Earnings Call: H2 2019

Mar 3, 2020

Good morning, everyone, and welcome to our 2019 annual results presentation. So 2019, this was our was the 30th year since we opened our 1st center in Brussels, all the it was actually not we. It was me at at that time, because it was only me. But it's been, you know, 30 years that have been transformational as the business has developed. We've seen sweeping changes to the competitive landscape of radical shift in the way corporations view real estate and a rapid acceleration of our strategy for growth. And especially, we expect more growth than our pivot towards franchising. The world of work has changed more in the last 10 years than at any time, in that past 30 years. And we believe the next decade is going to hold even greater change. Most futurists actually agreed us over Christmas, and then at the beginning of a new decade, you see lots of projections, lots of futurists coming up with what they think the next 10 years is about. A lot of them are talking about a change in the way people work as digital impacts And in in this case, 4 out of 3 out of the 4 were talking about local working, remote working distributors is working, becoming more of the norm. Also, there's a huge amount of research out there now, more coming, which starts to talk about this fundamental change in the way companies use real estate and the way consumers. Those are the people that work in offices want to use real estate, and it it becomes something quite different to what it is today. So a transformation of Decade. Now to put this into perspective, I saw when I was writing this, I was sort of saying, well, let's just what changed in the last decade. And, So and I asked one of my daughters, you know, tell me things that weren't there that became big in the last 10 years. And, you know, I'm not not on Instagram, but apparently, everyone that's a millennial is. And she said, well, the Instagram didn't exist. Greeter Thunberg was eight years old, and people weren't really talking about the environment 10 years ago. Meat was meat. And you've, you know, the popularity of non meat wasn't there. And then emojis weren't there as well. That's one that surprised me because I thought they'd been around for longer. Ten years old. And, you know, I can say that personally, there's been a real boon to allow me to convey emotion efficiently. As a man. So, and as many futurists are saying local work is the next big thing, and we believe it's going to be a huge industry. So it's about companies wanting to buy real estate as a product and remote workings, working from anywhere. That effectively is what digital. That's what the internet allows, but it's just not happening yet because the places to work that the local aren't there yet. That's that's our job. Today, about 1,200,000,000 people go to work in an office. And they commute, you know, many of them far from home and at great expense, and they missed time to do what they could be doing when they spent time commuting. And so, you know, there's gonna be a very strong demand from workers for this type of distributed work, not for everyone, But if it makes sense, people are gonna demand it because it's a real benefit to be able to save an hour, 2 hours, maybe 3 hours a day and to not commute, not every day, but quite a few days work close to the home. And just imagine when you if you probably came on the train this morning, you've got people traveling on that train carrying a laptop and their phone. And then they get it out in their desk start working, and then they pack it all the way again and go home again. It's really in a digital world for a lot of workers that doesn't make any sense. Plus, it's much cheaper for a company to provide a workspace in Weybridge than it is to have them in Central London. You know, you save half the money straight away apart from the impact on efficiency. So things are changing. I think environment what we've seen in the past 6 months is an incredible impact on companies sort of changing their priorities and putting the environment's now top. So there's looking for anything they can do to do something to preserve the planet in in some way. And of course, changing the way people people have employees are working, has a big impact. A huge impact just stop commuting for some people it's and it's cheaper for them, which they like, and it helps the environment. And it's what the what many workers want sort of hitting all three sweet spots at the same time. So we saw that in the last year, overall, and we saw flexible working sort of becoming more and more mainstream. It's not an exotic fruits anymore. It's right there center stage with all corporates, in terms of how they're looking at real estate now. So what I can tell you is this is the beginning of my 4th decade doing this business. You know, I'm more excited now than any any one of those other decades because, you know, it really starts to become, the business of the future. And we are in a great position to sort of capitalize on this growth market. And, you know, last year, the year before, we got a lot of questions about, okay, we work big noise, other competitors, you know, big noise. What are you? Well, when you actually analyze it, look at it, IWG is one of a kind. Absolutely uniquely positioned. Because, you know, one of the biggest advances we've got is we've been doing this for 30 years. So, you know, dealing with coronavirus, out there today. We've dealt with SARS, swine flu, we've dealt with volcanoes, earthquakes, cyclones, everything. Mean, this is going to be probably a bigger speed bump that we have experienced at dealing with speed bumps. We're sort of paranoyed about everything we do. So for 30 years, we're innovating all the time. We're not just standing still. So, and in 30 years, we've got great coverage. You know, people talk about, you know, being the biggest land of, you know, renters base in London or New York. To us, that is mean in us. What companies want is coverage, not, you know, dealing with someone that's all over London. So, you know, we're in a great position, and I think most important We've got now the ability to scale and to continue to grow returns to shareholders. So we've got a very good platform that can convert investments to cash. And with the pivot to franchising, we can release even more cash while we grow. So just quickly on innovation, just to put it in perspective, last year alone, 2019, we launched 117 new innovations in the 'nineteen year. We would do probably a few more this year A lot of these innovations are around technology, but they're also in work practices becoming more and more efficient in what we do effectively the sort of paranoia that lives in the business is about reducing costs, become more efficient, and gaining new routes to revenue by giving customers more what they're looking for. Overall, again, I might go through the whole slide, but there's lots of misunderstandings about what is our business, about what's the industry about. The difference between success and failure, apart from scale, apart from having basic skills, it's about the ability to have many, many sources of revenue. Most competitors totally miss that, or they don't have the scale to get it. We have 120 revenue lines, not not five revenue on 120, lots of small things that add up to our revenue. And they give us a lot of safety in what we're doing by providing an extra margin. My belief is the difference between profit and loss is those are the additional revenue lines. It's not renting the space. It's the additional revenue lines. Quite a few questions this morning, but just to note, are these additional revenues, about 28 percent of revenues are these revenue lines affected when you have to close centers? Some, but actually quite a small number. Most of the revenues that we have are subscription revenues, even for services. So, you know, we don't like sort of on demand service. We like subscription. So pretty much quite a lot of it. So some of it is on demand. That would be I need a meeting room I need a cup of coffee. Clearly, if the center's closed, then there's no coffee, there's no meetings, but the rest is subs subscriptions run through. And then brands, we're going to talk a little bit more about brands, but we believe strongly in having a portfolio of brands. So pretty much all other competitors have one brand. We've got a whole portfolio that allows us to get more choice and get more price reach, into the customer base. Quickly on the drivers, you know, we're seeing a profound shift in workplace, how companies work, how people want to work environment at the top of the agenda, companies also looking to buy, real estate as a product. They're trying to get cost efficiency, we are much cheaper, 50% or more cheaper. No CapEx, less OpEx and more flexibility as everything companies want. New, modern, well designed buildings, well own workplaces also help individuals become more productive. You know, when workspaces provided as a product, and not as a a sort of very small sideshow in what's going on in the company. Employees are more satisfied and we'll be more productive. So in today's work, just to conclude on this, you know, security again during 'nineteen become a big issue, and I'm talking here about data security, So we've done a lot of work to both improve data security, which was already good, but improve it. And we're launching more products this year that give enhanced levels of security, to customers. Again, these are just additional revenue lines. These these are adaptations that give the customer what they want more security and give us a little more revenue. And then finally, and maybe not least, good old if IFRS 16, and I I never thought I'd say this, but This has been, you know, very, very helpful because it's put real estate and the real cost of it in right up there in front of every CEO and every finance director. And where it was hidden before it's there up front, and it's forcing companies then to do something about it. So can we can we do it in a different way so we don't have all this liability that is going to increasingly affect affect my numbers. Let let's let's get rid of everything we can. So There are many forecasts as how big this industry can be. They all differ, but what they're consistent on is saying gonna be massive growth in this sector. And the flexible workspace, and there are many versions of it become an increasingly important part of the commercial property market. And I think just after 30 years, what I can tell you is, you know, we're still at the beginning, and this is nowhere near being mature in any way, shape, or form, that most of the growth is yet to come. On brands, it's simply about choice. All customers aren't the same. We've got a big portfolio of brands here. We expect to add more. So expect to see more coming on. You're going to see more specialist brands. We launched our 1st biotech center It's the first, so it's a trial center. But they start to become more specialized, more focused on the type of work. That a company's doing because they want their people in a, you know, biotech, how is it different there? The main thing that's different is they will biotech people there. So when they meet for coffee, they're talking biotech, different companies, same flows, common commonality is biotech. The events we put on the talks we put on, they're about biotech, not about finance, they're about biotech. That's what they're interested in. So This is going to be an important differentiator in a competitive market as it grows in the future, having choice for everyone. We pick up more of our inquiries. We can have a high conversion rate for having more brands. The the sort of the fuel, if you like, these days, and this is the the sort of move and the maturing and the, you know, the underlying change that, you know, the the the real fuel to, the growth now and in the future are enterprise size accounts. So, I mean, from day 1 center 1 in Brussels 30 years ago, a lot of the customers in my center then were large companies. They weren't startups. And there's this there is a misnomer and misunderstanding out there that what we do is for start ups and small businesses. Yes. We do have them. But the majority of customers are midsizeandlargesize companies. And and these guys are, you know, it's high on their agenda, as I said earlier. So we got lots of great names and lots of names you've never heard of that are growing very quickly in all sorts of sectors. An example here, you know, just to look at Deloitte, you all know Deloitte, but an interesting example here, because they they had an RFP covering a whole range of solutions they were looking for. We were awarded all three elements. So the entire RFP, we were successful in. All three elements. And this included, this, this was a European RFP. Now we're rolling out across Europe on all three of these and we're helping them monetize their excess spokes. But because by coming becoming more efficient, they release spokes that space, we can then monetize for them by opening centers in it for other companies. So that, that's worked very well. There's lots and lots of examples like this. So Where are we gonna be in 2030 looking back at this decayed? Now, you know, big health warning please do not start writing in 50,000 centers. This is an aspirational target and really The reason I talk about at the beginning, things that changed in the last decade is if things go as we expect them to go, the number of centers, the growth rate in our business, in particular, as we pivot to franchising, is going to be much higher. Now can we get it up from 10% to 30%? What we're endeavoring to do is to do to get close to the 30 and away from 10. So, remember this is a market coverage business. The more you have, the more coverage you have, the more useful it is to customers, the more customers use you, the more unique you are. And so we are extremely focused on both a pivots of franchise and ramping up the growth rate, working with many partners. And remember, for the last 30 years, we've largely grown with our own capital, under our own scene. This is partnering with thousands of partners in order to make this happen. This isn't about a few partners It's not about large MFA deals in big countries. This is about thousands of people that we're partnering with to create a full coverage network. So, you know, this is certainly, again, if you our own people. Internally, this is what we're aiming for. I just I repeat, please do not put high numbers in here, but what I can confirm is the growth rate will be higher over time. It's gonna get up. 30 would be good. I'd like to report that back to you at some point in the future. So onto the highlights, transformational year 'nineteen in many ways but it also brought record profits and record cash. So and you can see with that cash, we've reloaded the share repurchase program back to 100,000,000. And just to, again, word of warning on that, we're not controlling the share buybacks. Because we've got so much corporate activity going on that we're continually outsiders, so it's mandated. And, 2019, significant for many reasons, good excellent trading throughout the year, improving towards the end of the year, and the pivot to franchising. So, you know, in the last couple of days, 2 more countries, very small ones, Gibraltar and Monaco, that that have been franchised. And but, you know, lots and lots of others, and I'll show you those in a moment. So lots of live negotiations ongoing. But as I said at this time, last year, have patience. This is all about getting the right partners and, you know, getting the right partner is equally as valuable as the consideration if we're partnering on countries and selling parts of our business. So lots of good work here, also in network rationalization. This again improves the underlying overall performance. It's mostly non cash, so that, you know, a heavy cost last year, mostly non cash, it will benefit us this year. So we took the cost last year, benefits coming in this year. And we're already seeing that coming through in performance. So again, very strong start to the year. Probably the best we've seen, I don't know, in 10 years. It's a very, very good start. This is all pre coronavirus, which I will come to in a moment. Enterprise accounts, record sales and of just growing each month. So, good start to 2020. And onto the numbers themselves. Open center growth. So this, excludes closed centers. Increased 15%. 30 year business, remember, thirty year old business, we're still doing double digit growth. And this is double digit growth with our own capital pretty much. So once we start to get franchising coming on, This is going to be, you know, you're going to get a higher growth rate in group wide revenues, which feed through into our fees and so on. Operating profit up 8%. And this was, remember, after significant growth into the network, because last year was a big growth year for company owned units. So there's quite a lot of money went in there both in capital and of course in the earnings drag. From those earnings drag, Eric will talk to it, but over 100,000,000 of earnings drag because we opened those new centers. And that earnings drag pretty much isn't cash, but it's a drag on a GAAP basis. Financial position strong, leverage point 7, great position to be in as we look forward. To a more uncertain future at the moment. We're in a good position. We have a lot of capacity here if opportunities come up to to to to to work on these. We've grown the network strongly 277 locations. What's the next slide? I won't dwell too much on this. 195 closed. 277. Is that net, actually? Is that net added? That's gross. Gross added. And, then I'll jump on to franchising. So more countries franchise MFOs, these are the sales, these are master franchise agreements of countries where they tend to buy our business, and then refranchise it afterwards. But lots of other activity here. So This is really the key to getting that growth rate up. And, you can see, 400 locations here committed, and that's from quite a small number of franchise partners, and only 30 and, you know, but it it really takes off. It's a multiplier. Each franchise partner is buying 5 to 10 blocks or more, And it just takes some time then to open And then on to partnering, you know, I got quite a few questions. So, well, okay. Franchise seems like a good idea. It's an attractive sector. People are interested in what if I were if I were a franchisee, what do I get out of it? Well, as the industry leader, we offer a a great many attractions. And, like, you know, the key thing overall is that we help you get started more quickly and be more profitably. It's just the hours skills over 30 years applied to you as an investor you don't have to relearn everything, you you can just go straight ahead and do it. So the combination of their Local knowledge and our skill at doing what we do and our innovation room. It's not just where it is today, We're constantly innovating to improve the platform, improve the model, they get the benefits of this. So and then look, let's have a look at a few of these guys. They are, you know, these are just who are they? They, I think universally today, all the ones we signed so far, are successful business people who already have a number of franchise businesses. I don't I'm just thinking I don't think there's any we've signed where they don't already have successful franchise businesses. They see this as being a business, which has very good returns on investment is something for the future, and it is something they can do. It's a clean business. Most of them are in fast food and coffee. Or hotels. And so when they see this, it's a very good compliment. It's a much cleaner business for obvious reasons. And I've met, you know, we had our conference franchise conference at the beginning of this year, meeting these guys they I was inspired as a business person to actually meet these guys. These are very good business people. They're not amateurs. These are not individuals. These are really good people, and they have already, you know, the ones that we've done so far have been very successful. Because it, you know, that combination is a combination that's very, very powerful. So, I'm I'm enthusiastic here that not only can we improve the growth rate, we can find great partners that will all contribute something because, again, innovation can come from many places. And I think these guys will help us innovate as we go forward. Company owned over time, the investment in company owned will continue to go down as we have less countries to invest in. And, so overall growth rate will go up. Our investment as a percentage of that growth rate will go down. It's a matter of time. And that will start this year. We expect less growth this year than last year. Because clearly, we've got we'll have less countries to invest in. Okay. With that, I'll hand over to Eric. Thanks, Mark. And good morning. All right. In the following couple of slides, I will cover an essence 2 topics with you first. I'll walk you through the full year financial highlights of our results. The numbers that I will talk about are based on the formal lease standard. And picking up on some of the questions we got this morning, we will, for the foreseeable future, publish our accounts in both those standards. As we've done also last year. After discussing the financials, I will then update you on the 2019 shareholder cash returns. So let's first have a look at the key points to make on the income statement. As Margo already mentioned, 2019 revenue increased 9.2 percent at constant currency10.4 at actual to just under $2,700,000,000 or up $251,000,000 compared to the same period last year. That's more important open tender revenue was up $362,000,000, an increase of 15% at constant currency, with all of our 4 regions contributing to that performance. As we've said on numerous occasions, the best earnings performance indicator of our business is actually pre-eighteen EBITDA. And in 2019, we generated $472,200,000 of EBITDA from a pre 18 estate, an increase of $67,300,000 or up 15% again compared to the earnings we generated in 2018. Hence, record profit year, excluding the gains we made on the MFA, EBITDA was up 8 percent to $428,300,000 as you can see on this page. Our overheads were up just under $32,000,000 as we continue to invest in building strong foundations for the anticipated future growth of the group in both owned and also the franchise parts of our business. And measured as a percentage of revenue, revenues were up overheads were up just 22 basis points. Compared to 2018. Operating profit, as Mark already said, was 137,700,000 And this is after the drag on our earnings from $106,700,000 of growth investments, and network rationalization cost of 38,500,000. On a regional basis, there were very strong operating improvements in the America and EMEA with particularly strong performance in the U. S. In Canada, Mexico and Brazil on the one hand and France, Germany and the Netherlands in Europe just to call out a few examples. As Mark said, we posted record high profit for the period to the tune of $503,100,000 or less, obviously helped by the transactions in Japan, Taiwan and Switzerland and this has led to a record statutory EPS. Now look at the cash flow statement, we can see record cash generated before investment in growth CapEx, share repurchases and dividends. Of almost $650,000,000. This increase is driven by the positive impact from our growth in EBITDA The decrease in tax, the cash we received from the NFA and partly offset by the increase of investments we made in maintenance CapEx and higher finance costs as a result of the increase on our revolver. Late January last year. Our net growth CapEx for 2019 was 389,000,000. Net debt for 2019 decreased to 294.1, as Mark said, leads us to a net debt to EBITDA ratio of 0.7, which obviously compares very favorably to the 1.2 that we had at the end. Of 2018. Cash, cash returns to shareholders based on the record profit and strong cash generation that we've seen in our business last year, we returned overall $107,700,000 during the year in cash to our shareholders. If you look at it on a 5 year basis, on the left hand side, you see that's an increase of 105 percent from 1st year 14 on this page to 19. For 2019, we recommend a 10% increase in our final dividend to 4.8p which for the full year means an increase of 10.3 percent for a full year dividend of 6.95p. In the last five years, this means that our DPS has increased by almost 75%. And finally, based on the strong cash generation that we have seen, we have announced today indeed the increase again to a new $100,000,000 share repurchase program. Basically, we ended yesterday having bought back 66,000,000, so 34,000,000 to go under the formal program, we've upped that 34,000,000 again to 100,000,000. With that, I'll come to the end of this section and we'll now go to Mark for the outlook. Thank you, Eric. So look, 2019 was a transformational year. It was a great year for the company. You know, tough in many ways, but, you know, a very, very good outcome. We started 2020 with excellent momentum, but we are in uncertain times with the coronavirus outbreak. And as a global business, there have been outbreaks in some of the countries and now quite a lot of the countries because obviously it is a it's a fast moving situation here. We've not seen any immediate impacts on our performance, but there will be as the crisis continues to escalate and it looks, you know, we're pretty certain that it's going to escalate with the information that we have. And, you know, based on our experience in China, we can sort of calculate the effects even. But it's too too early to really to give any exact considerations, but clearly, it will impact the business this year. It's it's impacting, as I said earlier, part of the revenues is quite a lot already contracted. I mean, we are very diverse, not just in the revenues, but we're also diverse in, you know, in a 100 more than 120 countries. And, but, you know, we we we do think overall that, you know, we're playing a very cautious game here. We have put crisis planning into into effects really from 5, 6 weeks ago when China started. We have mitigation plans in place, numerous things, that we have done over the last 6 weeks. So we feel as a company, we're in a good position for whatever comes at us. In the short term, we've seen some positive impacts, but I emphasize this is short term. We do have quite a significant disaster recovery business. And as buildings sort of become unusable, disaster recovery comes in, and that gives us a small boost to business. And clearly business goes on and a lot of companies are sitting on the sidelines So they will go more temporary, rather than go long because everyone's waiting to see what's gonna happen. So there'll be very few long term leases signed I would expect and more companies would come to companies like ours. But, you know, just again to caution you, that's a short term effect. And, you know, overall which I can a very cautious view on this year's outcome, notwithstanding that we have a very strong forward order book, the best it's been in 10 years and so on. You know, we have to just watch how this thing will develop. So on that negative note after what we hope was a positive presentation here. We're very happy, Eric and I to answer any questions that you have. Yes. It's Andy Gerbler from Credit Suisse. Just in terms of rationalization costs for 2019, which you called out. What are you looking out for for 2020 as of now would be number 1? Number 2, just a quick one, enterprise clients you've talked about, very good momentum, how big is that as a proportion of the business, and 3, Japan is the oldest master franchise agreement how many new centers have been opened in Japan under that agreement as of now. Okay. So Right. So rationalization. A lot less this year than last year. So, there's a whole variety of reasons last year of why there were more last year because every year you have network rationalization. And just to be clear, what this is, a lot of it is we're closing old centers and we're opening a new one. So it's just upgrading the stock. You you get more cost to this when you're doing that before a sentence at the end of its life. So that there was more of that last year. So less this year, there will be some because it's just the program finishing off this year. But, you know, from a cash point of view, that's the way we look at the world. They are significantly cash positive, everything we do there. So we're not closing things without having, good upsides. I'd say probably it will end up. Half might be on the upside. It, you know, it depends. Again, these are changing times at the moment. So I don't want to put a number out there, but a little less than half If you'd have asked me the question in January, I would say a little less than half of that number, which is slightly above what the average is anyway. Don't forget, there's 3,400 buildings they're just cycling through. Okay. Question 1. Question 2. Enterprise depends how you describe it. So I one of the things we are doing, we're doing, you know, we've got We've invested quite a bit in CRM, so we've got to give better answers to this question. But, you know, the 2 key customer types are large enterprise customers and fast growing the future enterprise customers, if you like, are the most attractive customers because they are companies that have a small amount of people that have a successful business that need more people. Actually, the larger corporates tend to be more difficult because they already have a lot of spokes and they can't get rid of it. But new companies that are growing up, you know, that's probably the 2nd most important area. Now you recall them enterprises but they're just not household names. They're not Deloitte's, but they're companies with, you know, a thousand people going to 5000 people. A lot of those Okay. And because they have no legacy to deal with. But overall, enterprise, more than 50% of the business. Japan's growth rate, was moved to move we were growing at 10. They moved it to 20. 20 plus, but clearly, you know, Japan's affected And so that may slow down a bit in the, you know, for the next quarter, 2 quarters, I would have thought. For them. Let's look at the other example that I looked at myself in anticipation of the question. So We opened 4 in 2017, 2 in 2018, 13 last year, just to give you an idea of how quickly things can go. From the center perspective. And this is a question of whether the growth rate, that's what you're asking. Typically, I mean, it takes some time to bed it down. But they will grow it a quicker post. And, especially through sub franchisee. So, you know, to do the whole switch, and then you're gonna to do zermat, you you sub franchise that. Because you need you need to be local, but he will do it. Very, you know, a very impressive team. And, you know, we're they they will get Switzerland done far more quickly than we would get it done. And they're local. They know everyone. And, you know, so you've got an impressive team and you're there every day. You know, you can make, you know, big inroads into getting the network done. Everyone's very clear. It's all about network coverage. More is better in this particular thing, more coverage. Okay. Thanks. Good morning, Steve Hall from Numis. Just a couple at the moment. Could you run through the performance of the sure the pre-20 eighteen's through the year in terms of the weak constant FX growth, the organic growth, however you're splitting it. Combined with the occupancy, which if it's risen nicely through the year and particularly in Q4, just trying to marry that effect together. And then secondly, in terms of the franchising, do you feel it's on pace with the discussions and the execution of those mass franchise agreements? Just trying to get a sense of what either might be slowing the process down? Is it the DD on some partners? Does it now, you know, make price harder now that the macro is, you know, inevitably coronavirus has kicked in, do you think? It's too early to I'll do mine first. Yeah. Go for it. But, you know, it's just too early to say, you know, it's a question of How long it how long it all lasts? How big the speed bump is? What what I can tell you is to date that is today and last night, it it doesn't seem to have an effect. But again, I just was of caution. In the beginning, I said this is a 2 to 3 year program. If we get a 6 months of the effect of this, it's still going to be a 2 or 3 year program. Because the people we're talking to, they just, you know, maybe they'll go a bit of slower. That is not the case today. So, diligence goes on. And so on. So there's a whole variety of things here. And, you know, it's a major it's a major focus for the company. And, you know, again, I I met the franchise team yesterday, in fact. So there's a whole range of deals that we've we we, you know, we've got done, that we haven't announced in here because they're only done yesterday. There's a whole lots of lots of them. But these are smaller ones. These are not major announceable things. Together though, they're significant. So, yeah, it it's a it's a it's gonna cause could cause a delay, maybe. Ones, the bigger ones that you've done, obviously finishing with Switzerland, how it's really the thinking of those rather than the impact of the coronavirus, it's those discussions that have been ongoing, have they been going sort of on track? To where you would have thought the process rather than get announcing 1 a month, for example? It's, you know, it's not a regular, it's not sort of regular thing where you announce 1 a month. They they're all at different speeds and different people and different geographies. You know, the the main thing I can tell you is we've got tremendous interest. It's all about finding the right partner. And, you know, that that partner with the right financing, because again, we don't want to be, you know, we want the right partner with the right financing. In order to in order to move forward. The key thing for us is not necessarily it's the right partner, right consideration, write growth plan afterwards, okay, because it is all about the growth. What we don't want to do is is shut off the growth. So, you know, it it, you know, of course, it's it's likely to just slow things down a bit, but it's not you know, it's not something that's gonna it's not gonna stop it. It's certainly not the evidence of the evidence of this week for example, my experience on Monday. And I've I've frankly surprised that the level of stuff that we've got actually happening. So, anyway, let me leave it at that and pass we've always said it was going to be a 2 to 3 year program, right? Like last year, we said we asked for patients and then there was the Japan deal and month later, right? So pre-eighteen organic revenue growth was 3.6 percent for the year. And then the occupancy that goes hand in hand was up 3 ten basis points. So as we said at the half year and again, at this morning, we're very happy with that growth. If you look at H1 or H2 versus H1, they're both very positive quarters. The advantage of H1 was that was comparing to 18 was, which wasn't the best 1st 6 months of the year. And H2 'nineteen is comparing to an incredibly strong H2, if you recall from last year. And that's why, you know, if you sort of do your quarter by quarter, it sort of feels like, you know, something happened there. All the answer is, there isn't. How they're all positive quarters where we see that, that creating the state going from strength to strength. Yes. It's Michael Donnelly from Investec. Just a couple of questions. 1 for you, Mark, at the total of Q3, update. I think you said that at that point, when WeWork was kind of beginning to publicly unravel, it was too early to assess the impact, the potentially beneficial impact on your business. So could you give us an update now on Q4 and perhaps Q1 and let us know if you picked up anything from that ongoing unraveling And the second question is on the 28 percent ancillary that you spoke about. Could you maybe give us a very broad split between spot and subscription? I think you said majority of the subscription, but would it be sort of 20% versus 8%. Or something like that? The second one first is probably 20 and I, I would say. Yeah. 20% subscription. Like, because if you do 20% that, if you do then look at that's a quarter of my business, it turns out to be around 4 to 5 percent of my total business to do the math. Yeah. So that seems to be the right split. WeWork effect. Of course, you know, we benefited. It's very hard to actually put your finger on how we, you know, the benefits, you know, we had a strong end to the year, strong beginnings of this year. You know, customers, yeah, I think the uncertainty probably helped us. But overall, it coverage. You've gotta remember these guys talk a big story, but they're incredibly limited in coverage. You know, they're they they talk about everything's pumped up, but they just they're in a, you know, a handful of cities, I mean, 100 Cities. You know, we're in 1100 Cities. And that that's what the customer's looking for. They're not all looking to be in New York and London, San Francisco. So, Look, overall, forget about, you know, the WeWork unraveling benefit. It's put it in the spot Alright. So, and that helped. So, you know, you know, No. They put, you know, they a total of $15,000,000,000 to get in the spotlight. Which wasn't efficient use of capital in our view, but that has been incredibly helpful to us. And as the sort of, you know, if you like the last man standing, which we are, and the market leader, you know, we're seeing more now as the authority and a reliable partner. That's what corporates are looking for. They don't want risk. And, you know, that felt risky. We'll see what happens. Look, in the end, this industry is going to be very big. It's going to be lots of competitors, and there will be a few winners. Our rain and everything that we do is to be there and be the winner. That's the way we've operated the business over the last 30 years small beginnings, it's it's about you've gotta be there at the end, and you've gotta bring everyone with you, and you have to you've got to manage your capital. If you don't manage your capital, you get carried away in any sense and you start looking at things that are not return on capital related, you can very quickly lose track. And of course, you gotta manage risk. So it's return on capital, risk adjusted, only way to run, we believe, a business like ours. That's how we run it. It's that that invest to get that cash back quickly. Just hang on. Yes. Good morning, guys. Callen Bafi Merberg. Two questions. Firstly, apologies for repeating the last question, but to be slightly more specific on the WeWork impact, has there been any change in price or rational from their side on services offered that you've seen on the ground that's made any impact. And then secondly, just hoping that you could remind us on the flexibility of the cost base you mentioned that a few of the sites in China have closed down. When that happens, are you able to take any costs out or do the vast majority of costs in that center remain? Okay. Sorry, ma'am, what was the first one again? We will. Basically, have you seen them become more rational on price or on the service offering? So your answer to that is Absolutely. All all things rational as far as they could. But remember, this is they've got a lot of people still and and, you know, a lot of inefficiencies. It takes time for the message to get through, but absolutely, yes. So the flame field got even, that's also very helpful. In terms of mitigation, you know, there's we have a we so if you come back to China, so if you look at the cycle of China, And I believe, that in China could be a better outcome than other places. Because the Chinese government were able to get a hold of this thing, not at the beginning, they got a hold of it pretty quickly. So, you know, the worst at the worst for us, and this is over a very short period of time, just 6 weeks, we had we went up we have a 140 centers just to give you numbers. 90 of the centers were closed for a period of a week, some a week, some a few days, some a week, some 2 weeks. Now we only have 28 closed, and they are all in Hebei, which is Wuhan, and Chongqing, which are the 2 most badly affected areas. And we expect those to reopen again quite quickly. So it's quite a short period of time. It takes a while for the customers to come back in. So the major impact is actually on that top, you know, that top part of the revenue. Which is occasional revenues, which reduce. They don't go away. They're just less. Now mitigation, you know, we have a full mitigate. And effectively, you can mitigate quite some of the costs, not all have got The key one, of course, is the rent. And, you know, in China, there's, you know, pretty much no one's paying rent. So you, you know, you just have a period where you gotta have a discussion. So that is the mitigation. And this is a time when it's very bad, everyone works together. So it's not confrontational. Everyone needs to be there at the end. So people work together. Even in, you know, China, that's definitely the case. And, you know, next one's probably gonna be Italy and so on. So again, we've gained experience We know what to do in these cases anyway, and we are prepared and ready to go. We're already doing it in China. You know, we will you just gotta write quickly. You can't this is stuff you gotta do immediately. You can't sit around and do it a month afterwards. You gotta do it as it's happening. Hi. I'm Daniel Kane from Tostica Fund. Of the 40 possible transactions, sir, under discussion. Can you tell us how many involved disposal of existing assets? I would say 3rd to a half. That sort of range. Which of 19 revenues they represent? I can't because that would be a again, you have to be patient. I can't I'd love to be able to tell you, but I'd like these deals. I like the deals done, then I'll tell you, because what we don't want to do is lead expectations here. And that's why we've come back every time too. You know, this is a 2 to 3 year program. And it it will take it's gonna take that time to get the lot, you know, from the beginning to the end to get everything done. We've got great momentum. A lot of interest. And and, you know, we've got some very, very good people working on it. So I'm confident we'll achieve it. The timing is to think. And in particular with what's going on, that may cause some slippage So I don't wanna get sort of hoisted by our own petal by predicting any numbers at all. It's Samuel from Stifel. 3 from me. Firstly, you just said 28¢ are closed in China. I don't know if you guys could give the global figure from the coronavirus perspective. That is the global figure. And data centers. So that that can change on a day to day basis. And remember, some of them and some of you may have already experienced it if you're in Canary Wharf. You know, basically, this could be not even your part of the building. It's some other part of the building. You know, you just you gotta disinfect it all. That's that's the immediate today. That's what happens. So it could be a closure just for a day while it's all cleaned. And, again, we've prepared all of that. So if it happens, we get open again as quickly as possible. Thanks. Secondly on spaces, are you able to give the sort of run rate revenues, whether we should expect to grow ahead of group levels for the next few years? Spaces. Yeah. They'll be ahead, but we're opening other brands as well. It's just that, you know, spaces that we're doing larger centers with spaces. So, you know, overall, the last the numbers of centers about fifty-fifty still, their largest centers will become more of group revenues. Return on capital, no different. In other words, we just do all spaces, no regions, which is the 2 main growth avenues. And finally on franchising, I think Japan was sort of a 1,000,000 sales, 1,000,000 EBITDA business. Just looking at the accounts of FY2020, how are you show that in your account? Is that just your share of EBITDA as a line or how that would be changed? Yeah. I think the other thing, you know, it we talked at the beginning about IFRS 16 we we, you know, we do need to work on our accounts as well because they sort of become very complicated because we're all these different accounting standards. But over time, one of the effects is that at the end of it, you have almost no IFRS 16. Because you the the lease liabilities aren't there anymore. So it'll make the whole story a much simpler one to understand, which I think has been, if I look back over the last decade, is the complexity of a growth business that's, returning money to shareholders and investing more money. That's, there's lots of things going on. So you end up as we franchise with a much simpler investment proposition, that is easier for investors, we believe, will be easier to understand. In particular, in light of of IFRS 16 and other things that are bought in. Any more questions? Just one quick follow-up on franchising. I know Monaco and Gibraltar are pretty small, but could you share any financials with that in terms of EV or sales or centers please. No is the answer. I think it's a similar I mean, the people who bought it, the zone people who bought Switzerland, so it's Paris, Safra. So it's, you know, it's the same in Switzerland, pretty much but very, very small. We've we've chosen clearly when it comes to these size of size transactions. Don't don't make it fussy about it. I don't think it makes sense because they're, you know, these are small members. I think the other one is quite a private group. Who is our partner there. Very successful with the quite a private group, Switzerland Natural also. So I feel it's an electrical note here. I'll be talking too much about it. It's an extension to switch them on, isn't it? I think they've also got a lift install as well. Actually. So which we don't have anything, but they just report the franchise area for that as well. Anything else, ladies and gentlemen? No. Well, thank you all very much for your patience this morning. And, Thank you for