TIDMRWS
RNS Number : 2306W
RWS Holdings PLC
22 April 2021
For immediate release 22 April 2021
RWS Holdings plc
Half-year Trading and SDL Integration Update
RWS Holdings plc ("RWS", "the Group"), the world's leading
language services and technology group, today provides an update on
trading for the six months ended 31 March 2021 ("the first half"),
ahead of the announcement of its half-year results on 8 June 2021,
alongside further detail on the integration of RWS with SDL Plc
("SDL"), following the all-share combination which completed on 4
November 2020.
Highlights
-- Good first half performance despite FX headwinds, with revenue in line with our expectations
-- Group expects to report FY Adjusted PBT1 in line with market expectations2
-- SDL integration progressing well with total cost synergies of at least GBP32m now identified, significantly ahead
of the GBP15m originally stated
-- Will continue to identify further cost-saving synergies as Group progresses the integration through the year, and
will provide updates on the expected profit impact
-- Numerous workstreams underway to further integration and improve the Group's operational structure
-- Acquisition of SDL makes RWS the largest provider of Language Services and Language Technology in the world
-- The rationale for the SDL transaction is validated by the integration work to date
Half-year Trading Update
RWS has performed well during the first half.
Notwithstanding the FX headwinds that we flagged in our AGM
statement, the Group has achieved revenues of GBP326.4 million for
the first half, compared with GBP169.7 million in the prior-year
period, in line with our expectations.
The Group's first-half revenues incorporate the acquisitions
made in the previous financial year, namely the H1 revenue of
Iconic Translation Machines Ltd ("Iconic") and Webdunia.com (India)
Private Limited ("Webdunia") (combined revenue GBP4.4m), and five
months' trading of SDL (GBP151.5m revenue).
As a result, the Group expects to report Adjusted PBT of at
least GBP50.0 million in the first half, compared with GBP33.1m in
the prior year, which is ahead of our expectations.
The performance of the original RWS business in the first half
was strong with adjusted PBT significantly ahead of the prior year
and revenue in line with our expectations.
The average exchange rate for the first half was $1.350: GBP1,
compared with an average of $1.285: GBP1 during the prior year. As
RWS's revenue is predominantly denominated in USD, this 5% swing
formed the principal FX headwind in the period.
The Board will continue to monitor exchange rates over the
remainder of the year. However, if the current rates continue, the
Group expects to deliver a full-year Adjusted PBT figure in line
with current market expectations, with the projected impact of FX
being offset by the additional cost synergies identified.
Cash generation of the combined Group remains strong and the
Group had net cash(3) of over GBP10m on 31 March 2021, after the
recent payment of the Group's final dividend, acquisition costs and
the additional costs necessary to deliver the synergies achieved in
the first half.
The key drivers of the Group's performance in the first half
across each of its recently formed four divisions are set out
below:
-- RWS IP Services division recorded an improved trading performance in the first half of 2021 compared with the
second half of 2020, ahead of our expectations. However, revenue continues to be impacted by Covid-19 lockdowns
in Europe. Longer term, the prospects for the division remain bright, particularly in the Asia Pacific region.
-- RWS Regulated Industries division consists of the former RWS Life Sciences division and the former SDL Regulated
Industries business. Trading within the former RWS business has been strong, +5.4% in reported terms (+10.7% in
constant currency ("CC")) with the Linguistic Validation business and sales to the Group's largest pharmaceutical
customer continuing to see strong growth. We have also seen further sales growth in the rest of the Life Sciences
business following new customer wins, further work related to Covid-19 and the re-commencement of elective
surgery, as lockdown restrictions begin to ease. We expect this growth to continue into the second half of the
year. The former SDL business has also shown increased sales during the five months since acquisition. Margin
levels within the former SDL business continue to be reviewed and addressed as part of the integration process.
-- RWS Language Services division comprises both the former RWS Moravia and former SDL C&E businesses. Moravia saw
strong growth in revenue up +6% in CC, including increased sales to several of its major Technology customers.
Revenue from certain segments of the former SDL business, such as manufacturing, remain impacted by Covid-19 such
that it is down 3% on the prior year.
-- RWS Language Content and Technology is the fourth division in RWS's new organisational structure. This business
had a strong H1 with CC revenue +3.9% versus the same period in 2020. Several new business wins in the period
will also support the second-half performance.
RWS & SDL Integration
The integration of the businesses is progressing well and is in
line with our internal timetable. To date over GBP32 million of
annual cost synergies have been identified, significantly ahead of
the GBP15 million initially stated. Action plans are in place to
deliver these savings by September 2022 and GBP13.2 million will be
realised in the 2021 financial year, principally from the removal
of overlapping roles. This figure takes account of a limited amount
of dis-synergies that have been identified, principally in relation
to one of the Group's major customers.
The Group's Senior Management Team will continue to identify
further cost-saving initiatives as we progress the integration
through the year and will provide updates on the expected profit
impact.
There are numerous integration workstreams and operational
improvements currently being delivered. At Group level, we have
introduced a new cross-selling scheme which we are confident will
support organic growth across the Group. We are also undertaking a
number of divisional workstreams, some of which are outlined below,
by division:
-- Regulated Industries Integration
-- The division now has one operational structure
-- Sales teams have been restructured with new compensation plans
-- SDL's previous acquisition of Donnelley Language Solutions (DLS) had not been fully integrated with SDL.
This work has been accelerated
-- Work is underway to standardise quality metrics prior to migrating selected customers to the SDL Helix
delivery platform, which will lead to improved margins
-- Language Services Integration
-- Consolidated operational structure with integrated sales teams
-- Work is well underway to consolidate services to the Group's biggest customer on to the SDL delivery
platform
-- The language delivery operations for Webdunia have been integrated into the Group's Language Delivery team,
providing it with lower-cost support
-- The project to move smaller Moravia customers to Helix has commenced
-- Moravia's large technology customers will continue to be serviced by Moravia's highly bespoke and
successful operating model
-- Language and Content Technology
-- This is a separate division, with limited overlap with RWS and therefore limited integration. However, a
number of operational improvements have been made
-- The rationalisation of the Group's technology products is underway as we increasingly focus on the
development of Cloud and AI services for our customers
-- Iconic and the former SDL Machine Translation teams are being merged
-- IP Services
-- As there is very limited overlap between IP Services and the other RWS divisions, it is largely unaffected
by integration work
-- The Group's cross-selling project has identified some promising early sales opportunities which are being
progressed. To assist with cross-selling we have successfully shared CRM systems across the Group as a
precursor to the unification of our sales and marketing platforms
-- The division's ongoing ERP project continues to be delivered in line with budget
Andrew Brode, Chairman of RWS, commented:
"The successful and rapid integration of RWS and SDL remains the
Group's top priority in the near term and I would like to thank
colleagues across the business who are working tirelessly to
progress this complicated project whilst continuing to deliver a
first-class service to our customers, grow our business and work in
a challenging environment.
"Trading in the first half has been encouraging despite having
been impacted significantly by adverse FX rates. Notwithstanding FX
pressures, the future for the Group is bright. The markets in which
we operate are growing and we continue to see opportunities for
organic growth in all four of our divisions, whilst we also drive
synergies across the Group.
"The cash generative nature of our business model and strength
of our balance sheet enables the Group to continue to look for
selective acquisition opportunities in specific sectors and
geographies.
"We are making continued efforts to ensure the wellbeing of our
teams whilst providing an excellent service to our customers and
focusing on the ongoing integration work. We, therefore, look
forward to a successful second half."
For further information, please contact:
RWS Holdings plc
Andrew Brode, Chairman
Richard Thompson, Chief Executive Officer
Des Glass, Chief Financial Officer 01753 480796
MHP (Financial PR advisor) rws@mhpc.com
Katie Hunt / Simon Hockridge 0203 128 8100
Numis (Nomad & Joint Broker)
Stuart Skinner / Kevin Cruickshank (Nominated
Adviser) 0207 260 1000
Berenberg (Joint Broker)
Ben Wright / Toby Flaux / Alix Mecklenburg-Solodkoff 0203 207 7800
About RWS
RWS Holdings plc is the world's leading provider of
technology-enabled language, content management and intellectual
property services. We help our customers to connect with and bring
new ideas to people globally, by communicating business critical
content at scale and enabling the protection and realization of
their innovations.
Our vision is to help organizations interact effectively with
people anywhere in the world, by solving their language, content
and market access challenges through our collective global
intelligence, deep expertise and smart technology.
Customers include 90 of the globe's top 100 brands, the top 10
pharmaceutical companies and approximately half of the top 20
patent filers worldwide. Our client base spans Europe, Asia
Pacific, and North and South America across the technology,
pharmaceutical, medical, legal, chemical, automotive, government,
and telecommunications sectors, which we serve from offices across
five continents.
Founded in 1958, RWS is headquartered in the UK and publicly
listed on AIM, the London Stock Exchange regulated market
(RWS.L).
For further information, please visit: www.rws.com
Forward-looking statements
This announcement contains certain statements that are
forward-looking. These include statements regarding our intentions,
beliefs or current expectations and those of our officers,
Directors and employees concerning, amongst other things, our
results of operations, financial condition, liquidity, prospects,
growth, strategies and the business we operate. By their nature,
these statements involve uncertainty since future events and
circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this document and, unless otherwise required by
applicable law, the Company undertakes no obligation to update or
review these forward-looking statements. Nothing in this
announcement should be construed as a profit forecast. The Company
and its Directors accept no liability to third parties in respect
of this document save as would arise under English law.
(1) Adjusted PBT or Adjusted profit before tax - is stated
before amortisation of acquired intangibles, acquisition costs,
share-based payment expense and exceptional items
(2) Based on joint broker consensus Numis/Berenberg
(3) Net cash is defined as net cash less borrowings, but before
lease liabilities
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