Rws Holdings Plc · LSE:RWS
Rws — H1 2023 Earnings Presentation
39 slides from Rws's earnings presentation, Jun 8, 2023
Slide 1: RWS Half Year Results 2023
RWS Half Year Results 2023 8 June 2023 1 © 2023 RWS
Slide 2: Ian El-Mokadem, Chief Executive Officer; Candida Davies, Chief Financial Officer
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 159 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: Focused self-help to respond to confluence of headwinds
Focused self-help to respond to confluence of headwinds Situation Impact on RWS RWS response 1) Sales Effectiveness Slower client • Successful deployment in IP Services General Challenging decision– • Extending to other divisions macroeconomic backdrop making 2) Efficiency • £10m cost reduction in F
Slide 7: AI pivotal to RWS's current operation and future success
AI pivotal to RWS’s current operation and future success As per 2022 CMD, AI and technology represents significant opportunity; Group already able to support clients at multiple stages, backed by longstanding experience and expertise EXPLORING AI BUILDING AI USING AI Tech Services TrainAI Language W
Slide 8: Continued strategic progress, guidance maintained
Continued strategic progress, guidance maintained REVENUE GROSS MARGIN ADJUSTED PBT1 ADJUSTED PBT MARGIN¹ ADJUSTED BASIC EPS2 £366.3m 45.7% £54.4m 14.9% 10.6p + 2.5% (reported) - 20 bps - 10% - 210 bps - 11% - 6.8% (OCC)5 HY22: £357.3m HY22: 45.9% HY22: £60.7m HY22: 17.0% HY22: 11.9p CAPEX INTERIM D
Slide 9: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 9 © 2023 RWS
Slide 10: Income statement
Income statement • Revenue up 2.5% year on year 6 months ended 6 months ended 31 March 2023 31 March 2022 • Organic revenue growth +1.6% ( adjusting for Fonto, (£m) (£m) acquired March 2022) Revenue 366.3 357.3 • Organic constant currency1 -6.8% Cost of sales (198.9) (193.3) • Gross margin maintaine
Slide 11: Group revenue bridge
Group revenue bridge REPORTED ORGANIC CONSTANT £m CURRENCY CURRENCY1 REVENUE REVENUE GROWTH 400 GROWTH 3.3 30.3 366.3 357.3 350 336.0 (12.5) (8.1) +1% Language Services -8% (0.9) (3.1) 300 250 Regulated -1% -9% Industries 200 Language & Content 150 +13% Technology -1% 100 50 0% IP Services -6% 0 HY2
Slide 12: Net cash bridge & cash conversion
Net cash1 bridge & cash conversion 160 HY23 FY22 8.0 Cash conversion² 85% 83% 140 34.7 4.2 120 28.7 22.6 100 11.2 80 71.9 60 37.0 57.8 6.0 1.7 2.8 40 20 1 1 0 Net cash PBT YTD Non-cash Working Acquisitions Capex Tax Dividends Lease Interest FX & Other Net cash Sep-22 items capital payments Mar-23 1
Slide 13: Balance sheet
Confidential Balance sheet As at As at Non-current assets 31 March 2023 30 September 2022 (£m) (£m) • Goodwill decreased by £39.3m due to the impact of FX during the year Non-current assets 1,076.6 1,150.4 Trade and other receivables 196.3 220.5 • Intangible assets have decreased by £25.7m due to ad
Slide 14: Tracking our Growth Model and ESG progress
Tracking our Growth Model and ESG progress Mar-22 Mar-23 Measure FY22 YTD YTD1 1 Organic revenue growth at constant currency -1.0% 0.8% -6.8% Building long-term client 2 Net Promoter Score (Rolling 12 months) 41 n/a 42 relationships Measure Mar-23 3 Repeat revenue rate (Services) 99%FY22 n/a YTD1 98
Slide 15: Transformation programme update
Transformation programme update Progress in line with expectations, including successful move to single collaboration tool Scheduled completion 2023 2024 2025 Programme What is it? Current position H1 H2 H1 H2 H1 H2 • Consolidation of • Project successfully delivered Jan 2023 Highlander Microsoft co
Slide 16: Investments governed by capital allocations policy
Investments governed by capital allocations 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 inf
Slide 17: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 17 © 2023 RWS
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: HY23 – 44% (HY22 – 44%) Softer activity levels in some verticals, but progress in eLearning and AI Data Services and positive outcomes from several tender processes Performance Adjusted Operating • 8% organic revenue decline at constant currency Revenue¹ (£m) P
Slide 20: Growth initiative focus – AI Data Services
Growth initiative focus – AI Data Services Collection, annotation and validation of data to help organisations train their AI models effectively Client Need Attraction and right to win • Organisations increasingly deploying AI to better engage • Attractive market – £2bn in size and growing with cust
Slide 21: Regulated Industries
Regulated Industries Group revenue share: HY23 – 23% (HY22 – 24%) Softer activity levels in regulatory phase of therapy development; good growth in Linguistic Validation Performance Revenue¹ (£m) Adjusted Operating • 9% organic revenue decline (at constant currency), Profit (£m) driven by: 100 18 -
Slide 22: Life Sciences – therapy development & revenue profile
Life Sciences – therapy development & revenue profile Pre-clinical Clinical Regulatory Launch Linguistic validation Service lines Clinical operations & trial management where RWS plays Regulatory affairs Medical devices RWS revenue mix – current 0% c30% c70% Short-term impact Regulatory bottlenecks
Slide 23: Language and Content Technology
Language and Content Technology Group revenue share: HY23 – 18% (HY22 – 17%) Performance moderated by continued shift to SaaS revenues; new logo wins in multiple end markets Revenue¹ (£m) Performance 80 Adjusted Operating Profit² (£m) • 1% revenue decline in organic growth at constant -1% 20 currenc
Slide 24: IP Services
IP Services Group revenue share: HY23 – 14% (HY22 – 15%) IP Services revenue in line with expectations, reflecting impact of Unitary Patent Performance • 6% organic revenue decline (at constant currency), in Adjusted Operating Revenue¹ (£m) line and reflecting clients opting to defer their patent 60
Slide 25: RWS & AI – expertise, experience and agility
RWS & AI – expertise, experience and agility Over 20 years’ experience positions us well to help clients access the benefits and navigate the risks of AI developments • Language Weaver – since 2002 (pioneering neural machine translation) Established • AI Data Services – since 2016 products • AI func
Slide 26: M&A – more exciting pipeline in last six months
M&A – more exciting pipeline in last six months 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 management capabilities
Slide 27: ESG progress
ESG progress Environment Social & community Governance 55% carbon reduction by 2030 Active Employee Resource Strong policy & compliance Groups – Diversity festival (May) focus: Gathering baseline data to inform science-based targets The RWS Foundation relaunched: Health and Safety 3 focus areas – La
Slide 28: Agenda
Agenda Overview Financial Review Strategic and Operational Review Current Trading and Outlook Discussion / Appendix 28 © 2023 RWS
Slide 29: FY23: Current trading and outlook
FY23: Current trading and outlook • We expect to deliver an improved second half, due to: • Benefit of new client wins in H1 and ramp up of existing client projects delayed from H1 Growth • Further incremental revenues from growth initiatives, including early second half wins in AI Data Services • R
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: Estimated market size (2022)
Estimated market size (2022) 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 33 © 202
Slide 34: 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 FREE MACHINE TRANSLATION TOOLS HUMAN EXPERTISE TECHNOLOGY 34 © 2023 RWS
Slide 35: 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 36: RWS's role in AI model development
RWS’s role in AI model development Voice Quality Assurance Assistants Content Evaluation Chatbots Natural Language Understanding Speech Annotation Natural Language Generation Semantic Segmentation Voice-controlled Appliances Image / Video Object Detection Automatic Speech Recognition (ASR) Data Tagg
Slide 37: Shareholders
Shareholders As of 30 April 2023 Top shareholders Holding (%) Andrew S Brode 23.2 Liontrust Asset Management 11.7 Octopus Investments 4.8 RGM Capital 3.5 37 © 2023 RWS
Slide 38: 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 39: 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