)				-	-	(308.3)	(308.3)
Bank loans and corporate borrowings	-		(136.5)		-		(136.5)				-	-	-	-
Other loans	-		(30.0)		-		(30.0)				-	-	-	-
Contingent consideration on acquisitions	-		(6.8)		-		(6.8)				-	-	(6.8)	(6.8)
Trade and other payables	-		(919.8)		-		(919.8)				-	-	-	-
Other long-term payables	-		(5.6)		-		(5.6)				-	-	-	-
	728.0		(1,433.9)		-		(705.9)				-	-	(342.0)	(342.0)
31 December 2020		Carrying amount								Fair value
£m		Cash, loans and receivables		Other financial liabilities		Cash flow - hedging instruments	Total			Level 1		Level 2	Level 3	Total
Cash and cash equivalents		71.0		-		-	71.0			-		-	-	-
Trade and other receivables		875.3		-		-	875.3			-		276.2	-	276.2
Other long-term receivables		55.0		-		-	55.0			-		-	-	-
Derivative financial liabilities		-		(49.4)		(0.2)	(49.6)			-		(0.2)	(49.4)	(49.6)
Convertible bonds		-		(298.8)		-	(298.8)			-		-	(298.8)	(298.8)
Bank loans and corporate borrowings		-		(91.7)		-	(91.7)			-		-	-	-
Other loans		-		(31.6)		-	(31.6)			-		-	-	-
Trade and other payables		-		(1,007.6)		-	(1,007.6)			-		-	-	-
Other long-term payables		-		(5.9)		-	(5.9)			-		-	-	-
		1,001.3		(1,485.0)		(0.2)	(483.9)			-		276.0	(348.2)	(72.2)

Included within other receivables is £nil (2020: £276.2m) relating to mezzanine and senior debts acquired in December 2020. The balances have been recognised at fair value of £nil (2020: £276.2m) at 31 December 2021. The mezzanine and senior debt receivable balances was settled in full in February 2021.

At the date of issue, the £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability respectively. At 31 December 2021, the debt was valued at its amortised cost, £308.4m (2020: £298.8m) and the derivative liability at its fair value, £26.9m (2020: £49.4m).

During the years ended 31 December 2021 and 31 December 2020, 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 deposits, contingent consideration and investment loan receivables	For cash and cash equivalents, receivables/payables with a remaining life of 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 convertible bonds	The fair value of bank loans, overdrafts and other loans approximates the carrying value because interest rates are at floating rates where payments are reset to market rates at intervals of less than one year.
Foreign exchange contracts, interest rate swaps and derivative element of convertible bonds	The fair values are based on a combination of broker quotes, forward pricing, and swap models. The fair value of the derivative element of convertible bonds has been calculated with reference to unobservable credit spreads.

Derivative financial instruments

The following table summarises the notional amount of the open contracts as at the reporting date:

	2021 £m	2020 £m
Derivatives used for cash flow hedging	-	30.0

Committed borrowings

	2021 Facility £m	2021 Available £m	2020 Facility £m	2020 Available £m
Revolving credit facility	950.0	530.1	950.0	731.3

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2021, the amount of the facility remains £950.0m (2020: £950.0m) and the final maturity was extended in March 2020 to March 2025 with an option to extend until 2026. As at 31 December, £530.1m (2020: £731.3m) was available and undrawn under this facility.

The £950.0m revolving credit facility is subject to financial covenants. In April 2021 the Group agreed revised covenants for the period to June 2022 relating to EBITDA and liquidity headroom. The Group was in compliance with its covenants up to the date of the amendment of the covenants and is in compliance with the amended covenant requirements.

In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. In addition, the Group agreed revised covenants for the period to March 2023. The amended financial covenants include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio requirements.

In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants.

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.

Convertible bonds

In December 2020 the Group issued a £350.0m convertible bond, issued by IWG Group Holdings Sarl and transferred in the year to IWG International Holdings Sarl, 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 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 £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability, respectively. At 31 December 2021, the debt was valued at its amortised cost, £308.4m (2020: £298.8m) and the derivative liability at its fair value, £26.9m (2020: £49.4m).

The derivative liability represents a level 3 instrument, which has been valued with reference to the total convertible bond price (a level 1 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 £1.2m (2020: £1.1m).

 

25. 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 Executive Directors and certain employees to purchase shares in IWG plc. In accordance with this programme, holders of vested options are entitled to purchase shares at the market 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

	2021		2020
	Number of share options	Weighted average exercise price per share	Number of share options	Weighted average exercise price per share
At 1 January	42,926,841	184.38	32,511,195	200.34
Granted during the year	3,508,813	313.90	21,248,148	167.62
Lapsed during the year	(2,566,253)	190.35	(9,296,503)	208.41
Exercised during the year	(1,041,658)	142.60	(1,535,999)	145.00
Outstanding at 31 December	42,827,743	195.65	42,926,841	184.38
Exercisable at 31 December	11,694,349	198.51	7,355,419	174.33

Date of grant	Numbers granted	Weighted average exercise price per share	Lapsed	Exercised	At 31 Dec 2021		Exercisable from	Expiry date
13/06/2012	11,189,000	84.95	(3,805,914)	(6,447,899)	935,187	(1)	13/06/2015	13/06/2022
12/06/2013	7,741,000	155.60	(4,306,000)	(2,752,173)	682,827	(1)	12/06/2016	12/06/2023
18/11/2013	600,000	191.90	(575,000)	(25,000)	-	(1)	18/11/2016	17/11/2023
18/12/2013	1,000,000	195.00	(833,333)	(166,667)	-	(1)	18/12/2016	17/12/2023
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	(8,698,738)	(1,646,552)	2,530,506	(2)	05/11/2017	04/11/2024
19/05/2015	1,906,565	250.80	(1,829,565)	-	77,000	(2)	19/05/2018	18/05/2025
22/12/2015	1,154,646	322.20	(395,186)	(25,000)	734,460	(2)	22/12/2018	22/12/2025
29/06/2016	444,196	272.50	(367,735)	(11,009)	65,452	(2)	29/06/2019	29/06/2026
28/09/2016	249,589	258.00	(214,313)	(7,055)	28,221	(2)	28/09/2019	28/09/2026
01/03/2017	1,200,000	283.70	-	-	1,200,000	(2)	01/03/2020	01/03/2027
14/12/2017	1,000,507	197.00	(1,000,507)	-	-	(1)	14/12/2020	14/12/2027
10/10/2018	685,127	223.20	(685,127)	-	-	(1)	10/10/2021	10/10/2028
21/12/2018 (Grant 1)	300,000	203.10	(75,000)	-	225,000	(2)	21/12/2021	21/12/2028
28/12/2018 (Grant 2)(2)	20,900,000	199.80	(8,608,330)	-	12,291,670	(2)	28/12/2021	28/12/2028
15/05/2019	613,872	341.90	(385,635)	-	228,237	(3)	15/05/2022	15/05/2029
13/09/2019	196,608	402.30	(130,508)	-	66,100	(2)	13/09/2022	13/09/2029
19/12/2019	108,349	408.60	(81,427)	-	26,922	(3)	19/12/2022	19/12/2029
02/04/2020	20,325,000	165.00	(747,500)	-	19,577,500	(3)	02/04/2023	02/04/2030
15/05/2020	450,000	202.00	(300,000)	-	150,000	(3)	15/05/2023	15/05/2030
05/08/2020	300,000	222.60	-	-	300,000	(3)	05/08/2023	05/08/2030
09/09/2020	173,148	291.00	-	-	173,148	(3)	09/09/2023	09/09/2030
26/03/2021	466,377	342.80	-	-	466,377	(3)	26/03/2024	26/03/2031
11/05/2021	318,645	376.60	-	-	318,645	(3)	11/05/2024	11/05/2031
28/06/2021	487,964	307.40	-	-	487,964	(3)	28/06/2024	28/06/2031
12/08/2021	580,655	310.00	-	-	580,655	(3)	12/08/2024	12/08/2031
10/11/2021	1,500,000	297.70	-	-	1,500,000	(3)	10/11/2024	10/11/2031
09/12/2021	155,172	290.00	-	-	155,172	(3)	09/12/2024	09/12/2031
Total	88,767,716		(34,698,318)	(11,241,655)	42,827,743

1.  These options have fully vested as of 31 December 2021.

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 2021 there were 11,649,349 (2020: 7,355,419) outstanding share options which had fully vested with no further performance or holding period requirements and which had a weighted average exercise price of £198.51 (2020: £174.33).

 

 

Performance conditions for share options

May 2015 share options

The share options outstanding under this grant at 31 December 2021 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 2021 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 2018 and ending December 2022.

June 2016 share options

The share options outstanding under this grant at 31 December 2021 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 June 2019 and ending June 2023.

September 2016 share options

The share options outstanding under this grant at 31 December 2021 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 2019 and ending September 2023.

March 2017 share options

The share options outstanding under this grant at 31 December 2021 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 March 2020 and ending March 2022.

December 2018 (Grant 1) share options

The share options outstanding under this grant at 31 December 2021 are subject to 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 are subject to vesting ratably over a three-year period beginning December 2021 and ending December 2023.

December 2018 (Grant 2) share options

The share options outstanding under this grant at 31 December 2021 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 ending December 2023.

May 2019 share options

The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years. Any shares awarded based on achievement of these performance targets will be subject to 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 2021 are subject to Group performance targets based on Group operating profit and 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 be subject to 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 2021 are subject to Group performance targets based on Group operating profit and 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 be subject to 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 2021 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 April 2023 and ending April 2025.

 

May 2020 share options

The share options outstanding under this grant at 31 December 2021 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.

August 2020 share options

The share options outstanding under this grant at 31 December 2021 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 August 2023 and ending August 2025.

September 2020 share options

The share options outstanding under this grant at 31 December 2021 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 2021 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 2021 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.

June 2021 share options

The share options outstanding under this grant at 31 December 2021 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 June 2024 and ending June 2026.

August 2021 share options

The share options outstanding under this grant at 31 December 2021 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.

November 2021 share options

The share options outstanding under this grant at 31 December 2021 are subject to performance targets with 17% 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.

Another 17% of the 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.

22% of the options are subject to targets of value returned to shareholders during a two-year period with a minimum performance threshold based on achieving a minimum level of value paid per share to shareholders and the maximum award given for exceeding the maximum level of value paid per share to shareholders.

 

A further 22% of the options are subject to the date in which the value returned to shareholder targets are achieved during the two-year period with the maximum awarded if the shareholder return targets are achieved by December 2022 and half is awarded if the shareholder return targets are achieved by December 2023.

The remaining 22% of outstanding options are subject to the percentage of shareholder return paid in cash during the two-year period with the maximum awarded if the shareholder return targets are paid 100% in cash and half is awarded if the shareholder return targets are paid by a minimum of 50% in cash. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning November 2024 and ending November 2026.

December 2021 share options

The share options outstanding under this grant at 31 December 2021 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 2024 and ending December 2026.

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 2021	November 2021	August 2021	June 2021	May 2021	March 2021
Share price on grant date	290.00	297.70	310.00	307.40	376.60	342.80
Exercise price	290.00	297.70	310.00	307.40	376.60	342.80
Expected volatility	53.80% - 56.45%	53.77% - 56.46%	53.67% - 57.07%	53.69% - 58.28%	53.78% - 59.19%	53.64% - 59.13%
Option life	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years
Expected dividend	1.17%	1.17%	1.12%	1.13%	0.96%	1.00%
Fair value of option at time of grant	152.27p - 158.90p	157.28p - 163.15p	163.92p - 171.67p	162.59p - 173.10p	202.75p - 217.81p	183.02p - 196.95 p
Risk-free interest rate	0.52% - 0.61%	0.52% - 0.61%	0.37% - 0.49%	0.37% - 0.49%	0.16% - 0.34%	0.15% - 0.33%

	September 2020	August 2020	May 2020	April 2020	December 2019	September 2019	May 2019
Share price on grant date	291.00p	222.60p	202.00p	165.00p	408.60p	402.30p	341.90p
Exercise price	291.00p	222.60p	202.00p	165.00p	408.60p	402.30p	341.90p
Expected volatility	51.81% - 62.96%	51.88% - 63.17%	50.15% - 61.06%	49.02% - 59.29%	36.24% - 44.72%	36.33% - 44.83%	38.84% - 45.75%
Option life	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years	3-7 years	3-5 years
Expected dividend	2.39%	3.12%	3.44%	4.21%	1.59%	1.62%	1.85%
Fair value of option at time of grant	122.93p - 146.68p	84.95p - 102.54p	71.39p - 86.80p	50.79p - 62.29p	141.77p - 172.84p	137.79p - 169.19p	120.77p - 141.08p
Risk-free interest rate	(0.08%) - (0.04%)	(0.08%) - (0.04%)	0.00% - 0.06%	0.00% - 0.06%	0.57% - 0.65%	0.48% - 0.50%	0.52% - 0.60p
	December 2018 (Grant 2)	December 2018 (Grant 1)	March 2017	September 2016	June 2016	December 2015	May 2015
Share price on grant date	199.80p	203.10p	283.70p	258.00p	272.50p	322.20p	250.80p
Exercise price	199.80p	203.10p	283.70p	258.00p	272.50p	322.20p	250.80p
Expected volatility	37.66% - 44.35%	37.63% - 44.25%	27.42% - 29.87%	27.45% - 32.35%	27.71% - 34.81%	24.80% - 37.08%	27.23% - 30.12%
Option life	3-5 years	3-5 years	3-5 years	3-7 years	3-7 years	3-7 years	3-7 years
Expected dividend	2.95%	2.90%	1.80%	1.80%	1.71%	1.40%	1.59%
Fair value of option at time of grant	58.77% - 69.33%	39.36p - 46.42p	44.51p - 76.88p	40.96p - 67.89p	44.28p - 78.68p	29.76p - 90.61p	42.35p - 69.12p
Risk-free interest rate	0.87% - 1.01%	0.73% - 0.88%	0.23% - 0.56%	0.09% - 0.38%	0.14% - 0.39%	0.14% - 0.21%	0.81% - 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

	2021	2020
	Number of awards	Number of awards
At 1 January	3,237,768	2,370,535
PSP awards granted during the year	959,015	915,739
Lapsed during the year	(1,036,166)	-
Exercised during the year	-	(48,506)
Outstanding at 31 December	3,160,617	3,237,768
Exercisable at 31 December	-	-

There were no shares which were exercised during the year ended 31 December 2021. The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2021 was nil pence (2020: 288.60p).

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2021	Release date
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	(276,151)	-	782,427	07/03/2024
PSP	04/03/2020	915,739	(306,407)	-	609,332	04/03/2025
PSP	26/03/2021	959,015	-	-	959,015	26/03/2026
		5,307,088	(2,246,471)	-	3,160,617

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:

	26/03/2021	04/03/2020	07/03/2019	07/03/2018	01/03/2017
	PSP	PSP	PSP	PSP	PSP
Share price on grant date	346.40p	356.50p	244.90p	240.90p	283.70p
Exercise price	nil	nil	nil	nil	nil
Number of simulations	250,000	250,000	250,000	250,000	250,000
Number of companies	32	32	32	32	32
Award life	5 years	5 years	5 years	5 years	5 years
Expected dividend	1.00%	1.95%	2.57%	2.37%	1.80%
Fair value of award at time of grant	206.19p- 312.37p	292.36p- 192.98p	124.38p - 188.43p	124.92p - 189.26p	155.83p - 236.08p
Risk-free interest rate	0.33%	0.06%	0.79%	1.21%	0.56%

It is recognised by the Remuneration Committee that the additional 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.

2017 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 return on investment (ROI) conditions. These conditions were all achieved based on 2019 results and the total 583,039 shares vested in March 2021.

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 holding 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.

The EPS condition is based on the compound annual growth in EPS over the performance period measured from EPS in the financial year ending 31 December 2018 as follows:

Vesting scale	% of one third of the award that vests
25%	100%
Between 5% and 25%	On a straight-line basis between 0% and 100%
5%	0%

The TSR condition is based on the performance of the Group's TSR growth against the median TSR growth of the comparator group as follows:

Vesting scale	% of one third 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%

The ROI condition is based on the ROI improvement over the performance period relative to ROI for the financial year ending 31 December 2018 as follows:

Vesting scale	% of one third of the award that vests
Exceeds 2018 ROI plus 300 basis points	100%
Exceeds 2018 ROI by less than 300 basis points	On a straight-line basis between 0% and 100%
Equal to or less than the 2018 ROI	0%

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 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 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

	2021	2020
	Number of awards	Number of awards
At 1 January	376,291	495,678
DSBP awards granted during the year	-	264,277
Lapsed during the year	-	-
Exercised during the year	-	(383,664)
Outstanding at 31 December	376,291	376,291
Exercisable at 31 December	-	-

The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2021 was nil (2020: 360.62p).

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2021	Release date
DSBP	07/03/2019	112,014	-	-	112,014	07/03/2022
DSBP	04/03/2020	264,277	-	-	264,277	04/03/2023
		376,291	-	-	376,291

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 2020	March 2019
Share price on grant date	356.50p	244.90p
Exercise price	nil	nil
Number of simulations	-	-
Number of companies	-	-
Award life	3 years	3 years
Expected dividend	1.95%	2.57%
Fair value of award at time of grant	292.36p	188.42p
Risk-free interest rate	0.00%	0.68%

26. 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:

	2021 £m			2020 £m
	Switzerland	Philippines	Total	Switzerland	Philippines	Total
Fair value of plan assets	4.6	-	4.6	4.8	-	4.8
Present value of obligations	(5.8)	(0.7)	(6.5)	(6.0)	(0.9)	(6.9)
Net funded obligations	(1.2)	(0.7)	(1.9)	(1.2)	(0.9)	(2.1)

 

27. Acquisitions

Current period acquisitions

During the year ended 31 December 2021 the Group made various individually immaterial acquisitions for a total consideration
of £30.0m.

£m	Book value	Provisional fair value adjustments	Provisional fair value
Net assets acquired
Intangible assets	1.4	-	1.4
Right-of-use assets	78.3	-	78.3
Other property, plant and equipment	24.8	-	24.8
Cash	32.1	-	32.1
Other current and non-current assets	12.6	-	12.6
Lease liabilities	(80.8)	-	(80.8)
Current liabilities	(27.0)	-	(27.0)
Non-current liabilities	(10.9)	-	(10.9)
	30.5	-	30.5
NCI based on their proportionate interest in the recognised amounts of the assets and liabilities of 'The Wing'			(15.2)
Goodwill arising on acquisition			16.4
Negative goodwill arising on acquisition			(1.7)
Total consideration			30.0
Less: deferred consideration			(4.7)
Less: contingent consideration			(3.8)
Cash flow on acquisition
Cash paid			21.5
Less: cash acquired			(32.1)
Net cash inflow			(10.6)

Goodwill of £16.4m arose relating to 2021 acquisitions. In addition, a final fair value adjustment of £(3.7)m and a £3.0m contingent consideration were recognised for the 2020 acquisitions.

Goodwill arising on acquisitions in 2021 includes negative goodwill of £1.7m, recognised as part of the selling, general and administration expenses in the consolidated income statement.

The goodwill arising on the 2021 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.
Of the above goodwill, £16.4m is expected to be deductible for tax purposes.

If the above acquisitions had occurred on 1 January 2021, the revenue and net retained loss arising from these acquisitions
would have been £16.7m and £23.0m respectively. In the year, the acquisitions contributed revenue of £11.9m and net retained loss of £19.3m.

Deferred consideration of £4.7m arose on the acquisitions made in the year and is held on the Group's balance sheet at
31 December 2021. No additional deferred consideration relating to prior period acquisitions is held on the Group's balance sheet at 31 December 2021.

Contingent consideration of £3.8m arose on the 2021 acquisitions. No contingent consideration was paid during the current year with respect to milestones achieved on previous acquisitions. Contingent consideration balances of £6.8m are held on the Group's balance sheet at 31 December 2021.

The acquisition costs associated with these transactions were £1.0m, recorded within administration expenses in the consolidated income statement.

For acquisitions completed in 2021, 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.

 

Prior period acquisitions

During the year ended 31 December 2020 the Group made acquisitions for a total consideration of £31.5m.

£m	Book value	Provisional fair value adjustments	Final fair value adjustments	Final fair value
Net assets acquired
Intangible assets	-	-	3.7	3.7
Right-of-use assets	3.0	-	-	3.0
Other property, plant and equipment	5.1	-	-	5.1
Cash	1.7	-	-	1.7
Other current and non-current assets	12.3	-	-	12.3
Lease liabilities	(3.0)	-	-	(3.0)
Current liabilities	(14.8)	-	-	(14.8)
Non-current liabilities	(5.9)	-	-	(5.9)
	(1.6)	-	3.7	2.1
Previously held share of net assets(1)				1.4
Goodwill arising on acquisition			(3.7)	28.0
Total consideration				31.5
Less: deferred consideration				-
Less: contingent consideration(2)				(3.0)
Cash flow on acquisition
Cash paid				28.5
Less: cash acquired				(1.7)
Net cash outflow				26.8

1.  The 2020 acquisitions include one stepped-acquisition where the non-controlling interest in a former joint venture was acquired by the Group.

2.  Contingent consideration of £3.0m was recorded in 2021, relating to an acquisition completed in late December 2020. This consideration, and the related £3.0m goodwill, has been recognised in 2021.

The goodwill arising on the 2020 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. Of the above goodwill, £28.0m was expected to be deductible for tax purposes.

If the above acquisitions had occurred on 1 January 2020, the revenue and net retained profit arising from these acquisitions would have been £17.8m and £1.5m respectively. During 2020, the acquisitions contributed revenue of £2.6m and net retained profit of £0.6m.

No deferred consideration arose on the 2020 acquisitions.

Contingent consideration of £3.0m arose on the 2020 acquisitions but was only recognised in 2021 due to the late timing of the related acquisition. No contingent consideration was paid during the current year with respect to milestones achieved on previous acquisitions.

The acquisition costs associated with these transactions were £0.4m, 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 2020.

 

Non-controlling interests

During 2021, the Group completed the acquisition of 'The Wing', which included a 43% non-controlling interest.

The following table summarises the information relating to each of the Group's subsidiaries that have a material non-controlling interest.

	2021	2020
NCI percentage	43%	-
Non-current assets	42.3	-
Current assets	11.4	-
Non-current liabilities	(24.8)	-
Current liabilities	(6.7)	-
Net assets	22.2	-
Net assets attributable to NCI	9.6	-
Revenue	0.7	-
Loss after tax	(13.0)	-
Other comprehensive income	-	-
Total comprehensive income	(12.3)	-
Loss allocated to NCI	(5.6)	-
Other comprehensive income allocated to NCI	-	-
Cash flows from operating activities	(14.1)	-
Cash flows from investing activities	29.3	-
Cash flows from financing activities	(7.4)	-
Net increase in cash and cash equivalents	7.8	-

28. Capital commitments

	2021 £m	2020 £m
Contracts placed for future capital expenditure not provided for in the financial statements	88.7	147.0

These commitments are principally in respect of centre fit-out obligations. There are £0.5m capital commitments in respect of joint ventures at 31 December 2021 (2020: £nil).

29. 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 £309.4m (2020: £143.9m). There are no material lawsuits pending against the Group.

30. 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 owed by related party	Amounts owed to related party
2021
Joint ventures	3.5	19.7	20.0
2020
Joint ventures	2.6	17.6	4.3

As at 31 December 2021, none of the amounts due to the Group have been provided for as the expected credit losses arising on the balances are considered immaterial (2020: £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:

	2021 £m	2020 £m
Short-term employee benefits	4.3	6.7
Retirement benefit obligations	0.3	0.2
Share-based payments	1.8	1.9
	6.4	8.8

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 £6.1m (2020: £6.8m). These awards are subject to performance conditions and vest over three, four and five years from the award date (note 25).

Transactions with related parties

During the year ended 31 December 2021 the Group acquired goods and services from a company indirectly controlled by a Director of the Company amounting to £27,319 (2020: £5,629). There was a £6,751 balance outstanding at the year-end
(2020: £5,629).

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.

31. Principal Group companies

The Group's principal subsidiary undertakings at 31 December 2021, 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		Pathway IP II Sarl	Switzerland	100
Regus do Brasil Ltda	Brazil	100		Franchise International GmbH	Switzerland	100
Regus Business Service (Shenzen) Ltd	China	100		Regus Service Centre Philippines B.V.	Philippines	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
RBC Deutschland GmbH	Germany	100		IW Group Services (UK) Ltd	United Kingdom	100
Regus CME Ireland Limited	Ireland	100		Regus Management Group LLC	United States	100
Regus Business Centres Limited	Israel	100
Regus Business Centres Italia Srl	Italy	100		Holding and finance companies
Regus Management Malaysia Sdn Bhd	Malaysia	100		IWG Enterprises Sarl	Switzerland	100
Regus Management de Mexico, SA de CV	Mexico	100		IWG Group Holdings Sarl	Luxembourg	100
Regus New Zealand Management Ltd	New Zealand	100		IWG International Holdings Sarl	Luxembourg	100
Regus Business Centre Norge AS	Norway	100		Genesis Finance Sarl	Switzerland	100
IWG Management Sp z.o.o.	Poland	100		Pathway Finance Sarl	Switzerland	100
Regus Business Centre, Lda	Portugal	100		Pathway Finance EUR 2 Sarl	Switzerland	100
Regus Management Singapore Pte Ltd	Singapore	100		Pathway Finance USD 2 Sarl	Switzerland	100
Regus Management Espana SL	Spain	100		Regus Group Limited	United Kingdom	100
IWG Management (Sweden) AB	Sweden	100		Regus Corporation	United States	100
Avanta Managed Offices Ltd	United Kingdom	100
Basepoint Centres Limited	United Kingdom	100
H Work LLC	United States	100
RGN National Business Centre LLC	United States	100
RB Centres LLC	United States	100

 

32. 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

Adjusting items

Adjusting items are separately disclosed by the Group so as to provide readers with helpful additional information on the performance of the business across periods. Items arising specifically from the impact of the COVID-19 pandemic have been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board and the Operating Committee. 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. The classification of adjusting items requires significant management judgement after considering the nature and intentions of a transaction or provision.

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 represents the period from lease inception up to either:

-  The earliest point at which the lease could be broken, where break clauses exist;

-  The point at which the lease could be extended, but no further, where extension options exist; or

-  To the end of the contractual lease term in all other cases.

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 2021, 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.

While impairment of property, plant and equipment was noted as a key estimate in the 2020 Annual Report and Accounts,
COVID-19 continues to accelerate the need for further network rationalisation. 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.

The Group has considered the impact of COVID-19 with respect to all judgements and estimates it makes in the application of its accounting policies. This included assessing the impairment of property, plant and equipment, goodwill and the recoverability of trade receivables. The result of these reviews is detailed in note 10.

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.

Valuation of embedded conversion option (Level 3) in convertible bonds

The embedded conversion option relating to the Group's issue of convertible bonds is measured at mark-to-market with reference to the traded price of the convertible bonds as well as external valuation inputs based on credit comparables and bond spreads across competitors and wider markets.

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.

33. Subsequent events

In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. In addition, the Group agreed revised covenants for the period to March 2023. The amended financial covenants include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio requirements.

In addition, a £330.0m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants.

On 8 March 2022, the Group entered into a contract to merge certain of its digital and technology assets with The Instant Group, a global business which operates as the world's leading independent provider of flexible workspace advice and services, for a net cash investment of £270m. Due to the timing of this transaction, it is not practical to disclose the information associated with the initial accounting for this acquisition.

The Group notes with concern the escalation of the conflict in Ukraine in 2022. The Group operates 10 centres in Ukraine with a net asset value of £9.8m. Our primary focus has been on the safety and well-being of our employees and customers and we are committed to providing them with support throughout these extremely difficult circumstances.

There have been no other significant events affecting the Group since the year end.

 

PARENT COMPANY ACCOUNTS

Summarised extract of UNAUDITED Company balance sheet

(Accounting policies are based on the Swiss Code of Obligations)

	As at 31 Dec 2021 £m	As at 31 Dec 2020 £m
Trade and other receivables	1.2	1.1
Prepayments	0.3	0.5
Total current assets	1.5	1.6
Investments	3,069.1	3,272.3
Total non-current assets	3,069.1	3,272.3
Total assets	3,070.6	3.273.9
Trade and other payables	21.1	7.0
Accrued expenses	1.5	1.1
Total short-term liabilities	22.6	8.1
Long-term interest-bearing liabilities	99.3	99.3
Total long-term liabilities	99.3	99.3
Total liabilities	121.9	107.4
Issued share capital	10.5	10.5
Reserves from capital contributions	2,439.4	2,439.4
Retained earnings	874.5	(1,699.1)
(Loss)/profit for the year	(224.4)	2,569.8
Treasury shares	(151.3)	(154.1)
Total shareholders' equity	2,948.7	3,166.5
Total liabilities and shareholders' equity	3,070.6	3,273.9

The values of the investments recognised have been considered by the Directors and are considered fully recoverable.

Approved by the Board on 8 March 2022

Mark Dixon  Glyn Hughes

Chief Executive Officer      Chief Financial Officer

Accounting policies

Basis of preparation

These financial statements were prepared in accordance with accounting policies based on the Swiss Code of Obligations.

The Company is included in the consolidated financial statements of IWG plc.

The balance sheet has been extracted from the non-statutory accounts of IWG plc for the year ended 31 December 2021, which are available from the Company's registered office, Dammstrasse 19, CH-6300, Zug, Switzerland.

Investments

The value of the investment held in IWG Group is measured at acquisition cost.

During 2021, the Company acquired the direct investment in IWG International Holdings Sarl, as part of an internal restructuring. At the same time, the Company disposed of its investment in IWG Enterprise Sarl, IWG Global Investments Sarl and Umbrella Management Limited to IWG International Holdings Limited. This restructuring resulted in the Company recognising an impairment in subsidiaries of £203.2m.

 

PRE-IFRS 16 PRO FORMA STATEMENTS

Consolidated income statement (unaudited)

The purpose of these unaudited pages is to provide a reconciliation from the 2021 financial results to the pro forma statements 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 pro forma statements also reflect the impact of the adjusting items during 2021.

	£m	Notes	Year ended 31 Dec 2021 As reported	Rent & finance costs	Depreciation	Other adjustments	Taxation	Year ended 31 Dec 2021 pre-IFRS 16
	Revenue	3	2,227.9	-	-	-	-	2,227.9
	Total cost of sales		(1,885.8)	(982.3)	791.1	29.9	-	(2,047.1)
	Cost of sales		(1,870.0)	(982.3)	791.1	79.6	-	(1,981.6)
	Adjusting items to cost of sales(1)		(70.0)	-	-	4.5	-	(65.5)
	Reversal of impairment of property, plant and equipment and right-of-use assets(1)	3,5	54.2	-	-	(54.2)	-	-
	Expected credit losses on trade receivables(1)	5	(99.5)	-	-	-	-	(99.5)
	Gross profit (centre contribution)	3	242.6	(982.3)	791.1	29.9	-	81.3
	Total selling, general and administration expenses		(327.8)	(0.5)	1.2	-	-	(327.1)
	Selling, general and administration expenses		(294.7)	(0.5)	1.2	-	-	(294.0)
	Adjusting items to selling, general and administration expenses	10	(33.1)	-	-	-		(33.1)
	Share of loss of equity-accounted investees, net of tax	21	(2.2)	-	-	-	-	(2.2)
	Operating loss	5	(87.4)	(982.8)	792.3	29.9	-	(248.0)
	Finance expense	7	(198.0)	165.7	-	1.2	-	(31.1)
	Finance income	7	26.0	-	-	-	-	26.0
	Net finance expense		(172.0)	165.7	-	1.2	-	(5.1)
	Loss before tax for the year from continuing operations		(259.4)	(817.1)	792.3	31.1	-	(253.1)
	Income tax expense	8	(10.3)	-	-	-	(2.1)	(12.4)
	Loss after tax for the year from continuing operations		(269.7)	(817.1)	792.3	31.1	(2.1)	(265.5)
	Profit after tax for the period from discontinued operations	9	59.3	(13.3)	11.5	(11.1)	3.0	49.4
	Loss for the year		(210.4)	(830.4)	803.8	20.0	0.9	(216.1)
	Attributable to equity shareholders of the Group		(204.8)	(830.4)	803.8	19.7	0.9	(210.8)
	Attributable to non-controlling interests	27	(5.6)	-	-	0.3	-	(5.3)
	Loss per ordinary share (EPS):
	Attributable to ordinary shareholders
	Basic (p)	11	(20.3)					(20.9)
	Diluted (p)	11	(20.3)					(20.9)
	From continuing operations
	Basic (p)	11	(26.2)					(25.8)
	Diluted (p)	11	(26.2)					(25.8)

1.  The net reversal of adjusting items of £1.7m comprises the following items included in the balances referenced (note 10):

A reversal of the impairment of property, plant and equipment and right-of-use assets of £125.2m, the adjusting items to costs of sales of £70.0m and £53.5m of the expected credit losses on trade receivables balances reported.

 

Pro forma adjustments recognised

The performance of the Group is impacted by the following significant adjustments in adopting IFRS 16. The recognition of these balances will not impact the overall cash flows of the Group or the cash generation per share.

1. Right-of-use assets and related lease liabilities

These adjustments reflect the right-of-use assets recognised, together with the related lease liabilities. The initial lease liabilities are equal to the present value of the lease payments during the lease term that have not yet been paid. The cost of the right-of-use asset comprises the amount of the initial measurement of the lease liability, plus any additional direct costs associated with setting up the lease.

2. Rent 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 determined at the date of transition. The related finance costs arising on subsequent measurement are recognised directly through profit or loss.

3. Depreciation and lease payments

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 reduce the lease liabilities recognised in the balance sheet.

4. Taxation

The underlying tax charge is impacted by the change in the profit before tax and deferred tax assets recognised.

5. 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 balance sheet (unaudited)

	£m	Notes	As at  31 Dec 2021 As reported	Right-of-use assets & related lease liability	Rent & finance costs	Depreciation & lease payments	Other adjustments	Taxation	As at 31 Dec 2021 pre-IFRS 16
	Non-current assets
	Goodwill	13	703.8	-	-	-	-	-	703.8
	Other intangible assets	14	78.0	-	-	-	-	-	78.0
	Property, plant and equipment	15	6,376.5	(5,773.4)	568.9	805.0	(40.8)	-	1,936.2
	Right-of-use assets	15	5,254.1	(6,113.6)	-	892.9	(33.4)	-	-
	Other property, plant and equipment	15	1,122.4	340.2	568.9	(87.9)	(7.4)	-	1,936.2
	Deferred tax assets	8	326.6	-	-	-	-	(111.7)	214.9
	Other long-term receivables	16	49.7	-	-	-	0.2	-	49.9
	Investments in joint ventures	21	44.9	-	-	-	-	-	44.9
	Other investments		0.3	-	-	-	-	-	0.3
	Total non-current assets		7,579.8	(5,773.4)	568.9	805.0	(40.6)	(111.7)	3,028.0
	Current assets
	Inventory		1.2	-	-	-	-	-	1.2
	Trade and other receivables	17	734.2	-	122.1	-	-	-	856.3
	Corporation tax receivable	8	18.5	-	-	-	-	-	18.5
	Cash and cash equivalents	23	77.8	-	-	-	-	-	77.8
	Total current assets		831.7	-	122.1	-	-	-	953.8
	Total assets		8,411.5	(5,773.4)	691.0	805.0	(40.6)	(111.7)	3,981.8
	Current liabilities
	Trade and other payables (incl. customer deposits)	18	926.6	-	417.1	-	-	-	1,343.7
	Deferred revenue		346.4	-	-	-	-	-	346.4
	Corporation tax payable	8	35.9	-	-	-	-	-	35.9
	Bank and other loans	19,23	21.5	-	-	-	-	-	21.5
	Lease liabilities	23	932.5	(914.6)	(167.1)	149.2	-	-	-
	Provisions	20	8.2	-	-	-	126.8	-	135.0
	Total current liabilities		2,271.1	(914.6)	250.0	149.2	126.8	-	1,882.5
	Non-current liabilities
	Other long-term payables		5.6	-	896.6	-	0.2	-	902.4
	Deferred tax liability	8	140.6	-	-	-	-	(5.8)	134.8
	Bank and other loans	19,23	453.3	-	-	-	-	-	453.3
	Lease liabilities	23	5,188.7	(6,071.4)	-	882.7	-	-	-
	Derivative financial liabilities	24	26.9	-	-	-	-	-	26.9
	Provisions	20	12.4	-	-	-	13.4	-	25.8
	Provision for deficit on joint ventures	21	6.5	-	-	-	-	-	6.5
	Retirement benefit obligations	26	1.9	-	-	-	-	-	1.9
	Total non-current liabilities		5,835.9	(6,071.4)	896.6	882.7	13.6	(5.8)	1,551.6
	Total liabilities		8,107.0	(6,986.0)	1,146.6	1,031.9	140.4	(5.8)	3,434.1
	Total equity
	Issued share capital	22	10.5	-	-	-	-	-	10.5
	Issued share premium	22	312.6	-	-	-	-	-	312.6
	Treasury shares	22	(151.3)	-	-	-	-	-	(151.3)
	Foreign currency translation reserve		15.3	(17.7)	-	-	-	-	(2.4)
	Hedging reserve		-	-	-	-	-	-	-
	Other reserves		25.8	-	-	-	-	-	25.8
	Retained earnings		82.0	1,230.3	(455.6)	(226.9)	(179.2)	(105.9)	344.7
	Total shareholders' equity		294.9	1,212.6	(455.6)	(226.9)	(179.2)	(105.9)	539.9
	Non-controlling interests	27	9.6	-	-	-	(1.8)	-	7.8
	Total equity		304.5	1,212.6	(455.6)	(226.9)	(181.0)	(105.9)	547.7
	Total equity and liabilities		8,411.5	(5,773.4)	691.0	805.0	(40.6)	(111.7)	3,981.8

 

Consolidated statement of cash flows (unaudited)

	£m	Notes	Year ended  31 Dec 2021 As reported	Rent & finance	Depreciation & lease payments	Other adjustments	Year ended  31 Dec 2021 pre-IFRS 16
	Operating activities
	Loss for the year from continuing operations		(269.7)	(817.1)	792.3	29.0	(265.5)
	Adjustments for:
	Profit from discontinued operations	9	4.0	(13.3)	11.5	(1.4)	0.8
	Net finance expense(1)	7	172.0	(165.7)	-	(1.2)	5.1
	Share of loss on equity-accounted investees, net of income tax	21	2.2	-	-	-	2.2
	Depreciation charge	15	1,095.9	-	(803.8)	-	292.1
	Right-of-use assets	15	892.9	-	(892.9)	-	-
	Other property, plant and equipment	15	203.0	-	89.1	-	292.1
	Loss on impairment of goodwill	13	-	-	-	-	-
	Loss on disposal of property, plant and equipment	5	64.2	-	-	32.1	96.3
	Profit on disposal of right-of-use assets and related lease liabilities	5, 23	(41.5)	-	-	41.5	-
	Profit on sales of current assets		(1.4)	-	-	-	(1.4)
	Loss on disposal of intangible assets	5	0.3	-	-	-	0.3
	Reversal of impairment of property, plant and equipment	5, 15	(7.4)	-	-	7.4	-
	Reversal of impairment of right-of-use assets	5, 15	(46.8)	-	-	46.8	-
	Amortisation of intangible assets	5, 14	13.5	-	-	-	13.5
	Negative goodwill arising on an acquisition	27	(1.7)	-	-	1.7	-
	Loss on disposal of other investments	21	-	-	-	-	-
	Tax expense	8	10.3	-	-	2.1	12.4
	Expected credit losses on trade receivables	5	99.5	-	-	-	99.5
	Decrease in provisions	20	(14.5)	-	-	(107.5)	(122.0)
	Share-based payments		5.8	-	-	-	5.8
	Other non-cash movements		(12.3)	(2.1)	-	(1.9)	(16.3)
	Operating cash flows before movements in working capital		1,072.4	(998.2)	-	48.6	122.8
	Proceeds from partner contributions (reimbursement of costs)(3)	15	19.7		(19.7)	-	-
	Increase in trade and other receivables		(127.3)	20.1	-	(0.3)	(107.5)
	Decrease in trade and other payables		(38.5)	829.4	(809.2)	(48.3)	(66.6)
	Cash generated from operations		926.3	(148.7)	(828.9)	-	(51.3)
	Interest paid and similar charges on bank loans and corporate borrowings		(19.0)	-	-	-	(19.0)
	Interest paid on lease liabilities	23	(167.1)	167.1	-	-	-
	Tax paid		(5.4)	-	-	-	(5.4)
	Net cash inflows from operating activities		734.8	18.4	(828.9)	-	(75.7)
	Investing activities
	Purchase of property, plant and equipment	15	(220.5)	(19.7)	-	-	(240.2)
	Payment of initial direct costs related to right-of-use assets		(1.3)	1.3	-	-	-
	Purchase of subsidiary undertakings, net of cash acquired	27	10.6	-	-	-	10.6
	Purchase of intangible assets	14	(33.7)	-	-	-	(33.7)
	Purchase of other investments		(0.3)	-	-	-	(0.3)
	Proceeds from other current receivables(2)	17	283.7	-	-	-	283.7
	Proceeds on the sale of discontinued operations, net of cash disposed of	9,21	18.9	-	-	-	18.9
	Proceeds on sale of property, plant and equipment		1.0	-	-	-	1.0
	Interest received	7	3.5	-	-	-	3.5
	Net cash inflows from investing activities		61.9	(18.4)	-	-	43.5
	Financing activities
	Proceeds from issue of loans		983.1	-	-	-	983.1
	Repayment of loans		(946.7)	-	-	-	(946.7)
	Proceeds from issue of convertible bonds (net of transaction costs)	19	-	-	-	-	-
	Payment of lease liabilities	23	(864.8)	-	864.8	-	-
	Proceeds from partner contributions (lease incentives)(3)	15	35.9	-	(35.9)	-	-
	Proceeds from issue of ordinary shares, net of costs	22	-	-	-	-	-
	Purchase of treasury shares	22	-	-	-	-	-
	Proceeds from exercise of share awards		0.8	-	-	-	0.8
	Payment of ordinary dividend	12	-	-	-	-	-
	Net cash outflows from financing activities		(791.7)	-	828.9	-	37.2
	Net increase in cash and cash equivalents		5.0	-	-	-	5.0
	Cash and cash equivalents at beginning of year		71.0	-	-	-	71.0
	Effect of exchange rate fluctuations on cash held		1.8	-	-	-	1.8
	Cash and cash equivalents at end of the year	23	77.8	-	-	-	77.8

1.  The net finance expense includes mark-to-market adjustments of £22.5m (2020: £2.4m).

2.  Included in other receivables at 31 December 2020 was mezzanine and senior debt recognised at amortised cost of £276.2m. This receivable balance was fully repaid to the Group in February 2021, together with the reimbursement of associated costs, resulting in an additional £1.4m gain on settlement.

3.  The total proceeds from partner contributions relating to the reimbursement of costs and lease incentives of £55.6m are allocated by estate in the post-tax cash return on net investment, on page 171.

 

SEGMENTAL ANALYSIS

Segmental analysis - management basis (unaudited)

		Americas 2021 (pre-IFRS 16 basis)	EMEA 2021 (pre-IFRS 16 basis)	Asia Pacific 2021 (pre-IFRS 16 basis)	United Kingdom 2021 (pre-IFRS 16 basis)	Other 2021 (pre-IFRS 16 basis)	Total 2021 (pre-IFRS 16 basis)
	Pre-2020(1)
	Square feet (000's)(4)	11,693	8,342	2,956	4,397	-	27,388
	Occupancy (%)	70.9%	72.1%	67.3%	69.2%	-	70.6%
	Workstations(8)	211,031	180,653	79,828	102,150	-	573,662
	Workstations occupancy (%)	69.0%	71.6%	67.3%	66.8%	-	69.2%
	Revenue (£m)	866.1	624.6	214.5	316.9	5.9	2,028.0
	REVPOS (£)	105	104	108	104	-	105
	2020 Expansions(2)
	Square feet (000's)(4)	434	829	143	302	-	1,708
	Occupancy (%)	50.9%	55.3%	61.1%	52.8%	-	54.2%
	Revenue (£m)	40.2	45.8	10.5	23.9	-	120.4
	2021 Expansions(2)(5)
	Square feet (000's)(4)	142	597	108	41	-	888
	Occupancy (%)	29.6%	35.2%	28.8%	43.7%	-	33.9%
	Revenue (£m)	4.8	21.9	3.4	1.6	-	31.7
	Network rationalisations(3)
	Square feet (000's)(4)	137	257	135	151	-	680
	Occupancy (%)	48.2%	51.5%	58.5%	51.2%	-	52.1%
	Revenue (£m)	12.5	14.8	8.7	11.8	-	47.8
	Total
	Square feet (000's)(4)	12,405	10,024	3,343	4,892	-	30,664
	Occupancy (%)	69.4%	68.0%	65.4%	67.4%	-	68.2%
	Revenue (£m)	923.6	707.1	237.1	354.2	5.9	2,227.9
	Period end square feet (000's)(7)
	Pre-2020	11,733	8,356	2,975	4,430	-	27,494
	2020 Expansions	433	819	144	305	-	1,701
	2021 Expansions	239	955	193	55	-	1,442
	Total	12,405	10,130	3,312	4,790	-	30,637

 

Segmental analysis - management basis (unaudited)

		Americas 2020 (pre-IFRS 16 basis)	EMEA 2020 (pre-IFRS 16 basis)	Asia Pacific 2020 (pre-IFRS 16 basis)	United Kingdom 2020 (pre-IFRS 16 basis)	Other 2020 (pre-IFRS 16 basis)	Total 2020 (pre-IFRS 16 basis)
	Pre-2020(1)
	Square feet (000's)(4)	11,733	8,388	2,940	4,447	-	27,508
	Occupancy (%)	73.9%	71.5%	69.5%	72.6%	-	72.5%
	Workstations(8)	209,922	173,527	79,697	98,662	-	561,808
	Workstations occupancy (%)	71.8%	69.8%	68.8%	70.5%	-	70.5%
	Revenue (£m)	994.3	642.2	223.9	344.1	5.6	2,210.1
	REVPOS (£)	114.7	107.0	109.5	106.6	-	110.8
	2020 Expansions(2)
	Square feet (000's)(4)	325	545	100	155	-	1,125
	Occupancy (%)	26.2%	37.8%	34.7%	36.1%	-	33.9%
	Revenue (£m)	11.0	20.1	4.5	8.6	-	44.2
	Network rationalisations(6)
	Square feet (000's)(4)	818	762	400	415	-	2,395
	Occupancy (%)	59.1%	63.7%	65.1%	64.4%	-	62.5%
	Revenue (£m)	61.2	52.8	27.5	36.1	-	177.6
	Total
	Square feet (000's)(4)	12,876.0	9,695.0	3,440.0	5,017.0	-	31,028.0
	Occupancy (%)	71.7%	69.0%	68.0%	70.8%	-	70.3%
	Revenue (£m)	1,066.5	715.1	255.9	388.8	5.6	2,431.9

1.  The pre-2020 business comprises centres not opened in the current or previous financial year.

2.  Expansions include new centres opened and acquired businesses.

3.  A network rationalisation for the 2021 data is defined as a centre closed during the period from 1 January 2021 to 31 December 2021.

4.  Office square feet are calculated as the weighted average for the period.

5.  2021 expansions include any costs incurred in 2021 for centres which will open in 2022.

6.  A network rationalisation for the 2020 comparative data is defined as a centre closed during the period from 1 January 2020 to 31 December 2020.

7.  Office square feet available at year-end.

8.  Workstation numbers are calculated as the weighted average for the year.

PRE-TAX CASH RETURN ON NET INVESTMENT

The purpose of this unaudited page is to reconcile some of the key numbers used in the returns calculation, on a pre-IFRS 16 basis, back to the Group's IFRS 16 pro forma statements, and thereby give the reader greater insight into the returns calculation drivers.

2021

Description	Reference	2019 Aggregation	2020 Expansions	2021 Expansions	2022 Expansions	Closures	Total
Post-tax cash return on net investment (unaudited)		1.4%	-	-	-	-	0.4%
Revenue	Pro forma income statement, p164	2,028	120.4	31.7	-	47.8	2,227.9
Centre contribution	Pro forma income statement, p164	164.5	(25.0)	(25.9)	-	(44.3)	69.3
Loss on disposal of assets	EBIT reconciliation (analysed below)	20.9	11.3	-	-	64.1	96.3
Underlying centre contribution	CBIT reconciliation (analysed below)	185.4	(13.7)	(25.9)	-	19.8	165.6
Selling, general and administration expenses	Pro forma income statement, p164	(256.0)	(20.9)	(11.5)	(0.5)	(5.1)	(294.0)
EBIT	EBIT reconciliation (analysed below)	(70.6)	(34.6)	(37.4)	(0.5)	14.7	(128.4)
Depreciation and amortisation(1)		261.5	25.0	8.7	-	6.8	302.0
Amortisation of partner contributions		(82.0)	(9.2)	(2.8)	-	(1.1)	(95.1)
Amortisation of acquired lease fair value adjustments		-	-	-	-	-	-
Non-cash items		179.5	15.8	5.9	-	5.7	206.9
Taxation(2)		14.1	6.9	7.5	0.1	(2.9)	25.7
Adjusted net cash profit		123.0	(11.9)	(24.0)	(0.4)	17.5	104.2
Maintenance capital expenditure	Capital expenditure (analysed below)	101.1	-	-	-	-	101.1
Partner contributions	Partner contributions (analysed below)	(5.2)	-	-	-	-	(5.2)
Net maintenance capital expenditure		95.9	-	-	-	-	95.9
Post-tax cash return		27.1	(11.9)	(24.0)	(0.4)	17.5	8.3
Growth capital expenditure	Capital expenditure (analysed below)	2,656.0	393.4	117.3	5.7	-	3,172.4
Partner contributions	Partner contributions (analysed below)	(673.8)	(115.4)	(55.7)	(4.5)	-	(849.4)
Net investment (unaudited)		1,982.2	278.0	61.6	1.2	-	2,323.0

2021

EBITDA reconciliation		2019 Aggregation	2020 Expansions	2021 Expansions	2022 Expansions	Closures	Total
Centre contribution		164.5	(25.0)	(25.9)	-	(44.3)	69.3
Selling, general and administration expenses		(256.0)	(20.9)	(11.5)	(0.5)	(5.1)	(294.0)
Depreciation and amortisation		261.5	25.0	8.7	-	6.8	302.0
		170.0	(20.9)	(28.7)	(0.5)	(42.6)	77.3
Share of profit in joint ventures	Pro forma income statement, p164	(2.2)	-	-	-	-	(2.2)
EBITDA on continuing operations		167.8	(20.9)	(28.7)	(0.5)	(42.6)	75.1

1.  Excludes depreciation expenses related to discontinued operations of £3.6m.

2.  Based on EBIT at the Group's long-term effective tax rate of 20%.

 

2021

Movement in capital expenditure (unaudited)	2019 Aggregation	2020 Expansions	2021 Expansions	2022 Expansions	Closures	Total
December 2020	2,812.2	328.2	40.2	-	-	3,180.6
2021 Capital expenditure(3)	-	79.4	66.4	5.7	-	151.5
Properties acquired	-	-	10.7	-	-	10.7
Centre closures(4)	(156.2)	(14.2)	-	-	-	(170.4)
December 2021	2,656.0	393.4	117.3	5.7	-	3,172.4

3.  2022 expansions relate to costs and investments incurred in 2021 for centres which will open in 2022.

4.  The growth capital expenditure for an estate is reduced by the investment in centres closed during the year, but only where that investment has been fully recovered.

2021

Movement in partner contributions (unaudited)	2019 Aggregation	2020 Expansions	2021 Expansions	2022 Expansions	Closures	Total
December 2020	712.1	116.5	13.7	-	-	842.3
2021 Partner contributions	-	3.9	42.0	4.5	-	50.4
Centre closures(5)	(38.3)	(5.0)	-	-	-	(43.3)
December 2021	(673.8)	(115.4)	(55.7)	(4.5)	-	(849.4)

5.  The partner contributions for an estate are reduced by the partner contributions for centres closed during the year.

2021

CBIT reconciliation (unaudited)	Reference	£m
Centre contribution		69.3
Adjusting items(6)	Note 10, p136	12.0
Gross profit (centre contribution)	Pro forma income statement, p164	81.3

6.  The adjusting items of a reversal of £12.0m represents the costs of sales impact which, when combined with the additional £33.1m selling, general and administration impact, agrees to the £21.1m referred to on page 47.

2021

EBIT reconciliation (unaudited)	Reference	£m
EBIT		(128.4)
Loss on disposal of assets	Pro forma statement of cash flows, p167	(96.3)
Share of profit in joint ventures	Pro forma income statement, p164	(2.2)
Adjusting items(7)	CFO review. P47	(21.1)
Operating loss	Pro forma income statement, p164	(248.0)

7.  The adjusting items of £21.1m represents the total adjusting items referred to on page 47.

2021

Partner contributions receivables (unaudited)		£m
Opening partner contribution receivables	Note 17	33.8
Acquired in the period		-
Net partner contributions recognised	Statement of cash flows, p121	55.6
-  Maintenance partner contributions	CFO review, p50	5.2
-  Growth partner contributions	CFO review, p50	50.4
Settled in the period		(59.2)
Disposed of in the period		-
Exchange differences		(0.9)
Closing partner contribution receivables	Note 17	30.2

2021

Capital expenditure (unaudited)	Reference	£m
Maintenance capital expenditure	CFO review, p50	101.1
Growth capital expenditure	CFO review, p50	162.2
-  2021 Capital expenditure		151.5
-  Properties acquired		10.7
Total capital expenditure
Analysed as
-  Purchase of subsidiary undertakings	Pro forma statement of cash flows, p167	(10.6)
-  Purchase of property, plant and equipment	Pro forma statement of cash flows, p167	240.2
-  Purchase of intangible assets	Pro forma statement of cash flows, p167	33.7

 

FIVE-YEAR SUMMARY

	31 Dec 2021   £m	31 Dec 2020 Restated £m(1)	31 Dec 2019 Restated £m(1)	31 Dec 2018 Restated £m(1)	31 Dec 2017 Restated £m(1)
Income statement (full year ended)
Revenue	2,227.9	2,431.9	2,594.3	2,354.7	2,200.5
Cost of sales	(1,885.8)	(2,377.0)	(2,043.1)	(1,975.6)	(1,819.3)
Expected credit losses on trade receivables	(99.5)	(34.8)	(2.0)	(17.7)	(16.3)
Gross profit (centre contribution)	242.6	20.1	549.2	361.4	364.9
Selling, general and administration expenses	(327.8)	(367.5)	(279.4)	(246.5)	(230.9)
Share of (loss)/profit of equity-accounted investees, net of tax	(2.2)	(2.6)	2.7	(1.4)	(0.8)
Operating (loss)/profit	(87.4)	(350.0)	272.5	113.5	133.2
Finance expense	(198.0)	(266.4)	(228.5)	(15.9)	(14.1)
Finance income	26.0	3.1	0.4	0.5	0.3
(Loss)/profit before tax for the year from continuing operations	(259.4)	(613.3)	44.4	98.1	119.4
Income tax (expense)/credit	(10.3)	(32.0)	21.9	(29.1)	(32.7)
(Loss)/profit for the year from continuing operations	(269.7)	(645.3)	66.3	69.0	86.7
Profit/(loss) after tax for the year from discontinued operations	59.3	(1.5)	384.3	36.7	27.3
(Loss)/profit after tax for the year	(210.4)	(646.8)	450.6	105.7	114.0
(Loss)/earnings per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p)	(20.3)	(67.9)	50.5	11.7	12.4
Diluted (p)	(20.3)	(67.9)	49.6	11.6	12.3
Weighted average number of shares outstanding ('000s)	1,007,215	951,891	892,738	907,077	915,676
From continuing operations
Basic (p)	(26.2)	(67.8)	7.4	7.6	9.5
Diluted (p)	(26.2)	(67.8)	7.3	7.5	9.4
Weighted average number of shares outstanding ('000s)	1,007,215	951,891	892,738	907,077	915,676
Balance sheet data (as at)
Intangible assets	781.8	748.8	719.6	721.7	712.1
Right-of-use assets	5,254.1	5,646.9	5,917.4	-	-
Property, plant and equipment	1,122.4	1,209.0	1,273.3	1,751.2	1,367.2
Deferred tax assets	326.6	188.2	195.0	30.6	23.0
Other assets	848.8	1,100.4	781.4	848.7	702.7
Cash and cash equivalents	77.8	71.0	66.6	69.0	55.0
Total assets	8,411.5	8,964.3	8,953.3	3,421.2	2,860.0
Current liabilities	2,271.1	2,435.5	2,139.7	1,429.5	1,224.7
Non-current liabilities	5,835.9	6,015.0	5,933.1	1,240.5	907.6
Equity	304.5	513.8	880.5	751.2	727.7
Total equity and liabilities	8,411.5	8,964.3	8,953.3	3,421.2	2,860.0

1.  The comparative information has been restated to reflect the impact of discontinued operations (note 9).

 

GLOSSARY

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.

Adjusted centre contribution

Centre contribution excluding adjusting items.

Adjusted EBITDA

EBITDA excluding adjusting items.

Adjusted EPS

EPS excluding adjusting items.

Adjusted operating profit/(loss)

Operating profit excluding adjusting items.

Adjusting items

Adjusting items reflects the impact of adjustments, both incomes and costs, which are considered to be significant in nature and/or size.

Available workstations

The total number of workstations in the Group (also termed Inventory). During the year, this is expressed as a weighted average. At period ends the absolute number is used.

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 by IWG and acquired centres in the year.

Franchisee

The owners of business centres operating under a formal franchise arrangement.

Growth capital expenditure

Capital expenditure in respect of centres which opened during the current or prior financial period.

Growth estate

Comprises centres which opened during the current or prior financial year.

Growth-related partner contributions

Partner contributions received in respect of centres which opened during the current or prior financial period.

Like-for-like

The financial performance from centres owned and operated for a full 12-month period prior to the start of the financial year, which therefore have a full-year comparative.

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.

Mature business

Operations 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.

Net debt

Operations cash and cash equivalents, adjusted for both short and long‑term borrowings and lease liabilities.

Net growth capital investment

Growth capital expenditure net of growth-related partner contributions.

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.

Open centres

All centres excluding closures.

Open centre revenue

Revenue for all centres excluding closures.

Operating profit/(loss) before growth

Reported operating profit adjusted for the gross profit impact arising from centres opening in the preceding and current years, and centres to be opened in the subsequent year.

Partners

Owners or landlords of business centres, operating under a management lease arrangement.

Pre-2020 business

Operations 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.

Pre-2020 gross margin

Gross margin attributable to the Pre-2020 business.

Pre-IFRS 16 basis

IFRS accounting standards effective as at the relevant reporting date with the exception of IFRS 16.

Revenue development

Revenue programme on a continuing basis, for the last four years.

ROI

Return on investment.

TSR

Total shareholder return.

REVPOS

Revenue per occupied square feet.

System wide revenue

Total reported revenue generated, including revenue from franchise, managed centre and joint-venture partners, but excluding fee income.

Workstation occupancy

Occupied workstations divided by available workstations expressed as a percentage.

WIPOS

Workstation revenue per occupied square metre.

 

END

 

 

FR UWONRUWUORRR