Steady as She Goes: Profits, Revenues Up as RWS Reports Half-year Results

RWS released a short update for its financial half-year ended March 31, 2016. The full results for that period will be published on June 7, 2016.

Revenues for the first half of 2016 are expected to increase by 24% to approximately GBP 56.5m from GBP 45.4m in the first half of 2015. A significant portion of the revenue bump is likely thanks to the CTi acquisition.

RWS’ board puts growth down to three factors: first, its core translations activities; second, “an excellent five-month contribution” from CTi; and third, some currency effects.

RWS’ core end market in patents is fairly flat. The company cited figures from the World Intellectual Property Office that showed a 1.7% increase in 2015 international patent filings to 218,000; and the European Patent Office that showed a 1.6% increase to 278,867 in 2015 European patent filings. Against this backdrop, the UK language service provider pointed to a “solid performance” in its patent and commercial businesses.

Outside its service business, RWS said its searchable online global patent database PatBase continued to “grow by 6% during the period.” That is not explosive growth, but RWS has a history of advancing slowly but steadily.

Life science language service provider CTi (Corporate Translations Inc.) continued to perform well in the first three months of 2016 after it nearly doubled profits in 2015. RWS bought the company in late 2015 in a competitive process with other major LSPs also bidding for the Connecticut-based niche player.

Rather than rebranding CTi, which it acquired in October 2015, RWS “decided to integrate (RWS’) existing UK life sciences activities” into CTi. The result is a larger unit that will focus on “major pharmaceutical groups and contract research organisations in Europe.”

Expect the combined unit to ratchet up competitive pressure for juicy global pharma and CRO accounts. Unsurprisingly, RWS added, “The integration is proceeding well.”

Pretax profit at what Slator revealed to be the most valuable publicly listed translation company is expected to be GBP 13.8m for the first half of this year (H1 2015: GBP 10.8m). This is in line with previous board guidance and reflects, among other things, significantly improved gross margins.

RWS’ shares are up by 3% this morning on the London Stock Exchange. The stock has gained nearly 270% since the beginning of 2010. However, at at P/E ratio of 31 (Lionbridge is at 21), the market already appears to have priced in significant future earnings growth.