Welcome to the IWG 2020 full year results. My name is Molly, and I'll be your coordinator for today's event. Please note that this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I would now like to hand the call over to your host, Mark Dixon, Chief Executive Officer, to begin today's conference. Thank you. Thank you, Molly. Good morning, everyone. Welcome to the virtual presentation of our results for 2020. Apologies for the technical delay here, but some attendees have had some difficulty joining, which we'll look into for next time. We're changing the format of today's presentation to spend more time on outlook and vision. We think this will be more helpful than focusing on the aberrations of 2020. 2020, without question, an unforgettable year, the most challenging year by far, but we emerged from it with probably the most exciting outlook in all of the 30 years in our history. If we look back to 2020, we kicked off with a record performance. By April, life had changed for almost everyone. We took quick, decisive actions, rationalizing the network, reducing costs across the board, and negotiating with our landlord partners. All of this resets the business and positions us strongly for the future. We also had to invest heavily in new protocols to protect the health and safety of our customers and our teams. Our teams worked tirelessly through the pandemic, keeping our centers open pretty much continuously throughout the crisis. We support thousands of customers in critical industries, helping them keep going at all times. In addition, we provided approximately GBP 100 million of support during the year to struggling customers. The cost savings from all of the actions taken in 2020 are anticipated to be in the range of GBP 325 million-GBP 375 million on an annualized basis, and we've taken a one-off COVID-19 related charge of GBP 379 million. These are long-term savings. The estimated cumulative benefit to IWG is approximately GBP 2.4 billion. A painful exercise, but with a future payback and a key building block to our recovery in the future. As you can also see in the results today, we reduced CapEx in both growth and maintenance during the year. Looking to a few financial highs and lows, given what was thrown at us from April onwards, to close the year with an open center revenue growth of 0.5% is quite remarkable. Total revenue down 5.3% largely reflects the significant rationalization of the network during 2020. We opened during the year 141 locations, which would have made a small initial contribution to group revenue, but we closed 217 more established centers. As I said, it was a bad year, and therefore printing an adjusted operating loss of GBP 174 million is not a surprise. This loss is adjusted for specific COVID-19 related non-recurring charges. Cash generation at center level remained a positive feature to the business model. We successfully raised GBP 680 million of new capital through an equity offering of GBP 320 million and a convertible bond offering of GBP 350 million. We ended the year in a very strong financial position with net debt of GBP 351 million, a position that has since improved, which I'll comment on a little later. With that, I'll hand over to Eric to go through the numbers. Eric? Indicator of our business. Eric, we can't hear you. Please ensure that your line is unmuted and go ahead. Okay. I think, Molly, I think Eric's got a technical problem, so I'll pick this up. Okay. I think you can see the numbers here for open center revenue up by half a percent, which is pretty remarkable. Pre-IFRS 16 EBITDA of GBP 255.9 despite COVID-19. Operating loss in line with management expectations impacted by COVID-19. Lots of rationalization in this. You can see here the numbers, and we put a provision in here for expected credit losses. There's also transaction costs for deferred deals. These were MFAs that were in flight. Clearly, some of those discussions have restarted now, so those investments may come to the good as we go through 2021, 2022. Other restructuring items here of GBP 36 million. As I said in my comments, look, cash flow I think was a highlight of last year. In almost all the months, we had positive cash flow at the center level. There was negative cash flow only at the end of the year as we started to complete more restructuring deals, which involved some investment. Those were high-quality investments for the future, but needed to be done at the end of last year. In addition, as we come into the beginning of this year, we're completing a lot more deals. Again, you should expect small negative cash flows at the center level as we complete the restructuring. Overall, cash position strong, clearly helped by the addition of capital from the equity raise and the convertible bond. Moving to future vision. I'm going to go over here the shape of the recovery, the sort of market changes, which are quite exciting, and I think bode very well for the future. A sea change in the way corporate clients are engaging with us and buying from us with the best corporate sales in our history. I think one of the other key messages today is that growth is moving ahead of pace, almost all of it capital light. We've added some small, very attractive M&A additions. None of them are large, but they are very interesting and help build the business of the future. Looking at the likely recovery shape, not all countries, regions, or even cities are alike in their recovery profile. What we can clearly see is a marked improvement as we end February, with clear multiple inflection points reached. Even with this improvement though, Q1 and Q2 will continue to be difficult company-wide, with a stronger recovery beginning as we move through Q2, where we expect occupancy services to improve further, followed by price. Then, of course, the additional revenues from new membership cohorts providing additional support. Overall, expect a tough but improving H1, followed by a rapidly improving H2. This forecast is still a work in progress. Today, we're still in the eye of the storm, we think, but the signs are good with many, many more places reaching inflection points. Just to make it clear, some countries and cities in Asia are already through to the other side, and are showing very good results. There's just not enough of them at the moment to influence our overall numbers. The really good news, I think, is that hybrid working is becoming the norm. It's really been a transformational year for the industry and a pivotal year for IWG. I don't think anyone thought a year ago that hybrid working would become the norm, but it actually has. We believe strongly that the move is permanent for many companies, and the shift definitely is in our direction and very helpful to us in the future. The debate's going to go on for a while about how many employees will remain working from home, the future of corporate headquarters, and so on. What is for sure that is, in our view, the way people will work has fundamentally changed. For the majority, it will be much different to what it was at the beginning of 2020. As you know, we've been preparing to be the leading enabler and beneficiary of this trend, and we've built out the largest coverage both in urban and suburban locations. We've developed more and more service offerings to support employees in this new working environment of distributed working. You can see that one of the highlights this year is the growth in our virtual office and home working product lines, which are one of the few things to show very good growth during the course of the year. We've also added completely new services such as Rovva and Home to Work, which are really catering to this new group of people that work from home quite a lot of the time. We believe there is a massive opportunity opening up for us, and we're absolutely ready for it. You can see here, I mean, this is just a small collection of articles. I mean, there are articles each and every day, multiple articles worldwide. We had our best month, in the month of February, in terms of people talking both about the future of work and about our business. We think this is a mega trend that's underway. It's going to fundamentally change the real estate industry, and this is part of it. The fact that everyone's talking about it, most people think that hybrid working and flexible working is a good idea. As you can see from the deals we're winning, a lot of companies are voting with their feet and moving towards a much more flexible environment. Lots of studies out there, you'll find lots of them on the internet. This happens to be one from Ernst & Young. They're talking about six major resets in the workplace. Obvious stuff, where companies are reevaluating how they provide physical workspace. They're looking at learning, they're looking at culture, well-being of their communities, and the whole impact that digital has had on the way they can work in the future. There's so many of these studies. I think the busiest parts of the consulting firms are the ones consulting on the future of work and how companies can support people in this new digital arena with more flexible working. For companies, they're very much focused on getting better talent, keeping the talent they have, but also in cost control. They're very focused on capitalizing on the changes that were forced on them during 2020 and making it something much more permanent for the future. We don't see any means of going backwards now. Favorable tailwinds, the growth, we already saw it happening at the beginning of 2020, in that first quarter and at the end of 2019, with more and more companies looking to change even then. COVID-19 has massively accelerated this direction of travel. The scale of change in our market has, in our view, brought a decade of evolution in just 12 months. We've shared these drivers with you before, but essentially there are three strands. It's better for employees, it's better for companies, and it's good for the environment. In a few moments on each, there's lots of studies out there and evidence that people are embracing hybrid working for the benefit that it brings. It reduces commuting. Everyone agrees that carrying your computer and phone on a long commute to go to a place of work to use them just doesn't make any sense. The release of time, the cost savings in less commuting, are very much attractive to what people want. A lot of people, though, don't want to work from home all the time. They want to work from home some of the time, work from a local office some of the time, and then come into a headquarters some of the time as well. That is hybrid working. That is what people want now, and we think more and more into the future. For companies, cost savings, Ernst & Young in their study showed that there's a saving of GBP 11,000 per person per year for companies embracing hybrid working. Now, that's too much of a saving to ignore. This is one of the key drivers. That, plus you're going to need it to retain or obtain the best and most talented workforce in the future. Finally, it helps our customers to improve their own sustainability practices to the benefit of the environment. We think that the environment is the real elephant in the room. Once COVID exits, at some point, it's going to be the environment that's going to be front and center in agendas. ESG was already moving strongly up the agenda of boards across the world. Many of you probably on today's call, probably work for houses that closely monitor ESG and one of the growing number running ESG fund mandates. This all reflects the importance it has to investors and to the world community at large. Our support for ESG for our customers in multiple ways can make a real difference in their goals, and it's another strong driver for change in the future. That change is coming through. We're converting this sort of forced experiment for 2020 into new enterprise wins. We've already mentioned Standard Chartered, Nestlé, and others. The exciting thing is, we haven't had time to do a full slide here, we've signed up half a million people just in the last two weeks. We've got a million more members and users in the pipeline, you can see here some of the companies that we've signed up. NTT was signed over the weekend, 300,000 people. The companies are actually using it to show that they are embracing a new world of work themselves. It's quite exciting. For us, huge opportunity. What all of these companies want, though, is coverage and a great platform that makes it easy for their people to use the space when they need to. Again, as we onboard and as we do due diligence with these customers pre-contract, that is what they are looking for, and we provide it to them. We're rapidly evolving into our new model. This is a model we put forward a couple of years ago. Remember, the old legacy approach was we had a platform, but we also invested in the physical network, both leased and owned, and we'd invest and then harvest the returns. The opportunity we face today is far too great for us to achieve on our own with that old model. Going forward, we are increasingly looking to achieve our growth through investing more in our platform businesses, and we think this will grow exponentially, the platform itself, whilst growing the physical coverage rapidly using franchising and management contracts directly with property companies to grow the business into the future. We see a future opportunity here also to create property funds, and we're working on this project at the moment. We own some real estate. We know that there is a huge potential for specialist funds in the future that provide flexible real estate to the market. We're looking here to partner up with leading fund managers and investors to create funds around the world to provide the space that companies need for the future. Briefly on growth and deployment on capital. The punchline here is actually we've got plenty of growth without much capital deployment. It's quite a good news story. We said in our year-end trading update that we deployed GBP 300 million of capital in the fourth quarter. As I think most of you are aware from press coverage, a good portion of the money deployed was used to acquire the debt of a London-based rival with the aim of ultimately acquiring the operating business. That did not happen. We received our cash back plus a surplus. The cash is back in our coffers. Deployments so far have been small and almost all of them being small bolt-ons, and you can see a few of them here. The Wing, which I'll talk about in a moment. We've got a European competitor, which we've exchanged on but haven't completed. Most of the others are smaller service company bolt-ons where we can buy smaller companies either in digital or PropTech and then grow them across our platform into 120 companies. We have fantastic distribution. The platform becomes a much more exciting part of our business. Capital-light expansion goes on apace with very strong performances in franchise and in management contracts. Just a few minutes on The Wing. This is quite an important brand addition, and a good example of taking a brand and then growing it across the platform as we did with Spaces. We became the lead investor in The Wing about a month ago. We're co-investing with NEA, New Enterprise Associates, a U.S. venture capital firm, Google Ventures, and Sequoia. This is a company founded in 2016. It's a market-leading community co-working space designed especially for women. It's got a very strong networking membership, huge social presence, and it achieved very good growth prior to lockdown. We think this is a business that we can grow substantially, both in the U.S. and internationally, and create a very exciting brand. The combination of our ability to roll brands out and The Wing team's ability to work on the concepts and keep improving the concept, we think will work very well. We're quite excited about this one. We think this has a lot of intrinsic value that can be released in the future. Just to focus for a few moments on our brands. We have them here, and we haven't spoken that much about them in the past, but we think that these brands have huge value. As we add more, we will add more brands to this. We end up with really a choice of a brand that our partners can choose for each segment. We know that with The Wing, that this has been very popular with our partners who are very interested in this segment, and this will enable us to grow that brand much more quickly across the Services platform using the capital-light growth model that we've talked about already. The brands are important and valuable and we think are somewhat overlooked. As they grow, they have a value in their own right. Just to look at franchising, because this is really the cornerstone of growth going forward. Despite the unprecedented challenges of 2020, we've added more franchise partners, in fact, more in 2020 than we did in 2019. Here's a few of them pictured here. I think, look, the key thing for me is, having spoken to all of them, these are great entrepreneurs. They've got proven track records in other industries. Many of them are serial franchisees, so they're very experienced business people, and they are already growing and doing second or some third locations. This will accelerate our growth moving forward. I can also say that notable news in the first part of the year is that we've signed our first and now our second franchise partner in the U.S. We've added new partners in Togo, West Africa, and Libya. I think even more importantly, MFA discussions have restarted on a number of fronts, so we're quite excited about that as well. Finally, to sustainability. We, as a group, are also looking to continue to improve our sustainability performance, and it's high on our agenda. We focused on energy management, installing many measures, automatic lighting controls, self-adjusting building management systems, and then choosing new buildings where possible that meet the highest environmental certifications like LEED or BREEAM. We continue also to improve waste management, and very simple examples here, removing plastic water bottles, replacing with glass bottles, taking out coffee machines that have sachets and replacing them with bean-to-cup machines. Simple things, significantly reducing waste. We've also, you can see in the left-hand picture in Oslo, upgraded and expanded a tired 1950s building. The whole of this was done with pre-used materials from a total of 25 refurbished and demolished buildings in the area. This included office buildings, a school, a swimming pool, and a care home. This we were involved with, and it was one of Europe's most exciting and important development projects. The positive environmental impact has been immense. Using existing projects to rebuild this building reduced the CO2 footprint by up to 95%. We've also, in the right-hand picture, you can see new center in Napa Valley in California. This reusing retail space, again, fully recyclable interior. You can see here lots and lots of plants. If you go there, a lot of the air filtration is being done actually by the plants. Very excited about that, and we've got more of these rolling out, in particular into resale centers around the world. Overall, this all helps us move towards our ambition of achieving carbon neutral status over the next five years. Outlook. We're at a definite inflection point in February and March with more cities, more countries becoming more positive. The recovery will take time, so expect a tough but improving H1, followed by a much, much better H2. We've got huge increases in enterprise interest and sales, and this bodes well for the future. Franchising and partnering is moving growth to a new level. MFA discussions have restarted. IWG is absolutely at the nexus of a substantial and lasting change in the world of work. Hybrid and flex working will become the norm for many and we're the world's leading integrator enabler of this trend. With that, I'll now hand back to the operator to open up for questions. Thank you. If you would like to ask a question, please ensure that your line is unmuted locally. You'll then be advised when to go ahead with your question, star one. We do have some questions coming through. The first question comes from the line of Calum Battersby calling from Berenberg. Please go ahead. Your line is unmuted. Yeah, morning, guys. Thank you for the presentation. Two questions from me. First, I was hoping to understand how we should think about these new enterprise contracts signed. The way I'm trying to think about it is if you signed 1 million new members, and we say that half of those workers spend one day a week in your offices, that's 100,000 new occupied desks. Is that kind of the correct way to think about it? Would you expect the members to be in the offices more or less than that? Kind of there's something you can say to that end. Secondly, if we look at the results by cohort, the losses have unsurprisingly come from the new centers where you haven't signed new customers as you usually would, and those centers have therefore been more loss-making than we typically see at this stage in their maturity curve. I'm just wondering if there's anything that you can do to get these new offices to profitability, or is it just a case of the group-level cost savings protecting the P&L, and then we have to wait for the market to recover before those kind of sites go from being loss-making to profitability? Thanks. Thank you. Look, the shape of these enterprise contracts, it's an interesting one. Many of these contracts are not just for members. These are also for hub and spoke. They involve offices and other products. It's not singular products. In the end, it's the company itself moving towards a much more flexible sort of operating support for their workers. It's not one thing. However, in terms of the members, it takes some time, we know this from the early ones we did, to onboard the customers and train them how to use the product. It's a bit like using Uber for the first time. It's quite straightforward, but you've got to get people to do it, and then once they get used to it's very straightforward. It takes time to onboard the customers. If you look at Standard Chartered signed, whatever it was, a month, six weeks ago, we're getting good use from Standard Chartered now as people get used to using it. It takes time to come in. I think in reality, although it's early days, we're sort of banking on quite low percentages of daily users. You have a large signed-up base that use you occasionally as opposed to using you frequently. Some will use frequently, but on average, we think the usage will be quite low. If you're signing up one and a half million people, even if it's 1% of users, that's still 15,000 people a day. There's a lot more coming in the pipeline, Calum. That's the issue here. Our challenge really, and we think it's very much a growth challenge in terms of getting more locations in places people want to be, that will lead to more use. If it's convenient, people will use it. This is a good first step. It opens up the companies to doing more business with us, not just membership. It's going to bring very attractive earnings in the future. In terms of cohorts, look, it is very clear that new centers are filling up more slowly, but they are filling up. It's just happening more slowly. Normally, new centers have a drag anyway, but that drag is a higher drag because they've opened up at the wrong time. Somewhat it depends where they are. Centers that were opened up in the suburbs, the provinces, have typically done quite well, and ones that are in downtown areas have done more poorly. With new centers, there's by more of them in downtown, there's a bit more of a drag there. It is interesting to look at all the franchising activity is in the provinces and the suburbs, the franchises have done very well through the COVID period and have been filling up their centers and looking for more. That's been a very positive sign. The new centers, we just have to be a little more patient. I think the results you're seeing are GAAP results, not cash results. On a cash basis, they look a lot better because we've generally, on most, if not all, new centers, got concessions, if they opened at the wrong time. That, when you're looking at a long-term arrangement, doesn't really change the GAAP, but it does change cash. Thank you, Calum. Understood. Thanks a lot. The next question comes from the line of Andy Grobler calling from Credit Suisse. Please go ahead. Hi. Good morning. Just a few quick ones from me, if I may. Just kind of following on from the previous question about membership deals, could we go back one stage and just talk through how many of these deals you had a few months ago? There's extra 1 million people. How much is that building upon what you've already got, and what was it making or adding to revenue and profits kind of pre-COVID? Just so we can get some understanding of, there's lots of big numbers been thrown about, but what that's really going to mean for your long-term profitability would be one. Yeah. Two, I guess on a slightly similar theme, to get back to or above 2019 levels of profitability over the next couple of years, so really next year, what needs to happen? There's a whole bunch of moving parts. What confidence can we have that you're definitely on the path to getting there next year? Thirdly, again, related, just in terms of the pricing environment, how did that move through the back end of last year and into this year? What are your expectations through the rest of 2021? I know some of those in a very uncertain period are quite difficult, that would be really helpful. Thank you. Yeah. Okay. Thanks, Andy. I think the membership impact, let me just give you the numbers. When we started, we had a little over 7 million users and members. Registered users, let's say. Most of those people used us very infrequently. This also includes in the user base, you've also got the office customers and other product holders who've become, by definition, a user. There were very few. The biggest deal we've done thus far was Verizon, which was, I think, about 5,000 people from, or 8,000 people from Verizon. Completely different to what we're doing now. The membership's going to go up, but with a different type of user. The corporates that basically have a centralized account, so it's like having an Uber account where all of your people can use Uber, but the corporate can see what's going on and can control the spend. It has a lot of visibility in terms of who's going where, and so on. It's the digital management that's quite important when you have a distributed workforce, and we can provide high-quality reporting that allows you to both support people and to know what's going on. That's quite unique. No one else can do that. The impact could be, we know from some of the early customers that signed up, that they're buying not just membership, but across the range of products that we do, and that's what makes them attractive. Plus the usage. I know you, for one, have been asking for quite a time, where are the corporate customers? They're coming now. The engagement is totally different. They're fully engaged. They're not buying offices here and there. This is an engagement to move to a flexible work platform. It has much more of an impact than just membership. It has a much more of an impact on revenue in the future, and it will change the way we have to operate. Again, it's changing growth because it makes it much more attractive for franchise partners because they're on the receiving end of these sorts of customers they couldn't normally access. It helps us grow as well. I'll come back on that if you have any further questions, Andy, because it's an important point. On profitability and what needs to happen, let's just sort of describe how you go through this. Last year, you've got to take all your costs out, and you've got to do it. We are still doing it today. Costs are still going out today. We're completing things up till this morning, still more stuff coming in cost savings. We have to do that. As we make the cost savings, in particular, when we change the rents, it allows us to be much more competitive in the market. You're giving higher discounts to bring customers in on the sort of spot market that's out there. What we've seen, and it's very interesting looking at the U.S. in the past weeks, is that we have been able to those early concessions, we've now started reducing discounts already, which is a good sign. In terms of the recovery, basically price will suffer in the short term. Occupancy will go up from the inflection point we're at at the moment. The key thing that's missing is services. We've lost about 15% of our revenue from services. That will just come naturally back as the world normalizes in the future. It's higher occupancy first, it's services following, and then price follows that. All off a cost base that's dramatically reduced through permanent cost savings. Overall, that's what needs to happen. I think the icing on the cake are these enterprise relationships which are bringing more business in. We work with a large pharmaceutical company, and we've done probably about, I don't know, GBP 40 million-GBP 50 million of business with them. Again, we can't say who it is, but that's an important and ongoing piece of business. They can be meaningful, and will be meaningful, we think, as they grow and the relationship improves in the future. Okay. We should really think about Because the numbers, as you say, are really big for members, but it's just part of that increased demand environment. Yes the way we should think about it. Yes. Okay. It's the icing on the cake. Look, these people, a lot of these members will be drop-in members. They'll come in, and that just is another layer of revenue that will become stronger as they start to use us. That today is about, and I'm just taking it off the top of my head, about 2% of revenue will be drop-in, but that could become 10%. It's meaningful, and it gets you to a higher level of occupancy because the occupancies, Andy, that we're talking about all the time are the long-term contracted occupancy. It does not include the occupancy from short-term. If we could use some of the excess space, go from 2% to five or to higher, maybe 10%, that makes a big difference in income. That can increase your income by 5%-10%. That's a big difference. It takes time to build it, and most of all, to get the users used to using it. They have to learn how to do it. Okay. Can I just ask one follow-up, Mark? Just on the ancillary revenues. I guess people won't be in the office as much, even if they're contracted for whatever period. They just won't be in some of those central offices as much as they would have been before. Some of that kind of on-demand revenue streams of coffee is likely to be lower. I mean, is that kind of built into your expectations that ancillary doesn't get back to? I think ancillary does get back, actually. I'm not worried about ancillary. Again, because you're going to have drop-in people who also buy coffee, but it's the meeting room business that's almost nonexistent. People are going to meet more. All of these people that work in a more distributed manner need to meet more often. I think the meeting room will come back strongly, could even be better than before. We've got replacement service revenues. The virtual customers and many of these others, that has been growing and that growth, they also use services. That I think, again, gives me more confidence that the service revenues will recover and at least get back to where they were. Could even be helped by having a much wider user base buying more services across the board. I'm not concerned about that. Price may not get back to where it was simply because I think there's going to be a reset in big city centers in rent prices. We've already dealt with the rents. We brought the rent down in anticipation of that. The margin is really what counts. We've got a lower base, so we should be able to get a much better margin. Eventually, probably there's going to be inflation, and that helps everything. If you look at it over a three or four-year period, I think we'll be talking much more about inflation. All of these are fixed in will benefit from a market that inflates. Great. Thank you very much. The next question comes from the line of Daniel Cowan calling from HSBC. Please go ahead. Good morning. Thanks for the call. Question for me on franchises. Where do you think we are now in terms of the share of the business, either by revenues or number of centers that is franchised, that is in the hands of a franchise partner, whether an organic one or a Master Franchise partner? Where are we now? I think we sort of worked out that it was maybe 6%, 7% in 2019. How far have we got in 2020? A follow-up to that question is also, you've mentioned the master franchise discussions have restarted. What are the considerations around those at the moment? What's holding them up? What happened we see more of those? Okay. Let me deal with your second question first. Look, why you haven't seen more is because the discussions have recently restarted. We kept communication going throughout the period, but they have I think now, especially with signing up more of these large enterprise customers, so people are getting much more to think that this is something for the future. The number of discussions have rapidly grown just in the past few weeks. We've got one deal that's much more advanced, and there's several not far back from that. I'm optimistic that Master Franchise Agreements, which help us in our growth goals because we get local partners are much more able to grow more quickly than we are doing it from afar. Overall, expect more on that front. I think coming back to franchise itself, in percentage terms, there wouldn't have been a lot of movement in terms of openings last year. We signed up a lot of franchisees. Really the opening starts to come in more this year and so on. We've got a huge pipeline of franchise partners this year, a significant pipeline. It's not small. Also that's supplemented by management contracts from property owners who just want to say, "Look, can you come and run it for us?" So on. What we're working towards is, look, we were growing before at roughly 10%, 12%, growing the network by that amount, and our objective is to grow twice that through franchising and management contracts. We've just got to get there. The more franchisees that we sign up, they open their first one, second one, third, it becomes cumulatively interesting as they get into it. It takes time, but it is coming through, and momentum this year is very good. This also is a reflection of us continue to invest in franchise and the team and the support necessary throughout 2020. That gets us into a great position now. Are we going to grow at 20%+ in the future? Yes, is the answer to that. It's franchising management contracts that do it. Got you. Thank you. The next question comes from the line of Steve Woolf, calling from Numis Securities. Please go ahead. Morning. I've got a couple if okay. Firstly, where are we in terms of the rationalization of the network, and the discussions with landlords? You mentioned we were still ongoing at the moment. I was wondering also if you could follow that with the phasing of the 325, 375 cost savings. Secondly, in terms of those dynamics of the membership model, I get the bit where it's obviously pay as you turn up and have coffee, et cetera, but do the enterprises themselves pay up front for these licenses? If so, any dynamics around that? Thirdly, in terms of the prices, you mentioned that certainly where the U.S. was concerned, some of the costs had to be taken out, so you could match some of the prices that were on the street. Just if you could give any details about perhaps price peaks to trough dynamics that you've faced over the past year. Finally, in terms of the M&A, with the money you've raised, you clearly budgeted for the larger deal that you would have hoped to have got and then didn't. What's the plan now for the money that didn't get spent, as it were? That was obviously one quite large deal that didn't turn out to happen. Thanks. Okay. Thanks, Steve. Okay. Rationalization, where are we? We're closer to the end than the beginning. We've still got quite a lot. It's mainly finishing off legals, in fact. The negotiations have largely been completed. It's just finishing off all the legals, which takes time. We're hard at that, and most of the savings will come in. Some are short-term, most of them are long-term savings that essentially, in many cases, make the rents variable. As I've warned, if things do spring back, the rents go down, but they come back later. That's based on performance only. They're not deferments because deferments, we have to GAAP, they don't help us at all. You will see flurries of news stories about us closing centers and so on. These are just the final standoffs where we say, "Look, we have to make a deal, otherwise we will have to close it." We are pretty much through the worst of it. Let me say that I'm in receipt of more than 100 letters from landlords actually thanking us for being upfront, open, quick, and getting something done that allows us to keep going. The win-win deals, I think, stand us in good stead with these partners. Quite a lot of them want to do other deals with us. Again, some of the management contracts we're doing today are with owners where we've had to restructure the leases. Next question. That answers that. Now, pay as you go. Well, these contracts have universally pretty much minimum spends. Basically, pay up front is minimum spends. Because companies have an account, we've been doing this for a while, but on small scale. These are just much larger scale deals. That is the way they're structured. We, as a company, don't give credit, by definition, there has to be upfront cover. The question about pricing, Steve, one of the issues is it is, in some markets, like the Wild West. As people go out of business, in their death throes, they reduce prices to very low levels. They can't hold out for long, but while they're doing it can make things difficult. It's very, very specific to sort of very localized markets. There, that is very helpful, that is where we will use discounting to win share. If you look at one of the principal protagonists in this area as WeWork, they've closed a lot of centers, but they also have dropped prices to completely uneconomic levels in some markets. We now have the tools to compete against that by converting our leases into variables. In the end, they can't sustain. Even they can't sustain because it just costs billions more. Eventually they close these centers. As they close them, we're taking some of them over, we've taken over more WeWork. You slowly get back to some kind of normalized markets. It's very market specific. Once it normalizes, then we can get the prices back to a better level. Sure. M&A, what are we going to do with the cash? Well, just be careful with it. There's a long road ahead with lots of opportunity. We want to make sure that we keep our powder dry. Really, you have to think about it as a dual run here. Sort of bifurcated into build the platform. We are adding services, businesses, PropTech type things, and digital things, and tools to the platform to grow that. That is growing exponentially. That is completely transforming into more or less a standalone services interface. At the same time, keeping our eye open for attractive opportunities in the physical world, like the European competitor that we've exchanged on, where that gives us more coverage in long-term, what we think is, well medium-term, an attractive market at a reasonable price. Those are attractive. We want to be able to use our cash on those. Look, clearly, one of the things we have the benefit of is having a lot of cash. We will spend it prudently, and then if we can't spend it, you don't need me to explain what we'll do with it, which, return to shareholders, if we have no use for them, we can't put it to work profitably. Excellent. Thanks, Mark. We still have some more callers in the queue. Are you happy to continue with questions? Absolutely, yes. Brilliant. The next question comes from the line of Edward Donahue, calling from One Investments. Please go ahead. Good morning. A few from my side, if you don't mind. It's with regard to the membership structure. I know you talked a lot about it, so I'm sorry for going on. I'm trying to get an understanding. Are these existing customers, and the service value that they were taking from you, and therefore, is this incremental or are you swapping certain services in and out? Going back to your comment with regard to the relationship with franchisees, if one took the NTT, and bearing in mind one of your very successful franchisees, Master Franchise, was actually in Japan. Could you walk us through how the relationship between yourselves, NTT, as were they an existing client that they knew, and how that's worked out? If you looked at the aggregate revenue that you get on an annual basis, potentially from the membership services that you're running. I get your point with regard to ancillary revenues coming back. When you get these service agreements on the membership side, and it goes back to your point about the client being able to monitor basically the spend. Are there certain caveats or cappings with any of these contracts at the moment, or is it pretty open to the user on a drop-in basis how they actually spend? We'll just start with that one. I've got a couple of others afterwards. All right. Okay. Thank you. Look, the memberships is incremental, it's not replacement. It's a whole new set of revenue. For example, NTT had not been using this very much. I mean, a couple of offices here and there, but this is totally different. This is engagement right from the top of the company to the bottom. This is a major move for NTT. They themselves have done a lot of publicity about how they're changing the way they work. Normally, we never announce these things. NTT and others have been very happy to announce it themselves and allow us to do it. It's all incremental revenue. The next is the relationship between the franchisees and, say, NTT. I mean, basically, coming back to the bifurcation of the business into the physical network and the platform business. The platform allows NTT users, for example, in Japan, to use both the Japanese centers or any other centers they wish to use. In fact, NTT, the majority of their people are outside Japan. It's a very large global company. This applies to all franchisees. That's why you would want to be a franchisee. You can invest your money into having a center or a number of centers, and what we're providing is a steady stream of revenue coming from companies like this and lots of other companies that will give you revenue in the building that you are operating. Essentially, we're the middleman, the enabler between the franchisee or the owner of real estate who has a management contract, and the corporates on the other side. The platform is what is important here. That's the engine room that converts demand into revenue. In terms then of your question about aggregate revenue, and just to come to the final part, yes, corporates absolutely want caps. They want to be able to control. We've got a lot of digital work that has taken place, and we're developing more, that allows supervisors to several levels of supervision of what people use. You don't get uncontrolled. Corporates are worried about uncontrolled use and uncontrolled expense. Controlling and capping is a very important part of our platform, and they can do this. The user doesn't know, but they can't see what they can't buy effectively, and that's in the setup and the onboarding, and you can change it at any time. If you imagine a company with 300,000 people or Standard Chartered that we've already done, we had to get all 95,000 people onto the system so that they could use. Also every month, there are changes to the population. People leave and people arrive, and that has to be constantly updated. There's a lot in the digital platform here that enables this kind of use, and that's where the value is. No one else has it. No one else has the platform that works, and no one's got the physical platform. These two advantages are why we are getting these companies. The aggregate revenue, as I mentioned earlier, it's not just about drop-in and use of meeting rooms and so on. It impacts the whole business because, in the end, we become an extension to that corporate space and their way that they support their workers in the field. It becomes a very close relationship and an extension to the company's operated space. In the future, some of the things we're adding on will allow us to extend some of the services into the corporate space. It just becomes a continuum and not two different things as it is today. Okay. Many thanks for that. That's very helpful. Just on the franchise pipeline, if you used a relevant KPI on a sort of like for like that you had in 2019 to where you think you'd be by the end of this year? There's two different things at play here. You sign franchisees, they buy a development area, they start to develop. What the team are very focused on is getting signing is one thing, we've signed quite a few, but it's helping them open the first center getting onto the second and so on. The KPIs we're looking at are we getting people opening the first one moving on to their development programs. It's the number of franchise partners you have and their ability to open. Most of them are signing up for five or 10 units. It's getting the first one open and making sure that's successful, and they move on to the following ones. It's building up momentum. It sort of becomes the more you sign up, and we've got some quite big ones. We've got two in Asia. I think one's for 50 locations, another one for 40. Some of them are quite big. They're regional, but big. We've done one for one of the Philippines islands or two islands. They're quite big in its own right with the sort of the leading industrialists from those islands say, "We want this here." They're doing multi-branding on those islands. The world's a very big place. We've added lots to the franchise team. We're adding more people as we speak. This is a question, and you'll see there's a lot of marketing as well going out to bring in new partners. This is very important to us. We want to get to a growth rate of 20%+. The bulk of that will come through franchising. If you look at the value of those deals being done now versus those that were struck in 2019, are they of a commensurate value in structure and terms? Yes. Yeah, absolutely. Nothing's changed. Okay. Brilliant. My last question, and thanks for this, is just again on the capital that you expect to put to work by, let's say, the first half, looking at your pipeline, and just what have you actually spent year to date, just to give us an idea? I fully accept that some deals are hoping to close, maybe they don't, like the one which was very interesting, but sadly didn't come to fruit. Could you just give an idea of what you actually have spent and what you would anticipate spending by the end of the first half? I can tell you what we have spent. I can't tell you what we will spend, but I can give you an idea of that. So far, if we complete on the deal that we've done, plus the other deals that we've done on service side, you're talking sort of GBP 20 million total. It's small. What we got in the pipeline, and again, as I said earlier, this is good news, bad news story, that we're taking things over for no money or very small money. We're not using a lot of cash. Our team have completed some fantastic deals where it hasn't involved a lot of cash at all. I can't see. There's a few larger things out there, but nothing I could say hand on heart that I would expect to come through in the first half. It's going to be more of these smaller things adding on to the business as we go through. If something does come along that's more significant, then we'll be ready. The follow-on to that, if you don't mind, is at what point do you decide a cutoff with regard to the ability to spend versus returning it? I think that's likely During the course of this year, I think we'll get a very clear picture. I mean, the opportunity area is this year. We have cash, so we're ready for opportunities that may come along. As we come to the end of the year, we'll have to take a view then as to how much cash do we need to sort of keep on the balance sheet, and what should the future capital structure of the business be. Remember, the needs for cash are going to be completely different as the capital-light model takes over and also has a big impact on cash flow because we don't have the drag of opening lots of new centers that we had in the past. Cash production also becomes a very important part of our considerations. Mark, thank you very much for the answers. Oh, hello. Yeah, if I may add to that, Mark, and we have a clearly stated shareholder return policy, right, with a progressively growing dividend, which, and we didn't pay the final one last year. We suspended the share buyback. At some stage, when we go back beyond the inflection point of recovery this year is when we start to get much closer to that point of when do you reinstate the dividend then the share buyback. I think that will go hand in hand with us having much more clarity on where we are on one master franchising, i.e., us as a seller of assets. Also, I think we'll then have a better sense of what we have spent on M&A. With that, I think towards the second half of the year, we can start to talk about shareholder returns much more concretely than we can now. Gentlemen, thank you very much. Yeah. I think that's a very important point, Eric still. There's a lot moving here. It's good stuff. We own quite a bit of property that at some point will come off the balance sheet. That, again, produces more cash. We have master franchise discussions underway. That produces more cash. We have our cash flow that we expect to come back, and that will add to that cash. I think in the future, cash is not the issue. There will be an important question as to the timing of returning that cash to investors. Any more questions? The next question. Comes from the line of Michael Donnelly, calling from Investec. Please go ahead. Mark, my question's been answered, thank you. Thank you. Okay. We'll move to the next question, which comes from the line of James Zaremba, calling from Barclays. Please go ahead. Hi. Good morning. Yeah. Three questions, please. One, on your incentives, I saw that they switched in terms of the options from, I guess, 100% on TSR to now having 50% of the focus on the minimum level of franchises. I'm just wondering if you could elaborate on that a bit, please. I mean, is that the number of committed locations or the number of open locations, or does that sort of relate to the MFAs? Number of open locations. I mean, look, what we're trying to do is to try and tie the incentives here For the team, it's that dual approach that you'll see more of going forward. That is, we want to get the growth rate up to a 20% level through capital like partnering with franchises and others. It's a key driver. Again, success in this business is about convenience and coverage and having a great platform that facilitates everything. The winner is the one that gets You have to get there on both fronts. If you have the best platform and you don't have the physical network, you won't get there. You need both. Our incentives are targeted around that key area of partnering and franchising. It's critical, and that's what we think about. That's a key part of the strategy. Can you give us a sense of, I guess, what that minimum hurdle is over the next three years? In all honesty, I can't remember. Yeah. They're significant targets that, again, we're highly incentivized as a management team to get this right. We're very clear that a higher growth rate leads to a better share price and also leads to the achievement of options. Options are about getting the options and having a good exercise price. A good franchise program with successful franchisees, that's what leads you to the promised land of getting something into your retirement fund. Great. A couple of others. One, just on the rent savings, can you remind me again, what's the split of savings, I guess, from rationalization where you've terminated a lease and therefore no longer have to pay it versus, I guess, savings as in being a reduction on ongoing leases out of that kind of, I guess, GBP 300? That's an interesting question. Let me just try and work it out for you. If you look at the overall savings, two-thirds of it are rent and associated costs. I think the closures would be the ongoing, let's say, savings that where the rents actually physically reduce, sort of in the range of about GBP 100 million. I caveat that because some of the savings were short-term. I'm talking here about ongoing savings. It's quite a big subject. It's one we're very focused on, by the way. It's one that I'm looking at pretty much every day because the key thing is the restructuring of the estate to make sure that it's fit for the future. It's not necessarily about the past now. It's about making sure the conditions are right for the future in each market. Just the last one on cash flow. Obviously, you've got the GBP 100 million of customer support, which some of that is deferment. Can you just remind me, how much is deferred, I suppose, as we are today? I guess, what are the things which would make you then ask for that money? Is that specific lockdown changes in countries and things like that, or? I think that we've taken a charge on this as well. You can see that the charge Eric's taken for doubtful debt has got much bigger. Probably about GBP 30 million of that is actually deferred. Eric, I'm not sure if you can- Two things. One is the support that we've given. Ultimately, where they will pay us the money back, we are expecting that. That will help our working capital in 2021, and you've seen the positive results in my slide on working capital. We will benefit from that. We expect the vast majority of that support to come back to us, similar to the support that we've been receiving from landlords in the short term. That will help. Just to be clear. The point that Mark makes on the credit, we've seen, of course, people take longer to pay their bills. We've seen, we've talked about that last year as well. Those numbers have not increased massively. People pay a bit later, but in the end, the vast majority across the globe end up paying their bills. We do a good job at collecting that. On the bills that we have, which runs into a couple of hundred millions GBP a month, we only had to take a charge of GBP 17.5 million from memory. A relatively modest number if you think about the size of the customers that we have. I think with that, what you can see is that, yes, COVID has had an impact, but not to a huge extent. Again, that benefits my working capital in 2020, but will continue to do so in 2021. Just for clarity, Eric, look, we're not going to get GBP 100 million back, just for clarity. Right. That's That's right. I think it's about GBP 30 million, GBP 40 million. We'll probably have to give people time to pay. We're not trying to put people out of business. If we can help them and give them a payment schedule, we will do that. This is all about trying to separate those people that really need help and those people just taking advantage of the situation. We will work on that. We will get quite a lot of that amount back over the course of 2021, as Eric says. Thank you, guys. The final question today comes from the line of Sam Dindol calling from Stifel. Please go ahead. Morning, guys. A couple of questions from me. Firstly, I think overheads went up 5% last year as you invest in the platform. How much more investment do you think is there in the next couple of years to support enterprise customers and the pivot to capital light growth? Secondly, on the profit bridge, can you give us a broad sense of FY 2021 how much cost savings and sort of operating leverage from higher volumes and return to service revenue could support profitability and where we can hope to get to from that sort of negative GBP 170 base. Finally, on the flex property funds, appreciate early days, but can you give a sense of the timing and sort of potential returns that could drive in the next couple of years? Thanks. Yeah. I'll take the profit one, Mark. Yep, please. A loss over 2020 of GBP 173.8, as you have seen. For this year, we're expecting to be in the low tens of millions to break even somewhere between that, depending on what the shape of the recovery and the pace of the recovery will be. A much better H2 than an H1. What we then expect to happen in 2022, because then the cost savings that we've talked about really start to kick in, including that rent element. We think that we should be able to get back to a minimum of profitability that we saw in 2019. We talked about it a couple of months ago as well. As a reminder, that was an EBIT of GBP 138 million. If you think about sort of 2021, 2022, a minus GBP 173 last year, break even to a small profit for this year. North of GBP 140 million for 2022 at the operating profit level. I think just to deal with the overhead. Thank you, Eric. Just dealing with the overhead. The overhead is up, was up because we invested more in franchise. We had also, I'm pretty sure this is in the overhead, Eric, but the aborted charges for MFAs, plus we had huge legal costs. When you're running multiple restructurings as we were at the end of the year, this is quite literally tens of millions of additional costs. That's what's causing the overhead to go up. The reality is, just to talk, going to the point Eric was making, we've totally restructured the cost base. Yes, it's the rent savings, but there's lots of other things that we've done that fundamentally change the overhead going forward. Overall, overhead will be different and lower, but we continue to invest, which comes in the overhead. We're investing in the platform itself. There's been a lot of IT development to improve the platform, the apps and so on. There's been significant investment here. That is in people and also in contractors and outsourced people to make the changes required. We said this throughout the year, that we continue to invest and double up, in fact, on investment into the platform throughout last year. That's reflected somewhat in the increased overhead, plus additional transaction charges. That, again, we'll continue that into 2021, but we also start to get the benefits from those investments that we've made. That leads to a more efficient and lower overhead for a larger business. Yeah, maybe just to give some numbers around that narrative. If you adjust the overhead for 2020 for the adjusting items and then the non-recurring cost, so restructuring cost that we don't see coming back, our overhead actually in absolute terms went up by only GBP 15.15 million compared to 2019. Maybe just to give you a sense of one of the big drivers of that, of course, is people. If you would look at note six of our annual report published this morning, you could see that actually our staff levels have come down quite substantially from a year-end average of just under 10,000 to 8,500. Again, you don't quite see that cost savings in the 2020 number because you're paying for them for being there or leaving the organization. Of course, this is then the year and then next year when you start to see those cost savings coming in from that decrease of about 1,200 people. I think then just turning to the property side. Look, there's two things here. First of all, we've actually added to properties. It's one of the things we've been investing in, where the returns are interesting for us. It's still quite small, but there is substantial value there, and that value will be released in the course of, I would say it's highly likely to be in the course of the coming year. I think more and more people are going to be looking for yield, and these are very attractively yielding properties, so have a good market. I think in addition, we can definitely see an opportunity, and we are in early discussions with companies about sort of establishing more specialist funds to invest in the sector. The most efficient way overall is to actually buy the buildings that you then operate afterwards. Again, it's separating our operating skills and our platform from the investing skills and then the investors that can support that. That's how the highest return is obtained by owning the whole thing all the way through. But we don't want that on our balance sheet, but we see significant revenues for us and fee revenues from being part of that in a much more structured way. That's why we've added it into sort of future runway of opportunities. Thank you. We have no further questions coming through on the phone line, so I'll hand the call back for any concluding remarks. Thank you. Okay. Thank you. Thank you very much, Molly. Thank you very much, everyone, for joining. As always, Eric and myself and Wayne will be available for any questions that you didn't ask that we can help you with in the coming week. Thank you all for your time, and thank you. Bye-bye. Thank you for joining today's call. You may now disconnect your lines. Hosts, please stay connected and await further instructions.