IWG Q3 revenues jump amid strong demand for hybrid working

1st Nov 2022 08:05

(Sharecast News) - Office space provider IWG reported a rise in third-quarter revenues on Tuesday but said full-year profit was set to be at the lower end of market expectations.

In update for the quarter to 30 September, the company said revenues grew 25% year-on-year to £737m. It highlighted increased traction in "capital-light" agreements. These contracts such as franchise agreements and management or partnership contracts typically involve a fee structure, no capex spend by IWG and no lease liabilities.

IWG said it completed 252 capital-light contracts during the first nine months of the year, representing around 90% of all new agreements.

Chief executive Mark Dixon said: "The significant move to hybrid working is driving strong demand for our flexible work products and creating a long-term tailwind for IWG as businesses all over the world respond to the twin effects of economic uncertainty and their employees' desire to work flexibly.

"To meet this demand, our innovative capital-light growth strategy allows us to capitalise on the growing pipeline of commercial property owners and landlords seeking to maximise their returns by partnering with IWG. The third quarter has shown continuing strong revenue growth, margin improvement and underlying cash generation."

Despite the upbeat statement, the company also warned on Tuesday that adjusted earnings before interest, tax, depreciation and amortisation for the year are expected to be towards the lower end of the range of the market estimates of £304m to £380m.

At 0815 GMT, the shares were down 2% at 129.30p.

Victoria Scholar, head of investment at Interactive Investor, said: "The global leader in hybrid workspace is struggling with the structural decline in demand for office space post-pandemic. Covid-19 expedited an existing trend which was the shift away from office working towards working-from-home and hybrid working arrangements. Commercial property has struggled drastically while many households have been looking for bigger flats and houses to accommodate a home office outside of big cities like London.

"Like many businesses IWG has also been struggling with the macroeconomic headwinds including a slowing UK economic outlook plus rising inflation, which is sharply increasing costs."