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Pandemic impact worse than feared warns IWG

Simon Foy
·2-min read
IWG
IWG

IWG warned that the impact of the pandemic had been worse than feared as the flexible office space provider shut 66 of its buildings during the third quarter. 

The FTSE 250 company, previously known as Regus, posted a 14.3pc drop in revenues to £583m for the three months to September and said it could take a £100m hit this year from offering relief to its tenants, including rent deferrals.

"The impact of the pandemic has been greater than we imagined, and we remain in the eye of this global crisis," the company said.

Trading picked up between July and September when the UK economy was beginning to reopen, but the second wave of the virus has made market conditions "very challenging", it said.

The company closed 66 locations during the period and it expects to shut more office buildings as a result of the pandemic. 

IWG added that 2020 has "presented the toughest challenge the group has experienced since its formation 31 years ago.

"It is an unprecedented storm, but with the decisive actions we have taken across the business we are navigating its impact and look forward to entering 2021 as a stronger, more profitable business."

However, the company sounded an upbeat note about the future of flexible office space, saying that head offices will still have an important role to play "but the future will be hybrid working", where staff combine working from home with spending time in a flexible workspace. 

The company said it remained in a strong financial position, with a net cash position of £10.9m at the end of September compared to a net debt position of £15.9m at 30 June 2020.

"This improvement over the third quarter is a strong testament to the cash generation capabilities of the group even in challenging market conditions," it said. 

Andrew Shepherd-Barron, an analyst at Peel Hunt, said: "Good sales activity is reported for Q3... but with no mention of pricing. The investment case hinges on whether IWG can cut costs (ie renegotiate rent) as quickly as revenue falls. We believe this is unlikely in the short/mid term and expect to see further earnings downgrades."

Shares rose almost 10pc to 279p in afternoon trading.