IWG partners for growth

Workstation numbers grew 7 per cent to 481,773, benefiting from an increased focus on Spaces, the co-working format. IWG has continued to make good use of its capital-light partnering approach to expansion, with roughly half of its 115 organic openings supported by property owners and investors. They accounted for roughly 40 per cent of the total new additions and make up over half of the the pipeline. But this growth has not filtered through to earnings, with operating profit for the period down 13 per cent, at constant currencies, to £87m. The group gross margin weakened from 24.9 per cent to 22.2 per cent as mature revenue declined on a fixed cost base in the UK.

On the plus side, occupancy for the mature business was 75.1 per cent for the period, up from 74.4 per cent in the same period last year, although this still lags the average of the past couple of years. Declining occupancy has been a concern in the division since it warned that softer demand had driven down the level at the full-year mark. Performance improved across all geographies except the UK, where levels dipped to 72.9 per cent from 75.8 per cent in the same period last year.

Analysts at Peel Hunt are forecasting adjusted profit before tax of £209m, giving EPS of 17.6p for the year to December 2017 (from £175m and 14.7p in FY2016).