The future
of work
ANNUAL REPORT AND ACCOUNTS 2020
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2
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2020 HIGHLIGHTS
Revenue development (£m)
Adjusted EBITDA development (£m)
Net growth capital investment (£m)
£2,480.2m
£133.8m
£250.9 m
2020
2019
2018
2017
2,480.2
2020
133.8
2020
250.9
2,648.9
2019
428.3
2019
2,398.2
2,237.8
2018
2017
389.9
376.2
2018
2017
389.0
332.0
272.5
Number of locations
Cash to shareholders (£m)
Total shareholder return(1)
3,313
2020
2019
2018
2017
£43.7m
3,313
2020
43.7
3,388
2019
3,306
3,125
2018
2017
(0.5)%
Value (£) (rebased)
140
107.7
93.9
99.6
120
100
80
0
(0.5)%
(11.6)%
Jan 20 Mar 20 May 20
Jul 20
Sept 20 Nov 20
IWG plc
FTSE 350 Index
(excl. investment trusts)
1. Source: FactSet, Value of £100 invested in IWG plc
compared with £100 invested in the FTSE 350 (excl.
Investment Trusts) Index.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Board of Directors
Corporate governance
Nomination Committee report
Audit Committee report
Directors’ Remuneration report
Directors’ report
Directors’ statements
66
68
76
79
84
97
99
Independent auditor’s report to the
members of IWG plc
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
Parent company accounts
IFRS 16 pro forma statements
Segmental analysis
Post-tax cash return on
net investment
Five-year summary
Glossary
Shareholder information
100
105
106
107
108
109
110
153
154
158
160
162
163
164
Introduction
The future of work
Our purpose
At a glance
How we work
Our brands
Chairman’s statement
Chief Executive Officer’s review
Our response to COVID-19
Market review
Our business model
Our stakeholders
Franchisees and property owners
Strategic objectives and key
performance indicators
Chief Financial Officer’s review
Risk management
and principal risks
Introduction to ESG
Environment
Social
Corporate governance
Corporate social responsibility
Visit our website iwgplc.com
1
2
8
10
12
14
22
24
28
30
32
34
36
38
40
48
56
57
60
62
63
A glossary is included on page 163 which defines various alternative measures used to provide useful and relevant information.
† The comparative information has been restated to reflect the impact of discontinued operations.
¨ Results presented on a pre-IFRS 16 basis (as defined in the glossary on page 163).
Welcome to the
new world of work
The pandemic of 2020 has dramatically accelerated the shift
to a new way of working that’s been underway since the dawn
of the digital era.
Increasingly, the workplace is anywhere workers and
businesses want it to be: at home, in a local office, or at a
corporate HQ. This is hybrid, ‘hub-and-spoke’ working in
action – and it’s fundamentally and permanently changing the
way companies work and how people want to work for them.
At IWG, we are both the leading enabler and beneficiary of this
trend, which is driving productivity, saving companies money
and improving the lives of workers everywhere. This report
tells the story of how we’re central to the new world of work.
iwgplc.com
1
STRATEGIC REPORT THE FUTURE OF WORK
The new
world of work
If you can give a worker
two hours of their time
back every day, that’s
worth more than money.”
MARK DIXON,
CEO, IWG PLC.
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IWG plc Annual Report and Accounts 2020
Hybrid working – when employees split their time between home, a local office and a corporate
HQ – is increasingly what employees are requesting. At IWG, we are doing more than anybody
else to bring people across the world the opportunity to work in this balanced way.
By 2022, close to 1.9 billion people
worldwide will be working flexibly(1). And
by 2030, some 30% of global office space
will be flexible, up from just 2% today(2).
It’s not hard to find the reasons for this
shift. Even without the immense impact
of COVID-19, people want it because:
– It’s better for businesses: lower
property costs reduce exposure to
financial risk and release capital to
invest in generating shareholder value.
They also empower companies to
invest in their people and hire better,
more diverse teams attracted by the
opportunity to work flexibly, close
to home.
– It’s better for employees: not having to
travel far for work releases time, energy
and money for workers, improving
work-life balance to build loyalty and
reduce stress. Research shows that the
shift to remote working has boosted
productivity for individuals and
corporations(3).
– It’s better for communities and the
environment: reduced commuting and
increased employment opportunities
closer to where people live are
improving local economies and cutting
carbon emissions across the world.
By 2030, flexible working will support the
creation of 30 million new jobs across the
world’s leading economies(4). The great
majority of these will involve hybrid
working. Partially from home, supported
by ever-improving enabling technologies.
Partially from local offices, for that
all-important human interaction that
inspires innovation and creativity. And
occasionally from HQ, for corporate
identity, learning and cohesion. Nobody
worldwide is doing more to enable this
way of working than IWG – providing
services to support home-workers and
expanding our network, mostly by
opening franchised locations, with the
vision of providing a flexible workspace
in every community across the globe.
By 2022, close to
1.9 billion
people worldwide will
be working flexibly(1)
52%
of U.S. workers would
prefer a hybrid work
model(6)
By 2030, some
30%
of global office space
will be flexible(2)
More than
80%
of companies are
accelerating automation
in response to
COVID-19(5)
Companies expect
approximately
40%
of employees to utilise a
remote working model
in the future(7)
65%
said that they anticipate
increasing their
investments in digital
transformation(8)
Sources:
1. IWG, The Future of Work, 2019
2. JLL, Flexible Space, Jan 2019
3. Airtasker, The Benefits of Working From Home, 31 March 2020
4. Development Economics (Workplace Survey 2019)
5. Bain & Company, The “New Normal” Is a Myth. The Future Won’t Be Normal at All, 5 June 2020
6. Gensler, U.S Workplace Survey Summer / Fall 2020, Executive Summary: The Hybrid Future of Work
7. BCG, Remote Work Works – Where Do We Go from Here?, 30 June 2020
8. BCG, The Digital Path to Business Resilience, 6 July 2020
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STRATEGIC REPORT THE FUTURE OF WORK CONTINUED
A future with
less commuting
2.5%
IF 52% OF U.S. EMPLOYEES WORKED JUST
1 DAY FROM HOME, ANNUAL CO2
REDUCTIONS COULD BE 20MT ANNUALLY,
A 2.5% DECREASE AND THE EQUIVALENT
OF TAKING 4.3 MILLION CARS OFF THE
ROAD ANNUALLY(1).
Nobody likes commuting. Many studies, including
from the UK’s Office for National Statistics and
Princeton University in the US, have shown that
it’s among the least enjoyable activities for
workers(2). IWG research shows that just 8% of UK
workers are prepared to travel for more than an
hour to get to work, while 77% say a conveniently
located office is a must-have for their next job.
And 42% of employees in the US would take
a salary cut in exchange for more flexible job
options(3). These are some of the reasons why
US companies that offer flexible working report
they’ve improved their employee retention
rates by 46%(4).
Reducing the need for commuting is also the
greatest contribution companies can make to
meeting their environmental targets(5). At IWG,
we’re doing everything we can to help cut the
commute and boost productivity. As well as
providing local centres, we’ve recently launched
our new ‘HomeToWork ’ network, which delivers
everything anyone needs to stay connected, to
be productive and enjoy working from home.
And, where people still need to go to the office,
we’re providing extensive bike-parking facilities
in many centres – from Spaces Williamsburg to
our new building in Oslo.
Sources:
1. Oxford Martin School/University of Oxford, New report shows
that COVID-19 has accelerated the shift to remote working,
22 June 2020
2. Regional Science and Urban Economics, The relationship
between well-being and commuting revisited: Does the choice
of methodology matter?, November 2014
3. Cision PR Newswire, Survey of Working Adults Shows U.S.
Employees Willing to Take Pay Cut for Workplace Flexibility,
1 September 2011
4. Radware, Survey: C-Suite Executives Expect Changes Made in
Response To Covid-19 to Become Permanent, 15 September 2020
5. Forbes, The Future Of Work: The Hybrid Workforce,
11 November 2020
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IWG plc Annual Report and Accounts 2020
72%
WANT A HYBRID OFFICE MOVING FORWARD(1).
The benefits of a distributed workforce extend far
beyond protecting employees against COVID-19.
Greater productivity, improved wellness, lower
workforce turnover, better access to talent,
increased diversity and reduced expenditure are
all widely reported by companies that have
extended hybrid and flexible working in response
to the pandemic.
Technology is a powerful enabler of successful
hybrid working. For example, 45% of employees
have reported attending more meetings during
the pandemic than when in the office(2).
However, remote communication is not always
beneficial. A full week of virtual meetings leaves
38% of employees feeling exhausted(3), and the
‘always-on’ culture means some people are
working more than ever: 86% feel the need to
prove they are working hard, and people working
from home are doing an extra 28 hours in
monthly overtime(4).
It’s therefore important for companies to get
the balance right for their people. Companies like
Twitter and Facebook are allowing employees
to work where they want(5) and the hybrid model,
championed across the world by IWG, delivers
the best of both worlds by giving employees the
right balance between working remotely and
face-to-face as part of a team.
Sources:
1. BBC Worklife, Coronavirus: How the world of work may
change forever
2. Twingate, Cybersecurity in the Age of Coronavirus, 15 June 2020
3. Human Resource Executive, HRE’s number of the day:
virtual meeting overload, 8 June 2020
4. City A.M., Remote Working is Causing Employees to Feel
Overworked, 5 May 2020
5. The Washington Post, Americans might never come back to
the office, and Twitter is leading the charge, 1 October 2020
I
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A future
with
distributed
workforces
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THE FUTURE OF WORK CONTINUED
77%
SAY THAT A MORE CONVENIENTLY
LOCATED OFFICE IS A MUST-HAVE FOR
THEIR NEXT JOB MOVE. ALMOST HALF (46%)
SAY THEY WOULD QUIT THEIR JOB IF THEY
WERE ASKED TO RETURN TO THE OFFICE
FIVE DAYS A WEEK(1).
Ensuring employees’ mental health and wellbeing
is a key business responsibility. It is now clear to
see the power of the hybrid model in eradicating
the impacts of both the daily commute and
working full-time at home: isolation, boredom
and distraction. Companies that operate the
hybrid model are instead seeing improved
productivity, engagement and loyalty. Employee
mental health is flourishing too, with 80%
of remote workers saying they feel healthier,
less tired, more human or more connected
to their families(2).
Sources:
1. Opinium Research, August 2020
2. BusinessMatters, Majority of UK employees want to work remotely
at least once a week, 16 July 2020
A future
with a
balanced
lifestyle
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IWG plc Annual Report and Accounts 2020
A future
for greater
productivity
37%
OF COMPANIES THAT HAD MORE REMOTE
WORKERS BEFORE COVID-19 ARE NOW
SEEING INCREASED EMPLOYEE
PRODUCTIVITY(1).
According to one survey, a major concern for
managers of remote teams was that they would
be less productive than when based in the
office(2). They needn’t have worried. Research
consistently shows that working flexibly can
actually make people more productive.
Companies have also reported increased
productivity – speaking at the 2020 World
Economic Forum, the HR leaders of both Baker
McKenzie and Deutsche Bank confirmed this
was the case. The decisions of global businesses
like MasterCard and Barclays, Facebook
and Google, WPP and Twitter to extend
flexible working is testimony to their
heightened productivity.
But empowering teams to work smarter and
produce more is dependent on good leadership.
Regular communication, providing the right
resources, accessories and support, and the
opportunity to meet regularly with colleagues in
a safe environment, are all essential for improved
productivity. IWG not only provides the right
office accommodation – our advanced
efficiency solutions also enable effective people
management and communication, securely and
cost-effectively.
Sources:
1. Business Facilities, Even After COVID-19, Execs Expect Remote
Work Trend To Continue, 3 June 2020
2. World Economic Forum, 6 charts that show what employers
and employees really think about remote working, 3 June 2020
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STRATEGIC REPORT OUR PURPOSE
Our purpose underpins
everything we do
Everyone deserves to work productively
while leading better-balanced, greener
and more rewarding lives. We’re making
it happen.
The world of work has never changed faster than in 2020.
Already driven by powerful megatrends such as growing
environmental awareness, societal pressures and
technological advancement, change to the way we work was
radically accelerated by the COVID-19 pandemic.
As a result, the shift towards hybrid working gained traction
among greatly increased numbers of businesses across the
planet. Only IWG has the global coverage and service
portfolio to respond to this level of demand. And, with
our unique franchise model, we alone have the capability
to grow our offering in the suburbs, towns and even rural
communities where people wish to live and work.
OUR PURPOSE
OUR BUSINESS
MODEL
OUR STRATEGY
OUR PEOPLE
AND CULTURE
GOVERNANCE
AND RISK
MANAGEMENT
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IWG plc Annual Report and Accounts 2020
OUR VALUE CREATION FRAMEWORK
The unique way in which we are structured, our highly efficient platform,
our global reach, brands, service portfolio, technologies and outstanding people
enable us to meet the needs of all stakeholders: customers, partners, employees,
communities and shareholders.
WE HELP MILLIONS OF PEOPLE TO BE MORE PRODUCTIVE EVERY DAY,
SUPPORTING THEM TO LEAD MORE BALANCED AND REWARDING LIVES.
See pages 12-13
For more than three decades, we have successfully developed and refined our
business model to deliver excellent customer value and strong financial returns.
Today, with our unmatched scale, multi-brand approach and highly efficient platform
that delivers everything our partners and customers need, we are uniquely placed to
meet the accelerating global demand for hybrid working solutions.
See pages 32-33
Industry-
leading
profitable
growth
Best-in-class
cost leadership
Global
multi-brand
network
Strong cash
generation,
enabling
investment
Attractive
shareholder
returns
Our five strategic priorities enable sustainable
growth to achieve our purpose.
See pages 38-39
We recognise the critical importance of the value our diverse and passionate global
workforce brings to our business. Our people are at the heart of our culture, which
is based on our pioneering spirit, mutual empowerment, shared leadership and
unified global network that’s united by trust in one another.
See pages 60-61
Our operating model is underpinned and supported by strong and robust governance
and a rigorous risk management model that ensures our business is always managed
prudently, with all risks understood and appropriately assessed.
See pages 48-55, 66-96
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STRATEGIC REPORT AT A GLANCE
IWG: delivering the
future of work today
DRIVING CONTINUOUS IMPROVEMENT
IWG has been helping people have a great day at work
for more than three decades. Every year, we grow the
reach and quality of our network, strengthening our
position as the leading global leader in flexible and
hybrid working. Today, we continue to be the sector’s
pioneer, growing outer-city locations for better
work-life balance, stronger communities, reduced
pollution and less inner-city congestion.
Read about our progress in 2020 on pages 38-39
DELIVERING BUSINESS AGILITY
We are shaping the future of work. With our global
network of approximately 3,300 flexible work centres,
fuelled for growth by our exciting franchise model, we
give companies and their people the freedom to work
where, when and how they want. For companies, this
means reduced financial risk and a heightened ability
to generate value. For employees, this means receiving
the benefits of better mental-health and increased
productivity achieved through hybrid working.
Find out more about what we do on pages 12-13
END-TO-END SOLUTIONS
Our global network, highly trained and professional
teams, powerful IT and communication platforms,
unique line-up of brands and constant innovation
enable us to drive efficiency, creativity and productivity
across the planet. By bringing the ‘hub and spoke’
property model within the reach of businesses of every
size, we are delivering the preferred way of working for
the digital age.
Read more about our business model on pages 32-33
HYBRID SOLUTIONS FOR PEOPLE
AND CORPORATES
By enabling people to work away from city centres,
closer to their homes, families and friends, we are
potentially improving work-life balance for millions,
enhancing employee engagement, loyalty and job
satisfaction across the planet. By enabling companies
to free their capital from stagnating in bricks and
mortar, we are empowering them to invest more
in their people and sustainable growth.
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IWG plc Annual Report and Accounts 2020
Our Strengths
3,313
locations in 120 countries worldwide
141
12,000+
new openings in 2020, mainly
in suburban and non-city-based
locations
employees, supporting customers:
at home, in local offices and
corporate HQs
62.9m
sq ft of office,
coworking and meeting space
100+
centres upgraded to best-in-class
standards. 150 older, less efficient
centres closed
7m
120
users of IWG network and
associated services
countries operated in,
across 1,131 towns and cities
SUPPORTED BY A DIVERSE PORTFOLIO OF BRANDS
See pages 14-21 for more information on all of our brands
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STRATEGIC REPORT HOW WE WORK
A platform for
the future world
of work
Right across the world, we offer businesses of every
size and shape the flexible office-space agreements,
unique brand line-up, matchless range of services,
advanced technology, collaborative opportunities
and global footprint they need to run their businesses
precisely as they wish.
WE HAVE A RANGE OF SOLUTIONS TO
MATCH EVERYBODY’S WORK STYLE
With options ranging from an hour’s coworking to supporting team
members at home or providing multi-year service agreements on
office space, we empower everybody to work in exactly the way that
suits them best. With a flexible range of solutions from virtual office
services to meeting spaces and networking opportunities everywhere,
we release organisations from the property leasing straitjacket,
enabling them to flex up or down fast, easily and decisively. With
a range of solutions - including Rovva, our fast-growing business-
support platform that puts everything businesses need in one place
– we enable people to work when, where and how they want.
FOR INDIVIDUALS OR TEAMS
It makes no difference if a customer is a
freelancer or a global corporation – we have
tailored solutions that meet their individual needs.
From workplaces configured to their precise
productivity and safety requirements, to brands
that cover every style and image, we give
customers the freedom to choose the option
that’s best for their business. In short, with IWG,
every customer can focus 100% on their business
priorities, not real-estate issues. Whatever
bespoke solution they commission, every
customer can join our worldwide community for
collaboration and creativity, whether they’re in the
office, on the move or working from home.
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IWG plc Annual Report and Accounts 2020
WITH INFRASTRUCTURE TO
SUPPORT PRODUCTIVITY
IWG wants every customer to be able to focus on what
really matters to their business. That’s why all our
spaces are designed for productivity, so they come
with a full range of support services included as
standard, from industry-leading technology and
high-speed internet connections to professional
reception, kitchen and cleaning services. Customers
choose the precise level of service they require,
ensuring they only ever have to pay for what they
actually use. We increasingly provide a full range of
services to people working from home, supporting
productivity, delivering full connectivity and enabling
vital collaboration.
THE BEST LOCATIONS TO SUPPORT
EVERYONE’S NEEDS
With over 3,300 centres across the world, including ever-
increasing rural and suburban locations away from city centres,
we’re enabling fast-growing numbers of people to work closer
to home. Furthermore, with our increasing focus on enabling
home-working, we’re supporting literally millions of workplaces
across the planet. This is doing far more than just driving
productivity for an increasingly decentralised workforce – it’s
also massively reducing the environmental impact of the daily
commute and supporting better flexibility and mental health for
workers everywhere.
iwgplc.com
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STRATEGIC REPORT OUR BRANDS
Creating value
through our brands
At IWG, we believe that business success is underpinned by the effectiveness and happiness
of people. So, we’ve made it our mission to help millions of people have a great day at work
– every day. Here, we describe the brands that help to make this possible.
IWG provides a world-leading commercial real estate
platform, drawing on our 30-year track record of
delivering the best real estate solutions for businesses
worldwide. IWG’s workspace options reduce the risk
for our customers, with zero balance sheet impact and
a great solution for people as they are designed with
productivity in mind. They are simple to use, with a full
suite of business support services that enable people
to focus on their core business and enjoy a great
day at work.
IWG covers a wider breadth of sectors and locations
than any competitor, offering unparalleled choice
to customers through our unique portfolio of global
operating brands, including Regus, Spaces, HQ, and
Signature. Our diverse operational portfolio provides
businesses with a variation of design, fit-out, location,
building and customer base, enabling them to choose
a style which meets their unique needs. For individuals,
IWG offers the ability to work in practically every
country, town, city and transport hub in the world.
Enterprise clients can opt for a presence wherever they
need to be, choosing an operating brand that closely
matches the needs of their organisation and the people
working within it.
19
BRANDS
3,313
LOCATIONS
7m
USERS
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IWG plc Annual Report and Accounts 2020
WORK YOUR WAY
Regus was founded in 1989 and is the world’s
largest provider of flexible workspace solutions.
Regus helps businesses find and create the right
workplace for their people, offering choice,
flexibility, community, custom workspaces
and consistently professional locations all
over the world.
iwgplc.com
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STRATEGIC REPORT OUR BRANDS CONTINUED
A UNIQUE ENTREPRENEURIAL SPIRIT
Spaces was founded in 2006 in Amsterdam.
It creates an environment where people have
freedom to do their jobs however they want
to do them. Each Spaces is designed to offer
a professional and inspirational working
environment full of timeless design classics,
inspiring art and accessories combined with a
strong community programme of partnerships,
professional events and hospitality services.
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IWG plc Annual Report and Accounts 2020
WHERE REAL WORK GETS DONE
HQ provides efficient, functional space,
offering practical places with all the essentials
businesses need, set up and ready-to-go. HQ
appeals to businesses of all shapes and sizes,
from large corporates to individual freelancers
– everyone is welcome.
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STRATEGIC REPORT OUR BRANDS CONTINUED
YOUR KEY TO THE WORLD’S
ULTIMATE BUSINESS LOCATIONS
Signature represents an exclusive selection
of landmark buildings in the most sought-after
locations in the world. Signature provides a
premium working environment, with custom
designs reflecting the quality and nature of the
building. It provides businesses with ultimate
prestige, offering an exclusive address and place
to work that truly enhances their reputation.
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IWG plc Annual Report and Accounts 2020
OUR DOMESTIC OFFICE AND COWORKING BRANDS
In addition to our global brands, we also operate domestic office and coworking brands,
providing a unique service in key markets around the world.
Basepoint Business Centres comprises
a network of locations across England
and Wales, providing multifunctional
workspace to start-ups and SMEs. In
addition to office space, virtual offices
and meeting rooms, Basepoint offers
practical business units which are ideally
suited as studio or workshop space.
Stop & Work is a flexible working brand
operating in France. Throughout its
locations, it provides a drop-in service
and professional environment for
telecommuters to use open-plan or
private workspaces and meeting rooms.
Customers can access the locations
by the hour, day or longer as required.
THE OFFICE OPERATORS
The Office Operators is based in the
Netherlands and Belgium, specialising in
flexible office space, reception services
and conference products. As an
organisation, it aims to unburden its
customers in as much as possible in all
facility and operational matters.
The Clubhouse is a leading business
club in London, providing offices,
lounge and meeting space. Designed
to meet the requirements of growing
businesses, the Clubhouse provides
a luxurious, professional space where
customers can meet and work in an
inspiring and productive environment.
More than just a desk, BizDojo is
a coworking and collaboration
network operating in New Zealand.
It is passionate about supporting its
diverse community with an active and
collaborative culture of events, projects,
programmes and networking.
This flexible workspace brand has
locations exclusively in Japan and Korea.
OpenOffice provides office space, virtual
offices and meeting rooms in a
productive, self service office
environment.
No18 is a blend of curated business club
environments in the best locations, with
first-class service and expansive member
benefits. It’s a workplace where people
do business and socialise, moving from
premium offices to restaurants and
collaborative workspaces.
Central Working provides flexible and
scalable spaces, fully tailored to match
customer needs. More than just an
office space, it helps advance business
by providing access to training,
networking events and a supportive
community.
The Wing is a community of
professionals, entrepreneurs and
leaders from across the globe, who
find sanctuary and productivity in
our beautiful work and community
spaces designed for women,
meaningful connections through
our networking opportunities, career
growth through our job platform
and perhaps most importantly,
support and camaraderie through
sharing strategies and resources.
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STRATEGIC REPORT OUR BRANDS CONTINUED
OUR DIGITAL BUSINESSES
IWG also operates several digital
businesses, making it easy for our
customers to find and book
workspace online.
MAKING HOME A GREAT
PLACE TO WORK
HomeToWork improves the homeworking
experience by providing everything needed to
stay connected, productive and enjoy working
from home. Our leading home worker platform
provides access to useful daily content, a
carefully curated programme of events and
resources, and valuable benefits from industry-
leading companies. HomeToWork provides an
immersive experience which enables members
to make home a great place to work.
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IWG plc Annual Report and Accounts 2020
EasyOffices is an online broker that
makes it easier for people to find great
places to work. It provides a powerful
online search and comparison tool to
help people find their perfect
workspace. Customers can also contact
the team directly for impartial advice
and support.
Worka brings together every type of
IWG workspace in one easy-to-use app.
Users are able search and compare
3,300 global locations and instantly
book office space, coworking, and
meeting rooms. With the possibility to
see real-time availability, Worka is the
ideal choice for hybrid workers all
around the world.
Rovva is an online toolkit which provides
a range of products and services to help
people take their businesses further
– whether they’re just getting started,
trying to improve efficiency, or exploring
new markets. From virtual offices to
telephone answering, Rovva makes it
easy for people to do better business.
Meetingo is a digital platform that
provides everything customers need
for a successful meeting, all in one
place. With thousands of meeting
rooms to choose from, Meetingo
provides customers with the right
space, in the right place, at the right
price. There’s somewhere for every
need, from team training to five-star
board meetings, from city centres
to business parks. Customers can
compare features, locations, pricing
and style of meeting rooms, and
can book and pay in moments.
OUR MANAGED
CONVENTIONAL
OFFICE SPACE
Whether it’s a new workspace brief or
an adaptation to an existing office, IWG’s
Managed Office Solutions (MOS) can also
provide customised workspaces designed
to every client’s unique requirements.
MOS can provide additional revenue
opportunities for businesses’ surplus
space with the flexibility to re-occupy
that space in the future.
iwgplc.com
21
STRATEGIC REPORT CHAIRMAN’S STATEMENT
A year of challenge,
action and opportunity
Our clients, new franchise and landlord
partners across the world are attracted by
our brand portfolio, advanced technical
platform, global footprint and above all the
expertise and commitment of our people.”
DOUGLAS SUTHERLAND
CHAIRMAN
For everybody at IWG, our employees, clients, partners and other stakeholders, 2020 will always
be remembered as the year when the way we all work changed rapidly and forever.
THE YEAR EVERYTHING
CHANGED
The year began with enormous promise,
as our business made its strongest-ever
start with every sign that 2020 would be
a year of significant achievements,
especially as the shift towards the hybrid
flexible working model gradually
continued to gain traction among
businesses everywhere. But then things
changed, quickly and dramatically, as
awareness grew in markets across the
world of the very real challenges coming
from a growing global pandemic and
associated national and regional
lockdowns. The speed of change was
immense, as 2020 metamorphosed into
the most challenging year in memory,
not only for IWG but also for most
nations, businesses, communities,
families and individuals around the world.
FACING THE CHALLENGES
As the intimidating new challenges
faced by our clients, employees,
franchise and landlord partners, and
other stakeholders became apparent,
we quickly took comprehensive
proportional actions to help protect
the future of our business. For our
customers and employees, we rapidly
implemented new health and safety
protocols as well as provided financial
support for customers. To preserve
cash, we focused on reducing costs
across the organisation, including
renegotiating leases resulting in many
more variable lease terms and
management agreements and, where
necessary, rationalisation of our
network. We also withdrew our final
dividend to shareholders for 2019 and
suspended our share repurchase
scheme and further dividends.
The Board is especially grateful for the
personal contributions made by our
employees and Senior Leadership Team
in meeting the challenges, including
swiftly implementing the new health
and safety measures to protect the
work environments for our employees
and clients. I am personally very
appreciative for the Board engagement
throughout the year via more frequent
meetings and increased activity between
meetings to deal with pandemic related
matters. As the pandemic developed,
our Executive and Non-Executive
Directors alike took a 50% reduction
in their salaries or fees for the remainder
of the year and the Executive Directors
will not receive any bonuses for 2020,
although they have worked harder than
ever before.
The impact of the pandemic and
resulting actions taken had personal
and financial ramifications (as evidenced
in our own 2020 results reported herein)
on our clients, employees, franchise
and landlord partners, and investors.
The Board offers its sincere appreciation
to everyone working constructively
with us as we navigate through the
challenges created by the pandemic.
22
IWG plc Annual Report and Accounts 2020
EMBRACING THE
OPPORTUNITIES
As the year progressed it became
increasingly clear that the crisis was
driving fundamental long-term changes
for companies, workers, communities
and the environment. As more and more
organisations adopted the hybrid
working model, the desire for many
diverse groups to achieve the sustained
benefits from this way of working
became clear. Companies are able
to reduce their operating costs and
mitigate financial risk. With the right
support, there are mental health and
productivity benefits to employees from
working locally and commuting less.
By helping millions of individuals to work
efficiently closer to where they live,
we can be a powerful catalyst for our
customers to reduce their carbon
footprint. In addition, numerous
communities can retain talent and
attract employment as never before.
As part of our ongoing efforts to
continuously improve our approach to
environmental, social and governance
matters, we have the objective to
become carbon neutral within five years.
We will also add a Black, Asian or
Minority Ethnic Director to the Board
by May 2022. Reinforcing IWG’s
commitment to diversity, equity and
inclusion will help us retain and attract
talented people who will support our
clients and our own enterprise vitality
and growth going forward.
PREPARING FOR RAPID
GROWTH
Today IWG has by far the world’s largest
and most widely distributed flexible
workspace footprint, which allows us to
enable more people than anybody else
to work from home, close to home and
at other convenient meeting places.
The accelerated shift to hybrid working
habits is creating an opportunity for
unprecedented growth. We plan to
rapidly expand our already extensive
network by continuing to pursue our
capital-light model focusing on
franchising, management contracts and
other forms of partnership. During 2020
we raised equity capital and issued
convertible bonds collectively worth
£670m. These funds and the measures
previously described will support IWG’s
future development as we broaden our
network and service offerings through
organic growth and M&A opportunities.
IWG is well positioned to meet the
rapidly growing demands of the hybrid
working model as the world emerges
from the economic and social impacts
of the pandemic. Our clients, new
franchise and landlord partners across
the world are attracted by our brand
portfolio, advanced technical platform,
global footprint and above all the
expertise and commitment of our
people. We remain confident in the
long-term structural growth drivers
of the global flexible work market and
our strategy to strengthen our leading
position within it while unlocking
shareholder value.
DOUGLAS SUTHERLAND
CHAIRMAN
9 MARCH 2021
Today IWG has by far
the world’s largest and
most widely distributed
flexible workspace
footprint, which allows
us to enable more
people than anybody
else to work from home,
close to home and at
other convenient
meeting places.“
DOUGLAS SUTHERLAND
CHAIRMAN
iwgplc.com
23
STRATEGIC REPORT CHIEF EXECUTIVE OFFICER’S REVIEW
Our most challenging
year demonstrates our
business resilience
Overall, I am very confident that the events
of 2020 have done far more than merely
confirm the resilience of our organisation
and our business model. They have also
delivered the changes in attitudes and
working practices that will set us up for
sustained success over the next 10 or 20
years and far beyond.”
MARK DIXON
CHIEF EXECUTIVE OFFICER
2020 was simultaneously the toughest time in IWG’s 31-year history and the moment of our single
greatest developmental leap. It was when our market underwent a decade of evolution in just
12 months.
2020 was the most extraordinary year
of my career. On the one hand, it was
extremely challenging, not only for our
trading performance but also for our
customers, their employees, their
families and communities across the 120
countries where we have a presence.
The disruption caused by the COVID-19
pandemic to people’s businesses and
lives is immense, outweighing the
combined impact of all the 50+
national, regional and global recessions
I have personally experienced over
the last three decades. It will clearly
continue to have a major impact for
some time to come.
On the other hand, this was also a year
in which IWG’s global market took a
massive leap forward as companies
across the world discovered first-hand
that their workforces could be highly
engaged and productive while utilising
the hybrid way of working: at home,
in a local office, and occasionally
at corporate HQ.
industry we pioneered is looking more
positive than ever before.
A NEW WAY OF WORKING
It would be wrong to assume that the
shift we have been witnessing in how
organisations work has been driven
entirely by the COVID-19 pandemic.
This has merely accelerated a trend
that’s been underway since the dawning
of the digital era, which started in
the 1970s with the arrival of the first
personal computers.
Some five decades on, the only
‘analogue residue’ still holding
companies back from going fully digital
was the physical space they worked in.
Now, the pandemic has finally and
permanently blown this away – and
IWG, as the global leader in flexible
workspace, is at the forefront of both
driving and enabling the office to be
wherever workers have the digital tools
and access to data they need to do
their jobs.
As a result, at year end, the medium-
to long-term future for IWG and the
This begs a question: why should
companies go to all the expense of
providing city centre-based office
accommodation when recent months
have shown that people can be at
least as effective, engaged and
productive elsewhere?
In 2020, IWG did more than anybody
else to answer this question once and
for all. Quite simply, companies no
longer need to do so. They can and
do use our digital business and
communications tools to support and
engage their employees at home.
They can use our growing portfolio
of suburban and rural centres across
the world to give people the chance to
meet, brainstorm, innovate and create
close to home, without the need for
a long, tedious, expensive and
environmentally damaging commute.
And, when required for the purposes
of company identity and cohesion,
they can still bring people together to
congregate at a city-based corporate
HQ, provided and managed by IWG
or one of our growing global network
of franchise partners.
24
IWG plc Annual Report and Accounts 2020
GROUP INCOME STATEMENT
£m
Revenue
Gross profit/(loss) (centre contribution)
Overheads
Operating (loss)/profit(1)
Operating profit/(loss) before adjusting items(1)
(Loss)/profit before tax from continuing
operations
Taxation
Effective tax rate
(Loss)/profit after tax from continuing
operations
Adjusted EBITDA
1. Including joint ventures
REVENUE AND GROSS MARGIN
2020
(As reported)
IFRS 16
Impact
2020
(Pre-IFRS 16)
2019
(Pre-IFRS 16)
2,480.2
19.9
(369.3)
(352.0)
37.8
(620.1)
(30.1)
(4.9)%
–
189.8
11.5
201.3
211.6
(55.9)
13.2
(650.2)
1,233.9
(42.7)
2,480.2
(169.9)
(380.8)
(553.3)
(173.8)
(564.2)
(43.3)
(7.7)%
(607.5)
133.8
2,648.9
414.1
(280.0)
136.8
136.8
118.5
15.5
(13.1)%
134.0
428.3
IFRS 16
Impact
–
151.0
(1.0)
150.0
150.0
(63.5)
6.8
(56.7)
2019
(As reported)
% Change
(constant
currency)
(Pre-IFRS 16)
% Change
(actual
currency)
(Pre-IFRS 16)
2,648.9
565.1
(281.0)
286.8
286.8
55.0
22.3
(40.5)%
77.3
1,482.8
(5.3)%
(143)%
38%
(524)%
(235)%
(6.4)%
(141)%
36%
(504)%
(227)%
(576)%
(69)%
(553)%
(69)%
Continuing
2017 Aggregation
New 18
Pre-2019
New 2019
New 2020
Open centre revenue
Closures
Group
We can see the effects on our business
of this trend in action by studying the
location of the deals we completed
during 2020. While there was lower
demand for city-centre properties, we
saw a very strong escalation of interest
in suburban locations. For example,
while deals for locations in New York
City fell by around 30% during the year,
they rose by more than 40% in Southern
Connecticut and in many other primarily
suburban and rural locations. We also
saw a significant rise in demand for
small offices, accommodating one or
two people.
The sheer scale of our global network
positions us uniquely well to meet this
surging demand. During the year, the
appeal of the hybrid model persuaded
organisations of all sizes to become IWG
clients, from global giants like Standard
Chartered, Nestle, Cisco and Staples to
many thousands of large and medium-
sized organisations right down to small,
single-office and even freelance
businesses. In fact, we have just signed
our biggest enterprise deal in our
iwgplc.com
Revenue £m
Gross margin % (Pre-IFRS 16)
% change
(constant currency)
2019
2020 Reported
2020 Underlying
2,093.2
235.5
2,328.7
79.4
–
2,408.1
240.8
2,648.9
(8.9)%
5.8%
(7.4)%
171.5%
–
0.5%
(63.5)%
(5.3)%
12.2%
(25.0)%
7.9%
(76.5)%
–
(3.7)%
(103.4)%
(7.2)%
16.0%
(11.7)%
12.8%
(30.6)%
–
6.7%
(12.6)%
6.1%
2020
1,883.7
246.1
2,129.8
215.4
48.2
2,393.4
86.8
2,480.2
2019
22.7%
(9.3)%
19.5%
(27.7)%
–
17.9%
(7.5)%
15.6%
31-year history with NTT providing
global access to our centres to their
300,000 employees worldwide.
in this area during the year, with many
successful outcomes, but much work
remains to be done.
A RAPID, DECISIVE RESPONSE
So 2020 has been both enormously
difficult and hugely important for IWG.
Following a very encouraging beginning
to the year, our strongest ever in terms
of financial performance, the situation
rapidly changed as the scale of the crisis
facing our customers across the world
quickly became clear. We had to
respond with speed and determination,
taking some difficult decisions to cut
costs, acting fast to help many clients
overcome potentially existential
challenges and working hard to support
our own team members through this
exceptionally testing time. For example,
while the pandemic caused us to
rationalise some 6% of the network
during the year, it was our constant
priority to work with landlords on
creating solutions that make centres
impacted by COVID-19 sustainable for
both parties. We made good progress
We’ve also innovated as never before,
fast-tracking new products and services
to market, and refining and strengthening
others. And we’ve worked hard to
ensure we have the capital at our
disposal to help us grasp the important
opportunities for growth that are certain
to follow recovery.
Overall, our results for 2020 proved the
resilience of our unique business model.
In any other year, these results might
have been cause for some concern.
But given the challenges we faced and
overcame in 2020, I am extremely
proud of them and of the global team
of amazing IWG people whose hard
work, courage and passion have made
them possible.
This extends beyond our financial
results alone, and I have been delighted
that IWG is a company that is committed
to look after the health and safety of its
people and customers.
25
STRATEGIC REPORT CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
PARTNERING FOR
CAPITAL‑LIGHT EXPANSION
These are not the only benefits of hybrid
working. Its appeal extends beyond
potential customers and their
employees to include a range of
business types that are keen to become
involved in such a fast-growing sector
of the global real-estate industry.
Property companies, building owners
and new investors are all targeting it in
significant numbers, and they recognise
the value of the scale, experience,
visibility and skills we have to offer in
a partnership approach.
We also recognise that the wider
opportunity is far too big for IWG to
realise on our own, and that we need,
more than ever, to work with franchise
partners and property owners across
the world in the years ahead. We have
always worked closely with building
owners, bringing them the brands,
expertise and access to our platform
they need to maximise the value
of their investments.
Since 2019 and throughout 2020, our
emphasis has been on driving growth
through franchising, management
agreements and other forms of joint
venture, as the key enablers of our
capital-light growth strategy. This enables
us to open more centres, faster and
with less capital investment to meet
the growing demand for hybrid
working opportunities.
Our globally recognised brands,
industry-leading platform, decades
of experience and commitment to
innovation make our offer very attractive
to potential franchise partners. This and
the growing interest in hybrid and
remote working continue to drive more
opportunities with potential franchise
partners. During the year, we
successfully completed 15 new
franchise agreements in regions
including EMEA, Asia Pacific and the UK,
which between them included
commitments to open 67 new centres.
Since the year end, we have signed our
first franchise agreement with a US
partner, to develop seven centres over
seven years in Metro Detroit. Several
other agreements are in the pipeline
as I write. Please see pages 36-37 of this
report to find out more about our
approach to franchising.
CLEAR, COMPELLING
ADVANTAGES
The appeal of the hybrid working model
was underlined by the particularly strong
sales activity we experienced during the
second half of the year, although given
the exceptional circumstances this was
offset by increased customer churn.
During the year, we also supported
customers with a range of measures
worth approximately £100m including
payment deferrals.
Nonetheless, the fast-growing appeal
and universal advantages of the hybrid
working model are clear and
compelling. At their simplest, they are:
– Companies gain better financial
flexibility to invest in their people and
in growing the business instead of the
buildings from where they operate,
reducing financial risk and generating
shareholder value. They also enable
them to attract high-quality employees
with the offer of flexible working.
– Individual workers gain better mental
health and reduced costs through not
having to commute many miles into
city centres, gaining more time with
family and friends.
– Communities gain from the ability
to provide more high-quality
employment opportunities,
encouraging people to stay and
spend locally.
– The environment benefits from the
long-term carbon-reduction benefits
of reduced commuting allied
with more efficient modern and
upgraded workspaces with fewer
damaging emissions.
Indeed, we are so confident in the
environmental benefits of hybrid
working that we are now targeting
carbon-neutral status as an organisation
within five years, brought about by a
combination of reduced commuting,
improved building efficiency, better use
of resources such as water and energy,
and increased recycling and carbon-
offsetting activities. We will provide
regular updates as we progress towards
this target.
26
IWG plc Annual Report and Accounts 2020
We also continue to pursue management
agreements, in which building owners
pay us a fee for creating and operating
centres in their properties. In the second
half of the year we entered numerous
agreements of this type and have an
attractive pipeline of further opportunities
which I believe will come to
fruition in 2021.
Clearly, we continue to have centres
of our own on our balance sheet, which
we bought in the past as part of our
historical development programme.
We also continue from time to time to
buy assets, which ultimately could be
used to create property funds. Such
properties are a means to an end for
IWG, and our focus will increasingly be
on the capital-light route to expansion
throughout 2021 and beyond.
CREATING SERVICES FOR
A GLOBAL INDUSTRY
For some years, our business has
revolved less around the provision of
workspace and more about providing
the platform, the services and the support
that people and businesses need to
work efficiently and cost-effectively.
During that time, more than anybody
else, we have come to understand the
complete end-to-end requirements of
organisations everywhere, enabling us
to focus our development efforts on
innovative, and often digital, new
products and bespoke service offerings.
For example, in our 2019 Annual Report
we covered the launch of Rovva, our
unique business support platform that
puts in one place everything businesses
need, from practical advice on finding a
place to work, HR, funding and finance,
to virtual office plans, workspace
membership and business services on
a global scale. On page 35 of this report,
we describe our breakthrough, end-to-
end work with EY that shows how we
can innovate through partnerships to
help some of the world’s biggest
organisations meet their evolving needs.
And elsewhere in this year’s report,
we talk about the 2020 launch of
HomeToWork, our new business that
delivers everything workers need to stay
connected, productive and to enjoy
working from home.
These are both game-changing
innovations that are facilitating the shift
to new ways of working for businesses
of every type and size. And they are only
two of several other uniquely powerful
new solutions that we’ve either
launched or are set to bring to market in
the near future.
OUR PRUDENT
APPROACH TO M&A
We know that the period immediately
ahead of us is packed with opportunity
for IWG, and we are determined to
maximise the potential that this limited
time window presents. During 2020,
therefore, we raised significant quantities
of capital to enable us to grow
inorganically through M&A activities in
parallel with our capital-light expansion
strategy. At year end, we were in the
final stages of due diligence with a
number of acquisitions, on which we
will report in due course. Post year end
we have acquired a majority investment
in The Wing, the leading community and
co-working space company designed
for women, paving the way for the
business to pursue substantial growth
plans both in the US and internationally.
Naturally, we continue to take a prudent
approach to inorganic growth and will
only take action when we believe a deal
is overwhelmingly in the best interests
of our shareholders and other
key stakeholders.
OUTLOOK
This was a period of exceptional change
for IWG, for our employees, our clients
and for the overall business environment
worldwide. While it was undeniably an
extremely difficult time for everybody
and these conditions are likely to persist
well into 2021, I am in no doubt that the
uptake of new working practices it has
accelerated for so many organisations
and enforced on others is now
here for good.
I am also in no doubt that these will
ultimately be for the good of everybody
– businesses, individual workers and
their families, communities and the
environment.
As for IWG, this fundamental shift
in the way people work is clearly
an enormously positive step over the
medium and longer terms. Certainly,
2020 was very difficult, and I anticipate
these challenging market conditions
to prevail for a few months to come.
Indeed, we have made additional
provisions for further network
rationalisation as the recovery from
the pandemic continues to take longer
than we anticipated last summer.
I believe this was a prudent decision that
emphasises our commitment to doing
what needs to be done for the greatest
long-term benefit of the Group.
Overall, I am very confident that the
events of 2020 have done far more than
merely confirm the resilience of our
organisation and our business model.
They have also delivered the changes in
attitudes and working practices that will
set us up for sustained success over the
next 10 or 20 years and far beyond.
Today, we anticipate a massive surge in
growth when we eventually emerge
from the unprecedented downturn that
the COVID-19 pandemic has created.
Our franchising and management
agreement strategies are performing to
plan as the spearhead of our capital-light
expansion strategy. And we are
progressing well on our plans to
strengthen our position as the leading
service provider to the global flexible
workspace industry.
In short, in a single year we have made
a developmental leap equivalent to the
progress we had anticipated for the next
decade. The year gone is one we will
never forget – and the years ahead are
tremendously exciting.
MARK DIXON
CHIEF EXECUTIVE OFFICER
9 MARCH 2021
iwgplc.com
27
STRATEGIC REPORT OUR RESPONSE TO COVID-19
Connecting people and
businesses through COVID
A key part of ensuring our customers and employees have a great day at work in 2020 has involved
ensuring a clean, safe and socially-distanced working environment – every day and in every one
of our centres across the world.
£100m
provided in customer support
IMMEDIATE COVID‑SAFE MEASURES
Having seen the likely global impact of the pandemic earlier than
most as it swept towards our Asia Pacific operations in January and
February 2020, we were fast to invest in the new systems and
resources we needed to deliver services worldwide under
unprecedented conditions. Our immediate response included the
provision of temperature readers, clear information, signage and
procedures to enable physical distancing, new protocols covering
our meeting rooms and increased frequency
of cleaning. In particular, the measures we
have implemented are in line with the
recommendations of all relevant national and
regional governments and the World Health
Organization (WHO). As a result, we meet or
exceed all COVID-related guidelines in every
market where we operate. In addition, several
governments across the world, including in
the UK, consulted with us when developing
their workplace guidelines. We have also
carefully scrutinised COVID-related safety-
compliance standards across the world.
CUSTOMER SUPPORT
At IWG, we recognise the value to ourselves
and our shareholders of long-term relationships,
based on openness, mutual trust and respect.
So during 2020, we provided customers with
support worth more than £100 million to help
them through the COVID-19 crisis. Throughout,
we’ve been determined to communicate, to
listen, to understand and respond effectively to
our customers’ needs. We’ve collaborated widely to develop and
deliver new customised solutions that address the new realities
of how companies and their teams have been forced to work.
We’ve adapted pricing structures, introduced new services for
home workers as well as introduced further measures to help them
get through the crisis. In short, we’ve done all we can to strengthen
relationships for the long term.
28
IWG plc Annual Report and Accounts 2020
PRODUCT AND SERVICE INNOVATION
During 2020, we’ve innovated ceaselessly to help people
work better – remotely and in the office. A key example
is HomeToWork, our unique membership network
dedicated to home and hybrid workers. The vision
is straightforward – to become the go-to website
and app for a global, vibrant community of home
workers for information, discounts, events and key
resources. It also enables members to book shared
workspaces or private meeting rooms as well as
enjoying a great day at work at home. HomeToWork
was launched in the U.S. at the end of 2020, in the
UK in early 2021 and will be
rolled out globally later this year.
We aim to attract hundreds
of thousands of members
by attracting large enterprise
clients wishing to provide
valuable benefits to hybrid
working employees.
LOOKING FORWARD
Towards the end of the year, we saw strong signs of
business improvement, including growing demand
for products and services including our membership
and virtual office offerings. This trend appears set to
continue, and we will maintain our focus on further
new-product development to support home and
remote working. Demand for more flexible space
will continue to grow in the post-COVID 19 world,
as more companies build increasingly distributed
workforces with more satellite offices and more
employees working at or closer to home. Our
decentralised global portfolio of urban and suburban
workspaces in more than 1,100 towns and cities
means IWG is uniquely placed to help companies
everywhere adapt to new ways of working.
iwgplc.com
29
STRATEGIC REPORT MARKET REVIEW
The growing flexible
workspace market
Right across the world,
significant forces are
influencing the future
development of the flexible
workspace market. In 2020,
the COVID-19 pandemic
made these all the stronger.
Here we reflect on how the
ways we react to change
are enabling us to
strengthen our position
as global market leader.
CONCERN ABOUT THE
ENVIRONMENT
SOCIETAL
CHANGE
Continuing to support people working
at or near home following the pandemic
is the single biggest contribution
organisations can make to reducing
their carbon footprint. Taking positive
action attracts talent who share an
increasing sense of shared responsibility
and global citizenship.
COVID-19 has significantly accelerated
the uptake of hybrid working patterns.
Research from 2020 shows that
more than half of US workers (52%)
want to split their time working between
home and the office(1). Increasingly,
SMEs are demanding high-quality
accommodation and services in
local markets.
IMPACT ON OUR INDUSTRY
– Need to satisfy growing consumer,
shareholder, employee, legislative and
societal demand for reduced impact.
– Increased demand for flexible
workspace solutions, close to and
in the communities where people
want and can afford to live.
– Growing requirement for advanced
tech solutions to support home
working as individuals seek to
enhance their lifestyles and reduce
their carbon footprints.
IMPACT ON OUR INDUSTRY
– To attract and retain the best talent,
employers are seeking partners
who can provide flexible space
and services.
– Workspace providers without diverse
portfolios are struggling to meet
emerging customer needs and
remain competitive.
– Communities that cannot provide
high-quality workspace are finding
it hard to meet the evolving needs
of local employers.
HOW WE ARE RESPONDING
– Investing in highly efficient, intelligent
buildings, continuously upgrading
our estate and enabling reduced
commuting by opening more
locations outside city centres.
– Upgrading or closing inefficient
centres to improve environmental
performance across our portfolio.
– Supporting new ways of working that
allow people everywhere to contribute
to the carbon-reduction agenda.
HOW WE ARE RESPONDING
– Our network growth focuses
on local markets, enabled and
accelerated by our franchising
strategy that is driving our global
presence change to and goal
of reaching 50,000 centres.
– We ensure our customers gain
from our scale, brand portfolio
and service levels at every stage
of their development.
– We enable our customers to
participate in our local social
investment programmes across
the world.
1. Gensler, U.S Workplace Survey Summer /
Fall 2020, Executive Summary: The Hybrid
Future of Work
30
IWG plc Annual Report and Accounts 2020
EVOLVING GLOBAL
ECONOMY
RAPIDLY ADVANCING
TECHNOLOGY
DEMAND FOR MORE AGILE
PROPERTY MODELS
Companies across the world are aiming
to reflect their business priorities in their
real-estate strategies: responding to the
impact of a global pandemic; increasing
operational flexibility while driving down
overall costs; and seeking and finding
new ways of maintaining closer
relationships with customers and
suppliers alike.
Smart technology and universal
connectivity is enabling people to
choose how, when and where they
work. The pandemic enforced history’s
largest ever remote-working experiment,
which was 100% enabled by major
improvements in technology with
billions connecting globally via the latest
in video communications and virtual-
reality platforms.
Companies increasingly need to be
poised for rapid reinvention in an
ever-more complex and competitive
environment. To support rapid shifts in
strategy, scale and location, businesses
are increasingly demanding highly
efficient, intelligent buildings,
high-quality services and portfolio
solutions that extend far beyond
single offices.
IMPACT ON OUR INDUSTRY
– Companies are increasingly taking
a portfolio approach to real estate,
taking on a hierarchy of sites from
headquarters to local offices.
IMPACT ON OUR INDUSTRY
– The ability to offer, refresh, expand
IMPACT ON OUR INDUSTRY
– Fast-changing business needs mean
and manage an appropriate range of
digital offerings is a key differentiator.
that customer requirements are
continuously evolving.
– Companies are therefore having to
– Companies are seeking partners
– They are seeking new ways of building
dispersed customer relationships
while delivering personalised service.
focus attention on identifying the right
tech investments to make the
moment they are required.
who can meet increasingly rigorous
and mission-critical demands fast
and efficiently.
– The need is growing for customers
to understand and influence supplier
behaviour in local markets.
– The need to maintain service provision
is mission-critical, driving the often
expensive requirement to keep pace
with advances.
– Growing complexity is increasing the
need for enterprise companies to
have a single point of contact for their
property requirements.
HOW WE ARE RESPONDING
– We provide ‘hub-and-spoke’
infrastructure to meet national and
regional development plans.
– Our sophisticated platform allows
immediate personalised support to
meet emerging customer needs.
– Our global network supports a
worldwide, regional and local
presence wherever required,
allowing customers to make rapid
shifts in location, scale, strategy and
customer focus.
HOW WE ARE RESPONDING
– We leverage our unmatched insight
into the tech needs and expectations
of businesses, delivered by millions of
individuals who use our services
every day.
– We continually invest in world-class,
resilient IT infrastructure, innovative
digital offerings and services at all
our centres.
– With more than 3,300 centres
worldwide, we provide the resilience
and global infrastructure to meet
every flexible-working need.
HOW WE ARE RESPONDING
– We can respond fast and fluidly
to rapidly changing needs and
demands by developing bespoke
solutions that can be rapidly
engineered for global uptake.
– We have the experience, scale and
investment power to deliver and
continuously upgrade in line with
individual expectations.
– Our network comprises a wide variety
of building types able to serve even
complex business needs.
iwgplc.com
31
STRATEGIC REPORT OUR BUSINESS MODEL
Delivering value
through our platform
For over three decades, we have successfully developed our business model to deliver strong
returns. Today, with our unmatched scale, unique multi-brand approach and highly efficient
platform delivering everything partners and customers need, IWG is poised for unprecedented
network growth.
WHAT WE DO
HOW WE DO IT
We partner with franchisees and
property owners across the world
to provide the largest network of
flexible workspace for businesses
of every type and size. By using
our unique global infrastructure
to deliver a comprehensive service,
we ensure our partners and end
customers have a great day at work.
KEY INPUTS
OUR PARTNER
RELATIONSHIPS
We recognise that our success depends
on that of our partners, so we use all our
experience and expertise to deliver the
service and support they most need.
OUR PEOPLE
We employ the best people we can find
and help them to achieve their full
potential, so they can drive our and our
partners’ business success.
OUR NETWORKS
With a vision of having a centre serving
every community, we and our partners
are empowering businesses and
individuals to work flexibly and
productively anywhere in the world.
OUR BRANDS
Our growing line-up of global and local
brands segment the markets where we
operate to maximise uptake and give
ourselves and our partners a unique
growth opportunity.
OUR FORMATS
Versatile, inspiring and practical,
our formats drive worker satisfaction
and productivity.
OUR PLATFORM
Our multi-faceted platform provides
a world-class, easy-to-use infrastructure
that delivers simple points of access and
a great user experience.
CREATING
ACCESS TO
THE FLEXIBLE
WORKSPACE
MARKET
OUR
COMPETITIVE
OPERATING
MODEL
PROPERTY OWNERS
Our unique portfolio of brands and formats gives
building owners a choice of flexible workspace
solutions that add value to their properties by
maximising their potential and meeting the needs
of the local business community. Our platform and
associated centralised support functions make
implementation straightforward.
OPERATIONAL
EFFICIENCY
We focus on optimising
the performance and
operational effectiveness
of each of our locations.
Combined with a
disciplined approach to
overhead costs, this
enables us to continue
delivering long-term
value. Our scaled
platform and centralised
support functions
underpin IWG’s
operational efficiency
across the world.
CENTRALISED
SUPPORT
FUNCTIONS
Our support functions
are centralised to ensure
resources are utilised to
maximise value for our
partners, customers and
shareholders. From
procurement to
marketing, our support
functions benefit from
economies of scale and
global reach to provide
the business with a
consistency of support
and service.
OUR STRATEGIC
DRIVERS
See pages 38-39
to read more
about our strategic
priorities
INDUSTRY-
LEADING
PROFITABLE
GROWTH
BEST-IN-
CLASS
COST
LEADERSHIP
STRONG
GOVERNANCE AND
RISK MANAGEMENT
SYSTEM
Our operating model is underpinned by strong, robust
governance and a rigorous risk-management model
that ensures the business is being managed prudently
and risks are appropriately assessed.
32
IWG plc Annual Report and Accounts 2020
FRANCHISE PARTNERS
Our franchise partners find it easy to activate our clearly
defined business model, associated brands and
marketing appeal. Building on years of experience and
optimisation, we make it easy for our partners to scale
up their operations and earn attractive returns.
SCALED
PLATFORM
IWG’s different brands
operate from a single,
scaled and highly efficient
global platform, enabling
us to provide workplace
solutions across the
world in line with every
customer’s requirements.
MULTI-
BRANDED
We recognise there is no
‘one size fits all’ solution,
so we provide our
customers with a choice
of workspace formats
through our different
brands, formats and
workspaces to
accommodate their
varied needs and enable
them to have a great day
at work.
GLOBAL,
MULTI-BRAND
NETWORK
STRONG CASH
GENERATION,
ENABLING
INVESTMENT
ATTRACTIVE
SHAREHOLDER
RETURNS
VALUE CREATED
CUSTOMERS
We enable businesses to perform
better, with more flexibility and
agility, staffed by more fulfilled,
effective and loyal people.
PARTNERS
We give access to an exciting,
sustainable business opportunity
powered by our global leadership,
unique experience and unrivalled
operating platform.
EMPLOYEES
We recognise the talents of our
diverse and passionate workforce
across the world, enabling our
people to contribute to society
while driving successful careers.
COMMUNITIES
We bring employment
opportunities to the heart of
communities, attracting jobs,
eradicating unnecessary travel
and encouraging societal giving.
Importantly, it also ensures that we still benefit from an entrepreneurial
spirit and our ambitions for future growth.
See pages 48-55 and 66-96 for more on our approach to
risk and governance
SHAREHOLDERS
We deliver sustainable returns via
a progressive dividend policy that’s
enabled by our prudent approach
to investment.
iwgplc.com
33
STRATEGIC REPORT OUR STAKEHOLDERS
Adding value for
our stakeholders
We give our customers the freedom
to choose from a wide range of brands,
so they can find the solution that works
best for their business. We support
them in our centres, from home and
on the move via our app.
We support partners by providing
established international sales and
marketing channels and comprehensive
training from the outset as well as
ongoing support and training from
an experienced global team.
At IWG, we have a strong record of delivering value to our key stakeholders, primarily the five
groups that mean most to us: customers, partners, employees, communities and shareholders.
Who are they?
Why they are important to us?
What do they want from us?
How do we engage with them?
CUSTOMERS
Businesses of all sizes across the world,
seeking the flexibility, quality and value
from their workspace that boosts their
agility and competitiveness.
They are the reason for IWG to exist.
By paying for our services, they
enable us to consistently improve
our global offering with ever-better
property models, working
environments, value, service
and business solutions.
They need us to understand and
respond fast and with precision to their
changing needs. This means providing
them the flexibility to achieve rapid
shifts on cost, location and scale, while
providing the fabulous working
environments, world-class IT and admin
support they need to achieve their
business goals.
PARTNERS
Franchisees seeking opportunities to
diversify into an exciting and fast-growing
market, and building owners and
developers wishing to drive the best
possible return on investment.
EMPLOYEES
The people who – in growing numbers
of neighbourhoods across the world
– do most to ensure our customers have
a great day at work.
COMMUNITIES
The places where our centres are based,
increasingly home to where our own
people and customers’ employees live
and wish to work.
They not only own or manage the
buildings where our customers work
– they also bring us the benefits
of their experience across a range
of niche and local markets to
deepen our understanding
of customer needs.
Our partners need flexible, bespoke
relationships based on shared trust,
enabling them to maximise the benefits
of our proven business model, the
power of our brands and our global
leadership position.
These are the people who ensure
we deliver customer value and
therefore drive our growth, attract
new business and deliver the returns
our shareholders want.
Above all, they want a great day at work,
based on mutual loyalty, exciting
rewards, effective development
opportunities and the benefits associated
with working for a global leader.
Comprehensive training programme
with over 300 webinars delivered to
employees in 2020 as well as the
launch of the new IWG Academy.
They are increasingly the source
not only of our employees but our
customers too, enabling us to grow at
scale in multiple local markets across
the world.
They want us to help them thrive,
attracting new employment and
enabling local people to work close
to home.
IWG is heavily involved in community
projects from education to health
related initiatives.
SHAREHOLDERS
The individuals and institutions who
own our shares and provide the support
we need to deliver sustainable
stakeholder value.
They give us the financial support and
authorisation we need to continue
our unique strategy for growth and
strengthen our leadership position in
the global flexible-workspace sector.
Our investors want us to continue
articulating and following our successful
strategy, communicating with them
clearly and regularly, and giving them
the opportunity to comment on our
progress. Above all, they want us to
grow the value of our shares and
operate a progressive dividend policy.
In 2020 investor relations held over
300 meetings with investors and
analysts. After the first quarter of 2020,
these meetings were held virtually
in view of COVID-19 considerations.
34
IWG plc Annual Report and Accounts 2020
Who are they?
Why they are important to us?
What do they want from us?
How do we engage with them?
CUSTOMERS
They are the reason for IWG to exist.
They need us to understand and
By paying for our services, they
respond fast and with precision to their
enable us to consistently improve
changing needs. This means providing
our global offering with ever-better
them the flexibility to achieve rapid
Businesses of all sizes across the world,
seeking the flexibility, quality and value
from their workspace that boosts their
agility and competitiveness.
property models, working
environments, value, service
and business solutions.
shifts on cost, location and scale, while
providing the fabulous working
environments, world-class IT and admin
support they need to achieve their
business goals.
They not only own or manage the
Our partners need flexible, bespoke
buildings where our customers work
relationships based on shared trust,
– they also bring us the benefits
enabling them to maximise the benefits
of their experience across a range
of our proven business model, the
of niche and local markets to
deepen our understanding
of customer needs.
power of our brands and our global
leadership position.
We give our customers the freedom
to choose from a wide range of brands,
so they can find the solution that works
best for their business. We support
them in our centres, from home and
on the move via our app.
We support partners by providing
established international sales and
marketing channels and comprehensive
training from the outset as well as
ongoing support and training from
an experienced global team.
These are the people who ensure
Above all, they want a great day at work,
we deliver customer value and
based on mutual loyalty, exciting
therefore drive our growth, attract
rewards, effective development
new business and deliver the returns
opportunities and the benefits associated
our shareholders want.
with working for a global leader.
Comprehensive training programme
with over 300 webinars delivered to
employees in 2020 as well as the
launch of the new IWG Academy.
PARTNERS
Franchisees seeking opportunities to
diversify into an exciting and fast-growing
market, and building owners and
developers wishing to drive the best
possible return on investment.
EMPLOYEES
The people who – in growing numbers
of neighbourhoods across the world
– do most to ensure our customers have
a great day at work.
COMMUNITIES
The places where our centres are based,
increasingly home to where our own
people and customers’ employees live
and wish to work.
the world.
They are increasingly the source
They want us to help them thrive,
not only of our employees but our
attracting new employment and
customers too, enabling us to grow at
enabling local people to work close
scale in multiple local markets across
to home.
IWG is heavily involved in community
projects from education to health
related initiatives.
SHAREHOLDERS
The individuals and institutions who
own our shares and provide the support
we need to deliver sustainable
stakeholder value.
They give us the financial support and
Our investors want us to continue
authorisation we need to continue
articulating and following our successful
our unique strategy for growth and
strategy, communicating with them
strengthen our leadership position in
clearly and regularly, and giving them
the global flexible-workspace sector.
the opportunity to comment on our
progress. Above all, they want us to
grow the value of our shares and
operate a progressive dividend policy.
In 2020 investor relations held over
300 meetings with investors and
analysts. After the first quarter of 2020,
these meetings were held virtually
in view of COVID-19 considerations.
A GLOBAL SOLUTION FOR EY NORWAY
When it comes to working with our customers, one of our five key
stakeholder groups, all that matters is meeting as many of their
needs as possible.
So when EY made an initial enquiry about the provision of a head
office for its organisation in Norway, we were keen to provide its
professionals with the most flexible ‘hub-and-spoke’ service we
could devise. The resulting agreement is built on our 30 years’
experience of supporting large organisations with fully customised
solutions, and marks a new departure for EY across its global
footprint that covers more than 150 countries.
When it opens in 2023, EY’s Norway head office will cover the
four top floors of Oslo’s Stortorvet 7 building, the rest of which will
house our largest Spaces coworking centre in Norway. Critically,
all EY’s people in Norway will have access to all IWG’s meeting
rooms, workstations and coworking facilities across the world,
enabling them to work whenever they want to in more than 1,100
cities and suburbs.
According to Thomas Weeden, IWG’s country manager of Norway
and Finland, “Our global reach means we are uniquely positioned
to help companies benefit from a new way of working in an
international network.”
The Oslo HQ is set to provide everything that cutting-edge office
accommodation should deliver, including BREEAM certification,
‘drive-in’ bike parking, fitness facilities and changing rooms. It also
includes an exclusive roof terrace for EY, plus a bar and restaurant
that are open to the public.
iwgplc.com
35
STRATEGIC REPORT
FRANCHISEES AND PROPERTY OWNERS
Partnering to bring
hybrid working to the world
As we expand our global footprint, franchise partners and property owners are gaining ever-better
access to the opportunities that come from working with us.
Property owners across the world have
always been partners in IWG’s expansion
success. And franchise investors and
operators are increasingly coming to
recognise the opportunity working
with us presents as hybrid working
trends increase.
The time is right. Many franchise
operators are active in markets that are
working with brands that are either close
to saturated, overly reliant on retail,
or have been severely impacted by
the COVID-19 crisis. And today there is
one global industry where everything
is pointing to an exciting future of fast,
sustainable growth that provides an
attractive opportunity to diversify away
from the traditional franchise landscape
and make strong returns.
A POWERFUL GROWTH
OPPORTUNITY
This, of course, is the vibrant hybrid-
workspace sector, which is set to benefit
over the years ahead thanks to a
confluence of powerful trends:
– Employers are seeking more flexible
property solutions, to enable them
to scale up or down quickly and
cost-effectively in response to
emerging threats and opportunities.
– Employees are demanding more
vociferously than ever the right to
work flexibly: at home, in local satellite
offices and occasionally at HQ.
Employers, too, are increasingly open
to change having seen how the
flexible model works in action.
– Companies are increasingly aware
of the engagement, retention and
productivity benefits of flexible working.
– Demands for a lower-carbon
economy have gone mainstream,
and the ability to reduce employees
commuting is the quickest and most
important win many employers can
achieve as they focus on fulfilling their
ESG responsibilities.
– Digital solutions are now enabling
the distributed workforce to be
at least as productive as its
office-bound predecessor.
MAJOR FRANCHISE DEAL EXTENDS
FOOTPRINT IN GERMANY
One of Germany’s most respected entrepreneurs and angel
investors has become the country’s second IWG franchise partner,
with a commitment to take on a total of eight Regus centres
across Bavaria during the years ahead.
Dr Ralph Altenburger, owner of Planet9 Investments, is confident
that the sharing economy and flexible work solutions are
important social trends that are here to stay. As he says, “They
open up enormous growth opportunities that fascinate me as an
investor and entrepreneur. Regus, as the market leader, offers an
excellent basis to position myself in this area with a strong brand,
professional infrastructure and a global network.”
Dr Altenburger, with his business partner Hans Stübinger, took
over a franchise on an existing centre in Augsburg in late 2019.
According to Marco Wild, IWG’s Franchise Director for Germany,
Austria, Denmark & Sweden, “Augsburg is just the sort of second-
tier city that’s benefiting from people’s decisions, emphasised by
the COVID-19 crisis, to work closer to where they live. The centre
has performed exceptionally well during its first year, with a stable
customer base and strong pipeline of new leads.”
In December 2020, Dr Altenburger signed the lease on his second
centre, which will be in Regensburg, north of Munich. As Marco
Wild explains, “This is an excellent example of the growing
recognition by many successful businesspeople of the growing
investment opportunities connected with the shift to flexible
working.”
As Dr Altenburger put it, “I am now looking forward to providing
our customers with flexible, modern workplace solutions in
attractive Bavarian cities. We have already fired the starting pistol
in Augsburg and further locations will follow soon.”
36
IWG plc Annual Report and Accounts 2020
FEEDING AUSTRALIA’S ‘BOOMING’
APPETITE FOR FLEXIBLE SPACE
We’ve signed our first franchise deal in Australia,
enabling us to add 10 centres in Northern Queensland
to the 79 we already operate across the country.
Our partners in the new ventures are Adam and Katrina
Adams, owners of the highly successful Adams Group
which runs convenience and service-station franchises
across Australia.
According to Adam Adams, “The appetite for flexible
and coworking spaces was booming in Australia
pre-COVID and the pandemic has only increased
demand. There is a clear gap in the market for a
high-quality product in Queensland and our goal is to
partner with Regus, the global leader, with a strong
brand, professional infrastructure and worldwide
network to fulfil this need.”
The Australian flexible workspace market has rocketed
in recent years, reflecting the country’s ‘early adopter’
culture. According to Mark Bhardwaj, IWG’s Head of
Partnership growth in Australia and New Zealand, “We
are actively looking for franchise partners to capitalise
on this growing demand, and are confident of adding a
significant number of further locations to our footprint.”
In recent years, and vastly accelerated
by the 2020 COVID-19 crisis, IWG has
seen demand for flexible workspace
outside city centres – in the suburbs,
and even in small towns and villages
– grow exponentially. This is driving
increased interest from franchise
partners and is set to be IWG’s greatest
source of network expansion in the
years ahead.
It is therefore fuelling our strategic
shift towards the franchise model,
in which we sell our centres, regional
development areas and in some cases
even national networks to long-term
partners who then use the power of our
brands and business model to grow
their businesses. And the move away
from city centres is enabling our
franchise partners to develop their
business in their own areas, supporting
local communities by attracting new
employers and enabling more people
to live, work and spend locally.
It’s a win-win situation for everybody,
and our franchise partners are
enthusiastic. According to Tom Abuaita,
who with his business partner has
diversified away from the food and
beverage sector to open a 13,000 sq ft
Regus centre in Wolverhampton, UK,
“I enjoy turning a standard office into
an amazing coworking space. That’s one
of the things I like about Regus – they
are top-end, quality coworking spaces.”
STRATEGIC ADVICE
In the Philippines, franchise partner
Ricardo Lagdameo has committed to
opening eight new centres in the region
over the next five years. As he says,
IWG has been highly supportive, with
senior-level strategic advice and training
on everything from sales to operations.
“The good thing about IWG is that it
understands our success is its success.
And partnering with IWG as a globally
recognised brand makes it easier to
attract new clients.”
In 2020, IWG has entered agreements
with 15 new franchise partners, covering
a total of 67 committed centres in 14
countries, all of whom benefit from the
three decades and counting that we’ve
spent formulating and fine-tuning our
business model.
PROPERTY PARTNERSHIPS
As well as franchise partners, we are
interested in partnering with anybody
who owns commercial property
anywhere in the world. Over three
decades, we have together proven
how such partnerships add value to
properties, helping them transform into
high-quality spaces that can leverage
our globally recognised brands.
Today, our 2,500 landlord partners are
not only enjoying access to the global
commercial real-estate market’s
fastest-growing sector, they are also
gaining from more than three decades’
experience that has enabled us to refine
our business model into a precision tool
for driving sustainable growth.
iwgplc.com
37
STRATEGIC REPORT STRATEGIC OBJECTIVES AND KEY PERFORMANCE INDICATORS
A strategy for
sustainable growth
We aim to deliver
sustainable profitable
growth for our investors
through providing
customers globally with
an unrivalled choice
of convenient work
environments that suit the
full range of workspace
and service needs.
INDUSTRY‑LEADING
PROFITABLE GROWTH
BEST‑IN‑CLASS
COST LEADERSHIP
Pre-2019 Adjusted EBITDA
development (£m)
Overheads as
percentage of revenue (%)
£255.9m
11.9%
Pre-2019 Adjusted EBITDA*¨ down from
£435.3m for 2019 reflecting the impact
of COVID-19
Overheads as a % of revenue¨ before
all non-recurring items were well
controlled at 11.9%
2020 – Pre-2019*
255.9
2020
11.9%
2019 – Pre-2018
2018 – Pre-2017
2017 – Pre-2016
455.0
2019
402.5
379.5
2018
2017
10.6%
10.3%
10.4%
COVID-19 made 2020 the most
challenging year in our history.
Notwithstanding this, our revenue
performance was resilient, which,
together with the swift, comprehensive
actions taken to reduce costs, delivered
pre-2019 EBITDA¨ of £255.9m before
COVID-19 related adjusting items.
For the Group these adjusting items
were £379.5m.
FUTURE AMBITIONS AND RISKS
The continued impact on market
conditions of COVID-19 is likely to pose
a challenge for much of 2021. However,
we continue to aim to deliver long-term
revenue growth by expanding coverage
in growth markets and innovating to
create incremental revenue streams.
By also focusing strongly on controlling
costs, we aim to generate profitable
growth and reinvest in the business to
continue to provide attractive
shareholder returns.
Whilst Group overheads¨ for 2020,
excluding adjusting items of £56.4m
related to COVID-19, increased 17.0%
at constant currency to £324.4m
(2019: £280.0m), these included
£28.6m of non-recurring costs relating
to corporate restructuring. Excluding
these non-recurring costs, Group
overheads¨ increased by 5.6% to
£295.8m, representing 11.9% of the
Group’s lower revenue reported for
2020 (2019: 10.6%). The increased
investment in overheads, particularly
in the second half, reflects the Group’s
continued development of enterprise
accounts and pivot to a capital light
growth model and a scaled platform
of services.
FUTURE AMBITIONS AND RISKS
We will continue to focus on controlling
overheads to deliver operational
efficiency. This will be balanced with
further planned investment in overhead
to improve the performance of our
well-invested operating platform,
processes and people.
* Including only those operations that were
open throughout the period, pre COVID-19
related adjusting items and pre-IFRS 16
38
IWG plc Annual Report and Accounts 2020
GLOBAL MULTI‑BRAND
NETWORK
STRONG CASH
GENERATION,
ENABLING INVESTMENT
ATTRACTIVE
SHAREHOLDER RETURNS
Network
3,313 locations
We continue to add quality,
convenience and choice to our
network in a carefully controlled
and risk-managed way.
Cash flow before net growth
capital expenditure, investments,
dividends, share repurchases
and adjusting items¨
£140.7m
During 2020 we generated £140.7m
of cash flow.
Total return to shareholders
£43.7m
To preserve cash in direct response
to COVID-19 we withdrew our final
dividend to shareholders for 2019
and suspended our share repurchase
scheme and further dividends.
2020
2019
2018
2017
3,313
2020
£140.7m
3,388
2019
£224.6m
£43.7m
2020
2019
3,306
3,125
2018
2017
£259.2m
2018
£215.5m
2017
£107.7m
£93.9m
£99.6m
In direct response to the pandemic,
decisions were taken to accelerate the
rationalisation of underperforming
centres to ensure we emerge a stronger
business post COVID-19. Overall, 217
locations were rationalised, mostly
directly COVID-19 related. During 2020
we added 141 new locations in order
to maintain the largest global and most
widely distributed network.
FUTURE AMBITIONS AND RISKS
The overall business environment
globally in 2020 was extremely difficult
and these conditions are likely to persist
well into 2021, which may lead to
further rationalisation of the network.
We remain however, clearly focused
on accelerating growth through our
franchising strategy and, with many
discussions taking place, we anticipate
delivering further franchise agreements.
Simultaneously we will continue to
develop our unrivalled brand portfolio
to enhance the choice available to
more customers.
Cash generation continues to be an
attractive feature of our business model.
Despite the negative impact the
COVID-19 pandemic has had on
business activity and customer growth,
and the reported financial performance,
the Group’s cash performance has been
very resilient with a cash inflow of
£140.7m¨ before net investment in
growth, capital expenditure, investments,
dividends, share repurchase and
adjusting items.
FUTURE AMBITIONS AND RISKS
Whilst challenging conditions directly
related to COVID-19 are likely to
continue well into 2021, our focus
on 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. We also anticipate that
our strategic pivot towards franchising
will release further significant cash flows
over the medium term with the signing
of new agreements.
Given the prolonged uncertainty caused
by COVID-19, we believe it is prudent to
protect our liquidity and as a result the
cash distribution to shareholders in 2020
was restricted to the £43.7m on share
repurchases conducted before awareness
grew in markets across the world of
the very real challenges coming from
a growing global pandemic.
TOTAL SHAREHOLDER RETURN
Value (£) (rebased)
140
120
100
80
0
(0.5)%
(11.6)%
Jan 20 Mar 20 May 20
Jul 20
Sept 20 Nov 20
IWG plc
FTSE 350 Index
(excl. investment trusts)
FUTURE AMBITIONS AND RISKS
Our capital allocation policy remains
in place, prioritising investment in the
long term development of our business
and distributions to shareholders.
We intend the earliest possible return to
continuing to provide attractive returns
to shareholders with the continuation
of a progressive dividend distribution
and share repurchase programme.
iwgplc.com
39
STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S REVIEW
Despite COVID-19, cash
performance has been resilient
The demand for more distributed
working has increased sales in many
of the satellite towns and cities outside
of major cities, as more customers
adopt hybrid working. The conditions
experienced in 2020 have made it our
most challenging year ever experienced.”
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
FINANCIAL PERFORMANCE
The review below highlights the
reported results in accordance with
IFRS. Under IFRS 16, while total lease
related charges over the life of a lease
remain unchanged, the lease charges
are characterised as depreciation and
financing expenses with higher total
expense in the early periods of a lease
and lower total expense in the later
periods of the lease.
The Group also presents the results in
accordance with pre-IFRS 16 accounting
standards¨ as it provides useful
information to key stakeholders on
how the Group is managed, operating
performance targets are measured, and
reporting for bank covenants and certain
lease agreements are prepared.
COVID-19
The declaration by the World Health
Organization of the COVID-19 pandemic
and subsequent global government
restrictions impacted the Group’s ability
to operate at full capacity in 2020.
The continuation of COVID-19, including
new and extended preventative measures
in most of the Group’s markets, is
expected to prolong the impact on our
business in 2021. Following early signs
of recovery during the fourth quarter
of 2020, we expect our anticipated
recovery in 2021 to be delayed but aided
by global vaccination programmes.
As a result, in order to improve the
transparency and usefulness of the
financial information presented and
improve year-on-year comparability,
the Group has identified net charges
of £389.8m (pre-IFRS 16: £379.5m¨)
relating to directly attributable expenses
and gains resulting from COVID-19.
These charges are adjusting items as
they meet the Group’s definition applied
in previous years, being significant
both in nature and value to the results
of the Group for the year ended
31 December 2020.
The adjusting items relate to several
separately identifiable items which
involve accounting judgement and
estimates as follows:
– Network rationalisation
– Provision for expected credit losses
– Transaction costs on deferred
franchising deals
– Goodwill impairment
– Other one-off items
Should the actual costs relating to the
amounts provided prove to be different
to the costs incurred and provided for,
the excess or surplus will be disclosed
in future years, as adjusting items.
NETWORK RATIONALISATION
As previously announced, in direct
response to the pandemic, decisions
were taken to accelerate the
rationalisation of underperforming
centres to ensure we emerge a stronger
business post COVID-19. The estimated
net impact of network rationalisation
is £322.3m (pre-IFRS 16: £312.0m¨).
This charge includes the impairment
of right of use and non-moveable assets
and exit costs incurred in the year,
which are over and above the normal
run rate for the Group.
40
IWG plc Annual Report and Accounts 2020
2020
(Pre-IFRS 16)
2,480.2
(169.9)
2019
(Pre-IFRS 16)
2,648.9
414.1
GROUP INCOME STATEMENT
£m
Revenue
Gross profit/(loss)
(centre contribution)
Gross profit before adjusting items(1)
Overheads(2)
Joint ventures
Operating (loss)/profit
Operating (loss)/profit before
adjusting items(1)
Net finance costs
(Loss)/profit before tax from
continuing operations
Taxation
Effective tax rate
(Loss)/profit after tax from
continuing operations
Profit after tax from
discontinued operations
(Loss)/profit for the period
Basic EPS (p)
– From continuing operations
before adjusting items(1)
– Attributable to shareholders
Depreciation & amortisation
Adjusted(1) EBITDA
2020
(As reported)
2,480.2
19.9
353.3
(369.3)
(2.6)
(352.0)
37.8
(268.1)
(620.1)
(30.1)
(4.9)%
(650.2)
3.4
IFRS 16 impact
–
189.8
200.1
11.5
–
201.3
211.6
(257.2)
(55.9)
13.2
(42.7)
0.3
153.2
(380.8)
(2.6)
(553.3)
(173.8)
(10.9)
(564.2)
(43.3)
(7.7)%
(607.5)
3.1
(646.8)
(42.4)
(604.4)
(26.9)
(67.9)
1,195.0
1,233.9
(24.0)
(63.5)
307.3
133.8
IFRS 16 impact
–
151.0
151.0
(1.0)
–
150.0
150.0
(213.5)
(63.5)
6.8
(56.7)
2019
(As reported)
2,648.9
565.1
565.1
(281.0)
2.7
286.8
286.8
(231.8)
55.0
22.3
(40.5)%
77.3
4.2
373.3
(52.5)
450.6
8.7
50.5
1,169.2
1,482.8
414.1
(280.0)
2.7
136.8
136.8
(18.3)
118.5
15.5
(13.1)%
134.0
369.1
503.1
15.0
56.4
267.8
428.3
1. Adjusting items relate to income and costs arising specifically from the impact of COVID-19
2. Overheads for 2020 include COVID-19 and other non-recurring items of £85.0m
GOODWILL IMPAIRMENT
Despite the continued uncertainty
created by COVID-19, there are no
long-term indicators of impairment
identified for the US and UK and these
businesses are expected to recover post
COVID-19. However, as previously
reported with the interim results, the
COVID-19 crisis and linked restrictions
have impacted our ability to trade our
way to sustainable profitable growth in
certain markets. As a result, the
projected cash flows for the operations
in certain insignificant markets no longer
supported the carrying value of
goodwill, and an impairment of £4.9m
was taken as at 30 June 2020. No
further impairment was taken in the
second half.
PROVISION FOR EXPECTED
CREDIT LOSSES
The COVID-19 pandemic unfortunately
presents an unprecedented crisis to
many of our customers who may
struggle to navigate through these
challenges without external support.
We have therefore endeavoured to
provide support wherever possible
to our customers to sustain our
long-term relationships.
Considering the disruption of centres
globally, the Group reviewed the
recoverability of its debtor profile and
recorded an increase in the expected
credit-loss provision of £17.5m for 2020.
This increase reflects the greater
likelihood of credit default by the Group’s
debtors directly attributable to the
impact of COVID-19 and the likelihood
of recoverability of such outstanding
balances payable to the Group.
The increase is relatively low compared
to the overall debtor profile as the
Group has not historically incurred
significant credit losses and continues to
maintain customer deposits as additional
security in the rare event of non-
performance of customer contracts.
OTHER ONE-OFF ITEMS
INCLUDING RESTRUCTURING
During 2020, the Group incurred £8.2m
of transaction costs in respect of master
franchise agreements that have not
completed as at 31 December 2020
because of COVID-19. The Group
continues its pivot towards a franchising
model and discussions on master
franchise agreements have since
resumed. Other net charges of £36.9m
were also incurred in relation to
restructuring the Group in respect
of the COVID-19 crisis.
iwgplc.com
41
STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Pre-2019 revenue† for the year declined
7.4% at constant currency to £2,129.8m
(2019: £2,328.7m), with all regions
experiencing year-on-year revenue
declines. A similar pattern emerged
through the year. After a very strong first
quarter, weakness was experienced in
the second quarter resulting in a
relatively flat first half performance with
revenue up 0.2% at constant currency.
This weakness continued into the
second half with each quarter showing
increasingly weaker year-on-year
performance. As a result, pre-2019
revenue declined 15.8% at constant
currency in the second half.
Overall, occupancy for the pre-2019
business decreased marginally year-on-
year to 72.9% (2019: 73.9%).
Overall, open centre revenue† of
£2,393.4m (2019: £2,408.1m) was
broadly stable for the year, a 0.5%
increase when compared at constant
currency. Again, this performance is
reflective of conditions becoming more
challenging as we moved through the
year. Open centre revenue in the first
half increased 10.2% at constant
currency, an outcome that was very
much first quarter driven. The second
quarter reduced to a small positive
revenue increase and thereafter moved
increasingly into negative territory as the
impact of the pandemic continued to
be felt on the business.
The continued maturation of the
locations opened in 2018 and 2019 and
the initial revenue contribution from
the 2020 openings combined to deliver
the broadly flat revenue position for the
year. Regionally, as can be seen in the
table below, the increase in revenue
from our second largest region, EMEA,
was essentially offset by the decline
in our largest market, the Americas.
Open centre revenue is not
impacted by the pro-active network
rationalisation programme.
ESTIMATED RESULTING
COST BENEFIT
The anticipated annualised cost
benefit arising from these actions
taken to respond to COVID-19, if fully
implemented, is expected to be in
the range of £325m to £375m. The
estimated cumulative benefit of these
actions accruing to the Group in future
years will be significant and is estimated
to be approximately £2.4bn as
previously announced.
REVENUE
Total Group revenue† decreased from
£2,648.9m to £2,480.2m, a 5.3% decline
when compared at constant currency.
This is a commendable outcome given
the increasing quarterly year-on-year
weakness experienced from the second
quarter onwards, including double-digit
revenue declines in the third and fourth
quarters. The improvement achieved in
sales activity has been offset by
customer churn and the significant
impact the pandemic has had on service
revenue. Only EMEA recorded annual
revenue growth, aided by the annualised
benefit of acquisitions in late 2019,
but even here revenue declined in the
second half. Although the year-on-year
trends for the Group after the first
quarter were sequentially increasingly
more negative, the absolute level
of monthly revenues stabilised in the
second half and showed some
improvement in December.
As anticipated and previously
highlighted, the performance of the
business outside of central business
districts was more resilient. The demand
for more distributed working has
increased sales in many of the satellite
towns and cities outside of major cities,
as more customers adopt hybrid
working. The conditions experienced in
2020 have made it our most challenging
year ever experienced. Despite seeing
early signs of recovery during the fourth
quarter of 2020, the continuation of the
pandemic, including new or extended
preventative measures in most of the
Group’s markets, is likely to persist well
into 2021 before we see the
environment improving.
42
IWG plc Annual Report and Accounts 2020
OPEN CENTRE REVENUE PERFORMANCE BY REGION
On a regional basis, open centre revenue† performance can be analysed as follows:
£m
Americas
EMEA
Asia Pacific
UK
Other
Total
2020
1,034.2
688.9
285.0
379.7
5.6
2,393.4
% Change
(constant currency)
% Change
(actual currency)
2019
1,120.5
611.9
285.3
381.4
9.0
2,408.1
(5.9)%
12.6%
1.9%
(0.4)%
–
0.5%
(7.7)%
12.6%
(0.1)%
(0.4)%
–
(0.6)%
AMERICAS
After a strong first quarter in 2020 our largest region, the Americas, faced a very challenging environment as the pandemic spread
across the region.
£m
Total revenue†
Open centre revenue†
Pre-2019 revenue†
Pre-2019 occupancy
Number of centres
2020
1,066.5
1,034.2
969.8
74.1%
1,271
2019
1,187.9
1,120.5
1,099.8
77.2%
1,298
% Change
(constant currency)
% Change
(actual currency)
(8.4)%
(5.9)%
(10.1)%
–
–
(10.2)%
(7.7)%
(11.8)%
(308) bps
–
Revenue from open centres† declined 5.9% at constant currency to £1,034.2m as conditions increasingly deteriorated from the
second quarter onwards due to COVID-19. Total revenue† declined 8.4% at constant currency to £1,066.5m after a reduction
of 1.1% in the first half. Without the benefit of the maturation of the centres opened in 2019 and 2020, pre-2019 revenue† for the
region decreased 10.1% at constant currency to £969.8m, with double-digit declines in almost all the major countries in the
region. A notable exception among the top countries remained Mexico, where a strong first half resulted in mid-single digit
growth for the year despite negative growth in the second half.
Average occupancy for the region in the pre-2019 business decreased to 74.1% (2019: 77.2%).
During 2020, 32 new locations were opened in the region and 59 locations were rationalised. Following these actions there were
1,271 locations in total in the Americas at 31 December 2020.
EMEA
The stronger performance in EMEA relative to the other regions reflects the previously reported strong start to 2020 in
most of the major countries in the region and the annualised benefit of acquisitions completed in the second half of 2019.
Otherwise the performance through the year was similar to the other regions, with much weaker performance in Q3 and Q4.
Open centre revenue† has increased 12.6% to £688.9m at constant currency. Open centre revenue growth† was heavily weighted
to the first half with growth of 22.3% followed by a 3.8% increase in the second half. Total revenue† increased 4.7%, at constant
currency, to £715.1m. Pre-2019 revenue declined 1.6% at constant currency to £564.0m. The pre-2019 occupancy increased
to 73.9% (2019: 72.5%).
£m
Total revenue†
Open centre revenue†
Pre-2019 revenue†
Pre-2019 occupancy
Number of centres
2020
715.1
688.9
564.0
73.9%
1,093
2019
683.0
611.9
575.1
72.5%
1,096
% Change
(constant currency)
% Change
(actual currency)
4.7%
12.6%
(1.6)%
–
–
4.7%
12.6%
(1.9)%
138 bps
–
A total of 72 new locations were added and 76 locations were rationalised across this region during 2020. This net reduction
of three locations took the total in the region to 1,093 at 31 December 2020.
iwgplc.com
43
STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
ASIA PACIFIC
Our business in Asia Pacific endured a challenging second half as the effect of the pandemic impacted revenue after delivering
a good performance in the first half. Revenue from all open centres† increased 1.9% at constant currency to £285.0m. First half
growth of 16.2% was followed by a decrease of 11.0% in the second half. Total revenue† from the region declined by 9.5%
at constant currency to £304.2m. Pre-2019 revenue was down 6.4% to £252.2m (2019: £274.7m) and pre-2019 occupancy
decreased to 70.4% (2019: 71.3%).
£m
Total revenue†
Open centre revenue†
Pre-2019 revenue†
Pre-2019 occupancy
Number of centres
2020
304.2
285.0
252.2
70.4%
645
2019
342.7
285.3
274.7
71.3%
682
% Change
(constant currency)
% Change
(actual currency)
(9.5)%
1.9%
(6.4)%
–
–
(11.2)%
(0.1)%
(8.2)%
(84)bps
–
A total of 24 new locations were added in the region and 61 locations were rationalised during 2020. At 31 December 2020
we had a total of 645 centres in the region.
UK
Like our other markets, the UK had a strong first quarter, but was then increasingly impacted by the COVID-19 pandemic from
the second quarter onwards. As anticipated and previously highlighted, the performance of the UK business outside of central
London was more resilient. The demand for more distributed working has increased sales in many of the satellite towns and cities
outside of London, as more customers adopt hybrid working.
£m
Total revenue†
Open centre revenue†
Pre-2019 revenue†
Pre-2019 occupancy
Number of centres
2020
388.8
379.7
338.2
71.0%
304
2019
426.3
381.4
370.1
71.4%
312
% Change
(constant currency)
% Change
(actual currency)
(8.8)%
(0.4)%
(8.6)%
–
–
(8.8)%
(0.4)%
(8.6)%
(39)bps
–
Revenue from open centres† decreased 0.4% to £379.7m. Pre-2019 revenue† declined by 8.6% to £338.2m (2019: £370.1m)
and total revenue† in the UK declined 8.8% to £388.8m, reflecting the continued network rationalisation in the UK. Pre-2019
occupancy decreased to 71.0% (2019: 71.4%).
A total of 13 new locations were added and 21 locations rationalised in the UK during 2020. The net of these additions and the
network rationalisation programme led to an overall reduction of eight locations in the region to 304 at 31 December 2020.
EBITDA
Adjusted EBITDA as reported reduced to
£1,233.9m (2019: £1,482.8m), due to the
impact of COVID-19 on our business
performance.
Under pre-IFRS 16 reporting, adjusted
EBITDA¨ declined from £428.3m
to £133.8m. Adjusted EBITDA still
reflects the significant drag from the
investment in growth, which in 2020
was £112.5m (2019: £27.6m), and
a further £9.9m in respect of closed
centres (2019: £10.3m). The pre-2019
EBITDA¨, which eliminates the drag
from the investment in growth and
therefore offers a more representative
indication of the underlying earnings
performance of the business, was
£255.9m (2019: £435.3m).
Underlying performance has also
been directly impacted as more of our
markets went into lockdown, resulting
in reduced profitability from the second
quarter of 2020, that is expected to
improve as global vaccination rollout
programmes advance and restrictions
are lifted The impact that COVID-19 has
had on underlying trading performance
is not recognised within adjusting items.
OVERHEAD INVESTMENT
Whilst reported Group overheads,
excluding adjusting items¨ of £56.4m
related to COVID-19, increased 12.3%
at constant currency to £312.9m (2019:
£281.0m), these included £30.6m of
additional non-recurring costs related
to corporate restructuring. This was also
true under pre-IFRS 16 reporting, with
Group overheads excluding adjusting
items of £324.4m (2019: £280.0m).
Excluding these non-recurring costs,
overheads¨ increased by 4.9% to
£293.8m, representing 11.8% of the
Group’s lower revenue reported for
2020 (2019: 10.6%). The increased
investment in overheads, particularly
in the second half, reflects the Group’s
continued development of enterprise
accounts and pivot to a capital-light
franchise growth model and a scaled
platform of services.
44
IWG plc Annual Report and Accounts 2020
term incentive schemes. The Group
reissued 1,968,169 shares from treasury
to satisfy such exercises during 2020.
CASH FLOW AND FUNDING
Cash generation continues to be an
attractive feature of our business model
and the Group generated cash monthly
at the centre level up until December
when there was a modest operating
cash outflow resulting from the
completion of deals with landlords that
have secured the significant long-term
positive benefits noted earlier. As more
deals with landlords complete, further
modest outflows are expected in the
first quarter of 2021.
Despite the negative impact the
COVID-19 pandemic has had on
business activity and customer growth,
and the reported financial performance,
the Group’s cash performance has been
very resilient with a cash inflow¨ of
£140.7m before net investment in
growth capital expenditure, investments,
dividends, share repurchases and
adjusting items (2019: £224.6m).
As previously reported, the Group
deployed capital in the fourth quarter
which included £276.2m on a potential
investment which, post the year end, did
not proceed, and has resulted in a return
of that cash outflow in the first quarter
of 2021.
IFRS 16 has no impact on the Group’s
cash flows other than presentation of
where items are classified on the cash
flow statement.
OPERATING LOSS
– CONTINUING OPERATIONS
Adjusted operating profit† as reported
was £37.8m (2019: £286.8m). Including
the adjusting items, the operating loss†
was £352.0m compared to the profit
of £286.8m in 2019 due to COVID-19.
Under pre-IFRS 16 reporting, adjusted
operating loss¨ † for the year ended
31 December 2020 was £173.8m
(2019: profit of £136.8m). In addition
to the planned investment in overheads
to develop the business platform, the
operating profit¨ † continues to reflect
the drag from growth investment of
£175.3m (2019: £42.5m) as well as
£23.8m (2019: £37.8m) from centres
closed during 2020. Including the
adjusting items of £379.5m, the
operating loss¨ † was £553.3m compared
to a profit¨ † of £136.8m in 2019.
NET FINANCE COSTS
The Group reported net finance costs
for the year to 31 December 2020
of £268.1m (2019: £231.8m), including
£257.2m (2019: £213.5m) related to
interest on the Group’s lease liabilities.
Net finance costs in respect of bank
lending decreased to £10.9m (2019:
£18.3m) as there was less need for debt
usage during the year. This primarily
reflects the Group’s laser focus on cash
generation, the benefit for the entire
year of the proceeds from the master
franchise agreements completed last
year, over seven months’ benefit from
the £320m share placing in May 2020
and the lower interest rate benefit from
the £350m convertible bond issue at the
start of December 2020.
TAXATION
The reported effective tax rate for 2020
is (4.9)% (2019: (40.5)%). The effective
tax rate¨ † on continuing operations
under pre-IFRS 16 reporting was (7.7)%
(2019: (13.1)%). Despite reporting a
significant loss for the year resulting
from challenging trading conditions due
to COVID-19, the Group has incurred a
tax charge due to several factors. These
include the continuing profitability of
certain countries and entities within
the overall Group and following some
internal restructuring during 2020,
we have reduced the deferred tax asset
of £89.8m recognised in 2019 by
£20.1m, resulting in a 2020 deferred tax
charge. The tax charge benefited in
2020 from no US BEAT (base erosion
and anti-abuse tax) liabilities in contrast
to the negative £17.5m impact in 2019.
The 2020 tax charge also benefitted
from the positive tax impact of the 2020
US CARES Act, resulting in a prior year
current tax credit of £10.6m in the US.
Dependent upon the Group’s continuing
ownership of specific countries or
regions which may change due to future
potential master franchise agreements,
the impact of COVID-19 on future
results and how long it takes to utilise
available tax losses, we currently
anticipate an effective tax rate in future
years to move back to a similar rate to
that seen in the years prior to 2019
of approximately 20%.
EARNINGS PER SHARE
Basic earnings per share were a loss
of 67.9p (2019: profit of 50.5p). The loss
per share from continuing operations
before adjusting items was 26.9p (2019:
profit of 8.7p).
Under pre-IFRS 16 reporting, earnings
per share¨ decreased in the year ended
31 December 2020 from 56.4p,
including the gain in 2019 on the
strategic partnerships and deferred tax
benefit, to a loss per share of 63.5p.
Earnings per share¨ † from continuing
operations reduced from 15.0p to a loss
of 63.8p. Excluding the adjusting items,
the loss per share reduces to 24.0p.
Diluted earnings per¨ share for the year
to 31 December 2020 were a loss of
63.5p (2019: 55.4p). Diluted earnings per
share¨ † on a continuing basis before
adjusting items for the year were a loss
of 63.8p (2019: 14.7p).
The weighted average number of shares
in issue for the year was 951,890,712
(2019: 892,737,688). The weighted
average number of shares for diluted
earnings per share was 1,045,771,886
(2019: 908,939,911). The Group
acquired 13,590,080 shares in the
first half of 2020, before the share
repurchase programme was suspended,
to be held in treasury to satisfy future
exercises under various Group long-
iwgplc.com
45
STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
CASH FLOW
The table below reflects the Group’s cash flow:
£m
Adjusted EBITDA
Working capital
Growth-related partner contributions
Maintenance capital expenditure
Taxation
Finance costs
Finance lease liability arising on new
leases
Proceeds from partner contributions
(lease incentives)
Other items
Cash flow before growth capital
expenditure, investments, share
repurchases and dividends
Gross growth capital expenditure
Growth-related partner contributions
Net growth capital expenditure(1)
Total net cash flow from operations
Purchase of shares
Dividend
Corporate financing activities
Investment related loan receivable
Net proceeds from the issue of shares
Proceeds on convertible bond
Debt element of convertible bond
Proceeds from master franchise
Opening net debt
Exchange movement
Closing net debt
2020
(As reported)
IFRS 16 impact
2020
(Pre-IFRS 16)
2019
(Pre-IFRS 16)
IFRS 16 impact
2019
(As reported)
1,233.9
24.3
–
(81.9)
(21.9)
(266.4)
(917.8)
111.0
(6.8)
74.4
(310.4)
106.6
(203.8)
(129.4)
(43.7)
–
1.8
(276.2)
313.9
343.2
(291.4)
3.3
(6,840.1)
9.0
(6,909.6)
1,100.1
(218.0)
106.6
15.0
–
(249.4)
(917.8)
111.0
13.8
(66.3)
47.1
–
47.1
(19.2)
–
–
–
–
–
–
–
–
(6,546.0)
6.7
(6,558.5)
133.8
242.3
(106.6)
(96.9)
(21.9)
(17.0)
–
–
7.0
140.7
(357.5)
106.6
(250.9)
(110.2)
(43.7)
–
1.8
(276.2)
313.9
343.2
(291.4)
3.3
(294.1)
2.3
(351.1)
428.3
267.2
(263.0)
(147.8)
(48.8)
(20.7)
–
–
9.4
224.6
(652.0)
263.0
(389.0)
(164.4)
(49.5)
(58.2)
5.4
–
–
–
–
424.6
(460.8)
8.8
(294.1)
1,054.5
(579.3)
263.0
39.1
–
(213.2)
(1,872.8)
204.1
3.8
(1,100.8)
104.4
–
104.4
(996.4)
–
–
–
–
–
–
–
–
(5,643.4)
93.8
(6,546.0)
1,482.8
(312.1)
–
(108.7)
(48.8)
(233.9)
(1,872.8)
204.1
13.2
(876.2)
(547.6)
263.0
(284.6)
(1,160.8)
(49.5)
(58.2)
5.4
–
–
–
–
424.6
(6,104.2)
102.6
(6,840.1)
1. Net growth capital expenditure of £250.9m relates to the cash outflow in the year to 31 December 2020. Accordingly, it includes net capital expenditure
related to locations added in 2019 and to be added in 2021, as well as those added in 2020. The total net investment in the period for 2019 and 2021
additions amounted to £93.4m.
CAPITAL INVESTMENT
IN THE NETWORK
In line with the Group’s expectations,
net growth capital expenditure in 2020
reduced by £80.8m to £203.8m
(2019: £284.6m). This reflects the
dialling down of our growth programme
as part of the mitigating actions taken
to offset the impact of COVID-19 and
the continued focus on pivoting to
capital-light growth, which is expected
to result in further reductions in capital
expenditure in future years. Under
pre-IFRS 16 reporting, net growth capital
expenditure¨ reduced by £138.1m to
£250.9m (2019: £389.0m).
During 2020 we added 141 new
locations and rationalised 217 locations,
mostly directly COVID-19 related.
At 31 December 2020, the Group’s
physical network comprised 3,313
locations globally, providing the largest
global and most widely distributed
network. The new locations added
4.0m sq. ft. of space. This, together
with the impact of the rationalisation
programme, resulted in the Group
having 62.9m sq. ft. of flexible
workspace at 31 December 2020
(2019: 62.4m sq. ft.).
Maintenance capital expenditure¨
also reduced year on year. After the
completion of the planned stepped
up refurbishment programme, notably
in the first quarter, which increased
investment in the first half of the year
to £80.7m (pre-IFRS 16: £91.5m),
investment slowed from the
second quarter. Consequently,
maintenance capital expenditure¨ for
2020 reduced from £108.7m in 2019 to
£81.9m (pre-IFRS 16: from £147.8m in
2019 to £96.9m). A further slowdown
is anticipated for 2021.
STRONG FINANCIAL POSITION
The Group has maintained a strong
financial position throughout 2020.
At 31 December 2020, the Group had
significant liquidity headroom of £802.3m.
Net debt at 31 December 2020 has
increased to £6,909.6m from £6,840.1m
at 31 December 2019. Excluding debt
related to lease liabilities, the Group
had net borrowings¨ of £351.1m
(2019: £294.1m). The year-end position
46
IWG plc Annual Report and Accounts 2020
is below the interim position at 30 June
2020 of £7,067.9m reflecting the network
rationalisation programme and related
actions taken by the Group in response
to COVID-19.
The year-end net debt position includes
£320m of gross proceeds raised
through the equity placing on 28 May
2020, £350m from the convertible bond
offering on 2 December 2020 less the
debt element of the convertible bonds,
and £527.1m deployment of cash for
organic and inorganic growth and
investments. The Group, as previously
announced, also increased the net debt
to EBITDA covenant on its £950m
revolving credit facility. The new capital
raised and increased covenant flexibility
will enable the Group to further execute
its stated strategy.
The lease liabilities recognised by the
Group do not impact on the Group’s
covenants which are based on pre-IFRS
16 accounting standards.
FOREIGN EXCHANGE
The Group’s results are exposed to
translation risk from the movement in
currencies. During 2020 key individual
exchange rates have moved, as shown
in the table below. Overall, these
exchange rate movements had a mixed
but modest impact on the Group’s
results. Revenue was reduced by £27.3m
but gross profit and operating profit
increased by £9.5m and £27.1m
respectively, reflecting the relative
contribution to Group profit from our
US business.
RISK MANAGEMENT
Effective management of risk is an
everyday activity for the Group and,
crucially, integral to our strategic
planning. A detailed assessment of the
principal risks and uncertainties which
could impact the Group’s long-term
performance and the risk management
structure in place to identify, manage
and mitigate such risks can be found
on pages 48 to 55 of the 2020 Annual
Report and Accounts.
RELATED PARTIES
There have been no changes to the type
of related party transactions entered into
by the Group that had a material effect
FOREIGN EXCHANGE RATES
Per £ sterling
US dollar
Euro
At 31 December
Annual year average
2020
1.37
1.11
2019
1.32
1.18
%
3.8%
(5.9)%
2020
1.29
1.13
2019
1.28
1.14
%
0.8%
(0.9)%
on the financial statements for the
period ended 31 December 2020.
Details of related party transactions that
have taken place in the period can be
found in note 30.
DIVIDENDS AND SHARE
REPURCHASE PROGRAMME
For the purposes of liquidity, we are
ensuring that the Group maintains
sufficient funding especially in a period
of significant centre rationalisation.
Our capital allocation policy remains
in place, prioritising investment in the
long-term development of our business
and dividend distribution to shareholders.
However, given the prolonged
uncertainty caused by COVID-19, we
believe it is prudent to protect our
liquidity and as a result, future dividend
payments and a restart of our share
repurchase programme are placed on
hold for the moment with a clear
intention of the earliest possible return
to our stated shareholder return policy.
GOING CONCERN
The impact of COVID-19 on the global
economy and the operating activities
of many businesses has resulted in a
climate of considerable uncertainty.
The ultimate impact of the pandemic
on the Group is uncertain at the date
of signing these financial statements.
The Directors have assessed the
potential cash generation of the Group
against a range of illustrative COVID-19
scenarios (including a severe but
plausible outcome), the liquidity of the
Group, funding available under the
Group’s bank facility and mitigating
actions to reduce operating costs
and optimise cash flows during the
current environment.
In addition, the Group successfully
raised £320m of equity in May 2020
and issued £350m of unsubordinated
unsecured Guaranteed Convertible
Bonds in December 2020 to take
advantage of growth opportunities
and strengthen the Group’s global
leadership position.
On the basis of these actions and
assessments, the Directors consider
it appropriate to continue to adopt the
going concern basis in preparing the
financial statements of the Group.
OUTLOOK
After an excellent start to the year,
2020 brought enormous challenges
for the Group which we have navigated
in a robust manner whilst maintaining
a strong financial position. We have
successfully augmented our capital
resources and are consequently well
poised to capitalise on the new world
of hybrid working as global vaccination
programmes are rolled out, restrictions
are removed, and we emerge from
this crisis.
We are already witnessing an
unprecedented surge in new enterprise
deals. We are signing membership deals
that are multiple times larger than any
previous deals in the Group’s history
and there is a rich pipeline that represents
over one million future members.
The quality and scale of these deals
is demonstrably generating greater
momentum in the evident shift to hybrid
working solutions, which we are uniquely
positioned to support.
Our business has shown great resilience
through this period and, with the actions
we have taken to reset the Group, we
are confident this will bring us through
the challenges and into the new world
of working as a stronger, more profitable
business capable of delivering increased
cashflow and returns.
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
9 March 2021
iwgplc.com
47
STRATEGIC REPORT RISK MANAGEMENT AND PRINCIPAL RISKS
Understanding
and managing risk
We apply significant resources to considering the actual and
potential risks our organisation faces, calculating their possible
impact and creating strategies to protect the interests of IWG
and all our stakeholders.
GOVERNANCE
The Board oversees the risk management
strategy and the effectiveness of the
Group’s internal control framework.
While 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 one, 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.
IDENTIFICATION AND
MANAGEMENT OF RISKS
Identification, mitigation and
management of risks are critical to
achieving our strategic objectives and
protecting our personnel, assets and
reputation. Our enterprise-wide risk
management process allows us to
understand the nature, scope and
potential impact of our key business and
strategic risks, enabling us to manage
them effectively. IWG therefore has a
comprehensive approach to risk
management, as set out in more detail
in the Corporate Governance report on
pages 68 to 75.
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 IWG may also be
affected by risks which are not yet
manifested or reasonably foreseeable.
Any emerging risks that could potentially
affect the viability of IWG’s strategy are
carefully assessed and monitored. We
will continue to drive focus on new and
emerging risks especially in the current
fast changing environment.
A critical part of the risk management
process is to assess the impact and
likelihood of risks occurring so that we
can develop and implement appropriate
mitigation plans. IWG attempts to
minimise the likelihood and mitigate the
impact of all known risks facing the
business. According to the nature of the
risk, IWG may elect to: take or tolerate it;
treat it with controls and mitigating
actions; transfer it to third parties; or
terminate it by ceasing particular activities
or operations. We have zero tolerance of
financial and ethical non-compliance,
and aim to have our Health, Safety,
Environmental and Security risks
managed to levels that are as low as
reasonably practicable.
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.
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
for all investment decisions. These
activities include:
– Monthly business reviews for all
countries and Group functions;
– Individual reviews of every new
location investment and all
acquisitions;
– An annual budgeting and planning
process for all markets and Group
functions;
– A review in each Audit Committee
meeting of the status of our principal
risks; and
– Annual review of all risks in our
risk register, updated currently
for significant changes between
annual reviews.
COVID-19 IMPACT
The speed and scale of the impact of
COVID-19 has been unprecedented
and fundamentally affected all aspects
of our business. All levels of our
organisation have responded rapidly
to mitigate the risks presented to the
business by the pandemic, as set out
in more detail in pages 28 to 29. We
have also incorporated COVID-19
commentary into each of our principal
risks, where applicable, to highlight our
response to this.
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 adequate training of staff
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
48
IWG plc Annual Report and Accounts 2020
PRINCIPAL RISKS
Link to strategy:
Risk status
Risk likelihood
Risk impact
1 Industry-leading profitable growth
2 Best-in-class cost leadership
3 Global multi-brand network
4 Strong cash generation, enabling investment
5 Attractive shareholder returns
Increased
High
Same
Medium
Decreased
Low
High
Medium
Low
STRATEGIC RISKS
Risk
Mitigation
Changes since 2019
LEASE OBLIGATIONS
Link to strategy: 1 2 5
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 revenues
fall significantly, which can
impact profitability and
cash flows.
ECONOMIC
DOWNTURN
Link to strategy: 2 5
An economic downturn could
adversely affect the Group’s
operating revenue, thereby
reducing operating profit
performance or, in an extreme
scenario, result in operating
losses.
This risk is mitigated in a number of ways:
1. 95% 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. This flexibility has no impact
on our accounting for leases in the scope
of IFRS 16.
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 reduces the overall
risk to our business as the phasing of the
business cycle and the performance of the
commercial property market often varies
from country to country and region to region.
4. Each year a significant number of leases in
our portfolio reach a natural break point.
During 2020, the number of ‘flexible’ leases as a
percentage of the total remained the same at 95%.
Approximately 40% of the leases we entered into
during 2020 were variable in nature.
At the end of 2020, we were operating 3,313
locations in 1,131 towns and cities across
120 countries.
COVID-19 impact: During 2020 more than 1,500
leases were renegotiated or restructured which
resulted in short- or long-term cash benefits.
Discussions on the remaining leases are ongoing.
Growth capital expenditure was well controlled
in 2020 by limiting, delaying, or renegotiating the
terms of new centre openings.
We can also see the effects of people’s new way
of working on our business. While there was lower
demand for city centre properties during 2020,
we saw strong escalation of interest in
suburban locations.
In addition, customers can use our digital business
and communication tools to support and engage
their employees at home as an alternative to
having a city-centre based office.
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 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.
The number of ‘flexible’ leases as a percentage
of the total remained at 95%.
Our monthly business performance reviews
provide early warning of any impact on our
business performance and allow management
to react with speed. The Board reviewed the
potential impact of an economic downturn and
addressed a range of potential impacts from the
COVID-19 outbreak when making its annual
Viability Statement on page 55.
COVID-19 impact: There has been sharp focus on
cash generation by reducing cost, renegotiating
rents and rationalising the network. During 2020
more than 1,500 leases were renegotiated or
restructured which resulted in short- or long-term
cash benefits. Discussions on the remaining leases
are ongoing. In 2020, we opened 141 new centres
and closed 217 centres.
iwgplc.com
49
STRATEGIC REPORT
RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED
STRATEGIC RISKS CONTINUED
Risk
Mitigation
Changes since 2019
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.
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.
IWG also offers a diverse product range under
its different brands to cater to multiple
customer segments, allowing us to capture
and maintain market share across the flexible
workspace market.
We continuously review our portfolio to
provide products and services that are aligned
to customer expectations and requirements
and there are currently active investment
programmes being implemented across
our estate.
Assessing the medium- to long-term
implications of Brexit, the Group believes this
will have no significant impact to our business.
In addition, Performance Management
continues to conduct monthly business
reviews to assess centre performance, closures
and NCO performance.
EMERGING TRENDS
AND DISRUPTIVE
TECHNOLOGY
Link to strategy: 5
New formats and
technological developments
are driving demand for flexible
working. Failure to recognise
these could mean IWG’s
product offering is sub-optimal.
INCREASED
COMPETITION
Link to strategy: 3 5
Increased competition in the
serviced office industry and an
inability to maintain sustainable
competitive advantage may
result in loss of market share.
EXPOSURE TO UK
POLITICAL
DEVELOPMENTS
Link to strategy: 1 3 5
Exposure to UK political
developments including Brexit
drives uncertainty and could
adversely affect revenues,
thereby reducing operating
profit performance or, in an
extreme scenario, resulting
in operating losses.
2020 saw ongoing modernisation of the
technology used by IWG. The adoption of the
Microsoft suite of enterprise products underpins
a digital operating platform which supports
business agility and flexibility. The Company
continues to focus on using emerging technology
to improve the customer experience and achieve
operational efficiency.
We are continuously looking at every aspect of our
business for opportunities to leverage technology
to automate, simplify and future-proof our
platform. As technology evolves and matures,
even more opportunities arise.
COVID-19 impact: With the disruption to the office
market due to COVID-19, prompt action was taken
to respond to the situation including new
product development.
While the competitive landscape has shifted
significantly in the past year, we continue to focus
our efforts on offering an unrivalled network
and varied product range to suit the different
requirements of our customers. In 2020 we added
21 new towns and cities.
We rolled-out 61 new locations in our Spaces
coworking format.
COVID-19 impact: There is a continuous review
at both Group and country level to identify trends
or activities impacting our business plus new
acquisition opportunities.
Dependency on the UK market has been reduced
by growth being focused outside the UK. Only 9%
of the new locations added during 2020 were
in the UK.
In 2020, we continued to consolidate some
locations in the UK. In addition, several locations
were refurbished, and 13 new locations added.
Overall, our network in the UK decreased from
312 to 304 locations.
Based on the current position, over 36% of our
leases with landlords in the UK are variable
in nature.
COVID-19 impact: During 2020, 177 UK leases
were renegotiated or restructured.
50
IWG plc Annual Report and Accounts 2020
STRATEGIC RISKS CONTINUED
Risk
Mitigation
Changes since 2019
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.
BUSINESS PLANNING
AND FORECASTING
Link to strategy: 1 2 4 5
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.
FRANCHISE
Link to strategy: 1 2 3 4 5
As the franchising portfolio of
the business grows, it is
important that we are able to
deliver a scaled-up model to
support the transition of owned
businesses along with ongoing
management of the franchise
business.
This risk is mitigated as follows:
1. A Franchise Committee was formed to
oversee key programmes connected with the
franchising model and ensure that significant
risks are identified and mitigated.
2. We enhanced our communications to
franchise partners including sharing best
practices to drive performance and deliver
consistent service to our customers.
The existing forecasting process was enhanced
by creating different scenarios as the economic
environment in 2020 was constantly changing.
The main focus has been cash generation by
reducing cost, renegotiating rents and rationalising
the network.
COVID-19 impact: There has been focus on cash
flows to provide sufficient liquidity for working
capital requirements and potential acquisitions,
including focus on debt collection, supplier
payments and on underlying profitability
of the business.
In 2020, more countries and partners were added
in our franchise portfolio.
Franchise development and support teams
strengthened with the recruitment of a Franchise
Support Director and Franchise Development
Directors for the US, France, Poland and Brazil.
As a result of the franchisee survey conducted
during 2020, we are implementing hands-on
targeted support to the partners, monthly reviews
to drive performance and review of back-end
processes to identify improvement opportunities.
FINANCIAL RISKS
Risk
Mitigation
Changes since 2019
FUNDING
Link to strategy: 4 5
The Group relies on external
funding to support a net debt
position of £351.1m¨ at the end
of 2020. The loss of this
funding would cause a liquidity
issue for the Group.
This risk is mitigated in a number of ways:
1. 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 manage
the risk of breach. The measurement
of these covenant ratios is unaffected
by the recognition of lease liabilities under
IFRS 16.
2. The Group also stress tests these forecasts
with downside scenario planning to assess
risk and determine potential action plans.
3. The Board intends to maintain a prudent
approach to the Group’s capital structure.
4. 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.
5. The Group also constantly reviews and
manages the maturity profile of its
external funding.
The Group raised £320m of new equity in
May and issued a £350m convertible bond in
December. In addition to strengthening the
Group’s balance sheet, this reduced the
dependence on funding from the banking market.
Our liquidity position remains strong.
The Group has a £950m Revolving Credit Facility
provided by a group of prime banks. This facility
is committed and available until 2025 with an
option to extend until 2026. The RCF contains
financial covenants on net debt to EBITDA and
fixed charge cover ratios. We expect to remain
within the covenant limitations throughout the
forecast period.
iwgplc.com
51
STRATEGIC REPORT
RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED
FINANCIAL RISKS CONTINUED
Risk
Mitigation
Changes since 2019
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.
Overall, in 2020 the movement in exchange rates
over the course of the year reduced revenue by
£27.3m while gross profit and operating profit
increased by £9.5m and £27.1m respectively,
reflecting the relative contribution to Group profit
from our US business.
EXCHANGE RATES
Link to strategy: 2 5
The principal exposures of the
Group are to the US dollar and
the euro, with approximately
37% of the Group’s revenue
being attributable to the US
dollar and 22% to the euro.
Any depreciation or
appreciation of sterling would
have an adverse or beneficial
impact to 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.
INTEREST RATES
Link to strategy: 2
Operating in a net debt position,
an increase in interest rates
would increase finance costs.
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.
The Group’s exposure to higher interest rates was
significantly reduced following the issue of the
£350m convertible bond which carries a fixed rate
coupon of 0.5%.
The Group had interest rate protection on £30m
of borrowings until February 2021.
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IWG plc Annual Report and Accounts 2020
OPERATIONAL RISKS
Risk
Mitigation
Changes since 2019
CYBER SECURITY
Link to strategy: 2 5
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.
BUSINESS CONTINUITY
Link to strategy: 2 3 5
Business continuity covering
systems, regional hubs and
operations.
Should the data centres, sales
call centres, regional hubs and
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.
This risk is mitigated as follows:
1. IWG’s Information Security Steering
Committee reports regularly to the Board
of Directors and has wide representation from
business operations, risk assurance, legal, IT
and Non-Executive Board members.
2. IWG runs a world-class Information Security
programme with ISO/IEC 27000 adopted as
its charter to establish, operate and monitor
its Information Security Management System.
3. The programme is delivered in collaboration
with external specialists across
our environments.
4. Using a risk-based approach, IWG
continuously identifies, evaluates and applies
remediation controls to threats that could
impact the security, confidentiality and
integrity of its assets.
5. IWG transfers residual risk through its
comprehensive cyber insurance coverage
provided by a global leader in
cyber insurance.
6. We have a robust security incident
management process which facilitates and
coordinates our response in the event of
a security incident.
7. Security awareness training is mandatory
for all employees that covers Information
Security, PCI and Privacy.
IWG manages this risk through:
1. The implementation and regular testing of its
business continuity plans for different parts of
the organisation, which includes business
processes, personnel knowledge of manual
procedures and disaster recovery procedures
for our technology systems.
2. All critical applications have been migrated
to the cloud with high availability and
geo-redundancy, allowing availability of
critical systems and providing employees
access to the systems from any location,
a critical element of our business
continuity plans.
3. A robust managed services and managed
security services agreement in place with
leading vendor.
4. The Group uses a risk-based approach
to determine additional redundancy
requirements across its entire technology
platform, including the global telephony
infrastructure critical for continuity of its sales
and call centre environment.
5. Appropriate business interruption insurance is
in place.
6. Country Business Continuity Plan and Centre
Disaster Recovery Plan are in place and
regularly reviewed.
IWG has developed a security roadmap to carry
out information security best practices, strengthen
controls and implement security operations to
detect potential incidents.
All critical systems have been migrated to the
cloud with high availability and geo-redundancy
for disaster recovery. As part of this cloud
migration, IWG has implemented best practice
cloud security controls. The entire environment
is managed by a world- leading security managed
services provider.
Information Security approvals have been
established for all new projects which requires
conformance to our cloud security blueprint.
A programme is in place to continuously
implement Microsoft 365 platform
security features.
Our cloud migration project has been completed
and all critical systems have disaster recovery plans
in place.
All new systems development includes disaster
recovery built into the initial design phase.
For our voice communications platform, we
have built in additional redundancy in countries
where we experience minor disruption due to
external factors.
COVID-19 impact: All employees were able to
effortlessly work from home with no significant
disruption.
Immediate COVID-19 response was implemented
to keep centres open and safe for customers and
employees. Refer to pages 28 to 29 for our
response to COVID-19.
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STRATEGIC REPORT
RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED
OPERATIONAL RISKS CONTINUED
Risk
Mitigation
Changes since 2019
ETHICS AND
COMPLIANCE
Link to strategy: 2
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
Link to strategy: 5
IWG is required to comply with
legislation in the jurisdictions in
which it operates including the
new General Data Protection
Regulation (GDPR) and other
local data privacy laws.
Non-compliance and breaches
could result in significant
financial penalties and
reputational damage.
GROWTH RISKS
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 mitigates this risk as follows:
1. IWG operates a comprehensive programme
that covers all aspects of data privacy and
data protection.
2. Our strategy is to process minimum amounts
of personal data, which are kept only to the
extent necessary to provide a service to our
customers.
3. We apply the principle of ‘least access’
privilege and separation of duties to safeguard
our data.
4. All credit card data is stored on PCI-
accredited payment service providers and not
on IWG systems.
We continue to actively monitor and respond
to reports in our ethics hotline.
A robust supplier selection and evaluation process
continues to be in place with a view to enhance
controls to address the risk of fraud.
All projects are monitored and evaluated by
a centralised capex finance team.
A dedicated cost function to review spend across
all categories and detect anomalies or exceptions
is in place.
We continue to remain compliant with data
protection and privacy regulations across the
business, continuously monitoring and enhancing
our privacy and security controls.
We also continue to comply with PCI and
Swift standards.
COVID-19 impact: Enabled all users across the
globe to work from home safely and securely.
Rolled out security awareness training related to
working from home.
Risk
Mitigation
Changes since 2019
ENSURING DEMAND IS
THERE TO SUPPORT
OUR GROWTH
Link to strategy: 1 3 5
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 determine if 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.
Our new centres showed good opening
occupancies in 2020 especially when taking
COVID-19 restrictions in most markets into
account. Performance was helped by the fact that
approximately 40% of leases we entered into
during 2020 are based on variable rent structures.
COVID-19 impact: Centre openings in 2020 were
reduced to a minimum but we still managed to
open 141 new centres. Some openings were
moved into 2021 and for many new centres,
the terms were renegotiated.
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IWG plc Annual Report and Accounts 2020
HUMAN RESOURCES RISKS
Risk
Mitigation
Changes since 2019
ABILITY TO RECRUIT AT
THE RIGHT LEVEL
Link to strategy: 3 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.
TRAINING AND
EMPLOYEE
ENGAGEMENT
Link to strategy: 3 5
As a service-based business
the strength and capabilities of
our increasingly geographically
diverse team are critical to
achieving our strategic
objectives.
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
allows us to keep close to our employees and
maintain a two-way dialogue throughout the
year using a regular feedback process.
4. Regular external and internal evaluation of the
performance of the Board.
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.
The executive search firms we use agree to and
are working with the Group Board Diversity Policy.
Recruitment channels are constantly under review
to continue offering opportunities to as wide a
population as possible in each market.
COVID-19 impact: Key hires are planned for 2021.
Whilst succession planning is in place for critical
leadership roles, the Company will continue to
keep a tight control over costs and headcount
whilst the challenges of the health and economic
crisis continue.
Our investment in our Learning and Development
platform has allowed our employees to learn
through e-learning, videos, case studies and
coaching. It has over 3,400 online courses,
webinars, videos and articles which our team
members accessed more than 87,000 times
throughout 2020.
Our top 300 executives attended our first ever
virtual global leadership conference in January
2021 where the future strategy, opportunities and
business priorities were communicated and
consequently cascaded to the remaining leaders
in the business.
We also continued the roll-out of our Sales and
Customer Service Training Academy to
continuously give customers a great day at work.
COVID-19 impact: Our new management skills
training programme is now up and running and
induction is now carried out virtually around the
globe, which allows every field team member
to get a great start in IWG.
VIABILITY STATEMENT
In accordance with the 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 48 to 55, the following
are the most important to the assessment of the viability of the Group:
– impact of an economic downturn taking into account COVID-19
– £ sterling fluctuations (devaluation and appreciation)
– a significant cyber-security or data breach event leading to serious reputational and brand damage
The potential impact of each scenario was modelled on the Group’s revenue, gross profit, operating profit, 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 in combination of two or more risks over a range of assumptions. 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.
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STRATEGIC REPORT
INTRODUCTION TO ESG
Sustainability at the
top of our agenda
Sustainability is at the top of the agenda for investment decision-makers, clients, employees,
communities and other stakeholders across the world. It is set to become even more important
in the years ahead, and at IWG we are determined to report, openly and transparently, on the
environmental, social and governance issues that matter most to all our stakeholders.
ESG (Environmental, Social and
Governance) criteria are increasingly
important factors for corporate real-
estate investors, with 93% including
them in their investment decision-
making. As a result, investor demand for
sustainability disclosure has been rising
fast for some years(1).
COVID-19 has only accelerated this
existing trend, with KPMG reporting that
stakeholders will use ESG criteria to
evaluate companies’ response to and
performance during the pandemic(2).
At IWG, we started the process in 2019
of identifying key issues to meet our
investors’ information needs about our
sustainability and ethical practices.
At that time, we began the transition to a
more materiality-led disclosure for future
years, providing value to our primary
groups of stakeholders: employees,
customers, communities, partners
(including landlords and franchisees)
and shareholders.
As part of this process, we have
identified – and highlight in this report
– those issues that have been most
material to our business and activities
during 2020 (see table below).
This is not, however, the end of the
journey for us. We are continuing our
assessment and aim to evolve our
reporting further over the years ahead.
Sources
1. Knight Frank: How ESG is shaping
investment value
2. KPMG: The ESG imperative for
technology companies
ENVIRONMENTAL
Material issue
Measurement
Energy consumption
Water usage
– Global gas and electricity usage
– 2020 Carbon Disclosure programme
– Global water usage
– 2020 Carbon Disclosure programme
Waste reduction and recycling
– 2020 Carbon Disclosure programme
SOCIAL
Material issue
Measurement
New employment opportunities and
recognising talent
– Volume of new hires (incl. graduates and interns) and internal promotions
Training and education
– Volume of virtual/online courses and training completed
Diversity, equity and inclusion
– Workforce diversity
– Employee surveys/reviews
Health and wellbeing
Performance reward
– Engagement in health and wellbeing campaigns/initiatives
– Competitiveness of compensation structure and incentives
Community engagement
– Community investment (financial value generated)
GOVERNANCE
Material issue
Measurement
Corporate governance
– Adherence to structure and approach (detailed in Annual Report)
Risk governance
Compliance with local legislation
Ethics and compliance
– Risk management structure and approach (detailed in Annual Report)
– Business Assurance function conducts risk studies and tests compliance with internal
controls
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IWG plc Annual Report and Accounts 2020
ENVIRONMENT
Reducing our impact
We consider our environmental
performance in two broad ways: how to
reduce our own environmental impact;
and how to help our customers
reduce theirs.
HOW WE REDUCE OUR OWN
ENVIRONMENTAL IMPACT
Continually improving our sustainability
performance remains at the core of
our business and is firmly embedded
in everything we do. We address the
challenges of climate change as they
are manifested in our own operations
by a concerted focus on energy,
water and waste reductions and
recycling initiatives.
ENERGY AND
CARBON EMISSIONS
We have presented our successful
year-on-year energy and carbon
reductions in our climate change
submissions to the Carbon Disclosure
Programme – CDP (previously the
Carbon Disclosure Project). We have
once again received a strong ‘B’ score
for our submission for the fifth
consecutive year, higher than the
European and global averages.
These improvements translate directly
into reduced energy costs throughout
our centres. In 2020 our electricity
and gas costs per workstation reduced
by 33% when compared with our
2016 baseline.
This continued reduction in energy
costs has been achieved through
a concerted effort to identify and
implement energy-saving measures
through a focus on energy
management, centre refurbishments,
centre upgrades and the closure of
older, inefficient centres. These include
lighting upgrades to efficient LEDs,
installing automatic lighting controls,
upgrading our heating, ventilation and
air-conditioning (HVAC) plants and
adjusting Building Management System
settings. Several of our centres have an
environmental certification, for example
LEED or BREEAM.
IWG Total Electricity and Gas Costs (£) per Workstation
2020
2019
2018
2017
2016
£45.47
£16.78
£50.25
£17.33
£57.47
£19.86
£64.19
£24.46
£68.81
£25.82
■ Electricity per WS
■ Gas per WS
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57
STRATEGIC REPORT ENVIRONMENT CONTINUED
We have achieved this successful
reduction by implementing low-flow
plumbing fixtures such as economically
flushing toilets and push taps. We are
currently investigating the benefits of
grey water harvesting in some of our
key centres. If deemed appropriate,
this would further enhance our water-
reduction strategies. We also engage
our employees and customers in many
centres to enable them to manage
energy and other resources efficiently.
WASTE REDUCTION
AND RECYCLING
Our centres operate effective waste-
management policies and procedures
which help our clients reduce
unnecessary waste. For example, in
North America we have been removing
free plastic water bottles in many of our
centres, replacing them with refillable
glass alternatives. We are also currently
upgrading coffee machines from
single-service packets to service bean
type. Close to two-thirds of our coffee
machines have already been changed,
significantly reducing plastic waste.
We regularly engage with our waste
providers to ensure they are using the
most appropriate solutions. This has
reduced the amount of waste being
generated and increased the amount
being recycled.
Many of our countries have taken
additional measures. For example, we
have implemented demand response
agreements in some centres in the US.
Within the UK, we continue to review
and where appropriate implement the
energy-saving opportunities identified
through the UK Environment Agency’s
ESOS audits. We are optimistic of
achieving the predicted savings of 7%
in the upcoming years.
While the impact of COVID-19 will have
made it harder to identify some of the
savings made, we continue to monitor
and measure our energy consumption.
We will be able to identify more clearly
our energy savings once the COVID-19
pandemic has ended.
WATER
We recognise that water is an essential
resource, and failure to manage
it effectively could have detrimental
impacts on the environment.
Our business model is not considered to
be water intensive as we have very few
sites that utilise water for purposes other
than to provide amenities. Nevertheless,
we take our impact on water
consumption seriously.
This is the second year we have
submitted a response regarding our
water-security strategies to the CDP.
In both years our response received
a very good ‘B’ score, demonstrating
excellent management of this vitally
important resource.
To further demonstrate our
commitment to improving our water-
management practices, our 2020 water
costs show a reduction of 22% per
workstation when compared with our
2016 baseline year.
IWG Total Water Costs (£) per Workstation
2020
2019
2018
2017
2016
58
■ Water per WS
£3.33
£3.50
£3.66
£3.77
£4.26
HOW WE HELP OUR
CUSTOMERS REDUCE
THEIR IMPACT
As stated above, our business offering
helps our customers improve their own
sustainability practices.
For example, our large global footprint
of more than 3,300 centres – with
a growing proportion outside of city
centres – enables our customers to
find workspaces closer to where their
employees live. This directly reduces
the distances people have to travel and
lowers impact on inner-city congestion
and pollution levels. Research shows, in
fact, that allowing people to work closer
to home saves an average of 7,416
commuting hours per centre per year,
equating to 118 metric tonnes of
carbon(1). Additionally, with shorter
commuting distances they can also
embrace a better and healthier work-life
balance by working more flexibly
and efficiently.
This type of support has never been as
important as it is today. As the COVID-19
pandemic continues to impact daily life,
the ease of access we provide has
helped our clients reduce time spent on
public transport, enabling them to stay
safe during the COVID-19 pandemic
while continuing to run their businesses.
The internal spaces of our centres
were also redesigned using the most
up-to-date government guidance to
provide our customers with a safe
working environment.
We also offer all our customers the
opportunity to participate in our local
environmental and social investment
programmes across the world,
including local recycling and anti-
littering initiatives.
We engage suppliers who have a similar
sustainability business ethos to our own.
A good example of this can be seen with
our UK maintenance subcontractors,
who engage local people and reduce
unnecessary vehicle travel when visiting
our London sites.
1. Regus Economic Survey 2019
IWG plc Annual Report and Accounts 2020
BUILDING NEW BY USING OLD...
There’s nothing new about IWG’s latest Spaces centre,
in Oslo’s city centre – nothing new, that is, except the
thinking behind it, which makes this one of Europe’s
most exciting and important development projects. It
not only gives us the blueprint for a massively reduced
environmental footprint: it’s also defining a revolutionary
new approach to future development everywhere.
For this is a project with a vitally important difference:
when we were invited to participate in the upgrade of
a tired 1950s building, we agreed with owners Entra ASA
that only reclaimed or recycled materials should be
used. According to IWG’s Country Manager of Norway
and Finland, Thomas Weeden, “I immediately saw this
was the future.”
So did Kristine Aassved Storeide and her team from
Oslo-based Scenario Interior Architecture Design when
Thomas invited them to join the project. As a veteran
of seven previous Spaces refurbishments, Kristine was
captivated by the idea, relishing the idea of proving that
reuse can deliver commercial and aesthetic as well as
environmental benefits.
The team found a rich seam of pre-used materials from
a total of 25 refurbished or demolished buildings across
the city, including offices, a school and even a care
home. Reclaimed and repurposed items included
windows, toilets, wall tiles and more, as well as benches
from an old swimming pool that now have a new lease
of life as the steps in a massive staircase.
Part of the project involved the creation of a new
extension to the original building, and even here
previously used materials including concrete, steel
columns and facades from demolition sites were put
to new use. This principle also extended to re-using
furniture – and whenever new items had to be created,
they too were made from repurposed materials.
The positive environmental impact has been immense.
The use of existing products has reduced CO₂
emissions by up to 95% – just using old tiles has saved
34,000kg of CO₂, equivalent to 8,500 burgers. And the
sheer quantity of re-used materials is mind-blowing:
enough reclaimed bricks to create a stack 1.2km high.
The design challenges were many as well, from
ensuring longevity of use by enabling interior walls to be
moved without interrupting power supplies to creating
ingenious solutions for compliance with Norway’s strict
laws on natural lighting.
Overall, the project is recognised as being at the
forefront of circular construction principles. Thomas is
finding a particularly receptive audience for its look, feel
and environmental credentials among Oslo’s younger
workers. “They really like its quirkiness as well as its
green heritage,” he says.
Photo credit: Mad arkitekter / Kyrre Sundal.
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STRATEGIC REPORT SOCIAL
Advancing our
talent strategy
OUR PEOPLE
During 2020, our talent strategy has
been focused on innovation and new
ways of working to help our teams
continuously improve their ability to give
customers and one another a great
day at work.
We have broken this down into
workstreams around six essential
priorities: structure; recruitment; training
and education; diversity, equity and
inclusion (DE&I); communication;
and reward.
STRUCTURE
We have made it an important priority
in 2020 to consolidate and simplify how
we work across all our markets. Actions
have included the introduction of new
ways of working such as centralised
call-handling and regional help desks,
which are enabling us to streamline field
operations to allow our customer-facing
teams to spend more of their time on
ensuring our customers have a great
day at work.
We have also made some important
changes to how we operate our
workspaces for our own team members
and our customers’ teams to ensure
their health and safety always come first.
RECRUITMENT
Throughout the year, we continued to
recruit new talent to ensure we have the
ability to respond to the needs of the
business over the next decade. We have
made key hires in many areas, including
new product development, country
management, sales, technology,
franchising, acquisitions and new project
management resource focused on
delivering and deploying innovation,
automation and simplification.
Diversity of talent continues to be a
focus for us, and our recruitment
channels and processes offer
opportunity to everybody. Graduates
and interns are always a key element of
our talent strategy, and we will wherever
possible continue to provide them with
employment opportunities.
Of course, 2020 was an exceptional
year in many ways, and we received
60,000 job applications and 500,000
visits to our careers website. Having our
own specialist team recruiting our new
talent enabled us to make significant
cost savings across the 1,500 new
people to whom we offered new
careers. Additionally, we are also
involved in a number of partnerships to
help us offer as many opportunities as
we can to ensure nobody is unfairly
excluded from the workplace.
My experience at IWG
has been one of the
most stimulating of my
professional life. In
IWG, you take action
from day one, and your
activities and decisions
are highly valued. It is
an exciting place to be!”
FABIO MAGGIONI
EXPERIENCED GRADUATE
One of these is with the Youth
Employment UK scheme. As part of this,
we have signed up to The Good Youth
Employment Charter – see panel on page
61 for a list of principles it stands for.
Across all our global operations, we
have also been taking action to give
flexible working opportunities to people
who wish to fit their careers around
other commitments in their lives, due
to any number of personal, educational,
professional or family reasons, which
include opportunities for part-time and
freelance talent.
TRAINING AND EDUCATION
2020 was IWG’s most active year to date
for training and education, underpinned
by an entirely new global learning
platform. This came online during 2020
to support and deliver all our existing
and new training and development
activities, covering our direct employees
and those of our franchise partners.
This has helped us react quickly and
decisively to urgent new demands
arising from the pandemic. For example,
we rapidly shifted our induction
processes for new starters to a virtual
environment, supported by personal
coaching on Microsoft Teams.
We have placed more emphasis on
diversity, equity and inclusion in our
development activities for existing team
members, with the launch of interactive
webinars focused on ensuring we
always operate fairly and professionally.
This was in addition to the curriculum
of more than 3,400 online courses,
webinars, videos and articles on our
training website, which our people
collectively visited more than 87,000
times during the year.
Other innovations include the
development of a new curriculum on
compliance, covering key topics
including GDPR, anti-bribery, anti-
modern slavery, Code of Conduct, DE&I,
discrimination and harassment, social
media usage, anti-money laundering
and much more. Following the launch
in early 2021, this will be mandatory for
all IWG employees, irrespective of tenure,
as part of our ongoing commitment to
compliance and governance.
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IWG plc Annual Report and Accounts 2020
This was the background to our ‘Share
a Great Day at Work’ initiative, which
featured simple events like informal
online team meetings or pictures
showing our people running customer
events in our centres. This has been
highly successful – simply sharing
special moments with one another has
helped us remain connected as a team,
delivering an uplifting communication
platform for everybody.
Our communications also continued
to have a business focus, with our
established quarterly leadership calls,
employee newsletters and townhalls all
playing an important role. We ran our
annual employee survey in the first
quarter of 2020, giving us an accurate
picture of employee views and priorities
across a range of important topics.
We held our annual leadership
conference on a virtual platform in 2021
and plan to hold the annual employee
survey in the second half of the year.
REWARD
It is by selecting and retaining the best
people, helping them to become as
good as they can be and rewarding
them fairly, that we ensure the millions
of members and customers who use
our workspaces and service portfolio
have a great day at work.
Reward is therefore a key focus area
for us, working hard to ensure that
high-potential people at every level
– from intern to the Senior Leadership
Team – are encouraged to stay with
us thanks to attractive short- and
long-term incentives.
Health and wellbeing was a particular
priority for 2020, and there were more
than 5,500 visits to our health and
wellbeing curriculum which included
productivity and motivation in a remote
environment. Stress management,
leading teams remotely and staying
connected were all important aspects
of our training and talent plan that were
delivered during the year to adapt
quickly to the unfolding events of 2020.
DIVERSITY, EQUITY AND
INCLUSION (DE&I)
We extended our programme on DE&I
during the year, both online and via
interactive webinars investigating what
DE&I means in practice and how we
should all interact without bias with all
IWG team members, partners,
customers and other stakeholders.
We also launched a series of ‘Affinity
Groups’ in the US. Made up of team
members, these work with the
Company to make and consider
recommendations on how best to
address and resolve DE&I issues arising
from our day-to-day business operations.
We also continue to operate our
confidential ‘Right to Speak’ reporting
helpline for all members of our extended
team across the world. In addition,
we have various programmes in place
to provide employees with confidential
counselling services, 24/7 and 365
days a year.
COMMUNICATION
Communication and connectivity have
never been more important than in 2020,
as remote working added complexity to
staying aligned and connected with one
another. Communications on staying
healthy and happy have played a key
role in our communications programme
for the year.
THE GOOD YOUTH
EMPLOYMENT
CHARTER
The Good Youth Employment
Charter recognises the
importance of the following
principles:
Creating Opportunity – Provide
opportunities for young people
to gain the skills and experiences
they need, through meaningful
and good-quality experiences
of the world of work that raise
their aspirations, skills and
personal networks.
Recognising Talent – Recruit
young people based on their
ability, talent and potential,
recognising they may have
limited experience. Ensure young
people from Black, Asian and
Ethnic Minority groups, as well as
those young people from lower
socio-economic backgrounds or
those with additional needs or
barriers are not unfairly excluded.
Fair Employment – Provide
good-quality employment
opportunities for young people,
such as apprenticeships,
graduate roles, entry-level jobs
and supported internships.
Offer fair and safe opportunities
and rewards in accordance with
the highest industry standards.
Developing People – Promote
the development of all young
people through on and off-the-
job training and support so they
are motivated to take ownership
and responsibility for their
careers, and they are equipped
to progress.
Youth Voice – Listen to young
people. Actively provide
opportunities for their voices
to be heard within a community
or organisation.
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61
STRATEGIC REPORT DIVERSITY
Information on IWG’s diversity initiatives
can be found on pages 60 and 61.
Details of the Board Diversity Policy can
be found in our Nomination Committee
report on pages 76 to 78.
BRIBERY AND CORRUPTION
The Company is committed to carrying
out business in an honest and ethical
manner and has 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
at www.iwgplc.com.
MODERN SLAVERY
The Company has zero tolerance
of slavery and human trafficking.
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. Training is provided
to all employees through our global
learning platform.
CORPORATE GOVERNANCE
A strategic enabler
Good governance enables us to ensure
that all the decisions we make are based
on the right considerations: right for our
people and shareholders, the
communities where we work, our
customers and their employees, our
partners and society at large. It therefore
supports entrepreneurial and
commercial management while
ensuring the long-term sustainable
success of the business for everybody.
BOARD’S OVERSIGHT
OF SUSTAINABILITY
The Board has oversight of the Group’s
sustainability initiatives and receives
regular updates from the Executive
Directors and the Senior Leadership
Team. Through Nina Henderson,
Non-Executive Director with oversight
of employee engagement and corporate
social responsibility, it has oversight
of ESG reporting.
RISK GOVERNANCE
The Board defines IWG’s risk appetite
and tolerance and annually reviews the
principal risks faced by the Group and
the plans for mitigating those risks.
Responsibility for the Company’s system
of internal control and risk management
and for ensuring the effectiveness of this
system has been delegated to the Audit
Committee. Details of the system and
the Audit Committee’s review of its
effectiveness can be found on pages 80
and 81. Key risks and actions to mitigate
these risks are detailed in the Risk
Management report on pages 48 to 55.
DATA SECURITY AND RISK
Information security is a top priority for
IWG and remains a standing agenda
item with the Board of Directors.
Significant investment continues to be
made to ensure that the IWG Information
Security Management System (ISMS)
is established, implemented, monitored,
reviewed and improved, where
necessary, to ensure that the specific
security and business objectives of the
organisation are met.
IWG’s ISMS takes a holistic, coordinated
and risk-based view of the organisation’s
information security risks. Information
security is achieved by implementing
a suitable set of controls, including
policies, processes, procedures,
organisational structures and software
and hardware functions. These
controls ensure that the specific security
and business objectives of the
organisation are met.
Key components of the ISMS
programme can be found on page 63.
IWG’s data privacy strategy is to process
minimum amounts of personal data only
to the extent necessary to provide a
service to our customers and ensure the
appropriate safe-guards and controls are
in place to protect this data.
COMPLIANCE WITH LOCAL
LEGISLATION
We strive to take all reasonable and
practical steps to ensure that local
legislation and regulations are complied
with in all the countries in which we
operate. Compliance reporting is part
of our internal control and risk
management process and regular
updates are provided to the Audit
Committee. Compliance training is
provided to all employees, who are
also encouraged to make use of the
whistleblowing channel without fear
of repercussions. Further information
can be found on pages 71 and 82.
ETHICS AND COMPLIANCE
The Board is committed to instilling a
culture of doing what’s right, ensuring
that IWG does what is right for the
environment and for our people and
ensuring that our people act fairly and
professionally in all business activities.
To support our culture and values and
ensure compliance with our internal
policies, such as our Code of Conduct,
we provide a suite of training courses
on our global learning platform.
Further information on our global
learning platform can be found on
pages 60 and 61. Employees are
encouraged to raise any concerns
through the whistleblowing channel
as detailed on pages 71 and 82.
62
IWG plc Annual Report and Accounts 2020
CORPORATE SOCIAL RESPONSIBILITY
Rising to the
challenges of 2020
COMMUNITIES
Our teams across the world have a long
and successful record of setting up and
delivering charitable initiatives in their
areas. Last year was no exception, with
a total of more than £430,069 being
raised across the year. This was a year
like no other as the pandemic created
new challenges for our people to
overcome. It is great testament to their
commitment, talent and generosity with
both time and energy that they have
once again delivered so many initiatives
to support those most in need within
their communities.
These have included fundraising efforts
of many kinds, from raffles, networking
events and awareness campaigns, to
collections, participation in sporting
events and the donation of skills and
time to organisations in need.
As a company, IWG also continues to
support team-member activities and
initiatives, making direct donations,
enabling them to host events and
awarding concessions to many
organisations in need of space to work.
OUR ‘VALUABLE 500’
PARTNERSHIP
All our centres include disabled access
and other features, enabling people
with disabilities to work in a safe and
supportive environment. This is a
fundamental aspect of our commitment
to DE&I in the workplace, which we
have taken an important step further
in 2020.
This came in March, when we launched
our global partnership with The Valuable
500, a global CEO community that
is revolutionising inclusion through
business leadership and opportunity for
the 1.3 billion people across the world
who live with some form of disability.
All the 330 corporations whose CEOs
have to date given their signatures to
The Valuable 500 have committed to
putting disability inclusion at the heart
of the leadership agenda and to make
a firm commitment to action by January
2021. We are proud to be one of
these companies.
RAISING CANCER
AWARENESS
To raise awareness of breast and
prostate cancer, our team in New
Zealand participated in two months
of awareness raising, partnering
with the Breast Cancer Foundation
and the Prostate Cancer
Foundation. Fundraising activities
ranged from donation boxes to
bake sales, and centres displayed
information stressing the
importance of education, health
screening and early detection.
RUNNING TO GRANT
CHILDREN’S WISHES
For the seventh successive year,
our team in India supported the
Make-A-Wish Foundation by
participating in the Tata Mumbai
Marathon, the country’s single
largest philanthropic sporting event.
The 15 IWG team members who
participated collectively ran 124km
and have over the seven years
contributed to the granting of
wishes for over 250 children.
Working from a Regus office
is great as it is, but it feels even
better when seeing Regus
staff put so much effort into
organising charitable events.
They make it really easy for us
to contribute to important
causes and we appreciate their
work behind it.”
SAM ANDRIST,
ELECTROMOTIV,
IWG CUSTOMER
I’m very glad to have
contributed to this noble
cause by supporting the efforts
of the Make-A-Wish
Foundation in this small way.
This opportunity enabled me
to bring smiles to so many
young faces. If just a run could
bring so much joy into the
lives of these children, I would
run every single day. Thanks
for the opportunity and all the
support provided by IWG.”
DHANANJAY MISHRA,
TEAM LEAD COMMUNITY
MANAGER DEPUTY OPERATIONS
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63
STRATEGIC REPORT CORPORATE SOCIAL RESPONSIBILITY CONTINUED
EDUCATION FOR THE
ENVIRONMENT
All our Spaces centres in Madrid
launched and participated in the
‘Earth Month’ initiative, educating
our customers by sharing tips on
ways we can individually help the
environment and our planet.
They placed more than 60 posters
and messages in each centre,
displaying data on environmental
topics including climate change,
pollution and saving water. They also
highlighted ways of preventing
environmental damage, such as
recycling and reusing waste paper.
I am very proud to be able to
participate in an event as useful
and as necessary as this one
– especially being able to
communicate with our clients
about the serious challenge
we as a society are facing and
help them understand the
small gestures that can help
our planet.”
FERNANDO SANCHEZ,
COMMUNITY ASSOCIATE
HEART MATTERS…
The Children’s Heart Foundation
is the United States’ leading
organisation solely dedicated to
funding research into congenital
heart defects. Our team chose this
charity because our community
associate’s two-year-old niece has
struggled with heart failure all her life.
The team raised funds by holding a
community potluck, attended by our
community associate’s niece and
family to share their story and raise
awareness for this charity and cause.
The charitable event was
a joyful project both to put
together and to participate in.
We invited Piper and her family
to share their story – Piper was
just under two years old and
she already had several heart
reconstructive surgeries. It was
touching to hear her story,
as well as similar stories of
children that have been
assisted by the vital care of the
Children’s Heart Foundation.”
MADISON HUNTER,
COMMUNITY MANAGER
SUPPORTING
BUSINESS
INNOVATION
In March, our franchise partner in
Augsburg, Germany, hosted a ‘Room
for Innovation’ event, aiming to
connect well-established businesses
with start-ups. They also hosted a
lecture from Professor Kurt Matzler, a
four-time winner of the Race Across
America, who raises awareness for
the Rotary International charity. In
addition, IWG donated £1,350 to the
charity’s ‘End Polio Now’ campaign,
which aims to provide a polio vaccine
to every child.
Professor Matzler inspires not
only through his sporting
success as winner of the Race
Across America, but especially
through his great contribution
to the fight against polio. He
has already been able to collect
1 million euros in donations
thus making a significant
contribution to combating this
terrible childhood disease.”
DR. RALPH ALTENBURGER,
IWG FRANCHISEE
64
IWG plc Annual Report and Accounts 2020
SAFEGUARDING
YOUNG FUTURES
The SOS Children’s Villages charity in
Mauritius provides young people
with support until they’re able to live
independently. Great attention is
paid to ensure they receive the right
kind of education and training to
help them secure jobs. Our team
and clients donated educational gifts
and learning materials for children
up to the age of 15.
DELIVERING JOY
Our team in Ecuador partnered with
the Fasinarm charity, which helps
people with special educational
and training needs and delivers a
high level of support to their families.
To provide the children with
moments of joy, our team and their
customers made financial donations
to enable 25 children with Down’s
syndrome to attend the premiere
of a popular movie.
PROTECTING THE
VULNERABLE
HIV is a widespread disease in Kenya,
so all our centres in Nairobi
supported the Nyumbani Children’s
Home, which looks after many
orphaned children who are infected
with HIV. Our team and customers
donated food as well as numerous
toys and stationery supplies. In South
Africa, similar initiatives were held as
our team provided food donations
to ten charities who support
vulnerable people.
Being part of the SOS Village
project was an enriching
experience and well-organised
event. It was admirable to see
such commitment from the
Regus team to have this special
day – an unforgettable day for
the kids. The event organisation
was very professional and it
was a pleasure to have been
part of this project.”
YANNICK NAYNA,
IWG CUSTOMER
It was a beautiful event that
I enjoyed from start to finish.
It was a special and emotional
moment because I believe that
the children of Fasinarm can
teach us so much about
innocence and purity of love
– which is what life must be
all about.”
JUAN CARLOS BAZURTO,
ASURION ECUADOR LLC,
IWG CUSTOMER
It was a very fulfilling moment
to be able to interact with the
caregivers and the children at
Nyumbani Children’s Home.
Grateful to Nyumbani for the
impact they make on the lives
of the amazing children under
their care.”
EMMA TOWETT,
IWG CUSTOMER
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65
STRATEGIC REPORT BOARD OF DIRECTORS
Board of Directors
DOUGLAS
SUTHERLAND
CHAIRMAN
MARK DIXON
CHIEF EXECUTIVE
N
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
FLORENCE PIERRE
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
FRANÇOIS PAULY
SENIOR INDEPENDENT
NON-EXECUTIVE
DIRECTOR
A
R
N
LAURIE HARRIS
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
A
R
N
A
R
N
NINA HENDERSON
INDEPENDENT
NON-EXECUTIVE
DIRECTOR WITH
OVERSIGHT OF EMPLOYEE
ENGAGEMENT AND CSR
A
R
N
66
Committee membership key
A Audit Committee
R Remuneration Committee
N Nomination Committee
Chairman
IWG plc Annual Report and Accounts 2020
DOUGLAS SUTHERLAND
Appointment* 27 August 2008
FLORENCE PIERRE
Appointment 21 May 2013
Experience
Douglas was Chief Financial Officer of Skype during its acquisition
by eBay. 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.
External appointments
Douglas is currently also the Chairman of Socrates Health Solutions Inc.
and a member of the board of managers of AI Monet Parento S.àr.l.
and Kinetik S.àr.l.
* Independent on appointment as Chairman on 19 May 2010.
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 shares her time between directorships, private equity
investments in high-growth companies providing innovative and digital-
based services, managing her art collection and mountain trekking.
MARK DIXON
Founder
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 HAGEMAN
Appointment 1 January 2019
Experience
Eric has almost 25 years’ experience in international, financial,
operational and general management 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.
FRANÇOIS PAULY
Appointment 19 May 2015
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
François serves as the Senior Advisory Partner at Castik Capital Partners,
Non-Executive Chairman of the Saint Paul Group and Non-Executive
Chairman of Compagnie Financière La Luxembourgeoise SA. He also
serves as Non-Executive Director of Cobepa SA, the Luxaviation Group
and for several companies of the Edmond de Rothschild Group.
François also serves on the board of several charitable organisations.
LAURIE HARRIS
Appointment 14 May 2019
Experience
Laurie was a global engagement audit partner with
PricewaterhouseCoopers LLP, where she advised large public
companies, including Fortune 100 financial services companies, in the
United States and internationally over her 38-year career. Laurie is the
chair of the Audit Committee as the Board considers her to have
recent and relevant financial experience.
External appointments
Laurie currently serves as an Independent Director and Audit Committee
Chair of QBE North America, an integrated specialist insurer which is
part of QBE (ASX:QBE); Synchronoss Technologies, Inc. (NASAQ:SNCR),
a global leader and innovator in cloud, messaging, digital and IoT
platforms and products; and is a member of the board of Hagerty,
an automotive lifestyle company and world’s largest provider
of specialty insurance for enthusiast vehicles.
NINA HENDERSON
Appointment 20 May 2014
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 Corporate 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,
Commissioner of the Smithsonian National Portrait Gallery, Director
of CNO Financial Inc. (Bankers Life, Washington, National and Colonial
Penn insurance companies) and Chair of their Human Resource
Compensation Committee. Nina is Vice Chairman of Drexel University’s
Board of Trustees. She is a Director of the Foreign Policy Association
and the Visiting Nurse Service of New York. Nina holds a Bachelor
of Science with honours from Drexel.
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67
GOVERNANCE CORPORATE GOVERNANCE
Introduction to
Corporate Governance
2020 has highlighted the importance of
having an effective Board that is able to adapt
quickly to a rapidly changing environment.”
DOUGLAS SUTHERLAND
CHAIRMAN
DEAR SHAREHOLDER,
I am pleased to introduce the Corporate
Governance report for 2020. This report
explains our approach to corporate
governance and details the governance
structure we have implemented to
facilitate entrepreneurial management
whilst ensuring the long-term sustainable
success of the Company for the benefit
of our partners.
COVID-19
2020 has highlighted the importance
of having an effective Board that is able
to adapt quickly to a rapidly changing
environment and to support our
Executives in taking decisive actions
for the benefits of the Company and
our partners.
We have sought to overcome the
challenges of the pandemic by working
closely with our partners, including our
customers, people, investors, landlords,
franchisees and others. I am grateful to
my fellow Directors and all our partners
for their support as we continue to
navigate through this crisis and position
IWG for future growth.
Further information on our governance
through the COVID-19 pandemic can be
found on page 71.
CULTURE
At the heart of our culture are our
people. Their health, safety and well-
being and how we ensure the safety of
our customers has been of paramount
importance during 2020. We have been
extremely proud of how our people
have responded to the pandemic and
the support they have continued to
provide to our customers in times
of challenge.
SUSTAINABILITY
Within our ESG report on pages 56 to 65
we are pleased to report on the progress
we have made as a Company in pursuing
our sustainability ambitions and helping
our customers to achieve their own
targets. Sustainability is firmly at the top
of our Board agenda and informs all of
our decision-making. This year we are
particularly pleased to announce that
we are targeting carbon-neutral status
within five years.
DIVERSITY
We are pleased to advise that we have
recently launched a search for a Black,
Asian or other Minority Ethnic Director.
Further information can be found in our
Nomination Committee report on pages
76 to 78.
IN THIS SECTION
UK CORPORATE
GOVERNANCE CODE
During 2020 we have complied with
the UK Corporate Governance Code
published by the Financial Reporting
Council in July 2018 (the “Code”), with
the exception of my time as Chairman
exceeding nine years from the date of
my first appointment to the Board. This
has been discussed with several large
shareholders and is regularly reviewed
by the Nomination Committee which,
as further explained on page 77, has
concluded that due to the COVID-19
pandemic and the significant strategic
transformations IWG is undergoing, it is
in the best interests of the Group that I
currently continue in the Chairman role
subject to periodic review by the
Nomination Committee.
A copy of the Code is available on
www.frc.org.uk.
ANNUAL REPORT
Your Board and the Audit Committee
have reviewed this Annual Report and
consider that it provides the information
necessary for you to assess the
Company’s position and performance,
business model and strategy.
We consider the Annual Report, taken
as a whole, to be fair, balanced and
understandable and seek your approval
of the Annual Report at the Company’s
annual general meeting which will be
held on 11 May 2021.
Corporate governance
Nomination Committee report
Audit Committee report
68
76
79
Directors’ Remuneration report
Directors’ report
Directors’ statements
84
97
99
DOUGLAS SUTHERLAND
CHAIRMAN
68
IWG plc Annual Report and Accounts 2020
Members
Douglas Sutherland,
Chairman*
Mark Dixon
Eric Hageman
Laurie Harris
Nina Henderson
François Pauly
Florence Pierre
Attendance
(out of
possible
maximum
number of
meetings)
12/13
13/13
13/13
13/13
13/13
13/13
13/13
* The Chairman was unable to attend one
meeting due to unforeseen circumstances
and this was chaired by François Pauly, Senior
Independent Director.
Balance of
Non-Executive and
Executive Directors
■ Executive
■ Non-Executive
29%
71%
Length of tenure of
Non-Executive
Directors
■ 0-3 years, 1 Director
■ 3-5 years, 1 Director
■ 6+ years, 2 Director
■ 9+ years, 1 Director
20%
20%
40%
20%
AN EFFECTIVE BOARD
BOARD COMPOSITION
Our Board is made up of seven unique
individuals with a diverse combination
of skills, drive, beliefs, knowledge,
personal attributes and experiences.
Individual biographies can be found
on page 67.
We believe that an effective Board is
a diverse Board and further information
on the steps we are taking to embrace
diversity and to be inclusive at Board
level, as well as our annual performance
review, can be found in our Nomination
Committee report on pages 76 to 78.
BOARD MEETINGS
The Chairman and the Company
Secretary plan an annual schedule of
matters to be considered by the Board,
ensuring all key issues are covered
and that topics are covered at
appropriate times.
Initially seven meetings were scheduled
for 2020 but it was necessary to adapt
this as a result of the COVID-19
pandemic to ensure the Board met more
regularly and in a safe, virtual Boardroom
setting. More regular meetings ensured
the Board remained fully abreast of the
impact of COVID-19 and was better able
to respond to the challenges and
opportunities it presented.
The Board met 13 times in 2020 and
when time-sensitive approvals were
anticipated between scheduled meetings
the Board delegated its authority
to a committee to be convened
as appropriate.
Meetings were structured to ensure time
for in-depth discussions on key issues
and to allow time for the Chairman to
meet with Non-Executive Directors
without the Executive Directors present.
Longer virtual meetings held over two
days were held in May, September
and December providing time for more
in-depth strategy discussions and to
receive presentations from members
of the Senior Leadership Team as well
as internal and external specialists.
The Chairman and the Company
Secretary ensure that the Board receives
clear, concise and timely information on
all relevant matters so that discussions
are well-informed. Board papers are
made available in advance of meetings
on a secure Board portal. This portal is
also used to distribute relevant reference
material and the Board report.
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, such concerns are
recorded in the Board minutes or can
be recorded by Non-Executive Directors
who are resigning, in a written statement
which is circulated to the Board. No
such concerns were raised in 2020.
MATTERS RESERVED
FOR THE BOARD
Matters that are considered sufficiently
material that they can only be made by
the Board as a whole and cannot be
delegated 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;
– appointment and removal of the
Company Secretary;
– 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).
Full details of the matters reserved for
the Board are available on
www.iwgplc.com.
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69
GOVERNANCE CORPORATE GOVERNANCE CONTINUED
DEVELOPMENT AND SUPPORT
To ensure continuing development
and provide appropriate support, all
Directors have:
– a customised and comprehensive
induction programme prepared by
the Chairman with the support of the
Company Secretary, ensuring they
can quickly and effectively contribute
to discussion and decision-making;
– the opportunity to meet with major
shareholders;
– access to the Company’s operations
and employees;
– access to training which is provided
and reviewed on an ongoing basis to
meet particular needs;
– access to the advice and services
of the Company Secretary; and
– access to independent professional
advice at the Company’s expense.
CONFLICTS OF INTEREST
Directors are required to notify the
Company as soon as they become
aware of a conflict of interest or a
potential conflict of interest. At the start
of each Board meeting the Chairman
requires each Director to confirm that
they do not have a conflict of interest
with any of the matters to be discussed;
if a conflict does arise the Director is
excluded from that discussion.
TIME COMMITMENT
Directors are required to have sufficient
time to meet their Board responsibilities;
this is considered when making new
appointments. Following their
appointment Directors are required to
seek Board approval before taking on
additional external appointments.
INSURANCE
Appropriate insurance cover is obtained
to protect the Directors in the event
of a claim being brought against them.
KEY ACTIVITIES OF THE BOARD FOR 2020
STRATEGY
– Approved the purpose and values
– Approved strategy and objectives
– Approved the three-year plan
– Approved the operating model
and annual budget
– Regular review of forecast, strategy
and objectives
– Approved response to COVID-19
and monitored implementation
– Approved strategic projects and
monitored implementation
FINANCING
– Regular review of the Group’s
financial structure
– Approved and oversaw the issue of
£350m of unsecured Guaranteed
Convertible Bonds
CORPORATE REPORTING
AND PERFORMANCE
MONITORING
– Received regular performance
updates at scheduled meetings
and through Board reports
– Received updates from the
Remuneration Committee Chair
on key areas discussed
– Approved the Company’s year-end
and interim results
– Approved Q1 and Q3 trading
statements and trading updates
– Reviewed the Group’s talent
and culture
STAKEHOLDER ENGAGEMENT
– Conducted the IWG Global
Workplace Survey
– Approved and oversaw the
– Received Policy Statements
placing of new ordinary shares
raising £320m
– Suspended the share buyback
programme
provided by significant shareholders
– Received reports from the Chairman
on feedback from shareholder
meetings and correspondence
– Withdrew the final dividend in
– Attended investor presentations and
respect of the financial year ended
31 December 2019
PRUDENT AND EFFECTIVE
CONTROLS
– Assessed the Company’s viability
over a three-year period taking
into consideration the risks and
scenarios that could affect the
Group (page 55)
– Reviewed the Group’s key risks
and mitigating actions
– Received updates from the
Audit Committee Chair on key
areas discussed
– Renewed the Group’s
insurance programme
meetings
– Reviewed monthly updates on
investor relations
– Reviewed updates on our global
franchise partners
– Reviewed updates on employee
engagement initiatives
– Reviewed updates on ESG reporting
and community initiatives
GOVERNANCE
– Reviewed and approved the Notice
of annual general meeting
– Reviewed and approved the Notice
of extraordinary general meeting
regarding the corporate bonds issue
– Received updates from the
Nomination Committee Chairman
on succession planning and diversity
– Reviewed reports on employee
engagement and ESG
– Reviewed the performance of
the Board, its Committees and
all Directors
– Reviewed and approved statements
on anti-slavery and human
trafficking, and anti-bribery and
corruption
70
IWG plc Annual Report and Accounts 2020
PURPOSE AND STRATEGY
The Board is responsible for reviewing
and approving the Group’s purpose and
strategy as further detailed in Our Value
Creation Framework on pages 8 and 9.
Our purpose underpins everything
we do and is closely aligned with our
three-year plan and strategy which
is reviewed annually by the Board.
The two-day Board meetings held in
September and December allowed
the Board to undertake its deep-dive
strategic assessment. This included
a review of purpose and culture,
a talent review, a review of ESG and
presentations from key areas of the
business and external advisors.
The Board is also responsible for
approving the Group’s operating model
and annual budget, ensuring that the
right structure, talent and resources are
available to implement its strategy and
long-term objectives.
Full details of our approved strategy can
be found in our Strategic Report on
pages 1 to 65.
CULTURE, VALUES AND ETHICS
Our people are at the heart of our culture
which is based on our pioneering spirit,
mutual empowerment, shared
leadership and unified global network
that’s united by trust in one another.
Your Board is committed to doing what
is right, ensuring that we do what is right
for the environment and for our people
and ensuring that our people act
ethically and without bias or
discrimination in all our business activities.
To support our culture, values and ethics
we provide a global learning and
development platform to all employees.
The platform includes training on our
Code of Conduct, compliance policies
and approach to diversity and inclusion.
Employees are encouraged to speak out
without fear of repercussions, and we
provide a confidential whistleblowing
channel where concerns can be raised
anonymously. During 2020 we received
16 reports through our whistleblowing
channel, four of which were considered
significant; all significant reports
have been resolved to date.
We also maintain a zero-tolerance policy
both to bribery and corruption and to
slavery and human trafficking. Training
on these is provided to all employees
and our statements on these are
reviewed annually and made available
on www.iwgplc.com.
PERFORMANCE MONITORING
The Board monitors performance
through a regular report covering
profitability and cash flow, country
performance, growth, treasury and
investor relations.
Trading and finance updates as well as
updates on strategic projects are
provided at all scheduled Board
meetings, allowing the Board to monitor
and measure performance and to make
decisions on matters reserved to the
Board in order to support the delivery of
its strategy. In order to closely monitor
trading and take appropriate actions
during the COVID-19 pandemic the
Board held more regular Board meetings
during 2020.
The Board is responsible for approving
results, dividends and announcements,
including the going concern basis for
preparing these accounts as detailed
on pages 110 and 134 and reviewing
the stress testing and analysis which
underpins the viability statement as
detailed on page 55.
The Board also reviews the Group’s ESG
reporting, receiving updates on:
– the Group’s carbon footprint;
– the diversity of our workforce;
– the culture of the Group and the
wellbeing of employees;
– the Group’s talent; and
– the initiatives we support in the local
communities in which we operate.
Further information on our people and
ESG reporting can be found on pages
56 to 65.
PRUDENT AND EFFECTIVE
CONTROLS
The Board is responsible for assessing
the nature and extent of the principal
risks it is willing to take to achieve its
strategy and long-term objectives, and
also those risks and emerging 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 48 to 55.
The Board has delegated authority for
overseeing and reviewing its system of
internal controls and risk management
to the Audit Committee, which reports
regularly to the Board. Details of the
system and the Committee’s review
of its effectiveness are reported on
pages 81 to 82.
GOVERNANCE DURING THE
COVID-19 PANDEMIC:
COVID-19 has required your Board
to respond decisively to rapidly
changing circumstances. We have
had to consider changing business
outlooks and forecasts and to
oversee the implementation of
plans to ensure employee and
customer safety, remove costs
and rationalise our network. We
have also taken some tough
decisions such as withdrawing the
2019 final dividend and
suspending our share buyback
programme and we have taken
steps to position our business for
future growth by raising additional
capital and continuing our pivot
towards a capital-light business.
To achieve this whilst respecting
our internal travel ban and the
safety measures implemented
across the world, we have
embraced technology more than
ever before, holding Board and
Committee meetings in a virtual
Boardroom and using online tools
to maintain relationships with our
stakeholders. Whilst the online
experience cannot truly replicate
the personal contact achieved by
physically meeting, technology
has allowed us to work effectively
throughout the pandemic, being
able to convene meetings more
regularly and swiftly than normal.
iwgplc.com
71
GOVERNANCE CORPORATE GOVERNANCE CONTINUED
STAKEHOLDER ENGAGEMENT
Building and maintaining strong
relationships with our stakeholders is
key to the long-term success of our
business. During 2020 we have worked
closely with our partners and our
decision-making throughout the
COVID-19 pandemic has been informed
by their views and experiences.
Your Board seeks to take the views of
its key stakeholders: our shareholders,
customers, franchise partners, landlord
partners, employees and communities
into account in its discussions and
decision-making. The Board receives
regular updates from the Chief Executive
Officer on the views of key stakeholders
on the Group’s strategic agenda as well as
receiving insights from other members
of the Board and through the Company’s
stakeholder engagement initiatives.
Key stakeholder engagement initiatives
undertaken by the Company include
the customer workspace survey, the
employee engagement programme
overseen from the Board by Nina
Henderson, and initiatives to engage
with the Group’s strategic franchise
partners, many of whom attended the
Company’s annual leadership
conference in January 2020 and
participated in the virtual meeting held in
January 2021.
The Board also seeks to align our
strategy to the needs of our primary
stakeholders. For example by providing
hybrid working solutions to our
customers we are enabling their people
to work away from city centres, closer
to their homes, families and friends,
potentially improving the work-life
balance for millions and enhancing
employee engagement, loyalty and
job satisfaction.
Further information on how we have
placed our stakeholders at the centre
of our strategy can be found throughout
our Strategic Report and details on
how we create value for our primary
stakeholders can be found on pages
8 and 9.
Your Board is proud of the work
undertaken by our employees
throughout the world to engage with
our communities and reduce our
environmental impact; further details
of this work can be found in our ESG
report on pages 56 to 65.
During 2020 we have
worked closely with
our partners and our
decision-making
throughout the
COVID-19 pandemic
has been informed
by their views and
experiences.”
72
IWG plc Annual Report and Accounts 2020
Additionally, this year an extraordinary
general meeting was held to grant
authority to allot shares and disapply
pre-emption rights in relation to our
convertible bond offering (the “EGM”).
The COVID-19 pandemic necessitated
the holding of the EGM as a closed
meeting with Directors making
themselves available to respond to
shareholder questions outside of the
meeting. All resolutions were passed
with at least 97.9% of votes in favour.
The resolutions were voted on
separately by means of a poll and the
final results were published after
the meeting.
The 2021 annual general meeting will be
held on Tuesday 11 May. Notice of the
meeting can be found in a separate
document which will be sent out at least
20 working days before the meeting. We
will monitor the situation to see whether
it will be necessary or advisable to hold
the meeting as a closed meeting or
whether shareholder attendance will
be possible. As always, the Directors will
be available on request to respond to
any shareholder queries outside of
the meeting.
Company website
Our website www.iwgplc.com has
a dedicated Investor section which
includes our Annual Reports, results
presentations and our financial calendar.
Senior Independent Director
Our Senior Independent Director,
François Pauly, is available to address
any shareholder concerns that cannot
be resolved through normal channels
of communication.
EMPLOYEE ENGAGEMENT
The health, safety and wellbeing of our
people has been of paramount
importance during 2020. To support
this, Nina Henderson, our Non-Executive
Director with responsibility for employee
engagement, monitored initiatives
around the Group to help support our
employees throughout the year.
During 2020 Nina continued with her
programme of meeting with our global
workforce, with the majority of
interactions with employees during
2020 being moved to an online setting.
Through her interactions Nina was able
to report to the Board on employee
views on a large range of topics
including our response to COVID-19,
health and safety, culture, values,
strategy, recognition, training, community
engagement, communication, work-life
balance and reward.
Nina also reviewed the annual employee
survey as detailed on page 61 with the
full Board. She attended the leadership
conference in person in January 2020
and joined the virtual conference held
in January 2021 where she held
discussions with leaders from across
the global workforce.
Nina has supported IWG’s ongoing
efforts focused on enhancing diversity,
equity and inclusion throughout the
Group. In the USA she participates in the
African-American Affinity Network Group
hearing about their mission, objectives
and perspectives. This activity will
continue throughout 2021.
During 2021, Nina will continue her
programme of engaging with our
global workforce.
We are extremely proud of our diverse
global workforce and further information
on our people can be found on pages
60 and 61.
SHAREHOLDER ENGAGEMENT
Investor meetings
The Board is kept informed of investor
views through the distribution of analyst
and broker briefings and monthly
investor relations updates. In 2020
investor relations held over 300
meetings with investors and analysts.
After the first quarter of 2020, these
meetings were held virtually in view
of COVID-19 considerations.
The Chairman, Chief Executive Officer
and Chief Financial Officer maintain a
close dialogue with institutional
investors on the Company’s
performance, governance, plans and
objectives. They regularly participate in
investor meetings and make themselves
available for questions, at the time of
major announcements and on request.
The Chairman regularly updates the
Board on the results of these meetings
and the opinions of investors. All
Directors have a standing invitation to
participate in investor meetings.
Committee Chairs engage with
shareholders when there are significant
changes within their areas of responsibility.
General meetings
The annual general meeting each year
is held in May, save for in exceptional
circumstances, in Switzerland and is
attended by all members of the Board.
In addition to the formal business of the
meeting, there is normally a trading
update and shareholders have the
opportunity to ask questions and to
meet the Directors afterwards.
Due to the COVID-19 pandemic our
2020 annual general meeting was held
as a closed meeting and Directors who
were unable to attend in person
attended by phone. Directors were
available to respond to shareholder
queries outside of the meeting. All
resolutions were passed with at least
98% of votes in favour apart from the
approval of the Remuneration Policy
(94.33%) and the Annual Report on
Remuneration (87.33%). All resolutions
were voted on separately by means of a
poll and the final results were published
after the meeting.
iwgplc.com
73
GOVERNANCE CORPORATE GOVERNANCE CONTINUED
DIVISION OF RESPONSIBILITIES
There is a clear separation of responsibilities between the running of the Board and the Executive responsibility
for running the business.
BOARD
Non-Executive Chairman
DOUGLAS SUTHERLAND
See responsibilities on page 75
Executive Directors
Non-Executive Directors
MARK DIXON
ERIC HAGEMAN
FRANÇOIS PAULY
Chief Executive
Chief Financial
Officer
Senior Independent
Director
LAURIE HARRIS,
NINA HENDERSON,
FLORENCE PIERRE
Non-Executive
Directors
See Executive responsibilities
See Non-Executive responsibilities
on page 75
on page 75
BOARD
y
t
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i
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c
A
Audit
Committee
Remuneration
Committee
Nomination
Committee
Oversight of employee
engagement and CSR
LAURIE HARRIS
NINA HENDERSON
FRANÇOIS PAULY
NINA HENDERSON
Chair
Chair
Chair
Terms of reference
page 79
Terms of reference
page 89
Terms of reference
page 77
Responsibilities
page 75
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e
g
a
t
i
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n
o
f
r
e
s
p
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s
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b
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l
i
t
y
SENIOR LEADERSHIP TEAM
Accountable for delivery against the
Group’s strategic and operating objectives
Certain matters are reserved for the Board; these are detailed on page 69
74
IWG plc Annual Report and Accounts 2020
ROLE OF COMMITTEES
The Board is supported by a number of
Committees to which it has delegated
certain powers. The role of these
Committees is summarised below.
AUDIT COMMITTEE
Responsible for oversight of financial
reporting, audit, internal control,
compliance and risk management.
NOMINATION COMMITTEE
Responsible for Board composition,
appointment of Directors and senior
management and succession planning.
REMUNERATION COMMITTEE
Determines the remuneration of
Executive Directors, the Chairman and
senior management and oversees
remuneration policy for all employees.
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 OF EMPLOYEE ENGAGEMENT
AND CSR
Nina is responsible for overseeing and
keeping the Board informed on
engagement with the workforce and the
corporate responsibility activities of the
Group, including community and
environmental projects.
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 business 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.
TIMOTHY REGAN
COMPANY SECRETARY
The Company Secretary is responsible
for advising the Board, through the
Chairman, on all governance matters
and ensuring that the Board has the
policies, processes, information, time
and resources it needs to function
efficiently and effectively.
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.
The responsibilities of the Chairman, the
Chief Executive Officer and the Senior
Independent Director are available on
www.iwgplc.com.
DOUGLAS SUTHERLAND
NON-EXECUTIVE CHAIRMAN
The Chairman is responsible for the
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 and stakeholders. 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 OFFICER
The Chief Executive Officer is
responsible for formulating strategy and
for its delivery through the Senior
Leadership Team once agreed by the
Board. He creates a framework of
strategy, values and objectives to ensure
the successful delivery of key targets
and allocates decision-making and
responsibilities accordingly.
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
The Chief Financial Officer is 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.
iwgplc.com
75
GOVERNANCE NOMINATION COMMITTEE REPORT
Nomination Committee report
We define ‘Diversity’ as achieving strength and
sustainability through actively embracing and being
inclusive of all aspects (visible and invisible) of what
makes every individual unique.”
FRANÇOIS PAULY
CHAIRMAN, NOMINATION COMMITTEE
Members
François Pauly
Laurie Harris
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
■ 3-5 years
■ 6+ years
■ 9+ years
20%
20%
40%
20%
DEAR SHAREHOLDER,
I am pleased to present to you my
report on the work of the Nomination
Committee (the “Committee”)
during 2020.
2020 was an important year for us and
key activities included:
– launching a search for a new Black,
Asian or other Minority Ethnic Director;
– defining “Diversity“;
– measuring the effectiveness of our
Board through our annual Board review;
– overseeing changes to the Senior
Leadership Team;
– reviewing our succession plans for the
Board and senior leadership roles; and
– measuring progress made in respect
of our diversity objectives and revising
the objectives for 2021.
BOARD COMPOSITION
As at the date of this report, your Board
comprised seven members, being: the
Non-Executive Chairman (independent
at the time of appointment); two
Executive Directors; and four
independent Non-Executive Directors.
The biographies of Board members can
be found on pages 66 and 67.
DIVERSITY
In view of the 2020 Parker Review
research showing that more racially
and ethnically diverse Boards make
better decisions and our own diversity
objectives, your Committee has
launched a search for a Black, Asian or
other Minority Ethnic Director who will
be appointed to the Board on or before
our May 2022 Annual General Meeting.
We have also taken the step of defining
what diversity means to IWG in our
Board Diversity Policy. We define
“Diversity” as achieving strength and
sustainability through actively embracing
and being inclusive of all aspects (visible
and invisible) of what makes every
individual unique including education,
personalities, skill sets, experiences,
communication styles, knowledge
bases, social economic backgrounds,
age, race, gender, religious beliefs,
physical abilities and disabilities,
ethnicity, sexual orientation and
political beliefs.
Progress made against the Diversity
objectives we set ourselves for 2020 can
be found on page 78. Our objectives
for 2021 which will be reported on in
2022 are to:
– maintain a level of at least 30%
female Directors on the IWG plc
Board over the short to medium
term (currently 43%);
– appoint a Black, Asian or other
Minority Ethnic Director to the IWG
plc Board on or before our May 2022
annual general meeting;
– assist the development of a pipeline of
high-calibre candidates by
encouraging a broad range of senior
individuals within the business to take
on additional roles to gain valuable
board experience;
– consider candidates for appointment
as Non-Executive Directors from a
wider pool including those with little
or no previous FTSE Board experience;
– ensure Non-Executive Director long
lists have at least 50% of candidates
reflecting diversity including women
76
IWG plc Annual Report and Accounts 2020
and candidates with different racial
and ethnic backgrounds; and
– engage executive search firms who
have signed up to the voluntary Code
of Conduct on gender diversity and
best practice.
We are proud of our workforce diversity
at IWG. We are an equal opportunities
employer and are proactively looking to
identify, develop and promote key talent
from within our organisation which will
in turn improve our diversity at senior
levels. Further information on our work
to support diversity and inclusivity within
our workforce can be found on pages
60 and 61.
BOARD REVIEW
An internal review of the performance
of the Board, its Committees, the
Chairman and individual Directors was
conducted in respect of 2020.
Performance was evaluated through the
use of prompting questions and a series
of meetings and informal discussions.
The process was led by the Chairman
of the Board except for his own review
which was led by me as Senior
Independent Director.
Our review process monitors
effectiveness, performance, balance,
diversity, independence, leadership and
succession planning, enabling us to
identify the capabilities and roles required
for a particular Board appointment.
The results of the review were discussed
by the Board and the Committee who
considered that overall the Board had
performed well in a challenging year. All
suggestions for improvement are being
incorporated into our ongoing efforts to
continuously improve the processes and
effectiveness of the Board. We continue
to have full confidence in the Board’s
members and processes.
We intend to have an externally facilitated
review in respect of Board performance
in 2021, the last being in 2018.
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. Reasons why
the contribution of Directors offering
themselves for re-election or election
continues to be important to the
long-term success of the Company
are described in the Notice of annual
general meeting.
The Committee reviewed the
independence of all Non-Executive
Directors in 2020; all are independent
and continue to make independent
contributions and effectively
challenge management.
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 in accordance with
the Board Diversity Policy.
Nominations are based on the existing
balance of skills, knowledge, diversity
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.
During 2020 the Committee used the
results of its Board review to develop
a profile which is being used for the
recruitment of our next Non-Executive
Director. The profile has been provided
to Spencer Stuart who have been
appointed to assist the Committee in the
recruitment process. Spencer Stuart
have no connection with the Company
other than providing recruitment services
and are signed up to the November 2017
Voluntary Code of Conduct on gender
and diversity best practice.
SENIOR LEADERSHIP TEAM
The Committee oversees changes to
the Senior Leadership Team, and
supports initiatives to strengthen the
executive talent pipeline.
SUCCESSION PLANNING
We ensure that succession plans are
in place for the orderly succession
appointments to the Board and senior
positions, so that there is an appropriate
balance of skills, experience and
diversity. Succession planning
discussions and a talent review process
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.
As previously advised our current
Chairman, Douglas Sutherland, has been
on the Board for more than nine years.
He was appointed as Chairman on 10
May 2010 having been a Non-Executive
Director of the Group since 28 August
2008. As previously reported, after
reviewing the Chairman’s performance
and input from the 2018 independent
Board review and more recently from
the 2020 internal Board review and in
consideration of the Group’s current
challenges and opportunities, the
Committee considers that it is in the best
interests of the Group for the Chairman
to continue in his role, subject to
periodic review by the Committee.
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.
– Board Committees: to make
recommendations to the Board in
relation to the suitability of candidates
for membership of the Audit and
Remuneration Committees.
– Board effectiveness: to review
annually and make appropriate
recommendations.
– Board performance: to assist the
Chairman with the annual
performance review 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
iwgplc.com
77
GOVERNANCE NOMINATION COMMITTEE REPORT CONTINUED
PERFORMANCE AGAINST 2020 DIVERSITY OBJECTIVES
Objective
Performance achieved
Maintain a level of at least 30% female Directors on the IWG plc
Board over the short to medium term (currently 43%).
Throughout 2020 we have had three female Board members,
making up 43% of our Board.
Assist the development of a pipeline of high-calibre candidates
by encouraging a broad range of senior individuals within
the business to take on additional roles to gain valuable
Board experience.
The Committee supports initiatives aimed at strengthening the
executive talent pipeline and ensuring that high potential people
at every level are developed and retained within the business.
Senior individuals are encouraged to gain Board experience
through internal and external Board appointments and are also
invited to present at IWG plc Board meetings. Further information
on our talent strategy can be found on pages 60 and 61.
Consider candidates for appointment as Non-Executive Directors
from a wider pool including those with little or no previous FTSE
Board experience.
Our profile for the recruitment of our next Non-Executive Director
has been drawn up to allow us to consider a wider pool of talent;
FTSE experience is not a pre-requisite.
Ensure Non-Executive Director long lists have at least 50% of
candidates reflecting diversity including women and candidates
with different ethnic backgrounds.
Our next Non-Executive Director will be appointed from a long list
of Black, Asian or other Minority Ethnic candidates and will be
reflective of all other aspects of diversity.
Engage executive search firms who have signed up to the
voluntary Code of Conduct on gender diversity and best practice.
Spencer Stuart and Egon Zehnder are signatories to the
November 2017 Voluntary Code of Conduct on gender and
diversity best practice.
Gender split
of the Board
Gender split
of all employees
Gender split of
senior leadership
■ Male
■ Female
57%
43%
■ Male
■ Female
30%
70%
■ Male
■ Female
67%
33%
Nationality split
of the Board
Age split
of the Board
■ American
■ French
■ Dutch
■ British
■ Luxembourgish
78
■ 46-55
■ 56-65
■ 66-75
44%
14%
14%
14%
14%
Experience of the Board
Working
Internationally
Rapid Growth
Strategies
Digital
Transformation
Franchising
3
Enterprise Risk
Management
Outsourcing
Multiple
Industries
Mergers and
Acquisitions
14%
57%
29%
5
6
6
7
7
7
7
IWG plc Annual Report and Accounts 2020
AUDIT COMMITTEE REPORT
Audit Committee report
We have established the robustness of
management’s response to the pandemic in
terms of risk assessment, accounting,
controls and disclosures.”
LAURIE HARRIS
CHAIR, AUDIT COMMITTEE
Members
Laurie Harris
Nina Henderson
François Pauly
Florence Pierre
Attendance
(out of
possible
maximum
number of
meetings)
7/7
7/7
7/7
7/7
All members of the Committee are independent.
Length of tenure of
Non-Executive
Directors within the
Committee
■ 0-3 years
■ 3-5 years
■ 6+ years
25%
25%
50%
DEAR SHAREHOLDER,
I am pleased to present you with this
report on the work of the Audit
Committee (the “Committee”) during
2020; an unprecedented year when the
rapidly changing environment created
by the COVID-19 pandemic impacted
on all areas of our responsibility.
This year we have worked hard to
establish the robustness of
management’s response to the
pandemic, in terms of risk assessment,
accounting, controls and disclosures,
whilst also maintaining focus on our
core responsibilities.
KEY OBJECTIVE
Our 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 on:
– the integrity of financial reporting;
– the systems for internal control, risk
management and compliance; and
– the Company’s external auditors.
MEMBERSHIP AND MEETINGS
The Committee consists entirely of
independent Non-Executive Directors.
The Committee met more often than
normal during 2020 and from March
onwards it met in a virtual setting. Seven
Committee meetings were held in the
year and where time-sensitive approvals
were needed authority was delegated to
a sub-committee.
At my request, the external auditors,
Executive Directors, the Chairman, the
Company Secretary (as secretary to the
Committee) and the Business Assurance
Director may attend meetings.
At least annually, the Committee meets
independently, without management,
with the Company’s external auditors
and the Business Assurance Director.
In addition I regularly meet with the
external lead audit partner and the
Business Assurance Director outside
of the formal Committee process.
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: monitoring the
integrity of financial reporting for
compliance with applicable statutes
and accounting standards.
– Internal control and risk: reviewing the
effectiveness of internal controls and
risk management systems.
– Internal audit: monitoring the internal
audit programme, reviewing all
findings and making certain that the
function is sufficiently resourced and
free from restrictions.
– External audit: advising on the
appointment, reappointment,
remuneration and removal of the
external auditor.
– Employee concerns: reviewing
whistleblowing arrangements.
I routinely report to the Board on how
the Committee has discharged its
responsibilities, as well as highlighting
any concerns raised.
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79
GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
ACTIVITIES OF THE AUDIT
COMMITTEE DURING THE YEAR
This section summarises the main focus
areas of the Committee during 2020
and the results of the work undertaken.
FINANCIAL REPORTING
Our main focus 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
determine 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;
– compliance with accounting
standards and relevant financial
and governance reporting
requirements; and
– the process surrounding compilation
of the Annual Report and Accounts
to confirm 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 2020:
– COVID-19 related adjusting items:
The Committee considered the
impact of the global. COVID-19
pandemic on the Group’s financial
reporting, including the recognition
and disclosure of expenses and gains
incurred by the Group that are directly
attributable to COVID-19 as adjusting
items. The Committee concluded that
management’s judgements and the
disclosure of these expenses and
gains as adjusting items were
appropriate and in line with the
Group’s definition.
– Impairment of leasehold property,
plant and equipment (‘PPE’) and
right-of-use (‘ROU’) assets: The
committee considered the review
process and challenged the key
judgements and estimates relating to
the impairment of leasehold PPE and
ROU assets. The Committee
concluded that management’s
judgements and the disclosure of
these impairments were appropriate.
– Taxation: The Committee has
reviewed the basis on which
management has recognised and
valued deferred tax assets, with
particular focus on the recoverability
of deferred tax assets recognised in
Switzerland and for reporting under
IFRS 16. The Committee is satisfied
that management’s judgements on
the generation of future taxable profits
in the foreseeable future are aligned
with the Group’s other business
forecasting processes. The Committee
has considered the presentation and
disclosure (in accordance with IAS 1
and IAS 12) in respect of taxation-
related balances and is satisfied that
the Group’s disclosures reflect the
risks inherent in accounting for the
deferred taxation balances. See note 8.
– 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
13 and 14 for further information.
– IFRS 16 Leases: There have been
significant changes to the Group’s
leasing arrangements in 2020 arising
from COVID-19, with rent
concessions, deferrals and reductions
agreed with a large number of
landlords. The Committee has
carefully monitored work undertaken
by management to ascertain the
completeness and accuracy of the
Group’s lease database including the
implementation of new processes
and controls to identify the impact
of lease modifications in future
reporting periods. The Committee
is satisfied that management has
made appropriate assumptions and
judgements in relation to IFRS 16
and that appropriate disclosures have
been made in the 2020 financial
statements. See note 2.
In late 2020 the Financial Reporting
Council (the “FRC”) submitted a request
for further information based solely
on their review of the Group’s first time
adoption of IFRS 16 – Leases, due to
the material impact of the new standard
on the Group’s financial statements.
The Group responded fully to the
matters raised and as a result of the
FRC’s enquiry, the Group has reclassified
the following items in the Consolidated
Statement of Cash Flows as reported
in the 2019 Annual Report, as detailed
in note 2 ‘Accounting Policies’ to
the accounts:
– Lease interest paid as an operating
cash flow, instead of including it
as a financing cash outflow;
– Partner contributions received for a
reimbursement as an operating cash
flow, instead of being offset within
movements in trade and other
payables; and
– Partner contributions received for
a lease incentive as a financing cash
flow instead of being offset within
payment of lease liability.
The FRC’s enquiry did not result in any
change to reported profit, earnings per
share, assets, liabilities or the overall net
cash flows reported in respect of the
2019 financial year.
The Committee recommends the
Annual Report to the Board. 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.
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IWG plc Annual Report and Accounts 2020
RISK MANAGEMENT
The Board is responsible for establishing
the risk appetite for the Group.
The 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 part of
the planning process and are endorsed
by regional management. Key risks
are reported to the Committee, which
reports on them to the Board.
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
Committee and the Board in the year
under review and were formally
reviewed and approved.
EMERGING AND
PRINCIPAL RISKS
There are a number of existing and
emerging 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 such business risks. Risk
assessment and evaluation are an
integral part of the annual planning
process, as well as the Group’s monthly
review cycle.
COVID-19 is an example of an
unforeseen risk that has affected several
aspects of our business. The Committee
made certain that the Company
considered the implications of the
pandemic on its principal risks and
developed a response plan to address
these which the Committee continues
to review on a regular basis.
The Group’s principal risks, together with
an explanation of how the Group
manages these risks and the impact
from COVID-19, are presented on pages
48 to 55 of this Annual Report.
INTERNAL CONTROL
The Committee has a delegated
responsibility 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 Group’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’s Guidance
on Risk Management, Internal Control
and Related Financial and Business
Reporting (the “FRC Guidance”), the
Committee confirms there is an ongoing
process for identifying, evaluating
and managing significant risks faced
by the Group.
During 2020, 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:
– Group-wide procedures, policies and
standards have been established;
– a framework for reporting and
escalating significant matters is
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.
This 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 inherent risks are
identified and assessed, and
appropriate action plans developed to
manage the risk per the risk appetite
of the Group as established by the
Board. 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;
iwgplc.com
81
GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
– 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 coordinated
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 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 Group and country
specific policies, via the Group’s
intranet, including the Company’s
Code of 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
and its learning and development
systems;
– 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
employees 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 makes
sure 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 2020 and is satisfied that it
is in accordance with the FRC 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.
WHISTLEBLOWING POLICY
An externally hosted whistleblowing
channel, EthicsPoint, is available to
all employees via email or on the
Company’s intranet and may be used
anonymously. 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
Committee. Employees can monitor the
progress of the reports they have made.
The Business Assurance Director, in
consultation with the Senior Leadership
Team, decides on the appropriate
method and level of investigation.
The Committee is notified of all material
discourses made and receives reports
on the results of investigations and
actions taken on a regular basis.
The 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 Ireland audit
partner would best serve the needs of
the Group. The 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
2019 and completed a review of the
half-year results of the Group for the
period to 30 June 2020.
The value of non-audit services provided
by KPMG in 2020 amounted to
£1,188,000 (2019: £192,000). Non-audit
services related to half year review
engagements and other assurance
services in relation to reports provided
to landlords in the UK, tax services in
relation to statutory tax certifications in
South Africa and other assurance
services in Switzerland and the
Philippines. In 2020, KPMG were
engaged to perform carve-out
assurance services in relation to
potential transactions (£975,000).
During the year there were no
circumstances where KPMG were
engaged to provide services which
might have led to a conflict of interest.
The Committee safeguards KPMG’s
independence through its policy on
non-audit related services, which
includes the following measures:
– the external auditor is used for non-
audit related services only where their
use will deliver a demonstrable benefit
as compared with the use of other
potential providers 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 and/or Committee Chair
before any work is performed;
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IWG plc Annual Report and Accounts 2020
– permitted non-audit services are
reviewed annually by the Committee
and currently include: consultation on
financial accounting and regulatory
reporting matters; reviews of internal
accounting and risk management
controls; reviews of compliance with
policies and procedures; non-
statutory audits (e.g. regarding
acquisitions and disposal of assets and
interests in companies); assurance
and advice on finance-related
projects; attestation reports; due
diligence; and tax services (only where
the services will have no direct effect
or will have an immaterial effect on
the audited financial statements of
the Group);
– prohibited non-audit services include:
tax compliance and advisory services;
legal services; book-keeping and other
accounting services; design, provision
and implementation of information
technology services; internal audit
services; valuation services; payroll
services; recruitment services in
relation to key management positions;
HR services relating to the
organisation structure and cost
control; and transaction (acquisitions,
mergers and dispositions) work that
includes investment banking services,
preparation of forecasts or investment
proposals and deal execution
services; and
– KPMG confirm at every Committee
meeting that, since the prior meeting,
there have been no significant issues
affecting their objectivity and
independence arising from the
provision of non-audit services.
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 and will
rotate after the audit of the 2020
financial statements.
The breakdown of the fees paid to
the external auditor during the year to
31 December 2020 can be found in
note 5.
In assessing the effectiveness of the
external audit process for 2020 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.
Following the Committee’s assessment
of the effectiveness of the external audit
process for 2020 and of KPMG’s
continuing independence, 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 2021 be proposed at the
annual general meeting.
LAURIE HARRIS
CHAIR, AUDIT COMMITTEE
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83
GOVERNANCE DIRECTORS’ REMUNERATION REPORT
Directors’ Remuneration
report
We seek to motivate our people, reward performance
and recruit the calibre of talent that will lead IWG
through the COVID-19 pandemic and in our continuing
growth ambitions.”
NINA HENDERSON
CHAIRMAN, REMUNERATION COMMITTEE
Members
Nina Henderson
Laurie Harris
François Pauly
Florence Pierre
Attendance
(out of
possible
maximum
number of
meetings)
7/7
7/7
7/7
7/7
All members of the Committee are independent.
Length of tenure of
Non-Executive
Directors within the
Committee
■ 0-3 years
■ 3-5 years
■ 6+ years
25%
25%
50%
DEAR SHAREHOLDER,
I am pleased to present this Directors’
Remuneration report for 2020. The
Remuneration Committee (the
“Committee”) is focused on ensuring
that remuneration is designed to drive
our strategic priorities, support our
Company culture and values and
promote the long-term sustainable
success of the Company.
COVID-19
2020 has been an unprecedented year,
the most challenging ever experienced
by the Group. Our people and their
talents have been a key strength in
IWG’s response to COVID-19. We are
proud of their resilience and enormous
efforts to continue to drive the business
and deliver services to our customers
under difficult conditions.
All decisions taken during this
unprecedented period have recognised
the need to reward and incentivise
Executive performance while
simultaneously considering the
experience of the Company and our
stakeholders, including our employees,
customers, investors, landlords,
franchisees and communities.
We have actively engaged with our
partners to work together through the
challenges of the COVID-19 pandemic.
This engagement has informed our
decisions and actions.
The impact of the pandemic has been
greater than we imagined. We have
taken comprehensive actions to reduce
costs and improve cash flow and
liquidity. This included a decision to
withdraw our final dividend in respect
of the 2019 financial year.
Therefore, the following voluntary
measures were taken by Board members
in 2020 in order to reflect the experience
of shareholders and employees:
– implementation of the base salary
increase awarded to Mark Dixon
in 2020 was deferred until
1 January 2021;
– implementation of the fee increases
awarded to the Chairman and
Non-Executive Directors in 2020
was deferred until 1 January 2021;
– a 50% reduction in base salaries was
taken by the Executive Directors from
May 2020 until 31 December 2020;
– a 50% reduction in basic fees was
taken by the Chairman and Non-
Executive Directors from May 2020
until 31 December 2020.
There will be no recovery of the deferred
increases or voluntary reductions.
IWG reported an operating loss,
including adjusting items, of £352.0m
for 2020. A strong cash position has
been maintained and our strategic
transformation towards capital-light
growth through management
agreements, franchising and joint
ventures is furthering our rapid
growth strategy.
IWG’s human resources continue
to evolve. Key focus areas are assuring
team members’ health, wellbeing and
professional development along
with retention of existing capabilities.
Our policy aims to motivate our people,
celebrate their diversity, reward their
performance and recruit the calibre
84
IWG plc Annual Report and Accounts 2020
supports the Company’s objectives and
strategy and enables future success.
WORKFORCE ENGAGEMENT
Through my role as Non-Executive
Director with oversight of employee
engagement I have interacted with
employees across the Group in person
and following COVID-19 restrictions
in a socially distanced manner.
I attended the leadership conference in
January 2020 in person and joined the
virtual conference held in January 2021,
where I interfaced with 300 managers.
I also met with smaller groups of
employees both virtually and through
visits to IWG sites. Employees have
provided me with their reactions to
our response to COVID-19, strategic
endeavours, reward plans and
resources available to them to deliver
job performance.
On behalf of the Board I support IWG’s
ongoing efforts focused on enhancing
diversity, equity and inclusion. In the
USA I participate in the African American
Affinity Network Group hearing about
their mission, objectives and perspectives.
I provide feedback to the Committee and
the Board on employee perspectives as
a result of these interactions.
ANNUAL GENERAL MEETING
You will be asked to pass a resolution
approving the Annual Report (and the
Chairman’s annual statement) by way
of an advisory vote at the 2021 annual
general meeting. On behalf of the
Committee, I commend this report to
you and look forward to your support
for the resolution at the annual
general meeting.
NINA HENDERSON
CHAIR, REMUNERATION COMMITTEE
of talent that will lead IWG through
the COVID-19 pandemic and in our
continuing growth ambitions.
the need to incentivise Executive
performance and support the future
success of the Company:
ANNUAL BONUS
The 2020 annual bonus plan was
measured against an operating profit
target adjusted for actual growth costs.
The achieved underlying operating loss
before growth¨ of £61.5m (measured on
a pre-IFRS 16 basis) resulted in no annual
bonus being paid to Executive Directors.
Whilst the Committee recognises the
significant efforts and achievements by
the Executive Directors in responding
decisively to the COVID-19 pandemic,
it was not considered appropriate to
make use of the Committee’s discretion.
The decision not to pay a bonus to the
Executive Directors was in line with the
discussions and arrangements made
with the Company’s partners on how
to work together through the pandemic.
PERFORMANCE SHARE PLAN
(“PSP”)
The 2018 PSP will vest at 33.33% in
March 2021. The Committee reviewed
the three performance metrics and
determined that the threshold targets
for EPS growth and ROI improvement
metrics had not been met; the
Company TSR performance was 15%
p.a. above the comparator group
median, resulting in a vesting outcome
of 100% of the maximum for this
element. All metrics had a 33.33%
weighting and were measured over a
three-year period to 31 December 2020.
The Committee carefully considered the
outcome with regard to the overall
Company performance, shareholder
and employee experiences, and the
voluntary reduction in pay for Board
members, and decided that the
outcome was appropriate. Therefore
no discretion was applied to the
vesting outcome.
OUTCOMES FOR 2020
The Committee believes these outcomes
demonstrate strong alignment with the
Company’s performance and sensitivity
to its stakeholders.
THE YEAR AHEAD
The Committee was pleased that over
94% of shareholders supported the
Remuneration Policy (the “Policy”) in
2020. As a result the Committee has
not consulted directly with shareholders
regarding the Policy in 2020 and will
continue to operate under it in 2021.
The Committee has made the following
decisions for 2021 taking into account
the pay and conditions across the
Group’s workforce, the experiences of
the Company and its stakeholders and
– No increases to Executive Directors’
salaries for 2021. The increase reported
in last year’s report was implemented
on 1 January 2021 and the Executive
Directors returned to full pay on
1 January 2021, following the
voluntary reduction in 2020.
– The Company’s continued strategic
transformation is key to unlocking
shareholder value. Results from such
transformative actions are not
conveniently measured by classic
operational performance targets with
annual cut-offs, but should be
reflected in relative TSR performance.
Therefore, during this transformational
period, relative TSR performance
targets will also be a component of
the annual bonus to reflect current
year progress on implementing the
strategy as well as the measurement
of its sustained successful
implementation for the PSP awards.
Our strategy includes specific ESG
targets, in future years these will be
reviewed for incorporation into
the PSP targets.
– The maximum annual bonus will
remain unchanged at 150% of base
salary for Executive Directors with half
of any bonus paid deferred in share
options which vest after three years.
Performance will be measured against
stretching operating profit and relative
TSR targets.
– Awards of 250% of base salary will
be granted under the PSP in line with
the approved Policy. For the reasons
described the awards will vest subject
to a relative TSR target measured over
three financial years, 2021-2023. 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 remains fit
for purpose in the face of the pandemic
and the Company’s continuing strategic
transformation. It ensures alignment
between pay and performance through
robust target-setting.
Historically, variable pay has rewarded
sound performance. However, as
demonstrated this year, when
performance is less strong or when
long-term shareholder value is weaker.
performance outcomes are scaled back.
This year no annual bonus is being
awarded and partial vesting of the
2018 PSP is occurring. Such effective
alignment ensures that our Policy
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85
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY
This report sets out the Group’s Policy on remuneration for Executive and Non-Executive Directors, which was approved
by the Company’s shareholders at the annual general meeting on 12 May 2020. The full version of the shareholder-approved
Policy can be found on the Company’s website at https://investors.iwgplc.com/reports-and-presentations.
The Committee is satisfied that the approved Policy operated as intended in 2020.
OVERVIEW OF DIRECTORS’ REMUNERATION POLICY
The Policy 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 ensure ongoing alignment with the changes to the UK Corporate Governance Code of 2018;
– to align management and shareholder interests through building material share ownership over time;
– to reflect the remuneration received by the wider employee group 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 diversity, equality 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
BASE SALARY
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.
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 2021 are
set out on page 89 of the Remuneration
report.
There is no
prescribed
maximum salary.
Salary increases will
normally be 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).
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IWG plc Annual Report and Accounts 2020
Operation
Maximum
Performance framework
Component
BENEFITS
Purpose/link to
strategy
To provide a
competitive
benefits
package.
PENSION
To provide
retirement
benefits in line
with the
overall Group
Policy.
Incorporates various cash and 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).
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.
ANNUAL BONUS
To incentivise
and reward
annual
performance
and create
further
alignment with
shareholders
via the delivery
and retention
of deferred
equity.
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 in the full Policy).
N/A
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.
7% of base salary for
existing Directors
which is consistent
with provisions
provided to the
wider workforce.
The Committee
may set a higher
level for new
executives to reflect
those of the
workforce in their
location (up to a
maximum of 15% of
base salary).
150% of base salary
per annum.
N/A
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 in
the full Policy).
Performance below
threshold results in zero
payment. Payments rise
from 0% to 100% of the
maximum opportunity
levels for performance
between the threshold
and maximum targets.
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87
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
Component
PERFORMANCE
SHARE PLAN
(“PSP”)
Purpose/link to
strategy
Operation
Maximum
Performance framework
The normal plan
limit is 250% of base
salary.
Motivates and
rewards the
creation of
long-term
shareholder
value.
Aligns
executives’
interests with
those of the
shareholders.
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 in the full Policy).
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.
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 in the full Policy).
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.
SHAREHOLDING
GUIDELINES
POST-
CESSATION
SHAREHOLDING
REQUIREMENT
To align
Executive
Directors’
interests with
those of our
long-term
shareholders
and other
stakeholders.
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.
Executive Directors are expected to hold, for
up to two years post-cessation, the existing
shareholding requirement or the actual
shareholding at cessation, if lower.
N/A
N/A
N/A
N/A
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IWG plc Annual Report and Accounts 2020
ANNUAL REPORT ON REMUNERATION
MEMBERSHIP AND MEETINGS
All members of the Committee are independent. Committee membership during the year and attendance at the meetings is set
out on page 84. In addition to the designated members of the 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.
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 2021
This Annual Report on Remuneration (and the Committee Chair’s annual statement) will be put to a single advisory shareholder
vote at the 2021 annual general meeting. The information below includes how we intend to operate our Policy in 2021 and the
pay outcomes in respect of the 2020 financial year.
REPORTING
The Group continues to use pre-IFRS 16 results for its primary management reporting including performance target-setting and
measuring achievements against those targets. Therefore the figures in this report are presented on a pre-IFRS 16 basis.
BASE SALARIES FOR THE EXECUTIVE DIRECTORS
No base salary increases are proposed for 2021 (consistent with the approach for the rest of the workforce).
Implementation of the 6.1% salary increase awarded to Mark Dixon in 2020, as detailed in the 2020 Annual Report on
Remuneration which was approved at the 2020 annual general meeting, was voluntarily deferred by Mr Dixon in response to
COVID-19, and his salary increase has only been implemented with effect from 1 January 2021. Additionally, during 2020 the
Executive Directors voluntarily agreed to a 50% reduction in their base salaries from May 2020 to the end of December 2020.
There will be no recovery of the deferred salary increase or voluntary salary reductions.
The current salaries as at 1 January 2021 and compared to the approved figures in the 2020 Annual Report as well as the
voluntary reduced amount paid in 2020 are as follows:
Mark Dixon
Eric Hageman
Effective
1 Jan 2021
(£’000)
£875.0
£440.0
Effective
1 Jan 2020
(£’000)
£875.0
£440.0
Percentage
change
Actual amount
paid 2020
(£’000)
0%
0%
£550.5
£315.4
For context, the average base salary increase received by UK employees was 3% in 2020.
BENEFITS AND PENSION
Benefits and pension provisions will operate in line with the approved Policy.
ANNUAL BONUS
For 2021, 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 normally be deferred into shares under the Deferred Share Bonus Plan (“DSBP”), which will vest after
three years subject to continued employment.
The 2021 annual bonus will be based 50% on measurement against underlying operating profit targets ranging from threshold
to stretch and 50% on relative TSR performance. The targets are not being disclosed prospectively as they are commercially
sensitive; however, a description of the performance against targets set will be included in next year’s Annual Report.
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89
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
PERFORMANCE SHARE PLAN (“PSP”)
Recognising the substantial increase in opportunity for long-term value to be created for our shareholders through our strategic
transformation including our franchising strategy, PSP share option awards will be made at 250% of current salary (up to the
Policy maximum) to Executive Directors with performance measured over a three-year period ending 31 December 2023.
The awards will be subject to a TSR performance metric as summarised below. The Committee will continue to review the
suitability of the TSR metric and may revert back to a balanced set of metrics on the PSP in the future.
Performance conditions
Threshold vesting
Threshold performance Maximum vesting
Relative TSR versus FTSE 350 excluding
investment trusts (100% weighting)
25%
Median
100%
Maximum performance
10% compound annual
growth above median
Awards will be subject to a holding period of two years following achievement of performance conditions. 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 2021.
Fees were last reviewed and increased in 2020, as detailed in the 2020 Annual Report on Remuneration which was approved
at the 2020 annual general meeting, however implementation of the fee increases was voluntarily deferred by the Non-Executive
Directors due to COVID-19, and they have only been implemented with effect from 1 January 2021. Additionally, in response to
the COVID-19 pandemic, during 2020 the Non-Executive Directors voluntarily agreed to a 50% reduction in their basic fees from
May 2020 to the end of December 2020. There will be no recovery of the deferred fee increases or voluntary fee reductions.
The current fees as at 1 January 2021 and compared with the approved figures in the 2020 Annual Report as well as the voluntary
reduced amount paid in 2020 are as follows:
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
Oversight of employee engagement and CSR(1)
Variable dislocation allowance for non-Swiss Directors(2)
2021
(£’000)
300
62
15
15
15
15
5 to 10
2020
(£’000)
Percentage
change
300
62
15
15
15
15
5 to 10
0%
0%
0%
0%
0%
–
0%
2020 Actual
amount paid
due to
voluntary
reduction
(£’000)
167
38
12
12
12
0
2.5 to 5
1. Remuneration for this role was deferred to 1 January 2021.
2. The level of dislocation allowance for non-Swiss Directors is determined according to their country of residence.
REMUNERATION OUTCOMES FOR 2020
SINGLE TOTAL FIGURE OF REMUNERATION TABLE (AUDITED)
The following table shows the total remuneration in respect of the year ending 31 December 2020, together with the prior year
comparative.
Executive Directors
Salary
Benefits
Pension
Annual bonus
Long Term
Incentive Awards
Total
Total Fixed
Total Variable
£’000
2020
2019
2020
2019
2020
2019 2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Mark
Dixon
Eric
Hageman
550.5 825.0
–
8.1
38.5
57.8
– 1,237.5
703.5 2,052.3
1,292.5 4,180.7
589 890.9
703.5 3,289.8
315.4 440.0
9.6 44.2
41.5
41.5
– 660.0
–
–
366.5
1,185.7
366.5
525.7
–
660.0
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IWG plc Annual Report and Accounts 2020
Non-Executive Directors
Fees
Benefits
Pension
Annual bonus
Long Term
Incentive Awards
2020
166.7
2019
250.0
55.0
–
48.7
26.6
55.0
76.5
40.5
59.5
52.5
71.5
2020
2019
2020
2019
2020
2019
2020
2019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
2020
166.7
2019
250.0
55.0
–
48.7
26.6
55.0
76.5
40.5
59.5
52.5
71.5
£’000
Douglas
Sutherland
Laurie Harris
Elmar
Heggen
Nina
Henderson
Florence
Pierre
François
Pauly
Salary – The salaries shown are the voluntary reduced amount paid in 2020.
Fees – The fees shown are the voluntary reduced amount paid in 2020.
Annual bonus – The bonus shown is the full award in respect of the relevant financial year. Half of the bonus awarded to
Executive Directors is normally deferred into shares for three years.
Long Term Incentive Awards – Includes the value of awards made to Mark Dixon under the Performance Share Plan (“PSP”)
in previous years which vested in respect of a performance period ending in the relevant financial year. The 2017 PSP award
(583,039 shares (the maximum)) vested in March 2020 based on performance until 31 December 2019; the value of this is shown
in 2019 and reflects a price on the date of vesting of 352p. £402.3k of the 2017 PSP value of £2,052.4k was attributable to share
price increase. The 2018 PSP award (226,804 shares) vests in March 2021 based on performance until 31 December 2020; the
value of this is shown in 2020 and reflects a three-month average share price ending 31 December 2020 of 310p. £153.5k of the
2018 PSP value of £703.5k was attributable to share price increase.
Laurie Harris was appointed as Non-Executive Director and Chair of the Audit Committee on 14 May 2019. Remuneration detailed
above reflects time served in respect of the role during the relevant periods.
Elmar Heggen stepped down as Non-Executive Director and Chairman of the Audit Committee on 14 May 2019. Remuneration
detailed above reflects time served in respect of the role during the relevant periods.
DETERMINATION OF 2020 ANNUAL BONUS (AUDITED)
The 2020 annual bonus plan was measured on performance against the following targets:
Measure
Operating profit pre-growth
Director
Mark Dixon
Eric Hageman
Threshold
(50% of salary)
Target (90% of
salary)
Maximum
(150% of salary)
Basis
Achieved
Pre-IFRS 16
£149.4m £166.0 m £180.5m £(61.5m)(1)
Bonus maximum (% of
base salary)
150%
150%
Operating profit
achievement
(% of award)
0%
0%
Bonus awarded
(£’000)
Cash bonus
(£’000)(1)
Deferred shares
(£’000)(2)
£0
£0
£0
£0
0
0
1. Reflects the achieved a pre-IFRS 16 operating profit adjusted for actual growth costs of £112.3m.
2. Half of any bonus awarded is normally paid in cash with half deferred in shares which vest after three years.
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91
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
PSP AWARDS GRANTED VESTING IN 2020 (AUDITED)
The table below summarises the performance conditions and the actual performance against the award made under the PSP
in 2018. This award was subject to performance conditions measured over the three financial years ending 31 December 2020.
Relative TSR versus FTSE 350
(excluding investment trusts) (33.3% weighting)
% of each
element vesting
EPS
(33.3% weighting)
% of each
Return on investment
(33.3% weighting)
% of each
Target
element vesting
Target
element vesting
Target
Below threshold
0%
Below median
Threshold
25%
Median
Maximum
10% compound
annual growth
above median
100%
Performance achieved
Actual % vesting
Overall vesting
Director
Mark Dixon
Median
+15.1% p.a.
100%
33.33% of
maximum
Compound
annual growth of
less than 5%
Compound
annual growth of
5%
0%
0%
100%
Compound
annual growth of
25%
Compound
annual growth of
(61.4p) per share,
– less than 5%
Return below
2017
performance
Return to be
equal to 2017
performance
Return to be 300
basis points
above 2017
performance
0%
0%
100%
Return 13% below
2017
performance
0%
0%
2017 award number of
share options
680,412
Total vesting
No. of share options
(% of maximum)
33.33%
to vest
226,804
Award value
(£’000)
703.5
The value of awards reflects a three-month average share price ending 31 December 2020 of 310p.
Awards are 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.
The Committee believes the above outcome is representative of Company performance and no discretion was applied to the
2018 PSP vesting outcome.
PSP AWARDS VESTING IN 2022 (AUDITED)
PSP awards granted to Executive Directors on 4 March 2020 which vest subject to a three-year performance period ending
31 December 2022 were as follows:
Executive
Mark Dixon
Eric Hageman
Number of
share options
609,332
306,407
% of base salary
250%
250%
Value of award
(£’000)P(1)
£2,187.5
£1,100.0
% of maximum
amount receivable
for threshold vesting
25%
25%
1. Based on a face value grant of 250% of salary and using a share price of 359p on the date of grant.
The awards are subject to a TSR performance metric as summarised below.
Performance conditions
Threshold vesting Threshold performance
Maximum vesting Maximum performance
Relative TSR versus FTSE 350 excluding investment trusts
(100% weighting)
25%
Median
100%
10% compound
annual growth
above median
The Company’s current share price, including current assumptions regarding the future implementation of the Company’s
strategic transformation referenced in analysts’ reports, has been taken into account when setting stretching relative TSR targets.
Awards are 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.
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IWG plc Annual Report and Accounts 2020
DSBP AWARDS GRANTED IN THE YEAR
DSBP awards granted to Executive Directors on 4 March 2020 as a deferred bonus in respect of the financial year ended
31 December 2019 and which become exercisable on the third anniversary after the date of grant, subject to continuous
employment, were as follows:
Executive
Mark Dixon
Eric Hageman
Number of
share options
172,354
91,923
% of 2019 bonus
50%
50%
Value of award(1)
(£’000)
£618.7
£330.0
1. Based on a face value grant using a share price of 359p on the date of grant.
The awards were made as a deferral of the 2019 bonus and are not subject to any additional performance metrics.
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 2020 alongside the interests in share schemes for the
Executive Directors.
Shares held
outright
% of salary
required
Guideline met?
% of salary
attained(1)
Deferred Share
Bonus Plan
options(2)
PSP options
subject to
performance
conditions(3)
PSP options for
which
performance
conditions have
been achieved(4)
Options under the
Share Option Plan
subject to
performance
conditions(5)
Shareholding guidelines
Executive
Directors
Mark Dixon
Eric Hageman
Non-Executive
Directors
Douglas
Sutherland
Laurie Harris
Nina Henderson
François Pauly
Florence Pierre
286,949,493
–
200%
200%
Yes
No
1,124.5%
–
284,368
91,923
1,299,709
674,068
809,843
–
–
300,000
400,000
15,000
30,800
100,000
–
1. Based on a share price of 343.2p and base salary as at 31 December 2020.
2. Half of any bonus awarded is deferred in share options which vest after three years, subject to continued employment but no further performance targets.
3. Unvested awards under the 2019 and 2020 Performance Share Plan are subject to further performance conditions.
4. Options under the 2017 and 2018 Performance Share Plan for which performance conditions have been achieved are subject to a two-year holding period
requirement and 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.
5. In December 2018 Eric Hageman was granted unvested conditional options under the Company’s Share Option Plan at an exercise price of 203.1p per share.
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. There has been no movement in Directors’ share interests since year end to the date
of this report.
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93
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
SUPPORTING DISCLOSURES AND ADDITIONAL CONTEXT
PERCENTAGE CHANGE IN REMUNERATION OF DIRECTORS COMPARED TO EMPLOYEES
The table below shows the percentage change in remuneration of each Director and our UK employees (IWG plc does not have
any direct employees) on a full-time equivalent basis, between the year ending 31 December 2019 and the year ending 31
December 2020.
Executive Directors
Mark Dixon
Eric Hageman
Non-Executive Directors
Douglas Sutherland
Laurie Harris
Nina Henderson
François Pauly
Florence Pierre
Employees
Base salary
% change(1)
Benefits
% change
Annual bonus
% change
(33)%
(28)%
(33)%
(28)%
(28)%
(32)%
(27)%
3%
(100)%(2)
(78)%
(100)%(3)
(100)%(4)
–
–
–
–
–
(34)%
–
–
–
–
–
42%
1. In response to the COVID-19 pandemic Executive Directors and Non-Executive Directors voluntarily agreed to a 50% reduction in their base salaries from
1 May 2020 to 31 December 2020 and salary increases detailed in the 2020 Annual Report were voluntarily deferred until 1 January 2021. There will be
no recovery of the deferred increases or the voluntary reductions.
2. No benefits were paid to Mark Dixon in 2020, in 2019 benefits of £8.1k were paid.
3. No annual bonus will be paid to Mark Dixon in respect of 2020, a bonus of £1,237.5k was paid in respect of 2019.
4. No annual bonus will be paid to Eric Hageman in respect of 2020, a bonus of £660.0k was paid in respect of 2019.
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 2020 and 2019 and the percentage changes between years:
Total employee remuneration
Distributions to shareholders via dividends and share buybacks
2020
2019
£346.5m
£43.7m
£372.7m
£107.7m
Change
2019 to 2020
(7)%
(41)%
CHIEF EXECUTIVE OFFICER’S PAY RATIO
The table below shows our voluntary disclosure of the Chief Executive Officer pay ratio information from 2019 and the required
disclosure for 2020 at the 25th, 50th and 75th percentiles compared to the pay of our UK employees. The ratios have been
calculated based on the single total figure of remuneration for Mark Dixon and the total pay of our employees on a full-time
equivalent basis under calculation methodology A of the regulations, as of 31 December 2020. No element was omitted for the
purpose of the calculation.
The median pay ratio was lower this year as compared with last year largely due to the voluntary reduction in CEO salary during
COVID-19, no annual bonus being awarded and partial vesting of the 2018 PSP. Due to the differences in remuneration structure
between the CEO and employees and the higher weighting put on the variable pay elements for the CEO, we expect this ratio
to fluctuate year on year.
Overall, the Committee is satisfied that the median ratio is consistent with IWG’s pay, reward and progression policies for all
employees which relate pay levels to performance and market benchmarks. Bonus schemes, participated in by the majority
of employees, and long-term incentives align performance with shareholder experience.
Financial year
2019
2020
2020
Total pay
Base salary
94
Methodology
Option A
Option A
Mark Dixon
(£’000)
1,292.5
550.5
P25
(Lower
quartile)
231:1
43:1
P25
(£’000)
30.0
29.0
P50
P75
(Median)
(Upper quartile)
148:1
35:1
P50
(£’000)
37.2
32.2
102:1
20:1
P75
(£’000)
65.4
56.8
IWG plc Annual Report and Accounts 2020
PERFORMANCE GRAPH AND TABLE
The graph below shows the TSR of IWG in the ten-year period to 31 December 2020 against the TSR of the FTSE 350 (excluding
investment trusts). TSR reflects 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.
Value (£) (rebased)
700
600
500
400
300
200
100
0
Dec 10
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
IWG plc
FTSE 350 Index
(excl. investment trusts)
Source: Thomson Reuters Refinitive
This graph shows the value, by 31 December 2020, of £100 invested in IWG plc on 31 December 2010, compared with the value
of £100 invested in the FTSE 350 (excluding investment trusts) Index on the same date.
2011
2012
2013
2014
2015
2016
2017
2018
2019(1)
£1,130k
£1,773k
£1,854k
£2,770k
£1,968k
£3,035k
£1,132k
£1,451k
£4,181k
2020
1,293k
50%
100%
79%
100%
100%
0%
11%
35%
86%
97%
93%
91%
0%
11%
43%
100%
0%
2%
100%
33%(2)
Single total figure
of remuneration
Bonus
(% of maximum)
Long-term
incentive vesting
(% of maximum)
1. The single total figure of remuneration has been restated to reflect that the share price for the 2017 PSP on the date of vesting is now known.
2. Based on one-third of the 2018 PSP award vesting.
iwgplc.com
95
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
SERVICE CONTRACTS/LETTERS OF APPOINTMENT
Executive Directors have service contracts with the Group which can be terminated by the Company or the Director by giving
12 months’ notice. The Chairman and Non-Executive Directors are appointed for an initial three-year term, which shall continue
unless terminated 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.
The following table sets out the dates that each Director was first appointed by the Group, the expiry date of the current term
and the length of service as of 31 December 2020. All Directors will seek re-election at the 2021 annual general meeting.
Current service contract/appointment agreement
Initial appointment date as
Director within the Group
Expiry of
current term
Length of service
as Director
with the Group
Executive Directors
Mark Dixon
Eric Hageman
Appointment agreement – 19 December 2016
19 December 2016
Director Service agreement – 1 July 2020
Appointment agreement – 1 January 2019
Employment agreement – 1 January 2019
1 January 2019
–
–
Founder
2 years
Non-Executive
Directors
Douglas Sutherland Appointment agreement – 16 February 2017
19 December 2016
–
Laurie Harris
Nina Henderson
François Pauly
Florence Pierre
Appointment agreement – 14 May 2019
Appointment agreement – 19 December 2016
Appointment agreement – 19 December 2016
Appointment agreement – 19 December 2016
* Non-Executive Directors are appointed for an initial three year-term.
14 May 2019
19 December 2016
19 December 2016
19 December 2016
14 May 2021*
–
–
–
PAYMENTS TO PAST DIRECTORS/PAYMENTS FOR LOSS OF OFFICE
No payments were made to past Directors or for loss of office in 2020.
12 years 5 months
(10 years 8
months as
Chairman)
1 year 8 months
6 years 8 months
5 years 8 months
7 years 8 months
ADVISORS TO THE REMUNERATION COMMITTEE
The Executive Compensation team within PwC provided independent advice to the Committee during the year. No other services
were provided by PwC during the year. PWC was appointed by the Committee during 2020 in place of Aon, as a result of the
senior advisor moving from Aon to PwC. The fees charged by Aon for the provision of independent advice to the Committee
during 2020 were £29,500 (2019: £78,500) and by PwC were £9,500 during 2020. With regard to remuneration advice, the
Committee is comfortable that PWC’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 12 May 2020 in respect of remuneration related resolutions are shown in the table below:
Resolution
Approval of Directors’ Remuneration Policy
at the 2020 AGM
Approval of Annual Remuneration Report
for year ending 31 December 2019
For and on behalf of the Board
NINA HENDERSON
CHAIRMAN OF THE REMUNERATION COMMITTEE
Votes for
#
Votes against
%
#
%
Total votes cast
Votes withheld
727,136,890
94.33%
43,747,207
5.67% 770,884,097
1,177,273
659,375,053
87.33% 95,685,534
12.67% 755,060,587
17,000,783
96
IWG plc Annual Report and Accounts 2020
DIRECTORS’ REPORT
Directors’ report
The Directors of 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 2020.
DIRECTORS
The Directors of the Company who held
office during the financial year under
review were:
EXECUTIVE DIRECTORS
– Mark Dixon
– Eric Hageman
NON-EXECUTIVE DIRECTORS
– Douglas Sutherland (Chairman)
– François Pauly
– Laurie Harris
– Florence Pierre
– Nina Henderson
Biographical details for the Directors
are shown on page 67.
Details of the Directors’ interests and
shareholdings are given in the
Remuneration report on page 93.
Details of the role of the Board can be
found on page 75 and the process for
the appointment of Directors can be
found on page 77.
The Corporate Governance report,
Nomination Committee report, Audit
Committee report, Remuneration report
and Directors’ statements on pages 66
to 96 and 99 all form part of this report.
PRINCIPAL ACTIVITY
The Company works with franchise
partners, landlords and property owners
to provide the world’s largest network of
flexible workspace.
BUSINESS REVIEW
The Directors have presented a Strategic
report on pages 1 to 65 as follows:
The Chief Executive Officer’s review and
Chief Financial Officer’s review on pages
24 to 27 and 40 to 47 respectively
address:
– review of the Company’s business
(pages 24 to 27);
– an indication of the likely future
developments in the business
(page 27);
– development and performance during
the financial year (pages 40 to 47); and
– position of the business at the end
of the year (pages 45 to 47).
The Risk Management and Principal
Risks report, on pages 48 to 55, 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 detailed in the Risk
Management and Principal Risks report
on page 50.
The ESG report, on pages 56 to 65,
includes the sections in respect of:
– environmental matters;
– social and community issues; and
– employee development and
performance.
The Nomination Committee report on
pages 76 to 78 covers our approach
to diversity and further information on
diversity initiatives can be found on
pages 60 and 61.
The Directors’ statements on page 99
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
The loss before taxation† for the year
was £620.1m (2019: profit of £55.0m).
No interim dividend has been paid
and the Directors do not recommend
a final dividend in respect of the 2020
financial year (2019: paid total dividend
of £58.2m).
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:
– 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 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.
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 £430.1k during the year
(2019: £412.4k).
iwgplc.com
97
GOVERNANCE DIRECTORS’ REPORT CONTINUED
CAPITAL STRUCTURE
The Company’s share capital (including
treasury shares) comprises 1,057,248,651
issued and fully paid up ordinary shares
of 1p nominal value in IWG plc (2019:
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.
During the year, the Company
completed a placing of new ordinary
shares. More information can be found
below and in note 22 of the notes to the
accounts on page 133.
Details of the Company’s employee
share schemes can be found on 140
to 146. The outstanding awards and
options do not carry any rights in relation
to the control of the Company.
POWER FOR THE COMPANY
TO ISSUE SHARES
At the Company’s annual general
meeting held on 12 May 2020 the
shareholders of the Company approved
resolutions giving authority for the
Company to allot ordinary shares in
the Company up to one-third of the
Company’s issued share capital and up
to two-thirds of the Company’s issued
share capital in connection with a rights
issue and to dis-apply pre-emption rights,
in each case, until the earlier of the
conclusion of the Company’s next annual
general meeting or 11 August 2021.
On 28 May 2020, the Company used
the relevant authorities, taking into
account the guidance issued by the
Pre-Emption Group then in place, to
issue 133,891,213 new ordinary shares
by way of a placing including an offer to
retail investors. The placing represented
approximately 15.4% of the issued
ordinary share capital of the Company
prior to the placing.
The shareholders of the Company
approved further resolutions at a
general meeting of the Company on
21 December 2020 for the allotment
and issue of new ordinary shares on a
non-pre-emptive basis upon conversion
SUBSTANTIAL INTERESTS
At 5 March 2021, the Company has been notified of the following substantial
interests held in the issued share capital of the Company.
Estorn Limited(1)
Toscafund Asset Management LLP
Schroders plc
1. Mark Dixon owns 100% of Estorn Limited.
of £350m unsubordinated unsecured
guaranteed convertible bonds due
2027 which were issued by IWG Group
Holdings S.à.r.l., a subsidiary of the
Company (the “Bonds”) into ordinary
shares in IWG plc in accordance with
their terms. Such authority is limited to
the allotment and issue of new ordinary
shares pursuant to the conversion of the
Bonds, with no such conversion
occurring during 2020. Following a
change of control of the Company, the
holder of each Bond may exercise their
conversion right using the formula set
out in the terms of the Bonds or may
require the issuer to redeem that Bond
at its principal amount, together with
accrued and unpaid interest.
POWER FOR THE COMPANY
TO REPURCHASE SHARES
At the Company’s annual general
meeting held on 12 May 2020 the
shareholders of the Company approved
a resolution giving authority for the
Company to purchase in the market up
to 87,124,304 ordinary shares
representing approximately 10% of the
issued share capital (excluding treasury
shares) as at 9 April 2020.
13,590,080 shares were repurchased
during 2020, 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.
The share buyback programme was
suspended in March 2020 in response
to the COVID-19 pandemic.
BRANCHES
The Company is incorporated in Jersey
with a head office branch in Switzerland.
Number of
voting rights
286,949,493
146,625,056
52,336,087
% of issued share
capital (excluding
treasury shares)
28.50%
16.8%
5.20%
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 105 to 152.
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 24 to 27, as well as the Group’s
principal risks and uncertainties as set
out on pages 48 to 55.
Further details on the going concern
basis of preparation can be found in
note 2 of the notes to the accounts
on page 110.
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 4 March 2021.
On behalf of the Board
TIMOTHY REGAN
COMPANY SECRETARY
9 March 2021
98
IWG plc Annual Report and Accounts 2020
DIRECTORS’ STATEMENTS
Directors’ statements
Under applicable law and regulations,
the Directors are also responsible for
preparing a Directors’ report, a Strategic
report, a Remuneration report and a
Corporate Governance Statement
that comply with that law and
those regulations.
The Directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the Company’s websites.
Legislation in the UK and Jersey
governing the preparation and
dissemination of financial statements
may differ from legislation in
other jurisdictions.
STATUTORY STATEMENT AS
TO DISCLOSURE TO AUDITOR
The Directors who held office at the
date of approval of these Directors’
statements confirm that:
– so far as they are each aware, there is
no relevant audit information of which
the Group’s auditor is unaware; and
– each Director has taken all the steps
that he ought to have taken as a
Director in order to make himself
aware of any relevant audit
information and to establish that the
Group’s auditor is aware of
that information.
These financial statements have been
approved by the Directors of the
Company. The Directors confirm that
the financial statements have been
prepared in accordance with applicable
law and regulations.
STATEMENT OF RESPONSIBILITY
We confirm that to the best of our
knowledge:
– the financial statements prepared
in accordance with the applicable set
of accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss
of the Group;
– the Directors’ report, including
content contained by reference,
includes a fair review of the
development and performance of
the business and the position of the
Group taken as a whole, together with
a description of the principal risks and
uncertainties that they face; and
– the Annual Report and financial
statements, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.
By order of the Board
MARK DIXON
CHIEF EXECUTIVE OFFICER
9 March 2021
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
9 March 2021
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 IFRS.
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.
iwgplc.com
99
GOVERNANCE INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC
REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS
OPINION
We have audited the financial
statements of IWG plc and its
consolidated undertakings (‘the Group’)
for the year ended 31 December 2020
set out on pages 105 to 152, which
comprise the consolidated income
statement, consolidated statement of
comprehensive income, consolidated
statement of changes in equity,
consolidated balance sheet,
consolidated statement of cash flows
and related notes, including the
summary of significant accounting
policies set out in note 2. 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 state of the
Group’s affairs as at 31 December
2020 and of the Group’s loss for the
year then ended;
– the Group financial statements have
been properly prepared in accordance
with IFRS as adopted by the European
Union; and
– the financial statements have been
prepared in accordance with the
requirements of Companies (Jersey)
Law 1991.
BASIS FOR OPINION
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under those standards
are further described in the Auditor’s
responsibilities for the audit of the
financial statements section of our
report. We believe that the audit
evidence we have obtained is a
sufficient and appropriate basis for our
opinion. Our audit opinion is consistent
with our report to the Audit Committee.
We were appointed as auditor by
the directors on 21 December 2016.
The period of total uninterrupted
engagement is for the 5 financial years
ended 31 December 2020. We have
fulfilled our ethical responsibilities under,
and we remain independent of the
Group in accordance with UK ethical
requirements, including the Financial
Reporting Council (FRC)'s Ethical
Standard as applied to listed entities.
No non-audit services prohibited by
that standard were provided.
CONCLUSIONS RELATING TO
GOING CONCERN
The directors have prepared the
financial statements on the going
concern basis as they do not intend to
liquidate the Group or to cease their
operations, and as they have concluded
that the Group’s financial position
means that this is realistic. They have
also concluded that there are no
material uncertainties that could have
cast significant doubt over their ability to
continue as a going concern for at
least a year from the date of approval
of the financial statements (“the going
concern period”).
In auditing the financial statements,
we have concluded that the directors’
use of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the directors’
assessment of the Group’s ability to
continue to adopt the going concern
basis of accounting included
considering the strategic risks relevant
to the Group’s business model and
analysing how those risks might affect
the Group’s financial resources or ability
to continue operations for the going
concern period.
The sensitivity we considered most likely
to adversely affect the Group’s available
financial resources over the going
concern period was the potential
economic impact of a prolonged
economic downturn as a result of
COVID-19. We considered various
downside scenarios which were more
pessimistic than those indicated by the
Group’s own forecasts. A key judgement
in the downside scenarios of the Group
is that there is a reasonable expectation
that the exisiting committed debt
facilities in place are adequate to cover
the Group’s liquidity requirements in
such scenarios. No breach of covenants
was indicated by the additional
downside scenarios that we considered.
There were no other risks identified that
we considered were likely to have a
material adverse effect on the Group’s
and Company’s available financial
resources over this period.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or
collectively, may cast significant doubt
on the Group’s ability to continue as a
going concern for a period of at least
twelve months from the date when
the financial statements are authorised
for issue.
In relation to the Group’s reporting
on how they have applied the UK
Corporate Governance Code, we
have nothing material to add or draw
attention to in relation to the directors’
statement in the financial statements
about whether the directors considered
it appropriate to adopt the going
concern basis of accounting.
However, as we cannot predict all future
events or conditions and as subsequent
events may result in outcomes that are
inconsistent with judgements that were
reasonable at the time they were made,
the absence of reference to a material
uncertainty in this auditor's report is not
a guarantee that the Group will continue
in operation.
DETECTING IRREGULARITIES
INCLUDING FRAUD
We identified areas of laws and
regulations that could reasonably be
expected to have a material effect on
the financial statements and risks of
material misstatement due to fraud,
using our understanding of the entity's
industry, regulatory environment and
other external factors and inquiry with
the directors. In addition, our risk
assessment procedures included:
– Inquiring with the directors and other
management as to the Group’s the
policies and procedures regarding
compliance with laws and regulations,
identifying, evaluating and accounting
for litigation and claims, as well as
whether they have knowledge of non-
compliance or instances of litigation
or claims.
– Inquiring of directors as to the Group’s
high-level policies and procedures to
prevent and detect fraud, as well as
whether they have knowledge of any
actual, suspected or alleged fraud.
– Inquiring of directors regarding their
assessment of the risk that the
financial statements may be materially
misstated due to irregularities,
including fraud.
– Reading audit committee, nomination
committee, remuneration committee
and Board meeting minutes.
– Performing planning analytical
procedures to identify any usual
or unexpected relationships.
We discussed identified laws and
regulations, fraud risk factors and the
need to remain alert among the audit
team. This included communication
from the group to component audit
teams of relevant laws and regulations
and any fraud risks identified at Group
level and request to component audit
teams to report to the Group audit team
any instances of fraud that could give
rise to a material misstatement at Group.
100
100
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
Firstly, the Group is subject to laws and
regulations that directly affect the
financial statements including financial
reporting legislation (including related
companies legislation), distributable
profits legislation and taxation
legislation. We assessed the extent
of compliance with these laws and
regulations as part of our procedures
on the related financial statement items,
including assessing the financial
statement disclosures and agreeing
them to supporting documentation
when necessary.
Secondly, the Group is subject to many
other laws and regulations where the
consequences of non-compliance
could have a material effect on amounts
or disclosures in the financial
statements, for instance through the
imposition of fines or litigation or the
loss of Group’s licence to operate. We
identified the following areas as those
most likely to have such an effect:
health and safety, employment law and
certain aspects of company legislation
recognising the nature of the Group’s
activities.
Auditing standards limit the required
audit procedures to identify non-
compliance with these laws and
regulations to enquiry of the directors
and other management and inspection
of regulatory and legal correspondence,
if any. These limited procedures did not
identify actual or suspected non-
compliance.
Owing to the inherent limitations of
an audit, there is an unavoidable risk
that we may not have detected some
material misstatements in the financial
statements, even though we have
properly planned and performed our
audit in accordance with auditing
standards. For example, the further
removed non-compliance with laws
and regulations (irregularities) is from the
events and transactions reflected in the
financial statements, the less likely the
inherently limited procedures required
by auditing standards would identify it.
In addition, as with any audit, there
remained a higher risk of non-detection
of irregularities, as these may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of
internal controls. We are not responsible
for preventing non-compliance and
cannot be expected to detect non-
compliance with all laws and
regulations.
KEY AUDIT MATTERS: OUR
ASSESSMENT OF RISKS OF
MATERIAL MISSTATEMENT
Key audit matters are those matters that,
in our professional judgment, 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 in the
context of our audit of the financial
statements as a whole, and in forming
our opinion thereon, and we do
not provide a separate opinion on
these matters.
In the prior year, we identified the
Group’s adoption of IFRS 16 leases as
a key audit matter given the significant
judgement and complexity involved in
determining the right of use assets and
lease liabilities of the Group for the first
time. We continue to perform audit
procedures over the right of use assets
and lease liabilities, but we have not
assessed the adoption of IFRS 16 to be
one of the most significant risks in our
current year and, therefore, it is not
separately identified in our report
this year.
In arriving at our audit opinion above,
the key audit matters, in decreasing
order of audit significance, were as
follows:
GOODWILL AND INTANGIBLE
ASSETS - £695.5 MILLION
(2019: £721.7 MILLION)
Refer to page 113 (accounting policy)
and pages 127 to 128 (financial
disclosures)
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. Key
assumptions include revenue growth,
occupancy rates, discount rates and
terminal values. The recoverability of
goodwill is spread across multiple
geographies and economies as
highlighted in note 12 and is dependent
on individual businesses acquired
achieving or sustaining sufficient
profitability in the future. Goodwill
relating to the US and UK country
operations account for 73% of the
total carrying amount.
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, but were not limited to, our
assessment of the historical accuracy of
the Group’s forecasts and challenging
management’s profitability forecasts
underlying their impairment model.
We obtained and documented our
understanding of the impairment
testing process and the design and
implementation of the relevant controls
therein. We assessed the recoverability
of Goodwill across a sample of
countries but placed particular focus
on the UK impairment model due
to the limited headroom in the UK
operations in the past, the gross
operating loss in the current year and
given its significance to the Group’s
goodwill balance.
We used KPMG valuation specialists to
assist us in evaluating the judgements
used by the Group, in particular those
relating to the discount rates and
terminal growth calculations used to
determine the present value of the
cash flow projections.
We compared the Group’s key
assumptions, where possible, to
externally derived data and performed
our own assessment in relation to key
impairment model inputs. We examined
the sensitivity analysis performed by
Group management and performed our
own sensitivity analysis in relation to key
assumptions including revenue growth,
discount rates, occupancy rates and
terminal values. 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.
The Group’s impairment model
identified impairments of goodwill
amounting to £4.9 million during the
year ended 31 December 2020.
Based on the procedures we performed,
we concluded that the key assumptions
underpinning management’s
assessment of the recoverable amount
of goodwill and intangible assets, are
reasonable.
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101
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC CONTINUED
IMPAIRMENT OF LEASEHOLD
IMPROVEMENTS PROPERTY,
PLANT AND EQUIPMENT (‘PPE’)
AND RIGHT OF USE (‘ROU’)
ASSETS - £246 MILLION
(2019: £NIL)
Refer to page 112 (accounting policy)
and page 130 (financial disclosures)
THE KEY AUDIT MATTER
There is a risk that the carrying value of
the Group’s business centres exceeds
the recoverable amount of each centre
given the impact of the COVID-19
pandemic on the trading performance
of the Group in 2020. In response to
this risk, the Group has performed an
assessment of the Group’s CGU’s
(identified as individual business centres)
to identify indicators of impairment.
Management carried out an impairment
analysis for each CGU where
impairment indicators were identified
and impaired the associated Leasehold
Improvements PPE and Right of Use
assets to their estimated recoverable
amount. In assessing this key audit
matter, we considered the significance
of the assets and the impairment charge
recognised in the year. We also
considered the judgements made in
assessing impairment indicators for each
CGU and the key assumptions used to
determine the future cash flows of each
CGU, which are used to determine the
recoverable amount.
The recoverability of the Group’s
Leasehold Improvements PPE and
Right of Use assets and the associated
impairment charge recognised in the
year have been identified as a key
audit matter.
HOW THE MATTER WAS
ADDRESSED IN OUR AUDIT
The audit procedures we have
designed to respond to this risk
include challenging whether there
were indicators of impairment at the
CGU level, including comparing the
performance of business centres
against expected profitability measures.
We tested the completeness of
management’s identification of business
centres performing below expectations
and accordingly at a greater risk of
impairment. Where centres performed
below expectations, we considered
whether this was an indicator of
impairment given our understanding
of the maturity of the business centre,
the status of rent renegotiations with
landlords and assessment of the current
performance of the business centre.
Where there were indicators of
impairment, we assessed the Group’s
impairment analysis and challenged the
cash flow forecasts used to determine
the recoverable amount of each CGU,
including assessing any expected cash
outflows where a business centre will
be closed. We used statistical sampling
techniques and performed substantive
tests of detail over the impairment
charge to validate the accuracy of the
charge recorded in the year. We
recalculated the impairment charge for
the year and validated the mathematical
accuracy of management’s calculation.
The Group recognised an impairment
charge of £82.1 million and £163.9
million related to Leasehold
Improvements PPE and Right of Use
assets respectively in the year ended
31 December 2020. As a result of our
audit procedures, we found that the
identification of impairment indicators
by management was supported by
reasonable judgements. The judgements
made by management in relation to
future cash flow forecasts to assess the
recoverability of individual business
centres were supported by reasonable
assumptions and the calculation of the
impairment charge recognised in the
year was appropriate.
RECOGNITION OF DEFERRED
TAX ASSETS ASSOCIATED WITH
THE GROUP’S INTELLECTUAL
PROPERTY IN SWITZERLAND -
£69.7 MILLION (2019: £89.8
MILLION)
Refer to page 114 (accounting policy)
and pages 121 to 123 (financial
disclosures)
THE KEY AUDIT MATTER
The Group has significant deferred tax
assets in respect of the future benefit
of deductible temporary differences
and accumulated tax losses where it is
considered probable that they would be
utilised or recovered in the foreseeable
future through the generation of future
taxable profits by the relevant group
entities or by offset against deferred
tax liabilities. In addition, a significant
amount of deferred tax assets were
not recognised at the reporting date
due to the uncertainty of the relevant
group entities being able to generate
future taxable profits against which
the tax losses may be utilised before
they expire.
We identified the recognition of certain
deferred tax assets as a key audit matter
because of the inherent uncertainty
associated with key assumptions made
by management when forecasting
future taxable profits, which determine
the extent to which deferred tax assets
are or are not recognised. In addition,
we considered the significance of
the recognised deferred tax assets in
assessing this key audit matter. The
estimation uncertainty has continued to
be elevated in 2020 due to the ongoing
strategic developments in the business.
We focused our attention in particular
on the key assumptions applied by
management, including revenue growth,
when assessing the recoverability of
deferred tax assets associated with the
Group’s intellectual property in
Switzerland.
HOW THE MATTER WAS
ADDRESSED IN OUR AUDIT
In this area our audit procedures
included using our work on the Group’s
forecasts described in the goodwill key
audit matter above. In addition we used
our own tax specialists to assist us in
evaluating and challenging the key
assumptions and methodologies used
by the Group and its taxation advisors
in calculating the deferred tax assets
including assessing the recoverability
of the tax losses against the forecast
future taxable profits, taking into
account the Group’s tax position, the
timing of forecast taxable profits, and
our knowledge and experience of the
application of relevant tax legislation.
We considered the historical accuracy
of forecasts of future taxable profits
made by management by comparing
the actual taxable profits for the current
year with management’s estimates in
the forecasts made in the previous year
and assessing whether there were any
indicators of management bias in the
selection of key assumptions.
We considered the impact of the
ongoing changes in the Group’s strategy
which places greater focus on external
franchising and the impact of this on
management’s assessment of the
recoverability of the assets recognised.
We challenged management’s
assumptions in relation to the
recoverability of the deferred tax assets
recognised in Switzerland, arising on the
transfer of the Group’s intellectual
property in 2019, by involving our
taxation specialists to evaluate the
recoverability of the deferred tax asset
in relation to the deductible temporary
differences available. We evaluated
whether management’s judgements on
the generation of future taxable profits
in the foreseeable future were aligned
with the Group’s other business
forecasting processes. 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.
102
102
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
Based on the audit procedures
performed, we concluded that the
assumptions used by management in
calculating the future taxable profits of
the Group for the purpose of assessing
the recoverability of deferred tax assets
relating to Swiss Intellectual property
assets are appropriate.
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 £9 million (2019: £10 million which
is 0.36% (2019: 0.38%) of total revenues.
In 2020, consistent with 2019, we have
used revenue as the benchmark for
materiality. In 2019 we also used
adjusted profit before tax as a
benchmark. This benchmark was not
appropriate in 2020 given that the
Group has recorded a loss for the year.
We have determined, in our professional
judgement, that revenue is the principal
benchmark within the financial
statements relevant to members
of the Group in assessing financial
performance.
We agreed with the Audit Committee
to report corrected and uncorrected
misstatements we identified through
our audit with a value in excess of
£0.45 million (2019: £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 key
audit matters, on those transactions and
balances accounted for at Group and
operating unit level. In determining
those components in the Group on
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 thirteen
identified key reporting components,
augmented by risk focused audit
procedures which were performed for
certain other components. These audits
covered 81% (2019: 81%) of total Group
revenue and 94% (2019: 93%) of Group
total assets.
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
£1.5m to £6m, having regard to the mix
of size and risk profile of the
components.
Detailed audit instructions were sent to
the auditors of each 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 video 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 THE OTHER INFORMATION IN
THE ANNUAL REPORT
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 Strategic Report and
Governance sections of the Annual
Report, as well as the unaudited
appendices (including the unaudited
IFRS 16 proforma statements,
summarised extract of unaudited
Company balance sheet, the post-tax
cash return on net investment and the
five-year summary and the glossary).
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, except as explicitly
stated below, 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.
CORPORATE GOVERNANCE
STATEMENT
The Listing Rules require us to review
the directors' statement in relation to
going concern, longer-term viability and
that part of the Corporate Governance
Statement relating to the Group’s
compliance with the provisions of the
UK Corporate Governance Statement
specified for our review.
Based on the work undertaken as part
of our audit, we have concluded that
each of the following elements of the
Corporate Governance Statement is
materially consistent with the financial
statements or our knowledge obtained
during the audit:
– Directors' statement with regards the
appropriateness of adopting the going
concern basis of accounting and any
material uncertainties identified set
out on page 98;
– Directors’ explanation as to its
assessment of the entity’s prospects,
the period this assessment covers and
why the period is appropriate set out
on page 98;
– Directors' statement on the annual
report and financial statements, taken
as a whole on fair, balanced and
understandable and the information
necessary for shareholders to assess
the Group's position and
performance, business model and
strategy set out on page 99;
– Board’s confirmation that it has
carried out a robust assessment of the
emerging and principal risks and the
disclosures in the annual report that
describe the principal risks and the
procedures in place to identify
emerging risks and explain how they
are being managed or mitigated set
out on pages 81 to 82;
– The section of the annual report that
describes the review of effectiveness
of risk management and internal
control systems set out on page
81; and
– The section describing the work
of the audit committee set out
on pages 80 to 83.
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103
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC CONTINUED
WE HAVE NOTHING TO REPORT
ON THE OTHER MATTERS ON
WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Under Company (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, or
– returns adequate for our audit have
not been received from branches not
visited by us; or
– the financial statements are not in
agreement with the accounting
records and returns; 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
AND RESTRICTIONS ON USE
RESPONSIBILITIES OF DIRECTORS
FOR THE FINANCIAL STATEMENTS
As explained more fully in the directors’
responsibilities statement set out on
page 99, 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
FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
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 an opinion in an auditor’s report.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) 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
the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis
of these financial statements.
A fuller description of our responsibilities
is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
THE PURPOSE OF OUR AUDIT
WORK AND TO WHOM WE OWE
OUR RESPONSIBILITIES
Our report is made solely to the Group’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
Group’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
(SENIOR STATUTORY AUDITOR)
for and on behalf of
KPMG
1 Stokes Place,
St. Stephen’s Green,
Dublin 2, Ireland
9 March 2021
104
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IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
CONSOLIDATED INCOME STATEMENT
£m
Revenue
Total costs of sales
Cost of sales
Adjusting items to cost of sales
(Loss)/profit on impairment of property, plant, equipment and right-of-use assets
Expected credit losses on trade receivables
Gross profit (centre contribution)
Total selling, general and administration expenses
Selling, general and administration expenses
Adjusting items to selling, general and administration expenses
Share of (loss)/profit of equity-accounted investees, net of tax
Operating (loss)/profit
Finance expense
Finance income
Net finance expense
(Loss)/profit before tax for the year from continuing operations
Income tax (expense)/credit
(Loss)/profit after tax for the year from continuing operations
Profit after tax for the period from discontinued operations
(Loss)/profit for the period attributable to equity shareholders of the parent
(Loss)/earnings per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p)
Diluted (p)
From continuing operations
Basic (p)
Diluted (p)
1. The comparative information has been restated to reflect the impact of discontinued operations (note 9).
Notes
3
Year ended
31 Dec 2020
2,480.2
(2,425.5)
(2,108.4)
Year ended
31 Dec 2019
Restated(1)
2,648.9
(2,081.8)
(2,083.9)
10
5
5
10
21
5
7
7
8
9
11
11
11
11
(71.1)
(246.0)
(34.8)
19.9
(371.9)
(312.9)
(56.4)
(2.6)
(352.0)
(271.1)
3.0
(268.1)
(620.1)
(30.1)
(650.2)
3.4
(646.8)
(67.9)
(67.9)
(68.3)
(68.3)
–
2.1
(2.0)
565.1
(278.3)
(281.0)
–
2.7
286.8
(232.3)
0.5
(231.8)
55.0
22.3
77.3
373.3
450.6
50.5
49.6
8.7
8.5
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FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
£m
(Loss)/profit for the year
Other comprehensive income/(loss) that is or may be reclassified to profit or loss in subsequent periods:
Cash flow hedges - effective portion of changes in fair value
Foreign exchange recycled to profit or loss from discontinued operations
Foreign currency translation differences for foreign operations
Items that are or may be reclassified to profit or loss in subsequent periods
Other comprehensive income/(loss) that will never be reclassified to profit or loss in
subsequent periods:
Re-measurement of defined benefit liability, net of income tax
Items that will never be reclassified to profit or loss in subsequent periods
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive (loss)/income for the year
Notes
Year ended
31 Dec 2020
(646.8)
Year ended
31 Dec 2019
450.6
9
26
–
–
1.3
1.3
–
–
(0.5)
(8.8)
(24.5)
(33.8)
–
–
1.3
(33.8)
(645.5)
416.8
106
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IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
£m
Balance at 1 January 2019
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Cash flow hedges - effective portion of changes in
fair value
Foreign exchange recycled to profit or loss from
discontinued operations
Foreign currency translation differences for foreign
operations
Other comprehensive income, net of tax
Total comprehensive income for the year
Transactions with owners of the Company
Share-based payments
Ordinary dividend paid
Purchase of shares
Proceeds from exercise of share awards
Balance at 31 December 2019
Total comprehensive income/(loss) for the year:
Loss for the year
Other comprehensive income:
Foreign currency translation differences for
foreign operations
Other comprehensive income, net of tax
Total comprehensive income/(loss) for the year
Transactions with owners of the Company
Share-based payments
Ordinary dividend paid
Proceeds from issue of ordinary shares, net of costs
Purchase of shares
Proceeds from exercise of share awards
Balance at 31 December 2020
Notes
Issued
share
capital
9.2
Share
premium
–
Treasury
shares
(74.1)
Foreign
currency
translation
reserve
68.2
Hedging
reserve
0.3
Other
reserves
25.8
Retained
earnings
538.4
Total
equity
567.8
–
–
–
–
–
–
–
–
–
–
9.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.3
312.6
–
–
–
–
–
–
–
–
(49.5)
6.7
–
–
(8.8)
(24.5)
(33.3)
(33.3)
–
–
–
–
–
–
450.6
450.6
(0.5)
–
–
(0.5)
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.5)
(8.8)
(24.5)
(33.8)
450.6
416.8
0.7
(58.2)
–
(3.8)
0.7
(58.2)
(49.5)
2.9
(116.9)
34.9
(0.2)
25.8
927.7
880.5
–
–
–
–
–
–
–
–
1.3
1.3
1.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(646.8)
(646.8)
–
–
–
–
–
–
–
–
–
–
1.3
1.3
(646.8)
(645.5)
6.4
–
–
–
6.4
–
313.9
(43.7)
(4.3)
2.2
–
–
–
–
(43.7)
6.5
10.5
312.6
(154.1)
36.2
(0.2)
25.8
283.0
513.8
12
22
22
12
22
22
22
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.
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107
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
£m
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Other property, plant and equipment
Deferred tax assets
Other long-term receivables
Investments in joint ventures
Total non-current assets
Current assets
Inventory
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables (incl. customer deposits)
Deferred income
Corporation tax payable
Bank and other loans
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Other long-term payables
Deferred tax liability
Bank and other loans
Lease liabilities
Derivative financial liabilities
Provisions
Provision for deficit on joint ventures
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Total equity
Issued share capital
Issued share premium
Treasury shares
Foreign currency translation reserve
Hedging reserve
Other reserves
Retained earnings
Total equity
Total equity and liabilities
Approved by the Board on 9 March 2021
MARK DIXON
CHIEF EXECUTIVE OFFICER
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
Notes
As at
31 Dec 2020
As at
31 Dec 2019
13
14
15
15
15
8
16
21
17
8
23
18
8
19
23
20
8
19
23
24
20
21
26
22
22
22
695.5
53.3
6,855.9
5,646.9
1,209.0
188.2
55.0
11.3
7,859.2
1.3
1,003.7
29.1
71.0
1,105.1
8,964.3
1,007.6
328.9
40.0
21.9
1,019.6
17.5
2,435.5
5.9
0.2
400.2
5,538.9
49.6
13.5
4.6
2.1
6,015.0
8,450.5
10.5
312.6
(154.1)
36.2
(0.2)
25.8
283.0
513.8
8,964.3
674.6
45.0
7,190.7
5,917.4
1,273.3
195.0
61.0
13.8
8,180.1
1.3
681.3
24.0
66.6
773.2
8,953.3
788.8
322.6
32.3
9.7
977.4
8.9
2,139.7
2.0
–
351.0
5,568.6
0.2
6.9
2.9
1.5
5,933.1
8,072.8
9.2
–
(116.9)
34.9
(0.2)
25.8
927.7
880.5
8,953.3
108
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IWG plc Annual Report and Accounts 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
£m
Operating activities
(Loss)/profit for the year from continuing operations
Adjustments for:
Profit from discontinued operations
Net finance expense
Share of loss/(profit) on equity-accounted investees, net of income tax
Depreciation charge
Right-of-use assets
Other property, plant and equipment
Loss on impairment of goodwill
Loss on disposal of property, plant and equipment
(Profit)/loss on disposal of right-of-use assets and related lease liabilities
Loss/(profit) on disposal of intangible assets
Impairment/(reversal of impairment) of property, plant and equipment
Loss on impairment of right-of-use assets
Amortisation of intangible assets
Loss on disposal of other investments
Tax expense/(credit)
Expected credit losses on trade receivables
Increase/(decrease) in provisions
Share-based payments
Other non-cash movements
Operating cash flows before movements in working capital
Proceeds from partner contributions (reimbursement of costs)
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Interest paid and similar charges on bank loans and corporate borrowings
Interest paid on lease liabilities
Tax paid
Net cash inflows from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of subsidiary undertakings, net of cash acquired
Purchase of intangible assets
Purchase of joint ventures
Purchase of current other current receivables
Proceeds on the sale of discontinued operations, net of cash disposed of
Proceeds on sale of property, plant and equipment
Interest received
Net cash (outflows)/inflows from investing activities
Financing activities
Proceeds from issue of loans
Repayment of loans
Proceeds from issue of convertible bonds (net of transaction costs)
Payment of lease liabilities
Proceeds from partner contributions (lease incentives)
Proceeds from issue of ordinary shares, net of costs
Purchase of treasury shares
Proceeds from exercise of share awards
Payment of ordinary dividend
Net cash outflows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year
Notes
Year ended
31 Dec 2020
Year ended
31 Dec 2019
Restated(1)
(650.2)
0.6
268.1
2.6
1,186.3
946.0
240.3
4.9
93.1
(25.7)
0.1
82.1
163.9
8.7
1.6
30.4
34.8
15.2
6.4
(4.4)
1,218.5
38.4
(76.4)
77.3
1,257.8
(17.6)
(249.4)
(21.9)
968.9
(257.4)
(26.8)
(16.5)
–
(276.2)
3.3
8.2
0.6
(564.8)
876.5
(1,109.8)
343.2
(898.1)
111.0
313.9
(43.7)
2.2
–
(404.8)
(0.7)
66.6
5.1
71.0
9
7
21
15
15
15
13
5
5, 23
5
5, 15
5, 15
5, 14
21
8, 9
5
20
15
23
15
27
14
21
17
9
7
19
23
15
22
22
12
23
77.3
21.9
231.8
(2.7)
1,159.7
1,010.0
149.7
0.8
24.4
1.7
(0.3)
(2.1)
–
9.7
–
(22.3)
2.0
(1.3)
0.7
(1.6)
1,499.7
98.0
(108.7)
(301.4)
1,187.6
(21.2)
(213.2)
(48.8)
904.4
(356.4)
(24.2)
(12.8)
(1.8)
–
424.6
0.6
0.5
30.5
850.5
(1,013.0)
–
(878.3)
204.1
–
(49.5)
2.9
(58.2)
(941.5)
(6.6)
69.0
4.2
66.6
109
109
1. The comparative information has been restated to reflect the impact of discontinued operations (note 9), interest charges on lease liabilities and
partner contributions (note 2).
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
1. AUTHORISATION OF FINANCIAL STATEMENTS
IWG plc is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Group and
Company financial statements for the year ended 31 December 2020 were authorised for issue by the Board of Directors on
9 March 2021 and the balance sheets were signed on the Board’s behalf by Mark Dixon and Eric Hageman. The Company’s
ordinary shares are traded on the London Stock Exchange. The audited Group accounts are included from pages 105 to 152.
IWG plc owns, and is a franchise operator of, 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 unaudited accounts are presented on page 153.
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 2020 did not have a material effect
on the Group financial statements, unless otherwise indicated.
The 2019 Consolidated Statement of Cash Flows has been restated, whereby the Group previously disclosed:
– Interest charges on lease liabilities of £213.2m within the ‘payment of lease liabilities’ balance (£1,091.5m) within financing activities.
– Partner contributions of £302.1m offset within ‘Increase in trade and other payables’ for reimbursements for landlord assets
(£98.0m) and ‘Proceeds for lease incentives’ for lease incentives (£204.1m).
Having considered feedback from the Financial Reporting Council, the Group revisited these classifications and determined that:
– Cash flows related to lease interest payments (£213.2m in 2019) are material and should be disclosed separately as operating
cash flows, consistent with the treatment of other interest payments. The ‘payment of lease liabilities’ balance in 2019 has been
adjusted accordingly.
– Cash flows related to partner contributions (both reimbursements and lease incentives) are material and should be disclosed
separately with contributions received for reimbursements (£98.0m in 2019) as operating cash flows and contributions received
for lease incentives (£204.1m in 2019) as financing cash flows, with ‘movement in trade and other payables’ restated for these
changes respectively.
The following standards, interpretations and amendments to standards were adopted by the Group for periods commencing on
or after 1 January 2020:
Amendments to References to Conceptual Framework in IFRS Standards
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
COVID-19 Related Rent Concessions (Amendments to IFRS 16)(1)
1. This standard was not applied by the Group as adoption is optional.
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 or amortised cost.
GOING CONCERN
The Group reported a loss after tax of £650.2m from continuing operations for the year. This result includes a significant amount
of non-cash related charges. Net cash of £968.9m was generated from operations during the year. Although the Group’s balance
sheet at 31 December 2020 reports a net current liability position of £1,330.4m the Directors do not consider that this gives rise to
a liquidity risk. A large portion of the net current liabilities comprise non-cash liabilities such as deferred income which will be
recognised through future periods in the income statement. The Group also holds customer deposits which are spread across a
large number of customers with no deposit for any individual customer being material. Excluding deferred income and short-term
lease liabilities, the Group had net current assets of £18.1m at 31 December 2020.
The Group maintains a 12-month rolling forecast and a three-year strategic outlook. It also monitors the covenants in its facilities
to manage the risk of breach. The Group expects to remain within covenants throughout the forecast period. The Directors have
assessed the potential cash generation of the Group against a range of illustrative COVID-19 scenarios (including a severe but
plausible outcome), mitigating actions to reduce operating costs and optimise cash flows during the ongoing global restrictions,
the liquidity of the Group and funding available under the Group’s £950.0m Revolving Credit Facility. £731.3m was available and
undrawn at 31 December 2020. This facility is committed until March 2025 with an option to extend until 2026 (note 24).
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The Directors consider that the Group is well placed to successfully manage the actual and potential risks faced by the
organisation including risks related to COVID-19. (For more detail, see ‘Understanding and managing risk’ in this report.)
On the basis of their assessment, the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for a period of at least 12 months from the date of approval of these consolidated financial statements
and consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group.
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.
IFRS NOT YET EFFECTIVE
The following new or amended standards and interpretations that are mandatory for 2021 annual periods (and future years) are
not expected to have a material impact on the Group financial statements, unless otherwise stated:
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9
Onerous contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
Annual Improvements to IFRS Standards 2018-2020
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition
of Accounting Estimates
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
1 January 2021
1 January 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
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.
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.
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.
LEASES
The nature of the Group’s leases relates to the rental of commercial office real estate premises globally.
1. Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost,
less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised and initial direct costs incurred. The recognised right-of-
use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
Right-of-use assets are subject to impairment review on an annual basis.
2. Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments and variable lease payments that
depend on an index or a rate. The variable lease payments that do not depend on an index or a rate are recognised as a rent
expense in the period in which they are incurred.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement
date as the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities
is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease
liabilities is re-measured if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments.
3. Lease modifications
The carrying amount of lease liabilities is remeasured where there is a modification, a change in the lease term, a change in
the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease
payments) or a change in the assessment of an option to purchase the underlying asset. The impact of the modification is
recognised against the carrying amount of the right-of-use assets or is recorded in profit or loss if the carrying amount of the
right-of-use assets has been reduced to zero.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES (CONTINUED)
4. Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to short-term leases (i.e. those leases that have a lease term of
12 months or less from commencement). It also applies the lease of low-value assets recognition exemption under IFRS 16 to
leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as
a rent expense on a straight-line basis over the lease term.
5. Lessor accounting
There are no lessor arrangements in the Group as a result of the contractual arrangements in place with customers which
convey the right to use an identified asset.
6. 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. Partner contributions representing a reimbursement to the
lessee (IWG) are accounted for as agency arrangements, and form part of the lessor’s (landlord’s) assets.
Partner contributions where the Group retains ownership of the fit-out assets are accounted for as a lease incentive. If received
at or before the lease commencement date, are accounted for by reducing the right-of-use asset; and if received after the
commencement date, are accounted for as a reduction of the lease liability and the right-of-use asset.
7. Lease term
The lease term represents the period from lease inception up to either:
a. The earliest point at which the lease could be broken, where break clauses exist;
b. The point at which the lease could be extended, but no further, where extension options exist; or
c. To the end of the contractual lease term in all other cases.
8. Lease break penalties
Lease break penalties where the lease term has been determined as the period from inception up to a break clause and when
there are break payments or penalties, have been appropriately included in the measurement of the lease liability.
DILAPIDATIONS
A provision is recognised for those potential dilapidation payments when it is probable that an outflow will occur and can be
reliably estimated.
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 in two tranches, at 30 September 2020 and 31 December 2020 respectively. 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 and inventory), including right-of-
use assets, is reviewed at the reporting date to determine whether there is an indicator of impairment. If any such indication
exists, the assets’ 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 cash-generating unit (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.
The potential impairment of immovable property, plant and equipment and right-of-use assets at the centre (CGU) level are
evaluated 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 centres or elsewhere in the business that become obsolete or are damaged are assessed and
impaired where appropriate.
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.
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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 reassesses 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 reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred (negative goodwill), 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
Indefinite life
20 years
Up to 5 years
2 years
Amortisation of intangible assets is expensed through administration expenses in the income statement.
ACQUISITIONS OF NON-CONTROLLING INTERESTS
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore
no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the
loss of control are based on a proportionate amount of the net assets of the subsidiary.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Asset lives and
recoverable amounts are reviewed on annual basis. Depreciation is calculated on a straight-line basis over the estimated useful
life of the assets as follows:
Right-of-use assets(1)
Buildings
Leasehold improvements(1)
Furniture
Office equipment and telephones
Computer hardware
Over the lease term
50 years
10 years
10 years
5 – 10 years
3 – 5 years
1. 10 years represents the average useful economic life across the lease portfolio. Actual economic useful lives determined for leases in scope of IFRS 16
range from approximately 3 to in excess of 10 years.
REVENUE
The Group’s primary activity and only business segment is the provision of global workspace solutions.
The Group recognises revenue when it transfers services to a customer. It is measured based on the consideration specified
in a contract with a customer. Services transfer to the customer equally over the contract period based on the time elapsed.
Where discounted periods are granted to customers, service income is spread on a straight-line basis over the duration of the
customer contract.
1. Workstations
Workstation revenue is recognised over time as the services are provided. Amounts invoiced in advance are accounted for as
deferred income (contract liability) and recognised as revenue upon provision of the service.
2. Customer service income
Service income (including the provision of meeting rooms) is recognised over time as the services are delivered or at a point in
time depending on contractual obligations. In circumstances where the Group acts as an agent for the sale and purchase of
goods to customers, only the commission fee earned is recognised as revenue.
3. Management and franchise fees
Fees received for the provision of initial and subsequent services are recognised over time 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.
4. Membership card income
Revenue from the sale of membership cards is deferred and recognised over time within the period that the benefits of the
membership card are expected to be provided. Deferred revenue is included in contract liabilities.
The Group has generally concluded that it is the principal in its revenue arrangements, except where noted above.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES (CONTINUED)
ADJUSTING ITEMS
Significant infrequent transactions not indicative of the underlying performance of the consolidated Group are reported
separately as non-recurring/adjusting items.
Adjusting items are separately disclosed by the Group to provide readers with helpful, additional information on the performance
of the business across periods. In 2020, items arising specifically from the impact of the COVID-19 pandemic have been deemed
to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also
consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion
of these items is consistent with how the business performance is planned by, and reported to, the Board. The profit before tax
and adjusting items measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted
profit measures used by other companies. The classification of adjusting items requires significant management judgement after
considering the nature and intentions of a transaction.
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 plans is determined using the projected unit credit method.
Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling 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.
Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in
which the expenses are recognised.
SHARE-BASED PAYMENTS
The share awards programme entitles certain Directors and employees to acquire shares of the ultimate parent company
(IWG plc); these awards are granted by the ultimate parent company (IWG plc) and are equity-settled.
The fair value of options and awards granted under the Group’s share-based payment plans outlined in note 25 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. Deferred tax assets and liabilities are not subject to discounting. 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 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.
The carrying amount of a deferred tax asset or liability may change for reasons other than a change in the temporary difference
itself. Such changes might arise as a result of a change in tax rates or laws, a reassessment of the recoverability of a deferred tax
asset or a change in the expected manner of recovery of an asset or the expected manner of a settlement of a liability. The
impact of these changes is recognised in the income statement or in other comprehensive income depending on where the
original deferred tax balance was recognised.
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IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
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.
Upon adoption of IFRIC Interpretation 23, in 2019, the Group considered whether it has any uncertain tax positions, particularly
those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions
related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its
tax compliance and transfer pricing studies, that in most jurisdictions it is probable that its tax treatments (including those for the
subsidiaries) will be accepted by the taxation authorities. The Group has, where considered appropriate, provided for the potential
impact of uncertain tax positions where the likelihood of tax authority adjustment is considered to be more likely than not. The
adoption of the interpretation did not have an impact on the consolidated financial statements of the Group.
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 closure costs to the extent that the unavoidable costs of meeting the obligations exceed the economic
benefits expected to be delivered.
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.
INVENTORY
Inventories relate to consumable items which are measured at the lower of cost or net realisable value. The cost of inventories
is based on the first-in, first-out principle.
NET FINANCE EXPENSE
Interest charges and income are accounted for in the income statement on an accrual 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 an asset 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.
Compound financial instruments issued by the Group comprise convertible bonds denominated in pounds sterling that can be
converted to ordinary shares at the option of the holder.
The debt component of compound financial instruments is initially recognised at the fair value of a similar liability that does not
have an equity conversion option. The conversion option represents a derivative financial liability and is initially recognised as the
difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component.
Any directly attributable transaction costs are allocated to the debt host.
Subsequent to initial recognition, the debt component of a compound financial instrument is measured at amortised cost using
the effective interest method. The derivative component of a compound financial instrument is remeasured at fair value through
profit or loss. Interest related to the debt is recognised as a finance expense in profit or loss.
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115
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
2. ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s policy on the use of derivative financial instruments can be found in note 24. Derivative financial instruments are
measured initially at fair value and changes in the fair value are recognised through profit or loss unless the derivative financial
instrument has been designated as a cash flow hedge whereby the effective portion of changes in the fair value are deferred
in equity.
FINANCIAL ASSETS
Financial assets are classified and 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.
IFRS 9 requires the Group to record expected credit losses on all of its financial assets held at amortised cost, either on a 12-
month or lifetime basis. The Group applies the simplified approach to trade receivables and recognises expected credit losses
based on the lifetime expected losses. Provisions for receivables are established based on both expected credit losses and
information available that the Group will not be able to collect all amounts due according to the original terms of the receivables.
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 either returned to the customer at the end of their relationship with the Group, or released to the income
statement.
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 reclassified 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 change in value.
DISCONTINUED OPERATIONS
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
– represents a separate major line of business or geographic area of operations;
– is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or
– is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified
as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI
is re-presented as if the operation had been discontinued from the start of the comparative year.
FOREIGN CURRENCY TRANSLATION RATES
US dollar
Euro
116
116
At 31 December
Annual average
2020
1.37
1.11
2019
1.32
1.18
2020
1.29
1.13
2019
1.28
1.14
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
3. SEGMENTAL ANALYSIS
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) on a pre-IFRS 16 basis to make decisions about resources to be allocated to the segment and assess its performance,
and for which discrete financial information is available. The segmental information is presented on the same basis on which the
chief operating decision-maker received reporting during the year. The presentation of reported segment profit or loss has
changed in 2020 to a pre-IFRS 16 basis (2019: in accordance with IFRS) and comparatives have been restated on this basis.
Segmental assets and liabilities continue to be presented in accordance with IFRS.
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, which are included in the “Other”
segment. 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.
Americas
EMEA
Asia Pacific
United Kingdom
Other
Total
2020
2019
2020
£m
£m
£m
2019
Restated(5)
£m
2020
£m
2019
Restated(5)
£m
2020
2019
2020
2019
2020
£m
£m
£m
£m
£m
2019
Restated(5)
£m
1,066.5
1,187.9
715.1
683.0
969.8 1,099.8
564.0
53.4
11.0
32.3
20.7
103.4
–
67.4
21.5
26.2
575.1
36.8
–
71.1
304.2
252.2
27.1
5.7
19.2
342.7
274.7
10.6
–
57.4
388.8
338.2
31.5
10.0
9.1
426.3
370.1
11.3
–
44.9
5.6
5.6
–
–
–
9.0 2,480.2 2,648.9
9.0 2,129.8 2,328.7
–
–
–
215.4
79.4
48.2
86.8
–
240.8
(101.7)
220.5
23.0
123.4
(13.9)
28.4
(80.0)
28.9
2.7
12.9
(169.9)
414.1
Continuing operations
Revenue from external
customers(1)
Mature(2)
2019 Expansions(2)
2020 Expansions(2)
Closures(2)
Gross profit
(centre contribution)
Share of (loss)/profit of
equity-accounted
investees
–
–
(0.1)
Operating (loss)/profit
(184.6)
155.6
(60.4)
Finance expense
Finance income
Profit before tax for
the year
Depreciation and
amortisation
161.4
133.0
60.9
Impairment of assets
–
(0.7)
–
2.6
60.2
(0.2)
(44.8)
(0.1)
1.8
(2.3)
(116.7)
0.2
0.4
–
–
(2.6)
2.7
(146.8)
(81.2)
(553.3)
136.8
(13.9)
(18.7)
3.0
0.5
(564.2)
118.6
45.8
0.2
33.1
–
29.3
(1.2)
41.2
–
43.7
(0.4)
10.6
–
8.8
307.2
260.6
–
–
(2.1)
Assets(3)
Liabilities(3)
Net assets/(liabilities)
Non-current asset
additions(4)
3,460.0 3,797.4 2,542.0 2,294.4
676.5
730.1 1,925.4 1,699.6
360.4
431.8 8,964.3 8,953.3
(3,334.6) (3,443.7) (2,398.3) (2,058.9)
(685.3)
(639.6) (1,562.3) (1,426.5)
(470.0)
(504.1) (8,450.5) (8,072.8)
125.4
353.7
143.7
235.5
(8.8)
90.5
363.1
273.1
(109.6)
(72.3)
513.8
880.5
886.2
1,139.1
867.6
779.4
321.5
224.2
320.0
455.5
36.7
172.6 2,432.0 2,770.8
1. Excludes revenue from discontinued operations (note 9).
2. 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 – Based on estimates” on pages 158 and 159.
3. Presented on a basis consistent with IFRS 16.
4. Excluding deferred taxation.
5. The comparative information has been restated to reflect the impact of discontinued operations.
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.
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FINANCIAL STATEMENTS
Continuing operations
Gross profit (centre
contribution)
Rent
Depreciation of right-
of-use assets/property,
plant and equipment
Gross profit (centre
contribution) -
Reported
Continuing operations
Operating (loss)/profit
NOTES TO THE ACCOUNTS CONTINUED
3. SEGMENTAL ANALYSIS (CONTINUED)
The operating segment’s results presented on a pre-IFRS 16 basis reconcile to the financial statements as follows:
Americas
EMEA
Asia Pacific
United Kingdom
Other
Total
2020
2019
2020
£m
£m
£m
2019
Restated(5)
£m
2020
£m
2019
Restated(5)
£m
2020
2019
2020
2019
2020
£m
£m
£m
£m
£m
2019
Restated(5)
£m
(101.7)
220.5
23.0
445.4
454.1
308.4
123.4
249.7
(13.9)
148.3
28.4
158.1
(80.0)
147.9
28.9
149.8
2.7
1.2
12.9
(169.9)
414.1
(0.1) 1,051.2
1,011.6
Other
(9.0)
5.2
17.5
11.8
7.8
2.7
7.1
0.2
(339.5)
(376.8)
(275.7)
(235.0)
(137.4)
(128.6)
(130.9)
(140.2)
(1.0)
(0.3)
6.2
(884.5)
(874.4)
(6.1)
23.1
13.8
(4.8) 303.0
73.2
149.9
4.8
60.6
(55.9)
38.7
2.6
12.9
19.9
565.1
Americas
EMEA
Asia Pacific
United Kingdom
Other
Total
2020
2019
2020
£m
£m
£m
2019
Restated(5)
£m
2020
£m
2019
Restated(5)
£m
2020
2019
2020
2019
2020
£m
£m
£m
£m
2019
Restated(5)
£m
(184.6)
155.6
(60.4)
60.2
(44.8)
1.8
(116.7)
(146.8)
(81.2)
(553.3)
136.8
£m
0.4
Rent
445.5
454.1
308.4
249.7
148.3
158.1
160.8
149.8
2.2
– 1,065.2
1,011.7
Depreciation of right-
of-use assets/property,
plant and equipment
(339.5)
(376.8)
(275.7)
(235.0)
(137.4)
(128.6)
(131.5)
(140.5)
Other
(9.1)
5.0
17.1
11.4
7.4
2.7
7.0
0.1
(2.9)
0.7
5.4
(887.0)
(875.5)
(5.4)
23.1
13.8
Operating (loss)/profit -
Reported
(87.7)
237.9
(10.6)
86.3
(26.5)
34.0
(80.4)
9.8
(146.8)
(81.2)
(352.0)
286.8
Continuing operations
Depreciation and
amortisation
Depreciation of right-
of-use assets/property,
plant and equipment
Depreciation and
amortisation - Reported
Continuing operations
Impairment of assets
Impairment of right-of-
use assets/property,
plant and equipment
Impairment of assets -
Reported
Americas
EMEA
Asia Pacific
United Kingdom
Other
Total
2020
2019
2020
£m
£m
£m
2019
Restated(5)
£m
2020
£m
2019
Restated(5)
£m
2020
2019
2020
2019
2020
£m
£m
£m
£m
£m
2019
Restated(5)
£m
161.4
133.0
60.9
45.8
33.1
29.3
41.2
43.7
10.6
8.8
307.2
260.6
339.5
376.8
275.7
236.7
137.4
127.0
131.5
140.5
2.9
(6.9) 887.0
874.1
500.9
509.8
336.6
282.5
170.5
156.3
172.7
184.2
13.5
1.9 1,194.2
1,134.7
Americas
EMEA
Asia Pacific
United Kingdom
Other
Total
2020
2019
2020
£m
–
£m
(0.7)
£m
–
2019
Restated(5)
£m
0.2
2020
£m
–
2019
Restated(5)
£m
(1.2)
£m
–
£m
(0.4)
£m
–
£m
–
2019
Restated(5)
£m
(2.1)
2020
2019
2020
2019
2020
161.3
–
25.2
–
14.1
–
45.4
–
161.3
(0.7)
25.2
0.2
14.1
(1.2)
45.4
(0.4)
–
246.0
–
–
246.0
(2.1)
£m
–
–
–
118
118
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
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 are as follows:
£m
Country of tax domicile – Switzerland(1)
United States of America
United Kingdom
All other countries
2020
2019
External
revenue
–
899.7
388.8
1,191.7
2,480.2
Non-current
assets(2)
–
3,140.2
1,613.5
2,917.3
7,671.0
External
revenue
–
999.3
426.3
1,223.3
2,648.9
Non-current
assets(2)
–
3,500.1
1,653.5
2,831.5
7,985.1
1. Revenue of £nil (2019: £39.1m) is included in discontinued operations, following sale of master franchise agreement.
2. Excluding deferred tax assets.
5. OPERATING (LOSS)/PROFIT – CONTINUING OPERATIONS
Operating (loss)/profit has been arrived at after charging/(crediting):
Revenue
Depreciation on property, plant and equipment(1)
Right-of-use assets
Other property, plant and equipment
Amortisation of intangible assets
Variable property rents payable in respect of leases
Lease expense on low-value assets
Lease expense on short-term leases
Staff costs
Facility and other property costs
Expected credit losses on trade receivables(2)
Loss on disposal of property, plant and equipment
(Profit)/loss on disposal of right-of-use assets and related lease liabilities
Impairment of goodwill
Loss/(profit) on disposal of intangible assets
Impairment/(reversal of impairment) of property, plant and equipment(3)
Impairment/(reversal of impairment) of other property, plant and equipment
Impairment of right-of-use assets
Other costs
Operating (loss)/profit before equity-accounted investees
Share of (loss)/profit of equity-accounted investees, net of tax
Operating (loss)/profit
Notes
2020
£m
2,480.2
2019
£m(4)
2,648.9
15
15
15
14
6
24
13
14
15
21
1,185.5
1,125.0
945.4
240.1
8.7
64.9
3.4
–
346.5
431.9
34.8
93.1
(25.7)
4.9
0.1
246.0
82.1
163.9
435.5
(349.4)
(2.6)
(352.0)
982.0
143.0
9.7
43.7
0.9
2.3
372.7
419.0
2.0
31.0
1.7
0.8
(0.3)
(2.1)
(2.1)
–
358.4
284.1
2.7
286.8
1. Excludes depreciation expenses related to discontinued operations for right-of-use assets of £0.6m (2019: £27.7m) and other property, plant and
equipment of £0.2m (2019: £6.7m).
2. Of the £34.8m expected credit loss, £17.5m relates to COVID-19 adjusting items (note 10).
3. Of the £246.0m impairment charge, £244.8m relates to COVID-19 adjusting items (note 10).
4. The comparative information has been restated to reflect the impact of discontinued operations.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
5. OPERATING PROFIT – CONTINUING OPERATIONS (CONTINUED)
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
Other non-audit services
6. STAFF COSTS
The aggregate payroll costs were as follows:
Wages and salaries(2)
Social security
Pension costs
Share-based payments
1. Excludes staff costs related to discontinued operations of £0.1m (2019: £11.0m).
2. Includes worldwide financial support schemes disclosed in Note 10.
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
2020
£m
1.2
3.1
–
0.2
1.0
2019
£m
1.2
2.8
–
0.2
–
2020
£m(1)
2019
£m(1)
284.6
49.9
5.6
6.4
346.5
314.6
51.7
5.7
0.7
372.7
2020
Average
full time
equivalents(2)
2019
Average
full time
equivalents(3)
6,467
425
775
887
8,554
2,431
2,592
1,248
683
1,600
8,554
7,599
462
749
904
9,714
3,195
2,744
1,268
913
1,594
9,714
3. The average full-time equivalents excludes employees for countries sold during 2020 of 6 (2019: 227).
Details of Directors’ emoluments and interests are given on pages 84 to 96 in the Directors’ Remuneration report, with audited
schedules identified where relevant.
120
120
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
7. NET FINANCE EXPENSE
Interest payable and similar charges on bank loans and corporate borrowings
Interest payable on finance lease liabilities(1)
Total interest expense
Other finance costs (including foreign exchange)
Unwinding of discount rates
Total finance expense
Financial liabilities measured at FVTPL (note 19)
Total interest income
Total finance income
Net finance expense
1. Excludes lease liability finance expense related to discontinued operations of £0.1m (2019: £2.9m).
2. The comparative information has been restated to reflect the impact of discontinued operations.
8. TAXATION
(A) ANALYSIS OF CHARGE IN THE YEAR
Current taxation
Corporate income tax
Previously unrecognised tax losses and other differences
Over/(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)/credit on continuing operations
(B) RECONCILIATION OF TAXATION CHARGE
(Loss)/profit before tax from continuing operations
Tax on profit at 11.9% (2019: 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
2020
£m
(620.1)
73.8
(44.9)
155.0
8.5
(451.2)
11.1
217.6
(30.1)
%
(11.9)
7.2
(25.0)
(1.4)
72.8
(1.8)
(35.1)
4.8
2020
£m
(12.8)
(249.4)
(262.2)
(8.8)
(0.1)
2019
£m(2)
(13.7)
(213.3)
(227.0)
(5.1)
(0.2)
(271.1)
(232.3)
2.4
0.6
3.0
–
0.5
0.5
(268.1)
(231.8)
2020
£m
(42.8)
8.5
11.1
(23.2)
(6.9)
–
–
(6.9)
(30.1)
2019
£m
55.0
(8.0)
(38.5)
31.9
5.0
(49.0)
(0.9)
81.8
22.3
2019
£m
(60.9)
4.2
(0.6)
(57.3)
79.0
0.9
(0.3)
79.6
22.3
%
(14.6)
(70.0)
58.0
9.1
(89.1)
(1.6)
148.7
40.5
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.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
8. TAXATION (CONTINUED)
(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.
2020
2021
2022
2023
2024
2025
2026
2027
2028 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
Leases
Short-term temporary differences
2020
£m
–
24.9
43.1
45.9
49.3
53.8
38.8
18.5
1,106.9
1,381.2
919.3
2,300.5
1,029.0
3,329.5
2020
£m
420.0
26.4
564.5
48.6
22.7
3.7
1,085.9
2019
£m
13.9
31.7
37.7
50.2
64.0
44.9
47.1
17.3
472.9
779.7
640.9
1,420.6
488.5
1,909.1
2019
£m
410.8
17.7
347.3
11.2
23.1
5.6
815.7
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
2020
£m
(40.0)
29.1
2019
£m
(32.3)
24.0
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IWG plc Annual Report and Accounts 2020
(E) DEFERRED TAXATION
The movement in deferred tax is analysed below:
Intangibles
£m
Property,
plant and
equipment
£m
Tax losses
£m
Deferred tax asset
At 1 January 2019
Current year movement
Prior year movement
Disposals
Transfers
Exchange rate movements
At 31 December 2019
Current year movement
Prior year movement
Disposals
Transfers
Exchange rate movements
At 31 December 2020
Deferred tax liability
At 1 January 2019
Current year movement
Prior year movement
Disposals
Transfers
Exchange rate movements
At 31 December 2019
Current year movement
Prior year movement
Disposals
Transfers
Exchange rate movements
At 31 December 2020
(33.5)
71.5
–
–
–
1.4
39.4
(19.0)
–
–
(0.2)
1.8
22.0
(24.8)
(5.9)
(2.0)
0.6
0.1
0.5
(31.5)
(42.7)
–
–
(4.6)
0.8
(78.0)
(0.2)
(4.7)
–
–
–
–
–
(0.2)
–
–
–
0.2
–
–
–
–
–
(0.1)
0.2
(4.6)
–
–
–
4.6
–
–
45.8
71.2
1.1
(1.3)
–
(1.3)
115.5
137.6
–
–
4.2
(0.3)
257.0
4.6
(0.2)
–
–
–
(0.2)
4.2
–
–
–
Rent
£m
52.4
3.3
0.2
(0.1)
(0.1)
(1.6)
54.1
9.6
–
–
0.6
(1.7)
62.6
0.5
–
–
–
0.1
–
0.6
–
–
–
Short-term
temporary
differences
£m
(9.3)
(66.1)
0.4
(1.4)
–
0.3
(76.1)
(105.6)
–
–
–
Leases
£m
86.7
6.9
–
–
–
–
93.6
13.4
–
–
–
Total
£m
117.3
80.9
(0.3)
(2.2)
–
(0.7)
195.0
(6.7)
–
–
–
(0.1)
106.9
(0.6)
(182.3)
(0.1)
188.2
–
–
–
–
–
–
–
(0.2)
–
–
–
–
(0.2)
(0.2)
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
–
–
(0.2)
(4.2)
(0.6)
–
–
–
–
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 £11.9m
(2019: £12.1m). The only tax that would arise on these reserves would be non-recoverable withholding tax.
As part of the Group’s pivot towards franchising in 2019, the Group recognised a deferred tax asset of £89.8m and a
corresponding deferred tax credit. This arose in connection with a restructure during 2019 involving the move of the Group’s
intellectual property (IP) and franchising arrangements from Luxembourg to Switzerland, and was based on the expected future
value of annual amortisation on the fair market value of the IP at the date of the restructuring, which is deductible for Swiss
corporate income tax purposes.
Further restructuring of Group cost allocations in 2020 has resulted in a reduction in the recognition of the deferred tax asset to
£69.7m, resulting in a deferred tax charge of £20.1m, based on the updated future value of annual amortisation on the fair market
value of the IP.
Tax losses have increased in 2020 as a result of both trading conditions and a further simplification of the Luxembourg and
Switzerland head office structure.
The Directors have exercised judgement in determining the appropriate timescale (which is aligned with the Group’s business
planning processes) over which it is more likely than not that the Group will earn sufficient future taxable profits to utilise the
available amortisation deductions.
9. DISCONTINUED OPERATIONS
During 2020, the Group completed the sale of various country operations through the signing of master franchise agreements.
The financial impact of these transactions is treated as discontinued operations in accordance with IFRS 5, however these
operations under franchise will continue to be an important strategic component of the overall Group network. These
transactions form part of the larger change in strategy of the Group towards adopting a franchising model. Fees from
franchising activities subsequent to sale are reflected as franchise revenues in continuing operations.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
9. DISCONTINUED OPERATIONS (CONTINUED)
DISPOSAL OF OPERATIONS
During 2020, the Group completed the sale of individually immaterial operations for a consideration of £3.3m (2019: £104.3m).
The results of these operations up to the date of disposal were as follows:
Revenue
Expenses
Profit before tax for the year
Income tax (expense)/credit
Profit after tax for the year
Gain on the sale of discontinued operations
Profit for the year, net of tax
The assets and liabilities of these operations at their respective dates of disposal were as follows:
Total assets
Total liabilities
Net assets
Costs directly associated with the disposal(1)
Foreign exchange recycled to profit and loss
Consideration on disposal (net of cash and debt)
Gain on sale of discontinued operations
1. Includes net payments received as final settlement to the original agreements completed in 2019.
The net cash flows incurred by these operations are as follows:
Operating
Investing
Financing
Net cash inflow/(outflow)
2020
£m
1.8
(0.9)
0.9
(0.3)
0.6
2.8
3.4
2020
£m
2.9
(2.2)
0.7
(0.2)
–
0.5
3.3
2.8
2020
£m
1.3
0.3
(1.0)
0.6
2019
£m
50.3
(43.4)
6.9
2.8
9.7
84.5
94.2
2019
£m
141.2
(124.2)
17.0
5.0
(2.2)
19.8
104.3
84.5
2019
£m
15.2
(17.9)
(1.9)
(4.6)
DISPOSAL OF THE JAPANESE OPERATIONS (2019)
On 31 May 2019, the Group completed the sale of its Japanese operations to TKP Corporation for a consideration of £320.3m,
with final adjustments recognised during the second half of 2019.
Revenue
Expenses
Profit before tax for the year
Income tax expense
Profit after tax for the year
Gain on the sale of discontinued operations
Profit for the year, net of tax
The assets and liabilities of the Japanese operations as at 31 May 2019 were as follows:
Total assets
Total liabilities
Net assets
Costs directly associated with the disposal
Foreign exchange recycled to profit and loss
Consideration on disposal (net of cash and debt)
Gain on sale of discontinued operations
2020
£m
–
–
–
–
–
–
–
2020
£m
–
–
–
–
–
–
–
–
2019
£m
46.9
(31.9)
15.0
(2.8)
12.2
266.9
279.1
2019
£m
281.4
(245.5)
35.9
24.1
(6.6)
53.4
320.3
266.9
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IWG plc Annual Report and Accounts 2020
The net cash flows incurred by the Japanese operations were as follows:
Operating
Investing
Financing
Net cash inflow
2020
£m
–
–
–
–
2019
£m
6.6
(5.2)
–
1.4
10. COVID-19 RELATED ADJUSTING ITEMS
In March 2020, following the declaration by the World Health Organization of the COVID-19 pandemic (COVID-19) and
subsequent global government restrictions, the Group has been unable to operate at full capacity. Given the political and
economic uncertainty resulting from COVID-19, the Group continues to see significant volatility and business disruption,
reducing expected performance in 2021.
The impact that COVID-19 has had on underlying trading performance is not recognised within adjusting items.
In order to improve the transparency and usefulness of the financial information presented and improve year-on-year
comparability, the Group has identified net charges of £389.8m relating to directly attributable charges resulting from COVID-19.
These charges are considered to be adjusting items as they meet the Group's definition, as disclosed in previous annual reports,
being both significant in nature and value to the results of the Group in the current period. £333.4m of these charges have been
recognised as adjusting items to cost of sales and £56.4m of these charges have been recognised as adjusting items to selling,
general and administration expenses in the Group’s income statement.
The charges relate to several separately identifiable areas of accounting judgement and estimates as follows:
Impairments of property, plant and equipment (including right-of-use assets)(1)
Impairments of goodwill(2)
Provision for expected credit losses(1)
Network rationalisation(1)
Other one-off items including restructuring(3)
Year ended
31 Dec 2020
244.8
4.9
17.5
77.5
45.1
Total adjusting items
1. Included as an adjusting item in cost of sales.
2. Included as an adjusting item in selling, general and administration.
3. Included as adjusting items in selling, general and administration except for £6.4m in respect of worldwide financial support schemes which is included
389.8
in costs of sales.
– Impairments of property, plant and equipment (including right-of-use assets)
The continuation of COVID-19, including new and extended preventative measures in most of the Group’s markets, is expected
to prolong the impact on our business in 2021. As a result of these measures, management carried out a comprehensive review
exercise for potential impairments across the whole portfolio at a cash-generating units (CGUs) level.
The impairment review formed part of the Group’s rationalisation process undertaken throughout the year due to the impact
of COVID-19. This review compared the value-in-use of CGUs, based on management’s assumptions regarding likely future
trading performance, to the carrying values at 31 December 2020. Following this review, a charge of £244.8m was recorded
within net operating expenses. Of this charge, £80.9m was recorded against property, plant and equipment and a charge of
£163.9m was recorded against right-of-use assets.
– Impairments of goodwill
COVID-19 and linked restrictions has impacted our ability to trade our way to sustainable profitable growth in certain markets.
As a result, the projected cash flows for the operations in certain countries no longer supported the carrying value of the CGUs
and an impairment of £4.9m was recognised during 2020.
– Provision for expected credit losses
In light of the temporary closure of centres globally, the Group reviewed the recoverability of its trade receivables profile and
booked an increase of the expected credit loss provision of £17.5m. This increase reflects the greater likelihood of credit default
by the Group’s debtors directly attributable to the impact of COVID-19 and the significant change in the ageing profile of trade
receivables as a direct consequence of COVID-19.
The increase is relatively low compared to the overall debtor profile as the Group has not historically incurred significant
credit losses and continues to maintain customer deposits as additional security in the event of non-performance of
customer contracts.
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125
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
10. COVID-19 RELATED ADJUSTING ITEMS (CONTINUED)
– Network rationalisation
£77.5m of charges were incurred relating to network rationalisations that occurred in the year, which includes the write off of
the book value of assets and direct closure costs related to these centres. A separate rationalisation charge of £15.3m has also
been recorded which is not included as adjusting items.
– Other one-off items including restructuring
During the year, the Group incurred £8.2m of transaction costs in respect of master franchise agreements that did not
complete due to the outbreak of COVID-19. The Group fully expects to resume its pivot towards a franchising model in
due course.
Other charges of £43.3m were also incurred, including severance costs and restructurings arising from mitigating actions
taken by the Group in respect of COVID-19, completed by 31 December 2020 as well as claims in respect of centre closures.
In addition, during the year, the Group received a total of £6.4m in respect of worldwide financial support schemes to fund
staff costs.
Should the estimated charges not prove to be in excess of the amounts required, the release of any amounts provided for at
year-end would be treated as adjusting items.
11. EARNINGS PER ORDINARY SHARE (BASIC AND DILUTED)
Basic and diluted (loss)/profit for the year attributable to shareholders (£m)
Basic (loss)/earnings per share (p)
Diluted (loss)/earnings per share (p)
Basic and diluted (loss)/profit for the year from continuing operations (£m)
Basic (loss)/earnings per share (p)
Diluted (loss)/earnings per share (p)
Basic and diluted profit for the year from discontinued operations (£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 on convertible bonds
Weighted average number of shares for diluted EPS
2020
(646.8)
(67.9)
(67.9)
(650.2)
(68.3)
(68.3)
3.4
0.4
0.4
2019
450.6
50.5
49.6
77.3
8.7
8.5
373.3
41.8
41.1
951,890,712 892,737,688
41,016,473
34,671,862
(25,287,994)
(19,932,772)
1,744,492
1,463,133
76,408,203
–
1,045,771,886 908,939,911
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 Group issued £350.0m of convertible bonds in December 2020. The bond issue creates a potential 76,408,203 shares for
bondholders. This represents a potential 7.1% dilutive impact at time of issue.
The average market price of one share during the year was 296.88p (2019: 338.28p), with a high of 469.00p on 17 January 2020
and a low of 114.00p on 18 March 2020.
12. DIVIDENDS
Dividends per ordinary share proposed
Interim dividends per ordinary share declared and paid during the year
2020
–
–
2019
4.80p
2.15p
The Group initially declared a final dividend of 4.80 pence, equating to £42.4m, on 3 March 2020, for the year ended
31 December 2019. However, in response to COVID-19, the Group announced on 23 March 2020 the prudent and precautionary
decision to not pay this final dividend. Consequently, the resolution in respect of the 2019 final dividend was not proposed at the
AGM held on 12 May 2020 and no dividends were paid during the year (2019: £58.2m). The Company has proposed to
shareholders that no final dividend will be paid for the year ended 31 December 2020 (2019: Nil).
Our capital allocation policy remains unchanged, prioritising investment in the long-term growth of our business and dividend
distribution to shareholders. Given the uncertainty caused by COVID-19 and in order to protect our liquidity in the short-term,
future dividend payments have been placed on hold with the intention to review the return to our progressive dividend policy
when appropriate.
126
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IWG plc Annual Report and Accounts 2020
13. GOODWILL
Cost
At 1 January 2019
Recognised on acquisition of subsidiaries(1)
Disposal of goodwill
Goodwill impairment
Exchange rate movements
At 31 December 2019
Recognised on acquisition of subsidiaries(1)
Disposal of goodwill
Goodwill impairment
Exchange rate movements
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
£m
679.2
22.6
(10.9)
(0.8)
(15.5)
674.6
28.7
–
(4.9)
(2.9)
695.5
674.6
695.5
1. Net of £Nil (2019: £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.
The goodwill attributable to the reportable business segments is as follows:
Carrying amount of goodwill included within:
Americas
EMEA
Asia Pacific
United Kingdom
2020
£m
307.0
142.5
26.6
219.4
695.5
2019
£m
290.9
138.6
26.2
218.9
674.6
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 39 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
286.1
219.4
190.0
695.5
Intangible
assets
£m
–
11.2
–
11.2
2020
£m
286.1
230.6
190.0
706.7
2019
£m
268.7
230.1
187.0
685.8
The indefinite life intangible asset relates to the Regus brand.
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.
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127
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
13. GOODWILL (CONTINUED)
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 2021, and for a further four years, that follow a budgeting process approved by
the Board;
– 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.
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 business. The terminal value includes a three-year average inflation growth rate
which management believes is a reasonable long-term growth rate for the countries in which the Group operates; and
– The Group applies a country-specific pre-tax discount rate to the pre-tax cash flows for each country. The country-specific
discount rate is based on the underlying weighted average cost of capital (WACC) for the Group. The Group WACC is then
adjusted for each country to reflect the assessed market risk specific to that country. The Group pre-tax WACC decreased
from 12.4% in 2019 to 8.2% in 2020 (post-tax WACC: 6.6%), reflecting an update/refinement of the methodology and key
assumptions used by the Group in determining the WACC and changes in external information used to determine the cost
of equity. The country-specific pre-tax WACC reflecting the respective market risk adjustment has been set between 7.9%
and 10.6% (2019: 9.9% to 15.7%).
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 11.0% over the next five years. A terminal value centre gross margin of
16.0% is adopted from 2025, with a 2.1% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows
have been discounted using a pre-tax discount rate of 10.0% (2019: 14.0%). As disclosed in the sensitivities below, using the 2019
discount rate (before the update to the methodology and key assumptions in 2020) would not have resulted in a value in use of
the CGU amounting to less than its carrying value.
The UK model assumes an average centre contribution of 14.0% over the next five years. A terminal value centre gross margin
of 21.0% is adopted from 2025, with a 2.2% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows
have been discounted using a pre-tax discount rate of 8.3% (2019: 12.0%). As disclosed in the sensitivities below, using the 2019
discount rate (before the update to the methodology and key assumptions in 2020) would not have resulted in a value in use
of the CGU amounting to less than its carrying value.
Management has considered the following sensitivities:
– Market growth and WIPOS – Management has considered the impact of a variance in market growth and WIPOS. 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 31% (2019: 59%) for the US and 18% (2019: 15%) 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 in all future years would have to decrease by 13%
(2019: 17%) for the US and 8% (2019: 2%) for the UK.
128
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IWG plc Annual Report and Accounts 2020
14. OTHER INTANGIBLE ASSETS
Cost
At 1 January 2019
Additions at cost
Acquisition of subsidiaries
Disposals (including discontinued operations)
Exchange rate movements
At 31 December 2019
Additions at cost
Acquisition of subsidiaries
Disposals (including discontinued operations)
Exchange rate movements
At 31 December 2020
Amortisation
At 1 January 2019
Charge for year
Disposals (including discontinued operations)
Exchange rate movements
At 31 December 2019
Charge for year
Disposals (including discontinued operations)
Exchange rate movements
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
Brand
£m
63.6
0.2
–
–
(1.6)
62.2
–
–
–
2.9
65.1
37.4
2.6
–
(1.2)
38.8
1.1
–
2.3
42.2
26.2
23.4
22.9
Customer
lists
£m
Software
£m
32.5
–
–
–
(0.7)
31.8
–
0.1
(0.6)
(0.6)
30.7
32.3
0.3
(0.3)
(0.7)
31.6
–
(0.6)
(0.4)
30.6
0.2
0.2
0.1
66.1
12.6
–
(0.5)
(0.9)
77.3
16.5
0.2
(11.2)
0.2
83.0
50.0
6.8
(0.5)
(0.4)
55.9
7.6
(11.1)
0.3
52.7
16.1
21.4
30.3
Total
£m
162.2
12.8
–
(0.5)
(3.2)
171.3
16.5
0.3
(11.8)
2.5
178.8
119.7
9.7
(0.8)
(2.3)
126.3
8.7
(11.7)
2.2
125.5
42.5
45.0
53.3
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 13).
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
15. PROPERTY, PLANT AND EQUIPMENT
Right-of-use
assets(1)
£m
Land and
buildings
£m
Leasehold
improvements
£m
Furniture and
equipment
£m
Computer
hardware
£m
Cost
At 1 January 2019
Additions
Acquisition of subsidiaries
Disposals
Exchange rate movements
At 31 December 2019
Additions
Modifications(2)
Acquisition of subsidiaries
Disposals(4)
Exchange rate movements
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Charge for the year(3)
Disposals
Reversal of impairment
Exchange rate movements
At 31 December 2019
Charge for the year(3)
Disposals(4)
Impairment
Exchange rate movements
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
8,304.9
2,157.7
63.0
(1,046.2)
(40.0)
9,439.4
501.4
664.1
3.0
(1,073.5)
(4.5)
146.3
10.6
–
(0.5)
–
156.4
2.2
–
–
(8.7)
–
1,455.0
230.6
1.1
(174.7)
(42.5)
1,469.5
267.3
–
4.1
(193.7)
(26.2)
9,529.9
149.9
1,521.0
3,172.5
1,009.7
(706.9)
–
46.7
3,522.0
946.0
(736.5)
163.9
(12.4)
3,883.0
5,132.4
5,917.4
5,646.9
5.3
1.7
(0.1)
–
(0.1)
6.8
2.5
(0.7)
–
0.1
8.7
141.0
149.6
141.2
758.5
89.6
(115.0)
(2.1)
(27.3)
703.7
173.8
(108.1)
82.1
(16.0)
835.5
696.5
765.8
685.5
Total
£m
10,752.2
2,514.1
64.6
(1,271.7)
(111.7)
136.9
13.4
–
(13.4)
(4.4)
132.5
11,947.5
9.4
–
0.1
869.8
664.1
8.1
(10.9)
(2.1)
(1,341.4)
(43.3)
129.0
12,104.8
105.5
9.6
(10.1)
–
(3.1)
101.9
9.9
(10.2)
–
(0.7)
4,455.0
1,159.4
(858.5)
(2.1)
3.0
4,756.8
1,186.3
(901.9)
246.0
(38.3)
709.1
101.8
0.5
(36.9)
(24.8)
749.7
89.5
–
0.9
(54.6)
(10.5)
775.0
413.2
48.8
(26.4)
–
(13.2)
422.4
54.1
(46.4)
–
(9.3)
420.8
100.9
5,248.9
295.9
327.3
354.2
31.4
30.6
28.1
6,297.2
7,190.7
6,855.9
1. Right-of-use assets consist of property related leases.
2. Modifications includes lease modifications and extensions.
3. Includes depreciation expenses related to discontinued operations for right-of-use assets of £0.6m (2019: £27.7m) and other property, plant and
equipment of £0.2m (2019: £6.7m).
4. Included disposals related to discontinued operations for right-of-use assets of £0.7m (2019: £274.6m) and other property, plant and equipment of £1.2m
(2019: £42.3m).
Impairment tests for property, plant and equipment (including right-of-use assets) are performed on a cash-generating unit basis
when impairment triggers arise. Cash-generating units (CGUs) are defined as individual business centres, being the smallest
identifiable group of assets that generate cash flows that are largely independent of other groups of assets. The Group assesses
whether there is an indication that a CGU may be impaired, including persistent operating losses, net cash outflows and poor
performance against forecasts. During the year, and as a direct result of the challenging economic circumstances arising from
COVID-19, this gave rise to impairment tests in relation to various centres where impairment indicators were identified.
The recoverable amounts of property, plant & equipment are based on the higher of fair value less costs to sell and value in
use. The Group considered both fair value less costs to dispose and value in use in the impairment testing on a centre by centre
level. Value in use calculations are based on cash flow projections and discount rates for items of property, plant and equipment,
on the same basis as described in note 13. Impairment charges are recognised within cost of sales in the consolidated income
statement. In 2020, the Group recorded impairment charges of £163.9m in respect of right-of-use assets and £82.1m in respect
of leasehold improvements.
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16. OTHER LONG-TERM RECEIVABLES
Deposits held by landlords against rent obligations
Other receivables
Amounts owed by joint ventures
Total non-current
17. TRADE AND OTHER RECEIVABLES
Trade receivables, net
Prepayments and accrued income
Other receivables
VAT recoverable
Deposits held by landlords against rent obligations
Total current
2020
£m
54.5
0.5
–
55.0
2020
£m
285.1
128.4
416.0
171.8
2.4
1,003.7
2019
£m
59.3
1.3
0.4
61.0
2019
£m
242.1
134.3
226.8
73.0
5.1
681.3
Included within other receivables is £276.2m (2019: £Nil) of mezzanine and senior debt in an acquisition target that the Group
did not control as at 31 December 2020. This classification as a current asset reflects the status of the counterparty in default
and that the debt was technically repayable on demand. The balances have been recognised at amortised cost of £276.2m
at 31 December 2020 and, as the acquisition did not complete, the debts were fully repaid to the Group in February 2021.
18. TRADE AND OTHER PAYABLES (INCLUDING CUSTOMER DEPOSITS)
Customer deposits
Other accruals
Trade payables
VAT payable
Other payables
Other tax and social security
Total current
2020
£m
423.6
160.0
270.7
125.6
12.9
14.8
1,007.6
2019
£m
476.8
96.8
116.4
46.2
47.0
5.6
788.8
19. BORROWINGS
The Group’s total loan and borrowing position at 31 December 2020 and at 31 December 2019 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(1)
In more than five years
Total non-current
Total current
Total bank and other loans
1. Includes convertible bond debt of £298.8m (2019: £Nil).
2020
£m
2019
£m
6.6
392.8
0.8
400.2
21.9
422.1
8.1
341.3
1.6
351.0
9.7
360.7
The Group issued £350.0m convertible bonds in December 2020, raising £343.2m, net of transaction fees. At the date of issue
the convertible bonds were bifurcated between:
– A financial liability recognised at amortised cost of £298.2m, by using the discounted cash flow of interest payments and the
bonds’ nominal value; and subsequently remeasured at amortised cost of £298.8m at 31 December 2020. The financial liability
is included in the above, falling due in more than two but not more than five years.
– A derivative financial liability of £51.8m, not being closely related to the host financial liability, is recognised separately and
measured at fair value through profit or loss (see note 24). A gain has been recognised at 31 December 2020 of £2.4m through
net finance expenses, resulting in a year-end liability of £49.4m.
Further information regarding the committed borrowings and the convertible bonds can be found on page 139 in note 24.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
20. PROVISIONS
At 1 January
Provided in the period
Utilised in the period
Exchange rate movements
At 31 December
Analysed between:
Current
Non-current
At 31 December
Closures
£m
13.0
40.3
(29.0)
(0.4)
23.9
11.5
12.4
23.9
2020
2019
Other
£m
2.8
4.5
–
(0.2)
7.1
6.0
1.1
7.1
Total
£m
15.8
44.8
(29.0)
(0.6)
31.0
17.5
13.5
31.0
Closures
£m
14.1
20.4
(20.9)
(0.6)
13.0
6.9
6.1
13.0
Other
£m
3.0
2.6
(2.9)
0.1
2.8
2.0
0.8
2.8
Total
£m
17.1
23.0
(23.8)
(0.5)
15.8
8.9
6.9
15.8
CLOSURES
Provisions for closures relate to the expected costs of centre closures, including restructuring costs. Impairments of right-of-use
assets and property, plant and equipment (note 15), are not included above.
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.
The Group is involved in various disputes, primarily related to potential lease obligations, some of which are in the course of
litigation. Where there is a dispute and where, based on legal counsel advice, the Group estimates that it is probable that the
dispute will result in an outflow of economic resources, provision is made based on the Group’s best estimate of the likely
financial outcome. Where a reliable estimate cannot be made, or where the Group, based on legal counsel advice, considers that
it is not probable that there will be an outflow of economic resources, no provision is recognised. There are no disputes which
are expected to have a material impact on the Group.
21. INVESTMENTS IN JOINT VENTURES
At 1 January 2019
Additions
Share of profit
Exchange rate movements
At 31 December 2019
Share of loss
Disposals
Exchange rate movements
At 31 December 2020
Investments in
joint ventures
£m
12.2
Provision for
deficit in
joint ventures
£m
(5.5)
1.8
0.1
(0.3)
13.8
(0.9)
(1.6)
–
11.3
–
2.6
–
(2.9)
(1.7)
–
–
(4.6)
Total
£m
6.7
1.8
2.7
(0.3)
10.9
(2.6)
(1.6)
–
6.7
The Group has 46 joint ventures (2019: 59) 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-year 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
2020
£m
28.3
(36.9)
(8.6)
(0.7)
(9.3)
43.1
50.8
(68.8)
(36.4)
(11.3)
2019
£m
30.2
(34.3)
(4.1)
(0.7)
(4.8)
67.0
52.0
(74.3)
(52.8)
(8.1)
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IWG plc Annual Report and Accounts 2020
22. 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 issued for cash in the year
Ordinary 1p shares in IWG plc at 31 December
2020
Number
Nominal value
£m
2019
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
133,891,213
1,057,248,651
9.2
1.3
10.5
923,357,438
–
923,357,438
80.0
80.0
9.2
–
9.2
On 28 May 2020 the Group announced the placement of 133,891,213 new ordinary shares, with a par value of 1.0 pence each.
The price of 239.0 pence represented a discount of 8.1% to the middle market closing price of 260.2 pence on 27 May 2020,
with the Group recognising net proceeds of £313.9m, with share premium of £312.6m recognised.
TREASURY SHARE TRANSACTIONS INVOLVING IWG PLC SHARES BETWEEN 1 JANUARY 2020 AND
31 DECEMBER 2020
During the year, 13,590,080 shares were purchased in the open market and 1,968,169 treasury shares held by the Group were
utilised to satisfy the exercise of share awards by employees. As at 9 March 2021, 50,380,775 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
23. ANALYSIS OF FINANCIAL ASSETS/(LIABILITIES)
2020
Number
of shares
39,055,369
13,590,080
(1,968,169)
50,677,280
2019
Number
of shares
28,736,954
12,379,535
(2,061,120)
£m
116.9
43.7
(6.5)
154.1
39,055,369
£m
74.1
49.5
(6.7)
116.9
At 1 January 2019
Cash flow
Non-cash movements
Exchange rate movements
At 31 December 2019
Cash flow
Non-cash movements(4)
Exchange rate movements
At 31 December 2020
Cash and
cash
equivalents
£m
69.0
(6.6)
–
4.2
66.6
(0.7)
–
5.1
71.0
Gross
cash
£m
69.0
(6.6)
–
4.2
66.6
(0.7)
–
5.1
71.0
Debt due
within one
year
£m
Debt due
after one
year(2)(3)
£m
Lease due
within one
year (1)
£m
Lease due
after one
year (1)
£m
Gross
debt
£m
Net financial
assets/
(liabilities)
£m
(9.9)
–
–
0.2
(9.7)
(13.1)
–
0.9
(519.9)
162.5
2.0
4.4
(900.0)
(4,743.4)
(6,173.2)
(6,104.2)
171.7
919.8
1,254.0
1,247.4
(262.5)
(1,825.4)
(2,085.9)
(2,085.9)
13.4
80.4
98.4
102.6
(351.0)
(977.4)
(5,568.6)
(6,906.7)
(6,840.1)
(45.0)
151.6
995.9
1,089.4
1,088.7
(0.5)
(3.7)
(200.5)
(966.2)
(1,167.2)
(1,167.2)
6.7
–
3.9
9.0
(21.9)
(400.2)
(1,019.6)
(5,538.9)
(6,980.6)
(6,909.6)
1. There are no significant lease commitments for leases not commenced at 31 December 2020.
2. Includes £298.8m (2019: £Nil) convertible bond liability.
3. Excludes the convertible bond derivative liability element at the issue date value of £51.8m.
4. Includes early termination of lease liabilities of £362.8m (2019: £344.0m) of which £0.8m (2019: £281.1m) is related to discontinued operations.
Cash and cash equivalent balances held by the Group that are not available for use amounted to £4.1m at 31 December 2020
(2019: £8.3m). Of this balance, £1.6m (2019: £2.9m) is pledged as security against outstanding bank guarantees and a further
£2.5m (2019: £5.4m) is pledged against various other commitments of the Group.
Cash flows on lease liabilities consist of principal payments of £898.1m (2019: £878.3m) and interest payments of £249.4m
(2019: £213.2m). Total cash outflows of £1,212.4m (2019: £1,135.2m) for leases, including variable payments of £64.9m
(2019: £43.7m), were incurred in the year.
Non-cash movements of £1,166.7m (2019: £2,087.9m) represent the movements on lease liabilities in relation to new leases,
lease modifications/remeasurements and lease cessations.
Cash flows on debt due within, and after, one year relate to movements in the revolving credit facility and other borrowings.
These net movements align with the activities reported in the cash flow statement after taking into consideration the £51.8m
derivative liability recognised separately.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
23. ANALYSIS OF FINANCIAL ASSETS/(LIABILITIES) (CONTINUED)
The following amounts are included in the Group’s consolidated financial statements in respect of its leases:
Depreciation charge for right-of-use assets
Principal lease liability repayments
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low-value assets that are not shown above as short-term leases
Expenses relating to variable lease payments not included in lease liabilities
Total cash outflow for leases comprising interest and capital payments
Additions to right-of-use assets
Gains/(losses) arising from sale and leaseback transactions
Income from sub-leasing right-of-use assets
2020
(946.0)
(898.1)
(249.4)
–
3.4
64.9
1,147.5
501.4
–
–
2019
(1,010.0)
(878.3)
(213.2)
2.3
0.9
43.7
1,091.5
2,157.7
–
–
24. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The objectives, policies and strategies applied by the Group with respect to financial instruments and the management of capital
are determined at Group level. The Group’s Board maintains responsibility for the risk management strategy of the Group and the
Chief Financial Officer is responsible for policy on a day-to-day basis. The Chief Financial Officer and Group Treasurer review the
Group’s risk management strategy and policies on an ongoing basis. The Board has delegated to the Group Audit Committee the
responsibility for applying an effective system of internal control and compliance with the Group’s risk management policies.
Exposures to credit, interest rate and currency risks arise in the normal course of business.
GOING CONCERN
The Strategic Report on pages 1 to 65 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 40 to 47 within the Strategic
Report reviews the trading performance, financial position and cash flows of the Group. The Group’s net debt position increased
by £69.5m to a net debt position of £6,909.6m as at 31 December 2020. Excluding the IFRS 16 lease liabilities, the net debt
position increased to £351.1m (2019: £294.1m). The investment in growth is funded by a combination of cash flow generated
from the Group’s mature business centres, cash consideration received in franchising the business and debt. The Group has a
£950.0m revolving credit facility (RCF) provided by a group of relationship banks with a final maturity in 2025 with an option to
extend until 2026. As at 31 December 2020, £731.3m of the RCF was available and undrawn.
Although the Group has net current liabilities of £1,330.4m (2019: £1,366.5m), 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 £423.6m (2019: £476.8m)
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. Excluding short-term lease liabilities and deferred income, the
Group has net current assets of £18.1m at 31 December 2020 (2019: net current liabilities of £66.5m).
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 Group has assessed the other receivable balances for expected credit losses, with no further provision required due to the
nature of these items.
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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
2020
£m
113.6
82.7
31.6
57.2
285.1
2019
£m
40.2
98.3
39.9
63.7
242.1
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
Past due more than 60 days
Gross
2020
£m
161.5
27.9
16.9
104.5
310.8
Provision
2020
£m
–
–
–
(25.7)
(25.7)
Gross
2019
£m
178.2
32.1
13.1
26.4
249.8
Provision
2019
£m
–
–
–
(7.7)
(7.7)
At 31 December 2020, the Group maintained a provision of £25.7m for expected credit losses (2019: £7.7m) arising from
trade receivables. The Group had provided £34.8m (2019: £2.0m) in the year, utilised £16.8m (2019: £8.3m) and released
£Nil (2019: £8.2m). Customer deposits of £423.6m (2019: £476.8m) 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.
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
Liquidity risk represents the risk that the Group will not be able to meet their obligations as they fall due. 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. During 2020, there has been a
sharp focus on cash generation by reducing cost, renegotiating rents and rationalising the network. More than 1,500 leases were
renegotiated or restructured which resulted in short or long term cash benefits. The Group has free cash and liquid investments
(excluding blocked cash) of £66.9m (2019: £58.3m). In addition to cash and liquid investments, the Group had £731.3m 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. At 31 December 2020, the amount of
the facility remains £950.0m (2019: £950.0m) and the final maturity extended in March 2020 to March 2025 with an option to
extend until 2026.
The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly
reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating
interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This has a nominal amount
of £30.0m and a fixed rate of 1.2%.
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 Treasurer and Chief Financial Officer 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 2020 no cash was invested for a period exceeding three months
(2019: £Nil).
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135
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. 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 pounds sterling are of a long-term nature and the Group does not normally
hedge such foreign currency translation exposures.
The principal exposures of the Group are to the US dollar and the euro, with approximately 37% of the Group’s revenue being
attributable to the US dollar and 22% to the euro.
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
GBP
0.1
(0.4)
(0.3)
GBP
–
(0.2)
(0.2)
2020
2019
EUR
1.8
(4.1)
(2.3)
EUR
1.3
(1.4)
(0.1)
USD
1.3
(1.8)
(0.5)
USD
0.5
(2.4)
(1.9)
OTHER MARKET RISKS
The Group does not hold any equity securities for fair value measurement under IFRS 9 and is therefore not subject to risks of
changes in equity prices in the income statement.
SENSITIVITY ANALYSIS
For the year ended 31 December 2020, it is estimated that a general increase of one percentage point in interest rates would
have increased the Group’s loss before tax by approximately £1.8m (2019: decrease in profit of £3.8m) with a corresponding
decrease in total equity.
It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have increased
the Group’s loss before tax by approximately £2.9m for the year ended 31 December 2020 (2019: decrease in profit of £12.9m).
It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have increased the
Group’s loss before tax by approximately £1.0m for the year ended 31 December 2020 (2019: decrease in profit of £5.9m).
It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have decreased
the Group’s total equity by approximately £6.3m for the year ended 31 December 2020 (2019: decrease of £11.1m). It is estimated
that a five-percentage point weakening in the value of the euro against pounds sterling would have decreased the Group’s total
equity by approximately £5.4m for the year ended 31 December 2020 (2019: decrease of £6.1m).
136
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IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
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 73. 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 a major shareholder of the Company. Details of the Directors’ shareholdings
can be found in the Directors’ Remuneration report on pages 84 to 96. In addition, the Group operates various share option plans
for key management and other senior employees.
TREASURY SHARE TRANSACTIONS INVOLVING IWG PLC SHARES BETWEEN 1 JANUARY 2020 AND
31 DECEMBER 2020
During the year, 13,590,080 shares were purchased in the open market and 1,968,169 treasury shares held by the Group were
utilised to satisfy the exercise of share awards by employees. As at 31 December 2020, 50,677,280 treasury shares were held.
The Company declared and paid no interim dividend per share during the year ended 31 December 2020 (2019: 2.15p) and
proposed no final dividend per share (2019: 4.80p per share). The dividend initially proposed of 4.80p per share in the 2019
Annual Report and Accounts was not proposed at the AGM held on 12 May 2020 and no dividends were paid during the
current year.
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.
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.
Except for lease liabilities, the undiscounted cash flow and fair values of these instruments is not materially different from the
carrying value.
As at 31 December 2020
Cash and cash equivalents
Trade and other receivables(1)
Other long-term receivables
Financial assets(2)
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings
Convertible bonds – debt host
Lease liabilities
Other loans
Trade and other payables(4)
Other long-term payables(4)
Derivative financial liabilities:
Convertible bonds – embedded
conversion option
Interest rate swaps
– Outflow
– Inflow
Financial liabilities
Effective
interest rate
%
0.1%
–
–
Carrying
value
£m
71.0
875.3
55.0
Contractual
cash flow
£m
71.0
875.3
55.0
1,001.3
1,001.3
Less than
1 year
£m
71.0
875.3
–
946.3
1-2 years
£m
2-5 years
£m
More than
5 years
£m
–
–
27.8
27.8
–
–
27.2
27.2
2.8%
3.8%
3.4%
1.2%
–
–
–
–
–
(91.7)
(298.8)
(91.7)
(358.8)
–
(1.8)
(1.0)
(1.8)
(90.7)
(355.2)
(6,558.5)
(9,832.4)
(1,186.4)
(1,165.1)
(3,054.4)
(4,426.5)
(31.6)
(31.6)
(21.9)
(1,007.6)
(1,007.6)
(1,007.6)
(4.1)
(4.1)
(49.4)
(49.4)
–
–
(0.2)
–
(0.2)
–
(0.2)
–
(5.6)
–
(4.1)
–
–
–
(3.3)
(0.8)
–
–
(49.4)
–
–
–
–
–
–
–
(8,041.9)
(11,375.8)
(2,217.9)
(1,177.6)
(3,553.0)
(4,427.3)
–
–
–
–
–
–
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137
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
24. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
As at 31 December 2019
Cash and cash equivalents
Trade and other receivables(1)
Other long-term receivables
Financial assets(2)
Non-derivative financial liabilities(3):
Bank loans and corporate borrowings
Lease liabilities
Other loans
Trade and other payables(4)
Other long-term payables(4)
Derivative financial liabilities:
Interest rate swaps
– Outflow
– Inflow
Financial liabilities
Effective
interest rate
%
0.1%
–
–
Carrying
value
£m
66.6
547.0
61.0
674.6
Contractual
cash flow
£m
66.6
554.8
61.0
682.4
Less than
1 year
£m
66.6
554.8
–
621.4
1-2 years
£m
–
–
31.3
31.3
2-5 years
£m
–
–
29.7
29.7
More than
5 years
£m
–
–
–
–
–
3.2%
3.5%
0.8%
–
–
–
–
(340.2)
(340.2)
(0.1)
(2.0)
(338.1)
(6,546.0)
(8,965.4)
(1,168.6)
(1,164.7)
(2,942.2)
(3,689.9)
(20.5)
(788.8)
(2.0)
(20.5)
(788.8)
(2.0)
(9.6)
(788.8)
–
(0.2)
–
(0.2)
–
(0.2)
–
(6.1)
–
(2.0)
–
–
(3.2)
(1.6)
–
–
–
–
–
–
–
–
(7,697.7)
(10,117.1)
(1,967.3)
(1,174.8)
(3,283.5)
(3,691.5)
1. Excluding prepayments.
2. Financial assets are all held at amortised cost.
3. All financial instruments are classified as variable rate instruments.
4. Excluding deferred rents.
FAIR VALUE DISCLOSURES
The fair values together with the carrying amounts shown in the balance sheet are as follows:
31 December 2020
£m
Cash and cash equivalents
Trade and other receivables
Other long-term receivables
Derivative financial liabilities
Convertible bonds
Bank loans and corporate borrowings
Other loans
Trade and other payables
Other long-term payables
Cash,
loans and
receivables
71.0
875.3
55.0
–
–
–
–
–
–
–
–
–
(49.4)
(298.8)
(91.7)
(31.6)
(1,007.6)
(4.1)
Carrying amount
Other
financial
liabilities
Cash flow –
hedging
instruments
Fair value
Level 1
Level 2
Level 3
Total
71.0
875.3
55.0
(49.6)
(298.8)
(91.7)
(31.6)
(1,007.6)
(4.1)
–
–
–
(0.2)
–
–
–
–
–
–
276.2
–
–
–
–
(0.2)
(49.4)
–
–
–
–
–
(298.8)
–
–
–
–
Total
–
276.2
–
(49.6)
(298.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,001.3
(1,483.2)
(0.2)
(482.1)
276.0
(348.2)
(72.2)
Included within other receivables is £276.2m relating to mezzanine and senior debts acquired in December 2020. The balances
have been recognised at fair value of £276.2m at 31 December 2020. The mezzanine and senior debt receivable balances have
been settled in full in February 2021.
At the date of issue, the £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative
financial liability respectively. At 31 December 2020, the debt was valued at its amortised cost, £298.8m and the derivative liability
at its fair value, £49.4m.
31 December 2019
£m
Cash and cash equivalents
Trade and other receivables
Other long-term receivables
Derivative financial liabilities
Bank loans and corporate borrowings
Other loans
Trade and other payables
Other long-term payables
Carrying amount
Cash,
loans and
receivables
Other
financial
liabilities
Cash flow –
hedging
instruments
66.6
547.0
61.0
–
–
–
–
–
–
–
–
–
(340.2)
(20.5)
(788.8)
(2.0)
–
–
–
(0.2)
–
–
–
–
674.6
(1,151.5)
(0.2)
Total
66.6
547.0
61.0
(0.2)
(340.2)
(20.5)
(788.8)
(2.0)
(477.1)
Fair value
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
–
–
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
–
–
(0.2)
138
138
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
During the years ended 31 December 2020 and 31 December 2019, there were no transfers between levels for fair value
measured instruments.
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 and level 3 fair values and methods used for
financial assets and liabilities not measured at fair value:
Type
Cash and cash equivalents, trade and other
receivables/payables, customer deposits and
investment loan receivables
Loans, overdrafts and debt element of
convertible bonds
Foreign exchange contracts, interest rate swaps
and derivative element of convertible bonds
Valuation technique
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. The fair value of the derivative element of convertible bonds has been
calculated with reference to unobservable credit spreads.
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
COMMITTED BORROWINGS
Revolving credit facility
2020
£m
30.0
2019
Facility
£m
950.0
2019
£m
30.0
2019
Available
£m
485.9
2020
Facility
£m
950.0
2020
Available
£m
731.3
The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2020, the amount of
the facility remains £950.0m (2019: £950.0m) and the final maturity extended in March 2020 to March 2025 with an option to
extend until 2026. As at 31 December, £731.3m was available and undrawn under this facility.
The £950.0m revolving credit facility is subject to financial covenants relating to net debt to EBITDA, and EBITDA plus rent to
interest plus rent on a pre-IFRS 16 basis. The Group is in compliance with all covenant requirements.
The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly
reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating
interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This has a nominal amount
of £30.0m and a fixed rate of 1.2%.
CONVERTIBLE BONDS
In December 2020 the Group issued a £350.0m convertible bond, issued by IWG Group Holdings Sarl, a subsidiary of Group
and guaranteed by IWG plc, which is due for repayment in 2027 if not previously converted into shares. If the conversion option is
exercised by the holder of the option, the issuer has the choice to settle by cash or equity shares in the Group. The holders of the
bond have the right to put the bonds back to the Group in 2025 at par. The bond carries a fixed coupon of 0.5% per annum. The
bond liability is split between corporate borrowings (debt) and a derivative financial liability. At the date of issue, the £350.0m was
bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability respectively.
At 31 December 2020, the debt was valued at its amortised cost, £298.8m and the derivative liability at its fair value, £49.4m.
The derivative liability represents a level 3 instrument, which has been valued with reference to the total convertible bond price
(a level 1 valuation) minus the level 3 valuation of the debt host. A change of 10 basis points in the credit spread that is indirectly
used to value the derivative liability would have increased or decreased profit or loss by £1.1m.
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139
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
25. SHARE-BASED PAYMENTS
There are three 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
At 1 January
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2020
2019
Number of
share options
32,511,195
20,198,148
(11,124,669)
(1,535,999)
40,048,675
4,477,253
Weighted average
exercise price per
share
Number of
share options
Weighted average
exercise price per
share
200.34
36,441,222
167.21
209.91
145.00
183.10
156.40
918,829
(2,787,736)
(2,061,120)
32,511,195
4,807,175
191.87
362.69
205.68
143.37
200.34
142.44
Numbers
granted
Weighted average
exercise price per
share
Lapsed
Exercised
3,986,000
100.50
(3,499,063)
(486,937)
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)
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
15/05/2019
13/09/2019
19/12/2019
02/04/2020
15/05/2020
05/08/2020
09/09/2020
Total
613,872
196,608
108,349
19,575,000
150,000
300,000
173,148
101,241,049
75.00
69.10
(545,505)
(146,728)
(72,456)
(13,918)
114.90
(954,402)
(1,055,598)
109.50
(4,905,047)
(4,768,465)
84.95
(3,805,914)
(6,382,726)
155.60
(4,306,000)
(2,752,173)
191.90
195.00
(575,000)
(833,333)
187.20
(1,658,500)
–
(166,667)
(160,300)
186.00
(8,675,510)
(1,229,402)
250.80
(1,829,565)
322.20
272.50
258.00
283.70
(395,186)
(367,735)
(214,313)
–
197.00
(1,000,507)
223.20
203.10
(685,127)
–
341.90
402.30
408.60
165.00
202.00
222.60
291.00
(613,872)
(130,508)
(81,357))
(162,500)
–
–
–
–
(25,000)
(11,009)
(7,055)
–
–
–
–
–
–
–
–
–
–
–
–
At 31 Dec
2020
–
–
–
390,000 (1)
194,027 (1)
1,000,360 (1)
682,827 (1)
25,000 (1)
– (1)
26,700 (1)
2,970,884 (2)
77,000 (2)
734,460 (2)
65,452 (2)
28,221 (2)
1,200,000 (2)
–
–
300,000 (3)
12,225,004 (2)
– (3)
66,100 (3)
26,992 (3)
19,412,500 (3)
150,000 (3)
300,000 (3)
173,148 (3)
Exercisable from
Expiry date
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
05/11/2017
04/11/2024
19/05/2018
18/05/2025
22/12/2018
22/12/2025
29/06/2019
29/06/2026
28/09/2019
28/09/2026
01/03/2020
01/03/2027
14/12/2020
14/12/2027
10/10/2021
10/10/2028
21/12/2021
21/12/2028
28/12/2021
28/12/2028
15/05/2022
15/05/2029
13/09/2022
13/09/2029
19/12/2022
19/12/2029
02/04/2023
02/04/2030
15/05/2023
15/05/2030
05/08/2023
05/08/2030
09/09/2023
09/09/2030
(44,060,668)
(17,131,706)
40,048,675
1. These options have fully vested as of 31 December 2020.
2. The performance targets for these options have been met and they are subject to vesting schedules as described below.
3. These options are subject to performance targets and vesting schedules as described below.
The vesting of share options is subject to an ongoing employment condition. As at 31 December 2020 there were 4,477,253
(2019: 4,807,175) outstanding share options which had fully vested with no further performance or holding period requirements
and which had a weighted average exercise price of £156.40 (2019: £142.44).
140
140
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
28/12/2018 (Grant 2)
20,900,000
199.80
(8,674,996)
PERFORMANCE CONDITIONS FOR SHARE OPTIONS
November 2014 share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against the relevant performance targets and are now vesting ratably over a five-year period, which began in
November 2017 and will end in November 2021.
May 2015 share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning May 2020
and ending May 2024.
December 2015 share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning December
2018 and ending December 2022.
June 2016 share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning June 2019
and ending June 2023.
September 2016 share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning September
2019 and ending September 2023.
March 2017 share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against the relevant performance targets and are now vesting ratably over a three-year period beginning March
2020 and ending March 2022.
December 2018 (Grant 1) share options
The share options outstanding under this grant at 31 December 2020 are subject to the Group ranking at or above the median
for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of
achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group
median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will be
subject to vesting ratably over a three-year period beginning December 2021 and ending December 2023.
December 2018 (Grant 2) share options
The share options outstanding under this grant at 31 December 2020 reflect the options that have been awarded based on
achievement against performance targets and are now subject to vesting ratably over a three-year period beginning December
2021 and ending December 2023.
May 2019 share options
The share options outstanding under this grant at 31 December 2020 are subject to Group performance targets based on Group
ranking at or above the median for TSR performance relative to a comparator group over a period of three years. Any shares
awarded based on achievement of these performance targets will be subject to vesting ratably over a three-year period beginning
May 2022 and ending May 2024.
September 2019 share options
The share options outstanding under this grant at 31 December 2020 are subject to Group performance targets based on Group
operating profit and the Group ranking at or above the median for TSR performance relative to a comparator group over a period
of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum
award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based
on achievement of these performance targets will be subject to vesting ratably over a five-year period beginning September 2022
and ending September 2026.
December 2019 share options
The share options outstanding under this grant at 31 December 2020 are subject to Group performance targets based on Group
operating profit and the Group ranking at or above the median for TSR performance relative to a comparator group over a period
of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum
award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based
on achievement of these performance targets will be subject to vesting ratably over a five-year period beginning December 2022
and ending December 2026.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
25. SHARE-BASED PAYMENTS (CONTINUED)
April 2020 share options
The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options
subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance
relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by
10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year
period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based
on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be
subject to vesting ratably over a three-year period beginning April 2023 and ending April 2025.
May 2020 share options
The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options
subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance
relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by
10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year
period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based
on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be
subject to vesting ratably over a three-year period beginning May 2023 and ending May 2025.
August 2020 share options
The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options
subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance
relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by
10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year
period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based
on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be
subject to vesting ratably over a three-year period beginning August 2023 and ending August 2025.
September 2020 share options
The share options outstanding under this grant at 31 December 2020 are subject to performance targets with 50% of the options
subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance
relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the
median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by
10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year
period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based
on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then
be subject to vesting ratably over a three-year period beginning September 2023 and ending September 2025.
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
291.00p
222.60p
202.00p
165.00p
September
2020
August
2020
May
2020
April
2020
291.00p
222.60p
202.00p
165.00p
51.81% -
62.96%
51.88% -
63.17%
50.15% -
61.06%
49.02% -
59.29%
December
2019
408.60p
408.60p
36.24% –
44.72%
September
2019
May
2019
402.30p
341.90p
402.30p
341.90p
December
2018
(Grant 2)
199.80p
199.80p
36.33% –
44.83%
38.84% –
45.75%
37.66% –
44.35%
3-7 years 3-7 years 3-7 years 3-7 years
3-7 years
3-7 years 3-5 years
3-5 years
2.39%
3.12%
3.44%
4.21%
1.59%
1.62%
1.85%
2.95%
122.93p -
146.68p
84.95p -
102.54p
(0.08%) -
(0.04%)
(0.08%) -
(0.04%)
71.39p -
86.80p
0.00% -
0.06%
50.79p -
62.29p
0.00% -
0.06%
141.77p –
172.84p
137.79p –
169.19p
120.77p –
141.08p
0.57% –
0.65%
0.48% –
0.50%
0.52% –
0.60%
58.77p –
69.33p
0.87% –
1.01%
Exercise price
Expected volatility
Option life
Expected dividend
Fair value of option at time of grant
Risk-free interest rate
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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 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%
3-5 years
3-5 years
3-5 years
2.90%
39.36p –
46.42p
0.73% –
0.88%
2.64%
67.69p –
78.56p
0.70% –
0.91%
2.69%
40.06p –
44.20p
0.54% –
0.75%
March
2017
283.70p
283.70p
27.42% –
29.87%
3-5 years
1.80%
44.51p –
76.88p
0.23% –
0.56%
September
2017
258.00p
258.00p
27.45% –
32.35%
June
2016
272.50p
272.50p
27.71% –
34.81%
December
2015
322.20p
322.20p
24.80% –
37.08%
3-7 years
3-7 years
3-7 years
1.80%
40.96p –
67.89p
0.09% –
0.38%
1.71%
44.28p –
78.68p
0.14% –
0.39%
1.40%
29.76p –
90.61p
0.14% –
0.21%
PLAN 2: IWG PLC CO-INVESTMENT PLAN (CIP) AND PERFORMANCE SHARE PLAN (PSP)
The CIP operated in conjunction with the annual bonus whereby a gross bonus of up to 50% of basic annual salary was 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 vest
depending on the Company’s future performance. The maximum number of Matching Shares which could be awarded to a
participant in any calendar year under the CIP was 200% of salary. As such, the maximum number of Matching Shares which
could be awarded, based on Investment Shares awarded, was in the ratio of 4:1.
The PSP provides for the Remuneration Committee to make standalone 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
2020
2019
Number of
awards
2,370,535
Number of
awards
1,991,250
915,739
1,058,578
–
(679,293)
(48,506)
–
3,237,768
2,370,535
–
10,687
There were no shares which were exercised during the year ended 31 December 2020. The weighted average share price at the
date of exercise for share awards exercised during the year ended 31 December 2020 was 288.60p (2019: Nil).
Plan
PSP
PSP
PSP
PSP
PSP
Plan
CIP: Matching shares
CIP: Matching shares
Date of grant
03/03/2016
Numbers
granted
Lapsed
Exercised
1,038,179
(1,038,179)
01/03/2017
1,095,406
(512,367)
07/03/2018
1,278,350
(597,938)
07/03/2019
1,058,578
04/03/2020
915,739
–
–
5,386,252
(2,148,484)
At 31 Dec
2020
Release date
– 03/03/2021
583,039 01/03/2022
680,412 07/03/2023
1,058,578 07/03/2024
915,739 04/03/2025
3,237,768
–
–
–
–
–
–
Date of grant
05/03/2014
04/03/2015
Numbers
granted
647,688
831,808
Lapsed
(536,698)
(793,989)
Exercised
(110,990)
(37,819)
At 31 Dec
2020
Release date
– 05/03/2019
– 04/03/2020
1,479,496
(1,330,687)
(148,809)
–
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
25. SHARE-BASED PAYMENTS (CONTINUED)
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:
Share price on grant date
Exercise price
Number of simulations
Number of companies
Award life
Expected dividend
04/03/2020
07/03/2019
07/03/2018
01/03/2017
03/03/2016
04/03/2015
PSP
356.50p
PSP
244.90p
PSP
PSP
PSP
CIP
240.90p
283.70p
300.00p
225.00p
253.30p
Nil
Nil
Nil
Nil
Nil
Nil
Nil
250,000
250,000
250,000
250,000
250,000
250,000
250,000
32
32
32
5 years
5 years
5 years
1.95%
2.57%
2.37%
32
5 years
1.80%
32
32
32
5 years
3 years
3 years
1.50%
1.78%
06/03/2014
CIP
Fair value of award at time of grant
Risk-free interest rate
292.36p-
192.98p
124.38p –
188.43p
124.92p –
189.26p
155.83p –
236.08p
183.08p –
277.36p
75.67p –
114.6p
0.06%
0.79%
1.21%
0.56%
0.86%
1.01%
1.66%
83.11p–
214.33p
0.99%-
1.47%
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.
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. The financial performance period resulted in
10,687 shares vesting in March 2019 pursuant to partial achievement of the relative total shareholder return (TSR) target over
the respective period.
2015 CIP Investment and matching grants
The total number of matching awards made in 2015 to each participant was subject to a future performance period of three years
which resulted in 37,819 shares vesting in March 2020, based on partial achievement of the relative total shareholder return
(TSR) target.
2016 PSP Investment grant
The total number of shares awarded is subject to three different performance conditions which were not met and therefore all
awards under this plan lapsed.
2017 PSP Investment grant
The total number of shares awarded was subject to three different performance conditions with one third subject to defined
earnings per share (EPS) conditions, one third subject to relative total shareholder return (TSR) conditions and one third subject
return on investment (ROI) conditions. These conditions were all achieved based on 2019 results and the total 583,039 shares
vested subject to a holding period ending March 2021.
2018 PSP Investment grant
The total number of shares awarded was subject to three different performance conditions, with one third subject to defined
earnings per share (EPS) conditions, one third subject to relative total shareholder return (TSR) conditions and one third subject to
return on investment (ROI) conditions. These conditions are measured over three financial years commencing on 1 January 2018.
Based on results as of 31 December 2020, the relative TSR target of exceeding the comparator group median TSR by more than
10% was achieved in full, resulting in the vesting of 226,804 shares subject to a holding period ending March 2022. The
performance targets for EPS and ROI were not met and the share awards pursuant to these targets lapsed.
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IWG plc Annual Report and Accounts 2020
2019 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 2019. Thus, conditional on meeting these performance targets, these shares will
vest in March 2024. 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 2018 as follows:
Vesting scale
25%
Between 5% and 25%
5%
% of one third of the award that vests
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 vests
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 2018 as follows:
Vesting scale
Exceeds 2018 ROI plus 300 basis points
Exceeds 2018 ROI by less than 300 basis points
Equal to or less than the 2018 ROI
% of one third of the award that vests
100%
On a straight-line basis between 0% and 100%
0%
2020 PSP investment grant
The total number of shares awarded is subject to relative total shareholder return (TSR) conditions, measured over three financial
years commencing on 1 January 2020. Thus, conditional on meeting these performance targets, these shares will vest in
December 2025.
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:
Exceeds the median by 10% or more
Exceeds the median by less than 10%
Ranked at median
Ranked below the median
% of the awards that vests
100%
On a straight-line basis between 25% and 100%
25%
0%
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
25. SHARE-BASED PAYMENTS (CONTINUED)
PLAN 3: DEFERRED SHARE BONUS PLAN
The Deferred Share Bonus Plan, established in 2016, enables the Board to award options to selected employees on a
discretionary basis. 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 three years after the date of grant.
In March 2020, an award of 172,354 ordinary shares of 1p each in the Company was granted to the Chief Executive Officer,
Mark Dixon and an award of 91,923 ordinary shares of 1p each in the Company was granted to the Chief Financial Officer,
Eric Hageman. The awards are conditional on continuous employment and awards that are eligible will vest in March 2023.
Reconciliation of outstanding share options
At 1 January
DSBP awards granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2020
Number of
awards
495,678
264,277
–
(383,664)
2019
Number of
awards
383,664
112,014
–
–
376,291
495,678
–
–
The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2020
was 360.62p (2019: Nil).
Plan
DSBP
DSBP
DSBP
Date of grant
01/03/2017
07/03/2019
04/03/2020
Numbers
granted
383,664
112,014
264,277
759,955
Lapsed
–
Exercised
(383,664)
At 31 Dec
2020
Release date
– 01/03/2020
–
–
–
–
–
112,014 07/03/2022
264,277 04/03/2023
(383,664)
376,291
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 2020
356.5
March 2019
244.90p
March 2017
283.70p
Nil
–
–
Nil
–
–
Nil
–
–
3 years
1.95%
3 years
2.57%
3 years
1.80%
292.36p
188.42p
236.04p
0.00%
0.68%
0.23%
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26. 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 is as follows:
Fair value of plan assets
Present value of obligations
Net funded obligations
27. ACQUISITIONS
Current period acquisitions
2020
£m
4.8
(6.9)
(2.1)
2019
£m
11.0
(12.5)
(1.5)
During the year ended 31 December 2020 the Group made various individually immaterial acquisitions for a total consideration
of £28.5m.
£m
Net assets acquired
Right-of-use assets
Other property, plant and equipment
Cash
Other current and non-current assets
Lease liabilities
Current liabilities
Non-current liabilities
Previously held share of net assets(1)
Goodwill arising on acquisition
Total consideration
Cash flow on acquisition
Cash paid
Net cash outflow
Book value
Provisional
fair value
adjustments
Provisional
fair value
3.0
5.1
1.7
12.3
(3.0)
(14.8)
(5.9)
(1.6)
–
–
–
–
–
–
–
–
3.0
5.1
1.7
12.3
(3.0)
(14.8)
(5.9)
(1.6)
1.4
28.7
28.5
28.5
28.5
1. The 2020 acquisitions include one stepped-acquisition where the non-controlling interest in a former joint venture was acquired by the Group.
The goodwill arising on the 2020 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. Of
the above goodwill, £28.7m is expected to be deductible for tax purposes.
If the above acquisitions had occurred on 1 January 2020, the revenue and net retained profit arising from these acquisitions
would have been £17.8m and £1.5m respectively. In the year, the equity acquisitions contributed revenue of £2.6m and net
retained profit of £0.6m.
There was no contingent consideration arising on the 2020 acquisitions, nor was any contingent consideration paid during the
current year with respect to milestones achieved on previous acquisitions. There are no contingent considerations held on the
Group’s balance sheet at 31 December 2020.
The acquisition costs associated with these transactions were £0.4m, recorded within administration expenses in the
consolidated income statement.
For 2020’s acquisitions, 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 primarily for 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 dates and
any adjustments reported in future reports.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
27. ACQUISITIONS (CONTINUED)
Prior period acquisitions
During the year ended 31 December 2019 the Group made an acquisition for a total consideration of £24.4m.
£m
Net assets acquired
Right-of-use assets
Other property, plant and equipment
Cash
Other current and non-current assets
Lease liabilities
Current liabilities
Non-current liabilities
Goodwill arising on acquisition
Total consideration
Cash flow on acquisition
Cash paid
Net cash outflow
Book value
Final
fair value
adjustments
Final
fair value
63.0
1.6
5.5
6.8
(63.0)
(7.6)
(4.5)
1.8
–
–
–
–
–
–
–
–
63.0
1.6
5.5
6.8
(63.0)
(7.6)
(4.5)
1.8
22.6
24.4
24.4
24.4
The goodwill arising on the 2019 acquisition 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. Of the above
goodwill, £22.6m was expected to be deductible for tax purposes.
If the above acquisition had occurred on 1 January 2019, the revenue and net retained profit arising from these acquisitions
would have been £28.3m and £4.4m respectively. During 2019, the equity acquisition contributed revenue of £4.7m and net
retained profit of £1.2m.
There was no contingent consideration arising on the above acquisition. Contingent consideration of £5.3m was paid during the
prior year with respect to milestones achieved on a previous acquisition.
The acquisition costs associated with this transaction were £0.3m, recorded within administration expenses in 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 2019.
28. CAPITAL COMMITMENTS
Contracts placed for future capital expenditure not provided for in the financial statements
2020
£m
147.0
2019
£m
196.4
These commitments are principally in respect of centre fit-out obligations. There are no capital commitments in respect of joint
ventures at 31 December 2020 (2019: £Nil).
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29. CONTINGENT ASSETS AND LIABILITIES
The Group has bank guarantees and letters of credit held with certain banks, predominantly in support of leasehold contracts with
a variety of landlords, amounting to £143.9m (2019: £144.5m). 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
2020
Joint ventures
2019
Joint ventures
Management
fees received
from related
parties
Amounts
owed by
related party
Amounts
owed to
related party
2.6
3.6
17.6
15.5
4.3
4.9
As at 31 December 2020, none of the amounts due to the Group have been provided for as the expected credit losses arising on
the balances are considered immaterial (2019: £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
2020
£m
6.7
0.2
1.9
8.8
2019
£m
8.2
0.4
1.4
10.0
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 £6.8m (2019: £2.0m). These awards are subject to performance conditions and vest over three, four and five years
from the award date (refer to note 25 for further details).
TRANSACTIONS WITH RELATED PARTIES
During the year ended 31 December 2020 the Group acquired goods and services from a company indirectly controlled by
a Director of the Company amounting to £5,629 (2019: £18,764). There was a £5,629 balance outstanding at the year-end
(2019: £18,764).
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.
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FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
31. PRINCIPAL GROUP COMPANIES
The Group’s principal subsidiary undertakings at 31 December 2020, their principal activities and countries of incorporation are set
out below:
% of
ordinary
shares and
votes held
Name of undertaking
Management companies
Country of
incorporation
% of
ordinary
shares and
votes held
RGN Management Limited Partnership Canada
Pathway IP II Sarl
Franchise International GmbH
Switzerland
Switzerland
Regus Service Centre Philippines B.V.
Philippines
Regus Global Management Centre SA Switzerland
100
100
100
100
100
Regus Group Services Ltd
IW Group Services (UK) Ltd
United Kingdom 100
United Kingdom 100
Regus Management Group LLC
United States
100
Holding and finance companies
IWG Enterprises Sarl
IWG Group Holdings Sarl
Genesis Finance Sarl
Pathway Finance Sarl
Pathway Finance EUR 2 Sarl
Pathway Finance USD 2 Sarl
Regus Group Limited
Regus Corporation
Switzerland
Luxembourg
Switzerland
Switzerland
Switzerland
Switzerland
100
100
100
100
100
100
United Kingdom 100
United States
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Name of undertaking
Trading companies
Regus Australia Management Pty Ltd
Regus Belgium SA
Regus do Brasil Ltda
Regus Business Service (Shenzen) Ltd
Regus Management ApS
Regus Management (Finland) Oy
RBC Deutschland GmbH
Regus HK Management Ltd
Regus CME Ireland Limited
Regus Business Centres Limited
Regus Business Centres Italia Srl
Country of
incorporation
Australia
Belgium
Brazil
China
Denmark
Finland
Germany
Hong Kong
Ireland
Israel
Italy
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 Espana SL
IWG Management (Sweden) AB
Avanta Managed Offices Ltd
Basepoint Centres Limited
H Work LLC
RGN National Business Centre LLC
RB Centres LLC
Spain
Sweden
United Kingdom 100
United Kingdom 100
United States
United States
United States
100
100
100
During the year, Redox plc was deconsolidated from the Group due to the loss of control of the entity subsequent to it being
placed into formal bankruptcy proceedings. In addition, a further 132 entities incorporated in the USA, Canada and the UK are
currently in administration processes but have not been deconsolidated as they have not met the requirements for
deconsolidation as at 31 December 2020.
150
150
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
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.
KEY JUDGEMENTS
Adjusting items
Adjusting items are separately disclosed by the Group so as to provide readers with helpful additional information on the
performance of the business across periods. In 2020, items arising specifically from the impact of the COVID-19 pandemic have
been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size
and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred.
The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board and the
Operating Committee. The profit before tax and adjusting items measure is not a recognised profit measure under IFRS and may
not be directly comparable with adjusted profit measures used by other companies. The classification of adjusting items requires
significant management judgement after considering the nature and intentions of a transaction or provision.
Tax assets and liabilities
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide
provision for income taxes. 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 additional
tax liabilities over and above those already provided for.
Determining the lease term of contracts with renewal and termination options
IFRS 16 defines the lease term as the non-cancellable period of a lease together with the options to extend or terminate a lease,
if the lessee were reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease
term, the Group makes a judgement as to whether it is reasonably certain that the option will be taken. This will take into account
the length of time remaining before the option is exercisable, macro-economic environment, socio-political environment and
other lease specific factors.
The lease term represents the period from lease inception up to either:
a. The earliest point at which the lease could be broken, where break clauses exist;
b. The point at which the lease could be extended, but no further, where extension options exist; or
c. To the end of the contractual lease term in all other cases.
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151
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
32. KEY JUDGEMENTAL AND ESTIMATES AREAS ADOPTED IN PREPARING THESE ACCOUNTS (CONTINUED)
KEY ESTIMATES
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 2020,
including the sensitivity to changes in those assumptions, can be found in note 13.
Deferred tax assets
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 to the extent that it is probable that future
taxable profits will be available against which the assets can be used.
Given the significant level of corporate developments in the Group, the determination of the period of time representing
foreseeable future requires judgement to be exercised, using the Group’s business forecasting processes.
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.
While impairment of property, plant and equipment was noted as a key estimate in the 2019 Annual Report and Accounts,
COVID-19 has accelerated the need for further network rationalisation. 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 and for centres which
have been identified as part of the Group’s rationalisation programme. The key area of estimation involved is in determining the
recoverable amount of the rationalised centres, over what period the rationalisation will take place, and the level of moveable
assets that will be utilised in other centres.
The Group has considered the impact of COVID-19 with respect to all judgements and estimates it makes in the application of its
accounting policies. This included assessing the impairment of property, plant and equipment, goodwill and the recoverability of
trade receivables. The result of these reviews is detailed in note 10.
Estimating the incremental borrowing rates on leases
The determination of applicable incremental borrowing rates on leases at the commencement of lease contracts also requires
judgement. The Group determines its incremental borrowing rates by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms of the lease. The Group considers the relevant market interest rate,
based on the weighted average of the timing of the lease payments under the lease obligation. In addition, a spread over the
market rate is applied based on the cost of funds to the Group, plus a spread that represents the risk differential of the lessee
entity compared to the Group funding cost.
Valuation of embedded conversion option (Level 3) in convertible bonds
The embedded conversion option relating to the Group's issue of convertible bonds is measured at mark-to-market with
reference to the traded price of the convertible bonds as well as external valuation inputs based on credit comparables and bond
spreads across competitors and wider markets.
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.
152
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IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
PARENT COMPANY ACCOUNTS
SUMMARISED EXTRACT OF UNAUDITED 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
Share premium
Reserves from capital contributions
Retained earnings
Profit/(loss) for the year
Treasury shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
The values of the investments recognised have been considered by the Directors and are considered fully recoverable.
Approved by the Board on 9 March 2021
MARK DIXON
CHIEF EXECUTIVE OFFICER
ERIC HAGEMAN
CHIEF FINANCIAL OFFICER
As at
31 Dec 2020
£m
As at
31 Dec 2019
£m
1.1
0.5
1.6
3,272.3
3,272.3
14.4
0.1
14.5
644.6
644.6
3.273.9
659.1
7.0
1.1
8.1
99.3
99.3
6.3
2.7
9.0
332.3
332.3
107.4
341.3
10.5
312.6
2,126.8
(1,699.1)
2,569.8
(154.1)
3,166.5
9.2
–
2,126.8
(32.4)
(1,668.9)
(116.9)
317.8
3,273.9
659.1
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 2020, which
are available from the Company’s registered office, Dammstrasse 19, CH-6300, Zug, Switzerland.
INVESTMENTS
During 2020, the Company acquired the direct investments in IWG Enterprises Sarl and Umbrella Management Limited as part
of an internal restructuring. This transaction resulted in the Company recognising a dividend in specie of £2,966.0m and a
corresponding impairment in its investment of IWG Global Investments Sarl of £360.0m. The value of the investments recognised
have been considered by the Directors and are considered fully recoverable.
iwgplc.com
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153
153
FINANCIAL STATEMENTS
IFRS 16 PRO FORMA STATEMENTS
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
The purpose of these unaudited pages is to provide a reconciliation from the 2020 financial results to the pro forma statements
in accordance with the previous pre-IFRS 16 policies adopted by the Group, and thereby give the reader greater insight into
the impact of IFRS 16 on the results of the Group. The pro forma statements also reflect the impact of the adjusting items
during 2020.
£m
Revenue
Total costs of sales
Cost of sales
Adjusting items to cost of sales
(Loss) on impairment of property, plant, equipment and right-of-
use assets
Expected credit losses on trade receivables
Gross profit/(loss) (centre contribution)
Total selling, general and administration expenses
Selling, general and administration expenses
Adjusting items to selling, general and administration expenses
Share of (loss)/profit of equity-accounted investees, net of tax
Operating (loss)/profit
Finance expense
Finance income
Net finance expense
(Loss)/profit before tax for the year from continuing operations
Income tax expense
(Loss)/profit after tax for the year from continuing operations
Profit after tax for the period from discontinued operations
(Loss)/profit for the period attributable to equity shareholders of
the parent
Earnings per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p)
Diluted (p)
From continuing operations
Basic (p)
Diluted (p)
10
21
5
7
7
8
9
11
11
11
11
Rent &
finance
Other
costs Depreciation
adjustments Taxation
Year ended
31 Dec 2020
pre-IFRS 16
Year ended
31 Dec 2020
As reported
2,480.2
Notes
3
–
(2,425.5)
(1,051.2)
(2,108.4)
(1,051.2)
10
(71.1)
5
5
(246.0)
(34.8)
–
–
–
–
884.5
884.5
–
–
–
–
(23.1)
(33.3)
(235.8)
246.0
–
–
–
2,480.2
(2,615.3)
– (2,308.4)
–
–
–
–
–
–
–
–
–
–
–
–
(306.9)
–
(34.8)
(169.9)
(383.4)
(324.4)
(56.4)
(2.6)
(553.3)
(13.9)
3.0
(10.9)
(564.2)
(43.3)
19.9 (1,051.2)
884.5
(23.1)
(371.9)
(312.9)
(56.4)
(2.6)
(14.0)
(14.0)
–
–
2.5
2.5
–
–
–
–
–
–
(352.0)
(1,065.2)
887.0
(23.1)
(271.1)
249.4
3.0
–
(268.1)
249.4
–
–
–
7.8
–
7.8
(620.1)
(815.8)
887.0
(15.3)
(30.1)
–
–
–
(13.2)
(650.2)
(815.8)
887.0
(15.3)
(13.2)
(607.5)
3.4
(1.2)
0.7
0.2
–
3.1
(646.8)
(817.0)
887.7
(15.1)
(13.2)
(604.4)
(67.9)
(67.9)
(68.3)
(68.3)
(63.5)
(63.5)
(63.8)
(63.8)
154
154
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
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 assets and related lease liabilities
These adjustments reflect the right-of-use assets recognised on transition, together with the related lease liabilities. The initial
lease liabilities are 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.
2. Rent and finance costs
Under IFRS 16 conventional rent charges are not recognised in the profit or loss. The payments associated with these charges
instead form part of the lease payments used in calculating the right-of-use assets and related lease liabilities noted above. The
lease liabilities are 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 and lease payments
Depreciation on the right-of-use assets 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 liabilities recognised in the
balance sheet.
4. Taxation
The underlying tax charge is impacted by the change in the profit before tax and deferred tax assets recognised.
5. Other adjustments
These adjustments primarily reflect the impairment of the right-of-use assets and other property, plant and equipment as well
as the reversal of the closure cost provision on a pre-IFRS 16 basis. Certain parking, storage and brokerage costs are also
reversed, as they form part of the lease payments.
iwgplc.com
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155
155
FINANCIAL STATEMENTS
IFRS 16 PRO FORMA STATEMENTS CONTINUED
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at
31 Dec 2020
As reported
Notes
£m
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Other property, plant and equipment
Deferred tax assets
Other long-term receivables
Investments in joint ventures
Total non-current assets
Current assets
Inventory
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables (incl.
customer deposits)
Deferred income
Corporation tax payable
Bank and other loans
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Other long-term payables
Deferred tax liability
Bank and other loans
Lease liabilities
Non-current derivative financial
liabilities
Provisions
Provision for deficit on joint ventures
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Total equity
Issued share capital
Issued share premium
Treasury shares
Foreign currency translation reserve
Hedging reserve
Other reserves
Retained earnings
Total equity
13
14
15
15
15
8
16
21
17
8
23
18
8
19
23
20
8
19
23
24
20
21
26
22
22
22
Right-of-use
assets &
related lease
liability
–
–
(6,758.9)
(6,758.9)
–
–
–
–
Rent &
finance
costs
Depreciation
& lease
payments
Other
adjustments
Taxation
As at
31 Dec 2020
pre-IFRS 16
–
–
871.3
–
871.3
–
–
–
–
–
900.9
946.0
(45.1)
–
–
–
–
–
248.1
166.0
82.1
–
0.5
–
–
–
–
–
–
(107.0)
–
–
695.5
53.3
2,117.3
–
2,117.3
81.2
55.5
11.3
695.5
53.3
6,855.9
5,646.9
1,209.0
188.2
55.0
11.3
7,859.2
(6,758.9)
871.3
900.9
248.6
(107.0)
3,014.1
1.3
1,003.7
29.1
71.0
1,105.1
8,964.3
1,007.6
328.9
40.0
21.9
1,019.6
17.5
2,435.5
5.9
0.2
400.2
5,538.9
49.6
13.5
4.6
2.1
–
–
–
–
–
–
145.9
–
–
145.9
–
–
–
–
–
(6,758.9)
1,017.2
900.9
–
–
–
–
400.8
–
–
–
(921.9)
(249.3)
–
–
(921.9)
151.5
–
–
–
(6,534.8)
–
–
–
–
949.2
–
–
–
–
–
–
–
–
–
–
–
151.6
–
151.6
–
–
–
995.9
–
–
–
–
–
–
–
–
–
248.6
–
–
–
–
–
247.8
247.8
0.5
(0.2)
–
–
–
2.1
–
–
6,015.0
8,450.5
(6,534.8)
949.2
(7,456.7)
1,100.7
995.9
1,147.5
2.4
250.2
10.5
312.6
(154.1)
36.2
(0.2)
25.8
283.0
513.8
–
–
–
(14.8)
–
–
712.6
697.8
–
–
–
–
–
–
(83.5)
(83.5)
–
–
–
–
–
–
(246.6)
(246.6)
900.9
–
–
–
–
–
–
(1.6)
(1.6)
(107.0)
(107.0)
–
–
–
–
–
1.3
1,149.6
29.1
71.0
1,251.0
(107.0)
4,265.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,408.4
328.9
40.0
21.9
–
265.3
2,064.5
955.6
–
400.2
–
49.6
15.6
4.6
2.1
1,427.7
3,492.2
10.5
312.6
(154.1)
21.4
(0.2)
25.8
556.9
772.9
Total equity and liabilities
8,964.3
(6,758.9)
1,017.2
248.6
(107.0)
4,265.1
156
156
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
£m
Operating activities
Loss for the year from continuing operations
Adjustments for:
Profit from discontinued operations
Net finance expense
Share of loss on equity-accounted investees, net of income tax
Depreciation charge
Right-of-use assets
Other property, plant and equipment
Loss on impairment of goodwill
Loss on disposal of property, plant and equipment
Profit on disposal of right-of-use assets and related lease liabilities
Loss on disposal of intangible assets
Impairment of property, plant and equipment
Impairment of right-of-use assets
Amortisation of intangible assets
Gain on disposal of other investments
Tax expense
Expected credit losses on trade receivables
Increase in provisions
Share-based payments
Other non-cash movements
Operating cash flows before movements in working capital
Proceeds from partner contributions (reimbursement of costs)
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Interest paid and similar charges on bank loans and corporate
borrowings
Interest paid on lease liabilities
Tax paid
Net cash inflows from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of subsidiary undertakings, net of cash acquired
Purchase of intangible assets
Purchase of joint ventures
Purchase of current assets
Proceeds on the sale of discontinued operations, net of cash disposed of
Proceeds on sale of property, plant and equipment
Interest received
Net cash outflows from investing activities
Financing activities
Proceeds from issue of loans
Repayment of loans
Proceeds from issue of convertible bonds (net of transaction costs)
Payment of lease liabilities
Proceeds from partner contributions (lease incentives)
Proceeds from issue of ordinary shares, net of costs
Purchase of treasury shares
Proceeds from exercise of share awards
Payment of ordinary dividend
Net cash (outflows)/inflows from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year
iwgplc.com
iwgplc.com
Year ended
31 Dec 2020
As reported
Rent &
finance
Depreciation
& lease
payments
Notes
Other
adjustments
Year ended
31 Dec 2020
pre-IFRS 16
(650.2)
(815.8)
887.0
(28.5)
(607.5)
9
7
21
15
15
15
13
5
5, 23
5
5, 15
5, 15
5, 14
21
8,9
5
20
15
23
15
27
14
21
17
9
7
19
23
15
22
22
12
23
0.6
268.1
2.6
1,186.3
946.0
240.3
4.9
93.1
(25.7)
0.1
82.1
163.9
8.7
1.6
30.4
34.8
15.2
6.4
(4.4)
(1.2)
(249.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,218.5 (1,066.4)
–
14.7
955.6
38.4
(76.4)
77.3
1,257.8
(96.1)
(17.6)
(249.4)
(21.9)
968.9
–
249.4
–
153.7
(257.4)
(26.8)
(16.5)
–
(276.2)
3.3
8.2
0.6
(564.8)
(153.7)
–
–
–
–
–
–
–
(153.7)
876.5
(1,109.8)
343.2
(898.1)
111.0
313.9
(43.7)
2.2
–
(515.8)
(0.7)
66.6
5.1
71.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.7
–
–
(887.7)
(946.0)
58.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(38.4)
–
(748.7)
(787.1)
–
–
–
(787.1)
–
–
–
–
–
–
–
–
–
–
–
–
898.1
(111.0)
–
–
–
–
787.1
–
–
–
–
0.2
(7.8)
–
–
–
–
–
(11.5)
25.7
–
(82.1)
(163.9)
–
–
–
–
247.8
–
0.3
(19.8)
–
–
19.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
10.9
2.6
298.6
–
298.6
4.9
81.6
–
0.1
–
–
8.7
1.6
30.4
34.8
263.0
6.4
(4.1)
132.3
–
(61.7)
304.0
374.6
(17.6)
–
(21.9)
335.1
(411.1)
(26.8)
(16.5)
–
(276.2)
3.3
8.2
0.6
(718.1)
876.5
(1,109.8)
343.2
–
–
313.9
2.2
–
–
382.3
(0.7)
66.6
5.1
71.0
157
157
FINANCIAL STATEMENTS
SEGMENTAL ANALYSIS
SEGMENTAL ANALYSIS – BASED ON ESTIMATES (UNAUDITED)
Pre2019(1)
Workstations(4)
Occupancy (%)
Revenue (£m)
REVPOW (£)
2019 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
2020 Expansions(5)
Workstations(4)
Occupancy (%)
Revenue (£m)
Network rationalisations(3)
Workstations(4)
Occupancy (%)
Revenue (£m)
Total
Workstations(4)
Occupancy (%)
Revenue (£m)
REVPAW (£)
Period end workstations(7)
Mature
2019 Expansions
2020 Expansions
Total
Americas
2020
(pre-IFRS 16
Basis)
EMEA
2020
(pre-IFRS 16
Basis)
Asia Pacific
2020
(pre-IFRS 16
Basis)
United
Kingdom
2020
(pre-IFRS 16
Basis)
Other
2020
(pre-IFRS 16
Basis)
Total
2020
(pre-IFRS 16
Basis)
194,127
138,942
74.1%
969.8
6,742
23,258
49.9%
53.4
8,092
24.2%
11.0
8,578
45.5%
32.3
73.9%
564.0
5,491
41,765
55.4%
103.4
14,005
36.5%
21.5
7,076
63.0%
26.2
79,810
70.4%
252.2
4,488
11,766
59.4%
27.1
3,061
35.9%
5.7
7,319
61.7%
19.2
94,240
71.0%
338.2
5,052
11,698
60.2%
31.5
4,784
33.6%
10.0
2,277
66.6%
9.1
234,055
201,788
101,956
112,999
68.9%
1,066.5
4,557
67.1%
715.1
3,544
193,629
143,256
23,339
10,809
42,939
21,142
227,777
207,337
67.5%
304.2
2,984
81,959
12,070
4,659
98,688
68.2%
388.8
3,441
96,237
11,880
9,295
117,412
–
–
5.6
–
507,119
72.9%
2,129.8
5,761
–
–
–
–
–
–
–
–
–
–
–
5.6
–
–
–
–
–
88,487
55.1%
215.4
29,942
32.7%
48.2
25,250
57.0%
86.8
650,798
68.0%
2,480.2
3,811
515,081
90,228
45,905
651,214
158
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IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
SEGMENTAL ANALYSIS – BASED ON ESTIMATES (UNAUDITED)
Pre-2019(1)
Workstations(4)
Occupancy (%)
Revenue (£m)
REVPOW (£)
2019 Expansions(2)
Workstations(4)
Occupancy (%)
Revenue (£m)
Network rationalisations(6)
Workstations(4)
Occupancy (%)
Revenue (£m)
Total
Workstations(4)
Occupancy (%)
Revenue (£m)
REVPAW (£)
Notes:
Americas
2019
(pre-IFRS 16
Basis)
EMEA
2019
(pre-IFRS 16
Basis)
Asia Pacific
2019
(pre-IFRS 16
Basis)
United
Kingdom
2019
(pre-IFRS 16
Basis)
Other
2019
(pre-IFRS 16
Basis)
Total
2019
(pre-IFRS 16
Basis)
195,316
77.2%
1,099.8
7,296
9,682
40.0%
20.7
11,516
63.1%
67.4
135,864
84,238
91,886
72.5%
575.1
5,835
17,261
40.3%
36.8
12,021
66.3%
71.1
71.3%
274.7
4,577
6,218
37.4%
10.6
11,390
62.6%
57.4
71.4%
370.1
5,640
7,629
32.5%
11.3
9,976
57.1%
44.9
216,514
165,146
101,846
109,491
74.8%
1,187.9
5,486
68.7%
683.0
4,136
68.2%
342.7
3,365
67.4%
426.3
3,893
–
–
9.0
–
507,304
73.9%
2,328.7
6,211
–
–
–
–
–
–
–
–
9.0
–
40,790
38.3%
79.4
44,903
62.5%
240.8
592,997
70.6%
2,648.9
4,467
1. The pre-2019 business comprises centres not opened in the current or previous financial year.
2. Expansions include new centres opened and acquired businesses.
3. A network rationalisation for the 2020 data is defined as a centre closed during the period from 1 January 2020 to 31 December 2020.
4. Workstation numbers are calculated as the weighted average for the year.
5. 2020 expansions include any costs incurred in 2020 for centres which will open in 2021.
6. A network rationalisation for the 2019 comparative data is defined as a centre closed during the period from 1 January 2019 to 31 December 2020.
7. Workstations available at year-end.
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159
FINANCIAL 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, on a pre-IFRS 16
basis, back to the Group’s IFRS 16 pro forma statements, and thereby give the reader greater insight into the returns
calculation drivers.
2020
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
EBIT
Depreciation and amortisation(1)
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
Growth capital expenditure
Partner contributions
Net investment (unaudited)
2020
EBITDA reconciliation
Centre contribution
Selling, general and administration expenses
Depreciation and amortisation
Reference
2018
Aggregation
5.8%
2019
Expansions
–
2020
Expansions
–
2021
Expansions
–
Closures
–
Total
1.2%
Pro forma income
statement, p154
Pro forma income
statement, p154
EBIT reconciliation
(analysed below)
Pro forma income
statement, p154
EBIT reconciliation
(analysed below)
Capital expenditure
(analysed below)
Partner contributions
(analysed below)
2,129.8
215.4
48.2
–
86.8
2,480.2
277.5
(65.7)
(32.4)
(14.2)
(12.0)
153.2
–
–
–
–
277.5
(249.6)
(65.7)
(45.8)
(32.4)
(17.0)
(14.2)
(0.2)
80.4
68.4
(11.8)
80.4
233.6
(324.4)
27.9
(111.5)
(49.4)
(14.4)
56.6
(90.8)
230.5
(70.3)
(0.5)
159.7
(5.7)
181.9
96.9
(14.6)
82.3
99.6
49.0
(18.0)
–
31.0
22.3
13.8
(6.1)
–
7.7
9.9
–
–
–
–
2.9
(58.2)
(31.8)
(11.5)
–
–
–
–
–
–
–
–
–
13.9
(29.8)
0.3
(15.6)
(11.3)
29.7
–
–
–
(58.2)
(31.8)
(11.5)
29.7
307.2
(124.2)
(0.2)
182.8
18.1
110.1
96.9
(14.6)
82.3
27.8
Capital expenditure
(analysed below)
Partner contributions
(analysed below)
2,210.2
602.0
328.2
(505.3)
(206.8)
(116.5)
1,704.9
395.2
211.7
40.2
(13.7)
26.5
–
–
–
3,180.6
(842.3)
2,338.3
2018
Aggregation
277.6
2019
Expansions
(65.7)
2020
Expansions
(32.4)
2021
Expansions
(14.2)
Closed
(12.0)
(11.8)
13.9
(9.9)
Total
153.2
(324.4)
307.2
136.1
(45.8)
49.0
(62.5)
–
(17.0)
13.8
(35.6)
–
(0.2)
–
(14.4)
(62.5)
(35.6)
(14.4)
(9.9)
133.5
–
–
(2.6)
(249.6)
230.5
258.5
(2.6)
255.9
Share of profit in joint ventures
EBITDA on continuing operations
Pro forma income
statement, p154
1. Excludes depreciation expenses related to discontinued operations of £0.1m.
2. Based on EBIT at the Group’s long-term effective tax rate of 20%.
160
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IWG plc Annual Report and Accounts 2020
2020
Movement in capital expenditure (unaudited)
December 2019
2020 Capital expenditure(3)
Properties acquired
Centre closures(4)
December 2020
2018
Aggregation
2,343.5
2019
Expansions
528.8
2020
Expansions
93.7
2021
Expansions
–
Closures
–
Total
2,966.0
–
–
(133.3)
82.8
–
(9.6)
232.3
40.2
2.2
–
–
–
2,210.2
602.0
328.2
40.2
–
–
–
–
355.3
2.2
(142.9)
3,180.6
3. 2021 expansions relate to costs and investments incurred in 2020 for centres which will open in 2021.
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.
2020
Movement in partner contributions (unaudited)
December 2019
2020 Partner contributions
Centre closures(5)
December 2020
2018
Expansions
2019
Expansions
2020
Expansions
2021
Expansions
Closures
531.7
194.3
–
(26.4)
505.3
16.0
(3.5)
39.4
77.1
–
206.8
116.5
–
13.7
–
13.7
–
–
–
–
5. The partner contributions for an estate are reduced by the partner contributions for centres closed during the year.
2020
EBIT reconciliation (unaudited)
EBIT
Loss on disposal of assets
Share of profit in joint ventures
Adjusting items
Operating profit
2020
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
Business disposal
Exchange differences
Closing partner contributions
– Current
– Non-current
2020
Capital expenditure (unaudited)
Maintenance capital expenditure
Growth capital expenditure
– 2020 Capital expenditure
– Properties acquired
Total capital expenditure
Reference
Pro forma statement of cash flows, p157
Pro forma income statement, p154
note 10, p125
Pro forma income statement, p154
Reference
Reference
CFO review, p46
CFO review, p46
Analysed as
– Purchase of subsidiary undertakings
– Purchase of property, plant and equipment
– Purchase of intangible assets
Pro forma statement of cash flows, p157
Pro forma statement of cash flows, p157
Pro forma statement of cash flows, p157
iwgplc.com
iwgplc.com
Total
765.4
106.8
(29.9)
842.3
£m
(90.8)
(80.4)
(2.6)
(379.5)
(533.3)
£m
640.0
105.5
534.5
2.5
121.7
14.6
107.1
(126.7)
–
(4.2)
633.3
109.1
524.2
£m
96.9
357.5
355.3
2.2
26.8
411.1
16.5
161
161
FINANCIAL STATEMENTS
FIVE-YEAR SUMMARY
Income statement (full year ended)
Revenue
Cost of sales
Expected credit losses on trade receivables
Gross profit (centre contribution)
Administration expenses
Share of (loss)/profit of equity-accounted investees, net of tax
Operating profit
Finance expense
Finance income
(Loss)/profit before tax for the year from continuing operations
Income tax (expense)/credit
(Loss)/profit for the year from continuing operations
Profit after tax for the year from discontinued operations
(Loss)/profit after tax for the year
31 Dec 2020
£m
31 Dec 2019
Restated
£m
31 Dec 2018
Restated
£m
31 Dec 2017
Restated
£m
31 Dec 2016
Restated
£m
2,480.2
2,648.9
2,398.2
2,237.8
2,127.7
(2,425.5)
(2,081.8)
(2,006.9)
(1,845.2)
(1,694.5)
(34.8)
19.9
(369.3)
(2.6)
(352.0)
(271.1)
3.0
(620.1)
(30.1)
(650.2)
3.4
(646.8)
(2.0)
565.1
(281.0)
2.7
286.8
(232.3)
0.5
55.0
22.3
77.3
373.3
450.6
(17.7)
373.6
(248.0)
(1.4)
124.2
(15.9)
0.5
108.8
(29.6)
79.2
26.5
105.7
(16.2)
376.4
(231.8)
(0.8)
143.8
(14.1)
0.3
130.0
(32.8)
97.2
16.8
114.0
(10.3)
422.9
(255.0)
(0.8)
167.1
(11.6)
0.1
155.6
(35.0)
120.6
18.2
138.8
Earnings per ordinary share (EPS):
Attributable to ordinary shareholders
Basic (p)
Diluted (p)
(67.9)
(67.9)
50.5
49.6
11.7
11.6
12.4
12.3
14.9
14.7
Weighted average number of shares outstanding (‘000s)
951,891
892,738
907,077
915,676
929,830
From continuing operations
Basic (p)
Diluted (p)
(68.3)
(68.3)
8.7
8.5
8.7
8.7
10.6
10.5
13.0
12.8
Weighted average number of shares outstanding (‘000s)
951,891
892,738
907,077
915,676
929,830
Balance sheet data (as at)
Intangible assets
Right-of-use 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
748.8
5,646.9
1,209.0
188.2
1,100.4
71.0
8,964.3
2,435.5
6,015.0
513.8
8,964.3
719.6
5,917.4
1,273.3
195.0
781.4
66.6
8,953.3
2,139.7
5,933.1
880.5
8,953.3
721.7
–
712.1
–
738.1
–
1,751.2
1,367.2
1,194.4
30.6
848.7
69.0
3,421.2
1,429.5
1,240.5
751.2
23.0
702.7
55.0
2,860.0
1,224.7
907.6
727.7
29.3
649.2
50.1
2,661.1
1,183.1
736.0
742.0
3,421.2
2,860.0
2,661.1
162
162
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
GLOSSARY
The Group reports certain alternative performance measures
(APMs) that are not required under International Financial
Reporting Standards (IFRS) which represents the generally
accepted accounting principles (GAAP) under which the
Group reports. The Group believes that the presentation of these
APMs provides useful supplemental information, when viewed
in conjunction with our IFRS financial information as follows:
– 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.
to December of the current year. Network rationalisation for
the prior year comparative is defined as a centre that ceases
operation from 1 January of the prior year to December of the
current year.
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.
NET DEBT
Operations cash and cash equivalents, adjusted for both short
and long-term borrowings and lease liabilities.
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.
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.
ADJUSTED OPERATING PROFIT
Operating profit excluding adjusting items.
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.
ADJUSTING ITEMS
Adjusting items reflects the impact of adjustments, both
incomes and costs, which are considered to be significant
in nature and/or size.
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.
EBIT
Earnings before interest and tax.
EBITDA
Earnings before interest, tax, depreciation and amortisation for
the period.
EPS
Earnings per share.
EXPANSIONS
A general term which includes new business centres
established by IWG and acquired centres in the year.
GROWTH ESTATE
Comprises centres which opened during the current or prior
financial 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.
NETWORK RATIONALISATION
Network rationalisation for the current year is defined as a
centre that ceases operation during the period from 1 January
OPEN CENTRES
All centres excluding closures.
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.
PRE-2019 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.
PRE-2019 GROSS MARGIN
Gross margin attributable to the Pre-2019 business.
PRE-IFRS 16 BASIS
IFRS accounting standards effective as at the relevant reporting
date with the exception of IFRS 16.
REVENUE DEVELOPMENT
Revenue development, on a continuing basis, for the last
four years.
REVPAW
Total revenue per available workstation (revenue/available
workstations).
REVPOW
Total revenue per occupied workstation.
ROI
Return on investment.
TSR
Total shareholder return.
WIPOS
Workstation income per square metre.
WIPOW
Workstation income per occupied workstation.
iwgplc.com
iwgplc.com
163
163
FINANCIAL 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
Barclays Bank plc
5 The North Colonnade
Canary Wharf
London E14 4BB
HSBC Bank plc
8 Canada Square
London E14 5HQ
FINANCIAL PR ADVISORS
Brunswick Group LLP
16 Lincoln’s Inn Fields
London WC2A 3ED
164
164
IWG plc Annual Report and Accounts 2020
IWG plc Annual Report and Accounts 2020
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