Trading Statement

RWS Holdings PLC

25 October 2023

 

For immediate release                                                                                                 25 October 2023

RWS Holdings plc

Year End Trading Statement and Notice of Results

Encouraging progress with growth initiatives, new client wins and continued strong cash generation

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 year ended 30 September 2023 ("FY23") ahead of the announcement of its preliminary results on 12 December 2023.

FY23 Performance

The Group expects to report adjusted profit before tax within the range of market expectations¹. This reflects the previously announced management initiatives to improve efficiency and maintain profitability, together with the benefits of our foreign exchange hedging programme. This is despite reported revenue for the year declining by c.2% (c.6% decline in organic constant currency ("OCC")²) as a result of a continuing challenging market environment. As anticipated, the OCC revenue decline has slowed from c.7% in the first half to c.5% in the second half, with improving trends across our services divisions.

We saw continued progress in our growth initiatives, notably with TrainAI (our data services proposition) and eLearning in Language Services, Linguistic Validation in Regulated Industries and the Patent Attorney focus in IP Services. We made some progress in our pricing programme, particularly in the Language and Content Technology Division ("L&CT"), and we have continued to win new clients and see high levels of client retention and satisfaction scores through the year. As illustrated in our AI and Technology Teach-In earlier this month, we believe that developments in AI have been positive for RWS and will continue to support our growth and efficiency in FY24 and beyond.

Delivery of the significant cost actions announced in June is nearly complete and we continue to identify further opportunities for efficiency gains through our transformation programmes, including by increasing the proportion of work undertaken through our Language eXperience Delivery ("LXD") platform and the use of AI internally.

In July we completed the acquisition of Propylon, a content management technology business headquartered in Dublin, Ireland. Propylon's component content management system is used by governments, standards bodies, legal publishers and regulated firms to address the complexities involved with drafting, managing, publishing and updating legal and legislative content. Shortly after the end of FY23 we announced the acquisition of ST Communications, a long-term language partner of RWS, which has given us a presence in Africa and access to significant expertise in more than 40 African languages. Integration of both businesses has started well and is proceeding to plan.

Cash generation remains strong and the Group had net cash³ of c.£23m at the end of September 2023 (FY22: £72m) after £30.8m of acquisition costs (initial consideration for Propylon and deferred consideration for Fonto), as well as £46.3m in dividends and £19.4m on share repurchases. In line with our capital allocation policy, the share repurchase programme, announced with our half year results, is progressing as planned.

Divisional overview

In L&CT we have had some encouraging new client wins, with Language Weaver continuing to make good progress with strong second half bookings, including its largest ever Cloud SaaS contract, worth more than a million dollars over three years. Overall, SaaS revenues as a proportion of annual technology licences revenue continues to grow. While this has a negative impact on organic growth in the short-term, the cumulative benefit from this transition over recent years will deliver, as intended, a more predictable revenue profile for the division.

In Language Services client retention and satisfaction remained high and we were encouraged by positive outcomes following tender processes with several of our global technology clients, albeit we continued to see reduced activity from some clients as they adjusted to more challenging conditions in their own markets. The TrainAI and eLearning growth initiatives both performed well and provide momentum as we start FY24.

Regulated Industries continued to make positive progress in Linguistic Validation (services delivered at the clinical stage of therapy development) and while some Life Sciences clients continued to deliver reduced levels of activity at the regulatory stage, we expect volumes to increase as more products move through to the regulatory approval and launch stages in due course. The Financial and Legal Services segment performed well, driven by clients ensuring compliance with PRIIPS regulations.

In IP Services the launch of the Unitary Patent on 1 June resulted in the release of some of the backlog of IP work, with volumes in the second half recovering as previously expected.

Notice of Full Year Results

RWS will provide a further update with its full year results on 12 December 2023. To register your interest in attending the results presentation, please email [e-mail].

Ian El-Mokadem, CEO of RWS, commented:

"We have continued to make positive progress with our medium-term strategy in the second half of the year, including our growth initiatives, pricing, transformation programmes and expanding our portfolio. This progress has helped to mitigate some of the effects of a challenging macroeconomic environment which has resulted in reduced activity in a number of our end markets. While we have taken action to ensure that our cost base matches current levels of activity, we remain confident that activity levels will recover in due course.

"We have also made good progress with regard to AI and technology, building on our longstanding expertise and capability, as demonstrated at our recent AI and Technology Teach-In. With an increase in bookings for Language Weaver, revenue growth in TrainAI and the incorporation of AI features into our Trados product, we believe that we have the range of AI-enabled solutions with the enterprise-grade security, quality, and privacy that clients are actively seeking. Internally, we have also continued to enhance the use of AI in our production platform, the LXD.

"Despite the ongoing challenges in our some of our markets, we are successfully pivoting into higher growth segments, continuing to invest to develop our AI-centred technology solutions, building on our strong acquisition track record and transforming the Group into a scalable platform which will support organic and inorganic growth. With our strong balance sheet and cash generation, global scale and reach and unique combination of market-leading expertise and technology, we remain confident about the Group's long-term prospects."

1.     The latest Group-compiled view of analysts' expectations for FY 2023 gives a range of £738.1m-£757.4m for revenue, with a consensus of £748.8m and £116.5m-£129.0m for adjusted profit before tax, with a consensus of £125.8m.

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

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

For further information, please contact:

RWS Holdings plc Ian El-Mokadem, Chief Executive Officer Candida Davies, Chief Financial Officer	01753 480200
MHP (Financial PR advisor) Katie Hunt / Eleni Menikou / Catherine Chapman	[e-mail] 020 3128 8100 07884 494112
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 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 40+ 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). 

For further information, please visit: www.rws.com.

 

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