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.

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).