- Pre-tax loss narrows in flirst half
- Covid restrictions continue to impact the business
- Investors made to wait for dividends restart
Shares in IWG (IWG) plunged 11% to a one-year low of 171.4p, the worst performers in the FTSE 250, after the flexible office space provider said it will keep dividends on ice due to a continued uncertain environment.
The serviced office specialist also bemoaned the ongoing impact of lockdowns and inflationary cost pressures on the business. This overshadowed an encouraging first half performance which revealed reduced losses and improvements in both occupancy rates and pricing.
DEFICIT REDUCED
For the six months to June 2022, IWG reported pre-tax losses of £70.2 million, narrowed from £163.3 million a year earlier, as total sales ticked up almost 23% to over £1.3 billion.
Despite this encouraging performance, IWG said it would keep dividend payments on hold with management mindful of the current macroeconomic climate and geopolitical tensions.
However, IWG plans to return to its progressive dividend policy ‘at the earliest possible opportunity’.
Looking ahead, IWG said it intends to prepare for a further increase in hybrid working and is looking to expand the growth and coverage of its network to a strong state by the second half of 2022.
‘We have delivered strong revenue performance with record visibility of the forward order book with occupancy and pricing improvements,’ explained CEO Mark Dixon.
‘We continue to build resilience and cost efficiency into our business, and we have repeatedly demonstrated our ability to address new challenges. These attributes will be important as we continue to navigate the headwinds created by increased geopolitical tensions in Europe, general inflationary pressures, and the ebb and flow of Covid-related restrictions in some markets.’
THE EXPERT’S VIEW
Danni Hewson, financial analyst at AJ Bell, commented: ‘Serviced office providers found themselves in an unusual position during the pandemic. On one hand, the fact significant chunks of the population were suddenly working from home was a major threat to their earnings.
‘On the other hand, the new hybrid working model that has been adopted widely means more companies will want greater flexibility with their office needs. Therefore, using serviced offices might be better than leasing floors, or a building, outright.’
Unfortunately for IWG, explained Hewson, it ‘cannot escape the cost pressures hurting companies worldwide. Neither can it be relaxed about Covid as certain markets continue to experience lockdowns, which has a negative impact on demand for some of its serviced offices.
‘Before the numbers came out, analysts had forecast IWG returning to profit this year at £48.6 million. Given the ongoing cost pressures and lockdown disruptions, it seems likely this estimate will have to be scaled back.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
