Europe's leading provider of intellectual property support services (patent translations and searches) and technical translations recently provided a positive update on trading for the half year ended 31 March 2011 ahead of the announcement of its half year results on 2 June 2011. Group revenues have increased by at least 10% to £32.4m and having fully hedged Euro and dollar trading exposure for the current financial year, they anticipate that profits for the first half will be comfortably on course to deliver market expectations for the year as a whole. Consensus expectations are for pre-tax profit of £15.72m and earnings per share 26.58p and dividend per share of 15.3p.
Patent translations business, which represents approximately 70% of Group revenue for RWS (LON:RWS) performed strongly driven by a combination of an increase in the volume of patent translations from existing customers and the phasing in of work from several significant client wins in 2010. The balance sheet remains robust with shareholder funds at the half year end in excess of £53.7m and net cash of £19.8m.
- Underlying market strength
The European Patent Office recently published figures showing that the number of European patents applied for in 2010 increased by 10% over 2009, an encouraging sign that research and development and the protection of intellectual property has remained a priority through the financial crisis and global downturn. At the current share price (398p) the shares trade at c15x 2011 estimates and 13.5x for 2012, yielding approx 3.8%; with net cash of £19.8m the valuation doesn’t look too demanding.
