TIDMRWS
RNS Number : 1273J
RWS Holdings PLC
08 April 2020
For immediate release 8 April 2020
RWS Holdings plc
COVID-19 and Half Year Trading Update
RWS Holdings plc ("RWS", "the Group"), one of the world's
leading language, intellectual property support services and
localization providers, today provides an update on the Group's
response to the COVID-19 virus and on trading for the half-year
ended 31 March 2020 ("the first half").
COVID-19 update
The safety and wellbeing of our staff is the Group's key
priority and, to fully enable social distancing, we temporarily
closed all the RWS offices globally and implemented work from home
procedures. All RWS divisions remain fully operational with our
technology platforms supporting our people to work effectively from
home. The one geographical exception to this is China, where our
four offices have recently reopened following local Government
guidance.
To assist staff in this change in working practices, the Group
has taken additional steps through enhanced communication,
information sharing, and online activities to help maintain their
wellbeing, effectiveness and engagement.
The Group is doing all it can to support global efforts to fight
COVID-19, including having mobilized its global research community
to find and provide relevant prior scientific research to
pharmaceutical companies working on COVID-19 vaccines or
treatments, on a pro-bono basis.
In recent days, the Group has noted increased demand for
services within both our Life Science and Moravia divisions, as our
teams help with the clinical trials for new COVID-19 vaccines,
translate training material for COVID-19 related antibody testing
devices and provide additional services to the Group's technology
customers, who are recording higher usage of their online
communication and social networking platforms. However, there has
been a fall in demand from a limited number of customers more
directly exposed to the pandemic, predominantly those in the travel
sector.
We also now anticipate that RWS's second half revenues could be
held back by COVID-19 as some of Moravia's customers curtail
marketing-related localization expenditure and as a result of a
lengthening of the onboarding of new customers across our
divisions.
Given the unprecedented market uncertainty, it is impossible to
predict with any accuracy the likely financial impact of COVID-19
on the operations of RWS and we are therefore withdrawing our
previous guidance for the full financial year. Further details on
the Group's first half performance are provided below and an update
on trading will be provided when the Group releases its first half
results, scheduled for 9 June 2020.
Financial position
The Group's business model remains highly cash generative and
following robust stress testing, the Board is highly confident that
the Group's cash generation and liquidity put it in a strong
position to trade through this uncertain period and beyond. RWS
currently has cash reserves of cGBP29m and recently agreed an
amended US$200m banking facility, of which US$80m remains drawn,
being the rollover of the original facility to acquire Moravia.
This provides headroom of US$120m, of which US$40m is guaranteed
under a Revolving Credit Facility and a further US$80m is available
under a non-committed facility.
The Group has also taken a number of prudent steps to strengthen
its cash position, including freezing recruitment, limiting capital
expenditure and reducing marketing spend. Naturally, we will also
see lower travel and other operational costs as a result of the
global lockdown. We will also assess the COVID-19 funding
initiatives provided by local governments across the Group's global
operations and will utilize these where appropriate to do so.
A decision will be made regarding the interim dividend by the
time that we report our half year results in June, when we will
have been able to assess the impacts of COVID-19 more fully.
It is important to highlight that RWS utilizes external
freelancers for a high proportion of initial translations, which
results in a highly flexible cost base that can quickly respond to
any rise or fall in demand. In addition, the Group's geographical
spread, diverse client base and exposure to the typically more
defensive intellectual property and life sciences segments, provide
resilience to the impact of the virus.
Half Year Trading Update
The Group had a solid start to the year, with several excellent
new contract wins particularly within our IP Services division,
from a range of blue-chip international companies and major patent
attorneys.
We have had a less favourable trading performance in the second
quarter, reflecting a combination of the deferment of certain new
projects for clients, a delay in the time taken for some of the new
clients to come on board, and lower volumes of activity in IP
Services and certain segments of Life Sciences than anticipated, a
small proportion of which we believe has been influenced by some
disruption to our clients from COVID-19.
Nevertheless, until the most recent escalation of COVID-19, we
had been on course to deliver full year results in line with the
Board's underlying expectations for the year as a whole.
These impacts in the second quarter saw RWS recording sales of
GBP169.2m in the first half of 2020, compared with GBP172.3m in the
first half of 2019, a decrease of 1.8% or 2.5% on an underlying
like-for-like basis.
The key drivers of the Group's divisional performances in the
first half are set out below:
- RWS IP Services recorded very strong sales in H1 2019, as the
European Patent Office changed its practices to address a backlog
of validations. This has not been repeated in 2020. In addition,
the first half of 2019 included the final revenue from the
previously announced loss of a major customer.
- Within the RWS Life Sciences division, the Linguistic
Validation business continues to outperform our expectations and
sales to the Group's largest pharmaceutical customer are going
well, in line with our expectations. However, while the steps taken
under new leadership last year to address issues in the rest of the
Life Sciences business have begun to yield results, it will take
additional time to see this part of the division return to
growth.
- RWS Moravia saw good results from several customers although
one large new project was deferred into the second half. We are
pleased to confirm that this is now underway.
EU Unitary Patent ("UP")
In recent weeks the UK Government has made it clear that it does
not intend to participate in the UP. We welcome this decision, as
it significantly dilutes the appeal of the UP for our customers, as
the UK is the second most important European country for patent
protection.
Subsequent to the UK decision, the German constitutional court
upheld a complaint that the original approval of the UP agreement
by the German Government was unconstitutional.
Despite the German Government stating that it still intends to
work towards the introduction of the UP, we now believe that any
possible implementation has been delayed by several years and will
be subject to further lengthy renegotiation.
Andrew Brode, Chairman of RWS, commented:
"Our priority is to safeguard the health and wellbeing of our
people and I would like to thank all of the RWS staff who have
worked tirelessly to enable our teams to stay safe and work from
home.
"Trading in the second quarter has been somewhat challenging,
but as RWS operates in the largely recession-proof and innovative
sectors of IP Services and Life Sciences, and with the likely
long-term growth in sales to the Group's technology customers, we
believe the three divisions are all in relatively good shape.
"Notwithstanding the near term challenges presented by COVID-19,
the excellent new business wins in the first half of the year,
further good progress in China and the Group's strong financial
position give the Group firm foundations for the long-term success
of the business.
"We remain focused on looking after our staff, continuing to
provide an excellent service to our customers, reviewing selective
acquisition opportunities and, perhaps above all, continuing to do
our part in the fight to defeat COVID-19."
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 is the world's leading provider of intellectual property
support services (patent translations, international patent filing
solutions and searches), a market leader in life sciences
translations and linguistic validation, a leading localization
provider, and a high-level specialist language service provider in
other technical areas, providing for the diverse needs of a
blue-chip multinational client base spanning Europe, North America
and Asia.
RWS is based in the UK, with offices across five continents. The
company is 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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