Rws Holdings Plc · LSE:RWS
Rws — FY2023 Earnings Presentation
38 slides from Rws's earnings presentation, Dec 12, 2023
Slide 1: 2023 Final Results Investor briefing
2023 Final Results Investor briefing 12 December 2023
Slide 2: Ian El-Mokadem and Candida Davies
Ian El-Mokadem Candida Davies Chief Executive Chief Financial Officer Officer 2 © 2023 RWS
Slide 3: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 3 © 2023 RWS
Slide 4: Who we are
Who we are A unique, world-leading provider of technology-enabled language, content and intellectual property services; well-diversified, with many leading market positions Clear structural demand £47bn market size Attractive drivers markets >8,000 corporate clients Proprietary language in 106 count
Slide 5: What we do
What we do Using a unique combination of technology and human expertise, we support our clients to create, collect, transform and analyse, launch and manage content This helps our clients grow, by ensuring they are understood anywhere, in any language Content Analyse & Launch & Create Collect Transf
Slide 6: Strategic progress and efficiency drive mitigating a challenging market
Strategic progress and efficiency drive mitigating a challenging market Strong client Performance reflects retention & new £25m run rate cost £40m Capex lower activity levels business wins savings delivered from some clients invested to drive 100% win rate on Efficiency from growth initiatives & H2
Slide 7: FY23 overview – resilient performance as guided
FY23 overview – resilient performance as guided REVENUE GROSS MARGIN ADJUSTED PBT1 ADJUSTED PBT MARGIN¹ ADJUSTED BASIC EPS2 £733.8m 46.3% £120.1m 16.4% 23.3p - 2% (reported) - 40 bps - 11% - 170 bps - 12% - 6% (OCC)³ FY22: £749.2m FY22: 46.7% FY22: £135.7m FY22: 18.1% FY22: 26.6p CAPEX TOTAL DIVIDEN
Slide 8: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 8 © 2023 RWS
Slide 9: Income Statement
Income Statement • Revenue declined 2% year on year: • Organic constant currency1 -6% compared with prior year • Organic revenue2 -3% year-over-year FY23 Actuals FY22 Actuals • Client volume reductions, partially mitigated by growth lever performance and some pricing progress 30-Sep-23 30-Sep-22 (£m
Slide 10: Group revenue bridge
Group revenue bridge REPORTED ORGANIC CONSTANT CURRENCY CURRENCY1 REVENUE REVENUE GROWTH -2.1% Reported GROWTH H1 H2 FY -6.0% OCC +3% -4% Language Services -8% -6% -7% +2% -6% Regulated Industries -9% -9% -9% -10% Language & Content +8% -1% -0% -1% Technology -2% IP Services -6% -2% -4% -2% Group -7
Slide 11: Net cash bridge and cash conversion
Net cash1 bridge and cash conversion FY23 FY22 Cash conversion² 74% 93% 1 1 1 Net cash comprises cash and cash equivalents less loans but before lease liabilities 2 Cash conversion calculated as free cash flow before exceptional cash flows over Adjusted Net Income 11 © 2023 RWS
Slide 12: Balance Sheet
Balance Sheet As at As at 30 September 2023 30 September 2022 Non-current assets (£m) (£m) • Goodwill decreased by £84m due to the impairment Non-current assets 1,025.6 1,150.4 (£62m) and the impact of FX during the year (£35m), Trade and other receivables 212.3 220.5 partially offset by the acquisi
Slide 13: Tracking our Growth Model and ESG progress
Tracking our Growth Model and ESG progress Measure FY22 FY23 Building long-term client 1 Organic revenue growth at constant currency -1.0% -6.0% Mar-23 relationships 2 Net Promoter Score (Rolling Measure12 months) Measure FY22 41 Mar-22 FY22 YTD YTD 42 Mar-23 1 1 YTD 3 1 Repeat revenue Organic reven
Slide 14: Transformation programme
Transformation programme Key milestones: Key milestone achieved: Finance shared service centre launched; HR replatforming Phase 1 delivered Project completion: Area What is it? Impact Progress to date 2023¹ 2024 2025 Consolidation of • Project successfully delivered Jan 2023 Highlander Microsoft Eff
Slide 15: Investments governed by capital allocation policy
Investments governed by capital allocation policy Continued strong cash generation and disciplined capital allocation Continue to support divisions to drive base case organic growth BAU spend and sustain infrastructure Invest to accelerate organic Invest in growth areas, technology products and infr
Slide 16: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 16 © 2023 RWS
Slide 17: Strong portfolio, unique production platform
Strong portfolio, unique production platform Language IP Services Regulated Language and Services Industries Content Technology • Patent translation and OPERATING DIVISIONS • Localisation solutions filing • Life sciences • Linguistic AI - neural to multiple verticals MT • Search, retrieval and • Fin
Slide 18: Language Services
Group revenue share: FY23 – 45% (FY22: 46%) Language Services High client retention & satisfaction, with successful Management Actions retender processes; reduced activity partially • Growth levers - strong performance in Train AI & eLearning mitigated by performance of growth initiatives • EIG volu
Slide 19: Growth initiative focus – TrainAI
Growth initiative focus – TrainAI Data collection, annotation and validation to train classical AI; prompt engineering, reinforcement learning from human feedback, red teaming and locale support for generative AI Client Need Attraction and right to win • Clients focusing on AI to better engage with
Slide 20: IP Services
Group revenue share: FY23 – 14% (FY22: 14%) IP Services Rebounding Eurofile revenues following Unitary Management Actions Patent launch & improved sales effectiveness, giving strong foundation for FY24 • Growth levers - strong performance in penetrating Patent Attorney market Performance • Pricing p
Slide 21: Regulated Industries
Group revenue share: FY23 – 22% (FY22: 23%) Regulated Industries Reduced activity in Life Sciences, however Linguistic Management Actions Validation points to improved demand in regulatory • Growth levers - strong performance in Linguistic Validation phase in due course • Greater volume transitioned
Slide 22: Growth initiative focus – linguistic validation
Growth initiative focus – linguistic validation Translation, validation, copyright management & distribution of patient-facing, data-gathering questionnaires used in clinical trials Client Need Attraction and right to win • Critical in clinical trial phase of Life Sciences value chain • Significant,
Slide 23: Language and Content Technology
Group revenue share: FY23 – 19% (FY22: 17%) Language and Content Technology Encouraging new client wins; further shift to SaaS Management Actions revenues; continued focus on AI-centred solutions • SaaS transition progress - 23% growth in new SaaS licences • Trados technical debt - >100 migrations f
Slide 24: AI – RWS's right to win
AI – RWS’s right to win Enterprise- Data Deep Enviable Attractive Commercial grade creation & expertise client set partner AI products products validation already capability deployed We believe RWS is better placed than others to win 24 © 2023 RWS
Slide 25: AI products and solutions in the market
AI products and solutions in the market EXPLORING AI BUILDING AI USING AI USING AI Language Tech Services TrainAI Language Weaver Weaver Trados • Sample client project: • Sample client project: • AI-led innovation: • AI-centred product • Who – govt. agency • Who – global • “Evolve” – linguistic func
Slide 26: M&A – continuing to look at range of attractive opportunities
M&A – continuing to look at range of attractive opportunities Localisation New Assets that Data PRIORITIES assets with capabilities in broaden our annotation attractive AI technology natural language solutions end market & technology-enabled processing or content exposure language services managemen
Slide 27: ESG progress
ESG progress Environment Social & Governance Assurance community Science-Based Targets Continued strong policy & Awarded Silver Medal by submitted for validation compliance focus, incl.: EcoVadis – 2nd year running Diversity Council established & diversity Scope 1 & 2: 50% festival held to drive fur
Slide 28: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 28 © 2023 RWS
Slide 29: FY24: Current trading and outlook
FY24: Current trading and outlook • Growth initiatives delivering increasingly significant incremental revenues • Improving trend in OCC revenue performance in H2 FY23 Growth • Encouraged by recovery of Eurofile revenues post Unitary Patent launch • SaaS transition now a tailwind • New logo wins acr
Slide 30: Q&A
Q&A 30 © 2023 RWS
Slide 31: Agenda
Agenda Group Overview Group Financials Operational Performance Summary Appendix 31 © 2023 RWS
Slide 32: RWS positive demand drivers
RWS positive demand drivers Increasing ESG Changing Explosion of Continued Growth in AI / / regulatory globalisation data / content innovation automation requirements market Annual volume >3k rules/regulations Capex investment AI to contribute Value of global trade of data to reach added annually to
Slide 33: Technology evolution and market growth
Technology evolution and market growth Successive technology waves have improved efficiency/productivity and lowered price/cost-to-serve Localisation market growth Statistical Machine 2020s Translation (SMT) 2010s Terminology databases / electronic 2000s dictionaries LLMs / Generative AI 1990s Neura
Slide 34: 20+ years' AI experience gives us a competitive moat
20+ years’ AI experience gives us deep capability and a competitive moat Established Thought R&D Responsible Internal enterprise- leadership investment player deployment grade products Trados >£34m* >60% >40 Data Tridion patents Privacy FY22 MT first Language >100 Weaver peer- 600 Security MTQE revi
Slide 35: How to approach AI?
How to approach AI? Our core convictions relating to AI in our RWS is very well-placed to be a industry beneficiary Essential to adopt AI and play a lead role 1 in shaping its use While their roles will evolve, humans will Opportunity to be the valued partner 1 to our clients on their AI journey 2 c
Slide 36: Shareholders
Shareholders As of 31 October 2023 Top shareholders Holding (%) Andrew S Brode 23.8 Liontrust Asset Management 13.0 Octopus Investments 4.9 RGM Capital 3.5 36 © 2023 RWS
Slide 37: KPI definitions
KPI definitions Measure Definition Building long-term client relationships 1 Organic revenue growth at constant currency Calculated as a like-for-like comparison between reporting periods and assumes constant currency across both reporting periods 2 Net Promoter Score Rolling 12 month score from all
Slide 38: About RWS
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