RWS Holdings (LON:RWS), Europe's leading provider of intellectual property support services and technical translations, today released its half year report for the six months ended 31st March 2010. Formed over 40 years ago, the company provides specialist technical, legal and financial translation services for industry. The market is a strong one, approximately 1,000,000 patent documents are published every year, 200,000 of which are published in Europe (Source: European Patent Office).The half year report showed many positives, despite the £1.9m hit due to currency fluctuations. Sales were up 10% to £29.4m (2009: £26.8m), while underlying profit (before amortization of intangibles) was up 16% to £6.9m (2009: £5.9m) after eliminating the negative impact of currency fluctuations. However, profit before tax (taking in the same considerations) was down to £6.8m (2009: £8.0m). Nevertheless, this again takes in the £1.9m negative currency impact and a £0.2m reduction in interest due to the lower interest rates. The interim dividend was increased 13% to 3.15p (2009: 2.8p). Net cash at period end was £23.8m (2009: £24.5m) after a £2.5m development loan and £.0.7m acquisition in H2 2009.
The company has experienced tough trading conditions, especially in Germany and Japan, but has seen resilience of its core patent translation business. The Chinese business arm grew revenue by 40% and moved into profit. New client wins in December 2009 and a 31% increase in PatBase subscription revenues boosted the numbers. The outlook looks promising with new client wins and sales expected to benefit the second half incrementally. Executive Chairman Andrew Brode who holds 45% of the shares went on to say that “With the anticipated benefit of new clients won in December 2009 to be realised incrementally during the second half of the financial year, our expectations for the year as a whole remain unchanged.”
Consensus estimates for the financial year ending 30th September 2010 are for pre-tax profits of £15.28 and eps of 25.96p resulting in a PER of 11.36x (share price 295p). With a commanding market presence and net cash of £23.8m that implies decent value.
