ANNUAL REPORT
AND ACCOUNTS 2018
REDEFINING
THE WORLD OF
WORK
2018 PERFORMANCE HIGHLIGHTS
Net growth capital investment (£m)
STRATEGIC REPORT
£332.0m
18
17
16
162.3
Net growth capital investment
332.0
272.5
Number of locations
3,306
18
17
16
3,306
3,125
2,926
Group revenue development (£m)
£2,535.4m
18
17
16
2,535.4
2,352.3
2,233.4
EBITDA development (£m)
£389.9m
18
17
16
389.9
376.2
379.7
Shareholder returns (£m)
£93.9m
18
17
16
93.9
99.6
78.8
Dividends paid in year
Share repurchases
2018 Post-tax cash return on net
investment by year of opening (%)
20.6%1
(13.0)
17
16
15
14
13 and before
18
0.0
0.6
7.4
14.7
20.6
1. In respect of locations opened on or before 31 December 2013
1
2
3
4
10
12
14
18
20
22
28
30
34
42
44
Introduction
Who we are
Investment case
Redefining the world of work
Market review
Our business model
Our brands
How we work
Chairman’s statement
Chief Executive Officer’s review
Our strategic objectives and KPIs
Chief Financial Officer’s review
Risk management and principal risks
Our people
Corporate and social responsibility
GOVERNANCE
50
52
57
59
63
78
80
Board of Directors
Corporate governance
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Directors’ report
Directors’ statements
FINANCIAL STATEMENTS
81
85
86
87
Auditor’s report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement of changes
in equity
Consolidated balance sheet
Consolidated statement of cash flows
Notes to the accounts
88
89
90
131 Parent company accounts
132 Segmental analysis
134 Post-tax cash return on net investment
136 IFRS 16 pro forma statements
138 Five-year summary
139 Glossary
140 Shareholder information
Turn to page 33 for details on how we calculate
our post-tax cash return on net investment.
A glossary is included on page 139 which defines
various alternative measures used to provide
useful and relevant information.
Please visit our website iwgplc.com
REDEFINING
THE WORLD OF
WORK
The world of work is changing – fast and forever.
And IWG is at the forefront of the flexible
workspace revolution that’s making it possible for
businesses and individuals everywhere to take a
new approach to the traditional working day. Thanks
to our brands, worldwide footprint and highly
efficient operating platform, every day millions of
people can work precisely where, when and how
they choose, enabling them to have…
...a great day at work.
1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
WHO WE ARE
LEADING THE
GLOBAL WORKSPACE
REVOLUTION
We continue to lead the workspace revolution.
We are helping more than 2.5 million people and
their businesses work more productively,
right across the planet.
Our customers – freelancers, startups, SMEs and
big enterprises – want a choice of workspaces and communities
to match their wide range of different needs.
IWG provides that choice.
By offering a wide range of workspace options through our brands, we
can cater for the different and varied requirements of all customers – whether
that’s access to an individual co-working space, a business lounge or an entire
office suite. And we can offer this across the world.
In doing so, we help businesses perform better. Be more flexible and agile.
Better able to meet their growth and development ambitions. And
staffed by more fulfilled, effective and loyal people.
Our brands
Work, meet and
connect wherever your
business takes you
Your key to the
world’s ultimate
business locations
Creative spaces
with a unique
entrepreneurial spirit
Where the real
work gets done
The home for
a rewarding
business lifestyle
2
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
INVESTMENT CASE
WHO WE ARE
INVESTING IN OUR STRENGTHS
IWG HAS BEEN HELPING PEOPLE WORK
MORE PRODUCTIVELY FOR 30 YEARS.
NETWORK
3,306
locations in more than
110 countries.
1,100
cities right across
the globe.
10,000
employees supporting
local and international
businesses.
INVESTMENT IN TECHNOLOGY
EXPANDING NETWORKS
24/7
customer service and access to the
IWG app enable customers to use
our services easily and whenever
it suits them.
of location growth
delivered through
partnerships in the year
⅓
We work with property owners and investors
to help them tap into the increasing success of
the flexible workspace industry.
REVENUE GROWTH
OPERATING PROFIT
Revenue growth provides us
with the strategic opportunity to
invest in our business and deliver
long-term, sustainable value for
our shareholders.
£154.1m
COST EFFICIENCIES
GLOBAL FOOTPRINT
Enabling businesses everywhere to
pay only for the space they need,
scaling up or down at will and boosting
productivity in their choice of
stimulating work environment.
57m
square feet of office,
co-working and meeting space.
3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS REDEFINING THE WORLD OF WORK
LEADING THE
GLOBAL WORKSPACE
PLATFORM
IWG has more locations in more cities and
countries worldwide than anyone else. More brands,
more formats, more investment in technology and
customer experience, more awareness, more
customers and more potential for growth.
For more than a decade, annual growth in the global flexible workspace
market has averaged 13%2. It’s even faster in cities like Amsterdam, San
Francisco and Singapore. And the scope for growth is increasing too – the
proportion of occupiers saying flexibility is key to meeting their real estate
objectives has risen by 14 percentage points3 in just 12 months.
2. The Flexible Revolution, CBRE research, 2017
3. CBRE EMEA Occupier Survey 2018
4
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
HQ – Wallisellen, Switzerland
Regus – Taichung, Taiwan
Spaces – California, USA
No 18 – Stockholm, Sweden
5
REDEFINING THE WORLD OF WORK
REDEFINING
HOW BUSINESSES
WORK
Powerful economic, regulatory and technological
forces have liberated organisations of all sizes to
transform their approach to workspace. As a result,
more and more are embracing the strategic,
operational and financial benefits of the
flexible workspace revolution.
It’s no surprise that the flexible workspace market has grown by more
than 20% over the last seven years, or that 84%4 of corporates believe this
flexibility is a permanent feature of the workspace landscape. In fact, recent
estimates suggest that by 2030 around a third of all corporate
workspace will be flexible.
The benefits are undeniable. Getting closer to customers, suppliers and
talent pools. Reducing costs, and rapidly scaling up and down as required.
Focusing on true business priorities, not real-estate issues.
Equally important is the ability to drive improved workforce productivity
and employee engagement.
4. The Flexible Revolution, CBRE research 2017
5. Colliers, Flexible Workspace Report 2018, UK
6. JLL 2018 Flexible Workspace Market Forecast
6
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
HOW WE’RE SUPPORTING BUSINESSES
At IWG, we’re doing more than anybody else to deliver these
benefits. More centres, offices, co-working and drop-in
workspaces across 3,306 locations in over 110 countries. More
brands, ensuring we have the workspace solution for every
business. More advanced technology and apps, minimising
admin and streamlining processes. And more investment
in our workspaces via our efficient platform and systems,
making certain we deliver what our customers want.
“ As a start-up business you don’t have the
capital to pay for a fixed lease. We were able
to set up our business in a period of nine
weeks from start to finish. Now we have the
advantage by meeting our clients at a Regus
or Spaces location most convenient to them.
It truly is plug and play.”
Sabina Bovetti,
Inizi Human Capital Consulting
Spaces – Rotterdam, Netherlands
56%
of Asia’s top 200 occupiers are
already using flexible workspace
and 91% are considering it5
22%
the growth rate of flexible office space
over seven years. 1%: the growth rate
of traditional office space over the
same period6
7
REDEFINING THE WORLD OF WORK
REDEFINING
HOW PEOPLE
WORK
Increasingly, people are free to work in the way
they choose, liberated by mobile technology and
a changing culture to decide precisely where,
how and when. This demand is transforming
the provision and nature of workspace.
Flexibility is driving a new, location-agnostic blend of work and personal
time that’s rapidly becoming the established norm. Already, less than 20%
of adults want to work a traditional 9 to 5 day, and 60% see a convenient
work location as a key component of a good job.
And the overall trend is set to accelerate as the forces of change become even
more powerful: 80% of the world’s adult population will own a smartphone
by 2020, a quarter of all mobile traffic will be on 5G networks by 20247.
7. Ericsson Mobile Data Traffic Growth Outlook, November 2018
8. MacDonald’s UK: Flexible Working Survey 2018
9. PowWowNow, reported in Real Business, Demand for flexible working among UK employees is on the rise
8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Spaces – California, USA
HOW WE’RE SUPPORTING PROFESSIONALS
IWG’s unbeatable range of brands ensures people across the
world can always find what they need. Whether they’re
working close to home, setting up somewhere new or hosting
a meeting on the other side of the world, we can meet every
demand – from a room for an hour to a building for a year.
“ Working with Regus has helped us to attract
and retain talented individuals looking for a
flexible working policy.”
Claire Cobbledick,
Director of Gumtree, SA
69%
of employees who work
flexibly say it encourages them
to stay in a job for longer8
75%
of employees favour flexible
working, up from 70% in 20179
53%
of all US workers value
the flexibility to work in
different locations9
9
MARKET REVIEW
RESPONDING TO A
CHANGING WORLD
KEY DRIVERS
CHANGING GLOBAL ECONOMY
Large companies across the world are responding to
significant changes in the global economy by
re-engineering their approach to office provision and
real estate assets to ensure the balance sheet reflects
their business priorities. In addition, a new accounting
standard could make workspace contracts more attractive
for some businesses.
GROWING CUSTOMER DEMAND
Customers have responded to the changing environment by
demanding flexible working options in order to use their time
more productively, in both working and personal lives.
RAPIDLY CHANGING TECHNOLOGY
Smart technology and ever-present connectivity
continue to liberate people to choose where, how
and when they work.
INCREASING COMPETITION
The growing market for flexible workspace has driven
more competition as workspace providers offer increasingly
differentiated offers and related services.
10. CBRE EMEA Occupier survey 2017
1 0
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
WHAT THIS MEANS AND
HOW WE ARE RESPONDING
It is anticipated that 30% of the global corporate real estate
market will be formed of flexible space by 203010. We will
continue to take a prudent approach in meeting this global
demand for flexible workspace through strategies like
partnering and joint ventures.
Three key strengths will underpin IWG’s leadership position:
our proven ability to keep pace with technological change,
through world-class IT infrastructure and continuous service
innovation; the constant listening to customers and insight
that enable us to deliver against fast-changing expectations;
and our success in creating added value services for
customers, from startups to corporates.
People increasingly expect high-quality personalised service
as the norm. Accessibility and flexibility are becoming core
elements of workspace provision. IWG enables flexibility to
flourish at the heart of what we do. We enable our customers
to make rapid shifts in location, scale, strategy, technological
resource, customer focus and product development. It brings
them the flexibility they need to respond proactively to
fast-changing markets, consumer habits and
competitor activity.
In a fast-changing and unpredictable business environment,
it’s hard for companies to identify the investments in
technology they should be making. Merely keeping up with
advancements is costly and the impact of digital interruption
makes the need to maintain services mission critical. We are
continuously investing to provide world-class, resilient IT
infrastructure and connectivity at all our centres, spreading
the benefit of continuous advancement across our client
base. And, through understanding the needs and aspirations
of many thousands of clients across the world, we have
privileged insight into the direction businesses want
technology to take.
IWG has many advantages over other players. Our reach is
global, enabling us to ramp up and downsize in local markets
as conditions change, and our operating platform is the most
efficient in the industry. We have a multi-brand portfolio
that enables broader customer reach and more precise
segmentation which helps us to develop new margin-
accretive ancillary and lifestyle services. Moving forward, we
will seek to grow an increasing proportion of our business
through partnering and more prudent use of our capital.
Spaces – Fort Collins, USA
Regus – Bremen, Germany
1 1
OUR BUSINESS MODEL
CREATING VALUE
FOR THE LONG TERM
Our vision is to lead the global workspace revolution and provide our
customers with a great day at work. Our business model is delivered through an
efficient platform creating value for shareholders and reinvestment for the
benefit of our customers.
WHAT WE DO
HOW WE DO IT
We provide flexible workspace for over 2.5 million
customers across the globe. We work with landlords and
property owners in order to provide the largest network
of workspace for businesses of all shapes and sizes.
We can provide local, national and international solutions
and, through our different brands, can tailor workspaces
according to the needs of our customers. That means we
support our customers as they scale up or down, move
location and reconfigure existing workspace. We can also
provide the additional support services that are critical
to some businesses such as workplace recovery, a virtual
office or administrative support.
Our aim is to make sure we provide an ideal working
environment so our customers can have a great day at
work every day.
KEY INPUTS
Our people
Talented and experienced professionals who drive the
success of our business
Our brands
Segmenting the market for maximised uptake and returns
Our networks
National and international, empowering businesses and
individuals to work productively, anywhere in the world
Our formats
Versatile, inspiring and practical, driving productivity
for every type of customer
Our platform
Connecting the property industry, by providing a
world-class and easy-to-use infrastructure with simple
points of access and a great user experience
OUR STRATEGIC DRIVERS
• Delivering attractive,
sustainable returns
• Delivering profitable
growth
• Cash generation
• Cost leadership
• Developing multi-brand
networks
See page 28 to read more about our strategy
OUR COMPETITIVE OPERATING MODEL
Operational efficiency
We focus on optimising the performance and operational
effectiveness of each of our locations which, combined with
a disciplined and focused approach across the business to
overhead costs, enables us to continue delivering
long-term value.
IWG’s operational efficiency is underpinned by its scaled
platform and centralised support functions.
Scaled platform
IWG plc and its commercial brands operate from a single,
scaled global platform that enables us to provide workplace
solutions across the world efficiently according to a
customer’s requirements. This centralised platform serves
our different brands, allowing us to differentiate what we
offer to our customers more efficiently.
1 2
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
VALUE CREATED
LONG-TERM SHAREHOLDER VALUE
We aim to deliver sustainable returns for shareholders
over the long term through a progressive dividend policy.
We take a prudent approach to investments in our
business, ensuring strong cash generation and attractive
post-tax cash returns in order to provide sufficient capital
to meet growth demand and changing customer needs.
28.6p
Cash flow per share
pre-growth, up 22%
6.3p
Dividend per
share, up 11%
INVEST IN GROWTH
The flexible workspace market continues to grow at
c.13% and to meet future workspace demand we will
work with franchisees and property owners to optimise
our capital consumption and manage our market risk.
STRONG GOVERNANCE AND RISK
MANAGEMENT SYSTEM
Our operating model is underpinned by strong and robust
governance and a rigorous risk management model that
ensures the business is being managed prudently and
risks appropriately assessed whilst ensuring that we still
benefit from an entrepreneurial spirit and our
ambitions for future growth.
Centralised support functions
IWG’s support functions are centralised to ensure resources
and costs are controlled and utilised to maximise value for
customers and shareholders. From procurement to
marketing, the support functions benefit from economies
of scale and global reach as well as providing the business
with a consistency of support and service.
Multi-branded
We provide our customers with a choice of workspace
solutions through our different brands. We recognise there
is no ‘one-size fits all’ solution and therefore we offer
different formats and workspaces to accommodate the
varied needs of our customers.
See page 14 for details about our brands
See page 19 for stakeholders
See pages 18-19 for value added for stakeholders
1 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR BRANDS
CREATING VALUE
THROUGH OUR BRANDS
We give our customers the freedom to choose a way of working that works for
their business, through a range of brands designed to serve their unique needs.
Lille, France
Regus is the leading global workspace
provider. We have built an unparalleled
network of office, co-working and
meeting spaces for companies and
individuals to use in nearly every major
city in the world. It’s an infrastructure that
enables people to work wherever they
need – closer to home, closer to clients,
closer to new opportunities.
Our network of workspaces enables
businesses to operate without the need
for set-up costs or capital investment.
It provides them with immediate cost
benefits and the opportunity to fully
outsource their office portfolio. By
removing the administrative burden
of managing and maintaining their
workspace, people can work free from
distraction and focus more time on doing
what they do best.
Bertrange, Luxembourg
London, UK
1 4
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Stockholm, Sweden
Stockholm, Sweden
No18 is a cosmopolitan members’ club for businesses, with
beautifully designed lounges, meeting rooms and high-end
workspaces tailored to support all our members’ needs. It’s
a rewarding setting for both work and leisure, and a place to
call home.
No18 locations are a blend of workplace and residence, with
a unique eclectic aesthetic – aspirational environments with
a friendly and inspiring atmosphere. We combine professional
service, a high attention to detail, and state of the art
technology to create a truly enriching experience.
Our holistic philosophy, with a focus on community and
well-being, enables our members to enjoy a healthy, productive
and rewarding business lifestyle.
Stockholm, Sweden
1 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR BRANDS CONTINUED
Glasgow, UK
Centurion, South Africa
Madrid, Spain
We believe work is about people and ideas. Our Spaces are
inhabited by forward thinkers, innovators and game changers
who are confident in achieving their goals. Whether a small
business, entrepreneur or a corporate intrapreneur, at Spaces
we help our community to expand their horizon.
Our free-spirited vibe attracts an energetic community of
positive and open-minded business thinkers who love to meet
new people. The full programme of professional events and
hospitality services, and the inspiring sophisticated European
design of our business clubs, involves people in the buzz and
energy of Spaces, and makes them feel at home.
By creating dynamic workspaces with a unique and
entrepreneurial spirit we help people think, create and
collaborate while our friendly team sees to all of the background
logistics and services. At Spaces we make sure that our
community can focus on driving their business forward.
1 6
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Reims, France
HQ creates professional environments where real work gets
done – practical places with all the essentials businesses need,
set up and ready-to-go.
Our workspaces are in convenient locations across a growing
number of towns and cities. Inside, our spaces are designed for
productivity, with no hassles, tech issues or holdups. We take
care of everything so our customers can focus without
interruption on growing their business and getting important
work done.
From major businesses to freelancers, we provide a home for
everyone. Whether a workspace for one or 1,000 people, our
flexible terms and simple pricing ensure our space works
for everybody.
Cancun, Mexico
Vienna, Austria
1 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS HOW WE WORK
CREATING VALUE THROUGH
REDEFINING WORKSPACES
Customised workspace for rent wherever and whenever it’s needed.
Offices available by the day, by the week or by the year. Offices with everything
included – high-speed internet, office furniture and utilities.
People just show up and get to work.
08 04
Ready-to-go offices
Pay-as-you-go offices available as and
when you need them.
Business lounge
A worldwide network of drop-in
workspaces in key business locations,
equipped with high-speed internet,
snacks and comfortable furniture.
Workplace recovery
Keeping business going in the face of
disaster – access to a private office,
laptop and phone line assures business
continuity within 24 hours.
1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
08 04
Private office
A private office dedicated to you
and your business.
Meeting room
Professional space to meet, from
presentations and interviews to
conferences and board meetings.
Optional extras include catering,
coffee and projection equipment.
Co-working space
Workspace in a shared environment
– customers can benefit from our
first-class support as well as the
opportunity to share ideas and
experience with others.
Virtual office
An instant presence anywhere –
includes call answering and mail
handling with a professional
business address.
ADDING VALUE FOR
STAKEHOLDERS
PARTNERS
We can offer landlords of all sizes
and anywhere in the world exciting
opportunities to achieve and sustain
reliable revenue streams from their
property assets. Depending upon
individual risk profiles and preferences,
we can tailor our partnership
relationships to fit any requirements
from simple fit-outs to revenue and
profit sharing arrangements.
CUSTOMERS
Working with IWG helps corporate
customers in many ways, from better
talent attraction and retention to
reduced real-estate costs and an
optimised balance sheet. For smaller
businesses, including freelancers,
startups and expanding companies
in local and international growth
markets, we provide a global location
footprint that’s supported by high-
quality, hassle-free customer service.
EMPLOYEES
We recognise the importance that
working environment plays in
building employee loyalty. We have
frontline people with many years’
experience of meeting customer
expectations while ensuring
sustainable rental yields for our
partners. Our world-class operating
platform enables us to work
efficiently across all brands, allowing
us to reinvest in the customer
experience while delivering strong
shareholder returns.
SHAREHOLDERS
Our operating model and strategy are
designed to ensure we can deliver
consistent and sustainable returns
for shareholders while continuing to
invest in our people, our brands and
the customer experience. We are
committed to a sustainable and
progressive dividend, which reflects
our confidence in the long-term
performance of the business.
1 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S STATEMENT
PROFITABLE GROWTH AND
LONG-TERM VALUE FOR OUR
STAKEHOLDERS
“ In a year that offered plenty of opportunity
for distraction, the focus of our very talented
workforce on the key drivers of our business
delivered the performance improvement
demonstrated in the second half of the year.”
I am pleased to report that after a challenging start to the
year our business responded in a strong and positive manner,
to deliver a continuous improvement in performance,
particularly during the second half of the year. Finishing the
year in such a way provides a very encouraging platform
for 2019.
During the year, the attractiveness of our business was
highlighted by the significant levels of interest expressed by
several organisations in potential offers for the Group. In the
event, our Board unanimously determined that shareholder
value would be maximised by executing upon our strategy as an
independent public company. This is driven by our confidence
in the long-term value of the business and our unique position
in a high-growth industry. We believe we are at the most
exciting point in a 30-year journey that has seen us become the
outright global leader in the co-working and flexible workspace
sector. This industry is fast becoming mainstream and benefiting
from powerful global trends that drive long-term demand from
every area of the market, from freelancers to global enterprises.
Looking at our results for 2018, Group revenue increased from
£2,352.3m to £2,535.4m, an increase of 9.7% at constant
currency. Revenues from all our open centres increased 13.3%
at constant currency to £2,483.1m from £2,229.9m. The
improvement in the growth rate of these revenues as we moved
through the year was particularly pleasing. The 8% constant
currency decline in operating profit to £154.1m (2017: £163.2m)
was in line with our expectations, reflecting a strong year of
investment in both our network, marketing and our people to
support growth and improve our customer experience and drive
greater scale benefits from our business model. We also incurred
significant costs related to the potential offers for the Group.
Reflecting the attractive structural growth dynamics of our
industry and the capability of our proven business model to
deliver profitable growth, we continued to build our global and
national networks with the addition of over 6.8m sq. ft. of new
space and 299 new locations, taking the total for the Group to
3,306 locations as at 31 December 2018. In improving the
breadth of our offering, we have strengthened our position to
meet the growing demand from our customers globally.
We remain encouraged by the strong development of our newer
centres which validates the Group’s strong focus on capital
allocation discipline. This discipline has allowed the Group to
maintain a robust financial position, which was further
strengthened post the year-end with an increase in our
Revolving Credit Facility from £750m to £950m and an
improvement in the maturity profile with strong support from
our lending banks. Based on the strong cash generation of our
business we returned £93.9m during the year to our
shareholders through a continuation of our progressive
dividend policy and the repurchase of shares.
STRATEGY
We offer a variety of attractive workspaces through a range of
brands that respond to different customer needs and are
continuing to rapidly expand our national networks to provide
an even broader choice of convenient working locations. We are
confident that the approach of offering this uniquely broad
choice in type and location of workspace combined with our
efforts to continuously improve the customer experience and
enhance our digital platform are the right actions to maintain
our strong leadership position in the rapidly growing co-working
and flexible workspace sector.
Our focus in 2019 and for the foreseeable future remains on
achieving and sustaining the profitable growth that will allow us
to continue investing in the customer experience, our digital
platform, and the development of our employees while
delivering strong returns to our shareholders. To achieve this,
we are focusing more closely on partnering deals with property
owners and investors. We are also strongly promoting
opportunities for partners to share in the growing success of our
network across the world, and we have an excellent pipeline in
2 0
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
developing and developed markets alike. We see this as a very
important growth tool for IWG, and we will be placing even
more emphasis upon it during 2019 and beyond.
Our approach during 2018 was highly successful in markets
around the world. Total revenue growth in the US, which is our
largest market with 1,014 locations, was over 10% at constant
currency and profit growth was even stronger. Total revenue
growth in EMEA was particularly good with a 17.1% increase at
constant currency. We were also delighted by our progress in
the Asia Pacific region, with double-digit revenue growth across
our Mature businesses in Japan, Hong Kong and the Philippines.
As previously highlighted, our business in the UK has faced
challenges in recent times. We took corrective actions to
address these challenges which negatively affected our
financial performance during 2018. We are focused on
completing the revitalising of our UK operations through further
selective closures, refurbishing sites where we wish to remain
and investing more in customer service. Although this will
continue to have a short-term financial impact, these are the
right actions to stimulate long-term profitable growth in the UK.
This is supported by the highly encouraging performance of our
new locations in 2017 and 2018, particularly that of our new
Spaces sites in London. Overall, even taking the potential
impact of Brexit into account, we remain positive about the
medium to long-term future of the UK market.
OUR BOARD
The Board was very active during 2018 and performed strongly
throughout what was a very eventful period for the Group. I
would like to thank all my Board colleagues for their significant
time commitments and valuable contributions in addressing the
challenges the Group faced and efforts towards creating an
exciting future for the Group.
I would like to welcome Eric Hageman as our new Chief
Financial Officer. Eric brings us highly relevant expertise and
experience gained in Chief Financial Officer roles at Telecity
Group and Royal KPN. Eric performed strongly as our interim
Chief Financial Officer and will be an excellent long-term
addition to the management team.
A new role has been established with responsibility for Board
engagement with employees and I am delighted that Nina
Henderson has agreed to take this role as well as taking over
Board oversight for the Group’s corporate responsibility
activities. Nina’s knowledge, experience and passion for these
areas makes her well suited for these roles.
After nine years on the Board, Elmar Heggen will resign as a
Non-Executive Director with effect from our annual general
meeting on 14 May 2019. I would like to thank Elmar for his
good counsel, meaningful insights and recommendations over
this period. We are pleased to announce that Laurie Harris
will join IWG as a Non-Executive Director of the Company
and succeed Elmar as Chair of the Audit Committee. The
appointment will take effect from 14 May 2019 and is subject
to applicable law including shareholder approval at the
Company’s forthcoming annual general meeting. Laurie has
significant executive leadership and boardroom experience.
She currently serves as an Independent Director and
Audit Committee Chair of the board of directors of QBE
North America, an integrated specialist insurer. Previously,
Laurie was with PricewaterhouseCoopers LLP as a
Global Engagement Audit Partner where she helped
“We offer a variety of attractive workspaces
through a range of brands that respond
to different customer needs and are
continuing to rapidly expand our national
networks to provide an even broader choice
of convenient working locations.”
PricewaterhouseCoopers LLP’s larger clients address and
act upon complex business challenges and opportunities
in the United States and internationally. Laurie advised over
20 Audit Committees of large public companies and private
equity backed entities, including Fortune 100 financial
services companies.
I would also like to thank our former Chief Financial Officer and
Chief Operating Officer, Dominik de Daniel, for his contributions
during his time at IWG.
OUR PEOPLE
In a year that offered plenty of opportunity for distraction, the
focus of our very talented workforce on the key drivers of our
business delivered the performance improvement demonstrated
in the second half of the year. Their energy and commitment are
at the core of our ability to improve the performance of our
existing business while continuing to deliver strong growth.
Their tireless work and creativity are key to our efforts to ensure
that our over 2.5 million members in over 110 countries have
“a great day at work”.
At our senior leadership conference in Rome during January
2019 there was a new and more intense level of enthusiasm for
the future plans of the Group and a sense of pride in being on
the team of the market leader in our exciting and rapidly
growing industry. I see the effects of this enthusiasm and efforts
reflected every day at every level of the Group and on behalf of
the Board would like to personally thank everybody involved for
their continued contributions and commitment to succeed.
DIVIDEND
We continue with a sustainable and progressive dividend policy
that reflects both our confidence in the long-term prospects of the
business and our desire to reward shareholders for their loyalty.
We are therefore recommending a 10% increase in the final
dividend to 4.35p. Subject to the approval of shareholders at
the 2019 AGM, this will be paid on 24 May 2019 to shareholders
on the register at the close of business on 26 April 2019. This
represents an increase in the full year dividend of 11% to
6.30p (2017: 5.70p).
DOUGLAS SUTHERLAND
CHAIRMAN
6 March 2019
2 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE OFFICER’S REVIEW
2018: CONSISTENT SEQUENTIAL
QUARTERLY IMPROVEMENT
“ We have done much to position our
business to meet the growing needs of our
customers in the rapidly developing
market of co-working and flexible working
and to be well positioned to benefit from
clear structural growth drivers.”
For IWG, 2018 was in many ways a year of significant change
and consistent improvement. Responding to a tough start to the
year, the actions we took during 2018 ensured our performance
improved continuously as the months passed, enabling us to
end the year with record sales and enhanced like-for-like results.
ATTRACTIVE INVESTMENT RETURNS
The improvement in our performance throughout the year
has helped to deliver a strong post-tax cash return on net
investment that exceeds the Group’s cost of capital. The
post-tax cash return on net growth investment from locations
opened on or before 31 December 2013 was 20.6%
(2017: 19.3%). Moving the maturity profile of the estate
forward one year to all those locations opened on or before
31 December 2014, the post-tax cash return was 19.8%
(2017: 18.3%). Our post-tax returns are calculated after
deducting all net maintenance capital expenditure incurred in
the year. During 2018, as expected, we invested more in net
maintenance capital expenditure to take the opportunity to
refresh some of our existing locations, particularly in the UK.
SEQUENTIALLY IMPROVING FINANCIAL
PERFORMANCE
Group revenue increased 9.7% at constant currency to
£2,535.4m. This performance has been achieved through a
consistent improvement through the course of the year. First
quarter constant currency year-on-year revenue growth was
6.7%, rising to 7.1% for the half year and to 8.1% for the
nine months to 30 September. Year-on-year revenue growth
achieved in the fourth quarter was 14.3%. These Group
numbers also include the impact from closures, which has been
significant in 2018, with 118 closures, as we continued to
actively manage our estate. Consequently, a better indication
of the performance of the ongoing business is provided by the
revenues generated by our open centres. On this basis, revenue
increased 13.3%, at constant currency, to £2,483.1m
(2017: £2,229.9m). Encouragingly, we witnessed the same trend
of improving growth, rising steadily through the year from 9.0%
in the first quarter to 18.5% constant currency growth in the
fourth quarter with all regions contributing.
INVESTING IN OUR GLOBAL PLATFORM
To support the ongoing development of the business and
strengthen our global operating platform we selectively
invested in overheads, particularly in our partnering and
enterprise account activities. This investment was made within
the strong cost control framework maintained by the Group.
We also incurred significant costs in respect of the various
approaches for the Group. Overall, overheads increased
10% at constant currency from £237.6m to £253.7m.
Notwithstanding the increase in overheads, we maintained
our industry leading overhead efficiency with overheads as a
percentage of revenue down 10bp to 10.0% (2017: 10.1%).
After the investment in overheads, together with the start-up
costs from new centres added during the year and the closure
of 118 locations, operating profit declined 8% at constant
currency to £154.1m (2017: £163.2m). An outcome in line with
management’s expectations.
Our growth programme accelerated in 2018 with net growth
capital expenditure of £332.0m. This investment reflects a record
level of organic growth and a significant investment in locations
due to open in 2019 resulting from a strong growth pipeline,
especially in our Spaces format. In total we added 299 locations,
only nine of which were acquired, and 6.8m sq. ft. of space.
2 2
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
GROUP INCOME STATEMENT
£m
Revenue
Gross profit (centre contribution)
Overheads
Operating profit(1)
Profit before tax
Taxation
Profit after tax
EBITDA
1. Including joint ventures
2018
2,535.4
409.2
(253.7)
154.1
138.7
(33.0)
105.7
389.9
2017
2,352.3
401.6
(237.6)
163.2
149.4
(35.4)
114.0
376.2
% Change
(constant
currency)
% Change
(actual
currency)
9.7%
3%
10%
(8)%
4%
7.8%
2%
7%
(6)%
(7)%
(7)%
4%
The Group generated a gross profit of £409.2m (2017: £401.6m), an increase of 3% at constant currency. This performance is after
a significant investment in the new 2018 openings and the impact of closures. Excluding these factors, the gross profit on the
pre-2018 business increased by 17% from £394.6m to £460.0m.
GROSS MARGIN
2015 Aggregation
New 16
New 17
Pre-18
New 18(2)
Open centre revenue
Closures
Group
Revenue £m
Gross margin %
2018
2,107.7
130.1
179.9
2,417.7
65.4
2,483.1
52.3
2,535.4
2017
2,072.2
106.5
51.2
2,229.9
–
2,229.9
122.4
2,352.3
% Change
(constant
currency)
3.6%
24.0%
354.9%
10.4%
–
13.3%
(55.7)%
9.7%
2018
21.6%
5.4%
(1.1)%
19.0%
(48.2)%
17.2%
(36.1)%
16.1%
2017
20.6%
(12.1)%
(36.3)%
17.7%
–
17.7%
5.7%
17.1%
2. New 18 also includes any costs incurred in 2018 for centres which will open in 2019
We generated £447.4m of EBITDA from the pre-2018 estate, up
19%. Group EBITDA increased 4% at constant currency to
£389.9m (2017: £376.2m). These metrics are a good indication
of the cash generation capability of our business model. With a
positive working capital inflow of £166.4m and after the
overhead investment noted above, we generated cash of
£564.0m (2017: £425.8m).
We generated cash flow of £259.2m (2017: £215.5m) after
increased maintenance capital expenditure, taxation and
finance costs, but before investment in growth capital
expenditure, dividends of £53.7m and £40.2m on buying
back shares. After the significant investment in these items,
Group net debt increased from an opening position of
£296.4m to £460.8m at 31 December 2018. This represents
a net debt to EBITDA leverage ratio of 1.2x, thereby continuing
our prudent approach to the Group’s capital structure. At
31 December 2018, we had approximately £140m of freehold
property on the balance sheet.
THE MARKET IN 2018
Much of this success was due to the strengthened management
team we built during the year, which played a vital role in
helping us drive our improved performance. I would like to
record my thanks to everybody involved for their
invaluable contribution.
Overall, this was a year of responding positively to challenging
conditions. I am particularly pleased with the way in which the
business successfully addressed some powerful economic
headwinds in many of the countries where IWG operates.
One of the most telling examples was that of Brazil, where
recessionary forces continued to impact the country during the
year. We completely restructured our business there, increasing
its size significantly. Tangible improvements in performance
were already visible by the end of 2018, and our Brazilian
business appears set for a profitable 2019. We carried out
similarly successful actions in other countries, continuously
aiming to make decisions that improve our profitability across
the Group as we move forward.
2 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
THE FORCES ACCELERATING OUR
DEVELOPMENT
I am particularly struck that a number of forces that might
normally be regarded as barriers to business success have
counter-intuitively acted as growth accelerators for IWG,
resulting in the addition of almost 300 locations to our network
in 2018.
First and foremost, our performance during 2018 demonstrates
how the uncertainty brought about by economic challenges can
be a positive force for the Group. It causes individuals and
businesses alike to value even more highly the benefits of
flexible workspace allowing companies of all sizes to respond
rapidly and decisively to fast-changing conditions.
In a similar vein, the new lease accounting standard, IFRS 16,
which came into force on 1 January 2019 is already driving
significant increases in demand for our services from
enterprises. IFRS 16’s requirement for organisations to
recognise assets and liabilities for all leases does not extend to
those with a duration of 12 months or less. We believe that this
will focus organisations’ attention on the commitment of
material capital investment in long-term leases when property
is not their core competence.
In addition, as global market leader, we are even finding that
competitor activity is helping our business. In particular, we
continue to benefit from the marketing and communications
activities of our smaller rivals as they further raise awareness of
the benefits of co-working and taking a flexible approach to
corporate property. This helped interest in and demand for
co-working rise during the year, and we received record levels
of enquiries as a direct result.
This is far from the only benefit of a competitive market
environment. Competition also forces us to continuously
improve, constantly sharpening our performance across many
aspects of what we have to offer. This is how we ensure our
industry-leading position in areas such as app development,
digital interaction with our customers, improving reporting and
other tools for enterprise accounts, as we continue to deliver an
ever more flexible and easier-to-use customer experience.
DEVELOPING THE NETWORK
We reaccelerated the growth of our network and 2018 was a
record year for organic growth. Increasing the depth and
breadth of our geographic scope, and addressing different
styles of working and price points, is a major differentiator for
IWG by providing a competitive advantage as well as building
further resilience into the business. We continued to maintain a
sharp focus on our investment decision-making process during
2018 and we are seeing the tangible benefit of this discipline in
recent years in the development profile of our newer year-
group cohorts.
We opened 299 new locations during 2018, 290 of which were
organic openings. These locations added approximately 6.8m
sq. ft., taking the Group’s total space globally to 57.3m sq. ft. as
at 31 December 2018. Another important focus area was the
roll-out of our Spaces format. During 2018 we accelerated
our roll-out of the Spaces format with the addition of 103
locations, which represented approximately 56% of the space
added. The investment in our Spaces format during 2018
represented approximately two-thirds of the Group net growth
capital expenditure.
During 2018, we invested £332.0m of net growth capital
expenditure. This investment included expenditure on locations
opened before 2018 and to be opened in 2019 of £91.6m,
higher than previous years, primarily reflecting the strong
pipeline with which we have entered 2019, most notably in
our Spaces brand.
We finished 2018 strongly, with 95 additions in the fourth
quarter. This momentum has continued, and we have a good
pipeline of new openings already for 2019. At the end of
February 2019, we had visibility on 2019 net growth capital
expenditure of approximately £200m, representing
approximately 190 locations and 5.2m sq. ft. of additional space.
A CONTINUING GROWTH STORY
During 2018, we increased our emphasis on partnering. Being
able to clearly demonstrate the benefits of customer loyalty has
contributed to the number of parties signing up to partner with
us, which increased significantly during 2018 to create a very
strong forward pipeline.
Much of this success was also due to the efforts of our growing
franchise team, which is set to accelerate our growth further
during 2019 as franchising becomes an increasingly important
element of our growth strategy. In 2018 we signed agreements
covering the development of 49 locations, taking the total for
the Group as at 31 December 2018 to 135 committed locations.
We also saw a strong increase in the number of co-owned
locations across the world as we received unprecedented levels
of interest and commitment from property owners. During the
year, some 33% of our growth was through partnering.
Our 2018 focus was not just about opening new centres. We
also developed our multi-brand strategy which offers a portfolio
of brands to suit every work style and price point. Our multi-
brand portfolio provides unparalleled choice and delivers a
global consistency to provide quality customer experience
across all our brands.
2 4
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
To support our goal of providing our customers with a quality
experience to ensure they have “a great day at work”, we have
continued to innovate our platform. We strengthened our
industry-leading and highly scalable digital platform to give
customers an even better experience and access to higher
levels of service which they can self-serve. We launched an
account help desk and provided more centralised call handling.
We continued to train and develop our people, 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.
IMPROVING PERFORMANCE AT CENTRE LEVEL
I am very confident that our centres will continue to perform
well throughout 2019, as we continue to grow and improve.
With more than three decades’ experience under our belt of
running centres profitably, our focus will be on improving the
performance of all those centres in our network, regardless of
their age. Where necessary, we will continue to rationalise our
network as a means of optimising its performance. In particular,
we are focused on enhancing the profitability of our UK
business through important investments in both talent and
network performance.
One of the most powerful ways of achieving this is through
investing in our people. As the world in which we operate
becomes more competitive, they will be an increasingly
important source of advantage by further engaging our clients.
During 2018, we therefore made significant investments in
training and reviewed compensation across the organisation. I am
delighted by their performance during the year and believe there
is even more to come in 2019 and beyond. I am also very proud
of their great work to meet the needs of our clients and their
commitment to supporting the communities where we operate.
ENTERPRISE ACCOUNTS
We grew our enterprise accounts team during the year, along
with upgrading our national networks and product offering to
meet the growing demand from enterprises. This is enabling us
to build strategic relationships both nationally and globally.
The opportunity is huge. As we reported in our 2018 interim
results, our largest strategic corporate client uses 100 centres in
32 countries. Many others are using 10 or more centres, both
nationally and in multiple countries. We believe there are many
opportunities to develop other relationships of similar scale
across the world.
BUILDING OUR BRANDS
Our brand strategy is an important element of our commitment
to profitable growth. We recognise that not all our customers
want exactly the same flexible workspace solutions. This is even
true of different departments within the same organisation. Our
multi-brand offer addresses this issue, and during the year we
expanded brands, including No18 and HQ. We also saw strong
growth in our Regus brand, with 175 new centres, and 103 new
locations for our extremely popular Spaces co-working format.
SOLID OPERATING PLATFORM
Critically, all our brands are based on the same solid and highly
efficient operating platform across more than 110 countries,
ensuring that our full range of services is available around the
clock. Indeed, our highly trained and skilled people working in
tandem with ever-improving digital capabilities are driving
faster and more accurate response to client needs.
This is the bedrock of our business and the primary focus
for our strategy of continuous improvement across all our
sites. It is also at the heart of our highly efficient operating
model and tight focus on capital discipline, which enables us
to centralise processes from across our network, drive new
efficiencies from our scale and ensure that our future growth
is increasingly profitable.
This is what is making our ambition to be the most efficient
operator become a reality, enabling our customers to find with
us the best possible quality at the best possible price.
EXPANDING SERVICE PORTFOLIO
Increasingly, our operating platform is also supporting the
fast-growing universe of ancillary services we offer alongside
office space, which now represents approximately 29% of
Group revenues. I believe that this proportion will continue to
rise as we form increasingly close relationships with enterprise
clients seeking a partner capable of delivering an ever-wider
range of services.
One area of particular growth during 2018 was our industry-
leading workplace-recovery service, available in more than
1,000 towns and cities worldwide, which grew by almost 50%
during the year.
During 2019, we aim to continue introducing further new
services to meet the needs of the 2.5m-plus users and members
of our virtual and physical spaces and services across the world.
2 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
PERFORMANCE BY REGION
Looking to our financial performance in more detail, mature revenue increased by 4.6% during the year at constant currency, with
sequential improvements in each quarter through the year, culminating in an 8.2% year-on-year improvement in the fourth quarter.
This sustained improvement throughout the period was primarily driven by improvements in the Americas and EMEA, which had a
particularly strong second half.
On a regional basis, mature(1) revenue and contribution can be analysed as follows:
£m
Americas
EMEA
Asia Pacific
UK
Other
Total
Revenue
Contribution
Mature gross margin (%)
2018
961.7
527.1
368.0
376.5
4.5
2,237.8
2017
930.3
493.7
361.1
390.3
3.3
2,178.7
% Change
(constant
currency)
6.6%
7.2%
4.5%
(3.5)%
4.6%
2018
207.6
128.0
76.2
49.3
(0.2)
460.9
2017
162.3
105.9
71.4
75.2
(1.2)
413.6
% Change
(constant
currency)
31%
21%
9%
(34)%
2018
21.6%
24.3%
20.7%
13.1%
2017
17.4%
21.5%
19.8%
19.3%
13%
20.6%
19.0%
1. Centres open on or before 31 December 2016
AMERICAS
Revenue from open centres increased 12.8% at constant
currency to breach the billion-mark with £1,030.1m. Total
revenue (including closed centres) in the Americas increased
9.8% at constant currency to £1,048.5m (up 6.5% at actual
rates). Mature revenue in the region increased 6.6% at constant
currency to £961.7m (up 3.4% at actual rates), with good
sequential improvements during the year. This resulted in a
strong finish to the year with 8.4% growth in mature revenue
at constant currency in the fourth quarter.
Average mature occupancy for the region was 75.7%
(2017: 74.3%) and there was a good recovery in the gross
margin which increased significantly from 17.4% to 21.6%.
The US, our largest market, continued to build on the first half
performance, with further sequential quarterly improvements
to finish the year strongly with double-digit constant currency
revenue growth to generate £883.7m of total revenue and a
record level of profitability. This overall performance in the US
was underpinned by an improving high single digit mature
revenue growth. Our Canadian business started the year where
it finished 2017 with strong double-digit growth in its mature
revenue, ending the year with approximately 17% year-on-year
mature revenue growth in Q4. For the total business growth
exceeded 20% in Q4 and profitability more than doubled. Our
business in Latin America continued to face challenges,
particularly in the larger markets of Brazil and Mexico. In Brazil,
our largest market, we restructured our business by
repositioning our estate and re-energised our in-country
colleagues. We are now starting to see early tangible signs
of these actions in our Brazilian performance.
We added 59 new locations during the year, taking the total to
1,284 at 31 December 2018. This includes 37 Spaces. Almost a
quarter of these new locations were through partnering deals of
various types. The focus of growth continued to be the US with
the opening of 34 new locations, which increased the total to
1,014.
EMEA
Our EMEA business has had a strong year overall. Revenue from
all open centres increased 20.7% at constant currency to
£617.9m. Total revenue increased 17.1% at constant currency
to £630.8m (up 16.7% at actual rates). Mature revenue in the
region increased 7.2% at constant currency to £527.1m (up
2 6
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
6.8% at actual rates) for the year. These growth rates reflect a
very strong second half performance with growth accelerating
in Q4. With the improvement in revenue performance, the
mature gross margin increased from 21.5% to 24.3%. Mature
occupancy increased from 76.6% to 77.0%.
Reflective of such a diverse region, individual country
performances varied but, overall, the better performance was
driven by continental Europe. France had a very strong second
half as it benefited from, and grew into, the new inventory
added in prior periods. Italy and Germany both had better
second half performances and Switzerland improved its
performance as we moved through the year. Russia is now
responding to the actions taken and this helped its second half
performance. There were, however, some more challenging
markets amongst some of the Nordic countries and in parts of
the Middle East and Africa.
We added 148 new locations in EMEA, including 28 Spaces. 29%
of these locations were achieved via various partnering deals.
At 31 December 2018 we had 1,013 locations across EMEA.
ASIA PACIFIC
Overall, our Asia Pacific region reported a solid performance.
Revenue from all the open centres increased 13.3% at constant
currency to £404.6m. Total revenue in the region increased
10.3% at constant currency to £412.2m (up 7.6% at actual
rates) and revenue performance was stronger in the second
half of the year. In the Mature business, revenue increased
4.5% at constant currency (up 1.9% at actual rates), with a
good Q4 performance of 5.8% growth to finish the year.
There were good performances from several of the larger
countries across the region. Japan had a very strong year with
double-digit growth across the year in mature revenues. Hong
Kong came back strongly in 2018 and also delivered double-
digit growth. The Philippines too reported good revenue growth,
especially in the first half. China, after a better start, saw growth
slow in the second half and the same occurred in Australia,
while India and Singapore both remained challenged.
Mature occupancy increased from 71.3% to 72.8% and the
gross margin improved from 19.8% to 20.7%.
We added 65 new centres into Asia Pacific, over 46% of these
through partnering. There were 23 Spaces among the new
locations, as we roll out this format globally. As at
31 December 2018 we had 683 centres in the region.
“We delivered record organic growth in 2018
and invested in the building blocks for 2019
and through our actions we continue to
deliver an ever more streamlined and
scalable business model.”
locations we added during 2017 and 2018, across our range of
formats, are developing strongly. In markets where we have
faced challenges, we have taken decisive action to bring our
performance back on track with selective closures, refurbishing
locations we wish to retain, adding exciting new locations to the
network and investing in the customer service skills of our
people. We are starting to see the benefits of these initiatives.
There are however global macro-economic and geo-political
uncertainties in various parts of the world, which makes it
sensible to develop the business with some caution. We
continue to invest in and develop our partnering activities
which will allow us to deliver more growth with less capital
intensity on our balance sheet.
We remain very confident in our industry and its structural
growth drivers and the strength of our position in the industry
with a growing, profitable and cash generative proven business
model. The Board remains confident in our prospects for the
year ahead and the trading outlook for 2019 remains in line
with management’s expectations.
MARK DIXON
CHIEF EXECUTIVE OFFICER
6 March 2018
UK
Our UK business has faced challenges which has affected its
financial performance. We are focused on reversing this
situation. We are taking actions to stimulate long-term
profitable growth through a programme of significant
repositioning and investment, both in terms of estate and
personnel. We remain optimistic about the UK market, a view
reinforced by the performance of the centres that we have
added during 2017 and 2018. We are now seeing initial
evidence that these actions are now manifesting themselves in
improved performance.
Revenue from all the open centres increased 5.2% to £425.6m.
Total revenue (including closed centres) was broadly unchanged
at £439.0m (2017: £440.0m). Revenue from the Mature
business in the UK declined 3.5% to £376.5m. This reflects an
improvement in the second half, with revenue increasing 2.8%
in Q4.
In addition to adding new inventory into the UK market,
refurbishing those where we want to retain a presence and
selective closures in order to move back to the desired
performance levels, we have taken the opportunity to invest in
our people and their training. In the near term this investment
has increased our cost base in the UK ahead of the initial
revenue recovery. The resultant increased reduction in gross
profit has reduced the mature margin from 19.3% to 13.1%.
These were, however, the right actions to have taken. Mature
occupancy reduced from 71.6% to 68.8%.
We added 27 new locations in the UK, including 15 new Spaces
locations. Over 40% of the new locations were via partnering
agreements. In addition to adding high quality new centres into
our UK business we have been actively repositioning the
existing estate by increased selective investment and, where
appropriate, closing locations. We had 326 locations in the UK
at 31 December 2018.
OUTLOOK
We have done much to position our business to meet the
growing needs of our customers in the rapidly developing
market of co-working and flexible working and to be well
positioned to benefit from clear structural growth drivers. We
delivered record organic growth in 2018 and invested in the
building blocks for 2019 and through our actions we continue
to deliver an ever more streamlined and scalable business
model. We will continue to invest in our business model and, in
a disciplined manner, further invest in our network scale and
our multi-brand strategy in the years ahead. Our investment in
developing our partnering capabilities will be a key enabler of
the way that we want to deliver this growth. As well as having a
strong pipeline of IWG-owned locations for 2019, we are seeing
increasing momentum in our partnering approach with
counterparties wanting to operate our brands across a wide
geographic spectrum.
We remain focused on profitable growth, delivering attractive
returns and monetising our leading global network. To achieve
this, we will have a strong focus on margin improvement and a
continuation of our drive for greater efficiency, from good cost
discipline and the scale benefits deriving from our
global platform.
With the continued investment in the building blocks of our
business and with the momentum generated through the year,
we have had a strong start to 2019. The positive trends in global
sales activity have strengthened the order book. The new
2 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS
A STRATEGY FOR
SUSTAINABLE GROWTH
We aim to deliver strong and sustainable returns to our investors through providing
customers of all types across the world with convenient, inspiring and innovative
work environments that suit the full range of workspace and service needs.
DELIVERING ATTRACTIVE, SUSTAINABLE RETURNS
Long-term revenue growth
achieved through the addition of
new locations, the development of
incremental income streams and
the active management of the
existing network to drive
efficiency has once again driven
strong returns on investment in
2018, well ahead of the Group’s
cost of capital.
2018 post-tax cash return on net investment by year of opening (%)
Overall 2018 return on net growth investment made up to
31 December 2013 of 20.6%.
20.6%
(13.0)
18
0.0
0.6
17
16
15
14
7.4
13 and before
14.7
20.6
Future ambitions and risks
Delivering sustainable returns above the Group’s cost of capital is central to creating
future shareholder value. We are committed to achieving this by optimising revenue
development and controlling costs throughout our global network.
DELIVERING PROFITABLE GROWTH
From our scale we derive many
benefits that form the basis of our
attractive business. It is therefore
important that incremental
expansion of our business
generates profitable growth that
can be reinvested into the
business and provide attractive
returns to shareholders.
EBITDA development (£m)
Group EBITDA margin of 15.4% for year to 31 December 2018.
£389.9m
18
17
16
389.9
376.2
379.7
Future ambitions and risks
Maintaining our disciplined approach to capital investment and our strong focus on
operational efficiency we believe provides a strong platform to deliver future
profitable growth.
2 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
CASH GENERATION
The ability to convert profit into
cash remains an attractive feature
of our business model. These cash
flows delivered by our operations
support the investment in the
ongoing development of our
business and returns
to shareholders.
Cash flow before net growth capital expenditure, dividends
and share buybacks
During 2018, we generated £259.2m of cash before growth capital expenditure,
dividends and share buybacks.
£259.2m
18
17
16
259.2
215.5
286.1
Future ambitions and risks
With our business generating revenue growth over the long term and our strong focus
on operational efficiency, our business model is well positioned to continue to convert
profit into cash.
COST LEADERSHIP
Cost leadership, through
operational excellence and the
significant economies of scale and
operational leverage that our
global operating platform
delivers, provides a significant
competitive advantage.
During 2018 we made additional
overhead investment to build
upon anticipated future growth of
the business and the way it is to
be delivered.
Total overheads as percentage of revenue (%)
Overheads as a % of revenue well controlled.
10.0%
18
17
16
10.0
10.1
11.8
Future ambitions and risks
Further planned investment in overheads in 2019 is anticipated to be partly mitigated
by improved efficiencies elsewhere in the business as we continue to benefit from our
scale and well-invested operational platform.
DEVELOPING GLOBAL & NATIONAL MULTI-BRAND NETWORKS
We are continuing to grow our
networks in those markets with
the greatest growth potential and
where demand is strongest. By
expanding our network, investing
in services and continuously
improving the quality of our
infrastructure and centres, we are
able to expand our potential
customer base whilst retaining
more of our existing customers.
Location growth
We continue to be mindful of growing only in locations where the potential
investment opportunity meets our stringent returns criteria.
Number of locations
3,306
18
17
16
3,306
3,125
2,926
Future ambitions and risks
We are also focused on capital efficient ways of expanding the network, including
partnering with property owners and working with franchisees.
2 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHIEF FINANCIAL OFFICER’S REVIEW
ENCOURAGING IMPROVEMENT
IN PERFORMANCE THROUGH
THE YEAR
“ A key characteristic of our business model is
its cash generation capability through strong
profit conversion. Cash generated before net
investment in growth capital expenditure,
dividends and share repurchases increased
by £43.7m to £259.2m from £215.5m, up
20%. Cash flow per share increased 22%
to 28.6p from 23.5p.”
2018 can be characterised as a year of consistent improvement
after a more difficult start to the year. This sequential
improvement in our performance not only delivered the
stronger second half result we had anticipated but provides a
solid basis for 2019. This is an encouraging position to be in,
with prevailing macro-economic and geo-political uncertainties
in various parts of the world.
REVENUE
Reported Group revenue increased 9.7% at constant currency
to £2,535.4m (2017: £2,352.3m). Reflecting the uplift in sales
activity experienced since October 2017, revenue growth
improved consecutively in each quarter. After 6.7% year-on-
year constant currency Group revenue growth in the first
quarter, this improved to 7.1% for the half year, 8.1% year-to-
date to September 2018 and closed the year with a strong
fourth quarter performance to deliver the 9.7% growth reported
for the whole of 2018. All four regions contributed to this
development. There were good double-digit improvements in
EMEA and Asia Pacific and near double-digit growth from the
Americas. The UK, although marginally down year-on-year,
moved into a positive position in the fourth quarter, a quarter
which also witnessed stronger growth in the other three regions.
This performance trend was also reflected in open centre
revenue growth which is not impacted by the effect of closures
in the same way as Group revenue. For 2018 constant currency
open centre revenue growth was 13.3% with all regions
contributing positively. Again, the trend in growth improved
throughout the year from 9.0% in the first quarter to 18.5% in
the fourth quarter. Key drivers to this performance have been
the conversion of the improved sales activity into better
occupancy in the Mature business and strong development of
the newer locations. The latter is a reflection of our capital
discipline and strong investment processes.
The improved sales activity and the maturation of the 2016-year
group additions delivered the anticipated improvement in
mature revenue. Growth in mature revenues for the year, at
constant currency, was 4.6%. This is a significant improvement
on the 2.4% for the first half of 2018 and was delivered by
improvements in all regions, most significantly from EMEA,
with a strong second half increase, and the Americas. Mature
occupancy moved up 50bp to 74.2% (2017: 73.7%), with the
expected decline in occupancy in the UK more than offset by
improvements in the other regions, most notably the Americas
and EMEA.
GROSS PROFIT
Group gross profit was £409.2m (2017: £401.6m), up 3% at
constant currency, reflecting a stronger second half performance
after reporting a 5% decline for the first half. There were strong
increases in the Americas and EMEA which more than
compensated for the declines in the UK and Asia Pacific. This
continuing improvement reflects an increase in the gross profit
from the Mature business of £47.3m, a higher level of initial
losses from the new centre additions of £14.4m and an adverse
variance of £25.3m on closed locations. The 160bp improvement
in the mature margin to 20.6% reflects the encouraging
development seen through 2018 and provides a good basis for
2019. At the Group level, the improvement in the mature margin
has been negated by the dilutive impact from closures and new
openings, with the associated investment in pre-recruiting and
training additional centre team members. This has resulted in a
reduction in the Group gross margin from 17.1% to 16.1%.
EBITDA
Group EBITDA increased £13.7m to £389.9m. With the
continued investment in the building blocks of our business, the
increase in our depreciation and amortisation of £22.8m more
than offset the £9.1m reduction in operating profit. This higher
level of depreciation reflects the significant investment made in
recent years to grow the business globally. Consequently, a
better indication of the performance of our business is provided
by our pre-18 estate EBITDA. We generated £447.4m of EBITDA
from our pre-18 estate, an increase of 19% on the £376.2m
generated in 2017.
3 0
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
FINANCIAL PERFORMANCE
Group income statement
£m
Revenue
Gross profit (centre contribution)
Overheads
Joint ventures
Operating profit
Net finance costs
Profit before tax
Taxation
Effective tax rate
Profit after tax
Basic EPS (p)
Depreciation & amortisation
EBITDA
GROSS MARGIN
£m
Revenue
Cost of sales
Gross profit (centre contribution)
Gross margin
£m
Revenue
Cost of sales
Gross profit (centre contribution)
Gross margin
2018
2,535.4
409.2
(253.7)
(1.4)
154.1
(15.4)
138.7
(33.0)
23.8%
105.7
11.7
235.8
389.9
Mature centres
2,237.8
(1,776.9)
460.9
20.6%
Mature centres
2,178.7
(1,765.1)
413.6
19.0%
% Change
(constant
currency)
9.7%
3%
10%
(8)%
4%
Closed centres
52.3
(70.6)
(18.3)
(35.0)%
Closed centres
122.4
(115.4)
7.0
5.7%
2017
2,352.3
401.6
(237.6)
(0.8)
163.2
(13.8)
149.4
(35.4)
23.7%
114.0
12.4
213.0
376.2
New
centres
245.3
(278.7)
(33.4)
(13.6)%
New
centres
51.2
(70.2)
(19.0)
(37.1)%
% Change (actual
currency)
7.8%
2%
7%
(6)%
(7)%
(7)%
(6)%
4%
Total
2018
2,535.4
(2,126.2)
409.2
16.1%
Total
2017
2,352.3
(1,950.7)
401.6
17.1%
OVERHEAD INVESTMENT
Measured as a percentage of revenue, overhead reduced 10bp
to 10.0% in 2018. Further simplification and centralisation of
more activities is expected to unlock more scale benefits which
should reflect positively on this ratio over the coming years.
As planned, the second half saw a similar investment in
overheads as in the first half with a resultant 10% constant
currency increase for the year to £253.7m (2017: £237.6m).
This investment is important to build a strong foundation for the
anticipated future growth of the business and the way it will be
delivered. Accordingly, additional headcount investment has
gone into building our partnering and enterprise account teams,
as well as investment into the various activities to support the
network development, including incremental marketing.
Further planned investment in these areas in the current year
is anticipated to be mitigated by improved efficiencies
elsewhere in the business as we continue to benefit from our
scale and well invested operational platform.
OPERATING PROFIT
Group operating profit reduced £9.1m to £154.1m from
£163.2m. This reflects the combination of a lower gross profit
margin, for reasons previously discussed, and the absolute
increase in overheads as noted above.
It was negatively impacted by closure related provisions of
£16.0m, as we continued to actively manage our estate, as well
as costs incurred as part of the interest expressed by several
organisations in potential offers for the Group in 2018. This
impact was offset by the release of inactive customer deposits
of £17.6m identified as part of our ongoing active management
of working capital, together with a £6.2m beneficial impact from
the recognition of negative goodwill as reported in the
interim results.
On a regional basis, there were very strong operating profit
improvements in both the Americas and EMEA. Conversely, both
Asia Pacific and the UK reported reduced operating profits.
NET FINANCE COSTS
The Group’s net finance costs increased to £15.4m
(2017: £13.8m). This reflects the higher level of borrowing
through 2018 compared to 2017, and the cost of increasing the
Revolving Credit Facility from £550m to £750m in May 2018.
These higher costs were partially offset by a small positive
benefit from foreign exchange movements.
TAX
The effective tax rate for 2018 of 23.8% is broadly unchanged
(2017: 23.7%). This is marginally higher than anticipated due to
profit mix and some one-off items that can occur in a global
business of this scale. Looking forward at the factors that can
influence the effective tax rate would suggest a similar rate
based on pre IFRS 16 GAAP. However, under IFRS 16 the Group’s
effective tax rate may potentially be higher as the profit before
3 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
tax is reduced, reflecting the additional finance costs associated
with the lease liability. The extent of this will depend on how
local tax rules treat the IFRS 16 deductions where implemented
as well as the deferred tax impact in respect of countries not
adopting the new standard.
EARNINGS PER SHARE
Group earnings per share for 2018 were 11.7p (2017: 12.4p).
This lower level of earnings per share primarily reflects the
lower profitability, as we continue to build out our network,
being partially offset by the 1% reduction in the weighted
average number of shares outstanding for the year through
share repurchases.
The weighted average number of shares for the year
was 907,077,048 (2017: 915,676,309). The weighted
average number of shares for diluted earnings per
share was 914,206,379 (2017: 926,237,704). As at
31 December 2018 the total number of shares
in issue was 894,620,484.
For the year to 31 December 2018, IWG plc purchased
17,489,685 shares designated to be held in treasury at a
cost of £40.2m and 1,739,476 treasury shares were used to
satisfy the exercise of share awards by employees. As at
31 December 2018 the Group held 28,736,954 shares
in treasury.
CASH FLOW AND FUNDING
A key characteristic of our business model is its cash generation
capability through strong profit conversion. Cash generated
before net investment in growth capital expenditure, dividends
and share repurchases increased by £43.7m to £259.2m from
£215.5m, up 20%. Cash flow per share increased 22% to 28.6p
from 23.5p. This increase arises from the positive impact from
the growth in the Group’s EBITDA and the strong working capital
inflow, which is partly offset by the anticipated increase in
investment in maintenance capital expenditure and higher cash
outflows in respect of taxation and finance costs. The greater
usage of our Revolving Credit Facility is the main driver behind
the increase in the cash outflow for finance costs. The strength
of the Group’s EBITDA performance, particularly the pre-18
estate, in a year when operating profit declined, provides a
good indication of the scale of cash generated in the year.
CAPITAL INVESTMENT
Whilst our strategic focus remains on continuing to target less
capital-intensive growth, our net growth capital investment of
£332.0m in 2018 is higher than our previous guidance on
pipeline visibility of c.£230m and c.275 locations offering
approximately 6.7m sq. ft. of flexible space. There are several
contributing factors to this outcome. Firstly, we opened 299
locations, with a strong end to the year with 95 locations
opened in the fourth quarter. This momentum at the year-end
also resulted in a stronger pipeline of openings scheduled for
2019 on which a higher level of capital expenditure was
incurred in 2018 than had been assumed in the pipeline
guidance. As these locations were in development and not
opened, there is also a timing difference in relation to the
receipt of partner contributions.
As planned, with our refurbishment programme stepped up
during 2018, our investment in maintenance capital
expenditure increased by £16.4m to £112.0m (2017: £95.6m).
After partner contributions received in the year, net
maintenance capital expenditure was £88.5m, a £15.0m
increase on the net investment in 2017 of £73.5m. On a gross
3 2
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
and a net basis, the investment in 2018 represented 4.4% and
3.5% of Group revenues. Both percentages are c.40bp higher
than in 2017, which is in line with management’s expectations.
NET DEBT
Consequently, net debt increased from £296.4m at
31 December 2017 to £460.8m at 31 December 2018. This
increase also comes after paying dividends of £53.7m and
spending £40.2m on buying our own shares. Whilst our debt is
higher, this still represents a Group net debt to EBITDA leverage
ratio of 1.2 times. Although 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.
As at 31 December 2018 we had approximately £140m of
freehold property investment on the balance sheet.
INCREASED FUNDING SUPPORT
We continue to enjoy strong support from our banking partners
and in January 2019 we further increased our Revolving Credit
Facility from £750m to £950m. This facility provides adequate
headroom to continue to execute our growth strategy. We
simultaneously improved the debt maturity profile of this
facility by extending it to 2024 (previously 2023). There are
further options to extend until 2026. The financial covenants on
the increased facility are unchanged and will not be affected by
the implementation of IFRS 16. The facility is still predominantly
denominated in sterling but can be drawn in several
major currencies.
CASH FLOW
The table below reflects the Group’s cash flow:
£m
Group EBITDA
Working capital
Less: growth-related partner
contributions
Maintenance capital expenditure
Taxation
Finance costs
Other items
Cash flow before growth capital
expenditure, share repurchases
and dividends
Gross growth capital expenditure
Less: growth-related partner
contributions
Net growth capital expenditure(1)
Total net cash flow from
operations
Purchase of shares
Dividend
Corporate financing activities
Opening net debt
Exchange movement
Closing net debt
2018
389.9
166.4
(144.8)
(112.0)
(37.1)
(15.7)
12.5
2017
376.2
44.2
(80.6)
(95.6)
(22.4)
(11.9)
5.6
259.2
215.5
(476.8)
(353.1)
144.8
(332.0)
80.6
(272.5)
(72.8)
(40.2)
(53.7)
1.9
(296.4)
0.4
(460.8)
(57.0)
(51.1)
(48.5)
4.2
(151.3)
7.3
(296.4)
1. Net growth capital expenditure of £332.0m relates to the cash outflow in
2018. Accordingly, it includes capital expenditure related to locations
opened before 2018 and to be opened in 2019 of £91.6m
RETURN ON INVESTMENT
Our strong focus on capital discipline is a fundamental part of our
strategy, which is focused on generating attractive returns from
our investments. For the 12 months ended 31 December 2018,
the Group delivered a strong post-tax cash return on net growth
investment of 20.6% in respect of locations opened on or before
31 December 2013 (19.3% on the same estate for the 12 months
ended 31 December 2017). This estate encompasses a broad
range of centre vintages, including the very first centre opened
30 years ago, and some acquired locations going back even
further, which are continuing to contribute strongly to this
post-tax cash return. Moving the aggregated estate forward and
incorporating the centres opened during 2014, the Group
delivered a post-tax cash return on net growth investment of
19.8% (the equivalent return for the 12 months ended
31 December 2017 on the same estate was 18.3%). These
post-tax cash returns are calculated after deducting all the
maintenance capital expenditure invested during 2018. This
investment extends the cash returns we achieve on our centres
including the longer established ones.
The table below shows the status of our centre openings by year
of opening as they continue to progress towards full maturity.
2018 POST-TAX CASH RETURN ON NET
INVESTMENT BY YEAR GROUP
12 months to 31 December 2018 (%)
.
2
3
2
.
2
2
2
.
7
6
1
.
8
5
1
.
4
7
1
.
1
7
1
.
5
7
1
.
0
4
1
.
7
4
1
.
3
1
1
4
7
.
3
7
.
6
0
.
‘11
‘12
‘13
‘14
‘15
‘16
‘10
and
earlier
2018
2017
‘17
0
‘18
)
9
6
(
.
)
6
9
(
.
.
)
0
3
1
(
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.
2. These returns relate to the 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
FOREIGN EXCHANGE
The Group’s results are exposed to translation risk from the
movement in currencies. During 2018 key individual currency
exchange rates have moved, as shown in the table below. Overall,
the impact of the movements in key exchange rates was mixed.
Reported revenue and gross profit was lower by £45.9m and
£3.2m respectively. Operating profit increased by £2.6m as the
reported increase in overheads was lower in actual currency terms.
Foreign exchange rates
At 31 December
Annual average
Per £ sterling
US dollar
Euro
Japanese yen
2018
1.28
1.12
141
2017
1.35
1.13
152
%
2018
(5)% 1.33
(1)% 1.13
147
(7)%
2017
1.30
1.14
145
%
2%
(1)%
1%
“We continue to enjoy strong support from
our banking partners and in January 2019 we
further increased our Revolving Credit
Facility from £750m to £950m.”
RISK MANAGEMENT
The principal risks and uncertainties affecting the Group remain
broadly unchanged. A detailed assessment of the principal risks
and uncertainties and the risk management structure in place
can be found on pages 34 to 41 and 59 to 62 of the Annual
Report and Accounts.
RELATED PARTIES
There have been no changes to the type of related party
transactions entered by the Group that had a material
effect on the financial statements for the period ended
31 December 2018. Details of related party transactions that
have taken place in the period can be found in note 30 to the
2018 Annual Report and Accounts.
DIVIDENDS
We continue our commitment to a sustainable and progressive
dividend policy and, subject to shareholder approval, we will
increase the final dividend for 2018 by 10% to 4.35p
(2017: 3.95p). This will be paid on Friday, 24 May 2019, to
shareholders on the register at the close of business on Friday,
26 April 2018. This represents an increase in the full-year
dividend of 11%, taking it from 5.70p for 2017 to 6.30p for 2018.
IFRS 16 LEASES
IFRS 16 Leases replaces existing lease guidance, including IAS 17
Leases, from 1 January 2019. It introduces a single, on-balance
sheet lease accounting model for lessees while the lessor
accounting remains similar to the current treatment. The Group
has completed its initial assessment of the potential impact of
IFRS 16 on its consolidated financial statements and expects to
adopt a right-of-use asset of approximately £5.6bn and a related
lease liability of approximately £6.2bn as of 1 January 2019.
The recognition of these balances will not impact the overall
cash flows of the Group or cash generation per share. The
overall impact on the income statement of adopting IFRS 16
will be neutral over the life of a lease but will result in a higher
charge in the earlier years following implementation and a
lower charge in later years. IFRS 16 will have no impact on
the Group’s strategy, commercial lease negotiations, growth
or banking arrangements.
Further details of this initial assessment, together with the
approach and assumptions adopted by the Group, can be found
on pages 136 and 137.
IWG plans to manage the business and have internal and
supplemental external reporting on the pre IFRS 16 basis.
The majority of IWG’s leases fall within scope of IFRS 16; this
does not impact the flexibility of our leases. 97% of IWG’s leases
remain ‘flexible’, meaning that they are either terminable at our
option within six months and/or located in or assignable to a
stand-alone legal entity, which is not fully cross-guaranteed.
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
6 March 2019
3 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS RISK MANAGEMENT AND PRINCIPAL RISKS
STRONG FOCUS
ON RISK MANAGEMENT
Identification, mitigation and management of risks are central to
our strategy and our enterprise-wide risk management process
allows us to understand the nature, scope and potential impact
of our key business and strategic risks, so we are able to
manage these effectively.
IWG’s business could be affected by various risks, leading to
failure to achieve strategic targets for growth or loss of financial
standing, cash flow, earnings, return on investment and
reputation. Not all these risks are wholly within the Group’s
control and it may be affected by risks which are not yet
manifested or reasonably foreseeable.
Effective risk management is critical to achieving our strategic
objectives and protecting our personnel, assets and our
reputation. IWG therefore has a comprehensive approach to risk
management, as set out in more detail in the Corporate
Governance Report on pages 52 to 56.
A critical part of the risk management process is to assess the
impact and likelihood of risks occurring so that appropriate
mitigation plans can be developed and implemented.
For all known risks facing the business, IWG attempts to
minimise the likelihood and mitigate the impact. According to
the nature of the risk, IWG may elect to take or tolerate risk,
treat risk with controls and mitigating actions, transfer risk to
third parties, or terminate risk by ceasing particular activities or
operations. IWG has zero tolerance of financial and ethics
non-compliance and ensures that Health, Safety, Environmental
& Security risks are managed to levels that are as low as
reasonably practicable.
Whilst overall responsibility for the risk management process
rests with the Board, it has delegated responsibility for
assurance to the Audit Committee. Executive management is
responsible for designing, implementing and maintaining the
necessary systems of internal control.
A list of key risks is prepared and the Board collectively
assesses the severity of each risk, the likelihood of it occurring
and the strength of the controls in place. This approach allows
the effect of any mitigating procedures to be reflected in the
final assessment. It also recognises that risk cannot be totally
eliminated at an acceptable cost and that there are some risks
which, with its experience and after due consideration, the
Board will choose to accept.
Effective risk management requires awareness and engagement
at all levels of our organisation. It is for this reason that risk
management is incorporated into the day-to-day management
of our business, as well as being reflected in the Group’s core
processes and controls. The Board oversees the risk
management strategy and the effectiveness of the Group’s
internal control framework. Risk management is at the heart of
everything we do, particularly as we look to grow across
multiple markets around the world. For this reason, we conduct
risk assessments throughout the year as part of our business
review process and all investment decisions.
3 4
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
These activities include:
• Monthly business reviews for all countries and
Group functions;
• Individual reviews of every new location investment and
all acquisitions;
• Annual budgeting and planning process for all markets
and Group functions;
• Review of the status of our principal risks at each
Audit Committee meeting; and
• Annual review of all risks in our risk register.
BOARD
• Defines IWG’s risk appetite and tolerance
• Monitors risk identification and
assessment processes
• Assesses overall effectiveness
of risk management
AUDIT COMMITTEE
• Reviews effectiveness of internal controls
• Monitors progress against internal and
external audit recommendations
• Approves the annual internal
and external audit plans
SENIOR LEADERSHIP TEAM
• Accountable for the design and
implementation of risk management
processes and controls
• Accountable for the regular review
and appraisal of key risks
• Contributes to the identification
and assessment of key risks
GENERAL MANAGEMENT
• Responsible for compliance and ensuring
that staff are adequately trained
BUSINESS ASSURANCE FUNCTION
• Assists management and the
Board in conducting risk studies
• Advises and guides on policies
and internal controls framework
• Drives implementation of
recommendations in the business
• Tests compliance with internal controls
PRINCIPAL RISKS
Risk
Mitigation
Changes since 2017
STRATEGIC
Lease obligations
1 2 4
The single greatest financial risk
to IWG is represented by the
financial commitments deriving
from the portfolio of leases
held across the Group.
Whilst IWG has demonstrated
consistently that it has a
fundamentally profitable
business model which works
in all geographies, the
profitability of centres is
affected by movements in
market rents, which, in turn,
impact the price at which IWG
can sell to its customers.
The fact that the outstanding
lease terms with our landlords
are, on average, significantly
longer than the outstanding
terms on our contracts with our
customers creates a potential
mismatch if rentals fall
significantly, which can impact
profitability and cash flows.
Economic downturn
1 4
An economic downturn could
adversely affect the Group’s
operating revenue, thereby
reducing operating profit
performance or, in an extreme
scenario, resulting in operating
losses.
During 2018, the number of ‘flexible’
leases as a percentage of the total
increased to 97% from 96% on an
enlarged estate.
Approximately 33% of the leases we
entered into during 2018 were variable
in nature.
At the end of 2018, we were operating
3,306 locations in 1,109 towns and cities
across over 110 countries.
This risk is mitigated in a number of ways:
1 97% of our leases are ‘flexible’, meaning that
they are either terminable at our option within
six months and/or located in or assignable to a
standalone legal entity, which is not fully
cross-guaranteed. In this way, individual centres
are sustained by their own profitability and
cash flow.
2 Approximately one quarter of all our leases are
variable in nature, which means that payments
to landlords vary with the performance of the
relevant centre. In this way the ‘risk’ to
profitability and cash flow of that centre from
fluctuations in market rates is softened by the
consequent adjustment to rental costs.
3 The sheer number of leases and geographic
diversity of our business reduce the overall risk
to our business as the phasing of the business
cycle and the performance of the commercial
property market often vary from country to
country and region to region.
4 Each year a significant number of leases in our
portfolio reach a natural break point.
The Group has taken a number of actions to
mitigate this risk:
1 Approximately one quarter of all our leases are
variable in nature and our rental payments, if
any, vary with the performance of the centre.
2 Lease contracts include break clauses when
leases can be terminated at our behest. The
Group also looks to stagger leases in locations
where we have multiple centres so that we can
manage our overall inventory in those locations.
3 We review our customer base to assess
exposure to a particular customer or
industry group.
4 The increasing geographic spread of the Group’s
network increases the depth and breadth of our
business and provides better protection from an
economic downturn in a single market or region.
During 2018 the number of ‘flexible’
leases as a percentage of the total
increased to 97%.
We also increased the scale of our
network by 6% and added 53 new towns
and cities and two countries.
Our monthly business performance
reviews provide early warning of any
impact on our business performance and
allow management to react with speed.
More generally, investment in our
management team has also led to
improved, more responsive decision-
making at a country and area level.
Link to strategy
Status
Likelihood
Impact
1
2
3
Delivering attractive, sustainable returns
Developing profitable growth
Cash generation
4
5
Cost leadership
Developing global & national
multi-brand networks
Increased
Same
Decreased
High
Medium
Low
High
Medium
Low
3 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED
PRINCIPAL RISKS
Risk
STRATEGIC
Emerging trends and disruptive technology
Mitigation
1
New formats and technological
developments are driving
demand for flexible working.
Failure to recognise these could
mean IWG’s product offering is
sub-optimal.
IWG continually invests in innovation to develop
new products and services to increase its
competitive advantage, protect current revenue and
unlock potential new sources of revenue.
Changes since 2017
In 2018 IWG continued to invest in
research and development – both to
unlock efficiencies and improve the
overall proposition to customers.
In 2018, we launched customer apps for
our HQ, BizDojo and No18 brands in
addition to Regus, Spaces and Basepoint.
We have added many usability and
self-service features including
community and enhanced payment
features. The user base has grown by
77% and we now service more than
700,000 on the platform.
We continue to adopt a “Digital Business
Centre Strategy” across all stakeholders
and are leveraging “Internet of Things”
(IoT) technologies to provide our
customers with more convenience,
comfort and personalisation in addition
to creating better visibility and control of
our utilisation of inventory in operations.
Increased competition
1 5
Increased competition in the
serviced office industry and an
inability to maintain sustainable
competitive advantage may
result in loss of market share.
While physical barriers to entry into the flexible
workspace market at a local level are low, the
barriers to establishing a national or international
network are much higher, making it difficult for any
competitor to challenge our market position and
commercial success.
IWG also offers a diverse product range under its
different brands to cater to multiple customer
segments which allows us to capture and maintain
market share across the flexible workspace market.
We continuously review our portfolio to ensure that
our product and services are aligned to customer
expectations and requirements and there are
currently active investment programmes being
implemented across our estate.
We increased the scale of our network by
6% and added 53 new towns and cities
and two countries.
We accelerated the roll-out of our Spaces
co-working format with the opening of
103 new locations and the development
of a strong pipeline for 2019.
We continued to expand our multi-brand
offering during 2018 to cater to different
customer segments with varied needs
and price points.
We increased our investment in
refurbishing existing network locations
during 2018.
Exposure to UK political developments
1 2 5
Exposure to UK political
developments including Brexit.
The Group is continually monitoring political
developments in the UK to identify and assess the
medium to long-term implications of Brexit and the
impact that it may have on our business.
Uncertainty over the UK’s eventual relationship
with the EU creates a more uncertain outlook for
the UK economy. Accordingly, the Group has had a
prudent approach to growing its presence in the UK
market.
Dependency on the UK market has been
reduced by growth being focused outside
the UK. Only 9% of the new locations
added during 2018 were in the UK.
During 2018 the opportunity was taken
to consolidate some locations in the UK.
In addition, several locations were
refurbished, and 27 new locations added,
more than half in our Spaces format.
Overall our network in the UK increased
from 313 to 326 locations.
Based on the current position over 34%
of our leases with landlords in the UK are
variable in nature.
3 6
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
PRINCIPAL RISKS
Risk
STRATEGIC
Business planning and forecasting
1 2 3 4
Mitigation
Changes since 2017
IWG maintains a three-year business plan which is
updated and reviewed on an annual basis. We also
use a 12-month rolling forecast which is reviewed
every month based on actual performance.
The forecasting process has been
reviewed and tracking performance
against specific budgets and targets in
place was further enhanced.
The Group constantly monitors its cash flow and
financial headroom development and maintains a
12-month rolling forecast and a three-year strategic
outlook. The Group also monitors the relevant
financial ratios against the covenants in its facilities
to ensure the risk of breach is being managed. The
measurement of these covenant ratios is unaffected
by the forthcoming implementation of IFRS 16.
The Group also stress tests these forecasts with
downside scenario planning to assess risk and
determine potential action plans.
The Board intends to maintain a prudent approach
to the Group’s capital structure.
Part of the annual planning process is a debt
strategy and action plan to ensure that the Group
will have sufficient funding in place to achieve its
strategic objectives.
The Group also constantly reviews and manages the
maturity profile of its external funding.
Given that transactions generally take place in the
functional currency of Group companies, the
Group’s exposure to transactional foreign exchange
risk is limited.
Where possible, the Group attempts to create
natural hedges against currency exposures through
matching income and expenses, and assets and
liabilities, in the same currency.
The Group, where deemed appropriate, uses
currency swaps to maintain the currency profile
of its external debt.
We increased our committed Revolving
Credit Facility in January 2019 from
£750m to £950m and improved the debt
maturity profile by extending it to 2024
(previously 2023). There is an option to
extend by a further two years.
IWG had a net debt : EBITDA ratio at
31 December 2018 of 1.2 times. There
is significant headroom on the
covenant ratios.
Overall in 2018 the movement in
exchange rates reduced reported
revenue and gross profit by £45.9m and
£3.2m respectively. Operating profit
increased by £2.6m.
Business plans, forecasts and
review processes should
provide timely and reliable
information for short, mid and
long-term opportunities and
any risks to performance so that
these can be addressed on a
proactive basis.
FINANCIAL
Funding
1 3
The Group relies on external
funding to support a net debt
position of £460.8m at the end
of 2018. The loss of these
facilities would cause a liquidity
issue for the Group.
Exchange rates
1 4
The principal exposures of the
Group are to the US dollar and
the euro, with approximately
36% of the Group’s revenue
being attributable to the US
dollar and 16% to the euro.
Any depreciation or
appreciation of sterling would
have an adverse or beneficial
impact on the Group’s reported
financial performance and
position respectively. The
Group does not generally hedge
the translation exchange risk of
its business results. Rather, it
assumes that shareholders will
take whatever steps they deem
necessary based on their varied
appetites for exchange risk and
differing base currency
investment positions.
3 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED
PRINCIPAL RISKS
Risk
FINANCIAL
Interest rates
4
Operating in a net debt
position, an increase in
interest rates would
increase finance costs.
IFRS 16
1
Impact on internal financial
performance review vs IFRS 16
external compliance reporting.
Impact of IFRS 16 external
compliance reporting on
perception of IWG’s financial
performance.
OPERATIONAL
Cyber security
41
The trend towards an integrated
digital economy and use of
external cloud services
combined with the rise in
malicious attacks and increasing
consequential costs warrants
particular attention to cyber
security risks.
Mitigation
Changes since 2017
The Group constantly monitors its interest rate
exposure as part of its monthly treasury review.
As part of the Group’s balance sheet management it
utilises interest rate swaps.
At the end of 2018 the level of interest
rate protection was 25% of the Group’s
net debt being fixed for periods up
to 2021.
We will continue to provide IAS 17 (current
reporting) as well as IFRS 16 reported numbers. A
process has been established to allow for current
internal reporting to continue unaffected by IFRS
16 external reporting requirements. Reconciliation
between IFRS 16 reported numbers and internal
reporting will be undertaken on a quarterly basis.
We will prepare quarterly reconciliation between
IFRS 16 reported numbers and pre-IFRS 16
compliant reported numbers, reflecting no impact
on cash flows.
The Group plans to supplement the
requirement to report externally under
IFRS 16 from 1 January 2019 with
pre-IFRS 16 compliant numbers to
provide a consistency of reporting for
stakeholders. The Group intends to
engage with stakeholders to explain the
implication of IFRS 16.
This risk is mitigated as follows:
1 The Group maintains an active information
security programme under the direction of the
Group CIO with oversight by the Information
Security Committee and the Board.
2 We continually monitor our security using
internal resources and external specialists to
identify any vulnerabilities.
3 The Group ensures compliance with all major
legislation and directives.
4 The Group maintains a mandatory training
programme to promote staff awareness of
information security and compliance with best
practice.
5 Data, systems and access permissions are strictly
segregated to reduce exposure to risk.
6 The Corporate Communications team is
constantly engaged to provide support for any
internal and customer facing incidents.
The Group has implemented a number of
steps such as Multi Factor Authentication
and security awareness campaigns to
ensure that the business is risk aware and
our systems are adequately protected
against any external attacks.
An ongoing penetration testing
programme is in place performed
by external security specialists. This
allows us to identify and fix any
vulnerabilities to emerging cyber threats
on a proactive basis.
IWG has cyber insurance policies in place
which provide immediate response
services in the event of a breach.
Information security gap assessment
against ISO 27000 was conducted by an
external party and a risk-based roadmap
was created.
3 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
PRINCIPAL RISKS
Risk
OPERATIONAL
Business continuity
1 2 4
The Group’s systems and
applications are housed in data
centres. Should the data centres
or other key locations such as
our sales call centres be
impacted as a result of
circumstances outside the
Group’s control there could be
an adverse impact on the
Group’s operations and
therefore its financial results.
Ethics and compliance
4
Ethical misconduct by our
employees or non-compliance
with regulation either
inadvertently, knowingly or
negligently could lead to
financial loss/penalties,
reputational damage, loss of
business and impact on staff
morale.
Data protection and privacy
1
IWG is required to comply with
legislation in the jurisdictions in
which it operates including the
new General Data Protection
Regulation (GDPR) that came
into force in May 2018 and is
aimed at harmonising existing
EU privacy laws. Non-compliance
and breaches could result in
significant financial penalties
and reputational damage.
Mitigation
Changes since 2017
IWG manages this risk through:
1 Business continuity plans for our key systems
and sites.
2 A detailed service agreement with our external
data centre provider which incorporates
appropriate back-up procedures and controls.
3 Ensuring appropriate business interruption
insurance is in place.
4 Transitioning core infrastructure to cloud-based
and SaaS services.
We undertake regular testing of business
continuity procedures to ensure that they
are adequate and appropriate.
We have introduced redundant
connectivity of independently routed
circuits for our three main sales
call centres.
Currently implementing a cloud-based
BCP solution for our key systems and
applications.
IWG manages this risk through:
1 Visible ethical leadership.
2 A robust governance framework including a
detailed code of conduct plus policies on gifts
and hospitality and bribery and corruption that
are in place and rolled out to all employees as
mandatory training.
3 Centralised procurement contracts with
suppliers for key services and products.
4 Standardised processes to manage and monitor
spend including controls over supplier on-
boarding and payments approval.
5 Regular reviews to monitor effectiveness of
controls.
6 Independent and confidential ethics hotline
available to employees, contractors and third
parties.
7 Independent investigation of fraud incidents
and allegations of misconduct with Board-level
oversight.
IWG operates a detailed privacy policy that covers
all aspects of data privacy including and not limited
to personal data, demographic information,
financial data, cookies and other digital markers,
marketing communication etc.
A robust supplier selection and
evaluation process has been
implemented with a view to enhance
controls to address the risk of fraud.
We’ve also established a dedicated cost
function to review spend across all
categories and detect any anomalies
or exceptions.
A detailed GDPR review has been
performed to assess areas for
improvement and any resultant actions
have been implemented to ensure full
compliance with the requirements of
GDPR and e-Privacy regulations.
Mandatory data protection training
rolled out to all employees to raise
awareness. All suppliers that are in
receipt of any data from IWG are
asked to confirm compliance with data
protection legislation.
3 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED
Changes since 2017
On aggregate, our new centres continue
to perform in line with management
expectations and are delivering
attractive returns.
PRINCIPAL RISKS
Risk
GROWTH
Ensuring demand is there to support our growth
21
Mitigation
IWG has undertaken significant
growth to develop local and
national networks. Adding
capacity carries the risk of
creating overcapacity. Failure to
fill new centres would create a
negative impact on the Group’s
profitability and cash generation.
IWG mitigates this risk as follows:
1 Each investment or acquisition proposal is
reviewed and approved by the Investment
Committee.
2 A robust business planning and forecasting
process is in place to provide timely and reliable
information to address short and mid-term
opportunities and risks to performance.
3 A quarterly review process is in place to monitor
new centre performance against the investment
case to ensure that the anticipated returns are
being generated.
4 As part of the annual planning process, a growth
plan is agreed for each country which clearly
sets out the annual growth objectives.
HUMAN RESOURCES
Ability to recruit at the right level
1 5
Our ability to increase our
management capacity and
capabilities through the hiring
of experienced professionals
not only supports our ability to
execute our growth strategy,
but also enables us to improve
succession planning throughout
the Group.
Mitigating actions include:
1 Succession planning discussions are an integral
part of our business planning and review
process.
2 Part of the annual planning process is the
Human Resources Plan, and performance against
this Plan is reviewed through the year.
3 Our global performance management system
that allows us to keep close to our employees
and maintain a two-way dialogue throughout the
year using a monthly feedback process.
4 Regular external and internal evaluation of the
performance of the Board.
Our capability to hire the best talent
continued to increase in 2018. A full
talent plan is in place with key hires
planned to provide complete succession
planning and top talent bandwidth.
We recruit our team with diverse
backgrounds in mind, and the IWG
employee base is over 65% female. Our
top leadership team is split 36% female
and 64% male, placing us at number 66
in relation to diversity in Hampton
Alexander’s annual review of the UK FTSE
250’s best companies to work for. In
addition, 28% of our main Board is
female, which is above target for UK
listed companies.
4 0
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
PRINCIPAL RISKS
Risk
HUMAN RESOURCES
Training and employee engagement
1 5
Mitigation
As a service-based business the
strength and capabilities of our
increasingly geographically
diverse team are critical to
achieving our strategic
objectives.
One of the key items in the Human Resources Plan
is the Global Induction & Training Plan, which sets
out the key objectives for the forthcoming year.
Performance against these objectives is reviewed
through the year.
All new employees are surveyed in the first three
months to ensure they have been trained and are
receiving effective support.
Changes since 2017
Our investment in our new Learning
platform has allowed our employees to
learn through e-learning, videos, case
studies and coaching on the ground
rather than by using prescriptive and
traditional training channels.
Since January 2018, over 6,000 videos,
articles, best practice Q&A, white papers
and e-learning interactions have been
completed, with an average of 968 team
members using the learning platform
every day.
Our top 320 executives attended our
global leadership conference in January
2019 where we launched our new
Leadership Development Programme.
We have partnered with a global
leadership specialist to develop our
existing talent and leaders of the future.
We also launched our Sales & Customer
Service Training Academy in September
2018. This suite of training is pivotal to
ensuring that our team remains focused
on our existing and new customers alike.
VIABILITY STATEMENT
In accordance with provision C.2.2 of the UK Corporate Governance Code, and considering the Group’s current position and
prospects as outlined in the Strategic Report and its principal risks for a period longer than 12 months as required by the
going concern statement, the Board has a reasonable expectation that the Group will continue to operate and meet its
liabilities as they fall due, for the next three years.
The Board’s consideration of the long-term viability of the Group is an extension of our business planning process which
includes financial forecasting, a robust enterprise-wide risk management programme, regular business performance reviews
and scenario planning.
For the purposes of assessing the Group’s viability, the Board identified that, of the principal risks detailed on pages 34 to 41,
the following are the most important to the assessment of the viability of the Group:
• Impact of an economic downturn or geo-political events in our major markets
• A significant business event leading to serious reputational and brand damage
• Growing competition
• Access to funding arrangements
The potential impact of each scenario was modelled on the Group’s EBITDA, profit after tax, net debt and debt covenants over
the three-year forecast period. The Board subsequently considered the viability of the Group both in the context of the
individual risks listed above and a combination of two or more risks. The stress testing showed that the Group would be able
to withstand any of the severe but plausible scenarios by taking management action in the normal course of business.
4 1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR PEOPLE
REDEFINING
OUR TALENT
Our talent strategy for 2018 was to ensure we have great people everywhere
helping customers be successful in our growing network of global workspaces.
This approach continues to be pivotal to IWG’s profitable growth and continued
success, placing key factors like recruitment, talent, diversity, retention and
succession planning at the heart of our long-term plans.
We strive to have the most passionate and committed people
in place at every level of the organisation, to deliver the
flexibility, service and support our customers need. That is
why we focus so heavily on ensuring that everybody in
our operations across the world can have a great day at work
and an exciting career.
In 2018 we have continued to strengthen our leadership
team around the world, particularly in the areas of network
development, sales and customer service.
The role of the Network Development Director is to expand the
network with a breadth and variety of workspaces in every city
with great property investment partners. In particular we have
strengthened our Franchise team in key locations around
the world.
We recruit talent externally when required, using our internal
Executive Recruitment Team, which handles the majority of our
senior talent needs across the world.
We also invested in a new state-of-the-art recruitment
technology system in 2018. This allows many more people to
apply to IWG quickly and easily around the world, using video
technology alongside more traditional recruitment methods.
DIVERSITY OF TALENT
Future developments in the business, with multiple brands,
technology and supplier partnerships, will drive the need for
our leaders to have a growing breadth and range of skills,
experience and market knowledge. We recruit our team with
diverse backgrounds in mind, and the IWG employee base is
over 65% female. Our top leadership team is split 36% female
and 64% male, placing us at number 66 in relation to diversity
in Hampton Alexander’s annual review of the UK FTSE 250’s
best companies to work for. In addition, 28% of our main Board
is female.
“ I joined IWG as their strategic vision and
ambition to accelerate their growth are
incredibly exciting. I look forward to being
part of the team that cements IWG’s position
as the world’s number one provider of
flexible workspace.”
“ Flexible workspace represents an immense
market growth opportunity and one that IWG,
as global leader, is by far the best-placed
player to exploit. The business culture is
entrepreneurial and that manifests itself in a
fast-moving, ambitious and exciting place
to work.”
MATT KENLEY
FRANCHISE DEVELOPMENT DIRECTOR
PETER MOGG
NETWORK DEVELOPMENT DIRECTOR
4 2
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
We launched our Sales & Customer Service Training Academy in
September 2018. This suite of training, along with additional
sales training at the global conference, will be pivotal to
ensuring that our team remains focused on our existing and new
customers alike.
REWARD
Reward is another key focus area in our efforts to retain the best
talent. The competition for talent is unrelenting in our markets,
so we work hard to ensure that our overall compensation
structure is highly competitive. We also ensure that high-
potential people, at every level from graduate recruit to the
Executive Committee, are encouraged to stay with us via
attractive short and long-term incentives.
Altogether, the Group’s investments in its people, and their
burning desire to excel on all fronts, have resulted in countless
thousands of ‘great days at work’ throughout 2018. As IWG CEO
Mark Dixon has said:
“Our role is all about making a positive difference to those
around us, be that our customers, the businesses they run or
the communities in which we serve. We should never
underestimate the importance of the role we each play,
day-to-day in our centres.”
And it’s by selecting and retaining the right people, helping
them become as good as they can be and rewarding them fairly,
that IWG ensures the millions of members and users who spent
time at our centres in 2018 each experienced a great day
at work.
SUCCESSION AND INTERNATIONAL
OPPORTUNITIES
Providing international opportunities for team members
helps us to create a dynamic workforce. This year, experienced
employees travelled to locations including New Zealand and
China to work on important projects such as integrating new
acquisitions and coaching new team members in high-
growth markets.
This secondment activity also helps us get to know our talent
better, underpinning succession planning across the business.
Where possible, we promote from within and celebrate
important moves throughout the business.
TRAINING AND DEVELOPMENT
Our investment during 2017 in our new learning platform is
now allowing employees to learn through e-learning, videos,
case studies and coaching on the ground rather than by using
prescriptive and traditional training channels. Since January
2018, over 6,000 videos, best practice questions and answers,
articles, white papers and e-learning interactions have been
read and completed, with an average of 968 team members
using the learning platform every day. This is part of our
learning strategy to use multiple training and development
channel for a geographically dispersed workforce.
All new team members have a new-starter training programme
specific to their local market, supported by a peer level coach.
Following this, team members are accredited by their line
manager and coach to start their career with IWG after taking an
online exam. This way we can ensure that the best people are
looking after our customers.
Our top 320 executives attended our global leadership
conference in January 2019 where we launched our new
Leadership Development Programme. We have partnered with
an external global leadership specialist, to work with us globally
on developing our existing talent and leaders of the future. This
is a significant investment, but having a globally aligned,
world-class leadership team is fundamental to our success.
“I had the privilege of being chosen to assist
with the training and integration of a
strategic acquisition in New Zealand. It was
an amazing professional and personal
experience that can only come from working
for a global company.”
KRISTEN BUDA
(USA TO NEW ZEALAND)
“ I have been at IWG for 14 years in various
roles and multiple markets. Hard work,
dedication and a competitive spirit are
valued at IWG. My recent promotion to
a Regional Sales Vice President is
confirmation that these qualities open
up exciting career opportunities.”
ALISA KAPIC
(RECENTLY PROMOTED TO VP, SALES FOR
NORTHERN EUROPE)
4 3
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CORPORATE AND SOCIAL RESPONSIBILITY
STRENGTHENING
OUR COMMUNITIES
At IWG we are committed to promoting environmental sustainability and investing in the
communities where we live and work. As our network continues to expand, we provide
positive change to each location through our greener operations, inherently sustainable
products and community involvement. We aim to help improve the communities in
our areas, ensuring that they grow in parallel with our own growth.
IWG global utility cost per workstation yearly
change (£)
18
17
16
75.26
93.79
100.35
IWG global utility cost per workstation yearly
change breakdown (£)
54.72
67.31
71.28
18
17
16
17.44
3.10
22.71
24.84
3.77
4.23
Electricity per workstation
Gas per workstation
Water per workstation
CRC UK carbon emission yearly reduction (tonnes)
18
17
16
34,938
37,192
39,830
COMMUNITY DEVELOPMENT
As a company, we strive to expand our network into new
markets, growing in locations where there is demand for what
we provide. We invest in each community by providing local
employment opportunities and attracting talent to the area.
Wherever we can, we draw on local supply chain networks,
building relationships with local businesses and connecting
them with our clients. This generates wealth by helping to
improve and grow local economies through attracting new
people and organisations.
Our products also attract new businesses as their inherently
sustainable nature enables our clients to minimise their carbon
emissions, waste and energy usage. These organisations in turn
bring further local opportunities to the area.
ENVIRONMENTAL IMPACT
IWG continues to show year-on-year improvement in reducing
our global carbon footprint and related costs per centre.
An analysis of the global costs of gas and electricity per
workstation showed a 6.3% reduction in 2017, with a further
19.8% reduction in 2018, resulting in an overall reduction of
24.9% across the two years.
These global figures reflect the continuing improvements we
are making in reducing energy consumption across our global
estate and engaging our clients in our Greener Working
Strategy. A similar analysis of the usage of water per workstation
indicates a 26.8% reduction in costs over the same two years.
We have systematically been implementing some of the
recommendations identified by our lead assessors, PASCHALi,
from the Energy Savings Opportunity Scheme (ESOS) audit
carried out in Phase 1 (Dec 2015). This approach has supported
the positive reduction in energy consumption and
improvements in maintenance achieved across our UK estate.
The result of this work is demonstrated by the purchase of
fewer CRC equivalent carbon allowances this year than in
previous years. This equates to a CRC cost reduction per centre
of some 16.1% when comparing 2015/16 to 2017/18 figures.
In line with our transparent and open policies, IWG once again
participated in the Global CDP (formerly the Carbon Disclosure
Project) and has consistently held its very good rating of B. This
is higher than the sector average of B- demonstrating that we
have a good knowledge of climate change issues and are taking
coordinated management action to reduce any negative climate
change impacts.
4 4
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Generating value from waste
Our centres in Peru encouraged colleagues and clients to
collect their plastic caps and donate them to the Ayudanos
a Ayudar (“Help us to help”) charity.
The organisation then recycles these plastic caps, using the
proceeds to purchase wheelchairs for disabled children who
would not otherwise be able to afford them.
“ Thank you for letting us be part of this initiative, which
combines recycling and charities. Keep on encouraging
causes like this.”
Stephanie Cirilo, CPIM
Peru
Responsible recycling
Together with their customers, our team in Russia has been
sorting waste into plastic, paper and organic products to
ensure that it is properly recycled. Their key aim is to reduce
the use of plastic, as it is poorly processed.
To support them in this task, their clients are actively
participating in a campaign in which they receive all the food
they buy in the cafeteria in paper boxes or ceramic dishes.
CHARITABLE INVESTMENT
Along with clients, suppliers and other stakeholders, IWG
colleagues around the world used their time, talents and skills
throughout 2018 to support those most in need within their
local communities.
Their charitable initiatives included wide-ranging fundraising
campaigns, such as:
• raffles, networking events and fun, in-centre activities;
• collecting gifts in-kind to support local causes and
humanitarian appeals;
• participation in challenging sporting events to raise
public awareness for a particular cause; and
• donating their skills and time to organisations in need.
As a company, we proudly promoted our colleagues’ initiatives,
encouraging them to use our facilities for their charitable
activities. We also provided further direct donations and
concessions on working space to many organisations.
With the enthusiasm and support of our colleagues, clients,
suppliers and wider stakeholders, we collectively made a
significant positive contribution to causes within our local
communities, supporting 274 charities through 335 projects
in 47 countries to raise a total of £317,891. Please find further
information on our year-on-year progress in the table below:
Countries with community engagement activity
Projects
Charities supported
Donations made
2013
20
54
78
£80,500
2014
38
132
100
£155,329
2015
43
219
195
£209,905
2016
44
244
239
£237,479
2017
46
260
252
£302,066
2018
47
335
274
£317,891
4 5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CORPORATE AND SOCIAL RESPONSIBILITY CONTINUED
Canada
The transformative power of space
Since 2015, IWG has partnered with Up With Women,
helping the charity achieve its mission of enabling recently
homeless and at-risk women to exit poverty and achieve
financial self-reliance through coaching and support.
As part of the partnership, IWG provides the space required
to run programme sessions. We have supported 350 recently
homeless and at-risk women across Canada, providing
meeting rooms at no charge for group learning and support
sessions, and access to day offices for private sessions
between coaches and clients.
Due to housing affordability issues in major cities, many Up
With Women clients often spend several hours a day in
transit, managing jobs, job searches or child care. With IWG’s
large network of centres, the organisation’s clients can meet
with their coaches in private spaces near their own
neighbourhoods. This frees up additional travel time so that
they can focus more time on rebuilding their careers
and lives.
Each Up With Women client receives a year of free one-on-
one coaching with a certified professional coach, access to
personality and emotional intelligence assessment tools, and
subject matter expertise for developing career and
entrepreneurship skills. At open market rates, these free
services would be collectively worth $15,000.
As a result of the partnership with IWG, $1.5 million in
services was delivered to Up With Women clients during
2018 alone. More than $5 million in services has been
invested in the community since the start of the partnership.
IWG is committed to enabling Up With Women to meet its
goals and grow its support into new locations. One of the
biggest challenges for organisations when scaling up is in
achieving consistency of service. However, through the
partnership with IWG, Up With Women can grow quickly and
confidently by utilising established IWG locations.
“ From the day we first approached IWG to explore the
possibility of a community partnership, we have been
thrilled with the accessibility, enthusiasm, depth of
commitment and creativity of the team.
The importance of a great workspace is so easily
overlooked, but it is palpable to us. Our clients enter an
IWG space, and the transformation begins to unfold
immediately. From the attentiveness and warmth of the
community managers who greet and support them to the
functionality and aesthetics of great office design, our
clients feel welcome and can get right to work. IWG
facilitates productivity, and productivity is the first step
to self-belief. There truly is a transformative power of
place. We are so grateful that IWG helps ignite that
transformation for our clients and this organisation.”
Lia Grimanis, CEO, Up With Women
4 6
Responsible Recycling Meeting, Russia
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Responding to disaster
Throughout 2018, IWG actively engaged in helping
vulnerable people and business communities in areas
affected by natural disasters.
In the USA, for example, we continued our support of
previous years through the Hurricane Relief Programme,
welcoming any businesses and employees that had been
affected by Hurricane Florence and Michael. Our centres
offered a safe working space and vital connectivity, making
all lounges across the USA free to use. As a result, business
professionals could drop in, plug in and get a coffee while
getting back online. Our colleagues and clients provided
further support for hurricane victims by enthusiastically
donating food, toiletries, clothing and bottled water.
In California, our colleagues, clients and their friends and
family members collected clothing, toiletries, blankets and
food, donating them to the temporary housing facilities for
people affected by the California wild fires.
“ I always try to put myself in other people’s shoes or
situations. In this case, I cannot imagine myself or my
family going through the devastating fire and losing
everything. My heart goes out to those families who have
worked so hard for what they have built only to see it
suddenly disappear within minutes. Having an
opportunity to start and participate in this project meant
the world to me, because I wanted to bring a better
understanding and awareness. Working at IWG seems like
a perfect opportunity for me to spread the word and
gather everyone together to show human kindness.”
Susan Elarms (Community Manager)
“ Donating to help the families affected by the Camp Fire in
Northern California meant reaching out to help those in
need at such a vulnerable, scary and uncertain time in
their lives. Some had lost loved ones, including their pets,
as well as losing their homes. This is something that I
could not even begin to imagine happening to myself. I
felt that at such a rough point in their lives I should and
could help in any way possible, whether it be to help feed
the animals being taken in at the shelters or to provide
clothing and food for the families. My heart and prayers
go out to all of those (as well as their pets and the
surrounding wildlife) who have lost something, from as
little as a cherished family photo album to the ones who
have lost everything.”
Samantha Veil (IWG client)
Across the globe in Indonesia, our colleagues raised funds
and collected clothing to support those affected by the
Lombok Earthquake, which injured over 1,500 people. All
raised funds were provided to the ACT (Fast Action
Response) non-profit organisation, and were used to
purchase first aid supplies, food and hygiene items for those
affected. Together with a large donation of clothes, our team
made a significant impact.
“ Through the amazing support of our clients and centre
teams for the Lombok Earthquake Disaster appeal, we
received £486 and many boxes of clothing that have made
it possible to rush aid to the region.”
IWG colleague
Hurricane Michael donations, USA
4 7
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CORPORATE AND SOCIAL RESPONSIBILITY CONTINUED
Running for change
For the fifth year running, our team in India,
their clients and family members
enthusiastically supported the Make-A-Wish
Foundation India by taking part in the
Mumbai Marathon. This is amongst the top
10 marathons in the world, and is the single
largest philanthropic sporting event in India.
Through the team’s five-year participation,
over £15,000 has been provided, granting
the wishes of more than 250 children.
“ Our long association with the Make-A-Wish
Foundation gives the team and me the
knowledge that our efforts are going
towards helping terminally ill children
fulfil their wishes. In a small way, our
contribution is bringing joy into the lives
of these little ones. It’s what keeps us
going each year, and we are really proud
of this effort and association.”
Harsh Lambah, Country Manager, India
Mumbai Marathon, India
Raising funds for good causes
Our colleagues in the United Kingdom held
a charity raffle in aid of the DM Thomas
Foundation for Young People. This raised
£7,364 to help the charity’s work in
transforming the lives of young people. An
impressive 840 tickets were sold by one
person alone.
IWG centres have partnered with the
Foundation in a national raffle since 2009.
Since then, more than £92,000 has been
raised for the Foundation and nominated
charity project partners including DEBRA
(the “charity for people whose skin doesn’t
work”), the Duke of Edinburgh Award
Scheme and Evelina Children’s Hospital.
Our colleagues in the UK also participated
throughout the year in many other
charitable initiatives alongside their
clients, from hosting coffee mornings to
raise funds for the Macmillan Cancer
Foundation to holding Hula Hoop
competitions in aid of Sport Relief.
Charity raffle, UK
4 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Raising awareness
October is marked as the Breast Cancer Awareness month
worldwide. In Qatar, the IWG team set out to support the
Qatar Cancer Society in helping to raise awareness of breast
cancer. An interactive awareness session was arranged,
where a leading expert from the largest hospital in Doha
talked to our clients, colleagues and other community
representatives about the importance of early detection
and the range of different available treatment options.
All centres and clients were involved in this event. Further
awareness for the cause was raised through the sale of pink
roses in each centre.
Breast cancer awareness events were also held in other
parts of the world, including New Zealand and the UK.
The team in New Zealand held a ‘Pink for a day’ campaign,
where they dressed in pink and hosted charitable
networking events for their clients and stakeholders,
providing pink food and drinks to draw further attention
to the cause. To coincide with this campaign, the team also
raised donations to support the work of the New Zealand
Breast Cancer Foundation.
In the United Kingdom colleagues dressed in pink in support
of Breast Cancer Now.
Qatar – Think Pink
“ It was great to be part of a worldwide cause that affects so
many people all over the world. Most people know of
someone who is suffering from this illness, and I felt very
proud of being part of a coffee and cake morning to raise
funds for this charity.”
“ Our Basepoint colleagues held a brilliant display of cakes
galore and wore pink outfits dressed as the pink ladies
from Grease and Penelope Pitstop. Tommy graced us in
his Pink Panther onesie, and encouraged the rest of
Basepoint to wear pink that day.”
Jane at S-Connect Ltd.
Sue at S-Connect Ltd.
Volunteering for good causes
The team in New Zealand regularly holds activities with
clients to support local causes. Throughout the year, they
have also been involved in the ‘Eat My Lunch’ project in
which colleagues and clients volunteer to make over 1,500
lunches for vulnerable children. They also further support
these children by providing weekly lunch donations.
“ Through this campaign, with every lunch that we buy a
lunch is given to a child who would otherwise go without.
It’s a small gesture that has had a great impact for so many
children. With a good lunch in their tummies they do
better in so many ways, from helping them focus on
learning to just putting a smile on their faces.
Since starting the project at the beginning of the year,
we have now fed almost 300 kids with our weekly lunch
orders. Our clients in our community also love signing up
to attend our volunteer slot at the Eat My Lunch
headquarters. This makes us so proud as WE are helping
contribute to a great cause.”
The team at the Regus Constellation Drive centre
NZ – Eat My Lunch
4 9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS BOARD OF DIRECTORS
N
DOUGLAS SUTHERLAND
CHAIRMAN
MARK DIXON
CHIEF EXECUTIVE OFFICER
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
N
A
R
FRANÇOIS PAULY
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointment to Old Regus
27 August 2008
Appointment to Old Regus
Founder
Appointment to Old Regus
–
Appointment to Old Regus
19 May 2015
Appointment to IWG
14 October 2016
Appointment to IWG
14 October 2016
Appointment to IWG
1 January 2019
Appointment to IWG
14 October 2016
Experience
Douglas was Chief Financial
Officer of Skype during its
acquisition by eBay and was
also Chief Financial Officer
at SecureWave during its
acquisition by PatchLink.
Prior to this, Douglas was an
Arthur Andersen Partner with
international management
responsibilities. He has served
as a director of companies
in multiple jurisdictions and
was the founding Chairman
of the American Chamber of
Commerce in Luxembourg.
Experience
Chief Executive Officer and
founder, Mark is one of
Europe’s best known
entrepreneurs. Since founding
the Regus Group in Brussels,
Belgium in 1989, he has
achieved a formidable
reputation for leadership and
innovation. Prior to Regus and
IWG he established
businesses in the retail and
wholesale food industries. A
recipient of several awards
for enterprise, Mark has
revolutionised the way
business approaches its
property needs with his
vision of the future of work.
Eric has almost 25 years’
experience in financial,
operational and strategy roles.
Eric previously served as Chief
Financial Officer at a number
of leading listed companies
including TeleCity Group PLC
in the UK and Royal KPN NV,
the leading communications
group in the Netherlands. Eric
began his career in the
banking sector, working at
ABN Amro and Deutsche Bank.
He holds a Master’s degree in
Business Economics from
Maastricht University in the
Netherlands and an MBA from
London Business School.
Experience
François has over 30 years
of management experience in
the banking sector. Until April
2016 François served as Chief
Executive and Chairman of the
Management Board of Banque
Internationale à Luxembourg.
Previous management
experience includes
executive appointments at
BIP Investment Partners S.A.,
Dexia Group and at Sal.
Oppenheim jr. & Cie. S.C.A.
External appointments
Douglas is currently also the
Chairman of Socrates Health
Solutions Inc. and a Director
of AI Monet Parento S.àr.l.
External appointments
François serves as the Senior
Advisory Partner at Castik
Capital Partners and as
Non-Executive Director of
Group la Luxembourgeoise SA,
Quilvest Wealth Management
SA, M&C S.p.A Cobepa SA and
for several companies of the
Edmond de Rothschild Group.
François also serves on the
boards of several
charitable organisations.
R
R
Member of Remuneration Committee
Chairman, Remuneration Committee
A
A
Member of Audit Committee
Chairman, Audit Committee
N
N
Member of Nomination Committee
Chairman, Nomination Committee
5 0
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
N
A
R
N
A
R
N
A
R
FLORENCE PIERRE
INDEPENDENT
NON-EXECUTIVE DIRECTOR
ELMAR HEGGEN
INDEPENDENT
NON-EXECUTIVE DIRECTOR
NINA HENDERSON
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointment to Old Regus
21 May 2013
Appointment to Old Regus
1 June 2010
Appointment to Old Regus
20 May 2014
Appointment to IWG
14 October 2016
Appointment to IWG
14 October 2016(1)
Appointment to IWG
14 October 2016
BOARD BALANCE
AND DIVERSITY
The role of the Board is
to provide entrepreneurial
leadership and to review
the overall strategic
development of the Group.
Board gender diversity
Experience
Florence has over 30 years
of international corporate
finance practice, holding
senior positions at BNP,
Financière Rothschild,
Degroof Corporate Finance,
3i Infrastructure plc and her
own M&A advisory boutique.
Florence has an international
perspective, having worked in
Chicago, New York, Paris and
Brussels. She has also taught
economics and finance,
published a number of books
and articles on valuation, and
has been a member of several
French entrepreneurship and
innovation committees.
External appointments
Florence also shares her
time between directorships,
private equity investments
in hi-growth companies
providing innovative and
digital-based services,
managing her art collection
and mountain trekking.
Experience
Elmar has extensive
management experience.
Since 2006 he has been Chief
Financial Officer, Head of the
Corporate Centre and a
Member of the Executive
Committee of the RTL Group,
the leading European
entertainment network. Joining
the RTL Group in 2000 he has
previously held the positions
of Vice President of Mergers
and Acquisitions and Vice
President of Strategy and
Controlling. Prior to joining
RTL, Elmar was Vice President
and General Manager of Felix
Schoeller Digital Imaging
in the UK.
External appointments
Elmar is Chief Financial Officer
and Deputy Chief Executive
Officer of the RTL Group.
He is also a Board Member
of Atresmedia (Spain) and
Metropole Television (France)
and Chairman of the Broadcast
Centre Europe SA.
1. Elmar has resigned with effect
from the annual general meeting
on 14 May 2019.
Experience
During her 30-year career
with Bestfoods and its
predecessor company CPC
International, Nina held a
number of international and
North American general
management and executive
marketing positions, including
Vice President of Bestfoods
and President of Bestfoods
Grocery. She has also served
as a director of numerous
companies including AXA
Financial Inc., Royal Dutch
Shell plc, Del Monte Food
Company and
Pactiv Corporation.
External appointments
Nina is a Non-Executive
Director of Hikma
Pharmaceuticals plc and
Director of CNO Financial Inc.
(Bankers Life, Washington
National and Colonial Penn
insurance companies). Nina
is Vice Chairman of Drexel
University’s Board of Trustees
where she holds a Bachelor
of Science with honours and
received the AJ Drexel
Distinguished Alumni Award.
She is Director of the Visiting
Nurse Service of New York and
the Foreign Policy Association.
Male 5
Female 2
Balance of Non-Executive
and Executive Directors
Executive
Directors 2
Non-Executive
Directors 5
Length of tenure of
Non-Executive Directors
0-3 years 1
3-6 years 2
6 years+ 2
5 1
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT CORPORATE GOVERNANCE
“Good governance starts with a strong
Board providing entrepreneurial
leadership and setting the values
and culture of the Group.”
Board composition
In December we were pleased to announce the addition of
Eric Hageman to our Board as Chief Financial Officer with effect
from 1 January 2019. Eric replaced Dominik de Daniel who
stepped down from the Board on 12 September 2018.
Elmar Heggen will be stepping down from the Board with effect
from the annual general meeting on 14 May 2019. Laurie Harris
will join the Board as Non-Executive Director and Chair of the
Audit Committee on the same date.
We maintain a Board based on merit which we believe
encompasses the broad range of skills, backgrounds and
experience necessary to properly serve our shareholders. The
mix of Board members brings together many backgrounds and
nationalities covering diverse executive responsibilities and,
additionally, each member brings with them distinct yet
complementary personal experiences and approaches to
matters which include the evaluation of opportunities and
management of risks. We continue to see the rewards and
benefits of having such strength and diversity on the Board.
Nomination Committee
The Nomination Committee report is set out on pages 57 and 58.
Remuneration Committee
The Directors’ Remuneration report is set out on pages 63 to 77
including the Remuneration Policy on pages 65 to 70.
Audit Committee and auditors
The Audit Committee has continued to play a substantial role in
ensuring appropriate governance and challenge around our risk
and assurance processes. This is covered in further detail on
pages 34 to 41. Full details of the work of the Audit Committee
are in the Audit Committee report on pages 59 to 62.
Board evaluation
An external Board evaluation was performed in respect of 2018
and the process and results are summarised on page 55.
Employee engagement and corporate responsibility
Nina Henderson has taken over Board oversight for the Group’s
corporate responsibility activities and will also take on the new
Board role with responsibility for engagement with employees.
DOUGLAS SUTHERLAND
CHAIRMAN
DEAR SHAREHOLDER
This section is concerned with good governance and the
approach that your Board takes in order to promote an effective
and robust governance structure within the Group. It is the
responsibility of your Board to ensure and be responsible for
the long-term success of the Company through facilitating
effective entrepreneurial and prudent management.
Through the detail provided in the reports contained in this
section, I hope we can provide you with an insight into how we
continually strive to achieve effective governance.
Our approach to governance
We firmly believe that good governance starts with a strong
Board providing entrepreneurial leadership and setting the
values and culture of the Group against a backdrop of prudent
and appropriate safeguards, checks and balances which are
regularly reviewed, and which ensure that the right
considerations underpin every decision we make.
As your Board, it is our responsibility, through a culture of
openness and debate, to determine the conduct of the Group’s
business with particular focus on the following areas:
• performance and progress;
• major risks and their mitigation;
• strategy;
• ethics, behaviours and values;
• people and how we can create a high-performing team;
• future development and succession;
• customers; and
• accountability to shareholders.
I trust that you will find our reports to be fair, balanced and
understandable; this is a reflection of how we do business and
how the Board serves its stakeholders.
Independent Committee
At the start of the year an Independent Committee comprised of
the Chairman and Non-Executive Directors considered the
unsolicited approaches made by funds managed by affiliates of
Brookfield Asset Management, Inc. and Onex Corporation. The
discussions ended on 1 February 2018.
The Independent Committee reformed in May 2018 to consider
separate approaches from Lone Star Europe Acquisitions
Limited, Starwood Capital European Operations Limited, TDR
Capital LLP, Prime Opportunities Investment Group LLC and
Terra Firma Investments Limited. All discussions ended by
6 August 2018.
Your Board is confident that IWG has an exciting future as an
independent public company and we are exploring a range of
potential strategic opportunities to deliver increased value and
returns to shareholders.
5 2
5 2
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
In this section
52
57
59
63
78
80
Corporate governance
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Directors’ report
Directors’ statements
UK CORPORATE GOVERNANCE CODE
The UK Corporate Governance Code, as published by the
Financial Reporting Council in April 2016 and available on
www.frc.org.uk (the “Code”), sets out a series of principles and
provisions documenting good practice in governance. Our
Corporate Governance Report is structured to report against the
main principles of the Code, which relate to: leadership,
effectiveness, accountability, remuneration and relations with
shareholders. Together with the Audit Committee report, the
Nomination Committee report and the Directors’ Remuneration
report, this Corporate Governance Report shows how we have
applied the principles of the Code during 2018 when we
complied with all the provisions of the Code except in relation
to Senior Independent Director contact with major
shareholders. Further information on this is provided in our
Compliance Statement on page 56.
The UK Corporate Governance Code was updated in July 2018
with changes that will be applicable for accounting years
beginning after 1 January 2019. We have taken the appropriate
steps to address these changes and will report in compliance
with these new rules in our Annual Report for 2019.
LEADERSHIP
Role of the Board
The role of your Board is to facilitate effective, entrepreneurial
and prudent management and through that to be collectively
responsible for the long-term success of the Company. The
Board sets:
• the strategy for the Group and ensures that the necessary
resources, measures and controls are in place to implement
the agreed strategy and to monitor performance; and
• the values and standards which form the basis of the
corporate culture of the Company.
Role of the Chairman
The Chairman:
• is responsible for leadership of the Board and ensuring its
effectiveness on all aspects of its role;
• sets the Board meeting schedule and agenda; and
• ensures that each meeting covers an appropriate range of
topics including operations, strategy, business development,
special projects and administrative matters.
Board meetings
In 2018 the Board met ten times. Details of Board membership
throughout the year and attendance at meetings are set
out below:
Members
Douglas Sutherland,
Chairman
Mark Dixon
Dominik de Daniel(1)
François Pauly
Elmar Heggen
Florence Pierre
Nina Henderson
Attendance
(out of possible maximum
number of meetings):
10/10
10/10
6/7
10/10
10/10
10/10
10/10
1. Dominik de Daniel left the Board on 12 September 2018
The Board has a formal schedule of matters reserved for its
decision and which cannot be delegated. These include:
• approval of long-term objectives and commercial strategy;
• approval of the annual budget;
• approval of regulatory announcements including the interim
and annual financial statements;
• approval of terms of reference and membership of the Board
and its Committees;
• approval of risk management strategy;
• changes to the Group’s capital structure;
• changes to the Group’s management and control structure;
• capital expenditure in excess of £5m; and
• material contracts (with an annual value in excess of £5m).
Minutes are taken of all Board discussions and decisions. In the
event that a Director has a concern about the running of the
Company or a proposed action, and such concern remains
unresolved, Directors ensure that any such concerns are
recorded in the Board minutes.
Board Committees
There are three Committees which support the Board:
• the Audit Committee;
• the Remuneration Committee; and
• the Nomination Committee
(the “Committees”).
The Committees have been delegated certain powers by the
Board, further details of which, together with the work of the
Committees, can be found on pages 57 to 77. The terms of
reference of each Committee can be found on the Company’s
website: www.iwgplc.com.
The Company Secretary acts as Secretary to all the Committees
and minutes of meetings are circulated to all Board members.
Insurance
The Group’s insurance programme is reviewed annually and
appropriate insurance cover is obtained to protect the Directors
and senior management in the event of a claim being brought
against any of them in their capacity as Directors and Officers of
the Company.
5 3
5 3
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
CORPORATE GOVERNANCE CONTINUED
EFFECTIVENESS
Board composition
The Board currently comprises the Chairman, two Executive
Directors and four Non-Executive Directors. The Board considers
all Non-Executive Directors to be independent and they each
bring their own senior-level experience and objectivity to the
Board. Our aim is to appoint a Board with varied backgrounds
and gender to reflect the society in which we operate.
The names of our current Directors and their biographical
details are set out on pages 50 and 51. All Directors served
throughout the year under review, except for Eric Hageman who
was appointed to the Board with effect from 1 January 2019.
Dominik de Daniel stepped down from the Board on 12
September 2018.
Elmar Heggen has resigned from the Board with effect from the
annual general meeting on 14 May 2019. Laurie Harris will join
the Board as Non-Executive Director and Chair of the Audit
Committee on the same date.
The composition of the Board and Committees are both
regularly reviewed and the Board considers the correct balance
of expertise, skills and dedication in order to discharge its
duties effectively has been maintained.
Board appointments and succession
The Nomination Committee continues to be responsible for
leading the process for Board appointments, which it does on
the basis of the evaluation of the balance of skills, experience,
independence and knowledge, and succession planning. Further
details of the Nomination Committee’s work and responsibilities
are contained on pages 57 and 58.
Re-election of the Board
All Directors (unless they are retiring) submit themselves for re-
election by shareholders annually. Directors appointed during
the period since the last annual general meeting are required to
seek election at the next annual general meeting under the
Company’s articles of association. Eric Hageman, who was
appointed after the last general meeting, will seek election at
the 2019 annual general meeting.
ROLE OF BOARD MEMBERS
There is a clear division of responsibilities at the head of the
Company between the running of the Board and the running
of the Company’s business. No one individual Director has
unfettered powers of decision-making and all Directors are
required to act in the best interests of the Company.
DOUGLAS SUTHERLAND
CHAIRMAN
Responsible for leadership of the Board, setting its agenda
and monitoring its effectiveness. He ensures that adequate
time is available for discussion of all agenda items, in
particular strategic issues. Additionally, he ensures effective
communication with shareholders and that the Board is
aware of the views of major shareholders. He facilitates both
the contribution of the Non-Executive Directors and
constructive relations between the Executive Directors and
Non-Executive Directors, and regularly meets with the Non-
Executive Directors without the Executive Directors being
present.
MARK DIXON
CHIEF EXECUTIVE
Responsible for formulating strategy and for its delivery
once agreed by the Board. He creates a framework of
strategy, values, organisation and objectives to ensure the
successful delivery of key targets, and allocates decision-
making and responsibilities accordingly.
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
Responsible for leading the finance and accounting
functions of the Group. He is also responsible for business
ethics, good governance, assisting with strategy
and compliance.
FRANÇOIS PAULY
SENIOR INDEPENDENT DIRECTOR
The Senior Independent Director acts as a sounding board
and confidant for the Chairman, as an intermediary for other
Directors as required, and leads the appraisal of the
Chairman’s performance. He is also available to shareholders
if they have concerns that cannot be resolved through
normal channels.
NINA HENDERSON
NON-EXECUTIVE DIRECTOR WITH OVERSIGHT FOR CORPORATE
RESPONSIBILITY AND EMPLOYEE ENGAGEMENT
Responsible for overseeing the corporate responsibility
activities of the Group, including community and
environmental projects and engagement with the workforce
as foreseen by the 2018 UK Corporate Governance Code.
Non-Executive Directors
The independent counsel, character and judgement of the
Non-Executive Directors enhance the development of
strategy and the overall decision-making of the Board. The
Non-Executive Directors scrutinise the performance of
management and monitor the reporting of performance,
satisfying themselves on the integrity of financial
information and that financial controls and systems of
risk management are robust and defensible. They are also
responsible for determining appropriate levels of executive
remuneration. Non-Executive Directors are subject to the re-
election requirements and serve the Company under letters
of appointment, which have an initial three-year term.
TIMOTHY REGAN
COMPANY SECRETARY
The Company Secretary is responsible for advising the Board,
through the Chairman, on all governance matters and
ensuring that appropriate minutes are taken of all Board
meetings and discussions.
5 4
5 4
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Time commitment
In accordance with the terms of their appointment agreements,
the Chairman and all Non-Executive Directors are expected to
allocate such time as is necessary for the proper performance of
their duties as Directors of the Company and are required to
advise the Board if there is a change in circumstances which will
impact on the time they are able to dedicate to the Company.
Copies of all Directors’ appointment agreements are available
for inspection at the Company’s registered office during normal
business hours and at the annual general meeting. Details of
other commitments held by the Directors are disclosed on
pages 50 to 51.
Development, information and support
All Directors have:
• the opportunity to meet with major shareholders and have
access to the Company’s operations and employees;
• access to training which is provided and reviewed on an
ongoing basis to meet particular needs with the emphasis on
governance and accounting developments. During the year
the Company Secretary provided updates to the Board on
relevant governance matters, whilst the Audit Committee
regularly considers new accounting developments through
presentations from management, internal business assurance
and the external auditors; and
• access to the advice and services of the Company Secretary,
who is responsible for ensuring that Board procedures,
corporate governance and regulatory compliance are
followed and complied with. Appointment and removal of the
Company Secretary is a matter reserved for the Board.
The Board programme includes the receipt of monthly Board
reports and presentations given at Board meetings from
management with strategic responsibilities. These, together
with site visits, increase the Non-Executive Directors’
understanding of the business and sector.
Should a Director request independent professional advice to
carry out his duties, such advice is available to him or her at the
Company’s expense.
Board performance
The Senior Independent Director annually leads the Non-
Executive Directors’ performance evaluation of the Chairman,
taking the views of the Executive Directors into account.
An annual external evaluation of Board performance was
conducted for 2018 by Condign Board Consulting, with
experience in conducting such reviews. The evaluation included
a series of one-to-one discussions between the reviewer and
each Board member and a review of Board materials. The
evaluation results were reviewed by the Board and suggestions
are being incorporated in our ongoing efforts to continuously
improve the processes and effectiveness of the Board. There
were no reportable matters identified and we continue to have
full confidence in the Board’s members and processes.
ACCOUNTABILITY
Financial and business reporting
In accordance with its responsibilities the Board considers this
Annual Report and Accounts, taken as a whole, to be fair,
balanced and understandable in addition to providing the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
A statement by the Company’s auditor about their
responsibilities in relation to the Annual Report and Accounts is
included on pages 81 to 83.
The Board conducts regular reviews of the Group’s strategic
direction. Country and regional strategic objectives, plans and
performance targets are set by the Executive Directors and are
regularly reviewed by the Board in the context of the Group’s
overall objectives. Further details of the basis on which the
Company generates and preserves value over the longer term
and the strategy for delivering the objectives of the Company
are contained in the Strategic Report on pages 1 to 49.
Going concern
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 a
period of at least 12 months from the date of approval of the
financial statements. For this reason, they continue to adopt the
going concern basis in preparing the accounts on pages 85 to 130.
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the further
information included in the business activities commentary as
set out on pages 22 to 29, as well as the Group’s principal risks
and uncertainties as set out on pages 34 to 41.
Further details on the going concern basis of preparation can be
found in note 23 of the notes to the accounts on page 110.
Longer-term viability
The Directors have also assessed the viability of the Group and
Company over a three-year period. Based on this assessment,
the Directors have a reasonable expectation that the Group and
Company will be able to continue in operation and meet all
their liabilities as they fall due over the period up to 31
December 2021. Full details of the viability statement are
reported on page 41.
Principal risks
The Board is responsible for assessing the nature and extent of
the principal risks it is willing to take to achieve its strategic
objectives and also those risks that threaten its business model,
future performance, solvency or liquidity. The key risks to the
Group and the steps taken to manage and mitigate them which
were reviewed and approved by the Board are detailed on
pages 34 to 41.
The Board has delegated authority for overseeing and reviewing
the process of identifying, managing and reviewing risks to the
Audit Committee, which reports regularly to the Board.
5 5
5 5
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
CORPORATE GOVERNANCE CONTINUED
Internal control systems
The Board has delegated its responsibility for the Company’s
system of internal control and risk management and for
ensuring the effectiveness of this system to the Audit
Committee. Details of the system and the Committee’s review of
its effectiveness are reported on pages 59 to 62.
The Chief Executive Officer and the Chief Financial Officer
maintain a close dialogue with institutional investors on the
Company’s performance, governance, plans and objectives.
These meetings also serve to develop an ongoing
understanding of the views and any concerns of the Company’s
major shareholders.
Audit Committee and auditors
The Board has established an Audit Committee consisting
entirely of Independent Non-Executive Directors. The Audit
Committee has responsibility for ensuring the integrity of
financial information and the effectiveness of financial controls
and the internal control and risk management system. Further
details of the Audit Committee’s work and responsibilities are
contained on pages 59 to 62.
All members of the Audit Committee are considered by the
Board to be competent in accounting and/or auditing.
Furthermore, and in compliance with the Code, the Board
regards Elmar Heggen as the Committee member possessing
recent and relevant financial experience. The new Audit
Committee Chair, Laurie Harris, who will be appointed to the
Board in place of Elmar Heggen, will also be the Committee
member deemed to possess the necessary recent and relevant
financial experience. Details of the process for the appointment
of Laurie Harris are set out on page 58.
The Board proposes that KPMG be re-appointed as the auditor
for the financial year ending 31 December 2019.
REMUNERATION
Remuneration Committee
The Board has established a Remuneration Committee with
responsibility for overseeing and providing independent
judgement on all elements of the remuneration of the
Executive Directors, the first layer of management below Board
level, the Company Secretary and the Chairman of the Board,
including pension rights, compensation payments and exit
payments. In determining policy the Remuneration Committee
will take into account all factors which it deems necessary,
including the views of shareholders and other stakeholders, the
risk appetite of the Company and alignment with the Company’s
purpose, values and long-term strategic goals. The objective of
the policy will be to promote the long-term sustainable success
of the Company and ensure that members of the executive
management of the Company are provided with appropriate
incentives to encourage enhanced performance and are, in a
fair and responsible manner, rewarded for their individual
contributions to the success of the Company. Further details
of the Remuneration Committee’s work are contained on
pages 63 to 77.
At our annual general meeting approval will be sought for the
renewal of our Directors’ Remuneration Policy and an advisory
vote will be sought for our Annual Report on Remuneration.
RELATIONS WITH SHAREHOLDERS
Dialogue with shareholders
The Company reports formally to shareholders twice a year, with
the half-year results typically announced in August and the final
results in March. There are programmes for the Chief Executive
Officer and the Chief Financial Officer to give presentations of
these results to the Company’s institutional investors, analysts
and media in London and other key locations.
Non-Executive Directors are given regular updates as to the
views of institutional shareholders. The Chairman attends the
main presentations of the half-year and full-year results and is
also available to meet with shareholders on request.
The principal communication with private shareholders is
through the Annual Report, the half-year results and the annual
general meeting.
The Company continues to engage the services of Brunswick as
its investor relations advisor.
Annual general meeting
The annual general meeting each year is held in May in Switzerland
and will be attended, other than in exceptional circumstances, by
all members of the Board. In addition to the formal business of the
meeting, there is normally a trading update and shareholders are
invited to ask questions and are also given the opportunity to meet
the Directors informally afterwards.
Notice of the annual general meeting together with any related
documents is required to be mailed to shareholders at least 20
working days before the meeting and separate resolutions are
proposed on each issue.
The voting in respect of all resolutions to be put to the annual
general meeting is conducted by means of a poll vote.
The level of proxy votes cast and the balance for and against
each resolution, together with the level of abstentions, if any,
are announced following voting on a poll. Where the Board
considers that a significant proportion of votes have been cast
against a resolution, the actions which the Board intends to take
to understand the reasons behind the vote result will also be
explained.
Financial and other information is made available on the
Company’s website: www.iwgplc.com.
Compliance statement
The Company has complied with the provisions of the Code
throughout the year ended 31 December 2018, with the
exception of the following:
• Provision E.1.1 – the Senior Independent Non-Executive
Director, François Pauly, does not have regular meetings with
major external shareholders.
The Board considers it appropriate for the Chairman to be the
main conduit to investors, rather than the Senior Independent
Non-Executive Director. The Chairman participates in investor
meetings and makes himself available for questions, in person,
at the time of major announcements as well as upon request.
The Chairman regularly updates the Board and particularly the
Senior Independent Non-Executive Director on the results of his
meetings and the opinions of investors. On this basis, the Board
considers that the Senior Independent Non-Executive Director
is able to gain full awareness of the issues and concerns of
major shareholders. Notwithstanding this policy, all Directors
have a standing invitation to participate in meetings
with investors.
5 6
5 6
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
NOMINATION COMMITTEE REPORT
“A Board whose breadth and scope
in terms of expertise, gender and
nationality reflect the size and
geographical reach of the business.”
Members of the Committee
Committee membership during the year and attendance
at the meetings are set out below.
Members
François Pauly,
Chairman
Elmar Heggen
Nina Henderson
Florence Pierre
Douglas Sutherland
Attendance
(out of possible maximum
number of meetings)
4/4
4/4
4/4
4/4
4/4
All members of the Committee are independent.
Length of tenure of Non-Executive Directors
within the Committee
0-3 years
3-6 years
6 years+
DEAR SHAREHOLDER
I am pleased to present to you my report on the work of the
Nomination Committee (the “Committee”) during 2018.
2018 was an important year for us and key activities included:
• identifying and recommending the appointment of Eric
Hageman as Chief Financial Officer. Eric was appointed
interim Chief Financial Officer in September 2018 and was
appointed as Chief Financial Officer and Director, effective
1 January 2019, and he offers himself for election at the
Company’s 2019 annual general meeting. The process
followed in his appointment is detailed on page 58;
• leading the process to identify and recommend a new Audit
Committee Chairman to replace Elmar Heggen who will step
down as Non-Executive director and Audit Committee Chairman
at the annual general meeting on 14 May 2019. Laurie Harris will
be appointed as Non-Executive Director and Audit Committee
Chair on 14 May 2019. The process followed in respect of her
appointment is detailed on page 58;
• reviewing our succession policy for Executive Director and
senior management roles; and
• evaluating the balance of skills, knowledge and experience
on the Board and using this to set a profile and initiate our
search for new Non-Executive Directors.
Our Board composition
As at the date of this report, the Board comprises seven
members, being:
• the Chairman (Douglas Sutherland);
• two Executive Directors; and
• four Non-Executive Directors.
IWG maintains a Board whose breadth and scope in terms of
expertise, gender and nationality reflect the size and
geographical reach of the business. We believe the Board is the
right size to meet the requirements of the business and any
changes to the Board’s composition and to its Committees can
be managed without undue disruption.
Board appointments
The Committee leads the process for the appointment of all
new Directors and, in identifying and recommending candidates
to the Board, the Committee considers candidates on merit
against objective criteria and with due regard to the benefits of
diversity on the Board. Nominations are based on the existing
balance of skills, knowledge and experience on the Board, on
the merits and capabilities of the nominee and on the time they
are able to give to the role in order to promote the success of
the Company.
Our regular internal Board review process monitors
effectiveness, performance, balance, independence, leadership
and succession planning, enabling us to identify the capabilities
and roles required for a particular Board appointment.
In view of the future development of the Group and our
objective to continue to place strong emphasis on the diversity
of the Board, the Nomination Committee maintains an ongoing
programme of engagement with highly qualified female and
male Non-Executive Director candidates of varied education,
backgrounds and business experience.
Succession planning
We ensure that succession plans are in place for the orderly
succession for appointments to the Board and senior
management positions, so that there is an appropriate balance
of skills and experience within the Company and on the Board.
Succession planning discussions continue to be an integral
priority of the Group’s business planning and review process, as
is the continued development of both management capacity
and capabilities within the business.
The Committee notes the provisions relative to the succession of
the Board Chair in the 2018 UK Corporate Governance Code. The
current Chairman was first appointed on 10 May 2010, having been
a Non-Executive of the Group since 28 August 2008. After
5 7
5 7
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NOMINATION COMMITTEE REPORT CONTINUED
reviewing the Chairman’s performance and input from the 2018
independent Board review and in consideration of the Group’s
current challenges and opportunities, the Committee determined
that it was in the interest of the Group for the Chairman to continue
in that role with a successor to be selected in the course of 2020
for appointment by the annual general meeting on 11 May 2021.
Diversity
We maintain a policy of diversity, as is reflected in our current
Board of two women and five men, representing five nationalities
and six countries of residence. Along with their international
operational experience, they also bring in-depth working
knowledge of multiple industries, business and organisational
models, corporate cultures, functional areas and business issues.
We continue to monitor the broader discussion on diversity which
we take into consideration whilst maintaining a merit-based
approach to recommendations for Board appointments.
Terms of reference
Below is a summary of the terms of reference of the Committee:
• Board appointment and composition – to regularly review
the structure, size and composition of the Board and make
recommendations on the role and nomination of Directors
for appointment and reappointment to the Board for the
purpose of ensuring a balanced and diverse Board in respect
of skills, knowledge and experience.
• Board Committees – to make recommendations to the Board
in relation to the suitability of candidates for membership of
the Audit and Remuneration Committees. The appointment
and removal of Directors are matters reserved for the full
Board.
• Board effectiveness – to review annually and make
appropriate recommendations to the Board.
• Board performance – to assist the Chairman with the annual
performance evaluation to assess the performance and
effectiveness of the overall Board and individual Directors.
• Leadership – to remain fully informed about strategic issues
and commercial matters affecting the Company and to keep
under review the leadership needs of the organisation to
enable it to compete effectively.
Complete details of the above are available on the Company’s
website: www.iwgplc.com.
FRANÇOIS PAULY
CHAIRMAN, NOMINATION COMMITTEE
Gender split of Board
Gender split of all employees
Gender split of senior leadership
Male 5
Female 2
Male 35%
Female 65%
Male 64%
Female 36%
Appointment of Eric Hageman
Appointment of Laurie Harris
Following a review of the balance of existing skills,
knowledge and experience both on the Board and within the
Senior Leadership Team and having considered the strategic
plans for the Group, the Committee commenced a search for
a Chief Financial Officer. The Committee used Russell
Reynolds Associates, who provided external executive search
consultancy but had no other connections to the Company,
as well as the Committee’s industry connections, networks
and advisors, to identify internal and external candidates
from diverse backgrounds. Candidates were considered on
merit against the criteria set by the Committee giving due
regard to diversity. The shortlisted candidates met with all
members of the Committee, the Chief Executive and other
members of the Senior Leadership Team. The Committee
extensively discussed the merits of all the candidates and
recommended the appointment of Eric Hageman who had
performed strongly as interim Chief Financial Officer and
brought highly relevant experience to the role from his
previous positions.
The Board accepted the recommendation of the Committee
and Eric Hageman was appointed to the Board as Chief
Financial Officer with effect from 1 January 2019.
Following a review of the balance of existing skills, knowledge
and experience on the Board and specifically the requirements
for the Audit Committee Chairman to possess recent and
relevant financial experience, and considering the strategic
plans for the Group, the Committee commenced a search for
an Audit Committee Chairman to succeed Elmar Heggen who
will be stepping down at the Company’s 2019 annual general
meeting. The Committee used its industry connections,
professional advisors and networks to identify candidates
from diverse backgrounds. Candidates were considered on
merit against the criteria set by the Committee giving due
regard to diversity. The shortlisted candidates met with
members of the Committee, the Chief Executive and the
Chief Financial Officer as well as advisors to the Company. The
Committee extensively discussed the merits of the candidates
and recommend Laurie Harris be appointed as Non-Executive
Director and Audit Committee Chair.
The Board accepted the recommendation of the Committee
and Laurie Harris will be appointed to the Board on 14 May
2019, subject to her election at the Company’s 2019 annual
general meeting.
5 8
5 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
AUDIT COMMITTEE REPORT
“Particular focus is given to critical
accounting policies and practices
and changes thereto.”
Members of the Committee
Committee membership during the year and attendance
at the meetings are set out below.
Members
Elmar Heggen,
Chairman
Nina Henderson
François Pauly
Florence Pierre
Attendance
(out of possible maximum
number of meetings)
5/5
5/5
5/5
5/5
All members of the Committee are independent.
Length of tenure of Non-Executive Directors
within the Committee
0-3 years
3-6 years
6 years+
DEAR SHAREHOLDER
As Chairman of the Audit Committee (the “Committee”), I am
pleased to present to you this year’s Committee report which
shows how the Committee applied the principles of the UK
Corporate Governance Code during 2018. This will be my last
report as Committee Chairman as after almost nine years I will
be stepping down from the Board with effect from the
upcoming annual general meeting.
Key objective
Acting on behalf of the Board, the Committee’s key objective is
to provide effective governance over the Company’s financial
reporting; this is achieved by monitoring, reviewing and making
recommendations to the Board in respect of:
• the integrity of the Company’s external financial reporting;
• the Company’s system of internal control and compliance;
and
• the Company’s external auditors.
Membership and meetings
Five Committee meetings were held during 2018. At the request
of the Committee Chairman, the external auditors, the Executive
Directors, the Company Secretary (acting as secretary to the
Committee) and the Business Assurance Director may attend
each meeting. The Committee also, when required, and at least
annually, meets independently, without the presence of
management, with the Company’s external auditors and with
the Business Assurance Director to discuss matters of interest.
Responsibilities
Below is a summary of the terms of reference of the Committee
(the full text of which is available on the Company’s website:
www.iwgplc.com):
• Financial reporting – to provide support to the Board by
monitoring the integrity of financial reporting and ensuring
that the published financial statements of the Group and any
formal announcements relating to the Company’s financial
performance comply fully with the relevant statutes and
accounting standards.
• Internal control and risk systems – to review the
effectiveness of the Group’s internal controls and risk
management systems.
• Internal audit – to monitor and review the annual internal
audit programme ensuring that the internal audit function
is adequately resourced and free from management
restrictions, and to review and monitor responses to the
findings and recommendations of the internal auditor.
• External audit – to advise the Board on the appointment,
reappointment, remuneration and removal of the
external auditor.
• Employee concerns – to review the Company’s arrangements
under which employees may in confidence raise any concerns
regarding possible wrongdoing in financial reporting or other
matters. The Audit Committee ensures that these
arrangements allow proportionate and independent
investigation and appropriate follow-up action.
The Chairman of the Audit Committee routinely reports to the
Board on how the Committee has discharged its responsibilities,
as well as highlighting any concerns that have been raised as
and when they arise.
5 9
5 9
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
AUDIT COMMITTEE REPORT CONTINUED
Activities of the Audit Committee during the year
The following sections summarise the main areas of focus
of the Committee and the results of the work undertaken in 2018.
Financial reporting
The main focus of the Audit Committee was the review of the
half-year results and this Annual Report together with the
formal announcements relating thereto. Before recommending
these to the Board we ensure that the actions and judgements
made by management are appropriate. Particular focus is
given to:
• critical accounting policies and practices and changes thereto;
• changes in the control environment;
• control observations identified by the auditor;
• decisions delegated to and requiring judgements by
management;
• adjustments resulting from the audit;
• clarity of the disclosures made and compliance with
accounting standards and relevant financial and governance
reporting requirements; and
• the process surrounding compilation of the Annual Report
and Accounts to ensure they are fair, balanced and
reasonable.
The Committee formally considers and minutes its
consideration of the key audit matters before recommending
the financial statements to the Board.
The Committee discussed and reviewed the following
significant issues with KPMG and management in relation to the
financial statements for 2018:
• Taxation: The Committee considered the taxation risks arising
from the Group’s operations when assessing the accounting
for taxation related balances and applied sensitivity analysis
to determine the appropriateness of key judgements. Also
assessed was the recoverability of deferred tax assets and
whether the recognition of additional deferred tax assets
would be appropriate. The presentation and disclosure (in
accordance with IAS 1 and IAS 12) in respect of taxation
related balances were considered as was whether the Group’s
disclosures reflected the risks inherent in the accounting for
the taxation balances. The Committee is satisfied that
appropriate judgements have been made.
• Valuation of intangibles and goodwill: The Committee has
considered the impairment testing undertaken and disclosures
made in relation to the value of the Company’s goodwill and
intangibles and has challenged the key assumptions made by
management in their valuation methodology. The Committee
considers that an appropriately cautious approach has been
used by management and is satisfied that no additional
impairment of intangibles and goodwill is required. See notes
11 and 12 for further information.
• IFRS 16 Leases – 2019 implementation: The Committee has
had regular updates on all aspects of the Group’s IFRS 16
implementation project including the Group’s approach to
transition, the key assumptions and judgements made and
the expected impact of IFRS 16. Particular consideration has
been given to the discount rate methodology used by
management and other areas of judgement such as the
expected duration of a lease. The Committee is satisfied that
management have adopted an appropriate approach to the
implementation of IFRS 16 in 2019 and made appropriate
disclosures in the 2018 financial statements.
6 0
6 0
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Following its in-depth review of this Annual Report, the
Committee has advised the Board that it considers the
Annual Report, taken as a whole, to be fair, balanced and
understandable, providing the information necessary for
shareholders to assess the Company’s position and
performance, business model and strategy. As such, the
Committee recommended the Annual Report to the Board.
Risk management
On behalf of the Board, the Audit Committee oversees and
reviews an ongoing process for identifying, evaluating and
managing the risks faced by the Group. Major business risks and
their financial implications are appraised by the responsible
executives as a part of the planning process and are endorsed
by regional management. Key risks are reported to the Audit
Committee, which in turn ensures that the Board is made aware
of them. The appropriateness of controls is considered by the
executives, having regard to cost, benefit, materiality and the
likelihood of risks crystallising. Key risks and actions to mitigate
those risks were considered by both the Audit Committee and
the Board in the year under review, and were formally reviewed
and approved by the Board. The Company has put systems in
place to enable compliance with the requirements of the EU
Market Abuse Regulation since it came into effect in July 2016.
Principal risks
There are a number of risks and uncertainties which could have
an impact on the Group’s long-term performance.
The Group has a risk management structure in place designed to
identify, manage and mitigate business risks. Risk assessment
and evaluation are an integral part of the annual planning
process, as well as the Group’s monthly review cycle.
The Group’s principal risks, together with an explanation of how
the Group manages these risks, are presented on pages 34 to
41 of this Annual Report.
CONTROL ENVIRONMENT
High standards of behaviour are demanded from staff at
all levels within the Group. The following procedures are
in place to support this:
• a clearly defined organisation structure with
established responsibilities;
• an induction process to educate new team members
on the standards required from them in their role,
including business ethics and compliance, regulations
and internal policies;
• provision to all team members of a copy of the ‘Team
Member Handbook’ which contains detailed guidance
on employee policies and the standards of behaviour
required of staff;
• policies and procedure manuals and guidelines that are
readily accessible through the Group’s intranet site;
• operational audit and self-certification tools which
require individual centre managers to confirm their
adherence to Group policies and procedures; and
• to underpin the effectiveness of controls, it is the
Group’s policy to recruit and develop appropriately
skilled management and staff of high calibre and
integrity and with appropriate disciplines.
Internal control
The Committee has a delegated responsibility from the Board
for the Company’s system of internal control and risk
management and for reviewing the effectiveness of this system.
Such a system is designed to identify, evaluate and control the
significant risks associated with the Group’s achievement of its
business objectives with a view to safeguarding shareholders’
investments and the Group’s assets. Due to the limitations that
are inherent in any system of internal control, this system is
designed to meet the Company’s particular needs and the risks
to which it is exposed and is designed to manage rather than
eliminate risk. Accordingly, such a system can provide
reasonable, but not absolute, assurance against material
misstatement or loss.
In accordance with the FRC Revised Guidance, the Committee
confirms there is an ongoing process for identifying, evaluating
and managing significant risks faced by the Group.
During the year under review, the Committee continued to
revisit its risk identification and assessment processes, inviting
Board members and senior management to convene and
discuss the Group’s key risks and mitigating controls.
A risk-based approach has been adopted in establishing the
Group’s system of internal control and in reviewing its
effectiveness. To identify and manage key risks:
• a number of Group-wide procedures, policies and standards
have been established;
• a framework for reporting and escalating matters of
significance has been maintained;
• reviews of the effectiveness of management actions in
addressing key Group risks identified by the Board have been
undertaken; and
• a system of regular reports from management setting out key
performance and risk indicators has been developed.
The above process is designed to provide assurance by way of
cumulative assessment and is embedded in operational
management and governance processes.
Key elements of the Group’s system of internal control which
have operated throughout the year under review are as follows:
• the risk assessments of all significant business decisions at
the individual transaction level, and as part of the annual
business planning process. A Group-wide risk register is
maintained and updated at least annually whereby all
Company-inherent risks are identified and assessed, and
appropriate action plans developed to manage the risk per
the Company’s risk appetite. The Board reviews the Group’s
principal risks register at least annually and management
periodically reports on the progress against agreed actions to
keep a close watch on how key risks are managed;
• the annual strategic planning process, which is designed to
ensure consistency with the Company’s strategic objectives.
The final budget is reviewed and approved by the Board.
Performance is reviewed against objectives at each
Board meeting;
• comprehensive monthly business review processes under
which business performance is reviewed at business centre,
area, country, regional and functional levels. Actual results
are reviewed against targets, explanations are received for
all material movements, and recovery plans are agreed
where appropriate;
• the documentation of key policies and control procedures
(including finance, operations, and health and safety) having
Group-wide application. These are available to all staff via the
Group’s intranet system;
• formal procedures for the review and approval of all
investment and acquisition projects. The Group Investment
Committee reviews and approves all investments.
Additionally, the form and content of routine investment
proposals are standardised to facilitate the review process;
• the delegation of authority limits with regard to the approval
of transactions;
• the generation of targeted, action-oriented reports from the
Group’s sales and operating systems on a daily, weekly and
monthly basis, which provide management at all levels with
performance data for their area of responsibility, and which
help them to focus on key issues and manage them more
effectively;
• the delivery of a centrally co-ordinated assurance
programme by the business assurance department that
includes key business risk areas. The findings and
recommendations of each review are reported to both
management and the Committee; and
• the maintenance of high standards of behaviour which are
demanded from staff at all levels in the Group. The following
procedures are in place to support this:
• a clearly defined organisation structure with established
responsibilities;
• an induction process to educate new team members on the
standards required from them in their role, including
business ethics and compliance, regulation and internal
policies;
• the availability of the ‘Team Member Handbook’, via the
Group’s intranet, which contains the Company’s Code of
Business Conduct, detailed guidance on employee policies
and the standards of behaviour required of staff;
• policies, procedure manuals and guidelines are readily
accessible through the Group’s intranet site;
• operational audit and self-certification tools which require
individual managers to confirm their adherence to Group
policies and procedures; and
• a Group-wide policy to recruit and develop appropriately
skilled management and staff of high calibre and integrity
and with appropriate disciplines.
The Committee and the Board regard responsible corporate
behaviour as an integral part of the overall governance
framework and believe that it should be fully integrated into
management structures and systems. Therefore, the risk
management policies, procedures and monitoring methods
described above apply equally to the identification, evaluation
and control of the Company’s safety, ethical and environmental
risks and opportunities. This approach ensures that the
Company has the necessary and adequate information to
identify and assess risks and opportunities affecting the
Company’s long-term value arising from its handling of
corporate responsibility and corporate governance matters.
The Committee has completed its annual review of the
effectiveness of the system of internal control for the year to 31
December 2018 and is satisfied that it is in accordance with the
FRC Revised Guidance and the Code. The assessment included
consideration of the effectiveness of the Board’s ongoing
process for identifying, evaluating and managing the risks
facing the Group.
6 1
6 1
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
AUDIT COMMITTEE REPORT CONTINUED
Whistle-blowing policy
The Company has an externally hosted whistle-blowing channel,
EthicsPoint, which is available to all employees via email, and
on the Company’s intranet.
• KPMG are required to adhere to a rotation policy requiring
rotation of the lead audit partner at least every five years. The
current lead audit partner has been responsible since the
audit of the 2016 financial statements.
The breakdown of the fees paid to the external auditor during
the year to 31 December 2018 can be found in note 5 of the
notes to the financial statements on page 98.
In assessing the effectiveness of the external audit process for
2018 the Committee has considered:
• the audit process as a whole and its suitability for the
challenges facing the Group;
• the strength and independence of the external audit team;
• the audit team’s understanding of the control environment;
• the culture of the external auditor in seeking continuous
improvement and increased quality;
• the quality and timeliness of communications and reports
received; and
• the quality of interaction with management.
There was a tender process conducted for the external audit
during 2018 which resulted in proposals from several firms.
Amongst other criteria, the tender process addressed an
effective audit approach relative to the Group's operations
and organisation, use of technology and relevant expertise,
geographic coverage and location of key team members, the
ability to provide best practice insights and a competitive level
of fees. Following the Committee’s assessment of the results
of the tender process, the effectiveness of the external audit
process for 2018 and of KPMG’s continuing independence, and
in view of changes in the Audit Committee Chair and Chief
Financial Officer, the Committee has recommended to the Board
that a resolution to reappoint KPMG as the Company’s auditor in
respect of the financial year ending 31 December 2019 be
proposed at the annual general meeting.
ELMAR HEGGEN
CHAIRMAN, AUDIT COMMITTEE
The aim of the policy is to encourage all employees, regardless
of seniority, to bring matters that cause them concern to the
attention of the Audit Committee.
The Business Assurance Director, where appropriate and in
consultation with the senior management team, decides on the
appropriate method and level of investigation. The Audit
Committee is notified of all material discourses made and
receives reports on the results of investigations and actions
taken on a regular basis. The Audit Committee has the power to
request further information, conduct its own inquiries or order
additional action as it sees fit.
External audit
KPMG Ireland (“KPMG”) were appointed in 2016 as the auditors
of IWG plc. Whilst IWG plc is a Jersey company, after
consultation with KPMG, the Committee determined that
appointing a Jersey registered KPMG Dublin audit partner would
best serve the needs of the Group. The Audit Committee is
responsible for oversight of the external auditor, including an
annual assessment of their independence and objectivity and
the measures in place to safeguard this.
During the year, KPMG audited the consolidated financial
statements of the Group for the year ended 31 December 2018
and completed a review of the half-year results of the Group for
the period to 30 June 2018.
The value of non-audit services provided by KPMG in 2018
amounted to £39,000 (2017: £53,157). Non-audit services
related to assurance services in relation to reports provided
to landlords in the UK, tax services in relation to statutory tax
certifications in South Africa and IT services in the Philippines.
The services provided are considered by the Committee to be
necessary in the interests of the business and, by their nature,
these services could not easily be provided by another
professional auditing firm. During the year there were no
circumstances where KPMG were engaged to provide services
which might have led to a conflict of interests. Measures in
place to safeguard KPMG’s independence were:
• the Company’s policy to use the external auditor for non-
audit-related services only where the use of the external
auditor will deliver a demonstrable benefit to the Company
as compared to the use of other potential providers of the
services and where it will not impair their independence
or objectivity;
• all proposals for permitted defined non-audit services to use
the external auditor must be submitted to, and authorised by,
the Chief Financial Officer; permitted non-audit services
include advice on financial accounting and regulatory
reporting matters, reviews of internal accounting and risk
management controls, non-statutory audits (e.g. regarding
acquisitions and disposal of assets and interests in
companies) and tax compliance and advisory services;
• prohibited non-audit services include book-keeping and
other accounting services, actuarial valuation services,
recruitment services in relation to key management positions
and transaction (acquisitions, mergers and dispositions) work
that includes investment banking services, preparation of
forecasts or investment proposals and deal execution
services; and
6 2
6 2
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
DIRECTORS’ REMUNERATION REPORT
“Focused on ensuring that remuneration is designed
to drive our strategic priorities, support our
company culture and promote the long-term
sustainable success of the Company.”
Members of the Committee
Committee membership during the year and attendance
at the meetings are set out below.
Members
Nina Henderson,
Chairman
Florence Pierre
François Pauly
Elmar Heggen
Attendance
(out of possible maximum
number of meetings)
5/5
5/5
5/5
5/5
All members of the Committee are independent.
Length of tenure of Non-Executive Directors
within the Committee
0-3 years
0-3 years
3-6 years
3-6 years
6 years+
6 years+
DEAR SHAREHOLDER
I am pleased to present this Directors’ Remuneration report.
The Remuneration Committee (the “Committee”) is focused on
ensuring that remuneration is designed to drive our strategic
priorities, support our company culture and promote the long-
term sustainable success of the Company, A key driver of the
Company’s growth has been and will continue to be its people
and their talents. We seek to set a policy that enables us to
motivate our people, to reward performance and to recruit the
calibre of talent that will lead the Company in sustaining its
record of profitable growth. The Company’s human resource
continues to evolve, simultaneously adding new, whilst
retaining existing, capabilities and skills.
Our Directors’ Remuneration Policy (the “Policy”), approved on
16 May 2016, is subject to renewal at our 2019 annual general
meeting. The Committee’s view is that the existing Policy has
served the Company well and the fundamental design
continues to provide a strong basis for linking the Group’s
strategy and performance to Executive remuneration. Given
developments in good corporate governance, there were some
areas identified where updates could be made to reflect best
practice and improve the Policy. The primary changes are
summarised below:
• the Committee’s discretion with respect to determining the
outcome of performance measures has been enhanced so
that it can, where appropriate, override formulaic outcomes.
The Committee has ensured that the discretion in the plan
rules aligns with that set out in the updated policy;
• the circumstances in which the recovery and withholding
provisions may be operated have been augmented in line
with best practice;
• the Committee will now be responsible for setting the
remuneration for the first layer of management below Board
level and the Company Secretary as well as the Executive
Directors and the Chairman; and
• introduction of a five-year time limit in which Executive
Directors are required to build a shareholding in the Company
equal to 200% of base salary.
No other significant changes to the Policy are proposed and the
maximum incentive opportunity remains unchanged.
6 3
6 3
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
2018
Despite a difficult start to 2018 the business responded well
and actions taken across the Group facilitated continuous
improvement and delivered record sales at the end of the year.
Group revenue was up 9.7% at constant currency, to a record
£2,535.4m.
Management continues to focus on delivering profitable
growth and long-term value to shareholders. The Company
achieved an operating profit over the course of 2018 of
£154.1m (2017 £163.2m) with an underlying operating profit
before growth costs of £193.8m. EPS was 11.7p (2017: 12.4p).
For the 12 months ended 31 December 2018, the Group
delivered a strong post-tax cash return on net growth
investment of 20.6% in respect of locations opened on or
before 31 December 2013 (19.3% on the same estate for
the 12 months ended 31 December 2017).
Annual bonus
The 2018 annual bonus plan was measured against an
underlying operating profit target. The achieved underlying
operating profit before growth of £193.8m resulted in a bonus
equivalent to 64.9% of the respective salary (the maximum
being 150% of salary) being awarded. Half of the bonus will be
deferred in shares for three years, with vesting subject to
continued employment.
Performance Share Plan (“PSP”)
The Performance Share Plan was introduced in 2015 to replace
the Co-Investment Plan.
The first award made under the PSP in 2016 will lapse in its
entirety, the Committee having determined that EPS growth,
ROI improvements and TSR performance metrics (each a
33.33% weighting) measured over a three-year period to
31 December 2018 had not met the threshold targets for
vesting to occur. Further details are included on page 73.
Co-Investment Plan (“CIP”)
The CIP awards are subject to 75% EPS and 25% TSR
performance metrics.
The third tranche of the 2014 CIP Matching Share awards is due
to vest in March 2019 based on the performance measured
over five years to 31 December 2018. The Committee has
determined that EPS for 2018 of 11.7p was below the threshold
target for these awards and, as a result, all of the shares subject
to an EPS performance condition will lapse. With regard to the
TSR elements, performance over five years was slightly above
median and resulted in partial vesting of the 2014 awards.
No new awards have been granted since March 2015. The final
2015 CIP award vested based on the performance measured to
31 December 2017 and is subject to a holding period ending
in 2020.
One-off award
The vesting of the one-off share award granted to Dominik de
Daniel in November 2015 is subject to EPS growth measured
over a three-year period ending on 31 December 2018.
Compound EPS growth of (2.95%) for the three-year period
ended 31 December 2018 was below target and the award
will lapse.
Consideration of outcomes for 2018
The Committee believes the above outcomes demonstrate
strong pay for performance alignment and therefore did not
exercise its discretion in adjusting the performance outcomes.
Executive Director changes
Effective from 1 January 2019 Eric Hageman was appointed as
Chief Financial Officer of the Group; he had been in the position
of interim Chief Financial Officer since September 2018. The
Committee developed and approved a competitive package for
Eric Hageman, which is in line with the Policy and details of
which can be found on page 75.
When Dominik de Daniel stepped down from the Board in
September 2018, the Committee determined an appropriate
exit package for him with due consideration to shareholders,
with specific reference to the Policy and the Company's legal
and contractual commitments to him. Further information can
be found on page 75.
The year ahead
The Committee has made the following decisions for 2019:
• Executive Directors will receive no increase to base salary
in 2019. This is the third year that there has been no
salary increase;
• the maximum annual bonus will remain unchanged at 150%
of base salary for Executive Directors with half of any bonus
paid deferred in shares which vest after three years.
Performance will continue to be measured against stretching
operating profit targets; and
• awards of 200% of base salary will be granted under the
Performance Share Plan in line with the approved policy. The
awards will vest subject to performance measures over three
financial years, 2019-2021, against EPS, relative TSR and ROI
targets. Any award that vests will be subject to an additional
two-year holding period.
The Committee considers the remuneration earned by the
Executive Directors is a fair reflection of Company performance
and the return delivered to shareholders. The Committee is
satisfied that our variable pay model ensures alignment
between pay and performance through robust target setting.
Historically, variable pay has rewarded sound performance,
however, as demonstrated this year through the 65% bonus
pay-out award and the 2016 PSP awards not vesting, outcomes
are scaled back in years when performance is less strong or
when long-term shareholder value is weaker. Such effective
alignment ensures that our Remuneration Policy supports the
future success of the Company.
You will be asked to approve two remuneration-related
resolutions at our annual general meeting. First the renewal
of our Directors’ Remuneration Policy and second the
Annual Report on Remuneration, which will be subject to an
advisory vote.
On behalf of the Committee, I commend this report to you and
look forward to your support for the resolutions at the annual
general meeting.
NINA HENDERSON
CHAIRMAN, REMUNERATION COMMITTEE
6 4
6 4
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
DIRECTORS’ REMUNERATION POLICY
This report sets out the Group’s policy on remuneration for Executive and Non-Executive Directors, to be proposed to shareholders
at the annual general meeting on 14 May 2019, from which date the policy will apply if approved. This policy will, if approved,
supersede the Directors’ Remuneration Policy approved by the shareholders of Regus plc in 2016.
Overview of Directors’ Remuneration Policy
The revised policy, which was developed as part of a remuneration review carried out during 2019, considers principles of clarity,
simplicity, risk, predictability, proportionality and alignment to culture and has the following objectives:
• to provide a balanced package between fixed and variable pay, and long and short-term elements, to align with the Company’s
strategic goals and time horizons whilst encouraging prudent risk management;
• to incorporate incentives that are aligned with and support the Group’s business strategy and align executives to the creation
of long-term shareholder value, within a framework that is sufficiently flexible to adapt as our strategy evolves;
• to align the interests of the Executive Directors, senior executives and employees with the long-term interests of shareholders
and strategic objectives of the Company;
• to align management and shareholder interests through building material share ownership over time;
• to reflect the remuneration received by the wider employees through considering proportionality;
• to ensure that our remuneration structures are transparent and easily understood;
• to ensure that remuneration practices are consistent with and encourage the principles of equality, diversity and inclusion; and
• to reflect the global operating model of the Group whilst taking account of governance best practice.
Policy Table for Executive Directors
Component
Purpose / link to strategy
Operation
Maximum
Performance framework
While there are no
performance targets attached
to the payment of salary,
performance is a factor
considered in the annual
salary review process.
N/A
There is no prescribed
maximum salary. Salary
increases will normally
be broadly in line with
increases awarded to
other employees in the
business, although the
Committee retains
discretion to award
larger increases if it
considers it appropriate
(e.g. to reflect a change
in role, development
and performance in role,
or to align to market
data).
Benefit provision is
set at an appropriate
competitive market
rate for the nature and
location of the role.
There is no prescribed
maximum as some
costs may change
in accordance with
market conditions.
Base salary
To provide a
competitive
component of fixed
remuneration to
attract and retain
people of the
highest calibre and
experience needed
to shape and execute
the Company’s
strategy.
Salaries are set by the Committee. The
Committee reviews all relevant factors
such as: the scope and responsibilities
of the role, the skills, experience and
circumstances of the individual,
sustained performance in role, the
level of increase for other roles within
the business, and appropriate market
data. Salaries are normally reviewed
annually and any changes normally
made effective from 1 January.
The base salaries effective 1 January
2019 are set out on page 71 of the
Remuneration Report.
Benefits
To provide a
competitive benefits
package.
Incorporates various cash / non-cash
benefits which may include: a company
car (or allowance) and fuel allowance,
private health insurance, life assurance,
and, where necessary, other benefits
to reflect specific individual
circumstances, such as housing or
relocation allowances, representation
allowances, reimbursement of school
fees, travel allowances, or other
expatriate benefits. Any reasonable
business related expenses (including
tax thereon) can be reimbursed if
determined to be a taxable benefit.
Executive Directors are eligible for
other benefits which are introduced for
the wider workforce on broadly similar
terms. Executive Directors will be
eligible to participate in any all-
employee share plan operated by the
Company, on the same terms as other
eligible employees. The maximum level
of participation is subject to limits
imposed by relevant legislation from
time to time (or a lower cap set by
the Company).
6 5
6 5
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
Component
Purpose / link to strategy
Operation
Maximum
Performance framework
Pension
To provide
retirement benefits
in line with the
overall Group policy.
Annual
bonus
To incentivise and
reward annual
performance and
create further
alignment with
shareholders via
the delivery and
retention of deferred
equity.
Performance
Share Plan
(“PSP”)
Motivates and
rewards the creation
of long-term
shareholder value.
Aligns executives’
interests with those
of the shareholders.
Provided through participation in
the Company’s money purchase
(personal pension) scheme, under
which the Company matches individual
contributions up to a maximum of
base salary.
The Company may amend the form
of an Executive Director’s pension
arrangements in response to changes
in legislation or similar developments.
Provides an opportunity for additional
reward (up to a maximum specified as
a % of salary) based on annual
performance against targets set and
assessed by the Committee.
Half of any annual bonus paid will be
deferred in shares which will vest after
three years, subject to continued
employment but no further performance
targets. The other half is paid in cash
following the relevant year end.
A dividend equivalent provision allows
the Committee to pay dividends, at the
Committee’s discretion, on vested
shares at the time of vesting and may
assume the reinvestment of dividends
on a cumulative basis.
Recovery and withholding provisions
apply to bonus awards (see note 1
below).
Awards will normally be made annually
under the PSP and will take the form of
either nil-cost options or conditional
share awards. Participation and
individual award levels will be
determined at the discretion of the
Committee within the policy.
Awards vest five years following grant,
subject to performance against pre-
determined targets (measured after
three years) which are set and
communicated at the time of grant.
Recovery and withholding provisions
apply to PSP awards (see note 1 below).
A dividend equivalent provision allows
the Committee to pay dividends, at the
Committee’s discretion, on vested
shares at the time of vesting and may
assume the reinvestment of dividends
on a cumulative basis.
7% of base salary for
N/A
existing Directors which
is consistent with
provisions provided to
the wider workforce.
The Committee may set
a higher level for new
executives to reflect
local practice, but this
will be limited to 15%
of base salary.
150% of base salary
per annum.
The normal plan limit is
250% of base salary.
Performance metrics are
selected annually based on
the current business
objectives. The majority of
the bonus will be linked to
key financial metrics, of which
there will typically be a
significant profit based
element (see note 3 below).
Performance below threshold
results in zero payment with
no more than three-fifths of
the bonus available at target.
Payments rise from 0% to
100% of the maximum
opportunity levels for
performance between the
threshold and maximum
targets.
Awards have a performance
period of three financial years
starting at the beginning of
the financial year in which the
award is made. Performance
conditions will measure the
long-term success of the
Company (see note 4 below).
The Committee may introduce
or reweight performance
measures so that they are
directly aligned with the
Company’s strategic
objectives for each
performance period.
In respect of each
performance measure,
performance below the
threshold target results in
zero vesting. The starting
point for vesting of each
performance element will be
no higher than 25% and rises
on a straight-line basis to
100% for attainment of
levels of performance
between the threshold and
maximum targets. There is no
opportunity to re-test.
6 6
6 6
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Component
Purpose / link to strategy
Operation
Shareholding
guidelines
To align Executive
Directors’ interests
with those of
our long-term
shareholders and
other stakeholders.
Executive Directors are expected to
build a holding in the Company’s
shares to a minimum value of two
times their base salary within five
years. This may be built via the
retention of the net-of-tax shares
vesting under the Company’s equity
based share plans. Deferred shares
and shares subject to a holding period
(net-of-tax) can be counted towards
the total.
Maximum
N/A
Performance framework
N/A
Notes to the policy table:
1. Recovery and withholding provisions may be applied in circumstances which include misconduct or material error by a participant, material misstatement
in the Company’s audited accounts or a material downturn in the performance of the Company, or error in the assessment of performance and in other
circumstances in which the Committee thinks the operation of the process is appropriate. Awards subsequent to the grant, but before the expiry of the
holding period, may be reduced or an Executive Director may be required to repay an award at any time within three years of the date on which the award
vests. All cash and share bonuses alongside long-term incentives are subject to a malus and clawback policy.
2. For the avoidance of doubt, by approval of the policy, authority has been given to the Company to honour any commitments entered into with current or
former Directors (such as the payment of a pension or the unwinding of legacy share schemes) that have been disclosed to shareholders in previous
Directors’ Remuneration reports. Details of any payments to former Directors will be set out in the Annual Report on Remuneration as they arise. The
previous Remuneration Policy included the CIP which has been replaced by the new PSP. Under the CIP, Executive Directors could defer a proportion of their
bonus into shares and receive a performance based matching award for each deferred share. The final CIP awards were made in March 2015. Subject to
satisfaction of the relevant performance targets, the final CIP awards will be fully vested and exercisable from 4 March 2020 until 4 March 2025.
3. Annual bonus performance measures are determined at the start of each year, based on the key business priorities for the year. The majority will be based on
clear financial targets, including a significant weighting on profit, as this is the primary indicator of our sustainable growth.
4. PSP performance metrics are determined at the time of grant. Performance measures may include a measure of profitability (such as EPS), capital return (such
as EVA or ROI) and other measures of long-term success (such as relative TSR). These measures align with our long-term goal of value creation for
shareholders through underlying financial growth and above-market returns.
5. As IWG operates in a number of geographies, employee remuneration practices vary across the Group to reflect local market practice. However, employee
remuneration policies are based on the same broad principles. Our primary objective in awarding variable pay is to drive achievement of results, according to
role, and to recognise and reward excellent performance. Accordingly, to account for variances in responsibilities, influence and seniority, incentive schemes
are not uniform in approach. Performance targets are set annually taking into account a number of internal and external reference points including: the level
of performance that is achievable over a sustained period of time; historic performance and internal forecasts of future performance; market expectations,
and any guidance provided to the market.
6. In order to ensure that the Remuneration Policy achieves its intended aims, the Remuneration Committee retains discretion over the operation of certain
elements of the variable pay policy. This includes the discretion to adjust the annual bonus and PSP outcome if it is not considered to be reflective of the
wider performance of IWG and to ensure that it can, in appropriate circumstances, override formulaic outcomes. In addition, the Committee may adjust
elements of the Plans including but not limited to:
in exceptional circumstances determining that any share-based award (or any dividend equivalent) will be settled (in full or in part) in cash;
• participation;
•
• determining the extent of payment or vesting of an award based on the assessment of any performance condition, including discretion as to the basis
on which performance is to be measured if an award vests in advance of normal timetable (on cessation of employment as a good leaver or on the
occurrence of a corporate event) and whether (and to what extent) pro-ration will apply in such circumstances;
• whether (and to what extent) recovery and/or withholding will apply to any award;
• ability to adjust the number of shares under the DSBP, PSP or other share-based award to take into account a variation in the share capital;
• the timing of the grant of award and/or payment;
• the size of an award (up to plan limits) and/or payment within the limits set out in the policy table above;
• discretion relating to the measurement of performance within the limits set out in the policy table above in the event of a change of control;
• determination of a good leaver (in addition to any specified categories) for incentive plan purposes;
• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends); and
• the ability to adjust existing performance conditions for exceptional events at any point before vesting so that they can still fulfil their original purpose.
Should any such discretions be exercised, an explanation would be provided in the following Annual Report on Remuneration and may be subject to
shareholder consultation as appropriate.
7. For the avoidance of doubt, in approving this Remuneration Policy, authority is given to the Company to make payments and honour any prior commitments
entered into with current or former Directors (such as the payment of pension or the unwinding of legacy share schemes prior to the approval of the current
Remuneration Policy). Details of any payments will be set out in the Annual Report on Remuneration as they arise. The Committee reserves the right to make
any remuneration payments and payments for loss of office (including exercising any discretions available to it in connection with such payments)
notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed (i) before the policy came into effect or
(ii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for
the individual becoming a Director of the Company. For these purposes “payments” include the Committee satisfying awards of variable remuneration and,
in relation to an award over shares, the terms of the payment are “agreed” at the time the award is granted.
6 7
6 7
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
Policy Table for the Chairman and Non-Executive Directors
Component
Purpose / link to strategy
Operation
Maximum
There is no prescribed maximum
although fees and fee increases
will be considered in line with the
increases of the wider workforce
and market rates.
Neither the Chairman nor the
Non-Executive Directors are
eligible for any performance
related remuneration.
There is no prescribed maximum
although fees and fee increases
will be considered in line with the
increases of the wider workforce
and market rates.
Neither the Chairman nor the
Non-Executive Directors are
eligible for any performance
related remuneration.
Chairman
fees
Non-
Executive
Director fees
Normally reviewed, but not necessarily increased,
annually and as determined by the Remuneration
Committee. The Committee will consider, where
appropriate, pay data at companies of a similar scale.
A single fee which reflects all Board and Committee duties.
Set at a level sufficient to attract and retain individuals
with the required skills, experience and knowledge to
allow the Board to effectively carry out its duties.
Normally reviewed, but not necessarily increased,
annually and as determined by the Chairman and
the Executive Directors. The Committee will consider,
where appropriate, pay data at companies of a
similar scale.
A base fee is payable with additional fees for chairing
key Board Committees and for being the Senior
Independent Director.
Set at a level sufficient to attract and retain individuals
with the required skills, experience and knowledge to
allow the Board to effectively carry out its duties. Any
reasonable business-related expenses (including tax
thereon) can be reimbursed if determined to be a
taxable benefit. Additional fees may be payable in
relation to extra responsibilities undertaken such as
chairing a Board Committee or other similar duties or
being a member of a committee. If there is a
temporary yet material increase in the time
commitments for Non-Executive Directors, the Board
may pay extra fees on a pro-rata basis to recognise the
additional workload.
Fees are paid entirely in cash.
Consideration of conditions elsewhere in the Group
The Committee has regard to the pay and employment conditions of employees within the Group when it sets the Remuneration
Policy for the remuneration of Executive Directors, the first layer of management below the Board, the Company Secretary and the
Chairman of the Board. The Committee does not consult directly with employees when formulating the Remuneration Policy but
has established a conduit for consulting with employees and representing their feedback at Board level and if this feedback were
to include matters of remuneration, this would be taken into consideration by the Committee.
The general principles of the Group’s Remuneration Policy are broadly applied throughout the Group and are designed to support
recruitment, motivation and retention as well as to reward high performance in a framework of approved risk management, and to
promote the long-term sustainable success of the Company.
The structure of total remuneration packages for those within the Committee’s remit and for the broader employee population is
similar, comprising salary, pension and benefits and eligibility for a discretionary annual bonus. The level of bonus opportunity is
determined by role and responsibility. Executive Directors, the first layer of management below the Board and other selected
senior executives participate in the Company’s share schemes to aid retention and motivate the delivery of long-term growth in
shareholder value and to align their interests with those of shareholders. Annual base pay increases for the Executive Directors
and the first layer of management below the Board are normally limited to the average base pay increase for the wider employee
population unless there are exceptional circumstances such as a change in role or salary progression for a newly appointed
Director.
Consideration of shareholder views
The Committee is dedicated to ensuring that shareholders understand and support our remuneration structures. Accordingly, where
changes are being made to the Remuneration Policy, or in the event of a significant exercise of discretion, we will consult with
shareholders, as appropriate, to explain our approach and rationale fully. Additionally, the Committee considers shareholder
feedback received in relation to each annual general meeting alongside any views expressed during the year. We actively engage
with our largest shareholders and consider the range of views expressed. Except in exceptional circumstances, the members of the
Committee, including the Committee Chairman, attend the Company’s annual general meeting and are available to listen to views
and to answer shareholders’ questions about Directors’ remuneration.
The Committee also reviews the executive remuneration framework in the context of published shareholder guidelines.
6 8
6 8
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Approach to recruitment remuneration
When determining the remuneration package for a newly appointed Executive Director, the Committee would seek to apply
the following principles:
• The package must be sufficiently competitive to facilitate the recruitment of individuals of the highest calibre and
experience needed to shape and execute the Company’s strategy. At the same time, the Committee would seek to pay no
more than necessary.
• The remuneration package for a new Executive Director would be set in accordance with the terms of the Policy in force at the
time of the appointment. Salaries would reflect the skills and experience of the individual, and may (but not necessarily) be set
at a level to allow future salary progression to reflect performance in the role. Where salaries are set below market, multi-year
staged increases may be awarded to achieve the desired market positioning over time. Where necessary these increases may be
above those of the wider workforce but will be subject to continued development in the role.
• Benefits will be limited to those outlined in the Policy, with relocation assistance provided where appropriate. Where provided,
relocation assistance will normally be for a capped amount and/or limited time. Pension provisions will be set in line with the
Policy.
• The Committee may offer additional cash and/or share-based payments in the year of appointment when it considers these to be
in the best interests of the Company and, therefore, shareholders. Per the Policy, the maximum level of variable remuneration
which may be awarded is 400% of salary (of which 250% is permitted under the PSP under the exceptional circumstances limit
and 150% under the annual bonus plan). Performance conditions for variable pay in the year of appointment may be different
to those applying to other Directors, which would be subject to stretching performance conditions.
• Depending on the timing of the appointment, the Committee may deem it appropriate to set different performance conditions to
the current Executive Directors for the first performance year of appointment. A long-term incentive award can be made shortly
following an appointment (assuming the Company is not in a close period).
• Where an individual forfeits remuneration at a previous employer as a result of appointment to the Company, the Committee
may offer compensatory payments or awards to facilitate recruitment. Such payments or awards could include cash as well as
performance and non-performance-related share awards and would be in such form as the Committee considers appropriate
taking into account all relevant factors such as the form, expected value, anticipated vesting and timing of the forfeited
remuneration. The aim of any such award would be to ensure that, so far as possible, the expected value and structure of the
award will be no more generous than the amount forfeited.
• Any share-based awards referred to in this section will be granted as far as possible under the Company’s existing share plans. If
necessary, awards may be granted outside of these plans as permitted under the Listing Rules, and in line with the approach and
the limits set out above.
• In the case of an internal appointment, variable pay awarded in respect of the incumbent’s prior role may pay out according to its
terms of grant. In addition, any other ongoing remuneration obligations prior to their appointment may continue, provided that
they are put to shareholders for approval at the first annual general meeting following their appointment.
• For an overseas appointment, the Committee will have discretion to offer cost-effective benefits and pension provisions which
reflect local market practice and relevant legislation.
The remuneration package for a newly appointed Non-Executive Director would normally be in line with the structure set out in the
Policy Table for Non-Executive Directors on page 68.
Service contracts
Executive Directors have service contracts with the Group which can be terminated by the Company or the Director by giving
12 months’ notice. The service contract policy for new appointments will be on similar terms as existing Executive Directors, with
the facility to include a notice period of no more than 12 months. The Company may terminate employment of the Executive
Directors by making a payment in lieu of notice which would not exceed 12 months’ salary.
Under the current service agreements, Mark Dixon’s contract provides that, on a change of control, he may terminate the contract
by giving one month’s notice and will, in addition to contractual payments for the one-month notice period, receive a payment
equal to 12 months’ salary, and remain eligible for a discretionary bonus.
The Chairman and Non-Executive Directors are appointed for a three-year term, which is renewable, with six months’ notice on
either side, no contractual termination payments being due and subject to retirement pursuant to the Articles of Association at the
annual general meeting.
The Directors’ service contracts are available for inspection at the Company’s registered office within normal business hours.
Policy on payment for loss of office
Where an Executive Director leaves employment, the Committee’s approach to determining any payment for loss of office will
normally be based on the following principles:
• The Committee’s objective is to find an outcome which is in the best interests of the Company and its shareholders, taking into
account the specific circumstances, contractual obligations and seeking to pay no more than is warranted. Payments in lieu of
notice will not exceed 12 months’ salary and benefits.
6 9
6 9
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
Policy on payment for loss of office (continued)
• Treatment of annual bonus:
There is no contractual right to receive an annual bonus in the year of termination. However, the Committee has discretion for
certain leavers to make a payment under the annual bonus entirely in cash. This will reflect the period of service during the year
and performance (measured at the same time as performance for other plan participants, if feasible). Should the Committee make
a payment in these circumstances, the rationale would be set out in the following Annual Report on Remuneration.
• Treatment of share plans:
If an Executive Director leaves employment with the Company, unvested PSP and deferred bonus shares will lapse unless the
Committee in its absolute discretion determines otherwise for reasons including, amongst others, injury, disability, retirement,
redundancy and death or in any other circumstances at the discretion of the Committee. In such circumstances an Executive
Director’s award normally vests based on the time served and, in the case of the PSP, achievement of performance criteria.
Should the Committee adjust the time pro-rating, then this would be explained in the following Annual Report on Remuneration.
If the Executive Director ceases to be an employee for any reason other than those specified above then the award shall lapse
immediately on such cessation.
The terms of any other unvested share awards on termination will be as set out in the prior policy.
Awards will vest on the normal vesting date unless the Committee determines, in its discretion, that awards will vest at the date
of cessation.
• The Committee reserves the right to make additional exit payments where such payments are made in good faith in discharge
of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise
of any claim arising in connection with the termination of a Director’s office or employment. The Committee may also pay
reasonable outplacement and legal fees where considered appropriate.
Policy in respect of external Board appointments for Executive Directors
It is recognised that external non-executive directorships may be beneficial for both the Company and Executive Directors. At the
discretion of the Board, Executive Directors are permitted to retain fees received in respect of any such non-executive directorship.
Illustration of Remuneration Policy
The charts below illustrate the application of the Remuneration Policy set out in the Policy Table for Executive Directors. This assumes the
level of fixed remuneration (salary, benefits and pension) as at 1 January 2019 and the following in respect of each scenario:
• “Fixed” represents fixed remuneration only (i.e. current salary, benefits and pension).
• “Target” represents fixed remuneration plus an annual at target bonus of 90% of salary and 50% of salary (25% of maximum)
vesting of the maximum PSP award. Note, target levels of award are for illustrative purposes only.
• “Maximum” represents the maximum annual bonus of 150% of salary and full vesting of the normal PSP grant of 200% of
base salary.
• “Maximum + 50% share price growth” represents maximum levels of award plus the impact of 50% share price growth on the
PSP award.
£4,603
54%
£3,778
44%
£2,046
20%
36%
33%
27%
£891
100%
44%
23%
19%
£553
100%
£1,249
20%
36%
44%
£2,292
43%
33%
24%
Minimum
Target
Maximum
Maximum
+ 50% share
price growth
Minimum
Target
Maximum
Chief Executive Officer
Chief Financial Officer
Fixed Pay
Annual Bonus
Long-term incentives
All figures in £’000s and rounded to the nearest thousand.
£2,789
53%
27%
20%
Maximum
+ 50% share
price growth
The Chief Financial Officer’s benefits value is based on the estimated cost in 2019 of the benefits package and excludes the commuter costs which will be paid
on the basis of receipted cost incurred and will be disclosed in next year’s DRR. The Chief Executive Officer’s benefit value is based on the value of benefits
received in relation to 2018.
7 0
7 0
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
ANNUAL REPORT ON REMUNERATION
Members of the Committee
All members of the Committee are independent. Committee membership during the year and attendance at the meetings is set out
on page 63.
Terms of reference
The Committee’s terms of reference are available on the Company’s website: www.iwgplc.com.
Implementation of the Remuneration Policy for 2019
The Annual Report on Remuneration set out below (and the Chairman’s Annual Statement) will be put to a single advisory
shareholder vote at the 2019 AGM. The information below includes how we intend to operate our policy in 2019 and the pay
outcomes in respect of the 2018 financial year.
Base salaries for the Executive Directors
The Executive Directors’ salaries were reviewed, however, no salary increases have been awarded. The current salaries as at
1 January 2019 (and compared to 2018) are as follows. Eric Hageman was appointed with effect from 1 January 2019 and his salary
will first be reviewed with effect from 1 January 2020:
Mark Dixon
Eric Hageman
2019
2018
£825,000 £825,000
£440,000
–
Percentage
change
0%
–
For context, the average base salary increase received by Group support employees was 5%.
Benefits and pension
Benefits and pension provisions will operate in line with the approved policy.
Annual bonus
For 2019, the maximum bonus potential for both Executive Directors is 150% of salary. The on-target bonus is 90% of salary.
Half of any bonus paid will be normally deferred into shares under the DSBP, which will vest after three years subject to continued
employment.
The 2019 annual bonus will include a measurement against operating profit ranging from threshold to stretch. The target is not
being disclosed prospectively as it is commercially sensitive; however, a description of the performance against targets set will be
included in next year’s Annual Report.
Performance Share Plan (PSP)
PSP awards will be made at 200% of salary to Executive Directors with performance measured over a three-year period ending
31 December 2021. The awards will be subject to three independently operated performance metrics as summarised below:
Performance conditions
EPS (33.3% weighting)
Relative TSR versus FTSE 350 excluding
investment trusts (33.3% weighting)
Threshold
vesting
0%
25%
Return on investment (33.3% weighting)
0%
Threshold performance
Maximum
vesting
Maximum performance
Compound annual growth of 5% 100%
Compound annual growth of 25%
Median
Return to be equal to 2018
performance
100%
100%
10% compound annual growth
above median
Return to be 300 basis points
above 2018 performance
Awards will be subject to a post-vesting holding period of two years. This requires the Executive Directors to hold on to the net of
tax number of vested shares for a period of two years following vesting.
Chairman and Non-Executive fees
No fee increases are proposed for 2019:
Non-Executive Chairman
Basic fee for Non-Executive Director
Additional fees:
Chair of Audit Committee
Chair of Remuneration Committee
Senior Independent Director combined with Chair of Nomination Committee
2019
(£’000)
250
57
12
12
12
250
57
12
12
12
Variable dislocation allowance for non-Swiss Directors(1)
2.5 to 7.5
2.5 to 7.5
1. The level of dislocation allowance for non-Swiss Directors is determined according to their country of residence.
2018
(£’000)
Percentage
change
0%
0%
0%
0%
0%
0%
7 1
7 1
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
REMUNERATION OUTCOMES FOR 2018
Single total figure of remuneration table (audited)
The following table shows the total remuneration in respect of the year ending 31 December 2018, together with the prior year
comparative.
Salary / Fees
Benefits
Pension
Annual bonus
Long Term
Incentive Awards
Total
£’000
Mark Dixon
2018
2017
2018
2017
825.0
825.0
Dominik de Daniel
506.5
725.0
Non-Executive Directors
Douglas Sutherland
250.0
241.7
Lance Browne
Elmar Heggen
Nina Henderson
Florence Pierre
François Pauly
–
71.5
76.5
59.5
71.5
27.7
69.6
75.0
58.3
65.4
7.8
–
7.8
–
–
–
–
–
–
–
–
–
–
–
–
–
2018
57.8
35.5
2017
57.8
50.8
–
–
–
–
–
–
–
–
–
–
–
–
2018
2017
2018
2017
2018
2017
535.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24.0
24.2 1,450.0
914.8
–
–
542.0
775.8
–
–
–
–
–
–
–
–
–
–
–
–
250.0
241.7
–
71.5
76.5
59.5
71.5
27.7
69.6
75.0
58.3
65.4
Benefits – Include private health insurance and life insurance.
Pension – Includes pension contributions of 7% of salary into defined contribution arrangements (or cash equivalent) plus any
contributions in accordance with standard local practice or employment regulations.
Annual bonus – The bonus shown is the full award in respect of the relevant financial year. Half of the bonus awarded is normally
deferred into shares for three years.
Long Term Incentive Awards – Includes the value of Matching Share awards made to Mark Dixon under the Co-Investment Plan
(“CIP”) in previous years which vested in respect of a performance period ending in the relevant financial year. The vesting of the
third tranche of the 2013 award (62,862 shares out of a maximum of 251,447) and the 2015 CIP (37,819 shares out of a maximum
529,304) are included in the 2017 column. The figure reflects the actual share price on the date of vesting of 240.2p. The third
tranche of the 2014 award (10,687 shares will vest out of a maximum of 137,401) shall vest in March 2019 based on performance
until 31 December 2018; the value of this is shown in 2018 and reflects a three-month average share price ending 31 December
2018 of 224.9p.
Dominik de Daniel stepped down as Executive Director on 12 September 2018. Remuneration detailed above reflects time served.
Lance Browne stepped down as Senior Independent Director and Chairman of the Nomination Committee on 16 May 2017. Remuneration
detailed above reflects time served.
François Pauly was appointed as Senior Independent Director and Chairman of the Nomination Committee on 16 May 2017.
Remuneration detailed above reflects time served.
Determination of 2018 annual bonus (audited)
The 2018 annual bonus plan was on performance against the following:
Performance required
Measure
Weighting
Threshold (50% of
salary)
Target (90% of
salary)
Maximum (150%
of salary)
Actual
performance
achieved
Bonus payable
(% of maximum)
Operating profit before growth cost
100%
£186.0m
£207.0m
£225.0m
£193.8m
43.3%
The achieved underlying operating profit of £193.8m in 2018 resulted in a bonus equivalent to 64.9% of the respective salary (the
maximum being 150% of salary) being awarded as follows:
Director
Mark Dixon
Bonus
maximum
(% of base salary)
Operating profit
achievement
(% of award)
150%
64.9%
Bonus
awarded
(£’000)
£535.4
Cash
bonus
(£’000) (1)
£267.7
Deferred
shares
(£’000) (2)
£267.7
1. Dominik de Daniel stepped down from the Board in September 2018. He was placed on garden leave in September 2018 and left the Group in 2019. The
Committee has determined that no annual bonus will be payable to Dominik de Daniel in respect of 2018. See page 75 for further details.
2. Half of any bonus awarded is normally paid in cash with half deferred in shares which vest after three years.
The Committee decided that the resulting award was aligned with Company performance and therefore approved the bonus
payment at 64.9% of base salary.
7 2
7 2
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
PSP awards vesting in respect of 2018 performance (audited)
The table below summarises the performance conditions and the actual performance against the first award made under the PSP.
This award was subject to performance conditions measured over the three financial years ending 31 December 2018.
Relative TSR versus FTSE 350 (excluding
investment trusts) (33.3% weighting)
EPS
(33.3% weighting)
Return on investment
(33.3% weighting)
% of each
element vesting
Target
% of each
element vesting
Target
% of each
element vesting
Below threshold
0%
Below median
Threshold
25%
Median
Maximum
100% 10% compound
annual growth
above median
0%
0%
100%
Compound
annual growth of
less than 5%
Compound
annual growth
of 5%
Compound
annual growth
of 25%
Performance achieved
Actual % vesting
(28.2%)
0%
(2.95%)
0%
0%
0%
Target
Return below
2015
performance
Return to be
equal to 2015
performance
100% Return to be 300
basis points
above 2015
performance
17.5%
0%
Director
Mark Dixon
Dominik de Daniel
2016 award
number of shares
Total vesting
(% of maximum)
No. of shares
to vest
Award value
552,579
485,600
0%
0%
–
–
£0
£0
The Committee believes the above outcome is representative of Company performance and therefore no discretion was exercised
and the 2016 PSP awards did not vest.
CIP awards vesting in respect of 2018 performance (audited)
The 2014 Matching Share awards are divided into three separate equal tranches subject to performance over three, four and
five years from 1 January 2014. The third tranche of the 2014 award is due to vest in March 2019 based on performance until
31 December 2018, as shown in the table below.
Below threshold
Threshold
Maximum
Performance achieved
Actual % vesting
Relative TSR versus FTSE 350
(excluding financial services and mining
companies) (25% of tranche)
EPS
(33.3% weighting)
% of each
element vesting
Target
% of each
element vesting
0%
25%
Below median
Median
100% Upper quartile or
above
24%
31.1%
0%
25%
100%
Target
Below 16.1p
16.1p
20.2p
11.7p
0%
Straight-line vesting between these points. The Committee has reviewed these outcomes, including adjustments related to growth,
and it is content that they are a fair reflection of underlying performance over the period.
2014 award Tranche 3
Mark Dixon
Tranche 3 award
number of shares
Total vesting (% of
maximum)
No. of shares to
vest
Average share price
(1 October – 31
December 2018)
137,401
7.8%
10,687
£2.249
Estimated
award value
£24,035
Note the estimated value of the award is based on the average share price over the last quarter of the financial year. The actual
value will be the value at the date of vesting.
7 3
7 3
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
One-off award vesting in respect of 2018 performance (audited)
The vesting of the one-off share award granted to Dominik de Daniel in November 2015 was subject to an EPS performance
condition measured over a three-year period ending on 31 December 2018, with the shares vesting as follows:
Compound annual growth in EPS over the period
01.01.2016 – 31.12.2018
5%
Performance achieved
(2.95%)
%
of shares
vesting
100%
Actual %
of shares
vesting
0%
The Committee believes the above outcomes demonstrate strong pay for performance alignment and therefore did not exercise its
discretion in adjusting the performance outcomes.
PSP awards granted in the year (audited)
PSP awards granted to Executive Directors on 7 March 2018 which vest subject to a three-year performance period ending
31 December 2020 were as follows:
Executive
Mark Dixon
Dominik de Daniel(2)
Number
of shares
680,412
597,938
% of
base salary
200%
200%
Value
of award(1)
% of maximum amount
receivable for threshold vesting
£1,649,999
£1,450,000
8.3%
8.3%
1. Based on a face value grant of 200% of salary and using a share price of 242.5p.
2. Dominik de Daniel left the Group in 2019, therefore the PSP awards granted to him have lapsed in full.
The awards are subject to three independently operated performance metrics:
Metric
EPS (33.3% weighting)
Relative TSR versus FTSE 350 (excluding
investment trusts) (33.3% weighting)
Threshold
vesting
0%
25%
Threshold
Maximum
vesting
Maximum
Compound annual growth of 5% 100% Compound annual growth of 25%
Median
100%
10% compound growth
above median
Return to be 300 basis points
above 2017 performance
Return on investment (33.3% weighting)
0%
Return equal to 2017 performance
100%
Awards will be subject to a post-vesting holding period of two years. This requires the Executive Directors to hold on to the net of
tax number of vested shares for a period of two years following vesting.
DSBP awards granted in the year
No awards were granted under the DSBP in 2018.
Total pension benefits
During the year under review, the Executive Directors received pension contributions of 7% of salary into defined contribution
arrangements (or cash equivalent) plus any contributions in accordance with standard local practice or employment regulations.
Details of the value of pension contributions received in the year under review are set out in the Pension column of the single
figure of remuneration table.
Statement of share scheme interests and shareholdings (audited)
Executive Directors are expected to build a holding in the Company’s shares to a minimum value of two times their base salary
within five years of their appointment. This must be built via the retention of the net-of-tax shares vesting under the Company’s
equity-based share plans. The following table sets out, for Directors who served during the year, the total number of shares held
(including the interests of connected persons) as at 31 December 2018 alongside the interests in share schemes for the Executive
Directors. For Dominik de Daniel, the shareholding is at the date he stepped down from the Board.
7 4
7 4
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Executive Directors
Mark Dixon
Dominik de Daniel(6)
Non-Executive Directors
Douglas Sutherland
Elmar Heggen
Nina Henderson
François Pauly
Florence Pierre
Shares held
% of salary
required
Guideline
met?
% of salary
attained(1)
Deferred Share
Bonus Plan(2)
Performance
Share Plan(3)
CIP Matching
Shares(4)
One-off
award(5)
Shareholding guidelines
Interests in share/option awards
243,853,270
595,589
200%
200%
Yes 61,676%
204,208
1,816,030
175,220
–
Yes
173%
179,456
1,595,905
–
328,751
400,000
–
30,800
100,000
–
1. Based on a share price of 209.0p and base salary as at 31 December 2018, save for Dominik de Daniel whose percentage salary achieved is based on a share
price of 232.3p as at 12 September 2018 and base salary as at 12 September 2018.
2. Half of any bonus awarded is deferred in shares which vest after three years, subject to continued employment but no further performance targets. DSBP
awards granted to Dominik de Daniel will lapse when he ceases to be an employee.
3. The Performance Share Plan is in the form of unvested conditional shares awarded in 2016, 2017 and 2018 which will become exercisable on the fifth
anniversary of the date of grant and remain exercisable until the day before the tenth anniversary of the date of grant. The Committee has determined that
performance conditions for the 2016 award were not met and accordingly the award will not vest. PSP awards granted to Dominik de Daniel will lapse when
he ceases to be an employee.
4. The CIP Matching Shares includes 137,401 unvested conditional shares granted on 5 March 2014 which will vest subject to the achievement of EPS and TSR
performance targets and 37,819 vested shares granted on 4 March 2015 which are subject to a holding period ending in March 2020. The Committee has
determined that only 10,687 of the conditional shares granted on 5 March 2014 will vest.
5. Upon appointment Dominik de Daniel was granted a conditional award, details of which were disclosed in the 2015 Remuneration Report. The one-off
award is in the form of unvested conditional shares awarded to Dominik de Daniel as a one-off award arrangement established under Listing Rule 9.4.2(2).
The Committee has determined that performance conditions for the award were not met and accordingly the award will not vest.
6. Number of shares held and interests in share/option awards as at 12 September 2018 when Dominik de Daniel stepped down from the Board.
With the exception of the Directors’ interests disclosed in the table above, no Director had any additional interest in the share capital of the Company during
the year. Eric Hageman was appointed to the Board on 1 January 2019 and holds 300,000 options issued to him in 2018; no other Director has any additional
interests in the share capital of the Company since year end to the date of this report.
Dominik de Daniel
Dominik de Daniel stepped down from the Board on 12 September 2018. Dominik de Daniel was placed on garden leave (to expire
no later than 30 September 2019) as of 18 September 2018 for the remainder of his notice period. He remained an employee of
the Group until 31 January 2019.
The Committee has determined that Dominik de Daniel will receive an amount of CHF 410,000 (in two equal instalments, payable
on or about 11 March 2019 and 31 January 2020 respectively) in respect of his contractual entitlement to salary and benefits for
the period of his remaining garden leave. This sum has been reduced in accordance with the principles of mitigation to reflect
remuneration payable to Dominik de Daniel in connection with subsequent employment he has undertaken during this period. No
payment for loss of office or further remuneration payments will be made to him.
The Committee has determined, as detailed on pages 73 and 74, that the performance metrics applicable to the 2016 PSP award
and the one-off award held by Dominik de Daniel were not met and accordingly those awards will lapse. The Committee did not
exercise their discretion to adjust the award outcomes.
The Committee has exercised its discretion to permit the deferred bonus award granted to Dominik de Daniel on 1 March 2017
over 179,456 shares to vest in full on 1 March 2020, being the date that it would otherwise have vested but for his termination.
The Committee considered the 2018 bonus of Dominik de Daniel at the same time as for the other Executive Director and
concluded that no 2018 bonus would be payable to Dominik de Daniel.
Eric Hageman
Eric Hageman was appointed as Director and Chief Financial Officer of the Group with effect from 1 January 2019, from September
2018 until his appointment to the Board he served as interim Chief Financial Officer. In line with the Policy, the Committee took
account of market levels of remuneration as well as of the remuneration received by Eric in previous roles. His remuneration
package is set at an appropriate level to reward the skills and expertise he brings to the role.
Eric Hageman will receive a salary per annum of £440,000 and is entitled to benefits including a pension (7% of salary), health
insurance and medical insurance. Eric will also be reimbursed for his weekly commute including weekday accommodation in
Switzerland and airfares. He will participate in the annual bonus scheme for financial years starting on or after 1 January 2019 with
a maximum bonus potential of 150% of gross annual salary. Eric is entitled to participate in Company share schemes and for 2019
will be granted an award under the Performance Share Plan at 200% of salary; the awards will vest subject to performance
measures over three financial years, 2019-2021, against EPS, relative TSR and ROI targets and any award that vests will be subject
to an additional two-year holding period.
7 5
7 5
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED
SUPPORTING DISCLOSURES AND ADDITIONAL CONTEXT
Percentage change in remuneration of the Chief Executive Officer
The table below shows the percentage change in remuneration of the Chief Executive Officer and Group support employees
(on a like-for-like basis) between the year ending 31 December 2017 and the year ending 31 December 2018. Given the significant
scale and diversity of the overall global employee population, the Committee considers the Group support employees a more
relevant comparison.
Salary
Benefits
Annual bonus
Chief
Executive
Group support
employees
0%
0%
–(1)
5%
6%
–(1)
1. No annual bonuses were awarded based on 2017 performance. Bonuses were awarded based on 2018 performance, including a £535.4k bonus awarded to
the Chief Executive Officer.
Relative importance of spend on pay
The table below shows total employee remuneration and distributions to shareholders in respect of the years ending 31 December
2018 and 2017 and the percentage changes between years:
Total employee remuneration
Distributions to shareholders via dividends and share buybacks
2018
2017
Change 2017
to 2018
£380.9m
£331.5m
£93.9m
£99.6m
14.9%
(5)%
Performance graph and table
The graph below shows the TSR of IWG in the nine-year period to 31 December 2018 against the TSR of the FTSE 350 (excluding
investment trusts). TSR refers to share price growth and assumes dividends are reinvested over the relevant period. The Committee
considers the FTSE 350 (excluding investment trusts) relevant since it is an index of companies of similar size to IWG.
800
700
600
500
400
300
200
100
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
IWG plc
FTSE 350 Index (excl. investment trusts)
Source: FactSet
This graph shows the value, by 31 December 2018, of £100 invested in IWG plc on 31 December 2008, compared with the value of £100 invested in the
FTSE 350 (excl. Investment Trusts) Index on the same date.
The other points plotted are the values at intervening financial year-ends.
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Single total figure of remuneration £628k £759k £1,130k £1,773k £1,854k £2,770k £1,968k £3,034.5k £914.8k £1,450.0k
Bonus (% of maximum)
0%
19%
50% 100%
79% 100% 100%
93%
0%
43.3%
Long-term incentive vesting
(% of maximum)
0%
0%
0%
11%
35%
86%
97% 90.5%(1) 11.0%(1)
1.5%(2)
1. Based on 25% of tranche three of the 2013 Matching Shares vesting, 0% of tranche two of the 2014 Matching Shares vesting and 7.15% of the 2015
Matching Shares vesting. The single total figure of remuneration has been restated to reflect that the share price for the CIP on the date of vesting is
now known.
2. Based on 7.8% of tranche three of the 2014 Matching Shares vesting, and 0% of the 2016 PSP award vesting.
7 6
7 6
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Advisors to the Remuneration Committee
Details of the composition of the Remuneration Committee and attendance at Committee meetings are set out on page 63
of the Corporate Governance Report. The Committee’s terms of reference are freely available on the Company’s website:
www.iwgplc.com.
In addition to the designated members of the Remuneration Committee, the Chairman, Chief Executive Officer and Company
Secretary also attended Committee meetings during the year although none were present during discussions concerning their
own remuneration.
The Executive Compensation team within Aon provided independent advice to the Committee during the year. No other services
were provided by Aon during the year. Aon was appointed by the Committee during 2016 following a competitive selection
process undertaken by the Committee. The fees charged by Aon for the provision of independent advice to the Committee during
2018 were £63,010 (exclusive of VAT) (2017: £41,500). With regard to remuneration advice, the Committee is comfortable that
Aon’s engagement partner and team are objective and independent.
Statement of voting at general meeting
The Committee is directly accountable to shareholders and, in this context, is committed to an open and transparent dialogue
with shareholders on the issue of executive remuneration. The members of the Committee attend the Company’s annual general
meeting and are available to answer shareholders’ questions about Directors’ remuneration. Votes cast by proxy and at the annual
general meeting held on 15 May 2018 in respect of remunerated related resolutions are shown in the table below:
Resolution
Approval of Annual Remuneration Report for year
ending 31 December 2017
For and on behalf of the Board
NINA HENDERSON
CHAIRMAN OF THE REMUNERATION COMMITTEE
Votes for
Votes against
#
%
#
%
Total votes
cast
Votes
withheld
714,887,247
95.58% 33,073,045
4.42% 766,111,782
0%
7 7
7 7
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ REPORT
The Directors’ statements on page 80 include the statutory
statement in respect of disclosure to the auditor.
The Directors do not consider any contractual or other
relationships with external parties to be essential to the
business of the Group.
Anti-bribery and anti-corruption
The Company is committed to carrying out business in an
honest and ethical manner and has a zero tolerance of bribery
and corruption. All employees receive training on our bribery
and corruption policy. The Company’s statement of commitment
can be found on the Company’s website: www.iwgplc.com.
Respect for human rights
The Company has zero tolerance to slavery and human
trafficking and our statement made in accordance with the
Modern Slavery Act 2015, which is reviewed by the Board
annually, can be found on the Company’s website:
www.iwgplc.com.
Results and dividends
Profit before taxation for the year was £138.7m (2017: £149.4m).
The Directors are pleased to recommend a final dividend of
£38.9m (2017: paid £36.0m), being 4.35p per share (2017: 3.95p
per share). The total dividend for the year will therefore be 6.30p
per share, made up of the interim dividend of 1.95p per share
paid in October 2018 (2017: 1.75p per share) and, assuming the
final dividend is approved by shareholders at the forthcoming
annual general meeting, an additional 4.35p per share (2017:
3.95p per share) which is expected to be paid on 24 May 2019
to shareholders on the register at the close of business on
26 April 2019.
The Directors of IWG plc (the “Company”) present their Annual
Report and the audited financial statements of the Company
and its subsidiaries (together the “Group”) for the year ended
31 December 2018.
Directors
The Directors of the Company who held office during the
financial year under review were:
Executive Directors
Mark Dixon
Dominik de Daniel (resigned 12 September 2018)
Non-Executive Directors
Douglas Sutherland
François Pauly
Elmar Heggen
Florence Pierre
Nina Henderson
Biographical details for the Directors are shown on pages 50 and 51.
Details of the Directors’ interests and shareholdings are given
in the Remuneration Report on page 75.
The Corporate Governance Report, Nomination Committee
Report, Audit Committee Report, Remuneration Report and
Directors’ Statements on pages 52 to 77 and 80 all form part of
this report.
Principal activity
The Company is the world’s leading provider of global office
outsourcing services.
Business review
The Directors have presented a Strategic Report as follows:
The Chief Executive Officer’s review and Chief Financial Officer’s
review on pages 22 to 27 and 30 to 33 respectively address:
• review of the Company’s business (pages 22 to 27);
• an indication of the likely future developments in the
business (page 24);
• development and performance during the financial year
(pages 30 to 33); and
• position of the business at the end of the year (pages 31 to 33).
The Risk Management and Principal Risks Report, on pages 34 to
41, includes a description of the principal risks facing
the Company, including financial risks, and the steps taken and
policies implemented to mitigate those risks.
The Company’s activities in research and development are also
detailed in the Risk Management and Principal Risks Report on
page 36.
The Corporate and Social Responsibility Report, on pages 44 to
49, includes the sections in respect of:
• environmental matters; and
• social and community issues.
The Our People Report on pages 42 and 43 addresses employee
development and performance.
The Nomination Committee Report on pages 57 and 58 covers
our approach to diversity.
7 8
7 8
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Policy and practice on payment of creditors
The Group does not follow a universal code dealing specifically
with payments to suppliers but, where appropriate, our practice
is to:
Substantial interests
At 6 March 2019, the Company has been notified of the
following substantial interests held in the issued share capital
of the Company.
% of issued share
capital (excluding
treasury shares)
27.3%
18.1%
6.6%
• agree the terms of payment upfront with the supplier;
• ensure that suppliers are made aware of these terms of
payment; and
• pay in accordance with contractual and other legal
Estorn Limited(1)
Number of
voting rights
243,853,270
obligations.
Employees
The Group treats applicants for employment with disabilities
with full and fair consideration according to their skills and
capabilities.
Should an employee become disabled during their employment,
efforts are made to retain them in their current employment or
to explore opportunities for their retraining or redeployment
elsewhere within the Group.
All employees are encouraged to become involved in the
Company’s performance. Employee surveys are routinely
fielded to gather information on the Company, employee
contribution to performance and other issues.
Toscafund Asset Management LLP 161,605,841
M&G Investment Management
60,068,384
1. Mark Dixon indirectly owns 100% of Estorn Limited.
Post balance sheet events
There have been no significant subsequent events that require
adjustments or disclosure in this Annual Report.
Auditors
In accordance with Jersey law, a resolution for the
reappointment of KPMG Ireland as auditors of the Company is
to be proposed at the forthcoming annual general meeting.
Approval
This report was approved by the Board on 27 February 2019.
Political and charitable donations
It is the Group’s policy not to make political donations either in
the UK or overseas.
The Group made charitable donations of £317,891 during the
year (2017: £302,066).
On behalf of the Board
TIMOTHY REGAN
COMPANY SECRETARY
6 March 2019
Capital structure
The Company’s share capital (including treasury shares)
comprises 923,357,438 issued and fully paid up ordinary shares
of 1p nominal value in IWG plc (2017: 923,357,438). All
ordinary shares (excluding treasury shares) have the same rights
to vote at general meetings of the Company and to participate
in distributions. There are no securities in issue that carry
special rights in relation to the control of the Company. The
Company’s shares are traded on the London Stock Exchange.
Details of the role of the Board of Directors (the “Board”) and
the process for the appointment of Directors can be found on
pages 50 and 51, and 57 and 58.
At the Company’s annual general meeting held on 15 May 2018
the shareholders of the Company approved a resolution giving
authority for the Company to purchase in the market up to
91,070,626 ordinary shares representing approximately 10% of
the issued share capital (excluding treasury shares) as at 10
April 2018. 17,489,685 shares were repurchased during 2018,
the purpose of which was to satisfy share option obligations
and as part of a share buyback programme supporting the
Board’s prudent approach to managing its capital structure.
Details of the Company’s employee share schemes can
be found on pages 116 to 125. The outstanding awards and
options do not carry any rights in relation to the control of
the Company.
Branches
The Company is incorporated in Jersey with a head office
branch in Switzerland.
7 9
7 9
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
DIRECTORS’ STATEMENTS
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
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
6 March 2019
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.
8 0
8 0
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC
OUR OPINION IS UNMODIFIED
We have audited the Group financial statements of IWG plc for the
year ended 31 December 2018 which comprise the Group income
statement, the Group statement of comprehensive income, the
Group balance sheet, the Group statement of changes in equity, the
Group cash flow statement and the related accounting policies and
notes. The financial reporting framework that has been applied in
their preparation is Jersey Law and International Financial
Reporting Standards (IFRS) as adopted by the European Union.
In our opinion:
• the financial statements give a true and fair view of the assets,
liabilities and financial position of the Group as at 31 December
2018 and of its profit for the year then ended;
• the financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union; and
• the financial statements have been properly prepared in
accordance with the requirements of the Companies (Jersey)
Law 1991.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (“ISAs”). Our responsibilities under those standards are
further described in the Auditor’s Responsibilities section of our
report. We are independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in Jersey, together with the International Ethics
Standards Board for Accountants’ Code of Ethics for Professional
Accountants (“IESBA Code”) and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS
OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team.
These matters were addressed, and our results are based on
procedures undertaken, in the context of, and solely for the
purpose of, our audit of the financial statements as a whole, and
in forming our opinion thereon, and consequently are incidental
to that opinion, and we do not provide a separate opinion on
these matters.
In arriving at our audit opinion above, the key audit matters, in
decreasing order of significance, were as follows:
Goodwill and intangible assets £721.7 million
(2017: £712.1 million)
Refer to page 60 (Report of the Audit Committee), page 93
(accounting policy) and notes 11 and 12 to the Group Financial
Statements.
The key audit matter
There is a risk that the carrying amounts of the Group’s goodwill
and intangible assets will be more than the estimated recoverable
amount, if future cash flows are not sufficient to recover the
Group’s investment. This could occur if forecasted cash flows
decline in certain markets or where revenue and costs are subject
to significant fluctuations. The recoverability of goodwill is spread
across multiple geographies and economies as highlighted in
note 11, and is dependent on individual businesses acquired
achieving or sustaining sufficient profitability in the future.
We focus on this area due to the inherent uncertainty involved in
forecasting and discounting future cash flows, particularly in
projected revenue growth, which forms the basis of the assessment
of recoverability.
How the matter was addressed in our audit
Our audit procedures in this area included, among others, assessing
the Group’s impairment model for each group of CGUs and
challenging the key assumptions used by the Group in the model.
Key assumptions include revenue growth, occupancy rates,
discount rates and terminal values. We considered the historical
accuracy of the Group’s forecasts. We obtained and documented
our understanding of the impairment testing process and the
design and implementation of the relevant controls therein.
We used valuation specialists to assist us in evaluating the
judgements and methodologies used by the Group, in particular
those relating to the discount rate used to determine the present
value of the cash flow projections.
We compared the Group’s assumptions, where possible, to
externally derived data and performed our own assessment in
relation to key model inputs. We checked the mathematical
accuracy of the model. We examined the sensitivity analysis
performed by Group management and performed our own
sensitivity analysis in relation to the key assumptions. We also
compared the sum of projected discounted cash flows to the
market capitalisation of the Group to assess whether the projected
cash flows appear reasonable. We also assessed whether the
disclosures as set out in note 11 were appropriate and in
compliance with IAS 36.
The Group’s impairment model identified impairments of goodwill
amounting to £1.0 million during the year ended 31 December 2018.
As a result of our work, we found that the judgements applied by
management in arriving at this conclusion were supported by
reasonable assumptions. We found the disclosures to be adequate.
Taxation (current tax liabilities of £31.0 million
(2017: £21.6 million) and deferred tax assets of
£30.6 million (2017: £23.0 million))
Refer to page 60 (Report of the Audit Committee), page 95
(accounting policy) and note 8 to the Group Financial Statements.
The key audit matter
The Group operates in numerous tax jurisdictions around the world.
As a result, the tax charge on profits is determined according to a
variety of complex tax laws and regulations. The Group encounters
challenges by tax authorities on a range of tax matters during the
normal course of business and recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will
be due. The calculation of these liabilities is underpinned by
judgemental assumptions as the ultimate tax determination is
uncertain. The related deferred tax assets and liabilities require
judgement in determining the amounts to be recognised with
consideration to the timing and level of future taxable income.
Separately, the Group has incurred historic trading losses in certain
jurisdictions and acquisitions made may include complex tax
aspects. As a consequence, the Group’s current and deferred tax
balances are sensitive to assumptions used in determining the
appropriate liabilities and assets.
8 1
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
8 1
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC CONTINUED
How the matter was addressed in our audit
Our approach to the audit of taxation is underpinned by the
inclusion of foreign and domestic KPMG Taxation Specialists in the
Group audit team. These specialists evaluated and challenged the
key assumptions and methodologies used by the Group and its
taxation advisors in calculating the taxation provisions for the
period. Particular focus is placed on key assumptions relating to
provisions for uncertain tax positions and the recognition and
recoverability of deferred tax assets. We obtained and documented
our understanding of the taxation process and the design and
implementation of the relevant controls therein.
We specifically considered the taxation risks arising from the
Group’s operations when assessing the accounting for taxation
related balances. We assessed the recoverability of deferred
tax assets, which involved assessing the assumptions in relation
to the utilisation of losses carried forward against projected
taxable profits. We also considered whether the recognition
of additional deferred tax assets would be appropriate in
accordance with IAS 12.
We assessed the presentation and disclosure (in accordance with
IAS 1 and IAS 12) in respect of taxation related balances and
considered whether the Group’s disclosures reflected the risks
inherent in the accounting for the taxation balances.
We found that the Group’s estimates of the amounts recognised as
tax liabilities and deferred tax assets to be appropriate and that the
disclosures provide an adequate description of the assumptions
and estimates made by the Group.
OUR APPLICATION OF MATERIALITY AND AN
OVERVIEW OF THE SCOPE OF OUR AUDIT
The materiality for the consolidated financial statements as a whole
was set at £10 million (2017: £10 million), which is 0.4%
(2017: 0.4%) of total revenue and 7.2% (2017: 6.7%) of profit
before tax from continuing operations. We have determined, in our
professional judgement, that these benchmarks are two of the
principal benchmarks within the financial statements relevant to
members of the Company in assessing financial performance.
For certain account balances including goodwill, intangible assets,
bank loans, share-based payments, related party transactions and
taxation, we applied materiality of £7.5 million, or 5.4% (2017:
5.0%) of pre-tax profit, as we believe a misstatement of amounts
less than materiality for the financial statements as a whole could
be reasonably expected to influence a member’s assessment of the
financial performance of the Group.
We agreed with the Audit Committee to report corrected and
uncorrected misstatements we identified through our audit with a
value in excess of £0.5 million (2017: £0.5 million). We also agreed
to report other audit misstatements below that threshold that we
believe warranted reporting on qualitative grounds.
The structure of the Group’s finance function is such that certain
transactions and balances are accounted for by central Group
finance teams, with the remainder accounted for in the operating
units. We performed comprehensive audit procedures, including
those in relation to the significant risks above, on those
transactions and balances accounted for at Group and operating
unit level. In determining those components in the Group to which
we perform audit procedures, we considered the relevant size and
risk profile of the components.
In relation to the Group’s operating units, audits for Group reporting
purposes were performed at identified key reporting components,
augmented by risk focused audit procedures which were
8 2
8 2
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
performed for certain other components. These audits covered
80% (2017: 80%) of total Group revenue, 82% (2017: 80%)
of Group total assets and 87% (2017: 83%) of Group profit
before taxation.
The Group audit team instructed component auditors as to the
significant areas to be covered, including the relevant risks detailed
above and the information to be reported back. Planning meetings
were held with component auditors in order to assess the key audit
risks, audit strategy and work to be undertaken. The Group audit
team approved the materiality of each of the components, which
ranged from £3m to £8m, having regard to the mix of size and risk
profile of the Group across the components.
Detailed audit instructions were sent to the auditors in all of these
identified locations. These instructions covered the significant audit
areas to be covered by these audits (which included the relevant
risks of material misstatement detailed above) and set out the
information required to be reported to the Group audit team.
Senior members of the Group audit team, including the lead
engagement partner, attended each component audit closing
meeting via telephone conferencing facilities, at which the results
of component audits were discussed with divisional and Group
management. At these meetings, the findings reported to the
Group audit team were discussed in more detail, and any further
work required by the Group audit team was then performed by
the component auditor. The Group audit team interacted with the
component teams where appropriate during various stages of
the audit, reviewed key working papers and were responsible
for the scope and direction of the audit process. This, together
with the additional procedures performed at Group level,
gave us appropriate evidence for our opinion on the Group
financial statements.
WE HAVE NOTHING TO REPORT ON GOING
CONCERN
We are required to report to you if:
• we have anything material to add or draw attention to in relation
to the Directors’ statement in note 2 to the financial statements
on the use of the going concern basis of accounting with no
material uncertainties that may cast significant doubt over the
Group use of that basis for a period of at least 12 months from
the date of approval of the financial statements ; or
• if the related statement under the Listing Rules set out on
page 55 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
OTHER INFORMATION
The Directors are responsible for the other information presented
in the Annual Report together with the financial statements. The
other information comprises the information included in the Annual
Report other than the financial statements. The financial statements
and our auditor’s report thereon do not comprise part of the other
information. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with
the financial statements or our audit knowledge. Based solely on
that work we have not identified material misstatements in the
other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
• the principal risks disclosures describing these risks and
explaining how they are being managed and mitigated;
• the Directors’ confirmation within the viability statement that
they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its
business model, future performance, solvency and liquidity; and
• the Directors’ explanation in the viability statement of how they
have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our financial statements audit
and the Directors’ statement that they consider that 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; or
• the section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the 11
provisions of the 2016 UK Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in these respects.
WE HAVE NOTHING TO REPORT ON THE OTHER
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Under the Companies (Jersey) Law 1991, we are required to report
to you if, in our opinion:
• Adequate accounting records have not been kept by the parent
company;
• Returns adequate for our audit have not been received from
branches not visited by us;
• The financial statements are not in agreement with the
accounting records; or
• We have not received all the information and explanations we
require for our audit.
We have nothing to report in respect of the above responsibilities.
RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out on page 80, the
Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud, other irregularities, or error,
and to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not guarantee that
an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from
fraud, other irregularities or error and are considered material if,
individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the
financial statements.
Further details relating to our work as auditor is set out in the Scope
of Responsibilities Statement contained in the appendix to this
report, which is to be read as an integral part of our report.
THE PURPOSE OF OUR AUDIT AND TO WHOM WE
OWE OUR RESPONSIBILITIES
Our report is made solely to the Company’s members, as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Group and the Group’s members as a
body, for our audit work, for this report, or for the opinions we
have formed.
CLIONA MULLEN,
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place, St Stephen’s Green, Dublin 2, Ireland
6 March 2019
8 3
8 3
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC CONTINUED
We also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence, and communicate with
them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the (consolidated) financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
APPENDIX TO THE INDEPENDENT AUDITOR’S
REPORT
Further information regarding the scope of our
responsibilities as auditor
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the
going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible
for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
8 4
8 4
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
CONSOLIDATED INCOME STATEMENT
Continuing operations
Revenue
Cost of sales
Gross profit (centre contribution)
Selling, general and administration expenses
Share of loss of equity-accounted investees, net of tax
Operating profit
Finance expense
Finance income
Net finance expense
Profit before tax for the year
Income tax expense
Profit after tax for the year
Earnings per ordinary share (EPS):
Basic (p)
Diluted (p)
Year ended
31 Dec 2018
£m
Year ended
31 Dec 2017
£m
Notes
3
2,535.4
(2,126.2)
409.2
(253.7)
(1.4)
154.1
(15.9)
0.5
(15.4)
138.7
(33.0)
105.7
2,352.3
(1,950.7)
401.6
(237.6)
(0.8)
163.2
(14.1)
0.3
(13.8)
149.4
(35.4)
114.0
20
5
7
7
8
9
9
11.7
11.6
12.4
12.3
8 5
8 5
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended
31 Dec 2018
£m
Year ended
31 Dec 2017
£m
Notes
105.7
114.0
0.1
9.2
9.3
–
–
0.5
(34.4)
(33.9)
(0.7)
(0.7)
9.3
(34.6)
115.0
79.4
Profit for the year
Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods:
Cash flow hedges – effective portion of changes in fair value
Foreign currency translation differences for foreign operations
Items that are or may be reclassified to profit or loss in subsequent periods
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
25
Items that will never be reclassified to profit or loss in subsequent periods
Other comprehensive income/(loss) for the period, net of income tax
Total comprehensive income for the year
8 6
8 6
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Balance at 1 January 2017
9.2
(2.9)
97.6
(0.3)
25.8
612.6
Issued share
capital
£m
Treasury
shares
£m
Foreign
currency
translation
reserve
£m
Hedging
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
742.0
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Re-measurement of the defined benefit liability, net
of tax (note 25)
Cash flow hedges – effective portion of changes in fair
value
Foreign currency translation differences for foreign
operations
Other comprehensive (loss)/income, net of tax
Total comprehensive income for the year
Share-based payments
Ordinary dividend paid (note 10)
Purchase of shares (note 21)
Proceeds from exercise of share awards
Balance at 31 December 2017
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Cash flow hedges – effective portion of changes in
fair value
Foreign currency translation differences for foreign
operations
Other comprehensive income, net of tax
Total comprehensive income for the year
Share-based payments
Ordinary dividend paid (note 10)
Purchase of shares (note 21)
Proceeds from exercise of share awards
Balance at 31 December 2018
–
–
–
–
–
–
–
–
–
–
9.2
–
–
–
–
–
–
–
–
–
9.2
–
–
–
–
–
–
–
–
(51.1)
14.4
(39.6)
–
–
–
–
–
–
–
(40.2)
5.7
(74.1)
–
–
–
(34.4)
(34.4)
(34.4)
–
–
–
–
–
–
0.5
–
0.5
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63.2
0.2
25.8
–
–
9.2
9.2
9.2
–
–
–
–
–
0.1
–
0.1
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
114.0
114.0
(0.7)
(0.7)
–
–
(0.7)
113.3
1.7
(48.5)
–
(10.2)
668.9
0.5
(34.4)
(34.6)
79.4
1.7
(48.5)
(51.1)
4.2
727.7
105.7
105.7
–
–
–
105.7
0.5
(53.7)
–
(3.8)
0.1
9.2
9.3
115.0
0.5
(53.7)
(40.2)
1.9
751.2
72.4
0.3
25.8
717.6
Other reserves include £10.5m 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, £37.9m arising from the Scheme of Arrangement undertaken on 14 October 2008, £6.5m relating to merger reserves and
£0.1m to the redemption of preference shares partly offset by £29.2m arising from the Scheme of Arrangement undertaken in 2003.
8 7
8 7
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
As at
31 Dec 2018
£m
As at
31 Dec 2017
£m
Notes
Current liabilities
Trade and other payables (incl. customer deposits)
16
1,058.9
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Non-current derivative financial assets
Other long-term receivables
Investments in joint ventures
Total non-current assets
Current assets
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total current assets
Total assets
11
12
13
8
23
14
20
15
8
22
8
18
19
17
18
8
19
20
25
21
21
Deferred income
Corporation tax payable
Bank and other loans
Provisions
Total current liabilities
Non-current liabilities
Other long-term payables
Bank and other loans
Deferred tax liability
Provisions
Provision for deficit in joint ventures
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Total equity
Issued share capital
Treasury shares
Foreign currency translation reserve
Hedging reserve
Other reserves
Retained earnings
Total equity
Total equity and liabilities
Approved by the Board on 6 March 2019
MARK DIXON
CHIEF EXECUTIVE OFFICER
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
8 8
8 8
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
679.2
42.5
666.7
45.4
1,751.2
1,367.2
30.6
0.3
86.0
12.2
23.0
0.2
80.7
12.4
2,602.0
2,195.6
717.5
32.7
69.0
819.2
3,421.2
320.0
31.0
9.9
9.7
581.8
27.6
55.0
664.4
2,860.0
904.8
285.3
21.6
8.5
4.5
1,429.5
1,224.7
704.2
519.9
–
9.4
5.5
1.5
553.2
342.9
1.3
4.9
3.8
1.5
1,240.5
2,670.0
907.6
2,132.3
9.2
(74.1)
72.4
0.3
25.8
717.6
751.2
9.2
(39.6)
63.2
0.2
25.8
668.9
727.7
3,421.2
2,860.0
CONSOLIDATED STATEMENT OF CASH FLOWS
Operating activities
Profit before tax for the year
Adjustments for:
Net finance expense
Share of loss of equity-accounted investees, net of tax
Depreciation charge
Loss on impairment of goodwill
Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets
(Reversal of impairment)/impairment of property, plant and equipment
Amortisation of intangible assets
Gain on disposal of other investments
Amortisation of acquired lease fair value adjustments
Negative goodwill arising on an acquisition
Increase in provisions
Share-based payments
Other non-cash movements
Operating cash flows before movements in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Interest paid
Tax paid
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of subsidiary undertakings (net of cash acquired)
Disposal of other investments
Purchase of intangible assets
Purchase of joint ventures
Proceeds on sale of property, plant and equipment
Interest received
Net cash outflow from investing activities
Financing activities
Net proceeds from issue of loans
Repayment of loans
Purchase of treasury shares
Proceeds from exercise of share awards
Payment of ordinary dividend
Net cash inflow/(outflow) from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
Year ended
31 Dec 2018
£m
Year ended
31 Dec 2017
£m
Notes
138.7
149.4
7
20
5, 13
11
5
5
5, 13
5, 12
5
11, 26
19
13
26
12
20
7
21
10
22
15.4
1.4
225.4
1.0
13.6
0.1
(0.1)
10.4
(4.3)
(2.0)
(6.2)
9.7
0.5
(6.0)
397.6
(133.4)
299.8
564.0
(16.2)
(37.1)
510.7
(579.6)
(2.3)
4.4
(6.9)
–
0.4
0.5
13.8
0.8
202.1
–
4.3
1.6
0.1
10.9
–
(3.6)
–
–
1.7
0.5
381.6
(72.1)
116.3
425.8
(12.2)
(22.4)
391.2
(344.9)
(40.1)
–
(3.6)
(0.3)
0.5
0.3
(583.5)
(388.1)
644.3
(467.4)
(40.2)
1.9
(53.7)
84.9
12.1
55.0
1.9
69.0
651.6
(558.8)
(51.1)
4.2
(48.5)
(2.6)
0.5
50.1
4.4
55.0
8 9
8 9
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS
1. AUTHORISATION OF FINANCIAL STATEMENTS
The Group and Company financial statements for the year ended 31 December 2018 were authorised for issue by the Board of Directors
on 6 March 2019 and the balance sheets were signed on the Board’s behalf by Mark Dixon and Eric Hageman. 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 31, and information on other related party relationships of the Group is provided in note 30.
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 131.
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 2018 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 2018:
IFRS 9
IFRS 15
Financial Instruments
Revenue from Contracts with Customers
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 32.
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 23.
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 85 to 130.
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 22 to 27 as well as the Group’s principal risks and
uncertainties as set out on pages 35 to 41.
Further details on the going concern basis of preparation can be found in note 23 to the notes to the consolidated financial statements.
These Group consolidated financial statements are presented in pounds sterling (£), 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.
9 0
9 0
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Impact of the adoption of IFRS 9
The Group adopted IFRS 9 Financial Instruments from 1 January 2018. 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 replaced 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.
The new classification requirements didn’t have a material impact on any of its accounting balances. Furthermore, at 31 December 2018,
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 adoption of IFRS 9 did not result in any change in the classification of financial liabilities at 1 January 2018. Consequently, there
were 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 financial instruments, either on a 12-month or lifetime basis. The
Group applied the simplified approach to trade receivables and recorded the lifetime expected losses. The Group determined that due to
the nature of its receivables, taking into account the customer deposits obtained, the impact of applying IFRS 9 did 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. As IFRS 9 does not change the general principles of how an entity accounts for effective
hedges, applying the hedging requirements of IFRS 9 does not impact the Group’s financial statements.
9 1
9 1
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES (CONTINUED)
Impact of the adoption of IFRS 15
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced 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 and the timing of revenue recognised are
consistent with IFRS 15. Therefore, the application of IFRS 15 did not result in any differences in the timing of the performance and the
recognition of the revenue, for these services.
IFRSs not yet effective
The following new or amended standards and interpretations that are mandatory for 2019 annual periods (and future years) are not
expected to have a material impact on the Group financial statements, unless otherwise stated.
IFRS 16
Leases
IFRIC 23
Uncertainty over Income Tax Treatments
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
Plan Amendments, Curtailment or Settlement (Amendments to IAS 19)
Annual Improvements to IFRSs 2015 – 2017 Cycle
Prepayment features with Negative Compensation (Amendments to IFRS 9)
Amendments to References to Conceptual Framework in IFRS Standards
IFRS 17 Insurance Contracts
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 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:
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 its initial assessment of the potential impact on its consolidated financial statements. The actual impact of
applying IFRS 16 on the financial statements in the period of initial application depends on future economic conditions, including the
Group’s borrowing rate and credit rating, external interest rates, country risk factors, the composition of the Group’s lease portfolio, the
Group’s assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical
expedients and recognition exemptions. Taking these considerations into account, on transition:
• The Group will adopt the modified approach, choosing to measure the right-of-use asset at the retrospective amount as if IFRS 16 had
been applied from lease commencement date. The difference between the right-of use asset and the related lease liability is recognised
directly in retained earnings.
• In determining the right-of-use asset and lease liability to be recognised, the Group will adopt an incremental borrowing rate for each
lease. This rate has been determined by taking currency specific interest rates based on 10-year external market rates (where available,
which reflect the average centre lease duration) and then considering adjustments to reflect subsidiary/country specific credit ratings
and adjustments to reflect the level of collateral. This incremental borrowing rate will be updated annually and applied to leases
completed in the subsequent year.
• The right-of-use asset recognised will be depreciated over the life of the lease, adjusted for any period between the lease
commencement date and the date the related centre opens, reflecting the lease related costs directly incurred in preparing the business
centre for trading. The life of the lease reflects the contracted lease term and any renewal periods that are at IWG’s option to extend.
The most significant impact identified is the right-of-use asset and related lease liability the Group recognises for its leases in respect of its
global network, which will be recognised based on the modified retrospective approach. Based on the lease portfolio at 31 December
2018, the Group expects to report a right-of-use asset of approximately £4,417m to £4,882m and a related lease liability of approximately
£5,075m to £5,609m at 31 December 2019. These balances exclude the impact of any lease terminations, lease renewals and expected
9 2
9 2
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
growth in the lease portfolio in 2019. The recognition of these balances will not impact the overall cash flows of the Group or cash
generation per share. The pro forma impact from the adoption of IFRS 16 as at 1 January 2019 is disclosed on pages 136 and 137.
In addition, the nature of expenses related to 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 has also considered the impact of lessor accounting, which is not considered to be material.
The Group will adopt the exemptions permitted in respect of short-term and low value leases, which are not material due to the relatively
low number of these leases.
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 23.
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 2018. 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. Negative goodwill is recognised directly in profit or loss.
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
Brand – Other acquired brands
Computer software
Customer lists
Management agreements
Indefinite life
20 years
Up to 5 years
2 years
Minimum duration of the contract
Amortisation of intangible assets is expensed through administration expenses in the income statement.
9 3
9 3
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES (CONTINUED)
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
Leasehold improvements
Furniture
Office equipment and telephones
Computer hardware
50 years
10 years
10 years
5 years
3 – 5 years
Revenue
The Group’s primary activity and only business segment is the provision of global workplace solutions.
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 (contract liability) 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.
The Group has generally concluded that it is the principal in its revenue arrangement, except where noted above.
9 4
9 4
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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 and awards granted under the Group’s share-based payment plans outlined in note 24 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.
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 and closure costs 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.
9 5
9 5
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES (CONTINUED)
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 7).
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 as subsequently measured at amortised cost, fair value through the profit or loss or fair value through
other comprehensive income (OCI). The classification depends on the nature and purpose of the financial assets and is determined on
initial recognition.
Financial assets (including trade and other receivables) are measured at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount
outstanding.
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.
Financial assets (including trade and other receivables) are measured at fair value through OCI if both of the following conditions are met:
• The financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial
assets; and
• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
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.
9 6
9 6
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Derivative financial instruments
The Group’s policy on the use of derivative financial instruments can be found in note 23. 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
US dollar
Euro
Japanese yen
At 31 December
Annual average
2018
1.28
1.12
141
2017
1.35
1.13
152
2018
1.33
1.13
147
2017
1.30
1.14
145
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): the
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 2017.
Americas
EMEA
Asia Pacific
United Kingdom
Other
Total
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
Revenue from external
customers
Mature(1)
2017 Expansions(1)
2018 Expansions(1)
Closures(1)
Gross profit (centre contribution)
Share of loss of equity-
accounted investees
Operating profit/(loss)
Finance expense
Finance income
Profit before tax for the year
1,048.5
984.8 630.8 540.5 412.2 383.2 439.0 440.0
961.7
930.3 527.1
493.7
368.0
361.1
376.5
390.3
3.8 2,535.4 2,352.3
3.3 2,237.8
2,178.7
48.6
19.8
18.4
10.9
–
43.6
70.0
20.8
12.9
173.8
153.2 119.0
–
–
(1.3)
122.6
96.5
57.2
20.2
–
26.6
97.1
(0.8)
47.7
4.9
4.5
0.4
–
–
25.1
11.5
7.6
60.8
5.2
–
16.9
65.9
35.8
13.3
13.4
55.3
14.4
–
35.3
83.6
0.5
179.9
–
–
65.4
52.3
0.3
1.8
409.2
(0.1)
–
–
–
–
–
(1.4)
26.9
34.6
36.1
60.3
(88.7)
(75.9)
154.1
(15.9)
0.5
51.2
–
122.4
401.6
(0.8)
163.2
(14.1)
0.3
138.7
149.4
Depreciation and amortisation
118.3
112.2
40.2
32.8
32.3
29.4
35.0
29.9
10.0
8.7
235.8
213.0
Assets
Liabilities
1,417.4 1,213.2 751.7
573.5 472.5
378.1 672.0
571.1 107.6 124.1 3,421.2
2,860.0
(1,042.5)
(861.5) (502.9)
(386.0) (316.4)
(244.1) (310.7)
(266.1) (497.5)
(374.6) (2,670.0)
(2,132.3)
Net assets/(liabilities)
374.9
351.7 248.8
187.5 156.1
134.0 361.3
305.0 (389.9)
(250.5)
751.2
727.7
Non-current asset additions(2)
228.7
148.6 141.5
83.4
84.1
36.3 112.8
64.6
19.4
15.6
586.5
348.5
1. Revenue has been disaggregated to reflect the basis on which it is reported to the chief operating decision maker. Further information can be found in the unaudited
“Segmental analysis – Management basis” on pages 132 and 133.
2. 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.
9 7
9 7
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
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:
£m
Country of tax domicile – Switzerland
United States of America
United Kingdom
All other countries
1. Excluding deferred tax assets
5. OPERATING PROFIT
Operating profit has been arrived at after charging/(crediting):
Revenue
Depreciation on property, plant and equipment
Amortisation of intangibles
Amortisation of partner contributions
Property rents payable in respect of operating leases:
Property
Contingent rents paid
Equipment rents payable in respect of operating leases
Staff costs
Facility and other property costs
Expected credit losses of trade receivables
Loss on disposal of property, plant and equipment
Impairment of goodwill
Loss on disposal of intangible assets
(Reversal of impairment)/Impairment of property, plant and equipment
Amortisation of acquired lease fair value adjustments
Negative goodwill arising on acquisition
Other costs
Share of loss of equity-accounted investees, net of tax
Operating profit
Fees payable to the Group’s auditor and its associates for the audit of the Group accounts
Fees payable to the Group’s auditor and its associates for other services:
The audit of the Company’s subsidiaries pursuant to legislation
Other services pursuant to legislation:
Tax services
Other services
2018
2017
External
revenue
Non-current
assets(1)
External
revenue
Non-current
assets(1)
32.1
883.7
439.0
1,180.6
2,535.4
27.0
1,022.1
508.8
1,013.5
2,571.4
26.6
819.6
440.0
1,066.1
2,352.3
22.5
878.5
440.1
831.5
2,172.6
Notes
2018
£m
2017
£m
2,535.4
2,352.3
13
12
6
23
11
12
13
11
225.4
10.4
(67.5)
1,072.1
1,035.4
36.7
3.5
380.9
383.5
17.7
13.6
1.0
0.1
(0.1)
(2.0)
(6.2)
347.5
155.5
(1.4)
154.1
2018
£m
1.0
2.2
–
–
202.1
10.9
(60.6)
1,003.2
966.8
36.4
3.4
331.5
348.7
16.2
4.3
–
1.6
0.1
(3.6)
–
330.5
164.0
(0.8)
163.2
2017
£m
0.9
1.7
–
0.1
Change in estimate
During 2018 the Group conducted a review of its customer deposits for inactive customer accounts. Based on this review, the Group has
released £17.6m of such deposits in 2018. This has resulted in an increase in both revenue and operating profit.
9 8
9 8
I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
6. STAFF COSTS
The aggregate payroll costs were as follows:
Wages and salaries
Social security
Pension costs
Share-based payments
The average number of persons employed by the Group (including Executive Directors), analysed by category
and geography, was as follows:
Centre staff
Sales and marketing staff
Finance staff
Other staff
Americas
EMEA
Asia Pacific
United Kingdom
Corporate functions
2018
£m
324.8
50.3
5.3
0.5
2017
£m
278.6
45.9
5.3
1.7
380.9
331.5
2018
Average
full time
equivalents
2017
Average
full time
equivalents
7,424
6,786
493
791
907
497
739
766
9,615
8,788
3,001
2,425
1,670
926
1,593
9,615
2,860
2,161
1,641
848
1,278
8,788
Details of Directors’ emoluments and interests are given on pages 63 to 77 in the Remuneration Report, with audited schedules identified
where relevant.
9 9
9 9
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
7. NET FINANCE EXPENSE
Interest payable and similar charges on bank loans and corporate borrowings
Total interest expense
Other finance costs (including foreign exchange)
Unwinding of discount rates
Total finance expense
Total interest income
Total finance income
Net finance expense
8. TAXATION
(a) Analysis of charge in the year
Current taxation
Corporate income tax
Previously unrecognised tax losses and other differences
Under provision in respect of prior years
Total current taxation
Deferred taxation
Origination and reversal of temporary differences
Previously unrecognised tax losses and other differences
Under provision in respect of prior years
Total deferred taxation
Tax charge on profit
(b) Reconciliation of taxation charge
2018
£m
(12.4)
(12.4)
(3.3)
(0.2)
(15.9)
0.5
0.5
2017
£m
(7.5)
(7.5)
(5.7)
(0.9)
(14.1)
0.3
0.3
(15.4)
(13.8)
2018
£m
(40.3)
4.0
(5.3)
(41.6)
(0.7)
9.7
(0.4)
8.6
2017
£m
(26.8)
1.3
(5.2)
(30.7)
(5.2)
1.0
(0.5)
(4.7)
(33.0)
(35.4)
Profit before tax
Tax on profit at 14.6% (2017: 14.6%)
Tax effects of:
Expenses not deductible for tax purposes
Items not chargeable for tax purposes
Recognition of previously unrecognised deferred tax assets
Movements in temporary differences in the year not recognised in deferred tax
Adjustment to tax charge in respect of previous years
Differences in tax rates on overseas earnings
2018
2017
£m
138.7
(20.3)
(26.2)
24.9
13.7
(104.1)
(5.7)
84.7
(33.0)
%
(14.6)
(18.9)
18.0
9.9
(75.2)
(4.1)
61.1
(23.8)
£m
149.4
(21.8)
(19.2)
23.4
2.3
(91.1)
(5.7)
76.7
(35.4)
%
(14.6)
(12.8)
15.7
1.5
(61.0)
(3.8)
51.3
(23.7)
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.
1 0 0 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 0 0 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
(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:
2018
2019
2020
2021
2022
2023
2024
2025
2026 and later
Available indefinitely
Tax losses available to carry forward
Amount of tax losses recognised in deferred tax assets
Total tax losses available to carry forward
The following deferred tax assets have not been recognised due to uncertainties over recoverability.
Intangibles
Accelerated capital allowances
Tax losses
Rent
Short-term temporary differences
2018
£m
–
5.6
20.5
31.7
40.5
54.2
31.5
37.6
432.0
653.6
671.8
1,325.4
207.8
1,533.2
2018
£m
17.0
39.3
336.8
7.9
9.8
2017
£m
4.9
8.1
54.7
37.4
43.4
22.9
29.9
13.4
222.1
436.8
642.4
1,079.2
117.0
1,196.2
2017
£m
16.9
32.1
271.5
8.7
5.5
410.8
334.7
Estimates relating to deferred tax assets, including assumptions about future profitability, are re-evaluated at the end of each
reporting period.
(d) Corporation tax
Corporation tax payable
Corporation tax receivable
2018
£m
(31.0)
32.7
2017
£m
(21.6)
27.6
1 0 1
1 0 1
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
8. TAXATION (CONTINUED)
(e) Deferred taxation
The movement in deferred tax is analysed below:
Deferred tax asset
At 1 January 2017
Current year movement
Prior year movement
Transfers
Exchange rate movements
At 31 December 2017
Current year movement
Prior year movement
Transfers
Exchange rate movements
At 31 December 2018
Deferred tax liability
At 1 January 2017
Current year movement
Prior year movement
Transfers
Exchange rate movements
At 31 December 2017
Current year movement
Prior year movement
Transfers
Exchange rate movements
At 31 December 2018
Property,
plant and
equipment
£m
Intangibles
£m
Tax losses
£m
(54.8)
19.9
–
–
5.5
(29.4)
(1.6)
0.1
(0.1)
(2.5)
(33.5)
(0.4)
(0.1)
–
–
–
(0.5)
(0.1)
0.3
0.1
–
(0.2)
(20.5)
1.3
(1.6)
2.2
1.1
(17.5)
(6.2)
–
–
(1.1)
(24.8)
(3.2)
0.3
–
(2.2)
–
(5.1)
0.4
–
–
–
(4.7)
34.3
(5.5)
0.3
(1.3)
(0.9)
26.9
19.2
(0.3)
–
–
45.8
2.4
(0.2)
(0.3)
1.3
–
3.2
1.8
(0.4)
–
–
4.6
Short-term
temporary
differences
£m
0.5
(3.1)
–
(0.6)
(0.9)
(4.1)
(6.5)
(0.2)
0.1
1.4
(9.3)
(1.0)
(0.2)
0.7
0.6
0.1
0.2
(0.3)
–
(0.1)
–
(0.2)
Rent
£m
69.8
(17.2)
0.4
(0.5)
(5.4)
47.1
2.7
–
0.1
2.5
52.4
(0.2)
0.6
–
0.5
–
0.9
(0.4)
0.1
(0.1)
–
0.5
Total
£m
29.3
(4.6)
(0.9)
(0.2)
(0.6)
23.0
7.6
(0.4)
0.1
0.3
30.6
(2.4)
0.4
0.4
0.2
0.1
(1.3)
1.4
–
(0.1)
–
–
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.
At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was £23.2m (2017: £19.8m).
The only tax that would arise on these reserves would be non-recoverable withholding tax.
1 0 2 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 0 2 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
9. EARNINGS PER ORDINARY SHARE (BASIC AND DILUTED)
Basic and diluted profit for the year attributable to shareholders (£m)
Basic earnings per share (p)
Diluted earnings per share (p)
Weighted average number of shares for basic EPS
Weighted average number of shares under option
Weighted average number of shares that would have been issued at average market price
Weighted average number of share awards under the CIP, PSP, DSBP and One-off Award
Weighted average number of shares for diluted EPS
2018
105.7
11.7
11.6
2017
114.0
12.4
12.3
907,077,048 915,676,309
13,715,757
20,223,265
(8,736,525)
(11,750,214)
2,150,099
2,088,344
914,206,379 926,237,704
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 253.22p (2017: 285.56p).
10. DIVIDENDS
Dividends per ordinary share proposed
Interim dividends per ordinary share declared and paid during the year
2018
4.35p
1.95p
2017
3.95p
1.75p
Dividends of £53.7m were paid during the year (2017: £48.5m). The Company has proposed to shareholders that a final dividend of 4.35p
per share will be paid (2017: 3.95p). Subject to shareholder approval, it is expected that the dividend will be paid on 24 May 2019.
11. GOODWILL
Cost
At 1 January 2017
Recognised on acquisition of subsidiaries
Exchange rate movements
At 31 December 2017
Recognised on acquisition of subsidiaries (1)
Negative goodwill
Goodwill impairment
Exchange rate movements
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
£m
685.3
3.3
(21.9)
666.7
(7.5)
6.2
(1.0)
14.8
679.2
666.7
679.2
1. Net of £8.5m 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.
1 0 3
1 0 3
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
11. GOODWILL (CONTINUED)
The goodwill attributable to the reportable business segments is as follows:
Carrying amount of goodwill included within:
Americas
EMEA
Asia
United Kingdom
2018
£m
299.7
125.4
35.2
218.9
679.2
2017
£m
285.8
125.1
34.7
221.1
666.7
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 43 countries. The goodwill
and indefinite life intangibles allocated to the USA and the UK are set out below:
USA
United Kingdom
Other countries
Goodwill
£m
277.1
218.9
183.2
679.2
Intangible
assets
£m
–
11.2
–
11.2
2018
£m
277.1
230.1
183.2
690.4
2017
£m
262.4
232.3
183.2
677.9
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 12).
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 2019 that reflect an average annual growth rate of the three-year average
inflation rate of the country (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 2022 have been extrapolated using the same three-year average inflation 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 increased from 9.9% in 2017 to 10.4% in 2018 (post-
tax WACC: 8.3%). The country specific pre-tax WACC reflecting the respective market risk adjustment has been set between 9.7% and
14.1% (2017: 9.3% to 12.8%).
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 1.2% per annum from
2019. A terminal value centre gross margin of 17% is adopted from 2023, with a 1.2% long-term growth rate assumed on revenue and
costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 14% (2017: 10%).
The UK model assumes an average centre contribution of 11% over the next five years. Revenue and costs grow at 2.4% per annum from
2019. A terminal value centre gross margin of 13% is adopted from 2023, with a 2.4% 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% (2017: 10%).
1 0 4 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 0 4 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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 20% (2017: 12%) for the US and 12% (2017: 16%) for the UK.
Occupancy – Management has considered the impact of a variance in occupancy. The value in use calculation shows that for the
recoverable amount to be less than its carrying value, occupancy would have to decrease by 4% (2017: 6%) for the US and 2%
(2017: 6%) for the UK.
12. OTHER INTANGIBLE ASSETS
Cost
At 1 January 2017
Additions at cost
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2017
Additions at cost
Acquisition of subsidiaries (1)
Disposals
Exchange rate movements
At 31 December 2018
Amortisation
At 1 January 2017
Charge for year
Disposals
Exchange rate movements
At 31 December 2017
Charge for year
Disposals
Exchange rate movements
At 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017
At 31 December 2018
Brand
£m
65.3
–
–
–
(4.4)
60.9
–
–
–
2.7
63.6
33.3
2.6
–
(2.9)
33.0
2.5
–
1.9
37.4
32.0
27.9
26.2
Customer
lists
£m
Software
£m
32.6
–
1.6
–
(2.0)
32.2
–
0.1
–
0.2
32.5
31.4
1.4
–
(1.9)
30.9
0.8
–
0.6
32.3
1.2
1.3
0.2
66.6
3.6
–
(6.6)
(3.1)
60.5
6.9
–
(1.8)
0.5
66.1
47.0
6.9
(5.0)
(4.6)
44.3
7.1
(1.7)
0.3
50.0
19.6
16.2
16.1
Total
£m
164.5
3.6
1.6
(6.6)
(9.5)
153.6
6.9
0.1
(1.8)
3.4
162.2
111.7
10.9
(5.0)
(9.4)
108.2
10.4
(1.7)
2.8
119.7
52.8
45.4
42.5
1. Includes £0.1m on the finalisation of the accounting for prior year acquisitions previously reported on a provisional basis
Included within the brand value is £11.2m 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 11).
The remaining amortisation life for definite life brands is six years.
1 0 5
1 0 5
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
13. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
£m
Leasehold
improvements
£m
Furniture and
equipment
£m
Computer
hardware
£m
Cost
At 1 January 2017
Additions
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2017
Additions
Acquisition of subsidiaries (1)
Disposals
Exchange rate movements
At 31 December 2018
Accumulated depreciation
At 1 January 2017
Charge for the year
Disposals
Impairment
Exchange rate movements
At 31 December 2017
Charge for the year
Disposals
Reversal of impairment
Exchange rate movements
At 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017
At 31 December 2018
26.3
9.5
95.5
–
0.1
131.4
6.4
8.6
–
(0.1)
146.3
0.4
2.0
–
–
–
2.4
2.8
–
–
0.1
5.3
1,533.2
253.0
1.5
(16.5)
(82.9)
1,688.3
474.1
0.2
(125.8)
49.0
2,085.8
652.4
132.6
(12.8)
0.1
(32.7)
739.6
155.6
(114.4)
(0.1)
22.2
802.9
25.9
129.0
141.0
880.8
948.7
1,282.9
628.2
71.2
2.0
(8.5)
(32.4)
660.5
84.6
0.3
(56.2)
19.9
709.1
378.9
51.1
(7.5)
–
(19.8)
402.7
52.3
(53.6)
–
11.8
413.2
249.3
257.8
295.9
1. Includes £8.5m on the finalisation of the accounting for prior year acquisitions previously reported on a provisional basis
Additions include £nil in respect of assets acquired under finance leases (2017: £nil).
14. OTHER LONG-TERM RECEIVABLES
Deposits held by landlords against rent obligations
Acquired lease fair value asset
1 0 6 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 0 6 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Total
£m
2,310.4
344.9
99.2
(26.4)
(119.9)
2,608.2
579.6
9.1
(189.0)
70.2
122.7
11.2
0.2
(1.4)
(4.7)
128.0
14.5
–
(7.0)
1.4
136.9
3,078.1
84.3
16.4
(1.3)
–
(3.1)
96.3
14.7
(7.0)
–
1.5
1,116.0
202.1
(21.6)
0.1
(55.6)
1,241.0
225.4
(175.0)
(0.1)
35.6
105.5
1,326.9
38.4
31.7
31.4
1,194.4
1,367.2
1,751.2
2018
£m
82.4
3.6
86.0
2017
£m
76.3
4.4
80.7
15. TRADE AND OTHER RECEIVABLES
Trade receivables, net
Prepayments and accrued income
Other receivables
VAT recoverable
Deposits held by landlords against rent obligations
Acquired lease fair value asset
16. TRADE AND OTHER PAYABLES (INCLUDING CUSTOMER DEPOSITS)
Customer deposits
Deferred rents
Other accruals
Trade payables
VAT payable
Deferred partner contributions
Other payables
Other tax and social security
Acquired lease fair value liability
Total current
17. OTHER LONG-TERM PAYABLES
Deferred partner contributions
Deferred rents
Acquired lease fair value liability
Other payables
Total non-current
2018
£m
229.8
213.3
164.3
103.1
6.0
1.0
2017
£m
199.3
167.3
108.7
98.1
7.2
1.2
717.5
581.8
2018
£m
483.2
147.6
132.3
110.0
79.2
78.7
21.4
4.8
1.7
2017
£m
429.8
121.3
108.5
74.0
90.2
59.2
13.7
5.1
3.0
1,058.9
904.8
2018
£m
389.6
305.9
2.3
6.4
704.2
2017
£m
293.8
244.6
3.7
11.1
553.2
18. BORROWINGS
The Group’s total loan and borrowing position at 31 December 2018 and at 31 December 2017 had the following maturity profiles:
Bank and other loans
Repayments falling due as follows:
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Total non-current
Total current
Total bank and other loans
2018
£m
2017
£m
8.7
506.3
4.9
519.9
9.9
529.8
8.9
329.2
4.8
342.9
8.5
351.4
1 0 7
1 0 7
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
19. PROVISIONS
At 1 January
Provided in the period
Utilised in the period
Provisions released
Exchange rate movements
At 31 December
Analysed between:
Current
Non-current
At 31 December
2018
2017
Onerous
leases and
closures
£m
3.6
16.0
(1.6)
(1.9)
–
16.1
8.3
7.8
16.1
Other
£m
5.8
1.3
(3.8)
(0.3)
–
3.0
1.4
1.6
3.0
Onerous
leases and
closures
£m
3.5
3.2
(0.3)
(2.8)
–
3.6
0.4
3.2
3.6
Total
£m
9.4
17.3
(5.4)
(2.2)
–
19.1
9.7
9.4
19.1
Other
£m
5.9
2.1
(1.0)
(1.2)
–
5.8
4.1
1.7
5.8
Total
£m
9.4
5.3
(1.3)
(4.0)
–
9.4
4.5
4.9
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 2026.
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.
20. INVESTMENTS IN JOINT VENTURES
At 1 January 2017
Additions
Share of loss
Exchange rate movements
At 31 December 2017
Share of profit/(loss)
Exchange rate movements
At 31 December 2018
Investments in
joint ventures
£m
Provision for
deficit in
joint ventures
£m
13.6
0.3
(0.4)
(1.1)
12.4
0.3
(0.5)
12.2
(3.4)
–
(0.4)
–
(3.8)
(1.7)
–
(5.5)
Total
£m
10.2
0.3
(0.8)
(1.1)
8.6
(1.4)
(0.5)
6.7
1 0 8 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 0 8 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
The Group has 52 joint ventures (2017: 49) 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:
Income statement
Revenue
Expenses
Loss before tax for the year
Tax charge
Loss after tax for the year
Balance sheet
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net (liabilities)/assets
21. SHARE CAPITAL
Ordinary equity share capital
Authorised
Ordinary 1p shares in IWG plc at 1 January
Ordinary 1p shares in IWG plc at 31 December
Issued and fully paid up
Ordinary 1p shares in IWG plc at 1 January
Ordinary 1p shares in IWG plc at 31 December
2018
£m
27.6
(31.1)
(3.5)
(0.3)
(3.8)
15.7
43.5
(57.0)
(2.7)
(0.5)
2017
£m
29.9
(31.5)
(1.6)
(0.3)
(1.9)
15.0
35.7
(46.6)
(1.5)
2.6
2018
2017
Number
Nominal value
£m
Number
Nominal value
£m
8,000,000,000
8,000,000,000
80.0
80.0
8,000,000,000
8,000,000,000
923,357,438
923,357,438
9.2
9.2
923,357,438
923,357,438
80.0
80.0
9.2
9.2
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.
Treasury share transactions involving IWG plc shares between 1 January 2018 and 31 December 2018
During the year, 17,489,685 shares were purchased in the open market and 1,739,476 treasury shares held by the Group were utilised
to satisfy the exercise of share awards by employees. As at 6 March 2019, 28,736,954 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.
1 January
Purchase of treasury shares in IWG plc
Treasury shares in IWG plc utilised
31 December
2018
2017
Number
of shares
12,986,745
17,489,685
(1,739,476)
28,736,954
£m
39.6
40.2
(5.7)
74.1
Number
of shares
1,170,699
16,830,000
(5,013,954)
12,986,745
£m
2.9
51.1
(14.4)
39.6
1 0 9
1 0 9
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
22. ANALYSIS OF FINANCIAL ASSETS/(LIABILITIES)
Cash and cash equivalents
Gross cash
Debt due within one year
Debt due after one year
Net financial assets/(liabilities)
At
1 Jan 2018
£m
Cash flow
£m
Exchange rate
movements
£m
At
31 Dec 2018
£m
55.0
55.0
(8.5)
(342.9)
(351.4)
(296.4)
12.1
12.1
(1.4)
(175.5)
(176.9)
(164.8)
1.9
1.9
–
(1.5)
(1.5)
0.4
69.0
69.0
(9.9)
(519.9)
(529.8)
(460.8)
Cash and cash equivalent balances held by the Group that are not available for use amounted to £4.2m at 31 December 2018 (2017: £9.3m).
Of this balance, £1.9m (2017: £7.1m) is pledged as security against outstanding bank guarantees and a further £2.3m (2017: £2.2m) is
pledged against various other commitments of the Group.
23. 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 44 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 30 to 33 within the Strategic Report reviews
the trading performance, financial position and cash flows of the Group. During the year ended 31 December 2018, the Group made a
significant investment in growth and the Group’s net debt position increased by £164.4m to a net debt position of £460.8m as at
31 December 2018. The investment in growth is funded by a combination of cash flow generated from the Group’s mature business
centres and debt. The Group had a £750.0m revolving credit facility provided by a group of relationship banks with a final maturity in
2023. As at 31 December 2018, £125.4m was available and undrawn. The revolving credit facility was increased from £750.0m to
£950.0m in January 2019 and the final maturity extended to 2024 with an option to extend until 2026.
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 experience of the likelihood of recoverability of these trade receivables based on both historical and forward
looking information. 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.
Americas
EMEA
Asia Pacific
United Kingdom
2018
£m
33.3
94.8
51.7
50.0
2017
£m
27.8
75.0
41.6
54.9
229.8
199.3
1 1 0 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 1 0 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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:
Not overdue
Past due 0 – 30 days
Past due 31 – 60 days
More than 60 days
Gross
2018
£m
175.6
38.2
11.6
26.6
252.0
Provision
2018
£m
–
–
–
(22.2)
(22.2)
Gross
2017
£m
132.4
43.3
13.8
31.6
221.1
Provision
2017
£m
–
–
–
(21.8)
(21.8)
At 31 December 2018, the Group maintained a provision of £22.2m for expected credit losses (2017: £21.8m) arising from trade
receivables. The Group had provided £17.7m (2017: £16.2m) in the year and utilised £17.3m (2017: £13.5m). Customer deposits of
£483.2m (2017: £429.8m) are held by the Group, mitigating the risk of default.
IFRS 9 requires the Group to record expected credit losses on all of its receivables, either on a 12-month or lifetime basis. The Group has
applied the simplified approach to all trade receivables, which requires the recognition of the expected credit loss based on the lifetime
expected losses. The expected credit loss is mitigated through the invoicing of contracted services in advance and customer deposits of
£483.2m (2017: £429.8m) held at the end of the year. The Group believes no provision is generally required for trade receivables that are
not overdue as they are not considered credit impaired.
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 £64.8m (2017: £45.7m). In addition to cash and liquid investments, the
Group had £125.4m 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. In May, the amount of the facility was increased
from £550.0m to £750.0m with the final maturity extended to May 2023. As at 31 December, £125.4m was available and undrawn under
this facility. The revolving credit facility was increased from £750.0m to £950.0m in January 2019 and the final maturity extended to 2024
with an option to extend until 2026.
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, £70.0m and $30.0m were swapped into a fixed rate liability for a three-year period, maturing in
2019 with an average fixed rate of respectively 0.7% and 1.8% (excluding funding margin). A further £30.0m maturing in 2021 was added
in 2018 with a fixed rate of 1.2%.
Although the Group has net current liabilities of £610.3m (2017: £560.3m), 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 £483.2m (2017: £429.8m) 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 £290.3m at 31 December 2018 (2017: £275.0m).
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 2018 no cash was invested for a period exceeding three months.
1 1 1
1 1 1
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
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:
£m
Trade and other receivables
Trade and other payables
Net statement of financial position exposure
£m
Trade and other receivables
Trade and other payables
Net statement of financial position exposure
2018
2017
EUR
20.8
(3.9)
16.9
EUR
0.6
(8.7)
(8.1)
GBP
1.1
(0.8)
0.3
GBP
0.1
(6.7)
(6.6)
USD
2.3
(8.6)
(6.3)
USD
16.7
(10.4)
6.3
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 2018, 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 £4.0m (2017: decrease of £2.6m) 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 £13.4m for the year ended 31 December 2018 (2017: decrease of £8.6m). 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
£0.8m for the year ended 31 December 2018 (2017: decrease of £1.7m).
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 £11.6m for the year ended 31 December 2018 (2017: £11.1m). 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 £3.0m for the year
ended 31 December 2018 (2017: decrease of £1.1m).
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 52. 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. Details of the Directors’ shareholdings can be
found in the report of the Remuneration Committee on pages 63 to 77. In addition, the Group operates various share option plans for key
management and other senior employees.
1 1 2 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 1 2 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Treasury share transactions involving IWG plc shares between 1 January 2018 and 31 December 2018
During the year, 17,489,685 shares were purchased in the open market and 1,739,476 treasury shares held by the Group were utilised
to satisfy the exercise of share awards by employees. As at 31 December 2018, 28,736,954 treasury shares were held.
The Company declared and paid an interim dividend of 1.95p per share (2017: 1.75p) during the year ended 31 December 2018 and
proposed a final dividend of 4.35p per share (2017: 3.95p per share), a 10% increase on the 2017 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 £460.8m at the end of 2018
(2017: £296.4m) and £125.4m (2017: £131.8m) of committed undrawn borrowings on the £750.0m revolving credit facility as at the end
of the year.
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 2018
Cash and cash equivalents
Trade and other receivables(1)
Other long-term receivables(2)
Derivative financial assets:
Interest rate swaps
• Outflow
• Inflow
Financial assets(3)
Non-derivative financial liabilities(4):
Bank loans and corporate borrowings
Other loans
Trade and other payables(5)
Other long-term payables(5)
Financial liabilities
As at 31 December 2017
Cash and cash equivalents
Trade and other receivables(1)
Other long-term receivables(2)
Derivative financial assets:
Interest rate swaps
• Outflow
• Inflow
Financial assets(3)
Non-derivative financial liabilities(4):
Bank loans and corporate borrowings
Other loans
Trade and other payables(5)
Other long-term payables(5)
Financial liabilities
Effective
interest rate
%
Carrying
value
£m
Contractual
cash flow
£m
Less than
1 year
£m
–
–
–
–
–
69.0
503.2
82.4
–
0.3
69.0
525.4
82.4
–
0.3
69.0
525.4
–
–
0.3
1-2 years
£m
2-5 years
£m
–
–
–
–
41.2
41.2
–
–
–
–
654.9
677.1
594.7
41.2
41.2
2.9%
1.4%
–
–
(505.4)
(24.4)
(830.9)
(6.4)
(505.4)
(24.4)
(830.9)
(6.4)
(0.1)
(9.8)
(830.9)
–
(1,367.1)
(1,367.1)
(840.8)
(2.0)
(6.7)
–
(6.4)
(15.1)
(503.3)
(3.0)
–
–
(506.3)
(4.9)
Effective
interest rate
%
0.1%
–
–
–
–
Carrying
value
£m
Contractual
cash flow
£m
Less than
1 year
£m
55.0
413.3
76.3
–
0.2
55.0
435.1
76.3
–
0.2
55.0
435.1
–
–
0.2
1-2 years
£m
2-5 years
£m
–
–
–
–
38.1
38.2
–
–
–
–
544.8
566.6
490.3
38.1
38.2
2.5%
1.9%
–
–
(330.5)
(20.9)
(721.3)
(11.1)
(330.5)
(20.9)
(721.3)
(11.1)
–
(8.5)
(721.3)
–
(1,083.8)
(1,083.8)
(729.8)
(6.2)
(2.7)
–
(11.1)
(20.0)
(324.3)
(4.9)
–
–
(329.2)
More than
5 years
£m
–
–
–
–
–
–
_
(4.9)
–
–
More than
5 years
£m
–
–
–
–
–
–
_
(4.8)
–
–
(4.8)
1 1 3
1 1 3
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
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value disclosures
The fair values together with the carrying amounts shown in the balance sheet are as follows:
31 December 2018
£m
Cash and cash equivalents
Trade and other receivables
Other long-term receivables
Derivative financial asset
Bank loans and corporate borrowings
Other loans
Trade and other payables
Other long-term payables
Cash, loans and
receivables
Carrying amount
Other
financial
liabilities
Cash flow –
hedging
instruments
69.0
503.2
82.4
–
–
–
–
–
–
–
–
–
(505.4)
(24.4)
(830.9)
(6.4)
–
–
–
0.3
–
–
–
–
654.6
(1,367.1)
0.3
Unrecognised gain
31 December 2017
£m
Cash and cash equivalents
Trade and other receivables
Other long-term receivables
Derivative financial asset
Bank loans and corporate borrowings
Other loans
Trade and other payables
Other long-term payables
Unrecognised gain
Cash, loans and
receivables
Carrying amount
Other
financial
liabilities
Cash flow –
hedging
instruments
55.0
413.3
76.3
–
–
–
–
–
–
–
–
–
(330.5)
(20.9)
(721.3)
(11.1)
–
–
–
0.2
–
–
–
–
544.6
(1,083.8)
0.2
Fair value
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
–
–
–
0.3
Fair value
–
–
–
0.3
–
–
–
–
0.3
–
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
0.2
–
Total
69.0
503.2
82.4
0.3
(505.4)
(24.4)
(830.9)
(6.4)
(712.2)
Total
55.0
413.3
76.3
0.2
(330.5)
(20.9)
(721.3)
(11.1)
(539.0)
1 1 4 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 1 4 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
During the years ended 31 December 2017 and 31 December 2018, 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, trade and other
receivables/payables and customer deposits
Loans and overdrafts
Foreign exchange contracts and interest rate swaps
For cash and cash equivalents, receivables/payables with a remaining life of less
than one year and customer deposits, the book value approximates the fair value
because of their short-term nature.
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.
The fair values are based on 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:
Derivatives used for cash flow hedging
Derivatives used for cash flow hedging
Committed borrowings
Revolving credit facility
2018
GBP m
100.0
2018
USD m
30.0
2017
Facility
£m
550.0
2017
GBP m
70.0
2017
USD m
30.0
2017
Available
£m
131.8
2018
Facility
£m
750.0
2018
Available
£m
125.4
The Group maintains a revolving credit facility provided by a group of international banks. During the year, the amount of the facility was
increased from £550.0m to £750.0m with the final maturity extended to May 2023. As at 31 December, £125.4m was available and
undrawn under this facility. The revolving credit facility was increased from £750.0m to £950.0m in January 2019 and the final maturity
extended to 2024 with an option to extend until 2026.
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, £70.0m and $30.0m were swapped into a fixed rate liability for a three-year period, maturing in
2019 with an average fixed rate of respectively 0.7% and 1.8% (excluding funding margin). A further £30.0m maturing in 2021 was added
in 2018 with a fixed rate of 1.2%.
The £750.0m 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.
1 1 5
1 1 5
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. 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. 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
2018
2017
Number of
share options
18,259,790
14,785,127
(2,159,407)
(1,544,288)
29,341,222
5,999,946
Weighted
average
exercise price
per share
179.79
200.95
182.91
129.27
Number of
share options
24,519,624
2,200,507
(4,475,884)
(3,984,457)
191.87
18,259,790
136.24
5,622,041
Weighted
average
exercise price
per share
169.62
244.28
189.71
107.80
179.79
118.81
Weighted
average
exercise price
per share
Numbers
granted
Lapsed
Exercised
At 31 Dec 2018
Exercisable from
Expiry date
3,986,000
100.50
(3,473,779)
(425,258)
75.00
69.10
114.90
109.50
84.95
155.60
191.90
195.00
187.20
186.00
250.80
322.20
272.50
258.00
283.70
197.00
223.20
203.10
199.80
(541,798)
(146,728)
(954,402)
(57,086)
(13,918)
(481,866)
(4,905,047)
(4,301,951)
(3,805,914)
(5,830,003)
(4,290,683)
(2,185,921)
(575,000)
(750,000)
(1,658,500)
(6,390,041)
(1,829,565)
(320,186)
(175,000)
(181,367)
–
(150,253)
–
–
–
–
(83,333)
(106,866)
(48,385)
–
–
–
–
–
–
–
–
–
86,963 (1)
19,077 (1)
– (1)
963,732 (1)
660,541 (1)
1,553,083 (1)
1,264,396
25,000 (1)
166,667 (1)
80,134
23/03/2013
23/03/2020
28/06/2013
28/06/2020
01/09/2013
01/09/2020
01/04/2014
01/04/2021
30/06/2014
30/06/2021
13/06/2015
13/06/2022
12/06/2016
12/06/2023
18/11/2016
17/11/2023
18/12/2016
17/12/2023
20/05/2017
19/05/2024
6,437,370
05/11/2017
04/11/2024
77,000
834,460
269,196
68,222
19/05/2018
18/05/2025
22/12/2018
22/12/2025
29/06/2019
29/06/2026
28/09/2019
28/09/2026
1,200,000
01/03/2020
01/03/2027
850,254
685,127
300,000
14/12/2020
14/12/2027
10/10/2021
10/10/2028
21/12/2021
21/12/2028
13,800,000
28/12/2021
28/12/2028
158.36
(30,148,263)
(13,534,587)
29,341,222
At 1 January
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Date of grant
23/03/2010
28/06/2010
01/09/2010
01/04/2011
30/06/2011
13/06/2012
12/06/2013
18/11/2013
18/12/2013
20/05/2014
05/11/2014
19/05/2015
22/12/2015
29/06/2016
28/09/2016
01/03/2017
14/12/2017
10/10/2018
21/12/2018 (Grant 1)
28/12/2018 (Grant 2)
Total
617,961
160,646
2,400,000
9,867,539
11,189,000
7,741,000
600,000
1,000,000
1,845,500
12,875,796
1,906,565
1,154,646
444,196
249,589
1,200,000
1,000,507
685,127
300,000
13,800,000
73,024,072
1. All options have vested as of 31 December 2018
1 1 6 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 1 6 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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:
June 2016
June 2017
June 2018
Proportion
to vest
1/3
1/3
1/3
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:
May 2017
May 2018
May 2019
Proportion
to vest
1/3
1/3
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:
November 2017
November 2018
November 2019
November 2020
November 2021
Proportion
to vest
1/5
1/5
1/5
1/5
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:
May 2018
May 2019
May 2020
May 2021
May 2022
Proportion
to vest
1/5
1/5
1/5
1/5
1/5
1 1 7
1 1 7
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. SHARE-BASED PAYMENTS (CONTINUED)
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:
December 2018
December 2019
December 2020
December 2021
December 2022
Proportion
to vest
1/5
1/5
1/5
1/5
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:
June 2019
June 2020
June 2021
June 2022
June 2023
Proportion
to vest
1/5
1/5
1/5
1/5
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:
September 2019
September 2020
September 2021
September 2022
September 2023
Proportion
to vest
1/5
1/5
1/5
1/5
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:
Vesting scale
25%
Between 5% and 25%
5%
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
0%
1 1 8 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 1 8 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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:
Vesting scale
Exceeds the median by 10% or more
Exceeds the median by less than 10%
Ranked at median
Ranked below the median
% of one third of the award that vest
100%
On a straight-line basis between 25% and 100%
25%
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:
Vesting scale
Exceeds 2016 ROI plus 300 basis points
Exceeds 2016 ROI by less than 300 basis points
Equal to or less than the 2016 ROI
Once this condition is satisfied, those options that are eligible to vest will vest as follows:
September 2020
September 2021
September 2022
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
0%
Proportion
to vest
1/3
1/3
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:
December 2020
December 2021
December 2022
Proportion
to vest
1/3
1/3
1/3
October 2018 share option plan
The options awarded in October 2018 are conditional on the ongoing employment of the related employees for a specified period of time
and are also subject to Group performance targets based on Group operating profit. Once performance conditions are satisfied those
options that are eligible to vest will vest as follows:
October 2021
October 2022
October 2023
Proportion
to vest
1/3
1/3
1/3
December 2018 (Grant 1) share option plan
The options awarded in December 2018 are conditional on the ongoing employment of the related employee for a specified period of
time and are also subject to the achievement of a TSR performance condition.
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 award that vest
100%
On a straight-line basis between 25% and 100%
Vesting scale
Exceeds the median by 10% or more
Exceeds the median by less than 10%
Ranked at median
Ranked below the median
Once performance conditions are satisfied those options that are eligible to vest will vest as follows:
December 2021
December 2022
December 2023
25%
0%
Proportion
to vest
1/3
1/3
1/3
1 1 9
1 1 9
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. SHARE-BASED PAYMENTS (CONTINUED)
December 2018 (Grant 2) share option plan
The options awarded in December 2018 are conditional on the ongoing employment of the related employee for a specified period of
time and are also subject to various non-market performance targets. Once performance conditions are satisfied, those options that are
eligible to vest will vest as follows:
December 2021
December 2022
December 2023
Proportion
to vest
1/3
1/3
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:
Share price on grant date
Exercise price
Expected volatility
Option life
Expected dividend
Fair value of option at time of grant
Risk-free interest rate
Share price on grant date
Exercise price
Expected volatility
Option life
Expected dividend
Fair value of option at time of grant
Risk-free interest rate
December
2018
(Grant 2)
199.80p
199.80p
37.66% –
44.35%
December
2018
(Grant 1)
203.10p
203.10p
37.63% –
44.25%
October
2018
223.20p
223.20p
37.15% –
43.32%
December
2017
197.00p
197.00p
33.31% –
35.93%
March
2017
September
2016
283.70p
283.70p
27.42% –
29.87%
258.00p
258.00p
27.45% –
32.35%
3–5 years
3–5 years
3–5 years
3–5 years
3–5 years
3–7 years
2.95%
58.77p –
69.33p
0.87% –
1.01%
2.90%
39.36p –
46.42p
0.73% –
0.88%
June
2016
December
2015
272.50p
272.50p
322.20p
322.20p
2.64%
67.69p –
78.56p
0.70% –
0.91%
May
2015
250.80p
250.80p
27.71% –
34.81%
24.80% –
37.08%
27.23% –
30.12%
2.69%
40.06p –
44.20p
0.54% –
0.75%
1.80%
44.51p –
76.88p
0.23% –
0.56%
November
2014
188.40p
186.00p
24.67% –
33.53%
May
2014
191.00p
187.20p
27.30% –
41.91%
1.80%
40.96p –
67.89p
0.09% –
0.38%
June
2013
158.00p
155.60p
40.31% –
48.98%
3–7 years
3–7 years
3–7 years
3–7 years
3–5 years
3–5 years
1.71%
44.28p –
78.68p
0.14% –
0.39%
1.40%
29.76p –
90.61p
0.14% –
0.21%
1.59%
42.35p –
69.12p
0.81% –
1.53%
2.02%
27.24p –
54.58p
0.90% –
1.81%
2.00%
30.80p –
59.63p
0.99% –
1.47%
2.03%
39.21p –
58.39p
0.67% –
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.
1 2 0 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 2 0 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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
At 1 January
PSP awards granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2018
2017
Number of
awards
Number of
awards
3,321,464
3,292,656
1,278,350
1,095,406
(2,413,376)
(37,099)
(195,188)
(1,029,499)
1,991,250
3,321,464
–
–
The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2018 was
234.00p (2017: 289.66p).
Plan
PSP
PSP
PSP
Plan
CIP: Matching shares
CIP: Matching shares
CIP: Investment shares
CIP: Matching shares
Date of grant
Numbers
granted
Lapsed
Exercised
03/03/2016
1,038,179
01/03/2017
1,095,406
07/03/2018
1,278,350
(485,600)
(512,367)
(597,938)
3,411,935
(1,595,905)
–
–
–
–
At 31 Dec
2018
Release date
552,579 03/03/2021
583,039 01/03/2022
680,412 07/03/2023
1,816,030
At 31 Dec
Date of grant
Numbers
granted
06/03/2013
1,217,176
05/03/2014
04/03/2015
04/03/2015
647,688
207,952
831,808
Lapsed
Exercised
2018 Release date(1)
(506,272)
(409,984)
(710,904)
– 06/03/2018
(100,303)
137,401 05/03/2019
–
(207,952)
– 04/03/2018
(793,989)
–
37,819 04/03/2020
1. Based on the outstanding shares as at 31 December 2018
2,904,624
(1,710,245)
(1,019,159)
175,220
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:
07/03/2018
01/03/2017
03/03/2016
04/03/2015
05/03/2014
06/03/2013
Share price on grant date
Exercise price
Number of simulations
Number of companies
Award life
Expected dividend
Fair value of award at time of grant
PSP
PSP
PSP
CIP
CIP
240.90p
283.70p
300.00p
225.00p
253.30p
Nil
Nil
Nil
Nil
Nil
250,000
250,000
250,000
250,000
250,000
32
5 years
2.37%
32
5 years
1.80%
32
5 years
1.50%
124.92p–
189.26p
155.83p–
236.08p
183.08p–
277.36p
32
3 years
1.78%
75.67p–
114.6p
1.01%
32
3 years
1.66%
83.11p–
214.33p
0.99%–
1.47%
CIP
143.50p
Nil
250,000
32
3 years
2.23%
83.11p–
134.21p
0.35%
Risk-free interest rate
1.21%
0.56%
0.86%
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.
1 2 1
1 2 1
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. SHARE-BASED PAYMENTS (CONTINUED)
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:
% of awards eligible for vesting
25%
50%
75%
100%
Adjusted EPS targets for
the financial years ending
2016
14.3p
15.2p
16.1p
17.0p
2017
16.1p
17.4p
18.8p
20.2p
2018
17.1p
18.9p
20.7p
22.5p
No shares will vest in each respective year unless the minimum adjusted EPS target for that year is achieved.
% of awards eligible for vesting
Below index
Median
Upper quartile or above
1. Over the three-, four- or five-year performance period
IWG TSR % achieved relative to
FTSE All Share Total Return index(1)
0%
25%
100%
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:
% of awards eligible for vesting
25%
100%
Compound annual growth in adjusted
EPS over the performance period
24%
32%
The target is based on compound annual growth from an equivalent “base year” EPS figure for 2014 of 7.4p.
% of awards eligible for vesting
Below index
Median
Upper quartile or above
IWG TSR % achieved relative to
FTSE 350 Index (excluding financial
services and mining companies)
0%
25%
100%
1 2 2 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 2 2 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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:
Vesting scale
25%
Between 5% and 25%
5%
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
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:
Vesting scale
Exceeds the median by 10% or more
Exceeds the median by less than 10%
Ranked at median
Ranked below the median
% of one third of the award that vest
100%
On a straight-line basis between 25% and 100%
25%
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:
Vesting scale
Exceeds 2015 ROI plus 300 basis points
Exceeds 2015 ROI by less than 300 basis points
Equal to or less than the 2015 ROI
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
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:
Vesting scale
25%
Between 5% and 25%
5%
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
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:
Vesting scale
Exceeds the median by 10% or more
Exceeds the median by less than 10%
Ranked at median
Ranked below the median
% of one third of the award that vest
100%
On a straight-line basis between 25% and 100%
25%
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:
Vesting scale
Exceeds 2016 ROI plus 300 basis points
Exceeds 2016 ROI by less than 300 basis points
Equal to or less than the 2016 ROI
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
0%
1 2 3
1 2 3
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. SHARE-BASED PAYMENTS (CONTINUED)
2018 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 2018. Thus, conditional on meeting these performance targets, these shares will vest in March
2023. 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 2017 as follows:
Vesting scale
25%
Between 5% and 25%
5%
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
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:
Vesting scale
Exceeds the median by 10% or more
Exceeds the median by less than 10%
Ranked at median
Ranked below the median
% of one third of the award that vest
100%
On a straight-line basis between 25% and 100%
25%
0%
The ROI condition is based on the ROI improvement over the performance period relative to ROI for the financial year ending 31
December 2017 as follows:
Vesting scale
Exceeds 2017 ROI plus 300 basis points
Exceeds 2017 ROI by less than 300 basis points
Equal to or less than the 2017 ROI
% of one third of the award that vest
100%
On a straight-line basis between 0% and 100%
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 then 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). This award lapsed in 2018.
1 2 4 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 2 4 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
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 then 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 that are eligible will vest in March 2020.
Reconciliation of outstanding share options
At 1 January
DSBP award granted during the year
Outstanding at 31 December
Exercisable at 31 December
2018
2017
Number of
awards
383,664
–
383,664
–
Number of
awards
–
383,664
383,664
–
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:
Share price on grant date
Exercise price
Number of simulations
Number of companies
Award life
Expected dividend
Fair value of award at time of grant
Risk-free interest rate
March 2017
DBSP
283.70p
Nil
–
–
3 years
1.80%
236.04p
0.23%
1 2 5
1 2 5
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
25. RETIREMENT BENEFIT OBLIGATIONS
The Group accounts for the Swiss and Philippines pension plans as defined benefit plans under IAS 19 – Employee Benefits.
The reconciliation of the net defined benefit liability and its components are as follows:
Fair value of plan assets
Present value of obligations
Net funded obligations
2018
£m
9.9
(11.4)
(1.5)
2017
£m
8.5
(10.0)
(1.5)
26. ACQUISITIONS
Current period acquisitions
During the year ended 31 December 2018 the Group made various individually immaterial acquisitions for a total consideration of £1.5m.
£m
Net assets acquired
Intangible assets
Property, plant and equipment
Cash
Other current and non-current assets
Current liabilities
Non-current liabilities
Goodwill arising on acquisition
Total consideration
Less: Contingent consideration
Cash flow on acquisition
Cash paid
Net cash outflow
Provisional
fair value
adjustments
Provisional
fair value
Book value
–
0.6
0.7
1.0
(1.7)
(0.1)
0.5
–
–
–
–
–
–
–
–
0.6
0.7
1.0
(1.7)
(0.1)
0.5
1.0
1.5
0.3
1.2
1.2
1.2
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. £0.3m of the above goodwill is
expected to be deductible for tax purposes.
If the above acquisitions had occurred on 1 January 2018, the revenue and net retained profit arising from these acquisitions would have
been £4.6m and £0.1m respectively. In the year, the equity acquisitions contributed revenue of £1.7m and net retained profit of £0.6m.
There was £0.3m contingent consideration arising on the 2018 acquisitions. Contingent consideration of £1.8m (2017: £2.1m) was also
paid during the current year with respect to milestones achieved on prior year acquisitions.
The acquisition costs associated with these transactions were £0.2m, recorded within administration expenses within the consolidated
income statement.
For a number of the acquisitions in 2018, the fair value of assets acquired has only been provisionally assessed, pending completion
of a fair value assessment which has not yet been completed due to the limited time available between the date of acquisitions and the
year-end 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.
1 2 6 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 2 6 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
Prior period acquisitions
During the year ended 31 December 2017 the Group made various individually immaterial acquisitions for a total consideration of £43.5m.
£m
Net assets acquired
Intangible assets
Property, plant and equipment
Cash
Other current and non-current assets
Current liabilities
Non-current liabilities
Goodwill arising on acquisition
Total consideration
Cash flow on acquisition
Cash paid
Net cash outflow
Provisional
fair value
adjustments
Provisional
fair value
Final
fair value
adjustments
Final
fair value
Book value
–
98.4
5.5
0.4
(6.6)
(60.2)
37.5
1.5
0.6
–
0.4
–
–
2.5
1.5
99.0
5.5
0.8
(6.6)
(60.2)
40.0
3.5
43.5
43.5
43.5
43.5
0.1
8.5
–
–
(0.1)
–
8.5
(8.5)
–
1.6
107.5
5.5
0.8
(6.7)
(60.2)
48.5
(5.0)
43.5
43.5
43.5
43.5
Goodwill arising on acquisitions includes negative goodwill of £6.2m recognised as part of the selling, general and administration
expenses line item in the consolidated income statement. The negative goodwill recognised is primarily due to the fair value uplift on the
acquired properties based on the valuation provided by external valuation experts.
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. £0.4m 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 £19.6m and £3.2m respectively. In the year, the equity acquisitions contributed revenue of £11.6m and net retained profit of £3.3m.
There was £nil contingent consideration arising on the above acquisitions. Contingent consideration of £2.1m was also paid during the
prior year with respect to milestones achieved on previous acquisitions.
The acquisition costs associated with these transactions were £1.0m, 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 2018.
27. CAPITAL COMMITMENTS
Contracts placed for future capital expenditure not provided for in the financial statements
2018
£m
79.9
2017
£m
60.9
These commitments are principally in respect of fit-out obligations on new centres opening in 2019. There are no capital commitments in
respect of joint ventures at 31 December 2018 (2017: nil).
1 2 7
1 2 7
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
28. NON-CANCELLABLE OPERATING LEASE COMMITMENTS
As at the reporting date the Group was committed to making the following payments in respect of operating leases:
Lease obligations falling due:
Within one year
Between one and five years
After five years
2018
2017
Property
£m
Other
£m
Total
£m
Property
£m
Other
£m
Total
£m
1,047.8
3,119.0
2,474.7
6,641.5
0.1
–
–
0.1
1,047.9
3,119.0
2,474.7
6,641.6
914.8
2,630.5
1,511.3
5,056.6
0.5
0.4
–
0.9
915.3
2,630.9
1,511.3
5,057.5
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.
29. 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 £152.7m (2017: £142.7m). There are no material lawsuits pending against the Group.
30. RELATED PARTIES
Parent and subsidiary entities
The consolidated financial statements include the results of the Group and its subsidiaries listed in note 31.
Joint ventures
The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year.
£m
2018
Joint ventures
2017
Joint ventures
Management
fees received
from related
parties
Amounts
owed by
related party
Amounts
owed to
related party
2.8
3.0
12.8
9.0
3.4
2.2
As at 31 December 2018, none of the amounts due to the Group have been provided for as the expected credit losses arising on the
balances are considered immaterial (2017: £nil). 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:
Short-term employee benefits
Retirement benefit obligations
Share-based payments
2018
£m
7.9
0.4
1.0
9.3
2017
£m
6.7
0.5
1.4
8.6
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 £2.1m (2017: £3.9m). 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 2018 the Group acquired goods and services from a company indirectly controlled by a Director
of the Company amounting to £43,288 (2017: £91,120). There was a £53,630 balance outstanding at the year-end (2017: £9,506).
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.
1 2 8 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 2 8 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
31. PRINCIPAL GROUP COMPANIES
The Group’s principal subsidiary undertakings at 31 December 2018, their principal activities and countries of incorporation are set
out below:
Name of undertaking
Trading companies
% of
ordinary
shares
and votes
held
Country of
incorporation
Name of undertaking
Management companies
% of
ordinary
shares
and votes
held
Country of
incorporation
Regus Australia Management Pty Ltd
Regus Belgium SA
Regus do Brasil Ltda
Regus Business Service (Shenzen) Ltd
Regus Management ApS
Regus Management (Finland) Oy
Regus HK Management Ltd
Regus CME Ireland Limited
Regus Business Centres Limited
Regus Business Centres Italia Srl
Regus Japan K.K.
Australia
Belgium
Brazil
China
Denmark
Finland
Hong Kong
Ireland
Israel
Italy
Japan
Regus Management Malaysia Sdn Bhd
Malaysia
Regus Management de Mexico, SA de CV
Mexico
Regus New Zealand Management Ltd
New Zealand
Regus Business Centre Norge AS
IWG Management Sp. z o.o.
Norway
Poland
Regus Management Singapore Pte Ltd
Singapore
Regus Management (Sweden) AB
Sweden
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
RGN Management Limited Partnership
Canada
Pathway IP Sarl
Franchise International Sarl
RBW Global Sarl
Luxembourg
Luxembourg
Luxembourg
Regus Service Centre Philippines B.V.
Philippines
Regus Global Management Centre SA
Switzerland
100
100
100
100
100
100
Regus Group Services Ltd
IW Group Services (UK) Ltd
Regus Management Group LLC
United Kingdom 100
United Kingdom 100
United States
100
Holding and finance companies
Umbrella Group Sarl
IWG Global Investments Sarl
Regus Plc SA
IWG Group Holdings Sarl
Pathway Finance Sarl
Pathway Finance EUR 2 Sarl
Avanta Managed Offices Ltd
United Kingdom 100
Pathway Finance USD 2 Sarl
Basepoint Centres Limited
HQ Global Workplaces LLC
RGN-BSuites Holdings, LLC
RGN National Business Centre LLC
Office Suites Plus Properties LLC
Regus Business Centres LLC
United Kingdom 100
Regus Group Limited
Regus Corporation
United States
United States
United States
United States
United States
100
100
100
100
100
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Switzerland
Switzerland
Switzerland
100
100
100
100
100
100
100
United Kingdom 100
United States
100
1 2 9
1 2 9
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
32. KEY JUDGEMENTAL AND ESTIMATES 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 2018, including the sensitivity to changes in those assumptions, can be
found in note 11.
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, current 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.
1 3 0 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 3 0 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
PARENT COMPANY ACCOUNTS
SUMMARISED EXTRACT OF COMPANY BALANCE SHEET
(ACCOUNTING POLICIES ARE BASED ON THE SWISS CODE OF OBLIGATIONS)
Trade and other receivables
Prepayments
Total current assets
Investments
Total non-current assets
Total assets
Trade and other payables
Accrued expenses
Total short-term liabilities
Long-term interest bearing liabilities
Total long-term liabilities
Total liabilities
Issued share capital
Legal capital reserves
Reserves from capital contributions
Retained earnings
Loss for the year
Treasury shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
Approved by the Board on 6 March 2019
As at
31 Dec 2018
£m
As at
31 Dec 2017
£m
9.4
0.2
9.6
2,295.4
2,295.4
9.8
1.1
10.9
2,295.4
2,295.4
2,305.0
2,306.3
4.3
2.3
6.6
207.7
207.7
1.6
1.4
3.0
106.8
106.8
214.3
109.8
9.2
–
9.2
–
2,185.0
2,238.7
(15.1)
(14.3)
(74.1)
(3.0)
(8.8)
(39.6)
2,090.7
2,196.5
2,305.0
2,306.3
MARK DIXON
CHIEF EXECUTIVE OFFICER
ERIC HAGEMAN
CHIEF FINANCIAL 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 2018, which are
available from the Company’s registered office, Dammstrasse 19, CH-6300, Zug, Switzerland.
1 3 1
1 3 1
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
SEGMENTAL ANALYSIS
SEGMENTAL ANALYSIS – MANAGEMENT BASIS (UNAUDITED)
Mature(1)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
REVPOW (£)
2017 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
2018 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)(5)
Closures(6)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Total
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
REVPAW (£)
Period end workstations(7)
Mature
2017 Expansions
2018 Expansions
Total
Americas
2018
EMEA
2018
Asia Pacific
2018
174,629
75.7%
961.7
207.6
7,278
15,703
55.1%
48.6
(13.0)
9,421
37.4%
19.8
(12.3)
3,625
60.5%
18.4
(8.5)
96,850
77.0%
527.1
128.0
7,072
20,211
62.4%
70.0
3.1
15,264
31.9%
20.8
(8.1)
2,828
61.2%
12.9
(4.0)
92,879
72.8%
368.0
76.2
5,440
9,467
52.0%
25.1
(3.9)
7,989
29.4%
11.5
(7.2)
2,269
54.0%
7.6
(4.3)
203,378
135,153
112,604
72.0%
1,048.5
173.8
5,155
69.4%
67.6%
630.8
119.0
4,667
412.2
60.8
3,661
United
Kingdom
2018
74,106
68.8%
376.5
49.3
7,387
13,721
76.6%
35.8
12.4
6,036
30.0%
13.3
(4.9)
2,346
63.4%
13.4
(1.5)
96,209
67.3%
439.0
55.3
4,563
175,582
14,626
19,015
99,795
19,963
35,424
93,805
9,694
17,565
76,371
15,260
13,383
209,223
155,182
121,064
105,014
Other
2018
Total
2018
–
–
4.5
(0.2)
–
–
–
0.4
0.5
–
–
–
–
–
–
–
–
–
–
4.9
0.3
–
–
–
–
–
438,464
74.2%
2,237.8
460.9
6,880
59,102
62.1%
179.9
(0.9)
38,710
32.4%
65.4
(32.4)
11,068
60.0%
52.3
(18.3)
547,344
69.6%
2,535.4
409.2
4,632
445,553
59,543
85,387
590,483
1 3 2 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 3 2 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
SEGMENTAL ANALYSIS – MANAGEMENT BASIS (UNAUDITED)
Americas
2017
EMEA
2017
Asia Pacific
2017
United
Kingdom
2017
Other
2017
Total
2017
Mature(1)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
REVPOW (£)
2017 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Closures(3)
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
Total
Workstations(4)
Occupancy (%)
Revenue (£m)
Contribution (£m)
REVPAW (£)
Notes:
174,309
74.3%
930.3
162.3
7,183
7,309
27.0%
10.9
(14.1)
7,060
70.6%
43.6
5.0
92,301
76.6%
493.7
105.9
6,983
7,626
38.4%
20.2
(5.5)
5,977
60.3%
26.6
(3.3)
92,587
71.3%
361.1
71.4
5,470
3,694
25.2%
5.2
(5.0)
4,709
67.1%
16.9
(0.5)
188,678
72.3%
984.8
153.2
5,219
105,904
73.1%
540.5
97.1
5,104
100,990
69.4%
383.2
65.9
3,794
69,713
71.6%
390.3
75.2
7,819
6,641
73.1%
14.4
2.6
5,164
68.7%
35.3
5.8
81,518
71.5%
440.0
83.6
5,398
–
–
3.3
(1.2)
–
–
–
0.5
3.0
–
–
–
–
–
–
3.8
1.8
–
428,910
73.7%
2,178.7
413.6
6,892
25,270
42.3%
51.2
(19.0)
22,910
66.8%
122.4
7.0
477,090
71.7%
2,352.3
401.6
4,931
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 2017 comparative data is defined as a centre closed during the period from 1 January 2017 to 31 December 2018
4. Workstation numbers are calculated as the weighted average for the year
5. 2018 expansions includes any costs incurred in 2018 for centres which will open in 2019
6. A closure for the 2018 date is defined as a centre closed during the period from 1 January 2018 to 31 December 2018
7. Workstations available at period end
1 3 3
1 3 3
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
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.
Reference
2015
Aggregation
2016
Expansions
2017
Expansions
2018
Expansions
2019
Expansions Closures
17.6%
0.6%
–
–
Total
9.9%
–
Description
Post-tax cash return on net
investment (unaudited)
Revenue
Centre contribution
Loss on disposal of assets
Underlying centre contribution
Selling, general and administration
expenses(1)
EBIT
Depreciation and amortisation
Amortisation of partner contributions
Amortisation of acquired lease fair
value adjustments
Non-cash items
Taxation(2)
Adjusted net cash profit
Maintenance capital expenditure
Partner contributions
Net maintenance capital expenditure
Post-tax cash return
–
–
Income statement, p85
2,107.7
130.1
179.9
52.3
2,535.4
65.4
(31.4)
(0.9)
(1.0)
(18.3)
409.2
Income statement, p85
454.0
EBIT reconciliation
(analysed below)
Income statement, p85
0.4
454.4
6.8
–
6.8
–
–
–
(0.9)
(31.4)
(1.0)
13.2
(5.1)
13.6
422.8
(179.4)
(20.1)
(28.3)
(20.9)
(0.8)
(4.2)
(253.7)
EBIT reconciliation
(analysed below)
Note 5, p98
Note 5, p98
Note 5, p98
Capital expenditure
(analysed below)
Partner contributions
(analysed below)
275.0
166.0
(48.3)
(2.2)
115.5
(54.9)
336.6
109.3
(22.8)
86.5
249.1
(13.3)
(29.2)
(52.3)
(1.8)
19.6
(6.2)
0.1
13.5
2.7
2.9
2.7
(0.7)
2.0
0.9
31.1
(7.9)
0.1
23.3
5.8
(0.1)
–
–
–
13.6
(4.7)
0.1
9.0
10.5
(32.8)
–
–
–
–
–
–
–
0.4
(1.4)
–
–
–
(9.3)
5.5
(0.4)
(0.1)
5.0
1.9
169.1
235.8
(67.5)
(2.0)
166.3
(33.6)
(2.4)
301.8
–
–
–
112.0
(23.5)
88.5
(0.1)
(32.8)
(1.4)
(2.4)
213.3
Growth capital expenditure
Partner contributions
Net investment (unaudited)
Capital expenditure
(analysed below)
Partner contributions
(analysed below)
1. Including research and development expenses
2. Based on EBIT at the Group’s long-term effective tax rate of 20%
1,695.7
200.3
384.4
381.1
57.8
(278.6)
1,417.1
(58.0)
142.3
(84.8)
299.6
(128.2)
252.9
(4.5)
53.3
–
–
–
2,719.3
(554.1)
2,165.2
1 3 4 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 3 4 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
2018
Movement in capital expenditure (unaudited)
December 2017
2018 Capital expenditure(3)
Properties acquired
Centre closures(4)
December 2018
2015
Aggregation
2016
Expansions
2017
Expansions
2018
Expansions
2019
Expansions
Closures
Total
1,754.5
197.9
8.0
–
(66.8)
3.2
–
(0.8)
343.7
40.5
–
0.2
14.0
361.7
5.6
(0.2)
1,695.7
200.3
384.4
381.1
–
57.1
0.7
–
57.8
–
–
–
–
–
2,310.1
470.5
6.3
(67.6)
2,719.3
3. 2019 expansions relate to costs and investments incurred in 2018 for centres which will open in 2019
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
2018
Movement in partner contributions (unaudited)
December 2017
2018 Partner contributions
Centre closures(5)
December 2018
2015
Aggregation
2016
Expansions
2017
Expansions
2018
Expansions
2019
Expansions
Closures
285.8
2.8
(10.0)
278.6
58.2
–
(0.2)
58.0
74.9
9.9
–
84.8
0.6
127.6
–
128.2
–
4.5
–
4.5
–
–
–
–
Total
419.5
144.8
(10.2)
554.1
5. The partner contributions for an estate are reduced by the partner contributions for centres closed during the year
2018
EBIT reconciliation (unaudited)
EBIT
Loss on disposal of assets
Share of profit in joint ventures
Operating profit
2018
Partner contributions (unaudited)
Opening partner contributions
• Current
• Non-current
Acquired in the period
Received in the period
• Maintenance partner contributions
• Growth partner contributions
Utilised in the period
Exchange differences
Closing partner contributions
• Current
• Non-current
2018
Capital expenditure (unaudited)
Maintenance capital expenditure
Growth capital expenditure
• 2018 Capital expenditure
• Properties acquired
Total capital expenditure
Analysed as
• Purchase of subsidiary undertakings
• Purchase of property, plant and equipment
• Purchase of intangible assets
Reference
Note 5, p98
Income statement, p85
Income statement, p85
Reference
Note 16, p107
Note 17, p107
Note 5, p98
Note 16, p107
Note 17, p107
Reference
CFO review, p32
CFO review, p32
Cash flow, p89
Cash flow, p89
Note 13, p106
Cash flow, p89
Note 12, p105
£m
169.1
(13.6)
(1.4)
154.1
£m
353.0
59.2
293.8
–
168.3
23.5
144.8
(67.5)
14.5
468.3
78.7
389.6
£m
112.0
476.8
470.5
6.3
588.8
2.3
579.6
6.9
1 3 5
1 3 5
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
IFRS 16 PRO FORMA STATEMENTS
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
The purpose of these unaudited pages is to provide a reconciliation from the 2018 reported financial results to the pro forma statements
in accordance with IFRS 16, and thereby, give the reader greater insight into the expected impact of IFRS 16 on the performance of
the Group.
Continuing operations
Notes
Year ended
31 Dec 2018
As reported
£m
Rent &
finance costs
£m
Depreciation
£m
Other
adjustments
£m
Taxation
£m
Revenue
Cost of sales
3
2,535.4
–
(2,126.2)
1,022.5
Gross profit (centre contribution)
Selling, general and administration expenses
Share of loss of equity-accounted investees, net
of tax
20
Operating profit
Finance expense
Finance income
Net finance expense
Profit before tax for the year
Income tax expense
Profit after tax for the year
Earnings per ordinary share (EPS):
Basic (p)
Diluted (p)
5
7
7
8
9
9
1,022.5
–
–
1,022.5
(225.6)
–
(225.6)
796.9
–
796.9
409.2
(253.7)
(1.4)
154.1
(15.9)
0.5
(15.4)
138.7
(33.0)
105.7
11.7
11.6
–
(866.1)
(866.1)
–
–
(866.1)
–
–
–
(866.1)
–
(866.1)
(7.0)
32.8
25.8
–
–
25.8
–
0.6
0.6
26.4
–
26.4
–
–
–
–
–
–
–
–
–
–
0.7
0.7
Year ended
31 Dec 2018
per IFRS 16
£m
2,528.4
(1,937.0)
591.4
(253.7)
(1.4)
336.3
(241.5)
1.1
(240.4)
95.9
(32.3)
63.6
7.0
7.0
Pro forma adjustments recognised
The performance of the Group is impacted by the following significant adjustments in adopting IFRS 16. The recognition of these balances
will not impact the overall cash flows of the Group or the cash generation per share.
1. Right-of-use asset & related lease liability
These adjustments reflect the right-of-use asset recognised on transition, together with the related lease liability. The initial lease
liability is equal to the present value of the lease payments during the lease term that have not yet been paid. The cost of the right-of-
use asset comprises the amount of the initial measurement of the lease liability, plus any additional direct costs associated with setting
up the lease. Rent prepayments at the date of transition have been offset against the value of the liability recognised.
2. Rent & finance costs
Conventional rent charges recognised in the profit or loss under IAS 17 are de-recognised on adoption of IFRS 16. The payments
associated with these charges instead form part of the lease payments used in calculating the right-of-use asset and related lease
liability noted above. The lease liability is measured in subsequent periods using the effective interest rate method, based on the
applicable interest rate determined at the date of transition. The related finance costs arising on subsequent measurement are
recognised directly through profit or loss.
3. Depreciation & lease payments
Depreciation on the right-of-use asset recognised is depreciated over the life of the lease on a straight-line basis, adjusted for any
period between the lease commencement date and the date the related centre opens, reflecting the lease related costs directly incurred
in preparing the business centre for trading. Lease payments reduce the lease liability recognised in the balance sheet.
4. Other adjustments
On transition, the remaining net book value of rent costs previously capitalised, as costs directly incurred in preparing the business
centre for trading (i.e. as part of property, plant and equipment), are de-recognised and eliminated directly against retrained earnings.
Parking related costs previously expensed under IAS 17, but explicitly detailed within lease agreements, are de-recognised from profit
or loss and included as part of the right-of-use asset and related lease liability recognised on transition.
IWG acts as a lessor in a handful of instances. On transition, the difference between the right-of-use asset costs arising on the head-
lease and the related finance lease receivable on the sub-lease is recognised directly in retained earnings. The income statement is only
impacted by the finance expenses from the head-lease offset by the finance income from the sub-lease.
5. Taxation
The underlying tax charge is not impacted by IFRS 16 over the life of the leases but there is expected to be an upward impact on the
expected tax rate (ETR) in the short term. On transition however, the adoption of IFRS 16 impacts the profitability of various countries
across the Group, resulting in a decrease in the deferred tax asset recognised in respect of those countries. As this impact arises on the
adoption of IFRS 16, the corresponding tax adjustment is recognised directly in retained earnings.
1 3 6 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 3 6 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
CONSOLIDATED BALANCE SHEET (UNAUDITED)
Right-of-use
asset &
related
lease
liability
£m
As at
31 Dec 2018
£m
Notes
Rent &
finance
costs
£m
Depreciation
& lease
payments
£m
Other
adjustments
£m
Taxation
£m
679.2
42.5
–
–
1,751.2
6,530.8
30.6
0.3
86.0
12.2
–
–
–
–
2,602.0
6,530.8
–
–
–
–
–
–
–
–
–
–
–
–
(892.0)
(135.9)
–
–
–
–
–
–
–
–
–
–
–
(4.2)
–
–
–
(892.0)
(135.9)
(4.2)
8,100.7
Trade and other payables (incl. customer deposits)
16
1,058.9
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Non-current derivative financial assets
Other long-term receivables
Investments in joint ventures
Total non-current assets
Current assets
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
11
12
13
8
23
14
20
15
8
22
8
18
19
17
18
8
19
20
25
21
21
Deferred income
Corporation tax payable
Bank and other loans
Provisions
Total current liabilities
Non-current liabilities
Other long-term payables
Bank and other loans
Deferred tax liability
Provisions
Provision for deficit in joint ventures
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Total equity
Issued share capital
Treasury shares
Foreign currency translation reserve
Hedging reserve
Other reserves
Retained earnings
Reported balance / profit for the year
Directly in reserves – on adoption of IFRS 16
Total equity
Total equity and liabilities
–
–
–
–
5.5
–
–
5.5
(892.0)
(130.4)
–
0.7
–
0.7
(3.5)
3,421.2
6,399.4
(131.4)
(0.8)
–
–
(131.4)
–
–
–
905.8
–
–
–
(0.8)
(0.8)
(163.2)
–
–
–
–
1,429.5
905.8
(163.2)
717.5
32.7
69.0
819.2
320.0
31.0
9.9
9.7
704.2
519.9
–
9.4
5.5
1.5
–
(305.9)
6,002.3
231.2
(1,000.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.8
–
12.8
–
–
–
–
–
–
–
1,240.5
2,670.0
6,002.3
6,908.1
9.2
(74.1)
72.4
0.3
25.8
717.6
717.6
–
751.2
–
–
–
–
–
(508.7)
–
(508.7)
(508.7)
3,421.2
6,399.4
(74.7)
(1,000.9)
(237.9)
(1,000.9)
12.8
–
–
–
–
(5.6)
(25.9)
–
–
242.7
796.9
–
–
134.8
(866.1)
(554.2)
1,000.9
237.1
(0.8)
108.9
(892.0)
–
–
–
–
–
(143.2)
26.4
(169.6)
(143.2)
(130.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.5)
0.7
(4.2)
(3.5)
(3.5)
Year
ended
31 Dec
2018 per
IFRS 16
£m
679.2
42.5
7,254.1
26.4
0.3
86.0
12.2
590.8
33.4
69.0
693.2
8,793.9
895.7
320.0
31.0
928.5
9.7
2,184.9
398.3
5,752.5
–
9.4
5.5
1.5
6,167.2
8,352.1
9.2
(74.1)
40.9
0.3
25.8
439.7
675.5
(235.8)
441.8
8,793.9
1 3 7
1 3 7
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
FIVE-YEAR SUMMARY
Income statement (full year ended)
Revenue
Cost of sales
Gross profit (centre contribution)
Administration expenses
Share of post-tax (loss)/profit of joint ventures
Operating profit
Finance expense
Finance income
Profit before tax for the year
Income tax expense
Profit after tax for the year
Earnings per ordinary share (EPS):
Basic (p)
Diluted (p)
31 Dec 2018
£m
31 Dec 2017
£m
31 Dec 2016
£m
31 Dec 2015
£m
31 Dec 2014
£m
2,535.4
(2,126.2)
409.2
(253.7)
(1.4)
154.1
(15.9)
0.5
138.7
(33.0)
105.7
2,352.3
(1,950.7)
2,233.4
1,927.0
1,676.1
(1,784.6)
(1,498.6)
(1,293.0)
401.6
(237.6)
(0.8)
163.2
(14.1)
0.3
149.4
(35.4)
114.0
448.8
(262.8)
(0.8)
185.2
(11.6)
0.1
173.7
(34.9)
138.8
428.4
(268.6)
0.3
160.1
(15.0)
0.6
145.7
(25.8)
119.9
383.1
(279.6)
0.8
104.3
(17.3)
0.1
87.1
(17.2)
69.9
11.7p
11.6p
12.4p
12.3p
14.9p
14.7p
12.8p
12.6p
7.4p
7.2p
Weighted average number of shares outstanding (‘000s)
907,077
915,676
929,830
933,458
944,082
Balance sheet data (as at)
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Cash and cash equivalents
Total assets
Current liabilities
Non-current liabilities
Equity
Total equity and liabilities
721.7
1,751.2
30.6
848.7
69.0
3,421.2
1,429.5
1,240.5
751.2
3,421.2
712.1
1,367.2
23.0
702.7
55.0
2,860.0
1,224.7
907.6
727.7
738.1
1,194.4
29.3
649.2
50.1
2,661.1
1,183.1
736.0
742.0
666.0
917.0
36.4
644.3
63.9
2,327.6
1,085.7
658.2
583.7
549.9
718.8
40.0
565.2
72.8
1,946.7
891.9
517.4
537.4
2,860.0
2,661.1
2,327.6
1,946.7
1 3 8 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 3 8 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
GLOSSARY
The Group reports certain alternative performance measures
(‘APMs’) that are not required under International Financial
Reporting Standards (‘IFRS’) which represent the generally accepted
accounting principles (‘GAAP’) under which the Group reports. The
Group believes that the presentation of these APMs provides useful
supplemental information which, when viewed in conjunction with
our IFRS financial information, provides investors with a more
meaningful understanding of the underlying financial and
operating performance of the Group and its divisions.
These APMs are primarily used for the following purposes:
• to evaluate the historical and planned underlying results of our
operations;
• to set director and management remuneration; and
• to discuss and explain the Group’s performance with the
investment analyst community.
None of the APMs should be considered as an alternative to
financial measures derived in accordance with GAAP. The APMs can
have limitations as analytical tools and should not be considered in
isolation or as a substitute for an analysis of our results as reported
under GAAP. These performance measures may not be calculated
uniformly by all companies and therefore may not be directly
comparable with similarly titled measures and disclosures of other
companies.
Available workstations
The total number of workstations in the Group (also termed
Inventory). During the year, this is expressed as a weighted
average. At period ends the absolute number is used
Centre contribution
Gross profit comprising centre revenue less direct operating
expenses but before administrative expenses
Closures
A closure for the current year is defined as a centre closed during
the period from 1 January to December of the current year
A closure for the prior year comparative is defined as a centre
closed from 1 January of the prior year to December of the
current year
EBIT
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation and amortisation
EPS
Earnings per share
Expansions
A general term which includes new business centres established
by IWG and acquired centres in the year
Like-for-like
The financial performance from centres owned and operated for
a full 12-month period prior to the start of the financial year, which
therefore have a full-year comparative
Mature business
Operations owned for a full 12-month period prior to the start of
the financial year and operated throughout the current financial
year, which therefore have a full-year comparative
Occupancy
Occupied workstations divided by available workstations
expressed as a percentage
Occupied workstations
Workstations which are in use by clients. This is expressed
as a weighted average for the year
Operating profit before growth
Reported operating profit adjusted for the gross profit impact
arising from centres opening in the current year and centres to be
opened in the subsequent year
Post-tax cash return
EBITDA achieved, less the amortisation of any partner capital
contribution, less tax based on the EBIT and after deducting
maintenance capital expenditure over growth capital expenditure
less partner contributions
REVPAW
Total revenue per available workstation (revenue/available
workstations)
REVPOW
Total revenue per occupied workstation
ROI
Return on investment
TSR
Total shareholder return
WIPOW
Workstation income per occupied workstation
1 3 9
1 3 9
GOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTS
SHAREHOLDER INFORMATION
CORPORATE DIRECTORY
Secretary and Registered Office
Tim Regan, Company Secretary
IWG plc
Registered Office:
22 Grenville Street
St Helier
Jersey JE4 8PX
Registered Head Office:
Dammstrasse 19
CH-6300
Zug
Switzerland
Registered Number
Jersey
122154
Registrars
Link Market Services (Jersey) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Auditor
KPMG
1 Stokes Place
St. Stephen’s Green
Dublin 2
DO2 DE03
Ireland
Legal advisors to the Company as to English law
Slaughter and May
One Bunhill Row
London EC1Y 8YY
Legal advisors to the Company as to Jersey law
Mourant Ozannes
22 Grenville Street
St Helier
Jersey JE4 8PX
Legal advisors to the Company as to Swiss law
Bär & Karrer Ltd
Brandschenkestrasse 90
CH-8027
Zurich
Switzerland
Corporate stockbrokers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Financial PR advisors
Brunswick Group LLP
16 Lincoln’s Inn Fields
London WC2A 3ED
1 4 0 I W G P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 8
1 4 0 I W G p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 8
The Forest Stewardship Council® (FSC) is an international
network which promotes responsible management of the world’s
forests. Forest certification is combined with a system of product
labelling that allows consumers to readily identify timber-based
products from certified forests.
Designed and produced by Black Sun Plc | www.blacksunplc.com
Printed in England by the Pureprint Group
Join us at IWGplc.com