IWG profit drops on higher costs as it invests to support growth plans
IWG posted a 7% drop in profits on higher costs as it invested in revamping some sites and closing others in order to support its expansion plans.
The serviced office space provider made a pre-tax profit of £138.7 million in 2018 compared with £149.4 million the year earlier as overheads grew 7% to £253.7 million.
Revenue, however, rose 7.8% to £2.5 billion.
Last year, IWG, formerly Regus, spent more money on marketing and invested in its staff to support growth and improve customer service as it faces increasing competition from the likes of US start-up WeWork.
The company added more than 6.8 million square feet of new space last year and 299 new locations, taking its total to 3,306.
IWG said it also incurred costs related to a flurry of interest to buy the company which were not realised.
In 2018, it received offers from private equity firms Lonestar, Starwood Capital and TDR Capital, and a joint bid from Onex Corp and Brookfield Asset Management.
Chief executive Mark Dixon said: “In markets where we have faced challenges, we have taken decisive action to bring our performance back on track with selective closures, refurbishing locations we wish to retain, adding exciting new locations to the network and investing in the customer service skills of our people.
“We are starting to see the benefits of these initiatives”.
However, Mr Dixon also warned about “global macro-economic and geo-political uncertainties in various parts of the world, which makes it sensible to develop the business with some caution”.
“We continue to invest in and develop our partnering activities which will allow us to deliver more growth with less capital intensity on our balance sheet.”