IWG International Workplace Group Plc

 

 

6 August 2024

 

H1 RESULTS ANNOUNCEMENT

International Workplace Group plc, the world's largest hybrid workspace platform with a network in over 120 countries through flexible workspace brands such as Regus and Spaces, and the services business Worka, issues its results for the six months ended 30th June 2024.

STRATEGIC NETWORK EXPANSION DELIVERING RECORD REVENUE,
CASHFLOW AND EARNINGS GROWTH

 

Group Performance: Solid foundations driving record revenue, cashflow generation and positive earnings

·      Group H1 2024 results:

o  Highest-ever System-wide revenue of $2.1bn (2% constant currency-growth)

o  EBITDA growth of 13% to $274m (H1 2023: $245m)

o  Cashflow generation of $118m from business activities leading to a net debt reduction. Net debt of $(768)m (H1 2023: $(835)m)

o  Return to positive earnings with eps of 1.6¢ underpinning an interim dividend of 0.43¢ per share

o  Managed partnership growth continues with new centre signings of 387 and 247 openings (rooms opened +173% year-on-year)

·      Divisional performance:

o  Managed & Franchised: Growth in new centres with both signings and openings accelerating, fee income evolving as expected

o  Company-Owned & Leased: Margin expansion continuing

o  Worka: Maintained revenue as previously guided

·      Capital structure: Milestone refinancing of debt, extending maturities to 2029 / 2030 with new revolving credit facility, inaugural bond issued backed by a debut investment grade Fitch BBB credit rating

·      Stability: No change to the financial outlook set out in the Q1 Trading Update on 7 May 2024 with expected continued growth and net debt reduction throughout 2024

 

Mark Dixon, Chief Executive of IWG plc, said:

"The first half of 2024 produced good year-on-year open-centre revenue growth. We are delivering on our capital-light growth plan. Momentum continues in signings, and importantly openings, and we are delighted to return to positive earnings. We remain committed to our strategy of growing our network coverage and giving our customers a great day at work."

 

Summary financials

($m)	H1 2024	H1 2023	Constant currency	Actual currency
System-wide revenue	2,088	2,060	2%	1%
Managed & Franchised	287	252	15%	13%
Company Owned & Leased	1,613	1,619	0%	0%
Worka	188	189	-1%	0%
Group revenue	1,836	1,836	0%	0%
EBITDA	934	851	10%	10%
Adjusted EBITDA1	274	245	13%	12%
Earnings per share (¢)	1.6	(7.5)	n.m.	n.m.
Cashflow from business activities	118	204
Net financial debt	(768)	(835)

1.  Before the application of IFRS 16 as defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

 

 

Managed & Franchised: Room openings accelerate, momentum continues

System revenue growth (up 15% year-on-year on a constant currency basis) as previously signed rooms evolve into openings delivering fee income in-line with expectations (up 23% year-on-year on a constant currency basis). At the end of the first half, we have 154,000 rooms open and a pipeline of 151,000 rooms signed but not yet opened.

Signings up 19% year-on-year with 387 Managed & Franchised locations signed during H1 2024. The evolution of signings into openings is accelerating with an increase in openings by 173% year-on-year with 37,000 rooms opened in H1 2024.

Revenue Per Available Room ("RevPAR") is evolving as expected with RevPAR of all open rooms of $378 per month during the period. Targeted RevPAR at maturity is $250 per month which would lead to a blended estimated RevPAR of c$315 once all 305,000 rooms have opened and matured. This would produce a System revenue of over $1bn annually. It is worth noting that as we expand our network coverage, a significant proportion of new rooms openings are in more suburban locations, which generally deliver lower RevPAR on a like-for-like basis.

As previously guided, we invested heavily into this platform during 2023 to best position this business for growth. Direct costs have been held broadly flat, but overheads have gone up as we allocate more central overheads towards this division as this allocation is done on a System-revenue basis.

 

	H1 2024	H1 2023	Constant currency	Actual currency
System (Partner) revenue ($m)	287	252	15%	13%
RevPAR ($)	378	451	-14%	-16%
Fee revenue ($m)	35	28	23%	24%
Contribution1 ($m)	35	28	23%	24%
Overhead2 ($m)	(44)	(38)	17%	17%
Pre-IFRS 16 adjusted EBITDA ($m)	(9)	(10)	n.m.	n.m.
Rooms open	154,000	101,000		53%
Centres open	901	541		67%
Rooms opened in the period	37,000	14,000		173%
Centres opened in the period	247	78		217%
Rooms in pipeline	151,000	100,000		51%
New centre deals signed	387	325		19%

1.         Gross Profit excluding depreciation before the application of IFRS 16 defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

2.         Pre-rationalisation costs, SG&A excluding depreciation before the application of IFRS 16 defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

 

Company-Owned & Leased: Margin expansion delivering cash flow

In line with our strategy to expand margins in this platform to deliver cash flow, contribution margins expanded by 260bps in H1 2024 to 23.6% (H1 2023: 21.0%). Company-Owned & Leased continues to produce increasing cash flow as a result of both cost control and 6% constant currency revenue growth from open centres. We signed 78 new locations and opened 59 in the period; nearly all of these are capital-light in nature.

 

	H1 2024	H1 2023	Constant currency	Actual currency
Revenue ($m)	1,613	1,619	0%	0%
RevPAR ($)	354	351	1%	1%
Contribution1 ($m)	380	340	13%	12%
Contribution margin1(%)	23.6%	21.0%		260bps
Overhead2 ($m)	(167)	(162)	2%	3%
Pre-IFRS 16 adjusted EBITDA ($m)	213	178	23%	20%
Rooms open	771,000	777,000		-1%
Centres open	2,850	2,857		0%
Centres opened in the period	59	55		5%

1.         Gross Profit pre-rationalisation costs and excluding depreciation before the application of IFRS 16 defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

2.         Pre-rationalisation costs, SG&A excluding depreciation before the application of IFRS 16 defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

 

Worka: Focus on platform development

As previously guided, revenue growth for Worka has been flat. Worka is focused on the continued development of its platform and services to capture the full value chain from the structural growth resulting from the continued expansion of hybrid working. Worka management is committed to delivering the benefits from its strategy, but is not expected to be a key contributor to earnings growth in the short term.

 

($m)	H1 2024	H1 2023	Constant currency	Actual currency
Revenue	188	189	-1%	0%
Contribution1	96	99	-4%	-4%
Overhead2	(26)	(22)	11%	14%
Pre-IFRS adjusted EBITDA	70	77	-9%	-9%
EBITDA margin (%)	31.6%	34.1%		-250bps

1.         Gross Profit excluding depreciation before the application of IFRS 16 defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

2.         Pre-rationalisation costs, SG&A excluding depreciation before the application of IFRS 16 defined in the Alternative Performance measures section of the 2023 Annual Report and Accounts

 

Investing for the future: Reducing capex with focus on platform investment and growth

As we have previously said, Group capex will continue to decline. H1 2024 Capex was $79m (H1: 2023 $102m) and will be expected to decline further. Maintenance capex has been held flat despite inflationary pressures as we continue to make efficiency gains, and net fitout centre capex continues to fall as we pivot further towards Managed & Franchised. We will continue to invest in technology and systems to increase efficiency into the future.

 

Cashflow and balance sheet

The business generated cashflow from business activities of $118m in the first half of 2024 (H1 2023: $204m). Compared to H1 2023 cashflow from business activities in H1 2024 was lower by $(86)m mainly as a result of pre-paying rents in H1 2024. Net financial debt reduction remains our priority as we continue to work towards our leverage target of 1.0x net financial debt / EBITDA, with net financial debt reducing by $67m over the last 12 months to $(768)m. In line with our previous plans, we have extended our previous debt maturities with the issue of the €575m 2030 bond and refinancing of the RCF.

The Board has declared an interim dividend of 0.43c per share. The Group's capital allocation priority remains net financial debt reduction, targeting 1.0x net financial debt / EBITDA at which time the Group will share the proceeds of the business between debt and equity holders.

 

Changes to presentation of financials in 2024

IWG has successfully adopted USD as reporting currency, effective 1 January 2024. The Group has adopted a new name of International Workplace Group plc to better align us with our stakeholders.

 

Outlook and guidance

We remain focused on improving the margin in Company-Owned & Leased, growing fees in the Managed & Franchised business and controlling overheads across the Group. This is expected to be achieved by increasing both coverage and System-wide revenue in a capital-light manner. As a result, we are confident that both 2024 EBITDA and net financial debt will be in-line with management's expectations which have not changed since the Q1 trading update on 7 May 2024.

Capital allocation will continue as guided previously, with net debt reduction expected during the year as we progress towards our target of 1.0x net financial debt / EBITDA.

 

Financial calendar

5 November 2024   Third quarter 2024 trading update

4 March 2025          2024 Full Year Results

6 May 2025              First quarter 2025 trading update

 

Details of results presentation

Mark Dixon, Chief Executive Officer, and Charlie Steel, Chief Financial Officer, will be hosting a presentation of the results today for analysts and investors at 9.00am UK time (SPACES, New Broad Street House, 35 New Broad St, London, EC2M 1NH).

The presentation will be available via live webcast. This will be available to view at the following link: weblink

 

Further information

International Workplace Group plc Mark Dixon, Chief Executive Officer Charlie Steel, Chief Financial Officer Richard Manning, Head of Investor Relations

Brunswick Tel: + 44 (0) 20 7404 5959 Nick Cosgrove Peter Hesse

 

 

 

Chief Executive Officer's Review

 

When I look back at the first half of 2024, I see it as a period of strong evolution and progress, with organisations everywhere accelerating their investment in the new way of working that is set to transform millions of lives this year and beyond.

It was a continuation of the 'Big Bang' that started in 2022 and we are finally seeing the lift-off of the hybrid model and its need for multiple workplace solutions that some of us have been anticipating for many years.

A fast-growing number of businesses globally are adopting and reaping the benefits of a model that includes hybrid working. This model enables employers and employees to work wherever it best suits them - be it at home, the HQ, or a local office. This uptake is fueled by continuous technological advances.

Technology frees people from the burden of having to attend the same single far-off workplace five days a week, and it confers multiple freedoms for employers and employees.

For businesses, it allows more flexibility whilst also improving employee engagement and continued productivity, and whilst most workers prefer to work from an office, they do not want to commute. Hybrid working solves this problem.

As well as being good for people, it is good for the planet. If businesses' footprints reduce, and fewer people are commuting long distances, we are able to help our customers reduce their emissions. International Workplace Group has been carbon neutral since the start of 2023 and strives to go even further.

Unique strengths to benefit from hybrid working

In contrast to the Real Estate industry, the workplace solutions industry enabling hybrid work continues to grow. Our story and business are one to be optimistic about. Demand for our platform is accelerating from both corporates trying to reduce their real estate costs while creating more flexible working environments, and their employees. We are uniquely positioned to service this structural demand shift. Our global network of brands and locations is a huge attraction to customers and partners, helping us to accelerate our growth in a capital light fashion. As we enter the second half of the year, we are only at the start of the change to hybrid work and the flywheel of more coverage as demand is taking shape.

To meet this demand, we are focused on increasing our supply-side growth to build a fee-based business. Alongside increasing our partner signings, we are opening locations at an accelerating rate. In H1 2024, we opened [306] locations - more than our total openings in the whole of 2023. Due to our business being far more capital-light, we managed to open this many locations whilst also continuing to reduce our net growth capex spend.

Whilst our Managed & Franchised business adds additional strategic locations to our network, our focus for the Company-Owned & Leased segment continues to be to driving additional efficiencies resulting in margin expansion. This combination has led to good EBITDA growth year-over-year and gives us confidence in our longer-term goals and targets.

Looking forward

We enter the second half of the year with good momentum. The new route to market of managed partnerships is fueling growth, and we continue to sign new partnerships at a rate aligned to our plan. More importantly, these signings are rapidly evolving into openings, resulting in our total network growing by 10% over the past 12 months.

The future for IWG and all our stakeholders remains bright as we continue to grow our customer base, our global network and our best-in-class portfolio of locations and brands.

Customers and building owners understand our unique proposition allowing us to grow our network through the capital-light model, which, with its significantly lower capex requirements, has demonstrated our ability to deliver both strong growth and a strong balance sheet.

With the right business model, the right strategy, and the right people, we are superbly placed to benefit from the fundamental changes occurring in the workplace.

 

 

Mark Dixon

Founder and CEO

6 August 2024

 

Chief Financial Officer's Review

The first half of 2024 has been a strong period for the Group, delivering a record six months of System-revenue, growth in EBITDA, continued cash-flow generation, and a return to positive earnings for the first time in nearly five years. Previous periods have been about setting the foundations for the business across the three platforms and the results of those strategic decisions are now being realised. Combining the Group's unique brand strategy and unrivalled global network with an innovative new route to market has enabled us to grow with far less capital intensity, positioning the business well for the remainder of 2024 and beyond.

In line with plans, the Group successfully carried out a series of debt transactions resulting in a comprehensive refinancing, extending maturities to 2029 / 2030.

We have delivered growth, cash generation and a dividend whilst continuing to focus on clarity of financials to stakeholders.

Financial Performance

The Group reports results in accordance with IFRS. Under IFRS 16, while total lease-related charges over the life of a lease remain unchanged, the lease charges are characterised as depreciation and financing expenses with higher total expense in the early periods of a lease and lower total expense in the later periods of the lease.

 

Group income statement ($m)	H1 2024	H1 2023	Constant  currency	Actual Currency
System-wide revenue	2,088	2,060	+2%	+1%
Group revenue	1,836	1,836	0%	0%
Gross profit before impact of rationalisations1	513	383	35%	34%
Margin	28%	21%	n/a	+7ppt
Rationalisation items1	45	(15)
Gross Profit	558	368	+52%	+52%
Overheads & Joint ventures	(289)	(252)	+13%	+15%
Operating Profit before impact of rationalisations1	231	125	+93%	+85%
Operating Profit	269	116	+142%	+132%
Net finance cost	(225)	(203)		+11%
Profit/(Loss) before tax	44	(87)
Taxation	(28)	11
Effective tax rate	63%	13%
Profit/(Loss) for the period	16	(76)
Basic EPS (US cents) attributable to shareholders	1.6	(7.5)

1.  Rationalisations include charges related to closures, one-off impairments and other one-off items (see p. 24)

 

Revenue

System-wide revenue increased by 1% (2% constant currency) to $2,088m. Group revenue remained stable at $1,836m. Our Managed & Franchised business saw System-wide revenue growth of 15% and fee income growth very strong at 23% (constant currency).

	System revenue				Group Revenue
Revenue ($m)		H1 2023	Actual currency	Constant currency	H1 2024	H1 2023	Actual currency	Constant currency
Managed & Franchised system-wide	287	252	+13%	+15%	35	28	+24%	+23%
Company-Owned & Leased	1,613	1,619	+0%	+0%	1,613	1,619	+0%	+0%
Worka	188	189	+0%	-1%	188	189	+0%	-1%
Group	2,088	2,060	+1%	+2%	1,836	1,836	+0%	+0%

 

Revenue KPIs - RevPAR

RevPAR is a monthly average KPI, defined as the System revenue of the Group excluding Worka, divided by the number of available rooms, excluding rooms opened or closed in the period. RevPAR is a well-understood measure used across many industries and is particularly relevant to IWG as it incorporates all revenues received across IWG's expansive product portfolio.

Underlying RevPAR has grown, and it is only mix driving headline RevPAR lower as we bring on more centres into the network in suburban locations.

 

RevPAR in the first half of 2024 was $357 (H1 2023: $361). Company-Owned RevPAR grew by 1% year-on-year mainly due to improved pricing. As anticipated, Managed & Franchised saw a 14% decline in RevPAR to $378, driven by suburban focused capacity growth which has not yet matured. In addition, this segment includes franchises such Japan and Switzerland which are fully mature.

System RevPAR ($, monthly average)	H1 2024	H1 2023	Actual currency	Constant currency
Managed & Franchised	378	451	-16%	-14%
Company-Owned & Leased	354	351	+1%	+1%
Worka	n.a.	n.a.	-	-
IWG Network	357	361	-1%	-1%

Rationalisation impact

To improve the transparency and usefulness of the financial information presented and to improve year-on-year comparability the Group identified net adjusting items on operating profit relating to rationalisations in the network of $38m (H1 2023: $(9)m), of which $(1)m are cash items (H1 2023: $(3)m).

These items refer to the reversal of impairment of PPE (provisions for closures which have not yet taken place) of $42m (H1 2023: impairment of $(21)m), closure related credits (the actual costs of closing centres, including non-cash write-off of the book value of assets and the related lease liabilities) of $4m (H1 2023: $2m), asset impairment related to Russia & Ukraine and centre-related legal costs of $(1)m (H1 2023: credit of $4m) and other one-off items (including legal, acquisition and transaction cost) of $(7)m (H1 2023: reversal of $6m).

 

Rationalisation impact ($m)		H1 2024	H1 2023
Closure (cost)/credit		4	2
PP&E (impairment)/reversal		42	(21)
Others		(1)	4
Rationalisation impact on Gross Profit		45	(15)
Rationalisation impact on SG&A		(7)	6
Rationalisation impact on Operating Profit		38	(9)
Depreciation		(21)	(10)
Rationalisation impact on EBITDA		17	(19)

 

Gross Profit

Gross Profit, excluding rationalisations, increased 35% (constant currency) to $513m in H1 2024 (H1 2023: $383m), resulting in a 28% gross margin, a 7ppt improvement on H1 2023. Overall Gross Profit increased 52% to $558m (H1 2023: $368m).

Managed & Franchised delivered a 23% year-on-year growth underpinned by both network expansion and the positive impact of the high margins delivered by this segment.

Gross Profit excluding rationalisations in Company-Owned & Leased increased by 45% in predominantly due to margin expansion as a result of greater efficiencies. The rationalisation impact of $45m relates predominantly to the network rationalisations across the Company-Owned & Leased segment.

 

Gross Profit ($m)		H1 2024	H1 2023	Actual currency	Constant currency
Managed & Franchised		35	28	+24%	+23%
Company-Owned & Leased		376	262	+44%	+45%
Worka		102	93	+9%	+9%
Gross Profit before impact of rationalisations		513	383	+34%	+35%
Closure (cost)/credit		4	2
PP&E (impairment)/reversal		42	(21)
Others		(1)	4
Total rationalisation impact on Gross Profit		45	(15)
Gross Profit		558	368	+52%	+52%

Operating Profit

Operating profit before rationalisations increased by 93% (constant currency) from $125m in H1 2023 to $231m in H1 2024, reflecting the impact of higher revenue in Managed & Franchised, and margin expansion in Company-Owned & Leased. Reported operating profit delivered was $269m (142% constant currency growth) (H1 2023: $116m).

Adjusted EBITDA

The Group's Adjusted EBITDA increased by 6% (constant currency) to $917m (H1 2023: $870m) and Pre-IFRS Adjusted EBITDA increased by 13% (constant currency) to $274m (H1 2023: $245m).

The Group reports results in accordance with IFRS. Under IFRS 16, while total lease-related charges over the life of a lease remain unchanged, the lease charges are characterised as depreciation and financing expenses with higher total expense in the early periods of a lease and lower total expense in the later periods of the lease. Results are additionally presented before the application of IFRS 16 (in accordance with IAS 17 accounting standards) as it provides useful information to stakeholders on how the Group is managed, as well as reporting for bank covenants and certain lease agreements. The primary difference between the two standards is the treatment of operating lease liabilities. There is no difference between underlying cash flow.

To bridge the Group's Adjusted EBITDA of $917m under the IFRS 16 standard to $274m Adjusted EBITDA (Pre-IFRS Adjusted EBITDA) under IAS 17, we need to recognise rental income in subleases which are recognised as lease receivables under IFRS 16, rental costs on our lease portfolio reflected as lease liabilities under IFRS 16 and centre closure and other costs which are reflected as impairments under IFRS 16.

IFRS EBITDA to pre-IFRS EBITDA bridge ($m)		H1 2024	H1 2023
Adjusted EBITDA		917	870
Rent income		35	37
Rent expense		(680)	(674)
Other costs		(16)	4
Net impact of network rationalisation charges		39	32
Net impact of PPE impairments vs. Closure cost provisions		(24)	(19)
Net impact of Russia & Ukraine asset impairments and other items		3	(5)
Adjusted EBITDA before application of IFRS 16		274	245

Adjusted EBITDA by segment

Company Owned & Leased Adjusted EBITDA increased by 6% (constant currency) to $845m in H1 2024 (H1 2023: $806m), driven by increasing margins underpinned by cost efficiencies.

Managed & Franchised in H1 2024 delivered revenue growth of 23% which was largely offset by our investments into this capital-light growth model resulting in an EBITDA of $(11)m (H1 2023: $(10)m). As stated previously, the investment in Managed & Franchised has predominantly been made therefore EBITDA is expected to scale as fee revenue is generated.

Worka delivered stable results with EBITDA growth of 11% at constant currency to $83m (H1 2023: $74m).

Adjusted EBITDA by segment ($m)		H1 2024	H1 2023	Actual currency	Constant currency
Managed & Franchised		(11)	(10)	n.m.	n.m.
Company-Owned & Leased		845	806	+5%	+6%
Worka		83	74	+11%	+11%
Group		917	870	+5%	+6%

Foreign exchange

	At 30 Jun			Average
Per US dollar	2024	2023	%	H1 2024	H1 2023	%
British Pound Sterling	0.79	0.79	-1%	0.79	0.81	2%
Euro	0.93	0.86	-9%	0.93	0.87	-6%

Network growth

The success of our continued strategy to expand through partnerships is materialising. Our network increased by 10% to 3,751 centres (H1 2023: 3,398). We opened 306 new centres (H1 2023: 133 centres) and rationalised (69) centres (H1 2023: (80) centres).

Furthermore, 465 new centre deals were signed in H1 2024, 16% more than in H1 2023, which will lead to new centre openings going forward. Out of the 465 new deals signed 99% (460) deals are capital-light which underpins our success of growing the network through capital-light partnerships.

Key KPIs	H1 2024	H1 2023	YoY change	YoY change in %
Number of centres open	3,751	3,398	353	+10%
Centre openings	306	133	173	+130%
Of which capital-light1	291	116	175	+151%
In %	95%	87%
Total new centre deals signed	465	400	65	+16%
Of which capital-light1	460	382	78	+20%
In %	99%	96%

1.  Includes locations signed/opened in Managed & Franchised and Variable rent areas

Of the 306 centres opened in H1 2024, 291 centres were capital-light openings which comprised of managed partnership centres, variable rent centres, franchised centres and joint-venture centres. Only 15 centre openings were on a fully conventional basis.

Our estate of 3,751 centres as per the end of June 2024 is split into 24% or 901 centres in Managed & Franchised, which increased by 32% compared to December 2023, and 2,850 centres in Company-Owned & Leased (of which 826 are based on variable rents). Based on all the new deals signed so far which have not opened yet, the strong growth in Managed & Franchised centre openings will continue in 2024 and beyond.

 

System location movements by type	Dec 2023	Centre Openings	Centre Rationalisations	Changed	Jun 2024
Conventional	2,052	+15	(39)	(4)	2,024
Variable rent (capital-light)	780	+44	(19)	+21	826
Company-Owned & Leased	2,832	+59	(58)	+17	2,850
Managed & Franchised (capital-light)	682	+247	(11)	(17)	901
Total	3,514	+306	(69)	-	3,751

 

System rooms movements by type ('000)	Dec 2023	Rooms Opened	Rooms Rationalised	Changed	Jun 2024
Conventional	558	+5	(12)	(4)	547
Variable rent (capital-light)	214	+10	(4)	+4	224
Company-Owned & Leased	772	+15	(16)	0	771
Managed & Franchised (capital-light)	123	+37	(2)	(4)	154
Total	895	+52	(18)	(4)	925

Finance costs and taxation

The Group reported a net finance expense in H1 2024 of $(225)m (H1 2023: $(203)m).

The net finance expense of $(225)m in H1 2024 includes cash interest of $(25)m related to borrowing facilities (H1 2023: $(27)m), interest on the Group's lease liabilities of $(182)m (H1 2023: $(168)m), interest on the convertible bond of $(1)m (H1 2023: $(1)m), interest accretion on the convertible bond of $(8)m (H1 2023: $(7)m) and other finance costs of $(18)m (H1 2023: $(5)m) offset by a gain on early settlement of convertible bonds of $5m (H1 2023: nil). The increase in interest on lease liabilities is mainly driven by increased interest rates.

The effective tax rate in H1 2024 is 63% (H1 2023: 13%) which has been computed in accordance with IAS 12, based on the full year estimated tax position, applied to the half year actual results.

The Group operates across multiple jurisdictions which have varying tax rates and taxable result profiles. Deferred tax assets are recognised only to the extent these are expected to be utilised against future taxable profits and this contributes to upward pressure on the effective rate for the six months ended 30 June 2024. 

Earnings per share

Earnings per share in H1 2024 was US cents 1.6 (H1 2023: US cents (7.5)).

The weighted average number of shares in issue during H1 2024 was 1,007,598,732 (H1 2023: 1,006,682,105). The weighted average number of shares for diluted earnings per share is 1,094,612,381 (H1 2023: 1,090,178,139). In H1 2024 118,054 shares were purchased in the open market and (5,434,703) treasury shares held by the Group were utilized for an increased stake in the Worka subsidiary and to satisfy the exercise of share awards by employees. At 30 June 2024 the Group held 45,241,552 treasury shares (30 June 2023: 50,560,132).

 

Cashflow

($m)		H1 2024	H1 2023
Operating profit		269	116
Depreciation & amortisation		665	735
Rationalisation impact		(17)	19
Rent income		35	37
Rent expense		(680)	(674)
Other costs		(16)	4
Pre-IFRS additional rationalisation impact differences		18	8
Adjusted EBITDA before application of IFRS 16		274	245
Working capital (excl. amortisation of landlord contributions on leased centres)		(47)	78
Working capital related to the amortisation of landlord contributions		(57)	(60)
Maintenance capital expenditure (net)		(47)	(52)
Other items1		(5)	(7)
Cash inflow from business activities2		118	204
Tax paid		(16)	(30)
Finance costs on bank & other facilities		(36)	(37)
Cash inflow before growth capex and corporate activities		66	137
Gross growth capital expenditure		(53)	(76)
Growth-related landlord contributions on leased centres		25	34
Net growth capital expenditure		(28)	(42)
Purchase of subsidiary undertakings (net of cash)		(4)	(8)
Cash inflow/(outflow) before corporate activities		34	87
Purchase of shares		-	(1)
Dividend payment		(13)	-
Other corporate items		-	(1)
Net (repayments)/proceeds from loans		8	(122)
Net cash (outflow)/inflow for the year		29	(37)
Opening net cash		141	194
FX movements		(10)	1
Closing cash		160	158

1.  Includes capitalised rent related to centre openings (gross growth capital expenditure) of $(2)m (H1 2023: $(2)m)

2.  Cash flow before growth capex, corporate activities, tax and finance cost on bank & other facilities

We continued to grow revenue, manage our costs effectively and restructure centres where necessary resulting in a strong improvement of Adjusted EBITDA before the application of IFRS 16 to $274m (H1 2023: $245m).

Working capital, excluding the amortisation of landlord contributions, was impacted by prepaying quarterly rents upfront which resulted in an outflow of $(47)m (H1 2023: inflow of $78m).

Working capital relating to the amortisation of landlord contributions refers to historic cash contributions made by landlords for growth capex on a Pre-IFRS basis in the Company-Owned & Leased segment (shown as growth-related landlord contributions on leased centres further down the cash flow statement) and is amortised in the Pre-IFRS income statement over the lifetime of the corresponding lease.

Cash tax paid was $(16)m in H1 2024 (H1 2023: $(30)m) and primarily relates to corporate income tax paid in various countries. Finance costs on bank & other facilities was $(36)m in H1 2024 vs. $(37)m in H1 2023.

Cash inflow before growth capex and corporate activities was $66m (H1 2023: $137m).

Total net investment, including acquisitions and all capex, was $(79)m (H1 2023: $(102)m). This comprises of $(47)m net maintenance capex, $(28)m of net growth capex and $(4)m of M&A investments (H1 2023: $(8)m).
Total net investment of $(79)m (H1 2023: $(102)m) can also be split into $(26)m maintenance spent on centres (H1 2023: $(29)m), $(23)m net growth capex spent on centres (H1 2023: $(34)m), $(16)m investments into the platform and systems, new products and processes (H1 2023: $(22)m), $(10)m investments done within Worka (H1 2023: $(9)m) and $(4)m of M&A investments (H1 2023: $(8)m).

It is worth noting that net growth capital expenditure was significantly reduced in H1 2024 to $(28)m (H1 2023: $(42)m), demonstrating the benefit of our capital-light growth strategy. Centre-related growth capex is expected to fall further in H2 2024 and beyond.

For the first time since 2019 the Group paid a dividend of $13m in H1 2024 (H1 2023: nil).

Net cash before FX movements in H1 2024 increased by $29m after the dividend payment and net proceeds of $8m from loans.

 

Net debt ($m)		H1 2024	H1 2023
Closing cash		160	158
Opening loans		(916)	(1,054)
Net proceeds from issue & repayment of loans		(8)	122
Unrealised gains on fair value financial derivative instruments		(2)	-
Amortisation of the Convertible Bond's derivative financial instrument (net)		(8)	(7)
Gain on early settlement of convertible bond		5	-
FX impact on loans & non-cash movements		1	(54)
Net financial debt		(768)	(835)
Opening lease liabilities (net)		(6,732)	(7,115)
Principal & interest payments on finance leases		826	764
Non-cash movements (net)		(456)	(435)
Principal & interest received on net lease investment		(33)	(38)
FX impact on lease liabilities & investments (net)		114	(85)
Net debt		(7,049)	(7,744)

Risk management

Effective management of risk is an everyday activity for the Group, and crucially, integral to our growth planning. A detailed assessment of the principal risks and uncertainties which could impact the Group's long-term performance and the risk management structure in place to identify, manage and mitigate such risk can be found on pages 50-59 of the 2023 Annual Report and Accounts. All principal risks and uncertainties are unchanged.

Related parties

There have been no changes to the type of related party transactions entered into by the Group that had a material effect on the financial statements for the half year 2024. Details of related party transactions that have taken place in the period can be found in note 13.

Dividends

A final dividend of 1p per share for 2023 was paid by the Group on 31 May 2024 following shareholder approval. In line with the Group's previously announced dividend policy the Board has decided to pay an interim dividend of 0.43¢ per share for 2024. The interim dividend will be paid on 4 October 2024 to shareholders on the register at the close of business on 6 September 2024.

Financing

In June 2024 the Group successfully completed a series of debt transactions and extended the debt maturity:

-       Issued €575m Bond (investment grade rating from Fitch of BBB, Stable) due in June 2030 of which;

o  €400m has been swapped to $428m with a coupon of 8.153%, and

o  €175m remains in Euro with a coupon of 6.5%

-       Signed a new $720m revolving credit facility due in June 2029

-       Reduced the face value of the £350m 0.5% convertible bond (swapped to $445m) outstanding to £232m (swapped to $295m), valued at $277m as at 30 June 2024 (30 June 2023: $419m). The convertible bond is due for repayment or conversion at £4.5807 per share in December 2027 with an option for the bondholders to put the instrument back to the Group in December 2025 at par.

Overall, net financial debt was $(768)m at 30 June 2024 (30 June 2023: $(835)m).

 

 

The Group's total debt facilities, including details of drawings, is summarised below:

Net financial debt ($m)		Jun 2024	Jun 2023
Convertible bond		(277)	(411)
€575m bond		(605)	-
Revolving credit facility (RCF)		(720)	(1,107)
Total facilities		(1,602)	(1,518)
Revolving credit facility (RCF)		(720)	(1,107)
RCF available (undrawn)		456	143
RCF guarantee utilisation		264	412
RCF drawn		-	(552)
Convertible bond		(277)	(411)
€575m bond		(605)	-
Other debt		(44)	(30)
Derivative financial assets/(liabilities)		(2)	-
Closing cash		160	158
Net financial debt		(768)	(835)

At June 2024 the Group complied with the covenants of all facilities.

 

Going concern

The Group reported a profit for of $16m (H1 2023: $(76)m) in the first six months of 2024 while net cash of $727m (H1 2023: $761m) was generated from operations during the same period. Although the Group's balance sheet at 30 June 2024 reports a net current liability position of $(2,047)m (31 December 2023: $(2,145)m), the Directors concluded after a comprehensive review that no liquidity risk exists as:

(1)  The Group had additional funding available under the Group's $(720)m revolving credit facility (31 December 2023: $1,116m) of which $264m was utilised by bank guarantees with no cash drawings and $456m (31 December 2023: $279m) was available and undrawn at 30 June 2024. This facility's current maturity date is June 2029;

(2) A significant proportion of the net current liability position is due to $1,026m lease liabilities which are held in non-recourse special purpose vehicles but also with a corresponding right-of-use asset. A large proportion of the net current liabilities comprise non-cash liabilities such as deferred revenue of $535m (31 December 2023: $552m) which will be recognised in future periods through the income statement. The Group holds customer deposits of $586m (31 December 2023: $585m) which are spread across a large number of customers and no deposit held for an individual customer is material. Therefore, the Group does not believe the net current liabilities represents a liquidity risk; and

(3) The Group maintained a 12-month rolling forecast and a three-year strategic outlook. It also monitored the covenants in its facility to manage the risk of potential breach. The Group expects to be able to refinance external debt and/or renew committed facilities as they become due, which is the assumption made in the viability scenario modelling, and to remain within covenants throughout the forecast period. In reaching this conclusion, the Directors have assessed:

·    the potential cash generation of the Group against a range of illustrative scenarios (including a severe but plausible outcome); and

·    mitigating actions to reduce operating costs and optimise cash flows during any ongoing global uncertainty.

The Directors consider that the Group is well placed to successfully manage the actual and potential risks faced by the organisation including risks related to inflationary pressures and geopolitical tensions.

On the basis of their assessment, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the interim results announcement and consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group.

 

 

Charlie Steel

Chief Financial Officer

6 August 2024

	$m	Notes	Six months ended 30 June 2024	Six months ended 30 June 2023(1)(2)
	Revenue		1,836	1,836
	Total cost of sales		(1,269)	(1,456)
	Cost of sales		(1,314)	(1,441)
	Adjusting items to cost of sales(3)	4	27	20
	Net reversal/(impairment) of property, plant, equipment and right-of-use assets(3)	4	18	(35)
	Expected credit losses on trade receivables		(9)	(12)
	Gross profit		558	368
	Total selling, general and administration expenses		(287)	(251)
	Selling, general and administration expenses		(280)	(257)
	Adjusting items to selling, general and administration expenses	4	(7)	6
	Share of loss of equity-accounted investees, net of tax		(2)	(1)
	Operating profit		269	116
	Finance expense	3	(229)	(208)
	Finance income	3	4	5
	Net finance expense		(225)	(203)
	Profit/(loss) before tax for the period		44	(87)
	Income tax (expense)/credit	8	(28)	11
	Profit/(loss) for the period		16	(76)
	Attributable to equity shareholders of the Group		16	(75)
	Attributable to non-controlling interests		-	(1)
	Earnings/(loss) per ordinary share (EPS):
	Attributable to ordinary shareholders
	Basic (¢)		1.6	(7.5)
	Diluted (¢)		1.5	(7.5)

1.  Includes a net settlement fee of $2m recognised in 2023 (comprising the settlement fee of $22m, offset by a release of related accrued income of $20m), for TKP Corporation's sale of the Japanese master franchise agreement to Mitsubishi Estate Co.

2.  The 2023 revenue has been restated by $4m to net commissions fees for a new product category previously recognised on a gross basis, in accordance with IFRS 15 agent considerations.

3.  The net reversal of adjusting items on operating profit of $38m (2023: charge of $9m) comprises the following items included in the balances referenced (note 4): a net reversal of the impairment of property, plant and equipment and right-of-use assets of $42m (2023: net impairment of $21m), network rationalisation credits of $4m (2023: $2m), the impairment of Ukraine and Russia of $1m (2023: $3m), restructuring costs of $1m (2023: $3m) and other one-off item charges of $6m (2023: utilised $16m).

The above consolidated income statement should be read in conjunction with the accompanying notes.

 

	$m	Notes	Six months ended 30 June 2024	Six months ended 30 June 2023
	Profit/(loss) for the period		16	(76)
	Other comprehensive (loss)/income that is or may be reclassified to profit or loss in subsequent periods:
	Cash flow hedges - effective portion of changes in fair value		(2)	-
	Foreign currency translation loss for foreign operations		(1)	(6)
	Items that are or may be reclassified to profit or loss in subsequent periods		(3)	(6)
	Other comprehensive loss for the period, net of tax		(3)	(6)
	Total comprehensive profit/(loss) for the period, net of tax		13	(82)
	Attributable to shareholders of the Group		14	(84)
	Attributable to non-controlling interests		(1)	2

 

The above interim consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

 

$m	Notes	Issued share capital	Share premium	Treasury shares	Foreign currency translation reserve	Hedging reserve	Other reserves(1)	Retained earnings	Total equity attributable to equity shareholders	Non-controlling interests	Total equity
Balance at 1 January 2023		13	399	(194)	(331)	-	41	385	313	63	376
Total comprehensive income/(loss) for the period:
Loss for the period		-	-	-	-	-	-	(75)	(75)	(1)	(76)
Other comprehensive income:
Cash flow hedges - effective portion of changes in fair value		-	-	-	-	-	-	-	-	-	-
Foreign currency translation loss for foreign operations		-	-	-	(9)	-	-	-	(9)	3	(6)
Other comprehensive (loss)/income, net of tax		-	-	-	(9)	-	-	-	(9)	3	(6)
Total comprehensive (loss)/income for the period		-	-	-	(9)	-	-	(75)	(84)	2	(82)
Transactions with owners of the Company
Ordinary dividend paid	5	-	-	-	-	-	-	-	-	-	-
Share-based payments	11	-	-	-	-	-	-	3	3	-	3
Purchase of shares		-	-	(1)	-	-	-	-	(1)	-	(1)
Settlement from exercise of share awards		-	-	1	-	-	-	(1)	-	-	-
Total transactions with owners of the Company		-	-	-	-	-	-	2	2	-	2
Balance at 30 June 2023		13	399	(194)	(340)	-	41	312	231	65	296
Balance at 1 January 2024		13	399	(194)	(338)	-	41	123	44	65	109
Total comprehensive loss for the period:
Profit for the period		-	-	-	-	-	-	16	16	-	16
Other comprehensive loss:
Cash flow hedges - effective portion of changes in fair value		-	-	-	-	(2)	-	-	(2)	-	(2)
Foreign currency translation loss for foreign operations		-	-	-	-	-	-	-	-	(1)	(1)
Other comprehensive loss, net of tax		-	-	-	-	(2)	-	-	(2)	(1)	(3)
Total comprehensive (loss)/income for the period		-	-	-	-	(2)	-	16	14	(1)	13
Transactions with owners of the Company
Ordinary dividend paid	5	-	-	-	-	-	-	(13)	(13)	-	(13)
Share-based payments	11	-	-	-	-	-	-	1	1	-	1
Reissuance of shares		-	-	12	-	-	-	-	12	-	12
Settlement from exercise of share awards		-	-	-	-	-	-	-	-	-	-
Total transactions with owners of the Company		-	-	12	-	-	-	(12)	-	-	-
Purchase of non-controlling interest(2)		-	-	-	-	-	-	-	-	(14)	(14)
Balance at 30 June 2024		13	399	(182)	(338)	(2)	41	127	58	50	108

1.  Other reserves include $13m for the restatement of the assets and liabilities of the UK associate, from historic to fair value at the time of the acquisition of the outstanding 58% interest on 19 April 2006, $67m arising from the Scheme of Arrangement undertaken on 14 October 2008, $11m relating to merger reserves and $nil to the redemption of preference shares, partly offset by $48m arising from the Scheme of Arrangement undertaken in 2003.

2.  During the period the Group increased its equity voting rights to 89.3% (2023: 86.6%) in the Worka subsidiary in accordance with the terms of election agreements, which were originally entered into during the establishment of Worka in 2022. As a result, the Group purchased an increased stake of a subsidiary with a non-controlling interest for a consideration of $14m.

The above interim consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

 

	$m	Notes	As at 30 June 2024 (unaudited)	As at 31 December 2023
	Non-current assets
	Goodwill	6	1,159	1,172
	Other intangible assets		247	266
	Property, plant and equipment	7	6,460	6,883
	Right-of-use assets	7	5,243	5,574
	Other property, plant and equipment	7	1,217	1,309
	Non-current net investment in finance leases	9	88	81
	Deferred tax assets	8	567	576
	Other long-term receivables		73	67
	Investments in joint ventures		55	56
	Other investments		-	-
	Total non-current assets		8,649	9,101
	Current assets
	Inventory		1	1
	Trade and other receivables		1,192	1,136
	Current net investment in finance leases	9	30	43
	Corporation tax receivable		32	34
	Cash and cash equivalents	9	160	141
	Total current assets		1,415	1,355
	Total assets		10,064	10,456
	Current liabilities
	Trade and other payables (incl. customer deposits)		1,741	1,667
	Deferred revenue		535	552
	Corporation tax payable		58	55
	Bank and other loans	9	44	17
	Lease liabilities	9	1,056	1,178
	Provisions		28	31
	Total current liabilities		3,462	3,500
	Non-current liabilities
	Other long-term payables		14	16
	Deferred tax liability	8	220	220
	Bank and other loans	9	882	899
	Lease liabilities	9	5,343	5,678
	Derivative financial liabilities	9	2	-
	Provisions		22	23
	Provision for deficit on joint ventures		8	8
	Retirement benefit obligations		3	3
	Total non-current liabilities		6,494	6,847
	Total liabilities		9,956	10,347
	Total equity
	Issued share capital		13	13
	Issued share premium		399	399
	Treasury shares		(182)	(194)
	Foreign currency translation reserve		(338)	(338)
	Hedging reserve		(2)	-
	Other reserves		41	41
	Retained earnings		127	123
	Total shareholders' equity		58	44
	Non-controlling interests		50	65
	Total equity		108	109
	Total equity and liabilities		10,064	10,456

 

The above interim consolidated balance sheet should be read in conjunction with the accompanying notes.

 

	$m	Notes	Six months ended 30 June 2024	Six months ended 30 June 2023
	Operating activities
	Profit/(Loss) for the period		16	(76)
	Adjustments for:
	Net finance expense	3	225	203
	Share of loss on equity-accounted investees, net of tax		2	1
	Depreciation charge		626	703
	Right-of-use assets	7	505	578
	Other property, plant and equipment	7	121	125
	Loss on disposal of property, plant and equipment		18	13
	Profit on disposal of right-of-use assets and related lease liabilities	9	(15)	(12)
	Loss on disposal of intangible assets		6	-
	Net (reversal)/impairment of property, plant and equipment	7	(6)	13
	Net (reversal)/impairment of right-of-use assets	7	(12)	22
	Amortisation of intangible assets		39	32
	Tax expense/(credit)		28	(11)
	Expected credit losses on trade receivables		9	12
	Decrease in provisions		(4)	(31)
	Unrealised loss on fair value of financial derivative instruments		-	-
	Share-based payments	11	1	3
	Other non-cash movements		(5)	16
	Operating cash flows before movements in working capital		928	888
	Proceeds from landlord contributions (reimbursement of costs)(1)	7	3	14
	Increase in trade and other receivables		(114)	(290)
	Increase in trade and other payables		144	384
	Cash generated from operations		961	996
	Interest paid and similar charges on bank loans and corporate borrowings		(36)	(37)
	Interest paid on lease liabilities	9	(182)	(168)
	Tax paid		(16)	(30)
	Net cash inflows from operating activities		727	761
	Investing activities
	Purchase of property, plant and equipment	7	(75)	(104)
	Payment of initial direct costs related to right-of-use assets		-	(2)
	Interest received on net lease investment	3	4	5
	Payment received from net lease investment	9	28	34
	Purchase of subsidiary undertakings, net of cash acquired	14	(4)	(8)
	Purchase of intangible assets		(25)	(24)
	Interest received		-	-
	Net cash outflows from investing activities		(72)	(99)
	Financing activities
	Proceeds from issue of loans	9	1,421	384
	Repayment of loans	9	(1,413)	(506)
	Payment of lease liabilities	9	(643)	(596)
	Proceeds from landlord contributions (lease incentives)(1)		22	20
	Purchase of treasury shares		-	(1)
	Payment of ordinary dividend		(13)	-
	Net cash outflows from financing activities		(626)	(699)
	Net increase/(decrease) in cash and cash equivalents		29	(37)
	Cash and cash equivalents at beginning of the year		141	194
	Effect of exchange rate fluctuations on cash held		(10)	1
	Cash and cash equivalents at end of the period		160	158

1.  The total proceeds from landlord contributions relating to the reimbursement of costs and lease incentives of $25m (2023: $34m) are allocated between maintenance landlord contributions of $nil (2023: $nil) and growth landlord contributions of $25m (2023: $34m).

 

The above interim consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Note 1: Basis of preparation and accounting policies

International Workplace Group plc ("IWG") is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Company's ordinary shares are traded on the London Stock Exchange. International Workplace Group plc owns, and is a franchise operator of, a network of business centres which are utilised by a variety of business customers.

The unaudited condensed interim consolidated financial information as at and for the six months ended 30 June 2024:

·      was prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") as adopted for use in the UK ("adopted IFRS"), and therefore does not include all disclosures that would otherwise be required in a complete set of financial statements. Selected explanatory notes are included to understand events and transactions that are significant to understand the changes in the Group's financial position and performance since the last International Workplace Group plc Annual Report and Accounts for the year ended 31 December 2023;

·      was prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority;

·      comprises the Company and its subsidiaries (the "Group") and the Group's interests in jointly controlled entities;

·      does not constitute statutory accounts as defined in Companies (Jersey) Law 1991. A copy of the statutory accounts for the year ended 31 December 2023 has been filed with the Jersey Companies Registry. Those accounts have been reported on by the Company's auditors and the report of the auditors was (i) unqualified, and (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report. These accounts are available from the Company's website - www.iwgplc.com; and

·      was approved by the Board of Directors on 6 August 2024;

·      Note disclosures pertaining to the interim consolidated income statement, interim consolidated statement of comprehensive income, interim consolidated statement of cash flows and interim consolidated statement of changes in equity present results for the six months ended 30 June 2024 and previously six months ended 30 June 2023. Note disclosures pertaining to the interim consolidated balance sheet present results as at 30 June 2024 and 31 December 2023.

Effective 1 January 2024, certain strategic and financing companies within the Group adopted the US dollar as their functional currency.  Prior to 1 January 2024, the functional currency of these companies was sterling (£).  The change in the functional currency of these entities is due to the increased exposure to the US dollar as a result of the growth in international operations as well as redenomination of its Revolving Credit Facility and other arrangements to US dollars. 

In addition, International Workplace Group plc changed the presentation currency of its consolidated financial statements to US dollars ($) from pounds sterling (£).  All values are in million US dollars, except where indicated otherwise.  Prior period comparatives were translated from sterling and presented in US Dollars as follows: assets and liabilities at the rate of exchange in effect at the applicable balance sheet date and revenues and expenses at the average monthly rates applicable for the period. 

Unrealized gains and losses resulting from the translation to US dollars are accumulated in a separate component of shareholders' equity in a cumulative foreign currency translation reverse.  

Other than the change in presentation currency, the basis of preparation and accounting policies set out in the Report and Accounts for the year ended 31 December 2023 have been applied in the preparation of this half yearly report, except for the adoption of new accounting policies and new standards and interpretations effective as of 1 January 2024. There was no material effect on the Group's interim consolidated financial statements.

New standards and interpretations

The following standards, interpretations and amendments to standards were applicable to the Group for periods commencing on or after 1 January 2024, with no material impact on the Group:

Non-current Liabilities with Covenants - Amendments to IAS 1	1 January 2024
Classification of Liabilities as Current or Non-Current - Amendments to IAS 1	1 January 2024
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16	1 January 2024
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7	1 January 2024

 

The following new or amended standards and interpretations that are mandatory for 2025 annual periods (and future years) are not expected to have a material impact on the Company:

The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability - Amendments to IAS 21

1 January 2025

 

There are no other IFRS standards or interpretations that are not yet effective that would be expected to have a material impact on the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Seasonality

The majority of the Group's revenue is not subject to significant seasonal fluctuations.

Judgements and estimates

In preparing this condensed consolidated interim financial information, judgment was applied in adopting the US Dollar as the functional currency of certain head office and financing companies. Other significant judgements made by management and the key sources of estimation of uncertainty were the same as those that applied to the Report and Accounts for the year ended 31 December 2023.

Principal risks

As part of the half year risk assessment, the Board has considered the impact of geopolitical factors on the principal risks of the Group. Following this risk assessment, the Board is satisfied that the principal risks impacting the group over the next nine months are unchanged from those noted on pages 50 to 59 of the 2023 Annual Report.

Going concern

The Group reported a profit for the period of $16m (2023: loss of $76m) in the first six months of 2024 while net cash of $727m (2023: $761m) was generated from operations during the same period. Although the Group's balance sheet at 30 June 2024 reports a net current liability position of $2,047m (31 December 2023: $2,145m), the Directors concluded after a comprehensive review that no liquidity risk exists as:

1.             The Group had additional funding available under the Group's $720m revolving credit facility (31 December 2023: $1,116m) of which $264m was utilised by bank guarantees with no cash drawing and $456m (31 December 2023: $279m) was available and undrawn at 30 June 2024. This facility's current maturity date is June 2029;

2.             A significant proportion of the net current liability position is due to $1,026m lease liabilities which are held in non-recourse special purpose vehicles but also with a corresponding right-of-use asset. A large proportion of the net current liabilities comprise non-cash liabilities such as deferred revenue of $535m (31 December 2023: $552m) which will be recognised in future periods through the income statement. The Group holds customer deposits of $586m (31 December 2023: $585m) which are spread across a large number of customers and no deposit held for an individual customer is material. Therefore, the Group does not believe the net current liabilities represents a liquidity risk; and

3.             The Group maintained a 12-month rolling forecast and a three-year strategic outlook. It also monitored the covenants in its facility to manage the risk of potential breach. The Group expects to be able to refinance external debt and/or renew committed facilities as they become due, which is the assumption made in the viability scenario modelling, and to remain within covenants throughout the forecast period. In reaching this conclusion, the Directors have assessed:

· the potential cash generation of the Group against a range of illustrative scenarios (including a severe but plausible outcome); and

· mitigating actions to reduce operating costs and optimise cash flows during any ongoing global uncertainty.

The Directors consider that the Group is well placed to successfully manage the actual and potential risks faced by the organisation including risks related to inflationary pressures and geopolitical tensions.

On the basis of their assessment, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the interim results announcement and consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group.

 

Note 2: Segmental analysis

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses. An operating segment's results are reviewed regularly by the chief operating decision-maker (the Board of Directors of the Group) on a pre-IFRS 16 basis to make decisions about resources to be allocated to the segment and assess its performance, and for which distinct financial information is available. The segmental information is presented on the same basis on which the chief operating decision-maker received reporting during the year. Segmental assets and liabilities continue to be presented in accordance with IFRS.

The business is run on a worldwide basis but managed through two operating segments, IWG Network and Worka.

IWG Network represents the Group's segmental results excluding Worka. IWG Network is managed through both geographical regions and ownership structure splits. The three principle geographical regions are: the Americas, EMEA (including UK) and Asia Pacific. The results of business centres in each of these regions, based on time zones, economic relationships, market characteristics, cultural similarities and language clusters, form the basis for reporting geographical results to the chief operating decision-maker. These geographical regions exclude the Group's non-trading, holding and corporate management companies, which are included in Other.

The Group's IWG Network results are also managed by ownership structure and are an additional basis for reporting results to the chief operating decision-maker. Company-owned and Leased comprises results from business centres owned and operated by the Group. Managed and Franchised comprises results relating to services provided to business centres owned by third parties.

The Worka operating segment comprises the results relating to The Instant Group investment and includes the Group's digital assets, representing the world's leading fully integrated workspace platform. All reportable segments are involved in the provision of global workplace solutions. The Group's reportable segments operate in different markets and are managed separately because of the different economic characteristics that exist in each of those markets. Each reportable segment has its own distinct senior management team responsible for the performance of the segment.

The accounting policies of the operating segments are the same as those described in the Annual Report and Accounts for the Group for the year ended 31 December 2023.