IWG: Shared office firm warns of sharp profits drop

IWG, the flexible office provider, has warned that profits will be "well below" the previous year because of the emergence of new Covid variants.

The firm said while there had been improvements in some markets, such as the US, overall office occupancy has been lower than expected.

IWG blamed new mutations of the virus as well as continuing lockdowns in some regions for its performance.

It said it will have a "significant impact" on its results for 2021.

The company, which was previously known as Regus, said it expects underlying earnings before interest, tax, depreciation and amortisation (Ebitda) to be well below the £133.8n it reported in the previous year.

IWG is also carrying net debt of £293m as of 31 March.

Nevertheless, the company said it is seeing "unprecedented demand for our flexible work products as many more enterprises adopt hybrid working".

A number of companies have announced they will allow employees to mix working from home and the office as Covid restrictions ease.

On Monday, S4 Capital revealed that the advertising agency had ended a number of office leases and is encouraging people to adopt flexible hybrid working.

S4 Capital chief executive, Sir Martin Sorrell, said: "We always knew that our people, being digital natives, would adapt effortlessly and productively to working from home and, as a result, we are further developing a hybrid office model.

"We have terminated a number of office leases, which will enable us to integrate our operations even faster than we originally thought."

Recently, tech giant Apple said it wanted workers to return to the office for at least three days a week by September, but said they can choose to work from home for the remaining two.

IWG said it had seen "positive momentum" in markets where Covid restrictions are being relaxed, such as the US.

The company said occupancy was improving, enquiries had reached pre-pandemic levels and the pipeline of corporate customers was growing.

IWG said these trends "support the board's view that the prolonged impact of Covid-19 on the group's 2021 results is one of timing".

It expects that profitability and cash generation will strongly improve as lockdown restrictions ease. It said the business will also be boosted by action taken by the company to cut costs amid "unprecedented demand for hybrid working".

"Accordingly, the board's expectations for a strong recovery in 2022 are broadly unchanged," IWG said.