Rws Holdings Plc · LSE:RWS
Rws — H1 2020 Earnings Presentation
32 slides from Rws's earnings presentation, June 2020
Slide 1: Half Year Results June 2020
Half Year Results June 2020 RWS 2020© AN INTRODUCTION Andrew Brode Richard Thompson Des Glass 1 Chairman Chief Executive Officer Chief Financial Officer
Slide 2: Robust H1 performance, strong start to H2
Robust H1 performance, strong start to H2 Revenue Adjusted PBT2 Adjusted EPS2 £169.7m £33.1m 9.35p - 2% - 7% - 8% - 2% underlying1 - 7% underlying1 H1 2019: 10.06p H1 2019: £172.3m H1 2019: £35.6m Interim dividend Cash Net debt 1.75p £28.3m £34.5m Maintained in line with after £38.3m in debt, 0.4x E
Slide 3: Covid-19 update
Covid-19 update › Staff welfare and wellbeing the Group’s #1 › RWS’s business model utilizes freelancers priority which provides cost scalability in line with changes in demand › All offices fully operational and staff are working from home › Group is well diversified geographically, by markets, ser
Slide 4: H1 trading update
H1 trading update › Trading in H1 reflected: › Life Sciences revenue up 2%, driven by continued growth for its specialist, high › Lower activities in IP Services which faced a value linguistic validation offering. Action very tough comparative, due to a change in taken by new leadership starting to
Slide 5: A strong start to the second half and strategic acquisitions
A strong start to the second half and strategic acquisitions › Traded strongly in April and May › Announced two strategic acquisitions on 9 June: › Moravia: increase in volumes from tech customers due to Covid-19 messaging › Iconic, an award-winning machine across social media platforms and surge tr
Slide 6: Financial Review H1 2020
Financial Review H1 2020 RWS 2020© AN INTRODUCTION 6
Slide 7: Income statement
Income statement 6 months ended 6 months ended Reported and underlying revenues are both 31 March 2020 31 March 2019 2% lower YoY driven by (£m) (£m) › IP Services impacted by strong H1 2019 Revenue 169.7 172.3 comparative › Deferral of a significant project in Moravia Cost of sales (103.9) (103.6)
Slide 8: Underlying segmental revenue bridge
Underlying segmental revenue bridge Underlying1 revenue growth £m 175 172.3 -6.2% IP Services 0.8 0.8 169.7 170 0.1 169.4 (0.5) (3.8) 165 +2.3% Life Sciences 160 +0.1% Moravia 155 -1.7% Group 150 H1 2019 IP Services Moravia Life Sciences Underlying Acquisitions FX H1 2020 reported revenue reported r
Slide 9: Net debt bridge – H1 2020
Net debt bridge – H1 2020 Cash conversion £m 10 85% 40.4 H1 2019: 84% 5 0 Free cash flow -5 (5.2) (3.0) £21.3m -10 H1 2019: £23.1m -15 (8.7) -20 Net debt -25 £34.5m H1 2019: £63.9m -30 1.9 -35 (19.2) (1.2) (3.0) 0.3 (34.5) Effective tax rate -40 (36.8) 22.8% Opening net H1 2020 Working Capex Tax Div
Slide 10: Effectively mitigating our currency exposures
Effectively mitigating our currency exposures Moravia IP Services Life Sciences Corporate Revenues Operating costs Transactional Transactional Transactional Transactional Type of risk Translational Translational Translational Translational › Hedge CZK cost base › Distribute surplus ›
Slide 11: Balance sheet
Balance sheet Net debt As at As at Balance sheet 31 March 2020 30 September 2019 › Net debt reduced to £34.5m (£m) (£m) › Refinanced our existing term loan into a Non-current assets 453.6 444.8 $120m revolving credit facility (RCF) with an $80m accordion option Trade and other receivables 85.7 85.5
Slide 12: Operational Review H1 2020
Operational Review H1 2020 RWS 2020© AN INTRODUCTION 12
Slide 13: Leaders in specialist, growing market segments
Leaders in specialist, growing market segments IP Services Life Sciences Moravia World’s premier provider of patent Exclusive focus on language service Customized localization programs with translation and filing, search, retrieval Deelete biotech, needs of pharmaceutical, medical device companies a
Slide 14: IP Services
IP Services Revenue down 7% (CC1) Outlook IP Services Revenue (£m) IP Services Adjusted › H1 in previous period benefitted › Strong level of both new Operating Profit (£m) from a change in practices at the business wins and sales European Patent Office pipeline 70 › Strong organic growth from new ›
Slide 15: Life Sciences
Life Sciences Life Sciences Revenue (£m) Life Sciences Adjusted Revenue grew by 2% on underlying1 basis Operating Profit (£m) › Good growth from key clients › Increased sales in linguistic validations (+13% CC1) › Good new client wins in the period 40 25 › Offset by lower sales to Clinical Research
Slide 16: Moravia
Moravia Moravia Revenue (£m) Moravia Adjusted Operating Profit (£m) Revenue grew by 0.1% on underlying1 basis › Reasonable growth outside the ‘top 6’ clients (+4%) 100 25 › Revenue with ‘top 6’ customers mixed but slight reduction on FY19 › Tight control on overheads 80 20 › Delay in client’s new pr
Slide 17: Market Dynamics
Market Dynamics RWS 2020© AN INTRODUCTION 17
Slide 18: Challenges and opportunities
Challenges and opportunities Covid-19 › RWS has experienced limited demand-side impact overall from Covid-19 so far, with increased activity from Moravia’s large technology clients and Life Sciences’ clients, who are working on vaccines and antibody testing, offset by some impact on IP services › RW
Slide 19: Challenges and opportunities
Challenges and opportunities Machine Translation (MT) › Neural machine translation (NMT) remains a challenge and an opportunity › Group continues to trial and provide NMT services where it is in the customer’s interest and makes commercial sense to do so › The acquisition of Iconic significantly str
Slide 20: Acquisitions
Acquisitions RWS 2020© AN INTRODUCTION 20
Slide 21: Iconic acquisition
Iconic acquisition Rationale › Highly successful award winning niche machine translation (MT) provider based in Dublin › Strengthens RWS’s MT offering to the market › On recent MT projects RWS benchmarked Iconic’s technology against its competition and discovered it to be best-in-class Transaction d
Slide 22: Webdunia acquisition
Webdunia acquisition Rationale › Successful translation, localization and technology solutions business based in India and with offices in Thailand and the USA › Strengthens RWS’s translation and localization offering in the Indian and Asia Pacific markets to better support our customers growth aspi
Slide 23: Current trading and outlook
Current trading and outlook RWS 2020© AN INTRODUCTION 23
Slide 24: Outlook
Outlook › Group is a well-balanced and integrated › Uncertainty around impact of Covid-19 led to business with extensive service offerings withdrawal of market guidance on 8 April across three divisions and a global presence › However, second half expected to benefit › Well positioned in markets tho
Slide 25: Key investment case highlights
Key investment case highlights Strong market positions in three structurally growing end markets Experienced management team and Board Attractive and sustainable margins Consistent delivery of earnings growth Successful track record of value- enhancing M&A Strong balance sheet ensuring financial Str
Slide 26: Thank you and questions
Thank you and questions RWS.com RWS 2020© AN INTRODUCTION 26
Slide 27: Appendices
Appendices RWS 2020© AN INTRODUCTION 27
Slide 28: A 16-year track record of unbroken growth
28 27.3 2003/2004 31.0 35.9 2005/2006 40.8 46.2 2007/2008 54.1 55.7 2009/2010 60.6 65.4 2011/2012 68.8 RWS 2020© AN INTRODUCTION 77.4 2013/2014 93.6 95.2 2015/2016 122.0 164.0 2017/2018 306.0 355.7 2019 Annual revenue (£m) 5.6 2003/2004 6.0 A 16-year track record of unbroken growth 7.4 2005/2006 9.0
Slide 29: Shareholders list
Shareholders list As at 31 May 2020 Top seven shareholders Holding (%) Andrew S Brode 32.8 Liontrust Asset Management 11.3 Aberdeen Standard Investments 6.7 Octopus Investments 5.0 Canaccord Genuity 3.9 BlackRock 3.0 Sanford Deland Asset Management 2.7 RWS 2020© AN INTRODUCTION 29
Slide 30: Environmental, social and governance highlights
Environmental, social and governance highlights Environment Social and Community Corporate governance Compliant with Streamlined Energy Yes Employee health and wellbeing: proactively Compliance with the 10 key principles in Yes and Carbon Reporting (SECR) policy support the personal health and wellb
Slide 31: Attractive growth markets
Attractive growth markets PCT Filings European Patent Life Sciences Language industry 265,800 (EP) Applications US$10 trillion US$49.6bn 5.2% increase in 181,400 market by 2022 market 2019 4.0% increase in 2019 Source: WIPO Source: EPO 5.4% annual growth rate 2018-2022 7.8% CAGR 2009-2019 Source: De
Slide 32: Patent power tilts to Asia
283,248 average patents awarded Patent power tilts to Asia annually 2000 - 2018 119,689 average patents awarded 1% India annually 1980 - 1999 2% Italy 40,605 average patents awarded 1 China annually 1970 - 1979 2% 7% South 22% USA Switz. Korea 2% 5% 24% USA Italy Switz. 1% 7% UK 1% Switz. Israel 21%