When a company announces it has just had its “best year ever”, it is probably worth paying attention. That is what has happened at RWS Holdings (RWS), an intellectual property and translation group that expects to beat sales and profit forecasts for the 12 months to the end of September 2017.
The company is expecting revenues to be at least £163m, up from £122m in 2016 and slightly ahead of the £162.2m consensus forecast. No figure is given for the adjusted profit, but analysts at Numis have upgraded their pre-tax profit forecasts for 2017 and 2018 by 5 per cent and 7 per cent, respectively. It grew its earnings by 29 per cent during the first half of the year and by almost a quarter during 2016.
Numis also expects the group to move back into a net cash position by 2019, as a result of improving cash generation. This would support management's acquisition strategy. The improved performance has been attributed to significant growth in the group’s core translation activities, combined with the contributions from its two US life sciences acquisitions, Corporate Translations and LUZ.
Weakness in sterling has also inflated returns, as the group makes more than 80 per cent of its revenues in foreign currencies, primarily euros and US dollars. Underlying revenue growth was around 8.5 per cent. To mitigate risk from the euro, it has hedged its exposure at a rate averaging €1/90p for the year to September 2018. Management is now looking at making new acquisitions to build out the business in North America over the next five years.
