IWG revenue up but inflationary pressures loom

Workspace operator IWG reported solid improvements in first quarter revenue on Tuesday, but warned of higher costs going forward amid inflationary pressures.

The FTSE 250 company said system-wide revenue increased 18.3% year-on-year, supported by increased franchising and partnering, while revenue excluding closures increased 22.4% year-on-year.

Pre-2021 revenue and occupancy increased by 15.9% and 780 basis points to 74.5% respectively, while pricing continued to improve month-on-month.

IWG reported “substantial progress” in reducing its costs in line with previously-announced initiatives and related provisions, although increasing inflationary pressures were creating some headwinds during 2022.

“The trading momentum as we exited 2021, combined with record revenue visibility provided by the forward order book, has delivered a good start to 2022, with occupancy and pricing moving in the right direction towards pre-pandemic performance levels and service revenues improving quickly,” the board said in its statement.

“However, higher inflationary cost pressures will represent a headwind during 2022.

“We will also continue to monitor the uncertainty in selected key markets, notably in China, where lockdown restrictions have been reimposed or the return to more normalised market conditions has been slower than previously hoped, together with the increased general geopolitical uncertainty.”

IWG said that, with the combination of the Instant Group and the merger of some of its digital and technology assets, it had made a “significant step forward” in its strategy.

“The group continues to review the potential to realise value from its property investing activities.

“With increasingly more of the new centres focusing on franchising, partnerships, and management agreements.”

At 0947 BST, shares in IWG were down 7.29% at 235.2p.