RWS Holdings flags fall in first-half revenue
By Josh White
Date: Tuesday 23 Apr 2024
(Sharecast News) - Language, content and intellectual property technology firm RWS Holdings reported a 2% decline in organic constant currency revenue in a first-half trading update on Tuesday, showing an improving trend compared to the prior year.
The AIM-traded firm said reported revenue was expected to reach £350m for the six months ended 31 March, down 4% year-on-year.
Despite soft activity levels in certain market segments, two of its services divisions saw growth, while traction with AI-based solutions supported new business wins in the first half.
Adjusted profit before tax was anticipated to be around £45m for the half-year, down from £54m in the same period a year earlier.
The decline was attributed to weaker performance in some higher-margin businesses, unfavourable work mix in parts of language services, ongoing investments, and year-on-year foreign exchange differences.
However, increased use of the 'Language eXperience Delivery' (LXD) platform and cost reduction measures conducted in the prior year helped mitigate those factors.
The group said it remained focused on driving incremental revenues from growth initiatives across its divisions and expected stronger revenue performance in the second half, supported by new business wins and recovery in higher-margin segments.
However, market pressures and uncertainties in certain business segments posed challenges in short-term visibility.
Nevertheless, the group said its substantial investment in AI solutions positioned it well to lead and navigate the ongoing AI-related transformation in the industry.
Cash generation reportedly remained robust, with net debt standing at £40m as of 31 March, after the payment of dividends, share repurchase program expenditures, and planned transformation investments during the first half.
In terms of divisional performance, language services returned to growth on a constant currency basis, driven by enterprise services, particularly TrainAI.
The impact of Evolve, the group's linguistic AI solution, was also apparently becoming evident with early revenues from major clients.
Language and content technology saw revenue contraction on a constant currency basis, though reported revenues increased, supported by growth in Propylon.
IP services returned to growth, fueled by a strong performance in the Eurofile segment.
The group said it had also agreed to dispose of its interest in the patent information resource business, 'PatBase', for £30m in cash.
Despite challenges in certain segments, RWS said it remained optimistic about its future prospects, leveraging its expertise and AI capabilities to navigate industry transformations and deliver value to clients.
"The group's first half results reflect good progress in a number of areas and signal that we are well positioned for clients' increased appetite to harness AI to meet their language and content needs," said chief executive officer Ian El-Mokadem.
"Our successes with TrainAI and Evolve demonstrate that our AI-enabled solutions are resonating with clients at this pivotal moment for our industry.
"Through our unique combination of proprietary technologies and longstanding linguistic expertise, we are uniting the best of human and artificial intelligence to deliver innovative new offerings and support internal efficiency."
El-Mokadem said the company was pleased to see that both language services and IP services had returned to growth.
"Our growth initiatives, such as Linguistic Validation and eLearning, are also delivering incremental revenue and we have seen encouraging performance in Language Weaver, our long-established AI-centred machine translation solution.
"It has been disappointing that we have not seen the recovery in regulated industries as quickly as we would have hoped and that sales in some parts of our content management software business have been slower than planned."
Ian El-Mokadem said the firm expected both to show some recovery in the second half.
"Delivery of the board's full year expectations remains dependent on continuing to successfully leverage our growth initiatives and AI offerings to compensate for ongoing headwinds in some areas."
At 0926 BST, shares in RWS Holdings were down 12.51% at 162.56p.
Reporting by Josh White for Sharecast.com.
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