IWG points to franchising potential as shares take a hit from profit warnings
Hybrid working specialist IWG has warned of potential headwinds for profits this year, such as inflation, Covid-19 and the war in Ukraine in its first-quarter trading update.
Shares in the company have tumbled 5.36 per cent on the FTSE 250, despite record demand from big companies signing up to hybrid working.
This boom in demand has powered a sharp increase in system-wide revenues for the first three months of 2022, with an 18.3 per cent year-on-year boost, supported by increased franchising and partnering.
IWG’s total global network has risen to 3,328 locations and 64.4m square feet.
Revenue excluding closures has increased 22.4 per cent year-on-year, while pricing also continues to improve month-on-month – returning to 90 per cent of pre-pandemic levels.
The company has reported substantial progress in reducing costs in line with previously announced initiatives, and net debt now stands £763.8m, including bridge financing for The Instant Group merger.
IWG plans to review further opportunities around joint ventures and acquisitions after announcing the tie-up last month.
Franchising remains a key focus for IWG’s growth plans – with six agreements and 18 committed locations added over the first quarter of 2022.
However, it does expect further impact from ongoing lockdowns in certain markets, such as China, where the company operates around 120 locations across 29 cities.
It suggested the return to normal conditions in the country had been “slower than previously hoped” – with millions of people living in Shanghai now enduring stringent lockdowns.
Meanwhile, IWG has also reported additional costs as a result of inflation and taking on staff to roll out a new operating model, which it will use to franchise more of its network to partners.
IWG revealed it had signed up more than 1,000 new enterprise tenants, which are defined as having at least 500 employees during the first three months of the year.
This is the highest total recorded in a single quarter – with tenants able use multiple IWG offices rather than being fixed to one location.