RWS Holdings PLC – RWS – Half-year Report

RWS Holdings PLC – RWS – Half-year Report

RWS Holdings plc ("RWS", "the Group"), one of the world's leading language, intellectual property support services and localization providers, today announces its half year results for the six months ended 31 March 2020.

Financial overview

H1 2020H1 2019Change
Revenue£169.7m£172.3m-1.6%
Adjusted profit before tax1£33.1m£35.6m-7.1%
Reported profit before tax£25.8m£27.6m-6.3%
Adjusted earnings per share 19.35p10.06p-7.1%
Basic earnings per share7.26p7.78p-6.7%
Interim dividend1.75p1.75p-
Net debt£34.5m£63.9m-46.0%

H1 2020 highlights

  • Life Sciences was the best performer of the three RWS divisions followed by Moravia and IP Services. As previously stated, IP Services faced a very tough comparative with H1 2019 which had benefited from the one-off impact of procedural changes to improve patent grant efficiency at the European Patent Office in 2018.
  • Strong new client wins, particularly in IP Services, awaiting onboarding in H2 albeit moving slowly due to Covid-19.
  • The UK Government announced that the UK will not participate in the proposed EU Unitary Patent. A judgement in the German constitutional court has currently blocked participation by Germany.
  • Substantial reduction in net debt to £34.5m (H1 2019: £63.9m), while cash conversion has improved to 85% (H1 2019: 84%). Strong cash position of £28.3m (H1 2019: £27.4m).
  • The Board's confidence in the Group's future prospects is reflected in the interim dividend being maintained at the same level as in 2019.

Post period end acquisitions

  • Acquisition of Iconic Translation Machines, Ltd ("Iconic") for up to US$20m subject to targets being met; adds an award-winning machine translation (MT) and artificial intelligence (AI) solutions industry expert to the Group.
  • US$21.0m acquisition of Webdunia.com (India) Private Limited ("Webdunia"), brings a leader in translation, localization and technology services which will enable the Group to better support its technology customers in the Indian and Asian Pacific regions.

1 RWS uses adjusted results as key performance indicators as the Directors believe that these provide a more consistent measure of operating performance by adjusting for acquisition related charges and significant one-off or non-cash items. Adjusted profit before tax is stated before amortization of acquired intangibles, acquisition costs, share-based payment expenses and other exceptional items. Adjusted earnings per share adjusts for amortization of acquired intangibles, acquisitions costs, share option costs, other exceptional items, net of any associated tax effects.

Covid-19 update

  • The safety and wellbeing of our staff worldwide remain the Group's priority and all of our offices, with the exception of China and the Czech Republic, remain closed.
  • All divisions have remained fully operational as we successfully moved to working from home, with staff adapting well, supported by steps taken by the Group to maintain their wellbeing, effectiveness and engagement.
  • Overall, the Group is currently seeing limited impact on customer demand from Covid-19, 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, including slower onboarding of new clients.
  • As previously announced, the Group has taken prudent steps to curtail recruitment, capital expenditure and discretionary spend and retains a highly flexible cost base due to the high proportion of freelancers utilized for initial translations.
  • The Group's cash generation and liquidity put it in a very strong position during this uncertain period. At the period end, the Group's US$200m banking facility provided headroom of US$120m, of which US$40m is guaranteed under a Revolving Credit Facility and a further US$80m is available under a non-committed facility.

Current trading and outlook

  • Trading performance since the period end has been good, with a very strong result in April, and strong sales in May.
  • It remains difficult to predict with accuracy the likely financial impact of Covid-19 on the operations of RWS and we therefore believe it is prudent to continue to refrain from providing financial guidance for the full financial year.
  • However, despite this uncertainty in our markets created by Covid-19, we do expect the second half performance to benefit from:

o  the expected incremental ramp up in sales in all three divisions from new clients and contracts won in both the first half and prior periods.

o  a strong sales pipeline including several promising cross-sell and joint-sell opportunities and prominent new client opportunities for RWS IP Services.

 

Andrew Brode, Chairman of RWS, commented:

"RWS has delivered a robust performance against several challenging headwinds, with good results in Moravia and Life Sciences.

"The second half has started strongly despite the Covid-19 crisis, and, whilst it is still too early to be certain, recent client wins and a strong pipeline of opportunities leave the Board optimistic about a good outturn for the year as a whole.

"The Group's focus on Life Sciences and technology customers, who are thought to be likely beneficiaries in a post Covid-19 world, and the importance to our customers of managing their research and development investments through a strong global patent strategy, puts RWS in a strong position."

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