Office space provider IWG revenue drops as it closes sites
Office landlord IWG has posted a decline in revenue over the third quarter as it continued to close sites due to the “unprecedented storm” of the coronavirus pandemic.
The FTSE 250 firm posted a 14.3 per cent drop in revenue to £583.3m in the three months to the end of September and warned support measures for customers, including rent deferrals, could cost it £100m by the end of the year.
IWG said the impact of the pandemic had been “greater than we imagined” as stay at home orders sparked a sharp fall in demand for office space.
Despite this, shares were up more than eight per cent in early trading.
The company, formerly known as Regus, said sales had begun to pick up in July, August and September, but this was being offset by customer churn and a hit to service revenue, which normally accounts for more than a quarter of its total revenue.
As a result of the crisis, IWG shuttered 66 of its offices over the quarter, taking the total number of coronavirus-related closures to three per cent of its network.
IWG said office closures were a “last resort”, adding that its priority was to negotiate with landlords to keep sites open.
The company said 2020 “presented the toughest challenge the group has experienced since its formation 31 years ago”.
“It is an unprecedented storm, but with the decisive actions we have taken across the business we are navigating its impact and look forward to entering 2021 as a stronger, more profitable business capable of increased cashflow generation supplemented with potential revenue recovery,” it added.
IWG said it had a strong net cash position of £10.9m at the end of the year, adding that it was continuing to reduce capital investment and focusing on franchising and joint ventures.
The company also offered an optimistic view for the industry as the pandemic had fuelled increased demand for flexible working solutions.
“There is clear evidence of increasing interest in flexible working as companies address how their employees will work in the future, the advent of further potential pandemics and the need to preserve liquidity by limiting capital and operating expense,” it said.