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

Thank you, everyone, for joining us this morning, and welcome to IWG's 2022 results. The world is transforming very rapidly in the way that people are working. We're benefiting from this as more and more companies move towards hybrid working. Our platform with more than 3,000 buildings in 120 countries is starting to become more and more relevant to a customer base that is growing with every month that passes. In fact, the only thing that stops it growing more quickly is the fact that all companies already had commitments. They already have leases. They already have commitments that they can't get out of all at the same time. And therefore, that slows down adoption, but adoption is happening rapidly. I've been saying for some time that hybrid is the future way of working. We saw prepandemic our best quarter 2020 -- first quarter 2020, as more and more companies started to adopt them. And that's really picked up as we came through COVID and into '22. So we're absolutely in the right place at the right time, and we're quite excited about the future. Why is it going to happen? There's lots of commentary, and it's all very confused about this is about work from home or work from an office. People don't really get it yet. But it's not just a way of working. It's a total change in the way companies manage and operate themselves and use their people. So in the end, it's about productivity from people. Most companies -- some major investment after infrastructure is in people. And the better you can support those people, the more productive you can make them. The more engaged you can make them, the more successful your company will be. And hybrid very much allows that to happen. So workers working in a hybrid way, which means work close to home, not having to commute vast distances to go and find a place to work or be asked to go to work in a location that's inconvenient makes workers happy. They don't necessarily want to work from home, but they want to work close to home. And for companies that embrace hybrid, they become more efficient, and they love the cost, so companies, a very strong driver. In particular, if you look at the backdrop of the economy last year and into this year, a very difficult economy where resources become -- people start to look at what they can cut. And CFOs, CEOs looking at this -- and I hear more of them saying, "This is a fantastic way that we can both cut costs, get better productivity and make our people happier, is brilliant. How quickly can we do it?" Well, they're doing it as quickly as they can get out of their commitments. On top of that, ESG, the environment, it's not going away. It's just going to get bigger and bigger. By embracing hybrid working, by stopping people commuting, commuting done over the Internet, you can have a very, very strong impact on your carbon footprint and your overall ESG rating by having happier people that are more engaged more locally and less empty buildings used inefficiently by people coming into offices in central business locations but also locations across the country from time to time rather than being occupied many all of the time. So the time is very much now. The drivers are very positive, and we expect to continue to grow the business this year. The old-fashioned way. So I was on the wrong slide. Apologies for that, but here's the text that goes with it. So just backing this up, and you've got a vast amount of research, lots of institutions, universities, measuring productivity before, after, during. And there's some very interesting reports that have come out over the last year and at the beginning of this year that are backing up this move and confirming all the things I just said. It's cheaper to what people want, and companies can be more productive. You've got lots of companies. You've got CEOs coming out and saying, "Yes, we're doing it. We're embracing it." An interesting one to pick out is Cisco. They did it a long time ago because they settled the tape that goes with this move. They did it about 5 years ago. They've saved $500 million, their number so far, and people are more engaged and so on and so on. But there's lots of this. It's very interesting. So the one I'd recommend, if you do want some bedtime readings, the one from Professor Bloom, Stanford University is probably the best. It pulls everything together and really supporting this change. As I said, it's very often misunderstood. So what's clear is that many people are more productive when they actually go to an office and work. It's actually the break between home and work. And it's a very -- it's good for your mental well-being. And I've said many times, I can never work from home. I'm just awful at it. I don't have to go very far, but I need to go somewhere else to actually be productive. And that's the same for many. We can see this across many countries, and we can see that even in places wherein you would not expect this to be the case, places like India where the homes that people are coming from are sometimes the best places to work. Here, the commuting is so bad that there's a high value put on the ability to work [ locally ]. And unfortunately, there's not the properties available, but people still are working in a hybrid way even in India. I was in Japan, 3 weeks ago, the most traditional country in the world in terms of workplace, rapid change in Japan. We sold our franchise there to Mitsubishi. We'll see that deal actually in these results. And Mitsubishi, when I met with them, they're doing it because they see that this is the future of real estate in Japan, the biggest land or the biggest investor in real estate in Japan. And they can see it coming. And why? Because the commutes are very long in Japan. It's a very traditional place, but when it changes, it changes fundamentally and rapidly. So Japanese corporations are also practical, but they're also having a real challenge to get talent with the declining population. So they're very focused on the well-being of their people, the productivity of the people. High adoption rates in places like Japan, which is, I think, a precursor for the rest of the world. So -- and companies are changing. If you look at just where we are today, London or New York. But London, so around you here, you've got companies reducing their space. And so where they used to have 1,000 people in a building, they are -- if they can get out of the space, they're getting out of it, and they will reduce down to maybe 50, 100 people that actually need to be here and some meeting space. And everyone else picks up an office near where they live. Some people work from home. And that is universally happening here in London. If you look at our co-work offerings and our drop-in offerings, they're off the charts, up, and that's as a result of companies closing down space but still having people coming in for meetings and so on. They just don't have the space anymore. So they're taking subscriptions with us, and that's a very high-growth part of the business, which is very attractive. It gets the most efficient use. It's the highest-margin products -- amongst the highest-margin products that we do. So it's a very good trend. A lot of people ask me. They said, "Look, is this the end of the office?" And I said, "Absolutely not. The office is very much here to stay. It's just that the geography of the office has changed. And the use cases have changed." In a digital world, bringing everyone together in one single location just doesn't make any sense because those people can collaborate and do collaborate much better over tech than they do sitting in proximity with each other. You only have to have teenagers, by the way, to see this. They will communicate across a dinner table on phones rather than speak and so on. So that's the digital world, and it really is impacting or will continue to impact the workplace. So office is here to stay. Geography moves. Use cases move. We benefit. We provide a platform to link all the properties together so that companies and people can use space and facilities and get support wherever they want to be. I described it earlier this morning to a journalist. I said, "Look, at the dawn of motor vehicles, people started to build gas stations, petrol stations all over Britain. Today, there's gas stations everywhere." So you can drive anywhere because you can fill up your car with petrol. It's a sort of network of facilities that people use. Everyone knows how to use it. Phone boxes, we used to have them throughout the country. People knew how to use them. Workplace will be the same. It will be distributed throughout the country, and the whole population of workers will know how to use them and access them over platforms. That will be the future for probably about half of white-collar workers. The other half need to be together because they're doing some kind of highly collaborative work: architects, marketing, things like that. They need to be together. But it's a -- the big change is definitely here to stay, and it's definitely something that we can benefit from in the years to come. Three things: you need that physical platform, which we're fast adding to. You'll be pleased to hear us, investors and our bankers present that we're not doing it with our own cash. We're partnering. So capital-light -- ultra-capital light means that we can grow very quickly. Albeit that we make less margin, we share the margin with our partners, but we can grow as fast as we can manage as opposed to having to think about investments. So it's a completely different setup. So the physical platform is critical. Being ubiquitous, just being everywhere trumps everything else. You can have the best building here in London, but if you don't have a national network, you will fly off against someone that does have it. You need a digital platform. We continue to invest in this thing. A lot of money every year, improving apps. We're very busy at the moment improving all the drop-in staff so that we can have -- we've got more and more unmanned locations -- inconvenient locations, and we need the tech to work much, much better than our people present to help and so on. So the physical platform, digital and then operationally, you've got to be super-efficient with people because that's our second biggest cost. You've got to be good at people, making sure that you're eking out your operational capability and making it work very well, also very important. So results. A fantastic set of results in terms of revenue growth. And that's -- we've got -- this is after a lot of restructuring. So this is the result of lots of openings and quite a lot of closure as we've rationalized poor-performing units. So when we were talking, preparing yesterday, Charlie and I, it's quite a different business to the business that we have in 2020. And it's got a lot of attractive characteristics. If you compare back, we're in at the lower cost. We've actually improved the margin much more than it looks. And we're growing very rapidly. Remember, the results here -- after our investment, we're not doing bricks and mortar, but we do have about 350 people supporting this very rapid growth because we have to project-manage these locations, get them open. We've got to get them filled up, and we've got to sell the partnerships in the first place. So that's quite a lot of investment -- discretionary investment that we did last year that is reaping rewards. We're very happy with it, but the results would have been even better had we not made that investment. Cost, I think, is an outstanding deliverable that we delivered on in the past year. And we've always been focused on cost. Those who have followed us have always commented on our ability to lower overhead and become more efficient. And we did this in 2022, holding overhead flat or central cost flat, which took effort and focus and a lot of planning to get done, but actually, we were successful with this. And more important, I think, at central level, there's a lot of inflation out there. It's certainly well publicized, but we managed to hold costs down quite well during the year. So we did not -- our cost did not reach an inflationary level because we were able to become more efficient during the year. And that sets us up well for this year. And we continue to focus on getting maximum efficiency at central level so that we can keep moving the margin up. We have much better cash flow last year. That's -- we are focused on cash, and we're happy with the improvement in cash, the focus this year as well. We expect to see a step-up in cash flow from both EBITDA but also other initiatives that will help us manage working capital better and give us a good cash outcome in this year. And obviously, then profitability and so on coming back strongly. And again, into this year, you will have consensus. We expect to have a good year this year. We're set up well for that with where we ended the year. That sets us up well for going into this year. Strategic focuses. We've talked about this in previous presentations: super focused on margin, control the costs and move up the revenues, grow as quickly as we can manage. It's not -- we could grow more quickly, but we couldn't manage it. So we're growing to rather the edge of our ability to manage. And just to put this in perspective, we've opened up in a single year as many as we opened up in 10 years before. So you have to be well organized to get this to work well. For us and for our partners, we have to perform for partners and get them their margin, and then they will do more with us. Many are doing this. Some of them were up to 30 buildings already where they get good success. They do more with us. They expand locations and so on. So that's important. I'm sure you're going to have some questions about work and the beautiful platform, but we're really happy with this investment. Again, going back to what we said, we'll move our digital assets, and we've done this. It's a high-growth business. It is growing very nicely. We will, at some point, probably take an interim funding position from a third party. And we will IPO this business separately. So all of that -- we set that all out. When we invested, nothing's changed. We said at the time that it will give us a second horse in the race. And we've got IWG. Worka is a fantastic second horse that enables work to approach the rest of the market. Remember, we're part of the big things going on. We're the market leader, but the market itself is 8x our size. It's a much bigger market to go for, and that is what Worka are doing. So we're happy with that. [ Very supportive to ] strong cash, ESG, we'll be carbon-neutral this year. We're doing that for all -- we've improved our rating MSCI -- what is it, MSCI?

AA.

AA. Okay. We want to try and get that AAA, whatever it is. I'm sure someone knows what we have to do. But the most important thing for us is to become carbon-neutral so that we can sell this to our customers and be carbon-neutral ourselves. So it's important for our people, the company itself, for the planet, et cetera, et cetera. But our customers also want this. So our investment into carbon neutrality helps us in our ability to support customers at the same time. And with that, I hand over to you Charlie.

Good morning, everybody, and thank you, Mark. I'm delighted that this is the first time I take everybody through the numbers. We've seen significant revenue increases across the board, in particular with Worka. All segments have seen -- individually seeing margin expansion through 2022. As mentioned before, we signed another 452 centers, of which 421 are capital-light. This will drive a further increase in capacity. We already have a 26.5% capacity across our open estate, with occupancy at 73.5% during the year. Occupancy during December was the highest point during the year. Additionally, our ability to increase prices is highly correlated with inflation, and we have seen embedded pricing up 7% over 2022. It's worth bearing in mind that this embedded pricing, which continues to increase its contracts early. The group returned to operating profitability during 2022. This was impacted somewhat by pandemic restrictions, specifically in Asia and China, in particular, during the first half, with some inflationary and the interest rate pressure coming later during the year. As mentioned earlier by Mark, this is a record revenue year for IWG, both from systemwide and also a reported basis. We saw strong revenue recovery across occupancy, pricing and services, with some revenue reduction from center rationalization, albeit at a positive EBITDA perspective as you'll see on the next slide. Additionally, we saw just over GBP 200 million of additional income come through our investments in new centers, partnership and franchise agreements and our investments in Worka. Moving forward to EBITDA. In order to simplify how we talk about our financials, we've largely presented our numbers on an IFRS basis, basically as we report. The exception was on EBITDA, where we focus on alternative performance measure in line with IAS 17. The primary difference between the 2 measures concerns the impact of operating leases vis-à-vis the rent. A reconciliation between the IFRS EBITDA and EBITDA before the application of IFRS, which you see here, is in the appendix. We show a bridge from IFRS EBITDA to EBITDA before the application of IFRS to cash flow on the following slide. [indiscernible] is also in the RNS. You can see how this all translates through from one to the other but, most importantly, as Mark also mentioned, to cash. As a result of our revenue rising faster than costs, we have an increase in EBITDA from our existing business fully impact our investments by GBP 140 million to GBP 220 million. You can see occupancy pricing and services revenue, the increase following through from the previous page. So basically, the first 3 green blocks are exactly the same as the first 3 on this page. Alongside this, we've seen some [indiscernible] cost increase, primarily due to property service charges and the cost of delivering our services that we've also increased. In terms of rationalization, as you saw on the previous page, loss of GBP 81 million of revenue, but the net impact to EBITDA, we've increased to GBP 31 million [indiscernible] you can reduce the cost of new centers with a GBP 112 million saving. Regional overhead has to be increased as a result of additional marketing spend and our investments into our team signing capital-light centers. We're also seeing the benefits of our investments, including EBITDA from our new centers but also franchising partnership fee income, which comes with a very high margin and also Worka. Including investments and FX impact, EBITDA has increased by GBP 228 million to GBP 308 million over the year. And adjusted EBITDA is slightly higher at GBP 317 million in 2022, but we show the figures on an adjusted basis for a sense of comparability on a year-by-year basis. We announced our cash flow statement from IFRS profit -- sorry, IFRS operating profit through to EBITDA before the application of IFRS 16 through the net cash flow for the year. It's important to note that accounting standards do not impact the net cash flow for the year in any way at all, and nothing below cash flow from business activities contains noncash items. Whilst growth CapEx increased during 2022, which is a result in legacy center signings, and we expect net growth CapEx during 2023 to be about half of 2022 level, as Mark alluded to earlier. It's important to note, however, than some of the largest price increases globally, in particular, energy costs, represented a small amount of our overall cost base. In our case, electricity costs are only 2% of revenues, albeit have increased marginally from around 1% of revenues previously last year. Overall net debt would have fallen by about GBP 90 million in 2022, were it not for our discretionary investments in growth CapEx and the acquisition of The Instant Group. We have a strong cash flow generation profile. And as Mark mentioned, we expect this to continue. Our balance sheet continues to strengthen, albeit a lot of the numbers impacted during 2022 by the acquisition of The Instant Group. As revenues have increased, so our customer deposits as well. I think as everybody here knows, we took out a nonrecourse GBP 330 million bridge when we acquired The Instant Group, which is repayable during September 2023. The growth balance of that was GBP 270 million on 31st of December 2022, albeit the net debt is significantly lower than that, and we disclosed that and the detail of that within the RNS statement. We also have a convertible of GBP 350 million face value, on which we pay 0.5% interest, which matures in 2027, albeit there's a certain bondholder option during 2025 at par. I will touch briefly on our network. We have a very unique profile from 2 perspectives. Not only do we have the largest network globally by far, but we also have a number of brands within it. And we continue that brand diversification under the capital-light model. At the end of 2022, 43% of our network were in some sort of variable rent scenario -- or variable revenue scenario profit share. We opened a total of 152 buildings during 2022, a slightly increase from 2021. We continue to focus strongly on individual center margins and, as a last resort, look to rationalize our center portfolio, as Mark discussed earlier. As well as having the largest network globally by far, we are also present in 120 countries, far more than any competitor. This is reflected by vast geographical earnings as well. For the first time, we've also split our Worka, with a GBP 117 million pro forma EBITDA for 2022. We've also changed segmental reporting to include the U.K. within EMEA, given that the U.K. is not our largest country on either a revenue or center basis but has some of the characteristics with the rest of EMEA. I can tell you how [indiscernible] that for 2022, U.K. revenues are GBP 386 million, and operating profit has increased from a loss of GBP 34 million to a profit of GBP 13 million. Again, we detailed that in the RNS statement. ESG is hugely important to IWG but also for our clients. You've heard from Mark earlier how our core strategy of hybrid working is best for our clients, shareholders, employees and the planet. We delightedly expect to be carbon-neutral during 2023, and we'll update the market accordingly when this is achieved. We've also been upgraded to AA by MSCI, as Mark mentioned earlier, from an A rating last year. We continue to strive to be outstanding in the ESG, and we're targeting a AAA rating, which is the highest possible rating in ESG. Going forward to 2023 and the outlook. Underlying EBITDA after December was around GBP 30 million for the month. While 2022 is a fantastic year, we're seeing many economic headwinds outside of our control, in particular, inflationary factors. And as a result, we remain cautiously optimistic for 2023 overall. And with that, back to Mark.

Do you want to stay around? Right. Just to conclude, an excellent year in '22. Record revenues, footprint growing, more and more companies moving to hybrid and huge market opportunity as we come into '23. It's a year of also doubling down on the strategy, keep improving the margin. We grow the work of business, focus on cash, get the highest ESG rating, get to carbon-neutral. So all the things we've set out in past presentations, we double down this year. It's, I would say, a more difficult year. Economy-wise, a lot of volatility. But we've got off to a good start this year from an excellent end to '22. And the sort of -- as Charlie said, cautiously optimistic as we come into the year. But there are headwinds. It's certainly not a free pass here. A lot of hard work needs to be put in. And I'll just end by thanking our outstanding team members around the world for all the work they put in last year, the support from our customers and now an ever-growing group of partners that also are very much bought in to the strategy and to the use and the job we do for them. And I'd say, the more properties they put on the platform, and they themselves become evangelists for this move to flexible and hybrid working. So thank you to them. And with that, we'll open up for questions.

A couple from me. It's Michael Donnelly from Investec. One on Worka and one on the group. On Worka, first of all, I think in Page 11 you talked about the contribution you expect over the next 5 years, about 36%. Can I just check, are you talking about the EBITDA margin on the Worka business? You speak about in relation to your other businesses, where you've got a 5-year sort of expectation. And then the second question on the capacity in occupancy, you spoke about 26.5%. If I go back sort of like a decade, I think the comparable highest number was about mid-80s or something like that. Is it realistic? Or is it meaningful to talk about that whole delta as capacity? Or do you end up with sort of problems that you don't want to have that you push it up a bit too high towards the 100% level? Or is it all -- could you fill this place completely and it wouldn't fall off?

So I'll take the first one. I'll talk about capacity and pass it to Mark, Worka. So I think overall, on capacity, the way we think about it is all about margin. And then you -- so with that, you basically got the push and pull between capacity and pricing. Clearly, we don't have all of our [indiscernible], where you've got 1 person paying GBP 1 million a year for 1 desk. But at the same time, you're going to have all the tenants [indiscernible] but not anything. I think the main thing that's important about capacity, though, is you can see the fact that we have the capability to increase utilization of our centers. So it's normal that we're pushing up against the possibility right now. And I think with that 26.5% capacity, that gives us a lot of opportunity to increase the number of people coming to our doors.

Thanks for adding, Charlie, that occupancy is only long-term occupancy. It's not the total revenue from, for example, office. It does not include co-working income. It does not include drop-in income, and that -- in addition to the occupancy coming up, you also got the drop-in revenue moving up as well. So it's quite an attractive situation. But as Charlie said, it's all about margin. So we hope there's lots of levers that are being used and that data is good and improving all the time. We've got a lot of focus on how do you plan all those things. The worst outcome for us is not having capacity actually because that lets customers down. You have to plan in advance. And we do have that problem. It's a quality problem, but we do have it in some places. So we need to get more openings, in fact, in most places. On the margin of Worka, do you want to go for that?

Yes. So look, I think sort of where the margin Worka is at the moment, we disclosed that the first time, and we showed that on a pro forma basis in [indiscernible] and group as well. I don't think we see any change long term to that margin. That business overall [ as Worka ] is a great business. It's managed independently from either the [ regimes ]. And we'll update the market [indiscernible] appropriate with our strategy on that.

I think the key on that one as well, it's a full-on platform business. You had no very little CapEx, very high cash conversion, good gross margin, and it benefits from scale. So the margin or decline can move up with scale. It really benefits from scale. Remember, it has huge opportunity just like we do. It's doing the rest of the market, and the rest of the market is 8x bigger than we are.

Samuel from Stifel. Three questions for me, please. Firstly, on Worka. I think, given the EBITDA, are you able to -- is there any sort of more buckets into what's actually in there? Secondly, in terms of the growth this year in EBITDA [indiscernible] maybe 400, how much of that would be Worka? And how much of that would be the rest of the business? Just trying to get a sense of momentum in Worka itself. And then finally, on leverage and net debt. What sort of metric do you think this business should have going forward?

So I think on the first, with Worka, I think as everybody knows that, that sort of [indiscernible] our business eventually [indiscernible] additional asset. We'll do an update on more on that sometime in due course, but that's essentially where we are with that. On the EBITDA, overall, for the year, we basically see everything firing on all cylinders to sort of increase, hopefully, EBITDA this year. There's a lot of bases coming from one particular statement overall. It's broadly across the whole business. And then I think -- so that when we think about leveraging net debt, we'll update the market in due course when we sort of finished doing what we've committed to Worka, which market, which Mark alluded to earlier.

James Zaremba, Barclays. Just one follow-up on Worka. Can you comment on how complex it is to operate independently from the non-Worka group? For example, if it does work, do you utilize any of the non-Worka group locations or any of its services? And then secondly, on capital-light, do you have any expectations for how many operation centers you signed in '22 or open in '23 and what contribution it could make? And then lastly, on the pandemic network rationalization. What was the cash impact of that in '22? And any expectations for this year?

[indiscernible] They're quite separate. I mean, basically, the Davinci business is -- has a lot of homeworkers. So they're not attached as such. They're -- exclusively, people are working from home, and that's -- it's very attractive from a platform usage because you have large numbers of people. So -- and it's using -- they drop in to our centers -- to our network. So that's a network-wide application. It's not limited to us. And it is completely separate. Basically, so it's not complex. And it needs to be detachable, in any case, if we're going to take investment and if we're going to like the [indiscernible]. So for all of those reasons, it's been designed to be like that. And our digital assets were quite easy to transfer because they were already independent. They're sort of not attached to real estate. For capital-light contribution, Charlie, I mean this is time basically, time and revenue in percentage.

[ The time ], it takes around 18 months to kind of get to scale on the revenue and the openings. It's worth bearing in mind that sort of we signed a very large bulk of those capital-light contracts in the back end of last year. So when we're thinking about the impact financially in '23, I'd say it's not huge. But this will start to really sort of deliver that momentum going into the end back in '23 and also start of '24.

And it's not -- it's a very helpful addition to EBITDA, but it's just not a large addition. It does probably get us to breakeven on our investment in the people in the [indiscernible]. So we invested, recovering the entire cost and a bit more in the year 2 of operation. So -- and that's the way we look at it. But you're just continuing to build these centers. But signing centers means nothing. It's the ability to convert them into revenue. We're paid on a percentage of revenue, and some on the percentage of revenue and profits, therefore, it's important we generate revenue and returns from our partners in that. And it happened in some of the early ones that we've done. And if you look at them over and track them over the course of last year, very, very good outcomes for partners and for us because those same partners expand.

And then the last one on cash impact during '22 from closures. So there are basically 2 costs when we have closures. One is the cash impact, and the other one is basically effectively writing off the future liabilities in the rent. The cash impact is relative to -- we do disclose the center closure costs, and there's some really where you'll see on Slide 11 [indiscernible].

Andrew Shepherd-Barron, Peel Hunt. A couple of questions or maybe 3, if I may. One is just on Worka, a modeling question really. What was the -- given the Q4 run rate on the rest of the business, can you tell us what it was within Worka and what Worka, in its integrated form, some kind of growth metrics pro forma basis, revenue, EBITDA, whatever? And then on the core business, I'm sorry, well, core business [indiscernible] the business, can you talk about what the embedded price exit rate was compared to actual current achieved prices? Just to give us some sense of momentum. And whether or not your rents in general costs are now at market level, where do you think they stand? Is there more work to do?

So talking about and starting with Worka on Q4, actually, I think it's, from a modeling perspective, you've got the exit rate in the pro forma for '22. You just kind of assume that as a real straight line, but you're seeing that strong revenue momentum continue. And that translates from fairly good operational leverage as Mark mentioned earlier. On the core business, again, sort of from an embedded price perspective, I think the way to think about is -- around that is again it comes to -- obviously, we can't adjust the embedded pricing until people renew or we get new people coming through the door. Again, that's fairly well-correlated inflation. You can sort of see how that's developed during 2022 by going up 7% year-on-year. Clearly, that's an average, and we do see that continuing to go through with pricing momentum at the end of the year continue to be strong. And then sort of when you think about rents and market levels then, I think the most important thing here is that rents are below peak levels on from -- on a price per square foot basis versus Q1 2020. So I think what you are seeing is, to your point around sort of market rents moving, there is a correlation between that happening. So as long as those [indiscernible] very high, we are seeing that sort of expanding margin coming from that.

Just a couple of additional points that I'll make [indiscernible]. So while the rents are -- some rents are going up. Some rents are going down. It's not -- some places are more attractive. The rents also, some of them are index-linked. A lot of them are now variable. As Charlie said, over 43%, 44% of variable and management contracts and so on. So that takes a lot of them sort of out of contention. And obviously, the rents that we're paying is actually a good performance in rent overall. To be neutral on rents from '20 to now is quite good. But it's a tale of 2 things going on. And remember, in some high-inflation countries, Turkey, 85% whatever there's -- these are -- there's quite a lot of inflation also out there. And just to add a bit more color. The actual prices we're achieving are higher than that embedded price. So we've got some safety cushion in there as we go through into this year. But also you've got inflationary headwinds of the capacity as well.

Calum Battersby from Berenberg here. Just one question on occupancy. Would you mind updating us on where you ended the year versus the average position for '22? And then expectations for the year ahead, do you believe there's still a postpandemic catch-up to come in, in the main markets? And is there any way you'd expect occupancy to be back in '23?

Yes. I think, first of all, I would say, and I can't stress this point enough, it's all about margin, right? So occupancy is a very important factor into that margin calculation, but though, it's all about occupancy and price. But what I can say, though, is -- and I think I mentioned this in the slide, that occupancy in December was the highest level during the year. So occupancy [indiscernible] will continue to go in the right direction. We still do have a lot of room to go there, but we see that as an opportunity. And I think what we're seeing from that is the EBITDA exit rate of around GBP 30 million, again, sort of provide some of that momentum into 2023. But it is all about margin. So they're absolutely fine for what it's worth, but occupancy goes on a little bit if the pricing stays flat to increasing. Likewise, we're happy to see a little bit of movement in price and pay that occupancy trade-off. It's all about the margin.

Is there any way we're sort of seeing this go down during year?

I don't think we've seen any trend anywhere on that.

And we got -- you got a slide. We've got a following win now with China opening. That had quite a dramatic effect, not just because of China, others in China. It's a medium-sized business for us. But it's the effects of China being closed on the whole of Southeast Asia. That sort of lack of travel and interaction has an effect, and we can see that opening out this year. So we did okay in China, but so we did go down, but we didn't go up as much, but that should pick up this year. And it should have an effect on the rest of Southeast Asia.

Daniel Cane, Toscafund. Given the direction of the travel is clearly capital-light and the capital-light model and as far as a better rating in the U.S. markets, I wonder what sort of consideration the Board has given to the possibility of a U.S. listing?

We're both keen to answer this one. As you know, Charlie was -- [ did ] a U.S. listing. Absolutely, we're considering this. I mean anything else that will improve value for any stakeholders, this could do. More than half of our business is in the United States. We are something like 65% dollar already, but it's not high on the agenda. But the strategy, margin, cash flow, capital-light growth, they will come first. But we should be considering this in the interest of all investors.

We've got time for one more for this one.

A follow-up in terms of the kind of representation of volume of non-Worka and Worka. You previously presented some targets for contribution for the company-owned business. Do those change at all, now, I guess, some assets have been presented as Worka, the GBP 900 million contribution target and things like that?

Good question. Yes, they changed. That contribution included everything. And now you're taking some of that contribution. You're moving it to what we hope and expect will be an easier-to-understand higher-margin outcome with a higher multiple outcome. That's -- it's a very clean, more-easy-to-understand company that's going into. But yes, there is some downward pressure there.

Thank you very much, everybody.

Thanks very much, indeed.

Thanks for coming.