Full-year figures for RWS Holdings (RWS) benefited from "a strong maiden contribution" from Corporate Translations Inc (CTi), a US life sciences translation business acquired in October 2015. That contribution helped the intellectual property services group defy a low-growth macro environment to post its thirteenth straight year of sales and underlying profit growth. According to management, large corporations, which underpin the group's core patent translations business, prioritise their intellectual property activities even during economic downturns.
With more than 85 per cent of revenues not sterling-denominated, the group's top line was bolstered by the pound's post-EU referendum decline, though any benefits linked to the US dollar exposure were cancelled out by unfavourable hedging activities and a dollar-denominated loan taken out to acquire CTi. The American acquisition's high-margin business model contributed to a 339 basis point improvement in the group's gross margin, though the deal also pushed up amortisation charges significantly, which restricted earnings growth.
The deal also meant that net debt stood at £1.5m at the period-end from a net cash position of £30.6m a year earlier, but the group has subsequently moved back into the black due to its highly cash-generative business model. In the period, free cash flow increased by 29 per cent year-on-year to £23.1m.
Numis predicts adjusted profits of £34.8m for the year ending September 2017, giving rise to EPS of 12.4p (from £30.6m and 10.8p in FY2016).
| RWS HOLDINGS (RWS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 315p | MARKET VALUE: | £679m | |
| TOUCH: | 305p-315p | 12-MONTH HIGH: | 315p | LOW: 183p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 35 | |
| NET ASSET VALUE: | 50p* | NET DEBT: | 1% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings** per share (p) | Dividend** per share (p) |
|---|---|---|---|---|
| 2012 | 68.8 | 16.6 | 6.0 | 3.50 |
| 2013 | 77.4 | 20.5 | 7.5 | 4.06 |
| 2014 | 93.6 | 19.6 | 7.2 | 4.58 |
| 2015 | 95.2 | 20.7 | 7.3 | 4.88 |
| 2016 | 122 | 25.1 | 9.0 | 5.60 |
| % change | +28 | +21 | +23 | +15 |
Ex-div: 26 Jan Payment: 24 Feb *Includes intangible assets of £89.9m, or 42p a share **Pre-2015 figures adjusted for five-for-one share split. | ||||
