IWG plc Annual Report and Accounts 2021 ANNUAL REPORT AND ACCOUNTS 2021 ### Contents ### Strategic report ### 2021 Performance highlights Hybrid is happening 1 Revenue from continuing operations (£m) At a glance 10 Our purpose 12 ## £2,227.9m Our brands 14 Chairman’s statement 22 2,227.9 Chief Executive Officer’s review 24 2,431.9 Our strategy 31 2,594.3 Our business model 38 2,354.7 Market review 40 Key performance indicators 42 Overheads as percentage Stakeholder engagement 44 ¨ of revenue (%) Chief Financial Officer’s review 46 Introduction to ESG 52 ## 13.2% Environment 53 Task force on climate-related 58 13.2 financial disclosures 13.3 Social 60 10.7 Community engagement 62 Corporate governance 65 10.5 Risk management 66 ¨ and principal risks Adjusted EBITDA development ## £79.6m ### Governance 79.6 Board of Directors 76 Corporate governance 78 133.8 Nomination Committee report 86 428.3 Audit Committee report 90 389.9 Directors’ Remuneration report 94 Directors’ report 109 Network (locations) Directors’ statements 111 ## 3,314 ### Financial statements 3,314 Independent auditor’s report to 112 3,313 the members of IWG plc 3,388 Consolidated income statement 117 3,306 Consolidated statement 118 of comprehensive income ¨ Net growth capital investment Consolidated statement 119 of changes in equity ## £111.8m Consolidated balance sheet 120 Consolidated statement 121 111.8 of cash flows 250.9 Notes to the accounts 122 Parent company accounts 163 389.0 Pre-IFRS 16 pro forma statements 164 332.0 Segmental analysis 168 Post-tax cash return on 170 A glossary is included on page 173 which defines various alternative net investment measures used to provide useful and relevant information. Five-year summary 172 † The comparative information has been restated to reflect the impact of discontinued operations. Glossary 173 ¨ Shareholder information 175 Results presented on a pre-IFRS 16 basis (as defined in the glossary on page 174). | 2021 2021 2021 2021 2021 | | --- | | 2020 2020 2020 2020 2020 | | 2019 2019 2019 2019 2019 | | 2018 2018 2018 2018 2018 | STRATEGIC REPORT ### …and we are making it possible ## …for people ### for everyone everywhere. We’re expanding our network to bring new levels ### At IWG we’ve always recognised the of flexibility for people’s working lives. ### demand for a balanced work life, now ### the world is embracing the hybrid model. ## …for the planet ### It gives us a future where companies can ### attract and retain the best talent, where Alongside our employees, customers and partners, we’re welcoming a greener, more sustainable way ### carbon emissions will fall and where of working through an increasingly hybrid and ### people and communities will thrive digital world. ### as investment soars. ## …for better performance We’re supporting companies to adopt the hybrid model, leveraging business advantages such as increased productivity and reduced costs. With over 30 years as the leading enabler, we are in the right place at the right time with the right technology to meet this demand. ### Corporate HQ Work space Home At IWG, we are doing more than anybody else to bring people across the world the opportunity to work in a more balanced ‘hybrid’ way. Hybrid working – when employees split their time between home, a local office and a corporate HQ – is increasingly what employees are requesting. Visit our website: iwgplc.com ## Hybrid is happening… iwgplc.com 1 HYBRID IS HAPPENING ## The blended ## work approach ### Hybrid is more than just happening. It’s ### flourishing. And the multiple drivers of ### change underway are headed by an ### enormously powerful motivating factor: ### the fear among corporations across the ### world that they will lose their best ### people if they don’t provide them with ### the flexible working conditions they’re ### asking for. | | MONDAY | TUESDAY | | --- | --- | --- | | 90% | Responding to emails over | Working close to home | | | breakfast at home | at a flexspace | ### of business leaders believe ### splitting the working ### week between the home, ### HQ and a local workspace ### will help attract the (1) ### best talent 1. Source: IWG FTSE 350 Research, 2021 2 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT Recent IWG research reveals, in fact, that using a blend of the two – is benefiting every day of their most energetic and (1) | a full 90% of FTSE 100 and FTSE 250 | everybody involved in the form of | economically active members. And, | | --- | --- | --- | | business leaders believe their key talent | greater flexibility, enhanced safety, | by reducing the need for millions to | | would leave for the competition if they | better mental health and reduced | commute to work and back five times a | | didn’t have the ability to split their | burnout and disaffection. | week, it’s having a tremendous impact on | | working time between the office, home | | the single biggest contributor to many | It is also demonstrably improving and workspaces close to where they live. companies’ carbon footprint. companies’ efficiency, cost-effectiveness | The fear is well-founded, with the same | and productivity by enabling people to | At IWG, we are proud to be a global force | | --- | --- | --- | | research showing that half of all office | make and act on decisions | powering this revolution, which is freeing | | workers would resign rather than return | collaboratively, regardless of their | people to live and work in the ways that | | to the office full time. Considerably more | physical location. And it’s enabling easier | suit them best. By providing the world’s | | than half (58%) meanwhile believe the | access to the best talent, no matter | largest workspace network and leading | | pandemic has changed working practices | where it is: barriers between countries | technologies, supported by a customer- | | for the better. | and even continents are irrelevant in the | focused culture and proven strategy for | | | hybrid world. | growth, we aim to enable essential | For those companies already operating benefits every day, not just for the profits the hybrid working model, the benefits At the same moment, by freeing people and performance of the companies we extend far beyond the retention of talent. up to spend more time at or close to work with but also for our planet and all Empowering people to collaborate in home, the hybrid model is invigorating its people. the way that suits them and their local economies and enriching circumstances – remotely, face-to-face or communities that used to be stripped 1. Source: IWG FTSE 350 Research, 2021 ### WEDNESDAY THURSDAY FRIDAY Project meetings at the HQ Collaborating with colleagues Preparing presentations at home at a local flexspace followed by a lunchtime run iwgplc.com 3 HYBRID IS HAPPENING – FOR PEOPLE ## New levels of flexibility ## for people would look for another job if they were which work, home, shops, entertainment, ### Based on our unique capital- | | asked to return to the office for five days | | education and healthcare are all | | --- | --- | --- | --- | | light growth model, the rapid | | (1) | | | | a week | . More than 80% see not having | available on foot or by bicycle within the | | | to travel to work every day as a key | | average time commuters might spend | ### expansion of our global (2) benefit of hybrid working , and just one waiting on a station platform. ### workspace network is in five of respondents we spoke to in the This ideal is already supercharging local United States would be willing to economies across the world, creating ### bringing new levels of (3) commute for more than 30 minutes . opportunities for local people in former ### flexibility to millions of Close to three-quarters (72%), meanwhile, ‘dormitory’ communities that used to be told us they value the long-term ability to sucked dry of energy by the magnetic ### workers’ daily lives in more work flexibly more highly than they would pull of the city. ### than 120 countries across a 10% pay increase for returning to the We are working hard to accelerate this (1) office full time . phenomenon, not only by rapidly ### the world. The reasons for hating the commute – increasing the number of buildings we The increasingly widespread adoption by stress, expense, lost time among them have in suburban and rural locations, but businesses everywhere of the hybrid – are not hard to find. And neither are the also by opening centres in retail and working model is far more than a reasons for workers to love working at or hospitality venues to provide an array of knee-jerk reaction to the global closer to home: more time with friends facilities at our customers’ fingertips. pandemic. Already underway for much of and family, the opportunity to get more It all makes perfect sense. After all, why the 21st century, it is clear evidence that involved with the community, more should workers go to the effort and taking a ‘people first’ approach is at the scope for personal interests and projects. expense of dragging themselves into heart of many corporations’ talent- It all adds up to better mental and work to spend the day working on a attraction and retention strategies. physical wellbeing. device they brought with them and will Realistically, they have little choice in the take home again at the end of the day? But the benefits go deeper yet, bringing matter. Research we carried out during to life the ‘15-minute city’ concept, in Quite simply, they don’t have to any more. 2021 showed that half of all workers 1. Source: IWG Research, 2021 2. Source: IWG FTSE 350 Research, 2021 3. Source: IWG Hybrid Happiness Survey, 2021 1. Please add reference 4 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT | 92% | | | 87% | | | --- | --- | --- | --- | --- | | | of workers | | of workers prefer | | | would prefer to | | this way of working – | | | | commute less | | | | hybrid keeps | | Source: IWG Research, 2021 | | | | them happier | Source: PwC Remote Work Study, 2021 | 55% | | 86% | | --- | --- | --- | | of workers want | of workers feel working | | | a mixture of home | remotely reduces stress | | | and office working | Source: FlexJobs 2018 Annual Survey | | Source: Institute for Economic Policy Research iwgplc.com 5 HYBRID IS HAPPENING – FOR THE PLANET ## A more sustainable way of ## working together for the planet That alone is a massive step forward for We are increasingly reducing carbon ### The office is no longer a our planet and for the legacy we are emissions and energy usage by ### defined physical space leaving to future generations. By helping continuously upgrading the to begin the end of the daily commute, environmental performance of our ### where people have to go, in | | we are today starting to remove what the | | estate, recycling and the re-use of | | --- | --- | --- | --- | | a city centre at the end of a | American Center for Climate and Energy | | materials. And we are also well-placed | | | Solutions defines as the USA’s biggest | | to ensure businesses in our supply | | motorway or a railway line. | | (1) | | | | single source of carbon emissions | . | chain also take every action to reduce | their carbon footprint too. | Rather, it is a digital construct that people | And, by reducing the need to travel, | | | --- | --- | --- | | can enter or leave at will, using | we are helping to cut the journeys made | Our suppliers, across more than 120 | | technology to create, deliver, store, | by car that today are equivalent to an | countries and serving close to 3,500 | | retrieve and amend their work, no matter | average annual carbon footprint of | buildings, are from disparate cultures | (2) where they are. 3.2 tonnes of CO per person per year . and a very wide range of operational 2 backgrounds. IWG is what links them, As a result, we are beginning to see Companies across the world are placing great responsibility in our hands. and better understand the multiple extremely familiar with the issues We strive to live up to this, assessing environmental benefits of our involved, placing ESG concerns at the their performance and giving them the increasingly hybrid and digital ways of heart of the boardroom conversations examples and guidance they need to working, where the long daily commute as they increasingly prioritise and help them conform with environmental is becoming an anachronistic legacy of accelerate their progress to net zero. best practice. a world that no longer exists. 1. Source: Center for Climate and Energy Solutions: 2021 2. Source: IWG White Paper, 2021, Hybrid World: Sustainable World 6 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT | | 73% | | | 77% | | --- | --- | --- | --- | --- | | of employees would | | | potential reduction | | | like the work place | | | in net emissions with | | | | | to improve | home or local working | | | sustainability efforts | | | | Source: IWG White Paper, 2021, | Hybrid World: Sustainable World Source: HR News: 2019 | | | 6 | 15 mins | | | | --- | --- | --- | --- | --- | --- | | UN Sustainable Development | | | | | the rise of the | | | Goals are supported by | | | 15 minute commute | | ### the hybrid model iwgplc.com 7 HYBRID IS HAPPENING – FOR BETTER PERFORMANCE ## Improved productivity and ## reduced costs for better ## performance important. In fact, as disparate teams Above all, our hybrid working model ### Companies across the world | | became the norm for many in the early | defuses one of the greatest concerns | | --- | --- | --- | | are coming to recognise that | days of the pandemic, there were major | for the leaders of FTSE 100 and 250 | | | concerns about the impact of remote | businesses: our research shows that a full | ### the hybrid working model, working on efficiency and productivity. 90% of this group fears losing essential ### using IWG as a partner, is not These quickly proved to be baseless. talent to their competitors if they do not (2) Thanks to the significant cost savings offer flexible-working options . Working ### only good for their people associated with a smaller real estate with IWG can defuse this risk at a stroke. footprint, along with other factors ### and the planet – it’s also When it comes to workforce dynamics, including boosted productivity, however, giving the best workers no ### a positive force for companies using the hybrid model are reason to leave is only one advantage today saving an average of US$11,000 ### operational efficiency of adopting the hybrid model. Doing so (1) every year on every employee . also opens up a planet-wide pool of ### and the bottom line. Today, companies can work with us talent, meaning any business with the to devise and deliver the real estate right offer can employ the very best Naturally, advantages include the strategies that best serve their needs, people, regardless of where they are flexibility to increase or reduce their from space on demand to cope with based. Whether they are in another workspace spend as the changing peaks in activity, to hub-and-spoke country or another continent is entirely requirements of the business dictate. solutions for countries and entire irrelevant. In fact, when 24/7 service is In addition, the need for less city-centre regions. And they can leverage the essential, having a dispersed team that space for many will also cut their power of our continuous investments can take advantage of different time exposure to high rents and in research and development, to benefit zones is a major asset. associated property costs. from our wide-ranging tech solutions For many, these pure finance-related that make operating a disparate, gains and the greater operational flexible workforce seamless, flexibility they can achieve are equally efficient and effective. 1. Source: Global Workplace Analytics 2. Source: IWG FTSE 350 Research, 2021 8 IWG plc Annual Report and Accounts 2021 Design / images – TBC STRATEGIC REPORT | 63% | | 50% | | --- | --- | --- | | of high growth | of workers would quit if | | | companies work | forced to return to the | | | the hybrid way | office five days a week | | | Source: Accenture Future | | Source: IWG Research, 2021 | of Work Study, 2021 ## 50% Happier ### on savings – ### employees ### significant cost ### are more productive ### efficiencies Source: Global Workplace Analytics iwgplc.com 9 AT A GLANCE ## Delivering a great day at work – Global market leader in the fast- – A proven, profitable business with ### As the global workforce is growing hybrid working sector the industry’s most cost-efficient ### increasingly freed from the and scalable business model – The world’s largest network of flexible workspaces – Best-in-class global technology and ### limitations of a fixed – IWG is the global leader with four infrastructure platform ### physical office, IWG is times the number of locations – Partnering for capital-light expansion compared to the nearest competitor ### helping to create a better – 20 brands covering every segment ### future for employees and of the market ### employers across the planet. ### Our strategic pillars | Network | See pages 32-33 | | --- | --- | | Franchise partnerships | See pages 34-35 | | Platform (technology) | See pages 36-37 | ### Supported by a diverse portfolio of brands ## 8m+ people use IWG’s network & associated services ## 3,314 locations* (* at 31 December 2021) See pages 14-21 for more information on all of our brands 10 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ## for everybody, everywhere IWG worldwide coverage 201+ locations See pages 32-33 101–200 locations See pages 34-35 51–100 locations See pages 36-37 11–50 locations 1–10 locations ## 1,135 120+ 146 towns & cities* countries new openings in 2021 (* at 31 December 2021) | 4.1m | | 10,000+ | | | 20 | | --- | --- | --- | --- | --- | --- | | | total square ft | | | employees, supporting | different | | | added in 2021 | | customers: at home, in local | | brands | offices and corporate HQs iwgplc.com 11 OUR PURPOSE ### Our purpose ### Our business model ## Our purpose, ## culture and values ### Our strategy As we understand and harness the ### We all deserve a great day at major forces bringing about radical ### work. For us, this means not change in how people want to shape their working lives, these values are ### just working productively, central to our role at the forefront of ### but also leading better- the hybrid working revolution. Already driven by powerful megatrends such ### balanced lives: greener, as growing environmental awareness, societal pressures and technological ### with more time for friends, advancement, change to the way we ### family and community. work has been radically accelerated by the COVID-19 pandemic over the ### Our ability to deliver against this purpose Our people and last two years. ### is empowered by our uniquely diverse, culture As a result, the shift towards hybrid truly global culture, which is the result of working fast gained traction among working in more than 120 countries greatly increased numbers of businesses across the world. We recognise the across the planet. Only we have the critical importance of the value that this global coverage and service portfolio diverse and passionate global workforce to respond to this level of demand. brings to our business. And, with our unique capital-light Our people are therefore at the heart expansion model, we alone have the of our culture, which is based on our ### capability to grow our offering in Governance and pioneering spirit, mutual empowerment, the suburbs, towns and even rural ### risk management shared leadership, unified global communities where people wish network and commitment to placing the to live and work. customer at the heart of our thinking. At IWG, these essential properties are united by our trust in one another and driven by the shared values of diversity, flexibility and balance. 12 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ## Our value creation framework ### The unique way in which we are structured, our highly efficient platform, ### our global reach, brands, service portfolio, technologies and outstanding ### people enable us to meet the needs of all stakeholders: customers, ### partners, employees, communities and shareholders. ### We help millions of people to be more productive every day, ### supporting them to lead more balanced and rewarding lives. For more than three decades, we have successfully developed and refined our business model to deliver excellent customer value and strong financial returns. Today, with our unmatched scale, multi-brand approach and highly efficient platform that delivers everything our partners and customers need, we are uniquely placed to meet the accelerating global demand for hybrid working solutions. See pages 38-39 Network Franchise partnerships Platform (technology) Our three strategic priorities enable sustainable growth to achieve our purpose. See pages 31-37 We recognise the critical importance of the value our diverse and passionate global workforce brings to our business. Our people are at the heart of our culture, which is based on our pioneering spirit, mutual empowerment, shared leadership and unified global network and is united by trust in one another. See pages 60-64 Our operating model is underpinned and supported by strong and robust governance and a rigorous risk management model that ensures our business is always managed prudently, with all risks understood and appropriately assessed. See pages 65-75 iwgplc.com 13 OUR BRANDS ## Creating value through ## our brands Our products are simple to use, with a ### At IWG, we believe that full suite of business support services ### business success is that enable people to focus on their core ## 20 business and enjoy a great day at work. ### underpinned by the IWG covers a wider breadth of sectors brands ### effectiveness and happiness and locations than any competitor, offering unparalleled choice to ### of people. So, we’ve made it customers through our unique portfolio ### our mission to help millions of global operating brands, including Regus, Spaces, HQ and Signature. Our ### of people have a great day at ## diverse operational portfolio provides 3,314 ### work – every day. Here, we businesses with a variation of design, locations fit-out, location, building and customer ### describe the brands that base, enabling them to choose a style which meets their unique needs. For ### help to make this possible. individuals, IWG offers the ability to | IWG provides a world-leading | work in practically every country, town, | | | --- | --- | --- | | commercial real estate platform, drawing | city and transport hub in the world. | | | | Enterprise clients can opt for a presence | 8m+ | on our 33 year track record of delivering the best flexible real estate solutions for wherever they need to be, choosing an users businesses worldwide. IWG’s hybrid operating brand that closely matches the workspace options reduce the risk for needs of their organisation and the our customers, with zero balance-sheet people working within it. impact and solutions designed with people’s productivity in mind. 14 IWG plc Annual Report and Accounts 2021 THE OFFICE OPERATORS STRATEGIC REPORT ### WORK YOUR WAY Regus was founded in 1989 and is the world’s largest provider of flexible workspace solutions. Regus helps businesses find and create the right workplace for their people, offering choice, flexibility, community, custom workspaces and consistently professional locations all over the world. iwgplc.com 15 OUR BRANDS CONTINUED ### A unique entrepreneurial spirit Spaces was founded in 2006 in Amsterdam. It creates an environment where people have freedom to do their jobs however they want to do them. Each Spaces is designed to offer a professional and inspirational working environment full of timeless design classics, inspiring art and accessories combined with a strong community programme of partnerships, professional events and hospitality services. 16 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Where real work gets done HQ provides efficient, functional space, offering practical places with all the essentials businesses need, set up and ready-to-go. HQ appeals to businesses of all shapes and sizes, from large corporates to individual freelancers – everyone is welcome. iwgplc.com 17 OUR BRANDS CONTINUED ### Your key to the world’s ultimate ### business locations Signature represents an exclusive selection of landmark buildings in the most sought-after locations in the world. Signature provides a premium working environment, with custom designs reflecting the quality and nature of the building. It provides businesses with ultimate prestige, offering an exclusive address and place to work that truly enhances their reputation. 18 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Our domestic office and ### coworking brands In addition to our global brands, we also operate domestic office and coworking Basepoint Business Centres brands, providing a unique service in comprises a network of locations across England and Wales, key markets around the world. providing multifunctional workspace to start-ups and SMEs. In addition to office space, virtual offices and meeting rooms, Basepoint offers practical business units which are ideally suited as studio or workshop space. Stop & Work is a flexible working The Office Operators is based in The Clubhouse is a leading brand operating in France. the Netherlands and Belgium, business club in London, providing Throughout its locations, it specialising in flexible office space, offices, lounge and meeting space. provides a drop-in service and reception services and conference Designed to meet the requirements professional environment for products. As an organisation, it of growing businesses, The telecommuters to use open-plan aims to unburden its customers as Clubhouse provides a luxurious, or private workspaces and meeting much as possible in all facility professional space where rooms. Customers can access the and operational matters. customers can meet and work locations by the hour, day or in an inspiring and productive longer as required. environment. | More than just a desk, BizDojo | This flexible workspace brand has | No18 is a blend of curated | | --- | --- | --- | | is a coworking and collaboration | locations exclusively in Japan and | business club environments | | network operating in New Zealand. | South Korea. OpenOffice provides | in the best locations, with | | It is passionate about supporting | office space, virtual offices and | first-class service and expansive | | its diverse community with an | meeting rooms in a productive, | member benefits. It’s a | | active and collaborative culture | self-service office environment. | workplace where people | | of events, projects, programmes | | do business and socialise, | | and networking. | | moving from premium | offices to restaurants and collaborative workspaces. Central Working provides flexible The Wing is a community of Copernico provides smart working and scalable spaces, fully tailored professionals, entrepreneurs and environments across Italy. Set out to match customer needs. More leaders from across the globe, who to change the way work is done, than just an office space, it find sanctuary and productivity in it has created an ecosystem that helps advance business by our beautiful work and community accommodates businesses of any providing access to training, spaces designed for women, size with solutions ranging from networking events and a meaningful connections through coworking to office lounges. It also supportive community. our networking opportunities, provides users with events, career growth through our job workshops and informal meetings, platform and perhaps most fostering new knowledge and importantly, support and local excellence. camaraderie through sharing strategies and resources. iwgplc.com 19 THE OFFICE OPERATORS OUR BRANDS CONTINUED ### Our digital businesses IWG also operates several digital businesses, making it easy for our customers to find and book workspace online. ### Your app containing every hybrid ### work solution Worka brings together every type of IWG workspace in one easy-to-use app. Users are able to search and compare thousands of global locations and instantly book office space, coworking and meeting rooms. With the possibility to see real-time availability, Worka is the ideal choice for hybrid workers all around the world. 20 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT EasyOffices is an online broker that HomeToWork improves the makes it easier for people to find great homeworking experience by providing places to work. It provides a powerful everything needed to stay connected online search and comparison tool and productive and enjoy working from to help people find their perfect home. Our leading homeworker workspace. Customers can also contact platform provides access to useful daily the team directly for impartial advice content, a carefully curated programme and support. of events and resources, and valuable benefits from industry-leading companies. HomeToWork provides an immersive experience which enables members to make home a great place to work. Rovva is an online toolkit which Meetingo is a digital platform that provides a range of products and offers everything customers need for services to help people take their a successful meeting, all in one place. businesses further – whether they’re With thousands of meeting rooms to just getting started, trying to improve choose from, Meetingo provides the efficiency or exploring new markets. right space, in the right place and at the From virtual offices to telephone right price. There’s a location for every answering, Rovva makes it easy need, from team trainings to five-star for people to do better business. board meetings, from city centres to business parks. Customers can compare features, locations, pricing and style of meeting rooms, and can book and pay in moments. ### Our managed conventional ### office space Whether it’s a new workspace brief or an adaptation to an existing office, IWG’s Managed Office Solutions (MOS) can provide customised workspaces designed to match any client’s unique requirements. MOS can provide additional revenue opportunities for businesses’ surplus space with the flexibility to re-occupy that space in the future. iwgplc.com 21 CHAIRMAN’S STATEMENT ## Strong finish despite ## the challenges ### The last year has proven ### beyond all doubt that people ### around the world wish to work ### flexibly. With the widespread ### and accelerating adoption of ### hybrid working, the structural ### growth opportunity is clearly ### defining the runway that lies ### ahead of us. IWG is a business ### in the right place at the ### right time. In last year’s Annual Report, I wrote about how a year that started with enormous promise rapidly became one of the most difficult and challenging in IWG’s history. This year, our experience was the virtual opposite. 2021 was a year that started with a pandemic induced decline in demand across our global footprint as governments imposed unprecedented curbs on travel and work practices, yet ended with a significant uplift to our business as more and more companies across the world took action to gain the benefits inherent in the hybrid working model. The Delta and Omicron variants introduced new challenges during the year, but with focused sales efforts and building on the benefits of our efforts to reduce operating costs, we have now delivered a meaningful transition to revenue and EBITDA growth during the second half of the year. As a result, we ended 2021 with a sustained uplift to our business, including the strongest period for sales in our history. This positive development shows every sign of continuing as we support our customers’ safe return to the office. Our improving financial results provide a powerful springboard for accelerating our growth strategy in 2022. ### ESG journey As described further in this report, we are committed to our ESG journey and during 2021 we continued to deliver Douglas Sutherland against the objectives we have identified Chairman across our Environmental, Social and Governance pillars. We are proud to be 22 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT | a global organisation that is doing so | real estate efficiently and sustainably. | conducted during the year have been | | --- | --- | --- | | much to promote and enable the uptake | We are developing new ways of working | incorporated into our plans and we | | of the hybrid working model, which is at | with our partners to maximise and share | continue to have full confidence in | | the forefront of efforts to reduce the | the opportunities being created by the | the Board members and processes. | | global impact of the daily commute. | shift to hybrid working. For our | Succession planning at Board level | | The transition to hybrid working not only | shareholders, we are working to realise | will remain a key focus area for 2022. | | allows corporations to more efficiently | the full potential of their investment | | We are committed to increasing the provide office space, reducing their through improving our operating results ethnic diversity of the board and are overall property footprint by up to and the implementation of our strategy. pleased to announce that Tarun Lal will 50%, it also enables workers to As previously announced, we conducted be joining the Board as a Non-Executive eliminate the commute, reducing both a strategic review to address and capture Director with effect from 10 May 2022, the environmental impact and personal the opportunities being created by the subject to applicable law including time loss associated with travel. | | rapid shift to hybrid working. We believe | shareholder approval at the Company’s | | --- | --- | --- | | I would like to highlight here the progress | the value of our industry-leading digital | upcoming annual general meeting. Tarun | | we are making on our commitment to | and technology assets, services, and | will bring extensive franchising expertise | | achieving net-zero emissions. We are | network of physical locations will be | to the Board from his over 20 years of | | working hard on multiple fronts to reduce | better recognised through their being | experience with Yum! Restaurants where | | our own carbon footprint through | separately organised for focused | he has held executive roles including | | initiatives to switch to renewable energy | management and development. In this | Global Chief Operating Officer KFC and | | sources and reduce energy consumption. | regard, we are pleased to announce the | his current role as Managing Director, | | Colleague-led initiatives are underway | transfer of certain of our digital assets | Middle East, Turkey, Africa and India. | | across the business to reduce waste and | into a business to be merged with and | | | promote recycling. After the benefits | operated by The Instant Group to create | Looking ahead | | from our efforts to continuously reduce | the world’s leading fully integrated | The case for hybrid has been accelerated | | our carbon footprint, we will be investing | independent workspace platform. | to the forefront of employer and employee | | in carbon offset projects to eliminate the | | thinking across the world by the pandemic. | | remaining net effect of IWG’s operating | Our people | As hybrid working becomes the operational | | activities. As a result of these collective | | model for many organisations, we are | For our people, we aim to provide every efforts, we are bringing forward our confident about the continuing structural opportunity to build a great career with us, objective to achieve being carbon growth drivers at play in our industry. developing their talent and capabilities in neutral during 2023. For many businesses embracing these a diverse and inclusive environment and representing IWG as a progressive force in changes, IWG is the automatic first port ### Strategic review the countries where we operate. I would of call due to the advantages offered by Companies are being driven by the need like to take this opportunity to extend my the geographic coverage of our network, to reduce their real estate costs and personal thanks to everybody who has our differentiated technology platform carbon footprint while attracting and been responsible for IWG’s outstanding and the experience of our people. retaining talent. Employees want the achievements during the year. I would We are all watching with great concern choice to work in a metropolitan especially like to thank all those team the increasing geopolitical uncertainties headquarters, at home, or to collaborate members at every level who have and devastating humanitarian crises with colleagues in a suburban location continued to represent the Company so arising from the conflict in Ukraine, closer to their home. We had begun brilliantly in all our markets across the where our thoughts are with those planning for this shift at IWG well before world. Despite the many challenges they directly impacted, including our own the pandemic and, with the continued have faced during the pandemic, they colleagues and customers. development of our capital-light have shown great resolve to continuing to expansion model through franchising IWG has strong momentum as we prepare provide great service to our customers to and management agreements, are to address the challenges and capture maintain the IWG difference and our well placed to take the next major the opportunities in 2022 and beyond. position at the forefront of one of the steps forward in our growth story. Our ability to address new challenges world’s most exciting business sectors. has been demonstrated repeatedly We understand our success depends during the pandemic. We look forward to ### Our Board on executing against a strategy the opportunity to further strengthen both which provides value for all of our I am immensely grateful to my Board our lead and role as a facilitator of positive stakeholders, including customers, colleagues for their continued change and improvement for employers partners, employees and communities, dedication to fulfilling the IWG vision and employees as we deliver on our as well as shareholders. For our and the outstanding quality of advice mission to provide a great day at work. customers we are committed to ensuring that they have brought to the business that our products and services continue during another very active year. The Douglas Sutherland to empower them to attract and retain recommendations of the external Chairman the best talent and manage their evaluation of Board performance 8 March 2022 iwgplc.com 23 CHIEF EXECUTIVE OFFICER’S REVIEW ## Right business, right place, ## right time ### As more people around the ### world want to work flexibly, ### IWG is a business in the right ### place at the right time. The rapid global rise in the adoption of the hybrid working model, where companies use technology to give their employees effective remote access and home working, in combination with easy-to-access local centres and traditional head-office sites, is here to stay. These structural changes in the way that people across the world work are driving an irreversible change in the office market. As a result, opportunities to grow our business are accelerating strongly. The global pandemic presented IWG with many challenges throughout 2020 and the first half of 2021. However, these proved to be short-term issues, and during the second half of 2021 we made a rapid return to business growth, which is continuing strongly into 2022. Today, we are enhancing our strategy to enable us to deliver against our full potential by leveraging our global leadership position in two key areas. The first of these is our focus on growing our network through the increasing use of capital-light expansion methods such as franchising, management agreements and partnering deals. The second is our parallel focus on developing and deploying our digital assets to create an improved customer experience and build strong long-term growth with recurring revenues. As we enter 2022, our focus is sharper than ever. Our goals are clear. I believe that with 3,314 centres, we are operating at only a fraction of our underlying potential of 30,000 centres. I also believe that the optimal proportion of IWG-owned centres in the future will be at 10% at most. Today, conventional leases represent approximately 65% of our global portfolio, we expect to end the year with franchises, partnerships and management agreements reaching close to 50%. During 2021, we entered into many Mark Dixon attractive new franchising and Chief Executive Officer management agreements. These 24 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT Included the sale of existing units to franchise partners, as well as entering new relationships with new partners on new properties. These actions significantly improved the quality and diversity of our global portfolio and are designed to accelerate our activities in this area throughout 2022 and the years ahead as we drive IWG towards achieving its full potential. ### Our business performance in 2021 Throughout 2021, a period once again dominated by the global impact of the COVID-19 pandemic, we have shown that we are well-positioned to meet the needs of individuals and organisations who wish to change the way they work. This was a year of two halves that culminated in a period of significant positive change. In a matter of a few months, we moved from one of the most challenging moments in our Company's history at the beginning of 2021 when we experienced the highest concentration of lockdowns, which contributed to the losses reported for the year ended 31 December 2021, to the point where sales growth is now ahead of pre-pandemic levels. In fact, we experienced the best-selling months in our more than 30-year history in the year's fourth quarter. Our global membership continues to grow and over the year we added 2 million new network users. This was complemented with a major inflection in profitability ![img-0.jpeg](img-0.jpeg) and a cash positive performance that gathered strength as the year went on. We delivered our first franchise deals in new countries such as the USA, India, Malaysia, Poland, Brazil, Spain and Scotland. We have good momentum in the pipeline providing a positive outlook. We also continued to invest in capital-light network growth during 2021, adding 146 new centres to our global network at a cost of £142.5m (£111.8m on a pre-IFRS 16 basis). We used an approach based on our franchise and management-agreement model for 80 of these new centre openings. This accelerating growth in our franchise footprint is highly significant. Scale is essential for us to offer the convenience that employers and employees everywhere are looking for, and the fast-increasing coverage provided by our global network is a key competitive advantage. Working with new and existing franchise partners will therefore continue to be at the heart of our growth. Expansion through partnership rather than investment delivers the capital-light growth that we and our shareholders are looking for, enabling us to invest in the brands, technologies and people that are our true differentiators. It also empowers us to add higher-quality centres to our network, with the full engagement of owners who retain a powerful interest in making our franchise partnerships, management agreements and partnership deals work. As a result of this expansion in 2021, we have significantly improved the quality of our portfolio overall and will continue to do so throughout 2022 and beyond as we grow our global network. In addition, to underscore the relevance of our network to new and existing users across the world, we have progressively rebased our portfolio to deliver more choice and supply to commuter towns and rural areas. In this way, we continue to bring the workplace closer to home, helping to reduce the need for commuting and all the environmental and wellbeing challenges it brings. Recognising that it is essential for us to offer customers brands that cater to everybody's working style, we also further developed our market leadership in this area during 2021 (see page 14 for details of our full brand portfolio). The new brands in our portfolio include The Wing in the US and the Italian-based Copernico, both of which have ambitious expansion plans. The Wing, for example, is a female-focused co-working business and its acquisition gives us an exciting opportunity to expand its offer to women during a time of growing demand for alternative work environments. We also launched a new retail-based office-space concept, 'OpenDesks' with a more open plan environment. In addition, we continued to invest in industry-leading technology and focused on ensuring that our people have the opportunity to fulfil their talent with us. Ultimately, IWG creates value by enabling our customers to operate more cost-effectively and efficiently. We also maximise our own success by ensuring we have the skills and resources needed at every level to minimise the unnecessary use of resources, both physical and in terms of time and effort. Our unique technology platform has evolved over many years to ensure our customers have access to some of the world's most innovative and effective tools to streamline and simplify the working day. We made significant investments in our platform during the year, recording a total IT spend of £50m. Innovations we introduced during the year include solutions supporting very large enterprise customers with tens of thousands of employees in multiple locations, to apps that help the smallest SMEs comply with local legislation. We have also continued to develop our solutions supporting hybrid working, cloud telephony and cloud printing around the world. We have invested to further support home working through our virtual products including HomeToWork, our leading platform providing access to useful daily content, a carefully curated programme of events and resources, and valuable benefits from industry-leading companies. HomeToWork enables members to make home a great place to work. We also invested in our own systems and processes, including new enterprise ERP systems, leadership succession, and redesigned processes for forecasting and business review. heg4c.com 23 CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED ### In addition, we took the opportunity Our financial performance During 2021, we saw a significant to improve efficiency by reducing our recovery in the profitability of our ### in 2021 discretionary expenditure, with a existing company-owned assets. My greatest thanks go to all our notable reduction in our overheads Encouragingly, we are witnessing this team members, who were the while investing in technology, brand strength of performance in multiple driving force behind our success in and growth. markets across the world, driven in part achieving excellent results in very by the strong performance of our new Success on this scale is very exciting, difficult circumstances. centres which have improved the overall and it continues to fuel our ambition The first half of 2021 was challenging, quality of our estate. to create the global coverage that † with a revenue decline of 15.3% at will enable people to work anywhere To take maximum advantage, we constant currency and a significant and everywhere, no matter where amended our financing facilities in early impact on our EBITDA and cashflow. they are located. 2022, further securing our liquidity and However, this gave way to a strong strengthening our borrowing capacity for As a result, as we enter 2022, the second half, with a return to trading the medium term. company is clearly very well positioned profit, reduced overheads and clear for the future. Our network coverage is Overall, these achievements and trends visibility into 2022. We saw an increase already four times the size of our nearest are delivering tangible evidence that we in sales in every quarter from March competitor’s, and now we are on a have entered 2022 as a much stronger onwards, with progressive increases in powerful trajectory of business wins, business than we entered 2021. occupancy and price, giving excellent new partnerships and capital-light momentum for further improvement in network expansion. the year ahead. With the improvement in occupancy and price, a recovery in service revenues has followed, with further improvement expected in 2022. ### Group income statement | | | | | | | | | | | | | | % Change | % Change | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | (constant | (actual | | | | 2021 | IFRS 16 | | 2021 | | 2020 | † | IFRS 16 | | 2020 | † | currency) | currency) | | £m | (As reported) | | Impact | (Pre-IFRS 16) | | (Pre-IFRS 16) | | | Impact | (As reported) | | (Pre-IFRS 16) | | (Pre-IFRS 16) | Revenue 2,227.9 – 2,227.9 2,431.9 – 2,431.9 (4.7)% (8.4)% Gross profit/(loss) centre contribution 242.6 161.3 81.3 (173.7) 193.8 20.1 Overheads (327.8) (0.7) (327.1) (379.2) 11.7 (367.5) (11)% (14)% (1) Operating loss (87.4) 160.6 (248.0) (555.5) 205.5 (350.0) (1) Operating (loss)/profit before adjusting items (56.0) 170.9 (226.9) (176.0) 215.8 39.8 Loss before tax from continuing operations (259.4) (6.3) (253.1) (566.3) (47.0) (613.3) Taxation (10.3) 2.1 (12.4) (43.0) 11.0 (32.0) Effective tax rate (4.0)% (4.9)% (7.6)% (5.2)% Loss after tax from continuing operations (269.7) (4.2) (265.5) (609.3) (36.0) (645.3) (1) Adjusted EBITDA 1,057.7 79.6 133.8 1,233.9 (39)% (41)% 1. Including joint ventures ### Revenue and gross margin by maturity Revenue Gross margin % (Pre-IFRS 16) | | | % Change | % Change | | | | | --- | --- | --- | --- | --- | --- | --- | | | | (constant | (actual | | 2021 | | | Continuing 2021 2020 | † | currency) | currency) 2021 | Adjusted 2020 | | † | 2018 Aggregation 1,808.6 2,002.6 (6.0)% (9.7)% 8.5% 9.9% 6.2% New 19 219.4 207.5 9.5% 5.7% 13.4% (7.0)% (54.0)% Pre-2020 2,028.0 2,210.1 (4.6)% (8.2)% 9.0% 8.1% 0.5% New 2020 120.4 44.2 179.6% 172.4% (6.0)% (20.8)% (176.0)% New 2021 31.7 – – – – – – Open centre revenue 2,180.1 2,254.3 0.6% (3.3)% 6.7% 5.2% (3.0)% Closures 47.8 177.6 (72.2)% (73.1)% (133.9)% (92.7)% (60.3)% Group 2,227.9 2,431.9 (4.7)% (8.4)% 3.6% 3.1% (7.1)% 26 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ## Open centre revenue performance by region On a regional basis, open centre revenue performance can be analysed as follows: | £m | FY 2021 | FY 2020 | % Change (constant currency) | % Change (actual currency) | | --- | --- | --- | --- | --- | | Americas | **911.1** | 1,005.3 | (3.7)% | (9.3)% | | EMEA | **692.3** | 662.3 | 8.0% | 4.5% | | Asia Pacific | **228.4** | 228.4 | 2.2% | (0.1)% | | UK | **342.4** | 352.7 | (2.1)% | (2.1)% | | Other | **5.9** | 5.6 | — | — | | **Total** | **2,180.1** | 2,254.3 | 0.6% | (3.3)% | ## Americas The Americas, our largest region, was significantly impacted by the pandemic reaching its trough occupancy in February 2021 and has recovered strongly since then. The recovery in performance is mainly being driven by the US and the business in Canada also showed good recovery momentum in the second half of the year. | £m | FY 2021 | FY 2020 | % Change (constant currency) | % Change (actual currency) | | --- | --- | --- | --- | --- | | Total revenue | **923.6** | 1,066.5 | (8.0)% | (13.4)% | | Open centre revenue | **911.1** | 1,005.3 | (3.7)% | (9.3)% | | Pre-2020 revenue | **866.1** | 994.3 | (7.4)% | (12.9)% | | *Pre-2020 occupancy – Square feet* | **70.9%** | 73.9% | — | (300) bps | | Number of centres | **1,257** | 1,271 | — | — | Major Central Business Districts (CBDs) were challenged most in early 2021 but recovered well in the second half of the year which bodies well for a continuing trend in 2022. Regional districts achieved a higher level of occupancy and customer activity in the centres. In line with increasing occupancies, promotions were removed, and discounts tightened which will result in improved pricing in 2022. Sales in the Americas continued its positive trend into 2022. According to IWG research, 6 in 10 Americans want to work in the hybrid model and since the onset of the pandemic only 1 in 5 are now willing to commute for more than 30 minutes. Revenue from open centres declined 3.7% at constant currency to £911.1m. In the fourth quarter open centre revenue grew strongly by 25.0% at constant currency. It was a similar positive trend in Q4 in the pre-2020 estate with revenue growth of 18.4% at constant currency, while full year revenue decreased 7.4% at constant currency to £866.1m. Average occupancy for the region in the pre-2020 business was 70.9% (FY 2020: 73.9%), with strong occupancy recovery in the second half. Pre-2020 occupancy reached 74.7% in Q4 2021, being 555 bps higher compared to Q4 2020. Meeting room and day office revenues in the Americas improved strongly throughout the second half of 2021. The recovery of occupancy in LATAM improved in the fourth quarter with strong occupancy improvements in markets like Brazil, Peru and Chile. There were 25 new locations added in the region in 2021 and 39 locations were rationalised. After these movements, the total number of locations in the region was 1,257 at 31 December 2021. ## EMEA Our EMEA business has seen a clear turnaround in performance since February 2021, with turnover and occupancy improving strongly, especially in the second half of the year. The momentum of occupancy recovery improved in the second half of the year in all EMEA countries. Similarly, increased customer activity in centres led to improved ancillary service revenues with the fourth quarter being the strongest of the year. Open centre revenue increased by 8.0% at constant currency, with strong year-on-year growth of 25.6% in Q4. Pre-2020 revenue improved by 0.4%, while occupancy increased to 72.1% (FY 2020: 71.5%). Pre-2020 occupancy reached 76.8% in Q4 2021, being 775 bps higher compared to Q4 2020. | £m | FY 2021 | FY 2020 | % Change (constant currency) | % Change (actual currency) | | --- | --- | --- | --- | --- | | Total revenue | **707.1** | 715.1 | 2.2% | (1.1)% | | Open centre revenue | **692.3** | 662.3 | 8.0% | 4.5% | | Pre-2020 revenue | **624.6** | 642.2 | 0.4% | (2.7)% | | *Pre-2020 occupancy – Square feet* | **72.1%** | 72.5% | — | 56 bps | | Number of centres | **1,128** | 1,093 | — | — | hegplc.com 17 CHIEF EXECUTIVE OFFICER'S REVIEW CONTINUED COVID-19 restrictions in EMEA have been diverse across countries with respective impacts on our business, but the recovery in the second half of the year was across all markets. Our major markets like France, Germany, Italy and Spain all gained momentum in the recovery of occupancy in the second half of the year. Occupancy recovery was also strong in smaller countries, especially in markets like Ireland, Luxembourg, Norway and Portugal. Growth of our network in EMEA is progressively accelerating with the benefit of new franchise locations, management agreements and acquisitions. A total of 84 new locations were added across this region in 2021. After these additions and the rationalisation of 49 locations, the total locations in the region were 1,128 at 31 December 2021. ### Asia Pacific The impact of COVID-19 on our business in Asia Pacific was quite diverse. Revenue from all open centres increased 2.2% at constant currency to £228.4m. Revenue growth improved throughout the second half of the year. Pre-2020 revenue was down 2.2% to £214.5m (FY 2020: £223.9m) and pre-2020 occupancy decreased to 67.3% (FY 2020: 69.5%). Q4 occupancy was at 67.8%, up 144 bps compared to Q4 2020. | £m | FY 2021 | FY 2020 | % Change (constant currency) | % Change (actual currency) | | --- | --- | --- | --- | --- | | Total revenue | **237.1** | 255.9 | (5.4)% | (7.4)% | | Open centre revenue | **228.4** | 228.4 | 2.2% | (0.1)% | | Pre-2020 revenue | **214.5** | 223.9 | (2.2)% | (4.3)% | | Pre-2020 occupancy – Square feet | **67.3%** | 69.5% | – | (222) bps | | Number of centres | **644** | 645 | – | – | Trading in the second half of the year improved in major countries like Australia, China, Hong Kong, India, Singapore and Pakistan. In other markets the business environment remained challenging with recoveries anticipated in 2022. A total of 32 new locations were added and 33 were rationalised in the region in 2021. We are seeing a clear acceleration in variable rent and management agreement deals in the region. At 31 December 2021 we had a total of 644 centres in the region. Good progress is being made on franchising in the region. During the year we entered into a 50:50 joint venture with Hysan Development Company Limited to operate a flexible workspace business across Hong Kong, Macau and Guangdong ("the Greater Bay Area" ("GBA")). ### UK Lockdown restrictions had a significant impact on the UK business, with lower demand throughout the CBD of London. Outside of London our business has been more robust. Since the announcement of easing restrictions in March 2021, demand for more distributed working has further increased sales in many of the satellite towns and cities outside of London, and since summer, also in CBD of London. As a result, pre-2020 occupancy improved from March to exit the year at 70.8%. Pre-2020 occupancy for the period averaged 69.2% (FY 2020: 72.6%). Enquiries are good and sales conversion is improving. Lower discounting and the removal of COVID-19 promotions is helping pricing on new sales. Retention is improving and is now at its highest level since the start of the pandemic. Renewal pricing is also strengthening. Meeting room demand came back strongly in June and revenue from other services is recovering with footfall improvement. | £m | FY 2021 | FY 2020 | % Change (actual currency) | | --- | --- | --- | --- | | Total revenue | **354.2** | 388.8 | (8.9)% | | Open centre revenue | **342.4** | 352.7 | (2.1)% | | Pre-2020 revenue | **316.9** | 344.1 | (7.9)% | | Pre-2020 occupancy – Square feet | **69.2%** | 72.6% | (336) bps | | Number of centres | **285** | 304 | – | Revenue from open centres reduced by 2.1% to £342.4m, with the growth rate improving to 20.1% in Q4 year-on-year. Pre-2020 revenue declined by 7.9% to £316.9m (FY 2020: £344.1m), with the rate of growth improving in Q4 to 11.5%. Five new locations were added and 24 rationalised in the UK in 2021. The net of these additions and the network rationalisation led to an overall reduction of locations in the region to 285 at 31 December 2021. 28 IMG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Strategic review The case for hybrid working has never been clearer. At its simplest, employers wish to reduce their real estate costs and minimise their carbon footprint while successfully attracting the best available talent to help them compete as effectively as possible. Hybrid working is projected to save organisations an average of $11,000 every year for every person who works remotely for half of the week. The estimated savings have been calculated based on conservative assumptions by Global Workplace Analytics. The research-based consulting firm had noted that the primary savings will come from increased productivity, lower real estate costs, reduced absenteeism and turnover and better disaster preparedness. Employees, meanwhile, want the freedom to choose to work in a metropolitan headquarters or at home, and to collaborate with colleagues in a We have subsequently completed the platform operating in more than 40 rural or suburban centre close to where separation of certain of our digital assets languages. The next step anticipated they live. Research commissioned by and, as separately announced today, is a formal separation from the Group IWG shows that 70% of job candidates these digital assets will be merged with via a listing on the US or UK markets are insisting that companies have a The Instant Group to create the world’s within the next two years. hybrid work policy and half of existing leading fully integrated independent employees would quit their job if forced In a separate strategic strand, the workspace platform. The merged back to the office five days a week. Group continues to review the business will be run by Instant’s current potential separation of the property Enabling companies and individuals management, led by CEO Tim Rodber, investing activities. alike to gain from all these benefits who have achieved c. 31% Compound takes more than just a global network With these clear strategic objectives in Average Growth Rate in EBITDA over the of high-quality business centres. place, the Group is in a strong position period 2019 - 2021. The transaction Technology also plays an essential role, to generate enhanced free cash flow. comprises a net cash investment of and IWG is unique in having a true £270m, provided by a fully underwritten ### platform strategy that enables us to Focusing on what matters debt facility, to acquire the shares of bring together the users of hybrid ### selling shareholders and provide capital most to IWG space and the owners of real estate for growth with Instant management During the pandemic, I believe our across the world. investing a further £50m into the purpose – creating a better day at work In a very important strategic review of merged business. The merger underpins – became stronger, more clearly defined, our organisational structure, we set in the new company’s independent and more relevant for our stakeholders motion a major programme of work in leadership position in the flexible than ever before. 2021 that will shape our future direction, workspace market and creates a This new strength has manifested itself not only throughout 2022 but for many preferred platform for the booking of in several ways over the last year, years to come. Following the review in flexible office space, services and enabling us to articulate what matters July, the Board determined that inventory management, similar to most to us. For our customers, we aim customers and shareholders would models already operating in the travel always to ensure that our offering benefit from a structural separation of and hospitality sectors. The merged enables them to create value and some of the Group’s operating assets business creates the largest digital flexibility in their working days, helps and capabilities. platform, accessing over 30,000 them to attract the best talent, and buildings in more than 175 countries, supports them with the sustainable served 24/7 through an integrated management of their real estate. iwgplc.com 29 CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED | For our people, we continuously | In our 2020 Annual Report, I announced | capital-light growth, enabled by an | | --- | --- | --- | | invest in our teams, ensuring diversity | our commitment to being a carbon- | expanding base of franchise and | | and equal opportunities in all the | neutral organisation by 2025. | property partners, helps us serve | | communities across over 120 countries | Throughout 2021, we have refined | the fast-increasing demand we | | where we operate. | further our carbon-neutral programme. | are witnessing. | We accelerated our activities around For the environment, we are empowering We already have a strong balance sheet, minimising carbon emissions that arise thousands of businesses and millions of a superior and differentiated technology from our supply chain and will be people to reduce their carbon footprint. offering and a strong team. More investing in carbon offset projects. We achieve this simply by growing our innovation, an ever-better platform and As a result, we are bringing forward our network of centres to bring more and even stronger brands will improve our ambition of becoming carbon-neutral more workspaces into the local market-leading position yet further. This during 2023. communities, small towns and suburbs will enable us to bring new employment where people actually live, raise their opportunities, a reduced carbon ### Looking forward to 2022 families and socialise with their friends. footprint, better work-life balance and ### and beyond heightened efficiency to businesses, Over the last two years, market demand I believe that today IWG is uniquely workers and communities everywhere. has led us to open almost all our new well-positioned to continue to grow centres in non-city centre environments. We have all been watching with horror strongly in 2022, benefiting from the the devastating humanitarian crisis This approach is having three important trends I have already described. We unfolding in Ukraine, where our thoughts positive results. First, by driving down have a clear strategy and are capitalising are with those impacted, including some the need to commute, it is significantly on continuing structural tailwinds. As of our own people. Our commitment to reducing the carbon footprint of millions a result, our scale, our history, our profile our colleagues and customers in Ukraine of workers across the world. Second, it is and our franchise offer make us the is unwavering and we are supporting enabling companies to play more than obvious partner for property owners humanitarian relief efforts. Our centres lip service to the concept of work-life everywhere. in neighbouring countries are organising balance by giving people more of their Our presence in markets across the collections of essential supplies own time by enabling them to work world, long-established in urban centres including clothing and food for the close to where they live. And third, it is and growing fast in suburban and rural Ukrainian people displaced by the supporting local economies and small communities, make us globally the conflict. Additionally, a fund in aid of businesses by encouraging people to most visible, the most reputable and UNICEF has also been created. spend more in local communities, once the most experienced provider of again making them vibrant places to live Notwithstanding geopolitical high-quality hybrid and flexible and work. uncertainties, I am confident that IWG office accommodation, membership has the energy, agility and momentum In short, it is making the much-vaunted and home-work products and required for the significant opportunities concept of the 15-minute city a reality associated services. ahead. Our trading momentum and for millions by providing all the facilities Looking to 2022 and beyond, I firmly forward order book are giving us clear required for hybrid working in self- believe that these advantages will drive visibility for strong growth in 2022 and sustaining local neighbourhoods. our success and further strengthen our an increasingly positive future, which leadership position. We are committed confirms we are in the right place to further improvement as accelerating at the right time as businesses continue to embrace hybrid working. Mark Dixon Founder and CEO 8 March 2022 30 IWG plc Annual Report and Accounts 2021 OUR STRATEGY STRATEGIC REPORT ## A strategy to extend our global ## market lead ### Our unique, capital-light and highly cash-generative strategy for growth is based ### on three essential pillars that are enabling us to simultaneously expand our ### market-leading global presence, drive significant month-on-month increases in ### fee income, and create ever-closer customer relationships. ### Delivering growth through our three strategic pillars ### Network Franchise partnerships Platform (technology) ### Our fast-growing global Our unique approach to Our continuous-improvement ### network, providing high- franchising and partnering approach to technological ### quality workspace wherever it with building owners, creating development, bringing our ### is required, under a multiplicity close, mutually beneficial customers ever-better ### of leading brands and in relationships and driving solutions that maximise ### increasingly advanced significant month-on-month workforce efficiency, flexibility ### buildings in cities, towns, revenue increases, now and and loyalty, no matter where ### suburbs and rural locations into the future. their employees actually work. ### across the world. | | | | See pages 34-35 | | See pages 36-37 | | --- | --- | --- | --- | --- | --- | | | See pages 32-33 | For more on our franchising | | For more on our technology | | | For more on our locations | | and partnering | | | | ### Market opportunity iwgplc.com 31 STRATEGY IN ACTION – NETWORK ## Our global network: ## world-leading, fast-growing ## and worker-focused Quite simply, it’s a strategy of enabling ### The worldwide hybrid employers and employees to work in the ### working market is growing way they want by providing the solutions they want, wherever and however they ### fast. We are seeking to grow want them. ### our global network ahead of ### the curve to attract an ever- ### increasing share of the ## world’s employers and their 20 brands 2 new brands added in 2021 ### employees. With close to 3,400 high-quality centres serving more than 8 million customers every day via 20 brands in over 120 countries worldwide, IWG is already the dominant force in the flexible workspace ## 8m market globally. And, by accelerating our expansion ## customers programme, we are continuously extending our lead, particularly in those 2m added in 2021 local suburban and rural environments where people, freed and empowered by advanced hybrid working technologies, increasingly want to work. 32 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ## Any building, ## Any space, ## CBDs Suburbs Towns ## Any location ### Multiple buildings ### Entire buildings ## Rural Business Transport ### Floors ## parks hubs Delivering through our network in over 1,100 towns and cities across more than 120 countries iwgplc.com 33 STRATEGY IN ACTION – PARTNERSHIPS ## Partnering for shared success: ## mutual benefits and ## accelerating fee income IWG has always partnered with decades of experience and our deep ### Partnering with franchisees property owners across the world. understanding of more than 120 ### and property owners across But over recent years, more franchise national markets across the world. investors and operators than ever ### the world is an essential The reasons for this growing popularity before are recognising the opportunities among franchisees are clear, including: ### component of our strategy that working with us present as hybrid working rapidly becomes the norm – the desire for flexible workspace ### for capital-light growth. solutions that allow employers to for millions. scale up or down rapidly in the face The hybrid working segment is the area of market change; of the global workspace market that’s – the need to provide flexible working in most vibrant growth, following some to attract and retain their key talent; years of steady expansion before the – the ability to drive efficiency and revolutionising impact of the COVID-19 productivity improvements; and pandemic. And, as the global market leader, we are well-positioned to help – the increasingly urgent need for ambitious businesses diversify into this companies to reduce their burgeoning new sector of the franchise carbon footprint. landscape, supported by over three 34 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT Network mix – December 2021 So, for our franchise partners, the opportunity to work with us on developing a dynamic new business is highly attractive. For us, the sheer speed at which it enables us to grow our network, in partnership with highly commercial and engaged franchise partners, is equally compelling. ### 65% 35% This is what we mean by capital-light expansion. Conventional Franchises, partnerships and management contracts iwgplc.com 35 STRATEGY IN ACTION – PLATFORM (TECHNOLOGY) ## The technology gain: ## seamless end-to-end ## customer journeys it continues to become the normal way ensure all users’ experience in both ### The way we develop and of working for millions. From cloud worlds precisely meets their needs ### implement our technology telephony and cloud printing to thanks to the frictionless delivery of zero-touch internet around the world, the right service, delivered in the ### offer is an essential we have continued to broaden and right way and at the right moment. ### component of our strategy extend the services people need to ### work without barriers to productivity, Commercialising our ### to outperform our market. ### wherever they are. technology platform ### By ascertaining that As part of this programme, we recently We have developed and refined our introduced enterprise employee comprehensive ‘Everyware’ technology ### customers get the tools they solutions, which help large companies platform over many years and for tens of ### need from us to fulfil their support their employees in every aspect thousands of customers. And now we are of hybrid and flexible working. commercialising it, making its benefits ### business goals, we ensure available to any company, workspace ### Maximising space utilisation operator or property owner that wishes ### their growth and ours are Our customers often need to respond to use a true best-of-breed solution to ### seamlessly interconnected, quickly to fast-changing space streamline their own locations. We are requirements, especially at a time of confident there is a receptive market. ### maximising loyalty for global uncertainty. IWG therefore started Our ability to blend people, workspace to build a full digital representation of its and technology with local knowledge, ### long-term relationships. | | global estate in 2021, to help businesses | enterprise experience and global scale | | --- | --- | --- | | With our global footprint across 124 | adopt flexible planning strategies for the | presents a value proposition that we | | countries, the demands placed on the | future. This will enable real-time metrics | believe will persuade many companies | | technology we use to support our | from our existing IoT platform to be | to outsource to us. | | customers are virtually unique. It has to | blended with AI-driven planning tools | | | meet needs at every touchpoint, every | and demand forecasts, enabling us and | | | day for 8 million people working in | our customers to plan the most efficient | | | multiple languages and in multiple | use of space at any point in time. | | places – in the office, at home and | on the move. | Optimising office locations | | --- | --- | | As a result, during 2021 we invested | Our many decades of experience have | | more than £50m in developing systems, | given us a wealth of data on the key | | automation and apps across many areas. | factors that underpin the successful | | These ranged from solutions supporting | location and design of our centres, | | very large enterprise customers with | including detailed information on sales, | | tens of thousands of employees in | operating costs and space utilisation. | | multiple locations in many countries, to | Combined with an active feedback | | apps that help the smallest SMEs comply | loop, this enormously powerful resource | | with local legislation. | for training machine-learning algorithms | will give us accurate projections of Every country where we operate demand and profitability for optimised has a unique cultural and operating location selection as we extend our environment, and our ability to localise global network. effectively is a key source of competitive advantage for us. We therefore integrate ### Blending the customer our detailed knowledge of the local ### experience requirements in all our markets into our digital operating platform, helping We are bringing our customers’ physical businesses operate safely and and digital worlds together to deliver a seamlessly, no matter where they are. holistic working experience, whether in the office or online. By merging their We have also continued to develop our physical and digital profiles, we can solutions supporting hybrid working as 36 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT iwgplc.com 37 BUSINESS MODEL ## Our business model ### For over three decades, we have successfully developed our business model to deliver ### strong returns. Today, with our unmatched scale, unique multi-brand approach and highly ### efficient platform, IWG is poised for unprecedented growth. ### What we do How we do it We partner with franchisees and property owners across the world to ### provide the largest network of flexible Creating ### Property owners ### workspace for businesses of every type access to Our unique portfolio of brands and formats lets building and size. Through our unique global owners select the flexible workspace solution that will add ### the flexible infrastructure, we deliver a the most value by meeting the needs of the local business ### workspace comprehensive service that ensures our community. Our platform and associated centralised support ### market functions make implementation straightforward. partners and end customers have a great day at work. ### Key inputs ### Our partner relationships Our success depends on the success of our ### Our competitive Operational Centralised partners, so we use all our experience and ### expertise to deliver the service and support operating efficiency support functions they need. We continuously optimise Centralised support ### model the performance and functions maximise value ### Our people effectiveness of our for our partners, customers We employ great people and help them to locations. Combined with a and shareholders. achieve their full potential, so they can drive disciplined approach to From procurement to our and our partners’ success. costs, this enables us to marketing, we benefit from deliver long-term value. economies of scale and Our scaled platform and global reach to provide ### Our networks centralised support consistent support and It is our vision to have a centre serving functions underpin IWG’s service to the business. every community, so we and our partners operational efficiency can empower businesses and individuals across the world. to work flexibly and productively anywhere in the world. ### Our brands With a growing stable of global and local brands, we can segment the markets where we operate to maximise uptake and create a unique growth opportunity. ### Our strategic Our three strategic priorities enable sustainable ### pillars growth to achieve our purpose. ### Our formats Versatile, inspiring and practical, our formats drive worker satisfaction and productivity. See pages 31-37 to read more about ### Our platform Our flexible platform features world-class, our strategic priorities easy-to-use infrastructure that delivers simple points of access and a great user experience. ### Strong Robust governance and a rigorous risk-management ### governance and model underpin our operating model to ensure the business is managed prudently and risks are assessed ### risk management appropriately. ### system 38 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Value created ### Customers ### Franchise partners We help businesses perform better, with more flexibility and agility, Our franchise partners find it easy to activate our business model, brands and marketing appeal. Building on years of staffed by more fulfilled, effective experience and optimisation, we make it easy for our partners and loyal people. to scale up their operations and earn attractive returns. ### Partners We offer an exciting, sustainable business opportunity powered by our global leadership, unique experience and unrivalled operating platform. ### Scaled Multi- ### Employees ### platform branded We recognise the talents of our IWG’s different brands We recognise there diverse and passionate workforce operate from a single, is no ‘one size fits all’ across the world, enabling our scaled and highly efficient solution, so we provide global platform, enabling us a choice of workspace people to contribute to society to provide workplace formats through our while driving successful careers. solutions across the world different brands, formats ### that meet every customer’s and workspaces to Communities requirements. accommodate our We bring employment customers’ varied needs opportunities to the heart of and enable them to have a communities, attracting jobs, great day at work. reducing unnecessary travel and encouraging social connection. ### Shareholders We deliver sustainable returns via a progressive dividend policy that’s enabled by our prudent approach to investment. ### 1 2 3 Network Franchise partnerships Platform (technology) Importantly, our operating model ensures that we benefit from an entrepreneurial spirit and can strive for our ambitions for future growth. See pages 65-75 for more on our approach to risk and governance iwgplc.com 39 MARKET REVIEW ## The growing flexible ## workspace market ### Concern about the environment ### Right across the world, significant forces Continuing to support people working at or near home ### are influencing the future development following the pandemic is the single biggest contribution organisations can make to reduce their ### of the flexible workspace market. In carbon footprint. Taking positive action attracts talent ### 2020, the COVID-19 pandemic made who share an increasing sense of shared responsibility and global citizenship. ### these all the stronger. Here we reflect on ### how the ways we react to change are ### enabling us to strengthen our position ### as a global market leader. Societal change The global COVID-19 pandemic has significantly accelerated the uptake of hybrid working patterns. Research from 2021 shows that half of all workers would seek another job if asked to make a full time (1) return to the office . SME demand for high-quality accommodation and services in local markets continues to accelerate. 1. Source: IWG Research, 2021 ### Evolving global economy Companies across the world are aiming to reflect their business priorities in their real estate strategies. For many, this includes increasing operational flexibility while driving down overall costs, and seeking new ways of maintaining closer relationships with customers and suppliers alike. ### Rapidly advancing technology Smart technology and universal connectivity are enabling people to choose how, when and where they work. With the pandemic having made remote communications the norm, billions are now connecting globally via the latest in video communications and virtual reality platforms – a shift that’s being 100% enabled by major improvements in technology. ### Demand for more agile ### property models Companies increasingly need to be poised for rapid reinvention in an ever-more complex and competitive environment. To support rapid shifts in strategy, scale and location, businesses are increasingly demanding highly efficient, intelligent buildings, high-quality services and portfolio solutions that extend far beyond single offices. 40 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Impact on our industry How we are responding – Need to satisfy growing consumer, shareholder, – Investing in highly efficient, intelligent buildings, employee, legislative and societal demand for continuously upgrading our estate and enabling reduced environmental impact. reduced commuting by opening more locations – Increased demand for flexible workspace solutions, outside city centres. close to and in the communities where people want – Upgrading or closing inefficient centres to improve and can afford to live. environmental performance across our portfolio. – Growing requirement for advanced tech solutions to – Supporting new ways of working that allow people support home working as individuals seek to enhance everywhere to contribute to the carbon-reduction their lifestyles and reduce their carbon footprints. agenda. – To attract and retain the best talent, employers are – Our network growth is focused on local markets, seeking partners who can provide flexible space and enabled and accelerated by our franchising strategy services. that is driving our global presence towards our goal – Workspace providers without diverse portfolios are of reaching 50,000 centres. struggling to meet emerging customer needs and – We ensure our customers gain from our scale, brand remain competitive. portfolio and service levels at every stage of their – Communities that cannot provide high-quality development. workspace are finding it hard to meet the evolving – We enable our customers to participate in our local needs of local employers. social investment programmes across the world. – Companies are increasingly taking a portfolio – We provide ‘hub-and-spoke’ infrastructure to meet approach to real estate, taking on a hierarchy of sites national and regional development plans. from headquarters to local offices. – Our sophisticated global platform allows immediate – They are seeking new ways of building dispersed personalised support to meet emerging customer customer relationships while delivering a needs. personalised service. – Our global network supports a worldwide, regional – The need is growing for customers to understand and and local presence wherever required, influence supplier behaviour in local markets. allowing customers to make rapid shifts in location, scale, strategy and customer focus. – The ability to offer, refresh, expand and manage an – We leverage our unmatched insight into the tech appropriate range of digital offerings is a key needs and expectations of businesses, delivered by differentiator. millions of individuals who use our services – Companies are focusing their attention on identifying every day. the right tech investments to make the moment they – We continually invest in world-class, resilient IT are required. infrastructure, innovative digital offerings and – The need to maintain service provision is mission- services at all our centres. critical, driving the often expensive requirement to – With 3,314 centres worldwide, we provide the keep pace with advances. resilience and global infrastructure to meet every flexible-working need. – Fast-changing business needs mean that customer – We can respond fast and fluidly to rapidly changing requirements are continuously evolving. needs and demands by developing bespoke – Companies are seeking partners solutions that can be rapidly engineered for global who can meet increasingly rigorous and mission- uptake. critical demands, fast and efficiently. – We have the experience, scale and investment – Growing complexity is increasing the need for power to deliver and continuously upgrade in line enterprise companies to have a single point of with individual expectations. contact for their property requirements. – Our network comprises a wide variety of building types able to serve even complex business needs. iwgplc.com 41 KEY PERFORMANCE INDICATORS ## Key drivers for sustainable growth ### We aim to deliver ### sustainable profitable ### growth for our Pre-2020 Adjusted EBITDA ### Industry-leading ¨ development (£m) * ## investors through 1 ### profitable growth ### providing customers ## £167.8m ### globally with an | | 2021 - Pre-2020 | 167.8 | | | | --- | --- | --- | --- | --- | | unrivalled choice of | 2020 - Pre-2019 | | 244.6 | | | | 2019 - Pre-2018 | | | 425.9 | ### convenient work 2018 - Pre-2017 351.3 ### environments that suit ### the full range of Adjusted overhead as percentage ### Best-in-class ### workspace and service ¨ of revenue (%) * ## 2 ### cost leadership ### needs. ## 13.2% 13.2 13.3 10.7 10.5 Network (locations) ### Global multi-brand ## 3 ### network ## 3,314 3,314 3,313 3,388 3,306 ¨ ### Capital-light Net growth capital investment (£m) ## 4 ### growth ## £111.8m 111.8 250.9 389.0 332.0 ### Shareholder Total shareholder returns (£m) ## 5 ### returns ## nil nil 43.7 107.7 * Including only those operations that 93.9 were open throughout the period, pre COVID-19 related adjusting | 2021 2021 2021 2021 | items and pre-IFRS 16 | | | --- | --- | --- | | 2020 2020 2020 2020 | | | | | 42 | IWG plc Annual Report and Accounts 2021 | | 2019 2019 2019 2019 | | | | 2018 2018 2018 2018 | | | STRATEGIC REPORT ### Future ambitions and risks Overview Pre-2020 Adjusted EBITDA* down from £185.2m for The continued impact on market conditions of COVID-19 2020 to £167.8m for 2021, reflecting the prolonged and the possible appearance of new variants cannot be impact of COVID-19. dismissed. However, the momentum we have seen build in our business, particularly in the second half of 2021 and COVID-19 made 2021 another very challenging year in our into 2022, provides a basis to anticipate an improved history. Notwithstanding this, our revenue performance was performance in 2022. resilient, which, together with the swift, comprehensive ¨ actions taken to reduce costs, delivered pre-2020 EBITDA of £167.8m before COVID-19 related adjusting items. Overheads as a % of revenue before adjusting items We will continue to focus on controlling overheads to deliver | were well controlled at 13.2%. | | operational efficiency. This will be balanced with further | | --- | --- | --- | | | ¨ | planned investment in overhead to improve the performance | | Group overheads | for 2021, excluding adjusting items of | | of our well-invested operating platform, processes and £33.1m related to COVID-19, decreased 6.2% at constant † people and delivery of the Group’s franchise strategy. currency to £294.0m (2020 : £322.8m). Excluding these ¨ non-recurring costs, Group overheads represented 13.2% of the Group’s lower revenue reported for 2021 † (2020 : 13.3%). Although overheads have reduced, the Group has invested in the continued development of enterprise accounts, the pivot to a capital-light growth model and a scaled platform of services. We continue to add quality, convenience and choice Macro and geopolitical uncertainties are likely to persist to our network in a carefully controlled and risk- in many regions in 2022, which may lead to further managed way. rationalisation of the network. However, we remain clearly focused on accelerating growth through our franchising In direct response to the pandemic, decisions were taken to and partnering strategy. Simultaneously we will continue rationalise underperforming centres to ensure we emerge a to develop our brands to enhance the choice available to stronger business post COVID-19. Overall, 145 locations were more customers. rationalised, mostly directly COVID-19 related. During 2021 we added 146 new high-quality locations to maintain the largest global and most widely distributed network. During 2021 net growth capital expenditure reduced We have a pipeline in excess of 250 new franchise and to £111.8m. partner deals for 2022 which will further improve the network mix and deliver an acceleration of growth. During 2021 we made further progress on our strategy of more capital-light growth. Franchising and partnering reduces the capital deployed and speeds up the rate of growth. We invested more resource into our franchise and partnering teams during 2021. The benefit of this is already being seen, as the investment required per sq. ft. of flexible space more than halved in 2021. Continued to preserve cash in direct response to Our capital allocation policy remains in place, prioritising COVID-19. investment in the long-term development of our business and distributions to shareholders. We intend the earliest possible Given the prolonged uncertainty caused by COVID-19, we return to continuing to provide attractive returns to believe it was prudent to protect our liquidity and as a result shareholders with the continuation of a progressive dividend there was no cash distribution to shareholders in 2021. distribution and share repurchase programme. iwgplc.com 43 STAKEHOLDER ENGAGEMENT ## Adding value for our ## stakeholders ### At IWG, we have a strong record of delivering value to ### our key stakeholders, comprising the five groups that ### mean most to us: customers, partners, employees, ### communities and shareholders. ### CustomersPartners Franchisees seeking opportunities Businesses of all sizes across the to diversify into an exciting and world are seeking flexibility, fast-growing market, and building quality and value from their owners and developers wishing workspace to boost their agility, to drive the best possible return competitiveness and the on investment commitment of their people Why are they important to us? Why are they important to us? They not only own or manage the IWG exists to serve its customers. By paying for buildings where our customers work, our services, they enable us to consistently improve they also bring us the benefits of our global offering with ever-better property their experience across a range of models, working environments, value, service and niche and local markets to deepen business solutions that collectively add up to a our understanding of specific great day at work. customer needs. What do they want from us? What do they want from us? Our customers need us to understand their Our partners need flexible, bespoke changing needs, responding fast and with precision. relationships based on shared trust, This means giving them the flexibility to achieve enabling them to maximise the benefits rapid shifts on cost, location and scale, while of our proven business model, our providing the great working environments, experience, the power of our brands world-class IT and admin support they need and our global leadership position. to achieve their business goals. How do we engage with them? How do we engage with them? We provide established international We empower our customers to choose from a wide sales and marketing channels and range of leading brands, so they can find the comprehensive training from the outset, precise solution that works best for their business. as well as ongoing support and training We also give them and their people all the support from an experienced global team. they need, wherever they are: in the office, at home and on the move. 44 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### CommunitiesEmployees Shareholders The heart of our business: the The places where our centres are The individuals and institutions people who – in growing numbers based, increasingly home to where who own our shares and provide of neighbourhoods across the our own people and customers’ the support we need to deliver world – do most to ensure our employees live and wish to work sustainable stakeholder value customers have a great day at work Why are they important to us? Why are they important to us? Why are they important to us? They are the public face of IWG. They are increasingly the source They give us the financial support and They ensure we deliver customer not only of our employees but our authorisation we need to continue our value and drive our growth, attract customers too, enabling us to grow unique strategy for growth and new business and deliver the at scale in multiple local markets strengthen our leadership position in returns our shareholders want. across the world. the global flexible-workspace sector. What do they want from us? What do they want from us? What do they want from us? Like everybody else, they want a They want us to help them thrive, Our investors want us to continue great day at work, based on mutual attracting new employment and articulating and following our successful loyalty, exciting rewards, effective enabling local people to work strategy, communicating with them development opportunities and the closer to home. clearly and regularly, and giving them benefits associated with working the opportunity to comment on our How do we engage with them? for a global leader. progress. Above all, they want us to We are a part of the community, and grow the value of our shares and How do we engage with them? are heavily involved in community operate a progressive dividend policy. | Our People Promise commits us to | projects from education to health- | | | --- | --- | --- | | delivering interesting and achievable | related and other initiatives. | How do we engage with them? | | work, together with sensitive | | In 2021, our Investor Relations function | | management, a company that cares, | | held more than 400 meetings with | | and the opportunity to advance and | | investors and analysts. These meetings | | develop their careers with us. | | were predominantly held virtually in | view of COVID-19 considerations. iwgplc.com 45 CHIEF FINANCIAL OFFICER’S REVIEW ## 2021 dominated by COVID-19, ## but good progress achieved ### COVID-19 continued to ### present challenges globally, ### but it has also increased ### awareness and adoption of ### hybrid working. This, together ### with the swift actions the ### Group has taken since the ### onset of the pandemic, has ### delivered a sequentially ### improving financial ### performance commencing in ### the second quarter. ### Financial performance The review below highlights the reported results in accordance with IFRS. Under IFRS 16, while total lease-related charges over the life of a lease remain unchanged, the lease charges are characterised as depreciation and financing expenses with higher total expense in the early periods of a lease and lower total expense in the later periods of the lease. The Group also presents the results in accordance with pre-IFRS 16 accounting standards as it provides useful information to stakeholders on how the Group is managed, operating performance targets are measured, and reporting for bank covenants and certain lease agreements are prepared. ### Adjusting items The continuation of COVID-19 in most of the Group’s markets had a significant impact on our business in early 2021 which initially slowed the pace of recovery and directly contributed to the reduced revenue reported in 2021 (when compared to 2020) and the net losses. Consequently, the Group in 2021 continued to take measures to build greater resilience into the business and future-proof it for the long-term structural growth opportunity. The success of these measures became evident in the momentum that built in the business Glyn Hughes during the remainder of 2021. These Chief Financial Officer actions, together with the slower than originally anticipated recovery caused 46 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Group income statement 2021 2021 2020 † 2020 † £m (As reported) IFRS 16 impact (Pre-IFRS 16) (Pre-IFRS 16) IFRS 16 impact (As reported) System-wide revenue 2,498.5 – 2,498.5 2,721.9 – 2,721.9 Revenue 2,227.9 – 2,227.9 2,431.9 – 2,431.9 Gross profit/(loss) (centre 242.6 161.3 81.3 (173.7) 193.8 20.1 contribution) (1) Gross profit before adjusting items 240.9 171.6 69.3 149.4 204.1 353.5 (2) Overheads (327.8) (0.7) (327.1) (379.2) 11.7 (367.5) Joint ventures (2.2) – (2.2) (2.6) – (2.6) Operating loss (87.4) 160.6 (248.0) (555.5) 205.5 (350.0) Operating (loss)/profit before (56.0) 170.9 (226.9) (176.0) 215.8 39.8 (1) adjusting items Net finance costs (172.0) (166.9) (5.1) (10.8) (252.5) (263.3) Loss before tax from (259.4) (6.3) (253.1) (566.3) (47.0) (613.3) continuing operations Taxation (10.3) 2.1 (12.4) (43.0) 11.0 (32.0) Effective tax rate (4.0)% (4.9)% (7.6)% (5.2)% Loss after tax from continuing (269.7) (4.2) (265.5) (609.3) (36.0) (645.3) operations Profit/(loss) after tax from 59.3 9.9 49.4 4.9 (6.4) (1.5) discontinued operations (Loss)/profit for the period (210.4) 5.7 (216.1) (604.4) (42.4) (646.8) Basic EPS (p) – From continuing operations before (17.2) (23.7) (24.2) (26.4) (1) adjusting items – Attributable to shareholders (20.3) (20.9) (63.5) (67.9) Depreciation & amortisation 1,109.4 305.6 307.3 1,195.0 (1) Adjusted EBITDA 1,057.7 79.6 133.8 1,233.9 1. Adjusting items relate to income and costs arising specifically from the impact of COVID-19. | 2. Overheads for 2021 include COVID-19 non-recurring items of £33.1m (2020 | | † : £56.4m). | | | --- | --- | --- | --- | | directly by COVID-19, have resulted in | previously established provision, | | losses and continues to maintain | | further charges. These adjusting items | resulting in a net benefit of £64.8m | | customer deposits as additional security | | totalled £31.4m (2020: £389.8m), £8.4m | (2020: net charge of £312.0m). | | in the event of non-performance of | | of which are non-cash items. | | | customer contracts. | Restructuring costs On a pre-IFRS 16 basis these adjusting Other one-off items A charge of £32.6m (2020: £43.3m) is items totalled £21.1m (2020: £379.5m), included within adjusting items to cover During the year the Group incurred of which a net benefit of £1.9m was legal and other professional costs, £0.5m of transaction costs in respect non-cash. These adjusting items including costs associated with the of aborted transactions that did not primarily reflect network rationalisation, significant number of individual centre complete due to COVID-19 (2020: Group restructuring costs and provision renegotiations undertaken during 2021. £8.2m). In addition, during the year, for expected credit losses. the Group received a total of £0.7m Provision for expected credit losses Network rationalisation (2020: £6.4m) in respect of The prolonged impact of COVID-19 and worldwide support schemes. With the uncertainty caused directly by the emergence of new variants of the COVID-19 persisting through 2021, further ### virus in some markets continued to Cost benefit marginal centres were eliminated from present an unprecedented challenge to The swift actions taken to mitigate the the network. This led to a charge of £83.1m many customers who may struggle to impact of the global pandemic on the (2020: £58.5m). This charge was offset navigate through these challenges. The business, together with the ongoing by a £125.2m reversal of impairment of Group has therefore further reviewed sharp focus on all costs, has resulted in property, plant and equipment (2020: the recoverability of its debtor profile significant savings in overheads and impairment of £244.8m). and recognised an additional £53.5m centre-related costs, despite the Under pre-IFRS 16, COVID-19 related (2020: £17.5m) in credit losses. The operating losses incurred in 2021. rationalisation of the network led to a increase is low compared to the overall Overall, the cost optimisation programme charge of £59.8m which was more than debtor profile as the Group has not has delivered an annualised run rate cost fully offset by utilising £124.6m of the historically incurred significant credit reduction of approximately £324m. iwgplc.com 47 CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED These cost savings exclude the c. £129m decline of 15.3% being offset by good. Revenue from centres opened in † | of cost investment in new centres. After | year-on-year growth in the second | 2019 | increased by 9.5% at constant | | --- | --- | --- | --- | | the new centre investment, the net cost | half of 7.3%. | currency. The new locations opened in | | | benefit in 2021 was c. £148m. | | 2020 have performed strongly, with | | This improving momentum in the occupancy increasing from 33.9% to business from March 2021 was similarly ### Revenue 54.2%. The initial revenue contribution reflected in the revenue from open † from the new 2021 openings has also System-wide revenue decreased from centres and the like-for-like pre-2020 | £2,721.9m to £2,498.5m, a 4.2% decline | | † | been strong with exit occupancy in | | --- | --- | --- | --- | | | estate. Open centre revenue | declined | | | at constant currency. This is a new | | | December 2021 of 44.5%. | 10.4% in H1 but increased 12.6% in additional performance measurement H2 year-on-year, delivering a 0.6% ### Gross profit for the Group and one we consider increase at constant currency to ### provides a better reflection of the scale (before adjusting items) £2,180.1m (2020: £2,254.3m). of the business, which will become † † Pre-2020 revenue increased by 7.1% The adjusted gross profit reported for the increasingly relevant as we progress our | | in H2 which, after a H1 decline of | | period was £240.9m, which compares to | | | --- | --- | --- | --- | --- | | strategy of faster, capital-light growth, | | † | | † | | | 15.0%, resulted in a revenue | decline | £353.5m for 2020. Reported gross profit | | with the resultant increased emphasis on of 4.6% at constant currency to including the adjusting items was franchising, management agreements £2,028.0m (2020: £2,210.1m). £242.6m (2020: £20.1m). and other partnering arrangements. | | Occupancy in the pre-2020 estate for | Under pre-IFRS 16 the adjusted gross | | | --- | --- | --- | --- | | On a reported basis, total Group | | | † | | | 2021 was 70.6% (2020: 72.5%), with | profit | was £69.3m (2020: £149.4m). | † revenue decreased from £2,431.9m † momentum improving during the year. With a loss of £15.1m reported for the to £2,227.9m, a 4.7% decline when Fourth quarter occupancy was 270 bps first half of 2021, this full year gross compared at constant currency. This higher than the third quarter at 71.2%, profit illustrates the improved is a good outcome given the on-going with a December exit rate of 74.5%. profitability of the business in the impact of the pandemic and one that Encouragingly, this performance has second half. Adjusting for the negative demonstrates the growing sequential continued into the start of 2022, with contribution from closures of £44.3m momentum achieved from the second most major markets contributing. The and the contribution drag of £50.9m quarter onwards. The reported decline in breadth of our coverage in satellite from the new centres added in 2020 and † | Group revenue | in Q1 was 20.9%, down | | | † | | --- | --- | --- | --- | --- | | | | towns and suburban locations continues | 2021, the gross profit | generated by the | | 15.3% for the first half and down 9.9% | | to be beneficial. | | | pre-2020 estate was £164.5m (2020: for the nine months to 30 September, all £211.6m). † The continued maturation of the locations at constant currency. Full year revenue opened in 2019 and 2020 has been declined 4.7% reflecting the first half Pre-2020 New Closed Total 2021 performance, £m centres centres centres centres Revenue 2,028.0 152.1 47.8 2,227.9 Cost of sales (1,751.1) (189.0) (46.8) (1,987.0) Gross profit/(loss) (centre contribution) 276.9 (36.9) 1.0 240.9 Gross margin 13.7% 10.8% (1) Cost of sales (1,863.5) (203.0) (92.1) (2,158.6) (1) Gross profit/(loss) (centre contribution) 164.5 (50.9) (44.3) 69.3 (1) Gross margin 8.1% 3.1% Pre-2020 New Closed Total † 2020 performance, £m centres centres centres centres Revenue 2,210.1 44.2 177.6 2,431.9 Cost of sales (1,821.0) (78.9) (178.5) (2,078.4) Gross profit/(loss) (centre contribution) 389.1 (34.7) (0.9) 353.5 Gross margin 17.6% 14.5% (1) Cost of sales (1,998.5) (77.0) (207.0) (2,282.5) (1) Gross profit/(loss) (centre contribution) 211.6 (32.8) (29.4) 149.4 (1) Gross margin 9.6% 6.1% 1. Results presented in accordance with pre-IFRS 16 accounting standards and before adjusting items. 48 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT | EBITDA | | Net finance costs | | The weighted average number of shares | | --- | --- | --- | --- | --- | | | † | | | in issue for the year was 1,007,214,854 | | Adjusted EBITDA | as reported reduced to | The Group has reported net finance | | | | | | | † | (2020: 951,890,712). The weighted | | £1,057.7m (2020: £1,233.9m), due to | | costs | under IFRS 16 for the year of | | average number of shares for diluted the continued impact of COVID-19 on £172.0m (2020: £263.3m), including earnings per share was 1,102,442,649 our business performance. Reported interest on the Group’s lease liabilities. † (2020: 1,045,771,886). No shares were EBITDA including the adjusting items | | Under pre-IFRS 16, the Group reported | | acquired during 2021 to be held in | | --- | --- | --- | --- | | was £1,026.3m (2020: £844.1m). | | † | | | | a net finance expense | for the year of | treasury. The Group reissued 844,559 | † Under pre-IFRS 16, adjusted EBITDA £5.1m (2020: £10.8m). The reduction in shares from treasury to satisfy exercises declined from £133.8m to £79.6m. the net finance expense primarily reflects under various Group long-term incentive † | Adjusted EBITDA | reflects the significant | the significant gain on the mark-to-market | schemes during 2021. | | --- | --- | --- | --- | | drag from the investment in growth, which | | of the option element of the convertible | | | in 2021 was £50.1m (2020: £36.0m), and | | bond, resulting in a gain of £22.5m | Cash flow | | a further £42.6m in respect of closed | | (2020: £2.4m gain). Excluding the | | The Group reported cash inflow for the centres (2020: £23.3m). mark-to-market of the convertible bond year of £111.1m before net investment and a small foreign exchange translation | Pre-IFRS 16 EBITDA including the | | | in growth capital expenditure (2020: | | --- | --- | --- | --- | | | † | gain of £0.1m (2020: £3.2m gain), the | | | adjusting items | was £58.5m | | £74.4m), which is a strong improvement | total net financial expense was £27.7m (2020: a loss of £245.7m). on the cash outflow of £230m in the six (2020: £16.4m). months to 30 June 2021. This reflects ### Overhead investment the inflection of our trading performance ### Taxation | | † | | and an improvement in working capital | | --- | --- | --- | --- | | Reported Group overheads | , excluding | | | | | | The reported effective tax rate for 2021 | after the payment of deferred rents in | adjusting items of £33.1m, decreased is (4.0)% (2020: (5.2)%) on continuing H1 which were retained in 2020. 2.4% at constant currency to £294.7m operations. The effective tax rate on (2020: £311.1m). Overall, the Group reported a reduction continuing operations under pre-IFRS 16 in net debt for the year of £391.4m. This | Under pre-IFRS 16, Group overheads | | is (4.9)% (2020: (7.6)%). Despite | | | --- | --- | --- | --- | | | † | | was after the investment in net growth | | excluding adjusting items | reduced by | reporting a loss for the year, the Group | | capital expenditure of £142.5m (2020: 6.2% at constant currency to £294.0m incurred a tax charge due to the continuing £203.8m), purchase of investments in (2020: £322.8m). This is another good profitability of certain countries and joint ventures of £33.4m, proceeds from performance, building on the decisive entities within the overall Group. franchise agreements of £52.3m, the actions which commenced in 2020. Looking forward, factors that may return from an aborted potential As a percentage of Group revenue, | | † | potentially influence the effective tax rate | acquisition of £283.7m and a currency | | --- | --- | --- | --- | | overheads | were 13.2% which is 10 bps | | | | | | include the shape of the recovery in the | translation benefit of £119.6m. Net debt | lower than the 13.3% of revenue they Group’s trading performance, at 31 December 2021 reduced to represented in 2020, notwithstanding the availability of tax losses and the £6,518.2m from £6,909.6m at the £204.0m reduction in Group revenue continuing ownership of specific countries 31 December 2020. from 2020. We also invested in building or regions which may change due to future our in-country sales teams and our On a pre-IFRS 16 basis, the Group potential franchise agreements. marketing to support our pivot to experienced a cash outflow of £239.1m capital-light growth. before investment in growth compared ### Earnings per share to a cash inflow of £140.7m for 2020. † ### Operating loss – continuing Reported basic earnings per share for The full year cash outflow reflects an the year was a loss of 20.3p (2020: loss ### operations improvement on the £303.0m outflow of 67.9p). The loss per share from † in the six months to 30 June 2021. Adjusted operating loss as reported continuing operations before adjusting was £56.0m (2020: profit of £39.8m). The overall increase in net debt on a items was 17.2p (2020: loss of 26.4p). Including the adjusting items, the pre-IFRS 16 basis was £45.9m, primarily † † Under pre-IFRS 16, earnings per share operating loss was £87.4m compared through the planned reduction in net improved in the year from a loss of to a loss of £350.0m in 2020. growth capital expenditure to £111.8m 63.5p to a loss of 20.9p. Earnings per (2020: £250.9m) and the £283.7m | Under pre-IFRS 16, the adjusted | | | † | | | --- | --- | --- | --- | --- | | | | share from continuing operations | was a | | | | † | | | return of cash from an aborted potential | | operating loss | for the year was £226.9m | | | | loss of 25.8p compared to a loss of acquisition. Net debt at 31 December (2020: loss of £176.0m). The operating 64.0p in 2020. Excluding the adjusting 2021 was £397.0m (2020: £351.1m). profit continues to reflect the drag from † items, the loss per share was 23.7p With the Group generating positive cash growth investment of £83.8m (2020: (2020: loss of 24.2p). flow in the second half of 2021, the £51.0m) as well as losses of £49.4m † Diluted earnings per share for the year year-end position is better than the from centres closed during 2021 (2020: was a loss of 20.9p (2020: loss of 63.5p). interim net debt position of £414.6m £49.4m from closures in 2021 and Diluted earnings per share on a at 30 June 2021. 2020). Including the adjusting items of † continuing basis before adjusting £21.1m, the operating loss was items for the year was a loss of 23.7p £248.0m (2020: loss of £555.5m). (2020: loss of 24.2p). iwgplc.com 49 CHIEF FINANCIAL OFFICER'S REVIEW CONTINUED # Cash flow The table below reflects the Group's cash flow: | £m | 2021 (As reported) | 2021 IFRS 16 impact | 2021 (Pre-IFRS 16) | 2020 (Pre-IFRS 16) | 2020 IFRS 16 impact | 2020 (As reported) | | --- | --- | --- | --- | --- | --- | --- | | Adjusted EBITDA | 1,057.7 | 978.1 | 79.6 | 113.8 | 1,100.1 | 1,233.9 | | Working capital^{1)} | (146.1) | 28.0 | (174.1) | 242.3 | (205.0) | 39.3 | | Growth-related partner contributions | – | 50.4 | (50.4) | (106.6) | 106.6 | – | | Maintenance capital expenditure | (101.1) | – | (101.1) | (96.9) | – | (96.9) | | Maintenance-related partner contributions | 5.2 | – | 5.2 | 15.0 | – | 15.0 | | Tax paid | (5.4) | – | (5.4) | (21.9) | – | (21.9) | | Finance costs | (182.6) | (167.1) | (15.5) | (17.0) | (249.4) | (266.4) | | Finance lease liability arising on new leases^{2)} | (561.6) | (561.6) | – | – | (917.0) | (917.0) | | Proceeds from partner contributions (lease incentives) | 35.9 | 35.9 | – | – | 111.0 | 111.0 | | Other items | 9.1 | (13.5) | 22.6 | (8.0) | (14.6) | (22.6) | | **Cash flow before growth capital expenditure, investments, share repurchases and dividends** | **111.1** | **350.2** | **(239.1)** | **140.7** | **(66.3)** | **74.4** | | Gross growth capital expenditure | (192.9) | (30.7) | (162.2) | (337.5) | 47.1 | (320.4) | | Growth-related partner contributions | 50.4 | – | 50.4 | 106.6 | – | 106.6 | | **Net growth capital expenditure** | **(142.5)** | **(30.7)** | **(111.8)** | **(230.9)** | **47.1** | **(203.8)** | | **Cash flow before investments, share repurchases and dividends** | **(31.4)** | **319.5** | **(350.9)** | **(110.2)** | **(19.2)** | **(129.4)** | | Purchase of shares | – | – | – | (43.7) | – | (43.7) | | Dividend | – | – | – | – | – | – | | Corporate financing activities | 0.6 | – | 0.6 | 1.8 | – | 1.8 | | Net proceeds from the issue of shares | – | – | – | 313.9 | – | 313.9 | | Proceeds on convertible bond | – | – | – | 343.2 | – | 343.2 | | Less: Debt element of convertible bond | – | – | – | (291.4) | – | (291.4) | | Investment-related loan receivable | 283.7 | – | 283.7 | (276.2) | – | (276.2) | | Net proceeds on transactions | 18.9 | – | 18.9 | 3.3 | – | 3.3 | | Exchange movement | 119.6 | 117.8 | 1.8 | 2.3 | 6.7 | 9.0 | | Decrease/(increase) in net debt | 391.4 | 437.3 | (45.9) | (37.0) | (12.5) | (69.5) | | Opening net debt | (6,909.6) | (6,558.5) | (351.1) | (294.1) | (6,546.0) | (6,840.1) | | **Closing net debt** | **(6,518.2)** | **(6,121.2)** | **(397.0)** | **(351.1)** | **(6,558.5)** | **(6,909.6)** | 1. Consists of proceeds from partner contributions of £19.7m (2020: £58.4m), an increase in trade and other receivables of £127.5m (2020: £76.4m) and a decrease in trade and other payables of £38.5m (2020: increase of £77.3m) as disclosed in the consolidated cash flow statement on page 121. 2. The financial liability arising on new leases consists of the non-cash movements arising on new leases recognised less lease-related finance costs. # Capital investment in the network In line with the Group's expectations, net growth capital expenditure in 2021 reduced by £61.3m to £142.5m (2020: £203.8m) whilst adding a similar number of new locations and space, representing clear evidence of the increasing success of our capital-light growth strategy. Under pre-IFRS 16, net growth capital expenditure reduced by £139.1m to £111.8m (2020: £250.9m). During 2021 we added 146 new locations (2020: 141) and rationalised 145 locations (2020: 217), mostly directly COVID-19 related. At 31 December 2021, the Group's physical network comprised 3,314 locations globally, providing the largest global and most widely distributed network. The new locations added 4.1m sq. ft. of gross space. This, together with the impact of the rationalisation programme, resulted in the Group having 64.1m sq. ft. of gross space at 31 December 2021 (2020: 62.9m sq. ft.). Maintenance capital expenditure, both as reported and on a pre-IFRS 16 basis, increased modestly to £101.1m from £96.9m. After partner contributions received, net maintenance capital expenditure increased from £81.9m to £95.9m. # Strong financial position Reported net debt at 31 December 2021 reduced to £6,518.2m (2020: £6,909.6m), representing the renegotiation of existing leases and increased success of our capital-light growth strategy. Net debt at 31 December 2021 on a pre-IFRS 16 basis was £397.0m (2020: £351.1m). This is an improvement on the net debt position at 30 June 2021 of £414.6m, reflecting positive cash generation in the second half. The 31 December 2021 net debt position reflects the previously highlighted return of the £283.7m investment on an aborted potential acquisition and the 98 M/G plc Annual Report and Accounts 2021 STRATEGIC REPORT | higher-than-normal cash outflows | Foreign exchange rates | | | --- | --- | --- | | resulting from the completion of more | | At 31 December Annual year average | | deals with landlords, which triggered the | Per £ sterling 2021 2020 % 2021 2020 % | | | release of previously deferred rent | US dollar 1.35 1.37 (1.5)% 1.38 1.29 7.0% | | payments held over by the Group in 2020. Euro 1.19 1.11 7.2% 1.16 1.13 2.7% In February 2022, the Group reduced the £950m revolving credit facility to £750m with an unchanged maturity development of our business and The Directors consider that the Group is date in 2025. | | dividend distribution to shareholders. | well placed to successfully manage the | | --- | --- | --- | | In addition, a £330m bridge facility for | However, given the prolonged | actual and potential risks faced by the | | The Instant Group acquisition has been | uncertainty caused by COVID-19, we | organisation including risks related to | | agreed. The bridge facility has a maturity | believe it is prudent to protect our | COVID-19. | | in September 2023. | liquidity and as a result, future dividend | | On the basis of their assessment, the payments and a restart of our share Directors have a reasonable expectation ### Foreign exchange repurchase programme are placed on that the Group has adequate resources The Group’s results are exposed to hold for the moment with a clear to continue in operational existence translation risk from the movement in intention of the earliest possible return for a period of at least 12 months from currencies. During 2021 key individual to our stated shareholder return policy. the date of approval of these group exchange rates have moved, as shown in consolidated financial statements and ### Going concern the table above. Overall, these exchange consider it appropriate to continue † rate movements had a mixed impact on The Group reported a loss after tax of to adopt the going concern basis in the Group’s results. Revenue and gross £269.7m (2020: £645.3m) from preparing the financial statements profit were reduced by £91.1m and continuing operations for the year, while of the Group. £2.1m respectively, but operating profit net cash of £734.8m (2020: £968.9m) In February 2022, the Group reduced increased by £7.2m, reflecting the was generated from operations during the £950m revolving credit facility to relative contribution to Group profit the year. Although the Group’s balance £750m with an unchanged maturity from our US business. sheet at 31 December 2021 reports a date in 2025. The facility is subject to net current liability position of £1,439.4m financial covenants which include ### Risk management (2020: £1,330.4m), which could indicate quarterly or semi-annual EBITDA and Effective management of risk is a key a potential liquidity risk, the Directors minimum liquidity requirements and/or area of focus for the Group and, crucially, concluded after a comprehensive review interest cover and Net Debt to EBITDA integral to our strategic planning. A that no liquidity risk exists as: ratio requirements. detailed assessment of the principal 1. The Group had funding available risks and uncertainties which could In addition, a £330m bridge facility for under the Group’s £950.0m Revolving impact the Group’s long-term The Instant Group acquisition has been Credit Facility. £530.1m (2020: performance and the risk management agreed. The bridge facility has a maturity £731.3m) was available and undrawn structure in place to identify, manage in September 2023. This facility is at 31 December 2021. This facility is and mitigate such risks can be found secured and is subject to interest cover committed until March 2025 with an on pages 66 to 75 of this report. and net debt to EBITDA covenants. option to extend until 2026 (note 24); and On the basis of these actions and ### Related parties | | 2. The Group maintained a 12-month | assessments, the Directors consider it | | --- | --- | --- | | There have been no changes to the type | rolling forecast and a three-year | appropriate to continue to adopt the | | of related party transactions entered into | strategic outlook. It also monitored the | going concern basis in preparing the | | by the Group that had a material effect | covenants in its facilities to manage | financial statements of the Group. | | on the financial statements for the | the risk of potential breach. The Group | | | period ended 31 December 2021. | expects to remain within covenants | Glyn Hughes | | Details of related party transactions that | throughout the forecast period. In | Chief Financial Officer | | have taken place in the period can be | reaching this conclusion, the Directors | | | found in note 30. | | 8 March 2022 | have assessed: – the potential cash generation of the ### Dividends and share Group against a range of illustrative ### repurchase programme scenarios (including a severe but For the purposes of liquidity, we are plausible outcome); and ensuring that the Group maintains – mitigating actions to reduce sufficient funding especially in a period operating costs and optimise cash of significant centre rationalisation. Our flows during any ongoing global capital allocation policy remains in place, restrictions. prioritising investment in the long-term iwgplc.com 51 ENVIRONMENT, SOCIAL, GOVERNANCE ## ESG at the heart of ## our business ### In last year’s Annual Report, we said that sustainability was at the top of our ### agenda. This year, that statement is truer than ever, as we work hard to ensure ### that we are open and transparent on the ESG issues that matter most to all ### stakeholders. We aim to be a leading force in this area, evolving We have reviewed the Environmental, Social and our business and reporting practices to meet all Governance (ESG) issues that were most material stakeholders’ expectations in relation to our ethical to IWG’s business and determined that these and sustainability practices. continued to be key priorities in 2021 (see table below). We measure and report on the progress we have made against each one. ### Environmental Material issue Action Measurement Sustainable working model – Reduced energy consumption – 2021 Carbon Disclosure Programme – Waste reduction & recycling – Reduced water usage ### Social Material issue Action Measurement Employment opportunities, – Talent retention/acquisition – Volume of new hires (including health and wellbeing and – Training and education graduates and interns); internal recognising talent promotions; courses and training – Health and wellbeing completed campaigns/initiatives – Competitiveness of compensation and – Feedback and recognition reward – Performance reward Diversity, equity and – Recognising talent in all diverse – Workforce diversity inclusion offerings – Training programme participation – DE&I training programme – Affinity/Business Resource Groups – Voice Councils programme Corporate social – Corporate citizenship – Community investment (financial value responsibility – Proactive local community generated) support ### Governance Material issue Action Measurement | Corporate governance – Embed sustainability principles | | – Adherence to structure and approach | | --- | --- | --- | | | within business operations | (detailed on pages 78 to 85) | | Risk governance – Principal risk review and | | – Risk management structure and | | | mitigation | approach (detailed on pages 66 to 75) | – Business Assurance function conducts Ethics and compliance – Training and education risk studies and tests compliance with – Whistleblowing channel Bribery and corruption internal controls Compliance with local – Compliance training – Compliance reporting legislation 52 IWG plc Annual Report and Accounts 2021 ENVIRONMENT STRATEGIC REPORT ## Environment ### Hybrid working can help to IWG has an unparalleled network of ### IWG is committed to inner and outer-city locations, presenting ### build a better future ### delivering positive a wide choice of flexible workspaces for The majority of corporations, both businesses to choose from. By adopting ### environmental change for domestic and global, are actively the hybrid working model, companies incorporating hybrid working into their ### the long term. Through our can optimise the workspace they need operating models. The environmental and support people working at or near ### business model we provide agenda is one of the drivers of this home, reducing employee commuting change. We are increasingly seeing more levels. The compound saving across ### two clear, complementary businesses signing up to net zero these two factors can significantly commitments, with associated ### ways in which we can make reduce office-related carbon intensity. implications for their own core While reduced emissions at the office ### a real difference. operations and supporting supply chains. and from commuting have to be This is creating a shift in the way balanced against increased energy use Our core area of expertise, hybrid businesses manage their real estate in the home, most studies show working, provides a powerful enabler for portfolio and workspace policies. nonetheless that home or local working our customers to reduce their carbon – Sustainability is no longer a ‘nice-to- results in a net reduction. One suggests footprint. However, it is not enough for have’: businesses are positioning that carbon reduction can be as high as us to enable the environmental (1) sustainability at the forefront of their 77% . strategies of our clients and we have an decision-making, including real estate. exciting and positive carbon-reduction | strategy relating to our own business. | – New standards in sustainability: | | --- | --- | | We have taken the foundational steps | businesses are demanding new | | towards its creation in 2021, which will | minimum sustainability standards for | | allow us to enact a comprehensive | the spaces they occupy, including | | carbon reduction strategy in 2022 with | energy performance, sustainable | | the objective of achieving carbon | sourcing and responsible | | neutrality during 2023. | management. | 1. Source: IWG White Paper, Hybrid World: Sustainable World, 2021 iwgplc.com 53 ENVIRONMENT CONTINUED ### Hybrid working also has the potential to Our carbon-reduction Decent work and economic revitalise communities, as workers spend ### growth: economic growth strategies more time working at or close to home. can come from increased In 2021 we took the foundational steps This ‘hub-and-spoke’ model and the productivity, as workers necessary for us to progress a carbon- increasing number of flexible choose to work when and reduction strategy during 2022. Guided workspaces can also contribute to an where they’re happiest and by the Greenhouse Gas (GHG) Protocol, increase in wellbeing, community spirit most effective. developed by the World Resources and the creation of local supply-chain Sustainable cities and Institute (WRI) and the World Business networks. This working model is not only communities: hybrid working Council for Sustainable Development fundamentally and permanently revitalises communities, as (WBCSD), we carried out research during changing the way our clients work: it is more time is spent working at 2021 to determine our carbon-footprint also transforming how people want to or close to home. This can boundary and began analysing data to work for, and partner with, them. also increase wellbeing and make an accurate carbon calculation. We The major role that hybrid working can community spirit. used this work to help us identify the play in achieving their ESG goals means best approach for us to take. that companies can support six of the We are committed to helping all To meet our ambition, we are pursuing United Nations Sustainable stakeholders understand more about three parallel strategies: Development Goals (UN SDGs) for 2030 how their actions can help reduce the through its adoption. – Investment: actively seeking low environmental impact of their business operations and make their workspaces carbon properties and buildings with ### United Nations Sustainable low carbon energy suppliers. more sustainable. During the year, we ### Development Goals: published a series of educational white – Improvement: driving significant papers on a range of sustainability- sustainability impact through the Good health and wellbeing: related subjects, including papers titled widespread implementation of time spent working at home The 15-Minute Commute and Hybrid innovative initiatives, including or at a nearby office that’s World: Sustainable World. increased recycling and energy accessible by foot or bike reduction alongside improved staff means fewer stressful Both of these papers also highlighted engagement through our sustainable commutes and a generally how the hybrid working model cuts working model. healthier lifestyle. carbon emissions, reducing the need for – Carbon removal: in combination with workers to travel long distances to work Gender equality: hybrid the two strategies above, we aim to thanks to workspaces in or close to the working offers a future of address the emissions we are unable communities where they live. more equal opportunities and to reduce by leveraging commercial more equitable sharing of In addition, our centre-based teams offset schemes to accelerate the family responsibilities. regularly engage with their customers trajectory of our carbon-reduction and other stakeholders with advice and work. We will progressively replace Affordable and clean energy guidance on making their workplaces the emissions that are being offset and climate action: hybrid and ways of working more with embedded savings from the working can lead to environmentally friendly. greening of the estate. significant reductions in | greenhouse gas emissions | Delivery of these three strategies will | | --- | --- | | through fewer car and plane | enable our ambition of becoming | | journeys, while companies | carbon neutral during 2023. Further | | can reduce their carbon | details on the three strategic pathways | | footprints by downsizing | are as follows. | their offices and working from more advanced buildings. 54 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT iwgplc.com iwgplc.com 55 ENVIRONMENT CONTINUED ### 1. Investment strategy 2. Improvement strategy While this performance is pleasing, we are confident that we can do even Sustainability is of paramount We place a strong focus on continually better. One example of further importance for IWG. During 2021, we improving the performance of our improvement is in the UK, where we launched an audit into the energy source existing operations, specifically in have started to roll out an electric- and certification status of our centres, reducing energy and water consumption, vehicle (EV) charging infrastructure which we aim to finalise in 2022. This recycling and reducing waste. across the country, with imminent will identify which of our centres are Reducing energy consumption delivery across 33 locations. This will powered by renewable energy or have become a global initiative as we aim to sustainable building certifications in Our energy-efficiency solutions have make all our workplaces more place, such as Leadership in Energy and played an essential part in our sustainable. We are also developing an Environmental Design (LEED) or Building environmental strategy and support the initiative to lease EVs for use by our Research Establishment Environmental creation of emission savings across our employees, so reducing the emissions Assessment Method (BREEAM). business operations. We were pleased caused by their commutes to work, their for the sixth consecutive year to have This work will enable us to prioritise and business miles and their personal travel. received a strong ‘B’ score for our continuously upgrade the environmental climate change submissions to the We continually seek opportunities to performance of our new and existing Carbon Disclosure Programme (CDP), reduce our emissions further and have estate. higher than the global average and that implemented energy-management tools Through a collaborative approach with of our industry group. We have also and centre upgrades, procuring green our partners we will support them in responded more strongly than our technologies where possible and embedding environmentally sustainable industry peers in our governance of improving office facilities. practices within their locations. climate change and emissions-reduction initiatives, consistently receiving a score of A- or above. Energy-conscious design Several of our centres are in older buildings that have been repurposed away from their former usage to take on a new lease of life as a sustainable office building. For example, our Tour & Taxis centre in Brussels was built between 1902 and 1907 as one of Belgium’s foremost shipping and customs hubs. Following extensive refurbishment, its eco-centric features have now earned this Spaces centre an Outstanding rating by BREEAM. It has been refitted with a sustainable design and augmented with renewable materials. The centre runs entirely on geothermal and solar power, drawing on more than 17,000sqm of solar panels on its roof. As in many Spaces centres, rainwater is collected using water-recycling systems to maintain the centre’s 10 thematic gardens. 56 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT | Water usage | Waste reduction and recycling | 3. Carbon-removal strategy | | --- | --- | --- | | Due to the nature of our business, we | With almost 3,400 centres in over 100 | Recognising the urgency required to | | do not directly source or withdraw our | countries worldwide, we have a large | address the climate challenge, IWG is | | water, meaning our impact is considered | and highly dispersed supply chain. | well positioned to accelerate change in | | to be relatively low. | The challenges involved in ensuring | the short term, making tangible | | | all suppliers are compliant with our | contributions to a range of carbon- | Nevertheless, we are proud to have requirements are significant, but we reduction and avoidance projects. achieved a ‘B’ score for our water- have made considerable progress in We believe that the transition to carbon security submission to the CDP for the recent years. neutrality must be driven by shifting our third consecutive year, demonstrating portfolio towards climate-conscious strong management of water For example, IWG operates an effective investments and combining our consumption across our portfolio. We Global Recycling Initiative, in which knowledge and resources to support have again exceeded the performance of all centres around the world actively climate solutions for clean energy, clean our peers, achieving an ‘A’ score or participate. We are also managing plastic transport and environmental protection. above in categories including water waste more effectively, thanks to a business strategy, risk assessment, programme that includes upgrading We aim to select only those carbon- policies and governance. all our coffee machines from those offset projects that are robust, verified that use single-service pods to by third parties and issued by a carbon We also apply water-saving technologies ethically sourced beans. registry. Furthermore, we will assess and awareness initiatives to improve the each project by reference to its social, water usage at our centres. In addition, we have launched a economic and environmental programme to investigate the contributions, prioritising those that sustainability credentials of our demonstrate synergies with climate procurement activities, which will give priorities and the United Nations us the understanding necessary to Sustainable Development Goals. Only manage this area as effectively as when we are confident of an operation’s possible in future. This gives us a quality and satisfied that it meets our clear direction for further evolving criteria will we buy credits. our procurement activities across all product and services areas, countries and centres. iwgplc.com 57 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES ## Task Force on Climate-related Financial ## Disclosures (TCFD) The CFO, Executive Management and Customers and IWG’s internal operations ### The TCFD framework was Board assist with strategy and and staff impacted by these acute ### established by the Financial compliance and have responsibility for physical conditions can immediately business ethics and good governance. resume their business operations at ### Stability Board (FSB) in 2015 This includes the assessment of any unaffected nearby locations. ### and aims to improve the climate-related issues, maintaining Rising mean temperatures have been oversight of our climate-related financial identified as a medium-term chronic ### reporting of climate-related activities, reporting and sponsoring the physical risk. These are expected to have TCFD programme. ### financial information. a potential financial impact by placing A Non-Executive Board Director oversees increased strain on heating, ventilation The TCFD recommendations have been and informs the Board on employee and air-conditioning systems and structured around four thematic areas engagement and the Group’s corporate causing an increase in energy that each represent a fundamental responsibility activities, including consumption. To address this, we have element of how organisations operate: community and environmental projects. implemented energy-saving intervention governance; strategy; risk management; programmes in a number of locations Sustainability is firmly at the top of the and metrics and targets. This is the first and are monitoring them to measure Board agenda. The CEO and Board TCFD review we have issued, and we their impact and launch successful regularly discuss climate-related issues. anticipate we will build upon the measures at more of our sites. information provided here in future You can find more information on IWG’s Assessing risks and opportunities across years as we deepen our understanding corporate governance on pages 78 to 85. future time horizons and climate of and response to climate change. scenarios is central to the TCFD ### Strategy recommendations. IWG will hold its first ### Governance – Describe the climate-related risks and climate-related scenario assessment in – Describe the Board’s oversight of opportunities the organisation has 2022, drawing on guidance from several climate-related risks and opportunities identified over the short, medium, frameworks including the Representative – Describe management’s role in and long term Concentration Pathways (RCPs) set out assessing and managing climate- – Describe the impact of climate-related by the Intergovernmental Panel on related risks and opportunities risks and opportunities on the Climate Change (IPCC). organisation’s businesses, strategy, The Board takes overall oversight for ### and financial planning Transition risks climate-related risks and opportunities. IWG’s CEO is responsible for formulating – Describe the resilience of the As part of our approach to managing IWG’s environmental impact strategy organisation’s strategy, taking into transition risks, in March 2021 we and its delivery through the Senior consideration different climate-related announced our commitment to Leadership Team, once agreed by scenarios, including a 2°C or lower becoming a carbon-neutral business by the Board. scenario 2025. We are bringing forward this Our business is exposed to both ambition and our objective is to achieve In conjunction with the Board, risks are physical and transitional climate-related being carbon neutral during 2023. reviewed and assessed against severity, the likelihood of occurrence and the risks and we are committed to assessing We recognise the opportunity that our current strength of the controls in place. and mitigating the impact they pose climate commitments may bring, as they Responsibility for assurance is delegated across our businesses, strategy and can lead to an increased demand for our to the Audit Committee, while designing, financial planning. services and make us more attractive as implementing and maintaining the an employer. ### Physical risks necessary systems of internal control are We continue to evolve our strategy to responsibilities of the Senior Leadership We consider extreme weather conditions address climate-related risks and Team. By orchestrating climate change within our existing risk management opportunities. We make every effort to initiatives, the CEO can oversee their processes and procedures. To minimise ensure we comply with local regulations implementation and ensure their the financial and operational impact of (see the Governance section on page 65 effectiveness. these events, IWG provides a business- for further detail). continuity and crisis-recovery solution. 58 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Risk management More information can be found in The path forward the Risk management section on – Describe the organisation’s processes This is IWG’s first TCFD disclosure, and pages 66 and 67. for identifying and assessing climate- we view it as a concrete step forward, related risks Effective risk management requires building on our foundation of – Describe the organisation’s processes awareness and engagement at all levels environmental disclosure and for managing climate-related risks of our organisation and it is incorporated transparency. in the day-to-day management of our – Describe how processes for The Transition Pathway Initiative’s business and in the Group’s core identifying, assessing, and managing four-level staircase, a stepped approach processes and controls. climate-related risks are integrated to TCFD in direct alignment with the into the organisation’s overall risk We carry out risk assessments London Stock Exchange’s Climate management throughout the year as part of IWG’s Governance Score, has provided a clear business-review process and for every framework for communicating our IWG operates an enterprise-wide risk investment decision. IWG’s annual CDP actions and intentions through management process for identifying, disclosure programme also captures the measurable climate-related disclosures. assessing, managing and monitoring key risk management process and outlines We have used this framework to assess business and strategic risks, and the updated mitigation measures that our current status and conclude that we understanding the nature, scope and are deployed as risks expand and evolve. are at level 1: awareness, with every potential impacts involved. We set out intention of reaching level 2 in 2022. this comprehensive approach to risk For more information on IWG’s risk management in more detail on pages management, please see pages 66 to 75. 66 to 75. ### Metrics and targets IWG ensures that risks associated with | health and safety, environment and | – Disclose the metrics used by the | | --- | --- | | security are dealt with and managed at | organisation to assess climate-related | | appropriate levels. We operate the three | risks and opportunities in line with its | | lines of defence to manage risk, | strategy and risk management process | | managed by the Board. | – Disclose Scope 1, Scope 2 and if | appropriate, Scope 3 greenhouse gas – The first line of defence is formed by (GHG) emissions and the related risks managers and staff in the front line – Describe the targets used by the operations who are responsible for organisation to manage climate- identifying and managing risk in line related risks and opportunities and with functional objectives. performance against targets – The second line of defence consists of | the functions that oversee or | The adoption of IWG’s greenhouse gas | | --- | --- | | specialise in compliance or the | emission reduction goals and | | management of risk. They set the | commitment to achieving carbon | | policies and procedures and monitor | neutrality was formulated by the CEO | | risks and internal controls. | and agreed by the Board. IWG is on the | | – The third line of defence is provided | journey to calculating its Scope 1 and 2 | | by independent assurance. This line of | greenhouse gas emissions in alignment | | defence tests the design and | with the guidance provided by the | | operation of controls in place, and the | Greenhouse Gas Protocol. | procedures implemented by the first We continue to strive to reduce energy and second line. They assist usage and conserve water across our management and the Board in portfolio. We will build on our metrics conducting risk studies and test and targets to guide the implementation compliance with internal controls. of our commitment to reducing greenhouse gas emissions. iwgplc.com 59 SOCIAL # Advancing our talent strategy 2021 was a defining year. We hired more people than in any other year in our trading history and trained our team on the broadest curriculum to date. We were recognised as being in the top 1% of employers from the Leading Employers group. Our IWG people promises are to provide: - interesting and achievable work; - a manager who cares; and - an opportunity to advance and develop. To give our customers a great day at work, we first have to ensure our team members have a great day at work. The two are inextricably linked, and talent is therefore always at the forefront of our global strategy as the cornerstone of success for IWG and the customers we are proud to look after. The key people strategies are: - building a global HR platform; - acquisition of talent; - learning, development and careers; - diversity, equity and inclusion (DEBI); - communication and recognition; and - reward. ## The HR platform As our team grows across the world, we are providing two key HR tools as part of the on going simplification and efficiency programme that will run into 2022, supporting the growth of our investment partners and IWG. First, we are building an extensive HR platform that is accessible to all team members around the clock. This is a one-stop shop for everything from information on local and global policies, processes and documents to access to the IWG Learning Academy. Here you can raise an HR ticket, view data and much more. The platform provides employers and line managers with greater efficiency and real-time solutions to get their jobs done quickly and seamlessly. In addition, all our team members use TeamHub, a unique app they can access on any device, day or night. This gives them a rapid and intuitive way to book time off, register sickness or any other sort of absence, raise an IT ticket and see who is at work or out of office. It also enables them to check in for work every day, a vital security and safety feature in a geographically dispersed business. ## Talent acquisition We continued to recruit new talent throughout 2021, with a focus on delivering and deploying innovation, automation and simplification to give customers and team members a great day at work and ensure we can respond to the needs of the business over the next decade. In a record year we hired more than 3,000 new colleagues in a variety of roles, with a primary emphasis on the teams who look after our customers. We also added new opportunities in product development, country management, sales, technology franchising, acquisitions and project management. Graduates and interns are always a key element of our talent strategy, and we will wherever possible continue to provide them with employment opportunities. We took the opportunity to create a new learning and career development programme specifically for this cadre of our workforce, which we will launch in 2022. Of course, 2021 was another exceptional year, pivoting very quickly from a first half when there was great talent available to a second half characterised by a very competitive global landscape for talent. We responded by revising our fixed salary bands, city by city and country by country, to remain competitive in both retaining our exceptional people and in hiring new talent. We also launched a totally new global website for the external market, which better reflects the wealth of opportunity that is on offer at IWG. We also now have an easier, faster and fully inclusive process in place that makes it simple for all candidates to apply for roles with us. ## Diversity, equity and inclusion (DEBI) Diversity of talent continues to be a major focus area for us, and our recruitment channels and processes offer opportunity to everybody. In 2021, for example, we offered freelancers and home workers a range of opportunities that can be done on a part-time basis and entirely from home. This approach is designed to suit people with priorities that make it difficult for them to commute or be based in an office. In addition we will continue to partner with the Good Youth Employment scheme giving opportunity to talent starting off in their careers. Diversity statistics | | Male | Female | | --- | --- | --- | | Gender | 35.5% | 64.5% | Example: North America In our largest market our ethnicity reporting is as follows: | | Ethnicity | | --- | --- | | American Indian | 0.8% | | Asian | 5.1% | | Black | 19.4% | | Hispanic | 20.2% | | Pacific Islander | 1.2% | | Two or more races | 2.6% | | White | 50.7% | We extended our online programme on DEBI during the year. This included interactive webinars exploring what DEBI means in practice, investigating how we should all interact without bias with all IWG team members, partners, customers and other stakeholders. We also launched a series of 'Affinity Groups' in the US. Made up of team members, these work with the Company to make and consider recommendations on how best to ensure we remain fair and equitable in our day-to-day business operations. We also launched our global 'Voice Councils' programme, an initiative led by team members to provide a dedicated forum where relevant senior audiences can hear their views, with the aim of establishing greater understanding of people's actual needs across the business. Regional webinars were set up 90 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT | on a quarterly basis with elected | introduction to local marketing and | We held our annual leadership | | --- | --- | --- | | representatives from all countries. The | technology skills. | conference on a virtual platform in 2021, | | agenda of each meeting is led by | | which included our first virtual global | We launched a new leadership the participating Voice Council award ceremony to recognise just some programme incorporating 360 feedback representatives, who gather questions, of our team members’ extraordinary as a starting point with a coaching and feedback and suggestions in advance achievements. mentoring programme as development from their colleagues. Answers and and on going support. At a local level, team leaders and suggestions are captured and distributed managers give out ‘recognition pins’ to for information to the broader As a result of the People Plan, we colleagues on the spot for exceptional population, along with progress made promoted more team members from the behaviours, including team members on previous action items. field into Group functional roles than who have gone above-and-beyond for ever before in 2021. In addition, our These meetings have helped to their customers or colleagues. These customer facing teams have a defined continuously improve the business in are complemented by recognising career path with multiple opportunities an orchestrated manner. They have also extraordinary achievements such as on offer. increased levels of engagement between long service, certificates for exemplary our leadership and those working in the Communication and recognition work and on line badges for training field. In addition, they are improving our accreditations that underpin career Communication and connectivity people’s sense of team work and their development at IWG. continued to be important in 2021 as ability to improve situations both for hybrid working added complexity to Reward themselves and for the team members staying aligned and connected with one they represent. Reward is a key focus area for us, and we another. work hard to ensure that high-potential This is a key part to our commitment Communications on staying healthy, our people at every level – from intern to the to deliver on our promise to give financial progress, new partnerships and Executive Committee – are encouraged team members interesting and important milestone events played a key to stay with us via short and long-term achievable work. role in our communications programme incentives. We also continue to operate our for the year. In the second half of the year, we set confidential ‘Right to Speak’ reporting We also continued to operate our ‘Share about re-setting fixed pay for our helpline for all members of our extended a Great Day at Work’ initiative, which customer facing team members. team across the world. In addition, we featured team events including informal This was complemented by variable-pay have various programmes in place to online team meetings and pictures programmes focused on giving provide employees with confidential showing our people running customer customers a great day at work. counselling services, 24/7 and for events in our centres. We also 365 days a year. We also cascade short-term incentive highlighted our charitable activities here, plans throughout the organisation to inspiring us all wherever possible to give Learning, development and careers ascertain that everyone is rewarded for back to individuals and communities. The learning and development curriculum ensuring the millions of members and This programme has been highly is focused initially on giving our team customers who use our workspaces and successful: simply sharing special members the right start at IWG. It is then service portfolio receive a consistently moments with one another has helped about developing their skills and great service. us remain connected as a team, knowledge to offer opportunities to delivering an uplifting communication develop to take the next step on their platform for everybody. career ladder. Our usual ‘drum beat’ of business 2021 was another record year for initiatives such as quarterly leadership training and development at IWG. We calls, employee newsletters and townhalls filled 24,000 training slots (webinars) all continue to play an important role in from induction to skills development in our communications strategy. key areas such as customer service, sales and communication. We also launched our new first line management ### Step up programme development programme, underpinning our commitment to our ‘A Manager who Cares’ programme. A new development in 2021 was our ‘training-in-a-box’ programme which gives managers access to training plans and materials to deliver relevant training locally with their own team members. We held interviews with key executive functional leaders to enable team members to learn more about global functions, what they do and whether they might in future provide a fit for their interests and skills. We also continued our core programmes on important topics including health and wellbeing, financial compliance, and an iwgplc.com 61 SOCIAL CONTINUED ## Community engagement ### The continuation of the ### COVID-19 pandemic through ### the whole of 2021 presented ### challenges to the efforts of ### our colleagues across the ### world to support charitable ### and environmental causes ### within their communities. ### However, yet again they ### managed to overcome the ### difficulties involved and ### United States: Delivering essentials to ### have supported numerous strengthen communities ### causes with their local Our team in California partnered with the Our teams also partnered with Target ### communities. When it comes Food Bank of Contra Costa and Solano to Houston to provide direct food help with their Senior Food Program and assistance, through canned good ### to our Group-level social | | Meals on Wheels. With great enthusiasm, | collections, to food-insecure children, | | --- | --- | --- | | responsibility programmes, | they put together over 150 bags of food | families and seniors who face the risk | | | for seniors and helped Meals on Wheels | of going hungry every day. | ### IWG also provides deliver over 60 bags of food to those ### concessions to many with mobility issues. ### “Thanks to our amazing team ### charities in the form of ### members, friends and family ### “It felt great to be helping and ### reduced or complimentary we were able to collect six ### giving some of our time to our ### office space or meeting dozen pairs of shoes and ### community!” ### rooms. We are proud to enough school supplies to Cindy Lozano, ### help more kids than I could ### announce that at year end, IWG Community Manager ### have imagined get back to ### together with our colleagues ### school with confidence. We Elsewhere in the US, our colleagues and ### we had contributed £438,036 ### customers in Houston partnered with gave back to the community ### to charitable organisations. BEAR, to donate shoes and back-to- ### as a community.” school supplies to those who need it Our global geographic spread across most. The support contributes towards Steve Ganji, more than 120 countries means that CSR the wider provision of emergency IWG Community Manager continues to be highly localised. While items as well as various resources we have a global framework in place, our throughout the year for abused, community engagement takes place at a neglected and at-risk children in the local level, allowing our colleagues to Greater Houston Area. provide support to causes and charitable organisations that are important to them, their communities, their customers and their wider stakeholders. As a result, every year a broad range of charitable and environmental giving takes place across our global footprint, from fundraising activities to donations of gifts in kind. 62 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Mexico: Collecting toys United Kingdom: Supporting through sport ### for smiles IWG teams across Mexico have been Our colleagues have been very active In addition to these initiatives, IWG supporting vulnerable children this year. this year in support of charitable causes teamed up with KidsOut to put a smile in their areas. In London, they on each and every child’s face during Many centres organised toy and clothing participated in a charity tournament in the festive season. Children sent collections to show their support for partnership with St. Mungo’s Homeless through over 4,000 wishes to IWG, different communities, donating where Charity. In addition, 12 IWG colleagues which were displayed on Christmas possible. In Cancun our team worked signed up to the British Heart Foundation trees in the centres. Our colleagues with Cancun Center Foundation to provide Charity/Running challenge, running a and customers were invited to grant support to children from Wayak Community total of 2,692 miles and raising the same these children’s wishes by donating to Centre in Quintana Roo, while in amount. Our HR Manager completed the a local refuge home the toys the Queretaro our team collected clothes Thames Path 100 challenge, running a children were asking for. and toys for children from the ‘La Llave’ 100km race to raise funds for Ingane community in Mexico City and Michoacan. Our colleagues were overwhelmed by Yami Children’s Village and raising over everyone’s generosity as more than Our Guadalajara Regus team also joined £1,400 for the children. 2,000 gifts and £3,339 were donated their chosen collective called Posadas In another part of the country, our team to a total value of £30,723. Urbanas to donate and bring a smile to in Marlow took part in the ‘pedal power’ children in one of the most vulnerable ### challenge together with their customers, “Our community team at Marlow areas of the city. By uniting efforts to cycling throughout the day to raise ### provide toys and clothes, our teams were was beyond helpful when it money for the Alzheimer’s Society. The able to spread generosity and kindness ### challenge aimed to raise awareness of came to the delivery of our throughout the festive season. the 7,000 local people suffering from ### charity event, facilitating all our the disease by walking, running and ### “What we seek and desire for a ### cycling 7,000km. requirements, adding fresh ### better world will not happen if ### ideas, and even joining in to ### good men and women do not “It is very much our pleasure to ### raise funds. They’ve built a ### take the initiative to do it. We be able to help along with all ### strong network of tenants and I ### are the ones who must make the other customers in the ### feel this sense of connection ### the change. We are the change centre. Well done for ### helped us smash our ### we are looking for. IWG reflects organising such a ### fundraising target.” ### its social role not through worthy cause.” Jacey Bunker, BWP Business ### words, but through the Steve from Emenda, Director, IWG customer ### initiatives of our most valuable IWG customer ### asset: our people.” Samir Amad, IWG Executive Vice President, Latin America iwgplc.com 63 SOCIAL CONTINUED ### Spain: Raising awareness Australia: Promoting healthy ### and sustainable communities ### The Spanish Association Against Cancer Our team in Australia has been proactive “Our collaboration with (AECC) has continued in its mission to in supporting their communities. For ### Mentally Healthy City fight against cancer. To support its example, our franchise partner in ### efforts, our team designed a campaign to Townsville hosted volunteer groups to Townsville was an excellent raise awareness and collect donations support The Goodbox, a charity that ### opportunity to offer free for World Cancer Day. distributes care boxes containing ### essential items for homeless people. Mental Health workshops to Our colleagues also organised Wider engagements have also seen the ### campaigns to raise awareness of our clients. Mental health is a kickstart of a Ladies in Business network Multiple Sclerosis (MS). They collected ### significant public health issue and events for Townville’s Young donations on International MS Day to ### Chamber Committee within the area. throughout Australia as it is in support the Madrid Foundation – ### Fundación Esclerosis Múltiple (FEM) – in The team has also collaborated closely many other countries. The their quest to improve care for people with Mentally Healthy City Townsville ### Self-Care mind and body affected. (MHCT), an organisation with a mission to ### create Australia’s first Mentally Healthy sessions helped with building They also celebrated the essential role City. This has enabled events such as ### of women on International Women’s Day your resilience and wellbeing, High Intensity Interval Training and Yoga (8 March), where our team launched a ### classes to be scheduled at the centre encouraging healthy lifestyle campaign to raise awareness and regularly. ### initiate conversations about female changes and the uptake of scientists in history. ### self-care strategies to Additionally, the team also promoted the ### manage stress.” Re-Planta Madrid initiative organised by Madrid Futuro. Their objective was to Rhea Penafiel, repair the damage caused by Storm IWG Area Sales Manager Filomena, in which more than 700,000 trees were affected. As well as physically planting trees, the team’s fundraising efforts enabled many other people to get involved. 64 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ## Corporate governance ### Good governance helps us Data security and risk Ethics and compliance Information security is a top priority for The Board is committed to instilling a ### base the decisions we make IWG and remains a standing agenda item culture of doing what’s right, ensuring ### on what is right for our with the Board. We continue to make that IWG does what is right for the significant investment in this area to environment and for our people and ### people and shareholders; the ensure that the IWG Information Security ensuring that our people act fairly and Management System (ISMS) is professionally in all business activities. ### communities where we work; established, implemented, monitored, To support our culture and values and ### our customers and their reviewed and where necessary improved ensure compliance with our internal so that we always meet the policies, such as our Code of Conduct, ### employees; our partners; and organisation’s specific security and we provide a suite of training courses on ### society at large. business objectives. our global learning platform. Further information on our global learning IWG’s ISMS takes a holistic, coordinated As a result, having good governance platform can be found on pages 60 and risk-based view of the organisation’s supports entrepreneurial and and 61. Employees are encouraged information security risks. We achieve commercial management and ensures to raise any concerns through the information security by implementing the long-term sustainable success of whistleblowing channel as detailed on effective controls including policies, the business for everybody. pages 92 and 93. processes, procedures, organisational structures and software and hardware ### Board sustainability oversight Diversity functions. These controls ensure that The Board has oversight of all the See pages 60 and 61 for information on IWG’s specific security and business Group’s sustainability initiatives and IWG’s diversity initiatives. Details of the objectives are met. You can find key receives regular updates from the Board Diversity Policy can be found in components of the ISMS programme Executive Directors and the Senior our Nomination Committee report on on page 73. Leadership Team. It also has oversight of pages 86 to 87. IWG’s data privacy strategy is to process ESG reporting through Nina Henderson, only the minimum necessary amounts of ### the Non-Executive Director with Bribery and corruption personal data, to the extent necessary to oversight of employee engagement and IWG is committed to carrying out provide a service to our customers and corporate social responsibility. business in an honest and ethical ensure the appropriate safeguards and manner and has zero tolerance of controls are in place to protect this data. ### Risk governance bribery and corruption. We give all The Board defines IWG’s risk appetite employees training on our bribery ### Compliance with local and tolerance and annually reviews and corruption policy, and you can ### legislation the principal risks the Group faces see our statement of commitment and the plans for mitigating them. We make every effort to take all at https://iwgplc.com/Documents/ reasonable and practical steps to ensure IWG-Statement-of- The Audit Committee has responsibility we comply with local legislation and Commitment-540723792-2.pdf for the Company’s system of internal regulations in all the countries where we control and risk management and for ### operate. Compliance reporting is part of Modern slavery ensuring the effectiveness of this our internal control and risk system. You can find details of the IWG has zero tolerance of slavery and management process, and the Audit system and the Audit Committee’s human trafficking. You can read our Committee receives regular updates. review of its effectiveness on pages statement made in accordance with We also provide compliance training to 90 to 93. We detail key risks and actions the Modern Slavery Act 2015, which all employees and encourage them to to mitigate these risks in the Risk the Board reviews each year, at make use of our whistleblowing channel management report on pages 66 to 75. https://www.iwgplc.com/en-gb/ without fear of repercussions. See sustainability. We give all employees pages 92 and 93 for further details. training through our global learning platform. iwgplc.com 65 RISK MANAGEMENT AND PRINCIPAL RISKS ## Managing risk in ## an uncertain world ### We recognise the importance of effective enterprise risk management, especially in an ever ### changing environment. As such we conduct regular enterprise-wide risk reviews to identify ### and consider potential risks to the Group and its strategy. We calculate their possible impact ### and create strategies to protect the interests of IWG and all its stakeholders. ### The Board has overall responsibility Climate change risks and Effective risk management requires for ensuring that IWG has an adequate awareness and engagement throughout ### opportunities risk management framework in place. IWG to provide a top down and bottom Climate change risk has become a This includes approving the risk appetite up view of risk. At IWG risk management standalone principal risk to the business for the Group. Our risk appetite outlines is embedded into operational decision- in 2021. It also presents a unique the extent to which we are willing to making and reflected in the Group’s key opportunity for the Group in providing take measured risks in pursuit of our processes and controls. sustainable office solutions for clients strategic objectives. Risk management takes place at various who may not be able to meet climate levels across the business, including; change targets alone. ### Three lines of defence – monthly performance reviews for all IWG operates the three lines of defence IWG participates annually in the Carbon countries and Group functions; to manage risk, managed by the Board. Disclosure Programme and maintained a stronger rating than the global average – individual reviews of every new See diagram on page 67 for climate change. The Group has set a location investment and all clear target of becoming carbon neutral acquisitions; ### Three lines of defence during 2023. At its core, IWG embraces – an annual budgeting and planning IWG’s risk management framework is the 15 minute commute and advocates a process for all markets and Group designed to improve the prospect of hybrid working environment. functions; meeting our strategic intentions through – a review in each Audit Committee disciplined and practical risk ### Principal risks to the meeting of the status of our principal identification, assessment and ### achievement of our strategy risks; and mitigation. Through this process, we are ### in 2021 – annual review of all risks in our risk able to fully understand the risks and register, updated currently for opportunities present in our day-to-day Our principal risks are linked to our key significant changes between annual operations and in our business business objectives and overall strategy reviews. | objectives. Our enterprise-wide risk | and in 2021 were considered in the | | --- | --- | | management process allows us to | context of the ongoing pandemic, | | understand the nature, scope and | economic downturn and climate change. | potential impact of our key business and A critical component of the risk strategic risks, enabling us to manage management process is to assess the them effectively. IWG therefore has a impact and likelihood of risks, allowing comprehensive approach to risk determination to be made over the management, as set out in more detail current level of controls in place versus in the Corporate Governance report future controls and risk status. All our on pages 78 to 85. principal risks are managed in | In 2021, our risk work incorporated | accordance with our Group risk appetite | | --- | --- | | ongoing pandemic impacts, including | and mitigated as far as reasonably | | economic disruption as well as | practical. We have zero tolerance of | | considering climate change impact on | financial and ethical non-compliance, | | our principal risks. | and aim to have our health, safety, | environmental and security risks In particular, external risk and those managed to levels that are as low as outside of the Group’s control were reasonably practicable. considered in 2021 and included as part of scenario testing. 66 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Three lines of defence ### Board Sets the strategy Defines IWG’s risk appetite Monitors risk management process Assesses overall effectiveness of risk management ### Audit Committee Reviews effectiveness of internal controls Monitors progress against internal and external audit recommendations Approves the annual internal audit plan ### Assurance, risk and internal control reports ### 1st Line 2nd Line 3rd Line | – Front line business operations | – Corporate functions | – Independent assurance | | --- | --- | --- | | – Strategies, policies, procedures | – Sets policies and procedures | – Tests the design and operation | | and controls in day-to-day | – Monitors risks and internal | of controls in place including | | activities | controls | policies, and procedures | | – Daily management of risk in line | | implemented by the 1st and 2nd | – Accountable for the design and with functional objectives lines implementation of risk – Responsible for compliance with management processes and – Assists management and the Group policies, procedures and controls Board in conducting risk studies internal controls – Accountable for the regular – Advises and guides on policies review and appraisal of key risks and internal controls framework – Contributes to the identification – Drives implementation of and assessment of key risks recommendations in the business – Tests compliance with internal controls iwgplc.com 67 RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED Link to KPIs Link to strategy Risk status Strong cash generation, A Network Increased Industry-leading profitable growth enabling investment | | | | | B | Franchise and partnering | | Same | | --- | --- | --- | --- | --- | --- | --- | --- | | 2 | Best-in-class cost leadership | 5 | Attractive shareholder returns | | | | | | | | | | C | Platform (Technology) | | Decreased | | 3 | Global multi-brand network | | | | | | | | | | | | | | * | New | Strategic risks Risk description Mitigation Change / improvement since 2020 Growth risk IWG continues to undertake IWG mitigates this risk as follows: Additional resources were dedicated to network 1 significant growth to development teams. 1. Each investment or acquisition is low risk and 3 develop local and national | | | requires a proposal to be reviewed and | New centres showed strong opening occupancy in | | --- | --- | --- | --- | | 5 | networks. | | | | | | approved by the Investment Committee. | 2021 especially when taking COVID-19 restrictions | | | Mismatches between | 2. A robust business planning and forecasting | into account. | | | network growth and | process is in place to provide timely and reliable | | | A | | | COVID-19 impact: Demand was negatively | | | demand growth could lead | information to address short and mid-term | | impacted during 2021 due to extended COVID-19 B to under or over supply, opportunities and risks to performance. restrictions. The accelerating adoption of hybrid which could impact 3. A quarterly review process is in place to monitor working is anticipated to increase demand as competitive position, new centre performance against the investment COVID-19 restrictions are reduced and new work profitability and cash case to determine if the anticipated returns are habits adopted. generation. being generated. As part of the annual planning process, a growth plan is agreed for each country which clearly sets out the annual growth objectives. Transformation risk Execution of programmes This risk is mitigated as follows: We have recruited a number of senior roles and 3 are not delivered on time or external expertise is called on as and when 1. Governance Committee in place for all 5 do not meet the desired required to assist in the delivery of our transformation programmes. outcomes. transformation. * 2. Project management team is in place to ensure A programmes are monitored and properly managed. C 3. Dedicated resources are recruited to ensure programme requirements are met. External expertise utilised where required. 4. A Resource Committee is established to manage resource requirements needed for the execution of this. Lease obligations The Group’s portfolio of This risk is mitigated in a number of ways: During 2021, the number of ‘flexible’ leases as a 1 leases gives rise to an percentage of the total was 96%. Approximately a 1. Almost all of our leases are ‘flexible’, meaning 2 inherent risk in relation to third of the leases we entered into during 2021 that they are either terminable at our option 5 lease obligations and were variable in nature. within six months and/or located in or assignable associated financial to a standalone legal entity, which is not fully At the end of 2021, we were operating 3,314 commitment. cross- guaranteed. In this way, individual centres locations in 1,135 towns and cities across 120 A Whilst IWG has are sustained by their own profitability and cash countries. B demonstrated consistently flow. This flexibility has no impact on our COVID-19 impact: During 2021 more than 1,500 that it has a fundamentally accounting for leases in the scope of IFRS 16. leases were renegotiated or restructured which profitable business model, 2. Approximately one third of all our leases are resulted in short- or long-term cash benefits. the profitability of centres variable in nature, which means that payments to Reviews and discussions related to leases for is affected by movements landlords vary with the performance of the underperforming centres are an ongoing process. | in market rents, which, in | relevant centre. In this way the ‘risk’ to | | --- | --- | | turn, impact the price at | profitability and cash flow of that centre from | | which IWG can sell to its | fluctuations in market rates is softened by the | | customers. | consequent adjustment to rental costs. | | The life of the Group’s | 3. The sheer number of leases and geographic | | leases are, on average, | diversity of our business reduces the overall risk | | significantly longer than the | to our business as the phasing of the business | | average terms of customer | cycle and the performance of the commercial | | contracts which creates a | property market often varies from country to | | potential for mismatch if | country and region to region. | | revenues fall significantly, | 4. Each year a significant number of leases in our | | which can impact | portfolio reach a natural break point. | profitability and cash flows. 68 IWG plc Annual Report and Accounts 2021 1 4 STRATEGIC REPORT Strategic risks continued Risk description Mitigation Change / improvement since 2020 Economic downturn Failure to respond to an The Group has taken a number of actions to The number of ‘flexible’ leases as a percentage of 2 economic downturn in key mitigate this risk: the total remained at 98%. Our monthly business 5 markets, or changes in performance reviews provide early warning of any 1. Approximately one third of all our leases are market conditions could impact on our business performance and allow variable in nature and our rental payments, if adversely impact our global management to react with speed. The Board A any, vary with the performance of the centre. market share, operating reviewed the potential impact of an economic 2. Lease contracts include break clauses when B revenue and profit downturn and addressed a range of potential leases can be terminated at our behest. performance. impacts from COVID-19 when making its annual 3. The Group also looks to stagger leases in viability statement. locations where we have multiple centres so that COVID-19 impact: There has been sharp focus on we can manage our overall inventory in those cash generation by reducing cost, renegotiating locations. rents and rationalising the network. The adoption 4. We review our customer base to assess exposure of hybrid working is reflected in stronger demand to a particular customer or industry group. in suburban locations versus city centres. Reviews 5. The geographic spread of the Group’s network and discussions related to leases for increases the depth and breadth of our business underperforming centres are an ongoing process. and provides better protection from an economic downturn in a single market or region. Disruptive technology and competitive advantage New disruptive technology IWG continually invests in innovation to develop 2021 saw the continued modernisation of the 1 could negatively impact the new products and services to increase its technology used by IWG. The adoption of the 5 Group’s market share. competitive advantage, protect current revenue Microsoft suite of enterprise products underpins a Failure of the Group to and unlock potential new sources of revenue. digital operating platform which supports business respond to such agility and flexibility. The Company remains competition and/or focused on using emerging technology to improve technological the customer experience and achieve operational developments could result efficiency. in IWG's product offering We are continuously looking at every aspect of our being sub-optimal. business for opportunities to leverage technology to automate, simplify and future-proof our platform. As technology evolves and matures, even more opportunities arise. Increased competition The pandemic has While physical barriers to entry into the flexible The competitive landscape has continued to shift 1 accelerated the shift from workspace market at a local level are low, the in 2021 and has decreased. We continue our 3 | | city and office working to | barriers to establishing a national or international | efforts to offer an unrivalled network and varied | | --- | --- | --- | --- | | 5 | remote working, hybrid | network are much higher. | product range to suit the different requirements | | | models, suburban offices | | of our customers. In 2021, we added 20 new | IWG also offers a diverse product range under its and digital enhancements. towns and cities. different brands to cater to multiple customer A As such, more service office segments, allowing us to capture and maintain COVID-19 impact: There is a continuous review at offerings are likely to B market share across the flexible workspace both Group and country level to identify trends or emerge. An inability to market. activities impacting our business plus new maintain sustainable global acquisition opportunities. competitive advantage We continuously review our portfolio to provide could result in a loss of products and services that are aligned to market share and impact on customer expectations and requirements and profitability for the Group. there are currently active investment programmes being implemented across our estate. Geopolitical Instability Developments Increasing geopolitical The geographies most directly impacted to date The risk of broader economic impacts from 3 instability and conflicts are will not have a material effect on our global geopolitical instability, conflict and sanctions is * directly impacting some of operations or results. Our broader economic increasing. A our markets. Continued downturn scenario planning considers a range of escalation and sanctions economic downturns, irrespective of the cause. B could lead to broader economic impacts. iwgplc.com 69 c RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED Strategic risks continued Risk discription Mitigation Change / improvement since 2020 Business planning and forecasting Business plans, forecasts IWG maintains a three-year business plan which is The existing forecasting process was enhanced by 1 and review processes updated and reviewed on an annual basis. We creating different scenarios as the economic 2 | | should provide timely and | also use a 12-month rolling forecast which is | environment changes due to the pandemic. The | | --- | --- | --- | --- | | 4 | reliable information for | reviewed every month based on actual | main focus has been cash generation by reducing | | | short-, mid- and long-term | performance. | cost, renegotiating rents and rationalising the | 5 opportunities and any risks network. to performance so that COVID-19 impact: There has been focus on cash these can be addressed on flows to provide sufficient liquidity for working a proactive basis. capital requirements and potential acquisitions, The challenges to forecast including focus on debt collection, supplier come from the constantly payments and on underlying profitability of the changing and hard to business. predict external environment driven by the changes in the way people work due to COVID-19 restrictions and the rapid uptake of hybrid working. Funding The Group relies on This risk is mitigated in a number of ways: The Group has a £350m of convertible bonds at a 4 external funding to support fixed rate and the remainder in a Revolving Credit 1. The Group continually monitors its cash flow and 5 a net debt position of Facility provided by a group of prime banks, which financial headroom development and maintains £397.0m at the end of is committed and available until 2025 with an a 12-month rolling forecast and a three-year 2021. Any change to this option to extend until 2026. strategic outlook. The Group also monitors the support would result in relevant financial ratios against the covenants in Effective February 2022, updated financing liquidity risk for the Group. its facilities to manage the risk of breach. The arrangements aligned with the Group’s evolving measurement of these covenant ratios is strategic objectives were put in place, including a unaffected by the recognition of lease liabilities committed RCF to 2025, and a £330m bridge under IFRS 16. facility. We expect to remain within the covenant 2. The Group also stress tests these forecasts with limitations throughout the forecast period. downside scenario planning to assess risk and determine potential action plans. 3. The Board intends to maintain a prudent approach to the Group’s capital structure. 4. Part of the annual planning process is a debt strategy and action plan to ensure that the Group will have sufficient funding in place to achieve its strategic objectives. 5. The Group also constantly reviews and manages the maturity profile of its external funding. Franchise The continued expansion of This risk is mitigated as follows: In 2021, more countries and partners were added 1 our franchising portfolio is in our franchise portfolio. 1. A Franchise Committee oversees key 2 key to the Group’s | | | programmes connected with the franchising | Franchise development and support teams | | --- | --- | --- | --- | | 3 | capital-light strategy. | | | | | | model and ensures that significant risks are | strengthened with the recruitment of dedicated | Achieving our franchising 4 identified and mitigated. franchise development and support personnel in objectives will require the 2. We have regular communications with franchise key markets. Franchise development resources will 5 continued development of partners including sharing best practices to drive be further increased during 2022. our franchising skills, performance and deliver consistent service to services and resources. We have implemented hands-on targeted support our customers. A for franchise partners with monthly reviews to drive performance and review of processes to B identify improvement opportunities. 70 IWG plc Annual Report and Accounts 2021 A STRATEGIC REPORT Financial risks Risk description Mitigation Change / improvement since 2020 Exchange rates The Group's global Given that transactions generally take place in the Overall, in 2021 the movement in exchange rates 2 operations expose it to a functional currency of Group companies, the had a mixed impact on results. Revenue and gross 5 | | variety of financial risks, | Group’s exposure to transactional foreign | profit were reduced by £91.1m and £2.1m | | --- | --- | --- | --- | | | including the effects of | exchange risk is limited. | respectively. Whilst operating profit increased | | | changes in foreign currency | | by £7.2m, reflecting the relative contribution to | | A | | Where possible, the Group attempts to create | | | | exchange rates. In | | Group profit from our US business. | natural hedges against currency exposures particular, the Group’s through matching income and expenses, and substantial US operations assets and liabilities, in the same currency. generate revenue in USD and therefore any currency volatility can impact revenue. The Group does not undertake any speculative transactions to manage risk. Inflation risk Increasing inflationary Mitigating actions include: Inflationary pressures are expected to increase. 2 pressures may impact the 1. The short-term nature of most customer Currently pricing trends are keeping up with 5 Group’s costs, including contracts allow the possibility for prices to be inflation. financing charges, * adjusted in consideration of the evolution of impacting profitability costs. and cash flows. 2. The Group’s capital-light strategy includes a focus on flexible leases and management contracts which reduce the negative impacts of inflation. 3. The Group constantly monitors interest rates exposure and has a fixed rate coupon on its £350m convertible bond up to 2027. Operational risks Risk description Mitigation Change / Improvement since 2020 High Level recruiting and succession planning To achieve its strategic Mitigating actions include: Recruitment channels are constantly under review 3 objectives the Group needs to continue offering opportunities to as wide a 1. Resource Committee in place for key resource to increase its management population as possible in each market. positions 5 capabilities through the 2. Succession planning discussions are an integral The Group has implemented a comprehensive continued development part of our business planning and review strategy to address talent resource requirements. of existing talent process. supplemented by the Key hires are planned for 2022 to meet the 3. Part of the annual planning process is the Human growing needs of the business and reinforce hiring of experienced B Resources Plan, and performance against this succession planning. professionals. This will C Plan is reviewed through the year. support our strategic | execution and enhance | 4. Regular external and internal evaluation of the | | --- | --- | | succession planning | performance of the Board, including succession | | throughout the Group. | planning. | iwgplc.com 71 A A RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED Operational risks continued Risk description Mitigation Change / improvement since 2020 Employee engagement and retention As a serviced-based One of the key items in the Human Resources The Group has in place a comprehensive training 3 business, the strength and Plan is the Global Induction & Training Plan, which programme for all levels and functions. The 5 capabilities of our sets out the key objectives for the forthcoming significant investment in our Group’s Learning and geographically diverse year. Performance against these objectives is Development programme continues to provide a team are critical to reviewed through the year. means to engage with our colleagues through achieving our strategic e-learning, videos, webinars, case studies and Strong ESG and a remote working Human objectives, including coaching. Resources strategy on recruiting and salary delivering outstanding banding, including benchmarking, are in place Our Management Skills Training Programme and customer service. The across the globe to ensure that salaries and Sales and Customer Service Training Academy are increased competition for benefits are competitive. carried out virtually throughout the globe to talent impacts retention at support continuously giving customers a great day all levels, from executives All new employees are surveyed in the first three at work. to centre staff. months to ensure they have been trained and are receiving effective support. Ethics and compliance Ethical misconduct by our IWG manages this risk through: We continue to actively monitor and respond to 2 employees or non- reports in our ethics hotline. 1. Visible ethical leadership. compliance with regulation 2. A robust governance framework including a A robust supplier selection and evaluation either inadvertently, detailed Code of Conduct and other mandatory process continues to be in place with a view to knowingly or negligently B training for all employees (e.g. gifts and enhance controls to address the risk of fraud. could lead to financial loss/ hospitality, anti-bribery and corruption). penalties, reputational All projects are monitored and evaluated by a 3. Centralised procurement contracts with centralised capex finance team. damage, loss of business suppliers for key services and products. and impact on staff morale. A dedicated cost function to review spend across 4. Standardised processes to manage and monitor all categories and detect anomalies or exceptions spend including controls over supplier on- is in place. boarding and payments approval. 5. Regular reviews to monitor effectiveness of controls. 6. Independent and confidential ethics hotline available to employees, contractors and third parties. 7. Independent investigation of fraud incidents and allegations of misconduct with Board-level oversight. 72 IWG plc Annual Report and Accounts 2021 A STRATEGIC REPORT Operational risks continued Risk description Mitigation Change / improvement since 2020 Data protection and privacy IWG is required to IWG mitigates this risk as follows: We continue to remain compliant with data protection and privacy 5 comply with legislation regulations across the business, continuously monitoring and 1. IWG operates a comprehensive in the jurisdictions in enhancing our privacy and security controls, including a project to programme that covers all aspects of A which it operates remove Personal Identifiable Information (PII). We also continue to data privacy and data protection. including the General comply with PCI and Swift standards. B 2. Our strategy is to process minimum Data Protection amounts of personal data, which are In instances where specific countries implement stringent C Regulation (GDPR) and kept only to the extent necessary to new cyber security and privacy laws which could threaten our other local data provide a service to our customers. operations if IWG is found to not be compliant, the Information privacy laws. Non- Security team works with in-country experts to ensure we 3. We apply the principle of ‘least compliance and remain compliant. access’ privilege and separation of breaches could result duties to safeguard our data. in significant financial penalties and 4. All credit card data is stored on PCI reputational damage. accredited payment service providers and not on IWG systems. Cyber security The continued This risk is mitigated as follows: IWG has developed a security roadmap to carry out information 2 integration of the security best practices, strengthen controls and implement security 1. IWG’s Information Security Steering 5 digital economy and operations to detect potential incidents. Committee reports regularly to the use of external cloud Board of Directors and has wide All critical systems have been migrated to the cloud with high services, combined A representation from business availability and geo-redundancy for disaster recovery. As part of with a rise in phishing operations, risk assurance, legal, IT this cloud migration, IWG has implemented best practice cloud B attempts and malicious and Non-Executive Board members. security controls. The entire environment is managed by a world- attacks could result in C 2. IWG runs a world-class Information leading security managed services provider. additional costs and Security programme with ISO/IEC damage. Information Security gates have been established for all new 27000 adopted as its charter to projects which requires conformance to our cloud security establish, operate and monitor its blueprint. Information Security Management In our application development area, we have implemented a System. market-leading static code analysis tool which ensures that all 3. The programme is delivered in code developed follows global secure code best practices. collaboration with external specialists across our environments. A programme is in place to continuously implement new security 4. Using a risk-based approach, IWG features to improve our processes and controls in this area, continuously identifies, evaluates keeping pace with the ever-changing best practices. and applies remediation controls to In our business centre environment, we have a security blueprint threats that could impact the for all centres. We perform penetration testing in this environment security, confidentiality and integrity to ensure that our blueprint remains up to date as either of its assets. technology changes, or new risks emerge. All findings from these 5. IWG transfers residual risk through penetration tests are used to update the blueprint against which its comprehensive cyber insurance all centres need to comply. coverage provided by a global leader in cyber insurance. 6. We have a robust security incident management process which facilitates and coordinates our response in the event of a security incident. 7. Security awareness training is mandatory for all employees that covers Information Security, PCI and Privacy. iwgplc.com 73 RISK MANAGEMENT AND PRINCIPAL RISKS CONTINUED Operational risks continued Risk description Mitigation Change / improvement since 2020 Business continuity Business continuity covering IWG manages this risk through: Our cloud migration project has been 2 systems, regional hubs and completed and all critical systems have disaster 1. The implementation and regular testing of its 3 operations. Should the data recovery plans in place. business continuity plans for different parts of 5 centres, sales call centres, the organisation, which includes business All new systems development includes high regional hubs and centres be processes, personnel knowledge of manual availability and disaster recovery built into the impacted as a result of procedures and disaster recovery procedures initial design phase. A circumstances outside the for our technology systems. All critical Group’s control there could be For our voice communications platform, we B applications have been migrated to the cloud an adverse impact on the have built in additional redundancy in countries with high availability and geo-redundancy, C Group’s operations and where we experience minor disruption due to allowing availability of critical systems and therefore its financial results. external factors. providing employees access to the systems | from any location, a critical element of our | COVID-19 impact: Many employees continue to | | --- | --- | | business continuity plans. | successfully work from home. | | 2. A robust managed services and managed | We have further implemented a daily process to | | security services agreement in place with | ensure critical data is stored securely off-site. | | leading vendor. | This is data that would be needed to run our | | 3. The Group uses a risk-based approach to | business for several days in the worst case | | determine additional redundancy | scenario of both production and DR sites | | requirements across its entire technology | simultaneously being rendered inaccessible. | platform, including the global telephony infrastructure critical for continuity of its sales and call centre environment. 4. Appropriate business interruption insurance is in place. 5. Country Business Continuity Plan and Centre Disaster Recovery Plan are in place and regularly reviewed. 74 IWG plc Annual Report and Accounts 2021 STRATEGIC REPORT ### Viability statement In accordance with provision C.2.2 of the UK Corporate Governance Code, and considering the Group’s current position and prospects as outlined in the Strategic Report and its principal risks for a period longer than 12 months as required by the going concern statement, the Board has a reasonable expectation that the Group will continue to operate and meet its liabilities as they fall due, for the next three years. The Board’s consideration of the long-term viability of the Group is an extension of our business planning process which includes financial forecasting, a robust enterprise-wide risk management programme, regular business performance reviews and scenario planning. For the purposes of assessing the Group’s viability, the Board identified that, of the principal risks detailed on pages 68 to 74, the following are the most important to the assessment of the viability of the Group: – The following principal risks were modelled to support the viability statement – revenue shortfall; – a sterling (£) appreciation; – a significant cybersecurity or data breach event. – Two scenarios (likely-case and worst-case) were modelled for sterling appreciation and cybersecurity or data breach event using assumptions derived from historical data or based on case studies/available market research to determine the impact on revenue, gross profit, operating profit and EBITDA. – Since the impact of COVID-19 and related economic conditions is already factored into the three-year plan (base and downside scenarios), the revenue shortfall scenario is based on these plans. – The impact on performance was assessed over a three-year period (2022-24) and on account of individual risks as well as a combination of risks materialising. The potential impact of each scenario was modelled on the Group’s revenue, gross profit, operating profit, net debt and debt covenants over the three-year forecast period. The Board subsequently considered the viability of the Group both in the context of the individual risks listed above and in combination of two or more risks over a range of assumptions. The stress testing showed that the Group would be able to withstand any of the severe but plausible scenarios by taking management action in the normal course of business. iwgplc.com 75 BOARD OF DIRECTORS ## Board of Directors Douglas Sutherland Mark Dixon Glyn Hughes Chairman Chief Executive Officer Chief Financial Officer | Committee | | Appointment* | Founder | Appointment | | --- | --- | --- | --- | --- | | membership key | | 27 August 2008 | 1989 | 25 March 2021 | | | | Experience | Experience | Experience | | A | Audit | Douglas was Chief Financial | Chief Executive Officer and | Prior to joining IWG Glyn was | | | | Officer of Skype during its | founder, Mark is one of Europe’s | interim CEO of Mothercare plc, | | R | Remuneration | | | | | | | acquisition by eBay. Prior to this, | best-known entrepreneurs. | having previously been the CFO, | | | Nomination | Douglas was an Arthur Andersen | Since founding the Regus Group | where he was instrumental in | | | | Partner with international | in Brussels, Belgium in 1989, he | driving significant strategic | Chairman management responsibilities. has achieved a formidable initiatives to transform its global He has served as a director of reputation for leadership and franchise business. He spent companies in multiple innovation. Prior to Regus and more than a decade with the jurisdictions and was the IWG he established businesses Jardine Matheson Group in founding Chairman of the in the retail and wholesale food several senior finance and American Chamber of industries. A recipient of several executive leadership roles with Commerce in Luxembourg. awards for enterprise, Mark has significant franchising activities revolutionised the way business across various markets. Glyn External appointments approaches its property needs spent the early part of his career Douglas is currently also the with his vision of the future in corporate finance and in Chairman of Socrates Health of work. commercial-facing and strategic Solutions Inc. and a member of roles for both Kingfisher plc and the board of managers of AI Tesco plc. Monet Parento S.àr.l. * Independent on appointment as Chairman on 19 May 2010. 76 IWG plc Annual Report and Accounts 2021 N N GOVERNANCE A R A R R R AA Laurie Harris Nina Henderson François Pauly Florence Pierre Independent Independent Non-Executive Senior Independent Independent Non-Executive Director Director with oversight of Non-Executive Director Non-Executive Director employee engagement and CSR | Appointment | Appointment | Appointment | Appointment | | --- | --- | --- | --- | | 14 May 2019 | 20 May 2014 | 19 May 2015 | 21 May 2013 | | Experience | Experience | Experience | Experience | | Laurie was a global engagement | During her 30-year career with | François is CEO of the Edmond | Florence has over 30 years of | | audit partner with | Bestfoods and its predecessor | de Rothschild Group in Geneva | international corporate finance | | PricewaterhouseCoopers LLP, | company CPC International, | and has over 30 years of | practice, holding senior | | where she advised large public | Nina held a number of | management experience in the | positions at BNP, Financière | | companies, including Fortune 100 | | banking sector. Until April 2016 | Rothschild, Degroof Corporate | international and North financial services companies, in François served as Chief Finance, 3i Infrastructure plc American general management the United States and Executive and Chairman of the and her own M&A advisory and executive marketing internationally over her 38-year Management Board of Banque boutique. Florence has an positions, including Corporate career. Laurie is the chair of the Internationale à Luxembourg. international perspective, Vice President of Bestfoods and Audit Committee as the Board Previous management having worked in Chicago, New President of Bestfoods Grocery. considers her to have recent and experience includes executive York, Paris and Brussels. She has She has also served as a relevant financial experience. appointments at BIP Investment also taught economics and director of numerous Partners S.A., Dexia Group and at finance, published a number of External appointments companies including AXA Sal. Oppenheim jr. & Cie. S.C.A. books and articles on valuation, Laurie currently serves as an Financial Inc., Royal Dutch Shell He was also Senior Advisory and has been a member of Independent Director and Audit plc, Del Monte Food Company Partner at Castik Capital several French entrepreneurship Committee Chair of QBE North and Pactiv Corporation Partners. and innovation committees. America, an integrated specialist External appointments External appointments External appointments insurer which is part of QBE (ASX: QBE); Synchronoss Nina is a Non-Executive Director In addition to being CEO of the Florence shares her time between Technologies, Inc. of Hikma Pharmaceuticals plc, Edmond de Rothschild Group in directorships, private equity (NASAQ: SNCR), a global leader Director of CNO Financial Inc. Geneva, François serves as investments in high-growth and innovator in cloud, (Bankers Life, Washington, Non-Executive Chairman of companies providing innovative messaging and digital National and Colonial Penn Compagnie Financière La and digital-based services, e-platforms and products; insurance companies) and Chair Luxembourgeoise SA and as managing her art collection and Hagerty Inc (NYSE: HGTY), of their Human Resource Non-Executive Director of mountain trekking. an automotive lifestyle Compensation Committee. Nina is Cobepa SA. François also serves company and the world’s largest Vice Chair of Drexel University’s on the board of several provider of specialty insurance Board of Trustees. Commissioner charitable organisations. for enthusiast vehicles; and of the Smithsonian National Everlake Insurance Company, Portrait Gallery, she is a Director a US based insurance company of the Foreign Policy Association specialising in life assurance and the Visiting Nurse Service and annuities which is owned by of New York. Nina holds a the Blackstone Group (NYSE: BX). Bachelor of Science with honours from Drexel. iwgplc.com 77 N N N N N CORPORATE GOVERNANCE ## Introduction to ## corporate governance Attendance (out of possible maximum number of Members meetings) Douglas Sutherland, 14/14 Chairman Mark Dixon 14/14 Eric Hageman* 5/5 Laurie Harris 14/14 Douglas Sutherland Nina Henderson 14/14 Chairman Glyn Hughes** 9/9 François Pauly 14/14 ### Dear Shareholder, and executive leadership roles held Florence Pierre 14/14 with the Jardine Matheson Group and I am pleased to introduce the Corporate * resigned 24 March 2021 more recently as the interim CEO of Governance report for 2021. This report ** appointed 25 March 2021 Mothercare plc. explains our approach to corporate | governance and details the governance | Further information on all Board changes | | --- | --- | | structure we have implemented to | can be found in the Nomination | | facilitate entrepreneurial management | Committee report on pages 86 to 89. | whilst ensuring the long-term ### sustainable success of the Company UK Corporate Governance Code for the benefit of our stakeholders. During 2021 we have complied with the UK Corporate Governance Code ### Length of tenure Sustainability published by the Financial Reporting | of Non-Executive | | Sustainability is a key component of | Council in July 2018 (the “Code”), with | | --- | --- | --- | --- | | | Directors | our strategy and we are pleased to be | the exception of my time as Chairman | | | | bringing our objective for achieving | exceeding nine years from the date of | | | | carbon neutrality forward to 2023. | my first appointment to the Board. This | | | | We have also incorporated strategic | is regularly reviewed by the Nomination | | | | objectives including an ESG target into | Committee which, as further explained | | | | our annual bonus plan for Executive | on page 87, has concluded that due to | | | | Directors. Further information can be | the significant strategic transformations | 0-3 years found in our ESG report on pages 52 to IWG is undergoing, it remains in the 3-5 years 65 and our Remuneration Committee best interests of the Group that I 6-9 years 9+ years report on pages 94 to 108. currently continue in the Chairman role, subject to regular review by the ### Board changes Nomination Committee. We are committed to increasing the A copy of the Code is available on ethnic diversity of the Board and are www.frc.org.uk. pleased to announce that Tarun Lal will ### be joining the Board as a Non-Executive Annual Report Director with effect from 10 May 2022, Your Board and the Audit Committee Balance of subject to obtaining shareholder have reviewed this Annual Report and Non-Executive and approval at the Company’s upcoming consider that it provides the information Executive Directors annual general meeting. necessary for you to assess the Tarun brings extensive franchising Company’s position and performance, industry expertise from over 20 years business model and strategy. with Yum! Restaurants where he has We consider the Annual Report, taken held executive roles including Global as a whole, to be fair, balanced and Chief Operating Officer of KFC and his understandable and seek your approval Executive current role as Managing Director, of the Annual Report at the Company’s Non-Executive Middle East, Turkey, Africa and India. annual general meeting which will be In March 2021 we were pleased to held on 10 May 2022. announce the appointment of Glyn Hughes as Chief Financial Officer. Glyn Douglas Sutherland has brought franchising expertise to the Chairman Board gained from the senior finance | ■ ■ | | 29% 20% | | | --- | --- | --- | --- | | ■ ■ | 78 | 71% 0% | IWG plc Annual Report and Accounts 2021 | | ■ | | 60% | | | ■ | | 20% | | GOVERNANCE ### “Sustainability remains at ### the top of our agenda and at ### the top of our stakeholders’ ### agendas, it underpins our ### strategy and is a key ### consideration in all Board ### decision-making.” ### An effective Board The Chairman and the Company Douglas Sutherland Secretary ensure that our Board Chairman Board composition meetings are structured to ensure time | Our Board is made up of seven unique | for in-depth discussions on key issues | | --- | --- | | individuals with a diverse combination | and to allow time for the Chairman to | | of skills, drive, beliefs, knowledge, | meet with Non-Executive Directors | | personal attributes and experiences. | without the Executive Directors present. | | Individual biographies can be found | They ensure that the Board receives | | on pages 76 and 77. | clear, concise and timely information on | all relevant matters so that discussions The benefits of having a strong and are well-informed. diverse Board are clear and we believe the addition of Tarun Lal’s experience Board papers are made available in and viewpoints will add another advance of meetings on a secure Board dimension to those brought by our portal. This portal is also used to existing Board members. distribute relevant reference material and the Board report. Minutes are taken Further information on our Board ### In this section of all Board discussions and decisions. Diversity Policy, as well as our annual Corporate governance 78 performance review, can be found in our In the event that a Director has a concern Nomination Committee report 86 | | Nomination Committee report on pages | about the running of the Company or a | | --- | --- | --- | | Audit Committee report 90 | 86 to 89. | proposed action, such concerns are | | Directors’ Remuneration report 94 | | recorded in the Board minutes or can be | Board meetings recorded by Non-Executive Directors Directors’ report 109 The Chairman and the Company who are resigning, in a written statement Directors’ statements 111 Secretary plan an annual schedule of which is circulated to the Board. No such matters to be considered by the Board, concerns were raised in 2021. ensuring all key issues are covered and Matters reserved for the Board that topics are covered at appropriate times. Matters that are considered sufficiently material that they can only be made by Initially seven meetings were scheduled the Board as a whole and cannot be for 2021 with additional meetings to be delegated include: arranged as needed to ensure the Board | was kept abreast of the evolving | – approval of long-term objectives and | | --- | --- | | COVID-19 pandemic, as well as our | commercial strategy; | | strategic projects and to respond to | – approval of the annual budget; | business challenges and opportunities in – approval of regulatory announcements a timely manner. In total the Board met including the interim and annual 14 times during 2021, including a financial statements; two-day virtual meeting in February and – approval of terms of reference and a two-day strategy session in September. membership of the Board and its When time-sensitive approvals were Committees; anticipated between meetings the Board – appointment and removal of the delegated its authority to a committee to Company Secretary; be convened as appropriate. – approval of risk management strategy; The majority of our meetings were held – changes to the Group’s capital structure; in a virtual setting as a result of the – changes to the Group’s management pandemic. For the extended Board and control structure; strategy meeting in September 2021 the – capital expenditure in excess of £5m; Board was able to meet in person. Whilst and we have embraced the benefits of being able to meet online during the – material contracts (with an annual pandemic, meeting in person reminded value in excess of £5m). us of the benefits of in-person Full details of the matters reserved for interaction and debate and engaging the Board are available on: socially. The end of November 2021 www.iwgplc.com. meeting was returned to a virtual setting due to the onset of the Omicron variant. iwgplc.com 79 CORPORATE GOVERNANCE CONTINUED ### Development and support ### Induction To ensure continuing development and ### provide appropriate support, all The Chairman, supported by the Company Secretary, is Directors have: ### responsible for preparing and coordinating a customised and – a customised and comprehensive ### comprehensive induction programme for each newly induction programme prepared by the ### appointed Director, ensuring they can contribute effectively to Chairman with the support of the ### Company Secretary, ensuring they can discussion and decision-making. Details of the induction quickly and effectively contribute to ### programme developed for Glyn Hughes are below. discussion and decision-making; – the opportunity to meet with major Glyn was appointed as Chief Financial Officer and Director on 25 March 2021. shareholders; Glyn joined the Group during 2020 so already had a good network and – access to the Company’s operations understanding of the Group, and his induction therefore focused on the activities and employees; of the Board and the Audit Committee. The following activities were included in – access to training which is provided his induction programme: and reviewed on an ongoing basis to Activity Summary meet particular needs; Documentation Relevant documents were made available including recent – access to the advice and services of Board and Committee minutes, meeting papers and Board the Company Secretary; and reports, recent Board reviews, policies and procedures, the Company’s articles of association, Directors’ duties, matters – access to independent professional reserved for the Board, Committee terms of reference, Annual advice at the Company’s expense. Report and Accounts, investor presentations, and broker and analyst reports. ### Conflicts of interest Meetings Virtual and in person meetings were held with the Chairman, Directors are required to notify the Chief Executive Officer, all Non-Executive Directors, the Company as soon as they become aware Company Secretary and certain members of the Senior of a conflict of interest or a potential Leadership Team. Care was taken to address a broad range of conflict of interest. At the start of each relevant topics including: strategy; performance monitoring; Board meeting the Chairman requires culture; stakeholder engagement; remuneration; talent; each Director to confirm that they do not succession planning; governance and legal. have a conflict of interest with any of the Audit Committee Glyn spoke with the Chair, members of the Audit Committee, matters to be discussed; if a conflict and KPMG in order to understand the Audit Committee’s remit does arise the Director is excluded from and obtain an overview of key issues, policies and that discussion. developments. ### Time commitment Directors are required to have sufficient ### creation framework on pages 12 and 13. Culture, values and ethics time to meet their Board responsibilities; Our purpose underpins everything we do this is considered when making new Our people are at the heart of our culture and is closely aligned with our three- appointments. Following their which is based on our pioneering spirit, year plan and strategy which is reviewed appointment Directors are required to mutual empowerment, shared leadership annually by the Board. seek Board approval before taking on and unified global network that is united additional external appointments. The two-day Board meeting held in by trust in one another. September allowed the Board to Your Board is committed to doing what is ### Insurance and indemnity undertake its deep-dive strategic right, ensuring that we do what is right for assessment. This included a review of Appropriate insurance cover is obtained the environment and for our people and purpose and culture, a talent review, a to protect the Directors in the event of a ensuring that our people act ethically and review of ESG and presentations from claim being brought against them. In without bias or discrimination in all our key areas of the business. accordance with our articles and to the business activities. extent permitted by law, an indemnity is The Board is also responsible for As a Board we are very aware of our provided to Directors of the Company in approving the Group’s operating model impact on the climate and this year we respect of liability incurred as a result of and annual budget, ensuring that the have identified climate change as a their office. right structure, talent and resources are principal risk and have focused on how available to implement its strategy and the Group can reduce its impact on the ### Purpose and strategy long-term objectives. environment, including our goal of The Board is responsible for reviewing Full details of our approved strategy can achieving carbon neutrality during 2023; and approving the Group’s purpose and be found in our Strategic Report on further information on this can be found strategy as further detailed in Our value pages 1 to 75. 80 IWG plc Annual Report and Accounts 2021 GOVERNANCE | in our ESG report on pages 52 to 65. | – the Group’s carbon footprint; | strategy and long-term objectives, and | | --- | --- | --- | | As a Board we aim to balance the | – the diversity of our workforce; | also those risks and emerging risks that | | benefits of meeting in person with our | | threaten its business model, future | – the culture of the Group and the environmental goals and accordingly performance, solvency or liquidity. wellbeing of employees; we use commercial flights and avoid – the Group’s talent; and The key risks to the Group and the steps unnecessary air travel. | | – the initiatives we support in the local | taken to manage and mitigate them | | --- | --- | --- | | To support our culture, values and ethics | communities in which we operate. | which were reviewed and approved by | | we provide a global learning and | | the Board are detailed on pages 68 to 74. | Further information on our people development platform to all employees. and ESG reporting can be found on The Board has delegated authority for The platform includes training on our pages 52 to 65. overseeing and reviewing its system of Code of Conduct, compliance policies internal controls and risk management and approach to diversity and inclusion. ### Prudent and effective controls to the Audit Committee, which reports Employees are encouraged to speak out regularly to the Board. Details of the The Board is responsible for assessing without fear of repercussions, and we system and the Committee’s review of the nature and extent of the principal provide a confidential whistleblowing its effectiveness are reported on pages risks it is willing to take to achieve its channel where concerns can be raised 91 to 92. anonymously. During 2021 we received 19 reports through our whistleblowing ### channel, nine of which were considered Board decision-making Carbon neutrality during 2023 significant; eight of the significant As a Jersey incorporated Company we We are committed to achieving reports have been resolved to date are not required to make a Section carbon neutrality during 2023. In and the remaining report, which was 172 Statement under the UK reaching this decision the Board took received in December 2021, is under Companies Act; we do however particular account of the impact of investigation. maintain the same high standards the Company’s operations on the We also maintain a zero-tolerance policy when complying with our Director environment, the Company’s desire both to bribery and corruption and to duties in accordance with Jersey to position itself as a leader in slavery and human trafficking. Training Company law. Our Directors are sustainability and the views of on these is provided to all employees required to act in good faith and in our stakeholders, including our and our statements on these are the best interests of the Company employees, customers, franchise reviewed annually and made available and in doing this our Directors have partners, landlords and shareholders. on www.iwgplc.com. regard, amongst other matters, to the: Hybrid working strategy – the likely consequences of any ### Performance monitoring The Board has approved the Group’s decision in the long term; strategy of promoting hybrid working The Board monitors performance – the interests of the Company’s and positioning the Company for through a regular report covering key employees; growth to meet future demands for performance indicators, profitability – the need to foster the Company’s hybrid working. and cash flow, regional updates, costs, business relationships with treasury and investor relations. In our decision-making we considered suppliers, customers and others; how this strategy could promote the Trading and finance updates as well as – the impact of the Company’s long term success of IWG for our updates on strategic projects are operations on the community and shareholders and all of our provided at all scheduled Board the environment; stakeholders. In particular we listened meetings, allowing the Board to monitor – the desirability of the Company to the results of pulse surveys and measure performance and to make maintaining a reputation for high undertaken with employees and decisions on matters reserved to the standards of business conduct; and business leaders on the future of Board in order to support the delivery of – the need to act fairly as between work and we engaged with our its strategy. members of the Company. customers, landlords and franchise The Board is responsible for approving The following are some of the partners to understand their views results, dividends and announcements, decisions taken by the Board during and how we could better support including the going concern basis for the year and the consideration given them to deliver hybrid working preparing these accounts as detailed on to the stakeholder interests and solutions. pages 122 and 144, and reviewing the impacts: Furthermore, we understood that stress testing and analysis which hybrid working had clear benefits for underpins the viability statement as the planet and the work-life balance detailed on page 75. of the global workforce. The Board also reviews the Group’s ESG reporting, receiving updates on: iwgplc.com 81 CORPORATE GOVERNANCE CONTINUED ### Stakeholder engagement – Received updates from the Building and maintaining strong Remuneration Committee Chair relationships with our stakeholders is on key areas discussed key to the long-term success of our ### Key activities of | | – Approved the Company’s | business. During 2021 we have worked | | --- | --- | --- | | the Board in 2021 | year-end and interim results | closely with our partners and our | | | – Approved Q1 and Q3 trading | decision-making has been informed by | | | statements and trading updates | their views and experiences. | – Reviewed the Group’s talent Your Board seeks to take the views of and culture its key stakeholders: our shareholders, customers, franchise partners, landlord Stakeholder engagement partners, employees and communities, – Received policy statements into account in its discussions and Strategy provided by significant decision-making. The Board receives – Approved the purpose and values shareholders regular updates from the Chief Executive – Approved strategy and objectives – Received reports from the Officer on the views of key stakeholders – Approved the three-year plan Chairman on feedback from on the Group’s strategic agenda as well shareholder meetings and as receiving insights from other members – Approved the operating model and correspondence of the Board and through the Company’s annual budget – Attended investor presentations stakeholder engagement initiatives. – Regular review of forecast, strategy and virtual meetings and objectives Key stakeholder engagement initiatives – Reviewed monthly updates on – Monitored and reviewed the Group’s undertaken by the Company in 2021 investor relations response to COVID-19 included pulse surveys with business – Reviewed updates on our leaders and employees about the – Approved strategic projects and global franchise partners workplace and preferred ways of monitored implementation – Reviewed updates on employee working, the employee engagement Financing engagement initiatives programme overseen from the Board by – Regular review of the Group’s – Reviewed updates on ESG Nina Henderson, introduction of our financial structure and approval of reporting and community global Voice Councils and initiatives to amendments initiatives engage with the Group’s strategic – Determined that no dividend should franchise partners, many of whom Governance attended the Company’s virtual be declared in respect of the financial year ended 31 December – Reviewed and approved the conference held in January 2021. 2020 Notice of annual general The Board also seeks to align our meeting strategy to the needs of our primary Prudent and effective controls – Received updates from the stakeholders. For example by providing – Assessed the Company’s viability Nomination Committee hybrid working solutions to our over a three-year period taking into Chairman on succession customers we are enabling their people consideration the risks and scenarios planning, searches for Board to work away from city centres, closer that could affect the Group (page 75) members and diversity to their homes, families and friends, – Reviewed the Group’s key risks and – Appointment and induction of potentially improving the work-life mitigating actions Glyn Hughes as Chief Financial balance for millions and enhancing – Received updates from the Audit Officer employee engagement, loyalty and job Committee Chair on key areas – Monitored employee satisfaction. discussed engagement and ESG Further information on how we have – Renewed the Group’s insurance – Reviewed the performance of placed our stakeholders at the centre of programme the Board, its Committees and our strategy can be found throughout our all Directors Strategic Report and details on how we Corporate reporting and – Reviewed and approved create value for our primary stakeholders performance monitoring statements on anti-slavery and can be found on pages 44 and 45. – Received regular performance human trafficking, and anti- Your Board is proud of the work updates at scheduled meetings and bribery and corruption undertaken by our employees through Board reports throughout the world to engage with our communities and reduce our environmental impact; further details of this work can be found in our ESG report on pages 52 to 65. 82 IWG plc Annual Report and Accounts 2021 GOVERNANCE | We did not have a significant number | reactions to our response to COVID-19, | | --- | --- | | of votes cast against any resolutions at | strategic endeavours, reward plans and | | our 2021 annual general meeting, but | resources available to them to deliver job | | if this is the case at a future meeting, | performance. Through this role as well as | | the Company will explain, when it | through other employee surveys and | | announces the voting, the steps to | forums Nina ensures that the Committee | | be taken to understand the reasons | and the Board are aware of the views of | ### Shareholder engagement behind the result. the workforce on a wide range of issues. Investor meetings The 2022 annual general meeting will be On behalf of the Board, Nina supports The Board is kept informed of investor held on Tuesday 10 May 2022. Notice of IWG’s ongoing efforts focused on views through the distribution of analyst the meeting can be found in a separate enhancing diversity, equity and inclusion. and broker briefings and monthly document which will be sent out at least In the USA, she is a sponsor of the African investor relations updates. In 2021 20 working days before the meeting. We American Affinity Network Group’s investor relations held over 400 will monitor the situation to see whether advisory board and participates in their meetings with investors and analysts, it will be necessary or advisable to hold membership meetings. She is able to primarily in an online setting. the meeting as a closed meeting or provide the Board with insights from The Chairman, Chief Executive Officer whether shareholder attendance will these interactions. and Chief Financial Officer maintain a be possible. As always, the Directors In 2021 the Board supported the close dialogue with institutional will be available on request to respond introduction of our global Voice Councils. investors on the Company’s to any shareholder queries outside of This is a team member-led initiative performance, governance, plans and the meeting. providing employees with a dedicated objectives. They regularly participate in forum where they can express their views Company website investor meetings and make themselves with the relevant senior audience in order available for questions, at the time of Our website www.iwgplc.com has a to establish greater understanding of the major announcements and on request. dedicated Investor section which actual needs in the business. Regional The Chairman regularly updates the includes our Annual Reports, results webinars were set up with elected Board on the results of these meetings presentations and our financial calendar. representatives from all countries on and the opinions of investors. All a quarterly basis. The agenda of each Senior Independent Director Directors have a standing invitation to meeting is led by the Voice Council participate in investor meetings. Our Senior Independent Director, representatives who gather questions, François Pauly, is available to address Committee Chairs engage with feedback and suggestions from any shareholder concerns that cannot be shareholders when there are significant colleagues to be discussed. Answers and resolved through normal channels of changes within their areas of suggestions are captured and distributed communication. responsibility. for information to the broader population and progress on actions is monitored. We General meetings are pleased that these meetings have not The annual general meeting each year is only served as a way to continuously held in May, save for in exceptional improve the business in an orchestrated circumstances, in Switzerland and is manner, but have also increased attended by all members of the Board. engagement between leadership and the In addition to the formal business of the centre teams, providing an improved ### Employee engagement meeting, there is normally a trading sense of team work and empowering our The health, safety and emotional update and shareholders have the employees. We believe this is an effective wellbeing of our people is of paramount opportunity to ask questions and to way to learn from our employees and importance to us. On behalf of the Board, meet the Directors afterwards. forms a key part of our commitment to Nina Henderson, our Non-Executive deliver on our promise to give team Due to the COVID-19 pandemic our Director with responsibility for employee members interesting and achievable work. 2021 annual general meeting was held engagement has continued to monitor as a closed meeting and Directors who We also continue to operate our and report back to the Board on initiatives were unable to attend in person confidential ‘Right to Speak’ reporting in place around the Group to help attended by phone. Directors were helpline for all members of our extended support our employees during the available to respond to shareholder team across the world. In addition, we COVID-19 pandemic. queries outside of the meeting. All have various programmes in place to During 2021 Nina continued with her resolutions were passed with at least provide employees with confidential programme of meeting with our global 93% of votes in favour. All resolutions counselling services, 24/7 and 365 workforce. She attended the virtual were voted on separately by means of a days a year. leadership conference attended by 300 poll and the final results were published We are extremely proud of our diverse managers in January 2021 and also met after the meeting. global workforce and further information with smaller groups of employees both on our talent strategy can be found on virtually and through visits to IWG sites. pages 60 and 61. Employees provided Nina with their iwgplc.com 83 CORPORATE GOVERNANCE CONTINUED ### Division of responsibilities There is a clear separation of responsibilities between the running of the Board and the Executive responsibility for running the business. ### Board Non-Executive Chairman Douglas Sutherland See responsibilities on page 85 Executive Directors Non-Executive Directors Mark Dixon Glyn Hughes François Pauly Laurie Harris, Nina Henderson, Chief Executive Chief Financial Senior Independent Florence Pierre Officer Director Non-Executive | | | | | Directors | Delegation of responsibility | | --- | --- | --- | --- | --- | --- | | | See Executive responsibilities | | See Non-Executive responsibilities | | | | on page 85 | | on page 85 | | | | Accountability | | Audit | Remuneration | | Nomination | | Oversight of employee | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Committee | | Committee | | Committee | | engagement and CSR | | | | Laurie Harris | | Nina Henderson | | François Pauly | | | Nina Henderson | | | | Chair | | Chair | | Chair | | | | | Terms of reference | | Terms of reference | | Terms of reference | | | Terms of reference | | | | page 90 | | page 100 | | page 88 | | | page 85 | Senior Leadership Team Accountable for delivery against the Group’s strategic and operating objectives Certain matters are reserved for the Board; these are detailed on page 79 84 IWG plc Annual Report and Accounts 2021 GOVERNANCE ### Role of Board members Glyn Hughes Timothy Regan Chief Financial Officer Company Secretary There is a clear division of responsibilities at the head of the The Chief Financial Officer is responsible The Company Secretary is responsible Company between the running of the for leading the finance and accounting for advising the Board, through the Board and the running of the Company’s functions of the Group. He is also Chairman, on all governance matters and business. No one individual Director has responsible for business ethics, good ensuring that the Board has the policies, unfettered powers of decision-making governance, assisting with strategy and processes, information, time and and all Directors are required to act in compliance. resources it needs to function efficiently the best interests of the Company. and effectively. The responsibilities of the Chairman, the François Pauly ### Chief Executive Officer and the Senior Senior Independent Director Role of Committees Independent Director are available on The Board is supported by a number of www.iwgplc.com. The Senior Independent Director acts as Committees to which it has delegated a sounding board and confidant for the certain powers. The role of these Douglas Sutherland Chairman, as an intermediary for other Committees is summarised below. Non-Executive Chairman Directors as required, and leads the appraisal of the Chairman’s performance. ### Audit Committee The Chairman is responsible for the He is also available to shareholders if Responsible for oversight of financial leadership of the Board, setting its they have concerns that cannot be reporting, audit, internal control, agenda and monitoring its effectiveness. resolved through normal channels. compliance and risk management. He ensures that adequate time is available for discussion of all agenda Nina Henderson ### Nomination Committee items, in particular strategic issues. Non-Executive Director with oversight of Additionally, he ensures effective Responsible for Board composition, employee engagement and CSR communication with shareholders and appointment of Directors and senior that the Board is aware of the views of Nina is responsible for overseeing and management and succession planning. major shareholders and stakeholders. He keeping the Board informed on ### engagement with the workforce and the Remuneration Committee facilitates both the contribution of the Non-Executive Directors and corporate responsibility activities of the Determines the remuneration of constructive relations between the Group, including community and Executive Directors, the Chairman and Executive Directors and Non-Executive environmental projects. senior management and oversees Directors, and regularly meets with the remuneration policy for all employees. ### Non-Executive Directors Non-Executive Directors without the Executive Directors being present. The independent counsel, character and judgement of the Non-Executive Mark Dixon Directors enhance the development of Chief Executive Officer strategy and the overall decision-making of the Board. The Non-Executive The Chief Executive Officer is Directors scrutinise the performance of responsible for formulating strategy and management and monitor the reporting for its delivery through the Senior of business performance, satisfying Leadership Team once agreed by the themselves on the integrity of financial Board. He creates a framework of information and that financial controls strategy, values and objectives to ensure and systems of risk management are the successful delivery of key targets robust and defensible. They are also and allocates decision-making and responsible for determining appropriate responsibilities accordingly. levels of Executive remuneration. iwgplc.com 85 NOMINATION COMMITTEE REPORT ## Nomination Committee ## report François Pauly Chairman, Nomination Committee Attendance (out Dear Shareholder, We are pleased that, subject to obtaining of possible shareholder approval at our 2022 annual maximum I am pleased to present to you our number of general meeting, Tarun Lal has agreed to report on the work of the Nomination Members meetings) join our Board as a Non-Executive Committee (the “Committee”) during François Pauly 4/4 Director from May 2022. This will 2021. Laurie Harris 4/4 increase the ethnic diversity of our 2021 was an important year for us and Board and also make a significant Nina Henderson 4/4 key activities included: addition to our franchising expertise. Florence Pierre 4/4 – identifying and recommending the We believe the addition of Tarun Lal’s Douglas Sutherland 4/4 experience and viewpoints will add appointment of Glyn Hughes as Chief Financial Officer and Director; another dimension to those brought by All members of the Committee are independent. our existing Board members and support – leading the process to increase the our efforts to maintain an independent ethnic diversity and skillset of our Board and challenging Board. Further by identifying and recommending Tarun information on Tarun’s nomination can Lal for appointment as Non-Executive be found on page 88. Director; – launching a search for our next ### Diversity Policy and objectives Non-Executive Directors; In our Board Diversity Policy we define Length of tenure of – measuring the effectiveness of our “Diversity” as achieving strength and Non-Executive Directors Board through our External Board sustainability through actively embracing within the Committee Review; and being inclusive of all aspects (visible – overseeing changes to the Senior and invisible) of what makes every Leadership Team; individual unique including education, – reviewing our succession plans for the personalities, skill sets, experiences, Board and Senior Leadership Team; and communication styles, knowledge bases, – measuring progress made in respect of social economic backgrounds, age, race, our diversity objectives and revising 0-3 years gender, religious beliefs, physical the objectives for 2022. 3-5 years abilities and disabilities, ethnicity, sexual 6-9 years orientation and political beliefs. ### Board composition 9+ years Progress made against the Diversity As at the date of this report, your Board objectives we set ourselves for 2021 comprised seven members, being: the can be found on page 89. Our objectives Non-Executive Chairman (independent for 2022 which will be reported on in at the time of appointment); two 2023 are to: Executive Directors; and four | independent Non-Executive Directors. | – maintain a level of at least 35% | | --- | --- | | The biographies of Board members can | female Directors on the IWG plc Board | | be found on pages 76 and 77. | in the short term rising to 40% in the | medium term (currently 43%, but will Glyn Hughes joined the Group in 2020 decrease with the appointment of and in March 2021 was appointed as Tarun Lal); Chief Financial Officer and Director in – assist the development of a pipeline place of Eric Hageman; details of the of high-calibre candidates by Committee’s search and ultimate encouraging a broad range of senior nomination of Glyn can be found on individuals within the business to take page 88. | ■ | | 20% | | | --- | --- | --- | --- | | ■ | 86 | 0% | IWG plc Annual Report and Accounts 2021 | | ■ | | 60% | | | ■ | | 20% | | GOVERNANCE ### “We define ‘Diversity’ as ### achieving strength and ### sustainability through ### actively embracing and ### being inclusive of all ### aspects (visible and ### invisible) of what makes ### every individual unique.” The results of the review were discussed During 2021 the Committee used the by the Board and the Committee. All results of its External Board Review to François Pauly suggestions for improvement are being develop a profile which is being used for Chairman, Nomination Committee incorporated into our ongoing efforts to the recruitment of our next Non- continuously improve the processes and Executive Directors. The profile has been effectiveness of the Board. We continue provided to Audeliss Executive Search to have full confidence in the Board’s who have been appointed to assist the members and processes. Committee in the recruitment process. Audeliss have no connection with the The Committee uses the Board Review Company other than providing process to monitor effectiveness, recruitment services and are signed performance, balance, diversity, up to the November 2017 Voluntary independence, leadership and Code of Conduct on gender and succession planning, enabling the diversity best practice. on additional roles to gain valuable Committee to identify strengths and Board experience; weaknesses and ensuring that we are ### Senior Leadership Team able to identify the capabilities required – consider candidates for appointment for particular Board appointments. The Committee oversees changes to the as Non-Executive Directors from a Senior Leadership Team, and supports wide pool including those with little or ### Re-election of the Board initiatives to strengthen the executive no previous FTSE Board experience; talent pipeline. – ensure Non-Executive Director long All Directors (unless they are retiring) lists have at least 50% of candidates submit themselves for re-election by ### Succession planning reflecting diversity including women shareholders annually. Directors We ensure that succession plans are and candidates with different racial appointed during the period since the in place for the orderly succession of and ethnic backgrounds; and last annual general meeting are required appointments to the Board and senior to seek election at the next annual – engage executive search firms who positions, so that there is an appropriate general meeting under the Company’s have signed up to the November 2017 balance of skills, experience and articles of association. Reasons why Voluntary Code of Conduct on gender diversity. Succession planning the contribution of Directors offering diversity and best practice. discussions and a talent review themselves for re-election or election We are proud of our workforce diversity process continue to be an integral continues to be important to the at IWG. We are an equal opportunities priority of the Group’s business long-term success of the Company employer and are proactively looking to planning and review process, as is are described in the Notice of annual identify, develop and promote key talent the continued development of both general meeting. from within our organisation which will management capacity and capabilities The Committee reviewed the in turn improve our diversity at senior within the business. independence of all Non-Executive levels. Further information on our work As previously advised our current Directors in 2021; all are independent to support diversity and inclusivity Chairman, Douglas Sutherland, has been and continue to make independent within our workforce can be found on on the Board for more than nine years. contributions and effectively challenge pages 60 and 61. He was appointed as Chairman on 10 management. May 2010 having been a Non-Executive ### External Board Review ### Board appointments Director of the Group since 7 August The performance of your Board, its 2008. His continuation in the role of The Committee leads the process for the Committees, the Chairman and Chairman is subject to regular review by appointment of all new Directors and, in individual Directors is conducted the Committee, without the presence of identifying and recommending annually and every third year our review the Chairman. After reviewing the candidates to the Board, the Committee is facilitated externally. In 2021 Condign Chairman’s performance and input from considers candidates on merit against Board Consulting were appointed to the 2021 External Board Review and in objective criteria and in accordance with facilitate an external review. consideration of the Group’s current the Board Diversity Policy. The evaluation included a series of challenges and opportunities, the Nominations are based on the existing Committee considers that it is in the best one-to-one discussions between the balance of skills, knowledge, diversity interests of the Group for the Chairman reviewer and each Board member and a and experience on the Board, on the to continue in his role. This is considered review of Board materials. The reviewer merits and capabilities of the nominee to be a short-term situation and the considered that the Board and its and on the time they are able to give to Committee is considering plans for the governance had coped well with the the role in order to promote the success role in the long term. pandemic, assisted greatly by its of the Company. settled nature. iwgplc.com 87 NOMINATION COMMITTEE REPORT CONTINUED ### Terms of Reference Appointment of Tarun Lal Appointment of Glyn Hughes Below is a summary of the terms of reference of the Committee: Following a review of the balance Following a review of the balance of existing skills, knowledge and of existing skills, knowledge and – Board appointment and composition: experience on the Board and the experience both on the Board and to regularly review the structure, size Board’s desire to increase its within the Senior Leadership Team and composition of the Board and ethnic diversity in line with the and having considered the make recommendations on the role findings and objectives of the strategic plans for the Group, the and nomination of Directors for Parker Review, the Committee Committee commenced a search appointment and reappointment to commenced a search for a for a Chief Financial Officer. the Board. Non-Executive Director with a – Board Committees: to make The Committee used its existing different ethnic background. recommendations to the Board in executive search agencies as well relation to the suitability of candidates The Committee used Spencer as the Committee’s industry for membership of the Audit and Stuart, who provide executive connections, networks and Remuneration Committees. search consultancy and have no advisors, to identify internal and other connection to the Company, external candidates from diverse – Board effectiveness: to review as well as its industry connections, backgrounds. Candidates were annually and make appropriate professional advisors and considered on merit against the recommendations. networks, to identify a long list of criteria set by the Committee – Board performance: to assist the candidates. Candidates were giving due regard to diversity. Chairman with the annual performance considered on merit against the review to assess the performance The shortlisted candidates met criteria set by the Committee. The and effectiveness of the overall with all members of the shortlisted candidates met with Board and individual Directors. Committee, the Chief Executive members of the Committee and – Leadership: to remain fully informed Officer and other members of the the Chief Executive Officer. about strategic issues and commercial Senior Leadership Team. The matters affecting the Company and to The Committee extensively Committee extensively discussed keep under review the leadership discussed the merits of the the merits of all the candidates needs of the organisation to enable it candidates and recommended and recommended the to compete effectively. Tarun Lal be appointed as appointment of Glyn Hughes who Non-Executive Director. The Board had performed strongly since Complete details of the above are accepted the recommendation of joining the Group in 2020 and available on the Company’s website the Committee and Tarun Lal will brought highly relevant experience www.iwgplc.com. be appointed to the Board on 10 to the role from his previous May 2022, subject to his election positions. François Pauly at the Company’s 2022 annual The Board accepted the Chairman, Nomination Committee general meeting. recommendation of the Committee | Tarun, who was born and raised | and Glyn Hughes was appointed to | | --- | --- | | in Delhi, India, brings extensive | the Board as Chief Financial | | franchising expertise to the Board | Officer with effect from 25 March | | from over 20 years with Yum! | 2021; his appointment was | | Restaurants where he has held | subsequently approved at the | | executive roles including Global | 2021 annual general meeting. | Chief Operating Officer KFC and his current role as Managing Director, Middle East, Turkey, Africa and India. 88 IWG plc Annual Report and Accounts 2021 GOVERNANCE Experience of the Board 7 5 Nationality split Age split 6 of the Board of the Board 4 7 7 6 | American 44% | 36-45 | | | --- | --- | --- | | French 14% | 46-55 | 7 | | British 28% | 56-65 | | | Luxembourgish 14% | 66-75 | | Gender split Gender split Gender split of senior of the Board of all employees leadership Male Male Male Female Female Female ### Performance against 2021 Diversity objectives Objective Performance achieved Maintain a level of at least 30% female Directors on the IWG Throughout 2021 we have had three female Board members, making up 43% plc Board over the short to medium term (currently 43%). of our Board. Appoint a Director with a different ethnic background to Tarun Lal will be joining the Board as a Non-Executive Director with effect the IWG plc Board on or before our May 2022 annual from 10 May 2022, subject to the approval of our shareholders at the 2022 general meeting. annual general meeting. Assist the development of a pipeline of high-calibre The Committee supports initiatives aimed at strengthening the executive talent candidates by encouraging a broad range of senior pipeline and ensuring that high potential people at every level are developed individuals within the business to take on additional and retained within the business. Senior individuals are encouraged to gain roles to gain valuable Board experience. Board experience through internal and external Board appointments and are also invited to present at IWG plc Board meetings. Further information on our talent strategy can be found on pages 60 and 61. Consider candidates for appointment as Non-Executive Our profile for the recruitment of our next Non-Executive Directors has been Directors from a wider pool including those with little or drawn up to allow us to consider a wider pool of talent; FTSE experience is not Working no previous FTSE Board experience. a pre-requisite. Internationally Rapid Growth Ensure Non-Executive Director long lists have at least 50% Our profile for the recruitment of our next Non-Executive Directors has been drawn Strategies of candidates reflecting diversity including women and up to ensure that long lists reflect our desire to continue to improve the ethnic Digital candidates with different racial and ethnic backgrounds. diversity of our Board and to ensure that we maintain a level of at least 35% female Transformation Directors in the short term rising to 40% in the long term (currently 43%, but will Franchising decrease with the appointment of Tarun Lal). Engage executive search firms who have signed up to During 2021 we engaged Audeliss Executive Search and continued to work Enterprise Risk Management the Voluntary Code of Conduct on gender balance, with Spencer Stuart, each of whom are signatories to the November 2017 ■ ■ diversity and best practice. 1 Voluntary Code of Conduct. Outsourcing | ■ ■ | | | 0 | | | --- | --- | --- | --- | --- | | Multiple ■ ■ | | | 4 | | | ■ ■ ■ | iwgplc.com | 35% 75% 57% | | 89 | Industries ■ ■ 2 ■ ■ ■ 43% 65% 25% Mergers and Acquisitions AUDIT COMMITTEE REPORT ## Audit Committee report Laurie Harris Chair, Audit Committee Attendance (out of possible Dear Shareholder, At my request, the external auditors, maximum Executive Directors, the Chairman, the number of I am pleased to present you with this Members meetings) Company Secretary (as secretary to the report on the work of the Audit Committee) and the Business Assurance Laurie Harris 7/7 Committee (the “Committee”) during Director may attend meetings. 2021. Nina Henderson 7/7 At least annually, the Committee meets François Pauly 7/7 This report sets out the role and independently, without management, responsibilities of the Committee and Florence Pierre 7/7 with the Company’s external auditors our key activities during the year. It and the Business Assurance Director. In All members of the Committee are independent. explains how we manage the integrity addition I regularly meet with the of our financial reporting and the external lead audit partner and the effectiveness of our risk management Business Assurance Director outside of and control processes for the benefit the formal Committee process. of our stakeholders, including our shareholders, customers, partners, ### Responsibilities employees and communities. Below is a summary of the terms of During 2021 the COVID-19 pandemic reference of the Committee (the full text and its impact in terms of risk of which is available on the Company’s assessment and financial reporting Length of tenure of website www.iwgplc.com): remained a key focus of the Committee. Non-Executive Directors We have also worked hard to support – Financial reporting: monitoring the within the Committee the Company’s strategy and integrity of financial reporting for sustainability initiatives and have compliance with applicable statutes identified climate change risk as a and accounting standards. principal risk to the Group. – Internal control and risk: reviewing the effectiveness of internal controls and ### Key objective risk management systems. 0-3 years Our key objective is to provide effective – Internal audit: monitoring the internal 3-5 years governance over the Company’s audit programme, reviewing all 6-9 years financial reporting; this is achieved by findings and making certain that the monitoring, reviewing and making function is sufficiently resourced and recommendations to the Board on: free from restrictions. – External audit: advising on the – the integrity of financial reporting; appointment, reappointment, – the systems for internal control, risk remuneration and removal of the management and compliance; and external auditor. – the Company’s external auditors. – Employee concerns: reviewing whistleblowing arrangements. ### Membership and meetings I routinely report to the Board on how The Committee consists entirely of the Committee has discharged its independent Non-Executive Directors. responsibilities, as well as highlighting Seven Committee meetings were held in any concerns raised. the year and where time-sensitive approvals were needed authority was delegated to a sub-committee. | ■ | | 25% | | | --- | --- | --- | --- | | ■ | 90 | 0% | IWG plc Annual Report and Accounts 2021 | | ■ | | 75% | | GOVERNANCE ### “Responsible corporate ### behaviour is an integral part ### of the overall governance ### framework and our ### management structures and ### systems apply equally to ### the indentification, ### evaluation and control of ### Risk management eliminate risk. Accordingly, such a ### our safety, ethical and system can provide reasonable, but not The Board is responsible for establishing absolute, assurance against material ### environmental risks and the risk appetite for the Group. The misstatement or loss. ### opportunities.” Committee oversees and reviews an ongoing process for identifying, In accordance with the FRC’s Guidance evaluating and managing the risks faced on Risk Management, Internal Control Laurie Harris by the Group. Major business risks and and Related Financial and Business Chair, Audit Committee their financial implications are appraised Reporting (the “FRC Guidance”), the by the responsible executives as part of Committee confirms there is an ongoing the planning process and are endorsed process for identifying, evaluating and by regional management. Key risks are managing significant risks faced by the reported to the Committee, which Group. reports on them to the Board. The During 2021, the Committee continued appropriateness of controls is ### Activities of the Audit to revisit its risk identification and considered by the executives, having ### Committee during the year assessment processes, inviting Board regard to cost, benefit, materiality and members and senior management to This section summarises the main focus the likelihood of risks crystallising. Key convene and discuss the Group’s key areas of the Committee during 2021 and risks and actions to mitigate those risks risks and mitigating controls. the results of the work undertaken. were considered by both the Committee A risk-based approach has been adopted and the Board and were formally ### Financial reporting in establishing the Group’s system of reviewed and approved. Our main focus was the review of the internal control and in reviewing its ### half-year results and this Annual Report Emerging and principal risks effectiveness. To identify and manage together with the formal announcements key risks: There are a number of existing and relating thereto. Before recommending emerging risks and uncertainties which – Group-wide procedures, policies and these to the Board we determined that could have an impact on the Group’s standards have been established; the actions and judgements made by long-term performance. The Group has a – a framework for reporting and management were appropriate. risk management structure in place escalating significant matters is Particular focus was given to: designed to identify, manage and maintained; – critical accounting policies and mitigate such business risks. Risk – reviews of the effectiveness of practices and changes thereto; assessment and evaluation are an management actions in addressing key integral part of the annual planning – changes in the control environment; Group risks identified by the Board process, as well as the Group’s monthly – control observations identified by the have been undertaken; and review cycle. auditor; – a system of regular reports from – decisions delegated to and requiring The Group’s principal risks, together with management setting out key judgements by management; an explanation of how the Group performance and risk indicators has manages these risks and the impact from been developed. – adjustments resulting from the audit; COVID-19, are presented on pages 66 to – clarity of the disclosures made; This process is designed to provide 74 of this Annual Report. – compliance with accounting standards assurance by way of cumulative and relevant financial and governance assessment and is embedded in ### Internal control reporting requirements; and operational management and The Committee has a delegated governance processes. – the process surrounding compilation responsibility for the Company’s system of the Annual Report and Accounts to Key elements of the Group’s system of of internal control and risk management confirm they are fair, balanced and internal control which have operated and for reviewing the effectiveness of reasonable. throughout the year under review this system. Such a system is designed are as follows: | The Committee formally considers (and | to identify, evaluate and control the | | | --- | --- | --- | | minutes) key audit matters as detailed | significant risks associated with the | – the risk assessments of all significant | | on page 92 before recommending the | Group’s achievement of its business | business decisions at the individual | | financial statements to the Board. | objectives with a view to safeguarding | transaction level, and as part of the | | | shareholders’ investments and the | annual business planning process; | The Committee recommends the Annual Group’s assets. Due to the limitations – a Group-wide risk register is Report to the Board. It considers the that are inherent in any system of maintained and updated at least Annual Report, taken as a whole, to be internal control, this system is designed annually whereby all inherent risks are fair, balanced and understandable, to meet the Group’s particular needs and identified and assessed, and providing the information necessary for the risks to which it is exposed and is appropriate action plans developed to shareholders to assess the Company’s designed to manage rather than manage the risk per the risk appetite position and performance, business model and strategy. iwgplc.com 91 AUDIT COMMITTEE REPORT CONTINUED ### Significant financial reporting judgements The Committee discussed and reviewed the following significant issues with KPMG – a clearly defined organisation and management in relation to the financial statements for 2021. For each area, structure with established we discussed with KPMG their procedures to challenge and evaluate management’s responsibilities; assumptions. The Committee was satisfied with the accounting and disclosures – an induction process to educate in the financial statements. new team members on the Area of focus Action taken standards required from them in | Impairment of | The Committee reviewed the process used by management | their role, including business ethics | | --- | --- | --- | | leasehold property, | during 2021 to assess all open, non-franchise business | and compliance, regulation and | | plant and | centres across the Group for indicators of impairment. This | internal policies; | | equipment (“PPE”) | included a review of the new controls implemented during | – the availability of Group and country | | and right-of-use | 2021. We challanged key judgements and estimates relating | specific policies, via the Group’s | | (“ROU”) assets: | to the impairment of leasehold PPE and ROU assets and | internal platforms, including the | | | ultimately concluded that management’s judgements and the | Company’s Code of Conduct, | | | disclosure of these impairments were appropriate. See note 15. | detailed guidance on employee | | Recognition of | The Committee has reviewed the basis on which management | policies and the standards of | | deferred tax assets | has recognised and valued deferred tax assets, with particular | behaviour required of staff; | | associated with the | focus on the recoverability of deferred tax assets recognised | – policies, procedure manuals and | | Group’s intellectual | in Switzerland. The Committee is satisfied that management’s | guidelines are readily accessible | | property in | judgements on the generation of future taxable profits in the | through the Group’s internal | | Switzerland | foreseeable future are aligned with the Group’s other business | platforms and its learning and | | | forecasting processes. The Committee has considered the | development systems; | | | presentation and disclosure (in accordance with IAS 1 and IAS 12) | – operational audit and self- | | | in respect of taxation-related balances and is satisfied that the | certification tools which require | | | Group’s disclosures reflect the risks inherent in accounting for | individual managers to confirm their | | | the deferred taxation balances. See note 8. | adherence to Group policies and | | Goodwill and | The Committee has considered the impairment testing | procedures; and | | intangible assets | undertaken and disclosures made in relation to the value of | – a Group-wide policy to recruit and | | | the Company’s goodwill and intangibles and has challenged the | develop appropriately skilled | | | key assumptions made by management in their valuation | employees of high calibre and | | | methodology. The Committee considers that an appropriately | integrity and with appropriate | | | cautious approach has been used by management and | disciplines. | is satisfied that no additional impairment of intangibles The Committee and the Board regard and goodwill is required. See notes 13 and 14 for responsible corporate behaviour as an further information. integral part of the overall governance framework and believe that it should be fully integrated into management of the Group as established by the – formal procedures for the review and structures and systems. Therefore, the Board. The Board reviews the Group’s approval of all investment and risk management policies, procedures principal risks register at least acquisition projects. The Group and monitoring methods described annually and management periodically Investment Committee reviews and above apply equally to the identification, reports on the progress against agreed approves all investments. Additionally, evaluation and control of the Company’s actions, enabling the Committee to the form and content of routine safety, ethical and environmental risks monitor how key risks are managed; investment proposals are standardised and opportunities. This approach makes to facilitate the review process; sure that the Company has the necessary – the annual strategic planning process, and adequate information to identify which is designed to ensure – the delegation of authority limits with and assess risks and opportunities consistency with the Company’s regard to the approval of transactions; affecting the Company’s long-term value strategic objectives. The final budget – the generation of targeted, action- arising from its handling of corporate is reviewed and approved by the oriented reports from the Group’s responsibility and corporate governance Board. Performance is reviewed sales and operating systems on a daily, matters. | against objectives at each Board | weekly and monthly basis, which | | | --- | --- | --- | | meeting; | provide management at all levels with | The Committee has completed its annual | | – comprehensive monthly business | performance data for their area of | review of the effectiveness of the | | review processes under which | responsibility, and which help them to | system of internal control for the year to | | business performance is reviewed at | focus on key issues and manage them | 31 December 2021 and is satisfied that | | business centre, area, country, regional | more effectively; | it is in accordance with the FRC Guidance | | and functional levels. Actual results | – the delivery of a centrally coordinated | and the Code. The assessment included | | are reviewed against targets, | assurance programme by the business | consideration of the effectiveness of the | | explanations are received for all | assurance department that includes | Board’s ongoing process for identifying, | | material movements, and recovery | key business risk areas. The findings | evaluating and managing the risks facing | | plans are agreed where appropriate; | and recommendations of each review | the Group. | | – the documentation of key policies and | are reported to both management and | | ### Whistleblowing policy control procedures (including finance, the Committee; and operations, and health and safety) – the maintenance of high standards of An externally hosted whistleblowing having Group-wide application. These behaviour which are demanded from channel, which may be used are available to all staff via the staff at all levels in the Group. The anonymously, is available to all Group’s internal platforms; following procedures support this: employees via email or on the 92 IWG plc Annual Report and Accounts 2021 GOVERNANCE | Company’s internal platforms. The aim of | – the external auditor is used for | statements a new lead audit partner has | | --- | --- | --- | | the policy is to encourage all employees, | non-audit related services only where | taken responsibility for the audit of the | | regardless of seniority, to bring matters | their use will deliver a demonstrable | 2021 financial statements. | | that cause them concern to the attention | benefit as compared with the use of | | Our last audit tendering process was of the Committee. Employees can other potential providers and where undertaken in 2018. monitor the progress of the reports it will not impair their independence they have made. or objectivity; The breakdown of the fees paid to the external auditor during the year to 31 – all proposals for permitted defined The Business Assurance Director, in December 2021 can be found in note 5. non-audit services to use the external consultation with the Senior Leadership auditor must be submitted to, and In assessing the effectiveness of the Team, decides on the appropriate method authorised by, the Chief Financial external audit process for 2021 the and level of investigation. The Committee Officer and/or Committee Chair before Committee has considered: is notified of all material discourses made any work is performed; and receives reports on the results of – the audit process as a whole and its investigations and actions taken on a – permitted non-audit services are suitability for the challenges facing regular basis. The Committee has the reviewed annually by the Committee the Group; power to request further information, and currently include: consultation on – the strength and independence of the conduct its own enquiries or order financial accounting and regulatory external audit team; additional action as it sees fit. reporting matters; reviews of internal – the audit team’s understanding of the accounting and risk management control environment; ### External audit controls; reviews of compliance with – the culture of the external auditor in policies and procedures; non-statutory KPMG Ireland (“KPMG”) were appointed in seeking continuous improvement and audits (e.g. regarding acquisitions and 2016 as the auditors of IWG plc. Whilst increased quality; disposal of assets and interests in IWG plc is a Jersey company, after companies); assurance and advice on – the quality and timeliness of consultation with KPMG, the Committee finance-related projects; attestation communications and reports received; determined that appointing a Jersey reports; due diligence; and tax services and registered KPMG Ireland audit partner (only where the services will have no – the quality of interaction with would best serve the needs of the Group. direct effect or will have an immaterial management. The Committee is responsible for effect on the audited financial oversight of the external auditor, including Following the Committee’s assessment statements of the Group); an annual assessment of their of the effectiveness of the external audit independence and objectivity and the – prohibited non-audit services include: process for 2021 and of KPMG’s measures in place to safeguard this. tax compliance and advisory services; continuing independence, the legal services; book-keeping and other Committee has recommended to the During the year, KPMG audited the accounting services; design, provision Board that a resolution to reappoint consolidated financial statements of the and implementation of information KPMG as the Company’s auditor in Group for the year ended 31 December technology services; internal audit respect of the financial year ending 31 2020 and completed a review of the services; valuation services; payroll December 2022 be proposed at the half-year results of the Group for the services; recruitment services in annual general meeting. period to 30 June 2021. relation to key management positions; The value of non-audit services provided HR services relating to the ### Corporate governance by KPMG in 2021 amounted to £282,000 organisation structure and cost ### changes (2020: £1,188,000). Non-audit services control; and transaction (acquisitions, During 2021 we have also discussed the related to – legal advisory services in mergers and dispositions) work that consultation paper published by BEIS on China regarding cybersecurity and data includes investment banking services, restoring trust in audit and corporate privacy laws and other assurance services preparation of forecasts or investment governance and considered how best to in relation to reports provided to landlords proposals and deal execution services; prepare for the new regulations being in the UK, Denmark and Hong Kong and proposed by the UK Government. and tax services in relation to statutory – KPMG confirm at every Committee tax certifications. meeting that, since the prior meeting, Laurie Harris there have been no significant issues During the year there were no Chair, Audit Committee affecting their objectivity and circumstances where KPMG were engaged independence arising from the to provide services which might have led provision of non-audit services. to a conflict of interest. KPMG are required to adhere to a The Committee safeguards KPMG’s rotation policy requiring rotation of the independence through its policy on lead audit partner at least every five non-audit related services, which includes years. Following an audit partner rotation the following measures: after the audit of the 2020 financial iwgplc.com 93 DIRECTORS’ REMUNERATION REPORT ## Directors’ ## Remuneration report Nina Henderson Remuneration Committee Chair Attendance (out ### of possible Dear Shareholder, Strategic pivot, refocused maximum | | number of | I am pleased to present this Directors’ | organisation, delivering | | --- | --- | --- | --- | | Members | meetings) | | | | | | Remuneration report for 2021. | momentum | Nina Henderson 6/6 The Remuneration Committee (the During 2021, management, the Board Laurie Harris 6/6 “Committee”) is focused on ensuring that and the Committee acted with agility to François Pauly 6/6 remuneration is designed to promote the ensure our strategy kept pace with the long-term success of the Company by impacts of the evolving COVID-19 Florence Pierre 6/6 | | driving our strategic priorities, while | pandemic. At the start of the year, we set | | --- | --- | --- | | All members of the Committee are independent. | adhering to our Company’s culture and | stretching targets for incentive plans | | | values and ensuring our contribution to | based on our expectations of a then | | | environmental and societal principles. | broadly held view of a continuing return | | | Our people and their talents continue to | to normality. As the full impact of the | | | be at the centre of our ability to deliver | emerging Delta variant and related | | | our workplace solutions no matter where | extended lockdowns and restrictions | | | work is accomplished or conducted. We | became clear, it was determined that | | | are proud of their resilience and | initial revenue and profit targets would | | | relentless efforts to continue to drive | not be met, as the Company informed | | | the business and deliver services to our | the market in June 2021. | Length of tenure of customers under difficult conditions. | Non-Executive Directors | | Management quickly adapted our | | --- | --- | --- | | within the Committee | 2021 continued to challenge. All | business plans, enabling a strategic pivot | | | decisions taken during this | to address the new reality. With the | | | unprecedented period have recognised | Board’s concurrence, the 2021 employee | | | the need to reward and incentivise our | incentive schemes were revised to | | | team members’ performance at all levels | reward our employees for focusing on | | | of the organisation, as well as retain and | the key tasks, revenue turnaround and | | | attract talent. We also recognised the | working capital management, to best | 0-3 years need to offer additional health and navigate through the slower return to 3-5 years wellness support to our team members normality and to position the Company 6-9 years as pandemic impacts continued to affect to benefit from the growing adoption of their lives. All of our decisions have hybrid working. considered the experience of the Company and our stakeholders, including our employees, customers, investors, landlords, franchisees and communities. | ■ | | 25% | | | --- | --- | --- | --- | | ■ | 94 | 0% | IWG plc Annual Report and Accounts 2021 | | ■ | | 75% | | GOVERNANCE ### “We are focused on ### ensuring that remuneration ### is designed to promote the ### long-term success of the ### Company by driving our ### strategic priorities, while ### adhering to our Company’s ### culture and values and ### When the 2021 operating targets for the Performance Share Plan ### broader management team were ensuring our contribution to ### (“PSP”) adapted, the Committee communicated ### environmental and societal When considering the appropriate to Executive Directors that achievement ### remuneration outcomes for Executives, principles.” of these adapted targets would also be the Committee considered all elements taken into account when evaluating their of remuneration in combination. In performance. As a result of the strategic Nina Henderson relation to the 2019 PSP, the targets actions taken, a strong second-half Remuneration Committee Chair were set prior to the COVID pandemic, performance has been delivered despite and the final outcome of 17.1% has very challenging circumstances, been heavily influenced by the impact of including the emergence of the Omicron the pandemic and the restrictions variant. Second-half revenue and applied to office working globally. Whilst working capital performance achieved noting this, the Committee determined the revised stretching targets set at the ### that there would be no adjustment to the Executive changes mid year point. In fact, during the fourth PSP targets alongside the decisions quarter IWG experienced the best- As previously announced, Glyn Hughes taken in relation to the annual bonus and selling months in our more than 30-year was appointed to the Board as Chief the desire to maintain PSP outcomes that history. In addition, when evaluating Financial Officer with effect from 25 are strongly aligned with the interests of 2021 performance of the Executive March 2021. Upon appointment Glyn’s our shareholders. | Directors, the Committee noted the | | remuneration was set fully in line with | | --- | --- | --- | | significant progress relative to the | Therefore, in accordance with the targets | our approved Policy. His salary was set | | Group’s potential strategic and | set at the time of the initial award, the | at £440,000 per annum, his maximum | | commercial separation of its digital and | PSP vesting in March 2022 will vest at | bonus opportunity is 150% of base | | technology assets into separately | 17.1%. The Committee reviewed the | salary and maximum PSP opportunity is | | identified and constituted businesses. | three performance metrics and | 250% of salary. No other payments were | | | determined that the threshold targets for | made in association with his recruitment. | | Annual bonus outcomes | EPS growth and ROI improvement | | Upon departure, the Committee The Company exits a most challenging metrics had not been met; the Company determined an appropriate exit package 2021 in a strong financial position and TSR performance was 3.5% p.a. above for Eric Hageman with due consideration with significant momentum to capture the comparator group median, resulting to shareholders, and specific reference the opportunity arising from the rapid in a vesting outcome of 51.3% of the to the Policy and the Company’s legal shift to hybrid working. In order to maximum for this element. All metrics and contractual commitments to him. recognise the 2021 leadership had a 33.33% weighting and were Full details are provided on pages 107 achievements of the Executive Directors measured over a three-year period to 31 to 108. as described above, their annual bonus December 2021. is awarded for the 50% of the bonus The Committee believes variable pay potential related to operating objectives, outcomes should reward sound which equals 75% of the CEO/CFO performance and align with the salaries and will be paid with one-half as experience of our shareholders and with deferred stock over a three-year period, our wider stakeholders. The impacts of in accordance with the bonus policy. We the pandemic make decisions in this believe this outcome is fair and regard much more challenging. However, appropriate in recognition of the we believe awarding 50% of the annual achievements against-ever changing and bonus for 2021 based on the strong extremely difficult circumstances. This second-half performance improvement, Executive Director outcome is consistent as described above, combined with the with the annual bonus outcomes for the partial vesting of the 2019 PSP broader leadership team and other demonstrates such alignment. Also that employees who receive similar our Policy recognises the Company’s incentives elsewhere in the Group. achievements while supporting its pursuit of strategic objectives to enable future success. iwgplc.com 95 DIRECTORS' REMUNERATION REPORT CONTINUED ### The year ahead The Committee was pleased that over 94% of shareholders supported the Remuneration Policy (the "Policy") in 2020 and that over 98% approved our Remuneration report detailing our application of the Policy in 2020. Remuneration earned by the Executive Directors should reflect Company performance and shareholder return. The Committee is satisfied that our variable pay model remains fit for purpose in the face of the pandemic and the Company's continuing strategic transformation. It ensures alignment between pay and performance based on targets tied to strategic delivery. The policy will continue to be applied during 2022. The Committee has made the following decisions for 2022 taking into account the pay and conditions across the Group's workforce, the experiences of the Company and its stakeholders and the need to incentivise Executive performance and support the future success of the Company. - No increases to Executive Directors' salaries for 2022. - The Company's continued strategic transformation is key to unlocking shareholder value. Results from such transformative actions are not conveniently measured by classic operational performance targets with annual cut-offs, but should be reflected in relative TSR performance. Therefore, during this transformational period, relative TSR performance targets will also be a component of the annual bonus to reflect current year progress on implementing the strategy as well as the measurement of its sustained successful implementation for the PSP awards. - IWG has committed to achieving carbon neutrality during 2023. - The maximum annual bonus will remain unchanged at 150% of base salary for Executive Directors with half of any bonus paid deferred in share options which vest after three years. Performance will be measured against stretching operating profit and achievement of strategic objectives, including ESG and TSR targets. - Awards of 250% of base salary will be granted under the PSP in line with the approved Policy. Awards will vest subject to a relative TSR target measured over three financial years, 2022-2024. Any award that vests will be subject to an additional two-year holding period. ### Workforce engagement Through my role as Non-Executive Director with oversight of employee engagement I have interacted with employees across the Group in person and following COVID-19 restrictions in a socially distanced manner. I attended the virtual leadership conference attended by 300 managers in January 2021. I also met with smaller groups of employees both virtually and through visits to IWG sites. Employees have provided me with their reactions to our response to COVID-19, strategic endeavours, reward plans and resources available to them to deliver job performance. Through this role as well as through other employee surveys we ensure that the Committee and the Board are aware of the views of the workforce on a wide range of issues. Whilst we do not consult directly with the workforce on Executive pay, the workforce are able to raise any views through these forums. On behalf of the Board, I support IWG's ongoing efforts focused on enhancing diversity, equity and inclusion. In the USA, I am a sponsor of the African American Affinity Network Group's advisory board and participate in their membership meetings. They share their mission, objectives, perspectives and initiatives to further professional development and advancement on behalf of African Americans as well as community volunteer efforts. I provide feedback to the Committee and the Board on employee perspectives as a result of these interactions. ### Annual general meeting You will be asked to pass a resolution approving the Annual Report (and the Chairman's annual statement) by way of an advisory vote at the 2022 annual general meeting. On behalf of the Committee, I commend this report to you and look forward to your support for the resolution at the annual general meeting. Nina Henderson Chair, Remuneration Committee 98 IWG plc Annual Report and Accounts 2021 GOVERNANCE ### Directors’ Overview of Directors’ – to ensure ongoing alignment with the changes to the UK Corporate ### Remuneration Policy Remuneration Policy Governance Code of 2018; This report sets out the Group’s Policy on The Policy considers principles of clarity, – to align management and shareholder remuneration for Executive and Non- simplicity, risk, predictability, interests through building material Executive Directors, which was approved proportionality and alignment to culture share ownership over time; by the Company’s shareholders at the and has the following objectives: – to reflect the remuneration received annual general meeting on 12 May 2020. – to provide a balanced package by the wider employee group through The full version of the shareholder- between fixed and variable pay, and considering proportionality; approved Policy can be found on the long and short-term elements, to align – to ensure that our remuneration Company’s website at https://investors. with the Company’s strategic goals structures are transparent and easily iwgplc.com/reports-and-presentations. and time horizons whilst encouraging understood; The Committee is satisfied that the prudent risk management; – to ensure that remuneration practices approved Policy operated as intended – to incorporate incentives that are are consistent with and encourage the in 2021. aligned with and support the Group’s principles of diversity, equality and business strategy and align executives The Remuneration Policy will be due for inclusion; and to the creation of long-term renewal at the 2023 AGM. During 2022, – to reflect the global operating model shareholder value, within a framework the Committee will review the current of the Group whilst taking account of that is sufficiently flexible to adapt as Policy to assess the extent to which any governance best practice. our strategy evolves; changes are required to remain best aligned with IWG’s strategy and external – to align the interests of the Executive best practice. If any changes are Directors, senior executives and proposed the Committee intends to employees with the long-term engage with shareholders during the interests of shareholders and strategic course of the year. objectives of the Company; ### Policy table for Executive Directors Base salary Purpose/link to strategy Operation Maximum Performance framework | To provide a | Salaries are set by the Committee. The | There is no | While there are no performance targets | | --- | --- | --- | --- | | competitive | Committee reviews all relevant factors such | prescribed | attached to the payment of salary, | | component of | as: the scope and responsibilities of the role, | maximum salary. | performance is a factor considered in the | | fixed remuneration | the skills, experience and circumstances of the | Salary increases | annual salary review process. | | to attract and | individual, sustained performance in role, the | will normally be in | | | retain people of | level of increase for other roles within the | line with increases | | | the highest calibre | business, and appropriate market data. | awarded to other | | | and experience | Salaries are normally reviewed annually, and | employees in the | | | needed to shape | any changes normally made effective from | business, although | | | and execute the | 1 January. | the Committee | | | Company’s | | retains discretion to | | The base salaries effective 1 January 2022 are strategy. award larger set out on page 100 of the Remuneration increases if it report. considers it appropriate (e.g. to reflect a change in role, development and performance in role, or to align to market data). iwgplc.com 97 DIRECTORS’ REMUNERATION REPORT CONTINUED Benefits Purpose/link to strategy Operation Maximum Performance framework To provide a Incorporates various cash and non-cash benefits Benefit provision is N/A competitive which may include: a company car (or allowance) set at an appropriate benefits package. and fuel allowance, private health insurance, life competitive market assurance, and, where necessary, other benefits to rate for the nature and reflect specific individual circumstances, such as location of the role. housing or relocation allowances, representation There is no prescribed allowances, reimbursement of school fees, travel maximum as some allowances, or other expatriate benefits. Any costs may change in reasonable business-related expenses (including tax accordance with thereon) can be reimbursed if determined to be a market conditions. taxable benefit. Executive Directors are eligible for other benefits which are introduced for the wider workforce on broadly similar terms. Executive Directors will be eligible to participate in any all-employee share plan operated by the Company, on the same terms as other eligible employees. The maximum level of participation is subject to limits imposed by relevant legislation from time to time (or a lower cap set by the Company). Pension Purpose/link to strategy Operation Maximum Performance framework | To provide | Provided through participation in the Company’s | 7% of base salary for | N/A | | --- | --- | --- | --- | | retirement | money purchase (personal pension) scheme, under | existing Directors | | | benefits in line | which the Company matches individual | which is consistent | | | with the overall | contributions up to a maximum of base salary. | with provisions | | | Group Policy. | | provided to the wider | | The Company may amend the form of an Executive workforce. The Director’s pension arrangements in response to Committee may set a changes in legislation or similar developments. higher level for new executives to reflect those of the workforce in their location (up to a maximum of 15% of base salary). Annual bonus Purpose/link to strategy Operation Maximum Performance framework | To incentivise and | Provides an opportunity for additional reward (up | 150% of base salary | Performance metrics are selected | | --- | --- | --- | --- | | reward annual | to a maximum specified as a % of salary) based on | per annum. | annually based on the current | | performance and | annual performance against targets set and | | business objectives. The majority of | | create further | assessed by the Committee. | | the bonus will be linked to key | | alignment with | | | financial metrics, of which there will | Half of any annual bonus paid will be deferred in shareholders via typically be a significant profit-based shares which will vest after three years, subject to the delivery and element (see note 3 in the full Policy). continued employment but no further performance retention of targets. The other half is paid in cash following the Performance below threshold results deferred equity. | relevant year end. A dividend equivalent provision | in zero payment. Payments rise from | | --- | --- | | allows the Committee to pay dividends, at the | 0% to 100% of the maximum | | Committee’s discretion, on vested shares at the | opportunity levels for performance | | time of vesting and may assume the reinvestment | between the threshold and maximum | | of dividends on a cumulative basis. | targets. | Recovery and withholding provisions apply to bonus awards (see note 1 in the full Policy). 98 IWG plc Annual Report and Accounts 2021 GOVERNANCE Performance Share Plan (“PSP”) Purpose/link to strategy Operation Maximum Performance framework | Motivates and | Awards will normally be made annually under | The normal plan | Awards have a performance period of three | | --- | --- | --- | --- | | rewards the | the PSP and will take the form of either nil-cost | limit is 250% of | financial years starting at the beginning of | | creation of | options or conditional share awards. | base salary. | the financial year in which the award is | | long-term | Participation and individual award levels will be | | made. Performance conditions will measure | | shareholder | determined at the discretion of the Committee | | the long-term success of the Company (see | | value. | within the Policy. | | note 4 in the full Policy). The Committee may | introduce or reweight performance Aligns Awards vest five years following grant, subject measures so that they are directly aligned executives’ to performance against pre-determined targets with the Company’s strategic objectives for interests with (measured after three years) which are set and each performance period. those of the communicated at the time of grant. shareholders. In respect of each performance measure, Recovery and withholding provisions apply to performance below the threshold target PSP awards (see note 1 in the full Policy). results in zero vesting. The starting point for | A dividend equivalent provision allows the | vesting of each performance element will be | | --- | --- | | Committee to pay dividends, at the | no higher than 25% and rises on a straight- | | Committee’s discretion, on vested shares at the | line basis to 100% for attainment of levels | | time of vesting and may assume the | of performance between the threshold and | | reinvestment of dividends on a cumulative | maximum targets. There is no opportunity to | | basis. | re-test. | Shareholding guidelines Purpose/link to strategy Operation Maximum Performance framework To align Executive Directors are expected to build a N/A N/A Executive holding in the Company’s shares to a minimum Directors’ value of two times their base salary within five interests with years. This may be built via the retention of those of our the net-of-tax shares vesting under the long-term Company’s equity-based share plans. Deferred shareholders and shares and shares subject to a holding period other (net-of-tax) can be counted towards the total. stakeholders. Post-cessation shareholding requirement Purpose/link to strategy Operation Maximum Performance framework To align Executive Directors are expected to hold, for N/A N/A Executive up to two years post-cessation, the existing Directors’ shareholding requirement or the actual interests with shareholding at cessation, if lower. those of our long-term shareholders and other stakeholders. iwgplc.com 99 DIRECTORS’ REMUNERATION REPORT CONTINUED ### Annual Report on Remuneration Membership and meetings All members of the Committee are independent. Committee membership during the year and attendance at the meetings is set out on page 94. In addition to the designated members of the Committee, the Chairman, Chief Executive Officer and Company Secretary also attended Committee meetings during the year although none were present during discussions concerning their own remuneration. Terms of reference The Committee’s terms of reference are available on the Company’s website: www.iwgplc.com. Implementation of the Remuneration Policy for 2022 This Annual Report on Remuneration (and the Committee Chair’s annual statement) will be put to a single advisory shareholder vote at the 2022 annual general meeting. The information below includes how we intend to operate our Policy in 2022 and the pay outcomes in respect of the 2021 financial year. Reporting The Group continues to use pre-IFRS 16 results for its primary management reporting including performance target-setting and measuring achievements against those targets. Therefore the figures in this report are presented on a pre-IFRS 16 basis. Base salaries for the Executive Directors No base salary increases are proposed for 2022 (consistent with the approach for the rest of the workforce). The current salaries as at 1 January 2022 (and compared to 2021) are as follows: | Effective | Effective | | --- | --- | | 1 Jan 2022 | 1 Jan 2021 | | (£’000) | (£’000) Percentage change | Mark Dixon £875.0 £875.0 0% Glyn Hughes* £440.0 £440.0 0% * Glyn Hughes was appointed on 25 March 2021 For context, the average base salary increase received by UK employees was 1% in 2021. Benefits and pension Benefits and pension provisions will operate in line with the approved Policy. Annual bonus For 2022, the maximum bonus potential for both Executive Directors is 150% of salary. The on-target bonus is 90% of salary. Half of any bonus paid will normally be deferred into shares under the Deferred Share Bonus Plan (“DSBP”), which will vest after three years subject to continued employment. The 2022 annual bonus will be based 33.33% on measurement against underlying operating profit targets, 33.33% on relative TSR performance and 33.33% on strategic targets including ESG. The targets are not being disclosed prospectively as they are commercially sensitive; however, a description of the performance against targets set will be included in next year’s Annual Report. 100 IWG plc Annual Report and Accounts 2021 GOVERNANCE # **Performance Share Plan ("PSP")** Recognising the substantial increase in opportunity for long-term value to be created for our shareholders through our strategic transformation including our franchising strategy, PSP share option awards will be made at 250% of current salary (up to the Policy maximum) to Executive Directors with performance measured over a three-year period ending 31 December 2024. The awards will be subject to a TSR performance metric as summarised below. The Committee will continue to review the suitability of the TSR metric and may revert back to a broader selection of metrics on the PSP in the future. | Performance conditions | Threshold vesting | Threshold performance | Maximum vesting | Maximum performance | | --- | --- | --- | --- | --- | | Relative TSR versus FTSE 350 excluding investment trusts (100% weighting) | 25% | Median | 100% | 10% compound annual growth above median | Awards will be subject to a holding period of two years following achievement of performance conditions. This requires the Executive Directors to retain the net-of-tax number of vested shares for a period of two years following vesting. # **Chairman and Non-Executive fees** No fee increases are proposed for 2022. Fees were last reviewed and increased in 2020, as detailed in the 2019 Annual Report on Remuneration which was approved at the 2020 annual general meeting. The current fees as at 1 January 2022 compared with 2021 are as follows: | | 2022 (£'000) | 2021 (£'000) | Percentage change | | --- | --- | --- | --- | | Non-Executive Chairman | 300 | 300 | 0% | | Basic fee for Non-Executive Director | 62 | 62 | 0% | | **Additional fees:** | | | | | Chair of Audit Committee | 15 | 15 | 0% | | Chair of Remuneration Committee | 15 | 15 | 0% | | Senior Independent Director combined with Chair of Nomination Committee | 15 | 15 | 0% | | Oversight of employee engagement and CSR | 15 | 15 | - | | Variable dislocation allowance for non-Swiss Directors^{13} | 5 to 10 | 5 to 10 | 0% | 1. The level of dislocation allowance for non-Swiss Directors is determined according to their country of residence. # **Remuneration outcomes for 2021** # **Single total figure of remuneration table (Audited)** The following table shows the total remuneration in respect of the year ending 31 December 2021, together with the prior year comparative. # **Executive Directors** | £'000 | Salary | | Benefits | | Rescise | | Annual bonus | | Long-Term Intensive Awards | | Total | | Total fixed | | Total variable | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | | Mark Dixon | 875.0 | 550.5 | - | - | 84.0 | 38.5 | 656.5 | - | 543.7 | 865.0 | 1,958.9 | 1,454.0 | 959.0 | 589.0 | 1,000.0 | 863.0 | | Glyn Hughes | 290.6 | - | - | - | 19.8 | - | 218.0 | - | - | - | 328.4 | - | 510.4 | - | 218.0 | - | | Eric Hageman | 101.7 | 313.4 | - | 9.6 | 8.7 | 41.5 | - | - | - | - | 110.4 | 366.5 | 110.4 | 366.5 | - | - | hegpfc.com 101 DIRECTORS’ REMUNERATION REPORT CONTINUED Non-Executive Directors Long Term Fees Benefits Pension Annual bonus Incentive Awards Total £’000 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Douglas Sutherland 300.0 166.7 – – – – – – – – 300.0 166.7 Laurie Harris 84.5 55.0 – – – – – – – – 84.5 55.0 Nina Henderson 99.5 55.0 – – – – – – – – 99.5 55.0 Florence Pierre 67.0 40.5 – – – – – – – – 67.0 40.5 François Pauly 82.0 52.5 – – – – – – – – 82.0 52.5 Voluntary waivers – In response to the COVID-19 pandemic Executive Directors and Non-Executive Directors voluntarily agreed to a 50% reduction in their base salaries from 1 May 2020 to 31 December 2020 and the salary increases reflecting performance, increased responsibilities and market comparables which were approved at the 2020 annual general meeting were voluntarily deferred until 1 January 2021. There will be no recovery of the deferred increases or the voluntary reductions. Annual bonus – The bonus shown is the full award in respect of the relevant financial year. Half of the bonus awarded to Executive Directors is normally deferred into shares for three years. Long Term Incentive Awards – Includes the value of awards made to Mark Dixon under the PSP in previous years which vested in respect of a performance period ending in the relevant financial year. The 2018 PSP award (226,804 shares) vested in March 2021 based on performance until 31 December 2020; the value of this is shown in 2020 and reflects a price on the date of vesting of 381.4p. £315.0k of the 2018 PSP value of £865.0k was attributable to share price increase. The 2019 PSP award (118,054 shares) vests in March 2022 based on performance until 31 December 2021; the value of this is shown in 2021 and reflects a three-month average share price ending 31 December 2021 of 291.1p. £61.6k of the 2019 PSP value of £343.7k was attributable to share price increase. Glyn Hughes was appointed as Director and Chief Financial Officer on 25 March 2021. Remuneration detailed above reflects time served in respect of the role during the relevant periods. Eric Hageman resigned as Director and Chief Financial Officer on 24 March 2021. Remuneration detailed above reflects time served in respect of the role during the relevant periods. ### Determination of 2021 annual bonus (Audited) The targets originally set for the 2021 bonus at the start of the year were as follows: | | | Threshold | | Target | | | | --- | --- | --- | --- | --- | --- | --- | | | | payout | | (60% of | | Maximum | | Measure | (% of maximum) Threshold | | maximum) | | (100% of award) Achieved | | (1) Operating profit (pre-IFRS 16 basis) (50% weighting) 33% £84.6m £94.0m £109.0m £(226.2) Relative TSR versus FTSE 350 (excluding investment trusts) Exceeds the (50% weighting) 25% Median – median by 10% Below median 1. Reflects the achieved pre-IFRS 16 operating profit after adjusting items and taking into account discontinued operations of £0.7m. As outlined in the Remuneration Committee Chair’s letter on page 95, as the impact of the COVID-19 pandemic evolved, especially as a result of the Delta variant, the Committee recognised that the original targets were not appropriate or in line with the Company’s evolving strategy, as we informed the market in June 2021. Employee incentive schemes were updated below Board level to reflect the key tasks and priorities given the change in the operating environment. The Committee agreed to review outcomes at the end of the year taking into consideration the achievements against the updated employee incentive schemes. As outlined more fully in the Chair’s letter the Committee determined to award a bonus of 50% of maximum opportunity, which equates to 75% of salary for each Executive. Bonus | | maximum | | | | | | Deferred | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | (% of base | Bonus awarded | Bonus awarded | | Cash bonus | | shares | | | Director | salary) | (% of award) | | (£’000) | | (£’000) | (£’000) | (1) | Mark Dixon 150% 50% 656.3 328.2 328.2 (2) Glyn Hughes 150% 50% 218.0 109.0 109.0 1. Half of any bonus awarded is normally paid in cash with half deferred in shares which vest after three years. 2. Glyn Hughes was appointed on 25 March 2021. Bonus detailed reflects time served in respect of the role. 102 IWG plc Annual Report and Accounts 2021 GOVERNANCE ### PSP awards granted vesting in 2021 (Audited) The table below summarises the performance conditions and the actual performance against the award made under the PSP in 2019. This award was subject to performance conditions measured over the three financial years ending 31 December 2021. | | | Relative TSR versus FTSE 350 | | | EPS | | | | | Return on investment | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | (excluding investment trusts) (33.3% weighting) | | | (33.3% weighting) | | | | | | (33.3% weighting) | | | | | | % of each | | % of each | | | | | | % of each | | | | | | element vesting Target | element vesting Target | | | | | | element vesting Target | | | | | | | | | | | | Compound | | | | Return below | | | | | | | | | annual growth of | | | | | | 2018 | | Below threshold 0% Below median 0% | | | | | | | less than 5% 0% | | | | performance | | | | | | | | | | Compound | | | | Return to be | | | | | | | | | annual growth of | | | | | equal to 2018 | | | Threshold 25% Median 0% | | | | | | | | 5% 0% | | | performance | | Return to be 300 | | 10% compound | | Compound | | basis points | | --- | --- | --- | --- | --- | --- | | | annual growth | annual growth of | | | above 2018 | | Maximum 100% | above median 100% | | | 25% 100% | performance | Compound annual growth of Return 0.5 Median (24.3) per share, % above 2018 Performance achieved plus 3.5% p.a. – less than 5% performance Actual % vesting 51.3% 0% 0% 17.1% of | Overall vesting | maximum | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2019 award number of | | | Total vesting | No. of share options | | Award value | | | Director | | | share options | (% of maximum) | | | to vest | | (£’000) | Mark Dixon 690,377 17.1% 118,054 343.7 The value of awards reflects a three-month average share price ending 31 December 2021 of 291.1p. Awards are subject to a post-vesting holding period of two years. This requires the Executive Directors to hold on to the net-of-tax number of vested shares for a period of two years following vesting. The Committee believes the above outcome is representative of Company performance and no discretion was applied to the 2019 PSP vesting outcome. ### PSP awards vesting in 2023 (Audited) PSP awards granted to Executive Directors on 26 March 2021 which vest subject to a three-year performance period ending 31 December 2023 were as follows: % of maximum Number of Value of award amount receivable Executive share options % of base salary (£’000)P (1) for threshold vesting Mark Dixon 638,128 250% £2,187,503 25% Glyn Hughes 320,887 250% £1,100,001 25% 1. Based on a face value grant of 250% of salary and using the share price of 342.8p on 25 March 2021. The awards are subject to a TSR performance metric as summarised below. Performance conditions Threshold vesting Threshold performance Maximum vesting Maximum performance 10% compound Relative TSR versus FTSE 350 excluding investment trusts annual growth (100% weighting) 25% Median 100% above median The Company’s current share price, including current assumptions regarding the future implementation of the Company’s strategic transformation referenced in analysts’ reports, has been taken into account when setting stretching relative TSR targets. Awards are subject to a post-vesting holding period of two years. This requires the Executive Directors to hold on to the net-of-tax number of vested shares for a period of two years following vesting. iwgplc.com 103 DIRECTORS’ REMUNERATION REPORT CONTINUED ### Total pension benefits During the year under review, the Executive Directors received pension contributions of 7% of salary into defined contribution arrangements (or cash equivalent) plus any contributions in accordance with standard local practice or employment regulations. Details of the value of pension contributions received in the year under review are set out in the Pension column of the single figure of remuneration table. ### Statement of share scheme interests and shareholdings (Audited) Executive Directors are expected to build a holding in the Company’s shares to a minimum value of two times their base salary within five years of their appointment. This must be built via the retention of the net-of-tax shares vesting under the Company’s equity-based share plans. The following table sets out, for Directors who served during the year, the total number of shares held (including the interests of connected persons) as at 31 December 2021 alongside the interests in share schemes for the Executive Directors. Details for Eric Hageman are as at 24 March 2021 when he resigned as Director and Chief Financial Officer. Shareholding guidelines | | | | | | | | | | | PSP options for | | Options under the | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | PSP options | | | which | Share Option Plan | | | | | | | | | Deferred Share | | | subject to | | performance | | | subject to | | | Shares held | | % of salary | % of salary | | | Bonus Plan | | performance | | conditions have | | | performance | | | | outright | required Guideline met? | attained | (1) | | options | (2) | conditions | (3) | been achieved | | (4) | conditions | (5) | Executive Directors Mark Dixon 286,949,493 200% Yes 95,331.2% 284,368 1,937,837 809,843 – Glyn Hughes – 200% No – – 320,887 – 300,000 Eric Hageman – 200% No – 91,923 674,608 – 300,000 Non-Executive Directors Douglas Sutherland 400,000 Laurie Harris 15,000 Nina Henderson 30,800 François Pauly 50,000 Florence Pierre – 1. Based on a share price of 291p and base salary as at 31 December 2021. 2. Half of any bonus awarded is deferred in share options which vest after three years, subject to continued employment but no further performance targets. 3. Unvested awards under the 2020 and 2021 Performance Share Plan are subject to further performance conditions. 4. Options under the Performance Share Plan for which performance conditions have been achieved are subject to a two-year holding period requirement and become exercisable on the fifth anniversary of the date of grant and remain exercisable until the day before the tenth anniversary of the date of grant. 5. In December 2018 Eric Hageman was granted unvested conditional options under the Company’s Share Option Plan at an exercise price of 203.1p per share. In August 2020 Glyn Hughes was granted unvested conditional options under the Company’s Share Option Plan at an exercise price of 222.6p per share. With the exception of the Directors’ interests disclosed in the table above, no Director had any additional interest in the share capital of the Company during the year. There has been no movement in Directors’ share interests since year end to the date of this report. 104 IWG plc Annual Report and Accounts 2021 GOVERNANCE ## Supporting Disclosures and additional context ### Percentage change in remuneration of Directors compared to employees All Executive Directors and Non-Executive Directors had a salary freeze / fee freeze between 2020 and 2021. In addition, in response to the COVID-19 pandemic Executive Directors and Non-Executive Directors voluntarily agreed to a 50% reduction in their base salaries from 1 May 2020 to 31 December 2020 and the salary increases reflecting performance, increased responsibilities and market comparables which were approved at the 2020 annual general meeting were voluntarily deferred until 1 January 2021. There will be no recovery of the deferred increases or the voluntary reductions. The table below reflects the % changes excluding the effect of these voluntary waivers and deferrals during the height of the COVID-19 pandemic. The percentage change in remuneration of each Director is compared to our UK employees (determined to be the most representative comparison) on a full-time equivalent basis, between the year ending 31 December 2019 and the year ending 31 December 2021 on the basis described above. | | Year-on-year change in Directors' and Employees' pay | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | 2021 | | | 2020 | | | | | Base salary % change | Benefits % change | Annual bonus % change | Base salary % change | Benefits % change | Annual bonus % change | | **Executive Directors** | | | | | | | | Mark Dixon | 0% | – | NM^{1} | 6%^{2} | – | (100)%^{1,4} | | Glyn Hughes | – | – | NM^{1} | – | – | – | | Eric Hageman | 0% | – | – | – | – | (100)%^{1,5} | | **Non-Executive Directors** | | | | | | | | Douglas Sutherland | 0% | – | – | 20% | – | – | | Laurie Harris | 0% | – | – | 12% | – | – | | Nina Henderson | 0% | – | – | 33% | – | – | | François Pauly | 0% | – | – | 12% | – | – | | Florence Pierre | 0% | – | – | 9% | – | – | | **Employees** | 1% | – | NM^{1,4} | 3% | – | (100)%^{1,5} | 1. No annual bonus was paid to Mark Dixon in respect of 2020, a bonus of £1,237.16 was paid in respect of 2019. 2. No annual bonus was paid to Eric Hageman in respect of 2020, a bonus of £660.06 was paid in respect of 2019. 3. No annual bonuses were paid to UK employees in respect of 2020. 4. The percentage change is not meaningful due to no annual bonuses being paid in respect of 2020. 5. For comparative purposes, the accumulated % change in employees' base salaries over the period from the last salary increase for Mark Dixon was 9%. ### Relative importance of spend on pay The table below shows total employee remuneration and distributions to shareholders in respect of the years ending 31 December 2021 and 2020 and the percentage changes between years: | | 2021 | 2020 | Change 2020 to 2021 | | --- | --- | --- | --- | | Total employee remuneration | £342.3m | £343.7m | (0.4)% | | Distributions to shareholders via dividends and share buybacks | £0m | £43.7m | (100)% | twgpfc.com 189 DIRECTORS’ REMUNERATION REPORT CONTINUED Chief Executive Officer’s pay ratio The table below shows our voluntary disclosure of the Chief Executive Officer pay ratio information from 2019 and the required disclosure for 2021 at the 25th, 50th and 75th percentiles compared to the pay of our UK employees. The ratios have been calculated based on the single total figure of remuneration for Mark Dixon and the total pay of our employees on a full-time equivalent basis under calculation methodology A of the regulations, as of 31 December 2021. No element was omitted for the purpose of the calculation. The median pay ratio was higher this year as compared with last year largely due to the voluntary reduction in CEO salary during 2020 and no annual bonus being awarded in 2020. Due to the differences in remuneration structure between the CEO and employees and the higher weighting put on the variable pay elements for the CEO, we expect this ratio to fluctuate year on year. Overall, the Committee is satisfied that the median ratio is consistent with IWG’s pay, reward and progression policies for all employees which relate pay levels to performance and market benchmarks. Bonus schemes, participated in by the majority of employees, and long-term incentives align performance with shareholder experience. | | | P25 | | | | P75 | | --- | --- | --- | --- | --- | --- | --- | | | (Lower | | | P50 | (Upper | | | Financial year Methodology | quartile) | | (Median) | | quartile) | | 2019 Option A 231:1 148:1 102:1 2020 Option A 43:1 35:1 20:1 2021 Option A 74:1 50:1 29:1 Mark Dixon P25 P50 P75 2021 (£’000) (£’000) (£’000) (£’000) Total pay 1,958.9 26.4 39.2 68.3 Base salary 875.0 24.7 35.0 61.0 ### Performance graph and table The graph below shows the TSR of IWG in the ten-year period to 31 December 2021 against the TSR of the FTSE 350 (excluding investment trusts). TSR reflects share price growth and assumes dividends are reinvested over the relevant period. The Committee considers the FTSE 350 (excluding investment trusts) relevant since it is an index of companies of similar size to IWG. 700 600 500 400 300 200 100 0 Dec 11 Dec 15 Dec 16 Dec 17Dec 12 Dec 13 Dec 14 Dec 18 Dec 19 Dec 20 Dec 21 IWG plc FTSE 350 Index (excl. investment trusts) Value (£) (rebased) Source: Eikon from Refinitiv This graph shows the value, by 31 December 2021, of £100 invested in IWG plc on 31 December 2011, compared with the value of £100 invested in the FTSE 350 (excluding investment trusts) Index on the same date. 106 IWG plc Annual Report and Accounts 2021 GOVERNANCE | | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020** | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Single total figure of remuneration | £1,773k | £1,854k | £2,770k | £1,968k | £3,035k | £1,132k | £1,451k | £4,181k | 1,454k | **1,958.9k** | | Bonus (% of maximum) | 100% | 79% | 100% | 100% | 93% | 0% | 43% | 100% | 0% | **50%** | | Long-term incentive vesting (% of maximum) | 11% | 35% | 86% | 97% | 91% | 11% | 2% | 100% | 33% | **17.1%** | 1. The single total figure of remuneration has been restated to reflect that the share price for the 2018 PSP on the date of vesting is now known. ### Service contracts/letters of appointment Executive Directors have service contracts with the Group which can be terminated by the Company or the Director by giving 12 months' notice. The Chairman and Non-Executive Directors are appointed for an initial three-year term, which shall continue unless terminated with six months' notice on either side, no contractual termination payments being due and subject to retirement pursuant to the articles of association at the annual general meeting. The Directors' service contracts are available for inspection at the Company's registered office within normal business hours. The following table sets out the dates that each Director was first appointed by the Group, the expiry date of the current term and the length of service as of 31 December 2021. All Directors except those retiring will seek re-election at the 2022 annual general meeting. | | Current service contract/appointment agreement | Initial appointment date as Director within the Group | Expiry of current term | Length of service as Director with the Group | | --- | --- | --- | --- | --- | | **Executive Directors** | | | | | | Mark Dixon | Appointment agreement – 19 December 2016 Director service agreement – 1 July 2020 | 19 December 2016 | – | Founder | | Glyn Hughes | Appointment agreement – 24 March 2021 Employment agreement – 24 March 2021 | 25 March 2021 | – | 9 months | | **Non-Executive Directors** | | | | | | Douglas Sutherland | Appointment agreement – 16 February 2017 | 19 December 2016 | – | 15 years 5 months (11 years 8 months as Chairman) | | Laurie Harris | Appointment agreement – 14 May 2019 | 14 May 2019 | – | 2 years 8 months | | Nina Henderson | Appointment agreement – 19 December 2016 | 19 December 2016 | – | 7 years 8 months | | François Pauly | Appointment agreement – 19 December 2016 | 19 December 2016 | – | 6 years 8 months | | Florence Pierre | Appointment agreement – 19 December 2016 | 19 December 2016 | – | 8 years 8 months | ### Payments to past directors/payments for loss of office – Eric Hageman (Audited) Eric Hageman stepped down from the Board on 24 March 2021 and remained an employee of the Group until 31 March 2021. On cessation of his employment he was paid for his notice period not worked (12 months). This payment was limited to base salary only and was due to be paid in two instalments in March and August 2021, subject to mitigation. As a result of Eric commencing employment prior to August, the second instalment was subsequently not awarded. With the exception of minimal costs below our de minimis limit of £10,000, no other payments for loss of office were made. The total payments were as follows: | Item | Amount | | --- | --- | | Payment in lieu of notice | £220,000 | The Committee determined that Eric would not be eligible to receive a PSP award in 2021, nor would he be eligible to receive a bonus for 2021. hegfc.com 107 DIRECTORS' REMUNERATION REPORT CONTINUED In relation to unvested equity awards, the Committee determined that Eric was a good leaver, under the terms of the relevant share plan rules. In line with the Directors' Remuneration Policy, the Committee sought to find an outcome which is in the best interests of the Company and its shareholders, taking into account the specific circumstances, contractual obligations and seeking to pay no more than is warranted. An award under the Share Option Plan, granted to Eric on 21 December 2018 (prior to joining the Board), was pro-rated for the portion of the performance period worked until termination of employment. The remaining awards vested on 31 March and will become exercisable at their usual time, which is in equal tranches on 21 December 2021, 2022 and 2023 respectively. The PSP award granted on 7 March 2019 was also pro-rated for the portion of the performance worked until termination of employment. Performance was assessed at the point of departure, with the EPS and ROI measures assessed at 0% outcome and the TSR measure assessed at 100% outcome. The remaining awards vested on 31 March 2021 and will become exercisable on 7 March 2024, subject to the rules of the PSP. In its absolute discretion the Committee determined that the PSP award granted on 4 March 2020 will lapse. The total value of these awards is as follows: | Award | Original number of shares outstanding | Number of shares vested | Value** | | --- | --- | --- | --- | | Share Option Plan | 300,000 | 223,000 | £766,350 | | 2019 PSP | 368,201 | 92,050 | £313,522 | | 2020 PSP | 306,407 | - | - | | **Total** | | | **£1,079,872** | 1. Based on share price at close of business on 31 March 2021 of 340dpi All awards remain subject to recovery provisions in line with the relevant Plan rules. The Deferred Share Bonus Award granted on 4 March 2020 will become exercisable at the normal time on 4 March 2023, subject to the rules of the Deferred Share Bonus Plan. ### Advisors to the Remuneration Committee The Executive Compensation team within PwC provided independent advice to the Committee during the year. No other services were provided by PwC during the year. PwC was appointed by the Committee during 2020 in place of Aon, as a result of the senior advisor moving from Aon to PwC. The fees charged by PwC for the provision of independent advice to the Committee during 2021 were £19,000 (2020: £29,500 (AON) and £9,500 (PWC)). With regard to remuneration advice, the Committee is comfortable that PwC's engagement partner and team are objective and independent. ### Statement of voting at general meeting The Committee is directly accountable to shareholders and, in this context, is committed to an open and transparent dialogue with shareholders on the issue of executive remuneration. The members of the Committee attend the Company's annual general meeting and are available to answer shareholders' questions about Directors' remuneration. Votes cast by proxy and at the annual general meetings held on 12 May 2020 and 11 May 2021 in respect of remuneration-related resolutions are shown in the table below. | Resolution | Votes for | | Votes against | | Total votes cast | Votes withheld | | --- | --- | --- | --- | --- | --- | --- | | | # | % | # | % | | | | Approval of Directors' Remuneration Policy at the 2020 AON | 727,136,890 | 94.33% | 43,747,207 | 5.67% | 770,884,097 | 1,177,273 | | Approval of Annual Remuneration Report for year ending 31 December 2020 | 733,595,388 | 98.19% | 13,920,735 | 1.81% | 767,516,323 | 4,550 | For and on behalf of the Board Nina Henderson Chair of the Remuneration Committee 108 M/G plc Annual Report and Accounts 2021 GOVERNANCE ## Directors’ report ### The Directors of the Company present – a description of the composition and Anti-bribery and their Annual Report and the audited operation of the Board and its ### anti-corruption financial statements of the Company and Committees (pages 84 and 85); and The Company is committed to carrying its subsidiaries (together the “Group”) – our Board Diversity Policy is set out on out business in an honest and ethical for the year ended 31 December 2021. pages 86 and 87. manner and has a zero tolerance of bribery and corruption. All employees receive ### Directors Principal activity training on our bribery and corruption The Directors of the Company who held The Company works with franchise policy. The Company’s statement of office during the financial year under partners, landlords and property owners commitment can be found on the review were: to provide the world’s largest network of Company’s website: www.iwgplc.com. flexible workspace. ### Executive Directors ### Respect for human rights ### – Mark Dixon Business review The Company has zero tolerance to – Glyn Hughes (appointed 25 March 2021) The Directors have presented a Strategic slavery and human trafficking and our – Eric Hageman (resigned 24 March 2021) report on pages 1 to 75 as follows: statement made in accordance with the The Chief Executive Officer’s review and Modern Slavery Act 2015, which is ### Non-Executive Directors | | Chief Financial Officer’s review on pages | reviewed by the Board annually, can be | | --- | --- | --- | | – Douglas Sutherland (Chairman) | 24 to 30 and 46 to 51 respectively address: | found on the Company’s website: www. | | – François Pauly | | iwgplc.com. | – review of the Company’s business – Laurie Harris (pages 25 to 31); ### Results and dividends – Florence Pierre – an indication of the likely future The loss before taxation for the year was – Nina Henderson developments in the business (page 31); £259.4m (2020: loss of £613.3m). Biographical details for the current – development and performance during the financial year (pages 46 to 51); and No interim dividend has been paid and Directors are shown on pages 76 and 77. the Directors do not recommend a final – position of the business at the end of Details of the Directors’ interests and dividend in respect of the 2021 financial the year (pages 49 to 51). shareholdings are given in the year (2020: £nil). Remuneration report on page 104. The Risk management and principal risks report, on pages 66 to 75, includes a ### Details of the role of the Board can be Policy and practice on description of the principal risks facing ### found on pages 84 and 85, and the payment of creditors the Company, including financial risks, process for the appointment of Directors The Group does not follow a universal and the steps taken and policies can be found on page 87. code dealing specifically with payments implemented to mitigate those risks. The Corporate Governance report, to suppliers but, where appropriate, our The Company’s activities in research and Nomination Committee report, Audit practice is to: development are detailed on page 36 Committee report, Remuneration report – agree the terms of payment upfront and in the Risk management and and Directors’ statements on pages 78 to with the supplier; principal risks report on page 69. 108 and 111 all form part of this report. – ensure that suppliers are made aware The ESG report, on pages 52 to 65, of these terms of payment; and ### Corporate Governance includes the sections in respect of: – pay in accordance with contractual ### Statement – environmental matters including our and other legal obligations. | The “Governance” section of this Annual | climate disclosures; | | | --- | --- | --- | | Report on pages 76 to 111, together | – social and community issues; and | Employees | | with information contained in the | – employee development and | | The Group treats applicants for “Shareholder information” section on performance. employment with disabilities with full page 175, constitutes our Corporate and fair consideration according to their The Nomination Committee report on Governance Statement. This includes: skills and capabilities. pages 86 to 89 covers our approach to – information on how the Company diversity and further information on Should an employee become disabled complies with the Code and where the diversity initiatives can be found on during their employment, efforts are Code is publicly available (page 78); pages 60 and 61. made to retain them in their current – a description of the main features of employment or to explore opportunities The Directors’ statements on page our internal control and risk for their retraining or redeployment 111 include the statutory statement in management arrangements in relation elsewhere within the Group. respect of disclosure to the auditor. to the financial reporting process (pages 91 to 93); The Directors do not consider any contractual or other relationships with external parties to be essential to the business of the Group. iwgplc.com 109 DIRECTORS’ REPORT CONTINUED ### All employees are encouraged to Substantial interests become involved in the Company’s At 4 March 2022, the Company has been notified of the following substantial performance. Employee surveys are interests held in the issued share capital of the Company. routinely fielded to gather information % of issued share on the Company, employee contribution Number of capital (excluding to performance and other issues and voting rights treasury shares) (1) through our global Voice Councils Estorn Limited 286,949,493 28.50% employees are provided with a Toscafund Asset Management LLP 146,625,056 16.80% dedicated forum where they can express 1. Mark Dixon owns 100% of Estorn Limited. their views to the relevant senior audience. ### Political and charitable ### donations conclusion of the Company’s next annual Going concern general meeting or 10 August 2022. | It is the Group’s policy not to make political | | The Directors, having made appropriate | | --- | --- | --- | | donations either in the UK or overseas. | On 21 December 2020 the shareholders | enquiries, have a reasonable expectation | | | of the Company approved resolutions at | that the Group and the Company have | The Group made charitable donations of a general meeting for the allotment and adequate resources to continue in £438.0k during the year (2020: £430.1k). issue of new ordinary shares on a operational existence for a period of non-pre-emptive basis upon conversion at least 12 months from the date of ### Capital structure of £350m unsubordinated unsecured approval of the financial statements. The Company’s share capital (including guaranteed convertible bonds due 2027 For this reason, they continue to adopt treasury shares) comprises which were issued by IWG Group Holdings the going concern basis in preparing the 1,057,248,651 issued and fully paid up S.à.r.l., a subsidiary of the Company (the accounts on pages 117 to 162. ordinary shares of 1p nominal value in “Bonds”) into ordinary shares in IWG plc IWG plc (2020: 1,057,248,651). All In adopting the going concern basis for in accordance with their terms. Such ordinary shares (excluding treasury preparing the financial statements, the authority is limited to the allotment and shares) have the same rights to vote at Directors have considered the further issue of new ordinary shares pursuant to general meetings of the Company and to information included in the business the conversion of the Bonds, with no such participate in distributions. There are no activities commentary as set out on conversion occurring during 2021. securities in issue that carry special pages 24 to 30, as well as the Group’s Following a change of control of the rights in relation to the control of the principal risks and uncertainties as set Company, the holder of each Bond may Company. The Company’s shares are out on pages 66 to 74. exercise their conversion right using the traded on the London Stock Exchange. | | formula set out in the terms of the Bonds | Further details on the going concern basis | | --- | --- | --- | | Details of the Company’s employee | or may require the issuer to redeem that | of preparation can be found in note 24 of | | share schemes can be found in note 25 | Bond at its principal amount, together | the notes to the accounts on page 144. | | of the notes to the accounts on pages | with accrued and unpaid interest. On 8 | | ### Post balance sheet events | 150 to 156. The Company’s employee | October 2021 IWG International | | | --- | --- | --- | | share schemes contain provisions | Holdings S.à.r.l., a subsidiary of the | Subsequent events are detailed in | | relating to a change of control of the | Company, was substituted in place of | note 33 of the notes to the accounts | | Company. The terms, conditions and | IWG Group Holdings S.à.r.l as issuer and | on page 162. | | discretions for the vesting and exercise | principal debtor under the Bonds. | | | of awards and options may be amended | | Auditors | | in the event of a change of control of the | Power for the Company | | In accordance with Jersey law, a ### Company. to repurchase shares resolution for the reappointment of At the Company’s annual general KPMG Ireland as auditors of the ### Power for the Company meeting held on 11 May 2021 the Company is to be proposed at the ### to issue shares forthcoming annual general meeting. shareholders of the Company approved At the Company’s annual general meeting a resolution giving authority for the ### Approval | held on 11 May 2021 the shareholders of | Company to purchase in the market up | | | --- | --- | --- | | the Company approved resolutions giving | to 100,715,763 ordinary shares | This report was approved by the Board | | authority for the Company to allot ordinary | representing approximately 10% of the | on 8 March 2022. | | shares in the Company up to one-third of | issued share capital (excluding treasury | | On behalf of the Board the Company’s issued share capital and up shares) as at 6 April 2021. No shares to two-thirds of the Company’s issued were repurchased during 2021. Timothy Regan share capital in connection with a rights Company Secretary ### issue and to dis-apply pre-emption rights, Branches in each case, until the earlier of the The Company is incorporated in Jersey 8 March 2022 with a head office branch in Switzerland. 110 IWG plc Annual Report and Accounts 2021 GOVERNANCE ## Directors’ statement ### Statement of Directors’ Under applicable law and regulations, Statement of responsibility the Directors are also responsible for ### responsibilities in respect of We confirm that to the best of our preparing a Directors’ report, a Strategic knowledge: ### the Annual Report and financial report, a Remuneration report and a Corporate Governance Statement that – the financial statements prepared in ### statements comply with that law and those regulations. accordance with the applicable set of The Directors are responsible for accounting standards, give a true and The Directors are responsible for the preparing the Annual Report and the fair view of the assets, liabilities, maintenance and integrity of the Group financial statements in accordance financial position and profit or loss corporate and financial information with applicable law and regulations. of the Group; included on the Company’s websites. – the Directors’ report, including content Company law requires the Directors to Legislation in the UK and Jersey contained by reference, includes a fair prepare the Group financial statements governing the preparation and review of the development and for each financial year. Under that law, dissemination of financial statements performance of the business and the they are required to prepare the Group may differ from legislation in other position of the Group taken as a financial statements in accordance with jurisdictions. whole, together with a description of International Financial Reporting the principal risks and uncertainties Standards (“IFRSs”) as adopted by the ### Statutory statement as that they face; and EU and applicable law. ### to disclosure to auditor – the Annual Report and financial Under company law, the Directors must The Directors who held office at the statements, taken as a whole, is fair, not approve the financial statements date of approval of these Directors’ balanced and understandable and unless they are satisfied that they give a statements confirm that: provides the information necessary for true and fair view of the state of affairs shareholders to assess the Group’s of the Group and its profit or loss for the – so far as they are each aware, there is position and performance, business period. In preparing each of the Group no relevant audit information of which model and strategy. financial statements, the Directors are the Group’s auditor is unaware; and By order of the Board required to: – each Director has taken all the steps that they ought to have taken as a – select suitable accounting policies and Mark Dixon Director in order to make themselves then apply them consistently; aware of any relevant audit Chief Executive Officer – make judgements and estimates that information and to establish that the are reasonable and prudent; 8 March 2022 Group’s auditor is aware of that – for the Group financial statements, information. state whether they have been Glyn Hughes These financial statements have been prepared in accordance with IFRSs as Chief Financial Officer approved by the Directors of the adopted by the EU; and Company. The Directors confirm that the 8 March 2022 – prepare the financial statements on financial statements have been prepared the going concern basis unless it is in accordance with applicable law and inappropriate to presume that the regulations. Group and the parent company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that its financial statements comply with the Companies (Jersey) Law 1991 and IFRS. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. iwgplc.com 111 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC Report on the audit of the financial Conclusions relating to going concern In relation to the Group’s reporting on statements how they have applied the UK Corporate The directors have prepared the Governance Code, we have nothing Opinion financial statements on the going material to add or draw attention to in concern basis as they do not intend to We have audited the financial relation to the directors’ statement in the liquidate the Group or to cease their statements of IWG plc and its financial statements about whether the operations, and as they have concluded consolidated undertakings (‘the Group’) directors considered it appropriate to that the Group’s financial position means for the year ended 31 December 2021 adopt the going concern basis of that this is realistic. They have also set out on pages 117 to 162, which accounting. concluded that there are no material comprise the consolidated income uncertainties that could have cast statement, consolidated statement of Our responsibilities and the significant doubt over their ability to comprehensive income, consolidated responsibilities of the directors with continue as a going concern for at least statement of changes in equity, respect to going concern are described a year from the date of approval of the consolidated balance sheet, in the relevant sections of this report. financial statements (“the going consolidated statement of cash flows concern period”). However, as we cannot predict all future and related notes, including the events or conditions and as subsequent summary of significant accounting In auditing the financial statements, we events may result in outcomes that are policies set out in note 2. The financial have concluded that the directors’ use inconsistent with judgements that were reporting framework that has been of the going concern basis of accounting reasonable at the time they were made, applied in their preparation is Jersey Law in the preparation of the financial the absence of reference to a material and International Financial Reporting statements is appropriate. Our uncertainty in this auditor's report is not Standards (IFRS) as adopted by the evaluation of the directors’ assessment a guarantee that the Group will continue European Union. of the Group’s ability to continue to in operation. adopt the going concern basis of In our opinion: accounting included considering the Detecting irregularities – the financial statements give a true strategic risks relevant to the Group’s including fraud and fair view of the state of the business model and analysing how those We identified areas of laws and Group’s affairs as at 31 December risks might affect the Group’s financial regulations that could reasonably be 2021 and of the Group’s loss for the resources or ability to continue expected to have a material effect on year then ended; operations for the going concern period. the financial statements and risks of – the financial statements have been material misstatement due to fraud, The sensitivity we considered most likely properly prepared in accordance with using our understanding of the entity's to adversely affect the Group’s available IFRS as adopted by the European industry, regulatory environment and financial resources over the going Union; and other external factors and inquiry with concern period was the potential – the financial statements have been the directors. In addition, our risk economic impact of a prolonged prepared in accordance with the assessment procedures included: economic downturn impacting the requirements of Companies (Jersey) Group’s ability to generate revenue. We Law 1991. – Inquiring with the directors and other considered various downside scenarios management as to the Group’s Basis for opinion which were more pessimistic than those policies and procedures regarding We conducted our audit in accordance indicated by the Group’s own forecasts. compliance with laws and regulations, with International Standards on Auditing A key judgement in the downside identifying, evaluating and accounting (UK) (“ISAs (UK)”) and applicable law. Our scenarios of the Group is that there is a for litigation and claims, as well as responsibilities under those standards reasonable expectation that the existing whether they have knowledge of non- are further described in the Auditor’s committed debt facilities in place are compliance or instances of litigation responsibilities for the audit of the adequate to cover the Group’s liquidity or claims. financial statements section of our requirements in such scenarios. There – Inquiring of directors as to the Group’s report. We believe that the audit were no other risks identified that we high-level policies and procedures to evidence we have obtained is a considered were likely to have a material prevent and detect fraud, as well as sufficient and appropriate basis for our adverse effect on the Group’s available whether they have knowledge of any opinion. Our audit opinion is consistent financial resources over this period. actual, suspected or alleged fraud. with our report to the audit committee. – Inquiring of directors regarding their Based on the work we have performed, assessment of the risk that the We were appointed as auditor by the we have not identified any material financial statements may be materially directors on 21 December 2016. The uncertainties relating to events or misstated due to irregularities, period of total uninterrupted conditions that, individually or including fraud. engagement is for the 6 financial years collectively, may cast significant doubt – Reading audit committee, nomination ended 31 December 2021. We have on the Group’s ability to continue as a committee, remuneration committee fulfilled our ethical responsibilities and going concern for a period of at least and Board meeting minutes. we remain independent of the Group in twelve months from the date when the – Planning and performing analytical accordance with UK ethical financial statements are authorised for procedures to identify any usual or requirements, including the Financial issue. unexpected relationships. Reporting Council (FRC)'s Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. 112 IWG plc Annual Report and Accounts 2021 112 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS | We discussed identified laws and | In response to the fraud risks, we also | Consistent with our 2020 audit, in | | --- | --- | --- | | regulations, fraud risk factors and the | performed procedures including: | arriving at our audit opinion above, the | | need to remain alert among the audit | | key audit matters, in decreasing order | – Identifying journal entries to test team. This included communication from of audit significance, were as follows: based on specific risk criteria and the Group to component audit teams of comparing the identified entries to Goodwill and Intangible Assets – relevant laws and regulations and any supporting documentation. £781.8 million (2020: £748.8 fraud risks identified at Group level and – Evaluating the business purpose of request to component audit teams to million) significant unusual transactions, if any. report to the Group audit team any Refer to pages 124 to 125 (accounting – Assessing significant accounting instances of fraud that could give rise to policy) and pages 138 to 139 (financial estimates for bias. a material misstatement at Group level. disclosures) As the Group is regulated, our Firstly, the Group is subject to laws and The key audit matter assessment of risks involved obtaining regulations that directly affect the There is a risk that the carrying amounts an understanding of the legal and financial statements including financial of the Group’s goodwill and intangible regulatory framework that the Group reporting legislation (including related assets will be more than the estimated operates and gaining an understanding companies legislation), distributable recoverable amount, if future cash flows of the control environment including the profits legislation and taxation are not sufficient to recover the Group’s entity’s procedures for complying with legislation. We assessed the extent of investment. This could occur if regulatory requirements. compliance with these laws and forecasted cash flows decline in certain regulations as part of our procedures on Owing to the inherent limitations of an markets or where revenue and costs are the related financial statement items, audit, there is an unavoidable risk that subject to significant fluctuations. Key including assessing the financial we may not have detected some assumptions include revenue growth, statement disclosures and agreeing material misstatements in the financial occupancy rates, discount rates and them to supporting documentation when statements, even though we have terminal values. The recoverability of necessary. properly planned and performed our goodwill is spread across multiple audit in accordance with auditing geographies and economies as Secondly, the Group is subject to many standards. For example, the further highlighted in note 13 and is dependent other laws and regulations where the removed non-compliance with laws and on individual businesses acquired consequences of non-compliance could regulations (irregularities) is from the achieving or sustaining sufficient have a material effect on amounts or events and transactions reflected in the profitability in the future. Goodwill disclosures in the financial statements, financial statements, the less likely the relating to the US and UK country for instance through the imposition of inherently limited procedures required operations accounts for 72% of the total fines or litigation or the loss of Group’s by auditing standards would identify it. carrying amount. licence to operate. We identified the following areas as those most likely to In addition, as with any audit, there We assessed the recoverability of have such an effect: health and safety, remained a higher risk of non-detection goodwill across a sample of countries employment law and certain aspects of of irregularities, as these may involve but placed particular focus on the UK company legislation recognising the collusion, forgery, intentional omissions, impairment model due to the limited nature of the Group’s activities. misrepresentations, or the override of headroom in the UK operations in the internal controls. We are not responsible past, the gross operating loss in the Auditing standards limit the required for preventing non-compliance and current year and given its significance audit procedures to identify non- cannot be expected to detect non- to the Group’s goodwill balance. compliance with these non-direct laws compliance with all laws and regulations. and regulations to inquiry of the We focus on this area due to the directors and other management and Key audit matters: our assessment inherent uncertainty involved in inspection of regulatory and legal of risks of material misstatement forecasting and discounting future cash correspondence, if any. These limited flows, particularly in projected revenue Key audit matters are those matters that, procedures did not identify actual or growth, which forms the basis of the in our professional judgement, were of suspected non-compliance. assessment of recoverability. most significance in the audit of the We assessed events or conditions that financial statements and include the How the matter was addressed could indicate an incentive or pressure most significant assessed risks of in our audit to commit fraud or provide an material misstatement (whether or Our audit procedures in this area opportunity to commit fraud. As required not due to fraud) identified by us, included, but were not limited to, our by auditing standards, we performed including those which had the greatest assessment of the historical accuracy procedures to address the risk of effect on: the overall audit strategy; of the Group’s forecasts and challenging management override of controls the allocation of resources in the management’s profitability forecasts and the risk of fraudulent revenue audit; and directing the efforts of the underlying their impairment model. recognition. We did not identify any engagement team. These matters were We obtained and documented our additional fraud risks. addressed in the context of our audit of understanding of the impairment the financial statements as a whole, and testing process and tested the design in forming our opinion thereon, and we and implementation of the relevant do not provide a separate opinion on controls therein. these matters. iwgplc.com 113 iwgplc.com 113 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC CONTINUED We used our own valuation specialists assets and the related net impairment identification of indicators of to assist us in evaluating the key charge reversal, the judgements made in impairment and impairment reversals judgements used by the Group, in assessing impairment indicators for each by management was supported by particular those relating to the discount CGU and the key assumptions used to reasonable judgements. We found the rates and terminal growth calculations determine the future cash flows of each judgements made by management in used to determine the present value of CGU, which are used to determine the relation to future cash flow forecasts to the cash flow projections. recoverable amount. assess the recoverability of individual business centres were supported by We compared the Group’s key The recoverability of the Group’s reasonable key assumptions and the assumptions, where possible, to Leasehold Improvements PPE and Right calculation of the impairment charge and externally derived data and performed of Use assets and the associated impairment charge reversal recognised our own assessment in relation to key impairment charge recognised in the in the year were accurately recorded. impairment model inputs. We examined year have been identified as a key the sensitivity analysis performed by audit matter. Recognition of Deferred Tax Assets Group management and performed our associated with the Group’s How the matter was addressed own sensitivity analysis in relation to key intellectual property in in our audit assumptions including revenue growth, Switzerland - £69.7 million discount rates, occupancy rates and The audit procedures we have designed (2020: £69.7 million) terminal values. We also compared the to respond to this risk include Refer to pages 126 to 127 (accounting sum of projected discounted cash flows challenging whether there were policy) and pages 134 to 135 (financial to the market capitalisation of the Group indicators of impairment at the CGU disclosures) to assess whether the projected cash level, including comparing the flows appear reasonable. performance of business centres The key audit matter against expected profitability measures. The Group has significant deferred tax The Group’s impairment model did not We obtained and documented our assets in respect of the future benefit of identify any impairments of goodwill or understanding of the impairment deductible temporary differences and intangible assets at 31 December 2021. testing process and the design and accumulated tax losses where it is Based on the procedures we performed, implementation of the relevant key considered probable that they would be we found that the key assumptions controls. We tested the completeness of utilised or recovered in the foreseeable underpinning management’s assessment management’s identification of business future through the generation of future of the recoverable amount of goodwill centres performing below expectations taxable profits by the relevant Group and intangible assets, are reasonable. and accordingly at a greater risk of entities or by offset against deferred tax impairment. Where centres performed Impairment of Leasehold Property, liabilities. In addition, a significant below expectations, we considered Plant and Equipment (‘PPE’) and amount of deferred tax assets were not whether this was an indicator of Right of Use (‘ROU’) assets – £54.2 recognised at the reporting date due to impairment given our understanding of million net reversal of impairment the uncertainty of the relevant Group the maturity of the business centre, the (2020: £246 million impairment entities being able to generate future status of rent renegotiations with charge) taxable profits against which the tax landlords and assessment of the current losses may be utilised before they Refer to pages 123 to 124 (accounting performance of the business centre. expire. | policy) and page 140 (financial | Where there were indicators of | | | --- | --- | --- | | disclosures) | impairment, or where there were | We identified the recognition of certain | | | indicators that previously recognised | deferred tax assets as a key audit matter | The key audit matter impairment should be reversed, we because of the inherent uncertainty There is a risk that the carrying value of assessed the Group’s impairment associated with key assumptions made the Group’s business centres exceeds analysis and challenged the cash flow by management when forecasting future the recoverable amount of each centre forecasts used to determine the taxable profits, which determine the given the continued impact of the recoverable amount of each CGU. extent to which deferred tax assets are COVID-19 pandemic on the trading This included assessing any expected or are not recognised. In addition, we performance of the Group in 2021. In cash outflows where a business centre considered the significance of the response to this risk, the Group has will be closed and analysing the change recognised deferred tax assets in performed an assessment of the Group’s in circumstances giving rise to an assessing this key audit matter. The CGUs (identified as individual business impairment reversal. estimation uncertainty has continued to centres) to identify indicators of be elevated in 2021 due to the ongoing impairment. Management carried out an We performed testing over the strategic developments in the business. impairment analysis for each CGU where impairment charge and reversal of We focused our attention in particular impairment indicators were identified impairment to validate the accuracy of on the key assumptions applied by and impaired the associated Leasehold the net credit recorded in the income management, including revenue growth, Improvements PPE and Right of Use statement in the year. We recalculated when assessing the recoverability of assets to their estimated recoverable the impairment charge and impairment deferred tax assets associated with the amount. Management also reviewed charge reversal for the year and Group’s intellectual property in each CGU impaired at 31 December validated the mathematical accuracy of Switzerland. | 2020 to determine if previously | management’s calculation. The Group | | --- | --- | | recognised impairment losses no longer | recognised a net reversal of impairment | | existed or had decreased such that the | charges of £46.8 million and £7.4 million | | carrying value of the CGU should be | related to Right of Use assets and | | increased to its recoverable amount at | Leasehold Improvements PPE | | 31 December 2021. We consider this | respectively in the year ended 31 | | area to be a key audit matter, in | December 2021. As a result of our | | consideration of the significance of the | audit procedures, we found that the | 114 IWG plc Annual Report and Accounts 2021 114 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **How the matter was addressed in our audit** In this area our audit procedures included using our work on the Group's forecasts described in the goodwill key audit matter above. We obtained and documented our understanding of processes related to management's assessment of the recoverability of deferred tax assets and tested the design and implementation of the relevant controls therein. In addition we used our own tax specialists to assist us in evaluating and challenging the key assumptions used by the Group and its taxation advisors in calculating the deferred tax assets including assessing the recoverability of the tax losses against the forecast future taxable profits, taking into account the Group's tax position, the timing of forecast taxable profits, and our knowledge and experience of the application of relevant tax legislation. We considered the historical accuracy of forecasts of future taxable profits made by management by comparing the actual taxable profits for the current year with management's estimates in the forecasts made in the previous year and assessing whether there were any indicators of management bias in the selection of key assumptions. We considered the impact of the ongoing changes in the Group's strategy which places greater focus on external franchising and the impact of this on management's assessment of the recoverability of the assets recognised. We challenged management's key assumptions in relation to the recoverability of the deferred tax assets recognised in Switzerland, arising on the transfer of the Group's intellectual property in 2019, by involving our taxation specialists to evaluate the recoverability of the deferred tax asset in relation to the deductible temporary differences available. We evaluated whether management's judgements on the generation of future taxable profits in the foreseeable future were aligned with the Group's other business forecasting processes. We assessed the presentation and disclosure (in accordance with IAS 1 and IAS 12) in respect of taxation-related balances and considered whether the Group's disclosures reflected the risks inherent in the accounting for the taxation balances. Based on the audit procedures performed, we found that the key assumptions used by management in calculating the future taxable profits of the Group for the purpose of assessing the recoverability of deferred tax assets relating to Swiss intellectual property assets are reasonable. # **Our application of materiality and an overview of the scope of our audit** The materiality for the consolidated financial statements as a whole was set at £9 million (2020: £9 million) which is 0.40% (2020: 0.36%) of total revenues. In 2021, consistent with 2020, we have used revenue as the benchmark for materiality. Consistent with 2020, we determined that adjusted profit before tax was not an appropriate benchmark in 2021 given that the Group has recorded a loss for the year. We have determined, in our professional judgement, that revenue is the principal benchmark within the financial statements relevant to members of the Group in assessing financial performance. We agreed with the audit committee to report corrected and uncorrected misstatements we identified through our audit with a value in excess of £0.45 million (2020: £0.45 million). We also agreed to report other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds. We applied materiality to assist us determine what risks were significant risks and the appropriate audit procedures to be performed. The structure of the Group's finance function is such that certain transactions and balances are accounted for by central Group finance teams, with the remainder accounted for in the operating units. We performed comprehensive audit procedures, including those in relation to the key audit matters, on those transactions and balances accounted for at Group and operating unit level. In determining those components in the Group on which we perform audit procedures, we considered the relevant size and risk profile of the components. In relation to the Group's operating units, audits for Group reporting purposes were performed at thirteen identified key reporting components, augmented by risk focused audit procedures which were performed for certain other components. These audits covered 83% (2020: 81%) of total Group revenue and 95% (2020: 94%) of Group total assets. The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. Planning meetings were held with component auditors in order to assess the key audit risks, audit strategy and work to be undertaken. The Group audit team approved the materiality of each of the components, which ranged from £1.5m to £4m, having regard to the mix of size and risk profile of the components. Detailed audit instructions were sent to the auditors of each of these identified locations. These instructions covered the significant audit areas to be covered by these audits (which included the relevant risks of material misstatement detailed above) and set out the information required to be reported to the Group audit team. Senior members of the Group audit team, including the lead engagement partner, attended each component audit closing meeting via video conferencing facilities, at which the results of component audits were discussed with divisional and Group management. At these meetings, the findings reported to the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by the component auditor. The Group audit team interacted with the component teams where appropriate during various stages of the audit, inspected key working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements. # **We have nothing to report on the other information in the annual report** The directors are responsible for the other information presented in the annual report together with the financial statements. The other information comprises the information included in the Strategic Report and Governance sections of the Annual Report, as well as the unaudited appendices (including the unaudited IFRS 16 proforma statements, summarised extract of unaudited Company balance sheet, the post-tax cash return on net investment and the five-year summary and the glossary). The financial statements and our auditor's report thereon do not comprise part of the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. hagifc.com 333 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IWG PLC CONTINUED | Our responsibility is to read the other | We have nothing to report on the other | A fuller description of our | | --- | --- | --- | | information and, in doing so, consider | matters on which we are required to | responsibilities is provided | | whether, based on our financial | report by exception | on the FRC’s website at | | statements audit work, the information | Under Company (Jersey) Law 1991, we | www.frc.org.uk/auditorsresponsibilities. | | therein is materially misstated or | are required to report to you if, in our | | The purpose of our audit work and to inconsistent with the financial opinion: whom we owe our responsibilities statements or our audit knowledge. | Based solely on that work we have not | – adequate accounting records have not | Our report is made solely to the Group’s | | --- | --- | --- | | identified material misstatements in the | been kept by the parent company, or | members, as a body, in accordance with | | other information. | – returns adequate for our audit have | Article 113A of the Companies (Jersey) | | | not been received from branches not | Law 1991. Our audit work has been | Corporate Governance Statement visited by us; or undertaken so that we might state to the The Listing Rules require us to review – the financial statements are not in Group’s members those matters we are the directors' statement in relation to agreement with the accounting required to state to them in an auditor’s going concern, longer-term viability and records and returns; or report and for no other purpose. To the that part of the Corporate Governance – we have not received all the fullest extent permitted by law, we do Statement relating to the Group’s information and explanations we not accept or assume responsibility to compliance with the provisions of the require for our audit. We have nothing anyone other than the Group and the UK Corporate Governance Statement to report in respect of the above Group’s members, as a body, for our specified for our review. Based on the responsibilities. audit work, for this report, or for the work undertaken as part of our audit, opinions we have formed. Respective responsibilities and we have concluded that each of the restrictions on use Barrie O’Connell following elements of the Corporate Responsibilities of directors for the (Senior statutory auditor) Governance Statement is materially consistent with the financial statements financial statements for and on behalf of KPMG or our knowledge obtained during As explained more fully in the directors’ 1 Stokes Place, the audit: responsibilities statement set out on St. Stephen’s Green, page 111, the directors are responsible Dublin 2, – Directors' statement with regards the for: the preparation of the financial Ireland appropriateness of adopting the going statements including being satisfied that concern basis of accounting and any 8 March 2022 they give a true and fair view; such material uncertainties identified set internal control as they determine is out on page 111; necessary to enable the preparation of – Directors’ explanation as to its financial statements that are free from assessment of the entity’s prospects, material misstatement, whether due to the period this assessment covers and fraud or error; assessing the Group’s why the period is appropriate set out ability to continue as a going concern, on page 111; disclosing, as applicable, matters related – Directors' statement on the annual to going concern; and using the going report and financial statements, taken concern basis of accounting unless they as a whole on fair, balanced and either intend to liquidate the Group or to understandable and the information cease operations, or have no realistic necessary for shareholders to assess alternative but to do so. the Group's position and performance, business model and strategy set out Auditor’s responsibilities for the audit on page 111; of the financial statements – Board’s confirmation that it has carried Our objectives are to obtain reasonable out a robust assessment of the assurance about whether the financial emerging and principal risks and the statements as a whole are free from disclosures in the annual report that material misstatement, whether due to describe the principal risks and the fraud, other irregularities or error, and to procedures in place to identify issue an opinion in an auditor’s report. emerging risks and explain how they Reasonable assurance is a high level of are being managed or mitigated set assurance, but is not a guarantee that an out on pages 66 to 75; audit conducted in accordance with ISAs – The section of the annual report that (UK) will always detect a material describes the review of effectiveness misstatement when it exists. of risk management and internal Misstatements can arise from fraud, control systems set out on page 91; other irregularities or error and are and considered material if, individually or in – The section describing the work of the the aggregate, they could reasonably be audit committee set out on pages 90 expected to influence the economic to 93. decisions of users taken on the basis of these financial statements. 116 IWG plc Annual Report and Accounts 2021 116 IWG plc Annual Report and Accounts 2021 CONSOLIDATED INCOME STATEMENT FINANCIAL STATEMENTS | Item | Notes | Year ended 31 Dec 2020 | Year ended 31 Dec 2019 % of total | | --- | --- | --- | --- | | **Revenue** | 3 | **2,227.9** | 2,431.9 | | **Total cost of sales** | | **(1,885.8)** | (2,377.0) | | Cost of sales | | **(1,870.0)** | (2,059.9) | | Adjusting items to cost of sales^{(1)} | | **(70.0)** | (71.1) | | Reversal of (loss) on impairment of property, plant, equipment and right-of-use assets^{(1)} | 3.5 | **54.2** | (246.0) | | Expected credit losses on trade receivables^{(2)} | 5 | **(99.5)** | (34.8) | | **Gross profit (centre contribution)** | 3 | **242.6** | 20.1 | | **Total selling, general and administration expenses** | | **(327.8)** | (367.5) | | Selling, general and administration expenses | | **(294.7)** | (311.1) | | Adjusting items to selling, general and administration expenses | 10 | **(33.1)** | (56.4) | | Share of loss of equity-accounted investees, net of tax | 21 | **(2.2)** | (2.6) | | **Operating loss** | 5 | **(87.4)** | (350.0) | | Finance expense | 7 | **(198.0)** | (266.4) | | Finance income | 7 | **26.0** | 3.1 | | **Net finance expense** | | **(172.0)** | (263.3) | | **Loss before tax for the year from continuing operations** | | **(259.4)** | (613.3) | | Income tax expense | 8 | **(10.3)** | (32.0) | | **Loss after tax for the year from continuing operations** | | **(269.7)** | (645.3) | | Profit/(loss) after tax for the period from discontinued operations | 9 | **59.3** | (1.5) | | **Loss for the year** | | **(210.4)** | (646.8) | | Attributable to equity shareholders of the Group | | **(204.8)** | (646.8) | | Attributable to non-controlling interests | 27 | **(5.6)** | - | | **Loss per ordinary share (EPS):** | | | | | **Attributable to ordinary shareholders** | | | | | Basic (p) | 11 | **(20.3)** | (67.9) | | Diluted (p) | 11 | **(20.3)** | (67.9) | | **From continuing operations** | | | | | Basic (p) | 11 | **(26.2)** | (67.8) | | Diluted (p) | 11 | **(26.2)** | (67.8) | 1. The comparative information has been restated to reflect the impact of discontinued operations (note 9). 2. The net reversal of adjusting items of £1.7m (2020 charge of £333.1m) comprises the following items included in the balances referenced (note 10): A reversal of the impairment of property, plant and equipment and right-of-use assets of £125.2m (2020 charge of £244.8), the adjusting items to costs of sales of £70.0m (2020: £71.1m) and £53.5m (2020: £17.5m) of the expected credit losses on trade receivables balances reported. The above consolidated income statement should be read in conjunction with the accompanying notes. hagifc.com 117 ## CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | In | Years | Year ended 31 Dec 2021 | Year ended 31 Dec 2020 | | --- | --- | --- | --- | | Loss for the year | | **(210.4)** | (646.8) | | Other comprehensive income/(loss) that is or may be reclassified to profit or loss in subsequent periods: | | | | | Cash flow hedges – effective portion of changes in fair value | | 0.2 | – | | Foreign exchange recycled to profit or loss from discontinued operations | 9 | (0.5) | – | | Foreign currency translation (loss)/gain for foreign operations | | **(20.6)** | 1.3 | | **Items that are or may be reclassified to profit or loss in subsequent periods** | | **(20.7)** | 1.3 | | Other comprehensive income that will never be reclassified to profit or loss in subsequent periods: | | | | | Re-measurement of defined benefit liability, net of income tax | 26 | – | – | | **Items that will never be reclassified to profit or loss in subsequent periods** | | – | – | | **Other comprehensive (loss)/profit for the period, net of tax** | | **(20.7)** | 1.3 | | **Total comprehensive loss for the year, net of tax** | | **(231.1)** | (645.5) | | Attributable to shareholders of the Group | | **(225.5)** | (645.5) | | Attributable to non-controlling interests | 27 | **(5.6)** | – | The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 118 M/G plc Annual Report and Accounts 2021 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FINANCIAL STATEMENTS Total | | | | Foreign | | | | | | | equity | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Issued | | | currency | | | | | | attributable to | | | Non- | | | share | Share | Treasury | translation | Hedging | | Other | | Retained | | equity | controlling | | Total | | capital | premium | shares | reserve | reserve | reserves | | (1) | earnings | shareholders | | interests | | equity | Balance at 1 January 2020 9.2 – (116.9) 34.9 (0.2) 25.8 927.7 880.5 – 880.5 Total comprehensive income/(loss) for the year: Loss for the year – – – – – – (646.8) (646.8) – (646.8) Other comprehensive income: Foreign currency translation differences – – – 1.3 – – – 1.3 – 1.3 for foreign operations Other comprehensive income, net of tax – – – 1 .3 – – – 1. 3 – 1 .3 Total comprehensive income/(loss) – – – 1.3 – – (646.8) (645.5) – (645.5) for the year Transactions with owners of the Company Share-based payments – – – – – – 6.4 6.4 – 6.4 Ordinary dividend paid – – – – – – – – – – Proceeds from issue of ordinary shares, 1.3 312.6 – – – – – 313.9 – 313.9 net of costs Purchase of shares – – (43.7) – – – – (43.7) – (43.7) Proceeds from exercise of share awards – – 6.5 – – – (4.3) 2.2 – 2.2 Total transactions with owners of the Company 1.3 312.6 (37.2) – – – 2.1 278.8 – 278.8 Balance at 31 December 2020 10.5 312.6 (154.1) 36.2 (0.2) 25.8 283.0 513.8 – 513.8 Total comprehensive income/(loss) for the year: Loss for the year – – – – – – (204.8) (204.8) (5 .6) (210.4) Other comprehensive income/(loss): Cash flow hedges – effective portion of – – – – 0.2 – – 0.2 – 0.2 changes in fair value Foreign exchange recycled to profit or – – – (0.5) – – – (0.5) – (0.5) loss from discontinued operations Foreign currency translation differences – – – (20.4) – – – (20.4) – (20.4) for foreign operations Other comprehensive income/(loss), – – – (20.9) 0.2 – – (20.7) – (20.7) net of tax Total comprehensive income/(loss) – – – (20.9) 0.2 – (204.8) (225.5) (5.6) (231.1) for the year Transactions with owners of the Company Share-based payments – – – – – – 5.8 5.8 – 5.8 Ordinary dividend paid – – – – – – – – – – Proceeds from issue of ordinary shares, – – – – – – – – – – net of costs Purchase of shares – – – – – – – – – – Proceeds from exercise of share awards – – 2.8 – – – (2.0) 0.8 – 0.8 T o t a l t r a n s a c t i o n s w i t h o w n e r s o f t h e C o m p a n y – – 2.8 – – – 3.8 6.6 – 6.6 Acquisition of subsidiary with non-controlling – – – – – – – – 15.2 15.2 interests Balance at 31 December 2021 10.5 312.6 (151.3) 15.3 – 25.8 82.0 294.9 9.6 304.5 T o t a l t r a n s a c t i o n s w i t h o w n e r s o f t h e C o m p a n y 1. Other reserves include £10.5m for the restatement of the assets and liabilities of the UK associate, from historic to fair value at the time of the acquisition of the outstanding 58% interest on 19 April 2006, £37.9m arising from the Scheme of Arrangement undertaken on 14 October 2008, £6.5m relating to merger reserves and £0.1m to the redemption of preference shares, partly offset by £29.2m arising from the Scheme of Arrangement undertaken in 2003. The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. iwgplc.com 119 iwgplc.com 119 # CONSOLIDATED BALANCE SHEET | Inn | Notes | As at 31 Dec 2021 | As at 31 Dec 2020 | | --- | --- | --- | --- | | **Non-current assets** | | | | | Goodwill | 13 | 703.8 | 695.5 | | Other intangible assets | 14 | 78.0 | 53.3 | | Property, plant and equipment | 15 | 6,376.5 | 6,855.9 | | Right-of-use assets | 15 | 5,254.1 | 5,646.9 | | Other property, plant and equipment | 15 | 1,122.4 | 1,209.0 | | Deferred tax assets | 8 | 326.6 | 188.2 | | Other long-term receivables | 16 | 49.7 | 53.0 | | Investments in joint ventures | 21 | 44.9 | 11.3 | | Other investments | | 0.3 | - | | **Total non-current assets** | | **7,579.8** | **7,859.2** | | **Current assets** | | | | | Inventory | | 1.2 | 1.3 | | Trade and other receivables | 17 | 734.2 | 1,003.7 | | Corporation tax receivable | 8 | 18.5 | 29.1 | | Cash and cash equivalents | 23 | 77.8 | 71.0 | | **Total current assets** | | **831.7** | **1,105.1** | | **Total assets** | | **8,411.5** | **8,964.3** | | **Current liabilities** | | | | | Trade and other payables (incl. customer deposits) | 18 | 926.6 | 1,007.6 | | Deferred revenue | | 346.4 | 328.9 | | Corporation tax payable | 8 | 35.9 | 40.0 | | Bank and other loans | 19,23 | 21.5 | 21.9 | | Lease liabilities | 23 | 932.5 | 1,019.6 | | Provisions | 20 | 8.2 | 17.5 | | **Total current liabilities** | | **2,271.1** | **2,435.3** | | **Non-current liabilities** | | | | | Other long-term payables | | 5.6 | 5.9 | | Deferred tax liability | 8 | 140.6 | 0.2 | | Bank and other loans | 19,23 | 453.3 | 400.2 | | Lease liabilities | 23 | 5,188.7 | 5,538.9 | | Derivative financial liabilities | 24 | 26.9 | 49.6 | | Provisions | 20 | 12.4 | 13.5 | | Provision for deficit on joint ventures | 21 | 6.5 | 4.6 | | Retirement benefit obligations | 26 | 1.9 | 2.1 | | **Total non-current liabilities** | | **5,835.9** | **6,015.0** | | **Total liabilities** | | **8,107.0** | **8,450.5** | | **Total equity** | | | | | Issued share capital | 22 | 10.5 | 10.5 | | Issued share premium | 22 | 312.6 | 312.6 | | Treasury shares | 22 | (151.3) | (154.1) | | Foreign currency translation reserve | | 15.3 | 56.2 | | Hedging reserve | | - | (0.2) | | Other reserves | | 25.8 | 25.8 | | Retained earnings | | 82.0 | 283.0 | | **Total shareholders' equity** | | **294.9** | **513.8** | | **Non-controlling interests** | 27 | 9.6 | - | | **Total equity** | | **304.5** | **513.8** | | **Total equity and liabilities** | | **8,411.5** | **8,964.3** | The financial statements on pages 117 to 162 were approved by the Board on 8 March 2022 Chief Executive Officer Chief Financial Officer The above consolidated balance sheet should be read in conjunction with the accompanying notes. 128 M/G plc Annual Report and Accounts 2021 CONSOLIDATED STATEMENT OF CASH FLOWS FINANCIAL STATEMENTS | £m | Notes | Year ended 31 Dec 2021 | Year ended 31 Dec 2020 Percent^{1)} | | --- | --- | --- | --- | | **Operating activities** | | | | | **Loss for the year from continuing operations** | | **(269.7)** | **(665.3)** | | Adjustments for: | | | | | Profit/(loss) from discontinued operations | 9 | 4.0 | (0.9) | | Net finance expense^{2)} | 7 | 172.0 | 263.3 | | Share of loss on equity-accounted investees, net of income tax | 21 | 2.2 | 2.6 | | Depreciation charge | 15 | 1,895.9 | 1,186.3 | | Right-of-use assets | 15 | 892.9 | 946.0 | | Other property, plant and equipment | 15 | 203.0 | 240.3 | | Loss on impairment of goodwill | 13 | — | 4.9 | | Loss on disposal of property, plant and equipment | 3 | 64.2 | 93.1 | | Profit on disposal of right-of-use assets and related lease liabilities | 3, 23 | (41.5) | (25.7) | | Profit on sales of current assets | — | (1.4) | — | | Loss on disposal of intangible assets | 3 | 0.3 | 0.1 | | (Reversal)/loss on impairment of property, plant and equipment | 3, 13 | (7.4) | 82.1 | | (Reversal)/loss on impairment of right-of-use assets | 3, 13 | (46.8) | 163.9 | | Amortisation of intangible assets | 3, 14 | 13.5 | 8.7 | | Negative goodwill arising on an acquisition | 27 | (1.7) | — | | Loss on disposal of other investments | 21 | — | 1.6 | | Tax expense | 8 | 10.3 | 32.0 | | Expected credit losses on trade receivables | 3 | 99.3 | 34.8 | | (Decrease)/increase in provisions | 20 | (14.5) | 15.2 | | Share-based payments | — | 5.8 | 6.4 | | Other non-cash movements | — | (12.3) | (4.6) | | **Operating cash flows before movements in working capital** | | **1,072.4** | **1,218.5** | | Proceeds from partner contributions (reimbursement of costs)^{1)} | 15 | 19.7 | 38.4 | | Increase in trade and other receivables | — | (127.5) | (76.4) | | (Decrease)/increase in trade and other payables | — | (38.5) | 77.5 | | **Cash generated from operations** | | **926.3** | **1,257.8** | | Interest paid and similar charges on bank loans and corporate borrowings | — | (19.0) | (17.6) | | Interest paid on lease liabilities | 23 | (167.1) | (269.6) | | Tax paid | — | (5.4) | (21.9) | | **Net cash inflows from operating activities** | | **734.8** | **968.9** | | **Investing activities** | | | | | Purchase of property, plant and equipment | 15 | (220.5) | (257.6) | | Payment of initial direct costs related to right-of-use assets | — | (1.3) | (0.8) | | Purchase of subsidiary undertakings, net of cash acquired | 27 | 10.6 | (26.8) | | Purchase of intangible assets | 14 | (33.7) | (16.5) | | Purchase of other investments | — | (0.3) | — | | Proceeds from (purchase of) other current receivables^{2)} | 17 | 283.7 | (276.2) | | Proceeds on the sale of discontinued operations, net of cash disposed of | 9, 21 | 18.9 | 3.3 | | Proceeds on sale of property, plant and equipment | — | 1.0 | 8.2 | | Interest received | 7 | 3.5 | 0.6 | | **Net cash inflows/(outflows) from investing activities** | | **61.9** | **(563.6)** | | **Financing activities** | | | | | Proceeds from issue of loans | — | 983.1 | 876.5 | | Repayment of loans | — | (946.7) | (1,109.8) | | Proceeds from issue of convertible bonds (net of transaction costs) | 19 | — | 343.2 | | Payment of lease liabilities | 23 | (866.8) | (897.3) | | Proceeds from partner contributions (lease incentives)^{2)} | 15 | 35.9 | 111.0 | | Proceeds from issue of ordinary shares, net of costs | 22 | — | 313.9 | | Purchase of treasury shares | 22 | — | (63.7) | | Proceeds from exercise of share awards | — | 0.8 | 2.2 | | Payment of ordinary dividend | 12 | — | — | | **Net cash outflows from financing activities** | | **(791.7)** | **(406.0)** | | Net increase/(decrease) in cash and cash equivalents | — | 5.0 | (0.7) | | Cash and cash equivalents at beginning of the year | — | 71.0 | 66.6 | | Effect of exchange rate fluctuations on cash held | — | 1.8 | 3.1 | | **Cash and cash equivalents at end of the year** | 23 | **77.8** | **71.0** | 1. The comparative information has been restated to reflect the impact of discontinued operations (note 9). 2. The net finance expense includes mark-to-market adjustments of £23.5m (12.6m). 3. Included in other receivables of 31 December 2020 was net/online and senior debt recognised at amortised cost of £276.2m. This receivable balance was fully repaid to the Group in February 2021, together with the reimbursement of associated costs resulting in an additional £1.1m gain on settlement. 4. The total proceeds from partner contributions relating to the reimbursement of costs and lease incentives of £55.6m are allocated by estate in the post-tax cash return on net investment, on page 171. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. heg4c.com 323 NOTES TO THE ACCOUNTS CONTINUED ## 1. Authorisation of financial statements IWG plc is a public limited company incorporated in Jersey and registered and domiciled in Switzerland. The Group and Company financial statements for the year ended 31 December 2021 were authorised for issue by the Board of Directors on 8 March 2022 and the balance sheets were signed on the Board's behalf by Mark Dixon and Glyn Hughes. The Company's ordinary shares are traded on the London Stock Exchange. The audited Group accounts are included from pages 117 to 162. IWG plc owns, and is a franchise operator of, a network of business centres which are utilised by a variety of business customers. Information on the Group's structure is provided in note 31, and information on other related party relationships of the Group is provided in note 30. The Group financial statements have been prepared and approved by the Directors in accordance with Companies (Jersey) Law 1991 and International Financial Reporting Standards as adopted by the European Union ('Adopted IFRSs'). The Company prepares its parent company annual accounts in accordance with accounting policies based on the Swiss Code of Obligations; extracts from these unaudited accounts are presented on page 163. ## 2. Accounting policies ### Basis of preparation The Group financial statements consolidate those of the parent company and its subsidiaries (together referred to as the 'Group') and equity account the Group's interest in joint ventures. The extract from the parent company annual accounts presents information about the Company as a separate entity and not about its Group. The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements. Amendments to adopted IFRSs issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) with an effective date from 1 January 2021 did not have a material effect on the Group financial statements, unless otherwise indicated. The following standards, interpretations and amendments to standards were adopted by the Group for periods commencing on or after 1 January 2021, with no material impact on the Group: Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) Judgements made by the Directors in the application of these accounting policies that have significant effect on the consolidated financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 32. The consolidated financial statements are prepared on a historical cost basis, with the exception of certain financial assets and liabilities that are measured at fair value. These Group consolidated financial statements are presented in pounds sterling (£), which is IWG plc's functional currency, and all values are in million pounds, rounded to one decimal place, except where indicated otherwise. The attributable results of those companies acquired or disposed of during the year are included for the periods of ownership. ### Going concern The Group reported a loss after tax of £269.7m (2020: £645.3m) from continuing operations for the year, while net cash of £734.8m (2020: £968.9m) was generated from operations during the year. Although the Group's balance sheet at 31 December 2021 reports a net current liability position of £1,439.4m (2020: £1,330.4m) which could give rise to a potential liquidity risk, the Directors concluded after a comprehensive review that no liquidity risk exists as: 1. The Group had funding available under the Group's £950.0m revolving credit facility, £530.1m (2020: £731.5m) was available and undrawn at 31 December 2021. This facility was committed until March 2025 with an option to extend until 2026 (note 24); and 2. The Group maintained a 12-month rolling forecast and a three-year strategic outlook. It also monitored the covenants in its facilities to manage the risk of potential breach. The Group expects to remain within covenants throughout the forecast period. In reaching this conclusion, the Directors have assessed: - the potential cash generation of the Group against a range of illustrative scenarios (including a severe but plausible outcome); and - mitigating actions to reduce operating costs and optimise cash flows during any ongoing global restrictions. The Directors consider that the Group is well placed to successfully manage the actual and potential risks faced by the organisation including risks related to COVID-19. On the basis of their assessment, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these Group consolidated financial statements and consider it appropriate to continue to adopt the going concern basis in preparing the financial statements of the Group. ### Subsequent events In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. The facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio. The Directors performed an updated going concern assessment to reflect the impact of the amended revolving credit facility and concluded that the facility remains sufficient for the Group to retain sufficient cash reserves to continue as a going concern, for a period of at least 12 months from the date of approval of these group consolidated financial statements. In addition, a £330.0m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants. 122 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **IFRS not yet effective** The following new or amended standards and interpretations that are mandatory for 2022 annual periods (and future years) are not expected to have a material impact on the Group financial statements, unless otherwise stated: | Onerous contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) | 1 January 2022 | | --- | --- | | Annual Improvements to IFRS Standards 2018-2020 | 1 January 2022 | | Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) | 1 January 2022 | | Reference to the Conceptual Framework – Amendments to IFRS 3 | 1 January 2022 | | Classification of Liabilities as Current or Non-Current (Amendment to IAS 1) | 1 January 2023 | | IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts | 1 January 2023 | | Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates | 1 January 2023 | | Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) | 1 January 2023 | There are no other IFRS standards or interpretations that are not yet effective that would be expected to have a material impact on the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. # **Basis of consolidation** Subsidiaries are entities controlled by the Group. Control exists when the Group controls an entity, when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences. The results are consolidated until the date control ceases or the subsidiary qualifies as a disposal group, at which point the assets and liabilities are carried at the lower of fair value less costs to sell and carrying value. Joint ventures are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. The consolidated financial statements include the Group's share of the total recognised gains and losses of joint ventures on an equity-accounted basis, from the date that joint control commences until the date that joint control ceases or the joint venture qualifies as a disposal group, at which point the investment is carried at the lower of fair value less costs to sell and carrying value. When the Group's share of losses exceeds its interest in a joint venture, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of a joint venture. # **Leases** The nature of the Group's leases relates to the rental of commercial office real estate premises globally. # **1. Right-of-use assets** The Group recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised and initial direct costs incurred. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment review on an annual basis. # **2. Lease liabilities** At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments and variable lease payments that depend on an index or a rate. The variable lease payments that do not depend on an index or a rate are recognised as a rent expense in the period in which they are incurred. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date as the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term or a change in the fixed lease payments. # **3. Lease modifications** The carrying amount of lease liabilities is re-measured where there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The impact of the modification is recognised against the carrying amount of the right-of-use assets or is recorded in profit or loss if the carrying amount of the right-of-use assets has been reduced to zero. hegifc.com 323 NOTES TO THE ACCOUNTS CONTINUED 2. Accounting policies (continued) 4. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to short-term leases (i.e. those leases that have a lease term of 12 months or less from commencement). It also applies the lease of low-value assets recognition exemption under IFRS 16 to leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as a rent expense on a straight-line basis over the lease term. 5. Lessor accounting There are no lessor arrangements in the Group as a result of the contractual arrangements in place with customers which convey the right to use an identified asset. 6. Partner contributions Partner contributions are contributions from our business partners (property owners and landlords) towards the initial costs of opening a business centre, including the fit-out of the property. Partner contributions representing a reimbursement to the lessee (IWG) are accounted for as agency arrangements, and form part of the lessor’s (landlord’s) assets. Partner contributions for lease incentives are received at or before the lease commencement date for commercial reasons and, where the Group retains ownership of the fit-out assets, are accounted for as a lease incentive and recognised by reducing the right-of-use asset. Any other partner contributions for lease incentives received subsequent to the commencement of the lease are accounted for as part of the associated lease modification. 7. Lease term The lease term represents the period from lease inception up to either: – The earliest point at which the lease could be broken, where break clauses exist; – The point at which the lease could be extended, but no further, where extension options exist; or – To the end of the contractual lease term in all other cases. 8. Lease break penalties Lease break penalties, where the lease term has been determined as the period from inception up to a break clause and when there are break payments or penalties, have been appropriately included in the measurement of the lease liability. Dilapidations A provision is recognised for those potential dilapidation payments when it is probable that an outflow will occur and can be reliably estimated. Impairment of non-financial assets For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount was estimated at 30 September 2021. At each reporting date, the Group reviews the carrying amount of these assets to determine whether there is an indicator of impairment. If any indicator is identified, then the assets’ recoverable amount is re- evaluated. The carrying amount of the Group’s other non-financial assets (other than deferred tax assets and inventory), including right-of-use assets, is reviewed at the reporting date to determine whether there is an indicator of impairment. If any such indication exists, the assets’ recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit (CGU) exceeds its recoverable amount. Impairment losses are recognised in the income statement. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The Group has identified individual business centres as the CGU. The potential impairment of immovable property, plant and equipment and right-of-use assets at the centre (CGU) level are evaluated where there are indicators of impairment. Centres (CGUs) are grouped by country of operation for the purposes of carrying out impairment reviews of goodwill as this is the lowest level at which it can be assessed. Individual fittings and equipment in centres or elsewhere in the business that become obsolete or are damaged are assessed and impaired where appropriate. The recoverable amount of relevant assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Goodwill All business combinations are accounted for using the purchase method. Goodwill is initially measured at fair value, being the excess of the aggregate of the fair value of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred (negative goodwill), then the gain is recognised in profit or loss. 124 IWG plc Annual Report and Accounts 2021 124 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS Positive goodwill is stated at cost less any provision for impairment in value. An impairment test is carried out annually and, in addition, whenever indicators exist that the carrying amount may not be recoverable. Negative goodwill is recognised directly in profit or loss. Intangible assets Intangible assets acquired separately from the business are capitalised at cost. Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill if their fair value can be identified and measured reliably on initial recognition. Intangible assets are amortised on a straight-line basis over the estimated useful life of the assets as follows: Brand – Regus brand Indefinite life Brand – Other acquired brands 20 years Computer software Up to 5 years Customer lists 2 years Amortisation of intangible assets is expensed through administration expenses in the income statement. Acquisitions of non-controlling interests Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Asset lives and recoverable amounts are reviewed on an annual basis. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: (1) Right-of-use assets Over the lease term Buildings 50 years (1) Leasehold improvements 10 years Furniture and equipment 5 – 10 years Computer hardware 3 – 5 years 1. 10 years represents the average useful economic life across the lease portfolio. Revenue The Group’s primary activity and only business segment is the provision of global workspace solutions. 1. Workstations The Group recognises workstation revenue when it transfers services to a customer. It is measured based on the consideration specified in a contract with a customer. Services transfer to the customer equally over the contract period based on the time elapsed. Where discounted periods are granted to customers, service income is spread on a straight-line basis over the duration of the customer contract. Invoices are generally issued in advance, on a monthly basis with normal credit terms of 15 days, and initially recognised as deferred revenue. Workstation revenue is recognised over time as the services are provided. Amounts invoiced in advance are accounted for as deferred revenue (contract liability) and recognised as revenue upon provision of the service. 2. Management and franchise fees Fees received for the provision of initial and subsequent services are recognised over time as the services are rendered. Fees charged for the use of continuing rights granted by the agreement are measured based on the contractually agreed percentage of revenue, generated by the operation, except where a different basis is determined in the contractual arrangements. Fees charged for other services provided, during the period of the agreement, are recognised as revenue as the services provided or the rights used. Invoices are generally issued on a monthly basis with normal credit terms of 30 days. 3. Customer service income Service income (including the provision of meeting rooms) is recognised over time as the services are delivered or at a point in time depending on contractual obligations. Invoices are generally issued when the service is provided and subject to immediate settlement. In circumstances where the Group acts as an agent for the sale and purchase of goods to customers, only the commission fee earned is recognised as revenue. 4. Membership card income Revenue from the sale of membership cards is deferred and recognised over time within the period that the benefits of the membership card are expected to be provided. 5. Customer deposits Deposits received from customers against non-performance of the contract are held on the balance sheet as a current liability until they are either returned to the customer at the end of their relationship with the Group, or released to the income statement. The Group has concluded that it is the principal in its revenue arrangements, except where noted above. iwgplc.com 125 iwgplc.com 125 NOTES TO THE ACCOUNTS CONTINUED 2. Accounting policies (continued) Adjusting items Significant infrequent transactions not indicative of the underlying performance of the consolidated Group are reported separately as non-recurring/adjusting items. Adjusting items are separately disclosed by the Group to provide readers with helpful, additional information on the performance of the business across periods. Items arising specifically from the impact of the COVID-19 pandemic have been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board. The profit before tax and adjusting items measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The classification of adjusting items requires significant management judgement after considering the nature and intentions of a transaction. Adjusting items recognised are based on the actual costs incurred and/or calculated on a basis consistent with the key judgements and estimates disclosed in note 32. The classification of adjusting items requires management judgement after considering the nature and intentions of a transaction. Where necessary, this judgement applied is based on a formal methodology, including the comparison of current centre performance against pre-COVID-19 performance, to determine whether or not some, or all, of the associated costs are arising in the ordinary course of business. Employee benefits The majority of the Group’s pension plans are of the defined contribution type. For these plans the Group’s contribution and other paid and unpaid benefits earned by the employees are charged to the income statement as incurred. The cost of providing benefits under the defined benefit plans is determined using the projected unit credit method. Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, excluding net interest, are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under ‘cost of sales’ and ‘selling, general and administration expenses’ in the consolidated income statement: service costs comprising current service costs; past service costs; and gains and losses on curtailments and non-routine settlements. Settlements of defined benefit schemes are recognised in the period in which the settlement occurs. Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised. Share-based payments The share awards programme entitles certain directors and employees to acquire shares of the ultimate parent company (IWG plc); these awards are granted by the ultimate parent company (IWG plc) and are equity-settled. The fair value of options and awards granted under the Group’s share-based payment plans outlined in note 25 is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes valuation model or the Monte Carlo method, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest in respect of non-market conditions except where forfeiture is due to the expiry of the option. Taxation Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are not subject to discounting. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets and liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognised for unused tax losses only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. 126 IWG plc Annual Report and Accounts 2021 126 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS The carrying amount of a deferred tax asset or liability may change for reasons other than a change in the temporary difference itself. Such changes might arise as a result of a change in tax rates or laws, a reassessment of the recoverability of a deferred tax asset or a change in the expected manner of recovery of an asset or the expected manner of a settlement of a liability. The impact of these changes is recognised in the income statement or in other comprehensive income depending on where the original deferred tax balance was recognised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Upon adoption of IFRIC Interpretation 23, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing studies, that in most jurisdictions it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The Group has, where considered appropriate, provided for the potential impact of uncertain tax positions where the likelihood of tax authority adjustment is considered to be more likely than not. The adoption of the interpretation did not have an impact on the consolidated financial statements of the Group. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Restructuring provisions are made for direct expenditures of a business reorganisation where the plans are sufficiently detailed and well-advanced and where the appropriate communication to those affected has been undertaken at the reporting date. Provision is made for closure costs to the extent that the unavoidable costs of meeting the obligations exceed the economic benefits expected to be delivered. Equity Equity instruments issued by the Group are recorded at the value of proceeds received, net of direct issue costs. When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or re-issued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit on the transaction is presented within retained earnings. Inventory Inventories relate to consumable items which are measured at the lower of cost or net realisable value. The cost of inventories is based on the first-in, first-out principle. Net finance expense Interest charges and income are accounted for in the income statement on an accrual basis. Financing transaction costs that relate to financial liabilities are charged to interest expense using the effective interest rate method and are recognised within the carrying value of the related financial liability on the balance sheet. Fees paid for the arrangement of credit facilities are recognised as an asset and recognised through the finance expense over the term of the facility. Where assets or liabilities on the Group balance sheet are carried at net present value, the increase in the amount due to unwinding the discount is recognised as a finance expense or finance income as appropriate. Costs arising on bank guarantees and letters of credit and foreign exchange gains or losses are included in other finance costs (note 7). Interest-bearing borrowings and other financial liabilities Financial liabilities, including interest-bearing borrowings, are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, financial liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate method. The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or expired. Financial liabilities are classified as financial liabilities at fair value through profit or loss where the liability is either held for trading or is designated as held at fair value through profit or loss on initial recognition. Financial liabilities at fair value through profit or loss are stated at fair value with any resultant gain or loss recognised in the income statement. Compound financial instruments issued by the Group comprise convertible bonds denominated in pounds sterling that can be converted to ordinary shares at the option of the holder. The debt component of compound financial instruments is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The conversion option represents a derivative financial liability and is initially recognised as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the debt host. Subsequent to initial recognition, the debt component of a compound financial instrument is measured at amortised cost using the effective interest rate method. The derivative component of a compound financial instrument is re-measured at fair value through profit or loss. Interest related to the debt is recognised as a finance expense in profit or loss. iwgplc.com 127 iwgplc.com 127 NOTES TO THE ACCOUNTS CONTINUED ## 2. Accounting policies (continued) ### Derivative financial instruments The Group's policy on the use of derivative financial instruments can be found in note 24. Derivative financial instruments are measured initially at fair value and changes in the fair value are recognised through profit or loss unless the derivative financial instrument has been designated as a cash flow hedge whereby the effective portion of changes in the fair value are deferred in equity. ### Financial assets Financial assets are classified and subsequently measured at amortised cost, fair value through the profit or loss, or fair value through other comprehensive income (OCI). The classification depends on the nature and purpose of the financial assets and is determined on initial recognition. Financial assets (including trade and other receivables) are measured at amortised cost if both of the following conditions are met: - The financial asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and - Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instruments to the gross carrying amount of the financial assets. Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, are recognised in profit or loss. Financial assets (including trade and other receivables) are measured at fair value through OCI if both of the following conditions are met: - The financial asset is held within a business model whose objective is achieved by both collecting cash flows and selling financial assets; and - Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. IFRS 9 requires the Group to record expected credit losses on all of its financial assets held at amortised cost, either on a 12-month or lifetime basis. The Group applies the simplified approach to trade receivables and recognises expected credit losses based on the lifetime expected losses. Provisions for receivables are established based on both expected credit losses and information available that the Group will not be able to collect all amounts due according to the original terms of the receivables. ### Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of change in value. ### Non-controlling interests Non-controlling interests are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisitions. ### Discontinued operations A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which: - represents a separate major line of business or geographic area of operations; - is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or - is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative year. ### Foreign currency transactions and foreign operations Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the closing rate of exchange at the balance sheet date and the gains or losses on translation are taken to the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. The results and cash flows of foreign operations are translated using the average rate for the period. Assets and liabilities, including goodwill and fair value adjustments, of foreign operations are translated using the closing rate, with all exchange differences arising on consolidation being recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity. Exchange differences are reclassified to the income statement on disposal. ### Foreign currency translation rates | | At 31 December | | Annual average | | | --- | --- | --- | --- | --- | | | 2021 | 2020 | 2021 | 2020 | | US dollar | 1.35 | 1.37 | 1.38 | 1.29 | | Euro | 1.19 | 1.11 | 1.16 | 1.13 | 128 M/G plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS 3. Segmental analysis An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses. An operating segment’s results are reviewed regularly by the chief operating decision-maker (the Board of Directors of the Group) on a pre-IFRS 16 basis to make decisions about resources to be allocated to the segment and assess its performance, and for which distinct financial information is available. The segmental information is presented on the same basis on which the chief operating decision-maker received reporting during the year. Segmental assets and liabilities continue to be presented in accordance with IFRS. The business is run on a worldwide basis but managed through four principal geographical segments (the Group’s operating segments): the Americas; EMEA (Europe, Middle East and Africa); Asia Pacific; and the United Kingdom. These geographical segments exclude the Group’s non-trading, holding and corporate management companies, which are included in the “Other” segment. The results of business centres in each of these regions form the basis for reporting geographical results to the chief operating decision-maker. All reportable segments are involved in the provision of global workplace solutions. The Group’s reportable segments operate in different markets and are managed separately because of the different economic characteristics that exist in each of those markets. Each reportable segment has its own distinct senior management team responsible for the performance of the segment. Americas EMEA Asia Pacific United Kingdom Other Total | | 2021 | 2020 | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Restated | | (5) | | Restated | | (5) | | | | | | Restated | | (5) | | Continuing operations | £m | £m | £m | | £m | | £m | | £m | | £m | £m | £m | £m | £m | | | £m | Revenue from external (1) customers 923.6 1,066.5 707.1 715.1 237.1 255.9 354.2 388.8 5.9 5.6 2,227.9 2,431.9 (2) Mature 866.1 994.3 624.6 642.2 214.5 223.9 316.9 344.1 5.9 5.6 2,028.0 2,210.1 (2) 2020 Expansions 40.2 11.0 45.8 20.1 10.5 4.5 23.9 8.6 – – 120.4 44.2 (2) 2021 Expansions 4.8 – 21.9 – 3.4 – 1.6 – – – 31.7 – (2) Closures 12.5 61.2 14.8 52.8 8.7 27.5 11.8 36.1 – – 47.8 177.6 Gross profit/(loss) (centre contribution) 41.1 (101.7) 40.8 23.0 6.9 (17.7) (5.3) (80.0) (2.2) 2.7 81.3 (173.7) Share of loss of equity-accounted investees – – (1.2) (0.1) (0.1) (0.2) (0.9) (2.3) – – (2.2) (2.6) Operating loss (46.6) (184.6) (28.7) (60.4) (15.3) (47.0) (28.2) (116.7) (129.2) (146.8) (248.0) (555.5) Finance expense (31.1) (13.9) Finance income 26.0 3.1 Loss before tax for the year (253.1) (566.3) Depreciation and amortisation 146.7 161.4 65.8 60.9 26.8 27.8 44.8 41.2 17.9 10.6 302.0 301.9 Impairment of assets – – – – – – – – – – – – (3) Assets 3,364.2 3,460.0 2,480.4 2,542.0 532.1 676.5 1,456.1 1,925.4 578.7 360.4 8,411.5 8,964.3 (3) Liabilities (3,235.3) (3,334.6) (2,346.0) (2,398.3) (540.0) (685.3) (1,326.7) (1,562.3) (659.0) (470.0) (8,107.0) (8,450.5) Net assets/(liabilities) 128.9 125.4 134.4 143.7 (7.9) (8.8) 129.4 363.1 (80.3) (109.6) 304.5 513.8 Non-current asset 52.8 288.1 149.3 300.8 48.4 77.2 23.1 114.6 79.6 15.9 353.2 796.6 (4) additions 1. Excludes revenue from discontinued operations (note 9). 2. Revenue has been disaggregated to reflect the basis on which it is reported to the chief operating decision-maker. Further information can be found in the unaudited “Segmental analysis – management basis” on pages 168 and 169. 3. Presented on a basis consistent with IFRS 16. 4. Excluding deferred taxation. 5. The comparative information has been restated to reflect the impact of discontinued operations. Operating profit in the “Other” category is generated from services related to the provision of workspace solutions, offset by corporate overheads. iwgplc.com 129 iwgplc.com 129 NOTES TO THE ACCOUNTS CONTINUED 3. Segmental analysis (continued) The operating segment’s results presented on a pre-IFRS 16 basis reconcile to the financial statements as follows: Americas EMEA Asia Pacific United Kingdom Other Total | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Restated | | (5) | | | | | | Restated | | (5) | | Continuing operations | £m | £m | £m | £m | £m | | £m | | £m | £m | £m | £m | £m | | | £m | Gross profit/(loss) (centre contribution) – pre-IFRS 16 41.1 (101.7) 40.8 23.0 6.9 (17.7) (5.3) (80.0) (2.2) 2.7 81.3 (173.7) Rent 413.8 445.4 316.1 308.4 115.8 126.6 131.8 147.9 4.8 1.2 982.3 1,029.5 Depreciation of property, plant and equipment including right-of-use assets (317.5) (339.5) (270.8) (275.7) (91.1) (112.0) (107.3) (130.9) (4.4) (1.0) (791.1) (859.1) Other (15.3) (9.0) 2.3 17.5 (8.3) 8.1 17.5 7.1 (0.8) (0.3) (29.9) 23.4 Gross profit/(loss) (centre contribution) 122.1 (4.8) 88.4 73.2 23.3 5.0 11.4 (55.9) (2.6) 2.6 242.6 20.1 Americas EMEA Asia Pacific United Kingdom Other Total | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Restated | | (5) | | | | | | Restated | | (5) | | Continuing operations | £m | £m | £m | £m | £m | | £m | | £m | £m | £m | £m | £m | | | £m | Operating (loss)/profit – pre-IFRS 16 (46.6) (184.6) (28.7) (60.4) (15.3) (47.0) (28.2) (116.7) (129.2) (146.8) (248.0) (555.5) Rent 413.8 445.5 316.1 308.4 115.8 126.7 131.8 160.8 5.3 2.2 982.8 1,043.6 Depreciation of property, plant and equipment including right-of-use assets (317.5) (339.5) (270.8) (275.7) (91.1) (112.0) (107.6) (131.5) (5.3) (2.9) (792.3) (861.6) Other (15.7) (9.1) 1.9 17.1 (8.6) 7.8 (7.8) 7.0 0.3 0.7 (29.9) 23.5 Operating profit/(loss) 34.0 (87.7) 18.5 (10.6) 0.8 (24.5) (11.8) 80.4 (128.9) (146.8) (87.4) (350.0) Americas EMEA Asia Pacific United Kingdom Other Total | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Restated | | (5) | | | | | | Restated | | (5) | | Continuing operations | £m | £m | £m | £m | £m | | £m | | £m | £m | £m | £m | £m | | | £m | Depreciation and amortisation – pre-IFRS 16 146.7 161.4 65.8 60.9 26.8 27.8 44.8 41.2 17.9 10.6 302.0 301.9 Depreciation of property, plant and equipment including right-of-use assets 317.5 339.5 270.8 275.7 91.1 112.0 107.6 131.5 5.3 2.9 792.3 861.6 Depreciation and amortisation 464.2 500.9 336.6 336.6 117.9 139.8 152.4 172.7 23.2 13.5 1,094.3 1,163.5 Americas EMEA Asia Pacific United Kingdom Other Total | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | 2021 | 2020 | 2021 | 2020 | 2021 | | 2020 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Restated | | (5) | | | | | | Restated | | (5) | | Continuing operations | £m | £m | £m | £m | £m | | £m | | £m | £m | £m | £m | £m | | | £m | Impairment of assets – pre-IFRS 16 – – – – – – – – – – – – (Reversal)/impairment of property, plant and equipment including right-of-use assets (56.1) 161.3 0.1 25.2 4.7 14.1 (2.9) 45.4 – – (54.2) 246.0 Impairment of assets (56.1) 161.3 0.1 25.2 4.7 14.1 (2.9) 45.4 – – (54.2) 246.0 130 IWG plc Annual Report and Accounts 2021 130 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS 4. Segmental analysis – entity-wide disclosures The Group’s primary activity and only business segment is the provision of global workplace solutions, therefore all revenue is attributed to a single group of similar products and services. It is not meaningful to separate this group into further categories of products. Revenue is recognised where the service is provided. The Group has a diversified customer base and no single customer contributes a material percentage of the Group’s revenue. The Group’s revenue from external customers and non-current assets analysed by foreign country are as follows: | | | 2021 | | | | | 2020 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | External | | Non-current | | | External | | Non-current | | | | £m | revenue | | | assets | (2) | revenue | | | assets | (2) | Country of tax domicile – Switzerland 3.5 – 3.5 – United States of America 753.9 2,763.2 899.7 3,140.2 United Kingdom 354.2 1,328.8 388.8 1,613.5 (1) All other countries 1,116.3 3,161.2 1,139.9 2,917.3 2,227.9 7,253.2 2,431.9 7,671.0 1. Revenue of £33.8m (2020: £50.2m) is included in discontinued operations (note 9). 2. Excluding deferred tax assets. 5. Operating loss – continuing operations Operating loss has been arrived at after charging/(crediting): 2021 2020 Notes £m £m (4) Revenue 2,227.9 2,431.9 (1) Depreciation on property, plant and equipment 15 1,080.8 1,154.8 Right-of-use assets 15 879.8 919.1 Other property, plant and equipment 15 201.0 235.7 Amortisation of intangible assets 14 13.5 8.7 Variable property rents payable in respect of leases 23 62.8 64.9 Lease expense on low-value assets 23 1.0 3.4 Staff costs 6 342.3 343.7 Facility and other property costs 414.4 424.5 (2) Expected credit losses on trade receivables 99.5 34.8 Loss on disposal of property, plant and equipment 64.2 93.1 Loss on disposal of right-of-use assets and related lease liabilities (41.5) (25.7) Impairment of goodwill 13 – 4.9 24 Loss on disposal of intangible assets 14 0.3 0.1 (3) (Reversal of impairment)/impairment of property, plant and equipment 15 (54.2) 246.0 (Reversal of impairment)/impairment of other property, plant and equipment (7.4) 82.1 (Reversal of impairment)/impairment of right-of-use assets (46.8) 163.9 Negative goodwill arising on acquisition 13 (1.7) – Other costs 331.7 426.1 Operating loss before equity-accounted investees (85.2) (347.4) Share of loss of equity-accounted investees, net of tax 21 (2.2) (2.6) Operating loss (87.4) (350.0) 1. Excludes depreciation expenses related to discontinued operations for right-of-use assets of £13.1m (2020: £26.9m) and other property, plant and equipment of £2.0m (2020: £4.6m). 2. Of the £99.5m (2020: £34.8m) expected credit loss, £53.5m (2020: £17.5m) relates to COVID-19 adjusting items (note 10). 3. The reversal of impairment of £54.2m includes an additional impairment of £96.9m (2020: £246.0m), offset by the reversal of £151.1m (2020: £nil) previously provided for (note 5). 4. The comparative information has been restated to reflect the impact of discontinued operations. iwgplc.com 131 iwgplc.com 131 NOTES TO THE ACCOUNTS CONTINUED 5. Operating profit – continuing operations (continued) 2021 2020 £m £m Fees payable to the Group’s auditor and its associates for the audit of the Group accounts 1.3 1.4 Fees payable to the Group’s auditor and its associates for other services: The audit of the Company’s subsidiaries pursuant to legislation 3.0 2.9 Other services pursuant to legislation: Tax services – – Other services 0.3 0.2 Other non-audit services 0.3 1.2 6. Staff costs 2021 2020 £m (1) £m (1) The aggregate payroll costs were as follows: (2) Wages and salaries 282.0 282.0 Social security 49.5 49.7 Pension costs 5.0 5.6 Share-based payments 5.8 6.4 342.3 343.7 1. Excludes staff costs related to discontinued operations of £2.0m (2020: £2.9m). 2. Includes worldwide financial support schemes disclosed in note 10. | | | 2021 | | | 2020 | | --- | --- | --- | --- | --- | --- | | | Average | | | | Average | | | full-time | | | | full-time | | equivalents | | | (1) | equivalents | (1)(2) | The average number of persons employed by the Group (including Executive Directors), analysed by category and geography, was as follows: Centre staff 6,142 6,367 Sales and marketing staff 117 247 Finance staff 640 631 Other staff 1,340 1,209 8,239 8,454 Americas 2,518 2,431 EMEA 2,450 2,592 Asia Pacific 998 1,149 United Kingdom 679 683 Corporate functions 1,594 1,599 8,239 8,454 1. The average full-time equivalents exclude employees for disposals during 2021 of 65 (2020: 100). 2. Following internal restructuring in 2021, the allocation of staff between departments has been amended. The apportionment by department of 2020 staff numbers has been restated to reflect the revised allocation. Details of Directors’ emoluments and interests are given on pages 94 to 108 in the Directors’ Remuneration report, with audited schedules identified where relevant. 7. Net finance expense 2021 2020 £m £m (3) Interest payable and similar charges on bank loans and corporate borrowings (42.1) (12.8) (1) Interest payable on lease liabilities (165.7) (244.6) Total interest expense (207.8) (257.4) Other finance costs 9.8 (8.9) Unwinding of discount rates – (0.1) Total finance expense (198.0) (266.4) Fair value gain on financial liabilities measured at FVTPL (note 19) 22.5 2.4 (2) Total interest income 3.5 0.7 Total finance income 26.0 3.1 Net finance expense (172.0) (263.3) 1. Excludes lease liability finance expense related to discontinued operations of £1.4m (2020: £4.8m). 2. Excludes interest income related to discontinued operations of £nil (2020: £0.1m). 3. The comparative information has been restated to reflect the impact of discontinued operations. 132 IWG plc Annual Report and Accounts 2021 132 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **8. Taxation** # **(a) Analysis of charge in the year** | | 2021 £m | 2020 £m | | --- | --- | --- | | **Current taxation** | | | | Corporate income tax | (23.9) | (42.4) | | Previously unrecognised tax losses and temporary differences | 8.0 | 8.5 | | Over provision in respect of prior years | 4.6 | 11.0 | | **Total current taxation** | **(11.3)** | **(22.9)** | | **Deferred taxation** | | | | Origin and reversal of temporary differences | 1.0 | (9.1) | | **Total deferred taxation** | **1.0** | **(9.1)** | | **Tax charge on continuing operations** | **(10.3)** | **(32.0)** | 1. The comparative information has been restated to reflect the impact of discontinued operations. # **(b) Reconciliation of taxation charge** | | 2021 | | 2020 | | | --- | --- | --- | --- | --- | | | £m | % | £m | % | | **Loss before tax from continuing operations** | **(159.4)** | | **(613.3)** | | | **Tax on profit at 11.9% (2020: 11.9%)** | **30.9** | **(11.9)** | 73.0 | (11.9) | | Tax effects of: | | | | | | Expenses not deductible for tax purposes | (29.4) | 11.3 | (44.9) | 7.3 | | Items not chargeable for tax purposes | 34.1 | (13.1) | 155.0 | (25.3) | | Previously unrecognised temporary differences expected to be used in the future | 8.0 | (5.1) | 8.5 | (1.4) | | Current year temporary differences not currently expected to be used | (112.9) | 43.5 | (452.2) | 73.7 | | Adjustment to tax charge in respect of previous years | 4.6 | (1.8) | 11.0 | (1.8) | | Differences in tax rates on overseas earnings | 54.4 | (21.0) | 217.6 | (35.5) | | | **(10.3)** | **3.9** | **(32.0)** | **5.1** | 1. The comparative information has been restated to reflect the impact of discontinued operations. The applicable tax rate is determined based on the tax rate in the canton of Zug in Switzerland, which was the statutory tax rate applicable in the country of domicile of the parent company of the Group at the end of the financial year. # **(c) Factors that may affect the future tax charge** Unrecognised tax losses to carry forward against certain future overseas corporation tax liabilities have the following expiration dates. | | 2021 £m | 2020 £m | | --- | --- | --- | | 2021 | – | 24.9 | | 2022 | 33.6 | 43.1 | | 2023 | 41.1 | 45.9 | | 2024 | 48.2 | 49.3 | | 2025 | 49.1 | 53.8 | | 2026 | 69.7 | 38.8 | | 2027 | 36.5 | 18.5 | | 2028 | 36.7 | 16.6 | | 2029 and later | 1,455.6 | 1,090.3 | | | **1,770.5** | **1,381.2** | | Available indefinitely | 1,301.8 | 919.3 | | **Tax losses available to carry forward** | **3,072.3** | **2,300.5** | | Amount of tax losses recognised in deferred tax assets | 125.0 | 1,029.0 | | **Total tax losses available to carry forward** | **3,197.3** | **3,329.5** | Additional tax losses have been generated in 2021. There is a reduction in total tax losses recognised as deferred tax assets as a result of the overestimation of losses arising in certain head office entities in 2020 (£486.0m). hagifc.com 133 NOTES TO THE ACCOUNTS CONTINUED # **B. Taxation (continued)** The following deferred tax assets have not been recognised due to uncertainties over recoverability. | | 2021 £m | 2020 £m | | --- | --- | --- | | Intangibles | 390.4 | 420.0 | | Accelerated capital allowances | 29.8 | 26.4 | | Tax losses | 757.8 | 564.5 | | Rent | 49.1 | 48.6 | | Leases | 29.7 | 22.7 | | Short-term temporary differences | 6.7 | 3.7 | | | **1,363.5** | **1,085.9** | # **(d) Corporation tax** | | 2021 £m | 2020 £m | | --- | --- | --- | | Corporation tax payable | (35.9) | (40.0) | | Corporation tax receivable | 18.5 | 29.1 | # **(e) Deferred taxation** The movement in deferred tax is analysed below: | | Intangibles £m | Property, plant and equipment £m | Tax losses £m | Rent £m | Leases £m | Other temporary differences £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | **Deferred tax asset** | | | | | | | | | At 1 January 2020 | 39.4 | (31.5) | 115.5 | 54.1 | 93.6 | (76.1) | 195.0 | | Current year movement | (19.0) | (42.7) | 137.6 | 9.6 | 13.4 | (105.6) | (6.7) | | Prior year movement | - | - | - | - | - | - | - | | Disposals | - | - | - | - | - | - | - | | Transfers | (0.2) | (4.6) | 4.2 | 0.6 | - | - | - | | Exchange rate movements | 1.8 | 0.8 | (0.5) | (1.7) | (0.1) | (0.6) | (0.1) | | At 31 December 2020 | 22.0 | (78.0) | 257.0 | 62.6 | 106.9 | (182.5) | 188.2 | | Current year movement | - | 1.1 | (17.2) | 5.3 | 4.0 | 17.6 | 10.8 | | Prior year movement | - | (0.4) | (198.2) | - | - | - | (198.6) | | Disposals | - | - | - | - | - | - | - | | Transfers | 47.7 | 77.0 | - | (0.3) | 0.7 | 200.8 | 325.9 | | Exchange rate movements | - | 0.3 | - | - | - | - | 0.3 | | **At 31 December 2021** | **69.7** | **-** | **41.6** | **67.6** | **111.6** | **36.1** | **326.6** | # **Deferred tax liability** | At 1 January 2020 | (0.2) | (4.6) | 4.2 | 0.6 | - | - | - | | --- | --- | --- | --- | --- | --- | --- | --- | | Current year movement | - | - | - | - | (0.2) | - | (0.2) | | Prior year movement | - | - | - | - | - | - | - | | Disposals | - | - | - | - | - | - | - | | Transfers | 0.2 | 4.6 | (4.2) | (0.6) | - | - | - | | Exchange rate movements | - | - | - | - | - | - | - | | At 31 December 2020 | - | - | - | - | (0.2) | - | (0.2) | | Current year movement | (3.1) | (5.7) | - | (0.3) | (4.9) | 1.3 | (12.7) | | Prior year movement | - | - | - | - | - | 198.5 | 198.5 | | Disposals | - | - | - | - | - | - | - | | Transfers | (47.7) | (77.0) | - | 0.3 | (0.7) | (200.8) | (325.9) | | Exchange rate movements | - | (0.3) | - | - | - | - | (0.3) | | **At 31 December 2021** | **(50.8)** | **(83.0)** | **-** | **-** | **(5.8)** | **(1.0)** | **(140.6)** | 134 M/G plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS The movements in deferred taxes included above are after the offset of deferred tax assets and deferred tax liabilities where there is a legally enforceable right to set off and they relate to income taxes levied by the same taxation authority. The closing deferred tax position above represents the aggregated deferred tax asset or liability position within individual legal entities, with some companies recognising deferred tax assets and others recognising deferred tax liabilities. The closing position is a net deferred tax asset of £326.6m and a deferred tax liability of £140.6m. In 2021 the Group has separately presented deferred tax assets and deferred tax liabilities on a country by country, or entity by entity basis where available. The transfers line in the table above reflects the adjustment required to the opening balances as at 1 January 2021 to reflect this change in presentation. In evaluating whether it is probable that taxable profits will be earned in future accounting periods for the purposes of deferred tax asset recognition, management based their analysis on the Board-approved three-year forecasts prepared for the purposes of reviewing goodwill for impairment. Recognised deferred tax assets in respect of tax losses (£41.6m) include losses that have arisen in the United States where despite recent losses the Group considers it probable that sufficient taxable profits will be available against which these unused tax losses can be utilised over a period of three years, based on the period corresponding to the Group's business forecasting processes. The losses recorded in the United States were incurred during a period of uncertainty as a result of the global COVID-19 pandemic. Management is confident that the Group will return to profitability in this region within the aforementioned period. No reasonably possible change in any of the key assumptions would result in a significant reduction in projected tax profits such that the recognised deferred tax asset would not be realised. At the balance sheet date, the temporary difference arising from unremitted earnings of overseas subsidiaries was £15.0m (2020: £11.9m). The only tax that would arise on these reserves if they were remitted would be non-creditable withholding tax. In 2019 the Group recognised a deferred tax asset of £89.8m, and a corresponding deferred tax credit, in respect of the expected future value of annual amortisation on the fair market value of IP resulting from a Group restructure, which is deductible for Swiss corporate income tax purposes. Further restructuring of Group cost allocations in 2020 resulted in a reduction in the recognition of the deferred tax asset to £69.7m, and a deferred tax debit of £20.1m, based on the updated future value of amortisation deductions. In 2021 the deferred tax asset remains unchanged at £69.7m and is included as intangibles in the deferred tax table above. Recognition of this deferred tax asset is based on the approved three-year forecast. In October 2021, the OECD published the model rules for part of the second pillar of the proposed two-pillar solution to address the tax challenges of the digitalisation of the economy. Pillar Two is the so-called Global Anti-Base Erosion (GloBE) rule, which is designed to ensure that large multinational enterprises pay a minimum level of tax of 15% on the income arising in each jurisdiction where they operate. The minimum tax will apply to MNEs with revenue above €750.0m and so is expected to apply to the Group. These changes have not been enacted or substantively enacted and therefore do not have any impact on the tax reporting position of the Group. IWG will continue to monitor developments in these areas and consider the potential tax impact for the Group at the relevant time. ## 9. Discontinued operations During 2021, the Group completed the sale of various operations through the signing of franchise agreements. The financial impact of these transactions is treated as discontinued operations in accordance with IFRS 5, however these operations under franchise will continue to be an important strategic component of the overall Group network. These transactions form part of the larger change in strategy of the Group towards adopting a franchising model. Fees from franchising activities subsequent to sale are reflected as franchise revenues in continuing operations. ### Disposal of operations During the year, the Group completed the sale of individually immaterial operations for the consideration of £52.5m (2020: £3.3m). The results of these operations up to the date of disposal were as follows: | | 2021 £m | 2020 £m | | --- | --- | --- | | Revenue | 33.8 | 50.2 | | Expenses | (31.3) | (56.0) | | Profit/(loss) before tax for the year | 2.5 | (3.8) | | Income tax (expense)/credit | (3.6) | 1.5 | | Loss after tax for the year | (1.1) | (4.3) | | Gain on the sale of discontinued operations | 60.4 | 2.8 | | Profit/(loss) for the year, net of tax | 59.3 | (1.5) | twg01.com 133 NOTES TO THE ACCOUNTS CONTINUED # **9. Discontinued operations (continued)** The assets and liabilities of these operations at their respective dates of disposal were as follows: | | 2021 £m | 2020 £m | | --- | --- | --- | | Total assets | 72.6 | 2.9 | | Total liabilities | (81.5) | (2.2) | | Net (liabilities)/assets | (8.9) | 0.7 | | Costs directly associated with the disposal | 1.3 | (0.2) | | Foreign exchange recycled to profit and loss | (0.5) | – | | | (8.1) | 0.5 | | Consideration on disposal (net of cash and debt)^{1)} | 52.3 | 3.5 | | Gain on sale of discontinued operations | 60.4 | 2.8 | 1. The consideration recognised includes a non-cash element of £13.4m. The net cash flows incurred by these operations are as follows: | | 2021 £m | 2020 £m | | --- | --- | --- | | Operating | 48.0 | 28.3 | | Investing | (2.1) | (1.3) | | Financing | (45.8) | (27.5) | | **Net cash inflow/(outflow)** | **0.1** | **(0.5)** | # **10. COVID-19 related adjusting items** Following the declaration by the World Health Organization of the COVID-19 pandemic (COVID-19) and subsequent global government restrictions, the Group has been unable to operate at full capacity. Given the political and economic uncertainty resulting from COVID-19, the Group continues to see significant volatility and business disruption, reducing expected performance in 2021 and potentially 2022. The impact that COVID-19 has had on underlying trading performance is not recognised within adjusting items. In order to improve the transparency and usefulness of the financial information presented and improve year-on-year comparability, the Group has identified net charges of £31.4m (2020: £389.8m) relating to directly attributable charges resulting from COVID-19. These charges are considered to be adjusting items as they meet the Group's definition, as disclosed in previous annual reports, of being both significant in nature and value to the results of the Group in the current period. Reversals of £1.7m (2020: expenses of £333.4m) have been recognised as adjusting items to cost of sales and £33.1m (2020: £56.4m) of these charges have been recognised as adjusting items to selling, general and administration expenses in the Group's income statement. The charges relate to several separately identifiable areas of accounting judgement and estimates as follows: | | Year ended 31 Dec 2021 | Year ended 31 Dec 2020 | | --- | --- | --- | | Impairments of property, plant and equipment (including right-of-use assets)^{1)} – net of reversals | (125.2) | 244.8 | | Impairments of goodwill^{2)} | – | 4.9 | | Provision for expected credit losses^{1)} | 53.5 | 17.5 | | Network rationalisation^{1)} | 70.7 | 77.5 | | Other one-off items including restructuring^{1)} | 32.4 | 45.1 | | **Total adjusting items** | **31.4** | **389.8** | 1. Included as an adjusting item in cost of sales. 2. Included as an adjusting item in selling, general and administration. 3. Included as adjusting items in selling, general and administration except for £0.7m (2020: £6.4m) in respect of worldwide financial support schemes which is included in costs of sales. # **Impairments of property, plant and equipment (including right-of-use assets)** The continuation of COVID-19, including new and extended preventative measures in most of the Group's markets, is expected to prolong the impact on our business in 2022. As a result of these measures, management carried out a comprehensive review exercise for potential impairments across the whole portfolio at a cash-generating units (CGUs) level. The impairment review formed part of the Group's rationalisation process undertaken throughout the year due to the impact of COVID-19. This review compared the value-in-use of CGUs, based on management's assumptions regarding likely future trading performance, to the carrying values at 31 December 2021. Following this review, a reversal of £125.2m (2020: charge of £244.8m) was recognised within net operating expenses. Of this reversal, £38.1m (2020: charge of £80.9m) and £87.1m (2020: charge of £163.9m) were recognised against property, plant and equipment and right-of-use assets respectively. # **Impairments of goodwill** COVID-19 and linked restrictions have impacted our ability to trade our way to sustainable profitable growth in certain markets. As a result, the projected cash flows for these markets continue to be evaluated to determine the carrying value of the CGUs, with no additional impairment taken during 2021 (2020: impairment of £4.9m). 136 M/G plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **Provision for expected credit losses** In light of the temporary closure of centres globally, the Group reviewed the recoverability of its trade receivables profile and incurred further credit losses of £53.5m (2020: £17.5m). This increase reflects the increase in credit default by the Group's debtors directly attributable to the impact of COVID-19 and the significant change in the ageing profile of trade receivables as a direct consequence of COVID-19. # **Network rationalisation** £70.7m (2020: £77.5m) of charges were incurred relating to network rationalisations that occurred in the year, which includes the write off of the book value of assets and direct closure costs related to these centres. A separate rationalisation charge of £3.7m (£2020: £15.3m) has also been recorded which is not included as adjusting items. # **Other one-off items including restructuring** During the year, the Group incurred £0.5m (2020: £8.2m) of transaction costs in respect of master franchise agreements that did not complete due to the outbreak of COVID-19. The Group fully expects to resume its pivot towards a franchising model in due course. Other charges of £32.6m (2020: £43.3m) were also incurred, including severance costs and restructurings arising from mitigating actions taken by the Group in respect of COVID-19, completed by 31 December 2021 as well as claims in respect of centre closures. In addition, during the year, the Group received a total of £0.7m (2020: £6.4m) in respect of worldwide financial support schemes to fund staff costs. Should the estimated charges not prove to be in excess of the amounts required, the release of any amounts provided for at year-end would be treated as adjusting items. # **11. Earnings per ordinary share (basic and diluted)** | | 2021 | 2020 | | --- | --- | --- | | Basic and diluted loss for the year attributable to shareholders (£m) | (210.4) | (646.8) | | Basic loss per share (p) | (20.3) | (67.9) | | Diluted loss per share (p) | (20.3) | (67.9) | | Basic and diluted loss for the year from continuing operations (£m) | (269.7) | (643.3) | | Basic loss per share (p) | (26.2) | (67.8) | | Diluted loss per share (p) | (26.2) | (67.8) | | Basic and diluted profit for the year from discontinued operations (£m) | 59.3 | (1.5) | | Basic earnings per share (p) | 5.9 | (0.1) | | Diluted earnings per share (p) | 5.9 | (0.1) | | Weighted average number of shares for basic EPS | 1,007,214,854 | 951,890,712 | | Weighted average number of shares under option | 39,512,037 | 41,016,473 | | Weighted average number of shares that would have been issued at average market price | (22,437,997) | (25,287,994) | | Weighted average number of share awards under the CIP, PSP, DSBP and One-off Award | 1,747,819 | 1,744,492 | | Weighted average number of shares on convertible bonds | 76,405,916 | 76,408,203 | | Weighted average number of shares for diluted EPS | 1,102,442,649 | 1,045,771,886 | Options are considered dilutive when they would result in the issue of ordinary shares for less than the market price of ordinary shares in the period. The amount of the dilution is taken to be the average market price of shares during the period minus the exercise price. There were no material awards considered anti-dilutive at the reporting date. The Group issued £350.0m of convertible bonds in December 2020. The bond issue creates a potential 76,405,916 shares for bondholders. This represents a potential 7.1% dilutive impact at time of issue. The average market price of one share during the year was 321.95p (2020: 296.88p), with a high of 383.60p on 3 March 2021 and a low of 283.80p on 13 December 2021. # **12. Dividends** | | 2021 | 2020 | | --- | --- | --- | | Dividends per ordinary share proposed | - | - | | Interim dividends per ordinary share declared and paid during the year | - | - | Due to the prolonged uncertainty caused by COVID-19, we believe it is prudent to protect our liquidity and as a result, no final dividend will be paid for the year ended 31 December 2021 (2020: £nil). Our capital allocation policy remains unchanged, prioritising investment in the long-term growth of our business and dividend distribution to shareholders. Given the uncertainty caused by COVID-19 and in order to protect our liquidity in the short term, future dividend payments have been placed on hold with the intention to review the return to our progressive dividend policy when appropriate. hagafc.com 137 NOTES TO THE ACCOUNTS CONTINUED # **13. Goodwill** | | £m | | --- | --- | | **Cost** | | | At 1 January 2020 | 674.6 | | Recognised on acquisition of subsidiaries | 28.7 | | Goodwill impairment | (4.9) | | Exchange rate movements | (2.9) | | At 31 December 2020 | 695.5 | | Recognised on acquisition of subsidiaries^{1)} | **15.7** | | Goodwill on derecognised on sale of subsidiaries | **(0.9)** | | Goodwill impairment | — | | Exchange rate movements | **(6.5)** | | **At 31 December 2021** | **703.8** | # **Net book value** | At 31 December 2020 | 695.5 | | --- | --- | | **At 31 December 2021** | **703.8** | 1. Net of £5.7m derecognised on the finalisation of the accounting for prior year acquisitions previously reported on a provisional basis. Cash-generating units (CGUs), defined as individual business centres, are grouped by country of operation for the purposes of carrying out impairment reviews of goodwill as this is the lowest level at which it can be assessed. Goodwill acquired through business combinations is held at a country level and is subject to impairment reviews based on the cash flows of the CGUs within that country. The goodwill attributable to the reportable business segments is as follows: | | 2021 £m | 2020 £m | | --- | --- | --- | | **Carrying amount of goodwill included within:** | | | | Americas | **311.9** | 307.0 | | EMEA | **147.3** | 142.5 | | Asia Pacific | **25.2** | 26.6 | | United Kingdom | **219.4** | 219.4 | | | **703.8** | 695.5 | The carrying value of goodwill and indefinite life intangibles allocated to two countries, the USA and the UK, is material relative to the total carrying value, comprising 73% of the total. The remaining 27% of the carrying value is allocated to a further 38 countries. The goodwill and indefinite life intangibles allocated to the USA and the UK are set out below: | | Goodwill £m | Intangible asset^{2)} £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | --- | | USA | 290.3 | — | **290.3** | 286.1 | | United Kingdom | 219.4 | 11.2 | **230.6** | 230.6 | | Other countries | 194.1 | — | **194.1** | 190.0 | | | 703.8 | 11.2 | **715.0** | 706.7 | 1. The indefinite life intangible asset relates to the Regus brand. The value in use for each country has been determined using a model which derives the present value of the expected future cash flows for each individual country. Although the model includes budgets and forecasts prepared by management it also reflects external factors, such as capital market risk pricing as reflected in the market capitalisation of the Group and prevailing tax rates, which have been used to determine the risk-adjusted discount rate for the Group. Management believes that the projected cash flows are a reasonable reflection of the likely outcomes over the medium to long term. In the event that trading conditions deteriorate beyond the assumptions used in the projected cash flows, it is also possible that impairment charges could arise in future periods. The following key assumptions have been used in calculating the value in use for each country: - Future cash flows are based on forecasts prepared by management. The model excludes cost savings and restructurings that are anticipated but had not been committed to at the date of the determination of the value in use. Thereafter, forecasts have been prepared by management for 2022, and for a further four years, that follow a budgeting process approved by the Board; - These forecasts exclude the impact of acquisitive growth expected to take place in future periods; - Management considers these projections to be a reasonable projection of margins expected at the mid-cycle position. A terminal value is included in the assessment, reflecting the Group's expectation that it will continue to operate in these markets and the long-term nature of the business; and - The Group applies a country-specific pre-tax discount rate to the pre-tax cash flows for each country. The country-specific discount rate is based on the underlying weighted average cost of capital (WACC) for the Group. The Group WACC is then adjusted for each country to reflect the assessed market risk specific to that country. The Group pre-tax WACC decreased from 8.2% in 2020 to 7.5% in 2021 (post-tax WACC: 6.1%). The country-specific pre-tax WACC reflecting the respective market risk adjustment has been set between 7.2% and 9.7% (2020: 7.9% to 10.6%). 138 M/G plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS The amounts by which the values in use exceed the carrying amounts of goodwill are sufficiently large to enable the Directors to conclude that a reasonably possible change in the key assumptions would not result in an impairment charge in any of the countries. Foreseeable events are unlikely to result in a change in the projections of such a significant nature as to result in the goodwill carrying amount exceeding their recoverable amount. The forecast models used in assessing the impairment of goodwill are based on the related business centre structure at the end of the year. The US model assumes an average centre contribution of 24.0% (2020: 11.0%) over the next five years. A terminal value centre gross margin of 28.0% is adopted from 2026, with a 0.0% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 8.3% (2020: 10.0%). The UK model assumes an average centre contribution of 18.0% (2020: 14.0%) over the next five years. A terminal value centre gross margin of 22.0% is adopted from 2026, with a 0.0% long-term growth rate assumed on revenue and costs into perpetuity. The cash flows have been discounted using a pre-tax discount rate of 7.5% (2020: 8.3%). Management has considered the following sensitivities: - Market growth and WIPOS – Management has considered the impact of a variance in market growth and WIPOS. The value in use calculation shows that if the long-term growth rate is nil, the recoverable amount of the US and UK would still be greater than their carrying value. - Discount rate – Management has considered the impact of an increase in the discount rate applied to the calculation. The value in use calculation shows that for the recoverable amount to be less than its carrying value, the pre-tax discount rate would have to be increased to 88.1% (2020: 31.0%) for the US and 25.3% (2020: 18.0%) for the UK. - Occupancy – Management has considered the impact of a variance in occupancy. The value in use calculation shows that for the recoverable amount to be less than its carrying value, occupancy in all future years would have to decrease by 23.0% (2020: 13.0%) for the US and 12.0% (2020: 8.0%) for the UK. #### 14. Other intangible assets | | Brand £m | Customer Info £m | Software £m | Total £m | | --- | --- | --- | --- | --- | | **Cost** | | | | | | At 1 January 2020 | 62.2 | 31.8 | 77.3 | 171.3 | | Additions at cost | – | – | 16.5 | 16.5 | | Acquisition of subsidiaries | – | 0.1 | 0.2 | 0.3 | | Disposals (including discontinued operations) | – | (0.6) | (11.2) | (11.8) | | Exchange rate movements | 2.9 | (0.6) | 0.2 | 2.5 | | At 31 December 2020 | 65.1 | 30.7 | 83.0 | 178.8 | | Additions at cost | – | – | 33.7 | 33.7 | | Acquisition of subsidiaries | 2.2 | 1.5 | 1.4 | 5.1 | | Disposals (including discontinued operations) | – | – | (0.3) | (0.3) | | Exchange rate movements | – | (0.2) | (0.5) | (0.7) | | **At 31 December 2021** | **67.3** | **32.0** | **117.3** | **216.6** | #### Amortisation | At 1 January 2020 | 38.8 | 31.6 | 55.9 | 126.3 | | --- | --- | --- | --- | --- | | Charge for year | 1.1 | – | 7.6 | 8.7 | | Disposals (including discontinued operations) | – | (0.6) | (11.1) | (11.7) | | Exchange rate movements | 2.3 | (0.4) | 0.3 | 2.2 | | At 31 December 2020 | 42.2 | 30.6 | 52.7 | 125.5 | | Charge for year | 0.7 | 0.8 | 12.0 | 13.5 | | Disposals (including discontinued operations) | – | – | – | – | | Exchange rate movements | – | (0.1) | (0.3) | (0.4) | | **At 31 December 2021** | **42.9** | **31.3** | **64.4** | **138.6** | #### Net book value | At 1 January 2020 | 23.4 | 0.2 | 21.4 | 45.0 | | --- | --- | --- | --- | --- | | At 31 December 2020 | 22.9 | 0.1 | 30.3 | 53.3 | | **At 31 December 2021** | **24.4** | **0.7** | **52.9** | **78.0** | Included within the brand value is £11.2m relating to the acquisition of the remaining 58% of the UK business in the year ended 31 December 2006. The Regus brand acquired in this transaction is assumed to have an indefinite useful life due to the fact that the value of the brand is intrinsically linked to the continuing operation of the Group. As a result of the Regus brand acquired with the UK business having an indefinite useful life no amortisation is charged but the carrying value is assessed for impairment on an annual basis. The brand was tested at the balance sheet date against the recoverable amount of the UK business segment at the same time as the goodwill arising on the acquisition of the UK business (see note 13). regal.com 119 NOTES TO THE ACCOUNTS CONTINUED 15. Property, plant and equipment | Right-of-use | | | Land and | | | Leasehold | | Furniture and | | Computer | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | assets | (1) | buildings | | improvements | | | equipment | | hardware | | Total | | | | £m | | £m | | | £m | | £m | | £m | £m | Cost At 1 January 2020 9,439.4 156.4 1,469.5 749.7 132.5 11,947.5 Additions 501.4 2.2 267.3 89.5 9.4 869.8 (2) Modifications 664.1 – – – – 664.1 Acquisition of subsidiaries 3.0 – 4.1 0.9 0.1 8.1 (4) Disposals (1,073.5) (8.7) (193.7) (54.6) (10.9) (1,341.4) Exchange rate movements (4.5) – (26.2) (10.5) (2.1) (43.3) At 31 December 2020 9,529.9 149.9 1,521.0 775.0 129.0 12,104.8 Additions 176.2 10.7 109.8 73.3 7.0 377.0 (2) Modifications 478.9 – – – – 478.9 Acquisition of subsidiaries 78.3 – 23.1 1.7 – 103.1 (4) Disposals (851.8) (0.1) (146.4) (33.0) (5.4) (1,036.7) Exchange rate movements (123.2) – (22.8) (6.1) (2.3) (154.4) At 31 December 2021 9,288.3 160.5 1,484.7 810.9 128.3 11,872.7 Accumulated depreciation At 1 January 2020 3,522.0 6.8 703.7 422.4 101.9 4,756.8 (3) (6) Charge for the year 946.0 2.5 173.8 54.1 9.9 1,186.3 (4) (5) Disposals (736.5) (0.7) (108.1) (46.4) (10.2) (901.9) Impairment 163.9 – 82.1 – – 246.0 Exchange rate movements (12.4) 0.1 (16.0) (9.3) (0.7) (38.3) At 31 December 2020 3,883.0 8.7 835.5 420.8 100.9 5,248.9 (3) (6) Charge for the year 892.9 2.6 134.0 58.1 8.3 1,095.9 (4) (5) Disposals (675.1) (0.1) (67.0) (23.7) (4.5) (770.4) (7) Net reversal of impairment (46.8) – (7.4) – – (54.2) Exchange rate movements (19.8) (0.1) 1.9 (4.0) (2.0) (24.0) At 31 December 2021 4,034.2 11.1 897.0 451.2 102.7 5,496.2 Net book value At 1 January 2020 5,917.4 149.6 765.8 327.3 30.6 7,190.7 At 31 December 2020 5,646.9 141.2 685.5 354.2 28.1 6,855.9 At 31 December 2021 5,254.1 149.4 587.7 359.7 25.6 6,376.5 1. Right-of-use assets consist of property related leases. 2. Modifications includes lease modifications and extensions. 3. Includes depreciation expenses related to discontinued operations for right-of-use assets of £13.1m (2020: £26.9m) and other property, plant and equipment of £2.0m (2020: £4.6m). 4. Includes disposals related to discontinued operations for right-of-use assets of £38.8m (2020: £0.7m) and other property, plant and equipment of £24.4m (2020: £1.2m). 5. Disposals is net of £18.6m (2020: £nil) in respect of COVID-19 related adjusting items previously provided for (note 10). 6. Depreciation is net of £25.2m (2020: £nil) in respect of COVID-19 related adjusting items previously provided for (note 10). 7. The reversal of impairment of £54.2m includes an additional COVID-19 related impairment of £69.7m (2020: £244.8m), offset by the reversal of £151.1m (2020: £nil) previously provided for (note 10). The key assumptions and methodology in calculating right-of-use assets and the corresponding lease liability remain consistent with those noted in notes 1 and 32. Impairment tests for property, plant and equipment (including right-of-use assets) are performed on a cash-generating unit basis when impairment triggers arise. Cash-generating units (CGUs) are defined as individual business centres, being the smallest identifiable group of assets that generate cash flows that are largely independent of other groups of assets. The Group assesses whether there is an indication that a CGU may be impaired, including persistent operating losses, net cash outflows and poor performance against forecasts. During the year, and as a direct result of the challenging economic circumstances arising from COVID-19, this gave rise to impairment tests in relation to various centres where impairment indicators were identified. The recoverable amounts of property, plant and equipment are based on the higher of fair value less costs to sell and value in use. The Group considered both fair value less costs to dispose and value in use in the impairment testing on a centre by centre level, on a basis consistent with the impairment testing described in note 13. Impairment charges are recognised within cost of sales in the consolidated income statement. In 2021, the Group recorded a net reversal of impairment charges of £46.8m (2020: charge of £163.9m) in respect of right-of-use assets and a net reversal of £7.4m (2020: charge of £82.1m) in respect of leasehold improvements. 140 IWG plc Annual Report and Accounts 2021 140 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **16. Other long-term receivables** | | 2021 £m | 2020 £m | | --- | --- | --- | | Deposits held by landlords against rent obligations | 49.5 | 54.5 | | Other receivables | 0.2 | 0.5 | | Amounts owed by joint ventures | – | – | | **Total non-current** | **49.7** | **55.0** | # **17. Trade and other receivables** | | 2021 £m | 2020 £m | | --- | --- | --- | | Trade receivables, net | 262.4 | 285.1 | | Prepayments and accrued income | 133.7 | 128.4 | | Acquired debt receivable | – | 276.2 | | Other receivables | 145.5 | 106.0 | | Partner contributions receivables | 30.2 | 33.8 | | VAT recoverable | 159.4 | 171.8 | | Deposits held by landlords against rent obligations | 3.0 | 2.4 | | **Total current** | **734.2** | **1,003.7** | The amount of £276.2m recognised in 2020, related to mezzanine and senior debt in an acquisition target that the Group did not control as at 31 December 2020. This classification as a current asset reflected the status of the counterparty in default and that the debt was technically repayable on demand. The balances were recognised at amortised cost of £276.2m at 31 December 2020 as the acquisition did not complete. The debts were fully repaid to the Group in February 2021. # **18. Trade and other payables (including customer deposits)** | | 2021 £m | 2020 £m | | --- | --- | --- | | Customer deposits | 384.5 | 423.6 | | Other accruals | 188.5 | 160.0 | | Trade payables | 167.4 | 270.7 | | VAT payable | 104.1 | 125.6 | | Other payables | 67.2 | 12.9 | | Other tax and social security | 14.9 | 14.8 | | **Total current** | **926.6** | **1,007.6** | During 2021 the Group conducted a review of its customer deposits for inactive customer accounts. Based on this review, the Group has released the financial liabilities in respect of such deposits where the obligation qualifies for derecognition. The effect of these changes was an increase in operating profit of £21.9m in 2021. # **19. Borrowings** The Group's total loan and borrowing position at 31 December 2021 and at 31 December 2020 had the following maturity profiles: # **Bank and other loans** | | 2021 £m | 2020 £m | | --- | --- | --- | | Repayments falling due as follows: | | | | In more than one year but not more than two years | 4.7 | 6.6 | | In more than two years but not more than five years^{(1)} | 446.5 | 392.8 | | In more than five years | 2.1 | 0.8 | | **Total non-current** | **453.3** | **400.2** | | **Total current** | **21.5** | **21.9** | | **Total bank and other loans** | **474.8** | **422.1** | 1. Includes convertible bond debt of £508.5m (2020: £298.8m) The Group issued £350.0m convertible bonds in December 2020, raising £343.2m, net of transaction fees. At the date of issue, the convertible bonds were bifurcated between: - A financial liability recognised at amortised cost of £298.2m, by using the discounted cash flow of interest payments and the bonds' nominal value, and subsequently remeasured at amortised cost of £508.5m (2020: £298.8m) at 31 December 2021. The financial liability is included in the above, falling due in more than two but not more than five years. - A derivative financial liability of £51.8m, not being closely related to the host financial liability, was recognised separately and measured at fair value through profit or loss (note 24). A gain has been recognised at 31 December 2021 of £22.5m (2020: £2.4m) through net finance expenses, resulting in a year-end liability of £26.9m (2020: £49.4m). Further information regarding the committed borrowings and the convertible bonds can be found on page 149 in note 24. hegifc.com 143 NOTES TO THE ACCOUNTS CONTINUED 20. Provisions | | | 2021 | | | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Closures | | | Other | Total | Closures | | | Other | Total | | | £m | | £m | £m | | £m | | £m | £m | At 1 January 23.9 7.1 31.0 13.0 2.8 15.8 Acquired in the period – 4.3 4.3 – – – Provided in the period 12.4 2.7 15.1 40.3 4.5 44.8 (1) Utilised in the period (22.5) (6.5) (29.0) (29.0) – (29.0) Exchange rate movements (0.6) (0.2) (0.8) (0.4) (0.2) (0.6) At 31 December 13.2 7.4 20.6 23.9 7.1 31.0 Analysed between: Current 0.8 7.4 8.2 11.5 6.0 17.5 Non-current 12.4 – 12.4 12.4 1.1 13.5 At 31 December 13.2 7.4 20.6 23.9 7.1 31.0 1. Includes provisions release related to discontinued operations of £0.2m (2020: £nil). Closures Provisions for closures relate to the expected costs of centre closures, including restructuring costs. Impairments of right-of-use assets and property, plant and equipment (note 15) are not included above. Other Other provisions include the estimated costs of claims against the Group outstanding at 31 December 2021, of which, due to their nature, the maximum period over which they are expected to be utilised is uncertain. The Group is involved in various disputes, primarily related to potential lease obligations, some of which are in the course of litigation. Where there is a dispute and where, based on legal counsel advice, the Group estimates that it is probable that the dispute will result in an outflow of economic resources, provision is made based on the Group’s best estimate of the likely financial outcome. Where a reliable estimate cannot be made, or where the Group, based on legal counsel advice, considers that it is not probable that there will be an outflow of economic resources, no provision is recognised. There are no disputes which are expected to have a material impact on the Group. 21. Investments in joint ventures Provision for Investments in deficit in joint ventures joint ventures Total £m £m £m At 1 January 2020 13.8 (2.9) 10.9 Share of loss (0.9) (1.7) (2.6) Disposals (1.6) – (1.6) Exchange rate movements – – – At 31 December 2020 11.3 (4.6) 6.7 (1) Acquisition of joint ventures 33.4 – 33.4 Share of loss 0.1 (2.3) (2.2) Exchange rate movements 0.1 0.4 0.5 At 31 December 2021 44.9 (6.5) 38.4 1. The acquisition of joint ventures was settled via a non-cash transaction of £33.4m. The Group has 82 centres operating under joint venture agreements (2020: 46) at the reporting date, all of which are individually immaterial. The Group has a legal obligation in respect of its share of any deficits recognised by these operations. The results of the joint ventures below are the full-year results of the joint ventures and do not represent the effective share: 2021 2020 £m £m Income statement Revenue 35.3 28.3 Expenses (38.2) (36.9) Loss before tax for the year (2.9) (8.6) Tax charge (0.4) (0.7) Loss after tax for the year (3.3) (9.3) Balance sheet Non-current assets 136.9 43.1 Current assets 168.6 50.8 Current liabilities (160.1) (68.8) Non-current liabilities (125.6) (36.4) Net assets/(liabilities) 19.8 (11.3) 142 IWG plc Annual Report and Accounts 2021 142 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS 22. Share capital Ordinary equity share capital | | 2021 | | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Nominal value | | | | Nominal value | | | Number | | | £m | Number | | | £m | Authorised Ordinary 1p shares in IWG plc at 1 January 8,000,000,000 80.0 8,000,000,000 80.0 Ordinary 1p shares in IWG plc at 31 December 8,000,000,000 80.0 8,000,000,000 80.0 Issued and fully paid up Ordinary 1p shares in IWG plc at 1 January 1,057,248,651 10.5 923,357,438 9.2 Ordinary 1p shares issued for cash in the year – – 133,891,213 1.3 Ordinary 1p shares in IWG plc at 31 December 1,057,248,651 10.5 1,057,248,651 10.5 On 28 May 2020 the Group announced the placement of 133,891,213 new ordinary shares, with a par value of 1.0 pence each. The price of 239.0 pence represented a discount of 8.1% to the middle market closing price of 260.2 pence on 27 May 2020, with the Group recognising net proceeds of £313.9m, with share premium of £312.6m recognised. Treasury share transactions involving IWG plc shares between 1 January 2021 and 31 December 2021 During the year, nil shares were purchased in the open market and 49,832,721 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 8 March 2022, 49,832,721 treasury shares were held. The holders of ordinary shares in IWG plc are entitled to receive such dividends as are declared by the Company and are entitled to one vote per share at meetings of the Company. Treasury shares do not carry such rights until reissued. | | 2021 | | | 2020 | | --- | --- | --- | --- | --- | | Number | | | Number | | | of shares | | £m | of shares £m | | 1 January 50,677,280 154.1 39,055,369 116.9 Purchase of treasury shares in IWG plc – – 13,590,080 43.7 Treasury shares in IWG plc utilised (844,559) (2.8) (1,968,169) (6.5) 31 December 49,832,721 151.3 50,677,280 154.1 23. Net debt analysis | | | | Debt due | | Debt due | | Lease due | | | Lease due | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Cash and cash | | Gross | within one | | after one | | within one | | | after one | | | Gross | Net | Derivative | | | | equivalents | | cash | | year | year | (2) (3) | | year | (1) | | year | (1) | debt | debt | liability | | Total | | | £m | £m | | £m | | £m | | £m | | | £m | | £m | £m | | £m | £m | At 1 January 2020 66.6 66.6 (9.7) (351.0) (977.4) (5,568.6) (6,906.7) (6,840.1) (0.2) (6,840.3) Cash flow (0.7) (0.7) (13.1) (45.0) 151.6 995.1 1,088.6 1,087.9 (51.8) 1,036.1 (4) Non-cash movements – – – (0.5) (200.5) (965.4) (1,166.4) (1,166.4) 2.4 (1,164.0) Exchange rate movements 5.1 5.1 0.9 (3.7) 6.7 – 3.9 9.0 – 9.0 At 31 December 2020 71.0 71.0 (21.9) (400.2) (1,019.6) (5,538.9) (6,980.6) (6,909.6) (49.6) (6,959.2) Cash flow 5.0 5.0 1.1 (37.5) 149.1 882.8 995.5 1,000.5 0.2 1,000.7 (4) Non-cash movements – – (0.9) (15.5) (81.6) (630.7) (728.7) (728.7) 22.5 (706.2) Exchange rate movements 1.8 1.8 0.2 (0.1) 19.6 98.1 117.8 119.6 – 119.6 At 31 December 2021 77.8 77.8 (21.5) (453.3) (932.5) (5,188.7) (6,596.0) (6,518.2) (26.9) (6,545.1) 1. There are no significant lease commitments for leases not commenced at 31 December 2021. 2. Includes £308.3m (2020: £298.8m) convertible bond liability. 3. Excludes the convertible bond derivative liability element at 31 December 2021 of £26.9m (2020: £49.4m) and a cash flow hedging liability at 31 December 2021 of £nil (2020: £0.2m). 4. Includes early termination of lease liabilities of £231.7m (2020: £362.8m) of which £52.3m (2020: £0.8m) is related to discontinued operations. Cash and cash equivalent balances held by the Group that are not available for use amounted to £7.4m at 31 December 2021 (2020: £4.1m). Of this balance, £2.6m (2020: £1.6m) is pledged as security against outstanding bank guarantees and a further £4.8m (2020: £2.5m) is pledged against various other commitments of the Group. Cash flows on lease liabilities consist of principal payments of £864.8m (2020: £897.3m) and interest payments of £167.1m (2020: £249.4m). Total cash outflows of £1,094.7m (2020: £1,211.6m) for leases, including variable payments of £62.8m (2020: £64.9m), were incurred in the year. Non-cash movements of £712.3m (2020: £1,165.9m) represent the movements on lease liabilities in relation to new leases, lease modifications/re-measurements and lease cessations. Cash flows on debt due within, and after, one year relate to movements in the revolving credit facility and other borrowings. These net movements align with the activities reported in the cash flow statement after taking into consideration the £26.9m (2020: £49.4m) derivative liability and a £nil (2020: £0.2m) cash flow hedging liability recognised separately. iwgplc.com 143 iwgplc.com 143 NOTES TO THE ACCOUNTS CONTINUED # **23. Net debt analysis (continued)** The following amounts are included in the Group's consolidated financial statements in respect of its leases: | | 2021 | 2020 | | --- | --- | --- | | Depreciation charge for right-of-use assets | (892.9) | (946.0) | | Principal lease liability repayments | (864.8) | (897.3) | | Interest expense on lease liabilities | (167.1) | (249.4) | | Expenses relating to leases of low-value assets that are not shown above as short-term leases | 1.0 | 3.4 | | Expenses relating to variable lease payments not included in lease liabilities | 62.8 | 64.9 | | Total cash outflow for leases comprising interest and capital payments | 1,031.9 | 1,146.7 | | Additions to right-of-use assets | 176.2 | 501.4 | | Acquired right-of-use assets | 78.3 | 3.0 | # **24. Financial instruments and financial risk management** The objectives, policies and strategies applied by the Group with respect to financial instruments and the management of capital are determined at Group level. The Group's Board maintains responsibility for the risk management strategy of the Group and the Chief Financial Officer is responsible for policy on a day-to-day basis. The Chief Financial Officer and Group Treasurer review the Group's risk management strategy and policies on an ongoing basis. The Board has delegated to the Group Audit Committee the responsibility for applying an effective system of internal control and compliance with the Group's risk management policies. Exposures to credit, interest rate and currency risks arise in the normal course of business. # **Going concern** The Strategic Report on pages 1 to 75 sets out the Group's strategy and the factors that are likely to affect the future performance and position of the business. The financial review on pages 46 to 51 within the Strategic Report reviews the trading performance, financial position and cash flows of the Group. The Group's net debt position decreased by £391.4m (2020: increased by £69.5m) to a net debt position of £6,518.2m (2020: £6,909.6m) as at 31 December 2021. Excluding the IFRS 16 lease liabilities, the net debt position increased to £397.0m (2020: £351.1m). The investment in growth is funded by a combination of cash flow generated from the Group's mature business centres, cash consideration received in franchising the business and debt. The Group had a £950.0m revolving credit facility (RCF) provided by a group of relationship banks with a final maturity in 2025 with an option to extend until 2026. As at 31 December 2021, £530.1m (2020: £731.3m) of the RCF was available and undrawn. Although the Group has net current liabilities of £1,439.4m (2020: £1,330.4m), the Group does not consider that this gives rise to a liquidity risk. A large proportion of the net current liabilities comprise non-cash liabilities such as deferred revenue of £346.4m (2020: £328.9m) which will be recognised in future periods through the income statement. The Group holds customer deposits of £384.5m (2020: £423.6m) which are spread across a large number of customers and no deposit held for an individual customer is material. Therefore, the Group does not believe the net current liabilities represents a liquidity risk. # **Subsequent events** In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. The facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio. The Directors performed an updated going concern assessment to reflect the impact of the amended revolving credit facility and concluded that the facility remains sufficient for the Group to retain sufficient cash reserves to continue as a going concern, for a period of at least 12 months from the date of approval of these group consolidated financial statements. In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants. # **Credit risk** Credit risk could occur where a customer or counterparty defaults under the contractual terms of a financial instrument and arises principally in relation to customer contracts and the Group's cash deposits. A diversified customer base, requirement for customer deposits, and payments in advance on workstation contracts minimise the Group's exposure to customer credit risk. No single customer contributes a material percentage of the Group's revenue. The Group's policy is to provide against trade receivables when specific debts are judged to be irrecoverable or where formal recovery procedures have commenced. Trade debtors that are more than three months overdue are considered to be in default and therefore, under the simplified lifetime approach, are impaired in full. This reflects the Group's experience of the likelihood of recoverability of these trade receivables based on both historical and forward-looking information. These provisions, which take into consideration any customer deposits held, are reviewed on an ongoing basis to assess changes in the likelihood of recoverability. The Group has assessed the other receivable balances for expected credit losses, with no expected credit losses recognised due to the nature and default history of these items. 144 M/G plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS The maximum exposure to credit risk for trade receivables at the reporting date, not taking into account customer deposits held, analysed by geographic region, is summarised below. 2021 2020 £m £m Americas 103.7 113.6 EMEA 88.5 82.7 Asia Pacific 21.9 31.6 United Kingdom 48.3 57.2 262.4 285.1 All of the Group’s trade receivables relate to customers purchasing workplace solutions and associated services and no individual customer has a material balance owing as a trade receivable. The ageing of trade receivables at 31 December was: | Gross | Provision | | Gross | Provision | | | --- | --- | --- | --- | --- | --- | | 2021 | | 2021 | 2020 | | 2020 | | £m | | £m | £m | | £m | Not overdue 219.9 – 161.5 – Past due 0 – 30 days 20.8 – 27.9 – Past due 31 – 60 days 7.3 – 16.9 – Past due 61 – 90 days 4.3 – 3.9 – Past due more than 90 days 37.7 (27.6) 100.6 (25.7) 290.0 (27.6) 310.8 (25.7) The Group conducted a review of the expected credit risk associated with accounts receivable balances during 2021. This review was performed in response to changing commercial circumstances, with the Group recognising an increase in the expected credit losses of £6.1m. At 31 December 2021, the Group maintained a provision of £27.6m for expected credit losses (2020: £25.7m) arising from trade receivables. The Group had provided £99.5m (2020: £34.8m) in the year, utilised £97.6m (2020: £16.8m) and released £nil (2020: £nil). Customer deposits of £384.5m (2020: £423.6m) are held by the Group, mitigating the risk of default. IFRS 9 requires the Group to record expected credit losses on all of its receivables, either on a 12-month or lifetime basis. The Group has applied the simplified approach to all trade receivables, which requires the recognition of the expected credit loss based on the lifetime expected losses. The expected credit loss is mitigated through the invoicing of contracted services in advance and customer deposits. Cash investments and derivative financial instruments are only transacted with counterparties of sound credit ratings, and management does not expect any of these counterparties to fail to meet their obligations. Liquidity risk Liquidity risk represents the risk that the Group will not be able to meet its obligations as they fall due. The Group manages liquidity risk by closely monitoring the global cash position, the available and undrawn credit facilities, and forecast capital expenditure and expects to have sufficient liquidity to meet its financial obligations as they fall due. In response to the COVID-19 pandemic, the Group continues to focus on cash generation by reducing cost, renegotiating rents and rationalising the network, resulting in short or long-term cash benefits. The Group has free cash and liquid investments (excluding blocked cash) of £70.4m (2020: £66.9m). In addition to cash and liquid investments, the Group had £530.1m (2020: £731.3m) available and undrawn under its committed borrowings. The Directors consider the Group has adequate liquidity to meet day-to-day requirements. The Group maintained a revolving credit facility provided by a group of international banks. At 31 December 2021, the amount of the facility remained £950.0m (2020: £950.0m) and the final maturity was extended in March 2020 to March 2025 with an option to extend until 2026. Subsequent events In February 2022, the £950m revolving credit facility was reduced to £750m, with an unchanged maturity date in 2025. The facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio. The Directors performed an updated going concern assessment to reflect the impact of the amended revolving credit facility and concluded that the facility remains sufficient for the Group to retain sufficient cash reserves to continue as a going concern, for a period of at least 12 months from the date of approval of these group consolidated financial statements. In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants. The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly reduces the Group's exposure to an increase in interest rates. The final interest rate swap taken to hedge against the floating interest rate obligations of debt drawn under the revolving credit facility matured in February 2021. This had a nominal amount of £30.0m and a fixed rate of 1.2%. iwgplc.com 145 iwgplc.com 145 NOTES TO THE ACCOUNTS CONTINUED # **24. Financial instruments and financial risk management (continued)** # **Market risk** The Group is exposed to market risk primarily related to foreign currency exchange rates, interest rates and the market value of our investments in financial assets. These exposures are actively managed by the Group Treasurer and Chief Financial Officer in accordance with a written policy approved by the Board of Directors. The Group does not use financial derivatives for trading or speculative reasons. # **Interest rate risk** The Group manages its exposure to interest rate risk through the relative proportions of fixed rate debt and floating rate debt. Any surplus cash balances are invested short term, and at the end of 2021 no cash was invested for a period exceeding three months (2020: £nil). # **Foreign currency risk** The Group is exposed to foreign currency exchange rate movements. The majority of day-to-day transactions of overseas subsidiaries are carried out in local currency and the underlying foreign exchange exposure is small. Transactional exposures do arise in some countries where it is local market practice for a proportion of the payables or receivables to be in other than the functional currency of the affiliate. Intercompany charging, funding and cash management activity may also lead to foreign exchange exposures. It is the policy of the Group to seek to minimise such transactional exposures through careful management of non-local currency assets and liabilities, thereby minimising the potential volatility in the income statement. Net investments in IWG affiliates with a functional currency other than pounds sterling are of a long-term nature and the Group does not normally hedge such foreign currency translation exposures. The principal exposures of the Group are to the US dollar and the euro, with approximately 35% (2020: 37%) of the Group's revenue being attributable to the US dollar and 23% (2020: 22%) to the euro. From time to time the Group uses short-term derivative financial instruments to manage its transactional foreign exchange exposures where these exposures cannot be eliminated through balancing the underlying risks. No transactions of a speculative nature are undertaken. The foreign currency exposure arising from open third-party transactions held in a currency other than the functional currency of the related entity is summarised as follows: | £m | 2020 | | | | --- | --- | --- | --- | | | 1997 | 2020 | 2021 | | Trade and other receivables | - | 2.3 | 0.4 | | Trade and other payables | (0.9) | (8.6) | 0.2 | | Net statement of financial position exposure | (0.9) | (6.3) | 0.6 | | £m | 2020 | | | | --- | --- | --- | --- | | | 1997 | 2020 | 2021 | | Trade and other receivables | 0.1 | 1.8 | 1.3 | | Trade and other payables | (0.4) | (4.1) | (1.8) | | Net statement of financial position exposure | (0.3) | (2.3) | (0.5) | # **Other market risks** The Group does not hold any equity securities for fair value measurement under IFRS 9 and is therefore not subject to risks of changes in equity prices in the income statement. # **Sensitivity analysis** For the year ended 31 December 2021, it is estimated that a general increase of one percentage point in interest rates would have increased the Group's loss before tax by approximately £1.2m (2020: £1.8m) with a corresponding decrease in total equity. It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have increased the Group's loss before tax by approximately £1.5m for the year ended 31 December 2021 (2020: £2.9m). It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have increased the Group's loss before tax by approximately £0.4m for the year ended 31 December 2021 (2020: £1.0m). It is estimated that a five-percentage point weakening in the value of the US dollar against pounds sterling would have decreased the Group's total equity by approximately £8.0m for the year ended 31 December 2021 (2020: £6.3m). It is estimated that a five-percentage point weakening in the value of the euro against pounds sterling would have decreased the Group's total equity by approximately £4.5m for the year ended 31 December 2021 (2020: £5.4m). 146 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS Capital management The Group’s parent company is listed on the UK stock exchange and the Board’s policy is to maintain a strong capital base. The Chief Financial Officer monitors the diversity of the Group’s major shareholders and further details of the Group’s communication with key investors can be found in the Corporate Governance Report on page 78. In 2006, the Board approved the commencement of a progressive dividend policy to enhance the total return to shareholders. The Group’s Chief Executive Officer, Mark Dixon, is a major shareholder of the Company. Details of the Directors’ shareholdings can be found in the Directors’ Remuneration report on pages 94 to 108. In addition, the Group operates various share option plans for key management and other senior employees. Treasury share transactions involving IWG plc shares between 1 January 2021 and 31 December 2021 During the year, no shares were purchased in the open market and 844,559 treasury shares held by the Group were utilised to satisfy the exercise of share awards by employees. As at 31 December 2021, 49,832,721 treasury shares were held. The Company declared and paid no interim dividend per share during the year ended 31 December 2021 (2020: nil pence) and proposed no final dividend per share (2020: nil pence per share). The Group’s objective when managing capital (equity and borrowings) is to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. Effective interest rates In respect of financial assets and financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they mature. Except for lease liabilities and the convertible bond, the undiscounted cash flow and fair values of these instruments is not materially different from the carrying value. As at 31 December 2021 | | Effective | | Carrying | | Contractual | | Less than | | | | | | More than | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | interest rate | | | | value | cash flow | | | 1 year | 1-2 years | | 2-5 years | | | 5 years | | | | | % | | £m | | £m | | £m | | £m | | £m | | | £m | Cash and cash equivalents 0.0% 77.8 77.8 77.8 – – – (1) Trade and other receivables – 600.5 600.5 600.5 – – – Other long-term receivables – 49.7 49.7 – 25.0 24.7 – (2) Financial assets 728.0 728.0 678.3 25.0 24.7 – (3) Non-derivative financial liabilities : Bank loans and corporate borrowings 4.0% (136.5) (136.5) (0.2) (0.3) (136.0) – Convertible bonds – debt host 3.8% (308.3) (357.2) (1.8) (1.8) (353.6) – Lease liabilities 3.3% (6,121.2) (7,869.2) (1,094.7) (1,068.9) (2,564.0) (3,141.6) Other loans 0.0% (30.0) (30.0) (21.3) (4.4) (2.2) (2.1) Contingent consideration on acquisitions – (6.8) (6.8) (6.8) – – – Trade and other payables – (919.8) (919.8) (919.8) – – – Other long-term payables – (5.6) (5.6) – (5.6) – – Derivative financial liabilities: Convertible bonds – embedded conversion option – (26.9) (26.9) – – (26.9) – Interest rate swaps – Outflow – – – – – – – – Inflow – – – – – – – Financial liabilities (7,555.1) (9,352.0) (2,044.6) (1,081.0) (3,082.9) (3,143.7) iwgplc.com 147 iwgplc.com 147 NOTES TO THE ACCOUNTS CONTINUED 24. Financial instruments and financial risk management (continued) As at 31 December 2020 | Effective | | Carrying | | Contractual | | Less than | | | | | | More than | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | interest rate | | | value | cash flow | | 1 year | | 1-2 years | | 2-5 years | | 5 years | | | | % | | £m | | £m | | £m | | £m | | £m | | £m | Cash and cash equivalents 0.1% 71.0 71.0 71.0 – – – (1) Trade and other receivables – 875.3 875.3 875.3 – – – Other long-term receivables – 55.0 55.0 – 27.8 27.2 – (2) Financial assets 1,001.3 1,001.3 946.3 27.8 27.2 – (3) Non-derivative financial liabilities : Bank loans and corporate borrowings 2.8% (91.7) (91.7) – (1.0) (90.7) – Convertible bonds – debt host 3.8% (298.8) (358.8) (1.8) (1.8) (355.2) – Lease liabilities 3.4% (6,558.5) (9,073.8) (1,159.3) (1,074.1) (2,538,7) (4,301.7) Other loans 1.2% (31.6) (31.6) (21.9) (5.6) (3.3) (0.8) Trade and other payables – (1,007.6) (1,007.6) (1,007.6) – – – Other long-term payables – (5.9) (5.9) – (5.9) – – Derivative financial liabilities: Convertible bonds – embedded conversion option – (49.4) (49.4) – – (49.4) – Interest rate swaps – Outflow – (0.2) (0.2) (0.2) – – – – Inflow – – – – – – – Financial liabilities – (8,043.7) (10,619.0) (2,190.8) (1,088.4) (3,037.3) (4,302.5) 1. Excluding prepayments. 2. Financial assets are all held at amortised cost. 3. All financial instruments are classified as variable rate instruments. Fair value disclosures The fair values together with the carrying amounts shown in the balance sheet are as follows: 31 December 2021 Carrying amount Fair value | | | Cash, | Other | Cash flow – | | | --- | --- | --- | --- | --- | --- | | | loans and | | financial | | hedging | | £m | receivables | | liabilities | instruments Total Level 1 Level 2 Level 3 Total | | Cash and cash equivalents 77.8 – – 77.8 – – – – Trade and other receivables 600.5 – – 600.5 – – – – Other long-term receivables 49.7 – – 49.7 – – – – Derivative financial liabilities – (26.9) – (26.9) – – (26.9) (26.9) Convertible bonds – (308.3) – (308.3) – – (308.3) (308.3) Bank loans and corporate borrowings – (136.5) – (136.5) – – – – Other loans – (30.0) – (30.0) – – – – Contingent consideration on acquisitions – (6.8) – (6.8) – – (6.8) (6.8) Trade and other payables – (919.8) – (919.8) – – – – Other long-term payables – (5.6) – (5.6) – – – – 728.0 (1,433.9) – (705.9) – – (342.0) (342.0) 31 December 2020 | | | | Carrying amount | | | Fair value | | --- | --- | --- | --- | --- | --- | --- | | | | Cash, | | Other | Cash flow – | | | | loans and | | financial | | hedging | | | £m | receivables | | liabilities | | instruments Total Level 1 Level 2 Level 3 Total | | Cash and cash equivalents 71.0 – – 71.0 – – – – Trade and other receivables 875.3 – – 875.3 – 276.2 – 276.2 Other long-term receivables 55.0 – – 55.0 – – – – Derivative financial liabilities – (49.4) (0.2) (49.6) – (0.2) (49.4) (49.6) Convertible bonds – (298.8) – (298.8) – – (298.8) (298.8) Bank loans and corporate borrowings – (91.7) – (91.7) – – – – Other loans – (31.6) – (31.6) – – – – Trade and other payables – (1,007.6) – (1,007.6) – – – – Other long-term payables – (5.9) – (5.9) – – – – 1,001.3 (1,485.0) (0.2) (483.9) – 276.0 (348.2) (72.2) Included within other receivables is £nil (2020: £276.2m) relating to mezzanine and senior debts acquired in December 2020. The balances have been recognised at fair value of £nil (2020: £276.2m) at 31 December 2021. The mezzanine and senior debt receivable balances was settled in full in February 2021. 148 IWG plc Annual Report and Accounts 2021 148 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS At the date of issue, the £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability respectively. At 31 December 2021, the debt was valued at its amortised cost, £308.4m (2020: £298.8m) and the derivative liability at its fair value, £26.9m (2020: £49.4m). During the years ended 31 December 2021 and 31 December 2020, there were no transfers between levels for fair value measured instruments. Valuation techniques When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: – Level 1: quoted prices in active markets for identical assets or liabilities; – Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly; and – Level 3: inputs for the asset or liability that are not based on observable market data. The following tables show the valuation techniques used in measuring level 3 fair values and methods used for financial assets and liabilities not measured at fair value: Type Valuation technique Cash and cash equivalents, trade and other For cash and cash equivalents, receivables/payables with a remaining life of less than receivables/payables, customer deposits, one year and customer deposits, the book value approximates the fair value because contingent consideration and investment of their short-term nature. loan receivables Loans, overdrafts and debt element of The fair value of bank loans, overdrafts and other loans approximates the carrying convertible bonds value because interest rates are at floating rates where payments are reset to market rates at intervals of less than one year. Foreign exchange contracts, interest rate swaps The fair values are based on a combination of broker quotes, forward pricing, and and derivative element of convertible bonds swap models. The fair value of the derivative element of convertible bonds has been calculated with reference to unobservable credit spreads. Derivative financial instruments The following table summarises the notional amount of the open contracts as at the reporting date: 2021 2020 £m £m Derivatives used for cash flow hedging – 30.0 Committed borrowings | 2021 | | 2021 | 2020 | | 2020 | | --- | --- | --- | --- | --- | --- | | Facility | Available | | Facility | Available | | | £m | | £m | £m | | £m | Revolving credit facility 950.0 530.1 950.0 731.3 The Group maintains a revolving credit facility provided by a group of international banks. At 31 December 2021, the amount of the facility remains £950.0m (2020: £950.0m) and the final maturity was extended in March 2020 to March 2025 with an option to extend until 2026. As at 31 December, £530.1m (2020: £731.3m) was available and undrawn under this facility. The £950.0m revolving credit facility was subject to financial covenants. In April 2021 the Group agreed revised covenants for the period to June 2022 relating to EBITDA and liquidity headroom. The Group was in compliance with its covenants up to the date of the amendment of the covenants and is in compliance with the amended covenant requirements. Subsequent events In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2025. The facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio. In addition, a £330m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants. The Group actively reviews its exposure to interest rate movements. The issuance of the fixed rate convertible bond significantly reduces the Group's exposure to an increase in interest rates. Convertible bonds In December 2020 the Group issued a £350.0m convertible bond, issued by IWG Group Holdings Sarl and transferred in the year to IWG International Holdings Sarl, a subsidiary of the Group and guaranteed by IWG plc, which is due for repayment in 2027 if not previously converted into shares. If the conversion option is exercised by the holder of the option, the issuer has the choice to settle by cash or equity shares in the Group. The holders of the bond have the right to put the bonds back to the Group in 2025 at par. The bond carries a fixed coupon of 0.5% per annum. The bond liability is split between corporate borrowings (debt) and a derivative financial liability. At the date of issue, the £350.0m was bifurcated at £298.2m and £51.8m between corporate borrowings (debt) and a derivative financial liability, respectively. At 31 December 2021, the debt was valued at its amortised cost, £308.4m (2020: £298.8m) and the derivative liability at its fair value, £26.9m (2020: £49.4m). The derivative liability represents a level 3 instrument, which has been valued with reference to the total convertible bond price (a level 1 valuation) minus the level 3 valuation of the debt host. A change of 10 basis points in the credit spread that is indirectly used to value the derivative liability would have increased or decreased profit or loss by £1.2m (2020: £1.1m). iwgplc.com 149 iwgplc.com 149 NOTES TO THE ACCOUNTS CONTINUED 25. Share-based payments There are three share-based payment plans, details of which are outlined below: Plan 1: IWG Group Share Option Plan During 2004 the Group established the IWG Group Share Option Plan that entitles Executive Directors and certain employees to purchase shares in IWG plc. In accordance with this programme, holders of vested options are entitled to purchase shares at the market price of the shares at the day before the date of grant. The IWG Group also operates the IWG Group Share Option Plan (France) which is included within the numbers for the IWG Share Option Plan disclosed above. The terms of the IWG Share Option Plan (France) are materially the same as the IWG Group Share Option Plan with the exception that they are only exercisable from the fourth anniversary of the date of grant, assuming the performance conditions have been met. Reconciliation of outstanding share options | | 2021 | | | | 2020 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Weighted average | | | | Weighted average | | | Number of | | exercise price per | | Number of | | exercise price per | | | share options | | | share | share options | | | share | At 1 January 42,926,841 184.38 32,511,195 200.34 Granted during the year 3,508,813 313.90 21,248,148 167.62 Lapsed during the year (2,566,253) 190.35 (9,296,503) 208.41 Exercised during the year (1,041,658) 142.60 (1,535,999) 145.00 Outstanding at 31 December 42,827,743 195.65 42,926,841 184.38 Exercisable at 31 December 11,694,349 198.51 7,355,419 174.33 Weighted average Numbers exercise price per At 31 Dec Date of grant granted share Lapsed Exercised 2021 Exercisable from Expiry date (1) 13/06/2012 11,189,000 84.95 (3,805,914) (6,447,899) 935,187 13/06/2015 13/06/2022 (1) 12/06/2013 7,741,000 155.60 (4,306,000) (2,752,173) 682,827 12/06/2016 12/06/2023 (1) 18/11/2013 600,000 191.90 (575,000) (25,000) – 18/11/2016 17/11/2023 (1) 18/12/2013 1,000,000 195.00 (833,333) (166,667) – 18/12/2016 17/12/2023 (1) 20/05/2014 1,845,500 187.20 (1,658,500) (160,300) 26,700 20/05/2017 19/05/2024 (2) 05/11/2014 12,875,796 186.00 (8,698,738) (1,646,552) 2,530,506 05/11/2017 04/11/2024 (2) 19/05/2015 1,906,565 250.80 (1,829,565) – 77,000 19/05/2018 18/05/2025 (2) 22/12/2015 1,154,646 322.20 (395,186) (25,000) 734,460 22/12/2018 22/12/2025 (2) 29/06/2016 444,196 272.50 (367,735) (11,009) 65,452 29/06/2019 29/06/2026 (2) 28/09/2016 249,589 258.00 (214,313) (7,055) 28,221 28/09/2019 28/09/2026 (2) 01/03/2017 1,200,000 283.70 – – 1,200,000 01/03/2020 01/03/2027 (1) 14/12/2017 1,000,507 197.00 (1,000,507) – – 14/12/2020 14/12/2027 (1) 10/10/2018 685,127 223.20 (685,127) – – 10/10/2021 10/10/2028 (2) | 21/12/2018 (Grant 1) 300,000 203.10 (75,000) – 225,000 | | | 21/12/2021 21/12/2028 | | --- | --- | --- | --- | | | (2) | (2) | | | 28/12/2018 (Grant 2) | 20,900,000 199.80 (8,608,330) – 12,291,670 | | 28/12/2021 28/12/2028 | (3) 15/05/2019 613,872 341.90 (385,635) – 228,237 15/05/2022 15/05/2029 (2) 13/09/2019 196,608 402.30 (130,508) – 66,100 13/09/2022 13/09/2029 (3) 19/12/2019 108,349 408.60 (81,427) – 26,922 19/12/2022 19/12/2029 (3) 02/04/2020 20,325,000 165.00 (747,500) – 19,577,500 02/04/2023 02/04/2030 (3) 15/05/2020 450,000 202.00 (300,000) – 150,000 15/05/2023 15/05/2030 (3) 05/08/2020 300,000 222.60 – – 300,000 05/08/2023 05/08/2030 (3) 09/09/2020 173,148 291.00 – – 173,148 09/09/2023 09/09/2030 (3) 26/03/2021 466,377 342.80 – – 466,377 26/03/2024 26/03/2031 (3) 11/05/2021 318,645 376.60 – – 318,645 11/05/2024 11/05/2031 (3) 28/06/2021 487,964 307.40 – – 487,964 28/06/2024 28/06/2031 (3) 12/08/2021 580,655 310.00 – – 580,655 12/08/2024 12/08/2031 (3) 10/11/2021 1,500,000 297.70 – – 1,500,000 10/11/2024 10/11/2031 (3) 09/12/2021 155,172 290.00 – – 155,172 09/12/2024 09/12/2031 Total 88,767,716 (34,698,318) (11,241,655) 42,827,743 1. These options have fully vested as of 31 December 2021. 2. The performance targets for these options have been met and they are subject to vesting schedules as described below. 3. These options are subject to performance targets and vesting schedules as described below. The vesting of share options is subject to an ongoing employment condition. As at 31 December 2021 there were 11,649,349 (2020: 7,355,419) outstanding share options which had fully vested with no further performance or holding period requirements and which had a weighted average exercise price of £198.51 (2020: £174.33). 150 IWG plc Annual Report and Accounts 2021 150 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # Performance conditions for share options # May 2015 share options The share options outstanding under this grant at 31 December 2021 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning May 2020 and ending May 2024. # December 2015 share options The share options outstanding under this grant at 31 December 2021 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning December 2018 and ending December 2022. # June 2016 share options The share options outstanding under this grant at 31 December 2021 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning June 2019 and ending June 2023. # September 2016 share options The share options outstanding under this grant at 31 December 2021 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a five-year period beginning September 2019 and ending September 2023. # March 2017 share options The share options outstanding under this grant at 31 December 2021 reflect the options that have been awarded based on achievement against the relevant performance targets and are now vesting ratably over a three-year period beginning March 2020 and ending March 2022. # December 2018 (Grant 1) share options The share options outstanding under this grant at 31 December 2021 are subject to the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets are subject to vesting ratably over a three-year period beginning December 2021 and ending December 2023. # December 2018 (Grant 2) share options The share options outstanding under this grant at 31 December 2021 reflect the options that have been awarded based on achievement against performance targets and are now subject to vesting ratably over a three-year period beginning December 2021 and ending December 2023. # May 2019 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a three-year period beginning May 2022 and ending May 2024. # September 2019 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on Group operating profit and the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a five-year period beginning September 2022 and ending September 2026. # December 2019 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on Group operating profit and the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will be subject to vesting ratably over a five-year period beginning December 2022 and ending December 2026. # April 2020 share options The share options outstanding under this grant at 31 December 2021 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning April 2023 and ending April 2025. heg4c.com 333 NOTES TO THE ACCOUNTS CONTINUED 25. Share-based payments (continued) May 2020 share options The share options outstanding under this grant at 31 December 2021 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning May 2023 and ending May 2025. August 2020 share options The share options outstanding under this grant at 31 December 2021 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning August 2023 and ending August 2025. September 2020 share options The share options outstanding under this grant at 31 December 2021 are subject to performance targets with 50% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. The remaining 50% of outstanding options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning September 2023 and ending September 2025. March 2021 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning March 2024 and ending March 2026. May 2021 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning May 2024 and ending May 2026. June 2021 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning June 2024 and ending June 2026. August 2021 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning August 2024 and ending August 2026. November 2021 share options The share options outstanding under this grant at 31 December 2021 are subject to performance targets with 17% of the options subject to the achievement of a performance target based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Another 17% of the options are subject to individual and Group franchising targets for a three-year period with a minimum performance threshold based on achieving a minimum level of franchises and the maximum award based on achieving a stretch target for franchises. 22% of the options are subject to targets of value returned to shareholders during a two-year period with a minimum performance threshold based on achieving a minimum level of value paid per share to shareholders and the maximum award given for exceeding the maximum level of value paid per share to shareholders. 152 IWG plc Annual Report and Accounts 2021 152 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS A further 22% of the options are subject to the date in which the value returned to shareholder targets are achieved during the two-year period with the maximum awarded if the shareholder return targets are achieved by December 2022 and half is awarded if the shareholder return targets are achieved by December 2023. The remaining 22% of outstanding options are subject to the percentage of shareholder return paid in cash during the two-year period with the maximum awarded if the shareholder return targets are paid 100% in cash and half is awarded if the shareholder return targets are paid by a minimum of 50% in cash. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning November 2024 and ending November 2026. December 2021 share options The share options outstanding under this grant at 31 December 2021 are subject to Group performance targets based on the Group ranking at or above the median for TSR performance relative to a comparator group over a period of three years with a minimum performance threshold of achieving a ranking at the median TSR or above and the maximum award being given for exceeding the comparator group median TSR performance by 10% or more. Any shares awarded based on achievement of these performance targets will then be subject to vesting ratably over a three-year period beginning December 2024 and ending December 2026. Measurement of fair values The fair value of the rights granted through the employee share purchase plan was measured based on the Monte Carlo simulation or the Black-Scholes formula. The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices. The inputs to the model are as follows: December November August June May March 2021 2021 2021 2021 2021 2021 Share price on grant date 290.00 297.70 310.00 307.40 376.60 342.80 Exercise price 290.00 297.70 310.00 307.40 376.60 342.80 Expected volatility 53.80% - 53.77% - 53.67% - 53.69% - 53.78% - 53.64% - 56.45% 56.46% 57.07% 58.28% 59.19% 59.13% Option life 3-7 years 3-7 years 3-7 years 3-7 years 3-7 years 3-7 years Expected dividend 1.17% 1.17% 1.12% 1.13% 0.96% 1.00% | Fair value of option at time of grant | 152.27p - | | 157.28p - | | 163.92p - | | | 162.59p - | | | | 202.75p - | | | 183.02p - | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 158.90p | | 163.15p | | 171.67p | | | 173.10p | | | | | 217.81p | | 196.95 p | | | | Risk-free interest rate 0.52% - | | | | 0.52% - | | 0.37% - | | 0.37% - | | | | | 0.16% - | | | 0.15% - | | | | | 0.61% | | 0.61% | | 0.49% | | | 0.49% | | | | 0.34% | | | 0.33% | | | | September | | August | | May | | April | | | December | | | September | | | | May | | | | 2020 | | 2020 | 2020 | | 2020 | | | | 2019 | | | 2019 | | | 2019 | Share price on grant date 291.00p 222.60p 202.00p 165.00p 408.60p 402.30p 341.90p Exercise price 291.00p 222.60p 202.00p 165.00p 408.60p 402.30p 341.90p Expected volatility 51.81% - 51.88% - 50.15% - 49.02% - 36.24% – 36.33% - 38.84% - 62.96% 63.17% 61.06% 59.29% 44.72% 44.83% 45.75% Option life 3-7 years 3-7 years 3-7 years 3-7 years 3-7 years 3-7 years 3-5 years Expected dividend 2.39% 3.12% 3.44% 4.21% 1.59% 1.62% 1.85% | Fair value of option at time of grant 122.93p - | | | 84.95p – | | 71.39p - | | 50.79p - | | 141.77p - | | | 137.79p - | | | 120.77p - | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 146.68p | | 102.54p | | 86.80p | | 62.29p | | 172.84p | | | 169.19p | | | 141.08p | | | Risk-free interest rate (0.08%) - | | | (0.08%) - | | 0.00% - | | 0.00% - | | | 0.57% - | | | 0.48% - | | 0.52% - | | | | (0.04%) | | (0.04%) | | 0.06% | | 0.06% | | | 0.65% | | | 0.50% | | | 0.60p | | | December | | December | | | | | | | | | | | | | | | | | 2018 | | 2018 | | March | September | | | | June | | December | | | May | | | (Grant 2) | | (Grant 1) | | | 2017 | | 2016 | | | 2016 | | | 2015 | | 2015 | Share price on grant date 199.80p 203.10p 283.70p 258.00p 272.50p 322.20p 250.80p Exercise price 199.80p 203.10p 283.70p 258.00p 272.50p 322.20p 250.80p Expected volatility 37.66% - 37.63% – 27.42% – 27.45% – 27.71% - 24.80% - 27.23% - 44.35% 44.25% 29.87% 32.35% 34.81% 37.08% 30.12% Option life 3-5 years 3-5 years 3-5 years 3-7 years 3-7 years 3-7 years 3-7 years Expected dividend 2.95% 2.90% 1.80% 1.80% 1.71% 1.40% 1.59% | Fair value of option at time of grant 58.77% - | | 39.36p - | 44.51p - | 40.96p - | 44.28p - | 29.76p - | 42.35p – | | --- | --- | --- | --- | --- | --- | --- | --- | | | 69.33% | 46.42p | 76.88p | 67.89p | 78.68p | 90.61p | 69.12p | | Risk-free interest rate 0.87% - | | 0.73% - | 0.23% - | 0.09% - | 0.14% - | 0.14% - | 0.81% - | | | 1.01% | 0.88% | 0.56% | 0.38% | 0.39% | 0.21% | 1.53% | iwgplc.com 153 iwgplc.com 153 NOTES TO THE ACCOUNTS CONTINUED 25. Share-based payments (continued) Plan 2: IWG plc Performance Share Plan (PSP) The PSP provides for the Remuneration Committee to make standalone awards, based on normal plan limits, up to a maximum of 250% of base salary. Reconciliation of outstanding share awards | | 2021 | | 2020 | | --- | --- | --- | --- | | Number of | | Number of | | | | awards | | awards | At 1 January 3,237,768 2,370,535 PSP awards granted during the year 959,015 915,739 Lapsed during the year (1,036,166) – Exercised during the year – (48,506) Outstanding at 31 December 3,160,617 3,237,768 Exercisable at 31 December – – There were no shares which were exercised during the year ended 31 December 2021. The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2021 was nil pence (2020: 288.60p). Numbers At 31 Dec Plan Date of grant granted Lapsed Exercised 2021 Release date 583,039 01/03/2022 PSP 07/03/2018 1,278,350 1,051,546 – 226,804 07/03/2023 PSP 07/03/2019 1,058,578 (276,151) – 782,427 07/03/2024 PSP 04/03/2020 915,739 (306,407) – 609,332 04/03/2025 PSP 01/03/2017 1,095,406 (512,367) – 959,015 26/03/2026 3,160,617 Measurement of fair values PSP 26/03/2021 959,015 – – The fair value of the rights granted through the employee share purchase plan was measured based on the Monte Carlo simulation. 5,307,088 (2,246,471) – The inputs to the model are as follows: 26/03/2021 04/03/2020 07/03/2019 07/03/2018 01/03/2017 PSP PSP PSP PSP PSP Share price on grant date 346.40p 356.50p 244.90p 240.90p 283.70p Exercise price nil nil nil nil nil Number of simulations 250,000 250,000 250,000 250,000 250,000 Number of companies 32 32 32 32 32 Award life 5 years 5 years 5 years 5 years 5 years Expected dividend 1.00% 1.95% 2.57% 2.37% 1.80% Fair value of award at time of grant 206.19p- 292.36p- 124.38p – 124.92p – 155.83p – 312.37p 192.98p 188.43p 189.26p 236.08p Risk-free interest rate 0.33% 0.06% 0.79% 1.21% 0.56% It is recognised by the Remuneration Committee that the additional EPS targets represent a highly challenging goal and consequently, in determining whether they have been met, the Committee will exercise its discretion. The overall aim is that the relevant EPS targets must have been met on a run-rate or underlying basis. As such, an adjusted measure of EPS will be calculated to assess the underlying performance of the business. 2017 PSP investment grant The total number of shares awarded was subject to three different performance conditions with one third subject to defined earnings per share (EPS) conditions, one third subject to relative total shareholder return (TSR) conditions and one third subject return on investment (ROI) conditions. These conditions were all achieved based on 2019 results and the total 583,039 shares vested in March 2021. 2018 PSP investment grant The total number of shares awarded was subject to three different performance conditions, with one third subject to defined earnings per share (EPS) conditions, one third subject to relative total shareholder return (TSR) conditions and one third subject to return on investment (ROI) conditions. These conditions are measured over three financial years commencing on 1 January 2018. Based on results as of 31 December 2020, the relative TSR target of exceeding the comparator group median TSR by more than 10% was achieved in full, resulting in the vesting of 226,804 shares subject to a holding period ending March 2022. The performance targets for EPS and ROI were not met and the share awards pursuant to these targets lapsed. 154 IWG plc Annual Report and Accounts 2021 154 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **2019 PSP investment grant** The total number of shares awarded is subject to three different performance conditions. These conditions are measured over three financial years commencing on 1 January 2019. Thus, conditional on meeting these performance targets, these shares will vest in March 2024. One third is subject to defined earnings per share (EPS) conditions, one third is subject to relative total shareholder return (TSR) conditions and one third is subject to return on investment (ROI) conditions. The EPS condition is based on the compound annual growth in EPS over the performance period measured from EPS in the financial year ending 31 December 2018 as follows: | Sharing scale | % of one third of the award that rests | | --- | --- | | 25% | 100% | | Between 5% and 25% | On a straight-line basis between 0% and 100% | | 5% | 0% | The TSR condition is based on the performance of the Group's TSR growth against the median TSR growth of the comparator group as follows: | Sharing scale | % of one third of the award that rests | | --- | --- | | Exceeds the median by 10% or more | 100% | | Exceeds the median by less than 10% | On a straight-line basis between 25% and 100% | | Ranked at median | 25% | | Ranked below the median | 0% | The ROI condition is based on the ROI improvement over the performance period relative to ROI for the financial year ending 31 December 2018 as follows: | Sharing scale | % of one third of the award that rests | | --- | --- | | Exceeds 2018 ROI plus 300 basis points | 100% | | Exceeds 2018 ROI by less than 300 basis points | On a straight-line basis between 0% and 100% | | Equal to or less than the 2018 ROI | 0% | # **2020 PSP investment grant** The total number of shares awarded is subject to relative total shareholder return (TSR) conditions, measured over three financial years commencing on 1 January 2020. Thus, conditional on meeting these performance targets, these shares will vest in December 2025. The TSR condition is based on the performance of the Group's TSR growth against the median TSR growth of the comparator group as follows: | | % of the award that rests | | --- | --- | | Exceeds the median by 10% or more | 100% | | Exceeds the median by less than 10% | On a straight-line basis between 25% and 100% | | Ranked at median | 25% | | Ranked below the median | 0% | # **2021 PSP investment grant** The total number of shares awarded is subject to relative total shareholder return (TSR) conditions, measured over three financial years commencing on 1 January 2021. Thus, conditional on meeting these performance targets, these shares will vest in March 2026. The TSR condition is based on the performance of the Group's TSR growth against the median TSR growth of the comparator group as follows: | | % of the award that rests | | --- | --- | | Exceeds the median by 10% or more | 100% | | Exceeds the median by less than 10% | On a straight-line basis between 25% and 100% | | Ranked at median | 25% | | Ranked below the median | 0% | hsgpfc.com 159 NOTES TO THE ACCOUNTS CONTINUED 25. Share-based payments (continued) Plan 3: Deferred Share Bonus Plan The Deferred Share Bonus Plan, established in 2016, enables the Board to award options to selected employees on a discretionary basis. The awards are conditional on the ongoing employment of the related employees for a specified period of time. Once this condition is satisfied, those awards that are eligible will vest three years after the date of grant. Reconciliation of outstanding share options | | 2021 | | 2020 | | --- | --- | --- | --- | | Number of | | Number of | | | | awards | | awards | At 1 January 376,291 495,678 DSBP awards granted during the year – 264,277 Lapsed during the year – – Exercised during the year – (383,664) Outstanding at 31 December 376,291 376,291 Exercisable at 31 December – – The weighted average share price at the date of exercise for share awards exercised during the year ended 31 December 2021 was nil (2020: 360.62p). Numbers At 31 Dec Plan Date of grant granted Lapsed Exercised 2021 Release date DSBP 07/03/2019 112,014 – – 112,014 07/03/2022 DSBP 04/03/2020 264,277 – – 264,277 04/03/2023 376,291 – – 376,291 Measurement of fair values The fair value of the rights granted through the employee share purchase plan was measured based on the Black-Scholes formula. The expected volatility is based on the historic volatility adjusted for any abnormal movement in share prices. The inputs to the model are as follows: March 2020 March 2019 Share price on grant date 356.50p 244.90p Exercise price nil nil Number of simulations – – Number of companies – – Award life 3 years 3 years Expected dividend 1.95% 2.57% Fair value of award at time of grant 292.36p 188.42p Risk-free interest rate 0.00% 0.68% 26. Retirement benefit obligations The Group accounts for the Swiss and Philippines pension plans as defined benefit plans under IAS 19 – Employee Benefits. The reconciliation of the net defined benefit liability and its components is as follows: | | 2021 | | 2020 | | --- | --- | --- | --- | | | £m | | £m | | Switzerland Philippines Total | | Switzerland Philippines Total | | Fair value of plan assets 4.6 – 4.6 4.8 – 4.8 Present value of obligations (5.8) (0.7) (6.5) (6.0) (0.9) (6.9) Net funded obligations (1.2) (0.7) (1.9) (1.2) (0.9) (2.1) 156 IWG plc Annual Report and Accounts 2021 156 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **27. Acquisitions** # **Current period acquisitions** During the year ended 31 December 2021 the Group made various individually immaterial acquisitions for a total consideration of £30.0m. | £m | Book value | Provisional fair value adjustments | Provisional fair value | | --- | --- | --- | --- | | **Net assets acquired** | | | | | Intangible assets | 1.4 | – | 1.4 | | Right-of-use assets | 78.3 | – | 78.3 | | Other property, plant and equipment | 24.8 | – | 24.8 | | Cash | 32.1 | – | 32.1 | | Other current and non-current assets | 12.6 | – | 12.6 | | Lease liabilities | (80.8) | – | (80.8) | | Current liabilities | (27.0) | – | (27.0) | | Non-current liabilities | (10.9) | – | (10.9) | | | 30.5 | – | 30.5 | | NCI based on their proportionate interest in the recognised amounts of the assets and liabilities of 'The Wing' | | | (15.2) | | Goodwill arising on acquisition | | | 16.4 | | Negative goodwill arising on acquisition | | | (1.7) | | **Total consideration** | | | 30.0 | | Less: deferred consideration | | | (4.7) | | Less: contingent consideration | | | (3.8) | | **Cash flow on acquisition** | | | | | Cash paid | | | 21.5 | | Less: cash acquired | | | (32.1) | | **Net cash inflow** | | | (10.6) | Goodwill of £16.4m arose relating to 2021 acquisitions. In addition, a final fair value adjustment of £(3.7)m and a £3.0m contingent consideration were recognised for the 2020 acquisitions. Goodwill arising on acquisitions in 2021 includes negative goodwill of £1.7m, recognised as part of the selling, general and administration expenses in the consolidated income statement. The goodwill arising on the 2021 acquisitions reflects the anticipated future benefits IWG can obtain from operating the businesses more efficiently, primarily through increasing occupancy and the addition of value-adding products and services. Of the above goodwill, £16.4m is expected to be deductible for tax purposes. If the above acquisitions had occurred on 1 January 2021, the revenue and net retained loss arising from these acquisitions would have been £16.7m and £23.0m respectively. In the year, the acquisitions contributed revenue of £11.9m and net retained loss of £19.3m. Deferred consideration of £4.7m arose on the acquisitions made in the year and is held on the Group's balance sheet at 31 December 2021. No additional deferred consideration relating to prior period acquisitions is held on the Group's balance sheet at 31 December 2021. Contingent consideration of £3.8m arose on the 2021 acquisitions. No contingent consideration was paid during the current year with respect to milestones achieved on previous acquisitions. Contingent consideration balances of £6.8m are held on the Group's balance sheet at 31 December 2021. The acquisition costs associated with these transactions were £1.0m, recorded within administration expenses in the consolidated income statement. For acquisitions completed in 2021, the fair value of assets acquired has only been provisionally assessed, pending completion of a fair value assessment which has not yet been completed. The main changes in the provisional fair values expected are primarily for customer relationships and property, plant and equipment. The final assessment of the fair value of these assets will be made within 12 months of the acquisition dates and any adjustments reported in future reports. hegifc.com 157 NOTES TO THE ACCOUNTS CONTINUED # **27. Acquisitions (continued)** # **Prior period acquisitions** During the year ended 31 December 2020 the Group made acquisitions for a total consideration of £31.5m. | In | Back value | Pre-Annual fair value adjustments | Final Fair value adjustments | Final fair value | | --- | --- | --- | --- | --- | | **Net assets acquired** | | | | | | Intangible assets | – | – | 3.7 | 3.7 | | Right-of-use assets | 3.0 | – | – | 3.0 | | Other property, plant and equipment | 5.1 | – | – | 5.1 | | Cash | 1.7 | – | – | 1.7 | | Other current and non-current assets | 12.3 | – | – | 12.3 | | Lease liabilities | (3.0) | – | – | (3.0) | | Current liabilities | (14.8) | – | – | (14.8) | | Non-current liabilities | (5.9) | – | – | (5.9) | | | (1.6) | – | 3.7 | 2.1 | | Previously held share of net assets^{(1)} | | | | 1.4 | | Goodwill arising on acquisition | | | (3.7) | 28.0 | | **Total consideration** | | | | 31.5 | | Less: deferred consideration | | | | – | | Less: contingent consideration^{(1)} | | | | (3.0) | | **Cash flow on acquisition** | | | | | | Cash paid | | | | 28.5 | | Less: cash acquired | | | | (1.7) | | **Net cash outflow** | | | | 26.8 | 1. The 2020 acquisitions include one stepped-acquisition where the non-controlling interest in a former joint venture was acquired by the Group. 2. Contingent consideration of £3.0m was recorded in 2021, relating to an acquisition completed in late December 2020. This consideration, and the related £3.0m goodwill, has been recognised in 2021. The goodwill arising on the 2020 acquisitions reflects the anticipated future benefits IWG can obtain from operating the businesses more efficiently, primarily through increasing occupancy and the addition of value-adding products and services. Of the above goodwill, £28.0m was expected to be deductible for tax purposes. If the above acquisitions had occurred on 1 January 2020, the revenue and net retained profit arising from these acquisitions would have been £17.8m and £1.5m respectively. During 2020, the acquisitions contributed revenue of £2.6m and net retained profit of £0.6m. No deferred consideration arose on the 2020 acquisitions. Contingent consideration of £3.0m arose on the 2020 acquisitions but was only recognised in 2021 due to the late timing of the related acquisition. No contingent consideration was paid during the current year with respect to milestones achieved on previous acquisitions. The acquisition costs associated with these transactions were £0.4m, recorded within administration expenses in the consolidated income statement. The prior year comparative information has not been restated due to the immaterial nature of the final fair value adjustments recognised in 2020. 138 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS # **Non-controlling interests** During 2021, the Group completed the acquisition of 'The Wing', which included a 43% non-controlling interest. The following table summarises the information relating to each of the Group's subsidiaries that have a material non-controlling interest. | | 2021 | 2020 | | --- | --- | --- | | **NCI percentage** | **43%** | **–** | | Non-current assets | 42.3 | – | | Current assets | 11.4 | – | | Non-current liabilities | (24.8) | – | | Current liabilities | (6.7) | – | | **Net assets** | **22.2** | **–** | | Net assets attributable to NCI | 9.6 | – | | Revenue | 0.7 | – | | Loss after tax | (13.0) | – | | Other comprehensive income | – | – | | **Total comprehensive income** | **(12.3)** | **–** | | Loss allocated to NCI | (5.6) | – | | Other comprehensive income allocated to NCI | – | – | | Cash flows from operating activities | (14.1) | – | | Cash flows from investing activities | 29.3 | – | | Cash flows from financing activities | (7.4) | – | | **Net increase in cash and cash equivalents** | **7.8** | **–** | # **28. Capital commitments** | | 2021 £m | 2020 £m | | --- | --- | --- | | Contracts placed for future capital expenditure not provided for in the financial statements | 86.7 | 147.0 | These commitments are principally in respect of centre fit-out obligations. There are £0.5m capital commitments in respect of joint ventures at 31 December 2021 (2020: £nil). # **29. Contingent assets and liabilities** The Group has bank guarantees and letters of credit held with certain banks, predominantly in support of leasehold contracts with a variety of landlords, amounting to £509.4m (2020: £143.9m). There are no material lawsuits pending against the Group. # **30. Related parties** # **Parent and subsidiary entities** The consolidated financial statements include the results of the Group and its subsidiaries. # **Joint ventures** The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year. | £m | Management fees received from related parties | Amounts owed by related party | Amounts owed to related party | | --- | --- | --- | --- | | **2021** | | | | | **Joint ventures** | **3.5** | **19.7** | **20.0** | | 2020 | | | | | Joint ventures | 2.6 | 17.6 | 4.3 | As at 31 December 2021, none of the amounts due to the Group have been provided for as the expected credit losses arising on the balances are considered immaterial (2020: £nil). All outstanding balances with these related parties are priced on an arm's length basis. None of the balances are secured. # **Key management personnel** No loans or credit transactions were outstanding with Directors or Officers of the Company at the end of the year or arose during the year that are required to be disclosed. hagifc.com 119 NOTES TO THE ACCOUNTS CONTINUED Compensation of key management personnel (including Directors) Key management personnel include those personnel (including Directors) that have responsibility and authority for planning, directing and controlling the activities of the Group: 2021 2020 £m £m Short-term employee benefits 4.3 6.7 Retirement benefit obligations 0.3 0.2 Share-based payments 1.8 1.9 6.4 8.8 Share-based payments included in the table above reflect the accounting charge in the year. The full fair value of awards granted in the year was £6.1m (2020: £6.8m). These awards are subject to performance conditions and vest over three, four and five years from the award date (note 25). Transactions with related parties During the year ended 31 December 2021 the Group acquired goods and services from a company indirectly controlled by a Director of the Company amounting to £27,319 (2020: £5,629). There was a £6,751 balance outstanding at the year-end (2020: £5,629). All transactions with these related parties are priced on an arm’s length basis and are to be settled in cash. None of the balances are secured. 31. Principal Group companies The Group’s principal subsidiary undertakings at 31 December 2021, their principal activities and countries of incorporation are set out below: % of % of ordinary ordinary Country of shares and Country of shares and Name of undertaking incorporation votes held Name of undertaking incorporation votes held Trading companies Management companies Regus Australia Management Pty Ltd Australia 100 RGN Management Limited Partnership Canada 100 Regus Belgium SA Belgium 100 Pathway IP II Sarl Switzerland 100 Regus do Brasil Ltda Brazil 100 Franchise International GmbH Switzerland 100 Regus Business Service (Shenzen) Ltd China 100 Regus Service Centre Philippines B.V. Philippines 100 | Regus Management ApS | Denmark | 100 Regus Global Management Centre SA Switzerland 100 | | --- | --- | --- | | Regus Management (Finland) Oy | Finland | 100 Regus Group Services Ltd United Kingdom 100 | | RBC Deutschland GmbH | Germany | 100 IW Group Services (UK) Ltd United Kingdom 100 | Regus CME Ireland Limited Ireland 100 Regus Management Group LLC United States 100 Regus Business Centres Limited Israel 100 Regus Business Centres Italia Srl Italy 100 Holding and finance companies Regus Management Malaysia Sdn Bhd Malaysia 100 IWG Enterprises Sarl Switzerland 100 Regus Management de Mexico, SA de CV Mexico 100 IWG Group Holdings Sarl Luxembourg 100 Regus New Zealand Management Ltd New Zealand 100 IWG International Holdings Sarl Luxembourg 100 Regus Business Centre Norge AS Norway 100 Genesis Finance Sarl Switzerland 100 IWG Management Sp z.o.o. Poland 100 Pathway Finance Sarl Switzerland 100 Regus Business Centre, Lda Portugal 100 Pathway Finance EUR 2 Sarl Switzerland 100 Regus Management Singapore Pte Ltd Singapore 100 Pathway Finance USD 2 Sarl Switzerland 100 Regus Management Espana SL Spain 100 Regus Group Limited United Kingdom 100 IWG Management (Sweden) AB Sweden 100 Regus Corporation United States 100 Avanta Managed Offices Ltd United Kingdom 100 Basepoint Centres Limited United Kingdom 100 H Work LLC United States 100 RGN National Business Centre LLC United States 100 RB Centres LLC United States 100 160 IWG plc Annual Report and Accounts 2021 160 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS 32. Key judgemental and estimates areas adopted in preparing these accounts The preparation of consolidated financial statements in accordance with IFRS requires management to make certain judgements and assumptions that affect reported amounts and related disclosures. Key judgements Adjusting items Adjusting items are separately disclosed by the Group so as to provide readers with helpful additional information on the performance of the business across periods. Items arising specifically from the impact of the COVID-19 pandemic have been deemed to meet the definition of adjusting items. Each of these items are considered to be significant in nature and/or size and are also consistent with items treated as adjusting in prior periods in which significant non-recurring transactions occurred. The exclusion of these items is consistent with how the business performance is planned by, and reported to, the Board and the Operating Committee. The profit before tax and adjusting items measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The classification of adjusting items requires significant management judgement after considering the nature and intentions of a transaction or provision. Tax assets and liabilities The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. Where appropriate, the Group assesses the potential risk of future tax liabilities arising from the operation of its business in multiple tax jurisdictions and includes provisions within tax liabilities for those risks that can be estimated reliably. Changes in existing tax laws can affect large international groups such as IWG and could result in additional tax liabilities over and above those already provided for. Determining the lease term of contracts with renewal and termination options IFRS 16 defines the lease term as the non-cancellable period of a lease together with the options to extend or terminate a lease, if the lessee were reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease term, the Group makes a judgement as to whether it is reasonably certain that the option will be taken. This will take into account the length of time remaining before the option is exercisable, macro-economic environment, socio-political environment and other lease specific factors. The lease term represents the period from lease inception up to either: – The earliest point at which the lease could be broken, where break clauses exist; – The point at which the lease could be extended, but no further, where extension options exist; or – To the end of the contractual lease term in all other cases. Key estimates Impairment of intangibles and goodwill We evaluate the fair value of goodwill and other indefinite life intangible assets to assess potential impairments on an annual basis, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. We evaluate the carrying value of goodwill based on our CGUs aggregated at a country level and make that determination based upon future cash flow projections which assume certain growth projections which may or may not occur. We record an impairment loss for goodwill when the carrying value of the asset is less than its estimated recoverable amount. Further details of the methodology and assumptions applied to the impairment review in the year ended 31 December 2021, including the sensitivity to changes in those assumptions, can be found in note 13. Deferred tax assets We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, where relevant, the Group’s three-year business plans and other expectations about future outcomes. Changes in existing laws and rates, and their related interpretations, and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax consequences represents management’s best estimate of future events that can be appropriately reflected in the accounting estimates. It is Group policy to recognise a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the assets can be used. Significant changes to the Group's forecasts and other expectations of future outcomes could significantly impact the recognition of deferred tax assets. Given the significant level of corporate developments in the Group and the number of legal entities and countries in which the Group operates, the determination of the period of time representing foreseeable future requires judgement to be exercised. Management has determined the most suitable period to be the three-year period corresponding to the Group’s business forecasting processes. Any changes in management’s approach to this assessment could significantly impact the recognition of deferred tax assets. iwgplc.com 161 iwgplc.com 161 NOTES TO THE ACCOUNTS CONTINUED ### 32. Key judgemental and estimates areas adopted in preparing these accounts (continued) We evaluate the potential impairment of property, plant and equipment at a centre (CGU) level where there are indicators of impairment at the balance sheet date. In the assessment of value-in-use, key judgemental areas in determining future cash flow projections include: an assessment of the location of the centre; the local economic situation; competition; local environmental factors; the management of the centre; and future changes in occupancy, revenue and costs of the centre. While centre costs remain relatively stable, revenue is a function of the expected levels of occupancy and the corresponding pricing achieved. In assessing any impairment, the value-in-use calculated is therefore assessed for sensitivity to changes in both occupancy and pricing; to determine the extent to which these estimates need to change before an impairment arises. On a similar basis, overall performance is also a function of the discount rate applied (which is based on the capital asset pricing model). The value-in-use calculation is therefore also assessed for sensitivity to changes in this discount rate, to determine the extent to which this discount rate needs to change before an impairment arises. While impairment of property, plant and equipment was noted as a key estimate in the 2020 Annual Report and Accounts, COVID-19 continues to accelerate the need for further network rationalisation. We evaluate the potential impairment of property, plant and equipment at a centre (CGU) level where there are indicators of impairment at the balance sheet date and for centres which have been identified as part of the Group's rationalisation programme. The key area of estimation involved is in determining the recoverable amount of the rationalised centres, over what period the rationalisation will take place, and the level of moveable assets that will be utilised in other centres. The Group has considered the impact of COVID-19 with respect to all judgements and estimates it makes in the application of its accounting policies. This included assessing the impairment of property, plant and equipment, goodwill and the recoverability of trade receivables. The result of these reviews is detailed in note 30. #### Estimating the incremental borrowing rates on leases The determination of applicable incremental borrowing rates on leases at the commencement of lease contracts also requires judgement. The Group determines its incremental borrowing rates by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease. The Group considers the relevant market interest rate, based on the weighted average of the timing of the lease payments under the lease obligation. In addition, a spread over the market rate is applied based on the cost of funds to the Group, plus a spread that represents the risk differential of the lessee entity compared to the Group funding cost. #### Valuation of embedded conversion option (Level 3) in convertible bonds The embedded conversion option relating to the Group's issue of convertible bonds is measured at mark-to-market with reference to the traded price of the convertible bonds as well as external valuation inputs based on credit comparables and bond spreads across competitors and wider markets. #### Fair value accounting for business combinations For each business combination, we assess the fair values of assets and liabilities acquired. Where there is not an active market in the category of the non-current assets typically acquired with a business centre or where the books and records of the acquired company do not provide sufficient information to derive an accurate valuation, management calculates an estimated fair value based on available information and experience. The main categories of acquired non-current assets where management's judgement has an impact on the amounts recorded include tangible fixed assets, customer list intangibles and the fair market value of leasehold assets and liabilities. For significant business combinations management also obtains third-party valuations to provide additional guidance as to the appropriate valuation to be included in the financial statements. ### 33. Subsequent events In February 2022, the £950.0m revolving credit facility was reduced to £750.0m, with an unchanged maturity date in 2023. The facility is subject to financial covenants which include EBITDA, minimum liquidity, interest cover and net debt to EBITDA ratio. On 8 March 2022, the Group entered into a contract to merge certain of its digital and technology assets with The Instant Group, a global business which operates as the world's leading independent provider of flexible workspace platform and services, for a net cash investment of £270m. Due to the timing of this transaction, it is not practical to disclose the information associated with the initial accounting for this acquisition. A £330.0m bridge facility for The Instant Group acquisition has been agreed. The bridge facility has a maturity in September 2023. This facility is secured and is subject to interest cover and net debt to EBITDA covenants. The Group notes with concern the escalation of the conflict in Ukraine in 2022. The Group operates 10 centres in Ukraine with a net asset value of £9.8m. Our primary focus has been on the safety and well-being of our employees and customers and we are committed to providing them with support throughout these extremely difficult circumstances. There have been no other significant events affecting the Group since the year end. 192 M/G plc Annual Report and Accounts 2021 PARENT COMPANY ACCOUNTS FINANCIAL STATEMENTS Summarised extract of UNAUDITED Company balance sheet (Accounting policies are based on the Swiss Code of Obligations) | | As at | | As at | | --- | --- | --- | --- | | 31 Dec 2021 | | 31 Dec 2020 | | | | £m | | £m | Trade and other receivables 1.2 1.1 Prepayments 0.3 0.5 Total current assets 1.5 1.6 Investments 3,069.1 3,272.3 Total non-current assets 3,069.1 3,272.3 Total assets 3,070.6 3.273.9 Trade and other payables 21.1 7.0 Accrued expenses 1.5 1.1 Total short-term liabilities 22.6 8.1 Long-term interest-bearing liabilities 99.3 99.3 Total long-term liabilities 99.3 99.3 Total liabilities 121.9 107.4 Issued share capital 10.5 10.5 Reserves from capital contributions 2,439.4 2,439.4 Retained earnings 874.5 (1,699.1) (Loss)/profit for the year (224.4) 2,569.8 Treasury shares (151.3) (154.1) Total shareholders’ equity 2,948.7 3,166.5 Total liabilities and shareholders’ equity 3,070.6 3,273.9 The values of the investments recognised have been considered by the Directors and are considered fully recoverable. Approved by the Board on 8 March 2022 Mark Dixon Glyn Hughes Chief Executive Officer Chief Financial Officer Accounting policies Basis of preparation These financial statements were prepared in accordance with accounting policies based on the Swiss Code of Obligations. The Company is included in the consolidated financial statements of IWG plc. The balance sheet has been extracted from the non-statutory accounts of IWG plc for the year ended 31 December 2021, which are available from the Company’s registered office, Dammstrasse 19, CH-6300, Zug, Switzerland. Investments The value of the investment held in IWG Group is measured at acquisition cost. During 2021, the Company acquired the direct investment in IWG International Holdings Sarl, as part of an internal restructuring. At the same time, the Company disposed of its investment in IWG Enterprise Sarl, IWG Global Investments Sarl and Umbrella Management Limited to IWG International Holdings Limited. This restructuring resulted in the Company recognising an impairment in subsidiaries of £203.2m. iwgplc.com 163 iwgplc.com 163 PRE-IFRS 16 PRO FORMA STATEMENTS Consolidated income statement (unaudited) The purpose of these unaudited pages is to provide a reconciliation from the 2021 financial results to the pro forma statements in accordance with the previous pre-IFRS 16 policies adopted by the Group, and thereby give the reader greater insight into the impact of IFRS 16 on the results of the Group. The pro forma statements also reflect the impact of the adjusting items during 2021. | | Year ended | Rent & | | | Year ended | | --- | --- | --- | --- | --- | --- | | | 31 Dec 2021 | finance | | Other | 31 Dec 2021 | | £m Notes | As reported | costs Depreciation | adjustments Taxation | | pre-IFRS 16 | Revenue 3 2,227.9 – – – – 2,227.9 Total cost of sales (1,885.8) (982.3) 791.1 29.9 – (2,047.1) Cost of sales (1,870.0) (982.3) 791.1 79.6 – (1,981.6) (1) Adjusting items to cost of sales (70.0) – – 4.5 – (65.5) Reversal of impairment of property, plant and equipment and right- (1) 3,5 54.2 – – (54.2) – – of-use assets (1) Expected credit losses on trade receivables 5 (99.5) – – – – (99.5) Gross profit (centre contribution) 3 242.6 (982.3) 791.1 29.9 – 81.3 Total selling, general and administration expenses (327.8) (0.5) 1.2 – – (327.1) Selling, general and administration expenses (294.7) (0.5) 1.2 – – (294.0) Adjusting items to selling, general and administration expenses 10 (33.1) – – – (33.1) Share of loss of equity-accounted investees, net of tax 21 (2.2) – – – – (2.2) Operating loss 5 (87.4) (982.8) 792.3 29.9 – (248.0) Finance expense 7 (198.0) 165.7 – 1.2 – (31.1) Finance income 7 26.0 – – – – 26.0 Net finance expense (172.0) 165.7 – 1.2 – (5.1) Loss before tax for the year from continuing operations (259.4) (817.1) 792.3 31.1 – (253.1) Income tax expense 8 (10.3) – – – (2.1) (12.4) Loss after tax for the year from continuing operations (269.7) (817.1) 792.3 31.1 (2.1) (265.5) Profit after tax for the period from discontinued operations 9 59.3 (13.3) 11.5 (11.1) 3.0 49.4 Loss for the year (210.4) (830.4) 803.8 20.0 0.9 (216.1) Attributable to equity shareholders of the Group (204.8) (830.4) 803.8 19.7 0.9 (210.8) Attributable to non-controlling interests 27 (5.6) – – 0.3 – (5.3) Loss per ordinary share (EPS): Attributable to ordinary shareholders Basic (p) 11 (20.3) (20.9) Diluted (p) 11 (20.3) (20.9) From continuing operations Basic (p) 11 (26.2) (25.8) Diluted (p) 11 (26.2) (25.8) 1. The net reversal of adjusting items of £1.7m comprises the following items included in the balances referenced (note 10): A reversal of the impairment of property, plant and equipment and right-of-use assets of £125.2m, the adjusting items to costs of sales of £70.0m and £53.5m of the expected credit losses on trade receivables balances reported. 164 IWG plc Annual Report and Accounts 2021 164 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS Pro forma adjustments recognised The performance of the Group is impacted by the following significant adjustments in adopting IFRS 16. The recognition of these balances will not impact the overall cash flows of the Group or the cash generation per share. 1. Right-of-use assets and related lease liabilities These adjustments reflect the right-of-use assets recognised, together with the related lease liabilities. The initial lease liabilities are equal to the present value of the lease payments during the lease term that have not yet been paid. The cost of the right-of- use asset comprises the amount of the initial measurement of the lease liability, plus any additional direct costs associated with setting up the lease. 2. Rent and finance costs Under IFRS 16, conventional rent charges are not recognised in the profit or loss. The payments associated with these charges instead form part of the lease payments used in calculating the right-of-use assets and related lease liabilities noted above. The lease liabilities are measured in subsequent periods using the effective interest rate method, based on the applicable interest rate determined at the date of transition. The related finance costs arising on subsequent measurement are recognised directly through profit or loss. 3. Depreciation and lease payments Depreciation on the right-of-use assets recognised is depreciated over the life of the lease on a straight-line basis, adjusted for any period between the lease commencement date and the date the related centre opens, reflecting the lease related costs directly incurred in preparing the business centre for trading. Lease payments reduce the lease liabilities recognised in the balance sheet. 4. Taxation The underlying tax charge is impacted by the change in the profit before tax and deferred tax assets recognised. 5. Other adjustments These adjustments primarily reflect the impairment of the right-of-use assets and other property, plant and equipment as well as the reversal of the closure cost provision on a pre-IFRS 16 basis. Certain parking, storage and brokerage costs are also reversed, as they form part of the lease payments. iwgplc.com 165 iwgplc.com 165 PRE-IFRS 16 PRO FORMA STATEMENTS CONTINUED Consolidated balance sheet (unaudited) Right-of-use | | | As at | | assets & | Rent & | Depreciation | | | | | As at | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 Dec 2021 | | related lease | | finance | | & lease | | Other | 31 Dec 2021 | | | £m Notes | As reported | | | liability | costs | | payments | adjustments Taxation | | pre-IFRS 16 | | Non-current assets Goodwill 13 703.8 – – – – – 703.8 Other intangible assets 14 78.0 – – – – – 78.0 Property, plant and equipment 15 6,376.5 (5,773.4) 568.9 805.0 (40.8) – 1,936.2 Right-of-use assets 15 5,254.1 (6,113.6) – 892.9 (33.4) – – Other property, plant and equipment 15 1,122.4 340.2 568.9 (87.9) (7.4) – 1,936.2 Deferred tax assets 8 326.6 – – – – (111.7) 214.9 Other long-term receivables 16 49.7 – – – 0.2 – 49.9 Investments in joint ventures 21 44.9 – – – – – 44.9 Other investments 0.3 – – – – – 0.3 Total non-current assets 7,579.8 (5,773.4) 568.9 805.0 (40.6) (111.7) 3,028.0 Current assets Inventory 1.2 – – – – – 1.2 Trade and other receivables 17 734.2 – 122.1 – – – 856.3 Corporation tax receivable 8 18.5 – – – – – 18.5 Cash and cash equivalents 23 77.8 – – – – – 77.8 Total current assets 831.7 – 122.1 – – – 953.8 Total assets 8,411.5 (5,773.4) 691.0 805.0 (40.6) (111.7) 3,981.8 Current liabilities Trade and other payables (incl. customer deposits) 18 926.6 – 417.1 – – – 1,343.7 Deferred revenue 346.4 – – – – – 346.4 Corporation tax payable 8 35.9 – – – – – 35.9 Bank and other loans 19,23 21.5 – – – – – 21.5 Lease liabilities 23 932.5 (914.6) (167.1) 149.2 – – – Provisions 20 8.2 – – – 126.8 – 135.0 Total current liabilities 2,271.1 (914.6) 250.0 149.2 126.8 – 1,882.5 Non-current liabilities Other long-term payables 5.6 – 896.6 – 0.2 – 902.4 Deferred tax liability 8 140.6 – – – – (5.8) 134.8 Bank and other loans 19,23 453.3 – – – – – 453.3 Lease liabilities 23 5,188.7 (6,071.4) – 882.7 – – – Derivative financial liabilities 24 26.9 – – – – – 26.9 Provisions 20 12.4 – – – 13.4 – 25.8 Provision for deficit on joint ventures 21 6.5 – – – – – 6.5 Retirement benefit obligations 26 1.9 – – – – – 1.9 Total non-current liabilities 5,835.9 (6,071.4) 896.6 882.7 13.6 (5.8) 1,551.6 Total liabilities 8,107.0 (6,986.0) 1,146.6 1,031.9 140.4 (5.8) 3,434.1 Total equity Issued share capital 22 10.5 – – – – – 10.5 Issued share premium 22 312.6 – – – – – 312.6 Treasury shares 22 (151.3) – – – – – (151.3) Foreign currency translation reserve 15.3 (17.7) – – – – (2.4) Hedging reserve – – – – – – – Other reserves 25.8 – – – – – 25.8 Retained earnings 82.0 1,230.3 (455.6) (226.9) (179.2) (105.9) 344.7 Total shareholders’ equity 294.9 1,212.6 (455.6) (226.9) (179.2) (105.9) 539.9 Non-controlling interests 27 9.6 – – – (1.8) – 7.8 Total equity 304.5 1,212.6 (455.6) (226.9) (181.0) (105.9) 547.7 Total equity and liabilities 8,411.5 (5,773.4) 691.0 805.0 (40.6) (111.7) 3,981.8 166 IWG plc Annual Report and Accounts 2021 166 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS Consolidated statement of cash flows (unaudited) | | Year ended | | Depreciation | | | | Year ended | | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 Dec 2021 | Rent & | | & lease | | Other | 31 Dec 2021 | | £m Notes | As reported | finance | | payments | adjustments | | pre-IFRS 16 | Operating activities Loss for the year from continuing operations (269.7) (817.1) 792.3 29.0 (265.5) Adjustments for: Profit from discontinued operations 9 4.0 (13.3) 11.5 (1.4) 0.8 (1) Net finance expense 7 172.0 (165.7) – (1.2) 5.1 Share of loss on equity-accounted investees, net of income tax 21 2.2 – – – 2.2 Depreciation charge 15 1,095.9 – (803.8) – 292.1 Right-of-use assets 15 892.9 – (892.9) – – Other property, plant and equipment 15 203.0 – 89.1 – 292.1 Loss on impairment of goodwill 13 – – – – – Loss on disposal of property, plant and equipment 5 64.2 – – 32.1 96.3 Profit on disposal of right-of-use assets and related lease liabilities 5, 23 (41.5) – – 41.5 – Profit on sales of current assets (1.4) – – – (1.4) Loss on disposal of intangible assets 5 0.3 – – – 0.3 Reversal of impairment of property, plant and equipment 5, 15 (7.4) – – 7.4 – Reversal of impairment of right-of-use assets 5, 15 (46.8) – – 46.8 – Amortisation of intangible assets 5, 14 13.5 – – – 13.5 Negative goodwill arising on an acquisition 27 (1.7) – – 1.7 – Loss on disposal of other investments 21 – – – – – Tax expense 8 10.3 – – 2.1 12.4 Expected credit losses on trade receivables 5 99.5 – – – 99.5 Decrease in provisions 20 (14.5) – – (107.5) (122.0) Share-based payments 5.8 – – – 5.8 Other non-cash movements (12.3) (2.1) – (1.9) (16.3) Operating cash flows before movements in working capital 1,072.4 (998.2) – 48.6 122.8 (3) Proceeds from partner contributions (reimbursement of costs) 15 19.7 (19.7) – – Increase in trade and other receivables (127.3) 20.1 – (0.3) (107.5) Decrease in trade and other payables (38.5) 829.4 (809.2) (48.3) (66.6) Cash generated from operations 926.3 (148.7) (828.9) – (51.3) Interest paid and similar charges on bank loans and corporate borrowings (19.0) – – – (19.0) Interest paid on lease liabilities 23 (167.1) 167.1 – – – Tax paid (5.4) – – – (5.4) Net cash inflows from operating activities 734.8 18.4 (828.9) – (75.7) Investing activities Purchase of property, plant and equipment 15 (220.5) (19.7) – – (240.2) Payment of initial direct costs related to right-of-use assets (1.3) 1.3 – – – Purchase of subsidiary undertakings, net of cash acquired 27 10.6 – – – 10.6 Purchase of intangible assets 14 (33.7) – – – (33.7) Purchase of other investments (0.3) – – – (0.3) (2) Proceeds from other current receivables 17 283.7 – – – 283.7 Proceeds on the sale of discontinued operations, net of cash disposed of 9,21 18.9 – – – 18.9 Proceeds on sale of property, plant and equipment 1.0 – – – 1.0 Interest received 7 3.5 – – – 3.5 Net cash inflows from investing activities 61.9 (18.4) – – 43.5 Financing activities Proceeds from issue of loans 983.1 – – – 983.1 Repayment of loans (946.7) – – – (946.7) Proceeds from issue of convertible bonds (net of transaction costs) 19 – – – – – Payment of lease liabilities 23 (864.8) – 864.8 – – (3) Proceeds from partner contributions (lease incentives) 15 35.9 – (35.9) – – Proceeds from issue of ordinary shares, net of costs 22 – – – – – Purchase of treasury shares 22 – – – – – Proceeds from exercise of share awards 0.8 – – – 0.8 Payment of ordinary dividend 12 – – – – – Net cash outflows from financing activities (791.7) – 828.9 – 37.2 Net increase in cash and cash equivalents 5.0 – – – 5.0 Cash and cash equivalents at beginning of year 71.0 – – – 71.0 Effect of exchange rate fluctuations on cash held 1.8 – – – 1.8 C a s h a n d c a s h e q u i v a l e n t s a t e n d o f t h e y e a r 23 77.8 – – – 77.8 1. The net finance expense includes mark-to-market adjustments of £22.5m (2020: £2.4m). 2. Included in other receivables at 31 December 2020 was mezzanine and senior debt recognised at amortised cost of £276.2m. This receivable balance was fully repaid to the Group in February 2021, together with the reimbursement of associated costs, resulting in an additional £1.4m gain on settlement. C a s h a n d c a s h e q u i v a l e n t s a t e n d o f t h e y e a r 3. The total proceeds from partner contributions relating to the reimbursement of costs and lease incentives of £55.6m are allocated by estate in the post-tax cash return on net investment, on page 171. iwgplc.com 167 167 IWG plc Annual Report and Accounts 2021 SEGMENTAL ANALYSIS Segmental analysis – management basis (unaudited) United | Americas | | | EMEA | Asia Pacific | | | Kingdom | | | Other | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | | 2021 | | 2021 | | | 2021 | | 2021 | | 2021 | | (pre-IFRS 16 | | (pre-IFRS 16 | | (pre-IFRS 16 | | (pre-IFRS 16 | | | (pre-IFRS 16 | | (pre-IFRS 16 | | | | basis) | | basis) | | basis) | | | basis) | | basis) | | basis) | (1) Pre-2020 (4) Square feet (000’s) 11,693 8,342 2,956 4,397 – 27,388 Occupancy (%) 70.9% 72.1% 67.3% 69.2% – 70.6% (8) Workstations 211,031 180,653 79,828 102,150 – 573,662 Workstations occupancy (%) 69.0% 71.6% 67.3% 66.8% – 69.2% Revenue (£m) 866.1 624.6 214.5 316.9 5.9 2,028.0 REVPOS (£) 105 104 108 104 – 105 (2) 2020 Expansions (4) Square feet (000’s) 434 829 143 302 – 1,708 Occupancy (%) 50.9% 55.3% 61.1% 52.8% – 54.2% Revenue (£m) 40.2 45.8 10.5 23.9 – 120.4 (2)(5) 2021 Expansions (4) Square feet (000’s) 142 597 108 41 – 888 Occupancy (%) 29.6% 35.2% 28.8% 43.7% – 33.9% Revenue (£m) 4.8 21.9 3.4 1.6 – 31.7 (3) Network rationalisations (4) Square feet (000’s) 137 257 135 151 – 680 Occupancy (%) 48.2% 51.5% 58.5% 51.2% – 52.1% Revenue (£m) 12.5 14.8 8.7 11.8 – 47.8 Total (4) Square feet (000’s) 12,405 10,024 3,343 4,892 – 30,664 Occupancy (%) 69.4% 68.0% 65.4% 67.4% – 68.2% Revenue (£m) 923.6 707.1 237.1 354.2 5.9 2,227.9 (7) Period end square feet (000’s) Pre-2020 11,733 8,356 2,975 4,430 – 27,494 2020 Expansions 433 819 144 305 – 1,701 2021 Expansions 239 955 193 55 – 1,442 Total 12,405 10,130 3,312 4,790 – 30,637 168 IWG plc Annual Report and Accounts 2021 168 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS Segmental analysis – management basis (unaudited) United | Americas | | | EMEA | Asia Pacific | | | Kingdom | | | Other | | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2020 | | 2020 | | 2020 | | | 2020 | | 2020 | | 2020 | | (pre-IFRS 16 | | (pre-IFRS 16 | | (pre-IFRS 16 | | (pre-IFRS 16 | | | (pre-IFRS 16 | | (pre-IFRS 16 | | | | basis) | | basis) | | basis) | | | basis) | | basis) | | basis) | (1) Pre-2020 (4) Square feet (000’s) 11,733 8,388 2,940 4,447 – 27,508 Occupancy (%) 73.9% 71.5% 69.5% 72.6% – 72.5% (8) Workstations 209,922 173,527 79,697 98,662 – 561,808 Workstations occupancy (%) 71.8% 69.8% 68.8% 70.5% – 70.5% Revenue (£m) 994.3 642.2 223.9 344.1 5.6 2,210.1 REVPOS (£) 114.7 107.0 109.5 106.6 – 110.8 (2) 2020 Expansions (4) Square feet (000’s) 325 545 100 155 – 1,125 Occupancy (%) 26.2% 37.8% 34.7% 36.1% – 33.9% Revenue (£m) 11.0 20.1 4.5 8.6 – 44.2 (6) Network rationalisations (4) Square feet (000’s) 818 762 400 415 – 2,395 Occupancy (%) 59.1% 63.7% 65.1% 64.4% – 62.5% Revenue (£m) 61.2 52.8 27.5 36.1 – 177.6 Total (4) Square feet (000’s) 12,876.0 9,695.0 3,440.0 5,017.0 – 31,028.0 Occupancy (%) 71.7% 69.0% 68.0% 70.8% – 70.3% Revenue (£m) 1,066.5 715.1 255.9 388.8 5.6 2,431.9 1. The pre-2020 business comprises centres not opened in the current or previous financial year. 2. Expansions include new centres opened and acquired businesses. 3. A network rationalisation for the 2021 data is defined as a centre closed during the period from 1 January 2021 to 31 December 2021. 4. Office square feet are calculated as the weighted average for the period. 5. 2021 expansions include any costs incurred in 2021 for centres which will open in 2022. 6. A network rationalisation for the 2020 comparative data is defined as a centre closed during the period from 1 January 2020 to 31 December 2021. 7. Office square feet available at year-end. 8. Workstation numbers are calculated as the weighted average for the year. iwgplc.com 169 iwgplc.com 169 PRE-TAX CASH RETURN ON NET INVESTMENT CONTINUED The purpose of this unaudited page is to reconcile some of the key numbers used in the returns calculation, on a pre-IFRS 16 basis, back to the Group’s IFRS 16 pro forma statements, and thereby give the reader greater insight into the returns calculation drivers. 2021 | | | 2019 | | 2020 | | 2021 | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Description Reference | Aggregation | | Expansions | | Expansions | | Expansions Closures Total | | | Post-tax cash return on net investment | | 1.4% – – – – 0.4% | | | | | | | (unaudited) Pro forma income Revenue 2,028 120.4 31.7 – 47.8 2,227.9 statement, p164 Pro forma income Centre contribution 164.5 (25.0) (25.9) – (44.3) 69.3 statement, p164 EBIT reconciliation Loss on disposal of assets 20.9 11.3 – – 64.1 96.3 (analysed below) CBIT reconciliation Underlying centre contribution 185.4 (13.7) (25.9) – 19.8 165.6 (analysed below) Selling, general and administration (256.0) (20.9) (11.5) (0.5) (5.1) (294.0) Pro forma income expenses statement, p164 EBIT reconciliation EBIT (70.6) (34.6) (37.4) (0.5) 14.7 (128.4) (analysed below) (1) | Depreciation and amortisation | 261.5 25.0 8.7 – 6.8 302.0 | | | --- | --- | --- | | Amortisation of partner contributions | (82.0) (9.2) (2.8) – (1.1) (95.1) | | | Amortisation of acquired lease fair value | | – – – – – – | adjustments Non-cash items 179.5 15.8 5.9 – 5.7 206.9 (2) Taxation 14.1 6.9 7.5 0.1 (2.9) 25.7 Adjusted net cash profit 123.0 (11.9) (24.0) (0.4) 17.5 104.2 Capital expenditure Maintenance capital expenditure 101.1 – – – – 101.1 (analysed below) Partner contributions Partner contributions (5.2) – – – – (5.2) (analysed below) Net maintenance capital expenditure 95.9 – – – – 95.9 Post-tax cash return 27.1 (11.9) (24.0) (0.4) 17.5 8.3 Capital expenditure Growth capital expenditure 2,656.0 393.4 117.3 5.7 – 3,172.4 (analysed below) Partner contributions Partner contributions (673.8) (115.4) (55.7) (4.5) – (849.4) (analysed below) Net investment (unaudited) 1,982.2 278.0 61.6 1.2 – 2,323.0 2021 2019 2020 2021 2022 EBITDA reconciliation Aggregation Expansions Expansions Expansions Closures Total Centre contribution 164.5 (25.0) (25.9) – (44.3) 69.3 Selling, general and administration expenses (256.0) (20.9) (11.5) (0.5) (5.1) (294.0) Depreciation and amortisation 261.5 25.0 8.7 – 6.8 302.0 170.0 (20.9) (28.7) (0.5) (42.6) 77.3 Pro forma income Share of profit in joint ventures statement, p164 (2.2) – – – – (2.2) EBITDA on continuing operations 167.8 (20.9) (28.7) (0.5) (42.6) 75.1 1. Excludes depreciation expenses related to discontinued operations of £3.6m. 2. Based on EBIT at the Group’s long-term effective tax rate of 20%. 170 IWG plc Annual Report and Accounts 2021 170 IWG plc Annual Report and Accounts 2021 FINANCIAL STATEMENTS 2021 2019 2020 2021 2022 Movement in capital expenditure (unaudited) Aggregation Expansions Expansions Expansions Closures Total December 2020 2,812.2 328.2 40.2 – – 3,180.6 (3) 2021 Capital expenditure – 79.4 66.4 5.7 – 151.5 Properties acquired – – 10.7 – – 10.7 (4) Centre closures (156.2) (14.2) – – – (170.4) December 2021 2,656.0 393.4 117.3 5.7 – 3,172.4 3. 2022 expansions relate to costs and investments incurred in 2021 for centres which will open in 2022. 4. The growth capital expenditure for an estate is reduced by the investment in centres closed during the year, but only where that investment has been fully recovered. 2021 2019 2020 2021 2022 Movement in partner contributions (unaudited) Aggregation Expansions Expansions Expansions Closures Total December 2020 712.1 116.5 13.7 – – 842.3 2021 Partner contributions – 3.9 42.0 4.5 – 50.4 (5) Centre closures (38.3) (5.0) – – – (43.3) December 2021 (673.8) (115.4) (55.7) (4.5) – (849.4) 5. The partner contributions for an estate are reduced by the partner contributions for centres closed during the year. 2021 CBIT reconciliation (unaudited) Reference £m Centre contribution 69.3 (6) Adjusting items Note 10, p136 12.0 Gross profit (centre contribution) Pro forma income statement, p164 81.3 6. The adjusting items of a reversal of £12.0m represents the costs of sales impact which, when combined with the additional £33.1m selling, general and administration impact, agrees to the £21.1m referred to on page 47. 2021 EBIT reconciliation (unaudited) Reference £m EBIT (128.4) Loss on disposal of assets Pro forma statement of cash flows, p167 (96.3) Share of profit in joint ventures Pro forma income statement, p164 (2.2) (7) Adjusting items CFO review. P47 (21.1) Operating loss Pro forma income statement, p164 (248.0) 7. The adjusting items of £21.1m represents the total adjusting items referred to on page 47. 2021 Partner contributions receivables (unaudited) £m Opening partner contribution receivables Note 17 33.8 Acquired in the period – Net partner contributions recognised Statement of cash flows, p121 55.6 – Maintenance partner contributions CFO review, p50 5.2 – Growth partner contributions CFO review, p50 50.4 Settled in the period (59.2) Disposed of in the period – Exchange differences (0.9) Closing partner contribution receivables Note 17 30.2 2021 Capital expenditure (unaudited) Reference £m Maintenance capital expenditure CFO review, p50 101.1 Growth capital expenditure CFO review, p50 162.2 – 2021 Capital expenditure 151.5 – Properties acquired 10.7 Total capital expenditure Analysed as | – Purchase of subsidiar | | undertakin | s | Pro forma statement of cash flows, p167 (10.6) | | --- | --- | --- | --- | --- | | – Purchase of propert | | , plant and equipment | | Pro forma statement of cash flows, p167 240.2 | | – Purchase of intan | ible assets | | | Pro forma statement of cash flows, p167 33.7 | iwgplc.com 171 y g y g iwgplc.com 171 FIVE-YEAR SUMMARY | 31 Dec 2021 | | 31 Dec 2020 | | | 31 Dec 2019 | | | 31 Dec 2018 | | | 31 Dec 2017 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Restated | | | Restated | | | Restated | | | Restated | | | | £m | | | £m (1) | | | £m (1) | | | £m (1) | | | £m (1) | Income statement (full year ended) Revenue 2,227.9 2,431.9 2,594.3 2,354.7 2,200.5 Cost of sales (1,885.8) (2,377.0) (2,043.1) (1,975.6) (1,819.3) Expected credit losses on trade receivables (99.5) (34.8) (2.0) (17.7) (16.3) Gross profit (centre contribution) 242.6 20.1 549.2 361.4 364.9 Selling, general and administration expenses (327.8) (367.5) (279.4) (246.5) (230.9) Share of (loss)/profit of equity-accounted investees, net of tax (2.2) (2.6) 2.7 (1.4) (0.8) Operating (loss)/profit (87.4) (350.0) 272.5 113.5 133.2 Finance expense (198.0) (266.4) (228.5) (15.9) (14.1) Finance income 26.0 3.1 0.4 0.5 0.3 (Loss)/profit before tax for the year from continuing operations (259.4) (613.3) 44.4 98.1 119.4 Income tax (expense)/credit (10.3) (32.0) 21.9 (29.1) (32.7) (Loss)/profit for the year from continuing operations (269.7) (645.3) 66.3 69.0 86.7 Profit/(loss) after tax for the year from discontinued operations 59.3 (1.5) 384.3 36.7 27.3 (Loss)/profit after tax for the year (210.4) (646.8) 450.6 105.7 114.0 (Loss)/earnings per ordinary share (EPS): Attributable to ordinary shareholders Basic (p) (20.3) (67.9) 50.5 11.7 12.4 Diluted (p) (20.3) (67.9) 49.6 11.6 12.3 Weighted average number of shares outstanding (‘000s) 1,007,215 951,891 892,738 907,077 915,676 From continuing operations Basic (p) (26.2) (67.8) 7.4 7.6 9.5 Diluted (p) (26.2) (67.8) 7.3 7.5 9.4 Weighted average number of shares outstanding (‘000s) 1,007,215 951,891 892,738 907,077 915,676 Balance sheet data (as at) Intangible assets 781.8 748.8 719.6 721.7 712.1 Right-of-use assets 5,254.1 5,646.9 5,917.4 – – Property, plant and equipment 1,122.4 1,209.0 1,273.3 1,751.2 1,367.2 Deferred tax assets 326.6 188.2 195.0 30.6 23.0 Other assets 848.8 1,100.4 781.4 848.7 702.7 Cash and cash equivalents 77.8 71.0 66.6 69.0 55.0 Total assets 8,411.5 8,964.3 8,953.3 3,421.2 2,860.0 Current liabilities 2,271.1 2,435.5 2,139.7 1,429.5 1,224.7 Non-current liabilities 5,835.9 6,015.0 5,933.1 1,240.5 907.6 Equity 304.5 513.8 880.5 751.2 727.7 Total equity and liabilities 8,411.5 8,964.3 8,953.3 3,421.2 2,860.0 1. The comparative information has been restated to reflect the impact of discontinued operations (note 9). 172 IWG plc Annual Report and Accounts 2021 172 IWG plc Annual Report and Accounts 2021 GLOSSARY OTHER INFORMATION The Group reports certain alternative performance measures Growth capital expenditure (APMs) that are not required under International Financial Capital expenditure in respect of centres which opened during Reporting Standards (IFRS) which represents the generally the current or prior financial period. accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these APMs Growth estate provides useful supplemental information, when viewed in Comprises centres which opened during the current or prior conjunction with our IFRS financial information as follows: financial year. – to evaluate the historical and planned underlying results Growth-related partner contributions of our operations; Partner contributions received in respect of centres which – to set Director and management remuneration; and opened during the current or prior financial period. – to discuss and explain the Group’s performance with the investment analyst community. Like-for-like The financial performance from centres owned and operated None of the APMs should be considered as an alternative to for a full 12-month period prior to the start of the financial year, financial measures derived in accordance with GAAP. The APMs which therefore have a full-year comparative. can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our Maintenance capital expenditure results as reported under GAAP. These performance measures Capital expenditure in respect of centres owned for a full 12- may not be calculated uniformly by all companies and month period prior to the start of the financial year and therefore may not be directly comparable with similarly titled operated throughout the current financial year, which therefore measures and disclosures of other companies. have a full-year comparative. Adjusted centre contribution Maintenance-related partner contributions Centre contribution excluding adjusting items. Partner contributions received in respect of centres owned for Adjusted EBITDA a full 12-month period prior to the start of the financial year and operated throughout the current financial year, which EBITDA excluding adjusting items. therefore have a full-year comparative. Adjusted EPS Mature business EPS excluding adjusting items. Operations owned for a full 12-month period prior to the start Adjusted operating profit/(loss) of the financial year and operated throughout the current Operating profit excluding adjusting items. financial year, which therefore have a full-year comparative. Adjusting items Net debt Adjusting items reflects the impact of adjustments, both Operations cash and cash equivalents, adjusted for both short incomes and costs, which are considered to be significant in and long-term borrowings and lease liabilities. nature and/or size. Net growth capital investment Available workstations Growth capital expenditure net of growth-related partner The total number of workstations in the Group (also termed contributions. Inventory). During the year, this is expressed as a weighted Network rationalisation average. At period ends the absolute number is used. Network rationalisation for the current year is defined as a EBIT centre that ceases operation during the period from 1 January Earnings before interest and tax. to December of the current year. Network rationalisation for the prior year comparative is defined as a centre that ceases EBITDA operation from 1 January of the prior year to December of the Earnings before interest, tax, depreciation and amortisation. current year. EPS Occupancy Earnings per share. Occupied square feet divided by available square feet expressed as a percentage. Expansions Open centres A general term which includes new business centres established by IWG and acquired centres in the year. All centres excluding closures. Franchisee The owners of business centres operating under a formal franchise arrangement. iwgplc.com 173 iwgplc.com 173 GLOSSARY CONTINUED Open centre revenue SHAREHOLDER INFORMATION OTHER INFORMATION Revenue for all centres excluding closures. Operating profit/(loss) before growth Corporate director Le al advisors to the Compan as to En lish law Reported operating profit adjusted for the gross profit impact Slaughter and May arising from centres opening in the preceding and current Secretary and Registered Office One Bunhill Row years, and centres to be opened in the subsequent year. Tim Regan, Company Secretary London EC1Y 8YY Partners IWG plc Legal advisors to the Company as to Jersey law Registered Office: Registered Head Office: Owners or landlords of business centres, operating under a 22 Grenville Street Dammstrasse 19 Mourant Ozannes management lease arrangement. | | St Helier CH-6300 | 22 Grenville Street | | --- | --- | --- | | Pre-2020 business | Jersey JE4 8PX Zug | St Helier | | | Switzerland | Jersey JE4 8PX | Operations owned for a full 12-month period prior to the start of the financial year and operated throughout the current Registered number Legal advisors to the Company as to Swiss law financial year, which therefore have a full-year comparative. Jersey Bär & Karrer Ltd Pre-2020 gross margin 122154 Brandschenkestrasse 90 CH-8027 Gross margin attributable to the Pre-2020 business. Registrars Zurich Pre-IFRS 16 basis Link Market Services (Jersey) Limited Switzerland IFRS accounting standards effective as at the relevant reporting 12 Castle Street Corporate stockbrokers | date with the exception of IFRS 16. | St Helier | | | --- | --- | --- | | | Jersey JE2 3RT | Investec Bank plc | | Revenue development | | 2 Gresham Street | Auditor Revenue programme on a continuing basis, for the last four London EC2V 7QP years. KPMG Barclays Bank plc 1 Stokes Place ROI 5 The North Colonnade St. Stephen’s Green Canary Wharf Return on investment. Dublin 2 London E14 4BB DO2 DE03 TSR Ireland HSBC Bank plc Total shareholder return. 8 Canada Square REVPOS London E14 5HQ Revenue per occupied square feet. Financial PR advisors System wide revenue Brunswick Group LLP 16 Lincoln’s Inn Fields Total reported revenue generated, including revenue from London WC2A 3ED franchise, managed centre and joint-venture partners, but excluding fee income. Workstation occupancy Occupied workstations divided by available workstations expressed as a percentage. WIPOS Workstation revenue per occupied square metre. | | 174 | | | | | IWG plc Annual Report and Accounts 2021 | | --- | --- | --- | --- | --- | --- | --- | | g | | | y | y | g | | | | 174 IWG plc Annual Report and Accounts 2021 | iwgplc.com 175 | | | | | SHAREHOLDER INFORMATION OTHER INFORMATION Corporate director Le al advisors to the Compan as to En lish law Slaughter and May Secretary and Registered Office One Bunhill Row Tim Regan, Company Secretary London EC1Y 8YY IWG plc Legal advisors to the Company as to Jersey law Registered Office: Registered Head Office: | 22 Grenville Street Dammstrasse 19 | Mourant Ozannes | | --- | --- | | St Helier CH-6300 | 22 Grenville Street | | Jersey JE4 8PX Zug | St Helier | | Switzerland | Jersey JE4 8PX | | Registered number | Legal advisors to the Company as to Swiss law | | Jersey | Bär & Karrer Ltd | | 122154 | Brandschenkestrasse 90 | CH-8027 Registrars Zurich Link Market Services (Jersey) Limited Switzerland 12 Castle Street Corporate stockbrokers St Helier Jersey JE2 3RT Investec Bank plc 2 Gresham Street Auditor London EC2V 7QP KPMG Barclays Bank plc 1 Stokes Place 5 The North Colonnade St. Stephen’s Green Canary Wharf Dublin 2 London E14 4BB DO2 DE03 Ireland HSBC Bank plc 8 Canada Square London E14 5HQ Financial PR advisors Brunswick Group LLP 16 Lincoln’s Inn Fields London WC2A 3ED iwgplc.com 175 g y y g iwgplc.com 175 IWG plc Annual Report and Accounts 2021 ### Visit us at: IWGplc.com This report is printed on paper certified in accordance with the FSC®(Forest Stewardship Council®) and is recyclable and acid-free. 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