Rws Holdings Plc · LSE:RWS
Rws — FY2022 Earnings Presentation
41 slides from Rws's earnings presentation, Dec 15, 2022
Slide 1: RWS Full Year Results 2022
RWS Full Year Results 2022 15 Dec 2022 1 © 2022 RWS
Slide 2: Presenters
Andrew Brode Ian El-Mokadem Candy Davies Rod Day Chairman Chief Executive Chief Financial Deputy Chief Officer Officer Financial Officer 2 © 2022 RWS
Slide 3: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Appendix 3 © 2022 RWS
Slide 4: Unique, world-leading provider of technology-enabled language, content and IP services
Unique, world-leading provider of technology-enabled language, content and IP services Revenue¹ Adjusted PBT¹ Expertise Reach £m £m 2003 2003 400 2022 2022 7,761² Long track record of sustained growth and customer delivery 4 © 2022 RWS Notes: ¹ - includes full year of SDL; graphs show every other ye
Slide 5: High quality, long-term client relationships
High quality, long-term client relationships Supporting our ability to grow organically on a sustainable basis • Diversified client base: 16 of Fortune‘s Major global 88 of the Top 100 Top 20 most • Top 10 = 29% of Group revenues technology brands admired businesses • Top 30 = 43% of Group revenues
Slide 6: Robust, cash-generative, profitable growth in line with expectations
Robust, cash-generative, profitable growth in line with expectations REVENUE GROSS MARGIN ADJUSTED PBT1 ADJUSTED PBT MARGIN¹ ADJUSTED BASIC EPS2 £749.2m 46.7% £135.7m 18.1% 26.6p + 8% + 160 bps + 17% + 140 bps + 12% FY21: £694.5m FY21: 45.1% FY21: £116.4m FY21: 16.7% FY21: 23.8p CAPEX FINAL DIVIDEND
Slide 7: RWS Growth Model – continued good progress
RWS Growth Model – continued good progress • Investments in sales and marketing, including sales improvement initiatives Building long-term client in IP Services relationships • Expanded ‘voice of the customer’ programme Deepening our cultural • eLearning - upsell to established clients; Asia expans
Slide 8: Tracking our Growth Model and ESG progress
Tracking our Growth Model and ESG progress Measure FY22 FY21 Building long-term client 1 Organic revenue growth at constant currency -1% 4% relationships 2 Net Promoter Score +41 +43 3 Repeat revenue rate (Services) 99% 96% Deepening our cultural 1 Incremental revenue from defined growth initiatives
Slide 9: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Appendix 9 © 2022 RWS
Slide 10: Income statement
Income statement • Revenue up 8% following the acquisition of SDL in 12 months ended 12 months ended 30 September 2022 30 September 2021 November 2020: (£m) (£m) • Organic revenue growth +3% Revenue 749.2 694.5 • Organic constant currency1 -1% Cost of sales (399.0) (381.3) • Gross margin 160bps high
Slide 11: Group revenue bridge
Group revenue bridge £m 800 ORGANIC CONSTANT CURRENCY1 REVENUE GROWTH 27.1 750 749.2 +1% Language Services 3.8 6.3 31.6 720.8 1.3 (3.7) (11.7) 694.5 700 Regulated -2% Industries 650 Language & Content +5% Technology 600 -10% IP Services 550 -1% Group 500 2021 2021 Language Regulated Language IP Serv
Slide 12: Net cash bridge & cash conversion
Net cash1 bridge & cash conversion £m FY22 FY21 Cash conversion² 110.2% 96.7% 1 Net cash comprises cash and cash equivalents less loans but before lease liabilities 2 Cash conversion is measured as adjusted operating profit plus depreciation, amortisation of non-acquired intangibles and net changes
Slide 13: Balance sheet
Balance sheet Non-current assets As at As at 30 September 2022 30 September 2021 • Goodwill increased £76.8m or 12% following the (£m) (£m) acquisition of Fonto and the impact of FX during the year Non-current assets 1,150.4 1,059.4 • Intangible assets have increased £18.8m due to the Trade and othe
Slide 14: Capex in line with guidance
Capex in line with guidance Rising to 7% of revenue in FY23, as planned, expected to trend downwards thereafter Scheduled completion 2023 2024 2025 Programme What is it? Key benefits H1 H2 H1 H2 H1 H2 • Foundation for business transformation • Consolidation of Microsoft • Reduced complexity and incr
Slide 15: Investments governed by capital allocations policy
Investments governed by capital allocations policy Continued strong cash generation and disciplined capital allocation Continue to support the divisions to drive base case BAU spend organic growth and sustain infrastructure Invest to accelerate Invest in growth areas, technology products and 1 organ
Slide 16: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Appendix 16 © 2022 RWS
Slide 17: Strategy on a page
Strategy on a page Purpose Why we exist Unlocking global understanding A unique, world leading technology-enabled language, content Our business Who we are and IP services business Through content transformation and multi-lingual data analysis, our unique combination of technology and cultural Propo
Slide 18: Strong portfolio, unique production platform
Strong portfolio, unique production platform Language Regulated Language & IP Services Services Industries Content Technology • Patent translation and OPERATING DIVISIONS • Localisation solutions • Life sciences • Linguistic AI - neural filing to multiple verticals MT • Financial services • Search,
Slide 19: Language Services
Language Services Group revenue share: FY22 – 46% (FY21 – 46%) Solid growth in Strategic Solutions Group; some Enterprise Internationalisation Group clients reduced activity, but confidence in these established, long-term relationships remains Performance Revenue¹ (£m) Adjusted Operating Profit² (£m
Slide 20: Growth initiative focus – eLearning
Growth initiative focus – eLearning What is it? Market Attractiveness FY22 Progress • Digital learning experience for • Significant market size • Capability development in eLearning any organisation’s global • High growth development consulting and design audience through localisation • Localisation
Slide 21: Regulated Industries
Regulated Industries Group revenue share: FY22 – 23% (FY21 – 23%) Strong performance in Linguistic Validation, offset by some second half softness Performance Revenue¹ (£m) Adjusted Operating Profit² (£m) 200 -2% • Organic revenue at constant currency fell 2% 35 180 12% • Continued strong penetratio
Slide 22: Growth initiative focus – Linguistic Validation
Growth initiative focus – Linguistic Validation What is it? Market Attractiveness FY22 Progress • Translation, validation, copyright • Significant market size • Continued investing in operational capacity, management, and distribution of • High growth marketing and account management patient-facing,
Slide 23: Language and Content Technology
Language and Content Technology Group revenue share: FY22 – 17% (FY21 – 15%) Full ownership and accountability drove accelerated growth, despite faster-than-anticipated growth in SaaS revenues Revenue¹ (£m) Adjusted Operating Performance 140 Profit² (£m) 5% 40 • 5% organic growth in constant currenc
Slide 24: IP Services
IP Services Group revenue share: FY22 – 14% (FY21 – 16%) Lower revenue in Eurofile segment due to impact of forthcoming introduction of Unitary Patent (UP), partially offset by solid growth in Worldfile and other patent services Performance Revenue¹ (£m) Adjusted Operating • 10% revenue decline (con
Slide 25: Progress on environmental, social and governance
Progress on environmental, social and governance • Carbon emission reduction - expanded Scope 3 indirect carbon scope with aim of setting science-based targets using FY22 as a baseline Environmental • CDP - achieved a B score in latest ratings demonstrating our commitment to measuring and managing o
Slide 26: SDL – continuing strategic and operational benefits
SDL – continuing strategic and operational benefits Strategic Rationale Ongoing benefits Strong financial outcome Strengthening positions in life Life Sciences market leadership sciences and technology and ongoing growth in L&CT Acquisition EV = £570.5m¹ Enhanced client proposition Improved cross- a
Slide 27: M&A – clear priorities and rigorous screening criteria
M&A – clear priorities and rigorous screening criteria Localisation New Assets that Data PRIORITIES assets with capabilities in broaden our annotation attractive technology natural language solutions end market -enabled processing exposure language services capabilities All targets => 1st stage Do t
Slide 28: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Appendix 28 © 2022 RWS
Slide 29: FY23: Current trading and outlook
FY23: Current trading and outlook • Early signs of delivery on organic growth initiatives, particularly Linguistic Validation and eLearning • Accelerated growth in L&CT; solid growth in Strategic Solutions Group in Language Services Growth • Reduced activity with some major technology clients, but w
Slide 30: Q&A
Q&A 30 © 2022 2021 RWS
Slide 31: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Appendix 31 © 2022 RWS
Slide 32: Investment proposition
Investment proposition Attractive Unique Strong cash Consolidation markets + platform + generation + opportunity • Well diversified • Largest linguist • Value creation • Fragmented markets • Strong growth network track record • Proven M&A success potential • True global coverage • Optionality to inv
Slide 33: Four core use cases and outcomes
Four core use cases and outcomes Cultural Client Technical RWS brings Understanding Understanding Understanding Emotion Behaviour Regulation Data Customer Acquiring and outcomes Delivering User Maintaining Access to Retaining Experiences Compliance Insights Customers Localised Marketing Localised UI
Slide 34: Using technology to harness growth
Using technology to harness growth 640,000¹ 2,000² 1.3 billion translators globally X words/day (on average) = words translated /day Global generation 2.5 quintillion of bytes of data (daily) = bytes³ • While not all of this is for human consumption or requires translation, even a small percentage w
Slide 35: Solutions across the entire people/technology spectrum
Solutions across the entire people/ technology spectrum Medical and Knowledge eLearning User forums pharma content bases Patent Websites Email support Text analytics translation HUMAN EXPERTISE TECHNOLOGY 35 © 2022 RWS
Slide 36: 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 37: Market size
Market size Area Mkt Size (£bn) Language Services – core localisation 30.0 Language Services – data annotation 2.0 Life Sciences – localisation 3.0 Finance & Legal – localisation 4.0 Linguistic AI 3.0 Language Technology 0.3 IP Services 2.0 Content Technology 2.8 Total 47.1 37 © 2022 RWS Sources: OC
Slide 38: Our values
Our values X X = We play as one team – We shape the future – We choose to be We keep our promises with colleagues, clients combining the best of positive – using every – to clients, colleagues and partners people and technology experience to grow and communities 38 © 2022 RWS
Slide 39: 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 40: Shareholders
Shareholders As of 30 November 2022 Top shareholders Holding (%) Andrew S Brode 23.2 Liontrust Asset Management 11.7 Octopus Investments 4.5 RGM Capital 3.3 40 © 2022 RWS
Slide 41: 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 unique combination of technology and cultural expertise helps our clients to grow by ensuring