Berenberg reiterates 'buy' rating on RWS Holdings

Revenues at RWS grew by 8% year-on-year, adjusted pre-tax profits grew by 17% and earnings per share increased by 12%. Berenberg said RWS' improved performance comes from an extra month's trading from SDL, acquired in November 2020, continued synergy benefits from the combination of RWS and SDL, driving a 160 basis point gross margin improvement, and areas of "strong underlying growth", most significantly in the firm's technology businesses.

Looking ahead, the German bank believes that forecasts for 2023 weer "well set" and that it now assumes 2% constant currency organic growth and a 2% foreign exchange benefit, alongside a year of investment for the group, before a return to strong underlying revenue and profit growth from the 2024 trading year.

"As a result, our view is that the group remains very well placed for medium-term growth and a strong re-rating, with investors able to acquire a business with a more than £70.0m net cash position that has grown EPS at a 15% CAGR from 2010-2022, for just 8.9x EV/ EBIT or 11.9x September 2023E EV/net income," said Berenberg.

"Given this, a recovery in cyclical market factors and successes from the company's investment programme should drive material shareholder returns from here."

Reporting by Iain Gilbert at Sharecast.com