International Workplace Group plc (IWG) Earnings Call Transcript & Summary

Welcome to the IWG plc trading update. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present Mark Dixon, Chief Executive Officer; and Eric Hageman, Chief Financial Officer. Please begin your meeting.

Thank you, operator, and good morning, everyone, and welcome to today's year-end update ahead of the publication of our full year results on the 9th of March 2021. We're doing this update in the light of the ongoing pandemic, which has experienced various new twists and turns recently, which we believe will prolong the impact on our business. This is disappointing, given the early signs of recovery, particularly regarding sales activity in the fourth quarter. In light of this, the key announcement today is that we're taking prudent but decisive action to further expand the network rationalization program, increasing it by a similar amount to the original program we announced with the interim results on the 4th of August 2020. This will require a further provision of up to GBP 160 million in respect of network rationalization. If these actions are fully implemented, they are anticipated to deliver an annualized cost benefit of between GBP 300 million and GBP 350 million. The cumulative impact of the significant savings in future years we estimate to be approximately GBP 2 billion plus, GBP 2.2 billion, a good proportion of which will reduce our IFRS 16 liabilities. With a lot of the normal year-end processes to complete, this is not intended to be an early publication of our full results, which are due on the 9th of March. However, at this stage, we anticipate the group revenue will be approximately GBP 2.45 billion. What is key in the present environment is that we've maintained a strong financial position, not something that is commonplace across our industry. We invested over GBP 300 million in the fourth quarter on several opportunities we had previously flagged in the pipeline, and we still have a healthy pipeline to work on. After this investment, net debt at the 31st of December will be approximately GBP 350 million, leaving the group with significant liquidity headroom of over GBP 800 million. Our financial position has been helped by the positive monthly cash generation, apart from December when there was a modest outflow. This outflow primarily reflects agreeing deals with landlords that have created significant permanent savings, but in doing so has required, for example, bringing rent payments current and providing some elements of guarantee on the new deal. 2020 was the worst year this group has faced, and the first half of 2021 we also expect to be difficult for the most part. That said, the crisis has accelerated the pre-existing favorable industry trends, and we're very strongly placed to be a beneficiary of this. As the leading enabler of the growing trend towards hybrid working, we're seeing increasingly more and more companies wanting to partner with us. It is not always possible to publicly announce the identity of these customers. But in today's announcement, we note the recent deal signed by Standard Chartered to allow their 90,000 employees to work in a more flexible way globally. As we previously announced, we will continue to do refranchising deals throughout. We continued to do these deals throughout 2020, these franchising deals in general. But I'm pleased to report that conversations have restarted on several master franchise agreements, and we look forward to updating you on these in due course during '21. So looking through the prevailing crisis, the group remains confident that its pivot to both capital-light and a more service-based platform business will deliver a stronger and more profitable cash-generative business in the future. Thank you, and I'll hand the call back to the operator to open up for questions to myself and Eric Hageman.

[Operator Instructions] The first question is from Andy Grobler from Crédit Suisse.

Mark and Eric, I've got lots, but maybe just a couple to start with. In terms of the additional provisions you're taking, could you detail how much of that is cash versus noncash and whether that will all fall in terms of -- the cash element of that will fall within this year? And then secondly, in terms of the closures, geographically, where are those going to be focused? Is there a particular type of center, whether it be Spaces or Regus city center or more suburban that is likely to be closed through that process?

Okay. Thanks, Andy. Right. The split is about 1/3, 2/3, 1/3 cash, 2/3 noncash. The timing of the -- that is not all this year. That -- it would be timed over the next 2 years, possibly even 3 years. So that's one. So 2/3 write-off of assets, 1/3 cash, not all the cash this year. Second, in terms of geography, very few suburban centers affected for obvious reasons. These centers have been robust, in large part, robust globally. So they're more concentrated on marginal centers and city centers. And in terms of the geographic split, I mean it's pretty much Asia Pacific we've already completed, and business is showing some -- was showing some good signs of progress. That's probably going to be tempered down with more lockdowns occurring at the moment. This is Europe and U.S. But it's pretty widespread. It's not any particular geography. And just to be clear, it depends in some of the worst-affected geographies. We've made deals on pretty much every building, so there's no need for closure. The closures only take place on marginal centers where we can't make a sensible deal. These are the ones we have to close.

The next question is from Steve Wolf from Numis Securities.

Just a follow-on from Andy's. I'm just looking for some rough numbers of closures that either you have done this year, full year '20, and then sort of planned closures for 2021. I appreciate you don't want to close and will go to negotiation. But within that element, you must have an idea of locations you actually want to close regardless of the deal with landlords. And then secondly, turning to the M&A that you've done for approximately GBP 300 million, could you talk about that little P&L impacts revenue, profitability, and how that fits in with the [ overall ]?

Okay. Let me do the second one first, and I have to come back and ask you the first one again. I didn't quite understand the question. Sorry, Steve. On the second one, the -- first of all, we've invested GBP 300 million. There's a number of transactions in here. And one of them we're particularly pleased with, and that it's already making excellent contribution. We got synergies very quickly on that one. The -- it's still early stages, and it's more complex. The larger one in the group take -- is going to take longer for us to be able to answer the question of what it will deliver because it's a slightly more complex process, involving some restructuring and so on. So I don't want to go into too much detail. But rest assured, we have to make this money work very hard. And some of the things we've done, the money is already producing well. Others will take a little bit of time for us to be able to answer the question. I would hope that by early March, when we do the full year, we'll have a clearer picture and be able to answer that question more fully. We are seeing, if I just turn to acquisitions, Steve and everyone, the -- there are a lot of opportunities. And so we're being cautious. But we expect that to be in the first half of the year, quite a lot of activity. We are well financed and ready to do that. And because there's a lot of companies out there that need synergies, and they need them now because of the prolongation of the crisis. Can you do the first question again for me, Steve?

Just a follow-on from that, Mark. Is it possible to sort of quantify maybe a number of revenues that you might have purchased alongside that GBP 300 million? Just to get a rough idea with the scale of how it's been deployed.

It's too early to say. It's too -- I can't really go into it, Steve. It's a bit -- it's complicated because it involves real estate [ sitting by ]. So it's not a straightforward answer.

We expect to be able to answer it in detail on the 9th of March.

Yes.

Okay. No worries on that. And then going back to the first one and now the follows-on from that essentially. But you're into the rationalization plan now for 2021 that you've outlined. I know you don't want necessarily closing the centers. It's the last resort. But within the portfolio that you're now looking to rationalize, there must be a number that you have your eye on. It doesn't matter really what the landlords reset to. You actually want out of those locations. So it was really a question based around what do you anticipate the number of closures to be broadly that you're looking at. And then how does that affect now your planned CapEx for additions in 2021? Or should I think about it more of we'll do more M&A than organic deployments?

So the organic growth in 2021 will be small. In terms of like sort of full fat, we're investing in the type of investments that we've done in the past. What you will see, as we've already telegraphed, is you see more management contracts, more deals where other people put up the capital and so on. So -- and of course, a lot more franchising deals. So the -- in terms of CapEx, it's going to be relatively small. And that -- overall, we will be likely to replace whatever we do close. If you look at closures, you'll see in the note here, we're taking a provision. That is for centers we fully expect to close because the deal is not good enough. And in the end, those deals can improve. If the deals improve, then there may be occasions -- and we've seen this over the past few months where we're more or less moving everything out, and owners will then understand that we will close, and we managed to do something sensible to move forward. So it's still a moving target. And you'll notice in the note here that it's up to additional GBP 160 million. But -- so yes, there will be closures, definite closures, but the network will still -- will grow because we're adding other types of center to the group. And I would expect probably during '21, whilst the growth of the network might not be significant, it's unlikely to decline that much either.

Sure.

Maybe if I can add something, Mark. Steve, maybe it helps you if I give you a sense and others of what we did in 2020 in terms of closures. So we closed out 217 centers which compares to the 195 we did in 2019. And that equates to about 3.5 million square feet, which is about 10% more space closed than what we did in 2019, just to give you a sense of the provision we took at the half year, what impact that has on absolute number of closures. Again, as Mark said, too early to say what that will be for '21.

The next question is from Michael Donnelly from Investec.

I appreciate that you'll give us the update, hopefully, at March about the bolt-on, which is part of the GBP 300 million spend. Can I just ask about the other deals in there? So I think, last year, you spoke about 3 ways to deploy the capital. There was rescue situations, organic investments and M&A. So of the non-bolt-on bit of what you've deployed, can you tell us how much of any of that are rescue situations, like, for example, the deal you did recently in Hong Kong?

Yes. The deal in Hong Kong was -- yes, these are -- we've actually done 2 in Hong Kong, and they were both takeovers of WeWork centers, large, large centers. And so yes, those are rescued. They do not involve substantial cash outflows because we're taking over largely operating center to some working capital but very little, and they are fully on sort of on a variable basis of effectively management contracts. So there's a whole range of -- there's too many to mention rescue situations, and these -- most of them are quite small. And some of them are for services, star businesses, and some of them are for centers. We've done a whole number of centers, but they're individual ones. We're not sort of wasting time announcing those. But typically, we're taking things over directly with the landlord on the management contracts and so on. So there's a whole number of those in there. They typically don't involve a lot of capital. The -- and we expect to see more of these. There's a lot of distress. I mean you can see from our numbers the level of distress, and we were better. We've got more scale. We've got more -- we're in a much better position than everyone else, but we are still badly affected. And there's -- companies are very short of cash, and they -- so there's a lot of impetus here to bring things together. So we expect to see a lot of activity during the first part of this year. I'm not sure if that answers your question.

It is helpful.

The next question is from James Zaremba from Barclays.

Mark and Eric, a couple of questions from me, please. One would be just on the targeted cost cutting. How does this break out between where you've rationalized the estate, therefore, I guess, have taken costs out, but have also reduced the revenue opportunity at those sites versus taking cost out of sites which are still operational? And that will be the first question. And then on the second one, in terms of the GBP 2.4 billion potential cost savings, you mentioned, I guess, some of the upfront costs around guarantees. Are there any, I suppose, let's say, further out costs? For example, have you had to extend the life of any leases and therefore maybe foregoing a future rent-free period or something like that? And then the last question would be in terms of, I guess, as we move slightly more towards management contracts, and does that work with the master franchise agreements and where you're particularly getting a royalty in system sales? How would that work on those management contracts?

Okay. So when we look at rationalizing the estate, that's a sort of general descriptive word, but they hide a lot of details, a lot of variation underneath. So a lot of work has been done by Eric and the team and of course the property team. There's a myriad of different deal structures which have to be accounted for. Now some of the provision would apply to impairments, not closure. Most of it applies to closure, potential closure or closure. And so it doesn't necessarily mean that all -- that capacity is lost. That capacity changes, and you're providing for -- sometimes the capacity remains, but there's a cost to make that change, which also is provided for. Typically, there's also, as you suggest here, some of the leases we may extend the life, and we may also bring future rent-free periods forward. All of these things are part. Generally, there will be no provision there because there would be no closure and no need for impairment. It doesn't -- and a lot of this rest -- revolves around an important piece of work that the finance team have to do is moving the GAAP rent to the correct level. And if you move a rent-free period around, it helps cash, doesn't change GAAP rent. But -- so lots of work being done. There's a lot of deals. The key thing we're focused on that sort of trumps all is cash. So we're very focused on the cash performance of centers, both now and into the future. And that is how we do our calculations and -- as you would expect. And what we're building in is a lot of flexibility, not in the short term. We are sort of making sure that whatever we do, we just -- we don't do it short term. We need to make sure that we can sustain for the next 2, 3, 4, 5 years, not just for this initial period, in case there is volatility going forward and also so we can build in a capacity to recover our profitability and our past losses into the future. So our objective, and I think Eric has mentioned this many times, is to try and retain the capacity in all cases, unless that costs us too much in cash, and then we will not hesitate to close. Then the second part of your question, management contracts. When we do management contracts, we're doing them and building them, they're profiled, so that they can be handed or sold to a partner, a franchise partner, as we refranchise a country. So they are structured for this from -- in the first instance. And in fact, some of the discussions we're having include a whole number of management contracts. What you're going to see is there will be a change in the profile because there are more management contracts coming in, there are more rents on variable rents. So again, this we will put a bit more color on by March. The profile of our risk has changed quite a bit. And that also is appealing, of course, to future franchise partners. So there's a lot of good work being done that will help us in our future monetization of the existing estate.

The next question is from Daniel Cane from Toscafund.

Two questions from me. First one is return on investment. It looks like you spent about GBP 300 million of acquisition firepower in December. Previously, we've been thinking or been told that the sort of returns you're looking for are at the order of 20% to 30%. Does that still remain the case?

Yes. Still remains the case, yes.

Second question, on the bridge of profits from '20 to '21, previously, we've been thinking in terms of about GBP 250 million uplift '20 into '21, thanks to cost savings and some trading recovery. With these additional cost savings, would it be fair to say that, that bridge goes up, say, up to GBP 350 million?

Probably not. Eric, I don't know if you want to deal with this, but the V at the bottom of the recovery, so -- was move -- is moved forward. The sort of the trough, if you like, which we expected to -- which we thought we had sort of in November, has just been prolonged. So Eric, do you want to have a go at that one?

Yes. So I think, with regards to the bridge, Dan, so we've upped -- previously we're saying about GBP 200 million of cost savings at Q3, which was a combination of network rationalization, procurement, plus some FTE, some employees related, both front and back office, if you will. And that now has gone up to at this midpoint of GBP 350 million. So that bridge is still there. The question is how much falls within the specific calendar year of 2021. And that's -- it's a bit early days for that. So bridge is still firmly in place. How much of that absolute number had this combination of cost saving and trading uplift, yes, is the uncertain factor because the trading uplift certainly on the back of what we've been saying today. And we can all see the impact that the pandemic is having. That feels like it's more pushed out into later this year than what we originally thought at the beginning of the year. Not sure that answers your question, Dan.

Yes. That's fine.

The next question is from Sam Dindol from Stifel.

A couple of quick questions from me. Given the dragging on of the pandemic, does that impact your view of how much you could spend on M&A in the near term and how much liquidity headroom you would want to keep just as it sort of unwind? And then secondly, on the franchising. Is it sensible for analysts to still think about it in terms of a 3x revenue result on MFAs would be a pretty good outcome? Or has the pandemic and sort of the evolution of the industry in terms of more hybrid working going forward, sort of case, how you think about that?

So you said -- about the second part, I just didn't catch that. 3x?

Say, on the MFAs in the past, you've spoken about sort of 3x revenue has been a good result. I was wondering to the evolution of the industry or the pandemic has changed, how you sort of think about that or how we should think about that?

Yes. Okay. Well, we said 3x was a good result. We didn't say we get 3x every time. So it would be happy days if we did. So -- and overall, the key thing we are looking at is it's not really a multiple of revenue. It's a multiple of EBITDA. And when we're looking at partnering with a franchise partner, we -- there's a lot of look-through to say what things we'll get back to rather than what things are today. I mean the people are looking forward to the future shape of the business rather than what was the shape of it over the last 6 months. On top of that, the sort of partners we're dealing with are looking at a bigger picture and a bigger opportunity as more and more companies, customers, potential customers move towards flexible working. They can see that. They want to participate in it. So it's -- they look at the growth possibilities and so on. And on top of that, we are looking at it as, is this a decent multiple on the potential earnings that we would get from operating this business ourselves? So there's a combination of factors. The multiple of revenue is probably not the best indicator. The multiple of earnings, a better indicator. So if you look back at what we've done before, it's the multiple of earnings that we'd be more confident on dealing with. And we're not talking about depressed earnings, by the way, here, Sam. We're talking about sort of earnings that have recovered because there was an element of look-through. Some of the things we're talking about at the moment have already gone through, and there were reasons why people are interested. So people are looking through, or they've gone through the crisis. And so the business, in some places, has recovered already. So those are the sorts of conversations that we're having today, and there are quite a few going on. For smaller countries, where people are interested and the sort of level of interest is much, much higher amongst customers, a huge amount of publicity about hybrid working, you just can't miss it. Future of work, it's all over the place. So that is giving us a lot of very, very good customer conversations, which we're confident will turn to business, like Standard Chartered. There are many others like Standard Chartered. But on the other hand, you've got investors in countries that are saying, actually, we believe in the future of this type of working. And we want to participate. Who do we participate with? IWG, market leader, already established, have all the processes and systems, seems like -- and that sort of marriage of entrepreneurial people, some of them from the real estate -- from a real estate background, saying, this, we believe, is part of the future and could be a large part of the future of real estate. We want to be involved. Those are the conversations we're having.

Our next question is from Dan Cowan from HSBC.

Can I just follow up on the master franchise agreements? You mentioned you've got -- you restarted a number of discussions, Mark. And I was just wondering if you could perhaps give us an idea of the size of those deals. Any of the bigger territories in discussion yet? That's what, I guess, we're all hoping to hear. Where are you roughly with that? And the second question for me is, when you close a center -- I guess following up on one of the earlier questions. When you close a center, you have the opportunity to presume to transfer some revenue to adjacent centers in the network. Is there a sort of typical share of that sort of center's normalized revenue that you would be able to transfer to an adjacent center? So I guess how much can you retain where possible?

Yes. So normally, when we close a center, if it weren't -- if we were in normal times, we'd expect to transfer 80% of revenues. And during COVID, we're doing transfers at the -- about 55% to 60%. So you lose more customers during a COVID period. But we're still -- that is part of the calculation. I mean it is part of the risk planning anyway if we have 2 centers and both of them are not performing, close one, consolidate. It's a last resort. If possible, we'll try and make deals on both of those centers to reduce the operating costs so we can see it through. But if not, we close one of them. And that is a major part of what we're doing. You make one good center out of 2 poor ones. Size-wise of what we're talking about, there's quite a few small conversations. I mean an update on U.S., we sold our first franchise into the U.S., and we continue to build up the team there. So we are optimistic that the U.S. will sort of come on stream much more powerfully this year in terms of franchising and refranchising, but that will likely be done area by area. In terms of the -- most of the conversations for relatively small countries, there's one conversation taking place for a sort of medium-sized country. So that's -- but what I'm pleased about, I think, from our team's point of view, is the level of interest. We've got some very high-quality businesses that want to come in with us, and that is what's attractive. And that's in the eye of the storm. I think that will get better as sort of hybrid working becomes more the norm. It's going to bring a huge amount of opportunities.

The next question is from Alex Hugh from Kuvari Partners.

Actually, most of my questions were just answered on the MFAs, but I did have one follow-on. Just in terms of the people that you're speaking to now, are they parties that you were speaking to pre-COVID that you've maintained a dialogue through? Or are they new people that have come in on top of that? And when we look at specifically at the U.S., same question there. But are there some parties that were interested pre-COVID that are still around now?

The answer is yes to both. I mean some are pre, and some have come quite recently. So it's both, short answer.

Okay. But the same mix of family office real estate. Any other types of investors in there?

Yes. Same, same. Yes, same. Yes. So very similar people. I mean, look, there's -- it's -- there's many flavors to this. Look, our busiest -- apart from restructuring, our restructuring team, the next busiest team is the corporate team working on -- just there's a huge amount of transaction -- there's a huge amount of transactions, both on the sell and the buy side, that are likely to be done this year. So it's -- there's consolidation opportunities, sales opportunities, consolidation and sale. It's all of those things together. We're very focused here on what does the endgame look like. Is this -- we're in the eye of the storm, all this is going on. How do we create value? We create value by essentially franchising the operating business, the centers, very focused on doing that. And we end up with a services business. We're adding to that services platform. So one of those acquisitions we did in December is one of the first that adds to the services platform. And we've got quite a number more that will come in onto the services platform so that you've got -- what you end up with is a very strong global workplace services platform company with good quality earnings, with -- the investments are all about the improvements in the platform itself and not investments that are going into leases or buildings that you invest to harvest in the future. And that -- so that pivot, we're very focused on. So everything we are doing is focused on that endgame and, of course, in the meantime, maximizing our cash flow in the process. So a very definite strategy. And we are clearer today about our strategy than any time over the last 10 years in terms of what we are doing, where we are going. So very, very clear.

Okay. And then just one more, if I can. I think in the past, you'd kind of talked about much lower growth CapEx in 2021, obviously part of the pivot that you've been discussing. And if I remember right, the number was sub GBP 100 million or something like that. Is that still the case?

Eric, I think that's still the case, isn't it?

Yes, absolutely. And I think, just to be clear, we're talking net growth CapEx, so people are not confused by that number. Absolutely. Listen, I think we didn't talk about it explicitly because it's a trading update. But what you can hear us talk about on the 9th of March, again, very clearly, is we are firmly underlined and committed to this capital-light growth strategy, which is why Mark, also today in the Q&A, talked a lot about franchising, master franchising and the like and growing by taking over space from others. Now all those combinations where we are opening centers, growing our business, helping our clients, but without actually deploying our capital. So if you think about a '21 number, Alex, that's very much what you should be thinking about. We're really on the gross level looking at a couple of hundred million, which is less than half of what we were doing in the previous years. Again, more on that, but firmly committed to capital-light.

The next question is from Andy Grobler from Crédit Suisse.

Just a couple of follow-ups from me. You mentioned there have been cash outflows at the end of last year, and that would continue into Q1. Can you give any kind of quantum of how much out you would expect through the first quarter? And what is going to stop that, I guess, getting a bit larger as we go through the first half of this year? And I guess related to that, are you seeing any rise in bad debt relative to your previous expectations? And then the second question, just to check, Mark, on a comment you made earlier. You were talking about the U.S. and master franchise. And previously, you talked about maybe doing that as kind of one big go, but did you mention earlier that that's more likely to be in segments than in one big transaction?

Yes. So cash outflows, I mean, the moderate cash outflows, December is likely to be -- that's likely to continue January, February, March. These are small cash outflows, and they're mainly to do with completing deals and so on. So as I've said all the way through the crisis, Andy, our number one focus is on the -- building the cash flow. The rest doesn't matter. So we managed to go through pretty much the entirety of last year with positive cash flows. There's going to be a period now where we're completing huge numbers of deals, and that is why we've got the provision and that is why there are some early cash outflows that occur as you make closures and so on. So that's just to alert you to that. But these are small cash outflows that are not significant. In terms of bad debt, the bad debts are -- the way we account for this is we're writing them off past a certain point, and that point is quite short. The -- we would expect to collect some of these as we go through this year. I mean a lot of people are delaying payments but will pay and so on. But we haven't seen -- there's not a significant increase in bad debt and so on other than what we've already highlighted. Eric, I don't know if you want to add to that.

Yes. No, absolutely. I think if we think about sort of the development of net debt or cash this year, again, coming back to the comment to Alex, if we think about 2021 where, at some stage, we are on a post-COVID environment, sitting where we are sitting today, very difficult to call what the shape of that is. That's also not the 9th of March yet. But what we clearly expect is some sort of recovery during that year and the trading uplift that we've been talking about. With that, you would expect a recovery from the cash flow generation nature of this business. On top of that, we're going much more capital-light than we've done before, which would help in creating more and more free cash. The other sort of variable that goes through that is what happens on the M&A front, both where we are as a buyer and doing acquisitions like we did in Q4, but also us as a seller with regards to master franchise. So I think the best way to think about it is, if you would exclude M&A, where do we think that net debt to -- or net debt or net cash will go? We think slowly but surely. In 2021, we will get in a better position than the GBP 350 million where we ended in net debt for 2020. And again, keeping things constant, plus depending on what the pluses and minuses of M&A. But if you're sort of ingoing assumption, excluding M&A, I think you should think about a number which is better than the GBP 350 million that we ended 2020 at.

I think -- again, just to add to that, Eric, and coming back to Dan's point earlier, we're investing -- when we are doing M&A, we're investing it to create -- that money, as I've said all along, has to work hard. And the -- so you're going to have additional benefits from the M&A investments, which will -- once synergy is achieved and once deals are completed, because while some of the money might have gone out on deals, the deals -- that sort of the deal is not completed until it's complete, and you've got the synergies. So there's -- on some of these, there's some moving parts that take time. But all of that helps. There are a lot of moving parts at the moment. My takeaway from this is by March, Eric, we're going to need to be very clear, both on some of these -- many of these questions so that people can have -- we can help people towards what the future shape looks like. But for today, it's a trading update, and we're highlighting that there will be further provisions for closure with attendant cost savings, which is a necessary thing that we need to do. But we've got a lot of positive stories as well that we need to bring out our membership, our virtual office business, our -- the non-office part of the business has grown very well. You see Standard Chartered. There are many other deals like that. And so the business is also taking shape. The services part of the business is taking shape, and I think we need to provide more clarity on that by March. So we'll be able to answer a lot more of these questions, I think, more concretely by then. And we'll be able to talk more clearly, as Eric mentioned earlier, about the M&A and its effects.

Just on the master franchise in the U.S., is there a change of tone there? Time will tell how it works through, but rather than be one big transaction, you're thinking more about a number of kind of regional deal.

Yes, it's going to be a number of smaller -- look, it could be one large transaction. I mean it's -- but it's more likely to be a country done piece by piece.

The next question is from James Zaremba from Barclays.

I just had a quick follow-up on -- in terms of -- I see some of the social distancing arrangements you've put into place, at least on your U.K. website. I'm just wondering how that's evolved in countries which have progressed a little bit better, maybe in Asia Pacific, in terms of COVID and whether you've been able to, I guess, revert to more kind of office norm. Because I guess, maybe if you had a meeting room or an office, you were pitching out to 8 people, which is now 4 due to those social distancing impacts, I guess, maybe that makes it hard to get the same amount of revenue in the short term.

Yes. Look, first of all, revenue is not affected by the number of people in the room, generally. We -- certainly not for meeting rooms because meeting rooms sort of buy the number of square meters rather than number of people. In terms of -- in answer to your question, how -- is there any difference, any change in social distancing? Not discernible in any of these countries, but it depended really on how much they were concerned by this in the first place. Whatever we do, in the end, the customers choose how many people they want to put in a room. But typically, they would take larger rooms. We have given some customers offers for additional space in offices where they've expanded. It's quite small, but that has given us some additional space utilization, companies that do want to be less concentrated. So as when social distancing hopefully becomes something in the past tense, then customer -- those customers may well reduce the amount of space, but there'll be many other customers. We know that once -- we're sort of clear because we keep seeing it happen, but then it gets stopped by further lockdowns. There's a lot of pent-up demand. So we believe that once some kind of normality is -- comes back into countries or the world, whichever comes first, that customers are going to want space, and they want it to be flexible. They do not want to sign long-term leases because there's still -- there's going to be a lot of uncertainty going forward, and this plays into our business model very, very strongly. So -- and we've got lots of evidence of this. We keep seeing it, but then it gets stopped. And inquiry levels remain quite strong. This is not -- we haven't got an inquiry problem. It's a when do I start problem. So James, thanks for the question. Nothing we can tell you about on this today.

[Operator Instructions] The next question is from Edward Donahue from [ One Invest ].

Can you just give an idea of the potential spend and again maybe a split on the GBP 300 million that you spent in Q4 with regard to services versus nonservices and what you're going to -- and what's coming through on your pipeline that's got you quite excited?

The services part would be about 10% of the GBP 300 million. The GBP 300 million -- I don't want to go into it, but it's -- that number may change in the future, so it's -- that is why we're a little cautious on talking about the overall investment and so on. Because even though it's GBP 300 million, it's unlikely to remain at GBP 300 million. It will become a lower number. It's highly likely to. So I won't say any more on that. But in terms of coming back to the services part, there's an acquisition there of about GBP 30 million, but it has an outsized effect because it's -- the multiplier on the services side, much, much higher. So the return there, much, much higher. And again, it's -- we've got more of the services side. If you look on the future pipeline, there's a lot of services add-ons that sort of cement our position as the provider of choice, whether you're a corporate, whether you're a landlord for basically any type of flexible workplace or workspace in general. So there's pieces here that assimilate proptech. A lot of the things we already do, it's about monetizing those and potentially adding other pieces to it, so that the key is, once we have sold off or partnered our operating businesses, we need to have a strong, high-growth services business that remains that is sustainable that covers the whole market. It's already global, but has it got enough breadth in terms of the offer to be the go-to provider for anything workplace? And then this is what corporates want, this is what the property industry wants. They require a service so that they can change from where they are to where the future is going to be in a fully digital, flexible workplace. And that is how we're positioning. And you'll see more of that coming through. These bolt-ons are generally small. Some of them are single million, some of them -- this one is a larger one at about GBP 30 million. But it's piecing them together that adds the value. And so the majority of the money is going on, adding more inventory in at the right price. So -- and that's -- but it doesn't have the same multiplier effect. Very good returns on investment, but the multiplier comes out of the services part. And you can see more of that.

There are no further questions, so I will hand back to Mark for closing comments.

Okay. Well, look, thank you all very much. This was supposed to be a very short update, but we really appreciate the questions. We hope that we have been able to add some clarity. And as I've said, Eric and the team, myself, will aim for early March to provide a lot -- we'll be a lot clearer then. And I think we will take away from this call the sort of things that we need to be addressing in March, and we'll address them then. So thank you all very much for your time this morning. Goodbye.

This now concludes today's call. Thank you all for joining. You may now disconnect your lines.