Trading action on UK share markets remained pretty muted on Monday morning. Both the FTSE 100 and FTSE 250 are up only fractionally as news of slowing Chinese exports sapped investor appetite. These weak performances pale in comparison to the behaviour of the IWG (LSE: IWG) share price however.
The price of the office space provider collapsed 10% on Monday to 328p per share on a frosty reaction to latest trading numbers. The IWG share price slipped to its cheapest level since late January, to 306p at one point. Its gains over the past 12 months have now been trimmed to 8%.
IWG’s share price slumps on fresh trading commentary
In today’s update, IWG said “we have continued to see strong recovery in some of our markets” since its most recent update in late April. This included “positive occupancy momentum in the US,” the FTSE 250 company’s single-largest market.
However, IWG added that “the overall improvement in occupancy across the whole group has been lower than previously anticipated.” This is due to the prolonged impact of Covid-19, it said, which includes continued lockdown restrictions and the emergence of new virus variants in some of its territories.
Consequently, IWG said the recovery of its business will be delayed. It added that, given the level of operating gearing, these worse-than-predicted occupancy levels will have a “significant impact” on 2021 results.
The workspace provider said it now expects underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be “well below” the level it recorded last year.
Remaining bullish for 2022
IWG said trading conditions are improving in areas where Covid-19 restrictions are easing, such as in the US. It noted “occupancy is improving, enquiries have reached pre-Covid-19 levels, we have an increasing pipeline of corporate customers on network-wide deals and service revenues are starting to improve.”
The FTSE 250 firm’s flexible working products are witnessing “unprecedented demand” as companies adopt hybrid working (a mix of office- and home-based working). It added that those partnering with IWG continues to “strengthen significantly.” And it has “a very strong pipeline of potential partners wanting to work with us to grow the platform,” the company said.
The firm also said “good progress is being made in relation to larger master franchise agreements” too. It commented that several such agreements are in the final stages of discussions.
IWG said the positive trends it’s witnessing support its view that “the prolonged impact of Covid-19” on its 2021 results “is one of timing and that, as lockdown restrictions ease, the significant actions taken to restructure the Group’s cost base, together with the unprecedented demand for hybrid working and the Group’s unrivalled national and international network coverage, will deliver a strong improvement in profitability and cash generation.”
IWG’s expectations of a “strong recovery in 2022” are broadly unchanged. The company continues to maintain a strong financial position with significant liquidity, it added.