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RWS benefits from acquisitions

The group grew revenues in all but one of its divisions with a combination of acquisition and organic growth, assisted by currency movements
December 11, 2017

Shares in patent translation group RWS Holdings (RWS) jumped around following the release of its results for the year to September 2017, making the market’s interpretation of the numbers hard to pin down. From analysts at Numis, however, the message was clear: they upgraded the shares on the back of the company's "best organic performance in recent years".

IC TIP: Buy at 428p

It’s not hard to see why. Adjusted operating profit climbed 36 per cent to £43.4m in the year. The larger part of that was positive currency movements and the impact of the acquisition of life sciences translation business LUZ, but organic, constant-currency revenue growth was strong at 8 per cent.

The performance was broad-based, although in the life sciences division CTi had a challenging year on account of having to renegotiate contracts with several key customers. Still, LUZ has exceeded expectations since acquisition with sales of £17.4m.

The group’s post-period acquisition of Moravia offers another route to growth. Moravia provides 'localisation' services, helping companies adapt their branding and content to different markets and cultures. Promisingly, it counts five of the US’s largest tech companies as clients, providing ample opportunity for cross-selling.

Analysts at Numis made no changes to their forecasts, expecting adjusted pre-tax profit of £65.3m and EPS of 17.7p for the year to September 2018 (up from £43.3m and 14.2p in FY2017).

RWS HOLDINGS (RWS)   
ORD PRICE:428pMARKET VALUE:£1.17bn
TOUCH:426-428p12-MONTH HIGH:559pLOW: 285p
DIVIDEND YIELD:1.5%PE RATIO:39
NET ASSET VALUE:58p*NET DEBT:13%
Year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201377.420.57.54.06
201493.619.67.24.58
201595.220.77.34.88
201612225.19.05.6
201716433.911.06.5
% change+34+35+22+16
Ex-div:25 Jan   
Payment:23 Feb   
*Includes intangible assets of £150m, or 55p a share