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RWS' soaring revenues held back by FX headwinds
(WebFG News) - Despite facing "significant" exchange rate headwinds, language and localisation provider RWS has "performed well" throughout the first half of its trading year.
RWS' revenues soared 82% to £139.6m, broadly in line with its expectations; however, adjusted pre-tax profits of around £30m on a constant currency basis were held back by an average exchange rate of $1.37, compared to an average of $1.24 during the prior year, which dragged that figure down to approximately £28.3m.
While RWS will "continue to monitor exchange rates", if the current rates prevail, the firm expects its profits to fall to "slightly below" market consensus.
RWS' patent translation and filing division saw a "steady performance" following its record performance a year earlier, thanks to strong growth in its Chinese operations and the firm's life sciences wing improved after the successful integration of its two US acquisitions delivered "very positive results" that enabled the business to grow revenue.
The group's acquisition of Moravia, which completed in November for a total cash consideration of $320m, saw RWS add operations in the Czech Republic, USA, Japan, China, Argentina and Ireland, providing further geographic diversification and adding an additional profitable, cash generative division of scale to its operations.
Following recent US tax reform legislation, RWS' Federal tax rate dropped from 35% to 21%, meaning the group was now on a lower than previously expected effective tax rate of roughly 23%, resulting in a beneficial impact on its earnings per share and cash generation.
Andrew Brode, chairman of RWS, said, "Notwithstanding the foreign exchange headwinds, we have seen strong performances from several of our divisions. We are also already realising the benefits of synergies and cross-selling across our successfully integrated Life Sciences activities, which are now able to provide a full-service offering to their clients."
"Following the recent acquisition of Moravia, the group now operates from five clear divisions and we are seeing good momentum and a strong sales pipeline going into the second half. While FX may continue to have an impact, we expect to make continued underlying progress in both revenues and profits over the second half of the year," he added.
As of 1000 BST, shares had tumbled 15.14% to 389.50p.