IWG Shares Slide as Lockdowns, Inflation Outweigh Revenue Surge

By Scott Kanowsky

Investing.com -- IWG PLC (LON:IWG) shares tumbled by more than 10% to near the bottom of the U.K.'s FTSE 100 on Tuesday after the office space provider reported a first-half loss and analysts warned that a recession may hit future earnings.

The owner of the Regus and Spaces brands posted an adjusted operating loss of £2.2 million during the six months to June 30, citing a negative impact from COVID-19 lockdowns in key markets and soaring cost inflation.

Meanwhile, analysts at Barclays flagged that a broader market downturn may depress demand for new office space and ultimately lead to a decrease in the company's results by as much as £900 million between 2023 - 2025, according to the Financial Times.

Despite these worries, increased adoption of hybrid working in the wake of the pandemic helped drive a surge in revenue across the group, with the top-line number growing by 22.3% in constant currency to £1.45 billion. In June, data released by IWG showed employees in Britain preferred to come into the office on Tuesdays, Wednesdays, and Thursdays, with midweek foot traffic 23% higher than on Mondays and Fridays.

"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," said IWG chief executive officer Mark Dixon in a statement.

IWG added that it is making "good progress" in the integration of The Instant Group, the workspace platform it is merging its digital assets with to harness the increase in employees splitting their time between the home and office.

When the tie-up was first announced in March, Dixon predicted that IWG would return to a profit in 2022. He did not reiterate this forecast in IWG's latest financial results, but did say the company is cautiously optimistic about the remainder of the year.

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