REG - RWS Holdings PLC - Half Year Trading Statement

RWS HoldingsAnnouncement

25/04/2023 07:00

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RNS Number : 2880X  RWS Holdings PLC  25 April 2023

 

 

For immediate
release
25 April 2023

 

RWS Holdings plc

 

Half Year Trading Statement

 

 

RWS Holdings plc ("RWS" or "the Group"), a unique world-leading provider of
technology-enabled language, content and intellectual property services, today
provides an update on trading for the six months ended 31 March 2023 ("the
first half"), ahead of the announcement of its interim results on 8 June
2023.

Group performance

RWS has delivered solid revenue growth of 2.5% in challenging market
conditions, with revenue of £366.3m compared with £357.3m in the first half
of the prior year. This reflects an organic constant currency ("OCC") sales
contraction of 6.8%, offset by favourable currency movements.  During the
period, we continued to win new business in all divisions, and retention and
client satisfaction levels remain high, albeit we saw softer activity levels
and slower decision making amongst certain clients.

Adjusted profit before tax is expected to be approximately £54m in the first
half, compared with £60.7m in the first half of the prior year, reflecting
the planned investments in our organic growth initiatives and transformation
programmes, and including the benefits from our foreign currency hedging
programme.

As noted in our AGM statement and recognising ongoing macro-economic
uncertainty, we still expect an acceleration of organic growth in the second
half due to continued progress with certain growth initiatives, the expected
phasing of the impact of the Unitary Patent in IP Services, planned product
launches and the commencement of a number of projects postponed by clients in
H1.

Adjusted PBT for the full year is now expected to be at the lower end of the
range of market expectations(1), reflecting the current reduced levels of
activity, offset by cost actions we are taking and the ongoing efficiencies
being delivered through our Language eXperience Delivery ("LXD") platform.

Cash generation remains strong and the Group had net cash(2)
of £57.5m on 31 March 2023, after the recent £37m payment of the Group's
final dividend for FY22 and the anticipated higher level of investment in
transformation.

Divisional overview

In IP Services, trading remains on track for the year, with a positive impact
from our sales improvement initiative. The advent of the Unitary Patent, which
we expect to be launched on 1 June, is anticipated to result in the release of
a backlog of IP work supporting a stronger second half in line with our
expectations.

In Regulated Industries, first half revenues have been impacted year-on-year
by the loss of services revenue with a major CRO client, as guided previously.
We have also seen generally weaker trading conditions with a number of Life
Sciences clients showing reduced levels of activity at the regulatory stage
compared with the equivalent period last year. This is not expected to
continue as bottlenecks in US regulatory approvals are resolved and pharma
companies' ongoing early-stage investment leads to increased regulatory
activity in due course. By contrast, our focus on Linguistic Validation, a
service focused on the clinical stage of drug development, has continued to
deliver good growth.

In Language Services, we continue to see reduced demand from a number of our
clients as they adapt their priorities to changes in their end markets,
however we remain confident in the strength of these longstanding
relationships and our ability to service their very diverse needs.  Whilst we
continue to win new business across the division, we are also seeing more
competitive procurement-driven tender processes, especially in the technology
sector. Whilst these situations are raising the potential for us to gain share
and cross-sell new services, there is also a heightened risk of some revenue
loss or margin impact in some of our existing business.

Reported growth in the Language & Content Technology ("L&CT") division
has been moderated once again in the period by a faster than anticipated shift
to SaaS revenues, in line with our strategy, and we have seen some slower
decision-making by clients. Overall, we remain encouraged by the progress we
are making in the division, where we recently delivered a significant up-sell
of two of our content technology products (Tridion and Fonto) to an existing
major client in Life Sciences. New product releases in the second half are
expected to contribute to further strong progress in the division.

Strategic progress

We continue to make good progress with the growth initiatives and investments
outlined at our Capital Markets Day ("CMD") in March 2022, which build upon
existing capabilities and move us into higher growth segments. In particular,
we continue to see good growth in eLearning and Linguistic Validation.

At our CMD, we also highlighted that we see continued investment in AI and
content creation as growth opportunities for the Group. As well as seeing an
increase in bookings and a fast shift to SaaS of our Neural Machine
Translation platform, Language Weaver, we are also significant users of it
ourselves, with over 60% of the words we translate through the LXD platform
being supported by AI, thereby enhancing the productivity of both our in-house
and freelance linguists.

The experience we have gained developing and training Language Weaver, as well
as work on AI related projects we have completed for major clients, also
positions the Group well to support the development and training of AI
platforms for a range of other uses. We are therefore excited to have recently
launched, as planned, our data services proposition, TrainAI. This new growth
initiative offers a range of data collection, annotation and validation
services for all types of AI data, where we anticipate strong demand.

In January, we also completed the transition to a single Microsoft
collaboration platform and we continue to ramp up the transformation
programmes in HR, Finance, IP Services and the LXD.

Ian El-Mokadem, CEO of RWS, commented:

"Whilst the market context has become significantly more challenging in the
last 12 months, we continue to make important progress with the medium-term
growth strategy that we announced at our CMD in March 2022 which will provide
the Group with an efficient, scalable platform that is expected to underpin
  both organic growth and future acquisitions.

"Our diverse and growing client base, wide range of technology-enabled service
offerings, global footprint, the growth initiatives we are driving and the
efficiency actions we are taking, continue to provide the Group with
resilience and opportunity in an uncertain macroeconomic environment.

"We are well-established developers, providers and users of AI and welcome the
continuing growth in such technologies.  We plan to continue to develop our
offer with a range of AI enabled products and related services which provide
clients with enterprise-grade security, quality and privacy, as well as strong
ethical practices in the sourcing and quality checking of data for training AI
models.

"With our strong balance sheet and cash generation, we are actively pursuing
acquisition opportunities that could accelerate delivery of our medium-term
plans."

 

1.     The latest Group-compiled view of analysts' expectations for FY
2023 gives a range of £127.9m-£136.5m for adjusted profit before tax, with a
consensus of £133.2m.

2.     Net cash comprises cash and cash equivalents less loans but before
deducting lease liabilities.

 

For further information, please contact:

 RWS Holdings plc

 Andrew Brode, Chairman

 Ian El-Mokadem, Chief Executive Officer                01753 480200

 Candida Davies, Chief Financial Officer

 MHP (Financial PR advisor)                             rws@mhpgroup.com

 Katie Hunt / Simon Hockridge                           020 3128 8100

 Numis (Nomad & Joint Broker)

 Stuart Skinner / Kevin Cruickshank / Will Baunton      020 7260 1000

 Berenberg (Joint Broker)

 Ben Wright / Toby Flaux / Alix Mecklenburg-Solodkoff   020 3207 7800

About RWS:

 

RWS Holdings plc is a unique, world-leading provider of technology-enabled
language, content and intellectual property services. Through content
transformation and multilingual data analysis, our unique combination of
technology and cultural expertise helps our clients to grow by ensuring they
are understood anywhere, in any language.

 

Our purpose is unlocking global understanding. By combining cultural
understanding, client understanding and technical understanding, our services
and technology assist our clients to acquire and retain customers, deliver
engaging user experiences, maintain compliance and gain actionable insights
into their data and content.

 

We work with over 80% of the world's top 100 brands, more than three-quarters
of Fortune's 20 'Most Admired Companies' and almost all of the top
pharmaceutical companies, investment banks, law firms and patent filers. Our
client base spans Europe, Asia Pacific and North and South America. Our 65+
global locations across five continents service clients in the automotive,
chemical, financial, legal, medical, pharmaceutical, technology and
telecommunications sectors.

 

Founded in 1958, RWS is headquartered in the UK and publicly listed on AIM,
the London Stock Exchange regulated market (RWS.L).

 

For further information, please visit: www.rws.com (http://www.rws.com) .

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