IWG has hailed good momentum for Q1 as it pushes ahead with its capital-light strategy.
System-wide revenue increased to £691.8m for the three months ending 31 March – an 18.3% increase on the £581.7m in the same quarter last year.
The workspace operator said the centres opened in 2021 were developing strongly, with occupancy rising to more than 50% in Q1 2022 compared with an average of 43% in Q4 2021. The new 2022 openings were “exhibiting similarly strong trends”, it added.
In total, the portfolio grew by 300,000 sq ft in the quarter to 3,328 locations and 64.4m sq ft of gross space, across 1,143 towns and cities. It said its period of rationalisation was “near complete”, after closing 22 locations in Q1.
IWG continues to pursue a “capital-light” network, with 28 of the 36 locations added during the quarter being franchised and managed centres. As a result, net growth investment in new centres reduced to £24.7m compared with £46.1m in Q1 last year.
“Franchising remains a key focus in our pivot to a capital-light operating and platform business model,” the group said in a trading update. During the first quarter, it signed six franchise deals, adding a further 18 committed locations to its pipeline.
IWG currently has 78 franchise agreements, with a total commitment to open 783 locations. “With 474 of these commitments still to open, this provides a strong underpinning to future capital-light growth of our current global network,” it said.
Last month, IWG merged its digital and tech-focused assets with fellow flex company the Instant Group in a £320m deal. Under the terms of the arrangement, IWG stumped up £270m of investment while Instant put in around £50m. Financing for the merger resulted in IWG’s net debt almost doubling to £763.8m from December’s position of £397m.
The group has also agreed a reduction in its revolving credit facility from £950m to £750m, in view of its decreased requirements after the Instant Group merger.
“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,” it stated. “Occupancy and pricing [are] moving in the right direction towards pre-pandemic performance levels and service revenues improving quickly.”
However it warned that higher inflationary cost pressures will prove to be a headwind during 2022.
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