IWG’s business model is looking a little shaky. Shares in the $2 billion WeWork 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.
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.. 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 theRegister now for FREE unlimited access to Reuters.
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