IWG warns annual profit will miss expectations

IWG warned annual profit would be up to £20m lower than the serviced office group had expected because of weak performance at its UK business and short-term losses from opening new sites.

The FTSE 250 company, which is the subject of takeover attention from private equity firms, said global activity trends were strong but its UK business was doing poorly. IWG shares fell 4.7% to 309p at 08:10 BST.

IWG, which used to be called Regus, is seeking to tap into the trend for working away from big offices prompted by the digital revolution. It provided serviced offices, meeting rooms and videoconferencing to individuals and businesses in more than 100 countries.

In a trading update the company said it would speed up its expansion plans to meet demand by spending £230m on 275 locations – £30m more than planned.

“Higher network growth brings additional short-term opening losses, along with incremental overhead costs to support the growth,” IWG said. “Considering this, together with the current weak performance of our UK business, which is being addressed by local management, group operating profit for 2018 is now expected to be below management's previous expectations by approximately £15m to £20m.”

The company said it was confident the extra investment would generate good returns. It said occupancy and pricing were improving at its existing sites and that the benefits of these trends would come through in the second half of the year.

The company is being courted by four potential acquirers after Terra Firma joined Starwood Capital and TDR Capital in expressing interest in buying the company. US real estate investment group Prime Opportunities Investment has also said it is considering making an offer.