WeWork relies on US parent company lifeline as virus strikes.
WeWork Australia is counting on funding from US parent The We Company for operating capital to keep it going through the COVID-19 pandemic that has slashed revenue and delayed new location openings.
In contrast to a year earlier, when WeWork said it was receiving support from its US-based parent to pay only its debts, new corporate filings show WeWork Australia is now dependent on the parent company to meet basic revenue needs.
“The directors have been assured of continued support from WeWork Companies LLC, which is the operating company of The We Company in writing, in order to meet its working capital obligations in the foreseeable future,” the company said.
“Accordingly, the directors reasonably foresee that the entity will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report.”
Australia is not the only WeWork subsidiary to need propping up. WeWork India will get $US100 million ($145.9 million) to keep going through the pandemic, The Times of India reported earlier this month.
The local arm of the global co-working giant, which expanded rapidly to 18 locations after entering Australia in 2016, also said in its latest financial documents that the pandemic cast a cloud over its revenue and earnings in the current year.
“In response to the pandemic, the Australian government directed citizens to work from home which resulted in a reduction to WeWork’s new sales volume in both existing and new locations. WeWork has also delayed new location openings,” the company said in 2019 results filed with corporate regulator ASIC.
“These delays and sales trends will negatively affect the 2020 results. The financial year 2020 results may also be impacted by potential churn and non-payment from businesses negatively affected by the coronavirus.”
The pandemic that has thrown the country into all but the certain recession has only compounded problems for the company whose rapid expansion hit a wall last year when two new planned leasing agreements – one of which was to be its biggest Australian space to date – fell over as it sought to rein in costs.
WeWork Australia’s net after-tax loss widened nearly six-fold in calendar 2019 to $42.6 million from a $7.2 million loss a year earlier, even as revenue nearly doubled to $89.5 million from $49.1 million. One reason for the deterioration was the different treatment of lease liabilities, which required the company to bring leases on to the balance sheet and recognize certain charges as expenses.
No one from WeWork Australia was available to comment on Tuesday. WeWork last month reported March quarterly revenue of $US1.1 billion, the first time it topped $US1 billion.
The pandemic has delayed the opening of WeWork’s planned new locations at Sydney’s 320 Pitt Street from this month to a staged opening starting in August, and at Brisbane’s 123 Eagle Street from March to next month.
The slowdown came after a rapid expansion that pitted it against other rivals such as Singapore-based JustCo in a turf war that created a frothy market.
WeWork’s acquisitions included Naked Hub, for which it paid $21.4 million in April 2018, just three months after Naked Hub had acquired Gravity Coworking.