For immediate release                                                                                                                             12 June 2024

RWS Holdings plc

Half Year Report for the Six Months ended 31 March 2024

Encouraging trends and start to H2 support a full year performance in line with market expectations¹

RWS Holdings plc ("RWS", "the Group", "the Company"), a unique world-leading provider of technology-enabled language, content and intellectual property services, today announces its half year results for the six months ended 31 March 2024 ("the first half", "H1 2024" or "HY24").

Financial overview

H1 2024 highlights

·    The Group made further progress in improving performance, and mitigating end market pressures, with an encouraging return to growth in two of our four divisions and growing traction with our AI-based solutions, particularly TrainAI, Language Weaver and Evolve, supporting a number of new business wins in the first half:

·    Improving trend in organic constant currency ("OCC")⁴ revenues - 2% decline in the period (H1 FY23: -7% and H2 FY23: -5%), with the Group returning to growth in the second quarter

·    High levels of repeat revenue, supported by further incremental revenue contribution from our growth levers, particularly TrainAI and Linguistic Validation

·    Revenues from Language Weaver and TrainAI and the proportion of localisation revenues which are machine-translated first, which comprise the Group's AI-related products and services, now represent more than a quarter of Group revenues

·    Benefits from our investments in transformation and sales effectiveness starting to be realised 

·    Reported revenue of £350m, down 4% on prior period (HY23: £366m) and down 2% on an OCC⁴ basis (HY23: £357m):

·    Language Services returned to growth on an OCC⁴ 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

·    IP Services returned to growth on an OCC⁴ basis, driven by an encouraging performance in the Eurofile segment with many patent filers remaining committed to existing arrangements over the new Unitary Patent

·    In Language & Content Technology ("L&CT") revenue contracted on an OCC⁴ basis although reported revenues increased, supported by an 18% growth in SaaS licence revenues, good growth in Propylon, and a high level of new bookings in Language Weaver, offset by weaker performance in Tridion

·    In Regulated Industries revenue declined on an OCC⁴ 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-recurrence of some work in the financial services segment last year; however, we are encouraged by some early signs of recovery in the second half

·    Language eXperience Delivery ("LXD"), our production platform, has continued to drive increasing efficiency across the Group:

·    The LXD has started to handle volume from IP Services, and currently manages the majority (73%) of our localisation volume in Language Services and Regulated Industries; more than 60% of this content is now machine-translated first by Language Weaver

·    LXD technology and expertise is also being used to help manage the large communities of high-quality annotators and validators that are critical to enabling TrainAI revenue growth

·    Gross margins have been maintained at 45.7% (HY23: 45.7%), due to the cost reduction actions taken in H2 FY23 and ongoing LXD efficiencies, fully offsetting weaker performance in some parts of our higher margin businesses and foreign exchange headwinds

·    Adjusted profit before tax² ("PBT") of £45.6m (HY23: £54.4m) reflected lower gross profit. Adjusted administrative expenses remained in line with prior year, as the cost reduction actions in FY23 offset the expected foreign exchange headwinds and ongoing planned investments. As a result, adjusted profit before tax² margin was 13.0%, down from 14.9% in HY23

·    Net debt³ was £38.9m at 31 March 2024 (FY23: net cash of £23.6m) after payment during the first half of the £36m final dividend for FY23 and £30m under the share repurchase programme. £25m cash was received as initial consideration for PatBase in May 2024 after the period end 

·    Cash conversion² was 30% in H1 (as a result of weaker business performance, continued planned investments and a short-term lengthening of debtor days), which is expected to revert to normal levels by the year end

·    In October 2023 RWS acquired ST Comms Language Specialists Proprietary Limited, a Cape Town-based language services provider, enabling our clients to extend their reach into the African market with locally-based linguistic expertise across 40+ African languages, further strengthening RWS's position in rarer languages

·    The share repurchase programme, announced in June 2023, was successfully completed in February 2024

·    An interim dividend of 2.45p, an increase of 2% (HY23: 2.40p) has been approved

Progress on strategy

·    Evolve, our pioneering linguistic AI solution which utilises a private Large Language Model ("LLM"), has a strong opportunity pipeline, with 8 clients having completed or going through proof of concept and we anticipate it contributing to second half revenues

·    We have just launched HAI, a digital self-service platform designed to streamline the translation experience for small and medium businesses by combining human expertise and AI, simplifying project management, offering real-time cost visibility, security and ensuring high-quality translations, all in one place

·    In Q3 we are releasing Trados Studio 2024 and Tridion Docs 15.1, each with multiple AI features, which are expected to enhance revenues in the second half

·    We remain committed to our planned investments in sales and marketing, R&D and transformation that will underpin future growth, efficiency and margin development; having successfully completed the second and most significant release of our HR system in May, and we are on track to complete our HR transformation by the end of FY24

·    On 16 May the Group further strengthened its balance sheet with 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", receiving £25m in cash in May, with the remaining £5m payable at the latest six months after completion

Outlook

·    We continue to expect a stronger performance in the second half of the year, supported by new business wins across the Group and some recovery in higher margin parts of the business

·    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

·    We are encouraged by some strong wins in the period in our AI-centred solutions, particularly TrainAI, which will make further positive contribution to our revenue and growth rates in the second half

·    While mindful of the wider macroeconomic environment and continuing pressures in some of our end markets, we are pleased that recent trading, including an encouraging start to H2, currently points to a performance in line with market expectations for the full year¹ and we remain confident in the multiple long-term growth drivers for our products and services.

Ian El-Mokadem, Chief Executive Officer of RWS, commented:

"The Group's first half results reflect good progress in a number of areas and demonstrate 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, which have continued into the early part of the second half, demonstrate that our AI-enabled solutions are resonating with clients at this pivotal moment for our industry.

"With AI-related products and services accounting for more than a quarter of the Group's revenues, RWS is both an established industry leader and one of the principal AI innovators. RWS's proprietary technology platform and in-house linguistic expertise mean that we have a unique combination of human and artificial intelligence, which we call Genuine Intelligence™. Operating at the intersection of both allows us to continually improve our AI solutions with training data validated by our own language specialists, supporting rapid improvement in client outcomes.

"We are pleased to see that both Language Services and IP Services have returned to growth. Our growth initiatives, such as Linguistic Validation and TrainAI, continue to deliver incremental revenue. In parallel, we saw an encouraging first half performance in Language Weaver, our long-standing AI-based 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. However, with the implementation of a range of corrective actions, we expect these parts of the Group to show some recovery in the second half.

"We remain committed to the investments in growth and transformation that will underpin future revenue and margin development, alongside continued effective cost management.  The Group returned to growth in the second quarter, and has had an encouraging start to H2, currently pointing to a performance in line with market expectations for the full year.¹ The multiple long-term growth drivers for our products and services continue to give us confidence in the future."

For further information, please contact:

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).

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

Forward-looking statements

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.

1.     The latest Group-compiled view of analysts' expectations for FY24 gives a range of £721.4m-£756.0m for revenue, with a consensus of £735.1m, and a range of £110.4m-£118.4m for adjusted profit before tax, with a consensus of £113.8m, and a range of 21.8p to 24.0p for adjusted EPS, with a consensus of 22.8p.

2.     RWS uses adjusted results as key performance indicators as the directors believe these provide a more consistent measure of operating performance. The definitions for these key performance indicators can be found in the Appendix. 

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

4.     Adjusted to reflect a like-for-like comparison between reporting periods and assumes constant currency across both reporting periods.

RWS Holdings plc

Results for the Six Months ended 31 March 2024

Chief Executive Officer's Review

The Group's performance in the first six months of the year ("the first half", "H1 2024" or "HY24") demonstrates good progress compared with the second half of FY23 and shows the positive impact of the steps we continue to take in response to difficult trading conditions and in delivering our medium-term strategy. Two of our divisions, Language Services and IP Services, have returned to growth, our growth levers are delivering incremental revenues and our AI-centred solutions are playing an increasingly important role both for our clients and in respect of our internal efficiency. We are disappointed that we have not yet seen the anticipated recovery in the Regulated Industries division and that sales in some parts of our content technology business have been slower than planned. Our financial strength has allowed us to continue investing in sales and marketing effectiveness and our transformation programmes, which will underpin future growth, efficiency and margin development.

Business overview

RWS is a unique world-leading provider of AI-enabled language, content and intellectual property services. The Group is a profitable cash-generative business with a strong track record of growth and value creation. We operate in attractive markets with a combined global size estimated at more than £47bn, where specialist knowledge, in-house technology, proprietary linguistic data, security, reputation and scale are critical.

We have successfully diversified in recent years and now occupy leading positions in many of our chosen markets, as well as owning and developing a significant technology platform.

We offer a wide range of products and services, delivered with a unique blend of technology and human expertise to meet our clients' content needs. AI-based solutions and functionality are central to our success and, as an AI-native organisation, we have long-established capability across the content value chain, from the sourcing and validation of training data to the provision of neural machine translation across multiple use cases.

This is recognised by both industry analysts and our clients. Slator's recently published language industry report¹ noted RWS's leveraging of generative AI with a private large language model to deliver the automatic post-editing that underpins the Evolve solution. We will shortly be announcing an expansion to our partnership with Amazon Web Services to bring to market new solutions powered by generative AI.

·      Language Services focuses on localisation and related solutions for a wide range of industry verticals, including automotive, chemical, consumer, manufacturing, retail, technology, travel and telecommunications. The range of services includes AI-centred localisation and data services, eLearning and multimedia localisation. The division has three client segments - global technology enterprises (served by the Enterprise Services business unit), major accounts and small & medium enterprises (both served by the Strategic Content Solutions business unit). RWS's technology products, such as Language Weaver and Trados, either underpin the division's services solutions (such as Evolve and HAI) or are sold in combination with them. The division is able to support clients at any stage of their globalisation journey.

·      Regulated Industries provides a range of localisation services for three verticals - life sciences, financial services and the legal sector. Service provision is centred around highly specialised technical translations with a strong emphasis on quality and security. The division's clients include 19 of the world's top 20 pharmaceutical companies, all of the top 10 asset management companies and 18 of the top 20 law firms. In the pharmaceutical and medical device verticals, we work in both the clinical and regulatory phases of therapy development and our services often make a critical contribution to life safety.

·      Language & Content Technology offers a range of technology products which deliver translation and content management solutions. A pioneer in machine translation ("MT"), Language Weaver is a neural MT product, using linguistic AI. With Trados, RWS offers a suite of translation productivity and management solutions for enterprises, small and medium-sized organisations and professionals. Tridion, Contenta and Propylon are the Group's portfolio of content management products, which offer specialised solutions for multiple end markets, including aerospace and defence, high-tech, law-makers and law-takers, life sciences and manufacturing, alongside a leading XML editor (Fonto). All these products offer clients enterprise grade privacy, security and quality.

·      IP Services is one of the world's leading providers of patent translations, filing solutions and IP search, renewal, recordals and monitoring services. The division delivers highly specialised technical translations to patent applicants and their representatives and counts 18 of the world's top 20 patent filers as its clients.

Language eXperience Delivery ("LXD"), RWS's unique production platform, translates the majority of client content from the Language Services and Regulated Industries divisions: 73% (FY23: 63%). The LXD uses RWS's technology products to support operational efficiency and excellence in the delivery of solutions to clients - the Trados Enterprise product is deployed to aid translation productivity and management and Language Weaver AI is routinely used both to analyse client content to enable it to be better assigned to linguists and to pre-translate content before it is post-edited by linguists. More than 60% of this content is machine-translated first by Language Weaver, making the LXD an extensive and experienced user of AI.

The LXD began handling volumes from the IP Services division in the first quarter. The LXD is now running a common supply chain for the whole Group and, as a result, all three services divisions are benefiting from volume discounts with our freelance network of language specialists. The LXD supply chain team are now applying their expertise to support the sourcing and management of the communities that underpin the delivery of TrainAI and other data services.

Our strategy

RWS is confident that its medium-term strategy is supporting the next phase of the Group's development and will help build a long-term sustainable business, delivering financial and social value. Through our defined growth initiatives, we are accelerating penetration into existing higher growth segments, leveraging our capabilities into adjacent higher growth segments such as AI data services (TrainAI), Linguistic Validation and eLearning and re-affirming our technology product leadership. In respect of our language technology portfolio, we are underway with our Trados transition programme.

AI is at the heart of these developments and we are already well-established as developers, providers and users of AI technology through products such as Language Weaver and Trados and AI data services such as TrainAI. Large Language Models ("LLMs") represent an exciting development as far as content generation and transformation is concerned and we have deployed a private LLM as a core part of our Evolve solution.

In parallel we are investing to create an efficient scalable platform that can underpin both organic and inorganic growth. Having successfully completed the second and most significant release of HR D365 in May we are on track to complete our HR transformation by the end of FY24. In Finance the first phase of the shared service centre implementation has been completed. We have made good progress on moving a greater proportion of volume into the LXD (including some IP Services content) and we have rationalised the supply chain for our freelance network, with the resulting efficiency benefits already supporting margin. Looking forward, we will complete the existing programmes in Finance and IP Services, and look to access new opportunities in the further development and scaling of our AI propositions, end-to-end optimisation and legal entity rationalisation.

RWS's strong cash position means that the Group continues to seek acquisitions which can accelerate delivery of our medium-term plans. Our disciplined M&A programme is focused on selectively acquiring complementary businesses which enhance our organic growth profile and fit with our strategic priorities to add:

·      localisation assets with attractive end market exposure;

·      new capabilities in AI technology and technology-enabled language services;

·      assets that broaden our natural language processing capabilities; and

·      data annotation solutions.

Our strategy is underpinned by the RWS Growth Model, which demonstrates our unique position and the basis on which we will deliver our strategy.

The Growth Model's five components are:

·      Building long-term client relationships - we offer a comprehensive range of services and products, with configurable solutions to meet any mix of quality, value and speed requirements from clients, who also benefit from dedicated sector account management teams and specialist sector expertise in areas such as life sciences, technology and intellectual property. 

·      Deepening our cultural and technical expertise- we support over 429 language pairs and have access to more than 35,000 freelance linguists alongside nearly 1,600 that we directly employ. We have rich and varied data - translation memories, term bases and accumulated knowledge about brands and their voices and different cultures. We also invest in future linguistic and technical talent via the RWS Campus programme.

·      Deploying our unique technology and AI - we are machine translation pioneers via our AI-driven Language Weaver product, and our neural MT research team is accredited with more than 40 patents. The Trados suite offers a range of market-leading cloud-oriented translation management and productivity tools, and we provide complementary content management technologies through Tridion to allow brands to better reach their audiences. Contenta offers specialised content management for the defence and aerospace sectors. Our technology product suite is sold both separately and alongside our service solutions, as well as supporting our internal efficiency and effectiveness.

·      Developing our portfolio - RWS consistently delivers strong underlying cash generation. As a result, the Group has the ability to invest in service and technical development to support our clients as they innovate and grow. Our strong balance sheet also allows us to make further value accretive acquisitions which will support our move into higher growth segments.

·      Leveraging our global scale and reach - The LXD provides 24 x 7 coverage via a blend of human expertise and technology. The platform delivers operational leverage, with potential for sustained efficiency and margin improvement. We are also investing to establish effective and lean shared services which will support our four operating divisions and facilitate the integration of acquisitions and continued margin development.

Profit and Loss

The Group's revenues were £350.3m compared with £366.3m in the six months ended 31 March 2023 ("HY23"), a 4.4% decline. On an OCC² basis revenues fell by 2%, representing an improving trend (H1 FY23: -7% and H2 FY23: -5%), with the Group returning to growth in the second quarter. Gross margins were maintained at 45.7% (HY23: 45.7%) due to cost reduction actions taken in H2 FY23 and ongoing LXD efficiencies fully offsetting weaker performance in some parts of our higher margin businesses and foreign exchange headwinds.

The Group achieved an adjusted PBT³ of £45.6m in the first half-year, a decrease of 16% compared with £54.4m in HY23, reflecting the lower gross profit. Adjusted administrative expenses remained in line with prior year, as the cost reduction actions in FY23 offset the expected foreign exchange headwinds and ongoing planned investments. As a result, adjusted profit before tax³ margin was 13.0%, down from 14.9% in HY23. Adjusted profit before tax³ is stated before exceptional items, share-based payment expenses and amortisation of acquired intangibles. On the same basis, adjusted basic earnings per share³ decreased by 14% to 9.1p (HY23: 10.6p).

Taxation

The adjusted effective tax rate⁴ for the Group was 25.1% (HY23: 24.4%). This increase reflects the impact of different tax rates in the geographical locations where profits are made, together with the impact of movements in provisions as part of our regular reassessment of tax exposures across the Group.

Currency and FX

The Group remains exposed to movements in the US dollar exchange rate reflecting the fact that the majority of revenues are denominated in US dollars (approximately 52%). The Group continues to hedge transactional risk while relying on constant currency reporting to highlight underlying translation risk, which remains unhedged. The Group uses forward exchange contracts to hedge risk at both Group and divisional level.

Cash Flow

Net cash flow from operating activities was £37.4m (HY23: £60.2m). During the first half, the major cash outlays were the final dividend of £36.4m, repurchase of shares £30.4m, intangible asset additions of £21.6m and tax payments of £10.6m. Cash conversion was 30% as a result of weaker business performance, continued planned investments and a short-term lengthening of debtor days. Cash conversion is expected to revert to normal levels by the end of the period.

£25m cash was received as initial consideration for the disposal of the Group's interest in a revenue and cost sharing arrangement, together with some associated assets, relating to a patent information resource business known as "PatBase" in May 2024. 

Balance sheet and liquidity

At 31 March 2024, shareholders' funds amounted to £909.0m (HY23: £1,062.7m). At the same date, the Group had net debt⁵ of £38.9m (FY23: net cash £23.6m), comprising cash of £64.6m less borrowings of £103.5m. RWS has a cash generative business model and the Board is confident that the Group's cash generation and liquidity put it in a strong position to further invest in organic growth as well as explore suitable acquisition opportunities. In addition to its cash reserves, the Group had drawn US$135m of its US$220m banking facility, leaving headroom of US$85m at the period end and total liquidity of £132m.

Dividend

The Directors have approved an interim dividend of 2.45p per share, reflecting a 2% increase over the 2.40p interim dividend in HY23. This reflects the Group's strong financial position, its cash generative business model and the Board's confidence in its future prospects.

The dividend will be paid on 19 July 2024 to shareholders on the register at 21 June 2024 and the ex-dividend date is 20 June 2024. The Group remains committed to a progressive dividend policy, which has been followed in every year since flotation in 2003.

Operating review

Language Services

The Language Services division, which represented 45% of Group revenues (HY23: 44%) in the period, generated revenues of £156.5m (HY23: £160.9m).

Language Services returned to growth on an organic constant currency (OCC)² basis, up 2% versus prior year, 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 strong pipeline of opportunities 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.

We made good progress in respect of growth levers in the division during the period. In eLearning we have an increasing number of pilots and opportunities across all verticals and we have just launched HAI, a digital self-service platform designed to streamline the translation experience for small and medium businesses by simplifying project management, offering real-time cost visibility and ensuring high-quality translations, all in one place.

Once again, we saw high levels of client retention and satisfaction in the division, a number of new client wins in the technology and e-commerce sectors and good organic performance in the Asia-Pacific region.

The division's adjusted³ operating profit was £15.3m (HY23: £13.0m), reflecting top line revenue growth and the impact of cost reduction measures taken in the second half of FY23.

Regulated Industries

In Regulated Industries, reported revenues were £71.8m (HY23: £84.9m), representing 21% of Group revenues (HY23: 23%).

Revenue declined on an OCC² basis by 12%, 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 compliance work to meet PRIIPS regulatory changes in the financial services segment last year. By contrast, Linguistic Validation, one of our growth initiatives and a service used by clients at the clinical phase of therapy development, continues to perform strongly. Its success also points to improved demand in the regulatory and launch phases in due course.

During the period we secured our first Evolve contract with a large life sciences client and are encouraged by the number of pipeline opportunities in this part of the division. We are also encouraged by some early signs of recovery in the second half.

Adjusted³ operating profit for Regulated Industries was £7.5m (HY23: £11.7m), reflecting the reduction in top line revenues, partially mitigated by increased use of the LXD and the impact of FY23 cost actions.

Language & Content Technology

Language & Content Technology ("L&CT") revenues were £68.8m (HY23: £67.6m) and accounted for 20% of Group revenues (HY23: 18%).

Revenue contracted 3% on an OCC² basis, with good growth in Propylon and a high level of new bookings in Language Weaver, offset by lower term and perpetual licence sales and renewals and professional services revenues in Tridion. We saw new logo wins across a range of end markets, including financial services, government, media and retail.

We achieved an 18% growth in SaaS licence revenues in the period compared with HY23 and SaaS revenues as a percentage of total licence revenues in the division increased to 39% (HY23: 33%), demonstrating the continued shift in our licence models to SaaS, linked to the increased R&D investments in our technology products. This transition to SaaS builds long-term value for FY24 and beyond by supporting greater stability and predictability of future revenue streams.

The division's in-house R&D team led the development of the Evolve solution and continues to roll out the range of language pairs available through Evolve. In parallel, having announced end of life for the majority of our legacy translation management products in March, we have continued to work on the transition programme to Trados Enterprise for clients of these products, with 17% of transitions completed so far.

Later this month we will launch Trados Studio 2024, the latest version of our computer-assisted translation tool for individual users. Delivering access to cutting-edge AI, multiple usability improvements and enhanced accessibility features, and with Language Weaver as a standard feature, Trados Studio 2024 continues to address the diverse, evolving needs of users and reinforces Trados's position as the backbone of the industry.

The upcoming release of Tridion Docs 15.1 includes a host of new AI features, including Tridion Docs Genius and Draft Companion, marking a major step forward for organisations with complex content requirements.

Adjusted³ operating profit for the division was £12.8m (HY23: £15.5m), impacted by lower OCC² revenues and the intended transition from one off licence purchases to a higher proportion of SaaS revenues.

IP Services

In IP Services revenues were £53.2m (HY23: £52.9m), representing 15% of Group revenues (HY23: 14%).

Revenue grew 4% on an OCC² basis, driven by strong growth in the Eurofile segment with many patent filers remaining committed to the existing arrangements over the Unitary Patent. The IP research segment returned to growth with several new client wins and we saw growth in patent renewals work, particularly in China. With an expanded product offering in IP recordals and docketing, we further demonstrated our ability to serve clients across the entire IP lifecycle, reflecting an improved sales structure and effectiveness.

On 16 May the Group completed its 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. We received £25m in May, with the remaining £5m payable at the latest six months after completion.

The division delivered an adjusted³ operating profit of £14.2m (HY23: £13.1m), benefitting from top-line growth, transition to the LXD and the impact of cost reduction actions taken in FY23.

ESG

Environmental, social and governance ("ESG") matters continue to be core to the way RWS operates. Clients, partners and colleagues are keen to understand the steps we are taking to become a more sustainable business.

On environmental matters, the Group formally submitted its greenhouse gas ("GHG") emissions reduction targets to the Science Based Targets initiative ("SBTi") for validation in December 2023. We were delighted to receive confirmation from the SBTi in May that the targets had been validated. We have committed to reduce absolute scope 1 and 2 GHG emissions by 54.6% by FY33 from a FY22 base year. The Group has also committed to reduce scope 3 GHG emissions from purchased goods and services and colleague commuting by 61.1% per million GBP value added within the same timeframe.

RWS continues to promote Campus, a global programme nurturing localisation talent. By partnering with over 600 universities worldwide, we foster strong relationships to develop the next generation of professionals who will positively impact our industry. One of these is the University of Manchester, where the RWS Foundation provides funding each year via the RWS-Brode scholarship and, during the last six months, professional development workshops were delivered to students. The RWS Foundation also provided funding for our project to make Trados Studio more accessible to visually impaired and blind language specialists, as well as financial support to match the funds raised by colleagues across a range of local community initiatives.

In terms of governance, RWS has recently joined Meta's Open Loop to help bridge the gap between rapid advances in AI innovation and policy-making. Open Loop is a global programme involving a consortium of technology businesses, academics and civil society representatives that connects policymakers and technology companies to help develop effective and evidence-based policies around AI and specifically generative AI systems. As an extensive developer and user of AI, RWS believes that it is critical that proposed AI regulations strike the right balance between fostering innovation and ensuring that AI is developed safely and securely for the benefit of customers and broader society.

In recognition of our ESG progress, in December 2023 we were awarded a Silver Medal by EcoVadis for the second year running. Once again we ranked in the top quartile of participating companies and in the top 10% of companies in our industry category, improving our score to 66% (FY22: 63%).

People and Board

RWS teams across the world continue to deliver for our clients and each other every day. Over the past six months I have been particularly pleased to see enhanced collaboration across the Group, both in pursuit of cross-selling and in developing, operationalising and selling our Evolve solution. Our technology experts and our language specialists remain critical to the success of RWS and they are backed by our operational, sales and marketing and functional support teams.

We have continued to address the feedback from our 2023 colleague engagement survey, with action plans in place across four global workstreams and at individual divisional and functional levels to focus and drive improvements. In support of one of the global workstreams we held a "One RWS" event in every location in the last week of April, supplemented by a number of virtual events for those colleagues who are fully remote. It was an opportunity for colleagues to be recognised for their contribution, to better connect them to strategy and one another, to learn more about our portfolio of products and solutions, particularly how critical AI is to our future, and to focus on our community and culture. These events were well received and we anticipate it becoming an annual event in our calendar. Voluntary colleague attrition levels have fallen to 12.4% in the 12 months ended 31 March 2024, compared with 12.5% for the 12 months ended 31 March 2023⁶.

Paul Abbott and Graham Cooke were appointed to the Board as Non-Executive Directors on 1 January 2024. Paul sits on the Remuneration Committee and Graham on the Audit Committee, and both are members of the Nomination Committee. In February Lara Boro stepped down as a Non-Executive Director after six years and I would like to thank her for her guidance and support since I joined the Group. David Clayton succeeded Lara as Senior Independent Director.

At 31 March 2024 the number of full-time equivalent colleagues in the Group was 7,814 (HY23: 7,944).

On 23 May we announced my intention to step down from the role of CEO and Director of the company. I expect to remain with RWS until early 2025 in order to ensure an orderly transition, once a successor has been appointed. In the meantime, it remains my privilege to lead our talented and diverse global team and to serve our wonderful clients.

Current trading and outlook

The Group's first half results reflect good progress in a number of areas and demonstrate 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, which have continued into the early part of the second half, demonstrate that our AI-enabled solutions are resonating with clients at this pivotal moment for our industry.

The Group returned to growth in the second quarter and has had an encouraging start to the second half, currently pointing to a performance in line with market expectations for the full year⁷.

Ian El-Mokadem
Chief Executive Officer
11 June 2024

1.     Slator 2024 Language Industry Market Report, May 2024.

2.     Adjusted to reflect a like-for-like comparison between reporting periods and assumes constant currency across both reporting periods.

3.     RWS uses adjusted results as key performance indicators as the directors believe these provide a more consistent measure of operating performance. The definitions for these key performance indicators can be found in the Appendix. 

4.     The adjusted effective tax rate is the effective tax rate before exceptional items, amortisation of acquired intangibles, tax on exceptional items and prior year adjustments.

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

6.     Calculated as number of leavers during the financial year, on a rolling last twelve months basis, divided by average headcount over the same period, noting the constraints imposed by having multiple HR systems.

7.     The latest Group-compiled view of analysts' expectations for FY24 gives a range of £721.4m-£756.0m for revenue, with a consensus of £735.1m, and a range of £110.4m-£118.4m for adjusted profit before tax, with a consensus of £113.8m, and a range of 21.8p to 24.0p for adjusted EPS, with a consensus of 22.8p.

RWS Holdings plc: Condensed Consolidated Statement of Comprehensive Income

RWS Holdings plc: Condensed Consolidated Statement of Financial Position

RWS Holdings plc: Condensed Consolidated Statement of Changes in Equity

RWS Holdings plc: Condensed Consolidated Statement of Changes in Equity

RWS Holdings plc: Condensed Consolidated Statement of Cash Flows