IWG revenue growth underpinned by managed and franchised segment

International Workplace Group reported a 2% year-on-year revenue increase on a constant currency basis for the third quarter on Tuesday, alongside robust expansion in its managed and franchised segment, which achieved a 19% revenue rise.

The FTSE 250 company said net centre openings accelerated 52%, with 100 new centres in the quarter compared to 66 in the same period of 2023.

Managed and franchised fee revenue grew significantly, by 46% year-on-year, while company-owned and leased locations saw 4% revenue growth, with the contribution margin improving to 25.2%, up 330 basis points.

The group said its flexible workspace brand network, spanning over 120 countries, now included 169,000 open rooms and an additional 173,000 signed but not yet opened.

Revenue per available room (RevPAR) averaged $412, with estimated quarterly revenue expected to reach $320m once all rooms matured.

IWG also saw improvements in its capital structure, having reduced net financial debt by $34m to $734m as of the quarter’s end.

That was achieved through better cash flows and debt repurchases, which included a reduction in the 2027 convertible bond’s face value by 51.7%.

The group completed a refinancing in June, securing a $720m revolving credit facility and issuing a €625m bond at 6.5%.

IWG reaffirmed its 2024 EBITDA and debt reduction targets, and remained on track to exceed 2023’s capital-light centre signings.

IWG also reiterated its medium-term EBITDA target of $1bn.

Despite slower revenue growth in its digital Worka platform due to product delays, the group said it was confident in its growth trajectory and maintained its focus on achieving a short-term net debt-to-EBITDA target of 1x.

“This has been a good quarter for us with strong fee revenue growth of 46% in the managed and franchised segment, margin expansion in the company-owned and leased segment and further cashflow production which has reduced net debt,” said chief executive officer Mark Dixon.

“We are delivering on our plan and have good visibility to our medium-term $1bn EBITDA target.

“We remain committed to our strategy of growing our network coverage and giving our customers a great day at work.”

At 0926 GMT, shares in International Workplace Group were up 2.11% at 164.5p.

Reporting by Josh White for Sharecast.com.