IWG - 2022 Preliminary Results

RNS Number : 0782S

IWG PLC

07 March 2023

7 March 2023

PRELIMINARY RESULTS ANNOUNCEMENT

IWG plc, the largest provider of hybrid workspace globally including its Regus and Spaces brands and an unrivalled network of 3,345 buildings across 120 countries, issues its preliminary results for the twelve months ended
31 December 2022.

IWG DELIVERS HIGHEST-EVER REVENUE IN ITS 34-YEAR HISTORY

· Highest-ever revenue in IWG's 34-year history with 24% growth in system-wide revenue to £3.1bn

· Highest-ever network footprint of more than 65 million sq. ft. - market leader worldwide by far

· Continued cost discipline with central overhead costs remaining almost flat, despite global inflationary pressure

· Momentum continues going into 2023 with higher revenue, higher operating profit, higher occupancy and higher pricing in December 2022

· All delivered with operating profit of £147m in 2022

Delivering both growth and cash in 2022

· System-wide revenue¹ growth of 24% reflecting both increased demand for flexible working and higher pricing

· EBITDA² increase of 442% to £317m (2021: £59m) driven by combination of higher revenue and cost focus

· Cash flow from business activities of £151m (2021: outflow of £(219)m), delivering net debt reduction

· 26.5% of building capacity remaining with occupancy at 73.5%

Clear progress on expansion priorities

· Record signing of 462 new capital-light contracts completed in 2022 delivering both further capacity increases across the network and an even more unrivalled global network

· Continued strong momentum for new capital-light contracts with 2023 signings on track to exceed 2022

· Network now at 3,345 locations worldwide, with 65.1 million sq. ft. of space under management

Worka

· Continue to deliver on announced strategy to combine IWG's digital assets together with the Instant Group (investment in 2022) under a new brand, Worka

· Total Worka revenue up 105% year-on-year to £271m (2022 pro-forma⁴ revenue: £304m), with EBITDA of £112m
(2022 pro-forma⁴ EBITDA: £117m)

· IWG reaffirms Worka to operate independently, continuing plans to evaluate reducing its ownership stake

SUMMARY FINANCIALS

The Group reports results in accordance with IFRS. Some results are additionally presented before the application of IFRS 16 (in accordance with IAS 17 accounting standards)² as it provides useful information to stakeholders on how the Group is managed, and reporting for bank covenants and certain lease agreements. The primary difference between the two standards is the treatment of operating lease liabilities. There is no difference between underlying cash flow. A reconciliation between EBITDA before the application of IFRS 16 and the IFRS 16 EBITDA is provided in the CFO review.

Preliminary results (£m)	2022	2021	Constant currency	Actual currency
System-wide revenue¹	3,086	2,498	+18%	+24%
Group revenue	2,751	2,227	+17%	+24%
EBITDA	1,336	1,026	+22%	+30%
Operating profit/(loss)	147	(87)	n.m.	n.m.
EBITDA, before application of IFRS 16	317	59	+389%	+442%
Adjusted EBITDA, before application of IFRS 16	308	80	+250%	+287%
EPS³	(11.3)	(26.2)	n.m.	n.m.
Cash flow from business activities⁵	151	(219)	n.m.	n.m.

1. System-wide revenue represents the total of all revenue made by both non-consolidated and consolidated locations globally

2. Before the application of IFRS 16 as defined in the Alternative performance measures section

3. Basic EPS (p) from continuing operations

4. Pro-forma for Instant Group investment for the full year

5. Cash flow from operations less tax, interest and payment of lease liabilities (see p. 18)

Mark Dixon, Chief Executive of IWG plc, said:

"The growth juggernaut in hybrid working continues and 2022 has been a record year for IWG with our highest-ever revenue produced in our 34-year history, up 24% from 2021. We have delivered this through our multi-brand strategy, primarily Regus and Spaces, and continue to have the largest global network of hybrid workspace by far. We have also shown that we can deliver both high levels of growth and profitability alongside EBITDA and cash flow generation. We have done this through a combination of higher demand for flexible work products, higher pricing and continued cost discipline, and I am looking forward to continuing this momentum in 2023.

During 2023 we will continue building on our capital-light growth strategy which allows us to capitalise on the growing pipeline of property investors seeking to maximise their returns by partnering with IWG. We continue to be well-placed to deliver further revenue, profitable growth and reducing leverage as more companies permanently embrace hybrid working as their preferred model, with IWG set to benefit most as by far the leading global player.

I would like to thank the entire IWG team for their hard work in 2022, and also our customers for their continued support."

Outlook and guidance

The demand for hybrid working solutions continues to grow as businesses globally seek to reduce their real estate costs and respond to the needs of their employees. Whilst there are macroeconomic headwinds around global growth, which can impact demand, plus challenges for the Group from inflation and interest rates impacting costs, we remain cautiously optimistic about the outlook for 2023, with underlying EBITDA before application of IFRS 16 during the month of December 2022 at c.£30m. We are confident that EBITDA will be in line with management's expectations with net debt falling during the year. However, it should be noted that the Group is operationally leveraged, resulting in profitability moving up and down with relatively small changes in revenue.

Financial calendar

21^st March 2023	2022 Annual Report & Accounts publication
25^th April 2023	First quarter 2023 trading update
8^th August 2023	Interim 2023 results
7^th November 2023	Third quarter 2023 trading update

Details of results presentation

Mark Dixon, Chief Executive Officer, and Charlie Steel, Chief Financial Officer, will be hosting a presentation of the results today for analysts and investors at 9.00am GMT.

Conference call dials (for the live call, no PIN or password is required; callers just need to state they are dialling in for the IWG call):

UK & International +44 (0) 33 0551 0200

UK Toll Free 0808 109 0700

Replay (available for 7 days) After the LIVE presentation.

UK & International +44 (0) 203451 9993

UK Toll Free 0800 633 8453

Replay PIN: 1247003#

Further information

IWG plc

Brunswick Tel: + 44 (0) 20 7404 5959

Mark Dixon, Chief Executive Officer

Charlie Steel, Chief Financial Officer

Nick Cosgrove

Peter Hesse

Chairman's statement

Hybrid working is driving flexible workspace mainstream

The hybrid model is becoming the preferred way of working for millions of people across the planet. This reflects major societal and behavioural change, as technological advances empower people to work wherever they are most productive. IWG is uniquely positioned to benefit from these fundamental changes to how work is conducted.

Hybrid working is leading companies to replace their expensive conventional HQs in city centres with smaller, more flexible workspaces, while simultaneously taking on advanced workspaces in the suburbs and smaller communities close to where their employees live to benefit from the fundamental changes to how work is conducted. As a result, our rapidly growing network is bringing new opportunities into the heart of local communities, and companies of all sizes are using IWG across multiple locations as they continue to shift their real estate strategies to focus on flexibility.

This shift delivers benefits to multiple groups. To businesses, helping them reduce costs, meet their ESG priorities and win the war for talent. To their people, enabling them to lead happier, healthier, less costly and less environmentally damaging lives closer to where they live. To communities, through increased local business opportunities. To our shareholders, from improved financial returns as we implement our strategy to capture the opportunities from hybrid working.

While addressing the changes being brought by hybrid working, IWG remained concentrated on the fundamentals to deliver a strong finish to a year impacted by unforeseen geopolitical and economic developments. This resulted in IWG reporting record revenues, a record network footprint, steady increases to occupancy and pricing, and limited impacts from inflation due to strict cost discipline. When viewed in the context of the challenges over the last three years, these results are a significant accomplishment that reflects the dedication and continued hard work of our people.

Our people

We continually aim to bring our people every opportunity to build a great career with us. We provide the means for them to develop their talent and capabilities in a diverse, inclusive and often challenging environment that enables them to stretch themselves and represent IWG as a truly progressive force.

I would like to extend my personal thanks to everybody who has been responsible for IWG's outstanding achievements during the year, especially those team members who have continued to represent the Company so brilliantly in all our markets across the world. Our people provide great service to our millions of customers, delivering to each and every one of them a great day at work. I remain immensely proud and grateful to them for maintaining the IWG difference and our position at the forefront of one of the world's most exciting and important business sectors.

Our strategy

As true pioneers of flexible workspace, we have the coverage, the offer, the approach, the technology, and the people to place us front of mind for any business wishing to explore the advantages of hybrid. As previously announced, to capture the opportunities created by the rapid shift to hybrid working, we have organised to improve focus on three important areas.

First, we continue to develop our platform benefitting from years of investment and experience in effectively operating the largest global workspace physical network. This includes industry leading systems and processes to manage all aspects of flexible workspace and deliver services in an efficient and cost-effective manner. Our ongoing management platform developments will further improve efficiencies and service levels while addressing new opportunities from hybrid working.

Second, our network development organisation is accelerating the capital-light expansion of our physical network through management agreements, partnering and franchising as building owners adapt to providing flexible workspace. Having the largest and fastest growing flexible workspace network in convenient locations will be key to meeting the needs of hybrid workers.

Finally, during 2022 we completed the merger of certain digital assets with the Instant Group to create Worka, the world's leading integrated independent workspace digital platform for serving the needs of the broader flexible workspace market.

Our Board

I remain indebted 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 yet another very active year. I would like to take this opportunity to thank Florence Pierre, who left the Board in November after nine years as an active Board member, as well as Glyn Hughes, who stepped down as Chief Financial Officer in October. We also welcomed three new Directors during the year, who bring a wealth of experience and important new perspectives on our business.

Tarun Lal joined us in May, bringing extensive international franchising expertise. Tarun has over 20 years of experience gained with Yum! Restaurants, where his executive roles have included Global Chief Operating Officer KFC and Managing Director - KFC Middle East, Pakistan, Turkey, Africa, and India. Currently he is President of KFC U.S.

Charlie Steel joined us in November as CFO. Previously, Charlie was CFO of Babylon Holdings, a New York Stock Exchange listed digital health delivery and AI diagnosis business.

Sophie L'Helias joined us in December. A trained lawyer, Sophie is currently the President of LeaderXXchange™, which promotes diversity and sustainability in governance, leadership and investment through solutions for companies and investors seeking impact. She has public board experience in the US and Europe and was a co-founder of the International Corporate Governance Network.

We continue to implement the results of our internal board review process in our plans and have full confidence in the Board members and processes. We will maintain our focus on strategic objectives and succession planning at the Board level in 2023.

Our environmental journey

We are committed to advancing on our environmental journey and delivering against the objectives we have set. We are proud to be doing so much to promote and lead the global uptake of the hybrid-working model. This is at the forefront of efforts to reduce the negative effects of the daily commute, reducing both the environmental impact and personal time associated with travel. Recent research we have conducted with Arup highlights the importance of this shift, identifying the commute as a major contributor. By moving away from local daily commutes and working locally some of the time an average worker's carbon footprint can be reduced by up to 70%, making it a fundamentally important issue for all of us.

We are also actively reducing our own carbon footprint as part of the implementation of our robust ESG strategy. The actions we have already taken resulted in our AA ESG rating by MSCI. And, while we work towards our objective to achieve net zero carbon emissions by 2040, to eliminate the remaining net effect of our operating activities in the interim we are investing in a range of carbon removal projects to achieve carbon neutrality during 2023.

As part of our journey, we are working to convert to certified green electricity with the goal to achieve this by 2030. We are improving the efficiency of our global supply chain by consolidating it into regional hubs that reduce the overall impact of our logistics operations. In addition, our colleagues from across the world are leading numerous initiatives to reduce waste and promote recycling in our centres.

Looking ahead

While we enter 2023 with great confidence in the future, we are fully cognizant of the challenging economic and geopolitical environment in which we and our customers will be operating throughout the coming year. We will remain focused on our purpose at IWG, to help people have a great day at work. By enabling them to increasingly work in the ways they want and closer to home, we are actively improving the way people live - not just at work but in many other aspects of their lives as well.

IWG is a clear leader in enabling the changes from hybrid working and has everything in place to build on that lead: a rapidly growing global network, an efficient management platform, industry leading technology, an expanding customer base, a broad brand and service portfolio to meet the needs of our customers and property owners, our people experienced in all aspects of delivering flexible workspace, and the vision and drive necessary to ultimately benefit from these changes. We therefore look forward to a future of profitable growth providing opportunities and rewards for our people, customers, partners and investors in 2023 and beyond.

Douglas Sutherland

Chairman

Chief Executive Officer's Review

Leading the global shift to hybrid

For many years, I have been saying that I believed companies and their employees would eventually move to a hybrid working model, with people being given the flexibility to get their work done when and where they're most productive. This shift was taking place pre-Covid at a gradual pace, but now it's happening at break-neck speed, and there there's no turning back. Hybrid working is here to stay.

Hybrid working is better for people, cheaper and far more flexible for companies. The advent of hybrid has made it redundant for companies to tie themselves into inflexible and expensive long-term contracts on city-centre properties, while also having a hugely positive impact on the environment.

This type of working is being rapidly adopted by companies worldwide. It's no longer just about plans or intentions, as we can see in our record numbers for 2022, it's already changed the actions business leaders are taking when it comes to managing their property footprint. In IWG's recent CFO study, half of the financial leaders surveyed have already opted for some form of hybrid working solutions¹.

The reasoning for this shift to hybrid is simple: the approach gives them the flexibility to scale up or down quickly without being locked into lengthy contracts. It's also 'a no brainer' when it comes to profit, with an independent Global Analytics survey recently showing that hybrid working can save organisations an average of more than $11,000 per employee per year².

Savings of that scale ramp up dramatically. It's estimated that since Cisco went hybrid five years ago it has saved around $500 million by cutting around half of its real-estate footprint³.

We see a future where between 30% and 50% of white-collar workers (well over a billion people) will work in the hybrid style. Significant academic research and opinion reinforces this prediction and highlights why companies are embracing the model.

According to Stanford University's Professor Nicholas Bloom, acknowledged as the leading academic expert on hybrid: "Firms don't do things that lose them money. They do things that make them money. That's why every firm just about out there is doing hybrid, because it's such a no-brainer to increase profit"⁴.

This future world of work is one in which we thrive, as the global market leader of hybrid working products supplied from our platform. A new real estate frontier, where buildings are 'linked together' to form a single work platform that can be accessed by millions in a convenient, productive and efficient way. Most importantly, work becomes more local for many, with growing indications that the fast-changing working habits of millions of people across the world mean the days could be numbered for one of the greatest drivers of global warming: the daily commute.

Little has done more over the years to depress, stress and irritate workers than the daily commute, affecting people in otherwise fantastic careers, in exceptional cities and with great employers. It separates families, fractures communities, pollutes the environment and wastes vast amounts of time and money.

Today the daily commute is entirely unnecessary, because the office is no longer a physical place that people have to go to. Rather, it is a digital space, where data saved in the cloud is accessible at any time, from anywhere.

While sophisticated web-based technology has been around for a few years, it is only since the pandemic that companies have seen first-hand not only that hybrid works, but that they are able to thrive under the model. Firms are able to operate more efficiently with a more productive workforce, while employees are happier as they see hybrid working as the equivalent of a 7% to 8% pay rise⁴.

A bright future

As we enter 2023, our focus is sharper than ever and we have completely repositioned the Company and its strategy in three key areas to enable us to deliver against our full potential.

The first of these is an unrelenting focus on growing our margin, driven by strong performance on new and embedded price, sequential improvements in occupancy, service revenue growth and strict control of costs.

The second is our parallel focus on the rapid growth of our network coverage in partnership with the property industry and investors using capital-light expansion methods such as management agreements, partnering deals and franchising.

Finally, we are committed to accelerating the growth of our Worka business following our investment in the Instant Group at the beginning of Q1 in 2022.

1. IWG Research, 2022

2. Global Workplace Analytics: Latest Work-at-Home/Telecommuting/Remote Work Statistics - Global Workplace Analytics

3. BBC STORYWORKS

4. What we now know about hybrid work (charterworks.com)

Only expanding as a green business

There are two distinct yet complementary trends that companies are embracing that are driving the demand for hybrid working solutions. First, companies are downsizing in city centres, replacing long, restrictive, and expensive leases with flexible space with operators like IWG. Second, they are taking on flexible workspace in local neighbourhoods, closer to where their people live and want to be.

These drivers are empowering us to grow faster than ever before, supporting our plans to add new signed locations during 2023 and bring the benefits of hybrid to many more people.

Growth is clearly a priority for IWG, but we are determined only to expand as a carbon-neutral organisation. The action we have taken to restrict and offset IWG plc's environmental impact is having the desired effect; our strong rating by MSCI was upgraded to AA and I am pleased to say that we are on track to achieve carbon neutrality during 2023.

Driving growth at IWG

Hybrid working is sometimes presented as a binary choice, between people working from home and a central headquarters, but this misses the point entirely.

All studies show employees don't want to spend hours commuting each day to work in an inconveniently located office. Now, the remarkable advances in cloud technology and video conferencing software - both vital to enabling effective hybrid working - mean they don't need to. That is why we are seeing a fundamental shift in the geography of work with the centre of gravity moving towards the local communities where people actually live.

This rapidly growing demand for hybrid working is propelling the IWG business forward. The demand to work locally is particularly strong in the suburbs, former dormitory towns, satellite villages and countryside communities that used to be denuded of their people in the working week by the irresistible draw of the big city. In parallel, businesses everywhere are now typically opting for a fraction of their former conventional city-centre space in favour of sites closer to where their employees live and actually want to be.

Just look at the sites of some of our most recent openings. In the UK: Gerrards Cross, Buckinghamshire (population 8,000); Marlow, also in Buckinghamshire (14,000); and Chippenham in Wiltshire (relatively large at 45,000). In the USA: Kodak, Tennessee (10,500); Destin, Florida (14,000); Blufton, South Carolina (27,700); Middleton, Wisconsin (20,000); Ridgeland, Mississippi (24,000); and Stafford, Virginia (5,500).

That is not to say that businesses are abandoning city centres: far from it. Increasingly, we are helping companies shake off the expense of the long-term, city-centre lease and replace it with a flexible, cost-effective agreement on a smaller space in one of our city-based centres. This, too, is a trend that is proving highly beneficial for IWG and as a result we will continue to expand across metropolitan, suburban and rural locations. Make no mistake the office is most definitely not dead; it has just changed location.

Our financial performance in 2022

With all the trends on our side it is no surprise that our financial results for 2022 were very strong with the highest-ever revenue in IWG's 34-year history with 24% growth in system-wide revenue to £3.1bn.

The strong financial results we generated, with growth in revenue and operating profit, are providing outstanding momentum for the business. We also started to grow our network strongly by signing 462 new centres in 2022, and we are planning for even stronger network growth in the year ahead.

My greatest thanks go to all our team members, who were the driving force behind our success in achieving excellent results in an extraordinary year for our global market and our business.

Looking to the year ahead

We enter 2023 with strong momentum behind us. The future is extremely bright for IWG and all our stakeholders as we continue to grow our customer base, our global network and our matchless portfolio of brands and other solutions.

We remain ambitious and hungry for yet greater success Our ultimate goal is to grow by thousands of centres over the coming years, further consolidating our position at the forefront of the most important and positive revolution in the world of work.

With the market trends on our side, the right strategy, the right people and the right impetus, we are superbly placed to deliver against all our ongoing growth ambitions.

Mark Dixon

Founder and CEO, IWG plc

Chief Financial Officer's review

In 2022 IWG showed the ability to grow rapidly and profitably

2022 has been an extraordinary year for the Group, demonstrating the ability to deliver its highest-ever system-wide revenue of £3.1bn in IWG's 34-year history whilst simultaneously increasing operating profit and cash generation. Combining the Group's unique brand strategy and unrivalled global network with historic investment in new centre capacity positions the business well for 2023.

Financial performance

	Group income statement
Preliminary results (£m)	2022	2021	Constant currency	Actual currency
System-wide revenue	3,086	2,498	+18%	+24%
Group revenue	2,751	2,227	+17%	+24%
Gross profit	575	243	+124%	+137%
Overheads	(427)	(328)	+27%	+30%
Joint ventures	(1)	(2)
Operating profit/(Loss)	147	(87)	n.m.	n.m.
Net finance cost	(252)	(172)		+47%
Loss before tax from continuing operations	(105)	(259)		-59%
Taxation	(16)	(10)
Effective tax rate	-15%	-4%
Loss after tax from continuing operations	(121)	(269)
Profit after tax from discontinued operations	1	59
Loss for the period	(120)	(210)
Basic EPS (p)
From continuing operations, adjusted	(10.1)	(23.4)
Attributable to shareholders	(11.2)	(20.4)
Depreciation & amortisation	1,189	1,110	+2%	+7%
Profit on discontinued operations	-	3
EBITDA	1,336	1,026	+22%	+30%
Network rationalisation charge	58	71
Reversal of impairment of PP&E	(73)	(125)
Provision for expected credit losses	-	53
Asset impairment of Russia & Ukraine	9	-
Other one-off items incl. restructuring	19	32
Total adjusting items	13	31
EBITDA adjusted	1,349	1,057	+20%	+28%

Changes to segmental reporting

In March 2022 we invested in The Instant Group, which is the world's largest independent marketplace for flexible working solutions for a smarter working world, with an innovative technology platform and award-winning digital marketing capabilities (refer to note 28 for financial details). As stated at the time of the investment in The Instant Group, the intention was to combine this business with some of IWG's other assets, including digital assets, to form Worka. During the year this integration progressed as planned and as a result we have made changes to our segmental reporting. Worka is operated by an independent management team.

We have also split the Group pre-Worka into three principal geographical segments: the Americas, Asia and EMEA (Continental Europe including UK, Middle East and Africa). As part of our focus on operational efficiency we have organised our main management functions and processes on a global basis. These geographical segments reflect how we practically exercise our global management through groupings based on time zones, economic relationships, market characteristics, cultural similarities, and language clusters. As a result, the UK is now included in the EMEA segment reporting.

Revenue

System-wide revenue increased by 24%, or 18% at constant currency, to £3,086m. Group revenue also increased by 24%, or 17% at constant FX, to £2,751m. All three geographic regions reported good year-on-year revenue growth. In particular, our largest region of EMEA had strong revenue growth to £1,199m (17% at constant FX) and Americas to £1,024m (8% at constant FX). Asia still had significant COVID-19 restrictions throughout much of 2022, in particular in China, and therefore revenue growth was weaker to £248m (2% at constant FX). Worka grew to £271m (103% at constant FX) impacted in particular by investment in The Instant Group in March 2022. On a pro-forma basis, had we consolidated The Instant Group for the full year in 2022, Worka had revenue of approximately £304m.

	Revenue
Preliminary results (£m)		2021	Constant currency
EMEA	1,199	1,027	+17%
Americas	1,024	836	+8%
Asia	248	231	+2%
Other	9	1	n.m.
Group pre-Worka	2,480	2,095	+12%
Worka	271	132	+103%
Group	2,751	2,227	+17%
Worka pro-forma⁴	304	132	+128%

4. Pro-forma for Instant Group investment for the full year

Gross Profit

Revenue improvement coupled with cost control resulted in a 124% improvement of gross profit to £575m (2021: £243m).

	Gross Profit
Preliminary results (£m)	2022	2021	Constant currency
EMEA	191	78	+141%
Americas	184	73	+123%
Asia	51	20	+153%
Other	11	(6)	n.m.
Group pre-Worka	437	165	+148%
Worka	138	78	+76%
Group	575	243	+124%

Overheads

We are pleased that investment in our in-country sales teams and our marketing to support our pivot to capital-light growth is yielding results with 462 new deals signed in 2022. This investment to grow our network, coupled with the investment to fill our centres and the impact of The Instant Group investment, resulted in Group increased overheads of £(427)m (2021: £(328)m).

Operating Profit/(Loss) adjusted - continuing operations

In 2022 our results recovered strongly and we are pleased to report an operating profit for year of £147m compared to a loss of £(87)m in 2021.

EBITDA

The Group's EBITDA increased by 22% at constant currency to £1,336m from £1,026m in 2021. This EBITDA improvement demonstrates the great progress we made in restructuring our centre costs, mitigating the inflationary impacts and benefiting from increasing revenue.

The Group reports 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. Results are additionally presented before the application of IFRS 16 (in accordance with IAS 17 accounting standards) as it provides useful information to stakeholders on how the Group is managed, and reporting for bank covenants and certain lease agreements. The primary difference between the two standards is the treatment of operating lease liabilities. There is no difference between underlying cash flow.

Before the application of IFRS 16 the Group's EBITDA increased by 389% at constant currency to £317m from £59m in 2021.

To bridge the Group's EBITDA of £1,336m under the IFRS 16 standard to £317m under IAS 17, we need to recognise rental income on subleases which are recognise as lease receivables under IFRS 16, rental costs on our lease portfolio reflected as lease liabilities under IFRS 16 and centre closure and other costs which are reflected as impairments under IFRS 16.

	EBITDA bridge
Preliminary results (£m)	2022	2021
EBITDA	1,336	1,026
Rent income	50	-
Rent expense	(1,059)	(997)
Centre closure & other cost	(10)	30
EBITDA before application of IFRS 16	317	59
Network rationalisation charge	25	60
Closure cost provision release	(71)	(125)
Provision for expected credit losses	-	53
Asset impairment of Russia & Ukraine	19	-
Other one-off items incl. restructuring	18	33
Total adjusting items	(9)	21
Adjusted EBITDA before application of IFRS 16	308	80

All our segments reported strong results, led by EMEA with EBITDA up 26% at constant FX from £474m to £597m, Asia up 19% at constant FX from £115m to £144m and Americas up 15% at constant FX from £451m to £588m. Worka EBITDA was at £112m (2021: £75m) positively impacted by The Instant Group investment in March 2022. On a pro-forma basis, i.e. including The Instant Group for full 12 months, Worka EBITDA was at £117m.

	EBITDA by segment
Preliminary results (£m)	FY 2022	FY 2021	Constant ccy
EMEA	597	474	+26%
Americas	588	451	+15%
Asia	144	115	+19%
Other	(105)	(108)	-2%
Group pre-Worka	1,224	932	+23%
Worka	112	75	+48%
Continuing operations	1,336	1,007	+25%
Discontinuing operations	-	19
Group	1,336	1,026	+22%
Worka (pro-forma)⁴	117	75

Adjusting items

As in prior years, in order to improve the transparency and usefulness of the financial information presented and to improve year-on-year comparability the Group identified net adjusting items on operating profit of £13m compared to £31m in 2021, of which all £13m are non-cash items (2021: £8m).

These adjusting items in 2022 primarily reflect COVID-19 related network rationalisation charges of £58m vs. £71m in 2021, a reversal of impairment of property, plant and equipment of £(73)m vs. £(125)m in 2021 and other one-off items including restructuring costs of £19m vs. £32m in 2021. Additionally, a charge related to the asset impairment of Russia and the Ukraine of £9m as a result of the ongoing geopolitical tensions was also recognised.

Foreign exchange

The overall impact of exchange rate movements over the course of the year increased revenue by £133m and EBITDA by £79m. The Group's results are exposed to translation risk from the movement in currencies. During 2022 key exchange rates moved, as shown in the table below.

Foreign exchange rates

	At 31 Dec			Average
£ sterling	2022	2021	%	2022	2021	%
US dollar	1.21	1.35	-10%	1.23	1.38	-11%
Euro	1.13	1.19	-5%	1.17	1.16	1%

Network growth

Our focus has been and will continue to be on the expansion through partnerships. 91% (or 421 deals out of 462) of deals we signed in 2022 in total were capital-light. As a result, we are continuing to improve the quality of our portfolio as we grow our global network.

Total occupancy of the Group's continued operations improved strongly by 530 bps in 2022 to 73.5% (2021: 68.2%). This is a great achievement. It also means that we still have 26.5% of centre capacity to grow revenues at low marginal cost and with minimal further investment.

The Group's overall pricing continued to improve throughout the year and importantly ahead of cost inflation, with year-on-year pricing increasing by 7%, albeit down from the all-time high of Q1 2020. Our ability to increase prices is tied closely to macroeconomic inflation rates, and therefore we expect that our ability to pass on inflationary increases to customers will slow as inflation reduces globally.

We continue to manage prices appropriately and continue to mitigate ongoing inflationary pressures through our strong focus on supplier consolidation and renegotiation, further strengthening our industry cost leadership. Cost efficiency and focus on profitable growth is our key focus area together with our focus on capital-light growth.

	2022	2021	YoY change
Number of centres	3,345	3,314	+31
Centre openings	152	146
Centre rationalisations	(121)	(145)
Number of SQFT	65.1m	64.1m	+2%
Total new centre deals signed	462	193	+139%
Of which capital light	421	182
Average total occupancy	73.5%	68.2%	+530 bps
Embedded price, indexed*	95	89	+7%

* Price per square foot, Q1 2020 = 100

Finance costs and taxation

The Group reported a net finance expense for the year of £(252)m (2021: £(172)m). The net finance expense includes interest on the Group's lease liabilities of £(230)m (2021: £(166)m) and borrowing facilities of £(22)m (2021: £(6)m). The increase in the finance expense related to the borrowing facilities is driven by increased interest rates globally and increased debt related to the investment in The Instant Group in March 2022 mitigated by a £27m gain on the mark-to-market of the option element of the convertible bond (gain of £23m). Excluding the mark-to-market of the convertible bond the financial expense related to the borrowing facilities was £(49)m (2021: £(29)m).

The effective tax rate is -15% (2021: -4%). 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

Earnings per share improved in the year from a loss of (20.4)p to a loss of (11.2)p. Earnings per share from continuing operations on an adjusted basis was a loss of (10.1)p compared to a loss of (23.4)p in 2021.

Diluted earnings per share for the year was a loss of (11.3)p (2021: loss of (26.2)p). Diluted earnings per share on a continuing basis on an adjusted basis for the year was a loss of (10.1)p (2021: loss of (24.2)p).

The weighted average number of shares in issue during the year was 1,006,884,755 (2021: 1,007,214,854). The weighted average number of shares for diluted earnings per share was 1,090,855,142 (2021: 1,102,444,936). 2,174,738 shares were acquired in the period to be held in treasury to satisfy future exercises under various Group long-term incentive schemes. The Group reissued 1,442,606 shares from treasury to satisfy such exercises during the year. At 31 December 2022 the Group held 50,564,853 treasury shares (2021: 49,832,721).

Cash flow - continuing operations

In 2022 we demonstrated that actions taken to manage cost tightly, restructure centres where necessary and improve revenue resulted in £151m of cash inflow from business activities compared to an outflow of £(219)m in 2021. Net maintenance capital expenditure was £5m lower in 2022 at £(90)m (2021: £(95)m).

Cash inflow before growth capex and corporate activities was £90m (2021: outflow of £(240)m).

Net growth capital expenditure was at £(141)m (2021: £(104)m) mainly due to centres we signed in prior years. It is important to note that in 2022 we signed a total of 462 new centre deals (2021: 193 deals signed) which will be added to our global and widely distributed network in the future. 91% or 421 deals out of these 462 deals in total were capital-light which will result in significantly reduced net growth capital expenditure investments in future years.

Net cash for the year increased by £77m as cash outflow before investments, share repurchase and dividends of £(359)m (2021: £(334)m) was financed through net proceeds on transactions of £54m and net proceeds from loans of £386m.

	Cash flow
Preliminary results (£m)	2022	2021
Operating profit/(loss)	147	(87)
Depreciation & amortisation	1,189	1,110
Profit on discontinued operations	-	3
EBITDA	1,336	1,026
Rent income	50	-
Rent expense	(1,059)	(997)
Centre closure & other costs	(10)	30
EBITDA before application of IFRS 16	317	59
Working capital (excl. amortisation of partner contributions)	22	(129)
Working capital related to the amortisation of partner contributions	(104)	(95)
Maintenance capital expenditure (net)	(90)	(95)
Other items⁵	6	41
Cash inflow/(outflow) from business activities⁶	151	(219)
Tax paid	(24)	(5)
Finance costs on bank & other facilities	(37)	(16)
Cash inflow/(outflow) before growth capex and corporate activities	90	(240)
Gross growth capital expenditure	(180)	(154)
Growth-related partner contributions	39	50
Net growth capital expenditure	(141)	(104)
Purchase of subsidiary undertakings (net of cash)	(307)	11
Cash outflow before corporate activities	(358)	(333)
Purchase of shares	(5)	-
Investment-related loan receivable	-	283
Net proceeds on transactions	54	19
Net proceeds from loans	386	36
Net cash inflow for the year	77	5
Opening net cash	78	71
FX movements	6	2
Closing cash	161	78

5. Includes capitalised rent related to centre openings (gross growth capital expenditure) of £(12)m (2021: £(20)m)

6. Cash flow before growth capex, corporate activities, tax and finance cost on bank & other facilities

Cash at year-end 2022 was £161m (2021: £78m). Mainly due to the investment in The Instant Group we increased our loan balance by £(386)m to £(861)m and non-cash movements, which was further impacted by foreign exchange losses of £(12)m. This resulted in net debt before application of IFRS 16 of £(712)m (2021: £(397)m).

Under IFRS, we are obliged to report net debt including operating leases which comprise c.90% of our net debt balance. During 2022 we paid principal and interest on finance leases of £1,227m and recognised new principal and interest on net lease investments of £(48)m. Non-cash movements and currency impact on lease liabilities and investments increased the liability by £(950)m. Hence, total IFRS 16 related lease liabilities at the end of 2022 were £(5,892)m (2021: £(6,121)m).

As a result, net debt at the end of 2022 was at £(6,604)m compared with £(6,518)m at the end of 2021. Again, the increase in net debt was primarily driven by £(307)m of acquisitions (predominantly The Instant Group in March 2022), growth capex related to centre openings which we signed in prior years and the impact of currency changes.

	Net debt
Preliminary results (£m)	2022	2021
Closing cash	161	78
Opening loans	(475)	(422)
Net proceeds from issue & repayment of loans	(386)	(36)
Non-cash movements & FX impact on loans	(12)	(17)
Net financial debt	(712)	(397)
Opening lease liabilities	(6,121)	(6,559)
Principal & interest payments on finance leases	1,227	1,032
Non-cash movements (net)	(524)	(712)
Principal & interest received on net lease investment	(48)	-
FX impact on lease liabilities & investments (net)	(426)	118
Net debt	(6,604)	(6,518)

Risk management

Effective management of risk is an everyday activity for the Group and, crucially, integral to our growth 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. The principal risks and uncertainties are unchanged, other than climate change risk, where an inadequate ESG strategy would mean that IWG is unable to manage climate related exposures. IWG manages this risk in the following ways:

· ESG is firmly on the agenda for the Board;

· IWG is exposed to physical and transitional climate related risks and are exposed to assessment throughout the year; and

· ESG considerations are an integral part of our businesses, and our strategy will continue to evolve to address climate related risks and opportunities. The Group continually reviews its product offering to provide low carbon services; and In changing asset allocations towards decarbonising operations and value chains.

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 twelve months ended 31 December 2022. Details of related party transactions that have taken place in the period can be found in note 31.

Dividends and share repurchase

Given continuing macroeconomic uncertainties and geopolitical tensions the Group continued to focus on maintaining sufficient funding. As a result, dividend payments currently remain on hold with a clear intention to return to our progressive dividend policy at the earliest possible opportunity. During the year the Group made a number of small-scale share repurchases, in total acquiring 2.1m shares to be held in treasury at a cost of £5m.

Financing

The Group has a combination of debt financing instruments, including:

• Convertible bond of £318m (face value £350m, 2021: £308m) with an interest rate of 0.5%, due for repayment in 2027 with an option for the bondholders to put the instrument back to the Group in 2025 at par; and

• Net financial debt (excluding the convertible bond) at 31 December 2022 of £394m. This includes a non-recourse bridge facility against the Worka group, the gross balance of which was £270m at 31 December 2022

As at year-end 2022 the Group complied with all facility covenants. The financial instruments are discussed in relation to the going concern assessment below.

Going Concern

The Group reported a loss after tax of £(121)m (2021: £(269)m) from continuing operations for the year, while net cash of £1,147m (2021: £735m) was generated from operations during the year. Although the Group's balance sheet at 31 December 2022 reports a net current liability position of £1,868m (2021: £1,435m) which could give rise to a potential liquidity risk, the Directors concluded and are satisfied after a comprehensive review that no liquidity risk exists after taking into account the following considerations:

1. The Group has funding available under the Group's £750m revolving credit facility. £173m (2021: £530m) was available and undrawn at 31 December 2022. This facility is committed until March 2025 with an option to extend until 2026 (note 25);

2. The Group's initial £330m non-recourse bridge facility, to fund the investment in The Instant Group, matures in September 2023. The Instant Group, combined with the IWG digital assets in Worka, has been highly cash generative and reduced its net debt to £176m, excluding £4m of lease liabilities, at 31 December 2022. Based on the modelled scenarios the Directors expect that Worka will continue to reduce its net debt position by September 2023, and has already been doing so at the start of 2023. The Group is pursuing various options available to address the bridge facility refinancing, including but not limited to: repaying the bridge facility through asset sales, cash generated from operations, and/or the extension or replacement of this facility to ensure continued funding of this highly successful and cash generative business; and

3. 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:

1. the potential cash generation of the Group against a range of illustrative scenarios (including a severe but plausible outcome); and

2. mitigating actions to reduce operating costs and optimise cash flows during any ongoing global restrictions.

Based on the above, the Directors consider that the Group is well placed to successfully manage the actual and potential liquidity risks faced by the organisation subject to successful resolution of the uncertainty with regard to the bridge facility referred to in section 2 above.

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.

Charlie Steel

Chief Financial Officer

Consolidated income statement

£m	Notes	Year ended 31 Dec 2022 Unaudited	Year ended 31 Dec 2021 Restated⁽¹⁾
Revenue	3	2,751	2,227
Total cost of sales		(2,182)	(1,885)
Cost of sales		(2,169)	(1,869)
Adjusting items to cost of sales(2)		(65)	(70)
Net reversal of impairment of property, plant, equipment and right-of-use assets(2)	3,5	52	54
Expected credit reversal/(losses) on trade receivables(2)	5	6	(99)
Gross profit (centre contribution)	3	575	243
Total selling, general and administration expenses		(427)	(328)
Selling, general and administration expenses		(406)	(295)
Adjusting items to selling, general and administration expenses	10	(21)	(33)
Share of loss of equity-accounted investees, net of tax	21	(1)	(2)
Operating profit/(loss)	5	147	(87)
Finance expense	7	(287)	(198)
Finance income	7	35	26
Net finance expense		(252)	(172)
Loss before tax for the year from continuing operations		(105)	(259)
Income tax expense	8	(16)	(10)
Loss after tax for the year from continuing operations		(121)	(269)
Profit after tax for the period from discontinued operations	9	1	59
Loss for the year		(120)	(210)
Attributable to equity shareholders of the Group		(117)	(205)
Attributable to non-controlling interests	23	(3)	(5)

Loss per ordinary share (EPS):

Attributable to ordinary shareholders
Basic (p)	11	(11.2)	(20.4)
Diluted (p)	11	(11.2)	(20.4)

From continuing operations
Basic (p)	11	(11.3)	(26.2)
Diluted (p)	11	(11.3)	(26.2)

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

2. The net reversal of adjusting items of £17m (2021: £2m) 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 £73m (2021: £125m), impairment of Ukraine and Russia of £9m (2021: £nil), the adjusting items to costs of sales of £65m (2021: £70m) and £nil (2021: £53m) 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 2022 Unaudited	Year ended 31 Dec 2021
Loss for the year		(120)	(210)

Other comprehensive income/(loss) that is or may be reclassified to profit or loss in subsequent periods:
Foreign exchange recycled to profit or loss from discontinued operations	9	-	-
Foreign currency translation gain/(loss) for foreign operations		5	(20)
Items that are or may be reclassified to profit or loss in subsequent periods		5	(20)

Other comprehensive income that will never be reclassified to profit or loss in subsequent periods:
Items that will never be reclassified to profit or loss in subsequent periods		-	-

Other comprehensive profit/(loss) for the period, net of tax		5	(20)

Total comprehensive loss for the year, net of tax		(115)	(230)
Attributable to shareholders of the Group		(112)	(225)
Attributable to non-controlling interests	23	(3)	(5)

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

Consolidated statement of changes in equity

£m	Notes	Issued share capital	Share premium	Treasury shares	Foreign currency translation reserve	Other reserves⁽¹⁾	Retained earnings	Total equity attributable to equity shareholders	Non-controlling interests	Total equity
Balance at 1 January 2021		10	313	(154)	36	26	283	514	-	514
Total comprehensive income/(loss) for the year:
Loss for the year		-	-	-	-	-	(205)	(205)	(5)	(210)
Other comprehensive income/(loss):
Foreign exchange recycled to profit or loss from discontinued operations	9	-	-	-	-	-	-	-	-	-
Foreign currency translation gain/(loss) for foreign operations		-	-	-	(20)	-	-	(20)	-	(20)
Other comprehensive income/(loss), net of tax		-	-	-	(20)	-	-	(20)	-	(20)
Total comprehensive income/(loss) for the year		-	-	-	(20)	-	(205)	(225)	(5)	(230)
Transactions with owners of the Company
Share-based payments	6	-	-	-	-	-	6	6	-	6
Ordinary dividend paid	12	-	-	-	-	-	-	-	-	-
Purchase of shares	22	-	-	-	-	-	-	-	-	-
Proceeds from exercise of share awards	22	-	-	3	-	-	(2)	1	-	1
Total transactions with owners of the Company		-	-	3	-	-	4	7	-	7
Acquisition of subsidiary with non-controlling interests	23	-	-	-	-	-	-	-	14	14
Balance at 31 December 2021		10	313	(151)	16	26	82	296	9	305
Total comprehensive income/(loss) for the year:
Loss for the year		-	-	-	-	-	(117)	(117)	(3)	(120)
Other comprehensive income/(loss):
Foreign exchange recycled to profit or loss from discontinued operations	9	-	-	-	-	-	-	-	-	-
Foreign currency translation gain/(loss) for foreign operations		-	-	-	5	-	-	5	-	5
Other comprehensive income, net of tax		-	-	-	5	-	-	5	-	5
Total comprehensive income/(loss) for the year		-	-	-	5	-	(117)	(112)	(3)	(115)
Transactions with owners of the Company
Share-based payments	6	-	-	-	-	-	4	4	-	4
Ordinary dividend paid	12	-	-	-	-	-	-	-	-	-
Purchase of shares	22	-	-	(5)	-	-	-	(5)	-	(5)
Proceeds from exercise of share awards	22	-	-	4	-	-	(4)	-	-	-
Total transactions with owners of the Company		-	-	(1)	-	-	-	(1)	-	(1)
Acquisition of subsidiary with non-controlling interests	23	-	-	-	-	-	-	-	53	53
Divestiture of subsidiary with non-controlling interests	23	-	-	-	-	-	-	-	(7)	(7)
Balance at 31 December 2022 (unaudited)		10	313	(152)	21	26	(35)	183	52	235

1. Other reserves include £11m 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, £38m arising from the Scheme of Arrangement undertaken on 14 October 2008, £6m relating to merger reserves and £nil to the redemption of preference shares, partly offset by £29m 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 2022 Unaudited	As at 31 Dec 2021
Non-current assets
Goodwill	13	934	704
Other intangible assets	14	214	78
Property, plant and equipment	15	6,234	6,376
Right-of-use assets	15	5,009	5,254
Other property, plant and equipment	15	1,225	1,122
Non-current net investment in finance leases	24	95	-
Deferred tax assets	8	350	327
Other long-term receivables	16	57	50
Investments in joint ventures	21	45	45
Other investments		-	-
Total non-current assets		7,929	7,580

Current assets
Inventory		1	1
Trade and other receivables	17	919	734
Current net investment in finance leases	24	52	-
Corporation tax receivable	8	19	19
Cash and cash equivalents	24	161	78
Total current assets		1,152	832
Total assets		9,081	8,412

Current liabilities
Trade and other payables (incl. customer deposits)	18	1,202	923
Deferred revenue		455	346
Corporation tax payable	8	45	36
Bank and other loans	19,24	285	22
Lease liabilities	24	1,002	932
Provisions	20	31	8
Total current liabilities		3,020	2,267

Non-current liabilities
Other long-term payables		11	10
Deferred tax liability	8	145	141
Bank and other loans	19,24	588	453
Lease liabilities	24	5,037	5,189
Derivative financial liabilities	25	-	27
Provisions	20	37	12
Provision for deficit on joint ventures	21	6	6
Retirement benefit obligations	27	2	2
Total non-current liabilities		5,826	5,840
Total liabilities		8,846	8,107

Total equity
Issued share capital	22	10	10
Issued share premium		313	313
Treasury shares	22	(152)	(151)
Foreign currency translation reserve		21	16
Other reserves		26	26
Retained earnings		(35)	82
Total shareholders' equity		183	296
Non-controlling interests	23	52	9
Total equity		235	305
Total equity and liabilities		9,081	8,412

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 2022 Unaudited	Year ended 31 Dec 2021 Restated⁽¹⁾
Operating activities
Loss for the year from continuing operations		(121)	(269)
Adjustments for:
Profit from discontinued operations	9	-	2
Net finance expense⁽²⁾	7	252	173
Share of loss on equity-accounted investees, net of tax	21	1	2
Depreciation charge	15	1,145	1,096
Right-of-use assets	15	955	893
Other property, plant and equipment	15	190	203
Loss on impairment of goodwill	13	3	-
Loss on disposal of property, plant and equipment	5	34	64
Profit on disposal of right-of-use assets and related lease liabilities	5,24	(31)	(42)
Profit on sales of current assets		-	(1)
Loss on disposal of intangible assets	5	-	-
Net reversal of impairment of property, plant and equipment	5,15	(13)	(7)
Net reversal of impairment of right-of-use assets	5,15	(39)	(47)
Amortisation of intangible assets	5,14	44	14
Negative goodwill arising on an acquisition	28	-	(1)
Tax expense	8	16	10
Expected credit reversal/(losses) on trade receivables	5	(6)	99
Increase/(decrease) in provisions	20	40	(15)
Share-based payments	6	4	6
Other non-cash movements		(3)	(11)
Operating cash flows before movements in working capital		1,326	1,073
Proceeds from partner contributions (reimbursement of costs)⁽⁴⁾	15	19	20
Increase in trade and other receivables		(97)	(127)
Increase/(decrease) in trade and other payables		191	(40)
Cash generated from operations		1,439	926
Interest paid and similar charges on bank loans and corporate borrowings		(38)	(19)
Interest paid on lease liabilities	24	(230)	(167)
Tax paid		(24)	(5)
Net cash inflows from operating activities		1,147	735

Investing activities
Purchase of property, plant and equipment	15	(242)	(221)
Payment of initial direct costs related to right-of-use assets		(1)	-
Interest received on net lease investment	7	7	-
Payment received from net lease investment	24	41	-
Purchase of subsidiary undertakings, net of cash acquired	28	(307)	11
Purchase of intangible assets	14	(39)	(34)
Purchase of other investments		-	(33)
Proceeds on the sale of discontinued operations, net of cash disposed of	9	1	52
Proceeds on sale of property, plant and equipment		1	1
Proceeds on other current receivables⁽³⁾	17	-	283
Interest received	7	1	3
Net cash (outflows)/inflows from investing activities		(538)	62

Financing activities
Proceeds from issue of loans	24	1,340	983
Repayment of loans	24	(954)	(947)
Payment of lease liabilities	24	(997)	(865)
Proceeds from partner contributions (lease incentives)⁽⁴⁾	15	31	36
Proceeds from Non-controlling interests	23	53	-
Purchase of treasury shares	22	(5)	-
Proceeds from exercise of share awards		-	1
Payment of ordinary dividend	12	-	-
Net cash outflows from financing activities		(532)	(792)

Net increase in cash and cash equivalents		77	5
Cash and cash equivalents at beginning of the year		78	71
Effect of exchange rate fluctuations on cash held		6	2
Cash and cash equivalents at end of the year	24	161	78

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 £27m (2021: £23m).

3. Included in other receivables at 31 December 2020 was mezzanine and senior debt recognised at amortised cost of £276m. This receivable balance was fully repaid to the Group in February 2021, in addition to associated costs reimbursements, resulting in an additional £1m gain on settlement.

4. The total proceeds from partner contributions relating to the reimbursement of costs and lease incentives of £50m (2021: £56m) are allocated between maintenance partner contributions of £11m (2021: £6m) and growth partner contributions of £39m (2021: £50m).

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

The financial information presented in this preliminary release does not constitute full statutory financial statements. The Annual Report and Financial Statements will be approved by the Board of Directors and reported on by the Auditor in due course. Accordingly, the financial information is unaudited. The Group financial statements for the year ended 31 December 2021 have been published. The audit report on those financial statements was unqualified.

IWG plc is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Company's ordinary shares are traded on the London Stock Exchange.

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

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').

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 2022 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 2022, with no material impact on the Group:

Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

Annual Improvements to IFRS Standards 2018-2020

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

Reference to the Conceptual Framework - Amendments to IFRS 3

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

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.

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

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 33.

Climate change

The potential climate change-related risks and opportunities to which the Group is exposed, have been assessed by management, who assessed the potential financial impacts relating to the identified risks, primarily considering the useful lives of, and retirement obligations for, property, plant and equipment, the possibility of impairment of goodwill and other long-lived assets and the recoverability of the Group's deferred tax assets. Management has exercised judgement in concluding that there are no further material financial impacts of the Group's climate-related risks and opportunities on the consolidated financial statements. These judgements will be kept under review by management as the future impacts of climate change depend on environmental, regulatory and other factors outside of the Group's control which are not all currently known."

Going concern

The Group reported a loss after tax of £121m (2021: £269m) from continuing operations for the year, while net cash of £1,147m (2021: £735m) was generated from operations during the year. Although the Group's balance sheet at 31 December 2022 reports a net current liability position of £1,868m (2021: £1,435m) which could give rise to a potential liquidity risk, the Directors concluded and are satisfied after a comprehensive review that no liquidity risk exists after taking into account the following considerations:

1. The Group had funding available under the Group's £750m revolving credit facility. £173m (2021: £530m) was available and undrawn at 31 December 2022. This facility is committed until March 2025 with an option to extend until 2026 (note 25);

2. The Group's £330m non-recourse bridge facility, to fund the investment in The Instant Group, matures in September 2023. The Instant Group, combined with the IWG digital assets in Worka has been highly cash generative and reduced its net debt to £176m, excluding £4m of net lease liabilities, at 31 December 2022. Based on the modelled scenarios the Directors expect that Worka will continue to reduce its net debt position by September 2023. The Group is pursuing various options available to address this, including repaying the bridge facility through asset sales, cash generated from operations, and/or the extension or replacement of this facility to ensure continued funding of this highly successful and cash generative business; and

• 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.

Details of the principal risks, outcomes of modelled and stress-tested scenarios are set out in the Viability statement.

IFRS not yet effective

The following new or amended standards and interpretations that are mandatory for 2023 annual periods (and future years) are not expected to have a material impact on the Group financial statements:

Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12	1 January 2023
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 of Accounting Estimates	1 January 2023
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 primarily 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. 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.

6. 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.

7. 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.

8. Net investment in finance leases

The Group acts as an intermediate lessor where certain commercial office real estate properties, rented under a separate 'head' lease agreement, are sublet as part of a separate sublease agreement. Interest in the 'head' lease and sublease are accounted for separately, with the classification of the sublease assessed with reference to the right-of-use assets arising from the head lease (not with reference to the underlying asset).

The initial net investment in finance leases is equal to the present value of the lease receipts during the lease term that have not yet been paid. The right-of-use asset arising from the head lease is offset by the initial measurement of the net investment in the finance lease, plus any additional direct costs associated with setting up the lease.

If the sublease agreement contains lease and non-lease components, the Group applies IFRS 15 in determining the allocation of the agreement consideration.

Client contributions are contributions received from sub-lessees towards the initial costs of preparing the commercial property for their use, including the fit-out of the property. These contributions represent a reimbursement of costs incurred by the Group and are accounted for as agency arrangements, and form part of the sub-lessees' assets.

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 2022. 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.

At each reporting date, the Group assesses whether there is an indication that a previously recognised impairment loss has reversed because of a change in th estimates used to determine the impairment loss. If there is such an indication, and the recoverable amount of the impaired asset or CGU subsequently increases, then the impairment loss is generally reversed.

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 - service agreements	2 years
Customer lists - sublease agreements	Up to 5 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 is the provision of fully integrated, end-to-end 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 workspace bookings, meeting rooms and inventory management) 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.

Deferred revenue

Invoices issued in advance of services provided, in accordance with contractual arrangements with customers, are held on the balance sheet as a current liability until the services have been rendered.

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, geopolitical circumstances in the Ukraine and related sanctions against Russia, have been deemed to meet the definition of adjusting items. Each of these items is 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 33. 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 26 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 25. 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, on either a 12-month or a 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
	2022	2021	2022	2021
US dollar	1.21	1.35	1.23	1.38
Euro	1.13	1.19	1.17	1.16

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 two operating segments. The Group's primary operating segment is managed through three principal geographical segments: the Americas; EMEA (Continental Europe including UK, Middle East and Africa); and Asia Pacific. The results of business centres in each of these regions, based on time zones; economic relationships; market characteristics; cultural similarities; and language clusters, form the basis for reporting geographical results to the chief operating decision-maker. As a result, the UK is now included in the EMEA regional reporting. These geographical segments exclude the Group's non-trading, holding and corporate management companies, which are included in the Other segment. The impact from The Instant Group investment (note 28) has been incorporated into Worka, which is disclosed as a separate operating segment. The combined digital assets in Worka, represents the world's leading fully integrated workspace platform. 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.

£m	Americas		EMEA⁽²⁾		Asia Pacific		Other		Pre-Worka		Worka		Total
Continuing operations	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾
Reported revenue(3)	1,024	836	1,199	1,027	248	231	9	1	2,480	2,095	271	132	2,751	2,227
Rent income	-	-	-	-	-	-	-	-	-	-	50	-	50	-
Revenue on pre-IFRS 16 basis	1,024	836	1,199	1,027	248	231	9	1	2,480	2,095	321	132	2,801	2,227
Workstation revenue (4)	709	611	904	793	188	179	-	-	1,801	1,583	50	-	1,851	1,583
Fee income	3	1	19	13	10	10	2	-	34	24	-	-	34	24
Customer Service income (5)	312	224	276	221	50	42	7	1	645	488	271	132	916	620
Gross profit/(loss) (centre contribution)	82	(8)	120	14	26	3	13	(5)	241	4	142	78	383	82
Share of loss of equity-accounted investees	-	-	(1)	(2)	-	-	-	-	(1)	(2)	-	-	(1)	(2)
Operating (loss)/profit	(23)	(94)	23	(78)	2	(19)	(130)	(130)	(128)	(321)	85	73	(43)	(248)
Finance expense									(37)	(31)	(13)	-	(50)	(31)
Finance income									27	26	-		27	26
(Loss)/profit before tax for the year									(138)	(326)	72	73	(66)	(253)
Depreciation and amortisation	166	147	116	111	27	27	21	16	330	301	30	1	360	302
Impairment of assets	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Assets(3)	3,587	3,364	3,782	3,937	549	532	475	535	8,393	8,367	688	44	9,081	8,412
Liabilities(3)	(3,445)	(3,232)	(3,559)	(3,682)	(538)	(540)	(752)	(645)	(8,294)	(8,099)	(552)	(8)	(8,846)	(8,107)
Net assets/ (liabilities)	142	132	223	255	11	(8)	(277)	(110)	99	268	136	36	235	305
Non-current asset additions(6)	131	50	211	172	32	48	29	82	403	352	24	-	427	352

1. Restated to exclude revenue from discontinued operations (note 9) and/or the separate disclosure of the Worka segment.

2. Includes UK performance as follows: Revenue of £386m (2021: £346m), gross profit of £34m (2021: loss of £11m) and operating profit of £13m (2021: loss of £34m)

3. Presented on a basis consistent with IFRS 16.

4. Includes customer deposits

5. Includes membership card income

6. Excluding deferred taxation.

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:

£m	Americas		EMEA		Asia Pacific		Other		Pre-Worka		Worka		Total
Continuing operations	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾
Gross profit/(loss) (centre contribution) - pre-IFRS 16	82	(8)	120	14	26	3	13	(5)	241	4	142	78	383	82
Rent income	-	-	-	-	-	-	-	-	-	-	(50)	-	(50)	-
Rent	434	414	443	448	126	116	8	4	1,011	982	47	1	1,058	983
Depreciation of property, plant and equipment including right-of-use assets	(345)	(317)	(389)	(378)	(90)	(91)	(3)	(5)	(827)	(791)	(1)	-	(828)	(791)
Other	13	(16)	17	(6)	(11)	(8)	(7)	-	12	(30)	-	(1)	12	(31)
Gross profit/(loss) (centre contribution)	184	73	191	78	51	20	11	(6)	437	165	138	78	575	243

1. Restated to reflect the impact of discontinued operations on a pre-IFRS 16 basis and/or the separate disclosure of the Worka segment.

£m	Americas		EMEA		Asia Pacific		Other		Pre-Worka		Worka		Total
Continuing operations	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾
Operating profit/(loss) - pre-IFRS 16	(23)	(94)	23	(78)	2	(19)	(130)	(130)	(128)	(321)	85	73	(43)	(248)
Rent income	-	-	-	-	-	-	-	-	-	-	(50)	-	(50)	-
Rent	434	414	443	448	126	116	9	5	1,012	983	47	-	1,059	983
Depreciation of property, plant and equipment including right-of-use assets	(345)	(317)	(389)	(378)	(90)	(91)	(4)	(7)	(828)	(793)	(1)	-	(829)	(793)
Other	11	(16)	15	(7)	(11)	(9)	(5)	2	10	(30)	-	1	10	(29)
Operating profit/(loss)	77	(13)	92	(15)	27	(3)	(130)	(130)	66	(161)	81	74	147	(87)

1. Restated to reflect the impact of discontinued operations on a pre-IFRS 16 basis (note 5) and/or the separate disclosure of the Worka segment.

£m	Americas		EMEA		Asia Pacific		Other		Pre-Worka		Worka		Total
Continuing operations	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	202	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾	2022	2021 Restated⁽¹⁾
Depreciation and amortisation - pre-IFRS 16	166	147	116	111	27	27	21	16	330	301	30	1	360	302
Depreciation of property, plant and equipment including right-of-use assets	345	317	389	378	90	91	4	7	828	793	1	-	829	793
Depreciation and amortisation	511	464	505	489	117	118	25	23	1,158	1,094	31	1	1,189	1,095

1. Restated to reflect the impact of discontinued operations on a pre-IFRS 16 basis (note 5) and/or the separate disclosure of the Worka segment.

£m	Americas		EMEA		Asia Pacific		Other		Pre-Worka		Worka		Total
Continuing operations	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021
Impairment of assets - pre- IFRS 16	-	-	-	-	-	-	-	-	-	-	-	-	-	-
(Net reversal) /impairment of property, plant and equipment including right-of-use assets	(30)	(56)	(16)	(3)	(6)	5	-	-	(52)	(54)	-	-	(52)	(54)
(Net reversal) /Impairment of assets	(30)	(56)	(16)	(3)	(6)	5	-	-	(52)	(54)	-	-	(52)	(54)

4. Segmental analysis - entity-wide disclosures

The Group's primary activity is the provision of global workplace solutions, therefore all revenue is attributed to a single group of similar products and services. Relevant product categories have; however, been included in the segmental analysis in note 3. 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:

	2022		2021
£m	External revenue	Non-current assets(1)	External revenue	Non-current assets(1)
Country of tax domicile - Switzerland	5	-	4	-
United States of America	868	2,787	694	2,737
EMEA	1,199	3,264	1,027	3,467
Worka	271	429	132	34
All other countries(2)	408	1,099	370	1,015
	2,751	7,579	2,227	7,253

1. Excluding deferred tax assets.

2. Revenue of £nil (2021: £34m) is included in discontinued operations (note 9).

5. Operating profit/(loss) - continuing operations

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

£m	Notes	2022	2021 Restated(1)
Revenue		2,751	2,227

Depreciation on property, plant and equipment(2)	15	(1,145)	(1,081)
Right-of-use assets	15	(955)	(880)
Other property, plant and equipment	15	(190)	(201)
Amortisation of intangible assets	14	(44)	(14)
Variable property rents payable in respect of leases	24	(68)	(63)
Lease expense on low-value assets	24	-	(1)
Staff costs	6	(423)	(342)
Facility and other property costs		(496)	(414)
Expected credit reversal/(losses) on trade receivables⁽³⁾	25	6	(99)
Loss on disposal of property, plant and equipment		(34)	(64)
Profit on disposal of right-of-use assets and related lease liabilities		31	42
Impairment of goodwill	13	(3)	-
Net reversal of impairment of property, plant and equipment(4)	15	52	54
Net reversal of impairment of other property, plant and equipment		13	7
Net reversal of impairment of right-of-use assets		39	47
Negative goodwill arising on acquisition	28	-	1
Other costs		(479)	(331)
Operating profit/(loss) before equity-accounted investees		148	(85)
Share of loss of equity-accounted investees, net of tax	21	(1)	(2)
Operating profit/(loss)		147	(87)

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

2. Excludes depreciation expenses related to discontinued operations for right-of-use assets of £nil (2021: £13m) and other property, plant and equipment of £nil (2021: £2m).

3. Of the £6m reversal of expected credit loss (2021: charge of £99m), £nil (2021: £53m) relates to COVID-19 adjusting items (note 10).

4. The net reversal of impairment of £52m (2021: £54m) includes an additional impairment of £39m (2021: £97m), offset by the reversal of £91m (2021: £151m) previously provided for (note 15).

£m	2022	2021
Fees payable to the Group's auditor and its associates for the audit of the Group accounts	(2)	(1)
Fees payable to the Group's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation	(3)	(3)
Other services pursuant to legislation	-	-
Other non-audit services	-	-

6. Staff costs

£m	2022(1)	2021 Restated(1)
The aggregate payroll costs were as follows:
Wages and salaries(2)	357	281
Social security	55	50
Pension costs	7	5
Share-based payments	4	6
	423	342

1. Excludes staff costs related to discontinued operations of £nil (2021: £2m).

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

	2022 Average full-time Equivalents(1)	2021 Average full-time Equivalents(1)
The average number of persons employed by the Group (including Executive Directors), analysed by category and geography, was as follows:
Centre staff	6,572	6,142
Sales and marketing staff	532	510
Finance staff	647	640
Other staff	1,005	947
	8,756	8,239

Americas	2,778	2,518
EMEA	3,356	3,129
Asia Pacific	995	998
Corporate functions	1,627	1,594
	8,756	8,239

1. The average full-time equivalents exclude employees for disposals during 2022 of 2 (2021: 65).

Details of Directors' emoluments and interests are given in the Directors' Remuneration report.

7. Net finance expense

£m	Notes	2022	2021 Restated⁽¹⁾
Interest payable and similar charges on bank loans and corporate borrowings		(39)	(42)
Interest payable on lease liabilities(2)		(230)	(166)
Total interest expense		(269)	(208)
Other finance costs⁽³⁾		(18)	10
Unwinding of discount rates		-	-
Total finance expense		(287)	(198)

Interest income		1	3
Interest received on net lease investment		7	-
Fair value gain on financial liabilities measured at FVTPL	19	27	23
Total finance income		35	26

Net finance expense		(252)	(172)

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

2. Excludes lease liability finance expense related to discontinued operations of £nil (2021: £1m).

3. Excludes interest expense related to discontinued operations of £nil (2021: £nil).

8. Taxation

(a) Analysis of charge in the year

£m	2022	2021 Restated(1)
Current taxation
Corporate income tax	(40)	(24)
Previously unrecognised tax losses and temporary differences	6	8
Over provision in respect of prior years	1	5
Total current taxation	(33)	(11)
Deferred taxation
Origin and reversal of temporary differences	9	1
Previously unrecognised tax losses and other differences	8	-
Total deferred taxation	17	1
Tax charge on continuing operations	(16)	(10)

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

(b) Reconciliation of taxation charge

	2022		2021 Restated(1)
	£m	%	£m	%
Loss before tax from continuing operations	(105)		(259)
Tax on profit at 11.9% (2021: 11.9%)	13	(12)	31	(12)
Tax effects of:
Expenses not deductible for tax purposes	(34)	32	(29)	11
Items not chargeable for tax purposes	12	(11)	34	(13)
Previously unrecognised temporary differences expected to be used in the future	14	(14)	8	(3)
Current year temporary differences not currently expected to be used	(55)	52	(113)	44
Adjustment to tax charge in respect of previous years	1	(1)	5	(2)
Differences in tax rates on overseas earnings	33	(31)	54	(21)
	(16)	15	(10)	4

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.

Unrecognised tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates.

£m	2022	2021
2022	-	33
2023	54	41
2024	40	48
2025	56	49
2026	65	70
2027	72	36
2028	341	37
2029	71	25
2030 and later	1,434	1,431
	2,133	1,770
Available indefinitely	1,468	1,302
Tax losses available to carry forward	3,601	3,072
Amount of tax losses recognised in deferred tax assets	64	125
Total tax losses available to carry forward	3,665	3,197

Additional tax losses have been generated in 2022. The above loss expiry table excludes £254m (2021: £238m) US state tax losses.

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

£m	2022	2021
Intangibles	368	390
Accelerated capital allowances	33	30
Tax losses	852	758
Rent	63	49
Leases	37	30
Short-term temporary differences	11	7
	1,364	1,264

(d) Corporation tax

£m	2022	2021
Corporation tax payable	(45)	(36)
Corporation tax receivable	19	19

(e) Deferred taxation

The movement in deferred tax is analysed below:

£m	Intangibles	Property, plant and equipment	Tax losses	Rent	Leases	Other temporary differences	Total
Deferred tax asset
At 31 December 2020	22	(78)	257	63	107	(182)	189
Current year movement	-	1	(17)	5	4	18	11
Prior year movement	-	-	(199)	-	-	-	(199)
Disposals	-	-	-	-	-	-	-
Transfers(1)	48	77	-	-	1	200	326
Exchange rate movements	-	-	-	-	-	-	-
At 31 December 2021	70	-	41	68	112	36	327
Current year movement	12	(4)	(16)	(4)	8	25	21
Prior year movement	1	13	(14)	(3)	-	3	-
Disposals	-	-	-	-	-	-	-
Transfers	-	-	-	-	-	-	-
Exchange rate movements	(6)	(9)	4	8	-	5	2
At 31 December 2022	77	-	15	69	120	69	350

Deferred tax liability
At 31 December 2020	-	-	-	-	-	-	-
Current year movement	(3)	(6)	-	-	(5)	1	(13)
Prior year movement	-	-	-	-	-	198	198
Disposals	-	-	-	-	-	-	-
Transfers(1)	(48)	(77)	-	-	(1)	(200)	(326)
Exchange rate movements	-	-	-	-	-	-	-
At 31 December 2021	(51)	(83)	-	-	(6)	(1)	(141)
Current year movement	(6)	2	-	(1)	2	(1)	(4)
Prior year movement	-	-	-	-	-	-	-
Disposals	-	-	-	-	-	-	-
Transfers	-	-	-	-	-	-	-
Exchange rate movements	-	-	-	-	-	-	-
At 31 December 2022	(57)	(81)	-	(1)	(4)	(2)	(145)

1. In 2021 the Group 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.

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 £350m (2021: £327m) and a deferred tax liability of £145m (2021: £141m).

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 include assets 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 assets can be utilised over a period of three years, based on the period corresponding to the Group's business forecasting processes. Recent 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.

In 2022 the deferred tax asset recognised in respect of the fair market value of IP resulting from a group restructure in 2019, in relation to which the amortisation is deductible for Swiss corporate income tax purposes, increased to £77m (2021: £70m) and this is included as Intangibles in the deferred tax table above. Recognition of this deferred tax asset is based on the approved three-year forecast.

To address concerns about uneven profit distribution and tax contributions of large multinational corporations, various agreements have been reached at the global level, including an agreement by over 135 jurisdictions to introduce a global minimum tax rate of 15%. In December 2021, the Organisation for Economic Co-operation and Development (OECD) released a draft legislative framework, followed by detailed guidance released March 2022, that is expected to be used by individual jurisdictions that signed the agreement to amend their local tax laws. Once changes to the tax laws in any jurisdiction in which the Group operates are enacted or substantively enacted, the Group may be subject to top-up tax. At the date when the financial statements were authorised for issue, one jurisdiction in which the Group operates had enacted or substantively enacted the tax legislation related to the top-up tax. The Group may be potentially subject to the top-up tax because it operates in countries where the statutory tax rate is below 15%. Management is closely monitoring the progress of the legislative process in each jurisdiction in which the Group operates in. At 31 December 2022 the Group did not have sufficient information to determine the potential quantitative impact.

9. Discontinued operations

During 2022, 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. Closures in the ordinary course of business are not considered part of discontinued operations.

Disposal of operations

During the year, the Group completed the sale of individually immaterial operations for the consideration of £1m (2021: £52m). The results of these operations up to the date of disposal were as follows:

£m	2022	2021 Restated⁽¹⁾
Revenue	-	34
Expenses	-	(31)
Operating profit	-	3
Net finance expense	-	(1)
Profit before tax for the year	-	2
Income tax expense	-	(4)
Loss after tax for the year	-	(2)
Gain on the sale of discontinued operations	1	61
Profit after tax for the year	1	59

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

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

£m	2022	2021
Total assets	1	72
Total liabilities	(1)	(82)
Net liabilities	-	(10)
Costs directly associated with the disposal	-	1
Foreign exchange recycled to profit and loss	-	-
	-	(9)
Consideration on disposal (net of cash and debt)⁽¹⁾	1	52
Gain on sale of discontinued operations	1	61

1. The consideration recognised includes a non-cash element of £nil (2021: £33m).

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

£m	2022	2021 Restated⁽¹⁾
Operating	-	48
Investing	-	(2)
Financing	(1)	(46)
Net cash outflow	(1)	-

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

10. Adjusting items

The Group has recognised the following adjusting items for the year ended 31 December 2022:

£m	2022	2021
COVID-19 related adjusting items	4	31
Impairment of Ukraine and Russia	9	-
Total adjusting items	13	31

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 continued to see significant volatility and business disruption, impacting performance in 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 recognised a net charge of £4m (2021: £31m) 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 significant in both nature and value to the results of the Group in the current period. Reversals of £17m (2021: £2m) have been recognised as adjusting items to cost of sales and charges of £21m (2021: £33m) have been recognised as adjusting items to selling, general and administration expenses in the Group's income statement.

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

	2022		2021
£m	Cost of sales	Selling, general and administration costs	Cost of sales	Selling, general and administration costs
Net reversal of impairment of property, plant and equipment (including right-of-use assets)	(73)	-	(125)	-
Impairment of goodwill	-	3	-	-
Provision for expected credit losses	-	-	53	-
Network rationalisation	58	-	71	-
Other one-off items including restructuring⁽¹⁾	(2)	18	(1)	33
Total COVID-19 related adjusting items	(17)	21	(2)	33

1. Included as adjusting items in selling, general and administration except for £2m (2021: £1m) 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 some of the Group's markets, continues to prolong the impact on our business in 2022. As a result of these measures, management continues to carry 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 ongoing rationalisation process undertaken 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 2022. Following this review, a net reversal of £73m (2021: net reversal of £125m) was recognised within cost of sales. Of this net reversal, £22m (2021: £38m) and £51m (2021: £87m) were recognised against property, plant and equipment and right-of-use assets respectively.

• Impairments of goodwill

COVID-19 and linked restrictions impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for these markets continued to be evaluated to determine the carrying value of the CGUs, with an additional impairment of £3m taken during 2022 (2021: £nil).

• Provision for expected credit losses

The Group continues to review the recoverability of its trade and other receivables portfolio; however, no additional expected credit loss was deemed necessary (2021: £53m). The provision for expected credit losses reflecting the greater likelihood of credit default by the Group's debtors, directly attributable to the impact of COVID-19, is fully utilised as at 31 December 2022.

• Network rationalisation

£58m (2021: £71m) 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 £nil (£2021: £6m) has also been recorded which is not included as adjusting items.

• Other one-off items including restructuring

During the year, the Group incurred £nil (2021: £1m) of transaction costs in respect of master franchise agreements that did not complete due to the outbreak of COVID-19.

Other charges of £18m (2021: £32m) 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 2022, as well as claims in respect of centre closures. In addition, during the year, the Group received a total of £2m (2021: £1m) in respect of worldwide financial support schemes.

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.

Impairment of Ukraine and Russia

As a result of geopolitical circumstances in the Ukraine and related sanctions against Russia, the Board has taken the decision to recognise a total provision of £9m against the gross assets of both its Russian and Ukrainian operations. These operations are not material to the Group, representing less than 1% of both total revenue and net assets of the Group. Accordingly, the Group's significant accounting judgements, estimates and assumptions have not changed.

11. Earnings per ordinary share (basic and diluted)

	2022	2021
Basic and diluted loss for the year attributable to shareholders (£m)	(120)	(210)
Basic loss per share (p)	(11.2)	(20.4)
Diluted loss per share (p)	(11.2)	(20.4)
Basic and diluted loss for the year from continuing operations (£m)	(121)	(269)
Basic loss per share (p)	(11.3)	(26.2)
Diluted loss per share (p)	(11.3)	(26.2)
Basic and diluted profit for the year from discontinued operations (£m)	1	59
Basic earnings per share (p)	0.1	5.9
Diluted earnings per share (p)	0.1	5.4
Weighted average number of shares for basic EPS	1,006,884,755	1,007,214,854
Weighted average number of shares under option	35,393,807	39,512,057
Weighted average number of shares that would have been issued at average market price	(29,608,587)	(22,437,997)
Weighted average number of share awards under the CIP, PSP, DSBP and One-off Award	1,776,964	1,747,819
Weighted average number of shares on convertible bonds	76,408,203	76,408,203
Weighted average number of shares for diluted EPS	1,090,855,142	1,102,444,936

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 £350m of convertible bonds in December 2020. The bond issue creates a potential 76,408,203 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 207.05p (2021: 321.95p), with a high of 302.10p on 4 January 2022 and a low of 115.40p on 12 October 2022.

12. Dividends

£m	2022	2021
Dividends per ordinary share proposed	-	-
Interim dividends per ordinary share declared and paid during the year	-	-

Given continuing macroeconomic uncertainties and geopolitical tensions, the Group's capital allocation policy remains unchanged, prioritising investment in the long-term growth of our business and dividend distribution to shareholders.

In order to protect our liquidity in the short-term, no dividend will be paid for the year ended 31 December 2022 (2021: £nil) and future dividend payments continue to be placed on hold, with the intention to review the return to our progressive dividend policy when appropriate.

13. Goodwill

£m	Total
Cost
At 31 December 2020	696
Recognised on acquisition of subsidiaries(1)	16
Goodwill derecognised on sale of subsidiaries	(1)
Goodwill impairment	-
Exchange rate movements	(7)
At 31 December 2021	704
Recognised on acquisition of subsidiaries(1)	188
Goodwill derecognised on sale of subsidiaries	-
Goodwill impairment	(3)
Exchange rate movements	45
At 31 December 2022	934

Net book value
At 31 December 2021	704
At 31 December 2022	934

1. Net of £nil 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 and Worka 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 carrying amount of goodwill attributable to the reportable business segments is as follows:

£m	2022	2021 Restated⁽¹⁾
Americas	314	283
EMEA	373	367
Asia Pacific	27	25
Worka(2)	220	29
	934	704

1. Restated to reflect the impact of the separate disclosure of the Worka segment.

2. Includes goodwill of £183m relating to the acquisition of The Instant Group and £5m from other immaterial acquisitions (note 28).

The carrying value of goodwill and indefinite life intangibles allocated to the USA, UK and Worka is material relative to the total carrying value, comprising 78% of the total. The remaining 22% of the carrying value is allocated to a further 38 countries. The goodwill and indefinite life intangibles allocated to the USA, UK and Worka are set out below:

£m	Goodwill	Intangible assets(1)	2022	2021 Restated⁽²⁾
USA	290	-	290	262
United Kingdom	219	11	230	230
Worka(3)	220	-	220	29
Other countries	205	-	205	194
	934	11	945	715

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

2. Restated to reflect the impact of the separate disclosure of Worka.

3. Includes goodwill of £183m relating to the acquisition of The Instant Group and £5m from other immaterial acquisitions (note 28).

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 and Worka. 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 2023, 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 increased from 7.5% in 2021 to 9.1% in 2022 (post-tax WACC: 6.7%). The country-specific pre-tax WACC reflecting the respective market risk adjustment has been set between 8.1% and 11.0% (2021: 7.2% to 9.7%).

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 only result in a recognised impairment of £3m (2021: £nil), in respect of individually immaterial 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 21% (2021: 24%) over the next five years. A terminal value centre gross margin of 23% is adopted from 2027, with a 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 8.5% (2021: 8.3%).

The UK model assumes an average centre contribution of 13% (2021: 18%) over the next five years. A terminal value centre gross margin of 20% is adopted from 2027, with a 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 9.1% (2021: 7.5%).

The Worka model assumes an average contribution of 36% over the next five years. A terminal value centre gross margin of 38% is adopted from 2027, with a 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 9.1%.

Management has considered the following sensitivities:

· Market growth and REVPOS - Management has considered the impact of a variance in market growth and REVPOS. The value-in-use calculation shows that if the long-term growth rate is nil, the recoverable amount of the US, UK and Worka 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 216.6% (2021: 88.1%) for the US, 14.4% (2021: 25.3%) for the UK and 12.0% for Worka.

· 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 17.1% (2021: 23.0%) for the US and 8.1% (2021: 12.0%) for the UK.

14. Other intangible assets

£m	Brand	Customer lists	Software	Total
Cost
At 31 December 2020	65	31	83	179
Additions at cost	-	-	34	34
Acquisition of subsidiaries	2	2	1	5
Disposals	-	-	-	-
Exchange rate movements	-	-	-	-
At 31 December 2021	67	33	118	218
Additions at cost	-	-	39	39
Acquisition of subsidiaries	24	77	40	141
Disposals	-	-	-	-
Exchange rate movements	-	1	2	3
At 31 December 2022	91	111	199	401

Amortisation
At 31 December 2020	42	31	53	126
Charge for year	1	1	12	14
Disposals	-	-	-	-
Exchange rate movements	-	-	-	-
At 31 December 2021	43	32	65	140
Charge for year	2	17	25	44
Disposals	-	-	-	-
Exchange rate movements	-	2	1	3
At 31 December 2022	45	51	91	187

Net book value
At 31 December 2020	23	-	30	53
At 31 December 2021	24	1	53	78
At 31 December 2022	46	60	108	214

During the year ended 31 December 2022, the Group completed the investment in The Instant Group. As part of the purchase price allocation, the Group engaged with third party experts in recognising acquired brands valued at £24m, customer lists from sublease agreements of £77m and digital asset software of £40m.

Included within the brand value is £11m 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

£m	Right-of-use assets(1)	Land and buildings	Leasehold improvements	Furniture and equipment	Computer hardware	Total
Cost
At 31 December 2020	9,530	150	1,521	775	129	12,105
Additions	176	11	110	73	7	377
Modifications(2)	479	-	-	-	-	479
Acquisition of subsidiaries	78	-	23	2	-	103
Disposals(4)	(852)	(1)	(147)	(33)	(6)	(1,039)
Exchange rate movements	(123)	-	(22)	(6)	(2)	(153)
At 31 December 2021	9,288	160	1,485	811	128	11,872
Additions	253	-	139	78	6	476
Modifications(2)	313	-	-	-	-	313
Acquisition of subsidiaries	4	-	16	-	-	20
Disposals(4)	(826)	-	(84)	(36)	(6)	(952)
Exchange rate movements	622	-	149	70	10	851
At 31 December 2022	9,654	160	1,705	923	138	12,580

Accumulated depreciation
At 31 December 2020	3,883	8	836	421	101	5,249
Charge for the year(3) (6)	893	3	134	58	8	1,096
Disposals(4) (5)	(675)	-	(66)	(24)	(5)	(770)
Net reversal of impairment⁽⁷⁾	(47)	-	(7)	-	-	(54)
Exchange rate movements	(20)	-	-	(4)	(1)	(25)
At 31 December 2021	4,034	11	897	451	103	5,496
Charge for the year(3) (6)	955	3	115	65	7	1,145
Disposals(4) (5)	(563)	-	(61)	(25)	(5)	(654)
Net reversal of impairment⁽⁷⁾	(39)	-	(13)	-	-	(52)
Exchange rate movements	258	-	103	42	8	411
At 31 December 2022	4,645	14	1,041	533	113	6,346

Net book value
At 31 December 2020	5,647	142	685	354	28	6,856
At 31 December 2021	5,254	149	588	360	25	6,376
At 31 December 2022	5,009	146	664	390	25	6,234

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 £nil (2021: £13m) and other property, plant and equipment of £nil (2021: £2m).

4. Includes disposals related to discontinued operations for right-of-use assets of £1m (2021: £39m) and other property, plant and equipment of £nil (2021: £24m).

5. Disposals are net of £9m (2021: £19m) in respect of COVID-19 related adjusting items previously provided for (note 10).

6. Depreciation is net of £11m (2021: £25m) in respect of COVID-19 related adjusting items previously provided for (note 10).

7. The net reversal of impairment of £52m (2021: £54m) includes an additional COVID-19 related impairment of £22m (2021: £70m), offset by the reversal of £75m (2021: £151m) 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 2 and 33.

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, 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 2022, the Group recorded a net reversal of impairment charges of £39m (2021: £47m) in respect of right-of-use assets and a net reversal of £13m (2021: £7m) in respect of leasehold improvements.

16. Other long-term receivables

£m	2022	2021
Deposits held by landlords against rent obligations	57	50
Other receivables	-	-
	57	50

17. Trade and other receivables

£m	2022	2021
Trade receivables, net	395	262
Prepayments and accrued income	152	134
Other receivables	174	146
Partner contributions receivables	23	30
VAT recoverable	172	159
Deposits held by landlords against rent obligations	3	3
	919	734

18. Trade and other payables (including customer deposits)

£m	2022	2021
Customer deposits	447	385
Other accruals	252	189
Trade payables	220	163
VAT payable	119	104
Other payables	147	67
Other tax and social security	17	15
	1,202	923

During 2021 the Group conducted a review of its customer deposits for inactive customer accounts. Based on this review, the Group released the financial liabilities in respect of such deposits where the obligation qualified for derecognition. The effect of these changes was an increase in operating profit of £22m in 2021.

19. Borrowings

The Group's total loan and borrowing position at 31 December 2022 and at 31 December 2021 had the following maturity profiles:

Bank and other loans

£m	2022	2021
Repayments falling due as follows:
In more than one year but not more than two years	5	5
In more than two years but not more than five years⁽¹⁾	581	446
In more than five years	2	2
Total non-current	588	453
Total current	285	22
Total bank and other loans	873	475

1. Includes convertible bond debt of £318m (2021: £308m).

The Group issued £350m convertible bonds in December 2020, raising £343m, net of transaction fees. At the date of issue, the convertible bonds were bifurcated between:

· A financial liability recognised at amortised cost of £298m, by using the discounted cash flow of interest payments and the bonds' nominal value; and subsequently remeasured at amortised cost of £318m (2021: £308m) at 31 December 2022. 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 £52m, not being closely related to the host financial liability, was recognised separately and measured at fair value through profit or loss (note 25). A gain has been recognised at 31 December 2022 of £27m (2021: £23m) through net finance expenses, resulting in a year-end liability of £nil (2021: £27m).

Further information regarding the committed borrowings and the convertible bonds can be found in note 25.

20. Provisions

	2022			2021
£m	Closures	Other	Total	Closures	Other	Total
At 1 January	13	8	21	24	7	31
Acquired in the period	7	-	7	-	4	4
Provided in the period	38	6	44	12	3	15
Utilised in the period⁽¹⁾	(1)	(6)	(7)	(22)	(7)	(29)
Exchange rate movements	3	-	3	(1)	-	(1)
At 31 December	60	8	68	13	7	20
Analysed between:
Current	23	8	31	1	7	8
Non-current	37	-	37	12	-	12
At 31 December	60	8	68	13	7	20

1. Includes provisions release related to discontinued operations of £nil (2021: £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 2022, 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

£m	Investments in joint ventures	Provision for deficit in joint ventures	Total
At 31 December 2020	11	(5)	6
Acquisition of joint ventures⁽¹⁾	33	-	33
Share of loss	-	(2)	(2)
Exchange rate movements	1	1	2
At 31 December 2021	45	(6)	39
Acquisition of joint ventures	-	-	-
Share of loss	(1)	-	(1)
Exchange rate movements	1	-	1
At 31 December 2022	45	(6)	39

1. The acquisition of joint ventures was settled via a non-cash transaction of £33m.

The Group has 82 centres operating under joint venture agreements (2021: 82) 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:

£m	2022	2021
Income statement
Revenue	86	35
Expenses	(88)	(38)
Loss before tax for the year	(2)	(3)
Tax charge	(1)	-
Loss after tax for the year	(3)	(3)
Balance sheet
Non-current assets	153	137
Current assets	329	169
Current liabilities	(322)	(160)
Non-current liabilities	(139)	(126)
Net assets	21	20

22. Share capital

Ordinary equity share capital

	2022		2021
	Number	Nominal value £m	Number	Nominal value £m
Authorised
Ordinary 1p shares in IWG plc at 1 January	8,000,000,000	80	8,000,000,000	80
Ordinary 1p shares in IWG plc at 31 December	8,000,000,000	80	8,000,000,000	80
Issued and fully paid up
Ordinary 1p shares in IWG plc at 1 January	1,057,248,651	10	1,057,248,651	10
Ordinary 1p shares issued for cash in the year	-	-	-	-
Ordinary 1p shares in IWG plc at 31 December	1,057,248,651	10	1,057,248,651	10

Treasury share transactions involving IWG plc shares between 1 January 2022 and 31 December 2022

During the year, 2,174,738 shares were purchased in the open market and 1,442,606 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 7 March 2023, 50,564,853 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.

	2022		2021
	Number of shares	£m	Number of shares	£m
1 January	49,832,721	151	50,677,280	154
Purchase of treasury shares in IWG plc	2,174,738	5	-	-
Treasury shares in IWG plc utilised	(1,442,606)	(4)	(844,559)	(3)
31 December	50,564,853	152	49,832,721	151

23. Non-controlling interests

During 2022, the Group completed the investment in The Instant Group, acquiring 100% of the equity voting rights. In a separate transaction, the Group sold a 15% non-controlling equity interest in a subsidiary of the Worka structure for a consideration of £53m. The Group no longer exercises control of its 57% investment in The Wing and disposed of the remaining £7m non-controlling interest during the year.

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

£m	2022	2021
NCI percentage	15%	43%
Non-current assets	413	42
Current assets	282	11
Non-current liabilities	(131)	(24)
Current liabilities	(163)	(7)
Net assets	401	22
Net assets attributable to NCI	52	9
Revenue	138	1
Loss after tax	(13)	(12)
Other comprehensive income	-	-
Total comprehensive income	(13)	(12)
Loss allocated to NCI	(3)	(5)
Other comprehensive income allocated to NCI	-	-
Cash flows from operating activities	31	(14)
Cash flows from investing activities	49	29
Cash flows from financing activities	(33)	(7)
Net increase in cash and cash equivalents	47	8

24. Net debt analysis

£m	Notes	2022	2021
Cash and cash equivalents		161	78
Current net investment in finance leases		52	-
Non-current net investment in finance leases		95	-
Gross cash and lease receivables		308	78
Debt due within one year		(285)	(22)
Debt due after one year⁽¹⁾⁽²⁾		(588)	(453)
Lease due within one year⁽³⁾		(1,002)	(932)
Lease due after one year⁽³⁾		(5,037)	(5,189)
Gross debt		(6,912)	(6,596)
Net debt		(6,604)	(6,518)
Derivative liability	19	-	(27)
		(6,604)	(6,545)

1. Includes £318m (2021: £308m) convertible bond liability.

2. Excludes the convertible bond derivative liability element at 31 December 2022 of £nil (2021: £27m).

3. There are no significant lease commitments for leases not commenced at 31 December 2022.

The following table shows a reconciliation of net cash flow to movements in net debt:

£m	2022	2021
Net debt at 1 January	(6,518)	(6,910)
Net increase in cash and cash equivalents	77	5
Interest received on net lease investment	(7)	-
Payment received from net lease investment	(41)	-
Proceeds from issue of loans	(1,340)	(983)
Repayment of loans	954	947
Interest paid on lease liabilities	230	167
Payment of lease liability	997	865
Non-cash movements⁽¹⁾	(534)	(729)
Exchange rate movements	(422)	120
Net debt at 31 December	(6,604)	(6,518)

1. Includes acquired debt of £nil (2021: £6m), interests accrued on the convertible bond liability of £10m (£10m) and movements on leases in relation to new leases, lease modifications/re-measurements and lease cessations of £524m (2021: £713m). Early termination of lease liabilities represent £294m (2021: £232m) of the non-cash movements, including £1m (2021: £52m) related to discontinued operations.

Cash and cash equivalent balances held by the Group that are not available for use amounted to £7m at 31 December 2022 (2021: £7m). Of this balance, £1m (2021: £2m) is pledged as security against outstanding bank guarantees and a further £6m (2021: £5m) is pledged against various other commitments of the Group.

Cash flows on debt 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 £nil (2021: £27m) derivative liability and a £nil (2021: £nil) cash flow hedging liability recognised separately.

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

£m	2022	2021
Depreciation charge for right-of-use assets	(955)	(893)
Principal lease liability repayments	(997)	(865)
Interest expense on lease liabilities	(230)	(167)
Expenses relating to leases of low-value assets that are not shown above as short-term leases	-	1
Expenses relating to variable lease payments not included in lease liabilities	68	63
Total cash outflow for leases comprising interest and capital payments	1,227	1,032
Additions to right-of-use assets	253	176
Acquired right-of-use assets	4	78
Interest income on net lease investment	7	-
Principal payments received from net lease investment	41	-

Total cash outflows of £1,295m (2021: £1,095m) for leases, including variable payments of £68m (2021: £63m), were incurred in the year.

25. 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 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 within the Strategic Report reviews the trading performance, financial position and cash flows of the Group. The Group's net debt position increased by £86m (2021: decreased by £392m) to a net debt position of £6,604m (2021: £6,518m) as at 31 December 2022. Excluding the IFRS 16 net investment in finance leases and lease liabilities, the net debt position increased to 712m (2021: £397m). 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 had a £750m 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 2022, £173m (2021: £530m) of the RCF was available and undrawn.

Although the Group has net current liabilities of £1,868m (2021: £1,435m), 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 £455m (2021: £346m) which will be recognised in future periods through the income statement. The Group holds customer deposits of £447m (2021: £385m) 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.

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.

£m	2022	2021 Restated⁽¹⁾
Americas	151	103
EMEA	192	135
Asia Pacific	28	22
Worka	24	2
	395	262

1. Restated to reflect the impact of the separate disclosure of the Worka segment.

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:

	2022		2021
£m	Gross	Provision	Gross	Provision
Not overdue	312	-	220	-
Past due 0 - 30 days	40	-	21	-
Past due 31 - 60 days	19	-	7	-
Past due 61 - 90 days	15	-	4	-
Past due more than 90 days	19	(10)	38	(28)
	405	(10)	290	(28)

At 31 December 2022, the Group maintained a provision of £10m for expected credit losses (2021: £28m) arising from trade receivables. The Group had provided £nil (2021: £99m) in the year, utilised £12m (2021: £98m) and released £6m (2021: £nil). Customer deposits of £447m (2021: £385m) 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, on either a 12-month or a 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 ongoing political and economic uncertainty, the Group continues to focus on cash generation by reducing cost, renegotiating rents and rationalising the network, resulting in short-term or long-term cash benefits. The Group has free cash and liquid investments (excluding blocked cash) of £154m (2021: £71m). In addition to cash and liquid investments, the Group had £173m (2021: £530m) available and undrawn under its committed borrowings. The Directors consider the Group has adequate liquidity to meet day-to-day requirements.

The Group maintained a revolving credit facility provided by a group of international banks. At 31 December 2022, the amount of the facility is £750m (2021: £950m) and the final maturity was extended in March 2020 to March 2025 with an option to extend until 2026.

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 £30m 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 2022 no cash was invested for a period exceeding three months (2021: £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 36% (2021: 35%) of the Group's revenue being attributable to the US dollar and 23% (2021: 23%) 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:

	2022
£m	GBP	EUR	USD
Trade and other receivables	-	4	7
Trade and other payables	(1)	(11)	(15)
Net statement of financial position exposure	(1)	(7)	(8)

	2021
£m		GBP	EUR	USD
Trade and other receivables		-	2	1
Trade and other payables		(1)	(8)	-
Net statement of financial position exposure		(1)	(6)	1

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 2022, 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 £4m (2021: £1m) 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 £2m for the year ended 31 December 2022 (2021: £1m). 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 £3m for the year ended 31 December 2022 (2021: £nil).

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 £5m for the year ended 31 December 2022 (2021: £8m). 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 £2m for the year ended 31 December 2021 (2021: £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. 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. 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 2022 and 31 December 2022

The Company declared and paid no interim dividend per share during the year ended 31 December 2022 (2021: nil pence) and proposed no final dividend per share (2021: 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 2022

£m	Effective interest rate %	Carrying value	Contractual cash flow	Less than 1 year	1-2 years	2-5 years	More than 5 years
Cash and cash equivalents	0.3%	161	161	161	-	-	-
Trade and other receivables(1)	-	767	767	767	-	-	-
Net investment in finance leases	5.6%	147	172	60	36	51	25
Other long-term receivables	-	57	57	-	29	28	-
Financial assets (2)		1,132	1,157	988	65	79	25

Non-derivative financial liabilities(3):
Bank loans and corporate borrowings	4.8%	(266)	(266)	-	-	(266)	-
Convertible bonds - debt host	3.8%	(318)	(356)	(2)	(2)	(352)	-
Lease liabilities	4.1%	(6,039)	(8,235)	(1,264)	(1,203)	(2,795)	(2,973)
Other loans	0.0%	(289)	(289)	(283)	(3)	(1)	(2)
Deferred and contingent consideration	-	(8)	(8)	(4)	(2)	(2)	-
Trade and other payables	-	(1,198)	(1,198)	(1,198)	-	-	-
Other long-term payables	-	(7)	(7)	-	(7)	-	-
Derivative financial liabilities:
Convertible bonds - embedded conversion option	-	-	-	-	-	-	-
Financial liabilities		(8,125)	(10,359)	(2,751)	(1,217)	(3,416)	(2,975)

As at 31 December 2021

£m	Effective interest rate %	Carrying value	Contractual cash flow	Less than 1 year	1-2 years	2-5 years	More than 5 years
Cash and cash equivalents	0.0%	78	78	78	-	-	-
Trade and other receivables(1)	-	600	600	600	-	-	-
Net investment in finance leases	-	-	-	-	-	-	-
Other long-term receivables	-	50	50	-	25	25	-
Financial assets (2)		728	728	678	25	25	-

Non-derivative financial liabilities(3):
Bank loans and corporate borrowings	4.0%	(137)	(137)	(1)	-	(136)	-
Convertible bonds - debt host	3.8%	(308)	(357)	(2)	(2)	(353)	-
Lease liabilities	3.3%	(6,121)	(7,869)	(1,095)	(1,069)	(2,564)	(3,141)
Other loans	0.0%	(30)	(30)	(21)	(5)	(2)	(2)
Deferred and contingent consideration	-	(12)	(12)	(8)	-	(2)	(2)
Trade and other payables	-	(915)	(915)	(915)	-	-	-
Other long-term payables	-	(6)	(6)	-	(6)	-	-
Derivative financial liabilities:
Convertible bonds - embedded conversion option	-	(27)	(27)	-	-	(27)	-
Financial liabilities		(7,556)	(9,353)	(2,042)	(1,082)	(3,084)	(3,145)

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 2022	Carrying amount			Fair value
£m	Cash, loans and receivables	Other financial liabilities	Total	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	161	-	161	-	-	-	-
Trade and other receivables(1)	767	-	767	-	-	-	-
Other long-term receivables	57	-	57	-	-	-	-
Derivative financial liabilities	-	-	-	-	-	-	-
Bank loans and corporate borrowings	-	(266)	(266)	-	-	-	-
Convertible bonds	-	(318)	(318)	-	-	(318)	(318)
Other loans	-	(289)	(289)	-	-	-	-
Deferred and contingent consideration	-	(8)	(8)	-	-	(8)	(8)
Trade and other payables	-	(1,198)	(1,198)	-	-	-	-
Other long-term payables	-	(7)	(7)	-	-	-	-
	985	(2,086)	(1,101)	-	-	(326)	(326)

31 December 2021	Carrying amount			Fair value
£m	Cash, loans and receivables	Other financial liabilities	Total	Level 1	Level 2	Level 3	Total
Cash and cash equivalents	78	-	78	-	-	-	-
Trade and other receivables(1)	600	-	600	-	-	-	-
Other long-term receivables	50	-	50	-	-	-	-
Derivative financial liabilities	-	(27)	(27)	-	-	(27)	(27)
Bank loans and corporate borrowings	-	(137)	(137)	-	-	-	-
Convertible bonds	-	(308)	(308)	-	-	(308)	(308)
Other loans	-	(30)	(30)	-	-	-	-
Deferred and contingent consideration	-	(12)	(12)	-	-	(12)	(12)
Trade and other payables	-	(915)	(915)	-	-	-	-
Other long-term payables	-	(6)	(6)	-	-	-	-
	728	(1,435)	(707)	-	-	(347)	(347)

1. Excluding prepayments.

At the date of issue, the £350m was bifurcated at £298m and £52m between corporate borrowings (debt) and a derivative financial liability respectively. At 31 December 2022, the debt was valued at its amortised cost, £318m (2021: £308m) and the derivative liability at its fair value, £nil (2021: £27m).

During the years ended 31 December 2022 and 31 December 2021, 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 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.
Contingent consideration, 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

Committed borrowings

	2022		2021
£m	Facility	Available	Facility	Available
Revolving credit facility	750	173	950	530
Bridge facility	330	-	-	-

The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2022, the amount of the facility remains £750m (2021: £950m) and the final maturity was extended in March 2020 to March 2025 with an option to extend until 2026. As at 31 December, £173m (2021: £530m) was available and undrawn under this facility.

The £750m revolving credit facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio. The Group continued to operate in compliance with the covenants agreed with the lenders.

A £330m non-recourse bridge facility specifically to fund the investment in The Instant Group, has been fully utilised. The bridge facility, with an outstanding balance of £270m, has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants. The Instant Group, combined with the IWG digital assets in Worka has reduced its net debt to £176m, excluding £4m net lease liabilities, at 31 December 2022 and continues to be highly cash generative.

Convertible bonds

In December 2020 the Group issued a £350m convertible bond, issued by IWG Group Holdings S.à r.l. and transferred in the year to IWG International Holdings S.à r.l., 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 £350m was bifurcated at £298m and £52m between corporate borrowings (debt) and a derivative financial liability, respectively. At 31 December 2022, the debt was valued at its amortised cost, £318m (2021: £308m) and the derivative liability at its fair value, £nil (2021: £27m).

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 £1m (2021: £1m).

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.

26. 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 eligible employees to purchase shares in IWG plc. In accordance with this programme, holders of vested options are entitled to purchase shares at the mid-market closing 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

	2022		2021
	Number of share options	Weighted average exercise price per share	Number of share options	Weighted average exercise price per share
At 1 January	42,827,743	195.65	42,926,841	184.38
Granted during the year	18,603,116	130.85	3,508,813	313.90
Lapsed during the year	(7,829,580)	215.97	(2,566,253)	190.35
Exercised during the year	(1,297,155)	118.47	(1,041,658)	142.60
Outstanding at 31 December	52,304,124	171.48	42,827,743	195.65
Exercisable at 31 December	12,273,441	213.23	11,694,349	198.51

Date of grant	Numbers granted	Weighted average exercise price per share	Lapsed	Exercised	At 31 Dec 2022		Exercisable from	Expiry date
13/06/2012	11,189,000	84.95	(3,944,407)	(7,244,593)	-	⁽¹⁾	13/06/2015	13/06/2022
12/06/2013	7,741,000	155.60	(4,306,000)	(3,061,233)	373,767	⁽¹⁾	12/06/2016	12/06/2023
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	(9,366,754)	(1,671,285)	1,837,757	⁽²⁾	05/11/2017	04/11/2024
19/05/2015	1,906,565	250.80	(1,862,565)	-	44,000	⁽²⁾	19/05/2018	18/05/2025
22/12/2015	1,154,646	322.20	(395,186)	(25,000)	734,460	⁽¹⁾	22/12/2018	22/12/2025
29/06/2016	444,196	272.50	(389,150)	(11,009)	44,037	⁽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	⁽¹⁾	01/03/2020	01/03/2027
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)	20,900,000	199.80	(8,841,662)	(166,668)	11,891,670	⁽²⁾	28/12/2021	28/12/2028
15/05/2019	613,872	341.90	(595,834)	-	18,038	⁽²⁾	15/05/2022	15/05/2029
13/09/2019	196,608	402.30	(156,608)	-	40,000	⁽²⁾	13/09/2022	13/09/2029
19/12/2019	108,349	408.60	(81,428)	-	26,921	⁽²⁾	19/12/2022	19/12/2029
02/04/2020	20,325,000	165.00	(4,020,834)	-	16,304,166	⁽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)	-	-	⁽¹⁾	05/08/2023	05/08/2030
09/09/2020	173,148	291.00	(155,964)	-	17,184	⁽³⁾	09/09/2023	09/09/2030
26/03/2021	466,377	342.80	(58,345)	-	408,032	⁽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)	-	-	⁽¹⁾	28/06/2024	28/06/2031
12/08/2021	580,655	310.00	(161,292)	-	419,363	⁽³⁾	12/08/2024	12/08/2031
10/11/2021	1,500,000	297.70	(1,500,000)	-	-	⁽¹⁾	10/11/2024	10/11/2031
09/12/2021	155,172	290.00	(155,172)	-	-	⁽¹⁾	09/12/2024	09/12/2031
09/03/2022	204,659	255.00	-	-	204,659	⁽³⁾	09/03/2025	09/03/2032
10/05/2022 (Grant 1)	1,042,774	222.10	-	-	1,042,774	⁽³⁾	10/05/2025	10/05/2032
17/05/2022 (Grant 2)	382,791	242.30	-	-	382,791	⁽³⁾	17/05/2025	17/05/2032
14/10/2022 (Grant 1)	15,087,586	117.95	(406,953)	-	14,680,633	⁽³⁾	14/10/2025	14/10/2032
17/10/2022 (Grant 2)	600,000	122.25	-	-	600,000	⁽³⁾	17/10/2025	17/10/2032
01/12/2022	1,285,306	159.35	-	-	1,285,306	⁽³⁾	01/12/2025	01/12/2032
	104,085,198		(39,433,931)	(12,347,143)	52,304,124

1. These options have fully vested as of 31 December 2022.

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 2022, there were 12,273,441 (2021: 11,649,349) outstanding share options which had fully vested with no further performance or holding period requirements and which had a weighted average exercise price of £213.23 (2021: £198.51).

Performance conditions for share options

June 2013 share options

The share options outstanding under this grant at 31 December 2022 reflect the options that have been awarded and vested, based on achievement against the relevant performance targets and are now exercisable with an expiry date of June 2023.

May 2014 share options

November 2014 share options

May 2015 share options

The share options outstanding under this grant at 31 December 2022 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

June 2016 share options

September 2016 share options

March 2017 share options

December 2018 (Grant 1) share options

The share options outstanding under this grant at 31 December 2022 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 December 2021 and ending December 2023.

December 2018 (Grant 2) share options

The share options outstanding under this grant at 31 December 2022 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 2022 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 May 2022 and ending May 2024.

September 2019 share options

December 2019 share options

April 2020 share options

The share options outstanding under this grant at 31 December 2022 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

September 2020 share options

March 2021 share options

The share options outstanding under this grant at 31 December 2022 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

August 2021 share options

March 2022 share options

May 2022 (Grant 1) share options

May 2022 (Grant 2) share options

October 2022 (Grant 1) share options

October 2022 (Grant 2) share options

December 2022 share options

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 2022	October 2022 (Grant 2)	October 2022 (Grant 1)	May 2022 (Grant 2)	May 2022 (Grant 1)	March 2022
Share price on grant date	159.35p	122.25p	117.95p	242.30p	222.10p	255.00p
Exercise price	159.35p	122.25p	117.95p	242.30p	222.10p	255.00p
Expected volatility	54.01% - 59.92%	53.34% - 58.16%	53.30% - 58.05%	53.48% - 56.71%	54.59% - 56.66%	54.33% - 57.32%
Option life	3-5 years	3-5 years	3-5 years	3-5 years	3-5 years	3-5 years
Expected dividend	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Fair value of option at time of grant	106.53p - 113.10p	81.12p - 85.29p	78.24p - 82.21p	153.52p - 158.97p	142.70p - 145.61p	162.79p - 168.44p
Risk-free interest rate	3.22% - 3.24%	3.22% - 3.24%	3.22% - 3.24%	1.42% - 1.60%	1.42% - 1.60%	1.41% - 1.49%

	August 2021	May 2021	March 2021	September 2020	May 2020	April 2020	December 2019	September 2019
Share price on grant date	310.00p	376.60p	342.80p	291.00p	202.00p	165.00p	408.60p	402.30p
Exercise price	310.00p	376.60p	342.80p	291.00p	202.00p	165.00p	408.60p	402.30p
Expected volatility	53.67% - 57.07%	53.78% - 59.19%	53.64% - 59.13%	51.81% - 62.96%	50.15% - 61.06%	49.02% - 59.29%	36.24% - 44.72%	36.33% - 44.83%
Option life	3-5 years	3-5 years	3-5 years	3-5 years	3-5 years	3-5 years	3-7 years	3-7 years
Expected dividend	1.12%	0.96%	1.00%	2.39%	3.44%	4.21%	1.59%	1.62%
Fair value of option at time of grant	163.92p - 171.67p	202.75p - 217.81p	183.02p - 196.95 p	122.93p - 146.68p	71.39p - 86.80p	50.79p - 62.29p	141.77p - 172.84p	137.79p - 169.19p
Risk-free interest rate	0.37% - 0.49%	0.16% - 0.34%	0.15% - 0.33%	(0.08%) - (0.04%)	0.00% - 0.06%	0.00% - 0.06%	0.57% - 0.65%	0.48% - 0.50%

	May 2019	December 2018 (Grant 2)	December 2018 (Grant 1)	March 2017	September 2016	June 2016	December 2015	May 2015
Share price on grant date	341.90p	199.80p	203.10p	283.70p	258.00p	272.50p	322.20p	250.80p
Exercise price	341.90p	199.80p	203.10p	283.70p	258.00p	272.50p	322.20p	250.80p
Expected volatility	38.84% - 45.75%	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	3-5 years	3-7 years	3-7 years	3-7 years	3-7 years
Expected dividend	1.85%	2.95%	2.90%	1.80%	1.80%	1.71%	1.40%	1.59%
Fair value of option at time of grant	120.77p - 141.08p	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	0.52% - 0.60p	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

	2022	2021
	Number of awards	Number of awards
At 1 January	3,160,617	3,237,768
PSP awards granted during the year	1,289,217	959,015
Lapsed during the year	(1,324,583)	(1,036,166)
Exercised during the year	(583,039)	-
Outstanding at 31 December	2,542,212	3,160,617
Exercisable at 31 December	-	-

There were 583,039 shares which were exercised during the year ended 31 December 2022 (2021: nil). The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2022 was 256.00p (2021: nil pence).

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2022	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	(848,474)	-	210,104	07/03/2024
PSP	04/03/2020	915,739	(306,407)	-	609,332	04/03/2025
PSP	26/03/2021	959,015	(320,887)	-	638,128	26/03/2026
PSP	09/03/2022	1,289,217	(431,373)	-	857,844	09/03/2027
		6,596,305	(3,471,054)	(583,039)	2,542,212

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:

	March 2022	March 2021	March 2020	March 2019	March 2018
Share price on grant date	255.00p	346.40p	356.50p	244.90p	240.90p
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	0.00%	1.00%	1.95%	2.57%	2.37%
Fair value of award at time of grant	167.75p - 254.14p	206.19p- 312.37p	292.36p- 192.98p	124.38p - 188.43p	124.92p - 189.26p
Risk-free interest rate	1.45%	0.33%	0.06%	0.79%	1.21%

It is recognised by the Remuneration Committee that the 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.

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.

Based on results as of 31 December 2021, the relative TSR target of exceeding the comparator group median TSR by less than 10% was achieved, resulting in the vesting of 118,055 shares subject to a holding period ending March 2023. The performance targets for EPS and ROI were not met and the share awards pursuant to these targets lapsed.

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 relative 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 relative 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%

2022 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 2022. Thus, conditional on meeting these performance targets, these shares will vest in March 2027.

The relative 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

	2022	2021
	Number of awards	Number of awards
At 1 January	376,291	376,291
DSBP awards granted during the year	683,166	-
Lapsed during the year	-	-
Exercised during the year	(112,014)	-
Outstanding at 31 December	947,443	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 2022 was 256.00p (2021: nil pence).

Plan	Date of grant	Numbers granted	Lapsed	Exercised	At 31 Dec 2022	Release date
DSBP	07/03/2019	112,014	-	(112,014)	-	07/03/2022
DSBP	04/03/2020	264,277	-	-	264,277	04/03/2023
DSBP	09/03/2022	171,415	-	-	171,415	09/03/2025
DSBP	02/11/2022	511,751	-	-	511,751	02/11/2027
		1,059,457	-	(112,014)	947,443

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:

	November 2022	March 2022	March 2020	March 2019
Share price on grant date	131.90p	255.00p	356.50p	244.90p
Exercise price	nil	nil	nil	nil
Number of simulations	-	-	-	-
Number of companies	-	-	-	-
Award life	5 years	3 years	3 years	3 years
Expected dividend	0.00%	0.00%	1.95%	2.57%
Fair value of award at time of grant	131.18p	254.14p	292.36p	188.42p
Risk-free interest rate	3.24%	1.41%	0.00%	0.68%

27. 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:

	2022			2021
£m	Switzerland	Philippines	Total	Switzerland	Philippines	Total
Fair value of plan assets	6	-	6	5	-	5
Present value of obligations	(7)	(1)	(8)	(6)	(1)	(7)
Net funded obligations	(1)	(1)	(2)	(1)	(1)	(2)

28. Acquisitions

Current period acquisitions

The Instant Group

On 8 March 2022, the Group completed the investment in The Instant Group, acquiring 100% of the equity voting rights, for a total consideration of £324m. The primary reason for the investment was to combine The Instant Group with the IWG digital assets, to form Worka.

In a separate transaction on 8 March 2022, the Group sold a 15% non-controlling equity interest in a subsidiary of the Worka structure, for a consideration of £53m.

£m	Book value	Final fair value adjustments	Final fair value
Net assets acquired
Intangible assets	2	139	141
Right-of-use assets	3	-	3
Other property, plant and equipment	15	-	15
Net investment in finance leases	177	-	177
Cash	25	-	25
Other current and non-current assets	64	-	64
Lease liabilities	(172)	-	(172)
Provisions due within one year	(7)	-	(7)
Current liabilities	(111)	6	(105)
	(4)	145	141

Goodwill arising on acquisition			183
Total consideration			324
Cash flow on acquisition
Cash paid			324
Less: cash acquired			(25)
Net cash outflow			299

The goodwill arising on this acquisition reflects the future benefits anticipated by the IWG Group.

If the above acquisition had occurred on 1 January 2022, the revenue and net retained loss arising from this acquisition would have been £121m and £10m respectively. In the year, this acquisition contributed revenue of £104m and net retained loss of £11m.

The was no deferred or contingent consideration arising on this acquisition.

The acquisition costs associated with this transaction were £11m, recorded within administration expenses in the consolidated income statement.

Other immaterial acquisitions

During the year ended 31 December 2022 the Group made various other individually immaterial acquisitions for a total consideration of £5m.

£m	Book value	Provisional fair value adjustments	Provisional fair value
Net assets acquired
Right-of-use assets	1	-	1
Other property, plant and equipment	1	-	1
Lease liabilities	(1)	-	(1)
Current liabilities	(1)	-	(1)
	-	-	-

Goodwill arising on acquisition			5
Total consideration			5
Less: deferred consideration			(1)
Less: contingent consideration			(1)
Cash flow on acquisition
Cash paid			3
Net cash outflow			3

The goodwill arising on these other immaterial 2022 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, £5m is expected to be deductible for tax purposes.

If the above acquisitions had occurred on 1 January 2022, the revenue and net retained profit arising from these acquisitions would have been £2m and £nil respectively. In the year, the acquisitions contributed revenue of £1m and net retained profit of £nil.

Deferred consideration of £1m arose on the acquisitions made in the year and is held on the Group's balance sheet at
31 December 2022. In addition, £5m deferred consideration relating to prior period acquisitions is held on the Group's balance sheet at 31 December 2022.

Contingent consideration of £1m arose on the 2022 acquisitions. Contingent consideration of £5m was paid and £1m released, during the current year, with respect to milestones, achieved or not achieved, on previous acquisitions. In addition, £1m contingent consideration is held on the Group's balance sheet at 31 December 2022.

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

For acquisitions completed in 2022, except for The Instant Group, 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.

Goodwill of £188m arose relating to 2022 acquisitions.

Prior period acquisitions

During the year ended 31 December 2021 the Group made acquisitions for a total consideration of £30m.

£m	Book value	Provisional fair value adjustments	Final fair value adjustments	Final fair value
Net assets acquired
Intangible assets	1	-	-	1
Right-of-use assets	78	-	-	78
Other property, plant and equipment	25	-	-	25
Cash	32	-	-	32
Other current and non-current assets	13	-	-	13
Lease liabilities	(81)	-	-	(81)
Current liabilities	(27)	-	-	(27)
Provisions due after one year	(4)	-	-	(4)
Non-current liabilities	(7)	-	-	(7)
	30	-	-	30
NCI based on their proportionate interest in the recognised amounts of the assets and liabilities of The Wing				(15)
Goodwill arising on acquisition				16
Negative goodwill arising on acquisition				(1)
Total consideration				30
Less: deferred consideration				(5)
Less: contingent consideration				(4)
Cash flow on acquisition
Cash paid				21
Less: cash acquired				(32)
Net cash inflow				(11)

Goodwill of £16m arose relating to 2021 acquisitions. Goodwill arising on acquisitions in 2021 includes negative goodwill of £1m, 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, £16m is expected to be deductible for tax purposes.

Deferred consideration of £5m arose on the acquisitions made in the year and was held on the Group's balance sheet at 31 December 2021.

Contingent consideration of £4m arose on the 2021 acquisitions. 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 £1m, 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 2022.

29. Capital commitments

£m	2022	2021
Contracts placed for future capital expenditure not provided for in the financial statements	76	89

These commitments are principally in respect of centre fit-out obligations. There are £1m (2021: £1m) of capital commitments in respect of joint ventures and no significant lease commitments for leases not commenced at 31 December 2022.

30. 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 £337m (2021: £309m). There are no material lawsuits pending against the Group.

31. 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
2022
Joint ventures	6	51	49
2021
Joint ventures	4	20	20

As at 31 December 2022, none of the amounts due to the Group have been provided for as the expected credit losses arising on the balances are considered immaterial (2021: £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:

£m	2022	2021
Short-term employee benefits	6	4
Retirement benefit obligations	-	-
Share-based payments	3	2
	9	6

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 £6m (2021: £6m). These awards are subject to performance conditions and vest over three, four and five years from the award date (note 26).

Transactions with related parties

During the year ended 31 December 2022 the Group acquired goods and services from a company indirectly controlled by a Director of the Company amounting to an insignificant amount of £19,015 (2021: £27,319). There was a £5,217 balance outstanding at the year-end (2021: £6,751).

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.

32. Principal Group companies

The Group's principal subsidiary undertakings at 31 December 2022, 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 S.à r.l.	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 S.r.l.	Italy	100	Holding and finance companies
Regus Management Malaysia Sdn Bhd	Malaysia	100	IWG Enterprise S.à r.l.	Switzerland	100
Regus Management de Mexico, SA de CV	Mexico	100	IWG Group Holdings S.à r.l.	Luxembourg	100
Regus New Zealand Management Ltd	New Zealand	100	IWG International Holdings S.à r.l.	Luxembourg	100
Regus Business Centre Norge AS	Norway	100	Genesis Finance S.à r.l.	Switzerland	100
IWG Management Sp z.o.o.	Poland	100	Pathway Finance S.à r.l.	Switzerland	100
Regus Business Centre, Lda	Portugal	100	Pathway Finance EUR 2 S.à r.l.	Switzerland	100
Regus Management Singapore Pte Ltd	Singapore	100	Pathway Finance USD 2 S.à r.l.	Switzerland	100
Regus Management España SL	Spain	100	Regus Group Limited	United Kingdom	100
IWG Management (Sweden) AB	Sweden	100	Global Platform Services GmbH	United Kingdom	100
Avanta Managed Offices Ltd	United Kingdom	100	Ibiza Holdings Limited	Jersey	85
Basepoint Centres Limited	United Kingdom	100	Ibiza Finance Limited	Jersey	100
Green (Topco) Limited	United Kingdom	85	Regus Corporation	United States	100
HQ Global Workplaces LLC	United States	100
RGN National Business Centre LLC	United States	100
RB Centres LLC	United States	100
Regus Management Group LLC	United States	100

33. 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, geopolitical circumstances in the Ukraine and related sanctions against Russia, have been deemed to meet the definition of adjusting items. Each of these items is considered to be significant in nature and/or size and is 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 2022, 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.

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.

34. Subsequent events

In December 2022, TKP Corporation sold its Japanese operations to Mitsubishi Estate Co. which entered into a new 10-year master franchise agreement with the Group. The transaction received regulatory approval in February 2023, when the transaction became effective, and the Group received and recognised a settlement fee of £18m post year-end.

Concurrently the Group acquired the Taiwanese operations from TKP Corporation for a consideration of £6m.

Reconciliation for alternative performance measures

Alternative performance measurement adjustments recognised

The purpose of these unaudited pages is to provide a reconciliation from the 2022 financial results to the alternative performance measures 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 recognition of these adjustments will not impact the overall cash flows of the Group or the cash generation per share.

1. Rent income and finance income

Under IFRS 16, where the sublease is assessed with reference to the right-of-use assets arising from the head lease, conventional rent income is not recognised in the profit or loss. The receipts associated with this income instead are used to determine the net investment in finance leases noted above. The net investment in finance leases is measured in subsequent periods using the effective interest rate method, based on the applicable interest rate. The related finance income arising on subsequent measurement is recognised directly through profit or loss.

2. Rent expense 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. The related finance costs arising on subsequent measurement are recognised directly through profit or loss.

3. Depreciation, lease payments and lease receipts

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 on head leases reduce the lease liabilities recognised in the balance sheet. Lease receipts on subleases reduce the net investment in finance leases recognised in the balance sheet.

4. 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 EBITDA (unaudited)

Year ended 31 December 2022

£ m	Notes	As reported	Rent income	Rent expense	Depreciation	Other adjustments (1)	pre-IFRS 16
EBITDA		1,336	50	(1,059)	-	(10)	317
Depreciation on property plant and equipment	5	(1,145)	-	-	829	-	(316)
Amortisation of intangible assets	5	(44)	-	-	-	-	(44)
Operating profit/(loss)		147	50	(1,059)	829	(10)	(43)
Operating profit/(loss) from discontinued operations	9	-	-	-	-	-	-
Operating profit/(loss) from continuing operations	5	147	50	(1,059)	829	(10)	(43)

1. Includes £52m of net reversals of impairment of property, plant and equipment including right-of-use assets.

Year ended 31 December 2021

£ m	Notes	As reported	Rent income	Rent expense	Depreciation	Other adjustments(1)	pre-IFRS 16
EBITDA		1,026	-	(997)	-	30	59
Depreciation on property plant and equipment	5	(1,096)	-		805	-	(291)
Amortisation of intangible assets	5	(14)	-		-	-	(14)
Operating (loss)/profit		(84)	-	(997)	805	30	(246)
Operating (loss)/profit from discontinued operations	9	(3)	-	14	(12)	(1)	(2)
Operating (loss)/profit from continuing operations(2)	5	(87)	-	(983)	793	29	(248)

1. Includes £54m of net reversals of impairment of property, plant and equipment including right-of-use assets.

2. Restated to reflect the impact of discontinued operations on a pre-IFRS 16 basis

Working capital (unaudited)

Year ended 31 December 2022

£ m	Reference	As reported	Rent income & expense and finance income & costs	Depreciation and lease payments	Other adjustments	pre-IFRS 16
Partner contributions - reimbursement	Statement of cash flows	19	-	(19)	-	-
Decrease/(increase) in trade and other receivables	Statement of cash flows	(97)	(54)	-	-	(151)
(Decrease)/increase in trade and other payables	Statement of cash flows	191	852	(906)	(29)	108
Working capital		113	798	(925)	(29)	(43)
Analysed as:
Working capital (excluding amortisation of partner contributions)	CFO review					22
Working capital related to the amortisation of partner contributions	CFO review					(104)
Growth-related partner contributions	CFO review					39

Year ended 31 December 2021

£ m	Reference	As reported	Rent income & expense and finance income & costs	Depreciation and lease payments	Other adjustments	pre-IFRS 16
Partner contributions - reimbursement	Statement of cash flows	20	-	(20)	-	-
Decrease/(increase) in trade and other receivables	Statement of cash flows	(127)	20	-	-	(107)
(Decrease)/increase in trade and other payables	Statement of cash flows	(40)	829	(809)	(47)	(67)
Working capital		(147)	849	(829)	(47)	(174)
Analysed as:
Working capital (excluding amortisation of partner contributions)	CFO review					(129)
Working capital related to the amortisation of partner contributions	CFO review					(95)
Growth-related partner contributions	CFO review					50

Partner contributions receivables (unaudited)

£m	Reference	2022	2021
Opening partner contribution receivables	Note 17	30	34
Net partner contributions recognised	Statement of cash flows	50	56
• Maintenance partner contributions	CFO review	11	6
• Growth partner contributions	CFO review	39	50
Settled in the period		(59)	(59)
Exchange differences		2	(1)
Closing partner contribution receivables	Note 17	23	30

Capital expenditure (unaudited)

Year ended 31 December 2022

£ m	Reference	As reported	Rent income & expense and finance income & costs	pre-IFRS 16
Purchase of property, plant and equipment	Statement of cash flows	(242)	(12)	(254)
Purchase of intangible assets	Statement of cash flows	(39)	-	(39)
Total capital expenditure		(281)	(12)	(293)

Analysed as:		Net capital expenditure	Partner contributions	Gross capital expenditure
Net maintenance capital expenditure	CFO review	(90)	11	(101)
Gross growth capital expenditure	CFO review	(141)	39	(180)
Capitalised rent related to centre openings	CFO review	(12)	-	(12)
		(243)	50	(293)

Year ended 31 December 2021

£ m	Reference	As reported	Rent income & expense and finance income & costs	pre-IFRS 16
Purchase of property, plant and equipment	Statement of cash flows	(221)	(20)	(241)
Purchase of intangible assets	Statement of cash flows	(34)	-	(34)
Total capital expenditure		(255)	(20)	(275)

Analysed as:		Net capital expenditure	Partner contributions	Gross capital expenditure
Net maintenance capital expenditure	CFO review	(95)	6	(101)
Gross growth capital expenditure	CFO review	(104)	50	(154)
Capitalised rent related to centre openings	CFO review	(20)	-	(20)
		(219)	56	(275)

Five-year summary

£m	31 Dec 2022	31 Dec 2021 Restated⁽¹⁾	31 Dec 2020 Restated⁽¹⁾	31 Dec 2019 Restated⁽¹⁾	31 Dec 2018 Restated⁽¹⁾
Income statement (full year ended)
Revenue	2,751	2,227	2,432	2,593	2,355
Cost of sales	(2,182)	(1,885)	(2,377)	(2,043)	(1,975)
Expected credit reversal/(losses) on trade receivables	6	(99)	(35)	(2)	(18)
Gross profit (centre contribution)	575	243	20	548	362
Selling, general and administration expenses	(427)	(328)	(367)	(279)	(247)
Share of (loss)/profit of equity-accounted investees, net of tax	(1)	(2)	(3)	3	(2)
Operating profit/(loss)	147	(87)	(350)	272	113
Finance expense	(287)	(198)	(266)	(229)	(16)
Finance income	35	26	3	1	1
(Loss)/profit before tax for the year from continuing operations	(105)	(259)	(613)	44	98
Income tax (expense)/credit	(16)	(10)	(30)	22	(29)
(Loss)/profit for the year from continuing operations	(121)	(269)	(643)	66	69
Profit/(loss) after tax for the year from discontinued operations	1	59	(4)	385	37
(Loss)/profit after tax for the year	(120)	(210)	(647)	451	106

(Loss)/earnings per ordinary share (EPS):

Attributable to ordinary shareholders
Basic (p)	(11.2)	(20.4)	(67.9)	50.5	11.7
Diluted (p)	(11.2)	(20.4)	(67.9)	49.6	11.6
Weighted average number of shares outstanding ('000s)	1,006,885	1,007,215	892,738	892,738	907,077

From continuing operations
Basic (p)	(11.3)	(26.2)	(67.8)	7.4	7.6
Diluted (p)	(11.3)	(26.2)	(67.8)	7.3	7.5
Weighted average number of shares outstanding ('000s)	1,006,885	1,007,215	892,738	892,738	907,077

Balance sheet data (as at)
Intangible assets	1,148	782	749	720	722
Right-of-use assets	5,009	5,254	5,647	5,917	-
Property, plant and equipment	1,225	1,122	1,209	1,273	1,751
Net investment in finance leases	147	-	-	-	-
Deferred tax assets	350	327	188	195	31
Other assets	1,041	849	1,100	781	848
Cash and cash equivalents	161	78	71	67	69
Total assets	9,081	8,412	8,964	8,953	3,421
Current liabilities	3,020	2,267	2,435	2,140	1,430
Non-current liabilities	5,826	5,840	6,015	5,933	1,240
Equity	235	305	514	880	751
Total equity and liabilities	9,081	8,412	8,964	8,953	3,421

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.

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.

Net debt

Operations cash and cash equivalents, adjusted for both short-term 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 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-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.

TSR

Total shareholder return.

System wide revenue

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

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