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

Hello, and welcome to the IWG 2021 Interim Results Call. My name is Josh, and I will be your coordinator for today's event. [Operator Instructions] I'll now hand you over to your host, Mark Dixon, to begin today's conference. Thank you.

Thank you. Thank you, operator, and welcome, everybody, to today's webcast of our 2021 interim results. I'm joined on the call today by Glyn Hughes, Chief Financial Officer. The first half of 2021 has been something of a continuation of the unusual times, we've all had to navigate over the past 18 months. So first half really have a 2 very contrasting quarters with the impact of the pandemic still being felt in our business in Q1. But by the end of Q1 and the start of Q2, a very clear inflection point as our business starts to recover with some momentum. So from the worst of times, the business is now moving to better times. Throughout that time, we've never wavered in our strong belief in the very positive medium and long-term outlook for the business and for our industry and even more so as we move into a post-pandemic world. This will be a world where work in the future will become a much more flexible and a much more hybrid type of working. And in that environment, we should do very well. So let's look at some of the financial indicators here. And although year-on-year revenues are clearly down, the sequential quarter-on-quarter performance shows a very encouraging trend with revenues higher in Q2 than Q1. All of this driven by a month-to-month improvement in occupancy since March. And with occupancy going up, we're now able to see very clear movements in pricing, and this is coming about by us reducing some of the discounts and aids that we gave to our customers during the pandemic period. As they go away, our pricing starts to come back. So very strong performance on new sales going into the forward order book. We've also continued to make excellent progress on our cost reduction program. So excluding costs associated with growth of our new centers, we've reduced costs in this half year compared to the same period in 2020 by approximately GBP 190 million. And by the end of the year, we estimate that we would have taken approximately GBP 320 million of costs out of the pre-growth business. We have reported a positive EBITDA on a pre-IFRS 16 basis, and this reflects the improvement we've observed in Q2. You can see this in the small chart here on the right of the page. And we've also made really good progress in our pursuit of capital-light growth with net spend at about 40% of last year's level. And as I've mentioned on several occasions, this is -- the spend is mainly coming about because of the overhang of deals that we had signed up some time back. The real performance of new growth is excellent. The average performance which you can see here with 40% of last year's spend, but producing about the same space. So we're getting about 2x the growth for the same money, and that should improve into the second half. So 2 very different quarters and to emphasize that again, on this contrast, Q1 was very much the low point of our COVID-impacted performance. By the end of the quarter, we saw that very, very clear inflection point. But as we noted in our June update, the pace of recovery was slower than we had originally expected as new COVID variants emerged in various parts of the world. But in spite of these variants occupancy has grown and continued to grow, and we can see it growing into the future. And with that, service revenue is increasing, and as I've already mentioned, positive momentum also on pricing. And that momentum on pricing saw in June for the first time, the average new selling price exceeding the average embedded price in our forward order book. And this was the first time we've seen this in 18 months. And although it takes time to wash through, bear in mind our average contract length is 11 to 12 months, it's very much a move in the right direction. And as we've talked overall of our expected recovery trend, this is the -- price is the most lagging indicator but good performance now. If we can continue to do that during the second half and into next year, it really sets us up very well for 2022. So all of these things still together are giving us cautious optimism for the second half. We've got a very strong base of recovery here. So we've got a business that's recovering. We've also got powerful structural tailwinds that are going to help us this year, into next year and in the years to come. These tailwinds have been around for some time, but they've clearly strengthened over the past 1.5 years. And the coverage in -- on newspapers, TV programs and so on, I personally done 3 or 4 TV appearances really per week over the past 6 months, and that interest is not going away. There's very much a permanent shift in our direction, and you can see it in the unprecedented interest that we can see in our industry. So the vast majority of firms out there today are considering new ways of working. And many are doing it. They're doing something about it. So how do we know this? The conversations we're having with companies, I'm going to talk to you a little bit about that in a moment, are becoming more frequent. Inquiries and sales conversion have now reached to pre-2019 levels. So remember, we're still -- we haven't exited the pandemic yet. Things are quite tough in some parts of the world, but our inquiries and sales are now back to pre-19 or pre-pandemic level. So we're in a very good position looking forward. So again, this is another reason for our optimism in -- for the rest of the year into '22 and onwards as more and more companies look to just convert the way they work and move much more onto a platform work in a much more flexible basis, much more spread and remote working basis for many firms will become the norm. In spite of this, it's worth noting that whilst we are seeing a very good recovery, many of our competitors who were not in a great position, let's say, prior to the pandemic, are starting to really feel it. You really needed to be in a strong financial position to make your way through this crisis. And even though we're closer to the end we hope than the beginning, there are quite a number of competitors that have run out of capital, and we are working to consolidate them, acquire them, take them over. There's a lot of options out there. So we're getting some quite good traction here, which is pleasing. So if we just take another look at these drivers and just step back a moment and just -- in the end, our business is quite a simple one. You can see here the indicators that we're pointing now in the right direction. So occupancy is improving. You can see that very clearly improving month-on-month as we go through the quarter. You can see that inflection point that we've been discussing on many occasions. With the occupancy increasing, you can see that the embedded price starts to flatten out. So price, even when occupancy goes up can still go down because you're selling price into the future. But now with the price flattening and the embedded price starting to move up on average, this is a very strong sign for us. And then you can see that the -- our virtual office and membership business continues to grow very -- in a very healthy way as we go through the quarter. And again, this is reflecting a move from more and more firms to a more remote and a more hybrid type of working. And this is one of the clearest indicators that you will see in these numbers. That's why we've added them in for you. So strategic objectives. Look, we -- it's been a difficult year, 18 months, but we have continued to progress against our strategic objectives, which were to continue to develop enterprise development, overall strategy, to continue to grow the network. This is critical. We know what companies want is coverage. Coverage wins the day, everyday. And we need to grow the network whilst reducing our requirement for capital to do so. And then we need to manage costs very carefully. And again, I think we've done a good job here with more to come. So if we just look at these in a little more detail. First, customers, it's enterprise customers and customers overall that are driving the revenues and the company's development. And we had questions earlier on in the year, especially as we started to announce more significant deals with enterprises, and we were talking about the numbers of members that would be using the network or that we're signing up to the network. And I've added the siding to just give a bit more explanation, I'm going to talk a little bit to a few customer studies in a moment. But -- so customers enterprises are using us for a whole variety of products. Even though we may talk about large numbers of members joining, what they really use us for are these types of product here. So hubs; drop in; which is day-to-day short-term use of meeting rooms, day offices and collaboration suites. Our projects are going on in spite of the pandemic; and then smaller local headquarters and localized offices. We're seeing a lot of those as companies change the way they set up their companies to support people more locally. And then we're seeing more of a movement now to total space management solutions where we're starting to run not just offer products in our own space, but we're starting to offer management of corporation's own space using our technology. And we've got a number of customers that we are serving now, and we've got quite an interesting order book that's starting to develop here. So there's a whole variety of products within these groups that make up our revenue. But it's -- when companies use us, they're not -- they're rarely using us for one thing. If you look at one of our biggest clients, they are using us in over 650 of our locations in 27 countries. And thousands of our clients are using the network across multiple centers and multiple countries. So it's -- there is no single rule but what we are seeing very definitely are companies that are engaging more. We're winning new accounts. We updated the market on a few of these as we've gone through the year. These accounts may -- they start small or they can start large, but they take time to develop, and I'll show you that in a moment. But in the first half, we added 900 new enterprise clients during that period, and that's a record. So we've got just significantly more enterprises joining us, and that has been occurring throughout the first half. Also, we've been expanding existing relationships. Here's just a few of them. And well over 1,000 of our existing corporate customers significantly increased their purchases from us during the same period. So look, a few customer examples. And as I've explained before, it's quite difficult for us to give you customer names because customers clearly are reluctant for their office strategies to be revealed. So here's just a few examples. And the key thing to pick up from the 8 examples that I'm giving you, these are companies that were not using us last year or had small implementations that are going to multiple locations quite quickly with significant contract values. And so these are across all parts of the every sector. We've got consulting, we've got services providers, IT infrastructure providers, pharmaceutical and on the next page, again, more technology and then aerospace and defense. And you can see here, customers expanding a number of locations and spend. And overall, it's across all sectors. So we've got very good movement here. The -- coming back to the basics, everyone's talking about it, people are inquiring, learning and our sales force are converting. And it takes time to develop. But now we've got simultaneous development of lots of companies at the same time. And this is one of the things that underpins our outlook for the second half continue to develop in spite of a continuing pandemic and into 2022 where we expect to see even more wins and expansions occurring. So demand, we're very happy with the area under management is also growing strongly. And it is important that we understand that we need to meet a growing demand in the market with more network coverage. So even in this first half, a very difficult half for the company, we continue to grow the space we have under management, adding 84 new centers in the first half, a growth space now exceeds 64 million square feet. And we believe that in the second half of this year, we should grow the space under management or area under management at about 10% to 15% annualized. That's the annualized growth rate. So that's -- that would be a very strong growth rate in the second half. Underpinning this, we're seeing record levels of franchise and management agreements. So these are various capital lights as you can get. We've signed some fabulous franchise agreements since the second half. We'll update you on those in the third quarter results. And we've also signed a very exciting MFA joint venture with Hysan to further develop the Hong Kong and the Greater Bay Area, that's the Greater Bay Area, again, go into a bit more detail on that later. But these are very exciting developments that help us get more coverage. And as I mentioned earlier, we're also seeing excellent opportunities to take over customer -- competitors locations. You can see a few of them here. Some fabulous buildings where competitors have pulled out, and we've managed to take these over. And this is occurring in many countries, and we've got a very busy order book in the second half for more of these. And then you've got more center openings, again, many of them on either management contracts, joint venture or on a franchise basis. So lots of exciting developments, and we've got things definitely moving in a very attractive direction there. So capital-light working, absolutely. It's quite difficult to read this graph. But that very thin black line on the graph, we should have made it thicker because it's a great indicator. You can see the number of square feet added for the cost. And you can see that sort of hit the very much the green button in the first half with more square feet being added for less investment than we've ever done before. You can see also on the pie chart that the -- well over 1/3 already of the estate is now either franchised or managed, so much lower risk profile, much less impact on IFRS 16, et cetera, et cetera. We expect that to continue at pace during the next 18 months with that pie chart, eventually, 3/4 of it being off the balance sheet, let's say, and only a quarter on. And we're very confident that we can do this. So again, this is very important slide. The key in this business is to be able to grow the network and make our capital go much further, we are doing this. A key part of this is franchising. And we continue to build up momentum with this strategy. We've added some really great franchise partners in the first half. I've spoken to everyone of them. We've got some fantastic business men and women joining us who pretty much universally have excellent business experience overall and very strong local knowledge of their markets, and we're not only signing them up, we're opening some very, very successful centers for -- with these franchisees who then, of course, after one successful one, they want to get on and do the second, the third and so on. So we've got good momentum both in signing people, getting centers open, supporting them and then opening more with them. And this will just gain more and more momentum as we go through this year and into next year. We're doing this in many countries. It's not just one country. And I think importantly, we're starting to gain momentum in the U.S. with our first deals done in the U.S. in the first half year. A lot of interesting franchise as well. So we're, again, part of this overall interest in the sector is also helping our growth strategy bringing in more partners who want to work with us. So a few words on the JV with Hysan. This is an MFA, where we're retaining a minority stake. And this is really a meeting of a specialist in this market and the Hysan have in a huge amount of scale and history in the Hong Kong area and the Greater Bay Area of China. They have significant developments. We have been partnering with them for a long time, and this just formalizing it more. So the objective here will be to grow into this area. It's very high growth. It's got a population of 90 million, and it's really one of the key hubs in China. So we're very much looking forward to a more rapid development here with our partner. It also brings us some significant capital for the part of the business that we have sold. So it is an MFA in that sense. But the key deliverable here will be additional growth in this exciting part of our world market. And with that, Glyn, I'll hand over to you.

Thank you, Mark. Good morning, everyone. Hopefully, you've had an opportunity to look at our results this morning. Clearly, as expected, year-on-year, the results are down primarily due to the pandemic. Encouraging, however, as Mark alluded to, is the momentum that we've built in the business during the second quarter. Revenue from open centers in the second quarter was 3.4% higher than quarter 1. And in the like-for-like pre-2020 estate, Q2 revenue was 1.5% higher than Q1. So all in all, trending in the right direction and largely driven by occupancy improvements, which improved 120 basis points over quarter 1. We're also seeing encouraging trends in pricing as lower levels of discounting have been acquired relative to the prior year. And as Mark referenced, in June, we saw the average new sales price exceed the average price embedded in the forward order book for the first time since the onset of the pandemic. We've made good progress in our strategy to reduce costs, achieving year-on-year savings, excluding growth in property and non-property costs of approximately GBP 190 million in the first half relative to the first half last year. EBITDA on the mature estate of almost GBP 64 million was paid back to GBP 5.4 million after the drag from growth and the impact of rationalized centers. Moving to the revenue bridge. This slide shows the revenue bridge from the first half of 2020 when the pandemic only kicked in during the second quarter, so providing a tough comparative for this year's interim results. On a constant currency basis, we lost GBP 80 million of revenue due to the impact of lower occupancy and a further GBP 98 million due to pricing and customer support measures. Despite these challenges, we've continued to invest in the business and these new centers added over GBP 53 million of revenue in the first half. The network rationalization program resulted in a GBP 71.7 million reduction in revenue. After negative impact from currency headwinds, interim revenue for the half reduced from GBP 1.3 billion to just over GBP 1 billion. We've made good progress in taking costs out of the business. Excluding costs associated with new centers, we have visibility of reductions in our annualized cost run rate by approximately GBP 320 million. GBP 190 million was achieved in the first half and a further GBP 47 million was already recognized in 2020. The remainder is to come. The key components in achieving these savings have been the actions we've taken to close centers that were not profitable, to renegotiate leases and to instill a more disciplined approach to expenditure in the business, particularly rents. The cost bridge shows the main bucket of the GBP 190 million of savings. We've made good progress in taking costs out of both overheads and center-related costs. GBP 144 million of property-related savings, 2/3 on closures and 1/3 from rent savings in the pre-2020 estate, a further GBP 46 million from product costs and overhead savings. GBP 68 million of this cost save is offset by the costs associated with new center growth. Finally, we'll take a look at the cash flow bridge. We closed the period with net debt of GBP 414.6 million, having started the period with net debt of slightly in excess of GBP 351 million. As previously disclosed in the first quarter, we had a significant outflow of cash relating to the deferral of prior year rents and other expenditure. These rent-related outflows resulted from the conclusion of successful negotiations with landlords. We've also seen some natural working capital outflow as occupancy declined but expect this to reverse in the coming months given the improvement in performance we are now seeing. We maintained a disciplined approach to network investments and as previously disclosed, we received GBP 284 million in relation to the return of money from an aborted acquisition. I'll now hand the call back to Mark to conclude.

Thank you, Glyn. So we've navigated through extremely difficult market conditions, but we're now seeing encouraging trends in the business, and we can see forward trends in more adoption of flexible working practices and hybrid working practices is giving us a very attractive market future. We can see a very clear inflection point in our business at the end of the first quarter, which has continued. So the line has continued to progress right up to today's date. We're seeing unprecedented sales activity as the structural trends we've discussed on many occasions strengthened and we're seeing lots of good opportunities to grow the business itself by adding new sites, getting far more bang for our pound or our dollar than we've ever seen before. I think most importantly, and as Glyn highlighted, we've shown how it is possible to restructure a business in the most difficult of circumstances during the past 18 months, not only we structure it and reduce costs, but also grow it at the same time. And I think we have a much, much more efficient business as we go into the second half and into '22. And we still have our growth machine intact and we're going to see significant growth as we go through the rest of this year and into next year. So I think we're well set up for the future. Clearly, the pace of recovery will be determined by the continuing easing or imposing restrictions, but we do look forward with cautious optimism, even where we are seeing restrictions added, we're seeing no worse than flat and no worse than flat is good. On average, if some locations are flat, we have many that are progressing strongly, so we get an upward trend in the business. So for the time being, we remain very cautiously optimistic in spite of quite an uneven situation. If things move back to normality, then I think we're well set for a more accelerated recovery. But for the moment, we remain cautiously optimistic, not optimistic. So with that, I thank everybody and hand back to the moderator for any questions.

[Operator Instructions] And our first question comes from the line of Michael Donnelly from Investec.

Three quick ones on Hysan, please. First of all, Mark, in January, you spoke about the 2 rescue takeovers of WeWork Hong Kong centers. And over 32 in today's statements, were they WeWork centers or historical IWG centers or a mixture of both of them? That's the first question. The second one is, will Hysan 100% of the growth CapEx in the JV from now on or only half of it? And the final question is, can you just remind us how many centers you have in Mainland China, not including the 32% in today's statement?

Thank you, Michael. Look, the -- we subsequently took over 1/3 WeWork Center in Hong Kong. And all of those centers are within the Hysan joint venture now. The -- going forward, we will jointly fund and -- but we will follow the same strategy that we're using elsewhere in the world, so there'll be more joint venturing, more franchising and so on. And in terms of Greater China, there's about 100 more centers that are not in this group, rest of Mainland China.

Our next question comes from the line of Steve Woolf from Numis Securities.

2 follow-ons to Michael's question on Hysan. You mentioned, obviously, they're putting money in. Should we be thinking of this in the same way that we did with Switzerland, Taiwan, Japan in terms of what they might have bought in as a proportion of revenues or percentage of locations? And then could you outline sort of the committed growth targets you've got relative to the 32 under management. Are we looking at 3, 5, 10 a year as an opening? And should we think, again, also that the type of deals going forward, will it be more the likes of a Hysan? Or is it other sort of infrastructure funds or deals that you've done already in, say, Japan, Switzerland with those types of customers? And then secondly, in terms of the expansion, you mentioned the run rate of 10% to 15% annualized locations by the end of the year. So should we be thinking about adding 300 to 450 locations gross next year? Is that how I understood it?

Okay. There's a lot of questions there, Steve, you're going to make me work. So first of all, the transaction is similar to Switzerland and to Japan in terms of multiples, values, et cetera. The only difference is that we've retained part of the business, we are very happy to do that in this particular market. One of the most dynamic markets in the world at the moment. In terms of the growth in that market, I think that was your second part of your question. We have a business plan to grow that business. But as I've said, we will grow it along -- we'll do more partnerships will be the likelihood here. So the existing partnership would grow and we bring in more partners in this market. It's a very well-established real estate market, and there's a lot of interest in new ways of working. And we -- our objective is to capitalize on that here. Remember, it's 90 million people, and this is one of the wealthiest concentrations of money and business development in the world at the moment. It's the engine room much of China. In terms of other deals, we have a whole variety of discussions that continue to take place from very small to medium size. And none of them are the same, Steve. It really depends on a whole range of questions, who is the partner, what can they bring, do they want to take all of it, I'll be consolidating with other operators in order to do it. There's a whole range of questions. There's not any single rule here. I think what's happened over the past 2, 3 years since we started to follow this program is that we've learned a lot more about the ask of the possible. As we talk to more people, we become more creative and so we get more tools in the toolbox in terms of how we can grow the network. And so in answering the third part or the deals, yes, there will be more. And -- but there is no single rule as to how they will come out. And then in terms of the growth run rate, it's -- that's a very good question. I think we need to -- Glyn -- I think we need to do a bit more work on that. What I don't want to do is to start to put expectations out there in the market until we're very clear about them. What we can see at the moment is a lot of opportunity, as you would expect. We've got strong movement on the demand side and we've got strong movement on the supply side. How that ends up looking in 2022 is a question I'd like to do more work on. We're more confident about the second half of 2021. Bear in mind, we're already 2 months into it. And we've got a lot of much -- we've got a lot better visibility of what's going on here. But -- so we will look to clarify that in the next few months and give you a better and clearer picture next year. And really, it's not just about the growth, Steve, it's about the cost of the growth. It's about the effect of that growth on our balance sheet, the drag on profits, et cetera, et cetera, and the IFRS 16 effects. All of those are the questions, really. And it's the return on any capital we do invest, what does that look like. What you will see, and I can say this with confidence, is a much higher percentage of the growth being franchise. And that's the more franchisees we partner with this year, they begin to open centers. And that really is we are -- there's more and more visibility from these partners, both in signing them up and in them opening. And so that I think will be more franchise partners we have, the more growth we will have in the future and the business will start to look quite different. In the pie chart that I showed you in the slides earlier, we'll move rapidly on to a much more -- the business become much more of a franchise business than an operating business. I think that's a key part of our strategy, and it's a key part of releasing value, I think, Steve, in the future.

Okay. Just then just to cross check back of the presentation, if the run rate 10% to 15% annualized by the end of the year, specifically, what's that 10% to 15% then reference?

That's the number of square -- meter square feet added in the second half. 5% to 7.5% added in the second half annualized [indiscernible] -- yes.

Our next question comes from the line of Andy Grobler from Credit Suisse.

Just if I could follow-up on Steve's question from earlier. I guess, I mean, you said you can do a bit more work on this, but if you can give us a bit of guidance about the potential cost of that growth going forward. If I look back to 2019, I think you opened about 200 centers, and there was a cost of GBP 80 million, GBP 85 million at the EBIT level from growth. Is that going to be meaningfully different? And can you just kind of give us a framework to think about that as you shift more towards franchising going forward? Secondly, in terms of pricing, you've talked about some of the momentum there. Can you again talk a little around the competitive environment and what your competitors are doing from a pricing perspective, i.e., are you seeing different dynamics than much of that competition? And I guess, added to that, how much of the pricing pressure we've seen in the last couple of years is permanent reduction in pricing and how much of it is temporary?

Okay. Right. So first question, okay, cost of growth, meaningful reduction, Steve -- Andy, yes, meaningful reduction. You can see it already in these numbers. If you look at the bridge and the sort of cost of the drag from growth, it's much smaller. The only reason it's there at all is because these were centers that were signed up some time back that happened to open in the second half, there'll be much less in the -- sorry, in the first half. In the second half, there will be less, next year, very few at all. So the drag will be meaningfully less. There will be some, but it'll be meaningfully less linked next year. You have a lot more franchising. Glyn and I will do some work so that we can get a better indication for that. But you're getting -- that -- the chart that I put in there where you can see the amount of square feet, you're getting per dollar will continue to go up, and that's a really key indicator. So it's not just the capital, it's the drag, as you quite rightly say, that starts to go away and your profits are then out in the open. So meaningfully different, and we'll come back with some guidance on this, as we get closer to next year. But we're set fair for that even as we speak today. Then pricing, there's a very broad question, Andy, very, very broad. Overall, look, our pricing is improving, which is not our pricing improving, it's our discounting becoming less. And for us, the important rubicon that we need to cross was that we're selling our embedded book of business starts to go up, and we're doing that now consistently. Now that's on the back of strong demand for our network. And again, I refer you back to my slides, where you can see companies using us across many countries, many locations and growing their implementations with us. This is critical in terms of how I'm going to answer your question on pricing. When companies are using us on a meaningful basis, the spot price is less important. And they're looking for an average across the network as opposed to one office in one place compared to competition. In terms of where the competition are, there is still heavy discounting in the market, in particular, in some of the CBDs, where there is an oversupply without any question because we're still in a position in some CBD markets where even though people are coming back, they're not coming back in enough numbers yet to meaningfully fill up the inventory. So there is pricing pressure in some of those markets. But even in those markets, we have reduced our discounting levels. And we have also, again, referring back to our slides, very significantly reduced our breakeven costs in the CBD markets. This is where we've taken a forward view on rents, and we've reduced down to what we think the market will go to in the future rather than the sort of somewhat artificial market that people are talking about today. So we've taken a very, very cautious view as to what future rents will be. And so that also helps us be more competitive, clearly, helps us on the margin and helps us to make a margin where others don't. The provincial markets, again, we have the strongest network provincially suburbs, countryside, these markets much less affected by price. There, we've got much more pricing strength, if you like, than we do in a few of the CBDs. This is getting limited to a few markets. Overall, though, I mean, I think the key here, Andy, is it's at times like this where the global network nature of our network really pays off because referring going back to my comments, look, we've got very difficult circumstances in a number of countries today because of continuing restrictions. But even in those markets, we're trading flat, which is very pleasing. But we've got a lot of markets improving. We've got countries improving. We've got the suburbs and the country side also improving from a stronger base. So it's that sort of variety of outcome that's giving us an average performance improvement that you can see in these numbers.

Okay. Can I ask a follow-up? Just you mentioned about people coming back to cities or towns or whatever. How do you manage it if they used to be on a kind of a full-time basis and come back to you and say we just want to be in the office for 3 days a week? How do you balance that out? Is that practical? Or can they not do that?

They can do that. And it is practical and they are doing it. Look, it's a simple thing. It's something called mathematics. So this -- it's basically yield management, it's as simple as that. So some days, the week are more attractive than others, but the price that we need we have to gain on the days that people want to be there. So if people want to use -- come in and use an office for 3 days a week, they effectively are paying for almost a week when they pay for those 3 days. It's not -- we don't divide the price up into 5 or divide it by 5 and charge that, that would be not possible. So in terms of the way the pricing works and the mathematics of this pricing, we've done a lot of work on this, and we will continue to do that. In the end, it's a margin business, and part-time use. Some people want that. We have no problem with that, but it's a different pricing mechanism.

Our next question comes from the line of Andrew Shepherd-Barron from Peel Hunt.