WeWork rival IWG has a growing debt problem

2 minute read

People use laptops in a Spaces office workspace, an IWG brand, in London, Britain, December 1, 2021. REUTERS/May James

Register now for FREE unlimited access to Reuters.com

LONDON, Aug 9 (Reuters Breakingviews) - IWG’s (IWG.L) business model is looking a little shaky. Shares in the $2 billion WeWork (WE.N) rival fell 10% on Tuesday after the loss-making business said that inflationary pressures, the war in Ukraine and lockdowns in markets like China caused operating profit to stagnate at a worse than expected negative 2.2 million pounds in the first half. That’s in spite of leasing activity and margins creeping up after the pandemic.

Debt is another challenge for the perennial takeover candidate. In the six months ending June 30, IWG’s net debt rose 6% to nearly 7.2 billion pounds, equivalent to over 5.5 times the company’s revenue. The danger for CEO and founder Mark Dixon is that stubbornly high inflation erodes some of the benefits of his cost saving programme while the cost of servicing the company’s debt continues to rise. And, as key markets like the U.S. and the UK head into a downturn, IWG’s model of offering tenants short-term contracts will be vulnerable as companies seek to cut costs. A stretched balance sheet will make it harder for Dixon to reap the promised benefits of the post-pandemic shift to hybrid working. (By Aimee Donnellan)

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own. Updates to add related links.)

Register now for FREE unlimited access to Reuters.com

Follow @Breakingviews on Twitter

Capital Calls - More concise insights on global finance:

Abrdn struggles with mediocrity read more

Activists get partial victory in Nelson Peltz feud

Amazon ignores FTC’s Khan by vacuuming up firms read more

Beyond Meat has SPAM envy read more

Tencent faces new video-game M&A challenge read more

Register now for FREE unlimited access to Reuters.com
Editing by Neil Unmack and Pranav Kiran

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.