RWS Holdings plc

Well, good morning, everybody, and welcome to the RWS mid-year results for 2024. I'm Ian L Mockadam, CEO, and I'm joined today by Kandi Davis, our CFO. We're going to follow a similar structure to normal, so I'll commence with some opening remarks. I'll then hand over to Kandi to go through the financial review. I'll then come back to do a more detailed strategic and operational review, touch on current trading and outlook, and then we can go to questions. So I know many of you are very familiar with RWS, but a quick reminder of who we are. We're a unique world leading provider of technology enabled language content and IP services, well diversified with many leading market positions. We operate in a large market with attractive structural demand drivers. We are well established, founded in 1958. with a large, high-quality customer base across a range of sectors. Many of those clients are market leaders in their own industries. We've built a unique platform in our industry. We're a market leader with proprietary technologies and deep expertise and delivery platform that is truly global and capable of delivering on a 24-7, 365 basis. We're going to talk a lot about AI today, but whenever we talk about AI, we also always end up talking about people. And one of the features of our model that we think is of growing significance is our ability to deploy large communities of people with different expertise, linguists, data annotators, and other skills, all of which are both servicing our localization industry through language, but also helping to train our own AI models and increasingly through our train AI service, helping clients to deliver their own AI models for a whole range of different applications. And we'll talk more about that as we go through. We have a strong financial profile, good cash generation, low levels of debt, a progressive dividend policy and the ability, therefore, to continue to invest in the business both organically and through M&A. What do we do? Well, using that unique combination of technology and human expertise, we support our clients to create, collect, transform and analyze, launch and manage content. That helps them to grow by ensuring they are understood anywhere and in any language. And to give a more detail to that, how do we help our clients? Well, we help them to win customers. We help them to deliver great user experiences to those customers, for example, by making their devices work in different languages or their AI models deliver better user experiences. We often help them to maintain regulatory compliance while we're doing that. We operate in regulated industries. And increasingly, we help them use our technology and our expertise to gain insights from the huge amounts of content that they are both receiving and creating as organizations themselves. And of course, that content comes in a variety of forms these days, and we can handle content in all of those shapes and sizes. Now, We've had an encouraging period. We're seeing some encouraging trends and a good start to our second half as well, which is supporting our confidence around our full-year performance being in line with market expectations. And some headlines sitting underneath that. In the first half, two of our divisions have returned to constant currency growth. And we've seen an improving trend in terms of growth at a group level over the last three halves. So we went from minus seven in FY23 first half to minus five in the second half of FY23 to minus two in the period we're reporting now. And in quarter two, the group grew on a constant currency basis with continuing encouraging trends into H2. We've seen very encouraging interest in Evolve, our pioneering and patented new linguistic AI solution with eight clients completing or in the process of going through proof of concept. Revenue has already been generated from sales of that product and a pipeline of some 50 million of opportunities. Train AI, our data services proposition, is also having a really strong period, starting to broaden its client base outside of our technology clients who've been in that business for some time. And we've seen good wins that are supporting both the results for the first half, but also increasing momentum that we've guided to in the second. Our language platform, the LXD, is of increasing strategic significance. And I'm going to talk more about that. It is a source of competitive advantage, both for localization and for AI services. And it's been critical to maintaining our gross margin at 45.7 percent, consistent with the prior period through a period of volatility in terms of our top line. Our growth initiatives that we started investing in a few years ago are continuing to help and contributing positively in the period. Our shift to SaaS licenses in our software business is also making very good progress, with 18% reported growth in SaaS license revenues in the period. SaaS is now firmly established as a tailwind for revenues in our software division, having been a headwind in the early days of that transition. Yesterday, we launched High, which is our latest AI-powered innovation, a combination, again, of human and AI expertise, targeting in particular small and medium-sized enterprises. Any of you are welcome to give it a try. It's rwshigh.com. And, you know, we're very excited about this latest innovation. And our two most recent acquisitions, Propylon and ST Communications, are both performing ahead of our expectations. Critically, AI-related products and services now account for more than a quarter of the group's revenues, and they'd be at typically group average margins. And I think that raises an interesting contrast to maybe smaller AI businesses that could be pre-profit right now and the sort of valuations they are getting when they're out fundraising. So we're very pleased with the progress that that many years of investment in AI is starting to have on our business. So what's our right to win in the AI space? Well, we have deep longstanding capabilities, deep technical expertise, and a data creation and validation capability, which we think is unrivaled in our industry. We have the ability, as I've mentioned, to deploy large communities for human reinforcement learning to train those AI engines. We have an enviable client set with whom we've been partnering and learning for many years. So we have learned from the best in this space. And we are increasingly seen as a very attractive partner for leaders in the space as well. And as we've said previously, we think in the AI world, partnerships are going to become of increasing significance. So all of that is enabling us to deliver enterprise grade solutions across a range of linguistic AI data services and content technologies. And we've talked previously about our ability to help our clients on their journey through AI from exploring the opportunities that AI may have for their businesses to building AI related products and services through train AI, through training platforms that we can supply to them as well for their specific industries. and, of course, through using AI for a range of different language and content-related applications. And most recently, in the last sort of 12 months, we've launched two new products now, combining our existing platforms, LanguageWeaver, our pioneering neural machine translation platform, and Trados, the industry-leading language productivity translation management system. Evolve combines those tools with a specially trained large language model, securely trained and hosted, which allows us now to do AI-based quality estimation and automatic post-editing, removing some of the human requirement in that process. And Hi is a self-service platform, again, powered by both humans and AI to deliver a compelling self-service offering for clients whose needs are a little bit simpler. And that is a journey that we're on. We will continue to invest and launch new products based on those platforms. We're also credible in this space because we are a significant user of AI internally. And our language delivery platform is both a big user of these tools, but also is key to training and building those new propositions. And to talk a bit more about the LXD, I mean, those of you who followed the story, this was at what used to be called the language office in former SDL days. After the merger, we got really committed to this. We saw it as a great way of leveraging our scale and supporting our gross margin in our localization business. I think what we probably didn't realize fully at the time was the potential the LXD also had to enable us to create and generate and use that content to test and develop new AI models and increasingly to leverage and build the capability that we have for recruiting and deploying large numbers of people on a global basis. to work on projects that are across the AI data training spectrum. The LXD is now managing some 73% of the business from language services and regulated industries divisions and since quarter one has started handling content from IP services as well. It is AI dominant, some 60% of that content is machine translated first by language weaver and as i mentioned it's being used to train other tools so we're very excited about the lxd we think it again is unique in our industry no one has a similar platform to our knowledge and we continue to invest in this platform because we can see it being of real significance moving forward I'll go through the headlines quickly here and then I'll hand over to Candy and come back later on. So in the period revenues of 350.3 million, that was minus two at an OCC basis for the period. As I mentioned, we grew in quarter two. You can see there the gross margin being maintained period on period, despite the challenging trading conditions that we've been through. I think just down the bottom there, CapEx very much in line with expectations as we've been sort of moving towards the peak of our transformation programme. And Candy will talk a little bit more about that in a second. I think the other point I'll just point out here is that ongoing commitment to a progressive dividend with a 2.45 pence interim dividend up 2% on the previous period. And with that, I'll hand over to Candy.

Thanks, Ian. So turning to the numbers in a little bit more detail. Reported revenue was down 4% year on year. This includes the benefit relating to the acquisition of Propylon, which completed in July 2023. On a like-for-like basis, revenue declined 6%. We're reporting an organic revenue decline at constant currency of 2%, and we'll provide more details of that as a divisional breakdown on the next slide. Gross margin year-on-year was maintained at 45.7%. This reflects two dynamics at play. Firstly, on a like-for-like basis, the softer activity levels seen in the higher margin business units of RI and technology overall, and some adverse regional mix in language services, which are offset by cost reduction and efficiencies achieved across the business, and some small price upside. And secondly, on a reported basis, the addition of Propylon is more than offset by adverse FX trends, And if FX had remained at last year's rate, gross profit and margin would show a small year-on-year improvement. Admin expenses before adjusting items of 112 million increased 1 million year-on-year due to the acquisition of Propylon. As a percentage of gross profit, there has been an increase of 360 basis points, predominantly due to the lower revenue and thus the gross profit realised in the period. Savings and efficiencies from our planned cost reduction programme announced last year offset the planned investments in growth capabilities as well as the expected reduction in FX gains. The net result is an adjusted profit before tax of 45.6 million, running at 13% of revenue. There are a number of adjusting items totaling 28.3 million, which are detailed in the accounts. The main items include the amortization of acquired intangibles of 22 million relating to the past acquisitions of SDL and Moravia, exceptional items considered one-off in nature, encompassing divestment, integration, transformation and restructuring costs of £1 million, acquisition-related costs of £4 million, which are primarily the Propylon and Fonto contingent consideration, and share-based payments of £1.7 million. The reported tax expense for the year was £6.2 million, which results in a headline effective tax rate of 35.8%, an increase from the half-year 23 rate of 27.2 due to an increase in the amount of non-deductible acquisition and exceptional expenses and the lower profit in H1. Once we've taken account of the adjusting items just mentioned, the adjusted effective tax rate is 25.1% up from 24.4% in the prior period. This adjusted tax rate is derived from the group's jurisdictional mix of profits and the increase from prior year is primarily due to the 3% increase in the UK statutory rate from a blended rate of 22% to 25% in the full year 24. This is consistent with earlier guidance and expectations. Finally, the half-year adjusted EPS came in at 9.1 pence per share, down 14% on the prior year. And as Ian's mentioned, the board has approved an interim dividend of 2.5 pence, which is a 2% increase on last year's interim dividend, supporting the capital allocation policy of a progressive dividend. Looking at revenue in more detail, this slide shows the drivers of the revenue variance from half-year 23 to 24. Language services reported a decline of 3%, but at constant currency, a growth of 2% ahead of last year. As previously highlighted in the trading statement, we continue to see strong growth in our data services proposition, train AI and sustain new logo wins across the division, more than offsetting reduced activity from some of our EMEA clients as they continue to adapt their priorities to changes in their end markets. In regulated industries, revenue fell 15%, which at constant currency equates to a decline of 12%. This contraction is primarily due to the softer trading conditions and spending cuts in life sciences and in the finance and legal sector. It was partly offset by good growth in linguistic validation. On a reported basis, LNCT grew 2%. The like-for-like growth of the division adjusting for Propylon was a decline of 7%, and in organic constant currency terms it declined 3%. SAS revenues grew at 18% and now represent 39% of total licensed revenues in the division. The softness mostly came from Tridian term license and professional services revenues, as we've seen cautious buying behaviors in light of ongoing macroeconomic uncertainty and the wider AI discussions. In IP services, the growth in reported revenue of 0.4% and 4% on a constant currency basis was in line with our expectations. Increase in revenue included filing, as well as renewals and research, especially in China. As you can see, the year-on-year half-year FX impact has had circa 4% impact on our like-for-like top-line results in H1, as the US dollar and euro strengthened against the pound. These divisional OCC revenue dynamics translated into a group year-on-year reduction in volume of 5%, partly offset by price increases of a million, as well as the sustained performance of our growth levers at 3%. The language services OCC growth was driven primarily by the growth levers. RIs suffered adverse volume impact with existing clients outweighing progress on growth levers, new logo and price. LCT delivered incremental growth from both pricing and growth levers, but was impacted overall by the softer than expected new logo performance. And lastly, IP services saw positive growth across all drivers, volume, price and levers. Ian will discuss the business performance in more detail later in the presentation. So turning to the net cash and cash conversion. Group total cash at the end of March was 64.6 million and net cash after loans and borrowings was a net debt position of 38.9 million. Net cash increased 62.5 million in the half year. Significant outflows relate to the continued investments as outlined at the CMD in line with our strategy. The full year 23 final dividend payment of 36 million. tax of £11 million, as well as the completion of the share repurchase programme of £30 million in this period. As was expected, the initial consideration of £25 million for the disposable lot interest in a revenue and cost sharing arrangement related to PATBase was received on completion in May. The remaining £5 million is expected in Q1, full year 25. Regarding cash conversion, the net cash inflow from operating activities in the half came in at £37.4 million. Cash conversion for the half was 30%, a decline year on year driven primarily by the temporary increase in our DSO, and to a lesser degree, the weaker business performance. As planned, we've moved a large part of our finance operations into a shared service centre model in half one, and as often experienced with these transitions, we have experienced a temporary lengthening of debtor days. I'm pleased to say, however, that we've already seen improvement in the last two months and the Shared Service Centre has a recovery plan in place which is expected to remediate the position in the second half. Second half profit facing is also expected to help cash conversion recover to a more normal level by the year end. And a final note for information, as is typical, lease liabilities of £29.8 million are not included in these figures. Moving to the balance sheet, the balance sheet remains strong. And when comparing to September 23, the main changes relate to FX revaluation. The closing rate of the US dollar to GBP at September 30 was 1.220, whereas at 31st of March, it was 1.263. So the goodwill decreased by 15 million due to that FX revaluation. In intangible assets, it was also a decrease of 15 million, the additions of 22 million being more than offset by amortization of 30 million. and the FX revaluation impact of 7 million. As mentioned on the previous slide, networking capital increased, and the team will address that in the second half, and we expect it to normalize by year end. Whilst we have slipped into a net debt position as at 31st of March, this is considered to be the lowest cash position in the year, having completed the share repurchase program, paying the final dividend for last year, and before the PAT-based receipt. After including lease liabilities, the half-one balance represents a very modest net debt to adjusted EBITDA ratio of less than 0.5 and 0.3 if lease liabilities are excluded. We have a committed facility of $220 million, of which $85 million remained undrawn as at 31st of March. So now to our key KPIs and calling out just a few that we haven't touched on already in the financials. The NPS metric remains positive, with a slightly lower score being a function of the number of surveys completed in the rolling 12-month period, as opposed to any significant shift in feedback. For a company of our type, a score of over 30 is generally considered good. Reported repeat revenue shows a decline to 93%, but this is primarily as a result of FX. On an OCC basis repeat revenue is 97%, demonstrating the strong client relationships and satisfaction RWS maintains, albeit in a challenging environment. The cumulative incremental revenue from our defined growth initiatives now stands at 35 million, showing we continue to see the return of investment in the areas we focused on, with particular progress being made in data services and linguistic validation. We continue to see an expansion of our SaaS license model linked to the sustained R&D investments in our products. As I mentioned earlier, reported SaaS revenues grew 18% over half year 23, and as such now represent 39% of the licensed revenue reported in our tech division, compared to 33% this time last year. Excluding the impact of Propylon, the SaaS growth on an OCC basis is 8%. In H1, we observed a notable reduction in our capitalised development spend, which now stands at 7.9% of the total LCT revenue, down from 12.5% in the full year 23. This reduction reflects the increased emphasis we've made in the period on upfront research, which isn't capitalisable under IAS 38, targeting our investment in artificial intelligence, performance and security enhancements and usability improvements. Gross R&D technology spend is, however, in line with prior year. CapEx at 6.9% of revenue is also in line with the investment profile indicated at year end, as we rephrase some initiatives to full year 24. Spend to date is a combination of the continued investments being made in our software development, as well as the transformation programmes, of which I will provide some more detail in a moment. And finally, from a people perspective, our current level of voluntary attrition is consistent with prior and year end at 12%. And it's worth noting that the percentage of women in our senior leadership positions remain stable at 39% this year. Ian will cover ESG later in the presentation. So moving to our transformation update and to give a brief, very brief overview of the programs focused on both top line growth and driving efficient and sustainable operating models. The main takeaway here is we continue to make solid progress in a number of areas, having shifted to a single Microsoft platform for the group, delivered the bulk of the HR re-platforming, where some of you may remember we were looking to shift from 12 platforms to a single platform over the course of the programme. We've implemented the first phase of the finance shared service centre model, covering a significant proportion of the group. And as Ian mentioned earlier, with the LXD having completed the rationalisation and centralisation of our freelancer supply chain. and continuing to drive the migration of volume from the services divisions, including some early IP services volume. Looking ahead, we will complete these existing programs and we'll look to new opportunities to drive the business forward, both in terms of harnessing our AI-driven opportunities, as well as further simplifying the group. As mentioned previously, we expect total capex to represent about 7% of revenue for full year 24. And then as the transformation programs complete from full year 25 onwards, we project this percentage to normalize back towards full year 23 levels and subsequently to circa 4%. And finally, a reminder of our capital allocation policy. With a strong balance sheet, good cash generation and a committed facility with $85 million remaining undrawn at the 31st of March, we continue to apply a disciplined approach to our capital allocation. Firstly, our consistent commitment to business as usual spend ensures the ongoing maintenance improvement of core operations, supporting stability and operational excellence. We continue to make strategic investments aimed at accelerating organic growth, underscoring our dedication to expanding market share, seizing new opportunities in higher growth areas, and leveraging cutting-edge AI capabilities, fostering sustainable long-term value for our stakeholders. Rewarding our investors, we prioritise returning value through regular and progressive dividends, reflecting our confidence in our financial health and commitment to delivering consistent and tangible returns. And as you've heard, the board has approved an interim dividend consistent with this philosophy. Our growth strategy extends beyond organic avenues, and Ian will talk more to our M&A priorities shortly. But finally, a quick word on the share buyback. We successfully completed the £50 million share repurchase programme in February. There are currently no plans to initiate another programme, but the Board will, as they have done previously, continue to consider this option from time to time. And with that, I'll hand back to Ian.

Thanks, Candy. So let's run through the divisions quickly. There's no change to this structure. You can see here the slight shifts in revenue compared to the prior period. Those very observant of you in the audience will notice we now show the language experience delivery function covering all four divisions. And that reflects its role, not just supporting the language services components of what we do, but also the development of our technology products, as I've already mentioned. If we turn then to our largest division, language services, here we deliver 2% organic growth in constant currency, driven by in particular growth in train AI with our enterprise technology clients, increasingly benefiting from our data services expertise. And it's been very nice to see a general recovery in that West Coast sort of technology component, which makes up about half of this division. Eight clients have completed or are in proof of concept with Evolve, with a strong pipeline of opportunities in H2, as I've already mentioned, and we're already seeing revenues off Evolve right now. New client wins have continued, especially in the technology and e-commerce sectors. And as I mentioned earlier, we were delighted to launch Hi, our digital self-service platform for small and medium-sized enterprises yesterday. Also nice to see the profit performance here up 17% reflecting that top line revenue growth and the impact of some of the cost actions that we've been taking to drive greater efficiency in this part of the business. Looking to H2, I think the key thing to watch is the further growth momentum around train AI, which we have good confidence around given the wins that we've had in H1. Securing new Evolve wins is also a priority, but in terms of revenue, that's more likely to impact in a material way the next financial year. And we will now be rolling out the marketing campaign for high and we'll obviously report on progress with that when we next talk to everybody. If we turn to regulated industries, our second largest business here, as I think everyone knows, this has been much tougher than we expected. We always envisaged a second half weighted plan, and that is what we're seeing. But the first half was harder than we had anticipated. So constant currency organic revenue here declined by 12%. driven by reduced activity in life sciences due to spending cuts with large clients and an overall also softness in the other parts of this business, which serves financial and legal clients. And to give a bit more colour to that part, we didn't see a recurrence of the slight surge of work we saw last year linked to new prips regulations in financial services. That said, we're delighted to see that some of the the work that we've been doing, coupled with a bit of market recovery that we did expect to see started to come through in the second half. And we've had two periods of OCC growth in April and May. So encouraging signs of progress there. And in terms of other self-help, I mean, linguistic validation, one of our key growth initiatives that we've talked about many times, which was all about shifting more of this business towards the clinical stage of the product life cycle in life sciences, has continued to perform well in the period. And that shift of mix in the business continues. We've also taken cost actions which have partially helped to mitigate the impact on profit. But as you can see here, we have taken a hit in terms of operating profit. And that I guess what's going on there is the LXD is doing a pretty good job of matching the language talent to the varying mix of revenues. But we do also have some fixed costs in this business as we do in our other divisions, which we obviously can't vary quite as quickly. But we will continue to make further cost actions to try and recover that position. So H2 focus here, similar to language services, focusing on Evolve wins. sustaining those early signs of revenue improvement in April and May, and as I've mentioned, some further cost actions. If we turn then to language and content technology, we've had good progress with our AI-centered solutions, LanguageWeaver and Evolve, and with that shift to SaaS licenses, offset by weaker performance in the Tridian part of our content technology business. so revenue at constant currency here declined by three percent impacted by lower term and perpetual license sales and renewals and professional services revenues as candy's already mentioned we saw a high level of bookings for language weaver on your machine translation platform propylon is performing really well and ahead of plan so a great little addition to the group there we've seen new logo wins in particular in financial services government media and retail We talked about SAS revenues, which are moving, really encouraging in the direction we all plan to. Adjusted operating profit here reflects some effects, but also that mix of licenses with fewer perp and term licenses and more SaaS being one of the primary factors. In terms of H2 focus, I think that's sustaining that momentum with Language Weaver and Evolve, recovering the sales with Tridion, and we've taken some actions internally to do that. And we have exciting new launches coming later this month of both Trados and Tridian Docs, which will further support our expectations of recovery in this sector in the second half. Last but by no means least, IP services. 15% of group revenues had a really good performance in the first half. 4% organic constant currency revenue growth. Eurofile revenues, you know, really strong. and continuing the acceleration that we saw at the end of the last financial year and the unitary patterns really not having quite as much impact as we thought it might with a number of clients choosing not to use it a bit more than we thought. IP research also had a good period, a return to growth with several client wins and some good near-term opportunities. And as Candy's already mentioned, we've been making some improvements to the range of products generally in this space. We're really pleased with the drop through to profit, 9% higher, benefiting from top line growth, streamlined processes and cost reductions. And as we've mentioned, we think the LXD will start to contribute further to that as we start to optimise the processes for the language component of this division business in the second half. And I guess in terms of H2 focus, we'd like to see a bit of improvement in the world file portion of this business. We've mentioned the LXD already, and this will be the first division to see the new finance system deployed early at the beginning of the next financial year. So a lot of excitement here. And if you put IP services together with language services, that's 60% of the group's revenues that have already returned to growth in the period. As I mentioned, the whole group grew in Q2. Turning quickly to M&A, there's really nothing much to say to this slide. Our focus areas remain broadly consistent with previous periods. We continue to be interested in attractive localisation assets, particularly interested in acquisitions in the AI and technology space. and also that their area around data services and AI is also of interest. Our screening criteria haven't changed at all, and we continue to see a reasonably good pipeline of opportunities here. Quickly on ESG, this remains important to many of our colleagues around the world, certainly to the high quality client base that we serve, and I know to many of our investors as well. And here we're making continued progress on the environment. I think what's very exciting is we've had our science-based targets now approved by SBTI. We've committed to scope one and two reductions of 54.6% by FY33 and scope three, which is quite significant for us in terms of our supply chain reductions of 61.1% by FY33. So that is the gold standard really around carbon reduction. Our foundation and our social commitments continue. In particular, our very wide campus programme, where we work in partnership with universities around the world to attract talent into our industry and increasingly influence the syllabuses in those universities around the impact of AI for our industry and for people entering it. In terms of governance, I think exciting development is we've joined Meta's Open Loop program, which has the objective of developing effective and evidence-based policies around AI, a fast-evolving area. This is very aligned with our belief that innovation must be balanced with safety and security. And I think one of the things we are very focused on in all of our AI propositions is making sure that we can offer our clients secure and responsible solutions. So the Open Loop programme combines technology businesses, academics, civil society reps and policymakers with a view to evolving regulation in a sensible way in that space. And it's very pleasing to see that our work continues to be validated externally with a further increase to our EcoVardis score, putting us right at the top of our industry category. Final chart from me on current trading and outlook. As you mentioned, we're quite encouraged by the performance, so we continue to expect revenue to be stronger in the second half, building on that improving OCC trend and driven by some recovery in the higher margin parts of our business. And we've touched on regulated industries in particular there. and the impact of wins that we've had in the first half, specifically around train AI and evolve. We will be continuing to invest in our AI capabilities. I mentioned some of our recent and forthcoming product launches. And as Candice highlighted, our business transformation program that we embarked upon two, three years ago is also making really good progress now coming towards the end of that investment phase. And we're seeing both the growth and the efficiency benefits that we expected from that coming through. In terms of full year, we remain confident in the multiple long-term growth drivers for our products and services. And whilst we're mindful of the wider macroeconomic environment, which remains a little bit complicated, we are pleased that recent trading, including an encouraging start to H2, currently points to performance in line with market expectations for the full year. And with that, I think we can turn to questions. So I think we'll start with questions in the room. There's a microphone, I think somewhere. And as ever, if you wouldn't mind putting your hand up and saying who you are and where you come from when you get the mic, that would be good. So I think we've got the two Jameses in the front. There we go.

Hi, both. James Bayliss from Berenberg. Three questions, if I may. On high, how should we be thinking about the earnings profile from here? You've obviously talked about putting some marketing spend into it to really ramp up recognition of that. Do you have a sense of what revenues look like over the next few years, how that marketing spend phase is? Appreciating it is early there, just really what we should be thinking about in terms of contribution to the group over the medium term. second question on language and content tech can you just elaborate a bit more on the actions you've taken to address the trillion sales performance going into r2 and then question number three on the ip services piece you reference the fact that clients haven't perhaps adopted the unitary patent to the extent you expected which has been positive for you is there any risk that those decisions have just been pushed to the right by clients and that could impact growth further down the line or do you think you're seeing now kind of the status quo Going forward.

And if you want to take the first one, I'll take the other two.

Yeah. So, you know, high is a digital platform offering. You know, it's very self-service. We're hoping to be able to offer, you know, a combination of, you know, visibility of a good cost proposal, along with the efficiencies that we can drive end to end through that proposal. So. Hopefully it won't make a significant change to margin over time. Clearly there is some upfront marketing investment, but that has been already included in our investment growth lever profile that we have provided in the past. So there's no adjustment to that.

I think it's a fairly modest impact in H2. We've just launched the product, so it's early days, but I think significant strategically. In terms of Trideon, look, I think we've made some changes to our sales team. I think we are seeing tougher market conditions there, as Candy mentioned. I think in common with a lot of sort of software businesses, we're seeing clients a little bit slower to make commitments, a little bit concerned about whether they're backing the right horse in an AI, a complex AI environment. So we are getting decisions. But if we looked at our sort of CRM system, we're seeing it takes more conversations than than previously to to get those products along the line. So I think the combination of improved products, we've got a trillion launch later this month with an improved go to market. And hopefully, you know, some relaxation in some of those concerns. We'd expect to see some improvement in in the second half. In terms of IP services, I mean, I think we will. We do think we'll see more clients gradually shifting to the unitary patent over time. It's very hard to tell how quickly or how many, but we really think we're through the I guess we were all worried collectively that there'd be a sort of big cliff here. And I think what we're seeing is a much more gradual shift and that we're still capable of delivering service with the UP as well, of course, slightly less work for us to do in that environment. But that coupled with other sort of product enhancements and expansion in the IP services business, I think we're not looking at that as a particular principal risk sort of moving forward.

Cool, thanks, James Bearden. I've got three questions as well, please. Can you give us a little bit more granular detail on what you think has driven that improvement in RI performance in April and May? That was the first question. Secondly, on this AI business making up sort of circa 25% of group revenues at a sort of roughly group average, margin um the group margin profile has trended down over over recent periods so just wondering what the sort of what your expectations are in terms of the margin dynamics of those ai adjacent businesses on a medium-term view um can these businesses help contribute to future margin uplift um and then i guess a slightly related third question um in terms of the language and content division seeing profit and margin pressure coming about, partly because of an impact of that weaker perp and term license point. How much of an ongoing margin headwind is the SaaS transition within that division likely to be?

Okay, James, I'll take the first one. Can you take the other two? So on regulated industries, I think that If you go back to last year, I think we saw we were seeing an impact of sort of regulatory changes slowing down product launches. So in particular, Inflation Reduction Act. And we had expected that to start alleviating this year. We could see at the clinical stage there was still a lot of activity. And I think what we've started to see, James, is some of that coming through the pipe now. So a bit later, a bit slower than we thought, but we think that's coming through. The other thing that I think surprised in the sector was a number of clients going through sort of cost reduction programs. So if you looked at our top 20 accounts, very high levels of retention. We haven't lost any of those key clients, but lower levels of spend as a result of some of those internal changes. We're starting to see some of that alleviate as well. I think we've also started to see new business winds pick up in regulated industries. Now that's had less of an impact on revenue right now, but in terms of forward visibility, that gives us confidence, I think, as we go through the second half and into next year. So Not out the woods yet, but we were very pleased to see OCC growth in two months on the trot in that division after what has been quite a tough period. And I think our wider appetite for regulated industries, I mean, life sciences, we think it's still a tremendous place to have a presence, as is finance and legal. I mean, all of those industries have had some market headwinds recently, but the long-term sort of drivers of demand there, we believe, continue to remain there. they're very attractive and we are seeing clients more interested as we are in other parts of the business in AI related solutions where we think we've got some really good offers for them. So look, slow, steady progress there, but hopefully more of the same to come. Candy.

Okay, so the AI-related revenues are primarily made up of our training business, which is a slightly lower margin than the group average. So as that will accelerate, that will have a slightly dilutive impact. Language Weaver, however, is on the tech side of things. Software sale has a much higher margin than the average. So if that grows in line with train AI, you would see that offsetting. And on the localization revenues, I think what we believe is that we have continued opportunity to drive efficiencies to manage that margin as it moves forward. So I think you've got those three areas that probably move in different directions and it will depend upon very much which one drives the greater volume of revenue as to what the ultimate impact on the margin is. In terms of LCT, so Remind me of the question. Sorry, I've just completely forgot it. The margin mix on SAS. So we have hosted costs, obviously, within the SAS license fee. As we grow that proportion of volume, we would hope to be able to drive a better negotiation around those hosted costs and drive economy of scale there, which we would expect to see the SAS margin, therefore, improve incrementally over time. But obviously, we will see that continue to have an impact as the PERP term declines and then you will land at a steady state. We don't expect to move to 100% of SaaS. It will kind of stabilize in the next year or so.

Some of the products are not SaaS in that space. So there will be a settling, I think. Any other questions in the room? No. Any questions online?

We do have a question from Jeff Jones. Why are you sure that this business is suffering a cyclical downturn rather than losing market share due to other machine translation or AI providers?

So, I mean, I think we first we've pointed to our repeat revenue rate, which allowing for FX is 97%. We don't tend to lose clients. We're very, very focused on that very high levels of client satisfaction. I think the key component of our strategy all along has been to embrace AI and make sure that when our clients were ready to adopt AI related solutions, we were ready with solutions that would meet their needs. And I think with the launch of high now, In terms of those ambitions that we had, we've continued to invest in Language Weaver. We've continued to deploy AI through our language platform, the LXD. We've just launched Hi, and we've talked a lot today about Evolve. So I think we now have a very comprehensive set of AI offerings. So for clients who are increasingly ready to adopt new ways of working, we feel we are very well positioned. And for the types of client that we work with, they value working with a well-established listed company with high standards of governance, a focus on security and ethical practice when it comes to deploying AI, because those are genuine risks in a fast developing environment. So look, had we not made those investments, I think we would be much more exposed. I think the fact that we are on the front foot with these things positions us very well. And as we've seen with Evolve, in some cases, it's given us the ability to take share from our competitors who had less AI enabled and less competitive offerings. So I hope that answers the question.

Thank you. A follow-up question from Jeff. How are your data services protected against cloning of the data?

Gosh, okay. So I think that the nature of the services that we offer is we go into distinct projects for particular areas of improvement for our clients' AI offerings. Each of those projects will have a defined set of objectives a defined process for capturing and annotating or creating data in some cases and we will agree that plan with the client so that's very much the focus we're either helping the client to validate data that they've captured or in some cases capture data but in a very structured way and each project will be slightly different.

Our next question is from Craig McDougall. Surely with a share price 25% below the average paid in the share buyback, it must be time to exercise a further buyback.

Well, thank you for the question. As Candice answered, we have a clear capital allocation policy, which hasn't changed. I think we'll always prioritise, first of all, organic investment in the business, our progressive dividend, which today we've continued to commit to with the announcement of our interim dividend, and then M&A. And I think it's only after all of those things have been taken into consideration that we would consider a further share buyback. And right now, we are not anticipating a further share buyback. We do look at them from time to time. That isn't to say we won't do one at some point in the future, but it's not something we're currently considering.

Our next question from James Zaremba of Barclays. How much capex around transformation initiatives remain to be spent in the full year 25?

Candy, do you want to pick that one up?

Yes. So we said we would spend 100 million in total. We are tracking very slightly above that due to inflation and the delay of a couple of the projects. So it will be the remainder of the 50 million that we originally outlined along with... being slightly coy because we've introduced new transformation projects, which will create some additional spend next year. But it's largely in line, James, with what we have. So trailing back down to the 5% of capex in total for next year.

Thank you. There are no more questions online. I'll hand back to the speakers for any closing remarks.

Any final thoughts in the room? Nope. Okay, well, thank you all for coming. Thank you for dialing in as well, those who've been online. We'll close the meeting there.