RWS HOLDINGS PLC

Earnings Release • Dec 9, 2013

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RNS Number : 9757U

RWS Holdings PLC

09 December 2013

9 December 2013

RWS Holdings plc

Preliminary results for the year ended 30 September 2013

RWS Holdings plc ("RWS", "the Group"), Europe's leading provider of intellectual property support services (patent translations and filing, as well as patent searches) and commercial translations, today announced its preliminary results for the year ended 30 September 2013.

Financial Highlights:

Growth in sales, profits and dividends for the tenth successive year since flotation

·         Sales increased by 12.5% to £77.4m (2012: £68.8m).

·         Adjusted operating profit* was up 20% to £20.1m (2012: £16.8m).

·         Adjusted profit before tax* rose by 22.1% to £21.0m (2012: £17.2m).

·         Adjusted earnings per share* increased by 24.5% to 38.6p (2012: 31.0p).

·         Final dividend of 15.75p (2012: 13.48p); total dividend increased by 15.7% to 20.25p (2012: 17.5p), continuing an unbroken series of double digit dividend increases since flotation.

·         Net cash at year end of £18.2m (2012: £25.1m), after acquisitions amounting to £15.1m.

* before amortization of intangibles, share option cost and profit on sale of associate.

Operational Highlights:

Strong progress, both organically and by acquisition

Organic progress

·         Continued momentum in our patent translation business, driven by a number of significant client wins and translation work generated by the inovia filing business.

·        Establishment of a new Chinese production and training centre in co-operation with local universities.

·         Chinese business delivered a 62% increase in sales.

·         German and Swiss operations achieved significant improvements.

·         PatBase gross subscription revenues grew by 11% in constant currency terms.

Acquisitions during the period:

·         £2.2m acquisition of PharmaQuest Limited, announced on 1 May 2013.

·         £12.9m acquisition of the remaining two thirds of inovia Holdings Pty Limited, announced on 17 September 2013.

Current trading and outlook:

·        Solid trading performance in the first two months of the new financial year.

·        Continuing positive trends in worldwide patent applications.

·         New client wins help to position RWS for continued growth.

Executive Chairman Andrew Brode commented on current trading and outlook:

"The Group has continued to deliver strong cash generation, profit growth and a double digit increase in its dividend.  It has also completed the important acquisition of inovia, the largest non-law firm provider of international patent filing solutions.

"We have made a good start to the new financial year, in line with management's expectations, and comfortably ahead of the comparable period. Notwithstanding any changes to global macroeconomic conditions, we expect to continue to make good progress in the current year as we realise the full benefit of 2013 client wins and the ongoing positive trends in worldwide patent applications.

"With the full effect of the PharmaQuest and inovia acquisitions as well, the Board now expects the Group to deliver revenues in excess of £100m in 2014, as it continues to materially enhance its leading position in the intellectual property space."

A meeting for analysts will be held today at 10.15 am at the offices of Numis Securities, The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT.  Please contact Nick Hayns on 020 3128 8110 if you would like to attend.

For further information contact:

RWS Holdings plc

Andrew Brode, Executive Chairman                                                                                     01753 480200

MHP

Katie Hunt / Simon Hockridge                                                                                              020 3128 8100

Numis

Stuart Skinner (Nominated Adviser)                                                                                    020 7260 1000

James Serjeant (Corporate Broker)

About RWS:

RWS is the world's leading provider of patent translations and one of Europe's leading players in the provision of intellectual property support services and high level technical, medical, commercial, legal and financial translation services.  Specialist divisions provide for the diverse needs of a blue-chip multinational client base from Europe, North America and Asia in the aerospace, automotive, chemical, defence, electronics, financial, insurance, legal, medical, pharmaceutical and telecommunications industries.  RWS is based in the UK, with offices in Europe, New York, Tokyo, Beijing and Sydney, and is listed on AIM, the London Stock Exchange regulated market (RWS.L).

RWS recently acquired inovia Holdings Pty Limited which is headquartered in New York and is the largest non-law firm provider of international patent filing solutions globally.  Its patented, web-based technology provides over 1000 law firm and corporate clients with cost effective processing of international patent applications, typically producing cost savings in excess of 30%.  From its locations in the US, Australia and Europe, its patent filing service covers 124 countries.

Over 2,000,000 patent applications are filed per annum.  Applications filed in Europe have more than doubled in the last ten years to 258,000 applications in 2012 (source: European Patent Office), a 5.24% increase from 2011.  Applications from Asia have also seen significant recent growth.

For further information please visit: www.rws.com

RWS Holdings plc

Preliminary results for the year ended 30 September 2013

Executive Chairman's Statement

It gives me great pleasure to be able to report another year of progress for RWS against a sluggish, slowly improving economic backdrop.  For the tenth consecutive year as a public company we have delivered growth in sales, underlying profits and dividends, demonstrating the strength and resilience of the Group's core, market leading patent translations business.  RWS' businesses in China and Germany grew significantly, as did our medical division, whilst PatBase remained the primary driver of growth within the Group's information services business.  inovia achieved an outstanding performance in the year prior to becoming a wholly-owned subsidiary.

Results and Financial Review

The Group has achieved a further significant improvement in underlying operational performance, reflecting continued growth in the core patent translations business, together with excellent progress in China, Germany, and the medical division, and further growth in its database subscription service - PatBase.

Sales advanced by 12.5% to £77.4m (2012: £68.8m), an encouraging achievement given that market conditions have only improved gradually during the period.  Adjusted operating profit before amortization of intangibles, share option costs and profit on sale of associate, was up 20% to £20.1m (2012: £16.8m).  Adjusted profit before tax, intangibles amortization, share option costs and profit on sale of associate, rose by 22.1% to £21.0m (2012: £17.2m), giving rise to a 24.5% increase in adjusted earnings per share to 38.6p (2012: 31.0p).  There was no change during 2013 in the number of shares in issue.  Reported profit before tax was £20.5m (2012: £16.6m), a rise of 23.5%, and basic earnings per share 37.6p (2012: 29.9p), a rise of 25.7%.  The effective tax rate was 22.4% (2012: 23.6%); the reduction was due to the fall in corporation tax rates and prior year over provisions.

At 30 September 2013, shareholders' funds had reached £71.7m (2012: £63.2m), of which net cash represented £18.2m (2012: £25.1m).  The movement in net cash reflects an underlying increase of £8.2m before an outlay of £15.1m in respect of acquisitions.  The significant other cash outlays included corporation tax of £4.2m, the final dividend for 2012 and the interim dividend for 2013, totalling £7.6m.

RWS' policy was to hedge its net trading exposure to the Euro at an average rate of 85.1p per Euro during 2012/13.  Looking forward, RWS has hedged that exposure at 1 Euro = 87p until 30 September 2014, and will seek further suitable hedges.  As regards the US$ exposure, the Group intends to enter into rolling 12 month forward hedges in the near term.

Interest income on the Group's substantial cash balances remained at comparably subdued levels with the Bank of England maintaining a base rate of 0.5% throughout the financial year.

Dividend

The Board recommend a final dividend of 15.75p per share.  The interim dividend, paid in July, was 4.5p per share, so that the total payout in respect of the year will amount to 20.25p per share, an increase of 15.7% over 2012, reflecting the growth in Group earnings during 2013 and the Board's confidence in the continued progress of the Group.

The proposed total dividend per share is 1.86 times covered by basic earnings per share.  Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 21 February 2014 to all shareholders on the register at 24 January 2014.

Operating Review

Translations

The Group's core patent translations business, which accounts for approximately 69% of Group sales, grew its revenue by 10.5% to £53.5 million (2012: £48.4 million) despite the subdued economic conditions during the period. The Group has further consolidated its market leadership, with its European and International blue-chip client base representing many of the world's most active patent filers; its clients include 12 of the top 20 applicants at the World Intellectual Property Office in 2012 and 14 of the top 20 applicants at the European Patent Office in 2012.  We are particularly pleased with our recent progress in strengthening our new business pipeline with wins including significant household names in the USA, a prominent European pharmaceutical group and a new three year contract with a world leading agri-business.  Importantly, the patent translations business also derived significant benefit from a full year's transfer of work generated by the inovia international patent filing business, amounting to £4.2m (2012: £1.4m) in the UK alone.

We provide a high quality and competitive "translate and file" service which began in Europe and has now been successfully extended on a global scale.  US multinationals wishing to file via the national and PCT routes recognise the benefits of the Group's WorldFile service and RWS is benefiting from its increased direct sales effort in the US, still the largest potential market for intellectual property protection services.

Work from US clients has driven the growth in the Group's Beijing patent translation service.  It has also increased its share of a contract with an international patent body through its ability to provide high quality work.  These factors have led to a 62% increase in revenues.  Given this demand, we have continued to invest in staff, training and systems to develop our services, which are primarily focused on European and North American corporates' patent applications for filing in China and are typically sourced from our other offices.  A new Chinese production and training centre has been established in the city of Rizhao.  The site has also been designated a centre of excellence for translation technology, leveraging the latest developments in translation memory and machine translation to maximise productivity and profitability.  A cooperation agreement has been signed with local universities in Qufu and Rizhao, with RWS offering translation training to students and providing investment in the university technology infrastructure, in return for which the students undertake translation and terminology work on behalf of the company.

Our commercial translations business, which accounts for approximately 22% of Group sales, delivered increased revenues of £17.4 million (2012: £15.5 million), within which we experienced considerable variability across regions and market segments.  Our commercial translations business includes all non-patent translations and is typically more exposed to competition and the economic cycle than our patent translations business, though it remains differentiated by its ability to manage larger projects and deliver high quality client service, whilst its focus on technical, specialist niches enables it to achieve excellent margins.  During the year we saw an encouraging performance in medical translations, enhanced by the PharmaQuest acquisition in May 2013, and large projects for existing clients at major EU institutions.  We also experienced good growth in our German/Swiss business, influenced by a cyclical upturn in the work performed for one major international client.

Information

Our information business, which accounts for 7% of Group sales and a significantly higher proportion of operating profit, grew its revenues by 6% to £5.3 million (2012: £5.0 million).  This performance was primarily driven by the 11% growth in subscription revenues from PatBase, our subscription patent database service, offset by the continued low demand for our search services, which now represents less than 3% of Group revenues and has greater sensitivity to the economic environment.  Our ongoing investment in improving PatBase's searchability and coverage enabled us to secure a strong level of new subscriptions during the year as well as an increase in the number of users within existing client accounts.  

Acquisitions

inovia

In line with the Board's stated strategy, RWS announced on 17 September 2013 the completion of the acquisition of inovia Holdings Pty Limited ("inovia"), a leading provider of web-based international patent filing solutions. IFRS accounting required this transaction to be reflected as a disposal of the one third interest acquired in October 2011, and the acquisition of 100% of the issued share capital of inovia.

The total cash consideration for 100% of the issued share capital amounted to US$29.1 million before related costs, calculated by reference to an agreed earnout formula based upon the financial performance of inovia for its financial year ended 30 June 2013.

For this reference year, inovia's gross revenues increased by 37% to US$26.5m compared to 2012 and it achieved EBITDA of US$2.7m.  In addition, as noted elsewhere, the inovia business generated sufficient patent translation revenues for it to be RWS' largest customer prior to the full acquisition.

PharmaQuest

Again in line with the Board's strategy, RWS announced on 1 May 2013 the acquisition of the entire issued share capital of PharmaQuest Limited for an all cash consideration of £2.2m.  The company specialises in providing high quality translation and linguistic validation of patient reported outcome measures resulting from clinical trials conducted globally.  In the year ended 31 March 2013 PharmaQuest had revenues of £1.4m and adjusted profit before tax of £0.6m.

Market and Regulatory Update

Patent Filing Statistics

In March, the World Intellectual Property Office (WIPO) published figures showing a 6.6% increase in the 2012 PCT filings to 194,400 (2011: 182,379).  The European Patent Office (EPO) also published figures in January showing the total number of European patent filings increased by 5.2% to 257,744 (2011: 244,934).  Both the WIPO and EPO figures established new records for numbers of filings.  Current expectations are that 2013 will see further record patent filings with growth of not less than 4%.

European Union Patent

We have in the past drawn the market's attention to the proposed European Union Patent ("the Unitary Patent") and its potential impact upon the Group's sales and profits.   Despite significant legal hurdles it now appears possible that the Unitary Patent will come into effect in late 2015, and that the first patents could be granted in early 2016. It should be noted that a number of member states of the current European Patent system are not EU members, and that Spain and Italy remain  opposed to the Unitary Patent.  Professional opinion remains highly sceptical both as regards jurisdiction and the fee structure.

Because the proposed Unitary Patent will run in parallel with the existing system and will have a new and untried litigation system, our research indicates that there is currently little interest amongst large corporates and their professional advisers in using the new system.  That being the case, we anticipate minimal loss of revenues in the first few years after the introduction of the Unitary Patent.

Share Option Plan

RWS announced on 4 April 2013 that the Board had approved a new share option plan for executive directors and senior managers, under which options would be granted over ordinary shares representing up to a maximum of 4% of the Group's share capital.  The plan is designed to further align the interests of senior employees and shareholders and to promote the retention of the Group's senior executives.

Options have been issued to eleven participants, with a subscription price of 646p per share.  The earliest vesting date is 3 April 2015 and the latest exercise date is 3 April 2021.

People

RWS has always been dependent upon the quality and commitment of its entire staff to provide and maintain the high levels of service expected by the Group's clients.  We were pleased that we were able to avoid net staff reductions in the recent recession and headcount has now reached 591 full time equivalents (2012: 497), including the inovia staff, with productivity continuing to improve.

Corporate Social Responsibility

RWS seeks to be a socially responsible Group which has a positive impact on the communities it operates in.  We look to employ a workforce which reflects the diversity of the Group's communities.  No discrimination is tolerated, and we endeavour to give all employees the opportunity to develop their capabilities.  We provide an excellent working environment, the latest technology and appropriate training.

RWS' staff contribute generously on a monthly basis to a wide selection of local and national charities and their contributions are matched by the Group.

Current Trading and Outlook

We have made a solid start to the new financial year, in line with management's expectations and comfortably ahead of the comparable period. Notwithstanding any changes to global macroeconomic conditions, we expect to continue to make good progress in the current year as we realise the full year benefit of 2013 client wins, the ongoing positive trends in worldwide patent applications, and the full benefit of the PharmaQuest and inovia acquisitions.

The Board is confident that we will materially enhance the Group's leading position in the intellectual property arena over the near to medium term.

Andrew Brode

Executive Chairman

9 December 2013

Strategic Review

The Business

RWS is the world's leading provider of patent translations and one of Europe's leading players in the provision of intellectual property support services and high level technical, medical, legal and financial translation services.  Its main business - patent translation - translates well over 65,000 patents and intellectual property related documents each year.  It has a blue chip multinational client base spanning Europe, North America and Asia, active in patent filing in the medical, pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries, as well as patent agents representing such clients.  The Group's principal business activities include:

·      Translations, which currently accounts for over 90% of sales and incorporates both patent translation and commercial translation services;

·      Information, which includes a comprehensive range of patent search, retrieval and monitoring services as well as PatBase, one of the world's largest searchable commercial patent databases, access to which is sold exclusively as an annual subscription service; and:

·      Following the recent acquisition of inovia, RWS is now a provider of international web based patent filing solutions; an activity which is expected to continue to be a significant source of Group patent translation revenues.

RWS provides these services through offices in 6 countries. The table below shows their location and the principal services they deliver for RWS.

	Translation - Patent	Translation - Commercial	Information Services	inovia web based patent filing
UK	x	x	x
Germany		x
Japan	x
China	x	x
Australia				x
USA				x

In addition to the above locations, services are also offered through sales offices in France and Switzerland.

Strategy and Business Model

RWS' objective is to increase shareholder value by increasing the Group's sales revenue and profit before tax.

Our strategy to achieve this is focused upon organic growth complemented by deploying the Group's substantial cash holdings for selective acquisitions, providing these can be demonstrated to enhance shareholder value.  Organic growth is driven by increases in the worldwide patent filing activities of existing and potential multinational clients, the growing demand for language services and the Group's ability to increase its market share by winning new clients attracted by its leading position and reputation, in an otherwise fragmented sector. Our business model focuses on the retention of our client base, which includes the majority of the top 20 patent filers in Europe and globally, many of which will use the Group for substantially all of their patent translation requirements, and the addition of several key new clients each year with whom activity levels build up over time. The global number of patent applications reached new record levels in both 2011 and 2012 and RWS has successfully grown market share amongst its target blue-chip customers who have historically remained committed to protecting their intellectual property through the cycle.

In terms of acquisitive growth, having been pleased with the return on acquisitions made to date, we continue to search for suitable potential acquisitions in the high level commercial translation and intellectual property support services spaces.  We seek niche businesses capable of delivering well above industry average levels of profitability or highly complementary businesses capable of reinforcing the Group's dominant position in intellectual property support services.

Progress against our stated objectives is shown below:

	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013
Annual Revenue £m	27.3	31.0	35.9	40.8	46.2	54.1	55.7	60.6	65.4	68.8	77.4
Annual PBT Adj (£m)	5.6	6.0	7.4	9.0	11.0	13.9	14.5	14.6	16.2	17.2	21.0

The remuneration of the Executive Directors and Senior Executives is largely dependent upon growth in sales and adjusted profit before tax.

Principal Risks

The Directors, having conducted a further annual review of the Group's risk profile, are convinced that the principal risks to the business are errors in the provision of the Group's services, in a mismatch between currencies (especially as between the Euro and Sterling), in regulatory changes to patent translation requirements in Europe and following the acquisition of inovia, the integration of that business into RWS.  Additionally, as with any people business delivering high quality services, the Group depends upon its ability to attract and retain well trained staff.

These risks are mitigated as follows:

·        Failings in service provision are most likely to arise as a result of human error.  RWS was one of the earliest adopters of ISO certification and invests in exhaustive and regularly updated procedures to minimise the risk of error.  In addition, the Group carries substantial professional indemnity insurance.

·        Currency risk is normally addressed via hedging operations.  Currently, Sterling/Euro net trading exposure is hedged to 30 September 2014 at 1 Euro = 87p.

·        The London Agreement was implemented in May 2008 and the five financial years thereafter have borne the full effect, which was broadly in line with management expectations.  RWS could also be impacted if a further initiative - the European Union Patent - were to become effective, and be adopted by its clients.  Whilst the inovia acquisition would also be impacted by the proposed European Union Patent, its key business territories are outside of Europe.  The overall Group sales strategy heavily focuses on expanding its share in international non-European patent translations, especially of patents filed in BRIC countries, and with a strong focus on China.  The thrust of the Board's acquisition strategy since 2005 has been to target technical translation businesses which have zero exposure to any regulatory developments in the patent field.  Management is currently of the opinion that the EU Patent will not be introduced before late 2015 / early 2016, and is highly unlikely to be adopted by RWS' major clients for a number of years thereafter.

·        In October 2011 RWS acquired the first one third of the inovia business. From then through to the final acquisition in September 2013, RWS and inovia had the opportunity to work together to understand each others' respective, business model culture and ethos. This enabled the preparation of a detailed integration plan which identified areas and a timetable for integration. In line with that plan, since acquisition, meetings and detailed discussions have taken place between both teams which have so far resulted in a smooth integration process and substantial cross selling opportunities. 

·        As a significant employer in the local area of South Buckinghamshire, we believe we offer stability of employment, competitive salaries and an excellent working environment.  In the current economic climate we have been successful in recruiting high calibre staff as required, but competition for talented people to work on the periphery of the London conurbation is undoubtedly intensifying.

RWS Holdings plc

Annual Report 2013

Consolidated Statement of Comprehensive Income

for the year ended 30 September

	Note	2013 £'000	2012 £'000
Revenue	3	77,404	68,825
Cost of sales		(45,558)	(39,614)
Gross profit		31,846	29,211
Administrative expenses		(12,981)	(13,035)
Profit from operations		18,865	16,176
Analysed as:
Operating profit before charging:		20,060	16,773
Amortization of customer relationships and trademarks		(727)	(597)
Share based payment costs		(468)	-
Profit from operations		18,865	16,176
Finance income		456	405
Finance expense		-	(1)
Share in results of associate		496	18
Gain on disposal of associate		693	-
Profit before tax		20,510	16,598
Taxation expense	4	(4,592)	(3,925)
Profit for the year		15,918	12,673
Other comprehensive (expense)
Loss on retranslation of foreign operations		(294)	(694)
Share in other comprehensive income of associate		-	(135)
Total other comprehensive (expense)		(294)	(829)
Total comprehensive income attributable to:
Owners of the parent		15,624	11,844
Basic earnings per Ordinary share (pence per share)	6	37.6	29.9
Diluted earnings per Ordinary share (pence per share)	6	37.6	29.9

RWS Holdings plc

Annual Report 2013

Consolidated Statement of Financial Position

at 30 September

Registered company 3002645		2013 £'000	2012 £'000
Assets
Non-current assets
Goodwill		30,325	14,053
Intangible assets		9,896	4,274
Property, plant and equipment		13,002	13,285
Investment in associate		-	4,345
Deferred tax assets		270	228
		53,493	36,185
Current assets
Trade and other receivables		16,670	14,612
Foreign exchange derivatives		566	260
Cash and cash equivalents		18,211	25,096
		35,447	39,968
Total assets		88,940	76,153
Liabilities
Current liabilities
Trade and other payables		11,463	8,015
Income tax payable		2,555	2,007
Put and call option liability		-	769
Provisions		336	336
		14,354	11,127
Non-current liabilities
Other creditors		-	100
Provisions		530	530
Deferred tax liabilities		2,343	1,167
		2,873	1,797
Total liabilities		17,227	12,924
Total net assets		71,713	63,229
Equity
Capital and reserves attributable to owners of the parent
Share capital		2,116	2,116
Share premium		3,583	3,583
Share based payment reserve		468	-
Reverse acquisition reserve		(8,483)	(8,483)
Foreign currency reserve		1,187	1,481
Retained earnings		72,842	64,532
Total equity		71,713	63,229

RWS Holdings plc

Annual Report 2013

Consolidated Statement of Changes in Equity

for the year ended 30 September

	Share capital £'000	Share premium account £'000	Other reserves (see below) £'000	Retained earnings £'000	Total equity Attributable to owners of the parent £'000
At 1 October 2011	2,116	3,583	(6,173)	58,532	58,058
Profit for the year	-	-	-	12,673	12,673
Currency translation differences	-	-	(829)	-	(829)
Total Comprehensive income for	-	-	(829)	12,673	11,844
the year 30 September 2012
Dividends	-	-	-	(6,673)	(6,673)
At 30 September 2012	2,116	3,583	(7,002)	64,532	63,229
Profit for the year	-	-	-	15,918	15,918
Currency translation differences	-	-	(294)	-	(294)
Total Comprehensive income for	-	-	(294)	15,918	15,624
the year 30 September 2013
Dividends	-	-	-	(7,608)	(7,608)
Credit arising on share based payment charges	-	-	468	-	468
At 30 September 2013	2,116	3,583	(6,828)	72,842	71,713

Other reserves	Share based payment reserve £'000	Reverse acquisition reserve £'000	Foreign currency reserve £'000	Total other reserves £'000
At 1 October 2011	-	(8,483)	2,310	(6,173)
Currency translation differences	-	-	(829)	(829)
Total Comprehensive income for	-	-	(829)	(829)
the year 30 September 2012
Dividends	-	-	-	-
At 30 September 2012	-	(8,483)	1,481	(7,002)
Currency translation differences	-	-	(294)	(294)
Total Comprehensive income for	-	-	(294)	(294)
the year 30 September 2013
Dividends	-	-	-	-
Credit arising on share based payment charges	468	-	-	468
At 30 September 2013	468	(8,483)	1,187	(6,828)

RWS Holdings plc

Annual Report 2013

Consolidated Statement of Cash Flows

for the year ended 30 September

		2013 £'000	2012 £'000
Cash flows from operating activities
Profit before tax		20,510	16,598
Adjustments for:
Depreciation of property, plant and equipment		666	593
Amortization of intangible assets		799	656
Share based payments		468	-
Finance income		(456)	(405)
Finance expense		-	1
Share in results of associate		(496)	-
Gain on disposal of associate		(693)	-
Operating cash flow before movements
in working capital and provisions		20,798	17,443
(Increase)/decrease in trade and other receivables		(318)	63
Increase in trade and other payables		119	391
Cash generated from operations		20,599	17,897
Income tax paid		(4,249)	(4,297)
Net cash inflow from operating activities		16,350	13,600
Cash flows from investing activities
Interest received		151	98
Acquisition of subsidiary, net of cash acquired		(15,132)	(2,480)
Acquisition of share in associate		-	(3,693)
Purchases of property, plant and equipment		(376)	(363)
Purchases of intangibles (computer software)		(34)	(92)
Net cash outflow from investing activities		(15,391)	(6,530)
Cash flows from financing activities
Dividends paid		(7,608)	(6,673)
Net cash outflow from financing activities		(7,608)	(6,673)
Net (decrease)/increase in cash and cash equivalents		(6,649)	397
Cash and cash equivalents at beginning of the year		25,096	24,845
Exchange losses on cash and cash equivalents		(236)	(146)
Cash and cash equivalents at end of the year		18,211	25,096
Free cash flow
Analysis of free cash flow
Net cash generated from operations		20,599	17,897
Net interest received		151	98
Income tax paid		(4,249)	(4,297)
Purchases of property, plant and equipment		(376)	(363)
Purchases of intangibles (computer software)		(34)	(92)
Free cash flow		16,091	13,243

The Directors consider that the free cash flow analysis above indicates the cash generated from normal activities excluding acquisitions and dividends paid.

Notes to the Accounts

1.  General information

RWS Holdings plc is a company incorporated in the United Kingdom.  The address of the registered office is Europa House, Chiltern Park, Chiltern Hill, Chalfont St Peter, Buckinghamshire SL9 9FG.

The Group's financial statements for the year ended 30 September 2013, from which this financial information has been extracted, and for the comparative year ended 30 September 2012, are prepared in accordance with International Financial Reporting Standards ('IFRS') adopted for use in the EU.

The financial information shown in the announcement for the year ended 30 September 2013 and the year ended 30 September 2012 set out above does not constitute statutory accounts but is derived from those accounts.  The results have been prepared using accounting policies consistent with those used in the preparation of the statutory accounts.  The financial information contained in this announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.  Statutory accounts for the year ended 30 September 2012 have been delivered to the Registrar of Companies and those for the year ended 30 September 2013 will be delivered shortly, having been approved by the Directors on 6 December 2013.  The auditors have reported on the accounts for the years ended 30 September 2012 and 30 September 2013; their reports were unqualified, did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.

Copies of this announcement are available at the registered office of the Company for a period of 14 days from the date hereof.

2.  Significant accounting policies

Basis of accounting

The principal accounting policies adopted in the preparation of this preliminary announcement remain unchanged from those set out fully in the financial statements for the year ended 30 September 2012.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.  The Group expects to publish full financial statements that comply with IFRS on 10 January 2014.

3.  Segment information

The Group's operations are based in UK, Continental Europe, Asia, United States of America and Australia. The table below shows turnover by the geographic market in which customers are located.

	2013 £'000	2012 £'000
UK	11,401	8,584
Continental Europe	43,522	43,461
Asia, United States of America and Australia	22,481	16,780
	77,404	68,825

4.  Taxation

		2013 £'000	2012 £'000
Taxation recognised in the income statement is as follows:
Current tax expense
Tax on profit for the current year
- UK		4,097	3,714
- Overseas		861	644
Adjustment to prior years		(180)	(250)
		4,778	4,108
Deferred  tax
Current year movement		(196)	(238)
Prior year movement		10	55
Total tax expense in the Statement of Comprehensive Income		4,592	3,925

The table below reconciles the UK statutory tax charge to the Group's total tax charge.

		2013 £'000	2012 £'000
Profit before tax		20,510	16,598
Notional tax charge at UK corporation tax rate of 23.5% (2012: 25%)		4,820	4,150
Effects of:
Items not deductible or not chargeable for tax purposes		(160)	(67)
Profit on disposal of associate not chargeable for tax		(163)	-
Differences in overseas tax rates		275	163
UK tax rate change		-	(71)
Adjustments in respect of prior periods		(180)	(250)
Total tax expense for the year		4,592	3,925

5.  Dividends to shareholders

	2013 pence per share	2013 £'000	2012 pence per share	2012 £'000
Final, paid 22 February 2013 (2012: paid 17 February 2012)	13.48	5,704	11.75	4,972
Interim, paid 19 July 2013 (2012: paid 20 July 2012)	4.50	1,904	4.02	1,701
	17.98	7,608	15.77	6,673

The Directors recommend a final dividend in respect of the financial year ended 30 September 2013 of 15.75 pence per Ordinary share to be paid on 21 February 2014 to shareholders who are on the register at 24 January 2014.  This dividend is not reflected in these financial statements as it does not represent a liability at 30 September 2013.  The final proposed dividend will reduce shareholders' funds by an estimated £6.7 million.

6.  Earnings per Ordinary share

Basic earnings per share are based on the post-tax group profit for the year and a weighted average number of Ordinary shares in issue during the year calculated as follows:

	2013	2012
Weighted average number of Ordinary shares in issue for basic earnings	42,315,968	42,315,968
Dilutive impact of share options	23,190	-
Weighted average number of Ordinary shares for diluted earnings	42,339,158	42,315,968

Adjusted earnings per Ordinary share is also presented to eliminate the effects of amortization of customer relationships and trademarks, share option costs  and the profit on sale of associate. This presentation shows the trend in earnings per Ordinary share that is attributable to the underlying trading activities.  The reconciliation between the basic and adjusted figures is as follows:

	2013 £'000	2012 £'000	2013 Basic earnings per share pence	2012 Basic earnings per share pence	2013 Diluted earnings per share pence	2012 Diluted earnings per share pence
Profit for the year	15,918	12,673	37.6	29.9	37.6	29.9
Post tax adjustments
Amortization of customer relationships and trademarks	574	460	1.4	1.1	1.4	1.1
Profit on sale of Associate	(547)	-	(1.3)	0.0	(1.3)	0.0
Share based payment	370	-	0.9	0.0	0.9	0.0
Adjusted earnings	16,315	13,133	38.6	31.0	38.6	31.0

7.  Events since the reporting date

No significant events have occurred since 30 September 2013 at the date of authorisation of this announcement.

This information is provided by RNS

The company news service from the London Stock Exchange

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