Year End Trading Update

RNS Number : 2315M

IWG PLC

20 January 2021

 

20 January 2021

Year End Trading Update

IWG plc, the leading global operator of workspace brands, today issues a trading update for the year ended 31 December 2020, ahead of the publication of full year results on 9 March 2021.

Current trading and further COVID-19 impact and actions

The continuation of the coronavirus pandemic, including new or extended preventative measures in most of the Group's markets, is now expected to prolong the impact of the pandemic on our business. Following early signs of recovery during the fourth quarter of 2020 with improved sales activity, we now expect our anticipated recovery in 2021 to be delayed.

In response to the prolonged pandemic and to ensure we emerge a stronger business post COVID-19, we have identified, and are implementing, further prudent actions to reduce costs, including additional network rationalisation, similar in magnitude to the previously announced rationalisation programme, and giving more support to our customers. Accordingly, a further provision of up to £160¹m for network rationalisation will be taken with the Group's results for the year ended 31 December 2020, in addition to the net charges of £155.8m¹ directly related to COVID-19 that were identified with the interim results published on 4 August 2020. Group revenue for the year ended 31 December 2020 is anticipated to be approximately £2.45bn.

The anticipated annualised cost benefit arising from these actions, if fully implemented, is expected to be in the range of £325m to £375m. The estimated cumulative benefit of these actions accruing to the Group in future years will be significant and is anticipated to be c. £2.4bn.

Strong financial position

The Group remains in a strong financial position and has been operationally cash flow positive each month up until the month of December 2020. During December the Group experienced a modest operating cash outflow resulting from the completion of deals with landlords that secure significant long-term positive benefits. As more deals with landlords complete, further modest outflows are expected in the first quarter of 2021.

Following the deployment of over £300m of capital in the fourth quarter to accelerate future organic and inorganic growth, net debt¹ at 31 December 2020 is expected to be approximately £350m. We have made a bolt-on acquisition in the US and invested in several long-term investment opportunities elsewhere, with more deals in a healthy pipeline. The Group has maintained a strong financial position with significant liquidity headroom in excess of £800m at the end of December 2020.

Significant growth opportunities from favourable industry evolution

Whilst 2020 was the most challenging year ever experienced by the Group, and these conditions are likely to persist well into 2021 before we see the environment improving, it has accelerated the shift to a new way of working significantly and we have continued to invest for the future, developing new products and services. Hybrid working has become the new norm and, in our view, is here to stay. IWG is the leading enabler and beneficiary of this trend. We are seeing more enterprises wanting to partner with IWG to benefit from this new way of working. We have signed many new deals of this nature with enterprises, including with Standard Chartered to provide global access to our network to allow their 90,000 employees the opportunity to work in a more flexible and distributed way.

Although at an early stage, conversations have restarted on several master franchise agreements. Therefore, whilst current market conditions remain very challenging, the future of flexible and hybrid working looks very positive and the Board remains confident that the Group's pivot to a capital light and more service orientated business will deliver a stronger, more profitable business capable of delivering increased cashflow.

⁽¹⁾  Results presented in accordance with pre-IFRS 16 accounting standards

Conference call details

IWG plc will be hosting a call for analysts and investors at 08.30 GMT this morning. Please register for the call via the following link to gain your unique dial in code:

https://www.speakservecloud.com/register-for-call/f4aa61a2-12b7-4dda-a1c2-00e67bdda0e0  

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

UK Replay dial-in number:	[phone] (International Access Numbers can be found here )
Access PIN:	250851

This announcement contains inside information.

For further information, please contact:

IWG plc Tel: + 41 (0) 41 723 2353 Mark Dixon, Chief Executive Officer Eric Hageman, Chief Financial Officer Wayne Gerry, Group Investor Relations Director

Brunswick Tel: + 44 (0) 20 7404 5959 Nick Cosgrove Oli Sherwood

This trading update contains certain forward looking statements with respect to the operations of IWG plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.

 

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