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Investors didn’t react well to RWS Holdings’ first-half trading update last week. The Aim-traded language services specialist, which translates documents such as patents or trademark filings, issued a profit warning that sent its battered shares down by 44 per cent to a 14-year low.
Adjusted pre-tax profit for the six months to March 31 is expected to come in at around £17mn, down sharply from £46mn a year earlier. The company blamed a mix of factors, including currency issues, higher non-cash charges, the sale of its PatBase database and extra spend on technology.
RWS also lowered its full-year guidance. It now expects adjusted pre-tax profit of £60mn-£70mn for the 2025 fiscal year, well down from £106.7mn last year. Gross margins are under pressure due to a shift towards lower margin work, while tech investment is pushing up overheads.
Organic constant currency sales grew by 1.3 per cent, with three of its four divisions delivering growth. But reported revenue is set to fall 1.8 per cent to £344mn, weighed down by weakness in its regulated industries business. Management is guiding for modest single-digit organic growth over the full year.
Profit warnings aren’t an unfamiliar story for RWS. The most recent one took place in April 2023 as client demand slowed. More recently, investors have been fretting over the threat of translation tools powered by artificial intelligence. The company insists new AI services such as TrainAI and Language Weaver are now helping to drive growth.
The shares are down by more than two-thirds year to date, and management is buying into this weakness. Chief executive officer Benjamin Faes, the former Google executive who took over from Ian El-Mokadem in January, spent £679,000 on the company’s stock on April 24.
