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UPDATE 1-Regus operator IWG sees improving sales activity

(Adds details on sales, outlook)

Nov 3 (Reuters) - British office space provider IWG said on Tuesday it has started to see some improvement in its sales activity and highlighted increasing interest in flexible working as companies address how their employees will work in the future.

The owner of the Regus brand said the advent of further potential pandemics and the need to preserve liquidity by limiting capital and operating expense signals a clear shift towards flexible working.

Shares in the company were up 2.6% at 261.4 pence in early trade.

IWG, which competes against U.S.-based WeWork, said it has seen a strong pick-up in demand for its suburban locations, along with a rise in the sale of small offices, accommodating one to two people, compared to pre-COVID-19 levels.

The company said revenue fell 10.2% to 583.3 million pounds ($754.38 million) in the quarter ended Sept. 30, hurt by customer churn and the significant impact the pandemic had on service revenue.

The year “2020 has presented the toughest challenge the Group has experienced since its formation 31 years ago,” the company said, adding that it was on track to achieve targeted annualised cost savings of about 200 million pounds.

IWG, which is also looking to grow inorganically, said it is close to deploying the first tranche of capital raised in May with deals in the final stages of due diligence.

$1 = 0.7732 pounds Reporting by Tanishaa Nadkar in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber

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