IWG, the world’s largest serviced office provider, has announced a positive outlook for 2018, despite issuing a profit warning last year.
The company, which operates brands including Regus, has forecast a “tipping point” for the flexible office sector in 2018, in which it becomes “the norm for progressive businesses worldwide as they seek flexibility, employee satisfaction and cost efficiency.” On the back of the improved forecast, IWG upped its dividend by 12%.
Profit fall response
The group reported a pre-tax profit fall of 14% to £149.4m, while operating profits slumped 12% to £163.2m. Revenues rose to £2.4bn from £2.2bn. IWG issued a profit warning in October 2017, blaming the effect of Brexit in London and impact of natural disasters in the US.
Its shares fell by more than a third between June and December. The final year results, released today, were in line with expectations. However, IWG said its mature business had returned to growth in the fourth quarter, which confirmed its view “that the recovery in the growth rate was largely a timing issue and that the underlying market growth drivers remain strong”.
Mark Dixon, IWG chief executive, said he expected the company to benefit from accelerated customer demand and growth of flexible working, and a competitive advantage from its “operational scale, global network and quality of service and technology”.
He added: “While 2017 was not without its challenges, the improved revenue performance in Q4 on the back of a strong uplift in sales activity provides a strong platform for growth in 2018. Sales activity trends remain good and we anticipate improved revenue growth during the year. These trends, together with the very positive outlook for our industry, are reflected in our decision to increase the dividend by 12%, and maintain our progressive dividend policy. We look forward to the future with great confidence.”
Continued expansion
IWG opened 314 locations in 2017 – up 36% on the previous year. In total the group added 5.5m sq ft of workspace worldwide. New openings included 56 Spaces, its brand designed to target media, digital and creative companies.
The company’s estimated capital expenditure on expansion in 2018 is around £190m, representing 230 locations and 5.5m sq ft of additional space (a circa 11% increase), which is in line with the total space added in 2017.
The company said Germany was one country where it saw the potential for expansion. “We still only provide some 100 centres in a country which has the potential for many times that number of locations,” the results said.
The group said its operational and financial strength and scale would enable it to “act as a consolidating force across the industry, identifying, buying and strengthening brands and companies”.
Earlier this year, IWG rejected a takeover bid from Brookfield Asset Management and Onex Corporation, which valued it at £2.5bn.
IWG said it remained “highly confident in the prospects” of the group and that it had “an exciting future as an independent company”.
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