RWS Holdings returns to growth in second half

The AIM-traded firm said revenue for the 12 months ended 30 September was down 2% year-on-year to £718.2m, reflecting currency headwinds, although performance improved on an organic constant currency basis, with second-half growth of 2%.

Adjusted profit before tax fell 11% to £106.7m, reflecting reduced activity in higher-margin markets and adverse foreign exchange impacts.

Gross margins improved to 46.9%, supported by efficiency gains from restructuring efforts and the use of advanced platforms such as Language eXperience Delivery (LXD).

The group reported a profit before tax of £60m, swinging from a loss of £10.9m in the prior year.

It said that improvement was driven by lower restructuring and impairment charges as well as a £25 million profit from the sale of its interest in PatBase.

AI-led products and services accounted for about 25% of group revenue, achieving organic growth of 7% with a gross margin of 45%.

Key offerings such as TrainAI and Language Weaver drove strong contract wins and market expansion.

Software-as-a-service revenue continued to grow, representing 39% of divisional licence revenues compared to 34% in the previous year, improving revenue visibility.

Performance across divisions was mixed - language services achieved 3% organic revenue growth, buoyed by increased demand for TrainAI and growth in Asia-Pacific markets.

IP services also grew 3% organically, supported by strong contributions from Eurofile and IP lifecycle services.

Regulated industries showed signs of recovery, with a reduced rate of decline in the second half following corrective actions.

Language and content technology meanwhile delivered robust mid-single-digit growth in the second half, including securing its largest-ever three-year contract for Language Weaver.

Strategic investments in transformation continued, with capital spend peaking at £46m to support growth initiatives, including a new ‘human-in-the-loop’ AI platform, HAI.

Post-year-end achievements included the successful launch of a finance ERP system and the transition to a global finance shared services model.

The group reported a net debt position of £12.9m after significant investments, including £46m in dividends, £30m in share repurchases, and £46m in capital expenditure.

A final dividend of 10p per share was proposed, bringing the total dividend for the year to 12.45p, a 2% increase.

“Having driven significant improvements in performance in the second half, the group returned to growth on an organic constant currency basis,” said chief executive officer Ian El-Mokadem.

“Client retention levels have remained high, client satisfaction has improved and we have continued to win significant new accounts.

“Our AI-centred products and services now account for £180m of group revenues, demonstrating their clear traction.”

El-Mokadem said that with strong growth in TrainAI and Language Weaver and a number of significant wins for Evolve, the company was confident that AI represented a net opportunity for the group.

“We have also had another year of growth in Linguistic Validation and cross selling has been a highlight, illustrated by a significant win for the content technology business in regulated Industries at the end of the year.

“Whilst our market has been more challenging than anticipated when we set out our medium-term strategy in 2022, it is clear that our investments in growth and AI and the efficiency actions we have taken in line with that strategy are allowing us to pivot successfully towards both AI-led and more specialist solutions.

“We continue to invest in sales effectiveness, rationalising our translation management technology portfolio and transformation to create an even more scalable platform.”

That, combined with the firm’s “innovative solutions” and continued focus on efficiency, meant it was well-placed to emerge from the current market transition in a position of strength and as a leader, Ian El-Mokadem added.

“We remain confident in the long-term growth drivers for our products and services, underpinned by the unique combination of human and artificial intelligence that our proprietary technology platform and in-house linguistic expertise offers.”

At 1132 GMT, shares in RWS Holdings were up 10% at 176p.

Reporting by Josh White for Sharecast.com.