IWG executive deems significant share price decrease 'illogical'
International Workspace Group (IWG), the world's largest provider of serviced office space, experienced a 17% drop in its share price following a half-year trading update. Despite reporting a 6% increase in adjusted profits and growth in hybrid work demand, the company revised its full-year profit forecast to the lower end of its previous guidance range[1][2].
This downward revision and a slight fall in first-half revenue (from $1.87 billion to $1.85 billion) disappointed investors, triggering a sharp market reaction that CEO Mark Dixon interpreted as algorithmic or irrational selling[1][2].
IWG is committed to flexible working and transitioning to a "capital light" model — emphasizing business simplification, cashflow, and expansion via franchised and managed operations. However, this "slow-burn" growth strategy, while solid in fundamentals, did not meet some investors' expectations for faster or more aggressive profit improvement. Moreover, revenue from company-owned centers dipped slightly, lowering revenue per available room by 3%[2].
Despite these challenges, RBC analysts remain optimistic about IWG's future, rating its stock as 'outperform'. They believe IWG should benefit from better disclosure and lower capital intensity going forward[3].
Prior to 19 August, IWG's share price had risen more than 42% since the start of the year. However, today marks the largest single-day drop for IWG since the first day of lockdown in March 2020. Mark Dixon, who owns a quarter of the £1.9bn business, has stated that the share price drop was "not rational"[4].
IWG's half-year report indicates that earnings for the full year are likely to be towards the lower end of the $525m-$565m range. Despite this, the company remains committed to flexible working as the future of employment.
The "capital light" model allows IWG to open more offices more quickly and without significant cost. Almost all IWG's new openings between January and June were under the 'capital light' model. IWG is increasingly partnering with landlords to run serviced offices in their buildings, further supporting this strategic shift.
[1] Financial Times [2] City A.M. [3] RBC Capital Markets [4] The Telegraph
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