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RWS expects busier second half

RESULTS: With orders from new clients finally coming through, RWS expects a better second half
June 3, 2014

Patent-translations expert RWS (RWS) finished 2013 with a flourish. But new clients have taken their time placing firm orders, and the strong pound is a headache. The company's share price has underperformed the wider market since key numbers for the first half were flagged seven weeks ago. Still, management reports a "good" start to the second half, with new work now ramping up.

IC TIP: Hold at 846p

Adjusted operating profit rose 6 per cent to £11m in the half year to March; strip out last year's £1.1m net currency gain and profit grew even faster. Underlying sales at the core patent-translation business were up almost a tenth to £26.3m, and there's an "encouraging" pipeline: RWS has already won work with car-maker Ford, and Intel should soon sign.

Paying $23m (£14m) for inovia, a web-based international patent filing platform, reduced the cash pile, but the acquisition contributed much of the increase in group sales. Integration, however, has not been smooth. Inovia is also doing more lower-margin work for European firms and not enough for big-spending US law firms. A new senior sales team will hopefully turn things round.

Executive chairman Andrew Brode continues to dismiss a new EU patent - not expected for another two years - as "a pimple" on RWS. Big companies remain sceptical, too. Numis Securities expects full-year adjusted pre-tax profit of £22.1m, giving adjusted EPS of 39.2p (from £21m and 38.5p in 2013).

RWS HOLDINGS (RWS)

ORD PRICE:846pMARKET VALUE:£358m
TOUCH:832-860p12-MONTH HIGH:1,030pLow: 642p
DIVIDEND YIELD:2.4%PE RATIO:23
NET ASSET VALUE:170p*NET CASH:£14.9m

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201336.710.218.34.5
201446.99.616.84.9
% change+28-6-8+9

Ex-div: 25 Jun

Payment: 25 Jul

*Includes intangible assets of £39m, or 92p a share