IWG Plc

LSE:IWG

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to EIV -- IWG Q1 trading update. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mark Dixon. Please go ahead, sir.

[Mark Dixon, CEO & Executive Director]

Well, thank you, operator. First of all, let me apologize to everyone. There's a -- there seems to be a technical problem with our -- with the conference organizer here, so everyone has been held up. I apologize for that. There are still 1 or 2 people just coming on. I hope you've now joined us.Good morning, everyone, and thank you for joining the call today to discuss trading update 30th of April; and the equity placing, which raised approximately GBP 320 million, both of which were announced after market hours last night. So hopefully, you've had a chance to review the documents. I'm joined on the call today by Eric Hageman, our CFO. And we'll both take questions at the end of the call.First of all, to the trading update. As we said on previous occasions, we ended 2019 strongly, and we brought that momentum into the first part of this year. And you can see that in the strength of the first quarter results with open center revenue up almost 18%; and pre '19 revenue, which is on a strictly like-for-like basis up 7.6%. Pre-2018 (sic) [ Pre-2019 ] occupancy moved 6.6 percentage points to 78.8% occupied. This demonstrates what this business can do and will do again. The emergence of the COVID-19 pandemic started to have an effect on our business in March, particularly in Asia. As the number of lockdowns increased around the world, we anticipate this having a greater impact in Q2 and part of Q3.We've shown the data for the month of April, which has a large impact of the crisis. Nonetheless, we believe it was a very good result in the circumstances, with open revenue growth up 6.5%. Like-for-like pre '19 revenue is down just 2.9%, and this is a great outcome when you consider that more than 10% of our revenues are non-contracted day-to-day revenues. So we're particularly pleased with that one. April occupancy was down on March due to the lower new sales being made during the lockdown period. It's remarkable that we were able to do any new sales in this situation at all, but we have done and continue to do so throughout the lockdowns. And new sales are running at about 40% of normal, a lot of that now happening online, which is pleasing. We started with a strong forward order book. We still have a strong forward order book, but as we've said, we expect Q2 to be impacted more by the crisis, with the lowest occupancy over the summer.That said, May is looking encouraging. Quite how the recovery plays out in Q3 and Q4 are going to be dependent on how lockdown measures are eased. In China, where we saw a clear V-shaped return to activity, new sales last week for the first time exceeded pre-crisis levels and now year-on-year above. We have a similar picture in Korea, Japan and Taiwan, although Japan and Taiwan were less affected in the first place. We're seeing tentative signs of recovery in Europe; and places like Germany, for example, declined less and look like they will come out more rapidly. U.S. is a bit mixed. It's right in the eye of the storm at the moment, but generally people are going back to work. And we have a very wide coverage in the U.S., and clearly it's different state by state. U.K. is the most difficult of all the markets and -- but, again, has continued to perform reasonably during the period.Moving to mitigating actions. We've moved quickly to offset the impacts of the anticipated revenue decline by taking mitigating actions which give us cost savings, actual cost savings and deferrals. Thus far, we've secured approximately GBP 150 million of cash cost savings and about half of that from deferrals and half from actual savings. There's still more to go, and we hope that this could grow to GBP 200 million.On the balance sheet, these savings have clearly helped our financial position, which remains strong. Net debt is up by only GBP 26 million from the year-end, and we've invested GBP 97 million into growth in the same period. Our net debt-to-EBITDA ratio is 0.8% (sic) [ 0.8x ], again, a little changed on year-end. And we want to drive this lower even without the placing proceeds. We have over GBP 500 million of liquidity irrespective of the fund raised, so we are in an excellent financial position.On network development, as I've just said, we've continued to invest in growth with the addition of 64 new centers, taking the total to 3,405. We also closed 47 centers. This crisis has accelerated the need for further network rationalization, and we expect this will increase over the remainder of the year. This will impact profitability but have a limited impact on cash. That said, a good outcome will be that we don't close any more -- as many as we think, as that would mean that we'd restructure them, which we are in the middle of at the moment. However, the bottom line is that we'll not carry loss-making centers through the crisis.And turning then to demand. Demand has remained strong and is starting to pick up. The demand has also changed. We're getting more corporates. We're getting more companies looking to fundamentally change the way they support their people. And this is something that was happening pre crisis, but we can see a definite acceleration of interest through the crisis, and we think that will continue afterwards. I think, for the first time, during COVID-19, companies have realized that distributed work using technology does not need to damage productivity. And this is a real way, practical way, to operate the business in the future; and this really plays into our strong suite.Our decentralized portfolio of 1,100 towns and cities also helps this. And our home office products clearly have benefited during the period as more and more people have worked from home, but we feel the future is one where more and more companies are going to look for the financial advantages and the people advantages of allowing people to work close to home or at home in the future. And as we said during the fundraising, every person that works from home generally needs somewhere to drop into from time to time when they're not at home. So this gives us a really good opportunity for growth.On franchising. Just to be clear: There's no change to our strategy for franchising notwithstanding our fund raise. We will continue to make franchise the key part of our growth program. And with that in mind, we have continued to sign deals throughout the COVID-19 period, 2 being done just last week, 1 in Australia, 1 in Thailand. And whilst we do not expect to be signing any master franchise agreement, significant ones, in the short to medium term, we believe that, that will continue once the crisis has died down and once financing becomes a more realistic possibility.On the placing, we've raised GBP 320 million. The simple reason why, we see a generational opportunity with the opportunity to pick up new centers either from operators going out of business or from building owners who want to get in the business and work with us. And we see that coinciding with increasing demand from companies that are looking to save money, outsource, get property off the balance sheet and have a decentralized workforce. So we are in the middle already of a lot of opportunities. We have in fact signed a deal overnight that -- a small deal that we hope to be able to announce in the coming days. And I think that will start to demonstrate the opportunities as they come in.Our balance sheet is strong. And we can do some of these opportunities without extra capital, but we did not feel that it was strong enough to do all the opportunities that we see in front of us. We did not intend to take a risk with our balance sheet and so in terms of using it to fund too much growth. So excluding any new money, just for absolute clarity, we were fine on all covenants. And even in our direst worst-case scenario, we're still okay on covenants, and this as a result of our clear financial discipline and mitigation of the crisis from the first days. So we are confident in demand, and as we get more confident, we will get more confident with taking more of the investment opportunities around us. This is simple returns on capital will be higher if we can invest in these times.Overall, we look forward to this as a chance to really reposition the company. And that, for me as an investor, is what I'm seeking to do. It allows us to grow the business, the top line and the profitability into the coming years. It allow us to -- allows us to consolidate the marketplace, and it really gives us a -- the possibility to move the company a significant step forward. I think the most important thing, apart from our ability to grow profitably, is the ability to show a good set of results for 2020, which for me will be the -- one of the sort of the key benchmarks that we need to take forward. And it will, we hope, dispel many of the negative comments that may -- from time to time about our resilience during recessions. We've been through many. We did very well in '08, '09, and we hope to do the same thing during this crisis.And finally, we have great confidence in the structural growth drivers, I mean, to us. It's just a very simple thing. It's easier for companies, cheaper for companies; and it's what their people want. So it will happen. It takes time only because companies already have fixed positions that it takes some time to get out of, but we believe they will get out of them now more quickly and move over to our platform.So with that, once again, apologies for the delays. And I'll hand back to the operator and we'll get straight on with questions.Operator, questions?

[Operator]

[Operator Instructions] Our first question came from the line of Alexander Mees.

[Alexander Mees, Head of UK Small and Mid Cap Research]

Three, please. Firstly, Mark, you said that you won't carry loss-making centers through the crisis. I wonder. Does that mean that you won't, well, sort of consider the acquisition of loss-making businesses either? And secondly, the cash savings of GBP 150 million is an impressive number. I just wonder the source of those savings, please, and where the additional GBP 50 million might come from. And finally, I wonder if it's possible that the V-shaped recovery that you referred to in China could be a template for the shape of the recovery in other regions.

[Mark Dixon, CEO & Executive Director]

Okay. Let me deal with the last one first. I mean, is China a template? It's an indication. It's not a template. And I think China is quite -- I think you'd all agree, quite a unique place, but we -- what gives us a bit more confidence is we can see a similar pattern in other countries already. And it's a country-by-country thing. Germany, for example, is better than Italy, didn't go down as far and looks like it's coming up more quickly. But on average, the key thing for us is to the pickup in new sales, which is already picking up. So it's sort of stopping the occupancy drop as quickly as possible, and that happens through an acceleration in new sales. And getting back to -- the proof point is getting back to year-on-year revenue growth as quickly as possible, but it's hard to tell. And it -- I have to again caution everyone. It's still early days. And we certainly don't feel that we're through the crisis. We understand it, but we're not through it, so we're still in ultra cautious mode. I think then, to move on to the savings question: We are underway with a significant savings program. And this is we've taken really the last 12 weeks to examine every single part of our business to find savings. We also accelerated investment into digital and IT projects, which we were doing anyway, but if they had cost savings, we spend more money on that to move closer to a fully automatic platform. And we are now close. We will be there by the end of the year, and that gives us the ability to operate centers on a much more efficient basis. You simply need less people. And people that -- are our second highest cost after rent and property costs. So that was number one. Number two, savings on many, many other things. The biggest saving is on rents and associate costs, and here we've worked through with our landlords and counterparties to get -- every negotiation is trying to achieve a win-win situation for both sides. We're making good progress on that. The future savings beyond the GBP 150 million come from more efficiency in the business and some more property savings. So I don't know. They're probably equal on both. And this sort of excludes the effects of closures. And again just coming back to that. We -- our success will really be measured on this. We're not trying to close centers, but sometimes we -- if we meet with intransigence, then we have to deal with it. There's only one way to deal with that, and that is by closing the unit. I mean it's not what we want to do, but on occasion it's what we have to do. And we have telegraphed in this announcement that there could be more, and that's because we are negotiating a number at the moment.In terms of would we acquire loss-making centers. I mean, if you look at the one we've just done, which we can't announce yet, I mean, it's a single unit, by the way. So it's not large, but it is significant because of what it is. These -- it's about making -- we're not doing things where we've taken on loss-making activities that we would expect to lose money for any type of significant period. I mean, maybe for a few months while we synergize, but apart from that, this is not a time to be doing -- taking on loss-making operations. And it's really the synergies that extinguish the losses. There's too many competitors that have high overhead, no scale. And those are the ones that -- where it makes sense. And again it's a win-win for their investors and for us on each occasion, unless of course it's in distress. If it's distressed, that's another story. But there will be some -- there is a cost to doing them. And again, that's why we raised the capital, because we have to be able to bridge those losses. I mean, if we do too much of it, then that could have affected the covenants. Not cash, but it's the EBITDA covenants that we were concerned about if we did too many of them.

[Operator]

Your next question came from the line of Steve Woolf.

[Steven John Woolf, Analyst]

Just how we should be thinking about returns on a 2- to 3-year view for the sort of potential deals you might have on the table at this point in time. Secondly, where do you think those areas have the greatest opportunity? And then perhaps...

[Mark Dixon, CEO & Executive Director]

Geography, you mean, Steve?

[Steven John Woolf, Analyst]

Sorry. Say again?

[Mark Dixon, CEO & Executive Director]

Do you mean geography?

[Steven John Woolf, Analyst]

Yes, essentially so. Where do you see that sort of competition? I mean, how intense has it been? And where do you think they might drop out of the market as you look to consolidate or take on stronger positions? And then thirdly, in terms of the sales process starting to pick up again, we're just thinking in terms of the pricing flexibility that you've given to salesmen to complete deals to help with the occupancy.

[Mark Dixon, CEO & Executive Director]

Okay. Thanks, Steve. First, returns, what we are estimating is -- hold on a second. Can anyone hear an echo, or is that just me?

[Eric Hageman, CFO & Executive Director]

No, it's fine...

[Mark Dixon, CEO & Executive Director]

No. We've got a technical problem. Hold on a second.So on returns, we've been suggesting -- and there's 2 different types here. You've got organic and rescue, where we're expecting unleveraged returns in the 30% range; and then more conventional M&A in the 20% range. That's sort of -- those will be the sort of returns. And remember organic also includes working with property owners who we believe are going to have more vacant space. And we'll see what we do as an opportunity to create cash flow in a difficult market. So we -- that -- all of that would be in the 30% return area...

[Steven John Woolf, Analyst]

Is that pretax, Mark, or post tax?

[Mark Dixon, CEO & Executive Director]

Pretax.

[Steven John Woolf, Analyst]

Pretax.

[Mark Dixon, CEO & Executive Director]

Yes, unleveraged, though.

[Steven John Woolf, Analyst]

Yes.

[Mark Dixon, CEO & Executive Director]

Then in terms of geography. The early indications are -- I mean, again, it seems to be, following COVID, we've got quite a lot coming in -- that's come in from Asia. And the one we did last night, for example, is an Asia one. And the -- in some markets, we're very reluctant to reinvest in before. These are quite compelling deals to make it much more attractive. It just lowers -- what we're looking for is lower barriers to having a problem and lower barriers to making good returns. And that's what post crisis we expect to see, but this is -- we're purely opportunistic here, so we're not sort of chasing any markets. And we're reacting to what's there. And we have quite a big pipeline, and it's building week by week, of things to do.So in terms of sales and price, let me move to that. So far, we haven't really pulled the price trigger. So price is fairly flat. I'm not saying we won't change that, but we felt that people buying during COVID really wanted to buy. And where -- if we were going to pull the price trigger, if we needed to, we'd do it as sales came back in, if we can win more share. Clearly, we want to boost the occupancy up, but we want to see -- we're measuring it daily just to -- well, in fact, more than daily. It's all day every day just trying to see the demand versus our share gain. And so -- and flat means there is some give on the price for new sales but very small, but we have an inherent increase in price as discounts fall away for customers that were signed up a year ago or 6 months ago and so on, so you always have this price moving forward.

[Steven John Woolf, Analyst]

If I can just follow up on the -- that area of opportunity. What size of competitors are we looking at from a location perspective? Is it 0 to 5, 5 to 20, 20-plus?

[Mark Dixon, CEO & Executive Director]

Sorry. I missed that, Steve.

[Steven John Woolf, Analyst]

Yes. It was just a follow-up on the areas of opportunity, Mark, in terms of the size of the individual competitors, [ 5 or 8, 10, 20 ]...

[Mark Dixon, CEO & Executive Director]

What we've said is, if you look at the cash itself overall, if you look at the GBP 300 million, we would expect that about half to 2/3 of that will be going on more significant sort of M&A stuff which is giving immediate cash flow and so on where there's a high use of synergies. And sort of the biggest one we're looking at is about GBP 80 million, GBP 90 million revenue, GBP 100 million revenue. And then they've -- there are small ones and there are all sorts of things in the group, and we're being selective. We're not looking for growth by any means and, I think it came up in a previous question, to sort of buy problems here or even take over problems. Taking things over for 0 is fine, but you've got to be able to, a, make money; and b, not lose money. So -- but we're saying about half to 2/3 would go on the more conventional end. It's just straightforward consolidation in the market.

[Operator]

Your next question came from the line of Calum Battersby.

[Calum Battersby, Analyst]

Three questions from me. Firstly, just wondering if you've seen any significant change in customer renewals, so far, during the pandemic, if -- I think you said new sales are down about 40% of their normal level. Can you state what the change has been on renewal rates at the same time? Second, in terms of the competitive environment, would you connect maybe the strong revenue performance seen in the first 4 months to the well-publicized issues at WeWork? Or if you've seen anything to indicate that corporates have been less willing to sign contracts with operators who face a more uncertain future. And lastly, just hoping you could talk in slightly more detail about the support you've had from landlords. What form has it taken in terms of rent deferrals, reductions or making contracts slightly more variable in nature? And if that's been kind of consistent across the board or really just a case-by-case, site-by-site negotiation.

[Mark Dixon, CEO & Executive Director]

Just on -- with landlords, it's definitely case by case. And as I said earlier, we try and make every conversation a win-win conversation. We're not -- we're trying to get everyone to be able to live another day. It's not about -- even if we have excellent leverage because of the insurance program we pay for every year by running 3,500 companies, which is not cheap and is administratively burdensome, but it's at times like this that you need it. So that gives us some leverage. And -- but we still try and make it a win-win situation, so -- but it's definitely a case-by-case basis. And some of them, just again I'll repeat, we will not be successful on and we will be -- close those centers. If you look then at the competitive environment, the -- I mean, look, there is uncertainty. And I think there is a flight to safety certainly for the larger companies. They just -- continuity for them is extremely important, so we -- they do not want to be with an operator that could get into difficulty. So that's probably helped us. I mean we were -- this habit was occurring throughout last year, though, so it's not really something new. And we're getting -- it's not just we're getting more corporates, but -- and we're also getting more business from the same corporates. So if you look at whether it's Apple or Facebook or -- a lot of the digital companies were last year, I mean, embracing a more distributed work pattern. And they're just going to do it more now, and more companies will do it. And again, it's also we've got the biggest network. So it's the coverage that also buyers are looking for. They don't want to deal with 20 or 30 suppliers. They'd rather deal with one if they could. In terms of customer renewals -- and just to correct you, we're not doing 40% less sales. We're doing 40% of previous sales, so it's 60% less. And that was sort of in the worst part of the -- that sort of COVID, that sort of right at the bottom of the U or the V, whichever letter it turns out to be.In terms of renewals, we've been -- we've put in a whole variety of programs to retain customers who had renewal days, and that -- those have been successful. So we have had quite good performance on renewals. And coming back to the price question from Steve, we've been helping customers that do have a contract break or end of contract. We've help bridge them over to the other side of COVID, and that does have an effect on price, on average price. But again, the forward order book at the beginning was long and strong, and that helped. So this is quite a moderate effect, but we've clearly said occupancy will reduce, the way we see it, to sort of July, maybe August. And we're not sure about the inflection point when it starts to pick up again, and that depends a lot on the sort of lockdowns easing. I think it's worth also adding that we're supporting hundreds of thousands of customers working from home. And we're also doing telecoms, IT and so on that a lot of these companies are using. So they're renewing. They may not be using the office as much or at all, but they need the infrastructure to support their people who are at home. So it's -- there is a continuity thing here that we've seen emerge. Next question.

[Operator]

The next question came from the line from Andy Grobler.

[Andrew Charles Grobler, Analyst]

Mark, just a couple for me, if I may. You talked about large corporates changing the way that they work or the infrastructure. That's likely to put downward pressure on office and property prices more generally in the longer term. How do you balance that out? Because even if you can reduce your rental costs with those landlords, much of the -- rest of your cost is going to stay pretty fixed. So in the longer term, as we go through this process, how do you balance out those moving parts? And then secondly, you've talked about negotiations with landlords. Just so I'm clear, have you had to use your SPVs at any stage to kind of walk away from existing contracts? And is that something that's a potential in the coming months?

[Mark Dixon, CEO & Executive Director]

I think just going and dealing with the last one first, Andy. Thanks. The -- yes, we have used the SPVs already, but we do so sparingly and as a last resort. And we will use more of them. And that's what we're highlighting. Those write-offs are -- that is use of the SPVs. And so look, if everyone goes for the win-win and it's a -- we will use it less, I mean -- but we will use it. We know already we will because some counterparties just refuse to engage. And so there's nothing you can do other than that. I think the -- if you look at the longer term thing, look, I agree with you in that you -- one must be very careful with the future of real estate in certain places because this is very much a geography question. And this is sort of, and to me it is clear, difficult to get the timing right, but they -- you want to be longer where people live short and where they're commuting to, to an extent. It always gets adjusted by the level of building or the level of -- it's the level of new offices. And offices fall down or converted into apartments and things like this, so it's a constantly moving picture, but overall I personally -- I mean there's plenty of research out there, but I'm absolutely clear that the world of work will look totally different in even 5 years' time. But 10 years' time, there's sort of notion of large numbers of people commuting to spend a day in an office to do work will become sort of something quite unusual. It would be very specialist companies that need to do that. So -- and it would be then the catalyst really, the thing that really made it flow was COVID-19. Everyone realized all at the same time that a new way was possible because they had to do it. So -- but it's a gradual change. It's not an overnight change, but we can definitely see signs of it everywhere. And the key thing, Andy, is it's just so compelling on costs. I mean companies, in the end, can save 80% of previous costs. I mean it's just a huge number if you employ a lot of people. And that's what will make it happen.

[Andrew Charles Grobler, Analyst]

And does that mean that, again over a period of time, some of your locations in big cities like sort of Paris or London or New York or wherever, you're going to reduce your exposure in those areas...

[Mark Dixon, CEO & Executive Director]

I think, all right, the answer to that is that we've thought about this one a lot. And it does worry us, and that's a good thing. It's a good worry, but the -- what people need is less space that they don't need. So if you take the big cities, the big cities become places to meet. That's what they are. All the transport comes into the big cities. So for -- all the people that are working in a decentralized way, they need to come together for -- there's always a headquarters. You need to bring people together, but companies that today maybe have 300 people, let's say, in the city of London may have 30 people in the headquarters later, which is sort of -- so office space gets smaller. That helps us. So we're confident in what we're doing. And remember we have a tiny, tiny share at the moment. Those Central London locations become attractive in a different way as a place for people to meet and a -- you need a beating heart to any company. It's very hard to do it completely in a decentralized way. The key thing to watch is price because, over time, it -- the pricing starts to equalize, and that's what you've got to be careful of.

[Andrew Charles Grobler, Analyst]

Yes. And I guess that's good enough. The question is...

[Mark Dixon, CEO & Executive Director]

Well, that's why you have to maintain flexibility. It will choke off because what will happen is developments slow down. New space will stop coming on and so on. And things happen to property, especially in the U.K., by the way, because of you have to pay property taxes even if you're building is empty. So they don't sit empty for long, but it's going to change. We need to -- we're aware of it, thinking about it all the time in everything we do. And you've always got to keep some flexibility in your structure in case it happens more quickly than you think.

[Operator]

Your next question came from the line of [ Edward Donahue ].

[Mark Dixon, CEO & Executive Director]

Sorry. I can't hear. Hello? I can't hear.

[Unknown Analyst]

Apologies. I think it is me. Hello?

[Mark Dixon, CEO & Executive Director]

Yes. Hello? Yes. Can you hear?

[Unknown Analyst]

I can hear you. Can you hear me? Sorry, I got a bit of a problem.

[Mark Dixon, CEO & Executive Director]

Yes, I can hear you now. I didn't hear the questions, but...

[Unknown Analyst]

Okay. Apologies. Okay. We'll start then. Just you were talking about renewals. Can you just give an idea of the value of renewals versus a previous contract and use Asia as an example as you're coming out of there? And just actually, when you're renewing the contracts, what you're actually seeing maybe out of your China footprint but also interestingly out of the rest of Asia.

[Mark Dixon, CEO & Executive Director]

Sorry. The -- what's the question again? What's the renewal values...

[Unknown Analyst]

The renewal of contracts, yes, just to give an idea on the value of the contract, the pricing, and using Asia as an example.

[Mark Dixon, CEO & Executive Director]

The -- what I'm saying is that would be a slightly lower priced because we -- that's simply because we're using a bridging offer. So -- for companies. And we haven't -- it's not universally used. It's used for people that terminate, to encourage them to -- because they're terminating because they're not using an office, yes. So we've given them either 1 month or 2 months free on a new contract to get into the other side. So that reduces the average price by something. It will be about 10% on the 10-month contracts, obviously.

[Unknown Analyst]

Right. Okay. And then on the ancillary income as of the date yesterday, what was that looking like, as of the 27th? You say you have a real-time information coming through, so if you could give an idea what that was looking like would be helpful.

[Mark Dixon, CEO & Executive Director]

Well, yes. I mean ancillary revenues -- about 90% of our revenues are contracted. So we -- everything is a subscription. We don't like sort of the short-term stuff, but the overall effect on services is about -- that's the main reduction in revenue and that's about 10% of revenue. That's more or less sort of at a halt and has been depending on lockdowns. So that's creating the -- it's the biggest part of the revenue loss. And so it's about 10% of revenues.

[Unknown Analyst]

If you look to again your Asia footprint, what is that 10% flows looking like...

[Mark Dixon, CEO & Executive Director]

It's coming back.

[Unknown Analyst]

It's coming back, okay.

[Mark Dixon, CEO & Executive Director]

It's coming back, yes. It's a sort of falling U. It's not a V. So it takes -- it's like a 45% angle -- 45-degree angle, sorry, of recovery.

[Unknown Analyst]

Okay. All right. Great. And then last question, just on the closure of units. You had a significant step-up in '19 on '18. You've indicated that, '20, you're taking an active stance. Do you see that possibly greater than the number you had in '19? And what would be a sort of tail run rate [ lot off ] going forward? Would it be looking like sort of 10% of the footprint...

[Mark Dixon, CEO & Executive Director]

I mean I would be disappointed if it was that much. That's...

[Eric Hageman, CFO & Executive Director]

That's...

[Mark Dixon, CEO & Executive Director]

It's a different thing. If you look at last year, that was Brexit. There was a lot in the U.K., and that was fixed in the U.K. Now this time, it's a global thing. So yes. I mean it's way too early to say. And as I answered to Steve earlier, we've closed some already. You can see 47 in the first period. Could it eventually be the same as last year, which was what, Eric, I think, at 140 odd...

[Eric Hageman, CFO & Executive Director]

No. Just under 200, 197. Just under 200, from memory, 197; and 180 a year before that.

[Mark Dixon, CEO & Executive Director]

Yes. Could it be that -- might be that number but too early to say. It's a different type of negotiation now. People don't want to lose income. And we've learned, we keep learning on what we need to do. I think, every crisis, you get slightly better at it. So the objective is to keep as much as possible but not so that it continues to lose us cash.

[Operator]

The last question came from the line of Michael Donnelly.

[Michael Donnelly, Research Analyst]

Mark, just quickly, could you comment, please, on how Spaces has performed over the past couple of months?

[Mark Dixon, CEO & Executive Director]

Yes. We had this question during the fundraising, and I'll sort of answer it another way. It's performed very well. And it -- some people have got this -- there's this sort of misunderstanding that somehow Spaces is more shared space. It's not. It's none of -- pretty much, if you look at the whole of our revenue, less than 1% is shared space, in all the revenue or the whole company. And in Spaces it would be the same, so -- but Spaces has performed very well. There's no difference between the performance in Regus' and Spaces. The only -- there's quite a few new spaces, and they -- there is -- our problem is new centers. Obviously, if we've got new centers opening in -- and there's a lockdown, it's a challenging fill time. And there's quite a few new spaces in the opening program, but again, many of these have already been renegotiated and so on. But there isn't a sort of difference between the two. And just for absolute clarity: Our offices are far more private, whether that's Spaces, Regus or any of the other brands, than almost all other companies because people are buying offices from us. They're not -- we don't do open-plan space. And so there's far more sharing going on. If -- that's one of the bad stories, that people won't want to use shared space. Well, all office space is shared. It's just a question of who you're sharing it with, in any company in the office space. So less than 1% of revenue. And we're not seeing an effect there that's different to any other part of the business.

[Operator]

We have 2 questions, sir.

[Mark Dixon, CEO & Executive Director]

Okay.

[Operator]

Okay. Your next question came from the line of Sam Dindol.

[Samuel Frost Dindol, Associate]

Just 2 quick ones from me. Firstly, would you expect the capital from the placing to be deployed over the next year sort of mostly? And secondly, on the franchising, will it be fair to assume you're still in contact with franchisees where you're perhaps quite a long way down the negotiating path and you can maybe pick that up even later in the year or next year as things improve?

[Mark Dixon, CEO & Executive Director]

On the franchising thing, we have remained in contact. I think it's -- well, I mean it's -- I think we're going to need to have a sort of print on this year's numbers. You need to get -- you need to be doing these things from a position of stability. So as soon as we can see stability, then I think those -- and the financing markets are open and so on, I think we'll be able to move on, on that. In terms of deployment of capital, we've said that we expect to deploy quite fairly rapidly, always depending on the right time and the right opportunities. I mean we're not chasing things, but we -- expectation would be in the next 12 months, 18 months but quicker if the opportunities are there. And as I mentioned earlier, we have a significant pipeline, and it's just about coordinating it. We now have the capital and we have more confidence to actually do it. And so I think best guess 12 months or 18 months, with more of it front loaded into this year.

[Operator]

Your next question came from the line of [ Edward Donahue ].

[Unknown Analyst]

This is just a follow-up just on the franchisees. What level of support are you having to give, bearing in mind that this is a core of your strategy and this situation unprecedented and also versus your -- the last downturn, say, 10 years ago? I mean this is a sort of test for your behavior to the franchisees. What level of support are you having to give or feeling that you want to give?

[Mark Dixon, CEO & Executive Director]

Well, we've increased the level of support in terms of commercial support to -- so we've been doing regular calls with all franchisees and some of the bigger ones once a week to sort of guide them as much as we can, but the performance of the franchisees has been robust. As I've said earlier, when a franchise business is bought by a good business group or business person, they -- once they've got the message, they're absolutely on top of it. And these are good business people. So they're running good businesses. They act early. They do things at the right time, so yes, we definitely increase support. But if you're talking about financial support, no, and so on. And these businesses, if you look at Japan, Taiwan, Switzerland, these businesses run -- I mean they've been resilient. So -- and Japan particularly resilient.

[Operator]

We don't have any further question on the line, sir.

[Mark Dixon, CEO & Executive Director]

Okay. Well, look, once again, guys, sorry about the technical hitch here. We will sort that out for next time. And thanks very much for your questions. As usual, Eric and myself are available, if you didn't manage to get your follow-up in. And the transcripts and so on will be up for people to access if you came in late.So thank you all very much indeed. Bye-bye.

[Eric Hageman, CFO & Executive Director]

Bye-bye.

[Operator]

This concludes the conference for today. Thank you for participating. You may all disconnect.