TIDMIWG TIDMTTM
RNS Number : 7593G
IWG PLC
06 March 2018
6 March 2018
IWG plc - ANNUAL FINANCIAL REPORT ANNOUNCEMENT - YEARED 31
DECEMBER 2017
Improving revenue momentum into 2018, excellent overhead
performance and increased investment activity and network
growth
IWG plc, the global leader for flexible workspace, today
announces its annual results for the year ended 31 December
2017.
Key Financial Highlights
-- Attractive post-tax cash returns. Return on pre-2013 investment of 20.8%(i)
-- Net growth capital investment of GBP272.5m, of which
GBP110.2m on property assets with flexible workspace operations
-- Group revenue of GBP2,352.3m, with revenue growth improving in Q4 and since period end
-- Mature revenue returned to year-on-year growth in Q4, with a
0.5%(ii) improvement (Q3: 1.8%(ii) decline)
-- Overheads reduced 12%(ii) ; down 170bp as a percentage of revenue to 10.1%
-- Operating profit of GBP163.2m, in line with previous guidance
-- Cash generation (before net growth capital expenditure, share
buybacks, and dividends) of GBP215.5m (23.5p per share)
-- Strong financial position maintained with net debt of GBP296.4m (0.8x net debt : EBITDA)
-- 12% increase in dividend to 5.70p (2016: 5.10p), reflecting confidence in long-term outlook
% change % change
actual constant
GBPm 2017 2016 currency currency
------------------------------- ------- ------- ---------- ---------
Revenue 2,352.3 2,233.4 5.3% 1.9%
Gross profit 401.6 448.8 (11)% (13)%
Overheads (237.6) (262.8) (10)% (12)%
Operating profit (Inc.
JV) 163.2 185.2 (12)% (15)%
Profit before tax 149.4 173.7 (14)%
Earnings per share (p) 12.4 14.9 (17)%
Dividend per share (p) 5.70 5.10 12%
EBITDA 376.2 379.7 (1)% (4)%
Post-tax cash return on
Investment (i) 20.8% 23.6% Down 280bp
Cash flow before net growth
capex, buybacks and dividends 215.5 286.1 (25)%
Net debt 296.4 151.3
Net debt : EBITDA (x) 0.8 0.4
------------------------------- ------- ------- ---------- ---------
(i) Calculated as: EBITDA less amortisation of partner
contributions, less tax based on EBIT, less net maintenance capital
expenditure / growth capital less partner contribution. Returns
based on those locations open on or before 31 December 2012.
Prepared on the 12 months ended 31 December 2017 and for 2016 on
the 12 months ended 31 December 2016
(ii) At constant currency
Key operational highlights
-- Ongoing focus on disciplined investment, partnering and risk management
-- Benefitting from increased operational scale and efficiencies
-- Further network expansion and improvement in network quality,
with 314 new locations (272 organic) and 5.5m sq. ft. added in
2017. Now in 3,125 locations worldwide (up 7% from December 2016),
with 52.0m sq. ft. of space. Strong Q4 momentum with 119 new
locations opened
-- Successful roll out of our large co-working format, Spaces,
with 56 new locations (taking the total to 78) and 13 new countries
added in 2017
-- Current pipeline visibility on 2018 net growth capital
expenditure at the end of February 2018 of approximately GBP190m,
representing 230 locations and 5.5m sq. ft. of additional space
(c.11% growth in space), consistent with the total space added in
2017.
Mark Dixon, Chief Executive of IWG plc, said:
"2017 was an important year for the flexible workspace industry
globally and we remain confident that IWG will continue to drive,
and benefit from, the accelerating customer demand and growth of
flexible working. With the competitive advantage from our
operational scale, global network and quality of service and
technology, we are optimally positioned to benefit from these
long-term structural growth drivers.
Our Group strategy remains unchanged. We will continue to invest
in our network so we can deliver future earnings growth and
increasing shareholder returns. We will continue to focus on
partnerships to drive capital efficiency and to grow and interlink
our multi-brand national networks to enable more deals with larger
corporates. Alongside investing for growth, we will focus on
delivering attractive returns on the investments we have made in
recent years and monetising our leading network. A relentless focus
on execution and disciplined approach to risk management will be
key to delivering this.
While 2017 was not without its challenges, the improved revenue
performance in Q4 on the back of a strong uplift in sales activity
provides a strong platform for growth in 2018. Sales activity
trends remain good and we anticipate improved revenue growth during
the year. These trends, together with the very positive outlook for
our industry, are reflected in our decision to increase the
dividend by 12%, and maintain our progressive dividend policy.
We look forward to the future with great confidence."
Details of results presentation
Mark Dixon, Chief Executive Officer, and Dominik de Daniel,
Chief Financial Officer and Chief Operating Officer, are hosting a
presentation today for analysts and investors at 10.30am at
CityPoint, 1 Ropemaker Street, London, EC2Y 9HT.
For those unable to attend the presentation, please contact
Jessica Ayres to obtain details for the webcast or conference call:
jayres@brunswickgroup.com or +44 (0) 20 7396 7466
For further information, please contact:
IWG plc Tel: +41 (0) 41 723 2353
Mark Dixon, Chief Executive Officer Brunswick Tel: +44(0)
Dominik de Daniel, Chief Financial Officer & 20 7404 5959
Chief Operating Officer Nick Cosgrove
Wayne Gerry, Group Investor Relations Director Simone Selzer
For more information, please visit www.iwgplc.com
Chairman's statement
A year of continued strong returns
For the period Group revenue increased from GBP2,233.4m to
GBP2,352.3m, representing an increase of 1.9% at constant currency
(up 5.3% at actual rates). Revenue from all our open centres
(excluding closed centres) grew 4.2% to GBP2,322.4m (2016:
GBP2,154.8m) at constant currency (up 7.8% at actual rates). The
growth in open centre revenue accelerated sequentially through the
second half of the year, which provides a strong platform for 2018.
In line with previous guidance, operating profit declined 15% at
constant currency from GBP185.2m to GBP163.2m, down 12% at actual
currency.
We further enhanced the operational efficiency of the business
with overheads reducing in absolute terms from GBP262.8m to
GBP237.6m (down 12% at constant currency) and as a percentage of
revenue by a further 1.7 percentage points to 10.1%. This was
achieved whilst building the scale of our business and our national
networks with the opening of 314 new centres, adding c. 5.5m sq.
ft. of workspace globally. Notwithstanding this increased
investment in growth (including GBP110.2m on property), the strong
cash generation capability of the business ensured we maintained a
robust and conservative capital structure.
2017 was a year during which we saw the benefits of our strong
and balanced global portfolio. While the year was not without its
challenges, most notably in London, our good performance in growth
markets across the world meant that we delivered a set of results
which we are well-positioned to build on in 2018 and beyond.
We were also pleased to note the strong underlying performance
of the business, which is shown by an annual post-tax cash return
on net investment made up to 31 December 2012 of 20.8%,
significantly above our cost of capital. This performance underpins
our continuing commitment to a sustainable and progressive dividend
(see below), underlining our confidence in the long-term prospects
of the Group.
Our confidence is well-placed. All the evidence suggests that we
are fast approaching a tipping point which will see the flexible
workspace option, in which we are the leading global supplier,
become the norm for progressive businesses worldwide as they seek
flexibility, employee satisfaction and cost efficiency.
Our constructive, resilient and proven business model positions
us well to continue to seize the opportunities generated by the
flexible workspace sector. Our operational scale, diverse customer
base, innovative approach to service and format development, strong
post-tax returns and cash-generative capabilities should enable us
to deliver increasing shareholder returns while continuing to
invest in growth.
Our strategy
Our strategy enables us to drive, and to benefit from, the
continuing and accelerating growth of the flexible workspace
market.
In terms of our ability to drive growth, our market-leading
global footprint means we can constantly review our investments in
growth by region, country and city. For example, Germany is a
particularly attractive market where we significantly improved our
profile during 2017. However, we still only provide some 100
centres in a country which has the potential for many times that
number of locations.
The growth potential therefore remains huge, and we intend to
focus on growing in this and other similarly promising markets.
This approach of reviewing our investments based on evolving market
conditions and opportunities also helps us manage risk through the
economic cycle.
In terms of benefiting from growth, there is no doubt that
continuing to grow our share of the global flexible workspace
sector should deliver increased revenue and returns.
We also recognise, however, that our focus on growth should not
distract us from other priorities. During 2017 and into 2018,
therefore, we focused on delivering an enhanced service proposition
to customers, prioritising the development of key accounts. We also
continued to assess and develop new formats, to gain from improved
market segmentation by geography and business type.
Above all, we have continued our established efforts to improve
further our operating model with a determined focus on simplicity,
scalability, people, cost control, risk management and delivering a
great customer experience.
Our Board
I would again like to thank my Board colleagues for their
valuable contribution during 2017, which helped the Group deliver a
robust performance in the face of challenging conditions in some
markets.
Our people
Our performance in 2017 was driven by the energy and commitment
of our talented workforce.
The engagement demonstrated by more than 220 attendees
representing 110 countries at our recent annual leadership
conference was extremely impressive. The participants were clearly
excited to be part of the leading, global flexible workspace
operator.
I would like to thank everybody involved for their continued
enthusiasm for providing outstanding service to our customers and
growing our business. Their contributions remain key to our
success.
Dividend
As I have already stated, we continue our commitment this year
to a sustainable and progressive dividend, which reflects our
confidence in the long-term prospects of the business and the
strength of our cash generation. Accordingly, the Board is
recommending an 11% increase in the final dividend to 3.95p.
Subject to the approval of shareholders at the 2018 AGM, this will
be paid on 25 May 2018 to shareholders on the register at the close
of business on 27 April 2018. This represents an increase in the
full-year dividend of 12% to 5.70p (2016: 5.10p).
Douglas Sutherland
Chairman
6 March 2018
Chief Executive Officer's review
The revolution advances
2017 was an important year for the flexible workspace industry.
We have witnessed increased interest in the industry especially
from large corporates, the media and other stakeholders. People and
companies are increasingly talking about flexible workspace.
According to a 2017 survey from CBRE, one of many such reports to
come out last year, 71% of occupiers believe that productive and
flexible workspaces are vital to delivering corporate real estate
objectives. Critically, this figure is up from 57% just 12 months
earlier. And, in the same survey, 84% of respondents see the
disruption resulting from the flexible workspace revolution as a
permanent feature of the corporate real estate landscape.
Why is this? Our industry is becoming more mainstream because
major global trends are driving long-term demand. Digitalisation is
changing how people work, people are increasingly wanting the
personal lifestyle and productivity benefits, and businesses want
to capture the strategic and financial advantages. The impact of
these trends is significant. We are fast approaching the moment
when "flexible working" will simply be known as "working".
Building the foundations for success
What have we done to address this opportunity? We achieved many
milestones during 2017, laying the groundwork for 2018 to be a
significant year in terms of growth and opportunity.
This is not to say that 2017 was a year dedicated exclusively to
future development. Not only did we help some 2.5 million people
across the world work more productively, achieving a significant
number of major corporate account wins along the way, we also added
significant scale to our business.
For example, we opened 36% more new centres across the world
than we did in 2016. We opened 314 locations, including 56 Spaces
locations, and added c. 5.5m sq. ft. of workspace worldwide, taking
our global total to 3,125 locations and c. 52.0m sq. ft. of
workspace in over 110 countries. Most of these new openings were
organic and just over half of these were delivered through
partnering deals, that are variable in nature, with property owners
and investors in the global real estate industry. We remain very
encouraged by the increased traction with partnering deals which
represent attractive opportunities both to grow the network and
deliver more capital efficient growth.
We also continued our programme of upgrading or replacing our
older locations, to ensure the high quality of our offering.
Growing the platform
Our 2017 focus was not all about opening new centres. We also
added new brands to our expanding portfolio (such as No. 18 and
Basepoint), providing greater choice and making it easier than ever
to use the IWG platform to access the flexible workspace
market.
We strengthened our industry-leading and highly scalable digital
platform to give customers an even better experience and access to
higher levels of service. We continued to train and develop our
people across over 110 countries, simultaneously providing our
customer-facing employees with the 24/7 global support they need to
drive customer retention by focusing exclusively on meeting
customer needs.
And we continued to focus successfully on cost management,
leveraging economies of scale ever more efficiently to further
build on our advantage of having the lowest-cost operating model in
the industry. This in turn has enabled us to continue investing in
quality, service, technology and choice that customers are looking
for.
A year of strategic importance
So, in our view, 2017 was a successful year from a strategic
perspective, that has reinforced our platform for growth and
strengthened our ability to seize the opportunities presented by
our industry and our position within it.
It was not without its challenges though. In October, a
temporary confluence of events affecting certain national markets
caused us to lower our profit outlook for the year. Specifically,
the anticipated revenue improvement in the third quarter was weaker
than expected and resulted in a pause in the recovery of our Mature
business. In the UK, our London business was particularly slow.
There were also a number of natural disasters affecting certain
national markets in the third quarter. However, we were pleased to
see our Mature business return to growth in the fourth quarter,
with sustained improvements throughout the period, which confirmed
our view that the recovery in the growth rate was largely a timing
issue and that the underlying market growth drivers remain
strong.
Investing to strengthen our business through growing our
national networks, enhancing our development capabilities and
increasing the dedicated resources focused on corporate account
development inevitably led to investment in additional overhead
costs and more initial losses from new centres. Strategically,
these are the right actions to take advantage of the market growth
opportunities and we have won further new corporate account
contracts as a result. In the short term, however, they impacted
Group profitability.
Our operational and financial strength and scale also enable us
to act as a consolidating force across the industry, identifying,
buying and strengthening brands and companies. So, as we move ahead
in 2018, we are in a very strong competitive position, with
improving revenue momentum and a larger pipeline of opportunities
ahead of us.
Strong returns generation
We remain focused on the returns we deliver from the investments
we make. 2017 has been another year in which we have delivered
strong post-tax cash returns on net investment that are well above
the Group's cost of capital. The post-tax cash return on net growth
investment from locations opened on or before 31 December 2012 was
20.8% (2016: 23.6%). If we roll the estate forward one year to all
those locations opened on or before 31 December 2013, the post-tax
cash return is 19.3% (2016: 21.5%). The post-tax cash return for
the overall business is 11.2% (2016: 13.7%). Our post-tax returns
are calculated after deducting net maintenance capital expenditure.
In 2017, as expected, we invested more in net maintenance capital
expenditure to take the opportunity to refresh some of our existing
locations. Overall, a continuing strong performance.
Group revenue increased 1.9% at constant currency to
GBP2,352.3m, an increase of 5.3% at actual rates. This performance
reflects the previously reported softness experienced during the
third quarter. Encouragingly, our revenue performance improved in
the fourth quarter. Growth in Group revenue accelerated from 2.5%
in the third quarter to 5.9% in the fourth quarter, at constant
currency. These Group numbers reflect the impact of closures. A
better indication of the ongoing business, therefore, is provided
by the performance of our open centres (excluding closed centres).
On this basis, Group revenue increased 4.2%, at constant currency,
to GBP2,322.4m (2016: GBP2,154.8m), with revenue growth
accelerating from 4.4% in the third quarter to 7.5% in the fourth
quarter. This acceleration in revenue growth was driven by all
regions except for the UK, where revenue stabilised sequentially
during the quarter.
Mature revenue declined by 1.2% during the year at constant
currency, with a return to growth in the fourth quarter with a 0.5%
year-on-year improvement compared with a 1.8% decline for the third
quarter and sustained improvement throughout the period primarily
driven by improvements in the Americas and Asia Pacific.
Group income statement
% Change % Change
actual constant
GBPm 2017 2016 currency currency
=================================== ======= ======= ========= =========
Revenue 2,352.3 2,233.4 5.3% 1.9%
Gross profit (centre contribution) 401.6 448.8 (11)% (13)%
Overheads (237.6) (262.8) (10)% (12)%
=================================== ======= ======= ========= =========
Operating profit(*) 163.2 185.2 (12)% (15)%
=================================== ======= ======= ========= =========
Profit before tax 149.4 173.7 (14)%
Taxation (35.4) (34.9)
----------------------------------- ------- ------- --------- ---------
Profit after tax 114.0 138.8 (18)%
EBITDA 376.2 379.7 (1)% (4)%
=================================== ======= ======= ========= =========
* Including joint ventures
The Group generated a gross profit of GBP401.6m (2016:
GBP448.8m), down 13% at constant currency. This reflects, in
broadly equal measure, a lower Mature business gross profit and the
combined impact of higher initial losses from new locations opened
and a negative year-on-year impact from closures.
Gross margin
Gross margin
Revenue GBPm %
2017 2016 2017 2016
2014 Aggregation 1,857.6 1,847.3 21.5% 24.1%
New 15 307.1 270.7 11.8% 2.7%
New 16 106.5 36.8 (11.8)% (53.8)%
================= ======= ======= ======= =======
Pre-17 2,271.2 2,154.8 18.7% 20.1%
New 17(1) 51.2 - (40.0)% -
Closures 29.9 78.6 (6.0)% 19.8%
----------------- ------- ------- ------- -------
Group 2,352.3 2,233.4 17.1% 20.1%
================= ======= ======= ======= =======
(1) New 17 also includes any costs incurred in 2017 for centres
which will open in 2018.
We maintained our strong focus on managing overhead costs whilst
investing in areas to support future growth of the business. During
2017 we achieved a further 12% absolute reduction in overheads at
constant currency. This reduced overheads as a percentage of
revenue by an additional 1.7 percentage points to 10.1%. This
helped to mitigate the impact of the third quarter performance and
the Group to deliver an operating profit of GBP163.2m, in line with
previous guidance.
We accelerated our growth programme in 2017, reflecting the
attractive opportunities to grow our business. Excluding the
GBP110.2m investment in property, we invested GBP162.3m in net
growth capital expenditure during 2017 (2016: GBP136.7m).
We invested GBP110.2m in freehold and long-leasehold properties,
which have flexible workspace operations (2016: GBP25.6m). Long
term, the Group's strategy remains to pursue a predominantly
capital-light approach to network growth.
There remain significant attractive opportunities to deploy
capital and we finished 2017 strongly with 119 additions in the
fourth quarter and continue to invest to build upon this momentum
in 2018 accordingly.
With the significant investment in growth the Group has made
over recent years, our depreciation charge has increased
accordingly. The result is a broadly unchanged EBITDA performance.
This is also a good indication of the attractive cash generation
capability of our business model. We generated cash flow after
maintenance capital expenditure, but before investment in growth
capital expenditure, dividends of GBP48.5m and GBP51.1m on buying
back shares, of GBP215.5m. After the significant investment of
these latter three items of GBP372.1m, Group net debt increased
from an opening position of GBP151.3m to GBP296.4m at 31 December
2017, in line with our expectations. This represents a net debt :
EBITDA leverage ratio of 0.8x and reflects the continuation of our
prudent approach to the Group's capital structure. At 31 December
2017 we had approximately GBP130m of property investment on the
balance sheet.
Performance by region
On a regional basis, mature* revenue and contribution can be
analysed as follows:
Mature gross
Revenue Contribution margin (%)
================= ============== ==============
GBPm 2017 2016 2017 2016 2017 2016
============= ======= ======== ====== ====== ====== ======
Americas 926.4 897.4 177.6 173.8 19.2% 19.4%
EMEA 486.1 461.8 105.6 106.6 21.7% 23.1%
Asia Pacific 351.1 342.1 74.3 69.9 21.2% 20.4%
UK 398.2 409.9 79.2 95.9 19.9% 23.4%
Other 2.9 6.8 (0.2) 6.8
Total 2,164.7 2,118.0 436.5 453.0 20.2% 21.4%
============= ======= ======== ====== ====== ====== ======
* Centres open on or before 31 December 2015
Americas
Revenue from open centres increased 3.8% at constant currency to
GBP978.1m. Total revenue (including closed centres) in the Americas
increased 2.9% at constant currency to GBP984.8m (up 6.7% at actual
rates). Although mature revenue in the region declined 0.5% at
constant currency to GBP926.4m (up 3.2% at actual rates), we
experienced a sequential improvement during the year. This resulted
in a strong finish to the year with 3.0% growth at constant
currency in the fourth quarter.
Average mature occupancy for the region was 75.8% (2016: 75.5%).
The gross profit margin remained solid at 19.2%.
We continued to see an improving performance in the US, our
largest region in the Americas, generating GBP819.6m of total
revenue. After an improved second half and strong fourth quarter,
we ended with a small positive constant currency revenue growth
rate for our Mature business in 2017. After a slow start to the
year, our Canadian business produced a good performance with
momentum building from March onwards and finishing the year
strongly, with c. 9% year-on-year constant currency mature revenue
growth in Q4. Although we saw good performance from some of the
smaller countries in Latin America, like Puerto Rico, this was
offset by weak conditions in the larger markets, such as Mexico and
Brazil.
We added 65 new locations during the year, taking the total to
1,265 at 31 December 2017. The focus of growth continued to be the
US with the opening of 36 new locations, which increased the total
to 1,007. Over a third of the total openings were in Latin America,
with the majority in Brazil following a portfolio deal with a large
property owner. We also opened in Trinidad and Tobago through a
partnering agreement.
EMEA
EMEA continued to make progress during 2017, with a range of
performances in individual markets. Revenue from all open centres
increased 7.7% at constant currency to GBP535.4m. Total revenue
increased 6.7% at constant currency to GBP540.5m (up 13.4% at
actual rates). Mature revenue in the region declined 1.0% at
constant currency to GBP486.1m (up 5.3% at actual rates) for the
year but moved modestly into growth in Q4. The gross margin reduced
from 23.1% to 21.7% which is a robust performance given the mature
revenue decline. Mature occupancy increased from 75.9% to
77.3%.
EMEA added the largest number of new locations of any region
with 136 new locations opened. At 31 December 2017 we had 909
locations across EMEA. We also added Iceland, Azerbaijan and
Gibraltar to our global presence.
In such a diverse region, individual country performances varied
but, in the main, continental Europe, with the exception of France
and Switzerland, has been good. There were very good performances
from the Netherlands, Germany, Italy, Spain, Ireland and Israel.
More challenging were markets like Russia and parts of the Middle
East and Africa. Many countries in the region, however, delivered a
stronger second half performance, which is encouraging.
Asia Pacific
Revenue from all the open centres increased 5.1% at constant
currency to GBP379.3m. Total revenue in the region increased 2.2%
at constant currency to GBP383.2m (up 5.5% at actual rates). In the
Mature business, revenue performance was stronger in the second
half of the year. Although mature revenue declined by a modest 0.6%
at constant currency for the year as a whole (up 2.6% at actual
rates), we saw signs of positive improvement in the fourth
quarter.
Mature occupancy increased from 71.8% to 73.0% and the gross
margin improved from 20.4% to 21.2%. It was also pleasing to see
the build-up of momentum in the Mature business across several
countries, including Japan and Australia. Both ended the year
strongly. Some markets, however, like India and China, performed
below our expectations.
We added 57 new centres into Asia Pacific, taking the total as
at 31 December 2017 to 638 centres. The focus of this growth was in
Japan, India, China, Australia and, in the fourth quarter, New
Zealand where, including an acquisition, we more than doubled our
network to 16 locations. During 2017 we added Kazakhstan to our
network.
UK
Revenue from all the open centres increased 1.6% to GBP425.8m.
Total revenue (including closed centres) declined 4.8% to
GBP440.0m. Revenue from the Mature business in the UK declined 2.9%
to GBP398.2m after a weak third quarter.
There were two contrasting performances from our business in
London and that of the rest of the UK, as previously reported.
Revenue outside London increased and saw sequential quarterly
year-on-year improvement. Mature revenue in London declined
significantly and was particularly weak throughout the second half.
Even within the London market there were varied performances, with
softer demand experienced in the City. Although enquiry levels
remained weak compared to the rest of the UK, there was a distinct
improvement in average deal size in the fourth quarter. The absence
of larger deals in London had been a particular issue, especially
in the third quarter. With the decline in mature revenue,
especially in a high value market like London, on a relatively
fixed cost base in the near term, the mature gross margin declined
from 23.4% to 19.9%. Mature occupancy reduced from 75.6% to
72.1%.
We added 56 new locations in the UK, with a focus on the regions
outside London. During the first half we acquired Basepoint which
added 31 locations primarily in the South of England which were
very complementary to our existing network. Basepoint broadens our
product offering in the UK in terms of price point, geographic
presence and type of workspace as well as adding another brand to
the Group. We now have 313 locations in the UK at 31 December
2017.
Outlook
2017 was an important year for the flexible workspace industry
globally and we remain confident that IWG will continue to drive,
and benefit from, the accelerating customer demand and growth of
flexible working. With the competitive advantage from our
operational scale, global network and quality of service and
technology, we are optimally positioned to benefit from these
long-term structural growth drivers.
Our Group strategy remains unchanged. We will continue to invest
in our network so we can deliver future earnings growth and
increasing shareholder returns. We will continue to focus on
partnerships to drive capital efficiency and to grow and interlink
our multi-brand national networks to enable more deals with larger
corporates. Alongside investing for growth, we will focus on
delivering attractive returns on the investments we have made in
recent years and monetising our leading network. A relentless focus
on execution and disciplined approach to risk management will be
key to delivering this.
While 2017 was not without its challenges, the improved revenue
performance in Q4 on the back of a strong uplift in sales activity
provides a strong platform for growth in 2018. Sales activity
trends remain good and we anticipate improved revenue growth during
the year. These trends, together with the very positive outlook for
our industry, are reflected in our decision to increase the
dividend by 12%, and maintain our progressive dividend policy.
We look forward to the future with great confidence.
Mark Dixon
Chief Executive Officer
6 March 2018
Chief Financial Officer's review
Strong returns performance underscores the fundamental strength
of our business model and strategy
We remain focused on delivering strong returns on investment and
this has been achieved again during 2017. We reaccelerated the
growth of our national networks and did so in an increasingly
capital efficient manner. Our cost leadership has been further
enhanced. We reduced overheads as a percentage of revenue to 10.1%
and target further improvement.
Return on investment
Our strategy is focused on generating good returns from our
investments. For the 12 months ended 31 December 2017, the Group
delivered a strong post-tax cash return on net growth investment of
20.8% in respect of locations opened on or before 31 December 2012
(23.6% on the same estate for the 12 months ended 31 December
2016). Moving the aggregated estate forward and incorporating the
centres opened during 2013, the Group delivered a post-tax cash
return on net growth investment of 19.3% in respect of all
locations opened on or before 31 December 2013 (the equivalent
return for the 12 months ended 31 December 2016 on the same estate
was 21.5%).
This strong performance, well ahead of our cost of capital,
reflects the underlying level of profitability of the Group from
the continued focus on efficiency and productivity, and the
economies of scale on overheads that we enjoy as the Group
continues to grow.
The table below shows the status of our centre openings by year
of opening as they continue to progress towards full maturity.
2017 Post-tax cash return(1) on net investment by year group -
12 months to 31 December 2017
09
&
Year of opening earlier 10 11 12 13 14 15 16 17
---------------------- -------- ----- ----- ----- ----- ----- ----- ------ ------
Post-tax cash return 22.6% 17.7% 16.7% 17.1% 14.0% 11.3% 7.3% (9.6)% (6.9)%
---------------------- -------- ----- ----- ----- ----- ----- ----- ------ ------
Net growth investment
on locations opened
in year(2) GBPm 548.9 51.1 75.6 137.7 235.1 157.6 262.7 139.7 268.8
---------------------- -------- ----- ----- ----- ----- ----- ----- ------ ------
2016 Post-tax cash return on net investment by year group - 12
months to 31 December 2016
09
&
Year of opening earlier 10 11 12 13 14 15 16 17
---------------------- -------- ----- ----- ----- ----- ----- ------ -------
Post-tax cash return 25.0% 31.1% 21.3% 16.6% 13.9% 10.0% (2.6)% (15.8)% -
---------------------- -------- ----- ----- ----- ----- ----- ------ -------
Net growth investment
on locations opened
in year(2) GBPm 562.1 52.5 77.4 142.0 238.6 159.9 259.0 130.8 -
---------------------- -------- ----- ----- ----- ----- ----- ------ -------
(1) These returns are based on the post-tax cash return divided
by the net growth capital investment. The post-tax return is
calculated as the EBITDA achieved, less the amortisation of any
partner capital contribution, less tax based on the EBIT and after
deducting maintenance capital expenditure. Net growth capital
expenditure is the growth capital after any partner contributions.
We believe this provides an appropriate and conservative measure of
cash return
(2) Note these amounts relate to net investment based on the
year of opening of the centre. Depending on the timing of opening,
some capital expenditure can be incurred in the calendar year
before or after opening
Developing the network
We reaccelerated the growth of our network and this remains a
strategic priority. Increasing the depth and breadth of our
geographic scope, and addressing different styles of working and
price points, is a major differentiator for IWG and provides a
competitive advantage as well as building further resilience into
the business. We continued to maintain a sharp focus on our
investment decision-making during 2017, reflecting its critical
importance to maintaining strong future returns.
During 2017, we invested GBP272.5m of net growth capital
expenditure, including GBP110.2m on freehold and long-leasehold
properties which have flexible workspace businesses. This
investment included expenditure on locations opened before 2017 and
to be opened in 2018 of GBP30.4m.
We opened 314 new locations during 2017. These locations added
approximately 5.5m sq. ft., taking the Group's total space globally
to 52.0m sq. ft. as at 31 December 2017. Another important focus
area was the roll-out of our Spaces format. During 2017 we
accelerated our roll-out of the Spaces format with the addition of
56 locations, which represented approximately 44% of the net growth
capital expenditure and 35% of the space added. Most of the Group's
new additions in 2017 were organic openings and over half of these
were delivered through partnering deals.
We finished 2017 strongly, with 119 additions in the fourth
quarter. This momentum has continued and we have a good pipeline of
new openings already for 2018. At the end of February 2018, we had
visibility on 2018 net growth capital expenditure of approximately
GBP190m, representing approximately 230 locations and 5.5m sq. ft.
of additional space - c.11% of our current space and a similar
amount of space as added in 2017. We have a strong pipeline of
locations within our Spaces co-working format. These Spaces
locations represent approximately 41% of the total locations, over
60% of the added space and over 70% net growth capital expenditure
for the current 2018 pipeline.
Operational developments
Constantly striving to improve our business and the future
potential returns is an ongoing process. We have added new brands
and formats to our portfolio to enhance our ability to match
customer demand. The unrivalled scale of our business provides us
with the platform to automate more processes and unlock the
opportunity from allowing our employees to have greater focus on
customer service. We believe this will generate many positives for
our business, including further improved cost efficiency.
To unlock the growing opportunity with corporate accounts we
have focused more investment in this area. This investment included
the bolstering of our corporate accounts team to establish a team
of specialists in strategic marketing and selling to large
corporations. We believe this is an important investment for the
future of the business and we are already seeing the cost benefit
with new contract wins and a healthy pipeline of future
opportunities. We are also investing in our development
capabilities to establish a strong pipeline of growth in future
years.
Revenue
Reported Group revenue increased 1.9% at constant currency to
GBP2,352.3m (2016: GBP2,233.4m), an increase of 5.3% at actual
rates. We experienced a revenue acceleration throughout 2017, at
constant currency. Notably, Group revenue growth, at constant
currency, accelerated from 2.5% in the third quarter to 5.9% in the
fourth quarter. This revenue growth acceleration was driven by all
regions, except the UK, where revenue stabilised sequentially
through the quarter. Revenue growth from all open centres was
stronger and accelerated from 4.4% in the third quarter to 7.5% in
the fourth quarter, which delivered a 4.2% increase for the year,
all at constant currency. These improvements reflect the strong
uplift in sales activity since October 2017.
Our Mature business showed positive 0.5% revenue growth in Q4
2017, at constant currency, with the growth rate accelerating
throughout the quarter, which provides a good starting point for
2018. For the year, mature revenue at constant currency (from the
2,581 like-for-like locations added on or before 31 December 2015)
declined 1.2% to GBP2,164.7m (up 2.2% at actual rates), compared to
a 2.0% decline at constant currency for the six months to 30 June
2017 and a 1.8% decline for the third quarter. This was primarily
driven by improvements in the Americas and Asia Pacific and, to a
lesser extent, EMEA. Mature occupancy remained solid at 74.9%
(2016: 74.8%), with the decline in occupancy in the UK offset by
improvements in the other regions.
The continuation of these sales activity trends reinforces our
view that mature revenue can improve in 2018. Additionally, we
expect mature revenue to benefit from the maturation of the
2016-year Group location openings (230 locations), which were
incorporated into the Mature business on 1 January 2018.
Financial performance
Group income statement
% Change % Change
(actual (constant
GBPm 2017 2016 currency) currency)
----------------------------------- ------- ------- ---------- ----------
Revenue 2,352.3 2,233.4 5.3% 1.9%
Gross profit (centre contribution) 401.6 448.8 (11)% (13)%
Overheads (237.6) (262.8) (10)% (12)%
Joint ventures (0.8) (0.8)
----------------------------------- ------- ------- ---------- ----------
Operating profit 163.2 185.2 (12)% (15)%
Net finance costs (13.8) (11.5)
----------------------------------- ------- ------- ---------- ----------
Profit before tax 149.4 173.7 (14)%
Taxation (35.4) (34.9)
Effective tax rate 23.7% 20.1%
----------------------------------- ------- ------- ---------- ----------
Profit after tax 114.0 138.8 (18)%
----------------------------------- ------- ------- ---------- ----------
Basic EPS (p) 12.4 14.9 (17)%
Depreciation & amortisation 213.0 194.5
EBITDA 376.2 379.7 (1)% (4)%
----------------------------------- ------- ------- ---------- ----------
Gross profit
Group gross profit was GBP401.6m (2016: GBP448.8m), a 13%
decline at constant currency (down 11% at actual rates). This
reduction reflects the lower gross profit from the Mature business
of GBP16.5m, a higher level of initial losses from the new centre
additions of GBP13.3m and an adverse variance of GBP17.4m on the
closed locations. Reflecting the lower mature gross profitability
for the year, the mature gross margin declined 1.2 percentage
points to 20.2% (2016: 21.4%). This was a solid performance
considering the 1.2% constant currency decline in mature
revenue.
Gross margin
Mature Closed Total
GBPm centres New centres centres 2017
----------------------------------- --------- ----------- -------- ---------
Revenue 2,164.7 157.7 29.9 2,352.3
Cost of sales (1,728.2) (190.8) (31.7) (1,950.7)
----------------------------------- --------- ----------- -------- ---------
Gross profit (centre contribution) 436.5 (33.1) (1.8) 401.6
----------------------------------- --------- ----------- -------- ---------
Gross margin 20.2% (21.0)% (6.0)% 17.1%
----------------------------------- --------- ----------- -------- ---------
Mature Closed Total
GBPm centres New centres centres 2016
----------------------------------- --------- ----------- -------- ---------
Revenue 2,118.0 36.8 78.6 2,233.4
Cost of sales (1,665.0) (56.6) (63.0) (1,784.6)
----------------------------------- --------- ----------- -------- ---------
Gross profit (centre contribution) 453.0 (19.8) 15.6 448.8
----------------------------------- --------- ----------- -------- ---------
Gross margin 21.4% (53.8)% 19.8% 20.1%
----------------------------------- --------- ----------- -------- ---------
Very strong overhead efficiency
2017 was another very strong year of progress against our
strategic goal of controlling costs. For the second consecutive
year, overhead costs have reduced in absolute terms. As previously
reported, this reflects a full-year benefit of the reductions
achieved during 2016 and no repetition of the costs incurred and
expensed last year to deliver the new field structure. We have
continued to add to these efficiency gains by further
centralisation of more activities, globally and regionally, into
dedicated service centres to unlock more benefit from our scale and
provide better services to our customers. All this achieved whilst
investing to deliver our growth strategy and corporate account
development.
The absolute level of investment in overheads reduced 12% in
constant currency terms to GBP237.6m (2016: GBP262.8m) (down 10% at
actual rates). Overhead efficiency improved by 1.7 percentage
points from 11.8% as a percentage of revenue to 10.1%.
We continue to maintain a strong focus on overhead discipline
and anticipate further scale benefits to be reflected in overheads
as a percentage of revenue reducing further over time,
notwithstanding the anticipated investment in growth.
Operating profit
The absolute reduction in overheads in 2017 has helped to
mitigate some of the drop through of the reduction in gross profit.
Group operating profit decreased 15% at constant currency to
GBP163.2m (2016: GBP185.2m) (down 12% at actual rates).
Consequently, the Group operating margin decreased from 8.3% in
2016 to 6.9% in 2017.
Net finance costs
The Group's net finance costs increased to GBP13.8m (2016:
GBP11.5m). This reflects more interest paid on a higher level of
drawdown on the Revolving Credit Facility with an increase in net
debt from an opening position of GBP151.3m to GBP296.4m as at 31
December 2017. There was also a small negative impact from foreign
exchange movements compared to a positive benefit in 2016 following
the weakness of sterling after the result of the UK Referendum on
EU membership.
Tax
The effective tax rate for the year was 23.7% (2016: 20.1%). The
increase in effective tax rate is primarily due to decreased
recognition of deferred tax assets in the US. Our expectation is
that the effective tax rate will continue to be around 20%.
Earnings per share
Group earnings per share for 2017 reduced to 12.4p (2016:
14.9p). This 17% decrease primarily reflects the lower level of
profitability. This was only marginally offset by the 1.5%
reduction in the weighted average number of shares outstanding for
the year.
The weighted average number of shares for the year was
915,676,309 (2016: 929,830,458). The weighted average number of
shares for diluted earnings per share was 926,237,704 (2016:
944,015,143). As at 31 December 2017 the total number of shares in
issue was 923,357,438.
For the year to 31 December 2017, IWG plc purchased 16,830,000
shares designated to be held in treasury at a cost of GBP51.1m and
5,013,954 treasury shares were used to satisfy the exercise of
share awards by employees. As at 31 December 2017 the Group held
12,986,745 shares in treasury.
Cash flow and funding
Cash generation continues to be a highly attractive feature of
our business model. Although reported operating profit declined, as
noted above, Group EBITDA remained broadly similar to the level
reported in 2016, which provides a good indication of the scale of
cash generated in the period.
Cash generated before the net investment in growth capital
expenditure, dividends and share repurchases was GBP215.5m (2016:
GBP286.1m), reflecting the strong cash conversion characteristic of
our business model. Our performance in 2016 benefited from some
specific non-recurring projects to unlock approximately GBP50m of
additional working capital.
We have experienced increased traction on our strategic priority
of targeting less capital-intensive growth. In addition, we
invested GBP110.2m in property investments during the year. As a
consequence, Group net debt increased from GBP151.3m at 31 December
2016 to GBP296.4m at 31 December 2017, in line with our
expectations. This increase also comes after paying dividends of
GBP48.5m and spending GBP51.1m on buying our own shares. This
represents a Group net debt : EBITDA leverage ratio of 0.8 times.
Whilst our approach to our borrowing continues to be prudent, we
continue to recognise the long-term benefit of also operating with
an efficient balance sheet.
We continue to have adequate headroom through our GBP550.0m
Revolving Credit Facility to execute our strategy. We improved the
debt maturity profile of this facility during the first half of
2017 by extending it to 2022 (previously 2021). There is a further
option to extend until 2023. The facility is predominantly
denominated in sterling but can be drawn in several major
currencies.
Cash flow
The table below reflects the Group's cash flow:
GBPm 2017 2016
--------------------------------------------- ------- -------
Group EBITDA 376.2 379.7
Working capital 44.2 104.2
Less: growth-related partner contributions (80.6) (66.1)
Maintenance capital expenditure (95.6) (86.7)
Taxation (22.4) (31.5)
Finance costs (11.9) (16.1)
Other items 5.6 2.6
--------------------------------------------- ------- -------
Cash flow before growth capital expenditure,
share repurchases and dividends 215.5 286.1
Gross growth capital expenditure (353.1) (228.4)
Less: growth-related partner contributions 80.6 66.1
--------------------------------------------- ------- -------
Net growth capital expenditure(1) (272.5) (162.3)
Total net cash flow from operations (57.0) 123.8
Purchase of shares (51.1) (35.5)
Dividend (48.5) (43.3)
Corporate financing activities 4.2 (3.1)
Opening net debt (151.3) (190.6)
Exchange movement 7.3 (2.6)
Closing net debt (296.4) (151.3)
--------------------------------------------- ------- -------
(1) Net growth capital expenditure of GBP272.5m relates to the
cash outflow in 2017. Accordingly, it includes capital expenditure
related to locations opened before 2017 and to be opened in 2018 of
GBP30.4m. The remaining investment relates to the 314 locations
added in 2017, including a net investment in property assets of
GBP110.2m. The total net investment in the 2017 additions amounts
to GBP268.8m so far
Foreign exchange
The Group's results are exposed to translation risk from the
movement in currencies. During 2017 key individual currency
exchange rates have moved, as shown in the table above. Overall,
the favourable impact of the movement in exchange rates increased
reported revenue, gross profit and operating profit by GBP77.1m,
GBP12.3m and GBP6.4m respectively.
Foreign exchange rates
At 31 December Annual average
------------------ ------------------
Per GBP sterling 2017 2016 % 2017 2016 %
----------------- ----- ----- ---- ----- ----- ----
US dollar 1.35 1.24 9% 1.30 1.35 (4)%
Euro 1.13 1.17 (3)% 1.14 1.22 (7)%
Japanese yen 152 145 5% 145 147 (1)%
----------------- ----- ----- ---- ----- ----- ----
Risk management
The principal risks and uncertainties affecting the Group remain
broadly unchanged. A detailed assessment of the principal risks and
uncertainties which could impact the Group's long-term performance
and the risk management structure in place to identify, manage and
mitigate such risks can be found on pages 37 to 43 and 58 to 60 of
the Annual Report and Accounts.
Related parties
There have been no changes to the type of related party
transactions entered into by the Group that had a material effect
on the financial statements for the period ended 31 December 2017.
Details of related party transactions that have taken place in the
period can be found in note 31 to the 2017 Annual Report and
Accounts.
Dividends
Consistent with IWG's progressive dividend policy and subject to
shareholder approval, we will increase the final dividend for 2017
by 11% to 3.95p (2016: 3.55p). This will be paid on Friday, 25 May
2018, to shareholders on the register at the close of business on
Friday, 27 April 2018. This represents an increase in the full-year
dividend of 12%, taking it from 5.10p for 2016 to 5.70p for
2017.
Dominik de Daniel
Chief Financial Officer
and Chief Operating Officer
6 March 2018
Consolidated income statement
Year Year
ended ended
31 Dec 31 Dec
2017 2016
Continuing operations Notes GBPm GBPm
------------------------------------ ----- --------- ---------
Revenue 3 2,352.3 2,233.4
Cost of sales (1,950.7) (1,784.6)
------------------------------------ ----- --------- ---------
Gross profit (centre contribution) 401.6 448.8
Selling, general and administration
expenses (237.6) (262.8)
Share of loss of equity-accounted
investees, net of tax 21 (0.8) (0.8)
------------------------------------ ----- --------- ---------
Operating profit 5 163.2 185.2
Finance expense 8 (14.1) (11.6)
Finance income 8 0.3 0.1
------------------------------------ ----- --------- ---------
Net finance expense (13.8) (11.5)
------------------------------------ ----- --------- ---------
Profit before tax for the year 149.4 173.7
Income tax expense 9 (35.4) (34.9)
Profit after tax for the year 114.0 138.8
------------------------------------ ----- --------- ---------
Earnings per ordinary share (EPS):
Basic (p) 10 12.4 14.9
Diluted (p) 10 12.3 14.7
------------------------------------ ----- --------- ---------
Consolidated statement of comprehensive income
Year Year
ended ended
31 Dec 31 Dec
2017 2016
Notes GBPm GBPm
----------------------------------------- ----- ------- -------
Profit for the year 114.0 138.8
Other comprehensive income that is
or may be reclassified to profit or
loss in
subsequent periods:
Cash flow hedges - reclassified through
the income statement, net of income
tax - 2.1
Cash flow hedges - effective portion
of changes in fair value 0.5 (0.3)
Foreign currency translation differences
for foreign operations (34.4) 90.2
----------------------------------------- ----- ------- -------
Items that are or may be reclassified
to profit or loss in subsequent periods (33.9) 92.0
----------------------------------------- ----- ------- -------
Other comprehensive income that will
never be reclassified to profit or
loss in
subsequent periods:
Re-measurement of defined benefit
liability, net of income tax 26 (0.7) -
----------------------------------------- ----- ------- -------
Items that will never be reclassified
to profit or loss in subsequent periods (0.7) -
----------------------------------------- ----- ------- -------
Other comprehensive (loss)/income
for the period, net of income tax (34.6) 92.0
----------------------------------------- ----- ------- -------
Total comprehensive income for the
year 79.4 230.8
----------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
Foreign
Issued currency
share Treasury translation Hedging Other Retained Total
capital shares reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Balance at 1 January
2016 9.5 (42.9) 7.4 (2.1) 25.8 586.0 583.7
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Total comprehensive
income for the year:
Profit for the year - - - - - 138.8 138.8
Other comprehensive
income:
Cash flow hedges -
reclassified through
the income statement - - - 2.1 - - 2.1
Cash flow hedges -
effective portion of
changes in fair value - - - (0.3) - - (0.3)
Foreign currency translation
differences for foreign
operations - - 90.2 - - - 90.2
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Other comprehensive
income, net of tax - - 90.2 1.8 - - 92.0
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Total comprehensive
income for the year - - 90.2 1.8 - 138.8 230.8
Share-based payments - - - - - 2.4 2.4
Ordinary dividend paid
(note 11) - - - - - (43.3) (43.3)
Purchase of shares
(note 22) - (34.2) - - - (1.3) (35.5)
Proceeds from exercise
of share awards (note
22) - 8.5 - - - (4.6) 3.9
Cancellation of treasury
shares (note 22) (0.3) 65.7 - - - (65.4) -
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Balance at 31 December
2016 9.2 (2.9) 97.6 (0.3) 25.8 612.6 742.0
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Total comprehensive
income for the year:
Profit for the year - - - - - 114.0 114.0
Other comprehensive
income:
Remeasurement of the
defined benefit liability,
net
of tax (note 26) - - - - - (0.7) (0.7)
Cash flow hedges -
effective portion of
changes in
fair value - - - 0.5 - - 0.5
Foreign currency translation
differences for foreign
operations - - (34.4) - - - (34.4)
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Other comprehensive
(loss)/income, net
of tax - - (34.4) 0.5 - (0.7) (34.6)
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Total comprehensive
income for the year - - (34.4) 0.5 - 113.3 79.4
Share-based payments - - - - - 1.7 1.7
Ordinary dividend paid
(note 11) - - - - - (48.5) (48.5)
Purchase of shares
(note 22) - (51.1) - - - - (51.1)
Proceeds from exercise
of share awards (note
22) - 14.4 - - - (10.2) 4.2
-------- -------- ------------ -------- --------- --------- -------
Balance at 31 December
2017 9.2 (39.6) 63.2 0.2 25.8 668.9 727.7
----------------------------- -------- -------- ------------ -------- --------- --------- -------
Other reserves include GBP10.5m for the restatement of the
assets and liabilities of the UK associate from historic to fair
value at the time of the acquisition of the outstanding 58%
interest on 19 April 2006, GBP37.9m arising from the Scheme of
Arrangement undertaken on 14 October 2008, GBP6.5m relating to
merger reserves and GBP0.1m to the redemption of preference shares
partly offset by GBP29.2m arising from the Scheme of Arrangement
undertaken in 2003.
Consolidated balance sheet
As at As at
31 Dec 31 Dec
2017 2016
Notes GBPm GBPm
--------------------------------------------- ----- ------- -------
Non-current assets
Goodwill 12 666.7 685.3
Other intangible assets 13 45.4 52.8
Property, plant and equipment 14 1,367.2 1,194.4
Deferred tax assets 9 23.0 29.3
Non-current derivative financial asset 24 0.2 -
Other long-term receivables 15 80.7 83.7
Investments in joint ventures 21 12.4 13.6
--------------------------------------------- ----- ------- -------
Total non-current assets 2,195.6 2,059.1
--------------------------------------------- ----- ------- -------
Current assets
Trade and other receivables 16 581.8 517.1
Corporation tax receivable 9 27.6 34.8
Cash and cash equivalents 23 55.0 50.1
--------------------------------------------- ----- ------- -------
Total current assets 664.4 602.0
Total assets 2,860.0 2,661.1
Current liabilities
Trade and other payables (incl. customer
deposits) 17 904.8 875.2
Deferred income 285.3 276.4
Corporation tax payable 9 21.6 17.7
Bank and other loans 19 8.5 7.8
Provisions 20 4.5 6.0
--------------------------------------------- ----- ------- -------
Total current liabilities 1,224.7 1,183.1
--------------------------------------------- ----- ------- -------
Non-current liabilities
Other long-term payables 18 553.2 532.1
Non-current derivative financial liabilities 24 - 0.3
Bank and other loans 19 342.9 193.6
Deferred tax liability 9 1.3 2.4
Provisions 20 4.9 3.4
Provision for deficit in joint ventures 21 3.8 3.4
Retirement benefit obligations 26 1.5 0.8
--------------------------------------------- ----- ------- -------
Total non-current liabilities 907.6 736.0
Total liabilities 2,132.3 1,919.1
Total equity
Issued share capital 22 9.2 9.2
Treasury shares 22 (39.6) (2.9)
Foreign currency translation reserve 63.2 97.6
Hedging reserve 0.2 (0.3)
Other reserves 25.8 25.8
Retained earnings 668.9 612.6
--------------------------------------------- ----- ------- -------
Total equity 727.7 742.0
--------------------------------------------- ----- ------- -------
Total equity and liabilities 2,860.0 2,661.1
--------------------------------------------- ----- ------- -------
Approved by the Board on 6 March 2018
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Financial Officer
and Chief Operating Officer
Consolidated statement of cash flows
Year Year
ended ended
31 Dec 31 Dec
2017 2016
Notes GBPm GBPm
------------------------------------------- ----- ------- -------
Operating activities
Profit before tax for the year 149.4 173.7
Adjustments for:
Net finance expense 8 13.8 11.5
Share of loss of equity-accounted
investees, net of tax 21 0.8 0.8
Depreciation charge 5, 14 202.1 181.8
Loss on disposal of property, plant
and equipment 5 4.3 1.0
Loss on disposal of assets held for
sale 6 - 2.2
Impairment of intangible assets 5 1.6 -
Impairment of property, plant and
equipment 5, 14 0.1 -
Amortisation of intangible assets 5, 13 10.9 12.7
Amortisation of acquired lease fair
value adjustments 5 (3.6) (3.1)
Decrease in provisions 20 - (3.2)
Share-based payments 1.7 2.4
Other non-cash movements 0.5 (3.4)
------------------------------------------- ----- ------- -------
Operating cash flows before movements
in working capital 381.6 376.4
------------------------------------------- ----- ------- -------
(Increase)/decrease in trade and other
receivables (72.1) 81.0
Increase in trade and other payables 116.3 23.2
------------------------------------------- ----- ------- -------
Cash generated from operations 425.8 480.6
------------------------------------------- ----- ------- -------
Interest paid (12.2) (16.2)
Tax paid (22.4) (31.5)
Net cash inflow from operating activities 391.2 432.9
------------------------------------------- ----- ------- -------
Investing activities
Purchase of property, plant and equipment 14 (344.9) (313.8)
Purchase of subsidiary undertakings
(net of cash acquired) 27 (40.1) (8.9)
Purchase of intangible assets 13 (3.6) (5.5)
Purchase of joint ventures 21 (0.3) (1.3)
Dividends received from joint ventures 21 - 0.9
Proceeds on sale of property, plant
and equipment 0.5 16.1
Proceeds on the sale of assets held
for sale 6 - 3.3
Interest received 8 0.3 0.1
Net cash outflow from investing activities (388.1) (309.1)
------------------------------------------- ----- ------- -------
Financing activities
Net proceeds from issue of loans 651.6 599.8
Repayment of loans (558.8) (670.0)
Settlement of financial derivatives - (7.0)
Purchase of shares 22 (51.1) (35.5)
Proceeds from exercise of share awards 4.2 3.9
Payment of ordinary dividend 11 (48.5) (43.3)
Net cash outflow from financing activities (2.6) (152.1)
------------------------------------------- ----- ------- -------
Net increase/(decrease) in cash and
cash equivalents 0.5 (28.3)
Cash and cash equivalents at the beginning
of the year 50.1 63.9
Effect of exchange rate fluctuations
on cash held 4.4 14.5
Cash and cash equivalents at the end
of the year 23 55.0 50.1
------------------------------------------- ----- ------- -------
Notes to the accounts
1. Authorisation of financial statements
The Group and Company financial statements for the year ended 31
December 2017 were authorised for issue by the Board of Directors
on 6 March 2018 and the balance sheets were signed on the Board's
behalf by Mark Dixon and Dominik de Daniel. IWG plc is a public
limited company incorporated in Jersey and registered and domiciled
in Switzerland. The Company's ordinary shares are traded on the
London Stock Exchange.
IWG plc owns a network of business centres which are utilised by
a variety of business customers. Information on the Group's
structure is provided in note 32, and information on other related
party relationships of the Group is provided in note 31.
The Group financial statements have been prepared and approved
by the Directors in accordance with Companies (Jersey) Law 1991 and
International Financial Reporting Standards as adopted by the
European Union ('Adopted IFRSs'). The Company prepares its parent
company annual accounts in accordance with accounting policies
based on the Swiss Code of Obligations; extracts from these are
presented on page 126.
2. Accounting policies
Basis of preparation
The Group financial statements consolidate those of the parent
company and its subsidiaries (together referred to as the 'Group')
and equity account the Group's interest in joint ventures. The
extract from the parent company annual accounts presents
information about the Company as a separate entity and not about
its Group.
The accounting policies set out below have been applied
consistently to all periods presented in these Group financial
statements. Amendments to adopted IFRSs issued by the International
Accounting Standards Board (IASB) and the International Financial
Reporting Interpretations Committee (IFRIC) with an effective date
from 1 January 2017 did not have a material effect on the Group
financial statements, unless otherwise indicated.
The following standards, interpretations and amendments to
standards were adopted by the Group for periods commencing on or
after 1 January 2017:
IAS 7 Disclosure Initiative - Amendments to IAS 7
IAS 12 Recognition of Deferred Tax Assets for Unrealised
losses - Amendments to IAS 12
Various Annual Improvements (2012 - 2014 Cycle)
------- -------------------------------------------------
Judgements made by the Directors in the application of these
accounting policies that have significant effect on the
consolidated financial statements and estimates with a significant
risk of material adjustment in the next year are discussed in note
33.
The consolidated financial statements are prepared on a
historical cost basis, with the exception of certain financial
assets and liabilities that are measured at fair value as described
in note 24.
The Directors, having made appropriate enquiries, have a
reasonable expectation that the Group and the Company have adequate
resources to continue in operational existence for the foreseeable
future. For this reason they continue to adopt the going concern
basis in preparing the consolidated financial statements on pages
80 to 125.
In adopting the going concern basis for preparing the
consolidated financial statements, the Directors have considered
the further information included in the business activities
commentary as set out on pages 24 to 27 as well as the Group's
principal risks and uncertainties as set out on pages 38 to 43.
Further details on the going concern basis of preparation can be
found in note 24 to the notes to the consolidated financial
statements.
These Group consolidated financial statements are presented in
pounds sterling (GBP), which is IWG plc's functional currency, and
all values are in million pounds, rounded to one decimal place,
except where indicated otherwise.
The attributable results of those companies acquired or disposed
of during the year are included for the periods of ownership.
Joint ventures are those entities over whose activities the
Group has joint control, whereby the Group has rights to the net
assets of the arrangement, rather than rights to its assets and
obligations for its liabilities. The consolidated financial
statements include the Group's share of the total recognised gains
and losses of joint ventures on an equity accounted basis, from the
date that joint control commences until the date that joint control
ceases or the joint venture qualifies as a disposal group, at which
point the investment is carried at the lower of fair value less
costs to sell and carrying value. When the Group's share of losses
exceeds its interest in a joint venture, the Group's carrying
amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of a joint
venture.
On 19 December 2016, under a Scheme of Arrangement between Regus
plc, the former holding company of the Group, and its shareholders,
under Article 125 of the Companies (Jersey) Law 1991, and as
sanctioned by The Royal Court of Jersey, all the issued shares in
Regus plc were cancelled and an equivalent number of new shares in
Regus plc were issued to IWG plc in consideration for the allotment
to shareholders of one ordinary share in IWG plc for each ordinary
share in Regus plc that they held on the record date 18 December
2016. The establishment of IWG plc as the new parent company was
accounted for as a common control transaction under IFRS.
Consequently, no fair value acquisition adjustments were required
and the aggregate of the Group reserves have been attributed to IWG
plc.
IFRSs not yet effective
The following new or amended standards and interpretations that
are mandatory for 2018 annual periods (and future years) will be
applicable to the Company:
IFRS 1 January
9 Financial Instruments 2018
IFRS 1 January
15 Revenue from Contracts with Customers 2018
IFRS 1 January
16 Leases 2019
---- ------------------------------------- ---------
There are no other IFRS standards or interpretations that are
not yet effective that would be expected to have a material impact
on the Group.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
The impact of these new or amended standards and interpretations
has been considered as follows:
Estimated impact of the adoption of IFRS 9
The Group is required to adopt IFRS 9 Financial Instruments from
1 January 2018. The Group has assessed the estimated impact that
initial application of IFRS 9 will have on the consolidated
financial statements.
IFRS 9 Financial Instruments sets out requirements for
recognising and measuring financial assets, financial liabilities
and some contracts to buy and sell non-financial items. This
standard replaces IAS 39 Financial Instruments: Recognition and
Measurement.
Classification - financial assets
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics. It contains
three principal classification categories for financial assets:
measured at amortised costs, fair value through other comprehensive
income (OCI) and fair value through the profit or loss. The
standard eliminates the existing IAS 39 categories of held to
maturity, loans and receivables and available for sale.
Under IFRS 9, derivatives embedded in contracts where the host
is a financial asset in the scope of the standard are never
bifurcated. Instead, the hybrid financial instrument as a whole is
assessed for classification.
Based on its assessment, the Group concludes that the new
classification requirements will not have a material impact on any
of its accounting balances. Furthermore, at 31 December 2017, the
Group did not have any balances classified as available-for-sale.
Consequently, there are no adjustments to be recognised in either
the income statement or other comprehensive income.
Classification - financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification of financial liabilities. However, under IAS 39
all fair value changes of liabilities designated as at fair value
through the profit or loss are recognised in profit or loss,
whereas under IFRS 9 these fair value changes are generally
presented as follows:
-- The amount of change in fair value that is attributable to
changes in the credit risk of the liability is presented in other
comprehensive income; and
-- The remaining amount of change in the fair value is presented in profit or loss.
The Group has not designated any financial liabilities at fair
value through the profit or loss and it has no current intention to
do so. The Group's assessment did not indicate any change in the
classification of financial liabilities at 1 January 2018.
Consequently, there are no adjustments to be recognised in either
the income statement or other comprehensive income.
Impairment - financial assets
IFRS 9 requires the Group to record expected credit losses on
all of its trade receivables, either on a 12-month or lifetime
basis. The Group will apply the simplified approach and record
lifetime expected losses on all trade receivables. The Group has
determined that due to the nature of its receivables, taking into
account the customer deposits obtained, the impact of applying IFRS
9 will not significantly impact the provision for bad debts.
Hedge accounting
IFRS 9 requires the Group to ensure that hedge accounting
relationships are aligned with the Group's risk management
objectives and strategy and to apply a more qualitative and
forward-looking approach to assessing hedge effectiveness. IFRS 9
also introduces new requirements on rebalancing hedge relationships
and prohibiting voluntary discontinuation of hedge accounting.
Under the new model, it is possible that more risk management
strategies, particularly those involving hedging a risk component
(other than foreign currency risk) of non-financial items, will be
likely to qualify for hedge accounting.
The Group is exposed to foreign currency exchange rate
movements. The majority of day-to-day transactions of overseas
subsidiaries are carried out in local currency and the underlying
foreign exchange exposure is small. Transactional exposures do
arise in some countries where it is local market practice for a
proportion of the payables or receivables to be in other than the
functional currency of the affiliate. Intercompany charging,
funding and cash management activity may also lead to foreign
exchange exposures. It is the policy of the Group to seek to
minimise such transactional exposures through careful management of
non-local currency assets and liabilities, thereby minimising the
potential volatility in the income statement. Net investments in
IWG affiliates with a functional currency other than sterling are
of a long-term nature and the Group does not normally hedge such
foreign currency translation exposures.
From time to time the Group uses short-term derivative financial
instruments to manage its transactional foreign exchange exposures
where these exposures cannot be eliminated through balancing the
underlying risks. The Group designates these derivatives as fair
value hedges.
The Group determined that all existing hedge relationships that
are currently designated in effective hedging relationships will
continue to qualify for hedge accounting under IFRS 9. The Group
has chosen not to retrospectively apply IFRS 9 on transition. As
IFRS 9 does not change the general principles of how an entity
accounts for effective hedges, applying the hedging requirements of
IFRS 9 will not impact the Group's financial statements.
Estimated impact of the adoption of IFRS 15
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue,
IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty
Programmes.
The Group is involved in the provision of flexible workspace, as
well as performing related services. Revenue from the provision of
these services to customers is measured at the fair value of
consideration received or receivable (excluding sales taxes). Where
rent-free periods are granted to customers, rental income is spread
on a straight-line basis over the length of the customer contract.
The services performed are based on the list price at which the
Group provides the contracted services.
Based on the Group's assessment, the fair value of the service
performed under IAS 18 are consistent with IFRS 15. Therefore, the
Group does not expect the application of IFRS 15 to result in any
differences in the timing of the performance and the recognition of
the revenue, for these services.
IFRS 16 Leases
IFRS 16 replaces existing leases guidance, including IAS 17
Leases, IFRIC 4 Determining whether an Arrangement Contains a
Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating
the Substance of Transactions Involving the Legal Form of a
Lease.
The standard is effective for annual periods beginning on or
after 1 January 2019. Early adoption is permitted for entities that
apply IFRS 15 at or before the date of initial application of IFRS
16.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and lease
liability representing its obligation to make lease payments. There
are recognition exemptions for short-term leases and leases of
low-value items. Lessor accounting remains similar to the current
standard (i.e. lessors continue to classify leases as finance or
operating leases).
The Group has completed an initial assessment of the potential
impact on its consolidated financial statements but has not yet
completed its detailed assessment. The actual impact of applying
IFRS 16 on the financial statements in the period of initial
application will depend on future economic conditions, including
the Group's borrowing rate at 1 January 2019, the composition of
the Group's lease portfolio at that date, the Group's assessment of
whether it will exercise any lease renewal options and the extent
to which the Group chooses to use practical measures and
recognition exemptions.
The most significant impact identified is the right-of-use asset
and related lease liability the Group will recognise for its leases
in respect of its global network, which will be further dependant
on the transition method adopted.
In addition, the nature of expenses related to those leases will
change as IFRS 16 replaces the straight-line operating lease
expense with a depreciation charge for right-of-use assets and an
interest expense on the lease liabilities.
The Group does not expect the adoption of IFRS 16 to impact its
ability to comply with the covenant requirements on its revolving
credit facility described in note 24.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control
exists when the Group controls an entity when it is exposed to, or
has the rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences. The results are consolidated until the date
control ceases or the subsidiary qualifies as a disposal group, at
which point the assets and liabilities are carried at the lower of
fair value less costs to sell and carrying value.
Impairment of non-financial assets
For goodwill, assets that have an indefinite useful life and
intangible assets that are not yet available for use, the
recoverable amount was estimated at 30 September 2017. At each
reporting date, the Group reviews the carrying amount of these
assets to determine whether there is an indicator of impairment. If
any indicator is identified then the assets' recoverable amount is
re-evaluated.
The carrying amount of the Group's other non-financial assets
(other than deferred tax assets) are reviewed at the reporting date
to determine whether there is an indicator of impairment. If any
such indication exists, the asset's recoverable amount is
estimated.
An impairment loss is recognised whenever the carrying amount of
an asset or its cash-generating unit (CGU) exceeds its recoverable
amount. Impairment losses are recognised in the income
statement.
A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. The Group has
identified individual business centres as the CGU.
We evaluate the potential impairment of property, plant and
equipment at the centre (CGU) level where there are indicators of
impairment.
Centres (CGUs) are grouped by country of operation for the
purposes of carrying out impairment reviews of goodwill as this is
the lowest level at which it can be assessed.
Individual fittings and equipment in our centres or elsewhere in
the business that become obsolete or are damaged are assessed and
impaired where appropriate.
Calculation of recoverable amount
The recoverable amount of relevant assets is the greater of
their fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs.
Goodwill
All business combinations are accounted for using the purchase
method. Goodwill is initially measured at fair value, being the
excess of the aggregate of the fair value of the consideration
transferred and the amount recognised for non-controlling
interests, and any previous interest held, over the net
identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group re-assesses whether it has
correctly identified all of the assets acquired and all of the
liabilities assumed and reviews the procedures used to measure the
amounts to be recognised at the acquisition date. If the
re-assessment still results in an excess of the fair value of net
assets acquired over the aggregate consideration transferred, then
the gain is recognised in profit or loss.
Positive goodwill is stated at cost less any provision for
impairment in value. An impairment test is carried out annually
and, in addition, whenever indicators exist that the carrying
amount may not be recoverable.
Intangible assets
Intangible assets acquired separately from the business are
capitalised at cost. Intangible assets acquired as part of an
acquisition of a business are capitalised separately from goodwill
if their fair value can be identified and measured reliably on
initial recognition.
Intangible assets are amortised on a straight-line basis over
the estimated useful life of the assets as follows:
Brand - Regus brand Indefinite life
Brand - Other acquired brands 20 years
Computer software Up to 5 years
Customer lists 2 years
Minimum duration
Management agreements of the contract
----------------------------- ----------------
Amortisation of intangible assets is expensed through
administration expenses in the income statement.
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as
transactions with owners in their capacity as owners and therefore
no goodwill is recognised as a result. Adjustments to
non-controlling interests arising from transactions that do not
involve the loss of control are based on a proportionate amount of
the net assets of the subsidiary.
Assets held for sale
Assets held for sale are measured at the lower of the carrying
value of the identified asset and its fair value less cost to
sell.
Leases
Plant and equipment leases for which the Group assumes
substantially all of the risks and rewards of ownership are
classified as finance leases. All other leases, including all of
the Group's property leases, are categorised as operating
leases.
Operating leases
Minimum lease payments under operating leases are recognised in
the income statement on a straight-line basis over the lease term.
Lease incentives, including partner contributions and rent-free
periods, are included in the calculation of minimum lease payments.
The commencement of the lease term is the date from which the Group
is entitled to use the leased asset. The lease term is the
non-cancellable period of the lease, together with any further
periods for which the Group has the option to continue to lease the
asset and when at the inception of the lease it is reasonably
certain that the Group will exercise that option.
Contingent rentals include rent increases based on future
inflation indices or non-guaranteed rental payments based on centre
turnover or profitability and are excluded from the calculation of
minimum lease payments. Contingent rentals are recognised in the
income statement as they are incurred.
Onerous lease provisions are an estimate of the net amounts
payable under the terms of the lease to the first break point, at
the Group's option, discounted at an appropriate pre-tax rate that
reflects the time value of money and the risks specific to the
liability.
Partner contributions
Partner contributions are contributions from our business
partners (property owners and landlords) towards the initial costs
of opening a business centre, including the fit-out of the property
and the losses that we incur early in the centre life. The partner
contribution is treated as a lease incentive and is amortised over
the period of the lease.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any impairment in value. Depreciation is
calculated on a straight-line basis over the estimated useful life
of the assets as follows:
Buildings 50 years
Leasehold improvements 10 years
Furniture 10 years
Office equipment and telephones 5 years
Computer hardware 3 - 5 years
------------------------------- -----------
Revenue
Revenue from the provision of services to customers is measured
at the fair value of consideration received or receivable
(excluding sales taxes). Where rent-free periods are granted to
customers, rental income is spread on a straight-line basis over
the length of the customer contract.
-- Workstations
Workstation revenue is recognised when the provision of the
service is rendered. Amounts invoiced in advance are accounted for
as deferred income and recognised as revenue upon provision of the
service.
-- Customer service income
Service income (including the rental of meeting rooms) is
recognised as services are rendered. In circumstances where IWG
acts as an agent for the sale and purchase of goods to customers,
only the commission fee earned is recognised as revenue.
-- Management and franchise fees
Fees received for the provision of initial and subsequent
services are recognised as revenue as the services are rendered.
Fees charged for the use of continuing rights granted by the
agreement, or for other services provided during the period of the
agreement, are recognised as revenue as the services are provided
or the rights used.
-- Membership card income
Revenue from the sale of membership cards is deferred and
recognised over the period that the benefits of the membership card
are expected to be provided.
These categories represent all material sources of revenue
earned from the provision of global workplace solutions.
Employee benefits
The majority of the Group's pension plans are of the defined
contribution type. For these plans the Group's contribution and
other paid and unpaid benefits earned by the employees are charged
to the income statement as incurred.
The cost of providing benefits under the defined benefit plan is
determined using the projected unit credit method.
Re-measurements, comprising actuarial gains and losses, the
effect of the asset ceiling, excluding net interest and the return
on plan assets, excluding net interest, are recognised immediately
in the balance sheet with a corresponding debit or credit to
retained earnings through other comprehensive income in the period
in which they occur. Re-measurements are not reclassified to profit
or loss in subsequent periods.
Service costs are recognised in profit or loss, and include
current and past service costs as well as gains and losses on
curtailments.
Net interest is calculated by applying the discount rate to the
net defined benefit liability or asset. The Group recognises the
following changes in the net defined benefit obligation under 'cost
of sales' and 'selling, general and administration expenses' in the
consolidated income statement: service costs comprising current
service costs; past service costs; and gains and losses on
curtailments and non-routine settlements.
Settlements of defined benefit schemes are recognised in the
period in which the settlement occurs.
Share-based payments
The share awards programme entitles certain employees and
Directors to acquire shares of the ultimate parent company; these
awards
are granted by the ultimate parent and are equity settled.
The fair value of options granted is recognised as an employee
expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the period during which the
employees become unconditionally entitled to the options. The fair
value of the options granted is measured using the Black-Scholes
valuation model or the Monte Carlo method, taking into account the
terms and conditions upon which the options were granted. The
amount recognised as an expense is adjusted to reflect the actual
number of share options that vest in respect of non-market
conditions except where forfeiture is due to the expiry of the
option.
Share awards are granted by the Company to certain employees and
are equity settled. The fair value of the amount payable to the
employee is recognised as an expense with a corresponding increase
in equity. The fair value is initially recognised at grant date and
spread over the period during which the employees become
unconditionally entitled to payment. The fair value of the share
awards is measured based on the Monte Carlo valuation model, taking
into account the terms and conditions upon which the instruments
were granted. The amount recognised as an expense is adjusted to
reflect the actual number of awards that vest in respect of
non-market conditions.
Taxation
Tax on the profit for the year comprises current and deferred
tax. Tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets and liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the reporting date.
A deferred tax asset is recognised for all unused tax losses
only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilised.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the
obligation.
Restructuring provisions are made for direct expenditures of a
business reorganisation where the plans are sufficiently detailed
and well advanced and where the appropriate communication to those
affected has been undertaken at the reporting date.
Provision is made for onerous contracts to the extent that the
unavoidable costs of meeting the obligations under a contract
exceed the economic benefits expected to be delivered, discounted
using an appropriate weighted average cost of capital.
Equity
Equity instruments issued by the Group are recorded at the value
of proceeds received, net of direct issue costs.
When shares recognised as equity are repurchased, the amount of
the consideration paid, which includes directly attributable costs,
net of any tax effects, is recognised as a deduction from equity.
Repurchased shares are classified as treasury shares and are
presented in the treasury share reserve. When treasury shares are
sold or re-issued subsequently, the amount received is recognised
as an increase in equity and the resulting surplus or deficit on
the transaction is presented within retained earnings.
Net finance expenses
Interest charges and income are accounted for in the income
statement on an accruals basis. Financing transaction costs that
relate to financial liabilities are charged to interest expense
using the effective interest rate method and are recognised within
the carrying value of the related financial liability on the
balance sheet. Fees paid for the arrangement of credit facilities
are recognised as a prepayment and recognised through the finance
expense over the term of the facility.
Where assets or liabilities on the Group balance sheet are
carried at net present value, the increase in the amount due to
unwinding the discount is recognised as a finance expense or
finance income as appropriate.
Costs arising on bank guarantees and letters of credit and
foreign exchange gains or losses are included in other finance
costs (note 8).
Interest bearing borrowings and other financial liabilities
Financial liabilities, including interest bearing borrowings,
are recognised initially at fair value less attributable
transaction costs. Subsequent to initial recognition, financial
liabilities are stated at amortised cost with any difference
between cost and redemption value being recognised in the income
statement over the period of the borrowings on an effective
interest rate method.
The Group derecognises financial liabilities when the Group's
obligations are discharged, cancelled or expired.
Financial liabilities are classified as financial liabilities at
fair value through profit or loss where the liability is either
held for trading or is designated as held at fair value through
profit or loss on initial recognition. Financial liabilities at
fair value through profit or loss are stated at fair value with any
resultant gain or loss recognised in the income statement.
Financial assets
Financial assets are classified either at fair value through
profit or loss, held-to-maturity investments, available-for-sale
financial assets or loans and receivables. The classification
depends on the nature and purpose of the financial assets and is
determined on initial recognition.
Financial assets at fair value through profit or loss are
measured at fair value and changes therein, including any interest
or dividend income, are recognised in profit or loss.
Held-to-maturity financial assets are initially recognised at
fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, they are measured at amortised
cost using the effective interest rate method.
Available-for-sale financial assets are initially recognised at
fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, they are measured at fair value
and changes therein, other than impairment losses and foreign
currency differences on debt instruments, are recognised in OCI and
accumulated in the fair value reserve. When these assets are
derecognised, the gain or loss accumulated in equity is
reclassified to profit or loss.
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as
loans and receivables. Loans and receivables are measured at
amortised cost using the effective interest rate method, less any
impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when recognition
would be immaterial.
Customer deposits
Deposits received from customers against non-performance of the
contract are held on the balance sheet as a current liability until
they are returned to the customer at the end of their relationship
with the Group.
Foreign currency transactions and foreign operations
Transactions in foreign currencies are recorded using the rate
of exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
using the closing rate of exchange at the balance sheet date and
the gains or losses on translation are taken to the income
statement. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the transaction. The results and
cash flows of foreign operations are translated using the average
rate for the period. Assets and liabilities, including goodwill and
fair value adjustments, of foreign operations are translated using
the closing rate, with all exchange differences arising on
consolidation being recognised in other comprehensive income, and
presented in the foreign currency translation reserve in equity.
Exchange differences are released to the income statement on
disposal.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
are subject to an insignificant risk of changes in value.
Derivative financial instruments
The Group's policy on the use of derivative financial
instruments can be found in note 24. Derivative financial
instruments are measured initially at fair value and changes in the
fair value are recognised through profit or loss unless the
derivative financial instrument has been designated as a cash flow
hedge whereby the effective portion of changes in the fair value
are deferred in equity.
Foreign currency translation rates
At 31 December Annual average
---------------- ----------------
2017 2016 2017 2016
------------- ------- ------- ------- -------
US dollar 1.35 1.24 1.30 1.35
Euro 1.13 1.17 1.14 1.22
Japanese yen 152 145 145 147
------------- ------- ------- ------- -------
3. Segmental analysis - statutory basis
An operating segment is a component of the Group that engages in
business activities from which it may earn revenue and incur
expenses. An operating segment's results are reviewed regularly by
the chief operating decision maker (the Board of Directors of the
Group) to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete
financial information is available.
The business is run on a worldwide basis but managed through
four principal geographical segments (the Group's operating
segments): Americas; EMEA (Europe, Middle East and Africa); Asia
Pacific; and the United Kingdom. These geographical segments
exclude the Group's non-trading, holding and corporate management
companies. The results of business centres in each of these regions
form the basis for reporting geographical results to the chief
operating decision maker. All reportable segments are involved in
the provision of global workplace solutions.
The Group's reportable segments operate in different markets and
are managed separately because of the different economic
characteristics that exist in each of those markets. Each
reportable segment has its own discrete senior management team
responsible for the performance of the segment.
The accounting policies of the operating segments are the same
as those described in the Annual Report and Accounts for the Group
for the year ended 31 December 2016.
United
Americas EMEA Asia Pacific Kingdom Other Total
---------------- ---------------- ---------------- ---------------- ---------------- --------------------
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ---------
Revenue from
external customers 984.8 923.0 540.5 476.8 383.2 363.2 440.0 462.1 3.8 8.3 2,352.3 2,233.4
Gross profit
(centre contribution) 153.2 161.0 97.1 101.6 65.9 67.5 83.6 110.4 1.8 8.3 401.6 448.8
Share of loss
of equity-accounted
investees - - (0.8) (0.7) - - - (0.1) - - (0.8) (0.8)
Operating profit 96.5 102.0 47.7 49.3 34.6 33.6 60.3 84.5 (75.9) (84.2) 163.2 185.2
Finance expense (14.1) (11.6)
Finance income 0.3 0.1
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ---------
Profit before
tax for the
year 149.4 173.7
Depreciation
and amortisation 112.2 101.9 32.8 28.6 29.4 26.3 29.9 29.3 8.7 8.4 213.0 194.5
Assets 1,213.2 1,179.1 573.5 481.5 378.1 378.9 571.1 496.8 124.1 124.8 2,860.0 2,661.1
Liabilities (861.5) (852.1) (386.0) (323.5) (244.1) (251.9) (266.1) (279.8) (374.6) (211.8) (2,132.3) (1,919.1)
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ---------
Net
assets/(liabilities) 351.7 327.0 187.5 158.0 134.0 127.0 305.0 217.0 (250.5) (87.0) 727.7 742.0
Non-current
asset additions(1) 148.6 163.4 83.4 47.6 36.3 38.5 64.6 37.9 15.6 31.9 348.5 319.3
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------- ---------
1. Excluding deferred taxation
Operating profit in the "Other" category is generated from
services related to the provision of workspace solutions, including
fees from franchise agreements, offset by corporate overheads.
4. Segmental analysis - entity-wide disclosures
The Group's primary activity and only business segment is the
provision of global workplace solutions, therefore all revenue is
attributed to a single group of similar products and services. It
is not meaningful to separate this group into further categories of
products. Revenue is recognised where the service is provided.
The Group has a diversified customer base and no single customer
contributes a material percentage of the Group's revenue.
The Group's revenue from external customers and non-current
assets analysed by foreign country is as follows:
2017 2016
--------------------- ---------------------
External Non-current External Non-current
GBPm revenue assets(1) revenue assets(1)
-------------------------------------- -------- ----------- -------- -----------
Country of tax domicile - Switzerland 26.6 22.5 25.1 14.5
United States of America 819.6 878.5 766.6 930.0
United Kingdom 440.0 440.1 462.1 347.1
All other countries 1,066.1 831.5 979.6 738.2
-------------------------------------- -------- ----------- -------- -----------
2,352.3 2,172.6 2,233.4 2,029.8
-------------------------------------- -------- ----------- -------- -----------
1. Excluding deferred tax assets
5. Operating profit
Operating profit has been arrived at after
charging/(crediting):
2017 2016
Notes GBPm GBPm
-------------------------------------- ----- ------- -------
Revenue 2,352.3 2,233.4
Depreciation on property, plant and
equipment 14 202.1 181.8
Amortisation of intangibles 13 10.9 12.7
Amortisation of partner contributions (60.6) (50.2)
Property rents payable in respect
of operating leases: 1,003.2 909.2
-------------------------------------- ----- ------- -------
Property 966.8 872.5
Contingent rents paid 36.4 36.7
-------------------------------------- ----- ------- -------
Equipment rents payable in respect
of operating leases 3.4 3.4
Staff costs 7 331.5 335.6
Facility and other property costs 348.7 319.0
Provision for bad debts 24 16.2 10.3
Loss on disposal of property, plant
and equipment 14 4.3 1.0
Loss on disposal of assets held for
sale 6 - 2.2
Impairment of intangible assets 13 1.6 -
Impairment of property, plant and
equipment 0.1 -
Amortisation of acquired lease fair
value adjustments (3.6) (3.1)
Other costs 330.5 325.5
-------------------------------------- ----- ------- -------
164.0 186.0
Share of loss of equity-accounted
investees, net of tax (0.8) (0.8)
-------------------------------------- ----- ------- -------
Operating profit 163.2 185.2
-------------------------------------- ----- ------- -------
2017 2016
GBPm GBPm
------------------------------------------------------------------ ----- -----
Fees payable to the Group's auditor and its associates for the
audit of the Group accounts 0.9 0.9
Fees payable to the Group's auditor and its associates for other
services:
The audit of the Company's subsidiaries pursuant to legislation 1.7 1.4
Other services pursuant to legislation:
Tax services - -
Other services 0.1 0.4
------------------------------------------------------------------ ----- -----
6. Disposal of assets held for sale
The following major classes of assets and liabilities were
disposed of in 2016 as part of the assets held for sale:
2016
GBPm
------------------------------ -----
Assets
Goodwill (note 12) 4.5
Property, plant and equipment 1.4
Trade and other receivables 0.5
------------------------------- -----
Assets held for sale 6.4
------------------------------- -----
Liabilities
Trade and other payables (0.9)
------------------------------- -----
Liabilities held for sale (0.9)
Net assets held for sale 5.5
Disposal related costs -
Proceeds on disposal 3.3
------------------------------- -----
Loss on disposal (2.2)
------------------------------- -----
There were no disposals of assets held for sale in the current
year.
7. Staff costs
2017 2016
GBPm GBPm
--------------------------------------------- ----- -----
The aggregate payroll costs were as follows:
Wages and salaries 278.6 282.2
Social security 45.9 45.6
Pension costs 5.3 5.4
Share-based payments 1.7 2.4
--------------------------------------------- ----- -----
331.5 335.6
--------------------------------------------- ----- -----
2017 2016
Average Average
full full
time time
equivalents equivalents
------------------------------------------------------------------ ------------ ------------
The average number of persons employed by the Group (including
Executive Directors), analysed by category and geography, was as
follows:
Centre staff 6,786 6,551
Sales and marketing staff 497 425
Finance staff 739 768
Other staff 766 864
------------------------------------------------------------------ ------------ ------------
8,788 8,608
------------------------------------------------------------------ ------------ ------------
Americas 2,860 2,802
EMEA 2,161 2,044
Asia Pacific 1,641 1,746
United Kingdom 848 907
Corporate functions 1,278 1,109
------------------------------------------------------------------ ------------ ------------
8,788 8,608
------------------------------------------------------------------ ------------ ------------
Details of Directors' emoluments and interests are given on
pages 62 to 73 in the Remuneration Report, with audited schedules
identified where relevant.
8. Net finance expense
2017 2016
GBPm GBPm
----------------------------------------------------------------- ------ ------
Interest payable and similar charges on bank loans and corporate
borrowings (7.5) (7.4)
Total interest expense (7.5) (7.4)
Other finance costs (including foreign exchange) (5.7) (3.3)
Unwinding of discount rates (0.9) (0.9)
----------------------------------------------------------------- ------ ------
Total finance expense (14.1) (11.6)
----------------------------------------------------------------- ------ ------
Total interest income 0.3 0.1
Total finance income 0.3 0.1
----------------------------------------------------------------- ------ ------
Net finance expense (13.8) (11.5)
----------------------------------------------------------------- ------ ------
9. Taxation
(a) Analysis of charge in the year
2017 2016
GBPm GBPm
--------------------------------------------------------- ------ ------
Current taxation
Corporate income tax (26.8) (30.4)
Previously unrecognised tax losses and other differences 1.3 1.5
(Under)/over provision in respect of prior years (5.2) 4.4
--------------------------------------------------------- ------ ------
Total current taxation (30.7) (24.5)
--------------------------------------------------------- ------ ------
Deferred taxation
Origination and reversal of temporary differences (5.2) (12.2)
Previously unrecognised tax losses and other differences 1.0 1.4
(Under)/over provision in respect of prior years (0.5) 0.4
--------------------------------------------------------- ------ ------
Total deferred taxation (4.7) (10.4)
--------------------------------------------------------- ------ ------
Tax charge on profit (35.4) (34.9)
--------------------------------------------------------- ------ ------
(b) Reconciliation of taxation charge
2017 2016
-------------- --------------
GBPm % GBPm %
--------------------------------------- ------ ------ ------ ------
Profit before tax 149.4 173.7
--------------------------------------- ------ ------ ------ ------
Tax on profit at 14.6% (2016:
14.6%) (21.8) (14.6) (25.4) (14.6)
Tax effects of:
Expenses not deductible for tax
purposes (19.2) (12.8) (26.5) (15.3)
Items not chargeable for tax
purposes 23.4 15.7 33.8 19.5
Recognition of previously unrecognised
deferred tax assets 2.3 1.5 2.9 1.7
Movements in temporary differences
in the year not recognised in
deferred tax (91.1) (61.0) (85.5) (49.2)
Adjustment to tax charge in respect
of previous years (5.7) (3.8) 4.8 2.7
Differences in tax rates on overseas
earnings 76.7 51.3 61.0 35.1
--------------------------------------- ------ ------ ------ ------
(35.4) (23.7) (34.9) (20.1)
--------------------------------------- ------ ------ ------ ------
The applicable tax rate is determined based on the tax rate in
the canton of Zug in Switzerland which is the country of domicile
of the parent company of the Group for the financial year.
(c) Factors that may affect the future tax charge
Unrecognised tax losses to carry forward against certain future
overseas corporation tax liabilities have the following expiration
dates:
2017 2016
GBPm GBPm
------------------------------------------------------- ------- -----
2017 - 7.3
2018 4.9 8.2
2019 8.1 15.6
2020 54.7 57.2
2021 37.4 37.8
2022 43.4 18.8
2023 22.9 21.7
2024 29.9 13.3
2025 and later 235.5 79.1
------------------------------------------------------- ------- -----
436.8 259.0
Available indefinitely 642.4 453.9
------------------------------------------------------- ------- -----
Tax losses available to carry forward 1,079.2 712.9
------------------------------------------------------- ------- -----
Amount of tax losses recognised in deferred tax assets 117.0 131.2
------------------------------------------------------- ------- -----
Total tax losses available to carry forward 1,196.2 844.1
------------------------------------------------------- ------- -----
The following deferred tax assets have not been recognised due
to uncertainties over recoverability.
2017 2016
GBPm GBPm
--------------------------------- ----- -----
Intangibles 16.9 22.0
Accelerated capital allowances 32.1 24.5
Tax losses 271.5 187.7
Rent 8.7 11.3
Short-term temporary differences 5.5 8.2
--------------------------------- ----- -----
334.7 253.7
--------------------------------- ----- -----
Estimates relating to deferred tax assets, including assumptions
about future profitability, are re-evaluated at the end of each
reporting period.
(d) Corporation tax
2017 2016
GBPm GBPm
--------------------------- ------ ------
Corporation tax payable (21.6) (17.7)
Corporation tax receivable 27.6 34.8
--------------------------- ------ ------
(e) Deferred taxation
The movement in deferred tax is analysed below:
Property, Short-term
plant temporary
Intangibles and equipment Tax losses Rent differences Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ----------- -------------- ---------- ------ ------------ -----
Deferred tax asset
At 1 January 2016 (39.6) (4.4) 32.0 50.5 (2.1) 36.4
Current year movement (4.0) (14.0) (3.2) 9.6 1.7 (9.9)
Prior year movement - (1.3) 3.9 - (2.2) 0.4
Transfers 0.3 (0.1) (0.3) (0.2) 0.5 0.2
Exchange rate movements (11.5) (0.7) 1.9 9.9 2.6 2.2
------------------------ ----------- -------------- ---------- ------ ------------ -----
At 1 January 2017 (54.8) (20.5) 34.3 69.8 0.5 29.3
------------------------ ----------- -------------- ---------- ------ ------------ -----
Current year movement 19.9 1.3 (5.5) (17.2) (3.1) (4.6)
Prior year movement - (1.6) 0.3 0.4 - (0.9)
Transfers - 2.2 (1.3) (0.5) (0.6) (0.2)
Exchange rate movements 5.5 1.1 (0.9) (5.4) (0.9) (0.6)
------------------------ ----------- -------------- ---------- ------ ------------ -----
At 31 December 2017 (29.4) (17.5) 26.9 47.1 (4.1) 23.0
------------------------ ----------- -------------- ---------- ------ ------------ -----
Deferred tax liability
At 1 January 2016 - (1.5) 0.7 - (0.8) (1.6)
Current year movement (0.1) (1.9) 1.3 (0.4) 0.2 (0.9)
Prior year movement - 0.1 (0.1) - - -
Transfers (0.3) 0.2 0.2 0.2 (0.5) (0.2)
Exchange rate movements - (0.1) 0.3 - 0.1 0.3
------------------------ ----------- -------------- ---------- ------ ------------ -----
At 1 January 2017 (0.4) (3.2) 2.4 (0.2) (1.0) (2.4)
------------------------ ----------- -------------- ---------- ------ ------------ -----
Current year movement (0.1) 0.3 (0.2) 0.6 (0.2) 0.4
Prior year movement - - (0.3) - 0.7 0.4
Transfers - (2.2) 1.3 0.5 0.6 0.2
Exchange rate movements - - - - 0.1 0.1
------------------------ ----------- -------------- ---------- ------ ------------ -----
At 31 December 2017 (0.5) (5.1) 3.2 0.9 0.2 (1.3)
------------------------ ----------- -------------- ---------- ------ ------------ -----
The movements in deferred taxes included above are after the
offset of deferred tax assets and deferred tax liabilities where
there is a legally enforceable right to set off and they relate to
income taxes levied by the same taxation authority.
Deferred tax assets recognised on short-term temporary
differences consist predominantly of provisions deductible when
paid. Deferred tax assets have been recognised in excess of
deferred tax liabilities on the basis that there are forecast
taxable profits in the entities concerned.
At the balance sheet date, the temporary difference arising from
unremitted earnings of overseas subsidiaries was GBP19.8m (2016:
GBP94.1m). The only tax that would arise on these reserves would be
non-recoverable withholding tax.
10. Earnings per ordinary share (basic and diluted)
2017 2016
------------------------------------------------------------------- ------------ ------------
Basic and diluted profit for the year attributable to shareholders
(GBPm) 114.0 138.8
------------------------------------------------------------------- ------------ ------------
Basic earnings per share (p) 12.4 14.9
Diluted earnings per share (p) 12.3 14.7
------------------------------------------------------------------- ------------ ------------
Weighted average number of shares for basic EPS 915,676,309 929,830,458
Weighted average number of shares under option 20,223,265 26,744,249
Weighted average number of shares that would have been issued at
average market price (11,750,214) (14,295,963)
Weighted average number of share awards under the CIP and LTIP 2,088,344 1,736,399
------------------------------------------------------------------- ------------ ------------
Weighted average number of shares for diluted EPS 926,237,704 944,015,143
------------------------------------------------------------------- ------------ ------------
Options are considered dilutive when they would result in the
issue of ordinary shares for less than the market price of ordinary
shares in the period. The amount of the dilution is taken to be the
average market price of shares during the period minus the exercise
price. There were no material awards considered anti-dilutive at
the reporting date.
The average market price of one share during the year was
285.56p (2016: 283.67p).
11. Dividends
2017 2016
------------------------------------------------------------------ ----- -----
Dividends per ordinary share proposed 3.95p 3.55p
Interim dividends per ordinary share declared and paid during the
year 1.75p 1.55p
------------------------------------------------------------------ ----- -----
Dividends of GBP48.5m were paid during the year (2016:
GBP43.3m). The Company has proposed to shareholders that a final
dividend of 3.95p per share will be paid (2016: 3.55p). Subject to
shareholder approval, it is expected that the dividend will be paid
on 25 May 2018.
12. Goodwill
GBPm
---------------------------------------------- ------
Cost
At 1 January 2016 612.2
Recognised on acquisition of subsidiaries 6.8
Disposals (1.3)
Transferred to assets held for sale (4.5)
Exchange rate movements 72.1
---------------------------------------------- ------
At 31 December 2016 685.3
---------------------------------------------- ------
Recognised on acquisition of subsidiaries (1) 3.3
Exchange rate movements (21.9)
---------------------------------------------- ------
At 31 December 2017 666.7
---------------------------------------------- ------
Net book value
At 31 December 2016 685.3
---------------------------------------------- ------
At 31 December 2017 666.7
---------------------------------------------- ------
1. Net of GBP0.2m derecognised on the finalisation of the
accounting for prior year acquisitions previously reported on a
provisional basis
Cash-generating units (CGUs), defined as individual business
centres, are grouped by country of operation for the purposes of
carrying out impairment reviews of goodwill as this is the lowest
level at which it can be assessed. Goodwill acquired through
business combinations is held at a country level and is subject to
impairment reviews based on the cash flows of the CGUs within that
country.
The goodwill attributable to the reportable business segments is
as follows:
2017 2016
Carrying amount of goodwill included within: GBPm GBPm
--------------------------------------------- ----- -----
Americas 285.8 311.1
EMEA 125.1 119.4
Asia 34.7 35.4
United Kingdom 221.1 219.4
--------------------------------------------- ----- -----
666.7 685.3
--------------------------------------------- ----- -----
The carrying value of goodwill and indefinite life intangibles
allocated to two countries, the USA and the UK, is material
relative to the total carrying value, comprising 73% of the total.
The remaining 27% of the carrying value is allocated to a further
41 countries. The goodwill and indefinite life intangibles
allocated to the USA and the UK are set out below:
Intangible
Goodwill assets 2017 2016
GBPm GBPm GBPm GBPm
---------------- -------- ---------- ----- -----
USA 262.4 - 262.4 286.3
United Kingdom 221.1 11.2 232.3 230.6
Other countries 183.2 - 183.2 179.6
---------------- -------- ---------- ----- -----
666.7 11.2 677.9 696.5
---------------- -------- ---------- ----- -----
The indefinite life intangible asset relates to the brand value
arising from the acquisition of the remaining 58% of the UK
business in the year ended 31 December 2006 (see note 13).
The value in use for each country has been determined using a
model which derives the individual value in use for each country
from the value in use of the Group as a whole. Although the model
includes budgets and forecasts prepared by management it also
reflects external factors, such as capital market risk pricing as
reflected in the market capitalisation of the Group and prevailing
tax rates, which have been used to determine the risk adjusted
discount rate for the Group. Management believes that the projected
cash flows are a reasonable reflection of the likely outcomes over
the medium to long term. In the event that trading conditions
deteriorate beyond the assumptions used in the projected cash
flows, it is also possible that impairment charges could arise in
future periods.
The following key assumptions have been used in calculating the
value in use for each country:
-- Future cash flows are based on forecasts prepared by
management. The model excludes cost savings and restructurings that
are anticipated but had not been committed to at the date of the
determination of the value in use. Thereafter, forecasts have been
prepared by management for a further four years from 2018 that
reflect an average annual growth rate of 3% (2017: 3%);
-- These forecasts exclude the impact of acquisitive growth
expected to take place in future periods;
-- Management considers these projections to be a reasonable
projection of margins expected at the mid-cycle position. Cash
flows beyond 2021 have been extrapolated using a 2% growth rate
which management believes is a reasonable long-term growth rate for
any of the markets in which the relevant countries operate. A
terminal value is included in the assessment, reflecting the
Group's expectation that it will continue to operate in these
markets and the long-term nature of the businesses; and
-- The Group applies a country specific pre-tax discount rate to
the pre-tax cash flows for each country. The country specific
discount rate is based on the underlying weighted average cost of
capital (WACC) for the Group. The Group WACC is then adjusted for
each country to reflect the assessed market risk specific to that
country. The Group pre-tax WACC decreased from 11.3% in 2016 to
9.9% in 2017 (post-tax WACC: 7.9%). The country specific pre-tax
WACC reflecting the respective market risk adjustment has been set
between
9.3% and 12.8% (2016: 10.7% to 14.2%).
The amounts by which the values in use exceed the carrying
amounts of goodwill are sufficiently large to enable the Directors
to conclude that a reasonably possible change in the key
assumptions would not result in an impairment charge in any of the
countries. Foreseeable events are unlikely to result in a change in
the projections of such a significant nature as to result in the
goodwill carrying amount exceeding their recoverable amount. The
forecast models used in assessing the impairment of goodwill are
based on the related
business centre structure at the end of the year.
The US model assumes an average centre contribution of 17% over
the next five years. Revenue and costs grow at 3% per annum from
2018. A terminal value centre gross margin of 17% is adopted from
2021, with a 2% long-term growth rate assumed on revenue and costs
into perpetuity. The cash flows have been discounted using a
pre-tax discount rate of 10% (2016: 14%).
The UK model assumes an average centre contribution of 17% over
the next five years. Revenue and costs grow at 3% per annum from
2018. A terminal value centre gross margin of 17% is adopted from
2021, with a 2% long-term growth rate assumed on revenue and costs
into perpetuity. The cash flows have been discounted using a
pre-tax discount rate of 10% (2016: 11%).
Management has considered the following sensitivities:
Market growth and WIPOW - Management has considered the impact
of a variance in market growth and WIPOW. The value in use
calculation shows that if the long-term growth rate was reduced to
nil, the recoverable amount of the US and UK would still be greater
than their carrying value.
Discount rate - Management has considered the impact of an
increase in the discount rate applied to the calculation. The value
in use calculation shows that for the recoverable amount to be less
than its carrying value, the pre-tax discount rate would have to be
increased to 12% (2016: 24%) for the US and 16% (2016: 38%) for the
UK.
13. Other intangible assets
Customer
Brand lists Software Total
GBPm GBPm GBPm GBPm
-------------------------------- ----- -------- -------- -----
Cost
At 1 January 2016 56.3 28.8 58.7 143.8
Additions at cost 0.2 - 5.3 5.5
Acquisition of subsidiaries - 1.1 - 1.1
Disposals - (0.1) (0.3) (0.4)
Exchange rate movements 8.8 2.8 2.9 14.5
-------------------------------- ----- -------- -------- -----
At 31 December 2016 65.3 32.6 66.6 164.5
-------------------------------- ----- -------- -------- -----
Additions at cost - - 3.6 3.6
Acquisition of subsidiaries (1) - 1.6 - 1.6
Impairment - - (6.6) (6.6)
Exchange rate movements (4.4) (2.0) (3.1) (9.5)
-------------------------------- ----- -------- -------- -----
At 31 December 2017 60.9 32.2 60.5 153.6
-------------------------------- ----- -------- -------- -----
Amortisation
At 1 January 2016 25.6 26.5 37.9 90.0
Charge for year 2.5 2.4 7.8 12.7
Disposals - (0.1) - (0.1)
Exchange rate movements 5.2 2.6 1.3 9.1
-------------------------------- ----- -------- -------- -----
At 31 December 2016 33.3 31.4 47.0 111.7
-------------------------------- ----- -------- -------- -----
Charge for year 2.6 1.4 6.9 10.9
Impairment - - (5.0) (5.0)
Exchange rate movements (2.9) (1.9) (4.6) (9.4)
-------------------------------- ----- -------- -------- -----
At 31 December 2017 33.0 30.9 44.3 108.2
-------------------------------- ----- -------- -------- -----
Net book value
At 1 January 2016 30.7 2.3 20.8 53.8
-------------------------------- ----- -------- -------- -----
At 31 December 2016 32.0 1.2 19.6 52.8
-------------------------------- ----- -------- -------- -----
At 31 December 2017 27.9 1.3 16.2 45.4
-------------------------------- ----- -------- -------- -----
1. Includes GBP0.1m on the finalisation of the accounting for
prior year acquisitions previously reported on a provisional
basis
Included within the brand value is GBP11.2m relating to the
acquisition of the remaining 58% of the UK business in the year
ended 31 December 2006. The Regus brand acquired in this
transaction is assumed to have an indefinite useful life due to the
fact that the value of the brand is intrinsically linked to the
continuing operation of the Group.
As a result of the Regus brand acquired with the UK business
having an indefinite useful life no amortisation is charged but the
carrying value is assessed for impairment on an annual basis. The
brand was tested at the balance sheet date against the recoverable
amount of the UK business segment at the same time as the goodwill
arising on the acquisition of the UK business (see note 12).
The remaining amortisation life for definite life brands is
seven years.
14. Property, plant and equipment
Land Leasehold Furniture Computer
and buildings improvements and equipment hardware Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- -------------- ------------- -------------- --------- -------
Cost
At 1 January 2016 11.4 1,136.0 497.1 94.9 1,739.4
Additions 26.3 215.7 57.9 13.9 313.8
Acquisition of subsidiaries - 2.6 0.6 0.7 3.9
Disposals (11.4) (20.0) (10.7) (2.9) (45.0)
Exchange rate movements - 198.9 83.3 16.1 298.3
---------------------------- -------------- ------------- -------------- --------- -------
At 1 January 2017 26.3 1,533.2 628.2 122.7 2,310.4
---------------------------- -------------- ------------- -------------- --------- -------
Additions 9.5 253.0 71.2 11.2 344.9
Acquisition of subsidiaries
(1) 95.5 1.5 2.0 0.2 99.2
Disposals - (16.5) (8.5) (1.4) (26.4)
Exchange rate movements 0.1 (82.9) (32.4) (4.7) (119.9)
---------------------------- -------------- ------------- -------------- --------- -------
At 31 December 2017 131.4 1,688.3 660.5 128.0 2,608.2
---------------------------- -------------- ------------- -------------- --------- -------
Accumulated depreciation
At 1 January 2016 - 469.9 290.6 61.9 822.4
Charge for the year 0.4 116.4 49.4 15.6 181.8
Disposals - (14.9) (8.9) (3.0) (26.8)
Exchange rate movements - 81.0 47.8 9.8 138.6
---------------------------- -------------- ------------- -------------- --------- -------
At 1 January 2017 0.4 652.4 378.9 84.3 1,116.0
---------------------------- -------------- ------------- -------------- --------- -------
Charge for the year 2.0 132.6 51.1 16.4 202.1
Disposals - (12.8) (7.5) (1.3) (21.6)
Impairment - 0.1 - - 0.1
Exchange rate movements - (32.7) (19.8) (3.1) (55.6)
---------------------------- -------------- ------------- -------------- --------- -------
At 31 December 2017 2.4 739.6 402.7 96.3 1,241.0
---------------------------- -------------- ------------- -------------- --------- -------
Net book value
At 1 January 2016 11.4 666.1 206.5 33.0 917.0
---------------------------- -------------- ------------- -------------- --------- -------
At 31 December 2016 25.9 880.8 249.3 38.4 1,194.4
---------------------------- -------------- ------------- -------------- --------- -------
At 31 December 2017 129.0 948.7 257.8 31.7 1,367.2
---------------------------- -------------- ------------- -------------- --------- -------
1. Includes GBP0.2m on the finalisation of the accounting for
prior year acquisitions previously reported on a provisional
basis
Additions include GBPnil in respect of assets acquired under
finance leases (2016: GBPnil).
15. Other long-term receivables
2017 2016
GBPm GBPm
---------------------------------------------------- ----- -----
Deposits held by landlords against rent obligations 76.3 78.2
Acquired lease fair value asset 4.4 5.3
Other - 0.2
---------------------------------------------------- ----- -----
80.7 83.7
---------------------------------------------------- ----- -----
16. Trade and other receivables
2017 2016
GBPm GBPm
---------------------------------------------------- ----- -----
Trade receivables, net 199.3 200.9
Prepayments and accrued income 167.3 171.8
Other receivables 108.7 85.6
VAT recoverable 98.1 49.5
Deposits held by landlords against rent obligations 7.2 7.6
Acquired lease fair value asset 1.2 1.7
-----
581.8 517.1
---------------------------------------------------- ----- -----
17. Trade and other payables (including customer deposits)
2017 2016
GBPm GBPm
------------------------------------ ----- -----
Customer deposits 429.8 421.0
Deferred rents 121.3 113.2
Other accruals 108.5 134.4
Deferred partner contributions 59.2 68.5
Trade payables 74.0 60.3
VAT payable 90.2 53.1
Other payables 13.7 12.5
Other tax and social security 5.1 9.0
Acquired lease fair value liability 3.0 3.2
-----
Total current 904.8 875.2
------------------------------------ ----- -----
18. Other long-term payables
2017 2016
GBPm GBPm
------------------------------------ ----- -----
Deferred partner contributions 293.8 265.4
Deferred rents 244.6 244.1
Acquired lease fair value liability 3.7 8.3
Other payables 11.1 14.3
------------------------------------ ----- -----
Total non-current 553.2 532.1
------------------------------------ ----- -----
19. Borrowings
The Group's total loan and borrowing position at 31 December
2017 and at 31 December 2016 had the following maturity
profiles:
Bank and other loans
2017 2016
GBPm GBPm
---------------------------------------------------- ----- -----
Repayments falling due as follows:
In more than one year but not more than two years 8.9 6.9
In more than two years but not more than five years 329.2 186.7
In more than five years 4.8 -
---------------------------------------------------- ----- -----
Total non-current 342.9 193.6
Total current 8.5 7.8
---------------------------------------------------- ----- -----
Total bank and other loans 351.4 201.4
---------------------------------------------------- ----- -----
20. Provisions
2017 2016
--------------------------- ----------------------------
Onerous Onerous
leases leases
and closures Other Total and closures Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------------- ----- ----- ------------- ------ -----
At 1 January 3.5 5.9 9.4 7.7 5.2 12.9
Provided in the period 3.2 2.1 5.3 2.3 3.0 5.3
Utilised in the period (0.3) (1.0) (1.3) (1.4) (1.6) (3.0)
Provisions released (2.8) (1.2) (4.0) (5.1) (0.4) (5.5)
Exchange rate movements - - - - (0.3) (0.3)
------------------------ ------------- ----- ----- ------------- ------ -----
At 31 December 3.6 5.8 9.4 3.5 5.9 9.4
------------------------ ------------- ----- ----- ------------- ------ -----
Analysed between:
Current 0.4 4.1 4.5 0.3 5.7 6.0
Non-current 3.2 1.7 4.9 3.2 0.2 3.4
------------------------ ------------- ----- ----- ------------- ------ -----
At 31 December 3.6 5.8 9.4 3.5 5.9 9.4
------------------------ ------------- ----- ----- ------------- ------ -----
Onerous leases and closures
Provisions for onerous leases and closure costs relate to the
estimated future costs of centre closures and onerous property
leases. The maximum period over which the provisions are expected
to be utilised expires by 31 December 2025.
Other
Other provisions include the estimated costs of claims against
the Group outstanding at the year end, of which, due to their
nature, the maximum period over which they are expected to be
utilised is uncertain.
21. Investments in joint ventures
Provision
for deficit
Investments in
in joint joint
ventures ventures Total
GBPm GBPm GBPm
------------------------ ----------- ------------ -----
At 1 January 2016 5.6 (4.1) 1.5
Additions 6.8 - 6.8
Dividends received (0.9) - (0.9)
Share of loss (1.5) 0.7 (0.8)
Disposal of investment 3.0 - 3.0
Exchange rate movements 0.6 - 0.6
------------------------ ----------- ------------ -----
At 31 December 2016 13.6 (3.4) 10.2
------------------------ ----------- ------------ -----
Additions 0.3 - 0.3
Share of loss (0.4) (0.4) (0.8)
Exchange rate movements (1.1) - (1.1)
------------------------ ----------- ------------ -----
At 31 December 2017 12.4 (3.8) 8.6
------------------------ ----------- ------------ -----
The Group has 49 joint ventures (2016: 41) at the reporting
date, all of which are individually immaterial. The Group has a
legal obligation in respect of its share of any deficits recognised
by these operations.
The results of the joint ventures below are the full results of
the joint ventures and do not represent the effective share:
2017 2016
GBPm GBPm
-------------------------------------- ------ ------
Income statement
Revenue 29.9 23.5
Expenses (31.5) (22.5)
(Loss)/profit before tax for the year (1.6) 1.0
Tax charge (0.3) (0.7)
-------------------------------------- ------ ------
(Loss)/profit after tax for the year (1.9) 0.3
-------------------------------------- ------ ------
Net assets/(liabilities)
Non-current assets 15.0 12.2
Current assets 35.7 28.0
Current liabilities (46.6) (30.3)
Non-current liabilities (1.5) (2.1)
-------------------------------------- ------ ------
Net assets 2.6 7.8
-------------------------------------- ------ ------
22. Share capital
Ordinary equity share capital
2017 2016
---------------------- ----------------------
Nominal Nominal
value value
Number GBPm Number GBPm
------------------------------- ------------- ------- ------------- -------
Authorised
Ordinary 1p shares in IWG
plc (2016: Regus plc) at
1 January 8,000,000,000 80.0 8,000,000,000 80.0
Ordinary 1p shares in IWG
plc at 31 December 8,000,000,000 80.0 8,000,000,000 80.0
------------------------------- ------------- ------- ------------- -------
Issued and fully paid up
Ordinary 1p shares in IWG
plc (2016: Regus plc) at
1 January 923,357,438 9.2 950,969,822 9.5
Cancellation of 1p shares
in Regus plc held in treasury
(1) - - (27,612,384) (0.3)
Ordinary shares in IWG plc
issued on formation of the
company (1) - - 923,357,438 9.2
Ordinary shares in Regus
plc exchanged for ordinary
shares in IWG plc (1) - - (923,357,438) (9.2)
Ordinary 1p shares in IWG
plc at 31 December 923,357,438 9.2 923,357,438 9.2
------------------------------- ------------- ------- ------------- -------
1. As part of the Scheme of Arrangement completed on 19 December
2016
On 19 December 2016 under a Scheme of Arrangement between Regus
plc, the former holding company of the Group, and its shareholders,
under Article 125 of the Companies (Jersey) Law 1991, and as
sanctioned by The Royal Court of Jersey, all the issued shares in
Regus plc were cancelled and an equivalent number of new shares in
Regus plc were issued to IWG plc in consideration for the allotment
to shareholders of one ordinary share in IWG plc for each ordinary
share in Regus plc that they held on the record date, 18 December
2016. As a result, IWG plc acquired all of the issued share capital
of Regus plc in exchange for the issue of shares in IWG plc in the
ratio of one IWG plc share for one Regus plc share.
Treasury share transactions involving Regus plc shares between 1
January 2016 and 19 December 2016
In the period ending 19 December 2016, 11,834,627 shares were
purchased in the open market by Regus plc and 4,712,856 treasury
shares held by Regus plc were utilised to satisfy the exercise of
share awards by employees. At 19 December 2016, 27,612,384 shares
were held as treasury shares. These shares were cancelled as part
of the Group reorganisation and Scheme of Arrangement.
Treasury share transactions involving IWG plc shares between 19
December 2016 and 31 December 2016
In the period from 19 December 2016 to 31 December 2016,
1,280,032 shares were purchased in the open market by IWG plc and
109,333 treasury shares held by IWG plc were utilised to satisfy
the exercise of share awards by employees. At 31 December 2016,
1,170,699 shares were held as treasury shares.
Treasury share transactions involving IWG plc shares between 1
January 2017 and 31 December 2017
During the year, 16,830,000 shares were purchased in the open
market and 5,013,954 treasury shares held by the Group were
utilised to satisfy the exercise of share awards by employees. As
at 6 March 2018, 12,883,481 treasury shares were held. The holders
of ordinary shares in IWG plc are entitled to receive such
dividends as are declared by the Company and are entitled to one
vote per share at meetings of the Company. Treasury shares do not
carry such rights until reissued.
2017 2016
------------------- --------------------
Number Number
of shares GBPm of shares GBPm
---------------------------- ----------- ------ ------------ ------
1 January 1,170,699 2.9 20,490,613 42.9
Purchase of treasury shares
in Regus plc - - 11,834,627 31.1
Treasury shares in Regus
plc utilised - - (4,712,856) (8.3)
Cancellation of treasury
shares in Regus plc - - (27,612,384) (65.7)
Purchase of treasury shares
in IWG plc 16,830,000 51.1 1,280,032 3.1
Treasury shares in IWG plc
utilised (5,013,954) (14.4) (109,333) (0.2)
31 December 12,986,745 39.6 1,170,699 2.9
---------------------------- ----------- ------ ------------ ------
In addition to the treasury share transactions, the Group
purchased nil (2016: 467,291) shares on the open market at a cost
of GBPnil (2016: GBP1.3 m) to directly settle the exercise of share
awards by employees.
23. Analysis of financial assets/(liabilities)
At Exchange At
1 Jan Cash Non-cash rate 31 Dec
2017 flow changes movements 2017
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ------ -------- ---------- -------
Cash and cash equivalents 50.1 0.5 - 4.4 55.0
----------------------------------- ------- ------ -------- ---------- -------
Gross cash 50.1 0.5 - 4.4 55.0
----------------------------------- ------- ------ -------- ---------- -------
Debt due within one year (7.8) (1.4) - 0.7 (8.5)
Debt due after one year (193.6) (91.4) (60.1) 2.2 (342.9)
-------
(201.4) (92.8) (60.1) 2.9 (351.4)
----------------------------------- ------- ------ -------- ---------- -------
Net financial assets/(liabilities) (151.3) (92.3) (60.1) 7.3 (296.4)
----------------------------------- ------- ------ -------- ---------- -------
Cash and cash equivalent balances held by the Group that are not
available for use amounted to GBP9.3m at 31 December 2017 (2016:
GBP11.3m). Of this balance, GBP7.1m (2016: GBP9.6m) is pledged as
security against outstanding bank guarantees and a further GBP2.2m
(2016: GBP1.7m) is pledged against various other commitments of the
Group.
The Group acquired debt of GBP60.1m as part of an acquisition
during the current period.
24. Financial instruments and financial risk management
The objectives, policies and strategies applied by the Group
with respect to financial instruments and the management of capital
are determined at Group level. The Group's Board maintains
responsibility for the risk management strategy of the Group and
the Chief Financial Officer is responsible for policy on a
day-to-day basis. The Chief Financial Officer and Group Treasurer
review the Group's risk management strategy and policies on an
ongoing basis. The Board has delegated to the Group Audit Committee
the responsibility for applying an effective system of internal
control and compliance with the Group's risk management
policies.
Exposure to credit, interest rate and currency risks arise in
the normal course of business.
Going concern
The Strategic Report on pages 1 to 43 of the Annual Report and
Accounts sets out the Group's strategy and the factors that are
likely to affect the future performance and position of the
business. The financial review on pages 32 to 36 within the
Strategic Report reviews the trading performance, financial
position and cash flows of the Group. During the year ended 31
December 2017, the Group made a significant investment in growth
and the Group's net debt position increased by GBP145.1m to a net
debt position of GBP296.4m as at 31 December 2017. The investment
in growth is funded by a combination of cash flow generated from
the Group's mature business centres and debt. The Group has a
GBP550.0m revolving credit facility provided by a group of
relationship banks with a final maturity in 2022, with a further
option to extend to 2023. As at 31 December 2017, GBP131.8m was
available and undrawn.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and, accordingly,
continue to adopt the going concern basis in preparing the Annual
Report and Accounts.
Credit risk
Credit risk could occur where a customer or counterparty
defaults under the contractual terms of a financial instrument and
arises principally in relation to customer contracts and the
Group's cash deposits.
A diversified customer base, requirement for customer deposits,
and payments in advance on workstation contracts minimise the
Group's exposure to customer credit risk. No single customer
contributes a material percentage of the Group's revenue. The
Group's policy is to provide against trade receivables when
specific debts are judged to be irrecoverable or where formal
recovery procedures have commenced. A provision taking into account
the customer deposit held is created where debts are more than
three months overdue, which reflects the Group's historical
experience of the likelihood of recoverability of these trade
receivables. These provisions are reviewed on an ongoing basis to
assess changes in the likelihood of recoverability.
The maximum exposure to credit risk for trade receivables at the
reporting date, not taking into account customer deposits held,
analysed by geographic region, is summarised below.
2017 2016
GBPm GBPm
--------------- ----- -----
Americas 27.8 36.9
EMEA 75.0 71.0
Asia Pacific 41.6 41.8
United Kingdom 54.9 51.2
--------------- ----- -----
199.3 200.9
--------------- ----- -----
All of the Group's trade receivables relate to customers
purchasing workplace solutions and associated services and no
individual customer has a material balance owing as a trade
receivable.
The ageing of trade receivables at 31 December was:
Gross Provision Gross Provision
2017 2017 2016 2016
GBPm GBPm GBPm GBPm
---------------------- ----- --------- ----- ---------
Not overdue 132.4 - 128.5 -
Past due 0 - 30 days 43.3 - 43.9 (0.1)
Past due 31 - 60 days 13.8 - 12.0 -
More than 60 days 31.6 (21.8) 35.6 (19.0)
---------------------- ----- --------- ----- ---------
221.1 (21.8) 220.0 (19.1)
---------------------- ----- --------- ----- ---------
At 31 December 2017, the Group maintained a provision of
GBP21.8m against potential bad debts (2016: GBP19.1m) arising from
trade receivables. The Group had provided GBP16.2m (2016: GBP10.3m)
in the year and utilised GBP13.5m (2016: GBP4.5m). Customer
deposits of GBP429.8m (2016: GBP421.0m) are held by the Group,
mitigating the risk of default.
The Group believes no provision is generally required for trade
receivables that are not overdue as the Group collects the majority
of its revenue in advance of the provision of office services and
requires deposits from its customers.
Cash investments and derivative financial instruments are only
transacted with counterparties of sound credit ratings, and
management does not expect any of these counterparties to fail to
meet their obligations.
Liquidity risk
The Group manages liquidity risk by closely monitoring the
global cash position, the available and undrawn credit facilities,
and forecast capital expenditure and expects to have sufficient
liquidity to meet its financial obligations as they fall due. The
Group has free cash and liquid investments (excluding blocked cash)
of GBP45.7m (2016: GBP38.8m). In addition to cash and liquid
investments, the Group had GBP131.8m available and undrawn under
its committed borrowings. The Directors consider the Group has
adequate liquidity to meet
day-to-day requirements.
The Group maintains a revolving credit facility provided by a
group of international banks. During the year, the maturity was
extended until 2022, with a further option to extend to 2023.
The debt provided under the bank facility is floating rate,
however, as part of the Group's balance sheet management and to
protect against a future increase in interest rates, GBP70.0m and
$30.0m were swapped into a fixed rate liability for a three-year
period with an average fixed rate of respectively 0.7% and 1.8%
(excluding funding margin).
Although the Group has net current liabilities of GBP560.3m
(2016: GBP581.1m), the Group does not consider that this gives rise
to a liquidity risk. A large proportion of the net current
liabilities comprise non-cash liabilities such as deferred income
which will be recognised in future periods through the income
statement. The Group holds customer deposits of GBP429.8m (2016:
GBP421.0m) which are spread across a large number of customers and
no deposit held for an individual customer is material. Therefore,
the Group does not believe the balance represents a liquidity risk.
The net current liabilities, excluding deferred income, were
GBP275.0m at 31 December 2017 (2016: GBP304.7m).
Market risk
The Group is exposed to market risk primarily related to foreign
currency exchange rates, interest rates and the market value of our
investments in financial assets. These exposures are actively
managed by the Group treasury department in accordance with a
written policy approved by the Board of Directors. The Group does
not use financial derivatives for trading or speculative
reasons.
Interest rate risk
The Group manages its exposure to interest rate risk through the
relative proportions of fixed rate debt and floating rate debt. Any
surplus cash balances are invested short-term, and at the end of
2017 no cash was invested for a period exceeding three months.
Foreign currency risk
The Group is exposed to foreign currency exchange rate
movements. The majority of day-to-day transactions of overseas
subsidiaries are carried out in local currency and the underlying
foreign exchange exposure is small. Transactional exposures do
arise in some countries where it is local market practice for a
proportion of the payables or receivables to be in other than the
functional currency of the affiliate. Intercompany charging,
funding and cash management activity may also lead to foreign
exchange exposures. It is the policy of the Group to seek to
minimise such transactional exposures through careful management of
non-local currency assets and liabilities, thereby minimising the
potential volatility in the income statement. Net investments in
IWG affiliates with a functional currency other than sterling are
of a long-term nature and the Group does not normally hedge such
foreign currency translation exposures.
From time to time the Group uses short-term derivative financial
instruments to manage its transactional foreign exchange exposures
where these exposures cannot be eliminated through balancing the
underlying risks. No transactions of a speculative nature are
undertaken.
The foreign currency exposure arising from open third party
transactions held in a currency other than the functional
currency
of the related entity is summarised as follows:
2017
----------------------------
GBPm GBP JPY EUR USD
------------------------------------ ----- ----- ------ ------
Trade and other receivables 0.1 - 0.6 16.7
Trade and other payables (6.7) - (8.7) (10.4)
------------------------------------ ----- ----- ------ ------
Net statement of financial position
exposure (6.6) - (8.1) 6.3
------------------------------------ ----- ----- ------ ------
2016
----------------------------
GBPm GBP JPY EUR USD
------------------------------------ ----- ----- ------ ------
Trade and other receivables - - 15.1 19.1
Trade and other payables (0.5) (0.1) (26.5) (18.7)
------------------------------------ ----- ----- ------ ------
Net statement of financial position
exposure (0.5) (0.1) (11.4) 0.4
------------------------------------ ----- ----- ------ ------
Other market risks
The Group does not hold any available-for-sale equity securities
and is therefore not subject to risks of changes in equity prices
in the income statement.
Sensitivity analysis
For the year ended 31 December 2017, it is estimated that a
general increase of one percentage point in interest rates would
have decreased the Group's profit before tax by approximately
GBP2.6m (2016: decrease of GBP1.9m) with a corresponding decrease
in total equity.
It is estimated that a five percentage point weakening in the
value of the US dollar against sterling would have decreased the
Group's profit before tax by approximately GBP8.6m for the year
ended 31 December 2017 (2016: decrease of GBP8.8m). It is estimated
that a five percentage point weakening in the value of the euro
against sterling would have decreased the Group's profit before tax
by approximately GBP1.7m for the year ended 31 December 2017 (2016:
decrease of GBP2.7m).
It is estimated that a five percentage point weakening in the
value of the US dollar against sterling would have decreased the
Group's total equity by approximately GBP11.1m for the year ended
31 December 2017 (2016: GBP11.3m). It is estimated that a five
percentage point weakening in the value of the euro against
sterling would have decreased the Group's total equity by
approximately GBP1.1m for the year ended 31 December 2017 (2016:
decrease of GBP0.4m).
Capital management
The Group's parent company is listed on the UK stock exchange
and the Board's policy is to maintain a strong capital base. The
Chief Financial Officer monitors the diversity of the Group's major
shareholders and further details of the Group's communication with
key investors can be found in the Corporate Governance Report on
page 55. In 2006, the Board approved the commencement of a
progressive dividend policy to enhance the total return to
shareholders.
The Group's Chief Executive Officer, Mark Dixon, is the major
shareholder of the Company and all executive members of the Board
hold shares in the Company. Details of the Directors' shareholdings
can be found in the report of the Remuneration Committee on pages
62 to 73. In addition, the Group operates various share option
plans for key management and other senior employees.
Treasury share transactions involving IWG plc shares between 1
January 2017 and 31 December 2017
During the year, 16,830,000 shares were purchased in the open
market and 5,013,954 treasury shares held by the Group were
utilised to satisfy the exercise of share awards by employees. As
at 31 December 2017, 12,986,745 treasury shares were held.
The Company declared an interim dividend of 1.75p per share
(2016: 1.55p) during the year ended 31 December 2017 and proposed a
final dividend of 3.95p per share (2016: 3.55p per share), a 11%
increase on the 2016 dividend.
The Group's objective when managing capital (equity and
borrowings) is to safeguard the Group's ability to continue as a
going concern and to maintain an optimal capital structure to
reduce the cost of capital. The Group has a net debt position of
GBP296.4m at the end of 2017 (2016: GBP151.3m) and GBP131.8m (2016:
GBP299.4m) of committed undrawn borrowings.
Effective interest rates
In respect of financial assets and financial liabilities, the
following table indicates their effective interest rates at the
balance sheet date and the periods in which they mature. Interest
payments are excluded from the table.
The undiscounted cash flow and fair values of these instruments
is not materially different from the carrying value.
As at 31 December 2017
Effective Contractual Less More
interest Carrying cash than than
rate value flow 1 year 1-2 years 2-5 years 5 years
% GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- --------- ----------- ------- --------- --------- --------
Cash and cash equivalents 0.1% 55.0 55.0 55.0 - - -
Trade and other receivables(1) - 413.3 435.1 435.1 - - -
Other long-term receivables(2) - 76.3 76.3 - 38.1 38.2 -
Derivative financial assets:
Interest rate swaps
- -
* Outflow - - - - -
* Inflow - 0.2 0.2 0.2 - - -
=============================== ========= ========= =========== ======= ========= ========= ========
Financial assets(3) 544.8 566.6 490.3 38.1 38.2 -
------------------------------- --------- --------- ----------- ------- --------- --------- --------
Non-derivative financial
liabilities(4):
Bank loans and corporate
borrowings 2.5% (330.5) (330.5) - (6.2) (324.3) _
Other loans 1.9% (20.9) (20.9) (8.5) (2.7) (4.9) (4.8)
Trade and other payables(5) - (721.3) (721.3) (721.3) - - -
Other long-term payables(5) - (11.1) (11.1) - (11.1) - -
Financial liabilities (1,083.8) (1,083.8) (729.8) (20.0) (329.2) (4.8)
------------------------------- --------- --------- ----------- ------- --------- --------- --------
As at 31 December 2016
Effective Contractual Less More
interest Carrying cash than than
rate value flow 1 year 1-2 years 2-5 years 5 years
% GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- -------- ----------- ------- --------- --------- --------
Cash and cash equivalents 0.0% 50.1 50.1 50.1 - - -
Trade and other receivables(1) - 343.6 362.7 362.7 - - -
Other long-term receivables(2) - 78.4 78.4 - 39.3 39.1 -
---------------------------------- --------- -------- ----------- ------- --------- --------- --------
Financial assets(3) 472.1 491.2 412.8 39.3 39.1 -
---------------------------------- --------- -------- ----------- ------- --------- --------- --------
Non-derivative financial
liabilities(4):
Bank loans and corporate
borrowings 2.9% (193.6) (193.6) - (6.9) (186.7) -
Other loans 4.6% (7.8) (7.8) (7.8) - - -
Trade and other payables(5) - (690.3) (690.3) (690.3) - - -
Other long-term payables(5) - (14.3) (14.3) - (14.3) - -
Derivative financial liabilities:
Interest rate swaps
* Outflow - (0.3) (0.3) - - (0.3) -
* Inflow - - - - - - -
---------------------------------- --------- -------- ----------- ------- --------- --------- --------
Financial liabilities (906.3) (906.3) (698.1) (21.2) (187.0) -
---------------------------------- --------- -------- ----------- ------- --------- --------- --------
1. Excluding prepayments and accrued income and acquired lease
fair value asset
2. Excluding acquired lease fair value asset
3. Financial assets are all held at amortised cost
4. All financial instruments are classified as variable rate
instruments
5. Excluding deferred rents, deferred partner contributions and
acquired lease fair value liability
Fair value disclosures
The fair values together with the carrying amounts shown in the
balance sheet are as follows:
31 December 2017 Carrying amount Fair value
---------------------- ----------------------------------------------------- --------------------------
Cash
flow
Cash, Other -
loans financial hedging Level Level Level
GBPm and receivables liabilities instruments Total 1 2 3 Total
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
Cash and cash
equivalents 55.0 - - 55.0 - - - -
Trade and other
receivables 413.3 - - 413.3 - - - -
Other long-term
receivables 76.3 - - 76.3 - - - -
Derivative financial
asset - - 0.2 0.2 - 0.2 - 0.2
Bank loans and
corporate borrowings - (330.5) - (330.5) - - - -
Other loans - (20.9) - (20.9) - - - -
Trade and other
payables - (721.3) - (721.3) - - - -
Other long-term
payables - (11.1) - (11.1) - - - -
544.6 (1,083.8) 0.2 (539.0) - 0.2 - 0.2
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
Unrecognised
gain -
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
31 December 2016 Carrying amount Fair value
---------------------- ----------------------------------------------------- --------------------------
Cash
Cash, Other flow
loans financial - hedging Level Level Level
GBPm and receivables liabilities instruments Total 1 2 3 Total
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
Cash and cash
equivalents 50.1 - - 50.1 - - - -
Trade and other
receivables 343.6 - - 343.6 - - - -
Other long-term
receivables 78.4 - - 78.4 - - - -
Bank loans and
corporate borrowings - (193.6) - (193.6) - - - -
Other loans - (7.8) - (7.8) - - - -
Trade and other
payables - (690.3) - (690.3) - - - -
Other long-term
payables - (14.3) - (14.3) - - - -
Derivative financial
liabilities - - (0.3) (0.3) - (0.3) - (0.3)
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
472.1 (906.0) (0.3) (434.2) - (0.3) - (0.3)
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
Unrecognised
gain -
---------------------- ---------------- ------------ ------------ ------- ----- ----- ----- -----
During the years ended 31 December 2016 and 31 December 2017,
there were no transfers between levels for fair value measured
instruments, and no financial instruments requiring level 3 fair
value measurements were held.
Valuation techniques
When measuring the fair value of an asset or a liability, the
Group uses market observable data as far as possible. Fair values
are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in level 1
that are observable for the asset or liability, either directly or
indirectly; and
-- Level 3: inputs for the asset or liability that are not based on observable market data.
The following tables show the valuation techniques used in
measuring level 2 fair values and methods used for financial assets
and liabilities not measured at fair value:
Type Valuation technique
------------------------------------- ----------------------------------------
Cash and cash equivalents, For cash and cash equivalents,
trade and other receivables/payables receivables/payables with a
and customer deposits remaining life of less than
one year and customer deposits,
the book value approximates
the fair value because of their
short-term nature.
------------------------------------- ----------------------------------------
Loans and overdrafts The fair value of bank loans,
overdrafts and other loans approximates
the carrying value because interest
rates are at floating rates
where payments are reset to
market rates at intervals of
less than one year.
------------------------------------- ----------------------------------------
Foreign exchange contracts The fair values are based on
and interest rate swaps a combination of broker quotes,
forward pricing and swap models.
------------------------------------- ----------------------------------------
There was no significant unobservable input used in our
valuation techniques.
Derivative financial instruments
The following table summarises the notional amount of the open
contracts as at the reporting date:
2017 2016
GBP GBP
m m
--------------------------------------- ---- ----
Derivatives used for cash flow hedging 70.0 70.0
--------------------------------------- ---- ----
2017 2016
USD USD
m m
--------------------------------------- ---- ----
Derivatives used for cash flow hedging 30.0 30.0
--------------------------------------- ---- ----
Committed borrowings
2017 2017 2016 2016
Facility Available Facility Available
GBPm GBPm GBPm GBPm
-------------------------- --------- ---------- --------- ----------
Revolving credit facility 550.0 131.8 550.0 299.4
-------------------------- --------- ---------- --------- ----------
The Group maintains a revolving credit facility provided by a
group of international banks. During the year, the maturity was
extended until 2022, with a further option to extend to 2023. As at
31 December, GBP131.8m was available and undrawn under this
facility.
The debt provided under the credit facility is floating rate,
however, as part of the Group's balance sheet management and to
protect against a future increase in interest rates, GBP70.0m and
$30.0m were swapped into a fixed rate liability for a three-year
period with an average fixed rate of respectively 0.7% and 1.8%
(excluding funding margin).
The GBP550.0m revolving credit facility is subject to financial
covenants relating to net debt to EBITDA, and EBITDA plus rent to
interest plus rent. The Group is in compliance with all covenant
requirements.
25. Share-based payments
There are four share-based payment plans, details of which are
outlined below:
Plan 1: IWG Group Share Option Plan
During 2004 the Group established the IWG Group Share Option
Plan that entitles Executive Directors and certain employees to
purchase shares in IWG plc (previously Regus plc). In accordance
with this programme, holders of vested options are entitled to
purchase shares at the market price of the shares at the day before
the date of grant.
The IWG Group also operates the IWG Group Share Option Plan
(France) which is included within the numbers for the IWG Share
Option Plan disclosed above. The terms of the IWG Share Option Plan
(France) are materially the same as the IWG Group Share Option Plan
with the exception that they are only exercisable from the fourth
anniversary of the date of grant, assuming the performance
conditions have been met.
Reconciliation of outstanding share options
2017 2016
----------------------- ----------------------
Weighted
Weighted average
Number average Number exercise
of exercise of price
share price share per
options per share options share
--------------------------- ----------- ---------- ----------- ---------
At 1 January 24,519,624 169.62 29,494,624 155.35
Granted during the year 2,200,507 244.28 1,848,431 301.59
Lapsed during the year (4,475,884) 189.71 (2,972,532) 190.48
Exercised during the year (3,984,457) 107.80 (3,850,899) 101.69
--------------------------- ----------- ---------- ----------- ---------
Outstanding at 31 December 18,259,790 179.79 24,519,624 169.62
--------------------------- ----------- ---------- ----------- ---------
Exercisable at 31 December 5,622,041 118.81 6,357,981 119.87
--------------------------- ----------- ---------- ----------- ---------
Weighted
average
exercise
Numbers price At 31 Dec Exercisable Expiry
Date of grant granted per share Lapsed Exercised 2017 from date
-------------- ---------- ---------- ------------ ------------ ---------- --- ----------- ----------
23/03/2010 3,986,000 100.50 (3,463,777) (425,258) 96,965 (1) 23/03/2013 23/03/2020
28/06/2010 617,961 75.00 (546,198) (50,956) 20,807 (1) 28/06/2013 28/06/2020
01/09/2010 160,646 69.10 (146,728) (9,856) 4,062 (1) 01/09/2013 01/09/2020
01/04/2011 2,400,000 114.90 (954,402) (481,866) 963,732 (1) 01/04/2014 01/04/2021
30/06/2011 9,867,539 109.50 (4,900,647) (4,089,695) 877,197 (1) 30/06/2014 30/06/2021
13/06/2012 11,189,000 84.95 (3,833,070) (5,315,855) 2,040,075 (1) 13/06/2015 13/06/2022
12/06/2013 7,741,000 155.60 (4,280,910) (1,553,703) 1,906,387 12/06/2016 12/06/2023
18/11/2013 600,000 191.90 (575,000) - 25,000 18/11/2016 17/11/2023
18/12/2013 1,000,000 195.00 (750,000) - 250,000 18/12/2016 17/12/2023
20/05/2014 1,845,500 187.20 (1,658,500) (53,433) 133,567 20/05/2017 19/05/2024
05/11/2014 12,875,796 186.00 (4,606,142) (9,677) 8,259,977 05/11/2017 04/11/2024
19/05/2015 1,906,565 250.80 (1,794,565) - 112,000 19/05/2018 18/05/2025
22/12/2015 1,154,646 322.20 (270,528) - 884,118 22/12/2018 22/12/2025
29/06/2016 444,196 272.50 (175,000) - 269,196 29/06/2019 29/06/2026
28/09/2016 249,589 258.00 (33,389) - 216,200 28/09/2019 28/09/2026
01/03/2017 1,200,000 283.70 - - 1,200,000 01/03/2020 01/03/2027
14/12/2017 1,000,507 197.00 - - 1,000,507 14/12/2020 14/12/2027
-------------- ---------- ---------- ------------ ------------ ---------- --- ----------- ----------
Total 58,238,945 151.73 (27,988,856) (11,990,299) 18,259,790
-------------- ---------- ---------- ------------ ------------ ---------- --- ----------- ----------
1. All options have vested as of 31 December 2016
Performance conditions for share options
June 2013 share option plan
The Group performance targets for the options awarded in June
2013, based on Group operating profit for the year ending 31
December 2013, were partially met. Those options that are eligible
to vest will vest as follows:
Proportion
to vest
---------- ----------
June 2016 1/3
June 2017 1/3
June 2018 1/3
---------- ----------
November 2013 share option plan
The options awarded in November 2013 are partly subject to a
performance target based on the earnings before tax for the years
ending 31 December 2016 and 31 December 2017, such that the number
of shares vesting will be subject to the satisfaction of a
pre-determined earnings before tax target in 2016 and 2017.
Once performance conditions are satisfied, those options that
are eligible to vest will vest on the anniversary of the grant date
in the year following achievement of one or more of the target
thresholds. Those options not subject to the performance targets
are eligible to be exercised in three equal tranches from the third
anniversary of the grant date.
December 2013 share option plan
The options awarded in December 2013 are subject to a
performance target based on the earnings before tax for the years
ending 31 December 2018 and 31 December 2021, such that the number
of shares vesting will be subject to the satisfaction of a
pre-determined earnings before tax target in 2018 and 2021.
Once performance conditions are satisfied, those options that
are eligible to vest will vest on the anniversary of the grant date
in the year following attainment of one or more of the target
thresholds. Those options not subject to the performance targets
are eligible to be exercised in three equal tranches from the third
anniversary of the grant date.
May 2014 share option plan
The options awarded in May 2014 are conditional on the ongoing
employment of the related employees for a specified period of time.
Once this condition is satisfied, those options that are eligible
to vest will vest as follows:
Proportion
to vest
--------- ----------
May 2017 1/3
May 2018 1/3
May 2019 1/3
--------- ----------
November 2014 share option plan
The options awarded in November 2014 are conditional on the
ongoing employment of the related employees and the achievement of
margin targets. The dates and percentage of options vesting are
dependent on the year in which the margin targets are achieved. The
earliest dates on which the options are eligible to vest is as
follows:
Proportion
to vest
-------------- ----------
November 2017 1/5
November 2018 1/5
November 2019 1/5
November 2020 1/5
November 2021 1/5
-------------- ----------
May 2015 share option plan
The options awarded in May 2015 are conditional on the ongoing
employment of the related employees and the achievement of margin
targets. The dates and percentage of options vesting are dependent
on the year in which the margin targets are achieved. The earliest
dates on which the options are eligible to vest is as follows:
Proportion
to vest
--------- ----------
May 2018 1/5
May 2019 1/5
May 2020 1/5
May 2021 1/5
May 2022 1/5
--------- ----------
December 2015 share option plan
The Group performance targets for the options awarded in
December 2015, based on Group operating profit for the year ending
31 December 2016, were met. Those options that are eligible to vest
will vest as follows:
Proportion
to vest
-------------- ----------
December 2018 1/5
December 2019 1/5
December 2020 1/5
December 2021 1/5
December 2022 1/5
-------------- ----------
June 2016 share option plan
The Group performance targets for the options awarded in June
2016, based on Group operating profit for the year ending 31
December 2016, were met. Those options that are eligible to vest
will vest as follows:
Proportion
to vest
---------- ----------
June 2019 1/5
June 2020 1/5
June 2021 1/5
June 2022 1/5
June 2023 1/5
---------- ----------
September 2016 share option plan
The options awarded in September 2016 are conditional on the
ongoing employment of the related employee for a specified period
of time. Once this condition is satisfied, those options that are
eligible to vest will vest as follows:
Proportion
to vest
--------------- ----------
September 2019 1/5
September 2020 1/5
September 2021 1/5
September 2022 1/5
September 2023 1/5
--------------- ----------
March 2017 share option plan
The total number of shares awarded is subject to three different
performance conditions. These conditions are measured over three
financial years commencing on 1 January 2017. Thus, conditional on
meeting these performance targets, these shares will vest in March
2020. One third is subject to defined earnings per share (EPS)
conditions, one third is subject to relative total shareholder
return (TSR) conditions and one third is subject to return on
investment (ROI) conditions.
The EPS condition is based on the compound annual growth in EPS
over the performance period measured from EPS in the financial year
ending 31 December 2016 as follows:
% of one third of the
Vesting scale award that vest
------------------ ------------------------
25% 100%
On a straight-line basis
Between 5% and 25% between 0% and 100%
5% 0%
------------------ ------------------------
The TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group as
follows:
% of one third of the
Vesting scale award that vest
-------------------------------- ------------------------
Exceeds the median by 10% or
more 100%
Exceeds the median by less than On a straight-line basis
10% between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
-------------------------------- ------------------------
The ROI condition is based on the ROI improvement over the
performance period relative to ROI for the financial year ending 31
December 2016 as follows:
% of one third of the
Vesting scale award that vest
-------------------------------- ------------------------
Exceeds 2016 ROI plus 300 basis
points 100%
Exceeds 2016 ROI by less than On a straight-line basis
300 basis points between 0% and 100%
Equal to or less than the 2016
ROI 0%
-------------------------------- ------------------------
Once this condition is satisfied, those options that are
eligible to vest will vest as follows:
Proportion
to vest
--------------- ----------
September 2020 1/3
September 2021 1/3
September 2022 1/3
--------------- ----------
December 2017 share option plan
The options awarded in December 2017 are conditional on the
ongoing employment of the related employee for a specified period
of time and are also subject to Group performance targets based on
Group operating profit and employee's key performance indicators.
Once performance conditions are satisfied those options that are
eligible to vest will vest as follows:
Proportion
to vest
-------------- ----------
December 2020 1/3
December 2021 1/3
December 2022 1/3
-------------- ----------
Measurement of fair values
The fair value of the rights granted through the employee share
purchase plan was measured based on the Monte Carlo simulation or
the Black-Scholes formula. The expected volatility is based on the
historic volatility adjusted for any abnormal movement in share
prices.
The inputs to the model are as follows:
December March September June December May
2017 2017 2016 2016 2015 2015
---------------------- --------- --------- --------- --------- --------- ---------
Share price on grant
date 197.00p 283.70p 258.00p 272.50p 322.20p 250.80p
Exercise price 197.00p 283.70p 258.00p 272.50p 322.20p 250.80p
Expected volatility 33.31% 27.42% 27.45% 27.71% 24.80% 27.23%
- 35.93% - 29.87% - 32.35% - 34.81% - 37.08% - 30.12%
Number of simulations - - - - - -
Number of companies - - - - - -
Option life 3-5 years 3-5 years 3-7 years 3-7 years 3-7 years 3-7 years
Expected dividend 2.69% 1.80% 1.80% 1.71% 1.40% 1.59%
Fair value of option 40.06p 44.51p 40.96p 44.28p 29.76p 42.35p
at time of grant - 44.20p - 76.88p - 67.89p - 78.68p -90.61p - 69.12p
Risk-free interest 0.54% 0.23% 0.09% 0.14% 0.14% 0.81%
rate - 0.75% - 0.56% - 0.38% - 0.39% - 0.21% - 1.53%
---------------------- --------- --------- --------- --------- --------- ---------
November May December November June
2014 2014 2013 2013 2013
-------------------------- --------- --------- --------- --------- ---------
Share price on grant date 188.40p 191.00p 195.00p 191.90p 158.00p
Exercise price 186.00p 187.20p 195.00p 191.90p 155.60p
24.67% 27.30% 40.31%
Expected volatility - 33.53% - 41.91% 32.91% 32.69% -48.98%
Number of simulations - - - - 30,000
Number of companies - - - - -
Option life 3-7 years 3-5 years 5-8 years 3-5 years 3-5 years
Expected dividend 2.02% 2.00% 1.46% 1.46% 2.03%
Fair value of option at 27.24p 30.80p 52.41p 45.73p 39.21p
time of grant - 54.58p - 59.63p - 65.95p - 58.39p
Risk-free interest rate 0.90% 0.99% 1.57% 1.22% 0.67%
- 1.81% - 1.47% - 2.30% - 1.20%
-------------------------- --------- --------- --------- --------- ---------
Plan 2: IWG plc Co-Investment Plan (CIP) and Performance Share
Plan (PSP)
The CIP operates in conjunction with the annual bonus whereby a
gross bonus of up to 50% of basic annual salary will be taken as a
deferred amount of shares (Investment Shares) to be released at the
end of a defined period of not less than three years, with the
balance of the bonus paid in cash. Awards of Matching Shares are
linked to the number of Investment Shares awarded and will vest
depending on the Company's future performance. The maximum number
of Matching Shares which can be awarded to a participant in any
calendar year under the CIP is 200% of salary. As such, the maximum
number of Matching Shares which can be awarded, based on Investment
Shares awarded, is in the ratio of 4:1.
The PSP provides for the Remuneration Committee to make
stand-alone awards, based on normal plan limits, up to a maximum of
250% of base salary.
Reconciliation of outstanding share awards
2017 2016
----------- -----------
Number Number
of awards of awards
----------------------------------- ----------- -----------
At 1 January 3,292,656 3,673,686
PSP awards granted during the year 1,095,406 1,038,179
Lapsed during the year (37,099) (9,129)
Exercised during the year (1,029,499) (1,410,080)
----------------------------------- ----------- -----------
Outstanding at 31 December 3,321,464 3,292,656
----------------------------------- ----------- -----------
Exercisable at 31 December - -
----------------------------------- ----------- -----------
The weighted average share price at the date of exercise for
share awards exercised during the year ended 31 December 2017 was
289.66p (2016: 302.63p).
At 31
Date Numbers Dec Release
Plan of grant granted Lapsed Exercised 2017 date
----- ----------- --------- ------ --------- --------- ----------
PSP 03/03/2016 1,038,179 - - 1,038,179 03/03/2021
PSP 01/03/2017 1,095,406 - - 1,095,406 01/03/2022
----- ----------- --------- ------ --------- --------- ----------
2,133,585 - - 2,133,585
----------------- --------- ------ --------- --------- ----------
At 31
Date Numbers Dec Release
Plan of grant granted Lapsed Exercised 2017 date(1)
----------------------- ----------- --------- --------- --------- --------- ------------
CIP: Matching shares 06/03/2013 1,217,176 (317,687) (648,042) 251,447 06/03/2018
CIP: Investment shares 05/03/2014 161,922 - (161,922) - 05/03/2017
CIP: Matching shares 05/03/2014 647,688 (272,583) (100,303) 274,802 See below(2)
CIP: Investment shares 04/03/2015 207,952 - (75,626) 132,326 04/03/2018
CIP: Matching shares 04/03/2015 831,808 (302,504) - 529,304 04/03/2020
----------------------- ----------- --------- --------- --------- --------- ------------
3,066,546 (892,774) (985,893) 1,187,879
----------------------------------- --------- --------- --------- --------- ------------
1. Based on the outstanding shares as at 31 December 2017
2. The release dates for the remaining two tranches of the March
2014 CIP Matching Shares are 5 March 2018 and 5 March 2019
respectively
Measurement of fair values
The fair value of the rights granted through the employee share
purchase plan was measured based on the Monte Carlo simulation.
The inputs to the model are as follows:
01/03/2017 03/03/2016 04/03/2015 05/03/2014 06/03/2013
---------- ---------- ------------- -------------- --------------
PSP PSP CIP CIP CIP
---------------------------- ---------- ---------- ------------- -------------- --------------
Share price on grant date 283.70p 300.00p 225.00p 253.30p 143.50p
Exercise price Nil Nil Nil Nil Nil
Number of simulations 250,000 250,000 250,000 250,000 250,000
Number of companies 32 32 32 32 32
Award life 5 years 5 years 3 years 3 years 3 years
Expected dividend 1.80% 1.50% 1.78% 1.66% 2.23%
Fair value of award at time 155.83p- 183.08p- 75.67p-114.6p 83.11p-214.33p
of grant 236.08p 277.36p 83.11p-134.21p
0.99%-
Risk-free interest rate 0.56% 0.86% 1.01% 1.47% 0.35%
---------------------------- ---------- ---------- ------------- -------------- --------------
It is recognised by the Remuneration Committee that the
additional EPS targets represent a highly challenging goal and
consequently, in determining whether they have been met, the
Committee will exercise its discretion. The overall aim is that the
relevant EPS targets must have been met on a run-rate or underlying
basis. As such, an adjusted measure of EPS will be calculated to
assess the underlying performance of the business.
The performance conditions are as follows:
2013 CIP Investment and matching grants
The total number of matching awards made in 2013 to each
participant was divided into three separate equal amounts and is
subject to future performance periods of three, four and five years
respectively. Thus, conditional on meeting the performance targets,
the first amount will vest in March 2016, the second will vest in
March 2017 and the third will vest in March 2018. These vesting
dates relate to the financial years ending 31 December 2015, 31
December 2016 and 31 December 2017 respectively. The vesting of
these awards
is subject to the achievement of challenging corporate
performance targets. 75% of each of the three amounts is subject to
defined adjusted earnings per share (EPS) targets over the
respective performance periods. The remaining 25% of each will be
subject to relative total shareholder return (TSR) targets over the
respective periods. The targets are as follows:
Adjusted EPS targets
for the financial
years ending
------------------------
% of awards eligible for vesting 2015 2016 2017
-------------------------------- ------- ------- ------
25% 12.0p 14.0p 16.0p
50% 12.6p 14.6p 16.6p
75% 13.3p 15.3p 17.3p
100% 14.0p 16.0p 18.0p
-------------------------------- ------- ------- ------
No shares will vest in each respective year unless the minimum
adjusted EPS target for that year is achieved.
IWG TSR % achieved
relative to
FTSE All Share
% of awards eligible for vesting Total Return index(1)
--------------------------------- ----------------------
Below index 0%
Equal to index 25%
Equal to index + 15% p.a. 100%
--------------------------------- ----------------------
1. Over the three-, four- or five-year performance period
2014 CIP Investment and matching grants
The total number of matching awards made in 2014 to each
participant was divided into three separate equal amounts and is
subject to future performance periods of three, four and five years
respectively. Thus, conditional on meeting the performance targets,
the first amount will vest in March 2017, the second will vest in
March 2018 and the third will vest in March 2019. These vesting
dates relate to the financial years ending 31 December 2016, 31
December 2017 and 31 December 2018 respectively. The vesting of
these awards
is subject to the achievement of challenging corporate
performance targets. 75% of each of the three amounts is subject to
defined adjusted earnings per share (EPS) targets over the
respective performance periods. The remaining 25% of each will be
subject to relative total shareholder return (TSR) targets over the
respective periods. The targets are as follows:
Adjusted EPS targets
for the financial
years ending
------------------------
% of awards eligible for vesting 2016 2017 2018
-------------------------------- ------- ------- ------
25% 14.3p 16.1p 17.1p
50% 15.2p 17.4p 18.9p
75% 16.1p 18.8p 20.7p
100% 17.0p 20.2p 22.5p
-------------------------------- ------- ------- ------
No shares will vest in each respective year unless the minimum
adjusted EPS target for that year is achieved.
IWG TSR % achieved
relative to
FTSE All Share
% of awards eligible for vesting Total Return index(1)
--------------------------------- ----------------------
Below index 0%
Median 25%
Upper quartile or above 100%
--------------------------------- ----------------------
1. Over the three-, four- or five-year performance period
2015 CIP Investment and matching grants
The total number of matching awards made in 2015 to each
participant is subject to a future performance period of three
years. Conditional on meeting the performance targets, the matching
shares will vest in March 2020. The vesting date relates to the
adjusted earnings per share (EPS) performance in the last financial
year of the performance period, being 31 December 2017. The vesting
of these awards is subject to the achievement of challenging
corporate performance targets. 75% is subject to defined adjusted
EPS targets over the performance period. The remaining 25% will be
subject to relative total shareholder return (TSR) targets over the
period. The targets are as follows:
Compound annual
growth in adjusted
EPS
over the performance
% of awards eligible for vesting period
-------------------------------- ---------------------
25% 24%
100% 32%
-------------------------------- ---------------------
The target is based on compound annual growth from an equivalent
"base year" EPS figure for 2014 of 7.4p.
IWG TSR % achieved
relative to
FTSE 350 Index
(excluding financial
services and mining
% of awards eligible for vesting companies)
--------------------------------- ---------------------
Below index 0%
Median 25%
Upper quartile or above 100%
--------------------------------- ---------------------
2016 PSP Investment grant
The total number of shares awarded is subject to three different
performance conditions. These conditions are measured over three
financial years commencing on 1 January 2016. Thus, conditional on
meeting these performance targets, these shares will vest in March
2021. One third is subject to defined earnings per share (EPS)
conditions, one third is subject to relative total shareholder
return (TSR) conditions and one third is subject to return on
investment (ROI) conditions.
The EPS condition is based on the compound annual growth in EPS
over the performance period measured from EPS in the financial year
ending 31 December 2015 as follows:
% of one third of the
Vesting scale award that vest
------------------ ------------------------
25% 100%
On a straight-line basis
Between 5% and 25% between 0% and 100%
5% 0%
------------------ ------------------------
The TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group
as follows:
% of one third of the
Vesting scale award that vest
-------------------------------- ------------------------
Exceeds the median by 10% or
more 100%
Exceeds the median by less than On a straight-line basis
10% between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
-------------------------------- ------------------------
The ROI condition is based on the ROI improvement over the
performance period relative to ROI for the financial year
ending
31 December 2015 as follows:
% of one third of the
Vesting scale award that vest
-------------------------------- ------------------------
Exceeds 2015 ROI plus 300 basis
points 100%
Exceeds 2015 ROI by less than On a straight-line basis
300 basis points between 0% and 100%
Equal to or less than the 2015
ROI 0%
-------------------------------- ------------------------
2017 PSP Investment grant
The total number of shares awarded is subject to three different
performance conditions. These conditions are measured over three
financial years commencing on 1 January 2017. Thus, conditional on
meeting these performance targets, these shares will vest in March
2022. One third is subject to defined earnings per share (EPS)
conditions, one third is subject to relative total shareholder
return (TSR) conditions and one third is subject to return on
investment (ROI) conditions.
The EPS condition is based on the compound annual growth in EPS
over the performance period measured from EPS in the financial
year ending 31 December 2016 as follows:
% of one third of the
Vesting scale award that vest
------------------ ------------------------
25% 100%
On a straight-line basis
Between 5% and 25% between 0% and 100%
5% 0%
------------------ ------------------------
The TSR condition is based on the performance of the Group's TSR
growth against the median TSR growth of the comparator group
as follows:
% of one third of the
Vesting scale award that vest
-------------------------------- ------------------------
Exceeds the median by 10% or
more 100%
Exceeds the median by less than On a straight-line basis
10% between 25% and 100%
Ranked at median 25%
Ranked below the median 0%
-------------------------------- ------------------------
The ROI condition is based on the ROI improvement over the
performance period relative to ROI for the financial year
ending
31 December 2016 as follows:
% of one third of the
Vesting scale award that vest
-------------------------------- ------------------------
Exceeds 2016 ROI plus 300 basis
points 100%
Exceeds 2016 ROI by less than On a straight-line basis
300 basis points between 0% and 100%
Equal to or less than the 2016
ROI 0%
-------------------------------- ------------------------
Plan 3: One-Off Award
In November 2015, an award of 328,751 ordinary shares of 1p each
in the Company was granted to the Company's Chief Financial Officer
and Chief Operating Officer, Dominik de Daniel. The award was
structured as a conditional award and was granted under a one-off
award arrangement established under Listing Rule 9.4.2(2).
In the normal course of events the award will vest over five
years, if and to the extent to which performance conditions are
achieved. The applicable performance target is set out below:
Performance metric Target Vesting at target
-------------------------- ------ -----------------
Compound annual growth in
EPS over the performance
period 5% 100%
-------------------------- ------ -----------------
Reconciliation of outstanding share options
2017 2016
---------- ----------
Number Number
of awards of awards
--------------------------- ---------- ----------
At 1 January 328,751 328,751
Outstanding at 31 December 328,751 328,751
--------------------------- ---------- ----------
Exercisable at 31 December - -
--------------------------- ---------- ----------
Measurement of fair values
The fair value of the rights granted through the employee share
purchase plan was measured based on the Black-Scholes formula. The
expected volatility is based on the historic volatility adjusted
for any abnormal movement in share prices.
The inputs to the model are as follows:
November
2015
--------
Share price on grant date 334.70p
Exercise price Nil
Award life 5 years
Expected dividend 1.24%
Fair value of award at time of grant 313.65p
Risk-free interest rate 1.37%
------------------------------------- --------
Plan 4: Deferred Shared Bonus Plan
In March 2017, an award of 383,664 ordinary shares of 1p each in
the Company was granted to the Chief Executive Officer, Mark Dixon
and to the Company's Chief Financial Officer and Chief Operating
Officer, Dominik de Daniel.
The awards are conditional on the ongoing employment of the
related employees for a specified period of time. Once this
condition is satisfied, those awards are eligible to vest in March
2020.
Reconciliation of outstanding share options
2017
----------
Number
of awards
----------------------------------- ----------
At 1 January -
DSBP award granted during the year 383,664
Outstanding at 31 December 383,664
----------------------------------- ----------
Exercisable at 31 December -
----------------------------------- ----------
Measurement of fair values
The fair value of the rights granted through the employee share
purchase plan was measured based on the Black-Scholes formula. The
expected volatility is based on the historic volatility adjusted
for any abnormal movement in share prices.
The inputs to the model are as follows:
March
2017
-------
DBSP
------------------------------------- -------
Share price on grant date 283.70p
Exercise price Nil
Number of simulations -
Number of companies -
Award life 3 years
Expected dividend 1.80%
Fair value of award at time of grant 236.04p
Risk-free interest rate 0.23%
------------------------------------- -------
26. Retirement benefit obligations
The Group accounts for the Swiss and Philippines pension plans
as defined benefit plans under IAS 19 (2011) - Employee
Benefits.
The reconciliation of the net defined benefit liability and its
components are as follows:
2017 2016
GBPm GBPm
----------------------------- ------ -----
Fair value of plan assets 8.5 5.8
Present value of obligations (10.0) (6.6)
----------------------------- ------ -----
Net funded obligations (1.5) (0.8)
----------------------------- ------ -----
27. Acquisitions
Current period acquisitions
During the year ended 31 December 2017 the Group made various
individually immaterial acquisitions for a total consideration of
GBP43.5m.
Provisional
fair Provisional
Book value fair
GBPm value adjustments value
------------------------------------------ ------ ------------ -----------
Net assets acquired
Intangible assets - 1.5 1.5
Property, plant and equipment 98.4 0.6 99.0
Cash 5.5 - 5.5
Other current and non-current assets 0.4 0.4 0.8
Current liabilities (6.6) - (6.6)
Non-current liabilities (60.2) - (60.2)
------------------------------------------ ------ ------------ -----------
37.5 2.5 40.0
Goodwill arising on acquisition(1) 3.5
------------------------------------------ ------ ------------ -----------
Total consideration 43.5
Less: Fair value adjustment of historical
investment in acquired joint venture -
Less: Contingent consideration -
------------------------------------------ ------ ------------ -----------
43.5
Cash flow on acquisition
Cash paid 43.5
------------------------------------------ ------ ------------ -----------
Net cash outflow 43.5
------------------------------------------ ------ ------------ -----------
1. The goodwill arising on acquisition includes negative
goodwill of GBP0.4m. The negative goodwill has been recognised as
part of the selling, general and administration expenses line item
in the consolidated income statement
The goodwill arising on the above acquisitions reflects the
anticipated future benefits IWG can obtain from operating the
businesses more efficiently, primarily through increasing occupancy
and the addition of value-adding products and services. GBP0.4m of
the above goodwill is expected to be deductible for tax
purposes.
If the above acquisitions had occurred on 1 January 2017, the
revenue and net retained profit arising from these acquisitions
would have been GBP19.6m and GBP3.2m respectively. In the year, the
equity acquisitions contributed revenue of GBP11.6m and net
retained profit of GBP3.3m.
There was GBPnil contingent consideration arising on the 2017
acquisitions. Contingent consideration of GBP2.1m (2016: GBP2.7m)
was also paid during the current year with respect to milestones
achieved on prior year acquisitions.
The acquisition costs associated with these transactions were
GBP1.0m, recorded within administration expenses within the
consolidated income statement.
For a number of the acquisitions in 2017, the fair value of
assets acquired has only been provisionally assessed at the
reporting date. The main changes in the provisional fair values
expected are for the fair value of the leases (asset or liability),
customer relationships and plant, property and equipment. The final
assessment of the fair value of these assets will be made within 12
months of the acquisition date and any adjustments reported in
future reports.
The Group continued to complete acquisition transactions
subsequent to 31 December 2017, which will be accounted for in
accordance with IFRS 3. Due to the timing of these transactions, it
is not practical to disclose the information associated with the
initial accounting
for these acquisitions.
Prior period acquisitions
During the year ended 31 December 2016 the Group made various
individually immaterial acquisitions for a total consideration
of GBP10.8m.
Provisional Final
fair Provisional fair Final
Book value fair value fair
GBPm value adjustments value adjustments value
-------------------------------- ------ ------------ ----------- ------------ ------
Net assets acquired
Intangible assets - 0.1 0.1 0.1 0.2
Property, plant and equipment 2.4 - 2.4 0.2 2.6
Cash 1.2 - 1.2 - 1.2
Other current and non-current
assets 2.6 - 2.6 0.3 2.9
Current liabilities (5.4) - (5.4) (0.4) (5.8)
Non-current liabilities (0.1) - (0.1) - (0.1)
-------------------------------- ------ ------------ ----------- ------------ ------
0.7 0.1 0.8 0.2 1.0
Goodwill arising on acquisition 10.0 (0.2) 9.8
-------------------------------- ------ ------------ ----------- ------------ ------
Total consideration 10.8 - 10.8
Less: Fair value adjustment of historical
investment in acquired joint venture (2.5) (2.5)
Less: Contingent consideration (0.9) (0.9)
7.4 7.4
Cash flow on acquisition
Cash paid 7.4 7.4
-------------------------------- ------ ------------ ----------- ------------ ------
Net cash outflow 7.4 7.4
-------------------------------- ------ ------------ ----------- ------------ ------
The goodwill arising on the above acquisitions reflects the
anticipated future benefits IWG can obtain from operating the
businesses more efficiently, primarily through increasing occupancy
and the addition of value-adding products and services. GBP0.1m of
the above goodwill is expected to be deductible for tax
purposes.
If the above acquisitions had occurred on 1 January 2016, the
revenue and net retained profit arising from these acquisitions
would have been GBP10.1m and GBP0.2m respectively. In the year, the
equity acquisitions contributed revenue of GBP3.7m and net retained
loss of GBP0.5m.
There was GBP0.9m contingent consideration arising on the above
acquisitions.
The acquisition costs associated with these transactions were
GBP0.5m, recorded within administration expenses within the
consolidated income statement.
The prior year comparative information has not been restated due
to the immaterial nature of the final fair value adjustments
recognised in 2017.
28. Capital commitments
2017 2016
GBPm GBPm
----------------------------------------------------------------- ----- -----
Contracts placed for future capital expenditure not provided for
in the financial statements 60.9 42.6
----------------------------------------------------------------- ----- -----
These commitments are principally in respect of fit-out
obligations on new centres opening in 2018. In addition, our share
of the capital commitments of joint ventures amounted to GBPnil at
31 December 2017 (2016: GBPnil).
29. Non-cancellable operating lease commitments
As at the reporting date the Group was committed to making the
following payments in respect of operating leases:
2017 2016
------------------------ ------------------------
Property Other Total Property Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ----- ------- -------- ----- -------
Lease obligations falling
due:
Within one year 914.8 0.5 915.3 882.4 1.3 883.7
Between one and five
years 2,630.5 0.4 2,630.9 2,386.9 1.0 2,387.9
After five years 1,511.3 - 1,511.3 1,170.4 - 1,170.4
-------------------------- -------- ----- ------- -------- ----- -------
5,056.6 0.9 5,057.5 4,439.7 2.3 4,442.0
-------------------------- -------- ----- ------- -------- ----- -------
Non-cancellable operating lease commitments exclude future
contingent rental amounts such as the variable amounts payable
under performance-based leases, where the rents vary in line with a
centre's performance.
The Group's non-cancellable operating lease commitments do not
generally include purchase options nor do they impose
restrictions
on the Group regarding dividends, debt or further leasing.
30. Contingent assets and liabilities
The Group has bank guarantees and letters of credit held with
certain banks, substantially in support of leasehold contracts with
a variety of landlords, amounting to GBP142.7m (2016: GBP151.7m).
There are no material lawsuits pending against the Group.
31. Related parties
Parent and subsidiary entities
The consolidated financial statements include the results of the
Group and its subsidiaries listed in note 32.
Joint ventures
The following table provides the total amount of transactions
that have been entered into with related parties for the relevant
financial year.
Management
fees Amounts Amounts
received owed owed
from by to
related related related
GBPm parties party party
--------------- ---------- -------- --------
2017
Joint ventures 3.0 9.0 2.2
--------------- ---------- -------- --------
2016
Joint ventures 2.9 8.6 8.0
--------------- ---------- -------- --------
As at 31 December 2017, GBPnil of the amounts due to the Group
have been provided for (2016: GBPnil). All outstanding balances
with these related parties are priced on an arm's length basis.
None of the balances are secured.
Key management personnel
No loans or credit transactions were outstanding with Directors
or officers of the Company at the end of the year or arose during
the year that are required to be disclosed.
Compensation of key management personnel (including
Directors)
Key management personnel include those personnel (including
Directors) that have responsibility and authority for planning,
directing and controlling the activities of the Group:
2017 2016
GBPm GBPm
------------------------------- ----- -----
Short-term employee benefits 6.7 9.8
Retirement benefit obligations 0.5 0.5
Share-based payments 1.4 0.5
------------------------------- ----- -----
8.6 10.8
------------------------------- ----- -----
Share-based payments included in the table above reflect the
accounting charge in the year. The full fair value of awards
granted in the year was GBP3.9m (2016: GBP2.9m). These awards are
subject to performance conditions and vest over three, four and
five years from the award date.
Transactions with related parties
During the year ended 31 December 2017 the Group acquired goods
and services from a company indirectly controlled by a Director of
the Company amounting to GBP91,120 (2016: GBP30,228). There was a
GBP9,506 balance outstanding at the year-end (2016: GBP27,720).
All transactions with these related parties are priced on an
arm's length basis and are to be settled in cash. None of the
balances are secured.
32. Principal Group companies
The Group's principal subsidiary undertakings at 31 December
2017, their principal activities and countries of incorporation are
set out below:
% of % of
ordinary ordinary
shares shares
and and
Country votes Country votes
Name of undertaking of incorporation held Name of undertaking of incorporation held
--------------------------- ------------------ --------- ------------------------ ----------------- ---------
Trading companies Management companies
Regus Australia RGN Management
Management Pty Australia 100 Limited Partnership Canada 100
Regus Belgium SA Belgium 100 Regus Paris SAS France 100
Regus do Brasil Franchise International
Ltda Brazil 100 Sarl Luxembourg 100
HQ Do Brazil Administracao
de bens e servicos
Ltda Brazil 100 RBW Global Sarl Luxembourg 100
Regus Service
Centre Philippines
BV Philippines 100
Regus Global Management
Centre SA Switzerland
Regus Business United
Services Limited Kingdom
Regus Group Services United
Ltd Kingdom
Regus Management United
(UK) Ltd Kingdom
Regus Management United
Group LLC States
Regus GmbH & Co.
KG Germany 100 100
Regus HK Management
Ltd Hong Kong 100 100
Regus CME Ireland
Limited Ireland 100 100
Regus Business
Centres Limited Israel 100 100
Regus Business
Centres Italia
Srl Italy 100 100
Open Office K.K. Japan 100
Regus Management Mexico 100 Holding and finance
de Mexico,SA de companies
CV
Regus Amsterdam
BV Netherlands 100
Regus Management
Singapore Pte Ltd Singapore 100 Umbrella Group Luxembourg 100
Regus Management South Umbrella Global
Group (Pty) Ltd Africa 100 Holdings Luxembourg 100
Regus Management
(Sweden) AB Sweden 100 Regus Plc Luxembourg 100
Regus Business Umbrella Holdings
Centers AG Switzerland 100 Sarl Luxembourg 100
United Umbrella International
KBC Holdings Limited Kingdom 100 Holdings AG Switzerland 100
Avanta Managed United Pathway Finance
Offices Ltd Kingdom 100 Sarl Switzerland 100
Stonemartin Corporate United Pathway Finance
Centre Limited Kingdom 100 EUR 2 Sarl Switzerland 100
HQ Global Workplaces United Pathway Finance
LLC States 100 USD 2 Sarl Switzerland 100
RGN-BSuites Holdings, United United
LLC States 100 Regus Group Limited Kingdom 100
RGN National Business United Regus Corporation United
Centre LLC States 100 LLC States 100
Office Suites Plus United
Properties LLC States 100
Regus Business United
Centres LLC States 100
--------------------------- ------------------ --------- ------------------------ ----------------- ---------
33. Key judgemental areas adopted in preparing these
accounts
The preparation of consolidated financial statements in
accordance with IFRS requires management to make certain judgements
and assumptions that affect reported amounts and related
disclosures.
Fair value accounting for business combinations
For each business combination, we assess the fair values of
assets and liabilities acquired. Where there is not an active
market in the category of the non-current assets typically acquired
with a business centre or where the books and records of the
acquired company do not provide sufficient information to derive an
accurate valuation, management calculates an estimated fair value
based on available information and experience.
The main categories of acquired non-current assets where
management's judgement has an impact on the amounts recorded
include tangible fixed assets, customer list intangibles and the
fair market value of leasehold assets and liabilities. For
significant business combinations management also obtains
third-party valuations to provide additional guidance as to the
appropriate valuation to be included in the financial
statements.
Valuation of intangibles and goodwill
We evaluate the fair value of goodwill and other indefinite life
intangible assets to assess potential impairments on an annual
basis, or during the year if an event or other circumstance
indicates that we may not be able to recover the carrying amount of
the asset. We evaluate the carrying value of goodwill based on our
CGUs aggregated at a country level and make that determination
based upon future cash flow projections which assume certain growth
projections which may or may not occur. We record an impairment
loss for goodwill when the carrying value of the asset is less than
its estimated recoverable amount. Further details of the
methodology and assumptions applied to the impairment review in the
year ended 31 December 2017, including the sensitivity to changes
in those assumptions, can be found in note 12.
Impairment of property, plant and equipment
We evaluate the potential impairment of property, plant and
equipment at a centre (CGU) level where there are indicators of
impairment at the balance sheet date. In the assessment of
value-in-use, key judgemental areas in determining future cash flow
projections include: an assessment of the location of the centre;
the local economic situation; competition; local environmental
factors; the management of the centre; and future changes in
occupancy, revenue and costs of the centre.
Tax assets and liabilities
We base our estimate of deferred tax assets and liabilities on
current tax laws and rates and, in certain cases, business plans
and other expectations about future outcomes. Changes in existing
laws and rates, and their related interpretations, and future
business results may affect the amount of deferred tax liabilities
or the valuation of deferred tax assets over time. Our accounting
for deferred tax consequences represents management's best estimate
of future events that can be appropriately reflected in the
accounting estimates.
It is current Group policy to recognise a deferred tax asset
when it is probable that future taxable profits will be available
against which the assets can be used. The Group considers it
probable if the entity has made a taxable profit in the previous
year and is forecast to continue to make a profit in the
foreseeable future. Where appropriate, the Group assesses the
potential risk of future tax liabilities arising from the operation
of its business in multiple tax jurisdictions and includes
provisions within tax liabilities for those risks that can be
estimated reliably. Changes in existing tax laws can affect large
international groups such as IWG and could result in significant
additional tax liabilities over and above those already provided
for.
Onerous lease provisions
We evaluate the performance of centres to determine whether any
leases are considered onerous, i.e. the Group does not expect to
recover the unavoidable lease costs up to the first break point at
the Group's option. A provision for our estimate of the net amounts
payable under the terms of the lease to the first break point,
discounted at an appropriate discount rate, is recognised where
appropriate.
Dilapidations
Certain of our leases with landlords include a clause obliging
the Group to hand the property back in the condition as at the date
of signing the lease. The costs to bring the property back to that
condition are not known until the Group exits the property so the
Group estimates the costs at each balance sheet date. However,
given that landlords often regard the nature of changes made to
properties as improvements, the Group estimates that it is unlikely
that any material dilapidation payments will be necessary. A
provision is recognised for those potential dilapidation payments
when it is probable that an outflow will occur and can be reliably
estimated.
Parent company accounts
Summarised extract of Company balance sheet
(Accounting policies are based on the Swiss Code of
Obligations)
As at As at
31 Dec 31 Dec
2017 2016
GBPm GBPm
------------------------------------------- ------- -------
Trade and other receivables 9.8 8.5
Prepayments 1.1 -
------------------------------------------- ------- -------
Total current assets 10.9 8.5
Investments 2,295.4 2,296.4
------------------------------------------- ------- -------
Total non-current assets 2,295.4 2,296.4
Total assets 2,306.3 2,304.9
Trade and other payables 1.6 0.7
Accrued expenses 1.4 2.6
------------------------------------------- ------- -------
Total short-term liabilities 3.0 3.3
Long-term interest bearing liabilities 106.8 2.6
------------------------------------------- ------- -------
Total long-term liabilities 106.8 2.6
Total liabilities 109.8 5.9
------------------------------------------- ------- -------
Issued share capital 9.2 9.2
Legal capital reserves - -
Reserves from capital contributions 2,238.7 2,295.4
Retained earnings (3.0) -
Loss for the year (8.8) (2.7)
Treasury shares (39.6) (2.9)
------------------------------------------- ------- -------
Total shareholders' equity 2,196.5 2,299.0
Total liabilities and shareholders' equity 2,306.3 2,304.9
------------------------------------------- ------- -------
Approved by the Board on 6 March 2018
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Financial Officer
and Chief Operating Officer
Accounting policies
Basis of preparation
These financial statements were prepared in accordance with
accounting policies based on the Swiss Code of Obligations.
The Company is included in the consolidated financial statements
of IWG plc.
The balance sheet has been extracted from the non-statutory
accounts of IWG plc for the year ended 31 December 2017, which are
available from the Company's registered office, Dammstrasse 19,
CH-6300, Zug, Switzerland.
FIVE-YEAR SUMMARY
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2017 2016 2015 2014 2013
GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- --------- --------- --------- ---------
Income statement (full year
ended)
Revenue 2,352.3 2,233.4 1,927.0 1,676.1 1,533.5
Cost of sales (1,950.7) (1,784.6) (1,498.6) (1,293.0) (1,159.7)
----------------------------------- --------- --------- --------- --------- ---------
Gross profit (centre contribution) 401.6 448.8 428.4 383.1 373.8
Administration expenses (237.6) (262.8) (268.6) (279.6) (283.1)
Share of post-tax (loss)/profit
of joint ventures (0.8) (0.8) 0.3 0.8 0.1
----------------------------------- --------- --------- --------- --------- ---------
Operating profit 163.2 185.2 160.1 104.3 90.8
Finance expense (14.1) (11.6) (15.0) (17.3) (10.5)
Finance income 0.3 0.1 0.6 0.1 1.2
----------------------------------- --------- --------- --------- --------- ---------
Profit before tax for the
year 149.4 173.7 145.7 87.1 81.5
Income tax expense (35.4) (34.9) (25.8) (17.2) (14.6)
----------------------------------- --------- --------- --------- --------- ---------
Profit after tax for the
year 114.0 138.8 119.9 69.9 66.9
----------------------------------- --------- --------- --------- --------- ---------
Earnings per ordinary share
(EPS):
Basic (p) 12.4p 14.9p 12.8p 7.4p 7.1p
Diluted (p) 12.3p 14.7p 12.6p 7.2p 7.0p
Weighted average number
of shares outstanding ('000s) 915,676 929,830 933,458 944,082 943,775
----------------------------------- --------- --------- --------- --------- ---------
Balance sheet data (as at)
Intangible assets 712.1 738.1 666.0 549.9 491.7
Property, plant and equipment 1,367.2 1,194.4 917.0 718.8 608.7
Deferred tax assets 23.0 29.3 36.4 40.0 33.4
Other assets 702.7 649.2 644.3 565.2 423.8
Cash and cash equivalents 55.0 50.1 63.9 72.8 84.7
----------------------------------- --------- --------- --------- --------- ---------
Total assets 2,860.0 2,661.1 2,327.6 1,946.7 1,642.3
----------------------------------- --------- --------- --------- --------- ---------
Current liabilities 1,224.7 1,183.1 1,085.7 891.9 758.8
Non-current liabilities 907.6 736.0 658.2 517.4 369.3
Equity 727.7 742.0 583.7 537.4 514.2
----------------------------------- --------- --------- --------- --------- ---------
Total equity and liabilities 2,860.0 2,661.1 2,327.6 1,946.7 1,642.3
----------------------------------- --------- --------- --------- --------- ---------
SEGMENTAL ANALYSIS
Segmental analysis - management basis (unaudited)
Asia United
Americas EMEA Pacific Kingdom Other Total
2017 2017 2017 2017 2017 2017
--------------------------- -------- ------- -------- -------- ----- -------
Mature(1)
Workstations(4) 165,329 87,102 87,414 69,233 - 409,078
Occupancy (%) 75.8% 77.3% 73.0% 72.1% - 74.9%
Revenue (GBPm) 926.4 486.1 351.1 398.2 2.9 2,164.7
Contribution (GBPm) 177.6 105.6 74.3 79.2 (0.2) 436.5
REVPOW (GBP) 7,392 7,220 5,504 7,977 - 7,065
2016 Expansions(2)
Workstations(4) 14,593 9,870 8,850 3,929 - 37,242
Occupancy (%) 55.8% 64.6% 52.9% 62.9% - 58.2%
Revenue (GBPm) 40.8 29.1 23.0 13.2 0.4 106.5
Contribution (GBPm) (9.6) (1.4) (1.4) (0.4) 0.2 (12.6)
2017 Expansions(2)
Workstations(4) 7,306 7,380 3,694 6,640 - 25,020
Occupancy (%) 27.0% 39.0% 25.2% 73.1% - 42.5%
Revenue (GBPm) 10.9 20.2 5.2 14.4 0.5 51.2
Contribution (GBPm)(5) (14.3) (5.5) (5.1) 2.6 1.8 (20.5)
Closures
Workstations(4) 1,450 1,552 1,032 1,716 - 5,750
Occupancy (%) 66.8% 51.7% 64.9% 63.1% - 61.3%
Revenue (GBPm) 6.7 5.1 3.9 14.2 - 29.9
Contribution (GBPm) (0.5) (1.6) (1.9) 2.2 - (1.8)
Total
Workstations(4) 188,678 105,904 100,990 81,518 - 477,090
Occupancy (%) 72.3% 73.1% 69.4% 71.5% - 71.7%
Revenue (GBPm) 984.8 540.5 383.2 440.0 3.8 2,352.3
Contribution (GBPm) 153.2 97.1 65.9 83.6 1.8 401.6
REVPAW (GBP) 5,219 5,104 3,794 5,398 - 4,931
--------------------------- -------- ------- -------- -------- ----- -------
Period end workstations(6)
Mature 166,755 89,656 87,987 70,254 - 414,652
2016 Expansions 14,328 9,684 9,043 4,019 - 37,074
2017 Expansions 12,948 16,162 7,497 12,700 - 49,307
Total 194,031 115,502 104,527 86,973 - 501,033
--------------------------- -------- ------- -------- -------- ----- -------
Segmental analysis - management basis (unaudited)
Asia United
Americas EMEA Pacific Kingdom Other Total
2016 2016 2016 2016 2016 2016
-------------------- -------- ------ -------- -------- ----- -------
Mature(1)
Workstations(4) 162,875 85,793 87,569 64,137 - 400,374
75.5
Occupancy (%) % 75.9% 71.8% 75.6% - 74.8%
Revenue (GBPm) 897.4 461.8 342.1 409.9 6.8 2,118.0
Contribution (GBPm) 173.8 106.6 69.9 95.9 6.8 453.0
REVPOW (GBP) 7,298 7,092 5,441 8,454 - 7,072
2016 Expansions(2)
Workstations(4) 7,723 3,903 4,325 3,080 - 19,031
Occupancy (%) 30.4% 35.0% 31.0% 57.2% - 35.8%
Revenue (GBPm) 12.1 6.2 7.6 9.4 1.5 36.8
Contribution (GBPm) (12.8) (5.1) (3.3) (0.1) 1.5 (19.8)
Closures(3)
Workstations(4) 3,330 2,290 3,236 5,279 - 14,135
Occupancy (%) 70.8% 62.5% 75.8% 77.4% - 73.0%
Revenue (GBPm) 13.5 8.8 13.5 42.8 - 78.6
Contribution (GBPm) - 0.1 0.9 14.6 - 15.6
Total
Workstations(4) 173,928 91,986 95,130 72,496 - 433,540
Occupancy (%) 73.4% 73.8% 70.1% 75.0% - 73.0%
Revenue (GBPm) 923.0 476.8 363.2 462.1 8.3 2,233.4
Contribution (GBPm) 161.0 101.6 67.5 110.4 8.3 448.8
REVPAW (GBP) 5,307 5,183 3,818 6,374 - 5,152
-------------------- -------- ------ -------- -------- ----- -------
Notes:
1. The mature business comprises centres not opened in the
current or previous financial year
2. Expansions include new centres opened and acquired
businesses
3. A closure for the 2016 comparative data is defined as a
centre closed during the period from 1 January 2016 to 31 December
2017
4. Workstation numbers are calculated as the weighted average
for the year
5. 2017 expansions includes any costs incurred in 2017 for
centres which will open in 2018
6. Workstations available at period end
POST-TAX CASH RETURN ON NET INVESTMENT
The purpose of this unaudited page is to reconcile some of the
key numbers used in the returns calculation back to the Group's
audited statutory accounts, and thereby, give the reader greater
insight into the returns calculation drivers. The methodology and
rationale for the calculation are discussed in the Chief Financial
Officer's review on page 32 of this Annual Report.
2014 2015 2016 2017 2018
Description Reference Aggregation Expansions Expansions Expansions Expansions Closures Total
--------------- ---------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Post-tax cash return
on net investment 18.3% 7.3% (9.6%) (6.9%) - - 11.2%
--------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Income
statement,
Revenue p80 1,857.6 307.1 106.5 51.2 - 29.9 2,352.3
Income
Centre statement,
contribution p80 400.2 36.3 (12.6) (20.2) (0.3) (1.8) 401.6
EBIT
Loss on reconciliation
disposal (analysed
of assets below) 0.5 - - - - 3.8 4.3
EBIT
reconciliation
Impairment of (analysed
assets below) - - - - - 1.7 1.7
--------------- ---------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Underlying centre
contribution 400.7 36.3 (12.6) (20.2) (0.3) 3.7 407.6
Selling,
general
and Income
administration statement,
expenses(1) p80 (161.6) (39.9) (20.5) (13.2) (0.1) (2.3) (237.6)
--------------- ---------------- ------------ ----------- ----------- ----------- ----------- -------- -------
EBIT
reconciliation
(analysed
EBIT below) 239.1 (3.6) (33.1) (33.4) (0.4) 1.4 170.0
Depreciation
and Note 5,
amortisation p93 142.0 36.6 19.4 11.6 - 3.4 213.0
Amortisation of
partner Note 5,
contributions p93 (42.0) (8.6) (6.4) (3.4) - (0.2) (60.6)
Amortisation of
acquired lease
fair value Note 5,
adjustments p93 (4.3) 0.7 0.1 - - (0.1) (3.6)
--------------- ---------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Non-cash items 95.7 28.7 13.1 8.2 - 3.1 148.8
Taxation(2) (47.9) 0.7 6.6 6.7 0.1 (0.3) (34.1)
--------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Adjusted net cash
profit 286.9 25.8 (13.4) (18.5) (0.3) 4.2 284.7
Capital
Maintenance expenditure
capital (analysed
expenditure below) 87.0 8.6 - - - - 95.6
Partner
contributions
Partner (analysed
contributions below) (20.2) (1.9) - - - - (22.1)
--------------- ---------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Net maintenance
capital expenditure 66.8 6.7 - - - - 73.5
--------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Post-tax cash return 220.1 19.1 (13.4) (18.5) (0.3) 4.2 211.2
--------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Capital
expenditure
Growth capital (analysed
expenditure below) 1,425.9 328.6 197.9 343.7 14.0 - 2,310.1
Partner
contributions
Partner (analysed
contributions below) (219.9) (65.9) (58.2) (74.9) (0.6) - (419.5)
--------------- ---------------- ------------ ----------- ----------- ----------- ----------- -------- -------
Net investment 1,206.0 262.7 139.7 268.8 13.4 - 1,890.6
--------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
1. Including research and development expenses
2. Based on EBIT at the Group's long-term effective tax rate of
20%
2017
2014 2015 2016 2017 2018
Movement in capital expenditure Aggregation Expansions Expansions Expansions Expansions Closures Total
-------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
December 2016 1,454.4 325.0 183.7 30.0 - - 1,993.1
2017 Capital expenditure(3) 3.7 6.7 15.0 304.2 14.0 - 343.6
Properties acquired - - - 9.5 - - 9.5
Centre closures(4) (32.2) (3.1) (0.8) - - - (36.1)
-------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
December 2017 1,425.9 328.6 197.9 343.7 14.0 - 2,310.1
-------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -------
3. 2018 expansions relate to costs and investments incurred in
2017 for centres which will open in 2018
4. The growth capital expenditure for an estate is reduced by
the investment in centres closed during the year, but only where
that investment has been fully recovered
2017
2014 2015 2016 2017 2018
Movement in partner contributions Aggregation Expansions Expansions Expansions Expansions Closures Total
---------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -----
December 2016 221.9 66.0 52.9 3.3 - - 344.1
2017 Partner contributions 2.4 0.5 5.5 71.6 0.6 - 80.6
Centre closures(5) (4.4) (0.6) (0.2) - - - (5.2)
---------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -----
December 2017 219.9 65.9 58.2 74.9 0.6 - 419.5
---------------------------------- ------------ ----------- ----------- ----------- ----------- -------- -----
5. The partner contributions for an estate are reduced by the
partner contributions for centres closed during the year
2017
EBIT reconciliation Reference GBPm
---------------------------------- ------------ -----
EBIT 170.0
Note 5,
Loss on disposal of assets p93 (4.3)
Note 5,
Impairment of assets p93 (1.7)
Income
statement,
Share of profit in joint ventures p80 (0.8)
---------------------------------- ------------ -----
Income
statement,
Operating profit p80 163.2
---------------------------------- ------------ -----
2017
Partner contributions Reference GBPm
----------------------------------------- ---------- ------
Opening partner contributions 333.9
------
Note 17,
* Current p102 68.5
Note 18,
* Non-current p102 265.4
------
Acquired in the period -
Received in the period 102.7
------
* Maintenance partner contributions 22.1
* Growth partner contributions 80.6
------
Note 5,
Utilised in the period p93 (60.6)
Exchange differences (23.0)
----------------------------------------------------- ------
Closing partner contributions 353.0
----------------------------------------------------- ------
Note 17,
* Current p102 59.2
Note 18,
* Non-current p102 293.8
------
2017
Capital expenditure Reference GBPm
------------------------------------------------- ------------ -----
CFO review,
Maintenance capital expenditure p36 95.6
CFO review,
Growth capital expenditure p36 353.1
-----
* 2017 Capital expenditure 343.6
* Properties acquired 9.5
--------------------------------------------------------------- -----
Total capital expenditure 448.7
Analysed as
Cash flow,
* Purchase of subsidiary undertakings p84 40.1
Cash flow,
p84
Note 14,
* Purchase of property, plant and equipment p101 344.9
Cash flow,
p84
Note 13,
* Purchase of intangible assets p100 3.6
* Settlement of acquired debt(6) 60.1
--------------------------------------------------------------- -----
6. The acquired debt of GBP60.1m is included in the repayment of
loans in the Group Cash Flow Statement on page 84
Directors' statements
Statement of Directors' responsibilities in respect of the
Annual Report and financial statements
The Directors are responsible for preparing the Annual Report
and the Group financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare the Group
financial statements for each financial year. Under that law, they
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by the EU and applicable law.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and its profit or loss
for the period. In preparing each of the Group financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that
-- are reasonable and prudent;
-- for the Group financial statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the parent
company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and which disclose with reasonable accuracy at any
time the financial position of the Group and to enable them to
ensure that its financial statements comply with the Companies
(Jersey) Law 1991 and Article 4 of the IAS Regulation. They have
general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report, a Strategic Report,
a Remuneration Report and a Corporate Governance Statement that
comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's websites.
Legislation in the UK and Jersey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Statutory statement as to disclosure to auditor
The Directors who held office at the date of approval of these
Directors' statements confirm that:
-- so far as they are each aware, there is no relevant audit
information of which the Group's auditor is unaware; and
-- each Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Group's auditor is
aware of that information.
These financial statements have been approved by the Directors
of the Company. The Directors confirm that the financial statements
have been prepared in accordance with applicable law and
regulations.
Statement of responsibility
We confirm that to the best of our knowledge:
-- the financial statements prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Group;
-- the Directors' Report, including content contained by
reference, includes a fair review of the development and
performance of the business and the position of the Group taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- the Annual Report and financial statements, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
By order of the Board
Mark Dixon
Chief Executive Officer
Dominik de Daniel
Chief Financial Officer
and Chief Operating Officer
6 March 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JAMPTMBMMBIP
(END) Dow Jones Newswires
March 06, 2018 02:00 ET (07:00 GMT)
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