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RWS points to second-half recovery

After earnings dipped in the six months to 31 March, the intellectual property and localisation specialist has seen activity pick up in April and May
June 9, 2020

Language, intellectual property and ‘localisation’ specialist RWS (RWS) saw a slight dip in revenue in the six months to 31 March. This came as sales from IP services fell 7 per cent year on year to £57.9m. Up against a tough comparator, the first half of 2019 benefitted from efforts at the European Patent Office to clear its case backlog. The decline also reflects the loss of a major customer.

IC TIP: Buy at 625p

Over in Moravia, while revenue was largely flat at £79.2m, adjusted operating profit dropped by almost a fifth to £11.1m. This followed the integration of the lower margin language solutions business and investment in technology. But demand for localisation and translation picked up in April and May as clients saw increased use of social networking platforms and entertainment streaming services during the Covid-19 lockdowns.

Excluding £22m in lease liabilities, net debt ticked down 6 per cent from the September year-end to £34.5m, equivalent to 0.4 times cash profits (Ebitda). Net debt will likely increase after two acquisitions post-period – neural machine translation specialist Iconic Translations Machines for $10m (£8m) upfront and potentially a further $10m in shares, and Indian-based localisation business Webdunia for $21m.

House broker Numis anticipates £52.5m of net debt for the full year. It also expects adjusted pre-tax profit of £68.5m and EPS of 19.4p, down from £74.2m and 21.3p in 2019.

RWS (RWS)    
ORD PRICE:625pMARKET VALUE:£ 1.72bn
TOUCH:624-626p12-MONTH HIGH:685pLOW: 400p
DIVIDEND YIELD:1.4%PE RATIO:39
NET ASSET VALUE:144p*NET DEBT:14%**
Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201917227.67.781.75
202017025.87.261.75
% change-2-6-7-
Ex-div:25 Jun   
Payment:17 Jul   
*Includes £408m in intangible assets or 148p a share, **Includes £22m in lease liabilities