Questor share tip: RWS Holdings increases dividend 9pc

The Aim-listed patent translation firm reported a steady first half in which revenue increased but profits where hit by the strength of sterling, says Questor

RWS Holdings
859p-0.5
Questor says HOLD

AIM-LISTED translation firm RWS Holdings [LON:RWS] reported another period of revenue growth and rewarded investors with a 9pc increase in the interim dividend.

RWS takes patents in English and translates them for companies such as Siemens and Ford to protect their technology across different markets.

More than 2m patent applications are filed every year. The World Intellectual Property Office reported a 5.1pc increase to 205,000 in the number of patents filed last year, and in Europe there was a steady increase.

RWS reported first-half revenue up 28pc to £46.9m, adjusted pre-tax profits were 2pc ahead at £10.8m, while reported results were hit by currency effects. The company’s core operation of translating patents — 56pc of group revenue — reported a 9pc increase in revenue to £26.3m.

Commercial non-patent translation operations reported revenue flat at £8m. Other services, which include a searchable database of patents, reported revenues up 19pc to £3.1m.

Last year the company completed the purchase of an online patent filing service called inovia. Revenue at this new division increased by 28pc to $16.1m (£9.6m) and now makes up a fifth of the group total.

The company has ambitious targets to achieve more than £100m in revenue by the year ending September. Analysts at house broker Numis forecast adjusted pre-tax profits of £22.1m, giving 39p in earnings per share, rising to £42m next year. There is a slight drag on results as share options to management will cost £1m.

That said, the company has a solid balance sheet with net cash of £14.9m at the period end, down from £28m a year earlier after the inovia acquisition and a £4.3m property purchase. The shares, on 22 times forecast earnings, trade on a premium to sector peer Murgitroyd, which trades on 14 times, but part of this is because — as a qualifying Aim-listed company — it gets inheritance tax relief.

A good company but, with growth slowing, no better than a hold.