(This article was updated to add details of the potential listing move.)
IWG, the flexible office and hybrid workspace group that owns the Regus and Spaces brands, said it was considering switching from a London to a New York Stock Exchange listing as it reported record revenues and said it was riding the wave of a global pivot to hybrid working.
The group has 3,398 locations across 120 countries, making it the largest global operator of flexible workspaces. Since 2022 it has been refocusing the business on "capital light" management or franchise agreements with property owners and businesses and it said this is already feeding through to the record revenue. It has turned away from owning leases and property, which is more capital intensive.
Chief executive Mark Dixon said in a statement with the results that the revenue is the highest in the business's more than 30-year history.
"Importantly, we have achieved this alongside increasing EBITDA and cashflow generation, which is reducing net debt," Dixon added. Dixon put this down to a combination of higher demand for flexible work products, improved pricing and cost discipline.
Dixon also said property investors are seeking to make the most of their returns by partnering with IWG and said the business had signed almost as many agreements in the first half of 2023 as it did in the whole of 2022.
At a punchy investor call alongside the results Dixon explained: "We are the bridge between the property industry who own properties and a new customer base that wants to use property in a new way. From a customer point of view demand is still strong."
He added that "you saw a story today on Zoom asking people to come back to office two days a week. They are one of our customers. What they want is people to come together and collaborate at certain times in the month. The whole of this is misunderstood. The reality is large corporations globally are moving towards hybrid working and it is universal and gathering pace. The only thing slowing it down is companies have buildings they own or lease and they have to get out of them. But hybrid working reduces costs by 50% and it reduces carbon emissions and companies' people want it."
Dixon said it is both property owners and tenants that are knocking at the company's door.
"Investors in properties are having to innovate. They are coming to us in quantity. We have 10 to 15,000 in our pipeline of building owners who want to change. They are converting space into products that are easy for people and companies to buy. We run our centres well, they are clean and well-presented and we sell over a large digital platform. We can take space from investors and get it to produce cash. And separately big owners are coming back. Perial Asset Management and Generali are big institutions we are working with and there are lots of insurance companies at the top. Plus there are corporations trying to mitigate on having too much space in a hybrid world."
On its headline-grabbing rival in the coworking space, WeWork, Dixon said: "In terms of our friends at WeWork it is the same business but a different model and that is what is causing them a problem. The space is wrongly fitted out. We have taken over maybe 50 WeWorks and we have to refit them and go again. The performance here would be better if they reshape in some way. This is an anomaly from a massive investment made a few years ago. It is unravelling but it will normalise."
Dixon also confirmed IWG is considering moving its stock market listing from London to New York and looks at reporting in dollars and adhering to United States accounting standards.
Dixon said a move was not imminent, but switching was a “practical consideration" as two-thirds of IWG’s revenue is in dollars or dollar-related currencies and the “volatility in sterling” over the past year has made reporting in dollars increasingly attractive.
In results for the six months through the end of June, IWG reported six-month system-wide revenue of £1,679 million and constant currency growth of 14% year-on-year.
Earnings before interest, taxes, depreciation and amortisation increased 48% to £198 million (H1 2022: £131 million). The group posted a loss before tax of £70 million, the same as the first half of 2022. The business's net financial debt reduced by £54 million over the last six months to £658 million.
It signed 400 new locations in the first half of 2023, of which 5% are company-owned, highlighting the "capital light" expansion. Net growth capital expenditure has fallen to £34 million against £57 million in the first half of 2022, "in line with" the expectations of management.
It opened 133 centres and closed 80. There was an average total occupancy of 73.7%, stable on the prior year.
Its fee income received from this "capital light" strategy was up 40% to £21 million (H1 2022: £15 million) and it says will grow "meaningfully as signings progress to openings" over an average timeframe of 18 months.
IWG flagged successes with Worka, the digital platform it took control of via its merger with Instant Offices, with revenues increasing 32% to £153 million (H1 2022: £115 million) and 35% EBITDA growth to £62 million (H1 2022: £43 million).
Dixon said the company would eventually spin off the business and "may take an investment along the way. This is a spot to watch but it is not" the main event.
Dixon said it was a "truly fascinating time for the hybrid working industry".
"We are close to record levels for EBITDA and this is dropping through into cash. This has enabled us to pay down debt, over £100 million since last half of 2022, and this will continue to fall.
"Inflation has clearly been an issue but you will see a great performance in controlling costs. That comes from managing the supply chain, how we build things, even with other people's money, and how we operate the business."