Digital growth v2.0
The macro data may be unfavourable, but there are plenty of companies delivering growth through innovation.
Investors may face an extended period of macro uncertainty given the potential fallout from the trade wars, but we believe some industries are poised to expand even if global tensions remain elevated or GDP growth is subdued.
Evidence continues to suggest we are on the cusp of greater levels of industry disruption, led by the declining costs of technology, an acceleration of digital-focused consumer trends, more efficient manufacturing and productivity, and positive secular developments in long-term demographic trends.
Rather tellingly, as we search for growth companies in a low-growth world, our most recent investments are two examples of businesses that are benefiting from innovation, rising living standards, and tech-centric long-term themes.
These companies have the capabilities to connect more people digitally and enhance wellbeing. More specifically, they provide investors with access to exciting growth opportunities in two key areas of digitalisation: digital payments and localisation services.
Globally, people are using less cash and moving towards digital means of payment. Through technology, the ubiquity of connected devices is helping to change the way consumers pay for goods and services. The next stop in this global evolution of the digital payment and banking/card ecosystem is the MEA (Middle East and Africa) region.
Leading this movement is UK-listed Network International, which offers merchants and issuers a full suite of technology-enabled payment solutions. Through its platform and strategic partnership with Mastercard, it is the only vendor with scale and exposure across the full payment value chain.
Beyond the standard merchant payment options and issuer card and processing facilities, the group offers a range of value-added services to its customer base. This ranges from foreign exchange and fraud tools to post-transaction services such as payment plans. Importantly, this wide scope provides Network International further opportunities to monetise its operations.
In regions where there is still high cash usage, we are encouraged by the rapid secular trends towards better technology infrastructure, increasing industry and financial partnerships, higher mobile penetration and supportive government initiatives to accelerate digital payments.
Speaking their language
Another growth market is language and localisation services, which is both diverse and hugely fragmented. Due to the inexorable rise in e-commerce and digitalisation, the demand for more translation services to enable simultaneous product launches in multiple countries is increasing.
As a result, organisations are in need of technology-enabled localisation and linguistic solutions, given the pressing requirement for brands to be global and offer more culturally relevant and engaging content to a wider customer base.
This plays to the strengths of UK company RWS Holdings, a translation specialist whose outcome-based solutions platform can help blue-chip brands maximise their global potential. By harnessing its technical expertise, RWS is able to leverage its scale and long-term customer relationships for gains in market share, particularly in the technology, consumer and pharmaceutical industries.
As a testament to its market position, the company has a 15-year track record of unbroken growth, with a management team focused on driving future returns through further organic growth, cross-selling opportunities, and acquisitions.
Overall, we believe these companies operate in relatively non-cyclical end markets with cash-generative business models. Furthermore, they have a distinct advantage in building scale in their respective industries and markets, with exciting growth potential in a world where growth appears more difficult to find.