2020 INTERIM RESULTS 4 August 2020 2020 Interim Results 4 August - - PowerPoint PPT Presentation

2020 Interim Results – 4 August 2020

4 August 2020

2020 INTERIM RESULTS

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2020 Interim Results – 4 August 2020

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• f, this presentation or any further information supplied. In no circumstances, to

the fullest extent permitted by law, will the Company, or any of its respective subsidiaries, shareholders, affiliates, representatives, partners, directors,

• fficers, employees, advisers or agents (collectively “the Relevant Parties”) be

responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of this presentation, its contents (including the management presentations and details on the market), its omissions, reliance on the information contained herein, or on opinions communicated in relation thereto or otherwise arising in connection therewith. The presentation is supplied as a guide only, has not been independently verified and does not purport to contain all the information that you may require. This presentation may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. Although we believe our expectations, beliefs and assumptions are reasonable, reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and our plans and

• bjectives, to differ materially from those expressed or implied in the forward-

looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statement contained within this presentation, regardless of whether those statements are affected as a result of new information, further events or

• therwise.

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• r non-contractual, arising out of, or in connection with, this presentation,

including this disclaimer, shall be subject to the exclusive jurisdiction of the English Courts.

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Caution statement

2020 Interim Results – 4 August 2020

▪ H1 total revenue up 3.5% to £1,322.7m despite COVID-19 ▪ Open centre revenue up 10.2% to £1,298.2m, all regions contributing ▪ Pre-2019 revenue up 0.2% to £1,164.4m ▪ Pre-2019 EBITDA up 17.1% to £212.6m ▪ Cash generation before growth capital expenditure, share repurchases & adjusting items of £125.4m ▪ Strong balance sheet

• £830.3m of available liquidity
• Net debt close to zero

Key interim financial highlights

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2020 Interim Results – 4 August 2020

▪ Great start to year, best ever Q1, followed by a challenging Q2 ▪ Comprehensive actions taken to reduce costs, improve cash flow and liquidity

• £180m cash savings from operations so far
• One-off charge of £155.8m resulting from COVID-19
• £29.1m relating to H1
• £126.7m provision for network rationalisation

▪ Challenging Q3 but we are seeing green shoots for improvement by Q4 ▪ Long term structural drivers are strengthening

• Many companies increasingly looking at more dispersed working

▪ Current environment presenting increased growth opportunities ▪ IWG is in a strong financial position, generating positive cash every month

• Raised £320m new equity and increased debt covenant to accelerate growth

and enhance our market leading position ▪ Continued momentum in franchising strategy

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Interim highlights

2020 Interim Results – 4 August 2020

▪ Further cost savings: £180m cash savings so far and looking for more ▪ Increased focus on costs across all areas ▪ 50% reduction in Board remuneration ▪ Reduced growth and maintenance capital expenditures ▪ Network rationalisation – always a last resort ▪ Dividend cancelled ▪ £100m share repurchase programme suspended ▪ Result – positive monthly cash flow and working to generate more

Actions taken to mitigate impact of COVID-19

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2020 Interim Results – 4 August 2020

Enhanced demand for flexibility

▪ Enterprise customers addressing balance sheet pressure

Structural growth drivers

Environment What employees desire Secure technology platform Better for balance sheet ▪ Environmental advantage ▪ Less commuting ▪ Successful remote working ▪ Cyber crime means high security top of list Cost efficiency ▪ Cheaper – potential c.50% saving ▪ Higher productivity ▪ IFRS 16

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Incremental tailwinds

▪ Increased focus on cost saving initiatives ▪ Space required to comply with social distancing at a reasonable cost ▪ Increased corporate acceptance of remote working practices and need for secure work environments ▪ Opportunity to accelerate ESG strategies ▪ Growing acceptance of “remote working” during lockdown to drive growth in “working closer to home”

Current environment expected to accelerate the structural shift in the workplace

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2020 Interim Results – 4 August 2020

▪ Clear view of dramatically transitioning market place ▪ World beyond COVID-19 will still need offices ▪ Greater requirement for more flexible space ▪ More distributed workforces ▪ More working near home ▪ Significant opportunities for IWG

• Business scale
• Coverage
• Home working options

▪ Record sales of membership and home working solutions

New world of working

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2020 Interim Results – 4 August 2020

Importance of scale and coverage

IWG’s business model provides a level of resilience relative to the wider industry

Contracted Spot

Resilient revenue Truly global presence 3,392 centres Unrivalled coverage 1,131 towns & cities - urban and suburban

Americas EMEA APAC UK

33% 38% 9% 20%

Americas EMEA APAC UK

Supporting our diversified customer base and the increasing demand from enterprise customers

C.10% C.90% 11% 48% 29% 12%

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2020 Interim Results – 4 August 2020 9

Supporting dispersed workforces

Network coverage provides alternatives to commuting within a 5, 10 and 20 km radius of High Wycombe

2020 Interim Results – 4 August 2020

Unique capability to do this globally

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Dallas, Texas, US Sydney, Australia Kuala Lumpur, Malaysia Paris, France

2020 Interim Results – 4 August 2020

New Enterprise wins

Preparing for the new world of working

LOGO LOGO

LOGO LOGO LOOv LOGO

SANOFI: multinational pharmaceutical company. Transitioned from existing long-term traditional lease for small teams (10 to 150 people) to maximize agility and reduce real estate costs . Already installed in Hungary, Ecuador, Chile, Hong Kong, Italy and Portugal. ENGIE: multinational energy company. Installed its Digital branch in a Regus center in Paris CBD in order to attract and retain talent. ORACLE France: Relocating all the offices except the HQ from existing long-term traditional lease to a Hub & Spoke model to provide incremental flexibility & mitigate

• risk. 6 dedicated locations across France already installed.

Bytedance/Tik Tok: Video sharing, social networking platform having occupied space across multiple locations, is experiencing fast-paced growth and expanding rapidly.

LOGO LOGO

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2020 Interim Results – 4 August 2020

Four methods to accelerate growth

Organic expansion Rescue situations

▪ Organic network expansion in new and competitor locations ▪ Accelerating momentum in franchising strategy ▪ Brand expansion ▪ Ability for IWG platform to absorb

• ther operators profitably

▪ Enhanced speed to market

M&A

▪ Compelling opportunities ▪ Operators unable to meet growth funding requirements

Highly visible pipeline of active opportunities

Franchising

▪ Continue to make progress with MFAs and sub- franchising ▪ Keep active dialogue with interested parties across our global footprint ▪ 2020 to date

• Added 6 franchise partners
• Added 30+ committed

locations ▪ To date

• # franchise partners: 31
• # countries: 30
• # locations: 440+

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2020 Interim Results – 4 August 2020

Group results

£m H1 2020 H1 2019 Revenue 1,322.7 1,276.3 Open centre revenue 1,298.2 1,176.7 Adjusted gross profit 144.0 187.8 Adjusted operating (loss)/profit (13.4) 43.3 Adjusting operating items (155.8) 0.0 Operating (loss)/profit (169.2) 43.3 Taxation (26.1) (5.0) (Loss)/profit for the period (203.3) 294.8 Basic EPS (p) - Adjusted (5.2) 3.4 Basic EPS (p) - Statutory (22.7) 32.9 Adjusted EBITDA 137.4 189.8 Pre-2019 EBITDA 212.6 181.6

▪ Revenue up 3.5% to £1,322.7m ▪ Open centre revenue up 10.2% to £1,298.2m ▪ Pre-2019 EBITDA up 17.1% to £212.6m ▪ Adjusted operating loss of £13.4m, in line with management’s expectations, impacted by COVID-19

• Includes earnings drag of £96.7m (H1 2019: £46.2m)

▪ COVID-19 related adjusting items of £155.8m

• Network rationalisation £134.5m
• Including £7.8m incurred in H1
• £126.7m provision for rationalisation
• Provision for expected credit losses £9.4m
• Transaction costs for deferred deals £5.8m
• Goodwill impairment £4.9m
• Other one-off items £1.2m

H1 revenues up, profits impacted by COVID-19

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2020 Interim Results – 4 August 2020

▪ Cash flow before net growth capital expenditure of £125.4m

• Positively impacted by:
• Increase in working capital inflow
• Decrease in taxation & finance costs
• Partly offset by:
• More than £20m provided in customer help programmes
• Lower adjusted EBITDA

▪ Net growth capital expenditure of £116.2m ▪ Net debt reduced to £15.9m

• Net proceeds from equity raise of £313.9m
• Net debt to LTM EBITDA ratio of 0.0x

▪ Clear focus on

• Continued cost savings
• Monthly cash generation
• Maximising cash flows

Group cash flow

£m H1 2020 H1 2019 Adjusted EBITDA 137.4 189.8 Working capital 177.3 80.2 Growth related partner contributions (73.7) (95.4) Maintenance capital expenditure – Gross (91.5) (71.0) Taxation & finance costs (16.3) (24.8) Other items (7.8) 4.6 Cash flow before net growth capital expenditure, share repurchases, dividends & adjusting items 125.4 83.4 Cash flow before growth capex per share (p) 14.0 9.3 Net growth capital expenditure (116.2) (185.5) Share issue proceeds 313.9

• Master franchise proceeds
• 301.7

Dividends & share repurchases (42.7) (37.7) Closing net debt (15.9) (298.1) Net debt : LTM EBITDA 0.0x 0.7x

Strengthened balance sheet, monthly cash generation

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2020 Interim Results – 4 August 2020

Outlook

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▪ Impact of COVID-19 more prolonged than anticipated ▪ Expect challenging Q3, see improvements coming through into Q4 ▪ Very focused on costs and maximising savings in the coming months ▪ Long term structural drivers strengthening ▪ Many customers increasingly looking at more dispersed working ▪ Strong development in home working solutions ▪ Current environment presenting significantly increased growth opportunities ▪ Absolute focus on 2021, 2020 a year of transition

2020 Interim Results – 4 August 2020

Q&A?

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2020 Interim Results – 4 August 2020

Appendix

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2020 Interim Results – 4 August 2020

Adjusting items

Adjusting items Total (£m) Accelerated network rationalisation 134.5* Transaction costs in respect of Master Franchise Agreements not yet completed 5.8 Expected credit losses 9.4 Impairment of goodwill 4.9 Other one-off items 1.2 Total adjusting items 155.8

* £7.8m charge related to Q2 network rationalisation and £126.7m provision for future accelerated network rationalisation

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2020 Interim Results – 4 August 2020

Proven financial track record

2,129.6 2,240.0 2,402.1 2,653.0 2016 2017 2018 2019

Revenue (£m)

162.3 272.5 332.0 389.0 2016 2017 2018 2019

Net growth capital investment (£m)

379.7 376.2 389.9 428.3 2016 2017 2018 2019

EBITDA (£m)

43.3 48.5 53.7 58.2 35.5 51.1 40.2 49.5 2016 2017 2018 2019

Cash to shareholders(£m)

Dividend paid in year Share repurchases * Including discontinued operations

c.£380m returned to shareholders in the last 4 years

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2020 Interim Results – 4 August 2020

Thank you

iwgplc.com

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2020 Interim Results – 4 August 2020

Contact details

Wayne Gerry ▪ Group Investor Relations Director ▪ wayne.gerry@iwgplc.com

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