(Alliance News) - IWG PLC on Tuesday posted a swing to loss in the first half of 2020, and it said it expects the third quarter to be "particularly challenging".
Shares in the FTSE 250-listed office space provider were trading 8.7% lower at 206.00 pence each on Tuesday morning in London. The stock has more than halved so far in 2020.
IWG said its pretax loss for the six months ended June 30 was GBP235.4 million, swinging from a profit of GBP37.1 million a year prior. This was despite revenue rising 3.1% year-on-year to GBP1.32 billion from GBP1.28 billion.
Total charges of GBP155.8 million were incurred as a result of Covid. Of that amount GBP29.1 million relates to impairments of goodwill and property, plant and equipment, provision for expected credit losses, transaction costs for deferred deals, and other one-off costs including restructuring costs, as well as a GBP126.7 million provision to provide for network rationalisation.
The company blamed the hit to its profitability on the emergence of Covid-19 which started to affect trading from March, particularly in Asia where it experienced a significant drop in new sales activity during the lockdown period. The subsequent spread of the pandemic created a very challenging trading environment in the second quarter across its European, UK and Americas markets, with sales activity sharply declining in those markets during the lockdown period.
No interim dividend was declared due to Covid-19 related uncertainty, compared to 2.15p paid last year. All future dividend payments have also been put on hold.
Looking ahead, IWG said the challenging trading environment has continued into the third quarter but reassured that it has started to see an improvement in sales activity that bodes well for the fourth quarter.
"The new world of working is changing dramatically and the long-term structural drivers for our industry are strengthening, which is very encouraging. However, whilst the Covid-19 pandemic continues, we expect our third quarter to be particularly challenging. We therefore remain sharply focused on maximising further cost savings in the coming months to build on the GBP180 million of cash savings achieved through the extensive actions already taken, said Chief Executive Mark Dixon.
"We have reviewed all aspects of our business to prepare for success in a post Covid-19 world. As we have announced today, the network rationalisation will initially impact profitability, but we believe it will greatly benefit the business going forward. Whilst 2020 will undoubtedly be a challenging year given Covid-19, we look forward to entering 2021 as a more resilient, stronger and profitable business generating increased cash-flows," he added.
Cash held as at June end was GBP362.7 million.
By Ife Taiwo; ifetaiwo@alliancenews.com
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