In this video, Chris Boxall, co-founder of Fundamental Asset Management, discusses a watershed event for AIM as one of the market’s largest companies makes a big acquisition. For further information on Fundamental’s high performing AIM portfolio service please visit the link here or contact the Fundamental team by emailing [email protected].
The proposed acquisition of main market listed SDL (LON:SDL) by AIM quoted RWS Holdings (LON:RWS) is, in our opinion, a watershed moment for AIM, as an AIM company acquires a sizeable main market listed peer, but the combined group reamins on AIM.
RWS is one of the world’s leading language, intellectual property support services and localization providers. While those don’t sound like the most thrilling of activities RWS has delivered stunning results for shareholders over the years.
Chris Boxall discusses the deal in this video here.
Fundamental have been investors in RWS, whose headquarters is close to our own office, for about 14 years. Here is a brief history of its progress on AIM.
RWS arrived on AIM in October 2003 via a reverse into the previously named shell company Health Media Group.
The equivalent share price at the time was 22p and market capitalisation £45m. Fast forward nearly 17 years and the shares have risen nearly 2700% to 613p (they were as high as 767p this month), with the market capitalisation £1.8bn.
Through a mixture of organic, and more recently more acquisition led growth, RWS has developed into one of AIM’s largest companies.
RWS’s acquisition strategy really accelerated in 2013 with the acquisition of inovia Holdings, a leading provider of web-based international patent filing solutions.
It followed this in November 2015 with the sizeable acquisition of Corporate Translations for US$70m. CT was the world’s leading life sciences translation and linguistic validation providers.
February 2017 saw the acquisition of LUZ, a market leading Life Sciences language services provider based in San Francisco, for a cash consideration of US$82.5m. To support this meaningful acquisition, it raised gross proceeds of £40.0m at 330p per share.
In Nov 2017 it acquired Moravia, a leading provider of technology-enabled localisation services, for $320m. Localisation is the adaptation of content, software, websites, applications, marketing materials and audio/video for hundreds of languages and geographies. It requires the translation and customisation of clients’ content and platforms for cultural conventions, compliance with local regulations and consistency of brand style and tone.
For the half year ending 31 March 2020, Moravia represented 47% of RWS’ group revenue of £170m and 34% of the group’s operating profit.
Smaller acquisitions followed in 2019 and June 2020, culminating in this week’s deal to acquir main market peer SDL Group in a £700m all-share deal.
The combination of SDL and RWS will create the world’s leading language services and technology group with capabilities across a range of language services and IP services, combining the complementary strengths of RWS’ specialist technical translation and localisation capabilities with SDL’s software, machine translation and AI capabilities.
It will support an expanded blue chip customer base with limited overlap across its core markets, including 90 of the world’s top 100 brands by value, all the top 10 pharmaceutical companies globally, many of the major West Coast technology businesses, and approximately half of the top 20 patent filers worldwide.
The RWS name will be retained for the combined group which will continue to be headquartered in Chalfont St Peter and remain listed on AIM, which is good news for those holding shares in RWS for the Inheritance Tax planning attractions, including many of our clients.
The combination should put SDL’s technology to better use thereby enhancing margins, which in the case of SDL, have been somewhat ordinary – while the two businesses had similar revenues in 2019, RWS’s operating margins were more than double those of SDL. Pro forma FY2019 revenues are £732m and pro forma adjusted operating profit £116m, imply a combined operating margin of 15.8%.
What has been constant in RWS’ journey has been the presence of Chairman Andrew Brode, who retains a near 33% stake in the current business and to our knowledge has never sold a share. We are reassured that, with so much of his personal wealth at stake, Mr Brode would have thought long and hard about this deal. The Inheritance Tax planning attractions are no doubt an incentive for him to keep the group on AIM!
You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.
There were 830 companies listed on AIM at the end of July and approximately 70% qualified for the valuable Inheritance Tax reliefs.
Fundamental Asset Management have been expertly running AIM for IHT portfolios for more than 16 years and have an in-depth understanding of the Inheritance Tax qualifying rules.
Inheritance tax is the most hated tax in the UK and clients are looking for you to help them reduce or eliminate it altogether. But this is not the only challenge. Clients are also looking for a return on their investment.
So what is the answer?
AIM is one of the most successful growth markets in the world and an AIM IHT portfolio can qualify for 100% IHT exemption.
Want to hear more?
Come and meet me and our co-founders Chris Boxall and Stephen Drabwell where we will be discussing all you need to know about investing in AIM for Inheritance Tax.
Click on the picture below to register.
Fundamental Asset Management
Derek McLay
You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.
Find out from our co-founder Chris Boxall where the opportunities are in AIM and why this is a market you should be considering for growth and not just the Inheritance Tax planning benefits.
Despite their obvious appeal and relevance in our lives, many UK investors surprisingly have little direct exposure in their portfolios to leading US technology groups, preferring instead to invest via a collective investment scheme.
We find it surprising that while much of the UK population is happy to use Amazon, Google, Apple iPhones etc, it isn’t interested in owning some of these fantastic companies. That’s why our general bespoke portfolios, as well as our new Ultimate Stocks portfolio, holds shares in the companies discussed below.
The significant outperformance of the US stock market over the UK over virtually any time period you care to mention, suggests that as reluctant investors in the US market, UK investors are at a distinct disadvantage and destined to underperform. The main UK market is also lagging AIM over recent periods, which isn’t surprising given AIM’s abundance of growth opportunities compared to the many dinosaurs roaming on the UK main market.
Our long term general portfolio holding Microsoft opened results season with its quarterly results last week, reporting 13% growth in sales to $38 billion and profits of $11.2 billion, both ahead of expectations. Having closed the June quarter with $136 billion of cash it certainly has plenty of resources at its disposal, with video app TikTok rumoured to be a potential acquisition target.
Despite the closure of its stores around the world, portfolio holding Apple’s revenues for 4th quarter rose 11% to $59.7bn, a new record and significantly exceeding forecasts of a 3% decline. With a growing portfolio of excellent products and an attractive services business, Apple continues to look in great shape buoyed by a huge cash pile.
Google’s holding company Alphabet was the only one of the big tech titans to report declining numbers, although even these were better than revised expectations as many feared a more significant Covid related decline in advertising revenue.
The Ultimate Stocks portfolio, launched in conjunction with our associates Investors Champion, offers a simple and transparent route for UK investors to gain exposure to these and many other exciting companies.
Moving away from the US, it is great to be able to report positive news from plenty of our AIM holdings, many of whose services and products we also use and come across in our daily lives.
Jarvis Securities, the provider of stockbroking and financial administration services, recently issued fantastic interim results supporting a material increase in its dividend. Jarvis’ “Model B” outsourced arrangement is a great solution for small investment management firms and Fundamental is a client.
Gamma Communications, a provider of communications services to business markets in the UK and Europe, issued a very positive trading update with management now anticipating that full year will be ahead of estimates. With 93% of revenue recurring GAMA is in great shape and well-placed to continue to thrive. Fundamental uses Gamma’s horizon telephone system.
dotdigital, the leading ‘SaaS’ provider of marketing automation confirmed that the pandemic had a minimal impact. Having proved itself in the toughest of markets and with continuing momentum online supported by some fantastic partnerships, dotDigital appears to have an exciting future ahead. While we aren’t currently a client, we have always been impressed with its dotmailer email offering.
Satellite holding Property Franchise Group confirmed a strong performance across the half year as well as a return to growth in the final month of the period which has continued into July. EweMove, its hybrid online/physical sales and lettings brand, set new records for sales listings in June. Those considering a house move should considering using Ewemove.
CVS Group, one of the UK’s leading providers of veterinary services, provided a comprehensive assessment of business over the past few months. The soaring demand for pets over lockdown could offer a big post Covid-19 boost to CVS and the veterinary sector as a whole, and the difficulties experienced by small independent practices may also see an acceleration of the consolidation which could also benefit CVS. The market was clearly impressed, sending the shares up sharply.
Quartix, the supplier of vehicle tracking systems, announced impressive interim results highlighting the attraction of its long-term subscription-based model.
IG Design Group, one of the world’s leading designers and manufacturers of gift packaging, celebrations, stationery and Christmas crackers, reassured with its full year results. As a business serving over 210,000 stores for over 11,000 customers in over 80 countries, IG has a better picture than most of the market environment.
Commercial flooring manufacturer James Halstead’s primary concern was cash flow when the world went into lockdown. With trading conditions improving and the cash position robust they feel able to commit to a second interim dividend. All of us are likely to have walked on James Halstead’s Polyflor flooring at some time in our lives!
Smart Metering Systems, which installs and manages smart meters and carbon reduction assets, chose the perfect time to sell a portfolio of meter assets prior to the pandemic disrupting things. Its latest trading update confirmed that revenue and underlying profit would in line with expectations, reflecting the resilient nature of its business model and index linked recurring revenue.
Moving away from AIM, general portfolio holding Games Workshop, the fantasy games group which is also a constituent of the Ultimate Stocks portfolio, issued excellent results, despite the pandemic shutting down its business for 6 weeks. The extensive results statement is worth a read to gain a full understanding of this unusual high-performing business. The shares moved back to all-time highs and despite the valuation there could be plenty of growth potential in overseas markets.
You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.
Fundamental portfolios hold shares in Alphabet, Apple and Microsoft. For a full assessment of results from all the big technology groups please visit or associated Investor’s Champion site. Fundamental clients get free subscriber access to all premium content.
