RWS Holdings plc

Good morning, everybody. Thank you for coming. For those who don't know me, my name is Julie Southern. I'm chairman of RWS. I think it's a very overused phrase, but nevertheless a very true phrase to say that change has never been happening faster than it's happening now. And it's also true, I think, to say that with as much change as we're happening now, it's very hard for us all to imagine kind of the impact of that that's going to have on us as individuals, on society, on how businesses work. But out of disruption, usually good comes and society progresses and businesses find new ways of doing things, new approaches to the market, and everything moves forward. Now, I say that, and I don't mean that everything moves forward in a simple and seamless journey. It's hard. It often faces setbacks, and it probably takes more time than many people think. But when I look at RWS and I look at the work that Ben and Candy and the team have been doing, I think the thing that we are really excited about is that most of the macro trends that we see at the moment we think play into areas that we are already good at and spaces that we have every right to succeed in. We're not going to succeed in them today without changing but we have a clear view which you will hear from Ben on how we're going to change and where we need to change. So I'm really delighted to be able to hand you over to Candy and Ben who are going to talk about both the progress we've made in the first half of this year, and then excitingly, the journey that we're planning to go on over the next, certainly over the next six months when you'll get more detail, but over the next year or so. So enjoy it. I hope you find it really informative. I'm sure you will. And thank you for coming.

Thank you, Julie. Thank you and welcome, everyone. Good morning. Very excited to be here with Candy. Today, we will demonstrate how a new technology-first strategy, supported by a leaner, more agile organization, will accelerate growth and improve profitability. Our focus on embedding AI and automation at the heart of our operations, coupled with strengthened execution across all business units, will generate higher quality, more predictable earnings, and deliver higher value for our shareholder, long-lasting value for our shareholder. We're going to start with Candy, and I'll come back to detail the strategy. Thank you.

Thank you, Ben. So let me take you through the financial performance for the first half of 2025. We reported revenue of £344 million, reflecting organic constant currency growth of 1.4%, marking our fifth consecutive quarter of growth. Gross margin declined 240 basis points to 43.3%, impacted by business mix and investment in train AI. We expect improvement in the second half due to revenue growth and our ongoing cost reduction programmes, targeting approximately 44% for the full year. Adjusted EBITDA was 38 million, delivering 11% as a percentage of revenue, and adjusted profit before tax was 18 million, slightly ahead of our trading update. This translates to an adjusted basic EPS of 3.6 pence, Capital expenditure was 3.4% of revenue, down from 6.4% in the full year 24. Even without the change in capitalisation treatment in the first half, CapEx would have reflected a decrease as previously guided. Finally, despite the lower profit in the first half, I'm pleased to confirm that the Board has approved an interim dividend of 2.45 pence, consistent with the prior year. So moving to the income statement now and providing some more colour on the key items. As I said, gross margin declined by 240 basis points. Whilst ongoing efficiency efforts are gaining traction and have contained inflation and the price pressure felt in our core localisation businesses, we have experienced some adverse volume and mix effect across the business. There are several drivers here, so let me take a moment to unpack it a bit. Firstly, we've experienced weaker trading in our regulated industry segment, which has not only resulted in a lower margin within that segment, but has also driven an adverse mix impact for the group. Secondly, we've seen accelerated growth in our train AI business, which has had a dilutive impact on the group margin. We're currently investing in capabilities to support the growth and ramp up and would expect to see margin expansion in this area over time. In addition, as we explained at the time of the trading statement, we've experienced some one-off efficiency shortfalls, particularly with two clients within language services, with one client as they ramped up volume on our Evolve MT engine and another client who's also ramping up fast but is transitioning to a newer tool set of their own. Again, we expect to see resolution of these issues in H2. And finally, the divestment of PAT base has had a small impact on the margin, as has FX, as the pound continued to strengthen against the dollar and euro. Admin expenses before adjusting items of 128 million increased 16 million year-on-year, reflecting the increased amortisation linked to historical investments, as well as an updated approach to the capitalisation of software development, with a larger proportion of our investments being expensed in the year. Inflationary cost increases and investments in growth and core capabilities were offset by ongoing cost efficiency programmes and cost control initiatives. Our headcount in overheads reduced 5% from September to March, and we continue to focus on this as we drive simplified processes and greater automation. Adjusting items of 31 million are in line with the guidance given in December. These include amortisation of acquired intangibles of £22 million relating to the past acquisitions of SDL and Moravia, exceptional items considered one-off in nature, encompassing transformation and restructuring costs of £5 million, acquisition-related costs of £3 million, including the proper loan contingent consideration, and share-based payments of just under £2 million. The reported tax credit for the year was 1.4 million, resulting in a headline affected tax rate of 11%. However, once we've taken account of all adjusting items, such as exceptionals and amortisation of acquired intangibles, the affected adjusted tax rate is 25.6%, up from 25.1% in the first half last year, but in line with the guidance given in December. This adjusted tax rates increased in the reporting period mainly as a result of an increase in the corporate tax rate in the Czech Republic, one of the group's key operational jurisdictions. Moving to the next slide, and just to show a bridge summarising the main drivers of change year on year, to lay out clearly the elements already called out, we've reported lower profit than last year, primarily due to items that can be considered non-trading, most of which were guided to in December. We expect to see improvement in the second half, driven by increased revenue, addressing the specific client issues, and further realisation of our cost reduction programme. And I'll give a little more detail on the trading performance at a divisional level on the next slide. The non-trading items relate to the sale of PatBase in May 24, increased amortisation, the change in our capitalisation approach, which means more technology investment is being expensed in the year rather than being capitalised. And I should add that this is not as a result of a change to the gross R&D investment levels and does not drive any change to cash flow. And finally, FX, primarily being the year-on-year impact of the realised and unrealised hedging programmes, with almost 5 million loss this year versus a 4 million gain last year, with a smaller trading FX impact in the period of approximately 2 million. So moving to the next slide and giving some colour on the divisional revenue. Language services reported an increase of 4% at constant currency year-on-year. Our data services AI-led proposition train AI performs strongly with a number of our enterprise clients, and we continue to win new project work in this area. Whilst we have seen encouraging growth in the core localization services in APAC, we continue to see reduced activity from some of our clients in Americas, as they have adapted their priorities to changes in their end markets. The language services first half margin was impacted by some increased competition on price, primarily in the non-West Coast tech part of this division, adverse mix driven primarily by the accelerated growth of our train AI business and APAC core localization, as well as the incremental investment to support the large client volume increases, which was explained at the time of our trading statement. and adverse effects slightly while our cost reduction programmes did broadly offset inflation. In regulated industries, the revenue fell 7% at constant currency. Whilst we've seen some small growth with our life sciences clients within the core localisation services we offer, we have seen a reduced activity with our finance and legal clients. and a larger decline in our linguistic validation business in the first half, which we attribute partly to the changes made in our own management late last year and partly to timing variations in client study pipelines. We anticipate a somewhat stronger second half for linguistic validation as these clinical programmes advance into new phases. The first half margin for RI was impacted primarily by the reduction in top line revenues and mixed changes. So moving to language and content technology, which grew 6% at constant currency year on year, driven by a strong performance in Propolon and LanguageWeaver in particular. Licensed SaaS revenues grew 12% year on year on a reported basis across the portfolio, increasing the SaaS revenues as a percentage of licensed revenues to 43% from 39% last year. The margin in LCT was primarily impacted by the increased expense of technology development and the incremental amortization. The growing SAS segment, which was partially offset by favorable price as we continue to reflect inflation in contract renewals and ongoing cost reduction efforts. And in IP services, finally, we delivered 1% on a constant currency basis, which was in line with our expectations. The increase in revenue included strong performance in renewals and IP research, which have increased significantly year on year, offsetting some Eurofile softness. The margin in IP services was primarily impacted by the divestment of PAT base and a change in mix in filing with a growing dilutive world file versus a declining accretive Eurofile. There was also a step change in the level of investment and sales capability in the period. So moving to the cash flow, cash generated from operations came in at 46.3 million before tax, which is 37.2 million after tax, in line with the same period last year. As can be seen from the bridge, adjusted EBITDA of 38 million is further enhanced by some net working capital improvement in the period. The £14 million improvement has come primarily from trade and other payables, with an increase in accruals, mainly due to timing in items such as the holiday accrual, but also reflecting the focus this year in standardising vendor terms to 30 days, and the increase in deferred income, reflecting both the increase in SAS revenues, but also some phasing on the support and maintenance contracts. The major cash outlays were the final dividend of 37 million, capex of 12 million, and tax payments of 9 million. As expected, we received 5 million during the period relating to the final receipt on the sale of PatBase. And as a result of all these movements, net debt after loans and borrowings was 27 million. For information, as is typical, lease liabilities of 24 million are not included in these figures. Cash conversion for the year was 171%, an improvement from 30% in the first half last year. This high percentage is skewed by the disproportionate impact of net working capital relative to the half-year adjusted income. On a full year basis, we do expect to see strong improvement year on year, but moving back to more normalised levels. And as you can see from the red text on the slide, our operational free cash flow is close to 100% of our adjusted EBITDA. Finally, as a reminder, the group has a $220 million revolving credit facility, which matures on the 6th of August, 27. As of March 31, 2025, we have nearly $100 million undrawn, plus an additional uncommitted accordion of $100 million, providing us the flexibility to make responsible investment and capital allocation decisions without being constrained by debt levels. So moving to the full year outlook, as communicated in April with our trading statement, we expect modest revenue growth in the second half. We also expect to see gross margin expansion as the specific ramp-up issues are addressed and there is further realisation of our cost efficiency efforts. Guidance was provided at the last trading statement on the assumption of a GBPUSD exchange rate of 1.33 for the second half. To better mitigate exchange rate volatility for the remainder of the financial year, the Board has now approved increasing hedging to 75% of our net surplus cash flow, which we secured at a rate of 1.35. This, combined with further cost efficiencies within overheads, will deliver adjusted PBT within the range of 60 to 70 million as guided. And with that, I shall hand back to Ben.