RWS Posts Solid Full-Year 2018 Results as It Integrates Moravia

UK-based and London-listed language service provider (LSP) RWS announced their full year results on December 11, 2018. Revenues for the 12 months ending September 30, 2018 rose 87% to GBP 306m (USD 386m) from GBP 164m the year before. Adjusted profit before tax, which strips out a number of one-off factors and acquisition related costs, grew +43% to GBP 61.8m from GBP 43.3m in 2017. RWS now employs nearly 2,500 staff.

While RWS achieved modest organic progress throughout its five divisions, much of the growth originated from Moravia’s 11-month contribution. In October 2017, RWS acquired the Czech LSP in a step-changing USD 320m acquisition that transformed RWS into one of the world’s largest providers and added a large portfolio of US-based technology giants.

RWS Chairman, Andrew Brode, reiterated that their “strategy for growth would focus on the United States to 2020” before shifting to China, where the group grew 18% in 2018 and already employs nearly 300 people across its Patent and Moravia businesses.

After rebranding Moravia to RWS Moravia in October 2018, RWS now operates five business divisions—RWS Patent Translation & Filing, RWS Patent Information, RWS Life Sciences, Moravia, RWS Language Solution. The Patent Translation & Filing division remains the most significant contributor to the bottom line, generating GBP 30.9m in profit in the reporting period.

The division, which employs over 130 internal translators, again benefited from record patent filing activity, and management remains confident in its 2019 outlook. Potential headwinds include the looming decision on Europe’s Unitary Patent as well as a more competitive market environment after Questel’s acquisition of patent specialist Multiling in October 2018.

Moravia, meanwhile, bounced back from a slow first half while momentum in Life Sciences was reversed with a “challenging second half with slower trade from some of its core clients.” RWS subscription business Patent Information and its catch-all LSP division Language Solutions both grew modestly.

RWS also highlighted its elaborate risk management process, where an official risk register is reviewed and assessed on an annual basis by the company’s board of directors. The company identified five key risks to its business: errors in service provision, currency fluctuations, regulatory changes such as the Unitary Patents, emerging translation technologies, failure to integrate acquisitions.

RWS explained how Brexit has introduced additional uncertainty to the much discussed roll out of Europe’s Unitary Patent, which represents a potential threat to RWS’s cash cow patent translation business. For now, however, RWS does “not expect the Unitary Patent to have any impact on FY 2019 financial results” because even if it finally launches “major clients will be cautious in their take-up of this new and unproven system.”

Investors seem to have largely priced in the results with shares up modestly at press time. At a market capitalization of USD 1.65bn, RWS remains the most valuable language service service provider. Despite the USD 320m price tag for Moravia, the company retains a healthy balance sheet and has the financial firepower for more sizeable acquisitions in 2019. The company says it continues to look at selective acquisition “opportunities in the intellectual property services and specialist language services spaces.”