IWG, the parent company of co-working brands Regus and Spaces, has faced persistent challenges due to its lease-heavy business model. Although the company is transitioning to a lighter asset approach, managing offices for landlords, its debt remains a major concern. At the end of June, total net debt including leases was $7.5bn, while net financial debt excluding leases rose to $880mn.

Investors are particularly sensitive to cash flow issues. In the first half, cash flow before corporate activities deteriorated by more than $100mn, resulting in a free cash outflow of $55mn. This was mainly due to the rollout of new billing software, which disrupted payment timing, along with higher capital expenditure and financing costs.

The company had promised that its capital-light franchised model would fund share buybacks and dividends. However, with free cash flow turning negative, investors are questioning when those returns will materialize. Concerns grew when IWG chose not to extend its buyback at the half-year results.

Jefferies warned that weak cash flow could lead analysts to cut full-year forecasts and reduce confidence in future buyback announcements. Despite unchanged annual guidance and a 60% rise in fee income from the managed and franchised arm, adjusted earnings before interest, tax, depreciation and amortisation rose only 1% to $265mn, held back by a 26% increase in overheads.

Shares are down 18% this year, trading more than 50% below the consensus target price. Nonetheless, chief executive Christian Schmitz remains bullish, buying £258,500-worth of shares on August 19.