RWS Holdings plc (“RWS”, “the Group”), a unique world-leading provider of technology-enabled language, content and intellectual property services, today announces its half year report for the six months ended 31 March 2022 (“the first half”).
H1 2022 H1 20211 Change
Revenue £357.3m £326.4m +9%
Adjusted profit before tax² £60.7m £50.5m +20% Reported profit before tax £32.9m £14.9m +121%
Adjusted basic earnings per share² 11.9p 10.5p +13% Basic earnings per share 6.1p 3.0p +103%
Interim dividend 2.25p 2.0p +13% Cash conversion3 120% 79% +4100bps4
H1 2022 FY 2021 Change
Net cash5 £38.2m £45.3m -£7.14m
H1 2022 highlights
∙ A robust first half with encouraging progress on the plans and investments announced at our Capital Markets Day (“CMD”) in March:
o Technology product teams re-organised to give full ownership and accountability
o Business partnering model implemented in Language eXperience Delivery (“LXD”), our unique Group wide production platform, which is now processing a greater proportion of the Group’s translation volumes, supporting gross margin improvement
o The Business Transformation Office, our programme and project management function has been revitalised to ensure effective oversight of investments and growth initiatives
o Integration underway of Fonto, the structured content management business acquired in March
∙ 9% year-on-year revenue growth:
o Solid combined growth of 3% on an organic constant currency basis (“OCC”)6 across the three divisions that make up 85% of Group revenues – Language Services (2% growth), Regulated Industries (5% growth) and Language & Content Technologies (“L&CT”) (2% growth)
o In line with our expectations, continuing weakness in demand in IP Services (-8% OCC)6, which accounts for 15% of Group revenues, with actions underway to drive recovery
o Results demonstrate early progress in increasing the proportion of revenues coming from higher growth segments, with L&CT now representing 17% of Group revenues in the first half (FY21: 15%)
∙ Adjusted profit before tax² slightly ahead of Board expectations at £60.7m, up 20% on prior period, reflecting: o The full period effect of synergies following the SDL plc acquisition
o Revenue progression; and
o Our leveraging of LXD to enhance margins
∙ Adjusted profit before tax² margin of 17.0%, up from 15.5% in the prior period
∙ Continued strong cash generation, with cash conversion of 120% resulting in net cash5 of £38.2m at 31 March 2022 after payment of the €17.5m (£14.4m) initial consideration for Fonto and paying our largest ever final dividend of £33.1m
∙ RWS remains in a strong position to make the investments announced in March, fund further acquisitions and maintain a progressive dividend policy
Strategy and outlook
∙ Encouraging initial signs of organic growth in our software division (L&CT), with an encouraging increase in the proportion of new SaaS revenues to 34% (HY21: 24%), which will improve revenue predictability, notwithstanding the short term transitional impact
∙ Continued focus on our purpose of Unlocking Global Understanding and on delivering our accelerated growth plan, with positive progress in applying the RWS growth model introduced at the CMD:
o Building long-term client relationships
o Deepening our cultural and technical expertise
o Deploying our unique technology and AI
o Developing our portfolio (including a continuing focus on M&A); and
o Leveraging our global scale and reach
∙ Full year outlook in line with latest guidance and current market expectations7 and continuing confidence in the medium to long term drivers of demand for our products and services
Ian El-Mokadem, Chief Executive Officer of RWS, commented:
“We have delivered a robust performance in the first half, with some good progress made in defining our medium-term strategy and growth plans, whilst making the organisational changes that will enable delivery. We successfully launched our new purpose and values to more than 7,500 colleagues, and we are seeing an increasingly unified culture across the Group.
“We continued to build long-term relationships with our clients, with a wide range of contract renewals and service extensions across our divisions. We have won a number of new clients, with the Major Account and GoGlobal account segments in Language Services both having a strong first half. Technology-enabled service solutions continue to be a differentiator and our eLearning proposition has begun to gain some traction. In Regulated Industries we achieved further penetration in the high growth Linguistic Validation segment.
“We have seen good growth in technology product revenues compared with the prior period, including an increased uptake of SaaS solutions, ahead of our expectations and the prior period. We are making the planned investments in the core technology and AI products that we announced at our Capital Markets Day. These investments will enable us to capitalise on the benefits of being able to offer a unique blend of services and technology, at scale, to meet our clients’ evolving needs.
“We recognise that there are risks across the global economy, however we remain confident that we will continue to make good progress in the development of the Group in the second half, delivering good margin improvement in the current financial year, and that we are in a strong position to deliver on our medium-term growth strategy.”
For further information, please contact:
RWS Holdings plc
Andrew Brode, Chairman
Ian El-Mokadem, Chief Executive Officer
Rod Day, Chief Financial Officer 01753 480796
MHP (Financial PR Advisor) Katie Hunt / Simon Hockridge
Numis (Nomad & Joint Broker)
email@example.com 020 3128 8100 07884 494 112
Stuart Skinner / Kevin Cruickshank / Will Baunton 020 7260 1000
Berenberg (Joint Broker)
Ben Wright / Toby Flaux / Alix Mecklenburg-Solodkoff 020 3207 7800
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.
Our clients include 90 of the world’s top 100 brands, the top 20 pharmaceutical companies and 19 of the top 20 patent filers. Our client base spans Europe, Asia Pacific and North and South America. We work in the automotive, chemical, financial, legal, medical, pharmaceutical, technology and telecommunications sectors, which we serve from 80+ global locations across five continents.
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.
This announcement contains certain statements that are forward-looking. These include statements regarding our intentions, beliefs or current expectations and those of our officers, Directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and, unless otherwise required by applicable law, RWS undertakes no obligation to update or review these forward-looking statements. Nothing in this announcement should be construed as a profit forecast. RWS and its Directors accept no liability to third parties in respect of this document save as would arise under English law.
- Prior period balances restated to reflect finalisation of SDL purchase price allocation resulting in an increase of amortisation of acquired intangible assets. Profit before tax has decreased by £9.1m accordingly and profit after tax has decreased by £4.4m following release of deferred tax on amortisation and impact of prior period tax adjustments.
- RWS uses adjusted results as key performance indicators as the directors believe these provide a more consistent measure of operating performance by adjusting for acquisition-related charges and significant one-off or non-cash items. Adjusted profit before tax is stated before exceptional items, share-based payment expenses and amortisation of acquired intangibles. Adjusted earnings per share adjusts for the same items, net of any associated tax effects.
- Cash conversion is defined as adjusted operating cash flows divided by adjusted operating profit.
- The cash conversion figure for H1 2021 included the settlement of opening balance sheet liabilities resulting from the Group’s acquisition of SDL plc in November 2020. Adjusting for this one-off payment, cash conversion for H1 2021 would have been 97%.
- Net cash comprises cash and cash equivalents less loans but before deducting lease liabilities.
- OCC excludes the impact of acquisitions and assumes constant currency.
- The latest Group-compiled view of analysts’ expectations for FY 2022 gives a range of £735.8m-£755.5m for revenue, with a consensus of £746.5m, and a range of £133.8m-£135.1m for adjusted profit before tax, with a consensus of £134.2m.