REG - RWS Holdings PLC - Trading Statement

RWS HoldingsAnnouncement

23/04/2024 07:00

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RNS Number : 5919L  RWS Holdings PLC  23 April 2024

For immediate
release
                    23 April 2024

 

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 2024 ("the
first half"), ahead of the announcement of its half year results on 12 June
2024.

Group performance

Organic constant currency ("OCC")¹ revenues declined by 2% in the period, an
improving trend compared to the prior year (H1 FY23: -7% and H2 FY23: -5%).
Reported revenue is expected to be £350m, down 4% on prior year. Whilst we
continue to see soft activity levels from certain market segments, we are
encouraged that two of our services divisions have returned to growth and that
we are seeing growing traction with our AI-based solutions, supporting a
number of new business wins in the first half.

Adjusted profit before tax ("PBT") is expected to be approximately £45m in
the first half (H1 FY23: £54m). This reflects weaker performance in some
parts of our higher margin businesses, an unfavourable mix of work in parts of
Language Services, ongoing investments and year-on-year foreign exchange
differences, partially mitigated by increased use of the Language eXperience
Delivery platform (LXD) and the cost reduction exercise conducted in H2 FY23.

As previously indicated, we continue to drive incremental revenues from our
growth initiatives across the Group and we expect revenue to be stronger in
the second half, supported by new business wins across the business and some
recovery in higher margin parts of the business. We remain mindful of the
wider macroeconomic and geopolitical environment and the continuing market
pressures seen in the prior year, which is making visibility in certain
segments of our business less clear in the short-term. However, our many years
of investment in AI solutions, both to improve outcomes for clients and to
drive internal efficiency, position us well to play a leading role and
navigate the AI-related transformation we are seeing in our industry.

Cash generation continues to be strong. On 31 March 2024, the Group had net
debt² of £40m, after payment during the first half of the £36m final
dividend for FY23, £30m under the share repurchase programme and the planned
higher level of investment in transformation.

Divisional performance

Language Services returned to growth on a constant currency basis, driven by a
good performance in Enterprise Services, particularly in TrainAI, where our
major global technology clients are increasingly benefiting from our data
services expertise. We also won our first TrainAI contracts in other parts of
the Group and, with an encouraging pipeline, we anticipate TrainAI will make a
further positive contribution to our revenue growth rate in the second half.
Clients are attracted to the enterprise-grade security and privacy that RWS
offers, as well as its strong ethical practices in the sourcing and quality
checking of data for training their AI models.

We are also encouraged by the impact of Evolve, our pioneering linguistic AI
solution. Evolve combines RWS's language services expertise with its
translation management system (Trados Enterprise) and neural machine
translation technology (Language Weaver) alongside language specialist-trained
quality estimation and a finely tuned private large language model. After a
successful beta program in which a number of clients participated, we are now
seeing early revenues from Evolve contracts with major clients. With a healthy
pipeline including several clients currently going through proof of concept,
we anticipate Evolve contributing to second half revenues and becoming an
important part of our AI-enabled services portfolio.

In Language & Content Technology we saw revenue contraction on a constant
currency basis although reported revenues increased, supported by good growth
in Propylon. We made positive progress in Linguistic AI, with a high level of
new bookings in Language Weaver. The division's in-house R&D team led the
development of the Evolve solution and continues to roll out the range of
available language pairs available through Evolve. Weaker revenue performance
in content technology was driven by Tridion.

IP Services returned to growth on a constant currency basis, driven by an
encouraging performance in the Eurofile segment with many patent filers
remaining committed to existing arrangements over the Unitary Patent. The
division had several wins in research and renewal work, demonstrating our
ability to serve clients across the IP lifecycle. The Group has also agreed
terms for the disposal of its interest in a revenue and cost sharing
arrangement, together with some associated assets, relating to a patent
information resource business known as "PatBase" for £30m in cash, of which
£5m is deferred and will be payable at the latest six months after
completion. Completion is expected to take place in May.

In Regulated Industries revenue declined on a constant currency basis, driven
by a continuation of the challenges previously noted in the Life Sciences
segment, a number of our larger clients going through cost-cutting exercises
and the non-repeat of some compliance work to meet regulatory changes in
financial services last year. In clinically-oriented work in Life Sciences, we
have seen continued growth from our Linguistic Validation solutions.

Ian El-Mokadem, CEO of RWS, commented:

"The Group's first half results reflect good progress in a number of areas and
signal that we are well positioned for clients' increased appetite to harness
AI to meet their language and content needs. Our successes with TrainAI and
Evolve demonstrate that our AI-enabled solutions are resonating with clients
at this pivotal moment for our industry. Through our unique combination of
proprietary technologies and longstanding linguistic expertise, we are uniting
the best of human and artificial intelligence to deliver innovative new
offerings and support internal efficiency.

"We are pleased to see that both Language Services and IP Services have
returned to growth. Our growth initiatives, such as Linguistic Validation and
eLearning, are also delivering incremental revenue and we have seen
encouraging performance in Language Weaver, our long-established AI-centred
machine translation solution.

"It has been disappointing that we have not seen the recovery in Regulated
Industries as quickly as we would have hoped and that sales in some parts of
our content management software business have been slower than planned. We
expect both to show some recovery in the second half.

"Delivery of the Board's full year expectations remains dependent on
continuing to successfully leverage our growth initiatives and AI offerings to
compensate for ongoing headwinds in some areas."

 

Board Update

Following the departure of Lara Boro, David Clayton has been appointed as
Senior Independent Director, with immediate effect.

 

Notes:

¹ OCC excludes the impact of acquisitions and assumes constant currency.

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

 

 

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

RWS Holdings plc
 
    01753 480200

Ian El-Mokadem, Chief Executive Officer

Candida Davies, Chief Financial Officer

MHP (Financial PR
advisor)
                            rws@mhpgroup.com

Katie Hunt / Eleni Menikou / Catherine
Chapman
                            020 3128 8100

 
 
                        07884 494112

 

Deutsche Numis (Nomad & Joint
Broker)
                            020 7260 1000

Stuart Skinner / Will Baunton

Berenberg (Joint Broker)
 
020 3207 7800

Ben Wright / Toby Flaux / Milo Bonser

 

About RWS

RWS Holdings plc is a unique, world-leading provider of technology-enabled
language, content and intellectual property solutions. Through content
transformation and multilingual data analysis, our combination of AI-enabled
technology and human 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.

Over the past 20 years we've been evolving our own AI solutions as well as
helping clients to explore, build and use multilingual AI applications. With
45+ AI-related patents and more than 100 peer-reviewed papers, we have the
experience and expertise to support clients on their AI journey.

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, Africa 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).

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